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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2003
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 1-6364
SOUTH JERSEY INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-1901645
(State of incorporation) (IRS employer identification no.)
1 South Jersey Plaza, Folsom, NJ 08037
(Address of principal executive offices, including zip code)
(609) 561-9000
(Registrant's telephone number, including area code)
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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
As of November 3, 2003, there were 13,001,350 shares of the registrant's common
stock outstanding.
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SJI-1
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements-- See Pages 3 through 21
SJI-2
SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In Thousands Except for Per Share Data)
Three Months Ended
September 30,
-------------------------
2003 2002
----------- -----------
Operating Revenues:
Utility $ 53,267 $ 48,939
Nonutility 36,868 20,127
----------- -----------
Total Operating Revenues 90,135 69,066
----------- -----------
Operating Expenses:
Cost of Gas Sold - Utility 34,910 31,584
Cost of Sales - Nonutility 30,332 18,202
Operations 12,914 11,004
Maintenance 1,391 1,537
Depreciation 6,459 5,650
Energy and Other Taxes 1,414 1,446
----------- -----------
Total Operating Expenses 87,420 69,423
----------- -----------
Operating Income (Loss) 2,715 (357)
Other Income and Expense:
Equity in Affiliated Companies 170 287
Other 6 (54)
----------- -----------
Total Other Income and Expense 176 233
----------- -----------
Interest Charges 5,836 5,161
----------- -----------
Loss Before Income Taxes (2,945) (5,285)
Income Tax Benefit (1,327) (2,063)
----------- -----------
Loss from Continuing Operations (1,618) (3,222)
Discontinued Operations - Net (426) (18)
----------- -----------
Net Loss Applicable to Common Stock $ (2,044) $ (3,240)
=========== ===========
Basic Loss Per Common Share:
Continuing Operations $ (0.13) $ (0.27)
Discontinued Operations - Net (0.03) -
----------- -----------
Basic Loss Per Common Share $ (0.16) $ (0.27)
=========== ===========
Average Shares of Common Stock Outstanding - Basic 12,604 12,084
Diluted Loss Per Common Share:
Continuing Operations $ (0.13) $ (0.27)
Discontinued Operations - Net (0.03) -
----------- -----------
Diluted Loss Per Common Share $ (0.16) $ (0.27)
=========== ===========
Average Shares of Common Stock Outstanding - Diluted 12,604 12,084
Dividends Declared per Common Share $ 0.385 $ 0.375
=========== ===========
The accompanying footnotes are an integral part of the financial statements.
SJI-3
SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In Thousands Except for Per Share Data)
Nine Months Ended
September 30,
-------------------------
2003 2002
----------- -----------
Operating Revenues:
Utility $ 337,571 $ 253,897
Nonutility 138,605 76,400
----------- -----------
Total Operating Revenues 476,176 330,297
----------- -----------
Operating Expenses:
Cost of Gas Sold - Utility 231,943 157,902
Cost of Sales - Nonutility 121,231 66,896
Operations 37,581 32,675
Maintenance 4,331 4,627
Depreciation 18,225 16,731
Energy and Other Taxes 8,734 7,408
----------- -----------
Total Operating Expenses 422,045 286,239
----------- -----------
Operating Income 54,131 44,058
----------- -----------
Other Income and Expense:
Equity in Affiliated Companies 549 653
Other (45) 556
----------- -----------
Total Other Income and Expense 504 1,209
----------- -----------
Interest Charges 15,115 15,729
----------- -----------
Income Before Income Taxes 39,520 29,538
Income Taxes 16,345 12,321
----------- -----------
Income from Continuing Operations 23,175 17,217
Discontinued Operations - Net (728) (168)
Cumulative Effect of a Change in Accounting
Principle - Net (426) -
----------- -----------
Net Income Applicable to Common Stock $ 22,021 $ 17,049
=========== ===========
Basic Earnings Per Common Share:
Continuing Operations $ 1.87 $ 1.44
Discontinued Operations - Net (0.06) (0.02)
Cumulative Effect of a Change in Accounting
Principle - Net (0.04) -
----------- -----------
Basic Earnings Per Common Share $ 1.77 $ 1.42
=========== ===========
Average Shares of Common Stock Outstanding - Basic 12,412 11,996
Diluted Earnings Per Common Share:
Continuing Operations $ 1.85 $ 1.43
Discontinued Operations - Net (0.06) (0.02)
Cumulative Effect of a Change in Accounting
Principle - Net (0.03) -
----------- -----------
Diluted Earnings Per Common Share $ 1.76 $ 1.41
=========== ===========
Average Shares of Common Stock Outstanding - Diluted 12,508 12,068
Dividends Declared per Common Share $ 1.155 $ 1.125
=========== ===========
The accompanying footnotes are an integral part of the financial statements.
SJI-4
SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
September 30, December 31,
------------------------------- --------------
2003 2002 2002
-------------- -------------- --------------
Assets
Property, Plant and Equipment:
Utility Plant, at original cost $ 879,842 $ 833,060 $ 846,865
Accumulated Depreciation (250,659) (232,685) (236,813)
Nonutility Property and Equipment, at cost 64,381 50,834 57,950
Accumulated Depreciation (1,941) (1,120) (1,428)
-------------- -------------- --------------
Property, Plant and Equipment - Net 691,623 650,089 666,574
-------------- -------------- --------------
Investments:
Available-for-Sale Securities 4,105 3,475 3,462
Restricted 12,412 4,763 2,080
Investment in Affiliates 3,036 2,894 2,932
-------------- -------------- --------------
Total Investments 19,553 11,132 8,474
-------------- -------------- --------------
Current Assets:
Cash and Cash Equivalents 5,064 4,867 4,291
Accounts Receivable 68,916 50,623 94,105
Unbilled Revenues 6,794 7,504 33,537
Provision for Uncollectibles (3,351) (2,666) (3,574)
Natural Gas in Storage, average cost 84,605 53,739 41,490
Materials and Supplies, average cost 3,494 3,737 4,156
Energy Trading and Related Assets 17,052 25,286 29,089
Prepaid Taxes 8,831 13,938 2,440
Derivatives 2,352 - -
Other Prepayments and Current Assets 6,030 6,585 6,761
-------------- -------------- --------------
Total Current Assets 199,787 163,613 212,295
-------------- -------------- --------------
Regulatory and Other Non-Current Assets:
Deferred Fuel Costs - Net 14,221 47,366 31,594
Other Regulatory Assets 73,351 75,522 73,710
Energy Trading and Related Assets 3,043 4,356 2,767
Derivatives 19 - -
Unamortized Debt Discount and Expense 7,200 6,958 7,086
Other 14,949 6,258 9,939
-------------- -------------- --------------
Total Regulatory and Other Non-Current Assets 112,783 140,460 125,096
-------------- -------------- --------------
Total Assets $ 1,023,746 $ 965,294 $ 1,012,439
============== ============== ==============
The accompanying footnotes are an integral part of the financial statements.
SJI-5
SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
September 30, December 31,
------------------------------- --------------
2003 2002 2002
-------------- -------------- --------------
Capitalization and Liabilities
Common Equity:
Common Stock $ 15,885 $ 15,135 $ 15,258
Premium on Common Stock 167,221 147,513 150,434
Accumulated Other Comprehensive Loss (13,110) (1,581) (5,902)
Retained Earnings 85,621 70,752 78,002
-------------- -------------- --------------
Total Common Equity 255,617 231,819 237,792
-------------- -------------- --------------
Preferred Stock of Subsidiary 1,690 1,690 1,690
-------------- -------------- --------------
Long-Term Debt 328,560 289,446 274,098
-------------- -------------- --------------
Total Capitalization 585,867 522,955 513,580
-------------- -------------- --------------
Current Liabilities:
Notes Payable 96,400 133,550 166,500
Current Maturities of Long-Term Debt 8,423 12,884 10,696
Accounts Payable 64,316 42,535 76,657
Customer Deposits 7,340 6,575 6,924
Environmental Remediation Costs 5,066 11,261 5,104
Taxes Accrued 8,235 2,917 892
Energy Trading and Related Liabilities 20,323 16,353 15,565
Derivatives 436 238 142
Deferred Income Taxes - Net 12,095 27,443 24,818
Interest Accrued and Other Current Liabilities 19,226 12,830 9,334
-------------- -------------- --------------
Total Current Liabilities 241,860 266,586 316,632
-------------- -------------- --------------
Deferred Credits and Other Non-Current Liabilities:
Deferred Income Taxes - Net 106,498 93,518 97,890
Investment Tax Credits 3,558 3,905 3,819
Pension and Other Postretirement Benefits 19,869 17,405 15,828
Environmental Remediation Costs 47,043 41,423 47,051
Energy Trading and Related Liabilities 2,580 3,335 2,095
Derivatives 2,234 2,585 2,431
Other 14,237 13,582 13,113
-------------- -------------- --------------
Total Deferred Credits
and Other Non-Current Liabilities 196,019 175,753 182,227
-------------- -------------- --------------
Commitments and Contingencies (Note 9)
Total Capitalization and Liabilities $ 1,023,746 $ 965,294 $ 1,012,439
============== ============== ==============
The accompanying footnotes are an integral part of the financial statements.
SJI-6
SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In Thousands)
Nine Months Ended
September 30,
--------------------------------
2003 2002
-------------- --------------
Cash Flows from Operating Activities:
Net Income Applicable to Common Stock $ 22,021 $ 17,049
Adjustments to Reconcile Net Income to Cash Flows
Provided by Operating Activities:
Depreciation and Amortization 20,639 18,470
Unrealized Gain on Energy Trading and Related Contracts (1,902) 71
Provision for Losses on Accounts Receivable 1,226 1,469
Revenues and Fuel Costs Deferred - Net 17,373 (8,169)
Deferred and Non-Current Income Taxes and Credits - Net 1,570 9,881
Environmental Remediation Costs - Net 3,366 5,882
Changes in:
Accounts Receivable 50,843 40,237
Inventories (42,453) 6,120
Prepayments and Other Current Assets (731) (2,968)
Prepaid and Accrued Taxes - Net 952 (9,114)
Accounts Payable and Other Accrued Liabilities (2,033) (6,428)
Other - Net 1,084 18
-------------- --------------
Net Cash Provided by Operating Activities 71,955 72,518
-------------- --------------
Cash Flows from Investing Activities:
Investment in Affiliate (104) (443)
Affiliate Repayment of Loan 495 130
Purchase of Available-For-Sale Securities (238) (440)
(Purchase of) Proceeds from Sale of Restricted Investments (10,332) 18,199
Capital Expenditures, Cost of Removal and Salvage (44,422) (61,787)
-------------- --------------
Net Cash Used in Investing Activities (54,601) (44,341)
-------------- --------------
Cash Flows from Financing Activities:
Net Repayments of Lines of Credit (115,100) (18,810)
Proceeds from Issuance of Long-Term Debt 116,000 10,000
Principal Repayments of Long-Term Debt (18,811) (12,733)
Dividends on Common Stock (14,402) (13,515)
Proceeds from Sale of Common Stock 17,361 7,842
Payments for Issuance of Long-Term Debt (1,629) (59)
-------------- --------------
Net Cash Used in Financing Activities (16,581) (27,275)
-------------- --------------
Net Increase in Cash and Cash Equivalents 773 902
Cash and Cash Equivalents at Beginning of Period 4,291 3,965
-------------- --------------
Cash and Cash Equivalents at End of Period $ 5,064 $ 4,867
============== ==============
The accompanying footnotes are an integral part of the financial statements.
SJI-7
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 1. Summary of Significant Accounting Policies:
Consolidation - The condensed consolidated financial statements include
the accounts of South Jersey Industries, Inc. (SJI) and its subsidiaries. We
eliminated all significant intercompany accounts and transactions. SJI
reclassified some previously reported amounts to conform with current year
classifications. In our opinion, the condensed consolidated financial statements
reflect all adjustments needed to fairly present SJI's financial position and
operating results at the dates and for the periods presented. Our businesses are
subject to seasonal fluctuations and, accordingly, this interim financial
information should not be the basis for estimating the full year's operating
results. These financial statements should be read in conjunction with SJI's
Form 10-K and annual report for the fiscal year ended December 31, 2002.
Equity Investments - We classify equity investments purchased as
long-term investments as Available-for-Sale Securities on our condensed
consolidated balance sheets and carry them at their estimated fair value with
any changes in unrealized gains or losses included in Other Comprehensive
Income. SJI, either directly or through its wholly owned subsidiaries, currently
holds a 50% non-controlling interest in two affiliated companies and accounts
for these investments under the equity method. We include the operations of
these affiliated companies in the statements of condensed consolidated income
under the caption Equity in Affiliated Companies.
Estimates and Assumptions - We prepare our financial statements to
conform with generally accepted accounting principles. Management makes
estimates and assumptions that affect the amounts reported in the financial
statements and related disclosures. Therefore, actual results could differ from
those estimates.
Energy Trading Activities & Derivative Instruments - South Jersey
Resources Group, LLC (SJRG) manages its portfolio of purchases and sales, as
well as natural gas in storage, using a variety of instruments that include
forward contracts, swap agreements, option contracts and futures contracts.
Because SJRG's transactions will not necessarily settle physically, SJRG
accounted for these contracts at fair value under Emerging Issues Task Force
(EITF) Issue No. 98-10, "Accounting for Contracts Involved in Energy Trading and
Risk Management Activities" or FASB Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended. Under this method of
accounting, SJRG measures the difference between the contract price and the fair
value of the contracts and records these as Energy Trading and Related Assets or
Energy Trading and Related Liabilities on our condensed consolidated balance
sheets. For the three months ended September 30, 2003 and 2002, we recorded a
net unrealized pre-tax gain (loss) of $1.1 million and $(0.9) million,
respectively. For the nine months ended September 30, 2003 and 2002, we recorded
a net unrealized pre-tax gain (loss) of $1.9 million and $(0.1) million,
respectively. These unrealized gains and losses on energy trading and related
contracts determined under the mark-to-market method are included in Operating
Revenues - Nonutility.
SJI-8
Beginning with the third quarter of 2002, SJI began presenting revenues
and expenses related to SJRG's physical power contracts and energy-related
derivative contracts on a net basis in our condensed consolidated statements of
income consistent with EITF Issue No. 02-03, "Issues Involved in Accounting for
Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy
Trading and Risk Management Activities." Because of the difficulty in obtaining
certain information, we determined this presentation by netting the energy
contract related revenue and expense transactions of SJRG. As a result, we based
certain nonutility costs of sales on the transfer prices between SJRG and South
Jersey Energy Company (SJE). These transfer prices are generally at market.
There is no effect on operating income or net income from the above changes in
presentation.
On October 25, 2002, the EITF rescinded its consensus in Issue No.
98-10 effective for transactions entered into after that date, with a cumulative
effect adjustment for previously existing transactions being recognized in the
quarter beginning January 1, 2003. As a result of the rescission, SJI only
marks-to-market those energy-related contracts that meet the definition of a
derivative in FASB Statement No. 133. Energy-related contracts that do not meet
the definition of a derivative are accounted for using the accrual basis of
accounting. The effect of this change in accounting resulted in a net charge of
$426,338 in the first quarter of 2003 shown as a Cumulative Effect of a Change
in Accounting Principle - Net. Furthermore, management has designated any
contract entered into after December 31, 2002 to hedge physical gas in storage
as a cash flow hedge and accounts for them accordingly. We include these
balances on the condensed consolidated balance sheets under the caption
Derivatives. As of September 30, 2003, we calculated these hedges to be highly
effective; therefore, we record the offset, net of taxes, in Accumulated Other
Comprehensive Loss.
In November 2001, we entered into two interest rate swap contracts. The
first swap effectively provides us with a fixed interest rate of 4.08% on Marina
Energy LLC's (Marina) tax-exempt Series A variable rate bonds for a 10-year
period. The second swap effectively fixed the interest rate of Marina's taxable
Series B variable rate bonds at 4.55% for a 6-year period. The notional amount
of this second swap decreases by $3.0 million per year beginning in December
2005.
In January 2002, Marina issued an additional $10.0 million of taxable
Series B variable rate bonds. In April 2002, we entered into an interest rate
swap contract that effectively fixed the interest rate on these bonds at 4.62%
for a 4-year period. The notional amount of this swap decreases to $8.0 million
in December 2003, then to $3.9 million in December 2004, and terminates in
December 2005.
In May 2003, SJG entered into an interest rate swap contract that
effectively fixed the interest rate at 2.24% through May 20, 2004 on $20.0
million of SJG's debt outstanding under its bank credit agreements.
We entered into interest rate swap agreements to hedge the exposure to
increasing rates with respect to our variable rate debt. The differential to be
paid or received as a result of these swap agreements is accrued as interest
rates change and is recognized as an adjustment to interest expense. We account
for these interest rate swaps as cash flow hedges. As of September 30, 2003 and
2002, the market value of these swaps was $(2.3) and $(2.7) million,
SJI-9
respectively, which represents the amount we would have to pay the counterparty
to terminate these contracts as of those dates. We include these balances on the
condensed consolidated balance sheets under the caption Derivatives. As of
September 30, 2003 and 2002, we calculated the swaps to be highly effective;
therefore, we record the offset to the hedge, net of taxes, in Accumulated Other
Comprehensive Loss.
We determined the fair value of derivative instruments by reference to
quoted market prices of listed contracts, published quotations or quotations
from independent parties.
Stock Compensation - Prior to 2003, SJI valued stock options to
employees using the intrinsic value method. Effective in 2003, SJI adopted the
policy of accounting for this compensation using the fair value based method on
a prospective basis. At this time, SJI has no stock options outstanding.
New Accounting Pronouncements - In January 2003, SJI adopted FASB
Statement No. 143, "Accounting for Asset Retirement Obligations," which
establishes accounting and reporting standards for legal obligations associated
with the retirement of tangible long-lived assets and the associated asset
retirement costs. SJG has certain easements and right-of-way agreements that
qualify as legal obligations under Statement No. 143. However, it is our intent
to maintain these agreements in perpetuity; therefore, no change in SJG's
current accounting practices is required at this time.
SJG recovers certain asset retirement costs through rates charged to
customers as an approved component of depreciation expense. When we retire
depreciable properties, we charge the original cost thereof, plus cost of
removal less salvage, to accumulated depreciation. As of September 30, 2003, SJG
had accrued amounts in excess of actual removal costs incurred totaling $44.4
million which is included in Utility Plant Accumulated Depreciation. The
adoption of this statement did not materially affect SJI's financial condition
or results of operations.
In December 2002, the FASB issued Statement No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure," which was effective for
SJI's 2002 annual financial statements and subsequent interim financial
reporting. This statement provides alternate methods of transitioning for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, it requires prominent disclosures about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. Effective April 1, 2003, SJI adopted the policy
of accounting for this compensation using the fair value based method on a
prospective basis. This method calls for the expensing of the estimated fair
value of a stock option. The provisions of this statement currently have no
impact on SJI's financial statements.
In January 2003, the FASB issued FASB Interpretation No. ("FIN") 46,
"Consolidation of Variable Interest Entities." The Interpretation clarifies the
application of Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to certain entities in which equity investors do not have the
characteristics of controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. Management has evaluated the
impact of the adoption of FIN 46 and has determined that SJG Capital Trust,
which was established for the sole purpose of issuing $35 million of mandatorily
SJI-10
redeemable preferred securities, will no longer be consolidated into the
financial statements of SJI effective July 1, 2003. As a result, SJI now reports
the original equity investment amount in SJG Capital Trust as a separate $1.1
million investment in an affiliate. SJI is also required to report the $36.1
million subordinated debenture to SJG Capital Trust as debt on its condensed
consolidated balance sheet rather than the $35 million of mandatorily redeemable
preferred securities that it had previously reported. Previously reported
amounts have been restated to conform with current reporting requirements. The
adoption of FIN 46 did not have an impact on SJI's net income or retained
earnings for the periods reported.
In April 2003, the FASB issued Statement No. 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities," which is
effective for certain contracts entered into or modified and for hedging
relationships designated after June 30, 2003. The amendments set forth in
Statement No. 149 require that certain contracts with comparable characteristics
be accounted for similarly. We have determined there is no impact on our
financial statements from the provisions of this statement.
In May 2003, the FASB issued Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity."
Statement No. 150 requires that certain types of financial instruments be
reported as liabilities by their issuers. With the adoption of FIN 46, we expect
Statement No. 150 to have no impact on our financial statements.
In August 2003, the EITF reached a consensus on Issue No. 03-11, which
provides guidance on whether to report realized gains or losses on physically
settled derivative contracts not held for trading purposes on a gross basis, and
realized gains or losses on derivative contracts that net settle on a net basis.
The new guidance is applicable for financial statement periods after September
30, 2003. Management believes the portion of SJRG's operations that are not
currently being presented on a gross basis meet the definition of "trading" in
accordance with EITF No. 02-03, and are, therefore, reported net. We expect no
impact to our financial statements related to EITF No. 03-11.
Other Regulatory Assets - Other Regulatory Assets consisted of the
following items (in thousands):
Years September 30 December 31
Remaining 2003 2002 2002
________________________________________________________________________________
Environmental Remediation Costs:
Expended - Net 7 $ 3,058 $ 6,891 $ 6,470
Liability for Future Expenditures - 48,211 48,790 48,211
Income Taxes - Flowthrough
Depreciation 8.0 7,864 8,841 8,597
Postretirement Benefit Costs 9.3 3,496 3,875 3,780
Gross Receipts and Franchise Taxes 3.3 1,478 1,922 1,811
Other - 9,244 5,203 4,841
_________________________________
Total Other Regulatory Assets $ 73,351 $ 75,522 $ 73,710
=================================
SJI-11
Each item separately identified is being recovered through utility rate
charges without a return on investment over the period indicated. The majority
of the assets reflected under the caption "Other Regulatory Assets" are
currently subject to recovery through SJG's Societal Benefits Clause (SBC) as
described in Note 7, Regulatory Actions. As of September 30, 2003, SJG has $7.8
million of deferred costs subject to recovery from ratepayers through its SBC,
excluding environmental remediation costs. All other assets reflected within
this balance sheet caption are currently subject to filings with the New Jersey
Board of Public Utilities (BPU) requesting recovery. Management believes that
all such deferred costs are probable of recovery from ratepayers through future
utility rates.
In addition, we had one significant regulatory liability for
overcollected taxes totaling $3.9 million and $2.4 million, including interest,
as of September 30, 2003 and 2002, respectively. We included these amounts in
the caption "Other" under the heading Deferred Credits and Other Non-Current
Liabilities and they are subject to being returned to ratepayers in future rate
proceedings.
Note 2. Divestitures and Affiliations:
Divestitures - In 1996, Energy & Minerals, Inc. (EMI), an SJI
subsidiary, sold the common stock of The Morie Company, Inc. (Morie), its sand
mining and processing subsidiary.
In 1997, R&T Group, Inc., SJI's construction subsidiary, sold all its
operating assets, except some real estate.
SJI conducts tests annually to estimate the environmental remediation
costs for properties owned by South Jersey Fuel, Inc. (SJF), an EMI subsidiary,
from its previously operated fuel oil business. SJI reports the environmental
remediation activity related to these properties as discontinued operations.
This reporting is consistent with previous years.
SJG operated two retail stores which sold natural gas appliances. The
stores were intended to provide gas customers with access to and choice among
natural gas appliances. In 2001, SJG formally discontinued this merchandising
segment of its operations as those appliances are readily available from other
retailers.
Summarized operating results of the discontinued operations for the
three and nine months ending September 30 are as follows (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
________________________________________
Loss before Income Taxes:
Sand Mining $ (211) $ (16) $ (640) $ (222)
Construction (8) (2) (24) (14)
Fuel Oil (478) (12) (499) (43)
Income Taxes 271 12 435 111
________________________________________
Loss from Discontinued Operations - Net $ (426) $ (18) $ (728) $ (168)
========================================
Loss Per Common Share from
Discontinued Operations - Net $(0.03) $(0.00) $ (0.06) $ (0.02)
========================================
SJI-12
Losses from sand mining are mainly comprised of product liability
litigation associated with Morie's prior activities. Losses from fuel oil are
mainly attributable to a property sale in August 2003.
Affiliations - In January 1999, SJI and Conectiv Solutions, LLC formed
Millennium Account Services, LLC to provide meter reading services in southern
New Jersey.
In June 1999, SJE and Energy East Solutions, Inc. (EES) formed South
Jersey Energy Solutions, LLC (SJES) to market retail electricity and energy
management services. SJES began supplying retail electric during 2000, and
ceased active operations in May 2002. In January 2003, SJES became a wholly
owned subsidiary of SJE when EES redeemed its 50% interest in SJES for the book
value of its investment of $54,686.
In April 2000, SJE and GZA GeoEnvironmental, Inc. formed AirLogics, LLC
to market a jointly developed air monitoring system designed to assist companies
involved in environmental cleanup activities.
In October 2000, SJI formed Marina, a wholly owned subsidiary, to
develop, construct and operate a $56.6 million thermal energy plant. In December
2000, Marina entered into a 20-year contract with Marina District Development
Corporation to supply heat, hot water and cooling to The Borgata Resort in
Atlantic City. The plant began commercial operations in July 2003.
Note 3. Common Stock:
SJI has 20,000,000 shares of authorized Common Stock. The following
shares were issued and outstanding:
2003 2002
_____________________________
Beginning Balance, January 1 12,206,474 11,860,990
New Issues During Year:
Dividend Reinvestment Plan 468,151 243,544
Employees' Stock Ownership Plan 1,511 2,530
Stock Option, Stock Appreciation Rights
and Restricted Stock Award Plan 32,005 590
_____________________________
Ending Balance, September 30 12,708,141 12,107,654
=============================
We credited the par value ($1.25 per share) of stock issued in 2003 and
2002 to Common Stock. We credited the net excess over par value of approximately
$16.8 million and $7.6 million, respectively, to Premium on Common Stock.
SJI-13
Earnings Per Common Share - We present basic EPS based on the
weighted-average number of common shares outstanding. EPS is presented in
accordance with FASB Statement No. 128, "Earnings Per Share," which establishes
standards for computing and presenting basic and diluted EPS. The incremental
shares required for inclusion in the denominator for the diluted EPS calculation
were 96,555 and 71,861 shares for the nine months ended September 30, 2003 and
2002, respectively. Because they would have an antidilutive effect on EPS,
incremental shares of 105,783 and 98,277 for the three months ended September
30, 2003 and 2002, respectively, were not included in the denominator for a
diluted EPS calculation. These shares relate to restricted stock and were
calculated using the treasury stock method.
Stock Option, Stock Appreciation Rights and Restricted Stock Award Plan
- - Under this plan, up to an aggregate of 306,000 shares may be issued to SJI's
officers and other key employees. No options or stock appreciation rights may be
granted under the Plan after November 22, 2006. At September 30, 2003 and 2002,
SJI had no options outstanding. No options were granted in 2003 or 2002. No
stock appreciation rights were issued under the Plan. In 1999, we amended the
Plan to include restricted stock awards. In 2003 and 2002, we granted 30,810 and
23,839 restricted shares, respectively. These restricted shares vest over a
3-year period and are subject to SJI's achieving certain performance targets.
Dividend Reinvestment Plan (DRP) and Employees' Stock Ownership Plan
(ESOP) - Newly issued shares of common stock offered through the DRP are issued
directly by SJI. All shares offered through the ESOP are also issued directly by
SJI. As of September 30, 2003, 697,556 and 14,055 shares of authorized, but
unissued, common stock were registered for future issuance to the DRP and ESOP,
respectively.
Note 4. Financial Instruments:
Restricted Investments - In accordance with the terms of Marina's bond
agreements, we are required to invest unused proceeds in high-quality, highly
liquid investments pending approved construction expenditures. As of September
30, 2003 and 2002, these residual proceeds totaled $-0- and $4.8 million,
respectively.
Margin Account - SJRG maintains a margin account with a national
investment firm to support its energy trading activities. As of September 30,
2003 and 2002, the account reflected a $12.4 million and $0.5 million balance
due to changes in the market value of outstanding contracts.
Note 5. Segments of Business:
Information about SJI's operations in different industry segments for
the three and nine months ended September 30 is presented below (in thousands):
SJI-14
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
Operating Revenues:
Gas Utility Operations $ 58,490 $ 51,765 $ 373,973 $270,954
Wholesale Gas Operations 2,322 561 8,320 4,061
Retail Gas and Other Operations 30,145 19,761 124,802 72,816
On-Site Energy Production 5,447 294 7,447 365
____________________________________________________
Subtotal 96,404 72,381 514,542 348,196
Intersegment Sales (6,269) (3,315) (38,366) (17,899)
____________________________________________________
Total Operating Revenues $ 90,135 $ 69,066 $ 476,176 $ 330,297
====================================================
Operating Income:
Gas Utility Operations $ (1,047) $ (992) $ 43,169 $ 37,643
Wholesale Gas Operations 2,055 323 5,326 3,663
Retail Gas and Other Operations 70 348 3,951 2,931
On-Site Energy Production 1,844 117 2,323 138
General Corporate (207) (153) (638) (317)
___________________________________________________
Total Operating Income $ 2,715 $ (357) $ 54,131 $ 44,058
===================================================
Depreciation and Amortization:
Gas Utility Operations $ 7,192 $ 6,162 $ 20,008 $ 18,366
Wholesale Gas Operations 3 3 9 9
Retail Gas and Other Operations 28 21 77 63
On-Site Energy Production 467 5 524 5
Discontinued Operations 7 10 21 27
___________________________________________________
Total Depreciation and Amortization $ 7,697 $ 6,201 $ 20,639 $ 18,470
===================================================
Property Additions:
Gas Utility Operations $ 13,296 $ 12,947 $ 36,956 $ 34,314
Wholesale Gas Operations 2 - 2 -
Retail Gas and Other Operations 36 8 192 63
On-Site Energy Production 1,520 8,416 6,806 26,714
__________________________________________________
Total Property Additions $ 14,854 $ 21,371 $ 43,956 $ 61,091
==================================================
Identifiable Assets:
Gas Utility Operations $ 863,078 $ 851,288
Wholesale Gas Operations 63,013 42,436
Retail Gas and Other Operations 31,669 26,970
On-Site Energy Production 71,437 55,690
Discontinued Operations 2,354 2,350
___________________________
Subtotal 1,031,551 978,734
Corporate Assets 41,437 34,214
Intersegment Assets (49,242) (47,654)
___________________________
Total Identifiable Assets $ 1,023,746 $ 965,294
===========================
SJI-15
Gas Utility Operations consists primarily of natural gas distribution
to residential, commercial and industrial customers. Wholesale Gas Operations
include SJRG's activities. Retail Gas and Other Operations include natural gas
and electricity acquisition and transportation service companies. On-Site Energy
Production consists of Marina's construction and related financing activities.
SJI's interest expense relates primarily to SJG's and Marina's
borrowing and financing activities. Interest income is essentially derived from
borrowings between the subsidiaries and is eliminated during consolidation.
Note 6. Comprehensive Income:
The components of comprehensive income for the three and nine months
ended September 30 are as follows (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
_______________________________________
Net (Loss) Income Applicable to
Common Stock $ (2,044) $ (3,240) $ 22,021 $ 17,049
Other Comprehensive Income (Loss):
Change in Fair Value of Investments - Net* 83 - 236 -
Change in Fair Value of Energy Trading
and Related Assets / Liabilities - Net* (7,436) 1,212 (7,622) 2,077
Change in Fair Value of Interest Rate
Swaps - Net * 396 (1,161) 177 (1,970)
______________________________________
Total Other Comprehensive (Loss) Income (6,957) 51 (7,209) 107
______________________________________
Comprehensive (Loss) Income $ (9,001) $ (3,189) $ 14,812 $17,156
======================================
* Determined using a combined statutory tax rate of 40.85%.
Note 7. Regulatory Actions:
In January 1997, the BPU granted SJG rate relief, which was predicated
in part, upon a 9.62% rate of return on rate base, which included an 11.25%
return on common equity. Additionally, our threshold for sharing pre-tax margins
generated by interruptible and off-system sales and transportation increased.
Currently, SJG keeps 100% of pre-tax margins up to the threshold level of $7.8
million. The next $750,000 is credited to customers through the Basic Gas Supply
Service ("BGSS") clause. Thereafter, SJG keeps 20% of the pre-tax margins as we
have historically.
Effective January 10, 2000, the BPU approved full unbundling of SJG's
system. This allows all natural gas consumers to select their natural gas
commodity supplier. As of September 30, 2003, 98,149 of SJG's residential
customers were purchasing their gas commodity from someone other than SJG.
SJI-16
Customers choosing to purchase natural gas from providers other than the utility
are charged for the cost of gas by the marketer, not the utility. The resulting
decrease in SJG's revenues is offset by a corresponding decrease in gas costs.
While customer choice can reduce utility revenues, it does not negatively affect
SJG's net income or financial condition. The BPU continues to allow for full
recovery of natural gas costs through the BGSS. Other costs of service,
including deferred costs, are recovered through base rates.
In November 2001, SJG filed for a $2.7 million rate increase to recover
the cash related to a 3-year net deficiency in the Temperature Adjustment Clause
(TAC). Additionally, in September 2002, SJG filed for an $8.6 million rate
increase to recover the cash related to a TAC deficiency resulting from
warmer-than-normal weather for the 2001-2002 winter. As a result of the
colder-than-normal 2002-2003 winter, the cumulative TAC deficiency decreased to
$5.7 million. In August 2003, the BPU approved the recovery of the $5.7 million
TAC deficiency, effective September 1, 2003.
In December 2001, the BPU approved recovery of SJG's October 31, 2001
underrecovered gas cost balance of $48.9 million plus accrued interest since
April 1, 2001 at a rate of 5.75%. As of September 30, 2003, the remaining
deferred underrecovered balance totaled $20.2 million.
During 2002, the BPU convened a gas policy group to address BGSS, which
is the gas supply service being provided by the natural gas utility. In December
2002, the BPU approved the proposed BGSS price structure. The BGSS approved
price structure replaced the Levelized Gas Adjustment Clause (LGAC) pricing
structure. The LGAC was structured to reset gas charges to consumers once per
year. The BGSS resets gas prices monthly for larger customers, and for smaller
customers permits multiple resets each year, if certain conditions are met. With
the implementation of BGSS in March 2003, customers are able to make more
informed decisions about choosing an alternate supplier by having a utility
pricing structure that more currently reflects market conditions. Further, BGSS
provides SJG with more pricing flexibility, through self-implementing rate
changes under certain conditions and limitations, resulting in the reduction of
over/under-recoveries. LGAC related mechanisms, such as deferred accounting
treatment, the sharing of pre-tax margins generated by interruptible and
off-system sales and transportation, and the allowance for full recovery of
natural gas costs, remain in place under BGSS.
In August 2002, SJG filed for a SBC rate increase. The SBC recovers
costs related to BPU mandated programs and environmental remediation costs that
are recovered through SJG's Remediation Adjustment Clause (RAC); energy
efficiency and renewable energy program costs that are recovered through SJG's
New Jersey Clean Energy Programs; consumer education program costs; and the
interim low income program costs. In August 2003, the BPU approved a $6.7
million increase to SJG's SBC, effective September 1, 2003. This approval
increases the current annual recovery level of $6.7 million to $13.4 million.
Also in August 2002, SJG filed a petition with the BPU to transfer its
appliance service business from the regulated utility into a newly created
unregulated company. As filed, the newly created company would have the
flexibility to be more responsive to competition and customer needs by expanding
and modifying its service offerings in an unregulated environment.
SJI-17
In September 2002, SJG filed with the BPU to maintain its current BGSS
rate through October 2003. However, due to price increases in the wholesale
market, in February 2003 SJG filed an amendment to the September 2002 filing. In
April 2003, the BPU approved a $16.6 million increase to SJG's annual gas costs
revenues.
In March 2003, the BPU approved a statewide Universal Service Fund
(USF) program on a permanent basis. In June 2003, the BPU established a
statewide program through which funds for the USF and Lifeline Credit and
Tenants Assistance (Lifeline) Programs would be collected from customers of all
electric and gas utilities in the state. The BPU ordered that utility rates be
set to recover a total statewide USF budget of $33 million, and a total Lifeline
budget of $72 million. Recovery rates for both programs were implemented on
August 1, 2003.
In July 2003, SJG made its annual BGSS filing, as amended, with the
BPU. Due to further price increases in the wholesale market, SJG filed for a
$24.0 million increase to its annual gas cost revenues. In August 2003, the BPU
approved SJG's proposed $24.0 million price increase on a provisional basis,
subject to refund with interest, effective September 1, 2003.
In August 2003, SJG filed a base rate case with the BPU to increase its
base rate in an effort to obtain a certain level of return on its investment of
capital. SJG expects the rate case to be concluded some time during 2004. SJG
has not sought a base rate increase from the BPU since the implementation of its
base rate case approval in January 1997.
Filings and petitions described above are still pending unless
otherwise indicated.
Note 8. Retained Earnings:
Restrictions exist under various loan agreements regarding the amount
of cash dividends or other distributions that SJG may pay on its common stock.
As of September 30, 2003, SJG's restrictions do not affect the amount that may
be distributed from SJI's retained earnings.
Note 9. Commitments and Contingencies:
Construction and Environmental - SJI's estimated net cost of
construction and environmental remediation programs for 2003 totals $57.8
million. Commitments were made regarding some of these programs.
Pending Litigation - SJI is subject to claims arising in the ordinary
course of business and other legal proceedings. We accrue liabilities related to
these claims when we can determine the amount or range of amounts of likely
settlement costs for those claims. Among other actions, SJI has been named in
certain product liability claims related to our former sand mining subsidiary.
Management does not currently anticipate the disposition of any known claims to
have a material adverse effect on SJI's financial position, results of
operations or liquidity.
Parental Guarantees - In 2002, the FASB released Interpretation No. 45
(FIN 45) "Guarantor's Accounting and Disclosure Requirements for Guarantees,
SJI-18
Including Indirect Guarantees of Indebtedness of Others." FIN 45 requires
companies to disclose the nature of its guarantees or indemnification agreements
for interim and year-end financial statements ending after December 15, 2002. As
of September 30, 2003, SJI had issued $131.8 million of parental guarantees on
behalf of its subsidiaries. Of this total, $89.0 million expire within one year,
$106.0 million expire within two years and $25.8 million presently have no
expiration date. The vast majority of these guarantees were issued as guarantees
of payment to third parties with whom our subsidiaries have commodity supply
contracts. As of September 30, 2003, these guarantees support $20.2 million of
the Accounts Payable recorded on our condensed consolidated balance sheet. As
part of our risk management policy, we also require parental guarantees from
trading counterparties as applicable. These arrangements are typical in our
industry. SJI has also guaranteed $7.3 million related to Marina's construction
activity.
Standby Letters of Credit - SJI provided a $17 million standby letter
of credit to Marina District Development Corporation in support of Marina's
contractual obligations to construct the thermal energy plant and to supply
heat, hot water and cooling to The Borgata Resort. This letter of credit was
reduced to $6.4 million as of September 30, 2003.
As of September 30, 2003, SJI also provided $46 million of standby
letters of credit from commercial banks supporting the variable rate demand
bonds issued through the New Jersey Economic Development Authority used to
finance Marina's thermal plant project.
Also as of September 30, 2003, SJI has issued two letters of credit
totaling $800,000 to two different utilities. These letters were posted to
enable SJE to market retail electricity within the respective utilities' service
territories.
Environmental Remediation Costs - SJI incurred and recorded costs for
environmental clean up of sites where SJG or its predecessors operated gas
manufacturing plants. SJG stopped manufacturing gas in the 1950s. SJI and some
of its nonutility subsidiaries also recorded costs for environmental clean up of
sites where SJF previously operated a fuel oil business and Morie maintained
equipment, fueling stations and storage.
SJI successfully entered into settlements with all of its historic
comprehensive general liability carriers regarding the environmental remediation
expenditures at the SJG sites. Also, SJG purchased a Cleanup Cost Cap Insurance
Policy limiting the amount of remediation expenditures that SJG will be required
to make at 11 of its sites. This Policy will be in force until 2024 at 10 sites
and until 2029 at one site. The minimum future cost estimate discussed below is
not reduced by projected insurance recoveries from the Cleanup Cost Cap
Insurance Policy.
Since the early 1980s, SJI accrued environmental remediation costs of
$140.0 million, of which $87.8 million has been spent as of September 30, 2003.
With the assistance of a consulting firm, we estimate that future costs to clean
up SJG's sites will range from $48.2 million to $143.9 million. We recorded the
lower end of this range as a liability. It is reflected on the 2003 condensed
consolidated balance sheet under the captions Current Liabilities and Deferred
Credits and Other Non-Current Liabilities. Recorded amounts include estimated
costs based on projected investigation and remediation work plans using existing
technologies. Actual costs could differ from the estimates due to the long-term
SJI-19
nature of the projects, changing technology, government regulations and
site-specific requirements. The major portion of accrued environmental costs
relate to the clean up of SJG's former gas manufacturing sites.
SJG has two regulatory assets associated with environmental costs. The
first asset is titled Environmental Remediation Cost: Expended - Net. These
expenditures represent what was actually spent to clean up former gas
manufacturing plant sites. These costs meet the requirements of Statement No.
71. The BPU allows SJG to recover expenditures through the RAC.
The other asset titled Environmental Remediation Cost: Liability for
Future Expenditures relates to estimated future expenditures determined under
the guidance of FASB Statement No. 5, "Accounting for Contingencies." We
recorded this amount, which relates to former manufactured gas plant sites, as a
deferred debit with the corresponding amount reflected on the condensed
consolidated balance sheets under the captions Current Liabilities and Deferred
Credits and Other Non-Current Liabilities. The deferred debit is a regulatory
asset under Statement No. 71. The BPU's intent, evidenced by current practice,
is to allow SJG to recover the deferred costs over 7-year periods after they are
spent.
As of September 30, 2003, we reflected SJG's unamortized remediation
costs of $3.1 million on the condensed consolidated balance sheet under the
caption Regulatory Assets. Since implementing the RAC in 1992, SJG has recovered
$39.4 million through rates.
With Morie's sale, EMI assumed responsibility for environmental
liabilities estimated between $2.7 million and $8.8 million. The information
available on these sites is sufficient only to establish a range of probable
liability and no point within the range is more likely than any other.
Therefore, EMI continues to accrue the lower end of the range. Changes in the
accrual are included in the statements of condensed consolidated income under
the caption Loss from Discontinued Operations - Net.
SJI and SJF estimated their potential exposure for the future
remediation of four sites where fuel oil operations existed years ago. Estimates
for SJI's site range between $0.1 million and $0.3 million, while SJF's
estimated liability ranges from $1.1 million to $4.9 million for its three
sites. We recorded the lower ends of these ranges on the condensed consolidated
balance sheet under Current Liabilities and Deferred Credits and Other
Non-Current Liabilities as of September 30, 2003.
Note 10. Long-Term Debt:
On July 16, 2003, SJG issued $85.5 million of debt under its Medium
Term Note program established in 2002. On September 17, 2003, SJG issued an
additional $24.5 million of Medium Term Notes. A remainder of $40.0 million is
authorized to be issued under this program through July 31, 2005. The debt
issued has maturities of 10, 11, 13, 14 and 30 years, with a weighted average
maturity of 17 years at a weighted average interest rate of 4.97%. Proceeds were
used to refinance short-term borrowings under commercial bank credit facilities.
SJI-20
Note 11. Subsequent Events:
On October 3, 2003, SJG called for the redemption of its $36.1 million
subordinated debentures issued to its affiliate, SJG Capital Trust. This
redemption was effective November 5, 2003, at which time SJG Capital Trust
redeemed all of its $35 million of mandatorily redeemable preferred securities.
On October 14, 2003, SJG redeemed its 6.95% First Mortgage Bonds in
their entirety. The principal amount of the redemption totaled $31.9 million.
SJG paid a premium of $1.0 million in conjunction with the early redemption.
SJI-21
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview
South Jersey Industries, Inc. (SJI) is an energy services holding
company that provides a variety of products and services through the following
wholly owned subsidiaries:
1) South Jersey Gas Company (SJG) is a regulated natural gas utility.
SJG distributes natural gas in the seven southernmost counties of New Jersey to
299,609 customers at September 30, 2003 compared with 291,733 customers at
September 30, 2002. SJG also:
o sells natural gas and pipeline transportation capacity (off-system
sales) on a wholesale basis to various customers on the interstate
pipeline system;
o transports natural gas purchased directly from producers or suppliers
for its own sales and for some of its customers; and
o services appliances via the sale of appliance warranty programs, as
well as on a time and materials basis.
2) South Jersey Energy Company (SJE) acquires and markets natural gas
and electricity to retail end users and provides total energy management
services to commercial and industrial customers. SJE has one subsidiary, SJ
EnerTrade (EnerTrade), that formerly provided services for natural gas sales to
the casino industry in Atlantic City, N.J. and is now inactive. SJE also markets
an air quality monitoring system through AirLogics, LLC. SJE and GZA
GeoEnvironmental, Inc., an environmental consulting firm, each have a 50% equity
interest in AirLogics.
3) South Jersey Resources Group, LLC (SJRG) markets wholesale natural
gas storage, commodity and transportation in the mid-Atlantic and southern
states. SJRG also conducts price-risk management activities.
4) Marina Energy LLC (Marina) develops and operates energy-related
projects in southern New Jersey. Marina's largest project, the development of a
facility to provide cooling, heating and hot water to The Borgata Resort in
Atlantic City, began commercial operations in July 2003.
SJI also has a joint venture investment with Conectiv Solutions, LLC in
Millennium Account Services, LLC (Millennium). Millennium provides meter reading
services to SJG and Conectiv Power Delivery in southern New Jersey.
Forward-Looking Statements - This report contains certain
forward-looking statements concerning projected financial and operating
performance, future plans and courses of action and future economic conditions.
All statements in this report other than statements of historical fact are
forward-looking statements. These forward-looking statements are made based upon
SJI-22
management's expectations and beliefs concerning future events impacting the
company and involve a number of risks and uncertainties. We caution that
forward-looking statements are not guarantees and actual results could differ
materially from those expressed or implied in the forward-looking statements.
Also, in making forward-looking statements, we assume no duty to update these
statements should expectations change or actual results and events differ from
current expectations.
A number of factors could cause our actual results to differ materially
from those anticipated including, but not limited to, the following: general
economic conditions on an international, national, state and local level;
weather conditions in our marketing areas; changes in commodity costs; changes
in the availability of natural gas; regulatory and court decisions; competition
in our utility and nonutility activities; the availability and cost of capital;
our ability to maintain existing joint ventures to take advantage of marketing
opportunities; costs and effects of legal proceedings and environmental
liabilities; the failure of customers or suppliers to fulfill their contractual
obligations; and changes in business strategies.
Estimates and Assumptions - As described in the footnotes to our
condensed consolidated financial statements, management must make estimates and
assumptions that affect the amounts reported in the financial statements and
related disclosures. Actual results could differ from those estimates. Three
types of transactions presented in our condensed consolidated financial
statements require a significant amount of judgment and estimation. These relate
to regulatory assets, energy trading activities and environmental remediation
costs.
The New Jersey Board of Public Utilities (BPU) has reviewed and
approved, through specific orders, most of the items shown as regulatory assets.
Other items represent costs that were not yet approved by the BPU for recovery,
but are the subject of current or future filings. In recording these costs as
regulatory assets, management believes the costs are probable of recovery under
existing rate-making concepts that are embodied in current rate orders received
by SJG. However, ultimate recovery is subject to BPU approval.
SJI recognizes assets or liabilities for the energy-related contracts
entered into by its non-regulated subsidiary, SJRG, when the contracts are
executed. We record contracts at their fair value in accordance with FASB
Statement No. 133. We adjust the fair value of the contracts each reporting
period for changes in the market. We derive the fair value for most of the
energy-related contracts from markets where the contracts are actively traded
and quoted. For other contracts, SJI uses published market surveys and in
certain cases, independent parties to obtain quotes concerning the contracts'
current value. Market quotes tend to be more plentiful for contracts maturing in
two years or less. Very few of our contracts extend beyond two years.
An outside consulting firm assists us in estimating future costs for
environmental remediation activities. We estimate future costs based on
projected investigation and work plans using existing technologies. Developing a
single reliable estimation point is not feasible because of the amount of
uncertainty involved in the nature of projected remediation efforts and the long
period over which remediation efforts will continue. Therefore, we estimate the
range of future costs at $52.1 million to $157.9 million. In preparing financial
statements, SJI records liabilities for future costs using the lower end of the
range. We update estimates each year to take into account past efforts, changes
in work plans and remediation technologies.
SJI-23
Revenue Recognition - SJG, SJE and SJRG bill customers monthly for gas
delivered and recognize those revenues during the month. For SJG and SJE retail
customers we do not bill at the end of each month; we make an accrual to
recognize revenues for gas delivered from the date of the last meter reading to
the end of the month. We bill SJG customers at rates approved by the BPU. SJE
and SJRG customers are billed at rates negotiated between the parties.
We defer and recognize revenues related to SJG's appliance warranty
contracts over the full 12-month term of the contract as earned.
The BPU allows SJG to recover the excess cost of gas sold over the cost
included in rates through the Basic Gas Supply Service (BGSS) price structure
(formerly known as the Levelized Gas Adjustment Clause). SJG defers
over/under-recoveries of gas costs and includes them in subsequent adjustments
to the BGSS rate or other similar rate recovery mechanism. These adjustments
result in over/under-recoveries of gas costs being included in rates during
future periods. As a result of these deferrals, utility revenue recognition does
not directly translate to profitability. While we realize profits on gas sales
during the month of providing the utility service, significant shifts in revenue
recognition may result from the various recovery clauses approved by the BPU
(See Regulatory Matters) without shifting profits between periods, as these
clauses provide for recovery of costs on a dollar-for-dollar basis.
New Accounting Pronouncements - In January 2003, SJI adopted Statement
No. 143, "Accounting for Asset Retirement Obligations," which establishes
accounting and reporting standards for legal obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. SJG has certain easements and right-of-way agreements that qualify as
legal obligations under Statement No. 143. However, SJG intends to maintain
these agreements in perpetuity; therefore, no change in its current accounting
practices is required at this time.
SJG recovers certain asset retirement costs through rates charged to
customers as an approved component of depreciation expense. When SJG retires
depreciable properties, we charge the original cost thereof, plus cost of
removal less salvage, to accumulated depreciation. As of September 30, 2003, SJG
had accrued amounts in excess of actual removal costs incurred totaling $44.4
million which is included in utility plant accumulated depreciation. We do not
expect the adoption of this statement to materially affect SJI's financial
condition or results of operations.
In December 2002, the FASB issued Statement No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure," which is effective for
SJI's 2002 annual financial statements and subsequent interim financial
reporting. This statement provides alternate methods of transitioning for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, it requires prominent disclosures about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. Effective April 1, 2003, SJI adopted the policy
of accounting for this compensation using the fair value based method on a
prospective basis. This method calls for the expensing of the estimated fair
value of a stock option. The provisions of this statement currently have no
impact on SJI's financial statements.
SJI-24
In January 2003, the FASB issued FASB Interpretation No. ("FIN") 46,
"Consolidation of Variable Interest Entities." The Interpretation clarifies the
application of Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to certain entities in which equity investors do not have the
characteristics of controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. Management has evaluated the
impact of the adoption of FIN 46 and has determined that SJG Capital Trust,
which was established for the sole purpose of issuing $35 million of mandatorily
redeemable preferred securities, will no longer be consolidated into the
financial statements of SJI effective July 1, 2003. As a result, SJI now reports
the investment in SJG's Capital Trust as a separate $1.1 million investment in
an affiliate, the original equity investment amount in SJG Capital Trust. SJI is
also required to report the $36.1 million subordinated debenture to SJG Capital
Trust as debt on its condensed consolidated balance sheet rather than the $35
million of mandatorily redeemable preferred securities that it had previously
reported. Previously reported amounts have been restated to conform with current
reporting requirements. The adoption of FIN 46 did not have an impact on SJI's
net income or retained earnings for the periods reported.
In April 2003, the FASB issued Statement No. 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities," which is
effective for certain contracts entered into or modified and for hedging
relationships designated after June 30, 2003. The amendments set forth in
Statement No. 149 require that certain contracts with comparable characteristics
be accounted for similarly. We have determined there is no impact on our
financial statements from the provisions of this statement.
In May 2003, the FASB issued Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity."
Statement No. 150 requires that certain types of financial instruments be
reported as liabilities by their issuers. With the adoption of FIN 46, we expect
Statement No. 150 to have no impact on our financial statements.
In August 2003, the EITF reached a consensus on Issue No. 03-11, which
provides guidance on whether to report realized gains or losses on physically
settled derivative contracts not held for trading purposes on a gross basis, and
realized gains or losses on derivative contracts that net settle on a net basis.
The new guidance is applicable for financial statement periods after September
30, 2003. Management believes the portion of SJRG's operations that are not
currently being presented on a gross basis meet the definition of "trading" in
accordance with EITF No. 02-03, and are, therefore, reported net. We expect no
impact to our financial statements related to EITF No. 03-11.
Mandatorily Redeemable Preferred Securities - SJG's statutory trust
affiliate, SJG Capital Trust, currently has $35 million of 8.35% SJG-Guaranteed
Mandatorily Redeemable Preferred Securities outstanding. The securities
currently trade on the New York Stock Exchange under the symbol SJI.T. In
conjunction with the issuance of the Preferred Securities, SJG issued $36.1
million of subordinated debentures to SJG Capital Trust. The $36.1 million
subordinated debentures issued to SJG Capital Trust are reflected as liabilities
effective July 1, 2003.
On October 3, 2003, SJG called for the redemption of its $36.1 million
subordinated debentures issued to its affiliate, SJG Capital Trust. This
redemption was effective November 5, 2003, at which time SJG Capital Trust
SJI-25
redeemed all of its $35 million of mandatorily redeemable preferred securities.
Customer Choice Legislation - All residential natural gas customers in
New Jersey can choose their gas supplier under the terms of the Electric
Discount and Energy Competition Act of 1999. As of September 30, 2003, 98,149
SJG residential customers chose a natural gas commodity supplier other than the
utility. This number increased from 79,969 at September 30, 2002 as marketers
were able to offer natural gas at prices competitive with those available under
regulated utility tariffs. Customers purchasing natural gas from providers other
than SJG are charged for gas costs by the marketer, not SJG. The resulting
decrease in SJG's revenues is offset by a corresponding decrease in SJG's gas
costs. While customer choice can reduce utility revenues, it does not negatively
affect SJG's net income or financial condition. The BPU continues to allow for
full recovery of natural gas costs through the Basic Gas Supply Service Clause
as well as other costs of service including deferred costs, through tariffs. SJI
has benefited from customer choice legislation as SJE has successfully competed
for and profited from its gas commodity customers.
Temperature Adjustment Clause - SJG's Board of Public Utilities
approved Temperature Adjustment Clause (TAC) had the following impacts on 2003
and 2002 third quarter and nine months net earnings:
2003 2002
______________ _____________
TAC Adjustment (Decrease) Increase to
Net Income (in thousands)
Quarter Ended September 30 $ (38) $ -
Nine Months Ended September 30 $ (2,415) $ 3,249
The clause is designed to mitigate the effect of variations in heating
season temperatures from historical norms for both SJG and its customers. While
the revenue and income impacts of TAC adjustments are recorded as incurred, cash
inflows or outflows directly attributable to TAC adjustments generally do not
begin until the next TAC year. Each TAC year begins October 1.
Operating Revenues - Utility - Revenues increased $4.3 million and $83.7 million
in the third quarter and for the nine months ended September 30, 2003,
respectively, compared with the prior year periods. These increases were
primarily due to three factors. First, weather for the nine months ended
September 30, 2003 was 30.8% colder than the respective prior year period.
Weather was not a material factor on third quarter revenues. Second, off-system
sales revenues increased due to higher prices for natural gas sold in 2003 than
in the prior year. Third, SJG's total customers increased from 291,733 as of
September 30, 2002 to 299,609 as of September 30, 2003. Partially offsetting the
effect of these factors was a 23% increase in the number of residential
customers purchasing their gas from a source other than SJG. The decline in
customers who purchased their natural gas from SJG directly impacted utility
revenues. However, since gas costs are passed on directly to customers without
any profit margin added by SJG, the increased customer usage of gas marketers
did not impact SJG's profitability.
SJI-26
As a result of SJG's Temperature Adjustment Clause, revenues from
utility ratepayers are closely tied to 20-year normal temperatures calculated
under the clause and not actual temperatures. While the clause significantly
reduces fluctuations in revenues related to temperature, as a general rule,
revenues continue to be positively impacted by colder weather and negatively
impacted by warmer weather. During the nine months ended September 30, 2003,
weather was 30.8% colder than in 2002 and 9.2% colder than the 20-year TAC
average.
The following is a comparison of operating revenue and throughput for
the three and nine month periods ended September 30, 2003 vs. the same periods
ended September 30, 2002.
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
_________________________________________
Operating Revenues (Thousands):
Firm
Residential $ 16,523 $ 13,612 $ 131,529 $ 114,844
Commercial 5,595 5,560 40,311 34,215
Industrial 661 535 4,002 3,082
Cogeneration & Electric Generation 2,384 4,136 5,675 7,715
Firm Transportation 8,933 7,274 50,135 29,932
_________________________________________
Total Firm Operating Revenues 34,096 31,117 231,652 189,788
_________________________________________
Interruptible 268 207 1,317 753
Interruptible Transportation 252 298 747 1,100
Off-System 21,532 18,131 133,247 72,792
Capacity Release & Storage 1,559 1,213 4,372 4,043
Other 783 798 2,638 2,478
Intercompany Sales (5,223) (2,825) (36,402) (17,057)
_________________________________________
Total Operating Revenues $ 53,267 $ 48,939 $ 337,571 $ 253,897
=========================================
Throughput (MMcf):
Firm
Residential 912 891 11,416 10,262
Commercial 395 478 3,917 3,496
Industrial 13 17 161 132
Cogeneration & Electric Generation 341 1,000 689 1,722
Firm Transportation 5,541 5,138 23,031 17,932
_________________________________________
Total Firm Throughput 7,202 7,524 39,214 33,544
_________________________________________
Interruptible 38 37 170 140
Interruptible Transportation 511 619 1,469 2,259
Off-System 3,945 5,227 19,419 21,470
Capacity Release & Storage 12,613 12,640 29,008 29,784
_________________________________________
Total Throughput 24,309 26,047 89,280 87,197
=========================================
Total gas throughput decreased 6.7% to 24.3 billion cubic feet (Bcf)
in the third quarter and increased 2.4% to 89.3 Bcf for the nine months ended
SJI-27
September 30, 2003 compared with the respective prior year periods. The higher
throughput year-to-date was primarily due to the addition of 7,876 customers and
colder temperatures experienced in 2003. The increase in year-to-date firm
transportation throughput reflected the increasing number of households
purchasing their gas from suppliers other than SJG.
Operating Revenues - Nonutility - Nonutility operating revenues increased by
$16.7 million and $62.2 million for the third quarter and first nine months of
2003, respectively, compared to the same periods of 2002. Most of the increase
was due to the significant customer growth experienced by SJE, evidenced by the
addition of over 21,200 residential and 2,600 commercial natural gas customers
over the last twelve months. Higher natural gas prices and significantly colder
weather primarily in the first quarter also contributed to this increase.
Cost of Gas Sold - Utility - Gas purchased for resale increased $3.3 million and
$74.0 million for the third quarter and for the nine months ended September 30,
2003, respectively, compared with the same periods in 2002 due principally to an
increase in firm gas sales volume and higher gas costs for off-system sales.
Colder weather was the main cause of the increase in firm gas sales volume;
however, this was partially offset by the migration of firm gas sales customers
to transportation service. SJG's gas cost during the third quarter of 2003
averaged $6.83 per decatherm (dt) compared with $4.59/dt in 2002. During the
nine months ended September 30, 2003, gas costs averaged $6.67/dt compared with
$4.59/dt in 2002. Unlike gas costs associated with off-system sales, changes in
the unit cost of gas sold to utility ratepayers do not directly affect cost of
gas sold. We defer fluctuations in gas costs to ratepayers not reflected in
current rates in future periods under a BPU-approved Basic Gas Supply Service
price structure, formerly known as the Levelized Gas Adjustment Clause. Gas
supply sources include contract and open-market purchases. SJG secures and
maintains its own gas supplies to serve its sales customers. We do not
anticipate any difficulty renewing or replacing expiring contracts under
substantially similar terms and conditions.
Cost of Sales - Nonutility - Cost of sales - nonutility increased $12.1 million
and $54.3 million for the third quarter and nine months ended September 30, 2003
compared to the same periods of 2002 due mainly to SJE's customer growth, colder
temperatures and higher gas prices as described in the Operating Revenues -
Nonutility section.
Operations - A summary of net changes in operations (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
2003 vs. 2002 2003 vs. 2002
______________________________________
Utility:
Other Production Expense $ 12 $ 44
Transmission 2 46
Distribution (224) 70
Customer Accounts and Services 110 (76)
Sales 19 104
Administration and General 693 1,642
Nonutility 1,298 3,076
________________________________
Total Operations $ 1,910 $ 4,906
================================
SJI-28
Distribution expenses decreased in the third quarter of 2003 as labor
costs have been directed more toward capital improvement activities as compared
to the same period last year.
Administrative and General expenses increased in both the three and
nine months ended September 30, 2003 compared with the same periods in 2002
primarily because of increasing healthcare and pension costs, consulting costs
related to SJG's implementation of the Sarbanes-Oxley Act of 2002, and costs
associated with the establishment of committed bank facilities.
Nonutility expenses in 2003 rose primarily due to higher customer
acquisition costs resulting from substantial growth in SJE's customer base and
activity associated with Marina's energy projects.
Other Operating Expenses - A summary of principal changes in other consolidated
operating expenses (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
2003 vs. 2002 2003 vs. 2002
__________________ _________________
Maintenance $ (146) $ (296)
Depreciation 809 1,494
Energy and Other Taxes (32) 1,326
Depreciation was higher due to SJG's and Marina's increased investment
in property, plant and equipment. The increase in Energy and Other Taxes relate
primarily to increases in volumes of gas sold and transported by SJG as
reflected under the caption, "Operating Revenues - Utility".
Interest Charges - Interest charges were higher in the third quarter of 2003
compared with the same period of 2002 due primarily to Marina Energy incurring
interest that was previously permitted to be capitalized during the construction
phase of their thermal energy plant. Interest charges were lower for the first
nine months of 2003 compared with the same period of 2002 due primarily to
reduction in short-term rates on line of credit borrowings and the refunding of
higher priced, fixed rate, long-term debt with lower cost, floating rate, and
short-term debt. These refundings were refinanced in July and September 2003
with long-term debt issuances under our Medium Term Note program at
significantly lower interest rates compared to the previous long-term interest
rates.
Discontinued Operations - Loss from discontinued operations increased in 2003
due mainly to product liability litigation associated with previously disposed
of businesses, coupled with the sale of property in August 2003.
Cumulative Effect of a Change in Accounting Principle - Net - In October 2002,
the EITF rescinded its consensus in Issue No. 98-10 effective for transactions
entered into after that date, with a cumulative effect adjustment for previously
existing transactions to be recognized in the quarter beginning January 1, 2003.
As a result of the rescission, SJI only marks-to-market those energy-related
contracts that meet the definition of a derivative in Statement No. 133.
SJI-29
Energy-related contracts that do not meet the definition of a derivative are
accounted for using the accrual basis of accounting. The effect of this change
in accounting resulted in a net charge of $426,338 shown as a Cumulative Effect
of a Change in Accounting Principle - Net. Furthermore, management has
designated any contract entered into after December 31, 2002 to hedge physical
gas in storage as a cash flow hedge and accounts for them accordingly. As of
September 30, 2003, we calculated these hedges to be highly effective;
therefore, we record the offset, net of taxes, in Accumulated Other
Comprehensive Loss.
Net Income Applicable to Common Stock - Net income (in thousands) and earnings
per common share reflect the following changes:
Three Months Ended Nine Months Ended
September 30, September 30,
2003 vs. 2002 2003 vs. 2002
_____________________________________
Income from Continuing Operations $ 1,604 $ 5,958
Loss from Discontinued Operations - Net (408) (560)
Cumulative Effect of Accounting Change - Net - (426)
___________________________
Net Income Increase $ 1,196 $ 4,972
===========================
Earnings per Common Share:
Continuing Operations $ 0.14 $ 0.43
Discontinued Operations - Net (0.03) (0.04)
Cumulative Effect of Accounting Change - Net - (0.04)
___________________________
Earnings per Share Increase $ 0.11 $ 0.35
===========================
Regulatory Matters - In January 1997, the BPU granted SJG rate relief, which was
predicated in part, upon a 9.62% rate of return on rate base, which included an
11.25% return on common equity. Additionally, our threshold for sharing pre-tax
margins generated by interruptible and off-system sales and transportation
increased. Currently, SJG keeps 100% of pre-tax margins up to the threshold
level of $7.8 million. The next $750,000 is credited to customers through the
Basic Gas Supply Service ("BGSS") clause. Thereafter, SJG keeps 20% of the
pre-tax margins as we have historically.
Effective January 10, 2000, the BPU approved full unbundling of SJG's
system. This allows all natural gas consumers to select their natural gas
commodity supplier. As of September 30, 2003, 98,149 of SJG's residential
customers were purchasing their gas commodity from someone other than SJG.
Customers choosing to purchase natural gas from providers other than the utility
are charged for the cost of gas by the marketer, not the utility. The resulting
decrease in SJG's revenues is offset by a corresponding decrease in gas costs.
While customer choice can reduce utility revenues, it does not negatively affect
SJG's net income or financial condition. The BPU continues to allow for full
recovery of natural gas costs through the BGSS. Other costs of service,
including deferred costs, are recovered through base rates.
In November 2001, SJG filed for a $2.7 million rate increase to recover
the cash related to a 3-year net deficiency in the Temperature Adjustment Clause
(TAC). Additionally, in September 2002, SJG filed for an $8.6 million rate
increase to recover the cash related to a TAC deficiency resulting from
warmer-than-normal weather for the 2001-2002 winter. As a result of the
SJI-30
colder-than-normal 2002-2003 winter, the cumulative TAC deficiency decreased to
$5.7 million. In August 2003, the BPU approved the recovery of the $5.7 million
TAC deficiency, effective September 1, 2003.
In December 2001, the BPU approved recovery of SJG's October 31, 2001
underrecovered gas cost balance of $48.9 million plus accrued interest since
April 1, 2001 at a rate of 5.75%. As of September 30, 2003, the remaining
deferred underrecovered balance totaled $20.2 million.
During 2002, the BPU convened a gas policy group to address Basic Gas
Supply Service (BGSS), which is the gas supply service being provided by the
natural gas utility. In December 2002, the BPU approved the proposed BGSS price
structure. The BGSS approved price structure replaced the Levelized Gas
Adjustment Clause (LGAC) pricing structure. The LGAC was structured to reset gas
charges to consumers once per year. The BGSS resets gas prices monthly for
larger customers, and for smaller customers permits multiple resets each year,
if certain conditions are met. With the implementation of BGSS in March 2003,
customers are able to make more informed decisions about choosing an alternate
supplier by having a utility pricing structure that more currently reflects
market conditions. Further, BGSS provides SJG with more pricing flexibility,
through self-implementing rate changes under certain conditions and limitations,
resulting in the reduction of over/under-recoveries. LGAC related mechanisms,
such as deferred accounting treatment, the sharing of pre-tax margins generated
by interruptible and off-system sales and transportation, and the allowance for
full recovery of natural gas costs, remain in place under BGSS.
In August 2002, SJG filed for a Societal Benefits Clause (SBC) rate
increase. The SBC recovers costs related to BPU mandated programs and
environmental remediation costs that are recovered through SJG's Remediation
Adjustment Clause (RAC); energy efficiency and renewable energy program costs
that are recovered through SJG's New Jersey Clean Energy Programs; consumer
education program costs; and the interim low income program costs. In August
2003, the BPU approved a $6.7 million increase to SJG's SBC, effective September
1, 2003. This approval increases the current annual recovery level of $6.7
million to $13.4 million.
Also in August 2002, SJG filed a petition with the BPU to transfer its
appliance service business from the regulated utility into a newly created
unregulated company. As filed, the newly created company would have the
flexibility to be more responsive to competition and customer needs by expanding
and modifying its service offerings in an unregulated environment.
In September 2002, SJG filed with the BPU to maintain its current BGSS
rate through October 2003. However, due to price increases in the wholesale
market, in February 2003 SJG filed an amendment to the September 2002 filing. In
April 2003, the BPU approved a $16.6 million increase to SJG's annual gas costs
revenues.
In March 2003, the BPU approved a statewide Universal Service Fund
(USF) program on a permanent basis. In June 2003, the BPU established a
statewide program through which funds for the USF and Lifeline Credit and
Tenants Assistance (Lifeline) Programs would be collected from customers of all
electric and gas utilities in the state. The BPU ordered that utility rates be
SJI-31
set to recover a total statewide USF budget of $33 million, and a total Lifeline
budget of $72 million. Recovery rates for both programs were implemented on
August 1, 2003.
In July 2003, SJG made its annual BGSS filing, as amended, with the
BPU. Due to further price increases in the wholesale market, SJG filed for a
$24.0 million increase to its annual gas cost revenues. In August 2003, the BPU
approved SJG's proposed $24.0 million price increase on a provisional basis,
subject to refund with interest effective September 1, 2003.
In August 2003, SJG filed a base rate case with the BPU to increase its
base rate in an effort to obtain a certain level of return on its investment of
capital. SJG expects the rate case to be concluded some time during 2004. SJG
has not sought a base rate increase from the BPU since the implementation of its
base rate case approval in January 1997.
Filings and petitions described above are still pending unless
otherwise indicated.
Liquidity and Capital Resources - Liquidity needs at SJI are driven by factors
that include natural gas commodity prices; the impact of weather on customer
bills; lags in fully collecting gas costs from customers under the Basic Gas
Supply Service charge; working capital needs of our energy trading and marketing
activities; the timing of construction and remediation expenditures and related
permanent financings; mandated tax payment dates; and both discretionary and
required repayments of long-term debt.
Bank credit available to SJI totaled $226.0 million at September 30,
2003, of which $51.4 million was used. Those bank facilities consist of a $100
million, three-year revolving credit and $76 million of uncommitted bank lines
available to SJG and a $40 million, 364-day revolving credit and $10 million of
uncommitted bank lines available to SJI. The revolving credits were established
in August 2003 with a syndicate of banks for the purpose of enhancing the
liquidity positions of both companies. Based upon the existing credit facilities
and a regular dialog with our banks, we believe that there will continue to be
sufficient credit available to meet our business' future liquidity needs.
SJI supplements its operating cash flow and credit lines with both debt
and equity capital. Over the years, SJG has used long-term debt, primarily in
the form of First Mortgage Bonds, to finance its long-term needs. These needs
are primarily capital expenditures for property, plant and equipment. Since
1998, SJG has financed these needs via a Medium Term Note (MTN) program, secured
by the First Mortgage Bonds. SJG's registration of a new $150 million MTN
program with the Securities and Exchange Commission became effective in December
2002. This program replaces a previous $100 million, 3-year MTN program that was
fully used in 2001. In July 2003, SJG issued $85.5 million of long-term debt
under the program. In September, SJG issued an additional $24.5 million of
MTN's. Consequently, $40.0 million of the MTN program remains available for
future debt issuances. Proceeds of the July and September issues were used to
refinance short-term debt outstanding under commercial bank lines and for the
redemption of certain high-rate First Mortgage Bonds. Current maturities on
long-term debt over the next five years are as follows, $8.4 million per year in
2003 through 2007 and $6.1 million in 2008.
SJI-32
Between September 2001 and January 2003, Marina issued $20 million of
tax-exempt and $25 million of taxable variable rate demand bonds (VRDB's)
through the New Jersey Economic Development Authority. The tax-exempt and
taxable bonds mature in 2031 and 2021, respectively. Investors in the bonds
receive liquidity and credit support via a letter of credit provided by a
syndicate of commercial banks. While the ultimate maturity of these bonds is no
less than 18 years, the underlying letter of credit that provides liquidity
support for the weekly remarketing of the VRDB's extends to September 2004.
Consequently, we have reclassified the VRDB's from Long-Term Debt to Notes
Payable on SJI's balance sheet. Going forward, it is our intent to extend the
letter of credit to a maturity of more than one year and reflect the VRDB's on
SJI's balance sheet as long-term debt. Management does not anticipate any
difficulty obtaining an extension of the letter of credit maturity date. We used
the proceeds of these bond issuances to fund project development and
construction costs for the thermal energy plant constructed by Marina to serve
The Borgata Resort which opened in July 2003.
SJI has raised equity capital over the past three years through its
Dividend Reinvestment Plan (DRP). Participants in SJI's DRP receive newly issued
shares. We offer a 2% discount on DRP investments because it is the most
cost-effective way for us to raise equity capital in the quantities we are
seeking. Through the DRP, SJI raised $16.4 million of equity capital by issuing
632,249 shares for the nine months ended September 30, 2003 and $7.9 million of
equity capital by issuing 468,151 shares for the nine months ended September 30,
2002.
Capital Expenditures, Commitments and Contingencies
Capital Expenditures - SJI has a continuing need for cash resources and
capital, primarily to invest in new and replacement facilities and equipment and
for environmental remediation costs. We estimate the net costs for 2003, 2004
and 2005 at approximately $63.1 million, $75.3 million and $55.7 million,
respectively.
Commitments and Contingencies - SJG has certain commitments for both
pipeline capacity and gas supply for which it pays fees regardless of usage.
Those commitments as of September 30, 2003 average $44.5 million annually and
total $261.0 million over the contracts' lives. Approximately 15% of the
financial commitment under these contracts expires during the next five years.
We expect to renew each of these contracts under renewal provisions provided in
each contract. SJG recovers all prudently incurred fees through rates via the
BGSS.
SJI-33
Item 3. Quantitative and Qualitative Disclosures About
Market Risks of the Company
Commodity Market Risks
Certain regulated and unregulated SJI subsidiaries are involved in
buying, selling, transporting and storing natural gas for their own accounts as
well as managing these activities for others. These subsidiaries are subject to
market risk due to price fluctuations. To hedge against this risk, we enter into
a variety of physical and financial transactions including forward contracts,
swaps, futures and options agreements. To manage these transactions, SJI has a
well-defined risk management policy approved by our board of directors that
includes volumetric and monetary limits. Management reviews reports detailing
activity daily. Generally, we enter into derivative activities described above
for risk management, not trading, purposes.
SJG and SJE transact commodities on a physical basis only and do not
enter into financial derivative positions directly. SJRG manages risk for these
entities as well as for its own portfolio by entering into the types of
transactions noted above. It is management's policy, to the extent practical,
within predetermined risk management policy guidelines, to have limited
unmatched positions on a deal or portfolio basis while conducting these
activities. As a result of holding open positions to a minimal level, the
financial impact to SJRG of changes in value of a particular transaction is
substantially offset by an opposite change in the related hedge transaction. As
of September 30, 2003, SJRG had $8.7 million of accounts receivable under sales
contracts. Of that total, 92% were with companies rated investment-grade, or
were guaranteed by an investment-grade-rated parent or were with companies where
we have a collateral arrangement.
SJRG and SJE entered into certain contracts to purchase, sell, and
transport natural gas. For the quarters ended September 30, 2003 and 2002, we
recorded a net unrealized pre-tax gain (loss) on these energy trading and
related contracts of $1.1 million and $(0.9) million, respectively. For the nine
months ended September 30, 2003 and 2002, we recorded a net unrealized pre-tax
gain (loss) on these energy and related contracts of $1.9 million and $(0.1)
million, respectively. These unrealized gains and losses were derived primarily
from contracts entered into during 2003 and 2002 and it is included as a
component of Revenues - Nonutility. SJRG's and SJE's contracts are typically
less than 12 months long. The fair value of these contracts determined under the
mark-to-market method as of September 30, 2003 is as follows (in thousands):
Assets
Maturity Maturity
Source of Fair Value < 1 Year 1-3 Years Total
____________________ _________ _________ _________
Prices Actively Quoted NYMEX $ 7,829 $ 1,620 $ 9,449
Other External Sources Basis 9,223 1,423 10,646
_________ _________ _________
Total $ 17,052 $ 3,043 $ 20,095
========= ========= =========
SJI-34
Liabilities
Maturity Maturity
Source of Fair Value < 1 Year 1-3 Years Total
____________________ _________ _________ _________
Prices Actively Quoted NYMEX $ 13,067 $ 1,455 $ 14,522
Other External Sources Basis 7,256 1,125 8,381
_________ _________ _________
Total $ 20,323 $ 2,580 $ 22,903
========= ========= =========
NYMEX (New York Mercantile Exchange) is the primary national
commodities exchange on which natural gas is traded. Basis represents the price
of a NYMEX natural gas futures contract adjusted for the difference in price for
delivering the gas at another location.
A reconciliation of SJI's estimated net fair value of energy trading
and related contracts follows (in thousands):
Net Energy Trading and Related Assets, January 1, 2003 $ 14,196
Contracts Settled During the Nine Months
Ended September 30, 2003, Net (3,398)
Other Changes in Fair Value from Continuing and
New Contracts, Net (13,606)
__________
Net Energy Trading and Related Liabilities,
September 30, 2003 $ (2,808)
==========
Interest Rate Risk
Our exposure to interest rate risk relates primarily to short-term,
variable rate borrowings. Our short-term, variable rate debt outstanding at
September 30, 2003 was $51.4 million and averaged $98.0 million for the first
nine months of 2003. A hypothetical 100 basis point (1%) increase in interest
rates on our average variable rate debt outstanding would result in a $579,000
increase in our interest expense, net of tax, on an annual basis. We chose the
100 basis point increase for illustrative purposes, as it provides a simple
basis for calculating the impact of interest rate changes under a variety of
interest rate scenarios. Over the past five years, the change in basis points
(b.p.) of our average monthly interest rates from the beginning to end of each
year was as follows: 2002 -- 74 b.p. decrease; 2001 -- 383 b.p. decrease; 2000
- -- 83 b.p. increase; 1999 -- 81 b.p. increase; and 1998 -- 38 b.p. decrease. For
September 2003, our average interest rate on variable rate debt was 1.86%.
To reduce exposure to an interest rate increase on our variable rate
debt, SJG entered into an interest rate swap agreement that became effective in
June 2003 which fixed the rate on $20.0 million of variable rate debt through
May 2004 at 2.24%. SJG primarily issues long-term debt at fixed rates and,
consequently, interest expense is not significantly impacted by changes in
market interest rates. SJG prepaid, at par, $3.0 million of 8.6% debenture notes
in February 2003. In May 2003, SJG also redeemed an additional $5.1 million of
10.25% first mortgage bonds prior to scheduled maturity. SJG paid a premium of
$110,000 to redeem that issue. In October 2003, SJG redeemed in full its 6.95%
first mortgage bonds prior to scheduled maturity. To redeem the $31.9 million of
outstanding bonds, SJG paid a premium of $1.0 million. The only other debt
outstanding exclusive of that issued by the utility consists of the New Jersey
Economic Development Authority bonds used to finance the construction of
Marina's thermal plant. They were issued at floating rates that reset weekly.
SJI-35
Subsequent to issuance, we entered into interest rate swap contracts that
effectively fixed the rate on $20 million of tax-exempt debt at 4.08% through
2011 and $19 million of taxable debt at 4.59% through 2007. The amount of the
swap on the taxable debt reduces annually commencing December 2003.
Item 4. Controls and Procedures
SJI management, including the Chief Executive Officer and Chief
Financial Officer, has conducted an evaluation of the effectiveness of
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
on that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the disclosure controls and procedures are effective in ensuring
that all material information required to be filed in this quarterly report has
been made known to them in a timely fashion. There have been no significant
changes in internal controls, or in factors that could significantly affect
internal controls, subsequent to the date the Chief Executive Officer and Chief
Financial Officer completed their evaluation.
SJI-36
PART II -- OTHER INFORMATION
Item l. Legal Proceedings
Information required by this Item is incorporated by reference to Part
I, Item 1, Note 9, beginning on page 17.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
10.1 364-day, $40 million revolving credit agreement
for South Jersey Industries, executed August 21,
2003.
10.2 Three-year, $100 million revolving credit
agreement for South Jersey Gas Company, executed
August 21, 2003.
31.1 Certification of Chief Executive Officer Pursuant
to Rule 13a-14(a) of the Exchange Act.
31.2 Certification of Chief Financial Officer Pursuant
to Rule 13a-14(a) of the Exchange Act.
32.1 Certification of Chief Executive Officer Pursuant
to Rule 13a-14(b) of the Exchange Act as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 (subsections (a) and (b) of Section 1350,
Chapter 63 of Title 18, United States Code).
32.2 Certification of Chief Financial Officer Pursuant
to Rule 13a-14(b) of the Exchange Act as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 (subsections (a) and (b) of Section 1350,
Chapter 63 of Title 18, United States Code).
(b) Form 8-K
Dated July 30, 2003 South Jersey Industries issued a press release
providing an earnings report for the second
quarter of 2003 under Item 9 and 12.
SJI-37
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.
SOUTH JERSEY INDUSTRIES, INC.
(Registrant)
Dated: November 14, 2003 By: /s/ Charles Biscieglia
_____________________________________
Charles Biscieglia
Chief Executive Officer
Dated: November 14, 2003 By: /s/ David A. Kindlick
_____________________________________
David A. Kindlick
Vice President, Treasurer &
Chief Financial Officer
SJI-38
Exhibit 10.1
364-DAY REVOLVING CREDIT AGREEMENT
Dated as of August 21, 2003
among
SOUTH JERSEY INDUSTRIES, INC.,
as Borrower
and
THE SEVERAL LENDERS FROM
TIME TO TIME PARTY HERETO
and
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Administrative Agent
and
CITIZENS BANK OF PENNSYLVANIA,
JPMORGAN CHASE BANK, and
PNC BANK, NATIONAL ASSOCIATION
as Co-Syndication Agents
Arranged by:
WACHOVIA CAPITAL MARKETS, LLC,
Sole Lead Arranger and Book Manager
Cover Page
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS..................................................1
SECTION 1.01 Certain Defined Terms..................................1
SECTION 1.02 Computation of Time Periods...........................15
SECTION 1.03 Accounting Terms......................................15
SECTION 1.04 Internal References...................................15
ARTICLE II LOANS......................................................17
SECTION 2.01 Revolving Loans.......................................17
SECTION 2.02 Swingline Loans.......................................17
SECTION 2.03 Procedure for Advances of Loans.......................19
SECTION 2.04 Competitive Bid Loans.................................21
SECTION 2.05 Voluntary Exercise of Term Out Extension Option.......23
SECTION 2.06 Fees..................................................24
SECTION 2.07 Reduction of Commitments..............................24
SECTION 2.08 Prepayment of Loans...................................25
SECTION 2.09 Increase in Commitment................................26
SECTION 2.10 Evidence of Debt; Notes...............................27
SECTION 2.11 Interest Rates........................................28
SECTION 2.12 Additional Interest on LIBOR Rate Loans...............30
SECTION 2.13 Interest Rate Determination...........................30
SECTION 2.14 Voluntary Conversion of Loans.........................31
SECTION 2.15 Increased Costs.......................................31
SECTION 2.16 Illegality............................................32
SECTION 2.17 Nature of Obligations of Lenders Regarding
Extensions of Credit; Assumption by the Administrative Agent 32
SECTION 2.18 Net of Taxes, Etc.....................................33
ARTICLE III LETTER OF CREDIT FACILITY.................................35
SECTION 3.01 L/C Commitment........................................35
SECTION 3.02 Procedure for Issuance of Letters of Credit...........35
SECTION 3.03 Commissions and Other Charges.........................36
SECTION 3.04 L/C Participations....................................36
SECTION 3.05 Reimbursement Obligation of the Borrower..............37
SECTION 3.06 Obligations Absolute..................................38
ARTICLE IV CONDITIONS PRECEDENT.......................................39
SECTION 4.01 Conditions Precedent to the Execution
and Delivery of this Agreement..................................39
SECTION 4.02 Additional Conditions Precedent.......................41
SECTION 4.03 Reliance on Certificates..............................41
ARTICLE V REPRESENTATIONS AND WARRANTIES..............................43
SECTION 5.01 Representations and Warranties of the Borrower........43
i
ARTICLE VI COVENANTS OF THE COMPANY...................................47
SECTION 6.01 Affirmative Covenants.................................47
SECTION 6.02 Negative Covenants....................................48
SECTION 6.03 Reporting Requirements................................50
SECTION 6.04 Financial Covenants...................................52
ARTICLE VII EVENTS OF DEFAULT.........................................53
SECTION 7.01 Events of Default.....................................53
SECTION 7.02 Upon an Event of Default..............................54
SECTION 7.03 Rights and Remedies Cumulative; Non-Waiver; Etc.......55
ARTICLE VIII THE ADMINISTRATIVE AGENT.................................56
SECTION 8.01 Appointment...........................................56
SECTION 8.02 Delegation of Duties..................................56
SECTION 8.03 Exculpatory Provisions................................56
SECTION 8.04 Reliance by Administrative Agent......................56
SECTION 8.05 Notice of Default.....................................57
SECTION 8.06 Non-Reliance on Administrative Agent
and Other Lenders..............................................57
SECTION 8.07 Indemnification.......................................58
SECTION 8.08 Administrative Agent in Its Individual Capacity.......58
SECTION 8.09 Successor Administrative Agent........................58
SECTION 8.10 Issuing Lender........................................59
SECTION 8.11 Notices; Actions Under Loan Documents.................59
ARTICLE IX MISCELLANEOUS..............................................60
SECTION 9.01 Amendments, Etc.......................................60
SECTION 9.02 Notices, Etc..........................................60
SECTION 9.03 No Waiver; Remedies...................................61
SECTION 9.04 Set-off................................................61
SECTION 9.05 Indemnification.......................................62
SECTION 9.06 Liability of the Lenders..............................63
SECTION 9.07 Costs, Expenses and Taxes.............................63
SECTION 9.08 Binding Effect........................................64
SECTION 9.09 Assignments and Participation.........................64
SECTION 9.10 Severability..........................................67
SECTION 9.11 Governing Law.........................................67
SECTION 9.12 Headings..............................................67
SECTION 9.13 Submission To Jurisdiction; Waivers...................68
SECTION 9.14 Acknowledgments.......................................68
SECTION 9.15 Waivers of Jury Trial.................................68
SECTION 9.16 Confidentiality.......................................68
SECTION 9.17 Execution in Counterparts.............................70
ii
EXHIBITS
Exhibit A-1 Form of Revolving Loan Note
Exhibit A-2 Form of Swingline Note
Exhibit A-3 Form of Competitive Bid Note
Exhibit B-1 Form of Competitive Bid Request
Exhibit B-2 Form of Competitive Bid
Exhibit C Form of Notice of Borrowing
Exhibit D Form of Notice of Swingline Borrowing
Exhibit E Form of Notice of Account Designation
Exhibit F Form of Notice of Exercise of Term Out Extension Option
Exhibit G Form of Notice of Conversion
Exhibit H Form of Opinion of Counsel to the Borrower
Exhibit I Form of Assignment and Acceptance
Exhibit J Form of Compliance Certificate
SCHEDULES
Schedule I Lenders, Applicable Lending Offices, Commitments and
Initial Commitment Percentages
Schedule II Ownership
iii
364-DAY REVOLVING CREDIT AGREEMENT
364-DAY REVOLVING CREDIT AGREEMENT (as it may be amended, supplemented
or otherwise modified in accordance with the terms hereof at any time and from
time to time, this "Agreement") dated as of August 21, 2003 among SOUTH JERSEY
INDUSTRIES, INC., a New Jersey corporation (the "Borrower"), the several banks
and other financial institutions from time to time parties to this Agreement
(each a "Lender" and collectively, the "Lenders"), WACHOVIA BANK, NATIONAL
ASSOCIATION, a national banking association organized and existing under the
laws of the United States of America ("Wachovia"), as administrative agent for
the Lenders hereunder (in such capacity, together with its successors and
permitted assigns in such capacity, the "Administrative Agent").
PRELIMINARY STATEMENTS
WHEREAS, the Borrower has requested that the Lenders make revolving
credit loans to the Borrower and issue or participate in letters of credit for
the account of the Borrower, for working capital and general corporate purposes
of the Borrower and its Subsidiaries in an aggregate principal amount of up to
$40,000,000 at any one time outstanding; and
WHEREAS, the Lenders are willing, on the terms and subject to the
conditions set forth in this Agreement, to extend credit under this Agreement as
more particularly hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Administrative Agent" has the meaning assigned to that term in the
preamble hereto.
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors
and officers of such Person), controlled by, or under direct or indirect common
control with such Person. A Person shall be deemed to control another entity if
such Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such entity, whether through the
ownership of voting securities, by contract, or otherwise.
"Agreement" means this 364-Day Revolving Credit Agreement, as it may be
amended, supplemented or otherwise modified in accordance with the terms hereof
at any time and from time to time.
-1-
"Applicable Law" means all applicable laws, statutes, treaties, rules,
codes, ordinances, regulations, permits, certificates, orders, interpretations,
licenses, and permits of any Governmental Authority and judgments, decrees,
injunctions, writs, orders or like action of any court, arbitrator or other
judicial or quasi-judicial tribunal (including, without limitation, those
pertaining to health, safety, the environment or otherwise).
"Applicable Lending Office" means, with respect to any Lender, the
office of such Lender specified as such opposite its name on Schedule I hereto
or in the Assignment and Acceptance pursuant to which it became a Lender, or
such other office of such Lender as such Lender may from time to time specify to
the Borrower and the Administrative Agent.
"Applicable Margin" means, for Loans made to, and Utilization Fees and
Letter of Credit Commissions payable by, the Borrower on any date, the rate per
annum as set forth below, determined by reference to the Senior Debt Ratings:
Applicable Applicable
Facility Base Rate Applicable Utilization Margin for
Level Senior Debt Rating Fee Margin LIBOR Margin Fee Term Loans
----- ------------------ --- ------ -------------
I Greater than or equal to 0.125% 0.00% 0.500% 0.125% 1.100%
BBB+/Baa1
II BBB/Baa2 0.150% 0.00% 0.725% 0.125% 1.375%
III BBB-/Baa3 0.175% 0.00% 0.950% 0.125% 1.750%
IV Less than BBB-/Baa3 or no 0.200% 0.00% 1.050% 0.250% 2.000%
rating
Any change in the Applicable Margin will be effective as of the date on
which S&P or Moody's, as the case may be, announces the applicable change in the
Senior Debt Ratings. The Borrower shall notify the Administrative Agent in
writing promptly after becoming aware of any change in the Senior Debt Ratings.
For purposes of the foregoing, (i) if the Senior Debt Ratings
established or deemed to have been established by Moody's and S&P shall fall
within different "Levels" and the ratings differential is one level, the higher
rating will apply; (ii) if the Senior Debt Ratings established or deemed to have
been established by Moody's and S&P shall fall within different "Levels" and the
ratings differential is two levels or more, the level one above the lowest of
the two ratings will apply; and (iii) if the rating system of Moody's or S&P
shall change, or if Moody's or S&P shall cease to be in the business of rating
corporate debt obligations, the Borrower, the Administrative Agent and the
Lenders shall negotiate in good faith to amend this definition to reflect such
changed rating system or the unavailability of ratings from Moody's or S&P, and,
pending the effectiveness of any such amendment, the Senior Debt Ratings shall
be determined by reference to the Senior Debt Ratings most recently in effect
prior to such change or cessation.
-2-
"Applicable Rate" means:
(a) in the case of each Base Rate Loan, a rate per annum equal at all
times to the sum of the Base Rate plus the Applicable Base Rate Margin in effect
from time to time;
(b) in the case of each LIBOR Rate Loan comprising part of the same
Loan, a rate per annum during each Interest Period equal at all times to the sum
of the LIBOR Rate for such Interest Period plus the Applicable LIBOR Margin in
effect from time to time during such Interest Period;
(c) in the case of each Swingline Loan, a rate per annum equal at all
times to the sum of the Base Rate plus the Applicable Base Rate Margin in effect
from time to time;
(d) in the case of each Term Loan, a rate per annum equal at all times
to the sum of the one month LIBOR Rate plus the Applicable Margin for Term Loans
in effect from time to time; and
(e) in the case of each Competitive Bid Loan, a rate per annum as
determined in accordance with Section 2.04.
"Application" means an application, in the form specified by the
Issuing Lender from time to time, requesting the Issuing Lender to issue a
Letter of Credit.
"Assignment and Acceptance" means an Assignment and Acceptance executed
in accordance with Section 9.09 in the form attached hereto as Exhibit I.
"Bankruptcy Code" means Title 11 of the United States Code, as now
constituted or hereafter amended.
"Base Rate" means, for any period, a fluctuating interest rate per
annum as shall be in effect from time to time, which rate per annum shall at all
times be equal to the higher of (i) the rate of interest announced publicly by
Administrative Agent in Charlotte, North Carolina, from time to time, as
Administrative Agent's Prime Rate; and (ii) 1/2 of one percent per annum above
the Federal Funds Rate in effect from time to time.
"Base Rate Loan" has the meaning assigned to that term in Section
2.11(a) and shall include Revolving Loans bearing interest at the Base Rate.
"Benefited Lender" has the meaning assigned to that term in Section
9.04(b).
"Borrower" has the meaning assigned to that term in the preamble
hereto.
"Business Day" means a day of the year on which (i) banks are not
required or authorized to close in Charlotte, North Carolina, (ii) the New York
Stock Exchange is not closed, and (iii) with respect to any borrowing, payment
or rate selection of a LIBOR Rate Loan, banks are not required or authorized to
close in Charlotte, North Carolina and on which dealings in Dollars are carried
out in the London interbank market.
"Capital Lease" means any lease which is required to be capitalized on
a balance sheet of the lessee in accordance with GAAP, consistently applied.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) equity of such Person,
-3-
including any preferred interest, any limited or general partnership interest
and any limited liability company membership interest.
"Change in Control" means the occurrence of either of the following:
(i) any entity, person (within the meaning of Section 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) which theretofore
was beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of less
than 20% of the Borrower's then outstanding common stock either (x) acquires
shares of common stock of the Borrower in a transaction or series of
transactions that results in such entity, person or group directly or indirectly
owning beneficially 20% or more of the outstanding common stock of the Borrower,
or (y) acquires, by proxy or otherwise, the right to vote for the election of
directors, for any merger, combination or consolidation of the Borrower or any
of its direct or indirect Subsidiaries, or, for any other matter or question,
more than 20% of the then outstanding voting securities of the Borrower; or (ii)
20% or more of the directors of the board of directors of the Borrower fail to
consist of Continuing Directors.
"Closing Date" means August 21, 2003.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the regulations promulgated and rulings issued thereunder.
"Commitment" means (i) with respect to the Lenders, the aggregate
amount of the Commitments of the Lenders as set forth on Schedule I, and (ii)
with respect to a Lender, the amount of the Commitment of such Lender as set
forth on Schedule I, as such amounts may be otherwise reduced in accordance with
Section 2.07 or increased pursuant to Section 2.09 or otherwise modified in
accordance with Section 9.09. "Commitments" means the total of the Lenders'
Commitments.
"Commitment Percentage" means for each Lender, a fraction (expressed as
a decimal) the numerator of which is the Commitment of such Lender at such time
and the denominator of which are the Commitments of all of the Lenders at such
time. The initial Commitment Percentages are set out on Schedule I.
"Competitive Bid" means an offer by a Lender to make a Competitive Bid
Loan to the Borrower pursuant to the terms of Section 2.04 hereof.
"Competitive Bid Loan" means a loan made by a Lender to the Borrower in
its discretion pursuant to the provisions of Section 2.04 hereof.
"Competitive Bid Loan Notes" means the promissory notes of the Borrower
in favor of each Lender evidencing the Competitive Bid Loans made to the
Borrower and substantially in the form of Exhibit A-3, as such promissory notes
may be amended, modified, supplemented or replaced from time to time.
"Competitive Bid Rate" means, as to any Competitive Bid made by a
Lender to the Borrower in accordance with the provisions of Section 2.04 hereof,
the rate of interest offered by the Lender making the Competitive Bid.
-4-
"Competitive Bid Request" means a request by the Borrower for
Competitive Bids in the form of Exhibit B-1.
"Competitive Bid Request Fee" means $3,500 for each Competitive Bid
Request made by the Borrower, payable to the Administrative Agent for its
account.
"Compliance Certificate" means a certificate substantially in the form
of Exhibit J.
"Consolidated" means, when used with reference to any accounting term,
the amount described by such accounting term, determined on a consolidated basis
in accordance with GAAP, after elimination of intercompany items.
"Consolidated EBIT" means, with respect to the Borrower and its
Consolidated Subsidiaries, for any period, an amount equal to: (i) Consolidated
Net Income for such period, plus (ii) amounts deducted in the computation
thereof for (a) Consolidated Interest Expense and (b) federal, state and local
income taxes.
"Consolidated Interest Expense" means, with respect to the Borrower and
its Consolidated Subsidiaries, for any period, an amount equal to (i) all
interest in respect of Indebtedness accrued during such period (whether or not
actually paid during such period), plus (ii) the net amount payable (or minus
the net amount receivable) under any Hedging Obligation with respect to such
Indebtedness accrued during such period (whether or not actually paid or
received during such period).
"Consolidated Net Income" means the net income of the Borrower and its
Consolidated Subsidiaries, as determined on a consolidated basis in accordance
with GAAP and as adjusted to exclude (i) net after-tax extraordinary or
non-recurring gains or losses (whether cash or non-cash gains or losses), (ii)
net after-tax gains or losses attributable to any sale of capital assets, (iii)
the net income of any Consolidated Subsidiary to the extent that dividends or
distributions of such net income are not at the date of determination permitted
by the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or other regulation and (iv) the cumulative effect of any
changes in GAAP.
"Consolidated Total Capitalization" means the sum of (i) Indebtedness
of the Borrower and its Consolidated Subsidiaries, plus (ii) the sum of the
Capital Stock (excluding treasury stock and capital stock subscribed for and
unissued) and surplus (including earned surplus, capital surplus, translation
adjustment and the balance of the current profit and loss account not
transferred to surplus) accounts of the Borrower and its Consolidated
Subsidiaries appearing on a consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries, in each case prepared as of the date of determination
in accordance with GAAP consistent with those applied in the preparation of the
financial statements referred to in Section 4.01(f), after eliminating all
intercompany transactions and all amounts properly attributable to minority
interests, if any, in the stock and surplus of Subsidiaries.
"Continuing Director" means, with respect to any Person as of any date
of determination, any member of the board of directors of such Person who (a)
-5-
was a member of such board of directors on the Closing Date, or (b) was
nominated for election or elected to such board of directors with the approval
of a majority of the Continuing Directors who were members of such board at the
time of such nomination or election.
"Convert", "Conversion" and "Converted" each refers to a conversion of
a Loan of one Type into a Loan of another Type pursuant to Section 2.14 or the
selection of a new, or the renewal of the same, Interest Period for a LIBOR Rate
Loan pursuant to Section 2.14.
"Default" means any event or condition that would constitute an Event
of Default but for the requirement that notice be given or time elapse or both.
"Default Rate" means a per annum rate equal to 2% greater than the Base
Rate.
"Disclosure Documents" means the Borrower's Annual Report on Form 10-K
for the year ended December 31, 2002, its Quarterly Report on Form 10-Q for the
quarters ended March 31, 2003 and June 30, 2003, and any Current Report on Form
8-K delivered to the Lenders at least three (3) Business Days prior to the date
of this Agreement.
"Dollar" or "$" means dollars in lawful currency of the United States
of America.
"Eligible Assignee" means, with respect to any assignment of the
rights, interest and obligations of a Lender hereunder, a Person that is at the
time of such assignment (a) a commercial bank organized or licensed under the
laws of the United States or any state thereof, having combined capital and
surplus in excess of $500,000,000, (b) a commercial bank organized under the
laws of any other country that is a member of the Organization of Economic
Cooperation and Development, or a political subdivision of any such country,
having combined capital and surplus in excess of $500,000,000, (c) a finance
company, insurance company or other financial institution which in the ordinary
course of business extends credit of the type extended hereunder and that has
total assets in excess of $1,000,000,000, (d) a Lender hereunder (whether as an
original party to this Agreement or as the assignee of another Lender), (e) an
Affiliate or Subsidiary of a Lender (whether as an original party to this
Agreement or as the assignee of another Lender) hereunder that does not
otherwise qualify as an Eligible Assignee provided such Lender continues to be
obligated under this Agreement, (f) the successor (whether by transfer of
assets, merger or otherwise) to all or substantially all of the commercial
lending business of the assigning Lender, or (g) any other Person that has been
approved in writing as an Eligible Assignee by the Administrative Agent and, if
no Default or Event of Default exists and is continuing, by the Borrower.
"Environmental Laws" means any federal, state or local laws, ordinances
or codes, rules, orders, or regulations relating to pollution or protection of
the environment, including, without limitation, laws relating to hazardous
substances, laws relating to reclamation of land and waterways and laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollution, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes.
-6-
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" means any Person which for purposes of Title IV of
ERISA is a member of the Borrower's controlled group, or under common control
with the Borrower, within the meaning of Section 414 of the Code, and the
regulations promulgated and rulings issued thereunder.
"ERISA Event" means (i) the occurrence of a reportable event, within
the meaning of Section 4043 of ERISA, unless the 30-day notice requirement with
respect thereto has been waived by the PBGC; (ii) the provision by the
administrator of any Plan of a notice of intent to terminate such Plan, pursuant
to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan
amendment referred to in Section 404l(e) of ERISA); (iii) the cessation of
operations at a facility in the circumstances described in Section 4062(e) of
ERISA; (iv) the withdrawal by the Borrower or an ERISA Affiliate from a
Multiemployer Plan during a plan year for which it was a "substantial employer"
as defined in Section 4001(a)(2) of ERISA; (v) the failure by the Borrower or
any ERISA Affiliate to make a payment to a Plan required under Section 302 of
ERISA, which results in a lien pursuant to Section 302(f) of ERISA; (vi) the
adoption of an amendment to a Plan requiring the provision of security to such
Plan, pursuant to Section 307 of ERISA; or (vii) the institution by the PBGC of
proceedings to terminate a Plan, pursuant to Section 4042 of ERISA, or the
occurrence of any event or condition which might reasonably constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, a Plan by the PBGC.
"Eurocurrency Liabilities" has the meaning specified in Regulation D of
the Board of Governors of the Federal Reserve System, as in effect from time to
time.
"Event of Default" has the meaning assigned to that term in Section
7.01.
"Extension of Credit" means, as to any Lender at any time, an amount
equal to the sum of (a) such Lender's Commitment Percentage multiplied by the
aggregate principal amount of all Revolving Loans then outstanding, (b) such
Lender's Commitment Percentage multiplied by the aggregate principal amount of
all Competitive Bid Loans then outstanding, (c) such Lender's Commitment
Percentage multiplied by the L/C Obligations then outstanding, and (d) such
Lender's Commitment Percentage multiplied by the aggregate principal of amount
of all Swingline Loans then outstanding.
"Facility Fee" has the meaning assigned to that term in Section
2.06(a).
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to 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 Lender 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.
-7-
"Final Fee Payment Date" means the date all Commitments have been
terminated and all Loans have been paid in full; provided, that if the Maturity
Date has been extended pursuant to Section 2.05, the Final Fee Payment Date
shall be the Termination Date.
"Fronting Fee" has the meaning assigned to that term in Section
3.03(b).
"GAAP" means generally accepted accounting principles, as recognized by
the American Institute of Certified Public Accountants and the Financial
Accounting Standards Board, consistently applied and maintained on a consistent
basis for the Borrower and its Consolidated Subsidiaries throughout the period
indicated and consistent with the prior financial practice of the Borrower and
its Consolidated Subsidiaries.
"Governmental Action" means all authorizations, consents, approvals,
waivers, exceptions, variances, orders, licenses, exemptions, publications,
filings, notices to and declarations of or with any Governmental Authority,
other than routine reporting requirements the failure to comply with which will
not affect the validity or enforceability of this Agreement or any other Loan
Document or have a material adverse effect on the transactions contemplated by
this Agreement or any other Loan Document.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Hazardous Materials" means any petrochemical or petroleum products,
any flammable materials, explosives, radioactive materials, hazardous materials,
hazardous wastes, hazardous or toxic substances, or related or similar
materials, asbestos or any material containing asbestos, or any other substance
or material as so defined and regulated by any Federal, state or local
environmental law, ordinance, rule, or regulation including, without limitation,
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended (42 U.S.C. Sections 9601, et seq.), the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Sections 1801, et seq.), and the
Resource Conservation and Recovery Act, as amended (42 U.S.C. Sections 6901, et
seq.), and the regulations adopted and publications promulgated pursuant
thereto.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under any interest rate or currency swap agreement,
interest rate or currency future agreement, interest rate collar agreement, swap
agreement (as defined in 11 U.S.C. ss. 101), interest rate or currency hedge
agreement, and any put, call or other agreement or arrangement designed to
protect such Person against fluctuations in interest rates or currency exchange
rates.
"Indebtedness" means, for any Person, all obligations of such Person
which in accordance with GAAP should be classified on a balance sheet of such
Person as liabilities of such Person, and in any event shall include, without
duplication, all (i) indebtedness for borrowed money, (ii) obligations evidenced
by bonds, debentures, notes or other similar instruments, (iii) obligations to
pay the deferred purchase price of property or services, (iv) obligations as
lessee under leases which shall have been or should be, in accordance with GAAP,
recorded as capital leases, (v) obligations as lessee under operating leases
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which have been recorded as off-balance sheet liabilities, (vi) obligations
under Hedging Obligations, (vii) reimbursement obligations (contingent or
otherwise) in respect of outstanding letters of credit, (viii) indebtedness of
the type referred to in clauses (i) through (vi) above secured by (or for which
the holder of such indebtedness has an existing right, contingent or otherwise,
to be secured by) any lien or encumbrance on, or security interest in, property
(including, without limitation, accounts and contract rights) owned by such
Person, even though such Person has not assumed or become liable for the payment
of such indebtedness, and (ix) obligations under direct or indirect guaranties
in respect of, and obligations (contingent or otherwise) to purchase or
otherwise acquire, or otherwise to assure a creditor against loss in respect of,
indebtedness or obligations of others of the kinds referred to in clauses (i)
through (vii) above. Notwithstanding anything to the contrary set forth above,
Capital Stock, including Capital Stock having a preferred interest, shall not
constitute Indebtedness for purposes of this Agreement.
"Information" has the meaning assigned to that term in Section 9.16(b).
"Interest Period" has the meaning assigned to that term in Section
2.11(b).
"ISP 98" means the International Standby Practices (1998 Revision,
effective January 1, 1999), International Chamber of Commerce Publication No.
590.
"Issuing Lender" means Wachovia, in its capacity as issuer of any
Letter of Credit, or any successor thereto.
"L/C Commitment" means Ten Million and No/100 Dollars ($10,000,000).
"L/C Facility" means the letter of credit facility established pursuant
to Article III.
"L/C Obligations" means at any time, an amount equal to the sum of (a)
the aggregate undrawn and unexpired amount of the then outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit which
have not then been reimbursed pursuant to Section 3.05.
"L/C Participants" means the collective reference to all the Lenders
other than the Issuing Lender.
"Lenders" has the meaning assigned to that term in the preamble hereto,
and, in each case, includes their respective successors and permitted assigns,
and, with respect to Swingline Loans, the Swingline Lender.
"Letters of Credit" has the meaning assigned to that term in Section
3.01(a).
"LIBOR Lending Office" means, with respect to any Lender, the office of
such Lender specified as such opposite its name on Schedule I hereto or in the
Assignment and Acceptance pursuant to which it became a Lender (or, if no such
office is specified, its Applicable Lending Office), or such other office of
such Lender as such Lender may from time to time specify to the Borrower and the
Administrative Agent.
"LIBOR Rate" means with respect to each day during each Interest
Period pertaining to a LIBOR Rate Loan or Competitive Bid Loan, the rate
(rounded upwards, if necessary, to the next higher 1/100th of 1%) appearing on
Page 3750 of the Dow Jones Markets Service (or on any successor or
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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) at approximately 11:00 a.m.,
London time, two Business Days prior to the commencement of such Interest
Period, as the rate for Dollar deposits with a maturity comparable to such
Interest Period. In the event that such rate is not available at such time for
any reason, then the "LIBOR Rate" with respect to such LIBOR Rate Loan or
Competitive Bid Loan for such Interest Period shall be the rate per annum equal
to the rate at which the principal London office of the Administrative Agent
offers to place Dollar deposits at or about 11:00 a.m., London time, two
Business Days prior to the beginning of such Interest Period with first-class
banks in the London interbank market for delivery on the first day of such
Interest Period for the number of days comprised therein and in an amount
comparable to the amount of its LIBOR Rate Loan or Competitive Bid Loan to be
outstanding during such Interest Period.
"LIBOR Rate Loan" has the meaning assigned to that term in Section
2.11(a) and shall include Revolving Loans that bears interest at the LIBOR Rate.
"LIBOR Rate Reserve Percentage" of any Lender for each Interest Period
for each LIBOR Rate Loan and Competitive Bid Loan means the reserve percentage
contemplated in Section 2.12 applicable to such Lender during such Interest
Period (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) under Regulation D or other
regulations issued from time to time by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental or other
marginal reserve requirement) then applicable to such Lender with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities having
a term equal to such Interest Period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, a Person or any of its Subsidiaries shall be
deemed to own, subject to a Lien, any asset that it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
asset.
"Loan Documents" means this Agreement, the Notes and any other document
evidencing, relating to or securing any Extension of Credit, and any other
document or instrument delivered from time to time in connection with this
Agreement, the Notes or the Extensions of Credit, as such documents and
instruments may be amended or supplemented from time to time.
"Loans" means the loans made by the Lenders pursuant to this Agreement
including Swingline Loans, Revolving Loans, Term Loans and Competitive Bid
Loans.
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"Material Adverse Change" means (a) a materially adverse change in the
business, assets, liabilities (actual or contingent), operations, condition
(financial or otherwise) or prospects of (i) the Borrower or (ii) the Borrower
and its Subsidiaries, taken as a whole, (b) any material impairment of the
ability of the Borrower to perform any of its Obligations under this Agreement
or any other Loan Document or (c) any material impairment of the rights of, or
benefits available to, the Administrative Agent, the Issuing Lender, the
Swingline Lender or the Lenders under this Agreement or any other Loan Document.
"Maturity Date" means August 19, 2004, or such later date as may be
designated pursuant to Section 2.05, which date shall not be later then August
19, 2005.
"Moody's" means Moody's Investors Service, Inc., or any successor
thereto.
"Multiemployer Plan" means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA, which is subject to Title IV of ERISA and to which the
Borrower 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, 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 is subject to Title IV of ERISA and which
(i) is maintained for employees of the Borrower or an ERISA Affiliate and at
least one Person other than the Borrower and its ERISA Affiliates or (ii) was so
maintained and in respect of which the Borrower 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.
"Note" means the collective reference to the Revolving Loan Notes,
Swingline Notes and the Competitive Bid Loan Notes.
"Notice of Borrowing" has the meaning assigned to that term in
Section 2.03(a)(i)(A)
"Notice of Conversion" has the meaning assigned to that term in Section
2.14.
"Notice of Swingline Borrowing" has the meaning assigned to that term
in Section 2.03(a)(ii).
"Notice of Exercise of Term Out Extension Option" has the meaning
assigned to that term in Section 2.05.
"Obligations" means, in each case, whether now in existence or
hereafter arising: (a) the principal of and interest on (including interest
accruing after the filing of any bankruptcy or similar petition) the Loans, (b)
the L/C Obligations, (c) all payment and other obligations owing by the Borrower
to any Lender or the Administrative Agent under any other agreement to which a
Lender is a party (or any Affiliate of a Lender) which is related to and
permitted under this Agreement or any of the other Loan Documents, and (d) all
other fees and commissions (including attorney's fees), charges, indebtedness,
loans, liabilities, financial accommodations, obligations, covenants and duties
owing by the Borrower to the Lenders, the Issuing Lender, or the Administrative
Agent, in each case under or in respect of this Agreement, any Note, any Letter
of Credit or any of the other Loan Documents of every kind, nature and
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description, direct or indirect, absolute or contingent, due or to become due,
contractual or tortious, liquidated or unliquidated, and whether or not
evidenced by any note, and whether or not for the payment of money under or in
respect of this Agreement, any Note, any Letter of Credit or any of the other
Loan Documents.
"Participant" has the meaning assigned to that term in Section 9.09(e).
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Permitted Indebtedness" means any of the following:
(1) Indebtedness under this Agreement;
(2) Indebtedness of the Borrower (other than the type
described in clause (3) below) in an aggregate principal amount not to
exceed $100,000,000 (inclusive of the type described in clause (1)
above) at any time outstanding; and
(3) Indebtedness of the Borrower under Hedging Obligations
covering a notional amount not to exceed the face amount of outstanding
Indebtedness.
"Permitted Investments" means (1) noncallable, direct general
obligations of, or obligations the payment of the principal of and interest on
which are unconditionally guaranteed by, the United States of America; (2)
bonds, participation certificates or other obligations of Federal National
Mortgage Association, Government National Mortgage Association and Federal Home
Loan Mortgage Corporation; (3) certificates of deposit, bankers' acceptances or
other obligations issued by commercial banks which are fully insured by the
Federal Deposit Insurance Corporation or certificates of deposit, bankers'
acceptances or other deposit obligations issued by commercial banks whose
unsecured obligations are rated in one of the two highest rating categories by
Moody's or Standard S&P; (4) obligations issued or guaranteed by a state or
political subdivision of a state rated in one of the two highest rating
categories by Moody's or S&P; or (5) any other investments permitted under this
Agreement and which the Administrative Agent has approved in writing.
"Permitted Liens" means, with respect to any Person, any of the
following:
(1) Liens for taxes, assessments or governmental charges not
delinquent or being contested in good faith and by appropriate
proceedings and for which adequate reserves in accordance with GAAP are
maintained on such Person's books;
(2) Liens arising out of deposits in connection with workers'
compensation, unemployment insurance, old age pensions or other social
security or retirement benefits legislation;
(3) Deposits or pledges to secure bids, tenders, contracts
(other than contracts for the payment of money), leases, statutory
obligations, surety and appeal bonds, and other obligations of like
nature arising in the ordinary course of such Person's business;
(4) Liens imposed by law, such as mechanics', workers',
materialmen's, carriers' or other like liens arising in the ordinary
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course of such Person's business which secure the payment of
obligations which are not past due or which are being diligently
contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP are maintained on such
Person's books;
(5) Rights of way, zoning restrictions, easements and similar
encumbrances affecting such Person's real property which do not
materially interfere with the use of such property;
(6) Liens securing Permitted Indebtedness, described in
clause (2) and (3) of the definition of "Permitted Indebtedness", not
in excess of $5,000,000 in the aggregate; and
(7) Purchase money security interests for the purchase of
equipment to be used in the Borrower's business, encumbering only the
equipment so purchased, and which secures only the purchase-money
Indebtedness incurred to acquire the equipment so purchased, which
Indebtedness qualifies as Permitted Indebtedness and which Indebtedness
is not in excess of $5,000,000 in the aggregate.
"Person" means an individual, partnership, corporation (including,
without limitation, a business trust), joint stock company, limited liability
company, trust, unincorporated association, joint venture or other entity, or a
government or any political subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
"Prime Rate" means a rate per annum equal to the Administrative Agent's
index or base rate of interest announced from time to time by the Administrative
Agent (which is not necessarily the lowest rate charged to any customer),
changing when and as such base rate changes.
"Rated Entity" means South Jersey Industries, Inc. or any of its
Subsidiaries which maintain senior unsecured, non-credit enhanced debt ratings
by both Moody's and S&P. If more than one such Person exists, the Rated Entity
shall be South Jersey Industries, Inc. or any of its Subsidiaries which
maintains the lowest senior unsecured, non-credit enhanced debt rating by either
Moody's or S&P.
"Register" has the meaning assigned to that term in Section 9.09(c).
"Required Lenders" means Lenders whose aggregate Commitment Percentages
aggregate more than 50%.
"Revolving Loans" means those Base Rate Loans and LIBOR Rate Loans,
made pursuant to Section 2.01.
"Revolving Loan Notes" means the promissory notes of the Borrower in
favor of each Lender evidencing the Revolving Loans made to the Borrower and
substantially in the form of Exhibit A-1, as such promissory notes may be
amended, modified, supplemented or replaced from time to time.
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"S&P" means Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, Inc., or any successor thereto.
"Senior Debt Ratings" means the ratings assigned to the senior
unsecured, non-credit enhanced debt of the Rated Entity by Moody's and S&P, as
the case may be.
"Significant Subsidiary" means, with respect to any Person, a
Subsidiary which meets any of the following conditions:
(a) such Person's and its other Subsidiaries' investments in
and advances to the Subsidiary exceed 10% of the total assets of such
Person and its Consolidated Subsidiaries as of the end of the most
recently completed fiscal quarter;
(b) such Person's and its other Subsidiaries' proportionate
share (as determined by ownership interests) of the total assets (after
intercompany eliminations) of the Subsidiary exceeds 10% of the total
assets of such Person and its Consolidated Subsidiaries as of the end
of the most recently completed fiscal quarter;
(c) such Person's and its other Subsidiaries' proportionate
share (as determined by ownership interests) in the income from
continuing operations before income taxes, extraordinary items and
cumulative effect of changes in accounting principles of the Subsidiary
exceeds 10% of such income of such Person and its Consolidated
Subsidiaries for the most recently completed fiscal quarter; or
(d) with respect to the Borrower, such Subsidiary is Marina
Energy LLC or South Jersey Gas Company.
"Single Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, which is subject to Title IV of ERISA and which
(i) is maintained for employees of the Borrower or an ERISA Affiliate and no
Person other than the Borrower and its ERISA Affiliates or (ii) was so
maintained and in respect of which the Borrower or an ERISA Affiliate could have
liability under Section 4069 of ERISA in the event such plan has been or were to
be terminated.
"Solvent" means, with respect to any Person, that such Person (a) has
capital sufficient to carry on its business and transactions and all business
and transactions in which it is about to engage and is able to pay its debts as
they mature, (b) owns property having a value, both at fair valuation and at
present fair saleable value, greater than the amount required to pay its
probable liabilities (including contingencies), and (c) does not believe that it
will incur debts or liabilities beyond its ability to pay such debts or
liabilities as they mature.
"Subsidiary" means, with respect to any Person, any corporation or
unincorporated entity of which more than 50% of the outstanding capital stock
(or comparable interest) having ordinary voting power (irrespective of whether
at the time capital stock (or comparable interest) of any other class or classes
of such corporation or entity shall or might have voting power upon the
occurrence of any contingency) is at the time directly or indirectly owned by
said Person (whether directly or through one of more other Subsidiaries). In the
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case of an unincorporated entity, a Person shall be deemed to have more than 50%
of interests having ordinary voting power only if such Person's vote in respect
of such interests comprises more than 50% of the total voting power of all such
interests in the unincorporated entity.
"Swingline Borrowing" means a borrowing hereunder consisting of
Swingline Loans made to the Borrower.
"Swingline Commitment" means Five Million and No/100 Dollars
($5,000,000).
"Swingline Facility" means the swingline loan facility established
pursuant to Section 2.02.
"Swingline Lender" means Wachovia, in its capacity as swingline lender
hereunder, together with its successors and permitted assigns in such capacity.
"Swingline Loan" means the swingline loans made by the Swingline Lender
to the Borrower pursuant to Section 2.02, and all such loans collectively as the
context requires.
"Swingline Note" means the promissory note of the Borrower in favor of
the Swingline Lender evidencing the Swingline Loans made to the Borrower and
substantially in the form of Exhibit A-2, as such promissory note may be
amended, modified, supplemented or replaced from time to time.
"Taxes" has the meaning assigned to that term in Section 2.18.
"Term Loan" has the meaning assigned to that term in Section 2.05
"Termination Date" means the earliest of (a) August 19, 2004, (b) the
date of termination by the Borrower of the Commitments in full pursuant to
Section 2.07, or (c) the date of termination of the Commitment pursuant to
Section 7.02(a).
"Type" means a type of Loan, being either a LIBOR Rate Loan or a Base
Rate Loan, as applicable.
"Utilization Amount" has the meaning assigned to that term in Section
2.06(b).
"Utilization Fee" has the meaning assigned to that term in Section
2.06(b).
"Wachovia" has the meaning assigned to that term in the preamble
hereto.
SECTION 1.02 Computation of Time Periods In this Agreement, in the
computation of a period of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding".
SECTION 1.03 Accounting Terms All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, except as otherwise
stated herein.
SECTION 1.04 Internal References The words "herein", "hereof" and
"hereunder" and words of similar import, when used in this Agreement, shall
refer to this Agreement as a whole and not to any provision of this Agreement,
and "Article", "Section", "subsection", "paragraph", "Exhibit", "Schedule" and
respective references are to this Agreement unless otherwise specified.
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References herein or in any Loan Document to any agreement or other document
shall, unless otherwise specified herein or therein, be deemed to be references
to such agreement or document as it may be amended, modified or supplemented
after the date hereof from time to time in accordance with the terms hereof or
of such Loan Document, as the case may be.
[End of Article I]
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ARTICLE II
LOANS
SECTION 2.01 Revolving Loans
(a) Subject to the terms and conditions of this Agreement, and in
reliance upon the representations and warranties set forth herein, each Lender
severally agrees to make its Commitment Percentage of Revolving Loans to the
Borrower from time to time from the Closing Date to, but not including, the
Termination Date, as requested by the Borrower in accordance with the terms of
Sections 2.03(a)(i); provided, that (i) the aggregate principal amount of all
outstanding Extensions of Credit (after giving effect to any amount requested
and the application of the proceeds thereof) shall not exceed the Commitments of
the Lenders; and (ii) the principal amount of outstanding Revolving Loans from
any Lender to the Borrower shall not at any time exceed such Lender's Commitment
less such Lender's Commitment Percentage multiplied by the sum of the: (A) L/C
Obligations then outstanding, (B) aggregate principal amount of all Swingline
Loans then outstanding, and (C) aggregate principal amount of all Competitive
Bid Loans then outstanding. Each Revolving Loan by a Lender shall be in a
principal amount equal to such Lender's Commitment Percentage multiplied by the
aggregate principal amount of Revolving Loans requested on such occasion.
(b) Subject to the terms and conditions hereof, the Borrower may
borrow, repay and reborrow Revolving Loans prior to the Termination Date.
(c) Revolving Loans shall be disbursed in accordance with Section
2.03(d)(i).
SECTION 2.02 Swingline Loans
(a) Availability.
(i) Subject to the terms and conditions of this Agreement, and
in reliance upon the representations and warranties set forth herein, the
Swingline Lender agrees to make Swingline Loans to the Borrower from time to
time from the Closing Date through, but not including, the Termination Date, as
requested by the Borrower in accordance with the terms of Section 2.03(a)(ii);
provided, that (i) the aggregate principal amount of all outstanding Extensions
of Credit (after giving effect to any amount requested and the application of
the proceeds thereof) shall not exceed the Commitments of the Lenders; and (ii)
the aggregate principal amount of all Swingline Loans then outstanding shall not
exceed the Swingline Commitment. Each Lender acknowledges that the aggregate
principal amount of all outstanding Swingline Loans made by the Swingline
Lender, when taken together with the aggregate principal amount of all
outstanding Revolving Loans made by the Swingline Lender, may exceed the
Swingline Lender's Commitment. Upon and during the continuance of a Default or
an Event of Default, the Borrower shall no longer have the option of requesting
Swingline Loans and the Swingline Lender shall not be obligated to make
Swingline Loans. No more than one (1) Swingline Loan may be made on the same
Business Day.
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(ii) Each Swingline Loan shall be in the aggregate principal
amount of $500,000 or any multiple of $100,000 in excess thereof, or such lesser
amount as shall be equal to the aggregate amount of the unborrowed Swingline
Commitment on such date.
(iii) Subject to the terms and conditions hereof, the Borrower
may borrow, repay and reborrow Swingline Loans prior to the Termination Date.
(iv) Swingline Loans shall be disbursed in accordance with
Section 2.03(d)(ii).
(b) Maturity. No Swingline Loan shall remain outstanding more
than ten (10) days from the date such Swingline Loan is made.
(c) Refunding.
(i) Swingline Loans (including accrued and unpaid interest
thereon) shall be reimbursed fully by the Lenders on demand by the Swingline
Lender. Such reimbursements shall be made by the Lenders in accordance with
their respective Commitment Percentages and shall thereafter be reflected as
Revolving Loans of the Lenders on the books and records of the Administrative
Agent; provided, that no Lender shall be required to reimburse any Swingline
Loan if, after giving effect to such reimbursement, the aggregate principal
amount of such Lender's Extensions of Credit outstanding would exceed such
Lender's Commitment. Each Lender shall fund its respective Commitment Percentage
of Revolving Loans as required to repay Swingline Loans outstanding to the
Swingline Lender upon demand by the Swingline Lender but in no event later than
2:00 p.m. (Charlotte, North Carolina time) on the next succeeding Business Day
after such demand is made. No Lender's obligation to fund its respective
Commitment Percentage of a Swingline Loan shall be affected by any other
Lender's failure to fund its Commitment Percentage of a Swingline Loan, nor
shall any Lender's Commitment Percentage be increased as a result of any such
failure of any other Lender to fund its Commitment Percentage of a Swingline
Loan.
(ii) The Borrower shall pay to the Swingline Lender on demand
the amount of such Swingline Loans (including accrued and unpaid interest
thereon) to the extent amounts received from the Lenders are not sufficient to
repay in full the outstanding Swingline Loans requested or required to be
refunded. In addition, the Borrower hereby authorizes the Administrative Agent
and the Swingline Lender to charge any account maintained by the Borrower or any
Subsidiary of the Borrower with the Swingline Lender (up to the amount available
therein) in order to immediately pay the Swingline Lender the amount of such
Swingline Loans to the extent amounts received from the Lenders are not
sufficient to repay in full the outstanding Swingline Loans requested or
required to be refunded. If any portion of any such amount paid to the Swingline
Lender shall be recovered by or on behalf of the Borrower from the Swingline
Lender in bankruptcy or otherwise, the loss of the amount so recovered shall be
ratably shared among all the Lenders in accordance with their respective
Commitment Percentages.
(iii) Each Lender acknowledges and agrees that its obligation
to refund Swingline Loans (including accrued and unpaid interest thereon) in
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accordance with the terms of this Section 2.02(c) is absolute and unconditional
and shall not be affected by any circumstance whatsoever, including, without
limitation, the existence of a Default or an Event of Default other than a
Default or Event of Default that the Swingline Lender had actual knowledge of at
the time such Swingline Loan was made. Further, each Lender agrees and
acknowledges that if prior to the refunding of any outstanding Swingline Loans
pursuant to this Section 2.02(c), one of the events described in Section 7.01(e)
shall have occurred, each Lender will, subject to Section 2.02(c)(i), on the
next Business Day, purchase an undivided participating interest in the Swingline
Loan in an amount equal to its Commitment Percentage multiplied by the aggregate
amount of such Swingline Loan. Each Lender will immediately transfer to the
Swingline Lender, in immediately available funds, the amount of its
participation and upon receipt thereof the Swingline Lender will deliver to such
Lender a certificate evidencing such participation dated the date of receipt of
such funds and for such amount. Whenever, at any time after the Swingline Lender
has received from any Lender such Lender's participating interest in a Swingline
Loan, the Swingline Lender receives any payment on account thereof, the
Swingline Lender will distribute to such Lender its participating interest in
such amount (appropriately adjusted, in the case of interest payments, to
reflect the period of time during which such Lender's participating interest was
outstanding and funded).
(d) The Swingline Lender may resign at any time by giving written
notice thereof to the Lenders and the Borrower, with any such resignation to
become effective only upon the appointment of a successor Swingline Lender
pursuant to this Section 2.03(d). Upon any such resignation, the Required
Lenders shall have the right to appoint a successor Swingline Lender, which
shall be a Lender or an Eligible Assignee acceptable to the Borrower. If no
successor Swingline Lender shall have been so appointed by the Required Lenders,
and shall have accepted such appointment, within 30 days after the retiring
Swingline Lender's giving of notice of resignation, then the retiring Swingline
Lender may, on behalf of the Lenders, appoint a successor Swingline Lender,
which shall be a Lender or an Eligible Assignee. Upon the acceptance of any
appointment as Swingline Lender hereunder by a successor Swingline Lender, such
successor Swingline Lender shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring Swingline Lender.
SECTION 2.03 Procedure for Advances of Loans
(a) Requests for Borrowing.
(i) Revolving Loans.
(A) Base Rate Loans. By no later than 11:00 a.m.
(Charlotte, North Carolina time) on the Business Day
prior to the date of the Borrower's request for a borrowing of a Base Rate Loan,
the Borrower shall submit to the Administrative Agent a written notice in the
form attached hereto as Exhibit C (a "Notice of Borrowing") setting forth (A)
the amount requested and (B) the desire to have such Loans accrue interest at
the Base Rate, and complying in all respects with Section 4.02 hereof. A Notice
of Borrowing received after 11:00 a.m. (Charlotte, North Carolina time) shall be
deemed received on the next Business Day. The Administrative Agent shall
promptly notify the Lenders of each Notice of Borrowing.
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(B) LIBOR Rate Loans. By no later than 11:00 a.m.
(Charlotte, North Carolina time) on the third
Business Day prior to the date of the Borrower's request for a borrowing, the
Borrower shall submit a Notice of Borrowing of a LIBOR Rate Loan to the
Administrative Agent setting forth (A) the amount requested, (B) the desire to
have such Loans accrue interest at the LIBOR Rate and (C) the Interest Period
applicable thereto and complying in all respects with Section 4.02 hereof. A
Notice of Borrowing received after 11:00 a.m. (Charlotte, North Carolina time)
shall be deemed received on the next Business Day. The Administrative Agent
shall promptly notify the Lenders of each Notice of Borrowing.
(ii) Swingline Loans. By no later than 1:00 p.m. (Charlotte,
North Carolina time) on the Business Day of the proposed Swingline Loan, the
Borrower shall submit to the Administrative Agent a written notice in the form
attached hereto as Exhibit D (a "Notice of Swingline Borrowing"), specifying (A)
the date of such borrowing, which shall be a Business Day, and (B) the aggregate
amount of such borrowing, and complying in all respects with Section 4.02
hereof. A Notice of Swingline Borrowing received after 1:00 p.m. (Charlotte,
North Carolina time) shall be deemed received on the next Business Day. The
Administrative Agent shall promptly notify the Lenders of each Notice of
Swingline Borrowing.
(iii) Competitive Bid Loans. Competitive Bid Loans shall be
requested in the manner provided for in Section 2.04(b).
(b) Each Notice of Borrowing and Notice of Swingline Borrowing shall be
irrevocable and binding on the Borrower. In the case of any Borrowing that the
related Notice of Borrowing specifies is to comprise LIBOR Rate Loans, the
Borrower shall indemnify the applicable Lender against any loss, cost or expense
incurred by such Lender as a result of any failure of the Borrower to fulfill on
or before the date specified in such Notice of Borrowing for such Loans, the
applicable conditions set forth in Article IV, including, without limitation,
any loss (including loss of anticipated profits), cost or expense incurred by
reason of the liquidation or redeployment of deposits or other funds acquired by
such Lender as part of such Borrowing.
(c) Each Revolving Loan shall be in an aggregate principal amount of
$5,000,000 or any multiple of $1,000,000 in excess thereof (except that any such
Revolving Loan may be in the aggregate amount of the unborrowed Commitments on
such date).
(d) Disbursement of Loans.
(i) Revolving Loans. Not later than 2:00 p.m. (Charlotte,
North Carolina time) on the proposed borrowing date, (i) each Lender will make
available to the Administrative Agent, for the account of the Borrower, at the
office of the Administrative Agent in funds immediately available to the
Administrative Agent, as applicable, such Lender's Commitment Percentage
multiplied by the Revolving Loans to be made on such borrowing date. The
Borrower hereby irrevocably authorizes the Administrative Agent to disburse the
proceeds of each borrowing requested pursuant to this Section 2.03(d)(i) in
immediately available funds by crediting or wiring such proceeds to the deposit
account of the Borrower identified in the most recent notice substantially in
the form of Exhibit E hereto (a "Notice of Account Designation") delivered by
the Borrower to the Administrative Agent or such other account as may be
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designated in writing by the Borrower to the Administrative Agent from time to
time. Subject to Section 2.17, the Administrative Agent shall not be obligated
to disburse the portion of the proceeds of any Revolving Loan requested pursuant
to Sections 2.03(a)(i) and (ii) to the extent that any Lender has not made
available to the Administrative Agent its applicable Commitment Percentage of
such Revolving Loan. Revolving Loans to be made for the purpose of refunding
Swingline Loans shall be made by the Lenders as provided in Section 2.02(c).
(ii) Swingline Loans. The Swingline Lender shall, before 2:00
p.m. (Charlotte, North Carolina time) on the date of such Swingline Borrowing,
make available to the Administrative Agent for the account of the Borrower in
same day funds, the proceeds of such Swingline Borrowing. The Borrower hereby
irrevocably authorizes the Administrative Agent to disburse the proceeds of each
Swingline Borrowing requested pursuant to this Section 2.03(d)(ii) in
immediately available funds by crediting or wiring such proceeds to the deposit
account of the Borrower identified in the most recent Notice of Account
Designation or such other account as may be designated in writing by the
Borrower to the Administrative Agent from time to time. The Swingline Loans
shall be included in the Commitments of the Lenders, and each Swingline
Borrowing will reduce correspondingly the amount of the available Commitment of
each Lender on a pro rata basis based on each Lender's Commitment Percentage.
(iii) Competitive Bid Loans. Competitive Bid Loans shall be
disbursed in the manner provided for in Section 2.04(e).
SECTION 2.04 Competitive Bid Loans
(a) Competitive Bid Loans. Subject to the terms and conditions set
forth herein, the Borrower may, from time to time, during the period from the
Closing Date until the date occurring seven days prior to the Termination Date,
request and each Lender may, in its sole discretion, agree to make Competitive
Bid Loans to the Borrower; provided, that (i) the sum of the aggregate principal
amount of the Lenders' Extensions of Credit (including the amount set forth in
the Competitive Bid Request) outstanding shall not exceed the Commitments of the
Lenders, (ii) the sum of the aggregate principal amount of Competitive Bid Loans
outstanding (including the amount set forth in the Competitive Bid Request) to
the Borrower shall not exceed 50% of the Commitments of the Lenders, and (iii)
if a Lender makes a Competitive Bid Loan, such Lender's obligation to make its
Commitment Percentage of any Swingline Loan, L/C Obligation or Revolving Loan
shall not be reduced thereby. No Competitive Bid Loan shall be outstanding for a
period in excess of 6 months.
(b) Competitive Bid Requests. The Borrower may solicit Competitive Bids
by delivery of a Competitive Bid Request to the Administrative Agent by 10:00
a.m. (Charlotte, North Carolina time), on a Business Day four Business Days
prior to the date of a requested Competitive Bid Loan. A Competitive Bid Request
must be substantially in the form of Exhibit B-1, shall be accompanied by the
Competitive Bid Request Fee and shall specify (I) the date of the requested
Competitive Bid Loan (which shall be a Business Day), (II) the amount of the
requested Competitive Bid Loan, and (III) the applicable Interest Period or
Interest Periods requested. The Administrative Agent shall notify the Lenders of
its receipt of a Competitive Bid Request and the contents thereof and invite the
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Lenders to submit Competitive Bids in response thereto. The Borrower may not
request a Competitive Bid Loan more frequently than three times every calendar
month.
(c) Competitive Bid Procedure. Each Lender may, in its sole discretion,
make one or more Competitive Bids to the Borrower in response to a Competitive
Bid Request in the form of Exhibit B-2. Each Competitive Bid must be received by
the Administrative Agent not later than 10:00 a.m. (Charlotte, North Carolina
time) three Business Days prior to the date of the requested Competitive Bid
Loan; provided, that should the Administrative Agent, in its capacity as a
Lender, desire to submit a Competitive Bid it shall notify the Borrower of its
Competitive Bid and the terms thereof not later than 15 minutes prior to the
time the other Lenders are required to submit their Competitive Bids. A Lender
may offer to make all or part of the requested Competitive Bid Loan and may
submit multiple Competitive Bids in response to a Competitive Bid Request. Any
Competitive Bid must specify (I) the particular Competitive Bid Request as to
which the Competitive Bid is submitted, (II) the minimum (which shall be not
less than $5,000,000 and integral multiples of $1,000,000 in excess thereof) and
maximum principal amounts of the requested Competitive Bid Loan or Loans which
the Lender is willing to make and (III) the applicable interest rate or rates
and Interest Period or Interest Periods therefor. A Competitive Bid submitted by
a Lender in accordance with the provisions hereof shall be irrevocable. The
Administrative Agent shall promptly notify the Borrower of all Competitive Bids
made and the terms thereof. The Administrative Agent shall send a copy of each
of the Competitive Bids to the Borrower and each of the Lenders for their
respective records as soon as practicable.
(d) Acceptance of Competitive Bids. The Borrower may, in its sole
discretion, subject only to the provisions of this subsection (d), accept or
refuse any Competitive Bid offered to it. To accept a Competitive Bid, the
Borrower shall give oral notification of its acceptance of any or all such
Competitive Bids (which shall be promptly confirmed in writing) to the
Administrative Agent by 12:00 p.m. (Charlotte, North Carolina time) three
Business Days prior to the date of the requested Competitive Bid Loan; provided,
that (I) the failure by the Borrower to give timely notice of its acceptance of
a Competitive Bid shall be deemed to be a refusal thereof, (II) to the extent
Competitive Bids are for comparable Interest Periods, the Borrower may accept
Competitive Bids only in ascending order of rates, (III) the aggregate amount of
Competitive Bids accepted by the Borrower shall not exceed the principal amount
specified in the Competitive Bid Request, (IV) if the Borrower shall accept a
bid or bids made at a particular Competitive Bid Rate, but the amount of such
bid or bids shall cause the total amount of bids to be accepted by the Borrower
to be in excess of the amount specified in the Competitive Bid Request, then the
Borrower shall accept a portion of such bid or bids in an amount equal to the
amount specified in the Competitive Bid Request less the amount of all other
Competitive Bids accepted with respect to such Competitive Bid Request, which
acceptance in the case of multiple bids at such Competitive Bid Rate, shall be
made pro rata in accordance with the amount of each such bid at such Competitive
Bid Rate and (V) no bid shall be accepted for a Competitive Bid Loan unless such
Competitive Bid Loan is in a minimum principal amount of $5,000,000 and integral
multiples of $1,000,000 in excess thereof, except that where a portion of a
Competitive Bid is accepted in accordance with the provisions of clause (IV) of
this subsection (d), then in a minimum principal amount of $500,000 and integral
multiples of $100,000 (but not in any event less than the minimum amount
specified in the Competitive Bid), and in calculating the pro rata allocation of
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acceptances of portions of multiple bids at a particular Competitive Bid Rate
pursuant to clause (IV) of this subsection (d), the amounts shall be rounded to
integral multiples of $100,000 in a manner which shall be in the discretion of
the Borrower. A notice of acceptance of a Competitive Bid given by the Borrower
in accordance with the provisions hereof shall be irrevocable. The
Administrative Agent shall, not later than 1:00 p.m. (Charlotte, North Carolina
time) three Business Days prior to the date of such Competitive Bid Loan, notify
each bidding Lender whether or not its Competitive Bid has been accepted (and if
so, in what amount and at what Competitive Bid Rate), and each successful bidder
will thereupon become bound, subject to the other applicable conditions hereof,
to make the Competitive Bid Loan in respect of which its bid has been accepted.
(e) Funding of Competitive Bid Loans. Each Lender which is to make a
Competitive Bid Loan shall, before 2:00 P.M. (Charlotte, North Carolina time) on
the date specified in the Competitive Bid Request, make available to the
Administrative Agent, by deposit of immediately available funds at the office of
the Administrative Agent, for the account of the Borrower in same day funds, the
proceeds of such Competitive Bid Loan. The Borrower hereby irrevocably
authorizes the Administrative Agent to disburse the proceeds of each Competitive
Bid Loan requested pursuant to Section 2.04(b) in immediately available funds by
crediting or wiring such proceeds to the deposit account of the Borrower
identified in the most recent Notice of Account Designation or such other
account as may be designated in writing by the Borrower to the Administrative
Agent from time to time.
(f) Maturity of Competitive Bid Loans. Each Competitive Bid Loan shall
mature and be due and payable in full on the last day of the Interest Period,
selected in accordance with Section 2.11(b), which date shall not be less than 7
days nor more than the lesser of (i) 6 months duration, and (ii) the number of
days remaining until the Termination Date, applicable thereto. Unless the
Borrower shall give notice to the Administrative Agent otherwise (or repays such
Competitive Bid Loan), or a Default or Event of Default exists and is
continuing, the Borrower shall be deemed to have requested Revolving Loans from
all of the Lenders (in the amount of the maturing Competitive Bid Loan and
accruing interest at the Base Rate), the proceeds of which will be used to repay
such Competitive Bid Loan.
SECTION 2.05 Voluntary Exercise of Term Out Extension Option
The Borrower may, by delivering an irrevocable Notice of Exercise of
Term Out Extension Option (a "Notice of Exercise of Term Out Extension Option")
in the form of Exhibit F hereto to the Administrative Agent not later than
11:00 a.m.(Charlotte, North Carolina time) on the tenth Business Day prior to
the Maturity Date extend the Maturity Date to a date that is not later than the
first anniversary of the Maturity Date, subject to the following:
(a) The Borrower shall have satisfied the requirements set forth in
Section 4.02;
(b) The Commitments shall be reduced as set forth in Section 2.07;
(c) No amounts borrowed and repaid may be re-borrowed after the
Termination Date, except in connection with Conversions pursuant to Section
2.14; and
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(d) All Loans outstanding after the Termination Date shall also be
referred to herein as "Term Loans".
SECTION 2.06 Fees
(a) The Borrower hereby agrees to pay to the Administrative Agent, for
the ratable account of each Lender, a facility fee (the "Facility Fee") equal to
such Lender's Commitment multiplied by a rate per annum equal to the "Facility
Fee" under the definition of Applicable Margin from the date hereof to the Final
Fee Payment Date, payable quarterly in arrears on the last day of each March,
June, September and December, commencing September 30, 2003, and on the Final
Fee Payment Date.
(b) The Borrower hereby agrees to pay to the Administrative Agent, for
the ratable account of each Lender, a utilization fee (the "Utilization Fee"),
if the aggregate amount of the outstanding Lenders' Extensions of Credit is
equal to or greater than fifty percent (50%) of the Commitments of the Lenders,
calculated daily (the calculation of which is known as the "Utilization
Amount"), which Utilization Fee shall be equal to the aggregate amount of the
Utilization Amount multiplied by a rate per annum equal to the "Utilization Fee"
under the definition of Applicable Margin from the date hereof to the Final Fee
Payment Date, payable quarterly in arrears on the last day of each March, June,
September and December, and on the Final Fee Payment Date.
(c) The Borrower hereby agrees to pay to the Administrative Agent, such
other fees as are specified in the fee letter agreement dated July 2, 2003,
among South Jersey Industries, Inc., South Jersey Gas Company, Wachovia and
Wachovia Capital Markets, LLC.
SECTION 2.07 Reduction of Commitments
(a) Voluntary.
(i) Subject to Section 2.08(b)(i) and (ii), upon at least
three Business Days' notice, the Borrower shall have the right to permanently
terminate or reduce the aggregate unused amount of the Commitments at any time
or from time to time; provided, that (a) each partial reduction shall be in an
aggregate amount at least equal to $10,000,000 and in integral multiples of
$1,000,000 in excess thereof, and (b) no reduction shall be made which would
reduce the Commitment to an amount less than the sum of the then outstanding
Extensions of Credit. Any reduction in (or termination of) the Commitments shall
be permanent and may not be reinstated.
(ii) Subject to Section 2.08(b)(iii), upon at least three
Business Days' notice, the Borrower shall have the right to permanently
terminate or reduce the aggregate unused amount of the Swingline Commitment at
any time or from time to time; provided, that (a) each partial reduction shall
be in an aggregate amount at least equal to $1,000,000 and in integral multiples
of $1,000,000 in excess thereof, and (b) no reduction shall be made which would
reduce the Swingline Commitment to an amount less than the sum of the then
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outstanding Swingline Loans. Any reduction in (or termination of) the Swingline
Commitment shall be permanent and may not be reinstated.
(b) Mandatory
(i) On the Termination Date, the Commitments shall
automatically and permanently be reduced (A) to zero if the Borrower has not
delivered a Notice of Exercise of Term Out Extension Option, or (B) to the
amount of the Extensions of Credit outstanding on the Termination Date if the
conditions set forth in Section 2.05 have been satisfied.
(ii) On and after the Termination Date, the Commitments shall
automatically and permanently be reduced by the principal amount of any
prepayments or repayments of any Loans (other than repayments in connection with
Conversions pursuant to Section 2.14) and the face amount of any expired Letters
of Credit.
SECTION 2.08 Prepayment of Loans
(a) Voluntary Prepayments. The Borrower shall have the right to prepay
Loans (other than Competitive Bid Loans) made to it in whole or in part from
time to time without premium or penalty upon one Business Days' prior written
notice to the Administrative Agent; provided, that (i) LIBOR Rate Loans may only
be prepaid on three Business Days' prior written notice to the Administrative
Agent and any prepayment of LIBOR Rate Loans will be subject to Section 9.07(b),
(ii) each such partial prepayment of Loans (other than Swingline Loans) shall be
in the minimum principal amount of $10,000,000, and (iii) each such partial
prepayment of Swingline Loans shall be in a minimum principal amount of $500,000
(or such lesser amount that may be outstanding at any such time). Amounts
prepaid hereunder shall be applied first to Swingline Loans until paid in full,
second to Base Rate Loans until paid in full, and third to LIBOR Rate Loans
until paid in full, in direct order of Interest Period maturities, pro rata
among all Lenders holding same. The Borrower may not prepay Competitive Bid
Loans.
(b) Mandatory Prepayments.
(i) If at any time the amount of the Extensions of Credit
exceed the Commitments, the Borrower shall immediately make a principal payment
to the Administrative Agent for the ratable accounts of the Lenders in an amount
necessary together with (i) accrued interest to the date of such prepayment on
the principal amount repaid or prepaid and (ii) in the case of prepayments of
LIBOR Rate Loans, any amount payable to the Lenders pursuant to Section 9.07(b),
so that the Extensions of Credit do not exceed the Commitments. Any payments
made under this Section 2.09(b)(i) shall be applied first to Swingline Loans
until paid in full, second to Base Rate Loans until paid in full, third to LIBOR
Rate Loans in direct order of Interest Period maturities until paid in full and
fourth to Competitive Bid Loans, pro rata among all Lenders holding same.
(ii) On each date on which the Commitment is decreased
pursuant to Section 2.07, the Borrower shall pay or prepay to the Administrative
Agent for the ratable accounts of the Lenders such principal amount of the
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outstanding Loans as shall be necessary, together with (i) accrued interest to
the date of such prepayment on the principal amount repaid or prepaid and (ii)
in the case of prepayments of LIBOR Rate Loans, any amount payable to the
Lenders pursuant to Section 9.07(b), so that the aggregate amount of the
Lenders' Extensions of Credit does not exceed the Commitments. Any payments made
under this Section 2.08(b)(ii) shall be applied first to Swingline Loans until
paid in full, second to Base Rate Loans until paid in full, third to LIBOR Rate
Loans in direct order of Interest Period maturities until paid in full and
fourth to Competitive Bid Loans, pro rata among all Lenders holding same.
(iii) On each date on which the Swingline Commitment is
reduced pursuant to Section 2.07(b), the Borrower shall pay or prepay to the
Administrative Agent for the ratable accounts of the Lenders or prepay such
principal amount outstanding of Swingline Loans, together with accrued interest
to the date of such prepayment on the principal amount repaid or prepaid, if
any, as may be necessary so that after such payment the aggregate unpaid
principal amount of Swingline Loans does not exceed the amount of the Swingline
Commitment as then reduced.
(iv) On the Maturity Date, the Borrower shall pay to the
Administrative Agent for the ratable accounts of the Lenders, the principal
amount of all Loans then outstanding, together with (i) accrued interest to the
date of such payment on the principal amount repaid and (ii) in the case of
prepayments of LIBOR Rate Loans, any amount payable to the Lenders pursuant to
Section 9.07(b).
SECTION 2.09 Increase in Commitment
(a) The Borrower may increase the aggregate amount of the Commitments
by an amount not greater than $10,000,000 (any such increase, a "Commitment
Increase") by designating either one or more of the existing Lenders (each of
which, in its sole discretion, may determine whether and to what degree to
participate in such Commitment Increase) or one or more Eligible Assignees
reasonably acceptable to the Administrative Agent that at the time agree, in
the case of any existing Lender to increase its Commitment (an "Increasing
Lender") and, in the case of any other Eligible Assignee (an "Additional
Lender"), to become a party to this Agreement. The sum of the increases in the
Commitments of the Increasing Lenders pursuant to this Section 2.09 plus the
Commitments of the Additional Lenders upon giving effect to the Commitment
Increase shall not in the aggregate exceed the amount of the Commitment Increase
or be less than $10,000,000 in the aggregate. The Borrower shall provide prompt
notice of any proposed Commitment Increase pursuant to this Section 2.09 the
Administrative Agent, which shall promptly provide a copy of such notice to the
Lenders.
(b) Any Commitment Increase shall become effective upon (A) the receipt
by the Administrative Agent of (i) an agreement in form and substance
satisfactory to the Administrative Agent signed by the Borrower, each Increasing
Lender and each Additional Lender, setting forth the new commitments and
Commitment Percentage of each such Lender and setting forth the agreement of
each Additional Lender to become a party to this Agreement and to be bound by
all the terms and provisions hereof binding upon each Lender, and (ii) such
evidence of appropriate corporate authorization on the part of the Borrower with
respect to the Commitment Increase and such opinions of counsel for the Borrower
with respect to the Commitment Increase as the Administrative Agent may
reasonably request, (B) the funding by each Increasing Lender and Additional
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Lender of the Loan(s) to be made by each such Lender described in paragraph (c)
below, (C) receipt by the Administrative Agent of the reasonable fees and
expenses of the Administrative Agent and Lenders associated with such Commitment
Increase, and (D) receipt by the Administrative Agent of a certificate (the
statements contained in which shall be true) of a duly authorized officer of the
Borrower stating that both before and after giving effect to such Commitment
Increase (i) no Default or Event of Default has occurred and is continuing, and
(ii) all representations and warranties made by the Borrower in this Agreement
are true and correct in all material respects as of the date of the Commitment
Increase.
(c) If any Loans are outstanding upon the effective date of any
Commitment Increase, each Increasing Lender and each Additional Lender shall
provide funds to the Administrative Agent in the manner described in Section
2.03(d) in an amount equal to the product of (x) the aggregate outstanding
principal amount of such Loans (other than Competitive Bid Loans and Swingline
Loans), expressed as a percentage of the aggregate Commitments (calculated, in
each case, immediately after such Commitment Increase) and (y) in the case of an
Increasing Lender, such Increasing Lender's Commitment Increase and, in the case
of an Additional Lender, such Additional Lender's Commitment. The funds so
provided by any such Lender shall be deemed to be a Loan or Loans made by such
Lender on the date of such Commitment Increase, with such Loan(s) being in (A)
in an amount equal to the product of (x) the aggregate outstanding principal
amount of each Loan (other than Competitive Bid Loans and Swingline Loans)
expressed as a percentage of the aggregate Commitments (calculated, in each
case, immediately prior to such Commitment Increase) and (y) in the case of an
Increasing Lender, such Increasing Lender's Commitment Increase and, in the case
of an Additional Lender, such Additional Lender's Commitment and (B) of the same
Type(s) and having the same Interest Periods(s) as each Loan described in the
preceding clause (A), such that after giving effect to such Commitment Increase
and the Loan made on the date of such Commitment Increase, each Loan outstanding
hereunder shall consist of Loans made ratably by all of the Lenders (after
giving effect to such Commitment Increase). The Borrower shall pay to the
Administrative Agent any amounts payable pursuant to Section 9.07(b) in
connection with such Commitment Increase.
(d) Notwithstanding any provision contained herein to the contrary,
from and after the date of any Commitment Increase and the making of any Loans
on such date pursuant to paragraph (c) above, all calculations and payments of
Facility Fees, Utilization Fees and of interest on the Loans comprising any Loan
shall take into account the actual Commitment of each Lender (including the
Additional Lender) and the principal amount outstanding of each Loan made by
each such Lender during the relevant period of time.
SECTION 2.10 Evidence of Debt; Notes
(a) Evidence of Debt. The date, amount, type, interest rate and
duration of Interest Period (if applicable) of each Loan made by each Lender to
the Borrower, and each payment made on account of the principal thereof, shall
be recorded by such Lender on its books; provided, that the failure of such
Lender to make any such recordation or endorsement shall not affect the
obligations of the Borrower to make a payment when due of any amount owing
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hereunder or under any Note with respect of the Loans to be evidenced by such
Note, and each such recordation or endorsement shall be conclusive and binding
absent manifest error. In any legal action or proceeding in respect of this
Agreement, the entries made in such account or accounts shall, in the absence of
manifest error, be conclusive evidence of the existence and amounts of the
Obligations of the Borrower therein recorded.
(b) Revolving Loan Notes. The Revolving Loans made by the Lenders to
the Borrower shall be evidenced, upon request by any Lender, by the Revolving
Loan Notes in a principal amount equal to the amount of such Lender's Commitment
Percentage multiplied by the Commitment as originally in effect.
(c) Swingline Note. The Swingline Loans made by the Swingline Lender to
the Borrower shall be evidenced, upon request by the Swingline Lender, by a
Swingline Note in a principal amount equal to the Swingline Commitment.
(d) Competitive Bid Loan Notes. The Competitive Bid Loans made by the
Lenders to the Borrower shall be evidenced, upon request by the Lender or
Lenders making such Competitive Bid Loan, by a Competitive Bid Loan Notes in a
principal amount equal to the Competitive Bid Loan advanced under such
Competitive Bid Request.
SECTION 2.11 Interest Rates
(a) Interest Rate Options. Subject to the provisions of this Section
2.11, at the election of the Borrower, the aggregate unpaid principal balance of
each Loan shall bear interest at the Applicable Rate. Each Revolving Loan or
portion thereof bearing interest based on the Base Rate shall be a "Base Rate
Loan", and each Loan or portion thereof bearing interest based on the LIBOR
Rate, and, solely for purposes of this Section 2.11, Competitive Bid Loans,
shall be a "LIBOR Rate Loan." Any Loan or any portion thereof as to which the
Borrower has not duly specified an interest rate as provided herein shall be
deemed a Base Rate Loan. The Swingline Loan shall bear interest based on the
Base Rate.
(b) Interest Periods. In connection with each LIBOR Rate Loan, the
Borrower, by giving notice at the times described in Section 2.03(a)(i)(B),
shall elect an interest period (each, an "Interest Period") to be applicable to
such LIBOR Rate Loan, which Interest Period shall be a period of one (1), two
(2), three (3), or six (6) months; provided, that:
(i) the Interest Period shall commence on the date of advance
of or conversion to any LIBOR Rate Loan and, in the case of immediately
successive Interest Periods, each successive Interest Period shall commence on
the date on which the next preceding Interest Period expires;
(ii) the Borrower may not select any Interest Period that ends
after the Maturity Date;
(iii) Interest Periods commencing on the same date for LIBOR
Rate Loans comprising part of the same Loan shall be of the same duration;
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(iv) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding Business Day;
provided, that if such extension would cause the last day of such Interest
Period to occur in the next following calendar month, the last day of such
Interest Period shall occur on the next preceding Business Day;
(v) with respect to LIBOR Rate Loans, if any Interest Period
begins on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period, such Interest Period shall
end on the last Business Day of such calendar month; and
(vi) no more than five (5) Interest Periods may be in effect
at any time.
(c) Default Rate. Subject to Section 7.02, upon the occurrence and
during the continuance of an Event of Default, (i) the Borrower shall no longer
have the option to request LIBOR Rate Loans, (ii) all outstanding LIBOR Rate
Loans shall bear interest at a rate per annum equal to the Default Rate, (iii)
all outstanding Base Rate Loans, Term Loans and Swingline Loans shall bear
interest at a rate per annum equal to the Default Rate, and (iv) all outstanding
Competitive Bid Loans shall bear interest at a rate per annum equal to the
Default Rate. Interest shall continue to accrue on the Notes after the filing by
or against the Borrower of any petition seeking any relief in bankruptcy or
under any act or law pertaining to insolvency or debtor relief, whether state,
federal or foreign.
(d) Interest Payment and Computation. (A) Interest on each Base Rate
Loan and Swingline Loan shall be payable in arrears on the last Business Day of
each calendar quarter commencing September 30, 2003; and (B) interest on each
Term Loan, LIBOR Rate Loan shall be payable on the last day of each Interest
Period applicable thereto, and if such Interest Period extends over three (3)
months, at the end of each three (3) month interval during such Interest Period.
All interest rates, fees and commissions provided hereunder shall be computed on
the basis of a 360-day year and assessed for the actual number of days elapsed;
provided, that interest on each Base Rate Loan and Swingline Loan that is based
on the Prime Rate shall be computed on the basis of a 365-day or 366-day year,
as applicable, and assessed for the actual number of days elapsed.
(e) Payments. The Borrower shall make each payment hereunder not later
than 12:00 noon (Charlotte, North Carolina time) on the day when due in lawful
money of the United States of America to the Administrative Agent at its address
referred to in Section 9.02 in same day funds.
(f) Maximum Rate. In no contingency or event whatsoever shall the
aggregate amount of all amounts deemed interest hereunder or under any of the
Notes charged or collected pursuant to the terms of this Agreement or pursuant
to any of the Notes exceed the highest rate permissible under any Applicable Law
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which a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that such a court determines that the Lenders
have charged or received interest hereunder in excess of the highest applicable
rate, the rate in effect hereunder shall automatically be reduced to the maximum
rate permitted by Applicable Law and the Lenders shall at the Administrative
Agent's option promptly refund to the Borrower any interest received by Lenders
in excess of the maximum lawful rate or shall apply such excess to the principal
balance of the Obligations. It is the intent hereof that the Borrower not pay or
contract to pay, and that neither the Administrative Agent nor any Lender
receive or contract to receive, directly or indirectly in any manner whatsoever,
interest in excess of that which may be paid by the Borrower under Applicable
Law.
SECTION 2.12 Additional Interest on LIBOR Rate Loans
The Borrower shall pay to each Lender, so long as such Lender shall be
required under regulations of the Board of Governors of the Federal Reserve
System to maintain reserves with respect to liabilities or assets consisting
of or including Eurocurrency Liabilities and which are not required on the date
of this Agreement, additional interest on the unpaid principal amount of each
LIBOR Rate Loan and Competitive Bid Loan of such Lender, from the date of such
LIBOR Rate Loan and Competitive Bid Loan until such principal amount is paid
in full, at an interest rate per annum equal at all times to the remainder
obtained by subtracting (i) the LIBOR Rate for the Interest Period for such
LIBOR Rate Loan or Competitive Bid Loan, from (ii) the rate obtained by dividing
such LIBOR Rate by a percentage equal to 100% minus the LIBOR Rate Reserve
Percentage of such Lender for such Interest Period, payable on each date on
which interest is payable on such LIBOR Rate Loan or Competitive Bid Loan.
Such additional interest shall be determined by such Lender and notified to the
Borrower through the Administrative Agent.
SECTION 2.13 Interest Rate Determination
(a) The Administrative Agent shall give prompt notice to the Borrower
and the Lenders of the applicable interest rate determined by the Administrative
Agent for purposes of Section 2.11.
(b) If, with respect to any LIBOR Rate Loans and Competitive Bid Loan,
(i) the Required Lenders notify the Administrative Agent that the LIBOR Rate for
any Interest Period for such LIBOR Rate Loans or Competitive Bid Loan will not
adequately reflect the cost to such Required Lenders of making, funding or
maintaining their respective LIBOR Rate Loans or Competitive Bid Loan for such
Interest Period or (ii) the Required Lenders notify the Administrative Agent or
the Administrative Agent determines that adequate and fair means do not exist
for ascertaining the applicable interest rate on the basis provided for in the
definition of LIBOR Rate, the Administrative Agent shall forthwith so notify the
Borrower and the Lenders, whereupon:
(i) each LIBOR Rate Loan or Competitive Bid Loan will
automatically, on the last day of the then existing Interest Period therefor,
Convert into a Base Rate Loan, and
(ii) the obligation of the Lenders to make, or to Convert Base
Rate Loans into, LIBOR Rate Loans shall be suspended until the Administrative
Agent (based on notice from the Required Lenders) shall notify the Borrower and
the Lenders that the circumstances causing such suspension no longer exist.
(c) If the Borrower shall fail to (i) select the duration of any
Interest Period for any LIBOR Rate Loans in accordance with the provisions of
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Section 2.11(b), (ii) provide a Notice of Conversion with respect to any LIBOR
Rate Loans on or prior to 11:00 a.m., Charlotte, North Carolina time, on the
third Business Day prior to the last day of the Interest Period applicable
thereto, in the case of a Conversion to or in respect of LIBOR Rate Loans or
(iii) satisfy the conditions set forth in Section 2.14 with respect to a
Conversion, the Administrative Agent will forthwith so notify the Borrower and
the Lenders and such LIBOR Rate Loans will automatically, on the last day of the
then existing Interest Period therefor, Convert into Base Rate Loans.
SECTION 2.14 Voluntary Conversion of Loans
The Borrower may on any Business Day, by delivering an irrevocable
Notice of Conversion (a "Notice of Conversion") in the form of Exhibit G hereto
to the Administrative Agent not later than 11:00 a.m., Charlotte, North Carolina
time, on the third Business Day prior to the date of the proposed Conversion,
and subject to the provisions of Sections 2.11, 2.16 and 4.03, Convert all Loans
of one Type made simultaneously into Loans of the other Type; provided, that any
Conversion of any LIBOR Rate Loans into Base Rate Loans shall be made on, and
only on, the last day of an Interest Period for such LIBOR Rate Loans.
SECTION 2.15 Increased Costs
(a) If, due to either (i) the introduction of or any change (other than
any change by way of imposition or increase of reserve requirements, in the case
of LIBOR Rate Loans or Competitive Bid Loans, included in the LIBOR Rate Reserve
Percentage) in or in the interpretation of any law or regulation or (ii) the
compliance with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law), in any case,
promulgated, implemented or occurring on or after the date hereof, there shall
be any increase in the cost to any Lender of agreeing to make or making, funding
or maintaining LIBOR Rate Loans or Competitive Bid Loans, then the Borrower
shall from time to time, upon demand by such Lender (with a copy of such demand
to the Administrative Agent), pay to such Lender additional amounts sufficient
to compensate such Lender for such increased cost. Each Lender agrees to notify
the Borrower of any such increased costs as soon as reasonably practicable after
determining that such increased cost is applicable to LIBOR Rate Loans or
Competitive Bid Loans hereunder. A certificate as to the amount of such
increased cost, submitted to the Borrower and the Administrative Agent by such
Lender, shall be conclusive and binding for all purposes, absent manifest error.
(b) If any Lender determines that compliance with any law or regulation
or any guideline or request from any central bank or other governmental
authority (whether or not having the force of law), in any case promulgated,
implemented or occurring on or after the date hereof, affects or would affect
the amount of capital required or expected to be maintained by any such Lender
or any corporation controlling any such Lender and that the amount of such
capital is increased by or based upon the existence of such Lender's Commitment
hereunder and other Commitments of this Type, then, upon demand by any such
Lender, as the case may be (with a copy of such demand to the Administrative
Agent), the Borrower shall immediately pay to such Lender, as the case may be,
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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,
for any difference in the rate of return of any such Lender to the extent that
such Lender, as the case may be, reasonably determines such increase in capital
to be allocable to the existence of such Lender's Commitment hereunder, as the
case may be. Each Lender agrees to notify the Borrower of any such additional
amount as soon as reasonably practicable after the any Lender makes such
determination. A certificate as to such amounts submitted to the Borrower and
the Administrative Agent by such Lender shall be conclusive and binding for all
purposes, absent manifest error.
SECTION 2.16 Illegality
Notwithstanding any other provision of this Agreement, if any Lender
shall notify the Administrative Agent that the introduction of or any change in
or in the interpretation of any law or regulation makes it unlawful, or any
central bank or other governmental authority asserts that it is unlawful, for
any Lender or its LIBOR Lending Office to perform its obligations hereunder to
make LIBOR Rate Loans or Competitive Bid Loans, or to fund or maintain LIBOR
Rate Loans or Competitive Bid Loans hereunder, (i) the obligation of the Lenders
to make Competitive Bid Loans, (ii) the obligation of the Lenders to make, or to
Convert Base Rate Loans into, LIBOR Rate Loans shall be suspended until the
Administrative Agent (based on notice from the affected Lender) shall notify
the Borrower and the Lenders that the circumstances causing such suspension no
longer exist, and (iii) the Borrower shall pay (x) on the last day of the
applicable Interest Period, or (y) if the failure to prepay immediately would
cause any Lender to be in violation of such law or regulation, immediately,
in full all LIBOR Rate Loans and Competitive Bid Loans of all Lenders then
outstanding, together with interest accrued thereon and amounts payable pursuant
to Section 9.07(b), unless, in either case, the Borrower, within five Business
Days of notice from the Administrative Agent (or such shorter, maximum period of
time, specified by the Administrative Agent, as may be legally allowable),
Converts all LIBOR Rate Loans or Competitive Bid Loans of all Lenders then
outstanding into Base Rate Loans in accordance with Section 2.14.
SECTION 2.17 Nature of Obligations of Lenders Regarding Extensions of
Credit; Assumption by the Administrative Agent
The obligations of the Lenders under this Agreement to make the Loans
and issue or participate in Letters of Credit are several and are not joint or
joint and several. Unless the Administrative Agent shall have received notice
from a Lender prior to a proposed borrowing date that such Lender will not make
available to the Administrative Agent such Lender's ratable portion of the
amount to be borrowed on such date (which notice shall not release such Lender
of its obligations hereunder), the Administrative Agent may assume that such
Lender has made such portion available to the Administrative Agent on the
proposed borrowing date in accordance with this Agreement and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrower on
such date a corresponding amount. If such amount is made available to the
Administrative Agent on a date after such borrowing date, such Lender shall pay
to the Administrative Agent on demand an amount, until paid, equal to the
product of (a) the amount not made available by such Lender in accordance with
the terms hereof, times (b) the daily average Federal Funds Rate (or, if such
amount is not made available for a period of three (3) Business Days after the
borrowing date, the Base Rate) during such period as determined by the
Administrative Agent, times (c) a fraction the numerator of which is the number
of days that elapse from and including such borrowing date to the date on which
such amount not made available by such Lender in accordance with the terms
hereof shall have become immediately available to the Administrative Agent and
the denominator of which is 360. A certificate of the Administrative Agent with
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respect to any amounts owing under this Section 2.17 shall be conclusive, absent
manifest error. If such Lender's Commitment Percentage of such borrowing is not
made available to the Administrative Agent by such Lender within three (3)
Business Days of such borrowing date, the Administrative Agent shall be entitled
to recover such amount made available by the Administrative Agent with interest
thereon at the rate per annum applicable to the Loan hereunder, on demand, from
the Borrower. The failure of any Lender to make available its Commitment
Percentage of any Loan requested by the Borrower shall not relieve it or any
other Lender of its obligation, if any, hereunder to make its Commitment
Percentage of such Loan available on such borrowing date, but no Lender shall be
responsible for the failure of any other Lender to make its Commitment
Percentage of such Loan available on the borrowing date.
SECTION 2.18 Net of Taxes, Etc.
(a) All payments made by the Borrower under this Agreement shall be
made free and clear of, and without deduction or withholding for or on account
of, any present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority, excluding, in the
case of the Administrative Agent and each Lender, taxes imposed on its overall
net income, and franchise taxes imposed on it by the jurisdiction under the laws
of which the Administrative Agent or such Lender (as the case may be) is
organized or any political subdivision thereof and, in the case of each Lender,
taxes imposed on its overall net income, and franchise taxes imposed on it by
the jurisdiction of such Lender's Applicable Lending Office or any political
subdivision thereof (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
If any Taxes are required to be withheld from any amounts payable to the
Administrative Agent or any Lender hereunder, the amounts so payable to the
Administrative Agent or such Lender shall be increased to the extent necessary
to yield to the Administrative Agent or such Lender (after payment of all Taxes)
interest or any such other amounts payable hereunder at the rates or in the
amounts specified in this Agreement. Whenever any Taxes are payable by the
Borrower, as promptly as possible thereafter the Borrower shall send to the
Administrative Agent for its own account or for the account of such Lender, a
certified copy of an original official receipt received by the Borrower showing
payment thereof. If the Borrower fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the Administrative Agent the
required receipts or other required documentary evidence, the Borrower shall
indemnify the Administrative Agent and the Lenders for any incremental taxes,
interest or penalties that may become payable by the Administrative Agent or any
Lender as a result of any such failure. The agreements in this Section shall
survive the termination of this Agreement and the payment of the obligations
hereunder and all other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof agrees that it will deliver to the Borrower
and the Administrative Agent on or before the latter of the date hereof and the
date such Lender becomes a Lender (i) two duly completed copies of United States
Internal Revenue Service Form W-8BEN or W-8ECI or successor applicable form, as
the case may be. Each such Lender also agrees to deliver to the Borrower and the
Administrative Agent two further copies of said Form W-8BEN or W-8ECI, or
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successor applicable forms or other manner of certification, as the case may be,
on or before the date that any such form previously delivered expires or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent form previously delivered by it to the Borrower, and such extensions or
renewals thereof as may reasonably be requested by the Borrower or the
Administrative Agent, unless in any such case an event (including, without
limitation, any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required which renders all
such forms inapplicable or which would prevent such Lender from duly completing
and delivering any such form with respect to it and such Lender so advises the
Borrower and the Administrative Agent. Such Lender shall certify that it is
entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes and that it is entitled to
an exemption from United States backup withholding tax.
(c) If any Lender shall request compensation for costs pursuant to this
Section 2.18, (i) such Lender shall make reasonable efforts (which shall not
require such Lender to incur a loss or unreimbursed cost or otherwise suffer any
disadvantage deemed by it to be significant) to make within thirty (30) days an
assignment of its rights and delegation and transfer of its obligations
hereunder to another of its offices, branches or affiliates, if such assignment
would reduce such costs in the future, (ii) the Borrower may with the consent of
the Required Lenders, which consent shall not be unreasonably withheld, secure a
substitute bank to replace such Lender which substitute bank shall, upon
execution of a counterpart of this Agreement and payment to such Lender of any
and all amounts due under this Agreement, be deemed to be a Lender hereunder
(any such substitution referred to in clause (ii) shall be accompanied by an
amount equal to any loss or reasonable expense incurred by such Lender as a
result of such substitution); provided, that this Section 2.18(c) shall not be
construed as limiting the liability of the Borrower to indemnify or reimburse
such Lender for any costs or expenses the Borrower is required hereunder to
indemnify or reimburse.
[End of Article II]
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ARTICLE III
LETTER OF CREDIT FACILITY
SECTION 3.01 L/C Commitment
(a) Subject to the terms and conditions of this Agreement, the Issuing
Lender, in reliance on the agreements of the other Lenders set forth in Section
3.04(a), agrees to issue standby letters of credit ("Letters of Credit") for the
account of the Borrower on any Business Day from the Closing Date to, but not
including, the date that is ninety (90) days prior to the Termination Date in
such form as may be approved from time to time by the Issuing Lender; provided,
that the Issuing Lender shall have no obligation to issue any Letter of Credit
if, after giving effect to such issuance, (i) the L/C Obligations would exceed
the L/C Commitment or (ii) the aggregate principal amount of outstanding
Extensions of Credit, would exceed the Commitments.
(b) Each Letter of Credit shall (i) be denominated in Dollars in a
minimum amount of $500,000, (ii) be a standby letter of credit issued to support
obligations of the Borrower or any of its Subsidiaries, contingent or otherwise,
incurred in the ordinary course of business, (iii) (A) expire on a date not
later than five (5) Business Days prior to the Termination Date, (B) have a term
not exceeding one year, (C) and otherwise reasonably satisfactory to the Issuing
Lender, and (iv) be subject to the Uniform Customs and/or ISP 98, as set forth
in the Application or as determined by the Issuing Lender and, to the extent not
inconsistent therewith, the laws of the State of New York. The Issuing Lender
shall not at any time be obligated to issue any Letter of Credit hereunder if
such issuance would conflict with, or cause the Issuing Lender or any L/C
Participant to exceed any limits imposed by, any Applicable Law. References
herein to "issue" and derivations thereof with respect to Letters of Credit
shall also include extensions or modifications of any existing Letters of
Credit, unless the context otherwise requires.
SECTION 3.02 Procedure for Issuance of Letters of Credit
The Borrower may from time to time request that the Issuing Lender issue
a Letter of Credit by delivering to the Issuing Lender at the Administrative
Agent's Office an Application therefor, completed to the reasonable satisfaction
of the Issuing Lender, and such other certificates, documents and other papers
and information as the Issuing Lender may reasonably request. Upon receipt of
any Application, the Issuing Lender shall process such Application and the
certificates, documents and other papers and information delivered to it in
connection therewith in accordance with its customary procedures and shall,
subject to Section 3.01 and Article IV, promptly issue the Letter of Credit
requested thereby (but in no event shall the Issuing Lender be required to issue
any Letter of Credit earlier than two (2) Business Days after its receipt of the
Application therefor and all such other certificates, documents and other papers
and information relating thereto) by issuing the original of such Letter of
Credit to the beneficiary thereof or as otherwise may be agreed by the Issuing
Lender and the Borrower. The Issuing Lender shall promptly furnish to the
Borrower a copy of such Letter of Credit and promptly notify each Lender of the
issuance and upon request by any Lender, furnish to such Lender a copy of such
Letter of Credit and the amount of such Lender's L/C Participation therein.
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SECTION 3.03 Commissions and Other Charges
(a) The Borrower shall pay to the Administrative Agent, for the account
of the Issuing Lender and the L/C Participants, a letter of credit commission
with respect to each Letter of Credit in an amount equal to the product of (i)
the average daily maximum amount available to be drawn during the relevant
quarter under such Letter of Credit and (ii) the Applicable LIBOR Margin
(determined on a per annum basis). Such commission shall be payable quarterly in
arrears on the last Business Day of each calendar quarter and on the Termination
Date commencing on the last Business Day of the calendar quarter in which such
Letter of Credit is issued. The Administrative Agent shall, promptly following
its receipt thereof, distribute to the Issuing Lender and the L/C Participants
all commissions received pursuant to this Section 3.03(a) in accordance with
their respective Commitment Percentages.
(b) In addition to the foregoing commission, the Borrower shall pay to
the Administrative Agent, for the account of the Issuing Lender, a fronting fee
with respect to each Letter of Credit issued on or after the Closing Date in an
amount equal to the product of (i) the face amount of such Letter of Credit and
(ii) 12.5 basis points (0.125%) (the "Fronting Fee"). Such Fronting Fee shall be
payable in arrears on the last Business Day of each calendar quarter and on the
Termination Date for each day such Letter of Credit is issued and outstanding.
(c) In addition to the foregoing fees and commissions, the Borrower
shall pay or reimburse the Issuing Lender for such normal and customary costs
and expenses as are incurred or charged by the Issuing Lender in issuing,
effecting payment under, amending or otherwise administering any Letter of
Credit.
SECTION 3.04 L/C Participations
(a) The Issuing Lender irrevocably agrees to grant and hereby grants to
each L/C Participant, and, to induce the Issuing Lender to issue Letters of
Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase
and hereby accepts and purchases from the Issuing Lender, on the terms and
conditions hereinafter stated, for such L/C Participant's own account and risk
an undivided interest equal to such L/C Participant's Commitment Percentage in
the Issuing Lender's obligations and rights under and in respect of each Letter
of Credit issued (or deemed issued) hereunder and the amount of each draft paid
by the Issuing Lender thereunder. Each L/C Participant unconditionally and
irrevocably agrees with the Issuing Lender that, if a draft is paid under any
Letter of Credit for which the Issuing Lender is not reimbursed in full by the
Borrower through a Revolving Loan or otherwise in accordance with the terms of
this Agreement, such L/C Participant shall pay to the Issuing Lender upon demand
at the Issuing Lender's address for notices specified herein an amount equal to
such L/C Participant's Commitment Percentage multiplied by the amount of such
draft, or any part thereof, which is not so reimbursed.
(b) Upon becoming aware of any amount required to be paid by any L/C
Participant to the Issuing Lender pursuant to Section 3.04(a) in respect of any
unreimbursed portion of any payment made by the Issuing Lender under any Letter
of Credit, the Issuing Lender shall notify each L/C Participant of the amount
and due date of such required payment and such L/C Participant shall pay to the
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Issuing Lender the amount specified on the applicable due date. If any such
amount is paid to the Issuing Lender after the date such payment is due, such
L/C Participant shall pay to the Issuing Lender on demand, in addition to such
amount, the product of (i) such amount, times (ii) the daily average Federal
Funds Rate (or Base Rate, if such amount is not paid within three Business Days
of demand) as determined by the Administrative Agent during the period from and
including the date such payment is due to the date on which such payment is
immediately available to the Issuing Lender, times (iii) a fraction the
numerator of which is the number of days that elapse during such period and the
denominator of which is 360. A certificate of the Issuing Lender with respect to
any amounts owing under this Section 3.04(b) shall be conclusive in the absence
of manifest error. With respect to payment to the Issuing Lender of the
unreimbursed amounts described in this Section 3.04(b), if the L/C Participants
receive notice that any such payment is due (A) prior to 1:00 p.m. (Charlotte,
North Carolina time) on any Business Day, such payment shall be due that
Business Day, and (B) after 1:00 p.m. (Charlotte, North Carolina time) on any
Business Day, such payment shall be due on the following Business Day.
(c) Whenever, at any time after the Issuing Lender has made payment
under any Letter of Credit and has received from any L/C Participant its
Commitment Percentage of such payment in accordance with this Section 3.04, the
Issuing Lender receives any payment related to such Letter of Credit (whether
directly from the Borrower or otherwise) or any payment of interest on account
thereof, the Issuing Lender will distribute to such L/C Participant its pro rata
share thereof; provided, that in the event that any such payment received by the
Issuing Lender shall be required to be returned by the Issuing Lender, such L/C
Participant shall return to the Issuing Lender the portion thereof previously
distributed by the Issuing Lender to it.
SECTION 3.05 Reimbursement Obligation of the Borrower
(a) In the event of any drawing under any Letter of Credit, the
Borrower agrees to reimburse (either with the proceeds of a Revolving Loan as
provided for in this Section 3.05 or with funds from other sources), in same day
funds, the Issuing Lender on each date on which the Issuing Lender notifies the
Borrower of the date and amount of a draft paid under any Letter of Credit for
the amount of (a) such draft so paid and (b) any amounts referred to in Section
3.03(c) incurred by the Issuing Lender in connection with such payment. Unless
the Borrower shall immediately notify the Issuing Lender that the Borrower
intends to reimburse the Issuing Lender for such drawing from other sources or
funds, the Borrower shall be deemed to have timely given a Notice of Borrowing
to the Administrative Agent requesting that the Lenders make a Revolving Loan
bearing interest at the Base Rate on such date in the amount of (a) such draft
so paid and (b) any amounts referred to in Section 3.03(c) incurred by the
Issuing Lender in connection with such payment, and the Lenders shall make a
Revolving Loan bearing interest at the Base Rate in such amount, the proceeds of
which shall be applied to reimburse the Issuing Lender for the amount of the
related drawing and costs and expenses. Each Lender acknowledges and agrees that
its obligation to fund a Revolving Loan in accordance with this Section 3.05 to
reimburse the Issuing Lender for any draft paid under a Letter of Credit is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including, without limitation, the existence of a Default or an
Event of Default other than a Default or Event of Default that the Issuing
Lender had actual knowledge of at the time of the issuance of such Letter of
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Credit. If the Borrower has elected to pay the amount of such drawing with funds
from other sources and shall fail to reimburse the Issuing Lender as provided
above, the unreimbursed amount of such drawing shall bear interest in the rate
which would be payable on any outstanding Base Rate Loans which were then
overdue from the date such amounts become payable (whether at stated maturity,
by acceleration or otherwise) until payment in full.
SECTION 3.06 Obligations Absolute
The Borrower's obligations under this Article III (including, without
limitation, the Obligations) shall be absolute and unconditional under any and
all circumstances and irrespective of any set-off, counterclaim or defense to
payment which the Borrower may have or have had against the Issuing Lender or
any beneficiary of a Letter of Credit or any other Person. The Borrower also
agrees that the Issuing Lender and the L/C Participants shall not be responsible
for, and the Borrower's reimbursement obligation under Section 3.05 shall not be
affected by, among other things, the validity or genuineness of documents or of
any endorsements thereon, even though such documents shall in fact prove to be
invalid, fraudulent or forged, or any dispute between or among the Borrower and
any beneficiary of any Letter of Credit or any other party to which such Letter
of Credit may be transferred or any claims whatsoever of the Borrower against
any beneficiary of such Letter of Credit or any such transferee, except for such
matters caused by the Issuing Lender's gross negligence or willful misconduct.
The Issuing Lender shall not be liable for any error, omission, interruption or
delay in transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit, except for errors or
omissions caused by the Issuing Lender's gross negligence or willful misconduct.
The Borrower agrees that any action taken or omitted by the Issuing Lender under
or in connection with any Letter of Credit or the related drafts or documents,
if done in the absence of gross negligence or willful misconduct and in
accordance with the standards of care specified in ISP 98 or the Uniform
Customs, as the case may be, and, to the extent not inconsistent therewith,
the UCC, shall be binding on the Borrower and shall not result in any liability
of the Issuing Lender or Lenders.
[End of Article III]
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ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.01 Conditions Precedent to the Execution and Delivery
of this Agreement
The obligation of the Lenders to execute and deliver this Agreement
and to make Extensions of Credit is subject to the conditions precedent that the
Administrative Agent shall have received on or before the Closing Date, the
following, each dated such date, in form and substance reasonably satisfactory
to the Administrative Agent and the Lenders, with copies for each Lender:
(a) Agreement. Counterparts of this Agreement, duly executed by the
Borrower, the Administrative Agent, the Issuing Lender and the Lenders;
(b) Secretary's Certificate. Receipt by the Administrative Agent of (A)
a certificate of the secretary or assistant secretary of the Borrower, as
applicable, dated the Closing Date and certifying (1) that attached thereto is a
true and complete copy of the certificate of incorporation and all amendments
thereto of the Borrower, certified as of a recent date by the appropriate
Governmental Authority in its jurisdiction of organization, (2) that attached
thereto is a true and complete copy of the by-laws of the Borrower in effect on
the Closing Date and at all times since a date prior to the date of the
resolutions described in clause (3) below, (3) that attached thereto is a true
and complete copy of resolutions or consents, as applicable, duly adopted by the
board of directors of the Borrower authorizing, as applicable, the execution,
delivery and performance of this Agreement and that such resolutions have not
been modified, rescinded or amended and are in full force and effect, (4) that
the organizational documents of the Borrower have not been amended since the
date of the last amendment thereto shown on the certificate of good standing
attached thereto, and (5) as to the incumbency and specimen signature of each
officer of the Borrower executing this Agreement and any other document
delivered in connection herewith on its behalf; and (B) a certificate of another
officer as to the incumbency and specimen signature of such secretary or
assistant secretary executing the certificate pursuant to (A) above;
(c) Officer's Certificate. Receipt by the Administrative Agent of a
certificate from the chief executive officer or chief financial officer of the
Borrower, as applicable, in form and substance reasonably satisfactory to the
Administrative Agent, to the effect that, as of the Closing Date, all
representations and warranties of the Borrower contained in this Agreement and
the other Loan Documents are true, correct and complete; that the Borrower is
not in violation or aware of any event that would cause a Material Adverse
Change in the business or operation as reflected in the Disclosure Documents;
that the Borrower is not in violation of any of the covenants contained in this
Agreement and the other Loan Documents; that, after giving effect to the
transactions contemplated by this Agreement, no Default or Event of Default has
occurred and is continuing; and that the Borrower has satisfied each of the
conditions precedent set forth in this Section 4.01;
(d) Consents. Receipt by the Administrative Agent of a written
representation from the Borrower that (i) all governmental, shareholder, member,
partner and third party consents and approvals necessary or, in the reasonable
opinion of the Administrative Agent, desirable, in connection with the
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transactions contemplated hereby have been received and are in full force and
effect and (ii) no condition or requirement of law exists which could reasonably
be likely to restrain, prevent or impose any material adverse condition on the
transactions contemplated hereby;
(e) Proceedings. A certificate from the Borrower certifying that no
action, proceeding, investigation, regulation or legislation has been
instituted, or, to the Borrower's knowledge, threatened or proposed before any
court, government agency or legislative body to enjoin, restrain or prohibit, or
to obtain damages in respect of, or which is related to or arises out of this
Agreement or any other Loan Documents or the consummation of the transactions
contemplated hereby or thereby or which, in the Administrative Agent's
reasonable determination, would prohibit the extension of Letters of Credit or
could reasonably be expected to result in any such prohibition or a Material
Adverse Change;
(f) Financial Statements. Receipt by the Administrative Agent of the
Disclosure Documents and financial statements required pursuant to Section 6.03,
which demonstrate, in the Administrative Agent's reasonable judgment, together
with all other information then available to the Administrative Agent, that the
Borrower can repay its debts and satisfy its other obligations as and when they
become due, and can comply with the financial covenants contained in this
Agreement;
(g) Good Standing Certificate. Receipt by the Administrative Agent of a
certificate of good standing for the Borrower, dated on or immediately prior to
the Closing Date, from the Secretary of State of the state of organization of
the Borrower and from all states in which the Borrower is required to obtain a
certificate of good standing or like certificate due to the nature of its
operations in such state;
(h) Fees. Receipt by the Administrative Agent and the Lenders of the
fees set forth or referenced in this Agreement and any other accrued and unpaid
fees, expenses or commissions due hereunder (including, without limitation,
legal fees and expenses of counsel to the Administrative Agent), and to any
other Person such amount as may be due thereto in connection with the
transactions contemplated hereby, including all taxes, fees and other charges
related to the Loan Documents;
(i) Notice required by Section 4.02. Receipt by the Administrative
Agent of the notice required under Section 4.02;
(j) Note. If requested by any Lender, a Note, payable to the order of
such Lender, duly completed and executed by the Borrower;
(k) Opinions. Opinions of Cozen O'Connor, counsel to the Borrower, in
substantially the form of Exhibit H hereto, and as to such other matters as the
Administrative Agent may reasonably request addressed to the Administrative
Agent and the Lenders;
(l) Other Facilities. The Three-Year Revolving Credit Agreement among
South Jersey Gas Company, Wachovia, as the Administrative Agent thereunder and
the Lenders from time to time party thereto, shall have closed or shall close on
the Closing Date; and
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(m) Other. Receipt by the Administrative Agent of all other opinions,
certificates and instruments in connection with the transactions contemplated by
this Agreement satisfactory in form and substance to the Required Lenders.
SECTION 4.02 Additional Conditions Precedent
The obligation of the Lenders and the Issuing Lender to (i) make each
Extension of Credit, including the Extensions of Credit on the Closing Date,
(ii) Convert a Base Rate Loan into a LIBOR Rate Loan or from a LIBOR Rate Loan
into another LIBOR Rate Loan, (iii) Convert any Loan into a Term Loan, and
(iv) issue the Letters of Credit upon Application therefor, shall be subject to
the further conditions precedent that on the date of such extension, Conversion,
issuance or extension, as the case may be:
(a) The Administrative Agent shall have received a Notice of Borrowing
or Application, as the case may be, signed by duly authorized officer of the
Borrower, dated such date, stating that:
(i) The representations and warranties of the Borrower
contained in Section 5.01 of this Agreement are true and correct on and as of
the date of such Extension of Credit, Conversion, or issuance of the Letter of
Credit, as applicable, as though made, Converted or issued, as applicable, on
and as of such date, both before and after giving effect to such Extension of
Credit, Conversion, or issuance of the Letter of Credit, as applicable, and to
the application of the proceeds thereof;
(ii) Since June 30, 2003, there has been no Material Adverse
Change; and
(iii) No event has occurred and is continuing, or would result
from the Extension of Credit, Conversion, or issuance of the Letter of Credit,
as applicable, or the application of the proceeds thereof, as the case may be,
which constitutes a Default or an Event of Default.
(b) The Administrative Agent shall have received such other approvals,
opinions or documents as the Administrative Agent may reasonably request.
Unless the Borrower shall have previously advised the Administrative
Agent in writing that one or more of the statements contained in clauses (a)(i)
through (a)(iii) above are not true and correct, the Borrower shall be deemed to
have represented and warranted, on the date of any Extension of Credit
hereunder, that on the date of such Extension of Credit, Conversion, or issuance
of the Letter of Credit, as applicable, the above statements are true.
SECTION 4.03 Reliance on Certificates
Each of the Lenders, the Issuing Lender and the Administrative Agent
shall be entitled to rely conclusively upon the certificates delivered from time
to time by officers of the Borrower as to the names, incumbency, authority and
signatures of the respective Persons named therein until such time as the
Administrative Agent may receive a replacement certificate, in form acceptable
to the Administrative Agent, from an officer of the Borrower identified to the
Administrative Agent as having authority to deliver such certificate, setting
forth the names and true signatures of the officers and other representatives of
the Borrower thereafter authorized to act on its behalf.
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[End of Article IV]
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01 Representations and Warranties of the Borrower
The Borrower hereby represents and warrants as follows:
(a) Each of the Borrower and its Subsidiaries is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, as applicable and is duly
qualified to do business in, and is in good standing in, all other jurisdictions
where the nature of its business or the nature of property owned or used by it
makes such qualification necessary, except where such failure would not result
in a Material Adverse Change. Each of the Borrower and its Subsidiaries has all
requisite corporate (or other applicable) powers and authority to own or lease
and operate its properties and to carry on its business as now conducted and as
proposed to be conducted.
(b) The execution, delivery and performance by the Borrower of this
Agreement and each Loan Document to which it is a party are within the
Borrower's corporate (or other applicable) powers, have been duly authorized by
all necessary corporate (or other applicable) action, do not contravene (i) the
Borrower's certificate of incorporation, (ii) any law, rule or regulation
applicable to the Borrower or (iii) any contractual or legal restriction binding
on or affecting the Borrower, and will not result in or require the imposition
of any lien or encumbrance on, or security interest in, any property (including,
without limitation, accounts or contract rights) of the Borrower, except as
provided in this Agreement and any other the Loan Document.
(c) No Governmental Action is required for the execution or delivery by
the Borrower of this Agreement or any other Loan Document to which it is a party
or for the performance by the Borrower of its obligations under this Agreement
or any other Loan Document other than those which have previously been duly
obtained, are in full force and effect, are not subject to any pending or, to
the knowledge of the Borrower, threatened appeal or other proceeding seeking
reconsideration and as to which all applicable periods of time for review,
rehearing or appeal with respect thereto have expired.
(d) This Agreement and each Loan Document to which the Borrower is a
party is a legal, valid and binding obligation of the Borrower party thereto,
enforceable against the Borrower in accordance with its terms subject to the
effect of bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium and other similar laws of general application affecting rights and
remedies of creditors generally.
(e) Except as disclosed in the Disclosure Documents, there is no
pending or, to the Borrower's knowledge, threatened action or proceeding
(including, without limitation, any proceeding relating to or arising out of
Environmental Laws) affecting the Borrower or any of its Subsidiaries before any
court, governmental agency or arbitrator that has a reasonable possibility of
resulting in a Material Adverse Change.
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(f) The audited consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries, as at December 31, 2002, and the related consolidated
statements of income, retained earnings and cash flows of the Borrower and its
Consolidated Subsidiaries for the fiscal year then ended, and the unaudited
consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as
at June 30, 2003, and the related consolidated statements of income, retained
earnings and cash flows of the Borrower and its Consolidated Subsidiaries for
the six (6) months then ended, copies of which have been furnished to the
Administrative Agent and each Lender, fairly present in all material respects
the financial condition of the Borrower and its Consolidated Subsidiaries as at
such dates and the results of the operations of the Borrower and its
Consolidated Subsidiaries for the periods ended on such dates, all in accordance
with GAAP consistently applied, subject, solely in the case of unaudited
consolidated balance sheets, to normal year end adjustments. Since December 31,
2002, there has been no Material Adverse Change, or material adverse change in
the facts and information regarding such entities as represented to the Closing
Date.
(g) The issuance of, and the existence of, the Letters of Credit, the
Extensions of Credit and the use of the proceeds thereof will comply with all
provisions of applicable law and regulation in all material respects.
(h) Neither the Borrower nor any Subsidiary of the 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.
(i) The Borrower is a "holding company" exempt from registration under
Section 5 of the Public Utility Holding Company Act of 1935, as amended,
pursuant to Section 3(a)(2) of such Act.
(j) Neither the Borrower nor its Subsidiaries is engaged in the
business of extending credit for the purpose of buying or carrying margin stock
(within the meaning of Regulation U issued by the Board of Governors of the
Federal Reserve System), and no proceeds of any drawing on the Letters of Credit
or the Extensions of Credit will be used to buy or carry any margin stock or to
extend credit to others for the purpose of buying or carrying any margin stock.
(k) No ERISA Event has occurred or is reasonably expected to occur with
respect to any Plan which reasonably could be expected to result in a Material
Adverse Change. Since the actuarial valuation date specified in the most recent
Schedule B (Actuarial Information) to the annual report of Plans maintained by
the Borrower (Form 5500 Series), if any, (i) there has been no Material Adverse
Change in the funding status of the Plans referred to therein and (ii) no
"prohibited transaction" has occurred with respect thereto. Neither the Borrower
nor any of its respective ERISA Affiliates has incurred nor reasonably expects
to incur any material withdrawal liability under ERISA to any Multiemployer
Plan.
(l) Except as set forth in the Disclosure Documents, the Borrower and
its Subsidiaries are in compliance in all material respects with all applicable
Federal, state and local statutes, rules, regulations, orders and other
provisions of law relating to Hazardous Materials, air emissions, water
discharge, noise emission and liquid disposal, and other environmental, health
and safety matters, other than those the non-compliance with which would not
result in a Material Adverse Change (taking into consideration all fines,
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penalties and sanctions that may be imposed because of such non-compliance) or
on the ability of the Borrower to perform its obligations under this Agreement
or any other Loan Document to which the Borrower is a party. Except as set forth
in the Disclosure Documents, neither the Borrower nor any of its respective
Subsidiaries has received from any Governmental Authority any notice of any
material violation of any such statute, rule, regulation, order or provision.
(m) The Borrower and its Subsidiaries have filed all tax returns
(Federal, state and local) required to be filed and paid all taxes shown thereon
to be due, including interest and penalties, except to the extent that the
Borrower or any such Subsidiary is diligently contesting any such taxes in good
faith and by appropriate proceedings, and for which adequate reserves for
payment thereof have been established.
(n) No event has occurred or is continuing which constitutes a Default
or an Event of Default, or which constitutes, or which with the passage of time
or giving of notice or both would constitute, a default or event of default by
the Borrower or Subsidiary thereof under any material agreement or contract,
judgment, decree or order by which the Borrower or any of its respective
properties may be bound or which would require the Borrower or Subsidiary
thereof to make any payment thereunder prior to the scheduled maturity date
therefore, where such default could reasonably be expected to result in a
Material Adverse Change.
(o) As of the Closing Date, the Borrower and its Subsidiaries will be
Solvent.
(p) The capitalization of the Borrower and each Significant Subsidiary
of the Borrower consists of the Capital Stock, authorized, issued and
outstanding, of such classes and series, with or without par value, described on
Schedule II hereto. All such outstanding Capital Stock has been duly authorized
and validly issued and are fully paid and nonassessable. Except as set forth in
the Disclosure Documents, there are no outstanding warrants, subscriptions,
options, securities, instruments or other rights of any type or nature
whatsoever, which are convertible into, exchangeable for or otherwise provide
for or permit the issuance of, Capital Stock of the Borrower or any Subsidiary
of the Borrower or are otherwise exercisable by any Person.
(q) The Borrower and each Subsidiary of the Borrower has good and
marketable title to all assets and other property purported to be owned by it.
(r) None of the properties or assets of the Borrower is subject to any
Lien, except Permitted Liens.
(s) All written information, reports and other papers and data produced
by or on behalf of the Borrower and furnished to the Administrative Agent and
the Lenders were, at the time the same were so furnished, complete and correct
in all material respects. No document furnished or written statement made to the
Administrative Agent or the Lenders by the Borrower in connection with the
negotiation, preparation or execution of this Agreement or any other Loan
Documents contains or will contain any untrue statement of a fact material to
the creditworthiness of the Borrower or its Subsidiaries or omits or will omit
to state a fact necessary in order to make the statements contained therein not
misleading.
(t) The Borrower does not intend to treat the Loans as being a
"reportable transaction" (within the meaning of the Treasury Regulation Section
1.6011-4).
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[End of Article V]
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ARTICLE VI
COVENANTS OF THE COMPANY
SECTION 6.01 Affirmative Covenants
Until the Obligations have been finally and indefeasibly paid and
satisfied in full and the Commitments terminated, the Borrower will, and will
cause each of its Subsidiaries, unless the Required Lenders shall otherwise
consent in writing, to:
(a) Preservation of Existence, Etc. Preserve and maintain, and cause
each of its Subsidiaries to preserve and maintain, its corporate or company, as
applicable, existence, material rights (statutory and otherwise) and franchises,
and take such other action as may be necessary or advisable to preserve and
maintain its right to conduct its business in the states where it shall be
conducting its business, except where failure to do so does not result in, or
could not reasonably be expected to have, a Material Adverse Change.
(b) Maintenance of Properties, Etc. Maintain, and cause each of its
Subsidiaries to maintain, good and marketable title to all of its properties
which are used or useful in the conduct of its business, and preserve, maintain,
develop and operate, and cause each of its Subsidiaries to preserve, maintain,
develop and operate, in substantial conformity with all laws and material
contractual obligations, all such properties in good working order and
condition, ordinary wear and tear excepted, except where such failure would not
result in a Material Adverse Change.
(c) Ownership. Cause the Borrower to own, at all times, 100% of
the Capital Stock having voting rights of South Jersey Gas Company.
(d) Compliance with Material Contractual Obligations, Laws, Etc.
Comply, and cause each of its Subsidiaries to comply, with the requirements of
all material contractual obligations and all applicable laws, rules, regulations
and orders, the failure to comply with which could reasonably be expected to
result in a Material Adverse Change, such compliance to include, without
limitation, paying before the same become delinquent all taxes, assessments and
governmental charges imposed upon it or upon its property except to the extent
diligently contested in good faith and by appropriate proceedings and for which
adequate reserves for the payment thereof have been established, and complying
with the requirements of all applicable Federal, state and local statutes,
rules, regulations, orders and other provisions of law relating to Hazardous
Materials, air emissions, water discharge, noise emission and liquid disposal,
and other environmental, health and safety matters.
(e) Insurance. Maintain, and cause each of its Subsidiaries to
maintain, insurance with financially sound and reputable insurance companies or
associations in such amounts and covering such risks as are usually carried by
companies engaged in the same or similar businesses and similarly situated.
(f) Visitation Rights; Keeping of Books. At any reasonable time and
from time to time, upon reasonable advance notice, 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 Borrower and any of its Subsidiaries, and to
discuss the affairs, finances and accounts of the Borrower and any of its
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Subsidiaries with any of their respective officers or directors and with their
respective independent certified public accountants and keep proper books of
record and account, in which full and correct entries shall be made of all
financial transactions and the assets and liabilities of the Borrower in
accordance with GAAP, consistent with the procedures applied in the preparation
of the financial statements referred to in Section 5.01(f) hereof.
(g) Transactions with Affiliates. Conduct, and cause each of its
Subsidiaries to conduct, all transactions otherwise permitted under this
Agreement with any of its Affiliates on terms that are fair and reasonable and
no less favorable to the Borrower or such Subsidiary than it would obtain in a
comparable arm's-length transaction with a Person not an Affiliate.
(h) Use of Proceeds. Use the proceeds of any Extension of Credit solely
for general corporate purposes and working capital needs of the Borrower.
(i) Loan Documents. Perform and comply in all material respects with
each of the provisions of each Loan Document to which it is a party.
(j) Risk Management. Perform and comply in all material respects, and
require its Subsidiaries to perform and comply in all material respects, with
any risk management policies developed by the Borrower, including such policies,
if applicable, related to (i) the retail and wholesale inventory distribution
and trading procedures and (ii) dollar and volume limits.
(k) Tax Disclosure. In the event the Borrower determines to take any
action inconsistent with its intention not to treat the Loans as being a
"reportable transaction" (within the meaning of the Treasury Regulation Section
1.6011-4), the Borrower shall promptly notify the Administrative Agent thereof
in writing.
(l) Further Assurances. At the expense of the Borrower, promptly
execute and deliver, or cause to be promptly executed and delivered, all further
instruments and documents, and take and cause to be taken all further actions,
that may be reasonably necessary or that the Required Lenders through the
Administrative Agent may reasonably request, to enable the Lenders and the
Administrative Agent to enforce the terms and provisions of this Agreement and
the Loan Documents and to exercise their rights and remedies hereunder. In
addition, the Borrower will use all reasonable efforts to duly obtain
Governmental Actions required from time to time on or prior to such date as the
same may become legally required, and thereafter to maintain all such
Governmental Actions in full force and effect, except where such failure would
not result in a Material Adverse Change.
SECTION 6.02 Negative Covenants
Until all of the Obligations have been finally and indefeasibly paid
and satisfied in full and the Commitments terminated, the Borrower will not,
and will not cause or permit any of its Subsidiaries, without the written
consent of the Required Lenders, to:
(a) Liens, Etc. Except as permitted in Section 6.02(c), create, incur,
assume, or suffer to exist, or permit any of its Subsidiaries to create, incur,
assume, or suffer to exist, any Lien other than Permitted Liens.
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(b) Indebtedness. Create or suffer, or permit any Subsidiary to create
or suffer, to exist any Indebtedness except for Permitted Indebtedness.
(c) Obligation to Ratably Secure. Except as permitted by Section
6.02(a), create or suffer to exist, or permit any of its Subsidiaries to create
or suffer to exist, any Lien other than a Permitted Lien, in each case to secure
or provide for the payment of Indebtedness, unless, on or prior to the date
thereof, the Borrower shall have (i) pursuant to documentation reasonably
satisfactory to the Administrative Agent and Required Lenders, equally and
ratably secured the Obligations of the Borrower under this Agreement by a Lien
acceptable to the Administrative Agent and Required Lenders, and (ii) caused the
creditor or creditors, as the case may be, in respect of such Indebtedness to
have entered into an intercreditor agreement in form, scope and substance
reasonably satisfactory to the Administrative Agent and the Required Lenders.
(d) Mergers, Etc. Merge or consolidate with or into any Person, or
permit any of its Subsidiaries to do so, except that (i) any Subsidiary of the
Borrower may merge or consolidate with or into, any other Subsidiary of the
Borrower and (ii) any Subsidiary of the Borrower may merge or consolidate with
and into the Borrower; provided, that the Borrower is the surviving corporation;
provided, further, that in each case that, immediately after giving effect to
such proposed transaction, no Event of Default or Default would exist.
(e) Sale of Assets, Etc. Sell, transfer, lease, assign or otherwise
convey or dispose, or permit any Subsidiary to sell, transfer, lease, assign or
otherwise convey or dispose, of assets (whether now owned or hereafter
acquired), in any single transaction or series of transactions, whether or not
related having an aggregate book value in excess of 10% of the Consolidated
assets of the Borrower and its Consolidated Subsidiaries, except for
dispositions of capital assets in the ordinary course of business as presently
conducted.
(f) Restricted Investments. Other than in the ordinary course of
business (i) make or permit to exist any loans or advances to, or any other
investment in, any Person except for investments in Permitted Investments, or
(ii) acquire any assets or property of any other Person.
(g) New Business. Permit the Borrower or any of its Subsidiaries to
enter into any business which is not substantially similar to that existing on
the Closing Date.
(h) Distributions. Pay any dividends on or make any other distributions
in respect of any Capital Stock or redeem or otherwise acquire any such Capital
Stock without in each instance obtaining the prior written consent of the
Required Lenders; provided, that (i) any Subsidiary of the Borrower may pay
regularly scheduled dividends or make other distributions to the Borrower; (ii)
if no Default or Event of Default exists or would result therefrom, the Borrower
may pay distributions or dividends in either cash or Capital Stock or may redeem
or otherwise acquire Capital Stock.
(i) Lease Obligations. Permit the aggregate obligations of the Borrower
and its Subsidiaries that are due and payable during any fiscal year under
leases or agreements to lease (other than obligations under Capital Leases) to
exceed $5,000,000.
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(j) Compliance with ERISA. (i) Permit to exist any "accumulated funding
deficiency" (as defined in Section 412(a) of the Code), unless such deficiency
exists with respect to a Multiple Employer Plan or Multiemployer Plan and the
Borrower has no control over the reduction or elimination of such deficiency,
(ii) terminate, or permit any ERISA Affiliate to terminate, any Plan of the
Borrower or such ERISA Affiliate so as to result in any material liability of
the Borrower or ERISA Affiliate to the PBGC, or (iii) permit to exist any
occurrence of any reportable event (within the meaning of Section 4043 of
ERISA), or any other event or condition, which presents a material risk of a
termination by the PBGC of any Plan of the Borrower or such ERISA Affiliate and
such a material liability of the Borrower or ERISA Affiliate to the PBGC.
(k) Constituent Documents, Etc. Change in any material respect the
nature of its certificate of incorporation, by-laws, or other similar documents,
or accounting policies or accounting practices (except as required or permitted
by the Financial Accounting Standards Board or GAAP).
(l) Fiscal Year. Change its Fiscal Year.
SECTION 6.03 Reporting Requirements
So long as any Lender shall have any Commitment hereunder or the
Borrower shall have any obligation to pay any amount to the Administrative Agent
or any Lender hereunder, the Borrower will, unless the Required Lenders shall
otherwise consent in writing, provide to the Administrative Agent:
(a) as soon as available and in any event within sixty (60) days after
the end of each of the first three quarters of each fiscal year of the Borrower,
a consolidated and consolidating balance sheet of the Borrower and its
Consolidated Subsidiaries as at the end of such quarter and consolidated and
consolidating statements of income, retained earnings and cash flows of the
Borrower and its Consolidated Subsidiaries for the period commencing at the end
of the previous fiscal year and ending with the end of such quarter, all in
reasonable detail and duly certified by the chief financial officer or the
treasurer of the Borrower as fairly presenting in all material respects the
financial condition of the Borrower and its Consolidated Subsidiaries as at such
date and the results of operations of the Borrower and its Consolidated
Subsidiaries for the periods ended on such date, except for normal year end
adjustments, all in accordance with GAAP consistently applied (for purposes
hereof delivery of the Borrower's appropriately completed Form 10-Q will be
sufficient in lieu of delivery of such consolidated balance sheet and
consolidated statements of income, retained earnings and cash flows), together
with a Compliance Certificate, in the form of Exhibit J, of the chief financial
officer or the treasurer of the Borrower (A) demonstrating and certifying
compliance by the Borrower with the covenants set forth in Sections 6.04(a) and
(b) and (B) stating that no Event of Default or Default has occurred and is
continuing or, if an Event of Default or Default has occurred and is continuing,
a statement as to the nature thereof and the action which the Borrower has taken
and proposes to take with respect thereto;
(b) as soon as available and in any event within one hundred five (105)
days after the end of each fiscal year of the Borrower, a copy of the annual
report for such year for the Borrower and its Consolidated Subsidiaries,
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containing consolidated and consolidating financial statements for such year
certified by, and accompanied by an unqualified opinion of, independent public
accountants reasonably acceptable to the Administrative Agent (for purposes
hereof, delivery of the Borrower's appropriately completed Form 10-K will be
sufficient in lieu of delivery of such financial statements), together with a
Compliance Certificate, in the form of Exhibit J, of the chief financial officer
or the treasurer of the Borrower (A) demonstrating and certifying compliance by
the Borrower with the covenants set forth in Sections 6.04(a) and (b) and (B)
stating that no Event of Default or Default has occurred and is continuing or,
if an Event of Default or Default has occurred and is continuing, a statement as
to the nature thereof and the action which the Borrower has taken and proposes
to take with respect thereto;
(c) as soon as possible and in any event within five (5) days after the
occurrence of each Event of Default and each Default known to the Borrower, a
statement of the chief financial officer of the Borrower setting forth details
of such Event of Default or Default and the action which the Borrower has taken
and proposes to take with respect thereto;
(d) as soon as possible and in any event within five (5) days after
receipt thereof by the Borrower or any of its ERISA Affiliates from the PBGC
copies of each notice received by the Borrower or such ERISA Affiliate of the
PBGC's intention to terminate any Plan of the Borrower or such ERISA Affiliate
or to have a trustee appointed to administer any such Plan;
(e) as soon as possible and in any event within five (5) days after
receipt thereof by the Borrower or any ERISA Affiliate from a Multiemployer Plan
sponsor, a copy of each notice received by the Borrower or such ERISA Affiliate
concerning the imposition of withdrawal liability in the amount of at least
$1,000,000 pursuant to Section 4202 of ERISA in respect of which the Borrower or
such ERISA Affiliate is reasonably expected to be liable;
(f) as soon as possible and in any event within five (5) days after the
Borrower becomes aware of the occurrence thereof, notice of all actions, suits,
proceedings or other events (A) of the type described in Section 5.01(e) or (B)
for which the Administrative Agent or the Lenders will be entitled to indemnity
under Section 9.05;
(g) as soon as possible and in any event within five (5) days after the
sending or filing thereof, copies of all material reports that the Borrower
sends to any of its security holders, and copies of all reports and registration
statements which the Borrower or any of its Subsidiaries files with the
Securities and Exchange Commission or any national securities exchange;
(h) as soon as possible and in any event within five (5) days after
requested, such other information respecting the business, properties, assets,
liabilities (actual or contingent), results of operations, prospects, condition
or operations, financial or otherwise, of the Borrower or any Subsidiary thereof
as any Lender through the Administrative Agent may from time to time reasonably
request;
(i) as soon as possible and in any event within fifteen (15) days after
the occurrence of each ERISA Event, a statement of the chief financial officer
of the Borrower setting forth details of such ERISA Event and the action which
the Borrower has taken and proposes to take with respect thereto; and
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SECTION 6.04 Financial Covenants
So long as any Lender shall have any Commitment hereunder or the
Borrower shall have any obligation to pay any amount to the Administrative Agent
or any Lender hereunder, the Borrower will, unless the Required Lenders shall
otherwise consent in writing:
(a) Consolidated Indebtedness to Consolidated Total Capitalization.
Maintain at the end of each fiscal quarter, a ratio of Indebtedness to
Consolidated Total Capitalization of the Borrower and its Consolidated
Subsidiaries of not more than 0.65 to 1.0.
(b) Consolidated EBIT to Consolidated Interest Expense. Maintain at the
end of each fiscal quarter, for the four consecutive fiscal quarters then
ending, a ratio of Consolidated EBIT to Consolidated Interest Expense of the
Borrower and its Consolidated Subsidiaries of not less than 2.0 to 1.0.
[End of Article VI]
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ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01 Events of Default
Each of the following events should they occur and be continuing shall
constitute an "Event of Default":
(a) The Borrower shall fail to pay (i) any amount of principal when the
same becomes due and payable or (ii) any interest, fees or any other amount
payable hereunder within five (5) Business Days of when the same becomes due and
payable; or
(b) Any representation or warranty made by or on behalf of the Borrower
in any Agreement or Loan Document or by or on behalf of the Borrower (or any of
its officers) in connection with any Agreement or Loan Document shall prove to
have been incorrect in any material respect when made or deemed made; or
(c) (i) The Borrower shall fail to perform or observe any term,
covenant or agreement contained in Section 6.01(a), (c), (e), (g), (h), (i) or
(j), Section 6.02(a), (b), (c), (d), (e), (f), (g) or (h), Section 6.03 or
Section 6.04, or (ii) the Borrower shall fail to perform or observe any other
term, covenant or agreement contained in this Agreement (other than obligations
specifically set forth elsewhere in this Section 7.01) on its part to be
performed or observed if the failure to perform or observe such other term,
covenant or agreement, shall remain unremedied for thirty (30) days after
written notice thereof shall have been given to the Borrower by the
Administrative Agent or any Lender; or
(d) The Borrower or any Significant Subsidiary thereof shall fail to
pay any principal of or premium or interest on any Indebtedness (other than
Indebtedness incurred under this Agreement) thereof in the aggregate (for all
such Persons) in excess of $5,000,000, when the same becomes due and payable
(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 Indebtedness;
or any other event shall occur or condition shall exist under any agreement or
instrument relating to any such Indebtedness and shall continue after the
applicable grace period, if any, specified in such agreement or instrument, if
the effect of such event or condition is to accelerate, or to permit the
acceleration of, the maturity of such Indebtedness; or any such Indebtedness
shall be declared to be due and payable, or required to be prepaid (other than
by a regularly scheduled required prepayment), prior to the stated maturity
thereof; or
(e) The Borrower or any Significant Subsidiary thereof shall generally
not pay its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general assignment for the
benefit of creditors, or any proceeding shall be instituted by or against the
Borrower or a Significant Subsidiary thereof 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, custodian or other similar official for it or for any substantial part
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of its property and, in the case of any such proceeding instituted against it
(but not instituted by it), such proceeding shall remain undismissed or unstayed
for a period of forty-five (45) days, any of the actions sought in such
proceeding (including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or other similar
official for, it or for any substantial part of its property) shall occur or the
Borrower or a Significant Subsidiary thereof shall consent to or acquiesce in
any such proceeding; or the Borrower or a Significant Subsidiary thereof shall
take any corporate action to authorize any of the actions set forth above in
this subsection (e); or
(f) Any judgment or order for the payment of money in excess of
$5,000,000 (in the aggregate) shall be rendered against the Borrower or any
Significant Subsidiary thereof and either (i) enforcement proceedings shall have
been commenced by any creditor upon such judgment or order or (ii) there shall
be any period of ten (10) consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, shall not be
in effect; or
(g) The obligations of the Borrower under this Agreement or any other
Loan Document shall become unenforceable, or the Borrower, or any court or
governmental or regulatory body having jurisdiction over the Borrower, shall so
assert in writing or the Borrower or any of its Affiliates shall contest in any
manner the validity or enforceability thereof; or
(h) Any ERISA Event shall have occurred with respect to a Plan and,
thirty (30) days after notice thereof shall have been given to the Borrower by
the Administrative Agent or any Lender, (i) such ERISA Event shall still exist
and (ii) such ERISA Event is reasonably likely to result in a liability or lien
in excess of $5,000,000 against the Borrower or any ERISA Affiliate, or
(i) The Borrower or any Affiliate thereof as employer under a
Multiemployer Plan shall have made a complete or partial withdrawal from such
Multiemployer Plan and the plan sponsor of such Multiemployer Plan shall have
notified such withdrawing employer that such employer has incurred a withdrawal
liability in an annual amount exceeding $5,000,000; or
(j) Any Governmental Approval shall be rescinded, revoked, otherwise
terminated, or amended or modified in any manner which is materially adverse to
the interests of the Lenders and the Administrative Agent; or
(k) An Event of Default or Default, as defined in the Three-Year
Revolving Credit Agreement between South Jersey Gas Company and the parties,
other than the Borrower, hereto, shall occur; or
(l) A Change in Control shall occur.
SECTION 7.02 Upon an Event of Default
Upon the occurrence of an Event of Default, with the consent of the
Required Lenders, the Administrative Agent may, or upon the request of the
Required Lenders, the Administrative Agent shall, by notice to the Borrower:
(a) Acceleration; Termination of Credit Facility. Declare the principal
of and interest on the Extensions of Credit, the Notes and the Obligations
(except for Hedging Obligations, which shall be governed by the terms and
conditions of the documents controlling such obligations) at the time
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outstanding, and all other amounts owed to the Lenders and to the Administrative
Agent under this Agreement (including, without limitation, all L/C Obligations,
whether or not the beneficiaries of the then outstanding Letters of Credit shall
have presented the documents required thereunder), to be forthwith due and
payable, whereupon the same shall immediately become due and payable without
presentment, demand, protest or other notice of any kind, all of which are
expressly waived, anything in this Agreement to the contrary notwithstanding,
and terminate the Commitment and any right of the Borrower to request Extensions
of Credit or Letters of Credit thereunder; provided, that upon the occurrence of
an Event of Default specified in Section 7.01(e), the Commitment shall be
automatically terminated and all Obligations (except for Hedging Obligations,
which shall be governed by the terms and conditions of the documents controlling
such obligations) shall automatically become due and payable without
presentment, demand, protest or other notice of any kind, all of which are
expressly waived, anything in this Agreement or in any other Loan Document to
the contrary notwithstanding.
(b) Letters of Credit. With respect to all Letters of Credit with
respect to which presentment for honor shall not have occurred at the time of an
acceleration pursuant to Section 7.02(a), require the Borrower at such time to
deposit in a cash collateral account with the Administrative Agent an amount
equal to the aggregate then undrawn and unexpired amount of such Letters of
Credit. Amounts held in such cash collateral account shall be applied by the
Administrative Agent to the payment of drafts drawn under such Letters of
Credit, and the unused portion thereof after all such Letters of Credit shall
have expired or been fully drawn upon, if any, shall be applied to repay the
other Obligations. After all such Letters of Credit shall have expired or been
fully drawn upon, the Reimbursement Obligation shall have been satisfied and all
other Obligations shall have been paid in full, the balance, if any, in such
cash collateral account shall be returned to the Borrower.
SECTION 7.03 Rights and Remedies Cumulative; Non-Waiver; Etc.
The enumeration of the rights and remedies of the Administrative Agent
and the Lenders set forth in this Agreement is not intended to be exhaustive,
and the exercise by the Administrative Agent and the Lenders of any right or
remedy shall not preclude the exercise of any other rights or remedies, all of
which shall be cumulative, and shall be in addition to any other right or remedy
given hereunder or that may now or hereafter exist in law or in equity or by
suit or otherwise. No delay or failure to take action on the part of the
Administrative Agent or any Lender in exercising any right, power or privilege
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or privilege preclude other or further exercise thereof or
the exercise of any other right, power or privilege or shall be construed to be
a waiver of any Event of Default. No course of dealing between the Borrower, the
Administrative Agent and the Lenders or their respective agents or employees
shall be effective to change, modify or discharge any provision of this
Agreement or any of the other Loan Documents or to constitute a waiver of any
Event of Default.
[End of Article VII]
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ARTICLE VIII
THE ADMINISTRATIVE AGENT
SECTION 8.01 Appointment
Each Lender hereby irrevocably designates and appoints Wachovia as the
Administrative Agent of such Lender and the Issuing Lender under this Agreement
and the other Loan Documents, and each such Lender and the Issuing Lender
irrevocably authorizes Wachovia, as the Administrative Agent for such Lender
and the Issuing Lender, to take such action on its behalf under the provisions
of this Agreement and the other Loan Documents and to exercise such powers and
perform such duties as are expressly delegated to the Administrative Agent by
the terms of this Agreement and the other Loan Documents, together with such
other powers as are reasonably incidental thereto. Notwithstanding any provision
to the contrary elsewhere in this Agreement, the Administrative Agent shall not
have any duties or responsibilities, except those expressly set forth herein and
in the Loan Documents, or any fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Administrative Agent.
SECTION 8.02 Delegation of Duties
The Administrative Agent may execute any of its duties under this
Agreement, any Letter of Credit and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
SECTION 8.03 Exculpatory Provisions
Neither the Administrative Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any
action lawfully taken or omitted to be taken by it or such Person under or in
connection with this Agreement or any other Loan Document (except in the case
of gross negligence or willful misconduct as determined by a court of competent
jurisdiction) or (ii) responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by the Borrower or any
officer thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or the Letters of
Credit or any other Loan Document or for any failure of the Borrower to perform
its obligations hereunder or thereunder. The Administrative Agent shall not be
under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of the Borrower.
SECTION 8.04 Reliance by Administrative Agent
The Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it to be
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genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrower), independent accountants and other experts
selected by the Administrative Agent. The Administrative Agent may deem and
treat the payee of any evidence of indebtedness in respect of any Extension of
Credit, or other indebtedness hereunder as the owner thereof for all purposes
unless a written notice of assignment, negotiation or transfer thereof shall
have been filed with the Administrative Agent. The Administrative Agent shall be
fully justified in failing or refusing to take any action under this Agreement,
any Letter of Credit or any Loan Document unless it shall first receive such
advice or concurrence of the Required Lenders (unless all of the Lenders' action
is required hereunder) as it deems appropriate or it shall first be indemnified
to its satisfaction by the Lenders against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action. The Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement and the Loan
Documents in accordance with a request of the Required Lenders (unless all of
the Lenders' action is required hereunder), and such request and any action
taken or failure to act pursuant thereto shall be binding upon all the Lenders.
SECTION 8.05 Notice of Default
The Administrative Agent shall not be deemed to have knowledge or
notice of the occurrence of any Event of Default hereunder unless the
Administrative Agent has received notice from a Lender or the Borrower referring
to this Agreement, describing such Event of Default and stating that such notice
is a "notice of default". In the event that the Administrative Agent receives
such a notice, the Administrative Agent shall give notice thereof to the
Lenders. The Administrative Agent shall take such action with respect to such
Event of Default as shall be reasonably directed by the Required Lenders;
provided, that unless and until the Administrative Agent shall have received
such directions, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such Event
of Default as it shall deem advisable in the best interests of the Issuing
Lender and the Lenders.
SECTION 8.06 Non-Reliance on Administrative Agent and Other Lenders
Each Lender expressly acknowledges that neither the Administrative Agent
nor any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representations or warranties to it and that no act by
the Administrative Agent hereinafter taken, including any review of the affairs
of the Borrower, shall be deemed to constitute any representation or warranty by
the Administrative Agent to any Lender. Each Lender represents to the
Administrative Agent that it has, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrower and made its own decision to
enter into this Agreement. Each Lender also represents that it will,
independently and without reliance upon the Administrative 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 analysis, appraisals and decisions
in taking or not taking action under this Agreement and the Loan Documents and
to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Borrower. Except for notices, reports and other
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documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of the Borrower which may come into
the possession of the Administrative Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates.
SECTION 8.07 Indemnification
The Lenders agree to indemnify the Administrative Agent in its capacity
as such (to the extent not reimbursed by the Borrower and without limiting the
obligation of the Borrower to do so), ratably according to the respective
amounts of their Commitments, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the termination of the
Letters of Credit or Commitment) be imposed on, incurred by or asserted against
the Administrative Agent in any way relating to or arising out of this
Agreement, the Letters of Credit, any of the other Loan Documents or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omittedby the
Administrative Agent under or in connection with any of the foregoing;
provided, that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Administrative Agent's gross
negligence or willful misconduct. The agreements in this Section shall survive
the termination of this Agreement, the Extensions of Credit, the Letters of
Credit and the payment of all amounts payable hereunder.
SECTION 8.08 Administrative Agent in Its Individual Capacity
The Administrative Agent and its affiliates may make loans to, accept
deposits from and generally engage in any kind of business with, the Borrower as
though the Administrative Agent was not the Administrative Agent hereunder. With
respect to its interest on the Extensions of Credit and any other amounts owed
to it hereunder, the Administrative Agent shall have the same rights and powers
under this Agreement as any Lender and may exercise the same as though it were
not the Administrative Agent, and the terms "Lender" and "Lenders" shall include
the Administrative Agent in its individual capacity.
SECTION 8.09 Successor Administrative Agent
The Administrative Agent may resign as Administrative Agent upon
ten (10) days' notice to the Lenders and the Borrower. If the Administrative
Agent shall resign as Administrative Agent under this Agreement, then the
Required Lenders, with the consent of the Borrower, shall appoint from among
the Lenders a successor agent for the Lenders, whereupon such successor agent
shall succeed to the rights, powers and duties of the Administrative Agent, and
the term "Administrative Agent" shall mean such successor agent effective upon
its appointment, and the former Administrative Agent's rights, powers and duties
as Administrative Agent shall be terminated, without any other or further act or
deed on the part of such former Administrative Agent or any of the parties to
this Agreement. After any retiring Administrative Agent's resignation as
Administrative Agent, the provisions of this Section shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Administrative
Agent under this Agreement. In the event the Administrative Agent resigns
pursuant to this Section 8.09 the Administrative Agent shall also resign in its
capacity as Issuing Lender and Swingline Lender.
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SECTION 8.10 Issuing Lender
Each Lender hereby acknowledges that the provisions of this Article
VIII shall apply to the Issuing Lender in its capacity as such, in the same
manner as such provisions are expressly stated to apply to the Administrative
Agent.
SECTION 8.11 Notices; Actions Under Loan Documents
All notices received by the Issuing Lender pursuant to this Agreement
or any other Loan Document shall be promptly delivered by the receiving party to
the Administrative Agent, for distribution to the Lenders, and any notices,
reports or other documents received by the Administrative Agent pursuant to this
Agreement shall be promptly delivered to the Issuing Lender and the Lenders. The
Issuing Lender hereby agrees not to amend or waive any provision or consent to
the amendment or waiver of any Loan Document without the consent of the Required
Lenders (or, to the extent required pursuant to Section 9.01, all of the
Lenders).
[End of Article VIII]
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ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Amendments, Etc.
No amendment or waiver of any provision of this Agreement, nor consent
to any departure by the Borrower therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Required Lenders and the
Borrower, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided, that
no such waiver and no such amendment, supplement or modification shall without
the written consent of all the Lenders (a) extend the Termination Date or the
maturity of any Loan or unreimbursed drawing, or reduce the rate or extend the
time of payment of interest in respect thereof, or reduce any fee payable to any
Lender hereunder or extend the time for the payment thereof or change the amount
of any Lender's Commitment, in each case without the written consent of all the
Lenders, (b) amend, modify or waive any provision of this Section 9.01 or
Section 9.09(e) or reduce the percentage specified in the definition of Required
Lenders, or consent to the assignment or transfer by the Borrower of any of its
rights and obligations under this Agreement, in each case without the written
consent of all the Lenders, (c) amend, modify or waive any provision of
Article VIII without the written consent of the Administrative Agent, (d) waive,
modify or eliminate any of the conditions precedent specified in Article IV, in
each case without the written consent of all the Lenders, (e) forgive principal,
interest, fees or other amounts payable hereunder, or (f) waive any requirement
for the release of collateral.
SECTION 9.02 Notices, Etc.
All notices and other communications provided for hereunder shall be in
writing (including telegraphic communication) and mailed, telecopied,
telegraphed or delivered as follows:
The Borrower:
South Jersey Industries, Inc.
1 South Jersey Plaza
Folsom, New Jersey 08037
Attention: Stephen H. Clark
Telecopy No.: (609) 561-8225
With a copy to:
Cozen O'Connor
The Atrium
1900 Market Street
Philadelphia, Pennsylvania 19103
Attention: Richard J. Busis, Esq.
Telecopy No.: (215) 665-2013
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The Administrative Agent or the Issuing Lender:
Wachovia Bank, National Association
301 South College Street
One Wachovia Center
Charlotte, North Carolina 28288-0760
Attention: Lawrence P. Sullivan
Telecopy No.: (704) 383-6647
With a copy to:
Wachovia Bank, National Association
201 South College Street
Charlotte, North Carolina 28288-0680
Attention: Agency Services
Telecopy No.: (704) 383-0288
With a copy to:
Parker, Poe, Adams & Bernstein L.L.P.
Three Wachovia Center
401 South Tryon Street
Suite 3000
Charlotte, North Carolina 28202
Attention: Paul S. Donohue, Esq.
Telecopy No.: (704) 334-4706
and if to any Lender, at its address or telecopy number set forth on Schedule I
hereto; or, as to each party, 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, when mailed, be effective three (3) days after being
deposited in the mails or when sent by telecopy or telex or delivered to the
telegraph company, respectively, addressed as aforesaid.
SECTION 9.03 No Waiver; Remedies
No failure on the part of the Administrative Agent, the Issuing Lender
or any Lender to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder 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 9.04 Set-off
(a) Upon the occurrence and during the continuance of any Event of
Default, the Administrative Agent and 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 the
Administrative Agent or such Lender to or for the credit or the account of the
Borrower against any and all of the obligations of the Borrower now or hereafter
existing under this Agreement, irrespective of whether or not the Administrative
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Agent or such Lender shall have made any demand hereunder and although such
obligations may be contingent or unmatured.
(b) If any Lender (a "Benefited Lender") shall at any time receive any
payment of all or part of the Extensions of Credit or other obligations of the
Borrower to it hereunder (such Lender's "Borrower Obligations"), or interest
thereon, or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in Section 7.01(e), or otherwise), in a greater proportion than any
such payment to or collateral received by any other Lender, if any, in respect
of such other Lender's Borrower Obligations, or interest thereon, such Benefited
Lender shall purchase for cash from the other Lenders such portion of each such
other Lender's Borrower Obligations, or shall provide such other Lenders with
the benefits of any such collateral, or the proceeds thereof, as shall be
necessary to cause such Benefited Lender to share the excess payment or benefits
of such collateral or proceeds ratably with each of the Lenders; provided, that
if all or any portion of such excess payment or benefits is thereafter recovered
from such Benefited Lender, such purchase shall be rescinded, and the purchase
price and benefits returned, to the extent of such recovery, but without
interest. The Borrower agrees that each Lender so purchasing a portion of
another Lender's Borrower Obligations may exercise all rights of payment
(including, without limitation, rights of set-off) with respect to such portion
as fully as if such Lender were the direct holder of such portion.
(c) The Administrative Agent and each Lender agree promptly to notify
the Borrower after any such set-off and application referred to in subsection
(a) above; provided, that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Administrative Agent
and each Lender under this Section 9.04 are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which the
Administrative Agent and each Lender may have.
SECTION 9.05 Indemnification
The Borrower hereby indemnifies and holds the Issuing Lender, the
Administrative Agent, the Swingline Lender and each Lender harmless from and
against any and all claims, damages, losses, liabilities, costs and expenses
which such party may incur or which may be claimed against such party by any
Person:
(a) by reason of any inaccuracy or alleged inaccuracy in any
material respect, or any untrue statement or alleged untrue statement
of any material fact, or by reason of the omission or alleged omission
to state therein a material fact necessary to make such statements, in
the light of the circumstances under which they were made, not
misleading, in each case relating to any of the Loan Documents and the
transactions contemplated thereby, the Disclosure Documents or in any
manner, whether direct or indirect, related to this Agreement; or
(b) by reason of or in connection with the execution, delivery
or performance of this Agreement or other Loan Documents, or any
transaction contemplated by this Agreement or other Loan Documents,
other than as specified in subsection (c) below; or
(c) by reason of or in connection with the execution and
delivery or transfer of, or payment or failure to make payment under
this Agreement, the Letters of Credit or any other Loan Document;
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provided, that the Borrower shall not be required to indemnify any such
party pursuant to this Section 9.05(c) for any claims, damages, losses,
liabilities, costs or expenses to the extent caused by (i) the Issuing
Lender's willful misconduct or gross negligence in determining whether
documents presented under the Letters of Credit comply with terms of
the Letters of Credit or (ii) the Issuing Lender's willful or grossly
negligent failure to make lawful payment under the Letters of Credit
after the presentation to it of a certificate strictly complying with
the terms and conditions of the Letters of Credit.
Nothing in this Section 9.05 is intended to limit the Borrower's obligations
contained in Article II. Without prejudice to the survival of any other
obligation of the Borrower hereunder, the indemnities and obligations of the
Borrower contained in this Section 9.05 shall survive the payment in full of
amounts payable pursuant to Article II and Article III and the termination of
the Commitment.
SECTION 9.06 Liability of the Lenders
The Borrower assumes all risks of the acts or omissions of each
beneficiary or transferee of the Letters of Credit with respect to their use of
the Letters of Credit. None of the Issuing Lender, the Administrative Agent, the
Lenders nor any of their respective officers or directors shall be liable or
responsible for: (a) the use which may be made of the Letters of Credit or any
acts or omissions of each beneficiary or transferee in connection therewith;
(b) the validity, sufficiency or genuineness of documents, or of any endorsement
thereon, even if such documents should prove to be in any or all respects
invalid, insufficient, fraudulent or forged; (c) payment by the Issuing Lender
against presentation of documents which do not comply with the terms of the
Letters of Credit, including failure of any documents to bear any reference or
adequate reference to the Letters of Credit; or (d) any other circumstances
whatsoever in making or failing to make payment under the Letters of Credit,
except that the Borrower shall have a claim against the Issuing Lender and the
Issuing Lender shall be liable to the Borrower, to the extent of any direct, as
opposed to consequential, damages suffered by the Borrower which the Borrower
proves were caused by (i) the Issuing Lender's willful misconduct or gross
negligence in determining whether documents presented under the Letters of
Credit are genuine or comply with the terms of the Letters of Credit or (ii) the
Issuing Lender's willful or grossly negligent failure, as determined by a court
of competent jurisdiction, to make lawful payment under the Letters of Credit
after the presentation to it of a certificate strictly complying with the terms
and conditions of the Letters of Credit. In furtherance and not in limitation of
the foregoing, the Issuing Lender may accept original or facsimile (including
telecopy) certificates presented under the Letters of Credit that appear on
their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary.
SECTION 9.07 Costs, Expenses and Taxes
(a) The Borrower agrees to pay on demand all costs and expenses in
connection with the preparation, issuance, delivery, filing, recording, and
administration of this Agreement, the Letters of Credit, the Extensions of
Credit and any other documents which may be delivered in connection with this
Agreement, including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for the Administrative Agent and the Issuing Lender incurred
in connection with the preparation and negotiation of this Agreement, the
Letters of Credit, the Extensions of Credit and any document delivered in
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connection therewith and all costs and expenses incurred by the Administrative
Agent (and, in the case of clause (iii) or (iv) below, any Lender) (including
reasonable fees and out of pocket expenses of counsel) in connection with
(i) the transfer, drawing upon, change in terms, maintenance, renewal or
cancellation of this Agreement, the Extensions of Credit and the Letters of
Credit, (ii) any and all amounts which the Administrative Agent or any Lender
has paid relative to the Administrative Agent's or such Lender's curing of any
Event of Default resulting from the acts or omissions of the Borrower under
this Agreement or any other Loan Document, (iii) the enforcement of, or
protection of rights under, this Agreement or any other Loan Document
(whether through negotiations, legal proceedings or otherwise), (iv) any action
or proceeding relating to a court order, injunction, or other process or decree
restraining or seeking to restrain the Issuing Lender from paying any amount
under the Letters of Credit or (v) any waivers or consents or amendments to or
in respect of this Agreement, the Extensions of Credit or the Letters of Credit
requested by the Borrower. In addition, the Borrower shall pay any and all stamp
and other taxes and fees payable or determined to be payable in connection with
the execution, delivery, filing and recording of this Agreement, the Letters of
Credit, the Extensions of Credit or any of such other documents, and agree to
save the Issuing Lender, the Administrative Agent and the Lenders harmless from
and against any and all liabilities with respect to or resulting from any delay
in paying or omission to pay such taxes and fees.
(b) If any payment of principal of, or Conversion of, any LIBOR Rate
Loan is made other than on the last day of the Interest Period for such LIBOR
Rate Loan, as a result of a payment or Conversion pursuant to Section 7.02 or
for any other reason, the Borrower shall, upon demand by any 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 or Conversion, including, without limitation, any loss
(including 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 LIBOR Rate Loan.
SECTION 9.08 Binding Effect
This Agreement shall become effective when it shall have been executed
and delivered by the Borrower and the Issuing Lender, the Administrative Agent
and the Lenders and thereafter shall (a) be binding upon the Borrower, its
successors and assigns, and (b) inure to the benefit of and be enforceable by
the Lenders and each of their respective successors, assigns and permitted
transferees; provided, that the Borrower may not assign all or any part of its
rights or obligations under this Agreement without the prior written consent of
the Lenders.
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SECTION 9.09 Assignments and Participation
(a) Each Lender may assign to one or more Eligible Assignees all or a
portion of its rights and obligations under this Agreement and the Loan
Documents (including, without limitation, all or a portion of its Commitment and
the Extensions of Credit owing to it); provided, that (i) the Borrower (unless
a Default or an Event of Default shall have occurred and be continuing) shall
have consented to such assignment (such consent not to be unreasonably withheld
or delayed) by signing the Assignment and Acceptance referred to in clause
(iii) below, (ii) each such assignment shall be in a minimum amount of
$5,000,000 (or, if less, the entire amount of such Lender's Commitment) and be
of a constant, and not a varying, percentage of all of the assigning Lender's
rights and obligations under this Agreement and the Loan Documents and
(iii) the parties to each such assignment shall execute and deliver to the
Administrative Agent, for its acceptance and recording in the Register (as
defined in Section 9.09(c)), an Assignment and Acceptance, together with a
processing and recordation fee of $3,500, payable by the assigning Lender or
the Eligible Assignee, as agreed upon by such parties. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in each Assignment and Acceptance, (x) the Eligible 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 (y) the Lender assignor 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). Notwithstanding anything to the contrary contained in this
Agreement, any Lender may at any time assign all or any portion of the
Extensions of Credit owing to it to any Affiliate of such Lender. No such
assignment referred to in the preceding sentence, other than to an Affiliate of
such Lender consented to by the Borrower (such consent not to be unreasonably
withheld or delayed), shall release the assigning Lender from its obligations
hereunder. Nothing contained in this Section 9.09 shall be construed to relieve
the Issuing Lender of any of its obligations under the Letters of Credit.
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the Eligible 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 any other Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
Loan Document 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 the Borrower or the
performance or observance by the Borrower of any of its obligations under this
Agreement or any other Loan Document or any other instrument or document
furnished pursuant hereto or thereto; (iii) such Eligible Assignee confirms that
it has received a copy of this Agreement, together with copies of the financial
statements referred to in Section 5.01(f) 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 Eligible
Assignee will, independently and without reliance upon the Administrative 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
Eligible Assignee appoints and authorizes the Administrative Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to it by the terms hereof, together with such powers as are
reasonably incidental thereto; and (vi) such Eligible 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.
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(c) The Administrative Agent shall maintain at its address referred to
in Section 9.02 a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and addresses of
the Lenders and the Commitment of, and principal amount of the Extensions of
Credit 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 the Borrower, the Administrative Agent, the Issuing Lender 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 the Borrower or any Lender at any reasonable time and from
time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Eligible Assignee, the Administrative Agent shall, if
such Assignment and Acceptance has been completed and is in substantially the
form of Exhibit I hereto, and has been signed by the Borrower (if the Borrower's
consent is required), (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice of
such recordation to the Borrower.
(e) Each Lender may sell participations to one or more banks, financial
institutions or other entities (a "Participant") in all or a portion of its
rights and obligations under this Agreement and the Loan Documents (including,
without limitation, all or a portion of its Commitment and the Extensions of
Credit owing to it); provided, that (i) such Lender's obligations under this
Agreement (including, without limitation, its Commitment to the Borrower
hereunder) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
and (iii) the Borrower, the Administrative 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. Any agreement pursuant to
which any Lender may grant such a participating interest shall provide that such
Lender shall retain the sole right and responsibility to enforce the obligations
of the Borrower hereunder including, without limitation, the right to approve
any amendment, modification or waiver of any provision of this Agreement;
provided, that such participation agreement may provide that such Lender will
not agree to any modification, amendment or waiver of this Agreement which would
(a) waive, modify or eliminate any of the conditions precedent specified in
Article IV, (b) increase or extend the Commitments of the Lenders or subject the
Lenders to any additional obligations, (c) forgive principal, interest, fees or
other amounts payable hereunder or reduce the rate at which interest or any fee
is calculated, (d) postpone any date fixed for any payment of principal,
interest, fees or other amounts payable hereunder, (e) change the Commitment
Percentage or the number of Lenders which shall be required for the Lenders or
any of them to take any action hereunder, or (f) amend this Section 9.09(e).
(f) Any Lender may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section 9.09 and in
accordance with Section 9.16, disclose to the Eligible Assignee or Participant
or proposed Eligible Assignee or Participant, any Information relating to the
Borrower furnished to such Lender by or on behalf of the Borrower; provided,
that prior to any such disclosure, the Eligible Assignee or Participant or
proposed Eligible Assignee or Participant shall agree to preserve the
confidentiality of any confidential information relating to the Borrower
received by it from such Lender and use it only for purposes of this Agreement,
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the Loan Documents and the transactions contemplated hereby and thereby, or for
any other reason, directly or indirectly, relating to this Agreement; provided,
further, that the Eligible Assignee or Participant or proposed Eligible Assignee
or Participant may disclose any such information to the extent such disclosure
is required by law or requested by any regulatory authority.
(g) Anything in this Section 9.09 to the contrary notwithstanding, any
Lender may assign and pledge all or any portion of its Commitment and the
Extensions of Credit and other obligations owing to it to any Federal Reserve
Lender (and its transferees) as collateral security pursuant to Regulation A of
the Board of Governors of the Federal Reserve System and any Operating Circular
issued by such Federal Reserve Lender. No such assignment shall release the
assigning Lender from its obligations hereunder.
(h) If any Lender shall make any demand for payment under Section 2.16,
then within thirty (30) days after any such demand, the Borrower may, with the
approval of the Administrative Agent (which approval shall not be unreasonably
withheld) and provided, that no Event of Default or Default shall then have
occurred and be continuing, demand that such Lender assign in accordance with
this Section 9.09 to one or more Eligible Assignees designated by the Borrower
all (but not less than all) of such Lender's Commitment and the Extensions of
Credit and other obligations owing to it within the period ending on such 30th
day. If any such Eligible Assignee designated by the Borrower shall fail to
consummate such assignment on terms reasonably acceptable to such Lender, or if
the Borrower shall fail to designate any such Eligible Assignees for all or part
of such Lender's Commitment or Extensions of Credit, then such demand by the
Borrower shall become ineffective; it being understood for purposes of this
subsection (h) that such assignment shall be conclusively deemed to be on terms
reasonably acceptable to such Lender, and such Lender shall be compelled to
consummate such assignment to an Eligible Assignee designated by the Borrower,
if such Eligible Assignee (i) shall agree to such assignment by entering into an
Assignment and Acceptance in substantially the form of Exhibit I hereto with
such Lender and (ii) shall offer compensation to such Lender in an amount equal
to all amounts then owing by the Borrower to such Lender hereunder, whether for
principal, interest, fees, costs or expenses (other than the demanded payment
referred to above and payable by the Borrower as a condition to the Borrower's
right to demand such assignment), or otherwise.
SECTION 9.10 Severability
Any provision of this Agreement which is prohibited, unenforceable or
not authorized in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition, unenforceability or
non-authorization without invalidating the remaining provisions hereof or
affecting the validity, enforceability or legality of such provision in any
other jurisdiction.
SECTION 9.11 Governing Law
This agreement shall be governed by, and construed in accordance with,
the laws of the state of New York.
SECTION 9.12 Headings
Section headings in this Agreement are included herein for convenience
of reference only and shall not constitute a part of this Agreement for any
other purpose.
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SECTION 9.13 Submission To Jurisdiction; Waivers
The Borrower hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgment
in respect thereof, to the non-exclusive general jurisdiction of the
Courts of the State of New York, the courts of the United States of
America for the Southern District of New York, and appellate courts
from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Borrower at its address set forth in Section 9.02 or at
such other address of which the Administrative Agent shall have been
notified pursuant thereto; and
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction.
This Section 9.13 shall not be construed to confer a benefit upon, or grant a
right or privilege to, any Person other than the parties hereto.
SECTION 9.14 Acknowledgments
The Borrower hereby acknowledges:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and other Loan Documents;
(b) neither the Administrative Agent, the Issuing Lender nor
any Lender has a fiduciary relationship to the Borrower, and the
relationship between the Administrative Agent, the Issuing Lender and
any Lender, on the one hand, and the Borrower on the other hand, is
solely that of debtor and creditor; and
(c) no joint venture exists between the Borrower and the
Administrative Agent, the Issuing Lender or any Lender.
SECTION 9.15 Waivers of Jury Trial
Each of the Borrower, the Administrative Agent, the Issuing Lender and
the Lenders hereby irrevocably and unconditionally waives trial by jury in any
legal action or proceeding relating to this Agreement or any other Loan Document
and for any counterclaim therein. This Section 9.15 shall not be construed to
confer a benefit upon, or grant a right or privilege to, any person other than
the parties hereto.
SECTION 9.16 Confidentiality
(a) Each of the Administrative Agent, the Issuing Lender and the Lenders
agrees to maintain the confidentiality of the Information (as defined below),
and use it only for
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purposes of this Agreement, the Loan Documents and the transactions contemplated
hereby and thereby, or for any other reason, directly or indirectly, relating to
this Agreement, except that Information may be disclosed (i) to its and its
Affiliates' directors, officers, employees and agents, including accountants,
legal counsel and other advisors (it being understood that the Persons to whom
such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential); (ii) to the
extent requested by any regulatory authority; (iii) to the extent required by
Applicable Law; (iv) to any other party to this Agreement; (v) in connection
with the exercise of any remedies hereunder or any suit, action or proceeding
relating to this Agreement or the enforcement of rights hereunder; (vi) subject
to an agreement containing provisions substantially the same as those of this
Section, to (x) any Eligible Assignee of or Participant in, or any prospective
Eligible Assignee of or Participant in, any of its rights or obligations under
this Agreement or (y) any direct or indirect contractual counterparty or
prospective counterparty (or such contractual counterparty's or prospective
counterparty's professional advisor) to any credit derivative transaction
relating to obligations of the Borrower; (vii) with the written consent of the
Borrower; (viii) to the extent such Information becomes publicly available other
than as a result of a breach of this Section or (ix) becomes available to the
Administrative Agent or any Lender on a nonconfidential basis from a source
other than the Borrower and such source is not known by the Administrative Agent
or such Lender to be in violation of a duty of confidentiality; or (x) to the
National Association of Insurance Commissioners or any other similar
organization.
(b) The Administrative Agent and the Lenders may disclose the existence
of this Agreement and information about this Agreement to market data
collectors, similar service providers to the lending industry, and service
providers to the Administrative Agent and the Lenders in connection with the
administration and management of this Agreement, the other Loan Documents, the
Commitments, and the Extensions of Credit; provided, however, that information
disclosed by the Administrative Agent or any Lender to any such market data
collectors or similar service providers shall be of a type generally provided to
such Persons in other transactions. For the purposes of this Section 9.16,
"Information" means all non-public information received from the Borrower
relating to the Borrower or its business. Notwithstanding anything herein to the
contrary, Information, for purposes of this Section 9.16, shall not include, and
the Administrative Agent and each Lender may disclose to any and all Persons,
without limitation of any kind, any information with respect to the U.S. federal
income tax treatment and U.S. federal income tax structure of the transactions
contemplated hereby and all materials of any kind (including opinions or other
tax analyses) that are provided to the Administrative Agent or such Lender
relating to such tax treatment and tax structure.
(c) The Borrower acknowledges that one or more of the Lenders may treat
its Loans as part of a transaction that is subject to Treasury Regulation
Section 1.6011-4 or Section 301.6112-1, and the Administrative Agent and such
Lender or Lenders, as applicable, may file such IRS forms or maintain such lists
or other records as they may determine are required by such Treasury
Regulations.
(d) Any Person required to maintain the confidentiality of Information
as provided in this Section 9.16 shall be considered to have complied with its
obligation to do so if such Person has exercised the same degree of care to
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maintain the confidentiality of such Information as such Person would accord to
its own confidential information. Each of the Administrative Agent, the Lenders
and the Participants shall promptly notify the Borrower of its receipt of any
subpoena or similar process or authority, unless prohibited therefrom by the
issuing Person.
SECTION 9.17 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.
[SIGNATURE PAGES ATTACHED]
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IN WITNESS WHEREOF, the parties hereto have caused his Agreement to be
duly executed and delivered by their respective duly authorized officers as of
the date first above written.
THE BORROWER:
SOUTH JERSEY INDUSTRIES, INC.
By: /s/ David A. Kindlick
------------------------------------
David A. Kindlick
Vice President, Treasurer &
Chief Financial Officer
S-1
Counterpart signature page to the 364-Day Revolving Credit Agreement
dated as of August 21, 2003 among South Jersey Industries, Inc.,
Wachovia Bank, National Association and the participating banks a party thereto.
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Administrative Agent, as Issuing
Lender, as Swingline Lender and as a Lender
By: /s/ Lawrence P. Sullivan
------------------------------------
Name: Lawrence P. Sullivan
Title: Vice President
S-2
Counterpart signature page to the 364-Day Revolving Credit Agreement
dated as of August 21, 2003 among South Jersey Industries, Inc.,
Wachovia Bank, National Association and the participating banks a party thereto.
CITIZENS BANK OF PENNSYLVANIA,
as Co-Syndication Agent and as a Lender
By: /s/ Stephen M. Wilus
------------------------------------
Name:
Title:
S-3
Counterpart signature page to the 364-Day Revolving Credit Agreement
dated as of August 21, 2003 among South Jersey Industries, Inc.,
Wachovia Bank, National Association and the participating banks a party thereto.
JP MORGAN CHASE BANK,
as Co-Syndication Agent and as a Lender
By: /s/ Brendan L. Walsh
------------------------------------
Name: Brendan L. Walsh
Title: Vice President
S-4
Counterpart signature page to the 364-Day Revolving Credit Agreement
dated as of August 21, 2003 among South Jersey Industries, Inc.,
Wachovia Bank, National Association and the participating banks a party thereto.
PNC BANK NATIONAL ASSOCIATION,
as Co-Syndication Agent and as a Lender
By: /s/ Denise D. Killen
------------------------------------
Name: Denise D. Killen
Title: Vice President
S-5
Counterpart signature page to the 364-Day Revolving Credit Agreement
dated as of August 21, 2003 among South Jersey Industries, Inc.,
Wachovia Bank, National Association and the participating banks a party thereto.
BANK OF NEW YORK,
as a Lender
By: /s/ Charlotte Sohn Fuiks
------------------------------------
Name: Charlotte Sohn Fuiks
Title: Vice President
S-6
Counterpart signature page to the 364-Day Revolving Credit Agreement
dated as of August 21, 2003 among South Jersey Industries, Inc.,
Wachovia Bank, National Association and the participating banks a party thereto.
FLEET NATIONAL BANK,
as a Lender
By: /s/ Russ J. Lopinto
------------------------------------
Name: Russ J. Lopinto
Title: Senior Vice President
S-7
Counterpart signature page to the 364-Day Revolving Credit Agreement
dated as of August 21, 2003 among South Jersey Industries, Inc.,
Wachovia Bank, National Association and the participating banks a party thereto.
SUN NATIONAL BANK,
as a Lender
By: /s/ Peter Villa
------------------------------------
Name: Peter Villa
Title: Vice President
S-8
Counterpart signature page to the 364-Day Revolving Credit Agreement
dated as of August 21, 2003 among South Jersey Industries, Inc.,
Wachovia Bank, National Association and the participating banks a party thereto.
SCHEDULE I
LENDERS AND APPLICABLE LENDING OFFICES,
COMMITMENTS AND INITIAL COMMITMENT PERCENTAGES
Lender and Applicable
Lending Office
Initial Commitment
Applicable Lending Office Commitment Percentages
- ------------------------- ---------- -----------
Wachovia Bank, National Association $8,000,000.00 20.0000%
Domestic Lending Office and
LIBOR Lending Office:
One Wachovia Center
201 South College Street
Charlotte, North Carolina 28288-0680
Attn: Agency Services
Telephone: (704) 374-2698
Facsimile: (704) 383-0288
Citizens Bank of Pennsylvania $6,857,142.86 17.1429%
CML Operations
RDC 160
One Citizens Drive
Riverside, Rhode Island 19103
Attn: Karen Hazard
Telephone: 401-734-5297
Facsimile: 401-734-5385
JPMorgan Chase Bank $6,857,142.86 17.1429%
695 Route 46 West
Fairfield, New Jersey 07004
Attn: Alice Shanahan
Telephone: (973) 439-5034
Facsimile: (973) 439-5014
I-1
PNC Bank, National Association $6,857,142.86 17.1429%
500 First Avenue
Pittsburgh, Pennsylvania 15219
Attn: Marc Accamando
Telephone: (412) 768-7647
Facsimile: (412) 768-4586
The Bank of New York $4,285,714.29 10.7143%
One Wall Street, 19th Floor
New York, New York 10286
Attn: Lisa Williams
Telephone: (212) 635-7535
Facsimile: (212) 635-7552
Fleet National Bank $4,285,714.29 10.7143%
750 Walnut Avenue
Cranford, New Jersey 07016
Attn: Lekha Chopra
Telephone: (908) 709-5688
Facsimile: (908) 709-6433
Sun National Bank $2,857,142.86 7.1429%
401 Landis Avenue
Vineland, New Jersey 08360
Attn: Carol A. Hallman
Telephone: (856) 205-0222
Facsimile: (856) 609-8543
I-2
Schedule II
Ownership
---------
Ownership Classification
Entity Name Owner Interest of Interest
- ----------- ----- -------- --------------
South Jersey Public 100% Common Equity
Industries, Inc.
Marina Energy LLC Borrower 100% Membership Interest
South Jersey Gas Company Borrower 100% Common Equity
South Jersey Energy Borrower 100% Common Equity
Company
South Jersey Resources Borrower 100% Membership Interest
Group, LLC
III-1
Exhibit 10.2
THREE-YEAR REVOLVING CREDIT AGREEMENT
Dated as of August 21, 2003
among
SOUTH JERSEY GAS COMPANY,
as Borrower
and
THE SEVERAL LENDERS FROM
TIME TO TIME PARTY HERETO
and
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Administrative Agent
and
CITIZENS BANK OF PENNSYLVANIA,
JPMORGAN CHASE BANK, and
PNC BANK, NATIONAL ASSOCIATION
as Co-Syndication Agents
Arranged by:
WACHOVIA CAPITAL MARKETS, LLC,
Sole Lead Arranger and Book Manager
Cover Page
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS......................................................1
SECTION 1.01 Certain Defined Terms...............................1
SECTION 1.02 Computation of Time Periods........................15
SECTION 1.03 Accounting Terms...................................15
SECTION 1.04 Internal References................................15
ARTICLE II LOANS..........................................................17
SECTION 2.01 Revolving Loans....................................17
SECTION 2.02 Swingline Loans....................................17
SECTION 2.03 Procedure for Advances of Loans....................19
SECTION 2.04 Competitive Bid Loans..............................21
SECTION 2.05 Fees...............................................23
SECTION 2.06 Reduction of Commitments...........................24
SECTION 2.07 Prepayment of Loans................................24
SECTION 2.08 Increase in Commitment.............................26
SECTION 2.09 Evidence of Debt; Notes............................27
SECTION 2.10 Interest Rates.....................................27
SECTION 2.11 Additional Interest on LIBOR Rate Loans............29
SECTION 2.12 Interest Rate Determination........................29
SECTION 2.13 Voluntary Conversion of Loans......................30
SECTION 2.14 Increased Costs....................................30
SECTION 2.15 Illegality.........................................31
SECTION 2.16 Nature of Obligations of Lenders Regarding
Extensions of Credit; Assumption by the Administrative
Agent.....................................................32
SECTION 2.17 Net of Taxes, Etc..................................32
ARTICLE III LETTER OF CREDIT FACILITY.....................................35
SECTION 3.01 L/C Commitment.....................................35
SECTION 3.02 Procedure for Issuance of Letters of Credit........35
SECTION 3.03 Commissions and Other Charges......................36
SECTION 3.04 L/C Participations.................................36
SECTION 3.05 Reimbursement Obligation of the Borrower...........37
SECTION 3.06 Obligations Absolute...............................38
ARTICLE IV CONDITIONS PRECEDENT...........................................39
SECTION 4.01 Conditions Precedent to the Execution and
Delivery of this Agreement................................39
SECTION 4.02 Additional Conditions Precedent....................40
SECTION 4.03 Reliance on Certificates...........................41
ARTICLE V REPRESENTATIONS AND WARRANTIES..................................42
SECTION 5.01 Representations and Warranties of the Borrower.....42
i
ARTICLE VI COVENANTS OF THE COMPANY.......................................46
SECTION 6.01 Affirmative Covenants..............................46
SECTION 6.02 Negative Covenants.................................47
SECTION 6.03 Reporting Requirements.............................49
SECTION 6.04 Financial Covenants................................51
ARTICLE VII EVENTS OF DEFAULT.............................................52
SECTION 7.01 Events of Default..................................52
SECTION 7.02 Upon an Event of Default...........................53
SECTION 7.03 Rights and Remedies Cumulative; Non-Waiver; Etc....54
ARTICLE VIII THE ADMINISTRATIVE AGENT.....................................55
SECTION 8.01 Appointment........................................55
SECTION 8.02 Delegation of Duties...............................55
SECTION 8.03 Exculpatory Provisions.............................55
SECTION 8.04 Reliance by Administrative Agent...................55
SECTION 8.05 Notice of Default..................................56
SECTION 8.06 Non-Reliance on Administrative Agent and
Other Lenders.............................................56
SECTION 8.07 Indemnification....................................57
SECTION 8.08 Administrative Agent in Its Individual Capacity....57
SECTION 8.09 Successor Administrative Agent.....................57
SECTION 8.10 Issuing Lender.....................................58
SECTION 8.11 Notices; Actions Under Loan Documents..............58
ARTICLE IX MISCELLANEOUS..................................................59
SECTION 9.01 Amendments, Etc....................................59
SECTION 9.02 Notices, Etc.......................................59
SECTION 9.03 No Waiver; Remedies................................60
SECTION 9.04 Set-off.............................................60
SECTION 9.05 Indemnification....................................61
SECTION 9.06 Liability of the Lenders...........................62
SECTION 9.07 Costs, Expenses and Taxes..........................62
SECTION 9.08 Binding Effect.....................................63
SECTION 9.09 Assignments and Participation......................63
SECTION 9.10 Severability.......................................66
SECTION 9.11 Governing Law......................................66
SECTION 9.12 Headings...........................................66
SECTION 9.13 Submission To Jurisdiction; Waivers................67
SECTION 9.14 Acknowledgments....................................67
SECTION 9.15 Waivers of Jury Trial..............................67
SECTION 9.16 Confidentiality....................................67
SECTION 9.17 Execution in Counterparts..........................69
ii
EXHIBITS
Exhibit A-1 Form of Revolving Loan Note
Exhibit A-2 Form of Swingline Note
Exhibit A-3 Form of Competitive Bid Note
Exhibit B-1 Form of Competitive Bid Request
Exhibit B-2 Form of Competitive Bid
Exhibit C Form of Notice of Borrowing
Exhibit D Form of Notice of Swingline Borrowing
Exhibit E Form of Notice of Account Designation
Exhibit F Intentionally Omitted
Exhibit G Form of Notice of Conversion
Exhibit H Form of Opinion of Counsel to the Borrower
Exhibit I Form of Assignment and Acceptance
Exhibit J Form of Compliance Certificate
SCHEDULES
Schedule I Lenders and Applicable Lending Offices,
Commitments and Initial Commitment
percentages
Schedule II Ownership
Schedule III First Mortgage Notes
iii
THREE-YEAR REVOLVING CREDIT AGREEMENT
THREE-YEAR REVOLVING CREDIT AGREEMENT (as it may be amended,
supplemented or otherwise modified in accordance with the terms hereof at any
time and from time to time, this "Agreement") dated as of August 21, 2003 among
SOUTH JERSEY GAS COMPANY, a New Jersey corporation (the "Borrower"), the several
banks and other financial institutions from time to time parties to this
Agreement (each a "Lender" and collectively, the "Lenders"), WACHOVIA BANK,
NATIONAL ASSOCIATION, a national banking association organized and existing
under the laws of the United States of America ("Wachovia"), as administrative
agent for the Lenders hereunder (in such capacity, together with its successors
and permitted assigns in such capacity, the "Administrative Agent").
PRELIMINARY STATEMENTS
WHEREAS, the Borrower has requested that the Lenders make revolving
credit loans to the Borrower and issue or participate in letters of credit for
the account of the Borrower, for working capital and general corporate purposes
of the Borrower and its Subsidiaries in an aggregate principal amount of up to
$100,000,000 at any one time outstanding; and
WHEREAS, the Lenders are willing, on the terms and subject to the
conditions set forth in this Agreement, to extend credit under this Agreement as
more particularly hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Administrative Agent" has the meaning assigned to that term in the
preamble hereto.
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors
and officers of such Person), controlled by, or under direct or indirect common
control with such Person. A Person shall be deemed to control another entity if
such Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such entity, whether through the
ownership of voting securities, by contract, or otherwise.
"Agreement" means this Three-Year Revolving Credit Agreement, as it may
be amended, supplemented or otherwise modified in accordance with the terms
hereof at any time and from time to time.
-1-
"Applicable Law" means all applicable laws, statutes, treaties, rules,
codes, ordinances, regulations, permits, certificates, orders, interpretations,
licenses, and permits of any Governmental Authority and judgments, decrees,
injunctions, writs, orders or like action of any court, arbitrator or other
judicial or quasi-judicial tribunal (including, without limitation, those
pertaining to health, safety, the environment or otherwise).
"Applicable Lending Office" means, with respect to any Lender, the
office of such Lender specified as such opposite its name on Schedule I hereto
or in the Assignment and Acceptance pursuant to which it became a Lender, or
such other office of such Lender as such Lender may from time to time specify to
the Borrower and the Administrative Agent.
"Applicable Margin" means, for Loans made to, and Utilization Fees and
Letter of Credit Commissions payable by, the Borrower on any date, the rate per
annum as set forth below, determined by reference to the Senior Debt Ratings:
Applicable Base Applicable Utilization Fee
Level Senior Debt Rating Facility Fee Rate Margin LIBOR Margin
----- ------------------ ------------ ----------- ------------ ---------------
I Greater than or equal to 0.150% 0.00% 0.475% 0.125%
BBB+/Baa1
II BBB/Baa2 0.175% 0.00% 0.700% 0.125%
III BBB-/Baa3 0.225% 0.00% 0.900% 0.125%
IV Less than BBB-/Baa3 or no rating 0.250% 0.00% 1.000% 0.250%
Any change in the Applicable Margin will be effective as of the date on
which S&P or Moody's, as the case may be, announces the applicable change in the
Senior Debt Ratings. The Borrower shall notify the Administrative Agent in
writing promptly after becoming aware of any change in the Senior Debt Ratings.
For purposes of the foregoing, (i) if the Senior Debt Ratings
established or deemed to have been established by Moody's and S&P shall fall
within different "Levels" and the ratings differential is one level, the higher
rating will apply; (ii) if the Senior Debt Ratings established or deemed to have
been established by Moody's and S&P shall fall within different "Levels" and the
ratings differential is two levels or more, the level one above the lowest of
the two ratings will apply; and (iii) if the rating system of Moody's or S&P
shall change, or if Moody's or S&P shall cease to be in the business of rating
corporate debt obligations, the Borrower, the Administrative Agent and the
Lenders shall negotiate in good faith to amend this definition to reflect such
changed rating system or the unavailability of ratings from Moody's or S&P, and,
pending the effectiveness of any such amendment, the Senior Debt Ratings shall
be determined by reference to the Senior Debt Ratings most recently in effect
prior to such change or cessation.
-2-
"Applicable Rate" means:
(a) in the case of each Base Rate Loan, a rate per annum equal at all
times to the sum of the Base Rate plus the Applicable Base Rate Margin in effect
from time to time;
(b) in the case of each LIBOR Rate Loan comprising part of the same
Loan, a rate per annum during each Interest Period equal at all times to the sum
of the LIBOR Rate for such Interest Period plus the Applicable LIBOR Margin in
effect from time to time during such Interest Period;
(c) in the case of each Swingline Loan, a rate per annum equal at all
times to the sum of the Base Rate plus the Applicable Base Rate Margin in effect
from time to time;
(d) in the case of each Competitive Bid Loan, a rate per annum as
determined in accordance with Section 2.04.
"Application" means an application, in the form specified by the
Issuing Lender from time to time, requesting the Issuing Lender to issue a
Letter of Credit.
"Assignment and Acceptance" means an Assignment and Acceptance executed
in accordance with Section 9.09 in the form attached hereto as Exhibit I.
"Bankruptcy Code" means Title 11 of the United States Code, as now
constituted or hereafter amended.
"Base Rate" means, for any period, a fluctuating interest rate per
annum as shall be in effect from time to time, which rate per annum shall at all
times be equal to the higher of (i) the rate of interest announced publicly by
Administrative Agent in Charlotte, North Carolina, from time to time, as
Administrative Agent's Prime Rate; and (ii) 1/2 of one percent per annum above
the Federal Funds Rate in effect from time to time.
"Base Rate Loan" has the meaning assigned to that term in Section
2.10(a) and shall include Revolving Loans bearing interest at the Base Rate.
"Benefited Lender" has the meaning assigned to that term in Section
9.04(b).
"Borrower" has the meaning assigned to that term in the preamble
hereto.
"Business Day" means a day of the year on which (i) banks are not
required or authorized to close in Charlotte, North Carolina, (ii) the New York
Stock Exchange is not closed, and (iii) with respect to any borrowing, payment
or rate selection of a LIBOR Rate Loan, banks are not required or authorized to
close in Charlotte, North Carolina and on which dealings in Dollars are carried
out in the London interbank market.
"Capital Lease" means any lease which is required to be capitalized on
a balance sheet of the lessee in accordance with GAAP, consistently applied.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) equity of such Person,
including any preferred interest, any limited or general partnership interest
and any limited liability company membership interest.
-3-
"Change in Control" means (a) the Parent shall cease at any time to own
at least 100% of the Capital Stock having voting rights of the Borrower, or (b)
the occurrence of either of the following: (i) any entity, person (within the
meaning of Section 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act) which theretofore was beneficial owner (as defined in Rule
13d-3 under the Exchange Act) of less than 20% of the Parent's then outstanding
common stock either (x) acquires shares of common stock of the Parent in a
transaction or series of transactions that results in such entity, person or
group directly or indirectly owning beneficially 20% or more of the outstanding
common stock of the Parent, or (y) acquires, by proxy or otherwise, the right to
vote for the election of directors, for any merger, combination or consolidation
of the Parent or any of its direct or indirect Subsidiaries, or, for any other
matter or question, more than 20% of the then outstanding voting securities of
the Parent; or (ii) 20% or more of the directors of the board of directors of
the Parent fail to consist of Continuing Directors.
"Closing Date" means August 21, 2003.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the regulations promulgated and rulings issued thereunder.
"Commitment" means (i) with respect to the Lenders, the aggregate
amount of the Commitments of the Lenders as set forth on Schedule I, and (ii)
with respect to a Lender, the amount of the Commitment of such Lender as set
forth on Schedule I, as such amounts may be otherwise reduced in accordance with
Section 2.06 or increased pursuant to Section 2.08 or otherwise modified in
accordance with Section 9.09. "Commitments" means the total of the Lenders'
Commitments.
"Commitment Percentage" means for each Lender, a fraction (expressed as
a decimal) the numerator of which is the Commitment of such Lender at such time
and the denominator of which are the Commitments of all of the Lenders at such
time. The initial Commitment Percentages are set out on Schedule I.
"Competitive Bid" means an offer by a Lender to make a Competitive Bid
Loan to the Borrower pursuant to the terms of Section 2.04 hereof.
"Competitive Bid Loan" means a loan made by a Lender to the Borrower in
its discretion pursuant to the provisions of Section 2.04 hereof.
"Competitive Bid Loan Notes" means the promissory notes of the Borrower
in favor of each Lender evidencing the Competitive Bid Loans made to the
Borrower and substantially in the form of Exhibit A-3, as such promissory notes
may be amended, modified, supplemented or replaced from time to time.
"Competitive Bid Rate" means, as to any Competitive Bid made by a
Lender to the Borrower in accordance with the provisions of Section 2.04 hereof,
the rate of interest offered by the Lender making the Competitive Bid.
-4-
"Competitive Bid Request" means a request by the Borrower for
Competitive Bids in the form of Exhibit B-1.
"Competitive Bid Request Fee" means $3,500 for each Competitive Bid
Request made by the Borrower, payable to the Administrative Agent for its
account.
"Compliance Certificate" means a certificate substantially in the form
of Exhibit J.
"Consolidated" means, when used with reference to any accounting term,
the amount described by such accounting term, determined on a consolidated basis
in accordance with GAAP, after elimination of intercompany items.
"Consolidated EBIT" means, with respect to the Borrower and its
Consolidated Subsidiaries, for any period, an amount equal to: (i) Consolidated
Net Income for such period, plus (ii) amounts deducted in the computation
thereof for (a) Consolidated Interest Expense and (b) federal, state and local
income taxes.
"Consolidated Interest Expense" means, with respect to the Borrower and
its Consolidated Subsidiaries, for any period, an amount equal to (i) all
interest in respect of Indebtedness accrued during such period (whether or not
actually paid during such period), plus (ii) the net amount payable (or minus
the net amount receivable) under any Hedging Obligation with respect to such
Indebtedness accrued during such period (whether or not actually paid or
received during such period).
"Consolidated Net Income" means the net income of the Borrower and its
Consolidated Subsidiaries, as determined on a consolidated basis in accordance
with GAAP and as adjusted to exclude (i) net after-tax extraordinary or
non-recurring gains or losses (whether cash or non-cash gains or losses), (ii)
net after-tax gains or losses attributable to any sale of capital assets, (iii)
the net income of any Consolidated Subsidiary to the extent that dividends or
distributions of such net income are not at the date of determination permitted
by the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or other regulation and (iv) the cumulative effect of any
changes in GAAP.
"Consolidated Total Capitalization" means the sum of (i) Indebtedness
of the Borrower and its Consolidated Subsidiaries, plus (ii) the sum of the
Capital Stock (excluding treasury stock and capital stock subscribed for and
unissued) and surplus (including earned surplus, capital surplus, translation
adjustment and the balance of the current profit and loss account not
transferred to surplus) accounts of the Borrower and its Consolidated
Subsidiaries appearing on a consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries, in each case prepared as of the date of determination
in accordance with GAAP consistent with those applied in the preparation of the
financial statements referred to in Section 4.01(f), after eliminating all
intercompany transactions and all amounts properly attributable to minority
interests, if any, in the stock and surplus of Subsidiaries.
"Continuing Director" means, with respect to any Person as of any date
of determination, any member of the board of directors of such Person who (a)
was a member of such board of directors on the Closing Date, or (b) was
nominated for election or elected to such board of directors with the approval
of a majority of the Continuing Directors who were members of such board at the
time of such nomination or election.
-5-
"Convert", "Conversion" and "Converted" each refers to a conversion of
a Loan of one Type into a Loan of another Type pursuant to Section 2.13 or the
selection of a new, or the renewal of the same, Interest Period for a LIBOR Rate
Loan pursuant to Section 2.13.
"Default" means any event or condition that would constitute an Event
of Default but for the requirement that notice be given or time elapse or both.
"Default Rate" means a per annum rate equal to 2% greater than the Base
Rate.
"Disclosure Documents" means the Borrower's Annual Report on Form 10-K
for the year ended December 31, 2002, its Quarterly Report on Form 10-Q for the
quarters ended March 31, 2003 and June 30, 2003, and any Current Report on Form
8-K delivered to the Lenders at least three (3) Business Days prior to the date
of this Agreement.
"Dollar" or "$" means dollars in lawful currency of the United States
of America.
"Eligible Assignee" means, with respect to any assignment of the
rights, interest and obligations of a Lender hereunder, a Person that is at the
time of such assignment (a) a commercial bank organized or licensed under the
laws of the United States or any state thereof, having combined capital and
surplus in excess of $500,000,000, (b) a commercial bank organized under the
laws of any other country that is a member of the Organization of Economic
Cooperation and Development, or a political subdivision of any such country,
having combined capital and surplus in excess of $500,000,000, (c) a finance
company, insurance company or other financial institution which in the ordinary
course of business extends credit of the type extended hereunder and that has
total assets in excess of $1,000,000,000, (d) a Lender hereunder (whether as an
original party to this Agreement or as the assignee of another Lender), (e) an
Affiliate or Subsidiary of a Lender (whether as an original party to this
Agreement or as the assignee of another Lender) hereunder that does not
otherwise qualify as an Eligible Assignee provided such Lender continues to be
obligated under this Agreement, (f) the successor (whether by transfer of
assets, merger or otherwise) to all or substantially all of the commercial
lending business of the assigning Lender, or (g) any other Person that has been
approved in writing as an Eligible Assignee by the Administrative Agent and, if
no Default or Event of Default exists and is continuing, by the Borrower.
"Environmental Laws" means any federal, state or local laws, ordinances
or codes, rules, orders, or regulations relating to pollution or protection of
the environment, including, without limitation, laws relating to hazardous
substances, laws relating to reclamation of land and waterways and laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollution, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes.
-6-
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" means any Person which for purposes of Title IV of
ERISA is a member of the Borrower's controlled group, or under common control
with the Borrower, within the meaning of Section 414 of the Code, and the
regulations promulgated and rulings issued thereunder.
"ERISA Event" means (i) the occurrence of a reportable event, within
the meaning of Section 4043 of ERISA, unless the 30-day notice requirement with
respect thereto has been waived by the PBGC; (ii) the provision by the
administrator of any Plan of a notice of intent to terminate such Plan, pursuant
to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan
amendment referred to in Section 404l(e) of ERISA); (iii) the cessation of
operations at a facility in the circumstances described in Section 4062(e) of
ERISA; (iv) the withdrawal by the Borrower or an ERISA Affiliate from a
Multiemployer Plan during a plan year for which it was a "substantial employer"
as defined in Section 4001(a)(2) of ERISA; (v) the failure by the Borrower or
any ERISA Affiliate to make a payment to a Plan required under Section 302 of
ERISA, which results in a lien pursuant to Section 302(f) of ERISA; (vi) the
adoption of an amendment to a Plan requiring the provision of security to such
Plan, pursuant to Section 307 of ERISA; or (vii) the institution by the PBGC of
proceedings to terminate a Plan, pursuant to Section 4042 of ERISA, or the
occurrence of any event or condition which might reasonably constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, a Plan by the PBGC.
"Eurocurrency Liabilities" has the meaning specified in Regulation D of
the Board of Governors of the Federal Reserve System, as in effect from time to
time.
"Event of Default" has the meaning assigned to that term in Section
7.01.
"Extension of Credit" means, as to any Lender at any time, an amount
equal to the sum of (a) such Lender's Commitment Percentage multiplied by the
aggregate principal amount of all Revolving Loans then outstanding, (b) such
Lender's Commitment Percentage multiplied by the aggregate principal amount of
all Competitive Bid Loans then outstanding, (c) such Lender's Commitment
Percentage multiplied by the L/C Obligations then outstanding, and (d) such
Lender's Commitment Percentage multiplied by the aggregate principal amount of
all Swingline Loans then outstanding.
"Facility Fee" has the meaning assigned to that term in Section
2.05(a).
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to 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 Lender 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.
"Final Fee Payment Date" means the date all Commitments have been
terminated and all Loans have been paid in full.
-7-
"First Mortgage Notes" means those First Mortgage Notes identified on
Schedule III attached hereto, and subsequent First Mortgage Notes issued in
accordance with this Agreement.
"Fronting Fee" has the meaning assigned to that term in Section
3.03(b).
"GAAP" means generally accepted accounting principles, as recognized by
the American Institute of Certified Public Accountants and the Financial
Accounting Standards Board, consistently applied and maintained on a consistent
basis for the Borrower and its Consolidated Subsidiaries throughout the period
indicated and consistent with the prior financial practice of the Borrower and
its Consolidated Subsidiaries.
"Governmental Action" means all authorizations, consents, approvals,
waivers, exceptions, variances, orders, licenses, exemptions, publications,
filings, notices to and declarations of or with any Governmental Authority,
other than routine reporting requirements the failure to comply with which will
not affect the validity or enforceability of this Agreement or any other Loan
Document or have a material adverse effect on the transactions contemplated by
this Agreement or any other Loan Document.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Hazardous Materials" means any petrochemical or petroleum products,
any flammable materials, explosives, radioactive materials, hazardous materials,
hazardous wastes, hazardous or toxic substances, or related or similar
materials, asbestos or any material containing asbestos, or any other substance
or material as so defined and regulated by any Federal, state or local
environmental law, ordinance, rule, or regulation including, without limitation,
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended (42 U.S.C. Sections 9601, et seq.), the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Sections 1801, et seq.), and the
Resource Conservation and Recovery Act, as amended (42 U.S.C. Sections 6901, et
seq.), and the regulations adopted and publications promulgated pursuant
thereto.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under any interest rate or currency swap agreement,
interest rate or currency future agreement, interest rate collar agreement, swap
agreement (as defined in 11 U.S.C. ss. 101), interest rate or currency hedge
agreement, and any put, call or other agreement or arrangement designed to
protect such Person against fluctuations in interest rates or currency exchange
rates.
"Indebtedness" means, for any Person, all obligations of such Person
which in accordance with GAAP should be classified on a balance sheet of such
Person as liabilities of such Person, and in any event shall include, without
duplication, all (i) indebtedness for borrowed money, (ii) obligations evidenced
by bonds, debentures, notes or other similar instruments, (iii) obligations to
pay the deferred purchase price of property or services, (iv) obligations as
lessee under leases which shall have been or should be, in accordance with GAAP,
recorded as capital leases, (v) obligations as lessee under operating leases
which have been recorded as off-balance sheet liabilities, (vi) obligations
under Hedging Obligations, (vii) reimbursement obligations (contingent or
-8-
otherwise) in respect of outstanding letters of credit, (viii) indebtedness of
the type referred to in clauses (i) through (vi) above secured by (or for which
the holder of such indebtedness has an existing right, contingent or otherwise,
to be secured by) any lien or encumbrance on, or security interest in, property
(including, without limitation, accounts and contract rights) owned by such
Person, even though such Person has not assumed or become liable for the payment
of such indebtedness, and (ix) obligations under direct or indirect guaranties
in respect of, and obligations (contingent or otherwise) to purchase or
otherwise acquire, or otherwise to assure a creditor against loss in respect of,
indebtedness or obligations of others of the kinds referred to in clauses (i)
through (vii) above. Notwithstanding anything to the contrary set forth above,
Capital Stock, including Capital Stock having a preferred interest, shall not
constitute Indebtedness for purposes of this Agreement.
"Information" has the meaning assigned to that term in Section 9.16(b).
"Interest Period" has the meaning assigned to that term in Section
2.10(b).
"ISP 98" means the International Standby Practices (1998 Revision,
effective January 1, 1999), International Chamber of Commerce Publication No.
590.
"Issuing Lender" means Wachovia, in its capacity as issuer of any
Letter of Credit, or any successor thereto.
"L/C Commitment" means Ten Million and No/100 Dollars ($10,000,000).
"L/C Facility" means the letter of credit facility established pursuant
to Article III.
"L/C Obligations" means at any time, an amount equal to the sum of (a)
the aggregate undrawn and unexpired amount of the then outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit which
have not then been reimbursed pursuant to Section 3.05.
"L/C Participants" means the collective reference to all the Lenders
other than the Issuing Lender.
"Lenders" has the meaning assigned to that term in the preamble hereto,
and, in each case, includes their respective successors and permitted assigns,
and, with respect to Swingline Loans, the Swingline Lender.
"Letters of Credit" has the meaning assigned to that term in Section
3.01(a).
"LIBOR Lending Office" means, with respect to any Lender, the office of
such Lender specified as such opposite its name on Schedule I hereto or in the
Assignment and Acceptance pursuant to which it became a Lender (or, if no such
office is specified, its Applicable Lending Office), or such other office of
such Lender as such Lender may from time to time specify to the Borrower and the
Administrative Agent.
"LIBOR Rate" means with respect to each day during each Interest
Period pertaining to a LIBOR Rate Loan or Competitive Bid Loan, the rate
(rounded upwards, if necessary, to the next higher 1/100th of 1%)appearing on
Page 3750 of the Dow Jones Markets 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
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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) at approximately 11:00 a.m.,
London time, two Business Days prior to the commencement of such Interest
Period, as the rate for Dollar deposits with a maturity comparable to such
Interest Period. In the event that such rate is not available at such time for
any reason, then the "LIBOR Rate" with respect to such LIBOR Rate Loan or
Competitive Bid Loan for such Interest Period shall be the rate per annum equal
to the rate at which the principal London office of the Administrative Agent
offers to place Dollar deposits at or about 11:00 a.m., London time, two
Business Days prior to the beginning of such Interest Period with first-class
banks in the London interbank market for delivery on the first day of such
Interest Period for the number of days comprised therein and in an amount
comparable to the amount of its LIBOR Rate Loan or Competitive Bid Loan to be
outstanding during such Interest Period.
"LIBOR Rate Loan" has the meaning assigned to that term in Section
2.10(a) and shall include Revolving Loans that bear interest at the LIBOR Rate.
"LIBOR Rate Reserve Percentage" of any Lender for each Interest Period
for each LIBOR Rate Loan and Competitive Bid Loan means the reserve percentage
contemplated in Section 2.11 applicable to such Lender during such Interest
Period (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) under Regulation D or other
regulations issued from time to time by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental or other
marginal reserve requirement) then applicable to such Lender with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities having
a term equal to such Interest Period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, a Person or any of its Subsidiaries shall be
deemed to own, subject to a Lien, any asset that it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
asset.
"Loan Documents" means this Agreement, the Notes and any other document
evidencing, relating to or securing any Extension of Credit, and any other
document or instrument delivered from time to time in connection with this
Agreement, the Notes or the Extensions of Credit, as such documents and
instruments may be amended or supplemented from time to time.
"Loans" means the loans made by the Lenders pursuant to this Agreement
including Swingline Loans, Revolving Loans and Competitive Bid Loans.
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"Material Adverse Change" means (a) a materially adverse change in the
business, assets, liabilities (actual or contingent), operations, condition
(financial or otherwise) or prospects of (i) the Borrower or (ii) the Borrower
and its Subsidiaries, taken as a whole, (b) any material impairment of the
ability of the Borrower to perform any of its Obligations under this Agreement
or any other Loan Document or (c) any material impairment of the rights of, or
benefits available to, the Administrative Agent, the Issuing Lender, the
Swingline Lender or the Lenders under this Agreement or any other Loan Document.
"Maturity Date" means August 21, 2006.
"Moody's" means Moody's Investors Service, Inc., or any successor
thereto.
"Multiemployer Plan" means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA, which is subject to Title IV of ERISA and to which the
Borrower 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, 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 is subject to Title IV of ERISA and which
(i) is maintained for employees of the Borrower or an ERISA Affiliate and at
least one Person other than the Borrower and its ERISA Affiliates or (ii) was so
maintained and in respect of which the Borrower 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.
"Note" means the collective reference to the Revolving Loan Notes,
Swingline Notes and the Competitive Bid Loan Notes.
"Notice of Borrowing" has the meaning assigned to that term in
Section 2.03(a)(i)(A)
"Notice of Conversion" has the meaning assigned to that term in Section
2.13.
"Notice of Swingline Borrowing" has the meaning assigned to that term
in Section 2.03(a)(ii).
"Obligations" means, in each case, whether now in existence or
hereafter arising: (a) the principal of and interest on (including interest
accruing after the filing of any bankruptcy or similar petition) the Loans, (b)
the L/C Obligations, (c) all payment and other obligations owing by the Borrower
to any Lender or the Administrative Agent under any other agreement to which a
Lender is a party (or any Affiliate of a Lender) which is related to and
permitted under this Agreement or any of the other Loan Documents, and (d) all
other fees and commissions (including attorney's fees), charges, indebtedness,
loans, liabilities, financial accommodations, obligations, covenants and duties
owing by the Borrower to the Lenders, the Issuing Lender, or the Administrative
Agent, in each case under or in respect of this Agreement, any Note, any Letter
of Credit or any of the other Loan Documents of every kind, nature and
description, direct or indirect, absolute or contingent, due or to become due,
contractual or tortious, liquidated or unliquidated, and whether or not
evidenced by any note, and whether or not for the payment of money under or in
respect of this Agreement, any Note, any Letter of Credit or any of the other
Loan Documents.
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"Parent" means South Jersey Industries, Inc.
"Participant" has the meaning assigned to that term in Section 9.09(e).
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Permitted Indebtedness" means any of the following:
(1) Indebtedness under this Agreement;
(2) Indebtedness of the Borrower under the First Mortgage
Notes existing as of the Closing Date and as identified on Schedule III
attached hereto, and subsequent First Mortgage Notes, so long as before
and immediately after the incurrence of such Indebtedness, the Borrower
is in compliance with Section 6.04;
(3) Any Indebtedness of the Borrower so long as before and
immediately after the incurrence of such Indebtedness, the Borrower is
in compliance with Section 6.04; and
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(4) Indebtedness of the Borrower under Hedging Obligations
covering a notional amount not to exceed the face amount of outstanding
Indebtedness.
"Permitted Investments" means (1) noncallable, direct general
obligations of, or obligations the payment of the principal of and interest on
which are unconditionally guaranteed by, the United States of America; (2)
bonds, participation certificates or other obligations of Federal National
Mortgage Association, Government National Mortgage Association and Federal Home
Loan Mortgage Corporation; (3) certificates of deposit, bankers' acceptances or
other obligations issued by commercial banks which are fully insured by the
Federal Deposit Insurance Corporation or certificates of deposit, bankers'
acceptances or other deposit obligations issued by commercial banks whose
unsecured obligations are rated in one of the two highest rating categories by
Moody's or Standard S&P; (4) obligations issued or guaranteed by a state or
political subdivision of a state rated in one of the two highest rating
categories by Moody's or S & P; or (5) any other investments permitted under
this Agreement and which the Administrative Agent has approved in writing.
"Permitted Liens" means, with respect to any Person, any of the
following:
(1) Liens for taxes, assessments or governmental charges not
delinquent or being contested in good faith and by appropriate
proceedings and for which adequate reserves in accordance with GAAP are
maintained on such Person's books;
(2) Liens arising out of deposits in connection with workers'
compensation, unemployment insurance, old age pensions or other social
security or retirement benefits legislation;
(3) Deposits or pledges to secure bids, tenders, contracts
(other than contracts for the payment of money), leases, statutory
obligations, surety and appeal bonds, and other obligations of like
nature arising in the ordinary course of such Person's business;
(4) Liens imposed by law, such as mechanics', workers',
materialmen's, carriers' or other like liens arising in the ordinary
course of such Person's business which secure the payment of
obligations which are not past due or which are being diligently
contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP are maintained on such
Person's books;
(5) Rights of way, zoning restrictions, easements and similar
encumbrances affecting such Person's real property which do not
materially interfere with the use of such property;
(6) Liens securing Permitted Indebtedness, described in
clause (3) of the definition of "Permitted Indebtedness", not in
excess of $5,000,000 in the aggregate;
(7) Purchase money security interests for the purchase of
equipment to be used in the Borrower's business, encumbering only the
equipment so purchased, and which secures only the purchase-money
Indebtedness incurred to acquire the equipment so purchased, which
Indebtedness qualifies as Permitted Indebtedness and which Indebtedness
is not in excess of $5,000,000 in the aggregate; and
(8) Liens securing Permitted Indebtedness of the type
described in clause (2) of "Permitted Indebtedness".
"Person" means an individual, partnership, corporation (including,
without limitation, a business trust), joint stock company, limited liability
company, trust, unincorporated association, joint venture or other entity, or a
government or any political subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
"Prime Rate" means a rate per annum equal to the Administrative Agent's
index or base rate of interest announced from time to time by the Administrative
Agent (which is not necessarily the lowest rate charged to any customer),
changing when and as such base rate changes.
"Rated Entity" means South Jersey Gas Company or any of its
Subsidiaries which maintain senior unsecured, non-credit enhanced debt ratings
by both Moody's and S&P. If more than one such Person exists, the Rated Entity
shall be South Jersey Gas Company or any of its Subsidiaries which maintains the
lowest senior unsecured, non-credit enhanced debt rating by either Moody's or
S&P.
"Register" has the meaning assigned to that term in Section 9.09(c).
"Required Lenders" means Lenders whose aggregate Commitment Percentages
aggregate more than 50%.
"Revolving Loans" means those Base Rate Loans and LIBOR Rate Loans,
made pursuant to Section 2.01.
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"Revolving Loan Notes" means the promissory notes of the Borrower in
favor of each Lender evidencing the Revolving Loans made to the Borrower and
substantially in the form of Exhibit A-1, as such promissory notes may be
amended, modified, supplemented or replaced from time to time.
"S&P" means Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, Inc., or any successor thereto.
"Senior Debt Ratings" means the ratings assigned to the senior
unsecured, non-credit enhanced debt of the Rated Entity by Moody's and S&P, as
the case may be.
"Significant Subsidiary" means, with respect to any Person, a
Subsidiary which meets any of the following conditions:
(a) such Person's and its other Subsidiaries' investments in
and advances to the Subsidiary exceed 10% of the total assets of such
Person and its Consolidated Subsidiaries as of the end of the most
recently completed fiscal quarter;
(b) such Person's and its other Subsidiaries' proportionate
share (as determined by ownership interests) of the total assets (after
intercompany eliminations) of the Subsidiary exceeds 10% of the total
assets of such Person and its Consolidated Subsidiaries as of the end
of the most recently completed fiscal quarter; or
(c) such Person's and its other Subsidiaries' proportionate
share (as determined by ownership interests) in the income from
continuing operations before income taxes, extraordinary items and
cumulative effect of changes in accounting principles of the Subsidiary
exceeds 10% of such income of such Person and its Consolidated
Subsidiaries for the most recently completed fiscal quarter.
"Single Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, which is subject to Title IV of ERISA and which
(i) is maintained for employees of the Borrower or an ERISA Affiliate and no
Person other than the Borrower and its ERISA Affiliates or (ii) was so
maintained and in respect of which the Borrower or an ERISA Affiliate could have
liability under Section 4069 of ERISA in the event such plan has been or were to
be terminated.
"Solvent" means, with respect to any Person, that such Person (a) has
capital sufficient to carry on its business and transactions and all business
and transactions in which it is about to engage and is able to pay its debts as
they mature, (b) owns property having a value, both at fair valuation and at
present fair saleable value, greater than the amount required to pay its
probable liabilities (including contingencies), and (c) does not believe that it
will incur debts or liabilities beyond its ability to pay such debts or
liabilities as they mature.
"Subsidiary" means, with respect to any Person, any corporation or
unincorporated entity of which more than 50% of the outstanding capital stock
(or comparable interest) having ordinary voting power (irrespective of whether
at the time capital stock (or comparable interest) of any other class or classes
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of such corporation or entity shall or might have voting power upon the
occurrence of any contingency) is at the time directly or indirectly owned by
said Person (whether directly or through one of more other Subsidiaries). In the
case of an unincorporated entity, a Person shall be deemed to have more than 50%
of interests having ordinary voting power only if such Person's vote in respect
of such interests comprises more than 50% of the total voting power of all such
interests in the unincorporated entity.
"Swingline Borrowing" means a borrowing hereunder consisting of
Swingline Loans made to the Borrower.
"Swingline Commitment" means Five Million and No/100 Dollars
($5,000,000).
"Swingline Facility" means the swingline loan facility established
pursuant to Section 2.02.
"Swingline Lender" means Wachovia, in its capacity as swingline lender
hereunder, together with its successors and permitted assigns in such capacity.
"Swingline Loan" means the swingline loans made by the Swingline Lender
to the Borrower pursuant to Section 2.02, and all such loans collectively as the
context requires.
"Swingline Note" means the promissory note of the Borrower in favor of
the Swingline Lender evidencing the Swingline Loans made to the Borrower and
substantially in the form of Exhibit A-2, as such promissory note may be
amended, modified, supplemented or replaced from time to time.
"Taxes" has the meaning assigned to that term in Section 2.17.
"Termination Date" means the earliest of (a) August 21, 2006, (b) the
date of termination by the Borrower of the Commitments in full pursuant to
Section 2.06, or (c) the date of termination of the Commitment pursuant to
Section 7.02(a).
"Type" means a type of Loan, being either a LIBOR Rate Loan or a Base
Rate Loan, as applicable.
"Utilization Amount" has the meaning assigned to that term in Section
2.05(b).
"Utilization Fee" has the meaning assigned to that term in Section
2.05(b).
"Wachovia" has the meaning assigned to that term in the preamble
hereto.
SECTION 1.02 Computation of Time Periods In this Agreement, in the
computation of a period of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding".
SECTION 1.03 Accounting Terms All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, except as otherwise
stated herein.
SECTION 1.04 Internal References The words "herein", "hereof" and
"hereunder" and words of similar import, when used in this Agreement, shall
refer to this Agreement as a whole and not to any provision of this Agreement,
and "Article", "Section", "subsection", "paragraph", "Exhibit", "Schedule" and
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respective references are to this Agreement unless otherwise specified.
References herein or in any Loan Document to any agreement or other document
shall, unless otherwise specified herein or therein, be deemed to be references
to such agreement or document as it may be amended, modified or supplemented
after the date hereof from time to time in accordance with the terms hereof or
of such Loan Document, as the case may be.
[End of Article I]
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ARTICLE II
LOANS
SECTION 2.01 Revolving Loans
(a) Subject to the terms and conditions of this Agreement, and in
reliance upon the representations and warranties set forth herein, each Lender
severally agrees to make its Commitment Percentage of Revolving Loans to the
Borrower from time to time from the Closing Date to, but not including, the
Termination Date, as requested by the Borrower in accordance with the terms of
Sections 2.03(a)(i); provided, that (i) the aggregate principal amount of all
outstanding Extensions of Credit (after giving effect to any amount requested
and the application of the proceeds thereof) shall not exceed the Commitments of
the Lenders; and (ii) the principal amount of outstanding Revolving Loans from
any Lender to the Borrower shall not at any time exceed such Lender's Commitment
less such Lender's Commitment Percentage multiplied by the sum of the: (A) L/C
Obligations then outstanding, (B) aggregate principal amount of all Swingline
Loans then outstanding, and (C) aggregate principal amount of all Competitive
Bid Loans then outstanding. Each Revolving Loan by a Lender shall be in a
principal amount equal to such Lender's Commitment Percentage multiplied by the
aggregate principal amount of Revolving Loans requested on such occasion.
(b) Subject to the terms and conditions hereof, the Borrower may
borrow, repay and reborrow Revolving Loans prior to the Termination Date. In
addition, the Borrower will repay, by means of a reborrowing hereunder or
otherwise, each Base Rate Loan within 365 days of the date on which such Base
Rate Loan was made.
(c) Revolving Loans shall be disbursed in accordance with Section
2.03(d)(i).
SECTION 2.02 Swingline Loans
(a) Availability.
(i) Subject to the terms and conditions of this Agreement, and
in reliance upon the representations and warranties set forth herein, the
Swingline Lender agrees to make Swingline Loans to the Borrower from time to
time from the Closing Date through, but not including, the Termination Date, as
requested by the Borrower in accordance with the terms of Section 2.03(a)(ii);
provided, that (i) the aggregate principal amount of all outstanding Extensions
of Credit (after giving effect to any amount requested and the application of
the proceeds thereof) shall not exceed the Commitments of the Lenders; and (ii)
the aggregate principal amount of all Swingline Loans then outstanding shall not
exceed the Swingline Commitment. Each Lender acknowledges that the aggregate
principal amount of all outstanding Swingline Loans made by the Swingline
Lender, when taken together with the aggregate principal amount of all
outstanding Revolving Loans made by the Swingline Lender, may exceed the
Swingline Lender's Commitment. Upon and during the continuance of a Default or
an Event of Default, the Borrower shall no longer have the option of requesting
Swingline Loans and the Swingline Lender shall not be obligated to make
Swingline Loans. No more than one (1) Swingline Loan may be made on the same
Business Day.
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(ii) Each Swingline Loan shall be in the aggregate principal
amount of $500,000 or any multiple of $100,000 in excess thereof, or such lesser
amount as shall be equal to the aggregate amount of the unborrowed Swingline
Commitment on such date.
(iii) Subject to the terms and conditions hereof, the Borrower
may borrow, repay and reborrow Swingline Loans prior to the Termination Date.
(iv) Swingline Loans shall be disbursed in accordance with
Section 2.03(d)(ii).
(b) Maturity. No Swingline Loan shall remain outstanding more
than ten (10) days from the date such Swingline Loan is made.
(c) Refunding.
(i) Swingline Loans (including accrued and unpaid interest
thereon) shall be reimbursed fully by the Lenders on demand by the Swingline
Lender. Such reimbursements shall be made by the Lenders in accordance with
their respective Commitment Percentages and shall thereafter be reflected as
Revolving Loans of the Lenders on the books and records of the Administrative
Agent; provided, that no Lender shall be required to reimburse any Swingline
Loan if, after giving effect to such reimbursement, the aggregate principal
amount of such Lender's Extensions of Credit outstanding would exceed such
Lender's Commitment. Each Lender shall fund its respective Commitment Percentage
of Revolving Loans as required to repay Swingline Loans outstanding to the
Swingline Lender upon demand by the Swingline Lender but in no event later than
2:00 p.m. (Charlotte, North Carolina time) on the next succeeding Business Day
after such demand is made. No Lender's obligation to fund its respective
Commitment Percentage of a Swingline Loan shall be affected by any other
Lender's failure to fund its Commitment Percentage of a Swingline Loan, nor
shall any Lender's Commitment Percentage be increased as a result of any such
failure of any other Lender to fund its Commitment Percentage of a Swingline
Loan.
(ii) The Borrower shall pay to the Swingline Lender on demand
the amount of such Swingline Loans (including accrued and unpaid interest
thereon) to the extent amounts received from the Lenders are not sufficient to
repay in full the outstanding Swingline Loans requested or required to be
refunded. In addition, the Borrower hereby authorizes the Administrative Agent
and the Swingline Lender to charge any account maintained by the Borrower or any
Subsidiary of the Borrower with the Swingline Lender (up to the amount available
therein) in order to immediately pay the Swingline Lender the amount of such
Swingline Loans to the extent amounts received from the Lenders are not
sufficient to repay in full the outstanding Swingline Loans requested or
required to be refunded. If any portion of any such amount paid to the Swingline
Lender shall be recovered by or on behalf of the Borrower from the Swingline
Lender in bankruptcy or otherwise, the loss of the amount so recovered shall be
ratably shared among all the Lenders in accordance with their respective
Commitment Percentages.
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(iii) Each Lender acknowledges and agrees that its obligation
to refund Swingline Loans (including accrued and unpaid interest thereon) in
accordance with the terms of this Section 2.02(c) is absolute and unconditional
and shall not be affected by any circumstance whatsoever, including, without
limitation, the existence of a Default or an Event of Default other than a
Default or Event of Default that the Swingline Lender had actual knowledge of at
the time such Swingline Loan was made. Further, each Lender agrees and
acknowledges that if prior to the refunding of any outstanding Swingline Loans
pursuant to this Section 2.02(c), one of the events described in Section 7.01(e)
shall have occurred, each Lender will, subject to Section 2.02(c)(i), on the
next Business Day, purchase an undivided participating interest in the Swingline
Loan in an amount equal to its Commitment Percentage multiplied by the aggregate
amount of such Swingline Loan. Each Lender will immediately transfer to the
Swingline Lender, in immediately available funds, the amount of its
participation and upon receipt thereof the Swingline Lender will deliver to such
Lender a certificate evidencing such participation dated the date of receipt of
such funds and for such amount. Whenever, at any time after the Swingline Lender
has received from any Lender such Lender's participating interest in a Swingline
Loan, the Swingline Lender receives any payment on account thereof, the
Swingline Lender will distribute to such Lender its participating interest in
such amount (appropriately adjusted, in the case of interest payments, to
reflect the period of time during which such Lender's participating interest was
outstanding and funded).
(d) The Swingline Lender may resign at any time by giving written
notice thereof to the Lenders and the Borrower, with any such resignation to
become effective only upon the appointment of a successor Swingline Lender
pursuant to this Section 2.03(d). Upon any such resignation, the Required
Lenders shall have the right to appoint a successor Swingline Lender, which
shall be a Lender or an Eligible Assignee acceptable to the Borrower. If no
successor Swingline Lender shall have been so appointed by the Required Lenders,
and shall have accepted such appointment, within 30 days after the retiring
Swingline Lender's giving of notice of resignation, then the retiring Swingline
Lender may, on behalf of the Lenders, appoint a successor Swingline Lender,
which shall be a Lender or an Eligible Assignee. Upon the acceptance of any
appointment as Swingline Lender hereunder by a successor Swingline Lender, such
successor Swingline Lender shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring Swingline Lender.
SECTION 2.03 Procedure for Advances of Loans
(a) Requests for Borrowing.
(i) Revolving Loans.
(A) Base Rate Loans. By no later than 11:00 a.m.
(Charlotte, North Carolina time) on the Business Day prior to the date of the
Borrower's request for a borrowing of a Base Rate Loan, the Borrower shall
submit to the Administrative Agent a written notice in the form attached hereto
as Exhibit C (a "Notice of Borrowing") setting forth (A) the amount requested
and (B) the desire to have such Loans accrue interest at the Base Rate, and
complying in all respects with Section 4.02 hereof. A Notice of Borrowing
received after 11:00 a.m. (Charlotte, North Carolina time) shall be deemed
received on the next Business Day. The Administrative Agent shall promptly
notify the Lenders of each Notice of Borrowing.
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(B) LIBOR Rate Loans. By no later than 11:00 a.m.
(Charlotte, North Carolina time) on the third Business Day prior to the date of
the Borrower's request for a borrowing, the Borrower shall submit a Notice of
Borrowing of a LIBOR Rate Loan to the Administrative Agent setting forth (A) the
amount requested, (B) the desire to have such Loans accrue interest at the LIBOR
Rate and (C) the Interest Period applicable thereto and complying in all
respects with Section 4.02 hereof. A Notice of Borrowing received after
11:00 a.m. (Charlotte, North Carolina time) shall be deemed received on the next
Business Day. The Administrative Agent shall promptly notify the Lenders of each
Notice of Borrowing.
(ii) Swingline Loans. By no later than 1:00 p.m. (Charlotte,
North Carolina time) on the Business Day of the proposed Swingline Loan, the
Borrower shall submit to the Administrative Agent a written notice in the form
attached hereto as Exhibit D (a "Notice of Swingline Borrowing"), specifying (A)
the date of such borrowing, which shall be a Business Day, and (B) the aggregate
amount of such borrowing, and complying in all respects with Section 4.02
hereof. A Notice of Swingline Borrowing received after 1:00 p.m. (Charlotte,
North Carolina time) shall be deemed received on the next Business Day. The
Administrative Agent shall promptly notify the Lenders of each Notice of
Swingline Borrowing.
(iii) Competitive Bid Loans. Competitive Bid Loans shall
be requested in the manner provided for in Section 2.04(b).
(b) Each Notice of Borrowing and Notice of Swingline Borrowing shall be
irrevocable and binding on the Borrower. In the case of any Borrowing that the
related Notice of Borrowing specifies is to comprise LIBOR Rate Loans, the
Borrower shall indemnify the applicable Lender against any loss, cost or expense
incurred by such Lender as a result of any failure of the Borrower to fulfill on
or before the date specified in such Notice of Borrowing for such Loans, the
applicable conditions set forth in Article IV, including, without limitation,
any loss (including loss of anticipated profits), cost or expense incurred by
reason of the liquidation or redeployment of deposits or other funds acquired by
such Lender as part of such Borrowing.
(c) Each Revolving Loan shall be in an aggregate principal amount of
$5,000,000 or any multiple of $1,000,000 in excess thereof (except that any such
Revolving Loan may be in the aggregate amount of the unborrowed Commitments on
such date).
(d) Disbursement of Loans.
(i) Revolving Loans. Not later than 2:00 p.m. (Charlotte,
North Carolina time) on the proposed borrowing date, (i) each Lender will make
available to the Administrative Agent, for the account of the Borrower, at the
office of the Administrative Agent in funds immediately available to the
Administrative Agent, as applicable, such Lender's Commitment Percentage
multiplied by the Revolving Loans to be made on such borrowing date. The
Borrower hereby irrevocably authorizes the Administrative Agent to disburse the
proceeds of each borrowing requested pursuant to this Section 2.03(d)(i) in
immediately available funds by crediting or wiring such proceeds to the deposit
account of the Borrower identified in the most recent notice substantially in
the form of Exhibit E hereto (a "Notice of Account Designation") delivered by
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the Borrower to the Administrative Agent or such other account as may be
designated in writing by the Borrower to the Administrative Agent from time to
time. Subject to Section 2.16, the Administrative Agent shall not be obligated
to disburse the portion of the proceeds of any Revolving Loan requested pursuant
to Sections 2.03(a)(i) and (ii) to the extent that any Lender has not made
available to the Administrative Agent its applicable Commitment Percentage of
such Revolving Loan. Revolving Loans to be made for the purpose of refunding
Swingline Loans shall be made by the Lenders as provided in Section 2.02(c).
(ii) Swingline Loans. The Swingline Lender shall, before 2:00 p.m.
(Charlotte, North Carolina time) on the date of such Swingline Borrowing,
make available to the Administrative Agent for the account of the Borrower in
same day funds, the proceeds of such Swingline Borrowing. The Borrower hereby
irrevocably authorizes the Administrative Agent to disburse the proceeds of each
Swingline Borrowing requested pursuant to this Section 2.03(d)(ii) in
immediately available funds by crediting or wiring such proceeds to the deposit
account of the Borrower identified in the most recent Notice of Account
Designation or such other account as may be designated in writing by the
Borrower to the Administrative Agent from time to time. The Swingline Loans
shall be included in the Commitments of the Lenders, and each Swingline
Borrowing will reduce correspondingly the amount of the available Commitment of
each Lender on a pro rata basis based on each Lender's Commitment Percentage.
(iii) Competitive Bid Loans. Competitive Bid Loans shall be
disbursed in the manner provided for in Section 2.04(e).
SECTION 2.04 Competitive Bid Loans
(a) Competitive Bid Loans. Subject to the terms and conditions set
forth herein, the Borrower may, from time to time, during the period from the
Closing Date until the date occurring seven days prior to the Termination Date,
request and each Lender may, in its sole discretion, agree to make Competitive
Bid Loans to the Borrower; provided, that (i) the sum of the aggregate principal
amount of the Lenders' Extensions of Credit (including the amount set forth in
the Competitive Bid Request) outstanding shall not exceed the Commitments of the
Lenders, (ii) the sum of the aggregate principal amount of Competitive Bid Loans
outstanding (including the amount set forth in the Competitive Bid Request) to
the Borrower shall not exceed 50% of the Commitments of the Lenders, and (iii)
if a Lender makes a Competitive Bid Loan, such Lender's obligation to make its
Commitment Percentage of any Swingline Loan, L/C Obligation or Revolving Loan
shall not be reduced thereby. No Competitive Bid Loan shall be outstanding for a
period in excess of 6 months.
(b) Competitive Bid Requests. The Borrower may solicit Competitive Bids
by delivery of a Competitive Bid Request to the Administrative Agent by 10:00
a.m. (Charlotte, North Carolina time), on a Business Day four Business Days
prior to the date of a requested Competitive Bid Loan. A Competitive Bid Request
must be substantially in the form of Exhibit B-1, shall be accompanied by the
Competitive Bid Request Fee and shall specify (I) the date of the requested
Competitive Bid Loan (which shall be a Business Day), (II) the amount of the
requested Competitive Bid Loan, and (III) the applicable Interest Period or
Interest Periods requested. The Administrative Agent shall notify the Lenders of
its receipt of a Competitive Bid Request and the contents thereof and invite the
Lenders to submit Competitive Bids in response thereto. The Borrower may not
request a Competitive Bid Loan more frequently than three times every calendar
month.
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(c) Competitive Bid Procedure. Each Lender may, in its sole discretion,
make one or more Competitive Bids to the Borrower in response to a Competitive
Bid Request in the form of Exhibit B-2. Each Competitive Bid must be received by
the Administrative Agent not later than 10:00 a.m. (Charlotte, North Carolina
time) three Business Days prior to the date of the requested Competitive Bid
Loan; provided, that should the Administrative Agent, in its capacity as a
Lender, desire to submit a Competitive Bid it shall notify the Borrower of its
Competitive Bid and the terms thereof not later than 15 minutes prior to the
time the other Lenders are required to submit their Competitive Bids. A Lender
may offer to make all or part of the requested Competitive Bid Loan and may
submit multiple Competitive Bids in response to a Competitive Bid Request. Any
Competitive Bid must specify (I) the particular Competitive Bid Request as to
which the Competitive Bid is submitted, (II) the minimum (which shall be not
less than $5,000,000 and integral multiples of $1,000,000 in excess thereof) and
maximum principal amounts of the requested Competitive Bid Loan or Loans which
the Lender is willing to make and (III) the applicable interest rate or rates
and Interest Period or Interest Periods therefor. A Competitive Bid submitted by
a Lender in accordance with the provisions hereof shall be irrevocable. The
Administrative Agent shall promptly notify the Borrower of all Competitive Bids
made and the terms thereof. The Administrative Agent shall send a copy of each
of the Competitive Bids to the Borrower and each of the Lenders for their
respective records as soon as practicable.
(d) Acceptance of Competitive Bids. The Borrower may, in its sole
discretion, subject only to the provisions of this subsection (d), accept or
refuse any Competitive Bid offered to it. To accept a Competitive Bid, the
Borrower shall give oral notification of its acceptance of any or all such
Competitive Bids (which shall be promptly confirmed in writing) to the
Administrative Agent by 12:00 p.m. (Charlotte, North Carolina time) three
Business Days prior to the date of the requested Competitive Bid Loan; provided,
that (I) the failure by the Borrower to give timely notice of its acceptance of
a Competitive Bid shall be deemed to be a refusal thereof, (II) to the extent
Competitive Bids are for comparable Interest Periods, the Borrower may accept
Competitive Bids only in ascending order of rates, (III) the aggregate amount of
Competitive Bids accepted by the Borrower shall not exceed the principal amount
specified in the Competitive Bid Request, (IV) if the Borrower shall accept a
bid or bids made at a particular Competitive Bid Rate, but the amount of such
bid or bids shall cause the total amount of bids to be accepted by the Borrower
to be in excess of the amount specified in the Competitive Bid Request, then the
Borrower shall accept a portion of such bid or bids in an amount equal to the
amount specified in the Competitive Bid Request less the amount of all other
Competitive Bids accepted with respect to such Competitive Bid Request, which
acceptance in the case of multiple bids at such Competitive Bid Rate, shall be
made pro rata in accordance with the amount of each such bid at such Competitive
Bid Rate and (V) no bid shall be accepted for a Competitive Bid Loan unless such
Competitive Bid Loan is in a minimum principal amount of $5,000,000 and integral
multiples of $1,000,000 in excess thereof, except that where a portion of a
Competitive Bid is accepted in accordance with the provisions of clause (IV) of
this subsection (d), then in a minimum principal amount of $500,000 and integral
multiples of $100,000 (but not in any event less than the minimum amount
specified in the Competitive Bid), and in calculating the pro rata allocation of
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acceptances of portions of multiple bids at a particular Competitive Bid Rate
pursuant to clause (IV) of this subsection (d), the amounts shall be rounded to
integral multiples of $100,000 in a manner which shall be in the discretion of
the Borrower. A notice of acceptance of a Competitive Bid given by the Borrower
in accordance with the provisions hereof shall be irrevocable. The
Administrative Agent shall, not later than 1:00 p.m. (Charlotte, North Carolina
time) three Business Days prior to the date of such Competitive Bid Loan, notify
each bidding Lender whether or not its Competitive Bid has been accepted (and if
so, in what amount and at what Competitive Bid Rate), and each successful bidder
will thereupon become bound, subject to the other applicable conditions hereof,
to make the Competitive Bid Loan in respect of which its bid has been accepted.
(e) Funding of Competitive Bid Loans. Each Lender which is to make a
Competitive Bid Loan shall, before 2:00 P.M. (Charlotte, North Carolina time) on
the date specified in the Competitive Bid Request, make available to the
Administrative Agent, by deposit of immediately available funds at the office of
the Administrative Agent, for the account of the Borrower in same day funds, the
proceeds of such Competitive Bid Loan. The Borrower hereby irrevocably
authorizes the Administrative Agent to disburse the proceeds of each Competitive
Bid Loan requested pursuant to Section 2.04(b) in immediately available funds by
crediting or wiring such proceeds to the deposit account of the Borrower
identified in the most recent Notice of Account Designation or such other
account as may be designated in writing by the Borrower to the Administrative
Agent from time to time.
(f) Maturity of Competitive Bid Loans. Each Competitive Bid Loan shall
mature and be due and payable in full on the last day of the Interest Period,
selected in accordance with Section 2.10(b), which date shall not be less than 7
days nor more than the lesser of (i) 6 months duration, and (ii) the number of
days remaining until the Termination Date, applicable thereto. Unless the
Borrower shall give notice to the Administrative Agent otherwise (or repays such
Competitive Bid Loan), or a Default or Event of Default exists and is
continuing, the Borrower shall be deemed to have requested Revolving Loans from
all of the Lenders (in the amount of the maturing Competitive Bid Loan and
accruing interest at the Base Rate), the proceeds of which will be used to repay
such Competitive Bid Loan.
SECTION 2.05 Fees
(a) The Borrower hereby agrees to pay to the Administrative Agent, for
the ratable account of each Lender, a facility fee (the "Facility Fee") equal to
such Lender's Commitment multiplied by a rate per annum equal to the "Facility
Fee" under the definition of Applicable Margin from the date hereof to the Final
Fee Payment Date, payable quarterly in arrears on the last day of each March,
June, September and December, commencing September 30, 2003, and on the Final
Fee Payment Date.
(b) The Borrower hereby agrees to pay to the Administrative Agent, for
the ratable account of each Lender, a utilization fee (the "Utilization Fee"),
if the aggregate amount of the outstanding Lenders' Extensions of Credit is
equal to or greater than fifty percent (50%) of the Commitments of the Lenders,
calculated daily (the calculation of which is known as the "Utilization
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Amount"), which Utilization Fee shall be equal to the aggregate amount of the
Utilization Amount multiplied by a rate per annum equal to the "Utilization Fee"
under the definition of Applicable Margin from the date hereof to the Final Fee
Payment Date, payable quarterly in arrears on the last day of each March, June,
September and December, and on the Final Fee Payment Date.
(c) The Borrower hereby agrees to pay to the Administrative Agent, such
other fees as are specified in the fee letter agreement dated July 2, 2003,
among South Jersey Industries, Inc., South Jersey Gas Company, Wachovia and
Wachovia Capital Markets, LLC.
SECTION 2.06 Reduction of Commitments
(a) Voluntary.
(i) Subject to Section 2.07(b)(i) and (ii), upon at least three
Business Days' notice, the Borrower shall have the right to permanently
terminate or reduce the aggregate unused amount of the Commitments at any time
or from time to time; provided, that (a) each partial reduction shall be in an
aggregate amount at least equal to $10,000,000 and in integral multiples of
$1,000,000 in excess thereof, and (b) no reduction shall be made which would
reduce the Commitment to an amount less than the sum of the then outstanding
Extensions of Credit. Any reduction in (or termination of) the Commitments shall
be permanent and may not be reinstated.
(ii) Subject to Section 2.07(b)(iii), upon at least three Business
Days' notice, the Borrower shall have the right to permanently terminate or
reduce the aggregate unused amount of the Swingline Commitment at any time or
from time to time; provided, that (a) each partial reduction shall be in an
aggregate amount at least equal to $1,000,000 and in integral multiples of
$1,000,000 in excess thereof, and (b) no reduction shall be made which would
reduce the Swingline Commitment to an amount less than the sum of the then
outstanding Swingline Loans. Any reduction in (or termination of) the Swingline
Commitment shall be permanent and may not be reinstated.
(b) Mandatory
On the Termination Date, the Commitments shall automatically
and permanently be reduced to zero.
SECTION 2.07 Prepayment of Loans
(a) Voluntary Prepayments. The Borrower shall have the right to prepay
Loans (other than Competitive Bid Loans) made to it in whole or in part from
time to time without premium or penalty upon one Business Days' prior written
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notice to the Administrative Agent; provided, that (i) LIBOR Rate Loans may only
be prepaid on three Business Days' prior written notice to the Administrative
Agent and any prepayment of LIBOR Rate Loans will be subject to Section 9.07(b),
(ii) each such partial prepayment of Loans (other than Swingline Loans) shall be
in the minimum principal amount of $10,000,000, and (iii) each such partial
prepayment of Swingline Loans shall be in a minimum principal amount of $500,000
(or such lesser amount that may be outstanding at any such time). Amounts
prepaid hereunder shall be applied first to Swingline Loans until paid in full,
second to Base Rate Loans until paid in full, and third to LIBOR Rate Loans
until paid in full, in direct order of Interest Period maturities, pro rata
among all Lenders holding same. The Borrower may not prepay Competitive Bid
Loans.
(b) Mandatory Prepayments.
(i) If at any time the amount of the Extensions of Credit
exceed the Commitments, the Borrower shall immediately make a principal payment
to the Administrative Agent for the ratable accounts of the Lenders in an amount
necessary together with (i) accrued interest to the date of such prepayment on
the principal amount repaid or prepaid and (ii) in the case of prepayments of
LIBOR Rate Loans, any amount payable to the Lenders pursuant to Section 9.07(b),
so that the Extensions of Credit do not exceed the Commitments. Any payments
made under this Section 2.08(b)(i) shall be applied first to Swingline Loans
until paid in full, second to Base Rate Loans until paid in full, third to LIBOR
Rate Loans in direct order of Interest Period maturities until paid in full and
fourth to Competitive Bid Loans, pro rata among all Lenders holding same.
(ii) On each date on which the Commitment is decreased pursuant to
Section 2.06, the Borrower shall pay or prepay to the Administrative Agent for
the ratable accounts of the Lenders such principal amount of the outstanding
Loans as shall be necessary, together with (i) accrued interest to the date of
such prepayment on the principal amount repaid or prepaid and (ii) in the case
of prepayments of LIBOR Rate Loans, any amount payable to the Lenders pursuant
to Section 9.07(b), so that the aggregate amount of the Lenders' Extensions of
Credit does not exceed the Commitments. Any payments made under this Section
2.07(b)(ii) shall be applied first to Swingline Loans until paid in full, second
to Base Rate Loans until paid in full, third to LIBOR Rate Loans in direct order
of Interest Period maturities until paid in full and fourth to Competitive Bid
Loans, pro rata among all Lenders holding same.
(iii) On each date on which the Swingline Commitment is reduced
pursuant to Section 2.06(b), the Borrower shall pay or prepay to the
Administrative Agent for the ratable accounts of the Lenders or prepay such
principal amount outstanding of Swingline Loans, together with accrued interest
to the date of such prepayment on the principal amount repaid or prepaid, if
any, as may be necessary so that after such payment the aggregate unpaid
principal amount of Swingline Loans does not exceed the amount of the Swingline
Commitment as then reduced.
(iv) On the Termination Date, the Borrower shall pay to the
Administrative Agent for the ratable accounts of the Lenders, the principal
amount of all Loans then outstanding, together with (i) accrued interest to the
date of such payment on the principal amount repaid and (ii) in the case of
prepayments of LIBOR Rate Loans, any amount payable to the Lenders pursuant to
Section 9.07(b).
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SECTION 2.08 Increase in Commitment
(a) The Borrower may increase the aggregate amount of the Commitments
by an amount not greater than $40,000,000 (any such increase, a "Commitment
Increase") by designating either one or more of the existing Lenders (each of
which, in its sole discretion, may determine whether and to what degree to
participate in such Commitment Increase) or one or more Eligible Assignees
reasonably acceptable to the Administrative Agent that at the time agree, in the
case of any existing Lender to increase its Commitment (an "Increasing Lender")
and, in the case of any other Eligible Assignee (an "Additional Lender"), to
become a party to this Agreement. The sum of the increases in the Commitments of
the Increasing Lenders pursuant to this Section 2.08 plus the Commitments of the
Additional Lenders upon giving effect to the Commitment Increase shall not in
the aggregate exceed the amount of the Commitment Increase or be less than
$10,000,000 in the aggregate and integral multiples of $10,000,000 in excess
thereof. The Borrower shall provide prompt notice of any proposed Commitment
Increase pursuant to this Section 2.08 the Administrative Agent, which shall
promptly provide a copy of such notice to the Lenders.
(b) Any Commitment Increase shall become effective upon (A) the receipt
by the Administrative Agent of (i) an agreement in form and substance
satisfactory to the Administrative Agent signed by the Borrower, each Increasing
Lender and each Additional Lender, setting forth the new commitments and
Commitment Percentage of each such Lender and setting forth the agreement of
each Additional Lender to become a party to this Agreement and to be bound by
all the terms and provisions hereof binding upon each Lender, and (ii) such
evidence of appropriate corporate authorization on the part of the Borrower with
respect to the Commitment Increase and such opinions of counsel for the Borrower
with respect to the Commitment Increase as the Administrative Agent may
reasonably request, (B) the funding by each Increasing Lender and Additional
Lender of the Loan(s) to be made by each such Lender described in paragraph (c)
below, (C) receipt by the Administrative Agent of the reasonable fees and
expenses of the Administrative Agent and Lenders associated with such Commitment
Increase, and (D) receipt by the Administrative Agent of a certificate (the
statements contained in which shall be true) of a duly authorized officer of the
Borrower stating that both before and after giving effect to such Commitment
Increase (i) no Default or Event of Default has occurred and is continuing, and
(ii) all representations and warranties made by the Borrower in this Agreement
are true and correct in all material respects as of the date of the Commitment
Increase.
(c) If any Loans are outstanding upon the effective date of any
Commitment Increase, each Increasing Lender and each Additional Lender shall
provide funds to the Administrative Agent in the manner described in Section
2.03(d) in an amount equal to the product of (x) the aggregate outstanding
principal amount of such Loans (other than Competitive Bid Loans and Swingline
Loans), expressed as a percentage of the aggregate Commitments (calculated, in
each case, immediately after such Commitment Increase) and (y) in the case of an
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Increasing Lender, such Increasing Lender's Commitment Increase and, in the case
of an Additional Lender, such Additional Lender's Commitment. The funds so
provided by any such Lender shall be deemed to be a Loan or Loans made by such
Lender on the date of such Commitment Increase, with such Loan(s) being in (A)
in an amount equal to the product of (x) the aggregate outstanding principal
amount of each Loan (other than Competitive Bid Loans and Swingline Loans)
expressed as a percentage of the aggregate Commitments (calculated, in each
case, immediately prior to such Commitment Increase) and (y) in the case of an
Increasing Lender, such Increasing Lender's Commitment Increase and, in the case
of an Additional Lender, such Additional Lender's Commitment and (B) of the same
Type(s) and having the same Interest Periods(s) as each Loan described in the
preceding clause (A), such that after giving effect to such Commitment Increase
and the Loan made on the date of such Commitment Increase, each Loan outstanding
hereunder shall consist of Loans made ratably by all of the Lenders (after
giving effect to such Commitment Increase). The Borrower shall pay to the
Administrative Agent any amounts payable pursuant to Section 9.07(b) in
connection with such Commitment Increase.
(d) Notwithstanding any provision contained herein to the contrary,
from and after the date of any Commitment Increase and the making of any Loans
on such date pursuant to paragraph (c) above, all calculations and payments of
Facility Fees, Utilization Fees and of interest on the Loans comprising any Loan
shall take into account the actual Commitment of each Lender (including the
Additional Lender) and the principal amount outstanding of each Loan made by
each such Lender during the relevant period of time.
SECTION 2.09 Evidence of Debt; Notes
(a) Evidence of Debt. The date, amount, type, interest rate and
duration of Interest Period (if applicable) of each Loan made by each Lender to
the Borrower, and each payment made on account of the principal thereof, shall
be recorded by such Lender on its books; provided, that the failure of such
Lender to make any such recordation or endorsement shall not affect the
obligations of the Borrower to make a payment when due of any amount owing
hereunder or under any Note with respect of the Loans to be evidenced by such
Note, and each such recordation or endorsement shall be conclusive and binding
absent manifest error. In any legal action or proceeding in respect of this
Agreement, the entries made in such account or accounts shall, in the absence of
manifest error, be conclusive evidence of the existence and amounts of the
Obligations of the Borrower therein recorded.
(b) Revolving Loan Notes. The Revolving Loans made by the Lenders to
the Borrower shall be evidenced, upon request by any Lender, by the Revolving
Loan Notes in a principal amount equal to the amount of such Lender's Commitment
Percentage multiplied by the Commitment as originally in effect.
(c) Swingline Note. The Swingline Loans made by the Swingline Lender to
the Borrower shall be evidenced, upon request by the Swingline Lender, by a
Swingline Note in a principal amount equal to the Swingline Commitment.
(d) Competitive Bid Loan Notes. The Competitive Bid Loans made by the
Lenders to the Borrower shall be evidenced, upon request by the Lender or
Lenders making such Competitive Bid Loan, by a Competitive Bid Loan Notes in a
principal amount equal to the Competitive Bid Loan advanced under such
Competitive Bid Request.
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SECTION 2.10 Interest Rates
(a) Interest Rate Options. Subject to the provisions of this Section
2.10, at the election of the Borrower, the aggregate unpaid principal balance of
each Loan shall bear interest at the Applicable Rate; provided, that the LIBOR
Rate shall not be available until three (3) Business Days after the Closing
Date. Each Revolving Loan or portion thereof bearing interest based on the Base
Rate shall be a "Base Rate Loan", and each Loan or portion thereof bearing
interest based on the LIBOR Rate, and, solely for purposes of this Section 2.10,
Competitive Bid Loans, shall be a "LIBOR Rate Loan." Any Loan or any portion
thereof as to which the Borrower has not duly specified an interest rate as
provided herein shall be deemed a Base Rate Loan. The Swingline Loan shall bear
interest based on the Base Rate.
(b) Interest Periods. In connection with each LIBOR Rate Loan, the
Borrower, by giving notice at the times described in Section 2.03(a)(i)(B),
shall elect an interest period (each, an "Interest Period") to be applicable to
such LIBOR Rate Loan, which Interest Period shall be a period of one (1), two
(2), three (3), or six (6) months; provided, that:
(i) the Interest Period shall commence on the date of advance
of or conversion to any LIBOR Rate Loan and, in the case of immediately
successive Interest Periods, each successive Interest Period shall commence on
the date on which the next preceding Interest Period expires;
(ii) the Borrower may not select any Interest Period that ends
after the Maturity Date;
(iii) Interest Periods commencing on the same date for LIBOR
Rate Loans comprising part of the same Loan shall be of the same duration;
(iv) whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such Interest Period
shall be extended to occur on the next succeeding Business Day; provided, that
if such extension would cause the last day of such Interest Period to occur in
the next following calendar month, the last day of such Interest Period shall
occur on the next preceding Business Day;
(v) with respect to LIBOR Rate Loans, if any Interest Period
begins on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period, such Interest Period shall
end on the last Business Day of such calendar month; and
(vi) no more than eight (8) Interest Periods may be in effect at
any time.
(c) Default Rate. Subject to Section 7.02, upon the occurrence and
during the continuance of an Event of Default, (i) the Borrower shall no longer
have the option to request LIBOR Rate Loans, (ii) all outstanding LIBOR Rate
Loans shall bear interest at a rate per annum equal to the Default Rate, (iii)
all outstanding Base Rate Loans and Swingline Loans shall bear interest at a
rate per annum equal to the Default Rate, and (iv) all outstanding Competitive
Bid Loans shall bear interest at a rate per annum equal to the Default Rate.
Interest shall continue to accrue on the Notes after the filing by or against
the Borrower of any petition seeking any relief in bankruptcy or under any act
or law pertaining to insolvency or debtor relief, whether state, federal or
foreign.
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(d) Interest Payment and Computation. (A) Interest on each Base Rate
Loan and Swingline Loan shall be payable in arrears on the last Business Day of
each calendar quarter commencing September 30, 2003; and (B) interest on each
LIBOR Rate Loan shall be payable on the last day of each Interest Period
applicable thereto, and if such Interest Period extends over three (3) months,
at the end of each three (3) month interval during such Interest Period. All
interest rates, fees and commissions provided hereunder shall be computed on the
basis of a 360-day year and assessed for the actual number of days elapsed;
provided, that interest on each Base Rate Loan and Swingline Loan that is based
on the Prime Rate shall be computed on the basis of a 365-day or 366-day year,
as applicable, and assessed for the actual number of days elapsed.
(e) Payments. The Borrower shall make each payment hereunder not later
than 12:00 noon (Charlotte, North Carolina time) on the day when due in lawful
money of the United States of America to the Administrative Agent at its address
referred to in Section 9.02 in same day funds.
(f) Maximum Rate. In no contingency or event whatsoever shall the
aggregate amount of all amounts deemed interest hereunder or under any of the
Notes charged or collected pursuant to the terms of this Agreement or pursuant
to any of the Notes exceed the highest rate permissible under any Applicable Law
which a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that such a court determines that the Lenders
have charged or received interest hereunder in excess of the highest applicable
rate, the rate in effect hereunder shall automatically be reduced to the maximum
rate permitted by Applicable Law and the Lenders shall at the Administrative
Agent's option promptly refund to the Borrower any interest received by Lenders
in excess of the maximum lawful rate or shall apply such excess to the principal
balance of the Obligations. It is the intent hereof that the Borrower not pay or
contract to pay, and that neither the Administrative Agent nor any Lender
receive or contract to receive, directly or indirectly in any manner whatsoever,
interest in excess of that which may be paid by the Borrower under Applicable
Law.
SECTION 2.11 Additional Interest on LIBOR Rate Loans
The Borrower shall pay to each Lender, so long as such Lender shall be
required under regulations of the Board of Governors of the Federal Reserve
System to maintain reserves with respect to liabilities or assets consisting of
or including Eurocurrency Liabilities and which are not required on the date of
this Agreement, additional interest on the unpaid principal amount of each LIBOR
Rate Loan and Competitive Bid Loan of such Lender, from the date of such LIBOR
Rate Loan and Competitive Bid Loan until such principal amount is paid in full,
at an interest rate per annum equal at all times to the remainder obtained by
subtracting (i) the LIBOR Rate for the Interest Period for such LIBOR Rate Loan
or Competitive Bid Loan, from (ii) the rate obtained by dividing such LIBOR Rate
by a percentage equal to 100% minus the LIBOR Rate Reserve Percentage of such
Lender for such Interest Period, payable on each date on which interest is
payable on such LIBOR Rate Loan or Competitive Bid Loan. Such additional
interest shall be determined by such Lender and notified to the Borrower through
the Administrative Agent.
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SECTION 2.12 Interest Rate Determination
(a) The Administrative Agent shall give prompt notice to the Borrower
and the Lenders of the applicable interest rate determined by the Administrative
Agent for purposes of Section 2.10.
(b) If, with respect to any LIBOR Rate Loans and Competitive Bid Loan,
(i) the Required Lenders notify the Administrative Agent that the LIBOR Rate for
any Interest Period for such LIBOR Rate Loans or Competitive Bid Loan will not
adequately reflect the cost to such Required Lenders of making, funding or
maintaining their respective LIBOR Rate Loans or Competitive Bid Loan for such
Interest Period or (ii) the Required Lenders notify the Administrative Agent or
the Administrative Agent determines that adequate and fair means do not exist
for ascertaining the applicable interest rate on the basis provided for in the
definition of LIBOR Rate, the Administrative Agent shall forthwith so notify the
Borrower and the Lenders, whereupon:
(i) each LIBOR Rate Loan or Competitive Bid Loan will
automatically, on the last day of the then existing Interest Period therefor,
Convert into a Base Rate Loan, and
(ii) the obligation of the Lenders to make, or to Convert Base
Rate Loans into, LIBOR Rate Loans shall be suspended until the Administrative
Agent (based on notice from the Required Lenders) shall notify the Borrower and
the Lenders that the circumstances causing such suspension no longer exist.
(c) If the Borrower shall fail to (i) select the duration of any
Interest Period for any LIBOR Rate Loans in accordance with the provisions of
Section 2.10(b), (ii) provide a Notice of Conversion with respect to any LIBOR
Rate Loans on or prior to 11:00 a.m., Charlotte, North Carolina time, on the
third Business Day prior to the last day of the Interest Period applicable
thereto, in the case of a Conversion to or in respect of LIBOR Rate Loans or
(iii) satisfy the conditions set forth in Section 2.13 with respect to a
Conversion, the Administrative Agent will forthwith so notify the Borrower and
the Lenders and such LIBOR Rate Loans will automatically, on the last day of the
then existing Interest Period therefor, Convert into Base Rate Loans.
SECTION 2.13 Voluntary Conversion of Loans
The Borrower may on any Business Day, by delivering an irrevocable
Notice of Conversion (a "Notice of Conversion") in the form of Exhibit G hereto
to the Administrative Agent not later than 11:00 a.m., Charlotte, North Carolina
time, on the third Business Day prior to the date of the proposed Conversion,
and subject to the provisions of Sections 2.10, 2.15 and 4.03, Convert all Loans
of one Type made simultaneously into Loans of the other Type; provided, that any
Conversion of any LIBOR Rate Loans into Base Rate Loans shall be made on, and
only on, the last day of an Interest Period for such LIBOR Rate Loans.
SECTION 2.14 Increased Costs
(a) If, due to either (i) the introduction of or any change (other than
any change by way of imposition or increase of reserve requirements, in the case
of LIBOR Rate Loans or Competitive Bid Loans, included in the LIBOR Rate Reserve
-30-
Percentage) in or in the interpretation of any law or regulation or (ii) the
compliance with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law), in any case,
promulgated, implemented or occurring on or after the date hereof, there shall
be any increase in the cost to any Lender of agreeing to make or making, funding
or maintaining LIBOR Rate Loans or Competitive Bid Loans, then the Borrower
shall from time to time, upon demand by such Lender (with a copy of such demand
to the Administrative Agent), pay to such Lender additional amounts sufficient
to compensate such Lender for such increased cost. Each Lender agrees to notify
the Borrower of any such increased costs as soon as reasonably practicable after
determining that such increased cost is applicable to LIBOR Rate Loans or
Competitive Bid Loans hereunder. A certificate as to the amount of such
increased cost, submitted to the Borrower and the Administrative Agent by such
Lender, shall be conclusive and binding for all purposes, absent manifest error.
(b) If any Lender determines that compliance with any law or regulation
or any guideline or request from any central bank or other governmental
authority (whether or not having the force of law), in any case promulgated,
implemented or occurring on or after the date hereof, affects or would affect
the amount of capital required or expected to be maintained by any such Lender
or any corporation controlling any such Lender and that the amount of such
capital is increased by or based upon the existence of such Lender's Commitment
hereunder and other Commitments of this Type, then, upon demand by any such
Lender, as the case may be (with a copy of such demand to the Administrative
Agent), the Borrower shall immediately pay to such Lender, as the case may be,
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,
for any difference in the rate of return of any such Lender to the extent that
such Lender, as the case may be, reasonably determines such increase in capital
to be allocable to the existence of such Lender's Commitment hereunder, as the
case may be. Each Lender agrees to notify the Borrower of any such additional
amount as soon as reasonably practicable after the any Lender makes such
determination. A certificate as to such amounts submitted to the Borrower and
the Administrative Agent by such Lender shall be conclusive and binding for all
purposes, absent manifest error.
SECTION 2.15 Illegality
Notwithstanding any other provision of this Agreement, if any Lender
shall notify the Administrative Agent that the introduction of or any change in
or in the interpretation of any law or regulation makes it unlawful, or any
central bank or other governmental authority asserts that it is unlawful, for
any Lender or its LIBOR Lending Office to perform its obligations hereunder to
make LIBOR Rate Loans or Competitive Bid Loans, or to fund or maintain LIBOR
Rate Loans or Competitive Bid Loans hereunder, (i) the obligation of the Lenders
to make Competitive Bid Loans, (ii) the obligation of the Lenders to make, or to
Convert Base Rate Loans into, LIBOR Rate Loans shall be suspended until the
Administrative Agent (based on notice from the affected Lender) shall notify the
Borrower and the Lenders that the circumstances causing such suspension no
longer exist, and (iii) the Borrower shall pay (x) on the last day of the
applicable Interest Period, or (y) if the failure to prepay immediately would
cause any Lender to be in violation of such law or regulation, immediately, in
full all LIBOR Rate Loans and Competitive Bid Loans of all Lenders then
outstanding, together with interest accrued thereon and amounts payable pursuant
to Section 9.07(b), unless, in either case, the Borrower, within five Business
Days of notice from the Administrative Agent (or such shorter, maximum period
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of time, specified by the Administrative Agent, as may be legally allowable),
Converts all LIBOR Rate Loans or Competitive Bid Loans of all Lenders then
outstanding into Base Rate Loans in accordance with Section 2.13.
SECTION 2.16 Nature of Obligations of Lenders Regarding Extensions of
Credit; Assumption by the Administrative Agent
The obligations of the Lenders under this Agreement to make the Loans
and issue or participate in Letters of Credit are several and are not joint or
joint and several. Unless the Administrative Agent shall have received notice
from a Lender prior to a proposed borrowing date that such Lender will not make
available to the Administrative Agent such Lender's ratable portion of the
amount to be borrowed on such date (which notice shall not release such Lender
of its obligations hereunder), the Administrative Agent may assume that such
Lender has made such portion available to the Administrative Agent on the
proposed borrowing date in accordance with this Agreement and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrower on
such date a corresponding amount. If such amount is made available to the
Administrative Agent on a date after such borrowing date, such Lender shall pay
to the Administrative Agent on demand an amount, until paid, equal to the
product of (a) the amount not made available by such Lender in accordance with
the terms hereof, times (b) the daily average Federal Funds Rate (or, if such
amount is not made available for a period of three (3) Business Days after the
borrowing date, the Base Rate) during such period as determined by the
Administrative Agent, times (c) a fraction the numerator of which is the number
of days that elapse from and including such borrowing date to the date on which
such amount not made available by such Lender in accordance with the terms
hereof shall have become immediately available to the Administrative Agent and
the denominator of which is 360. A certificate of the Administrative Agent with
respect to any amounts owing under this Section 2.16 shall be conclusive, absent
manifest error. If such Lender's Commitment Percentage of such borrowing is not
made available to the Administrative Agent by such Lender within three (3)
Business Days of such borrowing date, the Administrative Agent shall be entitled
to recover such amount made available by the Administrative Agent with interest
thereon at the rate per annum applicable to the Loan hereunder, on demand, from
the Borrower. The failure of any Lender to make available its Commitment
Percentage of any Loan requested by the Borrower shall not relieve it or any
other Lender of its obligation, if any, hereunder to make its Commitment
Percentage of such Loan available on such borrowing date, but no Lender shall be
responsible for the failure of any other Lender to make its Commitment
Percentage of such Loan available on the borrowing date.
SECTION 2.17 Net of Taxes, Etc.
(a) All payments made by the Borrower under this Agreement shall be
made free and clear of, and without deduction or withholding for or on account
of, any present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority, excluding, in the
case of the Administrative Agent and each Lender, taxes imposed on its overall
net income, and franchise taxes imposed on it by the jurisdiction under the laws
of which the Administrative Agent or such Lender (as the case may be) is
organized or any political subdivision thereof and, in the case of each Lender,
taxes imposed on its overall net income, and franchise taxes imposed on it by
the jurisdiction of such Lender's Applicable Lending Office or any political
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subdivision thereof (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
If any Taxes are required to be withheld from any amounts payable to the
Administrative Agent or any Lender hereunder, the amounts so payable to the
Administrative Agent or such Lender shall be increased to the extent necessary
to yield to the Administrative Agent or such Lender (after payment of all Taxes)
interest or any such other amounts payable hereunder at the rates or in the
amounts specified in this Agreement. Whenever any Taxes are payable by the
Borrower, as promptly as possible thereafter the Borrower shall send to the
Administrative Agent for its own account or for the account of such Lender, a
certified copy of an original official receipt received by the Borrower showing
payment thereof. If the Borrower fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the Administrative Agent the
required receipts or other required documentary evidence, the Borrower shall
indemnify the Administrative Agent and the Lenders for any incremental taxes,
interest or penalties that may become payable by the Administrative Agent or any
Lender as a result of any such failure. The agreements in this Section shall
survive the termination of this Agreement and the payment of the obligations
hereunder and all other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof agrees that it will deliver to the Borrower
and the Administrative Agent on or before the latter of the date hereof and the
date such Lender becomes a Lender (i) two duly completed copies of United States
Internal Revenue Service Form W-8BEN or W-8ECI or successor applicable form, as
the case may be. Each such Lender also agrees to deliver to the Borrower and the
Administrative Agent two further copies of said Form W-8BEN or W-8ECI, or
successor applicable forms or other manner of certification, as the case may be,
on or before the date that any such form previously delivered expires or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent form previously delivered by it to the Borrower, and such extensions or
renewals thereof as may reasonably be requested by the Borrower or the
Administrative Agent, unless in any such case an event (including, without
limitation, any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required which renders all
such forms inapplicable or which would prevent such Lender from duly completing
and delivering any such form with respect to it and such Lender so advises the
Borrower and the Administrative Agent. Such Lender shall certify that it is
entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes and that it is entitled to
an exemption from United States backup withholding tax.
(c) If any Lender shall request compensation for costs pursuant to this
Section 2.17, (i) such Lender shall make reasonable efforts (which shall not
require such Lender to incur a loss or unreimbursed cost or otherwise suffer any
disadvantage deemed by it to be significant) to make within thirty (30) days an
assignment of its rights and delegation and transfer of its obligations
hereunder to another of its offices, branches or affiliates, if such assignment
would reduce such costs in the future, (ii) the Borrower may with the consent of
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the Required Lenders, which consent shall not be unreasonably withheld, secure a
substitute bank to replace such Lender which substitute bank shall, upon
execution of a counterpart of this Agreement and payment to such Lender of any
and all amounts due under this Agreement, be deemed to be a Lender hereunder
(any such substitution referred to in clause (ii) shall be accompanied by an
amount equal to any loss or reasonable expense incurred by such Lender as a
result of such substitution); provided, that this Section 2.17(c) shall not be
construed as limiting the liability of the Borrower to indemnify or reimburse
such Lender for any costs or expenses the Borrower is required hereunder to
indemnify or reimburse.
[End of Article II]
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ARTICLE III
LETTER OF CREDIT FACILITY
SECTION 3.01 L/C Commitment
(a) Subject to the terms and conditions of this Agreement, the Issuing
Lender, in reliance on the agreements of the other Lenders set forth in Section
3.04(a), agrees to issue standby letters of credit ("Letters of Credit") for the
account of the Borrower on any Business Day from the Closing Date to, but not
including, the date that is ninety (90) days prior to the Termination Date in
such form as may be approved from time to time by the Issuing Lender; provided,
that the Issuing Lender shall have no obligation to issue any Letter of Credit
if, after giving effect to such issuance, (i) the L/C Obligations would exceed
the L/C Commitment or (ii) the aggregate principal amount of outstanding
Extensions of Credit, would exceed the Commitments.
(b) Each Letter of Credit shall (i) be denominated in Dollars in a
minimum amount of $500,000, (ii) be a standby letter of credit issued to support
obligations of the Borrower or any of its Subsidiaries, contingent or otherwise,
incurred in the ordinary course of business, (iii) (A) expire on a date not
later than five (5) Business Days prior to the Termination Date, (B) have a term
not exceeding one year, (C) and otherwise reasonably satisfactory to the Issuing
Lender, and (iv) be subject to the Uniform Customs and/or ISP 98, as set forth
in the Application or as determined by the Issuing Lender and, to the extent not
inconsistent therewith, the laws of the State of New York. The Issuing Lender
shall not at any time be obligated to issue any Letter of Credit hereunder if
such issuance would conflict with, or cause the Issuing Lender or any L/C
Participant to exceed any limits imposed by, any Applicable Law. References
herein to "issue" and derivations thereof with respect to Letters of Credit
shall also include extensions or modifications of any existing Letters of
Credit, unless the context otherwise requires.
SECTION 3.02 Procedure for Issuance of Letters of Credit
The Borrower may from time to time request that the Issuing Lender
issue a Letter of Credit by delivering to the Issuing Lender at the
Administrative Agent's Office an Application therefor, completed to the
reasonable satisfaction of the Issuing Lender, and such other certificates,
documents and other papers and information as the Issuing Lender may reasonably
request. Upon receipt of any Application, the Issuing Lender shall process such
Application and the certificates, documents and other papers and information
delivered to it in connection therewith in accordance with its customary
procedures and shall, subject to Section 3.01 and Article IV, promptly issue the
Letter of Credit requested thereby (but in no event shall the Issuing Lender be
required to issue any Letter of Credit earlier than two (2) Business Days after
its receipt of the Application therefor and all such other certificates,
documents and other papers and information relating thereto) by issuing the
original of such Letter of Credit to the beneficiary thereof or as otherwise may
be agreed by the Issuing Lender and the Borrower. The Issuing Lender shall
promptly furnish to the Borrower a copy of such Letter of Credit and promptly
notify each Lender of the issuance and upon request by any Lender, furnish to
such Lender a copy of such Letter of Credit and the amount of such Lender's L/C
Participation therein.
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SECTION 3.03 Commissions and Other Charges
(a) The Borrower shall pay to the Administrative Agent, for the account
of the Issuing Lender and the L/C Participants, a letter of credit commission
with respect to each Letter of Credit in an amount equal to the product of (i)
the average daily maximum amount available to be drawn during the relevant
quarter under such Letter of Credit and (ii) the Applicable LIBOR Margin
(determined on a per annum basis). Such commission shall be payable quarterly in
arrears on the last Business Day of each calendar quarter and on the Termination
Date commencing on the last Business Day of the calendar quarter in which such
Letter of Credit is issued. The Administrative Agent shall, promptly following
its receipt thereof, distribute to the Issuing Lender and the L/C Participants
all commissions received pursuant to this Section 3.03(a) in accordance with
their respective Commitment Percentages.
(b) In addition to the foregoing commission, the Borrower shall pay to
the Administrative Agent, for the account of the Issuing Lender, a fronting fee
with respect to each Letter of Credit issued on or after the Closing Date in an
amount equal to the product of (i) the face amount of such Letter of Credit and
(ii) 12.5 basis points (0.125%) (the "Fronting Fee"). Such Fronting Fee shall be
payable in arrears on the last Business Day of each calendar quarter and on the
Termination Date for each day such Letter of Credit is issued and outstanding.
(c) In addition to the foregoing fees and commissions, the Borrower
shall pay or reimburse the Issuing Lender for such normal and customary costs
and expenses as are incurred or charged by the Issuing Lender in issuing,
effecting payment under, amending or otherwise administering any Letter of
Credit.
SECTION 3.04 L/C Participations
(a) The Issuing Lender irrevocably agrees to grant and hereby grants to
each L/C Participant, and, to induce the Issuing Lender to issue Letters of
Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase
and hereby accepts and purchases from the Issuing Lender, on the terms and
conditions hereinafter stated, for such L/C Participant's own account and risk
an undivided interest equal to such L/C Participant's Commitment Percentage in
the Issuing Lender's obligations and rights under and in respect of each Letter
of Credit issued (or deemed issued) hereunder and the amount of each draft paid
by the Issuing Lender thereunder. Each L/C Participant unconditionally and
irrevocably agrees with the Issuing Lender that, if a draft is paid under any
Letter of Credit for which the Issuing Lender is not reimbursed in full by the
Borrower through a Revolving Loan or otherwise in accordance with the terms of
this Agreement, such L/C Participant shall pay to the Issuing Lender upon demand
at the Issuing Lender's address for notices specified herein an amount equal to
such L/C Participant's Commitment Percentage multiplied by the amount of such
draft, or any part thereof, which is not so reimbursed.
(b) Upon becoming aware of any amount required to be paid by any L/C
Participant to the Issuing Lender pursuant to Section 3.04(a) in respect of any
unreimbursed portion of any payment made by the Issuing Lender under any Letter
of Credit, the Issuing Lender shall notify each L/C Participant of the amount
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and due date of such required payment and such L/C Participant shall pay to the
Issuing Lender the amount specified on the applicable due date. If any such
amount is paid to the Issuing Lender after the date such payment is due, such
L/C Participant shall pay to the Issuing Lender on demand, in addition to such
amount, the product of (i) such amount, times (ii) the daily average Federal
Funds Rate (or Base Rate, if such amount is not paid within three Business Days
of demand) as determined by the Administrative Agent during the period from and
including the date such payment is due to the date on which such payment is
immediately available to the Issuing Lender, times (iii) a fraction the
numerator of which is the number of days that elapse during such period and the
denominator of which is 360. A certificate of the Issuing Lender with respect to
any amounts owing under this Section 3.04(b) shall be conclusive in the absence
of manifest error. With respect to payment to the Issuing Lender of the
unreimbursed amounts described in this Section 3.04(b), if the L/C Participants
receive notice that any such payment is due (A) prior to 1:00 p.m. (Charlotte,
North Carolina time) on any Business Day, such payment shall be due that
Business Day, and (B) after 1:00 p.m. (Charlotte, North Carolina time) on any
Business Day, such payment shall be due on the following Business Day.
(c) Whenever, at any time after the Issuing Lender has made payment
under any Letter of Credit and has received from any L/C Participant its
Commitment Percentage of such payment in accordance with this Section 3.04, the
Issuing Lender receives any payment related to such Letter of Credit (whether
directly from the Borrower or otherwise) or any payment of interest on account
thereof, the Issuing Lender will distribute to such L/C Participant its pro rata
share thereof; provided, that in the event that any such payment received by the
Issuing Lender shall be required to be returned by the Issuing Lender, such L/C
Participant shall return to the Issuing Lender the portion thereof previously
distributed by the Issuing Lender to it.
SECTION 3.05 Reimbursement Obligation of the Borrower
(a) In the event of any drawing under any Letter of Credit, the
Borrower agrees to reimburse (either with the proceeds of a Revolving Loan as
provided for in this Section 3.05 or with funds from other sources), in same day
funds, the Issuing Lender on each date on which the Issuing Lender notifies the
Borrower of the date and amount of a draft paid under any Letter of Credit for
the amount of (a) such draft so paid and (b) any amounts referred to in Section
3.03(c) incurred by the Issuing Lender in connection with such payment. Unless
the Borrower shall immediately notify the Issuing Lender that the Borrower
intends to reimburse the Issuing Lender for such drawing from other sources or
funds, the Borrower shall be deemed to have timely given a Notice of Borrowing
to the Administrative Agent requesting that the Lenders make a Revolving Loan
bearing interest at the Base Rate on such date in the amount of (a) such draft
so paid and (b) any amounts referred to in Section 3.03(c) incurred by the
Issuing Lender in connection with such payment, and the Lenders shall make a
Revolving Loan bearing interest at the Base Rate in such amount, the proceeds of
which shall be applied to reimburse the Issuing Lender for the amount of the
related drawing and costs and expenses. Each Lender acknowledges and agrees that
its obligation to fund a Revolving Loan in accordance with this Section 3.05 to
reimburse the Issuing Lender for any draft paid under a Letter of Credit is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including, without limitation, the existence of a Default or an
Event of Default other than a Default or Event of Default that the Issuing
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Lender had actual knowledge of at the time of the issuance of such Letter of
Credit. If the Borrower has elected to pay the amount of such drawing with funds
from other sources and shall fail to reimburse the Issuing Lender as provided
above, the unreimbursed amount of such drawing shall bear interest in the rate
which would be payable on any outstanding Base Rate Loans which were then
overdue from the date such amounts become payable (whether at stated maturity,
by acceleration or otherwise) until payment in full.
SECTION 3.06 Obligations Absolute
The Borrower's obligations under this Article III (including, without
limitation, the Obligations) shall be absolute and unconditional under any and
all circumstances and irrespective of any set-off, counterclaim or defense to
payment which the Borrower may have or have had against the Issuing Lender or
any beneficiary of a Letter of Credit or any other Person. The Borrower also
agrees that the Issuing Lender and the L/C Participants shall not be responsible
for, and the Borrower's reimbursement obligation under Section 3.05 shall not be
affected by, among other things, the validity or genuineness of documents or of
any endorsements thereon, even though such documents shall in fact prove to be
invalid, fraudulent or forged, or any dispute between or among the Borrower and
any beneficiary of any Letter of Credit or any other party to which such Letter
of Credit may be transferred or any claims whatsoever of the Borrower against
any beneficiary of such Letter of Credit or any such transferee, except for such
matters caused by the Issuing Lender's gross negligence or willful misconduct.
The Issuing Lender shall not be liable for any error, omission, interruption or
delay in transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit, except for errors or
omissions caused by the Issuing Lender's gross negligence or willful misconduct.
The Borrower agrees that any action taken or omitted by the Issuing Lender under
or in connection with any Letter of Credit or the related drafts or documents,
if done in the absence of gross negligence or willful misconduct and in
accordance with the standards of care specified in ISP 98 or the Uniform
Customs, as the case may be, and, to the extent not inconsistent therewith, the
UCC, shall be binding on the Borrower and shall not result in any liability of
the Issuing Lender or Lenders.
[End of Article III]
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ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.01 Conditions Precedent to the Execution and Delivery of this
Agreement
The obligation of the Lenders to execute and deliver this Agreement
and to make Extensions of Credit is subject to the conditions precedent that the
Administrative Agent shall have received on or before the Closing Date, the
following, each dated such date, in form and substance reasonably satisfactory
to the Administrative Agent and the Lenders, with copies for each Lender:
(a) Agreement. Counterparts of this Agreement, duly executed by the
Borrower, the Administrative Agent, the Issuing Lender and the Lenders;
(b) Secretary's Certificate. Receipt by the Administrative Agent of (A)
a certificate of the secretary or assistant secretary of the Borrower, as
applicable, dated the Closing Date and certifying (1) that attached thereto is a
true and complete copy of the certificate of incorporation and all amendments
thereto of the Borrower, certified as of a recent date by the appropriate
Governmental Authority in its jurisdiction of organization, (2) that attached
thereto is a true and complete copy of the by-laws of the Borrower in effect on
the Closing Date and at all times since a date prior to the date of the
resolutions described in clause (3) below, (3) that attached thereto is a true
and complete copy of resolutions or consents, as applicable, duly adopted by the
board of directors of the Borrower authorizing, as applicable, the execution,
delivery and performance of this Agreement and that such resolutions have not
been modified, rescinded or amended and are in full force and effect, (4) that
the organizational documents of the Borrower have not been amended since the
date of the last amendment thereto shown on the certificate of good standing
attached thereto, and (5) as to the incumbency and specimen signature of each
officer of the Borrower executing this Agreement and any other document
delivered in connection herewith on its behalf; and (B) a certificate of another
officer as to the incumbency and specimen signature of such secretary or
assistant secretary executing the certificate pursuant to (A) above;
(c) Officer's Certificate. Receipt by the Administrative Agent of a
certificate from the chief executive officer or chief financial officer of the
Borrower, as applicable, in form and substance reasonably satisfactory to the
Administrative Agent, to the effect that, as of the Closing Date, all
representations and warranties of the Borrower contained in this Agreement and
the other Loan Documents are true, correct and complete; that the Borrower is
not in violation or aware of any event that would cause a Material Adverse
Change in the business or operation as reflected in the Disclosure Documents;
that the Borrower is not in violation of any of the covenants contained in this
Agreement and the other Loan Documents; that, after giving effect to the
transactions contemplated by this Agreement, no Default or Event of Default has
occurred and is continuing; and that the Borrower has satisfied each of the
conditions precedent set forth in this Section 4.01;
(d) Consents. Receipt by the Administrative Agent of a written
representation from the Borrower that (i) all governmental, shareholder, member,
partner and third party consents and approvals necessary or, in the reasonable
opinion of the Administrative Agent, desirable, in connection with the
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transactions contemplated hereby have been received and are in full force and
effect and (ii) no condition or requirement of law exists which could reasonably
be likely to restrain, prevent or impose any material adverse condition on the
transactions contemplated hereby;
(e) Proceedings. A certificate from the Borrower certifying that no
action, proceeding, investigation, regulation or legislation has been
instituted, or, to the Borrower's knowledge, threatened or proposed before any
court, government agency or legislative body to enjoin, restrain or prohibit, or
to obtain damages in respect of, or which is related to or arises out of this
Agreement or any other Loan Documents or the consummation of the transactions
contemplated hereby or thereby or which, in the Administrative Agent's
reasonable determination, would prohibit the extension of Letters of Credit or
could reasonably be expected to result in any such prohibition or a Material
Adverse Change;
(f) Financial Statements. Receipt by the Administrative Agent of the
Disclosure Documents and financial statements required pursuant to Section 6.03,
which demonstrate, in the Administrative Agent's reasonable judgment, together
with all other information then available to the Administrative Agent, that the
Borrower can repay its debts and satisfy its other obligations as and when they
become due, and can comply with the financial covenants contained in this
Agreement;
(g) Good Standing Certificate. Receipt by the Administrative Agent of a
certificate of good standing for the Borrower, dated on or immediately prior to
the Closing Date, from the Secretary of State of the state of organization of
the Borrower and from all states in which the Borrower is required to obtain a
certificate of good standing or like certificate due to the nature of its
operations in such state;
(h) Fees. Receipt by the Administrative Agent and the Lenders of the
fees set forth or referenced in this Agreement and any other accrued and unpaid
fees, expenses or commissions due hereunder (including, without limitation,
legal fees and expenses of counsel to the Administrative Agent), and to any
other Person such amount as may be due thereto in connection with the
transactions contemplated hereby, including all taxes, fees and other charges
related to the Loan Documents;
(i) Notice required by Section 4.02. Receipt by the Administrative
Agent of the notice required under Section 4.02;
(j) Note. If requested by any Lender, a Note, payable to the order of
such Lender, duly completed and executed by the Borrower;
(k) Opinions. Opinions of Cozen O'Connor, counsel to the Borrower, in
substantially the form of Exhibit H hereto, and as to such other matters as the
Administrative Agent may reasonably request addressed to the Administrative
Agent and the Lenders; and
(l) Other. Receipt by the Administrative Agent of all other opinions,
certificates and instruments in connection with the transactions contemplated by
this Agreement satisfactory in form and substance to the Required Lenders.
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SECTION 4.02 Additional Conditions Precedent
The obligation of the Lenders and the Issuing Lender to (i) make each
Extension of Credit, including the Extensions of Credit on the Closing Date,
(ii) Convert a Base Rate Loan into a LIBOR Rate Loan or from a LIBOR Rate Loan
into another LIBOR Rate Loan, and (iii) issue the Letters of Credit upon
Application therefor, shall be subject to the further conditions precedent that
on the date of such extension, Conversion, issuance or extension, as the case
may be:
(a) The Administrative Agent shall have received a Notice of Borrowing
or Application, as the case may be, signed by duly authorized officer of the
Borrower, dated such date, stating that:
(i) The representations and warranties of the Borrower
contained in Section 5.01 of this Agreement are true and correct on and as of
the date of such Extension of Credit, Conversion, or issuance of the Letter of
Credit, as applicable, as though made, Converted or issued, as applicable, on
and as of such date, both before and after giving effect to such Extension of
Credit, Conversion, or issuance of the Letter of Credit, as applicable, and to
the application of the proceeds thereof;
(ii) Since June 30, 2003, there has been no Material Adverse
Change; and
(iii) No event has occurred and is continuing, or would result
from the Extension of Credit, Conversion, or issuance of the Letter of Credit,
as applicable, or the application of the proceeds thereof, as the case may be,
which constitutes a Default or an Event of Default.
(b) The Administrative Agent shall have received such other approvals,
opinions or documents as the Administrative Agent may reasonably request.
Unless the Borrower shall have previously advised the Administrative
Agent in writing that one or more of the statements contained in clauses (a)(i)
through (a)(iii) above are not true and correct, the Borrower shall be deemed to
have represented and warranted, on the date of any Extension of Credit
hereunder, that on the date of such Extension of Credit, Conversion, or issuance
of the Letter of Credit, as applicable, the above statements are true.
SECTION 4.03 Reliance on Certificates
The Lenders, the Issuing Lender and the Administrative Agent shall be
entitled to rely conclusively upon the certificates delivered from time to time
by officers of the Borrower as to the names, incumbency, authority and
signatures of the respective Persons named therein until such time as the
Administrative Agent may receive a replacement certificate, in form acceptable
to the Administrative Agent, from an officer of the Borrower identified to the
Administrative Agent as having authority to deliver such certificate, setting
forth the names and true signatures of the officers and other representatives of
the Borrower thereafter authorized to act on its behalf.
[End of Article IV]
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01 Representations and Warranties of the Borrower
The Borrower hereby represents and warrants as follows:
(a) Each of the Borrower and its Subsidiaries is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, as applicable and is duly
qualified to do business in, and is in good standing in, all other jurisdictions
where the nature of its business or the nature of property owned or used by it
makes such qualification necessary, except where such failure would not result
in a Material Adverse Change. Each of the Borrower and its Subsidiaries has all
requisite corporate (or other applicable) powers and authority to own or lease
and operate its properties and to carry on its business as now conducted and as
proposed to be conducted.
(b) The execution, delivery and performance by the Borrower of this
Agreement and each Loan Document to which it is a party are within the
Borrower's corporate (or other applicable) powers, have been duly authorized by
all necessary corporate (or other applicable) action, do not contravene (i) the
Borrower's certificate of incorporation, (ii) any law, rule or regulation
applicable to the Borrower or (iii) any contractual or legal restriction binding
on or affecting the Borrower, and will not result in or require the imposition
of any lien or encumbrance on, or security interest in, any property (including,
without limitation, accounts or contract rights) of the Borrower, except as
provided in this Agreement and any other the Loan Document.
(c) No Governmental Action is required for the execution or delivery by
the Borrower of this Agreement or any other Loan Document to which it is a party
or for the performance by the Borrower of its obligations under this Agreement
or any other Loan Document other than those which have previously been duly
obtained, are in full force and effect, are not subject to any pending or, to
the knowledge of the Borrower, threatened appeal or other proceeding seeking
reconsideration and as to which all applicable periods of time for review,
rehearing or appeal with respect thereto have expired.
(d) This Agreement and each Loan Document to which the Borrower is a
party is a legal, valid and binding obligation of the Borrower party thereto,
enforceable against the Borrower in accordance with its terms subject to the
effect of bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium and other similar laws of general application affecting rights and
remedies of creditors generally.
(e) Except as disclosed in the Disclosure Documents, there is no
pending or, to the Borrower's knowledge, threatened action or proceeding
(including, without limitation, any proceeding relating to or arising out of
Environmental Laws) affecting the Borrower or any of its Subsidiaries before any
court, governmental agency or arbitrator that has a reasonable possibility of
resulting in a Material Adverse Change.
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(f) The audited consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries, as at December 31, 2002, and the related consolidated
statements of income, retained earnings and cash flows of the Borrower and its
Consolidated Subsidiaries for the fiscal year then ended, and the unaudited
consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as
at June 30, 2003, and the related consolidated statements of income, retained
earnings and cash flows of the Borrower and its Consolidated Subsidiaries for
the six (6) months then ended, copies of which have been furnished to the
Administrative Agent and each Lender, fairly present in all material respects
the financial condition of the Borrower and its Consolidated Subsidiaries as at
such dates and the results of the operations of the Borrower and its
Consolidated Subsidiaries for the periods ended on such dates, all in accordance
with GAAP consistently applied, subject, solely in the case of unaudited
consolidated balance sheets, to normal year end adjustments. Since December 31,
2002, there has been no Material Adverse Change, or material adverse change in
the facts and information regarding such entities as represented to the Closing
Date.
(g) The issuance of, and the existence of, the Letters of Credit, the
Extensions of Credit and the use of the proceeds thereof will comply with all
provisions of applicable law and regulation in all material respects.
(h) Neither the Borrower nor any Subsidiary of the 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.
(i) The Borrower is not a "holding company" as defined under Section 5
of the Public Utility Holding Company Act of 1935, as amended.
(j) Neither the Borrower nor its Subsidiaries is engaged in the
business of extending credit for the purpose of buying or carrying margin stock
(within the meaning of Regulation U issued by the Board of Governors of the
Federal Reserve System), and no proceeds of any drawing on the Letters of Credit
or the Extensions of Credit will be used to buy or carry any margin stock or to
extend credit to others for the purpose of buying or carrying any margin stock.
(k) No ERISA Event has occurred or is reasonably expected to occur with
respect to any Plan which reasonably could be expected to result in a Material
Adverse Change. Since the actuarial valuation date specified in the most recent
Schedule B (Actuarial Information) to the annual report of Plans maintained by
the Borrower (Form 5500 Series), if any, (i) there has been no Material Adverse
Change in the funding status of the Plans referred to therein and (ii) no
"prohibited transaction" has occurred with respect thereto. Neither the Borrower
nor any of its respective ERISA Affiliates has incurred nor reasonably expects
to incur any material withdrawal liability under ERISA to any Multiemployer
Plan.
(l) Except as set forth in the Disclosure Documents, the Borrower and
its Subsidiaries are in compliance in all material respects with all applicable
Federal, state and local statutes, rules, regulations, orders and other
provisions of law relating to Hazardous Materials, air emissions, water
discharge, noise emission and liquid disposal, and other environmental, health
and safety matters, other than those the non-compliance with which would not
result in a Material Adverse Change (taking into consideration all fines,
penalties and sanctions that may be imposed because of such non-compliance) or
on the ability of the Borrower to perform its obligations under this Agreement
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or any other Loan Document to which the Borrower is a party. Except as set forth
in the Disclosure Documents, neither the Borrower nor any of its respective
Subsidiaries has received from any Governmental Authority any notice of any
material violation of any such statute, rule, regulation, order or provision.
(m) The Borrower and its Subsidiaries have filed all tax returns
(Federal, state and local) required to be filed and paid all taxes shown thereon
to be due, including interest and penalties, except to the extent that the
Borrower or any such Subsidiary is diligently contesting any such taxes in good
faith and by appropriate proceedings, and for which adequate reserves for
payment thereof have been established.
(n) No event has occurred or is continuing which constitutes a Default
or an Event of Default, or which constitutes, or which with the passage of time
or giving of notice or both would constitute, a default or event of default by
the Borrower or Subsidiary thereof under any material agreement or contract,
judgment, decree or order by which the Borrower or any of its respective
properties may be bound or which would require the Borrower or Subsidiary
thereof to make any payment thereunder prior to the scheduled maturity date
therefore, where such default could reasonably be expected to result in a
Material Adverse Change.
(o) As of the Closing Date, the Borrower and its Subsidiaries will be
Solvent.
(p) The capitalization of the Borrower and each Significant Subsidiary
of the Borrower consists of the Capital Stock, authorized, issued and
outstanding, of such classes and series, with or without par value, described on
Schedule II hereto. All such outstanding Capital Stock has been duly authorized
and validly issued and are fully paid and nonassessable. Except as set forth in
the Disclosure Documents, there are no outstanding warrants, subscriptions,
options, securities, instruments or other rights of any type or nature
whatsoever, which are convertible into, exchangeable for or otherwise provide
for or permit the issuance of, Capital Stock of the Borrower or any Subsidiary
of the Borrower or are otherwise exercisable by any Person.
(q) The Borrower and each Subsidiary of the Borrower has good and
marketable title to all assets and other property purported to be owned by it.
(r) None of the properties or assets of the Borrower is subject to any
Lien, except Permitted Liens.
(s) All written information, reports and other papers and data produced
by or on behalf of the Borrower and furnished to the Administrative Agent and
the Lenders were, at the time the same were so furnished, complete and correct
in all material respects. No document furnished or written statement made to the
Administrative Agent or the Lenders by the Borrower in connection with the
negotiation, preparation or execution of this Agreement or any other Loan
Documents contains or will contain any untrue statement of a fact material to
the creditworthiness of the Borrower or its Subsidiaries or omits or will omit
to state a fact necessary in order to make the statements contained therein not
misleading.
(t) The Borrower does not intend to treat the Loans as being a
"reportable transaction" (within the meaning of the Treasury Regulation Section
1.6011-4).
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[End of Article V]
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ARTICLE VI
COVENANTS OF THE COMPANY
SECTION 6.01 Affirmative Covenants
Until the Obligations have been finally and indefeasibly paid and
satisfied in full and the Commitments terminated, the Borrower will, and will
cause each of its Subsidiaries, unless the Required Lenders shall otherwise
consent in writing, to:
(a) Preservation of Existence, Etc. Preserve and maintain, and cause
each of its Subsidiaries to preserve and maintain, its corporate or company, as
applicable, existence, material rights (statutory and otherwise) and franchises,
and take such other action as may be necessary or advisable to preserve and
maintain its right to conduct its business in the states where it shall be
conducting its business, except where failure to do so does not result in, or
could not reasonably be expected to have, a Material Adverse Change.
(b) Maintenance of Properties, Etc. Maintain, and cause each of its
Subsidiaries to maintain, good and marketable title to all of its properties
which are used or useful in the conduct of its business, and preserve, maintain,
develop and operate, and cause each of its Subsidiaries to preserve, maintain,
develop and operate, in substantial conformity with all laws and material
contractual obligations, all such properties in good working order and
condition, ordinary wear and tear excepted, except where such failure would not
result in a Material Adverse Change.
(c) Ownership. Cause the Parent to own, at all times, 100% of the
Capital Stock having voting rights of the Borrower.
(d) Compliance with Material Contractual Obligations, Laws, Etc.
Comply, and cause each of its Subsidiaries to comply, with the requirements of
all material contractual obligations and all applicable laws, rules, regulations
and orders, the failure to comply with which could reasonably be expected to
result in a Material Adverse Change, such compliance to include, without
limitation, paying before the same become delinquent all taxes, assessments and
governmental charges imposed upon it or upon its property except to the extent
diligently contested in good faith and by appropriate proceedings and for which
adequate reserves for the payment thereof have been established, and complying
with the requirements of all applicable Federal, state and local statutes,
rules, regulations, orders and other provisions of law relating to Hazardous
Materials, air emissions, water discharge, noise emission and liquid disposal,
and other environmental, health and safety matters.
(e) Insurance. Maintain, and cause each of its Subsidiaries to
maintain, insurance with financially sound and reputable insurance companies or
associations in such amounts and covering such risks as are usually carried by
companies engaged in the same or similar businesses and similarly situated.
(f) Visitation Rights; Keeping of Books. At any reasonable time and
from time to time, upon reasonable advance notice, 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 Borrower and any of its Subsidiaries, and to
-46-
discuss the affairs, finances and accounts of the Borrower and any of its
Subsidiaries with any of their respective officers or directors and with their
respective independent certified public accountants and keep proper books of
record and account, in which full and correct entries shall be made of all
financial transactions and the assets and liabilities of the Borrower in
accordance with GAAP, consistent with the procedures applied in the preparation
of the financial statements referred to in Section 5.01(f) hereof.
(g) Transactions with Affiliates. Conduct, and cause each of its
Subsidiaries to conduct, all transactions otherwise permitted under this
Agreement with any of its Affiliates on terms that are fair and reasonable and
no less favorable to the Borrower or such Subsidiary than it would obtain in a
comparable arm's-length transaction with a Person not an Affiliate.
(h) Use of Proceeds. Use the proceeds of any Extension of Credit solely
for general corporate purposes and working capital needs of the Borrower.
(i) Loan Documents. Perform and comply in all material respects with
each of the provisions of each Loan Document to which it is a party.
(j) Risk Management. Perform and comply in all material respects, and
require its Subsidiaries to perform and comply in all material respects, with
any risk management policies developed by the Borrower, including such policies,
if applicable, related to (i) the retail and wholesale inventory distribution
and trading procedures and (ii) dollar and volume limits.
(k) Tax Disclosure. In the event the Borrower determines to take any
action inconsistent with its intention not to treat the Loans as being a
"reportable transaction" (within the meaning of the Treasury Regulation Section
1.6011-4), the Borrower shall promptly notify the Administrative Agent thereof
in writing.
(l) Further Assurances. At the expense of the Borrower, promptly
execute and deliver, or cause to be promptly executed and delivered, all further
instruments and documents, and take and cause to be taken all further actions,
that may be reasonably necessary or that the Required Lenders through the
Administrative Agent may reasonably request, to enable the Lenders and the
Administrative Agent to enforce the terms and provisions of this Agreement and
the Loan Documents and to exercise their rights and remedies hereunder. In
addition, the Borrower will use all reasonable efforts to duly obtain
Governmental Actions required from time to time on or prior to such date as the
same may become legally required, and thereafter to maintain all such
Governmental Actions in full force and effect, except where such failure would
not result in a Material Adverse Change.
SECTION 6.02 Negative Covenants
Until all of the Obligations have been finally and indefeasibly paid
and satisfied in full and the Commitments terminated, the Borrower will not, and
will not cause or permit any of its Subsidiaries, without the written consent of
the Required Lenders, to:
(a) Liens, Etc. Except as permitted in Section 6.02(c), create, incur,
assume, or suffer to exist, or permit any of its Subsidiaries to create, incur,
assume, or suffer to exist, any Lien other than Permitted Liens.
-47-
(b) Indebtedness. Create or suffer, or permit any Subsidiary to create
or suffer, to exist any Indebtedness except for Permitted Indebtedness.
(c) Obligation to Ratably Secure. Except as permitted by Section
6.02(a), create or suffer to exist, or permit any of its Subsidiaries to create
or suffer to exist, any Lien other than a Permitted Lien, in each case to secure
or provide for the payment of Indebtedness, unless, on or prior to the date
thereof, the Borrower shall have (i) pursuant to documentation reasonably
satisfactory to the Administrative Agent and Required Lenders, equally and
ratably secured the Obligations of the Borrower under this Agreement by a Lien
acceptable to the Administrative Agent and Required Lenders, and (ii) caused the
creditor or creditors, as the case may be, in respect of such Indebtedness to
have entered into an intercreditor agreement in form, scope and substance
reasonably satisfactory to the Administrative Agent and the Required Lenders.
(d) Mergers, Etc. Merge or consolidate with or into any Person, or
permit any of its Subsidiaries to do so, except that (i) any Subsidiary of the
Borrower may merge or consolidate with or into, any other Subsidiary of the
Borrower and (ii) any Subsidiary of the Borrower may merge or consolidate with
and into the Borrower; provided, that the Borrower is the surviving corporation;
provided, further, that in each case that, immediately after giving effect to
such proposed transaction, no Event of Default or Default would exist.
(e) Sale of Assets, Etc. Sell, transfer, lease, assign or otherwise
convey or dispose, or permit any Subsidiary to sell, transfer, lease, assign or
otherwise convey or dispose, of assets (whether now owned or hereafter
acquired), in any single transaction or series of transactions, whether or not
related having an aggregate book value in excess of 10% of the Consolidated
assets of the Borrower and its Consolidated Subsidiaries, except for
dispositions of capital assets in the ordinary course of business as presently
conducted.
(f) Restricted Investments. Other than in the ordinary course of
business (i) make or permit to exist any loans or advances to, or any other
investment in, any Person except for investments in Permitted Investments, or
(ii) acquire any assets or property of any other Person.
(g) New Business. Enter into, or permit any of its Subsidiaries to
enter into any business which is not substantially similar to that existing on
the Closing Date.
(h) Distributions. Pay any dividends on or make any other distributions
in respect of any Capital Stock or redeem or otherwise acquire any such Capital
Stock without in each instance obtaining the prior written consent of the
Required Lenders; provided, that (i) any Subsidiary of the Borrower may pay
regularly scheduled dividends or make other distributions to the Borrower; (ii)
if no Default or Event of Default exists or would result therefrom, the Borrower
may pay distributions or dividends in either cash or Capital Stock or may redeem
or otherwise acquire Capital Stock, and (iii) the Borrower may cause the
redemption or acquisition of Capital Stock having a preferred interest only if
(a) such redemption or acquisition is effected by the proceeds of Capital Stock
issued by the Parent, or (b) such redemption or acquisition is effected with
proceeds from Permitted Indebtedness; provided, that before and after such
redemption or acquisition as described in (a) and (b) above, no Default or Event
of Default has occurred and is continuing.
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(i) Lease Obligations. Permit the aggregate obligations of the Borrower
and its Subsidiaries that are due and payable during any fiscal year under
leases or agreements to lease (other than obligations under Capital Leases) to
exceed $5,000,000.
(j) Compliance with ERISA. (i) Permit to exist any "accumulated funding
deficiency" (as defined in Section 412(a) of the Code), unless such deficiency
exists with respect to a Multiple Employer Plan or Multiemployer Plan and the
Borrower has no control over the reduction or elimination of such deficiency,
(ii) terminate, or permit any ERISA Affiliate to terminate, any Plan of the
Borrower or such ERISA Affiliate so as to result in any material liability of
the Borrower or ERISA Affiliate to the PBGC, or (iii) permit to exist any
occurrence of any reportable event (within the meaning of Section 4043 of
ERISA), or any other event or condition, which presents a material risk of a
termination by the PBGC of any Plan of the Borrower or such ERISA Affiliate and
such a material liability of the Borrower or ERISA Affiliate to the PBGC.
(k) Constituent Documents, Etc. Change in any material respect the
nature of its certificate of incorporation, by-laws, or other similar documents,
or accounting policies or accounting practices (except as required or permitted
by the Financial Accounting Standards Board or GAAP).
(l) Fiscal Year. Change its Fiscal Year.
SECTION 6.03 Reporting Requirements
So long as any Lender shall have any Commitment hereunder or the
Borrower shall have any obligation to pay any amount to the Administrative Agent
or any Lender hereunder, the Borrower will, unless the Required Lenders shall
otherwise consent in writing, provide to the Administrative Agent:
(a) as soon as available and in any event within sixty (60) days after
the end of each of the first three quarters of each fiscal year of the Borrower,
a consolidated and consolidating balance sheet of the Borrower and its
Consolidated Subsidiaries as at the end of such quarter and consolidated and
consolidating statements of income, retained earnings and cash flows of the
Borrower and its Consolidated Subsidiaries for the period commencing at the end
of the previous fiscal year and ending with the end of such quarter, all in
reasonable detail and duly certified by the chief financial officer or the
treasurer of the Borrower as fairly presenting in all material respects the
financial condition of the Borrower and its Consolidated Subsidiaries as at such
date and the results of operations of the Borrower and its Consolidated
Subsidiaries for the periods ended on such date, except for normal year end
adjustments, all in accordance with GAAP consistently applied (for purposes
hereof delivery of the Borrower's appropriately completed Form 10-Q will be
sufficient in lieu of delivery of such consolidated balance sheet and
consolidated statements of income, retained earnings and cash flows), together
with a Compliance Certificate, in the form of Exhibit J, of the chief financial
officer or the treasurer of the Borrower (A) demonstrating and certifying
compliance by the Borrower with the covenants set forth in Sections 6.04(a) and
(b) and (B) stating that no Event of Default or Default has occurred and is
continuing or, if an Event of Default or Default has occurred and is continuing,
a statement as to the nature thereof and the action which the Borrower has taken
and proposes to take with respect thereto;
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(b) as soon as available and in any event within one hundred five (105)
days after the end of each fiscal year of the Borrower, a copy of the annual
report for such year for the Borrower and its Consolidated Subsidiaries,
containing consolidated and consolidating financial statements for such year
certified by, and accompanied by an unqualified opinion of, independent public
accountants reasonably acceptable to the Administrative Agent (for purposes
hereof, delivery of the Borrower's appropriately completed Form 10-K will be
sufficient in lieu of delivery of such financial statements), together with a
Compliance Certificate, in the form of Exhibit J, of the chief financial officer
or the treasurer of the Borrower (A) demonstrating and certifying compliance by
the Borrower with the covenants set forth in Sections 6.04(a) and (b) and (B)
stating that no Event of Default or Default has occurred and is continuing or,
if an Event of Default or Default has occurred and is continuing, a statement as
to the nature thereof and the action which the Borrower has taken and proposes
to take with respect thereto;
(c) as soon as possible and in any event within five (5) days after the
occurrence of each Event of Default and each Default known to the Borrower, a
statement of the chief financial officer of the Borrower setting forth details
of such Event of Default or Default and the action which the Borrower has taken
and proposes to take with respect thereto;
(d) as soon as possible and in any event within five (5) days after
receipt thereof by the Borrower or any of its ERISA Affiliates from the PBGC
copies of each notice received by the Borrower or such ERISA Affiliate of the
PBGC's intention to terminate any Plan of the Borrower or such ERISA Affiliate
or to have a trustee appointed to administer any such Plan;
(e) as soon as possible and in any event within five (5) days after
receipt thereof by the Borrower or any ERISA Affiliate from a Multiemployer Plan
sponsor, a copy of each notice received by the Borrower or such ERISA Affiliate
concerning the imposition of withdrawal liability in the amount of at least
$1,000,000 pursuant to Section 4202 of ERISA in respect of which the Borrower or
such ERISA Affiliate is reasonably expected to be liable;
(f) as soon as possible and in any event within five (5) days after the
Borrower becomes aware of the occurrence thereof, notice of all actions, suits,
proceedings or other events (A) of the type described in Section 5.01(e) or (B)
for which the Administrative Agent or the Lenders will be entitled to indemnity
under Section 9.05;
(g) as soon as possible and in any event within five (5) days after the
sending or filing thereof, copies of all material reports that the Borrower
sends to any of its security holders, and copies of all reports and registration
statements which the Borrower or any of its Subsidiaries files with the
Securities and Exchange Commission or any national securities exchange;
(h) as soon as possible and in any event within five (5) days after
requested, such other information respecting the business, properties, assets,
liabilities (actual or contingent), results of operations, prospects, condition
or operations, financial or otherwise, of the Borrower or any Subsidiary thereof
as any Lender through the Administrative Agent may from time to time reasonably
request;
(i) as soon as possible and in any event within fifteen (15) days after
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the occurrence of each ERISA Event, a statement of the chief financial officer
of the Borrower setting forth details of such ERISA Event and the action which
the Borrower has taken and proposes to take with respect thereto; and
SECTION 6.04 Financial Covenants
So long as any Lender shall have any Commitment hereunder or the
Borrower shall have any obligation to pay any amount to the Administrative Agent
or any Lender hereunder, the Borrower will, unless the Required Lenders shall
otherwise consent in writing:
(a) Consolidated Indebtedness to Consolidated Total Capitalization.
Maintain at the end of each fiscal quarter a ratio of Indebtedness to
Consolidated Total Capitalization of the Borrower and its Consolidated
Subsidiaries of not more than 0.65 to 1.0.
(b) Consolidated EBIT to Consolidated Interest Expense. Maintain at the
end of each fiscal quarter, for the four consecutive fiscal quarters then
ending, a ratio of Consolidated EBIT to Consolidated Interest Expense of the
Borrower and its Consolidated Subsidiaries of not less than 2.0 to 1.0.
[End of Article VI]
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ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01 Events of Default
Each of the following events should they occur and be continuing shall
constitute an "Event of Default":
(a) The Borrower shall fail to pay (i) any amount of principal when the
same becomes due and payable or (ii) any interest, fees or any other amount
payable hereunder within five (5) Business Days of when the same becomes due and
payable; or
(b) Any representation or warranty made by or on behalf of the Borrower
in any Agreement or Loan Document or by or on behalf of the Borrower (or any of
its officers) in connection with any Agreement or Loan Document shall prove to
have been incorrect in any material respect when made or deemed made; or
(c) (i) The Borrower shall fail to perform or observe any term,
covenant or agreement contained in Section 6.01(a), (c), (e), (g), (h), (i) or
(j), Section 6.02(a), (b), (c), (d), (e), (f), (g) or (h), Section 6.03 or
Section 6.04, or (ii) the Borrower shall fail to perform or observe any other
term, covenant or agreement contained in this Agreement (other than obligations
specifically set forth elsewhere in this Section 7.01) on its part to be
performed or observed if the failure to perform or observe such other term,
covenant or agreement, shall remain unremedied for thirty (30) days after
written notice thereof shall have been given to the Borrower by the
Administrative Agent or any Lender; or
(d) The Borrower or any Significant Subsidiary thereof shall fail to
pay any principal of or premium or interest on any Indebtedness (other than
Indebtedness incurred under this Agreement) thereof in the aggregate (for all
such Persons) in excess of $5,000,000, when the same becomes due and payable
(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 Indebtedness;
or any other event shall occur or condition shall exist under any agreement or
instrument relating to any such Indebtedness and shall continue after the
applicable grace period, if any, specified in such agreement or instrument, if
the effect of such event or condition is to accelerate, or to permit the
acceleration of, the maturity of such Indebtedness; or any such Indebtedness
shall be declared to be due and payable, or required to be prepaid (other than
by a regularly scheduled required prepayment), prior to the stated maturity
thereof; or
(e) The Borrower or any Significant Subsidiary thereof shall generally
not pay its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general assignment for the
benefit of creditors, or any proceeding shall be instituted by or against the
Borrower or a Significant Subsidiary thereof 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,
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trustee, custodian or other similar official for it or for any substantial part
of its property and, in the case of any such proceeding instituted against it
(but not instituted by it), such proceeding shall remain undismissed or unstayed
for a period of forty-five (45) days, any of the actions sought in such
proceeding (including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or other similar
official for, it or for any substantial part of its property) shall occur or the
Borrower or a Significant Subsidiary thereof shall consent to or acquiesce in
any such proceeding; or the Borrower or a Significant Subsidiary thereof shall
take any corporate action to authorize any of the actions set forth above in
this subsection (e); or
(f) Any judgment or order for the payment of money in excess of
$5,000,000 (in the aggregate) shall be rendered against the Borrower or any
Significant Subsidiary thereof and either (i) enforcement proceedings shall have
been commenced by any creditor upon such judgment or order or (ii) there shall
be any period of ten (10) consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, shall not be
in effect; or
(g) The obligations of the Borrower under this Agreement or any other
Loan Document shall become unenforceable, or the Borrower, or any court or
governmental or regulatory body having jurisdiction over the Borrower, shall so
assert in writing or the Borrower or any of its Affiliates shall contest in any
manner the validity or enforceability thereof; or
(h) Any ERISA Event shall have occurred with respect to a Plan and,
thirty (30) days after notice thereof shall have been given to the Borrower by
the Administrative Agent or any Lender, (i) such ERISA Event shall still exist
and (ii) such ERISA Event is reasonably likely to result in a liability or lien
in excess of $5,000,000 against the Borrower or any ERISA Affiliate, or
(i) The Borrower or any Affiliate thereof as employer under a
Multiemployer Plan shall have made a complete or partial withdrawal from such
Multiemployer Plan and the plan sponsor of such Multiemployer Plan shall have
notified such withdrawing employer that such employer has incurred a withdrawal
liability in an annual amount exceeding $5,000,000; or
(j) Any Governmental Approval shall be rescinded, revoked, otherwise
terminated, or amended or modified in any manner which is materially adverse to
the interests of the Lenders and the Administrative Agent; or
(k) A Change in Control shall occur.
SECTION 7.02 Upon an Event of Default
Upon the occurrence of an Event of Default, with the consent of the
Required Lenders, the Administrative Agent may, or upon the request of the
Required Lenders, the Administrative Agent shall, by notice to the Borrower:
(a) Acceleration; Termination of Credit Facility. Declare the principal
of and interest on the Extensions of Credit, the Notes and the Obligations
(except for Hedging Obligations, which shall be governed by the terms and
conditions of the documents controlling such obligations) at the time
outstanding, and all other amounts owed to the Lenders and to the Administrative
Agent under this Agreement (including, without limitation, all L/C Obligations,
whether or not the beneficiaries of the then outstanding Letters of Credit shall
have presented the documents required thereunder), to be forthwith due and
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payable, whereupon the same shall immediately become due and payable without
presentment, demand, protest or other notice of any kind, all of which are
expressly waived, anything in this Agreement to the contrary notwithstanding,
and terminate the Commitment and any right of the Borrower to request Extensions
of Credit or Letters of Credit thereunder; provided, that upon the occurrence of
an Event of Default specified in Section 7.01(e), the Commitment shall be
automatically terminated and all Obligations (except for Hedging Obligations,
which shall be governed by the terms and conditions of the documents controlling
such obligations) shall automatically become due and payable without
presentment, demand, protest or other notice of any kind, all of which are
expressly waived, anything in this Agreement or in any other Loan Document to
the contrary notwithstanding.
(b) Letters of Credit. With respect to all Letters of Credit with
respect to which presentment for honor shall not have occurred at the time of an
acceleration pursuant to Section 7.02(a), require the Borrower at such time to
deposit in a cash collateral account with the Administrative Agent an amount
equal to the aggregate then undrawn and unexpired amount of such Letters of
Credit. Amounts held in such cash collateral account shall be applied by the
Administrative Agent to the payment of drafts drawn under such Letters of
Credit, and the unused portion thereof after all such Letters of Credit shall
have expired or been fully drawn upon, if any, shall be applied to repay the
other Obligations. After all such Letters of Credit shall have expired or been
fully drawn upon, the Reimbursement Obligation shall have been satisfied and all
other Obligations shall have been paid in full, the balance, if any, in such
cash collateral account shall be returned to the Borrower.
SECTION 7.03 Rights and Remedies Cumulative; Non-Waiver; Etc
The enumeration of the rights and remedies of the Administrative Agent
and the Lenders set forth in this Agreement is not intended to be exhaustive,
and the exercise by the Administrative Agent and the Lenders of any right or
remedy shall not preclude the exercise of any other rights or remedies, all of
which shall be cumulative, and shall be in addition to any other right or remedy
given hereunder or that may now or hereafter exist in law or in equity or by
suit or otherwise. No delay or failure to take action on the part of the
Administrative Agent or any Lender in exercising any right, power or privilege
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or privilege preclude other or further exercise thereof or
the exercise of any other right, power or privilege or shall be construed to be
a waiver of any Event of Default. No course of dealing between the Borrower, the
Administrative Agent and the Lenders or their respective agents or employees
shall be effective to change, modify or discharge any provision of this
Agreement or any of the other Loan Documents or to constitute a waiver of any
Event of Default.
[End of Article VII]
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ARTICLE VIII
THE ADMINISTRATIVE AGENT
SECTION 8.01 Appointment
Each Lender hereby irrevocably designates and appoints Wachovia as the
Administrative Agent of such Lender and the Issuing Lender under this Agreement
and the other Loan Documents, and each such Lender and the Issuing Lender
irrevocably authorizes Wachovia, as the Administrative Agent for such Lender and
the Issuing Lender, to take such action on its behalf under the provisions of
this Agreement and the other Loan Documents and to exercise such powers and
perform such duties as are expressly delegated to the Administrative Agent by
the terms of this Agreement and the other Loan Documents, together with such
other powers as are reasonably incidental thereto. Notwithstanding any provision
to the contrary elsewhere in this Agreement, the Administrative Agent shall not
have any duties or responsibilities, except those expressly set forth herein and
in the Loan Documents, or any fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Administrative Agent.
SECTION 8.02 Delegation of Duties
The Administrative Agent may execute any of its duties under this
Agreement, any Letter of Credit and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
SECTION 8.03 Exculpatory Provisions
Neither the Administrative Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any
action lawfully taken or omitted to be taken by it or such Person under or in
connection with this Agreement or any other Loan Document (except in the case of
gross negligence or willful misconduct as determined by a court of competent
jurisdiction) or (ii) responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by the Borrower or any
officer thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or the Letters of
Credit or any other Loan Document or for any failure of the Borrower to perform
its obligations hereunder or thereunder. The Administrative Agent shall not be
under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of the Borrower.
SECTION 8.04 Reliance by Administrative Agent
The Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
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or Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrower), independent accountants and other experts
selected by the Administrative Agent. The Administrative Agent may deem and
treat the payee of any evidence of indebtedness in respect of any Extension of
Credit, or other indebtedness hereunder as the owner thereof for all purposes
unless a written notice of assignment, negotiation or transfer thereof shall
have been filed with the Administrative Agent. The Administrative Agent shall be
fully justified in failing or refusing to take any action under this Agreement,
any Letter of Credit or any Loan Document unless it shall first receive such
advice or concurrence of the Required Lenders (unless all of the Lenders' action
is required hereunder) as it deems appropriate or it shall first be indemnified
to its satisfaction by the Lenders against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action. The Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement and the Loan
Documents in accordance with a request of the Required Lenders (unless all of
the Lenders' action is required hereunder), and such request and any action
taken or failure to act pursuant thereto shall be binding upon all the Lenders.
SECTION 8.05 Notice of Default
The Administrative Agent shall not be deemed to have knowledge or
notice of the occurrence of any Event of Default hereunder unless the
Administrative Agent has received notice from a Lender or the Borrower referring
to this Agreement, describing such Event of Default and stating that such notice
is a "notice of default". In the event that the Administrative Agent receives
such a notice, the Administrative Agent shall give notice thereof to the
Lenders. The Administrative Agent shall take such action with respect to such
Event of Default as shall be reasonably directed by the Required Lenders;
provided, that unless and until the Administrative Agent shall have received
such directions, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such Event
of Default as it shall deem advisable in the best interests of the Issuing
Lender and the Lenders.
SECTION 8.06 Non-Reliance on Administrative Agent and Other Lenders
Each Lender expressly acknowledges that neither the Administrative
Agent nor any of its officers, directors, employees, agents, attorneys-in-fact
or affiliates has made any representations or warranties to it and that no act
by the Administrative Agent hereinafter taken, including any review of the
affairs of the Borrower, shall be deemed to constitute any representation or
warranty by the Administrative Agent to any Lender. Each Lender represents to
the Administrative Agent that it has, independently and without reliance upon
the Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrower and made its own decision to
enter into this Agreement. Each Lender also represents that it will,
independently and without reliance upon the Administrative 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 analysis, appraisals and decisions
in taking or not taking action under this Agreement and the Loan Documents and
to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Borrower. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
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Administrative Agent hereunder, the Administrative Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of the Borrower which may come into
the possession of the Administrative Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates.
SECTION 8.07 Indemnification
The Lenders agree to indemnify the Administrative Agent in its capacity
as such (to the extent not reimbursed by the Borrower and without limiting the
obligation of the Borrower to do so), ratably according to the respective
amounts of their Commitments, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the termination of the
Letters of Credit or Commitment) be imposed on, incurred by or asserted against
the Administrative Agent in any way relating to or arising out of this
Agreement, the Letters of Credit, any of the other Loan Documents or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing; provided,
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Administrative Agent's gross
negligence or willful misconduct. The agreements in this Section shall survive
the termination of this Agreement, the Extensions of Credit, the Letters of
Credit and the payment of all amounts payable hereunder.
SECTION 8.08 Administrative Agent in Its Individual Capacity
The Administrative Agent and its affiliates may make loans to, accept
deposits from and generally engage in any kind of business with, the Borrower as
though the Administrative Agent was not the Administrative Agent hereunder. With
respect to its interest on the Extensions of Credit and any other amounts owed
to it hereunder, the Administrative Agent shall have the same rights and powers
under this Agreement as any Lender and may exercise the same as though it were
not the Administrative Agent, and the terms "Lender" and "Lenders" shall include
the Administrative Agent in its individual capacity.
SECTION 8.09 Successor Administrative Agent
The Administrative Agent may resign as Administrative Agent upon ten
(10) days' notice to the Lenders and the Borrower. If the Administrative Agent
shall resign as Administrative Agent under this Agreement, then the Required
Lenders, with the consent of the Borrower, shall appoint from among the Lenders
a successor agent for the Lenders, whereupon such successor agent shall succeed
to the rights, powers and duties of the Administrative Agent, and the term
"Administrative Agent" shall mean such successor agent effective upon its
appointment, and the former Administrative Agent's rights, powers and duties as
Administrative Agent shall be terminated, without any other or further act or
deed on the part of such former Administrative Agent or any of the parties to
this Agreement. After any retiring Administrative Agent's resignation as
Administrative Agent, the provisions of this Section shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Administrative
Agent under this Agreement. In the event the Administrative Agent resigns
pursuant to this Section 8.09 the Administrative Agent shall also resign in its
capacity as Issuing Lender and Swingline Lender.
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SECTION 8.10 Issuing Lender
Each Lender hereby acknowledges that the provisions of this Article
VIII shall apply to the Issuing Lender in its capacity as such, in the same
manner as such provisions are expressly stated to apply to the Administrative
Agent.
SECTION 8.11 Notices; Actions Under Loan Documents
All notices received by the Issuing Lender pursuant to this Agreement
or any other Loan Document shall be promptly delivered by the receiving party to
the Administrative Agent, for distribution to the Lenders, and any notices,
reports or other documents received by the Administrative Agent pursuant to this
Agreement shall be promptly delivered to the Issuing Lender and the Lenders. The
Issuing Lender hereby agrees not to amend or waive any provision or consent to
the amendment or waiver of any Loan Document without the consent of the Required
Lenders (or, to the extent required pursuant to Section 9.01, all of the
Lenders).
[End of Article VIII]
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ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Amendments, Etc.
No amendment or waiver of any provision of this Agreement, nor consent
to any departure by the Borrower therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Required Lenders and the
Borrower, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided, that
no such waiver and no such amendment, supplement or modification shall without
the written consent of all the Lenders (a) extend the Termination Date or the
maturity of any Loan or unreimbursed drawing, or reduce the rate or extend the
time of payment of interest in respect thereof, or reduce any fee payable to any
Lender hereunder or extend the time for the payment thereof or change the amount
of any Lender's Commitment, in each case without the written consent of all the
Lenders, (b) amend, modify or waive any provision of this Section 9.01 or
Section 9.09(e) or reduce the percentage specified in the definition of
Required Lenders, or consent to the assignment or transfer by the Borrower of
any of its rights and obligations under this Agreement, in each case without the
written consent of all the Lenders, (c) amend, modify or waive any provision
of Article VIII without the written consent of the Administrative Agent,
(d) waive, modify or eliminate any of the conditions precedent specified in
Article IV, in each case without the written consent of all the Lenders, (e)
forgive principal, interest, fees or other amounts payable hereunder, or (f)
waive any requirement for the release of collateral.
SECTION 9.02 Notices, Etc.
All notices and other communications provided for hereunder shall be
in writing (including telegraphic communication) and mailed, telecopied,
telegraphed or delivered as follows:
The Borrower:
South Jersey Gas Company
1 South Jersey Plaza
Folsom, New Jersey 08037
Attention: Stephen H. Clark
Telecopy No.: (609) 561-8225
With a copy to:
Cozen O'Connor
The Atrium
1900 Market Street
Philadelphia, Pennsylvania 19103
Attention: Richard J. Busis, Esq.
Telecopy No.: (215) 665-2013
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The Administrative Agent or the Issuing Lender:
Wachovia Bank, National Association
301 South College Street
One Wachovia Center
Charlotte, North Carolina 28288-0760
Attention: Lawrence P. Sullivan
Telecopy No.: (704) 383-6647
With a copy to:
Wachovia Bank, National Association
201 South College Street
Charlotte, North Carolina 28288-0680
Attention: Agency Services
Telecopy No.: (704) 383-0288
With a copy to:
Parker, Poe, Adams & Bernstein L.L.P.
Three Wachovia Center
401 South Tryon Street
Suite 3000
Charlotte, North Carolina 28202
Attention: Paul S. Donohue, Esq.
Telecopy No.: (704) 334-4706
and if to any Lender, at its address or telecopy number set forth on Schedule I
hereto; or, as to each party, 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, when mailed, be effective three (3) days after being
deposited in the mails or when sent by telecopy or telex or delivered to the
telegraph company, respectively, addressed as aforesaid.
SECTION 9.03 No Waiver; Remedies
No failure on the part of the Administrative Agent, the Issuing Lender
or any Lender to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise
of any right hereunder 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 9.04 Set-off
(a) Upon the occurrence and during the continuance of any Event of
Default, the Administrative Agent and 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 the
Administrative Agent or such Lender to or for the credit or the account of the
Borrower against any and all of the obligations of the Borrower now or
hereafter existing under this Agreement, irrespective of whether or not the
Administrative Agent or such Lender shall have made any demand hereunder
and although such obligations may be contingent or unmatured.
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(b) If any Lender (a "Benefited Lender") shall at any time receive any
payment of all or part of the Extensions of Credit or other obligations of the
Borrower to it hereunder (such Lender's "Borrower Obligations"), or interest
thereon, or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in Section 7.01(e), or otherwise), in a greater proportion than any
such payment to or collateral received by any other Lender, if any, in respect
of such other Lender's Borrower Obligations, or interest thereon, such Benefited
Lender shall purchase for cash from the other Lenders such portion of each such
other Lender's Borrower Obligations, or shall provide such other Lenders with
the benefits of any such collateral, or the proceeds thereof, as shall be
necessary to cause such Benefited Lender to share the excess payment or benefits
of such collateral or proceeds ratably with each of the Lenders; provided, that
if all or any portion of such excess payment or benefits is thereafter recovered
from such Benefited Lender, such purchase shall be rescinded, and the purchase
price and benefits returned, to the extent of such recovery, but without
interest. The Borrower agrees that each Lender so purchasing a portion of
another Lender's Borrower Obligations may exercise all rights of payment
(including, without limitation, rights of set-off) with respect to such portion
as fully as if such Lender were the direct holder of such portion.
(c) The Administrative Agent and each Lender agree promptly to notify
the Borrower after any such set-off and application referred to in subsection
(a) above; provided, that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Administrative Agent
and each Lender under this Section 9.04 are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which the
Administrative Agent and each Lender may have.
SECTION 9.05 Indemnification
The Borrower hereby indemnifies and holds the Issuing Lender,
the Administrative Agent, the Swingline Lender and each Lender harmless from
and against any and all claims, damages, losses, liabilities, costs and expenses
which such party may incur or which may be claimed against such party by any
Person:
(a) by reason of any inaccuracy or alleged inaccuracy in any
material respect, or any untrue statement or alleged untrue statement of
any material fact, or by reason of the omission or alleged omission to
state therein a material fact necessary to make such statements, in the
light of the circumstances under which they were made, not misleading,
in each case relating to any of the Loan Documents and the transactions
contemplated thereby, the Disclosure Documents or in any manner, whether
direct or indirect, related to this Agreement; or
(b) by reason of or in connection with the execution, delivery
or performance of this Agreement or other Loan Documents, or any
transaction contemplated by this Agreement or other Loan Documents,
other than as specified in subsection (c) below; or
(c) by reason of or in connection with the execution and
delivery or transfer of, or payment or failure to make payment under
this Agreement, the Letters of Credit or any other Loan Document;
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provided, that the Borrower shall not be required to indemnify any such
party pursuant to this Section 9.05(c) for any claims, damages, losses,
liabilities, costs or expenses to the extent caused by (i) the Issuing
Lender's willful misconduct or gross negligence in determining whether
documents presented under the Letters of Credit comply with terms of
the Letters of Credit or (ii) the Issuing Lender's willful or grossly
negligent failure to make lawful payment under the Letters of Credit
after the presentation to it of a certificate strictly complying with
the terms and conditions of the Letters of Credit.
Nothing in this Section 9.05 is intended to limit the Borrower's obligations
contained in Article II. Without prejudice to the survival of any other
obligation of the Borrower hereunder, the indemnities and obligations of the
Borrower contained in this Section 9.05 shall survive the payment in full of
amounts payable pursuant to Article II and Article III and the termination of
the Commitment.
SECTION 9.06 Liability of the Lenders
The Borrower assumes all risks of the acts or omissions of each
beneficiary or transferee of the Letters of Credit with respect to their use of
the Letters of Credit. None of the Issuing Lender, the Administrative Agent, the
Lenders nor any of their respective officers or directors shall be liable or
responsible for: (a) the use which may be made of the Letters of Credit or any
acts or omissions of each beneficiary or transferee in connection therewith;
(b) the validity, sufficiency or genuineness of documents, or of any endorsement
thereon, even if such documents should prove to be in any or all respects
invalid, insufficient, fraudulent or forged; (c) payment by the Issuing Lender
against presentation of documents which do not comply with the terms of the
Letters of Credit, including failure of any documents to bear any reference or
adequate reference to the Letters of Credit; or (d) any other circumstances
whatsoever in making or failing to make payment under the Letters of Credit,
except that the Borrower shall have a claim against the Issuing Lender and the
Issuing Lender shall be liable to the Borrower, to the extent of any direct, as
opposed to consequential, damages suffered by the Borrower which the Borrower
proves were caused by (i) the Issuing Lender's willful misconduct or gross
negligence in determining whether documents presented under the Letters of
Credit are genuine or comply with the terms of the Letters of Credit or (ii)
the Issuing Lender's willful or grossly negligent failure, as determined by a
court of competent jurisdiction, to make lawful payment under the Letters of
Credit after the presentation to it of a certificate strictly complying with
the terms and conditions of the Letters of Credit. In furtherance and not in
limitation of the foregoing, the Issuing Lender may accept original or facsimile
(including telecopy) certificates presented under the Letters of Credit that
appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary.
SECTION 9.07 Costs, Expenses and Taxes
(a) The Borrower agrees to pay on demand all costs and expenses in
connection with the preparation, issuance, delivery, filing, recording, and
administration of this Agreement, the Letters of Credit, the Extensions of
Credit and any other documents which may be delivered in connection with this
Agreement, including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for the Administrative Agent and the Issuing Lender incurred
in connection with the preparation and negotiation of this Agreement, the
Letters of Credit, the Extensions of Credit and any document delivered in
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connection therewith and all costs and expenses incurred by the Administrative
Agent (and, in the case of clause (iii) or (iv) below, any Lender) (including
reasonable fees and out of pocket expenses of counsel) in connection with
(i) the transfer, drawing upon, change in terms, maintenance, renewal or
cancellation of this Agreement, the Extensions of Credit and the Letters of
Credit, (ii) any and all amounts which the Administrative Agent or any Lender
has paid relative to the Administrative Agent's or such Lender's curing of any
Event of Default resulting from the acts or omissions of the Borrower under
this Agreement or any other Loan Document, (iii) the enforcement of, or
protection of rights under, this Agreement or any other Loan Document (whether
through negotiations, legal proceedings or otherwise), (iv) any action or
proceeding relating to a court order, injunction, or other process or decree
restraining or seeking to restrain the Issuing Lender from paying any amount
under the Letters of Credit or (v) any waivers or consents or amendments to or
in respect of this Agreement, the Extensions of Credit or the Letters of
Credit requested by the Borrower. In addition, the Borrower shall pay any and
all stamp and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing and recording of this Agreement,
the Letters of Credit, the Extensions of Credit or any of such other documents,
and agree to save the Issuing Lender, the Administrative Agent and the Lenders
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes and fees.
(b) If any payment of principal of, or Conversion of, any LIBOR Rate
Loan is made other than on the last day of the Interest Period for such LIBOR
Rate Loan, as a result of a payment or Conversion pursuant to Section 7.02 or
for any other reason, the Borrower shall, upon demand by any 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 or Conversion, including, without limitation, any loss
(including 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 LIBOR Rate Loan.
SECTION 9.08 Binding Effect
This Agreement shall become effective when it shall have been executed
and delivered by the Borrower and the Issuing Lender, the Administrative Agent
and the Lenders and thereafter shall (a) be binding upon the Borrower, its
successors and assigns, and (b) inure to the benefit of and be enforceable by
the Lenders and each of their respective successors, assigns and permitted
transferees; provided, that the Borrower may not assign all or any part of its
rights or obligations under this Agreement without the prior written consent
of the Lenders.
SECTION 9.09 Assignments and Participation
(a) Each Lender may assign to one or more Eligible Assignees all or a
portion of its rights and obligations under this Agreement and the Loan
Documents (including, without limitation, all or a portion of its Commitment
and the Extensions of Credit owing to it); provided, that (i) the Borrower
(unless a Default or an Event of Default shall have occurred and be continuing)
shall have consented to such assignment (such consent not to be unreasonably
withheld or delayed) by signing the Assignment and Acceptance referred to in
clause (iii) below, (ii) each such assignment shall be in a minimum amount of
$5,000,000 (or, if less, the entire amount of such Lender's Commitment) and be
of a constant, and not a varying, percentage of all of the assigning Lender's
-63-
rights and obligations under this Agreement and the Loan Documents and (iii)
the parties to each such assignment shall execute and deliver to the
Administrative Agent, for its acceptance and recording in the Register (as
defined in Section 9.09(c)), an Assignment and Acceptance, together with a
processing and recordation fee of $3,500, payable by the assigning Lender
or the Eligible Assignee, as agreed upon by such parties. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in each Assignment and Acceptance, (x) the Eligible 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 (y) the Lender assignor 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). Notwithstanding anything to the contrary contained in this
Agreement, any Lender may at any time assign all or any portion of the
Extensions of Credit owing to it to any Affiliate of such Lender. No such
assignment referred to in the preceding sentence, other than to an Affiliate of
such Lender consented to by the Borrower (such consent not to be unreasonably
withheld or delayed), shall release the assigning Lender from its obligations
hereunder. Nothing contained in this Section 9.09 shall be construed to relieve
the Issuing Lender of any of its obligations under the Letters of Credit.
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the Eligible 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 any other Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
Loan Document 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 the Borrower or the
performance or observance by the Borrower of any of its obligations under this
Agreement or any other Loan Document or any other instrument or document
furnished pursuant hereto or thereto; (iii) such Eligible Assignee confirms that
it has received a copy of this Agreement, together with copies of the financial
statements referred to in Section 5.01(f) 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 Eligible
Assignee will, independently and without reliance upon the Administrative 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
Eligible Assignee appoints and authorizes the Administrative Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to it by the terms hereof, together with such powers as are
reasonably incidental thereto; and (vi) such Eligible 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.
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(c) The Administrative Agent shall maintain at its address referred to
in Section 9.02 a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and addresses of
the Lenders and the Commitment of, and principal amount of the Extensions of
Credit 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 the Borrower, the Administrative Agent, the Issuing Lender 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 the Borrower or any Lender at any reasonable time and from
time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Eligible Assignee, the Administrative Agent shall, if
such Assignment and Acceptance has been completed and is in substantially the
form of Exhibit I hereto, and has been signed by the Borrower (if the Borrower's
consent is required), (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice of
such recordation to the Borrower.
(e) Each Lender may sell participations to one or more banks, financial
institutions or other entities (a "Participant") in all or a portion of its
rights and obligations under this Agreement and the Loan Documents (including,
without limitation, all or a portion of its Commitment and the Extensions of
Credit owing to it); provided, that (i) such Lender's obligations under this
Agreement (including, without limitation, its Commitment to the Borrower
hereunder) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
and (iii) the Borrower, the Administrative 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. Any agreement pursuant to
which any Lender may grant such a participating interest shall provide that such
Lender shall retain the sole right and responsibility to enforce the obligations
of the Borrower hereunder including, without limitation, the right to approve
any amendment, modification or waiver of any provision of this Agreement;
provided, that such participation agreement may provide that such Lender will
not agree to any modification, amendment or waiver of this Agreement which would
(a) waive, modify or eliminate any of the conditions precedent specified in
Article IV, (b) increase or extend the Commitments of the Lenders or subject the
Lenders to any additional obligations, (c) forgive principal, interest, fees or
other amounts payable hereunder or reduce the rate at which interest or any fee
is calculated, (d) postpone any date fixed for any payment of principal,
interest, fees or other amounts payable hereunder, (e) change the Commitment
Percentage or the number of Lenders which shall be required for the Lenders or
any of them to take any action hereunder, or (f) amend this Section 9.09(e).
(f) Any Lender may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section 9.09 and in
accordance with Section 9.16, disclose to the Eligible Assignee or Participant
or proposed Eligible Assignee or Participant, any Information relating to the
Borrower furnished to such Lender by or on behalf of the Borrower; provided,
that prior to any such disclosure, the Eligible Assignee or Participant or
proposed Eligible Assignee or Participant shall agree to preserve the
confidentiality of any confidential information relating to the Borrower
received by it from such Lender and use it only for purposes of this Agreement,
-65-
the Loan Documents and the transactions contemplated hereby and thereby, or for
any other reason, directly or indirectly, relating to this Agreement; provided,
further, that the Eligible Assignee or Participant or proposed Eligible Assignee
or Participant may disclose any such information to the extent such disclosure
is required by law or requested by any regulatory authority.
(g) Anything in this Section 9.09 to the contrary notwithstanding, any
Lender may assign and pledge all or any portion of its Commitment and the
Extensions of Credit and other obligations owing to it to any Federal Reserve
Lender (and its transferees) as collateral security pursuant to Regulation A of
the Board of Governors of the Federal Reserve System and any Operating Circular
issued by such Federal Reserve Lender. No such assignment shall release the
assigning Lender from its obligations hereunder.
(h) If any Lender shall make any demand for payment under Section 2.15,
then within thirty (30) days after any such demand, the Borrower may, with the
approval of the Administrative Agent (which approval shall not be unreasonably
withheld) and provided, that no Event of Default or Default shall then have
occurred and be continuing, demand that such Lender assign in accordance with
this Section 9.09 to one or more Eligible Assignees designated by the Borrower
all (but not less than all) of such Lender's Commitment and the Extensions of
Credit and other obligations owing to it within the period ending on such 30th
day. If any such Eligible Assignee designated by the Borrower shall fail to
consummate such assignment on terms reasonably acceptable to such Lender, or if
the Borrower shall fail to designate any such Eligible Assignees for all or part
of such Lender's Commitment or Extensions of Credit, then such demand by the
Borrower shall become ineffective; it being understood for purposes of this
subsection (h) that such assignment shall be conclusively deemed to be on terms
reasonably acceptable to such Lender, and such Lender shall be compelled to
consummate such assignment to an Eligible Assignee designated by the Borrower,
if such Eligible Assignee (i) shall agree to such assignment by entering into an
Assignment and Acceptance in substantially the form of Exhibit I hereto with
such Lender and (ii) shall offer compensation to such Lender in an amount equal
to all amounts then owing by the Borrower to such Lender hereunder, whether for
principal, interest, fees, costs or expenses (other than the demanded payment
referred to above and payable by the Borrower as a condition to the Borrower's
right to demand such assignment), or otherwise.
SECTION 9.10 Severability
Any provision of this Agreement which is prohibited, unenforceable or
not authorized in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition, unenforceability or
non-authorization without invalidating the remaining provisions hereof or
affecting the validity, enforceability or legality of such provision in any
other jurisdiction.
SECTION 9.11 Governing Law
This agreement shall be governed by, and construed in accordance with,
the laws of the state of New York.
SECTION 9.12 Headings
Section headings in this Agreement are included herein for convenience
of reference only and shall not constitute a part of this Agreement for any
other purpose.
-66-
SECTION 9.13 Submission To Jurisdiction; Waivers
The Borrower hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgment
in respect thereof, to the non-exclusive general jurisdiction of the
Courts of the State of New York, the courts of the United States of
America for the Southern District of New York, and appellate courts
from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Borrower at its address set forth in Section 9.02 or at
such other address of which the Administrative Agent shall have been
notified pursuant thereto; and
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction.
This Section 9.13 shall not be construed to confer a benefit upon, or grant a
right or privilege to, any Person other than the parties hereto.
SECTION 9.14 Acknowledgments
The Borrower hereby acknowledges:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and other Loan Documents;
(b) neither the Administrative Agent, the Issuing Lender nor
any Lender has a fiduciary relationship to the Borrower, and the
relationship between the Administrative Agent, the Issuing Lender and
any Lender, on the one hand, and the Borrower on the other hand, is
solely that of debtor and creditor; and
(c) no joint venture exists between the Borrower and the
Administrative Agent, the Issuing Lender or any Lender.
SECTION 9.15 Waivers of Jury Trial
Each of the Borrower, the Administrative Agent, the Issuing Lender and
the Lenders hereby irrevocably and unconditionally waives trial by jury in any
legal action or proceeding relating to this agreement or any other Loan Document
and for any counterclaim therein. This Section 9.15 shall not be construed to
confer a benefit upon, or grant a right or privilege to, any person other than
the parties hereto.
SECTION 9.16 Confidentiality
(a) Each of the Administrative Agent, the Issuing Lender and the Lenders
agrees to maintain the confidentiality of the Information (as defined below),
and use it only for
-67-
purposes of this Agreement, the Loan Documents and the transactions contemplated
hereby and thereby, or for any other reason, directly or indirectly, relating to
this Agreement, except that Information may be disclosed (i) to its and its
Affiliates' directors, officers, employees and agents, including accountants,
legal counsel and other advisors (it being understood that the Persons to whom
such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential); (ii) to the
extent requested by any regulatory authority; (iii) to the extent required by
Applicable Law; (iv) to any other party to this Agreement; (v) in connection
with the exercise of any remedies hereunder or any suit, action or proceeding
relating to this Agreement or the enforcement of rights hereunder; (vi) subject
to an agreement containing provisions substantially the same as those of this
Section, to (x) any Eligible Assignee of or Participant in, or any prospective
Eligible Assignee of or Participant in, any of its rights or obligations under
this Agreement or (y) any direct or indirect contractual counterparty or
prospective counterparty (or such contractual counterparty's or prospective
counterparty's professional advisor) to any credit derivative transaction
relating to obligations of the Borrower; (vii) with the written consent of the
Borrower; (viii) to the extent such Information becomes publicly available
other than as a result of a breach of this Section or (ix) becomes available to
the Administrative Agent or any Lender on a nonconfidential basis from a source
other than the Borrower and such source is not known by the Administrative Agent
or such Lender to be in violation of a duty of confidentiality; or (x) to the
National Association of Insurance Commissioners or any other similar
organization.
(b) The Administrative Agent and the Lenders may disclose the existence
of this Agreement and information about this Agreement to market data
collectors, similar service providers to the lending industry, and service
providers to the Administrative Agent and the Lenders in connection with the
administration and management of this Agreement, the other Loan Documents, the
Commitments, and the Extensions of Credit; provided, however, that information
disclosed by the Administrative Agent or any Lender to any such market data
collectors or similar service providers shall be of a type generally provided to
such Persons in other transactions. For the purposes of this Section 9.16,
"Information" means all non-public information received from the Borrower
relating to the Borrower or its business. Notwithstanding anything herein to the
contrary, Information, for purposes of this Section 9.16, shall not include, and
the Administrative Agent and each Lender may disclose to any and all Persons,
without limitation of any kind, any information with respect to the U.S. federal
income tax treatment and U.S. federal income tax structure of the transactions
contemplated hereby and all materials of any kind (including opinions or other
tax analyses) that are provided to the Administrative Agent or such Lender
relating to such tax treatment and tax structure.
(c) The Borrower acknowledges that one or more of the Lenders may treat
its Loans as part of a transaction that is subject to Treasury Regulation
Section 1.6011-4 or Section 301.6112-1, and the Administrative Agent and such
Lender or Lenders, as applicable, may file such IRS forms or maintain such lists
or other records as they may determine are required by such Treasury
Regulations.
(d) Any Person required to maintain the confidentiality of Information
as provided in this Section 9.16 shall be considered to have complied with its
obligation to do so if such Person has exercised the same degree of care to
maintain the confidentiality of such Information as such Person would accord to
-68-
its own confidential information. Each of the Administrative Agent, the Issuing
Lender, the Lenders and the Participants shall promptly notify the Borrower of
its receipt of any subpoena or similar process or authority, unless prohibited
therefrom by the issuing Person.
SECTION 9.17 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.
[SIGNATURE PAGES ATTACHED]
-69-
IN WITNESS WHEREOF, the parties hereto have caused his Agreement to be
duly executed and delivered by their respective duly authorized officers as of
the date first above written.
THE BORROWER:
SOUTH JERSEY GAS COMPANY
By: /s/ David A. Kindlick
--------------------------------
David A. Kindlick
Executive Vice President & Chief
Financial Officer
S-1
Counterpart signature page to the Three Year Revolving Credit
Agreement] dated as of August 21, 2003
among South Jersey Gas Company
Wachovia Bank, National Association and the participating banks a party thereto
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Administrative Agent, as Issuing
Lender, as Swingline Lender and as a
Lender
By: /s/ Lawrence P. Sullivan
--------------------------------
Name:Lawrence P. Sullivan
Title:Vice President
S-2
Counterpart signature page to the Three Year Revolving Credit
Agreement dated as of August 21, 2003
among South Jersey Gas Company
Wachovia Bank, National Association and the participating banks a party thereto
CITIZENS BANK OF PENNSYLVANIA,
as Co-Syndication Agent and as a Lender
By: /s/ Stephen M. Wilus
--------------------------------
Name:
Title:
S-3
Counterpart signature page to the Three Year Revolving Credit Agreement
dated as of August 21, 2003
among South Jersey Gas Company
Wachovia Bank, National Association and the participating banks a party thereto
JP MORGAN CHASE BANK,
as Co-Syndication Agent and as a Lender
By: /s/ Brendan L. Walsh
---------------------------------
Name: Brendan L. Walsh
Title:Vice President
S-4
Counterpart signature page to the Three Year Revolving Credit Agreement
dated as of August 21, 2003
among South Jersey Gas Company
Wachovia Bank, National Association and the participating banks a party thereto
PNC BANK NATIONAL ASSOCIATION,
as Co-Syndication Agent and as a Lender
By: /s/ Denise D. Killen
---------------------------------
Name:Denise D. Killen
Title: Vice President
S-5
Counterpart signature page to the Three Year Revolving Credit Agreement
dated as of August 21, 2003
among South Jersey Gas Company
Wachovia Bank, National Association and the participating banks a party thereto
BANK OF NEW YORK,
as a Lender
By: /s/ Charlotte Sohn Fuiks
---------------------------------
Name: Charlotte Sohn Fuiks
Title:Vice President
S-6
Counterpart signature page to the Three Year Revolving Credit Agreement
dated as of August 21, 2003
among South Jersey Gas Company
Wachovia Bank, National Association and the participating banks a party thereto
FLEET NATIONAL BANK,
as a Lender
By: /s/ Russ J. Lopinto
---------------------------------
Name: Russ J. Lopinto
Title: Senior Vice President
S-7
Counterpart signature page to the Three Year Revolving Credit Agreement
dated as of August 21, 2003
among South Jersey Gas Company
Wachovia Bank, National Association and the participating banks a party thereto
SUN NATIONAL BANK,
as a Lender
By: /s/ Peter Villa
---------------------------------
Name: Peter Villa
Title: Vice President
S-8
Counterpart signature page to the Three Year Revolving Credit Agreement
dated as of August 21, 2003
among South Jersey Gas Company
Wachovia Bank, National Association and the participating banks a party thereto
SCHEDULE I
LENDERS AND APPLICABLE LENDING OFFICES,
COMMITMENTS AND INITIAL COMMITMENT PERCENTAGES
Lender and Applicable
Lending Office
Initial Commitment
Applicable Lending Office Commitment Percentages
- ------------------------- ---------- -----------
Wachovia Bank, National Association
Domestic Lending Office and $20,000,000.00 20%
LIBOR Lending Office:
One Wachovia Center
201 South College Street
Charlotte, North Carolina 28288
Attn: Agency Services
Telephone: (704) 374-2698
Facsimile: (704) 383-0835
Citizens Bank of Pennsylvania $17,142,857.14 17.1429%
CML Operations
RDC 160
One Citizens Drive
Riverside, Rhode Island 19103
Attn: Karen Hazard
Telephone: 401-734-5297
Facsimile: 401-734-5385
JPMorgan Chase Bank $17,142,857.14 17.1429%
695 Route 46 West
Fairfield, New Jersey 07004
Attn: Alice Shanahan
Telephone: (973) 439-5034
Facsimile: (973) 439-5014
I-1
PNC Bank, National Association $17,142,857.14 17.1429%
500 First Avenue
Pittsburgh, Pennsylvania 15219
Attn: Marc Accamando
Telephone: (412) 768-7647
Facsimile: (412) 768-4586
The Bank of New York $10,714,285.71 10.7143%
One Wall Street, 19th Floor
New York, New York 10286
Attn: Lisa Williams
Telephone: (212) 635-7535
Facsimile: (212) 635-7552
Fleet National Bank $10,714,285.71 10.7143%
750 Walnut Avenue
Cranford, New Jersey 07016
Attn: Lekha Chopra
Telephone: (908) 709-5688
Facsimile: (908) 709-6433
Sun National Bank $7,142,857.14 7.1429%
401 Landis Avenue
Vineland, New Jersey 08360
Attn: Carol A. Hallman
Telephone: (856) 205-0222
Facsimile: (856) 609-8543
I-2
Schedule II
Ownership
---------
Ownership Classification
Entity Name Owner Interest of Interest
- ----------- ----- -------- -----------
South Jersey South Jersey Industries, Inc. 100% Common Equity
Gas Company
II-1
Schedule III
First Mortgage Notes
--------------------
Series Outstanding
Bonds of the Seventeenth Series $9,089,000
Bonds of the Eighteenth Series $31,850,000
Bonds of the Nineteenth Series $35,000,000
Bonds of the Twentieth Series $99,965,000
Bonds of the Twenty-First Series $85,500,000
III-1
Exhibit 31.1
CERTIFICATION
I, Charles Biscieglia, certify that:
1. I have reviewed this quarterly report on Form 10-Q of South Jersey
Industries, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent function):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
SJI-39
Date: November 14, 2003 /s/ Charles Biscieglia
________________________________________
Charles Biscieglia
Chairman & Chief Executive Officer
SJI-40
Exhibit 31.2
CERTIFICATION
I, David A. Kindlick, certify that:
1. I have reviewed this quarterly report on Form 10-Q of South Jersey
Industries, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent function):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
SJI-41
Date: November 14, 2002 /s/ David A. Kindlick
___________________________________
David A. Kindlick
Vice President, Treasurer &
Chief Financial Officer
SJI-42
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the filing of the Quarterly Report on Form 10-Q of
South Jersey Industries, Inc. (the "Company") for the period ended September 30,
2003 as filed with the Securities and Exchange Commission on the date hereof
(the "Report"), I, Charles Biscieglia, Chief Executive Officer of the Company,
hereby certify pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) The Report fully complies with the requirements of Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/ Charles Biscieglia
________________________________
Name: Charles Biscieglia
Title: Chairman & Chief Executive Officer
November 14, 2003
SJI-43
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the filing of the Quarterly Report on Form 10-Q of
South Jersey Industries, Inc. (the "Company") for the period ended September 30,
2003 as filed with the Securities and Exchange Commission on the date hereof
(the "Report"), I, David A. Kindlick, Chief Financial Officer of the Company,
hereby certify pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) The Report fully complies with the requirements of Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/ David A. Kindlick
____________________________
Name: David A. Kindlick
Title: Vice President, Treasurer & Chief Financial Officer
November 14, 2003
SJI-44