UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-7179
SONAT INC.
(Exact name of registrant as specified in its charter)
DELAWARE 63-0647939
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
AMSOUTH-SONAT TOWER
BIRMINGHAM, ALABAMA 35203
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (205) 325-3800
NO CHANGE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No _
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
COMMON STOCK, $1.00 PAR VALUE:
110,072,057 SHARES OUTSTANDING ON JULY 31, 1999
<PAGE>
SONAT INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
<S> <C>
(Unaudited)--June 30, 1999 and December 31, 1998 1
Condensed Consolidated Statements of Operations
(Unaudited)--Three Months and Six Months Ended
June 30, 1999 and 1998 2
Condensed Consolidated Statements of Cash Flows
(Unaudited)--Six Months Ended June 30, 1999 and 1998 3
Notes to Condensed Consolidated Financial
Statements (Unaudited) 4 - 15
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 16 - 30
Item 3. Quantitative and Qualitative Disclosure About
Market Risk 31
PART II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 32
Item 6. Exhibits and Reports on Form 8-K 32
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SONAT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
(In Thousands)
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 1,467 $ 7,104
Notes receivable from affiliates 46,732 50,359
Accounts receivable 356,039 388,075
Inventories 59,863 69,093
Income tax refund receivable 77,933 1,714
Gas imbalance receivables 8,050 7,673
Assets from trading activities 164,423 229,801
Other 15,324 46,690
---------- ----------
Total Current Assets 729,831 800,509
---------- ----------
Investments in Unconsolidated Affiliates and Other 690,390 671,263
---------- ----------
Plant, Property and Equipment 8,382,646 8,425,679
Less accumulated depreciation, depletion
and amortization 5,884,243 5,703,767
---------- ----------
2,498,403 2,721,912
---------- ----------
Deferred Charges and Other:
Assets from trading activities 58,472 25,694
Other 171,396 141,716
---------- ----------
229,868 167,410
---------- ----------
Total Assets $4,148,492 $4,361,094
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Long-term debt due within one year $ 104,839 $ 109,835
Unsecured notes 899,432 720,361
Accounts payable 320,143 401,357
Accrued income taxes 12,080 21,700
Accrued interest 51,348 47,864
Gas imbalance payables 11,046 11,497
Liabilities from trading activities 141,596 223,628
Other 49,705 40,357
---------- ----------
Total Current Liabilities 1,590,189 1,576,599
---------- ----------
Long-Term Debt 1,094,338 1,099,484
---------- ----------
Deferred Credits and Other:
Deferred income taxes 138,841 163,964
Liabilities from trading activities 46,502 12,564
Other 187,137 179,232
---------- ----------
372,480 355,760
---------- ----------
Commitments and Contingencies
Stockholders' Equity:
Common stock and other capital 179,048 180,192
Retained earnings 971,519 1,209,527
---------- ----------
1,150,567 1,389,719
Less treasury stock 59,082 60,468
---------- ----------
Total Stockholders' Equity 1,091,485 1,329,251
---------- ----------
Total Liabilities and Stockholders' Equity $4,148,492 $4,361,094
========== ==========
</TABLE>
See accompanying notes.
<PAGE>
SONAT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1999 1998* 1999 1998*
(In Thousands, Except Per-Share Amounts)
<S> <C> <C> <C> <C>
Revenues $849,421 $ 925,132 $1,623,161 $2,034,275
-------- ---------- ---------- ----------
Costs and Expenses:
Natural gas cost 518,760 551,734 1,006,675 1,315,217
Electric power cost 103,888 115,421 179,890 180,612
Operating and maintenance 34,932 39,246 74,614 79,730
General and administrative 41,528 28,506 78,772 58,652
Depreciation, depletion
and amortization 66,872 95,806 142,197 192,875
Ceiling test charges - 540,459 351,500 580,151
Restructuring costs - 15,017 - 15,017
Taxes, other than income 11,798 13,831 23,764 27,435
-------- ---------- ---------- ----------
777,778 1,400,020 1,857,412 2,449,689
-------- ---------- ---------- ----------
Operating Income (Loss) 71,643 (474,888) (234,251) (415,414)
Other Income, Net:
Equity in earnings of
unconsolidated affiliates 7,809 17,527 15,528 27,180
Minority interest 244 (1,089) (1,100) (1,631)
Other income, net 1,944 1,251 4,100 1,964
-------- ---------- ---------- ----------
9,997 17,689 18,528 27,513
-------- ---------- ---------- ----------
Earnings (Loss) Before Interest
and Taxes 81,640 (457,199) (215,723) (387,901)
-------- ---------- ---------- ----------
Interest:
Interest income 1,652 1,063 3,591 3,263
Interest expense (35,846) (34,792) (71,153) (66,922)
Interest capitalized 3,825 1,448 7,245 2,872
-------- ---------- ---------- ----------
(30,369) (32,281) (60,317) (60,787)
-------- ---------- ---------- ----------
Income (Loss) Before Income Taxes 51,271 (489,480) (276,040) (448,688)
Income Tax Expense (Benefit) 17,631 (174,184) (97,464) (161,342)
-------- ---------- ---------- ----------
Net Income (Loss) $ 33,640 $ (315,296) $ (178,576) $ (287,346)
======== ========== ========== ==========
Earnings (Loss) Per Share of
Common Stock $ .31 $ (2.87) $ (1.62) $ (2.61)
======== ========== ========== ==========
Earnings (Loss) Per Share of
Common Stock-Assuming Dilution $ .30 $ (2.87) $ (1.62) $ (2.61)
======== ========== ========== ==========
Weighted Average Shares Outstanding 110,062 110,049 110,054 110,008
======== ========== ========== ==========
Weighted Average Shares Outstanding-
Assuming Dilution 110,960 110,049 110,054 110,008
======== ========== ========== ==========
Cash Dividends Paid Per Share $ .27 $ .27 $ .54 $ .54
======== ========== ========== ==========
</TABLE>
*Restated, see Note 1
See accompanying notes.
<PAGE>
SONAT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
1999 1998*
(In Thousands)
Cash Flows from Operating Activities:
<S> <C> <C>
Net loss $(178,576) $(287,346)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation, depletion and amortization,
including ceiling test charges 493,697 773,026
Deferred income taxes (25,123) (138,507)
Equity in earnings of unconsolidated
affiliates, less distributions (7,719) (20,663)
Change in:
Accounts receivable 32,036 188,074
Inventories 9,230 2,140
Accounts payable (81,214) (133,913)
Accrued interest and income taxes, net (82,355) (26,027)
Accrued long-term compensation - (73,799)
Other current assets and liabilities 39,886 (29,283)
Net change from trading activities (15,494) (3,458)
Net change in restricted cash - 115,956
Other, net (15,739) 12,435
--------- ---------
Net cash provided by operating activities 168,629 378,635
--------- ---------
Cash Flows from Investing Activities:
Plant, property and equipment additions (293,435) (493,033)
Net proceeds from disposal of assets 19,323 14,479
Investments in unconsolidated affiliates and other (9,984) (88,518)
--------- ---------
Net cash used in investing activities (284,096) (567,072)
--------- ---------
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt - 400,000
Payments of long-term debt (10,360) (540,834)
Changes in short-term borrowings 179,071 370,188
--------- ---------
Net changes in debt 168,711 229,354
Dividends paid (59,429) (59,408)
Treasury stock purchases - (1,289)
Other equity 548 3,641
--------- ---------
Net cash provided by financing activities 109,830 172,298
--------- ---------
Net Decrease in Cash and Cash Equivalents (5,637) (16,139)
Cash and Cash Equivalents at Beginning of Period 7,104 27,278
--------- ---------
Cash and Cash Equivalents at End of Period $ 1,467 $ 11,139
========= =========
Supplemental Disclosures of Cash Flow Information
Cash Paid for:
Interest (net of amount capitalized) $ 57,598 $ 58,270
Income taxes paid, net 11,616 7,395
</TABLE>
*Restated, see Note 1
See accompanying notes.
<PAGE>
SONAT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying condensed consolidated financial statements of Sonat
Inc. (Sonat) and its subsidiaries (the Company) have been prepared in accordance
with the instructions to Form 10-Q and include the information and footnotes
required by such instructions. In the opinion of management, all adjustments
including those of a normal recurring nature have been made that are necessary
for a fair presentation of the results of operations for the interim periods
presented herein.
The 1998 periods have been restated for a change to the full cost method
of accounting for the Company's oil and gas operations. Certain other amounts in
the 1998 condensed consolidated financial statements and notes have been
reclassified to conform with the 1999 presentation.
2. Proposed Merger
On March 13, 1999, Sonat and El Paso Energy Corporation (El Paso)
entered into an Agreement and Plan of Merger, as amended (the Merger Agreement),
providing for, among other things, the merger of El Paso and the Company. Under
the terms of the Merger Agreement, the Company's stockholders will receive one
share of El Paso common stock (El Paso Common Stock), for each share of common
stock of the Company (Company Common Stock), they own. The merger, which has
been approved by the Company's and El Paso's stockholders, is subject to certain
customary conditions, including, among others, receipt of certain required
government approvals.
In connection with the Merger Agreement, on March 13, 1999, the Company
and El Paso also entered into cross option agreements, pursuant to which, among
other things, (i) El Paso has been granted an option to purchase up to 19.9
percent of the Company's Common Stock, exercisable if the Merger Agreement is
terminated under certain circumstances as set forth therein and (ii) the Company
has been granted an option to purchase up to 19.9 percent of the El Paso Common
Stock, exercisable if the Merger Agreement is terminated under certain
circumstances as set forth therein.
<PAGE>
3. Trading Activities and Derivative Financial Instruments
Derivative Commodity Instruments Held or Issued for Trading Purposes
The Company maintains active trading positions in energy commodity
futures, swap and option contracts. The Company manages its trading positions
with strict policies and procedures and limits its risk to changes in the value
of its outstanding positions through the use of policy limits on portfolio
Value-at-Risk, the establishment of offsetting positions, and other methods. The
trading operation also enters into natural gas and electricity commodity
purchase and sale commitments. These activities constitute its trading business
and are essential to provide customers with market products at competitive
prices.
At June 30, 1999, the Company's trading portfolio had outstanding energy
commodity futures, swaps and options. In the table below, buys of swaps
represent either 1) payment of a fixed price and receipt of a variable NYMEX or
index price; or 2) payment of a variable NYMEX or index price and receipt of a
variable index price. The absolute notional volumes and terms are:
Notional Volume Maximum
Commodity Buy Sell Term
- --------- --- ---- -------
Natural Gas (Thousands of Btu) 1,245 1,436 60 months
Crude Oil (Thousands of Barrels) 5,640 4,086 60 months
Electricity (Thousands of MWh) 10 10 2 months
The 60-month term deals begin in 2002 and end in 2006.
The amounts disclosed in the following table represent the end-of-period
fair value and the average fair value of the trading portfolio.
Fair Value Average Fair Value
(Carrying Amount) for the Three Months
as of 6/30/99 Ended 6/30/99
(In Thousands)
Assets $222,895 $231,729
Liabilities 188,098 197,903
Net trading gains for the three-month and six-month periods ending June 30,
1999 are $10.2 million and $24.8 million, respectively.
Derivative Commodity Instruments Held or Issued for Purposes Other Than Trading
In certain cases, derivative positions are taken specifically to mitigate
market price risk associated with significant physical transactions and are
accounted for using hedge accounting provided they meet hedge accounting
criteria. Sonat Exploration Company (Sonat Exploration) hedges a portion of its
production by entering into intercompany swaps with Sonat Marketing Company L.P.
(Sonat Marketing). The exposure that Sonat Marketing assumes from Sonat
Exploration is then hedged by entering into derivative instruments with third
parties. Sonat Marketing also hedges third-party purchases and sales by entering
into commodity futures, swaps and options.
<PAGE>
3. Trading Activities and Derivative Financial Instruments (Cont'd)
At June 30, 1999, the Company had outstanding energy commodity futures,
swaps and options for purposes other than trading. In the table below, buys of
swaps represent either 1) payment of a fixed price and receipt of a variable
NYMEX or index price; or 2) payment of a variable NYMEX or index price and
receipt of a variable index price. The absolute notional volumes and terms are:
Notional Volume Maximum
Commodity Buy Sell Term
- --------- --- ---- -------
Natural Gas (Thousands of Btu) 47 255 18 months
Crude Oil (Thousands of Barrels) - 3,698 18 months
The deals end in 2000.
The information in the following table represents the fair value, as of
June 30, 1999, of outstanding financial derivative positions held for purposes
other than trading. Not included are the related physical positions that these
derivative positions hedge.
Fair Value
(In Thousands)
Natural Gas:
Futures $ 1,601
Swaps (28,983)
Deferred amounts on open futures positions will mature through 2000.
Credit Risk from Derivative Activities
NYMEX traded futures are guaranteed by the NYMEX and have nominal credit
risk. On all other transactions described above, the Company is exposed to
credit risk in the event of nonperformance by the counterparties. The Company
has established policies and procedures to evaluate potential counterparties for
creditworthiness before entering into over-the-counter swap and option
agreements. The credit risk resulting from in-the-money swaps is monitored on a
regular basis against established collateralization limits and credit limits
established by the Company. Due to changes in market conditions, the market
value of swaps and options and the associated credit exposure with the
counterparties can change significantly. At June 30, 1999, the market value of
the Company's in-the-money swaps and options was $19.4 million, and one
counterparty posted collateral in the amount of $2.5 million. Reserves for
credit risk are established as necessary.
<PAGE>
4. Unconsolidated Affiliates
The following table presents the components of equity in earnings of
unconsolidated affiliates.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
(In Thousands)
Company's Share of Reported Earnings (Losses):
<S> <C> <C> <C> <C>
Exploration and Production $ 125 $ 177 $ 226 $ 321
------ ------- ------- -------
Natural Gas Transmission:
Citrus Corp. 5,357 10,482 11,619 14,993
Amortization of Citrus basis
difference 346 346 692 692
Bear Creek Storage 2,802 2,446 5,565 4,535
Destin Pipeline (344) 3,074 (721) 5,134
Other (33) 91 6 67
------ ------- ------- -------
8,128 16,439 17,161 25,421
------ ------- ------- -------
Energy Services (910) 556 (2,745) 781
------ ------- ------- -------
Other 466 355 886 657
------ ------- ------- -------
$7,809 $17,527 $15,528 $27,180
====== ======= ======= =======
</TABLE>
Natural Gas Transmission Affiliates - Sonat owns 50 percent of Citrus
Corp. (Citrus), the parent company of Florida Gas Transmission Company. Southern
Natural Gas Company (Southern) owns a one-third interest in Destin Pipeline
Company, L.L.C. (Destin) and a subsidiary of Southern owns 50 percent of Bear
Creek Storage Company (Bear Creek).
<PAGE>
4. Unconsolidated Affiliates (Cont'd)
The following is summarized income statement information for Citrus:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
(In Thousands)
<S> <C> <C> <C> <C>
Revenues $184,291 $161,981 $331,747 $295,562
Expenses:
Natural gas cost 104,644 70,989 174,268 129,603
Operating expenses 26,802 20,900 50,332 44,887
Depreciation and amortization 13,218 13,009 26,030 25,731
Interest and other 22,088 23,070 43,118 46,490
Income taxes 6,824 13,049 14,762 18,865
-------- -------- -------- --------
Income Reported $ 10,715 $ 20,964 $ 23,237 $ 29,986
======== ======== ======== ========
</TABLE>
The following is summarized income statement information for Bear Creek.
No provision for income taxes has been included since its income taxes are paid
directly by the joint-venture participants.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
(In Thousands)
<S> <C> <C> <C> <C>
Revenues $8,940 $8,821 $18,023 $17,850
Expenses:
Operating expenses 1,050 1,452 2,261 3,753
Depreciation 1,362 1,360 2,724 2,719
Other expenses, net 923 1,116 1,908 2,308
------ ------ ------- -------
Income Reported $5,605 $4,893 $11,130 $ 9,070
====== ====== ======= =======
</TABLE>
<PAGE>
4. Unconsolidated Affiliates (Cont'd)
The following are summarized results of operations for Destin. No
provision for income taxes has been included since its income taxes are paid
directly by joint venture participants.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
(In Thousands)
<S> <C> <C> <C> <C>
Revenues $ 6,093 $ 2,921 $ 9,926 $ 4,793
Expenses:
Operating expenses 1,754 - 3,379 -
Depreciation 3,229 - 4,815 -
Interest and other 2,141 (6,301) 3,896 (10,608)
------- ------- ------- --------
Income (Loss) Reported $(1,031) $ 9,222 $(2,164) $ 15,401
======= ======= ======= ========
</TABLE>
5. Debt and Lines of Credit
Unsecured Notes - Loans under all short-term credit facilities are for a
duration of less than three months.
At June 30, 1999, Sonat had short-term lines of credit of $900.0 million
available through April 13, 2000. Southern had short-term lines of credit of
$42.0 million available through May 29, 2000. Borrowings are available for a
period of not more than 364 days and are in the form of unsecured promissory
notes that bear interest at rates based on the banks' prevailing prime,
international or money-market lending rates. At June 30, 1999, Sonat had $11.9
million outstanding under its agreement at a rate of 5.75 percent. No amounts
were outstanding under Southern's agreement.
Sonat had $587.5 million in commercial paper outstanding at an average
rate of 5.23 percent at June 30, 1999. In addition, Sonat had $300 million of
short-term notes borrowed from a bank at an average rate of 5.39 percent at June
30, 1999.
Long-Term Debt - In July, Sonat issued $600 million of its 7 5/8 percent
Notes due July 15, 2011, at 98.949 percent to yield 7.761 percent. The net
proceeds from the offering were used to repay short-term indebtedness.
<PAGE>
6. Rate Matters and Contingencies
Periodically, Southern makes general rate filings with the FERC to
provide for the recovery of cost of service and a return on equity. The FERC
normally allows the filed rates to become effective, subject to refund, until it
rules on the approved level of rates. Southern provides reserves relating to
such amounts collected subject to refund, as appropriate, and makes refunds upon
establishment of the final rates. At June 30, 1999, Southern's rates are
established by a settlement that was approved by FERC orders issued in 1995 and
1996. All of its customers are parties to the settlement, and all revenue is
based on the final settlement rates and therefore is not being collected subject
to refund.
7. Comprehensive Income
Comprehensive income (loss), net of related tax, is as follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
--------------------- -----------------
1999 1998 1999 1998
---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C>
Net Income (Loss) $33,640 $(315,296) $(178,576) $(287,346)
Unrealized Gains (Loss)
on Securities (180) (411) (244) 863
Reclassification Adjustment 4 (27) (1,158) (37)
------- --------- --------- ---------
Comprehensive Income (Loss) $33,464 $(315,734) $(179,978) $(286,520)
======= ========= ========= =========
</TABLE>
Common Stock and Other Capital in the Condensed Consolidated Balance
Sheets includes $.2 million at June 30, 1999, and $1.6 million at December 31,
1998, related to other comprehensive income, which is comprised of unrealized
gains on securities.
<PAGE>
8. Segment Information
The Company's consolidated financial statements reflect operations in
three segments: Exploration and Production, Natural Gas Transmission and Energy
Services. The Company's revenues and earnings before interest and taxes (EBIT)
by business segment are shown in the following tables.
<TABLE>
<CAPTION>
Three Months Ended June 30, 1999
--------------------------------------------------------------------
Exploration Natural
and Gas Energy
Production Transmission Services Other Total
------------ ------------ -------- -------- --------
(In Thousands)
Revenues from
<S> <C> <C> <C> <C> <C>
External Customers $34,061 $87,934 $729,133 $(1,707) $849,421
Intersegment Revenues 84,135 7,253 150 15,501 107,039
Earnings (Loss) Before
Interest and Taxes 40,260 48,742 (1,898) (5,464) 81,640
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended June 30, 1998
--------------------------------------------------------------------
Exploration Natural
and Gas Energy
Production Transmission Services Other Total
------------ ------------ -------- -------- --------
(In Thousands)
Revenues from
<S> <C> <C> <C> <C> <C>
External Customers $ 42,138 $86,534 $800,164 $(3,704) $ 925,132
Intersegment Revenues 106,041 8,966 - 13,663 128,670
Earnings (Loss) Before
Interest and Taxes (523,358) 63,147 1,644 1,368 (457,199)
</TABLE>
<PAGE>
8. Segment Information (Cont'd)
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999
--------------------------------------------------------------------
Exploration Natural
and Gas Energy
Production Transmission Services Other Total
------------ ------------ -------- -------- --------
(In Thousands)
Revenues from
<S> <C> <C> <C> <C> <C>
External Customers $ 53,132 $181,957 $1,390,978 $(2,906) $1,623,161
Intersegment Revenues 156,755 13,933 150 30,055 200,893
Earnings (Loss) Before
Interest and Taxes (310,042) 104,924 (3,490) (7,115) (215,723)
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1998
--------------------------------------------------------------------
Exploration Natural
and Gas Energy
Production Transmission Services Other Total
------------ ------------ -------- -------- --------
(In Thousands)
Revenues from
<S> <C> <C> <C> <C> <C>
External Customers $ 121,936 $182,138 $1,737,219 $(7,018) $2,034,275
Intersegment Revenues 188,105 18,863 - 29,352 236,320
Earnings (Loss) Before
Interest and Taxes (525,803) 132,062 2,480 3,360 (387,901)
</TABLE>
<PAGE>
8. Segment Information (Cont'd)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
(In Thousands)
Total Earnings (Loss) Before
Interest and Taxes for
<S> <C> <C> <C> <C>
Reportable Segments $ 87,104 $(458,567) $(208,608) $(391,261)
Other Earnings (Loss) Before
Interest and Taxes (5,464) 1,368 (7,115) 3,360
Interest Income 1,652 1,063 3,591 3,263
Interest Expense (35,846) (34,792) (71,153) (66,922)
Interest Capitalized 3,825 1,448 7,245 2,872
-------- --------- --------- ---------
Income (Loss) Before Income
Taxes $ 51,271 $(489,480) $(276,040) $(448,688)
======== ========= ========= =========
</TABLE>
Assets for the Company's three segments are as follows:
June 30,
1999
(In Thousands)
Assets by Segment
Exploration and Production $1,367,429
Natural Gas Transmission 2,018,529
Energy Services 755,490
<PAGE>
9. Earnings Per Share
The calculation of earnings per share assuming dilution differs from
that of earnings per share due to the denominator for the assuming dilution
calculation including common stock equivalents applicable to outstanding stock
options.
The following table presents the computation of earnings (loss) per
share of common stock and earnings (loss) per share-assuming dilution:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
(In Thousands, Except
Per-Share Amounts)
Numerator:
<S> <C> <C> <C> <C>
Net income (Loss) $ 33,640 $(315,296) $(178,576) $(287,346)
======== ========= ========= =========
Denominator:
Denominator for Earnings Per Share:
Weighted average number of
shares of common stock
outstanding 110,062 110,049 110,054 110,008
Effect of Dilutive Securities:
Common stock equivalents
applicable to outstanding
stock options 898 - - -
-------- --------- --------- ---------
Denominator for Earnings Per
Share-Assuming Dilution:
Adjusted weighted average
shares using treasury
stock method for assumed
conversions 110,960 110,049 110,054 110,008
======== ========= ========= =========
Earnings (Loss) Per Share of
Common Stock $ .31 $ (2.87) $ (1.62) $ (2.61)
======== ========= ========= =========
Earnings (Loss) Per Share of
Common Stock-Assuming Dilution $ .30 $ (2.87) $ (1.62) $ (2.61)
======== ========= ========= =========
</TABLE>
<PAGE>
10. Subsequent Event
The Company has agreed with AGL Resources, Inc. (AGL) to purchase the 35
percent interest held by AGL in each of Sonat Marketing and Sonat Power
Marketing. The purchase price for both interests will be $65 million in total.
Completion of both transactions is subject to, among other things, termination
of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976. Additionally, completion of the purchase of AGL's interest in Sonat
Power Marketing is subject to approval of the FERC under Section 203 of the
Federal Power Act. The Company expects to close the purchase of AGL's interest
in Sonat Marketing sometime during the third quarter of 1999, while the purchase
of AGL's interest in Sonat Power Marketing is expected to close by the end of
1999.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Business segment operating results for Sonat Inc. and its subsidiaries
(the Company) are presented in the table below. The table also shows unusual
items that affect earnings before interest and taxes (EBIT) and net income
comparisons. The table is presented because management believes this information
enhances the analysis of results of operations.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
(In Millions)
Earnings (Loss) Before Interest and Taxes:
<S> <C> <C> <C> <C>
Exploration and production $ 40.3 $(523.4) $(310.0) $(525.8)
Natural gas transmission 48.7 63.1 104.9 132.0
Energy services (1.9) 1.7 (3.5) 2.5
Other (5.5) 1.4 (7.1) 3.4
------ ------- ------- -------
81.6 (457.2) (215.7) (387.9)
Adjustment for Unusual Items:
Exploration and Production
Ceiling test charges - (540.5) (351.5) (580.2)
Restructuring costs - (15.0) - (15.0)
------ ------- ------- -------
Earnings Before Interest and Taxes
Excluding Unusual Items $ 81.6 $ 98.3 $ 135.8 $ 207.3
====== ======= ======= =======
Net Income (Loss) As Reported $ 33.6 $(315.3) $(178.6) $(287.3)
Adjustment for Unusual Items:
Exploration and Production
Ceiling test charges - (351.4) (228.5) (377.1)
Restructuring costs - (9.7) - (9.7)
------ ------- ------- -------
Net Income Excluding Unusual Items $ 33.6 $ 45.8 $ 49.9 $ 99.5
====== ======= ======= =======
Earnings (Loss) Per Share of
Common Stock-Assuming Dilution $ .30 $ (2.87) $ (1.62) $ (2.61)
====== ======= ======= =======
Earnings Per Share of Common Stock
Excluding Unusual Item-
Assuming Dilution $ .30 $ .41 $ .46 $ .91
====== ======= ======= =======
</TABLE>
<PAGE>
EXPLORATION AND PRODUCTION
The Company is engaged in the exploration for and the acquisition,
development and production of oil and natural gas in the United States through
Sonat Exploration Company and Sonat Exploration GOM (Sonat Exploration). Most of
Sonat Exploration's natural gas production is sold to Sonat Marketing Company
L.P. (Sonat Marketing), the Company's majority-owned affiliate operating in the
Energy Services segment.
EXPLORATION AND PRODUCTION OPERATIONS
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------------- -----------------
1999 1998 1999 1998
---- ---- ---- ----
(In Millions)
<S> <C> <C> <C> <C>
Revenues $118.2 $ 148.1 $ 209.9 $ 310.0
------ ------- ------- -------
Costs and Expenses:
Operating and maintenance 14.2 19.2 31.7 38.6
General and administrative 10.3 9.2 19.2 18.3
Depreciation, depletion and
amortization 48.4 80.0 106.3 168.9
Ceiling test charges - 540.5 351.5 580.2
Restructuring costs - 15.0 - 15.0
Taxes and other 6.1 7.9 12.3 15.3
------ ------- ------- -------
79.0 671.8 521.0 836.3
------ ------- ------- -------
Operating Income (Loss) 39.2 (523.7) (311.1) (526.3)
Other Income 1.1 .3 1.1 .5
------ ------- ------- -------
Earnings (Loss) Before Interest
and Taxes $ 40.3 $(523.4) $(310.0) $(525.8)
====== ======= ======= =======
Net Sales Volumes:
Gas (Bcf) 47 60 93 123
Oil and condensate (MBbls) 1,141 1,784 2,399 3,734
Natural gas liquids (MBbls) 200 591 402 1,175
- ------------------------------------------------------------------------------------------------
Average Sales Prices:
Gas ($/Mcf) $ 2.02 $ 2.00 $ 1.84 $ 2.01
Oil and condensate ($/Bbl) 16.00 13.00 13.40 13.92
Natural gas liquids ($/Bbl) 8.30 8.81 7.80 9.27
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Second Quarter 1999 to Second Quarter 1998 Analysis
EBIT increased $8.2 million after excluding ceiling test charges and
restructuring costs of $555.5 million in the second quarter of 1998 primarily
due to lower costs and expenses partly offset by lower revenues from lower
production volumes. Production volumes decreased approximately 18 billion cubic
feet equivalent (Bcfe) due to property sales in 1998.
Natural gas and oil and condensate production decreased 22 percent and
36 percent, respectively, from the second quarter of 1998 primarily due to
property sales in 1998. Realized oil and condensate prices increased 23 percent
to an average of $16.00 per barrel from $13.00 per barrel in the 1998 period.
Average realized natural gas prices were relatively flat compared to the 1998
period.
Costs and expenses were $37.3 million lower than the prior period after
excluding the ceiling test charges and restructuring costs discussed earlier.
Depreciation, depletion and amortization expense decreased 40 percent due to
lower production and a lower amortization rate ($.88 for the 1999 period
compared to $1.08 for the 1998 period). Operating and maintenance expense
decreased 26 percent primarily due to property sales in 1998 and early 1999.
Six Months 1999 to Six Months 1998 Analysis
EBIT decreased $27.9 million after excluding the $351.5 million and
$580.2 million of ceiling test charges recognized in the 1999 and 1998 periods,
respectively, and the $15.0 million restructuring charge, discussed earlier. The
decline is due primarily to lower production volumes and lower energy prices,
partly offset by lower costs and expenses. Production volumes decreased
approximately 38 Bcfe due to property sales in 1998 and early 1999.
Natural gas and oil and condensate production decreased 24 percent and
36 percent, respectively, from the 1998 period primarily due to property sales
in 1998 and early 1999. Average realized natural gas prices decreased 8 percent
to $1.84 per thousand cubic feet (Mcf) for the 1999 period from $2.01 per Mcf
for the 1998 period.
Costs and expenses were $71.6 million lower than the prior period after
excluding the ceiling test charges and restructuring costs discussed earlier.
Depreciation, depletion and amortization expense decreased 37 percent due to
lower production and a lower amortization rate ($.97 for the 1999 period
compared to $1.11 for the 1998 period). Operating and maintenance expense
decreased 18 percent primarily due to property sales in 1998 and early 1999.
Taxes and other expense decreased 20 percent due to lower severance taxes from
lower volumes.
<PAGE>
Hedging Activities
Sonat Exploration, through Sonat Marketing, uses derivative financial
instruments to manage the risks associated with price volatility for its
production, which it sells in the spot market. (See Market Risk and Note 3 of
the Notes to Condensed Consolidated Financial Statements.) Gains or losses
experienced on Sonat Exploration's hedging transactions offset the changes in
revenue recognized on the sale of the commodity. Natural gas revenues decreased
by $.5 million and increased by $.2 million in the three-month and six-month
periods ended June 30, 1999 and decreased by $3.1 million and $1.9 million in
the three-month and six-month periods ended June 30, 1998, respectively, as a
result of hedging activities. There were no oil hedging activities reflected in
either period.
A portion of Sonat Exploration's future gas production is hedged through
the year 2012. Sonat Exploration's hedged gas production at June 30, 1999 is as
follows:
Weighted
Average
Volumes Price
(Bcf) (per Mcf)
Remainder of 1999 87.7 $2.10
2000 163.0 2.15
2001 4.4 2.30
2002 4.4 2.34
2003-2012 41.3 3.39
- ----------------------------------------------------------------------
300.8 $2.31
======================================================================
Oil production of 880 thousand barrels and 2,818 thousand barrels is
hedged for the remainder of 1999 and 2000, respectively, at a weighted average
price per barrel of $18.42 and $17.76, respectively.
NATURAL GAS TRANSMISSION
The Company is engaged in the natural gas transmission business through
Southern Natural Gas Company and its subsidiaries (Southern) and Citrus Corp. (a
50 percent-owned company). Southern and Citrus Corp. (Citrus) are actively
pursuing opportunities to expand their pipeline systems in their traditional
market areas and to connect new gas supplies.
Units of Shell Oil Company (Shell) and BP Amoco Corporation (BP Amoco)
are equal partners with Southern in the ownership of Destin Pipeline Company,
L.L.C. (Destin). Destin owns a 223-mile, 1 billion cubic feet per day interstate
pipeline system that transports natural gas from the growing eastern Gulf of
Mexico production area, which was placed fully in service in March 1999. An
additional 31-mile extension was placed in service in May 1999.
Construction is progressing on Southern's expansion project to North
Alabama. The 122-mile, 78 million-cubic-foot-per-day expansion is expected to be
in service in late 1999.
Southern LNG Inc., a subsidiary of Southern, filed an application with
the FERC in July 1999 to reactivate its liquefied natural gas (LNG) marine
receiving terminal located on Elba Island, near Savannah, Georgia. The Elba
Island terminal has been out of service since 1982. Sonat Energy Services Inc.
(Sonat Energy Services), another Sonat subsidiary, was awarded a 22-year service
agreement for all of Elba Island's terminaling, storage, and vaporization
capacity. The Elba Island terminal is capable of achieving a peak sendout of 540
million cubic feet of natural gas per day and a baseload sendout of 330 million
cubic feet of natural gas per day. Sonat estimates that the capital cost
associated with recommissioning the Elba Island terminal will be approximately
$26 million.
<PAGE>
Sonat Energy Services plans to import LNG from Trinidad through the Elba
Island terminal. Shipment of the LNG to Elba Island will be arranged by the
sellers of the LNG, who are a group of producers led by British Gas Trinidad and
Tobago Limited. Deliveries are estimated to commence in mid-2002 and will
provide approximately 80 Bcf of natural gas per year through the Elba Island
terminal for a primary term of 17 years. The supply arrangement could be
extended for an additional term of five years. Depending upon operating and
market conditions, Sonat Energy Services can handle additional volumes from
Trinidad or other sources through its contracted capacity in the reactivated
facility. Because of growing natural gas demand in the Southeast, Southern
expects to initiate several pipeline expansion projects over the next several
years. The Elba Island terminal is located on the eastern end of Southern's
service territory, making it a strategically valuable source of natural gas
supply. Not only is the terminal's reactivation expected to serve expansions
within its current service territory, but it is also offers the potential to
expand the Southern pipeline system to new markets.
Southern's Elba Island reactivation and Sonat Energy Services'
importation project are subject to several conditions, including U.S. and
Trinidadian governmental approvals, the execution of final agreements, the
finalization of plans relating to shipping, and the expansion of its LNG
facility in Trinidad by Atlantic LNG Company of Trinidad and Tobago.
Southern had previously announced plans to form a 50/50 joint venture
with Carolina Power & Light Company (CP&L) to construct, own, and operate a
natural gas pipeline, to be known as the Palmetto Interstate Pipeline, from
Southern's pipeline system to a delivery point in North Carolina. The planned
in-service date of the Palmetto Interstate Pipeline has been delayed in order to
allow CP&L time to analyze two other competing pipeline proposals that have been
announced. Consequently, all ongoing survey, environmental, and route selection
activities for this project have been suspended. The Company is unable to
predict whether or at what time this project may go forward.
Florida Gas had previously filed an application with the FERC seeking
approval of a Phase IV expansion project pursuant to which it would expand its
pipeline system by 272,000 MMBtu/day at a cost of $351 million to serve
additional demand in its market area, principally for gas-fired power
generation. The expansion is fully subscribed under contracts with primary terms
of 20 years. In July 1999 the FERC granted a preliminary determination approving
the Phase IV project on nonenvironmental issues, endorsing a settlement that had
been reached by Florida Gas and its shippers that includes a rate cap.
<PAGE>
SOUTHERN NATURAL GAS COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
(In Millions)
Revenues:
Market transportation and
<S> <C> <C> <C> <C>
storage $79.6 $77.9 $165.8 $161.4
Supply transportation 11.1 12.1 21.5 23.7
Other 4.5 5.5 8.6 15.9
----- ----- ------ ------
Total Revenues 95.2 95.5 195.9 201.0
----- ----- ------ ------
Costs and Expenses:
Operating and maintenance 18.5 19.0 38.0 38.6
General and administrative 16.0 12.2 31.6 27.7
Depreciation and amortization 14.9 13.1 28.9 18.6
Taxes, other than income 5.7 5.4 11.7 10.7
----- ----- ------ ------
55.1 49.7 110.2 95.6
----- ----- ------ ------
Operating Income 40.1 45.8 85.7 105.4
----- ----- ------ ------
Other Income:
Equity in Earnings of
Unconsolidated Affiliates 2.5 5.6 4.9 9.7
Other 1.0 1.1 2.9 1.8
----- ----- ------ ------
3.5 6.7 7.8 11.5
----- ----- ------ ------
Earnings Before Interest and Taxes $43.6 $52.5 $ 93.5 $116.9
===== ===== ====== ======
(Billion Cubic Feet)
Volumes:
Market transportation 135 137 312 322
Supply transportation 90 103 179 198
----- ----- ------ ------
Total Volumes 225 240 491 520
===== ===== ====== ======
</TABLE>
CITRUS CORP.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
(In Millions)
Equity in Earnings of
<S> <C> <C> <C> <C>
Citrus Corp. $ 5.7 $ 10.8 $ 12.3 $ 15.7
===== ====== ====== ======
(Billion Cubic Feet)
Florida Gas Volumes (100%):
Market transportation 123 109 215 204
Supply transportation 12 9 25 16
----- ------ ------ ------
Total Volumes 135 118 240 220
===== ====== ====== ======
</TABLE>
<PAGE>
Second Quarter 1999 to Second Quarter 1998 Analysis
Southern Natural Gas Company and Subsidiaries - EBIT for the second
quarter of 1999 decreased $8.9 million compared with the prior year. The
decrease was primarily due to higher general and administrative expenses as a
result of higher stock-based compensation expense in the 1999 period and an
insurance cost adjustment in the 1998 period, higher depreciation expense as a
result of higher plant balances in 1999 and lower equity in earnings of
unconsolidated affiliates.
Market transportation revenues increased due to recent expansions.
Supply transportation revenues declined due to lower volumes at Sea Robin
Pipeline Company. Equity in earnings of unconsolidated affiliates decreased
primarily due to lower earnings at Destin Pipeline as a result of allowance for
funds used during construction (AFUDC) capitalized in the 1998 period.
Citrus - Equity in earnings of Citrus decreased $5.1 million to $5.7
million. The decrease is primarily due to the recognition of credits on a gas
supply agreement in 1998 and higher operating expenses, partly offset by higher
utilization and prices for firm transportation capacity held by Citrus Trading
and lower interest expense due to lower debt levels.
Six Months 1999 to Six Months 1998 Analysis
Southern Natural Gas Company and Subsidiaries - EBIT decreased $23.4
million for the six months ending June 30, 1999 compared with the 1998 period.
The decrease was primarily due to higher depreciation and amortization expense,
the recognition of a royalty reserve reversal of $4.2 million in the 1998
period, higher general and administrative expenses, and lower equity in earnings
of unconsolidated affiliates. Depreciation and amortization expenses increased
primarily due to a $7.0 million pretax adjustment of the salvage value on
certain fixed assets in the 1998 period and higher plant balances in 1999.
General and administrative expenses increased in the 1999 period primarily due
to higher stock-based compensation expense in the 1999 period and an insurance
reserve reversal in the 1998 period. Equity in earnings of unconsolidated
affiliates decreased primarily due to lower earnings at Destin Pipeline as a
result of higher AFUDC capitalized in the 1998 period.
Partially offsetting the decrease was the effect of higher market
transportation revenues due to recent expansions. Supply transportation revenues
declined due to lower volumes at Sea Robin Pipeline Company. Other income
increased due to higher AFUDC equity and the sale of certain facilities.
Citrus - Equity in earnings of Citrus decreased $3.4 million to $12.3
million. The decrease is primarily due to the recognition of credits on a gas
supply agreement in 1998 and higher operating expenses, partly offset by higher
utilization and prices for firm transportation capacity held by Citrus Trading
and lower interest expense due to lower debt levels.
<PAGE>
Natural Gas Sales and Supply
Sales by Southern of natural gas are anticipated to continue only until
Southern's remaining supply contracts expire, are terminated, or are assigned.
As a result of its restructuring pursuant to FERC directives in past years,
Southern terminated or renegotiated to market pricing virtually all of its gas
supply contracts through which it had historically obtained its long-term gas
supply. Pending the termination or expiration of the few remaining supply
contracts, Southern's remaining gas supply is being sold on a month-to-month
basis. Because Southern is primarily a gas transporter and does not realize
significant margins on gas sales, the net of gas sales revenues and natural gas
cost is included in other revenue.
Except for the sale of its remaining gas supply described above,
Southern's participation in gas supply activities will be limited to the
purchase and sale of gas from time to time as may be required for system
management purposes.
Southern's annual purchase commitments total less than $21 million per
year for 1999 and subsequent years. Based on Southern's current expectations
with respect to natural gas prices in 1999 and the years following, an
immaterial volume of gas is expected to be at prices above market.
Rate Matters
Under terms of a settlement approved by the FERC, all of Southern
Natural Gas' previously pending rate proceedings and proceedings to recover gas
supply realignment and other transition costs associated with the implementation
of FERC Order No. 636 were resolved. The settlement requires Southern Natural
Gas to file a new rate case no later than September 1, 1999. Southern expects
the rates filed in that rate case to become effective after normal suspension by
the FERC on March 1, 2000, subject to refund upon settlement or final litigated
conclusion of the rate case.
In September 1997, the FERC approved a rate case settlement between
Florida Gas and its customers. The terms of the settlement provide for tiered
rates effective beginning March 1, 1997, which, for a two-year period, reflect
an increase over the rates in effect prior to the rate filing for transportation
through both the pre-expansion and Phase III expansion systems. The settlement
resolved all issues related to Phase III construction and the construction cost
audit. The settlement terms required Florida Gas to file a new rate case no
later than October 1, 2001, but a subsequent settlement in connection with
Florida Gas' Phase IV expansion application provides that Florida Gas will file
a general rate case on or before October 1, 2003, but not before October 1,
2001.
In June 1999, in a case on remand from the Fifth Circuit Court of
Appeals and in response to an application filed earlier by Southern's wholly
owned subsidiary, Sea Robin Pipeline Company (Sea Robin), the FERC determined
that Sea Robin performs a nonjurisdictional gathering function in part and a
jurisdictional transmission function in part. Specifically, the FERC concluded
that the two legs of Sea Robin's inverted Y-shaped pipeline system in the Gulf
of Mexico upstream of the Vermilion Block 149 compressor station constitute
gathering facilities, while a 66.3-mile, 36-inch pipeline downstream from the
Vermilion 149 station to Erath, Louisiana is a transmission facility. In the
order, the FERC required Sea Robin to file tariff sheets with separate gathering
rates for the gathering services to be provided on the gathering segments of Sea
Robin's system. Sea Robin has filed for an extension of time to make this tariff
filing until the FERC makes a decision on rehearing.
<PAGE>
ENERGY SERVICES
Sonat Energy Services, through its majority-owned subsidiaries, Sonat
Marketing and Sonat Power Marketing L.P. (Sonat Power Marketing), conducts
marketing activities in the natural gas and electric industries, respectively.
Sonat Marketing purchases and resells substantially all of Sonat Exploration's
natural gas production, as well as purchasing and reselling gas for other
customers. Sonat Power Marketing has executed electric power purchase, sales and
transmission agreements with numerous companies and is focused on expanding its
wholesale electric marketing business. Both of these subsidiaries use derivative
instruments. (See Market Risk and Note 3 of the Notes to Condensed Consolidated
Financial Statements).
Sonat Energy Services has reached agreement with AGL Resources, Inc.
(AGL) to purchase AGL's 35 percent interest in Sonat Marketing and Sonat Power
Marketing L.P. for $65 million. These transactions are subject to certain
customary conditions, including, among others, receipt of certain required
government approvals. These transactions are expected to close by the end of
1999. (See Note 10 of the Notes to the Condensed Consolidated Financial
Statements).
In July 1999, Sonat Energy Services was awarded a service agreement by a
wholly owned subsidiary of Southern in connection with the reactivation of the
Elba Island LNG marine receiving terminal. The service agreement is for all of
Elba Island's terminaling, storage and vaporization capacity. (See the related
discussion in the Natural Gas Transmission section).
<PAGE>
ENERGY SERVICES
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
(In Millions)
<S> <C> <C> <C> <C>
Revenues $729.3 $800.2 $1,391.1 $1,737.2
====== ====== ======== ========
Operating Margin $ 13.4 $ 14.3 $ 30.8 $ 27.4
====== ====== ======== ========
Operating Income (Loss) $ (1.3) $ 2.2 $ 1.8 $ 3.3
====== ====== ======== ========
Earnings (Loss) Before Interest
and Taxes $ (1.9) $ 1.7 $ (3.5) $ 2.5
====== ====== ======== ========
(Billion Cubic Feet)
Sonat Marketing Gas Sales
Volumes (100%) 263 284 553 644
====== ====== ======== ========
(Thousands of Megawatt Hours)
Sonat Power Marketing Sales
Volumes (100%) 3,060 2,729 6,069 5,899
====== ====== ======== ========
(Billion Cubic Feet)
Financial Volumes Notional
Settlements Third Parties-
Natural Gas 1,182 688 3,057 1,316
====== ====== ======== ========
</TABLE>
Second Quarter 1999 to Second Quarter 1998 Analysis
EBIT for the second quarter of 1999 was a loss of $1.9 million compared
with income of $1.7 million in 1998 primarily due to higher operating expenses
and lower margins. Sonat Marketing's physical sales volumes were lower in 1999
compared to 1998. However, notional volumes from natural gas derivative
settlements increased significantly in 1999 compared to 1998, reflecting an
increase in Sonat Marketing's financial transactions on behalf of customers and
an increase in market making of derivative products for its own account and to
manage its basis positions. Other income was slightly lower than the prior
period primarily due to an operating loss at the 50 percent-owned Mid-Georgia
Cogen L.P. power plant, partially offset by lower minority interest expense in
the current period.
Six Months 1999 to Six Months 1998 Analysis
EBIT for the first six months of 1999 was a loss of $3.5 million
compared to income of $2.5 million in 1998 primarily due to higher operating
expenses, lower other income, and lower margins at Sonat Marketing, partially
offset by higher margins at Sonat Power Marketing. Sonat Marketing's physical
sales volumes were 14 percent lower in 1999. Margins on notional volumes from
natural gas derivative settlements were also lower in 1999 compared to 1998.
Sonat Power Marketing's 1999 margins were substantially higher than the 1998
period. Other income was $4.5 million lower than the prior period due to an
operating loss at the 50 percent-owned Mid-Georgia Cogen L.P. power plant and a
write down of the carrying value of certain investments.
<PAGE>
Other Income Statement Items
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
(In Millions)
<S> <C> <C> <C> <C>
Interest Expense, Net $30.4 $ 32.3 $ 60.3 $ 60.8
</TABLE>
Net interest expense decreased in both the three-month and six-month
periods of 1999 compared to the same periods of 1998 due to lower average
interest rates in both periods, which was partly offset by higher average debt
levels in both periods. Interest capitalized increased in both periods of 1999
due to increased interest capitalized at Sonat Exploration and Sonat Energy
Services.
<TABLE>
<S> <C> <C> <C> <C>
Income Tax Expense (Benefit) $17.6 $(174.2) $(97.5) $(161.3)
</TABLE>
Income tax expense increased in the second period of 1999 compared to the
same period of 1998 due to ceiling test charges and restructuring costs recorded
at Sonat Exploration in 1998. Greater ceiling test charges in the 1998 six-month
period resulted in a decrease in income tax benefit in the current six-month
period. Absent the ceiling test charges and restructuring charge, the effective
tax rate increased in the 1999 periods due to a decrease in tax preference
items.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
<TABLE>
<CAPTION>
Six Months
Ended June 30,
1999 1998
(In Millions)
<S> <C> <C>
Operating Activities $ 168.6 $ 378.6
</TABLE>
Cash flow from operations decreased $210.0 million compared to the 1998
period primarily due to lower operating results, which were discussed earlier in
the individual segment discussions.
Depreciation, depletion, and amortization and deferred income taxes
include a charge of $351.5 million and a benefit of $123.0 million,
respectively, in the 1999 period and a charge of $580.2 million and a benefit of
203.1 million, respectively, in the 1998 period for ceiling test charges related
to Sonat Exploration's oil and gas properties. Absent the ceiling test charges,
the change in deferred income taxes and accrued interest and income taxes
primarily reflects a tax loss on the sale of certain properties and the
deduction of intangible drilling costs for income tax purposes, both of which
occurred in the current period at Sonat Exploration. The change in accounts
receivable and accounts payable is primarily attributable to the effects of
decreasing natural gas prices in the prior period and lower volumes in the
current period. The change in restricted cash, accrued long-term compensation,
and other current assets and liabilities primarily represent the payment of
certain expenses associated with the merger between the Company and Zilkha
Energy in January 1998. A decrease in broker deposits also contributed to the
change in other current assets and liabilities. The change in Other primarily
reflects the amortization of prepaid revenue at Sonat Exploration.
<PAGE>
<TABLE>
<CAPTION>
Six Months
Ended June 30,
1999 1998
(In Millions)
<S> <C> <C>
Investing Activities $(284.1) $(567.1)
</TABLE>
Net cash used in investing activities was $283.0 million lower in 1999
compared to 1998. The change was primarily due to lower capital expenditures at
Sonat Exploration partly due to lower developmental drilling in the current
period and property sales during 1998. In addition, the 1998 period included
higher investments in the Destin Pipeline and the Mid-Georgia cogen joint
ventures.
Capital expenditures for the Company's business segments (excluding
unconsolidated affiliates) were as follows:
<TABLE>
<S> <C> <C>
Exploration and Production $ 179.5 $ 401.8
Natural Gas Transmission 63.0 82.2
Energy Services 49.6 6.0
Other 1.3 3.0
------- -------
Total $ 293.4 $ 493.0
======= =======
</TABLE>
The Company's investments in unconsolidated affiliates were $11.7
million and $83.9 million in the first six months of 1999 and 1998,
respectively.
<TABLE>
<S> <C> <C>
Financing Activities $109.8 $ 172.3
</TABLE>
Net cash provided by financing activities decreased $62.5 million
compared to the 1998 period. The change was primarily due to lower cash
requirements for various corporate expenditures.
<PAGE>
CAPITAL RESOURCES
At June 30, 1999, the Company had bank lines of credit and a revolving
credit agreement with banks with a total capacity of $942 million. The Company's
bank and commercial paper borrowings in the aggregate are not authorized to
exceed the maximum amount available under its lines of credit and revolving
credit agreement. As a result, after giving effect to the $587.5 million of
commercial paper and $11.9 million of borrowings from the short-term lines of
credit outstanding at June 30, 1999, $342.6 million was available to the Company
under such lines of credit and revolving credit agreement at June 30, 1999.
In July, 1999 Sonat issued $600 million of its 7 5/8 percent Notes due
July 15, 2011, at 98.949 percent to yield 7.761 percent. The net proceeds from
the offering were used to repay short-term indebtedness.
Southern has a shelf registration statement with the Securities and
Exchange Commission which provides for the issuance of up to $500 million in
debt securities. Southern issued $100.0 million in debt under its registration
statement in 1998.
The Company's capital expenditures and other investing requirements for
1999 are expected to total $477 million. This amount reflects investments in
unconsolidated affiliates and proposed expenditures for oil and gas property
acquisitions, exploration and development, pipeline expansion and other
projects.
The Company believes that cash flow from operations and borrowings in
either the private or public market will provide the Company with the means to
fund operations and currently planned investment and capital expenditures.
YEAR 2000 PROJECT
The following disclosure contains forward-looking statements. The
Company's ability to meet its objectives identified below is dependent upon
several factors that could cause actual results to differ materially from those
set forth below, including the timely provision of necessary upgrades and
modifications by suppliers. In addition, the Company cannot guarantee that third
parties on whom it depends for essential services will convert their critical
systems and processes in a timely manner. Each of the phases of the Company's
Year 2000 project is progressing and the Company believes that it is taking all
reasonable and appropriate steps necessary to be able to operate in the Year
2000 and beyond.
To answer the Year 2000 challenge, the Sonat Board of Directors directed
that a corporate-wide initiative be undertaken. A consulting firm was engaged to
assist in this effort. The Company has divided its Year 2000 project into
assessment, remediation, testing, and contingency planning phases. During the
assessment phase, the Company completed a comprehensive inventory of IT systems,
embedded systems, equipment, computer hardware, and software that rely on a
computer chip as well as service providers that could be impacted by the Year
2000 problem. For vendor-supplied items, the Company has contacted its vendors
seeking written verification of Year 2000 readiness. In addition, the Company
continues to communicate with its critical service providers and business
partners such as natural gas suppliers, pipelines, electric utilities,
telecommunication service providers, banks, and other suppliers of goods and
services, to determine the extent to which the Company is vulnerable to the
failure of those third-parties to remediate their Year 2000 issues.
<PAGE>
The remediation phase includes completing the replacement of mainframe
systems with Year 2000-ready vendor packages on new client/server platforms and
performing any required modifications and upgrades identified during the
assessment phase. The testing phase involves testing systems for Year 2000
readiness. The Company has completed remediation and testing of its critical
systems and has substantially completed remediation and testing of its
non-critical systems.
The Company relies on producers of natural gas, natural gas pipelines,
natural gas distribution companies, natural gas marketing companies and electric
transmission providers to conduct its basic operations. External infrastructure,
such as electric, telecommunication and water service is also necessary for the
Company's basic operations. Should any third party with which the Company has a
material relationship fail, the impact could become a significant challenge to
the Company's ability to perform its basic operations. Due to the nature of the
Company's business, contingency plans are already in place for certain
conditions, including plans to provide pipeline system reliability. The company
has reviewed these existing plans and has developed additional plans as
practicable for critical systems, service providers and business partners. A
consulting firm was engaged to assist in this effort. These plans involve
contingencies for failures that may result from the Year 2000 problem, and
include plans to establish control centers to facilitate communications in the
event of a telecommunications failure and staffing at selected locations on the
Company's pipeline system.
The estimated cost to the Company of the Year 2000 project for capital
as well as general and administrative costs has been revised, due primarily to
its contingency planning activities, and is not expected to exceed $14 million.
As of June 30, 1999, the Company has incurred approximately $10.6 million in
Year 2000 project costs. The Company expects to fund Year 2000 expenditures from
normal operations. The timing of expenditures is not indicative of readiness
efforts or progress to date.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Quarterly Report contains certain forward-looking statements
regarding the Company's business plans and prospects, objectives, future
drilling plans, expansion projects, proposed capital expenditures and expected
performance or results. These forward-looking statements are based on
assumptions that the Company believes are reasonable, but are subject to a wide
range of risks and uncertainties and, as a result, actual results and experience
may differ materially from the anticipated results or other expectations
expressed in such forward-looking statements. Such statements are made in
reliance on the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995.
Important factors that could cause actual results to differ include
changes in oil and gas prices and underlying demand, which would affect
profitability and might cause the Company to alter its plans; the timing and
success of the Company's exploration and development drilling programs, which
would affect production levels and reserves; the results of the Company's
hedging activities; risks incident to the drilling and operation of oil and gas
wells; future drilling, production and development costs, including drilling rig
rates; the success of the Company's cost-reduction activities; and the
requirements to receive various governmental approvals to proceed with pipeline,
storage, LNG, and power generation projects, and the execution of final
agreements and unanticipated construction delays in connection with such
projects. Realization of the Company's objectives and expected performance can
also be adversely affected by the actions of customers and competitors, changes
in governmental regulation of the Company's businesses, and changes in general
economic conditions and the state of domestic capital markets.
<PAGE>
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Financial instruments of the Company expose it to both commodity price
risk and interest rate risk.
Commodity Price Risk - The Company's primary market risk exposure is the
volatility of energy commodity prices, relating to the portfolio position of its
financial instruments and physical commitments, which can affect the operating
results of Sonat Exploration and Sonat Energy Services. The Company uses
commodity futures contracts, options and price swap agreements as well as
offsetting physical positions to hedge its commodity price risk on crude oil,
natural gas and electricity. Sonat Energy Services performs all hedging activity
(non-trading) for both its own operations and for the operations of Sonat
Exploration. Sonat Energy Services, through its subsidiaries, Sonat Marketing
and Sonat Power Marketing, also uses derivative instruments as a market maker
(trading activity) by maintaining active trading positions in natural gas,
electricity, and crude oil commodity futures, swap and option contracts. Sonat
Marketing and Sonat Power Marketing limit their risk to changes in the value of
their outstanding positions through the use of Value-at-Risk models,
establishment of offsetting positions, and limit and monitoring procedures.
The Company's non-trading (hedging) and trading activities are
implemented under a set of policies approved by the Board of Directors.
Established procedures and processes are employed to manage and monitor these
activities and all derivative activities are internally reviewed by a Risk
Oversight Committee to ensure compliance with all policies. The Company's use of
derivative instruments to reduce the effect of market volatility is described in
Note 3 of the Notes to the Condensed Consolidated Financial Statements.
Interest Rate Risk - The Company's entire portfolio of interest rate
risk instruments is classified as non-trading. The Company's interest income and
expense are sensitive to changes in the level of short-term interest rates in
the United States. In general, the Company uses excess funds to reduce
short-term debt levels and therefore has minimal cash equivalent investments. To
mitigate the impact of fluctuations in interest rates, the Company maintains a
balance among components of its capital structure, providing a mix of maturities
and pricing methods for its debt obligations. In the past the Company has used
derivative instruments to aid in its management of interest rate risk, although
it is not currently doing so.
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On June 10, 1999, at a special meeting of the stockholders of Sonat Inc.
(the "Company"), the stockholders approved and adopted the Second Amended and
Restated Agreement and Plan of Merger, dated as of March 13, 1999, by and
between El Paso Energy Corporation ("El Paso") and the Company (the "Merger
Agreement") under which, among other things, the Company will merger into El
Paso (the "Merger"). Approximately 85 percent of the Company's outstanding
shares were voted in favor of the Merger Agreement. On June 10, 1999, El Paso's
stockholders also approved the Merger Agreement. Accordingly, the consideration
to be received by the Company's stockholders on completion of the Merger will be
one share of El Paso common stock for each share of the Company's common stock
to be exchanged in the Merger.
The Company expects the regulatory review of the proposed merger to be
completed during the third or fourth quarter of the year. The Merger will be
consummated as soon as all necessary regulatory approvals have been obtained.
The vote on the Merger Agreement was as follows:
---------------- ------------------- -----------------
For Against Abstained
---------------- ------------------- -----------------
---------------- ------------------- -----------------
94,068,773 723,225 521,814
---------------- ------------------- -----------------
There were no broker non-votes with respect to the vote on the merger.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits1
Exhibit
Number Exhibits
4* Credit Agreement dated as of April 15, 1999, among Sonat Inc., the Banks
named therein, The Chase Manhattan Bank, as Administrative Agent; Bank
of America National Trust and Savings Association, as Syndication Agent;
and SunTrust Bank, Atlanta, as Documentation Agent
12* Computation of Ratio of Earnings to Fixed Charges
27* Financial Data Schedule for the period ended June 30, 1999
- --------------
* Filed herewith
1 The Company will furnish to requesting security holders the exhibits on this
list upon the payment of a fee of $.10 per page up to a maximum of $5.00 per
exhibit. Requests must be in writing and should be addressed to Beverley T.
Krannich Secretary, Sonat Inc., P. O. Box 2563, Birmingham, Alabama 35202-2563.
<PAGE>
(b) Reports on 8-K
The Company filed a report on Form 8-K on April 22, 1999, reporting
certain information under Item 5 relating to the Company's announcement of its
results of operations for the first quarter of 1999, which included, among other
things, the effect of a $228.5 million, after tax, ceiling test charge under
full cost accounting provisions for its exploration and production business
segment.
The Company filed a report on Form 8-K on June 10, 1999, reporting
certain information under Item 5 regarding the Company's Special Meeting of
Shareholders where approximately 85 percent of the Company's outstanding shares
were voted to approve and adopt the Second Amended and Restated Agreement and
Plan of Merger, by and between the Company and El Paso Energy Corporation ("El
Paso"), dated as of March 13, 1999, whereby the Company will, among other
things, merger into El Paso.
The Company filed a report on Form 8-K on July 7, 1999, reporting
certain information under Item 5 relating to the merger of the Company and El
Paso and to place on file for incorporation into its Registration Statements
under the Securities Act of 1933 certain pro forma financial information
concerning the merger and El Paso's Annual Report on Form 10-K for the year
ended December 31, 1998 and quarterly report on Form 10-Q for the quarter ended
March 31, 1999.
The Company filed a report on Form 8-K on July 12, 1999, reporting
certain information under Item 5 relating to the Company's issuance and sale of
$600,000,000 aggregate principal amount of its 7 5/8% Notes due July 15, 2011,
registered under its Registration Statements on Form S-3 (Nos. 333-62383 and
333-82385).
<PAGE>
SONAT INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SONAT INC.
Date: August 11, 1999 By: /s/ James E. Moylan, Jr.
------------------------- --------------------------
James E. Moylan, Jr.
Senior Vice President and
Chief Financial Officer
Date: August 11, 1999 By: /s/ Thomas W. Barker, Jr.
------------------------- ---------------------------
Thomas W. Barker, Jr.
Vice President-Finance
<PAGE>
Exhibit 4
- -------------------------------------------------------------------------------
CREDIT AGREEMENT
dated as of April 15, 1999
among
SONAT INC.,
THE BANKS NAMED HEREIN,
and
THE CHASE MANHATTAN BANK,
as Administrative Agent,
BANK OF AMERICA National Trust AND Savings Association,
as Syndication Agent
and
SUNTRUST BANK, ATLANTA,
as Documentation Agent
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Article Page
I. LOANS........................................................... 1
1.01 Syndicated Loans.................................. 1
1.02 Money Market Loans................................ 4
1.04 Change of Commitments............................. 5
1.05 Borrowings of Syndicated Loans.................... 6
1.06 Several Commitments; Remedies Independent........ 8
1.08 Borrowings of Swingline Loans....................... 8
1.09 Lending Offices................................... 9
1.10 Notes.............................................. 9
II. PAYMENTS, INTEREST AND CERTAIN FEES............................. 10
2.01 Repayment of Loans................................ 10
2.02 Interest.......................................... 10
2.03 Interest Periods.................................. 11
2.04 Prepayments....................................... 11
2.05 Payments, etc..................................... 12
2.06 Pro Rata Treatment; Sharing....................... 13
2.07 Computations........................ ............. 14
2.08 Facility Fee...................................... 14
III. PROVISIONS RELATING TO FIXED RATE LOANS............... ......... 14
3.01 Additional Costs.................................. 14
3.02 Limitation on Types of Loans...................... 17
3.03 Illegality........................................ 17
3.04 Treatment of Affected Loans....................... 17
3.05 Compensation...................................... 17
3.06 Survival.......................................... 18
IV. CONDITIONS...................................................... 18
4.01 Conditions to Effectiveness....................... 18
4.02 Conditions Precedent to Loans..................... 19
V. COVENANTS....................................................... 20
5.01 Financial Statements.............................. 20
5.02 Access to Books and Inspection.................... 21
5.03 Litigation........................................ 21
5.04 Maintenance of Existence.......................... 21
5.05 Merger; Sale of Assets............................ 21
5.06 Default; Investment Rating........................ 22
5.07 ERISA............................................. 22
5.08 Liens............................................. 23
5.09 Total Indebtedness to Consolidated Capitalization. 24
5.10 [Intentionally Omitted.].......................... 24
5.11 Insurance......................................... 24
5.12 Maintenance of Properties......................... 24
5.13 Public Utility Holding Company Act................ 24
VI. REPRESENTATIONS AND WARRANTIES.................................. 24
6.01 Corporate Existence and Powers.................... 24
6.02 Corporate Authority, etc....................... .. 25
6.03 Financial Condition................. ............. 25
6.04 Litigation........................................ 25
6.05 Taxes............................................. 25
6.06 Approvals......................................... 26
6.07 ERISA............................................. 26
6.08 Margin Regulations................................ 26
6.09 Certain Subsidiaries.............................. 26
6.10 Investment Company Act............................ 26
6.11 Environmental Laws................................ 26
6.12 Year 2000 Problem................................. 26
VII. EVENTS OF DEFAULT............................................... 27
VIII. MISCELLANEOUS................................................... 29
8.01 Waiver............................................ 29
8.02 Notices and Delivery of Documents................. 29
8.03 Governing Law..................................... 29
8.04 Offsets, etc...................................... 29
8.05 Disposition of Loans.............................. 30
8.06 Expenses.......................................... 30
8.07 Amendments, Waivers, etc.......................... 31
8.08 Definitions....................................... 31
8.09 Successors and Assigns............................ 31
8.10 Counterparts...................................... 32
8.11 Confidentiality................................... 32
8.12 WAIVER OF JURY TRIAL.............................. 33
8.13 Severability...................................... 33
IX. THE AGENTS...................................................... 33
9.01 Appointment, Power and Immunities................. 33
9.02 Reliance by Agents................................ 33
9.03 Default............................ .............. 34
9.04 Rights as a Lender................................ 34
9.05 Indemnification................................... 34
9.06 Reports........................................... 35
9.07 Non-Reliance on Agents and Other Banks............ 35
9.08 Failure to Act.................................... 35
9.09 Resignation or Removal of Agents.................. 35
9.10 Documentation Agent............................... 36
9.11 Syndication Agent................................. 36
SCHEDULE 1 Definitions
SCHEDULE 2..... Lending Offices and/or Addresses for Notices
SCHEDULE 3..... Commitments
EXHIBIT A-1 Form of Note for Syndicated Loans EXHIBIT A-2 Form of Note for Money
Market Loans EXHIBIT A-3 Form of Note for Swingline Loans EXHIBIT B Form of
Opinion of Counsel to the Company EXHIBIT C Form of Opinion of Special New York
Counsel to the Banks
EXHIBIT D Form of Money Market Quote Request
EXHIBIT E Form of Money Market Quote
<PAGE>
CREDIT AGREEMENT dated as of April 15, 1999 among SONAT INC., a
Delaware corporation (the "Company"); the undersigned banks (each herein called
a "Bank"); and THE CHASE MANHATTAN BANK, as Administrative Agent, BANK OF
AMERICA National Trust AND Savings Association, as Syndication Agent, and
SUNTRUST BANK, ATLANTA, as Documentation Agent (in such capacities, each such
agent being herein called an "Agent" and collectively the "Agents"); and CREDIT
LYONNAIS, NEW YORK BRANCH and THE BANK OF NOVA SCOTIA, as Managing Agents and
THE FIRST NATIONAL BANK OF CHICAGO, MELLON BANK, N.A., and WACHOVIA BANK, N.A.
as Co-Agents.
The Company has requested the Banks to extend credit to the
Company for the general corporate purposes of the Company. The Banks are
prepared to do so on the terms hereof.
Accordingly, the Company, each Bank and the Agents hereby agree
as follows:
I. LOANS
1.01 Syndicated Loans. Each Bank severally agrees, on the terms
of this Agreement, to make loans to the Company in Dollars during the period
from and including the date hereof to but not including the Commitment
Termination Date in an aggregate principal amount at any one time outstanding up
to but not exceeding the amount of such Bank's Commitment as then in effect.
Subject to the terms of this Agreement, during such period the Company may
borrow, repay and reborrow the amount of the Commitments; provided that the sum
of (i) the aggregate principal amount of all Money Market Loans, plus (ii) the
aggregate principal amount of all Syndicated Loans plus (iii) the aggregate
principal amount of all Swingline Loans, at any one time outstanding shall not
exceed the aggregate amount of the Commitments at such time except that,
notwithstanding the foregoing, Money Market Loans outstanding at the time of any
termination or reduction of the Commitments pursuant to 1.04 hereof need not be
prepaid on account of this proviso.
1.02 Money Market Loans.
(a) In addition to borrowings of Syndicated Loans, the Company
may, as set forth in this 1.02, request the Banks to make offers to make Money
Market Loans to the Company in Dollars. The Banks may, but shall have no
obligation to, make such offers and the Company may, but shall have no
obligation to, accept any such offers in the manner set forth in this 1.02.
Money Market Loans shall be Set Rate Loans, provided that:
(i) there may be no more than fifteen different Interest
Periods for both Syndicated Loans (other than Domestic Loans) and Money
Market Loans outstanding at the same time (for which purpose Interest
Periods described in different lettered clauses of the definition of the
term "Interest Period" in 2.03 hereof shall be deemed to be different
Interest Periods even if they are coterminous); and
(ii) the sum of (x) aggregate principal amount of all Money
Market Loans, plus (y) the aggregate principal amount of all Syndicated
Loans plus (z) the aggregate principal amount of all Swingline Loans, at
any one time outstanding shall not exceed the aggregate amount of the
Commitments at such time except that, notwithstanding the foregoing,
Money Market Loans outstanding at the time of any termination or
reduction of the Commitments pursuant to 1.04 hereof need not be prepaid
on account of this proviso.
(b) When the Company wishes to request offers to make Money
Market Loans, it shall give each Bank notice (a "Money Market Quote Request") so
as to be received no later than 11:00 a.m. New York time on the Business Day
next preceding the date of borrowing proposed therein or such other time and
date as the Company and the Majority Banks may agree. The Company may request
offers to make Money Market Loans for up to three different Interest Periods in
a single notice (for which purpose Interest Periods in different lettered
clauses of the definition of the term "Interest Period" shall be deemed to be
different Interest Periods even if they are coterminous); provided that the
request for each separate Interest Period shall be deemed to be a separate Money
Market Quote Request for a separate borrowing (a "Money Market Borrowing"). Each
such notice shall be substantially in the form of Exhibit D hereto and shall
specify as to each Money Market Borrowing:
(i) the proposed date of such borrowing, which shall be
a Business Day;
(ii) the aggregate amount of such Money Market Borrowing,
which shall be at least $25,000,000 (or in larger multiples of
$5,000,000) but shall not cause the limits specified in 1.02 hereof to
be violated (without giving effect to any other Money Market Borrowing
subject to a simultaneous Money Market Quote Request);
(iii) the duration of the Interest Period applicable
thereto; and
(iv) the date on which the Money Market Quotes are to be
submitted if it is before the proposed date of borrowing (the date on
which such Money Market Quotes are to be submitted is called the
"Quotation Date").
Except as otherwise provided in this 1.02, no Money Market Quote Request shall
be given within five Business Days (or such other number of days as the Company
and the Majority Banks may agree) of any other Money Market Quote Request.
(c) (i) Each Bank may submit one or more Money Market Quotes,
each containing an offer to make a Money Market Loan in response to any Money
Market Quote Request; provided that, if the Company's request under 1.02(b)
hereof specified more than one Interest Period, such Bank may make a single
submission containing one or more Money Market Quotes for each such Interest
Period. Each Money Market Quote must be submitted to the Company not later than
10:00 a.m. New York time on the Quotation Date or such other time and date as
the Company and the Majority Banks may agree. Subject to 3.02(b), 3.03, 4.02 and
Article VII hereof, any Money Market Quote so made shall be irrevocable except
with the written consent of the Company.
(ii) Each Money Market Quote shall be substantially in the
form of Exhibit E hereto and shall specify:
(A) the proposed date of borrowing and the Interest
Period therefor;
(B) the principal amount of the Money Market Loan for
which each such offer is being made, which principal amount shall
be at least $5,000,000 or a larger multiple of $1,000,000;
provided that the aggregate principal amount of all Money Market
Loans for which a Bank submits Money Market Quotes (x) may be
greater or less than the Commitment of such Bank but (y) may not
exceed the principal amount of the Money Market Borrowing for a
particular Interest Period for which offers were requested;
(C) the rate of interest per annum (rounded upwards, if
necessary, to the nearest 1/10,000th of 1%) offered for each
Money Market Loan (the "Money Market Rate"); and
(D) the identity of the quoting Bank.
Unless otherwise agreed by the Company, no Money Market Quote shall contain
qualifying, conditional or similar language or propose terms other than or in
addition to those set forth in the applicable Money Market Quote Request and, in
particular, no Money Market Quote may be conditioned upon acceptance by the
Company of all (or some specified minimum) of the principal amount of the Money
Market Loan for which such Money Market Quote is being made.
(d) Not later than 11:30 a.m. New York time on the Quotation Date
or such other time and date as the Company and the Majority Banks may agree, the
Company shall notify each Bank of its acceptance or nonacceptance of the offers
so notified to it pursuant to 1.02(c)(i) hereof (and the failure of the Company
to give such notice by such time shall constitute nonacceptance). In the case of
acceptance, such notice shall specify the aggregate principal amount of offers
for each Interest Period that are accepted. The Company may accept any Money
Market Quote in whole or in part (provided that any Money Market Quote accepted
in part shall be at least $5,000,000 or in larger multiples of $1,000,000);
provided that:
(i) the aggregate principal amount of each Money Market
Borrowing may not exceed the applicable amount set forth in the related
Money Market Quote Request;
(ii) the aggregate principal amount of each Money Market
Borrowing shall be at least $25,000,000 (or in larger multiples of
$5,000,000) but shall not cause the limits specified in 1.02 hereof to
be violated;
(iii) acceptance of offers may be made only in ascending
order of Money Market Rates, in each case commencing with the lowest
rate so offered; and
(iv) the Company may not accept any offer that fails to
comply with 1.02(c)(ii) hereof or otherwise fails to comply with the
requirements of this Agreement (including, without limitation, 1.02(a)
hereof).
If offers are made by two or more Banks with the same Money Market Rates for a
greater aggregate principal amount than the amount in respect of which offers
are accepted for the related Interest Period, the principal amount of Money
Market Loans in respect of which such offers are accepted shall be allocated by
the Company among such Banks as nearly as possible (in multiples of $1,000,000)
in proportion to the aggregate principal amount of such offers. Determinations
by the Company of the amounts of Money Market Loans shall be conclusive in the
absence of manifest error. Promptly after the acceptance by the Company of any
Money Market Quote, the Company shall give Chase notice of the principal amount
of each Money Market Loan to be made pursuant to such Money Market Quote, the
rate of interest per annum and the duration of the Interest Period applicable
thereto and the name of the Bank making such Loan.
(f) Any Bank whose offer to make any Money Market Loan has been
accepted shall, not later than 1:00 p.m. New York time on the date specified for
the making of such Loan, make the amount of such Loan available to Chase at
account number 323-506909 maintained by Chase with The Chase Manhattan Bank at
its Principal Office in immediately available funds, for account of the Company.
The amount so received by Chase shall, subject to the terms and conditions of
this Agreement, be made available to the Company on such date by depositing the
same, in immediately available funds, in an account of the Company maintained
with The Chase Manhattan Bank at its Principal Office designated by the Company.
(g) The amount of any Money Market Loan made by any Bank shall
not constitute a utilization of such Bank's Commitment.
1.03 Swingline Commitment. Subject to the terms and conditions
hereof, the Swingline Bank agrees to make a portion of the credit otherwise
available to the Company under the Commitments by making swingline loans
("Swingline Loans") in Dollars to the Company during the period from and
including the date hereof to but not including the Commitment Termination Date;
provided that (a) the aggregate principal amount of Swingline Loans outstanding
at any time shall not exceed the Swingline Commitment then in effect, (b) the
aggregate principal amount of Swingline Loans plus the aggregate principal
amount of Syndicated Loans made by the Swingline Bank outstanding at any time
shall not exceed the Swingline Bank's Commitment then in effect, and (c) the
Company shall not request, and the Swingline Bank shall not make, any Swingline
Loan if, after giving effect to the making of such Swingline Loan, the sum of
(i) the aggregate principal amount of all Money Market Loans, plus (ii) the
aggregate principal amount of all Syndicated Loans plus (iii) the aggregate
principal amount of all Swingline Loans, at any one time outstanding shall
exceed the aggregate amount of the Commitments at such time except that,
notwithstanding the foregoing, Money Market Loans outstanding at the time of any
termination or reduction of the Commitments pursuant to 1.04 hereof need not be
prepaid on account of this proviso. During such period, the Company may use the
Swingline Commitment by borrowing, repaying and reborrowing, all in accordance
with the terms and conditions hereof.
1.04 Change of Commitments.
(a) The Company shall have the right at any time or from time to
time upon not less than three Business Days' prior notice to Chase (specifying
the date and the aggregate amount of each such reduction or termination) to
terminate in whole, or to reduce in part, (i) the aggregate unused amount of the
Commitments (and, in accordance with 1.02(g) hereof, outstanding Money Market
Loans shall not constitute a utilization of the Commitments) and/or (ii) the
aggregate unused amount of the Swingline Commitment. Each such reduction of the
Commitments shall be in an aggregate amount of at least $25,000,000 and a
multiple of $1,000,000 and each such reduction of the Swingline Commitment shall
be in an aggregate amount of at least $5,000,000 and a multiple of $1,000,000.
Chase shall promptly notify each Bank of its proportionate share and the date of
each such reduction.
(b) If either (i) during any period of 12 consecutive months,
individuals who were directors of the Company at the beginning of such period
cease to constitute a majority of the board of directors of the Company (except
for changes due to the retirement or death of any such individuals) or (ii) any
Person (or group of Persons which has an agreement, arrangement or understanding
for the purpose of acquiring the shares of the Company) shall acquire, directly
or indirectly, beneficial ownership or control of more than 35% of the then
outstanding voting shares of the Company (either such event being hereinafter
referred to as a "Change in Control"), then on the date 20 Business Days after
the Company shall have notified the Agents of any such Change in Control, the
Commitment of each Bank and the Swingline Commitment shall be reduced to zero
unless, prior to such 20th Business Day, all of the Banks shall have provided
written consent to maintain their respective Commitments. The Company agrees, as
soon as it shall become known to one of its senior officers, to notify the
Agents of any such Change in Control (and Chase shall promptly notify the Banks
thereof), but the failure to so notify shall not preclude any Bank from reducing
the unused amount of such Bank's Commitment as aforesaid.
(c) Provided that no Default shall have occurred and be
continuing, the Company may at any time terminate the Commitment of any Bank
(and, in the case of the Swingline Bank, the Swingline Commitment) that has
claimed any compensation under 3.01(a) or 3.01(c) hereof at any time during the
preceding one-month period, in whole but not in part, by (i) giving Chase (which
shall promptly notify such Bank) not less than five Business Days' prior notice
thereof, which notice shall be irrevocable and effective only upon receipt by
Chase and shall specify the identity of such Bank and the effective date of such
termination, and (ii) paying to such Bank (and there shall become due and
payable) on such date the outstanding principal amount of all Loans made by such
Bank, interest on such principal amount accrued to such date, any amounts
payable to such Bank pursuant to Article III hereof in connection therewith and
all other amounts owing to such Bank by the Company hereunder (provided that the
obligations of the Company under Article III and 8.06 hereof to such Bank shall
survive such termination).
(d) Provided that no Default shall have occurred and be
continuing, the Company may at any time replace any Bank that has claimed any
compensation under 3.01(a) or 3.01(c) hereof at any time during the preceding
one-month period, in whole but not in part, by giving Chase not less than five
Business Days' prior notice (and Chase shall promptly notify such Bank), that it
intends to replace such Bank with one or more banks (which may include any other
Bank under this Agreement) selected by the Company and acceptable to Chase
(which shall not unreasonably withhold its consent). Any such replacement shall
be accomplished pursuant to documentation in form and substance satisfactory to
Chase. Upon the effective date of any replacement under this 1.04(d) (and as a
condition thereto), the Company shall repay to the Bank being replaced the
principal of and interest on each Loan then outstanding from such Bank together
with all other amounts owing to such Bank hereunder and such replacement bank
(or banks, as the case may be) shall make a loan (or loans) to the Company in
the (aggregate) principal amount of each such Loan so repaid which loan (or
loans) shall be of the same type and have the same maturity and interest rate as
the respective Loan so repaid), whereupon such replacement bank (or banks) shall
become a "Bank" (or "Banks") for all purposes of this Agreement having a
Commitment (or Commitments in the aggregate) (and, in the case of the Swingline
Bank, the Swingline Commitment) in the amount of such Bank being replaced and
such loan (or loans) shall be deemed a Loan (or Loans) hereunder.
(e) The Swingline Bank may terminate in its sole discretion the
Swingline Commitment by giving the Company written notice thereof at least 30
days in advance of the date of such termination.
(f) The Commitments (and, in the case of the Swingline Bank, the
Swingline Commitment) once terminated or reduced may not be reinstated, except
that the Swingline Commitment may be reinstated by agreement of the Swingline
Bank and the Company.
1.05 Borrowings of Syndicated Loans.
(a) Each Syndicated Loan shall be either a Domestic Loan or
Eurodollar Loan. Syndicated Loans on the occasion of any borrowing thereof
hereunder may be Domestic Loans or Eurodollar Loans (each a "type" of Loan) or
any combination thereof; provided that there may be no more than ten Interest
Periods for Eurodollar Loans outstanding at the same time; and provided,
further, that there may be no more than fifteen different Interest Periods for
both Eurodollar Loans and Money Market Loans outstanding at the same time (for
which purpose Interest Periods described in different lettered clauses of the
definition of the term "Interest Period" in 2.03 hereof shall be deemed to be
different Interest Periods even if they are coterminous).
(b) The Company shall give Chase (which shall promptly notify the
Banks) notice of each borrowing hereunder of Syndicated Loans, which notice
shall be irrevocable and effective only upon receipt by Chase, shall specify
with respect to the Syndicated Loans to be borrowed (i) the aggregate amount
(which shall be at least $10,000,000 or a multiple of $1,000,000 in excess
thereof), (ii) the type or types of Loans to be borrowed and the aggregate
amount of each type, (iii) the date of such borrowing (which shall be a Business
Day), and (iv) (in the case of Eurodollar Loans) the duration of the Interest
Period therefor and shall be given not later than 11:00 a.m. New York time, in
the case of Domestic Loans, on the same day as the date of such borrowing and,
in the case of Eurodollar Loans, on the day which is not less than three
Business Days prior to the date of such borrowing.
(c) If at any time during which Syndicated Loans are outstanding
under this Agreement the Company shall fail to give a notice of the type
referred to in 1.05(b) or otherwise to advise Chase in writing by 11:00 a.m. New
York time on the day which is not less than one Business Day prior to the
maturity date of any such Syndicated Loans that it does not intend to reborrow
an amount at least equal to the aggregate amount of such Syndicated Loans (or,
if less, the aggregate amount of the Commitments) on such maturity date, the
Company shall be deemed to have given on such first Business Day preceding such
maturity date a notice of borrowing hereunder for Domestic Loans to be made on
such date in an amount equal to the lesser of (i) the aggregate principal amount
of the Syndicated Loans which are maturing on such date or (ii) the aggregate
amount of the Commitments to be outstanding on such date (after giving effect to
any reductions of the Commitments to be effected on such date), and Chase shall
notify the Banks of such borrowing.
(d) Subject to Chase's receipt or deemed receipt of a notice of
borrowing as provided in 1.05(b) or 1.05(c) hereof and to Chase's receipt of
notice from the Swingline Bank of the outstanding principal amount of the
Swingline Loans as of the Swingline Business Day next preceding the date of such
notice of borrowing, Chase shall give each Bank not less than three Business
Days' prior notice (with respect to each borrowing of Eurodollar Loans) or
same-day notice by noon (with respect to each borrowing of Domestic Loans), as
the case may be, of each such borrowing specifying (i) the aggregate amount to
be borrowed, (ii) the date of borrowing, (iii) the type or types of Loans to be
borrowed, (iv) in the case of any Fixed Rate Loans to be borrowed, the duration
of the Interest Period therefor and (v) such Bank's pro rata portion thereof.
Each Bank's (other than the Swingline Bank's) pro rata portion of each
Syndicated Loan shall equal a fraction, the numerator of which shall be the
amount of such Bank's Commitment as of the date the notice of borrowing is given
for such Syndicated Loan and the denominator of which shall be (i) the aggregate
Commitments of all Banks as of the date such notice of borrowing is given minus
(ii) the outstanding principal amount of the Swingline Loans as of the next
preceding Swingline Business Day. The Swingline Bank's pro rata portion of each
Syndicated Loan shall equal a fraction, the numerator of which shall be (i) the
amount of the Swingline Bank's Commitment as of the date the notice of borrowing
is given with respect to such Syndicated Loan minus (ii) the outstanding
principal amount of the Swingline Loans as of the next preceding Swingline
Business Day and the denominator of which shall be (i) the aggregate Commitment
of all Banks as of the date such notice of borrowing is given minus (ii) the
outstanding principal amount of the Swingline Loans as of the next preceding
Swingline Business Day. From and including the date that notice of a borrowing
of a Syndicated Loan is given to but excluding the date that such Syndicated
Loan is made, the principal amount of such Syndicated Loan required to be made
by the Swingline Bank shall be deemed to be outstanding for purposes of clause
(b) of 1.03.
(e) Not later than 1:00 p.m. New York time on the date specified
for each borrowing of Syndicated Loans, each Bank shall make available to Chase,
at account number 323-506909 maintained by The Chase Manhattan Bank at its
Principal Office in immediately available funds the amount of the Syndicated
Loan or Syndicated Loans to be made by it on such date, for account of the
Company. The amount so received by Chase shall, subject to the terms and
conditions of this Agreement, be made available to the Company on such date by
depositing the same, in immediately available funds, in an account of the
Company maintained with The Chase Manhattan Bank at its Principal Office
designated by the Company. If any Bank shall (i) be obligated but fail to make
available the amount of the Syndicated Loan to be made by it on the date
specified for a borrowing hereunder and (ii) have any Syndicated Loans which are
maturing on such date, such maturing Syndicated Loans shall automatically be
extended in an amount equal to (but not in excess of) the amount of the
Syndicated Loan to be made and in the type and for the Interest Period of such
Loan to be made (and such Loan which would otherwise mature on such date shall
not be considered to be past due hereunder).
1.06 Several Commitments; Remedies Independent. The failure of
any Bank to make any Loan to be made by it shall not relieve any other Bank of
its obligation to make its Loan on such date, but neither any other Bank nor any
Agent shall be responsible for such failure. The amounts payable at any time by
the Company hereunder and under the Notes to each Bank shall be a separate and
independent debt and each Bank shall be entitled to protect and enforce its
rights arising out of this Agreement and the Notes, and it shall not be
necessary for any other Bank or any Agent to consent to, or to be joined as an
additional party in, any proceedings for such purposes.
1.07 Availability of Funds. Unless Chase shall have been notified
by a Bank prior to the date of any borrowing hereunder that such Bank does not
intend to make available to Chase such Bank's Loans to be made on such day,
Chase may assume that such Bank has made the amount of such Loans to be made
available to Chase on such date and Chase may in reliance upon such assumption
(but shall not be required to) make available to the Company a corresponding
amount. If such proceeds are not in fact made available to Chase by such Bank,
Chase shall be entitled to recover such corresponding amount on demand from such
Bank (or, if such Bank fails to pay such corresponding amount forthwith upon
such demand, from the Company) together with interest thereon in respect of each
day during the period commencing on the date such corresponding amount was made
available to the Company and ending on (but excluding) the date Chase recovers
such corresponding amount at a rate per annum equal to the Federal Funds Rate
for such day (or if such day is not a Business Day, the next preceding Business
Day).
1.08 Borrowings of Swingline Loans. (a) If on any Swingline
Business Day prior to the Commitment Termination Date the aggregate
disbursements authorized by the Company and made from the Swingline Account
exceed the aggregate cash on hand and deposits received in the Swingline Account
on such Swingline Business Day, the Swingline Bank shall make a Swingline Loan
to the Company in an amount equal to such excess (subject to the provisions of
1.03 hereof), unless otherwise instructed by the Company. Each Swingline Loan
shall be credited to the Swingline Account as of the date made. The outstanding
Swingline Loans shall bear interest at such rate per annum as the Company and
the Swingline Bank shall agree. Accrued interest on the outstanding Swingline
Loans shall be paid on each date on which the outstanding Swingline Loans are
paid in full and on the first Swingline Business Day of each month if there are
any outstanding Swingline Loans on the Swingline Business Day next preceding
such day. The Company shall have the right to prepay the outstanding Swingline
Loans, in whole or in part, at any time. All payments with respect to Swingline
Loans shall be made at the Lending Office of the Swingline Bank. Upon request of
the Company made on any Swingline Business Day, the Swingline Bank shall give
Chase notice as promptly as practicable but in any event by no later than 11:00
a.m. New York time on the next Swingline Business Day of the outstanding
principal amount of the Swingline Loans as of the close of business on the
Swingline Business Day next preceding the date that such notice is given to
Chase.
(b) In the case of any of the Events of Default specified in
paragraphs A through I of Article VII hereof, (i) the Swingline Bank may, by
notice to the Company, terminate the Swingline Commitment hereunder and it shall
thereupon terminate, and (ii) the Swingline Bank may, by notice to the Company,
declare the outstanding Swingline Loans and Swingline Note and all other
obligations of the Company thereunder to be due and payable, whereupon the same
shall become forthwith due and payable, without further protest, presentment,
notice or demand, all of which are expressly waived by the Company. In case of
any of the Events of Default specified in paragraph J or K of Article VII
hereof, without any notice to the Company or any act by the Swingline Bank, the
Swingline Commitment hereunder shall terminate forthwith and the principal of
and interest accrued on the outstanding Swingline Loans and the Swingline Note
and all other obligations of the Company thereunder shall become and be due and
payable.
1.09 Lending Offices. The Loans of each type made by each Bank
shall be made and maintained at such Bank's Applicable Lending Office for Loans
of such type.
1.10 Notes.
(a) The Syndicated Loans made by each Bank shall be evidenced by
a single promissory note (a "Syndicated Note") of the Company substantially in
the form of Exhibit A-1 hereto, dated the Effective Date, payable to such Bank
in a principal amount equal to the amount of its Commitment as originally in
effect and otherwise duly completed. The date, amount, type, interest rate and
maturity date of each Syndicated Loan made by each Bank to the Company, and each
payment made on account of the principal thereof, shall be recorded by such Bank
on its books and, prior to any transfer of such Note held by it, endorsed by
such Bank on the schedule attached to such Note or any continuation thereof. The
failure of any Bank to make any notation or entry or any error in such a
notation or entry shall not, however, limit or otherwise affect any obligation
of the Company under this Agreement or the Notes.
(b) The Money Market Loans made by any Bank shall be evidenced by
a single promissory note (a "Money Market Note") of the Company substantially in
the form of Exhibit A-2 hereto, dated the date of the delivery of such Note to
Chase under this Agreement, payable to such Bank and otherwise duly completed.
The date, amount, interest rate and maturity date of each Money Market Loan made
by each Bank to the Company, and each payment made on account of the principal
thereof, shall be recorded by such Bank on its books and, prior to any transfer
of such Note held by it, endorsed by such Bank on the schedule attached to such
Note or any continuation thereof. The failure of any Bank to make any notation
or entry or any error in such a notation or entry shall not, however, limit or
otherwise affect any obligation of the Company under this Agreement or the
Notes.
(c) The Loans made by the Swingline Bank shall be evidenced by a
single promissory note (a "Swingline Note") of the Company substantially in the
form of Exhibit A-3 hereto, dated the Effective Date, payable to the Swingline
Bank in a principal amount equal to the amount of the Swingline Commitment as
originally in effect and otherwise duly completed. The date, amount, type,
interest rate and maturity date of each Swingline Loan made by the Swingline
Bank to the Company, and each payment made on account of the principal thereof,
shall be recorded by the Swingline Bank on its books and, prior to any transfer
of such Note held by it, endorsed by the Swingline Bank on the schedule attached
to such Note or any continuation thereof. The failure of the Swingline Bank to
make any notation or entry or any error in such a notation or entry shall not,
however, limit or otherwise affect any obligation of the Company under this
Agreement or the Notes.
II. PAYMENTS, INTEREST AND CERTAIN FEES
2.01 Repayment of Loans. The Company hereby promises to pay to
Chase for account of each Bank, the principal amount of each Loan made by such
Bank (except for the Swingline Loan, as to which payments shall be made to the
Swingline Bank pursuant to 1.08), and such Loan shall mature, on the last day of
the Interest Period therefor.
2.02 Interest. The Company hereby promises to pay to Chase for
account of each Bank, interest on the unpaid principal amount of each Loan made
by such Bank (except for the Swingline Loans, as to which payments shall be made
to the Swingline Bank pursuant to 1.08) for the period from and including the
date of such Loan to but excluding the date such Loan shall be paid in full, at
the following rates per annum:
(a) if such Loan is a Domestic Loan, the Base Rate (as in effect
from time to time) plus the Applicable Margin (if any);
(b) if such Loan is a Eurodollar Loan, the Fixed Rate for such
Loan for the Interest Period for such Loan plus the Applicable Margin
(as in effect from time to time during the Interest Period for such
Loan); and
(c) if such Loan is a Set Rate Loan, the Money Market Rate for
such Loan for the Interest Period therefor quoted by the Bank making
such Loan and accepted by the Company in accordance with 1.02 hereof.
Notwithstanding the foregoing, the Company hereby promises to pay to Chase for
account of each Bank, interest at the applicable Post-Default Rate on any
principal of any Loan made by such Bank, and on any other amount payable by the
Company hereunder or under the Notes held by such Bank to or for account of such
Bank, which shall not be paid in full when due (whether at stated maturity, by
acceleration or otherwise), for the period from and including the due date
thereof to but excluding the date the same is paid in full. Accrued interest on
each Loan shall be payable on each Interest Payment Date for such Loan, except
that interest payable at the Post-Default Rate shall be payable from time to
time on demand and interest on any Eurodollar Loan that is converted into a
Domestic Loan (pursuant to 3.04 hereof) 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,
Chase shall give notice thereof to the Banks, to which such interest is payable
and to the Company.
2.03 Interest Periods. As used in this Agreement, "Interest
Period" shall mean:
(a) With respect to any Eurodollar Loan, the period commencing on
the date such Eurodollar Loan is made and ending on the numerically
corresponding day in the first, second, third or sixth calendar month
thereafter, as the Company may select as provided in 1.05(b) hereof,
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;
(b) With respect to any Domestic Loan, the period commencing on
the date such Domestic Loan is made and ending on the date such Loan is
repaid;
(c) With respect to any Set Rate Loan, the period commencing on
the date such Set Rate Loan is made and ending on any Business Day up to
180 days thereafter, as the Company may select as provided in 1.02(b)
hereof; and
(d) With respect to a Swingline Loan, the period commencing on
the Swingline Business Day on which such Swingline Loan is made and
ending on the date such Swingline Loan is repaid.
Notwithstanding the foregoing: (i) no Interest Period may commence before and
end after the Commitment Termination Date; (ii) 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, in the case of an Interest Period for Eurodollar
Loans, if such next succeeding Business Day falls in the next succeeding
calendar month, on the next preceding Business Day); and (iii) notwithstanding
clause (i) above, no Interest Period for any Eurodollar Loans shall have a
duration of less than one month and, if the Interest Period for any Eurodollar
Loans would otherwise be a shorter period, such Loans shall not be available
hereunder.
2.04 Prepayments. (a) The Company shall have the right, at any
time or from time to time, to prepay Syndicated Loans in whole or in part,
provided that (i) the Company shall give Chase notice of each such prepayment
not less than three Business Days' prior to the date of such prepayment (which
notice shall be effective upon receipt), (ii) each partial prepayment shall be
in an aggregate principal amount which is at least $1,000,000 or a multiple
thereof, (iii) interest on the principal prepaid, accrued to the prepayment
date, shall be paid on the prepayment date and (iv) in the case of prepayment of
a Eurodollar Loan other than on the last day of the Interest Period applicable
thereto, the Company shall pay compensation, if any, due in accordance with
3.05(a) with respect thereto. The Company may not prepay any Money Market Loans.
Notwithstanding the foregoing, upon not less than four Business Days' prior
notice (which shall be effective upon receipt) the Company may simultaneously
prepay all Loans then outstanding hereunder and terminate in whole the
Commitments (in which case interest on the principal prepaid, accrued to the
prepayment date, together with all other amounts owing hereunder, including
without limitation under 3.05, shall be paid on such prepayment date).
(b) If, after giving effect to any termination or reduction of
the Commitment of any Bank pursuant to 1.04(a) or (b) hereof, the outstanding
aggregate principal amount of the Syndicated Loans held by such Bank exceeds the
amount of such Bank's Commitment, the Company shall prepay or pay such
Syndicated Loans (of a type to be designated by the Company by notice to Chase
not less than four Business Days prior to the date of such termination or
reduction and, failing such notice, such prepayment or repayment shall be
applied, first, to the outstanding Domestic Loans and, next, to the extent
necessary, to the outstanding Fixed Rate Loans with the fewest number of days
remaining in the Interest Periods therefor on such termination or reduction
date) in an aggregate principal amount equal to such excess, together with
interest thereon accrued to the date of such prepayment or payment and any other
amounts payable pursuant to 3.05 hereof in connection therewith.
2.05 Payments, etc.
(a) Except to the extent otherwise provided herein, all payments
of principal, interest and other amounts to be made by the Company under this
Agreement and the Notes shall be made in Dollars, in immediately available
funds, without deduction, set-off or counterclaim, to Chase at its Principal
Office, not later than 11:00 a.m. New York time on the date on which such
payment shall become due; provided that, if a new Loan is to be made by any Bank
on a date the Company is to repay any principal of an outstanding Loan of such
Bank, such Bank shall apply the proceeds of such new Loan to the payment of the
principal to be repaid and only an amount equal to the difference (if any)
between the principal to be borrowed and the principal to be repaid shall be
made available by such Bank to Chase as provided in 1.02 or 1.05 hereof (if such
principal to be borrowed exceeds such principal to be repaid) or paid by the
Company to Chase pursuant to this 2.05 (if such principal to be repaid exceeds
such principal to be borrowed).
(b) Each payment received by Chase under this Agreement or any
Note for account of a Bank shall be paid promptly to such Bank, in immediately
available funds, for account of such Bank's Applicable Lending Office for the
Loan in respect of which such payment is made.
(c) 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 (or, in the case
of any Swingline Loan or Swingline Note, a Swingline Business Day) such date
shall be extended to the next succeeding Business Day (or, in the case of any
Swingline Loan or Swingline Note, the next succeeding Swingline Business Day)
and interest shall be payable for any principal so extended for the period of
such extension.
2.06 Pro Rata Treatment; Sharing.
(a) Except to the extent otherwise provided herein: (i) each
borrowing from the Banks under 1.01 hereof shall be made from the Banks and each
termination or reduction of the amount of the Commitments under 1.04 hereof
shall be applied to the Commitments of the Banks, pro rata according to the
amounts of their respective Commitments; (ii) each payment of principal of
Syndicated Loans by the Company shall be made for account of the Banks pro rata
in accordance with the respective unpaid principal amounts of the Syndicated
Loans held by the Banks; and (iii) each payment of interest on Syndicated Loans
by the Company shall be made for account of the Banks pro rata in accordance
with the amounts of interest on Syndicated Loans due and payable to the
respective Banks.
(b) If any Bank shall obtain payment of any principal of or
interest on any Loan made by it to the Company under this Agreement 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 Bank shall have received a
greater percentage of the principal or interest then due to such Bank hereunder
than the percentage received by any other Banks, it shall promptly purchase from
such other Banks participations in (or, if and to the extent specified by such
Bank, direct interests in) the Loans made by such other Banks (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
Banks shall share the benefit of such excess payment (net of any expenses which
may be incurred by such Bank in obtaining or preserving such excess payment) pro
rata in accordance with the unpaid principal of and/or interest on the Loans
held by each of the Banks before giving effect to such payment. To such end all
the Banks shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if such payment is rescinded or must otherwise
be restored.
(c) The Company agrees that any Bank so purchasing a
participation (or direct interest) in the Loans made by other Banks (or in
interest due thereon, as the case may be) may exercise all rights of set-off,
bankers' lien, counterclaim or similar rights with respect to such participation
as fully as if such Bank were a direct holder of Loans in the amount of such
participation.
(d) Nothing contained herein shall require any Bank to exercise
any such right or shall affect the right of any Bank to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of the Company.
(e) If, under any applicable bankruptcy, insolvency or other
similar law, any Bank receives a secured claim in lieu of a set-off to which
this 2.06 applies, such Bank shall, to the extent practicable, exercise its
rights in respect of such secured claim in a manner consistent with the rights
of the Banks entitled under this 2.06 to share in the benefits of any recovery
on such secured claim.
(f) Notwithstanding the foregoing, this 2.06 shall not be
applicable to the Swingline Bank with respect to Swingline Loans.
2.07 Computations. Interest on Money Market Loans and Eurodollar
Loans 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 payable, and interest on Domestic Loans, Swingline Loans and
facility fees 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 payable.
2.08 Facility Fee. The Company shall pay to Chase for account of
each Bank a facility fee on such Bank's Commitment (whether used or not) for the
period commencing on the Effective Date and ending on the Commitment Termination
Date (or such earlier date on which such Bank's Commitment shall have terminated
in full pursuant to 1.04 hereof) at a rate per annum for each day during such
period equal to the Applicable Facility Fee Rate in effect on such day. Accrued
facility fees shall be payable quarterly on the last Business Day in March,
June, September and December in each year, commencing the first such date after
the Effective Date and on the date the Commitments are terminated in full.
III. PROVISIONS RELATING TO FIXED RATE LOANS. The following
provisions shall apply to all Fixed Rate Loans:
3.01 Additional Costs.
(a) The Company shall pay directly to each Bank from time to time
on request pursuant to paragraph (d) of this 3.01 such amounts as such Bank may
determine to be necessary to compensate it for any costs which such Bank
determines are attributable to its making or maintaining of any Fixed Rate Loans
or its obligation to make any Fixed Rate Loans hereunder, or any reduction in
any amount receivable by such Bank hereunder in respect of any of such Loans 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 Bank under this Agreement or its Notes in respect of any of such
Loans (other than taxes imposed on or measured by the overall net income
of such Bank or of its Applicable Lending Office for any of such Loans
by the jurisdiction in which such Bank has its principal office or such
Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit or
similar requirements (other than in the case of any Bank for any period
as to which the Company is required to pay any amount under paragraph
(e) below, the reserves against "Eurocurrency liabilities" under
Regulation D therein referred to) relating to any extensions of credit
or other assets of, or any deposits with or other liabilities of, such
Bank (including any of such Loans or any deposits referred to in the
definition of "Fixed Base Rate" in Schedule 1 hereof), or any commitment
of such Bank (including the Commitment of such Bank hereunder); or
(iii) imposes any other condition affecting this Agreement or
its Notes (or any of such extensions of credit or liabilities) or its
Commitment.
If any Bank requests compensation from the Company under this 3.01(a), the
Company may, by notice to such Bank (with a copy to Chase), suspend the
obligation of such Bank to make additional Loans of the type with respect to
which such compensation is requested (in which case the provisions of 3.04
hereof shall be applicable) until either (A) the Regulatory Change giving rise
to such request ceases to be in effect or (B) such Bank gives notice to the
Company that it will no longer require the Company to pay Additional Costs
arising from such Regulatory Change.
(b) Without limiting the effect of the provisions of paragraph
(a) of this 3.01, in the event that, by reason of any Regulatory Change, any
Bank 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 Bank which includes deposits by reference to which the interest rate on
Eurodollar Loans is determined as provided in this Agreement or a category of
extensions of credit or other assets of such Bank which includes Eurodollar
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 Bank so elects by
notice to the Company (with a copy to Chase), the obligation of such Bank to
make additional Loans of such type hereunder shall be suspended until such
Regulatory Change ceases to be in effect (in which case the provisions of 3.04
hereof shall be applicable).
(c) Without limiting the effect of the foregoing provisions of
this 3.01 (but without duplication), the Company shall pay directly to each Bank
from time to time on request pursuant to paragraph (d) of this 3.01 such amounts
as such Bank may determine to be necessary to compensate such Bank for any costs
which it determines are attributable to the maintenance by such Bank (or any
Applicable Lending Office), pursuant to any law or regulation or any
interpretation, directive or request (whether or not having the force of law) of
any court or governmental or monetary authority (i) following any Regulatory
Change or (ii) implementing any risk-based capital guideline or requirement
(whether or not having the force of law and whether or not the failure to comply
therewith would be unlawful) heretofore or hereafter issued by any government or
governmental or supervisory authority implementing at the national level the
Basle Accord (including, without limitation, the Final Risk Based Capital
Guidelines of the Board of Governors of the Federal Reserve System (12 CFR Part
208, Appendix A; 12 CFR Part 225, Appendix A) and the Final Risk-Based Capital
Guidelines of the Office of the Comptroller of the Currency (12 CFR Part 3,
Appendix A)), of capital in respect of its Commitment or Loans (such
compensation to include, without limitation, an amount equal to any reduction of
the rate of return on assets or equity of such Bank (or any Applicable Lending
Office) to a level below that which such Bank (or any Applicable Lending Office)
could have achieved but for such law, regulation, interpretation, directive or
request). For purposes of this 3.01(c), "Basle Accord" shall mean the proposals
for risk-based capital framework described by the Basle Committee on Banking
Regulations and Supervisory Practices in its paper entitled "International
Convergence of Capital Measurement and Capital Standards" dated July 1988, as
amended, modified and supplemented and in effect from time to time or any
replacement thereof.
(d) Each Bank will notify the Company of any event occurring
after the date of this Agreement that will entitle such Bank to compensation
under paragraph (a) or (c) of this 3.01 as promptly as practicable, but in any
event within 90 days, after such Bank obtains actual knowledge thereof;
provided, however, that if any Bank fails to give such notice within 90 days
after it obtains actual knowledge of such an event, such Bank shall, with
respect to compensation payable pursuant to this 3.01 in respect of any costs
resulting from such event, only be entitled to payment under this 3.01 for costs
incurred from and after the date 90 days prior to the date that such Bank does
give such notice; and provided, further, that each Bank will designate a
different Applicable Lending Office for the Loans of such Bank affected by such
event or by the matters requiring compensation pursuant to paragraph (e) of this
3.01, and take other measures in its sole discretion, if such designation or
other measures will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of such Bank, result in a
material cost to, or be otherwise disadvantageous to, such Bank, except that
such Bank shall have no obligation to designate an Applicable Lending Office
located in the United States of America. Each Bank will furnish to the Company a
certificate setting forth the basis and amount of each request by such Bank for
compensation under paragraph (a) or (c) of this 3.01. Determinations and
allocations by any Bank for purposes of this 3.01 of the effect of any
Regulatory Change pursuant to paragraph (a) or (b) of this 3.01, or of the
effect of capital maintained pursuant to paragraph (c) of this 3.01, on its
costs or rate of return of maintaining Loans or its obligation to make Loans, or
on amounts receivable by it in respect of Loans, and of the amounts required to
compensate such Bank under this 3.01, shall be conclusive, provided that such
determinations and allocations are made on a reasonable basis.
(e) Without limiting the effect of the foregoing (but without
duplication), the Company shall pay to each Bank on the last day of each
Interest Period so long as such Bank is maintaining reserves against
"Eurocurrency liabilities" under Regulation D (or, unless the provisions of
paragraph (b) above are applicable, so long as such Bank is, by reason of any
Regulatory Change, maintaining reserves against any other category of
liabilities which includes deposits by reference to which the interest rate on
Eurodollar Loans is determined as provided in this Agreement or against any
category of extensions of credit or other assets of such Bank which includes any
Eurodollar Loans) an additional amount (determined by such Bank and notified,
not less than five Business Days prior to the end of the applicable Interest
Period, to the Company through Chase) equal to the product of the following for
each Eurodollar Loan made by such Bank for each day during such Interest Period:
(i) the principal amount of such Eurodollar Loan
outstanding on such day; and
(ii) the remainder of (x) a fraction the numerator of which
is the annual rate (expressed as a decimal) at which interest accrues on
such Eurodollar Loan for such Interest Period as provided in this
Agreement (less the Applicable Margin) and the denominator of which is
one minus the effective annual rate (expressed as a decimal) at which
such reserve requirements are imposed on such Bank on such day minus (y)
such numerator; and
(iii) 1/360.
3.02 Limitation on Types of Loans. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of any Fixed Base
Rate for any Interest Period in accordance with the terms hereof:
(a) Chase determines, which determination shall be conclusive,
that quotations of interest rates for the relevant deposits referred to
in the definition of "Fixed Base Rate" in Schedule 1 hereof are not
being provided in the relevant amounts or for the relevant maturities
for purposes of determining rates of interest for any type of Fixed Rate
Loans as provided herein; or
(b) the Majority Banks determine, which determination shall be
conclusive, and notify (or notifies, as the case may be) Chase that the
relevant rates of interest referred to in the definition of "Fixed Base
Rate" in Schedule 1 hereof upon the basis of which the rate of interest
for Eurodollar Loans for such Interest Period is to be determined are
not likely adequately to cover the cost to such Banks (or to such
quoting Bank) of making or maintaining such type of Loans;
then Chase shall give the Company and each Bank prompt notice thereof, and so
long as such condition remains in effect, the Banks (or such quoting Bank) shall
be under no obligation to make additional Loans of such type.
3.03 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Bank or its Applicable
Lending Office to honor its obligation to make or maintain Eurodollar Loans
hereunder, then such Bank shall promptly notify the Company thereof (with a copy
to Chase) and such Bank's obligation to make Eurodollar Loans shall be suspended
until such time as such Bank may again make and maintain Eurodollar Loans (in
which case the provisions of 3.04 hereof shall be applicable).
3.04 Treatment of Affected Loans. If the obligation of any Bank
to make a particular type of Fixed Rate Loans shall be suspended pursuant to
3.01 or 3.03 hereof (Loans of such type being herein called "Affected Loans" and
such type being herein called the "Affected Type"), all Loans (other than Money
Market Loans) which would otherwise be made by such Bank as Loans of the
Affected Type shall be made instead as Domestic Loans and, if an event referred
to in 3.01(b) or 3.03 hereof has occurred and such Bank so requests by notice to
the Company with a copy to Chase, all Affected Loans of such Bank then
outstanding shall be automatically converted into Domestic Loans on the date
specified by such Bank in such notice and, to the extent that Affected Loans are
so made (or converted), all payments of principal which would otherwise be
applied to such Bank's Affected Loans shall be applied instead to such Loans.
3.05 Compensation. The Company shall pay to Chase for account of
each Bank, upon the request of such Bank through Chase, such amount or amounts
(the basis for which shall be set forth in reasonable detail in such request) as
shall be sufficient (in the reasonable opinion of such Bank) to compensate it
for any loss, cost or expense which such Bank determines is attributable to:
(a) any payment or conversion of a Fixed Rate Loan or a Set Rate
Loan made by such Bank for any reason (including, without limitation,
the acceleration of the Loans pursuant to Article VII hereof) on a date
other than the last day of the Interest Period for such Loan; or
(b) any failure by the Company for any reason (including, without
limitation, the failure of any of the conditions precedent specified in
Article IV hereof to be satisfied, but excluding the failure of such
Bank to make a Loan when so obligated hereunder) to borrow a Fixed Rate
Loan or a Set Rate Loan (with respect to which, in the case of a Money
Market Loan, the Company has accepted a Money Market Quote) from such
Bank on the date for such borrowing specified in the relevant notice of
borrowing given pursuant to 1.05 or 1.02 hereof.
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 otherwise would have accrued on the principal amount so paid or converted
or not borrowed for the period from the date of such payment, 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 minus the Applicable Margin for
such Loan over (ii) the interest component of the amount such Bank would have
bid in the London interbank market (if such Loan is a Eurodollar Loan) or the
United States secondary certificate of deposit market (if such Loan is a Set
Rate Loan) 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 Bank).
3.06 Survival. The obligations of the Company under this Article
III shall survive the repayment of the Loans and the cancellation of the Notes.
IV. CONDITIONS
4.01 Conditions to Effectiveness. The Agreement herein
contemplated shall become effective on April 15, 1999 (the "Effective Date"),
provided that on the Effective Date, the following conditions shall have been
satisfied:
(a) Chase has received each of the following documents, in form
and substance satisfactory to Chase:
(i) one or more counterparts of this Agreement executed
by each of the parties hereto;
(ii) certified copies of all corporate action taken by the
Company to authorize the execution and delivery of this Agreement and
the Notes and the borrowings hereunder;
(iii) a certificate of a duly authorized officer of the
Company as to the incumbency, and setting forth a specimen signature, of
each of the persons (a) who has signed this Agreement on behalf of the
Company, (b) who will sign the Notes on behalf of the Company, and (c)
who will, until replaced by other persons duly authorized for that
purpose, act as the representatives of the Company for the purpose of
signing documents in connection with this Agreement and the transactions
contemplated hereby;
(iv) the Syndicated Note and the Money Market Note for each
Bank and the Swingline Note for the Swingline Bank, all as provided in
1.10 hereof, in each case duly completed and executed by the Company;
(v) an opinion of Hughes Hubbard & Reed LLP, counsel for
the Company, substantially in the form of Exhibit B hereto, which
(except as to matters of New York or Federal law) may rely as to certain
matters upon an opinion of the Executive Vice President and General
Counsel of the Company substantially in the form attached to said
Exhibit B;
(vi) an opinion of Simpson Thacher & Bartlett, special
counsel to the Banks and the Agents, substantially in the form of
Exhibit C hereto; and
(vii) such other statements, documents, reports or
certificates as any Bank or Agent may reasonably request.
(b) The Banks and the Administrative Agent shall have received
all fees required to be paid relating to this Agreement in the amounts
and on the dates previously agreed to in writing by the Company and the
Administrative Agent and all expenses for which invoices have been
presented (including the reasonable fees and expenses of legal counsel)
on or before the Effective Date.
4.02 Conditions Precedent to Loans. The obligation of any Bank to
make any Loan hereunder (including any Money Market Loan and such Bank's initial
Syndicated Loan on or after the Effective Date) is subject to the further
conditions precedent that, both immediately prior to such Loan and also after
giving effect thereto: (a) either (i) if such borrowing is a Money Market Loan
or will increase the outstanding aggregate principal amount of the Syndicated
Loans, no Default shall have occurred and be continuing or (ii) in the case of
any other borrowing, no Event of Default shall have occurred and be continuing;
and (b) the representations and warranties made by the Company in Article VI
(other than, if such borrowing is not a Money Market Loan and will not increase
the outstanding aggregate principal amount of the Syndicated Loans, the last
sentence of 6.03, 6.04, 6.05, 6.07, 6.09 and 6.11 hereof) shall be true on and
as of the date of the notice or deemed notice of borrowing for such Loans and on
the date of the making of such Loans with the same force and effect as if made
on and as of each such date. The obligation of any Bank to make a Eurodollar
Loan hereunder is subject to the further condition precedent that, both
immediately prior to such Loan and also after giving effect thereto, no Default
shall have occurred and be continuing. Each notice or deemed notice of borrowing
by the Company hereunder shall constitute a certification by the Company to the
effect set forth in the two preceding sentences to the extent applicable to the
borrowing that is the subject of such notice (both as of the date of such
borrowing notice and, unless the Company otherwise notifies Chase in such
borrowing notice or prior to the date of such borrowing, as of the date of such
borrowing).
V. COVENANTS. So long as any Loan or any other amount owing by the
Company to any Agent or Bank hereunder remains outstanding or any
Bank's Commitment remains in effect:
5.01 Financial Statements. The Company shall deliver to each
Bank:
(a) As soon as available and in any event within 60 days after
the end of each of the first three quarterly accounting periods in each
fiscal year, the 10-Q report of the Company for such period;
(b) As soon as available and in any event within 120 days after
the end of each fiscal year, the 10-K report of the Company for such
fiscal year, accompanied by (A) an opinion as to the financial
statements contained in such 10-K report of independent certified public
accountants of recognized national standing, and (B) a statement by said
accountants that in the course of their regular examination of the
Company and its Consolidated Subsidiaries for purposes of their opinion
they obtained no knowledge, except as specifically stated, of the
occurrence and continuance of any Default;
(c) With each report delivered under 5.01(a) or (b) hereof, (A) a
statement signed by an Appropriate Officer of the Company certifying
and, where calculations are necessary, demonstrating compliance by the
Company with the provisions of 5.09 hereof, and (B) a statement of an
Appropriate Officer of the Company that such officer has no knowledge,
except as specifically stated, of the occurrence and continuance of any
Default.
(d) Promptly after their becoming available:
(i) Copies of all financial statements, reports and proxy
statements which the Company shall have sent to its stockholders
generally.
(ii) Copies of all regular and periodic reports, if any,
which the Company or any Restricted Subsidiary shall have filed with the
Securities and Exchange Commission, or any governmental agency
substituted therefor, or with any national securities exchange.
(e) From time to time, with reasonable promptness, such further
information regarding the business, affairs and financial position of
the Company and each Subsidiary as any Bank may reasonably request.
5.02 Access to Books and Inspection. The Company shall, upon
reasonable request by any Bank, give any representative of such Bank access, at
the Company's principal office, during normal business hours to, and permit such
representative to examine, copy or make excerpts from, any and all books,
records and documents in the possession of the Company relating to its affairs
and the affairs of its Subsidiaries, excluding, however, any privileged and
confidential communications or other materials, and to inspect any of the
properties of the Company or such Subsidiaries; provided that all information
(other than publicly available information) delivered by the Company to any Bank
pursuant to this 5.02 is strictly confidential, and each Bank agrees that it
shall (or shall cause the persons referred to in clause (ii) below to) maintain
the confidentiality of any such information, subject to: (i) the obligation to
disclose such information pursuant to subpoena or other legal process, or to
regulatory or examining authorities or other governmental agencies having
jurisdiction, or otherwise as may be required by law; (ii) the right to disclose
such information to the independent auditors and counsel of such Bank, or to the
Agents or any other Bank; and (iii) the right to disclose such information to
assignees and participants (including prospective assignees and participants) as
provided in 8.05 hereof.
5.03 Litigation. Notwithstanding any other provision of this
Agreement, the Company shall, promptly after its becoming available, furnish to
each Bank a copy of any report filed by the Company with the Securities and
Exchange Commission which contains a statement, description or disclosure as to
any litigation or proceeding before any governmental or regulatory agencies
affecting the Company or any of its Subsidiaries.
5.04 Maintenance of Existence. The Company will preserve and
maintain, and cause each of its Restricted Subsidiaries to preserve and
maintain, its corporate existence, provided that the foregoing shall not prevent
a merger or consolidation, or sale or other disposition of assets, of the
Company or any Restricted Subsidiary unless otherwise prohibited by this
Agreement.
5.05 Merger; Sale of Assets. The Company shall not:
(a) merge into or consolidate with any corporation if (i) the
Company is not the surviving corporation, (ii) the Company is the
surviving corporation and a majority of the board of directors of the
Company for a period of three months after the effective date of such
merger does not consist of individuals who were directors of the Company
12 months prior to such effective date (except for changes due to the
retirement or death of any such individuals) or (iii) after giving
effect to such merger or consolidation, a Default has occurred and is
continuing; or
(b) permit any Restricted Subsidiary to be a party to any merger
or consolidation or to transfer all or substantially all of its assets,
except that any such Restricted Subsidiary may merge or consolidate
with, or transfer all or substantially all of its assets to, the Company
or any of the Company's other Subsidiaries provided that (i) the
surviving entity of such merger or consolidation or the transferee of
such assets (if it is not the Company or another Restricted Subsidiary)
shall thereafter be treated as a Restricted Subsidiary for all purposes
of this Agreement and (ii) after giving effect to such merger,
consolidation or transfer of assets, no Default shall have occurred and
be continuing; or
(c) sell, assign, transfer or otherwise dispose of all or
substantially all of its assets or, in any case, any stock of or other
equity interest in any of the Restricted Subsidiaries, except that (i)
stock of or other equity interest in any such Restricted Subsidiary may
be sold, assigned or transferred by the Company to any of its
wholly-owned Subsidiaries provided that thereafter such Subsidiary shall
be treated as a Restricted Subsidiary for all purposes of this Agreement
and the Company shall not permit such Subsidiary to sell, assign,
transfer or otherwise dispose of any such stock or other equity interest
except to the Company or otherwise in accordance with this clause (c),
(ii) stock of or other equity interest in any Restricted Subsidiary may
be sold, assigned, transferred or disposed of (whether by the Company or
any of its wholly-owned Subsidiaries) so long as immediately after
giving effect to such transaction the Company and/or one or more of its
wholly-owned Subsidiaries owns stock of or other equity interests in
such Restricted Subsidiary (x) representing, in the case of a
partnership, not less than 80% of the outstanding capital and profit
interests in such partnership or, in the case of any other entity, not
less than 80% of the fair market value of the outstanding stock of or
other equity interests in such Restricted Subsidiary (excluding
Mandatory Preferred Stock of such Restricted Subsidiary) and (y)
representing not less than 80% of the ordinary voting power for the
election of directors or other persons performing similar functions of
such Restricted Subsidiary (other than stock or other equity interests
having such power only by reason of the happening of a contingency) and
(iii) Mandatory Preferred Stock of any Restricted Subsidiary may be
sold, assigned, transferred or disposed of (whether by the Company or
any of its Subsidiaries).
5.06 Default; Investment Rating. The Company shall:
(a) as soon as it shall become known to a senior officer of the
Company, forthwith notify each Agent if any Default shall have occurred;
and
(b) if Moody's or S&P (or any successor thereto) shall have
assigned a new rating to the senior debt securities of the Company,
notify each Agent of such new rating within 30 days after it is first
announced by the applicable rating agency.
5.07 ERISA. The Company will furnish to the Banks:
(a) as soon as possible and in any event within 15 days after the
Company knows or has reason to know that any Termination Event has
occurred, a statement of a senior officer of the Company describing such
Termination Event and the action, if any, which the Company proposes to
take with respect thereto;
(b) from time to time promptly after the request of any Bank,
copies of each annual report filed pursuant to Section 104 of ERISA with
respect to each Plan (including, to the extent required by Section 103
of ERISA, the related financial and actuarial statements and opinions
and other supporting statements, certifications, schedules and
information referred to in Section 103) and each annual report filed
with respect to each Plan under Section 4065 of ERISA;
(c) promptly after receipt thereof by the Company from the PBGC,
copies of each notice received by the Company of PBGC's intention to
terminate any Plan or to have a trustee appointed to administer any
Plan; and
(d) promptly after such request, such other documents and
information relating to Plans as any Bank may reasonably request from
time to time.
5.08 Liens. The Company will not, and will not permit any
Subsidiary to, grant a security interest in any stock of any of the Restricted
Subsidiaries or Citrus Corp. The Company will not grant a security interest in
any of its other assets to secure Indebtedness (except as provided in the next
sentence) unless the Company simultaneously grants to any Designated Agent for
the benefit of the Banks an equal and ratable security interest in the assets
subject to such security interest. The provisions of the preceding sentence
shall not apply to the grant by the Company of:
(a) Any purchase money mortgage or purchase money security
interest created to secure all or part of the purchase price of any
property (or to secure a loan made to enable the Company to acquire the
property described in such mortgage or in any applicable security
agreement); provided that such mortgage or security interest shall
extend only to the property so acquired, fixed improvements thereon,
replacements thereof and the income and profits therefrom;
(b) Any security interest on any property acquired or constructed
by the Company, and created not later than twelve months after (i) such
acquisition or completion of such construction or (ii) commencement of
operation of such property, whichever is later; provided that such
security interest shall extend only to the property so acquired or
constructed, fixed improvements thereon, replacements thereof and income
and profits therefrom;
(c) Any security interest deemed to be created as a result of the
deposit of cash or securities for the purpose of defeasance of
Indebtedness; and
(d) Any security interest in any of its cash or cash equivalents
(within the meaning of generally accepted accounting principles) created
by the Company for the purpose of securing Derivative Obligations of the
Company, provided that the aggregate amount of all cash or cash
equivalents secured by security interests permitted by this clause (d)
shall not exceed $25,000,000.
(e) Any security interest not otherwise permitted under the
preceding clauses (a) through (d) in any of its assets created by the
Company for the purpose of securing Indebtedness of the Company,
provided that the aggregate amount of all Indebtedness of the Company
secured by security interests permitted by this clause (e) shall not
exceed $10,000,000.
5.09 Total Indebtedness to Consolidated Capitalization. The
Company will not at any time permit Total Indebtedness of the Company to exceed
65% of the Consolidated Capitalization of the Company.
5.10 [Intentionally Omitted.]
5.11 Insurance. The Company will, and will cause each of its
Subsidiaries to, keep insured with financially sound and reputable insurers or
through self-insurance conforming with practices of similar corporations
maintaining systems of self-insurance all property of a character usually
insured by corporations 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 corporations and carry such other insurance as is
usually carried by such corporations.
5.12 Maintenance of Properties. The Company will, and will cause
each of its Subsidiaries to, keep all of its material properties necessary in
its business in good working order and condition appropriate for the use being
made thereof, ordinary wear and tear excepted; except, in every case, as and to
the extent that the Company or its Subsidiaries may be prevented from
maintaining their respective properties by fire, strikes, lockouts, acts of God,
inability to obtain labor or materials, governmental (including judicial)
restrictions, enemy action, civil commotion or unavoidable casualty or similar
causes beyond the control of the Company; provided, however, that nothing in
this 5.12 shall prevent the Company or any of its Subsidiaries from
discontinuing the use, operation or maintenance of any of such properties if
such discontinuance is, in the judgment of the Company or its applicable
Subsidiary, desirable in the conduct of the business of the Company or such
Subsidiary and if such discontinuance is not disadvantageous in any material
respect to the Banks; and provided, further, that nothing in this 5.12 shall
prohibit any sale, assignment, transfer or other disposition permitted by 5.05
hereof.
5.13 Public Utility Holding Company Act. The Company will not,
and will not permit any of its Subsidiaries to, be subject to regulation under
the Public Utility Holding Company Act of 1935, as amended.
VI. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants as follows:
6.01 Corporate Existence and Powers. The Company and each of its
Restricted Subsidiaries is a corporation duly incorporated and validly existing
and in good standing under the laws of the jurisdiction of its incorporation
(or, in case of any Restricted Subsidiary not a corporation, such Restricted
Subsidiary is duly organized and validly existing under the laws of the
jurisdiction of its organization) and is duly licensed or qualified to do
business and is in good standing in all states in which the Company believes the
conduct of its business or the ownership of its assets requires such
qualification, and the Company has corporate power to make this Agreement and
the Notes and to borrow hereunder.
6.02 Corporate Authority, etc. The making and performance by the
Company of this Agreement and the Notes and each borrowing hereunder have been
duly authorized by all necessary corporate action and do not and will not
contravene any provision of law applicable to the Company or of the certificate
of incorporation or by-laws of the Company or result in the material breach of,
or constitute a material default or require any consent under, or result in the
creation of any material lien, charge or other security interest or encumbrance
not permitted by 5.08 hereof upon any property or assets of the Company or any
of its Restricted Subsidiaries pursuant to, any indenture or other agreement or
instrument to which the Company or any of its Restricted Subsidiaries is a party
or by which the Company or any of its Restricted Subsidiaries or any of their
respective properties may be bound or affected (or, if any such consent is so
required, the Company has obtained such consent, which is sufficient for the
purpose and remains in full force and effect, and copies thereof have been
furnished to Chase). This Agreement has been duly and validly executed and
delivered by the Company and constitutes, and each of the Notes when executed
and delivered will constitute, its legal, valid and binding obligation,
enforceable in accordance with its terms.
6.03 Financial Condition. The consolidated balance sheets of the
Company and its Consolidated Subsidiaries as at December 31, 1998 and the
related statements of consolidated income and cash flows of the Company and its
Consolidated Subsidiaries for the 12 months ended on said date, heretofore
furnished by the Company to the Banks, fairly present in all material respects
the financial condition of the Company and its Consolidated Subsidiaries as at
said date and the results of their operations and cash flows for the 12 months
then ended in accordance with generally accepted accounting principles. Except
as disclosed in a letter dated the Effective Date, from the Treasurer of the
Company, a copy of which has been furnished to each Bank, since December 31,
1998 there has heretofore been no material adverse change in the financial
condition or operating results of the Company and its Consolidated Subsidiaries,
taken as a whole, from that set forth in the consolidated balance sheet and
related statements as at and for the period ended on said date.
6.04 Litigation. Except as disclosed in a letter dated the
Effective Date, from the Executive Vice President and General Counsel of the
Company, a copy of which has heretofore been furnished to each Bank, there are
no actions, suits or proceedings, and no proceedings before any arbitrator or by
or before any governmental commission, board, bureau or other administrative
agency, pending, or to the knowledge of the Company threatened, against or
affecting the Company or any Subsidiary which are reasonably likely to have a
material adverse effect on the financial condition, properties or operations of
the Company and its Subsidiaries, taken as a whole.
6.05 Taxes. Each of the Company and each Restricted Subsidiary
has filed all material tax returns required to be filed and paid all material
taxes shown thereon to be due, including interest and penalties, or provided
adequate reserves for payment thereof, except to the extent the same have become
due and payable but are not yet delinquent, and except for any taxes and
assessments of which the amount, applicability or validity is currently being
contested in good faith by appropriate proceedings.
6.06 Approvals. No approval, license or consent of any
governmental regulatory body is requisite to the making and performance by the
Company of this Agreement, or the execution, delivery and payment of the Notes
(or, if any such approval, license or consent is so requisite, the Company has
obtained the same, which is sufficient for the purpose and remains in full force
and effect, and copies thereof have been furnished to Chase).
6.07 ERISA. The Company, and each Subsidiary, has met its minimum
funding requirements under ERISA with respect to all its Plans and has not
incurred any material liabilities to PBGC or to such Plan under ERISA in
connection with any such Plan.
6.08 Margin Regulations. The Company is not engaged principally,
or as one of its important activities, in the business of extending credit for
the purpose of purchasing or carrying margin stock (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System), and no
part of the proceeds of any Loan will be used to purchase or carry any such
margin stock or to extend credit to others for the purpose of purchasing or
carrying any such margin stock.
6.09 Certain Subsidiaries. Except as a consequence of a
transaction or transactions permitted by this Agreement, the Company directly or
indirectly owns all of the outstanding shares of common stock of each of the
Restricted Subsidiaries (except for directors' qualifying shares), and all
shares of stock of such corporations are validly issued, fully paid and
non-assessable.
6.10 Investment Company Act. The Company is not an "investment
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
6.11 Environmental Laws. The Company and its Subsidiaries are in
compliance in all material respects with the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Superfund
Amendments and Reauthorization Act of 1986, the Resource Conservation and
Recovery Act, the Toxic Substances Control Act, as amended, the Clean Air Act,
as amended, the Clean Water Act, as amended, and each other federal, state or
local statute, law, ordinance, code, rule or regulation, regulating or imposing
liability or standards of conduct concerning, any hazardous, toxic or dangerous
waste, substance or material, except for any noncompliance that is not
reasonably likely to have a material adverse effect on the financial condition,
properties or operations of the Company and its Subsidiaries, taken as a whole.
6.12 Year 2000 Problem. The Company has (i) undertaken a detailed
review and assessment of all areas within its business and operations that could
reasonably be affected by the Year 2000 Problem, (ii) developed a detailed plan
and timeline for addressing the Year 2000 Problem on a timely basis and (iii)
implemented that plan to date in accordance with such plan and timeline. To the
best of Company's knowledge, all computer applications that are material to the
Company's business and operations will on a timely basis be able to perform
date-sensitive functions for all dates on and after January 1, 2000.
All representations and warranties made herein shall survive the
making of the Loans and the delivery of the Notes hereunder.
VII. EVENTS OF DEFAULT. If any of the following "Events of
Default" shall occur and shall not have been remedied:
A. default by the Company in the payment of any
principal of any of theNotes when the same becomes due and
payable;
B. default by the Company in the payment of interest on
any of the Notes or any other amounts payable under 1.03 or 2.08
hereof which shall remain unremedied for ten days after the same
becomes due and payable;
C. any representation or warranty made by the Company in
Article VI hereof or in any certificate furnished to the Agents
or to the Banks hereunder (or deemed to have been given at the
time of any borrowing hereunder) shall prove to have been
incorrect when made or deemed made, in any material respect;
D. default by the Company in the due performance or
observance of 5.05, 5.08 or 5.09 hereof;
E. default by the Company in the due performance or
observance of 5.06(a) hereof which shall remain unremedied for a
period of ten days;
F. default by the Company in the due performance or
observance of 5.03 or 5.06(b) hereof which shall remain
unremedied for a period of 30 days after such default shall have
become known to an executive officer of the Company;
G. default by the Company in the due performance or
observance of any other covenant or agreement herein contained
which shall remain unremedied for a period of 30 days after
written notice thereof shall have been given to the Company by
any Bank (through any Designated Agent);
H. default by the Company or any Restricted Subsidiary (i)
in the payment of any Indebtedness of the Company and/or one or
more Restricted Subsidiaries in an aggregate unpaid principal
amount of at least $25,000,000, beyond the period or periods of
grace (if any) provided with respect thereto, or (ii) in the
performance or observance of any other provisions in indentures,
credit or loan agreements or other agreements or instruments
under which such Indebtedness in such aggregate unpaid principal
amount of the Company and/or one or more Restricted Subsidiaries
is outstanding or by which such Indebtedness is evidenced and, in
the case of clause (ii) only, if the effect of such default is to
cause, or permit the holder or holders of such Indebtedness (or a
trustee or an agent on behalf of such holder or holders) to
cause, such Indebtedness to become due prior to its stated
maturity;
I. any Termination Event shall have occurred and shall
have continued under circumstances which result in an uninsured
payment or repayment liability of the Company or any of its
Subsidiaries to PBGC in an amount which is material in relation
to the financial position of the Company and its Subsidiaries, on
a consolidated basis;
J. either the Company or one or more Restricted
Subsidiaries (taken as a group) with total assets of at least
$10,000,000 in the aggregate (such Restricted Subsidiary or
Subsidiaries being hereinafter called the "Restricted Group")
shall (1) apply for or consent to the appointment of, or taking
possession by, a receiver, trustee, custodian, liquidator or
other similar official of itself or of all or a substantial part
of its assets, (2) admit in writing its inability to pay its
debts, or generally become unable to pay its debts, as they
become due, (3) make a general assignment for the benefit of its
creditors, (4) commence a voluntary case under the federal
bankruptcy laws (as now or hereafter in effect), (5) file a
petition seeking to take advantage of any other laws relating to
bankruptcy, reorganization, insolvency, winding-up or composition
or readjustment of debts, or (6) acquiesce in writing to, or fail
to controvert in a timely and appropriate manner, any petition
filed against it or in any involuntary case under the aforesaid
federal bankruptcy laws; or corporate action shall be taken by
the Company or the Restricted Group for the purpose of effecting
any of the foregoing; or
K. a proceeding or case shall be commenced, without the
application or consent of the Company or the Restricted Group (as
defined in paragraph J above), in any court of competent
jurisdiction, seeking (1) its liquidation, reorganization,
dissolution, winding-up, or composition or readjustment of debts,
(2) the appointment of a receiver, trustee, custodian, liquidator
or any similar official of itself of all or a substantial part of
its assets, (3) similar action with respect to the Company or the
Restricted Group under the federal bankruptcy laws (as now or
hereafter in effect) or any other laws relating to bankruptcy,
insolvency, reorganization, liquidation or 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
continued unstayed and in effect, for any period of 60
consecutive days; or an order for relief against the Company or
the Restricted Group shall be entered in an involuntary case
under such federal bankruptcy laws,
THEREUPON, (in addition to the rights and remedies of the Swingline Bank
pursuant to 1.08(b)) (1) in the case of any of the Events of Default specified
in paragraphs A through I above, (i) any Designated Agent may and, upon being
directed so to do by the Majority Banks, shall, by notice to the Company,
terminate all Commitments hereunder and they shall thereupon terminate, and (ii)
any Designated Agent may and, upon being directed by Banks holding at least
66-2/3% of the aggregate unpaid principal amount of the Loans shall, by notice
to the Company, declare all outstanding Loans and Notes and all other
obligations of the Company hereunder to be due and payable, whereupon the same
shall become forthwith due and payable, without further protest, presentment,
notice or demand, all of which are expressly waived by the Company, and (2) in
case of any of the Events of Default specified in paragraph J or K above,
without any notice to the Company or any act by any Designated Agent or the
Majority Banks or any Bank, all Commitments hereunder shall terminate forthwith
and the principal of and interest accrued on all the Loans and the Notes and all
other obligations of the Company hereunder shall become and be due and payable.
VIII. MISCELLANEOUS
8.01 Waiver. No failure on the part of any Agent, Bank or holder
of a Note to exercise and no delay in exercising and no course of dealing with
respect to any right, power or privilege under this Agreement or the Notes shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power, or privilege under this Agreement or the Notes preclude any other
or further exercise thereof or the exercise of any other right, power, or
privilege. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
8.02 Notices and Delivery of Documents. Except as otherwise
specified herein, all notices and other communications hereunder shall be in
writing or by telex or telecopy, and shall be deemed to have been duly given
when transmitted by telex or telecopier or personally delivered or, in the case
of a mailed notice or other communication, three Business Days after the date
deposited in the mails, certified and postage prepaid, addressed to any party
hereto at its address given on Schedule 2 hereto or on the signature pages of,
or any schedule to, any amendment hereto, or at such other address of which any
party hereto shall have notified in writing the party giving such notice or (in
the case of a telex message) addressed to any party at any telex number which is
published as belonging to the addressee. Except as otherwise expressly provided
herein, all Notes and other documents to be delivered to any Agent under this
Agreement shall be delivered to it at its Principal Office.
8.03 Governing Law. This Agreement and the Notes hereunder shall
be construed in accordance with and governed by the law of the State of New
York.
8.04 Offsets, etc. Upon the occurrence and during the continuance
of an Event of Default, each Bank is hereby authorized at any time and from time
to time, without notice to the Company except as required by law (any such
notice being expressly waived by the Company), to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Bank to or for the credit
or the account of the Company against any and all of the obligations of the
Company now or hereafter existing under this Agreement and the Notes held by
such Bank. Each Bank agrees promptly to notify the Company after any such
set-off and application made by such Bank, provided that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of the Banks under this 8.04 are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which the Banks may
have.
8.05 Disposition of Loans. Each Bank may at any time, at its own
expense, assign (but only with the prior written consent of the Company, which
it may refuse or grant in its sole discretion), or sell participations in, all
or any portion of any Loans made by it to another bank or other entity; provided
that no such assignment shall be in a principal amount less than $10,000,000.
Any Bank making an assignment hereunder shall pay to Chase an administrative fee
of $2,500 with respect to each assignment. In the case of an assignment, upon
notice thereof by such Bank to the Company and the Agents, to the extent of such
assignment and the Loans so assigned, the assignee shall have the same rights
and benefits as it would have if it were a Bank hereunder and the assignor shall
cease to have the rights and benefits of a Bank hereunder (provided that the
obligations of the Company under Article III to such Bank shall survive such
assignment). In the case of a participation, except as otherwise provided in
2.06(c) hereof, the participant shall not have any rights under this Agreement
or such Bank's Notes (the participant's rights against such Bank in respect of
such participations to be those set forth in the agreement executed by such Bank
in favor of the participant relating thereto) and all amounts payable by the
Company under Article III hereof shall be determined as if such Bank had not
sold such participation. The granting of any such participation shall not
relieve the grantor of its Commitment hereunder. Each Bank may furnish any
information concerning the Company or any of its Subsidiaries in the possession
of such Bank from time to time to assignees and participants (including
prospective assignees and participants) under this 8.05, provided that, if any
such information is confidential information consisting of or based upon
information provided by the Company, prior to furnishing any such information
such Bank shall obtain the agreement of any such assignee or participant, in
favor of the Company, to maintain the confidentiality of such information,
subject to the same requirements and exceptions as specified in 5.02 hereof (and
such Bank shall promptly furnish a copy of each such agreement to the Company).
Any Bank may at any time pledge or assign a security interest in all or any
portion of its rights under this Agreement to secure obligations of such Bank to
a Federal Reserve Bank, and this Section shall not apply to any such pledge or
assignment of a security interest; provided that no such pledge or assignment of
a security interest shall release a Bank from any of its obligations hereunder
or substitute any such pledgee or assignee for such Bank as a party hereto.
8.06 Expenses. All statements, reports, certificates, opinions
and other documents or information furnished by the Company to the Agents or the
Banks under this Agreement shall be supplied without cost to the Agents or the
Banks. Further, the Company hereby agrees that it shall pay, on demand, whether
or not any Loan is made hereunder, (a) all reasonable out-of-pocket costs and
expenses of the Banks and the Agents incurred in connection with the
preparation, execution and delivery of this Agreement, or any amendment or
supplement thereto, and the Notes and the making of the Loans hereunder, (b) the
reasonable fees and disbursements of Simpson Thacher & Bartlett, special counsel
to the Banks, in connection therewith, and (c) all costs and expenses of
collection (including, without limitation, reasonable legal fees) incident to
the enforcement, protection or preservation of any right of any Bank under this
Agreement or the Notes.
8.07 Amendments, Waivers, etc. This Agreement and the Notes may
not be amended, supplemented or modified, nor any of its terms be waived, except
by written instruments signed by the Company and the Majority Banks (and, in the
case of any amendment, supplement, modification or waiver affecting Article IX
hereof, each of the Agents); provided, however, that no such amendment,
supplement, modification or waiver shall, without the written consent of all of
the Banks: (i) extend the term of, or change the amount of, or change any of the
provisions of 1.04 hereof with respect to the reduction or increase of, the
Commitment of any Bank, or decrease the rate at which commitment or facility
fees accrue hereunder or extend the time for payment thereof, (ii) amend, modify
or waive any of the provisions of 1.04(b) with respect to the reduction of
Commitments resulting from a Change of Control or any of the provisions of
5.05(a), (iii) extend the maturity of any Loan, change the rate of interest
thereon, or affect in any way the terms of payment thereof, (iv) alter the
definition of "Majority Banks", (v) affect any provisions relating to Fixed Rate
Loans, (vi) alter this 8.07 or 8.09(a), (vii) waive any condition specified in
Article IV, (viii) waive an Event of Default under paragraph J or K of Article
VII or modify the effect thereof or (ix) waive or amend any representation
contained in Article VI; provided, further, that 1.03 and 1.08 hereof may be
amended, supplemented or modified, and any of the terms thereof waived, by
written instrument signed only by the Company and the Swingline Bank. Any such
amendment, supplement, modification or waiver so entered into shall apply
equally to all of the Banks and any holder of the Notes and shall be binding
upon all parties hereto. Any waiver hereunder shall be for such period and
subject to such conditions as shall be specified in such written instrument. In
the case of any waiver of an Event of Default, such Event of Default shall be
deemed to be cured and not continuing, but no such waiver shall extend to any
subsequent or other Event of Default or any right, power or privilege of the
Banks hereunder in connection therewith.
8.08 Definitions. Certain terms are defined in Schedule 1 hereto
and as used herein shall have meanings as so defined.
8.09 Successors and Assigns. (a) This Agreement shall be binding
upon and inure to the benefit of the Banks, the Agents, the Company and their
respective successors and assigns, except that Company may not assign or
transfer any of its respective rights or obligations hereunder without the prior
written consent of all the Banks.
(b) Notwithstanding anything to the contrary contained herein,
any Bank (a "Granting Lender") may grant to a special purpose funding vehicle
(an "SPC") of such Granting Lender, identified as such in writing from time to
time by the Granting Lender to the Agents and the Company, the option to provide
to the Company all or any part of any Loan that such Granting Lender would
otherwise be obligated to make to the Borrower pursuant to Section 1.01 or 1.02,
provided that (i) nothing herein shall constitute a commitment to make any Loan
by any SPC and (ii) if an SPC elects not to exercise such option or otherwise
fails to provide all or any part of such Loan, the Granting Lender shall be
obligated to make such Loan pursuant to the terms hereof. The making of a
Syndicated Loan by an SPC hereunder shall utilize the Commitment of the Granting
Lender to the same extent, and as if, such Loan were made by the Granting
Lender. Each party hereto hereby agrees that no SPC shall be liable for any
payment under this Agreement for which a Bank would otherwise be liable, for so
long as, and to the extent, the related Granting Lender makes such payment. In
furtherance of the foregoing, each party hereto hereby agrees that, prior to the
date that is one year and one day after the later of (i) the payment in full of
all outstanding senior indebtedness of any SPC and (ii) the Commitment
Termination Date, it will not institute against, or join any other person in
instituting against, such SPC any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or similar proceedings under the laws of
the United States or any State thereof. In addition, notwithstanding anything to
the contrary contained in this Section 8.09(b), any SPC may (i) with notice to,
but without the prior written consent of, the Company or any Agent and without
paying any processing fee therefor, assign all or a portion of its interests in
any Loans to its Granting Lender or to any financial institutions providing
liquidity and/or credit facilities to or for the account of such SPC to fund the
Loans made by such SPC or to support the securities (if any) issued by such SPC
to fund such Loans and (ii) disclose on a confidential basis any non-public
information relating to its Loans to any rating agency, commercial paper dealer
or provider of a surety, guarantee or credit or liquidity enhancement to such
SPC. In no event shall the Company be obligated to pay to an SPC that has made a
Loan any greater amount than the Company would have been obligated to pay under
this Agreement if the Granting Lender had made such Loan. Each Granting Lender
shall indemnify and hold harmless the Company and its directors, officers,
employees and agents from and against any and all losses, liabilities, claims,
damages and expenses arising from or attributable to the making of a Loan by an
SPC of such Granting Lender.
8.10 Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one instrument and
any of the parties hereto may execute this Agreement by signing any such
counterpart.
8.11 Confidentiality. Each of the Agents and the Banks agree to
maintain the confidentiality of the Information (as defined below), except that
Information may be disclosed (a) to its Affiliates and its Affiliates'
directors, officers, employees and agents, including accountants, legal counsel
and other advisors (it being understood that the Persons to whom such disclosure
is made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential), (b) to the extent requested
by any regulatory authority, (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any other party
to this Agreement, (e) in connection with the exercise of any remedies hereunder
or any suit, action or proceeding relation to this Agreement or the enforcement
of rights hereunder, (f) subject to any agreement containing provisions
substantially the same as those of this Section, to any assignee of or
participant in, or any prospective assignee of or participant in, any of its
rights or obligations under this Agreement, (g) with the consent of the Company
or (h) to the extent such Information (i) becomes publicly available other than
as a result of a breach of this Section or (ii) becomes available to any Agent
or any Bank on a nonconfidential basis from a source other than the Company. For
the purposes of this Section, "Information" means all information received from
the Company, its Subsidiaries or its agents relating to the Company or its
business, other than any such information that is available to any Agent or any
Bank on a nonconfidential basis prior to disclosure by the Company.
8.12 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
8.13 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction, and the remaining
portion of such provision and all other remaining provisions hereof will be
construed to render them enforceable to the fullest extent permitted by law.
IX. THE AGENTS
9.01 Appointment, Power and Immunities. Each Bank hereby
irrevocably appoints and authorizes each Designated Agent to act as its agent
hereunder with such powers as are specifically delegated to such Agent by the
terms of this Agreement, together with such other powers as are reasonably
incidental thereto. No Agent shall have any duties or responsibilities except
those expressly set forth in this Agreement, nor shall any Agent, by reason of
this Agreement, have a fiduciary relationship with any Bank. No Agent shall be
responsible to the Banks for any recitals, statements, representations or
warranties contained in this Agreement or in any information memorandum
pertaining to the Company or in any certificate or other document referred to or
provided for in, or received by any of them under, this Agreement, for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement or the Notes or any other document referred to or provided for
herein or for any failure by the Company to perform its obligations under any
thereof. Each Designated Agent may employ agents and attorneys-in-fact and shall
not be answerable, except as to money or securities received by it or its
authorized agents, for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. Neither the Agents nor
any of their directors, officers, employees or agents shall be liable or
responsible for any action taken or omitted to be taken by them hereunder or in
connection herewith, except for their own gross negligence or willful
misconduct.
9.02 Reliance by Agents. Each Agent shall be entitled to rely
upon any certificate, notice or other document (including any cable, telegram,
telecopy or telex) 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 Chase. Chase may deem and treat the payee of any Note as the owner
thereof for all purposes hereof unless and until a notice of the assignment
thereof satisfactory to Chase signed by such payee shall have been filed with
it. As to any matters not expressly provided for by this Agreement, each Agent
shall in all cases be fully protected in acting, or in refraining from acting,
hereunder in accordance with written instructions signed by the Majority Banks,
and such instructions of the Majority Banks and any action taken or failure to
act pursuant thereto shall be binding on all of the Banks.
9.03 Default. No Agent shall be deemed to have knowledge of the
occurrence of a Default or an Event of Default (other than nonpayment of
principal, interest or commitment or other fees) unless such Agent has received
written notice from a Bank or the Company specifying such Default or Event of
Default and stating that such notice is a "Notice of Default". In the event that
any Designated Agent receives such a notice of the occurrence of a Default or an
Event of Default, such Agent shall give prompt written notice thereof to the
other Agents and the Banks. The Designated Agents shall take such action with
respect to such Default or Event of Default as shall be reasonably directed in
writing by the Majority Banks provided that (i) unless and until the Designated
Agents shall have received such directions, the Designated Agents may take such
action, or refrain from taking such action, with respect to such Default or
Event of Default as they shall deem advisable in the best interests of the Banks
and (ii) in no event shall any Agent be required to institute any action, suit
or other proceeding in connection herewith.
9.04 Rights as a Lender. With respect to its Commitment and the
Loans made by it or any collateral therefor, each of Chase, Bank of America and
SunTrust (and any successor Agent hereunder) in its capacity as a Bank under
this Agreement shall have the same rights and powers hereunder as any other Bank
and may exercise the same as though it were not acting as an Agent, and the term
"Bank" or "Banks" shall, unless the context otherwise indicates, include each of
Chase, Bank of America and SunTrust (and any successor Agent hereunder) in its
individual capacity. Each of Chase, Bank of America and SunTrust (and any
successor Agent hereunder) and their affiliates may (without having to account
therefor to any Bank) accept deposits from, lend money to and generally engage
in any kind of banking, trust or other business with the Company (and any of its
related companies) as if it were not acting as an Agent and may accept fees and
other consideration from the Company for services in connection with this
Agreement and otherwise without having to account for the same to the other
Agent and the Banks.
9.05 Indemnification. The Banks severally agree to indemnify each
Agent (to the extent requested by such Agent as provided in 9.08 hereof and/or
to the extent not reimbursed by the Company), pro rata according to the amounts
of their respective Commitments, for any and all 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 such Agent in any way relating to or arising out
of this Agreement or any other documents referred to herein or the transactions
contemplated hereby (including, without limitation, the costs and expenses which
the Company is obligated to pay under 8.06 hereof 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 the enforcement
of any of the terms hereof or of any such other documents, provided that (a)
such Agent shall have given the Banks notice thereof and an opportunity to
defend against the same at the expense of the Banks and with counsel selected by
the Majority Banks, (b) no Bank shall be liable to an Agent for any of the
foregoing to the extent they arise from such Agent's gross negligence or willful
misconduct and (c) no Bank shall be liable for any amount in respect of any
compromise or settlement of any of the foregoing unless such compromise or
settlement is approved by the Majority Banks.
9.06 Reports. Promptly after its receipt thereof, each Agent (or,
if all Agents shall have received the same, Chase) will forward to each Bank a
copy of each report, notice or other document required by this Agreement to be
delivered to such Agent for such Bank.
9.07 Non-Reliance on Agents and Other Banks. Each Bank agrees
that it has, independently and without reliance on any Agent or any other Bank,
and based on such documents and information as it has deemed appropriate, made
its own credit analysis of the Company and decision to enter into this Agreement
and that it will, independently and without reliance upon any Agent or any other
Bank, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own analysis and decisions in taking or not
taking such action under this Agreement. No Agent shall be required to keep
itself informed as to the performance or observance by the Company of this
Agreement or any other document referred to or provided for herein or to make
inquiry of or to inspect the properties or books of the Company. Except for
notices, reports and other documents and information expressly required to be
furnished to the Banks by any Agent hereunder, no Agent shall have any duty or
responsibility to provide any Bank with any credit or other information
concerning the affairs, financial condition or business of the Company (or any
of its related companies) which may come into the possession of such Agent or
any of its affiliates.
9.08 Failure to Act. Except for action expressly required of any
Agent under this Agreement, such Agent shall in all cases be fully justified in
failing or refusing to act unless it shall be indemnified to its satisfaction by
the Banks against any and all liability and expense which may be incurred by it
by reason of taking or continuing to take any such action.
9.09 Resignation or Removal of Agents. Subject to the appointment
and acceptance of a successor Agent as provided below, any Agent may resign at
any time by giving written notice thereof to the Banks and the Company and any
Agent may be removed at any time with or without cause by the Majority Banks.
Upon any such resignation or removal, the Majority Banks shall have the right to
appoint a successor Agent. If no successor Agent shall have been so appointed by
the Majority Banks and shall have accepted such appointment within 30 days after
the retiring Agent's giving of notice of resignation or the Majority Banks'
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Banks, appoint a successor Agent, which shall be a bank which has an office (or
an affiliate or a Subsidiary with an office) in New York, New York. Upon the
acceptance of any appointment as Agent 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 Agreement 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.
9.10 Documentation Agent. Nothing in this Agreement shall impose
on SunTrust, in its capacity as Documentation Agent, any duties or obligations
whatsoever.
9.11 Syndication Agent. Nothing in this Agreement shall impose on
Bank of America, in its capacity as Syndication Agent, any duties or obligations
whatsoever.
<PAGE>
SCHEDULE 1
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the date first above written.
SONAT INC.
By:
Name:
Title:
AMSOUTH BANK, as a Bank
By:
Name:
Title:
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS
ASSOCIATION, as a Bank
By:
Name:
Title:
THE BANK OF NOVA SCOTIA, as a Bank
By:
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
as a Bank
By:
Name:
Title:
CREDIT AGRICOLE INDOSUEZ, as a Bank
By:
Name:
Title:
By:
Name:
Title:
THE CHASE MANHATTAN BANK, as a Bank
By:
Name:
Title:
CREDIT LYONNAIS, NEW YORK BRANCH,
as a Bank
By:
Name:
Title:
MELLON BANK, N.A., as a Bank
By:
Name:
Title:
THE NORTHERN TRUST CO., as a Bank
By:
Name:
Title:
REGIONS BANK, as a Bank
By:
Name:
Title:
SOUTHTRUST BANK N.A., as a Bank
By:
Name:
Title:
SUNTRUST BANK, ATLANTA, as a Bank
By:
Name:
Title:
By:
Name:
Title:
WACHOVIA BANK, N.A., as a Bank
By:
Name:
Title:
Agents
THE CHASE MANHATTAN BANK,
as Administrative Agent
By:
Name:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Syndication Agent
By:
Name:
Title:
SUNTRUST BANK, ATLANTA,
as Documentation Agent
By:
Name:
Title:
<PAGE>
DEFINITIONS
As used in this Agreement, the following terms shall have the
following respective meanings:
"Additional Costs" shall have the meaning attributed thereto in 3.01(a)
hereof.
"Affected Loans" shall have the meaning attributed thereto in 3.04 hereto.
"Affected Type" shall have the meaning attributed thereto in 3.04 hereto.
"Agents" shall have the meaning attributed thereto in the preamble to this
Agreement.
"Annual Dates" shall mean the Quarterly Date in December of each year.
"Applicable Facility Fee Rate" shall mean, with respect to any
day, the percentage indicated below opposite the Rating Level in effect on such
day:
Rating Level Percentage
I 0.100%
II 0.125%
III 0.150%
IV 0.175%
V 0.225%
"Applicable Lending Office" shall mean, with respect to each
Bank, with respect to each type of Loan, the Lending Office designated for such
type of Loan on Schedule 2 hereof, or on the signature pages of, or any schedule
to, any amendment hereto, or such other office or affiliate of such Bank as such
Bank may from time to time specify to Chase and the Company as the office at
which its Loans of such type are to be made and maintained.
"Applicable Margin" shall mean: (a) with respect to Domestic
Loans, zero; and (b) with respect to any Eurodollar Loan on any day, the
percentage indicated below opposite the Rating Level in effect on such day:
Rating Level Percentage
I 0.350%
II 0.375%
III 0.425%
IV 0.475%
V 0.525%
provided, that if on such day the aggregate principal amount of the Loans
outstanding equals or exceeds 33% of the Commitments in effect on such day, the
Applicable Utilization Margin shall be added to the foregoing percentage
otherwise applicable on such day.
"Applicable Utilization Margin" shall mean, with respect to any
Eurodollar Loan on any day, the percentage indicated below opposite the Rating
Level in effect on such day:
Rating Level Percentage
I 0.125%
II 0.125%
III 0.125%
IV 0.150%
V 0.250%
"Appropriate Officer" shall mean the chief executive officer, the
chief operating officer, the chief financial officer, the Vice
President-Comptroller, the Vice President-Finance or the Treasurer.
"Bank of America" shall mean Bank of America National Trust and
Savings Association, in its capacity as Syndication Agent.
"Banks" shall have the meaning attributed thereto in the preamble
to this Agreement, and which shall include the Swingline Bank in its capacity as
such.
"Base Rate" shall mean, for any day, the higher of (a) the
Federal Funds Rate for such day plus 1/2 of 1% per annum and (b) 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.
"Basle Accord" shall have the meaning attributed thereto in 3.01
(c) hereto.
"Business Day" shall mean any day on which commercial banks are
not authorized or required to close in New York City and, if such day relates to
a borrowing of, a payment or prepayment of principal of or interest on, or the
Interest Period for, a Eurodollar Loan or a notice by the Company with respect
to any such borrowing, payment, prepayment or Interest Period, which is also a
day on which dealings in Dollar deposits are carried out in the London interbank
market.
"Change in Control" shall have the meaning attributed thereto in
1.04(b)hereto.
"Chase" shall mean The Chase Manhattan Bank in its capacity as
the Administrative Agent.
"Commitment" shall mean, as to each Bank, the obligation of such
Bank to make Syndicated Loans pursuant to 1.01 hereof in an aggregate amount at
any one time outstanding up to but not exceeding the amount set opposite such
Bank's name on Schedule 3 to this Agreement under the caption "Commitment" (as
the same may be reduced at any time or from time to time pursuant to 1.04
hereof).
"Commitment Termination Date" shall mean the 363rd day after the
Effective Date.
"Company" shall have the meaning attributed thereto in the
preamble to this Agreement.
"Consolidated Capitalization" shall mean, for any Person, the sum
of Total Indebtedness and Equity of such Person and its Consolidated
Subsidiaries, provided that Consolidated Capitalization shall be determined
without giving effect to any non-cash charges after December 31, 1998, reflected
in the Company's consolidated financial statements attributable to the reduction
in the net carrying value of oil and natural gas properties.
"Consolidated Subsidiary" shall mean any Subsidiary of a Person
which was or shall be consolidated with such Person in any consolidated
financial statement furnished to the Banks under this Agreement.
"Default" shall mean an Event of Default or an event which, with
the notice or lapse of time or both specified in Article VII hereof, would
become such an Event of Default.
"Derivative Obligations" shall mean any transaction which is a
rate swap transaction, basis swap, forward rate transaction, commodity swap,
commodity option, equity or equity index swap, equity or equity index option,
bond option, interest rate option, foreign exchange transaction, cap
transaction, floor transaction, collar transaction, currency swap transaction,
cross-currency rate swap transaction, currency option or any other similar
transaction (including any option with respect to any of these transactions).
"Designated Agents" shall mean Chase and Bank of America.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"Domestic Loans" shall mean Syndicated Loans which bear interest
at rates based upon the Base Rate.
"Effective Date" shall have the meaning attributed thereto in
4.01 hereof.
"Equity" means at any time the sum of the following, for any
Person and its Consolidated Subsidiaries:
(i) the amount of share capital liability, including common
and preferred shares (less cost of treasury shares), plus
(ii) the amount of surplus and retained earnings (or, in the
case of a surplus or retained earnings deficit minus the amount of such
deficit).
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, including (unless the context otherwise
requires) any rules or regulations promulgated thereunder.
"Eurodollar Loans" shall mean Syndicated Loans, the interest
rates on which are determined on the basis of rates referred to in the
definition of "Fixed Base Rate".
"Event of Default" shall mean any of the Events of Default
specified in Article VII hereof.
"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
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (i) if the day 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 Chase Manhattan Bank on such day on such transactions as
determined by Chase.
"Fixed Base Rate" shall mean, with respect to any Fixed Rate
Loan, the arithmetic mean (rounded upwards, if necessary, to the nearest 1/100
of 1%), as determined by Chase, of the rate per annum quoted by each Reference
Bank at approximately 11:00 a.m. London time (or as soon thereafter as
practicable) on the date two Business Days prior to the first day of the
Interest Period for such Loan for the offering by such Reference Bank to leading
banks in the London interbank market of Dollar deposits having a term comparable
to such Interest Period and in an amount comparable to the principal amount of
the Eurodollar Loan to be made by such Reference Bank for such Interest Period.
If any Reference Bank is not participating in any Fixed Rate Loan, the Fixed
Base Rate for such Loan shall be determined by reference to the amount of the
Loan which such Reference Bank would have made had it been participating in such
Loan. If any Reference Bank does not timely furnish such information for
determination of any Fixed Base Rate, Chase shall determine such Fixed Base Rate
on the basis of information timely furnished by the remaining Reference Bank.
"Fixed Rate" shall mean, for any Fixed Rate Loan, a rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by
Chase to be equal to the Fixed Base Rate for such Loan for the Interest Period
for such Loan.
"Fixed Rate Loans" shall mean Eurodollar Loans.
"Indebtedness" shall mean, for any Person, all obligations for
borrowed money or purchase money obligations of such Person which in accordance
with generally accepted accounting principles would be shown on the balance
sheet of such Person as a liability; all obligations under leases required to be
capitalized under generally accepted accounting principles at the time of
entering into such lease; all guarantees of such Person in respect of
Indebtedness of others; Indebtedness of others secured by any mortgage, pledge,
security interest, encumbrance, lien or charge upon property owned by such
Person, whether or not assumed; Operating Lease Obligations; and, only as to any
Consolidated Subsidiary of the Company, any Mandatory Preferred Stock of such
Consolidated Subsidiary; provided that Indebtedness shall not include: (i) any
Indebtedness evidence of which is held in treasury (but the subsequent resale of
such Indebtedness shall be deemed to constitute the creation thereof); or (ii)
any particular Indebtedness if, upon or prior to the maturity thereof, there
shall have been deposited with the proper depositary, in trust, money or United
States government securities (or evidences of such Indebtedness as permitted by
the instrument creating such Indebtedness) in the necessary amount to pay,
redeem or satisfy such Indebtedness; or (iii) only as to the Company, any
Indebtedness of the Company to any of its Subsidiaries provided that such
Indebtedness is subordinated in right of payment to the prior payment in full of
the obligations of the Company to the Banks and the Agents under this Agreement
and the termination in full of the Commitments hereunder (including interest
accruing on such obligations after the date of any filing by the Company of any
petition in bankruptcy or the commencement of any bankruptcy, insolvency or
similar proceeding with respect to the Company) in the event that any Default
under this Agreement shall have occurred and be continuing and in the event of
any insolvency, bankruptcy or similar proceeding affecting the Company; or (iv)
any indirect guarantees or other contingent obligations in respect of
Indebtedness of other Persons, including agreements, contingent or otherwise,
with such other persons or with third persons with respect to, or to permit or
assure the payment of, obligations of such other persons, including, without
limitation, agreements to purchase or repurchase obligations of such other
persons, to advance or supply funds to, or to invest in, such other persons or
to pay for properties, products or services of such other persons (whether or
not conveyed, delivered or rendered); demand charge contracts, through-put,
take-or-pay, keep-well, make-whole or maintenance of working capital or similar
agreements; or guarantees with respect to rental or other similar periodic
payments to be made by such other Persons, including, but without limiting the
generality of the foregoing, the Guaranty Agreement dated as of June 1, 1968, as
amended as of August 1, 1968, May 1, 1970, April 13, 1973, May 26, 1973 and
November 30, 1984, between Boise Cascade Corporation, the Company and Parish of
Beauregard, Louisiana; or (v) any capitalized leases for space and/or equipment
in respect of oil and gas production platforms not in excess of $25,000,000 in
the aggregate; or (vi) any Indebtedness of Bear Creek Storage Company or Citrus
Corp. that is shown on the balance sheet of the Company as a liability and which
would not be required to be treated as Indebtedness of the Company or any of its
Subsidiaries under generally accepted accounting principles as in effect on the
date hereof but which is required to be treated as Indebtedness of the Company
or any of its Subsidiaries as a result of a change in generally accepted
accounting principles after the date hereof. For purposes of this Agreement, the
principal amount of any Indebtedness of any Person (excluding Operating Lease
Obligations and Mandatory Preferred Stock of a Consolidated Subsidiary) shall
mean the amount required in accordance with generally accepted accounting
principles to be shown as a liability on the balance sheet of such Person (or,
in the case of Indebtedness of another Person required to be treated as
Indebtedness of such Person under this Agreement, the balance sheet of such
other Person) prepared as of the applicable date.
"Interest Payment Date" shall mean, as to any Loan, the last day
of the Interest Period for such Loan and (i) with respect to a Set Rate Loan
with an Interest Period longer than 90 days, the last day of each consecutive 90
day period (other than such last day if such last day occurs within two Business
Days of the last day of such Interest Period) occurring during such Interest
Period commencing with the first day of such Interest Period, (ii) with respect
to a Eurodollar Loan with an Interest Period longer than three months, the last
day of each consecutive three month period (other than such last day if such
last day occurs within two Business Days of the last day of such Interest
Period) occurring during such Interest Period commencing with the first day of
such Interest Period and (iii) with respect to a Domestic Loan, each Quarterly
Date that occurs prior to the end of the Interest Period for such Loan.
"Interest Period" shall mean, for any Loan, the period provided
for such Loan pursuant to 2.03 hereof.
"Loans" shall mean Money Market Loans, Syndicated Loans and
Swingline Loans.
"Majority Banks" shall mean Banks having at least 66-2/3% of the
aggregate amount of the Commitments; provided that, if the Commitments shall
have terminated, Majority Banks shall mean Banks and SPCs holding at least
66-2/3% of the aggregate unpaid principal amount of the Loans.
"Mandatory Preferred Stock" shall mean, for any Person, the
aggregate stated liquidation value of any outstanding preferred stock issued by
such Person which is required to be redeemed, in whole or in part, by sinking
fund or other mandatory payments at any time prior to the Commitment Termination
Date.
"Moody's" shall mean Moody's Investor Service, Inc.
"Money Market Borrowing" shall have the meaning assigned to such
term in 1.02(b) hereof.
"Money Market Loans" shall mean the loans provided for by 1.02
hereof.
"Money Market Note" shall have the meaning assigned to such term
in 1.10(b) hereof.
"Money Market Quote" shall mean an offer in accordance with
1.02(c) hereof by a Bank to make a Money Market Loan with one single specified
interest rate.
"Money Market Quote Request" shall have the meaning assigned to
such term in 1.02(b) hereof.
"Money Market Rate" shall have the meaning assigned to such term
in 1.02(c)(ii)(C) hereof.
"Note" shall mean a Syndicated Note, a Money Market Note or a
Swingline Note.
"Operating Lease Obligations" shall mean, for the Company at any
date, if the minimum annual rental commitments of the Company and its
Consolidated Subsidiaries as lessee under leases (other than capital leases and
mineral leases) in effect on such date for the fiscal year in which such date
occurs shall exceed $30,000,000, the minimum rental commitments of the Company
and its Consolidated Subsidiaries as lessee over the remaining terms of such
leases that cause such minimum annual rental commitments to exceed $30,000,000,
discounted to present value at the rate of 10% per annum. For purposes of this
definition, rental payments under leases having the longest terms and which
cannot be canceled by the Lessee without the incurrence of a substantial penalty
shall be deemed to be those leases that cause such aggregate minimum rental
commitments to exceed $30,000,000.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and
any entity succeeding to any or all of its functions under ERISA.
"Person" shall mean an individual, a corporation, a company, a
voluntary association, a partnership, a trust, an unincorporated organization or
a government or any agency, instrumentality or political subdivision thereof.
"Plan" shall mean any employee benefit or other plan maintained
by the Company or any Subsidiary of the Company for its employees and covered by
Title IV of ERISA.
"Post-Default Rate" shall mean, in respect of any amount payable
under this Agreement which is not paid when due (whether at stated maturity, by
acceleration or otherwise), a rate per annum for each day during the period from
the due date of such amount until such amount shall be paid in full equal to 2%
above the Base Rate in effect on such day (provided that, if the amount so in
default is principal of a Fixed Rate Loan or a Money Market Loan and the due
date thereof is a day other than the last day of the Interest Period therefor,
the "Post-Default Rate" for such principal shall be, for the period from and
including such due date to but excluding the last day of the Interest Period for
such Loan, 2% above the interest rate for such Loan as provided in 2.02 hereof
and, thereafter, the rate provided for above in this definition).
"Prime Rate" shall mean the rate of interest from time to time
announced by Chase at its Principal Office as its prime commercial lending rate.
"Principal Office" shall mean (i) with respect to Chase or The
Chase Manhattan Bank, its principal office in New York, New York, presently
located at 1 Chase Manhattan Plaza, New York, NY and (ii) with respect to Bank
of America, its principal office in Concord California, presently located at
1850 Gateway Boulevard, Concord, CA.
"Quarterly Dates" shall mean the last day of each March, June,
September and December, commencing on the first such date after the Effective
Date.
"Quarterly Period" shall mean the period of three consecutive
calendar months ending on each Quarterly Date.
"Quotation Date" shall have the meaning attributed thereto in
1.02(b)(iv)hereof.
"Rating Level" shall mean, as of any day, the level indicated
below opposite the statement that is correct with respect to the ratings of the
Company's senior unsecured long-term debt securities as of such day, provided,
that if the ratings of S&P and Moody's on such day fall within different levels,
the level shall be the level which is the level with the lower rating unless
there is a difference of two or more levels, in which case the level shall be
the level which is one level above the level with the lower rating:
Rating Level
A- or better by S&P or A3 or better by I
Moody's
BBB+ by S&P or Baa1 by Moody's II
BBB by S&P or Baa2 by Moody's III
BBB- by S&P or Baa3 by Moody's IV
Below BBB- by S&P and below Baa3 by Moody's V
For purposes of this definition, "I" shall be the highest level and "V" shall be
the lowest level. If any rating established or deemed to have been established
by Moody's or S&P shall be changed, such change shall be effective as of the
date on which it is first announced by the applicable rating agency. Each change
in the Rating Level shall apply during the period commencing on the effective
date of such change and ending on the date immediately preceding the effective
date of the next such change. If the rating system of Moody's or S&P shall
change so as to make the above ratings inapplicable, or if either such rating
agency shall cease to be in the business of rating corporate debt obligations or
shall no longer have in effect a rating for any reason, the Company and the
Banks shall negotiate in good faith to amend the references to specific ratings
in this definition to reflect such changed rating system or the non-availability
of ratings from such rating agency or to select a substitute rating agency and
pending or in the absence of any agreement the Rating Level will be determined
by reference to the single available rating, if any, or, in the absence of any
rating, then such rating agencies will be deemed to have established a rating in
Level V.
"Reference Banks" shall mean The Chase Manhattan Bank and Bank of
America National Trust and Savings Association (or their Applicable Lending
Offices, as the case may be).
"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.
"Regulatory Change" shall mean, with respect to any Bank, any
change after the date of this Agreement in United States Federal, state or
foreign law or regulations (including, without limitation, Regulation D) or the
adoption or making after such date of any interpretation, directive or request
applying to a class of banks including such Bank of or under any United States
Federal, state or foreign law or regulations (whether or not having the force of
law) by any court or governmental or monetary authority charged with the
interpretation or administration thereof.
"Restricted Subsidiaries" shall mean SNG, Sonat Exploration and
any other Subsidiary of the Company which shall acquire or succeed to all or any
substantial part of the assets or the stock of any such Restricted Subsidiary
(in which case any references to any such Restricted Subsidiary in this
Agreement shall, mutatis mutandis, be deemed to refer to such other Subsidiary).
"Set Rate Auction" shall mean a solicitation of Money Market
Quotes setting forth Money Market Rates pursuant to 1.02 hereof.
"Set Rate Loans" shall mean Money Market Loans the interest rates
on which are determined on the basis of Money Market Rates pursuant to a Set
Rate Auction.
"SNG" shall mean Southern Natural Gas Company, a wholly-owned
Subsidiary of the Company (except for directors' qualifying shares).
"Sonat Exploration" shall mean Sonat Exploration Company, a
wholly-owned Subsidiary of the Company (except for directors' qualifying
shares).
"S&P" shall mean Standard & Poor's Ratings Services, a division
of The Mc-Graw Hill Companies.
"SPC" shall have the meaning provided in 8.09(b).
"Subsidiary" shall mean, as to any Person, any corporation,
partnership or other entity at least a majority of whose securities or other
ownership interests having ordinary voting power for the election of directors
or other persons performing similar functions of such corporation, partnership
or entity (other than securities or other ownership interests having such power
only by reason of the happening of a contingency) are at the same time owned by
such Person and/or one or more of its other Subsidiaries.
"SunTrust" shall mean SunTrust Bank, Atlanta, in its capacity as
the Documentation Agent.
"Swingline Account" shall mean the account of the Company
maintained with the Swingline Bank at its Lending Office which the Company and
the Swingline Lender shall designate as the Swingline Account for purposes of
this Agreement.
"Swingline Bank" shall mean SunTrust Bank, Atlanta, in its
capacity as the lender of Swingline Loans.
"Swingline Business Day" shall mean any day on which commercial
banks are not authorized or required to close in Atlanta, Georgia.
"Swingline Commitment" shall mean the obligation of the Swingline
Bank to make Swingline Loans pursuant to 1.03 hereof in an aggregate principal
amount at any one time outstanding up to but not exceeding $60,000,000.
"Swingline Loans" shall have the meaning assigned to such term in
1.03 hereof.
"Swingline Note" shall have the meaning assigned to such term in
1.10(c) hereof.
"Syndicated Loans" shall mean the loans provided for by 1.01
ereof.
"Syndicated Note" shall have the meaning assigned to such term in
1.10(a) hereof.
"Termination Event" shall mean any event or condition which would
constitute grounds under ss.4042 of ERISA for the termination of, or for the
appointment of a trustee to administer, any Plan.
"Total Indebtedness" shall mean, for any Person, the aggregate
unpaid principal amount of the Indebtedness of such Person and its Consolidated
Subsidiaries (excluding Indebtedness of any Consolidated Subsidiary to such
Person or another such Consolidated Subsidiary and, except for the Company,
Indebtedness of such Person to any of its Consolidated Subsidiaries).
"Year 2000 Problem" shall mean for any Person the risk that
computer applications used by such Person may be unable to perform properly
date-sensitive functions involving certain dates after December 31, 1999.
<PAGE>
SCHEDULE 2
LENDING OFFICES
AND/OR
ADDRESSES FOR NOTICES
1. Sonat Inc.
Address for Notices:
AmSouth-Sonat Tower
1900 Fifth Avenue North
Birmingham, Alabama 35202-2563
Attention: Treasurer
Fax: 205-325-7490
Telex: 4955644
Answerback: SNGC UI
2. The Chase Manhattan Bank (as a Bank and as Administrative Agent)
Lending Office for All Types of Loans:
The Chase Manhattan Bank
1 Chase Manhattan Plaza
New York, New York 10081
Address for Notices:
The Chase Manhattan Bank
1 Chase Manhattan Plaza
New York, New York 10081
Attention: Loan and Agency Services
Lisa Pucciarelli
Telephone: 212-552-7886
Fax: 212-552-5777
With copies to:
The Chase Manhattan Bank
270 Park Avenue, 21st Floor
New York, New York 10017
Attention: Oil & Gas Group
Steven Wood
Carlos Morales
Chase Securities Inc.
270 Park Avenue
New York, New York 10017-2070
Attention: Financial Products Money Market Management
6th Floor
Chase Securities Inc.
707 Travis, 8th Floor
Houston, Texas 77002
3. Bank of America National Trust and Savings Association (as a Bank and
as Syndication Agent)
Lending Office for All Types of Loans:
Bank of America National Trust and Savings Association
1850 Gateway Boulevard
Concord, CA 94520
Address for Notices:
Bank of America National Trust and Savings Association
1850 Gateway Boulevard
Concord, CA 94520
Attention: Camille Gibby
Telephone: 925-675-7759
Fax: 925-975-7531
with copies to:
Bank of America National Trust and Savings Association Three Allen
Center, 333 Clay St.
Houston, TX 77002
Attention:
Michael J. Dillon
Telephone: 713-651-4903
Fax: 713-651-4808
Robert R. Ingersoll
Telephone: 713-651-4922
Fax: 713-651-4904
4. SunTrust Bank, Atlanta (as a Bank, as the Swingline Bank and as
Documentation Agent)
Lending Office for All Types of Loans:
SunTrust Bank, Atlanta
25 Park Place
Atlanta, Georgia 30303
Attention: John Frazer
Telephone: 404-575-2841
Fax: 404-588-8833
Address for Notices:
SunTrust Bank, Atlanta
P.O. Box 4418, Mail Code 120
Atlanta, Georgia 30303
Attention: Gina Muncus
Telephone: 404-658-4624
Fax: 404-827-6270
Telex: 54220
Answerback: TruscoIntAtl
5. The Bank of Nova Scotia
Lending Office for All Types of Loans:
The Bank of Nova Scotia
600 Peachtree Street, N.E.
Suite 2700
Atlanta, Georgia 30308
Address for Notices:
The Bank of Nova Scotia
600 Peachtree Street, N.E.
Suite 2700
Atlanta, Georgia 30308
Attention: Donna Gardner
Telephone: 404-877-1559
Fax: 404-888-8998
Address for Loan Documentation Matters:
The Bank of Nova Scotia
1100 Louisiana, Suite 3000
Houston, Texas 77002
Attention: Jean Paul Purdy
Telephone: 713-759-3433
Fax: 713-752-2425
6. Credit Lyonnais, New York Branch
Lending Office for All Types of Loans
Credit Lyonnais, New York Branch
c/o Credit Lyonnais Houston Representative Office
1000 Louisiana, Suite #5360
Houston, Texas 77002
Address for Notices:
Credit Lyonnais, New York Branch
c/o Credit Lyonnais Houston Representative Office
1000 Louisiana, Suite #5360
Houston, Texas 77002
Attention: Robert LaRocque
Telephone: (713) 751-8721
Fax: (713) 751-0307
Telex: 6868674
Answerback: CL HOU UN
7. Mellon Bank, N.A.
Lending Office for All Types of Loans:
Mellon Bank, N.A.
Three Mellon Bank Center
Loan Administration
Room 1203
Pittsburgh, PA 15259
Attention: Supervisor
Telephone: 412-234-4087
Fax: 412-236-2027
Address for notices:
Mellon Bank, N.A.
One Mellon Bank Center
Room 4425
Pittsburgh, PA 15258
Attention: Roger Howard
Telephone: 412-234-5606
Fax: 412-236-1840
Address for Notices Regarding Money Market Loans
Mellon Bank, N.A.
One Mellon Bank Center
Capital Markets, Room 151-0400
Pittsburgh, PA 15258-0001
Attention: Marilyn Wagner
Telephone: (412) 234-1693
Fax: (412) 234-7834
8. AmSouth Bank
Lending Office for All Types of Loans:
AmSouth Bank
1900 Fifth Avenue North
Birmingham, Alabama 35203
Address for Notices:
AmSouth Bank
1900 Fifth Avenue North
Birmingham, Alabama 35203
Attention: David A. Simmons
Senior Vice President
Telephone: 205-326-5924
Fax: 205-801-0157
9. Regions Bank
Lending Office for All Types of Loans
Regions Bank (Birmingham)
417 20th Street North
Birmingham, AL 35202
Address for Notices:
Regions Bank (Birmingham)
417 North 20th Street
Birmingham, AL 35202
Attention: Chuck Allen
Telephone: (205) 326-7003
Fax: (205) 326-7739
10. Credit Agricole Indosuez
Lending Office for All Types of Loans
Credit Agricole Indosuez
600 Travis Street, Suite 2340
Houston, TX 77002
Attention: Doug Whiddon
Telephone: (713) 223-7003
Fax: (713) 223-7029
Alternate: Brian Knezeak
Telephone: (713) 223-7001
Fax: 223-7029
Address for Notices:
Credit Agricole Indosuez
55 East Monroe Street, Suite 4700
Chicago, IL 60603
Attention: Teresa Howard
Telephone: (312) 917-7554
Fax: (312) 372-4421
11. The Northern Trust Co.
Lending Office for All Types of Loans
Northern Trust
50 South LaSalle Street
Chicago, IL 60675
Attention:
Telephone:
Fax:
Address for Notices:
Northern Trust
50 South LaSalle Street
Chicago, IL 60675
Attention: Christina Jakuc
Telephone: (312) 444-3455
Fax: (312) 630-6062
12. SouthTrust Bank N.A.
Lending Office for All Types of Loans
SouthTrust Bank N.A.
420 N. 20th Street, 6th Floor
Birmingham, AL 35203 Attention:
Telephone:
Fax:
Address for Notices:
SouthTrust Bank N.A.
420 N. 20th Street, 6th Floor
Birmingham, AL 35203
Attention: John A. Lotz, Jr.
Telephone: (205) 254-5795
Fax: (205) 254-5911
13. The First National Bank of Chicago
Lending Office for All Types of Loans
The First National Bank of Chicago
One First National Plaza
0634, IFNP, 10
Chicago, IL 60670
Attention: Bill Laird
Telephone: (312) 732-5635
Fax: (312) 732-4840
Address for Notices:
The First National Bank of Chicago
One First National Plaza
I FNP, 0634
Chicago, IL 60670
Attention: Bill Laird
Telephone: (312) 732-5635
Fax: (312) 732-4840
14. Wachovia Bank N.A.
Lending Office for All Types of Loans
191 Peachtree Street, N.E., 29th Floor
Atlanta Georgia 30303-1750
Attention: Margery Pace
Telephone: (404) 332-4029
Fax: (404) 332-5016
Address for Notices:
191 Peachtree Street, N.E., 29th Floor
Atlanta Georgia 30303-1750
Attention: John Canty
Telephone: (404) 332-4331
Fax: (404) 332-5016
<PAGE>
SCHEDULE 3
BANKS COMMITMENT
THE CHASE MANHATTAN BANK $ 92,000,000
BANK OF America National Trust and Savings Association 91,500,000
SUNTRUST BANK, ATLANTA 91,500,000
CREDIT LYONNAIS, NEW YORK BRANCH 90,000,000
THE BANK OF NOVA SCOTIA 90,000,000
MELLON BANK, N.A. 90,000,000
WACHOVIA BANK N.A. 90,000,000
THE FIRST NATIONAL BANK OF CHICAGO 90,000,000
AMSOUTH BANK 50,000,000
SOUTHTRUST BANK N.A. 35,000,000
CREDIT AGRICOLE INDOSUEZ 30,000,000
THE NORTHERN TRUST CO. 30,000,000
REGIONS BANK 30,000,000
$900,000,000
<PAGE>
EXHIBIT A-1
[Form of Note for Syndicated Loans]
PROMISSORY NOTE
April 15, 1999
New York, New York
FOR VALUE RECEIVED, SONAT INC., a Delaware corporation (the
"Company"), hereby promises to pay to (the "Bank"), for account of its
respective Applicable Lending Offices provided for by the Credit Agreement
referred to below, at the principal office of The Chase Manhattan Bank at 1
Chase Manhattan Plaza, New York, New York 10081, the principal sum of Dollars
(or such lesser amount as shall equal the aggregate unpaid principal amount of
the Syndicated Loans made by the Bank to the Company under the Credit
Agreement), in lawful money of the United States of America and in immediately
available funds, on the dates and in the principal amounts provided in the
Credit Agreement, and to pay interest on the unpaid principal amount of each
such Syndicated Loan, at such office, in like money and funds, for the period
commencing on the date of such Syndicated Loan until such Syndicated Loan shall
be paid in full, at the rates per annum and on the dates provided in the Credit
Agreement.
The date, amount, type, interest rate and maturity date of each
Syndicated Loan made by the Bank to the Company, and each payment made on
account of the principal thereof, shall be recorded by the Bank on its books
and, prior to any transfer of this Note, endorsed by the Bank on the schedule
attached hereto or any continuation thereof. The failure of the Bank to make any
notation or entry or any error in such a notation or entry shall not, however,
limit or otherwise affect any obligation of the Company under the Credit
Agreement or this Note.
This Note is one of the Notes referred to in the Credit Agreement
(as modified and supplemented and in effect from time to time, the "Credit
Agreement") dated as of April 15, 1999, among the Company, the banks named
therein and The Chase Manhattan Bank, as Administrative Agent, Bank of America
National Trust and Savings Association, as Syndication Agent, and SunTrust Bank,
Atlanta, as Documentation Agent, and evidences Syndicated Loans made by the Bank
thereunder. Capitalized terms used in this Note have the respective meanings
assigned to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the
maturity of this Note upon the occurrence of certain events and for prepayments
of Loans upon the terms and conditions specified therein.
This Note shall be governed by, and construed in accordance with,
the law of the State of New York.
SONAT INC.
By
Title:
<PAGE>
SCHEDULE OF LOANS
This Note evidences Loans made under the within-described Credit
Agreement to the Company, on the dates, in the principal amounts, of the types,
bearing interest at the rates and maturing on the dates set forth below, subject
to the payments and prepayments of principal set forth below:
Principal
Date Amount Type Maturity Amount Unpaid
of of of Interest Date of Paid or Principal Notation
Loan Loan Loa Rate Loan Prepaid Amount Made by
<PAGE>
EXHIBIT A-2
[Form of Note for Money Market Loans]
PROMISSORY NOTE
April 15, 1999
New York, New York
FOR VALUE RECEIVED, SONAT INC., a Delaware corporation (the
"Company"), hereby promises to pay to (the "Bank"), for account of its
respective Applicable Lending Offices provided for by the Credit Agreement
referred to below, at the principal office of The Chase Manhattan Bank at 1
Chase Manhattan Plaza, New York, New York 10081, the aggregate unpaid principal
amount of the Money Market Loans made by the Bank to the Company under the
Credit Agreement, in lawful money of the United States of America and in
immediately available funds, on the dates and in the principal amounts provided
in the Credit Agreement, and to pay interest on the unpaid principal amount of
each such Money Market Loan, at such office, in like money and funds, for the
period commencing on the date of such Money Market Loan until such Money Market
Loan shall be paid in full, at the rates per annum and on the dates provided in
the Credit Agreement.
The date, amount, interest rate and maturity date of each Money
Market Loan made by the Bank to the Company, and each payment made on account of
the principal thereof, shall be recorded by the Bank on its books and, prior to
any transfer of this Note, endorsed by the Bank on the schedule attached hereto
or any continuation thereof. The failure of the Bank to make any notation or
entry or any error in such a notation or entry shall not, however, limit or
otherwise affect any obligation of the Company under the Credit Agreement or
this Note.
This Note is one of the Notes referred to in the Credit Agreement
(as modified and supplemented and in effect from time to time, the "Credit
Agreement") dated as of April 15, 1999, among the Company, the banks named
therein and The Chase Manhattan Bank, as Administrative Agent, Bank of America
National Trust and Savings Association, as Syndication Agent, and SunTrust Bank,
Atlanta, as Documentation Agent, and evidences Money Market Loans made by the
Bank thereunder. Capitalized terms used in this Note have the respective
meanings assigned to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the
maturity of this Note upon the occurrence of certain events and for prepayments
of Loans upon the terms and conditions specified therein.
This Note shall be governed by, and construed in accordance with,
the law of the State of New York.
SONAT INC.
By
Title:
<PAGE>
SCHEDULE OF LOANS
This Note evidences Loans made under the within-described Credit
Agreement to the Company, on the dates, in the principal amounts, bearing
interest at the rates and maturing on the dates set forth below, subject to the
payments and prepayments of principal set forth below:
Principal
Date Amount Maturity Amount Unpaid
of of Interest Date of Paid or Principal Notation
Loan Loan Rate Loan Prepaid Amount Made by
<PAGE>
EXHIBIT A-3
[Form of Note for Swingline Loans]
PROMISSORY NOTE
April 15, 1999
New York, New York
FOR VALUE RECEIVED, SONAT INC., a Delaware corporation (the
"Company"), hereby promises to pay to SUNTRUST BANK, ATLANTA (the "Bank"), for
account of its respective Applicable Lending Offices provided for by the Credit
Agreement referred to below, at the principal office of The Chase Manhattan Bank
at 1 Chase Manhattan Plaza, New York, New York 10081, the principal sum of
Dollars (or such lesser amount as shall equal the aggregate unpaid principal
amount of the Swingline Loans made by the Bank to the Company under the Credit
Agreement), in lawful money of the United States of America and in immediately
available funds, on the dates and in the principal amounts provided in the
Credit Agreement, and to pay interest on the unpaid principal amount of each
such Swingline Loan, at such office, in like money and funds, for the period
commencing on the date of such Swingline Loan until such Swingline Loan shall be
paid in full, at the rates per annum and on the dates provided in the Credit
Agreement.
The date, amount, type, interest rate and maturity date of each
Swingline Loan made by the Bank to the Company, and each payment made on account
of the principal thereof, shall be recorded by the Bank on its books and, prior
to any transfer of this Note, endorsed by the Bank on the schedule attached
hereto or any continuation thereof. The failure of the Bank to make any notation
or entry or any error in such a notation or entry shall not, however, limit or
otherwise affect any obligation of the Company under the Credit Agreement or
this Note.
This Note is one of the Notes referred to in the Credit Agreement
(as modified and supplemented and in effect from time to time, the "Credit
Agreement") dated as of April 15, 1999, among the Company, the banks named
therein and The Chase Manhattan Bank, as Administrative Agent, Bank of America
National Trust and Savings Association, as Syndication Agent, and SunTrust Bank,
Atlanta, as Documentation Agent, and evidences Swingline Loans made by the Bank
thereunder. Capitalized terms used in this Note have the respective meanings
assigned to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the
maturity of this Note upon the occurrence of certain events and for prepayments
of Loans upon the terms and conditions specified therein.
This Note shall be governed by, and construed in accordance with,
the law of the State of New York.
SONAT INC.
By
Title:
<PAGE>
SCHEDULE OF LOANS
This Note evidences Loans made under the within-described Credit
Agreement to the Company, on the dates, in the principal amounts, of the types,
bearing interest at the rates and maturing on the dates set forth below, subject
to the payments and prepayments of principal set forth below:
Principal
Date Amount Type Maturity Amount Unpaid
of of of Interest Date of Paid or Principal Notation
Loa Loan Loan Rate Loan Prepaid Amount Made by
<PAGE>
EXHIBIT B
[Form of Opinion of Special Counsel to the Company]
April 15, 1999
To the Banks party to the Agreement
referred to below and The Chase
Manhattan Bank, as Administrative
Agent, Bank of America National Trust and Savings Association,
as Syndication Agent and SunTrust Bank,
Atlanta, as Documentation
Agent
Dear Sirs:
We have acted as special counsel for Sonat Inc., a Delaware
corporation (the "Company"), in connection with the execution and delivery of
the Credit Agreement (the "Agreement") dated as of April 15, 1999, among the
Company, the Banks named therein and The Chase Manhattan Bank, as Administrative
Agent, Bank of America National Trust and Savings Association, as Syndication
Agent and SunTrust Bank, Atlanta, as Documentation Agent.
This opinion is delivered to you pursuant to 4.01(v) of the
Agreement. All capitalized terms not otherwise defined herein shall have the
meanings attributed to them in the Agreement.
In this connection, and as a basis for the opinions expressed
below, we have examined or relied upon originals or copies, certified or
otherwise identified to our satisfaction, of such records, instruments,
certificates and other documents, have made such inquiries as to questions of
fact of officers and representatives of the Company and have made such
examinations of law as we have deemed necessary or appropriate for purposes of
giving the opinions hereinafter expressed. As to certain matters in respect of
the opinions expressed in paragraphs 1 and 2 below, we have relied, with your
permission, solely on the opinion, a copy of which is attached hereto, of
William A. Smith, Executive Vice President and General Counsel.
In rendering the opinions expressed below, we have assumed that
the Agreement has been duly authorized, executed and delivered by each party
thereto other than the Company, that each party thereto other than the Company
has the requisite power and authority to execute, deliver and perform the
Agreement, and that such execution, delivery and performance by such other
parties does not and will not breach, conflict with or constitute a violation of
the laws or governmental rules or regulations of any jurisdiction.
Each of the opinions expressed below is restricted to matters
controlled or affected by Federal laws, the General Corporation Law of the State
of Delaware and the laws of the State of New York.
On the basis of the foregoing, it is our opinion that:
1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware and is duly licensed or qualified to do business and is
in good standing in the States of Alabama, Texas and New York,
constituting those states which we have been advised are the
states in which the Company believes the conduct of its business
or the ownership of its assets requires such qualification, and
the Company has the corporate power to make the Agreement and the
Notes and to borrow under the Agreement.
2. The making and performance by the Company of the
Agreement and the Notes and borrowings under the Agreement have
been duly authorized by all necessary corporate action and do not
and will not contravene any provision of law applicable to the
Company or of the certificate of incorporation or by-laws of the
Company or result in the material breach of, or constitute a
material default or require any consent under, or result in the
creation of any material lien, charge or other security interest
or encumbrance (except as may be required by the Agreement) upon
any property or assets of the Company pursuant to, any indenture
or other agreement or instrument to which the Company is a party
or by which the Company or any of its property may be bound or
affected.
3. No approval, license or consent of any governmental
regulatory body is requisite to the making and performance by the
Company of the Agreement or the execution, delivery and payment
of the Notes.
4. The Agreement and the Notes have been duly executed and
delivered by the Company and each constitutes a valid and binding
agreement of the Company enforceable in accordance with its terms
(subject to applicable bankruptcy, fraudulent conveyance,
fraudulent transfer, preferential transfer, insolvency,
moratorium and other like laws of general application affecting
creditors' rights and to the application of general principles of
equity, including without limitation concepts of materiality,
reasonableness, good faith and fair dealing and whether
considered in a proceeding in equity or at law), except that we
express no opinion as to 2.06(c) of the Agreement.
In connection with the above, we wish to point out that
provisions of the Agreement which permit any Agent or any Bank to take action or
make determinations or allocations, or to benefit from indemnities and similar
undertakings of the Company, may be subject to a requirement that such action be
taken or such determinations or allocations be made, and that any action or
inaction by an Agent or a Bank which may give rise to a request for payment
under such an indemnity or similar undertaking be taken or not taken, on a
reasonable basis and in good faith.
We express no opinion with respect to:
(A) the effect of any provision of the Agreement which is
intended to permit modification thereof only by means of an agreement in writing
by the parties thereto;
(B) the effect of any provision of the Agreement imposing
penalties or forfeitures;
(C) the enforceability of any provision of the Agreement to the
extent that such provision constitutes a waiver of illegality as a defense to
performance of contract obligations; and
(D) the effect of any provision of the Agreement relating to
indemnification or exculpation in connection with violations of any securities
laws or relating to indemnification, contribution or exculpation in connection
with willful, reckless or criminal acts or gross negligence of the indemnified
or exculpated Person or the Person receiving contribution.
Very truly yours,
<PAGE>
(ATTACHMENT TO
EXHIBIT B)
[Form of Opinion of General Counsel]
April 15, 1999
Hughes Hubbard & Reed LLP
One Battery Park Plaza
New York, New York 10004
Dear Sirs:
As Executive Vice President and General Counsel of Sonat Inc., a
Delaware corporation (the "Company"), I am familiar with the Credit Agreement
(the "Agreement") dated as of April 15, 1999, among the Company, the Banks named
therein and The Chase Manhattan Bank, as Administrative Agent, Bank of America
National Trust and Savings Association, as Syndication Agent and SunTrust Bank,
Atlanta, as Documentation Agent.
This opinion is delivered to you in connection with the opinion
which you are rendering pursuant to 4.01(v) of the Agreement. You may rely on
this opinion in rendering your opinion, you may attach a copy hereof to your
opinion and the Banks may rely on this opinion as if it were addressed to them.
All capitalized terms not otherwise defined herein shall have the meaning
attributed to them in the Agreement.
In this connection, and as a basis for the opinions expressed
below, I have examined or relied upon originals or copies certified or otherwise
identified to my satisfaction, of such records, instruments, certificates and
other documents, have made inquiries as to questions of fact of officers and
representatives of the Company and have made such examinations of law as I have
deemed necessary or appropriate for purposes of giving the opinions hereinafter
expressed.
On the basis of the foregoing, it is my opinion that:
1. The Company is duly licensed or qualified to do
business and is in good standing in the States of Alabama, Texas
and New York, constituting those states in which the Company
believes the conduct of its business or the ownership of its
assets requires such qualification.
2. The making and performance by the Company of the
Agreement and the Notes and borrowings under the Agreement do not
and will not contravene any provision of law of the State of
Alabama or the United States applicable to the Company by virtue
of the nature of its or any of its Subsidiaries' businesses or of
the properties owned or leased by any of them or result in the
material breach of, or constitute a material default or require
any consent under, or result in the creation of any material
lien, charge or other security interest or encumbrance upon any
property or assets of the Company pursuant to, any indenture or
other agreement or instrument to which the Company is a party or
by which the Company or any of its property may be bound or
affected.
3. The Company is not an "investment company" or a company
"controlled" by an "investment company", within the meaning of
the Investment Company Act of 1940, as amended.
4. Neither the Company nor any of its Subsidiaries is
subject to regulation under the Public Utility Holding Company
Act of 1935, as amended.
Very truly yours,
<PAGE>
EXHIBIT C
[Form of Opinion of Special Counsel
to the Banks and the Agents]
April 15, 1999
To the Banks currently party to the Credit Agreement referred to below and
listed on Schedule 1 attached hereto; The Chase Manhattan Bank, as
Administrative
Agent, Bank of America National Trust and Savings Association,
as Syndication Agent and SunTrust Bank,
Atlanta, as Documentation
Agent
Gentlemen:
We have acted as your special counsel in connection with the
Credit Agreement (the "Credit Agreement") dated as of April 15, 1999, among
Sonat Inc. (the "Company"), the Banks named therein and The Chase Manhattan
Bank, as Administrative Agent, Bank of America National Trust and Savings
Association, as Syndication Agent and SunTrust Bank, Atlanta, as Documentation
Agent. Terms defined in the Credit Agreement are used herein as defined therein.
We have assumed for purposes of our opinion hereinafter set forth
that (1) the Credit Agreement is a valid and legally binding obligation of each
of the Banks and that the Credit Agreement has been duly authorized, executed
and delivered by the Company, each Bank and each Agent, (2) the Company is duly
incorporated and validly existing under the laws of the State of Delaware and
has full power, authority and legal right to make and perform the Credit
Agreement and the Notes and that such execution, delivery and performance by the
Company does not contravene its certificate of incorporation or by-laws or
violate, or require any consent not obtained under, any applicable law or
regulation or any order, writ, injunction or decree of any court or other
governmental authority and does not violate, or require any consent not obtained
under, any contractual obligation applicable to or binding upon the Company and
(3) the Company is not an "investment company" within the meaning of and subject
to regulation under the Investment Company Act of 1940.
We have examined (i) a copy of the Credit Agreement signed by the
Company, each Bank and each Agent, (ii) a copy of the Notes delivered on the
date hereof and (iii) a copy of the opinion letter of Hughes Hubbard & Reed LLP,
counsel for the Company, addressed to you and dated the date hereof in respect
of the Credit Agreement together with the opinion of the Executive Vice
President and General Counsel of the Company, attached thereto. We have assumed
the genuineness of all signatures, the authenticity of documents submitted to us
as originals, the conformity with the originals of all documents submitted to us
as certified or photostatic copies, and the authenticity of the originals of
such latter documents.
Based upon the foregoing and subject to the comments and
qualifications set forth below, we are of the opinion that the Credit Agreement
constitutes, and the Notes when executed and delivered for value (assuming due
execution and delivery by the Company) will constitute, valid and binding
obligations of the Company enforceable in accordance with their respective
terms, except as the foregoing may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws relating
to or affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an implied covenant
of good faith and fair dealing, and except that we express no opinion as to
2.06(c) of the Credit Agreement.
We express no opinion in respect to:
(A) the effect of any provision of the Credit Agreement which is
intended to permit modification thereof only by means of an agreement in writing
by the parties thereto;
(B) the effect of any provisions of the Credit Agreement imposing
penalties or forfeitures;
(C) the enforceability of any provision of the Credit Agreement
to the extent that such provision constitutes a waiver of illegality as a
defense to performance of contract obligations; and
(D) the effect of any provision of the Credit Agreement relating
to indemnification or exculpation in connection with violations of any
securities laws or relating to indemnification, contribution or exculpation in
connection with willful, reckless or criminal acts or gross negligence of the
indemnified or exculpated Person or the Person receiving contribution.
We are members of the Bar of the State of New York and do not
herein intend to express any opinion as to any matters governed by any laws
other than the law of the State of New York and the Federal law of the United
States of America.
This opinion is rendered to you in connection with the above
described transactions. This opinion may not be relied upon by you for any other
purpose, or relied upon by, or furnished to, any other person, firm or
corporation without our prior written consent.
Very truly yours,
<PAGE>
EXHIBIT D
[Form of Money Market Quote Request]
[Date]
To: [Bank]
From: Sonat Inc.
Re: Money Market Quote Request
Pursuant to 1.02 of the Credit Agreement (the "Credit Agreement")
dated as of April 15, 1999, among Sonat Inc., the banks named therein and The
Chase Manhattan Bank, as Administrative Agent, Bank of America National Trust
and Savings Association, as Syndication Agent and SunTrust Bank, Atlanta, as
Documentation Agent, we hereby give notice that we request Money Market Quotes
for the following proposed Money Market Borrowing(s):
Borrowing Quotation Interest
Date Date [1] Amount [2] Period [3]
Money Market Quotes responding to this Money Market Quote Request
must be submitted to us not later than [time and date] [4].
Terms used herein have the meanings assigned to them in the
Credit Agreement.
SONAT INC.
By
Title:
<PAGE>
- ------------------------------
[1] For use if a Money Market Rate in a Set Rate Auction is requested to be
submitted before the Borrowing Date.
[2] Each amount must be $25,000,000 or a larger multiple of $5,000,000.
[3] A period of up to 180 days after the making of such Set Rate Loan and
ending on a Business Day.
[4] Insert time and date determined pursuant to 1.02(c)(i).
<PAGE>
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT DATED AS OF APRIL 15, 1999
AMONG SONAT INC., THE BANKS NAMED HEREIN, THE CHASE MANHATTAN BANK, AS
ADMINISTRATIVE AGENT, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS
SYNDICATION AGENT AND SUNTRUST BANK, ATLANTA, AS DOCUMENTATION AGENT.
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT DATED AS OF APRIL 15, 1999
AMONG SONAT INC., THE BANKS NAMED HEREIN, THE CHASE MANHATTAN BANK, AS
ADMINISTRATIVE AGENT, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS
SYNDICATION AGENT AND SUNTRUST BANK, ATLANTA, AS DOCUMENTATION AGENT.
[Form of Money Market Quote]
To: Sonat Inc.
Attention:
Re: Money Market Quote to Sonat
Inc. (the "Borrower")
This Money Market Quote is given in accordance with 1.02(c) of
the Credit Agreement (the "Credit Agreement") dated as of April 15, 1999, among
the Borrower, the banks named therein and The Chase Manhattan Bank, as
Administrative Agent, Bank of America National Trust and Savings Association, as
Syndication Agent and SunTrust Bank, Atlanta, as Documentation Agent. Terms
defined in the Credit Agreement are used herein as defined therein.
In response to the Borrower's invitation dated , , we hereby make
the following Money Market Quote(s) on the following terms:
1. Quoting Bank:
2. Person to contact at Quoting Bank:
3. We hereby offer to make Money Market Loan(s) in the
following principal amount[s], for the following Interest
Period(s) and at the following rate(s):
Borrowing Quotation Interest
Date Date [1] Amount [2] Period [3] Rate [4]
We understand and agree that the offer(s) set forth above,
subject to the satisfaction of the applicable conditions set forth in the Credit
Agreement, irrevocably obligate[s] us to make the Money Market Loan(s) for which
any offer(s) (is/are) accepted, in whole or in part (subject to the third
sentence of 1.02(d) of the Credit Agreement).
Very truly yours,
[Name of Bank]
By
Authorized Officer
Dated:
<PAGE>
- ------------------------------
[1] As specified in the related Money Market Quote Request.
[2] The principal amount bid for each Interest Period may not exceed the
principal amount requested. Bids must be made for at least $5,000,000 or
a larger multiple of $1,000,000.
[3] A period of up to 180 days after the making of such Set Rate Loan and
ending on a Business Day, as specified in the related Money Market Quote
Request.
[4] Specify rate of interest per annum (rounded to the nearest 1/10,000 of 1%).
EXHIBIT 12
SONAT INC. AND SUBSIDIARIES
Computation of Ratios of Earnings
from Continuing Operations to Fixed Charges
Total Enterprise (a)
<TABLE>
<CAPTION>
Six Months Ended June 30, Years Ended December 31,
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
(In Thousands)
Earnings from Continuing Operations:
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before income taxes $(275,319) $(453,822) $(838,232) $322,472 $379,004 $399,280 $176,901
Fixed charges (see computation below) 100,221 96,213 195,215 168,981 162,291 174,634 133,902
Less allowance for interest
capitalized (7,245) (2,872) (5,123) (7,448) (7,642) (8,072) (7,736)
--------- --------- --------- -------- -------- -------- --------
Total Earnings Available for Fixed
Charges $(182,343) $(360,481) $(648,140) $484,005 $533,653 $565,842 $303,067
========= ========= ========= ======== ======== ======== ========
Fixed Charges:
Interest expense before deducting
interest capitalized $ 96,456 $ 91,914 $ 187,102 $160,829 $154,769 $167,068 $126,193
Rentals(b) 3,765 4,299 8,113 8,152 7,522 7,566 7,709
--------- --------- --------- -------- -------- -------- --------
$ 100,221 $ 96,213 $ 195,215 $168,981 $162,291 $174,634 $133,902
========= ========= ========= ======== ======== ======== ========
Ratio of Earnings to Fixed Charges (c) (d) (e) 2.9 3.3 3.2 2.3
========= ========= ========= ======== ======== ======== ========
</TABLE>
- ----------------
(a) Amounts include the Company's portion of the captions as they relate to
persons accounted for by the equity method.
(b) These amounts represent 1/3 of rentals which approximate the interest
factor applicable to such rentals of the Company and its subsidiaries and
continuing unconsolidated affiliates.
(c) Earnings from continuing operations for the six months ended June 30, 1999
reflect a ceiling test charge of $351.5 million related to the Company's
oil and gas operations. Because of this charge, earnings were inadequate to
cover fixed charges of $100.2 million for the six months ended June 30,
1999. The coverage deficiency was $282.6 million.
(d) Earnings from continuing operations for the six months ended June 30, 1998
reflect a second quarter ceiling test charge related to the Company's oil
and gas operations and other restructuring expenses primarily associated
with a reduction in work force. Earnings were reduced $595.2 million pretax
as a result of the restructuring and ceiling test charges. Because of these
charges, earnings were inadequate to cover fixed charges of $96.2 million
for the six months ended June 30, 1998.
The coverage deficiency was $456.7 million for the six month period.
(e) Earnings from continuing operations for the year ended December 31, 1998
reflect ceiling test charges for the impairment of certain oil and gas
properties and restructuring expenses primarily associated with a reduction
in work force. Earnings before income taxes were reduced $1,050.2 million
as a result of the ceiling test charges and restructuring charge. Because
of these charges, earnings were inadequate to cover fixed charges of $195.2
million for the year ended December 31, 1998.
The coverage deficiency was $843.4 million for the year.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,467
<SECURITIES> 0
<RECEIVABLES> 402,771
<ALLOWANCES> 0
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0
0
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</TABLE>
