-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q+5NlmsJoL2Pxcc3npjljimejNgjF+VQYXJxW7ti0Jj87pC9BjmbM/+FUeMxIlmr DeRi6yLDUBSZgydT3+EGrA== 0000950129-99-004927.txt : 19991115 0000950129-99-004927.hdr.sgml : 19991115 ACCESSION NUMBER: 0000950129-99-004927 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EL PASO ENERGY CORP/DE CENTRAL INDEX KEY: 0001066107 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION [4922] IRS NUMBER: 760568816 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14365 FILM NUMBER: 99747694 BUSINESS ADDRESS: STREET 1: 1001 LOUISIANA ST CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7134202131 MAIL ADDRESS: STREET 1: 1001 LOUISIANA ST CITY: HOUSTON STATE: TX ZIP: 77002 10-Q 1 EL PASO ENERGY CORPORATION - DATED 09/30/99 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 SEPTEMBER 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 1-14365 --------------------- EL PASO ENERGY CORPORATION (Exact Name of Registrant as Specified in its Charter) DELAWARE 76-0568816 (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification No.) EL PASO ENERGY BUILDING 1001 LOUISIANA STREET 77002 HOUSTON, TEXAS (Zip Code) (Address of Principal Executive Offices)

Registrant's Telephone Number, Including Area Code: (713) 420-2131 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, par value $3.00 per share. Shares outstanding on November 8, 1999: 228,319,547 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 GLOSSARY The following abbreviations, acronyms, or defined terms used in this Form 10-Q are defined below:
DEFINITIONS ----------- ALJ................... Administrative Law Judge Company............... El Paso Energy Corporation and its subsidiaries Court of Appeals...... United States Court of Appeals for the District of Columbia Circuit Dynegy................ Dynegy Inc., formerly known as NGC Corporation EAPRC................. East Asia Power Resources Corporation, a publicly traded Philippine company EBIT.................. Earnings before interest expense and income taxes, excluding affiliated interest income Edison................ Southern California Edison Company EnCap................. EnCap Investments L.L.C., a Delaware limited liability company EPA................... United States Environmental Protection Agency EPEC.................. El Paso Energy Corporation, unless the context otherwise requires EPFS.................. El Paso Field Services Company, a wholly owned subsidiary of El Paso Tennessee Pipeline Co. EPME.................. El Paso Merchant Energy segment, which is comprised of El Paso Energy Marketing Company and El Paso Power Services Company EPNG.................. El Paso Natural Gas Company, a wholly owned subsidiary of El Paso Energy Corporation EPTPC................. El Paso Tennessee Pipeline Co., a direct subsidiary of El Paso Energy Corporation FERC.................. Federal Energy Regulatory Commission GSR................... Gas supply realignment PCB(s)................ Polychlorinated biphenyl(s) PLN................... Perusahaan Listrik Negara, the Indonesian government-owned electric utility PRP(s)................ Potentially responsible party(ies) Sonat................. Sonat Inc. TGP................... Tennessee Gas Pipeline Company, a wholly owned subsidiary of El Paso Tennessee Pipeline Co.
i 3 PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS EL PASO ENERGY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (IN MILLIONS, EXCEPT PER COMMON SHARE AMOUNTS) (UNAUDITED)
QUARTER NINE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, --------------- --------------- 1999 1998 1999 1998 ------ ------ ------ ------ Operating revenues.......................................... $2,305 $1,615 $5,567 $4,530 ------ ------ ------ ------ Operating expenses Cost of gas and other products............................ 1,902 1,244 4,316 3,372 Operation and maintenance................................. 176 168 522 523 Merger-related costs...................................... -- -- 126 -- Depreciation, depletion, and amortization................. 74 67 218 199 Taxes, other than income taxes............................ 20 24 71 70 ------ ------ ------ ------ 2,172 1,503 5,253 4,164 ------ ------ ------ ------ Operating income............................................ 133 112 314 366 ------ ------ ------ ------ Other income Equity investment earnings................................ (22) (11) (71) (34) Other, net................................................ (25) (36) (83) (71) ------ ------ ------ ------ (47) (47) (154) (105) ------ ------ ------ ------ Income before interest, income taxes, and other charges..... 180 159 468 471 ------ ------ ------ ------ Interest and debt expense................................... 83 65 230 186 Minority interest........................................... 12 4 20 8 Income tax expense.......................................... 28 31 73 93 ------ ------ ------ ------ 123 100 323 287 ------ ------ ------ ------ Income before preferred dividends of subsidiary and cumulative effect of accounting change.................... 57 59 145 184 Preferred stock dividends of subsidiary..................... 7 7 19 19 ------ ------ ------ ------ Income before cumulative effect of accounting change........ 50 52 126 165 Cumulative effect of accounting change, net of income taxes..................................................... -- -- (13) -- ------ ------ ------ ------ Net income.................................................. $ 50 $ 52 $ 113 $ 165 ====== ====== ====== ====== Comprehensive income........................................ $ 47 $ 49 $ 103 $ 157 ====== ====== ====== ====== Basic earnings per common share Income before cumulative effect of accounting change...... $ 0.43 $ 0.45 $ 1.08 $ 1.42 Cumulative effect of accounting change, net of income taxes................................................... -- -- (0.11) -- ------ ------ ------ ------ Net income................................................ $ 0.43 $ 0.45 $ 0.97 $ 1.42 ====== ====== ====== ====== Diluted earnings per common share Income before cumulative effect of accounting change...... $ 0.42 $ 0.43 $ 1.06 $ 1.36 Cumulative effect of accounting change, net of income taxes................................................... -- -- (0.11) -- ------ ------ ------ ------ Net income................................................ $ 0.42 $ 0.43 $ 0.95 $ 1.36 ====== ====== ====== ====== Basic average common shares outstanding..................... 118 116 117 116 ====== ====== ====== ====== Diluted average common shares outstanding................... 120 127 119 125 ====== ====== ====== ====== Dividends declared per common share......................... $ 0.20 $ 0.19 $ 0.60 $ 0.57 ====== ====== ====== ======
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements. 1 4 EL PASO ENERGY CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (IN MILLIONS, EXCEPT SHARE AMOUNTS)
SEPTEMBER 30, DECEMBER 31, 1999 1998 ------------- ------------ (UNAUDITED) ASSETS Current assets Cash and cash equivalents................................. $ 92 $ 90 Accounts and notes receivable, net........................ 1,531 734 Materials and supplies.................................... 51 49 Assets from price risk management activities.............. 309 181 Other..................................................... 178 155 ------- ------- Total current assets.............................. 2,161 1,209 Property, plant, and equipment, net......................... 7,305 7,220 Investments in unconsolidated affiliates.................... 1,199 600 Other....................................................... 1,278 1,009 ------- ------- Total assets...................................... $11,943 $10,038 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts and notes payable................................ $ 1,376 $ 724 Short-term borrowings (including current maturities of long-term debt)........................................ 225 812 Other..................................................... 522 595 ------- ------- Total current liabilities......................... 2,123 2,131 ------- ------- Long-term debt, less current maturities..................... 3,720 2,552 ------- ------- Deferred income taxes....................................... 1,654 1,564 ------- ------- Other....................................................... 1,162 993 ------- ------- Commitments and contingencies (See Note 4) Company-obligated mandatorily redeemable convertible preferred securities of El Paso Energy Capital Trust I.... 325 325 ------- ------- Minority interest Preferred stock of subsidiary............................. 300 300 ------- ------- Other minority interest................................... 565 65 ------- ------- Stockholders' equity Common stock, par value $3 per share; authorized 275,000,000 shares; issued 126,925,480 and 124,434,110 shares, respectively................................... 381 373 Additional paid-in capital................................ 1,506 1,436 Retained earnings......................................... 501 460 Treasury stock (at cost) 8,878,429 and 4,149,099 shares, respectively.................................... (270) (90) Accumulated comprehensive income.......................... (24) (14) Deferred compensation..................................... -- (57) ------- ------- Total stockholders' equity........................ 2,094 2,108 ------- ------- Total liabilities and stockholders' equity........ $11,943 $10,038 ======= =======
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements. 2 5 EL PASO ENERGY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN MILLIONS) (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, ---------------- 1999 1998 ------- ----- Cash flows from operating activities Net income................................................ $ 113 $ 165 Adjustments to reconcile net income to net cash provided by operating activities Depreciation, depletion, and amortization.............. 218 199 Deferred income taxes.................................. 62 79 Undistributed earnings in equity investees............. (37) (21) Cumulative effect of accounting change, net of income taxes................................................. 13 -- Non-cash impact of merger-related costs................ 83 -- Net gain on sale of assets............................. (20) (29) Other.................................................. (17) (5) Working capital changes, net of the effect of acquisitions........................................... (305) 59 Other..................................................... (60) (62) ------- ----- Net cash provided by operating activities......... 50 385 ------- ----- Cash flows from investing activities Capital expenditures...................................... (211) (202) Investment in joint ventures and equity investees......... (829) (442) Return of investment in joint ventures and equity investees.............................................. 25 -- Cash paid for acquisitions, net of cash received.......... (76) (343) Restricted cash deposited in escrow related to equity investee............................................... (101) -- Proceeds from sale of assets.............................. 42 47 Other..................................................... (13) 2 ------- ----- Net cash used in investing activities............. (1,163) (938) ------- ----- Cash flows from financing activities Net commercial paper borrowings (repayments).............. (150) 278 Revolving credit borrowings............................... 532 260 Revolving credit repayments............................... (922) (187) Long-term debt retirements................................ (75) (71) Net proceeds from issuance of long-term debt.............. 1,192 -- Net proceeds from issuance of preferred securities of El Paso Energy Capital Trust I............................ -- 317 Net proceeds from long-term note payable.................. 101 -- Dividends paid on common stock............................ (71) (68) Acquisition of treasury stock............................. -- (36) Net proceeds from sale of a preferred interest of Trinity River Associates L.L.C................................. 493 -- Other..................................................... 15 12 ------- ----- Net cash provided by financing activities......... 1,115 505 ------- ----- Increase (decrease) in cash and temporary investments....... 2 (48) Cash and temporary investments Beginning of period............................... 90 116 ------- ----- End of period..................................... $ 92 $ 68 ======= =====
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements. 3 6 EL PASO ENERGY CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The 1998 Annual Report on Form 10-K for the Company includes a summary of significant accounting policies and other disclosures and should be read in conjunction with this Quarterly Report on Form 10-Q. The condensed consolidated financial statements at September 30, 1999, and for the quarters and nine months ended September 30, 1999 and 1998, are unaudited. The condensed consolidated balance sheet at December 31, 1998, is derived from audited financial statements at that date. These financial statements do not include all disclosures required by generally accepted accounting principles, but have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. In the opinion of management, all material adjustments necessary to present fairly the results of operations for such periods have been included. All such adjustments are of a normal, recurring nature. Results of operations for any interim period are not necessarily indicative of the results of operations for the entire year due to the seasonal nature of the Company's businesses. Financial statements for the previous periods include certain reclassifications which were made to conform to the current presentation. Such reclassifications have no effect on reported net income or stockholders' equity. Cumulative Effect of Accounting Change In April 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-5, Reporting on the Costs of Start-Up Activities. The statement defines start-up activities and requires start-up and organization costs be expensed as incurred. In addition, it requires that any such cost that exists on the balance sheet be expensed upon adoption of the pronouncement. The Company adopted the pronouncement effective January 1, 1999, and reported a charge of $13 million, net of income taxes, in the first quarter of 1999 as a cumulative effect of an accounting change. 2. MERGERS AND ACQUISITIONS Sonat Inc. On October 25, 1999, the Company completed its merger with Sonat Inc. ("Sonat") in a transaction accounted for as a pooling of interests. In the merger, one share of the Company's common stock was issued in exchange for each share of Sonat common stock. Total common shares issued in connection with the merger were approximately 110 million. In addition, the Company assumed approximately $2.3 billion of Sonat debt. The transaction was valued at approximately $6.8 billion based on the Company's closing stock price on October 25, 1999. As a result of a Federal Trade Commission order related to the merger with Sonat, the Company must dispose of certain operations, including its wholly owned subsidiary East Tennessee Natural Gas Company as well as Sonat's wholly owned subsidiary, Sea Robin Pipeline Company, and its one-third interest in Destin Pipeline Company, L.L.C. The impact of the required divestitures are not expected to have a material effect on the Company's financial position, results of operations, or cash flows. 4 7 The following table presents summarized unaudited pro forma financial information for the combined operations of the Company and Sonat as though the merger occurred on January 1, 1998. Certain adjustments were made to this financial information to conform the accounting presentation of the combined companies.
NINE MONTHS QUARTER ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------- ----------------- 1999 1998 1999 1998 ------- ------- ------- ------- (IN MILLIONS, EXCEPT SHARE AMOUNTS) Results of Operations Data: Operating revenue................................ $3,290 $2,489 $8,178 $7,439 Net income (loss)(a)............................. 47 (206) (69) (381) Basic earnings (loss) per common share(a)........ .21 (.91) (.30) (1.69) Diluted earnings (loss) per common share(a)(b)... .20 (.91) (.30) (1.69)
- --------------- (a) Includes pre-tax ceiling test charges associated with Sonat's exploration and production activities of $352 million and merger-related costs of $126 million, or ($1.35) per basic share, for the nine months ended September 30, 1999. For the quarter ended September 30, 1998, pre-tax ceiling test charges of $455 million, or ($1.30) per basic share, were included. For the nine months ended September 30, 1998, pre-tax ceiling test charges of $1,035 million, or ($2.94) per basic share, were included. (b) As required by the accounting rules, we have excluded additional dilutive securities such as options in determining diluted earnings (loss) per common share. If we had included those securities, we would have shown less of a loss per common share.
SEPTEMBER 30, DECEMBER 31, 1999 1998 ------------- ------------ (IN MILLIONS) Financial Position Data: Total assets..................................... $16,339 $14,430 Short-term debt (including current maturities of long-term debt)............................... 800 1,642 Long-term debt, less current maturities.......... 5,407 3,651 Minority interest................................ 865 365 Stockholders' equity............................. 3,117 3,375
The unaudited pro forma information presented above is not necessarily indicative of the results of operations or the financial position which would have occurred had the merger been consummated at January 1, 1998, nor is it necessarily indicative of future results of operations or financial position. The EPEC stockholders' approval of the merger in June 1999 resulted in a defined change in control in EPEC under the terms of certain of its benefit plans. As a result, restrictions expired on approximately 6 million shares of restricted stock issued under these plans. In addition, non-vested options and other deferred compensation arrangements automatically vested. Total charges related to the Company's accelerated amortization of these plans was approximately $120 million. Furthermore, based on employee elections, approximately 5 million shares of vested restricted stock were placed in a trust under the Company's deferred compensation program. These shares are reflected as treasury stock with a corresponding liability included in other liabilities in the Condensed Consolidated Balance Sheet as of September 30, 1999. East Asia Power In February 1999, the Company acquired a 46 percent ownership interest in EAPRC along with an interest in a convertible loan. Following its acquisition, the Company converted its interest in the convertible loan to equity, increasing its ownership interest to 65 percent, and in September 1999, the Company acquired an additional 17 percent from another shareholder, increasing its overall ownership interest to 82 percent. As of September 30, 1999, the Company's total investment in EAPRC was approximately $92 million. EAPRC owns and operates seven power generation facilities in the Philippines with a total generating capacity of 388 megawatts. Electric power generated by the facilities is supplied to a diversified base of customers including National Power Corporation, the Philippine state-owned utility, private distribution companies and 5 8 industrial users. Since the Company is currently evaluating bids to partially sell-down the Company's interest in EAPRC and expects to complete its sell down prior to the end of the first quarter of 2000, the Company's majority ownership is expected to be temporary. Therefore, this investment is accounted for under the equity method of accounting. CE Generation In March 1999, the Company purchased a 50 percent ownership interest in CE Generation LLC. The investment of approximately $254 million is accounted for using the equity method of accounting. CE Generation LLC owns four natural gas-fired cogeneration projects in New York, Pennsylvania, Texas and Arizona and eight geothermal facilities near the Imperial Valley in southern California, which are qualifying facilities under the Public Utility Regulatory Policy Act. In addition, two additional geothermal facilities are currently under construction in southern California. Collectively, the 14 power projects will have a combined electric generating capacity of approximately 900 megawatts. EnCap In March 1999, the Company acquired EnCap for $52 million, net of cash acquired. The purchase price included $17 million in Company common stock, of which $7 million is issuable upon the occurrence of certain events. The acquisition was accounted for as a purchase. EnCap is an institutional funds management firm specializing in financing independent oil and gas producers. EnCap manages three separate institutional oil and gas investment funds in the U.S., and serves as investment advisor to Energy Capital Investment Company PLC, a publicly traded investment company in the United Kingdom. Chaparral Investors In August 1999, the Company formed Chaparral Investors, L.L.C. ("Chaparral") and made a capital contribution of $75 million. The other 50 percent owner is a financial investor whose interest earns a preferred return. From inception through September 30, 1999, Chaparral, through its wholly owned subsidiary, Mesquite Investors, L.L.C. ("Mesquite"), acquired ownership interests in the Newark Bay Cogeneration Facility, East Coast Power, and MassPower with investment proceeds from the third-party financial investor of $75 million and borrowings from the Company of $262 million. The Newark Bay facility is a 137 megawatt natural gas-fired cogeneration plant located in New Jersey which sells power to a large utility and steam to various local customers. East Coast Power has three natural gas-fired plants located in New Jersey with a combined capacity of 1,037 megawatts and long-term power purchase agreements with three utilities. MassPower has a 240 megawatt facility located in Massachusetts, which sells power to four large utilities and steam to a local customer. The Company's note receivable from Mesquite is collateralized by the membership interest in Mesquite, earns a variable interest rate, which was 8.1% per annum for the third quarter 1999, and is due in August 2001. The Company also currently has a note payable to Chaparral for $75 million. The note payable is unsecured with a variable interest rate, which was 6.3% per annum for the third quarter 1999, and is due upon demand. The Company's investment in Chaparral is being accounted for under the equity method of accounting. Other In March 1999, the Company acquired an additional 10 percent interest in the Samalayuca Power project for approximately $22 million, bringing its overall ownership to 40 percent. The Company also made a $48 million equity contribution to the project to replace equity financing established in the second quarter of 1996. In June 1999, the Company acquired a 26 percent interest in a power plant in Tamil Nadu, India for $37 million. Approximately $11 million was paid in June 1999, and the remaining amount will be paid in the first quarter of 2001. The project consists of a 346 megawatt combined cycle power plant which will serve as a base load facility and sell power to the state-owned Tamil Nadu Electricity Board under a thirty-year power 6 9 purchase agreement. Construction began in January 1999, and operations are expected to commence in early 2001. In June 1999, the Company increased its effective ownership interest in Leviathan Gas Pipeline Partners, L.P. ("Leviathan") from approximately 27 percent to approximately 35 percent by transferring a 49 percent interest in Viosca Knoll Gathering Company to Leviathan for total consideration of approximately $80 million. Proceeds included cash of approximately $20 million with the balance in Leviathan common units. The gain from the transaction, limited to the extent of third-party ownership in Leviathan, is included in Other, net in the Condensed Consolidated Statements of Income. In November 1999, Leviathan announced a name change to El Paso Energy Partners, L.P. effective December 1, 1999. In August 1999, the Company acquired a 100% interest in the 158 megawatt Rio Negro power plant located in Manaus, Brazil for $110 million. Electricity from the Rio Negro facility will be sold under a long-term contract to Eletronorte, a subsidiary of the Brazilian federal electric utility. 3. MINORITY INTEREST In June 1999, the Company formed Sabine River Investors, L.L.C. ("Sabine"), a wholly owned limited liability company, and other separate legal entities, for the purpose of raising funds for the Company's investments in capital projects and other assets. Through its ownership in Sabine, the Company contributed $125 million of equity capital to Trinity River Associates, L.L.C. ("Trinity"), in exchange for a managing member interest in Trinity. A third-party investor contributed $500 million of equity capital to Trinity for a non-controlling, preferred interest. The third-party investor is entitled to an adjustable preferred return derived from Trinity's net income. Proceeds from the equity contributions were used to invest in a note receivable from Sabine. The Company has the option to acquire the third-party investor's interest in Trinity at any time prior to June 2004. If the Company does not acquire the third-party investor's interest in Trinity before June 2004, and if the Company and the third-party investor do not agree to extend the maturity of the transaction, the note receivable from Sabine will mature and a portion of the proceeds therefrom will be used by Trinity to redeem the third-party investor's interest in Trinity. The assets, liabilities and operations of Sabine, Trinity and other entities involved in this transaction are included in the Company's consolidated financial statements. The third-party investor's interest is included in Other minority interest in the Condensed Consolidated Balance Sheets. 4. COMMITMENTS AND CONTINGENCIES Indonesia The Company owns a 47.5 percent ownership interest in a power generating plant in Sengkang, South Sulawesi, Indonesia. Under the terms of the project's power purchase agreement, PLN purchases power from the Company in Indonesian rupiah indexed to the U.S. dollar at the date of payment. Due to the devaluation of the rupiah beginning in 1997, the cost of power to PLN has increased. PLN has been unable to pass this increased cost on to its customers and has requested financial aid from Indonesia's Minister of Finance to help ease the effects of the devaluation. PLN has been paying the Company in rupiah indexed to the U.S. dollar at the rate in effect prior to the rupiah devaluation. The difference between the current and prior exchange rate has resulted in an outstanding balance due from PLN of $18 million at September 30, 1999. During September 1999, the Company entered into an interim agreement with PLN, pursuant to which PLN and the Company will attempt to negotiate long-term resolutions to the existing difficulties. The total investment in the Sengkang project was approximately $27 million at September 30, 1999. All project debt is non-recourse, and the Company has political risk insurance on the Sengkang project. The Company believes the current economic difficulties in Indonesia will not have a material adverse effect on the Company's financial position, results of operations, or cash flows. Brazil The Company owns 100 percent of a 240 megawatt power generating plant in Manaus, Brazil. Power from the plant is currently sold to a subsidiary of Centrais Electricas do Norte do Brasil, S.A., ("Eletronorte"), 7 10 denominated in Brazilian real. In January 1999, the real was devalued. Under a provision in the contract, the Company is entitled to adjust its forward tariff rate for devaluations. In April 1999, the contract with Eletronorte was amended to extend the term from four to six years. The Company believes the current economic difficulties in Brazil will not have a material adverse effect on the Company's financial position, results of operations, or cash flows. The contract for the Manaus power project provides for delay and availability damages to be paid to Eletronorte if the specified construction schedule is not met or the project does not meet certain availability standards. Completion of the project was delayed beyond the originally scheduled completion dates provided in the contract, and the availability standards were not met. Such delays resulted in claims by Eletronorte for damages. In the second quarter of 1999, the Company reached a settlement with all parties which resolved all claims for availability damages and continues to negotiate toward the settlement of the claims on delay damages. The Company does not believe the ultimate resolution of claims for delay damages will have a material adverse effect on the Company's financial position, results of operations, or cash flows. Pakistan The Company owns a 42 percent interest in a 151 megawatt natural gas-fired combined cycle plant in Kabirwala, Pakistan. Upon its completion, the plant will sell electricity to the state owned Water & Power Development Authority ("WAPDA") under a 30-year contract. Due to an inlet filter fire and other miscellaneous delays, the commencement of commercial operations of the power plant has been delayed. The project company has received a claim from WAPDA for liquidated damages due to this delay in commercial operations. The Company is disputing this claim. In addition, the project company has certain claims for delay damages against the project contractor. The Company believes that this delay and any resolution regarding these damages will not have a material adverse effect on the Company's financial position, results of operations, or cash flows. Rates and Regulatory Matters In July 1998, FERC issued a Notice of Proposed Rulemaking ("NOPR") in which it sought comments on a wide range of initiatives to change the manner in which short-term (less than one year) transportation markets are regulated. Among other things, the NOPR proposes the following: (i) removing the price cap for the short-term capacity market; (ii) establishing procedures to make pipeline and shipper-owned capacity comparable; (iii) auctioning all available short-term pipeline capacity on a daily basis with the pipeline unable to set a reserve price above variable costs; (iv) changing policies or pipeline penalties, nomination procedures and services; (v) increasing pipeline reporting requirements; (vi) permitting the negotiation of terms and conditions of service; and (vii) potentially modifying the procedures for certificating new pipeline construction. Also in July 1998, FERC issued a Notice of Inquiry ("NOI") seeking comments on FERC's policy for pricing long-term capacity. The Company provided comments on the NOPR and NOI in April 1999. TGP -- In April 1997, FERC approved the settlement of all issues related to the recovery of TGP's GSR and other transition costs and related proceedings (the "GSR Stipulation and Agreement"). Under the terms of the GSR Stipulation and Agreement, TGP is entitled to collect up to $770 million from its customers, $693 million through a demand surcharge and $77 million through an interruptible transportation surcharge. The demand portion has been fully collected. As of September 30, 1999, $45 million of the interruptible transportation portion had been collected. There is no time limit for collection of the interruptible transportation surcharge. The terms of the GSR Stipulation and Agreement also provide for a rate case moratorium through November 2000 (subject to certain limited exceptions) and an escalating rate cap, indexed to inflation, through October 2005, for certain of TGP's customers. In March 1999, TGP filed a GSR reconciliation report with FERC in accordance with the terms of its GSR Stipulation and Agreement. The report indicated that collections from firm customers through the demand surcharge were $14 million more than the $693 million TGP was entitled to collect. In June 1999, FERC accepted the report as complying with the GSR Stipulation and Agreement, and in July 1999, TGP refunded the overcollections to its firm customers. TGP will be required to refund to firm customers amounts collected in excess of each firm 8 11 customer's share of the final transition costs based on the final GSR reconciliation report, which will be filed in March 2001. Any future refund is not expected to have a material adverse effect on the Company's financial position, results of operations, or cash flows. In December 1994, TGP filed for a general rate increase with FERC and in October 1996, FERC approved a settlement resolving that proceeding. The settlement included a structural rate design change that results in a larger portion of TGP's transportation revenues being dependent upon throughput. One party, a competitor of TGP, filed a Petition for Review of the FERC approved settlement with the Court of Appeals, which subsequently remanded the case to FERC to respond to the competitor's argument that TGP's cost allocation methodology deterred the development of market centers (centralized locations where buyers and sellers can physically exchange gas). At FERC's request, comments were filed in January 1999. This matter is still pending before FERC. All cost of service issues related to TGP's 1991 general rate proceeding were resolved pursuant to a settlement agreement approved by FERC which now has become final. In a subsequent ruling, FERC remanded to an ALJ the issue of the proper allocation of TGP's New England lateral costs. In October 1998, FERC issued an order establishing the proper allocation of the New England lateral costs and in April 1999 FERC denied requests for rehearing of that order. The methodology approved by FERC economically approximates the methodology previously used by TGP. In April 1999, TGP filed with FERC revised rates to be effective May 1, 1999, consistent with the FERC's decision. TGP refunded approximately $1 million to certain of its customers in the third quarter of 1999. The refunds resolved this proceeding. In April 1999, FERC approved a settlement which resolved all outstanding FERC proceedings relating to the cashout reports that TGP had filed for the period September 1993 through August 1998. The settlement also established a new cashout mechanism to account for customer imbalances. The new cashout mechanism was implemented in the second quarter of 1999, retroactive to September 1998. As previously reported, contracts representing 70 percent of TGP's firm transportation capacity were due to expire by November 2000. As a result of negotiations with existing customers to extend or restructure these contracts, those contracts expiring by November 2000 now only represent approximately 20 percent of firm transportation capacity. To date, the conditions of settlements and extensions have been similar to the original contracts. Currently, 80 percent of TGP's contracted firm transportation capacity has an average term in excess of four years. TGP continues to pursue future markets and customers for the capacity that is not committed beyond November 2000 and expects that this capacity will be placed under a combination of long-term and short-term contracts. However, there can be no assurance as to whether TGP will be able to replace these contracts or that the terms of new contracts will be as favorable to TGP as the existing contracts. EPNG -- In June 1995, EPNG filed with FERC for approval of new system rates for mainline transportation to be effective January 1, 1996. In March 1996, EPNG filed a comprehensive offer of settlement to resolve that proceeding as well as issues surrounding certain contract reductions and expirations that were to occur from January 1, 1996 through December 31, 1997. In April 1997, FERC approved EPNG's settlement, as filed, and determined that only the contesting party, Edison, should be severed for separate determination of the rates it ultimately pays EPNG. In July 1997, FERC issued an order denying the requests for rehearing of the April 1997 order and the settlement was implemented effective July 1, 1997. Hearings to determine Edison's rates were completed in May 1998, and an initial decision was issued by the presiding ALJ in July 1998. Edison also filed a petition with the Court of Appeals for review of FERC's April 1997 and July 1997 orders, in which it challenged the propriety of FERC's approving EPNG's settlement over Edison's objections as a customer of Southern California Gas Company. In December 1998, the Court of Appeals issued its decision vacating and remanding FERC's order. In August 1999, EPNG and Edison filed a joint settlement with FERC resolving all issues related to EPNG's June 1995 rate filing. The joint settlement provides for Edison to withdraw its opposition to the rate settlement and to pay EPNG the maximum tariff rate for transportation service to California from July 1, 1999 through the end of the term of the rate settlement, exclusive of any risk sharing amounts, and for 9 12 EPNG to pay Edison $32 million in resolution of all claims raised by Edison. Payment to Edison is expected to occur in the fourth quarter of 1999. In addition to not having a risk sharing obligation, Edison will not participate in revenue sharing. The settlement payment to Edison exceeds the reserve previously provided by EPNG by approximately $14 million, and this difference has been reflected in results of operations for the third quarter of 1999. On November 10, 1999, FERC approved the joint settlement between EPNG and Edison. FERC also reapproved EPNG's rate settlement on remand conditioned upon the immediate adjustment of EPNG's fuel charges with respect to facilities refunctionalized as gathering (see discussion of Chaco and Blanco below). If FERC's condition is deemed to be a modification of EPNG's settlement, some parties to the settlement may assert a right to withdraw support for and become opponents to the settlement. EPNG is currently evaluating the potential impact of this ruling on the rate settlement. The rate settlement effective January 1996, establishes, among other things, base rates through December 31, 2005. Such rates escalate annually beginning in 1998. In addition, the settlement provides for settling customers to (i) pay $295 million (including interest) as a risk sharing obligation, which approximates 35 percent of anticipated revenue shortfalls over an 8 year period resulting from certain contract reductions and expirations identified in the settlement, (ii) receive 35 percent of additional revenues received by EPNG, above a threshold, for the same eight-year period, and (iii) have the base rates increase or decrease if certain changes in laws or regulations result in increased or decreased costs in excess of $10 million a year. Through September 30, 1999, approximately $238 million of the risk sharing obligation had been paid, and the remaining balance of $57 million will be collected by the end of 2003. The risk sharing obligation is being recognized in revenues ratably over the period of the related contractual reductions, and at September 30, 1999, the balance of the unearned risk sharing revenue was $192 million. This amount will be recognized ratably through the year 2003. Under the revenue sharing provisions of its rate case settlement, EPNG was obligated to return approximately $12 million of non-traditional fixed cost revenues earned in 1998 to certain customers. This amount was credited to those customers' transportation invoices between October 1998 and March 1999. EPNG continues to reserve for the revenue sharing provisions which are expected to be credited to customer accounts during the period October 1999 through March 2000. At September 30, 1999, EPNG had a reserve of approximately $10 million. To partially offset the effects of the reduction in firm capacity commitments referred to above, EPNG entered into contracts with Dynegy for the sale of substantially all of its turned back firm capacity available to California as of January 1, 1998, (approximately 1.3 billion cubic feet) for a two-year period at rates negotiated pursuant to EPNG's tariff provisions and FERC policies. The contracts have a transport-or-pay provision requiring Dynegy to pay a minimum charge equal to the reservation component of the contractual charge on at least 72 percent of the contracted volumes each month in 1999. EPNG realized $32 million in revenue in the nine months ended September 30, 1999 and anticipates realizing at least $11 million in revenues during the fourth quarter of 1999 for this capacity. Such revenue is subject to the revenue sharing provisions of the rate settlement. EPNG has offered this capacity for sale pursuant to EPNG's tariff provisions and FERC regulations, subject to Dynegy's right of first refusal, and expects that this capacity will be placed. However, there can be no assurance whether EPNG will be able to replace this capacity under similar contracts or that the terms of new contracts will be as favorable to EPNG as existing contracts. In December 1997, EPNG filed to implement several negotiated rate contracts, including those with Dynegy. In a protest to this filing, three shippers (producers/marketers) requested that FERC require EPNG to eliminate certain provisions from its Dynegy contracts, to publicly disclose and repost the contracts for competitive bidding, and to suspend their effectiveness. In June 1998, FERC rejected the protests to the Dynegy contracts, but required EPNG to file certain modifications to the contracts with FERC. In addition, EPNG agreed to separately post capacity covered by the Dynegy contracts as it becomes available. In July 1999, FERC issued an order on rehearing which generally denied all pending rehearing requests and accepted EPNG's letter agreement, subject to certain modifications to one of the Dynegy contracts. In 10 13 September 1999, the FERC issued a letter order accepting the Company's revised letter agreement filing. In October 1999, the FERC issued an order granting EPNG's request for clarification of the July 1999 order, but otherwise denied rehearing of such order. In a November 1997 order, FERC ruled that EPNG's Chaco Station should be functionalized as a gathering, not a transmission, facility and should be transferred to EPFS. In accordance with the FERC orders, the Chaco Station was transferred to EPFS in April 1998. EPNG and two other parties filed petitions for review with the Court of Appeals. In October 1999, the Court of Appeals sustained FERC's determination that the Chaco Station is a gathering facility, but remanded to FERC issues relating to the appropriate fuel and rate treatment resulting from this refunctionalization. In an order approved November 10, 1999, FERC ruled that an immediate adjustment of EPNG's fuel charges with respect to the refunctionalized facilities was appropriate but that no change should be made to EPNG's base rates as a result of refunctionalization. In August 1999, Williams Field Services Group ("Williams") filed a complaint against the Company seeking a determination that the Company's Blanco Compressor Station is a non-jurisdictional gathering facility rather than a jurisdictional transmission facility. Williams also requests the immediate removal of all costs of the Blanco and Chaco facilities from the Company's jurisdictional transmission rates, including fuel rates. The Company filed an answer in opposition to the complaint. On November 10, 1999, FERC ruled that two of the three Blanco compressor units were nonjurisdictional gathering facilities. FERC also held that EPNG's fuel charges should be adjusted to exclude these refunctionalized facilities. In September 1999, Burlington Resources and Amoco Energy filed a "Fast Track" complaint requesting that FERC order the Company to cease and desist selling primary firm delivery point capacity at the Southern California Gas Company Topock Delivery point in excess of the capacity available at that point. The Company filed an answer in opposition to the complaint. On November 10, 1999, FERC approved an order finding that EPNG's delivery point and receipt point allocation methodology may be unjust and unreasonable, and ordered EPNG to file new proposed tariff provisions regarding receipt and delivery point allocation rights within 60 days of the date of the order. EPNG is currently evaluating the impact of this order on its operations and its customers. TGP and EPNG, as interstate pipelines, are subject to FERC audits of their books and records. EPNG currently has an open audit covering the years 1990 through 1995. FERC is expected to issue its final audit report in 2000. As part of an industry-wide initiative, both EPNG's and TGP's property retirements are currently under review by the FERC audit staff. As the aforementioned rate and regulatory matters are fully and unconditionally resolved, the Company may either recognize an additional refund obligation or a non-cash benefit to finalize previously estimated liabilities. Management believes the ultimate resolutions of these matters, which are in various stages of finalization, will not have a material adverse effect on the Company's financial position, results of operations, or cash flows. Legal Proceedings In November 1993, TransAmerican Natural Gas Corporation ("TransAmerican") filed a complaint in a Texas state court which, as amended, seeks approximately $7.5 billion in actual and punitive damages related to a 1990 settlement agreement between EPNG, TransAmerican, and others. TransAmerican's complaint, as amended from time to time, has advanced ten causes of action against EPNG. As a result of orders by the court on various motions for summary judgment, three causes of action have been dismissed in their entirety and three have been partially dismissed. The partially dismissed claims allege tortious interference, civil conspiracy, and fraud, and the other claims that remain pending allege breach of contract, bad faith, participation in breach of fiduciary duty, and violation of the Texas Antitrust Act. Motions for summary judgment on all of TransAmerican's remaining claims are expected to be heard and decided by the court prior to the current trial setting of January 31, 2000. Additionally, EPNG has filed a breach of contract counterclaim against TransAmerican seeking to recover EPNG's expenses incurred in connection with the lawsuit. TransAmerican's motion for summary judgment on this counterclaim was denied by the court. In 11 14 April 1996, a former employee of TransAmerican filed a related case in Harris County, Texas, Vickroy E. Stone v. Godwin & Carlton, P.C., et al. ("Stone"), seeking other damages in unspecified amounts related to litigation consulting work allegedly performed for various entities, including EPNG, in cases involving TransAmerican. In June 1998, the court granted EPNG's motion for summary judgment and dismissed all claims in the Stone litigation. Stone has appealed the court's ruling to the Texas Court of Appeals in Houston, Texas. Based on information available at this time, management believes that the claims asserted against it in both cases have no factual or legal basis and that the ultimate resolution of these matters will not have a material adverse effect on the Company's financial position, results of operations, or cash flows. In February 1998, the United States and the State of Texas filed in a United States District Court a Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA" or "Superfund") cost recovery action against fourteen companies including the Company and certain of its affiliated companies relating to the Sikes Disposal Pits Superfund Site ("Sikes") located in Harris County, Texas. The suit claims that the United States and the State of Texas have expended over $125 million in remediating the site, and seeks to recover that amount plus interest from all defendants to the suit. Although factual investigation relating to Sikes is in the preliminary stages, the Company believes that the amount of material, if any, disposed at Sikes by the Company was small, possibly de minimis. However, the plaintiffs have alleged that the defendants are each jointly and severally liable for the entire remediation costs and have also sought a declaration of liability for future response costs such as groundwater monitoring. While the outcome of this matter cannot be predicted with certainty, management does not expect this matter to have a material adverse effect on the Company's financial position, results of operations, or cash flows. TGP is a party in proceedings involving federal and state authorities regarding the past use by TGP of a lubricant containing PCBs in its starting air systems. TGP has executed a consent order with the EPA governing the remediation of certain of its compressor stations and is working with the EPA and the relevant states regarding those remediation activities. TGP is also working with the Pennsylvania and New York environmental agencies regarding remediation and post-remediation activities at the Pennsylvania and New York stations. Management believes that the ultimate resolution of these matters will not have a material adverse effect on the Company's financial position, results of operations, or cash flows. In November 1988, the Kentucky environmental agency filed a complaint in a Kentucky state court alleging that TGP discharged pollutants into the waters of the state without a permit and disposed of PCBs without a permit. The agency sought an injunction against future discharges, sought an order to remediate or remove PCBs, and sought a civil penalty. TGP has entered into agreed orders with the agency to resolve many of the issues raised in the original allegations, has received water discharge permits for its Kentucky compressor stations from the agency, and continues to work to resolve the remaining issues. The relevant Kentucky compressor stations are scheduled to be characterized and remediated under the consent order with the EPA. Management believes that the resolution of this issue will not have a material adverse effect on the Company's financial position, results of operations, or cash flows. A number of subsidiaries of EPEC, both wholly and partially owned, have been named defendants in actions brought by Jack Grynberg on behalf of the U.S. Government under the False Claims Act. Generally, the complaints allege an industry-wide conspiracy to underreport the heating value as well as the volumes of the natural gas produced from federal and Indian lands, thereby depriving the U.S. Government of royalties. The Company believes the complaint to be without merit and that the ultimate resolution of this issue will not have a material adverse effect on the Company's financial position, results of operations, or cash flows. The Company is a named defendant in numerous lawsuits and a named party in numerous governmental proceedings arising in the ordinary course of business. While the outcome of such lawsuits or other proceedings cannot be predicted with certainty, management currently does not expect these matters to have a material adverse effect on the Company's financial position, results of operations, or cash flows. 12 15 Environmental The Company is subject to extensive federal, state, and local laws and regulations governing environmental quality and pollution control. These laws and regulations require the Company to remove or remedy the effect on the environment of the disposal or release of specified substances at current and former operating sites. As of September 30, 1999, the Company had reserves of approximately $240 million for expected environmental costs. In addition, the Company estimates that its subsidiaries will make capital expenditures for environmental matters of approximately $4 million for the remainder of 1999. These expenditures primarily relate to compliance with air regulations and, to a lesser extent, control of water discharges. The Company expects to incur expenditures of approximately $105 million in the aggregate for the years 2000 through 2007. Since 1988, TGP has been engaged in an internal project to identify and deal with the presence of PCBs and other substances of concern, including substances on the EPA List of Hazardous Substances, at compressor stations and other facilities operated by both its interstate and intrastate natural gas pipeline systems. While conducting this project, TGP has been in frequent contact with federal and state regulatory agencies, both through informal negotiation and formal entry of consent orders, to assure that its efforts meet regulatory requirements. In May 1995, following negotiations with its customers, TGP filed with FERC a Stipulation and Agreement (the "Environmental Stipulation") that establishes a mechanism for recovering a substantial portion of the environmental costs identified in the internal project. The Environmental Stipulation was effective July 1, 1995. As of September 30, 1999, all amounts have been collected under the Environmental Stipulation. Refunds may be required to the extent actual eligible expenditures are less than estimated eligible expenditures used to determine amounts collected under the Environmental Stipulation. The Company and certain of its subsidiaries have been designated, have received notice that they could be designated, or have been asked for information to determine whether they could be designated as a PRP with respect to 31 sites under CERCLA or state equivalents. The Company has sought to resolve its liability as a PRP with respect to these Superfund sites through indemnification by third parties and/or settlements which provide for payment of the Company's allocable share of remediation costs. Since the clean-up costs are estimates and are subject to revision as more information becomes available about the extent of remediation required, and because in some cases the Company has asserted a defense to any liability, the Company's estimate of its share of remediation costs could change. Moreover, liability under the federal Superfund statute is joint and several, meaning that the Company could be required to pay in excess of its pro rata share of remediation costs. The Company's understanding of the financial strength of other PRPs has been considered, where appropriate, in the determination of its estimated liability. The Company presently believes that the costs associated with the current status of such other entities as PRPs at the Superfund sites referenced above will not have a material adverse effect on the Company's financial position, results of operations, or cash flows. The Company has initiated proceedings against its historic liability insurers seeking payment or reimbursement of costs and liabilities associated with various environmental matters. In these proceedings, the Company contends that certain environmental costs and liabilities associated with various entities or sites, including costs associated with former operating sites, must be paid or reimbursed by certain of its historic insurers. The proceedings are in the discovery stage, and it is not yet possible to predict the outcome. It is possible that new information or future developments could require the Company to reassess its potential exposure related to environmental matters. The Company may incur significant costs and liabilities in order to comply with existing environmental laws and regulations. It is also possible that other developments, such as increasingly strict environmental laws, regulations and enforcement policies thereunder, and claims for damages to property, employees, other persons and the environment resulting from current or discontinued operations, could result in substantial costs and liabilities in the future. As such information becomes available, or other relevant developments occur, related accrual amounts will be adjusted accordingly. While there are still uncertainties relating to the ultimate costs which may be incurred, based 13 16 upon the Company's evaluation and experience to date, the Company believes the recorded reserves are adequate. Other than the items discussed above, management is not aware of any other commitments or contingent liabilities which would have a material adverse effect on the Company's financial condition, results of operations, or cash flows. 5. SEGMENT INFORMATION During the third quarter of 1999, the Company renamed its El Paso Energy Marketing segment El Paso Merchant Energy. The change had no impact on reported segment results.
SEGMENTS AS OF OR FOR THE QUARTER ENDED SEPTEMBER 30, 1999 ------------------------------------------------------------------- TENNESSEE EL PASO EL PASO EL PASO EL PASO GAS NATURAL FIELD MERCHANT ENERGY PIPELINE GAS SERVICES ENERGY INTERNATIONAL TOTAL --------- ------- -------- -------- ------------- ------- (IN MILLIONS) Revenues from external customers........ $ 172 $ 120 $ 107 $1,889 $ 14 $ 2,302 Intersegment revenues................... 8 -- 14 8 -- 30 Operating income (loss)................. 73 53 14 1 (11) 130 EBIT.................................... 76 54 23 9 12 174 Segment assets.......................... 4,938 1,750 1,477 1,848 1,279 11,292

SEGMENTS AS OF OR FOR THE QUARTER ENDED SEPTEMBER 30, 1998 ------------------------------------------------------------------ TENNESSEE EL PASO EL PASO EL PASO EL PASO GAS NATURAL FIELD MERCHANT ENERGY PIPELINE GAS SERVICES ENERGY INTERNATIONAL TOTAL --------- ------- -------- -------- ------------- ------ (IN MILLIONS) Revenues from external customers......... $ 171 $ 117 $ 37 $1,275 $ 15 $1,615 Intersegment revenues.................... 9 1 17 4 -- 31 Operating income (loss).................. 71 57 7 -- (9) 126 EBIT..................................... 82 58 12 -- 12 164 Segment assets........................... 4,906 1,750 1,462 606 886 9,610

SEGMENTS AS OF OR FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 ------------------------------------------------------------------- TENNESSEE EL PASO EL PASO EL PASO EL PASO GAS NATURAL FIELD MERCHANT ENERGY PIPELINE GAS SERVICES ENERGY INTERNATIONAL TOTAL --------- ------- -------- -------- ------------- ------- (IN MILLIONS) Revenues from external customers........ $ 555 $ 358 $ 276 $4,324 $ 43 $ 5,556 Intersegment revenues................... 22 1 47 29 -- 99 Operating income (loss)................. 286 163 37 6 (34) 458 EBIT.................................... 302 164 75 23 31 595 Segment assets.......................... 4,938 1,750 1,477 1,848 1,279 11,292

SEGMENTS AS OF OR FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 ------------------------------------------------------------------ TENNESSEE EL PASO EL PASO EL PASO EL PASO GAS NATURAL FIELD MERCHANT ENERGY PIPELINE GAS SERVICES ENERGY INTERNATIONAL TOTAL --------- ------- -------- -------- ------------- ------ (IN MILLIONS) Revenues from external customers......... $ 542 $ 355 $ 145 $3,440 $ 43 $4,525 Intersegment revenues.................... 28 2 41 13 -- 84 Operating income (loss).................. 230 165 41 (4) (22) 410 EBIT..................................... 252 167 53 -- 23 495 Segment assets........................... 4,906 1,750 1,462 606 886 9,610
14 17 The reconciliations of EBIT to income before interest, income taxes and other charges are presented below.
NINE MONTHS QUARTER ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, -------------- ------------- 1999 1998 1999 1998 ----- ----- ----- ---- (IN MILLIONS) Total EBIT for reportable segments................... $174 $164 $ 595 $495 Corporate expenses, net.............................. 6 (5) (127) (24) ---- ---- ----- ---- Income before interest, income taxes, and other charges............................................ $180 $159 $ 468 $471 ==== ==== ===== ====
6. DEBT AND OTHER CREDIT FACILITIES In February 1999, DeepTech International, Inc. retired its 11% senior promissory notes due 2000 in the amount of $16 million and in September 1999, EPNG retired its outstanding 9.45% Notes in the principal amount of $47 million. In May 1999, EPEC issued $500 million aggregate principal amount of 6.75% Senior Notes due 2009. Proceeds of approximately $496 million, net of issuance costs, were used to repay approximately $350 million of outstanding debt under EPEC's revolving credit facility and the remainder was used to repay commercial paper. In July 1999, EPEC issued $600 million aggregate principal amount of 6.625% Senior Notes due 2001 and $100 million aggregate principal amount of floating rate Senior Notes due 2001 with an interest rate equal to LIBOR plus 65 basis points. Proceeds of approximately $697 million, net of issuance costs, were used to repay approximately $410 million of short-term borrowings and the remaining amount was used for general corporate purposes. In August 1999, EPEC filed a shelf registration statement pursuant to which EPEC may offer up to $900 million of common or preferred equities, various forms of debt securities, and various types of trust securities from time to time as determined by market conditions. In August 1999, EPEC entered into an Interest Rate Swap agreement with a notional amount of $600 million and a termination date of July 2001. EPEC swapped its currently existing fixed interest rate on its July 1999, $600 million aggregate principal Senior Notes due 2001, for a floating 3 months LIBOR plus a floating rate margin of 14.75 basis points. The rate under the swap at September 30, 1999 was 5.76%. In August 1999, EPEC established a new $1,250 million 364-day renewable revolving credit and competitive advance facility. As of September 30, 1999, EPEC's interest rate for borrowings under this facility was equal to LIBOR plus 50 basis points. The rate will vary based on EPEC's long-term unsecured debt rating. This facility replaced EPEC's $750 million 364-day renewable revolving credit and competitive advance facility established in October 1997. EPNG and TGP are designated borrowers under this credit facility. As of September 30, 1999, no amounts were outstanding under this facility. The weighted average interest rate of short-term borrowings was 5.5% and 5.8% at September 30, 1999 and December 31, 1998, respectively. The Company had short-term borrowings, including current maturities of long-term debt, at September 30, 1999 and December 31, 1998, as follows:
1999 1998 ----- ----- (IN MILLIONS) EPEC revolving credit facility.............................. $ -- $350 Commercial paper............................................ 190 340 Other credit facilities..................................... 20 60 Current maturities of long-term debt........................ 15 62 ---- ---- $225 $812 ==== ====
15 18 In October 1999, Mojave Pipeline Company ("MPC") retired its variable rate non-recourse project financing in the principal amount of $107 million. Concurrently, MPC also terminated its associated interest rate swap at a cost of approximately $5 million. 7. PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment at September 30, 1999 and December 31, 1998, consisted of the following:
1999 1998 ------ ------ (IN MILLIONS) Property, plant, and equipment, at cost Tennessee Gas Pipeline.................................... $2,460 $2,438 El Paso Natural Gas....................................... 2,432 2,417 El Paso Field Services.................................... 1,132 1,118 El Paso Merchant Energy................................... 36 47 El Paso Energy International.............................. 295 162 Corporate and other....................................... 119 103 ------ ------ 6,474 6,285 Less accumulated depreciation............................... 1,612 1,546 ------ ------ 4,862 4,739 Additional acquisition cost assigned to utility plant, net of accumulated amortization............................... 2,443 2,481 ------ ------ Total property, plant, and equipment, net................... $7,305 $7,220 ====== ======
Current FERC policy does not permit the Company to recover amounts in excess of original cost allocated in purchase accounting to its regulated operations through rates. 8. EARNINGS PER SHARE The computation of basic and diluted earnings per common share are presented below.
QUARTER ENDED SEPTEMBER 30, --------------------------------- 1999 1998 --------------- --------------- BASIC DILUTED BASIC DILUTED ----- ------- ----- ------- (IN MILLIONS, EXCEPT PER COMMON SHARE AMOUNTS) Net income.................................................. $ 50 $ 50 $ 52 $ 52 Interest on trust preferred securities(1)................. -- -- -- 3 ----- ----- ----- ----- Adjusted net income......................................... $ 50 $ 50 $ 52 $ 55 ===== ===== ===== ===== Average common shares outstanding........................... 118 118 116 116 Effect of diluted securities Restricted stock.......................................... -- -- -- 1 Stock options............................................. -- 2 -- 2 Trust preferred securities(1)............................. -- -- -- 8 ----- ----- ----- ----- Average common shares outstanding........................... 118 120 116 127 ===== ===== ===== ===== Earnings per common share................................... $0.43 $0.42 $0.45 $0.43 ===== ===== ===== =====
16 19
NINE MONTHS ENDED SEPTEMBER 30, ---------------------------------- 1999 1998 ---------------- --------------- BASIC DILUTED BASIC DILUTED ------ ------- ----- ------- (IN MILLIONS, EXCEPT PER COMMON SHARE AMOUNTS) Income before cumulative effect of accounting change........ $ 126 $ 126 $ 165 $ 165 Interest on trust preferred securities(1)................. -- -- -- 6 ------ ------ ----- ----- Adjusted income before cumulative effect of accounting change................................................. 126 126 165 171 Cumulative effect of accounting change, net of income taxes.................................................. (13) (13) -- -- ------ ------ ----- ----- Adjusted net income......................................... $ 113 $ 113 $ 165 $ 171 ====== ====== ===== ===== Average common shares outstanding........................... 117 117 116 116 Effect of diluted securities Restricted stock.......................................... -- -- -- 1 Stock options............................................. -- 2 -- 2 Trust preferred securities(1)............................. -- -- -- 6 ------ ------ ----- ----- Average common shares outstanding........................... 117 119 116 125 ====== ====== ===== ===== Earnings per common share Adjusted income before cumulative effect of accounting change................................................. $ 1.08 $ 1.06 $1.42 $1.36 Cumulative effect of accounting change, net of income taxes.................................................. (0.11) (0.11) -- -- ------ ------ ----- ----- Net income................................................ $ 0.97 $ 0.95 $1.42 $1.36 ====== ====== ===== =====
- --------------- (1) The trust preferred securities are potentially convertible into approximately 8 million common shares. The impact of the assumed conversion for the 1999 periods would be antidilutive in the computation of diluted earnings per share and is therefore excluded. 9. INVESTMENT IN AFFILIATED COMPANIES The Company holds investments in various affiliates which are accounted for using the equity method of accounting. The principal equity method investments are the Company's investments in international pipelines, interstate pipelines, power generation plants, gathering systems and natural gas storage facilities. Summarized financial information of the Company's proportionate share of 50 percent or less owned companies and majority owned unconsolidated subsidiaries accounted for by the equity method of accounting is as follows:
NINE MONTHS QUARTER ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, ------------- ------------- 1999 1998 1999 1998 ----- ----- ----- ----- (IN MILLIONS) Operating results data: Revenues and other income.............................. $155 $127 $422 $149 Costs and expenses..................................... 122 116 323 113 Income from continuing operations...................... 33 11 99 36 Net income............................................. 22 11 71 34
10. NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED Accounting for Derivative Instruments and Hedging Activities In June 1998, Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, was issued by the Financial Accounting Standards Board to establish accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. This pronouncement requires that an entity classify all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as (i) a hedge of the 17 20 exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, (ii) a hedge of the exposure to variable cash flows of a forecasted transaction, or (iii) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security or a foreign-currency-denominated forecasted transaction. The accounting for the changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. The standard was amended by Statement of Financial Accounting Standards No. 137 issued in June 1999. The amendment defers the effective date to fiscal years beginning after June 15, 2000. The Company is currently evaluating the effects of this pronouncement. 18 21 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information contained in Item 2 updates, and should be read in conjunction with, information set forth in Part II, Items 7, 7A, and 8, in the Company's Annual Report on Form 10-K for the year ended December 31, 1998, in addition to the interim condensed consolidated financial statements and accompanying notes presented in Item 1 of this Quarterly Report on Form 10-Q. RECENT DEVELOPMENTS MERGER WITH SONAT INC. In March 1999, the Company announced it had entered into a definitive merger agreement with Sonat. On June 10, 1999, the Company's and Sonat's stockholders approved the second amended and restated agreement and plan of merger, and on October 25, 1999, the merger was completed. As part of the merger, the Company issued one share of EPEC common stock for each share of Sonat common stock. Total shares issued in the merger were approximately 110 million shares. The Company also assumed approximately $2.3 billion of Sonat debt. The Company accounted for the merger as a pooling of interests. The merger resulted in a defined change in control in EPEC under certain compensation arrangements. As a result, the vesting for certain employee benefits was accelerated. Total charges related to the change in control were approximately $120 million, and the Company has paid approximately $58 million as of September 30, 1999. The remaining amount is a non-cash charge. The Company has also incurred approximately $6 million in merger related costs as of September 30, 1999. The Company expects to incur additional merger related costs through the fourth quarter of 1999. As a result of a Federal Trade Commission order related to the merger with Sonat, the Company must dispose of certain operations, including its wholly owned subsidiary East Tennessee Natural Gas Company as well as Sonat's wholly owned subsidiary, Sea Robin Pipeline Company, and its one-third interest in Destin Pipeline Company, L.L.C. The impact of the required divestitures are not expected to have a material effect on the Company's financial position, results of operations, or cash flows. Sonat was a diversified energy holding company engaged in domestic oil and natural gas exploration and production, the transmission and storage of natural gas, and natural gas and power marketing. At the merger date, Sonat owned interests in approximately 14,000 miles of natural gas pipelines extending across the southeastern United States from Texas to South Carolina and Florida. Also, Sonat had interests in oil and gas producing properties in Louisiana, Texas, Oklahoma, Arkansas, Alabama, New Mexico and the Gulf of Mexico. Sonat owned approximately 1.4 trillion cubic feet equivalent of proved natural gas and oil reserves as of September 30, 1999. 19 22 RESULTS OF OPERATIONS SEGMENT RESULTS
QUARTER NINE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, -------------- ------------- 1999 1998 1999 1998 ----- ----- ----- ---- (IN MILLIONS) EARNINGS BEFORE INTEREST EXPENSE AND INCOME TAXES Tennessee Gas Pipeline...................................... $ 76 $ 82 $ 302 $252 El Paso Natural Gas......................................... 54 58 164 167 ---- ---- ----- ---- Regulated segments........................................ 130 140 466 419 El Paso Field Services...................................... 23 12 75 53 El Paso Merchant Energy..................................... 9 -- 23 -- El Paso Energy International................................ 12 12 31 23 ---- ---- ----- ---- Non-regulated segments.................................... 44 24 129 76 Corporate expenses, net..................................... 6 (5) (127) (24) ---- ---- ----- ---- Total EBIT................................................ $180 $159 $ 468 $471 ==== ==== ===== ====
TENNESSEE GAS PIPELINE
QUARTER NINE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, -------------- -------------- 1999 1998 1999 1998 ----- ----- ----- ----- (IN MILLIONS) Operating revenues........................................ $ 180 $ 180 $ 577 $ 570 Operating expenses........................................ (107) (109) (291) (340) Other, net................................................ 3 11 16 22 ----- ----- ----- ----- EBIT.................................................... $ 76 $ 82 $ 302 $ 252 ===== ===== ===== =====
Third Quarter 1999 Compared to Third Quarter 1998 Operating expenses for the quarter ended September 30, 1999, were $2 million lower than for the same period of 1998. This decrease was attributable to lower system fuel usage associated with operating efficiencies achieved as a result of lower throughput levels and lower direct operating and maintenance costs. Other, net for the quarter ended September 30, 1999, was $8 million lower than for the same period of 1998 primarily due to interest income on a favorable sales and use tax settlement received in the third quarter of 1998 and lower earnings from equity investments in the third quarter of 1999. Nine Months Ended 1999 Compared to Nine Months Ended 1998 Operating revenues for the nine months ended September 30, 1999, were $7 million higher than for the same period of 1998 primarily due to the favorable resolution of regulatory issues during 1999 and the impact of a downward revision in the amount of recoverable interest on GSR costs in 1998. The increase was partially offset by a favorable customer settlement in the second quarter of 1998 and lower system throughput in 1999 due to milder temperatures. Operating expenses for the nine months ended September 30, 1999, were $49 million lower than for the same period of 1998. The decrease was primarily due to the favorable resolution of certain regulatory issues during 1999 and lower fuel usage associated with operating efficiencies achieved as a result of lower system throughput. 20 23 Other, net for the nine months ended September 30, 1999, was $6 million lower than for the same period of 1998 primarily due to interest income received in the third quarter of 1998 on a favorable sales and use tax settlement and lower earnings from equity investments during 1999. The decrease was partially offset by the impact of a favorable settlement of a regulatory issue in the first quarter of 1999. EL PASO NATURAL GAS
QUARTER NINE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, ------------- --------------- 1999 1998 1999 1998 ---- ---- ----- ----- (IN MILLIONS) Operating revenues....................................... $120 $118 $ 359 $ 357 Operating expenses....................................... (67) (61) (196) (192) Other, net............................................... 1 1 1 2 ---- ---- ----- ----- EBIT................................................... $ 54 $ 58 $ 164 $ 167 ==== ==== ===== =====
Third Quarter 1999 Compared to Third Quarter 1998 Operating revenues for the quarter ended September 30, 1999, were $2 million higher than for the same period of 1998 primarily due to an increase in revenues from the sale of capacity to Dynegy and an increase in transportation revenues. Operating expenses for the quarter ended September 30, 1999, were $6 million higher than for the same period of 1998. This increase was primarily due to a regulatory settlement charge partially offset by revised estimates of regulatory recoveries in the third quarter of 1999. Nine Months Ended 1999 Compared to Nine Months Ended 1998 Operating revenues for the nine months ended September 30, 1999, were $2 million higher for the same period of 1998 primarily due to an increase in revenues from the sale of capacity to Dynegy and an increase in transportation revenues. These increases were partially offset by the favorable resolution of a contested rate matter in the second quarter of 1998. Operating expenses for the nine months ended September 30, 1999, were $4 million higher than for the same period of 1998. This increase was primarily due to the effect of a regulatory settlement charge partially offset by revised estimates of regulatory recoveries and lower fuel usage from greater system efficiency. EL PASO FIELD SERVICES
QUARTER NINE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, ------------- ------------- 1999 1998 1999 1998 ---- ---- ---- ---- (IN MILLIONS) Gathering and treating margin.............................. $ 40 $ 34 $116 $111 Processing margin.......................................... 11 10 31 36 Other margin............................................... 3 -- 7 2 ---- ---- ---- ---- Total gross margin............................... 54 44 154 149 Operating expenses......................................... (40) (37) (117) (108) Other, net................................................. 9 5 38 12 ---- ---- ---- ---- EBIT..................................................... $ 23 $ 12 $ 75 $ 53 ==== ==== ==== ====
21 24 Third Quarter 1999 Compared to Third Quarter 1998 Total gross margin for the quarter ended September 30, 1999, was $10 million higher than for the same period of 1998. The increase in the gathering and treating margin is primarily due to higher volumes and average gathering rates in the San Juan basin, partially offset by the sale of assets in the Anadarko Basin in September 1998. The increase in the processing margin resulted from higher volumes and realized liquids prices during the third quarter of 1999 compared to the same period of 1998. The increase in other margin resulted from the acquisition of EnCap in the first quarter of 1999. Operating expenses for the quarter ended September 30, 1999, were $3 million higher than for the same period of 1998 primarily due to an increase in amortization and depreciation expense attributable to acquisitions. Other, net for the quarter ended September 30, 1999, was $4 million higher than for the same period of 1998 due to equity investments, primarily the acquisition of DeepTech International Inc. Nine Months Ended 1999 Compared to Nine Months Ended 1998 Total gross margin for the nine months ended September 30, 1999, was $5 million higher than for the same period of 1998. The increase in the gathering and treating margin is primarily due to higher volumes in the San Juan basin. The increase was partially offset by the sale of assets in the Anadarko Basin in September 1998. The decrease in the processing margin resulted from lower realized liquids prices in 1999 compared to the same period of 1998. The increase in the other margin resulted from the acquisition of EnCap in the first quarter of 1999. Operating expenses for the nine months ended September 30, 1999, were $9 million higher than for the same period of 1998 primarily due to an increase in amortization and depreciation expense attributable to acquisitions. Other, net for the nine months ended September 30, 1999, was $26 million higher than for the same period of 1998 primarily due to net gains on the sale of assets during 1999 and additional earnings from equity investments, primarily the acquisition of DeepTech International Inc. EL PASO MERCHANT ENERGY
QUARTER NINE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, ------------- ------------- 1999 1998 1999 1998 ----- ----- ----- ----- (IN MILLIONS) Natural gas margin....................................... $ 10 $ 13 $ 40 $ 11 Power margin............................................. 4 (4) 7 15 ---- ---- ---- ---- Total gross margin............................. 14 9 47 26 Operating expenses....................................... (13) (9) (41) (30) Other, net............................................... 8 -- 17 4 ---- ---- ---- ---- EBIT................................................... $ 9 $ -- $ 23 $ -- ==== ==== ==== ====
Third Quarter 1999 Compared to Third Quarter 1998 Total gross margin for the quarter ended September 30, 1999, was $5 million higher than for the same period of 1998. The decrease in the natural gas margin was primarily due to decreased physical trading margins coupled with increases in broker expenses resulting from increases in financial volumes and positions. These decreases were partially offset by income recognition on long-term natural gas contracts closed in the quarter. The increase in the power margin was due to the earnings on power generation facilities acquired in December 1998 and the impact of improved power trading margins in 1999 over 1998 levels due to declines in the market value of certain open power contracts in the third quarter of 1998. 22 25 Operating expenses for the quarter ended September 30, 1999, were $4 million higher than for the same period of 1998 due to higher operating costs associated with an increase in power activities. Other, net for the quarter ended September 30, 1999, was $8 million higher than for the same period of 1998 primarily due to additional earnings from the acquisition of a 50 percent ownership interest in CE Generation LLC in March 1999. Nine Months Ended 1999 Compared to Nine Months Ended 1998 Total gross margin for the nine months ended September 30, 1999, was $21 million higher than for the same period of 1998. The increase in the natural gas margin was primarily due to the income recognition from long-term natural gas transactions closed during 1999. The increase was partially offset by increased broker expenses resulting from increases in financial volumes and positions. The decrease in the power margin was largely attributable to the rapid increase in the market value of certain open power contracts due to price volatility in the second and third quarters of 1998 and income recognition from electric power transactions during the first quarter of 1998. The decrease was partially offset by the earnings on power generation facilities acquired in December 1998. Operating expenses for the nine months ended September 30, 1999, were $11 million higher than for the same period of 1998 due to higher operating costs associated with an increase in power activities. Other, net for the nine months ended September 30, 1999, was $13 million higher than for the same period of 1998 primarily due to additional earnings from the acquisition of a 50 percent ownership interest in CE Generation LLC in March 1999, partially offset by a gain on the sale of assets sold in the second quarter of 1998. EL PASO ENERGY INTERNATIONAL
QUARTER NINE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, ------------- ------------- 1999 1998 1999 1998 ----- ----- ----- ----- (IN MILLIONS) Operating revenues....................................... $ 14 $ 15 $ 43 $ 43 Operating expenses....................................... (25) (24) (77) (65) Other, net............................................... 23 21 65 45 ---- ---- ---- ---- EBIT................................................... $ 12 $ 12 $ 31 $ 23 ==== ==== ==== ====
Third Quarter 1999 Compared to Third Quarter 1998 Operating revenues for the quarter ended September 30, 1999, were $1 million lower than for the same period of 1998 primarily due to a decrease in revenues from EMA Power, partially offset by revenues on Rio Negro which was consolidated in the third quarter of 1999. Operating expenses for the quarter ended September 30, 1999, were $1 million higher than for the same period of 1998 primarily due to higher operating expenses on consolidated projects. The increase was largely offset by lower project development costs. Other, net for the quarter ended September 30, 1999, was $2 million higher than for the same period of 1998 due to higher earnings on equity investments, principally the Samalayuca Power, East Asia Power, and Kladno projects. The 1998 earnings included a gain on the sale of surplus power equipment and a loss on an equity swap agreement. 23 26 Nine Months Ended 1999 Compared to Nine Months Ended 1998 Operating expenses for the nine months ended September 30, 1999, were $12 million higher than for the same period of 1998 primarily due to an increase in operating expenses in consolidated projects partially offset by lower project development costs. Other, net for the nine months ended September 30, 1999, was $20 million higher than for the same period of 1998 primarily due to higher earnings from equity investments, principally the Samalayuca Power and East Asia Power projects. The 1998 earnings included certain gains from project-related activities and a gain on the sale of surplus power equipment in 1998. CORPORATE EXPENSES, NET Third Quarter 1999 Compared to Third Quarter 1998 Net corporate expenses for the quarter ended September 30, 1999, were $11 million lower than for the same period of 1998 primarily due to power marketing start up costs incurred in the third quarter of 1998 and an increase in 1999 interest income. Nine Months Ended 1999 Compared to Nine Months Ended 1998 Net corporate expenses for the nine months ended September 30, 1999, were $103 million higher than for the same period of 1998 primarily due to charges in the second quarter of 1999 related to the merger with Sonat. These charges included the accelerated amortization of certain employee benefits and various legal, accounting, and financial advisory costs. The increase was partially offset by power marketing start up costs incurred in 1998. The Company expects to incur additional merger-related charges during the fourth quarter. INTEREST AND DEBT EXPENSE Interest and debt expense for the third quarter and nine months ended September 30, 1999, were higher than for the same periods of 1998 primarily due to increased borrowings used to fund capital expenditures, acquisitions, and other investing expenditures. LIQUIDITY AND CAPITAL RESOURCES CASH FROM OPERATING ACTIVITIES Net cash provided by operating activities was $50 million for the nine months ended September 30, 1999, compared to $385 million for the same period of 1998. The decrease was primarily attributable to net income tax refunds received in 1998, GSR collections, and the early payout of certain employee benefits as a result of an EPEC change of control in 1999. The decrease was partially offset by a take-or-pay refund paid to EPNG customers in 1998 and other working capital changes. CASH FROM INVESTING ACTIVITIES Net cash used in investing activities was $1,163 million for the nine months ended September 30, 1999. Expenditures related to joint ventures and equity investments were primarily for the acquisitions of a 50 percent interest in Chaparral, a 50 percent ownership interest in CE Generation LLC, and an 82 percent ownership interest in EAPRC. Other investment activity included expenditures for expansion and construction projects, as well as the acquisition of EnCap. Internally generated funds, supplemented by other financing activities, were used to fund these expenditures. Future funding for capital expenditures, acquisitions, and other investing expenditures is expected to be provided by internally generated funds, commercial paper issuances, available capacity under existing credit facilities, and/or the issuance of other long-term debt, trust securities, or equity. 24 27 CASH FROM FINANCING ACTIVITIES Net cash provided by financing activities was $1,115 million for the nine months ended September 30, 1999. Long-term debt borrowings and proceeds from the sale of preferred interest of Trinity, supplemented by internally generated funds, were used to fund capital and equity investments, reduce short-term borrowings, pay dividends, and for other corporate purposes. The following table reflects quarterly dividends declared and paid on EPEC's common stock:
AMOUNT PER DECLARATION DATE COMMON SHARE PAYMENT DATE TOTAL AMOUNT ---------------- ------------ ------------ ------------- (IN MILLIONS) October 22, 1998....................... $0.19125 January 4, 1999 $23 January 21, 1999....................... $0.20000 April 1, 1999 $24 April 21, 1999......................... $0.20000 July 1, 1999 $24 July 16, 1999.......................... $0.20000 October 1, 1999 $24
In October 1999, the board of directors of EPEC declared a quarterly dividend of $0.20 per share on EPEC's common stock, payable on January 11, 2000, to stockholders of record on December 10, 1999. Also during the nine months ended September 30, 1999, dividends of $19 million were paid on the 8 1/4% cumulative preferred stock, series A of EPTPC. In February 1999, DeepTech International Inc. retired its 11% senior promissory notes due 2000 in the amount of $16 million and in September 1999, EPNG retired its outstanding 9.45% Notes in the principal amount of $47 million. In May 1999, EPEC issued $500 million aggregate principal amount of 6.75% Senior Notes due 2009. Proceeds of approximately $496 million, net of issuance costs, were used to repay short-term debt and for other corporate purposes. In June 1999, the Company received net proceeds of $493 million from a third-party investor as a result of the sale of a preferred interest in Trinity. The proceeds were used to repay short-term debt and for other corporate purposes. In July 1999, EPEC issued $600 million aggregate principal amount of 6.625% Senior Notes due 2001 and $100 million aggregate principal amount of floating rate Senior Notes due 2001. Proceeds of approximately $697 million, net of issuance costs, were used to repay short-term borrowings and for other corporate purposes. In July 1999, the Company rescinded its common stock repurchase program in order to comply with the requirements of the Financial Accounting Standards Board and the U.S. Securities and Exchange Commission with respect to the treatment of the Company's merger with Sonat as a pooling of interests under generally accepted accounting principles. The program originally authorized the Company to repurchase up to 10 million shares. The Company had repurchased approximately one million shares with a weighted average price of $35.77 under the program prior to its rescission. In July 1999, the Company established an employee stock purchase plan ("ESPP"), with the first purchase of common stock to occur at the end of the quarter in which the EPEC and Sonat merger occurs. The ESPP allows eligible employees the right to purchase common stock on a quarterly basis at the lower of 85 percent of the market price at the beginning of the offering period or at the end of each calendar quarter. At July 1, 1999, a total of 2 million shares were reserved for purchase under the ESPP. The Company is currently recording a liability for the ESPP withholdings not yet applied towards the purchase of common stock. In August 1999, EPEC entered an Interest Rate Swap agreement with a notional amount of $600 million and a termination date of July 2001. EPEC swapped its currently existing fixed interest rate on its July 1999, $600 million aggregate principal Senior Notes due 2001, for a floating 3 months LIBOR plus a floating rate margin of 14.75 basis points. The rate under the swap at September 30, 1999, was 5.76%. 25 28 In August 1999, EPEC established a new $1,250 million 364-day renewable revolving credit and competitive advance facility. As of September 30, 1999, EPEC's interest rate for borrowings under this facility was equal to LIBOR plus 50 basis points. The rate will vary based on EPEC's long-term unsecured debt rating. This facility replaced EPEC's $750 million 364-day renewable revolving credit and competitive advance facility established in October 1997. EPNG and TGP are designated borrowers under this credit facility. As of September 30, 1999, no amounts were outstanding under this facility. In October 1999, Mojave Pipeline Company ("MPC") retired its variable rate non-recourse project financing in the principal amount of $107 million. Concurrently, MPC also terminated its associated interest rate swap at a cost of approximately $5 million. At September 30, 1999, the Company had approximately $2 billion available under its revolving credit facilities. The availability of borrowings under the Company's credit agreements is subject to certain specified conditions, which management believes it currently meets. Future funding for long-term debt retirements, dividends, and other financing expenditures is expected to be provided by internally generated funds, commercial paper issuances, available capacity under existing credit facilities, and/or the issuance of other long-term debt, trust securities, or equity. COMMITMENTS AND CONTINGENCIES See Note 4, which is incorporated herein by reference. OTHER In October 1999, the Company agreed to acquire Bonneville Pacific Corporation ("Bonneville") for approximately $63 million. Bonneville owns an interest in an 85 megawatt natural gas-fired cogeneration facility located in the Las Vegas area which sells power to a large utility under a long-term power purchase agreement. Bonneville also provides operations and maintenance services under long-term contract to two other cogeneration facilities in the Las Vegas area. In October 1999, the Company agreed to acquire Crystal Gas Storage, Inc. for approximately $220 million. The transaction will be accounted for as a purchase. Crystal Gas Storage owns and operates two natural gas storage facilities near Hattiesburg, Mississippi and holds interests in natural gas producing properties in northern Louisiana and southern Arkansas. In October 1999, the Company acquired for $13 million the remaining interest in Interenergy Company from Clan Energy International. Interenergy is a Cayman company that holds a 38 percent interest in Triunion Energy Company ("Triunion"). This increased the Company's ownership in Triunion to 71 percent. As a result, the Company will begin to consolidate Triunion in the fourth quarter of 1999. Triunion's principle asset is a 21 percent interest in the Argentina to Chile pipeline. With this acquisition, the Company's overall interest in the Argentina to Chile pipeline increased to 15 percent. In October 1999, the Company acquired a 25 percent interest in a 762 megawatt coal-fired power plant in the People's Republic of China. The Meizhou Wan power plant, located in the Fujian Province, is expected to be operational in the first quarter of 2001. YEAR 2000 Prior to its merger with Sonat, the Company had established an executive steering committee and a project team to coordinate the phases of its Year 2000 project to assure that the Company's key automated systems, equipment, and related processes will remain functional through the Year 2000. Those phases are: (i) awareness; (ii) assessment; (iii) remediation; (iv) testing; (v) implementation of the necessary modifications and (vi) contingency planning. In recognition of the importance of Year 2000 issues and their potential impact on the Company, the initial phase of the Year 2000 project involved the establishment of a company-wide awareness program. 26 29 The awareness program is directed by the executive steering committee and project team and includes participation of senior management in each core business area. The awareness phase is substantially completed, although the Company will continually update awareness efforts for the duration of the Year 2000 project. The Company's assessment phase consists of conducting a company-wide inventory of its key automated systems and related processes, analyzing and assigning levels of criticality to those systems and processes, identifying and prioritizing resource requirements, developing validation strategies and testing plans, and evaluating business partner relationships. The assessment phase is substantially complete. The assessment phase of the project, among other things, involves efforts to obtain representations and assurances from third parties, including third party vendors, that their hardware and equipment products, embedded chip systems, and software products being used by or impacting the Company are or will be modified to be Year 2000 compliant. Increasingly, the responses from such third parties are generally encouraging. Nonetheless, many of these responses lack the substantive detail to allow the Company to make a meaningful evaluation of such third-parties' Year 2000 readiness. Furthermore, in some circumstances, third parties are refusing to provide any response beyond those contained in their publicly-disseminated information. As a result, the overall evaluation of the Company's business partners' Year 2000 readiness remains inconclusive. Accordingly, the Company cannot predict the potential consequences if these or other third parties or their products are not Year 2000 compliant. The Company continues to evaluate the exposure associated with such business partner relationships, and will use the contingency planning process to attempt to mitigate the uncertainty concerning third-party readiness. The remediation phase involves converting, modifying, replacing or eliminating key automated systems identified in the assessment phase. The testing phase involves the validation of the identified key automated systems. The Company is utilizing test tools and written test procedures to document and validate, as necessary, its unit, system, integration and acceptance testing. The implementation phase involves placing the converted or replaced key automated systems into operation. One system that was not substantially complete with respect to Year 2000 issues as of June 30, 1999, was the nominations, scheduling and volume accounting applications utilized by TGP. That system is now substantially complete. In October 1999, the Company, in cooperation with other Interstate Natural Gas Association of America members, reported that its regulated pipelines, El Paso Natural Gas Pipeline, Tennessee Gas Pipeline, Midwestern Gas Transmission, East Tennessee Natural Gas Pipeline and Mojave Pipeline, will be Year 2000 compliant on the rollover date of January 1, 2000. The Company is substantially complete with its remediation, testing and implementation phases for domestic systems. The Company had previously identified the contingency planning phase as a subset of the implementation phase, but has now established the process as its own phase of the overall Year 2000 program. The contingency planning phase consists of developing a risk profile of the Company's critical business processes and then providing for actions the Company will pursue to keep such processes operational in the event of Year 2000 disruptions. The focus of such contingency planning is on prompt response to any Year 2000 events, and a plan for subsequent resumption of normal operations. The plan attempts to assess the risk of a significant failure to critical processes performed by the Company, and to address the mitigation of those risks. The plan will also consider any significant failures related to the most reasonably likely worst case scenario, discussed below, as they may occur. In addition, the plan attempts to factor in the severity and duration of the impact of a significant failure. The Company has developed contingency plans for each business unit and significant business process. By September 30, 1999, the Company had conducted desk-top testing of its contingency plans and had conducted drills and mock outages, including some testing with certain customers and other significant third parties. The Year 2000 contingency plans will continue to be tested, modified and adjusted throughout the year as additional information becomes available. The goal of the Year 2000 project is to ensure that all of the critical systems and processes which are under the Company's direct control remain functional. Certain systems and processes may be interrelated with or dependent upon systems outside the Company's control. However, systems within the Company's control may also have unpredicted problems. Accordingly, there can be no assurance that significant disruptions will be avoided. The Company's present analysis of its most reasonably likely worst case scenario for Year 2000 27 30 disruptions includes sporadic Year 2000 failures in the telecommunications and electricity industries, as well as interruptions from suppliers that might cause disruptions in the Company's operations, thus causing temporary financial losses and an inability to deliver products and services to customers. Virtually all of the natural gas transported through the Company's interstate pipelines is owned by third parties. Accordingly, failures of natural gas producers to be ready for the Year 2000 could significantly disrupt the flow of product to the Company's customers. In many cases, the producers have no direct contractual relationship with the Company, and the Company relies on its customers to verify the Year 2000 readiness of the producers from whom they purchase natural gas. Since most of the Company's revenues from the delivery of natural gas are based upon fees paid by its customers for the reservation of capacity, and not based upon the volume of actual deliveries, short-term disruptions in deliveries caused by factors beyond the Company's control should not have a significant financial impact on the Company, although it could cause operational problems for the Company's customers. Longer-term disruptions, however, could materially impact the Company's results of operations, financial condition, and cash flows. While the Company owns or controls most of its domestic facilities and projects, nearly all of the Company's international investments have been made in conjunction with unrelated third parties. In many cases, the operators of such international facilities are not under the sole or direct control of the Company. As a consequence, the Year 2000 programs instituted at some of the international facilities may be different from the Year 2000 program implemented by the Company domestically, and the party responsible for the results of such program may not be under the direct or indirect control of the Company. In addition, many foreign countries appear to be substantially behind the United States in addressing potential Year 2000 disruption of critical infrastructure and in developing a framework governing the reporting requirements and relative liabilities of business entities. Accordingly, the Year 2000 risks posed by international operations as a whole are different than those presented domestically. While management believes that most of the international facilities in which it has significant investments are addressing Year 2000 issues in an adequate manner, it is possible that some of them may experience significant Year 2000 disruption, and that the aggregate effect of problems experienced at multiple international locations may be material and adverse. The Company is incorporating this possibility into the relevant contingency plans. While the total cost of the Company's Year 2000 project continues to be evaluated, the Company estimates that the costs remaining to be incurred in 1999 and 2000 associated with assessing, remediating and testing internally developed computer applications, hardware and equipment, embedded chip systems, and third-party-developed software will be between $3 million and $7 million. Of these estimated costs, the Company expects between $2 million and $3 million to be capitalized and the remainder to be expensed. As of September 30, 1999, the Company has incurred expenses of approximately $12 million and has capitalized costs of approximately $5 million. The Company has previously only traced incremental expenses related to its Year 2000 project. This means that the costs of the Year 2000 project related to salaried employees of the Company, including their direct salaries and benefits, are not available, and have not been included in the estimated costs of the project. Since the earlier phases of the project primarily involved work performed by such salaried employees, the costs expended to date do not reflect the percentage completion of the project. The Company anticipates that it will expend a substantial amount of the remaining costs in the contingency planning phase of the project, including the potential acquisition of back-up assets and systems that may be deployed in the event primary systems fail to perform fully according to expectations. Furthermore, for the Company's international investments, the Company understands that many of the operators of such foreign facilities are incurring Year 2000 costs but obtaining detailed information regarding Year 2000 international cost expenditures has been slow and, at times, difficult. For this reason, the Year 2000 costs incurred may fall somewhat short of the estimated costs discussed above. As described elsewhere in this report, the Company and Sonat have merged and the Year 2000 risks, liabilities and expenses of Sonat and its subsidiaries have been assumed by the Company effective with the merger. Prior to the merger, Sonat implemented a Year 2000 program along very similar lines to those of the Company. Sonat previously reported in its Form 10-Q filed with the SEC on August 11, 1999, that it was complete with respect to its remediation and testing of all critical systems and substantially complete with respect to all systems. 28 31 Because Sonat's core business of natural gas transportation, prior to the merger, was very similar to the Company's, Sonat was exposed to the same types of risks as the Company's domestic operations; hence it has the same reasonably likely worst case scenario, including a reliance on third-party producers of natural gas with which it has no contractual privity. To help prepare for that reasonably likely worst case scenario, Sonat engaged a consulting firm to assist in the preparation of contingency plans. In many circumstances, this primarily involved updating existing plans which Sonat maintained in the normal course of its business to handle and respond to emergency conditions regardless of the cause. Sonat's contingency plans include the establishment of control centers to facilitate communications in the event of a telecommunications failure and staffing of selected strategic locations on Sonat's pipeline system. The cost, calculated prior to the merger, to Sonat of the Year 2000 project for capital as well as general and administrative costs was estimated to be no greater than $14 million. As of September 30, 1999, Sonat had incurred approximately $12 million in Year 2000 project costs. Sonat included in its Year 2000 costs an estimate for the internal labor costs and direct labor overhead burden. These costs and estimates were not material with respect to the cash flow of Sonat. Accordingly, all cost incurred by Sonat for Year 2000 expenditures were paid from cash flow resulting from normal operations. Although the Company does not expect the costs of its Year 2000 project, including any costs remaining to be expended for the readiness of assets formerly owned by Sonat, to have a material adverse effect on its financial position, results of operations, or cash flows, based on information available at this time the Company cannot conclude that disruption caused by internal or external Year 2000 related failures will not have such an effect. Specific factors which might affect the success of the Company's Year 2000 efforts and the frequency or severity of a Year 2000 disruption or the amount of expense include the failure of the Company or its outside consultants to properly identify deficient systems, the failure of the selected remedial action to adequately address the deficiencies, the failure of the Company or its outside consultants to complete the remediation in a timely manner (due to shortages of qualified labor or other factors), the failure of other parties to joint ventures in which the Company is involved to meet their obligations, both financial and operational, under the relevant joint venture agreements to remediate assets used by the joint venture, unforeseen expenses related to the remediation of existing systems or the transition to replacement systems, the failure of third parties to become Year 2000 compliant or to adequately notify the Company of potential noncompliance and the effects of any significant disruption at international facilities in which the Company has significant investments. The above disclosure is a "YEAR 2000 READINESS DISCLOSURE" made with the intention to comply fully with the Year 2000 Information and Readiness Disclosure Act of 1998, Pub. L. No. 105-271, 112 Stat, 2386, signed into law October 19, 1998. All statements made herein shall be construed within the confines of that Act. To the extent that any reader of the above Year 2000 Readiness Disclosure is other than an investor or potential investor in the Company's -- or an affiliate's -- equity or debt securities, this disclosure is made for the SOLE PURPOSE of communicating or disclosing information aimed at correcting, helping to correct and/or avoiding Year 2000 failures. NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED See Note 10, which is incorporated herein by reference. 29 32 CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Where any such forward-looking statement includes a statement of the assumptions or bases underlying such forward-looking statement, the Company cautions that, while such assumptions or bases are believed to be reasonable and are made in good faith, assumed facts or bases almost always vary from the actual results, and the differences between assumed facts or bases and actual results can be material, depending upon the circumstances. Where, in any forward-looking statement, the Company or its management expresses an expectation or belief as to future results, such expectation or belief is expressed in good faith and is believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished. The words "believe," "expect," "estimate," "anticipate" and similar expressions may identify forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements herein include the Company's ability to successfully integrate Sonat's operations, increasing competition within the Company's industry, the timing and extent of changes in commodity prices for natural gas and power, uncertainties associated with customer contract expirations on the TGP, EPNG and Southern Natural Gas pipeline systems, uncertainties associated with acquisitions and joint ventures, potential environmental liabilities, potential contingent liabilities and tax liabilities related to the Company's acquisitions, political and economic risks associated with current and future operations in foreign countries, conditions of the equity and other capital markets during the periods covered by the forward-looking statements, and other risks, uncertainties and factors, including the effect of the Year 2000 date change, discussed more completely in the Company's other filings with the U.S. Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 1998. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information contained in Item 3 updates, and should be read in conjunction with, information set forth in Part II, Item 7A in the Company's Annual Report on Form 10-K for the year ended December 31, 1998, in addition to the interim consolidated financial statements, accompanying notes, and Management's Discussion and Analysis of Financial Condition and Results of Operations presented in Items 1 and 2 of this Quarterly Report on Form 10-Q. There are no material changes in market risks faced by the Company from those reported in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. 30 33 PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS See Part I, Financial Information, Note 4, which is incorporated herein by reference. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM. 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits Each exhibit identified below is filed as a part of this report. Exhibits not incorporated by reference to a prior filing are designated by an asterisk; all exhibits not so designated are incorporated herein by reference to a prior filing as indicated. Exhibits designated with a "+" constitute a management contract or compensatory plan or arrangement required to be filed as an exhibit to this report.
EXHIBIT NUMBER DESCRIPTION ------- ----------- *3.A -- Restated Certificate of Incorporation of EPEC as filed with the Delaware Secretary of State on October 25, 1999. *3.B -- Restated By-Laws of EPEC, effective as of October 25, 1999. *4.K -- Indenture dated as of June 1, 1986, by and between Sonat Inc., and Manufacturers Hanover Trust Company, as trustee; First Supplemental Indenture dated as of June 1, 1995, by and between Sonat and Chemical Bank (as successor to Manufacturers Hanover Trust Company), as trustee; and Second Supplemental Indenture dated as of October 25, 1999, by and between El Paso Energy Corporation and The Chase Manhattan Bank, as trustee (as successor to Chemical Bank). *10.A -- $1,250,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement dated as of August 16, 1999, by and among EPEC, EPNG, TGP, the several banks and other financial institutions from time to time parties to the Agreement, The Chase Manhattan Bank, as administrative agent and as CAF Advance Agent for the Lenders thereunder, Citibank N.A. and ABN Amro Bank, N.V. as co-documentation agents for the Lenders and Bank of America, N.A. as syndication agent for the Lenders. +*10.O.1 -- Amendment to Employment Agreement dated August 25, 1999, by and between EPEC and William A. Wise. +*10.R -- Executive Award Plan of Sonat Inc., amended and restated effective as of July 23, 1998, as amended May 27, 1999. *27 -- Financial Data Schedule
31 34 Undertaking The undersigned hereby undertakes, pursuant to Regulation S-K, Item 601(b), paragraph (4)(iii), to furnish to the U.S. Securities and Exchange Commission, upon request, all constituent instruments defining the rights of holders of long-term debt of EPEC and its consolidated subsidiaries not filed herewith for the reason that the total amount of securities authorized under any of such instruments does not exceed 10 percent of the total consolidated assets of EPEC and its consolidated subsidiaries. b. Reports on Form 8-K - EPEC filed a Current Report on Form 8-K, dated July 2, 1999, updating the pro forma financial information to include historical financial information for EPEC and Sonat for the three months ended March 31, 1999. - EPEC filed a Current Report on Form 8-K, dated July 26, 1999, disclosing the operating results of EPEC for the quarter and six months ended June 30, 1999. - EPEC filed a Current Report on Form 8-K, dated August 24, 1999, updating the pro forma financial information to include historical financial information for EPEC and Sonat for the six months ended June 30, 1999. 32 35 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EL PASO ENERGY CORPORATION Date: November 12, 1999 /s/ H. BRENT AUSTIN ------------------------------------ H. Brent Austin Executive Vice President and Chief Financial Officer Date: November 12, 1999 /s/ JEFFREY I. BEASON ------------------------------------ Jeffrey I. Beason Senior Vice President and Controller (Chief Accounting Officer) 33 36 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION ------- ----------- *3.A -- Restated Certificate of Incorporation of EPEC as filed with the Delaware Secretary of State on October 25, 1999. *3.B -- Restated By-Laws of EPEC, effective as of October 25, 1999. *4.K -- Indenture dated as of June 1, 1986, by and between Sonat Inc., and Manufacturers Hanover Trust Company, as trustee; First Supplemental Indenture dated as of June 1, 1995, by and between Sonat and Chemical Bank (as successor to Manufacturers Hanover Trust Company), as trustee; and Second Supplemental Indenture dated as of October 25, 1999, by and between El Paso Energy Corporation and The Chase Manhattan Bank, as trustee (as successor to Chemical Bank). *10.A -- $1,250,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement dated as of August 16, 1999, by and among EPEC, EPNG, TGP, the several banks and other financial institutions from time to time parties to the Agreement, The Chase Manhattan Bank, as administrative agent and as CAF Advance Agent for the Lenders thereunder, Citibank N.A. and ABN Amro Bank, N.V. as co-documentation agents for the Lenders and Bank of America, N.A. as syndication agent for the Lenders. +*10.O.1 -- Amendment to Employment Agreement dated August 25, 1999, by and between EPEC and William A. Wise. +*10.R -- Executive Award Plan of Sonat Inc., amended and restated effective as of July 23, 1998, as amended May 27, 1999. *27 -- Financial Data Schedule
EX-3.A 2 RESTATED CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.A. RESTATED CERTIFICATE OF INCORPORATION OF EL PASO ENERGY CORPORATION ARTICLE 1. NAME The name of this corporation is EL PASO ENERGY CORPORATION. ARTICLE 2. REGISTERED OFFICE AND AGENT The address of the registered office of this corporation is Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, State of Delaware 19801, and the name of its registered agent at such address is The Corporation Trust Company. ARTICLE 3. PURPOSES The purpose of this corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. ARTICLE 4. SHARES 4.1 The total number of authorized shares of all classes of stock of this corporation consist of 750,000,000 shares of common stock having a par value of $3.00 per share (the "Common Stock") and 50,000,000 shares of preferred stock having a par value of $0.01 per share ("Preferred Stock"). Authority is hereby expressly granted to the Board of Directors to fix by resolution or resolutions any of the designations and the powers, preferences and rights, and the qualifications, limitations or restrictions which are permitted by the General Corporation Law of the State of Delaware in respect of any class or classes of stock or any series of any class of stock of the corporation. 4.2 There shall be designated a series of the corporation's Preferred Stock, as follows: 4.2.1. Designation and Amount. The shares of such series shall be designated as "Series A Junior Participating Preferred Stock," par value $.01 per share, and the number 2 of shares constituting such series shall be 7,500,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series A Junior Participating Preferred Stock to a number less than that of the shares then outstanding plus the number of shares issuable upon exercise of outstanding rights, options or warrants or upon conversion of outstanding securities issued by the corporation. 4.2.2. Dividends and Distributions. (A) Subject to the prior and superior rights of the holders of any shares of any series of Preferred Stock ranking prior and superior to the Series A Junior Participating Preferred Stock with respect to dividends, the holders of shares of Series A Junior Participating Preferred Stock in preference to the holders of shares of Common Stock and any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of January, April, July, and October in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Junior Participating Preferred Stock in an amount per share (rounded to the nearest cent) equal to the greater of (a) $25, or (b) subject to the provision for adjustment hereinafter set forth, 200 times the aggregate per share amount of all cash dividends, and 200 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Junior Participating Preferred Stock. In the event the corporation shall at any time after July 22, 1998 (the "Rights Declaration Date") (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The corporation shall declare a dividend or distribution on the Series A Junior Participating Preferred Stock as provided in paragraph (A) above immediately after it declares a dividend or distribution on the Common Stock 2 3 (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $25 per share on the Series A Junior Participating Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Junior Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Junior Participating Preferred Stock unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Junior Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 60 days prior to the date fixed for the payment thereof. 4.2.3. Voting Rights. The holders of shares of Series A Junior Participating Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Junior Participating Preferred Stock shall entitle the holder thereof to 200 votes on all matters submitted to a vote of the stockholders of the corporation. In the event the corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the number of votes per share to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event 3 4 and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein or by law, the holders of shares of Series A Junior Participating Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the corporation. (C) (i) If at any time dividends on any Series A Junior Participating Preferred Stock shall be in arrears in an amount equal to six (6) quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (herein called a "default period") which shall extend until such time when all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all shares of Series A Junior Participating Preferred Stock then outstanding shall have been declared and paid or set apart for payment. During each default period, all holders of Preferred Stock (including holders of the Series A Junior Participating Preferred Stock) with dividends in arrears in an amount equal to six (6) quarterly dividends thereon, voting as a class, irrespective of series, shall have the right to elect two (2) Directors. (ii) During any default period, such voting right of the holders of Series A Junior Participating Preferred Stock may be exercised initially at a special meeting called pursuant to subparagraph (iii) of this subsection 4.2.3(C) or at any annual meeting of stockholders, and thereafter at annual meetings of stockholders, provided that neither such voting right nor the right of the holders of any other series of Preferred Stock, if any, to increase in certain cases, the authorized number of Directors shall be exercised unless the holders of ten percent (10%) in number of shares of Preferred Stock outstanding shall be present in person or by proxy. The absence of a quorum of the holders of Common Stock shall not affect the exercise by the holders of Preferred Stock of such voting right. At any meeting at which the holders of Preferred Stock shall exercise such voting right initially during an existing default period, they shall have the right, voting as a class, to elect Directors to fill such vacancies, if any, in the Board of Directors as may then exist up to two (2) Directors or, if such right is exercised at an annual meeting, to elect two (2) Directors. If the number which may be so elected at any special meeting does not amount to the required number, the holders of the Preferred Stock shall have the right to make such increase in the number of Directors as shall be necessary to permit the election by them of the required number. After the holders of the Preferred Stock shall have exercised their right to elect Directors in any default period and during the continuance of such period, the number of Directors shall not be increased or decreased except by vote of the holders of Preferred Stock as herein provided or pursuant to the rights of any 4 5 equity securities ranking senior to or pari passu with the Series A Junior Participating Preferred Stock. (iii) Unless the holders of Preferred Stock shall, during an existing default period, have previously exercised their right to elect Directors, the Board of Directors may order, or any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding, irrespective of series, may request, the calling of a special meeting of the holders of Preferred Stock, which meeting shall thereupon be called by the Chairman of the Board, the President or the Chief Executive Officer of the corporation. Notice of such meeting and of any annual meeting at which holders of Preferred Stock are entitled to vote pursuant to this paragraph (C)(iii) shall be given to each holder of record of Preferred Stock by mailing a copy of such notice to him at his last address as the same appears on the books of the corporation. Such meeting shall be called for a time not earlier than 10 days and not later than 60 days after such order or request or in default of the calling of such meeting within 60 days after such order or request, such meeting may be called on similar notice by any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding. Notwithstanding the provisions of this paragraph (C)(iii), no such special meeting shall be called during the period within 60 days immediately preceding the date fixed for the next annual meeting of the stockholders. (iv) In any default period, the holders of Common Stock, and other classes of stock of the corporation if applicable, shall continue to be entitled to elect the whole number of Directors until the holders of Preferred Stock shall have exercised their right to elect two (2) Directors voting as a class, after the exercise of which right (x) the Directors so elected by the holders of Preferred Stock shall continue in office until their successors shall have been elected by such holders or until the expiration of the default period, and (y) any vacancy in the Board of Directors may (except as provided in paragraph (C)(ii) of this subsection 4.2.3) be filled by vote of a majority of the remaining Directors theretofore elected by the holders of the class of stock which elected the Director whose office shall become vacant. References in this paragraph (C) to Directors elected by the holders of a particular class of stock shall include Directors elected by such Directors to fill vacancies as provided in clause (y) of the foregoing sentence. (v) Immediately upon the expiration of a default period, (x) the right of the holders of Preferred Stock as a class to elect Directors shall cease, (y) the term of any Directors elected by the holders of Preferred Stock as a class shall terminate, and (z) the number of Directors shall be such number as may be provided for in the Restated Certificate of Incorporation or By-laws irrespective of any increase made pursuant to the provisions of paragraph (C) (ii) of this subsection 4.2.3 5 6 (such number being subject, however, to change thereafter in any manner provided by law or in the Restated Certificate of Incorporation or By-laws). Any vacancies in the Board of Directors effected by the provisions of clauses (y) and (z) in the preceding sentence may be filled by a majority of the remaining Directors. (D) Except as set forth herein, holders of Series A Junior Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. 4.2.4. Certain Restrictions. (A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Junior Participating Preferred Stock as provided in subsection 4.2.2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Junior Participating Preferred Stock outstanding shall have been paid in full, the corporation shall not: (i) Declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock; (ii) Declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock except dividends paid ratably on the Series A Junior Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) Redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock provided that the corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Junior Participating Preferred Stock; or (iv) Purchase or otherwise acquire for consideration any shares of Series A Junior Participating Preferred Stock or any shares of stock ranking on a parity with the Series A Junior Participating Preferred Stock except in accordance with a purchase offer made in writing or by publication (as determined by the Board of 6 7 Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The corporation shall not permit any subsidiary of the corporation to purchase or otherwise acquire for consideration any shares of stock of the corporation unless the corporation could, under paragraph (A) of this subsection 4.2.4, purchase or otherwise acquire such shares at such time and in such manner. 4.2.5. Reacquired Shares. Any shares of Series A Junior Participating Preferred Stock purchased or otherwise acquired by the corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein. 4.2.6. Liquidation, Dissolution or Winding Up. (A) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Series A Junior Participating Preferred Stock shall have received per share, the greater of 200 times $75 or 200 times the payment made per share of Common Stock, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the "Series A Liquidation Preference"). Following the payment of the full amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of shares of Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (i) the Series A Liquidation Preference by (ii) 200 (as appropriately adjusted as set forth in subparagraph C below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii), the "Adjustment Number"). Following the payment of the full amount of the Series A Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series A Junior Participating Preferred Stock and Common Stock, respectively, holders of Series A Junior Participating Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be 7 8 distributed in the ratio of the Adjustment Number to 1 with respect to such Preferred Stock and Common Stock, on a per share basis, respectively. (B) In the event there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of Preferred Stock, if any, which rank on a parity with the Series A Junior Participating Preferred Stock then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock. (C) In the event the corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 4.2.7. Consolidation, Merger, etc. If the corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property then in any such event the shares of Series A Junior Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 200 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Junior Participating Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that are outstanding immediately prior to such event. 4.2.8. Redemption. The shares of Series A Junior Participating Preferred Stock shall not be redeemable. 8 9 4.2.9. Ranking. The Series A Junior Participating Preferred Stock shall rank junior to all other series of the corporation's Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise. 4.2.10. Fractional Shares. Series A Junior Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Junior Participating Preferred Stock. ARTICLE 5. BY-LAWS The Board of Directors shall have the power to adopt, amend or repeal the By-laws of this corporation, subject to the power of the stockholders to amend or repeal such By- laws. The stockholders having voting power shall also have the power to adopt, amend or repeal the By-laws of this corporation. ARTICLE 6. ELECTION OF DIRECTORS Except as may be otherwise required by the By-laws, written ballots are not required in the election of Directors. ARTICLE 7. PREEMPTIVE RIGHTS Preemptive rights shall not exist with respect to shares of stock or securities convertible into shares of stock of this corporation. ARTICLE 8. CUMULATIVE VOTING The right to cumulate votes in the election of Directors shall not exist with respect to shares of stock of this corporation. ARTICLE 9. AMENDMENTS TO RESTATED CERTIFICATE OF INCORPORATION This corporation reserves the right to amend or repeal any of the provisions contained in this Restated Certificate of Incorporation in any manner now or hereafter permitted by law, and the rights of the stockholders of this corporation are granted subject to this reservation. 9 10 ARTICLE 10. LIMITATION OF DIRECTOR LIABILITY To the full extent that the General Corporation Law of the State of Delaware, as it exists on the date hereof or may hereafter be amended, permits the limitation or elimination of the liability of Directors, a Director of this corporation shall not be liable to this corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director. Any amendment to or repeal of this Article 10 shall not adversely affect any right or protection of a Director of this corporation for or with respect to any acts or omissions of such Director occurring prior to such amendment or repeal. ARTICLE 11. ACTION BY STOCKHOLDERS WITHOUT A MEETING Any action by the stockholders of this corporation shall be taken at a meeting of stockholders and no action may be taken by written consent of stockholders entitled to vote on such action. ARTICLE 12. SPECIAL VOTING REQUIREMENTS In addition to any affirmative vote required by law, by this Restated Certificate of Incorporation, by any agreement with any national securities exchange, or as may be otherwise required, any "Business Combination" (as hereinafter defined) involving this corporation shall be subject to approval in the manner set forth in this Article 12. 12.1 Definitions. For the purposes of this Article 12: (a) "Affiliate" and "beneficial owner" are used herein as defined in Rule 12b-2 and Rule 13d-3, respectively, under the Securities Exchange Act of 1934 as in effect on January 1, 1992 (the"1934 Act"). The term "Affiliate" as used herein shall exclude this corporation, but shall include the definition of "Associate" as contained in said Rule 12b-2. (b) An "Interested Stockholder" is a person other than (i) the corporation or (ii) Burlington Resources Inc., a Delaware corporation ("BRI"), as long as BRI continues to own at least a majority of the stock of this corporation entitled to vote for the election of Directors ("Voting Stock") and there has been no Change in Control of BRI since January 1, 1992, who is (A) the beneficial owner of ten percent or more of the Voting Stock or (B) an Affiliate of this corporation which (1) at any time within a two-year period prior to the record date for the vote on a Business Combination was the beneficial owner of ten percent or more of the Voting Stock, or (2) at the completion of the Business Combination will be the 10 11 beneficial owner of ten percent or more of the Voting Stock. (c) A "Person" is a natural person or a legal entity of any kind, together with any Affiliate of such person or entity, or any person or entity with whom such person, entity or any Affiliate has any agreement or understanding relating to acquiring, voting or holding Voting Stock. (d) A "Disinterested Director" is a member of the Board of Directors of this corporation (other than the Interested Stockholder) who was a Director prior to the time the Interested Stockholder became an Interested Stockholder, or any Director who was recommended for election by the Disinterested Directors. Any action to be taken by the Disinterested Directors shall require the affirmative vote of at least two-thirds of the Disinterested Directors. (e) A "Business Combination" is (i) a merger or consolidation of this corporation or any of its subsidiaries with an Interested Stockholder; (ii) the sale, lease, exchange, pledge, transfer or other disposition (A) by this corporation or any of its subsidiaries of all or a Substantial Part of the corporation's Assets to an Interested Stockholder, or (B) by an Interested Stockholder of any of its assets, except in the ordinary course of business, to this corporation or any of its subsidiaries; (iii) the issuance of stock or other securities of this corporation or any of its subsidiaries to an Interested Stockholder, other than on a pro rata basis to all holders of Voting Stock of the same class held by the Interested Stockholder pursuant to a stock spilt, stock dividend or distribution of warrants or rights; (iv) the adoption of any plan or proposal for the liquidation or dissolution of this corporation proposed by or on behalf of an Interested Stockholder; (v) any reclassification of securities, recapitalization, merger or consolidation or other transaction which has the effect, directly or indirectly, of increasing the proportionate share of any Voting Stock beneficially owned by an Interested Stockholder; or (vi) any agreement, contract or other arrangement providing for any of the foregoing transactions. (f) A "Substantial Part of the corporation's Assets" shall mean assets of this corporation or any of its subsidiaries in an amount equal to twenty percent or more of the fair market value, as determined by the Disinterested Directors, of the total consolidated assets of this corporation and its subsidiaries taken as a whole as of the end of its most recent fiscal year ended prior to the time the determination is made. (g) A "Change in Control" shall be deemed to occur (i) if any Person is or becomes the "beneficial owner" (as defined in Rule 13d-3 of the 1934 Act), directly or indirectly, of securities of BRI representing twenty percent or more of the stock of BRI entitled to vote for Directors of BRI, (ii) upon the first purchase 11 12 of BRI's common stock pursuant to a tender or exchange offer (other than a tender or exchange offer made by BRI), (iii) upon the approval by BRI's stockholders of a merger or consolidation, a sale or disposition of all or substantially all of BRI's assets or a plan of liquidation or dissolution of BRI, or (iv) if, during any period of two consecutive years, individuals who at the beginning of such period constitute the BRI Board of Directors cease for any reason to constitute at least a majority thereof, unless the election or nomination of the election by BRI's stockholders of each new Director was approved by a vote of at least two-thirds of the Directors then still in office who were Directors at the beginning of the period. 12.2 Vote Required for Business Combinations. The affirmative vote of not less than fifty-one percent of the Voting Stock, excluding the Voting Stock of an Interested Stockholder who is a party to the Business Combination, shall be required for the adoption or authorization of a Business Combination, unless the Disinterested Directors determine that: (a) The Interested Stockholder is the beneficial owner of not less than eighty percent of the Voting Stock and has declared its intention to vote in favor of or to approve such Business Combination; or (b) (i) The fair market value of the consideration per share to be received or retained by the holders of each class or series of stock of this corporation in a Business Combination is equal to or greater than the consideration per share (including brokerage commissions and soliciting dealer's fees) paid by such Interested Stockholder in acquiring the largest number of shares of such class of stock previously acquired in any one transaction or series of related transactions, whether before or after the Interested Stockholder became an Interested Stockholder and (ii) the Interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately as a stockholder), of any loans, advances, guarantees, pledges or other financial assistance provided by this corporation, whether in anticipation of or in connection with such Business Combination or otherwise. 12.3 Information Requirements. In the event any vote of holders of Voting Stock is required for the adoption or approval of any Business Combination, a proxy or information statement describing the Business Combination and complying with the requirements of the 1934 Act shall be mailed at a date determined by the Disinterested Directors to all stockholders of this corporation whether or not such statement is required under the 1934 Act. The statement shall contain any recommendations as to the advisability of the Business Combination which the Disinterested Directors, or any of them, may choose to state and, if deemed 12 13 advisable by the Disinterested Directors, an opinion of an investment banking firm as to the fairness of the terms of such Business Combination. Such firm shall be selected by the Disinterested Directors and be paid a fee for its services by this corporation as approved by the Disinterested Directors. 12.4 Amendment. No amendment to this Restated Certificate of Incorporation shall amend, alter, change or repeal any of the provisions of Article 11 or of this Article 12 unless such amendment shall receive the affirmative vote of not less than fifty-one percent of the Voting Stock, excluding the Voting Stock of any Interested Stockholder as defined in Section 12.1 of this Article 12. 13 EX-3.B 3 RESTATED BY-LAWS 1 EXHIBIT 3.B BY-LAWS OF EL PASO ENERGY CORPORATION As amended October 26, 1999 2 BY-LAWS OF EL PASO ENERGY CORPORATION TABLE OF CONTENTS
Page ARTICLE I. OFFICES ...................................................... 1 Section 1 - Registered Office and Agent ........................... 1 Section 2 - Other Offices ......................................... 1 ARTICLE II. STOCKHOLDERS ................................................ 1 Section 1 - Annual Meetings ....................................... 1 Section 2 - Special Meetings ...................................... 1 Section 3 - Place of Meetings ..................................... 2 Section 4 - Notice of Meetings .................................... 2 Section 5 - Fixing of Record Date for Determining Stockholders .... 2 Section 6 - Quorum ................................................ 3 Section 7 - Organization .......................................... 3 Section 8 - Voting ................................................ 4 Section 9 - Inspectors ............................................ 5 Section 10 - List of Stockholders .................................. 5 Section 11 - Stockholder Proposals ................................. 5 ARTICLE III. BOARD OF DIRECTORS ......................................... 6 Section 1 - Number, Qualification and Term of Office .............. 6 Section 2 - Vacancies ............................................. 7 Section 3 - Nominations of Directors .............................. 7 Section 4 - Resignations .......................................... 8 Section 5 - Removals .............................................. 8 Section 6 - Place of Meetings; Books and Records .................. 8 Section 7 - Annual Meeting of the Board ........................... 8 Section 8 - Regular Meetings ...................................... 9 Section 9 - Special Meetings ...................................... 9 Section 10 - Quorum and Manner of Acting ........................... 9 Section 11 - Organization .......................................... 9 Section 12 - Consent of Directors in Lieu of Meeting ............... 10 Section 13 - Telephonic Meetings ................................... 10 Section 14 - Compensation .......................................... 10 Section 15 - Interested Directors .................................. 10
3 ARTICLE IV. COMMITTEES OF THE BOARD OF DIRECTORS ........................ 11 Section 1 - Executive Committee ................................... 11 Section 2 - Finance Committee ..................................... 11 Section 3 - Audit Committee ....................................... 11 Section 4 - Compensation Committee ................................ 12 Section 5 - Committee Chairman, Books and Records ................. 12 Section 6 - Alternates ............................................ 12 Section 7 - Other Committees ...................................... 12 Section 8 - Quorum and Manner of Acting ........................... 13 ARTICLE V. OFFICERS ..................................................... 13 Section 1 - Number ................................................ 13 Section 2 - Election .............................................. 13 Section 3 - Resignations .......................................... 13 Section 4 - Removals .............................................. 14 Section 5 - Vacancies ............................................. 14 Section 6 - Chairman of the Board ................................. 14 Section 7 - Chief Executive Officer ............................... 14 Section 8 - President ............................................. 16 Section 9 - Vice Chairman of the Board ............................ 16 Section 10 - Chief Operating Officer ............................... 17 Section 11 - Chief Financial Officer ............................... 17 Section 12 - Vice Presidents ....................................... 17 Section 13 - General Counsel ....................................... 18 Section 14 - Secretary ............................................. 18 Section 15 - Treasurer ............................................. 18 Section 16 - Controller ............................................ 19 Section 17 - Absence or Disability of Officers ..................... 19 ARTICLE VI. STOCK CERTIFICATES AND TRANSFER THEREOF ..................... 19 Section 1 - Stock Certificates .................................... 19 Section 2 - Transfer of Stock ..................................... 19 Section 3 - Transfer Agents and Registrars ........................ 20 Section 4 - Additional Regulations ................................ 20 Section 5 - Lost, Stolen or Destroyed Certificates ................ 20 ARTICLE VII. DIVIDENDS, SURPLUS, ETC .................................... 20 ARTICLE VIII. SEAL ...................................................... 20 ARTICLE IX. FISCAL YEAR ................................................. 21 ARTICLE X. INDEMNIFICATION .............................................. 21 Section 1 - Right to Indemnification .............................. 21 Section 2 - Right of Indemnitee to Bring Suit ................... 22

4 Section 3 - Nonexclusivity of Rights .............................. 22 Section 4 - Insurance, Contracts and Funding ...................... 22 Section 5 - Wholly Owned Subsidiaries ............................. 23 Section 6 - Indemnification of Agents of the Corporation .......... 23 ARTICLE XI. CHECKS, DRAFTS, BANK ACCOUNTS, ETC .......................... 23 Section 1 - Checks, Drafts, Etc.; Loans ........................... 23 Section 2 - Deposits .............................................. 23 ARTICLE XII. AMENDMENTS ................................................. 23 ARTICLE XIII. MISCELLANEOUS ............................................. 24

5 BY-LAWS OF EL PASO ENERGY CORPORATION ARTICLE I OFFICES SECTION 1. REGISTERED OFFICE AND AGENT The registered office of the corporation is located at Corporation Trust Center, 1209 Orange Street in the City of Wilmington, County of New Castle, State of Delaware, and the name of its registered agent at such address is The Corporation Trust Company. SECTION 2. OTHER OFFICES The corporation may have offices at such other places both within and without the State of Delaware as the Board of Directors (the "Board") may from time to time determine or the business of the corporation may require. ARTICLE II STOCKHOLDERS SECTION 1. ANNUAL MEETINGS A meeting of the stockholders for the purpose of electing Directors and for the transaction of such other business as may properly be brought before the meeting shall be held annually at 9:00 o'clock A.M. on the third Thursday of April, or at such other time on such other date as shall be fixed by resolution of the Board. If the day fixed for the annual meeting shall be a legal holiday such meeting shall be held on the next succeeding business day. SECTION 2. SPECIAL MEETINGS Special meetings of the stockholders for any purpose or purposes may be called only by a majority of the Board, the Chairman of the Board, the Chief Executive Officer, the President or the Vice Chairman of the Board. 6 SECTION 3. PLACE OF MEETINGS The annual meeting of the stockholders of the corporation shall be held at the general offices of the corporation in the City of Houston, State of Texas, or at such other place in the United States as may be stated in the notice of the meeting. All other meetings of the stockholders shall be held at such places within or without the State of Delaware as shall be stated in the notice of the meeting. SECTION 4. NOTICE OF MEETINGS 4.1 GIVING OF NOTICE. Except as otherwise provided by statute, written notice of each meeting of the stockholders, whether annual or special, shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, notice shall be given when deposited in the United States mails, postage prepaid, directed to such stockholder at his address as it appears in the stock ledger of the corporation. Each such notice shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. 4.2 NOTICE OF ADJOURNED MEETINGS. When a meeting is adjourned to another time and place, notice of the adjourned meeting need not be given if the time and place thereof are announced at the meeting at which the adjournment is given. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. 4.3 WAIVER OF NOTICE. 4.3.1 Whenever any notice is required to be given to any stockholder under the provisions of these By-laws, the Restated Certificate of Incorporation or the General Corporation Law of the State of Delaware, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. 4.3.2 The attendance of a stockholder at a meeting shall constitute a waiver of notice of such meeting, except when a stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. SECTION 5. FIXING OF RECORD DATE FOR DETERMINING STOCKHOLDERS 5.1 MEETINGS. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. If no record date is fixed by the Board, the record date for 2 7 determining stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at the meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting. 5.2 DIVIDENDS, DISTRIBUTIONS AND OTHER RIGHTS. For the purpose of determining stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto. SECTION 6. QUORUM A majority of the outstanding shares of stock of the corporation entitled to vote, present in person or represented by proxy, shall constitute a quorum at a meeting of the stockholders; provided that where a separate vote by a class or classes or by a series of a class is required, a majority of the outstanding shares of such class or classes or of such series of a class, present in person or represented by proxy at the meeting, shall constitute a quorum entitled to take action with respect to the vote on that matter. Shares of stock will be counted toward a quorum if they are either (i) present in person at the meeting or (ii) represented at the meeting by a valid proxy, whether the instrument granting such proxy is marked as casting a vote or abstaining, is left blank or does not empower such proxy to vote with respect to some or all matters to be voted upon at the meeting. If less than a majority of the outstanding shares entitled to vote are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. If a quorum is present or represented at a reconvened meeting following such an adjournment, any business may be transacted that might have been transacted at the meeting as originally called. The stockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. SECTION 7. ORGANIZATION At each meeting of the stockholders, the Chairman of the Board, or in his absence the Chief Executive Officer, the President or the Vice Chairman of the Board, or if all of the said persons are absent, a person designated by the Board, the Chairman of the Board, the Chief Executive Officer, the President or the Vice Chairman of the Board, or in the absence of such designated person, a person elected by the holders of a majority in number of shares of stock present in person or represented by proxy and entitled to vote, shall act as chairman of the meeting. 3 8 The Secretary, or in his absence or in the event he shall be presiding over the meeting in accordance with the provisions of this Section, an Assistant Secretary or, in the absence of the Secretary and all of the Assistant Secretaries, any person appointed by the chairman of the meeting, shall act as secretary of the meeting. SECTION 8. VOTING 8.1 GENERAL PROVISIONS. Unless otherwise provided in the Restated Certificate of Incorporation or a resolution of the Board creating a series of stock, at each meeting of the stockholders, each holder of any share of any series or class of stock entitled to vote at such meeting shall be entitled to one vote for each share of stock having voting power in respect of each matter upon which a vote is to be taken, standing in his name on the stock ledger of the corporation on the record date fixed as provided in these By-laws for determining the stockholders entitled to vote at such meeting. In all matters other than the election of Directors, if a quorum is present, the affirmative vote of the majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, unless the vote of a greater number is required by these By-laws, the Restated Certificate of Incorporation or the General Corporation Law of the State of Delaware. In determining the number of votes cast for or against a proposal, shares abstaining from voting on a matter (including elections) will not be treated as a vote for or against the proposal. A non- vote by a broker will be treated as if the broker never voted, but a non-vote by a stockholder will be counted as a vote "for" the management's position. Where a separate vote by a class or classes or by a series of a class is required, if a quorum is present, the affirmative vote of the majority of shares of such class or classes or series of a class present in person or represented by proxy at the meeting shall be the act of such class or classes or series of a class. The provisions of this Section will govern with respect to all votes of stockholders except as otherwise provided for in these By-laws, the Restated Certificate of Incorporation or the General Corporation Law of the State of Delaware. 8.2 VOTING FOR DIRECTORS. At each election of Directors the voting shall be by written ballot. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of Directors. 8.3 SHARES HELD OR CONTROLLED BY THE CORPORATION. Shares of its own capital stock belonging to the corporation, or to another corporation if a majority of the shares entitled to vote in the election of Directors of such other corporation is held by the corporation, shall neither be entitled to vote nor counted for quorum purposes. 8.4 PROXIES. A stockholder may vote by a proxy which is in writing or is transmitted electronically, including but not limited to, via telegram, cablegram, internet, interactive voice response system, or other means of electronic transmission executed or authorized by the stockholder or by his attorney-in-fact. Any electronic transmission must set forth information from which it can be determined by the Company or the Inspector that such electronic transmission was authorized by the stockholder. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in 4 9 writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary of the corporation. A proxy shall become invalid three years after the date of its execution, unless otherwise provided in the proxy. A proxy with respect to a specified meeting shall entitle the holder thereof to vote at any reconvened meeting following adjournment of such meeting but shall not be valid after the final adjournment thereof. SECTION 9. INSPECTORS Prior to each meeting of stockholders, the Board shall appoint at least one Inspector who is not a Director, candidate for Director or officer of the corporation, who shall receive and determine the validity of proxies and the qualifications of voters, and receive, inspect, count and report to the meeting in writing the votes cast on all matters submitted to a vote at such meeting. In case of failure of the Board to make such appointments or in case of failure of any Inspector so appointed to act, the Chairman of the Board shall make such appointment or fill such vacancies. Each Inspector, immediately before entering upon his duties, shall subscribe to an oath or affirmation faithfully to execute the duties of Inspector at such meeting with strict impartiality and according to the best of his ability. SECTION 10. LIST OF STOCKHOLDERS The Secretary or other officer or agent having charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares of each class and series registered in the name of each such stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. Such list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section, or the books of the corporation, or to vote in person or by proxy at any such meeting. SECTION 11. STOCKHOLDER PROPOSALS At an annual meeting of stockholders, only such business shall be conducted, and only such proposals shall be acted upon, as shall have been properly brought before the annual meeting of stockholders (a) by, or at the direction of, the Board or (b) by a stockholder of the corporation who complies with the procedures set forth in this Section 11. For business or a proposal to be properly brought before an annual meeting of stockholders by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the corporation. To be timely, a stockholder's notice must be received by the Secretary at the principal executive offices of the corporation not earlier than 120 days nor later than 90 days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the 5 10 date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the stockholder to be timely must be received by the Secretary not earlier than the 120th day prior to such annual meeting and not later than the 90th day prior to such annual meeting, or if later, the 10th day following the day on which public announcement of the date of such meeting is first made. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder's notice as described above. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before an annual meeting of stockholders (i) a description, in 500 words or less, of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address, as they appear on the corporation's books, of the stockholders known by such stockholder to be supporting such proposal, (iii) the class and number of shares of the corporation which are beneficially owned by such stockholder on the date of such stockholder's notice and by any other stockholders known by such stockholder to be supporting such proposal on the date of such stockholder's notice, (iv) a description, in 500 words or less, of any interest of the stockholder in such proposal, and (v) a representation that the stockholder is a holder of record of stock of the corporation and intends to appear in person or by proxy at the meeting to present the proposal specified in the notice. Notwithstanding anything in these By-laws to the contrary, no business shall be conducted at a meeting of stockholders except in accordance with the procedures set forth in this Section 11. The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that the business was not properly brought before the meeting in accordance with the procedures prescribed by this Section 11, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Notwithstanding the foregoing, nothing in this Section 11 shall be interpreted or construed to require the inclusion of information about any such proposal in any proxy statement distributed by, at the direction of, or on behalf of, the Board. ARTICLE III BOARD OF DIRECTORS SECTION 1. NUMBER, QUALIFICATION AND TERM OF OFFICE The business, property and affairs of the corporation shall be managed by a Board consisting of not less than one Director. The Board shall from time to time by a vote of a majority of the Directors then in office fix the specific number of Directors to constitute the Board. At each annual meeting of stockholders a Board shall be elected by the stockholders for a term of one year. Each Director shall serve until his successor is duly elected and shall qualify. 6 11 SECTION 2. VACANCIES Vacancies in the Board and newly created directorships resulting from any increase in the authorized number of Directors may be filled by a vote of the majority of the Directors then in office, although less than a quorum, or by a sole remaining Director, at any regular or special meeting of the Board. SECTION 3. NOMINATIONS OF DIRECTORS Subject to the rights, if any, of the holders of any series of preferred stock then outstanding, only persons nominated in accordance with the procedures set forth in this Section 3 shall be eligible for election as Directors. Nominations of persons for election to the Board may be made at an annual meeting of stockholders or special meeting of stockholders called by the Board for the purpose of electing Directors (i) by or at the direction of the Board or (ii) by any stockholder of the corporation entitled to vote for the election of Directors at such meeting who complies with the notice procedure set forth in this Section 3. Such nominations, other than those made by or at the direction of the Board, shall be made pursuant to timely notice in writing to the Secretary of the corporation. To be timely, a stockholder's notice must be received by the Secretary at the principal executive offices of the corporation not earlier than 120 days nor later than 90 days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the stockholder to be timely must be received by the Secretary not earlier than the 120th day prior to such annual meeting and not later than the 90th day prior to such annual meeting, or if later, the 10th day following the day on which public announcement of the date of such meeting is first made. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder's notice as described above. A stockholder's notice to the Secretary shall set forth (i) as to each person whom the stockholder proposes to nominate for election or reelection as a Director (a) the name, age, business address and residence address of such person, (b) the principal occupation or employment of such person, (c) the class and number of shares of the corporation which are beneficially owned by such person on the date of such stockholder's notice and (d) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, or any successor statute thereto (the "Exchange Act") (including without limitation such person's written consent to being named in the proxy statement as a nominee and to serving as a Director if elected); (ii) as to the stockholder giving the notice (a) the name and address, as they appear on the corporation's (or its agent's) books, of such stockholder and any other stockholders known by such stockholder to be supporting such nominee(s), (b) the class and number of shares of the corporation which are beneficially owned by such stockholder on the date of such stockholder's notice and by any other stockholders known by such stockholder to be supporting such nominee(s) on the date of such stockholder's notice (c) a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to 7 12 nominate the person or persons specified in the notice; and (iii) a description of all arrangements or understandings between the stockholder and each nominee and other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder. No person shall be eligible for election as a Director of the corporation unless nominated in accordance with the procedures set forth in this Section 3. The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by this Section and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. SECTION 4. RESIGNATIONS Any Director may resign at any time upon written notice to the Board, the Chairman of the Board, the Chief Executive Officer, the President, the Vice Chairman of the Board or the Secretary of the corporation. Such resignation shall take effect on the date of receipt of such notice or at any later time specified therein; and the acceptance of such resignation, unless otherwise required by the terms thereof, shall not be necessary to make it effective. SECTION 5. REMOVALS Any Director may be removed, with or without cause, at any special meeting of the stockholders called for that purpose, by the affirmative vote of the holders of a majority in number of shares of the corporation entitled to vote for the election of such Director, and the vacancy in the Board caused by any such removal may be filled by the stockholders at such a meeting. SECTION 6. PLACE OF MEETINGS; BOOKS AND RECORDS The Board may hold its meetings, and have an office or offices, at such place or places within or without the State of Delaware as the Board from time to time may determine. The Board, subject to the provisions of applicable statutes, may authorize the books and records of the corporation, and offices or agencies for the issue, transfer and registration of the capital stock of the corporation, to be kept at such place or places outside of the State of Delaware as, from time to time, may be designated by the Board. SECTION 7. ANNUAL MEETING OF THE BOARD The first meeting of each newly elected Board, to be known as the Annual Meeting of the Board, for the purpose of electing officers, designating committees and the transaction of such other business as may come before the Board, shall be held as soon as practicable after the adjournment of the annual meeting of stockholders, and no notice of such meeting shall be necessary to the newly elected Directors, provided a quorum shall be present. In the event such meeting is not held due to the absence of a quorum, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board, or as shall be specified in a written waiver signed by all of the newly elected Directors. 8 13 SECTION 8. REGULAR MEETINGS The Board shall provide for regular meetings of the Board at such times and at such places as it deems desirable. Notice of regular meetings need not be given. SECTION 9. SPECIAL MEETINGS Special meetings of the Board may be called by the Chairman of the Board, the Chief Executive Officer, the President or the Vice Chairman of the Board and shall be called by the Secretary on the written request of three Directors on such notice as the person or persons calling the meeting shall deem appropriate in the circumstances. Notice of each such special meeting shall be mailed to each Director or delivered to him by telephone, telegraph or any other means of electronic communication, in each case addressed to his residence or usual place of business, or delivered to him in person or given to him orally. The notice of meeting shall state the time and place of the meeting but need not state the purpose thereof. Whenever any notice is required to be given to any Director under the provisions of these By-laws, the Restated Certificate of Incorporation or the General Corporation Law of the State of Delaware, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board or any committee appointed by the Board need be specified in the waiver of notice of such meeting. Attendance of a Director at any meeting shall constitute a waiver of notice of such meeting except when a Director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting was not lawfully called or convened. SECTION 10. QUORUM AND MANNER OF ACTING Except as otherwise provided by statute, the Restated Certificate of Incorporation, or these By-laws, the presence of a majority of the total number of Directors shall constitute a quorum for the transaction of business at any regular or special meeting of the Board, and the act of a majority of the Directors present at any such meeting at which a quorum is present shall be the act of the Board. In the absence of a quorum, a majority of the Directors present may adjourn the meeting, from time to time, until a quorum is present. Notice of any such adjourned meeting need not be given. SECTION 11. ORGANIZATION At every meeting of the Board, the Chairman of the Board or in his absence the Chief Executive Officer, the President or the Vice Chairman of the Board, or if all of the said persons are absent, a chairman chosen by a majority of the Directors present shall act as chairman of the meeting. The Secretary, or in his absence, an Assistant Secretary, or in the absence of the Secretary and all the Assistant Secretaries, any person appointed by the chairman of the meeting, shall act as secretary of the meeting. 9 14 SECTION 12. CONSENT OF DIRECTORS IN LIEU OF MEETING Unless otherwise restricted by the Restated Certificate of Incorporation or by these By-laws, any action required or permitted to be taken at any meeting of the Board, or any committee designated by the Board, may be taken without a meeting if all members of the Board or committee consent thereto in writing, and such written consent is filed with the minutes of the proceedings of the Board or committee. SECTION 13. TELEPHONIC MEETINGS Members of the Board, or any committee designated by the Board, may participate in any meeting of the Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in such a meeting shall constitute presence in person at such meeting. SECTION 14. COMPENSATION Each Director, who is not a full-time salaried officer of the corporation or any of its wholly owned subsidiaries, when authorized by resolution of the Board, may receive as a Director a stated salary or an annual retainer, and any other benefits as the Board may determine, and in addition may be allowed a fixed fee or reimbursement of his reasonable expenses for attendance at each regular or special meeting of the Board or any committee thereof. SECTION 15. INTERESTED DIRECTORS No contract or transaction between the corporation and one or more of its Directors or officers, or between the corporation and any other corporation, partnership, association or other organization in which one or more of its Directors or officers are Directors or officers of this corporation, or have a financial interest in such contract or transaction, shall be void or voidable solely for this reason, or solely because the Director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if: (1) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested Directors, even though the disinterested Directors be less than a quorum; or (2) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified by the Board, a committee thereof or the stockholders. Common or interested Directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction. 10 15 ARTICLE IV COMMITTEES OF THE BOARD OF DIRECTORS SECTION 1. EXECUTIVE COMMITTEE The Board may, in its discretion, designate an Executive Committee, consisting of such number of Directors as the Board may from time to time determine. The committee shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the corporation and may authorize the seal of the corporation to be affixed to all papers which may require it, but the committee shall have no power or authority to amend the Restated Certificate of Incorporation (except that the committee may, to the extent authorized by the Board, fix by resolution or resolutions the designations and any of the powers, preferences or rights of shares of any series of Preferred Stock relating to voting or other powers, dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the corporation, fix the qualifications, limitations or restrictions of shares of any such series of stock, or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series). The committee shall have such other powers as the Board may from time to time prescribe. SECTION 2. FINANCE COMMITTEE The Board may, in its discretion, designate a Finance Committee, consisting of such number of Directors as the Board may from time to time determine. The committee shall monitor, review, appraise and recommend to the Board appropriate action with respect to the corporation's capital structure, its source of funds and its financial position; review and recommend appropriate delegations of authority to management on expenditures and other financial commitments; review terms and conditions of financing plans; develop and recommend dividend policies and recommend to the Board specific dividend payments; and review the performance of the trustee of the corporation's pension trust fund, and any proposed change in the investment policy of the trustee with respect to such fund. The committee shall have such other duties, functions and powers as the Board may from time to time prescribe. SECTION 3. AUDIT COMMITTEE The Board shall designate annually an Audit Committee consisting of not less than two Directors as it may from time to time determine, none of whom shall be officers or employees of the corporation. The committee shall review with the independent accountants the corporation's financial statements, basic accounting and financial policies and practices, adequacy of controls, standard and special tests used in verifying the corporation's statements of account and in determining the soundness of the corporation's financial condition, and the committee shall report to the Board the results of such reviews; review the policies and practices pertaining to publication of quarterly and annual statements to assure consistency with audited results and the implementation of policies and practices recommended by the independent accountants; ensure that suitable independent audits are made of the operations and results of subsidiary corporations 11 16 and affiliates; and monitor compliance with the corporation's code of business conduct. The committee shall have such other duties, functions and powers as the Board may from time to time prescribe. SECTION 4. COMPENSATION COMMITTEE The Board shall designate annually a Compensation Committee consisting of not less than two Directors as it may from time to time determine, none of whom shall be officers or employees of the corporation. The committee shall administer the corporation's executive compensation plans and programs. In addition, the committee shall consider proposals with respect to the creation of and changes to executive compensation plans and will review appropriate criteria for establishing certain performance measures and determining annual corporate and executive performance ratings under applicable corporation plans and programs. The committee shall have such other duties, functions and powers as the Board may from time to time prescribe. SECTION 5. COMMITTEE CHAIRMAN, BOOKS AND RECORDS Each committee shall elect a chairman to serve for such term as it may determine, shall fix its own rules of procedure and shall meet at such times and places and upon such call or notice as shall be provided by such rules. It shall keep a record of its acts and proceedings, and all action of the committee shall be reported to the Board at the next meeting of the Board. SECTION 6. ALTERNATES Alternate members of the committees prescribed by this Article IV may be designated by the Board from among the Directors to serve as occasion may require. Whenever a quorum cannot be secured for any meeting of any such committee from among the regular members thereof and designated alternates, the member or members of such committee present at such meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of such absent or disqualified member. Alternative members of such committees shall receive a reimbursement for expenses and compensation at the same rate as regular members of such committees. SECTION 7. OTHER COMMITTEES The Board may designate such other committees, consisting of such number of Directors as the Board may from time to time determine, and each such committee shall serve for such term and shall have and may exercise, during intervals between meetings of the Board, such duties, functions and powers as the Board may from time to time prescribe. 12 17 SECTION 8. QUORUM AND MANNER OF ACTING At each meeting of any committee the presence of a majority of the members of such committee, whether regular or alternate, shall be necessary to constitute a quorum for the transaction of business, and if a quorum is present the concurrence of a majority of those present shall be necessary for the taking of any action; provided, however, that no action may be taken by the Executive Committee or the Finance Committee when one or more officers of the corporation are present as members at a meeting of either such committee unless such action shall be concurred in by the vote of at least one member of such committee who is not an officer of the corporation. ARTICLE V OFFICERS SECTION 1. NUMBER The officers of the corporation shall consist of such of the following as the Board may from time to time elect or appoint: a Chief Executive Officer, a President, a Vice Chairman of the Board, a Chief Operating Officer, a Chief Financial Officer, a General Counsel, a Secretary, a Treasurer, a Controller and one or more of the following: Executive Vice President, Senior Vice President, Vice President, Assistant Vice President, Associate or Assistant General Counsel, Assistant Secretary, Assistant Treasurer, Assistant Controller and such other officers with such titles and powers and/or duties as the Board shall from time to time determine. Officers of the corporation may simultaneously serve as officers of subsidiaries or divisions thereof. Any number of offices may be held by the same person. SECTION 2. ELECTION The officers of the corporation, except those who may be appointed by the Chief Executive Officer as provided in Section 7 of this Article V, shall be elected or appointed as soon as practicable after the annual meeting of stockholders in each year to hold office until the first meeting of the Board after the annual meeting of stockholders next succeeding his election, or until his successor is elected and qualified or until his earlier death, resignation or removal. SECTION 3. RESIGNATIONS Any elected or appointed officer may resign at any time upon written notice to the Chief Executive Officer or the Secretary of the corporation. Such resignation shall take effect upon the date of its receipt or at such later time as may be specified therein, and unless otherwise required by the terms thereof, no acceptance of such resignation shall be necessary to make it effective. 13 18 SECTION 4. REMOVALS Any elected or appointed officer may be removed, with or without cause, by the Board at any regular or special meeting of the Board, and in the case of an officer appointed pursuant to Section 7 of this Article V, may be so removed by the Chief Executive Officer. Any such removal shall be without prejudice to the contractual rights of such officer, if any, with the corporation, but the election or appointment of any officer shall not of itself create contractual rights. SECTION 5. VACANCIES Any vacancy occurring in any office by death, resignation, removal or otherwise may be filled for the unexpired portion of the term by the Board at any regular or special meeting or as otherwise provided in these By-laws. SECTION 6. CHAIRMAN OF THE BOARD The Chairman of the Board shall, when present, preside at all meetings of the stockholders and the Board; shall have authority to call special meetings of the stockholders and of the Board; and shall have such other powers and duties as are expressly provided in these By-laws. The Chairman of the Board shall not be an officer of the corporation and shall not have authority to sign or acknowledge in the name and on behalf of the corporation stock certificates, contracts or other documents or instruments. SECTION 7. CHIEF EXECUTIVE OFFICER The Chief Executive Officer shall have authority to sign and acknowledge in the name and on behalf of the corporation all stock certificates, contracts or other documents and instruments, except where the signing thereof shall be expressly delegated to some other officer or agent by the Board or required by law to be otherwise signed or executed and, unless otherwise provided by law or by the Board may authorize any officer, employee or agent of the corporation to sign, execute and acknowledge in his place and stead all such documents and instruments; he shall fix the compensation of officers of the corporation, other than his own compensation, and the compensation of officers of its principal operating subsidiaries reporting directly to him unless such authority is otherwise reserved to the Board or a committee thereof; and he shall approve proposed employee compensation and benefit plans of subsidiary companies not involving the issuance or purchase of capital stock of the corporation. He shall have the power to appoint and remove any Vice President, Controller, General Counsel, Secretary or Treasurer of the corporation. He shall also have the power to appoint and remove such associate or assistant officers of the corporation with such titles and duties as he may from time to time deem necessary or appropriate. He shall have such other powers and perform such other duties as from time to time may be assigned to him by the Board or the Executive Committee. 14 19 The Chief Executive Officer is hereby authorized, without further approval of the Finance Committee or the Board: (a) To approve individual expenditures by the corporation of up to $40 million each for individual expenditures in categories not presented to the Board in the annual budget or plan, including but not limited to individual expenditures pertaining to operating expenses, purchases, leases, options to purchase or lease assets, investments, business acquisitions, land purchases, products or services acquisitions, bid or performance bonds (provided however, that the authority to issue such a bond shall not be deemed to authorize the activity covered thereby unless such activity would itself be authorized hereunder), litigation settlements, charitable donations and political contributions. (b) To approve expenditures by the corporation for the amounts (subject to subparagraph (c) below) presented to the Board in the annual budget or plan, including but not limited to individual expenditures pertaining to operating and capital expenses, purchases, leases, options to purchase or lease assets, investments, business acquisitions, land purchases, products or services acquisitions, bid or performance bonds (provided however, that the authority to issue such a bond shall not be deemed to authorize the activity covered thereby unless such activity would itself be authorized hereunder), litigation settlements, charitable donations and political contributions. (c) To approve individual cost overruns of up to 10% of any amounts approved by or presented to the Board. (d) To enter into leases or extensions thereof and other agreements with respect to the assets of the corporation, including interests in minerals and real estate, for a term of not more than 10 years or for an unlimited term if the aggregate initial rentals, over the term of the lease, including renewal options, do not exceed $40 million. (e) To approve capital contributions to the corporation's subsidiaries and to enter into performance and financial guarantees for the benefit of the corporation's subsidiaries. (f) To approve disposition of assets and interests in securities of subsidiaries or related commitments, provided that the aggregate market value of the assets being disposed of in any one such transaction does not exceed $40 million. 15 20 (g) To approve increases in the capital budgets of the corporation's operating subsidiaries provided such increases in the aggregate do not exceed 10% of the corporation's capital budget for the fiscal year. (h) To approve in emergency situations commitments in excess of the above-described limits provided they are in the interests of the corporation. The above delegation of authority does not authorize the corporation or its subsidiaries to make a significant change in its business or to issue the corporation's capital stock without the specific approval of the Board. Notwithstanding the foregoing limitations, the Chief Executive Officer shall have such power and authority as is usual, customary and desirable to perform all the duties of the office (including, but not limited to, the approval of payments or arrangements made in connection with the corporation's debt, interest, tax, contractual, and regulatory obligations) necessary to, and consistent with, the businesses of the corporation and its subsidiaries. The Chief Executive Officer (and other officers of the corporation as delegated by the Chief Executive Officer or as authorized in these By-laws) may delegate the foregoing authorization to other officers, employees, and agents of the corporation by either written authorization (including powers of attorney) or otherwise, unless such authorization is expressly reserved for the Chief Executive Officer or other officer, as applicable. In the absence or disability of the Chairman of the Board, or at his request, the Chief Executive Officer may preside at any meeting of the stockholders or of the Board and, in such circumstances, may exercise any of the other powers or perform any of the other duties of the Chairman of the Board. SECTION 8. PRESIDENT The President shall have general authority over the property, business and affairs of the corporation, and over all subordinate officers, agents and employees of the corporation, subject to the control and direction of the Board, the Executive Committee and the Chief Executive Officer, including the power to sign and acknowledge in the name and on behalf of the corporation all stock certificates, deeds, mortgages, bonds, contracts or other documents and instruments except when the signing thereof shall be expressly delegated to some other officer or agent by the Board or required by law to be otherwise signed or executed and, unless otherwise provided by law or by the Board, may delegate to any officer, employee or agent of the corporation authority to sign, execute and acknowledge in his place and stead all such documents and instruments. SECTION 9. VICE CHAIRMAN OF THE BOARD The Vice Chairman of the Board shall assist the Chairman of the Board, the Chief Executive Officer and the President, in the performance of their duties and shall perform those duties assigned to him in other provisions of the By-laws and such other duties as may from time to time be assigned to him by the Board, the Chief Executive Officer or the President. In the absence or disability of the Chairman of the Board, the Chief Executive Officer or the President, or at the request of any of them, the Vice Chairman of the Board may preside at any meeting of 16 21 the stockholders or of the Board and, in such circumstances, may exercise any of the other powers or perform any of the other duties of the Chairman of the Board, the Chief Executive Officer or the President, as the case may be. Subject to delegations by the Chief Executive Officer pursuant to Section 7 of this Article V, the Vice Chairman of the Board may sign or execute, in the name of the corporation, all stock certificates, deeds, mortgages, bonds, contracts or other documents and instruments, except in cases where the signing or execution thereof shall be required by law or shall have been expressly delegated by the Board or these By-laws to some other officer or agent of the corporation. SECTION 10. CHIEF OPERATING OFFICER The Chief Operating Officer shall have direct management responsibility for the general business operations of the corporation, and he shall have such powers and perform such duties as may be incident to the office of chief operating officer of a corporation, those duties assigned to him by other provisions of the By-laws, and such other duties as may from time to time be assigned to him either directly or indirectly by the Board, the Chief Executive Officer, the President or the Vice Chairman of the Board. Subject to delegations by the Chief Executive Officer pursuant to Section 7 of this Article V, the Chief Operating Officer may sign or execute, in the name of the corporation, all stock certificates, deeds, mortgages, bonds, contracts or other documents and instruments, except in cases where the signing or execution thereof shall be required by law or shall have been expressly delegated by the Board or these Bylaws to some other officer or agent of the corporation. SECTION 11. CHIEF FINANCIAL OFFICER The Chief Financial Officer shall have responsibility for development and administration of the corporation's financial plans and all financial arrangements, its cash deposits and short term investments, its accounting policies and its federal and state tax returns. The Chief Financial Officer shall also be responsible for the corporation's internal control procedures and for its relationship with the financial community. The Chief Financial Officer shall perform all the duties incident to the office of chief financial officer of a corporation, those duties assigned to him by other provisions of these By-laws and such other duties as may be assigned to him either directly or indirectly by the Board, the Chief Executive Officer, the President, the Vice Chairman of the Board or the Chief Operating Officer, or as may be provided by law. SECTION 12. VICE PRESIDENTS Each Executive Vice President, Senior Vice President and Vice President shall have such powers and perform such duties as may from time to time be assigned to him, directly or indirectly, either generally or in specific instances, by the Board, the Chief Executive Officer, the President, the Vice Chairman of the Board or the Chief Operating Officer. Subject to delegations by the Chief Executive Officer pursuant to Section 7 of this Article V, each Executive Vice President, Senior Vice President and Vice President shall perform all duties incident to the office of vice president of a corporation and shall have authority to sign or 17 22 execute, in the name of the corporation, all stock certificates, deeds, mortgages, bonds, contracts or other documents or instruments, except in cases where the signing or execution thereof shall have been expressly delegated by the Board or these By-laws to some other officer or agent of the corporation. SECTION 13. GENERAL COUNSEL The General Counsel shall be the chief legal advisor of the corporation and shall have responsibility for the management of the legal affairs and litigation of the corporation and, in general, he shall perform the duties incident to the office of general counsel of a corporation and such other duties as may be assigned to him either directly or indirectly by the Board, the Chief Executive Officer, the President or the Vice Chairman of the Board, or as may be provided by law. SECTION 14. SECRETARY The Secretary shall keep the minutes of meetings of the stockholders and of the Board in books provided for the purpose; he shall see that all notices are duly given in accordance with the provisions of these By-laws or as required by law; he shall be custodian of the records and of the corporate seal or seals of the corporation; he shall see that the corporate seal is affixed to all documents requiring same, the execution of which, on behalf of the corporation, under its seal, is duly authorized, and when said seal is so affixed he may attest same; and, in general, he shall perform all duties incident to the office of the secretary of a corporation, and such other duties as from time to time may be assigned to him directly or indirectly by the Board, the Chief Executive Officer, the President, the Vice Chairman of the Board or the General Counsel, or as may be provided by law. Any Assistant Secretary may perform any of the duties or exercise any of the powers of the Secretary at the request of, or in the absence or disability of, the Secretary or otherwise as occasion may require in the administration of the business and affairs of the corporation. SECTION 15. TREASURER The Treasurer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the corporation, and shall deposit, or cause to be deposited, in the name of the corporation, all moneys or other valuable effects in such banks, trust companies or other depositaries as shall, from time to time, be selected by or under authority of the Board; if required by the Board, he shall give a bond for the faithful discharge of his duties, with such surety or sureties as the Board may determine; he shall keep or cause to be kept full and accurate records of all receipts and disbursements in books of the corporation; and, in general, he shall perform the duties incident to the office of treasurer of a corporation and such other duties as may be assigned to him directly or indirectly by the Board, the Chief Executive Officer, the President, the Vice Chairman of the Board, the Chief Operating Officer or the Chief Financial Officer, or as may be provided by law. Any Assistant Treasurer may perform any of the duties or exercise any of the powers of the Treasurer at the request of, or in the absence or disability of, the 18 23 Treasurer or otherwise as occasion may require in the administration of the business and affairs of the corporation. SECTION 16. CONTROLLER The Controller shall be the chief accounting officer of the corporation. He shall keep full and accurate accounts of the assets, liabilities, commitments, receipts, disbursements and other financial transactions of the corporation; shall cause regular audits of the books and records of account of the corporation and shall supervise the preparation of the corporation's financial statements; and, in general, he shall perform the duties incident to the office of controller of a corporation and such other duties as may be assigned to him directly or indirectly by the Board, the Audit Committee, the Chief Executive Officer, the President, the Vice Chairman of the Board, the Chief Operating Officer or the Chief Financial Officer, or as may be provided by law. SECTION 17. ABSENCE OR DISABILITY OF OFFICERS In the absence or disability of the Chairman of the Board, the Chief Executive Officer, the President or the Vice Chairman of the Board, the Board or a committee thereof may designate individuals to perform the duties of those absent or disabled. ARTICLE VI STOCK CERTIFICATES AND TRANSFER THEREOF SECTION 1. STOCK CERTIFICATES Except as otherwise permitted by statute, the Restated Certificate of Incorporation or resolution or resolutions of the Board, every holder of stock in the corporation shall be entitled to have a certificate, signed by or in the name of the corporation by the Chief Executive Officer, the President, the Vice Chairman of the Board, the Chief Operating Officer, the Chief Financial Officer or any Vice President and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the corporation, certifying the number of shares, and the class and series thereof, owned by him in the corporation. Any and all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. The Board or the Chief Executive Officer shall determine the form of stock certificate of the corporation. SECTION 2. TRANSFER OF STOCK Transfer of shares of the capital stock of the corporation shall be made only on the books (whether physically or electronically) of the corporation by the holder thereof, or by his attorney duly authorized, and on surrender of the certificate or certificates for such shares. A person in whose name shares of stock stand on the books of the corporation shall be deemed the owner thereof as regards the corporation, and the corporation shall not, except as expressly required by 19 24 statute, be bound to recognize any equitable or other claim to, or interest in, such shares on the part of any other person whether or not it shall have express or other notice thereof. SECTION 3. TRANSFER AGENTS AND REGISTRARS The Board or the Chief Executive Officer, as appropriate, may appoint responsible banks or trust companies from time to time to act as transfer agents and registrars of the stock of the corporation, as may be required by and in accordance with applicable laws, rules and regulations. Except as otherwise provided by the Board or the Chief Executive Officer, as appropriate, in respect of temporary certificates, no certificates for shares of capital stock of the corporation shall be valid unless countersigned by a transfer agent and registered by one of such registrars. SECTION 4. ADDITIONAL REGULATIONS The Board or the Chief Executive Officer, as appropriate, may make such additional rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates for shares of the capital stock of the corporation. SECTION 5. LOST, STOLEN OR DESTROYED CERTIFICATES The Board or the Chief Executive Officer may provide for the issuance of new certificates of stock to replace certificates of stock lost, stolen or destroyed, or alleged to be lost, stolen or destroyed, upon such terms and in accordance with such procedures as the Board or the Chief Executive Officer shall deem proper and prescribe. ARTICLE VII DIVIDENDS, SURPLUS, ETC. Except as otherwise provided by statute or the Restated Certificate of Incorporation, the Board may declare dividends upon the shares of its capital stock either (1) out of its surplus, or (2) in case there shall be no surplus, out of its net profits for the fiscal year, whenever, and in such amounts as, in its opinion, the condition of the affairs of the corporation shall render it advisable. Dividends may be paid in cash, in property, or in shares of the capital stock of the corporation. ARTICLE VIII SEAL The corporation may have a corporate seal which shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Delaware." The corporate seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. 20 25 ARTICLE IX FISCAL YEAR The fiscal year of the corporation shall begin on the first day of January of each year, or on such other day as may be fixed from time to time by the Board. ARTICLE X INDEMNIFICATION SECTION 1. RIGHT TO INDEMNIFICATION Each person who was or is made a party or is threatened to be made a party to or is involved (including, without limitation, as a witness) in any actual or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he is or was a Director, officer or employee of the corporation or is or was serving at the request of the corporation as a Director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter an "indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a Director, officer, employee or agent or in any other capacity while serving as such a Director, officer, employee or agent, shall be indemnified and held harmless by the corporation to the full extent authorized by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment), or by other applicable law as then in effect, against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts to be paid in settlement) actually and reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of the indemnitee's heirs, executors and administrators; provided, however, that except as provided in Section 2 of this Article with respect to proceedings seeking to enforce rights to indemnification, the corporation shall indemnify any such indemnitee seeking indemnification in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of the corporation. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition (hereinafter an "advancement of expenses"); further provided, however, that, if the DGCL requires, an advancement of expenses incurred by an indemnitee in his capacity as a Director, officer or employee (and not in any other capacity in which service was or is rendered by such indemnitee while a Director, officer or employee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the corporation of an 21 26 undertaking, by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined that such indemnitee is not entitled to be indemnified under this Section 1, or otherwise. SECTION 2. RIGHT OF INDEMNITEE TO BRING SUIT If a claim under Section 1 of this Article is not paid in full by the corporation within sixty days after a written claim has been received by the corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty days, the indemnitee may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, to the extent successful in whole or in part, the indemnitee also shall be entitled to be paid the expense of prosecuting such suit. The indemnitee shall be presumed to be entitled to indemnification under this Article upon submission of a written claim (and, in an action brought to enforce a claim for an advancement of expenses, where the required undertaking, if any is required, has been tendered to the corporation), and thereafter the corporation shall have the burden of proof to overcome the presumption that the indemnitee is not so entitled. Neither the failure of the corporation (including its Board, independent legal counsel, or its stockholders), to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances, nor an actual determination by the corporation (including its Board, independent legal counsel or its stockholders) that the indemnitee is not entitled to indemnification, shall be a defense to the suit or create a presumption that the indemnitee is not so entitled. SECTION 3. NONEXCLUSIVITY OF RIGHTS The rights to indemnification and to the advancement of expenses conferred in this Article shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Restated Certificate of Incorporation, By-law, agreement, vote of stockholders or disinterested Directors or otherwise. SECTION 4. INSURANCE, CONTRACTS AND FUNDING The corporation may maintain insurance, at its expense, to protect itself and any Director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of the State of Delaware. The corporation may enter into contracts with any indemnitee in furtherance of the provisions of this Article and may create a trust fund, grant a security interest or use other means (including, without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary to effect indemnification as provided in this Article. 22 27 SECTION 5. WHOLLY OWNED SUBSIDIARIES Any person who is or was serving as a Director of a wholly owned subsidiary of the corporation shall be deemed, for purposes of this Article only, to be a Director, officer or employee of the corporation entitled to indemnification under this Article. SECTION 6. INDEMNIFICATION OF AGENTS OF THE CORPORATION The corporation may, by action of the Board from time to time, grant rights to indemnification and advancement of expenses to agents of the corporation with the same scope and effect as the provisions of this Article with respect to the indemnification and advancement of expenses of Directors, officers and employees of the corporation. ARTICLE XI CHECKS, DRAFTS, BANK ACCOUNTS, ETC. SECTION 1. CHECKS, DRAFTS, ETC.; LOANS All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall, from time to time, be determined by resolution of the Board. No loans shall be contracted on behalf of the corporation unless authorized by the Board. Such authority may be general or confined to specific circumstances. SECTION 2. DEPOSITS All funds of the corporation shall be deposited, from time to time, to the credit of the corporation in such banks, trust companies or other depositories as the Board may select, or as may be selected by any officer or officers, agent or agents of the corporation to whom such power may, from time to time, be delegated by the Board; and for the purpose of such deposit, the Chief Executive Officer, the President, the Vice Chairman of the Board, any Executive Vice President, any Senior Vice President, any Vice President, the Treasurer or any Assistant Treasurer, or any other officer or agent to whom such power may be delegated by the Board, may endorse, assign and deliver checks, drafts and other order for the payment of money which are payable to the order of the corporation. ARTICLE XII AMENDMENTS These By-laws may be altered or repealed and new By-laws may be made by the affirmative vote, at any meeting of the Board, of a majority of the entire Board, subject to the rights of the stockholders of the corporation to amend or repeal By-laws made or amended by the 23 28 Board by the affirmative vote of the holders of record of a majority in number of shares of the outstanding stock of the corporation present or represented at any meeting of the stockholders and entitled to vote thereon, provided that notice of the proposed action be included in the notice of such meeting. ARTICLE XIII MISCELLANEOUS All references and uses herein of the masculine pronouns "he" or "his" shall have equal applicability to and shall also mean their feminine counterpart pronouns, such as "she" or "her." 24 EX-4.K 4 INDENTURE 1 EXHIBIT 4.K SONAT INC. ---------- Trust Indenture Act Cross Reference Sheet
Section of Act Section of Indenture - -------------- -------------------- 310(a)(1) and (2)...................................................... Section 6.05 and 9.09 310(a)(3) and (4)...................................................... Not Applicable 310(b)................................................................. Section 9.09 and 9.10 310(c)................................................................. Not Applicable 311(a) and (b)......................................................... Section 9.13 311(c)................................................................. Not Applicable 312(a)................................................................. Section 7.01 and 7.02(a) 312(b)................................................................. Section 7.02(b) 312(c)................................................................. Section 7.02(c) 313(a)................................................................. Section 7.04(a) 313(b)(1).............................................................. Not Applicable 313(b)(2).............................................................. Section 7.04(b) 313(c)................................................................. Section 7.04(c) 313(d)................................................................. Section 7.04(d) 314(a)................................................................. Section 7.03 314(b)................................................................. Not Applicable 314(c)................................................................. Section 14.01 and 16.05 314(d)................................................................. Not Applicable 314(e)................................................................. Section 16.05 314(f)................................................................. Not Applicable 315(a)................................................................. Section 9.01 315(b)................................................................. Section 8.07 315(c) and (d)......................................................... Section 9.01 315(e)................................................................. Section 808 316(a)(1).............................................................. Section 8.01, 8.06 and 10.04 316(a)(2).............................................................. Omitted 316(b)................................................................. Section 8.04 and 12.02 317(a)................................................................. Section 8.02 317(b)................................................................. Section 6.06 318(a)................................................................. Section 16.07
2 TABLE OF CONTENTS*
Page ---- Parties ...................................................................................... 1 Recitals ...................................................................................... 1 ARTICLE ONE. Definitions. Section 1.01. Certain terms defined; other terms defined in Trust Indenture Act of 1939 or in Securities Act of 1933 to have meanings therein assigned............... 1 Authenticating Agent......................................................... 2 Board of Directors........................................................... 2 Business Day................................................................. 2 Company...................................................................... 2 Eligible Obligations......................................................... 2 Event of Default............................................................. 2 Holder....................................................................... 2 Indenture.................................................................... 2 Interest..................................................................... 3 Lien......................................................................... 3 Officers' Certificate........................................................ 3 Opinion of Counsel........................................................... 3 Original Issue Discount Security............................................. 3 Outstanding.................................................................. 3 Paying Agent................................................................. 4 Person....................................................................... 4 Place of Payment............................................................. 5 Principal Office of the Trustee.............................................. 5 Redemption Date.............................................................. 5 Redemption Price............................................................. 5 Responsible Officer.......................................................... 5
- ------------- * This table of contents shall not for any purpose be deemed to be a part of the Indenture 3 ii Page ---- Restricted Subsidiary................................................................ 5 Securities........................................................................... 6 Subsidiary........................................................................... 6 Trustee.............................................................................. 6 Trust Indenture Act of 1939.......................................................... 6 U.S. Government Obligation........................................................... 7 Vice President....................................................................... 7 Yield to Maturity.................................................................... 7 Section 1.02. Meaning of words importing singular number and plural number; words used in conjunctive or disjunctive order; the terms "herein", "hereof" and "hereunder"; and accounting terms.................................................... 7 ARTICLE TWO. Security Forms. Section 2.01. Forms Generally...................................................................... 8 Section 2.02. Form of Trustee's Certificate of Authentication...................................... 8 ARTICLE THREE. The Securities. Section 3.01. Amount of Securities Unlimited; Issuable in Series................................... 9 Section 3.02. Denominations of Securities.......................................................... 11 Section 3.03. Authentication and Dating............................................................ 11 Section 3.04. Execution of Securities.............................................................. 12 Section 3.05. Registration, exchange and transfer of Securities.................................... 13 Charges upon exchange, transfer or registration of Securities........................ 14 Restriction on transfers or exchanges at time of redemptions and certain interest payments.................................................................... 14 Section 3.06. Temporary Securities................................................................. 14 Section 3.07. Mutilated, destroyed, lost or stolen Securities...................................... 15 Section 3.08. Payment of interest; interest rights reserved........................................ 16 Section 3.09. Cancellation of surrendered Securities............................................... 17 Section 3.10. Computation of Interest.............................................................. 17
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Page ---- ARTICLE FOUR. Redemption of Securities Section 4.01. Applicability of Article............................................................ 17 Section 4.02. Notice of Redemption; Selection of Securities....................................... 17 Section 4.03. Payment of Securities Called for Redemption......................................... 19 ARTICLE FIVE. Sinking Funds. Section 5.01. Applicability of Article............................................................ 20 Section 5.02. Mandatory Sinking Fund Payments..................................................... 20 Section 5.03. Credits Against Mandatory Sinking Fund.............................................. 21 Section 5.04. Certificates........................................................................ 21 Section 5.05. Manner of Redeeming Securities for Sinking Fund..................................... 22 ARTICLE SIX. Particular Covenants of the Company. Section 6.01. Payment of principal of (and premium, if any) and interest on Securities............ 23 Section 6.02. Maintenance of office or agency for payment of Securities........................... 23 Section 6.03. Corporate existence................................................................. 24 Section 6.04. Company to secure Securities ratably with certain mortgages, pledges or other liens or encumbrances..................................................................... 25 Section 6.05. Appointment to fill a vacancy in the office of Trustee.............................. 25 Section 6.06. (a) Duties of Paying Agent.......................................................... 25 (b) Company as Paying Agent......................................................... 25 (c) Turnover to Trustee by Paying Agent or Company.................................. 25 (d) Holding sums in trust........................................................... 26 Section 6.07. Annual certificate.................................................................. 26 Section 6.08. Waiver of certain covenants......................................................... 26
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Page ---- ARTICLE SEVEN. Holders' Lists and Reports by the Company and the Trustee. Section 7.01. Company to furnish Trustee information as to names and addresses of Holders........ 27 Section 7.02. (a) Trustee to preserve information as to names and addresses of Holders........... 27 Trustee may destroy list of Holders on certain conditions.......................... 27 (b) Trustee to make information as to name and addresses of Holders available to "applicants" or mail communications to Holders in certain circumstances........ 27 Procedure if Trustee elects not to make information available to "applicants".. 28 (c) Company and Trustee not accountable for disclosure of information.............. 28 Section 7.03. (a) Annual and other reports to be filed by Company with Trustee................... 29 (b) Additional information and reports to be filed with Trustee and Securities and Exchange Commission........................................................ 29 (c) Summaries of information and reports to be transmitted by Company Holders...... 29 Section 7.04. (a) Trustee to transmit annual report to Holders................................... 29 (b) Trustee to transmit certain further reports to Holders......................... 30 (c) To what Holders reports are to be mailed....................................... 31 (d) Copies of reports to be filed with stock exchanges and Securities and Exchange Commission..................................................................... 31 ARTICLE EIGHT. Remedies of the Trustee and Holders on Event of Default. Section 8.01. Events of Default defined.......................................................... 31 Acceleration of maturity upon Event of Default..................................... 33 Waiver of default and rescission of declaration of acceleration.................... 33
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Page ---- Restoration of former position and rights upon curing Section 8.02. Covenant of Company to pay to Trustee whole amount due......................... 34 on Securities on default in payment of interest or principal (or premium, if any)........................................................... 34 Trustee may recover judgment for whole amount due on Securities on failure of Company to pay.............................................................. 34 Filing of proof of claim by Trustee in bankruptcy, reorganization, arrangement, receivership or other judicial proceeding......................... 35 Rights of action and of asserting claims may be enforced by Trustee without possession of Securities....................................................... 36 Section 8.03. Application of moneys collected by Trustee..................................... 36 Section 8.04. Limitations on suits by Holders................................................ 37 Section 8.05. Remedies cumulative............................................................ 38 Delay or omission in exercise of rights not a waiver of default................ 38 Section 8.06. Rights of Holders of majority in principal amount of Securities to direct Trustee and to waive defaults.................................................. 39 Section 8.07 Trustee to give notice of defaults known to it, but may withhold in certain circumstances.................................................................. 39 Section 8.08 Requirements of an undertaking to pay costs in certain suits under this Indenture or against the Trustee............................................... 40 ARTICLE NINE Concerning the Trustee Section 9.01 Upon Event of Default occurring and continuing, Trustee shall exercise powers vested in it, and use same degree of care and skill in their exercise as a prudent man would use............................................ 40 Trustee not relieved from liability for negligence or wilful misconduct except as provided in this Section............................................. 41 (a) Prior to Event of Default and after the curing of all Events of Default which may have occurred.................................................... 41 (1) Trustee not liable except for performance of duties specifically set forth............................................................. 41
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Page ---- (2) In absence of bad faith, Trustee may conclusively rely on certificates or opinions furnished it hereunder, subject to duty to examine certain thereof................................................. 41 (b) Trustee not liable for action or nonaction in accordance with direction of Holders of majority in principal amount of Securities........................ 41 (c) Trustee not liable for action or nonaction in accordance with direction of Holders of majority in principal amount of Securities........................ 41 Trustee not required to incur unreasonable financial risk........................... 42 Section 9.02. Subject to provisions of Section 9.01............................................... 42 (a) Trustee may rely on documents believed genuine and properly..................... 42 (b) Sufficient evidence by certain instruments provided for......................... 42 (c) Trustee may act on Opinion of Counsel........................................... 42 (d) Trustee may require indemnity from Holders...................................... 42 (e) Trustee not liable for actions in good faith believed to be authorized.......... 42 (f) Trustee not bound to make investigation into facts except under certain circumstances................................................................... 43 (g) Trustee may act by or through agents or attorneys............................... 43 Section 9.03. Trustee or Authenticating Agent not liable for recitals herein or in Securities.......................................................................... 43 No representations by Trustee as to validity of Indenture or of Securities.......... 43 Trustee or Authenticating Agent not accountable for use of Securities or proceeds............................................................................ 43 Section 9.04. Trustee, Authenticating Agent, Paying Agent or Security registrar may own Securities.......................................................................... 43 Section 9.05. Moneys received by Trustee to be held in trust without interest..................... 43 Section 9.06. Trustee entitled to compensation reimbursement and indemnity........................ 44 Obligations to Trustee to be secured by lien prior to Securities.................... 44
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Page ---- Section 9.07. Right of Trustee to rely on Officers' Certificate where no other evidence specifically prescribed................................................... 44 Section 9.08. (a) Trustee acquiring conflicting interest to eliminate conflict or resign 45 (b) Notice to Holders in case of failure to comply with subsection (a).. 45 (c) Definition of conflicting interest.................................. 45 (d) Definition of certain terms......................................... 49 Calculation of percentages of securities............................ 50 Section 9.09. Requirements for eligibility of Trustee................................... 51 Section 9.10. (a) Resignation of Trustee.............................................. 51 (b) Removal of Trustee by Company or by court on Holders' application... 52 (c) Removal of Trustee by Holders of majority in principal amount of Securities.......................................................... 53 (d) Time when resignation or removal of Trustee effective............... 53 Section 9.11. Acceptance by succession of a Trustee..................................... 53 Notice of succession of a Trustee......................................... 55 Section 9.12. Successor to Trustee by merger, consolidation or succession to business... 55 Section 9.13. (a) Limitations on rights of Trustee as a creditor to obtain payment of certain claims within four months prior to default or during default, or to realize on property as such creditors thereafter.............. 56 (b) Certain creditor relationships excluded............................. 58 (c) Definition of certain terms......................................... 59 Section 9.14. Appointment of Authenticating Agent....................................... 60 ARTICLE TEN. Concerning the Holders Section 10.01. Evidence of action by Holders............................................. 62 Section 10.02. Proof of execution of instruments and of holding of Securities............ 62
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Page ---- Section 10.03. Who may be deemed owners of Securities.................................... 63 Section 10.04. Securities owned by Company or controlled or controlling companies disregarded for certain purposes.......................................... 63 Section 10.05. Instruments executed by Holders bind future Holders....................... 64 ARTICLE ELEVEN. Holders' Meetings. Section 11.01. Purposes for which meetings may be called................................. 65 Section 11.02. Manner of calling meetings................................................ 65 Section 11.03. Call of meetings by Company or Holders.................................... 65 Section 11.04. Who may attend and vote at meetings....................................... 66 Section 11.05. Regulations may be made by Trustee........................................ 66 Conduct of the meeting.................................................... 66 Voting rights - adjournment............................................... 66 Section 11.06. Manner of voting at meetings and record to be kept........................ 67 Section 11.07. Exercise of rights of Trustee and Holders not to be hindered or delayed... 68 ARTICLE TWELVE. Supplemental Indentures. Section 12.01. Purposes for which supplemental indentures may be entered into without consent of Holders........................................................ 68 Section 12.02. Modification of Indenture with consent of Holders of a majority in principal amount of Securities............................................ 70 Section 12.03. Effect of supplemental indentures......................................... 71 Section 12.04. Securities may bear notation of changes by supplemental indentures........ 72 Section 12.05. Supplemental indentures not to be in conflict with Trust Indenture Act of 1939...................................................................... 72 Section 12.06. Opinion of Counsel........................................................ 72
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Page ---- ARTICLE THIRTEEN. Consolidation, Merger and Sale. Section 13.01. Consolidations and mergers of Company and conveyances permitted................... 72 Section 13.02. Assumption of obligations of Company by successor company or transferee........... 73 ARTICLE FOURTEEN. Satisfaction and Discharge of Indenture; Unclaimed Moneys. Section 14.01. Satisfaction and discharge of Indenture........................................... 74 Section 14.02. Application of trust moneys....................................................... 75 Section 14.03. Repayment of moneys held by Paying Agent.......................................... 75 Section 14.04. Repayment of moneys held by Trustee............................................... 75 ARTICLE FIFTEEN. Defeasance and Convenant Defeasance. Section 15.01 Applicability of Article; Company's option to effect defeasance or convenant defeasance.............................................................. 76 Section 15.02. Defeasance and discharge.......................................................... 76 Section 15.03. Covenant defeasance............................................................... 77 Section 15.04. Conditions to defeasance or covenant defeasance................................... 77 Section 15.05. Deposited money, Eligible Obligations or U.S. Government Obligations to be held in trust..................................................................... 79
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Page ---- ARTICLE SIXTEEN. Miscellaneous Provisions. Section 16.01. Successors and assigns of Company bound by Indenture................................. 79 Section 16.02. Acts of board, committee or officer of successor corporation valid................... 80 Section 16.03. Required notices or demands may be served by mail.................................... 80 Section 16.04. Indenture and Securities to be construed in accordance with the laws of the State of New York.................................................................... 80 Section 16.05. Officers' Certificate and Opinion of Counsel to be furnished upon applications or demands by the Company............................................................... 80 Statements to be included in each certificate or opinion with respect to compliance with a condition or convenant........................................................ 80 Reliance, as to legal matters and factual matters, by officers and counsel, respectively......................................................................... 81 Section 16.06. Provisions of the Indenture and Securities for the sole benefit of the parties and the Holders.......................................................................... 81 Section 16.07. Provisions required by Trust Indenture Act of 1939 to control........................ 82 Section 16.08. Indenture may be executed in counterparts............................................ 82 Section 16.09. Table of contents and headings for convenience only.................................. 82 Section 16.10. Separability Clause.................................................................. 82 Section 16.11. Legal Holidays....................................................................... 82 Section 16.12. Incorporators, stockholders, officers and directors of Company exempt from individual liability............................................................................ 82 Acceptance of Trust ................................................................................... 83 Testimonium ........................................................................................... 84 Signatures and Seals................................................................................... 84 Acknowledgments........................................................................................ 85
12 INDENTURE, dated as of the first day of June, 1986, between Sonat Inc., a corporation duly organized and existing under the laws of the State of Delaware (hereinafter sometimes referred to as the "Company"), and MANUFACTURERS HANOVER TRUST COMPANY, a corporation organized and existing under the laws of the State of New York (hereinafter sometimes referred to as the "Trustee"). RECITALS OF THE COMPANY The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its unsecured debentures, notes or other evidences of indebtedness (herein called the "Securities"), to be issued in one or more series as in this Indenture provided. All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. Now Therefore, this Indenture Witnesseth: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities or of series thereof, as follows: ARTICLE ONE. DEFINITIONS. SECTION 1.01. The terms defined in this Section 1.01 (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section 1.01. All other terms used in this Indenture which are defined in the Trust Indenture Act of 1939 or which are by reference therein defined in the Securities Act of 1933 (except as herein otherwise expressly provided or unless the context otherwise requires) shall have the meaning assigned to such terms in said Trust Indenture Act and in said Securities Act as they were in force at the date of the execution of this Indenture. 13 2 Authenticating Agent: The term "Authenticating Agent" shall mean any person authorized by the Trustee to act on behalf of the Trustee to authenticate Securities. Board of Directors: The term "Board of Directors", when used with reference to the Company, shall mean the Board of Directors of the Company or any authorized committee of such Board. Business Day: The term "Business Day", when used with respect to any Place of Payment, shall mean a day which is not a day on which banking institutions in that Place of Payment are authorized or obligated by law to close. Company: The term "Company" shall mean Sonat Inc. and, subject to the provisions of Article Thirteen, shall also include its successors and assigns. Eligible Obligations: The term "Eligible Obligations" shall mean interest bearing obligations as a result of the deposit of which the Securities are rated in the highest generic long-term debt rating category assigned to legally defeased debt by one or more nationally recognized rating agencies. Event of Default: The term "Event of Default" shall have the meaning specified in Section 8.01. Holder: The terms "Holder", "Holder of Securities", "registered Holder" or other similar term shall mean the person or persons in whose name or names a particular Security shall be registered on the books of the Company kept for that purpose in accordance with the terms of this Indenture. Indenture: The term "Indenture" shall mean this instrument as originally executed, or, if amended or supplemented as herein provided, as so amended or 14 3 supplemented, and shall include the form and terms of particular series of Securities established as contemplated hereunder. Interest: The term "interest", when used with respect to an Original Issue Discount Security which by its terms bears interest only after maturity, shall mean interest payable after maturity. Lien: The term "Lien" shall mean any mortgage, pledge, lien, encumbrance or other security interest which secures the payment or performance of an obligation. Officers' Certificate: The term "Officers' Certificate" shall mean a certificate signed by the Chairman of the Board, the Vice Chairman of the Board, the President or any Vice President and by the Treasurer, the Secretary, an Assistant Treasurer or an Assistant Secretary of the Company. Each such certificate shall include the statements provided for in Section 16.05, if and to the extent required by the provisions thereof. Opinion of Counsel: The term "Opinion of Counsel" shall mean an opinion in writing signed by legal counsel who may be an employee of or of counsel to the Company or who may be other counsel satisfactory to the Trustee. Each such opinion shall include the statements provided for in Section 16.05, if and to the extent required by the provisions thereof. Original Issue Discount Security: The term "Original Issue Discount Security" shall mean any Security which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the maturity thereof pursuant to Section 8.01. Outstanding: The term "Outstanding", when used with reference to Securities shall subject to the provisions of Section 10.04, mean as of any particular time, all 15 4 Securities authenticated and delivered by the Trustee under this Indenture except: (a) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (b) Securities, or portions thereof, paid or redeemed or for the payment or for the redemption of which moneys in the necessary amount shall have been deposited in trust with the Trustee or with any Paying Agent (other than the Company) or shall have been set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent), provided that if such Securities or portions thereof are to be redeemed, notice of such redemption shall have been given as in Article Four provided, or provision satisfactory to the Trustee shall have been made for giving such notice; and (c) Securities in lieu of or in substitution for which other Securities shall have been authenticated and delivered pursuant to the terms of Section 3.07. In determining whether the Holders of the requisite principal amount of outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, the principal amount of an Original Issue Discount Security that shall be deemed to be Outstanding for such purposes shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon a declaration of acceleration of the maturity thereof pursuant to Section 8.01. Paying Agent: The term "Paying Agent" shall mean any person authorized by the Company to pay the principal of and premium, if any, or interest on any Securities on behalf of the Company. Person: The term "person" shall mean any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. 16 5 Place of Payment: The term "Place of Payment", when used with respect to the Securities of any series, means the place or places where the principal of and premium if any, and interest on the Securities of that series are payable as specified as contemplated by Section 3.01. Principal Office of the Trustee: The term "Principal Office of the Trustee", or other similar term, shall mean the principal office of the Trustee in the Borough of Manhattan, The City of New York, at which at any particular time its corporate trust business shall be administered. Redemption Date: The term "Redemption Date", when used with respect to any Security to be redeemed, shall mean the date fixed for such redemption pursuant to this Indenture Redemption Price: The term "Redemption Price", when used with respect to any Security to be redeemed, shall mean the price at which it is to be redeemed pursuant to this Indenture Responsible Officer: The term "Responsible Officer", when used with respect to the Trustee, shall mean the chairman of the board of directors, any vice-chairman of the board of directors, the president, the chairman of the executive committee, the chairman of the trust committee, any Vice President, any assistant vice president, the secretary, any assistant secretary, the treasurer, any trust officer any assistant trust officer, and any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively. or to whom any corporate trust matter is referred because of his knowledge of and familiarity with the particular subject. Restricted Subsidiary: The term "Restricted Subsidiary" shall mean Southern Natural Gas Company, Sonat Offshore Drilling Inc. Sonat Exploration Company and 17 6 Sonat Interocean Transportation Company, each of which is a Delaware corporation and a wholly-owned Subsidiary of the Company as of the date hereof, and any Subsidiary of the Company which is a successor of any of such corporations or to which all or substantially all of the properties and assets of any of such corporations have been transferred. Securities: The term "Securities" shall have the meaning stated in the first recital of this Indenture and more particularly shall mean any Securities authenticated and delivered under this Indenture. Subsidiary: The term "Subsidiary" shall mean a corporation, association or business trust more than 50% of the outstanding shares of capital stock of which having by the terms thereof ordinary voting power to elect a majority of its Board of Directors (irrespective of whether at the time stock of any other class or classes of such corporation, association or business trust shall have, or might have, voting power by reason of the happening of any contingency) is owned directly or indirectly by the Company or by one or more of its other Subsidiaries or by the Company in conjunction with one or more of its other Subsidiaries. Trustee: The term "Trustee" shall mean Manufacturers Hanover Trust Company until a successor trustee shall have become such pursuant to the provisions of Article Nine hereof, and thereafter "Trustee" shall mean or include each person who is then a Trustee hereunder, and if at any time there is more than one such person, "Trustee" as used with respect to the Securities of any series shall mean the Trustee with respect to Securities of that series. Trust Indenture Act of 1939: The term "Trust Indenture Act of 1939" shall, subject to the provisions of Section 12.05, mean the Trust Indenture Act of 1939 as it was in force at the date of execution of this Indenture. 18 7 U.S. Government Obligation: The term "U.S. Government Obligation" shall mean (i) a direct obligation of, or an obligation the principal of and interest on which are fully guaranteed by, the United States of America (provided that such obligation is not callable or redeemable at the option of the issuer thereof), or (ii) a depository receipt issued by a bank or trust company as custodian with respect to any U.S. Government Obligation described in clause (i) or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depository receipt, or (iii) a security that is backed by any U.S. Government Obligation described in clause (i) as collateral under an arrangement by which the principal and interest payments on the collateral generally flow directly through to the holder of the security. Vice President: The term "Vice President" shall mean any vice president, whether or not designated by a number or a word or words added before or after the title "vice president". Yield to Maturity: The term "Yield to Maturity" shall mean the yield to maturity, calculated at the time of issuance of a series of Securities or, if applicable, at the most recent redetermination of interest on such series and calculated in accordance with accepted financial practice. SECTION 1.02. Unless herein otherwise provided, or unless the context shall otherwise require, words importing the singular number shall include the plural number and vice versa: words or phrases employed in the conjunctive order shall be construed as employed also in the disjunctive order, and vice versa: the terms "herein", "hereof" and "hereunder", or other similar terms, refer to this Indenture as a whole and not only to the 19 8 particular sentence, paragraph or Section in which any such terms may be employed: all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles, and the term "generally accepted accounting principles" shall mean such accounting principles as are generally accepted at the date of the execution of this Indenture. ARTICLE TWO. SECURITY FORMS SECTION 2.01. The Securities of each series shall be in substantially the form as shall be established by or pursuant to a resolution of the Board of Directors or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with any law or with any rules made pursuant thereto or with any rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. The definitive Securities shall be engraved or lithographed or printed with engraved borders or may be produced in any other manner, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. SECTION 2.02. The Trustee's Certificate of Authentication on all Securities shall be in substantially the following form: This is one of the Securities of the series designated herein referred to in the within-mentioned Indenture. MANUFACTURERS HANOVER TRUST COMPANY as Trustee By ------------------------- Authorized Officer 20 9 ARTICLE THREE. THE SECURITIES. SECTION 3.01. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued in one or more series. There shall be established in or pursuant to a resolution of the Board of Directors or established in one or more indentures supplemental hereto, prior to the issuance of Securities of any series, (1) the title of the Securities of the series (which shall distinguish the Securities of the series from all other Securities): (2) any limit upon the aggregate principal amount of the Securities of the series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Section 3.05, 3.06., 3.07, 4.03 or 12.04); (3) the date or dates on which the principal of and premium, if any, on the Securities of the series is payable; (4) the rate or rates (which may be fixed or variable). or the method by which such rate or rates shall be determined, at which the Securities of the series shall bear interest, if any, the date or dates from which such interest shall accrue, or the method by which such date or dates shall be determined, the interest payment dates on which such interest shall be payable and the record dates for the determination of Holders to whom interest is payable; (5) the place or places where the principal of, and premium, if any, and any interest on Securities of the series shall be payable: (6) the price or prices at which, the period or periods within which and the terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Company, pursuant to any sinking fund or otherwise: (7) the obligation, if any, of the Company to redeem, purchase or repay Securities of the series pursuant to any sinking fund or analogous to 21 10 provisions or at the option of a Holder thereof and the price or prices at which and the period or periods within which and the terms and conditions upon which Securities of the series shall be redeemed, purchased or repaid, in whole or in part, pursuant to such obligation: (8) if other than denominations of $1,000 and any integral thereof, the denominations in which Securities of the series issuable; (9) if other than the principal amount thereof, the portion of the principal amount of Securities of the series which shall be payable upon declaration of acceleration of the maturity thereof pursuant to Section 8.01 or provable in bankruptcy pursuant to Section 8.02: (10) if other than the currency of the United States of America, the currency or currencies, including composite currencies, in which payment of the principal of and premium, if any, and interest on the Securities of the series shall be payable; (11) if the amount of payments of principal of and premium, if any, or interest on the Securities of the series may be determined with reference to an index, the manner in which such amounts shall be determined: (12) the application, if any, of either or both of Sections 15.02 or 15.03 to the Securities of the series; (13) any Events of Default with respect to Securities of the series, if not set forth herein; (14) any other covenant or warranty included for the benefit of Securities of the series in addition to (and not inconsistent with) those included in this Indenture for the benefit of Securities of all series, or any other covenant or warranty included for the benefit of Securities of the series in lieu of any covenant or warranty included in this Indenture for the benefit of Securities of all series, or any provision that any covenant or warranty included in this Indenture for the benefit of Securities of all series shall not be for the benefit of Securities of the series, or any combination of such covenants, warranties or provisions; and (15) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture). 22 11 All Securities of any one series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to such resolution of the Board of Directors or in any such indenture supplemental hereto. SECTION 3.02. The Securities of each series shall be issuable in registered form without coupons in such denominations as shall be specified as contemplated by Section 3.01. In the absence of any such specification with respect to the Securities of any series, the Securities of such series shall be issuable in denominations of $1,000 and any integral multiple thereof. SECTION 3.03. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series executed by the Company to the Trustee for authentication. Except as otherwise provided in this Article Three, the Trustee shall thereupon authenticate and deliver said Securities to or upon the written order of the Company, signed by the Chairman of the Board, the Vice Chairman of the Board, the President or any Vice President and by the Treasurer or any Assistant Treasurer. In authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive at the time of the initial delivery by the Company of Securities of such series to the Trustee for authentication, and (subject to Section 9.01) shall be fully protected in relying upon: (1) a copy of any resolution or resolutions of the Board of Directors relating thereto and, if applicable, an appropriate record of any action taken pursuant to such resolution, in each case certified by the Secretary or an Assistant Secretary of the Company; (2) an executed supplemental indenture, if any; (3) an Officers' Certificate; and (4) an Opinion of Counsel prepared in accordance with Section 16.05 which shall also state (a) that the form of such Securities has been established by or pursuant to a resolution of the Board of Directors or by a supplemental indenture as permitted by Section 2.01 in conformity with the provisions of this Indenture; 23 12 (b) that the terms of such Securities have been established by or pursuant Co a resolution of the Board of Directors or by a supplemental indenture as permitted by Section 3.01 in conformity with the provisions of this Indenture; (c) that such Securities, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject to bankruptcy, insolvency, moratorium, reorganization and other laws of general applicability relating to or affecting the enforcement of creditors' rights, to general equity principles and to such other qualifications as such counsel shall conclude do not materially affect the rights of the Holders of such Securities; and (d) that authentication and delivery of the Securities by the Trustee will not violate the terms of this Indenture. The Trustee shall have the right to decline to authenticate and deliver any Securities under this Section if the Trustee, being advised by counsel, determines that such action may not lawfully be taken or if the Trustee in good faith by its Board of Directors or trustees, executive committee, or a trust committee of directors or trustees and/or Vice Presidents shall determine that such action would expose the Trustee to personal liability to existing Holders. Each Security shall be dated the date of its authentication. SECTION 3.04. The Securities shall be signed on behalf of the Company by the manual or facsimile signature of its Chairman of the Board, its Vice Chairman of the Board, its President or one of its Vice Presidents under its corporate seal, attested by its Secretary or one of its Assistant Secretaries by his manual or facsimile signature. Such signatures may be the manual or facsimile signatures of the present or any future such officers and may be imprinted or otherwise reproduced on the Securities. The seal of the Company may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Securities. Only such Securities as shall bear thereon a certificate of authentication substantially in the form set forth in Section 2.02, executed by the Trustee by manual signature of one of its authorized officers, shall be entitled to the benefits of 24 13 this Indenture or be valid or obligatory for any purpose. Such certificate by the Trustee upon any Security executed by the Company shall be conclusive evidence that the Security so authenticated has been duly authenticated and delivered hereunder and that the Holder is entitled to the benefits of this Indenture. In case any officer of the Company who shall have signed any of the Securities shall cease to be such officer before the Securities so signed shall have been authenticated and delivered by the Trustee, or disposed of by the Company, such Securities nevertheless may be authenticated and delivered or disposed of as though the person who signed such Securities had not ceased to be such officer of the Company; and any Security may be signed, by manual or facsimile signature, on behalf of the Company by such persons as, at the actual date of the execution of such Security, shall be the proper officers of the Company, although at the date of such Security any such person was not such officer. SECTION 3.05. At the option of the Holder, Securities of any series may be exchanged for a like aggregate principal amount of Securities of the same series of other authorized denominations. The Securities to be exchanged shall be surrendered at the office or agency to be maintained by the Company in accordance with the provisions of Section 6.02 for Securities of such series, and the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor the Security or Securities which the Holder making the exchange shall be entitled to receive, bearing numbers not contemporaneously outstanding. The Company shall keep, at the Principal Office of the Trustee (which is hereby appointed registrar of the Company for such purpose), a register for each series of Securities issued hereunder in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities as in this Article Three provided. Upon due presentation for registration of transfer of any Security of any series at the office or agency to be maintained by the Company in accordance with the provisions of Section 6.02 for Securities of such series, the Company shall execute and the Trustee shall authenticate and deliver in the name of the transferee or transferees a new Security or Securities of the same series for an equal aggregate principal amount, and no transfer of any Security shall be valid unless made at such office. 25 14 All Securities presented or surrendered for transfer, exchange or payment shall (if so required by the Company or by the Trustee) be accompanied by a written instrument or instruments of transfer, in form satisfactory to the Company and the Trustee, duly executed by the registered Holder or by his attorney duly authorized in writing. No service charge shall be made for any exchange or transfer of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto, other than exchanges pursuant to Section 3.06, 4.03 or 12.04 not involving any transfer. The Company shall not be required to make transfers or exchanges of (a) any Securities of any series for a period of I5 days next preceding any selection of Securities of that series to be redeemed or (b) any Securities selected, called or being called for redemption except, in the case of any Security to be redeemed in pan, the portion thereof not so to be redeemed. SECTION 3.06. Pending the preparation of definitive Securities of any series, the Company may execute and the Trustee shall authenticate and deliver temporary Securities (printed, typewritten, lithographed or otherwise produced) in any authorized denomination and substantially of the tenor of the definitive Securities in lieu of which they are issued, but with such omissions, insertions and variations as may be appropriate for temporary Securities, all as may be approved by the Chairman of the Board, the Vice Chairman of the Board, the President or a Vice President of the Company authorized by the Board of Directors to execute the same, such approval to be conclusively evidenced by his execution thereof. Temporary Securities may contain such reference to any provisions of the Indenture as may be appropriate. Every such temporary Security shall be executed by the Company and authenticated by the Trustee upon the same conditions and in substantially the same manner, and with the same effect, as the definitive Securities. Without unnecessary delay the Company will execute and deliver to the Trustee definitive Securities of such series and thereupon any or all temporary Securities of such series may be surrendered in exchange therefor without expense to the Holders, at the office or agency of the Company designated pursuant to Section 6.02 for Securities of such series, and the Trustee shall authenticate and deliver in exchange for such temporary Securities an equal aggregate principal amount of definitive Securities. Until 26 15 so exchanged, the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series authenticated and delivered hereunder. SECTION 3.07. In case any temporary or definitive Security shall become mutilated or be destroyed, lost or stolen, the Company in the case of any mutilated Security shall, and in the case of any destroyed, lost or stolen Security in its discretion may, execute, and upon request by the Company the Trustee shall authenticate and deliver, a new Security of the same series, bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated Security, or in lieu of and in substitution for the Security so destroyed, lost or stolen, or, if any such Security shall have matured or shall be about to mature, instead of issuing a substituted Security, the Company may pay the same (without surrender thereof, except in the case of a mutilated Security). In every case the applicant for a substituted Security or for such payment shall furnish to the Company and to the Trustee and to any and all Paying Agents of the Company such Security or indemnity as may be required by them to save each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Company and to the Trustee evidence to their satisfaction of the destruction, loss or theft of such Security and of the ownership thereof. The written request or authorization of the Chairman of the Board, the Vice Chairman of the Board, the President, any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of the Company shall be complete authority to the Trustee for the authentication of any such substituted Security and for the delivery of the same and to the Trustee and any Paying Agent of the Company for the making of any such payment. Neither the Trustee nor any such Paying Agent shall incur any liability to anyone by reason of anything done or omitted to be done by it in good faith and without negligence under the provisions of this Section 3.07. Upon the issue of any substituted Security, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith and in addition a further sum not exceeding Two Dollars for each Security so issued in substitution. Every substituted Security issued pursuant to the provisions of this Section 3.07 in substitution for any destroyed, lost or stolen Security shall constitute an additional contractual obligation of the Company, whether or 27 16 not the destroyed lost or stolen Security shall be enforceable by anyone at any time, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series duly issued hereunder. All Securities shall be held and owned upon the express condition that the provisions of this. Section 3.07 are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities, and shall preclude (to the extent lawful) any and all other rights or remedies, notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. SECTION 3.08. The Holder of a Security of any series at the close of business on any record date with respect to any interest payment date for Securities of that series shall be entitled to receive the interest payable on such interest payment date notwithstanding the cancellation of such Security upon any transfer or exchange subsequent to such record date and prior to such interest payment date; provided, however, that if and to the extent the Company shall default in the payment of interest due on such interest payment date, such defaulted interest shall be paid by the Company, at its election in each case, as provided in clause (a) or (b) below: (a) The Company may make payment of any defaulted interest to the Holder on a subsequent record date established by notice given by mail by or on behalf of the Company to Holders of Securities of such series not less than I5 days preceding such subsequent record date, such record date to be not less than ten days preceding the date of payment of such defaulted interest (b) The Company may make payment of any defaulted interest on the Securities of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of such series may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in 28 17 exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. SECTION 3.09. All Securities surrendered for the purpose of payment, redemption, exchange or transfer or delivered in satisfaction in whole or in part of any sinking fund obligation, shall, if surrendered to the Company or any Paying Agent, be delivered to the Trustee for cancellation, or if surrendered to the Trustee, shall be cancelled by it, and no Securities shall be issued in lieu of any Securities so surrendered or delivered except as expressly permitted by any of the provisions of this Indenture. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly cancelled by the Trustee. The Trustee shall destroy cancelled Securities and deliver a certificate of destruction thereof to the Company. If the Company shall acquire any of the Securities, such acquisition shall not operate as a satisfaction of the indebtedness represented by such Securities unless and until the same are delivered to the Trustee for cancellation. SECTION 3.10. Except as otherwise specified as contemplated by Section 3.01 for Securities of any series, interest on the Securities of each series shall be computed on the basis of a year of twelve 30-day months. ARTICLE FOUR. REDEMPTION OF SECURITIES. SECTION 4.01. The provisions of this Article shall be applicable to the Securities of any series which are redeemable before their maturity except as otherwise specified as contemplated by Section 3.01 for Securities of such series. SECTION 4.02. In case the Company shall desire to exercise the right to redeem all or, as the case may be, any part of the Securities of any series in accordance with their terms, it shall fix a Redemption Date and it, or, at its request, the Trustee in the name of and at the expense of the Company, shall mail, or cause to be mailed, a notice of such redemption at least 30 and not 29 18 more than 60 days prior to the Redemption Date to the Holders of Securities of such series so to be redeemed as a whole or in part at their last addresses as the same appear on the Security register for such series. Such mailing shall be by first class mail. The notice if mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the Holder of any Security of a series designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Security of such series. Each such notice of redemption shall be given in the name of the Company and shall specify the Redemption Date, the Redemption Price, the Place of Payment, that payment will be made upon presentation and surrender of such Securities, that interest accrued to the Redemption Date will be paid as specified in said notice, and that on and after the Redemption Date interest thereon or on the portions thereof to be redeemed will cease to accrue. If less than all the Securities of a series are to be redeemed, the notice to the Holders of the Securities of such series to be redeemed shall identify the Securities to be redeemed. In case any Security of a series is to be redeemed in part only, the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the Redemption Date, upon surrender of such Security, a new Security or Securities of that series in aggregate principal amount equal to the unredeemed portion thereof will be issued without charge to the Holder. On or prior to the Redemption Date specified in the notice of redemption given as provided in this Section, the Company will deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust, as provided in Section 6.06) an amount of money sufficient to redeem on the Redemption Date all the Securities or portions thereof so called for redemption at the appropriate Redemption Price, together with accrued interest to the Redemption Date. If less than all the Securities of a series are to be redeemed the Company shall give the Trustee notice, at least 45 days (or such shorter period acceptable to the Trustee) in advance of the Redemption Date, as to the aggregate principal amount of Securities of such series to be redeemed and thereupon the Trustee shall select, by such method as it shall deem fair 30 19 and appropriate the Securities of such series or portions thereof (in integral multiples of $1,000, except as otherwise set forth in the applicable form of Security) to be redeemed, and shall as promptly as practicable notify the Company in writing of the numbers of the Securities of such series or portions thereof so selected. SECTION 4.03. If notice of redemption has been given as provided in Section 4.02 or Section 5.05, the Securities or portions of Securities of the series with respect to which such notice has been given shall become due and payable on the date and at the place stated in such notice at the applicable Redemption Price, together with interest accrued to the Redemption Date, and on and after such Redemption Date (unless the Company shall default in the payment of such Securities or portions thereof at the Redemption Price, together with interest accrued to such Redemption Date) interest on the Securities or portions of Securities of any series so called for redemption shall cease to accrue. On presentation and surrender of such Securities at the Place of Payment in said notice specified, such Securities, or the specified portions thereof shall be paid and redeemed by the Company at the applicable Redemption Price, together with interest accrued thereon to the Redemption Date; provided. however, that installments of interest becoming due on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more previous Securities evidencing all or a portion of the same debt as that evidenced by such particular Securities, registered as such at the close of business on the relevant record dates according to their terms and the provisions of Section 3.08. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium. if any) shall. until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security. Upon presentation and surrender of any Securities redeemed in part only, the Company shall execute and the Trustee shall authenticate and deliver to the Holder thereof, at the expense of the Company, a new Security or Securities of such series, of authorized denominations, in aggregate principal amount equal to the unredeemed portion of the Security so presented and surrendered. 31 20 ARTICLE FIVE. SINKING FUNDS Section 5.01. The provisions of this Article shall be applicable to any sinking fund for the retirement of Securities of a series except as otherwise specified as contemplated by Section 3.01 for Securities of such series. The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a "mandatory sinking fund payment", and any payment in excess of such minimum amount provided for by the terms of Securities of any series is herein referred to as an "optional sinking fund payment". SECTION 5.02. Neither the Trustee nor any Paying Agent shall redeem or purchase any Securities of a series with sinking fund moneys or mail any notice of redemption of such Securities by operation of the sinking fund during the continuance of any default in payment of interest on such Securities when due or of any Event of Default with respect to such Securities, except that if the notice of redemption of any such Securities shall theretofore have been mailed in accordance with the provisions hereof, the Trustee or any Paying Agent shall redeem such Securities if cash sufficient for that purpose shall be deposited with, or segregated by, it for that purpose in accordance with the terms of this Article. Except as aforesaid, any moneys in the sinking fund for any such series at the time when any such default or Event of Default shall occur and any moneys thereafter paid into such sinking fund shall, during the continuance of such default or Event of Default, be held as security for the payment of Securities of the applicable series; provided, however, that in case such default or Event of Default shall have been cured or waived as provided herein, such moneys shall thereafter be applied not later than the next sinking fund payment date for Securities of the applicable series on which such moneys may be applied pursuant to the provisions of this Article. Any and all sinking fund moneys with respect to the Securities of any particular series held by the Trustee or any Paying Agent on the maturity date with respect to Securities of such series and not held for the payment or redemption of particular Securities, shall be applied by the Trustee or such Paying Agent, together with other moneys, if necessary, to be deposited sufficient for the purpose, to the payment of the principal of the Securities of 32 21 that series at maturity; provided, however, that if such moneys held by the Trustee or held or segregated in trust by such Paying Agent are greater than are necessary for such purpose, the excess thereof shall be paid promptly to the Company after such date or need no longer be segregated and held in trust by the Company, as the case may be. SECTION 5.03. In lieu of making all or any part of any mandatory sinking fund payment with respect to any Securities of a series in cash, the Company may (a) deliver to the Trustee for cancellation Outstanding Securities of that series theretofore purchased or otherwise acquired by the Company or (b) take credit for the principal amount of any Securities of that series or portions thereof which have been redeemed either at the election of the Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities; provided that such Securities have not been previously so credited. Such Securities shall be received and credited for such purpose by the Trustee at the Redemption Price specified in such Securities for redemption through operation of the sinking fund and the amount of such mandatory sinking fund payment shall be reduced accordingly. SECTION 5.04. Not less than 45 days prior to each sinking fund payment date for any series of Securities, the Company shall-deliver to the Trustee: 1. Certificates (which need not be Officers' Certificates) stating: (i) the manner in which the Company will fulfill its mandatory sinking fund obligation for such series under this Article Five for such period; (ii) the amount of cash, if any, which the Company will pay to the Trustee prior to or not later than the opening of business on the applicable sinking fund payment date for such series; (iii) the principal amount of Securities of that series, if any, which the Company will surrender to the Trustee for cancellation in lieu of the payment of cash, and that such Securities have not theretofore been made the basis for the reduction of a mandatory sinking fund payment; 33 22 (iv) the principal amount of any Securities for which credit is claimed pursuant to clause (b) of Section 5.03, together with such facts as shall demonstrate that the Company is entitled to such credit; and (v) whether the Company intends to exercise its right to make a permitted optional sinking fund payment with respect to such series and, if so, specifying the amount of such optional sinking fund payment which the Company intends to pay. 2. The Securities, if any, referred to in clause (iii) above. In case of a failure by the Company, on or before the time provided above, to deliver such certificates and the Outstanding Securities, if any, the sinking fund payment due on the next succeeding sinking fund payment date for that series shall be paid entirely in cash and shall be sufficient to redeem the principal amount of such Securities subject to a mandatory sinking fund payment, and the Company shall not be permitted to deliver or credit Securities as provided in Section 5.03 or make any optional sinking fund payment, if any, with respect to such series. SECTION 5.05. The Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner provided in Section 4.02 and notice thereof shall be given by the Trustee to the Company, and the Company hereby irrevocably authorizes the Trustee, in the name of and at the expense of the Company, to give notice on behalf of the Company of the redemption of such Securities, all in the manner and with the effect provided in Section 4.02, except that, in addition to the matters required to be included in such notice by Section 4.02, such notice shall also state that the Securities therein designated for redemption are to be redeemed through operation of the sinking fund. Provided the Company shall not default in payment of the sinking fund obligation, such Securities shall be so redeemed and paid in accordance with such notice in the manner and with the effect provided in Section 4.03. Notwithstanding the foregoing, if at any time the amount of cash to be paid into the sinking fund on the next succeeding sinking fund payment date with respect to the Securities of any particular series together with any unused balance of any preceding sinking fund payment or payments with respect to the Securities of such series shall not exceed in the aggregate 34 23 $50,000, the Trustee, unless requested by the Company, shall not give notice of the redemption of Securities of such series through the operation of the sinking fund on the next succeeding sinking fund payment date. Such unused balance of moneys deposited in the sinking fund shall be added to the sinking fund payment to be made in cash on the next succeeding sinking fund payment date. ARTICLE SIX. PARTICULAR COVENANTS OF THE COMPANY. SECTION 6.01. The Company will duly and punctually pay or cause to be paid the principal of and premium, if any, and interest on each of the Securities of any series at the time and place and in the manner provided in that series of Securities and in this Indenture. The interest on the Securities shall be payable without presentation of the Securities and (subject to the provisions of Section 3.08) only to or upon the written order of the registered Holders thereof. As a condition precedent to the payment of any installment of interest on a Security, the Company may require the registered Holder of such Security to furnish such evidence as will enable the Company to determine whether it is required by law to deduct or to retain any tax or taxes from the interest so payable. SECTION 6.02. So long as any of the Securities of a series remain Outstanding, the Company will maintain an office or agency in each Place of Payment for Securities of that series where the Securities of that series may be presented for transfer and exchange as in this Indenture provided, where notices and demands to or upon the Company in respect of the Securities of that series or of this Indenture may be served and where the Securities of that series may be presented for payment; provided, however, that at the option of the Company payment of interest may be made by check mailed to the address of the person entitled thereto as such address shall appear in the Security register of that series. Unless otherwise specified as contemplated by the provisions of Section 3.01 with respect to the Securities of any series, such office or agency shall be the Principal Office of the Trustee. The Company will give to the Trustee written notice of the location of any such office or agency and of any change of the location thereof in the event that such office or agency shall not be the Principal Office of the Trustee. In case 35 24 the Company shall fail to maintain such office or agency or shall fail to give such notice of the location thereof or of any change in the location thereof, presentations and demands may be made and notices may be served at the Principal Office of the Trustee. Neither any agent of the Company maintaining such office or agency nor the Trustee shall be under any duty with respect to any such presentation, demand or notice, except to mail the same, postage prepaid, to the Company, at such address as may have been furnished to it by the Company, or if no such address shall have been furnished, to the Company at P.O. Box 2563. Birmingham. Alabama 35202. The Company may also from time to time designate one or more other offices or agencies where the Securities of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in each Place of Payment for Securities of any series for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and or any change in the location of any such office or agency. SECTION 6.03. Subject to Article Thirteen, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and franchises; provided, however, that the Company shall not be required to preserve any such franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders. SECTION 6.04. The Company will not grant a Lien to secure any indebtedness for borrowed money or any guarantee or indemnity in respect thereof upon, or with respect to, any capital stock of any Restricted Subsidiary owned directly or indirectly by the Company or upon, or with respect to, any capital stock of any Subsidiary owned directly by the Company, in each case unless the Company shall, simultaneously therewith or prior thereto, take any and all action necessary to procure that all amounts payable by it under the Securities are secured equally and ratably with (or prior to) such indebtedness (or such guarantee or indemnity in respect thereof, as the case may be), provided that nothing herein shall be construed to prevent the Company from selling, conveying, distributing 36 25 (through a dividend or otherwise) or transferring any or all of the capital stock of any Subsidiary (including any Restricted Subsidiary). SECTION 6.05. The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 9.10, a Trustee, so that there shall at all times be a Trustee with respect to each series of Securities hereunder. SECTION 6.06. (a) If the Company shall appoint a Paying Agent other than the Trustee with respect to the Securities of any series, it will cause such Paying Agent to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section: (1) that it will hold all sums held by it as such Paying Agent for the payment of the principal of and premium, if any, or interest on the Securities of such series (whether such sums have been paid to it by the Company or by any other obligor on the Securities of such series) in trust for the benefit of the Holders of the Securities of such series or the Trustee; and (2) that it will give the Trustee notice of any failure by the Company (or by any other obligor on the Securities of such series) to make any payment of the principal of and premium, if any, or interest on the Securities of such series when the same shall be due and payable. (b) If the Company shall act as its own Paying Agent with respect to the Securities of any series, it will, on or before each due date of the principal of and premium, if any, or interest on any of the Securities of such series, set aside, segregate and hold in trust for the benefit of the Holders of such Securities a sum sufficient to pay such principal or premium or interest so becoming due and will give the Trustee written notice of such action or any failure to take such action. (c) If the Company shall have appointed one or more Paying Agents with respect to the Securities of any series, it will, on or before each due date of the principal of and premium, if any, or interest on any Securities of such series, deposit with a Paying Agent a sum sufficient to pay the principal of and premium, if any, or interest so becoming due, such sum to be held in trust for the benefit of the Holders of such Securities, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act. 37 26 (d) Anything in this Section to the contrary notwithstanding, the Company may, at any time, for the purpose of obtaining a satisfaction and discharge of this Indenture, or for any other reason. pay or cause to be paid to the Trustee all sums held in trust by it, or any Paying Agent hereunder, as required by this Section, such sums to be held by the Trustee upon the trusts herein contained. (e) Anything in this Section to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section is subject to the provisions of Sections 14.03 and 14.04. SECTION 6.07. Annually, within 120 days after the close of each fiscal year beginning with the fiscal year ending December 31, 1986, the Company will deliver to the Trustee a certificate (which shall not be deemed to be an Officers' Certificate within the meaning of this Indenture and need not conform with any of the provisions of Section 16.05) of the Chairman of the Board or the Vice Chairman of the Board or the President or a Vice President and the Secretary or the Treasurer or an Assistant Sectary or an Assistant Treasurer of the Company, stating that a review of the activities of the Company during such year has been made under their supervision with a view to determining whether the Company has kept, observed, performed and fulfilled all its covenants, agreements and obligations under this Indenture, and that to the best of their knowledge the Company has kept, observed, performed and fulfilled each and every covenant, agreement and obligation on its pan in this Indenture contained and that to the best of their knowledge neither the Company nor any Paying Agent of the Company is in default in the performance, observance or fulfillment of any of the terms, provisions and conditions hereof, and that no default (as defined in Section 8.07 for the purposes thereof) exists or, if the Company or any Paying Agent shall be so in default or if any default, as so defined, exists, specifying all such defaults, and the nature thereof, of which they may have knowledge. SECTION 6.08. The Company may omit in any particular instance to comply with any term, provision or condition set forth in Section 6.04 with respect to the Securities of any series, if before the time for such compliance the Holders of at least a majority in principal amount of the Outstanding Securities of such series either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except 38 27 to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect ARTICLE SEVEN. HOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE. SECTION 7.01. The Company covenants and agrees that it will furnish or cause to be furnished to (the Trustee with respect to the Securities of each series not later than each interest payment date for such series (and on dates to be determined pursuant to Section 3.01 for any series of Original Issue Discount Securities which by their terms bear interest only after maturity), but in no case less frequently than semi-annually, and at such other times as the Trustee may request in writing, within thirty days after receipt by the Company of any such request. a list. in such form as the Trustee may reasonably require of the names and addresses of the Holders as of a date not more than fifteen days prior to the time such information is furnished but, so long as the Trustee shall be the Security registrar, no such list shall be required to be furnished. SECTION 7.02. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the Holders contained in the most recent list furnished to it as provided in Section 7.01 or received by it as Security registrar or Paying Agent (if so acting). The Trustee may destroy any list furnished to it as provided in Section 7.01 upon receipt of a new list so furnished. (b) In case three or more Holders of Securities of the same series (hereinafter referred to as "applicants") apply in writing to the Trustee, and furnish to the Trustee reasonable proof that each such applicant has owned a Security of such series for a period of at least six months preceding the date of such application, and such application states that the applicants desire to communicate with other Holders of Securities of such series with respect to their rights under this Indenture or under such Securities and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit then the Trustee shall, within five Business Days after the receipt of such application, at its election, either 39 28 (1) afford such applicants access to the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 7.02, or (2) inform such applicants as to the approximate number of Holders of Securities of such series whose names and addresses appear in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 7.02, and as to the approximate cost of mailing to such Holders the form of proxy or other communication, if any, specified in such application. If the Trustee shall elect not to afford such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Holder of a Security of such series whose name and address appear in the information preserved at the time by the Trustee in accordance with the provisions in subsection (a) of this Section 7.02, a copy of the form of proxy or other communication which is specified in such request, with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five days after such tender, the Trustee shall mad to such applicants and file with the Securities and Exchange Commission together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interests of the Holders of Securities of such series or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If said Commission, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections, or if, after the entry of an order sustaining one or more of such objections, said Commission shall find after notice and opportunity for hearing that all the objections so sustained have been met and shall enter an order so declaring the Trustee shall mail copies of such material to all such Holders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Trustee shall be relieved of any obligation or duty to such applicants respecting their application. (c) Each and every Holder of the Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any Paying Agent shall be held accountable 40 29 by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with the provisions of subsection (b) of this Section 7.02, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under said subsection (b) SECTION 7.03. (a) The Company covenants and agrees to file with the Trustee, within fifthteen days after the Company is required to file the same with the Securities and Exchange Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as said Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with said Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934; or, if the Company is not required to file information, documents or reports pursuant to either of such Sections, then the Company will file with the Trustee and said Commission, in accordance with rules and regulations prescribed from time to time by said Commission, such of the supplementary and period information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934 in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations. (b) The Company covenants and agrees to file with the Trustee and the Securities and Exchange Commission, in accordance with the rules and regulations prescribed from time to time by said Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants provided for in this Indenture as may be required from time to time by such rules and regulations. (c) The Company covenants and agrees to transmit by mail to all Holders, at the addresses of such Holders as they appear upon the registry books of the Company, within thirty days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Company pursuant to subsections (a) and (b) of this Section 7.03 as may be required by rules and regulations prescribed from time to time by the Securities and Exchange Commission. SECTION 7.04. (a) On or before July 15 each year, commencing in 1987, so long as any Securities are Outstanding hereunder, the Trustee shall 41 30 transmit to the Holders of Securities of all series for which it is Trustee hereunder as hereinafter in this Section 7.04 provided, a brief report dated as of May I5 of the year in which such report is made with respect to: (1) its eligibility under Section 9.09, and its qualifications under Section 9.08, or in lieu thereof, if to the best of its knowledge it has continued to be eligible and qualified under such Sections, a written statement to such effect; (2) the character and amount of any advances (and if the Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee (as such) which remain unpaid on the date of such report, and for the reimbursement of which it claims or may claim a lien or charge, prior to that of such Securities, on any property or funds held or collected by it as Trustee, except that the Trustee shall not be required (but may elect) to state such advances if such advances so remaining unpaid aggregate not more than one-half of one per cent of the principal amount of such Securities Outstanding on the date of such report; (3) the amount, interest rate and maturity date of all other indebtedness owing by the Company (or by any other obligor on the Securities) to the Trustee in its individual capacity, on the date of such report, with a brief description of any property held as collateral security thereon except an indebtedness based upon a creditor relationship arising in any manner described in paragraphs (2), (3), (4), or (6) of subsection (b) of Section 9.13; (4) the property and funds, if any, physically in the possession of the Trustee (as such) on the date of such report; (5) any additional issue of Securities for which it is the Trustee hereunder which the Trustee has not previously reported; and (6) any action taken by the Trustee in the performance of its duties under this Indenture which it has not previously reported and which in its opinion materially affects such Securities, except action in respect of a default, notice of which has been or is to be withheld by it in accordance with the provisions of Section 8.07. (b) The Trustee shall transmit to the Holders of Securities of all series for which it is the Trustee hereunder, as hereinafter provided, a brief report 42 31 with respect to the character and amount of any advances (and if the Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee (as such) since the date of the last report transmitted pursuant to the provisions of subsection (a) of this Section 7.04 (or if no such report has yet been so transmitted, since the date of execution of this Indenture), for the reimbursement of which it claims or may claim a lien or charge prior to that of such Securities on property or funds held or collected by it as Trustee, and which it has not, previously reported pursuant to this subsection (b) except that the Trustee shall not be required (but may elect) to report such advances if such advances remaining unpaid at any time aggregate ten per cent or less of the principal amount of such Securities Outstanding at such time. such report to be transmitted within ninety days after such time. (c) Reports pursuant to this Section 7.04 shall be transmitted by mail to the Holders specified in subsections (a) and (b) of this Section 7.04 at the addresses of such Holders as they appear upon the registry books of the Company. (d) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which any Securities are listed and also with the Securities and Exchange Commission. The Company agrees to notify the Trustee when and as the Securities of any series become listed on any stock exchange. ARTICLE EIGHT. REMEDIES OF THE TRUSTEE AND HOLDERS ON EVENT OF DEFAULT. SECTION 8.01 In case one or more of the following Events of Default with respect to Securities of any series shall have occurred and be continuing that is to say: (a) default in the payment of any installment of interest upon any Security of that series, as and when the same shall become due and payable, and continuance of such default for a period of thirty days: or (b) default in the payment of the principal of or premium, if any, on any Security of that series as and when the same shall become due and payable either at maturity, upon redemption. or by declaration: or (c) default in the payment or satisfaction of any sinking fund obligation, as and when such sinking fund obligation shall become due 43 32 and payable by the terms of the Securities of that series, and continuance of such default for a period of thirty days: or (d) failure on the part of the Company duly to observe or perform any other of the covenants or agreements on the part of the Company in this Indenture (other than a covenant or agreement which has been included in this Indenture for the benefit of Securities of any series other than that series) for a period of ninety days after the date on which written notice of such failure, requiring the same to be remedied, and stating that such notice is a "Notice of Default" hereunder, shall have been given by registered or certified mail to the Company by the Trustee, or to the Company and the Trustee by the Holders of at least twenty-five per cent in principal amount of the Securities of that series at the time Outstanding; or (e) a decree or order by a court having jurisdiction in the premises shall have been entered adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment, composition, liquidation, dissolution or winding-up of the Company or any similar relief under any present or future federal or state law or regulation, and such decree or order shall have continued undischarged or unstayed for a period of ninety consecutive days: or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver or trustee or assignee in bankruptcy or insolvency or other similar official of the Company or of its property, or for the winding-up or liquidation of its affairs, shall have been entered, and such decree or order shall have remained in force undischarged and unstayed for a period of ninety consecutive days; or (f) the Company shall institute proceedings to be adjudicated a voluntary bankrupt, or shall consent to the institution of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization, arrangement. adjustment, composition, liquidation, dissolution, winding-up or any similar relief under any present or future federal or state law or regulation, or shall consent to the filing of any such petition, or shall consent to the appointment of or the taking possession by a receiver or trustee or assignee in bankruptcy or insolvency or other similar official of it or of its property, or shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due: or 44 33 (g) any other Event of Default provided pursuant to Section 3.01 as part of the terms of and as applicable with respect to Securities of that series: then and in each and every such case, unless the principal of all the Securities of such series shall have already become due and payable, either the Trustee or the Holders of not less than twenty-five per cent m aggregate principal amount of the Securities of such series then Outstanding here-under, by notice in writing to the Company (and to the Trustee if given by Holders), may declare the principal amount (or, if the Securities of that series are Original issue Discount Securities, such portion of the principal amount as may be specified in the terms of that Series) of all the Securities of such series and the interest accrued thereon to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything in this Indenture or in the Securities of such series contained to the contrary notwithstanding. This provision, however, is subject to the condition that if, at any time after the principal amount (or, if the Securities of that series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of that series) of and accrued interest on the Securities of any series shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, the Company shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest upon all of the Securities of such series and the principal of and premium, if any, on any and all Securities of such series which shall have become due otherwise than by such declaration (with interest on overdue installments of interest to the extent that payment of such interest is enforceable under applicable law and on such principal and premium, if any, at the same rate per annum or Yield to Maturity (in the case of Original Issue Discount Securities) as is borne by the Securities of such series to the date of such payment or deposit) and the amount payable to the Trustee under Section 9.06, and any and all defaults under the Indenture with respect to the Securities of such series, other than the nonpayment of principal of and accrued interest on Securities of such series which shall have become due by such declaration, shall have been remedied or waived-then 45 34 and in every such case the Holders of a majority in aggregate principal amount of the Securities of such series then Outstanding, by written notice to the Company and to the Trustee, may consent to the waiver of all defaults with respect to that series and rescind and annul such declaration and its consequences; but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default, or shall impair any fight consequent thereon. In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceeding shall have been discontinued or abandoned because of such rescission or annulment or for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Company, the Trustee and the Holders shall be restored respectively to their several positions and rights hereunder, and all rights, remedies and powers of the Company, the Trustee and the Holders shall continue as though no such proceeding had been taken. SECTION 8.02. The Company covenants that (1) in case default shall be made in the payment of any installment of interest on any of the Securities of any series, as and when the same shall become due and payable, and such default shall have continued for a period of thirty days, or (2) in case default shall be made in the payment of the principal of and premium, if any, on any of the Securities of any series as and when the same shall have become due and payable, whether upon maturity of the Securities of that series or upon redemption or by declaration-then, upon demand of the Trustee, the Company will pay to the Trustee, for the benefit of the Holders of the Securities of that series, the whole amount that then shall have become due and payable on all such Securities of that series for principal and premium, if any, or interest, or both, as the case may be, with interest at the same rate per annum or Yield to Maturity (in the case of Original Issue Discount Securities) as is borne by the Securities of that series upon the overdue principal and premium, if any, and (to the extent that payment of such interest is enforceable under applicable law) on overdue installments of interest; and, in addition thereto, such further sums as shall be sufficient to cover the costs and expenses of collection and the amount payable to the Trustee under Section 9.06. In case the Company shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express trust, shall 46 35 be entitled and empowered to institute any actions or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against the Company or any other obligor on such Securities and collect in the manner provided by law out of the property of the Company or any other obligor on such Securities wherever situated the moneys adjudged or decreed to be payable. If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. No recovery of any such judgment by the Trustee and no levy of any execution upon any such judgment upon any of the property of the Company shall in any manner or to any extent. except as otherwise required by law, affect any rights, powers or remedies of the Trustee hereunder or any rights, powers or remedies of the Holders. but such rights, powers and remedies of the Trustee and of the Holders shall continue unimpaired as before. In case there shall be pending proceedings for the bankruptcy or for the reorganization of the Company or any other obligor on the Securities of any series under Federal bankruptcy laws or any other applicable law or in connection with the insolvency of the Company or any such other obligor or m case a receiver or trustee shall have been appointed for its property, or any other judicial proceedings relative to the Company or any such other obligor, its creditors or its property, the Trustee, irrespective of whether the principal of the Securities of any series shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section 8.02, shall be entitled and empowered, by intervention in such proceedings or otherwise, to file and prove a claim or claims for the whole amount of principal, premium, if any, and interest (or, if the Securities of that series are Original Issue Discount Securities, such portion of the 47 36 principal amount as may be specified in the terms of that series) owing and unpaid in respect of the Securities of such series, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and of the Holders allowed in any judicial proceeding relative to the Company or any other obligor on the Securities of such series, its creditors, or its property, and to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute the same after the deduction of the amount payable to the Trustee under Section 9.06; and each Holder hereby appoints the Trustee the attorney-in-fact for such Holder for such purpose, whether or not such Holder has filed a separate proof of claim in any such proceeding, and any receiver, assignee or trustee in bankruptcy or reorganization or other similar official is hereby authorized by each of the Holders to make such payments to the Trustee (and each of the Holders hereby waives any right to receive such payments except from the Trustee), and to pay to the Trustee any amount due it under Section 9.06. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. All rights of action and of asserting claims under this Indenture, or under any of the Securities may be enforced by the Trustee without the possession of any of the Securities, or the production thereof at any trial or other proceeding relative thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery or judgment (except for any amounts payable to the Trustee pursuant to the provisions of Section 9.06) shall be for the ratable benefit of the Holders of the Securities in respect of which such action was taken. SECTION 8.03. Any moneys collected by the Trustee pursuant to Section 8.02, together with any other sums held by the Trustee hereunder (other than sums held for the payment of a particular Security), shall be applied in the order following, at the date or dates fixed by the Trustee for the distribution of such moneys, and as regards the payments provided for in SECOND and THIRD below upon presentation of the Securities in respect of which moneys have been collected, and the notation thereon of the payment if only partially paid, and upon surrender thereof if fully paid: 48 37 FIRST: To the payment of costs and expenses of collection and of all amounts payable to the Trustee under Section 9.06; SECOND: In case the principal and premium, if any, of the Outstanding Securities in respect of which or for the benefit of which such moneys have been collected shall not have become due and be unpaid, to the payment of interest in default on such Securities, in the order of the maturity of the installments of such interest, with interest upon the overdue instalments of interest at the same rate per annum or Yield to Maturity (in the case of Original Issue Discount Securities) as is borne by the Securities of that series (to the extent that such interest on overdue installments of interest shall have been collected and to the extent that payment of such interest is enforceable under applicable law), such payments to be made ratably to the persons entitled thereto, without discrimination or preference; THIRD: In case the principal of the Outstanding Securities in respect of which or for the benefit of which moneys have been collected shall have become due, by declaration or otherwise, to the payment of the whole amount then owing and unpaid upon such Securities for principal and premium, if any, and interest, with interest at the same rate per annum or Yield to Maturity (in the case of Original Issue Discount Securities) as is borne by such Securities on the overdue principal and premium, if any, and on overdue installments of interest (to the extent that such interest on overdue installments of interest shall have been collected and to the extent that payment of such interest is enforceable under applicable law); and in the case such moneys shall be insufficient to pay in full the whole amount so due and unpaid upon such Securities, then to the payment of such principal and premium, if any, and interest without preference or priority of principal and premium, if any, over interest, or of interest over principal and premium, if any, or of any installment of interest over any other installment of interest, or of any Security of any series over any other Security of that series or any other series for which it is Trustee, ratably to the aggregate of such principal and premium, if any, and accrued and unpaid interest; and FOURTH: To the payment of the remainder, if any, to the Company, its successor or assigns, or to whoever may be lawfully entitled to receive the same, or as a court of competent jurisdiction may direct. SECTION 8.04. No Holder of any Security of any series shall have any right by virtue or by availing of any provision of this Indenture to institute 49 38 any suit, action or proceeding in equity or at law upon or under or with respect to this Indenture or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless such Holder previously shall have given to the Trustee written notice of default and of the continuance thereof, as hereinbefore provided, and unless also the Holders of not less than twenty-five per cent in aggregate principal amount of the Securities of that series then Outstanding shall have made written request upon the Trustee to institute such action suit or proceeding in its own name as Trustee hereunder and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee for sixty days after its receipt of such notice, request and offer of indemnity shall have neglected or refused to institute any such action, suit or proceeding; it being understood and intended, and being expressly covenanted by the taker and Holder of every Security with every other taker and Holder and the Trustee, that no one or more Holders of Securities shall have any right in any manner whatever by virtue or by availing of any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or seek to obtain priority over or preference to any other such Holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all such Holders. Notwithstanding any other provisions in this Indenture, however, the right of any Holder of any Security to receive payment of the principal of and premium, if any, and interest on such Security, on or after the respective due dates expressed in such Security, or to institute suit for the enforcement of any such payment on or after the date on which such payment becomes due, shall not, be impaired or affected without the consent of such Holder. SECTION 8.05. All rights, powers and remedies given by this Article Eight to the Trustee or to the Holders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any thereof or of any other rights, powers and remedies available to the Trustee or the Holders, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture, and no delay or omission of the Trustee or of any Holder to exercise any right. power or remedy accruing upon any default occurring and continuing as aforesaid shall impair any such right, power or remedy, or shall be construed to be a waiver of any such default or an acquiescence therein; and, subject to the 50 39 provisions of Section 8.04, every right, power and remedy given by this Article Eight or by law to the Trustee or to the Holders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Holders. SECTION 8.06. The Holders of a majority in aggregate principal amount of the Securities of any series at the time Outstanding shall have the right to direct the time method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to the Securities of such series; provided however, that subject to the provisions of Section 9.01 hereof, the Trustee shall have the right to decline to follow any such direction if the Trustee after consulting with counsel determines that the action so directed may not lawfully be taken, or conflicts with the terms of this Indenture or the Securities of any series. and the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Prior to the declaration of the maturity of the Securities of any series as provided in Section 8.01 hereof, the Holder of a majority in aggregate principal amount of the Securities of that series at the time Outstanding may on behalf of the Holders of an of the Securities of that series consent to the waiver of any past default hereunder and its consequences, except a default in the payment of interest, or premium, if any, on, or the principal of, the Securities of such series. In the case of any such waiver the Company, the Trustee and the Holders of the Securities of that series shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 8.07. The Trustee shall, within ninety (90) days after the occurrence of a default with respect to the Securities of any series, mail to all Holders of Securities of that series, at the addresses of such Holders as they appear upon the registry books of the Company for such series, notice of all defaults with respect to Securities of that series known to the Trustee, unless such defaults shall have been cured before the giving of such notice (the term "defaults" for the purposes of this Section 8.07 being hereby defined to be the events specified in clauses (a), (b), (c), (d), (e), (f) and (g) of Section 8.01, not including any periods of grace provided therein and irrespective of the giving of written notice as specified in clause (d) of Section 8.0 1 or any notice pursuant to clause (g) of Section 8.01); provided 51 40 that, in the case of any default of the character specified in said clause (d) of Section 8.01, no such notice shall be given until at least sixty (60) days after the occurrence thereof, and provided that, except in the case of default in the payment of the principal of or premium, if any, or interest on any of the Securities of such series or in the making of any sinking fund payment with respect to such series, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interests of the Holder of the Securities of such series. SECTION 8.08. All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 8.08 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder of the Securities of any series, or group of such Holders, holding in the aggregate more than ten per cent in principal amount of the Outstanding Securities of that series, or to any suit instituted by any Holder for the enforcement of the payment of the principal of and premium, if any, or interest on any Security, on or after the due date expressed in such Security (or, in the case of redemption, on or after the Redemption Date). ARTICLE NINE. CONCERNING THE TRUSTEE. SECTION 9.01. With respect to the Holders of any series of Securities issued hereunder, the Trustee, prior to the occurrence of an Event of Default with respect to the Securities of that series and after the curing of all Events of Default which may have occurred with respect to that series, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Event of Default with respect to the Securities of a series has occurred (which has not been cured or waived) the Trustee shall exercise such of the rights and powers vested in it by this Indenture with 52 41 respect to such series, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that (a) prior to the occurrence of an Event of Default with respect to the Securities of a series and after the curing of all Events of Default with respect to such series which may have occurred: (1) the duties and obligations of the Trustee with respect to the Securities of such series shall be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations with respect to such series as are specifically set forth in this Indenture, and no implied covenants or obligations with respect to such series shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any certificates or opinions specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts: and (c) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a majority in principal amount of the Securities of any series at the time Outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture. 53 42 None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there is reasonable ground for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Indenture. SECTION 9.02. Subject to the provisions of Section 9.01: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties: (b) any request, direction, order or demand of or notice by the Company mentioned herein shall be sufficiently evidenced by an instrument signed in the name of the Company by the Chairman of the Board, the Vice Chairman of the Board, the President or any Vice-President and by the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary (unless other evidence in respect thereof be herein specifically prescribed); and any resolution of the Board of Directors of the Company may be evidenced to the Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Company; (c) the Trustee may consult with counsel and any advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel; (d) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders, pursuant to the provisions of this Indenture, in the absence of an offer by such Holders to the Trustee of reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby; (e) the Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; 54 43 (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, or other paper or document, unless requested in writing so to do by the Holders of twenty-five per cent in aggregate principal amount of the Securities of any series affected then Outstanding; provided, however, that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security conferred upon it by the terms of this Indenture, the Trustee may require reasonable indemnity against such costs, expenses or liabilities as a condition to so proceeding; the reasonable expense for such investigation shall be paid by the Company or, if paid by the Trustee, shall be repaid by the Company upon demand; and (g) the Trustee may execute any of the trusts or powers or perform any duties hereunder either directly or by or through agents or attorneys, and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed by it with due care hereunder. SECTION 9.03. The recitals contained herein and in the Securities (other than the certificate of authentication on the Securities) shall be taken as the statements of the Company and the Trustee or any Authenticating Agent assumes no responsibility for the correctness of the same. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. The Trustee or any Authenticating Agent shall not be accountable for the use or application by the Company of any of the Securities or of the proceeds of such Securities. SECTION 9.04. The Trustee, any Authenticating Agent, Paying Agent or Security registrar, in its individual or any other capacity, may become the owner or pledgee of Securities with the rights it would have if it were not Trustee, Authenticating Agent, Paying Agent or Security registrar. SECTION 9.05. Subject to the provisions of Section 14.04 hereof, all moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by 55 44 law. The Trustee shall be under no liability for interest on any moneys received by it hereunder except such as it may agree with the Company to pay thereon. So long as no Event of Default shall have occurred and be continuing, all interest allowed on any such moneys shall be paid from time to tune upon the written order of the Company. SECTION 9.06. The Company covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, reasonable compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust), and the Company will pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in connection with any action taken by it under any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence or bad faith. The Company also covenants to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on the part of the Trustee and arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim of liability in the premises. The obligations of the Company under this Section 9:06 to compensate and indemnify and hold harmless the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture. Such additional indebtedness shall be secured by a lien prior to that of the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the Holders of particular Securities. SECTION 9.07. Subject to the provisions of Section 9.01, whenever in the administration of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or bad faith on the part of the Trustee, be deemed to be conclusively proved and established by an Officers' Certificate, delivered to the Trustee, which, in the absence of negligence or bad faith on the part of the Trustee, shall be full warrant to the Trustee for any action taken or omitted by it under the provisions of this Indenture upon the faith thereof. 56 45 SECTION 9.08. (a) If the Trustee has or shall acquire any conflicting interest, as defined in this Section 9.0 8 with respect to the Securities of any series, it shall, within ninety days after ascertaining that it has such conflicting interest, either eliminate such conflicting interest or resign with respect to the Securities of that series in the manner and with the effect specified in Section 9.10. (b) In the event that the Trustee shall fail to comply with the provisions of subsection (a) of this Section 9.08 with respect to the Securities of any series, the Trustee shall, within ten days after the expiration of such ninety-day period, transmit notice by mail of such failure to the Holders of Securities of that series, at the addresses of such Holders as they appear upon the registry books of the Company for such series. (c) For the purposes of this Section 9.08 the Trustee shall be deemed to have a conflicting interest with respect to the Securities of any series if (1) the Trustee is trustee under this Indenture with respect to the Outstanding Securities of any series other than that series, or is trustee under another indenture under which any other securities, or certificates of interest or participation in any other securities, of the Company are outstanding, unless such other indenture is a collateral trust indenture under which the only collateral consists of Securities issued under this Indenture, provided that there shall be excluded from the operation of this paragraph (a) this Indenture with respect to the Securities of any series other than that series and (b) any other indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Company are outstanding if (i) this Indenture and such other indenture or indentures are wholly unsecured and such other indenture or indentures are hereafter qualified under the Trust Indenture Act of 1939, unless the Securities and Exchange Commission shall have found and declared by order pursuant to subsection (h) of Section 305 or subsection (c) of Section 307 of the Trust Indenture Act of 1939 that differences exist between the provisions of this Indenture with respect to Securities of that series and one or more other series or the provisions of such other indenture or indentures which are so likely to involve a material conflict of interest as to make it necessary in the public interest or for the protection of investors to disqualify the Trustee from acting as such under this Indenture with respect to the Securities of that series and such other series or under one of such indentures, or (ii) the Company shall have sustained the burden of proving. on application to the Securities and Exchange Commission and after opportu- 57 46 nity for hearing thereon, that the trusteeship under this Indenture with respect to the Securities of that series and such other series or such other indenture or indentures is not so likely to involve a material conflict of interest as to make it necessary in the public interest or for the protection of investors to disqualify the Trustee from acting as such under this Indenture with respect to the Securities of that series and such other series or under one of such indentures; (2) the Trustee or any of its directors or executive officers is an obligor upon the Securities of any series or an underwriter for the Company; (3) the Trustee directly or indirectly controls or is directly or indirectly controlled by or is under direct or indirect common control with the Company or an underwriter for the Company; (4) the Trustee or any of its directors or executive officers is a director, officer, partner, employee, appointee, or representative of the Company, or of an underwriter (other than the Trustee itself) for the Company who is currently engaged in the business of underwriting, except that (A) one individual may be a director and/or an executive officer of the Trustee and a director and/or an executive officer of the Company, but may not be at the same time an executive officer of both the Trustee and the Company; (B) if and so long as the number of directors of the Trustee in office is more than nine, one additional individual may be a director and/or an executive officer of the Trustee and a director of the Company; and (C) the Trustee may be designated by the Company or by an underwriter for the Company to act in the capacity of transfer agent. Registrar, custodian, paying agent, fiscal agent, escrow agent, or depositary, or in any other similar capacity, on subject to the provisions of paragraph (I) of this subsection (c), to act as trustee whether under an indenture or otherwise: (5) ten per cent or more of the voting securities of the Trustee is beneficially owned either by the Company or by any director, partner or executive officer thereof, or twenty per cent or more of such voting securities is beneficially owned, collectively, by any two or more of such persons; or ten per cent or more of the voting securities of the Trustee is beneficially owned either by an underwriter for the Company or by any director, partner or executive officer thereof, or is beneficially owned, collectively, by any two or more such persons; 58 47 (6) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default, (A) five per cent or more of the voting securities, or ten per cent or more of any other class of security, of the Company, not including the Securities issued under this Indenture and securities issued under any other indenture under which the Trustee is also trustee, or (B) ten per cent or more of any class of security of an underwriter for the Company; (7) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default, five per cent or more of the voting securities of any person who, to the knowledge of the Trustee, owns ten per cent or more of the voting securities of, or controls directly or indirectly or is under direct or indirect common control with the Company; (8) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default, ten per cent or more of any class of security of any person who, to the knowledge of the Trustee, owns fifty per cent or more of the voting securities of the Company; or (9) the Trustee owns on May I5 in any calendar year, in the capacity of executor, administrator, testamentary or inter vivos trustee, guardian, committee or conservator, or in any other similar capacity, an aggregate of twenty-five per cent or more of the voting securities, or of any class of security, of any person, the beneficial ownership of a specified percentage of which would have constituted a conflicting interest under paragraph (6), (7), or (8) of this subsection. As to any such securities of which the Trustee acquired ownership through becoming executor, administrator, or testamentary trustee of an estate which included them, the provisions of the preceding sentence shall not apply, for a period of two years from the date of such acquisition, to the extent that such securities included in such estate do not exceed twenty-five per cent of such voting securities or twenty-five per cent of any such class of security. Promptly after May 15, in each calendar year, the Trustee shall make a check of its holdings of such securities in any of the above-mentioned capacities as of such May 15. If the Company fails to make payment in full of principal of or interest on any of the Securities when and as the same becomes due and payable and such 59 48 failure continues for thirty days thereafter the Trustee shall make a prompt check of its holdings or such securities in any of the above-mentioned capacities as of the date of the expiration of such thirty-day period, and after such date, notwithstanding the foregoing provisions of this paragraph (9), all such securities so held by the Trustee, with sole or joint control over such securities vested in it, shall, but only so long as such failure shall continue, be considered as though beneficially owned by the Trustee for the purposes of paragraphs (6), (7), and (8) of this subsection (C). The specification of percentages in paragraphs (5) to (9), inclusive, of this subsection (c) shall not be construed as indicating that the ownership of such percentages of the securities of a person is or is not necessary or sufficient to constitute direct or indirect control for the purposes of paragraph (3) or (7) of this subsection (c). For the purposes of paragraphs (6), (7), (8), and (9) of this subsection (c) only, (A) the terms "security" and "securities" shall include only such securities as are generally known as corporate securities, but shall not include any note or other evidence of indebtedness issued to evidence an obligation to repay moneys lent to a person by one or more banks, trust companies or banking firms, or any certificate of interest or participation in any such note or evidence of indebtedness; (B) an obligation shall be deemed to be in default when a default in payment of principal shall have continued for thirty days or more and shall not have been cured; and (C) the Trustee shall not be deemed to be the owner or holder of ( i) any security which it holds as collateral security (as trustee or otherwise) for an obligation which is not in default as defined in clause (B) above; or (ii) any security which it holds as collateral security under this Indenture irrespective of any default hereunder, or (iii) any security which it holds as agent for collection, or as custodian, escrow agent, or depositary, or in any similar representative capacity. Except as above provided, the word "security" or "securities" as used in this Indenture shall mean any note, stock. treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral trust certificate, pre-organization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or 60 49 other mineral rights, or, in general, any interest or instrument commonly known as a "security", or any certificate of interest or participation in a temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. (d) For the purposes of this Section 9.08 (1) The term "underwriter" when used with reference to the Company shall mean every person, who, within three years prior, to the time as of which the determination is made, has purchased from the Company with a view to, or has offered or sold for the Company in connection with, the distribution of any security of the Company outstanding at such time, or has participated or has had a direct or indirect participation in any such undertaking, or has participated or has had a participation in the direct or indirect underwriting of any such undertaking, but such term shall not include a person whose interest was limited to a commission from tin underwriter or dealer not in excess of the usual and customary distributors' or sellers' commission. (2) The term "director" shall mean any director of a corporation or any individual performing similar functions with respect to any organization whether incorporated or unincorporated. (3) The term "person" shall mean an individual, a corporation, a partnership, an association, a joint-stock company, a trust, an unincorporated organization, or a government or political subdivision thereof. As used in this paragraph, the term "trust' shall include only a trust where the interest or interests of the beneficiary or beneficiaries are evidenced by a security. (4) The term "voting security" shall mean any security presently entitling the owner or holder thereof to vote in the direction pr management of the affairs of a person, or any security issued under or pursuant to any trust, agreement or arrangement whereby a trustee or trustees or agent or agents for the owner or holder of such security are presently entitled to vote in the direction or management of the affairs of a person. (5) The term "Company" shall mean any obligor upon the Securities. 61 50 (6) The term "executive officer" shall mean the president, every vice-president, every trust officer, the cashier, the secretary, and the treasurer of a corporation and any individual customarily performing similar functions with respect to any organization whether incorporated or unincorporated, but shall not include the chairman of the board of directors. The percentages of voting securities and other securities specified in this Section 9.08 shall be calculated in accordance with the following provisions: (A) A specified percentage of the voting securities of the Trustee the Company or any other person referred to in this Section 9.08 (each of whom is referred to as a "person" in this paragraph) means such amount of the outstanding voting securities of such person as entities the holder or holders thereof to cast such specified percentage of the aggregate votes which the holders of all the outstanding voting securities of such person are entitled to cast in the direction or management or the affairs of such person. (B) A specified percentage of a class of securities of a person means such percentage of the aggregate amount of securities of the class outstanding. (C) The term "amount", when used in regard to securities, means the principal amount if relating to evidences of indebtedness, the number of shares if relating to capital shares, and the number of units if relating to any other kind of security. (D) The term "outstanding" means issued and not held by or for the account of the issuer. The following securities shall not be deemed outstanding within the meaning of this definition: (i) securities of an issuer held in a sinking fund relating to securities of the issuer of the same class; (ii) securities of an issuer held in a sinking fund relating to another class of securities of the issuer, if the obligation evidenced by such other class of securities is not in default as to principal or interest or otherwise; (iii) securities pledged by the issuer thereof as security for an obligation of the issuer not in default as to principal or interest or otherwise; and 62 51 (iv) securities held in escrow if placed in escrow by the issuer thereof; provided, however, that any voting securities of an issuer shall be deemed outstanding if any person other than the issuer is entitled to exercise the voting rights thereof. (E) A security shall be deemed to be of the same class as another security if both securities confer upon the holder or holders thereof substantially the same rights and privileges; provided, however, that, in the case of secured evidences of indebtedness, all of which are issued under a single indenture, differences in the interest rates or maturity dates of various series thereof shall not be deemed sufficient to constitute such series different classes; and provided, further, that, in the case of unsecured evidences of indebtedness, differences in the interest rates or maturity dates thereof shall not be deemed sufficient to constitute them securities of different classes, whether or not they are issued under a single indenture. SECTION 9.09. The Trustee hereunder shall at all times be a corporation organized and doing business under the laws of the United States or any State or Territory thereof or of the District of Columbia, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least Twenty Million Dollars ($20,000,000), subject to supervision or examination by Federal, State, Territorial, or District of Columbia authority and having its principal office and place of business in The City of New York, if there be such a corporation having its principal office and place of business in said City willing and able to act as Trustee on reasonable and customary terms. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 9.09, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 9.09, the Trustee shall resign immediately in the manner and with the effect specified in Section 9.10. SECTION 9.10. (a) The Trustee, or any trustee or trustees hereafter appointed, may at any time resign with respect to one or more or all series of 63 52 Securities by giving written notice of such resignation to the Company and by mailing notice thereof to the Holders of Securities of such series at their addresses as they shall appear on the registry books of the Company for such series. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee with respect to the Securities of such series by written instrument, in duplicate, executed by order of the Board of Directors of the Company, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee. If no successor trustee with respect to the Securities of such series shall have been so appointed and have accepted appointment within thirty days after the mailing of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee, or any Holder who has been a bona tide Holder of a Security or Securities of such series for at least six months may, subject to the provisions of Section 8.08, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee. (b) In case at any time any of the following shall occur: (1) the Trustee shall fail to comply with the provisions of subsection (a) of Section 9.08 after written request therefor by the Company or any Holder who has been a bona tide Holder of a Security or Securities for at least six months, or (2) the Trustee shall cease to be eligible in accordance with the provisions of Section 9.09 and shall fail to resign after written request therefor by the Company or by any such Holder, or (3) the Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed. or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, the Company may remove the Trustee with respect to all Securities and appoint a successor trustee by written instrument, in duplicate, executed by order of the Board of Directors of the Company, one copy of which instrument shall be delivered to the Trustee so removed and 64 53 one copy to the successor trustee, or, subject to the provisions of Section 8.08, any Holder who has been a bona fide Holder of a Security or Securities for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor trustee. Such court may thereupon alter such notice. if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee. (c) The Holders of a majority in aggregate principal amount of the Securities of any series at the time Outstanding may at any time remove the Trustee with respect to such series and appoint a successor trustee with respect to such series by the delivery to the Trustee so removed, to the successor trustee and to the Company of the evidence provided for in Section 10.01 of the action in that regard taken by the Holders. (d) Any resignation or removal of the Trustee and any appointment of a successor trustee pursuant to any of the provisions of this Article Nine shall become effective upon acceptance of appointment by the successor trustee as provided in Section 9.11. SECTION 9.11. (a) Any successor trustee appointed as provided in Section 9.10 with respect to the Securities of all series shall execute, acknowledge and deliver to the Company and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act. deed or conveyance. shall become vested with all the rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as Trustee herein; but, nevertheless, on the written request of the Company or the successor trustee, the trustee ceasing to act shall, upon payment of any amounts then due it pursuant to the provisions of Section 9.06, execute and deliver an instrument transferring to such successor trustee all the rights and powers of the trustee so ceasing to act. (b) In case of the appointment hereunder of a successor trustee with respect to the Securities of one or more (but not all) series, the Company, the predecessor trustee and each successor trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor trustee shall accept such appointment and which (1) shall contain such provisions as shall be 65 54 necessary desirable to transfer and confirm to, and to vest in. each successor trustee all the rights, powers, trusts and duties of the predecessor trustee with respect to the Securities of that or those series to which the appointment of such successor trustee relates, (2) if the predecessor trustee is not retiring with respect to the Securities of all series for which it is the trustee hereunder, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the predecessor trustee with respect to the Securities of that or those series as to which the predecessor trustee is not retiring shall continue to be vested in the predecessor trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such trustees co-trustees of the same trust and that each such trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the predecessor trustee shall become effective to the extent provided therein and each such successor trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the predecessor trustee with respect to the Securities of that or those series to which the appointment of such successor trustee relates: but, on the request of the Company or any successor trustee, such predecessor trustee shall duly assign, transfer and deliver to such successor trustee all property and money held by such predecessor trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor trustee relates. (c) Upon request of any such successor trustee, the Company shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights, powers and trusts referred to in subsection (a) or (b) of this Section 9.11, as the case may be. Any trustee ceasing to act shall, nevertheless retain the lien, if any, provided for in Section 9.06 upon all property or funds held or collected by such trustee. No successor trustee shall accept appointment as provided in this Section 9.11 unless at the time of such acceptance such successor trustee shall be qualified under the provisions of Section 9.08 and eligible under the provisions of Section 9.09. 66 55 Upon acceptance of appointment by a successor trustee as provided in this Section 9.11, the Company shall mail notice of the succession of such trustee hereunder to the Holders of the Securities of any applicable series at their addresses as they shall appear on the registry books of the Company for such series. If the Company fails so to mail such notice within ten days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be so mailed at the expense of the Company. SECTION 9.12. Any corporation into which the Trustee may be merged or convened or with which it may be consolidated or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder without the execution or filing of any paper or any further act on the pan of any of the parties hereto. In any such case such successor, unless it is the same corporation, shall forthwith make a report to Holders of the character required by paragraph (1) of subsection (a) of Section 7.04, in the manner provided in said Section 7.04. In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture any of the Securities of any series with respect to which the appointment of such successor trustee relates shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor Trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities of any series with respect to which the appointment of such successor trustee relates shall not have been authenticated. such successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of such successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities of such series or in this Indenture provided that the certificate of the Trustee shall have; provided, however, that the right to adopt the certificate of authentication of any predecessor Trustee or authenticate Securities of any series in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation. 67 56 SECTION 9.13. (a) Subject to the provisions of subsection (b) of this Section 9.13, if the Trustee shall be or shall become a creditor, directly or indirectly, secured or unsecured, of the Company or any other obligation on the Securities within four months prior to a default, as defined in subsection (c) of this Section 9.13, or subsequent to such default, then, unless and until such default shall be cured, the Trustee shall set apart and hold in a special account for the benefit of the Trustee individually, the Holders or the Securities and the holders of other indenture securities (as defined in subsection (c) of this Section 9.13). (1) an amount equal to any and all reductions in the amount due and owing upon any claim of the Trustee as such creditor in respect of principal or interest, effected after the beginning of such four months' period and valid as against the Company and its other creditors, except any such reduction resulting from the receipt or disposition of any property described in paragraph (2) of this subsection (a), or from the exercise of any right of set-off which the Trustee could have exercised if a petition in bankruptcy had been filed by or against the Company upon the date of such default; and (2) all property received by the Trustee in respect of any claim as such creditor, either as security therefor, or in satisfaction or composition thereof, or otherwise, after the beginning of such four months' period, or an amount equal to the proceeds of any such property, if disposed of; subject, however, to the rights, if any, of the Company and its other creditors in such property or such proceeds. Nothing herein contained. however, shall affect the right of the Trustee (A) to retain for its own account (i) payments made on account of any such claim by any person (other than the Company) who is liable thereon, and (ii) the proceeds of the bona fide sale of any such claim by the Trustee to a third person, and (iii) distributions made in cash. securities, or other property in respect of claims filed against the Company in bankruptcy or receivership or in proceedings for reorganization pursuant to the Federal bankruptcy laws or applicable State law; (B) to realize, for its own account, upon any property held by it as security for any such claim, if such property was so held prior to the beginning of such four months' period; 68 57 (C) to realize, for its own account. but only to the extent of the claim hereinafter mentioned, upon any property held by it as security for any such claim, if such claim was created after the beginning of such four months' period and such property was received as security therefor simultaneously with the creation thereof, and if the Trustee shall sustain the burden of proving that at the time such property was so received the Trustee had no reasonable cause to believe that a default, as defined in subsection (c) of this Section 9.13, would occur within four months; or (D) to receive payment on any claim referred to in paragraph (B) or (C), against the release of any property held as security for such claim as provided in such paragraph (B) or (C), as the case may be, to the extent of the fair value of such property. For the purposes of paragraphs (B), (C) and (D), property substituted after the beginning of such four months' period for property held as security at the time of such substitution shall, to the extent of the fair value of the property released. have the same status as the property released, and, to the extent that any claim referred to in any of such paragraphs is created in renewal of or in substitution for or for the purpose of repaying or refunding any preexisting claim of the Trustee as such creditor, such claim shall have the same status as such preexisting claim. If the Trustee shall be required to account, the funds and property held in such special account and the proceeds thereof shall be apportioned between the Trustee, the Holders and the holders of other indenture securities in such manner that the Trustee, the Holders and the holders of other indenture securities realize, as a result of payments from such special account and payments of dividends on claims filed against the Company in bankruptcy or receivership or in proceedings for reorganization pursuant to the Federal bankruptcy laws or applicable State law, the same percentage of their respective claims, figured before crediting to the claim of the Trustee anything on account of the receipt by it from the Company of the funds and property in such special account and before crediting to the respective claims of the Trustee, the Holders and the holders of other indenture securities dividends on claims filed against the Company in bankruptcy or receivership or in proceedings for reorganization pursuant to the Federal bankruptcy laws or applicable State law, but after crediting thereon receipts on account of the indebtedness represented by their respective claims from all sources 69 58 other than from such dividends and from the funds and property so held in such special account As used in this paragraph with respect to any claim, the term "dividends" shall include any distribution with respect to such claim, in bankruptcy or receivership or in proceedings for reorganization pursuant to the Federal bankruptcy laws or applicable State law, whether such distribution is made in cash, securities, or other property, but shall not include any such distribution with respect to the secured portion, if any, of such claim. The court in which such bankruptcy, receivership, or proceeding for reorganization is pending shall have jurisdiction (i) to apportion between the Trustee, the Holders, and the holders of other indenture securities in accordance with the provisions of this paragraph, the funds and property held in such special account and the proceeds thereof, or (ii) in lieu of such apportionment, in whole or in pan, to give to the provisions of this paragraph due consideration in determining the fairness of the distributions to be made to the Trustee, the Holders and the holders of other indenture securities with respect to their respective claims. in which event it shall not be necessary to liquidate or to appraise the value of any securities or other property held in such special account or as security for any such claim, or to make a specific allocation of such distributions as between the secured and unsecured portions of such claims, or otherwise to apply the provisions of this paragraph as a mathematical formula. Any Trustee who has resigned or been removed after the beginning of such four months' period shall be subject to the provisions of this subsection (a) as though such resignation or removal had not occurred. If any Trustee has resigned or been removed prior to the beginning of such four months' period, it shall be subject to the provisions of this subsection (a) if and only if the following conditions exist: (i) the receipt of property or reduction of claim which would have given rise to the obligation to account, if such Trustee had continued as Trustee, occurred after the beginning of such four months' period: and (ii) such receipt of property or reduction of claim occurred within four months after such resignation or removal. (b) There shall be excluded from the operation of subsection (a) of this Section 9.13 a creditor relationship arising from (1) the ownership or acquisition of securities issued under any indenture, or any security or securities having a maturity of one year or more at the time of acquisition by the Trustee; 70 59 (2) advances authorized by a receivership or bankruptcy court of competent jurisdiction, or by this Indenture, for the purpose of preserving any property which shall at any time be subject to the lien of this Indenture or of discharging tax liens or other prior liens or encumbrances thereon, if notice of such advance and of the circumstances surrounding the making thereof is given to the Holders at the time and in the manner provided in Section 7.04: (3) disbursements made in the ordinary course of business in the capacity of trustee under an indenture, transfer agent, registrar, custodian, paying agent, fiscal agent or depositary, or other similar capacity: (4) an indebtedness created as a result of services rendered or premises rented; or an indebtedness created as a result of goods or securities sold in a cash transaction as defined in subsection (c) of this Section 9.13, (5) the ownership of stock or of other securities of a corporation organized under the provisions of Section 25( a) of the Federal Reserve Act, as amended, which is directly or indirectly a creditor of the Company; or (6) the acquisition, ownership, acceptance or negotiation of any drafts, bills of exchange, acceptances or obligations which fall within the classification of self-liquidating paper as defined in subsection (c) of this Section 9.13. (c) As used in this Section 9.13: (1) The term "default" shall mean any failure to make payment in full of the principal of or interest upon any of the Securities or upon the other indenture securities when and as such principal or interest becomes due and payable; (2) The term "other indenture securities" shall mean securities upon which the Company is an obligor (as defined in the Trust Indenture Act of 1939) outstanding under any other indenture (A) under which the Trustee is also trustee, (B) which contains provisions substantially similar to the provisions of this Section 9.13; and (C) under which a default exists at the time of the apportionment of the funds and property held in said special account; 71 60 (3) The term "cash transaction" shall mean any transaction in which full payment for goods or securities sold is made within seven days after delivery of the goods or securities in currency or in checks or other orders drawn upon banks or bankers and payable upon demand, (4) The term "self-liquidating paper" shall mean any draft, bill of exchange, acceptance or obligation which is made, drawn, negotiated or incurred by the Company for the purpose of financing the purchase, processing, manufacture, shipment, storage or sale of goods, wares or merchandise and which is secured by documents evidencing title to, possession of or a lien upon, the goods, wares or merchandise or the receivables or proceeds arising from the sale of the goods, wares or merchandise previously constituting the security, provided the security is received by the Trustee simultaneously with the creation of the creditor relationship with the Company arising from the making, drawing, negotiating or incurring of the draft, bill of exchange, acceptance or obligation; and (5) The term "Company" shall mean any obligor upon the Securities. SECTION 9.14. At any time when any of the Securities remain Outstanding the Trustee may appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 3.07, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $20,000,000 and subject to supervision or exam- 72 61 ination by Federal or State authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus asset forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or convened or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section without the execution or filing of any paper or any further act on the pan of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall mail written notice of such appointment by first-class mail, postage prepaid, to all Holders of Securities of the series with respect to which such Authenticating Agent will serve, as their names and addresses appear in the register for such Securities. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section, and the Trustee shall be entitled to be reimbursed for such payments pursuant to the provisions of Section 9.06. 73 62 If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternate certificate of authentication in the following form: This is one of the Securities of the series designated herein referred to in the within mentioned Indenture. MANUFACTURERS HANOVER TRUST COMPANY As Trustee By --------------------------------- As Authenticating Agent By --------------------------------- Authorized Officer ARTICLE TEN. CONCERNING THE HOLDERS. SECTION 10.01. Whenever in this Indenture it is provided that the Holders of a specified percentage or a majority in aggregate principal amount of the Securities of any series may take any action (including the making of any demand or request, the giving of any direction, notice, consent or waiver or the taking of any other action) the fact that at the time of taking any such action the Holders of such specified percentage or majority have joined therein may be evidenced (a) by any instrument or any number of instruments of similar tenor executed by such Holders in person or by agent or proxy appointed in writing, or (b) by the record of such Holders voting in favor thereof at any meeting of such Holders duly called and held in accordance with the provisions of Article Eleven, or (c) by a combination of such instrument or instruments and any such record of such a meeting of such Holders. SECTION 10.02. Subject to the provisions of Sections 9.01, 9.02 and 11.05, proof of the execution of any instrument by a Holder or his agent or proxy and proof of the holding by any person of any of the be sufficient if made in the following manner: 74 63 (a) The fact and date of the execution by any such person of any instrument may be proved by the certificate of any notary public or other officer authorized to take acknowledgments of deeds to be recorded in the jurisdiction in which he acts, that the person executing such instrument acknowledged to him the execution thereof, or by an affidavit of a witness to such execution sworn to before any such notary or other such officer. The fact and date of the execution of any such instrument may also be proved in any other reasonable manner which the Trustee may deem sufficient. Such certificate or affidavit shall also constitute sufficient proof of the authority of the person executing any instrument in cases where Securities are not held by individuals. (b) The holding of Securities shall be proved by the registry books of the Company or by a certificate of the registrar thereof. The Trustee may require such additional proof of any matter referred to in this Section 10.02 as it shall deem necessary. The record of any Holders' meeting shall be proved in the manner provided in Section 11.06. SECTION 10.03. Prior to due presentment for registration of transfer of any Security the Company, the Trustee, any Paying Agent and any Security registrar may deem and treat the person in whose name any Security shall be registered upon the registry books of the Company as the absolute owner of such Security (whether or not such Security shall be overdue and notwithstanding any notation of ownership or other writing thereon made by anyone other than the Company or any Security registrar) for the purpose of receiving payment of or on account of the principal of and premium, if any, and, subject to Section 3.08, interest on such Security and for all other purposes; and neither the Company nor the Trustee nor any Paying Agent nor any Security registrar shall be affected by any notice to the contrary. All such payments so made to any such registered Holder for the time being, or upon his order, shall be valid, and. to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Security. SECTION 10.04. In determining whether the Holders of the requisite aggregate principal amount of Securities of any series have concurred in any demand, direction, request, notice, consent, waiver or other action under this 75 64 Indenture, Securities which are owned by the Company or any other obligor on the Securities or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any other obligor on the Securities shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, provided that for the purpose of determining whether the Trustee shall be protected in relying on any such demand. direction, request, notice, consent, waiver or other action, only Securities which the Trustee knows are so owned shall be disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding for the purposes of this Section 10.04, if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right to vote such Securities and that the pledgee is not the Company nor any other obligor on the Securities or a person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any such other obligor. In case of a dispute as to such right, any decision by the Trustee taken upon and in accordance with the advice of counsel shall be full protection to the Trustee. SECTION 10.05. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 10.01, of the taking of any action by the Holders of a majority or the percentage in aggregate principal amount of the Securities of a series specified in this Indenture in connection with such action, any Holder of a Security which is shown by the evidence to be included in the Securities the Holders of which have consented to such action may, by filing written notice with the Trustee at its Principal Office and upon proof of holding as provided in Section 10.02, revoke such action so far as concerns such Security. Except as aforesaid any such action taken by the Holder of any Security shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Security and of any Security issued in exchange therefor or in lieu thereof, irrespective of whether or not any notation in regard thereto is made upon such Security. Any action taken by the Holders of a majority or the percentage in aggregate principal amount of the Securities of a series specified in this Indenture in connection with such action shall be conclusively binding upon the Holders of all the Securities of such series. 76 65 ARTICLE ELEVEN. HOLDERS' MEETINGS. SECTION 11.01. A meeting of Holders of Securities of any series may be called at any time and from time to time pursuant to the provisions of this Article Eleven for any of the following purposes: (1) to give any notice to the Company or to the Trustee, or to give any directions to the Trustee, or to consent to the waiving of any default hereunder and its consequences, or to take any other action authorized to be taken by Holders pursuant to any of the provisions of Article Eight; (2) to remove the Trustee and appoint a successor trustee pursuant to the provisions of Article Nine; (3) to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of Section 12.02; or (4) to take any other action authorized to be taken by or on behalf of the Holders of a majority or any specified aggregate principal amount of the Securities of such series under any other provisions of this Indenture or under applicable law. SECTION 11.02. The Trustee may at any time call a meeting of Holders of Securities of any series to take any action specified in Section 11.01 to be held at such time and at such place in the Borough of Manhattan, The City of New York, as the Trustee shall determine. Notice of every meeting of the Holders of Securities of any series, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be mailed to the Holders of such Securities at their addresses as they shall appear on the registry hooks of the Company for such series. Such notice shall be mailed not less than twenty nor more than one hundred and eighty days prior to the date fixed for the meeting. SECTION 11.03. In case at any time the Company, pursuant to a resolution of its Board of Directors, or the Holders of at least ten per cent in aggregate principal amount of the Securities of any series then Outstanding shall have requested the Trustee to call a meeting of Holders of such series by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have mailed such notice 77 66 within twenty days after receipt of such request, then the Company or such Holders of Securities in the amount above specified may determine the time and the place in said Borough of Manhattan for such meeting and may call such meeting to take any action authorized in Section 11.01, by giving notice thereof as provided in Section 11.02. SECTION 11.04. To be entitled to vote at any meeting or Holders a person shall be (a) a Holder of one or more Securities with respect to which such meeting is being held or (b) a person appointed by an instrument in writing as proxy for such a Holder. The only persons who shall be entitled to be present or to speak at any meeting of Holders shall be the persons entitled to vote at such meeting and their counsel and any representatives of the Trustee and its counsel and any representatives of the Company and its counsel. SECTION 11.05. Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Holders, in regard to proof of the holding of Securities and of the appointment of proxies, and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall think fit. Except as otherwise permitted or required by any such regulations, the holding of Securities shall be proved in the manner specified in Section 10.02 and the appointment of any proxy shall be proved in. the manner specified in said Section 10.02 or by having the signature of the person executing the proxy witnessed or guaranteed by any trust company, bank or bankers or member firm of the New York Stock Exchange satisfactory to the Trustee. The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Holders as provided in Section 11.03, in which case the Company or the Holders calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by a majority vote of the meeting, irrespective of the principal amount of their respective holdings. Subject to the provisions of Section 10.04, at any meeting each Holder of Securities with respect to which such meeting is being held or proxy therefor shall be entitled to one vote for each $1,000 (or such other amount 78 67 as may be established pursuant to Section 3.01 as the minimum authorized denomination for Securities of such series) principal amount (in the case of Original Issue Discount Securities, such principal amount to be determined as provided in the definition of "Outstanding") of Securities held by him or represented by him at the meeting; provided, however, that no vote shall be cast or counted at any meeting in respect of any Security challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote other than by virtue of Securities held by him or instruments in writing as aforesaid duly designating him as the person to vote on behalf of other such Holders. Any meeting of Holders duly called pursuant to the provisions of Section 11.02 or 11.03 may be adjourned from time to time, and the meeting may be held as so adjourned without further notice. At any meeting of Holders, the presence of persons holding or representing Securities in an aggregate principal amount sufficient to take action on the business for the transaction of which such meeting was called shall constitute a quorum, but, if less than a quorum be present, the persons holding or representing a majority in aggregate principal amount of such Securities represented at the meeting may adjourn such meeting with the same effect, for all intents and purposes, as though a quorum had been present. SECTION 11.06. The vote upon any resolution submitted to any meeting of Holders of Securities with respect to which such meeting is being held shall be by written ballots on which shall be subscribed the signatures of such Holders or of their representatives by proxy and the serial number or numbers of the Securities held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Holders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was mailed as provided in Section 11.02; provided, however, that in case at any such meeting the Holders shall have voted to remove the Trustee and to 79 68 appoint a successor pursuant to the provisions of Section 9.10(c), the record of the proceedings of such meeting shall be prepared in triplicate. The record shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one copy of the record shall be delivered to the Company and another copy thereof to the Trustee (to be preserved by the Trustee); and if at such meeting a successor trustee shall have been appointed by vote of the Holders, a third copy of the record shall be delivered to such successor trustee. Any record so signed and verified shall be conclusive evidence of the matters therein stated. SECTION 11.07. Nothing in this Article Eleven contained shall be deemed or construed to authorize or permit, by reason of any call of a meeting of Holders or any rights expressly or impliedly conferred hereunder to make such call, any hindrance or delay in the exercise of any right or rights conferred upon or reserved to the Trustee or to the Holders under any of the provisions of this Indenture or of the Securities. ARTICLE TWELVE. SUPPLEMENTAL INDENTURES. SECTION 12.01. In addition to such indenture or indentures supplemental hereto for which provision is made elsewhere in this Indenture, the Company, when authorized by a resolution of its Board of Directors, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto for one or more of the following purposes: (a) to evidence the succession of another corporation to the Company, or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Company pursuant to Article Thirteen; (b) to add to the covenants of the Company such further covenants, restrictions or conditions for the protection of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities stating that such covenants are expressly being included solely for the benefit of such series) as its Board of Directors and the Trustee shall consider to be for the 80 69 protection of the Holders of Securities and to make the occurrence, or the occurrence and continuation of a default in any of such additional covenants, restrictions or conditions a default or an Event of Default permitting the enforcement of all or any of the several remedies provided in this Indenture as herein set forth; provided, however, that in respect of any such additional covenant, restriction or condition such supplemental indenture may provide for a particular period of days after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Trustee upon such default; (c) to add to or change any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate the issuance of Securities in bearer form, registrable or not registrable as to principal, and with or without interest coupons; (d) to change or eliminate any of the provisions of this Indenture, provided that any change or elimination shall become effective only when there is no Security Outstanding of any series created prior to the execution of such supplemental indenture which is entitled to the benefit of such provisions; (e) to evidence and provide for the acceptance of appointment hereunder by a successor trustee with respect to the Securities of one or more, series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one trustee pursuant to the requirements of Section 9.11(b); (f) to secure the Securities of any series pursuant to the requirements of Section 6.04 or otherwise; (g) to establish the form or terms of Securities of any series as permitted by Sections 2.01 and 3.01; (h) to modify, amend or supplement this Indenture in such a manner as to permit the qualification of any indenture supplemental hereto under the Trust Indenture Act of 1939 as then in effect except that nothing herein contained shall permit or authorize the inclusion in any indenture supplemental hereto of the provisions referred to in Section 3 16( a )( 2) of such Act; and 81 70 (i) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture, or to make such other provisions in regard to matters or questions arising under this Indenture which shall not be inconsistent with the provisions of this Indenture and which shall not adversely affect in any material respect the interests of any Holders of the Securities. The Trustee is hereby authorized to join with the Company in the execution of any supplemental indenture for which provision is made above or elsewhere in this Indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer and assignment of any property thereunder, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Any supplemental indenture authorized by the provisions of this Section 12.01 may be executed by the Company and the Trustee without the consent of the Holders of any of the Securities at the time Outstanding, notwithstanding any of the provisions of Section 12.02. SECTION 12.02. With the consent (evidenced as provided in Section 10.01) of the Holders of a majority in aggregate principal amount of the Outstanding Securities of each series affected by such supplemental indenture, the Company, when authorized by a resolution of its Board of Directors, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or modifying in any manner the rights of the Holders of the Securities of each such series; provided, however, that no such supplemental indenture shall (i) extend the fixed maturity of any Security, or reduce the rate or extend the time of payment of interest thereon, or reduce the principal amount thereof or any premium thereon, or make the principal thereof or interest or premium thereon payable in any coin or currency other than that provided in the Securities, or reduce the amount of the principal of an Original Issue Discount Security that would be due and payable upon an acceleration of 82 71 the maturity thereof pursuant to Section 8.01 or the amount thereof provable in bankruptcy pursuant to Section 8.02, without the consent of the Holder of such Security, or (ii) reduce the aforesaid percentage of Securities, the Holders of which are required to consent to any such supplemental indenture, without the consent of the Holders of all Securities affected thereby then Outstanding. A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series. Upon the request of the Company, accompanied by a copy of a resolution of its Board of Directors certified by the Secretary or an Assistant Secretary of the Company authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Holders as aforesaid, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental in-denture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion but shall not be obligated to enter into such supplemental indenture. It shall not be necessary for the consent of the Holders under this Section 12.02 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this Section 12.02, the Company shall mail a notice, setting forth in general terms the substance of such supplemental indenture, to the Holders of each Security of each series affected thereby at their addresses as they shall appear on the registry books of the Company. Any failure of the Company so to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. SECTION 12.03. Upon the execution of any supplemental indenture pursuant to the provisions of this Article Twelve this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities 83 72 under this Indenture of the Trustee, the Company and the Holders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. SECTION 12.04. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article Twelve may bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company or the Trustee shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Board of Directors of the Company, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Company, authenticated by the Trustee and delivered in exchange for the Securities of such series then Outstanding without charge to the Holders thereof. The Company or the Trustee may require the Outstanding Securities of such series to be presented for notation or exchange as aforesaid, if either of them shall see fit to do so. SECTION 12.05. Any indenture supplemental hereto entered into pursuant to any provision of this Indenture shall conform with the Trust Indenture Act of 1939 as then in effect. SECTION 12.06. Subject to the provisions of Section 9.01, the Trustee may receive an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant to the provisions of this Indenture complies with the requirements of this Indenture. ARTICLE THIRTEEN. CONSOLIDATION, MERGER AND SALE. SECTION 13.01. Nothing contained in this Indenture or the Securities shall prevent any consolidation or merger of the Company with or into any corporation or corporations (including any Subsidiary), or any consolidation or merger of any other corporation (including any Subsidiary) with or into the Company, or successive consolidations or mergers in which the Company or its successor or successors shall be a party or parties or shall prevent any sale or conveyance of the properties and assets of the Company 84 73 as an entirety or substantially as an entirety to any other person (including, any Subsidiary), or the acquisition by the Company by purchase or otherwise of all or any part of the properties and assets of any other person (including any Subsidiary), provided that in the case of any consolidation of the Company with, or merger of the Company into, any corporation or corporations. or any sale or conveyance of the properties and assets of the Company as an entirety or substantially as an entirety: (1) the corporation formed by such consolidation or into which the Company is merged or the person which acquires by conveyance or transfer the properties and assets of the Company as an entirety or substantially as an entirety shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the performance of the Securities and every covenant of this Indenture on the part of the Company to be performed or observed; (2) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both would become an Event of Default, shall have happened and be continuing; and (3) the Company shall have delivered to the Trustee an Officers Certificate and an Opinion of Counsel, each stating that such consolidation, merger, sale or conveyance and such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. SECTION 13.02. Upon any consolidation or merger, or any conveyance or transfer of the properties and assets of the Company as an entirety or substantially as an entirety, in accordance with the proviso in Section 13.01, the successor corporation formed by such consolidation or into which the 85 74 Company is merged or the person to which such conveyance or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of the Company under this Indenture with the same effect as if such successor corporation or person had been named as the Company, and thereafter, the predecessor shall be relieved of all obligations and covenants under this Indenture or the Securities, as the case may be. ARTICLE FOURTEEN. SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS. SECTION 14.01. This Indenture shall upon written order by the Company cease to be of further effect (except as to any surviving rights of registration of transfer or. exchange of Securities herein expressly provided for), and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (1) either (A) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 3.07 and (ii) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 6.06(d)) have been delivered to the Trustee for cancellation; or (B) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their stated maturity within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense of the Company, and the Company, in the case of (i), (ii) or (iii) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for the 86 75 purpose an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the stated maturity or Redemption Date, as the case may be; (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 9.06, the obligations of the Trustee to any Authenticating Agent under Section 9.14 and. if money shall have been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations of the Trustee under Sections 14.02 and 14.04 shall survive. SECTION 14.02. Subject to the provisions of Section 14.04, all money deposited with the Trustee pursuant to Section 14.01 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the persons entitled thereto, of the principal (and premium, if any and interest for whose payment such money has been deposited with the Trustee. SECTION 14.03. Upon the satisfaction and discharge of this Indenture all moneys then held by any Paying Agent under the provisions of this Indenture shall, upon demand of the Company, be repaid to it and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. SECTION 14.04. Any moneys deposited with the Trustee not applied but remaining unclaimed by the Holders of the Securities of any series for two years alter the date upon which the principal of and premium, if any, or 87 76 interest on such Securities shall have become due and payable shall be repaid to the Company by the Trustee on demand; and the Holder of any such Securities entitled to receive such payment shall thereafter look only to the Company for the payment thereof; provided, however, that the Trustee, before being required to make any such repayment, may at the expense of the Company mail first-class postage prepaid to each Holder of such Securities or cause to be published once a week for two successive weeks (in each case on any day of the week) in a newspaper printed in the English language and customarily published on each business day and of general circulation in the Borough of Manhattan, The City of New York, a notice that said moneys have not been so applied and that after a date named therein any unclaimed balance of said moneys then remaining will be returned to the Company. ARTICLE FIFTEEN. DEFEASANCE AND COVENANT DEFEASANCE. SECTION 15.01. If pursuant to Section 3.01 provision is made for either or both of (a) defeasance of the Securities of a series under Section 15.02 or (b) covenant defeasance of the Securities of a series under Section 15.03, then the provisions of such Section or Sections, as the case may be, together with the other provisions of this Article Fifteen, shall be applicable to the Securities of such series, and the Company may at its option by resolution of its Board of Directors, at any time, with respect to the Securities of such series, elect to have either Section 15.02 (if applicable) or Section 15.03 (if applicable) be applied to the Outstanding Securities of such series upon compliance with the conditions set forth below in this Article. SECTION 15.02. Upon the Company's exercise of the above option applicable to this Section, the Company shall be deemed to have been discharged from its obligations with respect to the Outstanding Securities of such series on the date the conditions set forth below are satisfied (hereinafter, "defeasance"). For this purpose, such defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by the Outstanding Securities of such series and to have satisfied all its other obligations under such Securities and this Indenture insofar as such Securities are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging 88 77 the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of Outstanding Securities of such series to receive, solely from the trust fund described in Section 15.04 and as more fully set forth in such Section, payments in respect of the principal of, and premium, if any, and interest on such Securities when such payments are due, (B) the Company's obligations with respect to such Securities under Sections 3.05, 3.06, 3.07, 6.02 and 6.06(d), (C) the rights, powers, trusts, duties, and immunities of the Trustee hereunder and (D) this Article. Subject to compliance with this Article, the Company may exercise its option under this Section 15.02 notwithstanding the prior exercise of its option under Section 15.03 with respect to the Securities of such series. SECTION 15.03. Upon the Company's exercise of the above option applicable to this Section, the Company shall be released from its obligations under Section 6.04 with respect to the Outstanding Securities of such series on and after the date the conditions set forth below are satisfied (hereinafter, "covenant defeasance"). For this purpose, such covenant defeasance means that, with respect to the Outstanding Securities of such series, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in such Section, whether directly or indirectly by reason of any reference elsewhere herein to such Section or by reason of any reference in such Section to any other provision herein or in any other document and such omission to comply shall not constitute an Event of Default under Section 8.01(d), but the remainder of this Indenture and such Securities shall be unaffected thereby. SECTION 15.04. The following shall be the conditions to application of either Section 15.02 or Section 15.03 to the Outstanding Securities of such series: (1) the Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 9.09 who shall agree to comply with the provisions of this Article Fifteen applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities, (A) money in an amount, or (B) Eligible Obligations 89 78 and/or U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, money in an amount, or (C) a combination thereof, sufficient. in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge, (i) the principal of (and premium, if any, on) and each installment of principal of (and premium. if any) and interest on the Outstanding Securities of such series on the stated maturity of such principal or installment of principal or interest and (ii) any mandatory sinking fund payments or analogous payments applicable to the Outstanding Securities of such series on the day on which such payments are due and payable in accordance with the terms of this Indenture and or such Securities. (2) No Event of Default with respect to the Securities of such series shall have occurred and be continuing on the date of such deposit. (3) Such defeasance or covenant defeasance shall not constitute a default (after the expiration of any periods of grace or the giving of notice or both) under this Indenture with respect to Securities of any other series or under any other agreement or instrument to which the Company is a parry or by which it is bound. (4) Such defeasance or covenant defeasance shall be effected in compliance with any additional terms, conditions or limitations which may be imposed on the Company in connection therewith pursuant to Section 3.01. (5) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to either the defeasance under Section 15.02 or the covenant defeasance under Section 15.03 (as the case may be) have been complied with. Notwithstanding the foregoing, if an Event of Default specified in Sections 8.01(e) and 8.01(f), or an event which with lapse of time would become such an Event of Default, shall occur during the period ending on the 91st day after the date of the deposit referred to in Section 15.04(1), 90 79 then, effective upon such occurrence, the defeasance or covenant defeasance and such deposit shall be rescinded and annulled, and the Company, the Trustee and the Holders of the Securities of such series shall be restored to their former positions. SECTION 15.05. Subject to the provisions of Section 14.04, all money and Eligible Obligations and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee-collectively for purposes of this Section 15.05, the "Trustee") pursuant to Section 15.04 in respect of the Outstanding Securities of such series shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Securities of all sums due and to become due thereon in respect of principal (and premium, if any) and interest but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the money, Eligible Obligations or U.S. Government Obligations deposited pursuant to Section 15.04 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Securities of such series. Anything in this Article Fifteen to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money, Eligible Obligations or U.S. Government Obligations held by it as provided in Section 15.04 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent defeasance or covenant defeasance. ARTICLE SIXTEEN. MISCELLANEOUS PROVISIONS. SECTION 16.01. All the covenants, stipulations, promises and agreements contained in this Indenture by or on behalf of the Company shall bind its successors and assigns, whether so expressed or not. 91 80 SECTION 16.02. Any act or proceeding by any provision of this Indenture authorized or required to be done or performed by any board, committee or officer of the Company shall and may be done and performed with like force and effect by the like board, committee or officer of any corporation that shall at the time be the lawful sole successor of the Company. SECTION 16.03. Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the Holders of Securities on the Company may be given or served by being deposited postage prepaid in a post office of the United States of America or in a United States post-office letter box addressed (until another address is filed by the Company with the Trustee), as follows: Sonar Inc., P.O. Box 2563, Birmingham, Alabama 35202, Attention: Vice President-Finance. Any notice, direction, request or demand by any Holder to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the Principal Office of the Trustee. Any notice required to be mailed to a Holder by the Company or the Trustee pursuant to any of the provisions of this Indenture shall be deemed to be properly mailed by being deposited postage prepaid in a post office of the United States of America or in a United States post-office letter box addressed to such Holder at the address of such Holder as shown on the registry books of the Company. SECTION 16.04. This Indenture and each Security shall be deemed to be a contract made under the laws of the State of New York, and for all purposes shall be construed in accordance with the laws of said State. SECTION 16.05. Upon any application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent have been complied with. Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture shall include (1) a statement that the person making such certificate or opinion has read such covenant or condition: 92 81 (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been compiled with; and (4) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with. Any certificate, statement or opinion of an officer of the Company may be based in so far as it relates to legal matters, upon a certificate or opinion of or representations by counsel unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate statement or opinion of counsel may be based in so far as it relates to factual matters, information with respect to which is in the possession of the Company, upon the certificate, statement or opinion of or representations by an officer or officers of the Company, unless such counsel knows that the certificate, statement or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate or opinion of an officer of the Company or of counsel may be based, in so far as it relates to accounting matters, upon a certificate or opinion of, or representations by; an accountant or firm of accountants, unless such officer or counsel, as the case may be, knows, or in the exercise of reasonable care should know that the certificate or opinion or representations with respect to the accounting matters upon which his certificate or opinion is based are erroneous. SECTION 16.06. Nothing in this Indenture or in the Securities, expressed or implied, shall give or be construed to give to any person, firm or corporation other than the panics hereto, any Paying Agent and the Holders of the Securities any legal or equitable right remedy or claim under or in respect of this Indenture or under any covenant, condition or provision herein contained; all its covenants, conditions and provisions being for the sole benefit of the parties hereto, any Paying Agent and of the Holders of the Securities. 93 82 SECTION 16.07. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with another provision included in this Indenture which is required to be included in this Indenture by any of Sections 310 to 317, inclusive, of the Trust Indenture Act of 1939, such required provision shall control. SECTION 16.08. This Indenture may be executed in any number of counterparts each of which shall be an original: but such counterparts shall together constitute but one and the same instrument. SECTION 16.09. The Table of Contents and the titles and headings of the Articles of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. SECTION 16.10. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 16.11. In any case where any interest payment date, Redemption Date or date of maturity of any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal, and premium, if any, need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the interest payment date or Redemption Date, or at the date of maturity, provided that no interest shall accrue for the period from and after such interest payment date, Redemption Date or date of maturity, as the case may be. SECTION 16.12. No recourse under or upon any obligation, covenant or agreement of this Indenture, or of any Security, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, stockholder, officer or director, as such, past, present or future, of the Company or of any successor corporation, either directly or through the Company; it being expressly understood that this Indenture and the obligations issued hereunder are solely corporate obligations, and that no such personal liability whatever shall attach to, or is or shall be incurred by, the incorporators, stockholders, officers or directors, as such, of the Company or of any successor corporation or any of them, because of the creation 94 83 of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Securities or implied therefrom; and that any and all such personal liability of every name and nature of, and any and all such rights and claims against, every such incorporator, stockholder, officer or director, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Securities or implied therefrom, are hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of such Securities. MANUFACTURERS HANOVER TRUST COMPANY hereby accepts the trust in this Indenture declared and provided. upon the terms and conditions hereinabove set forth. 95 84 In Witness Whereof, Sonat Inc. has caused this Indenture to be signed in its name and acknowledged by its Chairman of the Board, its Vice Chairman of the Board, its President, one or its Vice Presidents or its Treasurer, and its corporate seal to be affixed hereunto, and the same to be attested by its Secretary or one of its Assistant Secretaries; arid Manufacturers Hanover Trust Company has caused this Indenture to be signed in its name and acknowledged by one of its Vice Presidents or Assistant Vice Presidents, and its corporate seal to be affixed hereunto, and the same to be attested by one of its Assistant Secretaries. Executed and delivered as of the day and year first written above. SONAT INC. By /s/ John M. Musgrave -------------------------------- Treasurer Attest: /s/ Beverley T. Krannich ------------------------ Secretary [SEAL] MANUFACTURERS HANOVER TRUST COMPANY By /s/ [Illegible] -------------------------------- Vice President Attest: /s/ [Illegible] ------------------------ Assistant Vice President [SEAL] 96 SONAT INC. To CHEMICAL BANK as Trustee First Supplemental Indenture Dated as of June 1, 1995 To the Indenture Dated as of June 1, 1986 97 FIRST SUPPLEMENTAL INDENTURE, dated as of June 1, 1995, between Sonat Inc., a corporation duly organized and existing under the laws of the State of Delaware (the "Company"), and CHEMICAL BANK (successor by merger to Manufacturers Hanover Trust Company), a New York corporation (the "Trustee"), as Trustee. WHEREAS, the Company has heretofore executed and delivered to the Trustee an Indenture, dated as of June 1, 1986 (the "Indenture"), providing for the issuance from time to time of the Company's unsecured debentures, notes and other evidences of indebtedness (herein and therein called the "Securities"), to be issued in one or more series as in the Indenture provided; WHEREAS, Section 12.01 of the Indenture provides, among other things, that the Company, when authorized by a resolution of its Board of Directors, and the Trustee, at any time and from time to time, may without the consent of any Holders enter into an indenture supplemental to the Indenture (a) for the purpose of changing or eliminating any provision of the Indenture, provided that such change or elimination shall become effective only when there is no Security Outstanding of any series created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision, and (b) to cure any ambiguity, to correct or supplement any provision therein which may be inconsistent with any other provision therein, or to make any other provisions with respect to matters or questions arising under the Indenture which shall not be inconsistent with the provisions of the Indenture and shall not adversely affect in any material respect the interests of any Holders of the Securities; WHEREAS, the Company pursuant to the foregoing authority, proposes in and by this First Supplemental Indenture to amend the Indenture in certain respects with respect to the Securities of any series created on or after the date hereof; and WHEREAS, all things necessary to make this First Supplemental Indenture a valid agreement of the Company, in accordance with its terms, have been done. AGREEMENT NOW, THEREFORE, the Company and the Trustee hereby agree as follows: 1. The definition of "Depositary" is hereby added to Section 1.01 of the Indenture to read in its entirety as follows: "Depositary" means, with respect to the Securities of any series issuable or issued in whole or in part in the form of one or more 98 permanent global Securities, The Depository Trust Company or such other Person designated as Depositary by the Company pursuant to Section 3.01, which must be a clearing agency registered under the Securities Exchange Act of 1934, as amended, and if at any time there is more than one such Person, 'Depositary' as used with respect to the Securities of any such series shall mean the Depositary with respect to the Securities of that series." 2. A new Section 2.03 is hereby inserted into the Indenture to read in its entirety as follows: "SECTION 2.03. Securities in Permanent Global Form. If the Company shall establish pursuant to Section 3.01 that the Securities of a series are to be issued in whole or in part in permanent global form, then notwithstanding Section 3.01(8) and the provisions of Section 3.02, any such Security shall represent such of the Outstanding Securities of such series as shall be specified therein and may provide that it shall represent the aggregate amount of Outstanding Securities from time to time endorsed thereon and that the aggregate amount of Outstanding Securities represented thereby may from time to time be reduced to reflect exchanges. Any endorsement of a Security in permanent global form to reflect the amount, or any increase or decrease in the amount, of Outstanding Securities represented thereby shall be made by the Trustee or the Security registrar in such manner and upon instructions given by such Person or Persons as shall be specified in such Security in permanent global form or in the order to be delivered to the Trustee pursuant to Section 3.03 or Section 3.06. Subject to the provisions of Section 3.03 and, if applicable, Section 3.06, the Trustee or the Security registrar shall deliver and redeliver any Security in permanent global form in the manner and upon instructions given by the Person or Persons specified in such Security or in the applicable order of the Company. If an order of the Company pursuant to Section 3.03 or 3.06 has been, or simultaneously is, delivered, any instructions by the Company with respect to endorsement or delivery or redelivery of a global Security shall be in writing but need not be accompanied by an Officer's Certificate or an Opinion of Counsel, provided that the permanent global Security to be endorsed, delivered or redelivered has previously been covered by an Opinion of Counsel. The provisions of the last sentence of Section 3.03 shall only apply to any Security represented by a Security in permanent global form if such Security was never issued and sold by the Company and the Company delivers to the Trustee or the Security registrar the Security in permanent global form together with written instructions (which need not be accompanied by an Officers' Certificate or an Opinion of Counsel) with regard to the reduction in the principal amount of Securities represented thereby, together with the written statement contemplated by the last sentence of Section 3.03. 99 Except as provided in the Indenture and in any permanent global Security, owners of beneficial interests in any permanent global Security will not be entitled to have Securities registered in their names, will not receive or be entitled to physical delivery of Securities in definitive registered form and will not be considered the Holders thereof for any purpose under the Indenture. None of the Company, the Trustee, any Paying Agent nor any Securities registrar shall have any responsibility or liability for any aspect of records relating to or payments made on account of beneficial ownership interests in any permanent global Security, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests." 3. Section 3.01 of the Indenture is hereby amended by: (i) deleting paragraph two thereof and adding the following paragraph in lieu thereof: "The Securities may be issued in one or more series. There shall be established in or pursuant to a resolution of the Board of Directors and set forth, or determined in the manner provided, in an Officers' Certificate, or established in one or more indentures supplemental hereto, prior to the issuance of Securities of any series,"; adding the following to the end of the parenthetical phrase in clause (2): "and except for any Securities which, pursuant to Section 3.03 of the Indenture, shall have not been issued and sold by the Company and are therefore deemed never to have been authenticated and delivered hereunder"; (iii) adding the following to the beginning of clause (4): "the Person to whom any interest on any Security of the series shall be payable if other than as set forth in Section 3.08,"; (iv) renumbering clause (15) as clause (16); (v) adding the following as clause (15): "(15) whether the Securities of the series are to be issuable in whole or in part in permanent global form, without coupons, and, if so, (i) the circumstances under which beneficial owners of interests in such permanent global Security or Securities may exchange such interests for Securities of such series and of like interest rate and maturity and principal amount in definitive registered form and authorized denominations, if other than as set forth in Section 3.05, and (ii) the Depositary with respect to any such permanent global Security or Securities;" and 100 (vi) deleting the last paragraph thereof and adding the following paragraph in lieu thereof: "All Securities of any one series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to the resolution of the Board of Directors referred to above and set forth in the Officers' Certificate referred to above or in any such indenture supplemental hereto." 4. Section 3.02 of the Indenture is hereby amended to read in its entirety as follows: "The Securities of each series shall be issuable in registered form without coupons and, except for any Security issuable in permanent global form, in such denominations as shall be specified in accordance with Section 3.01. In the absence of such provisions with respect to the Securities of any series, the Securities of such series shall be issuable in denominations of $1,000 and any integral multiple thereof." 5. Section 3.03 of the Indenture is hereby amended by adding the following at the end of the last paragraph: "Notwithstanding the foregoing and subject, in the case of a Security in permanent global form, to Section 2.03, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 3.09 together with a written statement (which need not be accompanied by an Opinion of Counsel) directing such cancellation and stating that such Security has never been issued and sold by the Company, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture." 6. Section 3.05 of the Indenture is hereby amended by adding the following paragraph to the end thereof: "Notwithstanding the foregoing, except as otherwise specified as contemplated by Section 3.01, any permanent global Security shall be exchangeable pursuant to this Section only as provided in this paragraph. The beneficial owners of interests in a permanent global Security are entitled to the exchange of such interests for Securities of such series and of like interest rate and maturity and principal amount in definitive registered form and authorized denomination, as specified by Section 3.01, if (a) the Depositary notifies the Company that it is unwilling or 101 unable to continue as Depositary for such permanent global Security or if at any time the Depositary ceases to be a clearing agency registered under the Securities Exchange Act of 1934, as amended, (b) if the Company in its sole discretion determines that such permanent global Security shall be exchangeable for definitive registered Securities and executes and delivers to the Security registrar an order of the Company providing that such permanent global Security shall be so exchangeable, or (c) any event shall have occurred and be continuing which, after notice or lapse of time, or both, would become an Event of Default with respect to the securities of the series of which such permanent global Security is a part. Without unnecessary delay but in any event not later than the earliest date on which such interests may be so exchanged, the Company shall deliver to the Trustee or the Security registrar definitive registered Securities, executed by the Company, of that series in aggregate principal amount equal to the principal amount of such permanent global Security to be exchanged. On or after the earliest date on which such interests may be so exchanged, in accordance with instructions given by the Company to the Trustee, the Security registrar and the Depositary (which instructions shall be in writing but need not be accompanied by an Opinion of Counsel), such permanent global Security shall be surrendered from time to time by the Depositary or such other depositary as shall be specified in the order of the Company with respect thereto to the Trustee, as the Company's agent for such purpose, or to the Security registrar, to be exchanged, in whole or in part, for definitive Securities of the same series, without charge, and the Trustee shall authenticate and deliver in accordance with such instructions, in exchange for each portion of such permanent global Security, a like aggregate principal amount of definitive registered Securities of the same series of authorized denominations and of like tenor as the portion of such permanent global Security to be exchanged; provided, however, that no such exchanges may occur during a period beginning at the opening of business 15 days before any selection of Securities of that series for redemption and ending on the relevant Redemption Date. If a Security is issued in exchange for any portion of a permanent global Security after the close of business at the office or agency where such exchange occurs on (i) any regular record date in respect of such Security and before the opening of business at such office or agency on the relevant interest payment date or (ii) any special record date and before the opening of business at such office or agency on the related proposed date for payment of interest or defaulted interest, as the case may be, such interest or defaulted interest will not be payable on such interest payment date or proposed date for payment, as the case may be, in respect of such Security issued in exchange, but will be payable on such interest payment date or proposed date for payment, as the case may be, only to the Person to whom interest or defaulted interest 102 in respect of such permanent global Security is payable in accordance with the provisions of this Indenture. 7. Section 3.09 of the Indenture is hereby amended by deleting the second sentence thereof and adding the following sentence in lieu thereof: "The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold, and all Securities so delivered shall be promptly cancelled by the Trustee." 8. Section 4.03 of the Indenture is hereby amended by adding the following sentence at the end thereof: "If a Security in permanent global form is so surrendered, the Company shall execute, and the Trustee shall authenticate and deliver to the Depositary for such Security in permanent global form, without service charge, a new Security in permanent global form, in a denomination equal to and in exchange for the unredeemed portion of the principal of the Security in permanent global form so surrendered." 9. All provisions of this First Supplemental Indenture shall be deemed to be incorporated in, and made a part of, the Indenture; and the Indenture, as supplemented by this First Supplemental Indenture, shall be read, taken and construed as one and the same instrument. 10. The Trustee accepts the trusts created by the Indenture, as supplemented by this First Supplemental Indenture, and agrees to perform the same upon the terms and conditions in the Indenture, as supplemented by this First Supplemental Indenture. 11. The recitals contained in the Indenture and the Securities, except the Trustee's certificate of authentication, shall be taken as statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of the Indenture or the Securities. 12. All capitalized terms used and not defined herein shall have the respective meanings assigned to them in the Indenture. 13. This First Supplemental Indenture shall be governed by and construed in accordance with the laws of the jurisdiction which govern the Indenture and its construction. 103 14. This First Supplemental Indenture may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed, and their respective seals to be hereunto affixed and attested, all as of the date first above written. SONAT INC. /s/ Thomas W. Barker, Jr. ----------------------------------------- By: Thomas W. Barker, Jr. Title: Vice President-Finance and Treasurer [CORPORATE SEAL] Attest: /s/ Beverley T. Krannich - ----------------------------------- By: Beverley T. Krannich Title: Vice President and Secretary CHEMICAL BANK By: ---------------------------- Title: [CORPORATE SEAL] Attest: - ---------------------------------- Title: 104 STATE OF ALABAMA ) ) ss: COUNTY OF JEFFERSON ) On the 8th day of June, 1995, before me personally came Thomas W. Barker, Jr., to me known, who, being duly sworn, did depose and say that he is Vice Pres.- Finance/Treas. of Sonat Inc., one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. Regina A. Hinkle My Commission Expires Jan. 27, 1997 105 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the ___ day of June, 1995, before me personally came ___________________, to me known, who, being by me duly sworn, did depose and say that he is a ____________________ of Chemical Bank, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. ------------------------ 106 SECOND SUPPLEMENTAL INDENTURE This SECOND SUPPLEMENTAL INDENTURE, dated as of October 25, 1999 is between EL PASO ENERGY CORPORATION, a Delaware corporation ("El Paso Energy"), and THE CHASE MANHATTAN BANK (as successor to Manufacturers Hanover Trust Company), as trustee (the "Trustee"), and supplements and amends to the extent specified below that certain Indenture, dated as of June 1, 1986 (the "Indenture"), between Sonat Inc., a Delaware corporation ("Sonat"), and Manufacturers Hanover Trust Company, as trustee, as supplemented by that certain First Supplemental Indenture, dated as of June 1, 1995 (the "First Supplement"), between Sonat and Chemical Bank (as successor to Manufacturers Hanover Trust Company), as trustee. The Indenture as supplemented and amended by the First Supplement is referred to herein as the "Indenture." W I T N E S S E T H : WHEREAS, Sonat and the Trustee have entered into the Indenture; and WHEREAS, in accordance with that certain Second Amended and Restated Agreement and Plan of Merger between Sonat and El Paso Energy, dated as of March 13, 1999, effective as of October , 1999 Sonat merged (the "Merger") with and into El Paso Energy, with El Paso Energy continuing as the surviving corporation of the Merger; and WHEREAS, Section 13.01 of the Indenture requires El Paso Energy to expressly assume the obligations of Sonat under the Indenture in a supplemental indenture in form reasonably satisfactory to the Trustee; and WHEREAS, pursuant to and in compliance with Section 13.01 of the Indenture, El Paso Energy shall succeed to, and be substituted for, and may exercise every right and power of Sonat under the Indenture with the same effect as if it had been named as the "Company" therein; and WHEREAS, Section 12.01 of the Indenture provides that, without the consent of any Holders, the Company and the Trustee may enter into one or more indentures supplemental to the Indenture, in form satisfactory to the Trustee, for the purpose of, among other things, evidencing the succession of another corporation to the Company and the assumption by such successor of the covenants of the Company pursuant to Article Thirteen of the Indenture; and WHEREAS, the entry into this Second Supplemental Indenture by the parties hereto is in all respects authorized by the provisions of the Indenture; and WHEREAS, all things necessary to make this Second Supplemental Indenture a valid indenture and agreement according to its terms have been done; NOW, THEREFORE, for and in consideration of the premises, El Paso Energy and the Trustee mutually covenant and agree for the equal and proportionate benefit of the respective Holders from time to time of the Securities as follows: 107 ARTICLE 1 SECTION 1.01. Assumption of Obligations by El Paso Energy. Pursuant to Section 13.01 of the Indenture, El Paso Energy does hereby: (i) expressly assume the performance of the Securities and every covenant of the Indenture on the part of Sonat to be performed or observed; (ii) agree to succeed to and be substituted for Sonat under the Indenture with the same effect as if it had been named originally therein as the Company; and (iii) represent that immediately after giving effect to the Merger, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, exists. ARTICLE 2 MISCELLANEOUS SECTION 2.01. Further Assurances. El Paso Energy will, upon request by the Trustee, execute and deliver such further instruments and do such further acts as may reasonably be necessary or proper to carry out more effectively the purposes of this Second Supplemental Indenture. SECTION 2.02. Other Terms of Indenture. Except insofar as herein otherwise expressly provided, all the provisions, terms and conditions of the Indenture are in all respects ratified and confirmed and shall remain in full force and effect. SECTION 2.03. Terms Defined. All terms defined elsewhere in the Indenture shall have the same meanings when used herein. SECTION 2.04. GOVERNING LAW. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THIS SECOND SUPPLEMENTAL INDENTURE. SECTION 2.05. Multiple Counterparts. This Second Supplemental Indenture may be executed in any number of counterparts, each of which shall be deemed to be an original for all purposes, but such counterparts shall together be deemed to constitute but one and the same instrument. SECTION 2.06. Responsibility of Trustee. The recitals contained herein shall be taken as the statements of El Paso Energy, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representations as to the validity or sufficiency of this Second Supplemental Indenture. SECTION 2.07. Agency Appointments. El Paso Energy hereby confirms and agrees to all agency appointments made by Sonat under or with respect to the Indenture or the Securities and hereby expressly assumes the due and punctual performance and observance of all the covenants and conditions to have been performed or observed by Sonat contained in any agency agreement entered into by Sonat under or with respect to the Indenture or the Securities. -2- 108 IN WITNESS WHEREOF, this Second Supplemental Indenture has been duly executed by El Paso Energy and the Trustee as of the day and year first written above. EL PASO ENERGY CORPORATION By: /s/ H. Brent Austin --------------------------------- Name: H. Brent Austin Title: Executive Vice President THE CHASE MANHATTAN BANK, as Trustee By: /s/ C. Manner --------------------------------- Name: Title: -3- EX-10.A 5 REVOLVING CREDIT & COMPETITIVE ADVANCE FACILITY 1 EXHIBIT 10.A EXECUTION COPY ================================================================================ EL PASO ENERGY CORPORATION ------------------------------------- $1,250,000,000 364-DAY REVOLVING CREDIT AND COMPETITIVE ADVANCE FACILITY AGREEMENT DATED AS OF AUGUST 16, 1999 ------------------------------------- THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT AND CAF ADVANCE AGENT CITIBANK, N.A. AND ABN AMRO BANK, N.V., AS CO-DOCUMENTATION AGENTS BANK OF AMERICA, N.A., AS SYNDICATION AGENT ================================================================================ 2 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS AND ACCOUNTING TERMS ..................... 1 SECTION 1.1 Certain Defined Terms .................................................. 1 SECTION 1.2 Computation of Time Periods ............................................ 16 SECTION 1.3 Accounting Terms ....................................................... 16 SECTION 1.4 References ............................................................. 16 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES ..................... 17 SECTION 2.1 The Revolving Credit Advances .......................................... 17 SECTION 2.2 Making the Revolving Credit Advances ................................... 17 SECTION 2.3 Evidence of Debt ....................................................... 18 SECTION 2.4 CAF Advances ........................................................... 19 SECTION 2.5 Procedure for CAF Advance Borrowings ................................... 19 SECTION 2.6 CAF Advance Payments ................................................... 23 SECTION 2.7 Evidence of Debt ....................................................... 23 SECTION 2.8 Fees ................................................................... 24 SECTION 2.9 Reduction of the Commitments ........................................... 24 SECTION 2.10 Repayment of Advances .................................................. 24 SECTION 2.11 Interest on Revolving Credit Advances .................................. 25 SECTION 2.12 Additional Interest on Eurodollar Rate Advances ........................ 25 SECTION 2.13 Interest Rate Determination ............................................ 26 SECTION 2.14 Voluntary Conversion of Advances ....................................... 27 SECTION 2.15 Optional and Mandatory Prepayments ..................................... 28 SECTION 2.16 Increased Costs ........................................................ 28 SECTION 2.17 Increased Capital ...................................................... 29 SECTION 2.18 Illegality ............................................................. 30 SECTION 2.19 Pro Rata Treatment, Payments and Computations .......................... 30 SECTION 2.20 Taxes .................................................................. 32 SECTION 2.21 Sharing of Payments, Etc ............................................... 34 SECTION 2.22 Use of Proceeds ........................................................ 34 SECTION 2.23 Extension of Stated Termination Date ................................... 35 SECTION 2.24 Commitment Increases ................................................... 36 SECTION 2.25 Replacement of Lenders ................................................. 38
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Page ---- ARTICLE III CONDITIONS OF EFFECTIVENESS AND LENDING .................. 38 SECTION 3.1 Conditions Precedent to Effectiveness of this Agreement ................ 38 SECTION 3.2 Conditions Precedent to Initial Advances ............................... 39 SECTION 3.3 Conditions Precedent to Initial Advances to Any Borrowing Subsidiary ............................................ 40 SECTION 3.4 Conditions Precedent to Each Borrowing ................................. 40 ARTICLE IV REPRESENTATIONS AND WARRANTIES ...................... 41 SECTION 4.1 Representations and Warranties of the Borrowers ........................ 41 ARTICLE V COVENANTS OF THE BORROWERS ........................ 44 SECTION 5.1 Affirmative Covenants .................................................. 44 SECTION 5.2 Negative Covenants ..................................................... 45 SECTION 5.3 Reporting Requirements ................................................. 48 SECTION 5.4 Restrictions on Material Subsidiaries .................................. 51 ARTICLE VI GUARANTEE ................................. 51 SECTION 6.1 Guarantees ............................................................. 51 SECTION 6.2 No Subrogation ......................................................... 52 SECTION 6.3 Amendments, etc. with respect to the Obligations; Waiver of Rights ....................................................... 52 SECTION 6.4 Guarantee Absolute and Unconditional ................................... 53 SECTION 6.5 Reinstatement .......................................................... 54 ARTICLE VII EVENTS OF DEFAULT ............................. 54 SECTION 7.1 Event of Default ....................................................... 54
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Page ---- ARTICLE VIII THE ADMINISTRATIVE AGENT AND THE CAF ADVANCE AGENT .............. 58 SECTION 8.1 Authorization and Action ............................................... 58 SECTION 8.2 Administrative Agent's and CAF Advance Agent's Reliance, Etc ........... 58 SECTION 8.3 Chase and Affiliates ................................................... 59 SECTION 8.4 Lender Credit Decision ................................................. 59 SECTION 8.5 Indemnification ........................................................ 59 SECTION 8.6 Successor Administrative Agent and CAF Advance Agent ................... 60 ARTICLE IX MISCELLANEOUS................................ 60 SECTION 9.1 Amendments, Etc ........................................................ 60 SECTION 9.2 Notices, Etc ........................................................... 61 SECTION 9.3 No Waiver; Remedies .................................................... 61 SECTION 9.4 Costs and Expenses; Indemnity .......................................... 61 SECTION 9.5 Right of Set-Off ....................................................... 62 SECTION 9.6 Binding Effect ......................................................... 63 SECTION 9.7 Assignments and Participations ......................................... 63 SECTION 9.8 Confidentiality ........................................................ 66 SECTION 9.9 Consent to Jurisdiction ................................................ 66 SECTION 9.10 GOVERNING LAW .......................................................... 67 SECTION 9.11 Rate of Interest ....................................................... 67 SECTION 9.12 Execution in Counterparts .............................................. 68
SCHEDULE Schedule I Commitments, Addresses, Etc. EXHIBITS Exhibit A Form of Note Exhibit B Form of Notice of Borrowing Exhibit C Form of CAF Advance Request Exhibit D Form of CAF Advance Offer Exhibit E Form of CAF Advance Confirmation Exhibit F Form of Assignment and Acceptance Exhibit G Form of Opinion of [Associate General][Senior] Counsel of the Company Exhibit H Form of Opinion of New York Counsel to the Company 5 Exhibit I Form of Process Agent Letter Exhibit J Form of Joinder Agreement Exhibit K Form of Opinion of [Associate General][Senior] Counsel of the Company Exhibit L Form of Opinion of New York Counsel to the Company Exhibit M Form of Extension Request 6 $1,250,000,000 364-DAY REVOLVING CREDIT AND COMPETITIVE ADVANCE FACILITY AGREEMENT, dated as of August 16, 1999, among EL PASO ENERGY CORPORATION, a Delaware corporation (the "Company"), EL PASO NATURAL GAS COMPANY, a Delaware corporation ("EPNGC"), TENNESSEE GAS PIPELINE COMPANY, a Delaware corporation ("Tennessee"), the several banks and other financial institutions from time to time parties to this Agreement (the "Lenders"), THE CHASE MANHATTAN BANK, a New York banking corporation, as administrative agent (in such capacity, the "Administrative Agent") and as CAF Advance Agent (in such capacity, the "CAF Advance Agent") for the Lenders hereunder, CITIBANK, N.A. and ABN AMRO BANK, N.V., as co-documentation agents (in such capacity, the "Co-Documentation Agents") for the Lenders, and BANK OF AMERICA, N.A., as syndication agent (in such capacity, the "Syndication Agent") for the Lenders. The parties hereto hereby agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1 Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Administrative Agent" has the meaning assigned to such term in the preamble hereof. "Advance" means an advance by a Lender to any Borrower pursuant to Article II, and refers to a Base Rate Advance, a Eurodollar Rate Advance or a CAF Advance. "Affiliate" means as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. The term "control (including the terms "controlled by" or "under common control with") means, with respect to any Person, the possession, direct or indirect, of the power to vote 20% or more of the securities having ordinary voting power for the election of directors of such Person or to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities or by contract or otherwise. "Agreement" means this $1,250,000,000 364-Day Revolving Credit and Competitive Advance Facility, as amended, supplemented or otherwise modified from time to time. "Alternate Program" means any program providing for the sale or other disposition of trade or other receivables entered into by the Company or a Principal Subsidiary which is in addition to or in replacement of the program evidenced by either 7 2 Receivables Purchase and Sale Agreement (whether or not either Receivables Purchase and Sale Agreement shall then be in effect), provided that such program is on terms (a) substantially similar to either Receivables Purchase and Sale Agreement (as modified to comply with FASB 125 or similar policies or guidelines from time to time in effect) or (b) customary for similar transactions as reasonably determined by the Administrative Agent. "Applicable Eurodollar Rate Margin" with respect to any Eurodollar Rate Advance to any Borrower means for any day the rate per annum set forth below opposite the applicable S&P Bond Rating and Moody's Bond Rating in effect on such day for such Borrower:
Bond Rating Applicable Eurodollar (S&P/Moody's) Level Rate Margin ----------------- ----- --------------------- A/A2 or higher I .180% A-/A3 II .270% BBB+/Baa1 III .300% BBB/Baa2 IV .375% BBB-/Baa3 V .550% BB+/Ba1 or lower VI .800%;
provided that (i) if the Bond Ratings for any Borrower do not fall within the same Level, the Applicable Eurodollar Rate Margin applicable to such day will be the percentage opposite the Bond Rating that is at the higher level (Level I being the highest and Level VI being the lowest Level), (ii) in the event a Bond Rating for a Borrower is not available from one of the Rating Agencies, the Applicable Eurodollar Rate Margin will be based on the Bond Rating of the other Rating Agency, (iii) in the event a Bond Rating for the Company is available from none of the Rating Agencies, the Applicable Eurodollar Rate Margin for the Company will be the percentage opposite Level VI, and (iv) in the event a Bond Rating for a Borrowing Subsidiary is available from none of the Rating Agencies, the Applicable Eurodollar Rate Margin for such Borrower will be determined using the Bond Ratings of the Company (unless there is another Borrower (the "Intermediate Parent") that directly or indirectly owns 100% of the common stock of such Borrower and the Intermediate Parent has a Bond Rating in effect, in which case, the Applicable Eurodollar Rate Margin for such Borrower will be determined using the Bond Ratings of the Intermediate Parent of such Borrower); provided, that for each day on which the aggregate principal amount of the Advances outstanding hereunder are equal to or greater than 25% of the aggregate amount of the total Commitments hereunder, the Applicable Eurodollar Rate Margin for each Borrower will be increased by .125% for such day. "Applicable LIBO Rate" means in respect of any CAF Advance requested pursuant to a LIBO Rate CAF Advance Request, an interest rate per annum equal to the rate which appears on Page 3750 of the Telerate Service (or any successor or substitute page of such Service, or any successor to or substitute for such service providing rate 8 3 quotations comparable to those currently provided on such page of such service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to Dollar deposits in the London interbank market) as at approximately 11:00 A.M., London time, two Business Days prior to the beginning of the period for which such CAF Advance is to be outstanding as the rate for Dollar deposits with a maturity comparable to such period. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of Exhibit F. "Base CD Rate" means the sum of (a) the product of (i) the Three-Month Secondary CD Rate and (ii) a fraction, the numerator of which is one and the denominator of which is one minus the C/D Reserve Percentage and (b) the C/D Assessment Rate. "Base Rate" means for any day, a rate per annum (adjusted to the nearest 1/16 of 1% or, if there is no nearest 1/16 of 1%, rounded upwards to the next highest 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 2 of 1% and (c) the Effective Federal Funds Rate in effect on such day plus 2 of 1%. Any change in the Base Rate due to a change in the Prime Rate, the Three-Month Secondary CD Rate or the Effective Federal Funds Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate, the Three-Month Secondary CD Rate or the Effective Federal Funds Rate, respectively. "Base Rate Advance" means an Advance which bears interest as provided in Section 2.11(a)(i). "Bond Rating" means a rating assigned to a Borrower's senior long-term unsecured debt by any of the Rating Agencies. "Borrowers" means the collective reference to the Company and each Borrowing Subsidiary; each a "Borrower". "Borrowing" means a borrowing consisting of Advances of the same Type made on the same day by the Lenders, it being understood that there may be more than one Borrowing on a particular day. "Borrowing Subsidiary" means EPNGC, Tennessee and each other domestic Subsidiary of the Company which has been designated by the Company as a "Borrowing Subsidiary" by written notice to the Administrative Agent, which designation shall not have been revoked by written notice by the Company to the Administrative Agent (provided, that no such designation shall be revoked if either (a) any Default or Event of Default shall have occurred and be continuing or (b) any Advance to such Borrowing 9 4 Subsidiary, or any interest accrued thereon, shall be outstanding); collectively, the "Borrowing Subsidiaries". For avoidance of doubt, (i) Tennessee may be undesignated as a Borrowing Subsidiary by written notice to the Administrative Agent by the Company and (ii) EPNGC shall always be a Borrower hereunder. "Business Day" means a day of the year on which banks are not required or authorized to close in New York, New York and, if the applicable Business Day relates to any Eurodollar Rate Advances or LIBO Rate CAF Advances, on which dealings are carried on in the London interbank market. "CAF Advance" means an Advance made pursuant to Sections 2.4 and 2.5. "CAF Advance Agent" has the meaning assigned to such term in the preamble hereof. "CAF Advance Availability Period" means the period from and including the Closing Date until the earlier of (a) the date which is 7 days prior to the Stated Termination Date and (b) the Termination Date. "CAF Advance Confirmation" means each confirmation by the applicable Borrower of its acceptance of CAF Advance Offers, which CAF Advance Confirmation shall be substantially in the form of Exhibit E and shall be delivered to the CAF Advance Agent by telecopy. "CAF Advance Interest Payment Date" means as to each CAF Advance, each interest payment date specified by the applicable Borrower for such CAF Advance in the related CAF Advance Request. "CAF Advance Lenders" means Lenders from time to time designated by the Company, in consultation with the CAF Advance Agent, as CAF Advance Lenders as provided in Section 2.4. "CAF Advance Maturity Date" means as to any CAF Advance, the date specified by the applicable Borrower pursuant to Section 2.5(d)(ii) in its acceptance of the related CAF Advance Offer. "CAF Advance Offer" means each offer by a CAF Advance Lender to make CAF Advances pursuant to a CAF Advance Request, which CAF Advance Offer shall contain the information specified in Exhibit D and shall be delivered to the CAF Advance Agent by telephone, immediately confirmed by telecopy. "CAF Advance Request" means each request by the applicable Borrower for CAF Advance Lenders to submit bids to make CAF Advances, which request shall contain the information in respect of such requested CAF Advances specified in Exhibit C and shall 10 5 be delivered to the CAF Advance Agent in writing, by telecopy, or by telephone, immediately confirmed by telecopy. "Capitalization" of any Person means the sum (without duplication) of (a) consolidated Debt of such Person and its consolidated Subsidiaries, plus (b) the aggregate amount of Guaranties entered into by such Person and its consolidated Subsidiaries, plus (c) the consolidated common and preferred stockholders' equity of such Person and its consolidated Subsidiaries. "C/D Assessment Rate" means for any day as applied to any Base Rate Advance, the annual assessment rate determined by Chase to be payable on such day to the Federal Deposit Insurance Corporation (the "FDIC") for the FDIC's (or any successor's) insuring time deposits at offices of Chase in the United States. "C/D Reserve Percentage" means for any day as applied to any Base Rate Advance, that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) (the "Board"), for determining the then current reserve requirement for the Administrative Agent in respect of new non-personal time deposits in Dollars having a maturity of 30 days or more. "Chase" means The Chase Manhattan Bank, a New York banking corporation. "Closing Date" has the meaning assigned to such term in Section 3.2. "Co-Documentation Agents" has the meaning assigned to such term in the preamble hereof. "Commitment" means as to any Lender, the obligation of such Lender to make Revolving Credit Advances to the Borrowers hereunder in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender's name on Schedule I (as such Schedule I is amended from time to time pursuant to Section 9.7(c)), as such amount may be reduced from time to time in accordance with the provisions of this Agreement. "Commitment Expiration Date" has the meaning assigned to such term in Section 2.23(a). "Commitment Percentage" means as to any Lender at any time, the percentage which such Lender's Commitment then constitutes of the aggregate Commitments (or, at any time after the Commitments shall have expired or terminated, the percentage which the aggregate principal amount of such Lender's Advances then outstanding constitutes of the aggregate principal amount of the Advances then outstanding). "Company" has the meaning assigned to such term in the preamble hereof. 11 6 "Contingent Guaranty" has the meaning assigned to such term in the definition of the term "Guaranty" contained in this Section 1.1. "Convert", "Conversion" and "Converted" each refers to a conversion of Advances of one Type into Advances of another Type pursuant to Section 2.13, 2.14 or 2.18. "Debt" means, as to any Person, all Indebtedness of such Person other than (a) any Project Financing of such Person, (b) in the case of the Company or a Principal Subsidiary, any liabilities of the Company or such Principal Subsidiary, as the case may be, under any Alternate Program, or any document executed by the Company or such Principal Subsidiary, as the case may be, in connection therewith and (c) any obligations of the Company or a Principal Subsidiary with respect to lease payments for the headquarters building of the Company located in Houston, Texas; provided, however, that for purposes of Article V, "Debt" shall not include up to an aggregate amount (determined without duplication of amount) of $200,000,000 of (i) the amount of optional payments in lieu of asset repurchase or other payments to similar effect, including extension or renewal payments, on off balance sheet leases and (ii) the amount of the purchase price for optional acquisition of such asset (in either case, calculated at the lower amount payable in respect of such asset under clause (i) or (ii) above). "Default" means any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both. "Dollars" and "$" means dollars in lawful currency of the United States of America. "Effective Date" has the meaning assigned to such term in Section 3.1. "Effective Federal Funds Rate" means, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Eligible Assignee" means, with respect to any particular assignment under Section 9.7, any bank or other financial institution approved in writing by the Company expressly with respect to such assignment and, except as to such an assignment by Chase so long as Chase is the Administrative Agent hereunder, the Administrative Agent as an Eligible Assignee for purposes of this Agreement, provided that (i) neither the Administrative Agent's nor the Company's approval shall be unreasonably withheld and 12 7 (ii) neither the Administrative Agent's nor the Company's approval shall be required if the assignee is another Lender or an Affiliate of the assigning Lender. "EPNGC" has the meaning assigned to such term in the preamble hereof. "EPTPC" means El Paso Tennessee Pipeline Co., a Delaware corporation. "EPTPC Facility" means the $3,000,000,000 Revolving Credit and Competitive Advance Facility Agreement, dated as of November 4, 1996, among EPTPC, the several financial institutions from time to time parties thereto, and The Chase Manhattan Bank, as administrative agent and CAF advance agent thereunder, as the same may be amended, modified or supplemented from time to time. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued from time to time thereunder. "ERISA Affiliate" means any Person who is a member of the Company's controlled group within the meaning of Section 4001(a)(14)(A) of ERISA. "Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Eurodollar Rate" means, for any Interest Period for each Eurodollar Rate Advance comprising part of the same Borrowing, an interest rate per annum equal to the rate which appears on Page 3750 of the Telerate Service (or on any successor or substitute page of such service, or any successor to or substitute for such service providing rate quotations comparable to those currently provided on such page of such service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to Dollar deposits in the London interbank market) as at approximately 11:00 A.M. (London, England time) two Business Days before the first day of such Interest Period as the rate for Dollar deposits with a maturity comparable to such Interest Period; provided that if such rate is not available at such time for any reason, the Eurodollar Rate for such Borrowing for such Interest Period shall be the interest rate per annum equal to the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the rate per annum at which deposits in Dollars are offered by the principal office of each of the Reference Lenders in London, England, to prime banks in the London interbank market as at approximately 11:00 A.M. (London, England time) two Business Days before the first day of such Interest Period, in an approximate amount of each such Reference Lender's share of the relevant Borrowing for the applicable Interest Period. The Eurodollar Rate for the Interest Period for each Eurodollar Rate Advance comprising part of the same Borrowing, when being determined pursuant to the foregoing proviso clause, shall be determined by the Administrative Agent on the basis of applicable rates furnished to and received by the Administrative Agent from the Reference Lenders two Business 13 8 Days before the first day of such Interest Period, subject, however, to the provisions of Section 2.13. "Eurodollar Rate Advance" means an Advance which bears interest determined by reference to the Eurodollar Rate, as provided in Section 2.11(a)(ii). "Eurodollar Reserve Percentage" for any Lender for any Interest Period for any Eurodollar Rate Advance means the reserve percentage applicable during such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such Interest Period during which any such percentage shall be so applicable) for determining the maximum reserve requirement (including, but not limited to, any emergency, supplemental or other marginal reserve requirement) for such Lender with respect to liabilities or assets consisting of or including Eurocurrency Liabilities having a term equal to such Interest Period. "Events of Default" has the meaning assigned to such term in Section 7.1. "Excluded Acquisition Debt" means (a) Debt, Guaranties or reimbursement obligations of any corporation acquired by the Company or any of its Subsidiaries and which Debt, Guaranties or reimbursement obligations exist immediately prior to such acquisition (provided that (i) such Debt, Guaranties or reimbursement obligations are not incurred solely in anticipation of such acquisition and (ii) immediately prior to such acquisition such corporation is not a Subsidiary of the Company), (b) Debt, Guaranties or reimbursement obligations of EPTPC and its Subsidiaries in existence on the date of the merger of El Paso Tennessee Pipeline Company with El Paso Merger Company or (c) Debt, Guaranties or reimbursement obligations in respect of any asset acquired by the Company or any of its Subsidiaries and which Debt, Guaranties or reimbursement obligations exists immediately prior to such acquisition (provided that (i) such Debt, Guaranties or reimbursement obligations are not incurred solely in anticipation of such acquisition and (ii) immediately prior to such acquisition such asset is not an asset of the Company or any of its Subsidiaries). "Existing 364-Day Facility" means the $750,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement dated as of October 29, 1997, as the same has been or may be amended, supplemented or otherwise modified prior to the Closing Date, among the Company, EPNGC, Tennessee the several financial institutions from time to time parties thereto, Chase, as Administrative Agent and CAF Advance Agent, Citibank, N.A., as Documentation Agent and Morgan Guaranty Trust Company of New York, as Syndication Agent. "Existing 5-Year Facility" means the $750,000,000 5-Year Revolving Credit and Competitive Advance Facility Agreement, dated as of October 29, 1997, among the Company, EPNGC, Tennessee, the banks and other lenders parties thereto, Chase, as Administrative Agent and CAF Advance Agent, Citibank, N.A., as Documentation Agent 14 9 and Morgan Guaranty Trust Company of New York, as Syndication Agent, as the same has been and may be amended, supplemented and modified from time to time. "Exposure" means (a) with respect to an Objecting Lender at any time, the aggregate outstanding principal amount of its Revolving Credit Advances and (b) with respect to any other Lender at any time, the maximum amount of the Commitment of such Lender. "Extension Request" means each request by the Borrowers made pursuant to Section 2.23 for the Lenders to extend the Stated Termination Date, which shall contain the information in respect of such extension specified in Exhibit M and shall be delivered to the Administrative Agent in writing. "Facility Fee Commencement Date" means the date hereof. "FERC" means the Federal Energy Regulatory Commission, or any agency or authority of the United States from time to time succeeding to its function. "Fixed Rate CAF Advance" means any CAF Advance made pursuant to a Fixed Rate CAF Advance Request. "Fixed Rate CAF Advance Request" means any CAF Advance Request requesting the CAF Advance Lenders to offer to make CAF Advances at a fixed rate (as opposed to a rate composed of the Applicable LIBO Rate plus (or minus) a margin). "Guaranty", "Guaranteed" and "Guaranteeing" each means any act by which any Person assumes, guarantees, endorses or otherwise incurs direct or contingent liability in connection with, or agrees to purchase or otherwise acquire or otherwise assures a creditor against loss in respect of, any Debt or Project Financing of any Person other than the Company or any of its consolidated Subsidiaries (excluding (a) any liability by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, (b) any liability in connection with obligations of the Company, any of its consolidated Subsidiaries, including, without limitation, obligations under any conditional sales agreement, equipment trust financing or equipment lease, and (c) any such act in connection with a Project Financing that either (i) guarantees performance of the completion of the project which is financed by such Project Financing, until such time, if any, that such guaranty becomes a guaranty of payment of such Project Financing (other than a guaranty of payment of the type referred to in subclause (ii) below) or (ii) is contingent upon, or the obligation to pay or perform under which is contingent upon, the occurrence of any event other than or in addition to the passage of time or any Project Financing becoming due (any such act referred to in this clause (c) being a "Contingent Guaranty"); provided, however, that for purposes of this definition the liability of the Company or any of its Subsidiaries with respect to any obligation as to which a third party or parties are jointly, or jointly and severally, liable as 15 10 a guarantor or otherwise as contemplated hereby and have not defaulted on its or their portions thereof, shall be only its pro rata portion of such obligation. "Indebtedness" of any Person means, without duplication (a) indebtedness of such Person for borrowed money, (b) obligations of such Person (other than any portion of any trade payable obligation of such Person which shall not have remained unpaid for 91 days or more from the original due date of such portion) to pay the deferred purchase price of property or services, and (c) obligations of such Person as lessee under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, except that where such indebtedness or obligation of such Person is made jointly, or jointly and severally, with any third party or parties other than any consolidated Subsidiary of such Person, the amount thereof for the purposes of this definition only shall be the pro rata portion thereof payable by such Person, so long as such third party or parties have not defaulted on its or their joint and several portions thereof. "Indemnified Party" means any or all of the Lenders, the Administrative Agent and the CAF Advance Agent. "Interest Period" means, for each Eurodollar Rate Advance comprising part of the same Borrowing, the period beginning on the date of such Advance or the date of the Conversion of any Advance into such an Advance and ending on the last day of the period selected by the applicable Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the applicable Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, two, three or six months, or, subject to availability to each Lender, nine or twelve months, in each case as the applicable Borrower may, upon notice received by the Administrative Agent not later than 12:00 noon (New York City time) on the third Business Day prior to the first day of such Interest Period with respect to Eurodollar Rate Advances, select; provided, however, that: (a) the duration of any Interest Period which commences before the first anniversary of the Termination Date and would otherwise end after the first anniversary of the Termination Date shall end on the first anniversary of the Termination Date; (b) if the last day of such Interest Period would otherwise occur on a day which is not a Business Day, such last day shall be extended to the next succeeding Business Day, except if such extension would cause such last day to occur in a new calendar month, then such last day shall occur on the next preceding Business Day; (c) Interest Periods commencing on the same date for Advances comprising the same Borrowing shall be of the same duration; and 16 11 (d) with respect to Advances made by an Objecting Lender, no Interest Period with respect to such Advances shall end after the first anniversary of such Objecting Lender's Commitment Expiration Date. "Joinder Agreement" means a Joinder Agreement, substantially in the form of Exhibit J hereto, duly executed and delivered by the Company and the Borrowing Subsidiary party thereto. "Lenders" has the meaning assigned to such term in the preamble hereof. "LIBO Rate CAF Advance" means any CAF Advance made pursuant to a LIBO Rate CAF Advance Request. "LIBO Rate CAF Advance Request" means any CAF Advance Request requesting the CAF Advance Lenders to offer to make CAF Advances at an interest rate equal to the Applicable LIBO Rate plus (or minus) a margin. "Lien" means any lien, security interest or other charge or encumbrance, or any assignment of the right to receive income, or any other type of preferential arrangement, in each case to secure any Indebtedness or any Guaranty of any Person. "Majority Lenders" means Lenders the Commitment Percentages of which aggregate at least 51%, provided, that at any time after the Commitment Expiration Date with respect to any Objecting Lender (but prior to the termination of all the Commitments), "Majority Lenders" shall mean Lenders whose Exposure aggregates at least 51% of the aggregate Exposure of all the Lenders. "Margin Stock" means "margin stock" as defined in Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Material Adverse Effect" means a material adverse effect on the financial condition or operations of the Company and its consolidated Subsidiaries on a consolidated basis. "Material Subsidiary" means any Subsidiary of the Company (other than a Project Financing Subsidiary) that itself (on an unconsolidated, stand-alone basis) owns in excess of 10% of the consolidated net property, plant and equipment of the Company and its consolidated Subsidiaries. "Mojave" means Mojave Pipeline Company. "Moody's Bond Rating", with respect to any Borrower, means for any day the Bond Rating of such Borrower, if any, established by Moody's Investors Service, Inc. as in effect at 11:00 A.M., New York City time, on such day. 17 12 "Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which the Company or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions and in respect of which the Company or an ERISA Affiliate has any liability (contingent or otherwise), such plan being maintained pursuant to one or more collective bargaining agreements. "Multiple Employer Plan" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, which (a) is maintained for employees of the Company or an ERISA Affiliate and at least one Person other than the Company and its ERISA Affiliates or (b) was so maintained and in respect of which the Company or an ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated. "Net Worth" means with respect to the Company, as of any date of determination, the sum of the preferred stock and stockholders' equity of the Company as shown on the most recent consolidated balance sheet of the Company delivered pursuant to Section 5.3. "Note" has the meaning assigned to such term in Section 2.3(d). "Notice of Borrowing" has the meaning specified in Section 2.2(a). "Obligations" means the collective reference to the unpaid principal of and interest on the Advances and the Notes and all other financial liabilities of the Borrowers to the Administrative Agent, the CAF Advance Agent and the Lenders (including, without limitation, interest accruing at the then applicable rate provided in this Agreement after the maturity of the Advances and interest accruing at the then applicable rate provided in this Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Borrower whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement or the Notes, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Administrative Agent, the CAF Advance Agent or to the Lenders that are required to be paid by any Borrower pursuant to this Agreement). "Objecting Lenders" has the meaning assigned to such term in Section 2.23(a). "Other Taxes" has the meaning assigned to such term in Section 2.20(b). "Party" has the meaning assigned to such term in Section 9.8. "PBGC" means the Pension Benefit Guaranty Corporation (or any successor). 18 13 "Permitted Claims" has the meaning assigned to such term in Section 9.9(a). "Person" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a country or any political subdivision thereof or any agency or instrumentality of such country or subdivision. "Plan" means a Single Employer Plan or a Multiple Employer Plan. "Prime Rate" means the rate of interest per annum publicly announced from time to time by Chase as its prime rate in effect at its principal office in New York City. The Prime Rate is not intended to be the lowest rate of interest charged by Chase in connection with extensions of credit to debtors. "Principal Subsidiary" means, at any time, any Subsidiary of the Company (other than a Project Financing Subsidiary) either (a) having assets that are, or owning Subsidiaries with assets that together with its assets are, at such time greater than or equal to 5% of the consolidated assets of the Company and its consolidated Subsidiaries at such time or (b) constituting a Borrowing Subsidiary. "Process Agent" has the meaning specified in Section 9.9(a). "Project Financing" means any Indebtedness incurred to finance a project, other than any portion of such Indebtedness permitting or providing for recourse against the Company or any of its Subsidiaries other than (a) recourse to the stock or assets of the Project Financing Subsidiary, if any, incurring or Guaranteeing such Indebtedness, and (b) such recourse as exists under any Contingent Guaranty. "Project Financing Subsidiary" means any Subsidiary of the Company whose principal purpose is to incur Project Financing, or to become a partner, member or other equity participant in a partnership, limited liability company or other entity so created, and substantially all the assets of which Subsidiary, partnership limited liability company or other entity are limited to those assets being financed (or to be financed) in whole or in part by a Project Financing. "Rating Agency" means any of Moody=s Investors Service, Inc. and Standard & Poor=s Ratings Group; collectively the "Rating Agencies". "Receivables Purchase and Sale Agreement" means the collective reference to (a) the Receivables Purchase and Sale Agreement dated as of January 14, 1992 among EPNGC, CIESCO L.P., a New York limited partnership, Corporate Asset Funding Company, a Delaware corporation and Citicorp North America, Inc., as agent, as amended as of the date hereof, and (b) the Amended and Restated Receivables Sale Agreement dated as of December 31, 1996 among El Paso Energy Credit Corporation, Asset Securitization Cooperative Corporation and Canadian Imperial Bank of Commerce, 19 14 as administrative agent, as such Agreement may be amended, supplemented, restated or otherwise modified from time to time, provided that no such amendment, supplement, restatement or modification shall change the scope of such Agreement from that of a receivables securitization transaction. "Reference Lenders" means Chase, Citibank, N.A., ABN Amro Bank, N.V. and Bank of America, N.A.. "Register" has the meaning specified in Section 9.7(c). "Required Lenders" means Lenders (a) which are not Objecting Lenders with respect to any previous Extension Request and (b) which have Commitment Percentages aggregating at least 66-2/3% of the aggregate Commitment Percentages of such non-Objecting Lenders. "Revolving Credit Advances" has the meaning assigned to such term in Section 2.1. "S&P Bond Rating", with respect to any Borrower, means for any day the Bond Rating of such Borrower, if any, established by Standard & Poor's Ratings Group as in effect at 11:00 A.M., New York City time, on such day. "Single Employer Plan" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the Company or an ERISA Affiliate and no Person other than the Company and its ERISA Affiliates or (b) was so maintained and in respect of which the Company or an ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. "Sonat Agreement" means the Credit Agreement dated as of April 15, 1999 among Sonat Inc., the banks party thereto, Chase, as Administrative Agent thereunder, Bank of America National Trust and Savings Association, as Syndication Agent thereunder and Suntrust Bank, Atlanta, as Documentation Agent thereunder, as amended, supplemented or otherwise modified from time to time. "Stated Termination Date" means August 14, 2000 or such later date as shall be determined pursuant to the provisions of Section 2.23 with respect to non-Objecting Lenders. "Subsidiary" means, as to any Person, any corporation of which at least a majority of the outstanding stock having by the terms thereof ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether or not at the time stock of any other class or classes of such corporation shall or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly 20 15 beneficially owned or controlled by such Person or one or more of its Subsidiaries or such Person and one or more of the Subsidiaries of such Person. "Syndication Agent" has the meaning assigned to such term in the preamble hereof. "Taxes" has the meaning assigned to such term in Section 2.20(a). "Tennessee" has the meaning assigned to such term in the preamble hereof, and its successors. "Termination Date" means the earlier of (a) the Stated Termination Date and (b) the date of termination in whole of the Commitments pursuant to Section 2.9 or 7.1. "Termination Event" means (a) a Areportable event," as such term is described in Section 4043 of ERISA (other than a "reportable event" not subject to the provision for 30-day notice to the PBGC under subsection .11, .12, .13, .14, .16, .18, .19 or .20 of PBGC Reg. ' 2615), or an event described in Section 4062(e) of ERISA, or (b) the withdrawal of the Company or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a "substantial employer," as such term is defined in Section 4001(a)(2) of ERISA or the incurrence of liability by the Company or any ERISA Affiliate under Section 4064 of ERISA upon the termination of a Multiple Employer Plan, or (c) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, or (d) the institution of proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA, or (e) the conditions set forth in Section 302(f)(1)(A) and (B) of ERISA to the creation of a lien upon property or rights to property of the Company or any ERISA Affiliate for failure to make a required payment to a Plan are satisfied, or (f) the adoption of an amendment to a Plan requiring the provision of security to such Plan, pursuant to Section 307 of ERISA, or (g) the occurrence of any other event or the existence of any other condition which would reasonably be expected to result in the termination of, or the appointment of a trustee to administer, any Plan under Section 4042 of ERISA. "Three-Month Secondary CD Rate" means, for any day, the secondary market rate (adjusted to the basis of a year of 365 or 366 days, as the case may be) for three-month certificates of deposit reported as being in effect on such day (or, if such day shall not be a Business Day, the next preceding Business Day) by the Board of Governors of the Federal Reserve System (the "Board") through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day), or, if such rate shall not be so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 A.M., New York City time, on such day (or, if such day shall not be a Business Day, on the next preceding Business Day) by the Administrative Agent from 21 16 three New York City negotiable certificate of deposit dealers of recognized standing selected by it. "Type" means (a) as to any Revolving Credit Advance, its nature as a Base Rate Advance or a Eurodollar Rate Advance and (b) as to any CAF Advance, its nature as a Fixed Rate CAF Advance or a LIBO Rate CAF Advance. "Withdrawal Liability" has the meaning given such term under Part 1 of Subtitle E of Title IV of ERISA. SECTION 1.2 Computation of Time Periods. Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding." SECTION 1.3 Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles either (a) consistent with those principles applied in the preparation of the financial statements referred to in Section 4.1(e) or (b) not materially inconsistent with such principles (so that no covenant contained in Section 5.1 or 5.2 would be calculated or construed in a materially different manner or with materially different results than if such covenant were calculated or construed in accordance with clause (a) of this Section 1.3). SECTION 1.4 References. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Article, Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.1 The Revolving Credit Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make revolving credit advances ("Revolving Credit Advances") to the Borrowers or any one or more of them from time to time on any Business Day during the period from the date hereof to and including the Termination Date in an aggregate amount not to exceed at any time outstanding the amount of such Lender's Commitment; provided that the aggregate amount of the Advances (other than Advances of Objecting Lenders) outstanding shall not at any time exceed the aggregate amount of the Commitments. Each Borrowing shall be in an aggregate amount of $5,000,000 in the case of a Borrowing comprised of Base Rate Advances and $20,000,000 in the case of a Borrowing comprised of Eurodollar Rate Advances, or, in each case, an integral multiple of $1,000,000 in excess thereof (or, in the case of a Borrowing of Base Rate Advances, the aggregate unused Commitments, if less) and shall consist of Revolving Credit Advances of the same Type made on 22 17 the same day by the Lenders ratably according to their respective Commitments. Within the limits of each Lender's Commitment, any Borrower may make more than one Borrowing on any Business Day and may borrow, repay pursuant to Section 2.10 or prepay pursuant to Section 2.15, and reborrow under this Section 2.1. SECTION 2.2 Making the Revolving Credit Advances. (a) Each Borrowing of Revolving Credit Advances shall be made on notice by the Company on its own behalf or the Company on behalf of another Borrower, to the Administrative Agent (a "Notice of Borrowing") received by the Administrative Agent, (i) in the case of a proposed Borrowing comprised of Base Rate Advances, not later than 10:00 A.M. (New York City time) on the Business Day of such proposed Borrowing and (ii) in the case of a proposed Borrowing comprised of Eurodollar Rate Advances, not later than 12:00 noon (New York City time) on the third Business Day prior to the date of such proposed Borrowing. Each Notice of Borrowing shall be by telecopy or telephone (and if by telephone, confirmed promptly by telecopier), in substantially the form of Exhibit B, specifying therein the requested (A) Borrower, (B) date of such Borrowing, (C) Type of Revolving Credit Advances comprising such Borrowing, (D) aggregate amount of such Borrowing, and (E) in the case of a Borrowing comprised of Eurodollar Rate Advances, the initial Interest Period for each such Advance. Each Lender shall, before 1:00 P.M. (New York City time) on the date of such Borrowing, make available to the Administrative Agent at its address at 270 Park Avenue, New York, New York, 10017, Reference: El Paso Energy Corporation, or at such other address designated by notice from the Administrative Agent to the Lenders pursuant to Section 9.2, in same day funds, such Lender's ratable portion of such Borrowing. Immediately after the Administrative Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the applicable Borrower at Chase, 270 Park Avenue, New York, New York, 10017, Account No. 323291503, Reference: El Paso Energy Corporation, or at such other account of the applicable Borrower maintained by the Administrative Agent (or any successor Administrative Agent) designated by the applicable Borrower and agreed to by the Administrative Agent (or such successor Administrative Agent), in same day funds. (b) Each Notice of Borrowing shall be irrevocable and binding on the applicable Borrower. In the case of any Borrowing which the related Notice of Borrowing specified is to be comprised of Eurodollar Rate Advances, if such Advances are not made as a result of any failure to fulfill on or before the date specified for such Borrowing the applicable conditions set forth in Article III, the applicable Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of such failure, including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing. (c) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's ratable portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with subsection (a) of this Section 2.2 and the Administrative Agent 23 18 may, in reliance upon such assumption, make available to the applicable Borrower on such date a corresponding amount. If and to the extent such Lender shall not have so made such ratable portion available to the Administrative Agent, such Lender and the applicable Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the applicable Borrower until the date such amount is repaid to the Administrative Agent, at the Effective Federal Funds Rate for such day. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's Advance to the applicable Borrower as part of such Borrowing for purposes of this Agreement. (d) The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Advance on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing. SECTION 2.3 Evidence of Debt. (a) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of each Borrower to such Lender resulting from each Revolving Credit Advance of such Lender to such Borrower from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time in respect of such Revolving Credit Advance. (b) The Administrative Agent shall maintain the Register pursuant to Section 9.7(c), and a subaccount therein for each Lender, in which shall be recorded (i) the amount of each Revolving Credit Advance made hereunder, the Type thereof and each Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from each Borrower on account of such Revolving Credit Advance to each Lender hereunder and (iii) both the amount of any sum received by the Administrative Agent hereunder from each Borrower and each Lender's share thereof. (c) The entries made in the Register and the accounts of each Lender maintained pursuant to Section 2.3(a) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of each Borrower therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of each Borrower to repay (with applicable interest) the Revolving Credit Advances made to each such Borrower by such Lender in accordance with the terms of this Agreement. (d) Each Borrower agrees that, upon the request to the Administrative Agent by any Lender, such Borrower will execute and deliver to such Lender a promissory note of such Borrower evidencing the Revolving Credit Advances of such Lender to such Borrower, substantially in the form of Exhibit A with appropriate insertions as to date and principal amount (a "Note"). 24 19 SECTION 2.4 CAF Advances. Subject to the terms and conditions of this Agreement, the Borrowers or any one or more of them may borrow CAF Advances from time to time during the CAF Advance Availability Period on any Business Day. The Company shall, in consultation with the CAF Advance Agent, designate Lenders from time to time as CAF Advance Lenders by written notice to the CAF Advance Agent. The CAF Advance Agent shall transmit each such notice of designation promptly to each designated CAF Advance Lender. CAF Advances shall be borrowed in amounts such that the aggregate amount of Advances outstanding at any time shall not exceed the aggregate amount of the Commitments at such time. Any CAF Advance Lender may make CAF Advances in amounts which, individually and together with the aggregate amount of other Advances of such CAF Advance Lender, exceed such CAF Advance Lender's Commitment, and such CAF Advance Lender's CAF Advances shall not be deemed to utilize such CAF Advance Lender's Commitment. Within the limits and on the conditions hereinafter set forth with respect to CAF Advances, the Borrowers from time to time may borrow, repay and reborrow CAF Advances. SECTION 2.5 Procedure for CAF Advance Borrowings. (a) A Borrower, or the Company on behalf of a Borrower, shall request CAF Advances by delivering a CAF Advance Request to the CAF Advance Agent, not later than 12:00 Noon (New York City time) four Business Days prior to the date of the proposed Borrowing (in the case of a LIBO Rate CAF Advance Request), and not later than 10:00 A.M. (New York City time) one Business Day prior to the date of the proposed Borrowing (in the case of a Fixed Rate CAF Advance Request). Each CAF Advance Request may solicit bids for CAF Advances in an aggregate principal amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof and having not more than five alternative maturity dates. The maturity date for each CAF Advance shall be not less than 7 days nor more than 360 days after the date of the Borrowing therefor (and in any event shall be not later than the Stated Termination Date); provided that each LIBO Rate CAF Advance shall mature one, two, three or six months or, if available, nine [or twelve] months after the date of the Borrowing therefor. The CAF Advance Agent shall notify each CAF Advance Lender promptly by telecopy of the contents of each CAF Advance Request received by the CAF Advance Agent. (b) In the case of a LIBO Rate CAF Advance Request, upon receipt of notice from the CAF Advance Agent of the contents of such CAF Advance Request, each CAF Advance Lender may elect, in its sole discretion, to offer irrevocably to make one or more CAF Advances at the Applicable LIBO Rate plus (or minus) a margin determined by such CAF Advance Lender in its sole discretion for each such CAF Advance. Any such irrevocable offer shall be made by delivering a CAF Advance Offer to the CAF Advance Agent, before 10:30 A.M. (New York City time) on the day that is three Business Days before the date of the proposed Borrowing, setting forth: (i) the maximum amount of CAF Advances for each maturity date and the aggregate maximum amount of CAF Advances for all maturity dates which such CAF Advance Lender would be willing to make (which amounts may, subject to Section 2.4, exceed such CAF Advance Lender's Commitment); and 25 20 (ii) the margin above or below the Applicable LIBO Rate at which such CAF Advance Lender is willing to make each such CAF Advance. The CAF Advance Agent shall advise the Company and the applicable Borrower before 11:00 A.M. (New York City time) on the date which is three Business Days before the proposed date of the Borrowing of the contents of each such CAF Advance Offer received by it. If the CAF Advance Agent, in its capacity as a CAF Advance Lender, shall elect, in its sole discretion, to make any such CAF Advance Offer, it shall advise the Company and the applicable Borrower of the contents of its CAF Advance Offer before 10:15 A.M. (New York City time) on the date which is three Business Days before the proposed date of the Borrowing. (c) In the case of a Fixed Rate CAF Advance Request, upon receipt of notice from the CAF Advance Agent of the contents of such CAF Advance Request, each CAF Advance Lender may elect, in its sole discretion, to offer irrevocably to make one or more CAF Advances at a rate of interest determined by such CAF Advance Lender in its sole discretion for each such CAF Advance. Any such irrevocable offer shall be made by delivering a CAF Advance Offer to the CAF Advance Agent before 9:30 A.M. (New York City time) on the proposed date of the Borrowing, setting forth: (i) the maximum amount of CAF Advances for each maturity date, and the aggregate maximum amount for all maturity dates, which such CAF Advance Lender would be willing to make (which amounts may, subject to Section 2.4, exceed such CAF Advance Lender's Commitment); and (ii) the rate of interest at which such CAF Advance Lender is willing to make each such CAF Advance. The CAF Advance Agent shall advise the Company and the applicable Borrower before 10:00 A.M. (New York City time) on the proposed date of the Borrowing of the contents of each such CAF Advance Offer received by it. If the CAF Advance Agent, in its capacity as a CAF Advance Lender, shall elect, in its sole discretion, to make any such CAF Advance Offer, it shall advise the Company and the applicable Borrower of the contents of its CAF Advance Offer before 9:15 A.M. (New York City time) on the proposed date of the Borrowing. (d) Before 11:30 A.M. (New York City time) three Business Days before the proposed date of the Borrowing (in the case of CAF Advances requested by a LIBO Rate CAF Advance Request) and before 10:30 A.M. (New York City time) on the proposed date of the Borrowing (in the case of CAF Advances requested by a Fixed Rate CAF Advance Request), the Company, in its absolute discretion, shall: (i) cancel such CAF Advance Request by giving the CAF Advance Agent telephone notice to that effect, or (ii) by giving telephone notice to the CAF Advance Agent (immediately confirmed by delivery to the CAF Advance Agent of a CAF Advance Confirmation in 26 21 writing or by telecopy) (A) subject to the provisions of Section 2.5(e), accept one or more of the offers made by any CAF Advance Lender or CAF Advance Lenders pursuant to Section 2.5(b) or Section 2.5(c), as the case may be, of the amount of CAF Advances for each relevant maturity date and (B) reject any remaining offers made by CAF Advance Lenders pursuant to Section 2.5(b) or Section 2.5(c), as the case may be. (e) The Company's acceptance of CAF Advances in response to any CAF Advance Request shall be subject to the following limitations: (i) the amount of CAF Advances accepted for each maturity date specified by any CAF Advance Lender in its CAF Advance Offer shall not exceed the maximum amount for such maturity date specified in such CAF Advance Offer; (ii) the aggregate amount of CAF Advances accepted for all maturity dates specified by any CAF Advance Lender in its CAF Advance Offer shall not exceed the aggregate maximum amount specified in such CAF Advance Offer for all such maturity dates; (iii) the Company may not accept offers for CAF Advances for any maturity date in an aggregate principal amount in excess of the maximum principal amount requested in the related CAF Advance Request; and (iv) if the Company accepts any of such offers, it must accept offers based solely upon pricing for such relevant maturity date and upon no other criteria whatsoever and if two or more CAF Advance Lenders submit offers for any maturity date at identical pricing and the Company accepts any of such offers but does not wish to (or by reason of the limitations set forth in Section 2.4 or in Section 2.5(e)(iii), cannot) borrow the total amount offered by such CAF Advance Lenders with such identical pricing, the Company shall accept offers from all of such CAF Advance Lenders in amounts allocated among them pro rata according to the amounts offered by such CAF Advance Lenders (or as nearly pro rata as shall be practicable after giving effect to the requirement that CAF Advances made by a CAF Advance Lender on a date of the Borrowing for each relevant maturity date shall be in a principal amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof; provided that if the number of CAF Advance Lenders that submit offers for any maturity date at identical pricing is such that, after the Company accepts such offers pro rata in accordance with the foregoing, the CAF Advance to be made by such CAF Advance Lenders would be less than $5,000,000 principal amount, the number of such CAF Advance Lenders shall be reduced by the CAF Advance Agent by lot until the CAF Advances to be made by such remaining CAF Advance Lenders would be in a principal amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof). (f) If the Company notifies the CAF Advance Agent that a CAF Advance Request is cancelled pursuant to Section 2.5(d)(i), the CAF Advance Agent shall give prompt telephone notice thereof to the CAF Advance Lenders. 27 22 (g) If the Company accepts pursuant to Section 2.5(d)(ii) one or more of the offers made by any CAF Advance Lender or CAF Advance Lenders, the CAF Advance Agent promptly shall notify each CAF Advance Lender which has made such a CAF Advance Offer of (i) the aggregate amount of such CAF Advances to be made on such Borrowing Date for each maturity date and (ii) the acceptance or rejection of any offers to make such CAF Advances made by such CAF Advance Lender. Before 1:00 P.M. (New York City time) on the date of the Borrowing specified in the applicable CAF Advance Request, each CAF Advance Lender whose CAF Advance Offer has been accepted shall make available to the Administrative Agent at its office set forth in Section 9.2 the amount of CAF Advances to be made by such CAF Advance Lender, in same day funds. The Administrative Agent will make such funds available to the applicable Borrower as soon as practicable on such date at the Administrative Agent's aforesaid address. As soon as practicable after each Borrowing Date, the CAF Advance Agent shall notify each Lender of the aggregate amount of CAF Advances advanced on such Borrowing Date and the respective maturity dates thereof. (h) The failure of any CAF Advance Lender to make the CAF Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its CAF Advance on the date of such Borrowing, but no CAF Lender shall be responsible for the failure of any other CAF Advance Lender to make the CAF Advance to be made by such CAF Advance Lender on the date of any Borrowing. (i) A CAF Advance Request may request offers for CAF Advances to be made on not more than one Borrowing Date and to mature on not more than five CAF Advance Maturity Dates. No CAF Advance Request may be submitted earlier than five Business Days after submission of any other CAF Advance Request. SECTION 2.6 CAF Advance Payments. (a) The applicable Borrower shall repay to the Administrative Agent, for the account of each CAF Advance Lender which has made a CAF Advance to it, on the applicable CAF Advance Maturity Date the then unpaid principal amount of such CAF Advance. The Borrowers shall not have the right to prepay any principal amount of any CAF Advance. (b) The applicable Borrower shall pay interest on the unpaid principal amount of each CAF Advance to it from the date of the Borrowing to the applicable CAF Advance Maturity Date at the rate of interest specified in the CAF Advance Offer accepted by the applicable Borrower in connection with such CAF Advance (calculated on the basis of a 360-day year for actual days elapsed), payable on each applicable CAF Advance Interest Payment Date. (c) If all or a portion of the principal amount of any CAF Advance shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue principal amount shall, without limiting any rights of any Lender under this Agreement, bear interest from the date on which such payment was due at a rate per annum which is 1% above the rate which would otherwise be applicable pursuant to such CAF Advance until the stated maturity date of such CAF Advance, and for each day thereafter at a rate per annum which is 2% 28 23 above the Base Rate, in each case until paid in full (as well after as before judgment). Interest accruing pursuant to this paragraph (c) shall be payable from time to time on demand. SECTION 2.7 Evidence of Debt. Each Lender shall maintain in accordance with its usual practice appropriate records evidencing indebtedness of each Borrower to such Lender resulting from each CAF Advance of such Lender to such Borrower from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time in respect of such CAF Advance. The Administrative Agent shall maintain the Register pursuant to Section 9.7(c) and a record therein for each Lender, in which shall be recorded (i) the amount of each CAF Advance made by such Lender to each Borrower, the CAF Advance Maturity Date thereof, the interest rate applicable thereto and each CAF Advance Interest Payment Date applicable thereto, and (ii) the amount of any sum received by the Administrative Agent hereunder from a Borrower on account of such CAF Advance. The entries made in the Register and the records of each Lender maintained pursuant to this Section 2.7 shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of each Borrower therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain the Register or any such record, or any error therein, shall not in any manner affect the obligation of each Borrower to repay (with applicable interest) the CAF Advances made by such Lender in accordance with the terms of this Agreement. SECTION 2.8 Fees. (a) The Company agrees to pay to the Administrative Agent for the account of each Lender a facility fee for the period from and including the Facility Fee Commencement Date until all Advances have been paid in full and all Commitments have been terminated, computed at a variable rate per annum on the average daily amount of the greater of (i) the Commitment of such Lender and (ii) the outstanding principal amount of Revolving Credit Advances of such Lender during the period for which payment is made, which rate will vary according to the S&P Bond Rating for the Company and the Moody's Bond Rating for the Company as follows:
Bond Rating Facility (S&P/Moody's) Level Fee Rate ---------------- ----- -------- A/A2 or higher I .070% A-/A3 II .080% BBB+/Baa1 III .100% BBB/Baa2 IV .125% BBB-/Baa3 V .150% BB+/Ba1 or lower VI .200%;
provided that (i) if the Bond Ratings of the Company do not fall within the same Level, the rate applicable to such day will be the percentage opposite the Bond Rating that is at the higher Level (Level I being the highest and Level VI being the lowest), (ii) in the event a Bond Rating for the Company is not available from one of the Rating Agencies, the rate shall be based on the Bond Rating of the other Rating Agency, and (iii) in the event a Bond Rating for the Company is available from none of the Rating Agencies, the rate will be the percentage opposite Level VI. 29 24 Such facility fees shall be payable quarterly in arrears on the last day of each March, June, September and December and on the Termination Date or such earlier date on which the Commitments shall terminate as provided herein, and, if the Lender is an Objecting Lender, on the Commitment Expiration Date applicable to such Lender and on the first anniversary of the Termination Date (or if the Lender is an Objecting Lender, the first anniversary of the Commitment Expiration Date applicable to such Lender) or such earlier date on which the Advances are repaid in full, commencing on the first of such dates to occur after the date hereof. (b) The Company agrees to pay to Chase Securities Inc., the Administrative Agent and the CAF Advance Agent the fees set forth in the letter, dated as of July 12, 1999 from Chase Securities Inc. and Chase to the Company. SECTION 2.9 Reduction of the Commitments. The Company shall have the right, upon at least three Business Days' notice to the Administrative Agent, to terminate in whole or reduce ratably in part the unused portions of the respective Commitments of the Lenders, provided that each partial reduction shall be in the aggregate amount of $10,000,000 or any whole multiple of $1,000,000 in excess thereof. SECTION 2.10 Repayment of Advances. The Borrowers shall repay to each Lender on the first anniversary of the Termination Date the aggregate principal amount of the Advances then owing to such Lender; provided that the Revolving Credit Advances made by Objecting Lenders shall be repaid as provided in Section 2.23. SECTION 2.11 Interest on Revolving Credit Advances. (a) Ordinary Interest. Each Borrower shall pay interest on the unpaid principal amount of each Revolving Credit Advance of such Borrower owing to each Lender from the date of such Advance until such principal amount is due (whether at stated maturity, by acceleration or otherwise), at the following rates: (i) Base Rate Advances. During such periods as such Advance is a Base Rate Advance, a rate per annum equal at all times to the Base Rate in effect from time to time, payable quarterly in arrears on the last day of each March, June, September and December during such periods and on the date such Base Rate Advance shall be Converted or due (whether at stated maturity, by acceleration or otherwise). (ii) Eurodollar Rate Advances. During such periods as such Advance is a Eurodollar Rate Advance, at a rate per annum equal at all times during each Interest Period for such Advance to the sum of the Eurodollar Rate for such Interest Period plus the Applicable Eurodollar Rate Margin for such Borrower in effect from time to time, payable on the last day of each such Interest Period and, if any such Interest Period has a duration of more than three months, on each day which occurs during such Interest Period every three months from the first day of such Interest Period, and on the date such Advance shall be Converted or due (whether at stated maturity, by acceleration or otherwise). 30 25 (b) Default Interest. The applicable Borrower shall pay interest on the unpaid principal amount of each Revolving Credit Advance to it that is not paid when due (whether at stated maturity, by acceleration or otherwise) from the date on which such amount is due until such amount is paid in full, payable on demand, at a rate per annum equal at all times (i) from such due date to the last day of the then existing Interest Period in the case of each Eurodollar Rate Advance, to 1% per annum above the interest rate per annum required to be paid on such Advance immediately prior to the date on which such amount became due, and (ii) from and after the last day of the then existing Interest Period, and at all times in the case of any Base Rate Advance, to 1% per annum above the Base Rate in effect from time to time. SECTION 2.12 Additional Interest on Eurodollar Rate Advances. If any Lender shall determine in good faith that reserves under regulations of the Board of Governors of the Federal Reserve System are required to be maintained by it in respect of, or a portion of its costs of maintaining reserves under such regulations is properly attributable to, one or more of its Eurodollar Rate Advances, the applicable Borrower shall pay to such Lender additional interest on the unpaid principal amount of each such Eurodollar Rate Advance to it (other than any such additional interest accruing to a particular Lender in respect of periods prior to the 30th day preceding the date notice of such interest is given by such Lender as provided in this Section 2.12), payable on the same day or days on which interest is payable on such Advance, at an interest rate per annum equal at all times during each Interest Period for such Advance to the excess of (i) the rate obtained by dividing the Eurodollar Rate for such Interest Period by a percentage equal to 100% minus the Eurodollar Reserve Percentage, if any, for such Lender for such Interest Period over (ii) the Eurodollar Rate for such Interest Period. The amount of such additional interest (if any) shall be determined by each Lender, and such Lender shall furnish written notice of the amount of such additional interest to the Company and the Administrative Agent, which notice shall be conclusive and binding for all purposes, absent manifest error. SECTION 2.13 Interest Rate Determination. (a) Each Reference Lender agrees to furnish to the Administrative Agent timely information for the purpose of determining the Eurodollar Rate. If any one or more of the Reference Lenders shall not furnish such timely information to the Administrative Agent for the purpose of determining any such interest rate, the Administrative Agent shall determine such interest rate on the basis of timely information furnished by the remaining Reference Lenders. (b) The Administrative Agent shall give prompt notice to the Company and the Lenders of the applicable interest rate determined by the Administrative Agent for purposes of Section 2.11(a)(i) or (ii), and the applicable rate, if any, furnished by each Reference Lender for the purpose of determining the applicable interest rate under Section 2.11(a)(ii). (c) If fewer than two Reference Lenders furnish timely information to the Administrative Agent for determining the Eurodollar Rate for any Eurodollar Rate Advances, (i) the Administrative Agent shall give the Company and each Lender prompt notice thereof by telephone (confirmed in writing) that the interest rate cannot be determined for such Eurodollar Rate Advances, 31 26 (ii) each such Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance (or if such Advance is then a Base Rate Advance, will continue as a Base Rate Advance), and (iii) the obligations of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Company and the Lenders that the circumstances causing such suspension no longer exist. (d) If, with respect to any Eurodollar Rate Advances, the Majority Lenders determine and give notice to the Administrative Agent that, as a result of conditions in or generally affecting the London interbank eurodollar market, the rates of interest determined on the basis of the Eurodollar Rate for any Interest Period for such Advances will not adequately reflect the cost to such Majority Lenders of making, funding or maintaining their respective Eurodollar Rate Advances for such Interest Period, the Administrative Agent shall forthwith so notify the Company and the Lenders, whereupon, (i) each such Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance, and (ii) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Company and the Lenders that the circumstances causing such suspension no longer exist. (e) If the applicable Borrower shall fail to select the duration of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of "Interest Period" in Section 1.1, the Administrative Agent will forthwith so notify the applicable Borrower and the Lenders and such Advances will automatically, on the last day of the then existing Interest Period therefor, Convert into Base Rate Advances. (f) On the date on which the aggregate unpaid principal amount of Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $10,000,000, such Eurodollar Rate Advances shall automatically Convert into Base Rate Advances, and on and after such date the right of the applicable Borrower to Convert such Advances into Eurodollar Rate Advances shall terminate; provided, however, that if and so long as each such Eurodollar Rate Advance shall have the same Interest Period as Eurodollar Rate Advances comprising another Borrowing or other Borrowings, and the aggregate unpaid principal amount of all such Eurodollar Rate Advances shall equal or exceed $20,000,000, the applicable Borrower shall have the right to continue all such Advances as, or to Convert all such Advances into Eurodollar Rate Advances having the same Interest Period. (g) If any Reference Lender shall for any reason no longer have a Commitment or any Revolving Credit Advances, such Reference Lender shall thereupon cease to be a Reference Lender, and if, as a result, there shall only be one Reference Lender remaining, 32 27 the Administrative Agent (after consultation with the Company and the Lenders) shall, by notice to the Company and the Lenders, designate another Lender as a Reference Lender so that there shall at all times be at least two Reference Lenders. SECTION 2.14 Voluntary Conversion of Advances. Any Borrower may on any Business Day, upon notice given to the Administrative Agent, not later than 10:00 A.M. (New York City time) on the Business Day of the proposed Conversion of Eurodollar Rate Advances to Base Rate Advances and not later than 12:00 noon (New York City time) on the third Business Day prior to the date of the proposed Conversion in the case of a Conversion of Base Rate Advances to Eurodollar Rate Advances, and subject to the provisions of Sections 2.13, 2.16 and 2.18, Convert all Advances of one Type comprising the same Borrowing into Advances of another Type; provided, however, that any Conversion of any Eurodollar Rate Advances into Base Rate Advances made on any day other than the last day of an Interest Period for such Eurodollar Rate Advances shall be subject to the provisions of Section 9.4(b); and provided, further, that no Revolving Credit Advance may be converted into a Eurodollar Rate Advance after the date that is one month prior to (a) in the case of a Revolving Credit Advance made by an Objecting Lender, the first anniversary of such Objecting Lender's Commitment Expiration Date, and (b) in the case of all Revolving Credit Advances, the first anniversary of the Termination Date and provided, still further, that no Revolving Credit Advance may be converted into a Eurodollar Rate Advance if an Event of Default has occurred and is continuing. Each such notice of a Conversion shall, within the restrictions specified above, specify (a) the date of such Conversion, (b) the Advances to be Converted, and (c) if such Conversion is into Eurodollar Rate Advances, the duration of the Interest Period for each such Advance. SECTION 2.15 Optional and Mandatory Prepayments. (a) Optional Prepayments. Any Borrower may upon (i) in the case of Eurodollar Rate Advances, at least two Business Days' notice and (ii) in the case of Base Rate Advances, telephonic notice not later than 12:00 noon (New York City time) on the date of prepayment, to the Administrative Agent which specifies the proposed date and aggregate principal amount of the prepayment and the Type of Advances to be prepaid, and if such notice is given such Borrower shall, prepay the outstanding principal amounts of the Revolving Credit Advances comprising the same Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the amount prepaid; provided, however, that (A) each partial prepayment shall be in an aggregate principal amount not less than $10,000,000 or an integral multiple of $1,000,000 in excess thereof and (B) in the event of any such prepayment of Eurodollar Rate Advances on any day other than the last day of an Interest Period for such Eurodollar Rate Advances, such Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to, and to the extent required by, Section 9.4(b); provided, further, however, that such Borrower will use its best efforts to give notice to the Administrative Agent of the proposed prepayment of Base Rate Advances on the Business Day prior to the date of such proposed prepayment. (b) Mandatory Prepayments. If, at any time and from time to time, the aggregate principal amount of Advances (other than Advances of Objecting Lenders) then outstanding exceeds the Commitments of all the Lenders after giving effect to any reduction of the Commitments pursuant to Section 2.9, the Borrowers shall immediately prepay the Revolving 33 28 Credit Advances of Lenders (other than Objecting Lenders) (to the extent there are such outstanding Revolving Credit Advances) by an amount equal to such excess. SECTION 2.16 Increased Costs. (a) If, due to either (i) the introduction after the date of this Agreement of or any change after the date of this Agreement (including any change by way of imposition or increase of reserve requirements or assessments other than those referred to in the definition of "Eurodollar Reserve Percentage," "C/D Reserve Percentage" or "C/D Assessment Rate" contained in Section 1.1) in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request issued or made after the date of this Agreement from or by any central bank or other governmental authority (whether or not having the force of law), in each case above other than those referred to in Section 2.17, there shall be any increase in the cost to any Lender of agreeing to make, fund or maintain, or of making, funding or maintaining, Eurodollar Rate Advances funded in the interbank Eurodollar market, then the Borrowers shall from time to time, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender additional amounts sufficient to reimburse such Lender for all such increased costs (except those costs incurred more than 60 days prior to the date of such demand; for the purposes hereof any cost or expense allocable to a period prior to the publication or effective date of such an introduction, change, guideline or request shall be deemed to be incurred on the later of such publication or effective date). Each Lender agrees to use its best efforts promptly to notify the Company of any event referred to in clause (i) or (ii) above, provided that the failure to give such notice shall not affect the rights of any Lender under this Section 2.16(a) (except as otherwise expressly provided above in this Section 2.16(a)). A certificate as to the amount of such increased cost, submitted to the Company and the Administrative Agent by such Lender, shall be conclusive and binding for all purposes, absent manifest error. After one or more Lenders have notified the Company of any increased costs pursuant to this Section 2.16, the Company may specify by notice to the Administrative Agent and the affected Lenders that, after the date of such notice whenever the election of Eurodollar Rate Advances by the applicable Borrower for an Interest Period or portion thereof would give rise to such increased costs, such election shall not apply to the Revolving Credit Advances of such Lenders during such Interest Period or portion thereof, and, in lieu thereof, such Revolving Credit Advances shall during such Interest Period or portion thereof be Base Rate Advances. Each Lender agrees to use its best efforts (including, without limitation, a reasonable effort to change its lending office or to transfer its affected Advances to an affiliate of such Lender) to avoid, or minimize the amount of, any demand for payment from the Borrowers under this Section 2.16. (b) In the event that any Lender shall change its lending office and such change results (at the time of such change) in increased costs to such Lender, the Borrowers shall not be liable to such Lender for such increased costs incurred by such Lender to the extent, but only to the extent, that such increased costs shall exceed the increased costs which such Lender would have incurred if the lending office of such Lender had not been so changed, but, subject to subsection (a) above and to Section 2.18, nothing herein shall require any Lender to change its lending office for any reason. 34 29 SECTION 2.17 Increased Capital. If either (a) the introduction of or any change in or in the interpretation of any law or regulation or (b) compliance by any Lender with any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender and such Lender determines that the amount of such capital is increased by or based upon the existence of such Lender's commitment to lend hereunder and other commitments of this type, then, within ten days after demand, and delivery to the Company of the certificate referred to in the last sentence of this Section 2.17 by such Lender (with a copy of such demand to the Administrative Agent), the applicable Borrowers shall pay to the Administrative Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender or such corporation in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's commitment to lend hereunder (except any such increase in capital incurred more than, or compensation attributable to the period before, 90 days prior to the date of such demand; for the purposes hereof any increase in capital allocable to, or compensation attributable to, a period prior to the publication or effective date of such an introduction, change, guideline or request shall be deemed to be incurred on the later of such publication or effective date). Each Lender agrees to use its best efforts promptly to notify the Company of any event referred to in clause (a) or (b) above, provided that the failure to give such notice shall not affect the rights of any Lender under this Section 2.17 (except as otherwise expressly provided above in this Section 2.17). A certificate in reasonable detail as to the basis for, and the amount of, such compensation submitted to the Company by such Lender shall, in the absence of manifest error, be conclusive and binding for all purposes. SECTION 2.18 Illegality. Notwithstanding any other provision of this Agreement, if the introduction of or any change in or in the interpretation of any law or regulation shall make it unlawful, or any central bank or other governmental authority shall assert that it is unlawful, for any Lender or its lending office to perform its obligations hereunder to make Eurodollar Rate Advances or to continue to fund or maintain such Advances hereunder, such Lender may, by notice to the Company and the Administrative Agent, suspend the right of the Borrowers to elect Eurodollar Rate Advances from such Lender and, if necessary in the reasonable opinion of such Lender to comply with such law or regulation, Convert all such Eurodollar Rate Advances of such Lender to Base Rate Advances at the latest time permitted by the applicable law or regulation, and such suspension and, if applicable, such Conversion shall continue until such Lender notifies the Company and the Administrative Agent that the circumstances making it unlawful for such Lender to perform such obligations no longer exist (which such Lender shall promptly do when such circumstances no longer exist). So long as the obligation of any Lender to make Eurodollar Rate Advances has been suspended under this Section 2.18, all Notices of Borrowing specifying Advances of such Type shall be deemed, as to such Lender, to be requests for Base Rate Advances. Each Lender agrees to use its best efforts (including, without limitation, a reasonable effort to change its lending office or to transfer its affected Advances to an affiliate) to avoid any such illegality. 35 30 SECTION 2.19 Pro Rata Treatment, Payments and Computations. (a) Each Borrowing by any Borrower in respect of Revolving Credit Advances (subject to the provisions of Section 2.24(e)) shall be made pro rata according to the respective Commitment Percentages of the Lenders. The Borrowers shall make each payment hereunder (including, without limitation, under Section 2.6, 2.8, 2.10 or 2.11) and under the Notes, whether the amount so paid is owing to any or all of the Lenders or to the Administrative Agent, not later than 12:00 noon (New York City time) without setoff, counterclaim, or any other deduction whatsoever, on the day when due in Dollars to the Administrative Agent at its address at 270 Park Avenue, New York, New York 10017, Reference: El Paso Energy Corporation, or at such other location designated by notice to the Company from the Administrative Agent and agreed to by the Company, in same day funds. The Administrative Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or facility fees ratably (other than amounts payable pursuant to Section 2.12, 2.16, 2.17, 2.18 or 2.20) according to the respective amounts of such principal, interest or facility fees then due and owing to the Lenders, and like funds relating to the payment of any other amount payable to any Lender to such Lender, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 9.7(d), from and after the effective date specified in such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. (b) All computations of interest based on the Prime Rate and of facility fees shall be made by the Administrative Agent on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the Eurodollar Rate, the Base CD Rate or the Effective Federal Funds Rate shall be made by the Administrative Agent, and all computations of interest pursuant to Section 2.12 shall be made by each Lender with respect to its own Advances, on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable. Each determination by the Administrative Agent (or, in the case of Section 2.12, 2.16, 2.17, 2.18 or 2.20, by each Lender with respect to its own Advances) of an interest rate or an increased cost or increased capital or of illegality hereunder shall be conclusive and binding for all purposes if made reasonably and in good faith. (c) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest; provided, however, if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day. (d) Unless the Administrative Agent shall have received notice from the Company or any other applicable Borrower prior to the date on which any payment is due to the Lenders hereunder that the applicable Borrower will not make such payment in full, the 36 31 Administrative Agent may assume that the applicable Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the applicable Borrower shall not have so made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent, at a rate equal to the Effective Federal Funds Rate for such day. SECTION 2.20 Taxes. (a) Any and all payments by the Borrowers hereunder or under the Notes to each Indemnified Party shall be made, in accordance with Section 2.19, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding all taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, imposed by the jurisdiction under the laws of which such Indemnified Party is organized, domiciled, resident or doing business, or any political subdivision thereof or by any jurisdiction in which such Indemnified Party holds any interest in connection with this Agreement or any Note (including, without limitation, in the case of each Lender, the jurisdiction of such Lender's lending office) or any political subdivision thereof, other than by any jurisdiction with which the Indemnified Party's connection arises solely from having executed, delivered or performed obligations or received a payment under, or enforced, this Agreement or any Note (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If any Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Indemnified Party, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.20) such Indemnified Party receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make or cause to be made such deductions and (iii) such Borrower shall pay or cause to be paid the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law, provided that the Borrowers shall not be required to pay any additional amount (and shall be relieved of any liability with respect thereto) pursuant to this subsection (a) to any Indemnified Party that either (A) on the date such Lender became an Indemnified Party hereunder, (I) was not entitled to submit a U.S. Internal Revenue Service form 1001 (relating to such Indemnified Party, and entitling it to a complete exemption from United States withholding taxes on all amounts to be received by such Indemnified Party pursuant to this Agreement) and a U.S. Internal Revenue Service form 4224 (relating to all amounts to be received by such Indemnified Party pursuant to this Agreement) and (II) was not a United States person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) or (B) has failed to submit any form or certificate that it was required to file or provide pursuant to subsection (d) of this Section 2.20 and is entitled to file or give, as applicable, under applicable law, provided, further, that should an Indemnified Party become subject to Taxes because of its failure to deliver a form required hereunder, the Borrowers shall take such steps as such Indemnified Party shall reasonably request to assist such Indemnified Party to recover such Taxes, and provided, further, that each Indemnified Party, with respect to 37 32 itself, agrees to indemnify and hold harmless the Borrowers from any taxes, penalties, interest and other expenses, costs and losses incurred or payable by the Borrowers as a result of the failure of any of the Borrowers to comply with its obligations under clause (ii) or (iii) above in reliance on any form or certificate provided to it by such Indemnified Party pursuant to this Section 2.20. If any Indemnified Party receives a net credit or refund in respect of such Taxes or amounts so paid by the Borrowers, it shall promptly notify the Company of such net credit or refund and shall promptly pay such net credit or refund to the applicable Borrower, provided that the applicable Borrower agrees to return such net credit or refund if the Indemnified Party to which such net credit or refund is applicable is required to repay it. (b) In addition, each Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made by such Borrower hereunder or under the Notes or from the execution, delivery or performance of, or otherwise with respect to, this Agreement or the Notes (hereinafter referred to as "Other Taxes"). (c) Each Borrower will indemnify each Indemnified Party and the Administrative Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.20) paid by such Indemnified Party and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto except as a result of the gross negligence (which shall in any event include the failure of such Indemnified Party to provide to the Borrowers any form or certificate that it was required to provide pursuant to subsection (d) below) or willful misconduct of such Indemnified Party, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date such Indemnified Party makes written demand therefor. (d) On or prior to the date on which each Indemnified Party organized under the laws of a jurisdiction outside the United States becomes an Indemnified Party hereunder, such Indemnified Party shall provide the Company with U.S. Internal Revenue Service form 1001 or 4224, as appropriate, or any successor form prescribed by the U.S. Internal Revenue Service, certifying that such Indemnified Party is fully exempt from United States withholding taxes with respect to all payments to be made to such Indemnified Party hereunder, or other documents satisfactory to the Company indicating that all payments to be made to such Indemnified Party hereunder are fully exempt from such taxes. Thereafter and from time to time (but only so long as such Indemnified Party remains lawfully able to do so), each such Indemnified Party shall submit to the Company such additional duly completed and signed copies of one or the other of such Forms (or such successor Forms as shall be adopted from time to time by the relevant United States taxing authorities) as may be (i) notified by any Borrower to such Indemnified Party and (ii) required under then-current United States law or regulations to avoid United States withholding taxes on payments in respect of all amounts to be received by such Indemnified Party pursuant to this Agreement or the Notes. Upon the request of any Borrower from time to time, each Indemnified Party that is a United States person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) shall submit to the Company a certificate to the effect that it is such a United States person. If any Indemnified Party determines, as a 38 33 result of any change in applicable law, regulation or treaty, or in any official application or interpretation thereof, that it is unable to submit to the Company any form or certificate that such Indemnified Party is obligated to submit pursuant to this subsection (d), or that such Indemnified Party is required to withdraw or cancel any such form or certificate previously submitted, such Indemnified Party shall promptly notify the Company of such fact. (e) Any Indemnified Party claiming any additional amounts payable pursuant to this Section 2.20 shall use its best efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its lending office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts which may thereafter accrue and would not, in the reasonable judgment of such Indemnified Party, be otherwise disadvantageous to such Indemnified Party. (f) Without prejudice to the survival of any other agreement of the Borrowers hereunder, the agreements and obligations of the Borrowers and each Indemnified Party contained in this Section 2.20 shall survive the payment in full of principal and interest hereunder and under the Notes. (g) Any other provision of this Agreement to the contrary notwithstanding, any amounts which are payable by any Borrower under this Section 2.20 shall not be payable under Section 2.16. SECTION 2.21 Sharing of Payments, Etc. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Advances made by it (other than pursuant to Section 2.12, 2.16, 2.17, 2.18 or 2.20) in excess of its ratable share of payments on account of the Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the Advances made by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them, provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and each Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (a) the amount of such Lender's required repayment to (b) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. Each Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of such Borrower in the amount of such participation. SECTION 2.22 Use of Proceeds. Proceeds of the Advances may be used for general corporate purposes of the Borrowers and their respective Subsidiaries, including, without limitation, for acquisitions and for payment of commercial paper issued by the Borrowers, to refinance the Existing 364-Day Facility, and, upon the merger of the Company (or a wholly owned Subsidiary of the Company) with Sonat, Inc., to refinance the Sonat Agreement. 39 34 SECTION 2.23 Extension of Stated Termination Date. (a) Not less than 45 days and not more than 60 days prior to the Stated Termination Date then in effect, provided that no Event of Default shall have occurred and be continuing, the Company may request an extension of such Stated Termination Date by submitting to the Administrative Agent an Extension Request containing the information in respect of such extension specified in Exhibit M, which the Administrative Agent shall promptly furnish to each Lender. Each Lender shall, not less than 30 days and not more than 60 days prior to the Stated Termination Date then in effect, notify the Company and the Administrative Agent of its election to extend or not extend the Stated Termination Date as requested in such Extension Request. Notwithstanding any provision of this Agreement to the contrary, any notice by any Lender of its willingness to extend the Stated Termination Date shall be revocable by such Lender in its sole and absolute discretion at any time prior to the date which is 30 days prior to the Stated Termination Date then in effect. If the Required Lenders shall approve in writing the extension of the Stated Termination Date requested in such Extension Request, the Stated Termination Date shall automatically and without any further action by any Person be extended for the period specified in such Extension Request; provided that (i) each extension pursuant to this Section 2.23 shall be for a maximum of 364 days and (ii) the Commitment of any Lender that does not consent in writing, or which revokes, in accordance with the provisions of this Section 2.23, its consent to such extension not less than 30 days and not more than 60 days prior to the Stated Termination Date then in effect and has not thereafter reinstated its consent (an "Objecting Lender") shall, unless earlier terminated in accordance with this Agreement, expire on the Stated Termination Date in effect on the date of such Extension Request (such Stated Termination Date, if any, referred to as the "Commitment Expiration Date" with respect to such Objecting Lender). If, not less than 30 days and not more than 60 days prior to the Stated Termination Date then in effect, the Required Lenders shall not approve in writing the extension of the Stated Termination Date requested in an Extension Request, the Stated Termination Date shall not be extended pursuant to such Extension Request. The Administrative Agent shall promptly notify (y) the Lenders and the Company of any extension of the Stated Termination Date pursuant to this Section 2.23 and (z) the Company and the Lenders of any Lender which becomes an Objecting Lender. (b) Revolving Credit Advances owing to any Objecting Lender on the Commitment Expiration Date with respect to such Lender shall be repaid in full on or before the date that is one year after such Commitment Expiration Date. (c) The Borrowers shall have the right, so long as no Event of Default has occurred and is then continuing, upon giving notice to the Administrative Agent and the Objecting Lenders in accordance with Section 2.15, to prepay in full the Revolving Credit Advances of the Objecting Lenders, together with accrued interest thereon, any amounts payable pursuant to Sections 2.11, 2.12, 2.16, 2.17, 2.18, 2.20 and 9.4(b) and any accrued and unpaid facility fee or other amounts payable to the Objecting Lenders hereunder and/or, upon giving not less than three Business Days' notice to the Objecting Lenders and the Administrative Agent, to cancel the whole or part of the Commitments of the Objecting Lenders. (d) Notwithstanding the foregoing, if any Lender becomes an Objecting Lender, the Borrower may, at its own expense and in its sole discretion and prior to the then 40 35 Stated Termination Date, require such Lender to transfer or assign, in whole or in part, without recourse (in accordance with Section 9.7), all or part of its interests, rights and obligations under this Agreement to an Eligible Assignee (provided that the Borrower, with the full cooperation of such Lender, can identify an Eligible Assignee that is ready, willing and able to be an assignee with respect thereto) which shall assume such assigned obligations (which assignee may be another Lender, if such assignee Lender accepts such assignment); provided that (A) the assignee or the Borrower, as the case may be, shall have paid to such Lender in immediately available funds the principal of and interest accrued to the date of such payment on the Advances made by it hereunder and all other amounts owed to it hereunder, including, without limitation, any amounts owing pursuant to Section 9.4(b) and any amounts that would be owing under said Section if such Advances were prepaid on the date of such assignment, and (B) such assignment does not conflict with any law, rule or regulation or order of any governmental authority. Any assignee which becomes a Lender as a result of such an assignment made pursuant to this paragraph (d) shall be deemed to have consented to the applicable Extension Request and, therefore, shall not be an Objecting Lender. SECTION 2.24 [Intentionally Left Blank] SECTION 2.25 Replacement of Lenders. If any Lender requests compensation under Sections 2.12, 2.16 or 2.17 or if any Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.20, or if any Lender defaults in its obligation to fund Advances hereunder, then the Company may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.7), all its interests, rights and obligations under this Agreement (other than any outstanding CAF Advances held by it) to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Company shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Advances (other than CAF Advances), accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrowers (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Sections 2.12 , 2.16 or 2.17 or payments required to be made pursuant to Section 2.20, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Company to require such assignment and delegation cease to apply. 41 36 ARTICLE III CONDITIONS OF EFFECTIVENESS AND LENDING SECTION 3.1 Conditions Precedent to Effectiveness of this Agreement. This Agreement shall become effective (the "Effective Date") when (i) it shall have been executed by the Company, EPNGC Tennessee, the Administrative Agent, the CAF Advance Agent, the Co-Documentation Agents and the Syndication Agent and (ii) the Administrative Agent and the Company either shall have been notified by each Lender that such Lender has executed it or shall have received a counterpart of this Agreement executed by such Lender (or compliance with the forgoing shall have been waived by the Lenders). Anything in this Agreement to the contrary notwithstanding, if all of the conditions to effectiveness of this Agreement specified in this Section 3.1 shall not have been fulfilled on or before September 15, 1999, (i) the Company shall on such date pay all accrued and unpaid facility fees pursuant to Section 2.8 and (ii) this Agreement, and all of the obligations of the Company, the Lenders, the Administrative Agent and the CAF Advance Agent hereunder, shall be terminated on and as of 5:00 P.M. (New York City time) on September 15, 1999; provided, however, that as soon as the Administrative Agent determines that all of the conditions to effectiveness of this Agreement specified in this Section 3.1 shall have been fulfilled on or before September 15, 1999, the Administrative Agent shall furnish written notice to the Company and the Lenders to the effect that it has so determined, and such notice by the Administrative Agent shall constitute conclusive evidence that this Agreement shall have become effective for all purposes. Notwithstanding the foregoing, the obligations of the Company to pay fees pursuant to Section 2.8 as well as all obligations of the Borrowers pursuant to Section 9.4 shall survive the termination of this Agreement. SECTION 3.2 Conditions Precedent to Initial Advances. The agreement of each Lender to make the initial Advances to be made by it to the Borrowers hereunder is subject to (the date upon which all conditions listed in Section 3.2(a) and 3.2(b) are satisfied, the "Closing Date") (a) the occurrence of the Effective Date hereunder and (b) the receipt by the Administrative Agent of the following in form and substance satisfactory to the Administrative Agent and in sufficient copies for each Lender: (i) Certified copies of the resolutions of the Board of Directors of each of the Company, EPNGC and Tennessee approving the borrowings contemplated hereby and authorizing the execution of this Agreement and the Notes, and of all documents evidencing other necessary corporate action of each of the Company, EPNGC and Tennessee and governmental approvals to each of the Company, EPNGC and Tennessee, if any, with respect to this Agreement and the Notes. (ii) A certificate of the Secretary or an Assistant Secretary of each of the Company, EPNGC and Tennessee certifying the names and true signatures of the officers of each of the Company, EPNGC and Tennessee authorized to sign this Agreement and the other documents to be delivered by it hereunder. 42 37 (iii) A favorable opinion of the Senior Counsel of the Company, or the Associate General Counsel of the Company, in substantially the form of Exhibit G. (iv) A favorable opinion of Jones, Day, Reavis & Pogue, New York counsel to the Company, EPNGC and Tennessee, in substantially the form of Exhibit H. (v) A letter from the Process Agent, in substantially the form of Exhibit I, agreeing to act as Process Agent for each of the Company, EPNGC and Tennessee and to forward forthwith all process received by it to the Company, EPNGC and Tennessee, as applicable. (vi) Evidence satisfactory to the Administrative Agent that all advances, accrued interest and other fees and any other amounts owing to the lenders and the agents under the Existing 364-Day Facility shall have been, or simultaneously with the initial Advances are being, paid in full, and the commitments to make advances thereunder shall have been cancelled. SECTION 3.3 Conditions Precedent to Initial Advances to Any Borrowing Subsidiary. The agreement of each Lender to make the initial Advances to be made by it to any Borrowing Subsidiary (other than EPNGC and Tennessee) is further subject to the Administrative Agent receiving the following, in form and substance satisfactory to the Administrative Agent and (except for the Notes) in sufficient copies for each Lender: (a) A Joinder Agreement executed and delivered by such Borrowing Subsidiary conforming to the requirements hereof. (b) Notes, dated the date such Borrowing Subsidiary executes and delivers its Joinder Agreement, made by such Borrowing Subsidiary to the order of each Lender requesting a Note, respectively. (c) A certificate of the Secretary or an Assistant Secretary of such Borrowing Subsidiary certifying the names and true signature of the officers of such Borrowing Subsidiary authorized to sign the Joinder Agreement and the other documents to be delivered by it hereunder. (d) A favorable opinion of the Senior Counsel or Associate General Counsel of the Company, given upon the express instructions of the Company, in substantially the form of Exhibit K, and as to such other matters as any Lender through the Administrative Agent may reasonably request, with such assumptions, qualifications and exceptions as the Administrative Agent may approve. (e) A favorable opinion of Jones, Day, Reavis & Pogue or other New York counsel to the Company reasonably satisfactory to the Administrative Agent, in substantially the form of Exhibit L, and as to such other matters as any Lender through 43 38 the Administrative Agent may reasonably request, with such assumptions, qualifications and exceptions as the Administrative Agent may approve. (f) A letter from the Process Agent, in substantially the form of Exhibit I, agreeing to act as Process Agent for such Borrowing Subsidiary, as the case may be, and to forward forthwith all process received by it to such Borrowing Subsidiary. SECTION 3.4 Conditions Precedent to Each Borrowing. The obligation of each Lender to make an Advance (including the initial Advance, but excluding any continuation or Conversion of an Advance) on the occasion of any Borrowing shall be subject to the conditions precedent that on the date of such Borrowing this Agreement shall have become effective pursuant to Section 3.1 and, before and immediately after giving effect to such Borrowing and to the application of the proceeds therefrom, the following statements shall be true and correct, and the giving by the applicable Borrower or the Company on such Borrower's behalf of the applicable Notice of Borrowing and the acceptance by the applicable Borrower of the proceeds of such Borrowing shall constitute its representation and warranty that on and as of the date of such Borrowing, before and immediately after giving effect thereto and to the application of the proceeds therefrom, the following statements are true and correct: (i) each representation and warranty contained in Section 4.1 is correct in all material respects as though made on and as of such date; and (ii) no event has occurred and is continuing, or would result from such Borrowing, which constitutes an Event of Default or a Default. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.1 Representations and Warranties of the Borrowers. Each Borrower represents and warrants as follows: (a) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. Each Principal Subsidiary is duly incorporated, validly existing and in good standing in the jurisdiction of its incorporation. The Company and each Principal Subsidiary possess all corporate powers and all other authorizations and licenses necessary to engage in its business and operations as now conducted, the failure to obtain or maintain which would have a Material Adverse Effect. (b) The execution, delivery and performance by each Borrower of this Agreement, each Joinder Agreement, if any, to which it is a party and its Notes (as applicable) are within such Borrower's corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (A) such Borrower's charter or 44 39 by-laws or (B) any law or any material contractual restriction binding on or affecting such Borrower. (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by such Borrower of this Agreement, each Joinder Agreement, if any, to which it is a party or its Notes (as applicable), except filings necessary to comply with laws, rules, regulations and orders required in the ordinary course to comply with ongoing obligations of such Borrower under Section 5.1(a) and (b). (d) This Agreement constitutes, its Notes and each Joinder Agreement, if any, to which it is a party (as applicable) when delivered hereunder shall constitute the legal, valid and binding obligations of each Borrower, enforceable against such Borrower in accordance with their respective terms, except as may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally or by general principles of equity. (e) The consolidated balance sheet of the Company and its consolidated Subsidiaries as at December 31, 1998, and the related consolidated statements of income and cash flows of the Company and its consolidated Subsidiaries for the fiscal year then ended, reported on by PricewaterhouseCoopers LLP, independent public accountants, copies of which have been furnished to the Administrative Agent and the Lenders prior to the date hereof, fairly present the consolidated financial condition of the Company and its consolidated Subsidiaries as at such date and the consolidated results of the operations of the Company and its consolidated Subsidiaries for the period ended on such date, all in accordance with generally accepted accounting principles consistently applied, and since December 31, 1998, there has been no material adverse change in such condition or operations. The unaudited consolidated balance sheet of the Company and its consolidated Subsidiaries as of March 31, 1999, and the related consolidated statements of income and cash flows of the Company and its consolidated Subsidiaries for the three months then ended, certified by the chief financial officer of the Company, copies of which have been furnished to the Administrative Agent and the Lenders prior to the date hereof, fairly present the consolidated results of operations of the Company and its consolidated Subsidiaries for the three months then ended, all in accordance with generally accepted accounting principles consistently applied (except as approved by the chief financial officer of the Company and as disclosed therein) and subject to normal year-end audit adjustments. (f) Each of the Company and its Subsidiaries is in compliance with all laws, rules, regulations and orders of any governmental authority applicable to it or its property except where the failure to comply, individually or in the aggregate, would not in the reasonable judgment of the Company be expected to result in a Material Adverse Effect. (g) There is no action, suit or proceeding pending, or to the knowledge of any Borrower threatened, against or involving the Company or any Principal Subsidiary in 45 40 any court, or before any arbitrator of any kind, or before or by any governmental body, which in the reasonable judgment of the Company (taking into account the exhaustion of all appeals) would have a Material Adverse Effect, or which purports to affect the legality, validity, binding effect or enforceability of this Agreement or the Notes. (h) The Company and each Principal Subsidiary have duly filed all tax returns required to be filed, and have duly paid and discharged all taxes, assessments and governmental charges upon it or against its properties now due and payable, the failure to pay which would have a Material Adverse Effect, unless and to the extent only that the same are being contested in good faith and by appropriate proceedings by the Company or the appropriate Subsidiary. (i) The Company and each Principal Subsidiary have good title to their respective properties and assets, free and clear of all mortgages, liens and encumbrances, except for mortgages, liens and encumbrances (including covenants, restrictions, rights, easements and minor irregularities in title) which do not materially interfere with the business or operations of the Company or such Subsidiary as presently conducted or which are permitted by Section 5.2(a), and except that no representation or warranty is being made with respect to Margin Stock. (j) No Termination Event has occurred or is reasonably expected to occur with respect to any Plan which, with the giving of notice or lapse of time, or both, would constitute an Event of Default under Section 7.1(g). (k) Each Plan has complied with the applicable provisions of ERISA and the Code where the failure to so comply would reasonably be expected to result in an aggregate liability that would exceed 10% of the Net Worth of the Company. (l) The statement of assets and liabilities of each Plan and the statements of changes in fund balance and in financial position, or the statement of changes in net assets available for plan benefits, for the most recent plan year for which an accountant's report with respect to such Plan has been prepared, copies of which report have been furnished to the Administrative Agent, fairly present the financial condition of such Plan as at such date and the results of operations of such Plan for the plan year ended on such date. (m) Neither the Company nor any ERISA Affiliate has incurred, or is reasonably expected to incur, any Withdrawal Liability to any Multiemployer Plan which, when aggregated with all other amounts required to be paid to Multiemployer Plans in connection with Withdrawal Liability (as of the date of determination), would exceed 10% of the Net Worth of the Company. (n) Neither the Company nor any ERISA Affiliate has received any notification that any Multiemployer Plan is in reorganization, insolvent or has been terminated, within the meaning of Title IV of ERISA, and no Multiemployer Plan is 46 41 reasonably expected to be in reorganization, insolvent or to be terminated within the meaning of Title IV of ERISA the effect of which reorganization, insolvency or termination would be the occurrence of an Event of Default under Section 7.1(i). (o) The Borrowers are not engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no proceeds of any Advance will be used to extend credit to others (other than to any Subsidiary of the Company) for the purpose of purchasing or carrying Margin Stock. (p) No Borrower is an "investment company" or a "company" controlled by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (q) No Borrower is a "holding company" or a "subsidiary company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. (r) The borrowings by the Borrowers under this Agreement and the Notes and the applications of the proceeds thereof as provided herein will not violate Regulation T, U or X of the Board of Governors of the Federal Reserve System. (s) Except as set forth in the Company=s or any of its Subsidiaries= SEC reports filed prior to the date of this Agreement, the systems operated or used by the Company or such Subsidiaries are capable of providing or being adapted to provide uninterrupted functionality on or after January 1, 2000 to share, record, process and present data in substantially the same manner and with the same functionality as such systems share, record, process and present such data in the period immediately preceding December 31, 1999, except, in the aggregate, as would not have, or reasonably be expected to have, a Material Adverse Effect. The costs of the adaptions referred to in the prior sentence, in the aggregate, will not have a Material Adverse Effect. All representations and warranties made by the Borrowers herein or made in any certificate delivered pursuant hereto shall survive the making of the Advances and the execution and delivery to the Lenders of this Agreement and the Notes. ARTICLE V COVENANTS OF THE BORROWERS SECTION 5.1 Affirmative Covenants. So long as any amount payable by any Borrower hereunder or under any Note shall remain unpaid or any Lender shall have any Commitment hereunder, each Borrower will, unless the Majority Lenders shall otherwise consent in writing: 47 42 (a) Preservation of Corporate Existence, Etc. Preserve and maintain, and, in the case of the Company, cause each Principal Subsidiary to preserve and maintain, its corporate existence, rights (charter and statutory) and material franchises, except as otherwise permitted by Section 5.2(d) or 5.2(e). (b) Compliance with Laws, Etc. Comply, and, in the case of the Company, cause each Principal Subsidiary to comply, in all material respects with all applicable laws, rules, regulations and orders (including, without limitation, all environmental laws and laws requiring payment of all taxes, assessments and governmental charges imposed upon it or upon its property except to the extent contested in good faith by appropriate proceedings) the failure to comply with which would have a Material Adverse Effect. (c) Visitation Rights. At any reasonable time and from time to time, permit the Administrative Agent or any of the Lenders or any agents or representatives thereof, to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, the Company and any of its Subsidiaries, and to discuss the affairs, finances and accounts of the Company and any of its Subsidiaries with any of their officers and with their independent certified public accountants. (d) Books and Records. Keep, and, in the case of the Company, cause each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all its respective financial transactions and the assets and business of the Company and each of its Subsidiaries, as applicable, in accordance with generally accepted accounting principles either (i) consistently applied or (ii) applied in a changed manner provided such change shall have been disclosed to the Administrative Agent and shall have been consented to by the accountants which (as required by Section 5.3(b)) report on the financial statements of the Company and its consolidated Subsidiaries for the fiscal year in which such change shall have occurred. (e) Maintenance of Properties, Etc. Maintain and preserve, and, in the case of the Company, cause each Principal Subsidiary to maintain and preserve, all of its properties which are used in the conduct of its business in good working order and condition, ordinary wear and tear excepted, to the extent that any failure to do so would have a Material Adverse Effect. (f) Maintenance of Insurance. Maintain, and, in the case of the Company, cause each Principal Subsidiary to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Company or such Subsidiary operates. SECTION 5.2 Negative Covenants. So long as any amount payable by any Borrower hereunder or under any Note shall remain unpaid or any Lender shall have any Commitment hereunder, each Borrower will not, unless the Majority Lenders shall otherwise consent in writing: 48 43 (a) Liens, Etc. (i) Create, assume or suffer to exist, or, in the case of the Company, permit any Principal Subsidiary to create, assume or suffer to exist, any Liens upon or with respect to any of the capital stock of any Principal Subsidiary, whether now owned or hereafter acquired, or (ii) create or assume, or, in the case of the Company, permit any Principal Subsidiary to create or assume, any Liens upon or with respect to any other assets material to the consolidated operations of the Company and its consolidated Subsidiaries taken as a whole securing the payment of Indebtedness and Guaranties in an aggregate amount (determined without duplication of amount (so that the amount of a Guarantee will be excluded to the extent the Indebtedness Guaranteed thereby is included in computing such aggregate amount)) exceeding $100,000,000; provided, however, that this subsection (a) shall not apply to: (A) Liens on the stock or assets of any Project Financing Subsidiary (or any partnership, member or other equity interest in or assets of any partnership, limited liability company or other entity of which the Project Financing Subsidiary is a partner, member or other equity participant) securing the payment of a Project Financing and related obligations; (B) Liens on assets acquired by the Company or any of its Subsidiaries after February 11, 1992 to the extent that such Liens existed at the time of such acquisition and were not placed thereon by or with the consent of the Company in contemplation of such acquisition; (C) Liens created by any Alternate Program or any document executed by any Borrower in connection therewith; (D) Liens on Margin Stock; and (E) Liens for taxes, assessments or governmental charges or levies not yet overdue. (b) Consolidated Debt and Guarantees to Capitalization. Permit the ratio of (A) the sum of (1) the aggregate amount of consolidated Debt of the Company and its consolidated Subsidiaries (without duplication of amount under this clause (A) and determined as to all of the foregoing entities on a consolidated basis) plus (2) the aggregate amount of consolidated Guaranties of the Company and its consolidated Subsidiaries (without duplication of amount under this clause (A) and determined as to all of the foregoing entities on a consolidated basis) to (B) Capitalization of the Company (without duplication and determined as to all of the foregoing entities on a consolidated basis) to exceed .7 to 1. (c) Debt, Etc. In the case of the Company, permit any of its consolidated Subsidiaries to create or suffer to exist any Debt, any Guaranty or any reimbursement obligation with respect to any letter of credit (other than any Project Financing), if, immediately after giving effect to such Debt, Guaranty or reimbursement obligation and 49 44 the receipt and application of any proceeds thereof or value received in connection therewith, the aggregate amount (determined without duplication of amount) of Debt, Guaranties and letter of credit reimbursement obligations of the Company's consolidated Subsidiaries (other than any Project Financing) determined on a consolidated basis would exceed $300,000,000; provided, however, that the following Debt, Guaranties or reimbursement obligations shall be excluded from the application of, and calculation set forth in, this paragraph (c): (A) Debt, Guaranties or reimbursement obligations incurred by (x) Mojave or (y) EPNGC, (B) Debt, Guaranties or reimbursement obligations arising under (x) the EPTPC Facility that has been permanently repaid in full on the "Closing Date" under and as defined in the Existing 364-Day Facility or (y) this Agreement or the Existing 5-Year Facility, (C) Debt, Guaranties or reimbursement obligations incurred by El Paso Field Services Company up to an amount not to exceed at any time outstanding the tangible net worth of El Paso Field Services Company, provided that such Debt may be guaranteed by the Company, (D) Excluded Acquisition Debt, (E) successive extensions, refinancings or replacements (at the same Subsidiary or at any other consolidated Subsidiary of the Company) of Debt, Guaranties or reimbursement obligations (or commitments in respect thereof) referred to in clauses (A), (B) and (D) above and in an amount not in excess of the amounts so extended, refinanced or replaced (or the amount of commitments in respect thereof) and (F) Debt, Guarantees or reimbursement obligations incurred by Tennessee pursuant to one or more commercial paper programs allowing for the issuance by Tennessee of items of commercial paper having maturity dates not later than one year from the dates of their respective issuance provided that such Debt, Guarantees or reimbursement obligations of Tennessee shall be in an aggregate amount not to exceed at any time the excess of (x) the sum of (1) the aggregate amount of Commitments and (2) the aggregate amount of Commitments as defined in the Existing 5-Year Facility, over (y) the sum of (1) the aggregate amount of Advances, (2) the aggregate amount of Advances, as defined in and outstanding pursuant to, the Existing 5-Year Facility, and (3) the aggregate principal amount of commercial paper outstanding from time to time that (I) is issued by the Company and its Subsidiaries (other than Tennessee) and (II) relies upon credit availability under either this Agreement or the Existing 5-Year Facility for commercial paper liquidity purposes. (d) Sale, Etc. of Assets. Sell, lease or otherwise transfer, or, in the case of the Company, permit any Principal Subsidiary to sell, lease or otherwise transfer, (in either case, whether in one transaction or in a series of transactions) assets constituting a material portion of the consolidated assets of the Company and its Principal Subsidiaries taken as a whole, provided that provisions of this subsection (d) shall not apply to: (i) any sale of receivables and related rights pursuant to any Alternate Program; (ii) any Project Financing Subsidiary and the assets thereof; (iii) sales, leases or other transfers of assets or capital stock of any Subsidiary of the Company other than any Principal Subsidiary; 50 45 (iv) any sale of Margin Stock; (v) any sale of up to 20% of the equity of El Paso Field Services Company in an initial public offering of such corporation's equity securities; (vi) any sale, lease or other transfer to the Company or any Principal Subsidiary, or to any corporation which after giving effect to such transfer will become and be either (A) a Principal Subsidiary in which the Company's direct or indirect equity interest will be at least as great as its direct or indirect equity interest in the transferor immediately prior thereto or (B) a directly or indirectly wholly-owned Principal Subsidiary; and (vii) any transfer permitted by Section 5.2(e); and (viii) any transfer to the Company or any of its Subsidiaries of any stock or assets other than FERC regulated assets (or stock or any other equity interest in an entity owning FERC regulated assets) used in the mainline gas transmission business; provided that no Event of Default, or event that with the giving of notice or lapse of time or both would constitute an Event of Default, shall have occurred and be continuing before and after giving effect to such transfer. (e) Mergers, Etc. Merge or consolidate with any person, or permit any of its Principal Subsidiaries to merge or consolidate with any Person, except that (i) any Principal Subsidiary may merge or consolidate with (or liquidate into) any other Subsidiary (other than a Project Financing Subsidiary, unless the successor corporation is not treated as a Project Financing Subsidiary under this Agreement) or may merge or consolidate with (or liquidate into) the Company, provided that (A) if such Principal Subsidiary merges or consolidates with (or liquidates into) the Company, the Company shall be the continuing or surviving corporation and (B) if any such Principal Subsidiary merges or consolidates with (or liquidates into) any other Subsidiary of the Company, one of such Subsidiaries is the surviving corporation and, if either such Subsidiary is not wholly-owned by the Company, such merger or consolidation is on an arm's length basis, and (ii) the Company or any Principal Subsidiary may merge or consolidate with any other corporation (that is, in addition to the Company or any Principal Subsidiary of the Company), provided that (A) if the Company merges or consolidates with any such other corporation, the Company is the surviving corporation, (B) if any Principal Subsidiary merges or consolidates with any such other corporation, the surviving corporation is a wholly-owned Principal Subsidiary of the Company, and (C) if either the Company or any Principal Subsidiary merges or consolidates with any such other corporation, after giving effect to such merger or consolidation no Event of Default, and no event which with lapse of time or the giving of notice, or both, would constitute an Event of Default, shall have occurred and be continuing. SECTION 5.3 Reporting Requirements. So long as any amount payable by any Borrower hereunder or under any Note shall remain unpaid or any Lender shall have any 51 46 Commitment hereunder, the Company will furnish to each Lender in such reasonable quantities as shall from time to time be requested by such Lender: (a) as soon as publicly available and in any event within 60 days after the end of each of the first three fiscal quarters of each fiscal year of each of the Company and EPNGC, a consolidated balance sheet of each of the Company and EPNGC and its respective consolidated subsidiaries as of the end of such quarter, and consolidated statements of income and cash flows of each of the Company and EPNGC and its respective consolidated subsidiaries each for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, certified (subject to normal year-end adjustments) as being fairly stated in all material respects by the chief financial officer, controller or treasurer of the Company and accompanied by a certificate of such officer stating (i) whether or not such officer has knowledge of the occurrence of any Event of Default which is continuing hereunder or of any event not theretofore remedied which with notice or lapse of time or both would constitute such an Event of Default and, if so, stating in reasonable detail the facts with respect thereto, (ii) all relevant facts in reasonable detail to evidence, and the computations as to, whether or not the Company is in compliance with the requirements set forth in subsections (b) and (c) of Section 5.2, and (iii) a listing of all Principal Subsidiaries and consolidated Subsidiaries of the Company showing the extent of its direct and indirect holdings of their stocks; (b) as soon as publicly available and in any event within 120 days after the end of each fiscal year of each of the Company and EPNGC, a copy of the annual report for such year for each of the Company and EPNGC and its respective consolidated Subsidiaries containing financial statements for such year reported by nationally recognized independent public accountants acceptable to the Lenders, accompanied by (i) a report signed by said accountants stating that such financial statements have been prepared in accordance with generally accepted accounting principles and (ii) a letter from such accountants stating that in making the investigations necessary for such report they obtained no knowledge, except as specifically stated therein, of any Event of Default which is continuing hereunder or of any event not theretofore remedied which with notice or lapse of time or both would constitute such an Event of Default; (c) within 120 days after the close of each of the Company's fiscal years, a certificate of the chief financial officer, controller or treasurer of the Company stating (i) whether or not he has knowledge of the occurrence of any Event of Default which is continuing hereunder or of any event not theretofore remedied which with notice or lapse of time or both would constitute such an Event of Default and, if so, stating in reasonable detail the facts with respect thereto, (ii) all relevant facts in reasonable detail to evidence, and the computations as to, whether or not the Company is in compliance with the requirements set forth in subsections (b) and (c) of Section 5.2 and (iii) a listing of all Principal Subsidiaries and consolidated Subsidiaries of the Company showing the extent of its direct and indirect holdings of their stocks; 52 47 (d) promptly after the sending or filing thereof, copies of all publicly available reports which the Company or any Principal Subsidiary sends to any of its security holders and copies of all publicly available reports and registration statements which the Company or any Principal Subsidiary files with the Securities and Exchange Commission or any national securities exchange other than registration statements relating to employee benefit plans and to registrations of securities for selling security holders; (e) within 10 days after sending or filing thereof, a copy of FERC Form No. 2: Annual Report of Major Natural Gas Companies, sent or filed by the Company to or with the FERC with respect to each fiscal year of the Company; (f) promptly in writing, notice of all litigation and of all proceedings before any governmental or regulatory agencies against or involving the Company or any Principal Subsidiary, except any litigation or proceeding which in the reasonable judgment of the Company (taking into account the exhaustion of all appeals) is not likely to have a material adverse effect on the consolidated financial condition of the Company and its consolidated Subsidiaries taken as a whole; (g) within three Business Days after an executive officer of the Company obtains knowledge of the occurrence of any Event of Default which is continuing or of any event not theretofore remedied which with notice or lapse of time, or both, would constitute an Event of Default, notice of such occurrence together with a detailed statement by a responsible officer of the Company of the steps being taken by the Company or the appropriate Subsidiary to cure the effect of such event; (h) as soon as practicable and in any event (i) within 30 days after the Company or any ERISA Affiliate knows or has reason to know that any Termination G1 Event described in clause (a) of the definition of Termination Event with respect to any Plan has occurred and (ii) within 10 days after the Company or any ERISA Affiliate knows or has reason to know that any other Termination Event has occurred, a statement of the chief financial officer or treasurer of the Company describing such Termination Event and the action, if any, which the Company or such ERISA Affiliate proposes to take with respect thereto; (i) promptly and in any event within two Business Days after receipt thereof by the Company or any ERISA Affiliate, copies of each notice received by the Company or any ERISA Affiliate from the PBGC stating its intention to terminate any Plan or to have a trustee appointed to administer any Plan; (j) promptly and in any event within 30 days after the filing thereof with the Internal Revenue Service, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Single Employer Plan; (k) promptly and in any event within five Business Days after receipt thereof by the Company or any ERISA Affiliate from the sponsor of a Multiemployer Plan, a copy of each notice received by the Company or any ERISA Affiliate concerning (i) the 53 48 imposition of Withdrawal Liability by a Multiemployer Plan, (ii) the determination that a Multiemployer Plan is, or is expected to be, in reorganization or insolvent within the meaning of Title IV of ERISA, (iii) the termination of a Multiemployer Plan within the meaning of Title IV of ERISA, or (iv) the amount of liability incurred, or expected to be incurred, by the Company or any ERISA Affiliate in connection with any event described in clause (i), (ii) or (iii) above; and (l) as soon as practicable but in any event within 60 days of any notice of request therefor, such other information respecting the financial condition and results of operations of the Company or any Subsidiary of the Company as any Lender through the Administrative Agent may from time to time reasonably request. Each balance sheet and other financial statement furnished pursuant to subsections (a) and (b) of this Section 5.3 shall contain comparative financial information which conforms to the presentation required in Form 10-Q and 10-K, as appropriate, under the Securities Exchange Act of 1934, as amended. SECTION 5.4 Restrictions on Material Subsidiaries. The Company will not, and will not permit any Material Subsidiary, to enter into any agreement or understanding pursuant to which (a) any non-equity interest claim the Company may have against any Material Subsidiary would be subordinate in any manner to the payment of any other obligation of such Material Subsidiary (other than waivers or subordination of subrogation, contribution or similar rights under Guaranties and similar agreements) or (b) by its terms limits or restricts the ability of such Material Subsidiary to make funds available to the Company (whether by dividend or other distribution, by replacement of any inter-company advance or otherwise) if, in any such case referred to in this Section 5.4, there is, at the time any such agreement is entered into, a reasonable likelihood that all such agreements and understandings, considered together, would materially and adversely affect the ability of the Company to meet its obligations as they become due. ARTICLE VI GUARANTEES SECTION 6.1 Guarantees. (a) Subject to the provisions of Section 6.1(b), each Borrower hereby unconditionally and irrevocably guarantees to the Administrative Agent, for the ratable benefit of the Lenders and their respective successors, indorsees, transferees and assigns, the prompt and complete payment by each other Borrower when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations owing by such other Borrower. (b) Anything in this Article VI to the contrary notwithstanding, the maximum liability of each Borrower (other than a Borrower which is guaranteeing the Obligations of its Subsidiaries) under this Article VI shall in no event exceed the amount which can be guaranteed 54 49 by such Borrowing Subsidiary under applicable federal and state laws relating to the insolvency of debtors. (c) Each Borrower agrees that the Obligations owing by any other Borrower may at any time and from time to time exceed the amount of the liability of such other Borrower under this Article VI without impairing the guarantee of such Borrower under this Article VI or affecting the rights and remedies of the Administrative Agent or any Lender under this Article VI. (d) No payment or payments made by any Borrower or any other Person or received or collected by the Administrative Agent or any Lender from any Borrower or any other Person by virtue of any action or proceeding or any set-off or appropriation or application, at any time or from time to time, in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of the Borrowers under this Article VI which shall, notwithstanding any such payment or payments, continue until the Obligations are paid in full and the Commitments are terminated. (e) Each Borrower agrees that whenever, at any time, or from time to time, it shall make any payment to the Administrative Agent or any Lender on account of its liability under this Article VI, it will notify the Administrative Agent in writing that such payment is made under this Article VI for such purpose. SECTION 6.2 No Subrogation. Notwithstanding any payment or payments made by any Borrower under this Article VI or any set-off or application of funds of such Borrower by the Administrative Agent or any Lender, such Borrower shall not be entitled to be subrogated to any of the rights of the Administrative Agent or any Lender against any other Borrower or against any collateral security or guarantee or right of offset held by the Administrative Agent or any Lender for the payment of the Obligations, nor shall such Borrower seek or be entitled to seek any contribution or reimbursement from any other Borrower in respect of payments made by such Borrower hereunder, until all amounts owing to the Administrative Agent and the Lenders by the other Borrowers on account of the Obligations are paid in full and the Commitments are terminated. If any amount shall be paid to any Borrower on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full, such amount shall be held by such Borrower in trust for the Administrative Agent and the Lenders, segregated from other funds of such Borrower, and shall, forthwith upon receipt by such Borrower, be turned over to the Administrative Agent in the exact form received by such Borrower (duly indorsed by such Borrower to the Administrative Agent, if required), to be applied against the Obligations, whether matured or unmatured, in such order as the Administrative Agent may determine. SECTION 6.3 Amendments, etc. with respect to the Obligations; Waiver of Rights. Each Borrower shall remain obligated under this Article VI notwithstanding that, without any reservation of rights against such Borrower, and without notice to or further assent by such Borrower, any demand for payment of any of the Obligations made by the Administrative Agent or any Lender may be rescinded by the Administrative Agent or such Lender, and any of the Obligations continued, and the Obligations, or the liability of any other 55 50 party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Administrative Agent or any Lender, and this Agreement, any Notes and any other documents executed and delivered in connection herewith may be amended, modified, supplemented or terminated, in whole or in part, as the Administrative Agent (or the Majority Lenders, as the case may be) may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the Administrative Agent or any Lender for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. Neither the Administrative Agent nor any Lender shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Obligations or for this Agreement or any property subject thereto. When making any demand hereunder against any Borrower, the Administrative Agent or any Lender may, but shall be under no obligation to, make a similar demand on the applicable Borrowing Subsidiaries or any other guarantor, and any failure by the Administrative Agent or any Lender to make any such demand or to collect any payments from the other Borrowers or any such other guarantor or any release of the other Borrowers or such other guarantor shall not relieve such Borrower of its obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of the Administrative Agent or any Lender against such Borrower for the purposes hereof "demand" shall include the commencement and continuance of any legal proceedings. SECTION 6.4 Guarantee Absolute and Unconditional. Each Borrower waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Administrative Agent or any Lender upon this Agreement or acceptance of this Agreement; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Agreement; and all dealings between any Borrower, on the one hand, and the Administrative Agent and the Lenders, on the other, shall likewise be conclusively presumed to have been had or consummated in reliance upon this Agreement. Each Borrower waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the other Borrowers with respect to the Obligations. The guarantee contained in this Article VI shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (a) the validity, regularity or enforceability of this Agreement, any Note, any of the Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Administrative Agent or any Lender, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by any Borrower against the Administrative Agent or any Lender, or (c) any other circumstance whatsoever (with or without notice to or knowledge of any Borrower) which constitutes, or might be construed to constitute, an equitable or legal discharge of any Borrower for the Obligations, or of the Borrowers under this Agreement, in bankruptcy or in any other instance. When pursuing its rights and remedies hereunder against any Borrower, the Administrative Agent and any Lender may, but shall be under no obligation to, pursue such rights and remedies as it may have against any other Borrower or any other Person or against any collateral security or guarantee for the Obligations or any right of offset with respect thereto, and any failure by the Administrative Agent or any Lender to pursue such other rights or 56 51 remedies or to collect any payments from other Borrowers or any such other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of any other Borrower or any such other Person or of any such collateral security, guarantee or right of offset, shall not relieve any Borrower of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Administrative Agent or any Lender against such Borrower. The guarantees contained in this Article VI shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon each Borrower and its successors and assigns thereof, and shall inure to the benefit of the Administrative Agent and the Lenders, and their respective successors, indorsees, transferees and assigns, until all the Obligations and the obligations of the Borrowers under this Agreement shall have been satisfied by payment in full and the Commitments shall be terminated, notwithstanding that from time to time during the term of this Agreement the Borrowers may be free from any Obligations. SECTION 6.5 Reinstatement. The provisions of this Article VI shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by the Administrative Agent or any Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of any Borrower or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, any Borrower or any substantial part of its property, or otherwise, all as though such payments had not been made. ARTICLE VII EVENTS OF DEFAULT SECTION 7.1 Event of Default. If any of the following events ("Events of Default") shall occur and be continuing: (a) Any Borrower shall fail to pay any installment of principal of any of its Advances or Notes when due, or any interest on any of its Advances or Notes or any other amount payable by it hereunder within five Business Days after the same shall be due; or (b) Any representation or warranty made or deemed made by any Borrower herein or by any Borrower (or any of its officers) in connection with this Agreement shall prove to have been incorrect in any material respect when made or deemed made; or (c) Any Borrower shall fail to perform or observe any other term, covenant or agreement contained in this Agreement on its part to be performed or observed and any such failure shall remain unremedied for 30 days after written notice thereof shall have been given to such Borrower by the Administrative Agent or by any Lender with a copy to the Administrative Agent; or 57 52 (d) The Company or any Principal Subsidiary shall fail to pay any Debt or Guaranty (excluding Debt incurred pursuant hereto) of the Company or such Principal Subsidiary in an aggregate principal amount of $100,000,000 or more, or any installment of principal thereof or interest or premium thereon, when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt or Guaranty; or any other default under any agreement or instrument relating to any such Debt, or any other event, shall occur and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such default or event is to accelerate, or to permit the acceleration of, the maturity of such Debt; or any such Debt shall be required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof, as a result of either (i) any default under any agreement or instrument relating to any such Debt or (ii) the occurrence of any other event (other than an issuance, sale or other disposition of stock or other assets, or an incurrence or issuance of Indebtedness or other obligations, giving rise to a repayment or prepayment obligation in respect of such Debt) the effect of which would otherwise be to accelerate or to permit the acceleration of the maturity of such Debt; provided that, notwithstanding any provision contained in this subsection (d) to the contrary, to the extent that pursuant to the terms of any agreement or instrument relating to any Debt or Guaranty referred to in this subsection (d) (or in the case of any such Guaranty, relating to any obligations Guaranteed thereby), any sale, pledge or disposal of Margin Stock, or utilization of the proceeds of such sale, pledge or disposal, would result in a breach of any covenant contained therein or otherwise give rise to a default or event of default thereunder and/or acceleration of the maturity of the Debt or obligations extended pursuant thereto, or payment pursuant to any Guaranty, and as a result of such terms or of such sale, pledge, disposal, utilization, breach, default, event of default or acceleration or nonpayment under such Guaranty, or the provisions thereof relating thereto, this Agreement or any Advance hereunder would otherwise be subject to the margin requirements or any other restriction under Regulation U issued by the Board of Governors of the Federal Reserve System, then such breach, default, event of default or acceleration, or nonpayment under any Guaranty, shall not constitute a default or Event of Default under this subsection (d); or (e)(i) The Company or any Principal Subsidiary shall (A) generally not pay its debts as such debts become due; or (B) admit in writing its inability to pay its debts generally; or (C) make a general assignment for the benefit of creditors; or (ii) any proceeding shall be instituted or consented to by the Company or any Principal Subsidiary seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property; or (iii) any such proceeding shall have been instituted against the Company or any Principal Subsidiary and either such proceeding shall not be stayed or dismissed for 60 consecutive days or any of the actions sought in such proceeding (including, without limitation, the 58 53 entry of an order for relief against it or the appointment of a receiver, trustee, custodian or other similar official for it or any substantial part of its property) shall occur; or (iv) the Company or any Principal Subsidiary shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or (f) Any judgment or order of any court for the payment of money in excess of $50,000,000 shall be rendered against the Company or any Principal Subsidiary and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order (other than any enforcement proceedings consisting of the mere obtaining and filing of a judgment lien or obtaining of a garnishment or similar order so long as no foreclosure, levy or similar process in respect of such lien, or payment over in respect of such garnishment or similar order, has commenced) or (ii) there shall be any period of 30 consecutive days during which a stay of execution or of enforcement proceedings (other than those referred to in the parenthesis in clause (i) above) in respect of such judgment or order, by reason of a pending appeal, bonding or otherwise, shall not be in effect; or (g) (i) Any Termination Event with respect to a Plan shall have occurred and, 30 days after notice thereof shall have been given to the Company by the Administrative Agent, such Termination Event shall still exist; or (ii) the Company or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan; or (iii) the Company or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization, or is insolvent or is being terminated, within the meaning of Title IV of ERISA; or (iv) any Person shall engage in a "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan; and in each case in clauses (i) through (iv) above, such event or condition, together with all other such events or conditions, if any, would result in an aggregate liability of the Company or any ERISA Affiliate that would exceed 10% of the Net Worth of the Company. (h) Upon completion of, and pursuant to, a transaction, or a series of transactions (which may include prior acquisitions of capital stock of the Company in the open market or otherwise), involving a tender offer (i) a "person" (within the meaning of Section 13(d) of the Securities Exchange Act of 1934) other than the Company or a Subsidiary of the Company or any employee benefit plan maintained for employees of the Company and/or any of its Subsidiaries or the trustee therefor, shall have acquired direct or indirect ownership of and paid for in excess of 50% of the outstanding capital stock of the Company entitled to vote in elections for directors of the Company and (ii) at any time before the later of (A) six months after the completion of such tender offer and (B) the next annual meeting of the shareholders of the Company following the completion of such tender offer more than half of the directors of the Company consists of individuals who (1) were not directors before the completion of such tender offer and (2) were not appointed, elected or nominated by the Board of Directors in office prior to the completion of such tender offer (other than any such appointment, election or 59 54 nomination required or agreed to in connection with, or as a result of, the completion of such tender offer); or (i) Any event of default shall occur under any agreement or instrument relating to or evidencing any Debt now or hereafter existing of the Company or any Principal Subsidiary as the result of any change of control of the Company; or (j) Any of the guarantees contained in Article VI shall cease, for any reason, to be in full force and effect or any Borrower shall so assert; then, and in any such event, the Administrative Agent shall at the request, or may with the consent, of the Majority Lenders, by notice to the Company, (i) declare the obligation of each Lender to make Advances to be terminated, whereupon the same shall forthwith terminate, and (ii) declare the Advances and the Notes, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Advances and the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrowers; provided, however, that if an Event of Default under subsection (e) of this Section 7.1 (except under clause (i)(A) thereof) shall occur, (A) the obligation of each Lender to make Advances shall automatically be terminated and (B) the Advances and the Notes, all interest thereon and all other amounts payable under this Agreement shall automatically become and be forthwith due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrowers. ARTICLE VIII THE ADMINISTRATIVE AGENT AND THE CAF ADVANCE AGENT SECTION 8.1 Authorization and Action. Each Lender hereby appoints and authorizes the Administrative Agent and the CAF Advance Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent and the CAF Advance Agent by the terms hereof, together with such powers as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement (including, without limitation, enforcement of this Agreement or collection of the Notes), the Administrative Agent and the CAF Advance Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Lenders, and such instructions shall be binding upon all Lenders and all holders of Notes; provided, however, that the Administrative Agent and the CAF Advance Agent shall not be required to take any action which exposes the Administrative Agent or the CAF Advance Agent to personal liability or which is contrary to this Agreement or applicable law. The Administrative Agent and the CAF Advance Agent agree to give to each Lender prompt notice of each notice given to it by any Borrower pursuant to the terms of this Agreement. Notwithstanding anything to the contrary contained in this Agreement, the parties hereto hereby 60 55 agree that neither the Documentation Agent nor the Syndication Agent shall have any rights, duties or responsibilities in its capacity as Documentation Agent or Syndication Agent, as applicable, hereunder and neither the Documentation Agent nor the Syndication Agent shall have the authority to take any action hereunder in its capacity as such. SECTION 8.2 Administrative Agent's and CAF Advance Agent's Reliance, Etc. None of the Administrative Agent, the CAF Advance Agent or any of its respective directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Administrative Agent and the CAF Advance Agent: (i) may treat the payee of any Note as the holder thereof until the Administrative Agent receives and accepts an Assignment and Acceptance entered into by the Lender which is the payee of such Note, as assignor, and an Eligible Assignee, as assignee, as provided in Section 9.7; (ii) may consult with legal counsel (including counsel for the Company), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (iii) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement; (iv) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of the Borrowers or to inspect the property (including the books and records) of the Borrowers; (v) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; and (vi) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, telecopier, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. SECTION 8.3 Chase and Affiliates. With respect to its Commitment, the Advances made by it and the Note issued to it, Chase shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Administrative Agent or the CAF Advance Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include Chase in its individual capacity. Chase and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, the Company, any of its Subsidiaries and any Person who may do business with or own securities of the Company or any of its Subsidiaries, all as if Chase were not the Administrative Agent or the CAF Advance Agent and without any duty to account therefor to the other Lenders. SECTION 8.4 Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent, the CAF Advance Agent or any other Lender and based on the financial statements referred to in Section 4.1 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent, the CAF Advance Agent or any other 61 56 Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. SECTION 8.5 Indemnification. The Lenders agree to indemnify the Administrative Agent and the CAF Advance Agent (to the extent not reimbursed by the Borrowers), ratably according to the respective principal amounts of the Advances then outstanding by each of them (or if no Advances are at the time outstanding or if any Notes are held by Persons which are not Lenders, ratably according to the respective amounts of their aggregate Commitments), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Administrative Agent or the CAF Advance Agent in any way relating to or arising out of this Agreement or any action taken or omitted by the Administrative Agent or the CAF Advance Agent under this Agreement, provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent's or the CAF Advance Agent's gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse the Administrative Agent and the CAF Advance Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including reasonable counsel fees) incurred by the Administrative Agent or the CAF Advance Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings, in bankruptcy or insolvency proceedings, or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, to the extent that the Administrative Agent or the CAF Advance Agent is not reimbursed for such expenses by the Borrowers. SECTION 8.6 Successor Administrative Agent and CAF Advance Agent. The Administrative Agent and the CAF Advance Agent may resign at any time by giving written notice thereof to the Lenders and the Company and may be removed at any time with or without cause by the Majority Lenders. Upon any such resignation or removal, the Majority Lenders shall have the right to appoint a successor Administrative Agent or the CAF Advance Agent. If no successor Administrative Agent or CAF Advance Agent shall have been so appointed by the Majority Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's or the CAF Advance Agent giving of notice of resignation or the Majority Lenders' removal of the retiring Administrative Agent or CAF Advance Agent, then such retiring Administrative Agent or CAF Advance Agent may, on behalf of the Lenders, appoint a successor Administrative Agent or CAF Advance Agent, which shall be a Lender and a commercial bank organized, or authorized to conduct a banking business, under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent or CAF Advance Agent hereunder by a successor Administrative Agent or CAF Advance Agent, such successor Administrative Agent or CAF Advance Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent or CAF Advance Agent, and the retiring Administrative Agent or CAF Advance Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Agent's or CAF Advance Agent's resignation or removal hereunder as 62 57 Administrative Agent or CAF Advance Agent, the provisions of this Article VII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent or CAF Advance Agent under this Agreement. ARTICLE IX MISCELLANEOUS SECTION 9.1 Amendments, Etc. An amendment or waiver of any provision of this Agreement or the Notes, or a consent to any departure by any Borrower therefrom, shall be effective against the Lenders and all holders of the Notes if, but only if, it shall be in writing and signed by the Majority Lenders, and then such a waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall, unless in writing and signed by all the Lenders, be effective to: (a) waive any of the conditions specified in Article III, (b) increase or extend the Commitments of the Lenders or subject the Lenders to any additional obligations, (c) reduce the principal of, or interest on, any Advance or the Notes or any facility fees hereunder, (d) postpone any date fixed for any payment of principal of, or interest on, any Advance or the Notes or any facility fees hereunder, (e) change the percentage of the Commitments or of the aggregate unpaid principal amount of any Advance or the Notes, or the number of Lenders, which shall be required for the Lenders or any of them to take any action under this Agreement, (f) amend this Section 9.1, (g) amend, waive or consent to any departure of any provision in Article VI or (h) except as provided below, release any Borrower from its guarantee in Article VI; provided, further, that no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent and the CAF Advance Agent in addition to the Lenders required hereinabove to take such action, affect the rights or duties of the Administrative Agent or the CAF Advance Agent under this Agreement or any Note; provided, still further, that the guarantee of a Borrower under Article VI shall be released automatically upon (i) the sale by the Company of such Borrower, provided that such sale is permitted under this Agreement, or (ii) such Borrower ceasing to be a Borrower (it being understood that the Company and EPNGC shall never cease to be a Borrower hereunder). SECTION 9.2 Notices, Etc. Except as otherwise provided in Section 2.2(a), 2.5(d) or 2.15(b), all notices and other communications provided for hereunder shall be in writing (including telecopier and other readable communication) and mailed by certified mail, return receipt requested, telecopied or otherwise transmitted or delivered, if to any Borrower, c/o the Company at El Paso Energy Building, 1001 Louisiana Street, Houston, Texas 77002, Attention: Executive Vice President and Chief Financial Officer, Telecopier: (713) 420-4975; if to any Lender, at its address set forth under its name on Schedule I; if to the Administrative Agent, at 270 Park Avenue, 21st floor, New York, New York 10017, Attention: Peter Ling, Telecopier: (212) 270-3897; and if to the CAF Advance Agent, at One Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention: Jackie Reid, Telecopier: (212) 552-5777, Telephone: (212) 552-7683; or, as to each party and each Borrowing Subsidiary, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and communications shall, if so mailed, telecopied or otherwise transmitted, be effective 63 58 when received, if mailed, or when the appropriate answerback or other evidence of receipt is given, if telecopied or otherwise transmitted, respectively. A notice received by the Administrative Agent, the CAF Advance Agent or a Lender by telephone pursuant to Section 2.2(a), 2.5(d) or 2.15(a) shall be effective if the Administrative Agent or Lender believes in good faith that it was given by an authorized representative of the applicable Borrower and acts pursuant thereto, notwithstanding the absence of written confirmation or any contradictory provision thereof. SECTION 9.3 No Waiver; Remedies. No failure on the part of any Lender, the Administrative Agent or the CAF Advance Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder or under any Note preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 9.4 Costs and Expenses; Indemnity. (a) Each Borrower agrees to pay on demand (to the extent not reimbursed by any other Borrower) (i) all reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent in connection with the preparation, execution and delivery of this Agreement, the Notes and the other documents to be delivered hereunder and the fulfillment or attempted fulfillment of conditions precedent hereunder, (ii) all reasonable costs and expenses incurred by the Administrative Agent and its Affiliates in initially syndicating all or any portion of the Commitments hereunder, including, without limitation, the related reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent or its Affiliates, travel expenses, duplication and printing costs and courier and postage fees, and excluding any syndication fees paid to other parties joining the syndicate and (iii) all out-of-pocket costs and expenses, if any, incurred by the Administrative Agent, the CAF Advance Agent and the Lenders in connection with the enforcement (whether through negotiations, legal proceedings in bankruptcy or insolvency proceedings, or otherwise) of this Agreement, the Notes and the other documents to be delivered hereunder and thereunder, including the reasonable fees and out-of-pocket expenses of counsel. (b) If any payment of principal of, or Conversion of, any Eurodollar Rate Advance or CAF Advance is made by any Borrower to or for the account of a Lender on any day other than the last day of the Interest Period for such Advance, as a result of a prepayment pursuant to Section 2.15 or a Conversion pursuant to Section 2.13(f) or Section 2.14 or due to acceleration of the maturity of the Advances and the Notes pursuant to Section 7.1 or due to any other reason attributable to such Borrower, or if any Borrower shall fail to make a borrowing of Eurodollar Rate Advances or CAF Advances after such Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, such Borrower shall, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses which it may reasonably incur as a result of such payment, Conversion or failure to borrow, including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance. 64 59 (c) Each Borrower agrees to indemnify and hold harmless the Administrative Agent, the CAF Advance Agent and each Lender (to the extent not reimbursed by any other Borrower) from and against any and all claims, damages, liabilities and expenses (including, without limitation, fees and disbursements of counsel) which may be incurred by or asserted against the Administrative Agent, the CAF Advance Agent or such Lender in connection with or arising out of any investigation, litigation, or proceeding (whether or not the Administrative Agent, the CAF Advance Agent or such Lender is party thereto) related to any acquisition or proposed acquisition by the Company, or by any Subsidiary of the Company, of all or any portion of the stock or substantially all the assets of any Person or any use or proposed use of the Advances by any Borrower (excluding any claims, damages, liabilities or expenses incurred by reason of the gross negligence or willful misconduct of the party to be indemnified or its employees or agents, or by reason of any use or disclosure of information relating to any such acquisition or use or proposed use of the proceeds by the party to be indemnified or its employees or agents). SECTION 9.5 Right of Set-Off. Upon the declaration of the Advances and the Notes as due and payable pursuant to the provisions of Section 7.1, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of the applicable Borrower against any and all of the obligations of such Borrower now or hereafter existing under this Agreement and the Notes of such Borrower held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or such Notes and although such obligations may be unmatured. Each Lender agrees promptly to notify the Company after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this Section 9.5 are in addition to other rights and remedies (including, without limitation, other rights of set-off) which such Lender may have. SECTION 9.6 Binding Effect. This Agreement shall become effective in accordance with the provisions of Section 3.1, and thereafter shall be binding upon and inure to the benefit of the Borrowers, the Administrative Agent, the CAF Advance Agent and each Lender and their respective successors and assigns, except that no Borrower shall have the right to assign its rights or obligations hereunder or any interest herein without the prior written consent of all of the Lenders. SECTION 9.7 Assignments and Participations. (a) Each Lender may assign to one or more banks or other financial institutions all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Advances owing to it and the Notes held by it); provided, however, that (i) each such assignment shall be of a constant, and not a varying, percentage of all rights and obligations under this Agreement, (ii) the amount of the Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $15,000,000 (or, if less, the entire Commitment of the assigning Lender) and shall be an integral multiple of $1,000,000, (iii) each 65 60 such assignment shall be to an Eligible Assignee, and (iv) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Notes subject to such assignment and a processing and recordation fee of $2,500, and shall send to the Company an executed counterpart of such Assignment and Acceptance. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, (A) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (B) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto). (b) By executing and delivering an Assignment and Acceptance, each Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of each Borrower or the performance or observance by each Borrower of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.1 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Administrative Agent, the CAF Advance Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the Administrative Agent and the CAF Advance Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent and the CAF Advance Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (c) The Administrative Agent shall maintain at its address referred to in Section 9.2 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Advances owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, 66 61 and each Borrower, the Administrative Agent, the CAF Advance Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by any Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. Upon the acceptance of any Assignment and Acceptance for recordation in the Register, Schedule I hereto shall be deemed to be amended to reflect the revised Commitments of the Lenders parties to such Assignment and Acceptance as well as administrative information with respect to any new Lender as such information is recorded in the Register. (d) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and as assignee representing that it is an Eligible Assignee, together with any Notes subject to such assignment, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit G hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Company; within five Business Days after its receipt of such notice and its receipt of an executed counterpart of such Assignment and Acceptance, the Borrowers, at their own expense, shall execute and deliver to the Administrative Agent in exchange for the surrendered Notes, if any, new Notes to the order of such Eligible Assignee, if requested, in an amount equal to the Commitment assumed by it pursuant to such Assignment and Acceptance and, if the assigning Lender has retained a Commitment hereunder, new Notes, if requested, to the order of the assigning Lender in an amount equal to the Commitment retained by it hereunder. Such new Notes, if any, shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Notes, if any, shall be dated (A) in the case of Notes made by the Company, EPNGC and Tennessee the Closing Date and (B) in the case of Notes made by any other Borrower, the date such other Borrower executes and delivers its Joinder Agreement, and shall otherwise be in substantially the form of Exhibit A. (e) Each Lender may sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, and the Advances owing to it and the Notes held by it); provided, however, that (i) such Lender's obligations under this Agreement (including, without limitation, its Commitment to the Borrowers hereunder) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder of any such Notes for all purposes of this Agreement, (iv) the Borrowers, the Administrative Agent, the CAF Advance Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, (v) such Lender shall continue to be able to agree to any modification or amendment of this Agreement or any waiver hereunder without the consent, approval or vote of any such participant or group of participants, other than modifications, amendments and waivers which (A) postpone any date fixed for any payment of, or reduce any payment of, principal of or interest on such Lender's Advances or Notes or any facility fees payable under this Agreement, or (B) increase the amount of such Lender's Commitment in a manner which would have the effect of increasing the amount of a participant's participation, or (C) reduce the interest rate payable under this Agreement and such Lender's Notes, or (D) consent to the assignment or the transfer by any Borrower of any of its rights and 67 62 obligations under the Agreement, and (vi) except as contemplated by the immediately preceding clause (v), no participant shall be deemed to be or to have any of the rights or obligations of a "Lender" hereunder. (f) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.7, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Borrowers furnished to such Lender by or on behalf of the Borrowers; provided that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree in writing for the benefit of the Borrowers to preserve the confidentiality of any confidential information relating to the Borrowers received by it from such Lender in a manner consistent with Section 9.8. (g) Anything in this Agreement to the contrary notwithstanding, any Lender may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Advances owing to it) and the Notes issued to it hereunder in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System (or any successor regulation) and the applicable operating circular of such Federal Reserve Bank. SECTION 9.8 Confidentiality. Each Lender, the Administrative Agent and the CAF Advance Agent (each, a "Party") agrees that it will use its best efforts not to disclose, without the prior consent of the Company (other than to its, or its Affiliate's, employees, auditors, accountants, counsel or other representatives, whether existing at the date of this Agreement or any subsequent time), any information with respect to the Borrowers which is furnished pursuant to this Agreement, provided that any Party may disclose any such information (i) as has become generally available to the public, (ii) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state or Federal regulatory body having or claiming to have jurisdiction over such party or to the Board of Governors of the Federal Reserve System or the Federal Deposit Insurance Corporation or similar organizations (whether in the United States or elsewhere) or their successors, (iii) as may be required or appropriate in response to any summons or subpoena or in connection with any litigation or regulatory proceeding, (iv) in order to comply with any law, order, regulation or ruling applicable to such party, or (v) to any prospective assignee or participant in connection with any contemplated assignment of any rights or obligations hereunder, or any sale of any participation therein, by such Party pursuant to Section 9.7, if such prospective assignee or participant, as the case may be, executes an agreement with the Company containing provisions substantially similar to those contained in this Section 9.8; provided, however, that the Company acknowledges that the Administrative Agent has disclosed and may continue to disclose such information as the Administrative Agent in its sole discretion determines is appropriate to the Lenders from time to time. SECTION 9.9 Consent to Jurisdiction. (a) Each Borrower hereby irrevocably submits to the jurisdiction of any New York State or Federal court sitting in New York City and any appellate court from any thereof in any action or proceeding by the Administrative Agent, the CAF Advance Agent, any Lender or the holder of any Note in respect of, but only in respect of, 68 63 any claims or causes of action arising out of or relating to this Agreement or the Notes (such claims and causes of action, collectively, being "Permitted Claims"), and each Borrower hereby irrevocably agrees that all Permitted Claims may be heard and determined in such New York State court or in such Federal court. Each Borrower hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding in any aforementioned court in respect of Permitted Claims. Each Borrower hereby irrevocably appoints CT Corporation System (the "Process Agent"), with an office on the date hereof at 1633 Broadway, New York, New York 10019, as its agent to receive on behalf of such Borrower and its property service of copies of the summons and complaint and any other process which may be served by the Administrative Agent, any Lender or the holder of any Note in any such action or proceeding in any aforementioned court in respect of Permitted Claims. Such service may be made by delivering a copy of such process to the Company by courier and by certified mail (return receipt requested), fees and postage prepaid, both (i) in care of the Process Agent at the Process Agent's above address and (ii) at the Company's address specified pursuant to Section 9.2, and each Borrower hereby irrevocably authorizes and directs the Process Agent to accept such service on its behalf. Each Borrower agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. (b) Nothing in this Section 9.9 (i) shall affect the right of any Lender, the holder of any Note or the Administrative Agent or the CAF Advance Agent to serve legal process in any other manner permitted by law or affect any right otherwise existing of any Lender, the holder of any Note or the Administrative Agent or the CAF Advance Agent to bring any action or proceeding against any Borrower or its property in the courts of other jurisdictions or (ii) shall be deemed to be a general consent to jurisdiction in any particular court or a general waiver of any defense or a consent to jurisdiction of the courts expressly referred to in subsection (a) above in any action or proceeding in respect of any claim or cause of action other than Permitted Claims. SECTION 9.10 GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 9.11 Rate of Interest. It is the intention of the parties hereto that each Lender shall each conform strictly to usury laws applicable to it. Accordingly, if the transactions contemplated hereby would be usurious as to any Lender under laws applicable to it, then, in that event, notwithstanding anything to the contrary in this Agreement or in the Notes to the order of such Lender, it is agreed as follows: (a) the aggregate of all consideration which constitutes interest under law applicable to such Lender that is contracted for, taken, reserved, charged or received by such Lender hereunder, or under such Notes or otherwise, shall under no circumstances exceed the maximum amount allowed by such applicable law, and any excess shall be credited by such Lender on the principal amount of the sums owed to such Lender (or, if all amounts owing to such Lender shall have been paid in full, refunded by such Lender to the applicable Borrower); or (b) in the event that a prepayment of any Advances owed to any Lender is required, then such consideration that constitutes interest under law applicable to such Lender may never include more than the maximum amount allowed by such applicable law, and excess 69 64 interest, if any, provided for shall be cancelled automatically by such Lender as of the date of such prepayment and, if theretofore paid, shall be credited by such Lender on the principal amount of such prepayment obligation (or, if the principal amount of such prepayment obligation shall have been paid in full, refunded by such Lender to the applicable Borrower). To the extent that Article 5069-1.0001 of the Texas Revised Civil Statutes is relevant to any Lender for the purpose of determining the maximum amount of interest allowed by applicable law, such Lender hereby elects to determine the applicable rate ceiling under such Article by the indicated (weekly) rate ceiling from time to time in effect, subject to such Lender's right subsequently to change such method in accordance with applicable law. In no event, however, shall Chapter 346 of the Texas Finance Code apply to this Agreement or the Notes or the transactions contemplated hereby. SECTION 9.12 Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery to the Administrative Agent of a counterpart executed by a Lender shall constitute delivery of such counterpart to all of the Lenders. This Agreement may be delivered by facsimile transmission of the relevant signature pages hereof. 70 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their respective duly authorized officers as of the date first above written. EL PASO ENERGY CORPORATION By: /s/ C. Dana Rice ------------------------------------------------ Title: Vice President & Treasurer EL PASO NATURAL GAS COMPANY By: /s/ C. Dana Rice ------------------------------------------------ Title: Vice President & Treasurer TENNESSEE GAS PIPELINE COMPANY By: /s/ C. Dana Rice ------------------------------------------------ Title: Vice President & Treasurer THE CHASE MANHATTAN BANK, as Administrative Agent, CAF Advance Agent and a Lender By: /s/ Peter M. Ling ------------------------------------------------ Peter M. Ling Title: Vice President CITIBANK, N.A., as Co-Documentation Agent and a Lender By: /s/ Mark Stanfield Packard ------------------------------------------------ Mark Stanfield Packard Title: Vice President 71 ABN AMRO BANK N.V., as Co-Documentation Agent and a Lender By: /s/ Michael W. Nepveux ------------------------------------------------ Michael W. Nepveux Title: Group Vice President By: /s/ Charles W. Randall ------------------------------------------------ Charles W. Randall Title: Senior Vice President BANK OF AMERICA, N.A., as Syndication Agent and a Lender By: /s/ Patrick M. Delaney ------------------------------------------------ Patrick M. Delaney Title: Managing Director AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED, as a Lender By: /s/ [ILLEGIBLE] ------------------------------------------------ Title: Regional Credit Executive-Americas ARAB BANKING CORPORATION (B.S.C.), as a Lender By: /s/ Stephen A. Plauche ------------------------------------------------ Stephen A. Plauche Title: Vice President 72 BANCA COMMERCIALE ITALIANA- LOS ANGELES FOREIGN BRANCH, as a Lender By: /s/ C. Dougherty ------------------------------------------------ C. Dougherty Title: VP By: /s/ E. Bermant ------------------------------------------------ E. Bermant Title: FVP/Deputy Manager BANCA DI ROMA- CHICAGO BRANCH, as a Lender By: /s/ Aurora Pensa ------------------------------------------------ Title: Aurora Pensa (97974) Vice President By: /s/ Claudio Perna ------------------------------------------------ Title: Claudio Perna (19690) Sr. Vice President & Manager BANKBOSTON, N.A., as a Lender By: /s/ Michael Kane ------------------------------------------------ MICHAEL KANE Title: Managing Director THE BANK OF NEW YORK, as a Lender By: /s/ Ian K. Stewart ------------------------------------------------ IAN K. STEWART Title: SENIOR VICE PRESIDENT THE BANK OF NOVA SCOTIA, as a Lender By: /s/ [ILLEGIBLE] ------------------------------------------------ Title: Senior Manager Loan Operations 73 BANQUE NATIONALE DE PARIS, as a Lender By: /s/ Warren Ross ------------------------------------------------ Warren Ross Title: Assistant Vice President BARCLAYS BANK PLC, as a Lender By: /s/ [ILLEGIBLE] ------------------------------------------------ Title: Director CIBC, INC., as a Lender By: /s/ [ILLEGIBLE] ------------------------------------------------ Title: Authorized Signatory CREDIT AGRICOLE INDOSUEZ, as a Lender By: /s/ Douglas A. Whiddon ------------------------------------------------ Douglas A. Whiddon Title: Vice President, Senior Relationship Manager By: /s/ Patrick Cocquerel ------------------------------------------------ PATRICK COCQUEREL Title: FIRST VICE PRESIDENT, MANAGING DIRECTOR HEAD OF HOUSTON REPRESENTATIVE OFFICE CREDIT LYONNAIS NEW YORK BRANCH, as a Lender By: /s/ W. Jay Buckley ------------------------------------------------ W. JAY BUCKLEY Title: VICE PRESIDENT CREDIT SUISSE FIRST BOSTON, as a Lender By: /s/ Douglas E. Maher ------------------------------------------------ DOUGLAS E. MAHER Title: VICE PRESIDENT By: /s/ James P. Moran ------------------------------------------------ JAMES P. MORAN Title: DIRECTOR 74 THE DAI-ICHI KANGYO BANK, LTD. NEW YORK BRANCH, as a Lender By: /s/ [ILLEGIBLE] ------------------------------------------------ Title: Assistant Vice President DEUTSCHE BANK AG NEW YORK BRANCH a/o Cayman Islands Branch, as a Lender By: /s/ Paul L. Harinstein ------------------------------------------------ Paul L. Harinstein Title: Managing Director By: /s/ Catherine Ruhland ------------------------------------------------ CATHERINE RUHLAND, V.P. Title: CREDIT RISK MANAGEMENT DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, as a Lender By: /s/ Thomas Lake ------------------------------------------------ THOMAS LAKE Title: Vice President By: /s/ Frederic O. Lahner ------------------------------------------------ FREDERIC O. LAHNER Title: ASSISTANT VICE PRESIDENT THE FIRST NATIONAL BANK OF CHICAGO, as a Lender By: /s/ Karen C. Patterson ------------------------------------------------ Title: Authorized Signer FIRST UNION NATIONAL BANK, as a Lender By: /s/ Robert R. Wetteroff ------------------------------------------------ ROBERT R. WETTEROFF Title: SENIOR VICE PRESIDENT 75 THE FUJI BANK, LIMITED, as a Lender By: /s/ [ILLEGIBLE] ------------------------------------------------ Title: Senior Vice President & Manager THE INDUSTRIAL BANK OF JAPAN TRUST COMPANY, as a Lender By: /s/ Mike Oakes ------------------------------------------------ Mike Oakes Title: Senior Vice President The Industrial Bank of Japan, Limited, Houston Office (Authorized Representative) KBC BANK N.V., as a Lender By: /s/ Robert Snauffer ------------------------------------------------ ROBERT SNAUFFER Title: FIRST VICE PRESIDENT By: /s/ Raymond F. Murray ------------------------------------------------ RAYMOND F. MURRAY Title: FIRST VICE PRESIDENT MEES PIERSON CAPITAL CORP., as a Lender By: /s/ Darrell W. Holley ------------------------------------------------ Darrell W. Holley Title: Senior Vice President By: /s/ Karel Louman ------------------------------------------------ Karel Louman Title: Managing Director MELLON BANK, N.A., as a Lender By: /s/ Roger E. Howard ------------------------------------------------ Title: Vice President 76 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as a Lender By: /s/ Robert Bottamedi ------------------------------------------------ ROBERT BOTTAMEDI Title: VICE PRESIDENT NATIONAL WESTMINSTER BANK PLC, NEW YORK BRANCH, as a Lender By: /s/ Patricia J. Dundee ------------------------------------------------ PATRICIA J. DUNDEE Title: SENIOR VICE PRESIDENT NATIONAL WESTMINSTER BANK PLC, NASSAU BRANCH, as a Lender By: /s/ Patricia J. Dundee ------------------------------------------------ PATRICIA J. DUNDEE Title: SENIOR VICE PRESIDENT THE NORINCHUKIN BANK, NEW YORK BRANCH, as a Lender By: /s/ Yoshiro Niiro ------------------------------------------------ Yoshiro Niiro Title: General Manager THE NORTHERN TRUST COMPANY, as a Lender By: /s/ David J. Mitchell ------------------------------------------------ DAVID J. MITCHELL Title: VICE PRESIDENT PARIBAS, as a Lender By: /s/ Marian Livingston ------------------------------------------------ MARIAN LIVINGSTON Title: VICE PRESIDENT By: /s/ John H. Roberts ------------------------------------------------ John H. Roberts Title: Vice President PNC BANK, NATIONAL ASSOCIATION, as a Lender By: /s/ [ILLEGIBLE] ------------------------------------------------ Title: Vice President 77 ROYAL BANK OF CANADA, as a Lender By: /s/ J.D. Frost ------------------------------------------------ J.D. FROST Title: SENIOR MANAGER SOCIETE GENERALE, SOUTHWEST AGENCY, as a Lender By: /s/ Richard A. Gould ------------------------------------------------ Richard A. Gould Title: Director SUNTRUST BANK, ATLANTA as a Lender By: /s/ Deborah S. Armstrong ------------------------------------------------ Deborah S. Armstrong Title: Vice President TORONTO DOMINION (TEXAS), INC., as a Lender By: /s/ Jimmy Simien ------------------------------------------------ Jimmy Simien Title: Vice President WELLS FARGO BANK (TEXAS) N.A., as a Lender By: /s/ Christina Faith ------------------------------------------------ Title: AVP WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH, as a Lender By: /s/ Kheil A. McIntyre ------------------------------------------------ KHEIL A. MCINTYRE Title: VICE PRESIDENT By: /s/ Walter T. Duffy III ------------------------------------------------ Walter T. Duffy III Title: Vice President THE SUMITO BANK, LIMITED NEW YORK BRANCH, as a Lender By: /s/ [ILLEGIBLE] ------------------------------------------------ Title: Senior Vice President AMSOUTH BANK, as a Lender By: /s/ David A. Simmons ------------------------------------------------ David A. Simmons Title: Senior Vice President BANCO BILBAO VIZCAYA, as a Lender By: /s/ Manuel Sanchez ------------------------------------------------ Manuel Sanchez Title: Global Relationship Manager By: /s/ John Martini Carreras ------------------------------------------------ John Martini Carreras Title: Vice President 78 SCHEDULE I COMMITMENTS, ADDRESSES, ETC.
Name and Address of Lender Amount of Commitment - -------------------------- -------------------- The Chase Manhattan Bank 270 Park Avenue $70,888,463 New York, NY 10017 Attention: Peter Ling Telephone: 212-270-4676 Telecopier: 212-270-3897 Citibank, N.A. 1200 Smith Street, Suite 2000 $70,888,469 Houston, TX 77002 Attention: James Reilly/Steve Baillie Telephone: 713-654-2820/713-654-2887 Telecopier: 713-654-2849/713-654-2849 ABN AMRO Bank, N.V. Three Riverway, Suite 1700 $70,888,469 Houston, TX 77056 Attention: Michael Nepveux Telephone: 713-964-3316 Telecopier: 713-621-5801 Bank of America, N.A. 700 Louisiana Street, 8th Floor $70,888,469 Houston, TX 77002 Attention: Patrick Delaney Telephone: 713-247-7373 Telecopier: 713-247-6568 Australia and New Zealand Banking Group Limited $14,177,694 1177 Avenue of the Americas New York, NY 10036 Attention: David Giacalone Telephone: 212-801-9814 Telecopier: 212-556-4814
79 2
Name and Address of Lender Amount of Commitment - -------------------------- -------------------- Arab Banking Corporation (B.S.C.) $14,177,694 277 Park Avenue, 32nd Floor New York, NY 10172-3299 Attention: Loan Department Manager Telephone: 212-583-4771 Telecopier: 212-583-0921 Banca Commerciale Italianna- Los Angeles Foreign Branch $23,629,490 555 South Flower Street, 43rd Floor Los Angeles, CA 90071 Attention: Jack Wityak Telephone: 213-624-0440 Telecopier: 213-624-0457 Banca di Roma- Chicago Branch $14,177,694 225 West Washington Street, Suite 1200 Chicago, IL 60606 Attention: Aurora Pensa Telephone: 312-704-2630 Telecopier: 312-726-3058 BankBoston, N.A. $23,629,490 100 Federal Street MS 01-08-04 Boston, MA 02110 Attention: Michael Kane/Jill Calebrese Telephone: 617-434-5358/617-434-9579 Telecopier: 617-434-3652/617-434-3652 The Bank of New York $35,444,234 One Wall Street New York, NY 10286 Attention: Peter Keller/Kevin Walker Telephone: 212-635-7861/212-635-7609 Telecopier: 212-635-7923/24/212-635-7923 The Bank of Nova Scotia $47,258,979 600 PeachTree Street, N.A. Suite 2700 Atlanta, GA 30308 Attention: Robert Ahern Telephone: 404-877-1565 Telecopier: 404-888-8998
80 3
Name and Address of Lender Amount of Commitment - -------------------------- -------------------- Banque Nationale de Paris $35,444,234 333 Clay Street, Suite 3400 Houston, TX 77002 Attention: Warren Ross Telephone: 713-951-1224 Telecopier: 713-659-1414 Barclays Bank PLC $35,444,234 222 Broadway New York, NY 10038 Attention: Richard Williams/Derek Rozycki Telephone: 212-412-7570/212-412-7633 Telecopier: 212-412-7585/212-412-7585 CIBC, Inc. $35,444,234 1600 Smith Street, Suite 3100 Houston, TX 77002 Attention: Mark Wolf/Lucia Martinea Telephone: 713-650-2588/713-650-2549 Telecopier: 713-650-7675/713-650-7675 Credit Agricole Indosuez $14,177,694 600 Travis Street, Suite 2340 Houston, TX 77002 Attention: Doug Whiddon/Brian Knezeak Telephone: 713-223-7003/713-223-7001 Telecopier: 713-223-7029/713-223-7029 Credit Lyonnais, New York Branch $47,258,979 1000 Louisiana Street, Suite 5360 Houston, TX 77002 Attention: Robert LaRoque Telephone: 713-753-8733 Telecopier: 713-751-0307 Credit Suisse First Boston $23,629,490 11 Madison Avenue New York, NY 10010-3629 Attention: Doug Maher Telephone: 212-325-3641 Telecopier: 212-325-8615
81 4
Name and Address of Lender Amount of Commitment - -------------------------- -------------------- The Dai-ichi Kangyo Bank, Ltd. New York $14,177,694 Branch One World Trade Center, Suite 4911 New York, NY 10048 Attention: Katsuya Noto/Bert Tang Telephone: 212-432-6627/212-432-8839 Telecopier: 212-912-1879/212-912-1879 Deutsche Bank AG New York Branch a/o $35,444,234 Cayman Islands Branch 130 Liberty Street New York, NY 10006 Attention: Mark Tarkington Telephone: 212-250-7684 Telecopier: 212-250-8693 Dresdner Bank AG, New York and Grand $14,177,694 Cayman Branches 75 Wall Street New York, NY 10005 Attention: Andrew Cullinan/Mike Mangan Telephone: 212-429-2226/212-429-2112 Telecopier: 212-429-2192/212-429-2081 The First National Bank of Chicago $47,258,979 910 Travis Street, 6th Floor Houston, TX 77002 Attention: Karen Paterson Telephone: 713-751-3863 Telecopier: 713-751-3760 First Union National Bank $23,629,490 1001 Fannin Street Houston, TX 77002 Attention: Paul Riddle/Phillip Trinder Telephone: 713-346-2703/713-346-2718 Telecopier: 713-650-6354/713-650-6354 The Fuji Bank, Limited $23,629,490 One Houston Center, Suite 4100 Houston, TX 77010 Attention: Mark Polasek Telephone: 713-650-7863 Telecopier: 713-759-0048
82 5
Name and Address of Lender Amount of Commitment - -------------------------- -------------------- The Industrial Bank of Japan Trust Company $23,629,490 Three Allen Center Suite 4850 333 Clay Street Houston, TX 77002 Attention: W. Lynn Williford Telephone: 713-651-9444 ext. 104 Telecopier: 713-651-9209 KBC Bank, N.V. $23,629,490 125 West 55th Street, 10th Floor New York, NY 10019 Attention: Christine Park Telephone: 212-541-0731 Telecopier: 212-541-0784 Mees Pierson Capital Corp. $14,177,694 300 Crescent Court, Suite 1750 Dallas, TX 75201 Attention: Darrell Holley Telephone: 214-953-9307 Telecopier: 214-754-5981 Mellon Bank, N.A. $47,258,979 Three Mellon Bank Center, Room 1203 Pittsburgh, PA 15259-0003 Attention: Roger E. Howard/Richard A. Matthews Telephone: 412-234-5606/412- 234-9759 Telecopier: 412-236-1840/412- 236-1840 Morgan Guaranty Trust Company $14,177,694 of New York 60 Wall Street New York, NY 10260 Attention: Dennis Wilezek Telephone: 212-648-1265 Telecopier: 212-648-5018
83 6
Name and Address of Lender Amount of Commitment - -------------------------- -------------------- National Westminster Bank PLC, $23,629,490 New York Branch 65 East 55th Street, 24th Floor New York, NY 10022 Attention: Patricia Dundee Telephone: 713-221-2423 Telecopier: 713-221-2430 The Norinchukin Bank, New York $14,177,694 Branch 245 Park Avenue, 29th Floor New York, NY 10167 Attention: Keisuke Ishii/Hirotaka Shimizu Telephone: 212-808-4186/212-808-4186 Telecopier: 212-697-5754/212-697-5754 The Northern Trust Company $14,177,694 50 South LaSalle, 11th Floor Chicago, IL 60675 Attention: Ms. Jaron Grimm Telephone: 312-444-2406 Telecopier: 312-630-6062 PARIBAS $14,177,694 1200 Smith Street, Suite 3100 Houston, TX 77002 Attention: John Roberts Telephone: 713-659-4811 Telecopier: 713-659-6915 PNC Bank, National Association $23,629,490 Fiftth and Wood Street, 3rd Floor Pittsburgh, PA 15265 Attention: Thomas Majeski Telephone: 412-762-2431 Telecopier: 412-762-2571 Royal Bank of Canada $14,177,694 12450 Greenspoint Drive, Suite 1450 Houston, TX 77060 Attention: Doug Frost Telephone: 281-874-0191 Telecopier: 281-874-0081
84 7
Name and Address of Lender Amount of Commitment - -------------------------- -------------------- Societe Generale, Southwest Agency $23,629,490 2001 Ross Avenue, Suite 4800 Dallas, TX 75201 Attention: Richard Gould/Paul Cornell Telephone: 713-759-6324/713-759-6310 Telecopier: 713-650-0824/713-650-0824 SunTrust Bank, Atlanta $47,258,979 303 Peachtree Street Atlanta, GA 30308 Attention: John Fields Jr./Anne Ford Telephone: 404-724-3667/404-724-3899 Telecopier: 404-827-6270/404-827-6270 Toronto-Dominion Bank, Houston Agency $47,258,979 909 Fannin Street, 17th Floor Houston, TX 77010 Attention: Jimmy Simien Telephone: 713-653-8239 Telecopier: 713-951-9929 Wells Fargo Bank (Texas), N.A. $23,629,490 1000 Louisiana Street, 3rd Floor Houston, TX 77002 Attention: Christina Faith/Jennifer Hill Telephone: 713-319-1370/713-319-1376 Telecopier: 713-739-1087/713-739-1087 Westdeutsche Landesbank $23,629,490 Girozentrale, New York Branch 1211 Avenue of the Americas New York, NY 10036 Attention: Richard Newman Telephone: 212-852-6120 Telecopier: 212-852-6307 The Sumitomo Bank, Limited, $14,177,694 New York Branch 277 Park Avenue New York, NY 10172 Attention: Mike Garrido Telephone: 212-224-4128 Telecopier: 212-224-4384
85
8 Name and Address of Lender Amount of Commitment - -------------------------- -------------------- AmSouth Bank $23,629,490 1900 5th Avenue North Birmingham, AL 35288 Attention: David A. Simmons Telephone: 205-801-0663 Telecopier: 205-583-4436 Banco Bilbao Vizcaya $14,177,694 1345 Avenue of the Americas 5th Floor New York, NY 10105 Attention: Manuel Sanchez Telephone: 212-728-1511 Telecopier: 212-333-2904
86 EXHIBIT A --------- FORM OF NOTE $ New York, New York ----------- August__, 1999 FOR VALUE RECEIVED, the undersigned, ___________________, a ________ corporation (the "Borrower"), hereby unconditionally promises to pay to the order of (the "Lender") at the office of The Chase Manhattan Bank, located at 270 Park Avenue, New York, New York 10017, in lawful money of the United States of America and in same day funds, on the first anniversary of the Termination Date (or if the Lender is an Objecting Lender, the first anniversary of the Commitment Expiration Date applicable to the Lender) the principal amount of (a) DOLLARS ($ ), or, if less, (b) the aggregate unpaid principal amount of all Revolving Credit Advances made by the Lender to the Borrower pursuant to subsection 2.1 of the Credit Agreement, as hereinafter defined. The Borrower further agrees to pay interest in like money at such office on the unpaid principal amount hereof from time to time outstanding at the rates and on the dates specified in the Credit Agreement. The holder of this Note is authorized to, and prior to any transfer hereof shall, endorse on the schedules attached hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof the date, Type and amount of each Revolving Credit Advance made pursuant to subsection 2.1 of the Credit Agreement and the date and amount of each payment or prepayment of principal thereof, each continuation thereof, each conversion of all or a portion thereof to another Type and, in the case of Eurodollar Rate Advances, the length of each Interest Period with respect thereto. Each such endorsement shall constitute prima facie evidence of the accuracy of the information endorsed. The failure to make any such endorsement shall not affect the obligations of the Borrower in respect of such Revolving Credit Advance. This Note (a) is one of the Notes referred to in the $1,250,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement, dated as of August 16, 1999 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among El Paso Energy Corporation, El Paso Natural Gas Company, Tennessee Gas Pipeline Company, the Lender, the other banks and financial institutions from time to time parties thereto, The Chase Manhattan Bank, as Administrative Agent and CAF Advance Agent, Citibank, N.A. and ABN Amro Bank, N.V., as Co-Documentation Agents, and Bank of America, N.A., as Syndication Agent (b) is subject to the provisions of the Credit Agreement and (c) is subject to optional and mandatory prepayment in whole or in part as provided in the Credit Agreement. 87 A-2 Upon the occurrence of any one or more of the Events of Default, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided in the Credit Agreement. All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind except those expressly required under the Credit Agreement. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. [BORROWER] By: ----------------------------- Title: 88 Schedule A to Note ADVANCES, CONVERSIONS AND REPAYMENTS OF BASE RATE ADVANCES
Amount of Base Rate Amount Amount of Principal of Advances Converted to Amount of Base Rate Converted to Base Rate Advances Eurodollar Rate Unpaid Principal Balance Notation Date Advances Base Rate Advances Repaid Advances of Base Rate Advances Made By - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------------------------
89 Schedule B to Note ADVANCES, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR RATE ADVANCES
Amount of Rate Unpaid Principal Amount of Amount Converted Interest Period and Amount of Principal Advances Eurodollar Balance of Eurodollar Eurodollar Eurodollar Rate of Eurodollar Eurodollar Converted to Eurodollar Notation Date Rate Advances to Rate Advances with Respect Thereto Rate Advances Repaid Base Rate Advances Rate Advances Made By - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
90 EXHIBIT B FORM OF NOTICE OF BORROWING The Chase Manhattan Bank, as Administrative Agent for the Lenders parties to the Credit Agreement referred to below 270 Park Avenue New York, New York 10017 [Date] Attention: El Paso Energy Corporation Ladies and Gentlemen: The undersigned, EL PASO ENERGY CORPORATION, refers to the $1,250,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement, dated as of August 16, 1999 (the "Credit Agreement", the terms defined therein being used herein as therein defined), among the undersigned, El Paso Natural Gas Company, Tennessee Gas Pipeline Company, certain Lenders parties thereto, The Chase Manhattan Bank, as Administrative Agent and CAF Advance Agent for said Lenders, Citibank, N.A. and ABN Amro Bank, N.V., as Co-Documentation Agents, and Bank of America, N.A., as Syndication Agent, and hereby gives you notice, irrevocably, pursuant to Section 2.2 of the Credit Agreement that the undersigned hereby requests a Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such Borrowing (the "Proposed Borrowing") as required by Section 2.2(a) of the Credit Agreement: (i) The Borrower for the Proposed Borrowing is _______________. (ii) The Business Day of the Proposed Borrowing is ___________, 199__. (iii) The Type of Advances comprising the Proposed Borrowing is [Base Rate Advances] [Eurodollar Rate Advances]. (iv) The aggregate amount of the Proposed Borrowing is $__________. (v) The Interest Period for each Eurodollar Rate Advance made as part of the Proposed Borrowing is [______ month[s]]. The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing, before and immediately after giving effect thereto and to the application of the proceed therefrom: 91 (A) each representation and warranty contained in Section 4.1 is correct in all material respects as though made on and as of such date; and (B) no event has occurred and is continuing, or would result from such Proposed Borrowing, which constitutes an Event of Default or Default. Very truly yours, EL PASO ENERGY CORPORATION By: ------------------------------ Title: 92 EXHIBIT C FORM OF CAF ADVANCE REQUEST [Date] The Chase Manhattan Bank, as CAF Advance Agent 270 Park Avenue New York, New York 10017 Reference is made to the $1,250,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement, dated as of August 16, 1999, among El Paso Energy Corporation, El Paso Natural Gas Company, Tennessee Gas Pipeline Company, certain Lenders parties thereto, The Chase Manhattan Bank, as Administrative Agent and CAF Advance Agent, Citibank, N.A. and ABN Amro Bank, N.V., as Co-Documentation Agents, and Bank of America, N.A., as Syndication Agent (as the same may be amended, supplemented or otherwise modified from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. This is a [Fixed Rate] [LIBO Rate] CAF Advance Request* pursuant to Section 2.5 of the Credit Agreement requesting quotes for the following CAF Advances:
Loan 1 Loan 2 Loan 3 ~~Aggregate Principal Amount $ $ $ ---------- ---------- --------- CAF Advance Date Maturity Date Interest Payment Dates~~
Very truly yours, [Borrower] By: -------------------------------------- Name: Title: - ------------------- * Pursuant to the Credit Agreement, a CAF Advance Request may be transmitted in writing, by telecopy, or by telephone, immediately confirmed by telecopy. In any case, a CAF Advance Request shall contain the information specified in the second paragraph of this form. 93 EXHIBIT D FORM OF CAF ADVANCE OFFER [Date] The Chase Manhattan Bank, as CAF Advance Agent 270 Park Avenue New York, New York 10017 Reference is made to the $1,250,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement, dated as of August 16, 1999, among El Paso Energy Corporation, El Paso Natural Gas Company, Tennessee Gas Pipeline Company, certain Lenders parties thereto, The Chase Manhattan Bank, as Administrative Agent and CAF Advance Agent, Citibank, N.A. and ABN Amro Bank, N.V., as Co-Documentation Agents, and Bank of America, N.A., as Syndication Agent (as the same may be amended, supplemented or otherwise modified from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. In accordance with Section 2.5 of the Credit Agreement, the undersigned Lender offers to make CAF Advances thereunder in the following amounts with the following maturity dates:
CAF Advance Date: ,199 Aggregate Maximum Amount: $ ---------- -- --------- - ------------------------------------------------------------------------------- Maturity Date 1: Maximum Amount: $ ,199 $ offered at ----------* --------- -- ------- ---------- $ offered at * ------- ---------- - -------------------------------------------------------------------------------- Maturity Date 2: Maximum Amount: $ ,199 $ offered at ----------* --------- -- ------- ---------- $ offered at * ------- ---------- - -------------------------------------------------------------------------------- Maturity Date 3: Maximum Amount: $ ,199 $ offered at ----------* --------- -- ------- ---------- $ offered at * ------- ---------- - --------------------------------------------------------------------------------
Very truly yours, [NAME OF CAF ADVANCE LENDER] By: ----------------------------------- Name: Title: Telephone No.: Telecopy No.: - ---------------------------- * Insert the interest rate offered for the specified CAF Advance. In the case of LIBO Rate CAF Advances, insert a margin bid. In the case of Fixed Rate CAF Advances, insert a fixed rate bid. 94 EXHIBIT E FORM OF CAF ADVANCE CONFIRMATION [Date] The Chase Manhattan Bank, as CAF Advance Agent 270 Park Avenue New York, New York 10017 Reference is made to the $1,250,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement, dated as of August 16, 1999, among El Paso Energy Corporation, El Paso Natural Gas Company, Tennessee Gas Pipeline Company, certain Lenders parties thereto, The Chase Manhattan Bank, as Administrative Agent and CAF Advance Agent, Citibank, N.A. and ABN Amro Bank, N.V., as Co-Documentation Agents, and Bank of America, N.A., as Syndication Agent (as the same may be amended, supplemented or otherwise modified from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. In accordance with Section 2.5(d) of the Credit Agreement, the undersigned accepts and confirms the offers by the CAF Advance Lender(s) to make CAF Advances to the undersigned on , [date of CAF Advance Borrowing] under Section 2.5(d) in the (respective) amount(s) set forth on the attached list of CAF Advances offered. Very truly yours, [Borrower] By ---------------------------------- Name: Title: [The Borrower must attach CAF Advance offer list prepared by the CAF Advance Agent with accepted amount entered by the Borrower to the right of each CAF Advance offer]. 95 EXHIBIT F FORM OF ASSIGNMENT AND ACCEPTANCE Dated _____________, ____ Reference is made to the $1,250,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement, dated as of August 16, 1999 (as the same may be amended or otherwise modified from time to time, the "Credit Agreement") among EL PASO ENERGY CORPORATION, a Delaware corporation (the "Company"), EL PASO NATURAL GAS COMPANY, a Delaware corporation, TENNESSEE GAS PIPELINE COMPANY, a Delaware corporation, the Lenders (as defined in the Credit Agreement), The Chase Manhattan Bank, as administrative agent (the "Administrative Agent") and as CAF Advance Agent (the "CAF Advance Agent") for the Lenders, Citibank, N.A. and ABN Amro Bank, N.V., as Co-Documentation Agents, and Bank of America, N.A. , as Syndication Agent. Terms defined in the Credit Agreement are used herein with the same meaning. _____________ (the "Assignor") and ____________ (the "Assignee") agree as follows: 1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, that interest in and to all of the Assignor's rights and obligations under the Credit Agreement as of the date hereof which represents the percentage interest specified on Schedule 1 of all outstanding rights and obligations under the Credit Agreement, including, without limitation, such interest in the Assignor's Commitment, the Advances owing to the Assignor, and the Notes held by the Assignor. After giving effect to such sale and assignment, the Assignee's Commitment and the amount of the Advances owing to the Assignee will be as set forth in Section 2 of Schedule 1. 2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of each Borrower or the performance or observance by each Borrower of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto; and (iv) attaches the Notes referred to in paragraph 1 above and requests that the Administrative Agent exchange such Notes for new Notes payable to the order of the Assignee in an amount equal to the Commitment assumed by the Assignee pursuant hereto or new Notes payable to the order of the Assignee in an amount equal to the Commitment assumed by the Assignee pursuant hereto and the Assignor in an amount equal to the Commitment 96 F-2 retained by the Assignor under the Credit Agreement, respectively, as specified on Schedule 1 hereto. 3. The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 4.1 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon the Administrative Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv) appoints and authorizes the Administrative Agent and CAF Advance Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Administrative Agent and CAF Advance Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender; [and] (vi) specifies as its address for notices the address set forth beneath its name on the signature pages hereof [and (vii) attaches the forms prescribed by the Internal Revenue Service of the United States certifying as to the Assignee's status for purposes of determining exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Credit Agreement and the Notes or such other documents as are necessary to indicate that all such payments are subject to such rates at a rate reduced by an applicable tax treaty]*. 4. Following the execution of this Assignment and Acceptance by the Assignor and the Assignee, it will be delivered to the Administrative Agent for acceptance and recording by the Administrative Agent. The effective date of this Assignment and Acceptance shall be the date of acceptance thereof by the Administrative Agent, unless otherwise specified on Schedule 1 hereto (the "Effective Date"). 5. Upon such acceptance and recording by the Administrative Agent, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of Lender thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement. 6. Upon such acceptance and recording by the Administrative Agent, from and after the Effective Date, the Administrative Agent shall make all payments under the Credit Agreement and the Notes in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and commitment fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the Notes for periods prior to the Effective Date directly between themselves. - --------------------------- * If the Assignee is organized under the laws of a jurisdiction outside the United States. 97 F-3 7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance to be executed by their respective officers thereunto duly authorized, as of the date first above written, such execution being made on Schedule 1 hereto. 98 Schedule 1 to Assignment and Acceptance Dated _________, ____ Section 1. - ---------- Percentage Interest: % ----- Section 2. - ---------- Assignee's Commitment: $ Aggregate Outstanding Principal ----- Amount of Advances owing to the Assignee: $ ----- Note payable to the order of the Assignee Dated: , ---- ----- Principal amount: $ ----- Note payable to the order of the Assignor Dated: , ---- ----- Principal amount: $ ----- Section 3. - ---------- Effective Date*: , ------ ----- [NAME OF ASSIGNEE] [NAME OF ASSIGNOR] By: By: ------------------------------ ------------------------------ Title: Title: Address for notices: [Address] - -------------------------------- * This date should be no earlier than the date of acceptance by the Administrative Agent. 99 2 Consented to: EL PASO ENERGY CORPORATION THE CHASE MANHATTAN BANK, as Administrative Agent By: By: ------------------------ -------------------------------- Title: Title: 100 3 Accepted this day -- of , ---------- --- THE CHASE MANHATTAN BANK, as Administrative Agent By: --------------------------- Title: 101 EXHIBIT G --------- FORM OF OPINION OF [ASSOCIATE GENERAL][SENIOR] COUNSEL OF THE COMPANY August 16, 1999 To Each of the Lenders, the Administrative Agent and the CAF Advance Agent Referred to Below c/o The Chase Manhattan Bank 270 Park Avenue New York, New York 10017 Re: El Paso Energy Corporation Ladies and Gentlemen: This opinion is furnished to you pursuant to Section 3.2(b)(iii) of the $1,250,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement, dated as of August 16, 1999 (the "Credit Agreement"), among El Paso Energy Corporation (the "Company"), El Paso Natural Gas Company ("EPNGC"), Tennessee Gas Pipeline Company ("Tennessee") (Tennessee, together with the Company and EPNGC, the "Borrowers"), the banks and other financial institutions from time to time party thereto (each a "Lender", and together the "Lenders"), The Chase Manhattan Bank, as Administrative Agent (in such capacity, the "Administrative Agent") and as CAF Advance Agent (in such capacity, the "CAF Advance Agent") for the Lenders, Citibank, N.A. and ABN Amro Bank, N.V., as Co-Documentation Agents (in such capacity, the "Co-Documentation Agents") , and Bank of America, N.A., as Syndication Agent (in such capacity, the "Syndication Agent"). Unless the context otherwise requires, all capitalized terms used herein without definition shall have the meanings ascribed to them in the Credit Agreement. I am [Associate General] [Senior] Counsel of the Company, and I, or attorneys over whom I exercise supervision, have acted as counsel for the Borrowers in connection with the preparation, execution and delivery of the Credit Agreement. In that connection, I or such attorneys have examined: (1) the Credit Agreement, executed by the parties thereto; (2) the Notes, executed by the Borrowers; and (3) the other documents furnished by the Borrowers pursuant to Sections 3.1 and 3.2 of the Credit Agreement. 102 G-2 I, or attorneys over whom I exercise supervision, have also examined the originals, or copies certified to our satisfaction, of the agreements, instruments and other documents, and all of the orders, writs, judgments, awards, injunctions and decrees, which affect or purport to affect the Borrowers' ability to perform their respective obligations under the Credit Agreement or the Notes (collectively referred to herein as the "Documents"). In addition, I, or attorneys over whom I exercise supervision, have examined the originals, or copies certified to our satisfaction, of such other corporate records of the Borrowers, certificates of public officials and of officers of the Borrowers, and agreements, instruments and other documents, as I have deemed necessary as a basis for the opinions hereinafter expressed. In all such examinations, I, or attorneys over whom I exercise supervision, have assumed the legal capacity of all natural persons executing documents, the genuineness of all signatures on original or certified, conformed or reproduction copies of documents of all parties (other than, with respect to the Documents, the Borrowers), the authenticity of original and certified documents and the conformity to original or certified copies of all copies submitted to such attorneys or me as conformed or reproduction copies. As to various questions of fact relevant to the opinions expressed herein, I have relied upon, and assume the accuracy of, representations and warranties contained in the Credit Agreement and certificates and oral or written statements and other information of or from public officials, officers and/or representatives of the Borrowers and others. I have assumed that the parties to the Documents other than the Borrowers have the power to enter into and perform such documents and that such documents have been duly authorized, executed and delivered by, and constitute legal, valid and binding obligations of, such parties. The opinions expressed below are limited to the federal laws of the United States and, to the extent relevant hereto, the General Corporation Law of the State of Delaware, as currently in effect. I assume no obligation to supplement this opinion if any applicable laws change after the date hereof or if I become aware of any facts that might change the opinions expressed herein after the date hereof. Based on the foregoing and upon such investigation as we have deemed necessary, and subject to the limitations, qualifications and assumptions set forth herein, I am of the following opinion: 1. Each Borrower (i) is a corporation duly incorporated and existing in good standing under the laws of the State of Delaware, and (ii) possesses all the corporate powers and all other authorizations and licenses necessary to engage in its business and operations as now conducted, the failure to obtain or maintain which would have a Material Adverse Effect. 2. The execution, delivery and performance by each Borrower of the Documents to which it is a party are within such Borrower's corporate powers and have been duly authorized by all necessary corporate action in respect of or by such Borrower, and do not contravene (i) such Borrower's charter or by-laws, each as amended to date, (ii) any federal law, rule or regulation applicable to such Borrower (excluding provisions of federal law expressly referred to in and covered by the opinion of Jones, Day, Reavis & 103 G-3 Pogue delivered to you in connection with the transactions contemplated hereby) or any provision of the General Corporation Law of the State of Delaware applicable to such Borrower, or (iii) any contractual restriction binding on or affecting such Borrower. The Documents to which it is a party have been duly executed and delivered on behalf of each Borrower. 3. No authorization or approval or other action by, and no notice to or filing with, any federal governmental authority or regulatory body (including, without limitation, the FERC) is required for the due execution, delivery and performance by any Borrower of the Documents to which it is a party, except those required in the ordinary course of business in connection with the performance by each Borrower of its obligations under certain covenants and warranties contained in the Documents to which it is a party. 4. To the best of my knowledge, there is no action, suit or proceeding pending or overtly threatened against or involving the Company or any of the Principal Subsidiaries which, in my reasonable judgment (taking into account the exhaustion of all appeals), would have a material adverse effect upon the consolidated financial condition of the Company and its consolidated Subsidiaries taken as a whole, or which purports to affect the legality, validity, binding effect or enforceability of any Document. These opinions are given as of the date hereof and are solely for your benefit in connection with the transactions contemplated by the Credit Agreement. These opinions may not be relied upon by you for any other purpose or relied upon by any other person for any purpose without my prior written consent. Very truly yours, 104 EXHIBIT H --------- FORM OF OPINION OF NEW YORK COUNSEL TO THE COMPANY August 16, 1999 To Each of the Lenders, the Administrative Agent, the CAF Advance Agent, the Co-Documentation Agents and the Syndication Agent Referred to Below c/o The Chase Manhattan Bank 270 Park Avenue, 10th Floor New York, New York 10017 Re: $1,250,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement dated as of August 16, 1999 Dear Ladies and Gentlemen: We have acted as special New York counsel for El Paso Energy Corporation, a Delaware corporation (the "Company"), El Paso Natural Gas Company, a Delaware corporation ("EPNGC") and Tennessee Gas Pipeline Company, a Delaware corporation ("Tennessee") (Tennessee together with the Company and EPNGC, the "Borrowers"), in connection with the $1,250,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement, dated as of August 16, 1999 (the "Financing Agreement"), among the Company, EPNGC, Tennessee, the banks and other financial institutions from time to time party thereto (each a "Lender", and together the "Lenders"), The Chase Manhattan Bank, as administrative agent (in such capacity, the "Administrative Agent") and as CAF Advance Agent (in such capacity, the "CAF Advance Agent") for the Lenders, Citibank, N.A. and ABN Amro Bank, N.V, as Co-Documentation Agents (in such capacity, the Co-Documentation Agents"), and Bank of America, N.A., as Syndication Agent (in such capacity, the "Syndication Agent"). This opinion is delivered to you pursuant to Section 3.2(b)(iv) of the Financing Agreement. Capitalized terms used herein and not otherwise defined have the meanings assigned such terms in the Financing Agreement. With your permission, all assumptions and statements of reliance herein have been made without any independent investigation or verification on our part except to the extent otherwise expressly stated, and we express no opinion with respect to the subject matter or accuracy of the assumptions or items upon which we have relied. 105 H-2 In connection with the opinions expressed herein, we have examined such documents, records and matters of law as we have deemed necessary for the purposes of this opinion. We have examined, among other documents, the following: (a) An executed copy of the Financing Agreement; and (b) An executed copy of each of the Notes. The documents referred to in items (a) and (b) above are referred to herein collectively as the "Documents." In all such examinations, we have assumed the legal capacity of all natural persons executing documents, the genuineness of all signatures, the authenticity of original and certified documents and the conformity to original or certified copies of all copies submitted to us as conformed or reproduction copies. As to various questions of fact relevant to the opinions expressed herein, we have relied upon, and assume the accuracy of, representations and warranties contained in the Documents and certificates and oral or written statements and other information of or from representatives of the Borrowers and others and assume compliance on the part of all parties to the Documents with their covenants and agreements contained therein. With respect to the opinions expressed in paragraph (a) below, our opinions are limited (x) to our actual knowledge, if any, of the Borrowers' specially regulated business activities and properties based solely upon an officer's certificate in respect of such matters and without any independent investigation or verification on our part and (y) to our review of only those laws and regulations that, in our experience, are normally applicable to transactions of the type contemplated by the Documents. To the extent it may be relevant to the opinions expressed herein, we have assumed that the parties to the Documents have the power to enter into and perform such documents and to consummate the transactions contemplated thereby and that such documents have been duly authorized, executed and delivered by, and, except as set forth in paragraph (b) with respect to the Borrowers, constitute legal, valid and binding obligations of, such parties. Based upon the foregoing, and subject to the limitations, qualifications and assumptions set forth herein, we are of the opinion that: (a) The execution and delivery to the Administrative Agent, the CAF Advance Agent, the Co-Documentation Agents, the Syndication Agent and the Lenders by each Borrower of the Documents to which it is a party and the performance by each Borrower of its obligations thereunder (i) do not require under present law any filing or registration by such Borrower with, or approval or consent to such Borrower of, any governmental agency or authority of the State of New York that has not been made or obtained except those required in the ordinary course of business in connection with the performance by such Borrower of its obligations under certain covenants and warranties contained in the Documents to which it is a party and (ii) do not violate any present law, or present regulation of any governmental agency or authority, of the State of New York applicable to such Borrower or its property. 106 H-3 (b) The Documents to which it is a party constitute legal, valid and binding obligations of each Borrower enforceable against such Borrower in accordance with their respective terms. (c) The borrowings by each Borrower under the Financing Agreement and the applications of the proceeds thereof as provided in the Financing Agreement will not violate Regulation T, U or X of the Board of Governors of the Federal Reserve System. The opinions set forth above are subject to the following qualifications: (A) We express no opinion as to: (i) the validity, binding effect or enforceability (a) of any provision of the Documents relating to indemnification, contribution or exculpation in connection with violations of any securities laws or statutory duties or public policy, or in connection with willful, reckless or criminal acts or gross negligence of the indemnified or exculpated party or the party receiving contribution; or (b) of any provision of any of the Documents relating to exculpation of any party in connection with its own negligence that a court would determine in the circumstances under applicable law to be unfair or insufficiently explicit; (ii) the validity, binding effect or enforceability of (a) any purported waiver, release, variation, disclaimer, consent or other agreement to similar effect (all of the foregoing, collectively, a "Waiver") by the Borrowers under the Documents to the extent limited by provisions of applicable law (including judicial decisions), or to the extent that such a Waiver applies to a right, claim, duty, defense or ground for discharge otherwise existing or occurring as a matter of law (including judicial decisions), except to the extent that such a Waiver is effective under and is not prohibited by or void or invalid under provisions of applicable law (including judicial decisions), (b) any provision of any Document relating to choice of governing law to the extent that the validity, binding effect or enforceability of any such provision is to be determined by any court other than a court of the State of New York or (c) any provision of any Document relating to forum selection to the extent the forum is a federal court; (iii) the enforceability of any provision in the Documents specifying that provisions thereof may be waived only in writing, to the extent that an oral agreement or an implied agreement by trade practice or course of conduct has been created that modifies any provision of the Documents; (iv) the effect of any law of any jurisdiction other than the State of New York wherein the Administrative Agent, the CAF Advance Agent, the Co-Documentation Agents, the Syndication Agent or any Lender may be located or wherein enforcement of any document referred to above may be sought that limits the rates of interest legally chargeable or collectible; and (v) any approval, consent or authorization of the Federal Energy Regulatory Commission or any other United States federal agency or authority needed in connection 107 H-4 with the execution, delivery and performance by any Borrower of the Documents to which it is a party, the consummation of the transactions contemplated thereby and compliance with the terms and conditions thereof. (B) Our opinions above are subject to (i) applicable bankruptcy, insolvency, reorganization, fraudulent transfer, voidable preference, moratorium or similar laws, and related judicial doctrines, from time to time in effect affecting creditors' rights and remedies generally, (ii) general principles of equity (including, without limitation, standards of materiality, good faith, fair dealing and reasonableness, equitable defenses and limits on the availability of equitable remedies), whether such principles are considered in a proceeding at law or in equity and (iii) the qualification that certain other provisions of the Documents may be unenforceable in whole or in part under the laws (including judicial decisions) of the State of New York or the United States of America, but the inclusion of such provisions does not affect the validity as against any Borrower of the Documents to which it is a party, taken as a whole, and the Documents contain adequate provisions for enforcing payment of the obligations governed thereby, subject to the other qualifications contained in this letter. (C) Our opinions as to enforceability are subject to the effect of generally applicable rules of law that: (i) limit the availability of a remedy under certain circumstances when another remedy has been elected; and (ii) may, where less than all of a contract may be unenforceable, limit the enforceability of the balance of the contract to circumstances in which the unenforceable portion is not an essential part of the agreed exchange; and (iii) govern and afford judicial discretion regarding the determination of damages and entitlement to attorneys' fees and other costs. (D) For the purposes of the opinion set forth in paragraph (c) above, we have assumed that (i) none of the Administrative Agent, the CAF Advance Agent, the Co-Documentation Agents, the Syndication Agent or any of the Lenders has or will have the benefit of any agreement or arrangement (excluding the Documents) pursuant to which any Advances are directly or indirectly secured by Margin Stock, (ii) none of the Administrative Agent, the CAF Advance Agent, the Co-Documentation Agents, the Syndication Agent, any of the Lenders or any of their respective affiliates has extended or will extend any other credit to any of the Borrowers directly or indirectly secured by Margin Stock and (iii) none of the Administrative Agent, the CAF Advance Agent, the Co-Documentation Agents and the Syndication Agents or any of the Lenders has relied or will rely upon any Margin Stock as collateral in extending or maintaining any Advances pursuant to the Financing Agreement. (E) For purposes of our opinions above insofar as they relate to the Borrowers, we have assumed that (i) each Borrower is a corporation validly existing in good standing in its jurisdiction of incorporation, has all requisite power and authority, and has obtained all requisite corporate, shareholder, third party and governmental authorizations, consents and approvals, and made all requisite filings and registrations, necessary to execute, deliver and perform the 108 H-5 Documents to which it is a party (except to the extent noted in paragraph (a) above), and that such execution, delivery and performance will not violate or conflict with any law, rule, regulation, order, decree, judgment, instrument or agreement binding upon or applicable to such Borrower or its properties (except to the extent noted in paragraph (a) above), and (ii) the Documents to which each Borrower is a party have been duly executed and delivered by such Borrower. The opinions expressed herein are limited to the federal laws of the United States of America (in the case of the matters covered in paragraph (c) above) and the laws of the State of New York, as currently in effect, except that we express no opinion with respect to laws, rules or regulations of the State of New York, or of any governmental agency or authority thereof, applicable to companies engaged in the gathering, processing, transmission, distribution or marketing of natural gas or other hydrocarbon derivatives or power generation or the generation, transmission, distribution or marketing of electricity, or as to filings, registrations, approvals or consents under or by such laws, rules or regulations. We express no opinion as to the compliance or noncompliance, or the effect of the compliance or noncompliance, of each of the addressees with any state or federal laws or regulations applicable to each of them by reason of their status as or affiliation with a federally insured depository institution. The opinions expressed herein are solely for the benefit of the Administrative Agent, CAF Advance Agent, the Co-Documentation Agents, the Syndication Agent and the Lenders and may not be relied on in any manner or for any purpose by any other person or entity. Very truly yours, JONES, DAY, REAVIS & POGUE By: --------------------------- 109 EXHIBIT I --------- [LETTERHEAD OF PROCESS AGENT] [DATE] To each of the Lenders parties to the Credit Agreement (as defined and referred to below) and to The Chase Manhattan Bank as Administrative Agent and CAF Advance Agent for said Lenders c/o The Chase Manhattan Bank 270 Park Avenue New York, New York 10017 To El Paso Energy Corporation 1001 Louisiana Street Houston, Texas 77002 El Paso Energy Corporation/El Paso Natural Gas Company/Tennessee - ---------------------------------------------------------------- Gas Pipeline Company - -------------------- Gentlemen: Reference is made to that certain $1,250,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement, dated as of August 16, 1999 (said Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, being the "Credit Agreement", the terms defined therein being used herein with the same meaning) among El Paso Energy Corporation (the "Company"), El Paso Natural Gas Company ("EPNGC"), Tennessee Gas Pipeline Company ("Tennessee") (Tennessee, together with the Company and EPNGC, the "Borrowers"), certain banks and other financial institutions from time to time party thereto as Lenders thereunder (the "Lenders"), The Chase Manhattan Bank, as Administrative Agent and CAF Advance Agent (in such capacities, the "Administrative Agent" and the "CAF Advance Agent") for the Lenders, Citibank, N.A. and ABN Amro Bank, N.V., as Co-Documentation Agents, and Bank of America, N.A., as Syndication Agent. Pursuant to Section 9.9(a) of the Credit Agreement each of the Borrowers _________ has appointed the undersigned (with an office on the date hereof at 1633 Broadway, New York, New York 10019) as Process Agent to receive on behalf of such Borrower and its property service of copies of the summons and complaint and any other process which may be served by the 110 I-2 Administrative Agent, the CAF Advance Agent, any Lender or the holder of any Note in any action or proceeding by the Administrative Agent, the CAF Advance Agent, any Lender or the holder of any Note in any New York State or Federal court sitting in New York City in respect of, but only in respect of, any claims or causes of action arising out of or relating to the Credit Agreement and the Notes issued pursuant thereto. The undersigned hereby accepts such appointment as Process Agent and agrees with each of you that (i) the undersigned will not terminate the undersigned's agency as such Process Agent prior to August 26, 2004 (and hereby acknowledges that the undersigned has been paid in full by the Borrower for its services as Process Agent through such date), (ii) the undersigned will maintain an office in New York City through such date and will give the Administrative Agent prompt notice of any change of address of the undersigned, (iii) the undersigned will perform its duties as Process Agent in accordance with Section 9.9(a) of the Credit Agreement and (iv) the undersigned will forward forthwith to the Borrower at its address specified below copies of any summons, complaint and other process which the undersigned receives in connection with its appointment as Process Agent. This acceptance and agreement shall be binding upon the undersigned and all successors of the undersigned. Very truly yours, CT CORPORATION SYSTEM By: ---------------------------------- Title: Address of the Borrower: [Address] 111 EXHIBIT J --------- FORM OF JOINDER AGREEMENT Reference is made to the $1,250,000,000 364-Day Revolving Credit and CAF Advance Facility Agreement, dated as of August 16, 1999 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"; terms defined therein being used herein as therein defined), among El Paso Energy Corporation, El Paso Natural Gas Company, Tennessee Gas Pipeline Company, certain banks and other financial institutions from time to time party thereto, The Chase Manhattan Bank, as Administrative Agent and CAF Advance Agent, Citibank, N.A. and ABN Amro Bank, N.V., as Co-Documentation Agents, and Bank of America, N.A., as Syndication Agent. The undersigned hereby acknowledges that it has received and reviewed a copy (in execution form) of the Credit Agreement, and agrees to: (a) join the Credit Agreement as a Borrower party thereto; (b) be bound by all covenants, agreements and acknowledgments attributable to a Borrower in the Credit Agreement and any Note to which it is a party; and (c) perform all obligations required of it by the Credit Agreement and any Note to which it is a party. The undersigned hereby represents and warrants that the representations and warranties with respect to it contained in, or made or deemed made by it in, Article IV of the Credit Agreement are true and correct on the date hereof. THIS JOINDER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the undersigned has caused this Joinder Agreement to be duly executed and delivered in New York, New York by its proper and duly authorized officer as of this day of , . ---------- ------- ---- [Borrower] By: ------------------------------------ Title: 112 J-2 ACKNOWLEDGED AND AGREED TO: - --------------------------- [EL PASO ENERGY CORPORATION] By: ------------------------- Title: 113 EXHIBIT K --------- FORM OF OPINION OF [ASSOCIATE GENERAL] [SENIOR] COUNSEL OF THE COMPANY (a) [Each of the Company and the Borrowing Subsidiary] (i) is a corporation duly incorporated and existing in good standing under the laws of the jurisdiction of its organization, and (ii) possesses all the corporate powers and all other authorizations and licenses necessary to engage in its business and operations as now conducted, the failure to obtain or maintain which would have a Material Adverse Effect. (b) The execution and delivery by the Company and the Borrowing Subsidiary of the Joinder Agreement and by the Borrowing Subsidiary of the Notes made by it and the performance by the Borrowing Subsidiary of its obligations as a "Borrower" under the Credit Agreement and the Notes made by it are within such corporation's corporate powers and have been duly authorized by all necessary corporate action in respect of or by each of the Company and the Borrowing Subsidiary (as applicable), and do not contravene (i) the Company's or the Borrowing Subsidiary's charter or by-laws, each as amended to date, (ii) any federal law, rule or regulation applicable to the Company or the Borrowing Subsidiary (excluding provisions of federal law expressly referred to in and covered by the opinion of [New York Counsel] delivered to you in connection with the transactions contemplated hereby) or any provision of the General Corporation Law of the State of Delaware applicable to such corporation, or (iii) any contractual restriction binding on or affecting the Company or the Borrowing Subsidiary. The Joinder Agreement has been duly executed and delivered on behalf of the Company and the Borrowing Subsidiary and the Notes made by the Borrowing Subsidiary have been duly executed and delivered on behalf of the Borrowing Subsidiary. (c) No authorization or approval or other action by, and no notice to or filing with, any federal governmental authority or regulatory body (including, without limitation, the FERC) is required for (i) the due execution and delivery by the Company or the Borrowing Subsidiary of the Joinder Agreement, (ii) the performance by the Borrowing Subsidiary of its obligations as a "Borrower" under the Credit Agreement or (iii) the execution, delivery and performance by the Borrowing Subsidiary of the Notes made by it, except those required in the ordinary course of business in connection with the performance by the Company or the Borrowing Subsidiary of its obligations under certain covenants and warranties contained in the Joinder Agreement, the Credit Agreement and the Notes and those which have been obtained and are in full force and effect. (d) To the best of my knowledge, there is no action, suit or proceeding pending or overtly threatened against or involving the Company or any of the Principal 114 K-2 Subsidiaries which, in my reasonable judgment (taking into account the exhaustion of all appeals), would have a material adverse effect upon the consolidated financial condition of the Company and its consolidated Subsidiaries taken as a whole, or which purports to affect the legality, validity, binding effect or enforceability of the Joinder Agreement, the Credit Agreement or the Notes. 115 EXHIBIT L FORM OF OPINION OF NEW YORK COUNSEL TO THE COMPANY (a) The execution and delivery to the Administrative Agent, the CAF Advance Agent, the Co-Documentation Agents, the Syndication Agent and the Lenders by the Company and the Borrowing Subsidiary of the Joinder Agreement and by the Borrowing Subsidiary of the Notes made by it and the performance by the Borrowing Subsidiary of its obligations as a "Borrower" under the Credit Agreement and the Notes made by it (i) do not require under present law any filing or registration by the Company or the Borrowing Subsidiary with, or approval or consent to the Company or the Borrowing Subsidiary of, any governmental agency or authority of the State of New York that has not been made or obtained, except those, if any, required in the ordinary course of business in connection with the performance by the Company or the Borrowing Subsidiary of their respective obligations under certain covenants and warranties contained in the Joinder Agreement, the Credit Agreement and the Notes and (ii) do not violate any present law, or present regulation of any governmental agency or authority, of the State of New York applicable to the Company or the Borrowing Subsidiary or its respective property. (b) The Joinder Agreement, the Credit Agreement and the Notes (as applicable) constitute the legal, valid and binding obligations of each of the Company and the Borrowing Subsidiary enforceable against each of the Company and the Borrowing Subsidiary in accordance with their respective terms. (c) The borrowings by the Borrowing Subsidiary under the Credit Agreement and the applications of the proceeds thereof as provided in the Credit Agreement will not violate Regulation T, U or X of the Board of Governors of the Federal Reserve System. 116 EXHIBIT M FORM OF EXTENSION REQUEST [Date] The Chase Manhattan Bank, as Administrative Agent 270 Park Avenue New York, New York 10017 Attention: Jackie Reid Gentlemen: Reference is made to the $1,250,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement, dated as of August 16, 1999, among the undersigned, El Paso Natural Gas Company, Tennessee Gas Pipeline Company, certain Lenders parties thereto, The Chase Manhattan Bank, as Administrative Agent and CAF Advance Agent, Citibank, N.A. and ABN Amro Bank, N.V., as Co-Documentation Agents, and Bank of America, N.A., as Syndication Agent (as the same may be amended, supplemented or otherwise modified from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. The undersigned hereby represents and warrants that no Event of Default has occurred or is continuing. This is an Extension Request pursuant to Section 2.23 of the Credit Agreement requesting an extension of the Stated Termination Date to [INSERT REQUESTED TERMINATION DATE]. Please transmit a copy of this Extension Request to each of the Lenders. EL PASO ENERGY CORPORATION By: ------------------------- Title: EX-10.O.1 6 AMENDMENT TO EMPLOYMENT AGREEMENT - WILLIAM A WISE 1 EXHIBIT 10.O.1 AMENDMENT TO EMPLOYMENT AGREEMENT THIS AMENDMENT is made and entered into the 25th day of August, 1999, by and between EL PASO ENERGY CORPORATION, a Delaware corporation (the "Company") and WILLIAM A. WISE of Houston, Texas (the "Executive"). WHEREAS, the Company and Executive entered into an Employment Agreement dated July 31, 1992 (the "Employment Agreement"); and WHEREAS, pursuant to an amendment to the Employment Agreement, dated January 29, 1996 (the "January 1996 Amendment"), the Executive agreed to forego payment of his base salary for a period ending on the earlier of February 1, 2001, or the date of a Change in Control; and WHEREAS, the Compensation Committee of the Board of Directors has concluded that, regardless of the occurrence of a Change in Control as a result of the stockholder approval of the merger with Sonat Inc. (the "Merger") and the Executive's waiver to have his base salary reinstated as a result of such Change in Control, the Executive's performance as CEO and the Company's increased size both dictate that payment of a base salary be reinstated on October 1, 1999; and WHEREAS, it is the intended that this Amendment shall terminate the January 1996 Amendment, which shall hereafter be of no force and effect (except with respect to the benefits that may have accrued thereunder during its effectiveness). NOW THEREFORE, in consideration of the premises and mutual covenants contained herein, and for other consideration mutually acknowledged, the Parties agree as follows: -1- 2 1. The Executive's agreement to forego payment of base salary is considered terminated effective as of October 1, 1999. From that date forward, the Executive will be paid his base salary at an annual rate of one million one hundred thousand dollars ($1,100,000). Base salary shall thereafter be subject to periodic review and adjustment by the Compensation Committee. 2. Section 4(b)(i)(A) of the Employment Agreement is amended to read as follows: "Salary, at the rate in effect on the date of termination of employment." 3. This Amendment shall be governed by and construed and interpreted in accordance with the laws of the State of Texas without reference to the principles of conflicts of law thereunder. 4. This Amendment may be executed in counterparts. IN WITNESS WHEREOF, the undersigned have executed this Amendment on the date first written above. EL PASO ENERGY CORPORATION /s/ Ben F. Love ------------------------ Ben F. Love, Chairman Compensation Committee /s/ Joel Richards III ------------------------- Joel Richards III Executive Vice President WILLIAM A. WISE /s/ William A. Wise ------------------------ -2- EX-10.R 7 EXECUTIVE AWARD PLAN 1 EXHIBIT 10.R EXECUTIVE AWARD PLAN OF SONAT INC. (AS AMENDED AND RESTATED AS OF JULY 23, 1998) I. GENERAL 1.1 PURPOSE OF THE PLAN The Executive Award Plan (the "Plan") of Sonat Inc. (the "Company") is intended to advance the best interests of the Company and its subsidiaries by providing key employees with additional incentives through the grant of options ("Options") to purchase shares of Common Stock of the Company ("Common Stock") and through the award of shares of restricted Common Stock ("Restricted Stock"), thereby increasing the personal stake of such employees in the continued success and growth of the Company and encouraging them to remain in the employ of the Company. The Plan was adopted effective May 1, 1981, and has been amended at various times. The provisions of the Plan as hereby amended and restated may, at the discretion of the Committee referred to below, be made available to all grants outstanding on the effective date of this Amendment and Restatement, and all awards granted after such date, except that no such provision shall alter any outstanding grant in a manner unfavorable to the holder thereof without the written consent of the holder. 1.2 ADMINISTRATION OF THE PLAN (A) The Plan shall be administered by the Executive Compensation Committee or other designated committee (the "Committee") of the Board of Directors of the Company (the "Board of Directors") which shall consist of at least three Directors all of whom are not eligible to participate in the Plan and are "disinterested" within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 (the "Exchange Act"). The Committee shall have authority to interpret conclusively the provisions of the Plan, to adopt such rules and regulations for carrying out the Plan as it may deem advisable, to decide conclusively all questions of fact arising in the application of the Plan, and to make all other determinations necessary or advisable for the administration of the Plan. All decisions and acts of the Committee shall be final and binding upon all affected Plan participants. (b) The Committee shall meet once each fiscal year, and at such additional times as it may determine or at the request of the chief executive officer of the Company, to designate the eligible employees, if any, to be granted awards under the Plan and the type and amount of such awards and the time when awards will be granted. All awards granted under the Plan shall be on the terms and subject to the conditions hereinafter provided. 2 1.3 ELIGIBLE PARTICIPANTS Key employees, including officers, of the Company and its subsidiaries, and of partnerships or joint ventures in which the Company and its subsidiaries have a significant ownership interest as determined by the Committee (all of such subsidiaries, partnerships and joint ventures being referred to as "Subsidiaries") shall be eligible to participate in the Plan. Directors who are not employees of the Company or its Subsidiaries shall not be eligible to participate in the Plan. 1.4 AWARDS UNDER THE PLAN Awards under the Plan may be in the form of (i) Options to purchase shares of Common Stock, (ii) Stock Appreciation Rights and Limited Stock Appreciation Rights which may be issued in tandem with such Options, (iii) shares of Restricted Stock, and (iv) Supplemental Payments which may be awarded with respect to Options, Stock Appreciation Rights, Limited Stock Appreciation Rights, and Restricted Stock, or (v) any combination of the foregoing. 1.5 SHARES SUBJECT TO THE PLAN The aggregate number of shares of Common Stock which may be issued with respect to Options or Restricted Stock granted after April 27, 1995 (including Stock Appreciation Rights, Limited Stock Appreciation Rights and Supplemental Payments related thereto) shall not exceed (i) 4,000,000 shares plus (ii) the number of shares previously authorized for use in the Plan which have not been issued or have again become available for grants pursuant to the following paragraph. At no time shall the number of shares issued plus the number of shares subject to outstanding awards under the Plan exceed the number of shares that may be issued under the Plan. Options with respect to more than 250,000 shares of Common Stock shall not be granted to any optionee in any 12-month period. Shares distributed pursuant to the Plan may consist of authorized but unissued shares or treasury shares of the Company, as shall be determined from time to time by the Board of Directors. If any Option under the Plan shall expire, terminate or be canceled (except upon the holder's exercise of a related Stock Appreciation Right or Limited Stock Appreciation Right) for any reason without having been exercised in full, or if any shares of Restricted Stock shall be forfeited to the Company, the unexercised Options and forfeited shares of Restricted Stock shall not count against the above limit and shall again become available for grants under the Plan (regardless of whether the holder of such Options or shares received dividends or other economic benefits with respect to such Options or shares). Shares of Common Stock equal in number to the shares surrendered in payment of the option price, and shares of Common Stock which are withheld in order to satisfy federal, state or local tax liability, shall not count against the above limit and shall again become available for grants under the Plan. Notwithstanding the foregoing, any shares which were authorized for issuance under the Plan as in effect on April 25, 1985 shall not be available for issuance with respect to awards granted after April 24, 1995. 2 3 1.6 OTHER COMPENSATION PROGRAMS The existence and terms of the Plan shall not limit the authority of the Board of Directors in compensating employees of the Company and its subsidiaries in such other forms and amounts, including compensation pursuant to any other plans as may be currently in effect or adopted in the future, as it may determine from time to time. II. STOCK OPTIONS 2.1 TERMS AND CONDITIONS OF OPTIONS Subject to the following provisions, all Options granted under the Plan shall be in such form and shall have such terms and conditions as the Committee, in its discretion, may from time to time determine. (a) Option Price. The option price per share shall not be less than the fair market value of the Common Stock (as determined by the Committee) on the date the Option is granted. (b) Term of Option. The term of an Option shall not exceed ten years from the date of grant, and, notwithstanding any other provision of this Plan, no Option shall be exercised after the expiration of its term. (c) Exercise of Options. Options shall be exercisable at such time or times and subject to such terms and conditions as the Committee shall specify in the Option grant. The Committee shall have discretion to at any time declare all or any portion of the Options held by any optionee to be immediately exercisable. An Option may be exercised in accordance with its terms as to any or all shares purchasable thereunder. (d) Payment for Shares. Payment for shares as to which an Option is exercised shall be made in such manner and at such time or times as shall be provided by the Committee in the Option grant. Payment may be made in cash or in such other manner as the Committee in its discretion may authorize. (e) Nontransferability of Options. No Option or any interest therein shall be transferable by the optionee other than by will or by the laws of descent and distribution. During an optionee's lifetime, all Options shall be exercisable only by such optionee or by the guardian or legal representative of the optionee. (f) Shareholder Rights. The holder of an Option shall, as such, have none of the rights of a shareholder. (g) Termination of Employment. The Committee shall have discretion to specify in the Option grant or an amendment thereof, provisions with respect to the 3 4 period, not extending beyond the term of the Option, during which the Option may be exercised following the optionee's termination of employment. (h) Change of Control. Notwithstanding the exercisability schedule governing any Option, upon the occurrence of a Change of Control (as defined in Section 4.9) all Options outstanding at the time of such Change of Control and held by optionees who are employees of the Company or its Subsidiaries at the time of the Change of Control shall become immediately exercisable and, unless the optionee agrees otherwise in writing, shall remain exercisable for a period of three years following the optionee's termination of employment or such longer period as may be provided in the Option, but in no event beyond the term of the Option established pursuant to Section 2.1(b). 2.2 STOCK APPRECIATION RIGHTS IN TANDEM WITH OPTIONS (a) The Committee may, either at the time of grant of an Option or at any time during the term of the Option, grant Stock Appreciation Rights or Limited Stock Appreciation Rights with respect to all or any portion of the shares of Common Stock covered by such Option. A Stock Appreciation Right may be exercised at any time the Option to which it relates is then exercisable. A Limited Stock Appreciation Right may be exercised only within 60 days after the occurrence of a Change of Control. A Stock Appreciation Right or a Limited Stock Appreciation Right may only be exercised to the extent the Option to which it relates is exercisable, and shall be subject to the conditions applicable to such Option. When a Stock Appreciation Right or Limited Stock Appreciation Right is exercised, the Option to which it relates shall cease to be exercisable to the extent of the number of shares with respect to which the Stock Appreciation Right or Limited Stock Appreciation Right is exercised. Similarly, when an Option is exercised, the Stock Appreciation Rights or Limited Stock Appreciation Rights relating to the shares covered by such Option exercise shall terminate. Any Stock Appreciation Right which is outstanding on the last day of the term of the related Option (as determined pursuant to Section 2.1(b)) shall be automatically exercised on such date without any action by the optionee. (b) Upon exercise of a Stock Appreciation Right, the holder shall receive, for each share with respect to which the Stock Appreciation Right is exercised, an amount (the "Appreciation") equal to the difference between the option price per share of the Option to which the Stock Appreciation Right relates and the fair market value (as determined by the Committee) of a share of Common Stock on the date of exercise of the Stock Appreciation Right. The Appreciation shall be payable in cash, Common Stock, or a combination of both, at the option of the Committee, and shall be paid within 30 days of the exercise of the Stock Appreciation Right. (c) Notwithstanding the foregoing, if a Stock Appreciation Right is exercised within 60 days after the occurrence of a Change of Control, in addition to the Appreciation and any Supplemental Payment (as defined in Section 2.3) to which the holder is entitled, the holder shall receive (in cash, in Common Stock, or a combination of both, at the discretion of the Committee) (1) the amount by which the greater of 4 5 (a) the highest market price per share of Common Stock during the 60-day period preceding exercise of the Stock Appreciation Right or (b) the highest price per share of Common Stock (or the cash- equivalent thereof as determined by the Board of Directors) paid by an acquiring person during the 60-day period preceding a Change of Control, exceeds the fair market value of a share of Common Stock on the date of exercise of the Stock Appreciation Right, plus (2) if the holder is entitled to a Supplemental Payment, an additional payment, calculated under the same formula as used for calculating such holder's Supplemental Payment, with respect to the amount referred to in clause (1) of this sentence. (d) Upon exercise of a Limited Stock Appreciation Right, the holder shall receive, for each share with respect to which the Limited Stock Appreciation Right is exercised, the sum of (i) the Appreciation, as defined in Section 2.2(b); (ii) any Supplemental Payment (as defined in Section 2.3) to which the holder is entitled with respect to the Appreciation; (iii) the amount by which the greater of (a) the highest market price per share of Common Stock during the 60-day period preceding exercise of the Limited Stock Appreciation Right or (b) the highest price per share of Common Stock (or the cash-equivalent thereof as determined by the Board of Directors) paid by an acquiring person during the 60-day period preceding a Change of Control, exceeds the fair market value of a share of Common Stock on the date of exercise of the Limited Stock Appreciation Right; and (iv) if the holder is entitled to a Supplemental Payment, an additional payment, calculated under the same formula as used for calculating such holder's Supplemental Payment, with respect to the amount referred to in clause (iii) of this sentence. All of such amounts shall be paid within 30 days of the exercise of the Limited Stock Appreciation Right, and shall be paid in cash, in Common Stock, or a combination of both, at the discretion of the Committee. 2.3 SUPPLEMENTAL PAYMENT ON EXERCISE OF OPTIONS OR STOCK APPRECIATION RIGHTS The Committee, either at the time of grant or at the time of exercise of any Option or related Stock Appreciation Right or Limited Stock Appreciation Right, may provide for a supplemental payment (the "Supplemental Payment") by the Company to the optionee with respect to the exercise of any Option or related Stock Appreciation Right or Limited Stock Appreciation Right. The Supplemental Payment shall be in the amount specified by the Committee, which shall not exceed, but may be equal to, the amount necessary to pay the federal income tax payable with respect to both exercise of the Option or related Stock Appreciation Right or Limited Stock Appreciation Right and receipt of the Supplemental Payment, assuming the optionee is taxed at the maximum effective federal income tax rate applicable thereto. The Supplemental Payment shall be paid in cash, Common Stock, or a combination of both, at the option of the Committee. The Supplemental Payment shall be paid within 30 days of the date of exercise of an Option or Stock Appreciation Right or Limited Stock Appreciation Right (or, if later, within 30 days of the date on which income is recognized for federal income tax purposes with respect to such exercise). 5 6 2.4 STATUTORY OPTIONS Subject to the limitations on Option terms set forth in Section 2.1, the Committee shall have the authority to grant (i) incentive stock options within the meaning of Section 422 of the Code and (ii) Options containing such terms and conditions as shall be required to qualify such Options for preferential tax treatment under the Code as in effect at the time of such grant. Options granted pursuant to this Section 2.4 may contain such other terms and conditions permitted by Article II of this Plan as the Committee, in its discretion, may from time to time determine (including, without limitation, provision for Stock Appreciation Rights, Limited Stock Appreciation Rights and Supplemental Payments), to the extent that such terms and conditions do not cause the Options to lose their preferential tax treatment. To the extent the Code and Regulations promulgated thereunder require a plan to contain specified provisions in order to qualify options for preferential tax treatment, such provisions shall be deemed to be stated in this Plan. III. RESTRICTED STOCK 3.1 TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS Subject to the following provisions, all awards of Restricted Stock shall be in such form and shall have such terms and conditions as the Committee, in its discretion, may from time to time determine: (a) The Restricted Stock award shall specify the number of shares of Restricted Stock to be awarded, the price, if any, to be paid by the recipient of the Restricted Stock, and the date or dates on which the Restricted Stock will vest. The vesting of Restricted Stock may be conditioned upon the completion of a specified period of service with the Company or its Subsidiaries, upon the attainment of specified performance goals, or upon such other criteria as the Committee may determine in its sole discretion. (b) Stock certificates representing the Restricted Stock granted to an employee shall be registered in the employee's name. Such certificates shall either be held by the Company on behalf of the employee, or delivered to the employee bearing a legend to restrict transfer of the certificate until the Restricted Stock has vested, as determined by the Committee. The Committee shall determine whether the employee shall have the right to vote and/or receive dividends on the Restricted Stock before it has vested. No share of Restricted Stock may be sold, transferred, assigned, or pledged by the employee until such share has vested in accordance with the terms of the Restricted Stock award. In the event of an employee's termination of employment before all of his Restricted Stock has vested, or in the event other conditions to the vesting of Restricted Stock have not been satisfied prior to any deadline for the satisfaction of such conditions set forth in the award, the shares of Restricted Stock which have not vested shall be forfeited and any purchase price paid by the employee shall be 6 7 returned to the employee. At the time Restricted Stock vests (and, if the employee has been issued legended certificates of Restricted Stock, upon the return of such certificates to the Company), a certificate for such vested shares shall be delivered to the employee (or the beneficiary designated by the employee in the event of death), free of all restrictions. (c) Notwithstanding the vesting conditions set forth in the Restricted Stock award, (i) the Committee may in its discretion accelerate the vesting of Restricted Stock at any time, and (ii) all shares of Restricted Stock shall vest upon a Change of Control of the Company. 3.2 SUPPLEMENTAL PAYMENT ON VESTING OF RESTRICTED STOCK The Committee, either at the time of grant or at the time of vesting of Restricted Stock, may provide for a Supplemental Payment by the Company to the employee in an amount specified by the Committee which shall not exceed, but may be equal to, the amount necessary to pay the federal income tax payable with respect to both the vesting of the Restricted Stock and receipt of the Supplemental Payment, assuming the employee is taxed at the maximum effective federal income tax rate applicable thereto and has not elected to recognize income with respect to the Restricted Stock before the date such Restricted Stock vests. The Supplemental Payment shall be paid within 30 days of each date that Restricted Stock vests. The Supplemental Payment shall be paid in cash, Common Stock, or a combination of both, at the discretion of the Committee. IV. ADDITIONAL PROVISIONS 4.1 GENERAL RESTRICTIONS Each award under the Plan shall be subject to the requirement that, if at any time the Committee shall determine that (i) the listing, registration or qualification of the shares of Common Stock subject or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any government regulatory body, or (iii) an agreement by the recipient of an award with respect to the disposition of shares of Common Stock is necessary or desirable (in connection with any requirement or interpretation of any federal or state securities law, rule or regulation) as a condition of, or in connection with, the granting of such award or the issuance, purchase or delivery of shares of Common Stock thereunder, such award may not be consummated in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Committee. 7 8 4.2 ADJUSTMENTS FOR CHANGES IN CAPITALIZATION In the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares, rights offer, liquidation, dissolution, merger, consolidation, spin-off, sale of assets, payment of an extraordinary cash dividend, or any other change in or affecting the corporate structure or capitalization of the Company, the Committee shall make appropriate adjustment in the number and kind of shares authorized by the Plan (including any limitations on individual awards), in the number, price or kind of shares covered by the awards and in any outstanding awards under the Plan. 4.3 AMENDMENTS (a) The Board of Directors may amend the Plan from time to time. No such amendment shall require approval by the stockholders unless stockholder approval is required by applicable law or stock exchange requirements. (b) The Committee shall have the authority to amend any grant to include any provision which, at the time of such amendment, is authorized under the terms of the Plan; provided, however, that (1) no outstanding award may be revoked or altered in a manner unfavorable to the holder without the written consent of the holder, and (2) no outstanding Option may be altered in a manner that reduces the option price (except as provided in Section 4.2). 4.4 CANCELLATION OF AWARDS Any award granted under the Plan may be canceled at any time with the consent of the holder and a new award may be granted to such holder in lieu thereof, which award may, in the discretion of the Committee, be on more favorable terms and conditions than the canceled award; provided, however, that any Option that is granted in lieu of a canceled Option shall have an option price at least equal to the option price of the canceled Option. 4.5 WITHHOLDING (a) Whenever the Company proposes or is required to issue or transfer shares of Common Stock under the Plan, the Company shall have the right to require the holder to remit to the Company an amount sufficient to satisfy any federal, state or local withholding tax liability prior to the delivery of any certificate for such shares. Whenever under the Plan payments are to be made in cash, such payments shall be net of an amount sufficient to satisfy any federal, state or local withholding tax liability. (b) An employee entitled to receive Common Stock under the Plan who has not received a cash Supplemental Payment may elect to have the federal, state and local tax liability (or a specified portion thereof) with respect to such Common Stock satisfied by having the Company withhold from the shares otherwise deliverable to the employee shares of Common Stock having a value equal to the amount of the tax liability to be satisfied with respect to the Common Stock. An election to have all or a 8 9 portion of the tax liability satisfied using Common Stock shall comply with such requirements as may be imposed by the Committee and shall be subject to the disapproval of the Committee (if expressed prior to the making of such election). 4.6 NON-ASSIGNABILITY Except as expressly provided in the Plan, no award under the Plan shall be assignable or transferable by the holder thereof except by will or by the laws of descent and distribution. During the life of the holder, awards under the Plan shall be exercisable only by such holder or by the guardian or legal representative of such holder. 4.7 NON-UNIFORM DETERMINATIONS Determinations by the Committee under the Plan (including, without limitation, determinations of the persons to receive awards; the form, amount and timing of such awards; the terms and provisions of such awards and the agreements evidencing same; and provisions with respect to termination of employment) need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, awards under the Plan, whether or not such persons are similarly situated. 4.8 NO GUARANTEE OF EMPLOYMENT The grant of an award under the Plan shall not constitute an assurance of continued employment for any period. 4.9 CHANGE OF CONTROL A "Change of Control" shall mean: (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (1) the then outstanding shares of common stock of the Company (the "Outstanding Common Stock") or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Voting Securities"); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (D) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (iii); or (ii) Individuals who, as of December 1, 1995, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming 9 10 a director subsequent to such date whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors; or (iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Common Stock and Outstanding Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Common Stock and Outstanding Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board of Directors, providing for such Business Combination. 4.10 DURATION AND TERMINATION (a) The Plan shall be of unlimited duration. Notwithstanding the foregoing, no incentive stock option (within the meaning of Section 422 of the Code) shall be granted under the Plan after April 26, 2005, but awards granted prior to such date may extend beyond such date, and the terms of this Plan shall continue to apply to all awards granted hereunder. (b) The Board of Directors may discontinue or terminate the Plan at any time. Such action shall not impair any of the rights of any holder of any award outstanding on the date of the Plan's discontinuance or termination without the holder's written consent. 10 11 This document incorporates into a single document the provisions of the Plan as amended as of July 23, 1998. IN WITNESS WHEREOF, this document has been executed as of July 23, 1998. SONAT INC. by: /s/ RONALD L. KUEHN, JR. ------------------------------------------- Ronald L. Kuehn, Jr. Chairman of the Board, President and Chief Executive Officer 11 12 AMENDMENT TO EXECUTIVE AWARD PLAN AND CERTAIN STOCK OPTIONS GRANTED THEREUNDER The Executive Award Plan of Sonat Inc., as amended and restated as of July 23, 1998 (the "Plan"), and each Affected Option (as defined below) that has been granted thereunder, are each hereby amended as set forth below, effective as May 27, 1999. 1. A new Section 2.2(e) is hereby added to the Plan, reading in its entirety as follows: (e) (i) Notwithstanding the foregoing, the provisions of this Section 2.2(e) shall apply to the exercise of any Stock Appreciation Right or Limited Stock Appreciation Right in connection with the merger (the "Merger") between the Company and El Paso Energy Corporation ("El Paso") pursuant to the Second Amended and Restated Agreement and Plan of Merger, as amended from time to time (the "Merger Agreement") dated as of March 3, 1999 by and between the Company and El Paso. (ii) All Limited Stock Appreciation Rights shall be exercisable only at the time of the Merger and shall, if not so exercised, terminate immediately after the Merger. In addition, the amounts payable pursuant to Section 2.2(d) in connection with such exercise shall be determined by (x) excluding the amount described in clause (iii) thereof, (y) including an additional amount equal to the value (if any) of (I) the right of the holder to receive a payment based upon the pricing mechanism set forth in said clause (iii) and (II) the right of the holder to exercise the Limited Stock Appreciation Right during the 60-day period following the Merger, which rights (the "Rights") are eliminated pursuant to this Section 2.2(e), and (z) determining the amount described in clause (iv) thereof by reference to the value of the Rights determined in accordance with (y) hereof rather than by reference to the amount referred to in clause (iii) of Section 2.2(d). The value of the Rights shall be determined by the Committee based upon the advice of Merrill Lynch, Pierce, Fenner & Smith Incorporated and Donaldson, Lufkin & Jenrette Securities Corporation. (iii) All Stock Appreciation Rights shall be exercisable at the time of the Merger and, if so exercised, the amounts payable pursuant to Section 2.2(c) in connection with such exercise shall be determined by: (A) excluding the amount described in clauses (a) and (b) thereof, (B) including an additional amount determined in the same manner as set forth in clause (y) of Section 2.2(e)(ii) hereof with respect to Limited Stock Appreciation Rights; and (C) determining the amount described in clause (2) thereof by reference to the value of the Rights determined in accordance with clause (B) hereof rather than by reference to the amount 12 13 described in clauses (a) and (b) thereof. If a Stock Appreciation Right is exercised at any time other than at the time of the Merger, Section 2.2(c) shall not apply to such exercise. (iv) The consideration to be paid pursuant to Sections 2.2(c) and (d) as modified hereby (including the Supplemental Payment (if any)) shall be paid in the form of common stock of El Paso, based upon the value of such common stock on the day of the Merger. 2. Each outstanding Option granted under the Plan that includes a Stock Appreciation Right or a Limited Stock Appreciation Right (or both) (an "Affected Option") is hereby amended to incorporate the provisions of new Section 2.2(e) of the Plan set forth above. 3. It is acknowledged and agreed that as a result of the amendments set forth above: (i) with respect to an Affected Option with an associated Limited Stock Appreciation Right, to the extent that the holder of such Affected Option does not exercise the associated Limited Stock Appreciation Right at the time of the Merger, the Affected Option will be convened into an option to acquire common stock of El Paso pursuant to Section 2.7 of the Merger Agreement, which new option will not include a Limited Stock Appreciation Right; and (ii) with respect to any Affected Option with an associated Stock Appreciation Right, to the extent that the holder of such Affected Option does not exercise the associated Stock Appreciation Right at the time of the Merger, the Affected Option will be converted into an option to acquire common stock of El Paso pursuant to Section 2.7 of the Merger Agreement, which new option will include an associated Stock Appreciation Right to which Section 2.2(c) of the Plan does not apply. SONAT INC. By: /s/ Beverely T. Krannich ------------------------------------ Consented, agreed to and accepted: EL PASO ENERGY CORPORATION By: /s/ Britton White Jr. ----------------------------------- Britton White Jr., Esq. Date: October 25, 1999 EX-27 8 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED BALANCE SHEETS. 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 92 0 1,531 0 51 2,161 7,305 0 11,943 2,123 3,720 325 300 381 1,713 11,943 0 5,567 0 5,253 0 0 230 323 73 126 0 0 (13) 113 0.97 0.95 Not separately identified in the Consolidated Financial Statements or accompanying notes thereto.

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