-----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, Gl+mJ+6Ag/REdzHsJ5d8gJVIx9FvOFcD+v8UYg4VArVJ0+kZqy6LIdiRH0f2gXrd 9uXQSrXompFdPxLHYm6Jpw== 0000950129-01-502455.txt : 20010813 0000950129-01-502455.hdr.sgml : 20010813 ACCESSION NUMBER: 0000950129-01-502455 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EL PASO TENNESSEE PIPELINE CO CENTRAL INDEX KEY: 0000823549 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION [4922] IRS NUMBER: 760233548 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09864 FILM NUMBER: 1703727 BUSINESS ADDRESS: STREET 1: EL PASO BLDG STREET 2: 1001 LOUISIANA STREET CITY: HOUSTON STATE: TX ZIP: 77095 BUSINESS PHONE: 7134202600 MAIL ADDRESS: STREET 1: EL PASO BLDG. STREET 2: 1001 LOUISIANA STREET CITY: HOUSTON STATE: TX ZIP: 77095 FORMER COMPANY: FORMER CONFORMED NAME: TENNECO HOLDINGS INC DATE OF NAME CHANGE: 19871229 FORMER COMPANY: FORMER CONFORMED NAME: TENNECO INC /DE/ DATE OF NAME CHANGE: 19940728 10-Q 1 h88260e10-q.txt EL PASO TENNESSEE PIPELINE CO. - 6/30/01 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 JUNE 30, 2001 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 1-9864 --------------------- EL PASO TENNESSEE PIPELINE CO. (Exact Name of Registrant as Specified in its Charter) DELAWARE 76-0233548 (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification No.) EL PASO BUILDING 1001 LOUISIANA STREET HOUSTON, TEXAS 77002 (Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (713) 420-2600 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 $.01 per share. Shares outstanding on August 6, 2001: 1,971 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS EL PASO TENNESSEE PIPELINE CO. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (IN MILLIONS) (UNAUDITED)
QUARTER ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ---------------- ----------------- 2001 2000 2001 2000 ------ ------ ------- ------ Operating revenues...................................... $8,050 $3,980 $18,162 $6,847 ------ ------ ------- ------ Operating expenses Cost of natural gas and other products................ 7,568 3,541 17,059 6,036 Operation and maintenance............................. 179 129 372 262 Merger-related costs and asset impairments............ 43 -- 72 -- Depreciation, depletion, and amortization............. 52 55 126 113 Taxes, other than income taxes........................ 18 16 42 35 ------ ------ ------- ------ 7,860 3,741 17,671 6,446 ------ ------ ------- ------ Operating income........................................ 190 239 491 401 ------ ------ ------- ------ Other income Earnings from unconsolidated affiliates............... 36 21 57 18 Other, net............................................ 50 11 74 56 ------ ------ ------- ------ 86 32 131 74 ------ ------ ------- ------ Income before interest, income taxes, and extraordinary items................................................. 276 271 622 475 ------ ------ ------- ------ Non-affiliated interest and debt expense................ 37 33 78 72 Affiliated interest expense, net........................ 44 24 109 35 Income taxes............................................ 75 74 147 120 ------ ------ ------- ------ 156 131 334 227 ------ ------ ------- ------ Income before extraordinary items....................... 120 140 288 248 Extraordinary items, net of income taxes................ 38 -- 38 77 ------ ------ ------- ------ Net income.............................................. $ 158 $ 140 $ 326 $ 325 ====== ====== ======= ======
See accompanying notes. 1 3 EL PASO TENNESSEE PIPELINE CO. CONDENSED CONSOLIDATED BALANCE SHEETS (IN MILLIONS, EXCEPT SHARE AMOUNTS) (UNAUDITED)
JUNE 30, DECEMBER 31, 2001 2000 -------- ------------ ASSETS Current assets Cash and cash equivalents................................. $ 193 $ 179 Accounts and notes receivable, net Customer............................................... 3,214 2,828 Affiliates............................................. 1,020 194 Other.................................................. 308 262 Inventory................................................. 59 84 Assets from price risk management activities.............. 2,139 4,283 Deferred charges.......................................... 226 423 Other..................................................... 291 160 ------- ------- Total current assets.............................. 7,450 8,413 ------- ------- Property, plant, and equipment, at cost Pipelines................................................. 2,604 2,554 Power facilities.......................................... 506 351 Gathering and processing systems.......................... 2,473 2,543 Other..................................................... 101 96 ------- ------- 5,684 5,544 Less accumulated depreciation, depletion, and amortization.............................................. 958 843 ------- ------- 4,726 4,701 Additional acquisition cost assigned to utility plant, net....................................................... 2,281 2,287 ------- ------- Total property, plant, and equipment, net......... 7,007 6,988 ------- ------- Other assets Investments in unconsolidated affiliates.................. 2,064 2,070 Assets from price risk management activities.............. 1,942 1,638 Other..................................................... 864 356 ------- ------- 4,870 4,064 ------- ------- Total assets...................................... $19,327 $19,465 ======= =======
See accompanying notes. 2 4 EL PASO TENNESSEE PIPELINE CO. CONDENSED CONSOLIDATED BALANCE SHEETS -- (CONTINUED) (IN MILLIONS, EXCEPT SHARE AMOUNTS) (UNAUDITED)
JUNE 30, DECEMBER 31, 2001 2000 -------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts and notes payable Trade.................................................. $ 4,180 $ 3,156 Affiliates............................................. 3,126 3,760 Other.................................................. 234 179 Short-term borrowings (including current maturities of long-term debt)........................................ 213 356 Liabilities from price risk management activities......... 1,408 2,880 Other..................................................... 672 701 ------- ------- Total current liabilities......................... 9,833 11,032 ------- ------- Long-term debt, less current maturities..................... 1,576 1,845 ------- ------- Other Liabilities from price risk management activities......... 1,519 898 Deferred income taxes..................................... 1,758 1,647 Other..................................................... 1,028 838 ------- ------- 4,305 3,383 ------- ------- Commitments and contingencies Minority interests.......................................... 179 51 ------- ------- Stockholders' equity Preferred stock, Series A, no par; authorized 20,000,000 shares; issued 6,000,000 shares; stated at liquidation value.................................................. 300 300 Common stock, par value $0.01 per share; authorized 100,000 shares; issued 1,971 shares.................... -- -- Additional paid-in capital................................ 1,964 1,962 Retained earnings......................................... 1,263 949 Accumulated other comprehensive income.................... (93) (57) ------- ------- Total stockholders' equity........................ 3,434 3,154 ------- ------- Total liabilities and stockholders' equity........ $19,327 $19,465 ======= =======
See accompanying notes. 3 5 EL PASO TENNESSEE PIPELINE CO. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN MILLIONS) (UNAUDITED)
SIX MONTHS ENDED JUNE 30, ------------------ 2001 2000 ------- ----- Cash flows from operating activities Net income................................................ $ 326 $ 325 Adjustments to reconcile net income to net cash from operating activities Depreciation, depletion, and amortization.............. 126 113 Deferred income tax expense............................ 160 45 Extraordinary items.................................... (59) (128) Net gain on the sale of assets......................... -- (23) Undistributed earnings in unconsolidated affiliates.... (10) 3 Non-cash portion of merger-related costs and asset impairments........................................... 38 -- Other.................................................. (19) -- Working capital changes, net of non-cash transactions..... 2,776 (606) Other..................................................... (146) 15 ------- ----- Net cash provided by (used in) operating activities....................................... 3,192 (256) ------- ----- Cash flows from investing activities Purchases of property, plant, and equipment............... (252) (219) Net proceeds from the sale of assets...................... 113 418 Additions to investments.................................. (219) (501) Proceeds from the sale of investments..................... 5 89 Other..................................................... 13 24 ------- ----- Net cash used in investing activities............. (340) (189) ------- ----- Cash flows from financing activities Net borrowings (repayments) of commercial paper........... (47) (514) Payments to retire long-term debt......................... (364) (1) Net change in other affiliated advances payable........... (2,406) 831 Increase in notes payable to unconsolidated affiliates.... -- 67 Decrease in notes payable to unconsolidated affiliates.... (9) (82) Dividends paid............................................ (12) (12) Capital contributions..................................... -- 160 ------- ----- Net cash provided by (used in) financing activities....................................... (2,838) 449 ------- ----- Increase in cash and cash equivalents....................... 14 4 Cash and cash equivalents Beginning of period....................................... 179 32 ------- ----- End of period............................................. $ 193 $ 36 ======= =====
See accompanying notes. 4 6 EL PASO TENNESSEE PIPELINE COMPANY CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (IN MILLIONS) (UNAUDITED)
QUARTER ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------------- ----------------- COMPREHENSIVE INCOME 2001 2000 2001 2000 -------------------- ----- ----- ------- ------ Net income.................................................. $158 $140 $ 326 $325 Foreign currency translation adjustments.................. (12) (4) (20) (2) Unrealized net gains from cash flow hedging activity Cumulative-effect transition adjustment (net of tax of $66)................................................. -- -- (154) -- Reclassification of initial cumulative-effect transition adjustment at original value (net of tax of $5 and $66)....................................... 12 -- 128 -- Additional reclassification adjustments for changes in initial value to settlement date (net of tax of $66 and $66)............................................. 98 -- 98 -- Unrealized mark-to-market gains arising during period (net of tax of $84 and $61).......................... 195 -- (88) -- ---- ---- ----- ---- Comprehensive income........................................ $451 $136 $ 290 $323 ==== ==== ===== ====
ACCUMULATED OTHER COMPREHENSIVE INCOME 2001 2000 -------------------------------------- ----- ---- Beginning balances as of December 31, 2000 and 1999......... $ (57) $(29) Foreign currency translation adjustments.................. (20) (1) Unrealized net gains (losses) from cash flow hedging activity Cumulative-effect transition adjustment, net of taxes................................................. (154) -- Reclassification of initial cumulative-effect transition adjustment at original value, net of taxes................................................. 128 -- Additional reclassification adjustments for changes in initial value to settlement date, net of taxes........ 98 -- Unrealized mark-to-market losses arising during period, net of taxes.......................................... (88) -- ----- ---- Balance as of June 30, ..................................... $ (93) $(30) ===== ====
See accompanying notes. 5 7 EL PASO TENNESSEE PIPELINE CO. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION Our 2000 Annual Report on Form 10-K includes a summary of our significant accounting policies and other disclosures. You should read it in conjunction with this Quarterly Report on Form 10-Q. The financial statements as of June 30, 2001, and for the quarters and six months ended June 30, 2001 and 2000, are unaudited. The balance sheet as of December 31, 2000, is derived from the audited balance sheet included in our Annual Report on Form 10-K. These financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission and do not include all disclosures required by accounting principles generally accepted in the United States. In our opinion, we have made all adjustments, all of which are of a normal, recurring nature (except for merger-related costs and asset impairments as discussed in Note 2), to fairly present our interim period results. Information for interim periods may not necessarily indicate the results of operations for the entire year due to the seasonal nature of our businesses. The prior period information also includes reclassifications which were made to conform to the current period presentation. These reclassifications have no effect on our reported net income or stockholders' equity. Our accounting policies are consistent with those discussed in our Form 10-K, except as discussed below. You should refer to the Form 10-K for a further discussion of those policies. Accounting for Price Risk Management Activities Our business activities expose us to a variety of risks, including commodity price risk, interest rate risk, and foreign currency risk. Our corporate risk management group identifies risks associated with our businesses and determines which risks we want to manage and which types of instruments we should use to manage those risks. With the adoption of Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivatives and Hedging Activities, we now record all derivative instruments on the balance sheet at their fair value. These instruments consist of two types, those derivatives entered into and held to mitigate, or hedge a particular risk, and those that are entered into and held for purposes other than risk mitigation, such as those in our trading activities. Those instruments that do not qualify as hedges are recorded at their fair value with changes in fair value reported in current period earnings. For those instruments entered into to hedge risk, and which qualify as hedges under SFAS No. 133, the appropriate accounting treatment depends on each instrument's intended use and how it is designated. Derivative instruments that qualify as hedges may be designated as: - hedges of the fair value of a recognized asset or liability or of an unrecognized firm commitment (fair value hedges); - hedges of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedges); - foreign currency fair value or cash flow hedges (foreign currency hedges); or - hedges of a net investment in a foreign operation (net investment hedges). In addition to its designation, a hedge must be effective. To be effective, the value of the derivative or its resulting cash flows must substantially offset changes in the value or cash flows of the item being hedged. If it is determined that the hedge is no longer effective, hedge accounting is discontinued prospectively. Hedge accounting is also discontinued when: - the derivative instrument expires or is sold, terminated, or exercised; - it is no longer probable that the forecasted transaction will occur; 6 8 - the hedged firm commitment no longer meets the definition of a firm commitment; or - management determines that the designation of the derivative instrument as a hedge is no longer appropriate. At the time we enter into a hedge, we formally document relationships between the hedging instrument and the hedged items. This documentation includes: - the nature of the risk being hedged; - our risk management objectives and strategies for undertaking the hedging activity; - a description of the hedged item and the derivative instrument used to hedge the item; - a description of how effectiveness is tested at the inception of the hedge; and - how effectiveness will be tested on an ongoing basis. When hedge accounting is discontinued, the derivative instrument continues to be carried on the balance sheet at its fair value. However, any further changes in its fair value are recognized in current period earnings. Accounting for the item that was being hedged differs depending on how the hedge was originally designated. Our accounting policies for derivative instruments used in our business that qualify as hedges are discussed below:
IMPACT OF THE DISCONTINUATION OF HEDGE TYPE OF HEDGE ACCOUNTING TREATMENT ACCOUNTING ON ITEM BEING HEDGED - ------------- -------------------- -------------------------------------- Fair value Changes in the fair value of the When hedge accounting is discontinued, derivative and changes in the fair the hedged asset or liability is no value of the related asset or longer adjusted for changes in fair liability attributable to the value. When hedge accounting is hedged risk are recorded in current discontinued because the hedged item period earnings, generally as a no longer meets the definition of a component of revenue in the case of firm commitment, any asset or a sale or as a component of the liability that was recorded related to cost of products in the case of a the firm commitment is removed from purchase. the balance sheet and recognized in current period earnings. Cash flow Changes in the fair value of the When hedge accounting is discontinued derivative are recorded in other because it is unlikely that the comprehensive income for the forecasted transaction will occur, portion of the change in value of gains or losses that were accumulated the derivative that is effective. in other comprehensive income related The ineffective portion of the to the forecasted transaction will be derivative is recorded in earnings recognized immediately in earnings. in the current period. When a cash flow hedge is Classification in the income de-designated, but the forecasted statement of the ineffective transaction is still probable, the portion is based on the income accumulated amounts remain in other classification of the item being comprehensive income until the hedged. forecasted transaction occurs. At that time, the accumulated amounts are recognized in earnings.
Because our business activities encompass all aspects of the wholesale energy marketplace, including the gathering, processing, treating, transmission, and the purchase and sale of highly liquid energy commodities, our normal business contracts may qualify as derivative instruments under the provisions of SFAS No. 133. As a result, we evaluate each of our commercial contracts to see if derivative accounting is appropriate. Contracts that meet the criteria of a derivative are then evaluated to determine whether they qualify as a "normal 7 9 purchase" or a "normal sale" as those terms are defined in SFAS No. 133. If they qualify as normal purchases and normal sales, we may exclude them from SFAS No. 133 treatment. We also evaluate our contracts for "embedded" derivatives. Embedded derivatives have terms that are not clearly and closely related to the terms of the contract in which they are included. If embedded derivatives exist, they are accounted for separately from the host contract as derivatives, with changes in their fair value recorded in current period earnings. 2. MERGER-RELATED COSTS AND ASSET IMPAIRMENTS During the quarter and six months ended June 30, 2001, we incurred merger-related costs associated with El Paso Corporation's merger with The Coastal Corporation and asset impairments as follows:
QUARTER SIX MONTHS ENDED ENDED JUNE 30, JUNE 30, -------- ---------- 2001 2001 -------- ---------- (IN MILLIONS) Merger-related costs........................................ $ 5 $34 Asset impairments........................................... 38 38 --- --- $43 $72 === ===
Merger-Related Costs Our merger-related costs consisted of the following:
QUARTER SIX MONTHS ENDED ENDED JUNE 30, JUNE 30, -------- ---------- 2001 2001 -------- ---------- (IN MILLIONS) Employee severance, retention, and transition costs......... $ 1 $ 5 Make-whole commitments...................................... 4 25 Other....................................................... -- 4 --- --- $ 5 $34 === ===
Employee severance, retention, and transition costs include direct payments to, and benefit costs for, severed employees and early retirees that occurred as a result of El Paso's merger-related workforce reduction and consolidation. Make-whole commitments relate to a series of payments we will make to El Paso Energy Partners L.P. in connection with the Federal Trade Commission's (FTC) ordered divestiture of interests in assets owned by the partnership. Asset Impairments During the quarter ended June 30, 2001, we incurred an asset impairment charge of $38 million resulting from Merchant Energy's impairment of its East Asia Power investment in the Philippines. This write down was a result of weak economic conditions causing a permanent decline in the value of our investment. We continue to hold this investment. 3. EXTRAORDINARY ITEMS As a result of El Paso's merger with Coastal, we were required by the FTC to sell our Midwestern Gas Transmission system. We completed this sale in April 2001. Net proceeds were approximately $95 million, and we recognized an extraordinary gain of $38 million, net of income taxes of $21 million. During the first quarter of 2000, we sold East Tennessee Natural Gas Company to comply with an FTC order related to El Paso's merger with Sonat Inc. Net proceeds from the sale were approximately $386 million, and we recognized an extraordinary gain of $77 million, net of income taxes of $51 million. 8 10 4. ACCOUNTING FOR HEDGING ACTIVITIES On January 1, 2001, we adopted the provisions of SFAS No. 133, and recorded a cumulative-effect adjustment of $154 million, net of income taxes, in accumulated other comprehensive income to recognize the fair value of all derivatives designated as cash flow hedging instruments. The majority of the initial charge related to hedging forecasted sales of natural gas for 2001 and 2002. During the quarter and six months ended June 30, 2001, $12 million and $128 million, net of income taxes, of this initial transition adjustment was reclassified to earnings as a result of hedged sales and purchases during the period, and an additional $3 million of this adjustment will be reclassified by the end of 2001. A majority of our commodity sales and purchases are at spot market or forward market prices. We use futures, forward contracts, and swaps to limit our exposure to fluctuations in the commodity markets and allow for a fixed cash flow stream from these activities. As of June 30, 2001, the value of cash flow hedges included in accumulated other comprehensive income was an unrealized loss of $16 million, net of income taxes. Of this amount, we estimate that $1 million will be reclassified from accumulated other comprehensive income over the next 12 months. Reclassifications occur upon physical delivery of the hedged commodity and the corresponding expiration of the hedge. The maximum term of our cash flow hedges is 1 year. Our other comprehensive income includes a loss of $27 million representing our proportionate share of amounts recorded in other comprehensive income by our unconsolidated affiliates that use derivatives as cash flow hedges. The maximum term of these cash flow hedges is 2 years, excluding hedges relating to interest rates on variable debt. For the quarter and six months ended June 30, 2001, we recognized net gains of $12 million and $13 million, net of income taxes, related to the ineffective portion of all cash flow hedges. 5. INVENTORY Our inventory consisted of the following:
JUNE 30, DECEMBER 31, 2001 2000 -------- ------------ (IN MILLIONS) Natural gas in storage...................................... $ 24 $ 58 Materials and supplies, and other........................... 35 26 ---- ---- Total............................................. $ 59 $ 84 ==== ====
6. DEBT AND OTHER CREDIT FACILITIES At June 30, 2001, our weighted average interest rate on short-term borrowings was 4.6%, and at December 31, 2000, it was 7.6%. We had the following short-term borrowings, including current maturities of long-term debt:
JUNE 30, DECEMBER 31, 2001 2000 -------- ------------ (IN MILLIONS) Notes payable to unconsolidated affiliates.................. $ -- $ 9 Commercial paper............................................ 168 215 Current maturities of long-term debt........................ 45 132 ---- ---- $213 $356 ==== ====
Acquisition of PG&E's Texas Midstream Operations In connection with our acquisition of PG&E's Texas Midstream operations in December 2000, we assumed $527 million in debt. In February 2001, we redeemed $293 million of the assumed debt. 9 11 Revolving Credit Facility In June 2001, El Paso replaced its $2 billion, 364-day revolving credit facility with a renewable $3 billion, 364-day revolving credit and competitive advance facility. Tennessee Gas Pipeline (TGP) is a designated borrower under this facility and, as such, is liable for any amounts outstanding under this facility. The interest rate varies and was LIBOR plus 50 basis points at June 30, 2001. No amounts were outstanding under this facility at June 30, 2001. Other In addition to the items discussed above, during the six months ended June 30, 2001, we retired long-term debt with the aggregate principal amount of approximately $71 million. 7. COMMITMENTS AND CONTINGENCIES Legal Proceedings EPME and several of our affiliates were named defendants in eight purported class action or citizen lawsuits and one individual lawsuit filed in 2000 and 2001 in California state courts (a list of the California cases is included in Part II, Item 1, Legal Proceedings). These cases contend generally that our entities acted alone or in combination with other unrelated companies to create artificially high prices for natural gas in California, and that EPME's acquisition of capacity on the El Paso Natural Gas Company (EPNG) pipeline system, an affiliated pipeline system, was utilized to manipulate the market for natural gas in California. We removed each of these cases to federal court and have requested that they be consolidated for all pretrial activities. In June 2001, the Federal Judicial Panel on Multi-District Litigation granted our consolidation motion relating to four of the lawsuits, sending them to the U.S. District Court in Nevada. In July 2001, the remaining five cases were conditionally consolidated to the Nevada District Court. The Nevada court has scheduled oral arguments in September 2001 on the issue of whether some or all of these cases should be remanded to the California State Court system for all further proceedings. In August 2000, the Liquidating Trustee in the bankruptcy of Power Corporation of America (PCA) sued El Paso Merchant Energy (EPME), and several other power traders, in the U.S. Bankruptcy Court in Connecticut claiming EPME improperly cancelled its contracts with PCA during the summer of 1998. The trustee alleged we breached contracts damaging PCA in the amount of $120 million. In May 2001, we agreed to settle this matter for a cash payment of $3 million. In a related matter, PCA appealed the Federal Energy Regulatory Commission's (FERC) ruling that power marketers such as EPME did not have to give 60 days notice to cancel its power contracts under the Federal Power Act. PCA has appealed this decision to the United States Court of Appeals, which ruled in FERC's favor. In February 1998, the United States and the state of Texas filed in a U.S. District Court a Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) cost recovery action against 14 companies, including us and some of our current and former affiliates, related to the Sikes Disposal Pits Superfund Site located in Harris County, Texas. The suit claims that the United States and the state of Texas have spent over $125 million in remediating Sikes and seeks to recover that amount plus interest from the defendants to the suit. The Environmental Protection Agency (EPA) has recently indicated that it may seek an additional amount up to $30 million, plus interest, in indirect costs from the defendants under a new cost allocation methodology. Defendants are challenging this allocation policy. Although an investigation relating to Sikes is ongoing, we believe that the amount of material, if any, disposed at Sikes by our former affiliates 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. Settlement discussions are ongoing. In 1997, a number of our subsidiaries and affiliates were named defendants in actions brought by Jack Grynberg on behalf of the U.S. Government under the False Claims Act. Generally, these complaints allege 10 12 an industry-wide conspiracy to under report the heating value as well as the volumes of the natural gas produced from federal and Native American lands, which deprived the U.S. Government of royalties. These matters have been consolidated for pretrial purposes (In re: Natural Gas Royalties Qui Tam Litigation, U.S. District Court for the District of Wyoming). In May 2001, the court denied the defendants' motions to dismiss. A number of our subsidiaries and affiliates were named defendants in Quinque Operating Company, et al v. Gas Pipelines and Their Predecessors, et al, filed in 1999 in the District Court of Stevens County, Kansas. This class action complaint alleges that the defendants mismeasured natural gas volumes and heating content of natural gas on non-federal and non-Native American lands. The Quinque complaint was transferred to the same court handling the Grynberg complaint and has now been sent back to Kansas State Court for further proceedings. 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 and disposed of polychlorinated biphenyls (PCBs) without a permit. The agency sought an injunction against future discharges, an order to remediate or remove PCBs, and a civil penalty. TGP entered into agreed orders with the agency to resolve many of the issues raised in the original allegations and received water discharge permits from the agency for its Kentucky compressor stations. The relevant Kentucky compressor stations are being characterized and remediated under a 1994 consent order with the EPA. We are also a named defendant in numerous lawsuits and a named party in numerous governmental proceedings arising in the ordinary course of our business. While the outcome of the matters discussed above cannot be predicted with certainty, we do not expect the ultimate resolution of these matters will have a material adverse effect on our financial position, operating results, or cash flows. Environmental We are subject to extensive federal, state, and local laws and regulations governing environmental quality and pollution control. These laws and regulations require us 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 June 30, 2001, we had a reserve of approximately $116 million for expected remediation costs. In addition, we expect to make capital expenditures for environmental matters of approximately $103 million in the aggregate for the years 2001 through 2006. These expenditures primarily relate to compliance with clean air regulations. Since 1988, TGP has been engaged in an internal project to identify and deal with the presence of PCBs and other substances, including those on the EPA List of Hazardous Substances, at compressor stations and other facilities it operates. 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 ensure that its efforts meet regulatory requirements. In May 1995, following negotiations with its customers, TGP filed a Stipulation and Agreement (the Environmental Stipulation) with the Federal Energy Regulatory Commission (FERC) that established a mechanism for recovering a substantial portion of the environmental costs identified in its internal project. The Environmental Stipulation was effective July 1, 1995, and all amounts have been collected from customers. Refunds may be required to the extent actual eligible expenditures are less than amounts collected. TGP is a party in proceedings involving federal and state authorities regarding the past use of a lubricant containing PCBs in its starting air systems. TGP executed a consent order in 1994 with the EPA governing the remediation of the relevant 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. 11 13 We have been designated and have received notice that we could be designated, or have been asked for information to determine whether we could be designated, as a Potentially Responsible Party (PRP) with respect to eight active sites under CERCLA or state equivalents. We have sought to resolve our liability as a PRP at these CERCLA sites, as appropriate, through indemnification by third parties and/or settlements which provide for payment of our allocable share of remediation costs. As of June 30, 2001, we have estimated our share of the remediation costs at these sites to be between approximately $1 million and $2 million and have provided reserves that we believe are adequate for such costs. Since the cleanup costs are estimates and are subject to revision as more information becomes available about the extent of remediation required, and because in some cases we have asserted a defense to any liability, our estimates could change. Moreover, liability under the federal CERCLA statute is joint and several, meaning that we could be required to pay in excess of our pro rata share of remediation costs. Our understanding of the financial strength of other PRPs has been considered, where appropriate, in the determination of our estimated liabilities. We presently believe that the costs associated with these CERCLA sites will not have a material adverse effect on our financial position, operating results, or cash flows. It is possible that new information or future developments could require us to reassess our potential exposure related to environmental matters. We 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 and regulations and claims for damages to property, employees, other persons and the environment resulting from our current or past operations, could result in substantial costs and liabilities in the future. As this information becomes available, or other relevant developments occur, we will adjust our accrual amounts accordingly. While there are still uncertainties relating to the ultimate costs we may incur, based upon our evaluation and experience to date, we believe the recorded reserves are adequate. For a further discussion of specific environmental matters, see Legal Proceedings above. Rates and Regulatory Matters In April 2000, the California Public Utilities Commission (CPUC) filed a complaint with FERC alleging that EPNG's sale of approximately 1.2 billion cubic feet per day of California capacity to EPME was anticompetitive and an abuse of the affiliate relationship under FERC's policies. In August 2000, the CPUC filed a motion requesting that the contract between EPNG and EPME be terminated. Other parties in the proceedings have requested that the original complaint be set for hearing and that EPME pay back any profits it has earned under the contract. In March 2001, FERC established a hearing, before an administrative law judge, to address the issue of whether EPNG and/or EPME had market power and, if so, had exercised it. The hearing on the anticompetitive issue concluded in May 2001. In June 2001, FERC issued an order granting the request of the CPUC and others to allow the administrative law judge to take evidence on the affiliate abuse issue. The hearing for the purpose of taking evidence on this issue concluded on August 6, 2001, with final briefs due by September 9, 2001. We expect the administrative law judge to issue a decision in the fourth quarter 2001. In June 2001, the Western Australia regulators issued a draft rate decision at lower than expected levels for the Dampier-to-Bunbury pipeline owned by EPIC Energy Australia Trust (EPIC), in which we have a 33 percent ownership interest. EPIC's management is currently analyzing the impact of the draft rate decision on its current and anticipated future operating results, the results of which could impact our investment. While we cannot predict with certainty the final outcome or the timing of the resolution of all of our rates and regulatory matters, we believe the ultimate resolution of these issues will not have a material adverse effect on our financial position, results of operations, or cash flows. 12 14 8. SEGMENT INFORMATION We segregate our business activities into three distinct operating segments: Pipelines, Merchant Energy, and Field Services. These segments are strategic business units that provide a variety of energy products and services. They are managed separately as each business unit requires different technology and marketing strategies. We measure segment performance using earnings before interest expense and income taxes (EBIT). The following are our results as of and for the periods ended June 30:
QUARTER ENDED JUNE 30, 2001 ---------------------------------------------------- MERCHANT FIELD PIPELINES ENERGY SERVICES OTHER(1) TOTAL --------- -------- -------- -------- ------- (IN MILLIONS) Revenues from external customers............... $ 151 $ 7,813 $ 85 $ 1 $ 8,050 Intersegment revenues.......................... 19 9 61 (89) -- Merger-related costs and asset impairments..... -- 39 4 -- 43 Operating income............................... 65 92 25 8 190 EBIT........................................... 72 176 20 8 276 Segment assets................................. 4,996 10,485 2,928 918 19,327
QUARTER ENDED JUNE 30, 2000 ---------------------------------------------------- MERCHANT FIELD PIPELINES ENERGY SERVICES OTHER(1) TOTAL --------- -------- -------- -------- ------- (IN MILLIONS) Revenues from external customers............... $ 172 $ 3,674 $ 134 $ -- $ 3,980 Intersegment revenues.......................... 18 2 16 (36) -- Operating income (loss)........................ 80 136 24 (1) 239 EBIT........................................... 85 164 25 (3) 271 Segment assets................................. 4,872 6,704 1,116 262 12,954
SIX MONTHS ENDED JUNE 30, 2001 ---------------------------------------------------- MERCHANT FIELD PIPELINES ENERGY SERVICES OTHER(1) TOTAL --------- -------- -------- -------- ------- (IN MILLIONS) Revenues from external customers............... $ 350 $17,399 $ 412 $ 1 $18,162 Intersegment revenues.......................... 39 30 138 (207) -- Merger-related costs and asset impairments..... 1 39 32 -- 72 Operating income............................... 176 283 23 9 491 EBIT........................................... 185 407 21 9 622 Segment assets................................. 4,996 10,485 2,928 918 19,327
SIX MONTHS ENDED JUNE 30, 2000 ---------------------------------------------------- MERCHANT FIELD PIPELINES ENERGY SERVICES OTHER(1) TOTAL --------- -------- -------- -------- ------- (IN MILLIONS) Revenues from external customers............... $ 368 $ 6,232 $ 246 $ 1 $ 6,847 Intersegment revenues.......................... 35 9 31 (75) -- Operating income (loss)........................ 174 186 46 (5) 401 EBIT........................................... 185 247 50 (7) 475 Segment assets................................. 4,872 6,704 1,116 262 12,954
- --------------- (1) Includes Corporate, eliminations, and other non-operating segment activities. 13 15 9. INVESTMENTS IN UNCONSOLIDATED AFFILIATES We hold investments in various affiliates which we account for using the equity method of accounting. Summarized financial information for our proportionate share of these investments is as follows:
QUARTER ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ---------------- ---------------- 2001 2000 2001 2000 ----- ----- ----- ----- (IN MILLIONS) (IN MILLIONS) Operating results data Revenues and other income................. $ 208 $ 199 $ 448 $ 345 Costs and expenses........................ (164) (154) (354) (305) Income from continuing operations......... 44 45 94 40 Net income................................ 36 21 57 18
10. TRANSACTIONS WITH RELATED PARTIES We participate in El Paso's cash management program which matches short-term cash excesses and requirements of participating affiliates, thus minimizing total borrowing from outside sources. We had borrowed $1,777 million at June 30, 2001, at a market rate of interest which was 4.2% at June 30, 2001. At December 31, 2000, we had borrowed $3,691 million. At June 30, 2001, we had accounts receivable from other related parties of $1,020 million and $194 million at December 31, 2000. In addition, we had accounts payable to other related parties of $1,349 at June 30, 2001, versus $69 million at December 31, 2000. These balances were incurred in the normal course of business. 11. NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED Business Combinations In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141, Business Combinations. This statement requires that all transactions that fit the definition of a business combination be accounted for using the purchase method and prohibits the use of the pooling of interests method for all business combinations initiated after June 30, 2001. This statement also establishes specific criteria for the recognition of intangible assets separately from goodwill and requires unallocated negative goodwill to be written off immediately as an extraordinary item. This standard will have an impact on any business combination we undertake in the future. We are currently evaluating the effects of this pronouncement on our historical financial statements. Goodwill and Other Intangible Assets In July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible Assets. This statement requires that goodwill no longer be amortized but intermittently tested for impairment at least on an annual basis. Other intangible assets are to be amortized over their useful life and reviewed for impairment in accordance with the provisions of SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of. An intangible asset with an indefinite useful life can no longer be amortized until its useful life becomes determinable. This statement has various effective dates, the most significant of which is January 1, 2002. We are currently evaluating the effects of this pronouncement. Accounting for Asset Retirement Obligations In July 2001, the FASB approved for issuance SFAS No. 143, Accounting for Asset Retirement Obligations. This statement requires companies to record a liability relating to the retirement and removal of assets used in their business. The liability is discounted to the present value, and the related asset value is increased by the amount of the resulting liability. Over the life of the asset, the liability will be accreted to its future value and eventually extinguished when the asset is taken out of service. The provisions of this statement are effective for fiscal years beginning after June 15, 2002. We are currently evaluating the effects of this pronouncement. 14 16 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(1) The information contained in Item 2 updates, and you should read it in conjunction with, information disclosed in Part II, Items 7, 7A, and 8, in our Annual Report on Form 10-K for the year ended December 31, 2000, in addition to the financial statements and notes presented in Item 1, Financial Statements, of this Quarterly Report on Form 10-Q. RESULTS OF OPERATIONS For the quarter ended June 30, 2001, we had net income of $158 million versus $140 million for the quarter ended June 30, 2000. The 2001 results included merger-related costs and asset impairments totaling $43 million, or $26 million after taxes. In addition, we recorded extraordinary gains totaling $38 million, net of income taxes, as a result of FTC ordered sales of our Midwestern Gas Transmission system. Net income, excluding the effects of these charges, and extraordinary items, would have been $146 million in 2001 versus $140 million in 2000, or an increase of 4 percent. For the six months ended June 30, 2001, we had net income of $326 million versus $325 million for the six months ended June 30, 2000. The 2001 results included merger-related costs and asset impairments totaling $72 million, or $48 million after taxes. In addition, we recorded extraordinary gains totaling $38 million, net of income taxes, as a result of FTC ordered sales of our Midwestern Gas Transmission system. For the six months ended June 30, 2000, we recorded extraordinary gains on FTC ordered sales of our East Tennessee Natural Gas Company totaling $77 million, net of income taxes. Net income, excluding the after-tax effects of these charges, and extraordinary items, would have been $336 million in 2001 versus $248 million in 2000, or an increase of 35 percent. SEGMENT RESULTS Our business activities are segregated into three segments: Pipelines, Merchant Energy, and Field Services. These segments are strategic business units that offer a variety of different energy products and services and each requires different technology and marketing strategies. Operating revenues and expenses by segment include intersegment revenues and expenses which are eliminated in consolidation. Because changes in energy commodity prices have a similar impact on both our operating revenues and cost of products sold from period to period, we believe that gross margin (revenue less cost of sales) provides a more accurate and meaningful basis for analyzing operating results for the trading portion of Merchant Energy and the Field Services segment. For a further discussion of our individual segments see Item 1, Financial Statements, Note 8. The segment results presented below include merger-related costs and asset impairments as discussed above:
QUARTER ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------------- ---------------- 2001 2000 2001 2000 ---- ---- ----- ----- (IN MILLIONS) EARNINGS BEFORE INTEREST EXPENSE AND INCOME TAXES Pipelines............................................... $ 72 $ 85 $185 $185 Merchant Energy......................................... 176 164 407 247 Field Services.......................................... 20 25 21 50 ---- ---- ---- ---- Segment total......................................... 268 274 613 482 Corporate and other, net................................ 8 (3) 9 (7) ---- ---- ---- ---- Consolidated EBIT..................................... $276 $271 $622 $475 ==== ==== ==== ====
- --------------- (1) Below is a list of terms that are common to our industry and used throughout our Management's Discussion and Analysis: Btu = British thermal unit BBtu/d = billion British thermal units per day BBtue/d = billion British thermal unit equivalents per day MMBtu = million British thermal units MMWh = thousand megawatt hours
15 17 PIPELINES Our Pipelines segment operates our interstate pipeline businesses. Each pipeline system operates under a separate tariff that governs its operations and rates. Operating results for our pipeline systems have generally been stable because the majority of the revenues are based on fixed reservation charges. As a result, we expect changes in this aspect of our business to be primarily driven by regulatory actions and contractual events. Commodity or throughput-based revenues account for a smaller portion of our operating results. These revenues vary from period to period, and system to system, and are impacted by factors such as weather, operating efficiencies, competition from other pipelines, and fluctuations in natural gas prices. Results of operations of the Pipelines segment were as follows for the periods ended June 30:
QUARTER ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ---------------- ---------------- 2001 2000 2001 2000 ------ ------ ------ ------ (IN MILLIONS, EXCEPT VOLUME AMOUNTS) Operating revenues............................ $ 170 $ 190 $ 389 $ 403 Operating expenses............................ (105) (110) (213) (229) Other income.................................. 7 5 9 11 ------ ------ ------ ------ EBIT........................................ $ 72 $ 85 $ 185 $ 185 ====== ====== ====== ====== Throughput volumes (BBtu/d)(1)................ 4,111 4,027 4,589 4,447 ====== ====== ====== ======
- --------------- (1) Throughput volumes exclude those relating to pipeline systems sold in connection with our Coastal and Sonat mergers including the Midwestern Gas Transmission and East Tennessee Natural Gas systems. Second Quarter 2001 Compared to Second Quarter 2000 Operating revenues for the quarter ended June 30, 2001, were $20 million lower than the same period in 2000. The decrease was due to lower 2001 revenues resulting from contract remarketing during 2000 and lower rates on throughput in 2001 as a result of a higher proportion of short versus long hauls compared to 2000. Also contributing to the decrease were contract quantity reductions and cancellations on TGP's pipeline by customers of East Tennessee Natural Gas Company resulting from the FTC's order to El Paso to sell its East Tennessee system in the first quarter of 2000, and the impact of the sale of the Midwestern Gas Transmission system in April 2001. Partially offsetting the decrease was the impact of higher prices on sales of excess natural gas in 2001. Operating expenses for the quarter ended June 30, 2001, were $5 million lower than the same period in 2000. The decrease was due to lower depreciation expenses from the retirement of assets, reduced operating and depreciation expenses due to the sale of Midwestern, and lower corporate allocations and operating expenses as a result of cost savings following El Paso's merger with Coastal in January 2001. Six Months Ended 2001 Compared to Six Months Ended 2000 Operating revenues for the six months ended June 30, 2001, were $14 million lower than the same period in 2000. The decrease was due to lower 2001 revenues resulting from contract remarketing during 2000 and lower rates on throughput in 2001 as a result of a higher proportion of short versus long hauls compared to 2000. Also contributing to the decrease was the sale of East Tennessee, including contract quantity reductions or cancellations on TGP's pipeline by customers of East Tennessee resulting from the FTC's order to El Paso to sell East Tennessee and the impact of the sale of Midwestern. Partially offsetting the decrease was the impact of higher prices on sales of excess natural gas. Operating expenses for the six months ended June 30, 2001, were $16 million lower than the same period in 2000. The decrease was due to lower project development costs, lower depreciation expenses resulting from the retirement of assets, reduced operating and depreciation expenses from the sales of Midwestern and East Tennessee, and lower corporate allocations and operating expenses as a result of cost savings following El Paso's merger with Coastal. 16 18 MERCHANT ENERGY Merchant Energy is involved in a wide range of activities in the wholesale energy marketplace, including trading and risk management, asset ownership, and financial services. Each market served by Merchant Energy is highly competitive and is influenced directly or indirectly by energy market economics. Merchant Energy's trading and risk management activities provide energy trading and energy management solutions for its customers and affiliates involving primarily natural gas and power. The segment maintains a substantial trading portfolio that manages its risk across multiple commodities and over seasonally fluctuating energy demands. Merchant Energy's asset ownership activities include a 20 percent ownership interest in Chaparral Investors, L.L.C., an entity established to acquire, hold, and manage domestic power generation assets. During the six months ended June 30, 2001, Merchant Energy earned $74 million in fee-based revenues from Chaparral, and was reimbursed $10 million for operating expenses. For the six months ended June 30, 2000, fee-based revenues were $40 million, and expense reimbursements were $10 million. In the financial services area, Merchant Energy owns EnCap Investments and Enerplus Global Energy Management, Inc., and conducts other energy financing activities. EnCap manages three separate oil and natural gas investment funds in the U.S., and serves as an investment advisor to one fund in Europe. EnCap also holds investments in emerging energy companies, and earns a return from these investments. In 2000, Merchant Energy acquired Enerplus, a Canadian investment management company, through which it conducts fund management activities similar to EnCap, but in Canada. Below are Merchant Energy's operating results and an analysis of these results for the periods ended June 30:
QUARTER ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------- ------------------- 2001 2000 2001 2000 -------- ------- -------- ------- (IN MILLIONS, EXCEPT VOLUME AMOUNTS) Trading gross margin...................... $ 143 $ 141 $ 346 $ 191 Operating and other revenues.............. 71 49 165 101 Operating expenses........................ (122) (54) (228) (106) Other income.............................. 84 28 124 61 -------- ------- -------- ------- EBIT................................. $ 176 $ 164 $ 407 $ 247 ======== ======= ======== =======
Volumes Physical Natural gas (BBtue/d)................ 9,187 6,081 10,324 5,818 Power (MMWh)......................... 44,538 22,412 79,930 46,148 Financial settlements (BBtue/d)......... 120,929 72,705 145,077 82,144
Second Quarter 2001 Compared to Second Quarter 2000 Trading gross margin consists of revenues from commodity trading and origination activities less the cost of commodities sold. For the quarter ended June 30, 2001, these trading gross margins were $2 million higher than the same period in 2000. Higher deal origination activities during the second quarter of 2001 were partially offset by the impact of lower 2001 power price volatility and reserves related to our activities in California during the second quarter of 2001. In October 2000, Coastal, our affiliate, terminated their Engage joint venture with WestCoast Energy, Inc. In the transaction, they assumed the U.S. portion of Engage and WestCoast assumed the Canadian operations. As a result, they began consolidating these U.S. operations and conducting trading activities. In February 2001, Coastal transferred these contracts, which included Engage's marketing contracts and other 17 19 assets, to El Paso Merchant Energy, our subsidiary in exchange for 22 percent of the shares of El Paso Merchant Energy. These shares had an estimated fair value of approximately $135 million. Merchant Energy is a provider of power and natural gas to the state of California. During the latter half of 2000 and continuing into 2001, California experienced sharp increases in natural gas prices and wholesale power prices due to energy shortages resulting from a combination of unusually warm summer weather followed by high winter demand, low gas storage levels, lower hydroelectric power generation, maintenance downtime of significant generation facilities, and price caps that discouraged power movement from other nearby states into California. The increase in power prices caused by the imbalance of natural gas and power supply and demand coupled with electricity price caps imposed on rates allowed to be charged to California electricity customers has resulted in large cash deficits of the two major California utilities, Southern California Edison and Pacific Gas and Electric. As a result, both utilities have defaulted on payments to creditors and have accumulated substantial under-collections from customers. This resulted in their credit ratings being downgraded in 2001 from above investment grade to below investment grade, and in April 2001, Pacific Gas & Electric filed for bankruptcy. Both utilities have filed for emergency rate increases with the CPUC and are working with the state authorities to restore the companies' financial viability. We have historically been one of the largest suppliers of energy to California, and we are actively participating with all parties in California to be a part of the long-term, stable solution to California's energy needs. We have established reserves that we believe are sufficient to cover our exposure to these issues. As a result, we do not believe, based on information known to date, these matters will have a material impact on our operating results. Our investee, Chaparral, has ownership interests in 11 power plants in the state of California. As of June 30, 2001, customers of these facilities had only partially paid for power generated. This, coupled with Pacific Gas and Electric's bankruptcy declaration, has resulted in an event of default under the terms of each facility's loan agreement. Operations of these plants have been reduced, and each facility continues to take necessary actions to enforce the terms of its power purchase agreement. Management of Chaparral has indicated that it believes existing reserves against potential uncollectible accounts are adequate. We do not believe, based on information known to date, that these matters will have a material impact on our operating results. However, our management fee from Chaparral is based on the value of its assets. As a result, if the value of these power plants is permanently reduced, it could have a similar effect on our management fee in future years. Operating and other revenues consist of revenues from consolidated international power generation facilities and revenues from the financial services and asset management businesses of Merchant Energy. For the quarter ended June 30, 2001, operating revenues were $22 million higher than the same period in 2000. The increase resulted from higher management fees from Chaparral and the acquisition and consolidation of the CEBU power project in the Philippines during the first quarter of 2001. Operating expenses for the quarter ended June 30, 2001, were $68 million higher than the same period in 2000. The increase was due to the write-down of our investment in the East Asia power project in the Philippines due to weak economic conditions which caused a permanent decline in the value of that investment and higher professional fees and salaries resulting from the expansion of our operations in Europe, Asia, South America and in our liquefied natural gas business. Also contributing to the increase were higher operating expenses from the consolidation of the CEBU power project. 18 20 Other income for the quarter ended June 30, 2001, was $56 million higher than the same period in 2000. The increase resulted from agency and marketing fees received in the second quarter of 2001 for a Brazilian power transaction, as well as increased equity earnings on unconsolidated power project investments. Six Months Ended 2001 Compared to Six Months Ended 2000 Trading gross margin for the six months ended June 30, 2001, was $155 million higher than the same period in 2000. The increase was primarily due to higher margins from natural gas trading activities in the first six months of 2001 resulting from increased trading volumes and price volatility. Partially offsetting these increases were lower deal origination activities in the first half of 2001 and 2001 reserves for our activities in California. Operating and other revenues for the six months ended June 30, 2001, were $64 million higher than the same period in 2000. The increase was a result of higher management fees from Chaparral, the acquisition and consolidation of the CEBU power project in the Philippines and revenues from Enerplus which was acquired in August 2000. Operating expenses for the six months ended June 30, 2001, were $122 million higher than the same period in 2000. The increase was due to the write-down of our investment in the East Asia power project in the Philippines and higher professional fees and salaries resulting from the expansion of our operations in Europe, Asia, South America and in our liquefied natural gas business. Also contributing to the increase were higher operating expenses from the consolidation of the CEBU power project. Other income for the six months ended June 30, 2001, was $63 million higher than the same period in 2000. The increase was a result of a marketing and agency fee on a Brazilian power transaction in the second quarter of 2001, as well as increased equity earnings on unconsolidated power project investments. FIELD SERVICES Field Services provides a variety of services for the midstream component of our operations, including gathering and treating of natural gas, processing and fractionation of natural gas, natural gas liquids, and natural gas derivative products, such as ethane, propane, and butane. Field Services attempts to balance its earnings from its activities through a combination of fixed fee-based and market-based services. Our gathering and treating operations earn margins substantially from fixed fee-based services; however, some of these operations earn margins from market-based rates. Revenues for these commodity rate services are the product of the market price, usually related to the monthly natural gas price index, and the volume gathered. Processing and fractionation operations earn a margin based on fixed-fee contracts, percentage-of-proceeds contracts, and make-whole contracts. Percentage-of-proceeds contracts allow us to retain a percentage of the product as a fee for processing or fractionation service. Make-whole contracts allow us to retain the extracted liquid products and return to the producer a Btu equivalent amount of natural gas. Under our percentage-of-proceeds contracts and make-whole contracts, Field Services may have more sensitivity to price changes during periods when natural gas and natural gas liquids prices are volatile. 19 21 Field Services' operating results and an analysis of these results are as follows for each of the periods ended June 30:
QUARTER ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------ ------------------ 2001 2000 2001 2000 ------- ------- ------- ------- (IN MILLIONS, EXCEPT VOLUMES AND PRICES) Gathering, treating, and processing margin...... $ 100 $ 61 $ 209 $ 121 Operating expenses.............................. (75) (37) (186) (75) Other income (loss)............................. (5) 1 (2) 4 ------ ------ ------ ------ EBIT.......................................... $ 20 $ 25 $ 21 $ 50 ====== ====== ====== ====== Volumes and prices Gathering and treating Volumes (BBtu/d)........................... 5,709 2,945 5,626 2,994 ====== ====== ====== ====== Prices ($/MMBtu)........................... $ 0.12 $ 0.16 $ 0.13 $ 0.16 ====== ====== ====== ====== Processing Volumes (inlet BBtu/d)..................... 2,495 1,119 2,224 1,055 ====== ====== ====== ====== Prices ($/MMBtu)........................... $ 0.16 $ 0.19 $ 0.18 $ 0.18 ====== ====== ====== ======
Second Quarter 2001 Compared to Second Quarter 2000 Total gross margin for the quarter ended June 30, 2001, was $39 million higher than the same period in 2000. The increase was a result of higher gathering and treating margins, which increased approximately 35 percent, primarily due to higher volumes as a result of our acquisition of PG&E's Texas Midstream operations in December 2000. Processing margins during the second quarter of 2001 were also higher, almost tripling those levels during the same period in 2000, as a result of contributions from the processing operations acquired from PG&E and higher natural gas and natural gas liquids prices in the San Juan Basin. Lower average rates of gathering and treating and processing in 2001 compared to 2000 were due to the different mix of assets resulting from the acquisition of PG&E. Operating expenses for the quarter ended June 30, 2001, were $38 million higher than the same period in 2000. The increase was a result of higher operating costs and tax and depreciation expenses from the addition of PG&E's Texas Midstream operations, and merger-related costs arising from commitments made to Energy Partners related to FTC ordered sales of assets owned by the partnership. Six Months Ended 2001 Compared to Six Months Ended 2000 Total gross margin for the six months ended June 30, 2001, was $88 million higher than the same period in 2000. The increase was a result of higher gathering and treating margins, which increased approximately 49 percent, primarily due to higher San Juan gathering rates, along with higher volumes as a result of our acquisition of PG&E's Texas Midstream operations. Processing margins in 2001 were also higher, increasing 115 percent over 2000, as a result of contributions from the processing operations acquired from PG&E and higher natural gas and natural gas liquids prices in the San Juan Basin. Lower average rates of gathering and treating and processing in 2001 compared to 2000 were due to the different mix of assets resulting from the acquisition of PG&E. Operating expense for the six months ended June 30, 2001, were $111 million higher than the same period in 2000. The increase was a result of higher operating costs and tax and depreciation expenses from the addition of PG&E's Texas Midstream operations, and merger-related costs arising from commitments made related to FTC ordered sales of assets owned by Energy Partners. 20 22 NON-AFFILIATED INTEREST AND DEBT EXPENSE Non-affiliated interest and debt expense for the quarter and six months ended June 30, 2001, was $4 million and $6 million higher than the same periods in 2000 primarily due to long-term debt assumed by Field Services in relation to its acquisition of PG&E's Texas Midstream operations in December 2000 and decreased capitalized interest related to Merchant Energy's completion of the West Georgia power facility in June 2000. AFFILIATED INTEREST EXPENSE, NET Affiliated interest expense, net for the quarter and six months ended June 30, 2001, was $20 million and $74 million higher than the same periods in 2000 due to an increase in advances from El Paso for ongoing capital projects, investment programs, and operating requirements, offset by lower short-term interest rates. INCOME TAXES The income tax expenses for the quarters ended June 30, 2001 and 2000, were $75 million and $74 million, resulting in effective tax rates of 38 percent and 35 percent. Our effective tax rates were different than the statutory tax rate of 35 percent primarily due to the following: - state income taxes; - earnings from unconsolidated affiliates where we anticipate receiving dividends; and - foreign income not taxed in the U.S., but taxed at foreign rates. The income tax expenses for the six months ended June 30, 2001 and 2000, were $147 million and $120 million, resulting in effective tax rates of 34 percent and 33 percent. Our effective tax rates were different than the statutory tax rate of 35 percent primarily due to the following: - state income taxes; - earnings from unconsolidated affiliates where we anticipate receiving dividends; and - foreign income not taxed in the U.S., but taxed at foreign rates. LIQUIDITY AND CAPITAL RESOURCES CASH FROM OPERATING ACTIVITIES Net cash provided by our operating activities was $3,192 million for the six months ended June 30, 2001, compared to net cash used of $256 million for the same period of 2000. The increase was primarily due to liquidations of net derivative trading positions during the first half of 2001, coupled with the impact of lower commodity prices. Partially offsetting these increases were cash payments in 2001 for charges related to broker and over-the-counter margins and higher interest payments. CASH FROM INVESTING ACTIVITIES Net cash used in our investing activities was $340 million for the six months ended June 30, 2001. Our investing activities principally consisted of additions to property, plant, and equipment primarily in our Field Services and Pipelines segments for expansion and construction projects. We also had additions to joint ventures and investments in unconsolidated affiliates, primarily related to our investment in two international power companies located in Brazil and China. Cash inflows from investment-related activities included proceeds from the sale of our Midwestern Gas Transmission system. 21 23 CASH FROM FINANCING ACTIVITIES Net cash used in our financing activities was $2,838 million for the six months ended June 30, 2001. During 2001, we retired long-term debt, repaid short-term borrowings, paid dividends, and paid advances to El Paso. We expect that future funding for our working capital needs, capital expenditures, acquisitions, other investing activities, long-term debt retirements, payments of dividends and other financing expenditures will be provided by internally generated funds, commercial paper issuances, available capacity under existing credit facilities, the issuance of new long-term debt or equity, and/or contributions from El Paso. COMMITMENTS AND CONTINGENCIES See Item 1, Financial Statements, Note 7, which is incorporated herein by reference. NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED See Item 1, Financial Statements, Note 11, which is incorporated herein by reference. CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This report contains or incorporates by reference forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Where any forward-looking statement includes a statement of the assumptions or bases underlying the forward-looking statement, we caution that, while we believe these assumptions or bases to be reasonable and to be 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, we or our management express an expectation or belief as to future results, that expectation or belief is expressed in good faith and is believed to have a reasonable basis. We cannot assure you, however, that the statement of expectation or belief will result or be achieved or accomplished. The words "believe," "expect," "estimate," "anticipate" and similar expressions will generally identify forward-looking statements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This information updates, and you should read it in conjunction with, information disclosed in Part II, Item 7A in our Annual Report on Form 10-K for the year ended December 31, 2000, in addition to the information presented in Items 1 and 2 of this Quarterly Report on Form 10-Q. There have been no material changes in our quantitative and qualitative disclosures about market risks from those reported in our Annual Report on Form 10-K for the year ended December 31, 2000. 22 24 PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS See Part I, Item 1, Financial Statements, Note 7, which is incorporated herein by reference. The California cases are: four filed in the Superior Court of Los Angeles County (Continental Forge Company, et al v. Southern California Gas Company, et al, filed September 25, 2000; and Berg v. Southern California Gas Company, et al, filed December 18, 2000); (The City of Los Angeles, et al v. Southern California Gas Company, et al and The City of Long Beach, et al v. Southern California Gas Company, et al, both filed March 20, 2001); two filed in the Superior Court of San Diego County (John W.H.K. Phillip v. El Paso Merchant Energy and John Phillip v. El Paso Merchant Energy, both filed December 13, 2000); and three filed in the Superior Court of San Francisco County (Sweetie's, et al v. El Paso Corporation, et al, filed March 22, 2001; Philip Hackett, et al v. El Paso Corporation, et al, filed May 9, 2001; and California Dairies, Inc., et al v. El Paso Corporation, et al, filed May 21, 2001). The four cases filed in 2000 were the cases consolidated for pretrial activities. 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 We held our annual meeting of stockholders on May 21, 2001. Proposals presented for a stockholders vote included the election of one director by holders of EPTPC's 8 1/4% Cumulative Preferred Stock, Series A, and the election of five Directors by EPC, the sole holder of EPTPC's Common Stock. The one director nominated to be elected by the holder of EPTPC's 8 1/4% Cumulative Preferred Stock Series A was elected with the following voting results:
FOR WITHHELD --------- -------- Kenneth L. Smalley.......................................... 3,321,770 95,130
Each of the five directors nominated to be elected by the common stockholder were elected with the following voting results:
FOR WITHHELD ----- -------- William A. Wise............................................. 1,971 0 H. Brent Austin............................................. 1,971 0 Joel Richards III........................................... 1,971 0 Britton White, Jr. ......................................... 1,971 0 Jeffrey I. Beason........................................... 1,971 0
There were no broker non-votes for the election of directors. ITEM 5. OTHER INFORMATION None. 23 25 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits
EXHIBIT NUMBER DESCRIPTION ------- ----------- *10.A -- $3,000,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement, dated as of June 11, 2001, by and among El Paso Corporation, El Paso Natural Gas Company, Tennessee Gas Pipeline Company, the several banks and other financial institutions from time to time parties to the Agreement, The Chase Manhattan Bank, ABN Amro Bank, N.V., and Citibank, N.A., as co-documentation agents for the Lenders, and Bank of America, N.A. and Credit Suisse First Boston, as co-syndication agents for the Lenders.
Undertaking We hereby undertake, 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 our long-term debt not filed herewith for the reason that the total amount of securities authorized under any of these instruments does not exceed 10 percent of our total consolidated assets. b. Reports on Form 8-K None. 24 26 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 TENNESSEE PIPELINE CO. Date: August 10, 2001 /s/ H. BRENT AUSTIN ------------------------------------ H. Brent Austin Executive Vice President and Chief Financial Officer Date: August 10, 2001 /s/ JEFFREY I. BEASON ------------------------------------ Jeffrey I. Beason Senior Vice President and Controller (Chief Accounting Officer) 25 27 INDEX TO 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.
EXHIBIT NUMBER DESCRIPTION ------- ----------- *10.A -- $3,000,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement, dated as of June 11, 2001, by and among El Paso Corporation, El Paso Natural Gas Company, Tennessee Gas Pipeline Company, the several banks and other financial institutions from time to time parties to the Agreement, The Chase Manhattan Bank, ABN Amro Bank, N.V., and Citibank, N.A., as co-documentation agents for the Lenders, and Bank of America, N.A. and Credit Suisse First Boston, as co-syndication agents for the Lenders.
26 EX-10.A 3 h88260ex10-a.txt $3,000,000,000 364-DAY REVOLVING CREDIT AGMT. 1 CONFORMED COPY ================================================================================ EL PASO CORPORATION ------------------------------------- $3,000,000,000 364-DAY REVOLVING CREDIT AND COMPETITIVE ADVANCE FACILITY AGREEMENT Dated as of June 11, 2001 ------------------------------------- THE CHASE MANHATTAN BANK, as Administrative Agent and CAF Advance Agent ------------------------------ ABN AMRO BANK, N.V. and CITIBANK, N.A., as Co-Documentation Agents 2 CONFORMED COPY BANK OF AMERICA, N.A. and CREDIT SUISSE FIRST BOSTON, as Co-Syndication Agents JP MORGAN SECURITIES, INC., as Sole Lead Arranger and Book Manager ================================================================================ 3 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.........................15 SECTION 1.3. Accounting Terms....................................16 SECTION 1.4. References..........................................16 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES.................................16 SECTION 2.1. The Revolving Credit Advances.......................16 SECTION 2.2. Making the Revolving Credit Advances................16 SECTION 2.3. Evidence of Debt....................................17 SECTION 2.4. CAF Advances........................................18 SECTION 2.5. Procedure for CAF Advance Borrowings................18 SECTION 2.6. CAF Advance Payments................................21 SECTION 2.7. Evidence of Debt....................................22 SECTION 2.8. Fees................................................22 SECTION 2.9. Reduction of the Commitments........................23 SECTION 2.10. Repayment of Advances..............................23 SECTION 2.11. Interest on Revolving Credit Advances..............23 SECTION 2.12. Additional Interest on Eurodollar Rate Advances....24 SECTION 2.13. Interest Rate Determination........................24 SECTION 2.14. Voluntary Conversion of Advances...................25 SECTION 2.15. Optional and Mandatory Prepayments.................26 SECTION 2.16. Increased Costs....................................26 SECTION 2.17. Increased Capital..................................27
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PAGE ---- SECTION 2.18. Illegality.........................................28 SECTION 2.19. Pro Rata Treatment, Payments and Computations......28 SECTION 2.20. Taxes..............................................29 SECTION 2.21. Sharing of Payments, Etc...........................31 SECTION 2.22. Use of Proceeds....................................32 SECTION 2.23. Extension of Stated Termination Date...............32 SECTION 2.24. [Intentionally Left Blank].........................33 SECTION 2.25. Replacement of Lenders.............................33 ARTICLE III CONDITIONS OF EFFECTIVENESS AND LENDING..........................33 SECTION 3.1. Conditions Precedent to Effectiveness of this Agreement.........................................33 SECTION 3.2. Conditions Precedent to Initial Advances............34 SECTION 3.3. Conditions Precedent to Initial Advances to Any Borrowing Subsidiary..............................35 SECTION 3.4. Conditions Precedent to Each Borrowing..............35 ARTICLE IV REPRESENTATIONS AND WARRANTIES....................................36 SECTION 4.1. Representations and Warranties of the Borrowers.....36 ARTICLE V COVENANTS OF THE BORROWERS.........................................38 SECTION 5.1. Affirmative Covenants...............................38 SECTION 5.2. Negative Covenants..................................39 SECTION 5.3. Reporting Requirements..............................43 SECTION 5.4. Restrictions on Material Subsidiaries...............45 ARTICLE VI GUARANTEES........................................................45 SECTION 6.1. Guarantees..........................................45 SECTION 6.2. No Subrogation......................................46 SECTION 6.3. Amendments, etc. with respect to the Obligations; Waiver of Rights..................................46 SECTION 6.4. Guarantee Absolute and Unconditional................47
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PAGE ---- SECTION 6.5. Reinstatement.......................................48 ARTICLE VII EVENTS OF DEFAULT................................................48 SECTION 7.1. Event of Default....................................48 ARTICLE VIII THE ADMINISTRATIVE AGENT AND THE CAF ADVANCE AGENT..............51 SECTION 8.1. Authorization and Action............................51 SECTION 8.2. Administrative Agent's and CAF Advance Agent's Reliance, Etc.....................................51 SECTION 8.3. Chase and Affiliates................................52 SECTION 8.4. Lender Credit Decision..............................52 SECTION 8.5. Indemnification.....................................52 SECTION 8.6. Successor Administrative Agent and CAF Advance Agent.............................................53 SECTION 8.7. Syndication Agent; Co-Documentation Agents..........53 ARTICLE IX MISCELLANEOUS.....................................................53 SECTION 9.1. Amendments, Etc.....................................53 SECTION 9.2. Notices, Etc........................................54 SECTION 9.3. No Waiver; Remedies.................................54 SECTION 9.4. Costs and Expenses; Indemnity.......................54 SECTION 9.5. Right of Set-Off....................................55 SECTION 9.6. Binding Effect......................................56 SECTION 9.7. Assignments and Participations......................56 SECTION 9.8. Confidentiality.....................................58 SECTION 9.9. Consent to Jurisdiction.............................59 SECTION 9.10. GOVERNING LAW......................................59 SECTION 9.11. Rate of Interest...................................59 SECTION 9.12. Execution in Counterparts..........................60 SECTION 9.13. Existing Credit Facility...........................60
iii 6 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 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 iv 7 $3,000,000,000 364-DAY REVOLVING CREDIT AND COMPETITIVE ADVANCE FACILITY AGREEMENT, dated as of June 11, 2001, among EL PASO 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, ABN AMRO BANK, N.V. and CITIBANK, N.A., as co-documentation agents (in such capacity, the "Co-Documentation Agents") for the Lenders, and BANK OF AMERICA, N.A. and CREDIT SUISSE FIRST BOSTON, as co-syndication agents (in such capacity, the "Co-Syndication Agents") 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): "3-Year Facility" means the 3-Year Revolving Credit and Competitive Advance Facility Agreement, dated as of August 4, 2000, among the Company, EPNGC, Tennessee, the banks and other lenders parties thereto, Chase, as Administrative Agent and CAF Advance Agent, Citibank, N.A. and ABN Amro Bank, N.V., as Co-Documentation Agent and Bank of America, N.A., as Syndication Agent, as the same has been and may be amended, supplemented and modified from time to time. "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. Neither a director nor any officer of a Person, in such capacity, shall be deemed an "Affiliate" of such Person for purposes of this Agreement. "Agreement" means this 364-Day Revolving Credit and Competitive Advance Facility, as amended, supplemented or otherwise modified from time to time. 8 2 "Alternate Program" means any program providing for the sale or other disposition of trade or other receivables entered into by the Company or a Subsidiary which is in addition to or in replacement of the program evidenced by either 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 .310% BBB/Baa2 IV .400% 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 is 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 9 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 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 greater of (a) the Prime Rate in effect on such day and (b) the Effective Federal Funds Rate in effect on such day plus 1/2 of 1%. Any change in the Base Rate due to a change in the Prime 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 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 and, in the case of Eurodollar Rate Advances, having Interest Periods of the same duration, 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 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. 10 4 "Business Entity" means a partnership, limited partnership, limited liability partnership, corporation (including a business trust), limited liability company, unlimited liability company, joint stock company, trust, unincorporated association, joint venture or other entity. "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 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 by such Person and its consolidated Subsidiaries, plus (c) the consolidated common and preferred stockholders' equity of such Person and its consolidated Subsidiaries, plus (d) the cumulative amount by which stockholders' equity of such Person shall have been reduced by reason of non-cash write downs of long-term assets from and after the Effective Date. "Chase" means The Chase Manhattan Bank, a New York banking corporation. 11 5 "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. "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. "Co-Syndication Agents" has the meaning assigned to such term in the preamble hereof. "Current Reimbursement Obligations" means, with respect to any Person, non-contingent obligations of such Person to reimburse a bank or other Person in respect of amounts paid under a letter of credit or similar instrument that are paid on or prior to the fifth Business Day after the due date therefor. "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 Subsidiary, any liabilities of the Company or such Subsidiary, as the case may be, under any Alternate Program, or any document executed by the Company or such Subsidiary, as the case may be, in connection therewith, (c) any obligations of the Company or a Subsidiary with respect to lease payments for the headquarters building of the Company located in Houston, Texas and (d) Current Reimbursement Obligations of such Person; provided, however, that for purposes of Article V, "Debt" shall not include up to an aggregate amount (determined without duplication of amount) of $200,000,000 of (i) the amount of optional payments in lieu of asset repurchase or other payments to similar effect, including extension or renewal payments, on off balance sheet leases and (ii) the amount 12 6 of the purchase price for optional acquisition of such asset (in either case, calculated at the lower amount payable in respect of such asset under clause (i) or (ii) above). "Default" means any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both. "Dollars" and "$" 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 (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. "Equity Interests" means any capital stock, partnership, joint venture, member or limited liability or unlimited liability company interest, beneficial interest in a trust or similar entity or other equity interest or investment of whatever nature. "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. 13 7 "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 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 Business Entity 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 Business Entity is not a Subsidiary of the Company), (b) Debt, 14 8 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 existed immediately prior to such acquisition (provided that (i) such Debt, Guaranties or reimbursement obligations were not incurred solely in anticipation of such acquisition and (ii) immediately prior to such acquisition such asset was not an asset of the Company or any of its Subsidiaries). "Existing 364-Day Facility" means the $2,000,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement dated as of August 4, 2000, 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. and ABN Amro Bank, N.V., as Co-Documentation Agents and Bank of America, N.A., as Syndication Agent. "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). "GAAP" means generally accepted accounting principles in the United States of America, as in effect from time to time. "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 obligations under any 15 9 conditional sales agreement, equipment trust financing or equipment lease, and (c) any such act in connection with a Project Financing that either (i) guarantees to the provider of such Project Financing or any other Person performance of the acquisition, improvement, installation, design, engineering, construction, development, completion, maintenance or operation of, or otherwise affects any such act in respect of, all or any portion of the project that is financed by such Project Financing or performance by a Project Financing Subsidiary of certain obligations to Persons other than the provider of such Project Financing, except during any period, and then only to the extent, that such guaranty is 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 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 GAAP 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 second anniversary of the Termination Date and would otherwise end 16 10 after the second anniversary of the Termination Date shall end on the second 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; (d) with respect to Advances made by an Objecting Lender, no Interest Period with respect to such Advances shall end after the second anniversary of such Objecting Lender's Commitment Expiration Date; and (e) any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (a) above, end on the last Business Day of a calendar month. "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. 17 11 "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 book value of the consolidated assets 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. "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, 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 plus the cumulative amount by which stockholders' equity of the Company shall have been reduced by reason of non-cash write-downs of long term assets from and after the Effective Date. "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 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 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). 18 12 "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). "Permitted Claims" has the meaning assigned to such term in Section 9.9(a). "Permitted Liens" means: (i) inchoate Liens and charges imposed by law and incidental to construction, maintenance, development or operation of properties, or the operation of business, in the ordinary course of business if payment of the obligation secured thereby is not yet overdue or if the validity or amount of which is being contested in good faith by the Company or any of its Subsidiaries; (ii) Liens for taxes, assessments, obligations under workers' compensation or other social security legislation or other governmental requirements, charges or levies, in each case not yet overdue; (iii) Liens reserved in any oil, gas or other mineral lease entered into in the ordinary course of business for rent, royalty or delay rental under such lease and for compliance with the terms of such lease; (iv) easements, servitudes, rights-of-way and other rights, exceptions, reservations, conditions, limitations, covenants and other restrictions that do not materially interfere with the operation, value or use of the properties affected thereby; (v) conventional provisions contained in any contracts or agreements affecting properties under which the Company or any of its Subsidiaries is required immediately before the expiration, termination or abandonment of a particular property to reassign to such Person's predecessor in title all or a portion of such Person's rights, titles and interests in and to all or portion of the such property; (vi) any Lien reserved in a grant or conveyance in the nature of a farm-out or conditional assignment to the Company or any of its Subsidiaries entered into in the ordinary course of business on reasonable terms to secure undertakings of the Company or any such Subsidiary in such grant or conveyance; (vii) any Lien consisting of (A) statutory landlord's liens under leases to which the Company or any of its Subsidiaries is a party or other Liens on leased property reserved in leases thereof for rent or for compliance with the terms of such leases, (B) rights reserved to or vested in any municipality or governmental, statutory or public authority to control or regulate any property of the Company or any of its Subsidiaries, or to use such property in any manner which does not materially impair the use of such property for the purposes for which it is held by the Company or any such Subsidiary, (C) obligations or duties to any municipality or public authority with respect to any franchise, grant, license, 19 13 lease or permit and the rights reserved or vested in any governmental authority or public utility to terminate any such franchise, grant, license, lease or permit or to condemn or expropriate any property, and (D) zoning laws and ordinances and municipal regulations; (viii) any Lien on any assets (including Equity Interests and other obligations) securing Indebtedness or other obligations incurred or assumed for the purpose of financing all or any part of the cost of acquiring, improving, installing, designing, engineering, developing (including drilling), or constructing such assets, provided that such Lien attaches to such assets concurrently with or within 365 days after the acquisition or completion of development, construction or installation thereof or improvement thereto; and (ix) the creation of interests in property of the character commonly referred to as a "royalty interest" or "overriding royalty interest", production payments, farmouts, leases, subleases, rights of way and other easements, participations, joint venture, joint operating, unitization, pooling and communitization agreements, or other similar transactions in the ordinary course of business. "Person" means an individual, a Business 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 or refinance the acquisition, improvement, installation, design, engineering, construction, development, completion, maintenance or operation of, or otherwise in respect of, all or any portion of any project, or any asset related thereto, and any Guaranty with respect thereto, other than any portion of such Indebtedness or Guaranty permitting or providing for recourse against the Company or any of its Subsidiaries other than (a) recourse to the Equity Interests in, Indebtedness or other obligations of, or assets of, one or more Project Financing Subsidiaries, 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 direct or indirect partner, member or other equity participant or owner in a Business Entity so created, and substantially all the assets of which Subsidiary or Business Entity are limited to those assets being financed (or to be financed), or the operation of which is being financed (or to be financed), in whole or in part by a Project Financing or to Equity Interests in, or 20 14 Indebtedness or other obligations of, one or more other such Subsidiaries or Business Entities or to Indebtedness or other obligations of the Company or its Subsidiaries or other Persons. "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, 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, Bank of America, N.A., Citibank, N.A. and ABN Amro Bank, N.V. "Register" has the meaning specified in Section 9.7(c). "Required Lenders" means Lenders (a) that are not Objecting Lenders with respect to any previous Extension Request and (b) that 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. 21 15 "Stated Termination Date" means June 10, 2002 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 Business Entity of which shares of stock or other Equity Interests having ordinary voting power (other than stock or such other Equity Interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such Business Entity are at the time owned, directly or indirectly through one or more Subsidiaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Company. "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 "reportable 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. Section 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. "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, 22 16 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 GAAP either (a) consistent with those principles applied in the preparation of the financial statements referred to in Section 4.1(e) or (b) not so materially inconsistent with such principles that a 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. "Include", "includes" and "including" shall be deemed to be followed by "without limitation" whether or not they are in fact followed by such words or words of like import. References to any agreement or contract are to such agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. 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 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, 23 17 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 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 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. (a) 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, 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. (b) 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 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. (c) 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 24 18 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"). 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 25 19 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 (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 26 20 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 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, 27 21 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. (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. 28 22 (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% 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 .090% BBB/Baa2 IV .100% 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 29 23 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. 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 second anniversary of the Termination Date (or if the Lender is an Objecting Lender, the second 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 JP Morgan Securities, Inc., the Administrative Agent and the CAF Advance Agent the fees set forth in the letter, dated as of May 7, 2001 from JP Morgan 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 second 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 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). (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 30 24 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, (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 31 25 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, 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 32 26 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 second anniversary of such Objecting Lender's Commitment Expiration Date, and (b) in the case of all Revolving Credit Advances, the second 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 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" 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 33 27 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 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. 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 34 28 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 a reasonable effort to change its lending office or to transfer its affected Advances to an affiliate) to avoid any such illegality. 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 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 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 or the Effective Federal 35 29 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 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 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 36 30 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 W8-ECI (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 W8-BEN (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 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 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 W8-ECI or W8-BEN, 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 37 31 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 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. 38 32 SECTION 2.22. Use of Proceeds. Proceeds of the Advances may be used for general business purposes of the Borrowers and their respective Subsidiaries, including for acquisitions and for payment of commercial paper issued by the Borrowers, and to refinance any Indebtedness of the Borrowers and their respective Subsidiaries (whether in connection with any acquisition or otherwise). 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, being 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 two years 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. 39 33 (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 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 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 suspends the right of any Borrower to elect Eurodollar Rate Advances from such Lender pursuant to Section 2.18, 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. 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 40 34 the Company, EPNGC Tennessee, the Administrative Agent, the CAF Advance Agent, the Co-Documentation Agents and the Co-Syndication Agents 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 June 11, 2001, (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 June 11, 2001; 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 June 11, 2001, 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 Business Entity 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. (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. 41 35 (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 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 or before 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 42 36 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 Business Entity duly formed, validly existing and, if applicable, in good standing under the laws of the State of Delaware. Each Principal Subsidiary is duly organized or formed, validly existing and, if applicable, in good standing in the jurisdiction of its organization or formation. The Company and each Principal Subsidiary possess all applicable Business Entity 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 applicable Business Entity powers, have been duly authorized by all necessary applicable Business Entity action, and do not contravene (A) such Borrower's organizational documents 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 those 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, 2000, 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, 43 37 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 GAAP consistently applied, and since December 31, 2000, 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, 2001, 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 GAAP 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 any court, or before any arbitrator of any kind, or before or by any governmental body, existing as at the Effective Date 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 file or pay which, as applicable, 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). 44 38 (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 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) 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. (p) 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. (q) 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. 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: 45 39 (a) Preservation of Existence, Etc. Preserve and maintain, and, in the case of the Company, cause each Principal Subsidiary to preserve and maintain, its existence, rights (organizational and statutory) and material franchises, except as otherwise permitted by Section 5.2(d) or 5.2(e) and except that nothing herein shall prevent any change in Business Entity form of the Company or any Principal Subsidiary. (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 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 GAAP 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: (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 its Equity Interests in any Principal Subsidiary, whether 46 40 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 Guaranty will be excluded to the extent the Indebtedness Guaranteed thereby is included in computing such aggregate amount)) exceeding the greater of (x) $300,000,000 and (y) 10% of Net Worth as at the date of such creation or assumption; provided, however, that this subsection (a) shall not apply to: (A) Liens on the Equity Interests in, or Indebtedness or other obligations of, or assets of, any Project Financing Subsidiary (or any Equity Interests in, or Indebtedness or other obligations of, any Business Entity which are directly or indirectly owned by any Project Financing Subsidiary) securing the payment of a Project Financing and related obligations; (B) Liens on (1) 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 and (2) Equity Interests acquired after February 11, 1992 in a Business Entity that has become or becomes a Subsidiary of the Company, or on assets of any such Business Entity, 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 or any Subsidiary in connection therewith; (D) Liens on Margin Stock; (E) Permitted Liens; (F) Liens arising out of the refinancing, extension, renewal or refunding of any Indebtedness or Guaranty or other obligation secured by any Lien permitted by any of the foregoing clauses of this Section, provided that the principal amount of such Indebtedness or Guaranty or other obligation is not increased (except by the amount of costs reasonably incurred in connection with the issuance thereof) beyond the highest previous amount thereof and such Indebtedness or Guaranty or other obligation is outstanding immediately prior to the refinancing, extension, renewal or refunding and is not secured by any additional assets that would not have been permitted by this Section to secure the Indebtedness or Guaranty or other obligation refinanced, extended, renewed or refunded; and (G) Liens on products and proceeds (including dividend, interest and like payments on, and insurance and condemnation proceeds and rental, lease, licensing and similar proceeds) of, and property evidencing or embodying, or constituting rights or other general intangibles directly relating to or arising out of, and accessions and improvements to, collateral subject to Liens permitted by this Section 5.2(a). 47 41 (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 incur or become liable for 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 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 owing to Persons other than the Company and its consolidated Subsidiaries (other than any Project Financing) would exceed the greater of (x) $600,000,000 and (y) 10% of Net Worth determined as at the date of incurrence or assumption thereof; 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 or (y) this Agreement or the 3-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 3-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 3-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 3-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 all or 48 42 substantially all 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; (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 Person's Equity Interests; (vi) any sale, lease or other transfer to the Company or any Principal Subsidiary, or to any Business Entity that 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 Default shall have occurred and be continuing before and immediately after giving effect to such transfer. (e) Mergers, Etc. Merge or consolidate with any Person, or in the case of the Company 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 Business Entity 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, either (x) the Company shall be the continuing or surviving Business Entity or (y) the continuing or surviving Business Entity is organized under the laws of the United States or a State thereof and unconditionally assumes by agreement all of the performance obligations and payment Obligations of the Company under this Agreement and the Notes and (B) if any such Principal Subsidiary merges or consolidates with (or liquidates into) any other Subsidiary, one or more Business Entities that are Subsidiaries are the continuing or surviving Business Entity(ies) and, if either such Subsidiary is not directly or indirectly 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 Business Entity (that is, in addition to the Company or any Subsidiary), provided that (A) if the Company merges or consolidates with any such 49 43 other Business Entity, either (x) the Company is the continuing or surviving Business Entity or (y) the continuing or surviving Business Entity is organized under the laws of the United States or a State thereof and unconditionally assumes by agreement all of the performance obligations and payment Obligations of the Company under this Agreement and the Notes, (B) if any Principal Subsidiary merges or consolidates with any such other Business Entity, the surviving Business Entity is directly or indirectly a wholly-owned Principal Subsidiary of the Company, (C) if either the Company or any Principal Subsidiary merges or consolidates with any such other Business Entity, after giving effect to such merger or consolidation no Event of Default or Default shall have occurred and be continuing and (D) if any Principal Subsidiary which is a party to any merger, consolidation or liquidation permitted by this paragraph (e) is a Borrowing Subsidiary, either (x) such Principal Subsidiary shall be the continuing or surviving Business Entity or (y) the continuing or surviving Business Entity is organized under the laws of the United States or a State thereof and unconditionally assumes by agreement all of the performance obligations and payment Obligations of such Borrowing Subsidiary under this Agreement and the Notes (the Borrowers and the Lenders agreeing that it is their intention that each Business Entity that is a Borrower be organized under the laws of the United States or a State thereof). 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 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 GAAP and (ii) a letter from such accountants stating that in 50 44 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; (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 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 with respect to any Plan 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; 51 45 (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 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, 52 46 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 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 53 47 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 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 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 54 48 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 (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 $200,000,000 or more, at such time, 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 55 49 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 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 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 referred to above sought in such proceeding (including the 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 $100,000,000 shall be rendered against the Company or any Principal Subsidiary and either (i) enforcement proceedings shall have been commenced and are continuing or have been completed 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 56 50 process in respect of such lien, or payment over in respect of such garnishment or similar order, has commenced and is continuing or has been completed) 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 Net Worth; or (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 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; provided that if, within one Business Day after any Borrower receives notice from the Administrative Agent or otherwise becomes aware that such Guarantee is not in full force and effect, the Company delivers written notice to the Administrative Agent that the applicable Borrower intends to deliver a valid and effective Guarantee, or to reinstate such Guarantee, as soon as possible, then an Event of Default shall not exist pursuant this Section 7.1(j) unless the Company shall fail to deliver or reinstate or cause to be delivered or reinstated a Guarantee of the applicable Borrower having the same economic effect as the Guarantee 57 51 set forth in Article VI within four Business Days after the delivery of such written notice of intent; 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 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. 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 58 52 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 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, 59 53 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's 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 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. SECTION 8.7. Co-Syndication Agents; Co-Documentation Agents. None of the Lenders identified on the cover page or signature pages or in the preamble of this Agreement as a "co-syndication agent" or "co-documentation agent" shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such. Without limiting the foregoing, none of the Lenders so identified as a "co-syndication agent" or "co-documentation agent" shall have or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders so identified in deciding to enter into this Agreement or in taking or not taking action hereunder. 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 or consented to in writing 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 60 54 signed by all the Lenders, be effective to: (a) waive any of the conditions specified in Article III, (b) except as contemplated by Sections 2.4, 2.5, 2.23 and 2.25, 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: Steve Wood, Telecopier: (212) 270-2519, Telephone: (212) 270-7056; 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 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 61 55 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 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 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. (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 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 62 56 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 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 in a transaction not permitted by Section 5.2(e) 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 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 such Lender's rights and obligations under this Agreement, (ii) the amount of the Commitment of the assigning Lender being assigned to an assignee 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 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 63 57 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 (subject to approval in writing by the Company and, if applicable, the Administrative Agent to the extent required by the definition of "Eligible Assignee") 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 (which register may be in electronic form) 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, 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. 64 58 (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 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 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 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 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 65 59 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, 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 66 60 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 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. SECTION 9.13. Existing 364-Day Facility. The undersigned agree and acknowledge that, except for provisions that expressly provide for their survival of termination, the Existing 364-Day Facility is terminated and all Commitments thereunder (as defined in the Existing 364-Day Facility) are terminated, and the undersigned waive any right to receive any notice of such termination. Each Lender that was a party to the Existing 364-Day Facility agrees to return to the Borrower, with reasonable promptness, all Notes (as defined in the Existing 364-Day Facility) delivered by the Borrower to such Lender under the Existing 364-Day Facility. 67 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective duly authorized officers as of the date first above written. EL PASO CORPORATION By: /s/ JOHN HOPPER ------------------------------- John Hopper, Vice President Signature Page-1 68 EL PASO NATURAL GAS COMPANY By: /s/ JOHN HOPPER ------------------------------- John Hopper, Vice President Signature Page-2 69 TENNESSEE GAS PIPELINE COMPANY By: /s/ JOHN HOPPER ------------------------------- John Hopper, Vice President Signature Page-3 70 THE CHASE MANHATTAN BANK, as Administrative Agent, CAF Advance Agent and a Lender By: /s/ STEVEN WOOD ------------------------------- Steven Wood, Vice President Signature Page-4 71 BANK OF AMERICA, N.A., as Co-Syndication Agent and a Lender By: /s/ MICHAEL J. DILLON ------------------------------------ Michael J. Dillon, Managing Director Signature Page-5 72 CREDIT SUISSE FIRST BOSTON, as Co-Syndication Agent and a Lender By: /s/ DAVID L. SAWYER ------------------------------------ David L. Sawyer, Vice President By: /s/ BILL O'DALY ------------------------------------ Bill O'Daly, Vice President Signature Page-6 73 ABN AMRO BANK, N.V., as Co-Documentation Agent and a Lender By: /s/ RODNEY D. KUBICEK ------------------------------------ Rodney D. Kubicek, Group Vice President By: /s/ DANA L. MONTGOMERY ------------------------------------ Dana L. Montgomery, Vice President Signature Page-7 74 CITIBANK, N.A., as Co-Documentation Agent and a Lender By: /s/ J. CHRISTOPHER LYONS ------------------------------------- J. Christopher Lyons, Attorney-in-Fact Signature Page-8 75 THE BANK OF TOKYO-MITSUBISHI, LTD HOUSTON AGENCY, as a Lender By: /s/ JOHN W. MCGHEE ------------------------------------- John W. McGhee, Vice President & Manager Signature Page-9 76 BNP PARIBAS, as a Lender By: /s/ BRIAN M. MALONE ------------------------------------- Brian M. Malone, Managing Director By: /s/ BETSY JOCHER ------------------------------------- Betsy Jocher, Vice President Signature Page-10 77 COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, as a Lender By: /s/ HARRY P. YERGEY ------------------------------------- Harry P. Yergey, Senior Vice President & Manager By: /s/ W. DAVID SUTTLES ------------------------------------- W. David Suttles, Vice President Signature Page-11 78 BANCA DI ROMA-CHICAGO BRANCH, as a Lender By: /s/ AURORA PENSA ------------------------------------- Aurora Pensa (97974), Vice President By: /s/ ENRICO VERDOSCIA ------------------------------------- Enrico Verdoscia Signature Page-12 79 DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCHES, as a Lender By: /s/ HANS C. NARBERHAUS ------------------------------------- Hans C. Narberhaus, Vice President By: /s/ JOEL MAKOWSKY ------------------------------------- Joel Makowsky, Vice President Signature Page-13 80 BAYERISCHE HYPO-UND VEREINSBANK AG, NEW YORK BRANCH, as a Lender By: /s/ STEVEN ATWELL ------------------------------------- Steven Atwell, Director By: /s/ SHANNON BATCHMAN ------------------------------------- Shannon Batchman, Director Signature Page-14 81 KBC BANK N.V., as a Lender By: /s/ ROBERT SNAUFFER ------------------------------------- Robert Snauffer, First Vice President By: /s/ ERIC RASKIN ------------------------------------- Eric Raskin, Assistant Vice President Signature Page-15 82 NATIONAL WESTMINSTER BANK Plc, NEW YORK BRANCH, as a Lender By: /s/ KEITH JOHNSON ------------------------------------- Keith Johnson, Senior Vice President Signature Page-16 83 SOCIETE GENERALE, as a Lender By: /s/ ANTHONY C. QUAGLIETTA ------------------------------------- Anthony C. Quaglietta, Vice President Signature Page-17 84 THE FUJI BANK, LIMITED, as a Lender By: /s/ MASATOSHI ABE ------------------------------------- Masatoshi Abe, Vice President & Manager Signature Page-18 85 AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED, as a Lender By: /s/ SCOTT MCINNIS ------------------------------------- Scott McInnis, Head of Structured Finance & Relationship Management - Americas Signature Page-19 86 THE BANK OF NEW YORK, as a Lender By: /s/ PETER W. KELLER ------------------------------------- Peter W. Keller Vice President Signature Page-20 87 THE BANK OF NOVA SCOTIA, as a Lender By: /s/ F.C.H. ASHBY ------------------------------------- F.C.H. Ashby, Senior Manager Loan Operations Signature Page-21 88 BANK ONE, NA (MAIN OFFICE CHICAGO), as a Lender By: /s/ DIANNE L. RUSSELL ------------------------------------- Dianne L. Russell, Vice President Signature Page-22 89 BARCLAYS BANK, as a Lender By: /s/ DOUGLAS BERNEGGER ------------------------------------- Douglas Bernegger, Director Signature Page-23 90 CREDIT AGRICOLE INDOSUEZ, as a Lender By: /s/ PATRICK COCQUEREL ------------------------------------- Patrick Cocquerel, FVP, Managing Director By: /s/ SCOTT A. SCHROEDER ------------------------------------- Scott A. Schroeder, AVP, Credit Analysis Signature Page-24 91 CREDIT LYONNAIS NEW YORK BRANCH, as a Lender By: /s/ PHILIPPE SOUSTRA ------------------------------------- Philippe Soustra, Executive Vice President Signature Page-25 92 ROYAL BANK OF CANADA, as a Lender By: /s/ TOM J. OBERAIGNER ------------------------------------- Tom J. Oberaigner, Senior Manager Signature Page-26 93 FLEET NATIONAL BANK, as a Lender By: /s/ JILL A. CALABRESE BAIN ------------------------------------- Jill A. Calabrese Bain, Vice President Signature Page-27 94 MELLON BANK, N.A., as a Lender By: /s/ ROGER E. HOWARD ------------------------------------- Roger E. Howard, Vice President Signature Page-28 95 SUMITOMO MITSUI BANKING CORPORATION, as a Lender By: /s/ C. MICHAEL GARRIDO ------------------------------------- C. Michael Garrido, Senior Vice President Signature Page-29 96 SUNTRUST BANKS, INC., as a Lender By: /s/ JOSEPH M. MCCREERY ------------------------------------- Joseph M. McCreery, Assistant Vice President Signature Page-30 97 TORONTO DOMINION (TEXAS), INC., as a Lender By: /s/ CAROLYN R. FAETH ------------------------------------- Carolyn R. Faeth, Vice President Signature Page-31 98 WESTDEUTSCHE LANDESBANK GIROZENTRALE, as a Lender By: /s/ DUNCAN M. ROBERTSON ------------------------------------- Duncan M. Robertson, Director By: /s/ SALVATORE BATTINELLI ------------------------------------- Salvatore Battinelli, Managing Director, Credit Department Signature Page-32 99 DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, as a Lender By: /s/ WENDY C.H. ASTELL ------------------------------------- Wendy C.H. Astell, Vice President By: /s/ GILL SCHOR ------------------------------------- Gill Schor, Assistant Treasurer Signature Page-33 100 BANCO BILBAO VIZCAYA ARGENTARIA, as a Lender By: /s/ ALBERTO CONDE ------------------------------------- Alberto Conde, Vice President, Corporate Banking By: /s/ JOHN MARTINI ------------------------------------- John Martini, Vice President, Corporate Banking Signature Page-34 101 INTESABCI-LOS ANGELES FOREIGN BRANCH, as a Lender By: /s/ CHARLES DOUGHERTY ------------------------------------- Charles Dougherty, Vice President By: /s/ FRANK MAFFEI ------------------------------------- Frank Maffei, Vice President Signature Page-35 102 CIBC INC., as a Lender By: /s/ LINDSAY GORDON ------------------------------------- Lindsay Gordon, Executive Director CIBC World Markets Corp. as Agent Signature Page-36 103 LEHMAN COMMERCIAL PAPER INC., as a Lender By: /s/ MICHELE SWANSON ------------------------------------- Michele Swanson, Authorized Signatory Signature Page-37 104 STANDARD CHARTERED BANK NEW YORK, as a Lender By: /s/ ANDREW Y. NG ------------------------------------- Andrew Y. Ng, Vice President By: /s/ E. RUSHKEVICH ------------------------------------- E. Rushkevich, Senior Vice President Signature Page-38 105 SCHEDULE I COMMITMENTS, ADDRESSES, ETC.
Name and Address of Lender Amount of Commitment - -------------------------- -------------------- The Chase Manhattan Bank $160,000,000 270 Park Avenue New York, NY 10017 Attention: Steve Wood Telephone: 212-270-7056 Telecopier: 212-270-2519 Citibank, N.A. $160,000,000 1200 Smith Street, Suite 2000 Houston, TX 77002 Attention: Carol Rooney Telephone: 713-654-3590 Telecopier: 713-654-2899 ABN AMRO Bank, N.V. $160,000,000 208 South LaSalle, Suite 1500 Chicago, IL 60604-1003 Attention: Credit Administration Telephone: 312-992-5110 Telecopier: 312-992-5111 Bank of America, N.A. $160,000,000 333 Clay Street, Suite 4550 Houston, TX 77002 Attention: Michael J. Dillon Telephone: 713-651-4903 Telecopier: 713-651-4904 Credit Suisse First Boston $160,000,000 11 Madison Avenue New York, NY 10010 Attention: James Moran Telephone: 212-325-9176 Telecopier: 212-325-8615
106
Name and Address of Lender Amount of Commitment - -------------------------- -------------------- The Bank of Tokyo-Mitsubishi, Ltd Houston Agency $84,000,000 1100 Louisiana Street, Suite 2800 Houston, TX 77002-5216 Attention: John M. McIntyre Telephone: 713-655-3845 Telecopier: 713-655-3855 BNP Paribas $108,000,000 1200 Smith Street, Suite 3100 Houston, TX 77002 Attention: John Roberts Telephone: 713-659-4811 Telecopier: 713-659-6915 Commerzbank AG, New York and Grand Cayman Branches $84,000,000 1230 Peachtree Street, N.E., Suite 3500 Atlanta, GA 30309 Attention: David Suttles/Lee Ward Telephone: 404-888-6524/6526 Telecopier: 404-888-6539 Banca di Roma- Chicago Branch $45,000,000 225 West Washington, Suite 1200 Chicago, IL 60606 Attention: Aurora Pensa Telephone: 312-704-2630 Telecopier: 312-726-3058 Deutsche Bank AG New York and/or Cayman Islands Branches $108,000,000 31 West 52nd Street New York, NY 10019 Attention: Joel Makowsky Telephone: 212-469-7896 Telecopier: 212-469-5711 Bayerische Hypo- und Vereinsbank AG, New York Branch $108,000,000 150 East 42nd Street New York, NY 10017 Attention: Yoram Danker/Steve Atwell Telephone: 212-672-5446/5458 Telecopier: 212-672-5530
107
Name and Address of Lender Amount of Commitment - -------------------------- -------------------- KBC Bank N.V. $ 45,000,000 125 West 55th Street New York, NY 10019 Attention: Christine Park Telephone: 212-541-0731 Telecopier: 212-541-0784 National Westminster Bank plc $108,000,000 600 Travis Street, Suite 6070 Houston, TX 77002 Attention: Patty Dundee/Matt Main Telephone: 713-221-2423/2441 Telecopier: 713-221-2430 Societe Generale $108,000,000 1111 Bagby Street, Suite 2020 Houston, TX 77002 Attention: Paul Cornell Telephone: 713-759-6301 Telecopier: 713-650-0824 The Fuji Bank, Limited $108,000,000 1221 McKinney Street, Suite 4100 One Houston Center Houston, TX 77010 Attention: Lucy Walker Telephone: 713-759-1800 Telecopier: 713-759-0717 Australia & New Zealand Banking Group Limited $ 45,000,000 1177 Avenue of the Americas New York, NY 10036 Attention: Anna Arxer/David Giacalone Telephone: 212-801-9795/9814 Telecopier: 212-801-9131/4814 The Bank of New York $108,000,000 One Wall Street, 19th Floor New York, NY 10286 Attention: Peter Keller Telephone: 212-635-7861 Telecopier: 212-635-7923
108
Name and Address of Lender Amount of Commitment - -------------------------- -------------------- Bank of Nova Scotia $108,000,000 1100 Louisiana, Suite 3000 Houston, TX 77002 Attention: Todd Mogil Telephone: 713-759-3445 Telecopier: 713-752-2425 Bank One, NA (Chicago) $84,000,000 910 Travis, 6th Floor Houston, TX 77002 Attention: Susan Stiernberg/Karen Patterson/Helen Carr Telephone: 713-751-3751/3863/3731 Telecopier: 713-751-3760/3982/3760 Barclays Bank $84,000,000 222 Broadway, 12th Floor New York, NY 10038 Attention: Richard Williams/John Sullivan/ Nicholas Bell/Virginia Corpus Telephone: 212-412-7570/7605/4029/7512 Telecopier: 212-412-7585/2441/7585 Credit Agricole Indosuez $45,000,000 600 Travis, Suite 2340 Houston, TX 77002 Attention: Brian Knezeak/Doug Whiddon Telephone: 713-223-7001/7003 Telecopier: 713-223-7029 Credit Lyonnais New York Branch $108,000,000 1301 Avenue of the Americas New York, NY 10019 Attention: Bindu Menon Telephone: 212-261-7633 Telecopier: 917-849-5440 Royal Bank of Canada $45,000,000 2800 Post Oak Blvd. Houston, TX 77056 Attention: Tom Oberainger Telephone: 713-403-5678 Telecopier: 713-403-5624
109
Name and Address of Lender Amount of Commitment - -------------------------- -------------------- IntesaBci-Los Angeles Foreign Branch $45,000,000 One William Street New York, NY 10004 Attention: Charlie Dougherty Telephone: 212-607-3656 Telecopier: 212-809-2124 CIBC Inc. $45,000,000 1600 Smith Street, Suite 3100 Houston, TX 77002 Attention: Mark Wolf Telephone: 713-650-2588 Telecopier: 713-650-7670 Fleet National Bank $45,000,000 100 Federal Street, 01-08-02 Boston, MA 02110 Attention: Jill Calabrese Telephone: 617-434-9579 Telecopier: 617-434-3652 Lehman Commercial Paper Inc. $45,000,000 3 World Financial Center, 8th Floor New York, NY 10285 Attention: Nancy Wong Telephone: 212-526-6535 Telecopier: 212-526-7365 Mellon Bank, N.A. $70,000,000 One Mellon Bank Center, Room 4530 Pittsburgh, PA 15258 Attention: Roger Howard Telephone: 412-234-5606 Telecopier: 412-236-1840 Standard Chartered Bank New York $45,000,000 7 World Trade Center New York, NY 10048 Attention: Jack Insinga Telephone: 212-667-0264 Telecopier: 212-667-0780
110
Name and Address of Lender Amount of Commitment - -------------------------- -------------------- Sumitomo Mitsui Banking Corporation $45,000,000 277 Park Avenue, 6th Floor New York, NY 10172 Attention: Bruce Meredith Telephone: 212-224-4194 Telecopier: 212-224-4384 SunTrust Banks, Inc. $45,000,000 303 Peachtree Street, N.E., 3rd Floor Atlanta, GA 30308 Attention: John Fields, Jr./Joe McCreary Telephone: 404-724-3667/404-532-0274 Telecopier: 404-827-6270 Toronto Dominion (Texas), Inc. $84,000,000 909 Fannin Street, Suite 1700 Houston, TX 77010 Attention: Carolyn Faeth Telephone: 713-427-8520 Telecopier: 713-951-9921 Westdeutsche Landesbank Girozentrale $108,000,000 1990 Post Oak Blvd., Suite 1100 Houston, TX 77056 Attention: Richard Newman Telephone: 713-963-5203 Telecopier: 713-963-5308 Dresdner Bank AG New York and Grand Cayman Branches $45,000,000 75 Wall Street New York, NY 10005 Attention: Mike Mangan Telephone: 212-429-2112 Telecopier: 212-429-2081 Banco Bilbao Vizcaya Argentaria $45,000,000 1345 Avenue of the Americas New York, NY 10105 Attention: Manuel Sanchez Telephone: 212-728-1511 Telecopier: 212-333-2904
111 EXHIBIT A FORM OF NOTE $_______ New York, New York June 11, 2001 FOR VALUE RECEIVED, the undersigned, ___________________, a ________ corporation (the "Borrower"), hereby unconditionally promises to pay to the order of ________(the "Lender") at the office of The Chase Manhattan Bank, located at 270 Park Avenue, New York, New York 10017, in lawful money of the United States of America and in same day funds, on the second anniversary of the Termination Date (or if the Lender is an Objecting Lender, the second anniversary of the Commitment Expiration Date applicable to the Lender) the principal amount of (a) ________DOLLARS ($_____), 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 $3,000,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement, dated as of June 11, 2001 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among El Paso 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, ABN Amro, N.V. and Citibank, N.A., as Co-Documentation Agents, and Bank of America, N.A. and Credit Suisse First Boston, as Co-Syndication Agents (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. 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. A-1 112 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: A-2 113 Schedule A to Note ADVANCES, CONVERSIONS AND REPAYMENTS OF BASE RATE ADVANCES
Amount of Base Rate Advances Converted Amount of Amount Amount of Principal to Unpaid Principal Base Rate Converted to of Base Rate Advances Eurodollar Rate Balance of Base Notation Date Advances Base Rate Advances Repaid Advances Rate Advances Made By - -------- ---------- ------------------ ------------------ ------------------ ------------------ ------------------
114 Schedule B to Note ADVANCES, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR RATE ADVANCES
Amount of Eurodollar Rate Unpaid Principal Amount of Amount Converted Interest Period and Amount of Principal Advances Converted Balance of Eurodollar Rate to Eurodollar Rate Eurodollar Rate with of Eurodollar Rate to Base Rate Eurodollar Rate Notation Date Advances Advances Respect Thereto Advances Repaid Advances Advances Made By - ---- --------------- ---------------- -------------------- ------------------ ------------------ ---------------- ---------
115 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 Corporation Ladies and Gentlemen: The undersigned, EL PASO CORPORATION, refers to the $3,000,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement, dated as of June 11, 2001 (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, ABN Amro, N.V. and Citibank, N.A., as Co-Documentation Agents, and Bank of America, N.A. and Credit Suisse First Boston, as Co-Syndication Agents, 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 ___________, 200_. (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: B-1 116 (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 CORPORATION By: ------------------------------- Title: B-2 117 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 $3,000,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement, dated as of June 11, 2001, among El Paso 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, ABN Amro, N.V. and Citibank, N.A., as Co-Documentation Agents, and Bank of America, N.A. and Credit Suisse First Boston, as Co-Syndication Agents (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. C-1 118 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 $3,000,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement, dated as of June 11, 2001, among El Paso 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, ABN Amro, N.V. and Citibank, N.A., as Co-Documentation Agents, and Bank of America, N.A. and Credit Suisse First Boston, as Co-Syndication Agents (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: __________, 200__ Aggregate Maximum Amount: $_________ Maturity Date 1: Maximum Amount: $__________ __________, 200__ $________ offered at _______* $________ offered at _______* Maturity Date 2: Maximum Amount: $__________ __________, 200__ $________ offered at _______* $________ offered at _______* Maturity Date 3: Maximum Amount: $__________ __________, 200__ $________ offered at _______* $________ offered at _______*
- ---------- * 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. D-1 119 Very truly yours, [NAME OF CAF ADVANCE LENDER] By: ------------------------------------- Name: Title: Telephone No.: Telecopy No.: D-2 120 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 $3,000,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement, dated as of June 11, 2001, among El Paso 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, ABN Amro, N.V. and Citibank, N.A., as Co-Documentation Agents, and Bank of America, N.A. and Credit Suisse First Boston, as Co-Syndication Agents (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]. E-1 121 EXHIBIT F FORM OF ASSIGNMENT AND ACCEPTANCE Dated _____________, ____ Reference is made to the $3,000,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement, dated as of June 11, 2001 (as the same may be amended or otherwise modified from time to time, the "Credit Agreement") among EL PASO 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, ABN Amro, N.V. and Citibank, N.A., as Co-Documentation Agents (in such capacity, the "Co-Documentation Agents"), and Bank of America, N.A. and Credit Suisse First Boston, as Co-Syndication Agents (in such capacity, the "Co-Syndication Agents"). 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 F-1 122 by the Assignee pursuant hereto and the Assignor in an amount equal to the Commitment 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. 7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York. - ---------- * If the Assignee is organized under the laws of a jurisdiction outside the United States. F-2 123 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. F-3 124 Schedule 1 to Assignment and Acceptance June ___, 2001 Re: $3,000,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement dated as of June 11, 2001 among The Chase Manhattan Bank, as Administrative Agent and CAF Advance Agent, ABN Amro Bank, N.V. and Citibank, N.A., as Co-Documentation Agents and Bank of America, N.A. and Credit Suisse First Boston, as Co-Syndication Agents. Name of Assignor: Name of Assignee: Transfer Effective Date of Assignment: June ___, 2001 Assignor's Commitment Prior to Assignment: $
Percentage of Assignor's Interest Assignee's Commitment --------------------------------- --------------------- % $
[Name of Assignor] [Name of Assignee] By: By: ------------------------------- -------------------------------- Title: Title: Consented to: EL PASO CORPORATION THE CHASE MANHATTAN BANK, as Administrative Agent By: By: ------------------------------- -------------------------------- Title: Title: 125 EXHIBIT G FORM OF OPINION OF [ASSOCIATE GENERAL][SENIOR] COUNSEL OF THE COMPANY June 11, 2001 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 Corporation Ladies and Gentlemen: This opinion is furnished to you pursuant to Section 3.2(b)(iii) of the $3,000,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement, dated as of June 11, 2001 (the "Credit Agreement"), among El Paso 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, ABN Amro, N.V. and Citibank, N.A., as Co-Documentation Agents (in such capacity, the "Co-Documentation Agents"), and Bank of America, N.A. and Credit Suisse First Boston, as Co-Syndication Agents (in such capacity, the "Co-Syndication Agents"). 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. G-1 126 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 & 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 G-2 127 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, G-3 128 EXHIBIT H FORM OF OPINION OF NEW YORK COUNSEL TO THE COMPANY June 11, 2001 To Each of the Lenders, the Administrative Agent, the CAF Advance Agent, the Co-Documentation Agents and the Co-Syndication Agents Referred to Below c/o The Chase Manhattan Bank 270 Park Avenue, 10th Floor New York, New York 10017 Re: $3,000,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement dated as of August 4, 2000 Dear Ladies and Gentlemen: We have acted as special New York counsel for El Paso 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 $3,000,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement, dated as of June 11, 2001 (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, ABN Amro, N.V. and Citibank, N.A., as Co-Documentation Agents (in such capacity, the "Co-Documentation Agents"), and Bank of America, N.A. and Credit Suisse First Boston, as Co-Syndication Agents (in such capacity, the "Co-Syndication Agents"). 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. 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 H-1 129 (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 Co-Syndication Agents 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. (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: H-2 130 (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 Co-Syndication Agents 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 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 H-3 131 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 Co-Syndication Agents 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 Co-Syndication Agents, 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 Co-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 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, H-4 132 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 Co-Syndication Agents 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: ---------------------------------- H-5 133 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 Corporation 1001 Louisiana Street Houston, Texas 77002 El Paso Corporation/El Paso Natural Gas Company/Tennessee Gas Pipeline Company Gentlemen: Reference is made to that certain $3,000,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement, dated as of June 11, 2001 (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 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, ABN Amro, N.V. and Citibank, N.A., as Co-Documentation Agents, and Bank of America, N.A. and Credit Suisse First Boston, as Co-Syndication Agents. 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 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. I-1 134 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 ______ , 200_ (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] I-2 135 EXHIBIT J FORM OF JOINDER AGREEMENT Reference is made to the $3,000,000,000 364-Day Revolving Credit and CAF Advance Facility Agreement, dated as of June 11, 2001 (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 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, ABN Amro, N.V. and Citibank, N.A., as Co-Documentation Agents, and Bank of America, N.A. and Credit Suisse First Boston, as Co-Syndication Agents. 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 (a) 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: J-1 136 ACKNOWLEDGED AND AGREED TO: [EL PASO CORPORATION] By: -------------------------------------------- Title: J-2 137 EXHIBIT K FORM OF OPINION OF [ASSOCIATE GENERAL] [SENIOR] COUNSEL OF THE COMPANY (a) Each of the Company and the Borrowing Subsidiaries (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. (a) 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. (b) 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. (c) 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 K-1 138 affect the legality, validity, binding effect or enforceability of the Joinder Agreement, the Credit Agreement or the Notes. K-2 139 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 Co-Syndication Agents 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. L-1 140 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 $3,000,000,000 364-Day Revolving Credit and Competitive Advance Facility Agreement, dated as of June 11, 2001, 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, ABN Amro, N.V. and Citibank, N.A., as Co-Documentation Agents, and Bank of America, N.A. and Credit Suisse First Boston, as Co-Syndication Agents (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 CORPORATION By: --------------------------------------- Title: M-1 -----END PRIVACY-ENHANCED MESSAGE-----