SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Amendment No. 1)
Under the Securities Exchange Act of 1934
Kinder Morgan Energy Partners, L.P.
(formerly Enron Liquids Pipeline, L.P.)
(Name of Issuer)
Common Units
(Title of Class of Securities)
494550-10-6
(CUSIP Number)
George E. Rider, Esq., Morrison & Hecker L.L.P.,
2600 Grand Avenue, Kansas City, Missouri 64108 (816) 691-2600
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
February 14, 1997
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
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===============================================================
CUSIP No. 494550-10-6
- ---------------------------------------------------------------
1 Name of Reporting Persons
S.S. or I.R.S. Identification Nos. of Above
Persons
Kinder Morgan, Inc. (formerly, KC Liquids
Holding Corporation), a Delaware corporation
- ---------------------------------------------------------------
2 Check the Appropriate Box if a Member of a
Group (See Instructions)
(a)
(b) N/A
- ---------------------------------------------------------------
3 SEC Use Only
- ---------------------------------------------------------------
4 Source of Funds (See Instructions)
00*
- ---------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(e)
- ---------------------------------------------------------------
6 Citizenship or Place of Organization
State of Delaware, United States
- ---------------------------------------------------------------
7 Sole Voting Power
Number 431,000 Common Units**
of -------------------------------------------------
Shares 8 Shared Voting Power
Beneficially 0
Owned -------------------------------------------------
By 9 Sole Dispositive Power
Each 431,000 Common Units**
Reporting -------------------------------------------------
Person 10 Shared Dispositive Power
With 0
- ---------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each
Reporting Person
431,000 Common Units**
- ---------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11)
Excludes Certain Shares (See Instructions)
- ---------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
6.6%
- ---------------------------------------------------------------
Type of Reporting Person (See Instructions)
CO
===============================================================
*See Item 3.
**See Item 5.
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Item 1: Security and Issuer.
This Statement relates to 431,000 Common Units of Limited Partnership
Interest (the "Common Units") of Kinder Morgan Energy Partners, L.P. (formerly
Enron Liquids Pipeline, L.P.), a Delaware limited partnership (the "Issuer"),
whose principal executive office is located at 1301 McKinney, Suite 3450,
Houston, Texas 77010. This Statement is Amendment No. 1 to Schedule 13D filed on
January 24, 1997.
Item 2: Identity and Background.
This Statement is filed by Kinder Morgan, Inc. (formerly KC Liquids Holding
Corporation), a Delaware corporation ("KMI"). This Statement is the First
Amendment to Schedule 13D filed by KC Liquids Holding Corporation, Richard D.
Kinder and William V. Morgan on January 24, 1997 (the "Prior Statement"). The
Prior Statement was filed in anticipation of the purchase by KMI of all of the
issued and outstanding stock of Enron Liquids Pipeline Company, a Delaware
corporation and the general partner of the Issuer (the "Transaction"), pursuant
to a Purchase and Sale Agreement dated as of January 8, 1997 (the "Purchase and
Sale Agreement"). At the time the Prior Statement was filed, Enron Liquids
Pipeline Company owned 860,000 Common Units (approximately 12.9% of the total
outstanding Common Units). Prior to the closing of the Transaction, (i) Enron
Liquids Pipeline Company sold 429,000 Common Units to a third party, and (ii)
the parties to the Purchase and Sale Agreement executed an Amended and Restated
Purchase and Sale Agreement dated as of February 14, 1997 (the "Restated
Purchase and Sale Agreement"). Following the closing of the Transaction, the
name of Enron Liquids Pipeline Company was changed to Kinder Morgan G.P., Inc.
("KMGP") and the name of the Issuer was changed to Kinder Morgan Energy
Partners, L.P. This Statement is filed to reflect the consummation of the
Transaction, pursuant to which KMI purchased all of the issued and outstanding
capital stock of KMGP, and thereby became the indirect beneficial owner of
431,000 Common Units (approximately 6.6% of the total outstanding Common Units).
The Transaction closed on February 14, 1997. At or about the same time as the
filing of this Statement, KMGP will file an amendment to its Schedule 13D to
reflect the sale of 429,000 Common Units.
Following the completion of the Transaction, KMI owns 100% of KMGP, which
is the sole general partner of the Issuer, and KMGP owns 431,000 Common Units.
Mr. Kinder owns approximately 49.99% of the voting common stock of KMI and
approximately 50% of the total capital stock of KMI. Morgan Associates, Inc., a
Kansas corporation, the capital stock of which is owned by Mr. Morgan, owns
approximately 48.01% of the voting common stock of KMI and approximately 25.01%
of the total capital stock of KMI. A third party owns approximately 2% of the
voting common stock of KMI and 24.99% of the total capital stock of KMI.
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Neither KMI nor any of the stockholders of KMI individually has the power
to vote or direct the vote of, or dispose or direct the disposition of, the
Common Units owned by KMGP, or to dispose or direct the disposition of, or
receive or direct the receipt of, dividends with respect to such Common Units
deemed to be beneficially owned by KMI. There exists no contract, arrangement or
device which has the purpose or effect of requiring the stockholders of KMI to
act together with respect to any of such actions. As the sole stockholder of
KMGP, KMI has the power to elect the Board of Directors of KMGP, however, all
decisions regarding the Common Units owned by KMGP are within the exclusive
authority of the Board of Directors of KMGP.
KMI maintains its principal executive office at 1301 McKinney, Suite 3450,
Houston, Texas 77010. Schedule I attached hereto sets forth information with
respect to each director and executive officer of KMI.
None of KMI, or, to the best of the undersigned's knowledge, any person
listed on Schedule I hereto, has been (a) convicted in any criminal proceeding
during the last five years (excluding traffic violations or similar
misdemeanors), or (b) subject to a civil decree, final order or judgment of a
court or administrative body enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws, or finding
any violation with respect to such laws.
Item 3: Source and Amount of Funds or Other
Consideration.
In order to finance the acquisition of KMGP, KMI borrowed $15 million from
First Union National Bank of North Carolina ("First Union"). The loan is due
August 31, 1999 and bears interest, at the option of KMI, at either First
Union's Base Rate plus .5% per annum or LIBOR plus 2.5% per annum. In addition,
KMI obtained a $10.8 million letter of credit from First Union to support Enron
Corp.'s remaining obligations with respect to the minimum quarterly distribution
payable to the holders of the Issuer's Common Units. The "Support Period",
during which Enron Corp. committed that certain minimum quarterly distributions
would be made to holders of the Issuer's Common Units, will expire on September
30, 1997; and the letter of credit from First Union which supports such
commitment will terminate shortly thereafter. The borrowings by KMI from First
Union are secured by a pledge of all of the stock of KMGP. In addition, KMGP
pledged all of the Common Units owned by it as additional collateral for the
loans. The Credit Agreement requires First Union's consent for, among other
things, (i) the merger or consolidation of the Issuer with any other person,
(ii) the sale, lease or other disposition of all or substantially all of the
Issuer's property or assets to any other person or (iii) the issuance of any
additional Common Units.
Item 4: Purpose of Transaction.
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KMI acquired all issued and outstanding capital stock of KMGP, which owned
431,000 Common Units of the Issuer at the time the Transaction closed. KMI
intends to review on a continuing basis its indirect investments in the Issuer
and the Issuer's business and prospects. KMI currently is not considering the
direct acquisition of any Common Units. Whether KMI purchases, directly or
indirectly, additional Common Units will depend upon its evaluation of pertinent
factors, including without limitation, the availability of Common Units for
purchase at particular price levels, the business and prospects of the Issuer
and of KMI, regulatory and other requirements of KMI.
Immediately following the Transaction, KMI elected the following persons as
directors of KMGP: Richard D. Kinder, William V. Morgan, Thomas B. King, Alan L.
Atterbury and Edward O. Gaylord. Mr. Atterbury and Mr. Gaylord are outside
directors and constitute the Conflicts and Audit Committee of KMGP (on behalf of
the Issuer).
The above named directors of KMGP elected the following persons as officers
of KMGP: Richard D. Kinder as Chairman and Chief Executive Officer; William V.
Morgan as Vice Chairman; Thomas B. King as President; Thomas P. Tosoni as Vice
President, Chief Financial Officer and Assistant Secretary; Michael C. Morgan as
Vice President-Corporate Development; David G. Dehaemers, Jr. as Secretary and
Treasurer; and Roger C. Mosby as Vice President.
Except as described above, KMI does not have a present plan or proposal
with respect to any action that would relate to or result in the occurrence of
any of the matters enumerated under Item 4 of Schedule 13D.
Item 5: Interest in Securities of the Issuer.
(a) The aggregate number and percentage of the Common Units deemed to be
beneficially owned by KMI is described on the cover page.
(b) The aggregate number and percentage of the Common Units over which KMI
has sole voting power, shared voting power, sole dispositive power, and shared
dispositive power is described on the cover page, subject to the limitations
described herein and below.
(c) KMI has not participated in any transaction in the Common Units in the
past sixty days, except as described herein.
Neither KMI nor any of the stockholders of KMI individually has the power
to vote or direct the vote of, or dispose or direct the disposition of, the
Common Units owned by KMGP, or to dispose or direct the disposition of, or
receive or direct the receipt of, dividends with respect to such Common Units
deemed to be beneficially owned by KMI. There exists no contract, arrangement
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or device which has the purpose or effect of requiring the stockholders of KMI
to act together with respect to any of such actions. As the sole stockholder of
KMGP, KMI has the power to elect the Board of Directors of KMGP, however, all
decisions regarding the Common Units owned by KMGP are within the exclusive
authority of the Board of Directors of KMGP.
Item 6: Contracts, Arrangements, Understandings or
Relationships with Respect to Securities of
the Issuer.
Following the Transaction, KMI does not have any contract, arrangement,
understanding or relationship with any other person or entity regarding the
Common Units deemed to be beneficially owned by KMI. In connection with the
Transaction, as described in Item 3 above, the Common Units held by KMGP have
been pledged as additional security for KMI's obligations under Credit
Agreement.
Item 7: Material to be Filed as Exhibits.
The documents attached to the Prior Schedule 13D are irrelevant to the
Transaction as a result of the terms of the Restated Purchase and Sale Agreement
and have been deleted from this Statement. Attached to this Statement as
Exhibits are the following: the Amended and Restated Purchase and Sale Agreement
between Enron Liquids Holding Corp. and KMI dated as of February 14, 1997, and
the Credit Agreement between KMI and First Union dated as of February 14, 1997.
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SIGNATURE
After reasonable inquiry and to the best of the knowledge and belief of the
undersigned, the undersigned certifies that the information set forth in this
Statement is true, complete and correct.
Dated: March 5, 1997
KINDER MORGAN, INC.
By: /s/ William V. Morgan
William V. Morgan, President
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Exhibit Index To Schedule 13D
Filed By Kinder Morgan, Inc.
1. Amended and Restated Purchase and Sale Agreement
between Enron Liquids Holding Corp. and KMI dated as
of February 14, 1997.
2. Credit Agreement among Kinder Morgan, Inc. and
various lenders thereto dated as of February 14, 1997.
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Schedule I
Directors and Officers of
Kinder Morgan, Inc.
Name and Business Address Citizenship Position
Richard D. Kinder USA Director and
1301 McKinney Chairman
Suite 3450
Houston, Texas 77010
William V. Morgan USA Director and
1301 McKinney President
Suite 3450
Houston, Texas 77010
David G. Dehaemers, Jr. USA Secretary and
1301 McKinney Treasurer
Suite 3450
Houston, Texas 77010
9
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AMENDED AND RESTATED
PURCHASE AND SALE AGREEMENT
DATED AS OF FEBRUARY 14, 1997
BY AND BETWEEN
ENRON LIQUIDS HOLDING CORP.
as Seller
AND
KINDER MORGAN, INC.
as Buyer
<PAGE>
Table of Contents
ARTICLE 1..........................................-1-
ARTICLE 2..........................................-5-
2.1 PURCHASE AND SALE.........................-5-
2.2 PURCHASE PRICE............................-6-
2.3 ADJUSTMENTS TO THE PURCHASE PRICE.........-6-
2.4 STATEMENT.................................-7-
2.5 POST-CLOSING ADJUSTMENTS TO THE
PURCHASE PRICE............................-7-
ARTICLE 3..........................................-8-
3.1 TIME AND PLACE OF CLOSING.................-8-
3.2 DELIVERIES BY SELLER AND BUYER AT OR
PRIOR TO CLOSING..........................-8-
ARTICLE 4..........................................-9-
4.1 ORGANIZATION AND GOOD STANDING OF
SELLER AND ELPC...........................-9-
4.2 QUALIFICATION.............................-9-
4.3 CAPITALIZATION OF ELPC....................-9-
4.4 AUTHORIZATION OF AGREEMENT; NO
VIOLATION; NO CONSENTS....................-9-
4.5 GOVERNMENTAL CONSENTS....................-10-
4.6 ENFORCEABILITY...........................-10-
4.7 BALANCE SHEET............................-10-
4.8 ABSENCE OF CHANGES.......................-10-
4.9 CONTRACTS................................-11-
4.10 SUITS....................................-11-
4.11 COMPLIANCE WITH LAWS.....................-11-
4.12 TAX MATTERS..............................-11-
4.13 CONDITION OF THE ASSETS; PREFERENTIAL
RIGHTS TO PURCHASE.......................-12-
4.14 EMPLOYEES AND EMPLOYEE BENEFIT PLANS
AND POLICIES.............................-12-
4.15 EMPLOYEE MATTERS.........................-13-
4.16 PUBLIC FILINGS...........................-14-
4.17 BROKERS..................................-14-
4.18 SUITS AGAINST THE PARTNERSHIPS...........-14-
ARTICLE 5.........................................-14-
5.1 ORGANIZATION AND GOOD STANDING...........-14-
5.2 AUTHORIZATION OF AGREEMENT; NO
VIOLATION; NO CONSENTS...................-15-
5.3 GOVERNMENTAL CONSENTS....................-15-
5.4 ENFORCEABILITY...........................-15-
5.5 SUITS....................................-15-
5.6 FINANCING................................-15-
5.7 VALUE OF BUYER'S ASSETS..................-15-
5.8 PERFORMANCE OF OBLIGATIONS...............-15-
<PAGE>
5.9 BROKERS..................................-16-
ARTICLE 6.........................................-16-
6.1 COMMERCIALLY REASONABLE EFFORTS..........-16-
6.2 CONDUCT OF BUSINESS PRIOR TO THE
EFFECTIVE TIME...........................-16-
6.3 DIVIDENDS................................-16-
6.4 CREDIT RATING; LETTERS OF CREDIT.........-16-
6.5 ACCESS...................................-17-
6.6 TRANSITION SERVICES......................-17-
6.7 COMPUTER SOFTWARE........................-17-
6.8 RECORDS: ACCESS AND RETENTION............-18-
6.9 NAMES....................................-18-
6.10 EMPLOYMENT MATTERS.......................-19-
6.11 SUPPLEMENTS TO SCHEDULES.................-21-
6.12 SELLER'S PROPERTY LOCATED ON EASEMENTS
AFTER CLOSING............................-21-
6.13 CURRENT REPORT ON FORM 8-K...............-22-
6.14 BUSINESS OPPORTUNITIES...................-22-
6.15 SALE OF TRANSFERRED LP UNITS.............-23-
6.16 RETAINED LITIGATION......................-23-
ARTICLE 7.........................................-23-
7.1 SECTION 338(H)(10) ELECTIONS.............-23-
7.2 PREPARATION OF TAX RETURNS;
RESPONSIBILITY FOR TAXES.................-24-
7.3 ACCESS TO INFORMATION....................-25-
7.4 TRANSFER TAXES...........................-26-
7.5 TAX SHARING AGREEMENTS...................-26-
7.6 NON-FOREIGN PERSON AFFIDAVIT.............-26-
7.7 ASSISTANCE AND COOPERATION...............-26-
ARTICLE 8.........................................-26-
8.1 REPRESENTATIONS..........................-27-
8.2 PERFORMANCE..............................-27-
8.3 PENDING MATTERS..........................-27-
8.4 ASSUMPTION OF ENRON CORP. OBLIGATIONS....-27-
8.5 RETURN OF ENRON GUARANTY.................-27-
8.6 BANK ONE CONSENT.........................-27-
8.7 SALE OF TRANSFERRED LP UNITS.............-27-
ARTICLE 9.........................................-27-
9.1 REPRESENTATIONS..........................-27-
9.2 PERFORMANCE..............................-27-
9.3 PENDING MATTERS..........................-28-
9.4 RESIGNATION OF OFFICERS AND DIRECTORS....-28-
9.5 SALE OF TRANSFERRED LP UNITS.............-28-
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ARTICLE 10........................................-28-
10.1 TERMINATION AT OR PRIOR TO CLOSING.......-28-
10.2 EFFECT OF TERMINATION....................-28-
ARTICLE 11........................................-28-
11.1 INDEMNIFICATION BY BUYER.................-28-
11.2 INDEMNIFICATION BY SELLER................-29-
11.3 LIMITATION ON DAMAGES; SURVIVAL OF
REPRESENTATIONS..........................-29-
11.4 NOTICE OF ASSERTED LIABILITY;
OPPORTUNITY TO DEFEND....................-31-
11.5 EXCLUSIVE REMEDY.........................-31-
11.6 NEGLIGENCE AND STRICT LIABILITY WAIVER...-31-
ARTICLE 12........................................-32-
12.1 APPLICABLE LAW; ALTERNATIVE DISPUTE
RESOLUTION...............................-32-
12.2 EXPENSES.................................-33-
12.3 INDEPENDENT INVESTIGATION................-33-
12.4 DISCLAIMER REGARDING ASSETS..............-33-
12.5 WAIVER OF TRADE PRACTICES ACTS...........-33-
12.6 NO THIRD PARTY BENEFICIARIES.............-34-
12.7 WAIVER...................................-35-
12.8 ENTIRE AGREEMENT; AMENDMENT..............-35-
12.9 NOTICES..................................-35-
12.10 NO ASSIGNMENT...........................-36-
12.11 SEVERABILITY............................-36-
12.12 PUBLICITY...............................-36-
12.13 CONSTRUCTION............................-36-
12.14 COUNTERPARTS............................-36-
12.15 FURTHER ASSURANCES......................-37-
12.16 PAYMENT OF FUNDS........................-37-
12.17 CERTAIN INTERPRETIVE MATTERS............-37-
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AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT
THIS AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT (this "Agreement")
dated as of February 14, 1997, is between ENRON LIQUIDS HOLDING CORP., a
Delaware corporation ("Seller"), as seller, and KINDER MORGAN, INC., a Delaware
corporation ("Buyer"), as buyer. Buyer was previously known as "KC Liquids
Holding Corporation" but has changed its corporate name to "Kinder Morgan, Inc."
WHEREAS, Seller owns all of the outstanding capital stock of Enron Liquids
Pipeline Company, a Delaware corporation ("ELPC");
WHEREAS, ELPC is the general partner of Enron Liquids Pipeline, L.P., Enron
Liquids Pipeline Operating Limited Partnership, and Enron Transportation
Services, L.P. with approximately an aggregate 2% general partner interest and
approximately a 13% limited partner interest in Enron
Liquids Pipeline, L.P.;
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to acquire from
Seller, the ELPC Shares (as defined below) pursuant to the terms of this
Agreement;
WHEREAS, pursuant to the terms of a Purchase and Sale Agreement dated
January 8, 1997, between Buyer and Seller (the "Prior Contract"), Seller agreed
to sell to Buyer and Buyer agreed to acquire from Seller the ELPC Shares;
WHEREAS, the parties have determined that it is necessary and appropriate
to supersede and replace the Prior Contract in order to implement certain agreed
changes thereto, including the modification of certain representations and
warranties contained in the Prior Contract; and
WHEREAS, as of the date hereof, this Agreement
replaces and supersedes the Prior Contract in all respects;
NOW THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
"Acquired Employees" or "Acquired Employee" shall have the meaning given
such term in Section 6.10.
"Adjusted Purchase Price" shall have the meaning given such term in Section
2.2.
"Affiliate" shall mean with respect to any Person, any Person which
directly or indirectly, controls, is controlled by, or is under a common control
with such Person. The term "control" (including the terms "controlled by" and
"under common control with") as used in the preceding
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sentence means the possession, directly or indirectly, of the power to direct or
cause the direction of management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise, and with respect to
any ERISA regulated Benefit Plan shall have the meaning ascribed thereto in
Section 414 of the IRC and the rules and regulations thereunder.
"API" shall have the meaning given such term in the Partnership Agreement
of ELPLP.
"Applicable Period" shall have the meaning set forth in the Omnibus
Agreement.
"Balance Sheets" shall have the meaning given such term in Section 4.7.
"Benefit Plans" shall mean collectively, the Plans and each other plan,
contract, or arrangement providing for bonuses, pensions, deferred compensation,
retirement plan payments, profit sharing, incentive pay, hospitalization or
medical expenses or insurance for any officer, consultant, director or employee
associated with ELPC's Business and/or their covered dependents (other than
directors' and officers' liability policies), whether or not insured.
"Buyer Controlled Group" shall have the meaning given such term in Section
6.10.
"Buyer Indemnitees" shall have the meaning given such term in Section 11.2.
"Buyer Material Adverse Effect" shall mean any material and adverse effect
on the assets, liabilities, financial condition, business, operations, affairs
or circumstances of Buyer.
"Closing" shall have the meaning given such term in Section 3.1.
"Closing Date" shall have the meaning given such term in Section 3.1.
"Contracts" shall have the meaning given to such term in Section 4.9.
"Customary Post Closing Consents" shall mean consents and approvals from
Governmental Authorities or third parties that are customarily obtained after
Closing in connection with transactions similar in nature to the transactions
contemplated hereby.
"Effective Time" shall mean 11:59 p.m. on the Closing Date.
"ELPC's Business" shall mean the conduct, direction and management of
ELPLP, ELPOLP, ETS and ENGL pursuant to the terms of the Partnership Agreements.
"ELPC Shares" shall mean all of the issued and outstanding shares of common
stock, par value $10.00 per share, of Enron Liquids Pipeline Company, a Delaware
corporation.
"ELPLP" shall mean Enron Liquids Pipeline, L.P.
"ELPOLP" shall mean Enron Liquids Pipeline Operating Limited Partnership.
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"ELSC" shall mean Enron Liquid Services Corp., a Delaware corporation.
"ENGL" shall mean Enron Natural Gas Liquids
Corporation.
"Employee Schedule" shall have the meaning given such term in Section 6.10.
"Encumbrance" shall mean any lien, pledge, condemnation proceeding, claim,
restriction, security interest, mortgage or similar encumbrance.
"Environmental Laws" shall mean, as to any given asset, all laws, statutes,
ordinances, rules and regulations of any Governmental Authority pertaining to
protection of the environment or human health in effect as of the date hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and the regulations promulgated and rulings issued thereunder.
"ETS" shall mean Enron Transportation Services, L.P.
"Excluded Affiliate" shall mean those Affiliates which Enron Corp. or its
Affiliates own less than 80% of the outstanding common stock, partnership
interest or joint venture interest, as the case may be.
"FTC" shall mean the United States Federal Trade Commission.
"GAAP" shall mean generally accepted accounting principles.
"General Partner Interest" shall mean the 1% general partner interest in
ELPLP and the 1.0101% general partner interest in each of ELPOLP and ETS.
"Governmental Authority" shall mean the United States and any state,
county, city or other political subdivision, agency, department, board, court or
instrumentality that exercises jurisdiction over the asset or entity in
question.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976 and the rules and regulations adopted pursuant thereto.
"Income Taxes" shall mean federal income taxes as provided in IRC ss.11,
alternative minimum tax as provided in IRC ss.55, and any state taxes measured
by net income, and any interest and penalties thereon.
"IRC" shall mean the Internal Revenue Code.
"JAMS" shall mean Judicial Arbitration & Mediation Services, Inc.
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"Knowledge" or "known" or any similar term shall mean the actual knowledge
of such person's executive officers and key operational and management
personnel.
"Law" shall mean any statute, law, ordinance, rule, regulation or order of
any Governmental Authority.
"Letter of Credit" shall mean an irrevocable standby letter of credit
issued by a bank acceptable to Enron Corp. for the benefit of Enron Corp. in an
amount equal to Enron Corp.'s maximum remaining liability (measured from time to
time) for the purchase of APIs during the "Support Period" (as defined in the
ELPLP Partnership Agreement) having an expiry date of November 21, 1997.
"Limited Partner Interest" shall mean the 860,000 limited partner units in
ELPLP, which represents approximately a 13% limited partner interest in ELPLP,
and includes the Retained LP Units and the Transferred LP Units.
"Losses" shall have the meaning given such term in Section 11.1
"Net Worth Note" shall mean that certain demand promissory note of Enron
Corp. payable to ELPC in the original principal amount of $14.5 million.
"Omnibus Agreement" shall mean that certain Omnibus Agreement, dated as of
August 6, 1992, among Enron Corp., ELPLP, ETS, ELPOLP and ELPC, as amended.
"Partnership Agreements" shall mean the agreements of limited partnership,
as amended from time to time, of ELPLP, ELPOLP and ETS.
"Past Service" shall have the meaning given such term in Section 6.10.
"Pension Plan" shall mean any "employee pension benefit plan" as such term
is defined in Section 3(2) of ERISA which is maintained by, or otherwise
contributed to or sponsored by, Seller or any ERISA Affiliate for the benefit of
the employees associated with ELPC's Business.
"Plan" shall mean any "employee benefit plan" as such term is defined in
Section 3(3) of ERISA which is maintained by, or otherwise contributed to or
sponsored by, Seller or any ERISA Affiliate for the benefit of the employees
associated with ELPC's Business.
"Purchase Price" shall have the meaning given such term in Section 2.2.
"Records" shall have the meaning given such term in Section 6.8.
"Retained Liabilities" shall mean the liabilities, duties and obligations
of ELPC described on Exhibit A.
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"Retained LP Units" shall mean the 431,000 limited partner units in ELPLP
which will be owned by ELPC after sale of the Transferred LP Units.
"Seller Group" shall have the meaning given such term in Section 7.1.
"Seller Indemnitees" shall have the meaning given such term in Section
11.1.
"Seller Material Adverse Effect" shall mean any material and adverse effect
on the use, ownership or operation of ELPC and ELPC's Business, taken as a
whole.
"Tax" or "Taxes" shall mean all taxes, however denominated, including any
interest, penalties or other additions to tax that may become payable in respect
thereof, imposed by any federal, territorial, state, local or foreign government
or any agency or political subdivision of any such government, which taxes shall
include, without limiting the generality of the foregoing, all income or profits
taxes (including, but not limited to, federal income taxes and state income
taxes), real property gains taxes, payroll and employee withholding taxes,
unemployment insurance taxes, social security taxes, sales and use taxes, ad
valorem taxes, excise taxes, franchise taxes, gross receipts taxes, business
license taxes, occupation taxes, real and personal property taxes, stamp taxes,
environmental taxes, transfer taxes, workers' compensation, and other
obligations of the same or of a similar nature to any of the foregoing.
"Tax Returns" all returns and reports of or with respect to any federal,
state or other tax which are required to be filed with respect to ELPC.
"Transfer Taxes" shall mean all transfer Taxes (excluding Taxes measured by
net income), including without limitation sales, use, excise (including excise
Taxes on petroleum, products of petroleum, petrochemicals and other taxable
substances), stock, stamp, documentary, filing, recording, permit, license,
authorization, and similar Taxes, filing fees and similar charges.
"Transferred LP Units" shall mean the 429,000 limited partner units in
ELPLP which will be sold by ELPC prior to Closing.
ARTICLE 2
PURCHASE AND SALE
2.1 Purchase and Sale. Subject to the terms and conditions hereof, at the
Closing (i) Seller agrees to sell to Buyer the ELPC Shares for the payment to
Seller equal to the Purchase Price, and Buyer agrees to purchase from Seller the
ELPC Shares for the Purchase Price.
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2.2 Purchase Price. Buyer agrees to pay an aggregate amount to Seller of
$21,744,981 (the "Purchase Price"), as adjusted at Closing pursuant to Section
2.3 of this Agreement (the "Adjusted Purchase Price") by means of a completed
Federal Funds wire transfer of immediately available funds to an account
designated by Seller.
2.3 Adjustments to the Purchase Price. (a) The Purchase Price shall be
increased by the following amounts:
(i) All capital contributions, including the purchase by ELPC of APIs,
if any, required to be made pursuant to the Partnership Agreement of ELPLP,
made by ELPC with respect to any of the General Partner Interests, which
are attributable to the period of time from and after January 8, 1997 to
the Effective Time;
(ii) all pre-paid items that are attributable to ELPC as of the
Effective Time, such prepaid items to be determined in accordance with GAAP
and in a manner consistent with the accounting practices used in preparing
the historical Balance Sheet, and such increase will be made only to the
extent the prepaid items have not been distributed to Seller in connection
with the transfer of ELPC's current assets to Seller as contemplated in
Section 6.3;
(iii) the pro rata portion of any distributions payable by ELPLP,
ELPOLP or ETS on the General Partner Interests and the Retained LP Units
after the Closing that are attributable to the fourth quarter of 1996
(unless such amount is dividended to Seller pursuant to Section 6.3) and
the first quarter of 1997;
(iv) the distribution payable by ELPLP on the Transferred LP Units
after the Closing that are attributable to the fourth quarter of 1996
(unless such amount is dividended to Seller pursuant to Section 6.3);
(v) if the distribution on the Transferred LP Units with respect to the
first quarter of 1997 exceeds $.63 per Transferred LP Unit, then an amount
equal to (.5) * (x - $.63) * (429,000) where x equal the distribution per
Transferred LP Unit with respect to the first quarter of 1997;
(vi) the amount, if any, of fees, royalties and charges of third
parties incurred by Seller or its Affiliates to obtain consents, additional
licenses or sublicenses and other documentation necessary for Seller or its
Affiliates to transfer, assign or license to Buyer such software determined
by Seller and Buyer as necessary for Buyer to operate ELPC's Business; and
(vii) any other amount specifically provided for in this Agreement or
agreed upon in writing by Buyer and Seller.
(b) The Purchase Price shall be decreased by any amount specifically
provided for in this Agreement or agreed upon in writing by Buyer and Seller.
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(c) The adjustments described in Sections 2.3(a) and (b) are hereinafter
referred to as the "Purchase Price Adjustments".
2.4 Statement. Not later than three (3) business days prior to the Closing
Date, Seller shall prepare and deliver to Buyer a statement (the "Statement") of
the estimated Purchase Price Adjustments and the estimated Adjusted Purchase
Price ("Estimated Adjusted Purchase Price"). At Closing, Buyer shall pay the
Estimated Adjusted Purchase Price.
2.5 Post-Closing Adjustments to the Purchase Price. (a) On or before ninety
(90) days after the Closing Date, Seller shall prepare and deliver to Buyer a
revised Statement setting forth the actual Purchase Price Adjustments. To the
extent reasonably required by Seller, Buyer shall assist in the preparation of
the revised Statement. Seller shall provide Buyer such data and information as
Buyer may reasonably request supporting the amounts reflected on the revised
Statement in order to permit Buyer to perform or cause to be performed an audit.
The revised Statement shall become final and binding upon the parties on the
30th day following receipt thereof by Buyer (the "Final Settlement Date") unless
Buyer gives written notice of its disagreement ("Notice of Disagreement") to
Seller prior to such date. Any Notice of Disagreement shall specify in detail
the dollar amount, nature and basis of any disagreement so asserted. If a Notice
of Disagreement is received by Seller in a timely manner, then the Statement (as
revised in accordance with clause (i) or (ii) below) shall become final and
binding on the parties on, and the Final Settlement Date shall be, the earlier
of (i) the date Seller and Buyer agree in writing with respect to all matters
specified in the Notice of Disagreement or (ii) the date on which the Final
Statement (as hereinafter defined) is issued by the Arbitrator (as hereinafter
defined).
(b) During the thirty (30) days following the date of receipt by Seller of
the Notice of Disagreement, Seller and Buyer shall attempt to resolve in writing
any differences that they may have with respect to all matters specified in the
Notice of Disagreement. If, at the end of such 30 day period (or earlier by
mutual agreement to arbitrate), Buyer and Seller have not reached agreement on
such matters, the matters that remain in dispute may be submitted to an
arbitrator (the "Arbitrator") by either party for review and resolution. The
Arbitrator shall be a nationally recognized independent public accounting firm
as shall be agreed upon by Buyer and Seller in writing. Each party shall, not
later than seven (7) business days prior to the hearing date set by the
Arbitrator, submit a brief with dollar figures for settlement of the disputes as
to the amount of the Adjusted Purchase Price (together with a proposed Statement
that reflects such figures). The figures submitted need not be the figures
offered during prior negotiations. The hearing will be scheduled seven (7)
business days following submission of the settlement figures, or as soon
thereafter as is acceptable to the Arbitrator, and shall be conducted on a
confidential basis without continuance or adjournment. The Arbitrator shall
render a decision resolving the matters in dispute (which decision shall include
a written statement of findings and conclusions) within three (3) business days
after the conclusion of the hearing, unless the parties reach agreement prior
thereto and withdraw the dispute from arbitration. The Arbitrator shall provide
to the parties explanations in writing of the reasons for its decisions
regarding the Adjusted Purchase Price and shall issue the Final Statement
reflecting such decisions. The decision of the Arbitrator shall be final and
binding on the parties. The cost of any arbitration (including the fees and
expenses of the Arbitrator) pursuant to this Section 2.5 shall be borne equally
by Buyer, on the one hand, and Seller, on the other hand. The fees and
disbursements of Seller's independent auditors incurred
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in connection with the procedures performed with respect to the Statement shall
be borne by the Seller and the fees and disbursements of Buyer's independent
auditors incurred in connection with their preparation of the Notice of
Disagreement shall be borne by Buyer. As used in this Agreement the term "Final
Statement" shall mean the revised Statement described in Section 2.5(a), as
prepared by Seller and as may be subsequently adjusted to reflect any subsequent
written agreement between the parties with respect thereto, or if submitted to
the Arbitrator, the Statement issued by the Arbitrator.
(c) If the amount of the Adjusted Purchase Price as set forth on the Final
Statement exceeds the amount of the Estimated Adjusted Purchase Price paid at
Closing, then Buyer shall pay to Seller, within five (5) business days after the
Final Settlement Date, the amount by which the Adjusted Purchase Price as set
forth on the Final Statement exceeds the amount of the Estimated Adjusted
Purchase Price paid at Closing. If the amount of the Adjusted Purchase Price as
set forth on the Final Statement is less than the amount of the Estimated
Adjusted Purchase Price paid at Closing, then Seller shall pay to Buyer, within
five (5) business days after the Final Settlement Date, the amount by which the
Adjusted Purchase Price as set forth on the Final Statement is less than the
amount of the Estimated Adjusted Purchase Price paid at Closing. Any
post-Closing payment made pursuant to this Section 2.5(c) shall be made by means
of a Federal Funds wire transfer of immediately available funds to a bank
account designated by the party receiving the funds.
ARTICLE 3
CLOSING
3.1 Time and Place of Closing. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at 10:00 a.m. in
the offices of Seller at 1400 Smith Street, Houston, Texas 77002, on the last
business day of the month in which all conditions set forth in Articles 8 and 9
have been satisfied or waived by the appropriate party (the "Closing Date"), and
shall be effective as of the Effective Time; provided, however, that the parties
shall have the right to delay the Closing until February 28, 1997.
3.2 Deliveries by Seller and Buyer at or Prior to Closing. At the Closing,
(i) Seller and Buyer will execute and deliver, or cause their respective
Affiliates to execute and deliver, the agreement referred to in Section 8.4(i),
(ii) Seller will deliver to Buyer stock certificates representing all of the
ELPC Shares endorsed in blank or accompanied by duly executed assignment
documents, (iii) Seller and ELPC will execute and deliver an assignment and
assumption agreement, in substantially the form of Exhibit B attached hereto,
pursuant to which the accounts receivable and Retained Liabilities will be
assigned to, and assumed by, Seller; (iv) if agreed to by the parties, Seller
and Buyer will execute and deliver an agreement regarding transition services in
a form mutually agreeable to the parties, (v) Buyer shall deliver to Seller the
Letter of Credit, and (vi) Buyer will deliver to Seller the estimated Adjusted
Purchase Price.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as of the date hereof and as of the
Closing Date that:
4.1 Organization and Good Standing of Seller and ELPC. Each of Seller and
ELPC is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, with full corporate power, right and
authority to own and lease the properties and assets it currently owns and
leases and to carry on its business as such business is currently being
conducted. On or before the date hereof Seller has delivered to Buyer true and
complete copies of the charter and bylaws of ELPC, each as amended to date and
presently in effect. Section 4.1 of the Disclosure Schedule lists the officers
and directors of ELPC.
4.2 Qualification. Except as set forth in Section 4.2 of the Disclosure
Schedule ELPC is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which the nature of ELPC's Business
makes such qualification necessary, except where the failure to be so qualified
or in good standing would not have a Seller Material Adverse Effect.
4.3 Capitalization of ELPC. Section 4.3 of the Disclosure Schedule sets
forth for ELPC, the number of authorized shares of its capital stock, the number
of issued and outstanding shares of its capital stock and the owner thereof. The
issued and outstanding capital stock of ELPC has been duly authorized, validly
issued, fully paid and is nonassessable. There are no preemptive rights with
respect to the issuance of the shares of capital stock of ELPC. There are no
outstanding options, warrants, purchase rights, conversion rights, exchange
rights, or other contracts or commitments that could require ELPC to issue, sell
or otherwise cause to become outstanding any of such entity's capital stock.
There are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of the capital stock of ELPC.
4.4 Authorization of Agreement; No Violation; No Consents. This Agreement
has been duly executed and delivered by Seller. Seller has the full corporate
power and authority to enter into this Agreement, to make the representations,
warranties, covenants and agreements made herein and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by all requisite corporate action on the part
of Seller. Except as set forth on Section 4.4 of the Disclosure Schedule,
neither the execution and delivery of this Agreement by Seller nor the
consummation by Seller of the transactions contemplated hereby (a) will conflict
with, result in a breach, default or violation of, require consent of any third
party or give rise to a right of acceleration, termination, option to purchase
or sell any asset or otherwise adjust any material term (e.g., any price or
interest rate) (with or without notice, lapse of time, or both) under (i) the
terms, provisions or conditions of the Certificate of Incorporation or Bylaws of
Seller or ELPC or under the Partnership Agreements, or (ii) to the knowledge of
Seller, any judgment, decree, order, governmental permit, certificate, license,
law, statute, rule, regulation or material contract or agreement to which Seller
or ELPC is a party or is subject, or to which ELPC's Business is subject, except
for (A) Customary Post-Closing Consents, and (B) any conflict, breach, default,
violation, or consent that would not have, individually or in the aggregate, a
Seller Material Adverse Effect, or (b) will result in the creation
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of any Encumbrance on the ELPC Shares, the General Partnership Interests or the
Limited Partner Interests or other assets of ELPC, ELPLP, ELPOLP, ETS or ENGL.
4.5 Governmental Consents. To the knowledge of Seller and except as set
forth on Section 4.5 of the Disclosure Schedule, no consent, action, approval or
authorization of, or registration, declaration or filing with, any Governmental
Authority is required to authorize, or is otherwise required in connection with,
the execution and delivery of this Agreement by Seller or Seller's performance
of the terms of this Agreement or the validity or enforceability hereof against
Seller, except for Customary Post-Closing Consents.
4.6 Enforceability. This Agreement constitutes the legal, valid and binding
obligation of Seller enforceable against Seller in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting creditors' rights generally and general principles
of equity.
4.7 Balance Sheet. Section 4.7 of the Disclosure Schedule sets forth the
unaudited historical and pro forma balance sheets as of September 30, 1996 of
ELPC (the "Balance Sheets"). In the opinion of management of Seller, the
historical Balance Sheet has been prepared in accordance with GAAP, except as
stated therein, and fairly presents in all material respects the financial
position of ELPC at September 30, 1996, and (ii) the pro forma Balance Sheet
includes adjustments, as stated therein, contemplated by this Agreement.
4.8 Absence of Changes. Except as set forth in Section 4.8 of the
Disclosure Schedule, since September 30, 1996:
(a) there has not been any Seller Material Adverse Effect;
(b) there has been no issuance by ELPC of any shares of its capital stock,
or any repurchase or redemption by it of any shares of its capital stock;
(c) there has been no merger or consolidation of ELPC with any other person
or any acquisition by any such entity of the stock or business of any other
person;
(d) there has not been any sale, lease or other disposition of properties
or assets of ELPC, other than those in the ordinary course of business that have
not resulted in a Seller Material Adverse Effect;
(e) there has been no borrowing of funds, agreement to borrow funds or
guaranty by ELPC, other than loans or guaranties in the ordinary course of
business for the benefit of ELPLP, ELPOLP, ETS or ENGL, and transactions with
Seller or its Affiliates (other than ELPLP, ELPOLP, ETS and ENGL), which
transactions with Seller or its Affiliates will be settled at Closing;
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(f) there has been no creation or imposition of any Encumbrance on the
General Partner Interests or the Limited Partner Interests, other than pursuant
to the Partnership Agreements;
(g) ELPC has not made or entered into any employment, consulting, severance
or indemnification agreement with any employees, nor has ELPC incurred or
entered into any collective bargaining agreement or other obligation to any
labor organization or employee;
(h) there is no contract, commitment or agreement to do any of the
foregoing, except as expressly permitted hereby;
(i) ELPC and ELPC's Business have been operated and conducted only in the
ordinary course of business.
4.9 Contracts. (a) Section 4.9 of the Disclosure Schedule includes a list
of all contracts and agreements to which ELPC is a party in its own behalf, and
not solely as the general partner of ELPLP, ELPOLP or ETS (the "Contracts"),
except that the provisions of paragraph (b) of this Section 4.9 shall not apply
to those items marked with an asterisk in Section 4.9 of the Disclosure
Schedule.
(b) Each such Contract is in full force and effect, except where the
failure to be in full force and effect is not reasonably likely to have a Seller
Material Adverse Effect. ELPC has in all respects performed all material
obligations required to be performed by it to date under the Contracts, and is
not in default under any material obligation of any such contracts and no
circumstance or condition exists which with notice or lapse of time, or both,
would constitute a default under any such contract. To the knowledge of Seller,
no other party to any Contract is in default thereunder.
4.10 Suits. Except as set forth in Section 4.10 of the Disclosure Schedule,
there is no legal, administrative or arbitration proceeding pending or, to the
knowledge of Seller, threatened before any Governmental Authority against (a)
Seller (i) in connection with the ownership of the ELPC Shares or (ii) that
would prohibit or delay in any material respect the consummation of the
transactions contemplated hereby, or (b) ELPC.
4.11 Compliance With Laws. To the knowledge of Seller, ELPC is in
substantial compliance with each Law applicable to it and related to ELPC or
ELPC's Business, as the case may be, except for any violation that would not
have a Seller Material Adverse Effect. To the knowledge of Seller, ELPC
possesses all governmental licenses, permits, and certificates necessary for the
current operation of ELPC's Business except to the extent such permits are held
by ELPOLP, ETS or ENGL or that the failure to possess such governmental
licenses, permits, and certificates would not have a Seller Material Adverse
Effect. Nothing in this Section 4.11 shall be deemed or construed to constitute
a representation or warranty with respect to Environmental Laws.
4.12 Tax Matters. Except as set forth in Section 4.12 of the Disclosure
Schedule or as would not have a Seller Material Adverse Effect:
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(a) all returns and reports of or with respect to any Tax which are
required to be filed on or before the Closing Date by or with respect to ELPC
("Tax Returns") have been or will be duly and timely filed;
(b) all Taxes which are shown to be due on such Tax Returns have been or
will be timely paid in full; (c) all Tax withholding requirements imposed on or
with respect to ELPC have been satisfied in full in all respects; (d) no
assessment, deficiency or adjustment has been asserted in writing with respect
to any such Tax Return; and (e) there is not in force any extension of time with
respect to the due date for the filing of any such Tax or any waiver or
agreement for any extension of time for the assessment or payment of any Tax due
with respect to the period covered by any such Tax Return.
(c) ELPC has made valid elections under IRC Section 754 for ELPLP, ELPOLP
and ETS, and such elections have been valid, binding and in force since the
formation date of each of such entities and through the Closing Date.
4.13 Condition of the Assets; Preferential Rights to Purchase. (a) ELPC
owns the General Partner Interests and the Retained L.P. Units free and clear of
all Encumbrances, subject to the terms and provisions of the Partnership
Agreements and the Omnibus Agreement. At the time of the sale of the Transferred
LP Units, ELPC owned such units free and clear of any Encumbrances, subject to
the terms of the Partnership Agreement of ELPLP. Except for applicable
requirements of federal and state securities laws, there are no restrictions
upon the sale, transfer or assignment by ELPC of the Limited Partner Interests.
On the Closing Date immediately after the Closing, all of the conditions and
requirements set forth in the Partnership Agreement of ELPLP will be satisfied
and the Limited Partner Interest will be converted from "Deferred Participation
Units" to "Common Units" (as such terms are defined in the Partnership Agreement
of ELPLP) in the manner described in Section 5.7(c) of such Partnership
Agreement.
(b) Except as listed in Section 4.13 of the Disclosure Schedule or
elsewhere in this Agreement, there are no rights to purchase the General Partner
Interests or the Limited Partner Interests or the ELPC Shares.
(c) Seller is the owner, free and clear of any Encumbrances, of the ELPC
Shares.
4.14 Employees and Employee Benefit Plans and Policies. ELPC in its
capacity as general partner of ETS is a party to a collective bargaining
agreement with Local 318, International Union Of Operating Engineers, AFL-CIO
(the "IUOE Bargaining Agreement"). Seller has provided Buyer with a copy of the
IUOE Bargaining Agreement and a list indicating the job position of each
employee of ELPC who is represented thereby with respect to employment with
ELPC. ELPC is not a party to or bound by any other collective bargaining
agreement with respect to its employees. No material work stoppage affecting
ELPC is pending or, to the knowledge of Seller, threatened. There is no pending
or, to Seller's knowledge, any threatened labor dispute, arbitration, lawsuit,
or administrative proceeding relating to labor matters involving employees of
ELPC (excluding routine workers' compensation claims) that could reasonably be
expected to have a Seller Material Adverse Effect.
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4.15 Employee Matters. (a) Employment Obligations. Part I of Section 4.15
of the Disclosure sets forth a list of each individual employment, consulting,
severance, indemnification, or similar agreement, arrangement or contract
related to employment or personal services that exists between ELPC and any
current or former officer, consultant, director, employee or other person or
entity (all such agreements or contracts are hereinafter referred to as the
"Employment Obligations"), for which ELPC has an existing or future obligation.
True, correct and complete copies of governing documents for each of the
Employment Obligations have been furnished to Buyer.
(b) Company Employees. Except as may occur in the ordinary course of
business, there shall be no change in the job title or position, base salary,
work location or amount of eligible bonus for any of the employees of ELPC (the
"Company Employees") from the date of this Agreement until the Closing. Company
Employees who are not covered under a collective bargaining agreement or Skill
Based Pay are eligible for annual merit increases effective February 1, 1997,
not to exceed a budgeted amount equal to 4.25 percent of aggregate base
salaries.
(c) ELPC's Plans and Compensation Schedule. ELPC is neither the sponsor of
nor a "substantial employer" (as such term is defined in Section 4001(a)(2) of
ERISA) in any "employee benefit plan" (and any related trust or funding
arrangement) as such term is defined in Section 3(3) of ERISA ("Employee Benefit
Plan"). ELPC is a participating employer in certain Employee Benefit Plans
sponsored by an affiliated company of Seller which provide benefits for Company
Employees who are not a members of or represented by a collective bargaining
unit ("Enron's Plans") Except as disclosed on Section 4.15 of the Disclosure
Schedule, no Company Employee who is a member of or represented by a collective
bargaining unit is a participant in any of Enron's Plans. Part II of Section
4.15 of the Disclosure Schedule (the "Compensation Schedule") sets forth a list
identifying each compensation or remuneration plan or program that is not an
Employee Benefit Plan, excluding any collective bargaining agreement, that is
maintained by ELPC for any of ELPC Employees.
(d) No Changes. Except as provided by this Agreement or as required by law,
through the Closing Date, there will be no change in any of the Employment
Obligations or Enron's Plans, or in the administration thereof, that would have
a material adverse effect on ELPC.
(e) Multi-Employer Plans. (i) Part III of Section 4.15 of the Disclosure
Schedule lists each Employee Benefit Plan which is a multi-employer plan (within
the meaning of section 3(37) of ERISA) ("Multi-Employer Plan") to which ELPC has
or has had within the last seven (7) years an obligation to contribute or with
respect to which ELPC has participated, subscribed to or maintained.
(ii) Copies of all current and prior material documents, including all
amendments thereto, in the possession of ELPC with respect to each
Multi-Employer Plan have been delivered to Buyer. These documents include,
but are not limited to, the following: collective bargaining agreements,
plan and trust documents, plan rules with respect to withdrawal, estimates
of withdrawal liability, and statements of unfunded vested benefits and
contribution history.
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(iii) Part IV of Section 4.15 of the Disclosure Schedule sets out the
amount of contributions, and the number of contribution base units with
respect to such contributions, that ELPC has made to each Multi-Employer
Plan for each plan year of such Plan.
(iv) Part V of Section 4.15 of the Disclosure Schedule sets out the
liabilities that ELPC would incur with respect to each Multi-Employer Plan
on a complete withdrawal from each such Plan as of the most recent
calculation, under the applicable terms and conditions of each such Plan
and the applicable provisions of law.
(v) ELPC has not made a complete or partial withdrawal from any
Multi-Employer Plan for which a liability does or shall exist.
(vi) Except with respect to contributions owed under collective
bargaining agreements with respect to each Multi-Employer Plan, ELPC has
and has had no liability to or in connection with any Multi-Employer Plan
and will not incur any such liability on or before the Closing Date. All
obligations of ELPC to contribute to any Multi-Employer Plan incurred or
accrued as of the Closing Date have been or will be paid in full by ELPC.
4.16 Public Filings. There have been no material misstatements or omissions
in any Annual Report on Form 10-K, Quarterly Report on Form 10-Q, or Current
Report on Form 8-K, or any amendment to any of the foregoing filed by ELPLP with
the Securities and Exchange Commission with respect to its fiscal year ended
December 31, 1993 or thereafter.
4.17 Brokers. No broker or finder who acted on behalf of Seller or any
Affiliate of Seller is entitled to any brokerage or finder's fee, or to any
commission, based in any way on agreements, arrangements or understandings made
by or on behalf of Seller or any Affiliate of Seller for which the Buyer or ELPC
has or will have any liabilities or obligations (contingent or otherwise).
4.18 Suits Against the Partnerships. Except as set forth in Section 4.18 of
the Disclosure Schedule, there is no legal, administrative or arbitration
proceeding pending or, to the knowledge of Seller, threatened before any
Governmental Authority against ELPLP, ELPOLP, ETS or ENGL.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as of the date hereof and as of the
Closing Date that:
5.1 Organization and Good Standing. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
with full corporate power, right and authority to own and lease the properties
and assets it currently owns and leases and to carry on its business as such
business is currently being conducted.
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5.2 Authorization of Agreement; No Violation; No Consents. This Agreement
has been duly executed and delivered by Buyer. Buyer has the full corporate
power and authority to enter into this Agreement, to make the representations,
warranties, covenants and agreements made herein and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by all requisite corporate action on the part
of Buyer. Neither the execution and delivery of this Agreement by Buyer nor the
consummation by Buyer of the transactions contemplated hereby will conflict
with, result in a breach, default or violation of, or require the consent of a
third party under (a) the terms, provisions or conditions of the Certificate of
Incorporation or Bylaws of Buyer or (b) to the knowledge of Buyer, any judgment,
decree, order, governmental permit, certificate, material agreement, license,
law, statute, rule or regulation to which Buyer is a party or is subject, or to
which the business, assets or operations of Buyer are subject, except for (i)
Customary Post-Closing Consents, and (ii) any conflict, breach, default or
violation that is not reasonably likely to have, individually or in the
aggregate, a Buyer Material Adverse Effect.
5.3 Governmental Consents. To the knowledge of Buyer, no consent, action,
approval or authorization of, or registration, declaration, or filing with, any
Governmental Authority is required to authorize, or is otherwise required in
connection with, the execution and delivery of this Agreement by Buyer or
Buyer's performance of the terms of this Agreement or the validity or
enforceability hereof against Buyer, except for Customary Post-Closing Consents.
5.4 Enforceability. This Agreement constitutes the legal, valid and binding
obligation of Buyer enforceable against Buyer in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting creditors' rights generally and general principles
of equity.
5.5 Suits. There is no injunction or restraining order or legal,
administrative or arbitration proceeding pending or, to Buyer's knowledge,
threatened against Buyer which restrains or prohibits the consummation of the
transactions contemplated by this Agreement.
5.6 Financing. Buyer currently has commitments for (including commitments
for funds that can be drawn under existing lines of credit) all funds necessary
to pay the Purchase Price and any other amounts contemplated by this Agreement.
5.7 Value of Buyer's Assets. Buyer represents and warrants that its
"ultimate parent entity" (as that term is defined under the HSR Act) does not
have total assets or annual net sales of $10 million or more so as to require a
filing of the Notification and Report Form under the HSR Act.
5.8 Performance of Obligations. Buyer has reviewed the Partnership
Agreements and the Omnibus Agreement and understands the obligations of ELPC
thereunder. Following the Closing, ELPC will have the ability to perform all of
its obligations under the Partnership Agreement and the Omnibus Agreement to the
same extent it did prior to the Closing.
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5.9 Brokers. No broker or finder has acted for or on behalf of Buyer or any
Affiliate of Buyer in connection with this Agreement or the transactions
contemplated by this Agreement. No broker or finder is entitled to any brokerage
or finder's fee, or to any commission, based in any way on agreements,
arrangements or understandings made by or on behalf of Buyer or any Affiliate of
Buyer for which Seller have or will have any liabilities or obligations
(contingent or otherwise).
ARTICLE 6
COVENANTS
6.1 Commercially Reasonable Efforts. Each of the Buyer and Seller will use
commercially reasonable efforts to obtain the satisfaction of all conditions of
Closing attributable to such party in an expeditious manner.
6.2 Conduct of Business Prior to the Effective Time. (a) ELPC will continue
to operate ELPC's Business in all material respects in the ordinary course of
business and in accordance with the terms and provisions of the Partnership
Agreements and the Omnibus Agreement;
(b) Except as disclosed in Schedule 6.2(b) and except as provided in this
Agreement, Seller will not and will not cause or permit ELPC to, directly or
indirectly, do any of the following: (i) issue, sell, pledge, dispose of or
encumber: (A) any capital stock of ELPC or ENGL or (B) any of the General
Partner Interests, Limited Partner Interests or other general or limited partner
interests in ELPLP, ELPOLP or ETS or (C) any Common Units of ELPLP, (ii) amend
or propose to amend the charter or bylaws of ELPC or ENGL, (iii) amend or
propose to amend the certificate of limited partnership of ELPLP, ELPOLP or ETS,
the Partnership Agreements or the Omnibus Agreement, (iv) split, combine or
reclassify any outstanding capital stock of ELPC or ENGL, (v) redeem, purchase
or acquire or offer to acquire any such capital stock, (vi) incur any
indebtedness for borrowed money other than in the ordinary course of business,
(vii) enter into any transaction with Seller or any of its Affiliates (other
than ELPLP, ELPOLP, ETS or ENGL) other than in the ordinary course of business,
(viii) dividend any property, plant or equipment reflected on the Balance Sheets
(other than cash distributions received in respect of the General Partner
Interests or the Limited Partner Interests and the Net Worth Note) or the
proceeds from the sale thereof, other than proceeds from the sale of assets in
the ordinary course of business, or (ix) enter into any contract, agreement,
commitment or arrangement with respect to any of the matters prohibited by this
Section 6.2(b).
6.3 Dividends. On or before the Closing Date, Seller shall have the right
to cause ELPC to dividend to Seller any or all of the current assets of ELPC,
including distributions received from ELPLP, ELPOLP or ETS with respect to the
fourth (4th) quarter of 1996.
6.4 Credit Rating; Letters of Credit. (a) Buyer shall deliver to Seller the
Letter of Credit. The Letter of Credit will be in a form subject to the
reasonable satisfaction of Seller and Buyer and may only be drawn upon by Enron
Corp. to the extent Buyer fails to make any contributions to ELPLP which are
required under Part B of the Omnibus Agreement, and all proceeds of any such
draw will be contributed to ELPLP in exchange for APIs. All such APIs will be
issued to Buyer, or its designee.
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(b) At Closing, Buyer shall cause to be delivered to Seller an opinion of
legal counsel, in form and substance reasonably satisfactory to Buyer, to the
effect that ELPLP will continue to be classified as a partnership for tax
purposes, notwithstanding the distribution to Seller prior to Closing, of that
certain $14.5 million demand promissory note of Enron Corp. which opinion shall
contain the following assumptions of fact: (i) ELPLP had a reasonable basis
(within the meaning of Section 6662 of the Internal Revenue Code) for its
claimed classification; (ii) ELPLP did not undergo any change in its
classification since the date of formation of ELPLP; (iii) neither ELPLP nor any
partner of ELPLP has been notified in writing on or before the date of this
opinion that the classification of the entity was under examination; and (iv)
ELPC, as general partner, has made a valid protective election on Form 8832,
Entity Classification Election before March 14, 1997 to be effective as of
January 1, 1997. Buyer shall covenant and agree to abide by any conditions or
assumptions upon which such opinion of counsel is based in order to maintain
such tax status.
(c) Buyer shall cause Enron Corp. to be released from that certain
Guaranty, dated June 25, 1996, for the benefit of Wachovia Bank of Georgia by
either (i) delivering a replacement guaranty acceptable to such Bank, or (ii)
delivering a replacement letter of credit to Bank One, Texas, N.A., as Trustee,
for those certain tax exempt bonds issued by Jackson-Union Counties Regional
Port District due 2024. In either case any fees, charges or expenses to replace
the guaranty or the letter of credit shall be borne by Buyer and not by ETS,
ELPLP, ELPOLP or ENGL.
6.5 Access. Seller will permit Buyer's officers, employees, agents and
advisors to have reasonable access to ELPC and the employees associated with the
operation of ELPC's Business (so long as such access has been arranged through
Seller, occurs during normal business hours and does not unreasonably interfere
with the operation of ELPC's Business) for the following: (a) to inspect
facilities operated by ELPC on behalf of ELPOLP and ETS; (b) to observe the
operation of facilities operated by ELPC on behalf of ELPOLP and ETS and the
performance of duties by the employees associated with the facilities operated
by ELPC on behalf of ELPOLP and ETS prior to the Closing; and (c) related
purposes consistent with this Agreement. Buyer agrees to maintain the
confidentiality of all such information pursuant to the terms of that certain
letter agreement regarding confidentiality dated August 23, 1996, between Enron
Corp. and Morgan Associates, Inc., an Affiliate of Buyer, as amended from time
to time (the "Confidentiality Agreement").
6.6 Transition Services. If deemed appropriate by the parties, Buyer and
Seller agree to negotiate an agreement regarding transition services containing
terms and conditions mutually agreeable to the parties, which agreement may be
executed by the parties and delivered at the Closing.
6.7 Computer Software. Schedule 6.7 sets forth a preliminary list of (i)
computer hardware that will not be transferred to Buyer because it is not used
exclusively in connection with the operation of ELPC's Business, and (ii)
software that Seller does not have the right to transfer, assign or license to
Buyer, which could cost $25,000 or more for Buyer to acquire. Buyer and Seller
will cooperate with each other to (a) identify at least fourteen (14) days prior
to the anticipated Closing Date those computer software systems currently being
used to operate ELPC's Business that will be needed by Buyer to continue such
operations following the Closing or
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following termination of the Transition Services Agreement, as the case may be,
(b) obtain all necessary third party consents, additional licenses and other
documentation necessary (i) for Seller and its Affiliates to provide the
services contemplated by the Transition Services Agreement, and (ii) for Buyer
to obtain the right to use the third party software identified by Buyer in
clause (a) above, through either a transfer, assignment or license by Sellers or
their Affiliates where legally permissible in the judgment of Sellers, or a
direct purchase by Buyer. In the event and to the extent that Seller or its
Affiliates are unable to transfer, assign or license any particular third party
software to Buyer, Buyer shall purchase its own license and make such
modifications or enhancements as may be necessary to carry on the operation of
ELPC's Business. At or as soon as commercially reasonable following the Closing,
Seller shall, or shall cause its Affiliates to, undertake to transfer, assign,
or license, as appropriate, all computer software systems necessary to operate
ELPC's Business, if such transfer, assignment or license is, in the judgment of
Seller, legally possible, provided, however, Buyer acknowledges that it may not
be possible for Seller to transfer, assign or license all such software systems.
The Purchase Price will be increased by the amount of any fees or charges of
third parties incurred by Seller or its Affiliates in order to take the action
specified in clause (b)(ii) above and agreed to by Seller and Buyer as
necessary. NOTWITHSTANDING THE FOREGOING, THE INABILITY OF SELLER OR ITS
AFFILIATES TO TRANSFER, ASSIGN OR LICENSE ANY SOFTWARE TO BUYER SHALL NOT BE
DEEMED UNDER ANY CIRCUMSTANCES TO BE THE FAULT OF, OR CREATE ANY LIABILITY UNDER
ANY LEGAL THEORY FOR SELLER OR ITS AFFILIATES WHETHER UNDER BREACH OF WARRANTY,
CONTRACT, TORT OR STRICT LIABILITY; IT BEING CLEARLY UNDERSTOOD BY BUYER THAT
SUCH MATTERS ARE BEYOND THE CONTROL OF SELLER OR ITS AFFILIATES.
6.8 Records: Access and Retention. (a) As soon as reasonably possible after
the completion of the accounting cycle for the period up to and including the
Closing Date, Seller will deliver to Buyer all files, records, information and
data ("Records") relating to ELPC or ELPC's Business that are in the possession
or control of Seller or ELPC. After the Closing, Buyer shall give Seller and its
authorized representatives such access, during normal business hours, to the
Records, as may be reasonably required by Seller, provided that such access does
not unreasonably interfere with the ongoing operations of Buyer. Seller shall be
entitled to keep or obtain extracts and copies of such Records.
(b) For a period of three (3) years after the Closing Date, Buyer shall
preserve and retain all such Records; provided, however, that in the event that
Buyer transfers all or a portion of the ELPC Shares or the General Partner
Interests to any third party during such period, Buyer may transfer to such
third party all or a portion of the Records related thereto, provided such third
party transferee expressly assumes in writing the obligations of Buyer under
this Section 6.8 and Buyer first offers to Seller the opportunity, at Seller's
expense, to copy the Records to be transferred.
6.9 Names. As soon as reasonably possible after Closing, but in no event
later than ninety (90) days after Closing, Buyer shall remove the names of
Seller and its Affiliates, including "ENRON" and all variations thereof, from
all of the assets and businesses owned by ELPC, ELPLP, ELPOLP, ETS and ENGL and
make the requisite filings with, and provide the requisite notices to, the
appropriate federal, state or local agencies to place the title or other indicia
of ownership, including operation of ELPC's Business, in a name other than any
name of Seller or
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any of its Affiliates, or any variations thereof. Seller shall file amendments
to the charter documents (and foreign qualification documents) of ELPC and ENGL,
and to the certificate of limited partnership (and foreign qualification
documents) of ELPLP, ELPOLP and ETS to remove "Enron" from each entity's name on
the Closing Date. Seller agrees to include in such amendments any name proposed
by Buyer at least five (5) business days prior to the Closing, provided that
where necessary Buyer delivers to Seller consents to use of such names.
6.10 Employment Matters. (a) Schedule 6.10 attached hereto lists by
category of employee, the number of employees employed by, or allocated to, ELPC
and the average base salary earned by such employees. Seller will deliver to
Buyer approximately thirty (30) days prior to the anticipated Closing Date a
schedule (the "Employee Schedule") to the Vice President, Human Resources of
Buyer that will set forth for each of the Company Employees the individual's (i)
date of employment, (ii) job title or position, (iii) base salary on an hourly
or annualized basis, (iv) work location, (v) collective bargaining unit status,
and (vi) if any, the amount of eligible annual bonus. Seller shall also furnish
Buyer with a copy of the relevant information from each Company Employee's
personnel files and historical compensation data, and such other information
that is reasonably requested by Buyer for the purpose of carrying out the
provisions of this Section 6.10, except as may be prohibited by law or
contractual obligation. Upon Closing, Buyer shall cause ELPC to continue the
employment of all Company Employees who are employed by ELPC on the Closing Date
(the "Continuing Employees") at their current base pay as of such date.
(b) Certain individuals who provide support services for ELPC's Business
and are located in the corporate offices of Seller and its Affiliates are
designated by Seller on the Employee Schedule as "Available Employees." Buyer
agrees to cause a member of the controlled group of which Buyer is a member
(including Buyer (and as of the Closing ELPC) the "Buyer Controlled Group") to
make offers of employment as of the Closing Date to all Available Employees.
Seller shall deliver the Employee Schedule for "Available Employees" on a
confidential basis to the Vice President, Human Resources of Buyer at least 30
days before the anticipated Closing Date showing the name, job position, work
location, and years of Past Service credit for all Available Employees. In
addition, Sellers will provide Buyer on a confidential basis with relevant
written information in Seller's possession regarding each individual's work
qualifications, training history, and prior jobs held while employed by Seller
or any Affiliate. All employment offers to Available Employees (i) shall be made
sufficiently in advance of the Closing so as to give each individual reasonable
time to evaluate such offer and shall contain a condition that such offer be
accepted on a date prior to the Closing Date, and (ii) shall be at an annualized
base salary commensurate with that earned by other similarly situated employees
of the Buyer Controlled Group, taking into account such Available Employee's
qualifications and past experience performing the job for which the employment
offer is made. Available Employees listed on the Employee Schedule who accept
offers of employment and who are employed by a member of the Buyer Controlled
Group also are deemed to be Continuing Employees.
(c) As of Closing, the Continuing Employees participation in all Benefit
Plans sponsored by Seller or any of its Affiliates, or in which they are
participating employers, shall cease, and all liability associated with such
Benefit Plans, including but not limited to funding, claims for benefits, fines,
penalties and taxes, shall remain the liability of the Seller and its
Affiliates. Buyer will, or will cause its Affiliates to, take all action
necessary to cause all such Continuing Employees to be covered under the
employee benefit plans of Buyer or its Affiliates
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(including, without limitation, severance plans) and fringe benefit
arrangements, in each case effective as of the Closing Date, on the same basis
as those provided to Buyer's employees in comparable positions. Buyer will, or
will cause its Affiliates to, take all action necessary to give Continuing
Employees credit for their period of employment with Seller or any Affiliate
thereof ("Past Service") in determining (i) eligibility for participation in any
applicable pension, short term disability, severance and vacation plans
(including, without limitation, eligibility for early retirement), (ii) the
duration and amount, if any, of short term disability and severance benefits,
and (iii) vesting under any applicable pension, short term disability, vacation,
and severance plans. Notwithstanding the foregoing, credit for past service
shall not be given or taken into account in determining the level of employer
contributions or accrued benefits under any pension plan. Buyer represents and
warrants that if and to the extent there is currently no preexisting condition
limitation applicable to Continuing Employees under Seller's Benefit Plans,
there will be no such preexisting condition limitations applicable to Continuing
Employees under any medical and dental plans of Buyer or its Affiliates provided
with respect to each Continuing Employee and his or her covered dependents that
such Continuing Employee and each covered dependent enrolls in such plans within
thirty (30) days of the Continuing Employee commencing employment with Buyer or
a member of the Buyer Controlled Group. Additionally, any Continuing Employee or
covered dependent expenses applied toward deductibles in the year in which
Closing occurs and any out-of- pocket limitations under Seller's medical and
dental plans in the year in which Closing occurs shall be recognized under
Buyer's medical and dental plans and applied respectively toward any deductibles
or out-of-pocket limits thereunder in such year.
(d) Continuing Employees who are members of or represented by a collective
bargaining unit will not be eligible to participate in any of Buyer's Plans,
except as may be negotiated by ELPC with the union representative of such
bargaining unit.
(e) Buyer shall cause the Continuing Employees who are not members of a
collective bargaining unit to be eligible for severance benefits, to be paid to
such a Continuing Employee if within one (1) year after the Closing Date the
Continuing Employee either has a reduction in base pay and elects within thirty
(30) days thereof to terminate employment or is terminated by Buyer for a reason
other than termination for cause. Such severance benefits shall be no less than
the severance benefits under the Enron Liquid Services Corp. Divestiture
Severance Plan. "Termination for cause" as used in this paragraph shall mean (i)
the Continuing Employee's gross negligence or willful misconduct in the
performance of the duties and services required of the Continuing Employee, (ii)
the Continuing Employee's final conviction of a felony or of a misdemeanor
involving moral turpitude, or (iii) failure to meet established performance
objectives. Failure to meet established performance expectations shall not be
such a cause for termination with respect to entitlement to severance benefits
unless the expectations are reasonable, have been clearly established and
communicated to the Continuing Employee and the Continuing Employee has been
counseled about the unacceptable performance and coached to improve performance
for at least thirty (30) days.
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(f) Seller, subject to effecting Closing, shall take such action as is
necessary to terminate as of Closing Date the participation of ELPC as a
participating employer in all Benefit Plans. On or before the Closing Date, the
participation of ELPC in all Benefit Plans shall be discontinued and the
interests and the liabilities of ELPC in such Benefit Plans shall be assumed by
Seller, whereupon the assets, liabilities, and obligations of said Benefit Plans
shall be the assets, liabilities, and obligations of Seller. From and after the
Closing Date, ELPC shall not have any interest in rights, responsibility for, or
liability with respect to such Benefit Plans.
(g) Buyer agrees, in the event a member of the Buyer Controlled Group,
within six (6) months following the Closing Date, employs after the Closing Date
any Available Employee who as of the Closing Date does not accept an offer of
employment and become a Continuing Employee (whether or not an offer of
employment was made), to promptly pay to the designated Seller or one of its
Affiliates an amount equal to all or a portion of the severance benefit, if any,
paid to such Available Employee by either Seller of one of its Affiliates in
connection with such employee's termination of employment with either Seller or
one of its Affiliates determined by multiplying the amount of such severance
benefit by a fraction, the numerator of which is the number 6 reduced by the
number of full months that have passed from the Closing Date to the employment
date, and the denominator of which is the number 6; $ = severance amount x (6-
months)/6.
(h) Seller shall (i) cause the Continuing Employees who are employed by
ELPC to be fully vested effective as of the Closing Date in their accrued
benefits under any of Enron's Plans which is an employee pension benefit plan;
and (ii) provide disability benefit coverage under any of Enron's Plans which is
a sick pay, short-term or long-term disability plan for any Continuing Employee
who is a participant in the affected plan and is not actively at work on the
Closing Date in accordance with and to the extent provided in the applicable
plan.
6.11 Supplements to Schedules. Seller may, from time to time, prior to the
Closing, by written notice to Buyer, supplement or amend the Disclosure Schedule
to correct any matter that would constitute a breach of any representation or
warranty of Seller herein contained; provided, however, except as provided in
the following sentence, no such supplement or amendment will affect the rights
and obligations of Buyer under Section 9.1 or Section 9.2 hereof until after the
Closing Date. Notwithstanding any other provision hereof, if the Closing occurs,
any such supplement or amendment of any Schedule will be effective to cure and
correct for indemnification purposes (but only for such purposes) any breach of
any representation, warranty or covenant that would have existed by reason of
Seller not having made such supplement or amendment.
6.12 Seller's Property Located on Easements After Closing. Seller (or its
Affiliates) have facilities located on the real property, easements and leases
owned by ELPOLP or ETS. Except as provided in this Section 6.12, Buyer agrees
that in no event shall Buyer have the right to require Seller or its Affiliates
to remove, relocate, lower or otherwise alter in any respect any of their
respective facilities that are located on any such fee property, easement or
lease, except to the extent that the location, presence or manner of operation
of Seller's or its Affiliates' facilities will violate or result in a default
under any term, condition, covenant, restriction, zoning or other requirement
applicable to such fee property, easement or lease. Prior to Closing, Buyer and
Seller agree to negotiate in good faith to attempt to mutually agree upon the
extent to which block valves, quality measurement and metering facilities and
custody transfer points on the assets
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and properties owned by ELPOLP or ETS and on the interconnecting facilities of
Seller or its Affiliates as to handling of both gas and liquid hydrocarbons need
to be modified, moved, altered or installed, and the location of any such
facilities and custody transfer points. The costs of any such modifications,
alterations and additions will be borne equally by the parties, and to the
extent reasonably feasible such modifications, alterations and additions will be
completed by Closing or promptly thereafter. Prior to Closing, Buyer and Seller
will also negotiate in good faith to attempt to mutually agree upon arrangements
for the sharing of certain facilities (and costs related to the operation
thereof) that will be owned by one party after the Closing, but were used in
connection with both ELPC's Business and Seller's and its Affiliates retained
facilities prior to the Closing, such as cathodic protection equipment, radio
towers, and pigging equipment.
6.13 Current Report on Form 8-K. Buyer shall caused to be filed on behalf
of ELPLP within the time period required by the Securities and Exchange Act of
1934 and the rules and regulation adopted pursuant thereto a Current Report on
Form 8-K to report a change in the ownership of its general partner and a change
in ELPLP's name.
6.14 Business Opportunities. If during the period of three (3) years after
the Closing, Seller or any of its Affiliates (other than Excluded Affiliates)
shall desire to sell to an unaffiliated person any assets which are related to
(a) the natural gas liquid transportation, storage, processing or fractionation
business, or (b) the CO2 transportation business, or (c) the coal terminaling
business (collectively, the "Subject Assets" and individually, a "Subject
Asset") and which in any case are not the subject of Enron's current disposition
of certain of its natural gas liquids business and are not otherwise subject to
a prior preferential right to purchase, right of first refusal or similar right,
Seller shall notify Buyer in writing; provided, however, that the foregoing
shall not apply in any case in which Seller or its Affiliates desires to
transfer or sell a Subject Asset to a person in which Seller or the Affiliate
will retain an ownership interest. During the thirty (30) day period after the
date of such notice, Buyer and Seller (or its Affiliate) shall discuss the
possible sale of such assets to Buyer or its designee. The foregoing does not
constitute a preferential right, right of first refusal or similar right but
merely constitutes an obligation of Seller and its Affiliates (other than
Excluded Affiliates) to provide notice to Buyer and discuss for a thirty (30)
day period a possible transaction for the sale of certain assets to Buyer.
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6.15 Sale of Transferred LP Units. Seller and Buyer have received an
inquiry regarding the possible purchase prior to Closing of the Transferred LP
Units. Buyer hereby consents to the sale of the Transferred LP Units on or prior
to the Closing Date by ELPC for such cash consideration as ELPC shall determine
to be appropriate. Buyer shall have a right of reasonable review and approval of
the form of any contract or agreement under which the Transferred LP Units will
be sold by ELPC, in order to determine the extent of any representations,
warranties and contingent liabilities made or assumed by ELPC in connection with
any such sale. The cash proceeds received by ELPC as a result of the sale of the
Transferred LP Units shall constitute current assets of ELPC which will be
transferred to Seller as a dividend on or before the Closing Date, in accordance
with Seller's rights under Section 6.3 hereof.
6.16 Retained Litigation. Except for the "Excluded Matter" (hereinafter
defined), Seller shall be fully and solely responsible for all of the legal,
administrative and/or arbitration proceedings described in Sections 4.10 and/or
4.18 of the Disclosure Schedule (such matters, the "Retained Litigation"). With
respect to the Retained Litigation, Seller shall be responsible for providing a
defense against all such matters (as if Seller were the party in interest
therein) and Seller shall bear all of the costs and expenses of defending
against the claims presented in the Retained Litigation and the full amount of
any liabilities, losses, damages, judgments or settlements in connection
therewith (including, without limitation, court costs and attorney fees),
provided, however, that at no expense to Seller, Buyer and ELPC agree to
cooperate fully with Seller and its Affiliates with respect to all aspects of
the defense of the Retained Litigation. Without the consent of Buyer, Seller
will not consent to, enter into, or acquiesce in any settlement, finding,
confession of judgment, decree, or similar disposition of any of the Retained
Litigation against ELPC, ELPLP, ELPOLP, ENGL and/or ETS or any of their
operations which includes any terms other than payment of damages in cash, which
payment will be borne entirely by Seller, or which makes any finding which might
interfere with or have an adverse effect on the future business or operations of
ELPC, ELPLP, ELPOLP, ENGL and/or ETS. As used herein, the "Excluded Matter"
(responsibility for which shall be retained by ELPC) is the matter identified in
Sections 4.10 and 4.18 of the Disclosure Schedule as State of Illinois ex rel.
Ryan, et al. v. Enron Liquids Pipeline Company.
ARTICLE 7
TAX MATTERS
7.1 Section 338(h)(10) Elections. For purposes of this Article 7, the
"Seller Group" means, with respect to Seller, the affiliated group of
corporations filing a consolidated federal income Tax Return of which the Seller
is a member; and "Parent" means Enron Corp., the common parent of the Seller
Group. Parent and Buyer shall make a joint election under section 338(h)(10) of
the Code and a similar election under any applicable state income tax law for
ELPC (the "Section 338(h)(10) Election"). Not later than one hundred eighty
(180) days after the Closing Date, Seller shall prepare and deliver to Buyer an
Internal Revenue Service Form 8023-A and any similar form under applicable state
income tax law (the "Forms") with respect to the Section 338(h)(10) Elections,
together with any completed schedules required to be attached thereto, which
Forms shall have been duly executed by an authorized person for Parent. Within
fifteen (15) days of receipt thereof, Buyer shall cause the Forms to be duly
executed by an authorized person for Buyer, shall provide a copy of the executed
Forms and schedules to Seller, shall duly and timely file the Forms as
prescribed by Treasury Regulation ss.1.338(h)(10)-1 or the
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corresponding provisions of applicable state income tax law. The allocation of
purchase price among the assets of ELPC shall be made in accordance with Code
Sections 338 and 1060 and any comparable provisions of state, local or foreign
law, as appropriate. Seller shall, unless it would be unreasonable to do so,
accept Buyer's determination of such purchase price allocations and shall
report, act, file in all respects and for all purposes consistent with such
determination of Buyer.
7.2 Preparation of Tax Returns; Responsibility for Taxes. (a) Seller shall
cause to be included in the consolidated federal income Tax Returns (and the
state income Tax Returns of any state that permits consolidated, combined or
unitary income Tax Returns, if any) of the Seller Group for all taxable periods
ending on or before the Closing Date ("Pre-Closing Period(s)"), all items of
income, gain, loss, deduction and credit and other tax items ("Tax Items") of
ELPC which are required to be included therein, shall cause such Tax Returns to
be timely filed with the appropriate taxing authorities, and shall be
responsible for the timely payment (and entitled to any refund) of all Taxes due
with respect to the periods covered by such Tax Returns. The Seller Group shall
include (a) any gain attributable to the Section 338(h)(10) deemed asset sale
and (b) any gain attributable to the sale of Transferred LP Units pursuant to
Section 6.15(b) on its consolidated federal income tax return and any applicable
state tax return for the period ending on the Closing Date. At or prior to the
Closing Seller shall: (a) cause ELPC to distribute to Seller assets with a book
value in an amount equal to the liabilities for Accrued Income Taxes and Accrued
Taxes-Other Accounts to the extent not previously distributed to Seller; and (b)
cause ELPC to eliminate any Intercompany Receivables and Deferred Tax Accounts
and any other assets and liabilities of ELPC in a manner which results in a pro
forma balance sheet as of the Closing Date equivalent to that reflected in
Section 4.7 of the Disclosure Schedule. For all purposes of this Agreement,
whenever Seller is authorized or required to transfer, dividend, assign,
distribute or eliminate any asset, liability or capital of ELPC on or prior to
the Closing Date, Seller shall accomplish all such matters in a manner which
results in a pro forma balance sheet as of the Closing Date equivalent to that
reflected in Section 4.7 of the Disclosure Schedule.
(b) With respect to any Tax Return covering a Pre-Closing Period that is
required to be filed after the Closing Date with respect to ELPC that is not
described in paragraph (a) above (other than one-day returns necessitated by a
stand-alone election under Section 338(g) or the corresponding provisions of
applicable state income tax law), Seller shall cause such Tax Return to be
prepared, shall cause to be included in such Tax Return all Tax Items required
to included therein, shall cause such Tax Return to be filed timely with the
appropriate taxing authority, and shall be responsible for the timely payment
(and entitled to any refund) of all Taxes due with respect to the period covered
by such Tax Return.
(c) With respect to any Tax Return covering a taxable period beginning on
or before the Closing Date and ending after the Closing Date that is required to
be filed after the Closing Date with respect to ELPC (including one-day returns
necessitated by a stand-alone election under Section 338(g) or the corresponding
provisions of applicable state income law), Buyer shall cause such Tax Return to
be prepared, shall cause to be included in such Tax Return all Tax Items
required to be included therein, shall furnish a copy of such Tax Return to
Seller, shall file timely
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such Tax Return with the appropriate taxing authority, and shall be responsible
for the timely payment (and entitled to any refund) of all Taxes due with
respect to the period covered by such Tax Return. Buyer, subject to Seller's
approval, shall determine (by an interim closing of the books of ELPC, ELPLP,
ELPOLP and ETS as of the Closing Date, except for ad valorem Taxes which shall
be prorated on a daily basis) the portion of the Tax due with respect to the
period covered by such Tax Return which is attributable to the Pre-Closing
Period. For all purposes hereof, the Closing Date shall be included in the
Pre-Closing Period. Seller shall pay to Buyer the amount of Tax so determined to
be attributable to the Pre-Closing Period not later than fifteen (15) days after
the filing of such Tax Return. Without limiting the generality of the foregoing,
it is understood that the sale by ELPC of the Transferred LP Units will be
deemed to occur on or prior to the Closing Date and all taxable gain with
respect to such sale will be attributable to the Pre-Closing Period and will be
for the account of Seller and the amount of Tax thereon will be paid to Buyer by
Seller.
(d) Notwithstanding anything to the contrary herein, any franchise Tax paid
or payable with respect to ELPC shall be allocated to the taxable period during
which the right to do business obtained by the payment of such franchise Tax
relates, regardless of whether such franchise Tax is measured by income,
operations, assets or capital relating to another taxable period. With respect
to any franchise Tax so allocated to the taxable period in which the Closing
Date occurs: (i) the amount of such franchise Tax shall be prorated on a daily
basis between the portion of such taxable period ending on the Closing Date and
the remaining portion of such taxable period, and (ii) if the amount of such
franchise Tax paid or provided for as of the Closing Date exceeds the amount so
prorated to the portion of such taxable period ending on the Closing Date, the
Buyer shall pay to Seller such excess amount.
(e) Any Tax Return to be prepared pursuant to the provisions of this
Section 7.2 shall be prepared in a manner consistent with practices followed in
prior years with respect to similar Tax Returns, except for changes required by
changes in law or fact.
(f) Buyer shall not file an amended tax return for any period ending on or
prior to the Closing Date without the consent of Seller.
(g) Any refunds of taxes (except to the extent attributable to net
operating losses carried back from taxable periods after the Closing Date) paid
in Pre-Closing Periods will be for the account of Seller and upon receipt
thereof Buyer shall promptly pay such amounts to Seller.
7.3 Access to Information. (a) Seller and each member of the Seller Group
shall grant to Buyer (or its designees) access at all reasonable times to all of
the information, books and records relating to ELPC within the possession of
Seller or any member of the Seller Group (including work papers and
correspondence with taxing authorities), and shall afford Buyer (or its
designees) the right (at Buyer's expense) to take extracts therefrom and to make
copies thereof, to the extent reasonably necessary to permit Buyer (or its
designees) to prepare Tax Returns and to conduct negotiations with taxing
authorities.
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(b) Buyer shall grant or cause ELPC to grant to Seller (or its designees)
access at all reasonable times to all of the information, books and records
relating to ELPC within the possession of Buyer or ELPC (including work papers
and correspondence with taxing authorities), and shall afford Seller (or its
designees) the right (at Seller expense) to take extracts therefrom and to make
copies thereof, to the extent reasonably necessary to permit Seller(or its
designees) to prepare Tax Returns and to conduct negotiations with taxing
authorities.
7.4 Transfer Taxes. Buyer shall be responsible for the payment of all
federal, state and local Transfer Taxes resulting from the transactions
contemplated by this Agreement.
7.5 Tax Sharing Agreements. Seller and ELPC shall, as of the Closing Date,
terminate all tax allocation agreements or tax sharing agreements with respect
to ELPC and shall ensure that such agreements are of no further force or effect
as to ELPC on and after the Closing Date and there shall be no further liability
of ELPC under any such agreement.
7.6 Non-foreign Person Affidavit. Seller shall have delivered to Buyer an
affidavit to the effect that such Seller is not a "foreign person" within the
meaning of Sections 1445 or 7701 of the Code executed under penalty of perjury
and satisfying the requirements of the Treasury Regulations promulgated pursuant
to such Code sections.
7.7 Assistance and Cooperation. After the Closing Date, in the case of any
audit, examination or other proceeding ("Proceeding") with respect to Taxes for
which Seller is or may be liable pursuant to this Agreement, Buyer shall inform
Seller (within ten (10) days of the receipt of a notice of such Proceeding), and
shall afford Seller, at Seller's expense, the opportunity to control the conduct
of such Proceedings. Buyer shall execute or cause to be executed powers of
attorney or other documents necessary to enable Seller to take all actions
desired by Seller with respect to such Proceeding to the extent such Proceeding
may affect either the amount of Taxes for which Seller is liable pursuant to
this Agreement. Seller shall have the right to control any such Proceedings,
and, if there is substantial authority therefor, to initiate any claim for
refund, file any amended return or take any other action which it deems
appropriate with respect to such Taxes. Any Proceeding with respect to Taxes for
a period which includes but does not end on the Closing Date and any Proceeding
with respect to, and to the extent of, basis allocations among assets pursuant
to the Section 338(h)(10) Election shall be controlled jointly by Seller and
Buyer. Notwithstanding any provision of this Section 7.7 to the contrary, Seller
shall not have the right to initiate any claim for refund or to file any amended
return if, as result of such Proceeding, claim for refund or amended return, the
Taxes payable by Buyer or ELPC for a taxable period for which Seller is not
obligated to indemnify Buyer or ELPC pursuant to Section 11.2 would likely be
materially increased.
ARTICLE 8
CONDITIONS TO OBLIGATION OF SELLER
The obligation of Seller to consummate the transactions contemplated by
this Agreement at Closing is subject, at the option of Seller, to the following
conditions:
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8.1 Representations. The representations and warranties of Buyer herein
contained shall be made again at Closing and shall be true and correct in all
material respects on the Closing Date.
8.2 Performance. Buyer shall have performed all material obligations,
covenants and agreements contained in this Agreement to be performed or complied
with by it at or prior to the Closing.
8.3 Pending Matters. No suit, action or other proceeding shall be pending
that could reasonably be expected to restrain, enjoin or otherwise prohibit the
consummation of the transactions contemplated by this Agreement.
8.4 Assumption of Enron Corp. Obligations. Buyer shall have (i) assumed all
obligations of Enron Corp. under the Omnibus Agreement which continue following
termination of the Applicable Period, except that Buyer shall not assume any
other obligations of Enron Corp. under Parts E and F and Sections 1.15 and 1.16
of Part G of the Omnibus Agreement, (ii) caused that certain promissory note of
ETS payable to Enron Corp. in the original principal amount of $4,430,437
million to be purchased from Enron Corp. (or repaid) for a purchase price (or
repayment amount) equal to all principal and interest owing thereon on the
Closing Date, and (iii) delivered to Seller the opinion of counsel referred to
in Section 6.4.
8.5 Return of Enron Guaranty. Wachovia Bank of Georgia, N.A. shall have
released Enron Corp. from its guaranty dated June 25, 1996, of the obligations
of ETS under that certain irrevocable letter of credit issued on June 25, 1996
by such bank.
8.6 Bank One Consent. Bank One, Texas, N.A. shall have delivered the
consent to ELPOLP required pursuant to Section 6.01(R) of that certain Loan
Agreement, dated May 24, 1995, by and between ELPOLP and Bank One, Texas, N.A.
8.7 Sale of Transferred LP Units. ELPC shall have completed the sale of the
Transferred LP Units on terms and conditions and at a price satisfactory to
Seller.
ARTICLE 9
CONDITIONS TO OBLIGATION OF BUYER
The obligation of Buyer to consummate the transactions contemplated by this
Agreement at Closing are subject, at the option of Buyer, to the following
conditions:
9.1 Representations. The representations and warranties of Seller herein
contained (other than the representation and warranty set forth in Section 4.18)
shall be made again at Closing and shall be true and correct in all material
respects on the Closing Date.
9.2 Performance. Seller shall have performed all material obligations,
covenants and agreements contained in this Agreement to be performed or complied
with by it at or prior to the Closing.
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9.3 Pending Matters. No suit, action or other proceeding shall be pending
that could reasonably be expected to restrain, enjoin or otherwise prohibit the
consummation of the transactions contemplated by this Agreement.
9.4 Resignation of Officers and Directors. Buyer shall have received a copy
of the resignation, effective as of the Closing Date, of each officer and
director of ELPC and ENGL.
9.5 Sale of Transferred LP Units. The form of contract or agreement by
which ELPC has sold the Transferred LP Units (but excluding the price terms
thereof) shall have been approved by Buyer, which approval will not be
unreasonably withheld.
ARTICLE 10
TERMINATION
10.1 Termination At or Prior to Closing. This Agreement may be terminated
and the transactions contemplated hereby abandoned as follows:
(a) Seller and Buyer may elect to terminate this Agreement at any time on
or prior to the Closing Date by mutual written consent of the parties;
(b) either Seller or Buyer may elect to terminate this Agreement if the
Closing shall not have occurred on or before March 31, 1997; provided, however,
that neither Seller nor Buyer can so terminate this Agreement if such party is
at such time in material breach of any provision of this Agreement; or
(c) either Seller or Buyer may elect to terminate this Agreement if any
Governmental Entity shall have issued a final non-appealable order, judgment or
decree or taken any other action challenging, delaying beyond March 31, 1997,
restraining, enjoining, prohibiting or invalidating the consummation of any of
the transactions contemplated herein.
10.2 Effect of Termination. In the event that Closing does not occur as a
result of either party exercising its right to terminate pursuant to Section
10.1, then neither party shall have any further rights or obligations under this
Agreement, except that nothing herein shall relieve either party from any
liability for any willful breach hereof.
ARTICLE 11
INDEMNIFICATION
11.1 Indemnification By Buyer. Subject to Section 11.3(a), Buyer shall
indemnify, release, defend, and hold harmless Seller, their officers, directors,
employees, agents, representatives, Affiliates, subsidiaries, successors and
assigns (collectively, the "Seller Indemnitees") from and against any and all
claims, liabilities, losses, causes of actions, costs and expenses (including,
without limitation, court costs and attorneys' fees) ("Losses") asserted
against, resulting from, imposed upon or incurred by any of the Seller
Indemnitees as a result of, or arising out of: (a) the breach of any of the
representations, warranties, covenants or agreements of Buyer contained in this
Agreement, including the reimbursement obligation in Section 6.10(g), or (b) any
liability arising out of the operation, ownership, occupancy, condition or use
of the
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ELPC Shares or ELPC's Business, whether known or unknown, whether attributable
to periods of time before or after the Effective Time or (c) any liability for
Taxes (including interest, penalties or fines related thereto) the
responsibility for payment of which was assumed by Buyer pursuant to Article 7
above, provided, however, that Buyer shall have no obligation to indemnify any
of the Seller Indemnitees with respect to any matter for which Seller is
indemnifying Buyer pursuant to Section 11.2.
11.2 Indemnification By Seller. Subject to Section 11.3(b), Seller shall
indemnify, defend and hold harmless Buyer, its officers, directors, employees,
agents, representatives, Affiliates, subsidiaries, successors and assigns
(collectively, the "Buyer Indemnitees"; provided, however, that Buyer
Indemnitees shall not include ELPLP, ELPOLP, ETS or ENGL) from and against all
Losses asserted against, resulting from, imposed upon or incurred by any of the
Buyer Indemnitees as a result of, or arising out of, (a) the breach of any of
the representations, warranties, covenants or agreements of Seller contained in
this Agreement (other than the representation and warranty set forth in Section
4.18), or (b) ELPC's participation, if any, in the Benefit Plans, or (c) the
Retained Liabilities described on Exhibit A or the Retained Litigation described
in Section 6.16, or (d) any liability for Taxes related to ELPC (including
interest, penalties or fines related thereto) for the Pre-Closing Period other
than those assumed by Buyer pursuant to Article 7 above, or (e) the failure of
Enron Corp. to fully and timely perform, pay and discharge its obligations under
Part F, Indemnification, of the Omnibus Agreement (it being intended that such
obligations remain in full force and effect and are not altered by the
transactions herein contemplated).
11.3 Limitation on Damages; Survival of Representations. (a)
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, IN NO EVENT SHALL
BUYER BE LIABLE TO THE SELLER INDEMNITEES FOR ANY EXEMPLARY, PUNITIVE, REMOTE OR
SPECULATIVE DAMAGES; PROVIDED, HOWEVER, THAT IF ANY SELLER INDEMNITEE IS HELD
LIABLE TO A THIRD PARTY FOR ANY SUCH DAMAGES AND BUYER IS OBLIGATED TO INDEMNIFY
SUCH SELLER INDEMNITEE FOR THE MATTER THAT GAVE RISE TO SUCH DAMAGES, THE BUYER
SHALL BE LIABLE FOR, AND OBLIGATED TO REIMBURSE SUCH SELLER INDEMNITEE FOR, SUCH
DAMAGES. The representations and warranties of Buyer set forth in Article 5
shall survive the Closing for a period of three (3) years and such
representations and warranties of Buyer shall terminate at 5:00 p.m., local time
in Houston, Texas, on the third year anniversary of the Closing Date; provided,
however, that any such representation or warranty that is the subject of a
written notice of claim specifying in reasonable detail the specific nature of
the Losses and the estimated amount of such Losses ("Claim Notice") delivered in
good faith shall survive with respect only to the specific matter described in
such claim notice until the earlier to occur of (i) the date on which a final
nonappealable resolution of the matter described in such Claim Notice has been
reached or (ii) the date on which the matter described in such Claim Notice has
otherwise reached final resolution.
(b) Notwithstanding anything to the contrary in this Agreement, the
liability of Seller under this Agreement and any documents delivered in
connection herewith or contemplated hereby shall be limited as follows:
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(i) IN NO EVENT SHALL SELLER BE LIABLE TO THE BUYER INDEMNITEES FOR ANY
EXEMPLARY, PUNITIVE, REMOTE OR SPECULATIVE DAMAGES; PROVIDED, HOWEVER, THAT
IF ANY BUYER INDEMNITEE IS HELD LIABLE TO A THIRD PARTY FOR ANY SUCH
DAMAGES AND EITHER SELLER IS OBLIGATED TO INDEMNIFY SUCH BUYER INDEMNITEE
FOR THE MATTER THAT GAVE RISE TO SUCH DAMAGES, SUCH SELLER SHALL BE LIABLE
FOR, AND OBLIGATED TO REIMBURSE SUCH BUYER INDEMNITEE FOR, SUCH DAMAGES.
(ii) The representations and warranties of Seller set forth in Article
4 (except for Section 4.13 which shall survive forever and Section 4.18
which shall terminate at Closing) shall survive the Closing for a period of
three (3) years and such representations and warranties shall terminate at
5:00 p.m., local time in Houston, Texas, on the third year anniversary of
the Closing Date; provided, however, that any such representation and
warranty that is the subject of a Claim Notice delivered in good faith
shall survive with respect only to the specific matter described in such
Claim Notice until the earlier to occur of (A) the date on which a final
nonappealable resolution of the matter described in such Claim Notice has
been reached or (B) the date on which the matter described in such Claim
Notice has otherwise reached final resolution.
(iii) Notwithstanding anything to the contrary in this Agreement, in no
event shall Seller indemnify the Buyer Indemnitees, or be otherwise liable
in any way whatsoever to the Buyer Indemnitees, (A) for any individual
Losses not in excess of $10,000 or (B) for any Losses until the Buyer
Indemnitees have suffered Losses (other than Losses excluded pursuant to
clause (A)) in the aggregate in excess of a deductible in an amount equal
to $100,000, after which point Seller will be obligated only to indemnify
the Buyer Indemnitees from and against further Losses in excess of such
deductible (and only to the extent of any such excess).
(iv) Notwithstanding anything to the contrary herein, in no event shall
Seller indemnify the Buyer Indemnitees, or be otherwise liable in any way
whatsoever to the Buyer Indemnitees, for any Losses under Sections 11.2(a)
or 11.2(b) of this Agreement in excess of an amount equal to $2,500,000,
except such limitation shall not apply to Losses related to a breach of
Section 4.13 hereof.
(v) No amount shall be recovered from Seller for the breach or
inaccuracy of any of Seller's representations, warranties, covenants or
agreements, or for any other matter, to the extent that Buyer had actual
knowledge of such breach, inaccuracy or other matter at or prior to the
Closing, nor shall Buyer be entitled to post-Closing rescission with
respect to any such matter.
(vi) Seller shall have no liability for Losses pursuant to this Article
unless a Claim Notice has been delivered to Seller as required by Section
11.4 as follows: (A) within three (3) years after the Effective Time with
respect to any Losses under Sections 11.2(a) (except for Losses under
Section 11.2(a) relating to Section 4.13 which shall survive forever) and
11.2(b); (B) within the period of the applicable statute of limitations
with respect to any Losses under Sections 11.2(c), 11.2(d) and 11.2(e).
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11.4 Notice of Asserted Liability; Opportunity to Defend. All claims for
indemnification under Sections 11.1 and 11.2 shall be asserted and resolved
pursuant to this Section 11.4. Any person claiming indemnification hereunder is
hereinafter referred to as the "Indemnified Party" and any person against whom
such claims are asserted hereunder is hereinafter referred to as the
"Indemnifying Party". In the event that any Losses are asserted against or
sought to be collected from an Indemnified Party by a third party, said
Indemnified Party shall with reasonable promptness provide to the Indemnifying
Party a Claim Notice. The Indemnifying Party shall not be obligated to indemnify
the Indemnified Party with respect to any such Losses if the Indemnified Party
fails to notify the Indemnifying Party thereof in accordance with the provisions
of this Agreement in reasonably sufficient time so that the Indemnifying Party's
ability to defend against the Losses is not prejudiced. The Indemnifying Party
shall have thirty (30) days from the personal delivery or receipt of the Claim
Notice (the "Notice Period") to notify the Indemnified Party (i) whether or not
it disputes the liability of the Indemnifying Party to the Indemnified Party
hereunder with respect to such Losses and/or (ii) whether or not it desires, at
the sole cost and expense of the Indemnifying Party, to defend the Indemnified
Party against such Losses; provided, however, that any Indemnified Party is
hereby authorized prior to and during the Notice Period to file any motion,
answer or other pleading that it shall deem necessary or appropriate to protect
its interests or those of the Indemnifying Party (and of which it shall have
given notice and opportunity to comment to the Indemnifying Party) and not
prejudicial to the Indemnifying Party. In the event that the Indemnifying Party
notifies the Indemnified Party within the Notice Period that it desires to
defend the Indemnified Party against such Losses, the Indemnifying Party shall
have the right to defend all appropriate proceedings, and with counsel of its
own choosing, which proceedings shall be promptly settled or prosecuted by them
to a final conclusion. If the Indemnified Party desires to participate in, but
not control, any such defense or settlement it may do so at its sole cost and
expense. If requested by the Indemnifying Party, the Indemnified Party agrees to
cooperate with the Indemnifying Party and its counsel in contesting any Losses
that the Indemnifying Party elects to contest or, if appropriate and related to
the claim in question, in making any counterclaim against the person asserting
the third party Losses, or any cross-complaint against any person. No claim may
be settled or otherwise compromised without the prior written consent of the
Indemnifying Party.
11.5 Exclusive Remedy. As between the Buyer Indemnitees and the Seller
Indemnitees the rights and obligations set forth in this Article 11 will be the
exclusive rights and obligations with respect to this Agreement, the events
giving rise to this Agreement, and the transactions provided for herein or
contemplated hereby or thereby. It being understood and agreed between Seller
and Buyer that all other rights and obligations between Seller and its
Affiliates on the one hand and the Buyer and its Affiliates on the other hand
shall be governed by this Agreement.
11.6 NEGLIGENCE AND STRICT LIABILITY WAIVER. WITHOUT LIMITING OR ENLARGING
THE SCOPE OF THE INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS AGREEMENT, AN
INDEMNIFIED PARTY SHALL BE ENTITLED TO INDEMNIFICATION HEREUNDER IN ACCORDANCE
WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE LOSS OR CLAIM GIVING RISE TO
SUCH INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE, CONCURRENT OR
COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR VIOLATION OF ANY LAW OF OR BY SUCH
INDEMNIFIED PARTY. THE PARTIES AGREE THAT THIS PARAGRAPH CONSTITUTES A
CONSPICUOUS LEGEND.
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ARTICLE 12
MISCELLANEOUS
12.1 Applicable Law; Alternative Dispute Resolution. (a) This Agreement
shall be governed by and construed in accordance with the domestic laws of the
State of Texas without giving effect to any choice or conflict of law provision
or rule (whether of the State of Texas or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
Texas.
(a) Except as expressly provided in Section 2.5, any dispute arising under
this Agreement shall be resolved pursuant to this Section 12.1:
(i) Any party has the right to request the other to meet to discuss a
dispute. The party requesting the meeting will give at least ten (10)
business days notice in writing of the subject it wishes to discuss,
provide a written statement of the dispute, and designate an officer of the
company with complete power to resolve the dispute to attend the meeting.
Within three (3) business days after receipt of such request, the party
receiving the request will provide a responsive written statement and will
designate an officer of the company who will attend the meeting with
complete power to resolve the dispute.
(ii) If the meeting fails to resolve the dispute by a signed agreement
among the officers, the dispute shall be submitted for nonappealable,
binding determination through arbitration. The parties agree that an
officer with authority to resolve the dispute for each entity shall attend
the arbitration. The arbitrator chosen from the arbitrators available
through JAMS shall be the arbitrator unless the parties agree on a
substitute arbitrator. Unless otherwise agreed by the parties, the
arbitrator shall be a person with at least eight (8) years of professional
experience in the natural gas industry or the judiciary and who is not, and
within the previous five (5) years has not been, an employee or independent
contractor of either Seller or Buyer (or any affiliate thereof), and does
not have a direct or indirect interest in either Seller or Buyer (or any
affiliate thereof) or the subject matter of the arbitration.
(iii) The parties agree to make discovery and disclosure of all matters
relevant to the dispute to the extent and in the manner provided by the
Federal Rules of Civil Procedure. The arbitrator will rule on all requests
for discovery and disclosure and discovery shall be completed within ninety
(90) days of the date of the first notice pursuant to Section 12.1(b)(i).
The arbitrator shall follow the statutes and decisions of the substantive
law of Texas relevant to the subject. The arbitrator's powers shall be
limited to enforcement of this Agreement as to the issues raised by the
parties, and shall not include tort claims or the power to award punitive
damages. The arbitrator shall not have the authority or power to alter,
amend or modify any of the terms and conditions of the agreement of the
parties. The arbitrator shall issue a final ruling within one hundred
eighty (180) days of the date of the first notice pursuant to Section
12.1(b)(i).
(iv) The ruling of the arbitrator shall be in writing and signed, shall
contain a statement of findings and conclusions and shall be final and
binding upon the parties. The fees and expenses of counsel, witnesses and
employees of the parties and all other costs
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and expenses incurred exclusively for the benefit of the party incurring
the same shall be borne by the party incurring such fees and expenses. All
other fees and expenses including, without limitation, compensation for the
arbitrator shall be divided equally between the parties. All meetings and
arbitration hearings held pursuant to this Section 12.1 shall take place in
Houston, Texas. Judgment on the arbitration award or decision may be
entered in any court having jurisdiction.
12.2 Expenses. Each party shall be solely responsible for all expenses,
including due diligence expenses, incurred by it in connection with this
transaction, and neither party shall be entitled to any reimbursement for such
expenses from the other party hereto. Without limiting the generality of the
foregoing, Buyer will be solely responsible for all recording fees and taxes
relating to the conveyances to be delivered pursuant hereto.
12.3 Independent Investigation. Buyer represents and acknowledges that it
is knowledgeable of ELPC's Business, and in making the decision to enter into
this Agreement and consummate the transactions contemplated hereby, Buyer has
relied solely on the basis of its own independent due diligence investigation
and upon the representations and warranties of Seller made in Article 4 and on
the covenants of Seller in Article 6 and Article 7 of this Agreement.
12.4 Disclaimer Regarding Assets. Except as otherwise expressly provided in
this Agreement, BUYER ACKNOWLEDGES THAT SELLER HAS NOT MADE, AND SELLER HEREBY
EXPRESSLY DISCLAIMS AND NEGATES, ANY REPRESENTATION OR WARRANTY, EXPRESS IMPLIED
AT COMMON LAW, BY STATUTE, OR OTHERWISE, RELATING TO (I) THE CONDITION OF ELPC'S
ASSETS AND THE ASSETS AND BUSINESSES OF ELPLP, ELPOLP, ETS AND ENGL (INCLUDING,
WITHOUT LIMITATION, (A) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (B)
ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (C) ANY
IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, OR
(D) ENVIRONMENTAL CONDITION), (II) INFRINGEMENT BY SELLER, ELPC, ELPLP, ELPOLP,
ETS, OR ENGL OF ANY PATENT OR PROPRIETARY RIGHT, AND (III) ANY INFORMATION, DATA
OR OTHER MATERIALS (WRITTEN OR ORAL) FURNISHED TO BUYER BY OR ON BEHALF OF
SELLER. THE PARTIES AGREE THAT THIS PARAGRAPH CONSTITUTES A CONSPICUOUS LEGEND.
12.5 Waiver of Trade Practices Acts. (a) It is the intention of the parties
that Buyer's rights and remedies with respect to this transaction and with
respect to all acts or practices of Seller, past, present or future, in
connection with this transaction shall be governed by legal principles other
than the Texas Deceptive Trade Practices--Consumer Protection Act, Tex. Bus. &
Com. Code Ann. ss.17.41 et seq. (the "DTPA"). AS SUCH, BUYER HEREBY WAIVES THE
APPLICABILITY OF THE DTPA TO THIS TRANSACTION AND ANY AND ALL DUTIES, RIGHTS OR
REMEDIES THAT MIGHT BE IMPOSED BY THE DTPA, WHETHER SUCH DUTIES, RIGHTS AND
REMEDIES ARE APPLIED DIRECTLY BY THE DTPA ITSELF OR INDIRECTLY IN CONNECTION
WITH OTHER STATUTES; PROVIDED, HOWEVER, BUYER DOES NOT WAIVE ss. 17.555 OF THE
DTPA. BUYER ACKNOWLEDGES, REPRESENTS AND WARRANTS THAT IT IS PURCHASING THE
GOODS AND/OR SERVICES COVERED BY THIS AGREEMENT FOR COMMERCIAL OR BUSINESS USE;
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THAT IT HAS ASSETS OF $5 MILLION OR MORE ACCORDING TO ITS MOST RECENT FINANCIAL
STATEMENT PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES;
THAT IT HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT
ENABLE IT TO EVALUATE THE MERITS AND RISKS OF A TRANSACTION SUCH AS THIS; AND
THAT IT IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION WITH SELLER.
(b) TO THE MAXIMUM EXTENT PERMITTED BY LAW, BUYER HEREBY WAIVES ALL
PROVISIONS OF CONSUMER PROTECTION ACTS, DECEPTIVE TRADE PRACTICE ACTS AND OTHER
ACTS SIMILAR TO THE DTPA IN ALL JURISDICTIONS IN WHICH ANY OF THE ASSETS ARE
LOCATED (SUCH ACTS, TOGETHER WITH THE DTPA, ARE HEREINAFTER COLLECTIVELY
REFERRED TO AS THE "TRADE PRACTICES ACTS").
(c) BUYER EXPRESSLY RECOGNIZES THAT THE PRICE FOR WHICH SELLER HAS AGREED
TO PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT HAS BEEN PREDICATED UPON THE
INAPPLICABILITY OF THE TRADE PRACTICES ACTS AND THIS WAIVER OF THE TRADE
PRACTICES ACTS. BUYER FURTHER RECOGNIZES THAT SELLER, IN DETERMINING TO PROCEED
WITH THE ENTERING INTO OF THIS AGREEMENT, HAS EXPRESSLY RELIED ON THIS WAIVER
AND THE INAPPLICABILITY OF THE TRADE PRACTICES ACTS.
12.6 No Third Party Beneficiaries. Nothing in this Agreement shall provide
any benefit to any third party or entitle any third party to any claim, cause of
action, remedy or right of any kind, it being the intent of the parties that
this Agreement shall not be construed as a third party beneficiary contract;
provided, however, that the indemnification provisions in Article 11 shall inure
to the benefit of the Buyer Indemnitees and the Seller Indemnitees as provided
therein.
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12.7 Waiver. Except as expressly provided in this Agreement, neither the
failure nor any delay on the part of any party hereto in exercising any right,
power or remedy hereunder shall operate as a waiver thereof, or of any other
right, power or remedy; nor shall any single or partial exercise of any right,
power or remedy preclude any further or other exercise thereof, or the exercise
of any other right, power or remedy. Except as expressly provided herein, no
waiver of any of the provisions of this Agreement shall be valid unless it is in
writing and signed by the party against whom it is sought to be enforced.
12.8 Entire Agreement; Amendment. This Agreement, the Disclosure Schedule
and other Schedules and Exhibits hereto, each of which is deemed to be a part
hereof, and any agreements, instruments or documents executed and delivered by
the parties pursuant to this Agreement, constitute the entire agreement and
understanding between the parties, and all previous undertakings, negotiations
and agreements between the parties regarding the subject matter hereof
(including, without limitation, the Prior Contract) are merged herein; provided
however, that this Agreement does not supersede the Confidentiality Agreement,
which shall not terminate (except in accordance with its terms) unless and until
the Closing occurs, and following the Closing, only to the extent it relates to
the Assets. This Agreement may not be modified orally, but only by an agreement
in writing signed by Buyer and Seller.
12.9 Notices. Any and all notices or other communications required or
permitted under this Agreement shall be given in writing and delivered in person
or sent by United States certified or registered mail, postage prepaid, return
receipt requested, or by overnight express mail, or by telex, facsimile or
telecopy to the address of such party set forth below. Any such notice shall be
effective upon receipt or three (3) days after placed in the mail, whichever is
earlier.
If to Buyer:
By Mail or Hand Delivery:
Kinder Morgan, Inc.
c/o Morgan Associates, Inc.
411 Nichols, Suite 225
Kansas City, Missouri 64112
Attention: William V. Morgan
Telephone Number: (816) 931-5750
Telecopy Number: (816) 931-9170
If to Seller:
By Mail:
Enron Liquids Holding Corp.
P.O. Box 1188
Houston, Texas 77251-1188
Attention: Vice President and Secretary
With a copy to: Vice President and General Counsel
-35-
<PAGE>
By Hand Delivery :
Enron Liquids Holding Corp.
1400 Smith Street
Houston, Texas 77002
Attention: Vice President and Secretary
Telephone Number: (713) 853-6424
Telecopy Number: (713) 853-3920
With a copy to: Vice President and General Counsel
Telephone Number (713) 853-6009
Telecopy Number: (713) 646-2738
Any party may, by notice so delivered, change its address for notice purposes
hereunder.
12.10 No Assignment. This Agreement shall not be assigned or transferred in
any way whatsoever by either party hereto except with prior written consent of
the other party hereto, which consent such party shall be under no obligation to
grant, and any assignment or attempted assignment without such consent shall
have no force or effect with respect to the non-assigning party. Subject to the
preceding sentence, this Agreement shall be binding on and inure to the benefit
of the parties hereto and their permitted successors and assigns.
12.11 Severability. If any provision of this Agreement is invalid, illegal
or unenforceable, the balance of this Agreement shall remain in full force and
effect and this Agreement shall be construed in all respects as if such invalid,
illegal or unenforceable provision were omitted. If any provision is
inapplicable to any person or circumstance, it shall, nevertheless, remain
applicable to all other persons and circumstances.
12.12 Publicity. Seller and Buyer shall consult with each other with regard
to all publicity and other releases concerning this Agreement and the
transactions contemplated hereby and, except as required by applicable law or
the applicable rules or regulations of any Governmental Entity or stock
exchange, no party shall issue any such publicity or other release without the
prior written consent of the other party, which shall not be unreasonably
withheld.
12.13 Construction. Any section headings in this Agreement are for
convenience of reference only, and shall be given no effect in the construction
or interpretation of this Agreement or any provisions thereof. No provision of
this Agreement will be interpreted in favor of, or against, any party by reason
of the extent to which any such party or its counsel participated in the
drafting thereof.
12.14 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and which together
shall constitute but one and the same instrument.
-36-
<PAGE>
12.15 Further Assurances. After the Closing Date, each party hereto at the
reasonable request of the other and without additional consideration, shall
execute and deliver, or shall cause to be executed and delivered, from time to
time, such further certificates, agreements or instruments of conveyance and
transfer, assumption, release and acquaintance and shall take such other action
as the other party hereto may reasonably request, to convey and deliver the
Assets to Buyer, to assure to Seller the assumption of the liabilities and
obligations intended to be assumed by Buyer hereunder and to otherwise
consummate or implement the transactions contemplated by this Agreement.
12.16 Payment of Funds. The amount of all revenues received by Seller (or
any Affiliates thereof) relating to the ownership or operation of ELPC's Shares
on or after the Effective Time shall be remitted to Buyer in immediately
available funds on a timely basis. The amount of all revenues received by Buyer
(or any Affiliates thereof) relating to the ownership or operation of ELPC's
Shares prior to the Effective Time shall be remitted to Seller in immediately
available funds on a timely basis. Without in any way limiting either party's
obligation to remit such amounts on a timely basis, if any such amounts received
by a party (or any affiliate thereof) are in excess of $25,000 in the aggregate
and have not been remitted to the other party within thirty (30) days of receipt
by the receiving party (or any affiliate thereof), such amounts shall bear
interest from the date of such receipt until the date upon which the other party
receives remittance of such amount in full and in immediately available funds at
an annual rate of 6%.
12.17 Certain Interpretive Matters. The inclusion of any matter on any
Schedule will not be deemed an admission by either party that such listed matter
has or would have a Seller Material Adverse Effect or a Buyer Material Adverse
Effect.
-37-
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the date first written above.
SELLER:
ENRON LIQUIDS HOLDING CORP.
By:
Name: Michael P. Moran
Title: Vice President
BUYER:
KINDER MORGAN, INC.
By:
Name: William V. Morgan
Title: President
-38-
<PAGE>
Exhibit A
Retained Liabilities
Enron Liquids Pipeline Company
Schedule of Liabilities Retained
1. All deferred income taxes, accounts payable or other current liabilities of
ELPC including but not limitd to the accounts listed below provided,
however, the retained liabilities shall not include any liabilities
associated with the ELPC Job Order designated J00008 Property Unit 47500
Responsibility Center 0000.
101 2320 300 Vouchers Payable
101 2320 310 Accounts Payable-O/S Checks
101 2320 999 Accounts Payable-Other
101 2360 100 Accrued Use Taxes
101 2360 801 Accrued State Income Tax
101 2360 300 Accrued Franchise Taxes
101 2830 400 State LT Deferred Income Tax
101 2830 800 Federal LT Deferred Income Tax
2. Those litigation matters marked with an asterisk in Section 4.10 of the
Disclosure Schedule.
<PAGE>
Exhibit B
_______________________________________________________________________________
Conveyance, Assignment and Assumption Agreement
<PAGE>
EXHIBIT B
CONVEYANCE, ASSIGNMENT, AND
ASSUMPTION AGREEMENT
THIS GENERAL CONVEYANCE, ASSIGNMENT, BILL OF SALE and ASSUMPTION
AGREEMENT (this "Agreement"), is entered into on February 14, 1997 between Enron
Liquids Pipeline Company, a Delaware corporation ("ELPC"), and Enron Liquids
Holding Corp., a Delaware corporation ("ELHC").
W I T N E S S E T H:
WHEREAS, ELHC and Kinder Morgan, Inc. ("KMI"), a Delaware
corporation, have as of even date herewith entered into that certain Amended
and Restated Purchase and Sale Agreement (the "Purchase Agreement"), providing,
among other things, for the sale by ELHC of the issued and outstanding stock of
ELPC to KMI;
WHEREAS, pursuant to the Purchase Agreement, ELPC and ELHC are required
to execute and deliver this Agreement in connection with the consummation of the
transactions contemplated by the Purchase Agreement; and
WHEREAS, any capitalized term used but not defined in this Agreement
shall have the meaning ascribed to such term in the Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Conveyance and Assignment of Assets. ELPC hereby grants, conveys,
assigns, transfers, bargains and delivers unto ELHC and its successors and
assigns, all of ELPC's right, title and interest in and to the accounts
receivable and all other current assets of ELPC together with copies of records
maintained by ELPC pertaining to any of the foregoing assets, properties and
rights described in this Paragraph 1 (collectively, the "Conveyed Assets") such
grant, conveyance, assignment and transfer is made without recourse or any
representations or warranties regarding the Conveyed Assets including, the
condition, collectability and adequacy thereof.
2. Subsequent Actions. ELPC hereby covenants to and with ELHC, its
successors and assigns, to execute and deliver to ELHC, its successors and
assigns, all such other and further instruments of conveyance, assignment and
transfer, and all such notices, releases and other documents, that would more
fully and specifically convey, assign, and transfer to and vest in ELHC, its
successors and assigns, the title of ELPC in and to all and singular the
Conveyed Assets hereby conveyed, assigned, and transferred, or intended to be
conveyed, assigned or transferred. To the extent that, with respect to any of
the Conveyed Assets, no assignment document other than this Agreement is
executed, the parties intend that this Agreement constitutes the conveyance,
transfer and assignment of such Conveyed Assets.
3. ELHC Assumption. ELHC has and by these presents does hereby
fully assume all liabilities, duties and obligations related to the Retained
Liabilities.
4. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED, PERFORMED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS. ALL CLAIMS,
DISPUTES OR CAUSES OF ACTION RELATING TO OR ARISING OUT OF THIS ASSIGNMENT SHALL
BE BROUGHT, HEARD AND RESOLVED SOLELY AND EXCLUSIVELY BY AND IN A FEDERAL OR
STATE COURT SITUATED IN HARRIS COUNTY, TEXAS.
5. Conflict and Inconsistency; No Merger. To the extent any conflict or
inconsistency exists between the provisions of this Agreement and the Purchase
Agreement, the provisions of the Purchase Agreement shall be controlling. The
terms and provisions of the Purchase Agreement (including, without limitation,
the representations, warranties and covenants therein) shall not merge, be
extinguished or otherwise affected by the delivery and execution of this
Agreement or any other document delivered pursuant to Paragraph 2 of this
Agreement.
6. DISCLAIMER OF WARRANTIES. OTHER THAN AS EXPRESSLY SET FORTH IN THE
PURCHASE AGREEMENT OR THIS AGREEMENT, ELHC ACKNOWLEDGES THAT ELPC HAS NOT MADE,
AND HEREBY EXPRESSLY DISCLAIMS AND NEGATES, ANY REPRESENTATION OR WARRANTY,
EXPRESS IMPLIED AT COMMON LAW, BY STATUTE, OR OTHERWISE, RELATING TO (I) THE
CONDITION OF CONVEYED ASSETS (INCLUDING, WITHOUT LIMITATION, (A) ANY IMPLIED OR
EXPRESS WARRANTY OF MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE, (C) ANY IMPLIED OR EXPRESS WARRANTY OF
CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, OR (D) ENVIRONMENTAL CONDITION),
(II) INFRINGEMENT BY ELPC OF ANY PATENT OR PROPRIETARY RIGHT, AND (III) ANY
INFORMATION, DATA OR OTHER MATERIALS (WRITTEN OR ORAL) FURNISHED TO ELHC BY OR
ON BEHALF OF ELPC. THE PARTIES AGREE THAT THIS PARAGRAPH CONSTITUTES A
CONSPICUOUS LEGEND.
8. Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.
9. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, ELHC and ELPC have executed this Agreement as of
the day and year first above written.
ENRON LIQUIDS HOLDING CORP.
By:
Name:
Title:
ENRON LIQUIDS PIPELINE COMPANY
By:
Name:
Title:
-2-
<PAGE>
Disclosure Schedule
for
Amended and Restated Purchase and Sale Agreement
dated as of February 14, 1997
by and among
Enron Liquids Holding Corp.
as Seller
and
Kinder Morgan, Inc.
as Buyer
Section 4.1: Organization and Good Standing of Seller and ELPC
Section 4.2: Qualification
Section 4.3: Capitalization of ELPC
Section 4.4: Authorization of Agreement; No Violation; No Consents
Section 4.5: Governmental Consents
Section 4.6: Enforceability (No schedule required)
Section 4.7: Balance Sheet
Section 4.8: Absence of Changes
Section 4.9: Contracts
Section 4.10: Suits
Section 4.11: Compliance with Laws (No schedule required)
Section 4.12: Tax Matters
Section 4.13: Condition of the Assets; Preferential Rights to Purchase
Section 4.14: Employees and Employee Benefit Plans and Policies
(No schedule required)
Section 4.15: Employee Matters
Section 4.16: Public Filings (No schedule required)
Section 4.17: Brokers (No schedule required)
Section 4.18: Suits Against the Partnerships
Although each item of disclosure set forth in this Disclosure Schedule
specifically refers to the article and section of the Agreement to which such
disclosure responds, it shall also be deemed to be disclosed with respect to any
other article or section of the Agreement.
<PAGE>
Section 4.1
- ------------------------------------------------------------------------------
Officers and Directors of Enron Liquids Pipeline Company,
a Delaware corporation
DIRECTORS:
William V. Allison Director
Stanley C. Horton Director
William V. Morgan Director
Louis E. Potempa Director
Edmund P. Segner, III Director
Darrell G. Warner Director
Perry M. Waughtal Director
OFFICERS:
Stanley C. Horton Chairman of the Board
William V. Allison President
E. G. Parks Senior Vice President and
Controller
Steven M. Brown Vice President, Operations
Angus H. Davis Vice President, Communications and
Corporate Secretary
Robert S. Herlin Vice President
Robert J. Hermann Vice President, Tax
William D. Gathman Vice President, Finance and
Treasurer
Thomas B. King Vice President, Midwest Region
Michael P. Moran Vice President and General
Counsel
Thomas P. Tosoni Vice President, Finance, and
Assistant Secretary
Curtis H. Wilker Vice President, Gulf Coast
Region
Kate B. Cole Assistant Secretary
Geneva H. Hiroms Assistant Secretary
Peggy B. Menchaca Assistant Secretary
<PAGE>
Section 4.2
- ------------------------------------------------------------------------------
Qualification
None
<PAGE>
Section 4.3
- ------------------------------------------------------------------------------
Capitalization of ELPC
Enron Liquids Pipeline Company
COMMON STOCK
Shares Authorized: 1,000,000
Shares Issued: 1,000,000
Shares Outstanding: 1,000,000
Owner of all outstanding shares: Enron Liquids Holding Corp.
<PAGE>
Section 4.4
- -------------------------------------------------------------------------------
Consents
1. The Pipeage Agreement between Enron Liquids Pipeline
Operating Limited Partnership ("ELPOLP") and an
Investor Shipper provides that the Investor Shipper
will have the right to buy the Cypress Pipeline
(which is owned by ELPOLP) at a price calculated
pursuant to the Pipeage Agreement if there is a sale,
transfer, conveyance or material change of ownership
or control, direct or indirect, of all or
substantially all of the stock of ELPOLP or ELPOLP's
interest in Cypress Pipeline. The Investor Shipper
advised Enron that it may have the right to purchase
the pipeline as a result of the sale of ELPC.
ELPOLP responded by letter dated October 14, 1996, in
which, without acknowledging the existence of the
right claimed by the Investor Shipper, as provided in
the Pipeage Agreement, ELPOLP gave the Investor
Shipper thirty (30) days from receipt of such letter
to exercise any such right, should it exist. As of
this date, the Investor Shipper has acknowledged in
writing in an Amendment to the Pipeage Agreement that
the time period has lapsed for it to exercise its
right, if any, to acquire the Cypress Pipeline
related to the sale of all of the stock of ELPC
pursuant to this Agreement. Pursuant to the
Amendment to the Pipeage Agreement and certain other
ancillary agreements, the Investor Shipper and
ELPOLP agreed to, among other things, make certain
improvements to the Cypress Pipeline to increase
throughput and the commitment by the Investor Shipper
of the transportation through the Cypress Pipeline
of certain minimum volumes of product (Ethane or E/P
Mix) at an agreed upon rate that is in accordance
with the FERC tariff then in force.
2. Pursuant to Section 6.01(R) in that certain Loan
Agreement dated effective May 24, 1995, by and
between ELPOLP, as Borrower, and Bank One, Texas
N.A., as Lender, the consent of the Lender must be
obtained in order for any party that is not an
Affiliate of Enron Corp. to be the general partner
of the Borrower, such consent not to be unreasonably
withheld.
3. Pursuant to Section 2.20 of that certain Credit
Agreement dated December 29, 1994, between Enron
Transportation Services, L.P., as Borrower, and First
Union National Bank of North Carolina, as Lender,
the Applicable Margin, as defined therein, shall be
increased by 0.25% should Enron or a wholly-owned
subsidiary of Enron cease to own a controlling
interest in ELPC.
<PAGE>
Section 4.5
- ------------------------------------------------------------------------------
Governmental Consents
None
<PAGE>
Section 4.7
- ------------------------------------------------------------------------------
Financial Statements
See Attachment No. 1 hereto.
<PAGE>
<TABLE>
ENRON LIQUIDS PIPELINE COMPANY
BALANCE SHEET
"AT SEPTEMBER 30, 1996"
<CAPTION>
Historical Adjustments # Pro Forma
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and Working Funds 0 0 0
Temporary Cash Investments 0 0 0
Accounts Receivable
- Assoc Co. Other "(104,296)" "104,296 " 1 0
- Assoc Co. Corp "(677,538)" "677,538 " 1 0
- Oper - Co 535 0 0 0
- CAFCO 0 0 0
- Other Trade "1,943,688 " "(1,943,688)" 2 0
Notes Receivable 0 0 0
Inventories 0 0 0
Material and Supplies 0 0 0
Prepayments "155,182 " "(155,182)" 2 0
Commod Exchange Receiv. 0 0 0
Other 0 0 0
Total "1,317,036 " "(1,317,036)" 0
Investments and Other Assets
Investment in Consol Co 0 0 0
Investment in Unconsol Co 23,530,236 " 0 "23,530,236 "
Other 0 0 0
Total "23,530,236 " 0 "23,530,236 "
Plant "76,713 " 0 "76,713 "
Accumulated Depreciation "13,578 " 0 "13,578 "
Net Plant "63,135 " 0 "63,135 "
Deferred Charges
Severance/Relocation Charges 0 0 0
Other "325,275 " "(325,275)" 3 0
Total "325,275 " "(325,275)" 0
Total Assets "25,235,682 " "(1,642,311)" "23,593,371 "
LIABILITIES AND CAPITAL
Current Liabilities
Accounts Payable
- Assoc Co. Other 0 0 0
- Assoc Co. Corp 0 0 0
- Other Trade "127,389 " "(127,389)" 2 0
Notes Payable 0 0 0
Accrued Income Taxes "80,766 " "(80,766)" 2 0
Accrued Taxes - Other "38,211 " "12,979 " 2 "51,190 "
Current Deferred Income Taxes 0 0 0
Accrued Interest 0 0 0
Commod Exchange Payable 0 0 0
Current Portion - LT Obligation 0 0 0
Other 0 0 0
Total "246,366 " "(195,176)" "51,190 "
Reserves and Deferred Credits
Long-Term Deferred Income Taxes "28,718,979 " "(28,718,979)" 3 0
Long-Term Obligation-Assoc Co. 0 0 0
Long-Term Obligation-Trade 0 0 0
Minority Interest 0 0 0
Other "(78,000)" "78,000 " 3 0
Total "28,640,979 "(28,640,979)" 0
Capital
Pay to/(Receiv from)-Corp "(83,437,636)" "83,437,636 " 1 0
Common Stock "10,000,000 " 0 "10,000,000 "
Premium On Common Stock "14,500,000 " "(14,500,000)" 4 0
Retained Earnings "55,285,973 " "(41,743,792)" "1,2,3,4" "13,542,181 "
Cumul Foreign Curr Transl Adj 0 0 0
Total "(3,651,663)" "27,193,844 " "23,542,181 "
Total Liabilities and Capital "25,235,682 " "(1,642,311)" "23,593,371 "
Note: Certain information and notes normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been omitted.
</TABLE>
<PAGE>
ENRON LIQUIDS PIPELINE COMPANY
ADJUSTMENTS TO BALANCE SHEET
AT SEPTEMBER 30, 1996
1 Eliminate Intercompany Receivable/Payable balances.
2 Eliminate Working Capital itmes (excluding Accrued Franchise Taxes).
3 Eliminate Deferred Charges, Deferred Credits, and Deferred Income Taxes.
4 Reclass Note Payable to Retained Earnings
Note: The Pro-Forma Balance Sheet does not reflect the sale of the Transferred
LP Units.
<PAGE>
Section 4.8
- -------------------------------------------------------------------------------
Absences of Changes
1. Pursuant to Section 2.20 of that certain Credit
Agreement dated December 29, 1994, between
Enron Transportation Services, L.P., as Borrower, and
First Union National Bank of North
Carolina, as Lender, the Applicable Margin, as
defined therein, shall be increased by 0.25%
should Enron or a wholly-owned subsidiary of Enron
cease to own a controlling interest in
ELPC.
2. ELPC has entered into that certain Unit Purchase Agreement
between First Union Investors, Inc. ("First Union") and
ELPC dated as of February 14, 1997 providing for the sale
by ELPC of the Transferred L.P. Units to First Union.
<PAGE>
Section 4.9
- ------------------------------------------------------------------------------
Contracts
1. Amended and Restated Agreement of Limited Partnership of Enron Liquids
Pipeline, L.P., dated as of August 6, 1992, by and among Enron Liquids Pipeline
Company, Enron Gas Production Company, and other persons, with First Amendment
effective as of August 6, 1992, and Second Amendment effective as of September
30, 1993.
2. Amended and Restated Agreement of Limited Partnership of Enron Liquids
Pipeline Operating Limited Partnership, dated as of August 6, 1992, by and among
Enron Liquids Pipeline Company, Enron Liquids Pipeline, L.P. and other persons
who become partners, with First Amendment effective as of August 6, 1992, and
Second Amendment dated as of March 22, 1993, but effective as of August 6, 1992.
3. Omnibus Agreement by and among Enron Corp., Enron Liquids Pipeline, L.P.,
Enron Liquids Pipeline Operating Limited Partnership, and Enron Liquids Pipeline
Company, with First Amendment dated as of September 30, 1993, and Second
Amendment dated as of September 7, 1994.
4. Conveyance, Contribution and Assumption Agreement dated as of August 6, 1992,
by and among Enron Corp., Enron Liquids Pipeline Company, Enron Gas Processing
Company, Enron Gas Liquids, Inc., Enron Liquids Pipeline, L.P., Enron Liquids
Pipeline Operating Limited Partnership, and others, with First Amendment
effective as of August 6, 1992.
5. Amended and Restated Agreement of Limited Partnership of Enron Transportation
Services, L.P., dated as of September 30, 1993, by and among Enron Liquids
Pipeline Company, Enron Liquids Pipeline, L.P., and others.
6. Agency Agreement dated July 19, 1995, by and between Enron Liquids Pipeline
Company and Enron Liquid Fuel Company (the latter by change of name now known as
Enron Liquid Services Corp.).
*7. Unit Purchase Agreement dated as of February 14, 1997 by and between Enron
Liquids Pipeline Company and First Union Investors, Inc.
*8. Unit Registration Rights Agreement dated as of February 14, 1997 by and
among Enron Liquids Pipeline, L.P., Enron Liquids Pipeline Company and First
Union Investors, Inc.
The representations made in Section 4.9(b) of the Agreement are not made with
respect to the items marked with an "*" above.
<PAGE>
Section 4.10
- ------------------------------------------------------------------------------
Litigation
The following litigation is included herein to the extent that it applies to
ELPC as general partner of ELPLP, ELPOLP and/or ETS only. All matters listed
below marked with an "*" will be retained by the Seller.
1. State of Illinois ex rel. Ryan et al. v. Enron Liquids Pipeline Company.
Circuit Court for Grundy County, Illinois. Docket No. 95-CH-28. (Served November
2, 1995.) The Illinois EPA filed suit on September 13, 1995 against ELPC for
civil penalties and an injunction for events growing out of a fire exactly one
year earlier at ELPC's pipeline terminal at Morris, Ill. The incident occurred
when a sphere containing natural gasoline overfilled and released the product,
which ignited, causing fire and damage to ELPC's facilities, but no damage to
other property. The lawsuit contains five counts: a) air pollution; b) public
nuisance; c) common law public nuisance; d) water pollution, and e) creating a
water pollution hazard.
Counts one, four, and five seek civil damages in the amount of $50,000 for
each count, plus $10,000 per day for any continuing violation, and an injunction
against further violations. The nuisance counts ask for ELPC to be enjoined from
further nuisance activities and to be required to comply with the fire safety
recommendations. Count five also requests the court to order corrective action
in the form of improving the natural gasoline containment area.
On August 22, 1996, the Illinois Attorney General's office proposed a
consent decree that would require ELPC to implement several fire safety and
protection recommendations and pay a $100,000 civil penalty plus a $500/day
penalty for missing certain remedial deadlines. On December 31, 1996, ELPC
responded to the proposal, and negotiations with the OAG have started. ELPC
earlier had filed an answer to the suit.
In December, the U.S. Department of Transportation issued to ELPC a notice
of probable violations (eight) of federal pipeline safety regulations and a
proposed civil penalty of $90,000. DOT extended ELPC's time to respond from 30
days to 60 days.
*2. Robles v. Piper and others (including Enron Liquids Pipeline Company); Law
No. 56878, District Court for Johnson County, Iowa (served August 20, 1996).
This suit is a suit by the Administrator of the Robles estate against the
Executor of the Piper estate and ten other defendants for damages of unspecified
amount for death, injury, and loss of income that are asserted to have occurred
in an alleged propane gas explosion in a restaurant in Fredonia, Iowa on
September 17, 1994. Against ELPC, the plaintiff sets up three theories of
recovery: negligence, breach of implied warranty of safety, and strict
liability. ELPC has been impleaded, and its discovery is just commencing.
*3. Larry Bolton v. Enron Liquid Fuels, Inc., (properly Enron Liquids Pipeline
Company); U.S. District Court (S.D., TX.) (Served 12-1-95) This former employee
of Enron Liquids Pipeline Company has sued for compensatory and punitive
damages, back pay, injunctive relief and attorney fees. He asserts that he was
wrongfully terminated by ELPC on August 8, 1994 on the basis of race. An answer
has been filed for ELPC. Trial is set for March 14, 1997.
*4. Edward L. Harp, et al. v. Warren Petroleum, et al. 344th Judicial District
Court for Chambers County, Texas. Cause No. 9648. (Original Petition filed
September 2, 1982) Class action suit seeking unspecified damages alleging that
potential industrial accidents were a nuisance, land prices were depressed, and
brine disposal caused property damage. This case was inactive from 1985 to 1995.
In 1995, it was placed on a dismissal docket for want of prosecution. In 1996,
plaintiffs' counsel entered an appearance and moved for referral to mediation,
which was opposed by defendants and has not been ordered by the court. All
defendants now have filed motions for summary judgment, based on the limitation
of actions. A hearing on those motions is scheduled for January 31, 1997.
*5. Ripplemeyer v. Robles (and others, including ELPC), No. LACV057511, District
Court for Johnson County, Iowa (served December 10 and 12, 1996). Ripplemeyer
was the only survivor of the Fredonia explosion (in item 2, above). He has sued
the estate of the restaurant owner, alleging negligence, as well as appliance
and valve-control manufacturers, odorant manufacturers, retain propane dealers,
and pipeline transporters on the theory that they failed to warn him of the
danger of appliances.
<PAGE>
The three Kingsbury Inn cases, Robles, Ripplemeyer, and Piper, have been
consolidated for discovery and trial. In Ripplemeyer, ELPC has moved for
dismissal based on the fact that while the complaint was filed before the
statute of limitations ran, service was not perfected until afterward, and that
failure to attempt service violated Iowa procedural rules. The motion is
scheduled for hearing on January 9, 1997.
*6. Piper v. Farmers Elevator & Exchange (and others, including ELPC); No.
LACV057512, District Court of Johnson County, Iowa (served September 16, 1996).
This odorization suit arose from the Fredonia, Iowa restaurant explosion on
September 17, 1994. The plaintiffs are the widow and two children of Larry
Piper, deceased owner of the restaurant, and his estate. It seeks damages of
unstated amount for wrongful death and property damage from 12 defendants. As
against ELPC, the complaint asserts theories of recovery including negligence,
failure to warn, strict liability and failure to audit the safety programs of
its customers.
*7. Ritterhouse v. Enron Liquids Pipeline Company, L.P. (sic), Enron Corp., and
Enron Operations Company. Kansas Human Rights Commission, Case no. 20616-97W
(served September 18, 1996). The complainant, an employee of ELPC, charges
discrimination and harassment based on age and disability in violation of Kansas
law, and ADEA and ADA. He also asserts that the company retaliated against him
because of disability. According to the Kansas Human Rights Commission, the case
will be handled by the EEOC.
<PAGE>
Section 4.12
- ------------------------------------------------------------------------------
ELPC Group
1995 Income Tax Returns
Enron Liquids Pipeline Company
Federal Income Tax Return: Included in Enron Corp. & Subs Consolidated
Federal Income Tax Return
State Income Tax Returns: Illinois (Included in Unitary Return)
Indiana
Iowa (Included in Unitary Return)
Kansas (Included in Unitary Return)
Louisiana
Missouri
Nebraska (Included in Unitary Return)
New Mexico (Included in Unitary Return)
Texas (Franchise/Earned Surplus)
"Enron Liquids Pipeline, L.P."
Federal Partnership
Return of Income: Prepared by Enron Liquids Pipeline Company
State Partnership Return
of Income Where Business
is Conducted: Illinois Indiana
Iowa Kansas
Louisiana Missouri
Nebraska
State Partnership Return
of Income Where Partnership
has Resident Partners: Delaware Florida
Idaho Maine
New York Oregon
Pennsylvania Utah
West Virginia
Enron Liquids Operating
Limited Partnership
Federal Partnership
Return of Income: Prepared by Enron Liquids Pipeline Company
State Partnership Return
of Income: Illinois Indiana
Iowa Kansas
Louisiana Missouri
Nebraska
"Enron Transportation
Services, L.P."
Federal Partnership
Return of Income: Prepared by Enron Liquids Pipeline Company
State Partnership Return
of Income: Illinois
Enron Natural Gas Liquids
Corporation
Federal Income Tax Return: Deconsolidated entity (owned by Operating
Partnership)
State Income Tax Returns: Texas (Franchise/Earned Surplus)
Mont Belvieu Associates Partnership
Federal Partnership
Return of Income: Prepared by Enron Natural Gas Liquids
Corporation
<PAGE>
ENRON LIQUIDS GROUP
FEDERAL AUDIT ACTIVITY FOR ENTITIES
IN THE PROPOSED TRANSACTION
Statute
Company Tax Years Expiration Status
Enron Corp.
and Subsidiaries All tax years Expired Closed for federal
prior to 12/31/91 examinations
Enron Corp.
and Subsidiaries 1992-1994 1992: 9/30/97 Currently under
1993: 9/15/97 federal examination;
1994: 9/15/98 RAR not expected
until end of 1997
"Enron Liquids
Pipeline, L.P." No federal examinations currently in progress
<PAGE>
<TABLE>
ENRON LIQUIDS GROUP
STATE AUDIT ACTIVITY FOR ENTITIES
IN THE PROPOSED TRANSACTION
<CAPTION>
Company Tax Years State Statute Expiration Status
<S> <C> <C> <C> <C>
Enron Liquids Pipeline Company 1992-1994 Louisiana 12/31/97 Field audit nearing conclusion
Enron Liquids Pipeline Company 1991-1993 Indiana 10/15/96 Just received no-charge assessment
Enron Liquids Pipeline Company 1990-1993 Nebraska - estimated tax penalty and interest
assessment is $61,000
Enron Liquids Pipeline Operating 1993-96 Kansas - a notice of intent to audit has been
Company filed by the State of Kansas
Enron Corp. and Subsidiaries The following unitary states are in various stages of audit.
No specific issues attributable to the liquids companies have been identified.
1993 - 1984 Illinois 12/31/96 Finalizing settlement
1985 - 1987 Illinois Open until protest resolved Finalizing amended returns
1990 - 1991 Illinois Open until protest resolved Motion for Discovery pending
1992 - 1983 Illinois 10/15/97 Pending 90-91 closure
</TABLE>
<PAGE>
Section 4.13
- ------------------------------------------------------------------------------
Condition of Assets
As of even date herewith ELPC has entered into that certain Unit Purchase
Agreement with First Union Investors, Inc. ("First Union") providng for the
sale of the Transferred LP Units to First Union.
<PAGE>
Section 4.15
- -------------------------------------------------------------------------------
Part I
None
Part II
See Attachment No. 1 hereto.
Part III
The Central Pension Fund -- International Union of
Operating Engineers and Participating Employers,
established in 1960.
Part IV
See Attachment No. 2 hereto.
Part V
None
<PAGE>
ATTACHMENT NO. 1
TO
SECTION 4.15
=================================================================
| ENRON BENEFIT AND COMPENSATION PLANS |
| MLP EMPLOYEE PARTICIPATION |
=================================================================
(Note: Cora Terminal union employees do not participate in Enron's benefit
compensation plans with the exception of the Enron Liquid Services Corp.
Divestiture Plan. The union employees participate in the union welfare and
pension plans as provided and funded by negotiated contract. Cora Terminal
non-union employees participate in Enron's benefit and compensation plans along
with all other MLP employees.)
Benefit Plans Compensation Programs
Employee Stock Option Program Skill Based Pay
Savings Plan Merit Pay
Cash Balance Plan Variable Pay
Payroll Deducted Savings and Stock Purchase Bonus Stock Options
Flexible Compensation Plan All-Employee Stock Options
o "Flexdollars" Personal Best Award
o Spending Accounts Executive Compensation
o Medical Plan Executive Compensation
o Dental Plan Bonus Deferral
o Long Term Disability Club Membership
o Employee Life Insurance Enron Liquid Services Corp.
o Spouse Life Insurance Divestiture Plan
o Dependent Child Life Insurance
o Accident Death & Dismemberment Insurance
Business Travel Accident Insurance
Employee Assistance Program (EAP)
Service Awards
Sick Leave Pay Practice
Leaves Of Absence
Vacation
Holidays
Approved Time Off
Discontinued Child Day Care
Credit Union
Savings Bonds
Educational Assistance Program
Scholarship Program
Matching Gift Program
Workers' Compensation
Unemployment Compensation
<PAGE>
Attachment No. 2
to
Section 4.15
YEAR RATE TOTAL CONTRIBUTION
1996 (1/1/96-9/30/96)$1.10/HR. $ 36,999.80
1995 $1.00/HR. (1/1/95-8/31/95)
$1.10/HR. (9/1/95-12/31/95) $ 44,208.35
1994 $1.00/HR. $ 28,737.50
1993 $1.00/HR. $ 17,284.70
<PAGE>
Section 4.18
- --------------------------------------------------------------------------------
Suits Against the Partnerships
The following litigation is included herein to the extent that it applies to
ELPLP, ELPOLP, ENGL and/or ETS only. All matters listed below marked with an
"*" will be retained by the Seller.
1. State of Illinois ex rel. Ryan et al. v. Enron Liquids Pipeline Company.
Circuit Court for Grundy County, Illinois. Docket No. 95-CH-28. (Served November
2, 1995.) The Illinois EPA filed suit on September 13, 1995 against ELPC for
civil penalties and an injunction for events growing out of a fire exactly one
year earlier at ELPC's pipeline terminal at Morris, Ill. The incident occurred
when a sphere containing natural gasoline overfilled and released the product,
which ignited, causing fire and damage to ELPC's facilities, but no damage to
other property. The lawsuit contains five counts: a) air pollution; b) public
nuisance; c) common law public nuisance; d) water pollution, and e) creating a
water pollution hazard.
Counts one, four, and five seek civil damages in the amount of $50,000 for
each count, plus $10,000 per day for any continuing violation, and an injunction
against further violations. The nuisance counts ask for ELPC to be enjoined from
further nuisance activities and to be required to comply with the fire safety
recommendations. Count five also requests the court to order corrective action
in the form of improving the natural gasoline containment area.
On August 22, 1996, the Illinois Attorney General's office proposed a
consent decree that would require ELPC to implement several fire safety and
protection recommendations and pay a $100,000 civil penalty plus a $500/day
penalty for missing certain remedial deadlines. On December 31, 1996, ELPC
responded to the proposal, and negotiations with the OAG have started. ELPC
earlier had filed an answer to the suit.
In December, the U.S. Department of Transportation issued to ELPC a notice
of probable violations (eight) of federal pipeline safety regulations and a
proposed civil penalty of $90,000. DOT extended ELPC's time to respond from 30
days to 60 days.
*2. Robles v. Piper and others (including Enron Liquids Pipeline Company); Law
No. 56878, District Court for Johnson County, Iowa (served August 20, 1996).
This suit is a suit by the Administrator of the Robles estate against the
Executor of the Piper estate and ten other defendants for damages of unspecified
amount for death, injury, and loss of income that are asserted to have occurred
in an alleged propane gas explosion in a restaurant in Fredonia, Iowa on
September 17, 1994. Against ELPC, the plaintiff sets up three theories of
recovery: negligence, breach of implied warranty of safety, and strict
liability. ELPC has been impleaded, and its discovery is just commencing.
*3. Larry Bolton v. Enron Liquid Fuels, Inc., (properly Enron Liquids Pipeline
Company); U.S. District Court (S.D., TX.) (Served 12-1-95) This former employee
of Enron Liquids Pipeline Company
1
<PAGE>
has sued for compensatory and punitive damages, back pay, injunctive relief and
attorney fees. He asserts that he was wrongfully terminated by ELPC on August 8,
1994 on the basis of race. An answer has been filed for ELPC. Trial is set for
March 14, 1997.
*4. Edward L. Harp, et al. v. Warren Petroleum, et al. 344th Judicial District
Court for Chambers County, Texas. Cause No. 9648. (Original Petition filed
September 2, 1982) Class action suit seeking unspecified damages alleging that
potential industrial accidents were a nuisance, land prices were depressed, and
brine disposal caused property damage. This case was inactive from 1985 to 1995.
In 1995, it was placed on a dismissal docket for want of prosecution. In 1996,
plaintiffs' counsel entered an appearance and moved for referral to mediation,
which was opposed by defendants and has not been ordered by the court. All
defendants now have filed motions for summary judgment, based on the limitation
of actions. A hearing on those motions is scheduled for January 31, 1997.
*5. Ripplemeyer v. Robles (and others, including ELPC), No. LACV057511, District
Court for Johnson County, Iowa (served December 10 and 12, 1996). Ripplemeyer
was the only survivor of the Fredonia explosion (in item 2, above). He has sued
the estate of the restaurant owner, alleging negligence, as well as appliance
and valve-control manufacturers, odorant manufacturers, retain propane dealers,
and pipeline transporters on the theory that they failed to warn him of the
danger of appliances.
The three Kingsbury Inn cases, Robles, Ripplemeyer, and Piper, have been
consolidated for discovery and trial. In Ripplemeyer, ELPC has moved for
dismissal based on the fact that while the complaint was filed before the
statute of limitations ran, service was not perfected until afterward, and that
failure to attempt service violated Iowa procedural rules. The motion is
scheduled for hearing on January 9, 1997.
*6. Piper v. Farmers Elevator & Exchange (and others, including ELPC); No.
LACV057512, District Court of Johnson County, Iowa (served September 16, 1996).
This odorization suit arose from the Fredonia, Iowa restaurant explosion on
September 17, 1994. The plaintiffs are the widow and two children of Larry
Piper, deceased owner of the restaurant, and his estate. It seeks damages of
unstated amount for wrongful death and property damage from 12 defendants. As
against ELPC, the complaint asserts theories of recovery including negligence,
failure to warn, strict liability and failure to audit the safety programs of
its customers.
*7. Ritterhouse v. Enron Liquids Pipeline Company, L.P. (sic), Enron Corp., and
Enron Operations Company. Kansas Human Rights Commission, Case no. 20616-97W
(served September 18, 1996). The complainant, an employee of ELPC, charges
discrimination and harassment based on age and disability in violation of Kansas
law, and ADEA and ADA. He also asserts that the company retaliated against him
because of disability. According to the Kansas Human Rights Commission, the case
will be handled by the EEOC.
2
<PAGE>
Schedule 6.2(b)
Changes in Operations
- -------------------------------------------------------------------------------
None
<PAGE>
Schedule 6.7
Computer Software
Excluded Software and Hardware
1. ENRON Financial System
This consists of all software and hardware components that make up the
Enron Financial System environment including but not limited to the Dun &
Bradstreet Software and the Oracle Purchasing Software.
2. Environmental Management Information System (EMIS)
3. Envision - Document Imaging & Storage System This consists of all software
and hardware components that make up Envision including but not limited to
the FileNet Software and the HP Unix server.
4. FERA - Cathodic Protection
This consists of the FERA AS3, CISurvey, and PLSurvey software
applications at all ELPC General Partner locations.
5. ENRON Corp. Mainframe and Print Center Environments
This includes but is not limited to the IBM 3090
computers, peripheral hardware,
operating system software, language compilers, database
management software,
fourth generation languages, security software,
utilities, printers, paper and
supplies, LANs, data communications hardware and
software, and application
system software.
6. ENRON OTS VAX Environment
This includes but is not limited to OTS DEC VAX computers, peripheral
hardware, operating system software, language compilers, database
management software, fourth generation languages, security software, and
utilities.
7. ELSC Houston PC LAN Environment
This includes but is not limited to the "NGL" LAN
server which is a Compaq
Proliant 2000, the "ELSC-2" LAN server which is a
Compaq Proliant 1500, the
"RESENG" LAN server which is a Compaq SYSTEMPRO/LT, the
Storage
Dimensions tape backup hardware, other peripheral
hardware, network printers,
network operating system software, and various
networked software applications.
<PAGE>
Schedule 6.10
Employment Matters
AVERAGE
NUMBER OF EMPLOYEES SALARY
Available 13 $73,000
Company 128 $45,000
---
Total 141 $48,000
AVERAGE SALARY
EMPLOYEES PER FUNCTION PER FUNCTION
AVAILABLE
BUSINESS DEVELOPMENT 4 $87,000
MARKETING 1 $109,000
ACCOUNTING 6 $52,000
ENGINEERING 1 $110,000
SAFETY & COMPLIANCE 1 $64,000
COMPANY
PIPELINE CONTROLLER (DISPATCHERS) 13 $50,000
FACILITY MANAGEMENT 16 $58,000
CLERICAL 2 $33,000
ENGINEERING 1 $68,000
OPERATIONS & MAINTENANCE 74 $45,000
CORA TERMINAL-UNION EMPLOYEES 22 $31,000
---
141
<PAGE>
CREDIT AGREEMENT
Dated as of February 14, 1997
Among
KINDER MORGAN, INC.
as Borrower,
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Agent,
and
THE LENDERS SIGNATORY HERETO
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions and Accounting Matters
Section 1.01 Terms Defined Above................1
Section 1.02 Certain Defined Terms..............1
Section 1.03 Accounting Terms and
Determinations...................16
ARTICLE II
Commitments
Section 2.01 The Facilities....................16
Section 2.02 Borrowings, Continuations,
Conversions, Letters of Credit....17
Section 2.03 Changes of Facility A
Commitments.......................19
Section 2.04 Fees..............................19
Section 2.05 Several Obligations...............21
Section 2.06 Notes.............................21
Section 2.07 Prepayments.......................22
Section 2.08 Assumption of Risks...............22
Section 2.09 Obligation to Reimburse and to
Prepay............................23
Section 2.10 Lending Offices...................25
ARTICLE III
Payments of Principal and Interest
Section 3.01 Repayment of Loans................25
Section 3.02 Interest..........................25
ARTICLE IV
Payments; Pro Rata Treatment; Computations; Etc.
Section 4.01 Payments..........................26
Section 4.02 Pro Rata Treatment................26
Section 4.03 Computations......................27
Section 4.04 Non-receipt of Funds by the
Agent..... .......................27
Section 4.05 Set-off, Sharing of Payments,
Etc...............................27
Section 4.06 Taxes.............................28
<PAGE>
ARTICLE V
Capital Adequacy
Section 5.01 Additional Costs..................31
Section 5.02 Limitation on LIBOR Loans.........33
Section 5.03 Illegality........................34
Section 5.04 Base Rate Loans Pursuant to
Sections 5.01, 5.02 and 5.03......34
Section 5.05 Compensation......................34
ARTICLE VI
Conditions Precedent
Section 6.01 Initial Funding...................35
Section 6.02 Initial and Subsequent Loans
and Letters of Credit.............36
Section 6.03 Conditions Relating to Letters
of Credit.........................37
Section 6.04 Conditions Relating to
Distribution LC...................37
ARTICLE VII
Representations and Warranties
Section 7.01 Corporate Existence...............38
Section 7.02 Financial Condition...............38
Section 7.03 Litigation........................38
Section 7.04 No Breach.........................39
Section 7.05 Authority.........................39
Section 7.06 Approvals.........................39
Section 7.07 Use of Facilities.................39
Section 7.08 ERISA.............................39
Section 7.09 Taxes.............................41
Section 7.10 Titles, etc.......................41
Section 7.11 No Material Misstatements.........41
Section 7.12 Investment Company Act............42
Section 7.13 Public Utility Holding
Company Act.......................42
Section 7.14 Subsidiaries......................42
Section 7.15 Location of Business and
Offices...........................42
Section 7.16 Defaults..........................42
Section 7.17 Environmental Matters.............42
Section 7.18 Compliance with the Law...........43
Section 7.19 Insurance.........................44
Section 7.20 Hedging Agreements................44
Section 7.21 Restriction on Liens..............44
Section 7.22 Kinder Morgan G.P. Assets.........44
-ii-
<PAGE>
Section 7.23 LP Units..........................44
Section 7.24 Acquisition Documents.............45
ARTICLE VIII
Affirmative Covenants
Section 8.01 Financial Statements..............45
Section 8.02 Litigation........................47
Section 8.03 Maintenance, Etc..................47
Section 8.04 Environmental Matters.............48
Section 8.05 Further Assurances................48
Section 8.06 Performance of Obligations........48
Section 8.07 ERISA Information and
Compliance........................49
Section 8.08 Collateral........................49
Section 8.09 Minimum Distribution..............49
ARTICLE IX
Negative Covenants
Section 9.01 Debt..............................50
Section 9.02 Liens.............................50
Section 9.03 Investments, Loans and Advances...51
Section 9.04 Dividends, Distributions and
Redemptions.......................51
Section 9.05 Sales and Leasebacks..............52
Section 9.06 Nature of Business................52
Section 9.07 Limitation on Leases..............52
Section 9.08 Mergers, Etc......................52
Section 9.09 Proceeds of Notes.................52
Section 9.10 ERISA Compliance..................52
Section 9.11 Sale or Discount of Receivables...54
Section 9.12 Current Ratio.....................54
Section 9.13 Debt Service Coverage Ratio.......54
Section 9.14 Margin Maintenance Ratio..........54
Section 9.15 Sale of Properties................54
Section 9.16 Environmental Matters.............54
Section 9.17 Transactions with Affiliates......55
Section 9.18 Subsidiaries......................55
Section 9.19 Negative Pledge Agreements........55
-iii-
<PAGE>
ARTICLE X
Events of Default; Remedies
Section 10.01 Events of Default................55
Section 10.02 Remedies.........................57
ARTICLE XI
The Agent
Section 11.01 Appointment, Powers and
Immunities.......................58
Section 11.02 Reliance by Agent................59
Section 11.03 Defaults.........................59
Section 11.04 Rights as a Lender...............59
Section 11.05 Indemnification..................59
Section 11.06 Non-Reliance on Agent and
other Lenders....................60
Section 11.07 Action by Agent..................60
Section 11.08 Resignation or Removal of
Agent............................61
ARTICLE XII
Miscellaneous
Section 12.01 Waiver...........................61
Section 12.02 Notices..........................61
Section 12.03 Payment of Expenses,
Indemnities, etc.................62
Section 12.04 Amendments, Etc..................64
Section 12.05 Successors and Assigns...........64
Section 12.06 Assignments and Participations...65
Section 12.07 Invalidity.......................66
Section 12.08 Counterparts.....................66
Section 12.09 References.......................66
Section 12.10 Survival.........................67
Section 12.11 Captions.........................67
Section 12.12 No Oral Agreements...............67
Section 12.13 Governing Law; Submission to
Jurisdiction.....................67
Section 12.14 Interest.........................68
Section 12.15 Confidentiality..................69
Section 12.16 Effectiveness....................70
Section 12.17 Exculpation provisions...........70
-iv-
<PAGE>
Annex I - List of Commitments
Exhibit A-1 - Form of Facility A Note
Exhibit A-2 - Form of Facility B Note
Exhibit A-3 - Form of Facility C Note
Exhibit B - Form of Borrowing, Continuation and Conversion Request
Exhibit C - Form of Compliance Certificate
Exhibit D - Form of Legal Opinion of Morrison & Hecker, L.L.P.
Exhibit E - List of Security Instruments
Exhibit F - Form of Assignment Agreement
Exhibit G - Form of Distribution LC
Schedule 7.02 - Liabilities
Schedule 7.03 - Litigation
Schedule 7.09 - Taxes
Schedule 7.10 - Titles, etc.
Schedule 7.14 - Subsidiaries and Partnerships
Schedule 7.17 - Environmental Matters
Schedule 7.19 - Insurance
Schedule 7.20 - Hedging Agreements
Schedule 7.21 - Restrictions on Liens
Schedule 7.24 - Acquisition Documents
Schedule 9.01 - Debt
Schedule 9.02 - Liens
Schedule 9.03 - Investments, Loans and Advances
-v-
<PAGE>
THIS CREDIT AGREEMENT dated as of February 14, 1997 is among: KINDER
MORGAN, INC., a corporation formed under the laws of the State of Delaware (the
"Borrower"); each of the lenders that is a signatory hereto or which becomes a
signatory hereto as provided in Section 12.06 (individually, together with its
successors and assigns, a "Lender" and, collectively, the "Lenders"); and FIRST
UNION NATIONAL BANK OF NORTH CAROLINA, a national banking association (in its
individual capacity, "First Union"), as agent for the Lenders (in such capacity,
together with its successors in such capacity, the "Agent").
R E C I T A L S
A. The Borrower has requested that the Lenders provide certain loans to and
extensions of credit on behalf of the Borrower; and
B. The Lenders have agreed to make such loans and extensions of credit
subject to the terms and conditions of this Agreement.
C. In consideration of the mutual covenants and agreements herein contained
and of the loans, extensions of credit and commitments hereinafter referred to,
the parties hereto agree as follows:
ARTICLE I
Definitions and Accounting Matters
Section 1.01 Terms Defined Above. As used in this Agreement, the terms
"Agent," "Borrower," "First Union," "Lender" and "Lenders" shall have the
meanings indicated above.
Section 1.02 Certain Defined Terms. As used herein, the following terms
shall have the following meanings (all terms defined in this Article I or in
other provisions of this Agreement in the singular to have the same meanings
when used in the plural and vice versa):
"Acquisition" shall mean the acquisition by the Borrower of all of
the common stock of Enron Liquids Pipeline Company pursuant to the
Purchase Agreement.
"Acquisition Documents" shall mean the Purchase Agreement and all other
documents executed in connection with the Acquisition.
"Additional Costs" shall have the meaning assigned such term in Section
5.01(a).
"Affected Loans" shall have the meaning assigned such term in Section
5.04.
"Affiliate" of any Person shall mean (i) any Person directly or
indirectly controlled by, controlling or under common control with such
first Person, (ii)
<PAGE>
any director or officer of such first Person or of any Person referred to
in clause (i) above and (iii) if any Person in clause (i) above is an
individual, any member of the immediate family (including parents, spouse
and children) of such individual and any trust whose principal beneficiary
is such individual or one or more members of such immediate family and any
Person who is controlled by any such member or trust. For purposes of this
definition, any Person which owns directly or indirectly 25% or more of the
securities having ordinary voting power for the election of directors or
other governing body of a corporation or 25% or more of the partnership or
other ownership interests of any other Person (other than as a limited
partner of such other Person) will be deemed to "control" (including, with
its correlative meanings, "controlled by" and "under common control with")
such corporation or other Person.
"Agreement" shall mean this Credit Agreement, as the same may from time
to time be amended or supplemented.
"Aggregate Commitments" at any time shall equal the sum of the
Aggregate Facility A Commitments, the Aggregate Facility B Commitments and
the Aggregate Facility C Commitments.
"Aggregate Facility A Commitments" at any time shall equal $10,000,000
as reduced or terminated as provided in accordance with Section 2.03
hereof.
"Aggregate Facility B Commitments" at any time shall equal the sum of
the Facility B Commitments of the Lenders.
"Aggregate Facility C Commitments" at any time shall equal the sum of
the Facility C Commitments of the Lenders in the aggregate amount of
$5,000,000.
"Applicable Lending Office" shall mean, for each Lender and for each
Type of Loan, the lending office of such Lender (or an Affiliate of such
Lender) designated for such Type of Loan on the signature pages hereof or
such other offices of such Lender (or of an Affiliate of such Lender) as
such Lender may from time to time specify to the Agent and the Borrower as
the office by which its Loans of such Type are to be made and maintained.
"Applicable Margin" shall mean (i) 1/2 of 1% per annum with respect to
Base Rate Loans; and (ii) 2.50% per annum with respect to LIBOR Loans.
"Assignment" shall have the meaning assigned such term in Section
12.06(b).
"Base Rate" shall mean, with respect to any Base Rate Loan, for any
day, the higher of (i) the Federal Funds Rate for any such day plus 1/2 of
1% or (ii)
-2-
<PAGE>
the Prime Rate for such day. Each change in any interest rate provided for
herein based upon the Base Rate resulting from a change in the Base Rate
shall take effect at the time of such change in the Base Rate.
"Base Rate Loans" shall mean Loans that bear interest at rates based
upon the Base Rate.
"Business Day" shall mean any day other than a day on which commercial
banks are authorized or required to close in Charlotte, North Carolina and,
where such term is used in the definition of "Quarterly Date" or if such
day relates to a borrowing or continuation of, a payment or prepayment of
principal of or interest on, or a conversion of or into, or the Interest
Period for, a LIBOR Loan or a notice by the Borrower with respect to any
such borrowing or continuation, payment, prepayment, conversion or Interest
Period, any day which is also a day on which dealings in Dollar deposits
are carried out in the London interbank market.
"Cash Flow" for the Borrower shall equal the cumulative amount of
dividends received from Kinder Morgan G.P. for the period of calculation
less all cash expenditures for such period.
"Cash Flow After Debt Service" for the Borrower shall equal the
cumulative amount of dividends received from Kinder Morgan G.P. for the
period of calculation less all cash expenditures and payments of principal,
interest and other amounts in respect of the Indebtedness for such period.
"Closing Date" shall mean February 14, 1997.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time and any successor statute.
"Collateral" shall mean the Property owned by the Borrower which is
subject to the Liens existing and to exist under the terms of the Security
Instruments.
"Commitments" shall mean, for any Lender, its Facility A Commitment,
its Facility B Commitment and its Facility C Commitment.
"Consolidated Net Income" shall mean with respect to the Borrower and
its Consolidated Subsidiaries, for any period, the aggregate of the net
income (or loss) of the Borrower and its Consolidated Subsidiaries after
allowances for taxes for such period, determined on a consolidated basis in
accordance with GAAP; provided that there shall be excluded from such net
income (to the extent otherwise included therein) the following: (i) the
net income of any Person in
-3-
<PAGE>
which the Borrower or any Consolidated Subsidiary has an interest (which
interest does not cause the net income of such other Person to be
consolidated with thenet income of the Borrower and its Consolidated
Subsidiaries in accordance with GAAP), except to the extent of the amount
of dividends or distributions actually paid in such period by such other
Person to the Borrower or to a Consolidated Subsidiary, as the case may be;
(ii) the net income (but not loss) of any Consolidated Subsidiary to the
extent that the declaration or payment of dividends or similar
distributions or transfers or loans by that Consolidated Subsidiary is not
at the time permitted by operation of the terms of its charter or any
agreement, instrument or Governmental Requirement applicable to such
Consolidated Subsidiary, or is otherwise restricted or prohibited in each
case determined in accordance with GAAP; (iii) the net income (or loss) of
any Person acquired in a pooling-of-interests transaction for any period
prior to the date of such transaction; (iv) any extraordinary gains or
losses, including gains or losses attributable to Property sales not in the
ordinary course of business; and (v) the cumulative effect of a change in
accounting principles and any gains or losses attributable to writeups or
writedowns of assets.
"Consolidated Subsidiaries" shall mean each Subsidiary of the Borrower
(whether now existing or hereafter created or acquired) the financial
statements of which shall be (or should have been) consolidated with the
financial statements of the Borrower in accordance with GAAP.
"Debt" shall mean, for any Person the sum of the following (without
duplication): (i) all obligations of such Person for borrowed money or
evidenced by bonds, debentures, notes or other similar instruments
(including principal, interest, fees and charges); (ii) all obligations of
such Person (whether contingent or otherwise) in respect of bankers'
acceptances, letters of credit, surety or other bonds and similar
instruments; (iii) all obligations of such Person to pay the deferred
purchase price of Property or services (other than for borrowed money);
(iv) all obligations under leases which shall have been, or should have
been, in accordance with GAAP, recorded as capital leases in respect of
which such Person is liable (whether contingent or otherwise); (v) all
obligations under leases which require such Person or its Affiliate to make
payments over the term of such lease, including payments at termination,
which are substantially equal to at least eighty percent (80%) of the
purchase price of the Property subject to such lease plus interest as an
imputed rate of interest; (vi) all Debt (as described in the other clauses
of this definition) and other obligations of others secured by a Lien on
any asset of such Person, whether or not such Debt is assumed by such
Person; (vii) all Debt (as described in the other clauses of this
definition) and other obligations of others guaranteed by such Person or in
which such Person otherwise assures a creditor against loss of the debtor
or obligations of others; (viii) all obligations or undertakings of such
Person to maintain or cause to be maintained the financial position or
covenants of others or to purchase the Debt or Property of others; (ix)
obligations to deliver goods or services in consideration of advance
payments;
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(x) obligations to pay for goods or services whether or not such goods or
services are actually received or utilized by such Person; (xi) any capital
stock of such Person in which such Person has a mandatory obligation to
redeem such stock; (xii) any Debt of a Special Entity for which such Person
is liable either by agreement or because of a Governmental Requirement; and
(xiv) all obligations of such Person under Hedging Agreements.
"Default" shall mean an Event of Default or an event which with notice
or lapse of time or both would become an Event of Default.
"Distribution LC" shall mean that certain $10,851,096 letter of credit
in the form of Exhibit G issued to support Enron's obligations with respect
to the minimum quarterly distribution payable to the public unitholders of
Kinder Morgan Energy.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"EBITDA" shall mean, for any period, the sum of Consolidated Net Income
for such period plus the following expenses or charges to the extent
deducted from Consolidated Net Income in such period: interest, taxes,
depreciation, depletion and amortization; minus all non cash income added
to Consolidated Net Income in such period.
"Effective Date" shall have the meaning assigned such term in Section
12.16.
"Enron" shall mean Enron Corp., a Delaware corporation.
"Environmental Laws" shall mean any and all Governmental Requirements
pertaining to health or the environment in effect in any and all
jurisdictions in which the Borrower or any Subsidiary is conducting or at
any time has conducted business, or where any Property of the Borrower or
any Subsidiary is located, including without limitation, the Oil Pollution
Act of 1990 ("OPA"), the Clean Air Act, as amended, the Comprehensive
Environmental, Response, Compensation, and Liability Act of 1980
("CERCLA"), as amended, the Federal Water Pollution Control Act, as
amended, the Occupational Safety and Health Act of 1970, as amended, the
Resource Conservation and Recovery Act of 1976 ("RCRA"), as amended, the
Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as
amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Hazardous Materials Transportation Act, as amended, and other
environmental conservation or protection laws. The term "oil" shall have
the meaning specified in OPA, the terms "hazardous substance" and "release"
(or "threatened release") have the meanings specified in CERCLA, and the
terms "solid waste" and "disposal" (or "disposed") have the
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meanings specified in RCRA; provided, however, that (i) in the event either
OPA, CERCLA or RCRA is amended so as to broaden the meaning of any term
defined thereby, such broader meaning shall apply subsequent to the
effective date of such amendment and (ii) to the extent the laws of the
state in which any Property of the Borrower or any Subsidiary is located
establish a meaning for "oil," "hazardous substance," "release," "solid
waste" or "disposal" which is broader than that specified in either OPA,
CERCLA or RCRA, such broader meaning shall apply.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time and any successor statute.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which together with the Borrower or any Subsidiary would be
deemed to be a "single employer" within the meaning of section 4001(b)(1)
of ERISA or subsections (b), (c), (m) or (o) of section 414 of the Code.
"ERISA Event" shall mean (i) a "Reportable Event" described in Section
4043 of ERISA and the regulations issued thereunder, (ii) the withdrawal of
the Borrower, any Subsidiary or any ERISA Affiliate from a Plan during a
plan year in which it was a "substantial employer" as defined in Section
4001(a)(2) of ERISA, (iii) the filing of a notice of intent to terminate a
Plan or the treatment of a Plan amendment as a termination under Section
4041 of ERISA, (iv) the institution of proceedings to terminate a Plan by
the PBGC or (v) any other event or condition which might constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan.
"Event of Default" shall have the meaning assigned such term in Section
10.01.
"Excepted Liens" shall mean: (i) Liens for taxes, assessments or other
governmental charges or levies not yet due or which are being contested in
good faith by appropriate action and for which adequate reserves have been
maintained; (ii) Liens in connection with workmen's compensation,
unemployment insurance or other social security, old age pension or public
liability obligations not yet due or which are being contested in good
faith by appropriate action and for which adequate reserves have been
maintained in accordance with GAAP; (iii) operators', vendors', carriers',
warehousemen's, repairmen's, mechanics', workmen's, materialmen's,
construction or other like Liens arising by operation of law in the
ordinary course of business or statutory landlord's liens, each of which is
in respect of obligations that have not been outstanding more than 90 days
or which are being contested in good faith by appropriate proceedings and
for which adequate reserves have been maintained in accordance with GAAP;
(iv) any Liens reserved in leases or farmout agreements for rent or
royalties and for compliance with the terms of the farmout agreements or
leases in the case of
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leasehold estates, to the extent that any such Lien referred to in this
clause does not materially impair the use of the Property covered by such
Lien for the purposes for which such Property is held by the Borrower or
any Subsidiary or materially impair the value of such Property subject
thereto; (v) encumbrances (other than to secure the payment of borrowed
money or the deferred purchase price of Property or services), easements,
restrictions, servitudes, permits, conditions, covenants, exceptions or
reservations in any rights of way or other Property of the Borrower or any
Subsidiary for the purpose of roads, pipelines, transmission lines,
transportation lines, distribution lines for the removal of gas, oil, coal
or other minerals or timber, and other like purposes, or for the joint or
common use of real estate, rights of way, facilities and equipment, and
defects, irregularities, zoning restrictions and deficiencies in title of
any rights of way or other Property which in the aggregate do not
materially impair the use of such rights of way or other Property for the
purposes of which such rights of way and other Property are held by the
Borrower or any Subsidiary or materially impair the value of such Property
subject thereto; (vi) deposits of cash or securities to secure the
performance of bids, trade contracts, leases, statutory obligations and
other obligations of a like nature incurred in the ordinary course of
business; and (vii) Liens permitted by the Security Instruments.
"Facilities" shall mean Facility A, Facility B and Facility C.
"Facility A" shall mean the credit extended to the Borrower by the
Lenders pursuant to Section 2.01(a).
"Facility A Commitment" shall mean, as to each Lender under Facility A,
the amount set forth opposite such Lender's name on Annex I under the
caption "Facility A Commitment" (as the same may be reduced pursuant to
Section 2.03 hereof pro rata to each Lender based on its Percentage Share)
as modified from time to time to reflect any assignments permitted by
Section 12.06(b).
"Facility A Loans" shall mean Loans made pursuant to Section 2.01(a)(i)
hereof.
"Facility A Notes" shall mean the promissory note or notes (whether one
or more) of the Borrower described in Section 2.06 hereof and being in the
form of Exhibit A-1 hereto.
"Facility A Termination Date" shall mean August 31, 1999.
"Facility B" shall mean the credit extended to the Borrower by First
Union pursuant to Section 2.01(b).
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"Facility B Commitment" shall mean, for any Lender, its obligation to
participate in the Distribution LC up to its Percentage Share of the
original face amount of the Distribution LC.
"Facility B Loans" shall mean Loans made pursuant to Section 2.01(b)
hereof.
"Facility B Note" shall mean the promissory note of the Borrower
described in Section 2.06 hereof and being in the form of Exhibit A-2
hereto.
"Facility C" shall mean the credit extended to the Borrower by the
Lenders pursuant to Section 2.01(c).
"Facility C Commitment" shall mean, for any Lender, its obligation to
make Loans up to its Percentage Share as provided in Section 2.01(c).
"Facility C Loans" shall mean Loans made pursuant to Section 2.01(c)
hereof.
"Facility C Notes" shall mean the promissory note or notes (whether one
or more) of the Borrower described in Section 2.06 hereof and being in the
form of Exhibit A-3 hereto.
"Federal Funds Rate" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight federal funds transactions with
a member of the Federal Reserve System arranged by federal funds brokers on
such day, as published by the Federal Reserve Bank of New York on the
Business Day next succeeding such day, provided that (i) if the date for
which such rate is to be determined is not a Business Day, the Federal
Funds Rate for such day shall be such rate on such transactions on the next
preceding Business Day as so published on the next succeeding Business Day,
and (ii) if such rate is not so published for any day, the Federal Funds
Rate for such day shall be the average rate charged to the Agent on such
day on such transactions as determined by the Agent.
"Fee Letter" shall mean that certain letter agreement from First Union
Corporation to the Borrower and agreed to by First Union dated of even date
with this Agreement concerning certain fees in connection with this
Agreement and any agreements or instruments executed in connection
therewith, as the same may be amended or replaced from time to time.
"Financial Statements" shall mean the financial statement or statements
of the Borrower and its Consolidated Subsidiaries described or referred to
in Section 7.02.
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"First Union Corporation" shall mean First Union Corporation of
North Carolina, a North Carolina corporation.
"Funded Debt" shall mean all outstanding Loans under the Facilities A
and B and the LC Exposure.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"Governmental Authority" shall include the country, the state, county,
city and political subdivisions in which any Person or such Person's
Property is located or which exercises valid jurisdiction over any such
Person or such Person's Property, and any court, agency, department,
commission, board, bureau or instrumentality of any of them including
monetary authorities which exercises valid jurisdiction over any such
Person or such Person's Property. Unless otherwise specified, all
references to Governmental Authority herein shall mean a Governmental
Authority having jurisdiction over, where applicable, the Borrower, its
Subsidiaries or any of their Property or the Agent, any Lender or any
Applicable Lending Office.
"Governmental Requirement" shall mean any law, statute, code,
ordinance, order, determination, rule, regulation, judgment, decree,
injunction, franchise, permit, certificate, license, authorization or other
directive or requirement (whether or not having the force of law),
including, without limitation, Environmental Laws, energy regulations and
occupational, safety and health standards or controls, of any Governmental
Authority.
"Hedging Agreements" shall mean any commodity, interest rate or
currency swap, cap, floor, collar, forward agreement or other exchange or
protection agreements or any option with respect to any such transaction.
"Highest Lawful Rate" shall mean, with respect to each Lender, the
maximum nonusurious interest rate, if any, that at any time or from time to
time may be contracted for, taken, reserved, charged or received on the
Notes or on other Indebtedness under laws applicable to such Lender which
are presently in effect or, to the extent allowed by law, under such
applicable laws which may hereafter be in effect and which allow a higher
maximum nonusurious interest rate than applicable laws now allow.
"Indebtedness" shall mean any and all amounts owing or to be owing by
the Borrower to First Union, the Agent and/or Lenders in connection with
the Loan Documents, the Letter of Credit Agreements, and any Hedging
Agreements now or hereafter arising between the Borrower and First Union or
any Lender and permitted by the terms of this Agreement and all renewals,
extensions and/or rearrangements of any of the above.
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"Indemnified Parties" shall have the meaning assigned such term in
Section 12.03(b).
"Indemnity Matters" shall mean any and all actions, suits, proceedings
(including any investigations, litigation or inquiries), claims, demands
and causes of action made or threatened against a Person and, in connection
therewith, all losses, liabilities, damages (including, without limitation,
consequential damages) or reasonable costs and expenses of any kind or
nature whatsoever incurred by such Person whether caused by the sole or
concurrent negligence of such Person seeking indemnification.
"Initial Funding" shall mean the funding of the initial Loans or
issuance of the Distribution LC and the initial Letters of Credit pursuant
to Section 6.01 hereof.
"Interest Period" shall mean, with respect to any LIBOR Loan, the
period commencing on the date such LIBOR Loan is made and ending on the
numerically corresponding day in the first, second, third or sixth calendar
month thereafter, as the Borrower may select as provided in Section 2.02
(or such longer period as may be requested by the Borrower and agreed to by
the Majority Lenders), except that each Interest Period which commences on
the last Business Day of a calendar month (or on any day for which there is
no numerically corresponding day in the appropriate subsequent calendar
month) shall end on the last Business Day of the appropriate subsequent
calendar month.
Notwithstanding the foregoing: (i) no Interest Period may commence
before and end after the Facility A Termination Date; (ii) no Interest
Period for any LIBOR Loan may end after the due date of any installment, if
any, provided for in Section 3.01 hereof to the extent that such LIBOR Loan
would need to be prepaid prior to the end of such Interest Period in order
for such installment to be paid when due; (iii) each Interest Period which
would otherwise end on a day which is not a Business Day shall end on the
next succeeding Business Day (or, if such next succeeding Business Day
falls in the next succeeding calendar month, on the next preceding Business
Day); and (iv) no Interest Period shall have a duration of less than one
month and, if the Interest Period for any LIBOR Loans would otherwise be
for a shorter period, such Loans shall not be available hereunder.
"Kinder Morgan Energy" shall mean Kinder Morgan Energy Partners, L.P.,
a Delaware limited partnership.
"Kinder Morgan G.P." shall mean Kinder Morgan G.P., Inc., a Delaware
corporation.
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"Kinder Morgan Operating A" shall mean Kinder Morgan Operating L.P.
"A", a Delaware limited partnership.
"Kinder Morgan Operating B" shall mean Kinder Morgan Operating L.P.
"B", a Delaware limited partnership.
"LC Commitment" at any time shall mean $1,000,000.
"LC Exposure" at any time shall mean the aggregate face amount of all
undrawn and uncancelled Letters of Credit and the aggregate of all amounts
drawn under all Letters of Credit and not yet reimbursed.
"Letter of Credit Agreements" shall mean the written agreements with
the Agent, as issuing lender for any Letter of Credit or the Distribution
LC, executed or hereafter executed in connection with the issuance by the
Agent of the Letters of Credit and the Distribution LC, such agreements to
be on the Agent's customary form for letters of credit of comparable amount
and purpose as from time to time in effect or as otherwise agreed to by the
Borrower and the Agent.
"Letters of Credit" shall mean the letters of credit issued under
Facility A and all reimbursement obligations pertaining to any such letters
of credit, and "Letter of Credit" shall mean any one of the Letters of
Credit and the reimbursement obligations pertaining thereto.
"LIBOR" shall mean the rate of interest determined on the basis of the
rate for deposits in Dollars for a period equal to the applicable Interest
Period commencing on the first day of such Interest Period appearing on
Telerate Page 3750 as of 11:00 a.m. (London time) two (2) Business Days
prior to the first day of the applicable Interest Period. In the event that
such rate does not appear on Telerate Page 3750, "LIBOR" shall be
determined by the Agent to be the rate per annum at which deposits in
Dollars are offered by leading reference banks in the London interbank
market to First Union at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of the applicable Interest Period for
a period equal to such Interest Period and in an amount substantially equal
to the amount of the applicable Loan.
"LIBOR Loans" shall mean Loans the interest rates on which are
determined on the basis of rates referred to in the definition of "LIBOR
Rate".
"LIBOR Rate" shall mean, with respect to any LIBOR Loan, a rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
determined by the Agent to be equal to the quotient of (i) LIBOR for such
Loan for the Interest Period for such Loan divided by (ii) 1 minus the
Reserve Requirement for such Loan for such Interest Period.
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"Lien" shall mean any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether
such interest is based on the common law, statute or contract, and whether
such obligation or claim is fixed or contingent, and including but not
limited to (i) the lien or security interest arising from a mortgage,
encumbrance, pledge, security agreement, conditional sale or trust receipt
or a lease, consignment or bailment for security purposes. The term "Lien"
shall include reservations, exceptions, encroachments, easements, rights of
way, covenants, conditions, restrictions, leases and other title exceptions
and encumbrances affecting Property. For the purposes of this Agreement,
the Borrower or any Subsidiary shall be deemed to be the owner of any
Property which it has acquired or holds subject to a conditional sale
agreement, or leases under a financing lease or other arrangement pursuant
to which title to the Property has been retained by or vested in some other
Person in a transaction intended to create a financing.
"Loan Documents" shall mean this Agreement, the Notes, the Distribution
LC, the Letters of Credit, the Letter of Credit Agreements, the Fee Letter,
and the Security Instruments.
"Loans" shall mean the loans as provided for by Sections 2.01(a)(i),
2.01(b) and 2.01(c). "Loans" shall include the Facility A Loans, the
Facility B Loans and the Facility C Loans.
"LP Units" shall mean the limited partner units of Kinder Morgan
Energy.
"Majority Lenders" shall mean, at any time while no Loans are
outstanding, Lenders having at least sixty-six and two-thirds percent
(66-2/3%) of the Aggregate Commitments and, at any time while Loans are
outstanding, Lenders holding at least sixty-six and two-thirds percent
(66-2/3%) of the outstanding aggregate principal amount of the Loans
(without regard to any sale by a Lender of a participation in any Loan
under Section 12.06(c)).
"Material Adverse Effect" shall mean any material and adverse effect on
(i) the assets, liabilities, financial condition, business, operations or
affairs of the Borrower and its Subsidiaries taken as a whole or from the
facts represented or warranted in any Loan Document, or (ii) the ability of
the Borrower and its Subsidiaries taken as a whole to carry out their
business as at the Closing Date or as proposed as of the Closing Date to be
conducted or meet their obligations under the Loan Documents on a timely
basis.
"Maturity Date" shall mean August 31, 1999.
"Multiemployer Plan" shall mean a Plan defined as such in Section 3(37)
or 4001(a)(3) of ERISA.
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"Notes" shall mean the Notes provided for by Section 2.06, together
with any and all renewals, extensions for any period, increases,
rearrangements, substitutions or modifications thereof. The "Notes" shall
include the Facility A Notes, the Facility B Note and the Facility C Notes.
"Other Taxes" shall have the meaning assigned such term in Section
4.06(b).
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions.
"Percentage Share" shall mean the percentage of the Aggregate
Commitments to be provided by a Lender under this Agreement as indicated on
Annex I hereto, as modified from time to time to reflect any assignments
permitted by Section 12.06(b).
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization
or government or any agency, instrumentality or political subdivision
thereof, or any other form of entity.
"Plan" shall mean any employee pension benefit plan, as defined in
Section 3(2) of ERISA, which (i) is currently or hereafter sponsored,
maintained or contributed to by the Borrower, any Subsidiary or an ERISA
Affiliate or (ii) was at any time during the preceding six calendar years
sponsored, maintained or contributed to, by the Borrower, any Subsidiary or
an ERISA Affiliate.
"Post-Default Rate" shall mean, in respect of any principal of any Loan
or any other amount payable by the Borrower under this Agreement or any
Note, a rate per annum during the period commencing on the date of an Event
of Default until such amount is paid in full or all Events of Default are
cured or waived equal to 2% per annum above the Base Rate as in effect from
time to time plus the Applicable Margin (if any), but in no event to exceed
the Highest Lawful Rate provided that, for a LIBOR Loan, the "Post-Default
Rate" for such principal shall be, for the period commencing on the date of
the Event of Default and ending on the earlier to occur of the last day of
the Interest Period therefor or the date all Events of Default are cured or
waived, 2% per annum above the interest rate for such Loan as provided in
Section 3.02(ii), but in no event to exceed the Highest Lawful Rate.
"Prime Rate" shall mean the rate of interest from time to time
announced publicly by the Agent at the Principal Office as its prime
commercial lending rate. Such rate is set by the Agent as a general
reference rate of interest, taking into account such factors as the Agent
may deem appropriate, it being understood that many of the Agent's
commercial or other loans are priced in relation to such
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rate, that it is not necessarily the lowest or best rate actually charged
to any customer and that the Agent may make various commercial or other
loans at rates of interest having no relationship to such rate.
"Principal Office" shall mean the principal office of the Agent,
presently located at 301 South College Street, TW-10, Charlotte, North
Carolina 28288- 0608 or such other location as designated by the Agent from
time to time.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Purchase Agreement" shall mean the Amended and Restated Purchase and
Sale Agreement between Enron Liquids Holding Corp. and the Borrower dated
February 14, 1997, as amended, providing for the purchase by the Borrower
of all of the outstanding stock of Enron Liquids Pipeline Company.
"Quarterly Dates" shall mean the last day of each March, June,
September, and December, in each year, the first of which shall be March
31, 1997; provided, however, that if any such day is not a Business Day,
such Quarterly Date shall be the next succeeding Business Day.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be amended or
supplemented from time to time.
"Regulation U" shall mean Regulation U of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be amended or
supplemented from time to time.
"Regulatory Change" shall mean, with respect to any Lender, any change
after the Closing Date in any Governmental Requirement (including
Regulation D) or the adoption or making after such date of any
interpretations, directives or requests applying to a class of lenders
(including such Lender or its Applicable Lending Office) of or under any
Governmental Requirement (whether or not having the force of law) by any
Governmental Authority charged with the interpretation or administration
thereof.
"Required Payment" shall have the meaning assigned such term in Section
4.04.
"Responsible Officer" shall mean, as to any Person, the Chief Executive
Officer, the President or any Vice President of such Person and, with
respect to financial matters, the term "Responsible Officer" shall include
the Chief Financial Officer of such Person. Unless otherwise specified, all
references to a Responsible Officer herein shall mean a Responsible Officer
of the Borrower.
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"Rule 144" shall mean Rule 144 promulgated under the Securities Act of
1933, as amended.
"SEC" shall mean the Securities and Exchange Commission or any
successor Governmental Authority.
"Security Instruments" shall mean the agreements or instruments
described or referred to in Exhibit E, and any and all other agreements or
instruments now or hereafter executed and delivered by the Borrower or any
other Person (other than participation or similar agreements between any
Lender and any other lender or creditor with respect to any Indebtedness
pursuant to this Agreement) in connection with, or as security for the
payment or performance of the Notes, this Agreement, or reimbursement
obligations under the Letters of Credit and the Distribution LC, as such
agreements may be amended, supplemented or restated from time to time.
"Special Entity" shall mean any joint venture, limited liability
company or partnership, general or limited partnership or any other type of
partnership or company other than a corporation in which the Borrower or
one or more of its other Subsidiaries is a member, owner, partner or joint
venturer and owns, directly or indirectly, at least a majority of the
equity of such entity or controls such entity, but excluding any tax
partnerships that are not classified as partnerships under state law. For
purposes of this definition, any Person which owns directly or indirectly
an equity investment in another Person which allows the first Person to
manage or elect managers who manage the normal activities of such second
Person will be deemed to "control" such second Person (e.g. a sole general
partner controls a limited partnership).
"Special Purpose Subsidiary" shall have the meaning assigned such term
in Section 9.18.
"Subsidiary" shall mean (i) any corporation of which at least a
majority of the outstanding shares of stock having by the terms thereof
ordinary voting power to elect a majority of the board of directors of such
corporation (irrespective of whether or not at the time stock of any other
class or classes of such corporation shall have or might have voting power
by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by the Borrower or one or more of its
Subsidiaries or by the Borrower and one or more of its Subsidiaries and
(ii) any Special Entity. Unless otherwise indicated herein, each reference
to the term "Subsidiary" shall mean a Subsidiary of the Borrower. For
purposes of this Agreement Kinder Morgan Energy and its Subsidiaries shall
be deemed to be Subsidiaries of the Borrower commencing immediately upon
the Closing Date.
"Taxes" shall have the meaning assigned such term in Section 4.06(a).
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"Type" shall mean, with respect to any Loan, a Base Rate Loan or a
LIBOR Loan.
"Unrestricted Balance" shall mean at any time the sum of cash or cash
equivalents held by Kinder Morgan Energy free and clear of any Liens,
negative pledges or contracted restrictions with other Persons.
"Wholly-Owned Subsidiary" shall mean, as to the Borrower, any
Subsidiary of which all of the outstanding shares of stock having by the
terms thereof ordinary voting power to elect the board of directors of such
corporation, other than directors' qualifying shares, are owned or
controlled by the Borrower or one or more of the Wholly-Owned Subsidiaries
or by the Borrower and one or more of the Wholly-Owned Subsidiaries.
Section 1.03 Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the Agent or the Lenders hereunder shall be
prepared, in accordance with GAAP, applied on a basis consistent with the
audited financial statements of the Borrower referred to in Section 7.02 (except
for changes concurred with by the Borrower's independent public accountants).
ARTICLE II
Commitments
Section 2.01 The Facilities.
(a) Facility A.
(i) Loans. Each Lender severally agrees, on the terms of this
Agreement, to make Loans to the Borrower during the period from and
including (i) the Closing Date or (ii) such later date that such Lender
becomes a party to this Agreement as provided in Section 12.06(b), to but
excluding the Facility A Termination Date in an aggregate principal amount
at any one time outstanding up to but not exceeding the amount of such
Lender's Facility A Commitment as then in effect; provided, however, that
the aggregate principal amount of all such Loans by all Lenders hereunder
at any one time outstanding together with the LC Exposure shall not exceed
the Aggregate Facility A Commitments. Subject to the terms of this
Agreement, during the period from the Closing Date to but excluding the
Facility A Termination Date, the Borrower may borrow, repay and reborrow
the amount described in this Section 2.01(a).
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(ii) Letters of Credit. During the period from and including the
Closing Date to but excluding the Facility A Termination Date, the Agent,
as issuing bank for the Lenders, agrees to extend credit for the account of
the Borrower at any time and from time to time by issuing renewing,
extending or reissuing Letters of Credit; provided however, the LC Exposure
at any one time outstanding shall not exceed the lesser of (i) the LC
Commitment or (ii) the Aggregate Facility A Commitments, as then in effect,
minus the aggregate principal amount of all Facility A Loans then
outstanding. The Lenders shall participate in such Letters of Credit
according to their respective Percentage Shares.
(b) Facility B. On the Closing Date, the Agent, as issuing bank for the
Lenders, agrees to extend credit for the account of the Borrower by issuing
the Distribution LC. The Lenders shall participate in the Distribution LC
according to their respective Percentage Shares.
(c) Facility C. Each Lender severally agrees, subject to the terms and
conditions of this Agreement, to make a term Loan to the Borrower not to
exceed its Facility C Commitment. Such Loan shall be made by way of a
single borrowing made on the Closing Date. Any portion of each Lender's
Facility C Commitment not utilized by such borrowing on such date shall be
permanently canceled.
(d) Limitation on Types of Loans. Subject to the other terms and
provisions of this Agreement, at the option of the Borrower, the Loans
outstanding under the Facilities may be Base Rate Loans or LIBOR Loans;
provided that, without the prior written consent of the Majority Lenders,
no more than four (4) LIBOR Loans may be outstanding at any time under all
of the Facilities.
Section 2.02 Borrowings, Continuations, Conversions, Letters of Credit.
(a) Borrowings. The Borrower shall give the Agent (which shall promptly
notify the Lenders) advance notice as hereinafter provided of each
borrowing hereunder, which shall specify the aggregate amount of such
borrowing, the Type and the date (which shall be a Business Day) of the
Loans to be borrowed and (in the case of LIBOR Loans) the duration of the
Interest Period therefor.
(b) Minimum Amounts. If a borrowing consists in whole or in part of
LIBOR Loans, such LIBOR Loans with the same Interest Period shall be in
amounts of at least $500,000 or any whole multiple of $50,000 in excess
thereof.
(c) Notices. Each borrowing and all continuations and conversions shall
require advance written notice to the Agent (which shall promptly notify
the Lenders) in the form of Exhibit B hereto, which in each case shall be
irrevocable, from the Borrower to be received by the Agent not later than
11:00 a.m. Charlotte, North Carolina time at least one Business Day prior
to the date of each Base Rate Loan borrowing and three
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Business Days prior to the date of each LIBOR Loan borrowing, continuation
or conversion.
(d) Continuation Options. Subject to the provisions made in this
Section 2.02(d), the Borrower may elect to continue all or any part of any
LIBOR Loan beyond the expiration of the then current Interest Period
relating thereto by giving advance notice as provided in Section 2.02(c) to
the Agent (which shall promptly notify the Lenders) of such election,
specifying the amount of such Loan to be continued and the Interest Period
therefor. In the absence of such a timely and proper election, the Borrower
shall be deemed to have elected to convert such LIBOR Loan to a Base Rate
Loan pursuant to Section 2.02(e). All or any part of any LIBOR Loan may be
continued as provided herein, provided that (i) any continuation of any
such Loan shall be (as to each Loan as continued for an applicable Interest
Period) in amounts of at least $500,000 or any whole multiple of $50,000 in
excess thereof and (ii) no Default shall have occurred and be continuing.
If a Default shall have occurred and be continuing, each LIBOR Loan shall
be converted to a Base Rate Loan on the last day of the Interest Period
applicable thereto.
(e) Conversion Options. The Borrower may elect to convert all or any
part of any LIBOR Loan on the last day of the then current Interest Period
relating thereto to a Base Rate Loan by giving advance notice to the Agent
(which shall promptly notify the Lenders) of such election. Subject to the
provisions made in this Section 2.02(e), the Borrower may elect to convert
all or any part of any Base Rate Loan at any time and from time to time to
a LIBOR Loan by giving advance notice as provided in Section 2.02(c) to the
Agent (which shall promptly notify the Lenders) of such election. All or
any part of any outstanding Loan may be converted as provided herein,
provided that (i) any conversion of any Base Rate Loan into a LIBOR Loan
shall be (as to each such Loan into which there is a conversion for an
applicable Interest Period) in amounts of at least $500,000 or any whole
multiple of $50,000 in excess thereof and (ii) no Default shall have
occurred and be continuing. If a Default shall have occurred and be
continuing, no Base Rate Loan may be converted into a LIBOR Loan.
(f) Advances. Not later than 11:00 a.m. Charlotte, North Carolina time
on the date specified for each borrowing hereunder, each Lender shall make
available the amount of the Loan to be made by it on such date to the
Agent, to an account which the Agent shall specify, in immediately
available funds, for the account of the Borrower. The amounts so received
by the Agent shall, subject to the terms and conditions of this Agreement,
be made available to the Borrower by depositing the same, in immediately
available funds, in an account of the Borrower, designated by the Borrower
and maintained at the Principal Office.
(g) Letters of Credit. The Borrower shall give the Agent (which shall
promptly notify the Lenders of such request) advance notice to be received
by the Agent not later than 11:00 a.m. Charlotte, North Carolina time not
less than three (3) Business Days prior thereto of each request for the
issuance and at least thirty (30) Business Days
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prior to the date of the renewal or extension of a Letter of Credit
hereunder which request shall specify the amount of such Letter of Credit,
the date (which shall be a Business Day) such Letter of Credit is to be
issued, renewed or extended, the duration thereof, the name and address of
the beneficiary thereof, the form of the Letter of Credit and such other
information as the Agent may reasonably request all of which shall be
reasonably satisfactory to the Agent. Subject to the terms and conditions
of this Agreement, on the date specified for the issuance, renewal or
extension of a Letter of Credit, the Agent shall issue such Letter of
Credit to the beneficiary thereof.
In conjunction with the issuance of each Letter of Credit, the Borrower
shall execute a Letter of Credit Agreement. In the event of any conflict
between any provision of a Letter of Credit Agreement and this Agreement,
the Borrower, the Agent and the Lenders hereby agree that the provisions of
this Agreement shall govern.
The Agent will send to the Borrower and each Lender, upon issuance of
any Letter of Credit, or an amendment thereto, a true and complete copy of
such Letter of Credit, or such amendment thereto.
(h) Distribution LC. In conjunction with the issuance of the
Distribution LC, the Borrower shall execute a Letter of Credit Agreement.
In the event of any conflict between any provision of such Letter of Credit
Agreement and this Agreement, the Borrower, the Agent and the Lenders
hereby agree that the provisions of this Agreement shall govern.
The Agent will send to the Borrower and each Lender, upon issuance of
the Distribution LC, or an amendment thereto, a true and complete copy of
such Distribution LC, or such amendment thereto.
Section 2.03 Changes of Facility A Commitments. The Borrower shall have
the right to terminate or to reduce the amount of the Aggregate Facility A
Commitments at any time or from time to time upon not less than three (3)
Business Days' prior notice to the Agent (which shall promptly notify the
Lenders) of each such termination or reduction, which notice shall specify the
effective date thereof and the amount of any such reduction (which shall not be
less than $1,000,000 or any whole multiple of $100,000 in excess thereof) and
shall be irrevoca- ble and effective only upon receipt by the Agent. Once
terminated or reduced, the Aggregate Facility A Commitments may not be
reinstated.
Section 2.04 Fees.
(a) The Borrower shall pay to the Agent for the account of each Lender
a commitment fee on the daily average unused amount of the Aggregate
Facility A Commitments for the period from and including the Closing Date
up to but excluding the earlier of the date the Aggregate Facility A
Commitments are terminated or the Facility A Termination Date at a rate per
annum equal to 1/2 of 1%. Accrued commitment fees
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shall be payable quarterly in arrears on each Quarterly Date and on the
earlier of the date the Aggregate Facility A Commitments are terminated or
the Facility A Termination Date. Outstanding Letters of Credit will be
treated as utilization of Facility A for purposes of determining the
commitment fee.
(b) The Borrower agrees to pay the Agent, for the account of each
Lender, commissions for issuing the Letters of Credit at the rate of 2.25%
per annum, provided that each Letter of Credit shall bear a minimum
commission of $500.
(c) The Borrower agrees to pay to the Agent, for its own account, a
fronting fee of 1/8% per annum for each Letter of Credit on the daily
average outstanding of the maximum liability of the Agent existing from
time to time under each Letter of Credit (calculated separately for each
Letter of Credit).
(d) The Borrower agrees to pay the Agent, for the account of each
Lender, commissions for issuing the Distribution LC at the rate of either
(i) 1/2 of 1% per annum, provided Kinder Morgan Energy maintains at all
times an Unrestricted Balance equal to the maximum liability of the Agent
existing from time to time under the Distribution LC or (ii) 2.25% per
annum, if Kinder Morgan Energy does not maintain the required Unrestricted
Balance.
(e) The Borrower agrees to pay to the Agent, for its own account, a
fronting fee of 1/8% per annum for the Distribution LC on the daily average
outstanding of the maximum liability of the Agent existing from time to
time under such Distribution LC.
(f) Upon each issuance of any Letter of Credit or the Distribution LC,
the Borrower shall pay to the Agent for its own account an issuance fee of
$85.
(g) Upon each transfer of any Letter of Credit to a successor
beneficiary in accordance with its terms, the Borrower shall pay the sum of
$200 to the Agent for its own account. The Distribution LC shall be
non-transferrable.
(h) Upon each drawing of any Letter of Credit or the Distribution LC,
the Borrower shall pay to the Agent for its own account a negotiation fee
of $100; provided that such fee shall not be a condition to any drawing.
(i) Upon each amendment of any Letter of Credit or the Distribution LC,
the Borrower shall pay to the Agent for its own account the sum of $50.
(j) Each Letter of Credit and the Distribution LC shall be deemed to be
outstanding up to its full face amount until the Agent has received (1) the
canceled Letter of Credit or the Distribution LC or a written cancellation
of the Letter of Credit or the Distribution LC from the beneficiary of such
Letter of Credit or Distribution LC in form and substance acceptable to the
Agent, or (2) for any reductions in the amount of the Letter of Credit or
the Distribution LC (other than from a drawing or a scheduled
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reduction set forth in the Letter of Credit or the Distribution LC),
written notification from the beneficiary of such Letter of Credit or the
Distribution LC. The commissions and fronting fees in Sections 2.04(b),
(c), (d) and (e) are payable quarterly in advance on each Quarterly Date.
(k) The Borrower shall pay to First Union Corporation for its account
such other fees as are set forth in the Fee Letter on the dates specified
therein to the extent not paid prior to the Closing Date.
Section 2.05 Several Obligations. The failure of any Lender to make any
Loan to be made by it or to provide funds for disbursements or reimbursements
under Letters of Credit or the Distribution LC on the date specified therefor
shall not relieve any other Lender of its obligation to make its Loan or provide
funds on such date, but no Lender shall be responsible for the failure of any
other Lender to make a Loan to be made by such other Lender or to provide funds
to be provided by such other Lender.
Section 2.06 Notes.
(a) The Facility A Loans made by each Lender shall be evidenced by a
single promissory note of the Borrower in substantially the form of Exhibit
A-1 hereto, dated (i) the Closing Date or (ii) the effective date of an
Assignment pursuant to Section 12.06(b), payable to the order of such
Lender in a principal amount equal to its Percentage Share of the Aggregate
Facility A Commitments as in effect on the date of issue and otherwise duly
completed and such substitute Notes as required by Section 12.06(b).
(b) The Facility B Loans made by First Union shall be evidenced by a
single promissory note of the Borrower in substantially the form of Exhibit
A-2 hereto dated the Closing Date payable to the order of First Union.
(c) The Facility C Loans made by each Lender shall be evidenced by a
single promissory note of the Borrower in substantially the form of Exhibit
A-3 hereto dated (i) the Closing Date or (ii) the effective date of an
Assignment pursuant to Section 12.06(b), payable to the order of such
Lender in a principal amount equal to its Percentage Share of the Aggregate
Facility C Commitments as in effect on the date of issue and otherwise duly
completed.
(d) The date, amount, Type, interest rate and Interest Period of each
Loan made by each Lender, and all payments made on account of the principal
thereof, shall be recorded by such Lender on its books for its Notes, and,
prior to any transfer, may be endorsed by such Lender on schedules attached
to such Notes or any continuation thereof or on any separate record
maintained by such Lender. Failure to make any such notation or to attach a
schedule shall not affect any Lender's or the Borrower's rights or
obligations in respect of such Loans or affect the validity of such
transfer by any Lender of its Notes.
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Section 2.07 Prepayments.
(a) The Borrower may prepay the Base Rate Loans upon not less than one
(1) Business Day's prior notice to the Agent (which shall promptly notify
the Lenders), which notice shall specify the prepayment date (which shall
be a Business Day) and the amount of the prepayment (which shall be at
least $100,000 or the remaining aggregate principal balance outstanding on
the Notes) and shall be irrevocable and effective only upon receipt by the
Agent, provided that interest on the principal prepaid, accrued to the
prepayment date, shall be paid on the prepayment date. The Borrower may
prepay LIBOR Loans on the same condition as for Base Rate Loans and in
addition such prepayments of LIBOR Loans shall be subject to the terms of
Section 5.05 and shall be in an amount equal to all of the LIBOR Loans for
the Interest Period prepaid.
(b) If, after giving effect to any termination or reduction of the
Aggregate Facility A Commitments pursuant to Section 2.03, the outstanding
aggregate principal amount of the Facility A Loans plus the LC Exposure
exceeds the Aggregate Facility A Commitments, the Borrower shall (i) prepay
the Facility A Loans on the date of such termination or reduction in an
aggregate principal amount equal to the excess, together with interest on
the principal amount paid accrued to the date of such prepayment and (ii)
if any excess remains after prepaying all of the Facility A Loans, pay to
the Agent on behalf of the Lenders an amount equal to the excess to be held
as cash collateral as provided in Section 2.09(b).
(c) Upon any sale of the LP Units or any liquidating distribution or
special distribution attributable to the LP Units, the Borrower shall pay
to the Agent on behalf of the Lenders an amount equal to the proceeds of
such sale or distribution. Such proceeds shall be first applied as a
mandatory payment of any outstanding Facility A Loans, second, held as cash
collateral for any LC Exposure as provided in Section 2.09(b), third, held
by cash collateral for the contingent expenses on the Distribution LC as
provided in Section 2.09(b), and fourth, applied as a mandatory prepayment
of Facility C Loans. The Aggregate Facility A Commitments shall be reduced
by the amount of such proceeds, but not less than zero.
(d) Prepayments permitted or required under this Section 2.07 shall be
without premium or penalty, except as required under Section 5.05 for
prepayment of LIBOR Loans. Any voluntary prepayments on the Facility A
Loans under Section 2.07(a) may be reborrowed subject to the then effective
Aggregate Facility A Commitments. Any voluntary prepayments on the Facility
B Loans and the Facility C Loans and any mandatory prepayments of any
Facility may not be reborrowed.
Section 2.08 Assumption of Risks. The Borrower assumes all risks of the
acts or omissions of any beneficiary of any Letter of Credit or the Distribution
LC or any transferee thereof with respect to its use of such Letter of Credit or
the Distribution LC. Neither the Agent (except in the case of willful misconduct
or bad faith on the part of the Agent or any of its employees), its
correspondents nor any Lender shall be responsible for the validity, sufficiency
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or genuineness of certificates or other documents or any endorsements thereon,
even if such certificates or other documents should in fact prove to be invalid,
insufficient, fraudulent or forged; for errors, omissions, interruptions or
delays in transmissions or delivery of any messages by mail, telex, or
otherwise, whether or not they be in code; for errors in translation or for
errors in interpretation of technical terms; the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign any
Letter of Credit or the Distribution LC or the rights or benefits thereunder or
proceeds thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason; the failure of any beneficiary or any transferee of
any Letter of Credit or the Distribution LC to comply fully with conditions
required in order to draw upon any Letter of Credit or the Distribution LC; or
for any other consequences arising from causes beyond the Agent's control or the
control of the Agent's correspondents. In addition, neither the Agent nor any
Lender shall be responsible for any error, neglect, or default of any of the
Agent's correspondents; and none of the above shall affect, impair or prevent
the vesting of any of the Agent's or any Lender's rights or powers hereunder or
under the Letter of Credit Agreements, all of which rights shall be cumulative.
The Agent and its correspondents may accept certificates or other documents that
appear on their face to be in order, without responsibility for further
investigation of any matter contained therein regardless of any notice or
information to the contrary. In furtherance and not in limitation of the
foregoing provisions, the Borrower agrees that any action, inaction or omission
taken or not taken by the Agent or by any correspondent for the Agent in good
faith in connection with any Letter of Credit or the Distribution LC, or any
related drafts, certificates, documents or instruments, shall be binding on the
Borrower and shall not put the Agent or its correspondents under any resulting
liability to the Borrower.
Section 2.09 Obligation to Reimburse and to Prepay.
(a) (i) If a disbursement by First Union is made under any Letter of
Credit, the Borrower shall pay to First Union within two (2) Business Days
after notice of any such disbursement is received by the Borrower, the
amount of each such disbursement made by First Union under the Letter of
Credit (if such payment is not sooner effected as may be required under
this Section 2.09 or under other provisions of the Letter of Credit),
together with interest on the amount disbursed from and including the date
of disbursement until payment in full of such disbursed amount at a varying
rate per annum equal to (1) the then applicable interest rate for Base Rate
Loans through the second Business Day after notice of such disbursement is
received by the Borrower and (2) thereafter, the Post-Default Rate for Base
Rate Loans (but in no event to exceed the Highest Lawful Rate) for the
period from and including the third Business Day following the date of such
disbursement to and including the date of repayment in full of such
disbursed amount.
(ii) If a disbursement by First Union is made under the
Distribution LC, such disbursement shall constitute an automatic borrowing
under the Facility B Note as a Base Rate Loan subject to the right to
continue or convert such Loan as provided in Section 2.02.
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The obligations of the Borrower under this Agreement with respect to each
Letter of Credit and the Distribution LC shall be absolute, unconditional
and irrevocable and shall be paid or performed strictly in accordance with
the terms of this Agreement under all circumstances whatsoever, including,
without limitation, but only to the fullest extent permitted by applicable
law, the following circumstances: (1) any lack of validity or
enforceability of this Agreement, any Letter of Credit, the Distribution LC
or any of the Security Instruments; (2) any amendment or waiver of
(including any default), or any consent to departure from this Agreement
(except to the extent permitted by any amendment or waiver), any Letter of
Credit, the Distribution LC or any of the Security Instruments; (3) the
existence of any claim, set-off, defense or other rights which the Borrower
may have at any time against the beneficiary of any Letter of Credit or
Distribution LC or any transferee of any Letter of Credit or the
Distribution LC (or any Persons for whom any such beneficiary or any such
transferee may be acting), the Agent, any Lender or any other Person,
whether in connection with this Agreement, any Letter of Credit, the
Distribution LC, the Security Instruments, the transactions contemplated
hereby or any unrelated transaction; (4) any statement, certificate, draft,
notice or any other document presented under any Letter of Credit or the
Distribution LC proves to have been forged, fraudulent, insufficient or
invalid in any respect or any statement therein proves to have been untrue
or inaccurate in any respect whatsoever; (5) payment by First Union under
any Letter of Credit or the Distribution LC against presentation of a draft
or certificate which appears on its face to comply, but does not comply,
with the terms of such Letter of Credit or the Distribution LC; and (6) any
other circumstance or happening whatsoever, whether or not similar to any
of the foregoing.
Notwithstanding anything in this Agreement to the contrary, the Borrower
will not be liable for payment or performance that results from the gross
negligence or willful misconduct of First Union, except (1) where the
Borrower or any Subsidiary actually recovers the proceeds for itself or the
Agent of any payment made by First Union in connection with such gross
negligence or willful misconduct or (2) in cases where First Union makes
payment to the named beneficiary of a Letter of Credit or the Distribution
LC.
(b) In the event of the occurrence of any Event of Default, an amount
equal to the sum of the LC Exposure and the contingent exposure on the
Distribution LC shall be deemed to be forthwith due and owing by the
Borrower to First Union as of the date of any such occurrence; and the
Borrower's obligation to pay such amount shall be absolute and
unconditional, without regard to whether any beneficiary of any such Letter
of Credit or the Distribution LC has attempted to draw down all or a
portion of such amount under the terms of a Letter of Credit or the
Distribution LC, and, to the fullest extent permitted by applicable law,
shall not be subject to any defense or be affected by a right of set-off,
counterclaim or recoupment which the Borrower may now or hereafter have
against any such beneficiary, First Union, the Lenders or any other Person
for any reason whatsoever. Such payments shall be held by First Union on
behalf of the Lenders as cash collateral securing the LC Exposure and the
contingent exposure on the Distribution LC in an account or accounts at the
Principal Office; and the Borrower
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hereby grants to and by its deposit with First Union grants to First Union
a security interest in such cash collateral. In the event of any such
payment by the Borrower of amounts contingently owing under outstanding
Letters of Credit or the Distribution LC and in the event that thereafter
drafts or other demands for payment complying with the terms of such
Letters of Credit or the Distribution LC are not made prior to the
respective expiration dates thereof, First Union agrees, if no Event of
Default has occurred and is continuing or if no Indebtedness is outstanding
under this Agreement, the Facility A Notes or the Security Instruments, to
remit to the Borrower amounts for which the contingent obligations
evidenced by the Letters of Credit or the Distribution LC have ceased.
(c) Each Lender severally and unconditionally agrees that it shall
promptly reimburse First Union an amount equal to such Lender's Percentage
Share of any disbursement made by First Union under any Letter of Credit or
the Distribution LC that is not reimbursed according to Section 2.09(a)(i).
Section 2.10 Lending Offices. The Loans of each Type made by each
Lender shall be made and maintained at such Lender's Applicable Lending Office
for Loans of such Type as shown on the signature pages hereof.
ARTICLE III
Payments of Principal and Interest
Section 3.01 Repayment of Loans. The Borrower will pay to the Agent,
for the account of each Lender, the principal payments required by this Section
3.01. On the Maturity Date the Borrower shall repay the outstanding aggregate
principal and accrued and unpaid interest under the Facility A Notes, the
Facility B Note and the Facility C Notes.
Section 3.02 Interest. The Borrower will pay to the Agent, for the
account of each Lender, interest on the unpaid principal amount of each Loan
made by such Lender for the period commencing on the date such Loan is made to
but excluding the date such Loan shall be paid in full, at the following rates
per annum:
(i) if such a Loan is a Base Rate Loan, the Base Rate (as in effect
from time to time) plus the Applicable Margin (as in effect from time to
time), but in no event to exceed the Highest Lawful Rate; and
(ii) if such a Loan is a LIBOR Loan, for each Interest Period relating
thereto, the LIBOR Rate for such Loan plus the Applicable Margin (as in
effect from time to time), but in no event to exceed the Highest Lawful
Rate.
Notwithstanding the foregoing, the Borrower will pay to the Agent, for the
account of each Lender, interest at the applicable Post-Default Rate on any
principal of any Loan made by such
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Lender, and (to the fullest extent permitted by law) on any other amount payable
by the Borrower hereunder, under any Loan Document or under any Note held by
such Lender to or for account of such Lender, for the period commencing on the
date of an Event of Default until the same is paid in full or all Events of
Default are cured or waived.
Accrued interest on Base Rate Loans shall be payable on each Quarterly Date
commencing on March 31, 1997, and accrued interest on each LIBOR Loan shall be
payable on the last day of the Interest Period therefor and, if such Interest
Period is longer than three months at three-month intervals following the first
day of such Interest Period, except that interest payable at the Post-Default
Rate shall be payable from time to time on demand and interest on any LIBOR Loan
that is converted into a Base Rate Loan (pursuant to Section 5.04) shall be
payable on the date of conversion (but only to the extent so converted).
Promptly after the determination of any interest rate provided for herein
or any change therein, the Agent shall notify the Lenders to which such interest
is payable and the Borrower thereof. Each determination by the Agent of an
interest rate or fee hereunder shall, except in cases of manifest error, be
final, conclusive and binding on the parties.
ARTICLE IV
Payments; Pro Rata Treatment; Computations; Etc.
Section 4.01 Payments. Except to the extent otherwise provided herein,
all payments of principal, interest and other amounts to be made by the Borrower
under the Loan Documents shall be made in Dollars, in immediately available
funds, to the Agent at such account as the Agent shall specify by notice to the
Borrower from time to time, not later than 11:00 a.m. Charlotte, North Carolina
time on the date on which such payments shall become due (each such payment made
after such time on such due date to be deemed to have been made on the next
succeeding Business Day). Such payments shall be made without (to the fullest
extent permitted by applicable law) defense, set-off or counterclaim. Each
payment received by the Agent under this Agreement or any Note for account of a
Lender shall be paid promptly to such Lender in immediately available funds.
Except as provided in clause (iii) of the definition of "Interest Period", if
the due date of any payment under this Agreement or any Note would otherwise
fall on a day which is not a Business Day such date shall be extended to the
next succeeding Business Day and interest shall be payable for any principal so
extended for the period of such extension. At the time of each payment to the
Agent of any principal of or interest on any borrowing, the Borrower shall
notify the Agent of the Loans to which such payment shall apply. In the absence
of such notice the Agent may specify the Loans to which such payment shall
apply, but to the extent possible such payment or prepayment will be applied
first to the Loans comprised of Base Rate Loans.
Section 4.02 Pro Rata Treatment. Except to the extent otherwise
provided herein each Lender agrees that: (i) each borrowing from the Lenders
under Section 2.01 and each continuation and conversion under Section 2.02 shall
be made from the Lenders pro rata in
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accordance with their Percentage Share, each payment of commitment fee or other
fees under Section 2.04(a) and Section 2.04(b) shall be made for account of the
Lenders pro rata in accordance with their Percentage Share, and each termination
or reduction of the amount of the Aggregate Facility A Commitments under Section
2.03(b) shall be applied to the Facility A Commitment of each Lender, pro rata
according to the amounts of its respective Facility A Commitment; (ii) each
payment of principal of Loans under a Facility by the Borrower shall be made for
account of the Lenders pro rata in accordance with the respective unpaid
principal amount of the Loans held by the Lenders under such Facility; and (iii)
each payment of interest on Loans by the Borrower shall be made for account of
the Lenders pro rata in accordance with the amounts of interest due and payable
to the respective Lenders; and (iv) each reimbursement by the Borrower of
disbursements under Letters of Credit and the Distribution LC shall be made for
account of the Agent or, if funded by the Lenders, pro rata for the account of
the Lenders, in accordance with the amounts of reimbursement obligations due and
payable to each respective Lender.
Section 4.03 Computations. Interest on LIBOR Loans and fees shall be
computed on the basis of a year of 360 days and actual days elapsed (including
the first day but excluding the last day) occurring in the period for which such
interest is payable, unless such calculation would exceed the Highest Lawful
Rate, in which case interest shall be calculated on the per annum basis of a
year of 365 or 366 days, as the case may be. Interest on Base Rate Loans shall
be computed on the basis of a year of 365 or 366 days, as the case may be, and
actual days elapsed (including the first day but excluding the last day)
occurring in the period for which such interest is payable.
Section 4.04 Non-receipt of Funds by the Agent. Unless the Agent shall
have been notified by a Lender or the Borrower prior to the date on which such
notifying party is scheduled to make payment to the Agent (in the case of a
Lender) of the proceeds of a Loan or a payment under a Letter of Credit or the
Distribution LC to be made by it hereunder or (in the case of the Borrower) a
payment to the Agent for account of one or more of the Lenders hereunder (such
payment being herein called the "Required Payment"), which notice shall be
effective upon receipt, that it does not intend to make the Required Payment to
the Agent, the Agent may assume that the Required Payment has been made and may,
in reliance upon such assumption (but shall not be required to), make the amount
thereof available to the intended recipient(s) on such date and, if such Lender
or the Borrower (as the case may be) has not in fact made the Required Payment
to the Agent, the recipient(s) of such payment shall, on demand, repay to the
Agent the amount so made available together with interest thereon in respect of
each day during the period commencing on the date such amount was so made
available by the Agent until but excluding the date the Agent recovers such
amount at a rate per annum which, for any Lender as recipient, will be equal to
the Federal Funds Rate, and for the Borrower as recipient, will be equal to the
Base Rate plus the Applicable Margin.
Section 4.05 Set-off, Sharing of Payments, Etc.
(a) The Borrower agrees that, in addition to (and without limitation
of) any right of set-off, bankers' lien or counterclaim a Lender may
otherwise have, each Lender
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shall have the right and be entitled (after consultation with the Agent),
at its option, to offset balances held by it or by any of its Affiliates
for account of the Borrower at any of its offices, in Dollars or in any
other currency, against any principal of or interest on any of such
Lender's Loans, or any other amount payable to such Lender hereunder, which
is not paid when due (regardless of whether such balances are then due to
the Borrower), in which case it shall promptly notify the Borrower and the
Agent thereof, provided that such Lender's failure to give such notice
shall not affect the validity thereof.
(b) If any Lender shall obtain payment of any principal of or interest
on any Loan made by it to the Borrower under this Agreement (or
reimbursement as to any Letter of Credit) through the exercise of any right
of set-off, banker's lien or counterclaim or similar right or otherwise,
and, as a result of such payment, such Lender shall have received a greater
percentage of the principal or interest (or reimbursement) then due
hereunder by the Borrower to such Lender than the percentage received by
any other Lenders, it shall promptly (i) notify the Agent and each other
Lender thereof and (ii) purchase from such other Lenders participations in
(or, if and to the extent specified by such Lender, direct interests in)
the Loans (or participations in Letters of Credit or the Distribution LC)
made by such other Lenders (or in interest due thereon, as the case may be)
in such amounts, and make such other adjustments from time to time as shall
be equitable, to the end that all the Lenders shall share the benefit of
such excess payment (net of any expenses which may be incurred by such
Lender in obtaining or preserving such excess payment) pro rata in
accordance with the unpaid principal and/or interest on the Loans held by
each of the Lenders (or reimbursements of Letters of Credit or the
Distribution LC). To such end all the Lenders shall make appropriate
adjustments among themselves (by the resale of participations sold or
otherwise) if such payment is rescinded or must otherwise be restored. The
Borrower agrees that any Lender so purchasing a participation (or direct
interest) in the Loans made by other Lenders (or in interest due thereon,
as the case may be) may exercise all rights of set-off, banker's lien,
counterclaim or similar rights with respect to such participation as fully
as if such Lender were a direct holder of Loans (or Letters of Credit or
the Distribution LC ) in the amount of such participation. Nothing
contained herein shall require any Lender to exercise any such right or
shall affect the right of any Lender to exercise, and retain the benefits
of exercising, any such right with respect to any other indebtedness or
obligation of the Borrower. If under any applicable bankruptcy, insolvency
or other similar law, any Lender receives a secured claim in lieu of a
set-off to which this Section 4.05 applies, such Lender shall, to the
extent practicable, exercise its rights in respect of such secured claim in
a manner consistent with the rights of the Lenders entitled under this
Section 4.05 to share the benefits of any recovery on such secured claim.
Section 4.06 Taxes.
(a) Payments Free and Clear. Any and all payments by the Borrower
hereunder shall be made, in accordance with Section 4.01, free and clear
of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
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respect thereto, excluding, in the case of each Lender and the Agent, taxes
imposed on its income, and franchise or similar taxes imposed on it, by (i) any
jurisdiction (or political subdivision thereof) of which the Agent or such
Lender, as the case may be, is a citizen or resident or in which such Lender has
an Applicable Lending Office, (ii) the jurisdiction (or any political
subdivision thereof) in which the Agent or such Lender is organized, or (iii)
any jurisdiction (or political subdivision thereof) in which such Lender or the
Agent is presently doing business in which taxes are imposed solely as a result
of doing business in such jurisdiction (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If the Borrower shall be required by law to deduct any
Taxes from or in respect of any sum payable hereunder to the Lenders or the
Agent (i) the sum payable shall be increased by the amount necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 4.06) such Lender or the Agent (as
the case may be) shall receive an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrower shall make such deductions
and (iii) the Borrower shall pay the full amount deducted to the relevant taxing
authority or other Governmental Authority in accordance with applicable law.
(b) Other Taxes. In addition, to the fullest extent permitted by
applicable law, the Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement,
any Assignment or any Security Instrument (hereinafter referred to as
"Other Taxes").
(c) Indemnification. To the fullest extent permitted by applicable law,
the Borrower will indemnify each Lender and the Agent for the full amount
of Taxes and Other Taxes (including, but not limited to, any Taxes or Other
Taxes imposed by any Governmental Authority on amounts payable under this
Section 4.06) paid by such Lender or the Agent (on their behalf or on
behalf of any Lender), as the case may be, and any liability (including
penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted unless the payment of such Taxes was not correctly or legally
asserted and such Lender's payment of such Taxes or Other Taxes was the
result of its gross negligence or willful misconduct. Any payment pursuant
to such indemnification shall be made within thirty (30) days after the
date any Lender or the Agent, as the case may be, makes written demand
therefor. if any Lender or the Agent receives a refund or credit in respect
of any Taxes or Other Taxes for which such Lender or the Agent has received
payment from the Borrower it shall promptly notify the Borrower of such
refund or credit and shall, if no default has occurred and is continuing,
within thirty (30) days after receipt of a request by the Borrower (or
promptly upon
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receipt, if the Borrower has requested application for such refund or
credit pursuant hereto), pay an amount equal to such refund or credit to
the Borrower without interest (but with any interest so refunded or
credited), provided that the Borrower, upon the request of such Lender or
the Agent, agrees to return such refund or credit (plus penalties, interest
or other charges) to such Lender or the Agent in the event such Lender or
the Agent is required to repay such refund or credit.
(d) Lender Representations.
(i) Each Lender represents that it is either (1) a corporation or
banking association organized under the laws of the United States of
America or any state thereof or (2) it is entitled to complete
exemption from United States withholding tax imposed on or with respect
to any payments, including fees, to be made to it pursuant to this
Agreement (A) under an applicable provision of a tax convention to
which the United States of America is a party or (B) because it is
acting through a branch, agency or office in the United States of
America and any payment to be received by it hereunder is effectively
connected with a trade or business in the United States of America.
Each Lender that is not a corporation or banking association organized
under the laws of the United States of America or any state thereof
agrees to provide to the Borrower and the Agent on the Closing Date, or
on the date of its delivery of the Assignment pursuant to which it
becomes a Lender, and at such other times as required by United States
law or as the Borrower or the Agent shall reasonably request, two
accurate and complete original signed copies of either (A) Internal
Revenue Service Form 4224 (or successor form) certifying that all
payments to be made to it hereunder will be effectively connected to a
United States trade or business (the "Form 4224 Certification") or (B)
Internal Revenue Service Form 1001 (or successor form) certifying that
it is entitled to the benefit of a provision of a tax convention to
which the United States of America is a party which completely exempts
from United States withholding tax all payments to be made to it
hereunder (the "Form 1001 Certification"). In addition, each Lender
agrees that if it previously filed a Form 4224 Certification, it will
deliver to the Borrower and the Agent a new Form 4224 Certification
prior to the first payment date occurring in each of its subsequent
taxable years; and if it previously filed a Form 1001 Certification, it
will deliver to the Borrower and the Agent a new certification prior to
the first payment date falling in the third year following the previous
filing of such certification. Each Lender also agrees to deliver to the
Borrower and the Agent such other or supplemental forms as may at any
time be required as a result of changes in applicable law or regulation
in order to confirm or maintain in effect its entitlement to exemption
from United States withholding tax on any payments hereunder, provided
that the circumstances of such Lender at the relevant time and
applicable laws permit it to do so. If a Lender determines, as a result
of any change in either (i) a Governmental Requirement or (ii) its
circumstances, that it is unable to submit any form or certificate that
it is obligated to submit pursuant
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to this Section 4.06, or that it is required to withdraw or cancel any
such form or certificate previously submitted, it shall promptly notify
the Borrower and the Agent of such fact. If a Lender is organized under
the laws of a jurisdiction outside the United States of America, unless
the Borrower and the Agent have received a Form 1001 Certification or
Form 4224 Certification satisfactory to them indicating that all
payments to be made to such Lender hereunder are not subject to United
States withholding tax, the Borrower shall withhold taxes from such
payments at the applicable statutory rate. Each Lender agrees to
indemnify and hold harmless the Borrower or Agent, as applicable, from
any United States taxes, penalties, interest and other expenses, costs
and losses incurred or payable by (i) the Agent as a result of such
Lender's failure to submit any form or certificate that it is required
to provide pursuant to this Section 4.06 or (ii) the Borrower or the
Agent as a result of their reliance on any such form or certificate
which such Lender has provided to them pursuant to this Section 4.06.
(ii) For any period with respect to which a Lender has failed to
provide the Borrower with the form required pursuant to this Section
4.06, if any, (other than if such failure is due to a change in a
Governmental Requirement occurring subsequent to the date on which a
form originally was required to be provided), such Lender shall not be
entitled to indemnification under Section 4.06 with respect to taxes
imposed by the United States which taxes would not have been imposed
but for such failure to provide such forms; provided, however, that
should a Lender, 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 shall take such
steps as such Lender shall reasonably request to assist such Lender to
recover such taxes.
(iii) Any Lender claiming any additional amounts payable pursuant
to this Section 4.06 shall use reasonable efforts (consistent with
legal and regulatory restrictions) to file any certificate or document
requested by the Borrower or the Agent or to change the jurisdiction of
its Applicable Lending Office or to contest any tax imposed if the
making of such a filing or change or contesting such tax would avoid
the need for or reduce the amount of any such additional amounts that
may thereafter accrue and would not, in the sole determination of such
Lender, be otherwise disadvantageous to such Lender.
ARTICLE V
Capital Adequacy
Section 5.01 Additional Costs.
(a) Eurodollar Regulations, etc. The Borrower shall pay directly
to each Lender from time to time such amounts as such Lender may
determine to be necessary
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to compensate such Lender for any costs which it determines are
attributable to its making or maintaining of any LIBOR Loans or issuing or
participating in Letters of Credit or the Distribution LC hereunder or its
obligation to make any LIBOR Loans or issue or participate in any Letters
of Credit or the Distribution LC hereunder, or any reduction in any amount
receivable by such Lender hereunder in respect of any of such LIBOR Loans,
Letters of Credit or the Distribution LC or such obligation (such increases
in costs and reductions in amounts receivable being herein called
"Additional Costs"), resulting from any Regulatory Change which: (i)
changes the basis of taxation of any amounts payable to such Lender under
this Agreement or any Note in respect of any of such LIBOR Loans, Letters
of Credit or the Distribution LC (other than taxes imposed on the overall
net income of such Lender or of its Applicable Lending Office for any of
such LIBOR Loans by the jurisdiction in which such Lender has its principal
office or Applicable Lending Office); or (ii) imposes or modifies any
reserve, special deposit, minimum capital, capital ratio or similar
requirements relating to any extensions of credit or other assets of, or
any deposits with or other liabilities of such Lender, or the Facility A
Commitment or Loans of such Lender or the Eurodollar interbank market; or
(iii) imposes any other condition affecting this Agreement or any Note (or
any of such extensions of credit or liabilities) or such Lender's Facility
A Commitment or Loans. Each Lender will notify the Agent and the Borrower
of any event occurring after the Closing Date which will entitle such
Lender to compensation pursuant to this Section 5.01(a) as promptly as
practicable after it obtains knowledge thereof and determines to request
such compensation, and will designate a different Applicable Lending Office
for the Loans of such Lender affected by such event if such designation
will avoid the need for, or reduce the amount of, such compensation and
will not, in the sole opinion of such Lender, be disadvantageous to such
Lender, provided that such Lender shall have no obligation to so designate
an Applicable Lending Office located in the United States. If any Lender
requests compensation from the Borrower under this Section 5.01(a), the
Borrower may, by notice to such Lender, suspend the obligation of such
Lender to make additional Loans of the Type with respect to which such
compensa- tion is requested until the Regulatory Change giving rise to such
request ceases to be in effect (in which case the provisions of Section
5.04 shall be applicable).
(b) Regulatory Change. Without limiting the effect of the provisions of
Section 5.01(a), in the event that, by reason of any Regulatory Change or
any other circumstances arising after the Closing Date affecting such
Lender, the Eurodollar interbank market or such Lender's position in such
market, any Lender either (i) incurs Additional Costs based on or measured
by the excess above a specified level of the amount of a category of
deposits or other liabilities of such Lender which includes deposits by
reference to which the interest rate on LIBOR Loans is determined as
provided in this Agreement or a category of extensions of credit or other
assets of such Lender which includes LIBOR Loans or (ii) becomes subject to
restrictions on the amount of such a category of liabilities or assets
which it may hold, then, if such Lender so elects by notice to the
Borrower, the obligation of such Lender to make additional LIBOR Loans
shall be suspended until such Regulatory Change or other circumstances
ceases to be in effect (in which case the provisions of Section 5.04 shall
be applicable).
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(c) Capital Adequacy. Without limiting the effect of the foregoing
provisions of this Section 5.01 (but without duplication), the Borrower
shall pay directly to any Lender from time to time on request such amounts
as such Lender may reasonably determine to be necessary to compensate such
Lender or its parent or holding company for any costs which it determines
are attributable to the maintenance by such Lender or its parent or holding
company (or any Applicable Lending Office), pursuant to any Governmental
Requirement following any Regulatory Change, of capital in respect of its
Facility A Commitment, its Note, or its Loans or any interest held by it in
any Letter of Credit or the Distribution LC, such compensation to include,
without limitation, an amount equal to any reduction of the rate of return
on assets or equity of such Lender or its parent or holding company (or any
Applicable Lending Office) to a level below that which such Lender or its
parent or holding company (or any Applicable Lending Office) could have
achieved but for such Governmental Requirement. Such Lender will notify the
Borrower that it is entitled to compensation pursuant to this Section
5.01(c) as promptly as practicable after it determines to request such
compensation.
(d) Compensation Procedure. Any Lender notifying the Borrower of the
incurrence of additional costs under this Section 5.01 shall in such notice
to the Borrower and the Agent set forth in reasonable detail the basis and
amount of its request for compensation. Determinations and allocations by
each Lender for purposes of this Section 5.01 of the effect of any
Regulatory Change pursuant to Section 5.01(a) or (b), or of the effect of
capital maintained pursuant to Section 5.01(c), on its costs or rate of
return of maintaining Loans or its obligation to make Loans or issue
Letters of Credit or the Distribution LC, or on amounts receivable by it in
respect of Loans or Letters of Credit or the Distribution LC, and of the
amounts required to compensate such Lender under this Section 5.01, shall
be conclusive and binding for all purposes, provided that such
determinations and allocations are made on a reasonable basis. Any request
for additional compensation under this Section 5.01 shall be paid by the
Borrower within thirty (30) days of the receipt by the Borrower of the
notice described in this Section 5.01(d).
Section 5.02 Limitation on LIBOR Loans. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of LIBOR for any Interest
Period:
(i) the Agent determines (which determination shall be conclusive,
absent manifest error) that quotations of interest rates for the relevant
deposits referred to in the definition of "LIBOR" in Section 1.02 are not
being provided in the relevant amounts or for the relevant maturities for
purposes of determining rates of interest for LIBOR Loans as provided
herein; or
(ii) the Agent determines (which determination shall be conclusive,
absent manifest error) that the relevant rates of interest referred to in
the definition of "LIBOR" in Section 1.02 upon the basis of which the rate
of interest for LIBOR Loans for such Interest Period is to be determined
are not sufficient
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to adequately cover the cost to the Lenders of
making or maintaining LIBOR Loans;
then the Agent shall give the Borrower prompt notice thereof, and so long as
such condition remains in effect, the Lenders shall be under no obligation to
make additional LIBOR Loans.
Section 5.03 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain LIBOR
Loans hereunder, then such Lender shall promptly notify the Borrower thereof and
such Lender's obligation to make LIBOR Loans shall be suspended until such time
as such Lender may again make and maintain LIBOR Loans (in which case the
provisions of Section 5.04 shall be applicable).
Section 5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02 and 5.03.
If the obligation of any Lender to make LIBOR Loans shall be suspended pursuant
to Sections 5.01, 5.02 or 5.03 ("Affected Loans"), all Affected Loans which
would otherwise be made by such Lender shall be made instead as Base Rate Loans
(and, if an event referred to in Section 5.01(b) or Section 5.03 has occurred
and such Lender so requests by notice to the Borrower, all Affected Loans of
such Lender then outstanding shall be automatically converted into Base Rate
Loans on the date specified by such Lender in such notice) and, to the extent
that Affected Loans are so made as (or converted into) Base Rate Loans, all
payments of principal which would otherwise be applied to such Lender's Affected
Loans shall be applied instead to its Base Rate Loans.
Section 5.05 Compensation. The Borrower shall pay to each Lender within
thirty (30) days of receipt of written request of such Lender (which request
shall set forth, in reasonable detail, the basis for requesting such amounts and
which shall be conclusive and binding for all purposes provided that such
determinations are made on a reasonable basis), such amount or amounts as shall
compensate it for any loss, cost, expense or liability which such Lender
determines are attributable to:
(i) any payment, prepayment or conversion of a LIBOR Loan properly made
by such Lender or the Borrower for any reason (including, without
limitation, the acceleration of the Loans pursuant to Section 10.02) on a
date other than the last day of the Interest Period for such Loan; or
(ii) any failure by the Borrower for any reason (including but not
limited to, the failure of any of the conditions precedent specified in
Article VI to be satisfied) to borrow, continue or convert a LIBOR Loan
from such Lender on the date for such borrowing, continuation or conversion
specified in the relevant notice given pursuant to Section 2.02(c).
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
which would have accrued on the principal amount so paid, prepaid or converted
or not borrowed for the period from the date of
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such payment, prepayment or conversion or failure to borrow to the last day of
the Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for such Loan which would have commenced on the date specified
for such borrowing) at the applicable rate of interest for such Loan provided
for herein over (ii) the interest component of the amount such Lender would have
bid in the London interbank market for Dollar deposits of leading banks in
amounts comparable to such principal amount and with maturities comparable to
such period (as reasonably determined by such Lender).
ARTICLE VI
Conditions Precedent
Section 6.01 Initial Funding.
The obligation of the Lenders to make the Initial Funding is subject to
the receipt by the Agent and the Lenders of all fees payable pursuant to Section
2.04 on or before the Closing Date and the receipt by the Agent of the following
documents and satisfaction of the other conditions provided in this Section
6.01, each of which shall be satisfactory to the Agent in form and substance:
(a) A certificate of the Secretary or an Assistant Secretary of the
Borrower and of Kinder Morgan G.P. setting forth (i) resolutions of its
board of directors with respect to the authorization of the Borrower or
Kinder Morgan G.P. to execute and deliver the Loan Documents and the
Acquisition Documents to which it is a party and to enter into the
transactions contemplated in those documents, (ii) the officers of the
Borrower or Kinder Morgan G.P. (y) who are authorized to sign the Loan
Documents to which Borrower or Kinder Morgan G.P. is a party and (z) who
will, until replaced by another officer or officers duly authorized for
that purpose, act as its representative for the purposes of signing
documents and giving notices and other communications in connection with
this Agreement and the transactions contemplated hereby, (iii) specimen
signatures of the authorized officers, and (iv) the articles or certificate
of incorporation and bylaws of the Borrower or Kinder Morgan G.P.,
certified as being true and complete. The Agent and the Lenders may
conclusively rely on such certificate until the Agent receives notice in
writing from the Borrower or Kinder Morgan G.P. to the contrary.
(b) Certificates of the appropriate state agencies with respect to the
existence, qualification and good standing of the Borrower and Kinder
Morgan G.P.
(c) A compliance certificate which shall be substantially in the form
of Exhibit C, duly and properly executed by a Responsible Officer and dated
as of the date of the Initial Funding.
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(d) The Notes, duly completed and executed.
(e) The Security Instruments, including those described on Exhibit E,
duly completed and executed in sufficient number of counterparts for
recording, if necessary.
(f) An opinion of Morrison & Hecker, L.L.P., special counsel to the
Borrower and Kinder Morgan G.P., substantially in the form of Exhibit D
hereto.
(g) A certificate of insurance coverage of the Borrower evidencing that
the Borrower is carrying insurance in accordance with Section 7.19 hereof.
(h) The Agent shall have been furnished with appropriate UCC search
certificates reflecting the filing of all financing statements required to
perfect the security interests granted by the Security Instruments and
reflecting no prior liens or security interests.
(i) Evidence that the Borrower has (i) obtained all necessary or
advisable orders, consents, approvals and authorizations from, and (ii)
made all filings and notifications with, all Governmental Authorities and
other Persons required in connection with the Acquisition.
(j) The Agent shall have received a certificate of a Responsible
Officer of the Borrower certifying that (i) at least $9,000,000 of equity
has been contributed to the Borrower of which at least $1,486,651 has been
contributed by William V. Morgan (or his Affiliate) and $4,866,301 by
Richard D. Kinder (or his Affiliate), (ii) true and complete executed
copies of the Acquisition Documents, said agreements being in form and
substance reasonably satisfactory to the Agent, and being certified by such
Responsible Officer as being in full force and effect, and (iii) such other
related documents and information as the Agent shall have reasonably
requested.
(k) Evidence that the Acquisition shall be completed with the
Initial Funding.
(l) The Debt of Kinder Morgan Operating B shall have been refinanced on
terms acceptable to the Agent.
(m) The Agent shall have received an LP Unit Certificate registered in
the name of Kinder Morgan G.P. (or Enron Liquids Pipeline Company which is
the prior corporate name of Kinder Morgan G.P.), evidencing Kinder Morgan
G.P.'s ownership of 431,000 LP Units, together with a stock power endorsed
in blank.
(n) Such other documents as the Agent or any Lender or special counsel
to the Agent may reasonably request.
Section 6.02 Initial and Subsequent Loans and Letters of Credit. The
obligation of the Lenders to make Loans to the Borrower upon the occasion of
each borrowing hereunder
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and to issue, renew, extend or reissue Letters of
Credit or Distribution LC for the account of the Borrower (including the Initial
Funding) is subject to the further conditions precedent that, as of the date of
such Loans and after giving effect thereto: (i) no Default shall have occurred
and be continuing; (ii) no Material Adverse Effect shall have occurred; and
(iii) the representations and warranties made by the Borrower in Article VII and
in the Security Instruments shall be true on and as of the date of the making of
such Loans or issuance, renewal, extension or reissuance of a Letter of Credit
or Distribution LC with the same force and effect as if made on and as of such
date and following such new borrowing, except to the extent such representations
and warranties are expressly limited to an earlier date or the Majority Lenders
may expressly consent in writing to the contrary. Each request for a borrowing
or issuance, renewal, extension or reissuance of a Letter of Credit or
Distribution LC by the Borrower hereunder shall constitute a certification by
the Borrower to the effect set forth in the preceding sentence (both as of the
date of such notice and, unless the Borrower otherwise notifies the Agent prior
to the date of and immediately following such borrowing or issuance, renewal,
extension or reissuance of a Letter of Credit or Distribution LC as of the date
thereof).
Section 6.03 Conditions Relating to Letters of Credit. In addition to
the satisfaction of all other conditions precedent set forth in this Article VI,
the issuance, renewal, extension or reissuance of the Letters of Credit referred
to in Section 2.01(a) hereof is subject to the following conditions precedent:
(a) At least three (3) Business Days prior to the date of the issuance
and at least thirty (30) Business Days prior to the date of the renewal,
extension or reissuance of each Letter of Credit, the Agent shall have
received a written request for a Letter of Credit.
(b) Each of the Letters of Credit shall (i) be issued by the Agent,
(ii) contain such terms and provisions as are reasonably required by the
Agent, (iii) be for the account of the Borrower and (iv) expire not later
than the earlier of one (1) year from the date of issuance, renewal,
extension or reissuance or two (2) days before the Facility A Termination
Date.
(c) The Borrower shall have duly and validly executed and delivered to
the Agent a Letter of Credit Agreement pertaining to the Letter of Credit.
Section 6.04 Conditions Relating to Distribution LC. In addition to the
satisfaction of all other conditions precedent set forth in this Article VI, the
issuance, renewal, extension or reissuance of the Distribution LC is subject to
the following conditions precedent:
(a) the Distribution LC shall be issued by the Agent in the form of
Exhibit G.
(b) The Borrower shall have duly and validly executed and delivered to
the Agent a Letter of Credit Agreement pertaining to the Distribution LC.
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ARTICLE VII
Representations and Warranties
The Borrower represents and warrants to the Agent and the Lenders that
(each representation and warranty herein is given as of the Closing Date and
shall be deemed repeated and reaffirmed on the dates of each borrowing and
issuance, renewal, extension or reissuance of a Letter of Credit as provided in
Section 6.02):
Section 7.01 Corporate Existence. Each of the Borrower and each
Subsidiary: (i) is duly organized, legally existing and in good standing under
the laws of the jurisdiction of its incorporation or formation; (ii) has all
requisite corporate or partnership power, and has all material governmental
licenses, authorizations, consents and approvals necessary to own its assets and
carry on its business as now being or as proposed to be conducted; and (iii) is
qualified to do business in all jurisdictions in which the nature of the
business conducted by it makes such qualification necessary and where failure so
to qualify would have a Material Adverse Effect. Schedule 7.01 sets forth as of
the Closing Date the capital structure for the Borrower including any Debt that
is convertible into equity and includes the owners and percent of ownership and
voting rights of all stock, and other equity issued and outstanding as of the
Closing Date.
Section 7.02 Financial Condition.
(a) The pro forma balance sheet of Borrower as of the Closing Date (the
"Pro Forma Balance Sheet") correctly and fairly represents the financial
condition of Borrower as of the Closing Date. Except as reflected in the Pro
Forma Balance Sheet, Borrower has no material Debt, contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments.
(b) The balance sheet of Kinder Morgan G.P. as of September 30, 1996 which
was provided by Enron Liquid Holding Corp. to Borrower pursuant to the Purchase
Agreement, and the pro forma balance sheet for Kinder Morgan G.P. included
therewith (which reflects the pro forma financial condition of Kinder Morgan
G.P. following closing of the transactions described in the Purchase Agreement),
correctly and fairly represent the financial condition of Kinder Morgan G.P. as
of the dates specified therein. Except as reflected in such balance sheets,
Kinder Morgan G.P. has no material Debt, contingent liabilities, liabilities for
taxes, unusual forward or long-term commitments or unrealized or anticipated
losses from any unfavorable commitments.
Section 7.03 Litigation. Except as disclosed to the Lenders in Schedule
7.03 hereto, at the Closing Date there is no litigation, legal, administrative
or arbitral proceeding, investigation or other action of any nature pending or,
to the knowledge of the Borrower threatened against or affecting (a) the
Acquisition or (b) the Borrower or any Subsidiary which involves the possibility
of any judgment or liability against the Borrower or any Subsidiary not
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fully covered by insurance (except for normal deductibles), and which would have
a Material Adverse Effect.
Section 7.04 No Breach. Neither the execution and delivery of the Loan
Documents and the Acquisition Documents, nor compliance with the terms and
provisions thereof will conflict with or result in a breach of, or require any
consent which has not been obtained as of the Closing Date under, the respective
charter or by-laws or partnership agreement of the Borrower or any Subsidiary,
or any Governmental Requirement or any agreement or instrument to which the
Borrower or any Subsidiary is a party or by which it is bound or to which it or
its Properties are subject, or constitute a default under any such agreement or
instrument, or result in the creation or imposition of any Lien upon any of the
revenues or assets of the Borrower or any Subsidiary pursuant to the terms of
any such agreement or instrument other than the Liens created by the Loan
Documents.
Section 7.05 Authority. The Borrower and Kinder Morgan G.P. have all
necessary corporate power and authority to execute, deliver and perform its
obligations under the Loan Documents and the Acquisition Documents to which it
is a party; and the execution, delivery and performance by the Borrower and
Kinder Morgan G.P. of the Loan Documents and the Acquisition Documents to which
it is a party, have been duly authorized by all necessary corporate action on
its part; and the Loan Documents and the Acquisition Documents constitute the
legal, valid and binding obligations of the Borrower and Kinder Morgan G.P.,
enforceable in accordance with their terms.
Section 7.06 Approvals. No authorizations, approvals or consents of,
and no filings or registrations with, any Governmental Authority are necessary
for the execution, delivery or performance by the Borrower or any Subsidiary of
the Loan Documents or the Acquisition Documents or for the validity or
enforceability thereof, except for the recording and filing of the Security
Instruments as required by this Agreement.
Section 7.07 Use of Facilities. The proceeds of the Facility A Loans
shall be used to acquire the common stock of Enron Liquids Pipeline Company and
for general working capital and for the issuance of Letters of Credit for
general corporate purposes. The purpose of Facility B is for the issuance of the
Distribution LC. The proceeds of the Facility C Loans shall be used to acquire
the common stock of Enron Liquids Pipeline Company. The Borrower is not engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose, whether immediate, incidental or ultimate, of buying or
carrying margin stock (within the meaning of Regulation G, U or X of the Board
of Governors of the Federal Reserve System). No part of the proceeds of any Loan
or extension of credit hereunder will be used to buy or carry any margin stock.
Section 7.08 ERISA.
(a) The Borrower, each Subsidiary and each ERISA Affiliate have
complied in all material respects with ERISA and, where applicable, the
Code regarding each Plan, except where the failure to so maintain would not
have a Material Adverse Effect.
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(b) Each Plan is, and has been, maintained in substantial compliance
with ERISA and, where applicable, the Code, except where the failure to so
maintain a Plan would have a Material Adverse Effect.
(c) No act, omission or transaction has occurred which could result in
imposition on the Borrower, any Subsidiary or any ERISA Affiliate (whether
directly or indirectly) of (i) either a civil penalty assessed pursuant to
section 502(c), (i) or (l) of ERISA or a tax imposed pursuant to Chapter 43
of Subtitle D of the Code or (ii) breach of fiduciary duty liability
damages under section 409 of ERISA.
(d) No Plan (other than a defined contribution plan) or any trust
created under any such Plan has been terminated since September 2, 1974. No
liability to the PBGC (other than for the payment of current premiums which
are not past due) by the Borrower, any Subsidiary or any ERISA Affiliate
has been or is expected by the Borrower, any Subsidiary or any ERISA
Affiliate to be incurred with respect to any Plan. No ERISA Event with
respect to any Plan has occurred.
(e) Full payment when due has been made of all amounts which the
Borrower, any Subsidiary or any ERISA Affiliate is required under the terms
of each Plan or applicable law to have paid as contributions to such Plan,
and no accumulated funding deficiency (as defined in section 302 of ERISA
and section 412 of the Code), whether or not waived, exists with respect to
any Plan.
(f) The actuarial present value of the benefit liabilities under each
Plan which is subject to Title IV of ERISA does not, as of the end of the
Borrower's most recently ended fiscal year, exceed the current value of the
assets (computed on a plan termination basis in accordance with Title IV of
ERISA) of such Plan allocable to such benefit liabil- ities. The term
"actuarial present value of the benefit liabilities" shall have the meaning
specified in section 4041 of ERISA.
(g) None of the Borrower, any Subsidiary or any ERISA Affiliate
sponsors, maintains, or contributes to an employee welfare benefit plan, as
defined in section 3(1) of ERISA, including, without limitation, any such
plan maintained to provide benefits to former employees of such entities,
that may not be terminated by the Borrower, a Subsidiary or any ERISA
Affiliate in its sole discretion at any time without any material
liability.
(h) None of the Borrower, any Subsidiary or any ERISA Affiliate
sponsors, maintains or contributes to, or has at any time in the preceding
six calendar years, sponsored, maintained or contributed to, any
Multiemployer Plan.
(i) None of the Borrower, any Subsidiary or any ERISA Affiliate is
required to provide security under section 401(a)(29) of the Code due to a
Plan amendment that results in an increase in current liability for the
Plan.
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Section 7.09 Taxes. Except as set out in Schedule 7.09, each of the
Borrower and its Subsidiaries has filed all United States Federal income tax
returns and all other tax returns which are required to be filed by them and
have paid all material taxes due pursuant to such returns or pursuant to any
assessment received by the Borrower or any Subsidiary. The charges, accruals and
reserves on the books of the Borrower and its Subsidiaries in respect of taxes
and other governmental charges are, in the opinion of the Borrower, adequate. No
tax lien has been filed and, to the knowledge of the Borrower, no claim is being
asserted with respect to any such tax, fee or other charge.
Section 7.10 Titles, etc.
(a) Except as set out in Schedule 7.10, each of the Borrower and its
Subsidiaries has good and defensible title to its material (individually or
in the aggregate) Properties, free and clear of all Liens except Liens
permitted by Section 9.02.
(b) All leases and agreements necessary for the conduct of the business
of the Borrower and its Subsidiaries are valid and subsisting, in full
force and effect and there exists no default or event or circumstance which
with the giving of notice or the passage of time or both would give rise to
a default under any such lease or leases, which would adversely affect in
any material respect the conduct of the business of the Borrower and its
Subsidiaries.
(c) The rights, Properties and other assets presently owned, leased or
licensed by the Borrower and its Subsidiaries including, without
limitation, all easements and rights of way, include all rights, Properties
and other assets necessary to permit the Borrower and its Subsidiaries to
conduct their business in all material respects in the same manner as its
business has been conducted prior to the Closing Date.
(d) Except as provided in Schedule 7.10, all of the assets and
Properties of the Borrower and its Subsidiaries which are reasonably
necessary for the operation of its business are in good working condition
and are maintained in accordance with prudent business standards.
(e) After the Initial Funding the Borrower shall own good and
marketable title to 100% of the common stock of Kinder Morgan G.P., and
Kinder Morgan G.P. shall have no other stock issued or outstanding other
than the common stock owned by the Borrower and pledged to the Agent for
the benefit of the Lenders.
Section 7.11 No Material Misstatements. No written information,
statement, exhibit, certificate, document or report furnished to the Agent by
the Borrower or any Subsidiary in connection with the negotiation of this
Agreement contained any material misstatement of fact or omitted to state a
material fact or any fact necessary to make the statement contained therein not
materially misleading in the light of the circumstances in which made and with
respect to the Borrower and its Subsidiaries taken as a whole. There is no fact
peculiar to the Borrower or any Subsidiary which has a Material Adverse Effect
or in the future is reasonably likely to
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have (so far as the Borrower can now foresee) a Material Adverse Effect and
which has not been set forth in this Agreement or the other documents,
certificates and statements furnished to the Agent by or on behalf of the
Borrower or any Subsidiary prior to, or on, the Closing Date in connection with
the transactions contemplated hereby.
Section 7.12 Investment Company Act. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
Section 7.13 Public Utility Holding Company Act. Neither the Borrower
nor any Subsidiary is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," or a "public utility" within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
Section 7.14 Subsidiaries. Except as set forth
on Schedule 7.14, the Borrower has no Subsidiaries.
Section 7.15 Location of Business and Offices. The Borrower's principal
place of business and chief executive offices are located at the address stated
on the signature page of this Agreement. The principal place of business and
chief executive office of each Subsidiary are located at the addresses stated on
Schedule 7.14.
Section 7.16 Defaults. Neither the Borrower nor any Subsidiary is in
default nor has any event or circumstance occurred which, but for the expiration
of any applicable grace period or the giving of notice, or both, would
constitute a default under any material agreement or instrument to which the
Borrower or any Subsidiary is a party or by which the Borrower or any Subsidiary
is bound which default would have a Material Adverse Effect. No Default
hereunder has occurred and is continuing.
Section 7.17 Environmental Matters. Except (i) as provided in Schedule
7.17 or (ii) as would not have a Material Adverse Effect (or with respect to
(c), (d) and (e) below, where the failure to take such actions would not have a
Material Adverse Effect):
(a) Neither any Property of the Borrower or any Subsidiary nor the
operations conducted thereon violate any order or requirement of any court
or Governmental Authority or any Environmental Laws;
(b) Without limitation of clause (a) above, no Property of the Borrower
or any Subsidiary nor the operations currently conducted thereon or, to the
best knowledge of the Borrower, by any prior owner or operator of such
Property or operation, are in violation of or subject to any existing,
pending or to the best knowledge of the Borrower threatened action, suit,
investigation, inquiry or proceeding by or before any court or Governmental
Authority or to any remedial obligations under Environmental Laws;
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(c) All notices, permits, licenses or similar authorizations, if any,
required to be obtained or filed in connection with the operation or use of
any and all Property of the Borrower and each Subsidiary, including without
limitation past or present treatment, storage, disposal or release of a
hazardous substance or solid waste into the environment, have been duly
obtained or filed, and the Borrower and each Subsidiary are in compliance
with the terms and conditions of all such notices, permits, licenses and
similar authorizations;
(d) All hazardous substances, solid waste, and oil and gas exploration
and production wastes, if any, generated at any and all Property of the
Borrower or any Subsidiary have in the past been transported, treated and
disposed of in accordance with Environmental Laws and so as not to pose an
imminent and substantial endangerment to public health or welfare or the
environment, and, to the best knowledge of the Borrower, all such transport
carriers and treatment and disposal facilities have been and are operating
in compliance with Environmental Laws and so as not to pose an imminent and
substantial endangerment to public health or welfare or the environment,
and are not the subject of any existing, pending or threatened action,
investigation or inquiry by any Governmental Authority in connection with
any Environmental Laws;
(e) The Borrower has taken all steps reasonably necessary to determine
and has determined that no hazardous substances, solid waste, or oil and
gas exploration and production wastes, have been disposed of or otherwise
released and there has been no threatened release of any hazardous
substances on or to any Property of the Borrower or any Subsidiary [by
Borrower or its Subsidiaries] except in compliance with Environmental Laws
and so as not to pose an imminent and substantial endangerment to public
health or welfare or the environment;
(f) To the extent applicable, all Property of the Borrower and each
Subsidiary currently satisfies all design, operation, and equipment
requirements imposed by the OPA or scheduled as of the Closing Date to be
imposed by OPA during the term of this Agreement, and the Borrower does not
have any reason to believe that such Property, to the extent subject to
OPA, will not be able to maintain compliance with the OPA requirements
during the term of this Agreement; and
(g) Neither the Borrower nor any Subsidiary has any known contingent
liability in connection with any release or threatened release of any oil,
hazardous substance or solid waste into the environment.
Section 7.18 Compliance with the Law. Neither the Borrower nor any
Subsidiary has violated any Governmental Requirement or failed to obtain any
license, permit, franchise or other governmental authorization necessary for the
ownership of any of its Properties or the conduct of its business, which
violation or failure would have (in the event such violation or failure were
asserted by any Person through appropriate action) a Material Adverse Effect.
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Section 7.19 Insurance. Schedule 7.19 attached hereto contains an
accurate and complete description of all material policies of fire, liability,
workmen's compensation and other forms of insurance owned or held by the
Borrower and each Subsidiary. All such policies are in full force and effect,
all premiums with respect thereto covering all periods up to and including the
date of the closing have been paid, and no notice of cancellation or termination
has been received with respect to any such policy. Such policies are sufficient
for compliance with all requirements of law and of all agreements to which the
Borrower or any Subsidiary is a party; are valid, outstanding and enforceable
policies; provide adequate insurance coverage in at least such amounts and
against at least such risks (but including in any event public liability) as are
usually insured against in the same general area by companies engaged in the
same or a similar business for the assets and operations of the Borrower and
each Subsidiary; will remain in full force and effect through the respective
dates set forth in Schedule 7.19 without the payment of additional premiums; and
will not in any way be affected by, or terminate or lapse by reason of, the
transactions contemplated by this Agreement. Schedule 7.19 identifies all
material risks, if any, which the Borrower and its Subsidiaries and their
respective Board of Directors or officers have designated as being self insured.
To the best knowledge of Borrower, neither the Borrower nor any Subsidiary has
been refused any insurance with respect to its assets or operations, nor has its
coverage been limited below usual and customary policy limits, by an insurance
carrier to which it has applied for any such insurance or with which it has
carried insurance during the last three years.
Section 7.20 Hedging Agreements. Schedule 7.20 sets forth, as of the
Closing Date, a true and complete list of all Hedging Agreements (including
commodity price swap agreements, forward agreements or contracts of sale which
provide for prepayment for deferred shipment or delivery of oil, gas or other
commodities) of the Borrower and Kinder Morgan G.P., the material terms thereof
(including the type, term, effective date, termination date and notional amounts
or volumes), the net mark to market value thereof, all credit support agreements
relating thereto (including any margin required or supplied), and the
counterparty to each such agreement.
Section 7.21 Restriction on Liens. Except as provided in Schedule 7.21,
neither the Borrower nor Kinder Morgan G.P. is a party to any agreement or
arrangement (other than this Agreement and the Security Instruments), or subject
to any order, judgment, writ or decree, which either restricts or purports to
restrict its ability to grant Liens to other Persons on or in respect of their
respective assets of Properties.
Section 7.22 Kinder Morgan G.P. Assets. At the closing of the Acquisition
Kinder Morgan G.P. shall own an approximate: (i) 1.01% general partner interest
in Kinder Morgan Energy, (ii) 1.01% general partner interest in Kinder Morgan
Operating A, and (iii) 1.01% general partner interest in Kinder Morgan Operating
B.
Section 7.23 LP Units. Kinder Morgan G.P. has held the 431,000 LP Units
pledged to the Agent for the benefit of the Lenders continuously for more than
three (3) years for purposes of Rule 144. The Agent can freely sell all of the
LP Units in the public markets without registration pursuant to Rule 144,
provided that the Agent is not an affiliate of Kinder
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Morgan Energy for purposes of Rule 144. Kinder Morgan G.P. has the right to
register the 431, 000 LP Units.
Section 7.24 Acquisition Documents. Schedule 7.24 is a complete list
of the Acquisition Documents.
ARTICLE VIII
Affirmative Covenants
The Borrower covenants and agrees that, so long as any of the Commitments
are in effect and until payment in full of all Indebtedness hereunder, all
interest thereon and all other amounts payable by the Borrower hereunder:
Section 8.01 Financial Statements. The Borrower shall deliver, or shall
cause to be delivered, to the Agent with sufficient copies of each for the
Lenders:
(a) As soon as available and in any event within 120 days after the end
of each fiscal year of the Borrower, the audited consolidated and unaudited
consolidating statements of income, stockholders' equity, changes in
financial position and cash flow of the Borrower and Kinder Morgan G.P. for
such fiscal year, and the related consolidated and consolidating balance
sheets of the Borrower and Kinder Morgan G.P. as at the end of such fiscal
year, and setting forth in each case in comparative form the corresponding
figures for the preceding fiscal year, and accompanied by the related
opinion of independent public accountants of recognized national standing
acceptable to the Agent which opinion shall state that said financial
statements fairly present the consolidated and consolidating financial
condition and results of operations of the Borrower and Kinder Morgan G.P.
as at the end of, and for, such fiscal year and that such financial
statements have been prepared in accordance with GAAP except for such
changes in such principles with which the independent public accountants
shall have concurred and such opinion shall not contain a "going concern"
or like qualification or exception, and a certificate of such accountants
stating that, in making the examination necessary for their opinion, they
obtained no knowledge, except as specifically stated, of any Default.
(b) As soon as available and in any event within 60 days after the end
of each of the first three fiscal quarterly periods of each fiscal year of
the Borrower, unaudited consolidated and consolidating statements of
income, stockholders' equity, changes in financial position and cash flow
of the Borrower and Kinder Morgan G.P. for such period and for the period
from the beginning of the respective fiscal year to the end of such period,
and the related unaudited consolidated and consolidating balance sheets as
at the end of such period, and setting forth in each case in comparative
form the corresponding figures for the corresponding period in the
preceding fiscal year, accompanied by the certificate of a Responsible
Officer, which certificate shall state that to the best of the Responsible
Officer's knowledge said financial statements fairly present
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the consolidated and consolidating financial condition and results of
operations of the Borrower and Kinder Morgan G.P. in accordance with GAAP,
as at the end of, and for, such period (subject to normal year-end audit
adjustments).
(c) Promptly after the Borrower knows that any Default or any Material
Adverse Effect has occurred, a notice of such Default or Material Adverse
Effect, describing the same in reasonable detail and the action the
Borrower proposes to take with respect thereto.
(d) Promptly upon receipt thereof, a copy of each other report or
letter submitted to the Borrower or any Subsidiary by independent
accountants in connection with any annual, interim or special audit made by
them of the books of the Borrower and its Subsidiaries, and a copy of any
response by the Borrower or any Subsidiary of the Borrower, or the Board of
Directors of the Borrower or any Subsidiary of the Borrower, to such letter
or report.
(e) Promptly upon its becoming available, each financial statement,
report, notice or proxy statement sent by the Borrower to stockholders
generally and Kinder Morgan Energy to partners generally and each regular
or periodic report and any registration statement, prospectus or written
communication (other than transmittal letters) in respect thereof filed by
the Borrower and Kinder Morgan Energy with or received by the Borrower or
Kinder Morgan Energy in connection therewith from any securities exchange
or the SEC or any successor agency.
(f) Promptly after the furnishing thereof, copies of any statement,
report or notice furnished to or any Person pursuant to the terms of any
indenture, loan or credit or other similar agreement, other than this
Agreement and not otherwise required to be furnished to the Agent pursuant
to any other provision of this Section 8.01.
(g) From time to time such other information regarding the business,
affairs or financial condition of the Borrower or any Subsidiary
(including, without limitation, any Plan or Multiemployer Plan and any
reports or other information required to be filed under ERISA) as the
Required Lenders or the Agent may reasonably request.
(h) As soon as available and in any event within forty-five (45)
Business Days after the last day of each calendar quarter, a report, in
form and substance satisfactory to the Agent, setting forth as of the last
Business Day of such calendar quarter a true and complete list of all
Hedging Agreements (including commodity price swap agreements, forward
agreements or contracts of sale which provide for prepayment for deferred
shipment or delivery of oil, gas or other commodities) of the Borrower and
Kinder Morgan G.P., the material terms thereof (including the type, term,
effective date, termination date and notional amounts or volumes), the net
mark to market value therefor, any new credit support agreements relating
thereto not listed on Schedule 7.20, any margin required or supplied under
any credit support document, and the counterparty to each such agreement.
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The Borrower will furnish to the Agent, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate
substantially in the form of Exhibit C hereto executed by a Responsible Officer
(i) certifying as to the matters set forth therein and stating that no Default
has occurred and is continuing (or, if any Default has occurred and is
continuing, describing the same in reasonable detail), and (ii) setting forth in
reasonable detail the computations necessary to determine whether the Borrower
is in compliance with Sections 9.12, 913 and 9.14 as of the end of the
respective fiscal quarter or fiscal year.
Section 8.02 Litigation. The Borrower shall promptly give to the Agent
notice of all legal or arbitral proceedings, and of all proceedings before any
Governmental Authority affecting the Borrower or any Subsidiary, except
proceedings which, if adversely determined, would not have a Material Adverse
Effect. The Borrower will, and will cause Kinder Morgan G.P. to, promptly notify
the Agent of any claim, judgment, Lien or other encumbrance affecting any
Property of the Borrower or Kinder Morgan G.P. if the value of the claim,
judgment, Lien, or other encumbrance affecting such Property shall exceed
$250,000.
Section 8.03 Maintenance, Etc.
(a) The Borrower shall and shall cause each Subsidiary to: preserve and
maintain its corporate existence and all of its material rights, privileges
and franchises; keep books of record and account in which full, true and
correct entries will be made of all dealings or transactions in relation to
its business and activities; comply with all Governmental Requirements if
failure to comply with such requirements will have a Material Adverse
Effect; pay and discharge all taxes, assessments and governmental charges
or levies imposed on it or on its income or profits or on any of its
Property prior to the date on which penalties attach thereto, except for
any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which
adequate reserves are being maintained; upon reasonable notice, permit
representatives of the Agent, during normal business hours, to examine,
copy and make extracts from its books and records, to inspect its
Properties, and to discuss its business and affairs with its officers, all
to the extent reasonably requested by such the Agent; and keep, or cause to
be kept, insured by financially sound and reputable insurers all Property
of a character usually insured by Persons engaged in the same or similar
business similarly situated against loss or damage of the kinds and in the
amounts customarily insured against by such Persons and carry such other
insurance as is usually carried by such Persons including, without
limitation, environmental risk insurance to the extent reasonably
available.
(b) Contemporaneously with the delivery of the financial statements
required by Section 8.01(a) to be delivered for each year, the Borrower
will furnish or cause to be furnished to the Agent a certificate of
insurance coverage from the insurer in form and substance satisfactory to
the Agent and, if requested, will furnish the Agent copies of the
applicable policies.
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(c) The Borrower will and will cause each Subsidiary to operate its
Properties or cause such Properties to be operated in a careful and
efficient manner in accordance with the practices of the industry and in
compliance with all applicable contracts and agreements and in compliance
in all material respects with all Governmental Requirements.
Section 8.04 Environmental Matters.
(a) The Borrower will and will cause each Subsidiary to establish and
implement such procedures as may be reasonably necessary to continuously
determine and assure that any failure of the following does not have a
Material Adverse Effect: (i) all Property of the Borrower and its
Subsidiaries and the operations conducted thereon and other activities of
the Borrower and its Subsidiaries are in compliance with and do not violate
the requirements of any Environmental Laws, (ii) no oil, hazardous
substances or solid wastes are disposed of or otherwise released on or to
any Property owned by any such party except in compliance with
Environmental Laws, (iii) no hazardous substance will be released on or to
any such Property in a quantity equal to or exceeding that quantity which
requires reporting pursuant to Section 103 of CERCLA, and (iv) no oil, oil
and gas exploration and production wastes or hazardous substance is
released on or to any such Property so as to pose an imminent and
substantial endangerment to public health or welfare or the environment.
(b) The Borrower will promptly notify the Agent in writing of any
threatened action, investigation or inquiry by any Governmental Authority
of which the Borrower has knowledge in connection with any Environmental
Laws, excluding routine testing and corrective action.
Section 8.05 Further Assurances. The Borrower will and will cause
Kinder Morgan G.P. to cure promptly any defects in the creation and issuance of
the Notes and the execution and delivery of the Security Instruments and this
Agreement. The Borrower at its expense will and will cause Kinder Morgan G.P. to
promptly execute and deliver to the Agent upon request all such other documents,
agreements and instruments to comply with or accomplish the covenants and
agreements of the Borrower or Kinder Morgan G.P., as the case may be, in the
Security Instruments and this Agreement, or to further evidence and more fully
describe the collateral intended as security for the Notes, or to correct any
omissions in the Security Instruments, or to state more fully the security
obligations set out herein or in any of the Security Instruments, or to perfect,
protect or preserve any Liens created pursuant to any of the Security
Instruments, or to make any recordings, to file any notices or obtain any
consents, all as may be necessary or appropriate in connection therewith.
Section 8.06 Performance of Obligations. The Borrower will pay the
Notes according to the reading, tenor and effect thereof; and the Borrower will
and will cause Kinder Morgan G.P. to do and perform every act and discharge all
of the obligations to be performed and discharged by them under the Security
Instruments and this Agreement, at the time or times and in the manner
specified.
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Section 8.07 ERISA Information and Compliance. The Borrower will
promptly furnish and will cause the Subsidiaries and any ERISA Affiliate to
promptly furnish to the Agent with sufficient copies to the Lenders (i) promptly
after the filing thereof with the United States Secretary of Labor, the Internal
Revenue Service or the PBGC, copies of each annual and other report with respect
to each Plan or any trust created thereunder, (ii) immediately upon becoming
aware of the occurrence of any ERISA Event or of any "prohibited transaction,"
as described in section 406 of ERISA or in section 4975 of the Code, in
connection with any Plan or any trust created thereunder, a written notice
signed by a Responsible Officer specifying the nature thereof, what action the
Borrower, the Subsidiary or the ERISA Affiliate is taking or proposes to take
with respect thereto, and, when known, any action taken or proposed by the
Internal Revenue Service, the Department of Labor or the PBGC with respect
thereto, and (iii) immediately upon receipt thereof, copies of any notice of the
PBGC's intention to terminate or to have a trustee appointed to administer any
Plan. With respect to each Plan (other than a Multiemployer Plan), the Borrower
will, and will cause each Subsidiary and ERISA Affiliate to, (i) satisfy in full
and in a timely manner, without incurring any late payment or underpayment
charge or penalty and without giving rise to any lien, all of the contribution
and funding requirements of section 412 of the Code (determined without regard
to subsections (d), (e), (f) and (k) thereof) and of section 302 of ERISA
(determined without regard to sections 303, 304 and 306 of ERISA), and (ii) pay,
or cause to be paid, to the PBGC in a timely manner, without incurring any late
payment or underpayment charge or penalty, all premiums required pursuant to
sections 4006 and 4007 of ERISA.
Section 8.08 Collateral. The Borrower shall and shall cause Kinder
Morgan G.P. to have the following Property subject to a first and prior Lien for
the benefit of the Agent on behalf of the Lenders pursuant to the Security
Instruments: (a) 100% of the issued and outstanding stock of Kinder Morgan G.P.,
and (b) 431,000 LP Units owned by Kinder Morgan G.P. and (c) any additional LP
Units owned or acquired by the Borrower or Kinder Morgan G.P.. The Borrower
shall cause the LP Units to be evidenced by a certificate of common units
representing limited partnership interest in Kinder Morgan Energy and deliver
such certificates to the Agent together with executed stockpowers within five
(5) Business Days of the Closing Date.
Section 8.09 Minimum Distribution. The Borrower shall cause Kinder
Morgan G.P., as general partner of Kinder Morgan Energy to cause Kinder Morgan
Energy, to maintain a minimum cash distribution on each LP Unit equal to no less
than $0.55 per quarter.
ARTICLE IX
Negative Covenants
The Borrower covenants and agrees that, so long as any of the Commitments
are in effect and until payment in full of Indebtedness hereunder, all interest
thereon and all other amounts payable by the Borrower hereunder, without the
prior written consent of the Majority Lenders:
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Section 9.01 Debt. The Borrower will not and will not permit Kinder Morgan
G.P. to incur, create, assume or suffer to exist any Debt, except:
(a) the Notes or other Indebtedness arising under the Loan Documents or
any guaranty of or suretyship arrangement for the Notes or other
Indebtedness arising under the Loan Documents;
(b) Debt of the Borrower and Kinder Morgan G.P. existing on the
Closing Date which is reflected in the Financial Statements or is
disclosed in Schedule 9.01, and any renewals or extensions (but not
increases) thereof;
(c) accounts payable (for the deferred purchase price of Property or
services) from time to time incurred in the ordinary course of business
which, if greater than 90 days past the invoice or billing date, are being
contested in good faith by appropriate proceedings if reserves adequate
under GAAP shall have been established therefor;
(d) Debt under capital leases (as required to be reported on the
financial statements of the Borrower and Kinder Morgan G.P. pursuant to
GAAP) not to exceed in the case of the Borrower, $50,000, and in the case
of Kinder Morgan G.P., $600,000, outstanding at one time;
(e) Debt of the Borrower under Hedging Agreements with the Agent or
as approved by the Majority Lenders;
(f) Debt of a Special Purpose Subsidiary which is non recourse to
the Borrower or Kinder Morgan G.P. on terms acceptable to the Majority
Lenders;
(g) Debt of Kinder Morgan G.P. arising by operation of law as a result
of Kinder Morgan G.P. being the general partner of Kinder Morgan Energy,
Kinder Morgan Operating A or Kinder Morgan Operating B; and
(h) other Debt not to exceed in the case of the Borrower, $50,000, and
in the case of Kinder Morgan G.P., $600,000, in the aggregate outstanding
at any time.
Section 9.02 Liens. The Borrower will not and will not permit Kinder
Morgan G.P. to create, incur, assume or permit to exist any Lien on any Property
(now owned or hereafter acquired by the Borrower or Kinder Morgan G.P.), except:
(a) Liens securing the payment of any Indebtedness;
(b) Excepted Liens;
(c) Liens securing leases allowed under Section 9.01(d) but only on
the Property under lease; and
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(d) Liens disclosed on Schedule 9.02.
Section 9.03 Investments, Loans and Advances. The Borrower will not and
will not permit Kinder Morgan G.P. to make or permit to remain outstanding any
loans or advances to or investments in any Person, except that the foregoing
restriction shall not apply to:
(a) investments, loans or advances reflected in the Financial
Statements or which are disclosed to the Lenders in Schedule 9.03;
(b) accounts receivable arising in the ordinary course of business;
(c) direct obligations of the United States or any agency thereof, or
obligations guaranteed by the United States or any agency thereof, in each
case maturing within one year from the date of creation thereof;
(d) commercial paper maturing within one year from the date of creation
thereof rated in the highest grade by Standard & Poors Corporation or
Moody's Investors Service, Inc.;
(e) deposits maturing within one year from the date of creation thereof
with, including certificates of deposit issued by, any Lender or any office
located in the United States of any other bank or trust company which is
organized under the laws of the United States or any state thereof, has
capital, surplus and undivided profits aggregating at least $100,000,000.00
(as of the date of such Lender's or bank or trust company's most recent
financial reports) and has a short term deposit rating of no lower than A2
or P2, as such rating is set forth from time to time, by Standard & Poors
Corporation or Moody's Investors Service, Inc., respectively;
(f) deposits in money market funds investing exclusively in
investments described in Section 9.03(c), 9.03(d) or 9.03(e); and
(g) investments, loans or advances made by the Borrower or Kinder
Morgan G.P. in or to its Subsidiaries, not to exceed at any one time
outstanding $150,000 in the aggregate.
Section 9.04 Dividends, Distributions and Redemptions. The Borrower
will not declare or pay any dividend, purchase, redeem or otherwise acquire for
value any of its stock now or hereafter outstanding, return any capital to its
stockholders or make any distribution of its assets to its stockholders, except
that the Borrower may pay dividends on and redeem its common and preferred stock
provided that (a) the Distribution LC shall have expired, (b) no Default shall
have occurred and be continuing or would result from such dividend or redemption
and (c) the cumulative dollar amount of the dividends and redemption made by the
Borrower for the period commencing with the date the Distribution LC expired
through the determination date shall not exceed in the aggregate 50% of Cash
Flow after Debt Service for the same period.
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Section 9.05 Sales and Leasebacks. The Borrower will not and will not
permit Kinder Morgan G.P. to enter into any arrangement, directly or indirectly,
with any Person whereby the Borrower or Kinder Morgan G.P. shall sell or
transfer any of its Property, whether now owned or hereafter acquired, and
whereby the Borrower or Kinder Morgan G.P. shall then or thereafter rent or
lease as lessee such Property or any part thereof or other Property which the
Borrower or Kinder Morgan G.P. intends to use for substantially the same purpose
or purposes as the Property sold or transferred.
Section 9.06 Nature of Business. Neither the Borrower nor any
Subsidiary will allow any material change to be made in the character of its
business.
Section 9.07 Limitation on Leases. The Borrower will not and will not
permit Kinder Morgan G.P. to create, incur, assume or suffer to exist any
obligation for the payment of rent or hire of Property of any kind whatsoever
(real or personal including capital leases but excluding leases of Hydrocarbon
Interests), under leases or lease agreements which would cause the aggregate
amount of all payments made pursuant to all such leases or lease agreements to
exceed $50,000 in the case of the Borrower and $600,000 in the case of Kinder
Morgan G.P. in any period of twelve consecutive calendar months during the life
of such leases.
Section 9.08 Mergers, Etc. Neither the Borrower nor any Subsidiary will
merge into or with or consolidate with any other Person, or sell, lease or
otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its Property or assets to any other Person.
Section 9.09 Proceeds of Notes. The Borrower will not permit the
proceeds of the Notes to be used for any purpose other than those permitted by
Section 7.07. Neither the Borrower nor any Person acting on behalf of the
Borrower has taken or will take any action which might cause any of the Loan
Documents to violate Regulation G, U or X or any other regulation of the Board
of Governors of the Federal Reserve System or to violate Section 7 of the
Securities Exchange Act of 1934 or any rule or regulation thereunder, in each
case as now in effect or as the same may hereinafter be in effect.
Section 9.10 ERISA Compliance. The Borrower will not at any time:
(a) Engage in, or permit any Subsidiary or ERISA Affiliate to engage
in, any transaction in connection with which the Borrower, any Subsidiary
or any ERISA Affiliate could be subjected to either a civil penalty
assessed pursuant to section 502(c), (i) or (l) of ERISA or a tax imposed
by Chapter 43 of Subtitle D of the Code;
(b) Terminate, or permit any Subsidiary or ERISA Affiliate to
terminate, any Plan in a manner, or take any other action with respect to
any Plan, which could result in any material liability to the Borrower, any
Subsidiary or any ERISA Affiliate to the PBGC;
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(c) Fail to make, or permit any Subsidiary or ERISA Affiliate to fail
to make, full payment when due of all amounts which, under the provisions
of any Plan, agreement relating thereto or applicable law, the Borrower, a
Subsidiary or any ERISA Affiliate is required to pay as contributions
thereto;
(d) Permit to exist, or allow any Subsidiary or ERISA Affiliate to
permit to exist, any accumulated funding deficiency within the meaning of
Section 302 of ERISA or section 412 of the Code, whether or not waived,
with respect to any Plan;
(e) Permit, or allow any Subsidiary or ERISA Affiliate to permit, the
actuarial present value of the benefit liabilities under any Plan
maintained by the Borrower, any Subsidiary or any ERISA Affiliate which is
regulated under Title IV of ERISA to exceed the current value of the assets
(computed on a plan termination basis in accordance with Title IV of ERISA)
of such Plan allocable to such benefit liabilities. The term "actuarial
present value of the benefit liabilities" shall have the meaning specified
in section 4041 of ERISA;
(f) Contribute to or assume an obligation to contribute to, or permit
any Subsidiary or ERISA Affiliate to contribute to or assume an obligation
to contribute to, any Multiemployer Plan;
(g) Acquire, or permit any Subsidiary or ERISA Affiliate to acquire, an
interest in any Person that causes such Person to become an ERISA Affiliate
with respect to the Borrower, any Subsidiary or any ERISA Affiliate if such
Person sponsors, maintains or contributes to, or at any time in the
six-year period preceding such acquisition has sponsored, maintained, or
contributed to, (1) any Multiemployer Plan, or (2) any other Plan that is
subject to Title IV of ERISA under which the actuarial present value of the
benefit liabilities under such Plan exceeds the current value of the assets
(computed on a plan termination basis in accordance with Title IV of ERISA)
of such Plan allocable to such benefit liabilities;
(h) Incur, or permit any Subsidiary or ERISA Affiliate to incur, a
liability to or on account of a Plan under sections 515, 4062, 4063, 4064,
4201 or 4204 of ERISA;
(i) Contribute to or assume an obligation to contribute to, or permit
any Subsidiary or ERISA Affiliate to contribute to or assume an obligation
to contribute to, any employee welfare benefit plan, as defined in section
3(1) of ERISA, including, without limitation, any such plan maintained to
provide benefits to former employees of such entities, that may not be
terminated by such entities in their sole discretion at any time without
any material liability; or
(j) Amend or permit any Subsidiary or ERISA Affiliate to amend, a Plan
resulting in an increase in current liability such that the Borrower, any
Subsidiary or any ERISA Affiliate is required to provide security to such
Plan under section 401(a)(29) of the Code.
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Section 9.11 Sale or Discount of Receivables. The Borrower will not and
will not permit Kinder Morgan G.P. to discount or sell (with or without
recourse) any of its notes receivable or accounts receivable.
Section 9.12 Current Ratio. The Borrower will not permit its ratio of
(i) consolidated current assets plus the amount of the unused Aggregate Facility
A Commitments to (ii) consolidated current liabilities (excluding current
maturities of the Notes, if any) to be less than 1.1 to 1.0 at any time.
Section 9.13 Debt Service Coverage Ratio. The Borrower will not permit
its Debt Service Ratio as of the end of any fiscal quarter of the Borrower
(calculated quarterly at the end of each fiscal quarter) to be less than the
amount for the applicable date set forth below:
Date Ratio
Closing Date to March 31, 1998 1.1 to 1.0
April 1, 1998 to December 31, 1998 1.3 to 1.0
January 1, 1999 to August 31, 1999 1.4 to 1.0
For purposes of this Section 9.13, "Debt Service Ratio" shall mean the ratio of
(i) Cash Flow for the four fiscal quarters ending on such date to (ii) cash
payments made for principal and interest for such four fiscal quarters of the
Borrower.
Section 9.14 Margin Maintenance Ratio. (a) The Borrower will not permit the
ratio of the market value of the LP Units owned by Kinder Morgan G.P. to Funded
Debt to be less than 1.20011 to 1.00 at any time.
(b) The Borrower will not permit the ratio of the market value of the LP
Units owned by Kinder Morgan G.P. to Funded Debt to be less than 1.4001 to 1.00
for any ten (10) consecutive days that common units representing a limited
partner interest of Kinder Morgan Energy are publicly traded.
Section 9.15 Sale of Properties. The Borrower will not, and will not
permit Kinder Morgan G.P. to, sell, assign, convey or otherwise transfer any
Property, except for non Mortgaged Property which shall not exceed $300,000 in
the aggregate in any fiscal year.
Section 9.16 Environmental Matters. Neither the Borrower nor any
Subsidiary will cause or permit any of its Property to be in violation of, or do
anything or permit anything to be done which will subject any such Property to
any remedial obligations under any Environmental Laws, assuming disclosure to
the applicable Governmental Authority of all relevant facts, conditions and
circumstances, if any, pertaining to such Property where such violations or
remedial obligations would have a Material Adverse Effect.
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Section 9.17 Transactions with Affiliates. Neither the Borrower nor any
Subsidiary will enter into any transaction, including, without limitation, any
purchase, sale, lease or exchange of Property or the rendering of any service,
with any Affiliate unless such transactions are otherwise permitted under this
Agreement, are in the ordinary course of its business and are upon fair and
reasonable terms no less favorable to it than it would obtain in a comparable
arm's length transaction with a Person not an Affiliate.
Section 9.18 Subsidiaries. The Borrower shall not, and shall not
permit Kinder Morgan G.P. to, create any additional Subsidiaries or partnerships
except for Subsidiaries which are established solely for the purpose of
acquiring Properties financed by Debt which is non recourse to the Borrower and
Kinder Morgan G.P. ("Special Purpose Subsidiary"). The Borrower shall not and
shall not permit any Subsidiary to sell or to issue any stock or ownership
interest of a Subsidiary except to the Borrower or Kinder Morgan G.P. and except
in compliance with Section 9.03.
Section 9.19 Negative Pledge Agreements. The Borrower shall not, and shall
not permit Kinder Morgan G.P. to create, incur, assume or suffer to exist any
contract, agreement or understanding (other than this Agreement and the Security
Instruments) which in any way prohibits or restricts the granting, conveying,
creation or imposition of any Lien on any of its Property or restricts any
Subsidiary from paying dividends to the Borrower, or which requires the consent
of or notice to other Persons in connection therewith.
ARTICLE X
Events of Default; Remedies
Section 10.01 Events of Default. One or more of the following events shall
constitute an "Event of Default":
(a) the Borrower shall (i) default in the payment or prepayment when
due of any principal on any Loan or any reimbursement obligation for a
disbursement made under any Letter of Credit or the Distribution LC, (ii)
default, and such default shall continue unremedied for three (3) or more
Business Days, in the payment when due of any interest on any Loan or any
fees or other amount payable by it under the Loan Documents; or
(b) the Borrower or Kinder Morgan G.P. shall default in the payment
when due of any principal of or interest on any of its other Debt
aggregating $100,000 or more, or any event specified in any note,
agreement, indenture or other document evidencing or relating to any such
Debt shall occur if the effect of such event is to cause, or (with the
giving of any notice or the lapse of time or both) to permit the holder or
holders of such Debt (or a trustee or agent on behalf of such holder or
holders) to cause, such Debt to become due prior to its stated maturity; or
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(c) any representation, warranty or certification made or deemed made
herein or in any Security Instrument by the Borrower or Kinder Morgan G.P.,
or any certificate furnished to or the Agent pursuant to the provisions
hereof or any Security Instrument, shall prove to have been false or
misleading as of the time made or furnished in any material respect; or
(d) the Borrower shall default in the performance of any of its
obligations under Article IX or any other Article of this Agreement other
than under Article VIII; or the Borrower shall default in the performance
of any of its obligations under Article VIII or any Security Instrument
(other than the payment of amounts due which shall be governed by Section
10.01(a)) and such default shall continue unremedied for a period of thirty
(30) days after the earlier to occur of (i) notice thereof to the Borrower
by the Agent, or (ii) the Borrower otherwise becoming aware of such
default; or
(e) the Borrower shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or
(f) the Borrower shall (i) apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part of its property, (ii)
make a general assignment for the benefit of its creditors, (iii) commence
a voluntary case under the Federal Bankruptcy Code (as now or hereafter in
effect), (iv) file a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, winding-up, liquidation
or composition or readjustment of debts, (v) fail to controvert in a timely
and appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Federal Bankruptcy Code, or
(vi) take any corporate action for the purpose of effecting any of the
foregoing; or
(g) a proceeding or case shall be commenced, without the application or
consent of the Borrower, in any court of competent jurisdiction, seeking
(i) its liquida- tion, reorganization, dissolution or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of the Borrower of all
or any substantial part of its assets, or (iii) similar relief in respect
of the Borrower under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and such
proceeding or case shall continue undismissed, or an order, judgment or
decree approving or ordering any of the foregoing shall be entered and
continue unstayed and in effect, for a period of 60 days; or (iv) an order
for relief against the Borrower shall be entered in an involuntary case
under the Federal Bankruptcy Code; or
(h) a judgment or judgments for the payment of money in excess of
$150,000 in the aggregate shall be rendered by a court against the Borrower
or any Subsidiary and the same shall not be discharged (or provision shall
not be made for such discharge), or a stay of execution thereof shall not
be procured, within thirty (30) days from the date of entry thereof and the
Borrower or such Subsidiary shall not, within said period of 30
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days, or such longer period during which execution of the same shall have
been stayed, appeal therefrom and cause the execution thereof to be stayed
during such appeal; or
(i) the Security Instruments after delivery thereof shall for any
reason, except to the extent permitted by the terms thereof, cease to be in
full force and effect and valid, binding and enforceable in accordance with
their terms, or cease to create a valid and perfected Lien of the priority
required thereby on any of the collateral purported to be covered thereby,
except to the extent permitted by the terms of this Agreement, or the
Borrower shall so state in writing; or
(j) any Letter of Credit or the Distribution LC becomes the subject
matter of any order, judgment, injunction or any other such determination,
or if the Borrower or any other Person shall petition or apply for or
obtain any order restricting payment by First Union under any Letter of
Credit or the Distribution LC or extending First Union's liability under
any Letter of Credit or the Distribution LC beyond the expiration date
stated therein or otherwise agreed to by First Union; or
(k) the Borrower discontinues its usual business or suffers to exist
any material change in its ownership, control or management; or
(l) Kinder Morgan G.P. takes, suffers or permits to exist any of the
events or conditions referred to in paragraphs (e), (f), (g) or (h) hereof
or if any provision of any Security Instrument to which it is a party shall
for any reason cease to be valid and binding on Kinder Morgan G.P. or if
Kinder Morgan G.P.shall so state in writing; or
(m) any Subsidiary takes, suffers or permits to exist any of the events
or conditions referred to in paragraphs (e), (f), (g) or (h) hereof which
would result in a Material Adverse Effect; or
(n) Kinder Morgan Energy or any of its Subsidiaries shall default in
the payment when due of any principal of or interest in any of its Debt
aggregating $5,000,000.
Section 10.02 Remedies.
(a) In the case of an Event of Default other than one referred to in
clauses (e), (f) or (g) of Section 10.01 or in clause (m) to the extent it
relates to clauses (e), (f) or (g), the Agent, upon request of the Majority
Lenders, shall, by notice to the Borrower, cancel the Commitments and/or
declare the principal amount then outstanding of, and the accrued interest
on, the Loans and all other amounts payable by the Borrower hereunder and
under the Notes (including without limitation the payment of cash
collateral to secure the LC Exposure and exposure under the Distribution
LC) to be forthwith due and payable, whereupon such amounts shall be
immediately due and payable without presentment, demand, protest, notice of
intent to accelerate, notice of acceleration or other formalities of any
kind, all of which are hereby expressly waived by the Borrower.
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(b) In the case of the occurrence of an Event of Default referred to in
clauses (e), (f) or (g) of Section 10.01 or in clause (m) to the extent it
relates to clauses (e), (f) or (g), the Commitments shall be automatically
canceled and the principal amount then outstanding of, and the accrued
interest on, the Loans and all other amounts payable by the Borrower
hereunder and under the Notes (including without limitation the payment of
cash collateral to secure the LC Exposure and exposure under the
Distribution LC) shall become automatically immediately due and payable
without presentment, demand, protest, notice of intent to accelerate,
notice of acceleration or other formalities of any kind, all of which are
hereby expressly waived by the Borrower.
(c) All proceeds received after maturity of the Notes, whether by
acceleration or otherwise shall be applied first to reimbursement of
expenses and indemnities provided for in this Agreement and the Security
Instruments; second to accrued interest on the Notes; third to fees; fourth
pro rata to principal outstanding on the Notes and other Indebtedness;
fifth to serve as cash collateral to be held by First Union to secure the
LC Exposure and exposure under the Distribution LC; and any excess shall be
paid to the Borrower or as otherwise required by any Governmental
Requirement.
ARTICLE XI
The Agent
Section 11.01 Appointment, Powers and Immunities. Each Lender hereby
irrevocably appoints and authorizes the Agent to act as its agent hereunder and
under the Security Instruments with such powers as are specifically delegated to
the Agent by the terms of this Agreement and the Security Instruments, together
with such other powers as are reasonably incidental thereto. The Agent (which
term as used in this sentence and in Section 11.05 and the first sentence of
Section 11.06 shall include reference to its Affiliates and its and its
Affiliates' officers, directors, employees, attorneys, accountants, experts and
agents): (i) shall have no duties or responsibilities except those expressly set
forth in the Loan Documents, and shall not by reason of the Loan Documents be a
trustee or fiduciary for any Lender; (ii) makes no representation or warranty to
any Lender and shall not be responsible to the Lenders for any recitals,
statements, representations or warranties contained in this Agreement, or in any
certificate or other document referred to or provided for in, or received by any
of them under, this Agreement, or for the value, validity, effectiveness,
genuineness, execution, effectiveness, legality, enforceability or sufficiency
of this Agreement, any Note or any other document referred to or provided for
herein or for any failure by the Borrower or any other Person (other than the
Agent) to perform any of its obligations hereunder or thereunder or for the
existence, value, perfection or priority of any collateral security or the
financial or other condition of the Borrower, its Subsidiaries or any other
obligor or guarantor; (iii) except pursuant to Section 11.07 shall not be
required to initiate or conduct any litigation or collection proceedings
hereunder; and (iv) shall not be responsible for any action taken or omitted to
be taken by it hereunder or under any other document or instrument referred to
or provided for herein or in connection herewith including its own ordinary
negligence, except for its own gross
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negligence or willful misconduct. The Agent may employ agents, accountants,
attorneys and experts and shall not be responsible for the negligence or
misconduct of any such agents, accountants, attorneys or experts selected by it
in good faith or any action taken or omitted to be taken in good faith by it in
accordance with the advice of such agents, accountants, attorneys or experts.
The Agent may deem and treat the payee of any Note as the holder thereof for all
purposes hereof unless and until a written notice of the assignment or transfer
thereof permitted hereunder shall have been filed with the Agent and consented
to by Agent and the Borrower (which consent shall not be unreasonably withheld).
The Agent is authorized to release any collateral that is permitted to be sold
or released pursuant to the terms of the Loan Documents.
Section 11.02 Reliance by Agent. The Agent shall be entitled to rely
upon any certification, notice or other communication (including any thereof by
telephone, telex, telecopier, telegram or cable) believed by it to be genuine
and correct and to have been signed or sent by or on behalf of the proper Person
or Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by the Agent.
Section 11.03 Defaults. The Agent shall not be deemed to have knowledge
of the occurrence of a Default (other than the non-payment of principal of or
interest on Loans or of fees or failure to reimburse for Letter of Credit
drawings) unless the Agent has received notice from a Lender or the Borrower
specifying such Default and stating that such notice is a "Notice of Default."
In the event that the Agent receives such a notice of the occurrence of a
Default, the Agent shall give prompt notice thereof to the Lenders. In the event
of a payment Default, the Agent shall give each Lender prompt notice of each
such payment Default.
Section 11.04 Rights as a Lender. With respect to its Commitments and
the Loans made by it and its participation in the issuance of Letters of Credit,
First Union (and any successor acting as Agent) in its capacity as a Lender
hereunder shall have the same rights and powers hereunder as any other Lender
and may exercise the same as though it were not acting as the Agent, and the
term "Lender" or "Lenders" shall, unless the context otherwise indicates,
include the Agent in its individual capacity. First Union (and any successor
acting as Agent) and its Affiliates may (without having to account therefor to
any Lender) accept deposits from, lend money to and generally engage in any kind
of banking, trust or other business with the Borrower (and any of its
Affiliates) as if it were not acting as the Agent, and First Union and its
Affiliates may accept fees and other consideration from the Borrower for
services in connection with this Agreement or otherwise without having to
account for the same to the Lenders.
Section 11.05 Indemnification. The Lenders agree to indemnify the Agent
ratably in accordance with their Percentage Shares for the Indemnity Matters as
described in Section 12.03 to the extent not indemnified or reimbursed by the
Borrower under Section 12.03, but without limiting the obligations of the
Borrower under said Section 12.03 and for any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature whatsoever which may be imposed
on, incurred by or asserted against the Agent in any way relating
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to or arising out of: (i) this Agreement, the Security Instruments or any other
documents contemplated by or referred to herein or the transactions contemplated
hereby, but excluding, unless a Default has occurred and is continuing, normal
administrative costs and expenses incident to the performance of its agency
duties hereunder or (ii) the enforcement of any of the terms of this Agreement,
any Security Instrument or of any such other documents; whether or not any of
the foregoing specified in this Section 11.05 arises from the sole or concurrent
negligence of the Agent, provided that no Lender shall be liable for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of the Agent.
Section 11.06 Non-Reliance on Agent and other Lenders. Each Lender
acknowledges and agrees that it has, independently and without reliance on the
Agent or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own credit analysis of the Borrower and its
decision to enter into this Agreement, and that it will, independently and
without reliance upon the Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own analysis and decisions in taking or not taking action under this Agreement.
The Agent shall not be required to keep itself informed as to the performance or
observance by the Borrower of this Agreement, the Notes, the Security
Instruments or any other document referred to or provided for herein or to
inspect the properties or books of the Borrower. Except for notices, reports and
other documents and information expressly required to be furnished to the
Lenders by the Agent hereunder, the Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition or business of the Borrower (or any
of its Affiliates) which may come into the possession of the Agent or any of its
Affiliates. In this regard, each Lender acknowledges that Vinson & Elkins L.L.P.
is acting in this transaction as special counsel to the Agent only, except to
the extent otherwise expressly stated in any legal opinion or any Loan Document.
Each Lender will consult with its own legal counsel to the extent that it deems
necessary in connection with the Loan Documents and the matters contemplated
therein.
Section 11.07 Action by Agent. Except for action or other matters
expressly required of the Agent hereunder, the Agent shall in all cases be fully
justified in failing or refusing to act hereunder unless it shall (i) receive
written instructions from the Majority Lenders (or all of the Lenders as
expressly required by Section 12.04) specifying the action to be taken, and (ii)
be indemnified to its satisfaction by the Lenders against any and all liability
and expenses which may be incurred by it by reason of taking or continuing to
take any such action.
The instructions of the Majority Lenders (or all of the Lenders as expressly
required by Section 12.04) and any action taken or failure to act pursuant
thereto by the Agent shall be binding on all of the Lenders. If a Default has
occurred and is continuing, the Agent shall take such action with respect to
such Default as shall be directed by the Majority Lenders (or all of the Lenders
as required by Section 12.04) in the written instructions (with indemnities)
described in this Section 11.07, provided that, unless and until the Agent shall
have received such directions, the Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default as it shall deem advisable in the best interests of the Lenders. In
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no event, however, shall the Agent be required to take any action which exposes
the Agent to personal liability or which is contrary to this Agreement and the
Security Instruments or applicable law.
Section 11.08 Resignation or Removal of Agent. Subject to the
appointment and acceptance of a successor Agent as provided below, the Agent may
resign at any time by giving notice thereof to the Lenders and the Borrower, and
the Agent may be removed at any time with or without cause by the Majority
Lenders. Upon any such resignation or removal, the Majority Lenders shall have
the right to appoint a successor Agent with the consent of Borrower (which shall
not be unreasonably withheld). If no successor Agent shall have been so
appointed by the Majority Lenders and shall have accepted such appointment
within thirty (30) days after the retiring Agent's giving of notice of
resignation or the Majority Lenders' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent with the
consent of Borrower (which shall not be unreasonably withheld). Upon the
acceptance of such appointment hereunder by a successor Agent, such successor
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges 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 or removal hereunder as Agent, the provisions of this Article XI and
Section 12.03 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as the Agent.
ARTICLE XII
Miscellaneous
Section 12.01 Waiver. No failure on the part of the Agent or any Lender
to exercise and no delay in exercising, and no course of dealing with respect
to, any right, power or privilege under any of the Loan Documents shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power or privilege under any of the Loan Documents preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
Section 12.02 Notices. All notices and other communications provided
for herein and in the other Loan Documents (including, without limitation, any
modifications of, or waivers or consents under, this Agreement or the other Loan
Documents) shall be given or made by telex, telecopy, courier or U.S. Mail or in
writing and telexed, telecopied, mailed or delivered to the intended recipient
at the "Address for Notices" specified below its name on the signature pages
hereof or in the Loan Documents, except that for notices and other
communications to the Agent other than payment of money, the Borrower need only
send such notices and communications to the Agent care of the Houston address of
First Union Corporation; or, as to any party, at such other address as shall be
designated by such party in a notice to each other party. Except as otherwise
provided in this Agreement or in the other Loan Documents, all such
communications shall be deemed to have been duly given when transmitted, if
transmitted before
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1:00 p.m. local time on a Business Day (otherwise on the next succeeding
Business Day) by telex or telecopier and evidence or confirmation of receipt is
obtained, or personally delivered or, in the case of a mailed notice, three (3)
Business Days after the date deposited in the mails, postage prepaid, in each
case given or addressed as aforesaid.
Section 12.03 Payment of Expenses, Indemnities, etc. The Borrower agrees:
(a) whether or not the transactions hereby contemplated are
consummated, pay all reasonable expenses of the Agent in the administration
(both before and after the execution hereof and including advice of counsel
as to the rights and duties of the Agent and the Lenders with respect
thereto) of, and in connection with the negotiation, syndication,
investigation, preparation, execution and delivery of, recording or filing
of, preservation of rights under, enforcement of, and refinancing,
renegotiation or restructuring of, the Loan Documents and any amendment,
waiver or consent relating thereto (including, without limitation, travel,
photocopy, mailing, courier, telephone and other similar expenses of the
Agent, the cost of environmental audits, surveys and appraisals at
reasonable intervals, the reasonable fees and disbursements of counsel and
other outside consultants for the Agent and, in the case of enforcement,
the reasonable fees and disbursements of counsel for the Agent and any of
the Lenders); and promptly reimburse the Agent for all amounts expended,
advanced or incurred by the Agent or the Lenders to satisfy any obligation
of the Borrower under this Agreement or any Security Instrument, including
without limitation, all costs and expenses of foreclosure;
(b) to indemnify the Agent and each Lender and each of their Affiliates
and each of their officers, directors, employees, representatives, agents,
attorneys, accountants and experts ("Indemnified Parties") from, hold each
of them harmless against and promptly upon demand pay or reimburse each of
them for, the Indemnity Matters which may be incurred by or asserted
against or involve any of them (whether or not any of them is designated a
party thereto) as a result of, arising out of or in any way related to (i)
any actual or proposed use by the Borrower of the proceeds of any of the
Loans or Letters of Credit, (ii) the execution, delivery and performance of
the Loan Documents, (iii) the operations of the business of the Borrower
and its Subsidiaries, (iv) the failure of the Borrower or any Subsidiary to
comply with the terms of any Security Instrument or this Agreement, or with
any Governmental Requirement, (v) any inaccuracy of any representation or
any breach of any warranty of the Borrower set forth in any of the Loan
Documents, (vi) the issuance, execution and delivery or transfer of or
payment or failure to pay under any Letter of Credit, (vii) the payment of
a drawing under any Letter of Credit notwithstanding the non-compliance,
non- delivery or other improper presentation of the manually executed
draft(s) and certification(s), (viii) any assertion that the Lenders were
not entitled to receive the proceeds received pursuant to the Security
Instruments or (ix) any other aspect of the Loan Documents, including,
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without limitation, the reasonable fees and disbursements of counsel and
all other expenses incurred in connection with investigating, defending or
preparing to defend any such action, suit, proceeding (including any
investigations, litigation or inquiries) or claim and including all
Indemnity Matters arising by reason of the ordinary negligence of any
Indemnified Party, but excluding all Indemnity Matters arising solely by
reason of claims between the Lenders or any Lender and the Agent or a
Lender's shareholders against the Agent or Lender or by reason of the gross
negligence or willful misconduct on the part of the Indemnified Party; and
(c) to indemnify and hold harmless from time to time the Indemnified
Party from and against any and all losses, claims, cost recovery actions,
administrative orders or proceedings, damages and liabilities to which any
such Person may become subject (i) under any Environmental Law applicable
to the Borrower or any Subsidiary or any of their Properties, including
without limitation, the treatment or disposal of hazardous substances on
any of their Properties, (ii) as a result of the breach or non-compliance
by the Borrower or any Subsidiary with any Environmental Law applicable to
the Borrower or any Subsidiary, (iii) due to past ownership by the Borrower
or any Subsidiary of any of their Properties or past activity on any of
their Properties which, though lawful and fully permissible at the time,
could result in present liability, (iv) the presence, use, release,
storage, treatment or disposal of hazardous substances on or at any of the
Properties owned or operated by the Borrower or any Subsidiary, or (v) any
other environmental, health or safety condition in connection with the Loan
Documents, provided, however, no indemnity shall be afforded under this
Section 12.03(c) in respect of any Property for any occurrence arising from
the acts or omissions of the Agent or any Lender during the period after
which such Person, its successors or assigns shall have obtained possession
of such Property (whether by foreclosure or deed in lieu of foreclosure, as
mortgagee-in-possession or otherwise).
(d) No Indemnified Party may settle any claim to be indemnified without
the consent of the indemnitor, such consent not to be unreasonably
withheld; provided, that the indemnitor may not reasonably withhold consent
to any settlement that an Indemnified Party proposes, if the indemnitor
does not have the financial ability to pay all its obligations outstanding
and asserted against the indemnitor at that time, including the maximum
potential claims against the Indemnified Party to be indemnified pursuant
to this Section 12.03.
(e) In the case of any indemnification hereunder, the Agent or Lender,
as appropriate shall give notice to the Borrower of any such claim or
demand being made against the Indemnified Party and the Borrower shall have
the non-exclusive right to join
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in the defense against any such claim or demand provided that if the
Borrower provides a defense, the Indemnified Party shall bear its own cost
of defense unless there is a conflict between the Borrower and such
Indemnified Party.
(f) The foregoing indemnities shall extend to the Indemnified Parties
notwithstanding the sole or concurrent negligence of every kind or
character whatsoever, whether active or passive, whether an affirma- tive
act or an omission, including without limitation, all types of negligent
conduct identified in the restatement (second) of torts of one or more of
the Indemnified Parties or by reason of strict liability imposed without
fault on any one or more of the Indemnified Parties. To the extent that an
Indemnified Party is found to have committed an act of gross negligence or
willful misconduct, this contractual obligation of indemnification shall
continue but shall only extend to the portion of the claim that is deemed
to have occurred by reason of events other than the gross negligence or
willful misconduct of the Indemnified Party.
(g) The Borrower's obligations under this Section 12.03 shall survive
any termination of this Agreement and the payment of the Notes and shall
continue thereafter in full force and effect.
(h) The Borrower shall pay any amounts due under this Section 12.03
within thirty (30) days of the receipt by the Borrower of notice of the
amount due.
Section 12.04 Amendments, Etc. Any provision of this Agreement or any
Security Instrument may be amended, modified or waived with the Borrower's and
the Majority Lenders' prior written consent; provided that (i) no amendment,
modification or waiver which extends the final maturity of the Loans, increases
the Aggregate Maximum Credit Amounts, forgives the principal amount of any
Indebtedness outstanding under this Agreement, releases any guarantor of the
Indebtedness or releases all or substantially all of the collateral, reduces the
interest rate applicable to the Loans or the fees payable to the Lenders
generally, affects Section 2.03, this Section 12.04 or Section 12.06(a) or
modifies the definition of "Majority Lenders" shall be effective without consent
of all Lenders; (ii) no amendment, modification or waiver which increases the
Maximum Credit Amount of any Lender shall be effective without the consent of
such Lender; and (iii) no amendment, modification or waiver which modifies the
rights, duties or obligations of the Agent shall be effective without the
consent of the Agent.
Section 12.05 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
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Section 12.06 Assignments and Participations.
(a) The Borrower may not assign its rights or obligations hereunder or
under the Notes or any Letters of Credit without the prior consent of all
of the Lenders and the Agent.
(b) Any Lender may, upon the written consent of the Agent and the
Borrower (which consent will not be unreasonably withheld), assign to one
or more assignees all or a portion of its rights and obligations under this
Agreement pursuant to an Assignment Agreement substantially in the form of
Exhibit F (an "Assignment") provided, however, that (i) any such assignment
shall be in the amount of the lesser of (y) $5,000,000 or (z) the aggregate
rights and obligations of the Lender making such assignment immediately
before such assignment and (ii) the assignee or assignor shall pay to the
Agent a processing and recordation fee of $2,500 for each assignment. Any
such assignment will become effective upon the execution and delivery to
the Agent of the Assignment and the consent of the Agent and the Borrower.
Promptly after receipt of an executed Assignment, the Agent shall send to
the Borrower a copy of such executed Assignment. Upon receipt of such
executed Assignment and approval thereof by Borrower, the Borrower, will,
at its own expense, execute and deliver new Notes to the assignor and/or
assignee, as appropriate, in accordance with their respective interests as
they appear. Upon the effectiveness of any assignment pursuant to this
Section 12.06(b), the assignee will become a "Lender," if not already a
"Lender," for all purposes of this Agreement and the Security Instruments.
The assignor shall be relieved of its obligations hereunder to the extent
of such assignment (and if the assigning Lender no longer holds any rights
or obligations under this Agreement, such assigning Lender shall cease to
be a "Lender" hereunder except that its rights under Sections 4.06, 5.01,
5.05 and 12.03 shall not be affected). The Agent will prepare on the last
Business Day of each month during which an assignment has become effective
pursuant to this Section 12.06(b), a new Annex I giving effect to all such
assignments effected during such month, and will promptly provide the same
to the Borrower and each of the Lenders.
(c) Each Lender may transfer, grant or assign participations in all or
any part of such Lender's interests hereunder pursuant to this Section
12.06(c) to any Person, provided that: (i) such Lender shall remain a
"Lender" for all purposes of this Agreement and the transferee of such
participation shall not constitute a "Lender" hereunder; and (ii) no
participant under any such participation shall have rights to approve any
amendment to or waiver of any of the Loan Documents except to the extent
such amendment or waiver would (x) forgive any principal owing on any
Indebtedness or extend the final maturity of the Loans, (y) reduce the
interest rate (other than as a result of waiving the applicability of any
post-default increases in interest rates) or fees applicable to any of the
Commitments or Loans or Letters of Credit in which such participant is
participating, or postpone the payment of any thereof, or (z) release any
guarantor of the Indebtedness or release all or substantially all of the
collateral (except as provided in the Loan Documents) supporting any of the
Commitments or Loans or Letters of Credit in which such participant is
participating. In the case of any such
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participation, the participant shall not have any rights under this
Agreement or any of the Security Instruments (the participant's rights
against the granting Lender in respect of such participation to be those
set forth in the agreement with such Lender creating such participation),
and all amounts payable by the Borrower hereunder shall be determined as if
such Lender had not sold such participation, provided that such participant
shall be entitled to receive additional amounts under Article V on the same
basis as if it were a Lender and be indemnified under Section 12.03 as if
it were a Lender. In addition, each agreement creating any participation
must include an agreement by the participant to be bound by the provisions
of Section 12.15.
(d) The Lenders may furnish any information concerning the Borrower in
the possession of the Lenders from time to time to assignees and
participants (including prospective assignees and participants); provided
that, such Persons agree to be bound by the provisions of Section 12.15
hereof.
(e) Notwithstanding anything in this Section 12.06 to the contrary, any
Lender may assign and pledge its Note to any Federal Reserve Bank or the
United States Treasury as collateral security pursuant to Regulation A of
the Board of Governors of the Federal Reserve System and any operating
circular issued by such Federal Reserve System and/or such Federal Reserve
Bank. No such assignment and/or pledge shall release the assigning and/or
pledging Lender from its obligations hereunder.
(f) Notwithstanding any other provisions of this Section 12.06, no
transfer or assignment of the interests or obligations of any Lender or any
grant of participations therein shall be permitted if such transfer,
assignment or grant would require the Borrower to file a registration
statement with the SEC or to qualify the Loans under the "Blue Sky" laws of
any state.
Section 12.07 Invalidity. In the event that any one or more of the
provisions contained in any of the Loan Documents or the Letters of Credit, [the
Letter of Credit Agreements] shall, for any reason, be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of the Notes, this Agreement or any
Security Instrument.
Section 12.08 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
Section 12.09 References. The words "herein," "hereof," "hereunder" and
other words of similar import when used in this Agreement refer to this
Agreement as a whole, and not to any particular article, section or subsection.
Any reference herein to a Section shall be deemed to refer to the applicable
Section of this Agreement unless otherwise stated herein. Any reference herein
to an exhibit or schedule shall be deemed to refer to the applicable exhibit or
schedule attached hereto unless otherwise stated herein.
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Section 12.10 Survival. The obligations of the parties under Section
4.06, Article V, and Sections 11.05 and 12.03 shall survive the repayment of the
Loans and the termination of the Commitments. To the extent that any payments on
the Indebtedness or proceeds of any collateral are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, debtor in possession, receiver or other Person under any bankruptcy
law, common law or equitable cause, then to such extent, the Indebtedness so
satisfied shall be revived and continue as if such payment or proceeds had not
been received and the Agent's and the Lenders' Liens, security interests,
rights, powers and remedies under this Agreement and each Security Instrument
shall continue in full force and effect. In such event, each Security Instrument
shall be automatically reinstated and the Borrower shall take such action as may
be reasonably requested by the Agent and the Lenders to effect such
reinstatement.
Section 12.11 Captions. Captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
Section 12.12 No Oral Agreements. The Loan Documents embody the entire
agreement and understanding between the parties and supersede all other
agreements and understandings between such parties relating to the subject
matter hereof and thereof. The Loan Documents represent the final agreement
between the parties and may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements of the parties. there are no
unwritten oral agreements between the parties.
Section 12.13 Governing Law; Submission to Jurisdiction.
(a) this Agreement and the Notes shall be governed by, and construed in
accordance with, the laws of the state of Texas except to the extent that
United States federal law permits any Lender to charge interest at the
rate allowed by the laws of the state where such Lender is located. Tex.
Rev. Civ. Stat. Ann. Art. 5069, Ch. 15 (which regulates certain revolving
credit loan accounts and revolving tri-party accounts) shall not apply to
this Agreement or the notes.
(b) any legal action or proceeding with respect to the Loan Documents
shall be brought in the courts of the state of Texas or of the United
States of America for the Southern District of Texas, and, by execution and
delivery of this Agreement, the Borrower hereby accepts for itself and (to
the extent permitted by law) in respect of its Property, generally and
unconditionally, the jurisdiction of the aforesaid courts. The Borrower
hereby irrevocably waives any objection, including, without limitation, any
objection to the laying of venue or based on the grounds of forum non
conveniens, which it may now or hereafter have to the bringing of any such
action or proceeding in such respective
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jurisdictions. This submission to jurisdiction is non-exclusive and does
not preclude the Agent or any Lender from obtaining jurisdiction over the
Borrower in any court otherwise having jurisdiction.
(c) the Borrower Irrevocably consents to the service of process of any
of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid,
to the Borrower at its said address, such service to become effective
thirty (30) days after such mailing.
(d) nothing herein shall affect the right of the Agent or any Lender or
any holder of a Note to serve process in any other manner permitted by law
or to commence legal proceedings or otherwise proceed against the Borrower
in any other jurisdiction.
(e) Borrower and each lender hereby (i) irrevocably waive, to the
maximum extent not prohibited by law, any right it may have to claim or
recover in any such litigation any special, exemplary, punitive or
consequential damages, or damages other than, or in addition to, actual
damages; certify that no party hereto nor any representative or agent of
counsel for any party hereto has represented, expressly or otherwise, or
implied that such party would not, in the event of litigation, seek to
enforce the foregoing waiver, and (iii) acknowledge that it has been
induced to enter into this Agreement, the Security Instruments and the
transactions contemplated hereby and thereby by, among other things, the
mutual waivers and certifications contained in this Section 12.13.
Section 12.14 Interest. It is the intention of the parties hereto that
each Lender shall conform strictly to usury laws applicable to it. Accordingly,
if the transactions contemplated hereby would be usurious as to any Lender under
laws applicable to it (including the laws of the United States of America and
the State of Texas or any other jurisdiction whose laws may be mandatorily
applicable to such Lender notwithstanding the other provisions of this
Agreement), then, in that event, notwithstanding anything to the contrary in any
of the Loan Documents or any agreement entered into in connection with or as
security for the Notes, it is agreed as follows: (i) the aggregate of all
consideration which constitutes interest under law applicable to any Lender that
is contracted for, taken, reserved, charged or received by such Lender under any
of the Loan Documents or agreements or otherwise in connection with the Notes
shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be canceled automatically and if
theretofore paid shall be credited by such Lender on the principal amount of the
Indebtedness (or, to the extent that the principal amount of the Indebtedness
shall have been or would thereby be paid in full, refunded by such Lender to the
Borrower); and (ii) in the event that the maturity of the Notes is accelerated
by reason of an election of the holder thereof resulting from any Event of
Default under this Agreement or otherwise, or in the event of any required or
permitted prepayment, then such consideration that constitutes interest under
law applicable to any Lender may never include
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more than the maximum amount allowed by such applicable law, and excess
interest, if any, provided for in this Agreement or otherwise shall be canceled
automatically by such Lender as of the date of such acceleration or prepayment
and, if theretofore paid, shall be credited by such Lender on the principal
amount of the Indebtedness (or, to the extent that the principal amount of the
Indebtedness shall have been or would thereby be paid in full, refunded by such
Lender to the Borrower). All sums paid or agreed to be paid to any Lender for
the use, forbearance or detention of sums due hereunder shall, to the extent
permitted by law applicable to such Lender, be amortized, prorated, allocated
and spread throughout the full term of the Loans evidenced by the Notes until
payment in full so that the rate or amount of interest on account of any Loans
hereunder does not exceed the maximum amount allowed by such applicable law. If
at any time and from time to time (i) the amount of interest payable to any
Lender on any date shall be computed at the Highest Lawful Rate applicable to
such Lender pursuant to this Section 12.14 and (ii) in respect of any subsequent
interest computation period the amount of interest otherwise payable to such
Lender would be less than the amount of interest payable to such Lender computed
at the Highest Lawful Rate applicable to such Lender, then the amount of
interest payable to such Lender in respect of such subsequent interest
computation period shall continue to be computed at the Highest Lawful Rate
applicable to such Lender until the total amount of interest payable to such
Lender shall equal the total amount of interest which would have been payable to
such Lender if the total amount of interest had been computed without giving
effect to this Section 12.14. To the extent that Article 5069-1.04 of the Texas
Revised Civil Statutes is relevant for the purpose of determining the Highest
Lawful Rate, such Lender elects to determine the applicable rate ceiling under
such Article by the indicated weekly rate ceiling from time to time in effect.
Section 12.15 Confidentiality. In the event that the Borrower provides
to the Agent or the Lenders written confidential information belonging to the
Borrower, if the Borrower shall denominate such information in writing as
"confidential", the Agent and the Lenders shall thereafter maintain such
information in confidence in accordance with the standards of care and diligence
that each utilizes in maintaining its own confidential information. This
obligation of confidence shall not apply to such portions of the information
which (i) are in the public domain, (ii) hereafter become part of the public
domain without the Agent or the Lenders breaching their obligation of confidence
to the Borrower, (iii) are previously known by the Agent or the Lenders from
some source other than the Borrower, (iv) are hereafter developed by the Agent
or the Lenders without using the Borrower's information, (v) are hereafter
obtained by or available to the Agent or the Lenders from a third party who owes
no obligation of confidence to the Borrower with respect to such information or
through any other means other than through disclosure by the Borrower, (vi) are
disclosed with the Borrower's consent, (vii) must be disclosed either pursuant
to any Governmental Requirement or to Persons regulating the activities of the
Agent or the Lenders, or (viii) as may be required by law or regulation or order
of any Governmental Authority in any judicial, arbitration or governmental
proceeding. Further, the Agent or a Lender may disclose any such information to
any other Lender, any independent petroleum engineers or consultants, any
independent certified public accountants, any legal counsel employed by such
Person in connection with this Agreement or any Security Instrument, including
without limitation, the enforcement or exercise of all rights and remedies
thereunder, or any assignee or participant (including prospective assignees and
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participants) in the Loans; provided, however, that the Agent or the Lenders
shall receive a confidentiality agreement from the Person to whom such
information is disclosed such that said Person shall have the same obligation to
maintain the confidentiality of such information as is imposed upon the Agent or
the Lenders hereunder. Notwithstanding anything to the contrary provided herein,
this obligation of confidence shall cease three (3) years from the date the
information was furnished, unless the Borrower requests in writing at least
thirty (30) days prior to the expiration of such three year period, to maintain
the confidentiality of such information for an additional three year period. The
Borrower waives any and all other rights it may have to confidentiality as
against the Agent and the Lenders arising by contract, agreement, statute or
law, except as expressly stated in this Section 12.13.
Section 12.16 Effectiveness. This Agreement shall be effective on the
Closing Date (the "Effective Date").
Section 12.17 Exculpation Provisions. Each of the parties hereto
specifically agrees that it has a duty to read this Agreement and the Security
Instruments and agrees that it is charged with notice and knowledge of the terms
of this Agreement and the Security Instruments; that it has in fact read this
Agreement and is fully informed and has full notice and knowledge of the terms,
conditions and effects of this Agreement; that it has been represented by
independent legal counsel of its choice throughout the negotiations preceding
its execution of this Agreement and the Security Instruments; and has received
the advice of its attorney in entering into this Agreement and the Security
Instruments; and that it recognizes that certain of the terms of this Agreement
and the Security Instruments result in one party assuming the liability inherent
in some aspects of the transaction and relieving the other party of its
responsibility for such liability. Each party hereto agrees and covenants that
it will not contest the validity or enforceability of any exculpatory provision
of this Agreement and the Security Instruments on the basis that the party had
no notice or knowledge of such provision or that the provision is not
"conspicuous."
-70-
<PAGE>
The parties hereto have caused this Agreement to be duly executed as of
the day and year first above written.
BORROWER: KINDER MORGAN, INC.
By:_____________________________
William V. Morgan
President
Address for Notices:
1301 McKinney Street, Suite 3450
Houston, Texas 77010
Telecopier No.: (713) 844-9570
Telephone No.: (713) 844-9500
Attention: Richard D. Kinder
Chief Executive Office and Principal
Place of Business
1301 McKinney Street, Suite 3450
Houston, Texas 77010
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<PAGE>
LENDER AND AGENT: FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By:_____________________________
Name: Michael J. Kolosowsky
Title: Vice President
First Union National Bank of North Carolina
301 South College Street, TW-10
Charlotte, North Carolina 28288-0608
Telecopier No.: (704) 383-0288
Telephone No.: (704) 383-0281
Attention: Syndication Agency Services
With copy to:
First Union Corporation of North Carolina
1001 Fannin, Suite 2255
Houston, Texas 77002
Telecopier No.: (713) 650-6354
Telephone No.: (713) 650-3716
Attention: Paul N. Riddle
S-2
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