As Filed with the Securities and Exchange Commission on October 18, 1996
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Panda Funding Corporation
(Exact name of registrant as specified in its charter)
Delaware 75-2660911
(State or other (I.R.S. Employer
jurisdiction of (Primary Standard Industrial Identification No.)
incorporation or Classification Code Number)
organization)
Panda Interfunding Corporation
(Exact name of registrant as specified in its charter)
Delaware 75-2660915
(State or other (I.R.S Employer
jurisdiction of (Primary Standard Industrial Identification No.)
incorporation or Classification Code Number)
organization)
William C. Nordlund William C. Nordlund
Senior Vice President and Senior Vice President and
General Counsel General Counsel
Panda Funding Corporation Panda Interfunding Corporation
4100 Spring Valley Road, Suite 1001 4100 Spring Valley Road, Suite 1001
Dallas, Texas 75244 Dallas, Texas 75244
(972) 980-7159 (972) 980-7159
(Name, address, including zip code, (Name, address, including zip code,
and telephone number including area and telephone number, including area
code, of registrant's principal code, of guarantor's principal
executive offices and agent for executive offices and agent for service)
service)
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of Each Class of Amount to Maximum Maximum Amount of
Securities to be be Offering Aggregate Registration
Registered Registered Price Offering Fee
Per Share Price
11-5/8 % Pooled
Project Bonds, $105,525,000 100% $105,525,000 $36,388
Series A-1 due 2012
The Registrant and the Co-Registrant hereby amend this Registration
Statement on such date or dates as may be necessary to delay its effective
date until the Registrant and the Co-Registrant shall file a further
amendment which specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the Registration Statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a), may
determine.
PANDA FUNDING CORPORATION
PANDA INTERFUNDING CORPORATION
Cross Reference Sheet
Pursuant to Item 501(b) of Regulation S-K
1. Forepart of the Registration
Statement and Outside
Front Cover Page of Prospectus Outside Front Cover Page of
Prospectus; Facing Pages
2. Inside Front and Outside Back
Cover Pages of Prospectus Inside Front and Outside Back
Cover Pages of Prospectus
3. Summary Information, Risk
Factors and Ratio of Earnings
to Fixed Charges Prospectus Summary; Risk
Factors; Unaudited Pro Forma
Financial Data; Selected
Combined Financial Data
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price *
6. Dilution *
7. Selling Security Holders *
8. Plan of Distribution Outside Front Cover Page of
Prospectus; Prospectus
Summary; The Exchange Offer;
Plan of Distribution
9. Description of Securities to
be Registered Prospectus Summary;
Description of the Exchange
Bonds
10. Interests of Named Experts
and Counsel Legal Matters; Experts
11. Information with Respect to
the Registrant Outside Front Cover Page of
Prospectus; Available Information;
Prospectus Summary; Risk Factors;
The Company, the Issuer and Panda
International; Use of Proceeds;
Capitalization; Unaudited Pro Forma
Financial Data; Selected Combined
Financial Data; Management's
Discussion and Analysis of
Financial Condition and Results of
Operations; The Exchange Offer;
Certain U.S. Federal Income Tax
Considerations of the Exchange Offer;
Business; Description of the Projects;
Legal Proceedings; Regulation;
Management; Description of the Project
Debt; Description of the Exchange
Bonds; Old Bonds Registration Rights;
Plan of Distribution; Legal Matters;
Experts; Combined Financial
Statements; Defined Terms;
Consolidated Pro Forma Report;
Rosemary Engineering Report; Rosemary
Fuel Consultant's Report; Brandywine
Pro Forma Report; Brandywine Engineering
Report; Brandywine Fuel Consultant's
Report
12. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities *
* Not applicable
******************************************************************************
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
******************************************************************************
SUBJECT TO COMPLETION, OCTOBER 18, 1996
PROSPECTUS
OFFER TO EXCHANGE
11-5/8% Pooled Project Bonds, Series A-1 due 2012
which have been registered under the Securities Act
for any and all outstanding
11-5/8% Pooled Project Bonds, Series A due 2012 [LOGO]
of
PANDA FUNDING CORPORATION
Unconditionally Guaranteed By
PANDA INTERFUNDING CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON _____________, 1996, UNLESS EXTENDED.
Panda Funding Corporation, a Delaware corporation (the "Issuer"), a
special purpose finance subsidiary of Panda Interfunding Corporation, a
Delaware corporation (the "Company"), hereby offers, upon the terms and
subject to the conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal (the "Letter of Transmittal", which
together with this Prospectus constitute the "Exchange Offer"), to
exchange up to $105,525,000 in aggregate principal amount of its 11-5/8%
Pooled Project Bonds, Series A-1 due 2012 (the "Exchange Bonds") for a
like principal amount of its issued and outstanding 11-5/8% Pooled Project
Bonds, Series A due 2012 (the "Old Bonds") that were issued and sold in a
transaction exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act"). The terms of the Exchange Bonds are
substantially identical to the terms of the Old Bonds, except that the
Exchange Bonds (i) will have been registered under the Securities Act, and
(ii) holders of the Exchange Bonds will not be entitled to certain rights
of holders of the Old Bonds under the Registration Rights Agreement (as
defined herein), which rights will terminate upon the consummation of the
Exchange Offer. Such rights will also terminate as to holders of Old
Bonds who are eligible to tender their Old Bonds for exchange in the
Exchange Offer and fail to do so. See "The Exchange Offer -- Termination
of Certain Rights." The Exchange Bonds will evidence the same debt as the
Old Bonds which they replace and will be issued under, and be entitled to
the benefits of, the indenture governing the Old Bonds dated July 31, 1996
(the "Indenture"). As of the date of this Prospectus, $105,525,000
principal amount of Old Bonds is outstanding. The Old Bonds and the
Exchange Bonds are sometimes referred to herein collectively as the
"Existing Bonds."
The Exchange Bonds will bear interest from the date of issuance, at
the rate per annum set forth above, payable semiannually in cash in
arrears on February 20 and August 20 of each year, commencing February 20,
1997. Interest on the Old Bonds accepted for exchange will accrue thereon
to, but not including, the date of issuance of the Exchange Bonds and will
be paid together with the first interest payment on the Exchange Bonds
issued in exchange therefor. The principal of the Exchange Bonds is
payable semiannually in installments as described herein commencing
February 20, 1997. The Exchange Bonds will mature on August 20, 2012, and
will be redeemable at the option of the Issuer, in whole or in part, from
time to time on or after August 20, 2001, at the redemption prices set
forth herein, plus accrued and unpaid interest to the redemption date. In
addition, the Issuer is required to redeem the Exchange Bonds, in whole or
in part, upon the occurrence of certain events as set forth herein.
Payment of principal of, and premium, if any, and interest on the Exchange
Bonds is unconditionally guaranteed by the Company (the "Company
Guaranty"). The Exchange Bonds are payable from amounts received by the
Issuer from the repayment of the note issued by the Company (the "Initial
Company Note") to the Issuer in connection with the loan to the Company of
the proceeds from the issuance of the Old Bonds and from payments, if any,
under the Company Guaranty. The payments on the Initial Company Note are
identical to payments of principal of, and premium, if any, and interest
on the Existing Bonds. See "Description of the Exchange Bonds."
Subject to the terms and conditions of the Exchange Offer, the Issuer
will accept for exchange any and all Old Bonds validly tendered and not
withdrawn prior to 5:00 p.m., New York City time, on _____________, 1996,
unless extended by the Issuer in its sole discretion (the "Expiration
Date"). Tenders of Old Bonds may be withdrawn at any time prior to the
Expiration Date. The Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Old Bonds being tendered or accepted for
exchange. However, the Exchange Offer is subject to certain customary
conditions. See "The Exchange Offer -- Conditions of the Exchange Offer."
The Old Bonds may be tendered only in integral multiples of $1,000.
Prior to the consummation of the Exchange Offer, there has been no
public market for the Exchange Bonds. The Issuer does not intend to
apply for the listing of the Exchange Bonds on any securities exchange or
to seek approval for quotation through any automated quotation system,
and no active public market for the Exchange Bonds is currently
anticipated. There can be no assurance that an active public market for
the Exchange Bonds will develop.
(continued on next page)
See "Risk Factors" beginning on page 26 for a discussion of certain
matters that should be considered in connection with the Exchange Offer
and an investment in the Exchange Bonds offered hereby.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is _______________, 1996.
(cover page continued)
The Issuer and the Company were recently formed by Panda Energy
International, Inc., a Texas corporation and the ultimate parent
entity of the Company ("Panda International"), as vehicles for
financing future power project development through the transfer of
projects to the Company and the issuance of Bonds (as defined
herein) by the Issuer. Panda International has initially transferred
to a subsidiary of the Company its 100% indirect equity interests in
two electric power generation projects in the United States, one
operating and one expected to commence commercial operations in
November 1996. The Exchange Bonds are secured by, among other
collateral, pledges of, or grants of security interests in, (i) all
distributions the Company receives from its subsidiaries that own
interests in U.S. projects, (ii) all capital stock of the Company,
the Issuer and such subsidiaries, (iii) certain Company accounts
established to capture distributions from such subsidiaries and (iv)
the Initial Company Note. The Exchange Bonds are not secured by any
direct equity interests in, or assets of, any projects or by any
interest in distributions from subsidiaries of the Company that may
own interests in future non-U.S. projects, if any, or by any
accounts established in respect of such non-U.S. project
distributions; however, such non-U.S. accounts and distributions
will be pledged to the Company to secure loans from the Company to
such subsidiaries of the proceeds of any future series of Bonds
issued to finance non-U.S. projects.
The Old Bonds were originally issued and sold on July 31, 1996
in a transaction not registered under the Securities Act in reliance
upon the exemptions provided in Section 4(2) of the Securities Act
and Rule 144A promulgated under the Securities Act ("Rule 144A").
Accordingly, the Old Bonds may not be offered or sold, except
pursuant to an exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act. Based upon its
view of interpretations provided to third parties by the staff of
the Securities and Exchange Commission (the "Commission"), the
Company believes that the Exchange Bonds issued pursuant to the
Exchange Offer may be offered for resale, resold and otherwise
transferred by holders thereof (other than any holder which is (i)
an "affiliate" of the Company or the Issuer within the meaning of
Rule 405 promulgated under the Securities Act (an "Affiliate"), (ii)
a broker-dealer who acquired Old Bonds directly from the Issuer or
(iii) a broker-dealer who acquired Old Bonds as a result of market
making or other trading activities) without registration under the
Securities Act, provided that such Exchange Bonds are acquired in
the ordinary course of such holders' business and such holders are
not engaged in, and do not intend to engage in, and have no
arrangement or understanding with any person to participate in, a
distribution of such Exchange Bonds. Each broker-dealer that
receives Exchange Bonds for its own account pursuant to the Exchange
Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Bonds. The Letter of
Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of
Exchange Bonds received in exchange for Old Bonds where such Old
Bonds were acquired by such broker-dealer as a result of market
making activities or other trading activities. The Company and the
Issuer have agreed, for a period of 180 days after the consummation
of the Exchange Offer, to make available a prospectus meeting the
requirements of the Securities Act to any such broker-dealer for use
in connection with any such resale. A broker-dealer that delivers
such a prospectus to a purchaser in connection with such resales
will be subject to certain of the civil liability provisions under
the Securities Act and will be bound by the provisions of the
Registration Rights Agreement (including certain indemnification
provisions). Any holder who tenders in the Exchange Offer for the
purpose of participating in a distribution of the Exchange Bonds,
and any other holder that cannot rely upon such interpretations,
must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary
resale transaction. In addition, to comply with the securities laws
of certain jurisdictions, if applicable, the Exchange Bonds may not
be offered or sold unless they have been registered or qualified for
sale in such jurisdictions or an exemption from registration or
qualification is available and the conditions thereto have been met.
The Issuer expects that the Exchange Bonds issued pursuant to
the Exchange Offer to Qualified Institutional Buyers (as such term
is defined in Rule 144A) will be issued in the form of a fully
registered global bond which will be deposited with, or on behalf
of, The Depository Trust Company ("DTC") and registered in the name
of its nominee. Beneficial interest in the global bond representing
the Exchange Bonds will be shown on, and transfers thereof will be
effected only through, records maintained by DTC and its
participants. After the initial issuance of such global bond,
Exchange Bonds in certificated form will be issued in exchange for
the global bond as set forth in the Indenture. Any Exchange Bonds
issued pursuant to the Exchange Offer to non-Qualified Institutional
Buyers will be issued in registered certificated form. See
"Description of Exchange Bonds -- Book Entry; Delivery and Form."
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION AS TO
WHETHER ANY HOLDER OF OLD BONDS SHOULD TENDER OLD BONDS PURSUANT TO
THE EXCHANGE OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS OR IN THE LETTER OF TRANSMITTAL. IF
GIVEN OR MADE, SUCH RECOMMENDATIONS, INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE ISSUER OR
THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE
HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE
AFFAIRS OF THE ISSUER OR THE COMPANY SINCE THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES COVERED BY
THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SUCH SECURITIES BY ANY PERSON IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL.
DEFINED TERMS
All capitalized terms used in this Prospectus and not otherwise
defined herein have the meanings assigned in Part I of Appendix A
hereto. See also "Certain Technical Terms Commonly Used in the
Utility Industry" set forth in Part II of Appendix A hereto.
PRESENTATION OF FINANCIAL INFORMATION
Included in this Prospectus are historical and pro forma
combined financial statements which have been prepared on a "carved
out" basis and reflect the financial data of the entities that held
interests in the Panda-Brandywine Partnership and the Panda-Rosemary
Partnership, or their predecessors, during the periods presented.
The Company was not in existence during these historical periods;
however, the entities that currently own such partnership interests
are wholly-owned subsidiaries of the Company. Thus, references in
this Prospectus to the historical and pro forma combined financial
data of the "Company" are for convenience of reference, and it
should be understood that all such references are to the historical
and pro forma combined financial information of the entities that
held such interests during the periods presented.
AVAILABLE INFORMATION
The Company and the Issuer have filed with the Commission a
Registration Statement on Form S-1 (the "Registration Statement")
under the Securities Act with respect to the Exchange Bonds offered
hereby and the Company Guaranty. This Prospectus constitutes a part
of the Registration Statement and does not contain all of the
information set forth in the Registration Statement or the exhibits
thereto, certain parts of which have been omitted in accordance with
the rules and regulations of the Commission. For further
information pertaining to the Company, the Issuer, the Exchange
Bonds and the Company Guaranty, reference is made to the
Registration Statement, including the exhibits thereto. Statements
made in this Prospectus concerning the provisions of any documents
to which reference is made are not necessarily complete and, in the
case of documents filed as exhibits to the Registration Statement,
reference is made to the copy of the documents so filed for a more
complete description of the matter involved, and each such statement
shall be deemed qualified in its entirety by such reference.
As a result of this offering, the Company and the Issuer will
be subject to periodic reporting and other informational
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Registration Statement and the exhibits
thereto, as well as the periodic reports and other information filed
by the Company and the Issuer with the Commission, may be inspected
and copied at the public reference facility maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, Suite 1300, New
York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material may
also be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549.
The Company's and the Issuer's obligation to file periodic
reports with the Commission pursuant to the Exchange Act may be
suspended if the Exchange Bonds are held of record by fewer than 300
holders at the beginning of any fiscal year of the Company and the
Issuer, other than the fiscal year in which the Registration
Statement becomes effective. Pursuant to the Indenture, the Company
and the Issuer have agreed that, so long as the Company is not
subject to the reporting requirements of either Section 13 or 15(d)
of the Exchange Act, they will furnish to the Trustee copies of
annual, quarterly and current reports that the Company would be
required to file under the Exchange Act if it were subject to such
reporting requirements. In addition, subject to the limitations set
forth in the Indenture, upon the written request of a holder of
Bonds, the Issuer or the Company will provide without charge to such
holder or prospective investor, a copy of such information as is
required by Rule 144A to enable resales of Bonds to be made
pursuant to Rule 144A, unless at the time of such request the
Company or the Issuer is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act. Any such request will be
subject to the confidentiality provisions set forth below. Written
requests for such information should be addressed to Panda Funding
Corporation, c/o Panda Energy International, Inc., 4100 Spring
Valley Road, Suite 1001, Dallas, Texas 75244, Attention: Chief
Financial Officer.
By requesting additional information relating to the offering
of Bonds, each holder and prospective investor agrees to keep
confidential the various documents and all written information which
from time to time have been or will be disclosed to it concerning
the Issuer, the Company or any of their affiliates which is not
publicly available, and agrees not to disclose any portion of the
same to any person other than to its own consultants, except as may
be required by applicable law or in a legal proceeding involving the
Company or the Issuer.
Neither the Issuer, the Company nor any of their representatives
makes any recommendation to any holder of Old Bonds as to whether to
tender or refrain from tendering Old Bonds pursuant to the Exchange
Offer. Neither the Issuer, the Company nor any of their
representatives makes any representation to any offeree of the
Exchange Bonds offered hereby regarding the legality of any
investment by such offeree or purchaser under applicable legal
investment or similar laws. Each holder of Old Bonds should consult
with his or her own advisors as to legal, tax, business, financial
and related aspects of participation in the Exchange Offer and must
make his or her own decision with respect to the Exchange Offer.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and
should be read in conjunction with, the more detailed information and
the Company's combined financial statements, including the notes
thereto, appearing elsewhere in this Prospectus. Investors should
carefully consider the information set forth under "Risk Factors"
prior to making any decision to invest in the Exchange Bonds. For
definitions of certain terms used herein, see the glossary included
as Appendix A to this Prospectus.
This Prospectus contains forward-looking statements that involve
risks and uncertainties. Actual results may differ materially from
those discussed in the forward-looking statements. Factors that
might cause such a difference include, but are not limited to, those
discussed in "Risk Factors."
The Company, the Issuer and Panda International
General
Panda Interfunding Corporation (the "Company") is an indirect
wholly-owned Delaware subsidiary of Panda Energy International, Inc.,
a Texas corporation ("Panda International"). Panda Funding
Corporation (the "Issuer") is a wholly-owned Delaware subsidiary of
the Company organized for the sole purpose of issuing the Existing
Bonds and additional series of Pooled Project Bonds (the Existing
Bonds and all additional series, if any, are collectively referred to
herein as the "Bonds"). Panda International is an independent (i.e.,
non-utility) power company that is engaged principally in the
development, acquisition, ownership and operation of electric power
generation facilities, both in the United States and internationally.
The Company and the Issuer were recently formed by Panda
International as vehicles for financing future project development,
including the making of equity and debt investments in electric power
generation projects ("Projects"). Panda International intends to
transfer to subsidiaries of the Company a portfolio of Projects (the
"Project Portfolio") developed and to be developed by Panda
International, at the point in time when such Projects have reached
Financial Closing or achieved Commercial Operations, thereby reducing
development risk to the Company. Distributions received by the
Company from its subsidiaries that own interests in Projects in the
Project Portfolio ("Project Entities") will be used to make payments
on the Existing Bonds and on any additional series of Bonds issued in
connection with the inclusion of additional Projects in the Project
Portfolio.
As of the date of this Prospectus, the Project Portfolio
consists of indirect 100% equity interests in Project Entities that
own (i) a 180 megawatt ("MW") natural gas-fired, combined-cycle
cogeneration facility located in Roanoke Rapids, North Carolina (the
"Panda-Rosemary Facility"), which began commercial operations in
December 1990, and (ii) a 230 MW natural gas-fired, combined-cycle
cogeneration facility located in Brandywine, Maryland (the "Panda-
Brandywine Facility"), which the Company expects to begin commercial
operations in November 1996. These initial Projects were transferred
to the Project Portfolio at no cost to the Company. The transfer of
any additional Projects will be made pursuant to an agreement (the
"Additional Projects Contract") among Panda International, its
principal development subsidiary and the Company. See "Additional
Projects Contract" below.
Initial Project Portfolio
Panda-Rosemary
The Panda-Rosemary Facility is owned by Panda-Rosemary, L.P., a
Delaware limited partnership (the "Panda-Rosemary Partnership"). The
only partners of the Panda-Rosemary Partnership are indirect wholly-
owned subsidiaries of the Company. The Panda-Rosemary Facility uses
natural gas as its primary fuel to produce electricity and thermal
energy in the form of steam. The electric capacity of and electric
energy produced by the Panda-Rosemary Facility is sold to Virginia
Electric and Power Company ("VEPCO"). Steam and chilled water
produced by the Panda-Rosemary Facility are sold to The Bibb Company
("Bibb"), which operates a textile mill adjacent to the Panda-
Rosemary Facility. The Panda-Rosemary Partnership has entered into
agreements with Natural Gas Clearinghouse ("NGC") for natural gas
supply and fuel management services, with Transcontinental Gas Pipe
Line Corporation ("Transco"), Texas Gas Transmission Corporation
("Texas Gas") and CNG Transmission Corporation ("CNG") for firm
transportation of natural gas and with certain other parties to
provide pipeline operation, gas balancing and interruptible
transportation services. University Technical Services, Inc. ("U-
Tech"), a subsidiary of EMCOR Group, Inc., provides operation and
maintenance services to the Panda-Rosemary Facility.
Concurrently with the offering of the Old Bonds (the "Prior
Offering"), Panda-Rosemary Funding Corporation, a wholly-owned
subsidiary of the Panda-Rosemary Partnership, consummated the
offering and sale of $111.4 million in aggregate principal amount of
its 8-5/8% First Mortgage Bonds due 2016 (the "Rosemary Bonds"). The
Rosemary Bonds were issued pursuant to an indenture among the Panda-
Rosemary Partnership, Panda-Rosemary Funding Corporation and Fleet
National Bank, as trustee thereunder (the "Rosemary Indenture"). The
Rosemary Indenture contains various affirmative and negative
covenants, including limitations on the ability of the Panda-Rosemary
Partnership to make distributions to its partners. Subject to certain
other conditions, the Panda-Rosemary Partnership may make
distributions to its partners only if: (i) amounts deposited in
certain funds established pursuant to the Rosemary Indenture are
equal to or greater than the amounts required to be deposited
therein, including debt service and debt service reserve funds; (ii)
no event has occurred and is continuing and no condition exists that
constitutes an event of default under the Rosemary Indenture; (iii)
certain gas supply and transportation contracts that expire in
November 2005 and October 2006 have been extended or replaced prior
to November 30, 2005; and (iv) the Panda-Rosemary Facility meets
certain historical and projected debt service coverage requirements.
If the Panda-Rosemary Partnership is unable to make distributions to
its partners, the ability of the Issuer to make payments on the
Exchange Bonds would be materially and adversely affected. See "Risk
Factors -- Financial Risks" and "-- Project Risks." An unaffiliated
third party holds a cash flow participation in distributions from the
Panda-Rosemary Partnership (which the Company believes is 0.433% and
would increase to 1.732% after 2008 based on projected distributions,
but which percentages are the subject of a dispute). All references
in this Prospectus to distributions from U.S. Projects shall mean
distributions after giving effect to such cash flow participation.
See "Description of the Projects -- The Panda-Rosemary Facility --
Cash Flow Participation" and "Legal Proceedings -- NNW, Inc.
Proceeding."
For more detailed information regarding the Panda-Rosemary
Facility, including the various contracts and financing arrangements
referred to above and regulatory matters affecting the Panda-Rosemary
Facility, see "Description of the Projects -- The Panda-Rosemary
Facility," "Regulation" and "Description of the Project Debt -- The
Panda-Rosemary Financing."
Panda-Brandywine
The Panda-Brandywine Facility is owned by Panda-Brandywine,
L.P., a Delaware limited partnership (the "Panda-Brandywine
Partnership"). The Panda-Brandywine Partnership has two partners,
each of which is an indirect wholly-owned subsidiary of the Company.
The Panda-Brandywine Facility will utilize natural gas as its primary
fuel. The electric capacity of and electric energy produced by the
Panda-Brandywine Facility will be sold to Potomac Electric Power
Company ("PEPCO"). The thermal energy produced by the Panda-
Brandywine Facility will be sold to a distilled water production
facility which is owned by an indirect wholly-owned subsidiary of the
Company. The Panda-Brandywine Partnership will purchase firm and
interruptible natural gas supplies from Cogen Development Company,
which will be transported to the Panda-Brandywine Facility on either
a firm or interruptible basis through the interstate pipeline
facilities of Columbia Gas Transmission Corporation and Cove Point
LNG Limited Partnership and the local gas distribution facilities of
Washington Gas Light Company. The Panda-Brandywine Partnership has
contracted with Ogden Brandywine Operations, Inc. ("Ogden
Brandywine"), a subsidiary of Ogden Power Corporation, to operate and
maintain the Panda-Brandywine Facility.
Raytheon Engineers and Constructors, Inc. ("Raytheon")
constructed the Panda-Brandywine Facility pursuant to a fixed-price,
turnkey engineering, procurement and construction agreement with the
Panda-Brandywine Partnership. Raytheon completed the construction
and start-up of the Panda-Brandywine Facility and has met the
requirements for commercial operations and substantial completion
under the construction agreement. A subcontractor of Raytheon has
agreed to make certain modifications to the combustion liners of the
facility in order to enhance operating performance, which are expected
to be completed in early November 1996. The Company expects the
Panda-Brandywine Facility to commence commercial operations under the
power purchase agreement with PEPCO in November 1996. Raytheon has agreed
to pay liquidated damages to the Panda-Brandywine Partnership in an
amount up to 25% of the construction price for any failure to meet
specified performance specifications after start-up.
General Electric Capital Corporation ("GE Capital") has provided
a $215 million construction loan to finance construction of the Panda-
Brandywine Facility. The construction loan bears interest at a
Eurodollar base rate plus 250 basis points. It is anticipated that
the construction loan will be converted to permanent financing in the
form of a single investor lease (together with the construction loan,
the "Panda-Brandywine Financing") by November 1996. The fixed payment
terms under the single investor lease will be based on "Basic Rent
Factors" established in the lease using a series of fixed assumptions
about factors such as the final cost of the Panda-Brandywine
Facility, the federal income tax rate then applicable to GE Capital
and an interest factor based on a Treasury Bill Rate Index. To the
extent that actual conditions at the time of lease conversion differ
from such assumptions, the Basic Rent Factors will be adjusted. The
documents (the "Brandywine Financing Documents") governing the Panda-
Brandywine Financing contain various affirmative and negative
covenants, including limitations on the ability of the Panda-
Brandywine Partnership to make distributions to its partners. Subject
to certain other conditions, the Panda-Brandywine Partnership may
make distributions to its partners only if: (i) all amounts then
required to be deposited in certain reserve accounts established
pursuant to the Brandywine Financing Documents have been deposited,
including rent reserve and operation and maintenance reserve
accounts; (ii) all rent payments then due to GE Capital under the
lease have been paid; (iii) the Panda-Brandywine Facility meets an
operating cash flow to debt service ratio of 1.2:1; and (iv) at the
time of such distribution, and after giving effect thereto, no
default or event of default has occurred and is continuing under the
Brandywine Financing Documents. If the Panda-Brandywine Partnership
is unable to make distributions to its partners, the ability of the
Issuer to make payments on the Exchange Bonds would be materially and
adversely affected. See "Risk Factors -- Financial Risks" and "--
Project Risks."
For more detailed information regarding the Panda-Brandywine
Facility, including the various contracts and financing arrangements
referred to above and regulatory matters affecting the Panda-
Brandywine Facility, see "Description of the Projects -- The Panda-
Brandywine Facility," "Regulation" and "Description of the Project
Debt -- The Panda-Brandywine Financing."
Additional Projects Contract
Subject to certain conditions, including those set forth below,
the Additional Projects Contract will require Panda International and
its affiliates to transfer to the Company, or to certain wholly-owned
direct subsidiaries thereof (the "PIC Entities"), its interest in
each Project for which a power purchase agreement is entered into
prior to July 31, 2001, the fifth anniversary of the date of issuance
of the Old Bonds (the "Issue Date"), and which has reached Financial
Closing or achieved Commercial Operations prior to the 10th
anniversary of the Issue Date. Panda International and its affiliates
will be required to transfer its interest in a Project to the Project
Portfolio only if the principal amount of additional series of Bonds
that can be issued after giving effect to the inclusion of the
Project in the Project Portfolio equals or exceeds the amount of
Anticipated Additional Debt. For a description of how the amount of
Anticipated Additional Debt is calculated, see "The Company, the
Issuer and Panda International -- The Additional Projects Contract."
Interests in a Project will not be transferred if: (i) the Project
has not reached Financial Closing or achieved Commercial Operations;
(ii) Panda International does not own a controlling interest in the
Project; (iii) the transfer would be prohibited under any Project-
level financing, power purchase or related agreement; or (iv) after
giving effect to the issuance of the additional series of Bonds in
connection with the inclusion of the Project in the Project Portfolio
(a) the rating of the Bonds is not Reaffirmed by at least one rating
agency at a rating equal to or higher than that in effect immediately
prior to the issuance of such additional series or (b) the projected
Company Debt Service Coverage Ratio or the projected Consolidated
Debt Service Coverage Ratio (if then applicable) would be less than
1.7:1 or 1.25:1, respectively, for (1) the period beginning with the
date of determination through December 31 of that calendar year, (2)
each period consisting of a calendar year thereafter through the
calendar year immediately prior to the calendar year in which the
Final Stated Maturity occurs and (3) the period thereafter beginning
with January 1 and ending with the Final Stated Maturity (each such
period, a "Future Ratio Determination Period"). The Additional
Projects Contract requires Panda International to use commercially
reasonable efforts to cause each Project to meet the conditions for
transfer to the Project Portfolio as of the date a Project reaches
Financial Closing or achieves Commercial Operations, whichever occurs
first, or within a 90-day period thereafter. If, however, the
conditions for such a transfer cannot be satisfied using commercially
reasonable efforts, Panda International will have no further
obligation to the Company in respect of such Project and may retain
its interest in such Project or sell it to third parties.
The Company believes that Panda International will continue to
actively develop Projects; however, Panda International is under no
obligation to do so, or to use any proceeds from the Prior Offering
or future distributions from the Company to fund such development. In
addition, there can be no assurance that the Projects currently under
development by Panda International will reach Financial Closing,
achieve Commercial Operations or satisfy the other conditions for
transfer to the Project Portfolio pursuant to the Additional Projects
Contract. See "Risk Factors -- Financial Risks," "-- Project Risks"
and "-- Risks Relating to Future Non-U.S. Projects" and "The Company,
the Issuer and Panda International -- The Additional Projects
Contract."
Panda International
Panda International is an independent power company that is
engaged principally in the development, acquisition, ownership and
operation of electric power generation facilities, both in the United
States and internationally. It also owns a subsidiary engaged in oil
and gas exploration and development. Panda International's principal
business strategy is to use its experience in developing,
constructing, financing and managing electric power generation
facilities to provide low cost electricity and electric generating
capacity. Panda International is seeking to expand its presence in
the electric power industry by implementing this strategy in the
United States and certain other countries. Upon commencement of
commercial operations of the Panda-Brandywine Facility, Panda
International will have placed into commercial operations facilities
with electric generating capacity of approximately 410 MW. In addition,
Panda International has executed power purchase agreements or entered
into other development arrangements relating to four potential Projects
with a combined electric generating capacity of approximately 750 MW.
Panda International is continually engaged in the evaluation of
various opportunities for the development and acquisition of
additional electric power generation facilities, both in the United
States and internationally. The Company believes that there is and
will continue to be significant demand for new generating capacity
worldwide and that much of this new capacity will be provided by
independent power developers such as Panda International. See "Risk
Factors -- Project Risks," "-- Risks Relating to Future Non-U.S.
Projects," "The Company, the Issuer and Panda International" and
"Business -- The Independent Power Industry."
Panda International was formed as part of a corporate
reorganization that took place in October 1995 in which all of the
issued and outstanding capital stock of Panda Energy Corporation, a
Texas corporation ("PEC"), was exchanged for shares of capital stock
of Panda International, with the result that PEC became a wholly-
owned subsidiary of Panda International. PEC was organized in 1982 by
Robert and Janice Carter, who are the Chairman of the Board,
President and Chief Executive Officer, and the Executive Vice
President, Treasurer and Secretary, respectively, of Panda
International, PEC, the Company and the Issuer. See "Management."
Robert and Janice Carter and members of their family and family
trusts together own approximately 39.2% of the outstanding shares of
capital stock of Panda International. See "Risk Factors -- Control by
Principal Stockholders."
The principal executive offices of the Issuer, the Company,
Panda Energy Corporation and Panda International are located at 4100
Spring Valley Road, Suite 1001, Dallas, Texas 75244. The telephone
number at such offices is (972) 980-7159.
Projects under Development by Panda International
The following are Projects that Panda International and its
affiliates are developing. There are substantial risks associated
with the development of Projects, and increased risks associated with
the development of Projects outside the United States. There can be
no assurance that any Project under development will reach Financial
Closing, achieve Commercial Operations or satisfy the other
conditions for transfer to the Project Portfolio pursuant to the
Additional Projects Contract. See "Risk Factors -- Project Risks" and
"-- Risks Relating to Future Non-U.S. Projects."
Panda-Luannan (China)
The Company expects that, during the fourth quarter of 1996, a 2
x 50 MW coal-fired cogeneration facility (the "Panda-Luannan
Facility") to be located in Luannan County, Tangshan Municipality,
Hebei Province, People's Republic of China ("PRC" or "China") will
reach Financial Closing and will be eligible for transfer to the
Project Portfolio if the other conditions to such transfer contained
in the Additional Projects Contract can be satisfied. Subject to
output limitations during certain periods, all of the electric output
of the Panda-Luannan Facility will be sold to North China Power Group
Company, the business arm of North China Power Group ("NCPG"), which
is one of the five interprovincial power groups in China under the
supervision of the Ministry of Electric Power of the PRC. The Panda-
Luannan Facility is to be connected to one of the largest power grids
in China, which is operated by NCPG and serves the region which
includes the Beijing-Tianjin-Tangshan area. It is anticipated that
the steam generated will be sold to industrial and possibly to
governmental purchasers.
Panda of Nepal
Panda International has formed a joint venture with a major
international hydroelectric engineering company and a local Nepalese
party to build a 36 MW hydroelectric facility on the upper Bhote
Koshi River in Nepal. A power purchase agreement with the Nepal
Electricity Authority ("NEA"), and a project agreement with the
Government of Nepal obligating the Government of Nepal to guarantee
NEA's obligations and to provide certain other support and
incentives, were signed in July 1996. Approval of the joint venture
was received from the Government of Nepal in June 1996. Panda
International has received commitment letters from two multilateral
agencies to provide debt financing for this Project.
Panda-La Panga (India)
In August 1994, Panda International acquired from another
independent power developer a 90% interest in a Project company that
has executed a power purchase agreement with the Orissa State
Electricity Board for a proposed 500 MW coal-fired electric
generating facility to be located in the State of Orissa, India.
Certain of the central government approvals for the Project have been
obtained. Although Panda International believes its power purchase
agreement is valid and enforceable, the State of Orissa has given a
notice of cancellation of such agreement to Panda International, as
well as to several other third parties with respect to their projects
being developed. Panda International has objected to such notice and
is presently conducting discussions with the government of the State
of Orissa. Development efforts have been delayed pending the
resolution of this dispute.
Panda-Kathleen (United States)
Panda International owns an indirect 100% equity interest in
Panda-Kathleen, L.P., a Delaware limited partnership (the "Panda-
Kathleen Partnership"), which in 1991 entered into a power purchase
agreement with Florida Power Corporation ("Florida Power") for the
sale of capacity and all energy made available from a natural gas-
fired, combined-cycle cogeneration facility (the "Panda-Kathleen
Facility"). Construction of the Panda-Kathleen Facility was
originally scheduled to begin in 1995, but has been delayed because
of litigation with Florida Power and may never commence. The
Brandywine Financing Documents require the Panda-Kathleen Project to
be transferred to the Project Portfolio if it reaches Financial
Closing, whether or not the other conditions to transfer contained in
the Additional Projects Contract are satisfied.
Guaranty and Collateral; Effective Subordination
The Existing Bonds are, and all additional series of Bonds will
be issued pursuant to an indenture (the "Indenture") among the
Issuer, the Company and Bankers Trust Company, as trustee (the
"Trustee"). The Bonds will be paid from payments by the Company to
the Issuer on promissory notes (including the Initial Company Note,
the "Company Notes"), evidencing loans by the Issuer to the Company.
The aggregate outstanding principal amount of the Company Notes will
at all times equal the aggregate outstanding principal amount of the
Bonds.
The Existing Bonds are, and all additional series of Bonds will
be unconditionally guaranteed (such guaranty, the "Company Guaranty")
by the Company. In addition, the Existing Bonds are, and all
additional series of Bonds will be secured by pledges, or grants of
security interests, to the Trustee for the benefit of the holders of
the Bonds: (i) by PEC of and in all of the capital stock of the
Company; (ii) by the Company, of and in all of the capital stock of
the Issuer and the PIC Entities (the "PIC U.S. Entities") that
indirectly own Projects located in the United States and certain
international Projects for which no U.S. tax deferral will be sought
(the "U.S. Projects") and 60% of the capital stock of the PIC
Entities (the "PIC International Entities") that indirectly own
Projects not located in the United States and for which U.S. tax
deferral will be sought (the "Non-U.S. Projects"); (iii) by the
Issuer, of and in the Company Notes; (iv) by the Company, of and in
its interest in the Additional Projects Contract; and (v) by the
Company, of and in its interest in all distributions from the PIC
U.S. Entities and its interest in accounts, established in the
Company's name with the Trustee, into which such distributions are
deposited (all of the foregoing collateral so pledged, the
"Collateral"). The Bonds will not be secured by any direct equity
interest in, or assets of, any Project or by any interest in any
distributions to PIC International Entities, if any, or any accounts
into which such distributions are deposited. Each PIC International
Entity, however, will be required to pledge, as security for the
repayment of certain loans (the "PIC International Entity Loans") by
the Company to such PIC International Entity, its interest in all
distributions received by it in respect of Non-U.S. Projects, if any,
and all accounts, established in the name of such PIC International
Entity with the Trustee acting in its capacity as the International
Collateral Agent for the benefit of the Company (the "International
Collateral Agent"), into which such distributions are deposited. See
"Description of the Exchange Bonds -- Collateral for the Exchange
Bonds."
The Exchange Bonds will be exclusively the obligations of the
Issuer and, to the extent of the Company Guaranty, the Company, and
not of any of their affiliates. Because the operations of the Company
are conducted by Project Entities, the Company's cash flow and its
ability to service its debt, including its ability to make payments
on the Company Notes, and consequently the Issuer's ability to make
payments on the Bonds (including the Exchange Bonds), are almost
entirely dependent upon the earnings of the Project Entities and the
distribution of those earnings to the Company. The Project-level
financing arrangements for the Projects generally restrict the
ability of the Project Entities to pay dividends, make distributions
or otherwise transfer funds to equity owners of such Projects,
including the PIC Entities and, indirectly, the Company. These
restrictions generally require that, prior to the payment of
dividends or distributions or the making of other transfers of funds,
the Project Entity proposing to make the dividend, distribution or
transfer must provide for the payment of other obligations of the
Project, including operating expenses and debt service, fund a debt
service reserve and other reserves and meet certain debt service
coverage ratios and other tests. See "Risk Factors -- Financial
Risks" and "Description of the Project Debt."
PRIOR OFFERING
On July 31, 1996, the Issuer issued $105,525,000 aggregate
principal amount of its 11-5/8% Pooled Project Bonds, Series A due
2012 in a private placement under Section 4(2) of the Securities Act
and Rule 144A. The Old Bonds were sold to Jefferies & Company, Inc.
(the "Initial Purchaser") pursuant to the Purchase Agreement and were
placed by the Initial Purchaser with Qualified Institutional Buyers
and Institutional Accredited Investors (as defined in Section 501(a)
(1), (2), (3) or (7) under the Securities Act). Pursuant to the
Registration Rights Agreement entered into between the Company, the
Issuer and the Initial Purchaser in connection with the Prior
Offering, the Issuer and the Company agreed to file a shelf
registration statement covering the Old Bonds (a "Shelf Registration
Statement") or to effect a registered exchange offer for the Old
Bonds pursuant to which the holders of the Old Bonds would be offered
the opportunity to exchange their Old Bonds for registered Exchange
Bonds. The Registration Rights Agreement provides that if such an
exchange offer registration statement (an "Exchange Offer
Registration Statement") or a Shelf Registration Statement is not
declared effective within 180 days after the Issue Date, the interest
rate on the Old Bonds will increase by 50 basis points effective on
the 181st day following the Issue Date until such a registration
statement is declared effective. If such a registration statement is
not declared effective within two years following the Issue Date,
such increase in interest rate would become permanent. The
Registration Statement with respect to the Exchange Offer was
declared effective by the Commission on __________, 1996, thereby
avoiding the aforementioned interest rate increase.
THE EXCHANGE OFFER
The Issuer is making the following Exchange Offer to holders of
all Old Bonds presently outstanding:
The Exchange Offer For each $1,000 principal amount of
Old Bonds tendered, a holder will be
entitled to receive $1,000 principal
amount of Exchange Bonds. As of the date
of this Prospectus, $105,525,000 principal
amount of Old Bonds is outstanding. The
terms of the Exchange Bonds are
substantially identical to the terms of
the Old Bonds, except that the Exchange
Bonds (i) will have been registered under
the Securities Act, and (ii) holders of
the Exchange Bonds will not be entitled to
certain rights of holders of the Old Bonds
under the Registration Rights Agreement,
which rights will terminate upon the
consummation of the Exchange Offer. Such
rights will also terminate as to holders
of Old Bonds who are eligible to tender
their Old Bonds for exchange in the
Exchange Offer and fail to do so. See
"The Exchange Offer -- Termination of
Certain Rights" and "Old Bonds
Registration Rights."
Expiration Date The Exchange Offer will expire at
5:00 p.m., New York City time, on
____________, 1996, unless extended in the
Issuer's sole discretion. See "The
Exchange Offer -- Expiration Date;
Extensions; Termination; Amendments."
Withdrawal of Tenders Tenders of Old Bonds may be withdrawn
at any time prior to the Expiration Date.
Thereafter, such tenders are irrevocable.
See "The Exchange Offer -- Withdrawal of
Tenders."
Interest on the Exchange
Bonds and Accrued
Interest on the Old Bonds The Exchange Bonds will bear interest
from the date of their issuance. Interest on
the Old Bonds accepted for exchange will accrue
thereon to, but not including, the date of
issuance of the Exchange Bonds and will be
paid together with the first interest
payment on the Exchange Bonds issued in
exchange therefor.
Conditions of the Exchange
Offer The Exchange Offer is subject to
certain customary conditions. The Exchange
Offer is not conditioned upon any minimum
aggregate principal amount of Old Bonds
being tendered or accepted for exchange.
Old Bonds may be tendered only in integral
multiples of $1,000. See "The Exchange Offer
-- Conditions of the Exchange Offer."
Procedures for Tendering
Old Bonds Each holder of Old Bonds wishing to
accept the Exchange Offer must, prior to
the Expiration Date, either (i) complete
and sign the Letter of Transmittal, in
accordance with the instructions contained
herein and therein, and deliver such Letter
of Transmittal, together with any signature
guarantees and any other documents required
by the Letter of Transmittal, to the Exchange
Agent at its address set forth on the back
cover page of this Prospectus and the tendered
Old Bonds must either be (a) physically
delivered to the Exchange Agent or (b)
transferred pursuant to the procedures for
book-entry transfer described herein and a
confirmation of such book-entry transfer
must be received by the Exchange Agent
prior to the Expiration Date, or (ii)
comply with the guaranteed delivery
procedures set forth herein. By executing
the Letter of Transmittal, each holder
will represent that, among other things,
the Exchange Bonds acquired pursuant to
the Exchange Offer are being acquired in
the ordinary course of business of the
person receiving such Exchange Bonds
(whether or not such person is the
registered holder of such Exchange Bonds),
that neither the holder of such Exchange
Bonds nor any such other person has an
arrangement with any person to participate
in the distribution (within the meaning of
the Exchange Act) of such Exchange Bonds
and that neither the holder of such
Exchange Bonds or any such other person is
an Affiliate of the Issuer or the Company,
or if it is an Affiliate, it will comply
with the registration and prospectus
delivery requirements of the Securities
Act to the extent applicable. See "The
Exchange Offer -- Procedures for
Tendering."
Special Procedures for
Beneficial Owners Any beneficial owner whose Old Bonds are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender Old Bonds in the Exchange
Offer should contact such registered
holder promptly and instruct such
registered holder to tender on such
beneficial owner's behalf. See "The
Exchange Offer -- Procedures for
Tendering."
Guaranteed Delivery
Procedures Holders of Old Bonds who wish to
tender their Old Bonds and whose Old Bonds
are not immediately available or who
cannot deliver their Old Bonds, the Letter
of Transmittal or any other documents
required by the Letter of Transmittal to
the Exchange Agent prior to the Expiration
Date, may tender their Old Bonds according
to the guaranteed delivery procedures set
forth in "The Exchange Offer -- Guaranteed
Delivery Procedures."
Acceptance of the Old
Bonds and Delivery of
the Exchange Bonds Upon satisfaction or waiver of
the conditions of the Exchange Offer, the
Issuer will accept for exchange any and
all Old Bonds which are properly tendered
and not withdrawn prior to the Expiration
Date. The Exchange Bonds issued pursuant
to the Exchange Offer will be delivered on
the earliest practicable date following
the Expiration Date. See "The Exchange
Offer -- Acceptance of Old Bonds for
Exchange; Delivery of Exchange Bonds."
Certain Federal Income Tax
Considerations For a discussion of certain United
States federal income tax consequences of
the exchange of Old Bonds for Exchange
Bonds in the Exchange Offer, see "Certain
U.S. Federal Income Tax Considerations of
the Exchange Offer."
Effect on Holders of
Old Bonds Holders of the Old Bonds who do
not tender their Old Bonds in the Exchange
Offer will continue to hold such Old Bonds
and will be entitled to all the rights and
benefits, and will be subject to all
limitations applicable thereto, under the
Indenture. All Old Bonds not exchanged in
the Exchange Offer will continue to be
subject to the restrictions on transfer
provided for in the Old Bonds and the
Indenture. To the extent that Old Bonds
are tendered and accepted in the Exchange
Offer, the trading market, if any, for the
Old Bonds not so tendered could be
adversely affected. See "Risk Factors --
Consequences of Failure to Exchange Old
Bonds."
Rights of Dissenting
Holders Holders of Old Bonds do not have
any appraisal or dissenters' rights under
the Delaware General Corporation Law or
the Indenture in connection with the
Exchange Offer.
Exchange Agent Bankers Trust Company. See "The
Exchange Offer -- The Exchange Agent."
TERMS OF THE EXCHANGE BONDS
The Exchange Offer applies to $105,525,000 aggregate principal
amount of Old Bonds. The form and terms of the Exchange Bonds are
substantially identical to the terms of the Old Bonds, except that
the Exchange Bonds (i) will have been registered under the Securities
Act, and therefore, will not bear legends restricting their transfer
pursuant to the Securities Act, and (ii) holders of the Exchange
Bonds will not be entitled to certain rights of holders of the Old
Bonds under the Registration Rights Agreement, which rights will
terminate upon the consummation of the Exchange Offer. Such rights
will also terminate as to holders of Old Bonds who are eligible to
tender their Old Bonds for exchange in the Exchange Offer and fail to
do so. See "The Exchange Offer -- Termination of Certain Rights."
The Exchange Bonds will evidence the same debt as the Old Bonds which
they replace and will be issued under, and be entitled to the
benefits of, the Indenture.
Securities Offered $105,525,000 11-5/8% Pooled Project
Bonds, Series A-1 due 2012.
Final Maturity Date August 20, 2012.
Interest Payment Dates February 20 and August 20, commencing
February 20, 1997.
Ratings The Exchange Bonds have been rated
Ba3 by Moody's Investors Service, Inc.
and BB- by Duff & Phelps Credit Rating Co.
Initial Average Life The initial average life to maturity of
the Exchange Bonds is 11.7 years.
Scheduled Principal Payments Semiannually commencing February 20, 1997,
as follows:
Percentage of
Payment Date Original Principal
Amount Payable
February 20, 1997 0.2045%
August 20, 1997 0.0000%
February 20, 1998 0.0000%
August 20, 1998 0.0000%
February 20, 1999 0.0000%
August 20, 1999 0.5933%
February 20, 2000 0.6129%
August 20, 2000 0.0000%
February 20, 2001 0.0000%
August 20, 2001 1.3753%
February 20, 2002 1.4691%
August 20, 2002 2.2184%
February 20, 2003 2.3565%
August 20, 2003 2.9328%
February 20, 2004 3.1031%
August 20, 2004 3.2796%
February 20, 2005 3.4687%
August 20, 2005 3.5977%
February 20, 2006 3.7820%
August 20, 2006 2.8098%
February 20, 2007 3.0076%
August 20, 2007 4.8415%
February 20, 2008 5.1145%
August 20, 2008 5.0057%
February 20, 2009 5.2945%
August 20, 2009 5.5185%
February 20, 2010 5.8300%
August 20, 2010 5.7248%
February 20, 2011 6.0590%
August 20, 2011 6.4800%
February 20, 2012 6.8808%
August 20, 2012 8.4390%
Denominations and Form The Exchange Bonds will be issuable
in denominations of any integral multiple
of $1,000 in exchange for a like
principal amount of Old Bonds. The
Exchange Bonds will be issuable in book-
entry form through the facilities of The
Depository Trust Company ("DTC"), which
will act as depositary for the Exchange
Bonds. One fully-registered certificate
will be issued and will be deposited with
DTC, and interests therein will be shown
on, and transfers will be effected
through, records maintained by DTC and
its participants. Exchange Bonds issued
to Institutional Accredited Investors,
and Exchange Bonds issued in other
limited circumstances described herein,
will be issued in registered certificated
form. See "Description of the Exchange
Bonds -- Book Entry; Delivery and Form."
Mandatory Redemption The Existing Bonds and all
additional series of Bonds, if any, then
outstanding will be subject to mandatory
redemption, in whole or in part, to the
extent that, at any time (after giving
effect to transfers required to be made
to other Accounts and Funds on such
date), the aggregate amount of monies on
deposit in the U.S. and International
Mandatory Redemption Accounts is in
excess of $2.0 million. In the event of a
sale or other disposition of any
Collateral or any interest in a Project
or any event of casualty, loss or
condemnation with respect to a Project
(each, a "Mandatory Redemption Event"),
all proceeds of any distributions
resulting from such Mandatory Redemption
Event in excess of $2.0 million in the
aggregate in any calendar year that may
be legally distributed or paid to the
Company or any PIC Entity without
contravention of any Project debt
agreement shall be deposited into the
appropriate Mandatory Redemption Account,
unless (i) the Company provides a
certificate to the Trustee (supported by
a certificate to the Trustee from the
Consolidating Engineer) stating that such
Mandatory Redemption Event would not
result in either the projected Company
Debt Service Coverage Ratio being less
than 1.7:1 or the projected Consolidated
Debt Service Coverage Ratio (if then
applicable) being less than 1.25:1, for
each Future Ratio Determination Period;
and (ii) the rating of the Bonds is
Reaffirmed by at least one rating agency
at a rating equal to or higher than that
in effect immediately prior to such
Mandatory Redemption Event. Mandatory
redemptions will be made at a redemption
price equal to 100% of the principal
amount of the Bonds to be redeemed plus
interest thereon accrued to the date of
such redemption, plus a premium, if any,
provided in the supplemental indenture
for each series of Bonds to be redeemed.
For the Exchange Bonds, such premium is
equal to that payable were the Exchange
Bonds to be redeemed at the Issuer's
option on such date to the extent that
the mandatory redemption results from a
sale or other voluntary disposition of
any Collateral or any interest in a
Project (or if no optional redemption is
then available, a premium determined as
the excess, if any, of the remaining
payments due on the Exchange Bonds,
discounted at a rate which is equal to
the Applicable Treasury Rate plus one-
half of one percent over the par value of
such Exchange Bonds). Notwithstanding the
foregoing, the amount of Bonds required
to be redeemed shall not exceed the
amount necessary to cause (after giving
effect to such redemption) the coverage
ratio requirements set forth above to be
met and to achieve a Reaffirmation of the
rating on the Bonds by at least one
rating agency. See "Description of the
Exchange Bonds -- Redemption -- Mandatory
Redemption."
The applicable Consolidated Debt Coverage
Ratio, for purposes of determining
whether amounts are to be deposited in
the Mandatory Redemption Accounts or for
any other purposes under the Indenture,
need not be satisfied on and after the
time that more than four Projects have
been transferred to the Project
Portfolio.
Optional Redemption The Exchange Bonds will be subject
to redemption, in whole or in part, at
the option of the Issuer at any time on
or after August 20, 2001, at the
following redemption prices (expressed as
a percentage of principal amount) plus
interest accrued to the date of
redemption, if redeemed during the 12-
month period commencing on or after
August 20 of the year set forth below:
Redemption
Year Price
2001 105.8125%
2002 104.3594%
2003 102.9063%
2004 101.4532%
2005
and thereafter 100.0000%
The Exchange Bonds are also subject to
redemption, in whole or in part, at the
option of the Issuer at a redemption
price equal to 100% of the principal
amount of the Bonds to be redeemed plus
interest thereon accrued to the date of
such redemption if an Extraordinary
Financial Distribution in excess of $2.0
million is applied to prepay the Company
Notes. "Extraordinary Financial
Distributions" are distributions and
other amounts received by the Company or
any PIC Entity without contravention of
any Project debt agreement in respect of
settlements, judgments and other payments
received in respect of a Project in
connection with legal proceedings, monies
released from certain escrows relating to
Projects, buy-outs or settlements of
Project contracts and other transactions
resulting in the receipt of cash or other
property upon the sale, transfer or other
disposition of contractual rights
relating to a Project (in each case,
other than in respect of a Mandatory
Redemption Event). See "Description of
the Exchange Bonds -- Redemption --
Optional Redemption."
Change of Control Upon the occurrence of a Change of
Control, each holder of Existing Bonds
and all additional series of Bonds, if
any, will have the right to require the
Issuer to purchase all or a portion of
such holder's Bonds at a price equal to
101% of the aggregate principal amount
thereof, together with accrued and unpaid
interest to the date of purchase. See
"Description of the Exchange Bonds --
Certain Covenants -- Change of Control."
Certain Covenants The Indenture contains affirmative
and negative covenants that restrict the
activities of the Issuer, the Company and
the PIC Entities, including limitations
on: (i) distributions to the Company and
the PIC International Entities out of the
Accounts and Funds described below under
"Flow of Funds"; (ii) the ability of
Project Entities to incur new debt or
amend Project agreements if such actions
could reasonably be expected to reduce
Cash Available for Distribution by 10%
for any Future Ratio Determination
Period; (iii) how the proceeds of the
Prior Offering may be used; (iv) the
incurrence of indebtedness or lease
obligations, or the provision of
guaranties (see "Additional Debt" below);
(v) the payment of dividends on and
redemptions of capital stock; (vi) the
use of proceeds from the sale of assets
and certain other events; (vii)
transactions with affiliates and (viii)
the creation of liens. The Indenture will
also (a) require the Company to maintain
at least a 50% (direct or indirect)
ownership interest in each Project, or a
25% (direct or indirect) ownership
interest in each Project and controlling
influence over the management and
policies with respect to such Project,
provided that no other entity has greater
control than the Company over such
management and policies (except in
certain circumstances, including the sale
by the Company of its entire interest in
a Project), (b) restrict the ability of
the Company, the Issuer and the PIC
Entities to consolidate or merge with or
into, or to transfer all or substantially
all of their respective assets to,
another person, (c) require the Issuer to
pledge additional collateral in certain
instances and (d) require the Issuer
to offer to redeem the Bonds upon the
occurrence of a Change of Control. See
"Description of the Exchange Bonds --
Certain Covenants."
Additional Debt The Indenture will permit the Issuer
to incur additional debt only in the form
of additional series of Bonds for the
purpose of loaning the proceeds thereof
to the Company, which the Company may use
either to make investments in Projects in
connection with their transfer to the
Project Portfolio or for distribution or
loan to Panda International and its
affiliates. Panda International and its
affiliates may, but are under no
obligation to, use such funds for future
project development. Additional series of
Bonds may be issued only if, at the time
of such issuance, (i) the Company
provides a certificate to the Trustee
(supported by a certificate to the
Trustee from the Consolidating Engineer)
stating that, after giving effect to the
issuance of such additional series and
the application of the proceeds
therefrom, the projected Company Debt
Service Coverage Ratio and the projected
Consolidated Debt Service Coverage Ratio
(if then applicable) equal or exceed
1.7:1 and 1.25:1, respectively, for each
Future Ratio Determination Period and
(ii) the rating of the Bonds is
Reaffirmed by at least one rating agency
at a rating equal to or higher than that
in effect immediately prior to the
issuance of such additional series;
provided, however, that such
Reaffirmation of the rating shall not be
required if (a) neither the Company nor
any PIC Entity has, since the last date
upon which the Bonds were rated or a
Reaffirmation of rating was given in
respect thereof, acquired (or is
acquiring in connection with the issuance
of such additional series), sold or
otherwise disposed of direct or indirect
interests in one or more Projects in an
aggregate amount in excess of the lesser
of the amounts set forth in subclauses
(1) and (2) of clause (b) below and (b)
the principal amount of such additional
series to be issued is less than the
lesser of (1) $50 million and (2) 25% of
the aggregate principal amount of all
series of Bonds then outstanding. The
Company and the PIC Entities will be
prohibited from incurring any debt, other
than (i) in the case of the Company, the
Company Guaranty and the Company Notes,
(ii) in the case of the PIC International
Entities, the PIC International Entity
Notes, certain subordinated debt
(including Other International Notes)
payable to the Company or any PIC Entity,
(iii) in the case of the PIC U.S.
Entities, the PIC Entity Guaranties and
certain subordinated debt payable to the
Company or any PIC Entity and (iv) in the
case of Project Entities, Project debt
and certain guaranties. See "Description
of the Exchange Bonds -- Certain
Covenants."
Guaranty and Ranking All series of Bonds will be unconditionally
guaranteed by the Company Guaranty. The
Bonds will be secured indebtedness of the
Issuer; however, payments on the Bonds
will be effectively subordinated to all
liabilities of the Project Entities
incurred in respect of the Projects,
including Project-level debt financing
and trade payables. See "Risk Factors --
Financial Risks -- Substantial Leverage;
Effective Subordination of Exchange
Bonds," "Description of the Project Debt"
and "Description of the Exchange Bonds --
Ranking."
Flow of Funds All distributions in respect of U.S.
Projects received by or on behalf of the
Company or any PIC U.S. Entity (other than
Extraordinary Financial Distributions and
distributions received as a result of
Mandatory Redemption Events that are
required to be deposited in the U.S.
Mandatory Redemption Account), all
regularly scheduled interest and
principal payments on the PIC
International Entity Notes and any
payments resulting from the redemption or
partial redemption of any Other
International Notes shall be deposited
directly into the U.S. Project Account.
All distributions in respect of Non-U.S.
Projects received by or on behalf of any
PIC International Entity (other than Extraordinary
Financial Distributions and distributions
received as a result of Mandatory Redemption
Events that are required to be deposited
in the International Mandatory Redemption
Account) shall be deposited directly into
the International Project Account.
The Trustee shall, on the first Business
Day of each month (a "Monthly
Distribution Date"), transfer amounts on
deposit in the U.S. Project Accounts in
the following order of priority:
(i) to the Debt Service Fund (for
application to payments on the
Bonds), an amount equal to the
excess, if any, of (a) the
aggregate amount of interest (less
any amount on deposit in the
Capitalized Interest Fund in
respect of such payment) and, if
applicable, principal, in each case
due and payable on the Company
Notes (including any past due
amounts) on the Payment Date for
each series of Bonds then
outstanding next following the day
immediately preceding such Monthly
Distribution Date (other than in
connection with a call for
redemption) over (b) the amount
then on deposit in the Debt Service
Fund;
(ii) to the Capitalized Interest Fund,
an amount equal to the excess, if any,
of the Capitalized Interest Requirement
over the amount then on deposit in the
Capitalized Interest Fund;
(iii) to the Debt Service Reserve Fund, an
amount equal to the excess, if any, of
the Debt Service Reserve Requirement
over the sum of (a) the amount then on
deposit in the Debt Service Reserve Fund
plus (b) the aggregate amount available
to be drawn under a Letter of Credit;
(iv) to the Company Expense Fund,
an amount equal to the excess, if
any, of (a) the sum of (1) the
Company Expenses Amount for the
applicable calendar year plus (2)
the Annual Letter of Credit Fee
over (b) the aggregate amount
deposited to the Company Expense
Fund since the beginning of such
calendar year; and
(v) to the U.S. Distribution Suspense
Fund, the remaining balance, if
any, on deposit in the U.S. Project
Account.
On each Monthly Distribution Date, the
International Collateral Agent shall
transfer monies from the International
Project Account (i) first to the payment
of interest then due on any PIC
International Entity Note and (ii) then
to the International Distribution
Suspense Fund, the remaining balance, if
any, on deposit in the International
Project Account. Extraordinary Financial
Distributions will be initially deposited
in the appropriate Extraordinary
Distribution Account (U.S. or
International) and, if required pursuant
to the Indenture, proceeds received by
the Company or any PIC Entity as a result
of Mandatory Redemption Events will be
initially deposited in the appropriate
Mandatory Redemption Account (U.S. or
International). All amounts held in the
foregoing Accounts and Funds (other than
the International Accounts and Funds)
will be in the sole control of the
Trustee, acting in its capacity as agent
for the Collateral Agent, and will be
pledged to secure the obligations of the
Issuer under the Bonds. The International
Accounts and Funds will be in the sole
control of the International Collateral
Agent, acting in its capacity as agent
for the PIC International Entities, and
will be pledged to the Company to secure
the PIC International Entity Notes and
the Other International Notes. In
addition to the foregoing Accounts and
Funds, a U.S. Distribution Fund and an
International Distribution Fund will be
established in the name and be in the
control of the Company and the PIC
International Entities, respectively. See
"Description of the Exchange Bonds -- The
Accounts and Funds."
Debt Service Fund Amounts on deposit in the Debt
Service Fund shall be used to pay
interest and principal, if applicable,
due and payable on the Company Notes, as
and when provided in the Company Notes.
Payments on the Company Notes shall be
applied by the Trustee to the payment of
interest and principal on the Bonds. If,
on any Payment Date the amounts on
deposit in the Debt Service Fund, after
giving effect to all transfers to the
Debt Service Fund on such date, are
insufficient for the payment in full of
the interest and, if applicable,
principal on the Company Notes then due
and payable, including any past due
amounts (such deficiency hereinafter
referred to as a "Debt Service
Deficiency"), an amount equal to such
Debt Service Deficiency shall be
withdrawn and transferred to the Debt
Service Fund, first from the U.S.
Distribution Suspense Fund, then from the
U.S. Extraordinary Distribution Account
(using Available Amounts only), then from
the Company Expense Fund, then from the
Debt Service Reserve Fund, then from the
Capitalized Interest Fund and then from
the U.S. Mandatory Redemption Account
(using Available Amounts only); provided,
however, that if there are not sufficient
funds in the U.S. Accounts and Funds to
eliminate a Debt Service Deficiency,
monies will be transferred from the
International Accounts and Funds by the
International Collateral Agent to effect
a redemption or partial redemption of the
Other International Notes in an amount
equal to the lesser of (i) the amounts on
deposit in the International Accounts and
Funds, (ii) the outstanding principal
amount of the Other International Notes
and (iii) the amount of such Debt Service
Deficiency. The amounts realized from the
redemption or partial redemption of any
Other International Notes for purposes of
eliminating a Debt Service Deficiency
will be transferred to the U.S. Project
Account and then from the U.S. Project
Account to the Debt Service Reserve Fund.
PEC has agreed to cause the Company (and,
if necessary, to make capital
contributions to the Company) to loan
$6.4 million to a PIC International
Entity evidenced by an Other
International Note, on or prior to the
earlier of (i) the first date on which
Commercial Operations have been achieved
by any Non-U.S. Project in the Project
Portfolio and (ii) the date of transfer
to the Project Portfolio of any Non-U.S.
Project that has already achieved
Commercial Operations. The Company may,
but is under no obligation to, lend
additional amounts to the PIC
International Entities to create
additional Other International Notes.
Capitalized Interest Fund Upon the issuance of the Old Bonds,
the Company deposited approximately
$9,834,000 into the Capitalized Interest
Fund out of the loan by the Issuer to the
Company of the proceeds from the issuance
of the Old Bonds. Monies held on deposit
in the Capitalized Interest Fund shall be
transferred to the Debt Service Fund on
the Interest Payment Dates on February
20, 1997, August 20, 1997, February 20,
1998, August 20, 1998, February 20, 1999,
August 20, 2000, and February 20, 2001 in
the amounts of approximately $618,000,
$1,188,000, $1,233,000, $3,385,000,
$3,304,000, $71,000 and $35,000
respectively. See "Description of the
Exchange Bonds -- The Accounts and Funds
-- Capitalized Interest Fund."
Debt Service Reserve Fund Upon the issuance of the Old Bonds,
the Company deposited into the Debt
Service Reserve Fund $6.4 million, which
is equal to the amount of interest due on
the Existing Bonds on the first Payment
Date less the amount deposited upon the
issuance of the Old Bonds in the
Capitalized Interest Fund in respect of
such interest payment. The Company funded
this deposit with a portion of the loan
by the Issuer to the Company of the
proceeds from the issuance of the Old
Bonds. Until the amount on deposit in the
Debt Service Reserve Fund on any Monthly
Distribution Date equals the amount of
principal and interest payments on all
series of the Bonds outstanding due for
the immediately succeeding 12 months
(less the amount on deposit in the
Capitalized Interest Fund in respect of
interest payments scheduled to be
made during such 12-month period), all funds
deposited in the U.S. Project Account not
required to be transferred into the Debt Service
Fund or the Capitalized Interest Fund shall
be deposited into the Debt Service Reserve
Fund. Thereafter, so long as any series
of the Bonds remain outstanding, the
Company will be required to maintain in
the Debt Service Reserve Fund an amount
equal to the amount of debt service due
in respect of all series of the Bonds
then outstanding for the next 12-month
period, except that, if less than 12
months remain before the Final Stated
Maturity, then an amount equal to the
debt service for such period will be
maintained. The Debt Service Reserve Fund
may be drawn upon to pay the principal
of, and premium, if any, and interest on
all series of the Bonds, to the extent of
funds allocated within the Debt Service
Reserve Fund to such obligations, if
funds otherwise available to the Trustee
for such payments are insufficient. At
any time when the Capitalized Interest
Requirement for any series of the Bonds
equals zero, Panda International or PEC
may arrange for a Letter of Credit to be
provided in lieu of cash for all or a
part of the amount in respect of such
series required to be maintained in the
Debt Service Reserve Fund. See
"Description of the Exchange Bonds -- The
Accounts and Funds -- Debt Service
Reserve Fund."
Distributions Subject to certain limited
exceptions, distributions may be made to
the Company and the PIC International
Entities only from, and to the extent of,
monies then on deposit in the U.S.
Distribution Fund and the International
Distribution Fund, respectively.
Transfers into the Distribution Funds may
be made on any Monthly Distribution Date
subject to the prior satisfaction of the
following conditions: (i) the amount on
deposit in the Debt Service Fund is equal
to or greater than the amount of interest
(less amounts on deposit in the
Capitalized Interest Fund in respect of
such interest payment) and, if
applicable, principal due on all series
of the Bonds (including all past due
amounts) on the Payment Date for each
series of Bonds outstanding next
following the day immediately preceding
such Monthly Distribution Date (other
than in connection with a call for
redemption); (ii) the amount on deposit
in each of the Capitalized Interest Fund,
the Debt Service Reserve Fund (together
with the aggregate amount of any Letters
of Credit provided in respect of the Debt
Service Reserve Requirement), the Company
Expense Fund, the Mandatory Redemption
Accounts and the Extraordinary
Distribution Accounts is equal to or
greater than the amount then required to
be deposited therein under the Indenture;
(iii) no Default or Event of Default
under the Indenture shall have occurred
and be continuing; and (iv) with certain
exceptions, the Company can certify that
(a) the historical Company Debt Service
Coverage Ratio is equal to or greater
than 1.4:1 for the 12 months immediately
preceding the month in which such Monthly
Distribution Date is to occur (or for
such shorter period as Bonds have been
outstanding) and (b) the projected
Company Debt Service Coverage Ratio is
equal to or greater than 1.4:1 for the 12
months immediately succeeding the month
in which such Monthly Distribution Date
is to occur (or for such shorter period
as series of Bonds with the latest Final
Stated Maturity is scheduled to be
outstanding). See "Description of the
Exchange Bonds -- Certain Covenants --
Limitations on Distributions."
Registration Rights This Exchange Offer is intended to
satisfy certain rights under the
Registration Rights Agreement, which
rights terminate upon the consumma-tion
of the Exchange Offer. Therefore, the
holders of Exchange Bonds are not
entitled to any exchange or registration
rights with respect to the Exchange
Bonds. In addition, such exchange and
registration rights will terminate as to
holders of Old Bonds who are eligible to
tender their Old Bonds for exchange in
the Exchange Offer and fail to do so.
See "The Exchange Offer -- Termination of
Certain Rights" and "Old Bonds
Registration Rights."
Transfer of Exchange Bonds Based upon its view of interpretations
provided to third parties by the staff of
the Commission, the Company believes that
the Exchange Bonds issued pursuant to the
Exchange Offer may be offered for resale,
resold and otherwise transferred by holders
thereof (other than any holder which is (i)
an Affiliate of the Company or the Issuer,
(ii) a broker-dealer who acquired Old
Bonds directly from the Issuer or (iii) a
broker-dealer who acquired Old Bonds as a
result of market making or other trading
activities) without registration under
the Securities Act, provided that such
Exchange Bonds are acquired in the
ordinary course of such holders' business
and such holders are not engaged in, and
do not intend to engage in, and have no
arrangement or understanding with any
person to participate in, a distribution
(within the meaning of the Securities
Act) of such Exchange Bonds. Each broker-
dealer that receives Exchange Bonds for
its own account pursuant to the Exchange
Offer must acknowledge that it will
deliver a prospectus in connection with
any resale of such Exchange Bonds. The
Letter of Transmittal states that by so
acknowledging and by delivering a
prospectus, a broker-dealer will not be
deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. This Prospectus, as it
may be amended or supplemented from time
to time, may be used by a broker-dealer
in connection with resales of Exchange
Bonds received in exchange for Old Bonds
where such Old Bonds were acquired by
such broker-dealer as a result of market
making activities or other trading
activities. The Company and the Issuer
have agreed, for a period of 180 days
after the consummation of the Exchange
Offer, to make available a prospectus
meeting the requirements of the
Securities Act to any such broker-dealer
for use in connection with any such
resale. A broker-dealer that delivers
such a prospectus to a purchaser in
connection with such resales will be
subject to certain of the civil liability
provisions under the Securities Act and
will be bound by the provisions of the
Registration Rights Agreement (including
certain indemnification provisions). Any
holder who tenders in the Exchange Offer
for the purpose of participating in a
distribution of the Exchange Bonds and
any other holder that cannot rely upon
such interpretations must comply with the
registration and prospectus delivery
requirements of the Securities Act in
connection with a secondary resale
transaction. In addition, to comply with
the securities laws of certain
jurisdictions, if applicable, the
Exchange Bonds may not be offered or sold
unless they have been registered or
qualified for sale in such jurisdictions
or an exemption from registration or
qualification is available and the
conditions thereto have been met. See
"The Exchange Offer -- Purpose and
Effects of the Exchange Offer" and "Plan
of Distribution."
Use of Proceeds There will be no cash proceeds to
the Issuer or the Company from the
exchange of Exchange Bonds for Old Bonds
pursuant to the Exchange Offer.
Risk Factors
Investment in the Exchange Bonds involves certain risks. See
"Risk Factors" for a further discussion of the risks involved in an
investment in the Exchange Bonds.
Summary Combined Historical and Pro Forma Financial Data
Presented below is summary combined historical financial data
for the Company as of and for each of the years in the three-year
period ended December 31, 1995 and as of and for the six months ended
June 30, 1995 and 1996, which have been derived from the Company's
combined financial statements and pro forma combined financial data
as of and for the year ended December 31, 1995 and the six months
ended June 30, 1996. The pro forma financial data give effect to (i)
the issuance of $111.4 million in the aggregate principal amount of
Rosemary Bonds and the application of the net proceeds thereof to
refinance Panda-Rosemary project debt and to fund a portion of the
redemption of Ford Credit's limited partner interest in the Panda-
Rosemary Partnership, (ii) the release of certain reserves and escrow
deposits related to Panda-Rosemary project debt, (iii) the issuance
of the Existing Bonds and the application of the net proceeds thereof
(a) to fund the Capitalized Interest Fund, the Debt Service Reserve
Fund and the Company Expense Fund, (b) to fund the remaining portion
of the redemption of Ford Credit's limited partner interest in the
Panda-Rosemary Partnership and (c) to make a distribution to the
Company's parent and (iv) the write-off of debt issue costs and
losses from the early extinguishment of debt and the recording of
estimated transaction costs relating to the Prior Offering and the
Rosemary Offering. The pro forma balance sheet data reflect such
adjustments as if the transactions had occurred as of the end of the
relevant period and the pro forma statement of operations data
reflect such adjustments as if the transactions had occurred as of
the beginning of the relevant period. The unaudited pro forma
financial data do not purport to be indicative of the financial
position or results of operations which would actually have occurred
if the transactions described had occurred as presented in such
statements or which may be obtained in the future. Results for the
six months ended June 30, 1996 are not necessarily indicative of the
results that may be expected for the full fiscal year. The
information in this table should be read in conjunction with the
information contained under the captions "Capitalization," "Unaudited
Pro Forma Financial Data" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and with the
combined financial statements of the Company, including the notes
thereto, included elsewhere herein.
<TABLE>
<CAPTION>
------Year Ended December 31,------- --Six Months Ended June 30,--
Pro forma Pro forma
1993 1994 1995 1995 1995 1996 1996
(in thousands, except ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Electric capacity and energy sales $29,856 $30,664 $29,859 $29,859 $15,434 $14,559 $14,559
Steam and chilled water sales 618 650 473 473 257 263 263
Interest income 365 603 895 895 435 387 387
-------- -------- -------- -------- -------- -------- --------
Total revenue 30,839 31,917 31,227 31,227 16,126 15,209 15,209
Operating expenses 7,676 8,940 9,348 9,348 4,578 5,061 5,061
Development and administrative expenses 2,278 1,376 1,821 1,821 891 1,193 1,193
Interest expense 11,066 11,018 11,716 21,875 5,669 6,370 10,942
Depreciation 4,282 4,208 4,210 4,033 2,104 2,106 2,018
Amortization - Debt issue costs 502 600 554 312 273 282 170
Amortization - Partnership formation
costs 533 533 533 533 266 267 267
-------- -------- -------- -------- -------- -------- --------
Total expenses 26,337 26,675 28,182 37,922 13,781 15,279 19,651
Income (loss) before minority interest 4,502 5,242 3,045 (6,695) 2,345 (70) (4,442)
Minority interest (5,474) (5,700) (5,048) -- (2,995) (1,906) --
-------- -------- -------- -------- -------- -------- --------
Net income (loss) $ (972) $ (458) $ (2,003) $ (6,695) $ (650) $ (1,976) $ (4,442)
======== ======== ======== ======== ======== ======== ========
OTHER DATA:
Ratio of earnings to fixed charges 1.39 1.36 (1) (1) 1.13 (1) (1)
-------December 31,--------- -----------June 30,----------
Pro forma
1993 1994 1995 1995 1996 1996
(in thousands) (in thousands)
BALANCE SHEET DATA:
Cash and other current assets $ 14,084 $ 15,538 $ 11,333 $ 17,039 $ 16,240 $ 10,151
Power plant and equipment (net) 93,815 94,893 216,794 158,169 253,067 250,153
Reserves and escrow deposits, and
other assets 23,687 31,247 46,988 34,740 45,530 100,524
-------- -------- -------- -------- -------- --------
Total assets 131,586 141,678 275,115 209,948 314,837 360,828
Current liabilities 11,252 12,530 18,457 11,864 19,641 14,250
Long-term debt, less current portion 98,454 106,343 234,608 175,195 274,344 387,008
Minority interest 34,479 35,588 36,836 36,322 37,614 --
Shareholders' deficit (12,599) (12,783) (14,786) (13,433) (16,762) (40,430)
-------- -------- -------- -------- -------- --------
Total liabilities and
shareholders' deficit $131,586 $141,678 $275,115 $209,948 $314,837 $360,828
</TABLE>
______________________
Note (in thousands):
(1)For purposes of computing the ratio of earnings to fixed charges,
earnings represent net income (loss) plus fixed charges. Fixed
charges consist of interest expense, capitalized interest and
amortization of debt issuance costs. Earnings were insufficient to
cover fixed charges in 1995 by $2,748, in pro forma 1995 by
$12,488, in the six months ended June 30, 1996 by $6,295 and in the
pro forma six months ended June 30, 1996 by $10,667. In 1994, 1995
and for the six months ended June 30, 1996, fixed charges included
capitalized interest of $803, $5,793, and $6,225, respectively,
related to the Panda-Brandywine Project. This capitalized interest
is funded by additional borrowings under the construction loan.
The ratio of earnings to fixed charges excluding the capitalized
interest would be 1.45 and 1.25 in 1994 and 1995, respectively, and
earnings were insufficient to cover fixed charges, excluding
capitalized interest, by $70 and $4,442 for the six months ended
June 30, 1996, and for the pro forma six months ended June 30,
1996, respectively.
Independent Engineers' and Consultants' Reports
The Independent Engineers' and Consultants' Reports, and the
following summary thereof, contained in this Prospectus contain
forward-looking statements, including projections, that involve risks
and uncertainties. Actual results may differ materially from those
discussed in the forward-looking statements. Factors that might
cause such a difference include, but are not limited to, those
discussed in "Risk Factors" and actual conditions differing from the
assumptions made in the Independent Engineers' and Consultants'
Reports.
Consolidating Engineer's Pro Forma Report
ICF Resources, Incorporated ("ICF") has prepared a report dated
July 26, 1996 (the "Consolidated Pro Forma Report") that contains a
summary consolidation of the pro forma financial projections (the
"Consolidated Pro Forma") for the Panda-Brandywine Facility and the
Panda-Rosemary Facility contained in the Rosemary Engineering Report
and the Panda-Brandywine Pro Forma Report, both summarized below. The
Consolidated Pro Forma Report summarizes and describes the
Consolidated Pro Forma and explains how it was derived, and discusses
the methodology and assumptions used in its preparation. ICF has
also prepared an Officer's Certificate dated October 11, 1996
identifying certain events which have occurred since the date of the
Consolidated Pro Forma Report which ICF is currently assessing to
evaluate the impact, if any, such events may have on the report and
the information contained therein. The Consolidated Pro Forma Report
and such certificate are attached hereto as Appendix B and should be
read in its entirety by all prospective investors.
In preparing the Consolidated Pro Forma, ICF relied on the pro
forma financial projections (the "Rosemary Pro Forma") prepared by
Burns & McDonnell, which are contained in the Rosemary Engineering
Report, and the pro forma financial projections (the "Brandywine Pro
Forma") that ICF prepared for the Panda Brandywine Facility, which
are contained in the Brandywine Pro Forma Report. The Rosemary
Engineering Report and the Brandywine Pro Forma Report contain the
primary assumptions underlying, and the conclusions drawn from, the
Rosemary Pro Forma and the Brandywine Pro Forma, respectively. In its
capacity as Consolidating Engineer, ICF reviewed the Rosemary
Engineering Report and the Brandywine Pro Forma Report only to the
extent necessary to incorporate the results of the Rosemary Pro Forma
and the Brandywine Pro Forma in the Consolidated Pro Forma and made
no independent investigation of the Rosemary Pro Forma or the
Brandywine Pro Forma, their accuracy, or the assumptions made in the
preparation thereof. The Rosemary Engineering Report and the
Brandywine Pro Forma Report are attached hereto as Appendix C and
Appendix E, respectively, and should be read in their entirety by all
prospective investors.
The Consolidated Pro Forma Report presents two measures of debt
service coverage for the Company. The first, the "Company Coverage
Ratio," reflects the relationship between the total cash flow
available for Company debt service (i.e., cash flow from the Panda-
Rosemary Facility and the Panda-Brandywine Facility after paying
Project-level debt service, making additions to Project-level
reserves and providing for certain Company-level items) and Company
debt service (i.e., the debt service on the Existing Bonds). The
second, the "Consolidated Coverage Ratio," reflects the relationship
between the total combined operating cash flow of the Panda-Rosemary
Facility and the Panda-Brandywine Facility (i.e., cash flow from the
Panda-Rosemary Facility and the Panda-Brandywine Facility before
paying Project-level debt service and Company-level debt service and
after making additions to Project-level reserves and providing for
certain Company-level items) and the sum of the combined debt service
for such facilities plus the debt service on the Existing Bonds. Over
the 16-year term of the Existing Bonds, the Company Coverage Ratio is
at least 1.7:1, and on average is 1.9:1. The Consolidated Coverage
Ratio does not fall below 1.24:1, and on average is 1.25:1.
Independent Engineer's Report -- Rosemary
Burns & McDonnell ("Burns & McDonnell") has prepared a report
dated July 26, 1996 concerning certain technical, environmental and
economic aspects of the Panda-Rosemary Facility (the "Rosemary
Engineering Report"). Burns & McDonnell has also prepared an
Officer's Certificate dated October 11, 1996 confirming the
information contained in the Rosemary Engineering Report as of the
date of such certificate, but noting the hurricane damage sustained
by the Panda-Rosemary Facility and disclosing that it is currently
assessing the event and not presently able to evaluate the impact, if
any, such event may have on the Rosemary Engineering Report and the
information contained therein. The Rosemary Engineering Report and
such certificate are attached hereto as Appendix C and should be read
in its entirety by all prospective investors. Burns & McDonnell
provides a variety of professional and technical services in the
fields of engineering, architecture, planning, economics and
environmental sciences. Burns & McDonnell's project work includes
studies, design, planning and construction management for electric
power generation and transmission facilities, as well as for waste
management, water treatment, airport and other transportation
infrastructure facilities. Burns & McDonnell has been involved with
the Panda-Rosemary Facility since 1989. The Rosemary Engineering Report
includes, among other things, a review and assessment of the Panda-Rosemary
Facility's equipment and operating condition, a review of its operating
history, a review of the significant Project agreements and projections
of revenues, expenses and debt service coverage for the facility during
the period that the Rosemary Bonds are scheduled to be outstanding
(i.e., through 2016).
Burns & McDonnell has relied upon projections of the Panda-
Rosemary Facility's dispatch profile and fuel costs over the term of
the Rosemary Power Purchase Agreement prepared by ICF. Based on ICF's
experience in undertaking similar analyses, Burns & McDonnell
believes that the use of ICF's dispatch profile and fuel cost
projections is reasonable for the purposes of the Rosemary
Engineering Report. Burns & McDonnell also has relied upon certain
other information provided to it by sources it believes to be
reliable. Burns & McDonnell believes that the use of such information
is reasonable for the purposes of the Rosemary Engineering Report.
The principal assumptions made by Burns & McDonnell in
developing the pro forma operating projections contained in the
Rosemary Engineering Report are as follows:
(i) Burns & McDonnell made no determination as to the validity
and enforceability of any contract, agreement, rule or
regulation applicable to the Panda-Rosemary Facility and its
operations, and assumed that all such contracts, agreements,
rules and regulations are fully enforceable in accordance
with their terms and that all parties will comply with the
provisions of their respective agreements.
(ii) U-Tech, or a successor operator, will operate the Panda-
Rosemary Facility as currently required in the Rosemary O&M
Agreement, will employ qualified and competent personnel who
will properly operate the equipment in accordance with the
manufacturers' recommendations and good engineering practice
and will generally operate the Panda-Rosemary Facility in a
sound and business-like manner.
(iii) U-Tech, or a successor operator, will maintain the
Panda-Rosemary Facility in accordance with good engineering
practice, and will make all required equipment renewals and
replacements in a timely manner. Inspections, overhauls,
repairs and modifications have been and will continue to be
planned for and conducted in accordance with manufacturers'
recommendations and with special regard for the need to
monitor certain operating parameters to identify early signs
of potential problems.
(iv) All permits and approvals necessary to operate the
Panda-Rosemary Facility will remain in full force and
effect.
(v) Fuel costs will be as projected by ICF (which projections
have been determined by Benjamin Schlesinger and Associates,
Inc., the independent fuel consultant for the Panda-Rosemary
Facility, to employ reasonably conservative assumptions).
(vi) The Panda-Rosemary Facility will be dispatched as
projected by ICF, except that ICF's dispatch projections
have been increased by 400 hours per year in 1996 and 1997,
500 hours per year in 1998 through 2002 and 600 hours per
year in 2003 through 2015 to reflect hours that the Panda-
Rosemary Facility will be dispatched using gas supplied by
VEPCO, which increases ICF has determined to be reasonable.
Under these assumptions, dispatch is projected to increase
from 1,144 equivalent full load hours in 1997 to 4,216
equivalent full load hours in 2005. After 2005, dispatch is
projected to decrease steadily to 3,201 equivalent full load
hours in 2010, and thereafter to stay relatively constant
through 2015.
(vii) Thermal energy in the form of steam and chilled water
will be exported from the Panda-Rosemary Facility, operating
in the cogeneration mode, to Bibb's facility such that the
production and sale of useful thermal energy, as defined
under the Public Utility Regulatory Policies Act of 1978, as
amended ("PURPA"), and the regulations promulgated
thereunder, will be sufficient to maintain the Panda-
Rosemary Facility's QF status. The Panda-Rosemary
Partnership will continue to absorb an annual operating loss
on the sale of steam and chilled water over the life of the
Panda-Rosemary Facility.
(viii) Steam and chilled water sales to Bibb will remain
constant at 50,000 pounds per hour for 7,800 hours per year
and 1,010 tons per hour for 4,000 hours per year,
respectively.
(ix) Operating costs, including fuel transportation,
operating and maintenance and other administrative costs,
will equal those estimated by the Partnership, most of which
are assumed to increase at a rate of 3% per year.
(x) By August 1996, the Partnership will convert its firm
transportation service on Transco to a new transportation
service that will allow the Partnership to realize a return
of a portion of its firm transportation costs.
(xi) The original principal amount of the Rosemary Bonds
will be $111.4 million, the annual interest rate on the
Rosemary Bonds will be 8-5/8% and the amortization schedule
of the Rosemary Bonds will be as provided by the Panda-
Rosemary Partnership.
(xii) On the Issue Date, the debt service reserve fund
maintained pursuant to the Rosemary Indenture will be funded
at approximately $8.1 million and thereafter will be
maintained at adequate levels throughout the Rosemary Bonds'
repayment period, and such fund will earn interest at a rate
of 5.0% per year.
Although Burns & McDonnell believes that the use of these
assumptions in the Rosemary Engineering Report is reasonable,
assumptions are inherently subject to significant uncertainties and,
if actual conditions differ from those assumed, actual results will
differ from those projected, perhaps materially. Accordingly, the
projections contained in the Rosemary Engineering Report may not be
indicative of future performance and none of Burns & McDonnell, the
Company, the Issuer or any other person assumes any responsibility
for their accuracy. Therefore, no representations are made or
intended, nor should any be inferred, with respect to the likely
existence of any particular future set of facts or circumstances. If
actual results are less favorable than those projected in the
Rosemary Engineering Report or if the assumptions used in formulating
such projections prove to be incorrect, the Panda-Rosemary
Partnership's ability to make distributions to its partners and thus
ultimately to the Company, the Company's ability to make payments on
the Company Notes and consequently the Issuer's ability to make
payments on the Exchange Bonds may be materially and adversely
affected. See "Risk Factors -- Reliance upon Projections and
Underlying Assumptions Contained in Independent Consultants'
Reports."
Subject to the studies, analyses and investigations of the Panda-
Rosemary Facility they performed and the assumptions made in the
Rosemary Engineering Report, Burns & McDonnell offered the following
conclusions:
(i) The technology incorporated in the Panda-Rosemary Facility
is a sound, proven method of generating electric and thermal
energy and incorporates commercially proven technology. The
design, operation and maintenance of the Panda-Rosemary
Facility implemented by the Panda-Rosemary Partnership and U-
Tech were developed and have been implemented in accordance
with good engineering practices and generally accepted
industry practices and have taken into consideration
existing and proposed environmental and permit requirements
applicable to the Panda-Rosemary Facility. Burns & McDonnell
knows of no significant technical problems relating to the
Panda-Rosemary Facility that should be of concern to
potential investors.
(ii) The Panda-Rosemary Facility is in good condition and
its long-term maintenance program is consistent with the
manufacturers' recommendations and generally accepted
practices within the electric power generation industry.
(iii) The Panda-Rosemary Facility will have an expected
operating service life well beyond the term of the Rosemary
Power Purchase Agreement if properly operated and maintained
consistent with current practices.
(iv) The Panda-Rosemary Partnership has obtained and
maintained in full force and effect the key environmental
permits and approvals required from the various federal,
state and local agencies that are currently necessary to
operate the Panda-Rosemary Facility.
(v) The basis for the Panda-Rosemary Partnership's estimates of
the cost of operating and maintaining the Panda-Rosemary
Facility is reasonable. The expense projections prepared by
the Panda-Rosemary Partnership and based on projected levels
of dispatch appear adequate to account for the variable
operation and maintenance expenses of the Panda-Rosemary
Facility.
(vi) Projected revenues from the sale of electric generating
capacity, electricity and thermal energy and other income
are adequate to pay annual operation and maintenance
expenses (including provisions for major maintenance), fuel
costs and other operating expenses and provide a minimum
annual debt service coverage on the Rosemary Bonds of
1.37:1, as shown on Table I-1 in the Rosemary Engineering
Report.
Fuel Consultant's Report -- Rosemary
Benjamin Schlesinger and Associates, Inc. ("Schlesinger") has
prepared a report dated September 20, 1996 concerning the sufficiency
of the fuel supply and transportation arrangements entered into by
the Panda-Rosemary Partnership with respect to the Panda-Rosemary
Facility (the "Rosemary Fuel Consultant's Report"). Schlesinger has
also prepared an Officer's Certificate dated October 11, 1996
confirming the information contained in the Rosemary Fuel
Consultant's Report as of the date of such certificate. The Rosemary
Fuel Consultant's Report and such certificate are attached hereto as
Appendix D and should be read in its entirety by all prospective
investors. Schlesinger is a Bethesda, Maryland-based management
consulting firm that specializes in the natural gas industry,
including economic and regulatory analysis, market research, energy
supply and demand forecasting, gas rate development and related
economic, technical and environmental analyses. The Rosemary Fuel
Consultant's Report includes among other things a review and
assessment of the fuel supply and delivery arrangements for the Panda-
Rosemary Facility, with respect to both natural gas and fuel oil,
focusing on the appropriateness of the existing fuel arrangements and
the historic reliability of fuel supplies to the Panda-Rosemary
Facility. Schlesinger has used and relied upon certain information
provided to it by sources it believes to be reliable. Schlesinger
believes that the use of such information is reasonable for the
purposes of the Rosemary Fuel Consultant's Report.
In providing its conclusions set forth in the Rosemary Fuel
Consultant's Report, Schlesinger made certain assumptions. Although
Schlesinger believes that the use of these assumptions in the
Rosemary Fuel Consultant's Report is reasonable, assumptions are
inherently subject to significant uncertainties and, if actual
conditions differ from those assumed, actual results will differ from
those projected, perhaps materially. Accordingly, the conclusions
contained in the Rosemary Fuel Consultant's Report may not be
indicative of future events and none of Schlesinger, the Company, the
Issuer or any other person assumes any responsibility for their
accuracy. Therefore, no representations are made, nor should any be
inferred, with respect to the likely existence of any particular
future set of facts or circumstances. If actual results are less
favorable than the conclusions presented in the Rosemary Fuel
Consultant's Report or if the assumptions used in formulating the
conclusions presented prove to be incorrect, the Panda-Rosemary
Partnership's ability to make distributions to its partners and thus
ultimately to the Company, the Company's ability to make payments on
the Company Notes and consequently the Issuer's ability to make
payments on the Exchange Bonds may be materially and adversely
affected. See "Risk Factors -- Reliance upon Projections and
Underlying Assumptions Contained in Independent Consultants'
Reports."
Subject to the information contained and the assumptions made in
the Rosemary Fuel Consultant's Report, Schlesinger offered the
following conclusions:
(i) The Panda-Rosemary Partnership's existing arrangements with
NGC for firm natural gas supply and management services,
with Transco, Texas Gas and GNC for firm natural gas
transportation services and with North Carolina Natural Gas
Company for pipeline operating and certain gas balancing
services provide the Panda-Rosemary Partnership with an
appropriate degree of gas reliability for a summer peaking
facility.
(ii) The Panda-Rosemary Facility's on-site fuel oil storage,
ready access to oil terminals at four locations and fuel oil
resupply procedures with NGC provide an appropriate degree
of back-up fuel oil supply for the Panda-Rosemary Facility.
(iii) While the energy price in the Rosemary Power Purchase
Agreement closely parallels the actual seasonal availability
to the Panda-Rosemary Facility of gas and fuel oil, the
calculation of the energy price is not directly linked to
the Panda-Rosemary Facility's actual fuel costs. Therefore,
the Panda-Rosemary Facility is subject to the risk that the
fuel compensation component of the energy price under the
Rosemary Power Purchase Agreement will not match the Panda-
Rosemary Facility's fuel costs to produce the electricity.
This risk is greatest in the months of November, December
and March, when the energy price under the Rosemary Power
Purchase Agreement is based upon an index of spot gas prices
but when the Panda-Rosemary Facility may be required to burn
more expensive fuel oil upon dispatch due to potential
curtailment in gas supply and transportation during winter
months. This risk, however, is largely mitigated by a start-
up fee VEPCO pays the Panda-Rosemary Partnership for each
start-up in such months. See "Risk Factors -- Project Risks
-- Fuel-Related Pricing" and "-- Project Risks --
Interruptible Gas Supply and Transportation Risks."
(iv) The Panda-Rosemary Partnership's overall fuel supply
plan, both with respect to fuel supply and delivery, is
reasonable and appropriate given the Panda-Rosemary
Facility's operating history and energy payment structure.
Thus, so long as VEPCO continues to dispatch the Panda-
Rosemary Facility principally as a summer peaking facility,
the additional fixed costs that the Panda-Rosemary
Partnership would be required to incur to increase gas
supply or delivery reliability, and further mitigate the
risk discussed in clause (iii) above, are not warranted from
an economic or fuel reliability standpoint.
(v) The projections developed by Burns & McDonnell in the
Rosemary Engineering Report employ reasonably conservative
assumptions with respect to the Panda-Rosemary Partnership's
fixed gas transportation costs and the relationship of the
Panda-Rosemary Partnership's variable fuel costs to the
energy price under the Rosemary Power Purchase Agreement,
and contains reasonable assumptions concerning the revenue
that the Panda-Rosemary Partnership may receive by reselling
transportation capacity that is excess to the Panda-Rosemary
Facility's average daily capacity utilization and/or
reselling gas using its excess transportation capacity.
(vi) The Panda-Rosemary Partnership recently converted its
firm gas transportation service to a more flexible type of
transportation service that provides at least equivalent
service reliability and pricing to the previous firm
services, but enhances the Panda-Rosemary Facility's
operational flexibility by permitting it to switch receipt
and delivery points for the gas and to resell its capacity
to third parties when it is not needed.
(vii) The Panda-Rosemary Partnership should have little
difficulty extending its existing fuel supply and
transportation contracts or, if necessary, replacing the
current fuel arrangements with alternative service
agreements that offer comparable price, credit supply and
reliability provisions as necessary to match the contractual
duration of its fuel supply arrangements with the maturity
date of the Rosemary Bonds.
Independent Pro Forma Analysis -- Brandywine
ICF has prepared a report (the "Brandywine Pro Forma Report"),
dated July 26, 1996, presenting its independent pro forma operating
projections (the "Brandywine Pro Forma") for the Panda-Brandywine
Facility. ICF has also prepared an Officer's Certificate dated
October 11, 1996 identifying certain events which have occurred since
the date of the Brandywine Pro Forma Report which ICF is currently
assessing to evaluate the impact, if any, such events may have on the
report and the information contained therein. The Brandywine Pro
Forma Report and such certificate are attached hereto as Appendix E
and should be read in its entirety by all prospective investors. In
developing its projections, ICF reviewed the Panda-Brandywine
Facility's fuel supply and transportation contracts and the
Brandywine Power Purchase Agreement, as well as the Brandywine
Engineering Report and the Brandywine Fuel Consultant's Report. Based
on the experience of Pacific Energy Systems, Inc. ("PES") and C.C.
Pace Resources, Inc. ("C.C. Pace") in undertaking similar analyses,
ICF believes that the use of the Brandywine Engineering Report and
the Brandywine Fuel Consultant's Report is reasonable for the
purposes of the Brandywine Pro Forma. In preparing the Brandywine Pro
Forma, ICF used and relied on certain other information provided to
it by sources it believes to be reliable, including a report by ICF
providing its dispatch projections for the Panda-Brandywine Facility.
ICF believes that the use of such information is reasonable for the
purposes of the Brandywine Pro Forma.
In preparing the Brandywine Pro Forma and the conclusions
contained therein, ICF made assumptions with respect to conditions
that may exist or events that may occur in the future. The principal
assumptions made by ICF in developing the Brandywine Pro Forma
include:
(i) ICF made no determination as to the validity and
enforceability of any contract, agreement, rule or
regulation applicable to the Panda-Brandywine Facility, and
ICF assumed that all such contracts, agreements, rules and
regulations will be fully enforceable in accordance with
their terms and that all parties will comply with the
provisions thereof.
(ii) Raytheon and Ogden Brandywine will construct and
operate the Panda-Brandywine Facility as required under
their respective contracts with the Panda-Brandywine
Partnership, which contracts have been reviewed by PES. ICF
further assumes that PES's conclusions as to those
agreements are accurate.
(iii) Construction of the Panda-Brandywine Facility will be
completed by the end of September 1996, in time for
commercial operations to commence in October 1996, and
construction costs will not exceed the initial capital
budget of $215 million, all as projected by PES in the
Brandywine Engineering Report.
(iv) All permits and approvals necessary to construct and
operate the facility will be obtained on a timely basis and
will be maintained in full force and effect, and any changes
in required permits and approvals will not require changes
in design which result in a material delay in completion of
construction as scheduled or in significant increases in the
cost of constructing the Panda-Brandywine Facility.
(v) The Panda-Brandywine Facility's design will enable it to
perform at a level consistent with that anticipated in the
Brandywine Pro Forma.
(vi) Ogden Brandywine and its successors will employ
qualified and competent personnel who will properly operate
and maintain the equipment in accordance with the
manufacturers' recommendations and good engineering
practice, will make all required renewals and replacements
and will generally operate the facility in a sound and
business-like manner.
(vii) The fuel supply arrangements entered into by the Panda-
Brandywine Partnership fulfill the contractual requirements
of the Brandywine Power Purchase Agreement, and variable
fuel-related costs will be less than the energy payments to
be received from PEPCO, as confirmed by C.C. Pace in the
Brandywine Fuel Consultant's Report.
(viii) Thermal energy in the form of steam will be exported
from the Panda-Brandywine Facility, operating in the
cogeneration mode, to Brandywine Water Company's distilled
water plant such that the production and sale of useful
thermal energy, as defined in PURPA and the regulations
promulgated thereunder, will be sufficient to maintain the
Panda-Brandywine Facility's QF status.
(ix) Upon conversion of the Brandywine Construction Loan
Facility to a long term lease pursuant to the Brandywine
Loan Agreement, the final cost of the Panda-Brandywine
Facility will be $215 million, the federal income tax rate
then applicable to GE Capital will be 35% and the interest
factor is based on a Treasury Bill rate index of 6.83%.
Although ICF believes that the use of these assumptions, and the
others contained in the Brandywine Pro Forma Report, in developing
the Brandywine Pro Forma is reasonable, assumptions are inherently
subject to significant uncertainties and, if actual conditions differ
from those assumed, actual results will differ from those projected,
perhaps materially. Accordingly, the projections contained in the
Brandywine Pro Forma may not be indicative of future performance and
none of ICF, the Company, the Issuer or any other person assumes any
responsibility for their accuracy. Therefore, no representations are
made or intended, nor should any be inferred, with respect to the
likely existence of any particular set of facts or circumstances. If
actual results are less favorable than those projected in the
Brandywine Pro Forma Report or if the assumptions used in formulating
such projections prove to be incorrect, the Panda-Brandywine
Partnership's ability to make distributions to its partners and thus
ultimately to the Company, the Company's ability to make payments on
the Company Notes and consequently the Issuer's ability to make
payments on the Exchange Bonds may be materially and adversely
affected. See "Risk Factors -- Reliance upon Projections and
Underlying Assumptions Contained in Independent Consultants'
Reports."
Subject to the studies, analyses and investigations of the Panda-
Brandywine Facility performed by ICF, and the assumptions made in the
Brandywine Pro Forma, ICF offered the following conclusions:
(i) The financial projections in the Brandywine Pro Forma
provide a reasonable reflection of the Panda-Brandywine
Facility's expected costs, revenues and cash flows.
(ii) The energy and capacity revenue calculations contained
in the Brandywine Pro Forma are appropriate and consistent
with the Brandywine Power Purchase Agreement. Expectations
for capacity payment adjustments under the Brandywine Power
Purchase Agreement are reasonable given recent peak day
demand on PEPCO's system.
(iii) The Panda-Brandywine Facility's net cash flow will
average approximately $23.2 million per year through 2016,
ranging from $6.4 million in 1998 to $34.6 million in 2016.
(iv) During the 20-year term of the Brandywine Facility
Lease, the Panda-Brandywine Facility's lease coverage (i.e.,
the ratio of earnings before income taxes to lease payments)
will range from 3.05:1 in 1997 to 1.61:1 in 2016, and the
Panda-Brandywine Facility's average lease coverage through
2016 will be 1.84:1.
Independent Engineer's Report -- Brandywine
PES has prepared a report, dated July 22, 1996, evaluating the
design, construction and expected operation of the Panda-Brandywine
Facility (the "Brandywine Engineering Report"). PES has also prepared
an Officer's Certificate dated October 11, 1996 confirming the
information contained in the Brandywine Engineering Report as of the
date of such certificate. The Brandywine Engineering Report and such
certificate are attached hereto as Appendix G and should be read in
its entirety by all prospective investors. PES has provided
engineering services to approximately 50 power plants within the last
seven years. Such services include technical review, construction
monitoring, performance testing and certification, and operation and
maintenance audits. Approximately half of these plants utilize
combined-cycle combustion turbine technology with cogeneration as does
the Panda-Brandywine Facility. PES has been involved with the Panda-
Brandywine Facility since it performed a due diligence review for GE
Capital in connection with the Panda-Brandywine Facility's financial
closing in March 1995, and PES has monitored construction of the Panda-
Brandywine Facility since that date.
PES's review and assessment is based, among other things, on due
diligence work previously completed, construction monitoring of the
Panda-Brandywine Facility and a review of significant project
agreements. In providing its conclusions set forth in the Brandywine
Engineering Report, PES made certain assumptions. Although PES
believes these assumptions to be reasonable, assumptions are
inherently subject to significant uncertainties and, if actual
conditions differ from those assumed, actual results will differ from
those projected, perhaps materially. Accordingly, the conclusions
contained in the Brandywine Engineering Report may not be indicative
of future events and none of PES, the Company, the Issuer or any
other person assumes any responsibility for their accuracy.
Therefore, no representations are made, nor should any be inferred,
with respect to the likely existence of any particular future set of
facts or circumstances. If actual results are less favorable than the
conclusions presented in the Brandywine Engineering Report or if the
assumptions used in formulating such conclusions prove to be
incorrect, the Panda-Brandywine Partnership's ability to make
distributions to its partners and thus ultimately to the Company, the
Company's ability to make payments on the Company Notes and
consequently the Issuer's ability to make payments on the Exchange
Bonds may be materially and adversely affected. See "Risk Factors --
Reliance upon Projections and Underlying Assumptions Contained in
Independent Consultants' Reports."
PES has independently reviewed the project engineering, cost,
construction schedule, permits, contracts, operations and
maintenance, and performance estimates for completeness, risk,
variation from practices typical in the industry, and the ability of
the Panda-Brandywine Facility to perform as intended. Its principal
conclusions include the following:
(i) The Panda-Brandywine Facility is technically feasible and
its design is similar to that of several successfully
operated combined-cycle turbine plants. The design appears
to be adequate to meet the contractual commitments specified
in the Brandywine Power Purchase Agreement (including net
power output and heat rate) and the Brandywine Steam
Agreement, environmental permit conditions and QF
requirements.
(ii) Based on the guaranteed completion date of October 31,
1996 in the construction agreement, construction is ahead of
schedule. As of July 15, 1996, construction was
approximately 90% complete, and it is reasonable to expect
commercial operation by the end of September 1996. PES
expects final acceptance, as scheduled, in April 1997.
(iii) If constructed, operated and maintained according to
the design criteria and manufacturer's recommendations, and
if critical parts are renewed and replaced, the Panda-
Brandywine Facility will perform as anticipated and will
have an expected operating service life that exceeds the 25-
year primary term of the Brandywine Power Purchase
Agreement.
(iv) All required permits and licenses either have been
obtained or are reasonably expected to be obtained within a
time frame that will not delay the planned operation of the
Panda-Brandywine Facility.
(v) The Panda-Brandywine Partnership's $215 million budget for
the cost of constructing the Panda-Brandywine Facility is
reasonable. There have been cost overruns in some budget
items while other items have been completed at lower than
budgeted cost. Overall, construction is expected to be
completed at approximately $200,000 to $300,000 below the
original Project budget which included $8.7 million for
contingencies. The $5.8 million budget for expenses during
commissioning is consistent with experience at other
projects.
(vi) The Panda-Brandywine Facility's guaranteed heat rate
limit of 7,124 Btu/kWh (LHV) equates to an efficiency of
48%. The efficiency standard for QF status (45%) is,
therefore, satisfied regardless of the thermal load. PES
believes the Brandywine Steam Agreement is sufficient to
ensure the continued QF status of the Panda-Brandywine
Facility.
(vii) The Panda-Brandywine Facility, if constructed as designed,
is capable of meeting the air emission standards of the Environmental
Protection Agency and the Maryland Public Service Commission. Other
projects that PES has worked on that use similar GE turbines have
complied with air emission standards such as those required of the
Panda-Brandywine Facility.
(viii) The Panda-Brandywine Facility should be able to perform
at a level consistent with that anticipated in ICF's pro
forma projections.
Independent Fuel Consultant's Report -- Brandywine
C.C. Pace has prepared a report dated July 2, 1996 reviewing the
sufficiency of the fuel supply and transportation arrangements for
the Panda-Brandywine Facility (the "Brandywine Fuel Consultant's
Report"). C.C. Pace has also prepared an Officer's Certificate dated
October 11, 1996 confirming the information contained in the
Brandywine Fuel Consultant's Report as of the date of such
certificate, with an exception pertaining to a delay in the
construction of a pipeline which is a condition to certain rights of
the Panda-Brandywine Partnership for firm natural gas transportation
service, as more fully described therein and in "Description of the
Projects -- The Panda-Brandywine Facility -- Gas Transportation." The
Brandywine Fuel Consultant's Report and such certificate are attached
hereto as Appendix H and should be read in its entirety by all
prospective investors. C.C. Pace is an energy consulting firm based
in Fairfax, Virginia that specializes in analyzing fuel supply and
transportation arrangements for independent power projects.
The Brandywine Fuel Consultant's Report reviews whether the
Panda-Brandywine Partnership has contracted for adequate fuel supply
and transportation services to meet its obligations under the
Brandywine Power Purchase Agreement and the relationship between the
energy payments under the Brandywine Power Purchase Agreement and the
fuel and transportation costs the Panda-Brandywine Partnership is
likely to incur.
The Brandywine Fuel Consultant's Report is based upon certain
assumptions regarding the availability and future pricing of fuel.
Although C.C. Pace believes that the use of such assumptions is
reasonable, assumptions are inherently subject to significant
uncertainties and, if actual conditions differ from those assumed,
actual results will differ from those projected, perhaps materially.
Accordingly, the conclusions contained in the Brandywine Fuel
Consultant's Report may not be indicative of future performance and
none of C.C. Pace, the Company, the Issuer or any other person
assumes any responsibility for their accuracy. Therefore, no
representations are made, nor should any be inferred, with respect to
the likely existence of any particular future set of facts or
circumstances. If actual results are less favorable than the
conclusions presented in the Brandywine Fuel Consultant's Report or
if the assumptions used in formulating such conclusions prove to be
incorrect, the Panda-Brandywine Partnership's ability to make
distributions to its partners and thus ultimately to the Company, the
Company's ability to make payments on the Company Notes and,
consequently, the Issuer's ability to make payments on the Exchange
Bonds may be materially and adversely affected. See "Risk Factors --
Reliance upon Projections and Underlying Assumptions Contained in
Independent Consultants' Reports."
Subject to the information contained and the assumptions made in
the Brandywine Fuel Consultant's Report, C.C. Pace offers the
following key characteristics concerning the fuel supply and
transportation arrangements for the Panda-Brandywine Facility:
(i) Cogen Development Company ("CDC"), the natural gas supplier
for the Panda-Brandywine Facility, has sufficient natural
gas reserves and gas marketing operations to support its
obligations under the Brandywine Gas Agreement. CDC is
required annually to ensure its reserves continue to be
adequate to meet its fixed price obligations to the Panda-
Brandywine Facility, and CDC's parent has substantial assets
backing its corporate warranty of CDC's gas supply
obligations.
(ii) The market-based pricing provided under the Brandywine
Power Purchase Agreement corresponds to the pricing at which
gas supplies are generally available, and is similar to the
pricing at which gas supplies are available from CDC.
(iii) The Panda-Brandywine Partnership has contracted for
adequate firm transportation arrangements for its natural
gas supplies. Regulatory approvals are in place and
construction of necessary pipeline facilities is on schedule
for these arrangements to be available as of the
commencement of commercial operations at the Panda-
Brandywine Facility. (1)
(iv) There is a strong match between changes in the Panda-
Brandywine Facility's expected fuel-related costs and
changes in the revenues it will receive from energy payments
under the Brandywine Power Purchase Agreement. The risk of a
mismatch between changes in fuel costs and changes in
project revenues are mitigated by significant initial
positive margins in energy payment components.
(v) PEPCO has found that the fuel supply and transportation
arrangements for the Panda-Brandywine Facility fulfill, and
should continue to fulfill, the requirement in the
Brandywine Power Purchase Agreement that the Panda-
Brandywine Partnership maintain a reliable supply of fuel,
and can reasonably be expected to result in variable fuel-
related costs that are less than the energy payments under
the Brandywine Power Purchase Agreement. Under reasonable
assumptions, the fuel supply arrangements should continue to
fulfill the contractual requirements of the Brandywine Power
Purchase Agreement.
(vi) The fuel supply and transportation arrangements for the
Panda-Brandywine Facility are flexible enough to meet the
dispatch requirements under the Brandywine Power Purchase
Agreement. CDC, which also provides fuel management services
for the Panda-Brandywine Partnership, has the experience
necessary to manage these arrangements and CDC's fuel
management performance is backed by a corporate warranty of
its parent.
(vii) The fuel oil supply plan for the Panda-Brandywine
Facility provides the Panda-Brandywine Partnership with the
capability to meet dispatch requirements under the
Brandywine Power Purchase Agreement, assuming fuel oil
supply and transportation contracts with local fuel oil
suppliers and trucking companies are in place before each
heating season. Under normal conditions a sufficient fuel
oil supply should be available to the Panda-Brandywine
Facility.
(viii) The pro forma modeling of the Panda-Brandywine
Facility contained in the Brandywine Pro Forma reflects the
Panda-Brandywine Facility's fuel supply arrangements using
the gas and oil price projections of ICF. ICF is a
recognized forecaster of gas and oil prices. As a
consequence of the expected dispatch of the Panda-Brandywine
Facility also projected by ICF, such pro forma modeling
reflects significant benefits of certain pipeline balancing
provisions under the assumption that these provisions will
continue over the term of the Brandywine Power Purchase
Agreement. Although C.C. Pace has found these assumptions to
be reasonable as modeled, there can be no guaranty that
these provisions will continue over the entire pro forma
modeling term.
________________
(1)C.C. Pace's Officer's Certificate notes that construction of the
necessary pipeline facilities has been delayed and may not be
completed prior to commencement of commercial operations of the
Panada-Brandywine Facility. The Panda-Brandywine's rights to
firm gas transportation service under the Columbia Gas FT
Agreement is dependent upon completion of the construction of
such pipeline. Construction of the pipeline was delayed as a
result of a dispute with a land owner that has since been
resolved. Columbia Gas has obtained all required regulatory
approvals and environmental permits and has resumed construction.
The Panda-Brandywine Partnership has informed C.C. Pace that
Columbia Gas has provided a guaranty for firm gas transportation
service to the Panda-Brandywine Partnership commencing November
1, 1996.
RISK FACTORS
In addition to the other information contained in this
Prospectus, before tendering Old Bonds for the Exchange Bonds offered
hereby, holders of Old Bonds should consider carefully the following
factors. The terms of the Exchange Bonds are substantially identical
to the terms of the Exchange Bonds, and the Exchange Bonds will
evidence the same debt as the Old Bonds which they replace.
Accordingly, the following factors may be generally applicable to the
Old Bonds as well as to the Exchange Bonds.
Consequences of Failure to Exchange Old Bonds
Holders of Old Bonds who do not exchange their Old Bonds for
Exchange Bonds pursuant to the Exchange Offer will continue to be
subject to the restrictions on transfer of such Old Bonds, as
described in the legend thereon, as a consequence of the issuance of
the Old Bonds pursuant to exemptions from, or in transactions not
subject to, the registration requirements of the Securities Act and
applicable state securities laws. In general, the Old Bonds may not
be offered or sold unless registered under the Securities Act and
applicable state securities laws, or pursuant to an exemption
therefrom. Except under certain limited circumstances contained in
the Registration Rights Agreement, the Issuer does not intend to
register the Old Bonds under the Securities Act. Upon consummation
of the Exchange Offer, certain rights of holders of Old Bonds who are
eligible to tender their Old Bonds for exchange in the Exchange Offer
and fail to do so will terminate. To the extent Old Bonds are
tendered and accepted in the Exchange Offer, the trading market, if
any, for the Old Bonds not so tendered could be adversely affected.
See "The Exchange Offer -- Termination of Certain Rights" and "Old
Bonds Registration Rights."
Dependence on Distributions from Project Entities
The ability of the Company to make payments on the Exchange
Bonds will depend almost entirely upon the financial performance of
the Projects in the Project Portfolio and the ability of the Project
Entities that own such Projects to make distributions through the PIC
Entities to the Company. The failure of a Project in the Project
Portfolio to perform as expected or the inability of one or more of
the Project Entities to make distributions through the PIC Entities
to the Company could have a material and adverse effect on the
ability of the Company to make payments on the Company Notes and,
consequently, on the ability of the Issuer to make payments on the
Exchange Bonds. The Projects in the Project Portfolio are subject to
a number of financial, operating and regulatory risks that could
materially and adversely affect their performance, and the ability of
the Project Entities to make distributions is subject to a number of
contractual and legal restrictions. Prospective investors should read
the remaining risk factors set forth below for a more complete
discussion of certain factors that could materially and adversely
affect the performance of the Projects in the Project Portfolio and
the ability of the Project Entities to make distributions.
Dependence on Commencement of Commercial Operations of the Panda-
Brandywine Facility
Initially, the Project Portfolio will contain only one facility,
the Panda-Rosemary Facility, that is operational. The distributions
the Company expects to receive in respect of the Panda-Rosemary
Facility are insufficient to enable the Company to satisfy its
payment obligations under the Company Notes and in turn enable the
Issuer to satisfy its payment obligations under the Existing Bonds.
Therefore, the ability of the Issuer to satisfy its payment
obligations under the Existing Bonds will depend upon the timely and
successful commencement of Commercial Operations of the other initial
Project in the Project Portfolio, the Panda-Brandywine Facility,
which is currently expected to occur in November 1996. The Brandywine
Power Purchase Agreement requires that the Panda-Brandywine Facility
commence Commercial Operations no later than June 1, 1997; however,
any significant delay beyond November 1996 in the commencement of
Commercial Operations of the Panda-Brandywine Facility or conversion
of the Panda-Brandywine Financing to a single investor lease could
materially and adversely affect the ability of the Project Entities
that own the Panda-Brandywine Partnership to make the distributions
that will be required for the Company to satisfy its payment
obligations under the Company Notes and, consequently, for the Issuer
to satisfy its payment obligations under the Existing Bonds. See
"Project Risks -- Start-Up Risks" below.
Financial Risks
Substantial Leverage; Effective Subordination of Exchange Bonds
The Company and its Project Entities are and will continue to be
highly leveraged, primarily as a result of the non-recourse Project-
level indebtedness incurred to finance the development and
construction of the Projects. As of June 30, 1996, the Company's
total combined indebtedness was $283.4 million, its total combined
assets were $314.8 million and its combined shareholders' deficit was
$16.8 million. As of such date, on a pro forma combined basis, after
giving effect to the completion of this offering, the Prior Offering
and the Rosemary Offering and the application of the proceeds
therefrom, the Company's total combined indebtedness would have been
$391.3 million, its total combined assets would have been $360.8
million and its combined shareholders' deficit would have been $40.4
million. The Company's Project-level indebtedness is collateralized
by the assets of the underlying Project. If a lender forecloses on a
Project's assets, there can be no assurance that the related Project
Entities will maintain any ownership interest in the Project or
receive any compensation upon a sale of the foreclosed assets by such
lender. In addition to the foreclosure risk, high leverage and the
lack of unencumbered collateral could adversely affect the ability of
a Project Entity, and the Company, to obtain additional financing in
the future for working capital, capital expenditures or other
purposes. Such adverse consequences could materially and adversely
affect the financial performance of the Company and its ability to
make payments on the Company Notes and, consequently, on the Issuer's
ability to make payments on the Exchange Bonds. See "Capitalization,"
"Unaudited Pro Forma Financial Data" and "Description of the Project
Debt."
The Exchange Bonds and the Company Guaranty will be the
exclusive obligations of the Issuer and the Company, respectively,
and not of any of the Project Entities or any other affiliate of the
Company. The Project Entities are highly leveraged and their debt
agreements restrict their ability to pay dividends, make
distributions or otherwise transfer funds to the Company. The
restrictions in such agreements generally require that, prior to the
payment of dividends, distributions or other transfers, the Project
Entity provide for the payment of other obligations, including
operating expenses, debt service and the funding of reserves. The
Project Entities are separate and distinct legal entities and have no
obligation to pay any amounts due pursuant to the Exchange Bonds or
to make any funds available therefor, whether by dividends, loans or
other payments, and do not guarantee the payment of the Exchange
Bonds. Thus, payments on the Exchange Bonds are effectively
subordinated to all obligations of the Project Entities. In addition,
the Company's right to receive any assets of the Project Entities
upon their liquidation or reorganization will be effectively
subordinated to the claims of such Project Entities' creditors
(including trade creditors and holders of other debt issued by such
Project Entity). After giving pro forma effect to the Rosemary
Offering, as of June 30, 1996, the Project Entities had approximately
$295.8 million of indebtedness and other liabilities, which are
effectively senior to the Exchange Bonds. See "Description of the
Project Debt."
While the Indenture imposes limitations on the ability of the
Company, the Issuer and any other PIC Entity to incur additional
indebtedness, the Indenture does not limit the amount of debt that
the Project Entities may incur, except that such Project-level debt
cannot be incurred (other than such debt created or in existence on
the date a Project is transferred to the Project Portfolio or the
date PIC or a PIC Entity makes its initial investment in a Project)
or refinanced if, as a result thereof, Cash Available for
Distribution from all Projects combined would be reduced by 10% in
the aggregate for all Future Ratio Determination Periods, in which
event the Company would have to meet certain debt coverage ratios and
the rating of the Bonds would have to be reaffirmed by at least one
rating agency prior to the incurrence or refinancing of such Project-
level debt. See "Description of the Exchange Bonds -- Certain
Covenants -- Limitations on Debt."
Default on Project-level Debt; Enforcement of Rights and
Realization of Collateral
If a Project Entity fails to generate cash flows sufficient to
service its debt, such Project Entity could be forced to default on
its indebtedness. If a Project Entity were to default under the terms
of any such indebtedness, subject to the terms of such indebtedness,
the obligees thereunder would be permitted to accelerate the maturity
of such indebtedness, which could terminate distributions to the
Company and cause a default under the Exchange Bonds. In such
circumstances, holders of the Exchange Bonds may be forced to
accelerate the maturity of the Exchange Bonds to protect their
interests at a time when it would not otherwise have been in their
interests to do so. Furthermore, such defaults could delay or
preclude payments on the Exchange Bonds or result in the loss of the
Company's entire indirect ownership interest in a Project. See
"Financial Risks -- Substantial Leverage; Effective Subordination of
Exchange Bonds" above and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
All series of the Bonds will be secured by pledges of, or grants
of security interests in, the Collateral to the Trustee for the
benefit of the holders of the Bonds. If a Project Entity is in
default on an obligation with respect to Project-level debt, the
acceleration and foreclosure of such debt will not enable the Trustee
to take action to foreclose upon the Collateral unless such default
resulted in a default with respect to the Exchange Bonds. Therefore,
a portion of the Collateral could be lost to foreclosure without the
Trustee having any foreclosure rights of its own with respect to such
Collateral. Furthermore, because the Trustee will not have a security
interest in accounts established under the Indenture into which
distributions from the PIC International Entities will be deposited,
in order to realize upon those accounts, the Trustee would have to
foreclose first against the capital stock of the Company and then
realize on the Company's security interest in those accounts. See
"Description of the Exchange Bonds -- Collateral for the Exchange
Bonds."
Addition of Projects to Project Portfolio
Pursuant to the Additional Projects Contract, additional
Projects developed by Panda International, if any, will be
transferred to the Project Portfolio if certain conditions are
satisfied, and additional series of Bonds are likely to be issued to
finance debt or equity investments in such Projects, which additional
series will rank pari passu with the Exchange Bonds. If such
additional Projects do not perform up to expectations, their
inclusion in the Project Portfolio could weaken the overall
performance of the Project Portfolio and impair the ability of the
Company to make payments on the Company Notes and, consequently, the
ability of the Issuer to make payments on the Bonds. While it is the
Company's belief that diversification of the Project Portfolio will
reduce the risks associated with poor performance by any one Project
or a small portion of the Project Portfolio, there can be no
assurance that this will be the case.
Repurchase of Bonds Upon a Change of Control
Upon the occurrence of a Change of Control, the Issuer must
offer to purchase all Existing Bonds and all additional series of
Bonds, if any, then outstanding at a purchase price equal to 101% of
the principal amount thereof plus accrued and unpaid interest to the
date of purchase. See "Description of the Exchange Bonds -- Certain
Covenants -- Change of Control."
There can be no assurance that the Issuer will have available
funds sufficient to fund the purchase of the Bonds upon a Change of
Control. In the event a Change of Control occurs at a time when the
Issuer does not have available funds sufficient to pay for all of the
Bonds delivered by holders seeking to accept the Issuer's repurchase
offer, an Event of Default would occur under the Indenture.
Reliance upon Projections and Underlying Assumptions
Contained in Independent Consultants' Reports
Included as Appendices C, D, E, F and G are reports of
independent engineers and consultants concerning the Panda-Rosemary
Facility and the Panda-Brandywine Facility. Included as Appendix B is
a summary consolidation of the projections contained in the Rosemary
Engineering Report and the Brandywine Pro Forma Report. The terms of
the Exchange Bonds have been structured on the basis of the
projections contained in such reports. For the purpose of preparing
the projections contained in such reports, of necessity, certain
assumptions have been made with respect to general business,
financial and economic conditions, the prices that will be paid for
electric generating capacity of and electric energy produced by the
Panda-Rosemary Facility and the Panda-Brandywine Facility, the costs
of obtaining fuel for such facilities, the number of hours that such
facilities will be dispatched, the cost to complete, and anticipated
completion date of, the Panda-Brandywine Facility, the interest rate,
the federal income tax rate applicable to GE Capital and the final
construction cost upon which lease payments will be based upon
conversion of the Brandywine Construction Loan Facility to a long-
term lease and other matters and contingencies that are not within
the control of the Company or its affiliates and the outcome of which
are difficult to predict. The independent engineers' and consultants'
reports contain discussions of the assumptions used in preparing the
projections and potential investors should review these reports
carefully.
Projections are inherently inaccurate and actual results are
likely to vary from such projections, sometimes materially.
Accordingly, the assumptions made and the projections prepared by
such engineering and consulting firms are not necessarily indicative
of future performance and none of the Company, the Issuer, such firms
or any other person assumes any responsibility for their accuracy. No
representation is made or intended, nor should any be inferred, with
respect to the likely existence of any particular set of facts or
circumstances. If actual results are less favorable than those
projected, or if the assumptions used in formulating the projections
contained in such reports prove to be incorrect, the Company's
ability to make payments on the Company Notes and, consequently, the
ability of the Issuer to make payments on the Exchange Bonds, could
be materially and adversely affected.
All projections of future operations and the economic results
thereof included in the independent engineers' and consultants'
reports have been reviewed and accepted by the Issuer and the Company
on the basis of present knowledge and assumptions that the Issuer and
the Company believe to be reasonable. These projections have not been
prepared in accordance with published guidelines of the Commission,
the American Institute of Certified Public Accountants, any
regulatory or professional agency or body or generally accepted
accounting principles. Price Waterhouse LLP, the Company's
independent accountants, has neither examined nor compiled the
projections and, accordingly, does not express an opinion or any
other form of assurance with respect thereto. After the issuance of
the Exchange Bonds, no independent engineer or other consultant will
provide the holders of the Bonds with revised projections or report
any difference between the projections and the actual operating
results achieved by the Projects.
Project Risks
Operating Risks
The operation of power generation facilities involves many
risks, including the breakdown or failure of power generation
equipment, transmission lines, pipelines or other equipment or
processes, the inability to obtain adequate fuel supplies and
performance below expected levels of output or efficiency. Although
the Panda-Rosemary Facility and the Panda-Brandywine Facility contain
or will contain certain redundancies and back-up mechanisms, there
can be no assurance that any such breakdown or failure would not
prevent the affected facility from performing under applicable power
and steam purchase agreements. In addition, although insurance is
maintained to protect against certain of these operating risks, the
proceeds of such insurance may not be adequate to cover lost revenues
or increased expenses, and, as a result, the Project Entities owning
such Project might be unable to service the Project-level debt. A
default under such Project-level debt could result in the Company
losing its indirect ownership interest in such Project. See
"Financial Risks -- Default on Project-level Debt; Enforcement of
Rights and Realization of Collateral" above. Furthermore, in the
event of a major casualty or loss involving a Project facility,
casualty insurance proceeds, to the extent not applied to repair such
facility, would be applied first to satisfy redemption or other
obligations under Project-level debt, and it is unlikely (until such
Project-level debt is less than the maximum insurance proceeds
payable) that any such insurance proceeds would be available for
mandatory redemption of the Bonds.
Dispatchability Risk
The power purchase agreements for the Projects may provide
substantial leeway to the power purchaser in determining when, and to
what extent, a facility is dispatched. For example, the Rosemary
Power Purchase Agreement provides VEPCO the contractual right to
schedule the Panda-Rosemary Facility for dispatch on a daily basis at
full capacity, partial capacity or off-line. The Panda-Rosemary
Facility has been used by VEPCO primarily as a peaking plant and, as
a result, the number of hours for which the facility has been
dispatched and the quantity of electricity produced by the facility
have fluctuated throughout the facility's operating history.
Similarly, the Brandywine Power Purchase Agreement will permit PEPCO
to dispatch at its sole discretion a substantial portion of the Panda-
Brandywine Facility's capacity. While availability-based capacity
payments and other fixed payments under the power purchase agreements
are unaffected by levels of dispatch, revenues would be adversely
affected (due to a reduction in energy payments thereunder) if these
facilities were dispatched at levels materially below the recent
operating experience, in the case of the Panda-Rosemary Facility, or
the anticipated level, in the case of the Panda-Brandywine Facility.
See "Description of the Projects -- The Panda-Rosemary Facility --
Sale of Capacity and Electricity," and "-- The Panda-Brandywine
Facility -- Sale of Capacity, Electricity and Steam."
Adjustments to Fixed Payments
The Panda-Rosemary Facility is, and the Panda-Brandywine
Facility will be, dependent on capacity payments due from,
respectively, VEPCO and PEPCO under their respective power purchase
agreements to meet their fixed obligations. In the case of the Panda-
Rosemary Facility, capacity payments are payable by VEPCO whether or
not the facility is dispatched, provided that the facility satisfies
certain seasonal capacity tests which may be required by VEPCO in its
sole discretion and meets certain minimum availability standards. If
these minimum availability standards are not met, then capacity
payments otherwise due to the Panda-Rosemary Partnership are subject
to rebate or reduction and, in certain circumstances, the Panda-
Rosemary Partnership may be required to pay liquidated damages to
VEPCO. See "Description of the Projects -- The Panda-Rosemary
Facility -- Sale of Capacity and Electricity." In the case of the
Panda-Brandywine Facility, capacity payments are payable by PEPCO
whether or not the facility is dispatched, provided that the capacity
payments will be reduced if the facility cannot maintain 88%
equivalent availability and may be reduced in 1999 depending on when
and whether PEPCO's system peak load exceeds 5,697 MW prior to such
year. See "Description of the Projects -- The Panda-Brandywine
Facility -- Sale of Capacity, Electricity and Steam."
Fuel Related Pricing
Payments related to electric energy purchases by VEPCO and PEPCO
under their respective power purchase agreements generally adjust
upon the same or substantially equivalent fuel indices or pricing
mechanisms that govern adjustments to the base commodity charges for
natural gas under, respectively, the Rosemary Gas Agreement and the
Brandywine Gas Agreement. Nevertheless, the Panda-Rosemary Facility
and the Panda-Brandywine Facility are subject to the risk that the
fuel compensation components of electric energy prices paid under
their respective power purchase agreements and their respective
actual fuel costs may differ. Accordingly, increases in fuel supply
costs which are not matched by increases in electric energy prices
could have an adverse effect on the performance of the Projects. See
"Description of the Projects -- The Panda-Rosemary Facility -- Sale
of Capacity and Electricity" and "-- Gas Supply and Fuel Management"
and "-- The Panda-Brandywine Facility -- Sale of Capacity,
Electricity and Steam" and "-- Gas Supply and Fuel Management,"
Appendix D, Rosemary Fuel Consultant's Report and Appendix G,
Brandywine Fuel Consultant's Report.
Regulatory Disallowance
The Rosemary Power Purchase Agreement contains a clause known as
a "regulatory disallowance" provision, which requires the Panda-
Rosemary Facility to repay to VEPCO or reduce any capacity charges in
excess of $5.62 per kilowatt per month (as adjusted by the Gross
National Product Implicit Price Deflator ("GNPIPD") from 1987
dollars) that are disallowed by any regulatory authority from
recovery by VEPCO in its rate base (except where such disallowance is
due to VEPCO's failure to seek recovery or comply with procedural
requirements governing recovery of such costs). VEPCO cannot initiate
such a disallowance and must appeal such a disallowance, if
practicable. If a disallowance occurs, the cash flow of the Panda-
Rosemary Partnership could be materially and adversely affected and
the Company's ability to make payments on the Company Notes and,
consequently, the Issuer's ability to make payments on the Exchange
Bonds, could be materially and adversely affected. See "Description
of the Projects -- The Panda-Rosemary Facility -- Sale of Capacity
and Electricity" and "Regulation."
Interruptible Gas Supply and Transportation Risks
The Panda-Rosemary Partnership has contracted for most of its
natural gas supplies and transportation services on an interruptible
basis because the Panda-Rosemary Partnership has assumed that the
Panda-Rosemary Facility will be dispatched by VEPCO as a peaking
plant, with the bulk of the facility's dispatch hours occurring
during the summer months when operational experience suggests that
gas typically will be available for purchase. The Panda-Brandywine
Partnership has similarly contracted for approximately one-half of
its natural gas supply and transportation on an interruptible basis.
Interruptible gas supply and transportation arrangements are subject
to interruption or curtailment during periods of peak demand for gas.
Although independent consultants have found the fuel supply and
delivery arrangements for the Panda-Rosemary Facility and the Panda-
Brandywine Facility to be reasonable, if a power purchaser were to
significantly increase its dispatch of a facility, the risk of
potential curtailment in natural gas supply and transportation, and
thus that a facility would be unavailable for dispatch, would be
increased. See "Dispatchability Risk" above, "Description of the
Projects -- The Panda-Rosemary Facility -- Gas Supply and Fuel
Management" and "-- Gas Transportation," "-- The Panda-Brandywine
Facility -- Gas Supply and Fuel Management" and "-- Gas
Transportation," Appendix D, Rosemary Fuel Consultant's Report, and
Appendix G, Brandywine Fuel Consultant's Report.
Fuel Oil Supply
If natural gas supply or transportation is not available to the
Panda-Rosemary Facility or the Panda-Brandywine Facility, each such
facility can operate utilizing No. 2 fuel oil. The Panda-Rosemary
Facility has the capacity to store two million gallons of fuel oil on
site, which is enough fuel oil to operate the facility at full load
for approximately 168 hours. As a result of current market
conditions, the Panda-Rosemary Partnership purchases its fuel oil
supply on a spot market basis. The Panda-Brandywine Facility is being
constructed with similar fuel oil storage capacity and the Panda-
Brandywine Partnership will likely take the same approach to fuel oil
purchases. Future changes in market conditions or governmental
policy, however, could adversely affect the ability of a facility to
obtain economical fuel oil supply when needed and, consequently,
adversely affect the availability of the facility for dispatch. See
"Dispatchability Risk" above, "Description of the Projects -- The
Panda-Rosemary Facility -- Fuel Oil" and "-- The Panda-Brandywine
Facility -- Fuel Oil."
Dependence on Third Parties and Concentration of Customers
The nature of the Company's Projects is such that each facility
generally relies on one power purchase agreement with a single
electric utility customer for substantially all, if not all, of such
facility's revenues over the life of the Project. Furthermore, each
power generation facility may depend on a single or limited number of
entities to purchase thermal energy, to supply or transport natural
gas to such facility or to supply other goods and services which
constitute the principal inputs to such facility's operations. Any
material breach by any of these parties of its obligations under its
respective agreement with a facility could adversely affect the
Company's ability to make payments on the Company Notes and,
consequently, the Issuer's ability to make payments on the Exchange
Bonds. The other parties to each project agreement have the right to
terminate or withhold payments or performance under such agreement
upon the occurrence of certain events of default specified therein,
which include the failure of any Project Entity that is a party to
such agreement to materially perform its obligations thereunder.
Additionally, if a party to a project agreement were to undergo
bankruptcy, the trustee in the bankruptcy proceeding could disaffirm
such agreement. If a project agreement were terminated due to
nonperformance by a Project Entity, disaffirmation in a bankruptcy
proceeding or for any other reason, there is no assurance that the
Project Entity would be able to enter into a substitute agreement
having terms and conditions substantially equivalent to those
contained in such terminated agreement.
On July 3, 1996, Bibb, the steam host and lessor of the Panda-
Rosemary Facility site, filed a voluntary petition under Chapter 11
of the Bankruptcy Code with the United States Bankruptcy Court in
Delaware. In connection therewith, a reorganization was effected
September 27, 1996, which did not affect the Panda Rosemary Steam
Agreement and Panda Rosemary Site Lease. However, there can be no
assurance that Bibb will be able to meet its needs for capital on an
ongoing basis or meet its future obligations under the Rosemary Steam
Agreement. If Bibb were to fail to purchase and use the minimum
quantity of steam necessary for the Panda-Rosemary Facility to
satisfy the Qualifying Facility criteria, the Panda-Rosemary Facility
could continue to satisfy the Qualifying Facility criteria if a
distilled water facility or other thermal operation were installed at
the Panda-Rosemary Facility. The Rosemary Indenture permits the
borrowing of funds to make such enhancements or improvements to the
facility which are necessary to maintain the facility's Qualifying
Facility status. There can be no assurance, however, that the Panda-
Rosemary Partnership would have or be able to obtain the funds
necessary to install such a facility. See "Risk Factors --
Maintaining Qualifying Facility Status."
The Rosemary Gas Supply Agreement and the Rosemary Fuel
Management Agreement with NGC expire on November 30, 2005,
approximately six years prior to the maturity date of the Exchange
Bonds. The Transco 284 Agreement expires at 8:00 a.m. on November 1,
2006. The firm transportation contracts the Panda-Rosemary
Partnership entered into with Texas Gas and CNG also to expire on
November 1, 2006 at 8:00 a.m. Certain other contracts providing for
interruptible transmission services for the Panda-Rosemary Facility
are on a month-to-month basis. There can be no assurance that the
terms of any of such contracts can be extended or, if they expire,
that the Panda-Rosemary Partnership will be able to enter into
replacement contracts or fuel transportation plans on terms no less
favorable to the Panda-Rosemary Partnership than those contained in
the current agreements. The failure to extend such terms or to enter
into replacement contracts or fuel transportation plans is an event
of default under the Rosemary Indenture. See "Description of the
Projects -- The Panda-Rosemary Facility -- Gas Supply and Fuel
Management," "-- The Panda-Rosemary Facility -- Gas Transportation"
and "Description of the Project Debt -- The Panda-Rosemary
Financing."
Dependence on Panda International; Ability of Panda
International to Develop Additional Projects
All development activities in respect of Projects will be
undertaken by Panda International and certain of its affiliates. The
Company, the PIC Entities and the Project Entities have no employees
of their own (other than officers) and, in any event, do not engage
in development efforts. Thus, the Company is entirely dependent on
Panda International for the development of future Projects which may
be transferred to the Project Portfolio. See "No Restrictions on
Panda International's Business" below.
The development of electric power generation facilities is
subject to substantial risks. In developing a power generation
facility that may become eligible for transfer to the Project
Portfolio, Panda International must generally obtain power and
thermal energy purchase agreements, governmental permits and
approvals, fuel supply and transportation agreements, electricity
transmission agreements, site agreements and construction contracts,
as well as long-term non-recourse debt financing. There can be no
assurance that Panda International will be successful in doing so. In
addition, Project development is subject to environmental,
engineering and construction risks relating to cost-overruns, delays
and performance. In developing Projects in emerging markets such as
China, Nepal, India and Bangladesh, these risks may be increased by
political and regulatory uncertainties, the nature and evolution of
legal systems, the lack of developed infrastructure and other
factors. Although Panda International and its subsidiaries attempt to
minimize the financial risk in the development of a Project by
securing a favorable long-term power purchase agreement, obtaining
all required governmental permits and approvals and arranging
adequate financing prior to the commencement of construction, the
development of a Project may require Panda International or its
subsidiaries to expend significant sums for preliminary engineering,
permitting and legal and other expenses before it can be determined
that a Project is feasible, economically attractive or capable of
being financed. If Panda International were unable to complete a
Project, it would generally not be able to recover its investment in
such a Project, thus impairing its ability to develop future Projects
that could become eligible for transfer to the Project Portfolio
pursuant to the Additional Projects Contract. No assurance can be
given that Panda International or its affiliates will successfully
develop and arrange financing for any additional Projects or that
Projects currently under development or to be developed in the future
will become eligible for transfer to the Project Portfolio pursuant
to the Additional Projects Contract. In addition, although Panda
International has indicated that it intends to continue the
development of electric generation projects as its primary business,
it is under no obligation to do so and may use the proceeds of the
Bonds distributable to it or distributions from the Company available
to it for other purposes. See "The Company, the Issuer and Panda
International -- The Additional Projects Contract."
Construction Risk
Additional Projects may be transferred to the Company prior to
the commencement of, or during, their construction. The construction
of a Project involves many risks, including shortages of equipment,
material and labor, work stoppages, labor disputes, weather
interferences, unforeseen engineering, environmental and geological
problems and unanticipated cost increases, any of which could give
rise to delays or cost overruns. Difficulties in obtaining any
requisite licenses or permits could adversely affect the design or
increase the cost of a Project, or delay or prevent the completion of
construction or the commencement of commercial operations of a
Project. Construction-related risks can be mitigated through fixed-
price "turnkey" construction contracts; however, there can be no
assurance that a contractor will honor its commitments or have the
financial resources to satisfy its obligations under any liquidated
damages provisions, or that any affected Project would continue to
operate at its design specifications after the expiration of the
contractors' and equipment suppliers' warranties. There is also a
risk that construction delays will be caused by events, such as
events of force majeure, not covered by liquidated damages or
insurance. See "Dependence on Distributions from Project
Subsidiaries" and "Financial Risks -- Default on Project-level Debt;
Enforcement of Rights and Realization of Collateral" above.
Start-up Risks
The commencement of commercial operations of a newly constructed
Project involves many risks, including start-up problems, the
breakdown or failure of equipment or processes and performance below
expected levels of output or efficiency. Generally, insurance is
maintained to protect against certain of these risks, warranties are
obtained relating to the construction of a Project and the equipment
associated therewith, and construction contractors and equipment
suppliers are obligated to meet certain performance levels. Such
insurance, warranties or performance guaranties, however, may not be
adequate to cover lost revenues or increased expenses. As a result, a
Project may be unable to fund principal and interest payments under
its financing obligations. A default under such a financing
obligation could result in the Company losing its ownership interest
in a Project. See "Financial Risks -- Default on Project-level Debt;
Enforcement of Rights and Realization of Collateral" above. In
addition, power purchase agreements, which are typically entered into
with a utility early in the development phase of a Project, often
enable the utility to terminate such agreement, or to retain security
posted by the developer as liquidated damages if a Project fails to
commence commercial operations or certain operating levels by
specified dates or fails to make certain specified payments. If such
a termination right is exercised, a Project may not produce revenues,
the default provisions in a financing agreement would likely be
triggered (rendering the Project-level debt immediately due and
payable) and the Project would likely be rendered insolvent as a
result.
Competition
The electric power generation industry is characterized by
intense competition and, in the United States, the Company encounters
competition from utilities, industrial companies and other
independent power producers. In recent years, there has been
increasing competition for new power purchase agreements and this
competition has often contributed to a reduction in electricity
tariffs in power purchase agreements. In this regard, many utilities
often engage in competitive bid solicitations to satisfy demand for
additional capacity. This competition adversely affects the ability
of the Company to obtain power purchase agreements and reduces the
price paid for electricity. Internationally, the competitive
characteristics of Project development are less developed, although
there is a growing trend toward competitive bidding in the
privatization of government-owned electric utility systems.
Industry Conditions; Restructuring Initiatives; Utility Responses
The Federal Energy Regulatory Commission (the "FERC") and many
state utility commissions, including the Virginia State Corporation
Commission (the "SCC"), are currently studying a number of proposals
to restructure the electric utility industry in the United States to
permit utility customers to choose their supplier in a competitive
electric energy market. The FERC has recently issued a rule requiring
utilities to offer wholesale customers and suppliers open access on
their transmission lines on a basis which is comparable to the
utilities' own use of the lines. In addition, the United States
Congress has introduced a number of bills to promote electric utility
restructuring and deregulation of electric rates.
Many utilities fear that current captive customers may leave
their system to procure electricity from other electric power
suppliers and that the utilities may thereafter be unable to recover
their fixed costs from their remaining customers. These potential
"stranded" or "transition" costs include the cost of maintaining
electric generating capacity under many QF contracts. The
restructuring proposals being considered by regulatory agencies and
Congress differ as to how, and to what extent, utilities' "stranded"
or "transition" costs would be recoverable if current captive
customers leave the utilities' systems. To minimize the risk that
"stranded" or "transition" costs may not be recovered by utilities if
such restructuring proposals are enacted, many utilities have
implemented certain cost control strategies. Such strategies include
attempts to renegotiate, buy out or terminate existing power purchase
agreements containing prices that utilities believe will not be
competitive in a short-term marginal cost electric energy market. In
addition, some utilities have sought to rigorously enforce the terms
of such agreements and to exercise their contractual termination
rights if the agreements' provisions are not strictly observed. Some
utilities have engaged in litigation against Qualifying Facilities to
achieve these ends.
VEPCO has filed comments with the SCC indicating that it will
aggressively pursue initiatives to restructure contracts with
Qualifying Facilities to minimize its costs. VEPCO has recently filed
a request with the SCC for permission to institute a formal QF
monitoring program under which certain facilities (including the
Panda-Rosemary Facility) would be required to furnish certain
operational data to VEPCO on an annual basis. Under the proposed
monitoring program, if VEPCO believed, based on data provided by a
facility and any additional information, that a facility no longer
satisfied the QF criteria, VEPCO could institute proceedings with the
FERC to revoke such facility's QF status. See "Maintaining Qualifying
Facility Status" below.
VEPCO is currently involved in several proceedings with parties
with whom it has entered into power purchase agreements, including
several in which the interpretation of the power purchase agreements
is being disputed. Although there is currently no dispute between the
Panda-Rosemary Partnership and VEPCO, the Panda-Rosemary Partnership
anticipates that VEPCO will closely monitor the Panda-Rosemary
Partnership's compliance with the Rosemary Power Purchase Agreement
and vigorously enforce its rights thereunder. Because the Company's
present primary sources of revenue are the capacity and energy
payments that the Panda-Rosemary Partnership receives from VEPCO
under the Rosemary Power Purchase Agreement, a termination of the
Rosemary Power Purchase Agreement would, in the absence of another
source of funds, terminate the Panda-Rosemary Partnership's ability
to service its Project-level debt and to make distributions to the
Company. In this event, the Company would not be able to perform its
obligations under the Company Notes and, consequently, the Issuer
would not be able to make payments on the Exchange Bonds. See
"Regulation -- Federal Energy Regulation."
Maintaining Qualifying Facility Status
PURPA and the regulations promulgated thereunder provide
Qualifying Facilities such as the Panda-Rosemary Facility and the
Panda-Brandywine Facility with certain exemptions from federal and
state legislation and regulation, including regulation of rates at
which electricity can be sold. For a cogeneration facility to
maintain QF status, no more than 50% of the facility may be owned by
an electric utility, electric utility holding company or combination
thereof and the facility must produce both electricity and a related
quantity of useful thermal energy and satisfy certain operational and
efficiency criteria. If for any reason a Project failed to maintain
its status as a Qualifying Facility, or if there were a change in law
or regulation that eliminated the Project's status as a Qualifying
Facility (or exemption from regulation granted to Qualifying
Facilities), the Project would be subject to additional regulation
and the revenues of the Panda-Rosemary Partnership and the Panda-
Brandywine Partnership could be materially and adversely affected.
For discussions of the steam sales arrangements that permit the Panda-
Rosemary Facility and the Panda-Brandywine Facility to maintain their
QF status, see "Description of the Projects -- The Panda-Rosemary
Facility -- Steam and Chilled Water Sales" and "-- The Panda-
Brandywine Facility -- Sale of Capacity, Electricity and Steam."
Other Regulatory Risks Relating to U.S. Projects
Regulatory Approvals
The Company's U.S. Projects are subject to stringent energy and
environmental regulation by federal, state and local authorities.
Power plants in the United States are required to comply with
numerous federal, state and local statutory and regulatory
requirements and the Projects are required to obtain and maintain in
effect numerous approvals relating to energy and environmental laws.
There can be no assurance that existing regulations will not be
revised, that new laws and regulations will not be adopted or become
applicable to the Projects or that the Company's business and
financial condition will not be materially and adversely affected by
such future changes in laws and regulations (including the possible
loss of exemptions from regulations). See "Regulation."
Gas Transportation Regulation
The various gas transportation agreements for the U.S. Projects
contemplate the use of interstate natural gas pipelines and services.
These gas transportation arrangements, including pipeline facilities
and the rates charged for transportation services, are subject to the
jurisdiction of the FERC. In exercising such jurisdiction, the FERC
maintains or may maintain authority to modify aspects of the rates,
terms and conditions that govern the gas transportation services
provided. It is possible that such a modification could materially
increase the gas transportation costs of each U.S. Project. In
addition, certain provisions of the gas transportation agreements and
the approved tariffs allow the transporter to terminate, suspend
performance under or reduce the amount of gas transported upon the
occurrence of certain conditions, such as the taking of an adverse
action by a regulatory authority, if the transporter, in its
judgment, deems it necessary to make modifications or repairs to its
pipeline facilities or upon the occurrence of an event of force
majeure. Any failure by a transporter to provide gas transportation
services could have a material adverse effect on a Project's
operations. See "Description of the Projects -- The Panda-Rosemary
Facility -- Gas Transportation," "-- The Panda-Brandywine Facility --
Gas Transportation" and "Regulation -- Natural Gas Regulation."
Environmental and Other Matters
In operating any Project, the owner is generally required to
comply with a number of statutes and regulations relating to the
safety and health of personnel and the public, including the
identification, generation, storage, handling, transportation,
disposal, recordkeeping, labeling, reporting of and emergency
response in connection with hazardous and toxic materials or
substances associated with the facility, limits on noise emissions
from the facility, safety and health standards, practices and
procedures applicable to construction and operation of the facility
and environmental protection requirements including standards and
limitations relating to the discharge of air and water pollutants and
disposal of solid waste. Failure to comply with any of such statutes
and regulations could have adverse effects on a Project, including
the imposition of criminal or civil liability by regulatory agencies
or as a result of litigation by private parties, imposition of clean-
up fines or liens and the mandatory expenditure of funds to bring the
Project into compliance. Pursuant to the various financing, lease,
construction, easement and encroachment agreements, and as is common
practice in the independent power industry, the Panda-Rosemary
Partnership and the Panda-Brandywine Partnership have indemnified
third parties against the consequences of each Project's storage or
emission of hazardous and toxic materials. While the Company believes
that the Panda-Rosemary Facility's and the Panda-Brandywine
Facility's use of natural gas as the primary fuel source provides
comparative environmental advantages over other fossil fuel-fired
power production technologies, there can be no assurance that
environmental laws and regulations, whether now existing or adopted
in the future, will not impose significant constraints and increased
costs on such Facilities' operations. The 1990 Amendments to the
Federal Clean Air Act require the State of North Carolina, the State
of Maryland and the federal government, at various times, to take
regulatory actions that may affect the U.S. Projects. There can be no
assurance that each U.S. Project will or can satisfy all requirements
that may result from actions in response to the 1990 Amendments to
the Federal Clean Air Act. See "Regulation -- Environmental
Regulations."
Permitting Risk
Each Project Entity is responsible for obtaining various permits
and other regulatory approvals required for the operation of its
facility. Some of the permits and other approvals that are obtained
for a particular facility may contain certain continuing conditions,
including the obligation to renew or extend the permit or approval by
a certain date. Failure to satisfy any such condition could prevent
the operation of the Project or result in fines or other additional
costs. The Company believes that all Projects developed by Panda
International have been or will be designed and constructed in order
to substantially comply, insofar as can be reasonably controlled,
with their respective permit and approval conditions. All material
permits and other regulatory approvals currently required to operate
the Panda-Rosemary Facility and to construct and operate the Panda-
Brandywine Facility have been obtained. If future levels of dispatch
of the Panda-Rosemary Facility exceed the levels allowed under the
facility's existing operating permits (which is projected to be the
case; see Appendix D, Rosemary Engineering Report), additional
equipment designed to control air emissions would have to be
installed in order for the facility to continue to remain in
compliance with such permits. While the Panda-Rosemary Partnership
has set aside certain reserves which it believes are sufficient to
fund the cost of such equipment, there can be no assurance that such
reserves will be sufficient to pay the actual cost of such equipment
if and when required to be installed. There can be no assurance that
in the future the Projects will operate within the limits established
by current or future permits or other approvals. Any particular
Project could be adversely affected if regulatory changes or new
permit conditions were implemented which impose more comprehensive or
stringent requirements resulting in increased compliance costs or
which reduce certain benefits expected by the Company.
Risks Relating to Future Non-U.S. Projects
The Company does not hold an interest in any Non-U.S. Project.
The Company anticipates that one or more of the Non-U.S. Projects
under development by Panda International may reach Financial Closing
or commence Commercial Operations and thus be eligible for transfer
to the Project Portfolio pursuant to the Additional Projects
Contract, provided that the conditions contained therein for such a
transfer can be satisfied. See "The Company, the Issuer and Panda
International -- The Additional Projects Contract" and "Description
of the Projects -- Other Projects under Development by Panda
International." For any Non-U.S. Project transferred to the Project
Portfolio upon Financial Closing, there will remain significant risks
relating to the completion of construction and commencement of
commercial operations. Such risks include political and economic
uncertainties, expropriation, nationalization, renegotiation or
nullification of existing contracts and changes in rates and methods
of taxation. Once operational, Non-U.S. Projects involve risks such
as political and economic uncertainties, including risks of war,
expropriation, nationalization, renegotiation or nullification of
existing contracts, changes in rates and methods of taxation and
international exchange controls or governmental restrictions on the
repatriation of currency. The Company expects that Non-U.S. Project
entities may receive a substantial part of their revenues in
international currencies, which will need to be converted into other
currencies to meet international currency obligations or to pay
dividends or make distributions, thus exposing the Company to
convertibility, remittance and exchange risks. Certain countries in
which Projects may be developed may not have well-developed legal
systems with a well-developed, consolidated body of laws governing
international investment enterprises. The uncertainty of the legal
environment in these countries could make it difficult for the
Company to enforce its rights, or those of Project Entities, under
Project agreements.
No Restrictions on Panda International's Business
Panda International has informed the Company that it presently
intends to continue to focus on the development, acquisition and
ownership of electric power generation projects as its principal
business; however, the Indenture contains no restrictions on Panda
International's business or on its ability to use proceeds from the
issuance of Bonds or distributions from the Company to pursue other
businesses.
Control by Principal Stockholders
Robert and Janice Carter, members of their family and Carter
family trusts collectively own approximately 38.7% of the outstanding
shares of capital stock of Panda International. In addition, W.M.
Huffman (who is related to Mr. Carter by marriage), members of Mr.
Huffman's family and family trusts and partnerships own approximately
18.7% of such capital stock. See "The Company, the Issuer and Panda
International -- General." By virtue of their ownership share, the
Carters are in a position to influence the management and direction
of Panda International and, through Panda International, its
subsidiaries, including the Issuer and the Company. Moreover, the
Carters and the Huffmans, if they were to agree to act together in
voting their shares, could control the vote for election of
directors, and consequently the management and direction, of Panda
International and its subsidiaries, including the Issuer and the
Company.
Absence of Market for the Exchange Bonds
The Exchange Bonds are being offered to the holders of the Old
Bonds. The Old Bonds were offered and sold in July 1996 to a small
number of investors and are eligible for trading in the Private
Offerings, Resale and Trading through Automatic Linkages ("PORTAL")
Market, although an active trading market for the Old Bonds has not
developed to date.
There is currently no established market for the Exchange Bonds,
and the Issuer does not intend to list the Exchange Bonds or the Old
Bonds on a securities exchange or seek approval for quotation through
any automated dealer quotation system. The Company and the Issuer
have been advised by the Initial Purchaser that it currently intends
to make a market in the Exchange Bonds as permitted by applicable
laws and regulations; however, the Initial Purchaser is not obligated
to do so and may discontinue making a market at any time without
notice. There can be no assurance that a market for the Exchange
Bonds will develop or as to the ability of holders of the Exchange
Bonds to sell their Exchange Bonds or the price at which such holders
would be able to sell their Exchange Bonds. If a market for the
Exchange Bonds does not develop, purchasers may be unable to resell
the Exchange Bonds for an extended period of time, if at all.
Consequently, a purchaser may not be able to liquidate the investment
readily, and the Exchange Bonds may not be readily accepted as
collateral for loans. If a market for the Exchange Bonds were to
develop, the Exchange Bonds could trade at prices that may be lower
than the initial market values or at a discount from their face
amount depending on many factors, including prevailing interest
rates, the markets for similar securities, and the financial
performance of the Company and its subsidiaries. The liquidity of,
and trading market for, the Exchange Bonds also may be adversely
affected by general declines in the market for similar securities and
other factors that are independent of the financial performance of,
and prospects for, the Company.
THE COMPANY, THE ISSUER AND PANDA INTERNATIONAL
General
The Company is an indirect wholly-owned Delaware subsidiary of
Panda International, an independent power company that is engaged
principally in the development, acquisition, ownership and operation
of electric power generation facilities, both in the United States
and internationally. Panda International also owns a subsidiary
engaged in oil and gas exploration and development. The Issuer is a
wholly-owned Delaware subsidiary of the Company organized for the
sole purpose of issuing the Existing Bonds and any additional series
of Bonds. The Issuer and the Company were recently formed by Panda
International as vehicles for financing future project development,
including the making of equity and debt investments in electric power
generation projects. Subject to the terms of the Additional Projects
Contract, Panda International intends to transfer, to the Project
Portfolio, Projects developed and to be developed by Panda
International, at the point in time when such Projects have reached
Financial Closing or achieved Commercial Operations, thereby reducing
development risk to the Company. See "Additional Projects Contract"
below.
Panda International's principal business strategy is to use its
experience in developing, constructing, financing and managing
electric power generation facilities to provide low cost electricity
and electric generating capacity. Panda International will seek to
expand its presence in the electric power industry by implementing
this strategy in the United States and certain other countries. Upon
commencement of commercial operations of the Panda-Brandywine
Facility, Panda International will have placed into commercial
operations facilities with electric generating capacity of
approximately 410 MW. In addition, Panda International has executed
power purchase agreements or entered into other development
arrangements relating to four potential Projects with a combined
electric generating capacity of approximately 750 MW. See
"Description of the Projects -- Other Projects under Development by
Panda International." Panda International is continually engaged in
the evaluation of various opportunities for the development and
acquisition of additional electric power generation facilities, both
in the United States and internationally. See "Risk Factors --
Project Risks," "-- Risks Relating to Future Non-U.S. Projects" and
"Business -- General."
With 43 full time employees, Panda International has assembled a
team of professionals with expertise in business development,
marketing, engineering, design, construction management, fuel supply,
transportation and exploration, equipment procurement, utility
practices, contract management, regulatory policy and procedures,
environmental matters, law and finance and accounting. Panda
International believes that this team's scope of expertise allows
Panda International to compete effectively for cogeneration and
private power development opportunities.
Panda International was formed as part of a corporate
reorganization that took place in October 1995 in which all of the
capital stock of PEC was exchanged for shares of Panda International,
with the result that PEC became a wholly-owned subsidiary of Panda
International. PEC was organized in 1982 by Robert and Janice Carter,
who are the Chairman of the Board, President and Chief Executive
Officer, and the Executive Vice President, Treasurer and Secretary,
respectively, of Panda International, PEC, the Company and the
Issuer. See "Management."
Company Structure
Panda International is the parent company of PEC and through PEC
and its subsidiaries holds controlling interests in U.S. and non-U.S.
entities that hold interests in Projects under development. Panda
International generally holds its interests in Projects that are
being developed outside of the United States through entities
organized in tax favorable jurisdictions (such as the Cayman
Islands), which in turn hold interests in entities organized in the
country where Panda International's Projects will be located (e.g.,
China and Nepal). Panda International's U.S. Projects are generally
held in limited partnerships, with general and limited partners
organized as Delaware subsidiaries of PEC.
There are currently two PIC Entities, one organized as a wholly-
owned Delaware subsidiary of the Company (a PIC U.S. Entity) and the
other as a wholly-owned Cayman Islands subsidiary of the Company (a
PIC International Entity). Under the terms of the Indenture, PIC
Entities, with certain exceptions, cannot incur debt, become liable
in connection with guaranties or enter into Project Agreements, and
are subject to certain other restrictions, all for the purpose of
assuring that the PIC Entities' primary purpose is to hold Project
Entities and receive, and distribute to the Company, distributions
from Project Entities. Other PIC Entities may be established in the
future, and each will be directly wholly owned by the Company.
Project Entities, on the other hand, are those entities that are
owned by PIC Entities and directly or indirectly own Projects or are
obligated under Project Agreements. Under the term of the Indenture,
Project Entities are permitted to incur Project Debt, become liable
in connection with guaranties created, required or expressly
permitted to exist under Project Agreements and enter into and amend
Project Agreements, in each case subject to certain restrictions.
The PIC U.S. Entity, which is organized as described above, owns
the Project Entities that are the general and limited partners of the
Panda-Rosemary Partnership and the Panda-Brandywine Partnership and a
related distilled water subsidiary (which acts as the QF steam host
for the Panda-Brandywine Facility). The Company expects that Project
Entities owning future U.S. Projects, if any, will generally be
transferred to and held by a PIC U.S. Entity in a manner similar to
the ownership structure of the Panda-Rosemary Project and the Panda-
Brandywine Project described above. In the future, if Project
Entities owning a Non-U.S. Project are to be transferred to the
Project Portfolio pursuant to the Additional Projects Contract, Panda
International, PEC or their affiliates will transfer them to the PIC
International Entity organized as stated above or to another PIC
International Entity (unless U.S. tax deferral arrangements are not
being sought). Such transfers will generally be made by a transfer to
a PIC International Entity of the capital stock of the off-shore
Project Entities that hold the in-country Project Entities. Methods
of transfer may, however, vary depending upon, among other
considerations, U.S. and foreign tax treatment and Project-level
restrictions.
The following diagram shows the ownership structure of Panda
International and certain of its subsidiaries as of the date of this
Prospectus.
[diagram of ownership structure of Panda International]
(1) Pursuant to the Additional Projects Contract, interests in
Projects developed by Panda International and its affiliates will
be available for transfer to the Project Portfolio only if
Financial Closing is reached or Commercial Operations is achieved
and if certain other conditions contained in the Additional
Projects Contract are satisfied. See "Risk Factors -- Project
Risks," "-- Risks Relating to Non-U.S. Projects" and "The
Additional Projects Contract" below.
(2) In the case of other U.S. Project Entities and non-U.S.
Project Entities, the percentage ownership interest of Panda
International is expected to vary depending on the Project in
question.
(3) NNW, Inc. holds a cash flow participation in the
distributions from the Panda-Rosemary Partnership, (which the
Company believes is 0.433% and would increase to 1.732% after 2008
based on projected distributions, but which percentages are the
subject of dispute). See "Description of the Projects -- The Panda-
Rosemary Facility -- Cash Flow Participation" and "Legal
Proceedings -- NNW, Inc. Proceeding."
There were 11,397,879 shares of Common Stock of Panda
International outstanding at September 30, 1996. Of this amount,
4,418,957 shares (38.8%) are owned by Robert and Janice Carter and
members of their family and family trusts. See "Management." W.M.
Huffman and members of his family and family trusts and a family
partnership own 2,134,443 of the outstanding shares (18.7%). Other
directors, officers and employees of Panda International own less
than 1% of the outstanding shares of Common Stock. At September 30,
1996: (i) there were outstanding options to acquire 1,219,000 shares
of Common Stock of Panda International (options for 1,043,000 shares
being fully vested and for 176,000 shares vesting over a six-year
period) held by directors, officers and employees of Panda
International, and of this amount options for 250,000 shares are held
by Robert Carter and options for 25,000 shares are held by W.M.
Huffman; (ii) Trust Company of the West held warrants to purchase
1,004,000 shares of Common Stock of Panda International; and (iii)
NNW, Inc. held rights to acquire up to approximately 163,500 shares
of Common Stock of Panda International. See "Description of the
Projects -- The Panda-Rosemary Facility -- Cash Flow Participation."
Executive Offices
The principal executive offices of the Issuer, the Company, PEC
and Panda International are located at 4100 Spring Valley Road, Suite
1001, Dallas, Texas 75244. The telephone number at such offices is
(972) 980-7159.
The Additional Projects Contract
Subject to certain conditions, including those set forth below,
the Additional Projects Contract will require Panda International and
its affiliates to transfer to the Company, or to one or more PIC
Entities, each additional Project for which a power purchase
agreement is entered into prior to the fifth anniversary of the Issue
Date and which has reached Financial Closing or achieved Commercial
Operations prior to the 10th anniversary of the Issue Date. Panda
International and its affiliates will be required to transfer a
Project to the Project Portfolio only if the principal amount of
additional series of Bonds that can be issued after giving effect to
the inclusion of the Project in the Project Portfolio equals or
exceeds the amount of "Anticipated Additional Debt." A Project will
not be transferred if: (i) the Project has not reached Financial
Closing or achieved Commercial Operations; (ii) Panda International
does not own a controlling interest in the Project; (iii) the
transfer would be prohibited under any Project-level financing, power
purchase or related agreement; or (iv) after giving effect to the
issuance of the additional series of Bonds in connection with the
inclusion of the Project in the Project Portfolio (a) the rating of
the Bonds is not Reaffirmed by at least one rating agency at a rating
equal to or higher than that in effect immediately prior to the
issuance of such additional series or (b) the projected Company Debt
Service Coverage Ratio or the projected Consolidated Debt Service
Coverage Ratio (if then applicable) would be less than 1.7:1 or
1.25:1, respectively, for any Future Ratio Determination Period. The
Additional Projects Contract requires Panda International to use
commercially reasonable efforts to cause each Project to meet the
conditions for transfer to the Project Portfolio as of the date a
Project reaches Financial Closing or achieves Commercial Operations,
whichever occurs first, or within a 90-day period thereafter. If,
however, the conditions for such a transfer cannot be satisfied using
commercially reasonable efforts, Panda International will have no
further obligation to the Company in respect of such Project and may
retain such Project or sell it to third parties.
The Additional Projects Contract provides that in the case of a
Project being developed in phases, Panda International will use all
commercially reasonable efforts to separate the ownership of the
phases so that each phase will be owned and developed by a different
project entity. In that case, when each phase reaches Financial
Closing or achieves Commercial Operations, it will be required to be
transferred to a PIC Entity if it meets the other conditions for
transfer described above. If the ownership of a Project that is being
developed in phases cannot be separated into different ownership
arrangements for each phase, then the Project will not be required to
be transferred to a PIC Entity until all phases have reached
Financial Closing or achieved Commercial Operations if the conditions
for transfer are satisfied at that time. If Panda International
determines to discontinue development of a subsequent phase of a
Project, the earlier phase or phases of such Project shall be
required to be transferred to a PIC Entity once they have reached
Financial Closing or achieved Commercial Operations if the other
conditions for transfer are satisfied.
"Anticipated Additional Debt," as used in the Additional
Projects Contract, means the original principal amount of an
additional series of Bonds proposed to be issued by the Issuer which
is equal to the largest principal amount of such series that will
provide a projected Company Debt Service Coverage Ratio and a
projected Consolidated Debt Service Coverage Ratio (if then
applicable) of at least 1.7:1 and 1.25:1, respectively, for each
Future Ratio Determination Period, as confirmed by the Consolidating
Engineer, assuming, in respect of the additional series of Bonds
proposed to be issued: (i) a maximum maturity and average life
generally available in the marketplace for debt of a similar nature
and (ii) a coupon rate then prevailing in the market for debt of a
similar nature, and taking into account (a) in the case of the
Company Debt Service Coverage Ratio, Cash Available for Distribution
from the Project Portfolio and (b) in the case of the Consolidated
Debt Service Coverage Ratio, Cash Available from Operations (net of
any reserve requirements at both the Project debt and the Company
debt levels) from the Project Portfolio (giving effect, in each case,
to transfer to the Project Portfolio of any Project in respect of
which such additional series of Bonds is proposed to be issued); in
making this analysis, the Consolidating Engineer is required to use
generally accepted financial analysis methods and generally follow
the methods used to calculate the amount of the offering of the Old
Bonds, including the methods used in the Consolidated Pro Forma
Report.
The Company believes that Panda International will continue to
actively develop Projects; however, Panda International is under no
obligation to do so, or to use any proceeds from the Prior Offering
or future distributions from the Company to fund such development. In
addition, there can be no assurance that the Projects currently under
development by Panda International will reach Financial Closing or
achieve Commercial Operations or will meet the other conditions for
transfer to the Project Portfolio pursuant to the Additional Projects
Contract. See "Risk Factors -- Financial Risks," "-- Project Risks,"
"-- Risks Relating to Future Non-U.S. Projects" and "-- No
Restrictions on Panda International's Business."
USE OF PROCEEDS
There will be no cash proceeds to the Issuer or the Company
resulting from the Exchange Offer.
The proceeds from the sale of the Old Bonds was loaned to the
Company and is evidenced by the Initial Company Note. The net
proceeds of such loan of approximately $103.4 million (after
deducting underwriter discounts and commissions) was and will be used
by the Company for the following purposes: (i) to fund the
Capitalized Interest Fund in the amount of $9.8 million; (ii) to fund
the Debt Service Reserve Fund in the amount of approximately $6.4
million; (iii) to fund the Company Expense Fund in the amount of
approximately $300,000; (iv) to pay transaction expenses incurred in
connection with the Prior Offering, estimated at approximately
$900,000; (v) to fund in the amount of approximately $25.1 million a
portion of the redemption by the Panda-Rosemary Partnership of the
limited partner interest therein held by Ford Credit and (vi) to
distribute approximately $60.9 million to Panda International, of
which approximately $26.4 million was used to prepay senior
indebtedness held by Trust Company of the West, and the balance of
which Panda International intends to use for the development of
Projects and for general corporate purposes.
CAPITALIZATION
The following table sets forth the capitalization of the Company
as of June 30, 1996, and as adjusted to give pro forma effect to (i)
the issuance of the Existing Bonds (ii) the issuance of $111.4
million in aggregate principal amount of the Rosemary Bonds offered
and sold concurrently with the Old Bonds, (iii) the application of
the estimated net proceeds (after deducting underwriter discounts and
commissions) from the Prior Offering as described in "Use of
Proceeds" and (iv) the application of the estimated net proceeds from
the Rosemary Offering to refinance outstanding debt of the Panda-
Rosemary Partnership.
<TABLE>
<CAPTION>
June 30, 1996
Actual As adjusted
(in thousands)
<S> <C> <C>
Short-term debt
Bonds due 2012 $ -- $ 216
Current portion of term loan 900 --
Current portion of long-term
non-recourse project financing 8,200 4,049
-------- -------
Total short-term debt 9,100 4,265
-------- -------
Long-term debt
Bonds due 2012 -- 105,309
Term loan, less current portion 18,197 --
Long-term non-recourse project financing,
less current portion 256,147 281,699
-------- --------
Total long-term debt 274,344 387,008
-------- --------
Minority Interest 37,614 --- (1)
Shareholders' deficit
Combined equity 2 2
Accumulated deficit (16,764) (40,432) (2)
-------- --------
Total shareholders' deficit (16,762) (40,430)
-------- --------
Total Capitalization $304,296 $350,843
======== ========
</TABLE>
Notes (in thousands):
(1) The adjustment to minority interest reflects the use of
proceeds of the Prior Offering and the Rosemary Offering to redeem
Ford Credit's limited partnership interest in the Panda-Rosemary
Partnership.
(2) The adjustment to accumulated deficit reflects (i) the write-
off of debt issue costs of $3,709, (ii) the loss of $6,749 from
the early extinguishment of existing TCW indebtedness and (iii)
the loss of $13,210 from the early extinguishment of the Panda-
Rosemary Partnership's project indebtedness.
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following unaudited pro forma combined financial data are
derived from the historical combined financial statements of the
Company set forth elsewhere herein. The unaudited pro forma combined
financial data give effect to (i) the issuance of $111.4 million in
aggregate principal amount of the Rosemary Bonds and the application
of the net proceeds thereof to refinance the Panda-Rosemary
Partnership's Project debt, (ii) the release of certain reserves and
escrow deposits related to the Panda-Rosemary Partnership's Project
debt, (iii) the recording of the estimated transaction costs and (iv)
the write-off of debt issue costs and the loss from the early
extinguishment of such debt. In addition, the unaudited pro forma
combined financial data give effect to (i) the Prior Offering and the
application of the net proceeds (after deducting underwriting
discounts and commissions) thereof to (a) fund the Debt Service
Reserve Fund, the Capitalized Interest Fund and the Company Expense
Fund, (b) the redemption of Ford Credit's limited partner interest in
the Panda-Rosemary Partnership and (c) to make a distribution to the
Company's parent, (ii) the recording of estimated transaction costs
relating to the Prior Offering and (iii) the write-off of debt issue
costs and the loss from the early extinguishment of debt. As a result
of the redemption of Ford Credit's limited partner interest, the
Company owns 100% of the Panda-Rosemary Partnership and accordingly,
the redemption was accounted for using the purchase method of
accounting. The excess of minority interest over the amount paid to
Ford Credit was allocated to plant and equipment.
The unaudited pro forma combined balance sheet reflects the
above adjustments as if such transactions had occurred at June 30,
1996 and the unaudited pro forma combined statement of operations
reflect such adjustments as if such transactions had occurred as of
the beginning of the period. The unaudited pro forma combined
financial data should be read in conjunction with the notes thereto
and the historical combined financial statements of the Company, and
the notes thereto, included elsewhere herein.
The unaudited pro forma combined financial data do not purport
to be indicative of the financial position or results of operations
which would actually have occurred if the transactions described had
occurred as presented in such statements or which may be obtained in
the future.
<TABLE>
<CAPTION>
PANDA INTERFUNDING
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996
(in thousands)
Rosemary Prior Pro
Historical Offering Offering Forma
Revenue:
<S> <C> <C> <C> <C>
Electric capacity and energy sales $14,559 $ -- $ -- $14,559
Steam and chilled water sales 263 -- -- 263
Interest income 387 -- -- 387
------- -------- ------- -------
Total revenue 15,209 -- -- 15,209
Expenses:
Operating expenses 5,061 -- -- 5,061
Development and administrative expenses 1,193 -- -- 1,193
Interest expense 6,370 (12)(A) 4,584(H) 10,942
Depreciation 2,106 -- (88)(J) 2,018
Amortization - Debt issue costs 282 (164)(B) 52(I) 170
Amortization - Partnership formation
costs 267 -- -- 267
------- ------- ------ -------
Total expenses 15,279 (176) 4,548 19,651
Income (loss) before minority interest (70) 176 (4,548) (4,442)
Minority interest (1,906) -- 1,906(J) --
--------- ------- ------- --------
Net loss from continuing operations $ (1,976) $ 176 $(2,642) $(4,442)
======== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
PANDA INTERFUNDING
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
(in thousands)
Rosemary Prior Pro
Historical Offering Offering Forma
<S> <C> <C> <C> <C>
Revenue:
Electric capacity and energy sales $ 29,859 $ -- -- $29,859
Steam and chilled water sales 473 -- -- 473
Interest income 895 -- -- 895
-------- ------- ------- -------
Total revenue 31,227 -- -- 31,227
-------- ------- ------- -------
Expenses:
Operating expenses 9,348 -- -- 9,348
Development and administrative
expenses 1,821 -- -- 1,821
Interest expense 11,716 (611)(A) 10,770(H) 21,875
Depreciation 4,210 -- (177)(J) 4,033
Amortization - Debt issue costs 554 (346)(B) 104(I) 312
Amortization - Partnership formation
costs 533 -- -- 533
-------- ------- ------- -------
Total expenses 28,182 (957) 10,697 37,922
Income (loss) before minority interest 3,045 957 (10,697) (6,695)
Minority interest (5,048) -- 5,048(J) --
-------- ------- -------- --------
Net loss from continuing operations $ (2,003) $ 957 $ (5,649) $ (6,695)
======== ======= ======== ======
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements
<TABLE>
<CAPTION>
PANDA INTERFUNDING
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
June 30, 1996
(in thousands)
ASSETS
Rosemary Prior Pro
Historical Offering Offering Forma
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 1,904 $ -- $ -- $ 1,904
Restricted cash -- current 6,389 (6,389)(C) 300(K) 300
Accounts receivable 4,825 -- -- 4,825
Fuel oil, spare parts and supplies 3,078 -- -- 3,078
Other current assets 44 -- -- 44
-------- ------ ------- --------
Total current assets 16,240 (6,389) 300 10,151
Electric generating facility 276,152 -- (2,914)(J) 273,238
Furniture, fixtures and equipment 29 -- -- 29
Less: accumulated depreciation (23,114) -- -- (23,114)
-------- ------ ------- -------
Total plant and equipment, net 253,067 -- (2,914) 250,153
Receivable from parent 30,568 -- 32,441(O) 63,009
Reserves and escrow deposits 10,265 4,014(D) 16,248(K) 30,527
Debt issue costs 4,431 22(E) 2,269(L) 6,722
Partnership formation costs 266 -- -- 266
-------- ------- -------- --------
Total assets $314,837 $ (2,353) $ 48,344 $360,828
======== ======== ======== ========
LIABILITIES AND DEFICIT
Accounts payable -- construction $ 4,977 $ -- $ -- $ 4,977
Accounts payable -- trade 2,600 -- -- 2,600
Accrued interest 2,964 -- (556)(M) 2,408
Current portion of long-term debt 9,100 (4,151)(F) (684)(M) 4,265
------- -------- ------- --------
Total current liabilities 19,641 (4,151) (1,240) 14,250
Long-term debt, less current
portion 274,344 25,551 (F) 87,113 (M) 387,008
Minority interest 37,614 (7,565)(J) (30,049)(J) --
-------- ------- -------- --------
Total liabilities 331,599 13,835 55,824 401,258
Combined equity 2 -- -- 2
Accumulated deficit (16,764) (16,188)(G) (7,480)(N) (40,432)
-------- ------- ------- --------
Total deficit (16,762) (16,188) (7,480) (40,430)
-------- ------- ------- --------
Total liabilities and deficit $314,837 $(2,353) $48,344 $360,828
======== ======= ======= ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
PANDA INTERFUNDING
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(in thousands)
(A) The adjustment represents the change in interest expense
associated with (i) the inclusion of interest related to the
Rosemary Bonds at an interest rate of 8-5/8% and (ii) the
elimination of the Panda-Rosemary Partnership's project debt which
was refinanced with the Rosemary Bonds.
(B) The adjustment represents the change in amortization of debt
issue costs associated with (i) the inclusion of $3,000 in
estimated amortization of debt issue costs related to the Rosemary
Offering, at an amortization period of 20 years and (ii) the
elimination of amortization of debt issue costs related to the
project debt of the Panda-Rosemary Partnership which was
refinanced with the Rosemary Bonds.
(C) The adjustment represents the release of the revenue account
previously restricted by the Panda-Rosemary Partnership's project
debt which was refinanced with the Rosemary Bonds and the
distribution to the partners from proceeds of the Rosemary
Offering.
(D) The adjustment represents the change in certain reserves and
escrow deposits required by the Panda-Rosemary Partnership's
project debt, as compared to those certain reserve funds
established under the Rosemary Indenture.
(E) The adjustment represents the increase in debt issue costs
estimated at $3,000 related to the Rosemary Offering and the write-
off of $2,978 of debt issue costs related to the early
extinguishment of the Panda-Rosemary Partnership's project debt.
(F) These adjustments represent the net proceeds from the
issuance of the Rosemary Bonds less the refinancing of the Panda-
Rosemary Partnership's project debt, including the change to the
current portion of long-term debt.
(G) The adjustment represents the write-off of debt issue costs
of $2,978 and losses of $13,210 from the early extinguishment of
the Panda-Rosemary Partnership's project debt.
(H) The adjustment represents the change in interest expense
associated with (i) the inclusion of interest related to the Prior
Offering at an interest rate of 11-5/8% and (ii) the elimination
of interest resulting from the repayment of the TCW indebtedness.
(I) The adjustment represents the change in amortization of debt
issue costs associated with (i) the inclusion of the estimated
amortization of debt issue costs of $3,000 related to the Prior
Offering at an amortization period of 16 years and (ii) the
elimination of amortization of debt issue costs resulting from the
repayment of the TCW indebtedness.
(J) These adjustments represent the removal of minority interest
resulting from the redemption of Ford Credit's limited partner
interest in the Panda-Rosemary Partnership using $30,049 from the
proceeds of the Prior Offering and $7,565 from the proceeds of the
Rosemary Offering. The redemption was accounted for using the
purchase method of accounting and the total purchase price was
$34,700. The excess of minority interest over the purchase price
was allocated to electric generating facility, plant and
equipment. Depreciation is recorded on a straight line basis and
assumes a remaining useful life of 20 years.
(K) The adjustment represents the cash escrowed to fund the Debt
Service Reserve Fund of $6,414, the Capitalized Interest Fund of
$9,834 and the Company Expense Fund of $300.
(L) The adjustment represents the increase in debt issue costs
estimated at $3,000 related to the Prior Offering and the write-
off of $731 of debt issue costs related to the early
extinguishment of the TCW indebtedness.
(M) These adjustments represent the repayment of the TCW term
loan of $19,097 (including the current portion of $900), the
accrued interest thereon of $556 and the issuance of the Existing
Bonds.
(N) The adjustment represents the write-off of debt issue costs
of $731 and the loss of $6,749 from the early extinguishment of
the TCW indebtedness.
(O) The adjustment represents a distribution to Panda
International which it may (but is under no obligation to) use for
general corporate purposes, including for development of projects.
SELECTED COMBINED FINANCIAL DATA
(in thousands, except ratios)
Presented below is selected combined financial data for the
Company as of and for each of the years in the five-year period ended
December 31, 1995 and as of and for the six months ended June 30,
1995 and 1996, which have been derived from the Company's combined
financial statements. The selected combined financial data should be
read in conjunction with the information contained under the captions
"Capitalization," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the combined financial
statements of the Company, including the notes thereto, included
elsewhere herein.
<TABLE>
<CAPTION> Six Months Ended
Year Ended December 31, June 30,
1991 1992 1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Electric capacity and energy sales $31,396 $29,537 $29,856 $30,664 $29,859 $15,434 $14,559
Steam and chilled water sales 409 624 618 650 473 257 263
Interest income 797 562 365 603 895 435 387
------- ------- ------- ------- ------- ------- -------
Total revenue 32,602 30,723 30,839 31,917 31,227 16,126 15,209
Expenses:
Operating expenses 7,795 7,534 7,676 8,940 9,348 4,578 5,061
Development and administrative
expenses 1,196 1,608 2,278 1,376 1,821 891 1,193
Interest expense 15,414 11,478 11,066 11,018 11,716 5,669 6,370
Depreciation 4,131 4,177 4,282 4,208 4,210 2,104 2,106
Amortization -- Debt issue costs 493 436 502 600 554 273 282
Amortization -- Partnership
formation costs -- 533 533 533 533 266 267
------- ------- ------- ------- ------- ------- -------
Total expenses 29,029 25,766 26,337 26,675 28,182 13,781 15,279
------- ------- ------- ------- ------- ------- -------
Income before taxes and
minority interest 3,573 4,957 4,502 5,242 3,045 2,345 (70)
Minority interest -- (5,249) (5,474) (5,700) (5,048) (2,995) (1,906)
Provision for income taxes 1,930 -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Income (loss) before extraordinary
items 1,643 (292) (972) (458) (2,003) (650) (1,976)
Extraordinary loss, net(1) (6,640) -- -- -- -- -- --
-------- ------- ------- ------- -------- ------- --------
Net loss $ (4,997) $ (292) $ (972) $ (458) $ (2,003) $ (650) $ (1,976)
======== ======= ======= ======= ======== ======= ========
Other Data:
Ratio of earnings to fixed
charges(2) 1.22 1.42 1.39 1.36 (2) 1.13 (2)
-------------------- December 31,----------------- ---- June 30,-----
1991 1992 1993 1994 1995 1995 1996
Balance Sheet Data:
Cash and other current assets $ 5,642 $ 15,167 $ 14,084 $ 15,538 $ 11,333 $ 17,039 $ 16,240
Power plant and equipment (net) 99,125 96,529 93,815 94,893 216,794 158,169 253,067
Reserves and escrow deposits
and other assets 24,397 23,122 23,687 31,247 46,988 34,740 45,530
-------- -------- -------- -------- -------- -------- -------
Total assets 129,164 134,818 131,586 141,678 275,115 209,948 314,837
Current liabilities 32,625 9,735 11,252 12,530 18,457 11,864 19,641
Long-term debt 107,600 103,200 98,454 106,343 234,608 175,195 274,344
Minority Interest -- 33,346 34,479 35,588 36,836 36,322 37,614
Shareholders' deficit (11,061) (11,463) (12,599) (12,783) (14,786) (13,433) (16,762)
Total liabilities and
shareholders' deficit $129,164 $134,818 $131,586 $141,678 $275,115 $209,948 $314,837
</TABLE>
See accompanying notes to combined financial data.
NOTES TO COMBINED FINANCIAL DATA
(in thousands, except ratios)
(1) In 1991, there was an extraordinary loss from early
extinguishment of debt of $8,435, and an extraordinary gain from
utilization of net operating loss carry forwards of $1,795.
(2) For purposes of computing the ratio of earnings to fixed
charges, earnings represent income before taxes and extraordinary
items plus fixed charges. Fixed charges consist of interest
expense, capitalized interest and amortization of debt issuance
costs. Earnings were insufficient to cover fixed charges in 1995
by $2,748 and for the six months ended June 30, 1996 by $6,295.
In 1994 and 1995, and for the six months ended June 30, 1996,
fixed charges included capitalized interest of $803, $5,793 and
$6,225, respectively, related to the Panda-Brandywine Agreements.
This capitalized interest is funded by additional borrowings under
the Panda-Brandywine Construction Loan Facility. The ratio of
earnings to fixed charges excluding this capitalized interest
would be 1.45 and 1.25 in 1994 and 1995, respectively, and
earnings were insufficient to cover fixed charges, excluding
capitalized interest, by $70 for the six months ended June 30,
1996.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The historical and pro forma combined financial statements
included in this Prospectus have been prepared on a "carved-out"
basis and reflect the financial data of the entities that held
interests in the Panda-Rosemary Partnership and the Panda-Brandywine
Partnership, or their predecessors, during the periods presented. The
Company was not in existence during these historical periods;
however, the entities that currently own such partnership interests
are wholly-owned subsidiaries of the Company. Thus, references herein
to historical and pro forma combined financial data of the Company
are for convenience of reference, and it should be understood that
all such references are to the historical and pro forma combined
information of the entities that held such interests during the
periods presented.
The Company owns indirect equity interests in two electric power
generation facilities in the United States, the Panda-Rosemary
Facility, which began commercial operations in December 1990, and the
Panda-Brandywine Facility which is expected to begin commercial
operations in November 1996. The historical operating results of the
Company primarily represent the revenue and expenses of the Panda-
Rosemary Facility. Certain development expenses for the Panda-
Rosemary Facility and the Panda-Brandywine Facility have been
included in the operating results of the Company and are discussed
below as having arisen from development activities of the Company.
However, development expenses in respect of Projects which may be
transferred to the Project Portfolio in the future will not be
included in the results of operations of the Company because future
development activities will be undertaken by Panda International and
its affiliates. Such Projects, if any, will be transferred to the
Project Portfolio only upon reaching Financial Closing or achieving
Commercial Operations and meeting the other conditions for transfer
to the Project Portfolio pursuant to the Additional Projects
Contract.
See "Description of the Projects," "Regulation" and "Description
of the Project Debt" for a description of the Panda-Rosemary Facility
and the Panda-Brandywine Facility, including various contracts,
regulatory matters and financing arrangements relating thereto.
Results of Operations
First Half 1996 compared to 1995
The Company recorded a net loss before taxes and minority
interest of $70,000 in the first half of 1996 on revenues of
$15,209,000 compared to net income before taxes and minority interest
of $2,345,000 on revenues of $16,126,000 during the same period in
1995. This 6% decrease in revenues was primarily a result of the
decrease in dispatch hours at the Panda-Rosemary Facility. During the
first half of 1996, the Panda-Rosemary Facility was dispatched 231
hours as compared to 741 hours in 1995, resulting in a decrease in
recorded energy revenues of $875,000. Operating expenses, which
included fuel cost, operation and maintenance expense, insurance and
property taxes related to the Panda-Rosemary Facility, increased from
$4,578,000 in the first half of 1995 to $5,061,000 during the same
period in 1996, primarily due to additional scheduled maintenance
costs incurred at the end of March 1996 and the fuel cost increases
relating to the operation of the auxiliary boiler as a result of
higher winter gas prices. In addition, recorded administrative
expenses increased from $891,000 in the first half of 1995 to
$1,193,000 in the first half of 1996 as a result of additional
consulting projects performed on behalf of the Panda-Rosemary
Partnership.
Interest expense increased from $5,669,000 in the first half of
1995 to $6,370,000 in the first half of 1996 as a result of the
increase in outstanding indebtedness under the Trust Company of the
West loan which was partially offset by the scheduled reduction in
outstanding indebtedness of the Rosemary Bonds.
In September 1996, a transformer in one unit of the Panda-
Rosemary Facility sustained damage caused by a hurricane. A
temporary transformer has been installed pending repair of the
damaged transformer which is expected to occur within six months.
The Company believes that such event will not have a material adverse
effect on the financial condition or results of operation of the
Panda-Rosemary Partnership.
1995 compared to 1994
The Company recorded income before taxes and minority interest
of $3,045,000 on revenues of $31,227,000 in 1995 compared to
$5,242,000 on revenues of $31,917,000 in 1994. The decrease in
revenues was primarily the result of a scheduled contractual decrease
in capacity payments of $1,529,000, which was partially offset by
additional income generated due to an increase in the number of hours
the Panda-Rosemary Facility was dispatched by VEPCO and an increase
in interest income. The Panda-Rosemary Facility was dispatched 2,224
hours in 1995 versus 764 hours in 1994, due primarily to forced
outages at two VEPCO generating plants that are not likely to be
repeated. For approximately 1,200 of the dispatch hours in 1995, the
Panda-Rosemary Facility used natural gas provided directly by VEPCO
under a special fueling arrangement provided for in the Rosemary
Power Purchase Agreement. The Panda-Rosemary Facility's margin on
energy sales is lower when VEPCO supplies natural gas for the Panda-
Rosemary Facility than when the Panda-Rosemary Facility is dispatched
under normal energy pricing terms. However, overall margins at the
Panda-Rosemary Facility are increased in such circumstances (relative
to not operating at all) by the ability to provide steam and chilled
water to Bibb from the steam turbine offtake, which reduces the
operating costs of the auxiliary boilers.
Operating expenses, which included fuel cost, operations and
maintenance expense, insurance and property taxes related to the
Panda-Rosemary Facility, were $9,348,000 in 1995 as compared to
$8,940,000 in 1994, primarily due to additional maintenance expenses
and fuel related costs incurred due to the increase in the number of
hours the Panda-Rosemary Facility was dispatched by VEPCO. Project
development and administrative expense increased from $1,376,000 in
1994 to $1,821,000 in 1995 primarily due to additional administrative
expenses relating to construction of the Panda-Brandywine Facility.
In 1995, the Company recorded a net loss of $2,003,000 as
compared to a net loss of $458,000 in 1994. An allocation of
$5,048,000 was made in 1995 for minority interest, a decrease of
$652,000 from 1994 as a result of the overall decrease in net income
of the Panda-Rosemary Partnership.
1994 compared to 1993
The Company's 1994 income before taxes and minority interest was
$5,242,000 on revenues of $31,917,000, compared to $4,502,000 on
revenues of $30,839,000 in 1993. The increase in revenues was
primarily due to increased energy sales in 1994, as compared to 1993,
as a result of the Panda-Rosemary Facility being dispatched
approximately 764 hours in 1994 compared to 324 hours in 1993. In
addition, interest income increased slightly in 1994 as short-term
interest rates were higher than 1993 levels.
Operating expenses, which included fuel cost, operation and
maintenance expense, insurance and property taxes related to the
Panda-Rosemary Facility, increased to $8,940,000 in 1994 from
$7,676,000 in 1993. The increase was primarily a result of increased
fuel and maintenance costs related to the increase in the number of
hours the Panda-Rosemary Facility was dispatched by VEPCO and a
$257,000 increase in tariff rates for firm transportation on the
Transco pipeline through which gas is transported to the Panda-
Rosemary Facility. The dispatch hours for 1994 were substantially
greater than in 1993 due primarily to the second amendment to the
Rosemary Power Purchase Agreement entered into in 1993, under which
the formula used to calculate the energy purchase price was amended
to more closely match the fuel and variable operation and maintenance
costs of the Panda-Rosemary Facility. The amendment to the formula
resulted in lower energy margins in the spring, summer and fall
periods, when the Panda-Rosemary Facility primarily runs on natural
gas, and better cost recovery during the winter period when it runs
primarily on fuel oil. The reduction in the energy margin during the
summer months, when most of the dispatch hours were incurred, caused
the increase in run hours to have little overall impact on net
income.
The Company recorded a net loss of $458,000 in 1994 as compared
to a net loss of $972,000 in 1993. The allocation for minority
interest was $5,700,000, an increase of $226,000 from 1993 as the
Panda-Rosemary Partnership's net income increased slightly.
Liquidity and Capital Resources
To date, the Company has obtained cash from operations of the
Panda-Rosemary Facility, borrowings under non-recourse project debt
of the Panda-Rosemary Partnership and the Panda-Brandywine
Partnership, an equity contribution by Ford Credit (a former minority
interest partner in the Panda-Rosemary Partnership) and senior
indebtedness issued to Trust Company of the West. The Company
utilized this cash to fund operations of the Panda-Rosemary Facility,
fund development and construction of the Panda-Brandywine Facility,
service its debt obligations, make distributions to its parent to
fund project development efforts, provide equity distributions to
Ford Credit and for general and administrative expenses.
The principal future cash requirements of the Company will be
the payment of its obligations under the Company Notes, thus enabling
the Issuer to satisfy its obligations under the Existing Bonds. Semi-
annual principal and interest payments on the Company Notes are
expected to total $7.0 million on February 20, 1997 and $6.1 million
on each of August 20 and February 20 through February 20, 1999, after
which time scheduled payments will increase as more significant
principal amortization begins.
Because substantially all of the Company's operations are
conducted through its Project subsidiaries, the Company should have
no operating or administrative expenses other than those to be paid
out of the Company Expense Fund established under the Indenture,
which the Company will be required to fund annually. The Company
Expense Fund has initially been established to be $300,000 per annum.
The Company will rely almost exclusively on distributions from
its Project subsidiaries to meet its cash requirements. The Project
subsidiaries' ability to make such distributions will depend upon the
financial performance of the Projects in the Project Portfolio and
will be subject to a number of limitations on distributions contained
in the Project-level debt agreements. See "Risk Factors -- Dependence
on Distributions from Project Subsidiaries" and "Description of
Project Debt." The Company believes that it will have sufficient
liquidity from the cash flows available for distribution from the
Panda-Rosemary Partnership and the Panda-Brandywine Partnership,
together with the amounts held in the Capitalized Interest Fund, to
satisfy all obligations under the Company Notes, thus enabling the
Issuer meet its obligations under the Existing Bonds. However, there
can be no assurance that any one or more of the following factors, or
those described under "Risk Factors," will not adversely affect the
cash flows available for distribution.
The Panda-Rosemary Partnership is, and the Panda-Brandywine
Partnership will be, dependent on capacity payments under their
respective power purchase agreements to meet their fixed obligations,
including the payment of Project-level debt service and distributions
to their partners, including the Company's Project subsidiaries.
Capacity payments can be adversely affected by a major equipment
failure, resulting in a facility being unavailable for dispatch for
an extended period of time. Capacity payments can also be subject to
reduction pursuant to regulatory disallowance and, under contractual
provisions, as a result of events outside the Company's control. See
"Risk Factors -- Project Risks -- Operating Risks" and "-- Project
Risks -- Adjustments to Fixed Payments."
Each of the electric energy purchasers under the power purchase
agreements for the Panda-Rosemary Facility and the Panda-Brandywine
Facility has a contractual right to schedule such facility for
dispatch largely at such purchaser's discretion. Thus, revenues from
energy payments will vary depending on the hours these facilities are
dispatched by such purchasers. See "Risk Factors -- Project Risks --
Dispatchability Risk." In addition, the sustained failure of a fuel
supplier to deliver natural gas at the specified contract price could
have a material adverse effect on the operating results of the
affected facility. See "Risk Factors -- Project Risks --
Interruptible Gas Supply and Transportation Risks."
New Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" (SFAS 121). SFAS 121 is effective for financial
statements for fiscal years beginning after December 15, 1995 and
requires the write-down to market value of certain long-lived assets.
The Company adopted SFAS 121 in 1996 and such adoption did not have a
material impact on its financial position or results of operations.
Impact of Inflation
Inflationary increases in the Company's costs, primarily project
development costs, energy costs, and capital costs, may be offset by
increases in revenue as provided in the various power purchase
agreements, although competition may limit the Company's ability to
fully recover all such increases. The Company attempts, where
possible, to obtain provisions in its power purchase agreements
whereby certain revenue components, such as energy and operations and
maintenance, may be adjusted with inflationary increases. In
management's view, inflation will not have a material effect on the
Company's financial position over the long-term.
THE EXCHANGE OFFER
Purpose and Effects of the Exchange Offer
The Old Bonds were issued and sold by the Issuer on July 31,
1996 to the Initial Purchaser pursuant to the Purchase Agreement.
The Initial Purchaser subsequently placed the Old Bonds with
Qualified Institution Buyers and Institutional Accredited Investors
in transactions exempt from the registration requirements of the
Securities Act. As a condition of the Purchase Agreement, the
Company, the Issuer and the Initial Purchaser entered into the
Registration Rights Agreement, pursuant to which the Company and the
Issuer agreed (i) to file with the Commission a registration
statement under the Securities Act relating to the Exchange Offer
within 90 days after the Issue Date, (ii) to use their best efforts
to cause such registration statement to become effective no later
than 180 days after the Issue Date and (iii) upon effectiveness of
such registration statement to commence the Exchange Offer and offer
to the holders of Old Bonds the opportunity to exchange their Old
Bonds for a like principal amount of Exchange Bonds. This
Registration Statement is intended to satisfy the foregoing
obligations of the Company and the Issuer under the Registration
Rights Agreement. See "Old Bonds Registration Rights."
Upon the effectiveness of the Registration Statement and
consummation of the Exchange Offer within the aforementioned periods
of time, payment of additional interest on the Old Bonds provided for
in the Series A Supplemental Indenture will not be required.
Following the consummation of the Exchange Offer, any holder of Old
Bonds (other than one not permitted by law or any policy of the
Commission to participate in the Exchange Offer) which has not
exchanged its Old Bonds pursuant to the Exchange Offer will not have
any further registration rights under the Registration Rights
Agreement and its Old Bonds will continue to be subject to certain
restrictions on transfer. See "Termination of Certain Rights" and
"Transfer Restrictions on Old Bonds" below and "Risk Factors --
Consequences of Failure to Exchange Old Bonds." Accordingly, the
liquidity of the market, if any, for any Old Bonds which remain
outstanding could be materially adversely affected.
Based on an interpretation by the staff of the Commission set
forth in no-action letters issued to third parties, the Company
believes that Exchange Bonds issued in exchange for Old Bonds
pursuant to the Exchange Offer may be offered for resale, resold and
otherwise transferred by any holders thereof (other than any such
holder which is an Affiliate of the Company or the Issuer) without
compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such Exchange Bonds are acquired
in the ordinary course of such holders' business and such holders
have no arrangements with any person to participate in the
distribution of such Exchange Bonds. To comply with the securities
laws of certain jurisdictions, if applicable, the Exchange Bonds may
not be offered or sold unless they have been registered or qualified
for sale in such jurisdictions or an exemption from registration or
qualification is available and the conditions thereto have been met.
In addition, each broker-dealer that received Exchange Bonds for its
own account in exchange for Old Bonds, where such Old Bonds were
acquired by such broker-dealer as a result of market making
activities or other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange
Bonds. See "Plan of Distribution."
Terms of the Exchange Offer
The Issuer hereby offers, upon the terms and subject to the
conditions set forth herein and in the accompanying Letter of
Transmittal, to exchange $1,000 principal amount of Exchange Bonds
for each $1,000 principal amount of outstanding Old Bonds. As of the
date of this Prospectus, $105,525,000 principal amount of the Old
Bonds is outstanding. The Exchange Bonds will bear interest from the
date of their issuance. Interest on the Old Bonds accepted for
exchange will accrue thereon to, but not including, the date of
issuance of the Exchange Bonds and will be paid together with the
first interest payment on the Exchange Bonds issued in exchange
therefor.
The form and terms of the Exchange Bonds will be identical to
the form and terms of the Old Bonds, except that (i) the Exchange
Bonds will have been registered under the Securities Act, and
therefore, will not bear legends restricting their transfer pursuant
to the Securities Act, and (ii) the holders of the Exchange Bonds
will not be entitled to certain rights of the holders of Old Bonds
under the Registration Rights Agreement, which will terminate as to
Old Bonds tendered pursuant to the Exchange Offer upon the
consummation of the Exchange Offer. Such rights will also terminate
as to holders of Old Bonds who are eligible to tender their Old Bonds
for exchange in the Exchange Offer but fail to do so. See
"Termination of Certain Rights" below and "Old Bonds Registration
Rights." The Exchange Bonds will evidence the same debt as the Old
Bonds which they replace and will be issued under, and be entitled to
the same benefits as the Old Bonds pursuant to, the Indenture. See
"Description of the Exchange Bonds."
The Exchange Offer will expire at 5:00 p.m. New York City time,
on _____________, unless extended in the Issuer's sole discretion.
Tendered Old Bonds may be withdrawn at any time prior to the
Expiration Date. For a description of the Issuer's right to extend
the period of time during which the Exchange Offer is open, and to
delay, terminate or amend the Exchange Offer, and of tendering
holders' withdrawal rights, see "Expiration Date; Extensions;
Termination; Amendments" and "Withdrawal of Tenders" below.
The Issuer shall be deemed to have accepted validly tendered Old
Bonds in the Exchange Offer when, as and if the Issuer has given oral
or written notice thereof to the Exchange Agent. The Exchange Agent
will act as agent for the tendering holders of Old Bonds for the
purposes of receiving the Exchange Bonds from the Issuer. The
Exchange Bonds will be delivered as soon as practicable after
acceptance of the Old Bonds, which is expected to occur on the
Expiration Date.
This Prospectus, together with the Letter of Transmittal and
other relevant materials, will be mailed by the Issuer to record
holders of Old Bonds and will be furnished to brokers, banks and
similar persons whose names, or the names of whose nominees, appear
on the lists of holders for subsequent transmittal to beneficial
owners of Old Bonds. Holders of Old Bonds who tender in the Exchange
Offer will not be required to pay brokerage commissions or fees or,
subject to the instructions in the Letter of Transmittal, transfer
taxes with respect to the exchange of Old Bonds pursuant to the
Exchange Offer. The Company and the Issuer will pay all charges and
expenses, other than certain applicable taxes, in connection with the
Exchange Offer.
Although the Issuer has no plan or intention to do so, it
reserves the right in its sole discretion to purchase or make offers
for any Old Bonds that remain outstanding subsequent to the
Expiration Date, and to the extent permitted by applicable law,
purchase Old Bonds in the open market, in privately negotiated
transactions or otherwise. The terms of any such purchases or offers
could differ from the terms of the Exchange Offer.
Holders of Old Bonds do not have any appraisal or dissenters'
rights under the Delaware General Corporation Law or the Indenture in
connection with the Exchange Offer.
Expiration Date; Extensions; Termination; Amendments
The Exchange Offer expires on the Expiration Date. The term
"Expiration Date" means 5:00 p.m., New York City time, on
_______________, 1996, unless the Issuer in its sole discretion
extends the period during which the Exchange Offer is open, in which
event the term "Expiration Date" means the latest time and date on
which the Exchange Offer, as so extended by the Issuer, expires. The
Issuer reserves the right to extend the Exchange Offer at any time
and from time to time prior to the Expiration Date. The Issuer shall
notify the Exchange Agent of any extension by oral or written notice
and shall make a public announcement thereof prior to 5:00 p.m., New
York City time, on the next Business Day after the previously
scheduled Expiration Date. Such announcement may state that the
Issuer is extending the Exchange Offer for a specified period or on a
daily basis. Without limiting the manner by which the Issuer may
choose to make such public announcement thereof, the Issuer currently
intends to make such announcements, if any, by issuing a release to
the Dow Jones News Service. During any extension of the Exchange
Offer, all Old Bonds previously tendered pursuant to the Exchange
Offer will remain subject to the Exchange Offer.
The Issuer reserves the right (i) to extend the Exchange Offer,
(ii) to delay accepting any tendered Old Bonds, (iii) if any of the
events set forth below under "Conditions of the Exchange Offer" shall
have occurred and shall not have been waived by the Issuer, terminate
the Exchange Offer and not accept any Old Bonds, by giving oral or
written notice of such delay, extension or termination to the
Exchange Agent, and (iv) to amend at any time, or from time to time,
the terms of the Exchange Offer in any manner, whether before or
after any tender of the Old Bonds. Any amendment applicable to the
Exchange Offer will apply to all Old Bonds tendered in the Exchange
Offer, regardless of when or in what order the Old Bonds were
tendered. Any delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by public
announcement thereof in a manner set forth above. If the Exchange
Offer is amended (including by waiver of a condition to the Exchange
Offer) in a manner determined by the Issuer to constitute a material
change, the Issuer will promptly disclose such amendment in a manner
reasonably calculated to inform the holders of Old Bonds of such
amendment, and if the Exchange Offer would otherwise expire during
such period, the Issuer will extend the Exchange Offer for a period
which the Issuer in its discretion deems appropriate, depending upon
the significance of the amendment and the manner of disclosure to the
holders of Old Bonds. All of the conditions to the Exchange Offer set
forth below under the caption "Conditions of the Exchange Offer" must
be satisfied or waived prior to the consummation of the Exchange
Offer. The rights reserved by the Issuer in this paragraph are in
addition to the Issuer's rights set forth below under the caption
"Conditions of the Exchange Offer."
Conditions of the Exchange Offer
Notwithstanding any other term of the Exchange Offer, the Issuer
shall not be required to accept for exchange, or exchange the
Exchange Bonds for, any Old Bonds, and may terminate the Exchange
Offer as provided herein before the acceptance of such Old Bonds, if:
(a) any action or proceeding is instituted or threatened in any
court or by or before any governmental agency with respect
to the Exchange Offer which, in the sole judgment of the
Issuer, may materially impair the ability of the Issuer to
proceed with the Exchange Offer in accordance with the terms
contained herein and in the Letter of Transmittal or
materially impair the contemplated benefits of the Exchange
Offer to the Issuer, or any material adverse development has
occurred in any existing action or proceeding with respect
to the Company or any of its subsidiaries or affiliates;
(b) any change, or any development involving a prospective
change, in the business or financial affairs of the Company
or any of its subsidiaries has occurred which, in the sole
judgment of the Issuer, may materially impair the ability of
the Issuer to proceed with the Exchange Offer or materially
impair the contemplated benefits of the Exchange Offer to
the Issuer;
(c) any law, statute, rule or regulation is proposed, adopted or
enacted, which, in the sole judgment of the Issuer, may
materially impair the ability of the Issuer to proceed with
the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Issuer;
(d) any governmental approval has not been obtained, which
approval the Issuer shall, in its sole discretion, deem
necessary for the consummation of the Exchange Offer as
contemplated hereby;
(e) any stop order shall be threatened or in effect with respect
to the Registration Statement of which this Prospectus
constitutes a part or qualification of the Indenture under
the Trust Indenture Act of 1939, as amended; or
(f) the Trustee shall have objected in any respect to, or taken
any action that could, in the sole judgment of the Issuer,
adversely affect the consummation of the Exchange Offer, or
shall have taken any action that challenges the validity or
effectiveness of the procedures used by the Issuer in making
the Exchange Offer or the acceptance of Old Bonds in
exchange for Exchange Bonds.
The foregoing conditions to the Exchange Offer are for the sole
benefit of the Issuer and may be asserted by the Issuer in its sole
discretion regardless of the circumstances giving rise to any such
condition (including any action or inaction by the Company or the
Issuer) and may be waived by the Issuer, in whole or in part, at any
time and from time to time in its sole discretion. All of the
foregoing conditions must be satisfied or waived prior to the
consummation of the Exchange Offer. The failure by the Issuer at any
time to exercise any of the foregoing rights shall not be deemed a
waiver of any such right and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to
time. Any determination by the Issuer concerning the events
described in this section or the fulfillment or nonfulfillment of any
conditions shall be final and binding upon all persons.
The Exchange Offer is not conditioned upon any minimum principal
amount of Old Bonds being tendered.
Procedures for Tendering
Only a registered holder of the Old Bonds may tender such Old
Bonds in the Exchange Offer. To tender in the Exchange Offer, a
holder must, prior to the Expiration Date, either (i) complete and
sign the Letter of Transmittal (or a facsimile thereof), in
accordance with the instructions contained herein and therein, and
deliver such Letter of Transmittal, together with any signature
guarantees and any other documents required by the Letter of
Transmittal, to the Exchange Agent at its address set forth on the
back cover page of this Prospectus and the tendered Old Bonds must
either be (a) physically delivered to the Exchange Agent or (b)
transferred pursuant to the procedures for book-entry transfer
described herein and a confirmation of such book-entry transfer must
be received by the Exchange Agent prior to the Expiration Date, or
(ii) comply with the guaranteed delivery procedures set forth herein.
To be validly tendered, the Old Bonds, together with a properly
completed Letter of Transmittal (or facsimile thereof), executed by
the holder of record thereof, and any other documents required by the
Letter of Transmittal, must be received by the Exchange Agent at the
address set forth on the back cover page of this Prospectus prior to
5:00 p.m., New York City time, on the Expiration Date, except as
otherwise provided below under the caption "Guaranteed Delivery
Procedures."
The tender by a holder will constitute an agreement between such
holder and the Issuer in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
THE METHOD OF DELIVERY OF THE OLD BONDS AND THE LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS
AT THE ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL,
IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY
SERVICE. IF DELIVERY IS TO BE MADE BY MAIL, IT IS SUGGESTED THAT THE
HOLDER USE PROPERLY INSURED, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, AND THAT THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF
THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR THE OLD BONDS
SHOULD BE SENT TO THE ISSUER OR THE COMPANY.
Any beneficial owner whose Old Bonds are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee
and who wishes to tender should contact the registered holder
promptly and instruct such registered holder to tender on such
beneficial owner's behalf. See "Instructions from Beneficial Owner"
included with the Letter of Transmittal.
Signatures on a Letter of Transmittal must be guaranteed unless
the Old Bonds tendered pursuant thereto are (i) tendered by a
registered holder of the Old Bonds who has not completed the box
entitled "Special Delivery Instructions" on the Letter of Transmittal
or (ii) tendered for the account of an Eligible Institution (as
defined below). In the event that signatures on a Letter of
Transmittal are required to be guaranteed, such guarantee must be by
a firm that is a member of a registered national securities exchange
or a member of the National Association of Securities Dealers, Inc.
or by a commercial bank or trust company having an office or
correspondent in the United States (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than
the registered holder of any Old Bonds listed therein, such Old Bonds
must be endorsed by the registered holder or accompanied by a
properly completed bond power or other written instrument of transfer
in form satisfactory to the Issuer in its sole discretion, signed by
such registered holder as such registered holder's name appears on
such Old Bonds.
If the Letter of Transmittal or any Old Bonds or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-
in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when
signing, and proper evidence satisfactory to the Issuer of their
authority to so act must be submitted.
The Exchange Agent will establish accounts with respect to the
Old Bonds at DTC for the purpose of the Exchange Offer, and any
financial institution that is a participant in DTC may make book-
entry transfer of the Old Bonds by causing DTC to transfer such Old
Bonds into the Exchange Agent's account at DTC. Although delivery of
Old Bonds may be effected through book-entry transfer in the Exchange
Agent's account at DTC, the Letter of Transmittal (or facsimile
thereof), with any required signature guarantees and any other
required documents, must, in any case, be transmitted to and received
by the Exchange Agent at its address set forth on the back cover of
this Prospectus prior to 5:00 p.m., New York City time, on the
Expiration Date, except as otherwise provided under the caption
"Guaranteed Delivery Procedures" below. DELIVERY OF DOCUMENTS TO DTC
IN ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE
EXCHANGE AGENT. NOTWITHSTANDING COMPLIANCE WITH BOOK-ENTRY TENDER
DELIVERY PROCEDURES, FAILURE TO DELIVER TO THE EXCHANGE AGENT AN
EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS PRIOR
TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE MAY RESULT
IN THE TENDERED OLD BONDS NOT BEING ACCEPTED FOR EXCHANGE.
All questions as to the validity, form, eligibility (including
time of receipt) and acceptance of Old Bonds tendered for exchange
will be determined by the Issuer in its sole discretion, whose
determination will be final and binding. The Issuer reserves the
absolute right to reject any or all tenders that are not in proper
form or the acceptance of which would, in the opinion of the Issuer
or counsel for the Issuer, be unlawful. The Issuer also reserves the
right to waive certain of the conditions to the Exchange Offer or any
irregularities or defects in the tender of Old Bonds. The Issuer's
interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be
final and binding on all persons. Unless waived, any irregularities
in connection with tenders of Old Bonds must be cured within such
time as the Issuer shall determine. Neither the Company, the Issuer,
the Exchange Agent nor any other person shall be under any duty to
give notifications of defects or irregularities in such tenders or
shall incur any liability for failure to give such notification.
Tenders of Old Bonds will not be deemed to have been made until any
defects with respect to such tenders have been cured or waived.
By tendering, each registered holder of Old Bonds will represent
to the Issuer that, among other things, (i) the Exchange Bonds to be
acquired by the holder and any beneficial owner(s) of such Old Bonds
("Beneficial Owner(s)") in connection with the Exchange Offer are
being acquired by the holder and such Beneficial Owner(s) in the
ordinary course of business of the holder and any Beneficial
Owner(s), (ii) the holder (other than a broker-dealer referred to in
the last sentence of this paragraph) and each Beneficial Owner are
not participating and do not intend to participate in the
distribution (within the meaning of the Securities Act) of the
Exchange Bonds, (iii) the holder and each Beneficial Owner have no
arrangement or understanding with any person to participate in the
distribution (within the meaning of the Securities Act) of the
Exchange Bonds, (iv) the holder and each Beneficial Owner acknowledge
and agree that any person participating in the Exchange Offer for the
purpose of distributing the Exchange Bonds must comply with the
registration and prospectus delivery requirements of the Securities
Act in connection with a secondary resale transaction of the Exchange
Bonds acquired by such person and cannot rely on the position of the
staff of the Commission set forth in no-action letters that are
discussed herein under "Resale of Exchange Bonds," below, (v) the
holder and each Beneficial Owner understand that a secondary resale
transaction described in clause (iv) above should be covered by an
effective registration statement containing the selling security
holder information required by Item 507 of Regulation S-K of the
Commission and (vi) neither the holder nor any Beneficial Owner is an
Affiliate of the Company or the Issuer, or if it is an Affiliate, it
will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable. In
addition, each broker-dealer that receives Exchange Bonds for its own
account in exchange for Old Bonds, where such Old Bonds were acquired
by such broker-dealer as a result of market making activities or
other trading activities, must acknowledge that it will deliver a
Prospectus in connection with any resale of such Exchange Bonds. See
"Plan of Distribution."
Unless an exemption applies under the applicable law and
regulations concerning "backup withholding" of United States federal
income tax, the Exchange Agent will be required to withhold, and will
withhold, 31% of the gross proceeds otherwise payable to a holder
pursuant to the Exchange Offer if the holder does not provide its
taxpayer identification number (social security number or employer
identification number, as applicable) and certify that such number is
correct. Each tendering holder should complete and sign the main
signature form and the Substitute Form W-9 included as part of the
Letter of Transmittal, so as to provide the information and
certification necessary to avoid backup withholding, unless an
applicable exemption exists and is proved in a manner satisfactory to
the Issuer and the Exchange Agent.
Guaranteed Delivery Procedures
If a holder of Old Bonds desires to tender such Old Bonds and if
the Old Bonds are not immediately available, or time will not permit
such holder's Old Bonds or any other required documents to reach the
Exchange Agent before 5:00 p.m., New York City time, on the
Expiration Date, a tender for exchange may be effected if:
(a) the tender for exchange is made by or through an Eligible
Institution;
(b) prior to 5:00 p.m., New York City time, on the Expiration
Date, the Exchange Agent has received from such Eligible
Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand
delivery) setting forth the name and address of the holder
of the Old Bonds and the principal amount of Old Bonds
tendered for exchange, stating that tender is being made
thereby and guaranteeing that, within five Business Days
after the Expiration Date, the duly executed Letter of
Transmittal (or facsimile thereof), properly completed and
validly executed, together with the Old Bonds in proper form
for transfer (or confirmation of book-entry transfer of such
Old Bonds into the Exchange Agent's account with DTC), and
any other documents required by the Letter of Transmittal
and the instructions thereto, will be deposited by the
Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal
(or facsimile thereof), as well as the certificate(s)
representing all tendered Old Bonds in proper form for
transfer (or confirmation of book-entry transfer of such Old
Bonds into the Exchange Agent's account with DTC) and all
other documents required by the Letter of Transmittal, are
received by the Exchange Agent within five Business Days
after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed
Delivery will be sent to holders who wish to tender their Old Bonds
according to the guaranteed delivery procedures set forth above.
Acceptance of Old Bonds for Exchange; Delivery of Exchange Bonds
Upon the terms and subject to the conditions of the Exchange
Offer, the Issuer will accept on the Expiration Date all Old Bonds
properly tendered in the Exchange Offer and not withdrawn and will
issue the Exchange Bonds as soon as practicable after the acceptance
of the Old Bonds. The Exchange Bonds will be issued in fully registered
form only. For purposes of the Exchange Offer, the Issuer shall be
deemed to have accepted properly tendered Old Bonds when, as and if the
Issuer has given oral or written notice thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of Old
Bonds for the purposes of receiving the Exchange Bonds from the Issuer and
transmitting the Exchange Bonds to each holder exchanging Old Bonds.
If any tendered Old Bonds are not accepted for exchange because
of an invalid tender, the occurrence of certain other events set
forth herein, the withdrawal of tendered Old Bonds under
circumstances permitting such withdrawal as described herein or
otherwise, or if Old Bonds are submitted for a greater principal
amount than the holder thereof desires to exchange, any such
unaccepted or non-exchanged Old Bonds will be returned, without
expense, to the tendering holder thereof (or, in the case of the Old
Bonds tendered by book-entry transfer, to an account maintained at
DTC), as soon as practicable after the expiration or termination of
the Exchange Offer.
Withdrawal of Tenders
Tenders of Old Bonds may be withdrawn at any time prior to the
Expiration Date. Thereafter, such tenders are irrevocable. To
withdraw a tender of Old Bonds in the Exchange Offer, a written
notice of withdrawal, delivered by hand, mail or facsimile
transmission, must (i) be received by the Exchange Agent prior to
5:00 p.m., New York City time, on the Expiration Date at the address
set forth on the back cover hereof, (ii) specify the name of and be
signed by the registered holder of such Old Bonds in the same manner
as the applicable Letter of Transmittal (including any required
signature guarantees) as set forth above under "Procedures for
Tendering," (iii) specify the name of the person identified in the
Letter of Transmittal as having tendered the Old Bonds to be
withdrawn and (iv) specify the aggregate principal amount represented
by such withdrawn Old Bonds. If Old Bonds have been tendered
pursuant to the procedures for book-entry transfer as set forth
herein, any notice of withdrawal must also specify the name and
number of the account at DTC to be credited with the withdrawn Old
Bonds. Withdrawals of tenders of Old Bonds may not be rescinded, and
any Old Bonds withdrawn will thereafter be deemed not validly
tendered for purposes of the Exchange Offer; provided, however, that
withdrawn Old Bonds may be re-tendered by again complying with the
procedures for tendering Old Bonds described herein at any time prior
to 5:00 p.m., New York City time, on the Expiration Date.
All questions as to the validity, form and eligibility
(including time of receipt) of notices of withdrawal will be
determined by the Issuer, such determination to be final and binding.
None of the Company, the Issuer, the Exchange Agent or any other
person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal of Old Bonds or incur any
liability for failure to give any such notification.
Lost or Missing Certificates
If a holder of Old Bonds desires to tender Old Bonds pursuant to
the Exchange Offer, but such Old Bonds have been mutilated, lost,
stolen or destroyed, such holder should write to or telephone the
Trustee, at the address listed below, concerning the procedures for
obtaining replacement certificates for such Old Bonds, arranging for
indemnification or any other matter that requires handling by the
Trustee:
Bankers Trust Company
4 Albany Street
New York, New York 10006
Attention: Mr. Scott Thiel
Telephone: (212) 250-8327
Facsimile: (212) 250-6392
Termination of Certain Rights
Holders of Old Bonds have certain rights under the Registration
Rights Agreement that will terminate as a result of the consummation
of the Exchange Offer. The Exchange Offer shall be deemed to be
"consummated" upon the issuance and delivery of Exchange Bonds in
exchange for Old Bonds validly tendered and not withdrawn in the
Exchange Offer in accordance with the terms of the Registration
Rights Agreement. Such rights will terminate for all holders
exchanging Old Bonds in the Exchange Offer and all holders who are
eligible to participate in the Exchange Offer and fail to do so. The
rights of holders of Old Bonds provided for in the Registration
Rights Agreement which will terminate upon the consummation of the
Exchange Offer are discussed in "Old Bonds Registration Rights"
below.
The Exchange Agent
The Exchange Agent for the Exchange Offer is Bankers Trust
Company. All deliveries, correspondence and questions sent or
presented to the Exchange Agent relating to the Exchange Offer should
be directed to the following address or telephone number (which are
also set forth on the back cover of this Prospectus):
By Registered or Certified Mail, Hand Delivery or Overnight Courier:
Bankers Trust Company
4 Albany Street
New York, New York 10006
Attention: Mr. Matthew Seeley
Telephone Number: (212) 250-6657
or
By Facsimile:
Bankers Trust Company
Attention: Mr. Matthew Seeley
Facsimile Number: (212) 250-6392
Delivery to an address other than as set forth herein, or
transmissions of instructions via a facsimile number other than the
one set forth herein, will not constitute a valid delivery.
Fees and Expenses
The expenses of soliciting tenders will be borne by the Company
and the Issuer. The principal solicitation is being made by mail;
however, additional solicitation may be made by facsimile, telephone
or in person by officers and representatives of the Issuer and its
affiliates. The Issuer has not retained any dealer-manager in
connection with the Exchange Offer and will not make any payments to
brokers, dealers or others soliciting acceptance of the Exchange
Offer. The Issuer, however, will pay the Exchange Agent reasonable
and customary fees for its services and will reimburse it for
reasonable out-of-pocket expenses incurred in connection therewith.
The expenses to be incurred in connection with the Exchange Offer
will be paid by the Issuer and the Company and are estimated in the
aggregate to be approximately $130,000. Such expenses include fees
and expenses of the Exchange Agent and Trustee, accounting and legal
fees and independent engineers' and fuel consultants' fees.
The Issuer will pay all transfer taxes, if any applicable, to
the exchange of the Old Bonds pursuant to the Exchange Offer. If,
however, a transfer tax is imposed for any reason other than the
exchange of the Old Bonds pursuant to the Exchange Offer, then the
amount of any such transfer taxes (whether imposed on the registered
holder or any other person) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tending
holder.
Accounting Treatment
The Exchange Bonds will be recorded at the carrying value of the
Old Bonds, as reflected in the Issuer's accounting records on the
date of the exchange. Accordingly, no gain or loss for accounting
purposes will be recognized.
Transfer Restrictions on Old Bonds
The Old Bonds that are not exchanged for Exchange Bonds pursuant
to the Exchange Offer will remain "restricted securities" (within the
meaning of the Securities Act). Accordingly, prior to the date that
is three years after the later of the Issue Date and the last date on
which the Issuer or any Affiliate of the Issuer was the owner
thereof, such Old Bonds may be resold only (i) to the Issuer (upon
redemption thereof or otherwise), (ii) so long as the Old Bonds are
eligible for resale pursuant to Rule 144A, to a person whom the
seller reasonably believes is a Qualified Institutional Buyer,
purchasing for its own account or for the account of a Qualified
Institutional Buyer to whom notice is given that the resale, pledge
or other transfer is being made in reliance on Rule 144A, (iii) to an
Institutional Accredited Investor that is purchasing for its own
account or the account of an Institutional Accredited Investor, (iv)
in an offshore transaction in accordance with Regulation S under the
Securities Act, (v) pursuant to another available exemption from
registration under the Securities Act, or (vi) pursuant to an
effective registration statement under the Securities Act, subject in
each of the foregoing cases to compliance with applicable state
securities laws.
Resales of New Bonds
With respect to resales of the Exchange Bonds, based on an
interpretation by the staff of the Commission set forth in no-action
letters issued to third parties, the Company believes that a holder
(other than a person that is an Affiliate of the Company or the
Issuer) who exchanges Old Bonds for Exchange Bonds will be allowed to
resell the Exchange Bonds acquired in the Exchange Offer to the
public without further registration under the Securities Act and
without delivering to the purchasers of the Exchange Bonds a
prospectus that satisfies the requirements of Section 10 thereof;
provided that (i) the Exchange Bonds are acquired in the ordinary
course of the holder's business, (ii) the holder (other than a broker-
dealer referred to in the next sentence) is not participating and
does not intend to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Bonds and (iii) the
holder has no arrangement or understanding with any person to
participate in the distribution (within the meaning of the Securities
Act) of the Exchange Bonds. In addition, each broker-dealer that
receives Exchange Bonds for its own account in exchange for Old
Bonds, where such Old Bonds were acquired by such broker-dealer as a
result of market making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Bonds. However, if any holder acquires
Exchange Bonds in the Exchange Offer for the purpose of distributing
or participating in a distribution of the Exchange Bonds, such holder
cannot rely on the position of the staff of the Commission enunciated
in such no-action letters and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection
with a secondary resale transaction, unless an exemption from
registration is otherwise available. In addition, to comply with the
securities laws of certain jurisdictions, if applicable, the Exchange
Bonds may not be offered or sold unless they have been registered or
qualified for sale in such jurisdictions or an exemption from
registration or qualification is available and the conditions thereto
have been met. See "Plan of Distribution."
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS OF THE EXCHANGE OFFER
The following discussion is based upon current provisions of the
Internal Revenue Code of 1986, as amended, applicable Treasury
regulations, judicial authority and administrative rulings and
practice. There can be no assurance that the Internal Revenue
Service will not take a contrary view, and no ruling from the
Internal Revenue Service has been or will be sought. Legislative,
judicial or administrative changes or interpretations may be
forthcoming that could alter or modify the statements and conclusions
set forth herein. Any such changes or interpretations may or may not
be retroactive and could affect the tax consequences to holders of
the Old Bonds. Certain holders (including insurance companies, tax-
exempt organizations, financial institutions, broker-dealers, foreign
corporation and persons who are not citizens or residents of the
United States) may be subject to special rules not discussed below.
The exchange of the Exchange Bonds for the Old Bonds pursuant to
the Exchange Offer should not be treated as an "exchange" for United
States federal income tax purposes because the Exchange Bonds should
not be considered to differ materially in kind or extent from the Old
Bonds. The Exchange Bonds received by a holder should be treated as a
continuation of the Old Bonds in the hands of such holder. As a
result, there should be no federal income tax consequences to holders
as a result of the exchange of the Old Bonds for the Exchange Bonds
pursuant to the Exchange Offer. If, however, the exchange of the Old
Bonds for the Exchange Bonds were treated as an "exchange" for
federal income tax purposes, such exchange should constitute a
recapitalization for federal income tax purposes. Holders exchanging
the Old Bonds pursuant to such recapitalization should not recognize
any gain or loss upon the exchange.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX
CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE.
EACH HOLDER OF OLD BONDS SHOULD CONSULT ITS OWN TAX ADVISOR AS TO
PARTICULAR TAX CONSEQUENCES OF HOLDING, EXCHANGING OR SELLING THE OLD
BONDS, INCLUDING THE APPLICATION AND EFFECT OF ANY FEDERAL, STATE,
LOCAL OR FOREIGN TAX LAWS, AND OF ANY CHANGES IN APPLICABLE TAX LAWS.
BUSINESS
General
The Company is an indirect wholly-owned subsidiary of Panda
International, an independent (i.e., non-utility) power company that
is engaged primarily in the development, acquisition, ownership and
operation of electric power generation facilities. As of the date of
this Prospectus, the Company's assets include one natural gas-fired
electric power generation facility located in Roanoke Rapids, North
Carolina that has been operational since December 1990 and a second
natural gas-fired electric power generation facility located in
Brandywine, Maryland that is expected to begin commercial operations
in November 1996.
As of the date of this Prospectus, the Company owns interests in
and operates electric power generation facilities with an aggregate
electric generating capacity of approximately 410 MW. Each of the
facilities produces or will produce electricity for sale to a
utility. Thermal energy produced by the facilities is sold or will be
sold to an industrial user (which, in the case of the Panda-
Brandywine Facility, is a subsidiary of the Company).
Panda International is continually engaged in the evaluation of
various opportunities for the development and acquisition of
additional electric power generation facilities. The Company has been
informed by Panda International that it intends to focus primarily on
development and acquisition opportunities where it is able to
capitalize on its management and technical expertise to implement an
innovative and fully integrated approach to project development in
which Panda International controls the entire development process,
including design, engineering, procurement, construction management,
fuel and resource acquisition and finance. Panda International has
informed the Company that it believes that it is able to minimize the
financial risks associated with project development primarily by
utilizing this fully integrated approach, by carefully controlling
development expenses and by securing project financing and power
purchase agreements prior to making significant capital investments.
Pursuant to the Additional Projects Contract, if a power purchase
agreement for a Project is executed within five years from the Issue
Date and the Project reaches Financial Closing or achieves Commercial
Operations within 10 years after the Issue Date, such Project will be
eligible for transfer to the Company or to a PIC Entity if certain
other conditions contained in the Additional Project's Contract are
satisfied. See "The Company, the Issuer and Panda International --
The Additional Projects Contract."
The Independent Power Industry
The United States independent power industry expanded rapidly in
the 1980s following the enactment of PURPA in 1978. Prior to PURPA,
the demand for power in the United States had traditionally been met
by utilities constructing large-scale electric generating plants
under cost-of-service based regulation. PURPA removed most regulatory
constraints on the production and sale of electric energy by certain
non-utility generators known as "Qualifying Facilities" or "QFs" and
required electric utilities to buy electricity from QFs at the
utilities' avoided costs, thereby encouraging companies other than
electric utilities to enter the electric power production market.
Concurrently, due in part to regulatory disallowance of many large
utility construction project costs, there was a general decline in
the construction of generating plants by electric utilities. As a
result, a significant market for electric power produced by
independent power producers has developed in the United States since
the enactment of PURPA.
The future market for independently produced power in the United
States will be determined primarily by the need for new electric
generation capacity. According to the North American Electricity
Reliability Council's 1995-2004 Electricity Supply and Demand Report,
electric utilities forecast that they will need approximately 78,000
MW of new generating capacity from 1995 through 2004. Many published
forecasts reflect expectations for the continued growth of
independent power producers. According to RCG/Hagler Bailly, based on
a review of the capacity of the top 125 U.S. electric utilities, it
is probable that, from 1994 to 2003, independent power producers will
supply from 45-50% of total electric generating capacity additions.
In February 1993, the Utility Data Institute projected that, of the
total amount of generating capacity projected to be added through the
year 2000, the amount of new independent power capacity expected to
become operational will be approximately 45,000 MW. For a discussion
of the movement to restructure the electric utility industry, see
"Regulation -- Federal Energy Regulation."
The Company believes that there is and will continue to be
significant demand for new generating capacity worldwide and that
much of this new capacity will be provided by independent power
developers such as Panda International.
Natural gas-fired power generation has become the predominant
power generation technology utilized by new power plants in the
United States, accounting for 60% or more of the annual increase in
independent power generation capacity during each of the last three
years. Industry analysts predict that natural gas will continue to be
the dominant fuel for new power generation facilities in the United
States for the foreseeable future. Natural gas-fired power plants
offer significant advantages over other power generation
technologies, such as coal, oil or nuclear energy, including
favorable resource prices, significant environmental benefits, the
availability of high efficiency turbines and shorter construction
periods. Internationally, Panda International believes that private
power projects will continue to rely on indigenous fuel supplies that
are the least expensive and most abundant for the region needing the
electric power. Those fuels and technologies will most likely
emphasize coal, hydroelectric and natural gas.
Competition
The Company competes both in the United States and
internationally with other independent power producers, including
affiliates of utilities, in obtaining long-term contracts to sell
electric power to utilities. In addition, utilities may elect to
expand or create generating capacity through their own direct
investments in new plants. Over the past decade, obtaining a power
purchase agreement with a utility has become a progressively more
difficult, expensive and competitive process. In recent years, more
contracts have been awarded through competitive bidding. Increased
competition also has lowered profit margins of successful projects.
The demand for power in the United States traditionally has been
met by utilities constructing large-scale electric generating plants
under rate-based regulation. The enactment of PURPA in 1978 spawned
the growth of the independent power industry, which expanded rapidly
in the 1980s. The initial independent power producers were
cogenerators and small power producers who recognized the potential
business opportunities offered by PURPA. This initial group was
joined by larger, better capitalized companies, such as subsidiaries
of fuel supply companies, engineering companies, equipment
manufacturers and affiliates of other industrial companies. In
addition, a number of regulated utilities have created subsidiaries
(known as "utility affiliates") that compete with independent power
producers. Some independent power producers operate in market niches
by utilizing a specific technology or fuel (for example, geothermal,
gas-fired cogeneration, hydroelectric, refuse-to-energy, wind, solar,
coal or wood) or by operating in a specific region of the United
States where they believe they have a market advantage.
Recent amendments to the Public Utility Holding Company Act of
1935 ("PUHCA") made by the Energy Policy Act are likely to increase
the number of competitors in the independent power industry in the
United States by reducing certain restrictions currently applicable
to certain facilities that are not QFs under PURPA. However, these
amendments also should make it simpler for the Company to develop new
Projects, by enabling the Company to develop large gas-fired
electrical generation Projects without the necessity of locating them
in the vicinity of a steam purchaser or otherwise finding a steam
purchaser to accept the useful thermal output required of a
cogeneration QF under PURPA.
The FERC is currently studying a number of proposals to
restructure the electric utility industry to permit utility customers
to choose their utility supplier in a competitive electric energy
market. The FERC has recently issued a rule (Order 888) requiring
utilities to offer wholesale customers and suppliers open access on
their transmission lines, on a basis which is comparable to the
utilities' own use of the lines. In addition, the U.S. Congress has
introduced a number of bills to promote electric utility
restructuring and deregulation of electric rates. See "Regulation."
Typical Project Structure
Typically, a Project's economic structure will have long-term
contracts under which customers pay the Project:
(i) a fixed capacity payment based upon a specified power
generating capacity of the Project; capacity payments are
designed to cover fixed costs (including debt service, local
taxes and insurance) and to provide an acceptable return on
equity; and
(ii) a variable energy payment based on actual energy
output; energy payments are designed to cover variable costs
including fuel costs and variable operating expenses
incurred in connection with energy output.
Typically, the capacity payments are the predominant source of
revenue for a Project. Thus, the resulting earnings stream is more
predictable than that of a business that encounters market
fluctuations in supply or demand for its product. As a result,
Project lenders are often more willing to make long-term loans to a
Project that has been structured to cover debt service from capacity
payments. Because Panda International usually seeks long-term loans
with limited recourse to the Project owners, the lenders generally must
rely on the more predictable Project revenues to ensure loan repayment.
Moreover, Project lenders expect Project cash flow, after operating
costs and local taxes, to cover debt service by an acceptable margin,
and these lenders review Project contracts, equipment specifications,
operator qualifications, permits, warranties, performance testing
procedures and sensitivities carefully before providing limited
recourse funds. Thus, each new Project is evaluated not only by Panda
International but also by the Project lenders, Panda International's
financial partners in that Project and the Project's vendors including
independent engineers, construction service providers and other
contractors, such as fuel suppliers.
Project Development
The development of electric power generation projects is a
complex endeavor, which requires expertise in several areas,
including evaluation of development opportunities, project design and
engineering, negotiation of power and steam sales agreements,
acquisition of necessary land rights, permits and fuel resources,
finance and construction management. Panda International has informed
the Company that it intends to continue to focus primarily on
development opportunities where it is able to capitalize on its
expertise in implementing an integrated approach to Project
development in which it controls the entire development process.
Utilizing this approach, the Company believes that Panda
International is able to enhance the value of its Projects through
each stage of development, and that Panda International is able to
minimize the financial risks associated with Project development by
implementing this integrated approach and by securing project
financing and power purchase agreements prior to making significant
capital investments.
Panda International initially evaluates and selects potential
development Projects based on a variety of factors, including
location, the likelihood of obtaining a power purchase agreement
containing acceptable pricing terms, the availability of rights to a
favorable geographic site, in emerging markets the ability to
denominate tariffs and re-patriate profits in U.S. Dollars and the
probability of obtaining required licenses and permits. For coal and
gas-fired power Projects, Panda International also evaluates the
access to and likely cost of potential fuel supplies and
transportation and, in the case of cogeneration plants, considers the
proximity to industrial or commercial users of the plant's thermal
energy. Following the initial selection of an opportunity, Panda
International analyzes the technical and commercial requirements of
the Project and formulates a conceptual design. The design becomes
the foundation for selecting the equipment configuration for the
Project, developing the Project structure and developing a financial
plan. Panda International also prepares financial feasibility studies
and analyzes various structural alternatives to determine a financial
plan for the Project.
As part of the development process, Panda International
identifies and obtains the land rights necessary to install and
operate the proposed Project. A particular site may also require the
installation of a new electrical transmission line to deliver energy
to the existing grid.
Beginning early in the development process, Panda International
also seeks to obtain all permits, licenses and other approvals
required for the construction and operation of the Project, including
siting, construction and environmental permits, rights-of-way and
planning approvals.
Power Purchase Agreements
The power generated by Panda International's Projects is sold
pursuant to power purchase agreements at pricing formulas generally
consisting of separate payments for energy and capacity. Panda
International's objective is to negotiate or obtain power purchase
agreements that result in adequate cash flow to fund the Project's
non-recourse debt and provide income to Panda International. Panda
International also seeks opportunities to achieve revenue growth
through a schedule of increasing prices for electrical energy and
capacity sold in future years. As part of Panda International's
effort to minimize the financial risks in the development of new
Projects, Panda International does not incur significant capital
expenditures until a power purchase agreement has been executed.
A portion of the thermal energy produced by cogeneration
Projects may be sold to industrial or other users pursuant to a steam
sales agreement. Steam sales agreements may require a purchaser to
take at least the minimum amount of steam necessary for the Project
to retain its QF status under PURPA if the Project is a U.S.
facility. For natural gas-fired or coal-fired Projects, Panda
International seeks to acquire gas or coal reserves and/or enter into
long-term gas or coal supply and transportation agreements.
Project Financing
Panda International has informed the Company that its electric
power generation projects are and will continue to be financed using
a variety of leveraged financing structures, primarily consisting of
limited recourse debt and lease obligations. Each such obligation is
structured to be fully paid out of cash flow provided by the Project,
the assets of which (together with the stock or partnership interests
in the Project Entities owning the Project) are pledged to secure
such obligations, without recourse to the general corporate assets of
Panda International or its subsidiaries (other than the Project
Entities) or the other Projects in which Panda International has an
interest. Panda International's existing Projects are financed using
a high proportion of debt to equity, and Panda International intends
to continue using such high leverage.
Construction
Panda International manages the construction of its Projects
usually by entering into a turnkey contract with a construction
company. Under a turnkey contract, the contractor generally assumes
the risks of cost overruns, other than costs for changes to the
Project requested by the owners and specified events beyond the
control of the contractor. The turnkey contractor manages
construction through various subcontractors and retains ultimate
responsibility for the timely completion of the Project and for
achieving specified performance levels.
Operating and Maintenance Contracts
Panda International currently contracts with third parties for
operation and maintenance ("O&M") services for power generation
facilities in which Panda International has an interest. These
services are performed under the terms of an operation and
maintenance agreement pursuant to which Panda International generally
reimburses the O&M provider for certain costs, pays an annual
operating fee and pays an incentive fee based on the performance of
the facility.
Fuel Supply
Panda International acquires fuel reserves (usually coal or
natural gas) from third parties under supply agreements, and
transportation services for those supplies are also acquired from
third parties. Panda International endeavors to structure a Project's
fuel supply agreement so that the payments received for electricity
generated exceed fuel costs.
DESCRIPTION OF THE PROJECTS
The following summary table presents certain summary information
concerning the two power generation Projects, one of which is in
operation and one of which is expected to begin commercial operations
in November 1996, that constitute the initial Projects in the Project
Portfolio. In addition, information is provided regarding certain
other Projects which are under development by Panda International and
could become eligible for transfer to the Project Portfolio if the
conditions for transfer set forth in the Additional Projects Contract
are satisfied. Following the table are more detailed descriptions of
the Panda-Rosemary Facility, the Panda-Brandywine Facility and
certain other Projects being developed by Panda International. The
Company believes the information presented with respect to the
Projects under development in the table below to be accurate;
however, because these Projects remain in the development stage,
there can be no assurance as to how long the information presented
will remain accurate. In addition, there can be no assurance that any
of these Projects under development will reach Financial Closing or
achieve Commercial Operations or meet the other conditions making
them eligible for inclusion in the Project Portfolio. See "Risk
Factors -- Financial Risks," "-- Project Risks -- Operating Risks"
and "The Company, the Issuer and Panda International -- The
Additional Projects Contract."
<TABLE>
<CAPTION>
Facilities in Operation
Construction Commercial
PPA Commencement Operations Fuel Electric Contract
Facility Signed Date Date Technology Output Term
<S> <C> <C> <C> <C> <C> <C>
Panda-Rosemary 1Q 1989 3Q 1989 4Q 1990 Gas-fired 180 MW Through
Combined December
Cycle 2015
Panda-Brandywine 3Q 1991 2Q 1995 4Q 1996 Gas-fired 230 MW 25 yrs from date
Brandywine, MD Combined of Commercial
Cycle Operations
-------
Total 410 MW
=======
</TABLE>
<TABLE>
<CAPTION>
Facilities Under Contract
Projected Projected Contract
Construction Commercial Expected Term from
PPA Signed Commencement Operations Fuel Electric Commercial
Facility or Acquired Date Date Technology Output Operations
<S> <C> <C> <C> <C> <C> <C>
Panda-Luannan 3Q 1995 4Q 1996 4Q 1998 Coal 100 MW 20 yrs
Luannan County
Tangshan Municipality
Hebei Province, China
Panda of Nepal 3Q 1996 1Q 1997 4Q 1999 Hydro- 36 MW 25 yrs
Nepal electric
Panda-La Panga 3Q 1994 3Q 1997 3Q 2000 Coal 500 MW 25 yrs
State of Orissa,
India
Panda-Kathleen(3) 3Q 1992 (3) (3) Gas-fired 115 MW 30 yrs
Lakeland, FL Combined
Cycle
------
Total 751 MW
======
</TABLE>
(1) Estimated.
(2) A merger of PEPCO and Baltimore Gas & Electric Company
("BG&E") has been publicly announced and is anticipated to close
in 1997. BG&E's bond credit rating is A--.
(3) The future of this Project is uncertain due to pending
litigation. See "Legal Proceedings -- Florida Power Proceedings."
(4) This percentage may be reduced to 78% if a second stockholder
in an intermediate holding company is successful in developing Non-
U.S. Projects. The cash flow interest of a PIC International
Entity in this Project may be larger than the stated percentage,
however, because it is intended that such PIC International Entity
would satisfy its obligations to fund the Project Entity's equity
investment requirements through a loan to, or a preferred stock
equity investment in, the Project Entity.
(5) Final equity interest may vary depending on financing
arrangements for these Projects.
<TABLE>
<CAPTION>
Facilities in Operation
Customer/ Panda
Credit Rating Fuel Supplier Project Cost Financing Ownership Status
<S> <C> <C> <C> <C> <C>
VEPCO/A2 Natural Gas Clearinghouse $125 M Funded 100% Operational
PEPCO/A1 (2) Cogen Development $215 M(1) Funded 100% Commercial operations
Company ______ expected 4Q 1996.
$340 M(1)
======
Facilities Under Contract
Customer/ Estimated Panda
Credit Rating Fuel Supplier Project Cost Financing Ownership Status
North China Power Kailuan Coal Administration $118 M To be funded 85%(4)(5) Government approvals
Group Company/N.A. and certain other coal mines pending
Nepal Electricity. N.A. $100 M To be funded 75%(5) Multilateral lenders have
Authority/N.A. provided commitment
letters for providing debt
requirements.
Orissa State
Electricity Dedicated coal mine owned $600 M To be funded 90%(5) Certain required clearances
Board/N.A. by Project received. Delayed pending
resolution of dispute
regarding notice of
cancellation of power
purchase agreement given by
the State of Orissa.
Florida Power/AA N.A. $100 M To be funded 100% Litigation with Florida Power
------
$918 M
======
</TABLE>
The Panda-Rosemary Facility
The Panda-Rosemary Facility is a combined-cycle cogeneration
facility located in Roanoke Rapids, North Carolina, with a total
electric generating capacity of approximately 180 MW. A cogeneration
facility produces electric energy and forms of useful thermal energy
(such as heat or steam), used for industrial, commercial, heating or
cooling purposes through the sequential use of one or more energy
inputs. A properly designed and constructed cogeneration facility is
able to convert the energy contained in the input fuel source to
useful energy outputs more efficiently than plants employing what
was, historically, conventional utility electrical generation
technology. The Panda-Rosemary Facility uses natural gas as its
primary fuel input to produce electric energy for sale to VEPCO and
to produce useful thermal energy in the form of steam for sale to
Bibb. The Panda-Rosemary Facility uses No. 2 fuel oil as an alternate
fuel in the event gas supplies or transportation are curtailed. The
Panda-Rosemary Facility was designed and constructed by Hawker
Siddeley.
The Panda-Rosemary Facility began commercial operations in
December 1990. The Panda-Rosemary Facility is certified as a
Qualifying Facility under PURPA and thus is exempt from rate
regulation as an electric utility under federal and state law,
provided that it continues to meet the applicable requirements of
PURPA. See "Regulation -- Federal Energy Regulation -- PURPA."
The Panda-Rosemary Facility is designed to be operated in a
combined-cycle mode. It uses natural gas or fuel oil to power two
General Electric combustion turbine generators, a GE Frame 6 and a GE
Frame 7, each fitted with a heat recovery steam generator ("HRSG").
The HRSGs use the reject heat from the combustion turbines that might
otherwise dissipate to produce steam which drives a steam turbine
generator. The combustion and steam turbines generate electric energy
for sale to VEPCO. When the Panda-Rosemary Facility is being
dispatched, some of the steam produced by the HRSGs is sold to Bibb
and some is used in two absorption chillers to supply chilled water
for Bibb. The combustion turbines use natural gas as their primary
fuel and can use No. 2 fuel oil as an alternate fuel. When the
facility is not being dispatched, two auxiliary boilers are available
to be used to produce steam for Bibb and to direct steam to the
absorption chillers to supply chilled water for Bibb. The design of
the Panda-Rosemary Facility permits flexible operation, including the
production of both electricity and a sufficient amount of steam to
meet QF requirements, using either one or both of the combustion
turbine generators.
Recent Hurricane Damage Sustained
On September 6, 1996, a transformer at the Panda-Rosemary
Facility sustained damage from a hurricane. A substitute transformer
has been temporarily installed pending repair of the damaged
transformer, which is expected to be completed within six months.
The Company believes that this event will not have a material adverse
effect on the financial condition or operating results of the Panda-
Rosemary Partnership or its ability to make distributions to the
Company through the PIC Entities.
Sale of Capacity and Electricity
The Panda-Rosemary Partnership sells electric capacity and
energy to VEPCO pursuant to a Power Purchase and Operating Agreement
(the "Rosemary Power Purchase Agreement"). The Rosemary Power
Purchase Agreement has an initial term ending December 26, 2015, and
may be extended for periods of up to five years if the parties so
agree.
VEPCO has the right to dispatch the Panda-Rosemary Facility
(i.e., require the Panda-Rosemary Facility to deliver electricity)
on a daily basis within certain guidelines and the design limits
(which specify load levels, start-up and shutdown times and minimum
run times consistent with prudent utility practice). VEPCO must
dispatch all facilities obligated to deliver electricity to VEPCO
based upon economic factors and without regard to the facilities'
ownership.
The Rosemary Power Purchase Agreement provides for two types of
payments: a capacity payment and an energy payment. The capacity
payment is a fixed charge required to be paid regardless of whether
the Panda-Rosemary Facility is dispatched, subject to reductions
under certain circumstances as described below. Monthly capacity
payments throughout the term of the Rosemary Power Purchase Agreement
are calculated by multiplying the Panda-Rosemary Facility's
"Dependable Capacity" by the following rates: $12.488 per kilowatt
per month through December 1996; $11.654 per kilowatt per month
through December 1998; $10.821 per kilowatt per month through
December 2005; and $8.321 per kilowatt per month through December
2015. The Panda-Rosemary Facility's Dependable Capacity is currently
165 MW for the summer period and 198 MW for the winter period, which
are the maximum Dependable Capacity levels for which capacity
payments must be made under the Rosemary Power Purchase Agreement.
Dependable Capacity is determined by semi-annual tests which may be
requested by VEPCO.
Capacity payments may be reduced if any of the following events
or circumstances occur:
(i) if the Panda-Rosemary Facility fails to meet required
dispatch levels within a tolerance of 5%, the operating
level (as adjusted for ambient weather conditions) does not
exceed Dependable Capacity and such failure is not the
result of a forced outage, then VEPCO has the right to
decrease the capacity payment in respect of the then-current
billing month by 10% per occurrence;
(ii) if, as a result of a performance test, the Panda-
Rosemary Facility's Dependable Capacity is set at less than
90% of the initial Dependable Capacity as set forth in the
Rosemary Power Purchase Agreement (150 MW for the first
summer period and 180 MW for the first winter period), then
the Panda-Rosemary Partnership is obligated to pay VEPCO
liquidated damages for the deficiency in an amount equal to
the product of $21.60 per kilowatt, in 1987 dollars as
escalated annually by the GNPIPD, multiplied by the
Dependable Capacity shortfall;
(iii) if a forced outage is designated by the Panda-Rosemary
Partnership as having resulted from an event of force
majeure, then beginning the day after the Panda-Rosemary
Partnership makes such designation, capacity payments are
suspended and prorated daily until the Panda-Rosemary
Partnership notifies VEPCO that the condition of force
majeure has ended; and
(iv) if the number of forced outage days in a given capacity
test period exceeds the number of permitted forced outage
days, then within 60 days after the end of the capacity test
period, the Panda-Rosemary Partnership is obligated to
reimburse VEPCO an amount equal to 4% of the capacity
payments paid during the capacity test period for each
forced outage day in excess of the permitted number; the
Panda-Rosemary Partnership is entitled to the greater of 25
forced outage days per capacity test period (the period from
December 1 through November 30) and 10% of the number of
days that the Panda-Rosemary Facility is dispatched during
such period, without any loss of capacity payments for such
period.
Energy payments are calculated based on the actual electrical
output transmitted to VEPCO and are designed to compensate the Panda-
Rosemary Partnership for its cost of fuel and its variable operations
and maintenance expense.
The Panda-Rosemary Partnership is required to maintain the Panda-
Rosemary Facility as a QF. VEPCO may terminate the Rosemary Power
Purchase Agreement within one year after the loss of QF certification
if the Panda-Rosemary Partnership has not obtained all necessary
governmental or regulatory approvals for the Rosemary Power Purchase
Agreement to remain in effect and for electricity to continue to be
sold to VEPCO.
The Rosemary Power Purchase Agreement also contains a provision
known as a "regulatory disallowance" provision, which requires the
Panda-Rosemary Partnership to repay or reduce any capacity charges in
excess of $5.62 per kilowatt per month, as adjusted by the GNPIPD
from 1987 dollars, that are disallowed by any regulatory authority
from recovery by VEPCO in its rate base (except where such
disallowance is due to VEPCO's failure to properly seek such
recovery). VEPCO cannot initiate such a disallowance, and must appeal
such a disallowance, if practicable. If such a disallowance were to
occur prior to December 27, 2006, beginning on such date up to 75% of
the capacity payments could be withheld by VEPCO to make up for any
disallowance, plus interest, until the sooner of December 27, 2007 or
the date on which such disallowance, plus interest, was recouped by
VEPCO. If such disallowance, plus interest, were not fully recouped
by December 27, 2007, the Partnership would be obligated to pay the
remaining balance, plus interest, by January 24, 2008. If any
disallowance were to occur for capacity payments after December 27,
2006, future capacity payments would be reduced to the amount of the
capacity payment unaffected by the disallowance. In addition, the
Panda-Rosemary Partnership would be required to repay the amount of
previously received capacity payments which are affected by the
disallowance, plus interest, by the later of one year from the date
of the disallowance or December 27, 2007. The amount upon which a
possible reduction in, or repayment of, capacity charges by the Panda-
Rosemary Partnership would be calculated if a disallowance occurred
was $7.24 per kilowatt per month as of December 1995. Assuming a
GNPIPD of 3.0% per year throughout the initial term of the Rosemary
Power Purchase Agreement, this amount would increase to $10.02 per
kilowatt per month in 2006 and $13.07 per kilowatt per month upon the
expiration of the initial term. The monthly capacity payments due
from VEPCO under the Rosemary Power Purchase Agreement are calculated
based on Dependable Capacity at the following rates: $12.488 per
kilowatt per month through December 1996; $11.654 per kilowatt per
month through December 1998; $10.821 per kilowatt per month through
December 2005; and $8.321 per kilowatt per month through December
2015. Thus, assuming a GNPIPD of 3.0% per year from 1996 through
2015, the risk that the Panda-Rosemary Partnership may be required to
reduce or repay capacity charges under the "regulatory disallowance"
provision would exist through 2005. See "Regulation -- Federal Energy
Regulation -- PURPA."
Steam and Chilled Water Sales
The Panda-Rosemary Partnership sells steam and chilled water to
Bibb for use in its textile manufacturing facility, located adjacent
to the Panda-Rosemary Facility, pursuant to a Cogeneration Energy
Supply Agreement (the "Rosemary Steam Agreement"). The Rosemary Steam
Agreement has an initial term that expires on December 26, 2015. Upon
expiration of the initial term, Bibb has the option to (i) negotiate
a 10-year extension of the Rosemary Steam Agreement, (ii) purchase
the Panda-Rosemary Facility with VEPCO's consent or (iii) terminate
the Rosemary Steam Agreement.
Bibb is obligated to pay $1.00 per 1,000 pounds of steam for the
first 45,000 pounds of steam delivered in an hour and $2.50 per 1,000
pounds of steam for any additional quantities of steam delivered in
an hour. Bibb is obligated to pay the following fixed prices for
chilled water: $0.035/ton/hour through December 27, 2000;
$0.04/ton/hour thereafter through December 27, 2005; $0.045/ton/hour
thereafter through December 27, 2010; and $0.05/ton/hour thereafter
through December 27, 2015.
Although Bibb is not required to purchase a minimum quantity of
steam or chilled water, Bibb has an irrevocable obligation to
purchase all of its steam and chilled water requirements from the
Panda-Rosemary Facility to the extent that the Panda-Rosemary
Facility is able to supply such requirements. The Rosemary Steam
Agreement requires that the Panda-Rosemary Facility have the capacity
to produce an annual average of 65,000 pounds of steam per hour at
150 psi and 2,000 tons of 45 degrees F chilled water for up to 8,000 hours
per year. This requirement is not currently met because the Panda-
Rosemary Facility's actual capacity to produce chilled water does not
exceed 1,600 tons per year of chilled water. However, because Bibb's
chilled water requirements have never exceeded 1,500 tons per year
and, in most cases, have been approximately 1,200 tons per year, the
Panda-Rosemary Facility has never failed to satisfy Bibb's chilled
water requirements. Furthermore, the Rosemary Steam Agreement allows
the Panda-Rosemary Partnership to utilize, at its own expense, back-
up electric chillers located at Bibb's textile mill to supply chilled
water to meet Bibb's demands. Finally, if Bibb's requirements were
to exceed the facility's current capacity to produce chilled water,
the Panda-Rosemary Partnership could expand the capacity of its
absorption chillers to reach the required level by purchasing a new
chiller at a cost currently estimated at approximately $770,000. For
these reasons, the Company does not believe that the current capacity
limitations of the absorption chillers will adversely affect the
Panda-Rosemary Partnership's rights under the Rosemary Steam
Agreement.
Site Lease
The 4.83 acre site on which the Panda-Rosemary Facility is
located is leased to the Panda-Rosemary Partnership by Bibb pursuant
to a Real Property Lease and Easement Agreement (the "Rosemary Site
Lease") in exchange for a nominal yearly rental payment. The initial
term of the Rosemary Site Lease expires on December 31, 2015 and is
automatically extended on the same terms and conditions for 10 years
if the Rosemary Steam Agreement is extended for an additional 10-year
period. At the Panda-Rosemary Partnership's option, the initial term
of the Rosemary Site Lease may also be extended on the same terms and
conditions for a 10-year term if the Panda-Rosemary Partnership gives
Bibb two years' notice prior to December 31, 2015 and for an
additional 10-year term if the Panda-Rosemary Partnership gives Bibb
two years' notice prior to December 31, 2025, regardless of whether
the Rosemary Steam Agreement is extended or terminated.
The public records of the City of Roanoke Rapids and Halifax
County, North Carolina indicate that Bibb failed to pay all of its
1994 and 1995 property taxes relating to its parcel of real property,
which includes the site on which the Panda-Rosemary Facility is
located (the "Rosemary Facility Site"). The local taxing authorities
have a lien against Bibb's property, including the Rosemary Facility
Site, to secure the payment by Bibb of its delinquent property taxes
in the amount of approximately $376,000, plus interest and penalties.
If such taxes remain unpaid and the local taxing authorities
foreclose their lien against Bibb's property, the title to such
property (including the Rosemary Facility Site) would pass to the
taxing authorities, or to a purchaser at a foreclosure sale, and
would not be subject to the leasehold interest in the Rosemary
Facility Site held by the Panda-Rosemary Partnership under the
Rosemary Site Lease. Therefore, unless the Panda-Rosemary Partnership
or another person paid Bibb's past due taxes upon such foreclosure,
the taxing authorities, or a purchaser at a foreclosure sale, could
terminate the Rosemary Site Lease and (i) cause the Panda-Rosemary
Partnership to remove the Panda-Rosemary Facility from the Rosemary
Facility Site or (ii) negotiate a new lease for the Rosemary Facility
Site which could be on terms that are much less favorable to the
Panda-Rosemary Partnership than the terms contained in the Rosemary
Site Lease.
Concurrently with the Prior Offering, Panda-Rosemary Funding
Corporation (the "Rosemary Issuer"), a wholly-owned subsidiary of the
Panda-Rosemary Partnership, issued $111.4 million in aggregate
principal amount of the Rosemary Bonds. The payment of the Rosemary
Bonds are secured by, among other things, a lien on the Panda-
Rosemary Partnership's leasehold interest in the Rosemary Facility
Site. See "Financing" below and "Description of the Project Debt --
The Panda-Rosemary Financing." A title insurance policy exists for the
benefit of the holders of the Rosemary Bonds which insures such holders'
security interest in the Panda-Rosemary Partnership's leasehold interest
in the Rosemary Facility Site against losses which may be sustained as a
result of the tax lien on the Rosemary Facility Site.
Gas Supply and Fuel Management
The Panda-Rosemary Partnership purchases certain quantities of
natural gas on a firm basis from Natural Gas Clearinghouse ("NGC")
pursuant to a Gas Purchase Contract (the "Rosemary Gas Supply
Agreement"). The Rosemary Gas Supply Agreement is effective through
November 30, 2005, and thereafter from month-to-month until
terminated by either NGC or the Panda-Rosemary Partnership. The
Rosemary Indenture (as defined below) provides that with certain
limited exceptions the Panda-Rosemary Partnership will not be
permitted to make distributions to its partners if the Rosemary Gas
Supply Agreement is not extended or replaced on or before the end of
its term. See "Description of the Project Debt -- The Panda-Rosemary
Financing -- Partnership Distributions." NGC has agreed to deliver
natural gas on a firm basis to the Panda-Rosemary Partnership, at
pipeline points near the Gulf of Mexico or (at the Panda-Rosemary
Partnership's request and using the Panda-Rosemary Partnership's firm
transportation arrangements) to the Panda-Rosemary Pipeline, up to
the total contract quantity under the Firm Gas Transportation
Agreements (as defined below), which is currently 3,075 Mcf of
natural gas per day. The firm natural gas supplied under the Rosemary
Gas Supply Agreement enables the Panda-Rosemary Partnership to have
adequate natural gas supplies available to meet its estimate of
Bibb's requirements for steam and chilled water.
The price paid by the Panda-Rosemary Partnership for gas
delivered by NGC is generally equal to an indexed price (based upon
monthly market-price indices determined by reference to the receipt
points where NGC delivers gas to the Panda-Rosemary Partnership) plus
$0.04 per MMBtu. If gas is required in daily volumes that are greater
than those included in monthly estimates delivered to NGC, the price
for the excess volume required is equal to NGC's actual cost incurred
in acquiring such excess plus $0.04 per MMBtu. If the Panda-Rosemary
Partnership fails to purchase the amount included in monthly
estimates delivered to NGC, and such failure is not excused by force
majeure, the Panda-Rosemary Partnership must pay NGC, as liquidated
damages for such failure, $0.14 for each MMBtu of gas not purchased
below the monthly estimates delivered.
The Panda-Rosemary Partnership receives certain fuel supply
management services from NGC pursuant to a Fuel Supply Management
Agreement, (the "Rosemary Fuel Management Agreement"). The Rosemary
Fuel Management Agreement is effective through the expiration date of
the Rosemary Gas Supply Agreement, which is November 30, 2005, unless
extended.
NGC's responsibilities under the Fuel Supply Management
Agreement include advising the Panda-Rosemary Partnership with
respect to the negotiation of natural gas and fuel oil purchase and
transportation arrangements, arranging for the delivery to the Panda-
Rosemary Facility of natural gas or fuel oil, endeavoring to make
such arrangements on a "best cost" basis, managing the communications
among the Panda-Rosemary Facility and the Panda-Rosemary
Partnership's pipeline transporters and natural gas and fuel oil
suppliers and advising and assisting the Panda-Rosemary Partnership
with respect to fuel oil inventory hedging arrangements.
The Panda-Rosemary Partnership pays NGC a management fee based
on fuel supply arranged by NGC. The management fee is composed as
follows: (i) $0.04 per MMBtu of natural gas purchased and transported
to the Panda-Rosemary Facility pursuant to arrangements made by NGC;
(ii) $0.03 per MMBtu of natural gas reserves owned by the Panda-
Rosemary Partnership and transported to the Panda-Rosemary Facility
pursuant to arrangements made by NGC; (iii) $0.01 per MMBtu of
natural gas purchased from North Carolina Natural Gas Corporation
("NCNG") and transported to the Panda-Rosemary Facility pursuant to
arrangements made by NGC; (iv) $0.002 per gallon of fuel oil
purchased and delivered to the Panda-Rosemary Facility pursuant to
arrangements made by NGC; and (v) $0.005 per MMBtu of natural gas and
$0.05 per barrel of No. 2 fuel oil as a transaction fee for fuel
hedging transactions executed by NGC as approved by the Panda-
Rosemary Partnership. The Panda-Rosemary Partnership must also
reimburse NGC for the cost of any letter of credit NGC must provide
to purchase gas pursuant to the Rosemary Fuel Management Agreement.
If in a given month NGC arranges for natural gas supplies at a
delivered price less than the benchmark delivered price for such
month, the Panda-Rosemary Partnership pays NGC an additional amount
equal to 60% of the difference in such prices.
Gas Transportation
The Rosemary Indenture (as defined below) provides that with
certain limited exceptions the Panda-Rosemary Partnership will not be
permitted to make distributions to its partners if the Transco
Service Agreement or its replacements are not extended or replaced on
or before the end of its term. See "Description of the Project Debt -
- - The Panda-Rosemary Financing -- Partnership Distributions."
The Partnership receives firm transportation service for up to
the thermal equivalent of 3,075 Mcf of natural gas per day. The
Partnership has recently converted this firm transportation service
from service provided pursuant to an individual certificate of public
convenience and necessity issued by FERC pursuant to section 7 of the
Natural Gas Act ("NGA") to service provided pursuant Part 284 of the
FERC's rules and regulations. To effectuate this conversion, the
Partnership and Transco executed the Transco 284 Agreement (which
replaces the Transco Service Agreement), and the Partnership executed
similar firm transportation agreements with Texas Gas and CNG. The
Transco 284 Agreement, together with the firm transportation
agreements the Partnership entered into with Texas Gas and CNG
(collectively, the "Firm Gas Transportation Agreements"), replicate
the firm transportation service previously provided by Transco under
the Transco Service Agreement through October 31, 2006.
The Panda-Rosemary Partnership also has the right to receive
interruptible gas transportation service from Columbia Gas
Transmission Company and Columbia Gulf Transmission Company under the
Columbia Gas IT Agreement and the Columbia Gulf IT Agreement,
respectively. Under the Columbia Gas IT Agreement, the Panda-Rosemary
Partnership may request up to 36,000 Dth per day of interruptible
transportation service from an interconnection between the facilities
of Columbia Gas and Columbia Gulf near Leach, Kentucky to an
interconnection between Columbia Gas's facilities and the Panda-
Rosemary Pipeline. Under the Columbia Gulf IT Agreement, the Panda-
Rosemary Partnership may request up to 39,000 Dth per day of
interruptible transportation service from various available receipt
points on Columbia Gulf's system to an interconnection between the
facilities of Columbia Gas and Columbia Gulf near Leach, Kentucky.
The terms of both the Columbia Gas IT Agreement and the Columbia Gulf
IT Agreement are month-to-month until terminated by either party to
the respective agreements.
The rates and most of the significant terms and conditions of
service under the Firm Gas Transportation Agreements, the Columbia
Gas IT Agreement and the Columbia Gulf IT Agreement are set forth in
the respective pipeline's effective FERC gas tariff. These rates,
terms and conditions are subject to review, approval and modification
by FERC.
Panda-Rosemary Pipeline
The Panda-Rosemary Partnership owns, and NCNG operates and
maintains for the Panda-Rosemary Partnership, the Panda-Rosemary
Pipeline, which runs for 10.26 miles through portions of Halifax and
Northampton Counties, North Carolina. The Panda-Rosemary Pipeline is
located under, over and upon properties owned, in certain instances,
by private landowners and, in others, by the State of North Carolina
or the City of Roanoke Rapids, pursuant to easement agreements or
encroachment agreements. The Panda-Rosemary Pipeline terminates on a
1.26-acre parcel in Pleasant Hill Township, Northampton County, North
Carolina, which is owned by the Panda-Rosemary Partnership. The meter
stations and certain appurtenant facilities interconnecting the Panda-
Rosemary Pipeline and the interstate pipeline facilities of Columbia
Gas and Transco are located on this parcel.
The Partnership has entered into a Pipeline Operating Agreement
with NCNG (the "Pipeline Operating Agreement"), pursuant to which
NCNG has agreed to operate the Panda-Rosemary Pipeline and provide
certain natural gas balancing services for the Panda-Rosemary
Partnership's gas supplies. The term of the Pipeline Operating
Agreement continues until December 27, 2005, and may be extended for
two additional periods of five years each upon the agreement of the
parties.
NCNG is obligated to manage the day-to-day operations of the
Panda-Rosemary Pipeline, including the interconnection facilities
between the Panda-Rosemary Pipeline and the pipeline facilities of
Columbia Gas and Transco, using the same degree of care and diligence
with which it operates its own gas distribution system. NCNG's
management activities include the right to suggest and make repairs
to the Panda-Rosemary Pipeline under certain circumstances. The Panda-
Rosemary Partnership is responsible for all costs of such repairs.
The Pipeline Operating Agreement provides NCNG with an option to
purchase the Panda-Rosemary Pipeline at its fair market value if
certain specified events occur. NCNG's purchase option is subject to
a right of first refusal of VEPCO to purchase the pipeline and the
Panda-Rosemary Facility. NCNG's option to purchase the Panda-Rosemary
Pipeline survives VEPCO's exercise of its right of first refusal or
the sale of the pipeline to a third party, and parties taking an
interest in the Panda-Rosemary Pipeline take such rights subject to
NCNG's option.
The Panda-Rosemary Partnership is required to pay NCNG an
operator fee equal to $20,000 per month until December 27, 1999.
Thereafter, the operator fee will be at least $240,000 per year,
adjusted by the percentage increase, if any, in the U.S. Bureau of
Labor Statistics Consumer Price Index from December 27, 1990 to
December 27, 1999, which yearly sums will be payable in equal monthly
installments.
Several of the easements and encroachment agreements, pursuant
to which the Panda-Rosemary Partnership is granted the right to
locate the Panda-Rosemary Pipeline, contain provisions allowing the
underlying interest owner to cause the Panda-Rosemary Pipeline to be
removed from its current location. Most of such easements and
encroachment agreements require the underlying interest owner to
provide an alternate location for the pipeline, and in some cases the
underlying interest owner must share the cost of relocating the
pipeline. However, two such easements allow the underlying interest
owner to cause the Panda-Rosemary Pipeline to be removed, but do not
require such owner to provide an alternate location or share the cost
of relocating the pipeline. The Company does not expect that the
Panda-Rosemary Pipeline will be required to be removed pursuant to
these easements or, if it were required to be removed, that
relocating the Panda-Rosemary Pipeline from these two easement tracts
would significantly interfere with the supply of natural gas to the
Panda-Rosemary Facility for an extended period of time or, given the
ability of the Panda-Rosemary Facility to operate utilizing fuel oil,
significantly limit the availability of the Panda-Rosemary Facility
for dispatch by VEPCO. However, there can be no assurance that the
Panda-Rosemary Partnership could relocate the Panda-Rosemary
Pipeline, if required to do so, without incurring significant
expenses or, if the pipeline could not be relocated, that the Panda-
Rosemary Partnership could make alternate arrangements for the
delivery of a supply of fuel which would be adequate to assure the
availability of the Panda-Rosemary Facility for dispatch by VEPCO.
In addition, the Panda-Rosemary Partnership has entered into
agreements with Transco and Columbia Gas, pursuant to which the Panda-
Rosemary Partnership has agreed to pay for the maintenance and repair
expenses relating to the interconnection facilities between the Panda-
Rosemary Pipeline and the facilities of Transco and Columbia Gas,
respectively.
Fuel Oil
The Panda-Rosemary Facility was constructed with the capability
to operate on No. 2 fuel oil and is designed to change fuel sources
from natural gas to fuel oil and back without interrupting the
generation of electricity. The Panda-Rosemary Facility currently has
on-site storage for approximately 2.0 million gallons of fuel oil, a
supply sufficient to operate the Panda-Rosemary Facility at full load
for approximately 168 hours. The Panda-Rosemary Partnership purchases
fuel oil on a spot-market basis. Since the fuel oil suppliers either
own trucks or have contracts with local trucking firms for regional
truck delivery and the purchase price includes delivery to the Panda-
Rosemary Facility, the Panda-Rosemary Partnership does not
independently arrange trucking service from the terminals to the
Panda-Rosemary Facility.
Operation and Maintenance
The Panda-Rosemary Partnership purchases operations and
maintenance services for the Panda-Rosemary Facility from U-Tech
pursuant to an Operation and Maintenance Agreement (the "Rosemary O&M
Agreement") which expires on December 26, 1996. At or prior to that
time, the Panda-Rosemary Partnership expects to either extend the
Rosemary O&M Agreement or to enter into a comparable agreement with
another operator. Under the Rosemary O&M Agreement, U-Tech is paid a
fixed monthly fee that will equal $128,625 per month for the
remainder of 1996, with bonus and penalty provisions based on
maintenance of dependable capacity levels, availability of the Panda-
Rosemary Facility for dispatch and the achievement of certain safety
and training goals established by the Panda-Rosemary Partnership.
U-Tech and Ogden Power Corporation are discussing an arrangement
whereby U-Tech would assign to Ogden Rosemary Operations, Inc.
("Ogden Rosemary"), a subsidiary of Ogden Power Corporation, and
Ogden Rosemary would assume, all of U-Tech's responsibilities for
operation and maintenance services under the Rosemary O&M Agreement.
The Company is not aware of any reason why such an arrangement would
not be acceptable to the Panda-Rosemary Partnership.
Operating History
The following table contains a summary of certain levels of
operating performance achieved by the Panda-Rosemary Facility since
the beginning of 1991:
1991 1992 1993 1994 1995
[S] [C] [C] [C] [C] [C]
Summer Dependable Capacity (MW) 161 161 165 165 165
Winter Dependable Capacity (MW) 192 198 198 198 198
Hours Under VEPCO Dispatch 1,174 377 324 764 2,224
Electric Energy Production (GWH) 129.0 44.8 31.9 76.7 234.9
Steam Production (MM Lbs) 330.8 377.9 429.9 364.8 291.2
Chilled Water Production
(MM Ton-hours) N/A 4.0 3.7 4.1 4.1
Forced Outage Days 12 1 16 12 18
The Panda-Rosemary Facility was dispatched for 1,174 hours in
1991. Dispatch was reduced to 377 hours in 1992 and 324 hours in 1993
due to several new coal-fired, non-utility generation plants becoming
available for dispatch by VEPCO. The increases in dispatch hours to
764 in 1994 and 2,224 in 1995 were partially due to the effect of the
second amendment to the Rosemary Power Purchase Agreement entered
into in 1993, under which the formula used to calculate the energy
payment was amended to more closely match the fuel and variable
operation and maintenance costs incurred by the Panda-Rosemary
Partnership.
During 1995, the Panda-Rosemary Facility was dispatched for
2,224 hours. The significant increase in dispatch hours from 1994 to
1995 was primarily due to the fact that, during much of the 1995
summer months, two of VEPCO's gas-fired plants suffered forced
outages that are not likely to be repeated and, under the terms of
the Rosemary Power Purchase Agreement, VEPCO was allowed to redirect
to the Panda-Rosemary Facility the gas that would otherwise have been
transported to these unavailable plants. For approximately 1,200 of
the 2,224 hours, the Panda-Rosemary Facility used natural gas
provided directly by VEPCO under this fueling arrangement. The Panda-
Rosemary Partnership's profit margin on the energy payment from VEPCO
is lower for this type of dispatch compared to its energy margins
under normal dispatch conditions under which the Panda-Rosemary
Partnership provides the fuel.
Cash Flow Participation
NNW, Inc., formerly known as Nova Northwest, Inc., an Oregon
corporation ("NNW"), has a cash flow participation (the "NNW Cash
Flow Participation") in the Panda-Rosemary Partnership arising out of
a Credit, Term Loan and Security Agreement (the "Credit Agreement")
entered into by PEC, PR Corp., PRC II (collectively, the "Rosemary
Borrowers") and NNW in August 1993, under which NNW made a loan to
the Rosemary Borrowers which has since been repaid. The Credit
Agreement provides that NNW, in addition to repayment of debt, is to
receive a cash flow participation equal to 4.33% of certain
distributions from the Panda-Rosemary Partnership to the Rosemary
Borrowers. At the time the Credit Agreement was entered into the
aggregate equity interest in the Panda-Rosemary Partnership held by
PR Corp. and PRC II was 10%. After the redemption of Ford Credit's
90% limited partner interest in the Panda-Rosemary Partnership from a
portion of the proceeds of the Prior Offering, PR Corp. and PRC II,
collectively, own 100% of the equity interest in the Panda-Rosemary
Partnership.
The Credit Agreement states that the parties intend that any
financial restructuring of the Panda-Rosemary Facility shall not
materially affect the NNW Cash Flow Participation, positively or
negatively. The Credit Agreement also provides that, in the case of
any such financial restructuring, the calculation of the amount of
distributions to be paid to NNW shall continue to be based on the
scheduled principal and interest amounts of the then existing
indebtedness of the Panda-Rosemary Partnership under the Second
Amended and Restated Letter of Credit and Reimbursement Agreement
dated as of January 6, 1992 among the Panda-Rosemary Partnership, The
Fuji Bank, Limited, and certain other banks party thereto (the
"Reimbursement Agreement"). Accordingly, it is the position of Panda
International and the Company that the NNW Cash Flow Participation
remained the same following the closing of the Prior Offering (as if
the Reimbursement Agreement had remained in place with the letter of
credit and bonds relating thereto and as if the redemption of Ford
Credit's 90% limited partner interest and the issuance of the
Rosemary Bonds had never occurred). Based on the position of Panda
International and the Company, the NNW Cash Flow Participation is
equal to 0.433% of distributions to the Rosemary Borrowers and would
increase to 1.732% after 2008 based on projected distributions. NNW
has disputed the position of Panda International and the Company with
respect to the redemption of Ford Credit's 90% limited partner
interest. NNW claims that it is entitled to receive 4.33% of
distributions to the Rosemary Borrowers following redemption of Ford
Credit's interest. PEC has, as a result, filed a petition against NNW
to have the amount of the NNW Cash Flow Partnership determined. See
"Legal Proceedings -- NNW, Inc. Proceeding." Because the debt
structure existing prior to the closing date of the restructuring of
the Panda-Rosemary Partnership would have resulted in cash flow
distributions during the early years after such date that are lower
than the cash flow distribution under the new debt structure, a NNW
Cash Flow Participation at the percentage claimed by NNW, if NNW were
to prevail in this dispute, would not have a material adverse impact
on the Company or its financial condition. If NNW prevails in this
dispute and the NNW Cash Flow Participation is not converted into
Panda International common stock or cash (as described below), the
reduction in total cash flows to be received by the Company through
2012 would be approximately $1.9 million on a net present value basis
and the reduction in annual cash flows to be received by the Company
would be (i) approximately $81,000 during the balance of 1996 and
increase to approximately $255,000 in 2004; (ii) in the range of
approximately $525,000 to $550,000 per year during the years 2005 to
2008; and (iii) approximately $333,000 in 2009 and decline thereafter
to approximately $310,000 in 2012. See Appendix B, Consolidated Pro
Forma Report.
The Credit Agreement gives NNW a right to convert the NNW Cash
Flow Participation into common stock of Panda International under
certain circumstances. It also gives Panda International the right to
convert the NNW Cash Flow Participation into Panda International
common stock or cash under certain circumstances. Panda International
does not have any current intention of exercising such right, and
accordingly, holders of the Exchange Bonds should assume that the NNW
Cash Flow Participation will continue indefinitely.
The Panda-Brandywine Facility
The Panda-Brandywine Facility is a combined-cycle cogeneration
facility located in Brandywine, Maryland (near Washington, D.C.),
with a total electric generating capacity of approximately 230 MW.
The Panda-Brandywine Facility uses natural gas as its primary fuel
input and No. 2 fuel oil as an alternative fuel in the event that gas
supplies or transportation are curtailed. The Panda-Brandywine
Facility was constructed by Raytheon Engineers and Constructors, Inc.
("Raytheon") pursuant to the Amended and Restated Turnkey
Cogeneration Facility Agreement between the Panda-Brandywine
Partnership and Raytheon (the "Brandywine EPC Agreement"). Raytheon
met the requirements for commercial operations and substantial
completion under the Brandywine EPC Agreement, and the Company expects
the Panda-Brandywine Facility to commence commercial operations
under the power purchase agreement with PEPCO in November 1996. The
Panda-Brandywine Partnership has agreed to sell the capacity of, and
energy produced by, the Panda-Brandywine Facility to Potomac Electric
and Power Company ("PEPCO"), a utility that serves the District of
Columbia and parts of Maryland, for an initial term of 25 years
from the commencement of commercial operations. A merger of PEPCO
and Baltimore Gas & Electric, a utility that serves other parts
of Maryland, has been publicly announced and is anticipated to close in
1997.
The Panda-Brandywine Facility is certified as a Qualifying
Facility under PURPA and thus is exempt from rate regulation as an
electric utility under federal and state law, provided that, upon and
during commercial operations, it continues to meet the applicable
requirements of PURPA. See "Regulation -- Federal Energy Regulation
- -- PURPA."
Construction Contract
Pursuant to the Brandywine EPC Agreement, Raytheon agreed to
construct the Panda-Brandywine Facility (including the distilled
water plant) for approximately $122 million (including change
orders). Because Raytheon provided a letter of credit, initially
equal to 10% of the contract price, no retainage is withheld. The
amount of this letter of credit will be reduced as of the commencement
of commercial operations to 5% of the aggregate amount paid by the
Panda-Brandywine Partnership to Raytheon through that date, and
thereafter must be maintained at a level which is twice the cost of
completing punch list items remaining at final acceptance of the
Panda-Brandywine Facility. Raytheon Company, a Delaware corporation
and the parent corporation of Raytheon, has provided a guaranty
covering all obligations of Raytheon under the Brandywine EPC
Agreement.
Raytheon warrants and guarantees in the Brandywine EPC Agreement
(i) that the Panda-Brandywine Facility will commence commercial
operations on or before October 31, 1996 and (ii) that it will meet
certain performance criteria, including (a) that the net power output
of the Panda-Brandywine Facility will be 230,000 kW at commercial
operations and (b) that the net plant heat rate of the Panda-
Brandywine Facility will not exceed 7,124 Btu/kWh LHV, plus 2%. Under
the Brandywine EPC Agreement, Raytheon will be liable to the Panda-
Brandywine Partnership for liquidated damages for a failure to meet
these guarantees in the following amounts: (i) $80,000 per day,
capped at $14.4 million, for each day that Raytheon fails to meet the
guaranteed completion date; (ii) $1,000 for each kW that the net
power output is less than the guaranteed net power output amount
(Raytheon, however, may not declare that the facility has achieved
commercial operations if the net power output is below 210,000 kW);
and (iii) $45,000 for each Btu/kWh in excess of the net plant heat
rate guarantee plus 2%. In any event, the total liquidated damages
payable under the Brandywine EPC Agreement shall not exceed 25% of
the contract price. Conversely, Raytheon will be paid bonuses by
exceeding the timing and/or performance guarantees contained in the
Brandywine EPC Agreement, including (i) $16,600 per day for each day
that commercial operations occur after September 30, 1996 but on or
before October 31, 1996, and $40,000 per day for each day that
commercial operations occur on or after August 1, 1996 but on or
before September 30, 1996; (ii) $300 per kW by which the net power
output is greater than 230,000 kW up to 233,000 kW; and (iii) $22,500
per Btu/kWh by which the plant heat rate is less than the net plant
heat rate guarantee, less 2%. Raytheon also guarantees that the Panda-
Brandywine Facility will not exceed certain air contaminant emission
and noise level limitations.
Raytheon conducted initial acceptance testing of the Panda-
Brandywine Facility and has met the requirements for commercial
operations and substantial completion under the Brandywine EPC
Agreement. A subcontractor of Raytheon has agreed to make certain
modifications to the combustion liners of the facility in order to
enhance operating performance, which modifications are expected to be
completed in early November 1996. Accordingly, the Company expects the
Panda-Brandywine Facility to commence commercial operations under the
power purchase agreement with PEPCO in November 1996.
Operations and Maintenance
The Panda-Brandywine Partnership will purchase operations and
maintenance services from Ogden Brandywine Operations, Inc. ("Ogden
Brandywine") pursuant to an Operation and Maintenance Agreement, (the
"Brandywine O&M Agreement"). The Brandywine O&M Agreement is
effective until the third anniversary of the commercial operations
date, and may be extended thereafter by agreement of the parties. In
exchange for such services, Ogden Brandywine is currently being paid
a fixed fee of $10,000 per month, plus reimbursement for certain
expenses. After the commercial operations date, Ogden Brandywine
will be paid a fixed fee of $117,750 per month, with bonus and
penalty provisions based on maintenance of dependable capacity levels
and availability of the Panda-Brandywine Facility for dispatch.
Sale of Capacity, Electricity and Steam
The Panda-Brandywine Partnership has agreed to sell electric
capacity and energy to PEPCO pursuant to a Power Purchase Agreement
(as amended by a first amendment ("First Amendment") thereto, the
"Brandywine Power Purchase Agreement"). The Brandywine Power Purchase
Agreement has an initial term of 25 years from the commercial
operations date and may be extended by agreement of the parties. The
Maryland Public Service Commission has approved the Brandywine Power
Purchase Agreement and the First Amendment. The District of Columbia
Public Service Commission has issued orders indicating its approval
of the Brandywine Power Purchase Agreement as in the public interest
and the First Amendment as a reasonable modification thereof. The
District of Columbia Public Service Commission also has made certain
findings of fact and conclusions of law that were conditions
precedent to the effectiveness of the First Amendment according to
its terms.
PEPCO will have the right to dispatch the Panda-Brandywine
Facility on a daily basis within certain guidelines and design
limits. The design limits specify load levels, start-up and shutdown
times and minimum run times, specifically adhering to Prudent Utility
Practices. The guidelines will require PEPCO to dispatch all
facilities obligated to deliver electricity to PEPCO based on
economic factors and without regard to the ownership of the Panda-
Brandywine Facility. PEPCO is required to dispatch 90 MW of the Panda
Brandywine Facility's dependable capacity for no fewer than 60 hours
per week (Monday through Friday). The remaining portion of the Panda-
Brandywine Facility can be dispatched by PEPCO under the guidelines
described above.
The Brandywine Power Purchase Agreement provides for two
payments: a capacity payment and an energy payment. The capacity
payment is a fixed charge to be paid regardless of whether the Panda-
Brandywine Facility is dispatched, subject to reduction in certain
circumstances described below. Monthly capacity payments throughout
the term of the Brandywine Power Purchase Agreement are based on the
Panda-Brandywine Facility's dependable capacity, the capacity rate
and other factors. Upon commencement of operations the Panda-
Brandywine Facility will be required to establish a dependable
capacity of 230 MW in summer ambient conditions (defined as 92 degrees F and
50% humidity). The dependable capacity will be determined by semi-
annual tests and PEPCO has the right to require the Panda-Brandywine
Partnership to revalidate the dependable capacity. The capacity rate,
stated in $/kW/month, is a fixed schedule of payments for each of the
25 years of the initial term of the Brandywine Power Purchase
Agreement, ranging from $13.74 in 1997 to $23.63 in the 18th contract
year. The capacity payment is subject to specified downward
adjustments in contract years one, two, four and five, and to
specified upward adjustments in the 11th through the 25th contract
years. Capacity payments will be reduced if the Panda-Brandywine
Facility cannot maintain 88% equivalent availability, and will be
increased if it exceeds 92% equivalent availability. Capacity
payments may also be decreased in 1999 depending on when and whether
PEPCO's system peak load exceeds 5,697 MW prior to that year.
The energy payment is determined in accordance with a series of
formulas that reflect specified heat rates, hours of synchronization
and operation and a combination of fixed and market prices for
natural gas. The Brandywine Power Purchase Agreement provides that
the energy price will be increased to compensate the Panda-Brandywine
Partnership for its variable costs of fuel oil if the gas supply is
interrupted. In such event, the Brandywine Power Purchase Agreement
specifies a base cost of oil, which is escalated at the annual rate
of change according to an oil index described therein.
PEPCO has the right under certain circumstances to cancel the
Brandywine Power Purchase Agreement before commercial operations
commence by paying all expenses incurred by the Panda-Brandywine
Partnership in connection with the Panda-Brandywine Facility,
including construction and capital costs incurred through the date of
termination, plus $5.0 million. This termination right is triggered
by a material change in circumstances that is recognized in PEPCO's
least cost planning process. Such material changes include, but are
not limited to, changes in load growth, technology or legislation.
The Company has been informed by Panda International that Panda
International believes termination pursuant to this provision is
highly unlikely, particularly since the Panda-Brandywine Facility was
included in PEPCO's most recent least-cost plan submitted to the
Maryland and District of Columbia Public Service Commissions and in
view of the amount of construction funds expended to date
(approximately $174 million as of June 30, 1996), which would make
termination extremely expensive for PEPCO. Moreover, the District of
Columbia Public Service Commission, which conducts formal least cost
plan reviews, is not scheduled to review PEPCO's least cost plan
again until March 1998, which is after the expected commercial
operations date. The Maryland Public Service Commission does not
conduct formal least cost plan hearings, and no challenge to the
Panda-Brandywine Facility's status in PEPCO's least cost plan has
been raised in either jurisdiction. In addition, PEPCO may terminate
the Brandywine Power Purchase Agreement under certain circumstances
if the Panda-Brandywine Facility ceases to be a QF, unless the Panda-
Brandywine Partnership receives all governmental and regulatory
approvals necessary to continue operating the Panda-Brandywine
Facility without QF certification. PEPCO may terminate the Brandywine
Power Purchase Agreement immediately if the actual commercial
operations date does not occur, for any reason other than PEPCO's
default, by June 1, 1997 (which can be extended for up to an
additional 366 days upon the occurrence of an event or events of
force majeure).
The Panda-Brandywine Partnership has constructed a seven-mile
long electric transmission line to connect the Panda-Brandywine
Facility and the transmission facilities of PEPCO. Consolidated Rail
Corporation has entered into an agreement with the Panda-Brandywine
Partnership to provide transmission line easements for a portion of
the transmission line.
The Panda-Brandywine Partnership will sell steam to the
Brandywine Water Company, pursuant to a Steam Sales Agreement dated
March 30, 1995 (the "Brandywine Steam Agreement"). Brandywine Water
Company, which is an indirect wholly owned subsidiary of the Company,
will use the steam to generate distilled water which is sold locally.
This planned production and sale of thermal energy will allow the
Panda-Brandywine Facility to achieve and maintain QF status. The
Brandywine Steam Agreement has an initial term of 25 years from the
commercial operations date of the Panda-Brandywine Facility and may
be extended by agreement of the parties for additional terms of five
years. Brandywine Water Company unconditionally agrees to purchase
all of the thermal energy produced by the Panda-Brandywine Facility
and will use the steam to generate distilled water to be sold
locally. Brandywine Water Company has entered into a contract with
the United States Navy to sell its distilled water for heating and
other industrial uses in a naval facility. The contract is for a one-
year term commencing October 1, 1996. Prior to the expiration of the
term of the Navy contract, Brandywine Water Company will have to
extend the contract or find one or more other customers to purchase
the distilled water. The Brandywine Power Purchase Agreement provides
that PEPCO may, under certain circumstances, terminate the Brandywine
Power Purchase Agreement if the Panda-Brandywine Facility ceases to
be a QF, unless the Panda-Brandywine Partnership receives all
governmental and regulatory approvals necessary to continue operating
the Panda-Brandywine Facility without QF certification. Additionally,
it is a condition to the conversion of the construction loan into the
long-term lease financing that the facility be a QF. If Brandywine
Water Company is unable to extend its contract to sell distilled
water to the United States Navy or to find one or more replacement
contracts for the sale of such water, there is no assurance that the
Panda-Brandywine Facility will be able to remain a Qualifying
Facility. See "Risk Factors -- Maintaining Qualifying Facility
Status."
Gas Supply and Fuel Management
The Panda-Brandywine Partnership will purchase both firm and
interruptible natural gas supply from Cogen Development Company
("CDC") pursuant to the Gas Sales Agreement, dated March 30, 1995,
between the Panda-Brandywine Partnership and CDC (the "Brandywine Gas
Agreement"). MCN Corporation, the parent corporation of CDC, has
unconditionally guaranteed the payment and performance obligations of
CDC under the Brandywine Gas Agreement. The Brandywine Gas Agreement
is effective for an initial term of 15 years from the date the Panda-
Brandywine Facility commenced commercial operations, and thereafter
for an additional two-year term unless terminated by either party
upon nine months' written notice.
CDC is obligated to sell and deliver to the Panda-Brandywine
Partnership, at receipt points along the pipeline system of Columbia
Gas, up to 24,240 MMBtu of gas per day on a firm basis and up to
24,240 MMBtu of gas per day on an interruptible basis. Gas delivered
by CDC within the firm basis limit falls within one of the three
following categories: "Limited Dispatch Gas," "Scheduled Dispatch
Gas" or "Dispatchable Gas" (each as defined in the Brandywine Gas
Agreement).
The price for the gas delivered by CDC is dependent upon the
category of the gas delivered. The price for Limited Dispatch Gas
consists of a monthly demand charge, a commodity charge and a charge
relating to costs incurred by CDC for gas storage service CDC
receives from ANR Pipeline Company. The commodity charge escalates
annually while the demand charge and the ANR-related charge increases
after the fifth year of the initial term of the Brandywine Gas
Agreement. The price for Scheduled Dispatch Gas consists of a
commodity charge based on the monthly NYMEX settlement price for
natural gas futures contracts plus a margin which increases after
year five of the Brandywine Gas Agreement. The price for Scheduled
Dispatch Gas is capped based on three monthly natural gas price
indices. The price for Dispatchable Gas is a negotiated price
or, if a negotiated price cannot be reached, is based on a daily
natural gas price index. In addition, the Panda-Brandywine
Partnership receives a price credit from CDC for each MMBtu of gas
delivered by CDC during a month not to exceed the demand charge for
Limited Dispatch Gas.
The Panda-Brandywine Partnership must annually take or pay for
no less than 2,299,500 MMBtu (or 2,305,800 MMBtu during a leap year)
of Limited Dispatch Gas, which amount is reduced by 7,000 MMBtu for
each day of regularly scheduled outage at the Panda-Brandywine
Facility. In addition, the Panda-Brandywine Partnership must take or
pay for a quantity of Scheduled Dispatch Gas each month that is no
less than 80% of the Scheduled Dispatch Gas that was scheduled for
delivery during such month. If the Panda-Brandywine Partnership pays
for but fails to take the minimum quantities of Limited Dispatch Gas
or Scheduled Dispatch Gas, the Panda-Brandywine Partnership has the
opportunity later to receive the quantities of gas paid for but not
taken.
Each year, CDC must deliver a report to the Panda-Brandywine
Partnership demonstrating that the expected production from the
proven gas reserves owned by CDC or an affiliate will be greater than
CDC's total firm gas supply commitments over the next five years. If
the total firm commitments exceed the gas reserves, CDC must take
necessary action to ensure that its gas reserves will equal or exceed
the total firm commitments within six months, or CDC must dedicate
adequate reserves to meet its obligation to provide Limited Dispatch
Gas to the Panda-Brandywine Partnership through the end of the term
of the Brandywine Gas Agreement. The dedicated gas reserves can be
released from dedication if CDC submits reports for three consecutive
years demonstrating that CDC's gas reserves exceed total firm
commitments or CDC submits a report demonstrating that CDC's gas
reserves are greater than or equal to 125% of total firm commitments.
The Panda-Brandywine Partnership will also purchase fuel
management services from CDC pursuant to the Fuel Supply Management
Agreement between CDC and the Panda-Brandywine Partnership (the
"Brandywine Fuel Management Agreement"). MCN Investment Corporation
has unconditionally guaranteed CDC's payment and performance
obligations under the Brandywine Fuel Management Agreement. The
Brandywine Fuel Management Agreement is effective for an initial term
that is the greater of 15 years from the date the Panda-Brandywine
Facility commenced commercial operations and the initial term of the
Brandywine Gas Agreement, and will be extended for an additional two-
year term unless terminated by either party upon nine months' written
notice. The Brandywine Fuel Management Agreement will immediately
terminate at either party's option if (i) the Brandywine Gas
Agreement terminates; (ii) the Panda-Brandywine Facility does not
achieve commercial operations by June 1, 1998; (iii) the MCN
Investment Corporation guaranty is terminated; or (iv) subsequent to
the commencement of commercial operations, the Panda-Brandywine
Facility ceases operations for twelve consecutive months.
CDC's fuel management responsibilities under the Brandywine Fuel
Management Agreement include advising the Panda-Brandywine
Partnership with respect to the negotiation of natural gas and fuel
oil supply and transportation arrangements, arranging for the
delivery to the Panda-Brandywine Facility of natural gas or fuel oil,
endeavoring to make such arrangements on the basis of "best efforts"
and "best competitive offer" and advising the Panda-Rosemary
Partnership with respect to fuel hedging arrangements.
Gas Transportation
The Panda-Brandywine Partnership and Columbia Gas have entered
into a Precedent Agreement (the "Columbia Precedent Agreement"),
whereby Columbia Gas has agreed to construct new pipeline facilities
to expand its existing interstate pipeline and provide the Panda-
Brandywine Partnership with firm transportation service upon the
fulfillment of certain conditions and the Panda-Brandywine
Partnership has agreed to contribute up to $6,772,590, plus any
applicable tax gross-up, toward the construction of Columbia Gas'
pipeline facilities.
The Panda-Brandywine Partnership will purchase from Columbia Gas
firm gas transportation service pursuant to an Amended and Restated
FTS Service Agreement (the "Columbia Gas FT Agreement"). Service
under the Columbia Gas FT Agreement commences on the date that
Columbia Gas completes construction of its required facilities, which
will be no earlier than November 1, 1996, and continues for an
initial term of 25 years from the date the Panda-Brandywine Facility
commences commercial operations, and year-to-year thereafter unless
terminated by either party upon six months' notice. Columbia Gas has
agreed to provide the Panda-Brandywine Partnership with firm gas
transportation service from November 1, 1996 until the completion of
construction of its required facilities on substantially the same
terms and conditions as provided in the Columbia Gas FT Agreement.
Columbia Gas is obligated to provide the Panda-Brandywine
Partnership with up to 24,240 Dth per day of firm gas transportation
service from a receipt point near Monclova, Ohio to an
interconnection between the facilities of Columbia Gas and Cove Point
LNG Limited Partnership ("Cove Point") in Loudoun County, Virginia.
Columbia Gas provides the firm transportation service pursuant to the
terms of the Columbia Gas FT Agreement, a rate schedule and the general
terms and conditions of Columbia Gas's effective FERC gas tariff.
The Panda-Brandywine Partnership purchases from Cove Point firm
gas transportation service to transport gas delivered by Columbia Gas
to the facilities of Cove Point pursuant to a FTS Service Agreement
(the "Cove Point FT Agreement"). The Cove Point FT Agreement
continues for a term of 25 years from the earlier of the commencement
of commercial operations of the Panda-Brandywine Facility and June 1,
1997.
Cove Point is obligated to provide the Panda-Brandywine
Partnership with up to 24,000 Dth per day of firm gas transportation
service from an interconnection between the facilities of Cove Point
and Columbia Gas in Loudoun, Virginia to an interconnection between
the facilities of Cove Point and Washington Gas Light Company ("WGL")
in Charles County, Maryland. Cove Point provides the firm
transportation service pursuant to the Cove Point FT Agreement, the
Rate Schedule FTS and the general terms and conditions of its
effective FERC gas tariff.
The Panda-Brandywine Partnership and Cove Point have also
entered into the Service Agreement Under Rate Schedule ITS, dated
June 20, 1996, whereby Cove Point will provide the Panda-Brandywine
Partnership with 30,000 Dth per day of interruptible transportation
service on a month-to-month basis over the same pipeline path Cove
Point will utilize to provide firm transportation service to the
Panda-Brandywine Partnership.
The Panda-Brandywine Partnership will purchase from WGL gas
transportation, gas sales and gas balancing service pursuant to a Gas
Transportation and Supply Agreement (the "WGL Agreement"). The WGL
Agreement continues for an initial term of 25 years from the first
day of the calendar month following the date the Panda-Brandywine
Facility commences commercial operations, and will continue year-to-
year after the expiration of the initial term unless terminated by
either party upon six months' written notice.
WGL is obligated to provide the Panda-Brandywine Partnership
with firm transportation service, up to the quantity of gas nominated
for such service on a given day, from an interconnection between the
facilities of Cove Point and WGL in Charles County, Maryland to the
interconnection between the WGL facilities and the Panda-Brandywine
Facility, provided that WGL only must use its best efforts to deliver
transportation gas to the Panda-Brandywine Facility when the pressure
on the Cove Point pipeline is less than 500 psig. During the months
of January, February and December of any calendar year, WGL may,
under certain circumstances, request that the Panda-Brandywine
Partnership release to WGL for its system use a quantity of gas
purchased by the Panda-Brandywine Partnership under the Brandywine
Gas Agreement and transported to the WGL system.
Additionally, WGL will sell and deliver gas to the Panda-
Brandywine Facility on an as-available basis from November through
March and on a best efforts basis from April through October, at a
price to be agreed by the parties. WGL will also provide the Panda-
Brandywine Partnership with both a daily and monthly balancing
service with respect to gas that it transports on behalf of the Panda-
Brandywine Partnership.
WGL constructed, at its expense, the necessary pipeline and
appurtenant facilities necessary to deliver gas from the Cove Point
pipeline to the Panda-Brandywine Facility.
Fuel Oil
The Panda-Brandywine Facility was constructed with the
capability to operate on No. 2 fuel oil and has the ability to change
fuel sources from natural gas to fuel oil and back without
interrupting the generation of electricity. The Panda-Brandywine
Facility has on-site storage for approximately 2.0 million gallons of
fuel oil, a supply sufficient to operate the Panda-Brandywine
Facility at full load for approximately six days. The Panda-
Brandywine Partnership will purchase fuel oil on a spot basis. The
price that the Panda-Brandywine Partnership will pay for fuel oil
will include delivery to the Panda-Brandywine Facility, since the
fuel oil suppliers deliver or arrange for the delivery of such fuel
oil.
Water
The Panda-Brandywine Partnership has entered into a 25-year
Treated Effluent Water Purchase Agreement ("Water Supply Agreement")
with the County Commissioners of Charles County, Maryland to purchase
up to 2.7 million gallons per day of treated effluent from a local
sewage treatment plant. Treated effluent is a byproduct of the sewage
treatment process and will be used as the primary cooling water
source for the Panda-Brandywine Facility's cooling towers. The
treated effluent will be transported from the sewage treatment plant
to the Panda-Brandywine Facility by a buried transmission pipeline
that has the capacity to supply up to 3.0 million gallons per day.
The Panda-Brandywine Partnership has been approved to use well water
for boiler and potable water.
Other Projects under Development by Panda International
The following are additional Projects that Panda International
and its affiliates are developing. There are substantial risks
associated with the development of Projects, and increased risks
associated with the development of Projects outside the United
States. There can be no assurance that any Project under development
will reach Financial Closing or achieve Commercial Operations, or
will satisfy the other conditions for transfer to the Project
Portfolio pursuant to the Additional Projects Contract. See "Risk
Factors -- Project Risks" and "-- Risks Relating to Future Non-U.S.
Projects."
The Panda-Luannan Project
The Panda-Luannan Facility will be comprised of two 50 MW coal-
fired electric generating units and a steam and hot water
distribution system and will be located in Luannan County near
Tangshan City in Tangshan Municipality, Hebei Province, PRC. Luannan
County is located in northeastern Hebei Province in the area that is
frequently referred to as the Beijing-Tianjin-Tangshan Triangle, an
important economic and political center in the PRC.
PEC has formed four equity joint ventures with PRC registered
companies for purposes of developing, constructing and operating the
Panda-Luannan Facility (collectively, the "Joint Venture Companies").
The Panda Luannan Facility will sell power to North China Power
Group Company ("NCPGC") pursuant to an Electric Energy Purchase and
Sales Agreement and a General Interconnection Agreement
(collectively, the "Luannan Power Purchase Agreement"), among NCPGC
and two of the Joint Venture Companies. Gross generation amounts vary
among three eight-hour periods per day, designated as peak hours, non-
peak hours and trough hours, as determined under the Luannan Power
Purchase Agreement. The Company understands that, subject to output
limitations during non-peak hours and trough hours, NCPGC has agreed
to purchase and take all electric energy delivered to NCPGC from the
Panda-Luannan Facility, as dispatched by the grid. The Joint Venture
Companies may not sell any electric energy directly to third parties
without the consent of NCPGC. Steam generated by the Panda-Luannan
Facility will be sold to industrial purchasers, and possibly to
governmental purchasers, located in Luannan County under various heat
and supply agreements.
Panda International, through two of the Joint Venture Companies,
has selected Harbin Power Engineering Company Limited as the
engineering, procurement and construction contractor ("Harbin").
Harbin has extensive engineering, procurement and construction
experience in the power industry in the PRC. A bank guaranty is
expected to be provided by The Export-Import Bank of China in respect
of Harbin's obligations under the construction contract in a maximum
amount of 35% of the original construction contract price. The two
Joint Venture Companies also will reserve 10% of the construction
costs as retainage, and a guaranty of all of Harbin's liabilities and
obligations under the construction contract will be provided by
Harbin's parent company, Harbin Power Equipment Group Company.
Two of the Joint Venture Companies and NCPGC entered into a
transmission line construction agreement on February 10, 1996 for the
construction of transmission lines and associated facilities to
connect the Panda-Luannan Facility to the grid. These two Joint
Venture Companies subsequently transferred their interests in the
transmission line construction agreement to another Joint Venture
Company. NCPGC will own the transmission lines and perform all
operation, maintenance and repair of the transmission lines during
the term of the Luannan Power Purchase Agreement. The Joint Venture
Company which was transferred the interest in the transmission line
construction agreement will make available the funds to cover the
cost of constructing the transmission lines and associated
facilities.
The Panda-Luannan Facility's largest coal supplier will be the
Kailuan Coal Mining Administration ("Kailuan"), a central government
coal mining bureau. Kailuan has committed by contract to supply
300,000 metric tons of coal per year to the Panda-Luannan Facility
for 10 years. Additional coal supplies totaling 310,000 metric tons
per year are available under contracts with five other coal mines.
All coal will be delivered to the Panda-Luannan Facility by truck.
The commitments under these six coal supply agreements are equivalent
to 150% of the Panda-Luannan Facility's projected annual
requirements, but the Joint Venture Companies are not required to
purchase that entire amount. A contract for the provision of
operation and maintenance services has been signed with Duke/Fluor
Daniel International Services, Inc.
The formation of a Sino-foreign equity joint venture, including
both the joint venture contract and the articles of association,
requires the approval of the Ministry of Foreign Trade and Economic
Cooperation (MOFTEC) or, if the amount of the total investment in the
joint venture falls below the applicable approval threshold, the
applicable provincial or, in some cases, local commission of foreign
trade and economic cooperation (COFTEC). All businesses in China
require business licenses issued by the local branch of the State
Administration of Industry and Commerce (SAIC). The Panda-Luannan
Facility also requires certain other approvals with respect to such
items as grid interconnection, legal and financial structure,
transmission systems, land use, zoning, pricing, international
exchange, water usage, environmental protection, ash transportation
and ash disposal. These various approvals have been obtained.
The Panda of Nepal Project
Panda International has formed a joint venture with a major
hydroelectric engineering company and a local Nepalese party to build
a 36 MW hydroelectric facility on the upper Bhote Koshi River in
Nepal. A power purchase agreement with the Nepal Electricity
Authority ("NEA") and a project agreement with the Government of
Nepal obligating the Government of Nepal to guarantee NEA's payment
obligations and provide certain other support and incentives were
signed in July 1996. Approval of the joint venture was received from
the Government of Nepal in June 1996. Panda International has
received commitment letters from two multilateral agencies to provide
debt financing for this Project.
The Panda-La Panga Project
In August 1994, Panda International acquired from another
independent power developer a 90% interest in a Project company that
had entered into a power purchase agreement with the Orissa State
Electricity Board for a proposed 500 MW coal-fired power project to
be located in the State of Orissa, India. Certain of the central
governmental approvals for the Project have been obtained. Although
Panda International believes its power purchase agreement is valid
and enforceable, the State of Orissa has given a notice of
cancellation of such agreement to Panda International, as well as to
several other third parties with respect to their projects being
developed. Panda International has objected to such notice and is
presently conducting discussions with the government of the State of
Orissa. Development efforts have been delayed pending resolution of
this dispute.
The Panda-Kathleen Project
The Panda-Kathleen Facility is planned to be a combined cycle
natural gas-fired, intermediate-load, cogeneration facility to be
located on a 7.5-acre site owned by the Panda-Kathleen Partnership in
an industrial park near Lakeland, Florida. The Panda-Kathleen
Partnership entered into a power purchase agreement with Florida
Power Corporation ("Florida Power") in 1991.
The Panda-Kathleen Partnership and Florida Power are engaged in
litigation before various state and federal forums in Florida over
the interpretation of the Panda-Kathleen power purchase agreement.
See "Legal Proceedings -- Florida Power Proceedings." The outcome of
this litigation will determine whether construction of the Panda-
Kathleen Facility is initiated and completed. Pursuant to
arrangements with GE Capital under the Brandywine Financing
Documents, the entities which are partners of the Panda-Kathleen
Partnership will be required to be transferred to the Company and
become part of its Project Portfolio if, and within 180 days after,
the Panda-Kathleen Facility reaches the earlier of Financial Closing
or Commercial Operations.
LEGAL PROCEEDINGS
Neither the Company nor the Issuer is a party to any legal
proceedings. Affiliates of the Company are claimants or defendants in
various legal proceedings which have arisen in the ordinary course of
business. The Company believes such claims and legal actions,
individually or in aggregate, will not have a material adverse effect
on the business or financial condition of the Company.
NNW, Inc. Proceeding
On July 12, 1996, PEC filed an action against NNW captioned
Panda Energy Corporation v. NNW, Inc. f/k/a Nova Northwest Inc. (No.
96-07151-C), in the District Court of Dallas County, Texas (68th
Judicial District). PEC's petition seeks a declaratory judgment that
the NNW Cash Flow Participation remains at 0.433% after the
restructuring of the Panda-Rosemary Partnership interest pursuant to
the terms of the Credit Agreement. See "Description of the Projects -
- - The Panda-Rosemary Facility -- Cash Flow Participation." Pursuant
to the Credit Agreement, NNW received a cash flow participation
interest in distributions from the Panda-Rosemary Partnership in the
amount of 4.33% of PEC's own participation interest. At the time the
Credit Agreement was entered into, the aggregate equity interest in
the Panda-Rosemary Partnership held by PEC was 10%,
making the NNW Cash Flow Participation equal to 0.433%. As a result
of the redemption of Ford Credit's 90% limited partnership interest
in the Panda-Rosemary Partnership, PEC (through the Company) owns an
indirect 100% interest in the Panda-Rosemary Partnership.
Pursuant to the Credit Agreement, the NNW Cash Flow
Participation interest is not to be affected either positively or
negatively by "any financial restructuring." It is the opinion of
Panda International and the Company that the redemption of Ford
Credit's limited partnership interest is a "financial restructuring"
within the meaning of that term in the Credit Agreement and that, as
a result, the NNW Cash Flow Participation remains equal to 0.433% of
total cash flow distributions by the Panda-Rosemary Partnership
(based on the current debt structure). NNW is disputing this position
and asserts that after the restructuring it is entitled to 4.33% of
PEC's distributions from the Panda-Rosemary Partnership. The
declaratory judgment petition seeks a determination that the NNW Cash
Flow Participation is equal to 0.433%. A resolution of this dispute
and the declaratory judgment proceeding adverse to PEC and the
Company would not have a material adverse effect on the Company. See
"'Description of the Projects -- The Panda-Rosemary Facility -- Cash
Flow Participation."
In the view of PEC's counsel in this matter, Lynn Stodghill
Melsheimer & Tillotson, L.L.P. (Dallas, Texas), and taking into
account that no discovery has been conducted, PEC's interpretation of
the Credit Agreement is fully supported by the unambiguous terms of
the Credit Agreement. Under such circumstances, PEC would be entitled
to judgment as a matter of law that its interpretation is correct.
Even if a court were to conclude that a factual dispute exists as to
the meaning of the Credit Agreement, it is the view of Lynn Stodghill
Melsheimer & Tillotson, L.L.P. that parol and other extrinsic
evidence supports PEC's interpretation of the Credit Agreement. Lynn
Stodghill Melsheimer & Tillotson, L.L.P., however, also state that,
as in any litigation matter, there can be no assurance that PEC will
prevail in this case, and its position could be rejected in whole or
in part by a judge or jury. However, based on its review of the
information PEC has provided them, such counsel believes that PEC's
interpretation of the Credit Agreement is more likely than not to
prevail in court.
Heard Proceedings
PEC is a party to a lawsuit captioned Panda Energy Corporation,
Plaintiff v. Heard Energy Corporation, CLF Energia Y Electricidad,
S.A., Robert A. Wolf, Armin Alexander Budzinsky, Edward R. Gwynn,
Donald L. Kinney, Morgan Stanley & Co., Inc., Allstate Insurance
Company, Allstate Life Insurance Company, Entergy Corporation,
Entergy Enterprises, Inc., Entergy Power, Inc., Entergy Power
Development Corporation, Anil Desai, Drs. IR. Poerwanto P., and PT
Panca Serodja Pradhana, Defendants, (No. 94-0672-J), District Court
of Dallas County, Texas (191st Judicial District). PEC initiated this
litigation in April 1994 and alleges that defendants Wolf, Gwynn and
Kinney, former PEC employees, formed a competing company (Heard
Energy Corporation) and misappropriated certain of PEC's
international power project opportunities. PEC alleges that the other
defendants knowingly participated, collaborated and/or conspired in
the misappropriation. PEC alleges causes of action for
misappropriation, conspiracy, fraud, breach of contract, breach of
fiduciary duty and legal malpractice against one or more of the
defendants and alleges damages in an unspecified amount.
Defendant Morgan Stanley filed a counterclaim on September 14,
1995 against PEC, alleging that it had performed services for PEC
pursuant to an engagement agreement relating to the Panda-Brandywine
Project. PEC terminated the engagement agreement on May 4, 1993.
Morgan Stanley alleges that the services it performed prior to such
termination included assisting PEC in obtaining certain regulatory
approvals, preparing a draft solicitation booklet and identifying
potential project financing sources, including GE Capital. Morgan
Stanley further alleges that PEC obtained financing from GE Capital
after Morgan Stanley was terminated, and that Morgan Stanley is
entitled to a "transaction fee," either pursuant to the engagement
agreement or based on the value of the services it allegedly
performed, in an amount of not less than $4.3 million, plus
attorneys' fees and interest.
Defendants Heard Energy Corporation, Wolf, Gwynn, Kinney and
Budzinsky (the "Heard Defendants") also filed a counterclaim during
November 1994 against PEC and a third-party claim against Robert
Carter and Janice Carter, alleging that PEC, Robert Carter and Janice
Carter negligently made misrepresentations of PEC's lack of a
continued interest in developing international power projects. The
Heard Defendants allege that they would not have engaged in allegedly
competing international power project transactions but for these
misrepresentations and that they incurred damages in the amount of
approximately $5.0 million as a result of these misrepresentations,
such damages allegedly consisting of expenses incurred by Heard
Energy Corporation, certain portions of which allegedly are
guaranteed by the individual Heard Defendants. In both the
counterclaim and the third-party claim, the Heard Defendants further
allege that PEC, Robert Carter and Janice Carter violated a
confidentiality order relating to certain documents produced by the
Heard Defendants during the discovery phase of this action by
misappropriating confidential information in these documents for the
purpose of gaining a competitive advantage over Heard Energy
Corporation. The Heard Defendants seek $5.0 million in damages as
well as unspecified "exemplary" damages based on this alleged
violation. PEC believes that the Heard Defendants' discovery order
claim is not actionable as a claim for damages.
On March 15, 1996, all of the defendants filed motions for
summary judgment, and PEC filed motions for summary judgment with
respect to Morgan Stanley's counterclaim and the Heard Defendants'
counterclaim and third-party claim. By letter dated April 30, 1996,
the court advised all counsel that it intended to grant the
defendants' motions for summary judgment, indicating that PEC could
not show legally sufficient evidence of damages to sustain its
claims. This order was entered on June 19, 1996.
PEC has filed an appeal bond and intends to appeal the court's
ruling. In light of the court's ruling and pending the appeal, Morgan
Stanley and the Heard Defendants have dismissed without prejudice
their counterclaims and third-party claims, and PEC has agreed that
any applicable statutes of limitations or other time-based defenses
will be tolled during the pendency of the appeal.
The Company has been informed by PEC that PEC does not believe
that either the Morgan Stanley counterclaim or the Heard Defendants'
counterclaims and third-party claims will be refiled unless and until
the judgment dismissing PEC's claims against those parties is
reversed and remanded to the trial court by the appellate court. In
any event, PEC does not believe that these counterclaims or third-
party claims, if reasserted, have any merit, nor does PEC believe
that these claims, if eventually decided adversely to PEC, would have
a material effect on the business of PEC.
Brandywine Proceedings
On June 26, 1996, certain plaintiffs commenced a proceeding
against the Panda-Brandywine Partnership and one of its contractors
captioned Jeannine McConnell, McConnell Pool Service, Inc. and
McConnell Fuel Oil, Inc. v. Panda-Brandywine, L.P. and Flippo
Construction (Case No. CV 96-1344) in the Circuit Court for Charles
County, Maryland. In this proceeding, plaintiffs allege that in
connection with the construction of a water line/pipe, a contractor
for the Panda-Brandywine Partnership, Flippo Construction ("Flippo")
and the Panda-Brandywine Partnership left their easement and
inadvertently trespassed on to plaintiffs' property. While on
plaintiffs' property, Flippo and the Panda-Brandywine Partnership
allegedly dug a deep and wide hole and laid pipe in it. Plaintiffs
allege that this trespass damaged the property, decreased its fair
market value and resulted in loss of use thereof. Plaintiffs' claim
damages in numerous counts that aggregate to $3,250,000 in actual
damages against each defendant plus punitive damages aggregating
$3,000,000 against each defendant.
The Panda-Brandywine Partnership intends to vigorously contest
this proceeding. Panda International and the Company do not believe
that the outcome of this proceeding will have any material adverse
effect on the financial condition of the Company or the Panda-
Brandywine Partnership. Immediately following the inadvertent digging
of the hole on plaintiffs' property, Flippo went onto such property,
filled in and compacted the hole and moved the pipe route off of
plaintiffs' property. Panda International and the Company believe
that this action should be sufficient to eliminate any substantial
damage to this property. Flippo has offered to go on to plaintiffs'
property and fix any remaining damage (if any) to plaintiffs'
property but plaintiffs have refused this offer.
In the opinion of Panda International and the Company, the
contract between the Panda-Brandywine Partnership and Flippo requires
Flippo to hold the Panda-Brandywine Partnership harmless for any
activities relating to the plaintiffs' property.
Florida Power Proceedings
In January 1995, Florida Power commenced a proceeding before the
Florida PSC against the Panda-Kathleen Partnership captioned In re:
Petition for Declaratory Statement Regarding Eligibility for Standard
Offer Contract and Payment Thereunder by Florida Power Corporation,
Case No. 950110-EI. Florida Power's petition seeks a declaratory
statement that the Kathleen Power Purchase Agreement is not
"available" to the Panda-Kathleen Partnership because the Panda-
Kathleen Partnership's proposed cogeneration facility allegedly is
not in compliance with the Florida PSC's rules (because it may be
capable of exceeding 75 MW in electric generating capacity).
Additionally, if the contract is "available" to the Panda-Kathleen
Partnership, Florida Power seeks a declaratory statement that it is
only obligated to pay capacity payments under the Kathleen Power
Purchase Agreement for a term of 20 years rather than for the entire
30-year term of the Kathleen Power Purchase Agreement. The Panda-
Kathleen Partnership filed a cross-petition seeking a declaratory
statement that the milestone dates in the Kathleen Power Purchase
Agreement must be extended due to Florida Power's improper actions
and as a result of the delays in developing the Panda-Kathleen
Facility caused by Florida Power's petition and the ensuing
proceeding before the Florida PSC. The Panda-Kathleen Partnership
filed a motion to dismiss the proceeding based on lack of
jurisdiction, but that motion was denied by the Florida PSC. In
February of 1996, the Florida PSC held a one-day hearing.
On May 20, 1996, the Florida PSC issued a decision granting
Florida Power's petition, and holding that the Kathleen Power
Purchase Agreement is not available to the Panda-Kathleen Facility as
proposed because it has an electric generating capacity in excess of
75 MW and that Florida Power is only obligated to make capacity
payments under the Panda-Kathleen Power Purchase Agreement for 20
years. The Florida PSC's decision also grants the Panda-Kathleen
Partnership's cross-petition insofar as it grants the Panda-Kathleen
Partnership a 12-month extension to meet the construction
commencement milestone date and an 18-month extension to meet the
commercial operation milestone date. The Panda-Kathleen Partnership
has appealed the Florida PSC's order to the Florida Supreme Court.
There are two actions related to this matter pending before the
Florida Supreme Court and the United States District Court for the
Middle District of Florida.
REGULATION
Project subsidiaries of the Company are subject to complex and
stringent energy, environmental and other governmental laws and
regulations at the federal, state and local levels in connection with
the development, ownership and operation of its electricity
generation facilities. Federal laws and regulations govern
transactions by electric and gas utility companies, the types of fuel
that may be utilized by an electric generating facility, the type of
energy that may be produced by such a facility and the ownership of
the facility. State utility regulatory commissions must approve the
rates and terms and conditions under which public utilities sell
electric power at retail and, under certain circumstances, purchase
electric power from independent producers. Under certain
circumstances where specific exemptions are otherwise unavailable,
state utility regulatory commissions may have broad jurisdiction over
non-utility electric power generation facilities. Energy producing
projects also are subject to federal, state and local laws and
administrative regulations governing the emissions and other
substances produced, discharged or disposed of by a facility and the
geographical location, zoning, land use and operation of a facility.
Applicable federal environmental laws typically have state and local
enforcement and implementation provisions. These environmental laws
and regulations generally require that a variety of permits and other
approvals be obtained before the commencement of construction or
operation of an energy-producing facility and that the facility then
operate in compliance with those permits and approvals.
Federal Energy Regulation
PURPA
The Public Utility Regulatory Policies Act of 1978 ("PURPA") and
the regulations promulgated thereunder provide certain rate and
regulatory incentives to an electric generating facility that is a
qualifying cogeneration or small power production facility ("QF").
The Panda-Rosemary Facility and the Panda-Brandywine Facility are
QFs. If built, the Panda-Kathleen Facility also would be a QF. A
cogeneration facility is a QF if it (i) sequentially produces both
electricity and useful thermal energy that is used for industrial,
commercial, heating or cooling purposes, (ii) meets certain energy
efficiency and operating standards when oil or natural gas is used as
a fuel source and (iii) is not more than 50%-owned by an electric
utility, electric utility holding company or an entity or person
owned by either or any combination thereof.
Under PURPA and the regulations promulgated thereunder, QFs
receive two primary benefits. First, a QF is exempt from most
provisions of the Public Utility Holding Company Act of 1935, as
amended ("PUHCA"), from most provisions of the Federal Power Act, as
amended (the "FPA"), and from certain state laws relating to
organizational, rate and financial regulation. Second, regulations
promulgated by the Federal Energy Regulatory Commission (the "FERC")
under PURPA require that (i) electric utilities purchase electricity
generated by QFs, construction of which commenced on or after
November 9, 1978, at a price based on the purchasing utility's full
"avoided costs" and (ii) the utilities sell supplementary, back-up,
maintenance and interruptible power to the QFs on a just and
reasonable and non-discriminatory basis. See "PUHCA" and "FPA" below.
PURPA and the regulations promulgated thereunder define "avoided
costs" as the "incremental costs to an electric utility of electric
energy or capacity or both which, but for the purchase from the
qualifying facility or qualifying facilities, such utility would
generate itself or purchase from another source." Utilities may also
purchase power from QFs at prices other than "avoided costs" pursuant
to negotiations as provided by FERC regulations.
The FERC's regulations also provide that if energy or capacity
is provided pursuant to a legally enforceable obligation over a
specified term, avoided costs may be determined, at the option of the
QF, either at the time the energy or capacity is delivered or as
calculated at the time the obligation is incurred. The FERC's
regulations further provide that, in the case of rates based on
estimates of avoided costs over the term of a contract, the rates do
not violate the FERC's rules if the rules for such purchases differ
from avoided costs at the time of delivery.
In certain instances, payments based upon avoided costs
estimated at the time a contract is entered into have proven to be
greater than a utility's avoided costs at the time of delivery. Many
utilities have attempted to minimize the disparity by implementing
strategies designed to reduce avoided cost payments under such
contracts to levels that the utilities believe will be more
competitive in a short-term marginal cost electric energy market. See
"Industry Restructuring Proposals" below. Such strategies include
attempts to renegotiate or buy out power purchase contracts with QFs.
Some utilities have sought rigorously to enforce the terms of such
contracts and to exercise their contractual termination rights if the
contracts are not strictly observed. In addition, some utilities have
engaged in litigation and regulatory action against QFs to achieve
these ends.
The FERC has refused to disturb QF contract rates on two
operating projects where estimates of a utility's avoided costs,
calculated at the time the contracts were signed, were higher than
the actual avoided costs at the time of delivery and the contract
rates were not challenged at the time the contracts were signed and
were not the subject of an ongoing challenge to the state's avoided
cost determination. New York State Electric & Gas Corporation, 71
FERC 61,027, reconsideration denied, 72 FERC 61,067 (1995). This
decision is currently the subject of a petition for review in the
United States Court of Appeals for the D.C. Circuit.
Relying in part on the FERC's regulations, a federal court of
appeals has held that once a state commission has approved (by final
and nonappealable order) a QF contract rate as being consistent with
avoided costs, just, reasonable and prudently incurred, any action or
order by the state commission to reconsider its approval or deny the
pass-through of the QF's charges to the utility's retail customers
under purported state authority is preempted by PURPA. Freehold
Cogeneration Associates, L.P. v. Board of Regulatory Comm'rs of New
Jersey, 44 F.3d 1178 (3rd Cir.), cert. denied sub nom., Jersey
Central Power & Light Co. v. Freehold Cogeneration Associates, L.P.,
116 S. Ct. 68 (1995).
In Independent Energy Producers Assoc. v. California Public
Utilities Comm'n, 36 F.3d 848 (9th Cir. 1994), the U.S. Court of
Appeals for the Ninth Circuit held that states are not preempted by
PURPA from instituting a program that requires QFs to submit
operating data, to purchasing utilities for monitoring compliance
with QF status requirements, as long as the monitoring requirements
do not impose an undue burden on the QFs. However, the same court
determined that states and utilities are preempted by federal law
from taking action on their determination that a QF is no longer in
compliance with QF status requirements, other than requesting that
the FERC revoke the facility's QF status, either by filing a request
for revocation or by filing a petition for a declaratory order that
the facility is no longer a QF.
On May 29, 1996, VEPCO filed with the State Corporation
Commission of the Commonwealth of Virginia ("SCC") a request for
authorization to institute a formal QF status monitoring program. The
request states that the proposed monitoring program would apply to
all QFs that have entered into power purchase agreements with VEPCO.
Under the proposed program, QFs would submit to VEPCO by March 1 of
each year certain operational data from the previous year. If VEPCO
believes, on the basis of such data, that a QF does not comply with
QF requirements, the request indicates that VEPCO would first inform
the QF and, if the QF agreed with or failed to respond to VEPCO's
findings, VEPCO would file a petition seeking a declaration from the
FERC that such a facility is not a QF.
The North Carolina Utilities Commission ("NCUC") has disallowed
the pass-through to VEPCO's North Carolina retail rates of a portion
of capacity payments VEPCO had been making to several non-utility
generation plants. The capacity payment rates for the plants had been
determined by an arbitrator and approved by the SCC. The NCUC found
that bids from a 1988 solicitation (the "1988 VEPCO Solicitation")
were available at the time the contract was approved and should have
been used, instead of arbitration, to determine VEPCO's avoided
costs. The NCUC ruled that rates in excess of the rates derived from
bids received in the 1988 VEPCO Solicitation were therefore
disallowed in VEPCO's North Carolina retail rates. The North Carolina
Supreme Court upheld the NCUC's decision, saying that the NCUC had
simply disallowed rates above avoided costs. North Carolina Utilities
Comm'n v. North Carolina Power, 338 N.C 412, 450 S.E.2d 896 (1994).
The United States Supreme Court declined to review that decision.
While the Rosemary Power Purchase Agreement with VEPCO was not
specifically approved by the SCC, the SCC did approve the 1988 VEPCO
Solicitation that resulted in the Rosemary Power Purchase Agreement.
Although the NCUC used the 1988 VEPCO Solicitation to determine the
avoided costs in the North Carolina decision discussed above, there
can be no assurance that it would not disallow the pass-through of
the Rosemary Power Purchase Agreement rates, which arose from the
1988 VEPCO Solicitation. If the NCUC were to disallow such pass-
through, and if the courts were to allow the decision to stand, the
Company believes that any such disallowance would affect only that
portion of VEPCO's rates allocated to its North Carolina retail
customers. The Brandywine Power Purchase Agreement has been approved
by both the Maryland and District of Columbia Public Service
Commissions.
The Company endeavors to develop its Projects, monitor
compliance by the Projects with applicable regulations and choose its
customers in a manner which minimizes the risks of losing their QF
status. Certain factors necessary to maintain QF status are, however,
subject to the risk of events outside the Company's control. For
example, loss of a thermal energy customer or failure of a thermal
energy customer to take required amounts of thermal energy from a
cogeneration facility that is a QF could cause the facility to fail
to satisfy the criteria required for QF status regarding the level of
useful thermal energy output. Upon the occurrence of such an event,
the Company would seek to replace the thermal energy customer or find
another use for the thermal energy that meets PURPA's requirements,
but no assurance can be given that this would be possible.
If one of the Projects in which the Company has an interest
should lose its status as a QF, the Project would no longer be
entitled to the exemptions from PUHCA and the FPA. This could subject
the Project to rate regulation as a public utility under the FPA and
state law and could result in the Company inadvertently becoming a
public utility holding company by owning more than 10% of the voting
securities of, or controlling, a facility that would no longer be
exempt from PUHCA. This could cause all of the Company's remaining
Projects to lose their QF status, because QFs may not be controlled,
or more than 50% owned, by public utility holding companies. Loss of
QF status may also trigger defaults under covenants to maintain QF
status in the Projects' power purchase agreements, steam sales
agreements and financing agreements and result in termination,
penalties or acceleration of indebtedness under such agreements. A
facility may lose its QF status on a retroactive or a prospective
basis.
If a Project were to lose its QF status (because, for example,
it lost its steam customer), the Company could attempt to avoid
holding company status (and thereby protect the QF status of its
other Projects) on a prospective basis by restructuring its interests
in the Project. For instance, the Company could change its voting
interest in the entity owning the nonqualifying Project to nonvoting
or limited partnership interests and sell the voting interest to an
individual or company which could tolerate the lack of exemption from
PUHCA, or by otherwise restructuring ownership of the Project so as
not to become a holding company. These actions, however, would
require approval of the Commission or a no-action letter from the
Commission, and would result in a loss of control over the
nonqualifying Project, could result in a reduced financial interest
therein and might result in a modification of the Company's operation
and maintenance agreement relating to such Project. A reduced
financial interest could result in a gain or loss on the sale of the
interest in such Project, the removal of the affiliate through which
the ownership interest is held from the consolidated income tax group
or the consolidated financial statements of the Company, or a change
in the results of operations of the Company. Loss of QF status on a
retroactive basis could lead to, among other things, fines and
penalties being levied against the Company and its subsidiaries and
claims by utilities for refund of payments previously made.
Under the Energy Policy Act of 1992 ("Energy Policy Act"), a
company engaged exclusively in the business of owning and/or
operating a facility used for the generation of electric energy
exclusively for sale at wholesale may be exempted from PUHCA as an
"exempt wholesale generator." An exempt wholesale generator may not
make retail sales of electricity. If a Project can be qualified as an
exempt wholesale generator ("EWG") under Section 32 of PUHCA it will
be exempt from PUHCA even if it does not qualify as a QF. Therefore,
if a QF in the Company's Project Portfolio were to lose its QF
status, the Company could apply to have the Project qualified as an
EWG. However, assuming this changed status would be permissible under
the terms of the applicable power purchase agreement, rate approval
from FERC would be required. See "FPA" below. In addition, the
Project would be required to cease selling electricity to any retail
customers (such as the thermal energy customer) and could become
subject to state regulation of sales of thermal energy. See "PUHCA"
below.
PUHCA
PUHCA provides that any corporation, partnership or other entity
or organized group that owns, controls or holds power to vote 10% or
more of the outstanding voting securities of a "public utility
company" or a company that is a "holding company" of a public utility
company is subject to regulation under PUHCA, unless an exemption is
established or a FERC order declaring it not to be a holding company
is granted. Registered holding companies under PUHCA are required to
limit their utility operations to a single integrated utility system
and to divest any other operations not functionally related to the
operation of the utility system. In addition, a public utility
company that is a subsidiary of a registered holding company under
PUHCA is subject to financial and organizational regulation,
including approval by the Commission of certain of its financing
transactions.
FPA
Under the FPA, the FERC has exclusive rate-making jurisdiction
over wholesale sales of electricity and transmission in interstate
commerce. These rates may be determined on either a cost-of-service
basis or a market-based approach. If a QF in the Company's Project
Portfolio were to lose its Qualifying Facility status, the rates set
forth in the applicable power purchase agreement would have to be
filed with the FERC and would be subject to initial and potentially
subsequent reviews by the FERC under the FPA, which could result in
reductions to the rates.
Industry Restructuring Proposals
The United States Congress is currently considering legislation
to repeal PURPA entirely, or at least to repeal the obligation of
utilities to purchase from Qualifying Facilities. There is strong
Congressional support for grandfathering existing Qualifying
Facilities contracts if such legislation is passed, and also support
for requiring utilities to conduct competitive bidding for new
electric generation if the PURPA purchase obligation is eliminated.
The FERC and many state utility commissions are currently
studying a number of proposals to restructure the electric utility
industry in the United States to permit utility customers to choose
their utility supplier in a competitive electric energy market. The
FERC has recently issued a final rule requiring utilities to offer
wholesale customers and suppliers open access on their transmission
lines, on a basis comparable to the utilities' own use of the lines.
Although the rule (Order No. 888) may be appealed, many utilities
have already filed "open access" tariffs. The utilities contend that
they should recover from departing customers their fixed costs that
will be "stranded" if their wholesale customers choose new electric
power suppliers. These stranded costs include the capacity costs
utilities are required to pay under many QF contracts, which the
utilities view as excessive when compared with current market prices
for capacity. Many utilities are therefore seeking ways to lower
these contract prices or terminate the contracts altogether, out of
fear that their shareholders will have to bear all or part of such
"stranded" costs. Some utilities have engaged in litigation against
QFs to achieve these ends. See "PURPA" above. The FERC's rule allows
full recovery of "legitimate and verifiable" prudently incurred
stranded costs at the wholesale level. However, the FERC has
jurisdiction over only a small percentage of electric rates, and
there is likely to be litigation over whether wholesale stranded
costs are "legitimate and verifiable."
In addition to restructuring proposals being considered by
regulatory agencies, a number of bills have been introduced in the
U.S. Congress to promote electric utility restructuring and
deregulation of electric rates. These bills differ as to how and to
what extent a utility's "stranded" or "transition" costs would be
recoverable if current captive customers left the utility's system.
The existence of this legislation may increase the desire of
utilities to renegotiate, buy out or attempt to terminate existing
power purchase agreements containing prices that the utilities
believe will not be competitive in a short-term marginal cost
electric energy market. In addition, if electric energy prices are
deregulated, electric energy producers will have to sell electric
energy at competitive market prices.
State Regulations
State public utility commissions ("PUCs") have broad authority
to regulate both the rates charged by and financial activities of
electric utilities, and to promulgate regulations implementing PURPA.
Since a power purchase agreement will become a part of a utility's
cost structure (and therefore generally is reflected in its retail
rates), power purchase agreements from independent power producers
are potentially subject to the regulatory purview of PUCs,
particularly the process by which the utility has entered into the
power purchase agreements. If a PUC has approved the process by which
a utility secures its power supply, a PUC generally will be inclined
to allow a utility to "pass through" the expenses associated with an
independent power contract to the utility's retail customers.
Moreover, a PUC may not disallow the full reimbursement to a utility
for the purchase of electricity from a QF once the PUC has approved
the rates as consistent with the requirements of PURPA. In addition,
retail sales of electricity or thermal energy by an independent power
producer may be subject to PUC regulation, depending on state law.
Independent power producers that are not QFs under PURPA are
considered to be public utilities in many states and are subject to
broad regulation by PUCs ranging from the requirement that
certificates of public convenience and necessity be obtained to
regulation of organizational, accounting, financial and other
corporate matters. However, sales of electricity at wholesale are
subject to the exclusive regulatory jurisdiction of the FERC. In
addition, states may assert jurisdiction over the siting and
construction of facilities, and over the issuance of securities and
the sale or other transfer of assets by these facilities that are not
QFs.
State PUCs also have jurisdiction over the transportation and
retail sale of natural gas by local distribution companies. Each
state's regulatory laws are somewhat different; however, all
generally require a local distribution company to obtain approval
from the PUC to provide services and construct facilities. The rates
of local distribution companies are usually subject to continuing
oversight by the PUC.
In the case of the Panda-Rosemary Facility, the Panda-Rosemary
Partnership is subject to a number of conditions imposed by the NCUC
pursuant to a Certificate of Public Convenience and Necessity
("CPCN"), including that the Panda-Rosemary Facility and the Panda-
Rosemary Pipeline both be owned by the Panda-Rosemary Partnership,
that the Panda-Rosemary Partnership not transport gas for or sell or
deliver gas to any other entity, that all electricity generated at
the Panda-Rosemary Facility be sold to an electric utility and that
all thermal energy produced at the Panda-Rosemary Facility be sold
only to Bibb. If Bibb were no longer the steam purchaser, the Panda-
Rosemary Partnership would be obligated to notify the NCUC and VEPCO
and the NCUC could order such further proceedings as it deemed
appropriate, which proceedings could result in revocation of the CPCN
or the imposition of other conditions. See "Risk Factors --
Maintaining Qualifying Facility Status."
Natural Gas Regulation
The Company has an ownership interest in and operates two
natural gas-fired cogeneration projects in the United States. The
cost of natural gas is ordinarily (other than debt costs) the largest
expense of a power project and is critical to the project's
economics. The risks associated with using natural gas can include
the need to arrange transportation of the gas across great distances,
including obtaining removal, export and import authority if the gas
is transported from Canada, the possibility of interruption of the
gas supply or transportation (depending on the quality of the gas
reserves purchased or dedicated to the Project, the financial and
operating strength of the gas supplier and whether firm or non-firm
transportation is purchased), and obligations to take a minimum
quantity of gas or pay for it (take-or-pay obligations).
Pursuant to the Natural Gas Act, the FERC has jurisdiction over
the transportation and storage of natural gas in interstate commerce.
With respect to most transactions that do not involve the
construction of pipeline facilities, regulatory authorization can be
obtained on a self-implementing basis. However, pipeline rates for
such services are subject to continuing FERC oversight. Order No.
636, issued by the FERC in April 1992, mandated the restructuring of
interstate natural gas pipeline sales and transportation services.
The restructuring required by the rule includes (i) the separation
("unbundling") of a pipeline's sales and transportation services,
(ii) the implementation of a straight fixed-variable rate design
methodology under which all of a pipeline's fixed costs are recovered
through its reservation charge, (iii) the implementation of a
capacity release mechanism under which holders of firm transportation
capacity on pipelines can release that capacity for resale by the
pipeline, and (iv) the opportunity for pipelines to recover 100% of
their prudently incurred costs ("transition costs") associated with
implementing the restructuring mandated by the rule. On July 16,
1996, the United States Court of Appeals for the District of Columbia
Circuit issued an order following appeals of Order No. 636 by various
interested parties (United Distribution Companies v. FERC, No.
92-1485). The court approved most of Order No. 636. However, the
court remanded some issues to the FERC for further consideration. The
remanded issues include: (i) the FERC's requirement that an existing
firm transportation customer bid up to a 20-year term to retain its
rights to firm transportation capacity at the end of its contract
term; (ii) certain aspects of the FERC's efforts to mitigate the
economic effect of Straight Fixed-Variable ("SFV") transportation
rates on certain transportation customers; (iii) the FERC's
limitation on the obligation of the pipelines to provide "no-notice"
transportation service; and (iv) the FERC's determination that
pipelines can recover 100% of their prudently-incurred Gas Supply
Realignment ("GSR") costs from their transportation customers and can
recover 10% of these costs from their interruptible transportation
customers. The FERC's order on remand of these issues should not have
an adverse effect on the Partnership's gas transportation
arrangements.
Environmental Regulations
The development, construction and operation of power projects is
subject to extensive federal, state and local laws and regulations
adopted for the protection of the environment and to regulate land
use. The laws and regulations applicable to the Company and its
subsidiaries primarily involve the discharge of emissions into the
water and air and the use of water, but can also include wetlands
preservation, endangered species, waste disposal and noise
regulations. These laws and regulations in many cases require a
lengthy and complex process of obtaining licenses, permits and
approvals from federal, state and local agencies.
Noncompliance with environmental laws and regulations can result
in the imposition of civil or criminal fines or penalties. In some
instances, environmental laws also may impose clean-up or other
remedial obligations in the event of a release of pollutants or
contaminants into the environment. The following federal laws are
among the more significant environmental laws that may apply to the
Company and its subsidiaries. In most cases, analogous state laws
also exist that may impose similar, and in some cases more stringent,
requirements on the Company and its subsidiaries.
Clean Air Act
The Federal Clean Air Act, as amended (the "Clean Air Act"),
provides for the regulation, largely through state implementation of
federal requirements, of ambient air quality and emissions of air
pollutants from certain facilities and operations. As originally
enacted, the Clean Air Act set guidelines for emissions standards
for major pollutants (e.g., sulfur dioxide and nitrogen oxide) from
new sources. The 1990 Clean Air Act Amendments tightened regulations
on emissions from existing sources, particularly previously exempted
older power plants. The Company believes that the Panda-Rosemary
Facility is in compliance with federal performance standards mandated
for such plants under the Clean Air Act. The Company also believes
that the Panda-Brandywine Facility, now under construction, will meet
standards applicable to the plant under the Clear Air Act.
Clean Water Act
The Federal Clean Water Act, as amended (the "Clean Water Act"),
also provides for the regulation, largely through state
implementation of federal requirements, of the quality of surface
waters and imposes limitations on discharges to those waters from
point sources, including certain facilities and operations. The water
quality standards established under the Clean Water Act are used as
the basis for developing specific pollutant discharge limitations
from point sources. The discharge limitations are incorporated into
permits called National Pollutant Discharge Elimination System
("NPDES") permits. The Company believes that the Panda-Rosemary
Facility is in compliance with the federal and state requirements
applicable through its NPDES wastewater discharge permit under the
Clean Water Act. The Clean Water Act also imposes requirements with
respect to the discharge of stormwater runoff from industrial sites.
Those requirements are implemented through state stormwater discharge
permits, one of which has been obtained for the Panda-Rosemary
Facility. The Company believes that the operation of the Panda-
Rosemary Facility complies with the requirements of its stormwater
discharge permit. The Clean Water Act also restricts discharges of
fill materials to wetlands. The Panda-Rosemary Facility obtained
approval for discharges in connection with its construction. The
Company believes that the Panda-Brandywine Facility meets standards
applicable to it under the Clean Water Act.
Resource Conservation and Recovery Act
The Resource Conservation and Recovery Act of 1976 ("RCRA")
regulates the generation, treatment, storage, handling,
transportation and disposal of solid and hazardous waste. The Company
believes that it and its subsidiaries are in material compliance with
solid and hazardous waste requirements under RCRA.
Comprehensive Environmental Response, Compensation, and Liability Act
The Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended ("CERCLA" or "Superfund"), requires
the remediation of sites from which there has been a release or
threatened release of hazardous substances and authorizes the United
States Environmental Protection Agency to take any necessary response
action at Superfund sites, including ordering potentially responsible
parties liable for the release to take or pay for such actions.
Potentially Responsible Parties are broadly defined under CERCLA to
include past and present owners and operators of such sites, as well
as generators, arrangers and transporters of wastes sent to a site.
MANAGEMENT
Director, Independent Director and Officers of the Issuer and the Company
The number of members of the Board of Directors of each of the
Issuer and the Company has been set initially at one, but the number
may be increased or decreased by the Board of Directors or the
stockholders. Directors of each of the Issuer and the Company are
elected annually and each elected director holds office until a
successor is elected. Robert W. Carter was appointed the sole
director of each of the Issuer and the Company at the time of their
formation in July 1996.
The Certificate of Incorporation of each of the Issuer and the
Company also provides that the corporation shall always have an
individual serving as an "Independent Director" who shall have the
right to vote or consent only on, and whose affirmative vote or
consent shall be required with respect to, any decision by the
corporation or the Board of Directors to (i) file a bankruptcy
petition, make an assignment for the benefit of creditors, apply for
the appointment of a custodian, receiver or trustee for the
corporation or its property, consent to the filing of such proceeding
or admit in writing to the corporation's inability to pay its debts
generally as they become due; (ii) commence the dissolution,
liquidation, consolidation, merger or sale of all or substantially
all of the assets of the corporation; (iii) amend the Certificate of
Incorporation to broaden the purposes of the corporation and in other
respects; or (iv) authorize the corporation to engage in any activity
other than those set forth in the Certificate of Incorporation. The
Certificate of Incorporation of each of the Issuer and the Company
provides that the Independent Director shall be a person who is not
and has not been, for the five years preceding his election, (i) a
direct or indirect legal or beneficial owner of the corporation or
its affiliates (or a member of the immediate family of such owner),
(ii) a creditor, supplier, officer, director, promoter, underwriter,
manager or contractor of the corporation or any of its affiliates (or
a member of the immediate family of any such officer or director) or
(iii) a person (or a member of the immediate family of a person)
employed by the corporation or any of its affiliates or by any
creditor, supplier, employee, stockholder, officer, director,
promoter, underwriter, manager or contractor thereof. The Independent
Director may, however, serve in such capacity for other special
purpose subsidiaries of Panda International. In July 1996, Brian G.
Trueblood was elected as the Independent Director of each of the
Issuer and the Company. Mr. Trueblood also serves as the Independent
Director for Panda Interholding, PRC II, PR Corp. and Panda-Rosemary
Funding Corporation.
The following table sets forth the names and ages of the
director, the Independent Director and the executive officers of each
of the Issuer and the Company and their positions with the Issuer and
the Company. Since the formation of the Issuer and the Company, each
executive officer of the Issuer and the Company has held the same
office(s) with the Issuer and the Company that he or she has held
with Panda International, PEC and each other corporation that is
currently a direct or indirect subsidiary of the Company.
Name Age Position with the Issuer and the Company
Robert W. Carter 58 Director, Chairman of the Board, President
and Chief Executive Officer
Janice Carter 55 Executive Vice President, Secretary and
Treasurer
William C. Nordlund 42 Senior Vice President and General Counsel
Marjean Henderson 45 Senior Vice President and Chief Financial
Officer
James D. (Pete) Wright 42 Senior Vice President, Project Finance and
Acquisitions
Brian G. Trueblood 35 Independent Director
Robert W. Carter has been the Chairman of the Board and Chief
Executive Officer of Panda International since January 1995. Mr.
Carter has held similar chief executive positions with PEC and its
subsidiaries since he founded PEC in 1982. Mr. Carter also is
President of Robert Carter Oil & Gas, Inc. (an oil and gas
exploration company), which he founded in 1980. From 1978 to 1980,
Mr. Carter was Vice President of oil and gas lease sales for Reserve
Energy Corporation (an oil and gas exploration company). From 1974 to
1978, he served as a marketing consultant to Forward Products, Inc.
(a petrochemical company). Mr. Carter was Executive Vice President of
Blasco Industries (a chemical and textile manufacturer) from 1970 to
1974. He served as a sales representative and sales manager for Olin
Mathieson Chemical Corporation (a petrochemical, pulp and paper
company) from 1965 to 1970. From 1960 to 1965, he was a sales
representative for Inland, Mead Paper Company in Atlanta. Mr. Carter
attended the University of Georgia.
Janice Carter has been the Executive Vice President, Secretary,
Treasurer and a Director of Panda International since January 1995
and has served as a Director of PEC from its organization in 1982 to
October 1995. Mrs. Carter has also served as an officer of PEC in the
capacities described above since its inception in 1982. From 1975 to
1980, Mrs. Carter was office manager of Reserve Energy Corporation.
From 1969 to 1972, Mrs. Carter worked for University Computing, and
from 1962 to 1968 she directed administration for the engineering
department of Otis Engineering, a division of Halliburton
International. Mrs. Carter also serves as Vice President and
Secretary/Treasurer of Robert Carter Oil & Gas, Inc. Mrs. Carter
attended Texas Tech University. Mrs. Carter is married to Robert W.
Carter.
William C. Nordlund has served as Senior Vice President and
General Counsel of Panda International and PEC since August 1996.
Prior thereto, he served as Vice President and General Counsel of
Panda International since January 1995 and of PEC since January 1994.
Mr. Nordlund was General Counsel of PEC from April 1993 to January
1994. He was Senior Vice President and General Counsel from August
1992 to April 1993 and Vice President and General Counsel from
September 1991 to August 1992 for The Oxford Energy Company (a
developer of independent power facilities). From July 1990 to
September 1991, Mr. Nordlund was an attorney with Constellation
Holdings, Inc., an affiliate of Baltimore Gas & Electric Company
which developed independent power facilities. Prior to July 1990, he
was a partner in the law firm of Winston & Strawn in Chicago. Mr.
Nordlund earned a Bachelor of Arts degree from Vanderbilt University,
a Juris Doctor degree from Duke University and a Master of Management
degree from the J.L. Kellogg Graduate School of Business at
Northwestern University.
Marjean Henderson has been Senior Vice President and Chief
Financial Officer of Panda International since August 1996 and a
Director of Panda International since January 1995. Ms. Henderson
served as a Director of PEC from January 1993 to October 1995. Prior
to joining Panda International Ms. Henderson was the Senior Vice
President, Chief Financial Officer, Treasurer and Secretary for Nest
Entertainment, the producer and distributor of children's animated
home videos and movies. From 1987 to 1993, Ms. Henderson was the Vice
President, Chief Financial Officer, Treasurer and Secretary at RCL
Enterprises, the holding company for the Lyons Group/Lyrick Studios,
the creator, producer and distributor of the home video television
series, "Barney, the Purple Dinosaur." Ms. Henderson was previously
with Arthur Andersen and Co. for twelve years, specializing in the
energy and distribution industries, with significant initial public
offering responsibilities. Ms. Henderson earned a BBA with a
concentration in accounting from the University of Texas at Austin
and she is a Certified Public Accountant.
James D. (Pete) Wright has served as Senior Vice President,
Project Finance and Acquisitions of Panda International and PEC since
August 1996. Prior thereto, he served as Vice President and Chief
Financial Officer of Panda International since January 1995 and of
PEC since January 1994. Mr. Wright served as Chief Financial Officer
of PEC from February 1993 to January 1994. Prior to joining PEC in
February 1993, he served as Vice President of Banc One Capital
Corporation (a merchant banking group) from May 1986 to December
1992. Mr. Wright previously held the position of Vice President with
the investment banking firms of Schneider, Bernet & Hickman, Inc. in
Dallas and Wheat, First Securities, Inc. in Richmond, Virginia. Mr.
Wright earned a Bachelor of Science degree from Vanderbilt University
and a Master of Business Administration degree from the Colgate
Darden Graduate School of Business Administration of the University
of Virginia.
Brian G. Trueblood became the Independent Director of the Issuer
and the Company in July 1996. He has served as Vice President of TNS
Partners, Inc. (a Dallas-based retained executive search firm) since
August 1994. From September 1989 to August 1994, Mr. Trueblood served
as a senior partner in the Dallas office of Lucas Associates (an
Atlanta-based executive search firm). Mr. Trueblood received a
Bachelor of Science degree in general engineering from the United
States Military Academy.
Executive and Board Compensation and Benefits
No cash or non-cash compensation was paid in any prior year or
is proposed to be paid in the current calendar year to any of the
officers and directors listed under "Management" for their services
to the Issuer or the Company. Mr. Trueblood will be paid $1,000 per
year by each of the Issuer and the Company for serving as an
Independent Director thereof.
DESCRIPTION OF THE PROJECT DEBT
The Panda-Rosemary Financing
Concurrently with the Prior Offering, Panda-Rosemary Funding
Corporation (the "Rosemary Issuer"), a wholly-owned subsidiary of the
Panda-Rosemary Partnership, consummated the offering and sale (the
"Rosemary Offering") of $111.4 million in aggregate principal amount
of its 8-5/8% First Mortgage Bonds due 2016 (the "Rosemary Bonds").
The Rosemary Bonds were issued pursuant to an indenture among the
Panda-Rosemary Partnership, the Rosemary Issuer and Fleet National
Bank, as trustee (the "Rosemary Indenture"). The following
description of the Rosemary Bonds and certain provisions of the
Rosemary Indenture does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, the Rosemary
Indenture, a copy of which is attached as an exhibit to the
Registration Statement of which this Prospectus constitutes a part.
Interest and Principal Payments
The Rosemary Bonds bear interest at the rate of 8-5/8% per year
from July 31, 1996, the date of original issuance, or from the most
recent interest payment date to which interest has been paid or
provided for, payable quarterly on February 15, May 15, August 15 and
November 15, commencing February 15, 1997. Principal of the Rosemary
Bonds is payable in semiannual installments as follows:
<TABLE>
<CAPTION>
Percentage Percentage
of Original of Original
Principal Principal
Payment Date Amount Payable Payment Date Amount Payable
<C> <C> <C> <C>
November 15, 1996 1.2356% August 15, 2006 0.9632%
February 15, 1997 1.2356% November 15, 2006 0.9632%
May 15, 1997 1.2344% February 15, 2007 0.9632%
August 15, 1997 1.2344% May 15, 2007 1.0081%
November 15, 1997 1.2344% August 15, 2007 1.0081%
February 15, 1998 1.2344% November 15, 2007 1.0081%
May 15, 1998 1.3291% February 15, 2008 1.0081%
August 15, 1998 1.3291% May 15, 2008 1.0558%
November 15, 1998 1.3291% August 15, 2008 1.0558%
February 15, 1999 1.3291% November 15, 2008 1.0558%
May 15, 1999 1.1429% February 15, 2009 1.0558%
August 15, 1999 1.1429% May 15, 2009 1.1039%
November 15, 1999 1.1429% August 15, 2009 1.1039%
February 15, 2000 1.1429% November 15, 2009 1.1039%
May 15, 2000 1.2282% February 15, 2010 1.1039%
August 15, 2000 1.2282% May 15, 2010 1.1541%
November 15, 2000 1.2282% August 15, 2010 1.1541%
February 15, 2001 1.2282% November 15, 2010 1.1541%
May 15, 2001 1.3196% February 15, 2011 1.1541%
August 15, 2001 1.3196% May 15, 2011 1.2168%
November 15, 2001 1.3196% August 15, 2011 1.2168%
February 15, 2002 1.3196% November 15, 2011 1.2168%
May 15, 2002 1.4124% February 15, 2012 1.2168%
August 15, 2002 1.4124% May 15, 2012 1.2772%
November 15, 2002 1.4124% August 15, 2012 1.2772%
February 15, 2003 1.4124% November 15, 2012 1.2772%
May 15, 2003 1.5119% February 15, 2013 1.2772%
August 15, 2003 1.5119% May 15, 2013 1.3359%
November 15, 2003 1.5119% August 15, 2013 1.3359%
February 15, 2004 1.5119% November 15, 2013 1.3359%
May 15, 2004 1.6192% February 15, 2014 1.3359%
August 15, 2004 1.6192% May 15, 2014 1.3888%
November 15, 2004 1.6192% August 15, 2014 1.3888%
February 15, 2005 1.6192% November 15, 2014 1.3888%
May 15, 2005 1.7273% February 15, 2015 1.3888%
August 15, 2005 1.7273% May 15, 2015 1.3534%
November 15, 2005 1.7273% August 15, 2015 1.3534%
February 15, 2006 1.7273% November 15, 2015 1.3534%
May 15, 2006 0.9632% February 15, 2016 1.3534%
</TABLE>
Collateral
All obligations of the Rosemary Issuer with respect to the
Rosemary Bonds are unconditionally guaranteed by the Panda-Rosemary
Partnership. The obligations of the Panda-Rosemary Partnership under
the guaranty, as well as certain other obligations, are secured by
(i) liens on, and security interests in, substantially all of the
assets of the Panda-Rosemary Partnership, including the Panda-
Rosemary Facility, (ii) pledges by each of PR Corp. and PRC II, which
are wholly-owned indirect subsidiaries of the Company, of their
respective interests in the Panda-Rosemary Partnership and (iii)
pledges of all of the capital stock of the Rosemary Issuer and each
of PR Corp. and PRC II.
Partnership Distributions
Subject to certain limited exceptions, distributions may be made
by the Panda-Rosemary Partnership to its partners only from, and to
the extent of, amounts then on deposit in the Panda-Rosemary
Partnership distribution fund established pursuant to the Rosemary
Indenture. Such distributions may only be made upon the satisfaction
of the following conditions: (i) amounts deposited in certain funds
established pursuant to the Rosemary Indenture shall be equal to or
greater than the amount then required to be deposited therein,
including the debt service and debt service reserve funds; (ii) no
event or condition has occurred and is continuing that constitutes a
default or an event of default under the Rosemary Indenture; and
(iii) if there has been a loss of QF status, the Panda-Rosemary
Facility has achieved a permitted alternative utility status. In
addition, except for certain limited exceptions, the Panda-Rosemary
Partnership may not make distributions unless (i) the average of the
debt service coverage ratios for the two semi-annual payment periods
on the Rosemary Bonds immediately preceding the distribution date is
at least 1.2:1 and (ii) after giving effect to such distributions,
the average of the projected debt service coverage ratios for the
current semi-annual payment period and the next succeeding semi-
annual payment period on the Rosemary Bonds is at least 1.2:1.
Notwithstanding the requirements of the immediately preceding
sentence, the Panda-Rosemary Partnership may make distributions to
its partners solely for the purpose of enabling the partners to pay
their income tax liabilities if a lower debt service coverage ratio
(1.1:1) and projected debt service coverage ratio (1.1:1) for certain
periods exist. Except for certain limited exceptions set forth in the
Rosemary Indenture, the Panda-Rosemary Partnership will not be
permitted to make any distributions to its partners after November
30, 2005 unless (i) the Rosemary Gas Supply Agreement and the Firm
Gas Transportation Agreements have been extended on substantially the
same terms to have a termination date no earlier than the longest
stated maturity of the Rosemary Bonds, (ii) the Rosemary Gas Supply
Agreement and the Firm Gas Transportation Agreements, if not so
extended on substantially the same terms, have been otherwise
extended to have a termination date no earlier than the longest
stated maturity of the Rosemary Bonds and the rating agencies confirm
that the then current rating of the Rosemary Bonds will not be
reduced as a result of such extension or (iii) the Rosemary Gas
Supply Agreement and the Firm Gas Transportation Agreements, if not
extended as described in clause (i) or (ii), are replaced with a new
gas supply agreement or gas transportation agreement (or with respect
to a transportation agreement, a gas transportation plan), provided
that the effect of the replacement agreement or plan would not reduce
the average of the annual projected debt service coverage ratios for
the remaining term of the Rosemary Bonds below 1.2:1 and the rating
agencies confirm that the then current ratings of the Rosemary Bonds
will not be reduced as a result of such replacement.
Certain Other Covenants
The Rosemary Indenture contains numerous other affirmative and
negative covenants which restrict the activities of the Rosemary
Issuer and the Panda-Rosemary Partnership, including, but not limited
to, the following:
(i) prohibition against incurring debt (including guaranties of
debt) except as described below, and a prohibition against
other guaranties except certain permitted guaranties;
(ii) a prohibition against creating or suffering to exist
liens on any of their respective properties other than
certain permitted liens;
(iii) a prohibition against selling, leasing or otherwise
disposing of any property or assets except worn-out
equipment and certain property with a fair market value not
in excess of $3.0 million in the aggregate in any one year
and, with respect to any single item of property, a fair
market value in excess of $1.0 million, and certain other
exceptions;
(iv) a limitation on the Panda-Rosemary Partnership's
ability to enter into new project agreements or to
terminate, amend or modify certain project agreements unless
certain tests are satisfied;
(v) a limitation on the ability of the Panda-Rosemary
Partnership and the Rosemary Issuer to merge or consolidate
with or into any person, or acquire all or any substantial
part of the assets or business of any person, or form
subsidiaries; and
(vi) covenants regarding compliance with laws and
governmental regulations, maintenance of government
approvals, employee benefit plans, affiliate transactions,
payment of taxes, the preparation of various budgets and
reports, the maintenance of specified insurance coverages
and other matters.
The debt that the Rosemary Issuer is permitted to incur is
limited to the Rosemary Bonds, other series of bonds permitted to be
issued under the Rosemary Indenture and certain other indebtedness
ranking pari passu or subordinate to the Rosemary Bonds and such
other series of bonds, the proceeds of which are loaned to the Panda-
Rosemary Partnership. The debt permitted by the Rosemary Indenture to
be incurred by the Rosemary Issuer or the Panda-Rosemary Partnership
includes: (i) purchase money or capitalized lease obligations not
exceeding $1.0 million in the aggregate outstanding at any time; (ii)
trade accounts payable; (iii) working capital loans or letter of
credit reimbursement obligations if the minimum annual projected debt
service coverage ratios for the remaining term of the Rosemary Bonds
and the average of the annual projected debt service coverage ratios
for the remaining term of the Rosemary Bonds equal or exceed 1.5:1
and 1.75:1, respectively; (iv) debt incurred to finance enhancements
to or modifications of the Panda-Rosemary Facility if, after giving
effect to such debt, the same minimum and average annual projected
debt service coverage ratios are satisfied (or, if the enhancement is
required to maintain QF status, each of such debt service coverage
ratios described above is at least 1.2:1); (v) certain interest rate
protection agreements; (vi) guaranties arising in the ordinary course
of business not exceeding $1.0 million in the aggregate; and (vii)
various indemnities with respect to mechanics and other liens,
obligations to governmental authorities, surety bonds and guaranties,
indemnities or similar obligations provided under or required by a
Panda-Rosemary Project agreement.
Events of Default
Events of default under the Rosemary Indenture include: (i) a
default in the payment of principal of, interest on or premium, if
any, on any Rosemary Bonds; (ii) any misrepresentation made by the
Panda-Rosemary Partnership or the Rosemary Issuer under the Rosemary
Indenture which has resulted in a material adverse change; (iii) the
breach by the Panda-Rosemary Partnership or the Rosemary Issuer of
any covenant under the Rosemary Indenture or related collateral
documents; (iv) the bankruptcy or insolvency of the Panda-Rosemary
Partnership or the Rosemary Issuer; (v) a final judgment or judgments
for the payment of money in excess of $1.0 million rendered against
either of the Panda-Rosemary Partnership or the Rosemary Issuer
unless covered by indemnity or insurance; (vi) a default on certain
other debt of the Panda-Rosemary Partnership or the Rosemary Issuer;
(vii) the termination or expiration of certain Project agreements to
which the Panda-Rosemary Partnership is a party (some of which are
currently scheduled to expire prior to the maturity date of the
Rosemary Bonds; see "Partnership Distributions" above); (viii) the
cessation of liens or certain collateral; (ix) a modification of
certain Project agreements which results in a material adverse
change; (x) Panda International shall cease to own directly or
indirectly 51% of the capital stock of PR Corp. or PRC II; and (xi)
PR Corp. shall withdraw or be removed as general partner of the Panda-
Rosemary Partnership. Upon the occurrence of an event of default and
after the lapse of certain applicable cure periods, the trustee under
the Rosemary Indenture has the right, among other things, to
accelerate the maturity of the Rosemary Bonds and to direct a
collateral agent to foreclose the mortgage on the Panda-Rosemary
Facility and otherwise realize upon the collateral securing the
repayment of the Rosemary Bonds and other secured obligations,
including the capital stock of PR Corp. and PRC II (through which the
Company holds an indirect equity interest in the Panda-Rosemary
Partnership).
Debt Service Reserve Fund
Upon issuance of the Rosemary Bonds, the Panda-Rosemary
Partnership deposited approximately $8.1 million into the debt
service reserve fund established under the Rosemary Indenture. The
balances that must be maintained in the debt service reserve fund
generally decline over the life of the Rosemary Bonds. In addition,
the Panda-Rosemary Partnership is required to maintain in the debt
service reserve fund an amount equal to the maximum amount of debt
service due in respect of certain other debt permitted under the
Rosemary Indenture for any six-month period during the succeeding
three-year period. The debt service reserve fund may be drawn upon to
pay principal of, premium, if any, and interest on the Rosemary
Bonds, any additional series of bonds issued under the Rosemary
Indenture and certain debt permitted under the Rosemary Indenture, to
the extent of funds allocated within the debt service reserve fund to
such obligations, if funds otherwise available for such payments are
insufficient.
Rating
The Rosemary Bonds have been rated Baa3 by Moody's Investors
Service, Inc. and BBB- by Duff & Phelps Rating Co. Inc.
The Panda-Brandywine Financing
The Panda-Brandywine Partnership, PBC and GE Capital entered
into the Construction Loan Agreement and Lease Commitment (the
"Brandywine Loan Agreement") dated as of March 30, 1995, pursuant to
which GE Capital has agreed, either directly or indirectly through an
owner trustee, to (i) provide construction financing for the Panda-
Brandywine Facility, (ii) issue letters of credit as security for
certain obligations of the Panda-Brandywine Partnership under the
Brandywine Power Purchase Agreement, (iii) lease the Panda-Brandywine
Facility site from, and immediately thereafter sublease the site to,
the Panda-Brandywine Partnership, (iv) upon completion of the
construction of the Panda-Brandywine Facility, purchase the Panda-
Brandywine Facility from the Panda-Brandywine Partnership and lease
the Panda-Brandywine Facility back to the Panda-Brandywine
Partnership and (v) upon completion of the construction of the Panda-
Brandywine Facility, make certain equity loans to the Panda-
Brandywine Partnership or its partners. The following description of
the Brandywine Loan Agreement does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the
Brandywine Loan Agreement, including definitions therein not
contained in this Prospectus, a copy of which is attached as an
exhibit to the Registration Statement of which this Prospectus
constitutes a part.
Construction Loans
Pursuant to the Brandywine Loan Agreement, GE Capital has
committed to make construction loans to the Panda-Brandywine
Partnership in the maximum aggregate principal amount of $215 million
(the "Brandywine Construction Loan Facility"), the proceeds of which
must be used to pay costs incurred by the Panda-Brandywine
Partnership in connection with the development and construction of
the Panda-Brandywine Facility. As of June 30, 1996, the Panda-
Brandywine Partnership had borrowed an aggregate of approximately
$174.0 million under the Brandywine Construction Loan Facility.
Construction of the Panda-Brandywine Facility was complete in
September 1996. All construction loans reach maturity, and are due
and payable on, the earlier of (i) the date that the Panda-Brandywine
Facility is sold to GE Capital and leased back to the Panda-
Brandywine Partnership and (ii) December 1, 1996. The Company
anticipates that the sale/lease-back closing date will occur in
November 1996. If the sale/lease-back closing date occurs prior to
December 1, 1996, the Panda-Brandywine Partnership may draw the
remaining funds available under the Brandywine Construction Loan
Facility to establish balances which are required to be maintained in
certain funds pursuant to the Panda-Brandywine Facility lease and, if
all project costs have then been paid, the remainder can be drawn for
working capital purposes. Interest is payable, at the Panda-
Brandywine Partnership's option, in one-, two- or three-month
intervals. Interest accrues on the aggregate unpaid principal amount
of all outstanding construction loans at a rate equal to the sum of a
Eurodollar base rate corresponding to the interest period for such
loan and 250 basis points and, upon the occurrence and during the
continuance of an event of default, an additional 200 basis points.
The Panda-Brandywine Partnership pays to GE Capital a fee equal to
0.5% per annum of the average daily unused balance of the Brandywine
Construction Loan Facility. If certain events of loss occur
(including the destruction, condemnation, confiscation or seizure of,
or requisition of title to, the Panda-Brandywine Facility) and, in
the case of physical damage, the Panda-Brandywine Facility is not
repaired, then the construction loans become subject to mandatory
prepayment.
Letters of Credit
GE Capital has agreed to issue and deliver stand-by letters of
credit for the account of the Panda-Brandywine Partnership in favor
of PEPCO to secure certain obligations of the Panda-Brandywine
Partnership under the Brandywine Power Purchase Agreement. The
"Development Security Letter of Credit," in the stated amount of
$3.45 million, is currently outstanding and will expire on the
earlier to occur of 40 days after the commercial operations date and
June 30, 1998. The Development Security Letter of Credit secures the
Panda-Brandywine Partnership's obligation to ensure that the Panda-
Brandywine Facility reaches commercial operations not later than June
1, 1997. The "Performance Letter of Credit," in the stated amount of
$2.0 million, will be issued on the commercial operations date and
will expire on the next succeeding December 31 unless earlier
terminated, and thereafter may be renewed for each succeeding
calendar year during the term of the Panda-Brandywine Loan Agreement
and the Panda-Brandywine Facility lease. PEPCO may draw on the
Performance Letter of Credit to pay any monetary damages awarded to
it as a result of the termination of the Brandywine Power Purchase
Agreement after the commercial operations date to the extent that
such damages are not the result of events covered by liquidated
damages. The "O&M Letter of Credit" will be issued in the stated
amount of $1.0 million on the later of December 31, 1998 and the
second anniversary of the commercial operations date, will expire on
the next succeeding December 31 unless earlier
terminated, and thereafter is increased and may be renewed for each
succeeding calendar year up to a maximum stated amount of $5.0
million. PEPCO may draw on the O&M Letter of Credit to pay certain
maintenance expenses relating to the Panda-Brandywine Facility.
The aggregate stated amount of all letters of credit outstanding
at any one time under the Brandywine Loan Agreement cannot exceed a
specified aggregate amount, currently $10.45 million. The Panda-
Brandywine Partnership is obligated to reimburse GE Capital for any
disbursement under any letter of credit on the day that GE Capital
makes any payment to a beneficiary thereof. If the Panda-Brandywine
Partnership does not reimburse GE Capital on such day, it must pay
interest on the amount not reimbursed at a rate per annum equal to
the base rate applicable to the loans made under the Brandywine
Construction Loan Facility plus 265 basis points. The Panda-
Brandywine Partnership is obligated to pay to GE Capital an issuance
fee of 1.75% of the stated amount of each letter of credit, a letter
of credit fee of 1.5% per annum on the aggregate stated amounts of
all outstanding letters of credit and a commitment fee of 1.25% per
annum on the unused balance of the letter of credit commitment.
Collateral
The loans made under the Brandywine Construction Loan Facility
are secured by (i) a pledge of, and a security interest in,
substantially all of the assets of the Panda-Brandywine Partnership,
(ii) pledges by PBC and Panda Energy Delaware, which are indirect
wholly-owned subsidiaries of the Company, of their respective
interests in the Panda-Brandywine Partnership and (iii) pledges of
all the capital stock of PBC, Panda Energy Delaware, and Brandywine
Water Company, which is an indirect wholly-owned subsidiary of the
Company that operates the distilled water facility serving as the
steam host for the Panda-Brandywine Facility.
Brandywine Facility Lease
After construction of the Panda-Brandywine Facility is
substantially complete, the Panda-Brandywine Partnership has agreed
to sell the Panda-Brandywine Facility to an owner trustee at the
Panda-Brandywine Partnership's cost, payable by GE Capital on behalf
of the owner trustee, at which time the Panda-Brandywine Partnership
has agreed to lease (the "Brandywine Facility Lease") the Panda-
Brandywine Facility from the owner trustee.
The initial term of the Brandywine Facility Lease is 20 years.
Basic rent is payable quarterly, beginning on the last business day
of the calendar month that is three months after the sale/lease-back
closing date, at the percentages of the Brandywine Lessor's cost
listed below:
Basic Rent Factors
Basic Rent Payment (Percentage of Lessor's Cost)
1 0.00000
2 1.02334
3-4 1.26434
5 1.25312
6-8 1.24765
9-12 2.21498
13-16 2.38930
17-20 3.21281
21-24 3.32682
25-28 3.37790
29-32 3.40402
33-36 3.44410
37-40 3.44095
41-44 3.54688
45-48 3.68489
49-52 3.79178
53-56 4.06738
57-60 4.26030
61-64 4.98855
65-68 5.21087
69-72 5.40858
73-76 5.38827
77-80 4.92324
These percentages are based on a series of assumptions expected
to prevail at the time of lease conversion and are subject to
adjustment based on differences between those assumptions and actual
conditions at the time of lease conversion. These assumptions include
certain U.S. tax treatment in connection with the Brandywine Facility
Lease, the date of the lease conversion, a treasury bill rate index,
the federal income tax rate to which GE Capital is subject and the
final construction cost of the Panda-Brandywine Facility.
In addition, and from time to time, GE Capital may require the
Panda-Brandywine Partnership to pay, as supplemental rent, (i)
amounts to GE Capital in reimbursement of certain letters of credit
issued by GE Capital, (ii) amounts due to GE Capital under any
outstanding equity loans, (iii) certain tax liabilities of GE Capital
and (iv) interest payable to GE Capital with respect to overdue rent
payments. Base rent amounts may be adjusted to negate any adverse
affect on GE Capital's net economic return arising from changes in
tax laws and other factors that occur prior to the sale/lease-back
closing date. At the end of the initial lease term, so long as no
default or event of default shall have occurred and be continuing
under the Brandywine Facility Lease, the Panda-Brandywine Partnership
may renew the Brandywine Facility Lease for two consecutive five-year
terms. Alternatively, the Panda-Brandywine Partnership may purchase
the Panda-Brandywine Facility in exchange for its fair market sales
value at the end of the initial lease term or any renewal term. If
the Panda-Brandywine Partnership does not renew the Brandywine
Facility Lease or purchase the Panda-Brandywine Facility, it must
surrender possession of the Panda-Brandywine Facility.
Lease Reserve Accounts
The Panda-Brandywine Partnership is required to fund an
"Operation and Maintenance Reserve Account" on the sale/lease-back
closing date in the amount of $1.0 million. Thereafter, until the
balance of such reserve account reaches $5.0 million, the Panda-
Brandywine Partnership must make quarterly contributions to this
reserve account of $125,000 in each of the first eight calendar
quarters and $375,000 for each of the next eight calendar quarters.
After any withdrawal from the Operation and Maintenance Reserve
Account, the Panda-Brandywine Partnership must contribute one-half of
its cash flow remaining after payment of project expenses, rent,
letter of credit fees and debt service ("Brandywine Available Cash
Flow") to such reserve account, in addition to any required
contribution, until the amount of the withdrawal has been deposited.
The Panda-Brandywine Partnership is required to fund a "Rent Reserve
Account" on the sale/lease-back closing date in the amount of $2.4
million. If at any time the sum of the next two payments of basic
rent exceeds the balance in the Rent Reserve Account, the Panda-
Brandywine Partnership must contribute one-half of Brandywine
Available Cash Flow (less any required deposits into the Operation
and Maintenance Reserve Account) ("Brandywine Distributable Cash
Flow") to such reserve account until the balance is restored to $2.4
million. After any withdrawal from the Rent Reserve Account, the
Panda-Brandywine Partnership must contribute 100% of Brandywine
Distributable Cash Flow to such reserve account, in addition to any
required contribution, until the balance is restored to $2.4 million.
The Panda-Brandywine Partnership is required to fund a "Warranty
Maintenance Reserve Account" on the sale/lease-back closing date in
the amount of $750,000, which account will be terminated on the day
that the turbine warranty expires and in any event not later than the
second anniversary of the final completion date. The required
balances of all other reserve accounts must be maintained for so long
as the Brandywine Facility Lease is in effect. If the Panda-
Brandywine Partnership receives a notice from PEPCO that PEPCO has
determined that the Panda-Brandywine Partnership has failed to comply
with its obligation under the Brandywine Power Purchase Agreement to
have a reliable supply of fuel for the Panda-Brandywine Facility,
then the Panda-Brandywine Partnership is required to establish and
fund a "Special Account" with 100% of the excess, if any, of
Brandywine Distributable Cash Flow over required contributions to the
Rent Reserve Account, required prepayments of any equity loan and
debt service on all equity loans until such notice is rescinded or
the fuel default is cured. Any funds remaining in the Special Account
after the cure of the fuel default will be transferred to a blocked
account.
Equity Loans
On the date of final completion of the Panda-Brandywine
Facility, subject to the same conditions precedent as are applicable
to the sale/lease-back closing, GE Capital will make available to the
Panda-Brandywine Partnership, or to PBC and Panda Energy Delaware,
jointly and severally, a multiple draw credit facility (the
"Brandywine Equity Loan Facility") of up to $20 million. The
Brandywine Equity Loan Facility may be drawn against for four years
and will permit not more than four draws of a minimum amount of $4.0
million per draw. Interest will be payable on amounts drawn against
the Brandywine Equity Loan Facility at a rate per annum equal to 515
basis points over the applicable treasury rate in effect at the time
of each draw. The loans borrowed under the Equity Loan Facility will
mature 15 years after the sale/lease-back closing date. If the
Brandywine Equity Loan Facility is made available to the Panda-
Brandywine Partnership, then the loans made thereunder will be
secured with the same collateral that secures the construction loans
and other obligations of the Panda-Brandywine Partnership. If the
Brandywine Equity Loan Facility is made available to PBC and Panda
Energy Delaware, then the loans made thereunder shall be non-recourse
to the Panda-Brandywine Partnership and will be secured by a pledge
of the stock of PBC and Panda Energy Delaware and their respective
partnership interests in the Panda-Brandywine Partnership. The
documentation relating to the Brandywine Equity Loan Facility will
include substantially the same representations, warranties,
conditions precedent, covenants and defaults as are contained in the
Brandywine Loan Agreement.
Partnership Distributions
The Brandywine Loan Agreement and the Brandywine Facility Lease
and certain agreements relating thereto (collectively, the
"Brandywine Financing Documents") place limitations on the ability of
the Panda-Brandywine Partnership to make distributions to its
partners. Subject to certain other conditions, the Panda-Brandywine
Partnership may make distributions to its partners only if: (i) all
amounts then required to be deposited in certain reserve accounts
established pursuant to the Brandywine Financing Documents have been
deposited, including rent reserve and operation and maintenance
reserve accounts; (ii) all rent payments then due to GE Capital under
the lease have been paid; (iii) the Panda-Brandywine Facility meets
an operating cash flow to debt service ratio of 1.2:1; and (iv) at
the time of such distribution, and after giving effect thereto, no
default or event of default has occurred and is continuing under the
Brandywine Financing Documents.
Certain Other Covenants
The Brandywine Financing Documents also contain certain
affirmative and negative covenants which restrict the ability of the
Panda-Brandywine Partnership and PBC to take certain actions
including, but not limited to, the following:
(i) a requirement that the Panda-Brandywine Facility be
constructed in compliance with the terms of the Brandywine
Power Purchase Agreement;
(ii) a requirement that the Panda-Brandywine Partnership pay
all of its indebtedness and obligations under the Brandywine
Financing Documents and perform its obligations under the
related project documents;
(iii) a requirement that the Panda-Brandywine Partnership and
PBC maintain their current respective form of organization,
that PBC remain the general partner of the Panda-Brandywine
Partnership and that the Panda-Brandywine Facility be
maintained as a QF;
(iv) a prohibition against mergers, sales of assets other
than electric power and steam, and certain acquisitions;
(v) a prohibition against indebtedness other than under the
Brandywine Loan Agreement and ordinary course legal and
consulting fees incurred in connection with the development
of the Panda-Brandywine Facility;
(vi) a prohibition against amending certain contracts
without the consent of GE Capital;
(vii) a prohibition against entering into leases other than
those specifically contemplated by the Brandywine Loan
Agreement;
(viii) a prohibition against the Panda-Brandywine Partnership
accepting the Panda-Brandywine Facility as substantially
complete without the prior approval of GE Capital;
(ix) a prohibition against the Panda-Brandywine Partnership
paying any project costs, making or committing to make any
capital expenditures, approving additional project
documents, altering the Panda-Brandywine Facility site or
changing the approved budget related to the Panda-Brandywine
Facility, without the prior approval of GE Capital; and
(x) a requirement (set forth in a stock pledge agreement entered
into by Panda Interholding) that all subsidiaries of Panda
Interholding (either existing or subsequently acquired or
formed) which are engaged in the financing, development,
construction or operation of independent power projects or
energy transmission projects located in the United States
(other than the Panda-Kathleen Partnership and the partners
of that partnership) remain as subsidiaries of Panda
Interholding; provided, that the Panda-Kathleen Partnership
and the partners thereof shall continue to be subsidiaries
of PEC and shall be transferred to Panda Interholding within
180 days after the earlier of Financial Closing or the date
of Commercial Operations with respect to such Project, and
provided, further, that Panda Interholding may sell all or
any of the stock of any subsidiary that is subject to this
requirement to any person who is not an affiliate of Panda
Interholding.
Events of Default
The Brandywine Loan Agreement and the Brandywine Facility Lease
contain substantially similar events of default, including but not
limited to: (i) default in the payment of principal or interest on
any indebtedness or any other amount payable under the Brandywine
Loan Agreement; (ii) a misrepresentation contained in any document
furnished to GE Capital by or on behalf of the Panda-Brandywine
Partnership; (iii) a failure of the Panda-Brandywine Partnership or
any affiliate to perform or observe any covenants or obligations
contained in the Brandywine Financing Documents to which it is a
party; (iv) bankruptcy or insolvency of any party to or participant
under any of the Brandywine Financing Documents or other project
agreements related to the construction and operation of the facility;
(v) a judgment or judgments in excess of $150,000 being rendered
against the Panda-Brandywine Partnership, Brandywine Water Company or
PBC and remaining in effect and unstayed for more than 30 days; (vi)
if Panda Interholding shall cease to own, directly or indirectly, 51%
of PBC, Panda Energy Delaware and Brandywine Water Company; and (vii)
a failure to make the rent payments and to observe certain covenants
in the Brandywine Facility Lease, including the maintenance of
certain reserve accounts. Upon an event of default under the
Brandywine Financing Documents, GE Capital may, in addition to other
remedies, foreclose upon or terminate the Brandywine Facility Lease.
DESCRIPTION OF THE EXCHANGE BONDS
The Exchange Bonds will be issued under the Indenture, including
the Series A Supplemental Indenture which forms a part thereof. In
issuing the Exchange Bonds and performing its obligations under the
Indenture, the Issuer is acting both as principal and as agent for
the Company. The following summaries of certain provisions of the
Exchange Bonds, the Company Guaranty, the Indenture and the Security
Documents do not purport to be complete or definitive and are
qualified in their entirety by reference to the full terms of the
Exchange Bonds, the Company Guaranty, the Indenture and the Security
Documents, including the definitions therein of certain terms that
are not otherwise defined in this Prospectus, copies of which are
attached as exhibits to the Registration Statement of which this
Prospectus constitutes a part.
General
The Exchange Bonds constitute one series of the Bonds that may
be issued under the Indenture. The title of the Exchange Bonds is "11-
5/8% Pooled Project Bonds, Series A-1 due 2012." The source of
payment for the Exchange Bonds and all additional series of Bonds, if
any, will be the payments by the Company to the Issuer of principal,
premium, if any, and interest due under the Company Notes and
payments, if any, by the Company under the Company Guaranty. The
principal source of payments under the Company Notes is distributions
to the Company and the PIC Entities from the Project Entities that
own Projects that are part of the Project Portfolio. Thus, while the
Exchange Bondholders have recourse against the Issuer and, through
the Company Guaranty, the Company and the Collateral for payment
should the Issuer be unable to make payments on the Exchange Bonds,
the ability of the Issuer to make such payments depends primarily
upon the performance of the Projects and the ability of the Project
Entities to make distributions to the PIC Entities and ultimately to
the Company. See "Collateral for the Exchange Bonds -- General"
below.
Ranking
The indebtedness evidenced by the Existing Bonds and all
additional series of Bonds, if any, will constitute senior secured
indebtedness of the Issuer. In order for the Company to receive
distributions or payments on a PIC International Entity Note and for
the Issuer then to receive payments from the Company on the Company
Notes, Projects must generate sufficient operating cash flow to pay
all operating expenses, all debt service, debt service and other
reserve requirements and other payment obligations to lenders and
other Project creditors. Therefore, although the Issuer and the
Company have no other secured indebtedness, the Existing Bonds and
the Company Guaranty are effectively subordinated to all liabilities
of the Project Entities incurred in respect of the Projects. See
"Risk Factors -- Financial Risks -- Substantial Leverage; Effective
Subordination of Exchange Bonds" and "Description of the Project
Debt."
Company Guaranty
The obligations of the Issuer under the Existing Bonds and all
additional series of Bonds, if any, will be guaranteed on a senior
secured basis by the Company. Rights of subrogation under the Company
Guaranty will be subordinated to the prior right of the holders of
the Bonds to be paid in full.
Transfer, Exchange and Replacement
The Exchange Bonds will have been registered under the
Securities Act. Based upon its view of interpretations provided to
third parties by the staff of the Commission, the Company believes
that the Exchange Bonds issued pursuant to the Exchange Offer may be
offered for resale, resold and otherwise transferred by holders
thereof (other than any holder which is (i) an Affiliate of the
Company or the Issuer, (ii) a broker-dealer who acquired Old Bonds
directly from the Issuer or (iii) a broker-dealer who acquired Old
Bonds as a result of market making or other trading activities)
without registration under the Securities Act provided that such
Exchange Bonds are acquired in the ordinary course of such holders'
business and such holders are not engaged in, and do not intend to
engage in, and have no arrangement or understanding with any person
to participate in, a distribution (within the meaning of the
Securities Act) of such Exchange Bonds. Each broker-dealer that
receives Exchange Bonds for its own account pursuant to the Exchange
Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Bonds. The Letter of
Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of Exchange
Bonds received in exchange for Old Bonds where such Old Bonds were
acquired by such broker-dealer as a result of market making
activities or other trading activities. The Company and the Issuer
have agreed, for a period of 180 days after the consummation of the
Exchange Offer, to make available a prospectus meeting the
requirements of the Securities Act to any such broker-dealer for use
in connection with any such resale. A broker-dealer that delivers
such a prospectus to a purchaser in connection with such resales will
be subject to certain of the civil liability provisions under the
Securities Act and will be bound by the provisions of the
Registration Rights Agreement (including certain indemnification
rights and obligations). Any holder who tenders in the Exchange Offer
for the purpose of participating in a distribution of the Exchange
Bonds and any other holder that cannot rely upon such interpretations
must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary
resale transaction. In addition, to comply with the securities laws
of certain jurisdictions, if applicable, the Exchange Bonds may not
be offered or sold unless they have been registered or qualified for
sale in such jurisdictions or an exemption from registration or
qualification is available and the conditions thereto have been met.
Subject to any restrictions under applicable federal and state
securities laws, upon registration of transfer of an Exchange Bond
and surrender of the old Exchange Bond, a new Exchange Bond will be
executed and delivered in the name of the new beneficial owner or the
record holder for the new beneficial owner. The security registrar is
not required (i) to issue, register the transfer of or exchange any
physical Exchange Bonds during a period (a) beginning at the opening
of business 15 days before the day of the mailing of notice of
redemption of Exchange Bonds and ending at the close of business on
the day of such mailing and (b) beginning on the regular record date
for the payment of any installment of principal of or interest on the
Exchange Bonds and ending on the date of payment of such installment
of principal or interest or (ii) to issue, register the transfer of
or exchange any physical Exchange Bonds selected for redemption in
whole or in part except the unredeemed portion of any such Exchange
Bonds selected for redemption in part. Subject to the terms of the
Indenture, the Exchange Bonds will be exchangeable at any time into
an equal aggregate amount of Exchange Bonds of different authorized
denominations. The Issuer will maintain an office or agency of the
Security Registrar where Exchange Bonds may be presented for
registration of transfer or exchange, which shall initially be the
corporate trust office of the Trustee in New York, New York. No
service charge shall be made for any transfer or exchange, but the
Issuer or the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in
relation thereto.
Exchange Bonds that become mutilated, destroyed, stolen or lost
will be replaced upon delivery to the Trustee, or delivery to the
Issuer and the Trustee of evidence of the loss, theft or destruction
thereof satisfactory to the Issuer and the Trustee. An indemnity
satisfactory to the Trustee and the Issuer may be required at the
expense of the holder of such Exchange Bond before a replacement
Exchange Bond will, at the Bondholder's cost, be issued.
Payment of Principal and Interest
Interest on the Exchange Bonds will be paid semiannually on each
February 20 and August 20, commencing February 20, 1997 (each, an
"Interest Payment Date"), at the Issuer's option, at the corporate
office of the Trustee or by check mailed on such Interest Payment
Date to the registered owners thereof at the close of business on the
February 6 or August 6, as the case may be, immediately preceding
such Interest Payment Date or, if a Bondholder owning $2.0 million or
more in aggregate principal amount (or such lesser principal amount
as results from all payments of principal and redemptions in respect
of Existing Bonds or any additional series of Bonds in the original
principal amount of $2.0 million) requests in writing, by wire
transfer. Interest shall be calculated on the basis of a 360-day year
consisting of twelve 30-day months.
Principal of the Exchange Bonds is payable semiannually in
installments on each February 20 and August 20, commencing on
February 20, 1997 (each, a "Principal Payment Date"), in the amounts
set forth below, at the Issuer's option, at the corporate office of
the Trustee or by check mailed on such Principal Payment Date to the
registered owners thereof on the close of business on the February 6
or August 6, as the case may be, immediately preceding such Principal
Payment Date or, if a Bondholder owning $2.0 million or more in
aggregate principal amount (or such lesser principal amount as
results from all payments of principal and redemptions in respect of
Existing Bonds or any additional series of Bonds in the original
principal amount of $2.0 million) requests in writing, by wire
transfer.
Percentage of
Original Principal
Payment Date Amount Payable
February 20, 1997 0.2045%
August 20, 1997 0.0000%
February 20, 1998 0.0000%
August 20, 1998 0.0000%
February 20, 1999 0.0000%
August 20, 1999 0.5933%
February 20, 2000 0.6129%
August 20, 2000 0.0000%
February 20, 2001 0.0000%
August 20, 2001 1.3753%
February 20, 2002 1.4691%
August 20, 2002 2.2184%
February 20, 2003 2.3565%
August 20, 2003 2.9328%
February 20, 2004 3.1031%
August 20, 2004 3.2796%
February 20, 2005 3.4687%
August 20, 2005 3.5977%
February 20, 2006 3.7820%
August 20, 2006 2.8098%
February 20, 2007 3.0076%
August 20, 2007 4.8415%
February 20, 2008 5.1145%
August 20, 2008 5.0057%
February 20, 2009 5.2949%
August 20, 2009 5.5185%
February 20, 2010 5.8300%
August 20, 2010 5.7248%
February 20, 2011 6.0590%
August 20, 2011 6.4800%
February 20, 2012 6.8808%
August 20, 2012 8.4390%
Redemption
Mandatory Redemption
In the event of (i) the sale or disposition of any of the
Collateral, any Project or portion thereof or any direct or indirect
interest of the Company, any PIC Entity or any Project Entity in any
Project or (ii) an event of casualty, loss or condemnation with
respect to any Project (each, a "Mandatory Redemption Event") then
there shall be deposited in the U.S. Mandatory Redemption Account if
such Mandatory Redemption Event relates to a U.S. Project or in the
International Mandatory Redemption Account if such Mandatory
Redemption Event relates to a Non-U.S. Project, all proceeds of any
distributions resulting from or arising out of such Mandatory
Redemption Event received by the Company, any PIC Entity, or any
person on behalf of the Company or any PIC Entity in excess of $2.0
million in the aggregate (net of related unreimbursed reasonable
costs and expenses) in any calendar year that may be legally
distributed or paid to the Company or any PIC Entity, or to any
person or entity on behalf of the Company or any PIC Entity, without
contravention of any Project agreement, unless (a) the Company
provides a certificate to the Trustee (supported by a certificate to
the Trustee from the Consolidating Engineer) stating that such
Mandatory Redemption Event (without giving effect to any required
redemption that would otherwise be required in respect thereof) would
not result in either the projected Company Debt Service Coverage
Ratio being less than 1.7:1 or the projected Consolidated Debt
Service Coverage Ratio (if then applicable) being less than 1.25:1,
in each case for each Future Ratio Determination Period and (b) the
rating of the Bonds in effect immediately prior to the Mandatory
Redemption Event is Reaffirmed. Notwithstanding the foregoing, the
applicable Consolidated Debt Service Coverage Ratio, for purposes of
determining whether amounts are to be deposited in the Mandatory
Redemption Accounts or for any other purposes under the Indenture,
need not be satisfied on and after the time that more than four
Projects have been transferred to the Project Portfolio.
The Existing Bonds, and all additional series of Bonds, if any,
shall be subject to mandatory redemption, in whole or in part, to the
extent that at any time (after giving effect to transfers required to
be made to the other Accounts and Funds on such date pursuant to the
Indenture), the aggregate amount of monies on deposit in the U.S. and
International Mandatory Redemption Accounts is in excess of $2.0
million. The amount of Bonds required to be so redeemed pursuant to
the mandatory redemption provisions of the Indenture shall not exceed
the amount necessary (after giving effect to such mandatory
redemption) to satisfy the coverage ratio requirements described
above as are then applicable to be met and the rating on the Bonds in
effect immediately prior to the Mandatory Redemption Event to be
Reaffirmed.
Mandatory redemptions shall be made at a redemption price equal
to 100% of the principal amount of the Bonds to be redeemed plus
interest thereon accrued to the date of such redemption, plus a
premium, if any, provided for in the supplemental indenture for each
series of Bonds to be redeemed. For the Exchange Bonds, such premium
is equal to that payable were the Exchange Bonds to be redeemed at
the Issuer's option on such date to the extent that the mandatory
redemption results from a sale or other voluntary disposition of any
Collateral or any interest in a Project (or if no optional redemption
is available, a premium determined as the excess, if any, of the
present value of the remaining payments due on the Exchange Bonds,
discounted at a rate which is equal to the then current treasury rate
(the "Applicable Treasury Rate") on the most actively traded security
having a maturity approximately equal to the remaining average life
of the Exchange Bonds, plus one-half of one percent over the par
value of such Exchange Bonds).
Interest earned on amounts (i) on deposit in the U.S. Mandatory
Redemption Account will be transferred to the U.S. Project Account
and (ii) on deposit in the International Mandatory Redemption Account
will be transferred to the International Project Account on each
Monthly Distribution Date. Any determination of mandatory redemption
shall be made within 60 days following the applicable Payment Date.
The Trustee will select the Bonds to be redeemed pro rata as provided
in the Indenture. The Bonds may be redeemed in multiples of $1,000
only. Notice of redemption will be mailed not less than 30 nor more
than 60 days before the redemption date to each holder whose Bonds
are to be redeemed at such holder's address of record. On and after
the redemption date, interest shall cease to accrue on the portion of
the Bonds called for redemption.
If, on any Monthly Distribution Date, after giving effect to any
transfers required to be made to the other Accounts and Funds and
after deducting any amounts required to effect a mandatory redemption
on such Monthly Distribution Date, the aggregate balance in the
Mandatory Redemption Accounts is equal to or less than $2.0 million
(or exceeds $2.0 million due only to funds on deposit therein not
needed to effect a mandatory redemption because the debt service
coverage ratio requirements described above are otherwise met and the
rating of the Bonds has been Reaffirmed) and (i) transfers to the
Distribution Funds would be permitted under the Indenture, such
monies on deposit in the U.S. and International Mandatory Redemption
Accounts may be transferred to the U.S. and International
Distribution Suspense Funds, respectively, or (ii) transfers to the
Distribution Funds would not be permitted under the Indenture, such
monies on deposit in the U.S. and International Mandatory Redemption
Accounts shall be held in such accounts until the next Monthly
Distribution Date on which transfers to the Distribution Funds would
be permitted under the Indenture, at which time such amounts may be
transferred to the applicable Distribution Suspense Funds.
Optional Redemption.
The Exchange Bonds will be redeemable, at the Issuer's option in
whole or in part, at any time on or after August 20, 2001, and prior
to maturity, upon not less than 30 nor more than 60 days prior notice
at the following redemption prices (expressed as a percentage of
principal amount), plus accrued interest to the date of redemption,
if redeemed during the 12-month period commencing on or after August
20 of the years set forth below:
Redemption
Year Price
2001 105.8125%
2002 104.3594%
2003 102.9063%
2004 101.4532%
2005 and thereafter 100.0000%
In addition, all distributions and other amounts received by the
Company, any PIC Entity, or any other person on behalf of the Company
or any PIC Entity (net of related unreimbursed costs and expenses),
that may be legally distributed or paid to the Company or any PIC
Entity without contravention of any Project agreement, resulting from
or arising out of (i) settlements, judgments or other payments
received in respect of a Project in connection with any litigation,
arbitration or similar proceeding at law or in equity or any
administrative proceeding, except to the extent that any such
proceeding is in connection with a Mandatory Redemption Event, (ii)
any monies released from an escrow or similar account established by
or on behalf of a Project in connection with the financing or
contractual arrangements of such Project (other than (a) monies held
in an escrow or similar account established under the Project's
financing arrangements for the purpose of governing the disbursement
of such Project's revenue, either before or subsequent to a default
by a Project under any of such Project's contractual obligations, (b)
moneys held in operating or similar reserve accounts established for
Project operating contingencies and funded out of the Project's
operating cash flow and (c) monies held in an escrow or similar
account as a construction contingency or for the payment of
development or similar fees), (iii) any buy-out or settlement of a
contract to which a Project is a party or (iv) any transaction which
results in the receipt of cash or other property upon the sale,
transfer or other disposition (other than as set forth in clause
(iii) hereof) of any contractual rights of a Project except to the
extent that such transaction is in connection with a Mandatory
Redemption Event (each of clauses (i) through (iv) being an
"Extraordinary Financial Distribution") will be deposited in the U.S.
Extraordinary Distribution Account if such Extraordinary Distribution
relates to a U.S. Project and in the International Extraordinary
Distribution Account if it relates to a Non-U.S. Project.
If, on any Monthly Distribution Date, after giving effect to any
transfers required to be made to the other Accounts and Funds on such
Monthly Distribution Date, any amounts remain on deposit in either
Extraordinary Distribution Account and transfers to the Distribution
Funds would be permitted under the Indenture, the Company may request
the Trustee to transfer 100% of the monies in the U.S. Extraordinary
Distributions Account to the U.S. Distribution Suspense Fund and the
Company, on behalf of any PIC International Entity, may request the
International Collateral Agent to transfer 100% of the monies in the
International Extraordinary Distribution Account to the International
Distribution Suspense Fund, provided that the Company provides a
certificate (with supporting calculations attached to such
certificate) to the Trustee or the International Collateral Agent, as
the case may be, stating that as of such Monthly Distribution Date
after giving effect to such proposed transfer the following is true:
(i) the conditions for transfers to the Distribution Funds, as
described under "Certain Covenants -- Limitations or Distributions,"
have been satisfied; and (ii) the projected Company Debt Service
Coverage Ratio and the projected Consolidated Debt Service Coverage
Ratio (if then applicable) equal or exceed 1.7:1 and 1.25:1,
respectively, for each Future Ratio Determination Period. In
addition, if the amount on deposit in either Extraordinary
Distribution Account is equal to or greater than $5.0 million on any
Monthly Distribution Date, after giving effect to any transfer
required to be made to the other Accounts and Funds on such Monthly
Distribution Date, in order for transfers to the appropriate
Distribution Suspense Fund to be made from such Extraordinary
Distribution Account, the Consolidating Engineer must provide a
certificate to the Trustee or the International Collateral Agent, as
the case may be, stating that (i) it has reviewed and confirmed the
reasonableness of (in accordance with the guidelines set forth in the
Indenture) the projections prepared by the Company of Cash Available
for Distribution and Cash Available from Operations (if the projected
Consolidated Debt Service Coverage Ratio is then applicable) after
giving effect to the event or events which caused such Extraordinary
Financial Distribution and (ii) based on such review it confirms the
reasonableness of the calculations supporting the Company's
certification described above.
If any balance in excess of $2.0 million remains on deposit in
either Extraordinary Distribution Account for more than 35 days, then
prior to the next Monthly Distribution Date the Company shall deliver
to the Trustee a certificate setting forth its election either (i)(a)
in the case of a balance in the U.S. Extraordinary Distribution
Account, to apply any such amount to redeem or partially redeem the
Existing Bonds and additional series of Bonds, if any, which
redemption shall be deemed a prepayment or partial prepayment of the
Company Notes; and (b) in the case of a balance in the International
Extraordinary Distribution Account, to instruct one or more PIC
International Entities to apply any such amount to redeem or
partially redeem any PIC International Entity Notes, which amounts
will then be used by the Company to redeem or partially redeem the
Bonds (which redemption shall be deemed a prepayment or partial
prepayment of the Company Notes) or (ii) to have the amount of any
such balance segregated and held in the U.S. or International
Extraordinary Distribution Account, as the case may be, until the
next Monthly Distribution Date, if any, with respect to which the
certificates described in the immediately preceding paragraph, are
delivered, whereupon on such Monthly Distribution Date such balance
shall be transferred to the appropriate Distribution Suspense Fund.
If, on any Monthly Distribution Date, after giving effect to any
transfers required to be made to other Accounts and Funds, the
balance in either Extraordinary Distribution Account is equal to or
less than $2.0 million and transfers to the Distribution Funds would
not be permitted under the Indenture, such balance shall be held in
such Extraordinary Distribution Account until the next Monthly
Distribution Date, if any, with respect to which transfers to the
Distribution Funds would be permitted under the Indenture, whereupon
such balance shall be transferred to the appropriate Distribution
Suspense Fund.
If the Company elects to redeem the Bonds, the Trustee will
select the Bonds to be redeemed pro rata as provided in the
Indenture. The Bonds may be redeemed in multiples of $1,000 only.
Notice of redemption will be mailed to holders not less than 30 nor
more than 60 days before the redemption date to each holder whose
Bonds are to be redeemed at such holder's address of record. On any
date after the redemption date, interest shall cease to accrue on the
portion of the Bonds called for redemption.
Offer to Purchase
As described below, upon the occurrence of a Change of Control,
the Issuer will be obligated to make an offer to purchase all
Existing Bonds and all additional series of Bonds, if any, then
outstanding at a purchase price equal to 101% of the principal amount
thereof, together with accrued and unpaid interest, if any, to the
date of purchase. See "Certain Covenants -- Change of Control."
Ratings
Moody's Investors Service, Inc., and Duff & Phelps Credit Rating
Co. have assigned the Exchange Bonds ratings of Ba3 and BB-,
respectively. Each such rating reflects only the view of the
applicable Rating Agency at the time the rating is issued, and any
explanation of the significance of such rating may only be obtained
from such Rating Agency. There is no assurance that any such credit
rating will remain in effect for any given period of time or that
such rating will not be lowered, suspended or withdrawn entirely by
the applicable Rating Agency if, in such Rating Agency's judgment,
circumstances so warrant. Any such lowering, suspension or withdrawal
of any rating may have an adverse effect on the market price or
marketability of the Exchange Bonds.
Collateral for the Exchange Bonds
General
To secure the payment of the Existing Bonds and all additional
series of Bonds, if any, PEC, the Company and the Issuer have granted
the security interests described below pursuant to the PEC Stock
Pledge Agreement, the Issuer Security Agreement, the Company Security
Agreement and the Company Stock Pledge Agreement (each as defined
below) (collectively, the "Security Documents"). Pursuant to the PEC
Stock Pledge Agreement, PEC has pledged to Bankers Trust Company, as
collateral agent (the "Collateral Agent") for the benefit of the
Secured Parties (as defined below), all of the issued and outstanding
capital stock of the Company. Pursuant to the Issuer Security
Agreement, the Issuer has collaterally assigned to the Collateral
Agent for the benefit of the Secured Parties (i) the Company Notes,
including, without limitation, the Initial Company Note representing
the loan of the proceeds of the issuance of the Old Bonds, (ii) its
interest under the Company Loan Agreement and (iii) other personal
property of the Issuer. Pursuant to the Company Security Agreement,
to secure the Company Guaranty and the payment of the Bonds, the
Company has pledged to the Collateral Agent for the benefit of the
Secured Parties (i) all of its rights with respect to each Account
and Fund (excluding the International Accounts and Funds and the
Distribution Funds), including all funds and investments in
securities and other instruments from time to time therein and all
letters of credit or other instruments substituting for funds in any
such Accounts or Funds (collectively, the "U.S. Account Rights"),
(ii) all of the Company's interest in distributions from PIC U.S.
Entities and (iii) all of the Company's interest in and under the
Additional Projects Contract. Pursuant to the Company Stock Pledge
Agreement, to secure the Company Guaranty and the payment of the
Bonds, the Company pledged to the Collateral Agent for the benefit of
the Secured Parties (i) all of the issued and outstanding capital
stock of the Issuer, (ii) all of the issued and outstanding capital
stock of each PIC U.S. Entity and (iii) 60% of the issued and
outstanding capital stock of each PIC International Entity. The
aforesaid interests and rights so pledged are referred to herein,
collectively, as the "Collateral." Although the Bondholders have
recourse against the Issuer (whose sole assets are the Company Notes
and the Company Loan Agreement) and, through the Company Guaranty,
against the Company, and against the Collateral for payment of the
Bonds, the ability of the Company to make payments under the Company
Notes, and consequently the ability of the Issuer to make payments on
the Bonds, depends entirely upon the performance of the Projects and
their ability to make distributions through the PIC U.S. Entities to
the Company. See "Risk Factors -- Financial Risks." Each of PEC, the
Company and the Issuer may have available to it certain defenses
against enforcement of the Security Documents if the Collateral Agent
proceeds against the Collateral under the applicable Security
Documents. See "Risk Factors -- Default on Project-Level Debt;
Enforcement of Rights and Realization of Collateral."
All of the Collateral is held by the Collateral Agent for the
benefit of the Secured Parties as collateral and security for the
Bonds, the Company Guaranty and, on a subordinated basis, the
obligations of Panda International or any affiliate thereof under any
Letter of Credit reimbursement agreement.
PEC Stock Pledge Agreement
PEC has executed and delivered a Stock Pledge Agreement to the
Collateral Agent (the "PEC Stock Pledge Agreement") for the benefit
of the Secured Parties pledging all of the issued and outstanding
capital stock of the Company.
Issuer Security Agreement
The Issuer has entered into a Security Agreement with the
Collateral Agent (the "Issuer Security Agreement") for the benefit of
the Secured Parties providing for the collateral assignment of all of
the Issuer's personal property, including, without limitation, (i)
the Company Notes, (ii) the Issuer's rights under the Company Notes,
(iii) all of the Issuer's other contract rights, receivables and
insurance proceeds, (iv) all of the Issuer's interest in and under
the Company Loan Agreement, (v) all of the Issuer's other assets and
(vi) all proceeds of the foregoing.
Company Security Agreement
The Company has entered into a Security Agreement with the
Collateral Agent (the "Company Security Agreement") for the benefit
of the Secured Parties providing for the collateral assignment of (i)
all of the Company's interests in and rights to receive distributions
from PIC Entities in respect of U.S. Projects, (ii) the U.S. Account
Rights, (iii) all of the Company's interest in and rights under the
Additional Projects Contract and (iv) all proceeds of the foregoing.
Company Stock Pledge Agreement
The Company has entered into a Stock Pledge Agreement with the
Collateral Agent (the "Company Stock Pledge Agreement") for the
benefit of the Secured Parties providing for the pledge of (i) all
the issued and outstanding capital stock of the Issuer and each PIC
U.S. Entity and (ii) 60% of the issued and outstanding capital stock
of each PIC International Entity.
Sharing of Collateral
The Bondholders (represented by the Trustee), the Letter of
Credit Provider (when and if a Letter of Credit is provided as
permitted by the Indenture), the Trustee (collectively, the "Secured
Parties") and the Collateral Agent have entered into a Collateral
Agency Agreement with the Issuer and the Company, pursuant to which
the Collateral Agent has been appointed as agent for the Secured
Parties and acts as such under the Security Documents. Accordingly,
the rights of the Secured Parties with respect to the Collateral are
shared among the Secured Parties in accordance with the terms of the
Collateral Agency Agreement as described in more detail below.
Collateral Agency Agreement
The Collateral Agency Agreement provides that, upon an Event of
Default, the Bondholders may direct the exercise of remedies by the
Collateral Agent under the Security Documents.
The proceeds of any sale or other realization upon the
Collateral pursuant to the Collateral Agent's exercise of remedies
under the Security Documents are to be distributed as follows:
First, to the Collateral Agent and the Trustee, ratably, in an
amount equal to any fees, costs, expenses and other amounts then due
to them;
Second, to the Trustee for distribution in accordance with the
Indenture, an amount equal to the principal of and premium, if any,
and interest on the Existing Bonds and all additional series of
Bonds, if any, and all other amounts owed to the Bondholders pursuant
to the Indenture;
Third, to the Letter of Credit Provider, in an amount equal to
the unpaid amount of all reimbursement obligations, interest and
other obligations owed to the Letter of Credit Provider; and
Fourth, to the applicable grantors and pledgors of the
Collateral under the Security Documents.
Remedies Under the Security Documents
If an Event of Default shall have occurred and be continuing and
the conditions contained in the Indenture have been satisfied, the
Trustee may take any or all of the following actions: (i) declare all
or any portion of the Issuer's obligations under the Indenture (or
the Company's obligations under the Company Notes) to be immediately
due and payable; (ii) to the extent not already in its possession,
direct the Collateral Agent to take possession of all or any portion
of the Collateral; (iii) to the extent it has not already done so,
instruct all obligors on any of the Collateral to make payment
directly to the Collateral Agent; (iv) direct the Collateral Agent to
take all cash or cash proceeds in respect of the Collateral; (v)
direct the Collateral Agent to take actions necessary to protect the
first priority perfected security interest in the Collateral; (vi)
direct the Collateral Agent to foreclose or otherwise realize (as
permitted by law) upon the Collateral; (vii) direct the Collateral
Agent to exercise all voting and other rights associated with the
capital stock included in the Collateral; (viii) direct the
Collateral Agent to receive all distributions made by the U.S.
Projects with respect to the Collateral; and (ix) direct the
Collateral Agent to exercise any additional rights afforded a secured
party under the Uniform Commercial Code.
Nonetheless, there is no assurance that a foreclosure or other
realization upon the Collateral will produce proceeds in an amount
that would be sufficient to pay the principal of and accrued and
unpaid interest on the Secured Obligations (as defined in the
Collateral Agency Agreement), including, without limitation, the
Existing Bonds. Furthermore, the ability of the Collateral Agent (on
behalf of the Secured Parties, including the Bondholders) to
foreclose or otherwise realize upon the Collateral following the
occurrence of an Event of Default under the Security Documents will
be subject in certain instances to perfection and priority issues and
to practical problems associated with the realization of security
interests in collateral of a type such as the Collateral. There can
be no assurance that procedural impediments or delays will not affect
the prompt execution of foreclosure or other realization upon the
Collateral.
Certain Bankruptcy Limitations
The right of the Collateral Agent to repossess and dispose of
the Collateral upon the occurrence of an Event of Default is likely
to be significantly impaired by applicable law, if a bankruptcy,
insolvency or similar proceeding were to be commenced by or against
the Issuer, the Company or PEC or if a receiver were appointed with
respect to PEC, the Company or the Issuer, prior to the Collateral
Agent having repossessed the Collateral. Under bankruptcy law, a
secured creditor such as the Collateral Agent is prohibited from
repossessing its security from a debtor in a bankruptcy case, or from
disposing of security repossessed from such debtor, without
bankruptcy court approval. Moreover, the bankruptcy law permits the
debtor to continue to retain and use collateral even though the
debtor is in default under applicable debt instruments, provided that
the secured creditor is given "adequate protection." The meaning of
the term "adequate protection" may vary according to the
circumstances, but it is intended in general to protect the value of
the secured creditor's interest in the collateral and may include
cash payments or the granting of additional security, if and at such
times as the court in its discretion determines, for any diminution
in the value of the collateral as a result of the stay of
repossession or disposition or any use of the collateral by the
debtor during the pendency of the bankruptcy case. Generally,
adequate protection payments, in the form of interest or otherwise,
are not required to be paid by the debtor to a secured creditor
unless the bankruptcy court determines that the value of the secured
creditor's interest in the collateral is declining during the
pendency of the bankruptcy case. In view of the lack of a precise
definition of the term "adequate protection" and the broad
discretionary powers of a bankruptcy court, it is impossible to
predict how long payments on the Bonds, including the Exchange Bonds,
could be delayed following commencement of a bankruptcy case, whether
or when the Collateral Agent could repossess or dispose of the
Collateral or whether or to what extent holders of the Bonds,
including the Exchange Bonds, would be compensated for any delay in
payment or loss of value of the Collateral through the requirement of
"adequate protection."
The Accounts and Funds
The Company has established and maintains with and in the name
of the Trustee, acting as agent for the Collateral Agent for the
benefit of the Secured Parties, the U.S. Project Account, the Debt
Service Fund, the Debt Service Reserve Fund, the Company Expense
Fund, the Capitalized Interest Fund, the U.S. Mandatory Redemption
Account, the U.S. Extraordinary Distribution Account, and the U.S.
Distribution Suspense Fund (collectively, the "U.S. Accounts"). The
Company, on behalf of the PIC International Entities, has established
and maintains with and in the name of the Trustee acting as agent for
the PIC International Entities for the benefit of the Company
(referred to in this capacity as the "International Collateral
Agent") the International Project Account, the International
Mandatory Redemption Account, the International Extraordinary
Distribution Account, and the International Distribution Suspense
Fund.
In addition, the Company has established a U.S. Distribution
Fund, and on behalf of the PIC International Entities, an
International Distribution Fund. The U.S. Distribution Fund is in the
name and sole control of the Company, and the International
Distribution Fund is in the name and sole control of the PIC
International Entities.
Project Accounts
All (i) distributions and other amounts received by the Company,
any PIC U.S. Entity or any person on behalf of the Company or any PIC
U.S. Entity, from, or in connection with, the U.S. Projects that may
be legally distributed or paid to the Company or any PIC U.S. Entity
without contravention of any Project agreement (other than in each
case Extraordinary Financial Distributions (which shall be applied as
set forth in "Redemption -- Optional Redemption" above) and
distributions received that are required to be deposited in the
Mandatory Redemption Account (which shall be applied as set forth in
"Redemption -- Mandatory Redemption" above), (ii) interest earned and
received on amounts on deposit in the U.S. Accounts and Funds, (iii)
payments of regularly scheduled interest and, if applicable,
principal on the PIC International Entity Notes (other than in
connection with any redemption or partial redemption thereof) and
(iv) payments resulting from the redemption or partial redemption of
the outstanding Other International Notes upon the occurrence of an
International Redemption Event, are required to be deposited in the
U.S. Project Account. All (i) distributions and other amounts
received by any PIC International Entity or any person on behalf of
any PIC International Entity, from or in connection with, the Non-
U.S. Projects that may be legally distributed or paid to any PIC
International Entity without contravention of any Project Agreement
and (ii) interest earned and received on amounts on deposit in the
International Accounts and Funds are required to be deposited in the
International Project Account.
The Trustee shall, on the first Business Day of each calendar
month (each a "Monthly Distribution Date"), transfer monies from the
U.S. Project Account (to the extent then available therein after
giving effect to any transfers to be made to the U.S. Project Account
on such Monthly Distribution Date and after withdrawing an amount
equal to the agreed-upon fees and reasonable expenses of the Trustee
and its agents and counsel due under the Indenture), in the
respective amounts and in the order of priority as follows:
(i) to the Debt Service Fund (the "Debt Service Fund"), for
application to the payment of principal and interest on the
Bonds, an amount equal to the excess, if any, of (a) the
aggregate amount of interest (less any amount on deposit in
the Capitalized Interest Fund in respect of such payment)
and, if applicable, principal due and payable on the Company
Notes (including any past due amounts) on the Payment Date
for each series of Bonds then outstanding next following the
day immediately preceding such Monthly Distribution Date
(other than in connection with a call for redemption) over
(b) the amount then on deposit in the Debt Service Fund.
(ii) to the Capitalized Interest Fund (the "Capitalized
Interest Fund"), an amount equal to the excess, if any, of
(a) the Capitalized Interest Requirement then in effect over
(b) the amount then on deposit in the Capitalized Interest
Fund, after giving effect to any withdrawals from such Fund
on such date;
(iii) to the Debt Service Reserve Fund (the "Debt Service
Reserve Fund"), an amount equal to the excess, if any, of
(a) the Debt Service Reserve Requirement then in effect over
(b) the sum of (1) the amount then on deposit in the Debt
Service Reserve Fund, after giving effect to any withdrawals
from such Fund on such date, and (2) the amount available to
be drawn under any Letter of Credit, after giving effect to
any drawings under any Letter of Credit on such date;
(iv) to the Company Expense Fund (the "Company Expense
Fund"), an amount equal to the excess, if any, of (a) the
sum of (1) the Company Expenses Amount for the applicable
calendar year plus (2) the Annual Letter of Credit Fee, if
any, for such calendar year over (b) the aggregate amount
deposited in the Company Expense Fund since the beginning of
such calendar year; and
(v) to the U.S. Distribution Suspense Fund (the "U.S.
Distribution Suspense Fund"), the remaining balance, if any,
on deposit in the U.S. Project Account.
On each Monthly Distribution Date, the International Collateral
Agent shall transfer monies from the International Project Account
(to the extent then available therein after giving effect to any
transfers to be made to the International Project Account on such
Monthly Distribution Date and after withdrawing an amount equal to
the agreed upon fees and reasonable expenses of the International
Collateral Agent and its agents and counsel due under the Indenture)
(i) first to the payment of any amount then due on any PIC
International Entity Note and (ii) then to the International
Distribution Suspense Fund, the remaining balance, if any on deposit
in the International Project Account.
Debt Service Fund
Amounts on deposit in the Debt Service Fund shall be applied by
the Trustee solely to pay interest and principal (whether at stated
maturity or by acceleration or otherwise, other than in connection
with a call for redemption), due and payable on the Company Notes, as
and when provided under the Company Notes (for application by the
Trustee to the payment of interest and principal on the Bonds). If,
on any Payment Date the amounts on deposit in the Debt Service Fund
(after giving effect to all transfers to the Debt Service Fund on
such date) are insufficient for the payment in full of the interest
and, if applicable, principal on the Company Notes scheduled to be
paid on such date, including any past due amounts (such deficiency
hereinafter referred to as a "Debt Service Deficiency"), an amount
equal to such Debt Service Deficiency shall be withdrawn and
transferred to the Debt Service Fund first, from the U.S.
Distribution Suspense Fund, then, from the U.S. Extraordinary
Distribution Account (using Available Amounts only), then, from the
Company Expense Fund, then, from the Debt Service Reserve Fund, the
monies on deposit therein, then, from the Debt Service Reserve Fund,
the proceeds received by the Trustee after making a drawing on the
Letter of Credit, if any, then, from the Capitalized Interest Fund
and then, from the U.S. Mandatory Redemption Account (using Available
Amounts only); provided, however, that if there are not sufficient
funds in the U.S. Accounts and Funds to eliminate a Debt Service
Deficiency, monies will be transferred from the International
Accounts and Funds by the International Collateral Agent to effect a
redemption or partial redemption of the Other International Notes in
an amount equal to the lesser of (i) the amount necessary to cure the
remaining Debt Service Deficiency, (ii) the entire outstanding
principal amount of the Other International Notes and (iii) the
amount then on deposit in the International Accounts and Funds. The
amount of any Other International Note that is redeemed or partially
redeemed for purposes of eliminating a Debt Service Deficiency will
be transferred to the U.S. Project Account and then from the U.S.
Project Account to the Debt Service Fund. PEC has agreed to cause
the Company (and, if necessary, to make contributions to the Company)
to loan $6.4 million to a PIC International Entity evidenced by an
Other International Note, on or prior to the earlier of (i) the first
date on which Commercial Operations have been achieved by any Non-
U.S. Project in the Project Portfolio and (ii) the date of transfer
to the Project Portfolio of any Non-U.S. Project that has already
achieved Commercial Operations. The Company may, but is under no
obligation to, lend additional amounts to the PIC International
Entities to create additional Other International Notes.
Capitalized Interest Fund
Upon issuance of the Old Bonds, the Company delivered to the
Trustee for deposit in the Capitalized Interest Fund approximately
$9.8 million out of the loan by the Issuer to the Company of the
proceeds from the issuance of the Old Bonds. Monies from time to time
held on deposit in the Capitalized Interest Fund shall be transferred
to the Debt Service Fund on the Interest Payment Dates and in the
amounts set forth in each Series Supplemental Indenture. On any
Monthly Distribution Date on which the Company provides a certificate
to the Trustee (supported by a certificate to the Trustee from the
Consolidating Engineer) stating that (i) the Company Debt Service
Coverage Ratio and the Consolidated Debt Service Coverage Ratio (if
then applicable) for the 12 months immediately preceding the month in
which such Monthly Distribution Date occurs equal or exceed 1.7:1 and
1.25:1, respectively, and (ii) the projected Company Debt Service
Coverage Ratio and the projected Consolidated Debt Service Coverage
Ratio (if then applicable) will (after giving effect to any
distribution from the Capitalized Interest Fund to the U.S.
Distribution Suspense Fund proposed to be made on such Monthly
Distribution Date), equal or exceed 1.7:1 and 1.25:1, respectively,
for each Future Ratio Determination Period, then all amounts in the
Capitalized Interest Fund may be transferred to the U.S. Distribution
Suspense Fund. Upon any such transfer, the Capitalized Interest
Requirement shall be zero unless and until a new Capitalized Interest
Requirement is established by a subsequent Series Supplemental
Indenture. If, on any Monthly Distribution Date, the amount on
deposit in the Capitalized Interest Fund (after giving effect to all
transfers to the Capitalized Interest Fund to be made on such Monthly
Distribution Date) is less than the Capitalized Interest Requirement
in effect on such date (each such deficiency, a "Capitalized Interest
Deficiency"), an amount equal to such Capitalized Interest Deficiency
shall be withdrawn and transferred to the Capitalized Interest Fund
first, from the U.S. Distribution Suspense Fund, then from the U.S.
Extraordinary Distribution Account (using Available Amounts only),
then from the Company Expense Fund, then from the Debt Service
Reserve Fund, the monies on deposit therein, then from the Debt
Service Reserve Fund, the proceeds received by the Trustee after
making a drawing on the Letter of Credit, if any, and then from the
U.S. Mandatory Redemption Account (using Available Amounts only);
provided, however, that if there are not sufficient funds in the U.S.
Accounts and Funds to eliminate a Capitalized Interest Deficiency,
monies will be transferred from the International Accounts and Funds
(after giving effect to any transfers therefrom in respect of a Debt
Service Deficiency) by the International Collateral Agent to effect a
redemption or partial redemption of the Other International Notes in
an amount equal to the lesser of (i) the amounts on deposit in the
International Accounts and Funds, (ii) the outstanding principal
amount of the Other International Notes and (iii) the amount of such
Capitalized Interest Deficiency. The amounts realized from the
redemption or partial redemption of any Other International Notes for
purposes of eliminating a Capitalized Interest Deficiency will be
transferred to the U.S. Project Account and then from the U.S.
Project Account to the Capitalized Interest Fund. PEC has agreed to
cause the Company (and, if necessary, to make contributions to the
Company) to loan $6.4 million to a PIC International Entity evidenced
by an Other International Note, on or prior to the earlier of (i) the
first date on which Commercial Operations have been achieved by any
Non-U.S. Project in the Project Portfolio and (ii) the date of
transfer to the Project Portfolio of any Non-U.S. Project that has
already achieved Commercial Operations. The Company may, but is under
no obligation to, lend additional amounts to the PIC International
Entities to create additional Other International Notes.
Debt Service Reserve Fund
Upon the issuance of the Old Bonds, the Company delivered to the
Trustee for deposit in the Debt Service Reserve Fund $6.4 million out
of the loan by the Issuer to the Company of the proceeds from the
issuance of the Old Bonds. The Trustee shall apply amounts held in
the Debt Service Reserve Fund solely to eliminate any Debt Service
Deficiency or Capitalized Interest Deficiency.
At any time when the Capitalized Interest Requirement for any
series of Bonds is zero, in lieu of maintaining monies in the Debt
Service Reserve Fund, all or a portion of the Debt Service Reserve
Requirement in respect of such series may be satisfied by the
delivery to the Trustee of one or more Letters of Credit.
On any Payment Date on which a Debt Service Deficiency exists,
an amount equal to any Debt Service Deficiency, subject to the order
of priority established under "Debt Service Fund" above, will be
withdrawn from the Debt Service Reserve Fund, with any Letter of
Credit being drawn upon only after all monies on deposit in the Debt
Service Reserve Fund have been exhausted.
If thirty days prior to the expiration of any Letter of Credit
delivered in respect of the Debt Service Reserve Requirement, such
Letter of Credit has not been renewed, extended or replaced, the
Trustee shall make a drawing thereunder in an amount equal to the
lesser of (i) the excess, if any, of (a) the Debt Service Reserve
Requirement then in effect over (b) the sum of the undrawn face
amount of all other Letters of Credit, if any, and the amount of
monies held in the Debt Service Reserve Fund and (ii) the maximum
amount available to be drawn under such Letter of Credit. The
proceeds of any such drawing shall be deposited in the Debt Service
Reserve Fund to be applied in accordance with the Indenture. If, on
any Monthly Distribution Date, the amount on deposit in the Debt
Service Reserve Fund (after giving effect to all transfers to the
Debt Service Reserve Fund to be made on such Monthly Distribution
Date) is less than the Debt Service Reserve Requirement in effect on
such date (each such deficiency, a "Debt Service Reserve
Deficiency"), an amount equal to such Debt Service Reserve Deficiency
shall be withdrawn and transferred to the Debt Service Reserve Fund
first, from the U.S. Distribution Suspense Fund, then from the U.S.
Extraordinary Distribution Account (using Available Amounts only),
then from the Company Expense Fund and then from the U.S. Mandatory
Redemption Account (using Available Amounts only); provided, however,
that if there are not sufficient funds in the U.S. Accounts and Funds
to eliminate a Debt Service Reserve Deficiency, monies will be
transferred from the International Accounts and Funds (after giving
effect to any transfers therefrom in respect of a Debt Service
Deficiency or a Capitalized Interest Deficiency) by the International
Collateral Agent to effect a redemption or partial redemption of the
Other International Notes in an amount equal to the lesser of (i) the
amounts on deposit in the International Accounts and Funds, (ii) the
outstanding principal amount of the Other International Notes and
(iii) the amount of such Debt Service Reserve Deficiency. The amounts
realized from the redemption or partial redemption of any Other
International Notes for purposes of eliminating a Debt Service
Reserve Deficiency will be transferred to the U.S. Project Account
and then from the U.S. Project Account to the Debt Service Reserve
Fund. PEC has agreed to cause the Company (and, if necessary, to make
capital contributions to the Company) to loan $6.4 million to a PIC
International Entity evidenced by an Other International Note, on or
prior to the earlier of (i) the first date on which Commercial
Operations have been achieved by any Non-U.S. Project in the Project
Portfolio and (ii) the date of transfer to the Project Portfolio of
any Non-U.S. Project that has already achieved Commercial Operations.
The Company may, but is under no obligation to, lend additional
amounts to the PIC International Entities to create additional Other
International Notes.
Company Expense Fund
Except as otherwise provided in the Indenture, on each Monthly
Distribution Date all monies held on deposit in the Company Expense
Fund shall be applied solely to pay all reasonable accrued and unpaid
costs and expenses incurred by or on behalf of the Issuer, the
Company or any PIC Entity in connection with the management of the
Issuer, the Company or the PIC Entities through such Monthly
Distribution Date plus any portion of the Annual Letter of Credit Fee
that is due and payable or past due on such Monthly Distribution
Date. Upon the issuance of the Old Bonds, the Company delivered to
the Trustee for deposit in the Company Expense Fund $300,000, which
amount constitutes the estimated Company Expenses Amount for the
remainder of calendar year 1996.
Distribution Suspense Funds and Distribution Funds
On each Monthly Distribution Date, upon receipt of the
appropriate required Distribution Certificate from the Company, the
Trustee shall transfer from the U.S. Distribution Suspense Fund to
the U.S. Distribution Fund and the International Collateral Agent
shall transfer from the International Distribution Suspense Fund to
the International Distribution Fund monies then on deposit in such
Distribution Suspense Funds, in the amount set forth in such
Distribution Certificate as being available for distribution to such
Distribution Fund (see "Certain Covenants -- Limitations on
Distributions" below). The U.S. Distribution Fund is in the name and
sole control of the Company, the International Distribution Fund is
in the name and sole control of the PIC International Entities, and
none of the Issuer, the Trustee, the International Collateral Agent
or the Bondholders has any interest in the Distribution Funds.
Mandatory Redemption Accounts
Promptly after receipt by the Company or any PIC Entity, monies
received in respect of Mandatory Redemption Events (subject to
certain exceptions described in "Redemption -- Mandatory Redemption"
above), shall be deposited in the U.S. Mandatory Redemption Account
if such Mandatory Redemption Event relates to a U.S. Project and in
the International Mandatory Redemption Account if such Mandatory
Redemption Event relates to Non-U.S. Project, and all such amounts
deposited in the Mandatory Redemption Accounts shall remain therein
until they are used in the manner described in the Indenture for the
mandatory redemption of the Bonds or otherwise are transferred or
distributed as provided in the Indenture. See "Redemption --
Mandatory Redemption" above.
Extraordinary Distribution Accounts
Promptly after receipt by the Company or any PIC Entity, all
Extraordinary Financial Distributions shall be deposited in the U.S.
Extraordinary Distribution Account if such Extraordinary Financial
Distribution relates to a U.S. Project and in the International
Extraordinary Distribution Account if it relates to a Non-U.S.
Project, and all such amounts deposited in the Extraordinary
Distribution Accounts shall remain therein until they are used in the
manner described in the Indenture for the optional redemption of
Bonds or otherwise are transferred or distributed as provided in the
Indenture. See "Redemption -- Optional Redemption" above.
Investment of Accounts and Funds
If directed by the Company or any PIC International Entity, the
Trustee and the International Collateral Agent, as the case may be,
shall invest the monies on deposit in the Accounts and Funds in
Permitted Investments, provided that if an Event of Default has
occurred and is continuing, the Trustee or the International
Collateral Agent, as the case may be, may only invest monies in the
Accounts and Funds in Permitted Investments of a maturity of 30 days
or less. Neither the Trustee nor the International Collateral Agent
shall be liable for any losses incurred on such investments. Any
earnings received from and losses on Permitted Investments using
monies in the U.S. Accounts and Funds shall be deposited in the U.S.
Project Account, and any earnings received from and losses on
Permitted Investments using monies in the International Accounts and
Funds shall be deposited in the International Project Account.
Identity and Role of Consolidating Engineer
ICF will serve initially as the Consolidating Engineer in
accordance with the Indenture. Pursuant to the Indenture, the
Consolidating Engineer is responsible for providing certificates to
the Trustee with respect to the calculations made by the Company in
certificates delivered to the Trustee in connection with (i) any
issuance of additional series of Bonds, (ii) Mandatory Redemption
Events and (iii) requests for distributions in respect of
Extraordinary Financial Distributions in excess of $5.0 million. In
providing such certificates, the Consolidating Engineer is entitled
to rely on reports or certificates of qualified Independent Engineers
or other independent consultants. See "Consolidating Engineer."
Certain Covenants
Limitations on Distributions
Transfers from the Distribution Suspense Funds to the
corresponding Distribution Funds are subject to the satisfaction of
the following conditions on the applicable Monthly Distribution Date
and the Trustee shall have received a certificate (with supporting
calculations attached to such certificate) at least two Business Days
prior to such Monthly Distribution Date to the effect that, after
giving effect to such proposed transfer: (i) the amount on deposit in
the Debt Service Fund is equal to or greater than the aggregate
amount of interest (less amounts on deposit in the Capitalized
Interest Fund in respect of such interest payment) and, if
applicable, principal due and payable on the Bonds (including any
past due amounts) on the Payment Date for each series of Bonds then
outstanding next following the day immediately preceding such Monthly
Distribution Date (other than in connection with a call for
redemption); (ii) the amount on deposit in each of the Capitalized
Interest Fund, the Debt Service Reserve Fund, the Company Expense
Fund, the Mandatory Redemption Accounts and the Extraordinary
Distribution Accounts is equal to or greater than the amount then
required to be on deposit in each such Fund or Account as of such
date; (iii) no Default (to the knowledge of any officer of the
Company) or Event of Default under the Indenture has occurred and is
continuing; (iv) with certain exceptions, the Company Debt Service
Coverage Ratio is equal to or greater than 1.4:1 for the 12 months
immediately preceding the month in which such Monthly Distribution
Date is to occur (or for such shorter period as the Existing Bonds
have been outstanding); and (v) the projected Company Debt Service
Coverage Ratio is equal to or greater than 1.4:1 for the 12 months
immediately succeeding the month in which such Monthly Distribution
Date is to occur (or for such shorter period as the series of Bonds
with the latest Final Stated Maturity is scheduled to be
outstanding). Notwithstanding the foregoing, on the Monthly
Distribution Date immediately succeeding the delivery to the Trustee
of any Letter of Credit, any amounts on deposit in the Debt Service
Reserve Fund in excess of the Debt Service Reserve Requirement minus
the undrawn stated amount of all such Letters of Credit shall be
transferred by the Trustee to the U.S. Distribution Suspense Fund.
Neither the Company nor any PIC Entity shall make payments or
distributions to PEC or any other affiliate of the Company or
payments to any subordinated lender with respect to any subordinated
loan and the Issuer shall not distribute any dividends to the Company
(such payments, distributions and dividends being herein referred to
as "Distributions") out of Project Distributions or any Collateral
except from, and to the extent of, in the case of the Company or any
PIC U.S. Entity, monies on deposit in the U.S. Distribution Fund and,
in the case of any PIC International Entity, monies on deposit in the
International Distribution Fund.
Limitations on Debt
Neither the Issuer nor the Company shall, nor shall the Company
permit any PIC Entity or Project Entity to, create or incur or suffer
to exist any debt, except:
(i) in the case of the Issuer, (a) the Existing Bonds and
(b) additional series of Bonds, if any, provided that at the
time of the creation of each additional series of Bonds
(other than any series issued solely in exchange for an
equivalent aggregate principal amount of outstanding Bonds
of another series) (1) the Company provides a certificate to
the Trustee (supported by a certificate to the Trustee from
the Consolidating Engineer) stating that, after giving
effect to the issuance of such additional series of Bonds
and the application of the proceeds therefrom, the projected
Company Debt Service Coverage Ratio and the projected
Consolidated Debt Service Coverage Ratio (if then
applicable) equal or exceed 1.7:1 and 1.25:1, respectively,
for each Future Ratio Determination Period, and (2) the
rating (in effect immediately prior to the issuance of such
additional series) of the Bonds is Reaffirmed after giving
effect to the issuance of such additional series, provided,
further, that such Reaffirmation shall not be required if
(A) neither the Company nor any PIC Entity has acquired (or
is acquiring in connection with the issuance of such
additional series of Bonds), sold or otherwise disposed of,
since the last date upon which the Bonds were rated or a
Reaffirmation of rating was given in respect thereof, any
amount of direct or indirect interests in one or more
Projects with respect to which the sum of (w) the aggregate
purchase prices of all such acquisitions and (x) the
aggregate sales prices and proceeds received in connection
with any such disposition of all such sales or other
disposition, exceeds the greater of (y) $50 million and (z)
25% of the aggregate principal amount of the Bonds then
outstanding and (B) the aggregate principal amount of the
additional series of Bonds to be issued is less than the
lesser of (x) $50 million and (y) 25% of the then
outstanding aggregate principal amount of the Bonds then
outstanding;
(ii) in the case of the Company, the Company Notes, the
Company Guaranty and allocations among the Company and
affiliates of the Company of overhead expenses not in excess
at any one time of the Company Expenses Amount;
(iii) in the case of the PIC International Entities, (a) the
PIC International Entity Notes and (b) subordinated debt
(including Other International Notes) payable to the Company
or any PIC Entity which shall not have independent rights of
acceleration or remedies without the occurrence of rights of
acceleration or remedies on the Company Notes;
(iv) in the case of the PIC U.S. Entities, (a) the PIC U.S.
Entity Guaranties and (b) subordinated debt payable to the
Company or any PIC Entity which shall not have independent
rights of acceleration or remedies without the occurrence of
rights of acceleration or remedies on the Company Notes; and
(v) in the case of Project Entities, Project debt and debt
arising under guaranties permitted pursuant to the
Indenture.
Limitations on Guaranties
Neither the Issuer nor the Company shall, and the Company shall
not permit any PIC Entity or Project Entity to, contingently or
otherwise, be or become liable, directly or indirectly, in connection
with any guaranty except (i) guaranties by endorsement of negotiable
instruments for deposit or collection in the ordinary course of
business; (ii) in the case of the Company, the Company Guaranty;
(iii) in the case of any PIC U.S. Entity, the PIC U.S. Entity
guaranties; and (iv) in the case of any Project Entity, guaranties of
Project Debt permitted by the Indenture and guaranties of payment or
performance created, required or expressly permitted to exist under
any Project agreement.
Limitations on Liens
The Issuer and the Company shall not, and the Company shall not
permit any PIC Entity to, create or suffer to exist or permit any
Lien upon or with respect to any of their respective property or any
Project Distributions, except (i) Liens created or otherwise
expressly permitted or required to exist by the Indenture or any
Transaction Document, (ii) Liens for taxes, assessments, charges,
levies, claims or obligations which are either not yet due, are due
but payable without penalty or are the subject of a good faith
contest by the Issuer, the Company, or any PIC Entity, as the case
may be, (iii) legal or equitable encumbrances deemed to exist by
reason of the existence of any litigation or other legal proceeding
if the same are the subject of a good faith contest, (iv) with
respect to property of, or Project Distributions to, any PIC Entity,
Liens required or permitted to exist by the Project agreements if
such Liens were required to exist or existed (a) on the date the
Existing Bonds are issued or (b), with respect to Liens upon or with
respect to property or Project Distributions relating to a particular
Project, at the time the Company or any PIC Entity makes its initial
capital contribution or purchase price payment with respect to such
Project or receives interests in such Project acquired subsequent to
such initial contribution or payment, or any replacement or successor
Lien created in connection with the refinancing of any Project,
provided such replacement or successor Lien shall not secure any
monetary obligation materially greater than the Lien it replaces or
succeeds or encumber any Property not subject to the Lien it replaces
or succeeds unless (and only to the extent that) the provisions for
incurring or refinancing Project Debt (as provided in "Limitations on
Project Debt and Project Agreements" below) have been satisfied, (v)
Liens in connection with worker's compensation, unemployment
insurance or other social security or pension obligations and (vi)
with respect to property of, or Project Distributions to, any PIC
Entity, Liens other than to secure debt, provided such Lien could not
reasonably be expected to (A) result in a Material Adverse Change or
(B) in the case of any Lien on the Collateral, materially diminish
the value of, or the security offered by, the Property subject to
such Lien.
Limitations on Activities of the Issuer and the Company
The Company shall not engage in any business other than (i) the
direct or indirect ownership of PIC Entities, Project Entities and
Projects, (ii) the making of loans to its controlling affiliates, PIC
Entities and Project Entities, (iii) the issuance of the Company
Notes and the Company Guaranty, (iv) distributions and investments
permitted by the Indenture and (v) activities reasonably necessary,
in the judgment of the Company, to preserve, protect or enhance the
value of the Company's investments in the Projects.
The Issuer shall not have any Subsidiaries. The Company shall
not create, acquire or purchase (i) any direct Subsidiary other than
the PIC Entities or (ii) any indirect Subsidiary other than the
Project Entities, in each case for the purposes contemplated above or
in connection with the acquisition of interests in Project Entities
permitted by the Indenture.
The Issuer shall not engage in any business other than (i) the
issuance of the Existing Bonds and the additional series of Bonds, if
any, (ii) the performance of its obligations under the Transaction
Documents, (iii) enforcement of its rights under the Security
Documents and the Company Notes and (iv) activities reasonably
related to the foregoing.
Ownership of Projects
The Company shall maintain (i) at least a 50% (direct or
indirect) ownership or equivalent interest in each Project or (ii)(a)
at least a 25% (direct or indirect) ownership or equivalent interest
in each Project not meeting the requirements of clause (i) above and
(b) a controlling influence over the management and policies with
respect to each Project, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise, provided
that no other entity has greater control than the Company over the
management and policies of such Project. Notwithstanding the
foregoing, this covenant shall not prohibit the sale, lease, transfer
or other disposition of all interests in a Project, or a reduction in
the ownership or equivalent interest of, or control over, a Project
occurring pursuant to the terms of a build-operate-transfer
arrangement at least ten years after the entering into of such
arrangement. See "Prohibition on Fundamental Changes and Dispositions
of Assets" below.
Limitations on Project Debt and Project Agreements
The Company shall not, nor shall it permit any PIC Entity to,
incur or refinance any Project Debt or enter into any Project
agreement (other than in connection with Liens permitted under the
Indenture), and the Company shall not permit any Project Entity to,
(i) incur any Project Debt other than that existing or created on the
date that the Project to which such Project Debt relates is
transferred to the Project Portfolio or on the date that the Company
or any PIC Entity makes its initial investment in the Project to
which such Project Debt relates, (ii) refinance any Project Debt,
(iii) enter into any Project agreements other than any Project
agreement existing or created on the date that the Project to which
such Project Debt relates is transferred to the Project Portfolio or
on the date that the Company or any PIC Entity makes its initial
contribution with respect to the Project to which such Project
agreement relates or (iv) amend or modify any Project agreement, if
in the case of clause (i), (ii), (iii) or (iv) such action could
reasonably be expected to reduce Cash Available for Distribution
(including any such action that could (a) decrease the amount of, or
postpone the receipt of, any revenues, distributions or other amounts
to be received by or on behalf of the Company, a PIC Entity or such
Project Entity, (b) increase the amount of, or accelerate the date
for payment of, any fees, prepayments, costs, expenses, liabilities
or other amounts payable by or on behalf of the Company, a PIC Entity
or such Project Entity or (c) create additional conditions precedent
to, or modify existing conditions if such modification could impair,
the right of the Company or a PIC Entity to receive distributions or
other amounts directly or indirectly from any PIC Entity or Project
Entity) by 10% or more in the aggregate during any Future Ratio
Determination Period unless at the time of such action (1) the
Company provides a certificate to the Trustee (supported by a
certificate to the Trustee from the Consolidating Engineer) stating
that, after giving effect to such action, the projected Company Debt
Service Coverage Ratio and the projected Consolidated Debt Service
Coverage Ratio (if then applicable) equal or exceed 1.7:1 and 1.25:1,
respectively, for each Future Ratio Determination Period and (2) the
rating of the outstanding Bonds, after giving effect to such action,
has been Reaffirmed.
Distributions by Projects
Subject to reasonable working capital and capital improvement
requirements (taking into account reasonable currency exchange and
tax planning requirements), the Company shall cause each Project
Entity to distribute to the PIC Entities all distributions and other
amounts received, directly or indirectly, by such Project Entity or
by any other person on behalf of such Project Entity from, or in
connection with, the Project Portfolio that may be legally
distributed or paid to any PIC Entity without contravention of any
Project agreement.
Prohibition on Fundamental Changes and Disposition of Assets
None of the Issuer, the Company and any PIC Entity shall enter
into any transaction of merger, consolidation, sale, lease, transfer
or other disposition of all or substantially all of its assets
(including the Project Portfolio), change its form of organization or
its business, or liquidate or dissolve itself (or suffer any
liquidation or dissolution); provided, however, that the Issuer, the
Company or any PIC Entity may merge or consolidate or sell, lease,
transfer or otherwise dispose of all or substantially all of its
assets, if: (i) (a) in the case of the Issuer, the successor or
transferee entity is a wholly owned Subsidiary of the Company and
such successor or transferee entity expressly assumes, by an
instrument in form and substance reasonably satisfactory to the
Trustee, all of the Issuer's obligations under the Indenture, the
Bonds and the other Transaction Documents to which the Issuer is a
party; (b) in the case of the Company, the successor or transferee
entity shall be an entity organized and existing under the laws of
any state of the United States or the District of Columbia and shall
expressly assume, by an instrument in form and substance satisfactory
to the Trustee, all of the obligations of the Company under the
Indenture, the Company Guaranty, the Company Notes and the other
Transaction Documents to which the Company is a party; and (c) in the
case of any PIC Entity, the successor or transferee entity shall be
organized under the laws of any state of the United States or the
District of Columbia, or, in the case of a PIC International Entity,
an appropriate foreign tax jurisdiction, and shall expressly assume,
by an instrument in form and substance satisfactory to the Trustee
all of the obligations of such PIC Entity, if any, under the
Transaction Documents to which such PIC Entity is a party; (ii)
immediately before and immediately after giving effect to such
transaction on a pro forma basis (and after giving effect to any
modifications made to the terms of the Indenture in order to reflect
the particular characteristics of the purchasing or surviving entity,
provided that the rating in effect immediately prior to such
modification of the Existing Bonds and any additional series of
Bonds, then outstanding, is Reaffirmed), no Event of Default shall
have occurred and be continuing; (iii) the Company shall have
delivered an Officer's Certificate and an Opinion of Counsel (as
defined in the Indenture) each stating that all conditions precedent
provided in the Indenture relating to such transaction have been
complied with and (iv) the rating then in effect on the Existing
Bonds and any additional series of Bonds, then outstanding, is
Reaffirmed, after giving effect to such merger, consolidation, sale,
lease, transfer or other transaction. Notwithstanding the foregoing,
(i) in no event shall the Company be permitted to merge or
consolidate with or into, or sell, lease, transfer or otherwise
dispose of all or substantially all of its assets to, the Issuer and
(ii) in no event shall the Issuer be permitted to merge or
consolidate with or into, or sell, lease, transfer or otherwise
dispose of all or substantially all of its assets to, the Company.
Notwithstanding anything in this paragraph to the contrary, the
Company or a PIC Entity may sell its direct or indirect interests in
a Project or Projects to the extent provided in "Sales of Projects"
below. None of the Issuer, the Company or any PIC Entity shall
purchase or otherwise acquire all or substantially all of the assets
of any person except that (i) the Company and the PIC Entities may
acquire direct or indirect interests in Project Entities and Projects
to the extent permitted by the Indenture, (ii) in connection with any
merger, consolidation or sale, lease, transfer or other transaction
satisfying the applicable requirements of this paragraph and as
provided in "Sales of Projects" below, (iii) for the creation or
acquisition by PIC of a PIC Entity or by a PIC Entity of a Project
Entity or (iv) any purchase or other acquisition of interests in or
held by the Company's or any PIC Entity's existing investments if
after giving effect to any such purchase or acquisition, no Default
or Event of Default will exist or result therefrom. Except in
connection with any merger, consolidation or sale transaction
satisfying the applicable requirements of this paragraph, or as
contemplated by the Security Documents, the Company may not transfer
all or any portion of its ownership interest in the Issuer or any PIC
Entity.
Change of Control
Upon the occurrence of a Change of Control, the Issuer will be
obligated to make an offer to purchase all of the then outstanding
Existing Bonds and additional series of Bonds, if any (a "Change of
Control Offer"), and will purchase on a Business Day (the "Change of
Control Purchase Date") not more than 60 nor less than 30 days
following such Change of Control, all of the then outstanding Bonds
validly tendered pursuant to such Change of Control Offer and not
withdrawn, at a purchase price (the "Change of Control Purchase
Price") equal to 101% of the principal amount thereof plus accrued
and unpaid interest, if any, to the Change of Control Purchase Date
in accordance with the terms of the Indenture. The Change of Control
Offer is required to remain open for at least 20 Business Days and
until the close of business on the fifth Business Day prior to the
Change of Control Purchase Date.
In order to effect such Change of Control Offer, the Issuer
will, not later than the 30th day after the Change of Control, mail
to the Trustee and each Bondholder a notice of the Change of Control
Offer, which notice shall govern the terms of the Change of Control
Offer and shall state, among other things, the procedures that
Bondholders must follow to accept the Change of Control Offer.
There can be no assurance that the Issuer will have available
funds sufficient to fund the purchase of the Bonds upon a Change of
Control. In the event a Change of Control occurs at a time when the
Issuer does not have available funds sufficient to pay the Change of
Control Purchase Price for all of the Bonds delivered by Bondholders
seeking to accept the Change of Control Offer, an Event of Default
would occur under the Indenture. The definition of Change of Control
includes an event by which the Company sells, conveys, transfers,
leases or otherwise disposes of all or substantially all of the
properties and assets of the Company and its Subsidiaries, taken as a
whole; the phrase "all or substantially all" is subject to applicable
legal precedent and, as a result, in the future there may be
uncertainty as to whether a Change of Control has occurred.
The Issuer will not be required to make a Change of Control
Offer upon a Change of Control if another person makes the Change of
Control Offer at the same purchase price, at the same time and
otherwise in substantial compliance with the requirements applicable
to a Change of Control Offer to be made by the Issuer and purchases
all Bonds validly tender and not withdrawn under such Change of
Control Offer.
The Issuer will comply with Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder, if
applicable, if a Change of Control occurs and the Issuer is required
to repurchase Bonds as described above. The existence of a
Bondholder's right to require, subject to certain conditions, the
Issuer to repurchase its Bonds upon a Change of Control may deter a
third party from acquiring the Issuer in a transaction that
constitutes, or results in, a Change of Control.
The Issuer shall, subject to certain exceptions described in the
Indenture, be required to purchase all Existing Bonds and Bonds of
additional series, if any, properly tendered pursuant to the Change
of Control Offer and not withdrawn.
Additional Collateral
If the U.S. federal income tax laws are amended to permit the
International Accounts and Funds or any shares of the capital stock
of or other ownership interests in the PIC International Entities
that have not been pledged to the Collateral Agent pursuant to the
Security Documents to be included as part of the Collateral without
adversely affecting Panda International's ability to defer U.S.
federal income taxes on earnings from Non-U.S. Projects, then (i) the
Issuer and the Company will enter into a supplemental indenture with
the Trustee to include such capital stock or other ownership
interests and the International Accounts and Funds as part of the
Collateral and (ii) the Company shall, and shall cause the PIC
International Entities to, execute appropriate security documents
pledging to the Collateral Agent as Collateral such International
Accounts and Funds and such stock or other ownership interests, as
the case may be.
Transactions with Affiliates
The Issuer and the Company shall not, and the Company shall not
permit any PIC Entity or Project Entity (collectively, the "PIC
Group") to, engage in transactions with affiliates of the Company
other than members of the PIC Group except for (i) transactions which
are on terms no less favorable to the PIC Group than the PIC Group
could obtain in arms-length transactions from third parties which are
not affiliates of the Company, (ii) distributions, loans and
investments permitted by the Indenture and (iii) transactions
required by the Indenture or the Transaction Documents.
Use of Proceeds
The Issuer loaned all of the proceeds received by it from the
issuance of the Old Bonds to the Company which used the net proceeds
thereof (i) to fund the Capitalized Interest Fund in the amount of
approximately $9.8 million; (ii) to fund the Debt Service Reserve
Fund in the amount of approximately $6.4 million; (iii) to fund the
Company Expense Fund in the amount of approximately $300,000; (iv) to
pay transaction expenses, commissions and fees incurred in connection
with the Prior Offering, estimated at approximately $900,000; (v) to
fund in the amount of approximately $25.1 million a portion of the
redemption by the Panda-Rosemary Partnership of the limited
partnership interest therein held by Ford Credit; (vi) to distribute
approximately $60.9 million to Panda International, of which
approximately $26.4 million was used by Panda International to prepay
senior indebtedness held by Trust Company of the West.
Sales of Projects
The Company will not, and the Company will not permit any PIC
Entity or Project Entity to, sell any direct or indirect interests in
Projects for aggregate consideration in excess of $2,000,000 in any
calendar year; provided, however, that any such sale may be made (i)
if after giving effect to any such sale, the Company complies with
the requirements set forth in "Certain Covenants -- Ownership of
Projects," (ii) the proceeds of any such sale are applied as provided
in "Mandatory Redemption" above to effect a mandatory redemption of
any PIC International Entity Notes or Bonds, as the case may be,
(iii) the Company provides a certificate to the Trustee (supported by
a certificate to the Trustee from the Consolidating Engineer) stating
that, after giving effect to such sale and the application of the
proceeds therefrom (including through a mandatory redemption), the
projected Company Debt Service Coverage Ratio and the projected
Consolidated Debt Service Coverage Ratio (if then applicable) equal
or exceed 1.7 to 1.0 and 1.25 to 1.0, respectively for each Future
Ratio Determination Period and (iv) if the proceeds of such sale to
be received by the Company or any PIC Entity exceed the lesser of (x)
$50 million and (y) 25% of the aggregate principal amount of the
Bonds then outstanding, the rating on the Bonds immediately prior to
such sale is Reaffirmed (after giving effect to such sale and the
application of the proceeds therefrom). (Section 7.28)
PIC International Entity Loan Agreements
The Company shall cause each PIC International Entity that is
created, acquired or purchased after the Issue Date to execute, and
to deliver a copy to the Trustee, a loan agreement, substantially in
the form of the PIC International Entity Loan Agreement attached to
the Indenture, at the time such PIC International Entity is so
created, acquired or purchased, and to enter into the security
documents granting the Company a security interest in the
International Accounts and Funds and distributions from PIC
International Entities.
PIC U.S. Entity Guaranties
The Company shall cause each PIC U.S. Entity that is created,
acquired or purchased after the Issue Date to execute and deliver to
the Trustee a PIC Entity Guaranty, substantially in the form attached
to the Indenture, at the time such PIC U.S. Entity is so created,
purchased or acquired.
Additional Covenants
In addition to the covenants described above, the Indenture also
contains covenants of the Issuer and the Company regarding
maintenance of existence, compliance with organizational documents,
nonmodification and nonamendment of organizational documents (except
in the manner provided therein and in a manner that does not modify
certain provisions relating to the existence of an independent
director or the business purpose of such entity and that could not be
reasonably expected to result in a Material Adverse Change), payment
of taxes, pursuing rights to compensation upon the occurrence of a
casualty or condemnation, maintenance of books and records, the right
of the Trustee to inspect the property, compliance with laws,
opinions of counsel regarding the maintenance of recordations and
filings, providing further assurances, delivery of financial
statements, compliance certificates, reports, notices of certain
material subsequent events and certain information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act in
order to permit compliance by a Bondholder with Rule 144A in
connection with the resale of Existing Bonds and additional series of
Bonds, if any, restrictions on termination or amendment of any
Transaction Document or entry into any new agreement which could
reasonably be expected to result in a Material Adverse Change,
limitations on investments, restrictions on actions that require
registration as an "investment company" under the Investment Company
Act, pursuing rights to compensation with respect to certain events
of loss, compliance with the Public Utility Holding Company Act,
appointments to fill vacancy in the office of Trustee, the issuance
of Other International Notes and furnishing of lists of holders of
the Existing Bonds and the additional series of Bonds, if any, to the
Trustee.
Defaults and Remedies
Events of Default.
Each of the following shall constitute an Event of Default:
(i) the failure to pay or cause to be paid principal of, or
premium, if any, or interest on any Existing Bond or any
Bond of an additional series when the same becomes due and
payable, whether by scheduled maturity or required
redemption, upon repurchase pursuant to a Change of Control
Offer, or by acceleration or otherwise, and the continuation
of such failure for 15 or more days;
(ii) any representation, warranty or statement made by any
of Panda International, PEC, the Company, the Issuer or any
PIC Entity in any certificate, financial statement or other
document furnished to the Trustee by or on behalf of Panda
International, PEC, the Company, the Issuer or any PIC
Entity under the Indenture, any Security Document or any
other Transaction Document proves to have been false or
misleading in any material respect as of the time made,
confirmed or furnished and the fact, event or circumstance
that gave rise to such inaccuracy has resulted in a Material
Adverse Change, and the fact, event or circumstance that
gave rise to such Material Adverse Change, shall continue
uncured for 30 or more days after the earlier to occur of
(a) any officer of such person obtaining actual or
constructive knowledge thereof and (b) written notice
thereof being given to such person; provided that if such
person commences and diligently pursues efforts to cure such
fact, event or circumstance within such 30-day period, such
person may continue to effect such cure of the fact, event
or circumstance (and such misrepresentation shall not be
deemed an "Event of Default") for an additional 60 days so
long as such person is diligently pursuing the cure;
(iii) failure by the Company or the Issuer to perform or
observe its respective covenants contained in the Indenture
relating to maintenance of existence, prohibition on
fundamental changes and disposition of assets, limitations
on Debt, limitations on Liens, limitations on guaranties,
limitations on distributions, limitations of activities by
the Company or the Issuer, limitations on transactions with
affiliates, limitation on formation of Subsidiaries,
limitations on Project Debt and Project agreements,
distributions by Projects, additional collateral,
limitations or sales of Projects, PIC International Entity
Loan Agreements, PIC U.S. Entity guaranties and not being
required to register under the Investment Company Act and
such failure continues uncured for 30 or more days;
(iv) failure by the Company or the Issuer to perform or
observe any of the covenants contained in the Indenture and
not listed in clause (iii) or clause (xv) under "Events of
Default", and such failure continues uncured for 30 or more
days after the earlier to occur of (a) any officer of the
Company or the Issuer, as the case may be, obtaining actual
or constructive knowledge of such failure and (b) written
notice thereof being given to the Company or the Issuer by
the Trustee or to the Company, the Issuer or the Trustee by
holders of at least 10% in aggregate principal amount of the
Bonds then outstanding; provided that if the Company or the
Issuer, as the case may be, commences and diligently pursues
efforts to cure such default within such 30-day period, the
Company or the Issuer, as the case may be, may continue to
effect such cure of the default (and such default shall not
be deemed an "Event of Default") for an additional 60 days
so long as the Company or the Issuer, as the case may be, is
diligently pursuing the cure;
(v) failure by Panda International, PEC, the Company, the
Issuer or any PIC Entity to observe or perform any of their
respective covenants or agreements contained in any
Transaction Document other than the Indenture, and such
failure continues unremedied beyond the expiration of any
applicable grace period which may be expressly allowed under
such Transaction Document;
(vi) certain events involving the bankruptcy, insolvency,
dissolution, receivership or reorganization of the Company,
the Issuer or any PIC Entity;
(vii) the entry of one or more final and non-appealable
judgments for the payment of money in excess of $2.0 million
against any of the Company, the Issuer or any PIC Entity
which remain unpaid or unstayed for a period of 60 or more
consecutive days;
viii) failure by the Company, the Issuer or any PIC Entity to
make any payment when due (subject to any applicable grace
period) in respect of any debt, which debt is in an amount
exceeding $2.0 million (other than debt which is
subordinated debt and other than any amount due under or
pursuant to the Indenture), which failure continues unwaived
beyond any applicable grace period;
(ix) failure by any PIC Entity to make any payment when due
(subject to any applicable grace period) in respect of any
outstanding subordinated debt, which subordinated debt is in
an amount exceeding $2.0 million and a default and
acceleration is declared with respect to such debt;
(x) any grant of a Lien contained in the Security Documents
ceases to be effective to grant a perfected Lien to the
Collateral Agent on any of the Collateral described therein
with the priority purported to be created thereby which
cessation results in a Material Adverse Change; provided,
however, that an Event of Default shall not result from the
creation of Permitted Liens;
(xi) the Company Guaranty or any PIC Entity Guaranties shall
for any reason cease to be, or be asserted by the Company,
any PIC U.S. Entity or the Issuer not to be, in full force
and effect and enforceable in accordance with its terms;
(xii) the Issuer shall cease to have ownership of the Company
Notes free and clear of all Liens and other encumbrances on
title thereto or the Company shall cease to have ownership
of the PIC International Entity Notes free and clear of all
Liens and other encumbrances on title thereto;
xiii) (a) the Company shall cease to own and control 100% of
the capital stock or ownership interest of the Issuer or any
PIC Entity (excluding any director's qualifying shares
required to be held by third parties pursuant to applicable
law) that holds direct or indirect ownership interests in
any Project or (b) PEC or Panda International shall cease to
own and control directly or indirectly 100% of the capital
stock of the Company (except as permitted under "Prohibition
on Fundamental Changes and Disposition of Assets" above);
(xiv) any Letter of Credit ceases to be in full force and
effect and valid, binding and enforceable in accordance with
its terms and is not replaced within 10 days, unless the
amount on deposit in the Debt Service Reserve Fund (without
giving effect to such Letter of Credit) at such time equals
or exceeds the Debt Service Reserve Requirement then
applicable; and
(xv) the failure to make or consummate a Change of Control
Offer in accordance with the provisions of the "Change of
Control" covenant.
Remedies
If an Event of Default described in clause (i) under "Defaults
and Remedies -- Events of Default," above occurs, the Trustee may,
and upon request of the holders of not less than 33-1/3% in aggregate
principal amount of all Existing Bonds and all additional series of
Bonds, if any, then outstanding (considered as one class) shall,
declare the principal of all Existing Bonds and all additional series
of Bonds, if any, then outstanding to be immediately due and payable.
If an Event of Default (other than one described in the immediately
preceding sentence) occurs, the Trustee may, and upon request of the
holders of not less than 50% in aggregate principal amount of all
Existing Bonds and all additional series of Bonds, if any, then
outstanding (considered as one class) shall, declare the principal of
all Existing Bonds and all additional series of Bonds, if any, then
outstanding to be immediately due and payable. Upon such declaration
said principal, together with interest accrued thereon, shall become
due and payable immediately. If an Event of Default due to the
bankruptcy, insolvency or reorganization of the Company, the Issuer
or any PI Entity occurs, all unpaid principal, premium, if any, and
interest will immediately become due and payable. For remedies
available under the Security Documents, see "Collateral for the
Exchange Bonds -- Remedies under the Security Documents" above.
If, after the principal of the Existing Bonds and the additional
series of Bonds, if any, has been declared or is deemed to be due and
payable, the Issuer (i) pays all principal and interest due (other
than by a declaration of acceleration) on the Existing Bonds and the
additional series of Bonds, if any, including any Bonds required to
have been purchased on a Change of Control Date, and the reasonable
fees, expenses and advances of the Trustee and its agents and counsel
and (ii) cures all other Events of Default under the Indenture (other
than nonpayment of principal and interest on the Existing Bonds and
any additional series of Bonds that became due solely by reason of
such acceleration), the holders of a majority in aggregate principal
amount of the Existing Bonds and all additional series of Bonds, if
any, then outstanding (considered as one class) may annul such
declaration and its consequences.
If any Event of Default occurs and is continuing, the Trustee
may, and upon the request of a majority in aggregate principal amount
of the Existing Bonds and all additional series of Bonds, if any then
outstanding (considered as one class), and the offering to it of any
indemnity required under the Indenture shall (unless the Trustee in
good faith shall determine that such exercise would involve it in
personal liability or expense), enforce every right available to it
under the Indenture and under the Security Documents.
Any monies received by the Trustee following an Event of Default
shall be applied first to pay the compensation due to and reasonable
costs and expenses incurred by the Trustee and its agents and counsel
and second to pay principal and interest then owing on the Existing
Bonds and the additional series of Bonds, if any, (if such monies
shall be insufficient to pay the same in full, then to the payment of
principal and interest ratably). The Trustee shall pay the surplus,
if any, to the Collateral Agent to be applied pursuant to the
Collateral Agency Agreement or the person lawfully entitled to
receive the same. See "Collateral for the Exchange Bonds --
Collateral Agency Agreement" above.
Amendments and Supplements
Without the consent of the holders of any Existing Bonds or
additional series of Bonds, if any, the Issuer, the Company and the
Trustee may enter into one or more supplemental indentures thereto
for any of the following purposes: (i) to establish the form and
terms of any additional series permitted under the Indenture; (ii) to
evidence the succession of another entity to the Issuer or the
Company, and the assumption by any such successor of the covenants
and other obligations of such entity under the Existing Bonds or any
additional series of Bonds or the Indenture; (iii) to evidence the
succession of a new Trustee pursuant to the Indenture; (iv) to add to
the covenants of the Issuer or the Company, or to surrender any right
or power therein conferred upon the Issuer or the Company; (v) to
convey, transfer and assign to the Trustee properties or assets to
secure the Existing Bonds and the additional series of Bonds, if any,
and to correct or amplify the description of any property at any time
subject to the Indenture or to assure, convey and confirm unto the
Trustee or the Collateral Agent any property subject or required to
be subject to the Indenture; (vi) to permit or facilitate the
issuance of Existing Bonds or any additional series of Bonds in
uncertificated form; (vii) to change or eliminate any provision of
the Indenture that does not adversely affect the interests of the
holders of the Existing Bonds and the additional series of Bonds, if
any; (viii) to comply with any requirement of the Commission in
connection with qualifying the Indenture under the Trust Indenture
Act of 1939, as amended, or maintaining such qualification
thereafter; (ix) to provide for the issuance of a new series of Bonds
registered under the Securities Act in exchange for a series of Bonds
if such exchange is contemplated by any registration rights agreement
entered into in connection with the issuance of a series of Bonds or
any other exchange securities pursuant to any other agreement to
register any series of Bonds under the Securities Act, and to make
such other changes in the Indenture or the Transaction Documents as
the board of directors of the Company determines are necessary or
appropriate in connection therewith, provided such action shall not
adversely affect the interests of the holders of Bonds of any series
in any material respect; (x) to cure any ambiguity or to correct or
supplement any provision of the Indenture that may be defective or
inconsistent with any other provision therein; or (xi) to make any
other provisions with respect to matters or questions arising under
the Indenture, provided such action shall not adversely affect the
interests of the holders of any Existing Bonds or the additional
series of Bonds, if any, in any material respect.
With the consent of the holders of not less than a majority in
aggregate principal amount of the Existing Bonds and all additional
series of Bonds, if any, then outstanding (considered as one class)
the Issuer and the Company may, and the Trustee shall, enter into an
indenture or indentures supplemental thereto for the purpose of
adding any provisions to or changing in any manner or eliminating or
waiving any of the provisions of, the Indenture; provided, that no
such supplemental indenture shall, without the consent of the holder
of each outstanding Bond directly affected thereby, (i) change the
stated maturity of any Bond (or the stated maturity of any such
installment of principal of any Bond), or of any payment of interest
thereon, or the dates or circumstances of payment of premium, if any,
on any Bond or change the principal amount thereof or the interest
thereon or any premium payable upon the redemption thereof, or change
the place of payment where, or the coin or currency in which, any
Bond or the premium, if any, or the interest thereon is payable, or
impair the right to institute suit for the enforcement of any such
payment or interest on or after the stated maturity thereof (or, in
the case of redemption, on or after the redemption date) or such
payment of premium, if any, on or after the date such payment of
premium becomes due and payable or change the dates or the amounts of
payments to be made through the operation of a sinking fund in
respect of such Bonds, (ii) permit the creation of any lien prior to
or pari passu with the Lien of the Security Documents with respect
to any of the property pledged under the Security Documents or
terminate the Lien of the Security Documents of any property pledged
thereunder or deprive any holder of the security afforded by the Lien
of the Security Documents, except to the extent expressly permitted
by the Indenture or any of the Security Documents, (iii) reduce the
percentage in principal amount of the outstanding Bonds, if any, the
consent of whose holders is required for any such supplemental
indenture, or the consent of whose holders is required for any waiver
(of compliance with certain provisions of the Indenture or certain
defaults thereunder and their consequences) provided for in the
Indenture, or reduce the requirements with respect to quorum or
voting, (iv) modify certain of the provisions of the Indenture
relating to the waiver of defaults or the making of modifications or
(v) amend, change or modify the obligation of the Issuer to make and
consummate a Change of Control Offer in the event of a Change of
Control, or to modify any of the provisions or definitions with
respect thereto.
Amendment of Security Documents or Collateral Agency Agreement
The Issuer, the Company, the Trustee or the Collateral Agent, as
the case may be, may, without the consent of or notice to the
Bondholders, consent to any amendment or modification of any Security
Document or the Collateral Agency Agreement as may be required (i) by
the provisions of such Security Document, the Collateral Agency
Agreement or the Indenture, (ii) to cure any ambiguity or formal
defect, (iii) to add additional rights in favor of the Issuer in the
Company Notes or Security Documents or (iv) in connection with any
other change in the Security Documents or the Collateral Agency
Agreement, including any change required by the rating agencies, with
respect to which the Trustee shall have received an officer's
certificate of the Company or the Issuer, as the case may be, or an
opinion of counsel reasonably satisfactory to the Trustee to the
effect that such change is not to the prejudice of the Trustee or the
Bondholders and which, in the judgment of the Trustee, is not to the
prejudice of the Trustee or the Bondholders provided that the Trustee
shall not be liable for any action it takes or omits to take in good
faith in reliance on any such officer's certificate or opinion of
counsel. Except as described above, neither the Issuer nor the
Trustee shall consent to any other amendment or modification of a
Security Document or the Collateral Agency Agreement without the
consent of the holders of not less than 66-2/3% in aggregate
principal amount of the Existing Bonds and the additional series of
Bonds, if any, then outstanding (considered as one class). An
amendment to a Security Document or the Collateral Agency Agreement
which changes the amounts of payments due thereunder, the person to
whom such payments are to be made or the date on which such payments
are to be made shall not be made without the unanimous consent of the
Bondholders.
Discharge of Indenture
The Issuer may terminate the Indenture by delivering all
outstanding Existing Bonds and the additional series of Bonds, if
any, to the Trustee for cancellation, by paying all sums payable
under the Indenture and by delivering an officer's certificate and
opinion of counsel stating that all conditions precedent in the
Indenture relating to its discharge have been complied with.
In addition to the foregoing, the Existing Bonds and any
additional series of Bonds, shall, prior to the stated maturity
thereof, be deemed to be paid, and the indebtedness of the Issuer
and, to the extent of the Company Guaranty, the Company in respect
thereof shall be deemed to be satisfied and discharged, on the 123rd
day after the date of the deposit referred to in clause (i) below and
the other conditions set forth below have been satisfied:
(i) the Issuer has irrevocably deposited with the Trustee,
in trust, monies or U.S. government obligations in an amount
which shall be sufficient to pay when due the principal of
and premium, if any, and interest due and to become due on
the Existing Bonds and any additional series of Bonds, on
each stated maturity of such principal or installment of
principal or interest (to and including the final
installment of principal thereof);
(ii) no Event of Default or Default with respect to the
Existing Bonds or any additional series of Bonds shall have
occurred and be continuing on the date of such deposit or
during the period ending on the 123rd day after such date;
(iii) the Issuer has delivered to the Trustee (a) a ruling
from the Internal Revenue Service or an opinion of counsel
to the effect that such satisfaction and discharge of the
indebtedness of the Issuer with respect to the Existing
Bonds or any additional series of Bonds shall not be deemed
to be, or result in, a taxable event with respect to the
holders of Existing Bonds or additional series of Bonds, if
any, for purposes of United States Federal income taxation
and (b) an Opinion of Counsel with respect to certain
Investment Company Act and bankruptcy matters set forth in
the Indenture;
(iv) the Issuer shall have irrevocably designated a
redemption date, if applicable; and
(v) the Issuer shall have delivered to the Trustee an
officer's certificate and Opinion of Counsel stating that
all conditions precedent in the Indenture relating to the
discharge of the Existing Bonds and any additional series of
Bonds, have been complied with.
Trustee
There shall at all times be a Trustee under the Indenture, which
shall be a corporation having a combined capital, surplus and
undivided profits of at least $50 million, authorized by federal or
state or District of Columbia law to exercise corporate trust powers,
to the extent there is such an institution eligible and willing to
serve. The Trustee may resign at any time by giving written notice
thereof to the Issuer, the Company and the holders of the Existing
Bonds and the additional series of Bonds, if any. The Trustee may be
removed at any time by act of the holders of the Bonds, if any, of a
majority in principal amount of the outstanding Existing Bonds and
the additional series of Bonds, if any, delivered to the Trustee and
to the Issuer. The Issuer shall give notice of each resignation and
removal of the Trustee and each appointment of a successor Trustee to
all Bondholders.
Governing Law
The Indenture, the Company Guaranty and the Existing Bonds shall
be governed by, and construed in accordance with, the laws of the
State of New York.
Agency Relationship
The Company has designated the Issuer as its agent under the
Indenture for the sole purpose of (i) issuing the Existing Bonds and
any additional series of Bonds, to the extent of the Company's
obligations thereunder, and (ii) otherwise carrying out the Company's
obligations and duties and exercising the Company's rights and
privileges under the Indenture and under the Company Guaranty. The
Company will indemnify the Issuer against all claims arising in
connection with the Issuer's performance of its obligations.
Information Available to Bondholders
The Company and the Issuer have filed the Registration Statement
with the Commission. This Prospectus constitutes a part of the
Registration Statement and does not contain all of the information
set forth in the Registration Statement or the exhibits thereto,
certain parts of which have been omitted in accordance with the rules
and regulations of the Commission. For further information
pertaining to the Issuer, the Company, the Exchange Bonds and the
Company Guaranty, reference is made to the Registration Statement,
including the exhibits thereto. Statements made in this Prospectus
concerning the provisions of any documents to which reference is made
are not necessarily complete and, in the case of documents filed as
exhibits to the Registration Statement, reference is made to the copy
of the documents so filed for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its
entirety by such reference.
As a result of this offering, the Company and the Issuer will be
subject to periodic reporting and other informational requirements of
the Exchange Act. The Registration Statement and the exhibits
thereto, as well as the periodic reports and other information filed
by the Company with the Commission, may be inspected and copied at
the public reference facility maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the regional offices of the Commission located at Seven
World Trade Center, Suite 1300, New York, New York 10048 and Citicorp
Center, Suite 1400, 500 West Madison Street, Chicago, Illinois 60661.
Copies of such material may also be obtained at prescribed rates from
the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549.
The Company's and the Issuer's obligation to file periodic
reports with the Commission pursuant to the Exchange Act may be
suspended if the Exchange Bonds are held of record by fewer than 300
holders at the beginning of any fiscal year of the Company or the
Issuer, other than the fiscal year in which the Registration
Statement becomes effective. Pursuant to the Indenture, the Company
and the Issuer have agreed that, so long as the Company is not
subject to the reporting requirements of either Section 13 or 15(d)
of the Exchange Act, they will furnish to the Trustee copies of
annual, quarterly and current reports that the Company would be
required to file under the Exchange Act if it were subject to such
reporting requirements. In addition, subject to the limitations set
forth in the Indenture, upon the written request of a holder of
Bonds, the Issuer or the Company will provide without charge to such
holder or prospective investor, a copy of such information as is
required by Rule 144A to enable resales of Bonds to be made pursuant
to Rule 144A, unless at the time of such request the Company or the
Issuer is subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act. Any such request will be subject to the
confidentiality provisions set forth below. Written requests for such
information should be addressed to Panda Funding Corporation, c/o
Panda Energy International, Inc., 4100 Spring Valley Road, Suite
1001, Dallas, Texas 75244, Attention: Chief Financial Officer.
By requesting additional information relating to the offering of
Bonds, each holder and prospective investor agrees to keep
confidential the various documents and all written information which
from time to time have been or will be disclosed to it concerning the
Issuer, the Company or any of their affiliates which is not publicly
available, and agrees not to disclose any portion of the same to any
person other than to its own consultants, except as may be required
by applicable law or in a legal proceeding involving the Company or
the Issuer.
Book Entry; Delivery and Form
Except as described below, the Exchange Bonds initially will be
represented by a single, permanent global certificate in definitive,
fully registered form (the "Global Bond"). The Global Bond will be
deposited with, or on behalf of DTC and registered in the name of a
nominee of DTC. Exchange Bonds (i) issued in the Exchange Offer to
Institutional Accredited Investors or transferred to Institutional
Accredited Investors or "foreign purchasers" who are not Qualified
Institutional Buyers or (ii) issued to Qualified Institutional Buyers
who elect to take physical delivery of their certificates instead of
holding their interest through the Global Bond (and which are thus
ineligible to trade through DTC) (collectively referred to herein as
the "Non-Global Purchasers") will be issued in registered
certificated form ("Certificated Securities"). Upon the transfer to a
Qualified Institutional Buyer of any Certificated Security initially
issued to a Non-Global Purchaser, such Certificated Security will,
unless the transferee requests otherwise or the Global Bond has
previously been exchanged in whole for Certificated Securities, be
exchanged for an interest in the Global Bond.
The Global Bond
The Company and the Issuer expect that pursuant to procedures
established by DTC (i) upon the issuance of the Global Bond, DTC or
its custodian will credit, on its internal system, the principal
amount of Bonds of the individual beneficial interests represented by
such Global Bond to the respective accounts for persons who have
accounts with DTC and (ii) ownership of beneficial interests in the
Global Bond will be shown on, and the transfer of such ownership will
be effected only through, records maintained by DTC or its nominee
(with respect to interests of participants) and the records of
participants (with respect to interests of persons other than
participants). Ownership of beneficial interests in the Global Bond
will be limited to persons who have accounts with DTC
("participants") or persons who invest through participants.
Qualified Institutional Buyers will hold their interests in the
Global Bond directly through DTC, if they are participants in such
system, or indirectly through organizations which are participants in
such system.
So long as DTC or its nominee is the registered owner or holder
of the Exchange Bonds, DTC or such nominee, as the case may be, will
be considered the sole owner or holder of the Exchange Bonds
represented by such Global Bond for all purposes under the Indenture.
No beneficial owners of an interest in any Global Bond will be able
to transfer that interest except in accordance with DTC's procedures
in addition to those provided for under the Indenture.
Payments of the principal of, premium, if any, and interest on,
the Global Bond will be made to DTC or its nominee, as the case may
be, as the registered owner thereof. None of the Company, the Issuer,
the Trustee or any paying agent of the Company will have any
responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests in the
Global Bond or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
The Company and the Issuer expect that DTC or its nominee, upon
receipt of any payment of principal, premium, if any, or interest in
respect of the Global Bond, will credit participants' accounts with
payments in amounts proportionate to their respective beneficial
interests in the principal amount of the Global Bond as shown on the
records of DTC or its nominee. The Company and the Issuer also expect
that payments by participants to owners of beneficial interests in
the Global Bond held through such participants will be governed by
standing instructions and customary practice, as is now the case with
securities held for the accounts of customers registered in the names
of nominees for such customers. Such payments will be the
responsibility of such participants.
Transfers between participants in DTC will be effected in the
ordinary way in accordance with DTC rules and will be settled in
clearinghouse funds. If a holder requires physical delivery of a
Certificated Security for any reason, including to sell Exchange
Bonds to persons in states which require physical delivery of the
Certificated Securities, or to pledge such Securities, such holder
must transfer its interest in the Global Bond in accordance with the
normal procedures of DTC and with the procedures set forth in the
Indenture.
DTC has advised the Company and the Issuer that it will take any
action permitted to be taken by a holder of Exchange Bonds only at
the direction of one or more participants to whose account the
interests in the Global Bond are credited and only in respect of such
portion of the aggregate principal amount of Exchange Bonds as to
which such participant or participants have given such direction.
However, if there is an Event of Default under the Indenture, DTC
will exchange the Global Bond for Certificated Securities, which it
will distribute to its participants.
DTC has advised the Company and the Issuer as follows: DTC is a
limited purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "Clearing
corporation" within the meaning of the Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book
entry changes in accounts of its participants, thereby eliminating
the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing
corporations and certain other organizations. Indirect access to the
DTC system is available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Bond among
participants of DTC, it is under no obligation to perform such
procedures, and such procedures may be discontinued at any time. None
of the Company, the Issuer or the Trustee will have any
responsibility for the performance by DTC or its participants or
indirect participants of their respective obligations under the rules
and procedures governing their operations.
Certificated Securities
If DTC is at any time unwilling or unable to continue as a
depositary for the Global Bond and a successor depositary is not
appointed by the Company within 90 days, or at the Company's election
at any time, Certificated Securities will be issued in exchange for
the Global Bond.
OLD BONDS REGISTRATION RIGHTS
The holders of the Old Bonds have certain rights under the
Registration Rights Agreement, certain provisions of which are
discussed below. The following summary does not purport to be
complete or definitive and is qualified in its entirety by reference
to the Registration Rights Agreement, a copy of which is attached as
an exhibit to the Registration Statement of which this Prospectus
constitutes a part.
The Registration Rights Agreement provides that: (i) the Issuer
and the Company will file an Exchange Offer Registration Statement
with the Commission on or prior to 90 days after the Issue Date; (ii)
the Issuer and the Company will use their best efforts to have the
Exchange Offer Registration Statement declared effective by the
Commission on or prior to 180 days after the Issue Date; and (iii)
unless the Exchange Offer would not be permitted by applicable law or
Commission policy, the Issuer and the Company will commence the
Exchange Offer and use their best efforts to issue, on or prior to 30
business days after the date on which the Exchange Offer Registration
Statement was declared effective by the Commission, Exchange Bonds in
exchange for all Old Bonds tendered prior thereto in the Exchange
Offer. If (i) the Issuer and the Company are not permitted to file
the Exchange Offer Registration Statement or to consummate the
Exchange Offer because the Exchange Offer is not permitted by
applicable law or Commission policy or (ii) any holder of Old Bonds
notifies the Issuer and the Company within the specified time period
that (a) due to a change in law or policy it is not entitled to
participate in the Exchange Offer, (b) due to a change in law or
policy it may not resell the Exchange Bonds acquired by it in the
Exchange Offer to the public without delivering a prospectus and the
prospectus contained in the Exchange Offer Registration Statement is
not appropriate or available for such resales by such holder or (c)
it is a broker-dealer and owns Old Bonds acquired directly from the
Issuer or an affiliate of the Issuer, the Issuer and the Company will
file with the Commission the Shelf Registration Statement to cover
resales of the Transfer Restricted Bonds (as defined below) by the
holders thereof. The Issuer and the Company will use their best
efforts to cause the applicable registration statement to be declared
effective by the Commission within the specified periods. If
obligated to file the Shelf Registration Statement, the Issuer and
the Company will file on or prior to the later of (a) 90 days after
the Issue Date or (b) 30 days after such filing obligation arises and
use their best efforts to cause the Shelf Registration Statement to
be declared effective by the Commission on or prior to 90 days after
such obligation arises; provided that if the Issuer and the Company
have not consummated the Exchange Offer within 180 days after the
Issue Date, then the Issuer and the Company will file the Shelf
Registration Statement with the Commission on or prior to the 181st
day after the Issue Date and use their best efforts to cause the
Shelf Registration Statement to be declared effective within 60 days
after such filing. The Issuer and the Company will be required to use
their best efforts to keep such Shelf Registration Statement
continuously effective, supplemented and amended until the third
anniversary of the Issue Date or such shorter period that will
terminate when all the Transfer Restricted Bonds covered by the Shelf
Registration Statement have been sold pursuant thereto.
If (i) the Issuer and the Company fail to file any of the
registration statements required by the Registration Rights Agreement
on or before the date specified for such filing, (ii) any of such
registration statements are not declared effective by the Commission
on or prior to the date specified for such effectiveness (the
"Effectiveness Target Date"), (iii) the Issuer and the Company fail
to consummate the Exchange Offer within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer
Registration Statement or (iv) the Shelf Registration Statement or
the Exchange Offer Registration Statement is declared effective but
thereafter, subject to certain exceptions, ceases to be effective or
usable in connection with the Exchange Offer or resales of Transfer
Restricted Bonds, as the case may be, during the periods specified in
the Registration Rights Agreement (each such event referred to in
clauses (i) through (iv) above, a "Registration Default"), then the
interest rate on Transfer Restricted Bonds will increase ("Additional
Interest") by 0.50% per annum effective on the 181st day following
the Issue Date and Additional Interest will accrue until all
Registration Defaults have been cured. Following the cure of all
Registration Defaults, the accrual of Additional Interest will cease
and the interest rate will revert to the original rate; provided,
however, if all Registration Defaults are not cured within two years
following the Issue Date, such increase in the interest rate shall
become permanent.
For purposes of the foregoing, "Transfer Restricted Bonds" means
each Old Bond until (i) the date on which such Old Bond has been
exchanged by a person other than a broker-dealer for an Exchange Bond
in the Exchange Offer, (ii) following the exchange by a broker-dealer
in the Exchange Offer of an Old Bond for an Exchange Bond, the date
on which such Exchange Bond is sold to a purchaser who receives from
such broker-dealer on or prior to the date of such sale a copy of the
prospectus contained in the Exchange Offer Registration Statement,
(iii) the date on which such Old Bond has been effectively registered
under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iv) the date on which such Old Bond is
distributed to the public pursuant to Rule 144 under the Securities
Act.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Bonds for its own
account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange
Bonds. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with
resales of Exchange Bonds received in exchange for Old Bonds where
such Old Bonds were acquired as result of market making activities or
other trading actives. The Company and the Issuer have agreed, for a
period of 180 days after the consummation of the Exchange Offer, to
make available a prospectus meeting the requirements of the
Securities Act to any such broker-dealer for use in connection with
any such resale. A broker-dealer that delivers such a prospectus to
a purchaser in connection with such resales will be subject to
certain of the civil liability provisions under the Securities Act
and will be bound by the provisions of the Registration Rights
Agreement (including certain indemnification provisions). In
addition, until _________ (90 days from the date of this Prospectus),
all dealers effecting transactions in the Exchange Bonds may be
required to deliver a prospectus.
Each holder of Old Bonds who wishes to exchange such Old Bonds
for Exchange Bonds in the Exchange Offer will be required to make
certain representations, including representations that (i) any
Exchange Bonds to be received by it will be acquired in the ordinary
course of its business (whether or not it is the registered holder of
such Exchange Bonds), (ii) it has no arrangement with any person to
participate in the distribution (within the meaning of the Securities
Act) of the Exchange Bonds and (iii) it is not an Affiliate of the
Issuer or the Company or, if it is an Affiliate, it will comply with
the registration and prospectus delivery requirements of the
Securities Act to the extent applicable.
Neither the Issuer nor the Company will receive any proceeds
from any sale of Exchange Bonds by broker-dealers. Exchange Bonds
received by broker-dealers for their own account pursuant to the
Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Bonds or
a combination of such methods of resale, at market prices prevailing
at the time of resale, at prices related to such prevailing market
prices or at negotiated prices. Any such resale may be made directly
to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Bonds. Any
broker-dealer that resells Exchange Bonds that were received by it
for its own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such Exchange Bonds may
be deemed to be an "underwriter" within the meaning of the Securities
Act and any profit on any such resale of Exchange Bonds and any
commissions or concessions received by any such persons may be deemed
to be underwriting compensation under the Securities Act. The Letter
of Transmittal states that by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the
Securities Act.
The Company and the Issuer have agreed to pay all expenses
incidental to the Exchange Offer other than commissions and
concessions of any brokers or dealers and will indemnify holders of
the Bonds (including any brokers or dealers) against certain
liabilities, including liabilities under the Securities Act, as set
forth in the Registration Rights Agreement.
LEGAL MATTERS
The validity of the Exchange Bonds and certain other legal
matters in connection with this offering are being passed upon for
the Company and the Issuer by Chadbourne & Parke LLP, New York, New
York, as special counsel to the Company and the Issuer.
EXPERTS
Independent Accountants
The combined financial statements of Panda Interfunding as of
December 31, 1994 and 1995 and for each of the three years in the
period ended December 31, 1995 included in this Prospectus have been
so included in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as
experts in auditing and accounting. Price Waterhouse LLP has neither
examined nor compiled the accompanying prospective financial
information appearing in the Appendices hereto and, accordingly, does
not express an opinion or any other form of assurance with respect
thereto.
Independent Engineers And Consultants
Consolidated Pro Forma
ICF Resources, Incorporated, a subsidiary of ICF Kaiser
International, has prepared a report entitled "Summary of the
Consolidated Pro Formas of the Panda-Rosemary and Panda-Brandywine
Power Projects," dated July 26, 1996, and an Officer's Certificate
dated October 11, 1996, included as Appendix B to this Prospectus.
The Consolidated Pro Forma Report is included herein in reliance upon
such firm as experts in energy economics and financial analysis. The
Consolidated Pro Forma Report should be read in its entirety by all
prospective investors for an understanding of the reliance placed by
ICF on pro forma projections prepared by Burns & McDonnell and of the
methods of calculating the debt coverage ratios projected therein.
Panda-Rosemary Project
Burns & McDonnell has prepared a report entitled "Panda-Rosemary
Cogeneration Project Condition Assessment Report," dated July 26,
1996, and an Officer's Certificate dated October 11, 1996, included
as Appendix C to this Prospectus. The Rosemary Engineering Report is
included herein, in reliance upon such firm as experts in preparing
independent engineering reports for similar projects. The Rosemary
Engineering Report should be read in its entirety by all prospective
investors for information with respect to the Panda-Rosemary Facility
and the related subjects discussed therein.
Benjamin Schlesinger and Associates, Inc. has prepared a report
entitled "Assessment of Fuel Price, Supply and Delivery Risks for the
Panda-Rosemary Cogeneration Project," dated September 20, 1996, and
an Officer's Certificate dated October 11, 1996, included as Appendix
D to this Prospectus. The Rosemary Fuel Consultant's Report is
included herein in reliance upon such firm as experts in preparing
fuel consultant's reports for similar projects. The Rosemary Fuel
Consultant's Report should be read in its entirety by all prospective
investors for information with respect to the Panda-Rosemary Facility
and related subjects discussed therein.
Panda-Brandywine Project
ICF Resources, Incorporated, a subsidiary of ICF Kaiser
International, has prepared a report entitled "Independent Panda-
Brandywine Pro Forma Projections," dated July 26, 1996, and an
Officer's Certificate dated October 11, 1996, included as Appendix E
to this Prospectus. The Brandywine Pro Forma Report is included
herein in reliance on such firm as experts in energy economics and
financial analysis. The Brandywine Pro Forma Report should be read in
its entirety by all prospective investors for information with
respect to the Panda-Brandywine Facility and related subjects
discussed therein.
Pacific Energy Systems, Inc. has prepared a report entitled
"Independent Engineer's Report Panda-Brandywine Cogeneration
Project," dated July 22, 1996, and an Officer's Certificate dated
October 11, 1996, included as Appendix G to this Prospectus. The
Brandywine Engineering Report is included herein in reliance upon
such firm as experts in preparing independent engineering reports for
similar projects. The Brandywine Engineering Report should be read in
its entirety by all prospective investors for information with
respect to the Panda-Brandywine Facility and the related subjects
discussed therein.
C.C. Pace Resources, Inc. has prepared a report entitled "Panda-
Brandywine, L.P. Generating Facility Fuel Consultant's Report," dated
July 2, 1996, and an Officer's Certificate dated October 11, 1996,
included as Appendix H to this Prospectus. The Brandywine Fuel
Consultant's Report is included herein in reliance upon such firm as
experts in preparing fuel consultant's reports for similar projects.
The Brandywine Fuel Consultant's Report should be read in its
entirety by all prospective investors for information with respect to
the Panda-Brandywine Facility and related subjects discussed therein.
F-1
INDEX TO COMBINED FINANCIAL STATEMENTS
Panda Interfunding Combined Financial Statements:
Report of Independent Accountants F-2
Combined Balance Sheets as of December 31, 1994 and 1995 F-3
Combined Statements of Operations and Accumulated Deficit for
the years ended December 31, 1993, 1994 and 1995 F-4
Combined Statements of Cash Flows for the years ended
December 31, 1993, 1994 and 1995 F-5
Notes to Combined Financial Statements for the years ended
December 31, 1993, 1994 and 1995 F-6
Panda Interfunding Interim Combined Financial Statements:
Interim Combined Balance Sheets as of December 31, 1995 and
June 30, 1996 F-13
Interim Combined Statements of Operations and Accumulated
Deficit for the six months ended June 30, 1995 and 1996 F-14
Interim Combined Statements of Cash Flows for the six months
ended June 30, 1995 and 1996 F-15
Notes to Interim Combined Financial Statements for the six
months ended June 30, 1995 and 1996 F-16
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Panda Energy International, Inc.
In our opinion, the accompanying combined balance sheets and
the related combined statements of operations and accumulated
deficit and of cash flows present fairly, in all material
respects, the financial position of Panda Interfunding at
December 31, 1994 and 1995, and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted
accounting principles. These financial statements are the
responsibility of Panda Interfunding's management; our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the
opinion expressed above.
/s/Price Waterhouse LLP
Dallas, Texas
May 20, 1996
<TABLE>
<CAPTION>
PANDA INTERFUNDING
COMBINED BALANCE SHEETS
December 31, 1994 and 1995
ASSETS
1994 1995
<S> <C> <C>
Current Assets:
Cash and cash equivalent $ 3,921,093 $ 1,160,096
Restricted cash -- current 2,571,826 1,876,142
Accounts receivable 5,660,318 5,199,999
Fuel oil, spare parts and supplies 3,345,684 3,084,168
Other current assets 39,148 12,664
----------- -----------
Total current assets 15,538,069 11,333,069
Plant and equipment:
Electric generating facility 111,662,232 237,772,588
Furniture and fixtures 29,080 29,080
Less accumulated depreciation (16,798,583) (21,008,036)
----------- -----------
Total plant and equipment, net 94,892,729 216,793,632
Receivable from parent 16,519,536 32,265,771
Debt service reserves and escrow
deposits 9,451,293 10,198,948
Debt issuance costs, net of accumulated
amortization of $2,614,974, and
$3,169,285, respectively 4,210,575 3,990,655
Partnership formation costs, net of
accumulated amortization of
$1,599,324 and $2,132,440,
respectively 1,066,216 533,100
------------ ------------
$141,678,418 $275,115,175
============ ============
LIABILITIES AND COMBINED SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses:
Construction costs $ 1,489,412 $ 5,597,818
Interest and letter of credit fees 2,623,715 2,540,347
Operating expenses and other 1,217,421 1,219,061
Current portion of long-term debt 7,200,000 9,100,000
----------- -----------
Total current liabilities 12,530,548 18,457,226
Long term debt, less current portion 106,342,894 234,608,361
Minority interest 35,588,365 36,835,666
Commitments and contingencies -- --
Combined shareholders' deficit:
Combined equity 2,020 2,020
Accumulated deficit (12,785,409) (14,788,098)
------------ ------------
Combined total shareholders'
deficit (12,783,389) (14,786,078)
------------ ------------
$141,678,418 $275,115,175
============ ============
</TABLE>
See accompanying notes to combined financial statements.
<TABLE>
<CAPTION>
PANDA INTERFUNDING
COMBINED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
For the Years Ended December 31, 1993, 1994 and 1995
1993 1994 1995
<S> <C> <C> <C>
Revenue:
Electric capacity and energy sales $29,856,269 $30,664,096 $29,858,475
Steam and chilled water sales 617,598 650,575 473,040
Interest income 365,276 602,783 895,268
----------- ----------- -----------
30,839,143 31,917,454 31,226,783
=========== =========== ===========
Expenses:
Operating expenses 7,676,470 8,940,146 9,347,707
Project development and administrative 2,277,786 1,376,349 1,821,376
Interest expense and letter of credit
fees 11,065,648 11,017,418 11,715,929
Depreciation 4,281,673 4,208,314 4,209,453
Amortization of debt issuance costs 502,613 600,382 554,311
Amortization of partnership formation
costs 533,104 533,116 533,116
----------- ----------- -----------
26,337,294 26,675,725 28,181,892
----------- ----------- -----------
Income before minority interest 4,501,849 5,241,729 3,044,891
Minority interest (5,474,483) (5,699,994) (5,047,580)
Net loss (972,634) (458,265) (2,002,689)
Accumulated deficit, beginning of
year (11,354,510) (12,327,144) (12,785,409)
------------ ----------- -----------
Accumulated deficit, end of year $(12,327,144) $(12,785,409) $(14,788,098)
============ ============ ============
</TABLE>
See accompanying notes to combined financial statements.
<TABLE>
<CAPTION>
PANDA INTERFUNDING
COMBINED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1993, 1994 and 1995
1993 1994 1995
<S> <C> <C> <C>
Operating activities:
Net loss $(972,634) $(458,265) $(2,002,689)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Minority interest 5,474,483 5,699,994 5,047,580
Depreciation 4,281,673 4,208,314 4,209,453
Amortization of debt issuance costs 502,613 600,382 554,311
Amortization of partnership
formation costs 533,104 533,116 533,116
Amortization of loan discount -- -- 124,176
Changes in assets and liabilities:
Accounts receivable 2,727,654 (2,454,524) 460,319
Fuel oil, spare parts and supplies 180,866 (33,698) 261,516
Other current assets (34,430) 6,646 26,484
Accounts payable and accrued
expenses 45,433 (114,382) (81,728)
----------- ---------- -----------
Net cash provided by operating
activities 12,738,762 7,987,583 9,132,538
----------- ---------- -----------
Investing activities:
Additions to plant and equipment (2,986,156) (3,801,777) (122,001,950)
Increase in debt service reserves
and escrow deposits (808,526) (457,538) (747,655)
----------- ---------- -----------
Net cash used in investing
activities (3,794,682) (4,259,315) (122,749,605)
----------- ---------- -----------
Financing activities:
Distributions to minority interest
owner (4,341,935) (4,590,354) (3,800,279)
Receivable from parent (855,933) (8,701,884) (15,746,235)
Proceeds from long-term debt 2,550,000 16,534,706 147,541,291
Repayment of long-term debt (4,400,000) (7,500,000) (17,500,000)
Debt issuance costs (105,354) (498,281) (334,391)
---------- ----------- ----------
Net cash provided by (used in)
financing activities (7,153,222) (4,755,813) 110,160,386
---------- ---------- -----------
Increase (decrease) in cash, including
restricted amounts 1,790,858 (1,027,545) (3,456,681)
Cash, including current restricted
amounts, beginning of period 5,729,606 7,520,464 6,492,919
Cash, including current restricted
amounts, end of period $7,520,464 $6,492,919 $3,036,238
========== ========== ==========
Supplemental cash flow information:
Interest paid, net of amounts
capitalized 11,078,485 9,983,508 5,968,240
Non cash investing and financing
activities:
Accrued construction costs -- 1,489,412 5,597,818
Interest Cost -- -- 153,861
Debt Discount -- 1,241,812 --
</TABLE>
See accompanying notes to combined financial statements.
PANDA INTERFUNDING
NOTES TO COMBINED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1994 and 1995
1. ORGANIZATION
The accompanying combined financial statements have been
prepared on a "carved-out" basis and reflect the ownership
interests of two independent power projects for all periods.
These ownership interests are held by certain entities which are
wholly-owned by Panda Energy Corporation, a Texas corporation
(PEC), which in turn is a wholly-owned subsidiary of Panda Energy
International, Inc. (PEII) and are collectively referred to as
"Panda Interfunding" or the "Company". The entities primarily
include Panda Rosemary Corporation (PRC), a 1% general partner in
Panda-Rosemary L.P. (Panda-Rosemary); PRC II Corporation (PRC
II), a 9% limited partner in Panda-Rosemary; Panda Brandywine
Corporation, a 50% general partner in Panda-Brandywine, L.P.
(Panda-Brandywine); Panda Energy Corporation, a Delaware
corporation (PEC-Delaware), a 50% limited partner in Panda-
Brandywine; and Brandywine Water Company. Management of PEC
anticipates Panda Funding Corporation and Panda Cayman
Interfunding Corporation will be formed as wholly-owned
subsidiaries of the Company for purposes of facilitating the
financing of the development and the acquisition of debt and
equity interests of certain electric generation facilities and
currently have no independent operations. The two independent
power projects are in different stages of development,
construction and operation and are located in the United States.
Other projects currently under development by PEII may be
transferred to the Company. All material intercompany accounts
and transactions have been eliminated.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
Cash -- Included in cash and cash equivalents are highly
liquid investments with original maturities of three months or
less. Restricted cash-current includes escrowed cash which may be
used to pay operating expenses.
Debt Service Reserves and Escrow Deposits -- Debt service
reserves and escrow deposits include cash held by the bank to pay
debt service and capital improvements related to Panda-Rosemary.
Fuel Oil, Spare Parts and Supplies -- These items include
fuel oil stored on-site, chemical inventory and various spare
parts and supplies necessary for plant maintenance. The items are
valued at cost using the weighted average method, which
approximates the fair market value, and are expensed, as
operating expenses, when used.
Plant and Equipment -- Electric generating facility assets
are recorded at cost and depreciated using the straight-line
method over the estimated useful lives of the assets, generally
twenty-five years. Depreciation of office furniture, equipment,
and leasehold improvements is provided using the straight-line
method over the estimated useful lives of the assets, generally
three to five years. Costs, including interest on funds borrowed
to finance the construction of facilities, related to projects in
advanced stages of development and construction are capitalized
as electric generating facility assets. Capitalized interest was
$0, $803,254, and $5,793,296 during 1993, 1994 and 1995,
respectively. Maintenance and repair costs are charged to expense
as incurred.
Debt Issuance Costs -- The costs related to the issuance of
debt are capitalized and amortized using the effective interest
method over the lives of the related debt.
Partnership Formation Costs -- The costs related to the
formation of Panda-Rosemary are capitalized and amortized over
five years.
Environmental Matters -- The operations of the Company are
subject to federal, state and local laws and regulations relating
to protection of the environment. Although the Company believes
that its operations are in general compliance with applicable
environmental regulation, risks of additional costs and
liabilities are inherent in cogeneration operations, and there
can be no assurance that significant costs and liabilities will
not be incurred by the Company.
Environmental expenditures are expensed or capitalized as
appropriate. Expenditures that relate to an existing condition
caused by past operations, and which do not contribute to current
or future revenue generation, are expensed. Liabilities will be
recorded if environmental assessments and/or remedial efforts
become probable, and the costs reasonably estimable. The timing
of these accruals would generally coincide with the completion of
a feasibility study or the Company's commitment to a formal plan
of action.
Revenue Recognition -- Revenue generated from the sale of
electric capacity and energy for Panda-Rosemary is recognized
based on the amount billed under the power purchase agreement
entered into prior to May 21, 1992. The revenue generated from
the sale of electric capacity and energy for other projects will
be recognized based on the lesser of the amount billable under
the power purchase agreement or an amount determined by the
annual kilowatts made available multiplied by the estimated
average revenue per kilowatt over the term of the Power Purchase
Agreement. Revenue from the sale of steam and chilled water is
recognized based on the output delivered at rates specified under
contract terms.
Income Taxes -- The Company records income taxes according
to Statement of Financial Accounting Standards No. 109 (SFAS 109)
which requires deferred tax liabilities or assets to be
recognized for the anticipated future tax effects of temporary
differences that arise as a result of the differences in the
carrying amounts and the tax bases of assets and liabilities.
SFAS 109 also requires a valuation allowance for deferred tax
assets in certain circumstances.
The Company is included in the consolidated federal income
tax return of PEII. The accompanying financial statements reflect
income taxes as if the Company were a separate tax filing entity.
Allocation of Administrative Costs -- PEII performs certain
accounting, legal, insurance, consulting and advertising
services. These general and administrative costs are generally
allocated to the Company using the percentage of time PEII spent
performing these services. The expenses allocated were $701,153,
$600,353 and $870,200 in 1993, 1994 and 1995, respectively, and
are included in project development and administrative expenses
in the statement of operations. Management believes the method
used to allocate these costs is reasonable.
Loss Per Common Share -- Historical loss per share has not
been presented as the Company was not a separate legal entity
during the periods presented. However, loss per share on a pro
forma basis for 1995, utilizing the anticipated 1,000 shares
outstanding upon formation of the Company, was $2,003.
New Accounting Pronouncements -- In March 1995, the
Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" (SFAS 121). SFAS 121 is effective for financial
statements for fiscal years beginning after December 15, 1995 and
requires the write-down to market value of certain long-lived
assets. The Company will adopt SFAS 121 in 1996 and such adoption
will not have a material impact on its financial position or
results of operations.
3. FUEL OIL, SPARE PARTS AND SUPPLIES
Fuel oil, spare parts and supplies are comprised of the
following amounts:
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Fuel Oil $1,235,022 $1,182,310
Spare parts 2,082,310 1,880,732
Chemicals 28,352 21,126
Total $3,345,684 $3,084,168
</TABLE>
4. POWER PROJECTS
Rosemary Project -- Effective May 5, 1989, PEII formed a
wholly-owned subsidiary, now a wholly-owned subsidiary of the
Company, to develop, construct, and operate the 180 megawatt
Rosemary cogeneration facility in Roanoke Rapids, North Carolina
("Rosemary Project"). Construction on the Rosemary Project began
in September 1989, and commercial operation of the facility began
on December 27, 1990.
On January 6, 1992, PRC contributed substantially all
project assets and liabilities and $216,553 in cash to Panda-
Rosemary, in exchange for general partnership and certain limited
partnership interests. An institutional investor ("Investor")
contributed cash in exchange for the remaining limited
partnership interests. The Rosemary Project is managed by PRC,
the general partner, and is operated by an unrelated third party
under a three-year agreement with Panda-Rosemary.
The Rosemary Project produces both electricity and useful
thermal energy in the form of steam. Electric capacity and energy
sales are based on the terms of the power purchase agreement
between Panda-Rosemary and Virginia Electric and Power Company
("VEPCO") dated January 24, 1989. The agreement requires Panda-
Rosemary to provide VEPCO with all the available capacity of the
Rosemary Project on an as-needed basis with VEPCO obligated to
pay for the power delivered and dependable capacity of the
facility at a rate per kilowatt which decreases in certain
periods as defined by the agreement. The term of the agreement is
25 years and it expires December 2015. Steam and chilled water
sales are a result of an agreement with the Bibb Company.
For its investment, the Investor receives percentage
allocations of income, expense, and cash flow which decline over
time if certain rate of return hurdles are achieved. The
allocations to the Investor begin at 90%, then decrease to 60%,
30%, and finally 15% based upon designated rate of return
requirements. The corresponding remainder of the cash flow (10%,
40%, 70%, and finally 85%) is allocated to the Company.
The Company controls Panda-Rosemary through its one percent
general partner interest and a 9% limited partner interest, which
increases over time if certain rate of return hurdles are
achieved by Panda-Rosemary. Accordingly, Panda-Rosemary's balance
sheet as of December 31, 1994 and 1995, and statements of income
for the years ended December 31, 1993, 1994, and 1995 have been
combined in the accompanying financial statements. The capital of
the Investor and Panda-Rosemary's net income allocated to the
Investor are presented as minority interest in the accompanying
financial statements.
Brandywine Project -- On August 9, 1991, through a wholly-
owned partnership, Panda-Brandywine L.P. ("Panda-Brandywine"),
PEII entered into a Power Purchase Agreement with Potomac
Electric Power Company ("PEPCO") to build a 230 megawatt gas-
fired facility. The agreement requires Panda-Brandywine to supply
PEPCO with all available capacity from the facility for the 25-
year term of the contract with a guaranteed dispatch level of at
least 60 hours per week for the first 15 years. The Brandywine
Project, currently being constructed in Brandywine, Maryland, by
Raytheon Engineers and Constructors, Inc. under a fixed fee, turn-
key contract is scheduled for commercial operations in October,
1996. A construction loan in the amount of $215 million was
provided by General Electric Capital Corporation ("GECC") in
April, 1995. Upon completion of construction, the loan will
convert to a single-investor lease with GECC with a twenty year
term and two five year renewal options. The Company has incurred
total costs of $140.1 million as of December 31, 1995, which is
included in plant and equipment under electric generating
facility in the accompanying balance sheets.
5. RECEIVABLE FROM PARENT
PEII performs all treasury and administrative functions for
the Company. The receivable from parent reflects the net activity
for the costs related to these functions including cash advances
to the parent and allocations of corporate general and
administrative expenses. The receivable from parent also includes
cash remitted to the parent for assets not contributed upon
formation of Panda-Rosemary (Note 4).
6. LONG-TERM DEBT
Long-term debt of the Company as of December 31, 1994, and
1995 is summarized as follows:
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Taxable Revenue Bonds for Rosemary project $ 97,200,000 $ 90,000,000
Development Loan for Brandywine project 10,084,706 --
Construction Loan for Brandywine project -- 134,735,719
Term Loan with TCW, net of discount 6,258,188 18,972,642
------------ ------------
113,542,894 243,708,361
(7,200,000) (9,100,000)
------------ ------------
$106,342,894 $234,608,361
============ ============
</TABLE>
Taxable Revenue Bonds -- In October 1989, PRC obtained long-
term financing for the Rosemary Project in the form of $116
million of taxable revenue bonds ("Bonds") issued by the Halifax
Regional Economic Development Corporation ("Issuer"), a nonprofit
corporation organized in North Carolina. The Bonds bear interest
at a fixed rate of 9.25% payable semiannually. Scheduled
principal payments are required annually and began on October 1,
1991 and will continue through maturity on October 1, 2005. Such
principal and interest payments paid by Panda-Rosemary to the
Issuer are used to make required payments on the Bonds. The Bonds
are subject to mandatory redemption prior to maturity under
certain conditions.
The Bonds are fully guaranteed by an irrevocable, direct-pay
letter of credit issued by The Fuji Bank, Limited, Houston Agency
("Fuji"). The letter of credit has a term equal to the term of
the Bonds and includes annual fees of .9375% for years 1-5,
1.3125% for years 6-10, and 1.6875% per annum thereafter. The
letter of credit is secured by the Rosemary Project as well as
all of the outstanding capital stock of PRC. The letter of credit
contains certain covenants including a minimum debt service
coverage ratio.
During the Rosemary Project's operating period and while
amounts are outstanding under the long-term financing
arrangements, all revenues of Panda-Rosemary are paid to a
collateral agent, acting on behalf of Fuji. On a quarterly basis,
the collateral agent remits to Panda-Rosemary remaining funds
available after payment of all expenditures relating to the
Rosemary Project, including debt service, provided that Panda-
Rosemary is in compliance with the debt service coverage ratio
and other covenants under the letter of credit. Under the long-
term financing arrangements, the collateral agent withholds funds
to meet future debt service, maintenance and pollution control
requirements, if necessary. These amounts are reflected as
restricted cash-current and debt service reserves and escrow
deposits in the accompanying combined balance sheets.
Fuji has also provided a letter of credit for approximately
$5 million guaranteeing Panda-Rosemary's performance under the
power purchase agreement.
Term Loan -- On October 27, 1995, PEII obtained a term loan
in the amount of $20 million from Trust Company of the West
("TCW"). This loan amended and restated the loan agreement dated
November 8, 1994. The loan bears interest at a rate of 13.5%,
payable at a rate of 11.0%, and matures on November 8, 2004. The
loan is secured by the pledge of the common stock of PEC which
currently owns the interest in all PEII's various projects
(including the projects held by the Company). In addition, the
Company is in the process of completing a debt offering in which
a portion of the proceeds will be used to retire all the term
loan debt. Accordingly, the TCW loan and related interest and
debt issuance costs are reflected in the accompanying combined
financial statements.
Under the loan agreement, TCW also received 1,004,000
warrants to purchase shares of PEII stock. A loan discount of
$1,241,812 was created as a result of the allocation to the
warrants. The warrants are exercisable at $8 per share, subject
to adjustment, and expire on November 8, 2004. If a public
offering of PEII's stock has not occurred, PEII is obligated to
repurchase the warrants at the holder's option for $2.18 and
$2.91 at November 8, 1999 and 2001, respectively. The warrants
are callable in total by PEII if a public offering of stock has
occurred at $12 per warrant during a call period when the closing
price for PEII's common stock has equaled or exceeded 250% of the
exercise price of the warrants. The carrying value of the
warrants is adjusted annually to the redemption price. Such
adjustment was $153,861 in 1995 and was recorded as interest
expense in the accompanying statement of operations. The term
loan contains certain restrictive covenants including limitations
on indebtedness, limitations on corporate investments and others.
Proceeds from the November 8, 1994, TCW loan were used to
pay unpaid principal and accrued interest in the amount of
$1,431,781 on an existing term loan with Nova Northwest Inc.
("Nova"). Under the agreement, Nova will continue to receive
4.33% of cash flow participation in the distributions received by
PEII from the Rosemary Project for the term of the Panda-Rosemary
L.P. partnership agreement. PEII and Nova each have the option to
convert the present value of cash flow participation, as defined
by the agreement, to PEII common stock at $6 a share.
Construction Loan -- On April 10, 1995, Panda-Brandywine
closed the funding of a $215 million construction loan with GECC.
The construction loan is considered non-recourse project debt and
should provide for all capital costs of the project. The
construction loan bears an interest rate of the Eurodollar rate
plus 2.5%, and upon completion of the Brandywine facility the
construction loan will be converted to a single-investor lease
with GECC which will have a 20-year initial term and two 5-year
renewal options. The lease payments anticipated under the single-
investor lease are used to determine the future minimum payments
(Note 9). The construction loan provides for commitments under
letters of credit aggregating approximately $12.4 million of
which approximately $5.4 million is outstanding as of December
31, 1995. The letters of credit have terms up to the terms of the
lease, an annual fee of 1.50% on any amounts outstanding and
1.25% on the unused commitment and are secured by Panda-
Brandywine.
Long-term Debt Maturities -- The maturities of long-term
obligations, excluding the construction loan for each of the five
years succeeding December 31, 1995 and thereafter, are as
follows:
1996 $9,100,000
1997 9,178,000
1998 9,978,000
1999 9,278,000
2000 11,178,000
Thereafter 60,260,642
------------
$108,972,642
============
7. FEDERAL INCOME TAXES
A provision for income taxes for 1993, 1994 and 1995 has not
been recorded since operating losses were incurred for each year.
PEII has approximately $16 million of NOL carryforwards at
December 31, 1995 which are available to the Company and will
expire during the years 2007 to 2010. PEII may become subject to
a limitation on the amount of NOL carryforwards which may be used
annually to offset income should certain changes in its ownership
occur in the future.
Deferred tax assets of approximately $10 million and $8
million as of December 31, 1995 and 1994, respectively, consist
primarily of interest in partnerships and net operating losses
and are offset by a valuation allowance. The deferred tax asset
for interest in partnerships relates to the difference between
the tax basis of the assets contributed to the partnership upon
its formation and the Company's financial reporting basis in
those assets.
SFAS No. 109 requires that a valuation allowance be recorded
against tax assets which are not likely to be realized.
Specifically, the Company's carryforwards expire at specific
future dates and utilization of certain carryforwards is limited
to specific amounts each year. However, due to the uncertain
nature of their ultimate realization based upon past performance
and expiration dates, the Company has established a full
valuation allowance against these carryforward benefits and is
recognizing the benefits only as reassessment demonstrates they
are realizable. Realization is entirely dependent upon future
earnings in specific tax jurisdictions. While the need for this
valuation allowance is subject to periodic review, if the
allowance is reduced, the tax benefits of the carryforwards will
be recorded in future operations as a reduction of the Company's
income tax expense.
The provision for income taxes differs from the amount of
income tax determined by applying the applicable U.S. statutory
federal income tax rate to pre-tax income primarily due to the
change in the valuation allowance.
8. COMBINED EQUITY
The combined equity consists of contributed capital related
to PRC of $1,000, PRC II of $10, Panda-Brandywine Corporation of
$500, PEC-Delaware of $500 and Brandywine Water Company of $10.
Each of the above legal entities have common stock of $.01 par
value and 1,000 shares issued and outstanding and the remaining
contributed capital represents additional paid-in capital.
9. COMMITMENTS AND CONTINGENCIES
The Company leases the property for the Rosemary Project
under a twenty-five year lease for a nominal amount. The
Brandywine Project, upon completion of construction, will be
leased under a capital lease with GECC.
The future minimum lease commitments under the capital lease
for each of the five years succeeding December 31, 1995 and
thereafter are as follows:
<TABLE>
<CAPTION>
Capital Lease
<S> <C>
1996 $ --
1997 4,785,840
1998 6,731,491
1999 11,937,477
2000 12,876,962
Thereafter 352,885,459
------------
Total minimum lease payments $389,217,229
Amounts representing interest 254,481,510
------------
Present value of net minimum
payments $134,735,719
============
</TABLE>
PEC is also involved in other legal and administrative
proceedings in the ordinary course of business. Management
believes, based on the advice of counsel, the amount of ultimate
liability with respect to these matters will not have a material
affect on the financial position of the Company.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATION OF
CREDIT RISK
The estimated fair values of the Company's financial
instruments as of December 31, 1995 are as follows:
Carrying Value Fair Value
Long-term debt $243,708,361 $257,877,561
The carrying amounts of variable rate debt approximate their
fair values. The taxable revenue bonds have limited trading. The
fair value of these bonds is estimated based on a March 1996,
third party quotation, adjusted to reflect changes in the yield
of government securities with similar maturities since December
31, 1995. The fair market value of the other long-term debt is
established using discounted cash flow analyses, based on the
Company's current incremental borrowing rates for similar types
of borrowing arrangements.
The Company is also a party to letters of credit.
Historically, no claims have been made against these financial
instruments and management does not expect any material losses to
result from these off-balance-sheet instruments because
performance is not usually expected to be required. Therefore,
management is of the opinion that the fair value of these
instruments is zero.
The Company has various purchase commitments for gas supply
and delivery incident to the ordinary conduct of business. In the
aggregate, such commitments are not at prices in excess of the
current market.
The Company's electric capacity and energy sales are
currently under one power sales contract with a single customer.
The failure of this customer to fulfill its contractual
obligations could have a substantial negative impact on the
Company's revenue. However, the Company does not anticipate non-
performance by the customer under this contract.
<TABLE>
<CAPTION>
PANDA INTERFUNDING
COMBINED BALANCE SHEETS
(Unaudited)
ASSETS
December 31 June 30
1995 1996
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,160,096 $ 1,904,391
Restricted cash -- current 1,876,142 6,389,496
Accounts receivable 5,199,999 4,824,659
Fuel oil, spare parts and supplies 3,084,168 3,077,790
Other current assets 12,664 43,502
------------ ------------
Total current assets 11,333,069 16,239,838
Plant and equipment:
Electric generating facilities 237,772,588 276,152,108
Furniture and fixtures 29,080 29,080
Less: accumulated depreciation (21,008,036) (23,114,476)
------------ ------------
Total plant and equipment, net 216,793,632 253,066,712
Receivable from parent 32,265,771 30,567,876
Debt service reserves and escrow deposits 10,198,948 10,264,560
Debt issuance costs, net of accumulated
amortization of $3,169,285 and
$3,451,100, respectively 3,990,655 4,431,042
Partnership formation costs, net of
accumulated amortization of $2,132,440
and $2,398,990, respectively 533,100 266,550
----------- ------------
$275,115,175 $314,836,578
============ ============
LIABILITIES AND COMBINED SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses:
Construction costs $ 5,597,818 $ 4,976,623
Interest and letter of credit fees 2,540,347 2,964,145
Operating expenses and other 1,219,061 2,600,037
Current portion of long-term debt 9,100,000 9,100,000
------------ ------------
Total current liabilities 18,457,226 19,640,805
Long-term debt, less current portion 234,608,361 274,343,682
Minority interest 36,835,666 37,614,084
Commitments and contingencies -- --
Combined shareholders' deficit:
Combined equity 2,020 2,020
Accumulated deficit (14,788,098) (16,764,013)
------------ ------------
Combined total shareholders' deficit (14,786,078) (16,761,993)
------------ ------------
$275,115,175 $314,836,578
</TABLE>
See accompanying notes to interim combined financial statements.
<TABLE>
<CAPTION>
PANDA INTERFUNDING
COMBINED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
For the Six Months Ended June 30, 1995 and 1996
(Unaudited)
1995 1996
<S> <C> <C>
Revenue:
Electric capacity and energy sales $ 15,433,928 $ 14,558,903
Steam and chilled water sales 256,937 263,002
Interest income 435,522 386,826
16,126,387 15,208,731
Expenses:
Operating expenses 4,578,037 5,061,346
Project development and administrative 890,559 1,192,659
Interest expense and letter of credit fees 5,669,089 6,369,754
Depreciation 2,104,156 2,106,439
Amortization of debt issuance costs 272,636 281,815
Amortization of partnership formation costs 266,558 266,550
------------ ------------
13,781,035 15,278,563
------------ ------------
Income (loss) before minority interest 2,345,352 (69,832)
Minority interest (2,994,945) (1,906,083)
------------ ------------
Net loss (649,593) (1,975,915)
Accumulated deficit, beginning of period (12,785,409) (14,788,098)
------------ ------------
Accumulated deficit, end of period $(13,435,002) $(16,764,013)
============ ============
</TABLE>
See accompanying notes to interim combined financial statements.
<TABLE>
<CAPTION>
PANDA INTERFUNDING
COMBINED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1995 and 1996
(Unaudited)
1995 1996
<S> <C> <C>
Operating activities:
Net loss $ (649,593) $(1,975,915)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Minority interest 2,994,945 1,906,083
Depreciation 2,104,156 2,106,439
Amortization of debt issuance costs 272,636 281,815
Amortization of partnership formation
costs 266,558 266,550
Amortization of loan discount 62,088 95,366
Changes in assets and liabilities:
Accounts receivable (146,662) 375,340
Fuel oil, spare parts and supplies (122,462) 6,378
Other current assets (11,508) (30,838)
Accounts payable and accrued expenses 486,446 1,804,774
----------- -----------
Net cash provided by operating
activities 5,256,604 4,835,992
----------- -----------
Investing activities:
Additions to property, plant and
equipment (66,533,743) (39,000,715)
Increase in debt service reserves and
escrow deposits (205,948) (65,612)
----------- ------------
Net cash used in investing activities (66,739,691) (39,066,327)
----------- ------------
Financing activities:
Distributions to minority interest owner (2,261,072) (1,127,665)
Receivable from parent (3,825,320) 1,697,895
Proceeds from long-term debt 68,790,037 39,864,956
Repayment of long-term debt -- (225,000)
Debt issuance costs -- (722,202)
----------- -----------
Net cash provided by financing
activities 62,703,645 39,487,984
----------- -----------
Increase in cash, including restricted
amounts 1,220,558 5,257,649
Cash, including current restricted amounts,
beginning of period 6,492,919 3,036,238
----------- -----------
Cash, including current restricted amounts,
end of period $ 7,713,477 $ 8,293,887
=========== ===========
</TABLE>
See accompanying notes to interim combined financial statements.
PANDA INTERFUNDING
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS
For the Six Months Ended June 30, 1995 and 1996
1. ORGANIZATION
The accompanying combined financial statements have been
prepared on a "carved-out" basis and reflect the ownership
interests of two independent power projects for all periods.
These ownership interests are held by certain entities which are
wholly-owned by Panda Energy Corporation, a Texas corporation
(PEC), which in turn is a wholly-owned subsidiary of Panda Energy
International, Inc. (PEII) and are collectively referred to as
"Panda Interfunding" or the "Company". The entities primarily
include Panda Rosemary Corporation (PRC), a 1% general partner in
Panda-Rosemary L.P. (Panda-Rosemary); PRC II Corporation (PRC
II), a 9% limited partner in Panda-Rosemary; Panda Brandywine
Corporation, a 50% general partner in Panda-Brandywine, L.P.
(Panda-Brandywine); Panda Energy Corporation, a Delaware
corporation, (PEC-Delaware), a 50% limited partner in Panda-
Brandywine; and Brandywine Water Company. Panda Funding
Corporation and Panda Cayman Interfunding Corporation have been
formed as wholly-owned subsidiaries of the Company for purposes
of facilitating the financing of the development and the
acquisition of debt and equity interests of certain electric
generation facilities and currently have no independent
operations. The two independent power projects are in different
stages of development, construction and operation and are located
in the United States. Other projects currently under development
by PEII may be transferred to the Company. All material
intercompany accounts and transactions have been eliminated.
2. SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited interim combined financial
statements have been prepared in accordance with generally
accepted accounting principles and should be read in conjunction
with the audited financial statements for the year ended December
31, 1995. The accompanying unaudited interim combined financial
statements for the six months ended June 30, 1995 and 1996
include all adjustments, consisting of normal recurring accruals,
which management considers necessary for a fair presentation of
the results for the interim periods. The results of operations
for the six months ended June 30, 1996 are not necessarily
indicative of the results that may be expected for the year
ending December 31, 1996. The amounts presented in the balance
sheet as of December 31, 1995 were derived from the Company's
audited combined financial statements.
Allocation of Administrative Costs -- PEII performs certain
accounting, legal, insurance, consulting and advertising
services. These general and administrative costs are generally
allocated to the Company using the percentage of time PEII spent
performing these services. The expenses allocated were $433,000
and $554,000 for the six months ended June 30, 1995 and 1996,
respectively, and are included in project development and
administrative expenses in the statement of operations.
Management believes the method used to allocate these costs is
reasonable.
Loss Per Common Share -- Historical loss per share has not
been presented as the Company was not a separate legal entity
during the periods presented. However, loss per share on a pro
forma basis for the six months ended June 30, 1996, utilizing the
anticipated 1,000 shares outstanding upon formation of the
Company, was $1,976.
3. POWER PROJECTS AND LONG-TERM DEBT
The Company has incurred total costs on the Brandywine
Project of $140.1 million and $179.1 million as of December 31,
1995 and June 30, 1996, respectively, which is included in plant
and equipment under electric generating facility in the
accompanying balance sheets. Long-term debt related to the
Brandywine Project was $134.7 million and $174.3 million at
December 31, 1995 and June 30, 1996, respectively.
APPENDIX A
PART I -- DEFINED TERMS
Unless the context requires otherwise, any reference in this
Prospectus to any agreement means such agreement and all
schedules, exhibits and attachments thereto as amended,
supplemented or otherwise modified and in effect from time to
time. Unless otherwise stated, any reference in this Prospectus
to any person or entity shall include its successors and assigns
and, in the case of any governmental authority, any entity
succeeding to its functions and capacities. All terms defined
herein used in the singular shall have the same meanings when
used in the plural and vice versa.
TERM DEFINITION
"Accounts and Funds" means Project Accounts, the Debt
Service Fund, the Capitalized Interest
Fund, the Debt Service Reserve Fund, the
Company Expense Fund, the Mandatory
Redemption Accounts, the Extraordinary
Distribution Accounts and the
Distribution Suspense Funds.
"Additional Interest" means the additional interest
payable on Transfer Restricted Bonds as
a result of a Registration Default.
"Additional Projects
Contract" means the Additional Projects
Contract, dated the Issue Date, among Panda
International, PEC and the Company.
"Affiliate" means an affiliate within the
meaning of Rule 405 promulgated under
the Securities Act.
"Annual Letter of
Credit Fee" means the annual fee, or the
cumulative fees charged over one year,
charged by the Letter of Credit
Provider.
"Anticipated Additional
Debt" means the original principal amount of
an additional series of Bonds proposed
to be issued by the Issuer which is equal
to the largest principal amount of such
series that will provide a projected
Company Debt Service Coverage Ratio and
a projected Consolidated Debt Service
Coverage Ratio (if then applicable) of
at least 1.7:1 and 1.25:1, respectively,
for each Future Ratio Determination Period,
as confirmed in each case by a Consolidating
Engineer Certificate, assuming, in respect of
the additional series of Bonds proposed to
be issued:
(i) a maximum maturity and average life
generally available in the marketplace
for debt of a similar nature and (ii) a
coupon rate then prevailing in the
market for debt of a similar nature, and
taking into account (a) in the case of
the Company Debt Service Coverage Ratio,
Cash Available for Distribution and (b)
in the case of the Consolidated Debt
Service Coverage Ratio, Cash Available
from Operations (net of any reserve
requirements under Project-level debt
and Company-level debt) from the Project
Portfolio (giving effect, in each case,
to the transfer to the Project Portfolio
of any Project in respect of which such
additional series of Bonds is proposed
to be issued); in making this analysis,
the Consolidating Engineer is required
to use generally accepted financial
analysis methods and generally follow
the methods used to calculate the amount
of the offering of the Existing Bonds,
including the methods used in the
Consolidated Pro Forma Report attached
to this Prospectus as Appendix B.
"Applicable Treasury
Rate" means a rate which is equal to
the then current treasury rate on the
most actively traded security having a
maturity approximately equal to the
remaining average life of the Existing
Bonds.
"Available Amounts" means, as of any date of determination,
amounts held in the Extraordinary
Distribution Accounts and the Mandatory
Redemption Accounts, as the case may be,
that are not needed to effect a redemption
as specified in a written request or order
of the Issuer to the Trustee given prior
to such date.
"Beneficial Owners" means the beneficial owners of the
Old Bonds.
"Bibb" means The Bibb Company, a Delaware
corporation.
"Bond" or "Bonds" means, individually or collectively,
the Existing Bonds and any additional series
of bonds that may be issued under the Indenture.
"Bondholder" or
"Bondholders" means a holder or holders of the Bonds.
"Brandywine Available
Cash Flow" means Panda-Brandywine Partnership's
cash flow remaining after payment of Project
expenses, rent, letter of credit fees and debt
service.
"Brandywine Construction
Loan Facility" means the construction loan
facility in the aggregate principal
amount of $215 million under the
Brandywine Loan Agreement.
"Brandywine Distributable
Cash Flow" means Brandywine Available Cash
Flow less any required deposits into the
Operation and Maintenance Reserve
Account established under the Brandywine
Facility Lease.
"Brandywine Engineering
Report" means the report entitled
"Independent Engineer's Report Panda-
Brandywine Cogeneration Project"
prepared by PES dated July 22, 1996,
evaluating the design, construction and
expected operation of the Panda-
Brandywine Facility.
"Brandywine EPC
Agreement" means the Amended and Restated
Turnkey Cogeneration Facility Agreement,
dated March 30, 1995, between Raytheon
and the Panda-Brandywine Partnership.
"Brandywine Equity Loan
Facility" means the $20 million multiple
draw credit facility under the Brandywine
Loan Agreement.
"Brandywine Facility
Lease" means the lease by the Panda-Brandywine
Partnership of the Panda-Brandywine
Facility from the owner trustee under
the Brandywine Loan Agreement.
"Brandywine Financing
Documents" means the Brandywine Loan
Agreement, the Brandywine Facility Lease
and certain agreements relating thereto.
"Brandywine Fuel
Consultant's Report" means the report entitled "Panda-
Brandywine, L.P. Generating Facility
Fuel Consultant's Report" prepared by
C.C. Pace, dated July 2, 1996, analyzing
the sufficiency of the fuel supply and
transportation arrangements for the
Panda-Brandywine Facility.
"Brandywine Fuel Management
Agreement" means the Fuel Supply Management
Agreement, dated March 30, 1995, between
CDC and the Panda-Brandywine Partnership.
"Brandywine Gas
Agreement" means the Gas Sales Agreement,
dated March 30, 1995, between the Panda-
Brandywine Partnership and CDC.
"Brandywine Loan
Agreement" means the Construction Loan
Agreement and Lease Commitment, dated
March 30, 1995, among GE Capital, the
Panda-Brandywine Partnership and PBC.
"Brandywine O&M
Agreement" means the Operations & Maintenance
Agreement, dated November 21, 1994, as
amended on December 7, 1994, between the
Panda-Brandywine Partnership and Ogden
Brandywine.
"Brandywine Power Purchase
Agreement" means the Power Purchase Agreement,
dated August 9, 1991, as amended
September 16, 1994, between the Panda-
Brandywine Partnership and PEPCO.
"Brandywine Pro Forma" means the pro forma financial
projections prepared by Burns &
McDonnell which are contained in the
Brandywine Pro Forma Report.
"Brandywine Pro Forma
Report" means the report entitled "Independent
Panda-Brandywine Pro Forma Projections"
prepared by ICF dated July 26, 1996 presenting
an independent assessment of the pro forma
for the Panda-Brandywine Facility.
"Brandywine Steam
Agreement" means the Steam Sales Agreement, dated
March 30, 1995, between Brandywine Water
Company and the Panda-Brandywine Partnership.
"Brandywine Water
Company" means Brandywine Water Company, a
Delaware corporation.
"Burns & McDonnell" means Burns & McDonnell.
"Business Day" means any day on which commercial
banks are not authorized or required to
close in New York City, New York,
Dallas, Texas, the Cayman Islands or
Luxembourg.
"Capital Stock" means, with respect to any person,
any and all shares, interests,
participations, rights or other
equivalents in the equity interests
(however designated) in such person, and
any rights (other than debt securities
convertible into an equity interest),
warrants or options exercisable for,
exchangeable for or convertible into
such an equity interest in such person.
"Capitalized Interest
Deficiency" means, with respect to any Monthly
Distribution Date, the amount by which
the amount on deposit in the Capitalized
Interest Fund as of such date (after giving
effect to all transfers to the Capitalized
Interest Fund to be made on such date) is
less than the Capitalized Interest
Requirement in effect on such date.
"Capitalized Interest
Fund" means the fund entitled "Capitalized Interest
Fund" described in and maintained by the Trustee
pursuant to Article IV of the Indenture.
"Capitalized Interest
Requirement" means for purposes of the Indenture an
amount equal to the aggregate amounts
required to be on deposit in the Capitalized
Interest Fund on any date as set forth in all
Series Supplemental Indentures, as the same may
be reduced pursuant to the Indenture.
"Cash Available for
Distribution" means Total Cash Flow from all Project
Entities on a consolidated basis less
(i) regularly scheduled payments of
principal and interest on Project Debt, (ii)
additions to reserves required by Project
agreements, (iii) Trustee's fees under
the Indenture and (iv) the NNW Cash Flow
Participation, plus interest earned on
reserves required by Transaction Documents
entered into by the Company, excluding,
however, Extraordinary Financial Distributions
and proceeds received as a result of
Mandatory Redemption Events, that at the time of
determination is available to be legally
distributed from the Project Entities to
the PIC Entities without contravention
of any Project agreement.
"Cash Available from
Operations" means, for any period, Total Cash Flow
from all Project Entities on a consolidated
basis prior to all Consolidated Debt Service,
less (i) additions to reserves required by
Project agreements, (ii) Trustee's fees
under the Indenture plus interest earned
on reserves required by Transaction
Documents entered into by the Company,
and (iii) the NNW Cash Flow
Participation, excluding, however,
Extraordinary Financial Distributions
and proceeds received as a result of
Mandatory Redemption Events.
"C.C. Pace" means C.C. Pace Resources, Inc.
"CDC" means Cogen Development Company.
"Change of Control" means the occurrence of any event
or series of events by which: (a) any
"person" or "group" (as such terms are
used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly
or indirectly, of more than 50% of the
total voting stock of the Company; (b)
the Company consolidates with or merges
into another person or any person
consolidates with, or merges into, the
Company, in any such event pursuant to a
transaction in which the outstanding
voting stock of the Company is changed
into or exchanged for cash, securities
or other property, other than any such
transaction where (i) the outstanding
voting stock of the Company is changed
into or exchanged for voting stock of
the surviving or resulting person that
is Qualified Capital Stock and (ii) the
holders of the voting stock of the
Company immediately prior to such
transaction own, directly or indirectly,
not less than a majority of the voting
stock of the surviving or resulting
person immediately after such
transaction; (c) the Company, either
individually or in conjunction with one
or more of its Subsidiaries, sells,
assigns, conveys, transfers, leases or
otherwise disposes of, or the
Subsidiaries of the Company sell,
assign, convey, transfer, lease or
otherwise dispose of, all or
substantially all of the properties of
the Company and its Subsidiaries, taken
as a whole (either in one transaction or
a series of related transactions),
including Capital Stock of such
Subsidiaries, to any person (other than
the Company or a wholly owned Subsidiary
of the Company); or (d) the liquidation
or dissolution of the Company.
"Change of Control
Offer" means an offer by the Issuer to purchase
all then outstanding Bonds upon the
occurrence of a Change of Control.
"Change of Control
Purchase Date" means a Business Day not more than 60
nor less than 30 days following a Change
of Control on which the Issuer is obligated
to purchase Bonds pursuant to a Change of Control
Offer.
"Change of Control
Purchase Price" means a purchase price equal to 101% of the
principal amount of Bonds to be purchased by
the Issuer in connection with a Change of
Control, plus accrued and unpaid interest
thereon.
"China" means the People's Republic of China.
"CNG" means CNG Transmission Corporation.
"Collateral" means all of the property and
interests in property, real or personal,
now owned or hereafter acquired in or
upon which a Lien has been or is
purported or intended to have been
granted to the Collateral Agent pursuant
to the Security Documents.
"Collateral Agency
Agreement" means the Collateral Agency Agreement,
dated the Issue Date, among the Collateral
Agent, the Issuer, the Trustee, PEC,
the Letter of Credit Provider and the Company.
"Collateral Agent" means Bankers Trust Company, a New
York banking corporation.
"Columbia Gas" means Columbia Gas Transmission
Corporation, a Delaware corporation.
"Columbia Gas FT
Agreement" means the Amended and Restated
FTS Service Agreement, dated March 23,
1995, between the Panda-Brandywine
Partnership and Columbia Gas.
"Columbia Gas IT
Agreement" means the Service Agreement for
Service Under ITS Rate Schedule,
dated as of April 4, 1991, between
Columbia Gas and PR Corp., which
agreement was assigned by PR Corp. to,
and assumed by, the Panda-Rosemary
Partnership on January 6, 1992.
"Columbia Gulf" means Columbia Gulf Transmission
Company, a Delaware corporation.
"Columbia Gulf IT
Agreement" means the ITS-1 Transportation
Service Agreement, dated as of June 13,
1996, between Columbia Gulf and the
Panda-Rosemary Partnership.
"Columbia Precedent
Agreement" means the Precedent Agreement, dated as
of February 25, 1994, as amended by
the Amending Agreement, dated March 24, 1995,
between the Panda-Brandywine Partnership and
Columbia Gas.
"Commercial Operations" means, with respect to a Project,
(i) the completion of construction and
testing and the functioning of such
Project and (ii) the satisfaction and
discharge of all completion requirements
of, and commencement of regular capacity
or reservation payments under, the
purchase, transportation or other off-
take or use contracts for such Project.
"Commission" means the U.S. Securities and
Exchange Commission.
"Company" means Panda Interfunding Corporation, a
Delaware corporation.
"Company Debt Service" means, for any period, scheduled
principal and interest payments on the
Bonds.
"Company Debt Service
Coverage Ratio" means for purposes of the Indenture, as of
any date of determination, the ratio of (i)
Cash Available for Distribution during the
relevant period to (ii) Company Debt
Service for such period.
"Company Distribution
Certificate" means the officer's certificate
from the Company stating that the
conditions precedent for transferring
monies from a Distribution Suspense Fund
to the appropriate Distribution Fund
have been satisfied.
"Company Expense Fund" means the fund entitled "Company
Expense Fund" described in and
maintained by the Trustee pursuant to
Article IV of the Indenture.
"Company Expenses
Amount" means for each calendar year commencing
with 1997, an amount equal to $300,000
inflated annually commencing
January 1, 1997 and adjusted as of
January of each year ratably for each
partial calendar year in which Notes
shall be outstanding, and as such amount
may otherwise be increased pursuant to
the Indenture.
"Company Guaranty" means the unconditional guarantee
of the Existing Bonds by the Company.
"Company Loan Agreement" means the Loan Agreement, dated the
Issue Date, between the Company and the
Issuer.
"Company Notes" means the Initial Company Note and
each promissory note evidencing loans
from the Issuer to the Company of the
proceeds from the Prior Offering and any
future offerings of additional series of
Bonds.
"Company Security
Agreement" means the Security Agreement,
dated the Issue Date, between the
Company and the Collateral Agent.
"Company Stock Pledge
Agreement" means the Stock Pledge Agreement, dated
the Issue Date, between the Company and
the Collateral Agent, pledging as Collateral
all of the issued and outstanding capital
stock of the Issuer and each PIC U.S. Entity
and 60% of the issued and outstanding capital
stock or other ownership interests of
each PIC International Entity.
"Consolidated Debt
Service" means for purposes of the
Indenture, for any period, Company Debt
Service plus scheduled principal and
interest payments on all Project Debt.
"Consolidated Debt Service
Coverage Ratio" means, as of any date of determination, the
ratio of (i) Cash Available from Operations
during the relevant period to (ii) Consolidated
Debt Service for such period; provided,
however, that at any time that the
Company holds Project Interests in more
than four Projects, then the
Consolidated Debt Service Coverage Ratio
shall not be applied in respect of any
event or requirement.
"Consolidated Pro Forma" means a summary consolidation of
the pro forma financial projections for
the Panda-Brandywine Facility and the
Panda-Rosemary Facility.
"Consolidated Pro Forma
Report" means the report entitled "Summary of the
Consolidated Pro Formas of the Panda-Rosemary
and Panda-Brandywine Power Projects" prepared by
ICF dated July 26, 1996 containing the
Consolidated Pro Forma.
"Consolidating Engineer" means ICF, or its successor, which
shall be a firm of national reputation
with expertise in engineering and
financial analysis and which may rely,
to the extent necessary for purposes of
performing its duties under the
Indenture, on other Independent
Engineers.
"Cove Point" means Cove Point LNG Limited
Partnership.
"Cove Point FT
Agreement" means that certain FTS Service
Agreement, dated March 30, 1995, between
the Panda-Brandywine Partnership and
Cove Point.
"Credit Agreement" means the Credit, Term Loan and
Security Agreement, dated August 31,
1993, among PEC, PR Corp., PRC II and
NNW.
"Debt Service
Deficiency" means, with respect to any
Payment Date, the amount by which monies
on deposit in the Debt Service Fund as
of such date (after giving effect to all
transfers to the Debt Service Fund to be
made on such date) is insufficient for
the payment of the amounts of interest
and, if applicable, principal due and
payable on the Company Notes (including
any past due amounts) on the Payment
Date for each series of Bonds
outstanding next following the day
immediately preceding such Monthly
Distribution Date.
"Debt Service Fund" means the fund entitled "Debt
Service Fund" described in and
maintained by the Trustee pursuant to
Article IV of the Indenture.
"Debt Service Reserve
Fund" means the fund entitled "Debt
Service Reserve Fund" described in and
maintained by the Trustee pursuant to
Article IV of the Indenture.
"Debt Service Reserve
Deficiency" means the amount, with respect to any Monthly
Distribution Date, the amount by which the
amount on deposit in the Debt Service Reserve Fund
as of such date (after giving effect to
all transfers to the Debt Service
Reserve Fund to be made on such date) is
less than the Debt Service Reserve
Requirement in effect on such date.
"Debt Service Reserve
Requirement" means on the Issue Date, an amount equal to
$6.4 million, and, except as may be otherwise
provided in any Series Supplemental Indenture, at
any time thereafter, an amount equal to
the scheduled principal and interest
payments on the Bonds created by such
Series Supplemental Indenture due pursuant to
the Indenture during the 12- month period
immediately following the date of determination,
except that, if less than 12 months remain before
the Final Stated Maturity of the Bonds, then
an amount equal to the scheduled principal and
interest payments on the Bonds due pursuant to
the Indenture for such period shall be maintained;
provided that the Debt Service Reserve
Requirement, as determined at any time,
shall be reduced by the amount then on
deposit in the Capitalized Interest Fund
in respect of interest payments
scheduled to be made during the 12-month
period immediately following the date of
determination.
"Disqualified Capital
Stock" means any Capital Stock that, either by its
terms, by the terms of any security into which
it is convertible or exchangeable or by contract
or otherwise, is, or upon the happening of
an event or passage of time would be,
required to be redeemed or repurchased
prior to the final stated maturity of
the Bonds or is redeemable at the option
of the holder thereof at any time prior
to such final stated maturity, or is
convertible into or exchangeable for
debt securities at any time prior to
such final stated maturity.
"Distribution Funds" means the U.S. Distribution Fund
and the International Distribution Fund.
"Distribution Suspense
Funds" means the U.S. Distribution
Suspense Fund and the International
Distribution Suspense Fund.
"DTC" means The Depository Trust Company,
a limited purpose trust company
organized under the laws of the State of
New York and a member of the Federal
Reserve System.
"Effectiveness Target
Date" means the respective target date for
effectiveness of the Exchange Offer
Registration Statement or the
Shelf Registration Statement as
specified in the Registration Rights
Agreement.
"Eligible Institution" means a firm that is a member of a
registered national securities exchange
or a member of the National Association
of Securities Dealers, Inc. or by a
commercial bank or trust company having
an office or correspondent in the United
States.
"Energy Policy Act" means the Energy Policy Act of 1992.
"Event of Default" means the events listed in Section
9.1 of the Indenture.
"EWG" means an Exempt Wholesale Generator.
"Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Exchange Agent" means Bankers Trust Company.
"Exchange Bonds" means the 11-5/8% Pooled Project
Bonds, Series A-1 due 2012, of Panda
Funding Corporation.
"Exchange Offer" means the offer of the Issuer, upon
the terms and subject to the conditions
set forth in the Prospectus and in the
Letter of Transmittal, to exchange up to
$105,525,000 in aggregate principal
amount of its 11-5/8% Pooled Project
Bonds, Series A-1 due 2012 for a like
principal amount of its 11-5/8% Pooled
Project Bonds, Series A due 2012.
"Exchange Offer
Registration Statement" means a registration statement
covering an offer by the Issuer to
exchange Old Bonds for like bonds to be
filed with the Commission by the Company
and the Issuer pursuant to the
Registration Rights Agreement.
"Exempt Wholesale
Generator" means a company that the FERC
has declared to be an exempt wholesale
generator pursuant to Section 32 of
PUHCA and that, as a result, is exempt
from PUHCA.
"Existing Bonds" means collectively, the Old Bonds
and the Exchange Bonds.
"Expiration Date" means the expiration of the
Exchange Offer at 5:00 p.m., New York
City time, on _________, 1996, unless
extended by the Issuer in its sole
discretion.
"Extraordinary
Distribution Accounts" means the U.S. Extraordinary Distribution
Account and the International Extraordinary
Distribution Account.
"Extraordinary Financial
Distribution" means all Project distributions received by
the Company or any PIC Entity or any person
on behalf of the Company or any PIC Entity,
directly or indirectly, in respect of
any of the Projects (including all
distributions from Project Entities
directly or indirectly to the Company or
any PIC Entity), net of related
unreimbursed costs and expenses that are
attributable to or incurred by the
Company or any PIC Entity that may be
legally distributed or paid to the
Company or any PIC Entity without
contravention of any Project agreement,
in respect of (i) settlements, judgments
or other payments received by a Project
in connection with any litigation,
arbitration or similar proceeding at law
or in equity or any administrative
proceeding, except to the extent that
any such proceeding is in connection
with a Mandatory Redemption Event, (ii)
any monies released from an escrow or
similar account established by or on
behalf of a Project in connection with
the financing or contractual
arrangements of such Project (other than
(a) monies held in an escrow or similar
account established under the Project's
financing arrangements for the purpose
of governing the disbursement of such
Project's revenue either before or
subsequent to a default by a Project
under any of such Project's contractual
obligations, (b) monies held in
operating or similar reserve accounts
established for Project operating
contingencies and funded out of the
Project's operating cash flow and (c)
monies held in an escrow or similar
account as a construction contingency or
for the payment of development or
similar fees), (iii) any buy-out or
settlement of a contract to which a
Project is a party or (iv) any
transaction that results in the receipt
of cash or other property upon the sale,
transfer or other disposition (other
than as set forth in clause (iii)
hereof) of any contractual rights of a
Project except to the extent that such
transaction is in connection with a
Mandatory Redemption Event.
"FERC" means the Federal Energy Regulatory
Commission.
"Final Stated Maturity" means the last stated maturity date
of any series of Bonds outstanding under
the Indenture.
"Financial Closing" means closing of the initial
construction or long-term project
financing of a Project.
"Firm Gas
Transportation
Agreements" means the Transco 284 Agreement and the
similar firm transportation agreements
the Panda-Rosemary Partnership entered into
with Texas Gas and CNG.
"Flippo" means Flippo Construction.
"Florida Act" means the Florida Securities Act.
"Florida Power" means Florida Power Corporation, a Florida
corporation.
"Florida PSC" means the Florida Public Service
Commission.
"Ford Credit" means Ford Motor Credit Company, a
Delaware corporation.
"FPA" means the Federal Power Act, as amended.
"Fuel Consultant" means, with respect to the Panda-Rosemary
Facility, Schlesinger and, with respect to
the Panda-Brandywine Facility, C.C. Pace,
or their respective successors.
"Future Ratio
Determination Period" means, as of the date of determination,
each of the following: (1) the period
beginning with the date of determination through
December 31 of that calendar year; (2)
each period consisting of a calendar
year thereafter through the calendar
year immediately prior to the calendar
year in which the Final Stated Maturity
occurs and (3) the period thereafter
beginning with January 1 and ending with
the Final Stated Maturity.
"GE Capital" means General Electric Capital
Corporation, a New York corporation.
"Global Bond" means the single permanent global
certificate in definitive, fully
registered form that represents the
Exchange Bonds.
"GNPIPD" means the Gross National Product
Implicit Price Deflator.
"Harbin" means Harbin Power Engineering
Company Limited, the engineering,
procurement and construction contractor
for the Panda-Luannan Facility.
"Heard Defendants" means the Heard Energy Corporation,
collectively with certain individual
former PEC officers, employees and
advisors who are involved in litigation
with PEC.
"ICF" means ICF Resources, Incorporated,
a Florida corporation.
"Indenture" means collectively the Trust
Indenture, dated the Issue Date, among
the Issuer, the Company and the Trustee
and all Series Supplemental Indentures.
"Independent Director" means the "Independent Director" of
each of the Issuer and the Company, with
the power and authority and duties
provided in the respective Certificates
of Incorporation and By-laws thereof.
"Independent Engineer" means, with respect to the Panda-
Rosemary Facility, Burns & McDonnell,
and, with respect to the Panda-
Brandywine Facility, PES, or their
respective successors.
"Initial Company Note" means the promissory note issued by
the Company to the Issuer with an
original principal amount equal to the
original aggregate principal amount of
the Old Bonds, representing a loan to
the Company of the proceeds of the
issuance of the Old Bonds.
"Initial Purchaser" means Jefferies & Company, Inc., a
Delaware corporation.
"Institutional
Accredited Investors" means institutional "accredited investors"
as defined under Rule 501(a)(1), (2), (3) or
(7) under the Securities Act.
"Interest Payment Date" means each February 20 and August
20, commencing February 20, 1997, on
which interest on the Existing Bonds is
paid, and the dates on which each
installment of interest is due on any
other series of Bonds.
"International Accounts
and Funds" means the International Accounts and Funds
described in and maintained by the International
Collateral Agent pursuant to Article IV
of the Indenture.
"International
Collateral Agent" means the Trustee acting in its capacity as
agent for the PIC International Entities for
the benefit of the Company.
"International
Distribution Fund" means the fund entitled "International
Distribution Fund" described in and maintained
pursuant to Article IV of the Indenture.
"International
Distribution
Suspense Fund" means the fund entitled "International
Distribution Suspense Fund" described in and
maintained by the International Collateral
Agent pursuant to Article IV of the Indenture.
"International
Extraordinary
Distribution Account" means the account entitled "International
Extraordinary Distribution Account" described
in and maintained by the International
Collateral Agent pursuant to Article IV
of the Indenture.
"International Mandatory
Redemption Account" means the account entitled "International
Mandatory Redemption Account" described in and
maintained by the International Collateral Agent
pursuant to Article IV of the Indenture.
"International Project
Account" means the account entitled "International
Project Account" described in and maintained by
the International Collateral Agent pursuant
to Article IV of the Indenture.
"International Project
Distributions" means distributions and amounts received
by any PIC International Entity or any other person
on behalf of any PIC International
Entity from, or in connection with, Non-
U.S. Projects that may be legally
distributed or paid to any PIC
International Entity without
contravention of any Project agreement,
other than Extraordinary Financial
Distributions and amounts that are
required to be deposited in the
International Mandatory Redemption
Account pursuant to the Indenture, and
all interest earned and received on
amounts on deposit in the International
Accounts and Funds.
"Investment Company Act" means the Investment Company Act of
1940, as amended.
"Issue Date" means July 31, 1996, the date of
issuance of the Old Bonds.
"Issuer" means Panda Funding Corporation, a
Delaware corporation.
"Issuer Security
Agreement" means that certain Security
Agreement, dated the Issue Date, between
the Issuer and the Collateral Agent
which provides for the collateral
assignment of all of the Issuer's
personal property.
"Joint Venture
Companies" means collectively the four
equity joint ventures formed under PRC
law for purposes of developing,
constructing and operating the Panda-
Luannan Facility.
"Letter of Credit" means for purposes of the Indenture
an irrevocable standby letter of credit
which may be used to satisfy in whole or
in part, the Debt Service Reserve
Requirement.
"Letter of Credit
Provider" means any commercial bank that issues a
Letter of Credit and that enters
into a reimbursement agreement as
required pursuant to the Indenture and
becomes a party to the Collateral Agency
Agreement.
"Letter of Transmittal" means the Letter of Transmittal
accompanying the Prospectus which
holders of Old Bonds must execute and
deliver to the Exchange Agent in order
to tender their Old Bonds in the
Exchange Offer.
"Lien" means for purposes of the Indenture
any mortgage, pledge, hypothecation,
security interest, collateral
assignment, lien (statutory or other),
preference, priority or other security
agreement or payment arrangement or
encumbrance of any kind or nature
whatsoever, including, without
limitation, any conditional sale or
other title retention agreement, any
financing lease having substantially the
same effect as any of the foregoing and
the filing of any financing statement or
similar instrument under the Uniform
Commercial Code or comparable law of any
jurisdiction, domestic or international.
"Mandatory Redemption
Accounts" mean the U.S. Mandatory Redemption Account
and the International Mandatory Redemption Account.
"Mandatory Redemption
Event" means (i) the sale or disposition of any
Collateral, any Project or portion thereof or
any direct or indirect interest of the Company or
any PIC Entity in any Project or (ii)
any event of casualty, loss or
condemnation with respect to any
Project.
"Material Adverse
Change" means (i) a material adverse change
in the business, results of
operations, condition (financial or
otherwise) or property of (a) the
Company, (b) the Issuer, (c) any PIC
Entity or (d) any Project or (e) any
Project Entity, in each case to the
extent that such change could be
reasonably expected to have a material
adverse effect on the Issuer or its
ability to make payments on the Bonds,
or on the Company or its ability to make
payments on the Company Notes or to
perform its obligations under the
Company Guaranty or (ii) any event or
occurrence of whatever nature, which in
any case has a material adverse effect
on (a) the ability of PEC, the Company,
the Issuer or any PIC Entity to perform
its obligations under any agreement
governing the rights and obligations of
such entity, including any Transaction
Document, or any Project Entity's
ability to perform its obligations under
any agreement governing the rights and
obligations of such entity, in each such
case, to the extent that such event or
occurrence could be reasonably expected
to have a material adverse effect on the
Issuer or its ability to make payments
on all series of Bonds, or on the
Company or its ability to make payments
on the Company Notes or its ability to
perform its obligations under the
Company Guaranty or (b) the validity or
priority of the Trustee's or Collateral
Agent's Lien on the Collateral.
"Monthly Distribution
Date" means a date prescribed each
month for the distribution of monies
deposited in the Project Accounts
according to the priority set forth in
Article IV of the Indenture.
"NCNG" means North Carolina Natural Gas
Corporation, a Delaware corporation.
"NCPG" means North China Power Group, one
of five interprovincial power groups in
China.
"NCPGC" means North China Power Group
Company, the business arm of NCPG.
"NCUC" means the North Carolina Utilities
Commission.
"NEA" means Nepal Electricity Authority.
"NGC" means Natural Gas Clearinghouse, a
Colorado general partnership.
"Non-U.S. Projects" means the Projects owned by PIC
International Entities and located
outside of the United States in respect
of which deferral of U.S. federal income
taxes is being sought.
"NNW" means NNW, Inc., formerly known as
Nova Northwest, Inc., an Oregon
corporation.
"NNW Cash Flow
Participation" means NNW's cash flow participation in
distributions from the Panda-Rosemary Partnership.
"NPDES" means the National Pollutant Discharge
Elimination System.
"Ogden Brandywine" means Ogden Brandywine Operations,
Inc., a subsidiary of Ogden Power
Corporation.
"Ogden Rosemary" means Ogden Rosemary Operations,
Inc., a subsidiary of Ogden Power
Corporation.
"Old Bonds" means the 11-5/8% Pooled Project
Bonds, Series A due 2012, of Panda
Funding Corporation.
"Other International
Note" means any loan to a PIC International Entity
from the Company which is not evidenced by
a PIC International Entity Note.
"Panda-Brandywine
Facility" means the 230 MW natural gas-fired,
combined-cycle cogeneration
facility located in Brandywine, Prince
George's County, Maryland.
"Panda-Brandywine
Financing" means, collectively, the single investor lease
and the construction loan provided by GE Capital
in respect of the Brandywine Facility.
"Panda-Brandywine
Partnership" means Panda-Brandywine, L.P., a Delaware limited
partnership.
"Panda Energy Delaware" means Panda Energy Corporation, a
Delaware corporation.
"Panda Interholding" means Panda Interholding Corporation, a
Delaware corporation.
"Panda International" means Panda Energy International,
Inc., a Texas corporation.
"Panda-Kathleen
Facility" means the natural gas-fired,
combined-cycle cogeneration facility to
be located near Lakeland, Florida that
is being developed by Panda
International.
"Panda-Kathleen
Partnership" means Panda-Kathleen, L.P., a Delaware limited
partnership.
"Panda-La Panga
Facility" means the 500 MW coal-fired
power generation facility to be located
in the State of Orissa, India that is
being developed by Panda International.
"Panda-Luannan Facility" means the 2 X 50 MW coal-fired
cogeneration facility to be located in
Luannan County, Tangshan Municipality,
Hebei Province, China that is being
developed by Panda International.
"Panda-Nepal Facility" means the 36 MW hydroelectric
generation facility to be located on the
upper Bhote Koshi River in Nepal that is
being developed by Panda International.
"Panda-Rosemary
Facility" means the 180 MW natural gas-fired,
combined-cycle cogeneration
facility located in Roanoke Rapids,
North Carolina.
"Panda-Rosemary
Partnership" means Panda-Rosemary, L.P., a Delaware limited
partnership.
"Panda-Rosemary
Partnership Loan" means the loan by the Rosemary Issuer to
the Panda-Rosemary Partnership of funds from the
proceeds from the sale of the Rosemary Bonds.
"Panda-Rosemary
Pipeline" means the approximately 10.26 mile natural gas
pipeline owned by the Panda-Rosemary Partnership
commencing in Pleasant Hill, North Carolina
and terminating at the Panda-Rosemary
Facility, together with all appurtenant
facilities.
"Payment Date" means a Principal Payment Date or
Interest Payment Date.
"PBC" means Panda Brandywine Corporation,
a Delaware corporation.
"PEC" means Panda Energy Corporation, a
Texas corporation.
"PEC Stock Pledge
Agreement" means the Stock Pledge Agreement, dated the Issue
Date, between PEC and the Collateral Agent,
pursuant to which PEC pledges 100% of its capital
stock in the Company as Collateral.
"PEPCO" means Potomac Electric Power
Corporation, a District of Columbia and
Virginia corporation.
"Permitted Investments" means those investments of balances
in Accounts and Funds that are permitted
under the Indenture.
"PES" means Pacific Energy Services, Inc.
"PIC Entity or Entities" means one or more corporations, companies,
partnerships, limited liability companies or
other entities (i) that are not Project Entities,
(ii) 100% of the voting capital stock or
other voting equity interests of which
is owned directly by the Company, other
than directors' qualifying shares
mandated by applicable law and (iii)
through which the Company owns indirect
interests in Project Entities.
"PIC Entity Guaranties" means the guaranty agreement dated
the Issue Date, among the PIC U.S.
Entities and the Collateral Agent.
"PIC International
Entities" means PIC Entities that own, through Project
Entities, Non-U.S. Projects.
"PIC International
Entity Loan" means any loan by the Company to a PIC
International Entity of the proceeds of the
issuance of a series of Bonds (issued by the
Issuer to the Company and represented by
a Company Note), the payments on which are to be
made from distributions from a Non-U.S.
Project to be held by such PIC
International Entity as part of the
Project Portfolio.
"PIC International
Entity Note" means a note evidencing a PIC International
Entity Loan.
"PIC U.S. Entities" means PIC Entities that, through
Project Entities, own U.S. Projects.
"Pipeline Operating
Agreement" means the Pipeline Operating Agreement, dated
as of February 14, 1990, among PEC, PR Corp.,
and NCNG, as amended, which agreement
was assigned by PEC to PR Corp. on
January 15, 1990 and as the same was
assigned by PR Corp. to, and assumed by,
the Panda-Rosemary Partnership.
"PORTAL" means the Private Offerings, Resale
and Trading through Automatic Linkages.
"PR Corp." means Panda-Rosemary Corporation, a
Delaware corporation.
"PRC" means the People's Republic of China.
"PRC II" means PRC II Corporation, a Delaware corporation.
"Principal Payment Date" means each February 20 and August 20,
commencing on February 20, 1997, on
which principal on the Existing Bonds is
paid, and the dates on which each
installment of principal is due on any
other series of Bonds.
"Prior Offering" means the offering of the Old Bonds.
"Project" or "Projects" means one or more electric power
generation projects (including
businesses substantially related
thereto, such as a steam host affiliated
therewith) that has been or will be
transferred to the Company or a PIC
Entity pursuant to the Additional
Projects Contract.
"Project Accounts" means the U.S. Project Account and
the International Project Account.
"Project Debt" means any indebtedness created,
incurred or assumed by a Project Entity
or secured by the assets of a Project.
"Project Distributions" means U.S. Project Distributions
and International Project Distributions.
"Project Entity" means any corporation, company,
partnership, limited liability company
or other entity that is (i) directly or
indirectly owned by a PIC Entity and
(ii) (A) that is the direct or indirect
owner of a Project or (B) that is
obligated under or a guarantor of
Project Debt or that has granted a
security interest in any of its assets
(including Project cash flows), other
than the capital stock of any of its
Subsidiaries (and any dividends or other
distributions on such capital stock and
proceeds therefrom), to secure the
payment of Project Debt or the
performance of any Project agreement.
"Project Interest" means an equity or similar
ownership interest in a Project.
"Project Portfolio" means the portfolio of Projects
owned, directly or indirectly, by the
Company.
"Project Distributions" means U.S. Project Distributions
and International Project Distributions.
"Propectus" means this Prospectus dated ________
with respect to the Exchange Bonds.
"Prudent Utility
Practices" means the practices generally followed by
the electric utility industry, as changed from
time to time, which generally include, but are
not limited to, engineering and operating
considerations.
"PUCs" means state public utility commissions in the
United States.
"PUHCA" means the Public Utility Holding Company Act of
1935, as amended.
"Purchase Agreement" means the Purchase Agreement dated July 26,
1996, between the Issuer and the Initial Purchaser.
"PURPA" means the Public Utility Regulatory
Policies Act of 1978, as amended.
"QF" means Qualifying Facility.
"Qualified Capital
Stock" of any person means any and all Capital Stock
of such person other than Disqualified Capital
Stock.
"Qualified Institutional
Buyer" means a qualified institutional buyer as such
term is defined in Rule 144A.
"Qualifying Facility" means either a small power
production facility or a cogeneration
facility that has satisfied the
definition of "qualifying facility" as
set forth in 18 C.F.R. 292.101(b)(1)
of the regulations promulgated under
PURPA.
"Rating Agencies" means Moody's Investors Service,
Inc. and Duff & Phelps Credit Rating Co.
"Raytheon" means Raytheon Engineers and
Constructors, Inc.
"Reaffirmation" means, with respect to any event, a
confirmation in writing from at least
one rating agency that the rating of the
Bonds in effect immediately prior to
such event will be maintained or
improved after giving effect to such
event. The terms "Reaffirm" or
"Reaffirmed" used as verbs have a
correlative meaning.
"Registration Default" means the occurrence of any of the
following: (a) the Issuer and the
Company fail to file any of the
registration statements required by the
Registration Rights Agreement on or
before the date specified for such
filing, (ii) any of such registration
statements are not declared effective by
the Commission on or prior to the
Effectiveness Target Date, (iii) the
Issuer and the Company fail to
consummate the Exchange Offer within 30
business days after the Effectiveness
Target Date or (iv) the Shelf
Registration Statement or the Exchange
Offer Registration Statement is declared
effective but thereafter, subject to
certain exceptions, ceases to be
effective or usable in connection with
the Exchange Offer or resales of
Transfer Restricted Bonds, as the case
may be, during the periods specified in
the Registration Rights Agreement.
"Registration Rights
Agreement" means the Registration Rights Agreement, dated
the Issue Date, among the Company, the Issuer
and the Initial Purchaser.
"Registration Statement" means this Registration Statement
on Form S-1 filed with the Commission
covering the Exchange Bonds.
"Reimbursement
Agreement" means the Second Amended and
Restated Letter of Credit and
Reimbursement Agreement, dated January
6, 1992, among the Panda-Rosemary
Partnership, The Fuji Bank, Limited, and
certain other banks party thereto.
"Rosemary Bonds" means the 8-5/8% First Mortgage
Bonds due 2016 of Panda-Rosemary Funding
Corporation.
"Rosemary Borrowers" means PEC, PR Corp. and PRC II.
"Rosemary Engineering
Report" means the report entitled "Panda-Rosemary
Corporation Project Condition Assessment Report
for Potential Investors at the Request of
Panda Energy Corporation" prepared by
Burns & McDonnell, dated July 26, 1996,
concerning certain technical,
environmental and economic aspects of
the Panda-Rosemary Facility.
"Rosemary Facility Site" means the site on which the Panda-
Rosemary Facility is located.
"Rosemary Fuel
Consultant" means Schlesinger or its successor.
"Rosemary Fuel
Consultant's Report" means the report entitled "Assessment of
Fuel Price, Supply and Delivery Risks for the
Panda-Rosemary Cogeneration Project" prepared
by Schlesinger, dated September 20,
1996, analyzing the sufficiency of the
fuel supply and transportation
arrangements for the Panda-Rosemary
Facility.
"Rosemary Fuel Management
Agreement" means the Fuel Supply Management
Agreement, dated October 10, 1990,
between the Panda-Rosemary Partnership
and NGC, as amended.
"Rosemary Gas Supply
Agreement" means the Gas Purchase Contract, dated April 12,
1990, between the Panda-Rosemary Partnership
and NGC, as amended.
"Rosemary Indenture" means the indenture, dated as of
the Issue Date, among the Panda-Rosemary
Partnership, Panda-Rosemary Funding
Corporation, and Fleet National Bank.
"Rosemary Issuer" means Panda-Rosemary Funding
Corporation, a Delaware corporation.
"Rosemary O&M Agreement" means the Operations & Maintenance
Agreement, effective as of December 27,
1993, between the Panda-Rosemary
Partnership and U-Tech, as amended.
"Rosemary Offering" means the offering of the Rosemary Bonds.
"Rosemary Power
Purchase Agreement" means the Power Purchase and
Operating Agreement, dated January 24,
1989, as amended on October 24, 1989 and
July 30, 1993, between VEPCO and the
Panda-Rosemary Partnership.
"Rosemary Pro Forma" means the pro forma financial
projections prepared by Burns &
McDonnell that are contained in the
Rosemary Engineering Report.
"Rosemary Site Lease" means the Real Property Lease and
Easement Agreement, dated June 9, 1989,
as amended on October 1, 1989 and as
further amended on January 31, 1990 and
March 15, 1996, between the Panda-
Rosemary Partnership and Bibb.
"Rosemary Steam
Agreement" means the Cogeneration Energy
Supply Agreement, dated January 12,
1989, by and between PEC and Bibb, which
contract was assigned by PEC to, and
assumed by, PR Corp., as such contract
was amended October 1, 1989, and as the
same was further assigned by PR Corp.
to, and assumed by, the Panda-Rosemary
Partnership on January 3, 1990.
"Rule 144A" means Rule 144A under the Securities Act.
"SCC" means the Virginia State Corporation Commission.
"Schlesinger" means Benjamin Schlesinger and Associates, Inc.
"Secured Parties" means the Bondholders, the Letter
of Credit Provider and the Trustee.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Documents" means, collectively, (i) the Collateral Agency
Agreement, (ii) the Issuer Security Agreement,
(iii) the PEC Stock Pledge Agreement, (iv)
the Company Stock Pledge Agreement, (v) the
Company Security Agreement, and all financing
statements executed in connection
therewith and any and all other
agreements or instruments now or
hereafter executed by the Issuer, the
Company, any PIC Entity, PEC, Panda
International or any other person as
security for the payment or performance
of the Bonds.
"Series A Supplemental
Indenture" means collectively, the First Supplemental
Indenture, dated the Issue Date, and the Second
Supplemental Indenture, dated __________, 1996,
entered into in accordance with the
Indenture among the Company, the Issuer
and the Trustee in connection with the
Existing Bonds.
"Series Supplemental
Indenture" means any supplemental indenture entered into
in accordance with the Indenture among the
Company, the Issuers and the Trustee.
"Shelf Registration
Statement" means a shelf registration statement covering
resales of the Old Bonds which the Company and
the Issuer may be required to file with
the Commission pursuant to the
Registration Rights Agreement.
"SPC" means the State Planning Commission
of the People's Republic of China.
"Subsidiary" means, in respect of any person, a
corporation, partnership, limited
liability company or other entity, (i)
at least a 50% (direct or indirect)
ownership or equivalent interest of the
outstanding stock or other equity
interests of which are owned, directly
or indirectly, by such person or (ii)
(a) at least a 25% (direct or indirect)
ownership or equivalent stock or other
equity interests are owned, directly or
indirectly, by such person and (b) such
person exercises a controlling influence
over the management and policies with
respect to such corporation,
partnership, limited liability company
or other entity, directly or indirectly,
whether through the ownership of voting
securities, by contract or otherwise,
provided that no other entity has
greater control than such person over
the management and policies of such
corporation, partnership, limited
liability company or other entity.
"TCW" means Trust Company of the West.
"Texas Gas" means Texas Gas Transmission
Corporation.
"Total Cash Flow" means, as to any person, the sum of
the net income of such person for any
period plus, to the extent deducted from
net income, all non-cash items,
including, but not limited to,
depreciation, depletion and impairment,
amortization of intangibles and deferred
taxes, in each case for such period and
determined as to such person minus to
the extent included in net income, all
non-cash income, calculated in
accordance with generally accepted
accounting principles.
"Transaction Documents" means the Security Documents, the
Company Notes, the Bonds, the Company
Guaranty, the Indenture, the Company
Loan Agreement, the PIC U.S. Entity
Guarantees, the PIC International Entity
Pledge Agreement, the PIC International
Entity Loan Agreement, the PIC
International Entity Notes, the Other
International Notes and the Additional
Projects Contract, together with any
other document, instrument or agreement,
now or hereafter entered into in
connection with the Indenture, the Bonds
or the Collateral.
"Transco" means Transcontinental Gas Pipe Line Corporation,
a Delaware corporation.
"Transco Service
Agreement" means the Service Agreement, dated October 22,
1991, between Transco and PEC, which agreement
was assigned by PEC to, and assumed by, PR
Corp., thereafter assigned by PR Corp. to, and
assumed by, the Panda-Rosemary Partnership.
"Transco 284 Agreement" means the Service Agreement, dated
July 26, 1996, between Transco and the
Panda-Rosemary Partnership.
"Transfer Restricted
Bonds" means each Old Bond until (i) the date on which
such Old Bond has been exchanged by a person other
than a broker-dealer for an Exchange Bond in
the Exchange Offer, (ii) following the
exchange by a broker-dealer in the
Exchange Offer of an Old Bond for an
Exchange Bond, the date on which such
Exchange Bond is sold to a purchaser who
receives from such broker-dealer on or
prior to the date of such sale a copy of
the prospectus contained in the Exchange
Offer Registration Statement, (iii) the
date on which such Old Bond has been
effectively registered under the
Securities Act and disposed of in
accordance with the Shelf Registration
Statement or (iv) the date on which such
Old Bond is distributed to the public
pursuant to Rule 144 under the
Securities Act.
"Trustee" means Bankers Trust Company, a New
York banking corporation, as trustee
under the Indenture.
"U.S. Accounts and
Funds" means U.S. Accounts and Funds
described in and maintained by the
Trustee pursuant to Article IV of the
Indenture.
"U.S. Account Rights" means for purposes of the Indenture, collectively,
all of the rights with respect to each U.S. Account
and Fund, including all funds and
investments in securities and other
instruments from time to time therein
and all letters of credit or other
instruments substituting for funds in
any such U.S. Accounts or Funds.
"U.S. Distribution
Fund" means the fund entitled "U.S.
Distribution Fund" described in and
maintained by the Trustee pursuant to
Article IV of the Indenture.
"U.S. Distribution
Suspense Fund" means the fund entitled "U.S. Distribution
Suspense Fund" fescribed in and maintained
by the Trustee pursuant to Article IV of the
Indenture.
"U.S. Extraordinary
Distribution Account" means the account entitled "U.S.
Extraordinary Distribution Account"
described in and maintained by the
Trustee pursuant to Article IV of the
Indenture.
"U.S. Mandatory
Redemption Account" means the account entitled "U.S.
Mandatory Redemption Account" described
in and maintained by the Trustee
pursuant to Article IV of the Indenture.
"U.S. Project Account" means the account entitled "U.S.
Project Account" described in and
maintained by the Trustee pursuant to
Article IV of the Indenture.
"U.S. Project
Distributions" means distributions and amounts received by the
Company, any PIC U.S. Entity or any other
person on behalf of the Company or any PIC
U.S. Entity from, or in connection with, U.S.
Projects that may be legally distributed
or paid to the Company or any PIC U.S.
Entity without contravention of any
Project agreement, other than
Extraordinary Financial Distributions
and amounts that are required to be
deposited in the Mandatory Redemption
Accounts pursuant to the Indenture, and
all interest earned and received on
amounts on deposit in the U.S. Accounts
and Funds.
"U.S. Projects" means the Projects owned by PIC
U.S. Entities and located in the United
States and certain other international
Projects in respect of which deferral of
U.S. federal income taxes is not being
sought.
"U-Tech" means University Technical Services, Inc.,
a California corporation, doing business
as UTECH Services, Inc., a wholly owned
subsidiary of EMCOR Group, Inc.
"VEPCO" means Virginia Electric and Power
Company, a Virginia public service
corporation (including North Carolina
Power).
"WGL" means the Washington Gas Light
Company, a District of Columbia
Corporation and a Virginia Corporation.
"WGL Agreement" means the Gas Transportation and
Supply Agreement, dated November 10,
1994, between the Panda-Brandywine
Partnership and WGL.
PART II -- CERTAIN TECHNICAL TERMS COMMONLY USED IN THE UTILITY
INDUSTRY
Defined below are certain technical terms commonly used in
the electric and gas utility industries.
TERM DEFINITION
"Available" means the status of a major piece
of equipment which is capable of
service, whether or not it is actually
in service.
"Bcf" means one billion standard cubic feet.
"Btu" means British Thermal Unit, the
amount of heat required to raise the
temperature of 1 pound of pure water 1
degree F from 59 degrees F to 60 degrees
F at a constant pressure of 14.73 pounds
per square inch absolute.
"Capability" means the maximum load which an
electric generating unit can carry under
specific conditions for a given period
of time, without exceeding approved
limits of temperature and stress.
"Capacity" means the load for which an
electric generating unit is rated either
by the user or by the manufacturer.
"Capacity Factor" means the ratio of the average
operating load of an electric generating
unit for a period of time to the
capacity rating of the unit during that
period.
"Cogeneration" means the sequential production of
electric energy and useful thermal
energy for industrial, commercial,
heating or cooling purposes.
"Cogeneration Facility" means a facility that produces
electric energy and useful thermal
energy used for industrial, commercial,
heating or cooling purposes. A
cogeneration facility must meet certain
efficiency and useful thermal output
criteria to qualify for certain
regulatory benefits under PURPA.
"Dekatherm" or "Dth" means a unit of heating value
equivalent to 10 therms or 1,000,000
Btu's.
"Dispatch" means the operating control of an
integrated electric system to assign
generation to specific generating
stations and other sources of supply to
effect the most reliable and economical
supply as demand rises or falls.
"Dispatch Factor" means the amount of production
scheduled by an electric generating
unit's power purchaser in a given time
period (i.e., output level of that unit
times the number of hours dispatched).
"Economic Dispatch" means the start-up, shutdown and
allocation of load to individual
electric generating units to effect the
most economical production of
electricity for customers by a utility.
"Equivalent
Availability Factor" means the ratio of the number of megawatt
hours a facility could have produced in a
given period to the rated number of megawatt
hours of the facility.
"GWh" means gigawatt hour or one million
kilowatt hours.
"Heat Rate" means a measure of generating
station thermal efficiency, generally
expressed in Btu per net kilowatt-hour.
It is computed by dividing the total Btu
content of fuel burned for electric
generation by the resulting net kilowatt-
hour generation.
"Heating Value" means the amount of heat produced
by the complete combustion of a unit
quantity of fuel. The gross or higher
heating value (HHV) is that which is
obtained when all of the products of
combustion are cooled to the temperature
existing before combustion, the water
vapor formed during combustion is
condensed and all the necessary
corrections have been made. The net or
lower heating value (LHV) is obtained by
subtracting the latent heat of
vaporization of the water vapor, formed
by the combustion of the hydrogen in the
fuel, from the gross or higher heating
value.
"HRSGs" means Heat Recovery Steam Generators.
"Kilowatt" or "kW" means 1,000 watts.
"Kilowatt-hour" or "kWh" means the basic unit of electric
energy equal to one kilowatt of power
supplied to or taken from an electrical
circuit steadily for one hour.
"Load Factor" means, in the context of electric
generation, the ratio of the average
load in kilowatts supplied during a
designated period to the peak or maximum
load in kilowatts occurring in that
period. Load factor, in percent, also
may be derived by multiplying the
kilowatt-hours in the period by 100 and
dividing by the product of the maximum
demand in kilowatts and the number of
hours in the period. In the context of
gas transportation, "load factor" means
the ratio of the average actual
requirement for gas transportation
capacity to the maximum contractual gas
transportation capacity for the same
time period.
"LHV" means lower heating value (see Heating Value).
"Mcf" means one thousand standard cubic
feet of gas (cubic feet at 60 degrees F
and at a pressure of 14.73 pounds per
square inch absolute).
"MMBtu" means one million British thermal units.
"MM Lbs" means one million pounds.
"MW" or "Megawatt" means one million watts.
"No" means oxides of nitrogen.
"O&M" means operating and maintenance.
"Partial Outage" means the outage of an electric
generating unit or plant auxiliary
equipment which reduces the capability
of the electric generating unit without
causing a complete shutdown.
"Watt" means the electric unit of real
power or rate of doing work. The rate of
energy transfer equivalent to one ampere
flowing due to an electrical pressure of
one volt at unity power factor.
APPENDIX B
Summary of the
Consolidated Pro Formas of the
Panda Rosemary and
Panda Brandywine Power Projects
Prepared for:
Panda Energy International, Inc.
Prepared by:
ICF Resources Incorporated,
A Subsidiary of ICF Kaiser International
July 26, 1996
This report was produced by ICF Resources Incorporated
(ICF) in accordance with an agreement with Panda Energy
International, Inc., who paid for its services in producing
the report and this report is subject to the terms of that
agreement. This report is meant to be read as a whole and
in conjunction with this disclaimer. Any use of this report
other than as a whole and in conjunction with this disclaimer
is forbidden. Any use of this report, other than as provided
for in ICF's agreement with Panda Energy International, is
forbidden. This report may not be copied in whole or in part
or distributed to anyone outside Panda Energy International
without ICF's prior express and specific written permission.
This report and information and statements herein are based
in whole or in part on information obtained from various sources.
ICF makes no assurances as to the accuracy of any such information
or any conclusions based thereon. ICF bears no responsibility for
the results of any actions taken on the basis of this Report.
CONSOLIDATED PRO FORMA
ICF Resources, Incorporated ("ICF"), a subsidiary of ICF Kaiser International,
was retained by Panda Energy International ("Panda") on behalf of its
subsidiary, Panda Interfunding Corporation (the "Company"), to create a
consolidated summary of the pro forma financial projections (the "Consolidated
Pro Forma") for the Panda-Rosemary cogeneration project (the "Rosemary
Project") and the Panda-Brandywine cogeneration project (the "Brandywine
Project") (collectively, the "Projects"). In preparing the Consolidated Pro
Forma,ICF has relied on the independent reports described below of Burns &
McDonnell, the independent engineer for the Rosemary Project, and of ICF and
Pacific Energy Systems ("PES"), the independent consultant and independent
engineer, respectively, for the Brandywine Project. This report describes the
Consolidated Pro Forma and explains how it was derived.
Background
The Rosemary Project
The Rosemary Project is a 180 MW gas- and oil-fired cogeneration project
operating in Roanoke Rapids, North Carolina. The Rosemary Project sells
electricity to Virginia Electric and Power Company pursuant to a Power
Purchase Agreement that expires on December 27, 2015.
Burns & McDonnell, the independent engineer for the Rosemary Project since
1988, has prepared pro forma financial projections (the "Rosemary Pro Forma"),
which are presented in Panda-Rosemary Cogeneration Project Condition
Assessment Report (the "Rosemary Engineering Report"). The Rosemary
Engineering Report contains the primary assumptions underlying, and the
conclusions drawn from, the Rosemary Pro Forma. ICF has reviewed the Rosemary
Engineering Report only to the extent necessary to incorporate the results of
the Rosemary Pro Forma in the Consolidated Pro Forma, and has made no
independent investigation of the conclusions or the assumptions contained
therein.
The Brandywine Project
The Brandywine Project is a 230 MW gas- and oil-fired cogeneration project
under construction in Brandywine, Maryland. According to PES, construction
was 85 percent complete as of June 15, 1996, and it is reasonable to expect
the commencement of commercial operations by the end of September 1996.
Beginning on the commercial operations date, the Brandywine Project will sell
electricity to Potomac Electric Power Company pursuant to a 25-year Power
Purchase Agreement.
ICF has prepared financial projections for Brandywine's operations (the
"Brandywine Pro Forma"), which are presented in Independent Panda-Brandywine
Pro Forma Projections (the "Brandywine Pro Forma Report"). As discussed more
fully in the Brandywine Pro Forma Report, in preparing the Brandywine Pro
Forma, ICF relied, among other things, on PES's report, Independent
Engineer's Report: Panda-Brandywine Cogeneration Project (the "Brandywine
Engineering Report"). A more complete discussion of the assumptions underlying
the Brandywine Pro Forma and the conclusions drawn therefrom are contained in
the Brandywine Pro Forma Report.
Results
The attached table presents the Consolidated Pro Forma. The information set
forth under Company Debt Service assumes the issuance of Pooled Project Bonds
(the "Bonds") in an aggregate principal amount of $105.525 million, an
interest rate of 11.625 percent and amortization over 16 years. Amounts for
Trustee Fees, the NNW Interest (as defined below), and Interest from Company
Reserves have been provided by the Company based on estimates of Trustee's
fees provided by Bankers Trust Company, the requirements of the cash flow
participation interest held by NNW, Inc. (the "NNW Interest"), and an assumed
interest factor on Company reserves of 5 percent.
The operating cash flows prior to Project-level debt, as taken from the
Rosemary Pro Forma and the Brandywine Pro Forma, are presented as the
Projects' "Total Operating Cash Flow." In the first full calendar year after
issuance of the Bonds, the Projects have a Total Operating Cash Flow of
approximately $41.3 million. This figure increases to over $74.5 million by
2005.
Project Debt Service and Additions to Reserves for the Projects are then
subtracted from Total Operating Cash Flow to arrive at "Net Cash Available
from Projects." After subtracting Trustee Fees and the NNW Interest and
adding Interest from Company Reserves, the result is "Total Cash Flow
Available for Company Debt Service." This figure is divided by the total
debt service on the Bonds to arrive at the Company Coverage ratio. Company
Coverage is at least 1.7 times Company Debt Service through the final
maturity of the Bonds. The average Company Coverage ratio over the life
of the Bonds is 1.9:1.
The Projects' consolidated debt service coverages are also provided in the
Consolidated Pro Forma. Consolidated Coverage divides the Total Operating
Cash Flow, less Additions to Reserves, less Trustee Fees and the NNW
Interest, plus Interest from Company Reserves, by the sum of the Company's and
the Projects' debt service. Consolidated Coverage does not fall below 1.24
times the combined debt service of the Company and the Projects through the
final maturity of the Bonds. The average Consolidated Coverage ratio over the
life of the Bonds is 1.25:1.
Respectfully Submitted,
/s/ ICF Resources Incorporated
<PAGE>
<TABLE>
<CAPTION>
Page 1 of 3
Consolidated Pro Forma for
Panda Brandywine and Panda Rosemary
($ in thousands)
Year Ended December 31
1996 1997 1998 1999 2000 2001
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Operating Cash Flow
Rosemary $10,902 $20,175 $20,721 $19,480 $19,835 $20,062
Brandywine 8,359 21,160 21,619 38,948 40,604 51,360
------- ------- ------- ------- ------- -------
Total Operating Cash Flow 19,261 41,335 42,340 58,428 60,439 71,422
Project Debt Service
Rosemary(1) 7,928 14,694 14,627 13,314 13,242 13,164
Brandywine - 6,935 9,799 18,214 19,609 26,705
------ ------ ------ ------ ------ ------
Total Project Debt Service 7,928 21,629 24,426 31,528 32,851 39,869
Additions to Reserves
Rosemary (515) 280 (218) 547 648 743
Brandywine 1,317 2,628 5,876 2,943 5,014 3,658
------ ----- ------ ----- ----- -----
Total Additions to Reserves 802 2,908 5,658 3,490 5,662 4,401
Net Cash Available
from Projects 10,531 16,798 12,256 23,410 21,925 27,151
Less: Trustee Fees (20) (40) (40) (40) (40) (40)
Less: NNW Interest (9) (13) (18) (18) (20) (22)
Plus: Interest from
Co. Reserves 247 543 485 773 743 900
------ ------ ------ ------ ------ ------
Cash Flow for Co.
Debt Service 10,749 17,289 12,683 24,125 22,609 27,989
Company Debt Service (2)
Principal Payments 216 - - 1,273 - 3,001
Interest Payments 6,815 12,242 12,242 12,206 12,094 12,010
------ ------ ------ ------ ------ ------
Total Company Bonds
Debt Service 7,031 12,242 12,242 13,479 12,094 15,011
Coverage Ratios (3) (4)
Company Coverage 1.7x 1.8x 2.3x 1.8x 1.9x 1.9x
Consolidated Coverage 1.31x 1.24x 1.24x 1.24x 1.24x 1.24x
</TABLE>
- -------------------------------------------------------
(1) Represents debt service for the year ended February 15 in the year
immediately following the year presented.
(2) Represents debt service for the year ended February 20 in the year
immediately following the year presented.
(3) Ratios are calculated net of capitalized interest of $617,449,,
$2,421,348, $6,688,699, and $106,614 for 1996, 1997, 1998, and 2000
respectively.
(4) In the event NNW were to prevail in its dispute with Panda Energy
Corporation concerning the value of its Cash Flow Participation Interest
in Rosemary, the Company Coverage Ratio would be projected to be maintained
at a level of at least 1.7x in all years (except 1996, where the level
would be 1.6x). In such event, the Consolidated Coverage Ration would be
projected to be maintained at a level of 1.23x in all years (excluding,
(i) 1996, where the level would be projected to be 1.28, (ii) 2006 where
the level would be projected to be 1.22x; and (iii) 2012, where the level
would be projected to be 1.69x).
<PAGE>
<TABLE>
<CAPTION>
Page 2 of 3
Consolidated Pro Forma for
Panda Brandywine and Panda Rosemary
($ in thousands)
Year Ended December 31
2002 2003 2004 2005 2006 2007
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Operating Cash Flow
Rosemary $20,447 $20,976 $21,517 $22,079 $15,716 $14,859
Brandywine 51,899 52,462 52,327 52,453 53,382 56,718
------- ------- ------- ------- ------- -------
Total Operating Cash Flow 72,346 73,438 73,844 74,532 69,098 71,577
Project Debt Service
Rosemary(1) 13,058 12,943 12,825 12,669 8,710 8,534
Brandywine 27,590 28,140 28,343 28,672 28,630 29,534
------ ------ ------ ------ ------ ------
Total Project Debt Service 40,648 41,083 41,168 41,341 37,340 38,068
Additions to Reserves
Rosemary 855 1,021 1,165 (604) 1,301 1,260
Brandywine 1,817 1,083 1,244 3,633 4,303 1,718
----- ----- ----- ----- ----- -----
Total Additions to Reserves 2,672 2,104 2,409 3,029 5,604 2,978
Net Cash Available
from Projects 29,025 30,251 30,267 30,161 26,155 30,530
Less: Trustee Fees (40) (40) (40) (40) (40) (40)
Less: NNW Interest (26) (28) (27) (58) (60) (57)
Plus: Interest from
Co. Reserves 978 1,021 1,018 977 907 1,059
------ ------ ------ ------ ------ ------
Cash Flow for Co.
Debt Service 29,937 31,204 31,217 31,041 26,961 31,492
Company Debt Service (2)
Principal Payments 4,828 6,369 7,121 7,788 6,139 10,506
Interest Payments 11,609 11,004 10,242 9,395 8,538 7,700
------ ------ ------ ----- ----- ------
Total Co. Bonds
Debt Service 16,437 17,374 17,364 17,183 14,677 18,206
Coverage Ratios (3) (4)
Company Coverage 1.8x 1.8x 1.8x 1.8x 1.8x 1.7x
Consolidated Coverage 1.24x 1.24x 1.24x 1.24x 1.24x 1.24x
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page 3 of 3
Consolidated Pro Forma for
Panda Brandywine and Panda Rosemary
($ in thousands)
Year Ended December 31
2008 2009 2010 2011 2012
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Operating Cash Flow
Rosemary $14,772 $14,227 $13,683 $13,560 $13,371
Brandywine 57,607 58,993 62,363 66,845 74,412
------- ------- ------- ------- -------
Total Operating Cash Flow 72,379 73,220 76,046 80,405 87,783
Project Debt Service
Rosemary(1) 8,352 8,154 7,946 7,772 7,565
Brandywine 30,718 31,628 33,989 35,665 41,937
------ ------ ------ ------ ------
Total Project Debt Service 39,070 39,782 41,935 43,437 49,502
Additions to Reserves
Rosemary 1,218 1,184 1,177 1,188 1,203
Brandywine 2,351 2,387 3,693 6,010 2,386
----- ----- ----- ----- -----
Total Additions to Reserves 3,569 3,571 4,870 7,198 3,589
Net Cash Available
from Projects 29,740 29,867 29,241 29,770 34,691
Less: Trustee Fees (40) (40) (40) (40) (40)
Less: NNW Interest (57) (218) (209) (207) (203)
Plus: Interest from
Co. Reserves 1,016 996 954 993 318
------ ------ ------ ------ ------
Cash Flow for Co.
Debt Service 30,660 30,604 29,946 30,517 34,766
Company Debt Service (2)
Principal Payments 10,870 11,975 12,435 14,099 8,905
Interest Payments 6,469 5,173 3,769 2,277 518
------ ------ ------ ------ ------
Total Co. Bonds Debt Service 17,338 17,149 16,204 16,376 9,423
Coverage Ratios (3) (4)
Company Coverage 1.8x 1.8x 1.8x 1.9x 3.7x
Consolidated Coverage 1.24x 1.25x 1.24x 1.24x 1.43x
</TABLE>
<PAGE>
ICF RESOURCES INCORPORATED
Officer's Certificate
I, B. S. Venkateshware, Vice President of ICF Resources,
Incorporated, DO HEREBY CERTIFY that:
Except as set forth below, since July 25, 1996, to our knowledge,
no event affecting our reports entitled "Independent Panda-Brandywine Pro
Forma Projections" and "Summary of the Consolidated Pro Formas of Panda
Rosemary and Panda Brandywine Power Projects" (the "Pro Forma Reports") or
the matters referred to therein has occurred which makes untrue or incorrect
in any material respect, as of the date hereof, any information or statement
contained in the Pro Forma Reports or in the Prospectus relating to the
offering of Pooled Project Bonds, Series A-1 due 2012 by Panda Funding
Corporation (the "Prospectus") under the captions "Consolidating Engineer's
Pro Forma Report" and "Independent Pro Forma Analysis-Brandywine" in the
Prospectus Summary.
ICF notes that since July 25, 1996, the following events have occurred:
(i) More recent fuel price projections are available.
(ii) Virginia Power has announced in one case that it has reached an
agreement to terminate a Power Sales Agreement (PSA) with a
Qualifying Facility and replace that PSA with an agreement to
purchase at market-based prices.
ICF is currently assessing these events in connection with the Pro Forma
Reports and is not presently able to determine the impact, if any, such events
may have on the Pro Forma Reports and the information contained therein.
WITNESS my hand this 11th day of October, 1996.
By: /s/ B. S. Venkateshwara
Name: B. S. Venkateshwara
Title: Vice President
<PAGE>
APPENDIX C
PANDA - ROSEMARY COGENERATION PROJECT
CONDITION ASSESSMENT REPORT
for
POTENTIAL INVESTORS
at the Request of
PANDA ENERGY CORPORATION
(SYMBOL OF PANDA LOGO)
Burns
&
McDonnell
[Burns & McDonnell Letterhead]
July 26, 1996
Mr. Bryan Urban
Panda Energy International, Inc.
4100 Spring Valley, Suite 1001
Dallas, TX 75244
Panda - Rosemary Cogeneration Project
Burns & McDonnell Project No. 94-443-4
--------------------------------------
Dear Bryan:
We are pleased to submit this Final Report for the Panda - Rosemary
Cogeneration project. This document summarizes efforts by Panda Energy
Corporation and Burns & McDonnell to assess the conditions, operating history,
and operating projections of the 180-MW Panda - Rosemary Cogeneration project
on behalf of potential Project Investors.
Please feel free to call if you have any comments or questions.
Sincerely,
BURNS & MCDONNELL
Gregory L. Mack, P.E.
Project Manager
Jeffrey J. Greig
Senior Economist
Melissa A. Yancey
Project Analyst
cc: Pete Wright
TABLE OF CONTENTS
Page No.
PART I - EXECUTIVE SUMMARY
Assumptions. . . . . . . . .. . . . . . . . . . . . . . . . C-1
Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . C-3
PART II - INTRODUCTION
PART III - FACILITY DESCRIPTION
Project Site . . . . . . . . . . . . . . . . . . . . . . . . C-8
Mechanical Equipment and Systems . . . . . . . . . . . . . . C-8
Environmental Control Equipment. . . . . . . . . . . . . . . C-9
Electrical Intertie. . . . . . . . . . . . . . . . . . . . . C-11
Site Visit . . . . . . . . . . . . . . . . . . . . . . . . . C-11
PART IV - OPERATING HISTORY
Electric Power Production. . . . . . . . . . . . . . . . . . C-14
Steam Production . . . . . . . . . . . . . . . . . . . . . . C-14
Availability . . . . . . . . . . . . . . . . . . . . . . . . C-15
Heat Rate. . . . . . . . . . . . . . . . . . . . . . . . . . C-16
Qualifying Facility Compliance . . . . . . . . . . . . . . . C-18
Environmental Compliance . . . . . . . . . . . . . . . . . . C-19
Air Permit. . . . . . . . . . . . . . . . . . . . . . C-20
Clean Air Act Amendments. . . . . . . . . . . . . . . C-20
NPDES Permit. . . . . . . . . . . . . . . . . . . . . C-20
Spill Prevention. . . . . . . . . . . . . . . . . . . C-20
Forced Outages . . . . . . . . . . . . . . . . . . . . . . . C-21
Major Maintenance Activities . . . . . . . . . . . . . . . . C-21
Equipment and System Design Changes. . . . . . . . . . . . . C-22
Freeze Protection . . . . . . . . . . . . . . . . . . C-22
Transformers. . . . . . . . . . . . . . . . . . . . . C-23
Corrosion Protection. . . . . . . . . . . . . . . . . C-23
Chiller #2. . . . . . . . . . . . . . . . . . . . . . C-24
Fire Protection . . . . . . . . . . . . . . . . . . . C-24
Oil Conditioning. . . . . . . . . . . . . . . . . . . C-25
Ultraviolet Protection. . . . . . . . . . . . . . . . C-25
Chemical Feed Lines . . . . . . . . . . . . . . . . . C-25
TABLE OF CONTENTS
(continued)
Page No.
PART IV - OPERATING HISTORY (continued)
Automatic Generation Control . . . . . . . . . . . . C-25
O&M Contractor . . . . . . . . . . . . . . . . . . . . . . C-26
Training Program . . . . . . . . . . . . . . . . . . . . . C-26
PART V - EQUIPMENT ASSESSMENT
Operating Condition. . . . . . . . . . . . . . . . . . . . C-27
Major Maintenance and Overall Programs . . . . . . . . . . C-28
Equipment Replacement Program. . . . . . . . . . . . . . . C-28
PART VI - PROJECTED PLANT PERFORMANCE
Capacity . . . . . . . . . . . . . . . . . . . . . . . . . C-30
Capacity and Heat Rate Degradation. . . . . . . . . C-30
Dispatch . . . . . . . . . . . . . . . . . . . . . . . . . C-32
Availability . . . . . . . . . . . . . . . . . . . . . . . C-32
Heat Rate. . . . . . . . . . . . . . . . . . . . . . . . . C-32
Annual Operation and Maintenance Costs . . . . . . . . . . C-35
Major Maintenance Programs and Costs . . . . . . . . . . . C-35
Equipment Replacement Provisions . . . . . . . . . . . . . C-36
Overall Economic Life. . . . . . . . . . . . . . . . . . . C-36
Steam Turbine Rankine Cycle . . . . . . . . . . . . C-37
Combustion Turbines Brayton Cycle . . . . . . . . . C-37
PART VII - FINANCIAL ASSESSMENT OF PROJECT
Power Purchase Agreement . . . . . . . . . . . . . . . . . C-39
Factors Affecting Project. . . . . . . . . . . . . . . . . C-39
Effective Operating Service Life of the Project . . C-39
Expected Rates for Capacity and Energy. . . . . . . C-39
Expected Dispatch of the Project. . . . . . . . . . C-44
Zero Dispatch Case. . . . . . . . . . . . . . . . . C-44
Expected Operating Performance. . . . . . . . . . . C-44
Project Capacity. . . . . . . . . . . . . . C-47
Project Heat Rate . . . . . . . . . . . . . C-47
Project Fixed Operating Costs . . . . . . . C-48
Project Variable Operation and
Maintenance Expenses . . . . . . . . . . C-49
Project Overhaul Requirements . . . . . . . C-49
Project Steam/Chilled Water Sales and
Costs. . . . . . . . . . . . . . . . . . C-49
Expected Fuel Costs. . . . . . . . . . . . . . . . C-49
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . C-52
Statement of Limiting Conditions . . . . . . . . . . . . . C-52
TABLE OF CONTENTS
(continued)
Page No.
PART VIII - CONCLUSIONS
Project Condition . . . . . . . . . . . . . . . . . . . . . C-55
EXHIBIT A - PROJECT PRO FORMA
EXHIBIT B - PROJECT PRO FORMA FOR ZERO DISPATCH
LIST OF TABLES
Table No. Page No.
PART I - EXECUTIVE SUMMARY
I-1 Summary of Project Debt Coverage Ratios. . . . . . . . . . C-5
PART IV - OPERATING HISTORY
IV-1 Panda-Rosemary Project Operating History . . . . . . . . . C-14
IV-2 Project Availability History . . . . . . . . . . . . . . . C-16
IV-3 Annual Average Heat Rate . . . . . . . . . . . . . . . . . C-16
IV-4 Average Fired Hours Per Start. . . . . . . . . . . . . . . C-17
IV-5 History of Qualifying Facility Status. . . . . . . . . . . C-19
PART V - EQUIPMENT ASSESSMENT
V-1 Comparison of Manufacturers' Recommendations with 10 Year
Plan Maintenance Activities for Major Pieces of Rotating
Equipment. . . . . . . . . . . . . . . . . . . . . . . . . C-29
PART VI - PROJECTED PLANT PERFORMANCE
VI-1 Historical Capacity Test Results. . . . . . . . . . . . . . C-30
VI-2 Results of Heat Rate Review . . . . . . . . . . . . . . . . C-33
PART VII - FINANCIAL ASSESSMENT OF PROJECT
VII-1 Contractual Capacity Charges . . . . . . . . . . . . . . . . C-40
VII-2 Summer and Winter Gas Energy Charges . . . . . . . . . . . . C-42
VII-3 Dispatch Assumptions . . . . . . . . . . . . . . . . . . . . C-45
VII-4 Fuel Cost Assumptions. . . . . . . . . . . . . . . . . . . . C-50
VII-5 Summary of Project Debt Coverage Ratios. . . . . . . . . . . C-53
VII-6 Summary of Project Debt Coverage Ratios, Zero Dispatch
Option. . . . . . . . . . . . . . . . . . . . . . . . . . C-54
LIST OF FIGURES
Figure No. Page No.
PART III - FACILITY DESCRIPTION
III-1 Panda-Rosemary Simplified Process Diagram. . . . . . . . . C-10
III-2 Panda-Rosemary Electrical Interconnections- One
Line Diagram. . . . . . . . . . . . . . . . . . . . . . . C-12
III-3 Panda-Rosemary Project Site Plan. . . . . . . . . . . . . . C-13
PART VI - PROJECTED PLANT PERFORMANCE
VI-1 Heavy-Duty Gas Turbine Degradation as a Function
of Total Factored Hours. . . . . . . . . . . . . . . . . C-31
PART VII - FINANCIAL ASSESSMENT OF PROJECT
VII-1 Contractural Capacity Charges . . . . . . . . . . . . . . . . C-41
VII-2 Summer and Winter Gas Energy Charges. . . . . . . . . . . . . C-43
VII-3 Dispatch Assumptions. . . . . . . . . . . . . . . . . . . . . C-46
VII-4 Fuel Cost Assumptions . . . . . . . . . . . . . . . . . . . . C-51
PART I
EXECUTIVE SUMMARY
This Report includes, among other things, a review and assessment of the 180-MW
Panda-Rosemary cogeneration project (the "Project") and its facility (the
"Facility"), the Facility's equipment and operating condition, its operating
history, the significant Project agreements and projections of revenues,
expenses and debt service coverage for the Facility for the period that the
First Mortgage Bonds due 2016 (the "Bonds") proposed to be issued by a finance
subsidiary of the Panda-Rosemary Partnership (the "Partnership") are scheduled
to be outstanding. Burns & McDonnell provides a variety of professional and
technical services in the fields of engineering, architecture, planning,
economics and environmental sciences. Our project work includes studies,
design, planning, construction and construction management for electric power
generation and transmission facilities as well as for waste management, water
treatment, airport, and other transportation infrastructure facilities. Burns
& McDonnell has been involved with the Facility since 1989.
In the preparation of this Report and the opinions contained herein, Burns &
McDonnell made certain assumptions with respect to conditions that may exist
or events that may occur in the future. Although Burns & McDonnell believes
those assumptions to be reasonable for the purposes of this Report, they are
dependent upon future events, and actual conditions may differ from those
assumed. In addition, Burns & McDonnell used and relied upon certain
information provided to us by sources that we believe to be reliable. Burns &
McDonnell believes the use of such information and assumptions is reasonable
for the purposes of this Report. However, some assumptions may prove to be
inaccurate, perhaps materially, due to unanticipated events and circumstances.
To the extent that actual future conditions differ from those assumed in this
Report or provided to us by others, the results will vary from those forecast.
This Report summarizes our work up to the date hereof. Thus, changed
conditions occurring or becoming known after this date could affect the
material presented to the extent of these changes.
Burns & McDonnell has relied upon projections of the Facility's dispatch
profile and fuel costs over the term of the Power Purchase Agreement prepared
by ICF Resources Incorporated ("ICF"). Based on ICF's experience in
undertaking similar analyses, Burns & McDonnell believes that the use of ICF's
dispatch profile and fuel cost projections is reasonable for the purposes of
this Report.
ASSUMPTIONS
The principal assumptions made in developing the projected operating results
are as follows:
1. We have made no determination as to the validity and enforceability
of any contract, agreement, rule or regulation applicable to the
Facility and its operations. For purposes of this Report, we have
assumed that all such contracts, agreements, rules and regulations
will be fully enforceable in accordance with their terms and that
all parties will comply with the provisions of their respective
agreements.
2. The operator under the Operations and Maintenance Agreement (the
"Operator") will operate the Facility as currently required under
such agreement.
3. The Operator will maintain the Facility in accordance with good
engineering practice, and make all required equipment renewals and
replacements in a timely manner.
4. The Operator will employ qualified and competent personnel who will
properly operate the equipment in accordance with the manufacturers'
recommendations and good engineering practice and will generally
operate the Facility in a sound and businesslike manner.
5. Inspections, overhauls, repairs and modifications have been and will
continue to be planned for and conducted in accordance with
manufacturers' recommendations and with special regard for the need
to monitor certain operating parameters to identify early signs of
potential problems.
6. All permits and approvals necessary to operate the Facility will
remain in full force and effect.
7. Long-term fuel costs will equal the projections prepared by ICF.
8. The Facility will be dispatched as projected by ICF, except that
ICF's dispatch projections have been increased by 400 hours annually
in 1996-1997, 500 hours annually in 1998-2002, and 600 hours annually
in 2003-2015 to reflect hours that we project the Facility will be
dispatched using gas supplied by Virginia Electric Power Co. Under
these assumptions, dispatch is projected to increase from 1,144
equivalent full load hours in 1997 to 4,216 equivalent full load
hours in 2005. After 2005, dispatch is projected to decrease
steadily to 3,201 equivalent full load hours in 2010, and thereafter
to stay relatively constant through 2015.
9. Thermal energy in the form of steam and chilled water will be
exported from the Facility, operating in the cogeneration mode, to
Bibb's facility such that the useful thermal energy, as defined under
PURPA and the regulations promulgated thereunder, will be sufficient
to maintain the Facility's QF status. The Partnership will continue
to absorb an annual operating loss on the sale of steam and chilled
water over the life of the Facility.
10. Steam and chilled water sales to Bibb will remain constant at 50,000
lbs/hr for 7,800 hours per year and 1,010 tons/hr for 4,000 hours
per year, respectively.
11. Operating costs, including fixed fuel transportation and operating
and maintenance and other administrative costs, will equal those
estimated by the Partnership. The fixed operating cost forecast
reflects an annual 3.0% escalation for most cost components. The
exceptions include property taxes, Facility maintenance costs, and
firm gas transportation costs. The property tax estimate is
decreased 3.0% annually to reflect a declining asset value. The
general maintenance and repair costs are escalated at a rate of 8.0%
per year due to an increase in anticipated maintenance and repair.
The additional maintenance allowance component of Facility
maintenance costs is held constant.
12. By August 1996, the Partnership expects to convert its existing fixed
fuel transportation agreement with Transco to a new agreement that
will permit the release of pipeline transportation capacity when not
required by the Facility. The benefits of capacity released and
bundled sales of pipeline capacity and gas sales are estimated to
result in a 50% return of firm gas transportation costs for 1800
MMBtu/d of the Facility's contracted capacity of 3075 MMBtu/d.
13. The original principal amount of the bonds will be $111,400,000.
14. The projected annual interest rate on the Bonds outstanding upon
their initial date of issuance (the "Issue Date") will be 8.63.
15. On the Issue Date, the Debt Service Reserve Fund will be funded at
$8,090,714 and thereafter will be maintained at adequate levels
throughout the Bonds' repayment period. The Debt Service Reserve
fund will earn interest at a rate of 5% per year.
16. The Partnership will not be required to establish or maintain any
balance in the Property Tax Fund.
17. The actual amortization schedule of the Bonds will be as provided by
the Partnership.
CONCLUSIONS
Set forth below are the principal conclusions that we have reached with respect
to the technical, economic and environmental aspects of the Facility. For a
complete understanding of the estimates, assumptions and calculations upon
which these conclusions are based, this Report should be read in its entirety.
On the basis of our review and analysis of the Facility and the assumptions
set forth in this Report, we conclude that:
1. The technology incorporated in the Facility is a sound, proven
method of generating electric and thermal energy and incorporates
commercially proven technology. The design, operation and
maintenance of the Facility implemented by the Partnership and the
Operator were developed and have been implemented in accordance with
good engineering practices and generally accepted industry practices
and have taken into consideration existing and proposed
environmental and permit requirements applicable to the Facility.
The Independent Engineer knows of no significant technical problems
relating to the Facility that should be of concern to potential
investors.
2. The Facility is in good condition and has a competent, conscientious
operation and maintenance staff that has developed a long-term
Facility maintenance program that is consistent with the
manufacturers' recommendations and generally-accepted practices
within the electric power generation industry.
3. The Facility will have an expected operating service life well
beyond the term of the Power Purchase Agreement if properly operated
and maintained, consistent with current practices.
4. The Partnership has obtained and maintained in full force and effect
the key environmental permits and approvals required from the various
federal, state and local agencies that are currently necessary to
operate the Facility.
5. The basis for the Partnership's estimates of the cost of operating
and maintaining the Facility is reasonable. The expense projections
prepared by the Partnership and based on projected levels of dispatch
appear adequate to account for the variable operation and maintenance
expenses. The budgeted allowance for overhauls should be increased
from $220 to $260 per fired hour.
6. The Facility's heat rate will average 9,100 Btu/kWh (HHV) over the
remaining initial term of the Power Purchase Agreement.
7. Table I-1 on the following page summarizes the projected revenues and
expenditures and debt coverage ratios of the Project based upon the
issuance of the Bonds and the refinancing plan submitted to us by the
Partnership. Projected revenues from the sale of thermal energy and
electricity and other income are adequate to pay annual operations
and maintenance expenses (including provision for major maintenance),
fuel costs, and other operating expenses and provide a minimum annual
debt service coverage on the Bonds of 1.37:1 and an average debt
service coverage over the outstanding term of the Bonds of 1.66:1,
as shown on Table I-1.
<PAGE>
<TABLE>
<CAPTION>
Table I-1
SUMMARY OF PROJECT DEBT COVERAGE RATIONS
Panda-Rosemary Cogeneration Project
Pre-Tax Total Debt
Total Total Operating Debt Service Coverage
Year Revenues Expenses Cashflow Costs Ratio
----- ----------- ---------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C>
7/96-12/96[1] $15,633,000 $ 4,731,000 $10,902,000 $ 7,928,000 1.38
1997 $30,151,000 $ 9,976,000 $20,175,000 $14,694,000 1.37
1998 $32,288,000 $11,567,000 $20,721,000 $14,627,000 1.42
1999 $32,670,000 $13,190,000 $19,480,000 $13,314,000 1.46
2000 $34,377,000 $14,542,000 $19,835,000 $13,242,000 1.50
2001 $36,189,000 $16,127,000 $20,062,000 $13,164,000 1.52
2002 $38,456,000 $18,009,000 $20,447,000 $13,058,000 1.57
2003 $41,244,000 $20,268,000 $20,976,000 $12,943,000 1.62
2004 $44,549,000 $23,032,000 $21,517,000 $12,825,000 1.68
2005 $48,512,000 $26,433,000 $22,079,000 $12,669,000 1.74
2006 $42,050,000 $26,334,000 $15,716,000 $ 8,710,000 1.80
2007 $41,179,000 $26,320,000 $14,859,000 $ 8,534,000 1.74
2008 $41,128,000 $26,356,000 $14,772,000 $ 8,352,000 1.77
2009 $40,751,000 $26,524,000 $14,227,000 $ 8,154,000 1.74
2010 $40,249,000 $26,746,000 $13,683,000 $ 7,946,000 1.72
2011 $41,487,000 $27,927,000 $13,560,000 $ 7,772,000 1.74
2012 $42,623,000 $29,252,000 $13,371,000 $ 7,565,000 1.77
2013 $43,969,000 $30,732,000 $13,237,000 $ 7,328,000 1.81
2014 $45,459,000 $32,403,000 $13,056,000 $ 7,042,000 1.85
2015 $47,137,000 $34,288,000 $12,849,000 $ 6,356,000 2.02
</TABLE>
Average coverage over the term of the Bonds is 1.66:1.
[1] Reflects one-half year of operations following the planned debt
refinancing in July 1996.
PART II
INTRODUCTION
The Panda-Rosemary Cogeneration Project (Project) is a 180-MW combined cycle
cogeneration plant located in Roanoke Rapids, North Carolina. Burns &
McDonnell has been involved with the Project since the initial development of
the Project in 1988. Burns & McDonnell's responsibility throughout the
development, financing, construction, start-up, and operation of the Project
has been to serve as independent engineer to Project investors. Burns &
McDonnell was originally retained by Heller Financial as their independent
engineer for a $6 million subordinated bridge loan. This bridge loan was
necessary to continue Project development efforts required to meet an
aggressive construction loan closing schedule. Based upon the Project
economics and the technical input provided by Burns & McDonnell, Heller
Financial provided the bridge loan despite the fact that key Project
development activities, such as the air permit, were not yet complete. As
anticipated, development activities were eventually completed and long- term
Project financing was placed through The Fuji Bank.
Since 1989, Burns & McDonnell has served as independent engineer for The Fuji
Bank. Throughout Project design, construction, start-up, and six years of
operation, Burns & McDonnell has continuously provided independent engineer
services to the Project lenders. These services have included:
- Monthly site visits and preparation of monthly progress
reports during Project construction and start-up activities.
- Participation in Project performance test activities to
confirm that actual Project performance met or exceeded
guarantees included in the turnkey construction contract.
- Review of Project spare parts inventories and planned
maintenance activities in comparison with generally-accepted
industry practices.
- Additional efforts following commercial operation of the
Project have included:
- review of monthly operating reports
- annual site visits
- preparation of annual reports to assess the Project
Most recently, Burns & McDonnell has been retained to provide independent
engineer services for potential investors in the Project refinancing.
During February 1996, Burns & McDonnell conducted a Project site visit. The
primary purpose of this site visit was to assess recent Project condition,
operations and maintenance activities, and to report any observed deficiencies
that could potentially have a detrimental impact upon existing or future
Project investors. The following report is based on Burns & McDonnell's long
association with the Project, the February 1996 site visit, and recent
telephone conversations with the Project participants, permitting agencies and
others.
PART III
FACILITY DESCRIPTION
PROJECT SITE
The Panda-Rosemary Project is a nominal 180-MW combined cycle, intermediate-
load cogeneration plant located in Roanoke Rapids, North Carolina. It is
located adjacent to the Bibb Company which is the Project's thermal host. The
Project commenced commercial operation on December 27, 1990. The Project is
presently operated by University Technical Services under contract to Panda-
Rosemary.
MECHANICAL EQUIPMENT AND SYSTEMS
The Project consists of two combustion turbines, each with a heat recovery
steam generator (HRSG). The facility also has one steam turbine along with two
auxiliary boilers, two absorption chillers, and miscellaneous equipment.
Combustion turbine No. 1 is a General Electric (GE) PG7111(EA) ("Frame 7").
Its nominal output is 83.5 megawatts. The first Frame 7 combustion turbines
were commercially available in 1984. Combustion turbine No. 2 is a General
Electric (GE) PG6541(B) ("Frame 6"). Its nominal output is 38.3 megawatts.
The first Frame 6 combustion turbines were introduced in 1978. Both combustion
turbines use natural gas as a primary fuel and No. 2 distillate fuel as a
backup. Both combustion turbines are capable of on-line fuel changes such
that potential fuel switch outages may be avoided.
HRSG No. 1 receives exhaust from the Frame 7 combustion turbine. It is a three-
pressure HRSG manufactured by Nooter Erikson. The high-pressure section of
the boiler operates at 1,455 psig and has a steam flow capacity of 265,540
pounds per hour. The intermediate-pressure section operates at 215 psig and
the low pressure section operates at 25 psig. The HRSG connected to the
Frame 6 combustion turbine (Unit No. 2) is also a three-pressure HRSG
manufactured by Nooter Erikson. The three pressures of HRSG No. 2 are the
same as those listed for Unit No. 1. The highpressure steaming capacity of
HRSG No. 2 is 130,470 pounds per hour.
The Project has one Asea Brown Boveri (ABB) "VAX" steam turbine. It has an
output of 60 megawatts. The high pressure and low pressure sections of the
turbine are split and operate at different speeds. The high pressure steam
turbine rotor and generator are coupled with a reducing gear while the low
pressure steam turbine rotor and generator are direct coupled. The turbine
has two controlled extractions at 200 and 40 psig and has a single 200 psig
controlled induction.
Two auxiliary boilers are on-site. These boilers supply steam to the thermal
host while the Project is not dispatched to Virginia Electric and Power Company
(VEPCO). The auxiliary boilers were manufactured by ABCO Industries, Inc.
They have the capacity to produce an annual average 65,000 pounds of steam
per hour at 150 psi.
The Project has two 1,000-ton absorption chillers manufactured by York
International. These chillers supply chilled water to the thermal host. Each
absorption chiller has a chilled water flow of 240 gpm at a cold water outlet
temperature of 45 degrees F.
For the reader's convenience and enhanced understanding of Project operations,
a simplified Process Flow diagram is shown in Figure III-1. Natural gas is
transported to the facility via three pipeline systems interconnected to a 10-
mile dedicated pipeline owned by the Project. These redundant gas
interconnections provide flexibility and added assurance of gas supply should
problems evelop in any of the pipeline systems.
The Project is also capable of operating on fuel oil during times when natural
gas is curtailed. Fuel oil is transported to the Project by trucks. The
Project has two million gallons of onsite fuel oil storage capacity capable of
operating the Project at full load for 168 hours. This fuel oil storage
capacity was installed by Panda to conform to requirements included in the
Power Purchase Agreement.
The condensate system consists of a 100,000-gallon demineralized water tank, a
100,000-gallon condensate storage tank, and an online conductivity meter for
determining condensate return quality. The operator may close the condensate
return valve when the conductivity meter indicates the return condensate
quality is unacceptable.
Bibb typically returns good-quality condensate. However, Bibb returns only
about 10 percent of the condensate from the steam it receives from Panda.
Panda uses on-site water treatment equipment to produce demineralized water
required as make-up to the HRSG's.
ENVIRONMENTAL CONTROL EQUIPMENT
The Project has several environmental control features including the following:
- Combustion turbines equipped with water injection capability
for NOx control.
- A berm around each fuel oil tank for spill containment.
- Silencers installed in the relief valve stacks for noise
attenuation.
- An oil-water separator for wastewater treatment.
FIGURE III-1
PANDA-ROSEMARY
SIMPLIED PROCESS
DIAGRAM
- Sanitary water treatment for pH control in a neutralization
tank before it is discharged. No hazardous waste is
produced on the site.
Panda and Burns & McDonnell know of no soil or groundwater contamination.
ELECTRICAL INTERTIE
The Project ties into the VEPCO grid system. The Project intertie with VEPCO
is rated 300 MVA at 230 kV. The interconnection point is the 230 kV
underground cable termination structure (205704) located inside the Project's
substation. See Figure III-2 for the electrical interconnection one-line.
Note that North Carolina Power (NCP) is an operating utility in the VEPCO
system and they are considered to be the same entity in this report.
SITE VISIT
Burns & McDonnell conducted a site visit on February 29, 1996. Figure III-3 is
a site plan. Photographs from the site visit are also included.
FIGURE III-2
PANDA-ROSEMARY
ELECTRICAL INTERCONNECTIONS
ONE-LINE DIAGRAM
HAWKER SIDDELEY POWER ENGINEERING INC.
PLOT PLAN
PANDA-ROSEMARY CORPORATION
BIBB ROSEMARY COGENERATION FACILITY
PART IV
OPERATING HISTORY
The operating history of the Project is summarized in Table IV-1.
<TABLE>
<CAPTION>
TABLE IV-1
PANDA-ROSEMARY PROJECT OPERATING HISTORY
1991 1992 1993 1994 1995
-------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Total Hours Dispatched 1,174 377 324 764 2,224
Total Electricity Produced (MW) 129,042 44,759 31,938 76,652 234,866
Summer Dependable Capacity (MW) 161 161 165 165 165
Winter Dependable Capacity (MW) 192 198 198 198 198
Forced Outage Days 12 1 16 12 18
Total Steam Produced (1,000 lbs) 330,832 377,940 429,915 364,786 291,170
Total Chilled Water Produced
(1,000 ton-hrs) N/A 4,028 3,694 4,123 4,069
</TABLE>
ELECTRIC POWER PRODUCTION
The dispatch hours for 1994 were greater than the previous two years due
primarily to an amendment to the Power Purchase Agreement (PPA). Panda
negotiated this amendment to the PPA as a means of increasing dispatch hours
which allows equipment exercising to be increasingly conducted while on-line.
During 1995, the Project was dispatched for 2,224 hours. A fueling
arrangement Included in a 1993 amendment to the PPA provided specific
provisions for the Project to use natural gas provided directly from VEPCO.
VEPCO had two extended forced outages at their other gas fired plants, which
resulted in gas being redirected to the Project. These two forced outages
were caused by unusual problems with major components at VEPCO's facilities.
For planning purposes, these extended outages by VEPCO are not anticipated in
the future. Approximately 54 percent of the total dispatch hours in 1995 were
due to this fuel arrangement contained in the amendment. Approximately
1,0002,000 dispatched hours would have been normal for 1995 based on typical
conditions.
STEAM PRODUCTION
The Bibb Company (Bibb) is the Project's thermal host. Bibb is a major
manufacturer of terry cloth towels. Bibb's Rosemary mill currently produces
approximately thirty percent of the terry cloth towels produced in the United
States. Steam and chilled water required by Bibb are supplied by the Project.
Steam and chilled water sales to Bibb are required to satisfy the requirements
of the Public Utilities Regulatory Policy Act (PURPA) as described further
below under the heading "Qualifying Facility Compliance". The amount of steam
produced in the HRSGs considered for PURPA requirements during 1995 was 88,852
klb. The total exported steam summarized in Table IV-1 includes both
extraction steam and steam produced by the auxiliary boilers. Bibb also
purchases chilled water for its Rosemary Complex textile mill. Chilled water
is derived from steam through the use of absorption chillers. While the steam
and chilled water sales contract between Panda and Bibb has no "minimum take"
requirement, Bibb is obligated to purchase all of its steam and chilled water
requirements from the Project.
In the event Bibb discontinued operations, Panda would need to either find a
new steam host, install a self-performing steam host, or have the Project
reclassified as an Exempt Wholesale Generator (EWG). Since the Bibb plant is
a major manufacturer of terry cloth towels, it is unlikely the plant will
discontinue operations under its current ownership or with future ownership.
In the event the Project's steam host did discontinue operations, two other
potential steam hosts in Roanoke Rapids include Champion Paper and Halifax
Paperboard. Although it is technically feasible to deliver steam to these
facilities, a relatively long steam pipeline directed through town would be
required. This would present additional economic and sociologic challenges to
the Project. As an alternative, Panda may build a distilled water plant or a
similar facility to replace Bibb as the steam host. This would allow the
Project to continue operation as a Qualifying Facility under PURPA.
Panda currently has a water distillation plant as the thermal host at their
Brandywine, MD facility. Because Panda has complete control over the steam
production and usage, PURPA requirements can be met without sacrificing heat
rate on output performance.
The Brandywine distilled water plant process uses steam from the Project to
evaporate effluent water into a vapor. Vapor released from the liquid is
condensed in a water-cooled condenser to produce distilled water. A complete
installed distilled water plant budget price for the Rosemary facility would
be approximately $2,000,000. This cost estimate appears reasonable for this
type of facility.
Burns & McDonnell believes Bibb will remain a viable steam host into the
foreseeable future. However, if they discontinue operations of the facility,
the Project has a sufficient back-up plan in the form of a distilled water
facility that is viable and cost effective.
AVAILABILITY
The facility was dispatched to VEPCO for 137 days during 1995. There were 18
forced-outage days declared and 26 scheduled maintenance-outage days declared.
The following table summarizes the information reported by Panda to the
National Electric Reliability Council - Generating Availability Data System
(NERC-GADS):
<TABLE>
<CAPTION>
TABLE IV-2
PROJECT AVAILABILITY HISTORY
1991 1992 1993 1994 1995
-------- ------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
Dispatched MWh 129,052 45,056 31,930 76,652 234,866
Period Hours 8,760 8,760 8,760 8,760 8,760
Forced MWh 23,908 3,857 60,357 44,193 23,890
Unavailable MWh 148,534 122,844 164,828 133,619 141,719
Hours Unavailable 906.1 776.2 949.4 768.4 818.9
Capacity Factor 7.56% 2.88% 1.98% 6.60% 14.56%
Equivalent Forced Outage Rate 1.40% 0.25% 3.75% 3.80% 1.48%
Equivalent Availability 91.29% 92.14% 89.76% 88.50% 91.22%
Availability 90.64% 91.16% 89.13% 88.36% 90.65%
</TABLE>
HEAT RATE
Hawker Siddely, the turnkey construction contractor, guaranteed the facility
would have a heat rate of 7,936 Btu/kWh (LHV) at full load, burning natural
gas, at an ambient temperature of 90 degrees F. This equates to a higher
heating value (HHV) heat rate of 8,809 Btu/kWh. Hawker Siddeley achieved its
performance guarantees during initial performance tests of the Project.
The contract heat rate as determined by the PPA is 8,900 Btu/kWh (HHV). The
weighted average heat rate for the Project, including start-ups and shut-
downs, is summarized in Table IV-3. The Project heat rates included in Table
IV-3 do not include a credit for thermal production of steam.
TABLE IV-3
ANNUAL AVERAGE HEAT RATE
Year Btu/kWh (HHV)
------- ----------------
1991 9,024
1992 9,290
1993 9,550
1994 9,459
1995 9,652
The actual heat rate of the Project has historically been greater than the
construction contract guaranteed heat rate. There are several factors that
contribute to this. First and foremost, the construction contract guaranteed
heat rate should be viewed in the proper context. The heat rate guarantee of
8,809 Btu/kWh (HHV) represents an achievable Project heat rate for full load,
steady state conditions with all equipment in "as new" condition. Second,
normal day-to-day operation of the Project has varied substantially from these
conditions with the plant being operated as a peaking facility with numerous
starts and stops and with the Frame 6 (highest heat rate) being dispatched
on-line for nearly twice the number of hours as the Frame 7 (lowest heat
rate), partially due to equipment availability and PURPA efficiency
requirements. The thermal efficiency of a combined cycle unit is lower
during the start-up period than when operating at full load. As a result,
more hours of full load operation and longer run times between starts would
improve annual heat rate. Table IV-4 illustrates the average fired hours per
start over the history of the Project.
<TABLE>
<CAPTION>
TABLE IV-4
AVERAGE FIRED HOURS PER START
1992 1993 1994 1995
------- ------- ------- --------
<S> <C> <C> <C> <C>
Frame 6 17 26 30 19
Frame 7 27 11 10 11
Plant Average 22 17 18 15
</TABLE>
The pattern of dispatch by VEPCO has require numerous start-ups and shut-downs
during the past three years. This has caused an increase in the heat rate
during this time period. All other variables constant, if the dispatch
pattern by VEPCO is modified to schedule more hours per start, the heat rate
of the Project would improve. According to our estimate, a heat rate
improvement of 1.6 percent may be realized if the hours per start are
increased from 20 to 50. It is unlikely the hours per start will be any less
than what has been experienced recently.
The PPA allows VEPCO to dispatch the Project at full load with both combustion
turbines or to use the Frame 6 or Frame 7 separately. The Frame 7 is more
efficient than the Frame 6. As a result the overall Project heat rate will
improve as the Frame 7 is operated more often. The more efficient Frame 7
combustion turbine was unavailable at times during 1993 and 1994 due to
problems with certain power transformers. During this period, the Project
operated its Frame 6 gas turbine which increased the average heat rate. In
addition, during 1994 and 1995, additional hours of only Frame 6 operation were
incurred in connection with Owner Requested Generation (ORG) runs necessary to
meet certain PURPA requirements. (See "Qualifying Facility Compliance"
section).
During 1994 and 1995, the Frame 7 operated 38 percent of the total fired hours
of both units. If the number of hours of operation had been equal between the
two machines, Burns & McDonnell would expect the heat rate to improve.
According to our estimate, if the Frame 7 would have been used for the same
number of hours as the Frame 6, a 3 to 4 percent heat rate improvement would
have been realized during the last two years.
Generation load also affects heat rate. The design heat rate was calculated
at full load output. Unit efficiency decreases as the output from the unit
decreases. Therefore, to realize the best heat rate possible for the Project,
the optimum operation is both the Frame 6 and Frame 7 together at full load.
VEPCO implemented Automatic Generation Control (AGC) in 1995. The purpose of
AGC was to use the help of computers to enhance economic dispatch of the
entire VEPCO system. During 1995 under AGC, the facility was ramped from full
load to minimum load and back to full load at the maximum ramp rate as often
as seven times in one hour. The PPA requires Panda to achieve a load ramp
rate of 16 MW/min. Panda has indicated most VEPCO power purchase agreements
are much less stringent with load ramp rates typically in the range of
5 MW/min.
Excessive load ramp rates are not consistent with prudent utility practices and
are detrimental to heat rate optimization. Panda has discussed this issue
with VEPCO and is optimistic less severe load ramp rates can be negotiated in
accordance with prudent utility practices. As an electric utility, VEPCO
should understand Panda's concerns regarding load ramp rates. Panda is
optimistic VEPCO will therefore be willing to reach agreement on this issue.
QUALIFYING FACILITY COMPLIANCE
The Public Utilities Regulatory Policies Act (PURPA) of 1978 established
certain criteria which must be met before facilities such as the Project may
be deemed as a Qualifying Facility (QF) as defined under PURPA. As a QF, the
Project may generate and sell electric power under legal constraints that are
far less stringent than those for electric utilities such as VEPCO. The
Federal Energy Regulatory Commission has jurisdiction over all QFs.
To maintain status as a QF under PURPA regulations, the Project must meet
minimum annual requirements for thermal output and efficiency. For any QF,
thermal output must be at least 5 percent of the total energy output of the
facility.
PURPA defines thermal output as that useful cogenerated thermal energy
delivered to the host facility while the Project is being dispatched. For the
Project, we estimate thermal efficiency as follows:
(Send-Out Steam, lbs)(1,094 Btu/lb) + (Send-Out Chilled
Thermal Water, Tons Hrs)(12,000 Btu/Ton Hr)
-----------------------------------------------
Output = Net Thermal and Electrical Output
PURPA also requires the Project to meet an efficiency standard ("FERC
Efficiency") of at least 45 percent (Note: This standard is at least 42.5
percent if the project produces more than 15 percent thermal output). FERC
Efficiency is defined under the regulations as the useful electric output
plus half the useable thermal energy output divided by the lower heating
value of fuel input for any calendar year.
FERC (Useful Net Electric Output) + (one-half)(Useful Thermal Output)
---------------------------------------------------------
Efficiency = Energy Input
Thermal Output and FERC Efficiency calculations are based upon operating
results while the Project is being dispatched to provide electric power to the
utility. The operation of the auxiliary boilers, therefore, has no impact upon
the calculations. Also, thermal and electrical energy sold or purchased by the
Project while the Project is not being dispatched has no impact on the above
calculations.
Another important criteria is that the Project must meet PURPA requirements
based only upon annual operating results. If the Project is unable to meet
PURPA requirements for one or more months, the Project will still be in
compliance so long as the annual operating results calculated at the end of
each calendar year meet PURPA requirements.
Panda reviews the PURPA requirements monthly. The early October 1994 review
revealed a shortage in the percentage of thermal heat exported to the host.
For the first time since commercial operations, Panda requested an ORG run
with VEPCO to raise the percentage of thermal energy exported to the host.
After the October 1994 ORG, the Project's annual operating results satisfied
all PURPA requirements.
Again in October 1995 an ORG was required to satisfy PURPA requirements. For
388 hours in October 1995, the plant ran below full capacity to ensure meeting
PURPA requirements. This was unfortunate that the October 1995 ORG was needed
because the project had been exceeding PURPA requirements until July when Bibb
shut down during an extended Project dispatch period. During this period,
annual thermal efficiency fell below PURPA requirements because a substantial
amount of electric power was produced without any steam sales (see "thermal
output" equation above). If Bibb would have taken steam during this period,
the October 1995 ORG may not have been required.
The project has shown the ability to effectively schedule ORG runs as needed
to facilitate meeting annual PURPA requirements or to test equipment after
maintenance outages.
Results from prior years of Project operation are summarized in Table IV-5.
<TABLE>
<CAPTION>
TABLE IV-5
HISTORY OF QUALIFYING FACILITY STATUS
1992 1993 1994 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Thermal Output 25.46% 16.30% 16.17% 15.18%
FERC Efficiency 48.39% 44.35% 44.70% 43.38%
Meet PURPA Yes Yes Yes Yes
</TABLE>
ENVIRONMENTAL COMPLIANCE
The Project records were reviewed to determine the status of compliance with
existing permit conditions and reporting requirements. Our review included
interviews with Panda representatives at the plant, and confirmation of the
responses by representatives of the City of Roanoke Rapids and the North
Carolina Department of Environmental Management (NCDEM). Based on our review,
it appears the Project is currently operating in compliance with all permit
conditions.
Air Permit
The existing air permit (No. 6586R2) required initial compliance stack testing
of nitrogen oxides, carbon monoxide, and particulate matter. It also requires
submittal of quarterly reports. Compliance tests, which were performed in
March 1991, showed the facility to be operating in compliance with the limits
set in the permit. There is no continuous emission monitoring required.
The permit also restricts the hours of operation of the two combustion turbine
units. Currently, the Project does not include SCR pollution control
equipment. If the fired hours exceed 2,000 for the Frame 7 combustion turbine
unit or the combined fired hours of both combustion turbines exceed 4,000, the
permit requires an SCR to be installed. In 1995, the Frame 6 unit had 2,220
fired hours, while the Frame 7 had 1,473 fired hours. Quarterly reports have
been submitted to the NCDEM regional office in Raleigh indicating the hours of
operation, fuel use, etc. The NCDEM indicated that the reports have been
satisfactory.
Clean Air Act Amendments
Title V of the Clean Air Act Amendments of 1990 requires that Panda obtain an
operating permit for the Project. In North Carolina, the mandated application
submittal date is third quarter 1996. Panda has retained a consultant to
review the operating permit requirements for the Project, to conduct an
emissions inventory of all plant emission sources, and to prepare the actual
permit application. They indicate the work is scheduled to be completed ahead
of the mandatory submittal date.
NPDES Permit
The Project has a valid National Pollution Discharge Elimination System
(NPDES) permit (NC0079014) which pertains to discharges related to the tank
farm containment area. The Project has submitted monthly reports as required
by the NPDES permit.
Panda currently discharges to the wastewater treatment facility to the City of
Roanoke Rapid's sanitary sewer system under a separate permit (No. 007) with
the Roanoke Rapids Sanitary District. The city requires monthly reports which
document the results of an effluent sampling program. Eight separate sampling
locations are included in the program. The Sanitary District has indicated
that there have been a few minor violations of the permit onditions since the
facility became operational in 1991. These violations reportedly were related
to plant start-up and appear to have been remedied to the point where future
violations are not expected.
Spill Prevention
Panda has indicated a Spill Prevention and Countermeasure Control (SPCC) plan
is currently in place for the Project.
No other unresolved permitting issues were identified during our investigation.
FORCED OUTAGES
In 1991, 12 Forced Outage Days, as defined under the PPA, were taken to
correct the Project's typical first year problems including: HRSG drum level
control problems, hot well level control problems, intermittent steam turbine
trips, and boiler tube failures. None of these problems have reoccurred.
Only one forced outage day was declared in 1992.
In 1993, 16 Forced Outage Days were experienced primarily due to failure in
the Frame 7 step-up power transformer bushings. The bushings were replaced
and minor modifications were made to the transformers to prevent reoccurrence.
In 1994, 12 Forced Outage Days were taken due to freeze problems during the
record January cold snap (3-day outage) and failure of an auxiliary power
transformer (9-day outage). Panda recognized improvements were needed in
these two areas. Actions taken to prevent future problems are described under
"Equipment and System Design Changes."
In 1995, 18 Forced Outage Days were experienced due to equipment problems on
the Combustion Turbines. The specific equipment causing the failures were the
hydraulic fluid lines to the gas control valve, generator breaker, electrical
synchronization equipment, and a faulty cable. A contributing factor to these
equipment failures was the unusually high ramp loading and unloading rates
imposed on the Project by the VEPCO AGC. These ramp load rates and the
inconsistency with prudent utility practices are discussed above in more
detail under the heading "Heat Rate".
Other events causing forced outages in 1995 were tube leaks in HRSG No. 1 and
a steam turbine trip caused by a sharp increase in steam demand by Bibb. High
axial vibration was a concern on the Frame 6 turbine, although it did not
cause a forced outage and was corrected in the fall of 1995.
MAJOR MAINTENANCE ACTIVITIES
Maintenance activities performed recently include:
- Reviewing of the heat tracing system to prevent overloading
feeder circuits.
- Repair of boiler feedwater heater tube leaks.
- Installation of new insulation and heat tracing on the Bibb
steam pressure control valve.
- Installation of sidewalks throughout the facility to improve
maintenance access.
- Installation of a skywalk for direct access across the top
landings of the HRSGs.
- Modification of Frame 6 bearing pedestal to reduce vibration.
- Planned outage which included inspection and scheduled
maintenance of both combustion turbines, both HRSGs,
steam turbine, and transformers T-1 and T-2.
EQUIPMENT AND SYSTEM DESIGN CHANGES
Freeze Protection
Weaknesses in freeze protection were responsible for a forced outage
experienced during January 1994. Actions taken by Panda to improve Project
freeze protection since January 1994 include the following:
- Heat tracing replacements - A portion of the Project's heat
tracing, a type of electric heating element used to prevent lines
from freezing, was and is being replaced by Panda with an improved
type of heat tracing. The new heat tracing to be installed will be
self-limiting such that it will not overheat and boil out the
fluid contained in the tubing.
- Transmitter relocations - A number of pressure transmitters were
originally installed at grade, requiring long tubing runs that
were susceptible to freezing in the event of cold weather and an
open circuit on the heat tracing or boiling in the event of
overheating by the heat tracing. These transmitters were relocated
closer to the equipment to minimize the length of tubing runs.
This should minimize freezing and boiling problems.
- Instrument air - Small diameter lines such as the tubing used to
convey compressed instrument air for Project instrumentation and
controls are typically susceptible to freezing in cold weather.
Moisture in the compressed air may freeze, causing the Project
controls to become inoperable. To minimize this problem, Panda
has modified their nitrogen blanketing system (see discussion
below regarding this new system) to allow the use of nitrogen in
the instrument air system. If properly purged with nitrogen
before the onset of cold weather, freezing in the instrument air
system should be avoided with the use of moisture-free nitrogen
which has a very low dew point of -70 degrees F. A new vent valve
and filter were installed in the compressed air system to prevent
moisture in the lines. This change should also minimize freezing
in the instrument air system.
- New deaerator level controls - Panda has added a new deaerator
level control column to replace the conventional transmitter and
tubing used previously. This is in response to frozen deaerator
controls that were a significant problem during the recent cold
ambient temperatures.
- Steam heat under HRSGs - Panda has enclosed the area under the
HRSGs and installed a bare steam line network under each HRSG.
This provides heat for the water and steam lines previously exposed
to the elements.
- Cold weather operating procedures - Panda operates the combustion
turbines at zero load whenever temperatures inside the HRSG drop
below 33 degrees F. Other systems found to be susceptible to
freezing are also operated during off-line conditions as a means of
building up heat in these systems.
- Enclosures - Panda has built enclosures around the air compressors
and raw water pumps. Provisions for heating these buildings have
been made to help prevent freezing in these systems.
Forced outages due to freezing will be minimized due to Panda's freeze
protection improvement plan. Burns & McDonnell feels Panda's freeze protection
improvements are prudent.
Transformers
A two-week forced outage was experienced in September 1993 due to a failure in
generator step-up transformer T-1. This transformer is connected to the
General Electric Frame 7 combustion turbine and is capable of being switched to
the steam turbine. The failure was attributed to the failure of the low
voltage bushing.
The bushing manufacturer has supplied new bushings with larger oil reservoirs.
These larger reservoirs are designed to allow for more expansion thereby
reducing the operating pressures within the bushing to acceptable levels. In
addition, ventilation ducts have been added to the transformer connection box
to reduce the temperatures inside the bushing housing, further reducing
internal bushing pressure due to thermal expansion of the oil inside the
bushing.
It appears the problems associated with these bushings have been eliminated
and should not be a problem in the future.
Transformer T-3 failed to meet performance guarantees while still under
warranty. In early 1994, T-3 was sent to ABB for extensive repair and was
re-installed at the Project site in April 1995. Panda has essentially a new
transformer in this location now.
Corrosion Protection
The Project currently operates as a peaking unit that typically goes on line
only during peak demand periods. This type of service requires equipment to
sit idle during extended periods between peak demands. During these periods
when the Project is not on line, internal heat transfer surfaces are
susceptible to corrosion due to the presence of oxygen. Panda has found
corrosion pitting has occurred in the steam drum, evidence of oxygen-related
corrosion.
In an effort to enhance the long term reliability of the Project, Panda
installed a nitrogen blanketing system in 1994. When the Project is taken off
line, equipment will return to ambient temperatures and pressures such that,
if left unchecked, the infiltration of atmospheric oxygen is possible. The
nitrogen blanketing system introduces compressed nitrogen to the waterside
internal components of the Project and maintains a positive pressure on these
components to prevent the infiltration of atmospheric oxygen. This reduces
the amount of corrosion experienced by the Project during off-line periods.
Similar systems have been used effectively to reduce corrosion at many other
operating facilities.
In Burns & McDonnell's opinion, the installation of the nitrogen blanketing
system should be viewed by the Project investors as a positive event. Panda's
efforts to install this system serves as a good indication that Panda is
concerned about the long term economic viability of the Project.
Chiller #2
Chilled water production was not initiated until March 1992. The turnkey
contractor for the chilled water system aborted attempts to make the system
work properly. An alternate contractor redesigned and modified the chilled
water system. Presently, the system operates satisfactorily. However, there
were damages to Chiller #2 from the original installation which cause the
system to not achieve full output. Operating data indicates Chiller #2 will
only produce approximately 50 to 60 percent of nominal capacity in its
current condition. Panda has recently tried unsuccessfully to correct the
problem by replacing damaged absorber tubes.
A pinhole leak in the original vacuum pump may have contributed to the
problems experienced by Chiller #2. The performance of the lithium bromide
chillers is dependent on a good vacuum existing in the machine. The
performance of Chiller #2 was improved when a new high volume vacuum pump was
purchased and used during start-up to initially pull the required vacuum.
However, this improvement is not perceived as a permanent solution. Chiller
#2 is budgeted to be replaced in 1996 at an estimated cost of $770,000.
Fire Protection
During 1993 Panda installed additions to the fire protection system including
installation of the following:
- New sprinklers around the steam turbine lube oil area to meet the
recommendation of Hartford Steam Boiler Insurance Co.
- Bearing protection system for the steam turbine.
- Wet suppression system on the subfloor under the steam turbine.
- Deluge system on the south side of both the administration building
and power house.
- Additional fire water pump at the cooling tower basin to support
the capacity of above mentioned systems.
These fire protection system improvements were made to lower the insurance
premium payments.
Oil Conditioning
During 1995, the Facility installed a permanent lube oil conditioning (filter
and coalescent) unit for the steam turbine. Conditioning the lube oil will
extend the life of the turbine by preventing foreign particles and water from
entering the bearings. This is increasingly important because of the high
rotational speed of the ABB VAX turbine.
Panda has plans in place to purchase a portable lube oil conditioner for the
combustion turbines. This portable unit will condition the combustion turbine
lube oil by a batch process. Consistent with the steam turbine, this
commitment to improving lube oil quality will improve bearing life and reduce
overall long-term turbine maintenance costs.
Ultraviolet Protection
Panda has completed covering the cable trays previously exposed to the
atmosphere. If left to the elements, cable insulation degrades from UV
exposure from direct sunlight. The covered cable trays should improve cable
life. This project completion should be viewed as a step to reduce cable
replacement costs in the future.
Chemical Feed Lines
Panda has added chemical feed lines from the bulk chemical storage to the
water treatment building. In the past, facility personnel were required to
carry chemicals in buckets to the water treatment equipment. This improvement
will cut down a chemical waste and, more importantly, improve safety at the
Project.
Automatic Generation Control
In July 1995 Automatic Generation Control was introduced to the Project. In
this operating mode, North Carolina Power (NCP), a wholly-owned subsidiary of
VEPCO and operating under VEPCO direction, uses computers to calculate the
most economic load for the Project and sends this information directly to the
Project's Distributed Control System (DCS). The DCS controls the plant
generation to match the continuously updated set point signal sent by NCP's
computer. Since the AGC was a new and complex control system, much tuning
needed to be done on the system. During the first week of operation, a
facility transducer caused an 11 MW error in its output set point
determination. The AGC is able to fluctuate load within a window between 80
percent and 100 percent of full load. Per the contract operating procedures,
AGC often changes load at a ramp rate of 8 MW/min up and 16 MW/min down.
These ramp rates are as much as four times the maximum ramp rate guidelines
used at other combined cycle facilities. The severe loading and shedding
ramp rates cause higher stresses on the plant equipment and, as discussed,
increased the number of forced outages incurred during 1995. Also, the
overall plant heat rate suffers because of the part load operation that AGC
requires.
O&M CONTRACTOR
University Technical Services (U-TECH) is responsible for managing the day-to-
day operations and administrative functions of the Project. U-TECH is under
contract to provide these services until December 1996. Panda's alternatives
after December 1996 include extending the term of the present agreement or
requesting bids for a new O&M contract. The current O&M contract calls for a
fixed monthly payment of approximately $130,000 and includes bonuses and
penalties based on availability and other factors. Panda should be able to
replace this agreement when it expires in 1996 without a significant change in
the basic terms. U-TECH has 19 employees on-site to operate and maintain the
facility.
It is the opinion of Burns & McDonnell that U-TECH's performance has been
adequate during the term of the O&M contract in force and that U-TECH has not
suffered any operational deficiencies as a result of its ownership by EMCOR,
the restructured entity established during the Chapter 11 bankruptcy of JWP
Inc., the former owner.
TRAINING PROGRAM
Since many of the current site employees were also working at the Project in
1990, they were able to take part in the Hawker Siddeley training program
during the start-up of the plant. Panda has frequent training sessions for the
U-TECH personnel. In November 1994, Panda held a training session for the
U-TECH employees on gas turbines. All new employees are required to go through
a 3- to 6-month training period with day shift personnel. After this period of
training, employees are allowed to work other shifts on their own without
constant supervision. Safety meetings are held monthly for all employees.
PART V
EQUIPMENT ASSESSMENT
OPERATING CONDITION
The current operating condition of the Project is very good with only a few
exceptions. The Unit No. 2 chiller is operating at reduced capacity, as
previously discussed. Another exception may be the recent problems with the
Frame 7 combustion turbine. Although of some concern, steps have been taken
to remedy this situation.
Hartford Steam Boiler and Chemtreat conducted the nnual package boiler
inspection in July 1995. The Operating Certificates for the two package
boilers have been extended until July 1996.
Panda completed a scheduled maintenance outage during September 16-30, 1995.
Activities that were successfully completed include:
- Hot gas path inspection on the Frame 6 combustion turbine.
- New first stage turbine buckets on the Frame 6.
- Frame 6 generator inspection.
- Borescopic inspection of the low pressure section of the
steam turbine.
- Replacement of several boiler tubes in HRSG No. 1.
- Annual HRSG inspections.
Results of the outage indicate the equipment is generally in very good
condition. Panda chose to perform a hot gas path inspection of the Frame 6
much earlier than scheduled because new first stage turbine buckets were
provided by GE free of charge. Panda's Frame 6 was a forecast unit (built
before the order was placed). GE improved the design of the first stage
buckets shortly after the Project's Frame 6 was built, but before Panda
placed the order with GE. Therefore, GE was obligated to install the
improved first stage buckets to upgrade the turbine to its design at the time
of the order. The casing was removed to replace the buckets, so a hot gas
path inspection was performed simultaneously. Only minor wear was detected
at various points along the hot gas path. Rebuilt combustion liners and
transition pieces were reinstalled during the inspection.
An exhaust temperature spread on the Frame 7 combustion turbine has been
consistently noticed while the unit operated at full load. In attempts to
solve this problem, Panda has replaced worn or inaccurate thermocouples,
replaced fuel nozzles with rebuilds from GE, and improved the purge air check
valves. The spread in exhaust temperature has been constant and as much as 120
degrees F, however the machine is operable in this condition. GE has stated
that the spread is acceptable and does not restrict the load capability of the
machine.
MAJOR MAINTENANCE AND OVERALL PROGRAMS
Burns & McDonnell feels adequate maintenance of major pieces of rotating
equipment (i.e. the combustion turbines and the steam turbine) is crucial for
long term Project reliability. For each of these pieces of equipment,
manufacturers provide recommended maintenance activities.
Burns & McDonnell has compared the manufacturer's recommendations with Panda's
proposed maintenance schedule as summarized in Table V-1. In addition to the
items listed in Table V-1, U-TECH performs borescopic inspections of the three
turbines annually. By reviewing Table V-1, Burns & McDonnell concludes that
planned maintenance activities meet or exceed manufacturer recommendations.
It is apparent that Panda has established a maintenance schedule that will
provide major equipment maintenance activities recommended by the equipment
manufacturers. Panda's 10-year maintenance plan is regarded by plant
personnel as a living document that will be reviewed and updated periodically,
as the actual operations become known and future predications regarding
turbine operating hours and starts become more accurate. Burns & McDonnell
views this as an indication that Panda's operation and maintenance philosophy
is geared toward long term Project reliability.
Although Burns & McDonnell has not inventoried maintenance activities on every
piece of equipment for the Project, we have generally observed that U-TECH
uses an organized computerized preventative maintenance program and noted that
annual spare parts inventory counts are performed. The computer schedules and
prioritizes all preventive and corrective maintenance requests. Based upon this
program, Panda completes approximately 90 to 110 preventative maintenance
requests in one month's time and also completes 40 to 70 maintenance requests
per month. Currently, they have a backlog of around 70 maintenance requests.
To respond to maintenance requests, Panda maintains a $2 million spare parts
inventory on-site.
EQUIPMENT REPLACEMENT PROGRAM
Project operating hours are relatively low and there is currently little need
for equipment replacement. Equipment replacement is set up on an operating
hours schedule. Panda has established a ten-year program for predicting
equipment replacement based on hours of equipment operation.
The No. 2 chiller replacement is a capital project that is required despite
low operating hours. This chiller was damaged during its installation and now
needs to be replaced. The replacement of the No. 2 chiller is included in the
1996 capital expenditure budget.
<TABLE>
<CAPTION>
TABLE V-1
COMPARISON OF MANUFACTURERS' RECOMMENDATIONS
WITH 10 YEAR PLAN MAINTENANCE ACTIVITIES FOR MAJOR PIECES OF ROTATING EQUIPMENT
Panda-Rosemary Cogeneration Project
(Factored Hours)
Combustion Hot Gas Path Major Limited Major
Unit Inspection Inspection Inspection Overhaul Overhaul
- -------- ------------ ------------- ---------- -------- --------
MFG Panda MFG Panda MFG Panda MFG Panda MFG Panda
----- ------ ----- ------ ----- ----- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit 1,
Frame 7 8,000 8,000 24,000 24,000 48,000 40,000
Combustion Turbine
Unit 2,
Frame 6 12,000 8,000 24,000 24,000 48,000 48,000
Combustion Turbine
Unit 3 25,000 16,000 50,000 50,000
Steam Turbine
</TABLE>
PART VI
PROJECTED PLANT PERFORMANCE
CAPACITY
Panda is required to perform capacity tests to satisfy the requirements of the
PPA. The maximum contract capacity payments are available if the plant can
achieve 198 MW in the winter and 165 MW in the summer. The winter period is
defined as October through March. The summer period starts in April and runs
through September. If required by VEPCO, the output capacity shall be
demonstrated for 12 hours in the summer and 6 hours in the winter.
Table VI-1 presents the historical capacity test results for the Project in
summer and winter periods. As indicated in Table VI-1, the Project was
exceeded the maximum contract capacity output of 198 MW winter and 165 MW
since 1993. The Project has not been requested to demonstrate capacity limits
by VEPCO during the past two years.
<TABLE>
<CAPTION>
TABLE V1-1
HISTORICAL CAPACITY TEST RESULTS
Test Date Result Contract Maximum
------------ --------- --------------------
<S> <C> <C>
Winter 1990 185 198
Winter 1991 192 198
Winter 1992 200 198
Summer 1991 161 165
Summer 1992 161 165
Summer 1993 168 165
Summer 1994 167 165
</TABLE>
Capacity and Heat Rate Degradation
Figure VI-1 indicates General Electric's anticipated combustion turbine
capacity and heat rate degradation as a function of factored hours. At
48,000 factored hours, a major combustion turbine overhaul is performed and
capacity returns to near-new condition (typically within 0.5 percent of as-new
condition). This cycle then is continue throughout the life of the Project.
Figure VI-1 indicates: (1) the anticipated capacity derate will vary from zero
to 5.5 percent and, (2) the anticipated heat rate derate will vary from zero
to 3.0 percent between major overhauls. Burns & McDonnell has used a
straight-line capacity and heat rate derate estimation of 4 percent and 3
percent, respectively, for the life of the Project. In any given year, this
estimation of capacity and heat rate derate will be higher or lower than
actual equipment performance depending upon the number of total factored
hours since the last major overhaul.
FIGURE VI-1
HEAVY-DUTY GAS TURBINE
DEGRADATION AS A
FUNCTION OF TOTAL
FACTORED HOURS
LINE CHART
Since the Project currently has about 8,000 factored hours, Project
performance during 1995 was deemed as representative of the estimated
straight-line derate performance throughout the life of the Project (refer
to Figure VI-1). Actual Project performance in 1995 was therefore used as
the basis for projecting Project capacity and heat rate throughout the life
of the Project.
Based upon actual performance in 1995, it was assumed the Project would, on
average, continue to achieve those capacity levels included in the PPA. A
more detailed discussion of heat rate is included below.
DISPATCH
Panda amended the Power Purchase Agreement with VEPCO in 1993 to effect the
results of an energy price redetermination. The amended PPA closely matches
energy payments with energy production costs. This increased the Project
dispatch hours and allowed Panda the opportunity to increase on-line exercise
of equipment more often. Refer dispatch analysis discussion in Part IV.
The Project realized a sharp increase in dispatch hours in 1995. VEPCO
furnished the Project with natural gas from their Chesterfield 7 gas turbine
unit. Under stipulations in the PPA, Panda was required to use this fuel
displaced from the Chesterfield unit experiencing an extended forced outage.
This caused an unexpected increase in dispatch hours during 1995. The total
dispatch hours in 1995 were 2,224 compared to 760 in 1994.
Due to emission permit requirements, annual dispatch hours are of concern. If
the fired hours exceed 2,000 hours for the Frame 7 or the total combined hours
of the combustion turbines exceed 4,000 hours, an SCR or alternate pollution
control system needs to be installed to reduce NOx emissions levels.
According to forecast predictions, which we have reviewed for adequacy of the
reserve provided, this NOx reduction equipment installation will take place
in 2003.
AVAILABILITY
Availability during 1994 was hampered largely due to transformer and freeze
protection problems. Since Panda addressed these issues, the availability of
the Project in 1995 has increased to 90.65 percent from 88.36 percent.
HEAT RATE
As noted earlier, the contract heat rate determined by the PPA is 8,900
Btu/kWh (HHV). Recent operating data shows the Project has demonstrated a
full continuous load plant heat rate of 8,678 Btu/kWh (HHV) during the
spring of 1995. This demonstrates the plant's ability of achieving the PPA
heat rate when the plant is operated at continuous full load and providing
steam to the thermal host. This heat rate includes fuel that was used to
cogenerate thermal energy for the steam host. In order to fairly compare
the Project's heat rate to the contract heat rate, credit must be given for
the portion of fuel used for process steam generation. Following is a summary
of the Project's 1995 heat rate review. Specific days selected were days
when no unusual operations events occurred and the plant was either running
continuously or had a normal start-up/shut-down transition.
The dates selected were:
- May 18 - The plant was operating for the entire 24 hour period at
full load with only a short period of minimum load on all units.
The plant was not on AGC.
- July 5-6 - These days represent normal morning dispatch, start-up,
continuous operation and shut-down with both CT's for short
operational periods. This data represents a period of operation
without the thermal host. The plant operated as it would in a
"merchant plant" mode. The low pressure section of the steam
turbine was not designed to handle full throttle flow steam rate.
Therefore, large quantities of steam were being dumped to the
condenser during this period.
- October 17 - This day represents the plant under an ORG "PURPA"
run. As was mentioned earlier, Panda was forced to run for
several days in October to meet PURPA requirements. The plant
operated the Frame 6 at part load while sending steam and chilled
water to Bibb. Table VI-2 summarizes the results of the heat rate
review.
<TABLE>
<CAPTION>
TABLE V1-2
RESULTS OF HEAT RATE REVIEW
Overall Project HR Electrical Portion of HR
(Btu/kWh) (Btu/kWh)
-------------------- --------------------------
<S> <C> <C>
PPA Contract -- 8,900
May 18 8,678 8,238
1995 Year End Results 9,652 9,095
July 5-6 9,160 9,160
October 17 11,899 9,640
</TABLE>
The plant heat rate increases when the Facility is not able to provide steam
to Bibb. This is evidenced by the July 5th and 6th records in which Bibb was
down for an outage. The plant operated at a heat rate of approximately 9,160
Btu/kWh (HHV). Since Bibb did not take steam, no credit can be given to this
heat rate figure. The design of the steam turbine does not allow more steam
through the low pressure section when the steam is not exported to process.
Therefore steam must be wasted directly to the condenser instead of using the
energy in the turbine or process.
The 1995 year end adjusted heat rate was higher than the contract heat rate
due to several circumstances that occurred in 1995. They include:
- The plant operated at full load in early July while Bibb was shut
down. It was during this time when the Project lost good PURPA
standing for the year, causing the ORG run in October.
- 1995 was the first year for AGC. This system automatically ramps
the Project load from 80 percent to 100 percent based on economic
dispatch factors. The AGC system had several first year "bugs"
which contributed to lower dispatch power levels.
- The PURPA run in October was performed operating only the Frame 6
at part load.
As can be seen in Table VI-2, the Project has demonstrated excellent heat rate
for as-designed conditions of full load, cogeneration mode. Presently, two
factors prevent the Project from demonstrating this excellent heat rate
potential: (1) the reliability of the thermal host, and (2) the dispatch
pattern of VEPCO. With the normalization of these events, Burns & McDonnell
feels that the contract heat rate of 8900 Btu/kWh can be consistently
obtained.
For planning purposes during the PPA term, Burns & McDonnell believes
estimating the Project's fuel costs on the contract heat rate of 8900 Btu/kWh
is achievable, but aggressive given the recent operating history of the
Project. Burns & McDonnell has estimated a more conservative net electrical
heat rate of 8900 Btu/kWh with a corresponding overall heat rate of 9100
Btu/kWh excluding a thermal production credit. Burns & McDonnell believes
the Project can achieve these heat rate performance levels if no ORG runs are
required in the future. If the Frame 7 unit dispatch can be increased and
the operating hours per start increased while mitigating the substantial AGC
fluctuations, Burns & McDonnell believes the Project can outperform the heat
rate estimates indicated.
Following the PPA term, Panda can pursue two capital improvement alternatives
to reduce the waste of steam that would otherwise be exported to Bibb and
impact the Project's heat rate. First, the steam turbine could be modified
to accept more steam in the LP section. A change in the LP design will
decrease the heat rate to a point under the contract heat rate when operating
without a steam host.
The second alternative consists of constructing a separate condensing system
for the steam extraction which would relieve a back pressure problem with
the steam turbine when more steam is sent through the LP section. This
change would reduce the heat rate penalty of operating the Project without a
steam host. A capital cost estimate has not been developed for either of
these alternatives.
ANNUAL OPERATION AND MAINTENANCE COSTS
Annual fixed and variable operation and maintenance (O&M) costs are
characterized as follows:
- The 19 member operational staff is the primary component of fixed
O&M cost.
- The variable O&M costs consist primarily of water usage and
discharge chemicals, equipment repairs and maintenance, consumable
equipment parts, and other expenses bought through purchase orders
and open Purchase orders.
Since an increase in staff size is unlikely, we do not anticipate a
substantial increase in fixed O&M costs other than those increases due to the
inflation rate. The maintenance budget should escalate at a slightly higher
rate than inflation due to the increasing age of the facility. As the plant
ages, an increasing amount of small consumables will be needed to repair and
replace worn-out components.
As is the case with any power facility, unexpected repairs are needed. Panda
has experienced these "extraordinary" events during the past few years with
the HRSG tube leaks and transformer bushing failures. These past
"extraordinary" events have been identified and an estimated dollar amount has
been assumed. This amount, it is assumed, would escalate with inflation.
Panda's actual expenditures have historically tracked budgeted expenditures
very closely. The 1996 budget was very similar to actual 1995 expenditures
on a total cost basis.
MAJOR MAINTENANCE PROGRAMS AND COSTS
The maintenance staff at Panda is doing an excellent job of maintaining the
major pieces of rotating equipment. In many cases, the inspections are being
done at more frequent intervals than are required by the manufacturers, but
in all cases the minimum manufacturers maintenance schedules are followed.
Panda plans to continue the same inspection interval policies as evidenced
by their ten year maintenance plan. The ten year plan charts the planned
maintenance on all the major equipment until 2005.
The Project maintains a Major Maintenance Overhaul Reserve to fund equipment
overhaul costs. As indicated in Table V-1 presented previously in the
report, Panda plans for combustion inspections of the combustion turbines at a
8,000 factored hours interval, hot gas path inspections at a 24,000 factored
hours interval, and major overhauls for the Frame 6 unit at 48,000 factored
hours and 40,000 factored hours for the Frame 7 unit. Panda also schedules
periodic limited and major overhauls of the steam turbine. As noted
previously, Panda plans to meet or exceed the manufacturer's recommended
maintenance overhauls for the major equipment. Burns & McDonnell has reviewed
the current ten year maintenance plan as well as a long-term forecast of
overhaul schedules and costs. Burns & McDonnell has concluded that Panda
has appropriately planned for maintenance overhauls and the costs of the
overhauls can be met with a hourly dispatch overhaul allowance of $260 per
fired hour. This is slightly higher than the current overhaul allowance of
$220 per hour.
EQUIPMENT REPLACEMENT PROVISIONS
Since maintenance and repairs on the No. 2 chiller have been unable to restore
its capacity to the original design, plans are being made for its replacement.
Auxiliary boilers typically have a life of 25-30 years. The auxiliary boiler
at the Project is operated a large number of hours but typically operates at
less than full load. The boilers also operate on gas fuel which is easier on
the equipment than heavier fuel oils. The boilers should last 30 years,
assuming similar modes of operation and proper water chemistry practices are
followed.
Assuming the recommended maintenance activities are performed as scheduled,
the combustion turbines and steam turbines are likely to last the entire
40 year economic life of the Project. Hence, no provisions need to be made
for their replacement.
OVERALL ECONOMIC LIFE
The financial projections included in this report assume the Project will
remain in operation well beyond the term of the PPA. Burns & McDonnell has
evaluated the Project and combined cycle/combustion turbine technology as a
whole and concluded this is a reasonable assumption in the event the Project
is continuously upgraded and maintained throughout the operating life of the
Project.
Additional repairs and maintenance allowances have been included in the
Project financial projections to account for future upgrades and maintenance
that may be required to extend the economic life of the Project beyond the
expiration date of the Power Purchase Agreement. Burns & McDonnell has
concluded these allowances are reasonable. The repairs and maintenance
allowances included in the financial projections include the following:
- General Maintenance and Repairs - This allowance in the annual
Project budget accounts for normal maintenance activities required
to keep the Project functioning on a dayto-day basis. Normal parts
replacement and repairs to equipment is included in this allowance.
The allowance was prepared using historic data escalated at an
accelerated rate of eight percent annually to account for the fact
that as the plant ages, additional repairs and maintenance will be
required. The compounding effect of this accelerated escalation
rate is intended to address the potential need in the future to
perform any upgrades or maintenance activities that may be required
to extend the economic life of the Project.
- Planned Plant Maintenance Projects - These costs represent regularly-
scheduled maintenance activities on the major pieces of equipment
including both combustion turbines and the steam turbine. The
overhaul allowance to fund these planned maintenance costs has been
calculated using the projected Project dispatch hours to estimate
the frequency of regularly-scheduled maintenance activities based
upon the manufacturers' recommendations. Key examples of
maintenance activities included in this allowance are combustion
turbine hot gas path inspections and major overhauls for the
combustion turbines and steam turbine.
- Additional Maintenance Allowance - This allowance has been included
to account for unplanned, medium-to large-scaled maintenance
activities that are required due to unforeseeable events. Typically,
during the first five-year "shake-out" period of a project, a fairly
high number of these maintenance activities are required. After the
shakeout period, far fewer unplanned maintenance activities are
required until the equipment becomes old enough that components begin
to show substantial signs of wear (after about twenty years). This
allowance was calculated using historic costs during the first five
years escalated at the rate of inflation.
To assess the economic life of the Project, Burns & McDonnell has evaluated
each of the major components of the Project as described below.
Steam Turbine Rankine Cycle
Based upon past operating experience within the electric power generation
industry, it is Burns & McDonnell's professional opinion that if the Project
continues to be appropriately maintained, the steam turbine and balance of
plant equipment should have an operating life well beyond the term of the PPA.
We base this conclusion primarily upon past experience with similar steam
turbine cycles that have received proper maintenance.
Combustion Turbines Brayton Cycle
Combustion turbine technology has been commercially available for power
generation for about thirty years. As a result, we are unable to refer to a
significant number of combustion turbines that, with good maintenance
practices, have historically operated for forty years or more. The
combustion turbines should therefore be of primary concern in assessing the
remaining life of the Project.
Panda plans to continue to maintain the Project in accordance with
recommendations by the major equipment manufacturers. The combustion turbine
manufacturer, General Electric, has developed their recommended maintenance
procedures based upon the operating experience of the entire General Electric
combustion turbine fleet. Based upon past experience with this fleet, General
Electric recommends periodic inspection and, as required, replacement of
combustion turbine components. Generally speaking, the components covered by
these recommended maintenance activities include those components that are in
direct contact with the gas path. This includes all blades for the compressor
and power turbine, combustion nozzles, combustor liners, transition pieces and
related parts.
The philosophy behind these periodic inspections is to identify and repair or
replace damaged components before they have the chance to break-off and
potentially cause additional downstream damage to other internal components.
However, due to the relatively recent commercialization of combustion turbine
technology, it is not possible to use historic information to determine if
these and other components will eventually need to be replaced due to
long-term metal fatigue.
Regardless, combustion turbines are fabricated using numerous components, each
of which can be epaired or replaced. Some components are more difficult and
expensive than others to replace. For example, the "wheels" which are bolted
together to form the rotor shaft, are designed to remain in service for the
life of the equipment. While we know of very few cases where it has been
necessary to actually replace the wheels of a combustion turbine, it can be
done if required over time due to metal fatigue.
But even a worst-case scenario resulting in the need in the future to replace
certain components originally designed for the life or the equipment would not
result in the combustion turbine reaching the end of it's operating life.
Notwithstanding a catastrophic failure requiring replacement of the casing,
each combustion turbine component, including the rotor shaft, is replaceable.
PART VII
FINANCIAL ASSESSMENT OF PROJECT
POWER PURCHASE AGREEMENT
Panda's existing Power Purchase Agreement (PPA) with VEPCO has a remaining
term of 20 years, until December 27, 2015. The PPA can be extended for
additional periods if both parties agree. The existing PPA provides for fixed
capacity payments subject to capacity and availability requirements, and energy
payments based on fuel prices, variable operation and maintenance expenses,
and the Project's dispatch. VEPCO retains the right to dispatch the Project
based on relative economic dispatch criteria, subject to specified operating
limitations.
FACTORS AFFECTING PROJECT
The primary factors influencing the value of the Project include the following
and are discussed below:
- Effective Operating Service Life of the Project
- Expected Rates for Capacity and Energy
- Expected Dispatch of the Project
- Expected Operating Performance of the Project
- Expected Fuel Costs
Effective Operating Service Life of the Project
Burns & McDonnell has concluded the Project will ave an expected operating
service life well beyond the term of the PPA if properly operated and
maintained, consistent with current practices.
Expected Rates for Capacity and Energy
The Project's capacity payments are fixed by the existing PPA and are only
adjusted if the Project's demonstrated capacity changes. The contract
capacity payments for the remainder of the PPA term are presented in Table
VII-1 and illustrated graphically in Figure VII-1.
Energy charges under the existing PPA are based on the delivered cost of fuel
and the Project's variable operation and maintenance expenses. The forecasted
value of energy sales under the current PPA as estimated by ICF are presented
in Table VII-2 and illustrated graphically in Figure VII-2. The forecasted
value of energy sales under the current PPA are based on a fuel cost forecast
prepared by ICF.
TABLE VII-1
CONTRACTUAL CAPACITY CHARGES
Panda-Rosemary Cogeneration Project
Year Capacity Charge
------- -----------------
($/kW-month)
1996 [1] 12.49
1997 11.65
1998 11.65
2000 10.82
2001 10.82
2002 10.82
2003 10.82
2004 10.82
2005 10.82
2006 8.32
2007 8.32
2008 8.32
2009 8.32
2010 8.32
2011 8.32
2012 8.32
2013 8.32
2014 8.32
2015 8.32
[1] Capacity payments through 2015 are contractually
established by the PPA.
FIGURE VII-1
CONTRACTUAL CAPACITY CHARGES
Panda-Rosemary Cogeneration Project
LINE CHART
<TABLE>
<CAPTION>
TABLE VII-2
SUMMER AND WINTER GAS ENERGY CHARGES
Panda-Rosemary Cogeneration Project
Summer Winter
Year Energy Charge Energy Charge
------- -------------- --------------
($/kWh) ($/kWh)
<S> <C> <C>
1996 [1] 0.0231 0.0288
1997 0.0233 0.0293
1998 0.0237 0.0297
1999 0.0240 0.0300
2000 0.0245 0.0304
2001 0.0254 0.0317
2002 0.0264 0.0331
2003 0.0276 0.0345
2004 0.0288 0.0359
2005 0.0300 0.0373
2006 0.0320 0.0397
2007 0.0340 0.0421
2008 0.0362 0.0446
2009 0.0386 0.0475
2010 0.0411 0.0504
2011 0.0433 0.0530
2012 0.0455 0.0558
2013 0.0479 0.0588
2014 0.0505 0.0616
2015 0.0532 0.0647
</TABLE>
[1] Summer and Winter gas energy charges under the PPA term
based cost of delivered fuel and variable operation
and maintenance expenditures. Delivered fuel cost forecast
prepared by ICF.
FIGURE VII-2
SUMMER & WINTER
GAS ENERGY CHARGES
Panda-Rosemary Cogeneration Project
LINE CHART
Expected Dispatch of the Project
VEPCO controls the dispatch of the Project under the terms of the existing
PPA. urrently, VEPCO uses the Project to meet peak and intermediate capacity
and energy requirements based on economic dispatch of its generation and
power supply resources. The expected dispatch for the remainder of the PPA
term are presented in Table VII-3 and illustrated graphically in Figure
VII-3 as estimated by ICF.
Zero Dispatch Case
To illustrate the ability to repay debt service under the most extreme
dispatch case, a Project pro forma analysis has been prepared under a zero
dispatch scenario, meaning it has been assumed that the Project is mothballed
with no dispatch over the remaining life of the PPA. Although extremely
unlikely, based on recent dispatch history and also based on the ICF forecast
of dispatch for the Project, the ability to pay debt service under this zero
dispatch case is illustrated in this scenario and demonstrates strong
coverages of debt service over the remainder of the PPA.
Certain operating assumptions consistent with mothballing the Project under
this zero dispatch case have been made including: release of turbine overhaul
reserves, release of gas transmission capacity and reduction in staff
associated with reduced operations of the Project. There is no reason to
believe the zero dispatch case is likely to materialize for the Project,
especially in light of the Project's recent performance, forecasted demand
growth in VEPCO system requirements, and the Project's competitive heat rate.
The pro forma analysis associated with this case was prepared as an
illustration of the Project's ability to repay Project debt in the most
unlikely dispatch case.
Expected Operating Performance
The expected operating performance of the Project under the long-term dispatch
forecast presented in Table VII-3 is dependent upon the following factors
discussed below:
- Project Capacity
- Project Heat Rate
- Project Fixed Operating Costs
- Project Variable Operation and Maintenance Costs
- Project Overhaul Requirements
- Project Steam/Chilled Water Sales and Costs
<TABLE>
<CAPTION>
TABLE VII-3
DISPATCH ASSUMPTIONS [1]
Panda-Rosemary Cogeneration Project
Summer Winter Gas Winter Oil VEPCO Gas Total
Dispatch Dispatch Dispatch Dispatch Dispatch
Year Hours Hours Hours Hours [2] Hours Percent
- ---- --------- ---------- ---------- ----------- ----------- ---------
%
<S> <C> <C> <C> <C> <C> <C>
1996[3] 674 3 0 400 1077 12.29%
1997 625 119 0 400 1144 13.06%
1998 918 219 0 500 1637 18.69%
1999 1201 210 0 500 2030 23.17%
2000 1463 248 15 500 2326 26.55%
2001 1715 276 30 500 2621 29.92%
2002 1887 480 48 500 2915 33.28%
2003 2077 601 76 500 3354 38.29%
2004 2285 742 122 600 3749 42.80%
2005 2513 908 195 600 4216 48.13%
2006 2418 763 185 600 3966 45.27%
2007 2327 642 175 600 3744 42.74%
2008 2239 539 166 600 3544 40.46%
2009 2155 452 157 600 3364 38.40%
2010 2073 379 149 600 3201 36.54%
2011 2000 429 147 600 3176 36.26%
2012 1929 485 144 600 3158 36.05%
2013 1861 548 142 600 3151 35.97%
2014 1794 619 140 600 3153 35.99%
2015 1729 698 138 600 3165 36.13%
</TABLE>
[1] Equivalent full load dispatch hours.
[2] VEPCO gas dispatch assumptions provided by Panda.
[3] Forecast of equivalent full dispatch hours prepared by ICF.
FIGURE VII-3
DISPATCH ASSUMPTIONS
Panda-Rosemary Cogeneration Project
BAR CHART
Project Capacity: The Project's demonstrated capacity directly impacts the
capacity charge revenues contracted in the PPA. The current capacity charges
under the existing PPA are based on a net summer capacity of 165 MW and a net
winter capacity of 198 MW. The Project may be tested twice per year at
VEPCO's discretion to demonstrate its dependable capacity. The capacity
charges will be adjusted through liquidated damage payments if the Project
fails to demonstrate a net capacity output within 10 percent of the 150 MW
summer and 180 MW winter capacity levels initially contracted with VEPCO in
the PPA. Demonstrated capacity output between the minimum capacity
requirements and a maximum capacity output level equal to 110 percent of the
initial contract levels determine the capacity payments made by VEPCO during
the corresponding summer or winter period. If the demonstrated capacity of
the Project exceeds the maximum capacity levels of 165 MW in the summer and
198 MW in the winter, which represent 110 percent of the initial levels,
VEPCO is not required to pay additional capacity charges. The Project has
demonstrated summer and winter capacity output in excess of the 110 percent
limits for the last three years consecutively.
As the Project ages during the term of the PPA, the expected capacity output
will degrade in the periods between major overhauls of the combustion turbines
and steam turbine. Major overhauls of this equipment can restore the expected
capacity output to near-original levels. The Project's historical capacity
tests and capacity degradation issues were discussed in Part VI of the Report.
As noted, the Project has demonstrated summer and winter capacity output in
excess of the 110 percent limits for the last three years consecutively.
During this time period, the Project has not yet undergone amajor overhaul of
the combustion turbines and steam turbine. The first major overhaul of the
combustion turbines is scheduled for 2002. Therefore, Burns & McDonnell
concludes it is reasonable to expect that the Project can maintain the
demonstrated capacity levels at the 110 percent maximum capacity limits of the
PPA throughout the remainder of the PPA term with adequately scheduled and
completed major overhauls.
Project Heat Rate: The Project's heat rate performance directly impacts the
annual fuel costs incurred in meeting the dispatch requirements of VEPCO.
During the term of the PPA, the Project's energy payments are based on a
contract average annual heat rate of 8900 Btu/kWh, irrespective of actual heat
rate performance. If the Project exceeds the contracted heat rate
performance, the additional fuel costs are absorbed by Panda. Conversely,
improved heat rate performance directly increases Panda's margin on energy
charges.
The Project's actual heat rate performance was reviewed in Part VI of the
Report. Historically, the Project has not been able to achieve the average
annual heat rate performance of 8900 Btu/kWh, but can achieve this target
under steady-state, full load operating conditions. The specific issues
related to the Project's heat rate performance and heat rate degradation were
reviewed in Part VI of the Report.
As the Project ages during the term of the PPA, the expected heat rate
performance will also degrade in the periods between major overhauls of the
combustion turbines and steam turbine. Major overhauls of this equipment can
restore the expected heat rate performance to near original levels. The
Project has not yet undergone a major overhaul of the combustion turbines
and steam turbine. The first major overhaul of the combustion turbines is
scheduled for 2002. Burns & McDonnell has estimated the Project can maintain
an average annual electrical heat rate performance of 9100 Btu/kWh throughout
the remainder of the PPA term with adequately scheduled and completed major
overhauls.
Project Fixed Operating Costs: The Project's fixed operating costs are
generally incurred independent of the dispatch of the Project. The major
cost items include fixed fuel transportation and management services, costs
for the Project's third-party operation and maintenance contract currently
provided by University Technical Services, annual recurring maintenance and
repair costs, property taxes, insurance, administration and office costs, and
Panda's management fee. Panda provided the actual fixed operating costs in
1995, the 1996 budget, and a forecast of fixed operating costs for the
remainder of the PPA term. Burns & McDonnell reviewed the actual and
projected fixed operating costs for reasonableness and concluded the expense
projections appear adequate to account for these cost items.
The fixed operating cost forecast reflects an annual 3.0 percent escalation
for most cost components. The exceptions include property taxes, Project
maintenance costs, the Panda management fee, and firm gas transportation
costs. The property tax cost estimate is decreased 3.0 percent annually
to reflect a declining asset value. The general maintenance and repair cost
component of Project maintenance costs is escalated at an 8.0 percent annual
rate to provide a conservative allowance that the increased age of the Project
will require additional maintenance and repair expenditures over time. The
additional maintenance allowance component of Project maintenance costs is
held constant throughout the planning period. In addition, Panda will
subordinate the management fee of $480,000 annually to all other Project
operating, debt, and capital costs. Therefore, the Panda management fee has
been removed from the Project fixed operating cost forecast.
The Project's firm gas transportation costs are based on 3075 MMBtu/d firm
capacity of which 1200 MMBtu/d is currently utilized on an average annual
basis. Historically, Panda's firm transportation agreement with Transco did
not permit capacity releases. By August 1996, Panda expects to convert its
existing FTNT transportation agreement to a new FT agreement that would permit
Panda to release pipeline transportation capacity when not required by the
Project. In addition, Panda expects to bundle excess pipeline capacity with
gas purchases and sell this bundled product to recapture firm gas
transportation costs. The benefits of capacity release and bundled capacity
and gas sales are estimated to result in a 50.0% return of firm gas
transportation costs for 1800 MMBtu/d of Panda's contracted capacity of 3075
MMBtu/d. This reduction in firm gas transportation costs as estimated by
Panda has been reflected in the economic analysis by Burns & McDonnell
beginning in August 1996.
Project Variable Operation and Maintenance Expenses: The Project's variable
operation and maintenance (O&M) expenses vary directly with the dispatch of
the project and consist of electricity usage when the Project is not
dispatched, water and chemical costs, and water discharge costs. Panda
provided the actual variable O&M expenses in 1995 and a forecast of variable
O&M expenses for the remainder of the PPA term. Burns & McDonnell reviewed
the actual and projected variable O&M expenses for reasonableness and
concluded the expense projections appear adequate to account for these cost
items. The variable O&M expense forecast is based on the projected dispatch
of the Project and also reflects an annual 3.0 percent escalation of costs.
Project Overhaul Requirements: Currently, Panda provides for an overhaul
allowance of $220 for each fired hour of the Project. As noted in Part VI,
Burns & McDonnell believes the Panda maintenance staff is doing an excellent
job of maintaining the major equipment. Inspections have been done and are
planned to be done at more frequent intervals than required by the
manufacturers. Burns & McDonnell has reviewed the 10 year maintenance plan
and the long-term scheduling of the major overhauls for the combustion
turbines. Burns & McDonnell concludes that the maintenance plan and overhaul
schedule are prudent, and that the budgeted costs are reasonable. Burns &
McDonnell recommends that the overhaul allowance be slightly increased to
$260 per fired hour to cover all overhaul costs in the future.
Project Steam/Chilled Water Sales and Costs: Currently, Panda provides both
steam and chilled water to its thermal host, the Bibb Company, to maintain QF
status under PURPA. However, due to the Project's low dispatch requirements,
the thermal loads for the Bibb Company are mainly met from the operation of
auxiliary boilers. The current steam and chilled water pricing in the
Cogeneration Energy Supply Agreement provides the Bibb Company with a
significant discount on the production costs of the thermal energy. Panda
currently absorbs an annual operating loss on the sale of steam and chilled
water to the Bibb Company. The pro forma assumes this will continue
throughout the life of the Project.
Expected Fuel Costs
As noted, energy charges under the existing PPA are based on the delivered
cost of fuel and the Project's variable operation and maintenance expenses.
A long-term fuel cost forecast was prepared for Panda by ICF. The forecast
of seasonal delivered fuel costs under the current PPA as estimated by ICF
are presented in Table VII-4 and illustrated graphically in Figure VII-4.
The forecasted fuel costs under the current PPA term were directly used to
determine the resulting energy charges presented in Table VII-2.
<TABLE>
<CAPTION>
TABLE VII-4
FUEL COST ASSUMPTIONS
Panda-Rosemary Cogeneration Project
Summer Winter Winter
Year Gas Cost Gas Cost Oil Cost
------ ---------- ---------- ----------
($/MMBtu) ($/MMBtu) ($/MMBtu)
<S> <C> <C> <C>
1996 [1] $2.26 $2.92 $3.82
1997 $2.28 $2.97 $3.96
1998 $2.31 $3.00 $4.10
1999 $2.34 $3.03 $4.25
2000 $2.38 $3.07 $4.40
2001 $2.47 $3.20 $4.43
2002 $2.57 $3.35 $4.46
2003 $2.69 $3.48 $4.48
2004 $2.81 $3.63 $4.51
2005 $2.94 $3.78 $4.54
2006 $3.14 $4.03 $4.59
2007 $3.35 $4.29 $4.64
2008 $3.57 $4.55 $4.70
2009 $3.82 $4.85 $4.76
2010 $4.08 $5.16 $4.82
2011 $4.31 $5.44 $4.87
2012 $4.54 $5.74 $4.93
2013 $4.78 $6.06 $5.00
2014 $5.05 $6.35 $5.06
2015 $5.33 $6.68 $5.12
</TABLE>
[1] Fuel cost forecast prepared by ICF.
FIGURE VII-4
FUEL COST ASSUMPTIONS
Panda-Rosemary Cogeneration Project
LINE CHART
CONCLUSION
Table VII-5 presents a summary of the forecasted revenues and expenditures,
and debt coverage ratios of the Project. The summary information was taken
from a detailed economic model which is included in Exhibit A of this Report.
Table VII-6 presents a summary of the forecasted revenues and expenditures,
and debt coverage ratios of the Project with the zero dispatch scenario. The
summary information was taken from a detailed economic model which is
included in Exhibit B of this Report.
Table VII-5 indicates the Project is expected to maintain strong debt coverage
ratios throughout the twenty-year debt repayment period under the dispatch
forecast presented in Table VII-4. Table VII-6 further indicates that the
Project can also maintain adequate debt coverage ratios under an extreme zero
dispatch scenario. This is due to the Project's fixed capacity revenues
which will provide adequate revenues for the Project irrespective of dispatch
operations.
STATEMENT OF LIMITING CONDITIONS
The conclusion stated above is subject to the following limiting conditions:
- In preparation of this Report, Burns & McDonnell has relied on
operating and financial information provided by Panda and its
consultants. While we have no reason to believe that the
information provided to Burns & McDonnell by Panda and its
consultants, and upon which we have relied, is inaccurate in any
material respect, Burns & McDonnell has not independently verified
such information and cannot guarantee its accuracy or
completeness.
- This Report is prepared on the assumption that all contracts and
agreements, specifically the Power Purchase Agreement, the
Cogeneration Energy Supply Agreement, the Gas Supply Agreement,
the Fuel Supply Management Agreement, and the Gas Transportation
Agreements, as well as all statutes, regulations, rules and
permits under which the Project is currently operating will be
fully enforceable in accordance with all provisions and conditions
throughout the duration of their term. Burns & McDonnell makes no
representations or warranties and provides no opinion concerning
the enforceability or legal interpretation of such contractual,
regulatory, or legal requirements.
In addition, in preparation of this Report and the opinions expressed herein,
Burns & McDonnell has made certain assumptions with respect to conditions
which may exist in the future. While we believe the assumptions made are
reasonable for the purposes of this Report, Burns & McDonnell makes no
representation that the conditions assumed will, in fact, occur. To the
extent future conditions differ from those assumed herein or from estimates
and information provided by Panda and its consultants, the actual results
will vary from those projected.
<TABLE>
<CAPTION>
TABLE VII-5
SUMMARY OF PROJECT DEBT COVERAGE RATIOS
Panda-Rosemary Cogeneration Project
Pre-Tax Total Debt Debt
Total Total Operating Service Coverage
Year Revenues Expenses Cashflow Cost Ratio
------ ---------- ---------- ------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
7/96-12/96 [1] $15,633,000 $ 4,731,000 $10,902,000 $ 7,928,000 1.38
1997 $30,151,000 $ 9,976,000 $20,175,000 $14,694,000 1.37
1998 $32,288,000 $11,567,000 $20,721,000 $14,627,000 1.42
1999 $32,670,000 $13,190,000 $19,480,000 $13,314,000 1.46
2000 $34,377,000 $14,542,000 $19,835,000 $13,242,000 1.50
2001 $36,189,000 $16,127,000 $20,062,000 $13,164,000 1.52
2002 $38,456,000 $18,009,000 $20,447,000 $13,058,000 1.57
2003 $41,244,000 $20,268,000 $20,976,000 $12,943,000 1.62
2004 $44,549,000 $23,032,000 $21,517,000 $12,825,000 1.68
2005 $48,512,000 $26,433,000 $22,079,000 $12,669,000 1.74
2006 $42,050,000 $26,334,000 $15,716,000 $ 8,710,000 1.80
2007 $41,179,000 $26,320,000 $14,859,000 $ 8,534,000 1.74
2008 $41,128,000 $26,356,000 $14,772,000 $ 8,352,000 1.77
2009 $40,751,000 $26,524,000 $14,227,000 $ 8,154,000 1.74
2010 $40,429,000 $26,746,000 $13,683,000 $ 7,946,000 1.72
2011 $41,487,000 $27,927,000 $13,560,000 $ 7,772,000 1.74
2012 $42,623,000 $29,252,000 $13,371,000 $ 7,565,000 1.77
2013 $43,969,000 $30,732,000 $13,237,000 $ 7,328,000 1.81
2014 $45,459,000 $32,403,000 $13,056,000 $ 7,042,000 1.85
2015 $47,137,000 $34,288,000 $12,849,000 $ 6,356,000 2.02
</TABLE>
Average coverage over the term of the Bonds is 1.66:1.
[1] Reflects one-half year of operations following the planned debt
refinancing in July 1996.
<TABLE>
<CAPTION>
TABLE VII-6
SUMMARY OF PROJECT DEBT COVERAGE RATIOS
ZERO DISPATCH OPTION
Panda-Rosemary Cogeneration Project
Pre-Tax Total Debt
Total Total Operating Debt Service Coverage
Year Revenues Expenses Cashflow Costs Ratio
- ------- ---------- ---------- ---------- ------------- --------
<S> <C> <C> <C> <C> <C>
7/96-12/96 [1] $14,088,500 $2,748,500 $11,340,000 $ 7,928,000 1.43
1997 $26,343,000 $5,497,000 $20,846,000 $14,694,000 1.42
1998 $26,326,000 $5,553,000 $20,773,000 $14,627,000 1.42
1999 $24,494,000 $5,598,000 $18,896,000 $13,314,000 1.42
2000 $24,493,000 $5,689,000 $18,804,000 $13,242,000 1.42
2001 $24,512,000 $5,799,000 $18,713,000 $13,164,000 1.42
2002 $24,509,000 $5,928,000 $18,581,000 $13,058,000 1.42
2003 $24,507,000 $6,064,000 $18,443,000 $12,943,000 1.42
2004 $24,504,000 $6,205,000 $18,299,000 $12,825,000 1.43
2005 $24,451,000 $6,355,000 $18,096,000 $12,669,000 1.43
2006 $18,973,000 $6,572,000 $12,401,000 $ 8,710,000 1.42
2007 $18,969,000 $6,806,000 $12,163,000 $ 8,534,000 1.74
2008 $18,964,000 $7,045,000 $11,919,000 $ 8,352,000 1.43
2009 $18,959,000 $7,308,000 $11,651,000 $ 8,154,000 1.43
2010 $18,955,000 $7,585,000 $11,370,000 $ 7,946,000 1.43
2011 $18,970,000 $7,830,000 $11,140,000 $ 7,772,000 1.43
2012 $18,965,000 $8,108,000 $10,861,000 $ 7,565,000 1.43
2013 $18,959,000 $8,375,000 $10,584,000 $ 7,328,000 1.44
2014 $18,943,000 $8,673,000 $10,270,000 $ 7,042,000 1.44
2015 $18,853,000 $8,983,000 $ 9,870,000 $ 6,356,000 1.55
</TABLE>
[1] Reflects one-half year of operations following the planned debt
refinancing in July 1996.
PART VIII
CONCLUSIONS
This report summarizes Burns & McDonnell's efforts to assess the condition,
operating history, and pro forma operating projections of the 180-MW Panda-
Rosemary cogeneration project operating in Roanoke Rapids, North Carolina.
These efforts have been performed on behalf of potential Project investors.
PROJECT CONDITION
Overall, the Project is in very good condition. The Project has a competent,
conscientious operation and maintenance staff that has developed a long-term
Project maintenance program that is consistent with manufacturer's
recommendations and generally-accepted practices within the electric power
generation industry. Burns & McDonnell knows of no significant technical
problems with the Project that should be of concern to potential investors.
Burns & McDonnell concludes that the Project would have an expected operating
service life well beyond the term of the PPA if properly operated and
maintained, consistent with current practices.
Respectfully submitted,
/s/ BURNS & MCDONNELL
-----------------------------------
<PAGE>
Exhibit A
Project Pro Forma
Burns & McDonnell
94-433-4-001 PANDA
Panda Energy Corporation
Alternative: Case with ICF Dispatch Projections
Panda-Rosemary Cogen Project Refinancing
File Name: CASEICF3.WK4
********************************************************************************
26-Jul-96 Page 1
11:43 AM
<PAGE>
OPERATING ASSUMPTIONS
Planning Period
Base Year: 1996
PPA Final Year: 2015
PPA Remaining Term: 20 years
Planning Period: 20 years
Rounding Precision: -3
<TABLE>
<CAPTION>
Capacity Assumptions
--------------------
Summer Summer Winter Winter
Demonstrated Capacity Contract Demonstrated Capacity Contract
Year Capacity Degradation Capacity Capacity Degradation Capacity
---- -------- ----------- -------- -------- ----------- --------
(MW) (%) (MW) (MW) (%) (MW)
<S> <C> <C> <C> <C> <C> <C>
1996 174.0 0.00% 165.0 198.0 0.00% 198.0
1997 174.0 0.00% 165.0 198.0 0.00% 198.0
1998 174.0 0.00% 165.0 198.0 0.00% 198.0
1999 174.0 0.00% 165.0 198.0 0.00% 198.0
2000 174.0 0.00% 165.0 198.0 0.00% 198.0
2001 174.0 0.00% 165.0 198.0 0.00% 198.0
2002 174.0 0.00% 165.0 198.0 0.00% 198.0
2003 174.0 0.00% 165.0 198.0 0.00% 198.0
2004 174.0 0.00% 165.0 198.0 0.00% 198.0
2005 174.0 0.00% 165.0 198.0 0.00% 198.0
2006 174.0 0.00% 165.0 198.0 0.00% 198.0
2007 174.0 0.00% 165.0 198.0 0.00% 198.0
2008 174.0 0.00% 165.0 198.0 0.00% 198.0
2009 174.0 0.00% 165.0 198.0 0.00% 198.0
2010 174.0 0.00% 165.0 198.0 0.00% 198.0
2011 174.0 0.00% 165.0 198.0 0.00% 198.0
2012 174.0 0.00% 165.0 198.0 0.00% 198.0
2013 174.0 0.00% 165.0 198.0 0.00% 198.0
2014 174.0 0.00% 165.0 198.0 0.00% 198.0
2015 174.0 0.00% 165.0 198.0 0.00% 198.0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Dispatch Assumptions
--------------------
Summer Gas Winter Gas Winter Oil VEPCO Gas Total
Dispatch Summer Dispatch Winter gas Dispatch Winter Gas Dispatch VEPCO Gas Dispatch
Year Hours(1) Output Hours(1) Output Hours(1) Output Hours(1)(2) Output Hours(1) Percent
- ---- -------- ------ -------- ------ -------- ------ ----------- ------ -------- -------
(MWh) (MWh) (MWh) (MWh) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 674 111,210 3 594 0 0 400 66,000 1077 12.29%
1997 625 103,125 119 23,562 0 0 400 66,000 1144 13.06%
1998 918 151,470 219 43,362 0 0 500 82,500 1637 18.69%
1999 1210 199,650 320 63,360 0 0 500 82,500 2030 23.17%
2000 1463 241,395 348 68,904 15 2,970 500 82,500 2326 26.55%
2001 1715 282,975 376 74,448 30 5,940 500 82,500 2621 29.92%
2002 1887 311,355 480 95,040 48 9,504 500 82,500 2915 33.28%
2003 2077 342,705 601 118,998 76 15,048 600 99,000 3354 38.29%
2004 2285 377,025 742 146,916 122 24,156 600 99,000 3749 42.80%
2005 2513 414,645 908 179,784 195 38,610 600 99,000 4216 48.13%
2006 2418 398,970 763 151,074 185 36,630 600 99,000 3966 45.27%
2007 2327 383,955 642 127,116 175 34,650 600 99,000 3744 42.74%
2008 2239 369,435 539 106,722 166 32,868 600 99,000 3544 40.46%
2009 2155 355,575 452 89,496 157 31,086 600 99,000 3364 38.40%
2010 2073 342,045 379 75,042 149 29,502 600 99,000 3201 36.54%
2011 2000 330,000 429 84,942 147 29,106 600 99,000 3176 36.26%
2012 1929 318,285 485 96,030 144 28,512 600 99,000 3158 36.05%
2013 1861 307,065 548 108,504 142 28,116 600 99,000 3151 35.97%
2014 1794 296,010 619 122,562 140 27,720 600 99,000 3153 35.99%
2015 1729 285,285 698 138,204 138 27,324 600 99,000 3165 36.13%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Electric Heat Assumptions(3) Aux. Boiler Steam/Chilled Water Assumptions
---------------------------- -------------------------------------------
Demonstrated Contract Steam C. Water Steam
Heat Heat Rate Heat Production Steam Production C. Water Heat
Year Rate Degradation Rate Hours Production Hours Production Requirement
- ---- ---- ----------- ---- ----- ---------- ----- ---------- -----------
(Btu/kWh) (%) (Btu/kWh) (pph) (ton-hr) (Btu/lb)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 8900 0.00% 8900 7800 50,000 4000 1010 1714
1997 8900 0.00% 8900 7800 50,000 4000 1010 1714
1998 8900 0.00% 8900 7800 50,000 4000 1010 1714
1999 8900 0.00% 8900 7800 50,000 4000 1010 1714
2000 8900 0.00% 8900 7800 50,000 4000 1010 1714
2001 8900 0.00% 8900 7800 50,000 4000 1010 1714
2002 8900 0.00% 8900 7800 50,000 4000 1010 1714
2003 8900 0.00% 8900 7800 50,000 4000 1010 1714
2004 8900 0.00% 8900 7800 50,000 4000 1010 1714
2005 8900 0.00% 8900 7800 50,000 4000 1010 1714
2006 8900 0.00% 8900 7800 50,000 4000 1010 1714
2007 8900 0.00% 8900 7800 50,000 4000 1010 1714
2008 8900 0.00% 8900 7800 50,000 4000 1010 1714
2009 8900 0.00% 8900 7800 50,000 4000 1010 1714
2010 8900 0.00% 8900 7800 50,000 4000 1010 1714
2011 8900 0.00% 8900 7800 50,000 4000 1010 1714
2012 8900 0.00% 8900 7800 50,000 4000 1010 1714
2013 8900 0.00% 8900 7800 50,000 4000 1010 1714
2014 8900 0.00% 8900 7800 50,000 4000 1010 1714
2015 8900 0.00% 8900 7800 50,000 4000 1010 1714
</TABLE>
(1) Dispatch hour forecast represents equivalent full load dispatch hours
incorporating planned and forced outage factors.
(2) VEPCO gas dispatch forecast during PPA term provided by Panda.
(3) Net electrical generation heat rate including credit from thermal
production.
<PAGE>
FUEL COST ASSUMPTIONS
Escalation 1996-2015 ICF Forecast
<TABLE>
<CAPTION>
Summer Gas Cost
---------------
SSG SGT SGT SGT SR1 SR2 SRX Summer Summer Summer
Gulf Spot Transco Panda NCG Transco NCNG Swing Gas Gas Gas Gas
Year Price IT Pipeline IT Mgt. Fee Retainage Retainage Retainage Charge Charge Cost Margin Margin
- ---- ----- -- ----------- -------- --------- --------- --------- ------ ------ ---- ------ ------
($/MMBtu) ($/MMBtu) ($/MMBtu) ($/MMBtu) (%) (%) (%) ($/MMBtu) ($/kWh) ($/MMBtu) ($/MMBtu) ($/kWh)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $1.79 $0.34 $0.26 $0.04 3.79% 2.00% 3.00% $2.59 $0.02307 $2.26 $0.33 $0.00297
1997 $1.81 $0.34 $0.27 $0.04 3.79% 2.00% 3.00% $2.62 $0.02335 $2.28 $0.34 $0.00304
1998 $1.84 $0.35 $0.27 $0.04 3.79% 2.00% 3.00% $2.66 $0.02372 $2.31 $0.35 $0.00312
1999 $1.85 $0.36 $0.28 $0.04 3.79% 2.00% 3.00% $2.69 $0.02398 $2.34 $0.36 $0.00320
2000 $1.88 $0.37 $0.29 $0.04 3.79% 2.00% 3.00% $2.75 $0.02447 $2.38 $0.37 $0.00329
2001 $1.96 $0.38 $0.30 $0.04 3.79% 2.00% 3.00% $2.86 $0.02542 $2.47 $0.38 $0.00339
2002 $2.05 $0.38 $0.31 $0.04 3.79% 2.00% 3.00% $2.97 $0.02642 $2.57 $0.39 $0.00351
2003 $2.15 $0.39 $0.32 $0.04 3.79% 2.00% 3.00% $3.10 $0.02757 $2.69 $0.41 $0.00363
2004 $2.26 $0.40 $0.33 $0.04 3.79% 2.00% 3.00% $3.23 $0.02877 $2.81 $0.42 $0.00375
2005 $2.37 $0.42 $0.34 $0.04 3.79% 2.00% 3.00% $3.37 $0.03001 $2.94 $0.44 $0.00388
2006 $2.55 $0.43 $0.35 $0.04 3.79% 2.00% 3.00% $3.59 $0.03198 $3.14 $0.45 $0.00404
2007 $2.75 $0.43 $0.36 $0.04 3.79% 2.00% 3.00% $3.83 $0.03404 $3.35 $0.47 $0.00421
2008 $2.95 $0.44 $0.37 $0.04 3.79% 2.00% 3.00% $4.07 $0.03620 $3.57 $0.49 $0.00438
2009 $3.18 $0.45 $0.38 $0.04 3.79% 2.00% 3.00% $4.34 $0.03859 $3.82 $0.51 $0.00456
2010 $3.41 $0.47 $0.39 $0.04 3.79% 2.00% 3.00% $4.62 $0.04110 $4.08 $0.53 $0.00475
2011 $3.61 $0.48 $0.40 $0.04 3.79% 2.00% 3.00% $4.86 $0.04326 $4.31 $0.55 $0.00493
2012 $3.83 $0.48 $0.41 $0.04 3.79% 2.00% 3.00% $5.11 $0.04552 $4.54 $0.58 $0.00512
2013 $4.05 $0.49 $0.43 $0.04 3.79% 2.00% 3.00% $5.38 $0.04787 $4.78 $0.60 $0.00531
2014 $4.30 $0.51 $0.44 $0.04 3.79% 2.00% 3.00% $5.67 $0.05048 $5.05 $0.62 $0.00552
2015 $4.55 $0.52 $0.45 $0.04 3.79% 2.00% 3.00% $5.98 $0.05321 $5.33 $0.64 $0.00573
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Winter Gas Cost
---------------
WSG Panda WGT WR1 WR2 WR2 WRX
Appala- WGT WGT Pipe- NGC Transco CNG NCNG Swing Gas Winter Winter Winter Winter
chian Transco CNG line Mgt. Retain- Retain- Retain- Retain- Gas Gas Gas Gas
Year Price IT IT IT Fee age age age age Charge Charge Cost Cost Margin Margin
- ---- ----- -- -- -- --- --- --- --- --- ------ ------ ---- ---- ------ ------
(------------$/MMBtu-------------) (%) (%) (%) (%) ($/MMBtu) ($/kWh)($/MMBtu) ($/kWh) ($/MMBtu) ($/kWh)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $2.28 $0.24 $0.21 $0.26 $0.04 1.97% 2.28% 2.00% 3.00% $3.23 $0.02878 $2.92 $0.02596 $0.31673 $0.00282
1997 $2.31 $0.24 $0.21 $0.27 $0.04 1.97% 2.28% 2.00% 3.00% $3.29 $0.02932 $2.97 $0.02642 $0.32541 $0.00290
1998 $2.34 $0.25 $0.21 $0.27 $0.04 1.97% 2.28% 2.00% 3.00% $3.33 $0.02967 $3.00 $0.02669 $0.33403 $0.00297
1999 $2.36 $0.25 $0.21 $0.28 $0.04 1.97% 2.28% 2.00% 3.00% $3.37 $0.03001 $3.03 $0.02695 $0.34288 $0.00305
2000 $2.39 $0.26 $0.22 $0.29 $0.04 1.97% 2.28% 2.00% 3.00% $3.42 $0.03044 $3.07 $0.02731 $0.35196 $0.00313
2001 $2.50 $0.26 $0.23 $0.30 $0.04 1.97% 2.28% 2.00% 3.00% $3.56 $0.03169 $3.20 $0.02846 $0.36345 $0.00323
2002 $2.62 $0.27 $0.23 $0.31 $0.04 1.97% 2.28% 2.00% 3.00% $3.72 $0.03311 $3.35 $0.02977 $0.37563 $0.00334
2003 $2.74 $0.28 $0.24 $0.32 $0.04 1.97% 2.28% 2.00% 3.00% $3.87 $0.03447 $3.48 $0.03102 $0.38789 $0.00345
2004 $2.86 $0.29 $0.25 $0.33 $0.04 1.97% 2.28% 2.00% 3.00% $4.03 $0.03587 $3.63 $0.03231 $0.40055 $0.00356
2005 $2.98 $0.30 $0.26 $0.34 $0.04 1.97% 2.28% 2.00% 3.00% $4.19 $0.03733 $3.78 $0.03365 $0.41361 $0.00368
2006 $3.21 $0.30 $0.25 $0.35 $0.04 1.97% 2.28% 2.00% 3.00% $4.46 $0.03967 $4.03 $0.03584 $0.42962 $0.00382
2007 $3.45 $0.30 $0.26 $0.36 $0.04 1.97% 2.28% 2.00% 3.00% $4.73 $0.04211 $4.29 $0.03814 $0.44622 $0.00397
2008 $3.69 $0.31 $0.26 $0.37 $0.04 1.97% 2.28% 2.00% 3.00% $5.02 $0.04465 $4.55 $0.04053 $0.46305 $0.00412
2009 $3.95 $0.32 $0.27 $0.38 $0.04 1.97% 2.28% 2.00% 3.00% $5.33 $0.04745 $4.85 $0.04317 $0.48088 $0.00428
2010 $4.22 $0.33 $0.28 $0.39 $0.04 1.97% 2.28% 2.00% 3.00% $5.66 $0.05038 $5.16 $0.04594 $0.49936 $0.00444
2011 $4.46 $0.34 $0.29 $0.40 $0.04 1.97% 2.28% 2.00% 3.00% $5.95 $0.05298 $5.44 $0.04838 $0.51726 $0.00460
2012 $4.73 $0.35 $0.30 $0.41 $0.04 1.97% 2.28% 2.00% 3.00% $6.27 $0.05585 $5.74 $0.05108 $0.53622 $0.00477
2013 $5.01 $0.36 $0.31 $0.43 $0.04 1.97% 2.28% 2.00% 3.00% $6.61 $0.05884 $6.06 $0.05389 $0.55585 $0.00495
2014 $5.28 $0.37 $0.30 $0.44 $0.04 1.97% 2.28% 2.00% 3.00% $6.93 $0.06163 $6.35 $0.05651 $0.57572 $0.00512
2015 $5.58 $0.36 $0.31 $0.45 $0.04 1.97% 2.28% 2.00% 3.00% $7.27 $0.06472 $6.68 $0.05941 $0.59675 $0.00531
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Winter Fuel Oil Cost
--------------------
Delivered Panda Winter Winter Winter
Fuel Oil Handling Oil Oil Fuel Oil Oil
Year Price Charge Charge Charge Usage Cost Margin Margin
- ---- ----- ------ ------ ------ ----- ---- ------ ------
($/MMBtu) ($/MMBtu) ($/MMBtu) ($/kWh) (%) ($/MMBtu) ($/MMBtu) ($/kWh)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $4.05 $0.10 $4.14 $0.03686 80.00% $3.82 $0.32219 $0.00287
1997 $4.21 $0.10 $4.31 $0.03833 80.00% $3.96 $0.34700 $0.00309
1998 $4.38 $0.10 $4.48 $0.03985 80.00% $4.10 $0.37759 $0.00336
1999 $4.55 $0.11 $4.66 $0.04144 80.00% $4.25 $0.40979 $0.00365
2000 $4.73 $0.11 $4.84 $0.04309 80.00% $4.40 $0.44134 $0.00393
2001 $4.73 $0.11 $4.84 $0.04309 80.00% $4.43 $0.41551 $0.00370
2002 $4.73 $0.11 $4.84 $0.04309 80.00% $4.46 $0.38604 $0.00344
2003 $4.73 $0.11 $4.84 $0.04309 80.00% $4.48 $0.35809 $0.00319
2004 $4.73 $0.11 $4.84 $0.04309 80.00% $4.51 $0.32905 $0.00293
2005 $4.73 $0.11 $4.84 $0.04309 80.00% $4.54 $0.29888 $0.00266
2006 $4.73 $0.11 $4.84 $0.04309 80.00% $4.59 $0.24961 $0.00222
2007 $4.73 $0.11 $4.84 $0.04309 80.00% $4.64 $0.19805 $0.00176
2008 $4.73 $0.11 $4.84 $0.04309 80.00% $4.70 $0.14432 $0.00128
2009 $4.73 $0.11 $4.84 $0.04309 80.00% $4.76 $0.08489 $0.00076
2010 $4.73 $0.11 $4.84 $0.04309 80.00% $4.82 $0.02271 $0.00020
2011 $4.73 $0.11 $4.84 $0.04309 80.00% $4.87 ($0.03204) ($0.00029)
2012 $4.73 $0.11 $4.84 $0.04309 80.00% $4.93 ($0.09269) ($0.00082)
2013 $4.73 $0.11 $4.84 $0.04309 80.00% $5.00 ($0.15601) ($0.00139)
2014 $4.73 $0.11 $4.84 $0.04309 80.00% $5.06 ($0.21484) ($0.00191)
2015 $4.73 $0.11 $4.84 $0.04309 80.00% $5.12 ($0.27998) ($0.00249)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VEPCO Gas Cost
--------------
MGT Panda VEPCO VEPCO Plant FA VEPCO VEPCO VEPCO VEPCO
Management Pipeline Gas Gas Variable NCNG Nomination Gas Nomination Gas
Year Fee Charge Charge Charge O&M Costs Retainage Fee Charge Fee Cost Margin
- ---- --- ------ ------ ------ --------- --------- --- ------ --- ---- ------
($/MMBtu) ($/MMBtu) ($/MMBtu) ($/kWh) ($/kWh) (%) ($/day) ($/kWh) ($/day) ($/kWh) ($/kWh)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $0.04 $0.13 $0.17 $0.00150 $0.00222 2.00% $ 7,500 $0.00391 $ 7,500 $0.00011 $0.00380
1997 $0.04 $0.13 $0.17 $0.00153 $0.00229 2.00% $ 7,500 $0.00402 $ 7,500 $0.00011 $0.00390
1998 $0.04 $0.14 $0.18 $0.00157 $0.00236 2.00% $ 9,375 $0.00412 $ 9,375 $0.00011 $0.00401
1999 $0.04 $0.14 $0.18 $0.00161 $0.00243 2.00% $ 9,375 $0.00423 $ 9,375 $0.00011 $0.00412
2000 $0.04 $0.14 $0.18 $0.00164 $0.00250 2.00% $ 9,375 $0.00434 $ 9,375 $0.00011 $0.00423
2001 $0.04 $0.14 $0.18 $0.00164 $0.00258 2.00% $ 9,375 $0.00442 $ 9,375 $0.00011 $0.00431
2002 $0.04 $0.14 $0.18 $0.00164 $0.00266 2.00% $ 9,375 $0.00450 $ 9,375 $0.00011 $0.00439
2003 $0.04 $0.14 $0.18 $0.00164 $0.00274 2.00% $11,250 $0.00458 $11,250 $0.00011 $0.00447
2004 $0.04 $0.14 $0.18 $0.00164 $0.00282 2.00% $11,250 $0.00466 $11,250 $0.00011 $0.00455
2005 $0.04 $0.14 $0.18 $0.00164 $0.00290 2.00% $11,250 $0.00475 $11,250 $0.00011 $0.00464
2006 $0.04 $0.14 $0.18 $0.00164 $0.00299 2.00% $11,250 $0.00484 $11,250 $0.00011 $0.00473
2007 $0.04 $0.14 $0.18 $0.00164 $0.00308 2.00% $11,250 $0.00493 $11,250 $0.00011 $0.00482
2008 $0.04 $0.14 $0.18 $0.00164 $0.00317 2.00% $11,250 $0.00503 $11,250 $0.00011 $0.00491
2009 $0.04 $0.14 $0.18 $0.00164 $0.00327 2.00% $11,250 $0.00512 $11,250 $0.00011 $0.00501
2010 $0.04 $0.14 $0.18 $0.00164 $0.00337 2.00% $11,250 $0.00522 $11,250 $0.00011 $0.00511
2011 $0.04 $0.14 $0.18 $0.00164 $0.00347 2.00% $11,250 $0.00533 $11,250 $0.00011 $0.00521
2012 $0.04 $0.14 $0.18 $0.00164 $0.00357 2.00% $11,250 $0.00543 $11,250 $0.00011 $0.00532
2013 $0.04 $0.14 $0.18 $0.00164 $0.00368 2.00% $11,250 $0.00554 $11,250 $0.00011 $0.00543
2014 $0.04 $0.14 $0.18 $0.00164 $0.00379 2.00% $11,250 $0.00565 $11,250 $0.00011 $0.00566
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Auxillary Boiler Steam/Chilled Water Fuel Cost
----------------------------------------------
Texas Steam Steam
Gulf Spot Transco GRI/ACA NCG Transco CNG Gas NCNG Gas Gas Steam
Year Price Commodity Surcharge Mgt. Fee Retainage Retainage Retainage Retainage Cost Cost Charge Margin
- ---- ----- --------- --------- -------- --------- --------- --------- --------- ---- ---- ------ ------
($/MMBtu) ($/MMBtu) ($/MMBtu) ($/MMBtu) (%) (%) (%) (%) ($/MMBtu) ($/klbs) ($/klbs) ($/klbs)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $1.79 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.05 $3.51 $1.15 ($2.36)
1997 $1.81 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.07 $3.55 $1.15 ($2.40)
1998 $1.84 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.10 $3.60 $1.15 ($2.45)
1999 $1.85 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.11 $3.62 $1.15 ($2.47)
2000 $1.88 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.15 $3.68 $1.15 ($2.53)
2001 $1.96 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.24 $3.83 $1.15 ($2.68)
2002 $2.05 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.34 $4.01 $1.15 ($2.86)
2003 $2.15 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.45 $4.20 $1.15 ($3.05)
2004 $2.26 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
2005 $2.37 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.68 $4.60 $1.15 ($3.45)
2006 $2.55 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
2007 $2.75 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $3.10 $5.32 $1.15 ($4.17)
2008 $2.95 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $3.32 $5.69 $1.15 ($4.54)
2009 $3.18 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $3.57 $6.12 $1.15 ($4.97)
2010 $3.41 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $3.83 $6.56 $1.15 ($5.41)
2011 $3.61 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $4.04 $6.93 $1.15 ($5.78)
2012 $3.83 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $4.29 $7.35 $1.15 ($6.20)
2013 $4.05 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $4.53 $7.76 $1.15 ($6.61)
2014 $4.30 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $4.79 $8.21 $1.15 ($7.06)
2015 $4.55 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $5.07 $8.69 $1.15 ($7.54)
</TABLE>
<PAGE>
PROJECT FINANCING ASSUMPTIONS
Equal
Financing Sources of Funds Annual
Refinancing Debt Service
----------- ------------
DEBT FINANCING:
First Mortage Bonds:
Percentage Financed 85.63%
Principal Amount $111,400,000 $11,879,000
Interest Rate 8.63%
Term 20.0
Years of Interest Only 0.0
Debt Service Reserve Fund
(% of Principal) 7.26%
Financing Fees 2.69%
Subordinate Debt A:
Percentage Financed 0.00%
Principal Amount $0 $0
Interest Rate 9.00%
Term 20.0
Years of Interest Only 0.0
Debt Service Reserve Fund
(% of Principal) 0.00%
Financing Fees 0.00%
OTHER FINANCING SOURCES:
Existing Debt Service
Reserve Fund $4,117,388
Existing Turbine Overhaul
Reserve $931,032
Existing Reimbursement
Obligation Account $8,247,605
Existing Pollution Control
Account $5,256,983
Existing Spare Parts
Account $113,737
Existing Revenue Account $27,763
-------
Total Other Financing
Sources $18,694,508
TOTAL SOURCES OF FUNDS $130,094,508
Financing Uses of Funds
REFINANCING COSTS::
Operating Account $868,226
Defeasance of Taxable Revenue
Bonds $103,209,600
PROJECT COSTS:
Pollution Control Reserve $5,256,983
Turbine Overhaul Reserve $942,632
FINANCING COSTS
Debt Service Reserve $8,090,714
Fees and Expenses $3,000,000
Partial Redemption of FMCC
Rosemary Interest $8,726,353
TOTAL USES OF FUNDS $130,094,508
<PAGE>
Custom Principal
Amortization Schedules
----------------------
First Mortgage Subordinate
Year Bonds Debt A
- ---- ----- ------
1996 2,752,798 0
2997 5,500,608 0
1998 5,992,178 0
1999 5,092,966 0
2000 5,472,948 0
2001 5,879,990 0
2002 6,293,568 0
2003 6,737,102 0
2004 7,215,320 0
2005 7,696,926 0
2006 4,292,216 0
2007 4,491,704 0
2008 4,704,828 0
2009 4,919,192 0
2010 5,142,758 0
2011 5,422,034 0
2012 5,691,114 0
2013 5,952,686 0
2014 6,188,248 0
2015 6,030,816 0
====================================
111,400,000
<PAGE>
<TABLE>
<CAPTION>
DEBT SERVICE CALCULATIONS 50.00%
1996 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Mortgage Bonds:
Beginning Balance 111,400,000 108,647,202 103,146,594 97,224,416 92,131,450 86,658,502 80,778,512 74,484,944
Interest 5,175,000 9,192,911 8,704,848 8,220,881 7,769,322 7,284,115 6,763,589 6,206,423
Principal 2,752,798 5,500,608 5,922,178 5,092,966 5,472,948 5,879,990 6,293,568 6,737,102
Debt Service 7,927,798 14,693,519 14,627,026 13,313,847 13,242,270 13,164,105 13,057,157 12,943,525
Ending Balance 108,647,202 103,146,594 97,224,416 92,131,450 86,658,502 80,778,512 74,484,944 67,747,842
Subordinated Debt A:
Beginning Balance 0 0 0 0 0 0 0 0
Interest 0 0 0 0 0 0 0 0
Principal 0 0 0 0 0 0 0 0
Debt Service 0 0 0 0 0 0 0 0
Ending Balance 0 0 0 0 0 0 0 0
TOTAL DEBT SERVICE
Interest 5,175,000 9,192,911 8,704,848 8,220,881 7,769,322 7,284,115 6,763,589 6,206,423
Principal 2,752,798 5,500,608 5,922,178 5,092,966 5,472,948 5,879,990 6,293,568 6,737,102
Debt Service 7,927,798 14,693,519 14,627,026 13,313,847 13,242,270 13,164,105 13,057,157 12,943,525
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
2004 2005 2006 2007 2008 2009 2010 2011
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Mortgage Bonds:
Beginning Balance 67,747,842 60,532,522 52,835,596 48,543,380 44,051,676 39,346,848 34,427,656 29,284,898
Interest 5,609,882 4,971,983 4,418,244 4,041,589 3,647,284 3,234,560 2,803,049 2,350,454
Principal 7,215,320 7,696,926 4,292,216 4,491,704 4,704,828 4,919,192 5,142,758 5,422,034
Debt Service 12,825,202 12,668,909 8,710,460 8,533,293 8,352,112 8,153,752 7,945,807 7,772,488
Ending Balance 60,532,522 52,835,596 48,543,380 44,051,676 39,346,848 34,427,656 29,284,898 23,862,864
Subordinated Debt A:
Beginning Balance 0 0 0 0 0 0 0 0
Interest 0 0 0 0 0 0 0 0
Principal 0 0 0 0 0 0 0 0
Debt Service 0 0 0 0 0 0 0 0
Ending Balance 0 0 0 0 0 0 0 0
TOTAL DEBT SERVICE
Interest 5,609,882 4,971,983 4,418,244 4,041,589 3,647,284 3,234,560 2,803,049 2,350,454
Principal 7,215,320 7,696,926 4,292,216 4,491,704 4,704,828 4,919,192 5,142,758 5,422,034
Debt Service 12,825,202 12,668,909 8,710,460 8,533,293 8,352,112 8,153,752 7,945,807 7,772,488
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
2012 2013 2014 2015
---- ---- ---- ----
<S> <C> <C> <C> <C>
First Mortgage Bonds:
Beginning Balance 23,862,864 18,171,750 12,219,064 6,030,816
Interest 1,874,100 1,374,781 853,744 325,100
Principal 5,691,114 5,952,686 6,188,248 6,030,816
--------- --------- --------- ---------
Debt Service 7,565,214 7,327,467 7,041,992 6,355,916
Ending Balance 18,171,750 12,219,064 6,030,816 0
Subordinated Debt A:
Beginning Balance 0 0 0 0
Interest 0 0 0 0
Principal 0 0 0 0
- - - -
Debt Service 0 0 0 0
Ending Balance 0 0 0 0
TOTAL DEBT SERVICE
Interest 1,874,100 1,374,781 853,744 325,100
Principal 5,691,114 5,952,686 6,188,248 6,030,816
--------- --------- --------- ---------
Debt Service 7,565,214 7,327,467 7,041,992 6,355,916
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FUEL COSTS
Dispatch Operations 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760 8,760 8,760 8,760
Summer & VEPCO Capacity 165.0 165.0 165.0 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0 198.0 198.0 198.0
Summer Dispatch 674 625 918 1,210 1,463 1,715 1,887
Winter Gas Dispatch 3 119 219 320 348 376 480
Winter Oil Dispatch 0 0 0 0 15 30 48
VEPCO Gas Dispatch 400 400 500 500 500 500 500
--- --- --- --- --- --- ---
Total Dispatch Hour 1,077 1,144 1,637 2,030 2,326 2,621 2,915
Percentage 12.29% 13.06% 18.69% 23.17% 26.55% 29.92% 33.28%
Winter Starts 0 3 5 8 9 9 12
Winter Start Duration 40 40 40 40 40 40 40
Net Generation
Availability Factor [1] 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Equivalent Load Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
[1] Equivalent full load dispatch hours from Dispatch Assumptions incorporate
planned outage and forced outage availability factors.
Summer Output MWh 111,210 103,125 151,470 199,650 241,395 282,975 311,355
Winter Gas Output MWh 594 23,562 43,362 63,360 68,904 74,448 95,040
Winter Oil Dispatch MWh 0 0 0 0 2,970 5,940 9,504
VEPCO Gas Dispatch MWh 66,000 66,000 82,500 82,500 82,500 82,500 82,500
------ ------ ------ ------ ------ ------ ------
Net Generation MWh 177,804 192,687 277,332 345,510 395,769 445,863 498,399
Fuel Usage - Electrical Generation
Net Electric
Heat Rate Btu/kWh 8900 8900 8900 8900 8900 8900 8900
Summer Gas Fuel MMBtu 989,769 917,813 1,348,083 1,776,885 2,148,416 2,518,478 2,771,060
Winter Gas Fuel MMBtu 5,287 209,702 385,922 563,904 613,246 662,587 845,856
Winter Oil Fuel MMBtu 0 0 0 0 26,433 52,866 84,586
VEPCO Gas Fuel MMBtu 587,400 587,400 734,250 734,250 734,250 734,250 734,250
------- ------- ------- ------- ------- ------- -------
Total Fuel MMBtu 1,582,456 1,714,914 2,468,255 3,075,039 3,522,344 3,968,181 4,435,751
Fuel Cost - Electrical Generation
Summer Gas Fuel $/MMBtu $2.26 $2.28 $2.31 $2.34 $2.38 $2.47 $2.57
Winter Gas Fuel $/MMBtu $2.92 $2.97 $3.00 $3.03 $3.07 $3.20 $3.35
Winter Oil Fuel $/MMBtu $3.82 $3.96 $4.10 $4.25 $4.40 $4.43 $4.46
VEPCO Gas Fuel $/kWh $0.00011 $0.00011 $0.00011 $0.00011 $0.00011 $0.00011 $0.00011
Summer Gas Fuel $ 2,236,000 2,094,000 3,120,000 4,149,000 5,113,000 6,233,000 7,134,000
Winter Gas Fuel $ 15,000 623,000 1,157,000 1,708,000 1,882,000 2,119,000 2,829,000
Winter Oil Fuel $ 0 0 0 0 116,000 234,000 377,000
VEPCO Gas Fuel $ 7,500 7,500 9,400 9,400 9,400 9,400 9,400
----- ----- ----- ----- ----- ----- -----
Total Fuel Cost $ 2,258,500 2,724,500 4,286,400 5,866,400 7,120,400 8,595,400 10,349,400
Total Fuel Costs - Cogen Plant
Summer Gas Fuel $ 2,236,000 2,094,000 3,120,000 4,149,000 5,113,000 6,233,000 7,134,000
Winter Gas Fuel $ 15,000 623,000 1,157,000 1,708,000 1,882,000 2,119,000 2,829,000
Winter Oil Fuel $ 0 0 0 0 116,000 234,000 377,000
VEPCO Gas Fuel $ 7,500 7,500 9,400 9,400 9,400 9,400 9,400
Fuel Usage - Thermal MMBtu 35,561 38,537 55,466 69,102 79,154 89,173 99,680
Fuel Cost - Thermal [2]$ 73,000 80,000 116,000 146,000 170,000 199,000 233,000
------ ------ ------- ------- ------- ------- -------
Total Fuel Costs -
Cogen Plant 2,332,000 2,805,000 4,402,000 6,012,000 7,290,000 8,794,000 10,582,000
Average Fuel Cost($/MMBtu) $1.44 $1.60 $1.74 $1.91 $2.02 $2.17 $2.33
Average Fuel Cost($/kWh) $0.0131 $0.0146 $0.0159 $0.0174 $0.0184 $0.0197 $0.0212
[2] Boiler fuel cost estimate below used to determine fuel cost allocation of
thermal production.
Steam/Chilled Water
Steam Production Hours 7,800 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production 4,000 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production Hours - Boiler 6,723 6,656 6,163 5,770 5,474 5,179 4,885
Chilled Water Production
Hours - Boil 2,923 2,856 2,363 1,970 1,689 1,409 1,133
Steam Fuel - Boiler MMBtu 576,161 570,419 528,169 494,489 469,122 443,840 418,645
C. Water Fuel - Boiler MMBtu 90,070 88,006 72,814 60,704 52,045 43,417 34,913
------ ------ ------ ------ ------ ------ ------
Total Boiler Fuel MMBtu 666,231 658,425 600,983 555,193 521,167 487,258 453,557
Boiler Fuel Cost $/MMBtu $2.05 $2.07 $2.10 $2.11 $2.15 $2.24 $2.34
Boiler Fuel Cost $ 1,365,000 1,365,000 1,261,000 1,172,000 1,120,000 1,089,000 1,062,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FUEL COSTS
Dispatch Operations 2003 2004 2005 2006 2007 2008 2009
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760 8,760 8,760 8,760
Summer & VEPCO Capacity 165.0 165.0 165.0 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0 198.0 198.0 198.0
Summer Dispatch 2,077 2,285 2,513 2,418 2,327 2,239 2,155
Winter Gas Dispatch 601 742 908 763 642 539 452
Winter Oil Dispatch 76 122 195 185 175 166 157
VEPCO Gas Dispatch 600 600 600 600 600 600 600
--- --- --- --- --- --- ---
Total Dispatch Hour 3,354 3,749 4,216 3,966 3,744 3,544 3,364
Percentage 38.29% 42.80% 48.13% 45.27% 42.74% 40.46% 38.40%
Winter Starts 15 19 23 19 16 13 11
Winter Start Duration 40 40 40 40 40 40 40
Net Generation
Availability Factor [1] 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Equivalent Load Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
[1] Equivalent full load dispatch hours from Dispatch Assumptions incorporate
planned outage and forced outage availability factors.
Summer Output MWh 342,705 377,025 414,645 398,970 383,955 369,435 355,575
Winter Gas Output MWh 118,998 146,916 179,784 151,074 127,116 106,722 89,496
Winter Oil Dispatch MWh 15,048 24,156 38,610 36,630 34,650 32,868 31,086
VEPCO Gas Dispatch MWh 99,000 99,000 99,000 99,000 99,000 99,000 99,000
------ ------ ------ ------ ------ ------ ------
Net Generation MWh 575,751 647,097 732,039 685,674 644,721 608,025 575,157
Fuel Usage - Electrical Generation
Net Electric
Heat Rate Btu/kWh 8900 8900 8900 8900 8900 8900 8900
Summer Gas Fuel MMBtu 3,050,075 3,355,523 3,690,341 3,550,833 3,417,200 3,287,972 3,164,618
Winter Gas Fuel MMBtu 1,059,082 1,307,552 1,600,078 1,344,559 1,131,332 949,826 796,514
Winter Oil Fuel MMBtu 133,927 214,988 343,629 326,007 308,385 292,525 276,665
VEPCO Gas Fuel MMBtu 881,100 881,100 881,100 881,100 881,100 881,100 881,100
------- ------- ------- ------- ------- ------- -------
Total Fuel MMBtu 5,124,184 5,759,163 6,515,147 6,102,499 5,738,017 5,411,423 5,118,897
Fuel Cost - Electrical Generation
Summer Gas Fuel $/MMBtu $2.69 $2.81 $2.94 $3.14 $3.35 $3.57 $3.82
Winter Gas Fuel $/MMBtu $3.48 $3.63 $3.78 $4.03 $4.29 $4.55 $4.85
Winter Oil Fuel $/MMBtu $4.48 $4.51 $4.54 $4.59 $4.64 $4.70 $4.76
VEPCO Gas Fuel $/kWh $0.00011 $0.00011 $0.00011 $0.00011 $0.00011 $0.00011 $0.00011
Summer Gas Fuel $ 8,205,000 9,431,000 10,835,000 11,146,000 11,455,000 11,754,000 12,100,000
Winter Gas Fuel $ 3,691,000 4,747,000 6,050,000 5,415,000 4,848,000 4,325,000 3,864,000
Winter Oil Fuel $ 600,000 970,000 1,561,000 1,497,000 1,432,000 1,374,000 1,316,000
VEPCO Gas Fuel $ 11,300 11,300 11,300 11,300 11,300 11,300 11,300
Total Fuel Cost $ 12,507,300 15,159,300 18,457,300 18,069,300 17,746,300 17,464,300 17,291,300
Total Fuel Costs - Cogen Plant
Summer Gas Fuel $ 8,205,000 9,431,000 10,835,000 11,146,000 11,455,000 11,754,000 12,100,000
Winter Gas Fuel $ 3,691,000 4,747,000 6,050,000 5,415,000 4,848,000 4,325,000 3,864,000
Winter Oil Fuel $ 600,000 970,000 1,561,000 1,497,000 1,432,000 1,374,000 1,316,000
VEPCO Gas Fuel $ 11,300 11,300 11,300 11,300 11,300 11,300 11,300
Fuel Usage - Thermal MMBtu 115,150 129,419 146,408 137,135 128,944 121,605 115,031
Fuel Cost - Thermal [2]$ 282,000 332,000 393,000 395,000 400,000 404,000 410,000
------- ------- ------- ------- ------- ------- -------
Total Fuel Costs -
Cogen Plant 12,789,000 15,491,000 18,850,000 18,464,000 18,146,000 17,868,000 17,701,000
Average Fuel Cost($/MMBtu) $2.44 $2.63 $2.83 $2.96 $3.09 $3.23 $3.38
Average Fuel Cost($/kWh) $0.0222 $0.0239 $0.0257 $0.0269 $0.0281 $0.0294 $0.0308
[2] Boiler fuel cost estimate below used to determine fuel cost allocation of
thermal production.
Steam/Chilled Water
Steam Production Hours 7,800 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production 4,000 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production Hours - Boiler 4,446 4,051 3,584 3,834 4,056 4,256 4,436
Chilled Water Production
Hours - Boil 722 373 0 219 431 622 793
Steam Fuel - Boiler MMBtu 381,022 347,171 307,149 328,574 347,599
C. Water Fuel - Boiler MMBtu 22,248 11,494 0 6,748 13,281 19,166 24,436
------ ------ - ----- ------ ------ ------
Total Boiler Fuel MMBtu 403,270 358,664 307,149 335,322 360,880 383,906 404,601
Boiler Fuel Cost $/MMBtu $2.45 $2.56 $2.68 $2.88 $3.10 $3.32 $3.57
Boiler Fuel Cost $ 988,000 919,000 824,000 966,000 1,120,000 1,276,000 1,444,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FUEL COSTS
Dispatch Operations 2010 2011 2012 2013 2014 2015
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760 8,760 8,760
Summer & VEPCO Capacity 165.0 165.0 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0 198.0 198.0
Summer Dispatch 2,073 2,000 1,929 1,861 1,794 1,729
Winter Gas Dispatch 379 429 485 548 619 698
Winter Oil Dispatch 149 147 144 142 140 138
VEPCO Gas Dispatch 600 600 600 600 600 600
--- --- --- --- --- ---
Total Dispatch Hour 3,201 3,176 3,158 3,151 3,153 3,165
Percentage 36.54% 36.26% 36.05% 35.97% 35.99% 36.13%
Winter Starts 9 11 12 14 15 17
Winter Start Duration 40 40 40 40 40 40
Net Generation
Availability Factor [1] 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Equivalent Load Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
[1] Equivalent full load dispatch hours from Dispatch Assumptions incorporate
planned outage and forced outage availability factors.
Summer Output MWh 342,045 330,000 318,285 307,065 296,010 285,285
Winter Gas Output MWh 75,042 84,942 96,030 108,504 122,562 138,204
Winter Oil Dispatch MWh 29,502 29,106 28,512 28,116 27,720 27,324
VEPCO Gas Dispatch MWh 99,000 99,000 99,000 99,000 99,000 99,000
------ ------ ------ ------ ------ ------
Net Generation MWh 545,589 543,048 541,827 542,685 545,292 549,813
Fuel Usage - Electrical Generation
Net Electric
Heat Rate Btu/kWh 8900 8900 8900 8900 8900 8900
Summer Gas Fuel MMBtu 3,044,201 2,937,000 2,832,737 2,732,879 2,634,489 2,539,037
Winter Gas Fuel MMBtu 667,874 755,984 854,667 965,686 1,090,802 1,230,016
Winter Oil Fuel MMBtu 262,568 259,043 253,757 250,232 246,708 243,184
VEPCO Gas Fuel MMBtu 881,100 881,100 881,100 881,100 881,100 881,100
------- ------- ------- ------- ------- -------
Total Fuel MMBtu 4,855,742 4,833,127 4,822,260 4,829,897 4,853,099 4,893,336
Fuel Cost - Electrical Generation
Summer Gas Fuel $/MMBtu $4.08 $4.31 $4.54 $4.78 $5.05 $5.33
Winter Gas Fuel $/MMBtu $5.16 $5.44 $5.74 $6.06 $6.35 $6.68
Winter Oil Fuel $/MMBtu $4.82 $4.87 $4.93 $5.00 $5.06 $5.12 VEPCO Gas Fuel $/kWh
Summer Gas Fuel $ 12,433,000 12,648,000 12,858,000 13,066,000 13,309,000 13,546,000
Winter Gas Fuel $ 3,447,000 4,109,000 4,905,000 5,848,000 6,926,000 8,211,000
Winter Oil Fuel $ 1,265,000 1,262,000 1,252,000 1,250,000 1,247,000 1,245,000
VEPCO Gas Fuel $ 11,300 11,300 11,300 11,300 11,300 11,300
Total Fuel Cost $ 17,156,300 18,030,300 19,026,300 20,175,300 21,493,300 23,013,300
Total Fuel Costs - Cogen Plant
Summer Gas Fuel $ 12,433,000 12,648,000 12,858,000 13,066,000 13,309,000 13,546,000
Winter Gas Fuel $ 3,447,000 4,109,000 4,905,000 5,848,000 6,926,000 8,211,000
Winter Oil Fuel $ 1,265,000 1,262,000 1,252,000 1,250,000 1,247,000 1,245,000
VEPCO Gas Fuel $ 11,300 11,300 11,300 11,300 11,300 11,300
Fuel Usage - Thermal MMBtu 109,118 108,610 108,365 108,537 109,058 109,963
Fuel Cost - Thermal [2]$ 417,000 439,000 465,000 491,000 523,000 558,000
------- ------- ------- ------- ------- -------
Total Fuel Costs -
Cogen Plant 17,573,000 18,469,000 19,491,000 20,666,000 22,016,000 23,571,000
Average Fuel Cost($/MMBtu) $3.54 $3.74 $3.95 $4.18 $4.44 $4.71
Average Fuel Cost($/kWh) $0.0322 $0.0340 $0.0360 $0.0381 $0.0404 $0.0429
[2] Boiler fuel cost estimate below used to determine fuel cost allocation of
thermal production.
Steam/Chilled Water
Steam Production Hours 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production Hours - Boiler 4,599 4,624 4,642 4,649 4,647 4,635
Chilled Water Production
Hours - Boil 948 971 986 991 987 973
Steam Fuel - Boiler MMBtu 394,134 396,277 397,819 398,419 398,248 397,220
C. Water Fuel - Boiler MMBtu 29,212 29,921 30,383 30,537 30,414 29,982
------ ------ ------ ------ ------ ------
Total Boiler Fuel MMBtu 423,346 426,197 428,202 428,956 428,662 427,202
Boiler Fuel Cost $/MMBtu $3.83 $4.04 $4.29 $4.53 $4.79 $5.07
Boiler Fuel Cost $ 1,620,000 1,723,000 1,836,000 1,941,000 2,054,000 2,167,000
</TABLE>
<PAGE>
PLANT OPERATING COSTS
<TABLE>
<CAPTION>
1995 1996
Estimated Actual Budget Escalation
---------------- ------ ----------
<S> <C> <C> <C>
Fuel Transportation Costs:
Firm Transportation - Transco $1,097,889 $1,080,318 0.00%
Less: Capacity Release $0 ($132,000) 0.00%
Fuel Management Fee $240,000 $240,000 3.00%
-------- --------
Total Fuel Transportation $1,337,889 $1,188,318
Operating Costs:
O&M Contract Fee $1,641,825 $1,703,120 3.00%
General Maintenance & Repairs $144,622 $160,825 8.00%
Planned Plant Maintenance $156,972 $328,425 3.00%
Additional Maintenance $274,024 $155,000 0.00%
Parts Replacement $228,392 $167,940 3.00%
Other Plant Expenses $34,930 $52,100 3.00%
Panda Management Fee [2] $480,000 $0 0.00%
Office & Admin Expenses $231,061 $190,015 3.00%
Property Taxes $977,109 $972,000 -3.00%
Insurance $298,728 $300,000 3.00%
VEPCO Performance LOC $64,602 $66,232 Input Panda Forecast
------- -------
Total Operating Costs $4,532,265 $4,095,657
Total Plant Operating Cost $5,870,154 $5,283,975
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Plant Operating Costs 1996 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Firm Transportation - Transco 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000
Capacity Release Revenues (132,000) (316,000) (316,000) (316,000) (316,000) (316,000) (316,000) (316,000)
Fuel Management Fee 240,000 247,000 255,000 262,000 270,000 278,000 287,000 295,000
O&M Contract Fee 1,703,000 1,754,000 1,807,000 1,861,000 1,917,000 1,974,000 2,034,000 2,095,000
General Maintenance & Repairs 161,000 174,000 188,000 203,000 219,000 236,000 255,000 276,000
Planned Plant Maintenanance 328,000 338,000 348,000 359,000 370,000 381,000 392,000 404,000
Additional Maintenance 155,000 155,000 155,000 155,000 155,000 155,000 155,000 155,000
Parts Replacement 168,000 173,000 178,000 184,000 189,000 195,000 201,000 207,000
Other Plant Expenses 52,000 54,000 55,000 57,000 59,000 60,000 62,000 64,000
Panda Management Fee [2] 0 0 0 0 0 0 0 0
Office & Admin Expenses 190,000 196,000 202,000 208,000 214,000 220,000 227,000 234,000
Property Taxes 972,000 943,000 915,000 887,000 861,000 835,000 810,000 785,000
Insurance 300,000 309,000 318,000 328,000 338,000 348,000 358,000 369,000
VEPCO Performance LOC 66,000 66,000 66,000 66,000 84,000 84,000 84,000 84,000
------ ------ ------ ------ ------ ------ ------ ------
Plant Operating Costs 5,283,000 5,173,000 5,251,000 5,334,000 5,440,000 5,530,000 5,629,000 5,732,000
Percent Change -10.00% -2.08% 1.51% 1.58% 1.99% 1.65% 1.79% 1.83%
</TABLE>
[1] Capacity release revenues based on estimated 1800 MMBtu/d and 50% recovery
of tariff rate starting in August 1996.
[2] Panda Management Fee will be subordinated to all Project costs.
<PAGE>
<TABLE>
<CAPTION>
Plant Operating Costs 2004 2005 2006 2007 2008 2009 2010
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Firm Transportation - Transco 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000
Capacity Release Revenues (316,000) (316,000) (316,000) (316,000) (316,000) (316,000) (316,000)
Fuel Management Fee 304,000 313,000 323,000 332,000 342,000 352,000 363,000
O&M Contract Fee 2,157,000 2,222,000 2,289,000 2,358,000 2,428,000 2,501,000 2,576,000
General Maintenance & Repairs 298,000 321,000 347,000 375,000 405,000 437,000 472,000
Planned Plant Maintenanance 416,000 429,000 441,000 455,000 468,000 482,000 497,000
Additional Maintenance 155,000 155,000 155,000 155,000 155,000 155,000 155,000
Parts Replacement 213,000 219,000 226,000 232,000 239,000 247,000 254,000
Other Plant Expenses 66,000 68,000 70,000 72,000 74,000 77,000 79,000
Panda Management Fee [2] 0 0 0 0 0 0 0
Office & Admin Expenses 241,000 248,000 255,000 263,000 271,000 279,000 287,000
Property Taxes 762,000 739,000 717,000 695,000 674,000 654,000 635,000
Insurance 380,000 391,000 403,000 415,000 428,000 441,000 454,000
VEPCO Performance LOC 84,000 84,000 84,000 84,000 84,000 84,000 84,000
------ ------ ------ ------ ------ ------ ------
Plant Operating Costs 5,840,000 5,953,00 6,074,000 6,200,000 6,332,000 6,473,000 6,620,000
Percent Change 1.88% 1.93% 2.03% 2.07% 2.13% 2.23% 2.27%
</TABLE>
[1] Capacity release revenues based on estimated 1800 MMBtu/d and 50% recovery
of tariff rate starting in August 1996.
[2] Panda Management Fee will be subordinated to all Project costs.
<PAGE>
<TABLE>
<CAPTION>
Plant Operating Costs 2011 2012 2013 2014 2015
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Firm Transportation - Transco 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000
Capacity Release Revenues (316,000) (316,000) (316,000) (316,000) (316,000)
Fuel Management Fee 374,000 385,000 397,000 409,000 421,000
O&M Contract Fee 2,653,000 2,733,000 2,815,000 2,899,000 2,986,000
General Maintenance & Repairs 510,000 551,000 595,000 643,000 694,000
Planned Plant Maintenanance 512,000 527,000 543,000 559,000 576,000
Additional Maintenance 155,000 155,000 155,000 155,000 155,000
Parts Replacement 262,000 269,000 278,000 286,000 294,000
Other Plant Expenses 81,000 84,000 86,000 89,000 91,000
Panda Management Fee [2] 0 0 0 0 0
Office & Admin Expenses 296,000 305,000 314,000 323,000 333,000
Property Taxes 616,000 597,000 579,000 562,000 545,000
Insurance 467,000 481,000 496,000 511,000 526,000
VEPCO Performance LOC 84,000 84,000 84,000 84,000 84,000
------ ------ ------ ------ ------
Plant Operating Costs 6,774,000 6,935,000 7,106,000 7,284,000 7,469,000
Percent Change 2.33% 2.38% 2.47% 2.50% 2.54%
</TABLE>
[1] Capacity release revenues based on estimated 1800 MMBtu/d and 50% recovery
of tariff rate starting in August 1996.
[2] Panda Management Fee will be subordinated to all Project costs.
<PAGE>
<TABLE>
<CAPTION>
VARIABLE PLANT COSTS
1995 1996
Actual Summary Escalation
------ ------- ----------
<S> <C> <C> <C>
Plant Electricity Usage
Hours Not Dispatched 7698 7683
Average Electric Load (kW) 1150 1150
Electric Rate ($/kWh) $0.0440 $0.0453 3.00%
------- -------
Total Plant Electricity Usage $389,519 $400,423
Water & Chemical Usage
Hours Dispatched 1062 1077
Gallons per Hour Usage - Cogen 32,000 32,000
Steam/Chilled Water Production Hours 11,800 11,800
Gallons per Hour Usage - Boiler 8,000 8,000
Total Gallons (1000s) 128,384 128,864
Water & Chemical Cost ($/1000 gal) $1.34 $1.38 3.00%
----- -----
Total Water & Chemical Usage $172,035 $177,858
Water Discharge
Hours Dispatched 1062 1077
Gallons per Hour Usage - Cogen 8,000 8,000
Steam/Chilled Water Production Hours 11,800 11,800
Gallons per Hour Usage - Boiler 2,000 2,000
Total Gallons (1000s) 32,096 32,216
Water Discharge Cost ($/1000 gal) $1.09 $1.12 3.00%
----- -----
Total Water Discharge $34,985 $36,169
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Plant Variable Costs 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hours Dispatched 1077 1144 1637 2030 2326 2621 2915 3354 3749 4216
Hours Not Dispatched 7683 7616 7123 6730 6434 6139 5845 5406 5011 4544
Steam/Chilled Water Production Hours 11,800 11,800 11,800 11,800 11,800 11,800 11,800 11,800 11,800 11,800
Plant Electricity Usage 400,000 409,000 394,000 383,000 377,000 371,000 364,000 347,000 331,000 309,000
Water & Chemical Usage 178,000 186,000 215,000 240,000 262,000 285,000 309,000 342,000 375,000 413,000
Water Discharge 36,000 38,000 44,000 49,000 53,000 58,000 63,000 70,000 76,000 84,000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Plant Variable Cost 614,000 633,000 653,000 672,000 692,000 714,000 736,000 759,000 782,000 806,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Plant Variable Costs 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hours Dispatched 3966 3744 3544 3364 3201 3176 3158 3151 3153 3165
Hours Not Dispatched 4794 5016 5216 5396 5559 5584 5602 5609 5607 5595
Steam/Chilled Water Production Hours 11,800 11,800 11,800 11,800 11,800 11,800 11,800 11,800 11,800 11,800
Plant Electricity Usage 336,000 362,000 388,000 413,000 438,000 453,000 469,000 483,000 497,000 511,000
Water & Chemical Usage 411,000 409,000 409,000 410,000 411,000 422,000 433,000 445,000 459,000 474,000
Water Discharge 83,000 83,000 83,000 83,000 84,000 86,000 88,000 91,000 93,000 96,000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Plant Variable Cost 830,000 854,000 880,000 906,000 933,000 961,000 990,000 1,019,000 1,049,000 1,081,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REVENUE GENERATION
Dispatch Operations 1996 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760 8,760 8,760 8,760 8,760
Summer & VEPCO Capacity 165.0 165.0 165.0 165.0 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0 198.0 198.0 198.0 198.0
Summer Dispatch 674 625 918 1,210 1,463 1,715 1,887 2,077
Winter Gas Dispatch 3 119 219 320 348 376 480 601
Winter Oil Dispatch 0 0 0 0 15 30 48 76
VEPCO Gas Dispatch 400 400 500 500 500 500 500 600
Total Dispatch Hours 1,077 1,144 1,637 2,030 2,326 2,621 2,915 3,354
Percentage 12.29% 13.06% 18.69% 23.17% 26.55% 29.92% 33.28% 38.29%
Winter Starts 0 3 5 8 9 9 12 15
Winter Start Duration 40 40 40 40 40 40 40 40
Net Generation
Availability Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Load Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Summer Output MWh 111,210 103,125 151,470 199,650 241,395 282,975 311,355 342,705
Winter Gas Output MWh 594 23,562 43,362 63,360 68,904 74,448 95,040 118,998
Winter Oil Dispatch MWh 0 0 0 0 2,970 5,940 9,504 15,048
VEPCO Gas Dispatch MWh 66,000 66,000 82,500 82,500 82,500 82,500 82,500 99,000
Net Generation MWh 177,804 192,687 277,332 345,510 395,769 445,863 498,399 575,751
Capacity Revenues
Capacity Rate $/kw-mo $12.49 $11.65 $11.65 $10.82 $10.82 $10.82 $10.82 $10.82
Capacity Revenues - Summer 12,363,000 11,537,000 11,537,000 10,713,000 10,713,000 10,713,000 10,713,000 10,713,000
Capacity Revenues - Winter 14,836,000 13,845,000 13,845,000 12,855,000 12,855,000 12,855,000 12,855,000 12,855,000
Total Capacity Revenues 27,199,000 25,382,000 25,382,000 23,568,000 23,568,000 23,568,000 23,568,000 23,568,000
Energy Revenues
Summer Gas Charge $/kWh $0.0231 $0.0233 $0.0237 $0.0240 $0.0245 $0.0254 $0.0264 $0.0276
Winter Gas Charge $/kWh $0.0288 $0.0293 $0.0297 $0.0300 $0.0304 $0.0317 $0.0331 $0.0345
Winter Oil Charge $/kWh $0.0369 $0.0383 $0.0399 $0.0414 $0.0431 $0.0431 $0.0431 $0.0431
VEPCO Gas Chargee $/kWh $0.0039 $0.0040 $0.0041 $0.0042 $0.0043 $0.0044 $0.0045 $0.0046
Variable O&M Charge $/kWh $0.0022 $0.0023 $0.0024 $0.0024 $0.0025 $0.0026 $0.0027 $0.0027
Summer Gas Revenues $ 2,813,000 2,644,000 3,950,000 5,273,000 6,510,000 7,923,000 9,054,000 10,387,000
Winter Gas Revenues $ 18,000 745,000 1,389,000 2,055,000 2,270,000 2,552,000 3,400,000 4,427,000
Winter Oil Revenues $ 0 0 0 0 135,000 271,000 435,000 690,000
VEPCO Gas Revenues $ 258,000 265,000 340,000 349,000 358,000 365,000 371,000 454,000
Total Energy Revenues $ 3,089,000 3,654,000 5,679,000 7,677,000 9,273,000 11,111,000 13,260,000 15,958,000
Start Revenues
Winter Gas Start Payment $38,286 $38,286 $38,286 $38,286 $38,286 $38,286 $38,286 $38,286
Winter Gas Start Revenues 0 154,000 283,000 499,000 611,000 566,000 687,000 779,000
Thermal Revenues
Steam Production Hours 7,800 7,800 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production Hours 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production pph 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Chilled Water Production tph 1,010 1,010 1,010 1,010 1,010 1,010 1,010 1,010
Steam Production klbs 390,000 390,000 390,000 390,000 390,000 390,000 390,000 390,000
Chilled Water Productio ktons 4,040 4,040 4,040 4,040 4,040 4,040 4,040 4,040
Steam Charge $/klbs $1.15 $1.15 $1.15 $1.15 $1.15 $1.15 $1.15 $1.15
Chilled Water Charge $/ton $0.035 $0.035 $0.035 $0.035 $0.035 $0.040 $0.040 $0.040
Steam Revenues $ 449,000 449,000 449,000 449,000 449,000 449,000 449,000 449,000
Chilled Water Revenues $ 141,000 141,000 141,000 141,000 141,000 162,000 162,000 162,000
Total Thermal Revenues $ 590,000 590,000 590,000 590,000 590,000 611,000 611,000 611,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REVENUE GENERATION
Dispatch Operations 2004 2005 2006 2007 2008 2009 2010 2011
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760 8,760 8,760 8,760 8,760
Summer & VEPCO Capacity 165.0 165.0 165.0 165.0 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0 198.0 198.0 198.0 198.0
Summer Dispatch 2,285 2,513 2,418 2,327 2,239 2,155 2,073 2,000
Winter Gas Dispatch 742 908 763 642 539 452 379 429
Winter Oil Dispatch 122 195 185 175 166 157 149 147
VEPCO Gas Dispatch 600 600 600 600 600 600 600 600
Total Dispatch Hours 3,749 4,216 3,966 3,744 3,544 3,364 3,201 3,176
Percentage 42.80% 48.13% 45.27% 42.74% 40.46% 38.40% 36.54%
Winter Starts 19 23 19 16 13 11 9 11
Winter Start Duration 40 40 40 40 40 40 40 40
Net Generation
Availability Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Load Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Summer Output MWh 377,025 414,645 398,970 383,955 369,435 355,575 342,045 330,000
Winter Gas Output MWh 146,916 179,784 151,074 127,116 106,722 89,496 75,042 84,942
Winter Oil Dispatch MWh 24,156 38,610 36,630 34,650 32,868 31,086 29,502 29,106
VEPCO Gas Dispatch MWh 99,000 99,000 99,000 99,000 99,000 99,000 99,000 99,000
Net Generation MWh 647,097 732,039 685,674 644,721 608,025 575,157 545,589 543,048
Capacity Revenues
Capacity Rate $/kw-mo $10.82 $10.82 $8.32 $8.32 $8.32 $8.32 $8.32 $8.32
Capacity Revenues - Summer 10,713,000 10,713,000 8,238,000 8,238,000 8,238,000 8,238,000 8,238,000 8,238,000
Capacity Revenues - Winter 12,855,000 12,855,000 9,885,000 9,885,000 9,885,000 9,885,000 9,885,000 9,885,000
Total Capacity Revenues 23,568,000 23,568,000 18,123,000 18,123,000 18,123,000 18,123,000 18,123,000 18,123,000
Energy Revenues
Summer Gas Charge $/kWh $ $0.0288 $0.0300 $0.0320 $0.0340 $0.0362 $0.0386 $0.0411 $0.0433
Winter Gas Charge $/kWh $ $0.0359 $0.0373 $0.0397 $0.0421 $0.0446 $0.0475 $0.0504 $0.0530
Winter Oil Charge $/kWh $ $0.0431 $0.0431 $0.0431 $0.0431 $0.0431 $0.0431 $0.0431 $0.0431
VEPCO Gas Chargee $/kWh $ $0.0047 $0.0048 $0.0048 $0.0049 $0.0050 $0.0051 $0.0052 $0.0053
Variable O&M Charge $/kWh $ $0.0028 $0.0029 $0.0030 $0.0031 $0.0032 $0.0033 $0.0034 $0.0035
Summer Gas Revenues $ 11,909,000 13,648,000 13,951,000 14,254,000 14,544,000 14,884,000 15,209,000 15,419,000
Winter Gas Revenues $ 5,684,000 7,233,000 6,444,000 5,744,000 5,104,000 4,539,000 4,033,000 4,795,000
Winter Oil Revenues $ 1,109,000 1,776,000 1,688,000 1,600,000 1,520,000 1,441,000 1,370,000 1,355,000
VEPCO Gas Revenues $ 462,000 470,000 479,000 488,000 498,000 507,000 517,000 527,000
Total Energy Revenues $ 19,164,000 23,127,000 22,562,000 22,086,000 21,666,000 21,371,000 21,129,000 22,096,000
Start Revenues
Winter Gas Start Payment $38,286 $38,286 $38,286 $38,286 $38,286 $38,286 $38,286 $38,286
Winter Gas Start Revenues 881,000 934,000 515,000 124,000 498,000 421,000 345,000 421,000
Thermal Revenues
Steam Production Hours 7,800 7,800 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production Hours 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production pph 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Chilled Water Production tph 1,010 1,010 1,010 1,010 1,010 1,010 1,010 1,010
Steam Production klbs 390,000 390,000 390,000 390,000 390,000 390,000 390,000 390,000
Chilled Water Productio ktons 4,040 4,040 4,040 4,040 4,040 4,040 4,040 4,040
Steam Charge $/klbs $1.15 $1.15 $1.15 $1.15 $1.15 $1.15 $1.15 $1.15
Chilled Water Charge $/ton $0.040 $0.040 $0.045 $0.045 $0.045 $0.045 $0.045 $0.050
Steam Revenues $ 449,000 449,000 449,000 449,000 449,000 449,000 449,000 449,000
Chilled Water Revenues $ 162,000 162,000 182,000 182,000 182,000 182,000 182,000 202,000
Total Thermal Revenues $ 611,000 611,000 631,000 631,000 631,000 631,000 631,000 651,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REVENUE GENERATION
Dispatch Operations 2012 2013 2014 2015
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760
Summer & VEPCO Capacity 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0
Summer Dispatch 1,929 1,861 1,794 1,729
Winter Gas Dispatch 485 548 619 698
Winter Oil Dispatch 144 142 140 138
VEPCO Gas Dispatch 600 600 600 600
Total Dispatch Hours 3,158 3,151 3,153 3,165
Percentage
Winter Starts 12 14 15 17
Winter Start Duration 40 40 40 40
Net Generation
Availability Factor 100.0% 100.0% 100.0% 100.0%
Load Factor 100.0% 100.0% 100.0% 100.0%
Summer Output MWh 318,285 307,065 296,010 285,285
Winter Gas Output MWh 96,030 108,504 122,562 138,204
Winter Oil Dispatch MWh 28,512 28,116 27,720 27,324
VEPCO Gas Dispatch MWh 99,000 99,000 99,000 99,000
Net Generation MWh 541,827 542,685 545,292 549,813
Capacity Revenues
Capacity Rate $/kw-mo $8.32 $8.32 $8.32 $8.32
Capacity Revenues - Summer 8,238,000 8,238,000 8,238,000 8,238,000
Capacity Revenues - Winter 9,885,000 9,885,000 9,885,000 9,885,000
Total Capacity Revenues 18,123,000 18,123,000 18,123,000 18,123,000
Energy Revenues
Summer Gas Charge $/kWh $0.0455 $0.0479 $0.0505 $0.0532
Winter Gas Charge $/kWh $0.0558 $0.0588 $0.0616 $0.0647
Winter Oil Charge $/kWh $0.0431 $0.0431 $0.0431 $0.0431
VEPCO Gas Chargee $/kWh $0.0054 $0.0055 $0.0057 $0.0058
Variable O&M Charge $/kWh $0.0036 $0.0037 $0.0038 $0.0039
Summer Gas Revenues $ 15,625,000 15,827,000 16,065,000 16,294,000
Winter Gas Revenues $ 5,706,000 6,783,000 8,018,000 9,484,000
Winter Oil Revenues $ 1,330,000 1,315,000 1,299,000 1,284,000
VEPCO Gas Revenues $ 538,000 549,000 560,000 571,000
Total Energy Revenues $ 23,199,000 24,474,000 25,942,000 27,633,000
Start Revenues
Winter Gas Start Payment $38,286 $38,286 $38,286 $38,286
Winter Gas Start Revenues 459,000 536,000 574,000 651,000
Thermal Revenues
Steam Production Hours 7,800 7,800 7,800 7,800
Chilled Water Production Hours 4,000 4,000 4,000 4,000
Steam Production pph 50,000 50,000 50,000 50,000
Chilled Water Production tph 1,010 1,010 1,010 1,010
Steam Production klbs 390,000 390,000 390,000 390,000
Chilled Water Productio ktons 4,040 4,040 4,040 4,040
Steam Charge $/klbs $1.15 $1.15 $1.15 $1.15
Chilled Water Charge $/ton $0.050 $0.050 $0.050 $0.050
Steam Revenues $ 449,000 449,000 449,000 449,000
Chilled Water Revenues $ 202,000 202,000 202,000 202,000
Total Thermal Revenues $ 651,000 651,000 651,000 651,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL FORECAST
Revenues 7/96-12/96 [1] 1997 1998 1999 2000 2001 2002
-------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues from Electric Sales:
Total Capacity Revenues 13,599,500 25,382,000 25,382,000 23,568,000 23,568,000 23,568,000 23,568,000
Energy Charges
Summer Gas Charge 1,406,500 2,644,000 3,950,000 5,273,000 6,510,000 7,923,000 9,054,000
Winter Gas Charge 9,000 745,000 1,389,000 2,055,000 2,270,000 2,552,000 3,400,000
Winter Oil Charge 0 0 0 0 135,000 271,000 435,000
VEPCO Gas Charge 129,000 265,000 340,000 349,000 358,000 365,000 371,000
------- ------- ------- ------- ------- ------- -------
Total Energy Revenues 1,544,500 3,654,000 5,679,000 7,677,000 9,273,000 11,111,000 13,260,000
Winter Gas Start Revenues 0 154,000 283,000 499,000 611,000 566,000 687,000
Steam Sales Revenues 224,500 449,000 449,000 449,000 449,000 449,000 449,000
Chilled Water Sales Revenues 70,500 141,000 141,000 141,000 141,000 162,000 162,000
------ ------- ------- ------- ------- ------- -------
Total Thermal Revenues 295,000 590,000 590,000 590,000 590,000 611,000 611,000
Total Sales Revenues 15,439,000 29,780,000 31,934,000 32,334,000 34,042,000 35,856,000 38,126,000
Interest - D.S.R. 5.0% 194,000 371,000 354,000 336,000 335,000 333,000 330,000
------- ------- ------- ------- ------- ------- -------
Total Revenues 15,633,000 30,151,000 32,288,000 32,670,000 34,377,000 36,189,000 38,456,000
Expenses
Fuel Costs - Cogen Plant 1,166,000 2,805,000 4,402,000 6,012,000 7,290,000 8,794,000 10,582,000
Fuel Costs - Boiler 682,500 1,365,000 1,261,000 1,172,000 1,120,000 1,089,000 1,062,000
Plant Operating Costs 2,575,500 5,173,000 5,251,000 5,334,000 5,440,000 5,530,000 5,629,000
Plant Variable Costs 307,000 633,000 653,000 672,000 692,000 714,000 736,000
------- ------- ------- ------- ------- ------- -------
Total Operating Costs 4,731,000 9,976,000 11,567,000 13,190,000 14,542,000 16,127,000 18,009,000
Rev. Avail. for Debt Service 10,902,000 20,175,000 20,721,000 19,480,000 19,835,000 20,062,000 20,447,000
Debt Service
Total Interest Costs 5,175,000 9,193,000 8,705,000 8,221,000 7,769,000 7,284,000 6,764,000
Total Principal Payments 2,753,000 5,501,000 5,922,000 5,093,000 5,473,000 5,880,000 6,294,000
--------- --------- --------- --------- --------- --------- ---------
Total Debt Service 7,928,000 14,694,000 14,627,000 13,314,000 13,242,000 13,164,000 13,058,000
Operating Cashflow
Pre-Tax Cashflow from Operations 2,974,000 5,481,000 6,094,000 6,166,000 6,593,000 6,898,000 7,389,000
Overhaul Reserve Fund Additions (140,000) (306,000) (452,000) (577,000) (681,000) (790,000) (905,000)
Expected Debt Service Reserve Releases 655,000 26,000 670,000 30,000 33,000 47,000 50,000
Debt Service Reserve Fund Additions 0 0 0 0 0 0 0
- - - - - - -
Net Balance from Operations [2] 3,489,000 5,201,000 6,312,000 5,619,000 5,945,000 6,155,000 6,534,000
Debt Service Coverage
Revenue Avail. for Debt Service 10,902,000 20,175,000 20,721,000 19,480,000 19,835,000 20,062,000 20,447,000
Total Interest Costs 5,175,000 9,193,000 8,705,000 8,221,000 7,769,000 7,284,000 6,764,000
Total Principal Payments 2,753,000 5,501,000 5,922,000 5,093,000 5,473,000 5,880,000 6,294,000
--------- --------- --------- --------- --------- --------- ---------
Total Debt Service Costs 7,928,000 14,694,000 14,627,000 13,314,000 13,242,000 13,164,000 13,058,000
Times Interest Coverage 2.11 2.19 2.38 2.37 2.55 2.75 3.02
Times Total Debt Coverage 1.38 1.37 1.42 1.46 1.50 1.52 1.57
</TABLE>
[1] Project closing of July 1996 assumed. Reflects one-half year's operations
following refinancing.
[2] Available for capital expenditures or distributions to Project owners.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL FORECAST
Revenues 2003 2004 2005 2006 2007 2008 2009
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues from Electric Sales:
Total Capacity Revenues 23,568,000 23,568,000 23,568,000 18,123,000 18,123,000 18,123,000 18,123,000
Energy Charges
Summer Gas Charge 10,387,000 11,909,000 13,648,000 13,951,000 14,254,000 14,544,000 14,884,000
Winter Gas Charge 4,427,000 5,684,000 7,233,000 6,444,000 5,744,000 5,104,000 4,539,000
Winter Oil Charge 690,000 1,109,000 1,776,000 1,688,000 1,600,000 1,520,000 1,441,000
VEPCO Gas Charge 454,000 462,000 470,000 479,000 488,000 498,000 507,000
------- ------- ------- ------- ------- ------- -------
Total Energy Revenues 15,958,000 19,164,000 23,127,000 22,562,000 22,086,000 21,666,000 21,371,000
Winter Gas Start Revenues 779,000 881,000 934,000 515,000 124,000 498,000 421,000
Steam Sales Revenues 449,000 449,000 449,000 449,000 449,000 449,000 449,000
Chilled Water Sales Revenues 162,000 162,000 162,000 182,000 182,000 182,000 182,000
------- ------- ------- ------- ------- ------- -------
Total Thermal Revenues 611,000 611,000 611,000 631,000 631,000 631,000 631,000
Total Sales Revenues 40,916,000 44,224,000 48,240,000 41,831,000 40,964,000 40,918,000 40,546,000
Interest - D.S.R. 5.0% 328,000 325,000 272,000 219,000 215,000 210,000 205,000
------- ------- ------- ------- ------- ------- -------
Total Revenues 41,244,000 44,549,000 48,512,000 42,050,000 41,179,000 41,128,000 40,751,000
Expenses
Fuel Costs - Cogen Plant 12,789,000 15,491,000 18,850,000 18,464,000 18,146,000 17,868,000 17,701,000
Fuel Costs - Boiler 988,000 919,000 824,000 966,000 1,120,000 1,276,000 1,444,000
Plant Operating Costs 5,732,000 5,840,000 5,953,000 6,074,000 6,200,000 6,332,000 6,473,000
Plant Variable Costs 759,000 782,000 806,000 830,000 854,000 880,000 906,000
------- ------- ------- ------- ------- ------- -------
Total Operating Costs 20,268,000 23,032,000 26,433,000 26,334,000 26,320,000 26,356,000 26,524,000
Rev. Avail. for Debt Service 20,976,000 21,517,000 22,079,000 15,716,000 14,859,000 14,772,000 14,227,000
Debt Service
Total Interest Costs 6,206,000 5,610,000 4,972,000 4,418,000 4,042,000 3,647,000 3,235,000
Total Principal Payments 6,737,000 7,215,000 7,697,000 4,292,000 4,492,000 4,705,000 4,919,000
--------- --------- --------- --------- --------- --------- ---------
Total Debt Service 12,943,000 12,825,000 12,669,000 8,710,000 8,534,000 8,352,000 8,154,000
Operating Cashflow
Pre-Tax Cashflow from Operations 8,033,000 8,692,000 9,410,000 7,006,000 6,325,000 6,420,000 6,073,000
Overhaul Reserve Fund Additions (1,072,000) (1,235,000) (1,430,000) (1,386,000) (1,347,000) (1,314,000) (1,284,000)
Expected Debt Service Reserve Releases 51,000 70,000 2,034,000 85,000 87,000 96,000 100,000
Debt Service Reserve Fund Additions 0 0 0 0 0 0 0
- - - - - - -
Net Balance from Operations [2] 7,012,000 7,527,000 10,014,000 5,705,000 5,065,000 5,202,000 4,889,000
Debt Service Coverage
Revenue Avail. for Debt Service 20,976,000 21,517,000 22,079,000 15,716,000 14,859,000 14,772,000 14,227,000
Total Interest Costs 6,206,000 5,610,000 4,972,000 4,418,000 4,042,000 3,647,000 3,235,000
Total Principal Payments 6,737,000 7,215,000 7,697,000 4,292,000 4,492,000 4,705,000 4,919,000
--------- --------- --------- --------- --------- --------- ---------
Total Debt Service Costs 12,943,000 12,825,000 12,669,000 8,710,000 8,534,000 8,352,000 8,154,000
Times Interest Coverage 3.38 3.84 4.44 3.56 3.68 4.05 4.40
Times Total Debt Coverage 1.62 1.68 1.74 1.80 1.74 1.77 1.74
</TABLE>
[1] Project closing of July 1996 assumed. Reflects one-half year's operations
following refinancing.
[2] Available for capital expenditures or distributions to Project owners.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL FORECAST
Revenues 2010 2011 2012 2013 2014 2015
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues from Electric Sales:
Total Capacity Revenues 18,123,000 18,123,000 18,123,000 18,123,000 18,123,000 18,123,000
Energy Charges
Summer Gas Charge 15,209,000 15,419,000 15,625,000 15,827,000 16,065,000 16,294,000
Winter Gas Charge 4,033,000 4,795,000 5,706,000 6,783,000 8,018,000 9,484,000
Winter Oil Charge 1,370,000 1,355,000 1,330,000 1,315,000 1,299,000 1,284,000
VEPCO Gas Charge 517,000 527,000 538,000 549,000 560,000 571,000
------- ------- ------- ------- ------- -------
Total Energy Revenues 21,129,000 22,096,000 23,199,000 24,474,000 25,942,000 27,633,000
Winter Gas Start Revenues 345,000 421,000 459,000 536,000 574,000 651,000
Steam Sales Revenues 449,000 449,000 449,000 449,000 449,000 449,000
Chilled Water Sales Revenues 182,000 202,000 202,000 202,000 202,000 202,000
------- ------- ------- ------- ------- -------
Total Thermal Revenues 631,000 651,000 651,000 651,000 651,000 651,000
Total Sales Revenues 40,228,000 41,291,000 42,432,000 43,784,000 45,290,000 47,058,000
Interest - D.S.R. 5.0% 201,000 196,000 191,000 185,000 169,000 79,000
------- ------- ------- ------- ------- ------
Total Revenues 40,429,000 41,487,000 42,623,000 43,969,000 45,459,000 47,137,000
Expenses
Fuel Costs - Cogen Plant 17,573,000 18,469,000 19,491,000 20,666,000 22,016,000 23,571,000
Fuel Costs - Boiler 1,620,000 1,723,000 1,836,000 1,941,000 2,054,000 2,167,000
Plant Operating Costs 6,620,000 6,774,000 6,935,000 7,106,000 7,284,000 7,469,000
Plant Variable Costs 933,000 961,000 990,000 1,019,000 1,049,000 1,081,000
------- ------- ------- --------- --------- ---------
Total Operating Costs 26,746,000 27,927,000 29,252,000 30,732,000 32,403,000 34,288,000
Rev. Avail. for Debt Service 13,683,000 13,560,000 13,371,000 13,237,000 13,056,000 12,849,000
Debt Service
Total Interest Costs 2,803,000 2,350,000 1,874,000 1,375,000 854,000 325,000
Total Principal Payments 5,143,000 5,422,000 5,691,000 5,953,000 6,188,000 6,031,000
--------- --------- --------- --------- --------- ---------
Total Debt Service 7,946,000 7,772,000 7,565,000 7,328,000 7,042,000 6,356,000
Operating Cashflow
Pre-Tax Cashflow from Operations 5,737,000 5,788,000 5,806,000 5,909,000 6,014,000 6,493,000
Overhaul Reserve Fund Additions (1,259,000) (1,287,000) (1,318,000) (3,354,000) (2,396,000) (1,443,000)
Expected Debt Service Reserve Releases 82,000 99,000 115,000 139,000 476,000 3,145,000
Debt Service Reserve Fund Additions 0 0 0 0 0 0
- - - - - -
Net Balance from Operations [2] 4,560,000 4,600,000 4,603,000 2,694,000 4,094,000 8,195,000
Debt Service Coverage
Revenue Avail. for Debt Service 13,683,000 13,560,000 13,371,000 13,237,000 13,056,000 12,849,000
Total Interest Costs 2,803,000 2,350,000 1,874,000 1,375,000 854,000 325,000
Total Principal Payments 5,143,000 5,422,000 5,691,000 5,953,000 6,188,000 6,031,000
--------- --------- --------- --------- --------- ---------
Total Debt Service Costs 7,946,000 7,772,000 7,565,000 7,328,000 7,042,000 6,356,000
Times Interest Coverage 4.88 5.77 7.14 9.63 15.29 39.54
Times Total Debt Coverage 1.72 1.74 1.77 1.81 1.85 2.02
</TABLE>
[1] Project closing of July 1996 assumed. Reflects one-half year's operations
following refinancing.
[2] Available for capital expenditures or distributions to Project owners.
<PAGE>
<TABLE>
<CAPTION>
RESERVE FUNDS
Debt Service Reserve Fund 1996 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning Balance 8,090,714 7,435,714 7,409,285 6,739,285 6,709,642 6,677,142 6,630,356 6,580,713
Additions 0 0 0 0 0 0 0 0
Interest 5.00% 388,000 371,000 354,000 336,000 335,000 333,000 330,000 328,000
Withdrawals (388,000) (371,000) (354,000) (336,000) (335,000) (333,000) (330,000) (328,000)
Releases (655,000) (26,429) (670,000) (29,643) (32,500) (46,786) (49,643) (51,429)
-------- ------- -------- ------- ------- ------- ------- -------
Ending Balance 7,435,714 7,409,285 6,739,285 6,709,642 6,677,142 6,630,356 6,580,713 6,529,284
Overhaul Reserve Fund
Beginning Balance 942,632 904,632 1,256,632 1,565,632 2,213,632 1,214,632 1,874,632 1,247,632
Additions 280,000 306,000 452,000 577,000 681,000 790,000 905,000 1,072,000
Additional Overhaul Allowance 0 0 0 0 0 0 0 0
Interest 5.00% 46,000 54,000 71,000 94,000 86,000 77,000 78,000
Turbine Overhauls (318,000) 0 (197,000) 0 (1,774,000) (216,000) (1,609,000) (2,575,000)
Other Withdrawals 0 0 0 0 0 0 0 0
Interest Withdrawal 0 0 0 0 0 0 0 0
Releases 0 0 0 0 0 0 0 0
- - - - - - - -
Ending Balance 904,632 1,256,632 1,565,632 2,213,632 1,214,632 1,874,632 1,247,632 (177,368)
Dispatch Hours [1] 1,077 1,144 1,637 2,030 2,326 2,621 2,915 3,354
Reserve Addition 3.00% $260 $268 $276 $284 $293 $301 $310 $320
Reserve Addition 280,000 306,000 452,000 577,000 681,000 790,000 905,000 1,072,000
Overhaul Requirements
Frame 6 Operating Hours 4,863 6,007 7,644 9,674 12,000 14,621 17,536 20,890
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82 2.82 2.82 2.82
Frame 6 Factored Hours 14,056 16,940 21,556 27,281 33,840 41,231 49,452 58,910
Combustion Inspection (CI) [2] $59,000 $63,000 $65,000 $69,000
Hot Gas Path Inspection (HGP) [3]
Major Overhaul (MO) [4] $1,513,000
Frame 7 Operating Hours 3,525 4,669 6,306 8,336 10,662 13,283 16,198 19,552
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82 2.82 2.82 2.82
Frame 7 Factored Hours 10,186 13,167 17,783 23,508 30,067 37,458 45,678 55,137
Combustion Inspection (CI) [5] $85,000 $93,000 $96,000
Hot Gas Path Inspection (HGP) [6] $1,711,000
Major Overhaul (MO) [7] $2,445,000
Steam Turbine Equiv. Hours 9,029 10,173 11,810 13,840 16,166 18,787 21,702 25,056
Limited ST Overhaul (LO) [8] $53,000 $58,000 $61,000
Major ST Overhaul (MO) [9] $318,000
--------
Total Overhaul Costs $318,000 $0 $197,000 $0 $1,774,000 $216,000 $1,609,000 $2,575,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESERVE FUNDS
Debt Service Reserve Fund 2004 2005 2006 2007 2008 2009 2010 2011
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning Balance 6,529,284 6,458,927 4,424,641 4,339,284 4,252,141 4,156,427 4,056,070 3,973,927
Additions 0 0 0 0 0 0 0 0
Interest 5.00% 325,000 272,000 219,000 215,000 210,000 205,000 201,000 196,000
Withdrawals (325,000) (272,000) (219,000) (215,000) (210,000) (205,000) (201,000) (196,000)
Releases (70,357) (2,034,286) (85,357) (87,143) (95,714) (100,357) (82,143) (99,286)
------- ---------- ------- ------- ------- -------- ------- -------
Ending Balance 6,458,927 4,424,641 4,339,284 4,252,141 4,156,427 4,056,070 3,973,927 3,874,641
Overhaul Reserve Fund
Beginning Balance (177,368) 912,632 (777,368) 309,632 1,382,632 (1,019,368) 64,632 (1,921,368)
Additions 1,235,000 1,430,000 1,386,000 1,347,000 1,314,000 1,284,000 1,259,000 1,287,000
Additional Overhaul Allowance 0 0 0 0 0 0 0 0
Interest 5.00% 27,000 18,000 49,000 84,000 38,000 (12,000) 42,000 9,000
Turbine Overhauls (172,000) (1,315,000) (183,000) (4,506,000) (265,000) (199,000) (3,703,000) (212,000)
Other Withdrawals 0 0 0 0 0 0 0 0
Interest Withdrawal 0 0 0 0 0 0 0 0
Releases 0 0 0 0 0 0 0 0
- - - - - - - -
Ending Balance 912,632 1,045,632 2,297,632 (777,368) 309,632 1,382,632 (1,019,368) 64,632
Dispatch Hours [1] 3,749 4,216 3,966 3,744 3,544 3,364 3,201 3,176
Reserve Addition 3.00% $329 $339 $349 $360 $371 $382 $393 $405
Reserve Addition 1,235,000 1,430,000 1,386,000 1,347,000 1,314,000 1,284,000 1,259,000 1,287,000
Overhaul Requirements
Frame 6 Operating Hours 24,639 28,855 32,821 36,565 40,109 43,473 46,674 49,850
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82 2.82 2.82 2.82
Frame 6 Factored Hours 69,482 81,371 92,555 103,113 113,107 122,594 131,621 140,577
Combustion Inspection (CI) [2] $71,000 $75,000 $80,000 $82,000 $87,000
Hot Gas Path Inspection (HGP) [3] $1,211,000 $1,404,000
Major Overhaul (MO) [4] $1,754,000
Frame 7 Operating Hours 23,301 27,517 31,483 35,227 38,771 42,135 45,336 48,512
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82 2.82 2.82 2.82
Frame 7 Factored Hours 65,709 77,598 88,782 99,340 109,334 118,821 127,848 136,804
Combustion Inspection (CI) [5] $101,000 $104,000 $108,000 $114,000 $117,000 $125,000
Hot Gas Path Inspection (HGP) [6] $2,299,000
Major Overhaul (MO) [7] $2,752,000
Steam Turbine Equiv. Hours 28,805 33,021 36,987 40,731 44,275 47,639 50,840 54,016
Limited ST Overhaul (LO) [8] $71,000
Major ST Overhaul (MO) [9]
Total Overhaul Costs $172,000 $1,315,000 $183,000 $4,506,000 $265,000 $199,000 $3,703,000 $212,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESERVE FUNDS
Debt Service Reserve Fund 2012 2013 2014 2015
---- ---- ---- ----
<S> <C> <C> <C> <C>
Beginning Balance 3,874,641 3,759,998 3,621,069 3,145,447
Additions 0 0 0 0
Interest 5.00% 191,000 185,000 169,000 79,000
Withdrawals (191,000) (185,000) (169,000) (79,000)
Releases (114,643) (138,929) (475,622) (3,145,449)
-------- -------- -------- ----------
Ending Balance 3,759,998 3,621,069 3,145,477 (2)
Overhaul Reserve Fund
Beginning Balance 64,632 (1,921,368) (2,060,368) 4,632
Additions 1,318,000 1,354,000 1,396,000 1,443,000
Additional Overhaul Allowance 0 2,000,000 1,000,000 0
Interest 5.00% (24,000) (46,000) (100,000) (51,000)
Turbine Overhauls (3,280,000) (3,447,000) (231,000) (2,763,000)
Other Withdrawals 0 0 0 0
Interest Withdrawal 0 0 0 0
Releases 0 0 0 0
- - - -
Ending Balance (1,921,368) (2,060,368) 4,632 (1,366,368)
Dispatch Hours [1] 3,158 3,151 3,153 3,165
Reserve Addition 3.00% $417 $430 $443 $456
Reserve Addition 1,318,000 1,354,000 1,396,000 1,443,000
Overhaul Requirements
Frame 6 Operating Hours 53,008 56,159 59,312 62,477
Estimated Maintenance Factor 2.82 2.82 2.82 2.82
Frame 6 Factored Hours 149,483 158,368 167,260 176,185
Combustion Inspection (CI) [2] $90,000 $95,000 $98,000
Hot Gas Path Inspection (HGP) [3]
Major Overhaul (MO) [4] $2,094,000
Frame 7 Operating Hours 51,670 54,821 57,974 61,139
Estimated Maintenance Factor 2.82 2.82 2.82 2.82
Frame 7 Factored Hours 145,709 154,595 163,487 172,412
Combustion Inspection (CI) [5] $132,000 $136,000
Hot Gas Path Inspection (HGP) [6] $2,665,000
Major Overhaul (MO) [7] $3,190,000
Steam Turbine Equiv. Hours 57,174 60,325 63,478 66,643
Limited ST Overhaul (LO) [8]
Major ST Overhaul (MO) [9] $1,221,000
----------
Total Overhaul Costs $3,280,000 $3,447,000 $231,000 $2,763,000
</TABLE>
[1] Equivalent full load dispatch hours.
[2] CI conducted each 8,000 factored hours. Estimated cost of $56,000 (1996$)
[3] HGP conducted each 24,000 factored hours. Estimated cost of $928,000
(1996$)
[4] MO conducted each 48,000 factored hours. Estimated cost of $1,267,000
(1996$)
[5] CI conducted each 8,000 factored hours. Estimated cost of $80,000 (1996$)
[6] HGP conducted each 24,000 factored hours. Estimated cost of $1,520,000
(1996$)
[7] MO conducted each 40,000 factored hours. Estimated cost of $1,988,000
(1996$)
[8] LO conducted each 16,000 equivalent hours. Estimated cost of $50,000
(1996$)
[9] MO conducted each 50,000 equivalent hours. Estimated cost of $739,000
(1996$)
<PAGE>
OPERATING ASSUMPTIONS
Planning Period
Base Year: 1996
PPA Final Year: 2015
PPA Remaining Term: 20 years
Planning Period: 20 years
Rounding Precision: -3
<TABLE>
<CAPTION>
Capacity Assumptions
--------------------
Summer Summer Winter Winter
Demonstrated Capacity Contract Demonstrated Capacity Contract
Year Capacity Degradation Capacity Capacity Degradation Capacity
---- -------- ----------- -------- -------- ----------- --------
(MW) (%) (MW) (MW) (%) (MW)
<S> <C> <C> <C> <C> <C> <C>
1996 174.0 0.00% 165.0 198.0 0.00% 198.0
1997 174.0 0.00% 165.0 198.0 0.00% 198.0
1998 174.0 0.00% 165.0 198.0 0.00% 198.0
1999 174.0 0.00% 165.0 198.0 0.00% 198.0
2000 174.0 0.00% 165.0 198.0 0.00% 198.0
2001 174.0 0.00% 165.0 198.0 0.00% 198.0
2002 174.0 0.00% 165.0 198.0 0.00% 198.0
2003 174.0 0.00% 165.0 198.0 0.00% 198.0
2004 174.0 0.00% 165.0 198.0 0.00% 198.0
2005 174.0 0.00% 165.0 198.0 0.00% 198.0
2006 174.0 0.00% 165.0 198.0 0.00% 198.0
2007 174.0 0.00% 165.0 198.0 0.00% 198.0
2008 174.0 0.00% 165.0 198.0 0.00% 198.0
2009 174.0 0.00% 165.0 198.0 0.00% 198.0
2010 174.0 0.00% 165.0 198.0 0.00% 198.0
2011 174.0 0.00% 165.0 198.0 0.00% 198.0
2012 174.0 0.00% 165.0 198.0 0.00% 198.0
2013 174.0 0.00% 165.0 198.0 0.00% 198.0
2014 174.0 0.00% 165.0 198.0 0.00% 198.0
2015 174.0 0.00% 165.0 198.0 0.00% 198.0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Dispatch Assumptions
--------------------
Summer Gas Winter Gas Winter Oil VEPCO Gas Total
Dispatch Summer Dispatch Winter gas Dispatch Winter Gas Dispatch VEPCO Gas Dispatch
Year Hours Output Hours Output Hours Output Hours Output Hours Percent
- ---- -------- ------ -------- ------ -------- ------ ----------- ------ -------- -------
(MWh) (MWh) (MWh) (MWh) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 0 0 0 0 0 0 0 0 0 0
1997 0 0 0 0 0 0 0 0 0 0
1998 0 0 0 0 0 0 0 0 0 0
1999 0 0 0 0 0 0 0 0 0 0
2000 0 0 0 0 0 0 0 0 0 0
2001 0 0 0 0 0 0 0 0 0 0
2002 0 0 0 0 0 0 0 0 0 0
2003 0 0 0 0 0 0 0 0 0 0
2004 0 0 0 0 0 0 0 0 0 0
2005 0 0 0 0 0 0 0 0 0 0
2006 0 0 0 0 0 0 0 0 0 0
2007 0 0 0 0 0 0 0 0 0 0
2008 0 0 0 0 0 0 0 0 0 0
2009 0 0 0 0 0 0 0 0 0 0
2010 0 0 0 0 0 0 0 0 0 0
2011 0 0 0 0 0 0 0 0 0 0
2012 0 0 0 0 0 0 0 0 0 0
2013 0 0 0 0 0 0 0 0 0 0
2014 0 0 0 0 0 0 0 0 0 0
2015 0 0 0 0 0 0 0 0 0 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Electric Heat Assumptions(3) Aux. Boiler Steam/Chilled Water Assumptions
---------------------------- -------------------------------------------
Demonstrated Contract Steam C. Water Steam
Heat Heat Rate Heat Production Steam Production C. Water Heat
Year Rate Degradation Rate Hours Production Hours Production Requirement
- ---- ---- ----------- ---- ----- ---------- ----- ---------- -----------
(Btu/kWh) (%) (Btu/kWh) (pph) (ton-hr) (Btu/lb)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 8900 0.00% 8900 7800 50,000 4000 1010 1714
1997 8900 0.00% 8900 7800 50,000 4000 1010 1714
1998 8900 0.00% 8900 7800 50,000 4000 1010 1714
1999 8900 0.00% 8900 7800 50,000 4000 1010 1714
2000 8900 0.00% 8900 7800 50,000 4000 1010 1714
2001 8900 0.00% 8900 7800 50,000 4000 1010 1714
2002 8900 0.00% 8900 7800 50,000 4000 1010 1714
2003 8900 0.00% 8900 7800 50,000 4000 1010 1714
2004 8900 0.00% 8900 7800 50,000 4000 1010 1714
2005 8900 0.00% 8900 7800 50,000 4000 1010 1714
2006 8900 0.00% 8900 7800 50,000 4000 1010 1714
2007 8900 0.00% 8900 7800 50,000 4000 1010 1714
2008 8900 0.00% 8900 7800 50,000 4000 1010 1714
2009 8900 0.00% 8900 7800 50,000 4000 1010 1714
2010 8900 0.00% 8900 7800 50,000 4000 1010 1714
2011 8900 0.00% 8900 7800 50,000 4000 1010 1714
2012 8900 0.00% 8900 7800 50,000 4000 1010 1714
2013 8900 0.00% 8900 7800 50,000 4000 1010 1714
2014 8900 0.00% 8900 7800 50,000 4000 1010 1714
2015 8900 0.00% 8900 7800 50,000 4000 1010 1714
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Summer Gas Cost
---------------
SSG SGT SGT SGT SR1 SR2 SRX Summer Summer Summer
Gulf Spot Transco Panda NCG Transco NCNG Swing Gas Gas Gas Gas
Year Price IT Pipeline IT Mgt. Fee Retainage Retainage Retainage Charge Charge Cost Margin Margin
- ---- ----- -- ----------- -------- --------- --------- --------- ------ ------ ---- ------ ------
($/MMBtu) ($/MMBtu) ($/MMBtu) ($/MMBtu) (%) (%) (%) ($/MMBtu) ($/kWh) ($/MMBtu) ($/MMBtu) ($/kWh)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $1.79 $0.34 $0.26 $0.04 3.79% 2.00% 3.00% $2.59 $0.02307 $2.26 $0.33 $0.00297
1997 $1.81 $0.34 $0.27 $0.04 3.79% 2.00% 3.00% $2.62 $0.02335 $2.28 $0.34 $0.00304
1998 $1.84 $0.35 $0.27 $0.04 3.79% 2.00% 3.00% $2.66 $0.02372 $2.31 $0.35 $0.00312
1999 $1.85 $0.36 $0.28 $0.04 3.79% 2.00% 3.00% $2.69 $0.02398 $2.34 $0.36 $0.00320
2000 $1.88 $0.37 $0.29 $0.04 3.79% 2.00% 3.00% $2.75 $0.02447 $2.38 $0.37 $0.00329
2001 $1.96 $0.38 $0.30 $0.04 3.79% 2.00% 3.00% $2.86 $0.02542 $2.47 $0.38 $0.00339
2002 $2.05 $0.38 $0.31 $0.04 3.79% 2.00% 3.00% $2.97 $0.02642 $2.57 $0.39 $0.00351
2003 $2.15 $0.39 $0.32 $0.04 3.79% 2.00% 3.00% $3.10 $0.02757 $2.69 $0.41 $0.00363
2004 $2.26 $0.40 $0.33 $0.04 3.79% 2.00% 3.00% $3.23 $0.02877 $2.81 $0.42 $0.00375
2005 $2.37 $0.42 $0.34 $0.04 3.79% 2.00% 3.00% $3.37 $0.03001 $2.94 $0.44 $0.00388
2006 $2.55 $0.43 $0.35 $0.04 3.79% 2.00% 3.00% $3.59 $0.03198 $3.14 $0.45 $0.00404
2007 $2.75 $0.43 $0.36 $0.04 3.79% 2.00% 3.00% $3.83 $0.03404 $3.35 $0.47 $0.00421
2008 $2.95 $0.44 $0.37 $0.04 3.79% 2.00% 3.00% $4.07 $0.03620 $3.57 $0.49 $0.00438
2009 $3.18 $0.45 $0.38 $0.04 3.79% 2.00% 3.00% $4.34 $0.03859 $3.82 $0.51 $0.00456
2010 $3.41 $0.47 $0.39 $0.04 3.79% 2.00% 3.00% $4.62 $0.04110 $4.08 $0.53 $0.00475
2011 $3.61 $0.48 $0.40 $0.04 3.79% 2.00% 3.00% $4.86 $0.04326 $4.31 $0.55 $0.00493
2012 $3.83 $0.48 $0.41 $0.04 3.79% 2.00% 3.00% $5.11 $0.04552 $4.54 $0.58 $0.00512
2013 $4.05 $0.49 $0.43 $0.04 3.79% 2.00% 3.00% $5.38 $0.04787 $4.78 $0.60 $0.00531
2014 $4.30 $0.51 $0.44 $0.04 3.79% 2.00% 3.00% $5.67 $0.05048 $5.05 $0.62 $0.00552
2015 $4.55 $0.52 $0.45 $0.04 3.79% 2.00% 3.00% $5.98 $0.05321 $5.33 $0.64 $0.00573
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Winter Gas Cost
---------------
WSG Panda WGT WR1 WR2 WR2 WRX
Appala- WGT WGT Pipe- NGC Transco CNG NCNG Swing Gas Winter Winter Winter Winter
chian Transco CNG line Mgt. Retain- Retain- Retain- Retain- Gas Gas Gas Gas
Year Price IT IT IT Fee age age age age Charge Charge Cost Cost Margin Margin
- ---- ----- -- -- -- --- --- --- --- --- ------ ------ ---- ---- ------ ------
(------------$/MMBtu-------------) (%) (%) (%) (%) ($/MMBtu) ($/kWh)($/MMBtu) ($/kWh) ($/MMBtu) ($/kWh)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $2.28 $0.24 $0.21 $0.26 $0.04 1.97% 2.28% 2.00% 3.00% $3.23 $0.02878 $2.92 $0.02596 $0.31673 $0.00282
1997 $2.31 $0.24 $0.21 $0.27 $0.04 1.97% 2.28% 2.00% 3.00% $3.29 $0.02932 $2.97 $0.02642 $0.32541 $0.00290
1998 $2.34 $0.25 $0.21 $0.27 $0.04 1.97% 2.28% 2.00% 3.00% $3.33 $0.02967 $3.00 $0.02669 $0.33403 $0.00297
1999 $2.36 $0.25 $0.21 $0.28 $0.04 1.97% 2.28% 2.00% 3.00% $3.37 $0.03001 $3.03 $0.02695 $0.34288 $0.00305
2000 $2.39 $0.26 $0.22 $0.29 $0.04 1.97% 2.28% 2.00% 3.00% $3.42 $0.03044 $3.07 $0.02731 $0.35196 $0.00313
2001 $2.50 $0.26 $0.23 $0.30 $0.04 1.97% 2.28% 2.00% 3.00% $3.56 $0.03169 $3.20 $0.02846 $0.36345 $0.00323
2002 $2.62 $0.27 $0.23 $0.31 $0.04 1.97% 2.28% 2.00% 3.00% $3.72 $0.03311 $3.35 $0.02977 $0.37563 $0.00334
2003 $2.74 $0.28 $0.24 $0.32 $0.04 1.97% 2.28% 2.00% 3.00% $3.87 $0.03447 $3.48 $0.03102 $0.38789 $0.00345
2004 $2.86 $0.29 $0.25 $0.33 $0.04 1.97% 2.28% 2.00% 3.00% $4.03 $0.03587 $3.63 $0.03231 $0.40055 $0.00356
2005 $2.98 $0.30 $0.26 $0.34 $0.04 1.97% 2.28% 2.00% 3.00% $4.19 $0.03733 $3.78 $0.03365 $0.41361 $0.00368
2006 $3.21 $0.30 $0.25 $0.35 $0.04 1.97% 2.28% 2.00% 3.00% $4.46 $0.03967 $4.03 $0.03584 $0.42962 $0.00382
2007 $3.45 $0.30 $0.26 $0.36 $0.04 1.97% 2.28% 2.00% 3.00% $4.73 $0.04211 $4.29 $0.03814 $0.44622 $0.00397
2008 $3.69 $0.31 $0.26 $0.37 $0.04 1.97% 2.28% 2.00% 3.00% $5.02 $0.04465 $4.55 $0.04053 $0.46305 $0.00412
2009 $3.95 $0.32 $0.27 $0.38 $0.04 1.97% 2.28% 2.00% 3.00% $5.33 $0.04745 $4.85 $0.04317 $0.48088 $0.00428
2010 $4.22 $0.33 $0.28 $0.39 $0.04 1.97% 2.28% 2.00% 3.00% $5.66 $0.05038 $5.16 $0.04594 $0.49936 $0.00444
2011 $4.46 $0.34 $0.29 $0.40 $0.04 1.97% 2.28% 2.00% 3.00% $5.95 $0.05298 $5.44 $0.04838 $0.51726 $0.00460
2012 $4.73 $0.35 $0.30 $0.41 $0.04 1.97% 2.28% 2.00% 3.00% $6.27 $0.05585 $5.74 $0.05108 $0.53622 $0.00477
2013 $5.01 $0.36 $0.31 $0.43 $0.04 1.97% 2.28% 2.00% 3.00% $6.61 $0.05884 $6.06 $0.05389 $0.55585 $0.00495
2014 $5.28 $0.37 $0.30 $0.44 $0.04 1.97% 2.28% 2.00% 3.00% $6.93 $0.06163 $6.35 $0.05651 $0.57572 $0.00512
2015 $5.58 $0.36 $0.31 $0.45 $0.04 1.97% 2.28% 2.00% 3.00% $7.27 $0.06472 $6.68 $0.05941 $0.59675 $0.00531
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Winter Fuel Oil Cost
--------------------
Delivered Panda Winter Winter Winter
Fuel Oil Handling Oil Oil Fuel Oil Oil
Year Price Charge Charge Charge Usage Cost Margin Margin
- ---- ----- ------ ------ ------ ----- ---- ------ ------
($/MMBtu) ($/MMBtu) ($/MMBtu) ($/kWh) (%) ($/MMBtu) ($/MMBtu) ($/kWh)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $4.05 $0.10 $4.14 $0.03686 80.00% $3.82 $0.32219 $0.00287
1997 $4.21 $0.10 $4.31 $0.03833 80.00% $3.96 $0.34700 $0.00309
1998 $4.38 $0.10 $4.48 $0.03985 80.00% $4.10 $0.37759 $0.00336
1999 $4.55 $0.11 $4.66 $0.04144 80.00% $4.25 $0.40979 $0.00365
2000 $4.73 $0.11 $4.84 $0.04309 80.00% $4.40 $0.44134 $0.00393
2001 $4.73 $0.11 $4.84 $0.04309 80.00% $4.43 $0.41551 $0.00370
2002 $4.73 $0.11 $4.84 $0.04309 80.00% $4.46 $0.38604 $0.00344
2003 $4.73 $0.11 $4.84 $0.04309 80.00% $4.48 $0.35809 $0.00319
2004 $4.73 $0.11 $4.84 $0.04309 80.00% $4.51 $0.32905 $0.00293
2005 $4.73 $0.11 $4.84 $0.04309 80.00% $4.54 $0.29888 $0.00266
2006 $4.73 $0.11 $4.84 $0.04309 80.00% $4.59 $0.24961 $0.00222
2007 $4.73 $0.11 $4.84 $0.04309 80.00% $4.64 $0.19805 $0.00176
2008 $4.73 $0.11 $4.84 $0.04309 80.00% $4.70 $0.14432 $0.00128
2009 $4.73 $0.11 $4.84 $0.04309 80.00% $4.76 $0.08489 $0.00076
2010 $4.73 $0.11 $4.84 $0.04309 80.00% $4.82 $0.02271 $0.00020
2011 $4.73 $0.11 $4.84 $0.04309 80.00% $4.87 ($0.03204) ($0.00029)
2012 $4.73 $0.11 $4.84 $0.04309 80.00% $4.93 ($0.09269) ($0.00082)
2013 $4.73 $0.11 $4.84 $0.04309 80.00% $5.00 ($0.15601) ($0.00139)
2014 $4.73 $0.11 $4.84 $0.04309 80.00% $5.06 ($0.21484) ($0.00191)
2015 $4.73 $0.11 $4.84 $0.04309 80.00% $5.12 ($0.27998) ($0.00249)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VEPCO Gas Cost
--------------
MGT Panda VEPCO VEPCO Plant FA VEPCO VEPCO VEPCO VEPCO
Management Pipeline Gas Gas Variable NCNG Nomination Gas Nomination Gas
Year Fee Charge Charge Charge O&M Costs Retainage Fee Charge Fee Cost Margin
- ---- --- ------ ------ ------ --------- --------- --- ------ --- ---- ------
($/MMBtu) ($/MMBtu) ($/MMBtu) ($/kWh) ($/kWh) (%) ($/day) ($/kWh) ($/day) ($/kWh) ($/kWh)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $0.04 $0.13 $0.17 $0.00150 $0.00222 2.00% $0 $0.00000 $0 $0.00000 $0.00000
1997 $0.04 $0.13 $0.17 $0.00153 $0.00229 2.00% $0 $0.00000 $0 $0.00000 $0.00000
1998 $0.04 $0.14 $0.18 $0.00157 $0.00236 2.00% $0 $0.00000 $0 $0.00000 $0.00000
1999 $0.04 $0.14 $0.18 $0.00161 $0.00243 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2000 $0.04 $0.14 $0.18 $0.00164 $0.00250 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2001 $0.04 $0.14 $0.18 $0.00164 $0.00258 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2002 $0.04 $0.14 $0.18 $0.00164 $0.00266 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2003 $0.04 $0.14 $0.18 $0.00164 $0.00274 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2004 $0.04 $0.14 $0.18 $0.00164 $0.00282 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2005 $0.04 $0.14 $0.18 $0.00164 $0.00290 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2006 $0.04 $0.14 $0.18 $0.00164 $0.00299 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2007 $0.04 $0.14 $0.18 $0.00164 $0.00308 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2008 $0.04 $0.14 $0.18 $0.00164 $0.00317 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2009 $0.04 $0.14 $0.18 $0.00164 $0.00327 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2010 $0.04 $0.14 $0.18 $0.00164 $0.00337 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2011 $0.04 $0.14 $0.18 $0.00164 $0.00347 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2012 $0.04 $0.14 $0.18 $0.00164 $0.00357 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2013 $0.04 $0.14 $0.18 $0.00164 $0.00368 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2014 $0.04 $0.14 $0.18 $0.00164 $0.00379 2.00% $0 $0.00000 $0 $0.00000 $0.00000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Auxillary Boiler Steam/Chilled Water Fuel Cost
----------------------------------------------
Texas Steam Steam
Gulf Spot Transco GRI/ACA NCG Transco CNG Gas NCNG Gas Gas Steam
Year Price Commodity Surcharge Mgt. Fee Retainage Retainage Retainage Retainage Cost Cost Charge Margin
- ---- ----- --------- --------- -------- --------- --------- --------- --------- ---- ---- ------ ------
($/MMBtu) ($/MMBtu) ($/MMBtu) ($/MMBtu) (%) (%) (%) (%) ($/MMBtu) ($/klbs) ($/klbs) ($/klbs)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $1.79 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.05 $3.51 $1.15 ($2.36)
1997 $1.81 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.07 $3.55 $1.15 ($2.40)
1998 $1.84 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.10 $3.60 $1.15 ($2.45)
1999 $1.85 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.11 $3.62 $1.15 ($2.47)
2000 $1.88 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.15 $3.68 $1.15 ($2.53)
2001 $1.96 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.24 $3.83 $1.15 ($2.68)
2002 $2.05 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.34 $4.01 $1.15 ($2.86)
2003 $2.15 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.45 $4.20 $1.15 ($3.05)
2004 $2.26 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.56 $4.39 $1.15 ($3.24)
2005 $2.37 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.68 $4.60 $1.15 ($3.45)
2006 $2.55 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.88 $4.94 $1.15 ($3.79)
2007 $2.75 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $3.10 $5.32 $1.15 ($4.17)
2008 $2.95 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $3.32 $5.69 $1.15 ($4.54)
2009 $3.18 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $3.57 $6.12 $1.15 ($4.97)
2010 $3.41 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $3.83 $6.56 $1.15 ($5.41)
2011 $3.61 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $4.04 $6.93 $1.15 ($5.78)
2012 $3.83 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $4.29 $7.35 $1.15 ($6.20)
2013 $4.05 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $4.53 $7.76 $1.15 ($6.61)
2014 $4.30 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $4.79 $8.21 $1.15 ($7.06)
2015 $4.55 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $5.07 $8.69 $1.15 ($7.54)
</TABLE>
<PAGE>
PROJECT FINANCING ASSUMPTIONS
Equal
Financing Sources of Funds Annual
Refinancing Debt Service
----------- ------------
DEBT FINANCING:
First Mortage Bonds:
Percentage Financed 85.63%
Principal Amount $111,400,000 $11,879,000
Interest Rate 8.63%
Term 20.0
Years of Interest Only 0.0
Debt Service Reserve Fund
(% of Principal) 7.26%
Financing Fees 2.69%
Subordinate Debt A:
Percentage Financed 0.00%
Principal Amount $0 $0
Interest Rate 9.00%
Term 20.0
Years of Interest Only 0.0
Debt Service Reserve Fund
(% of Principal) 0.00%
Financing Fees 0.00%
OTHER FINANCING SOURCES:
Existing Debt Service
Reserve Fund $4,117,388
Existing Turbine Overhaul
Reserve $931,032
Existing Reimbursement
Obligation Account $8,247,605
Existing Pollution Control
Account $5,256,983
Existing Spare Parts
Account $113,737
Existing Revenue Account $27,763
-------
Total Other Financing
Sources $18,694,508
TOTAL SOURCES OF FUNDS $130,094,508
Financing Uses of Funds
REFINANCING COSTS::
Operating Account $868,226
Defeasance of Taxable Revenue
Bonds $103,209,600
PROJECT COSTS:
Pollution Control Reserve $5,256,983
Turbine Overhaul Reserve $942,632
FINANCING COSTS
Debt Service Reserve $8,090,714
Fees and Expenses $3,000,000
Partial Redemption of FMCC
Rosemary Interest $8,726,353
TOTAL USES OF FUNDS $130,094,508
<PAGE>
Custom Principal
Amortization Schedules
----------------------
First Mortgage Subordinate
Year Bonds Debt A
- ---- ----- ------
1996 2,752,798 0
2997 5,500,608 0
1998 5,992,178 0
1999 5,092,966 0
2000 5,472,948 0
2001 5,879,990 0
2002 6,293,568 0
2003 6,737,102 0
2004 7,215,320 0
2005 7,696,926 0
2006 4,292,216 0
2007 4,491,704 0
2008 4,704,828 0
2009 4,919,192 0
2010 5,142,758 0
2011 5,422,034 0
2012 5,691,114 0
2013 5,952,686 0
2014 6,188,248 0
2015 6,030,816 0
====================================
111,400,000
<PAGE>
<TABLE>
<CAPTION>
DEBT SERVICE CALCULATIONS 50.00%
1996 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Mortgage Bonds:
Beginning Balance 111,400,000 108,647,202 103,146,594 97,224,416 92,131,450 86,658,502 80,778,512 74,484,944
Interest 5,175,000 9,192,911 8,704,848 8,220,881 7,769,322 7,284,115 6,763,589 6,206,423
Principal 2,752,798 5,500,608 5,922,178 5,092,966 5,472,948 5,879,990 6,293,568 6,737,102
Debt Service 7,927,798 14,693,519 14,627,026 13,313,847 13,242,270 13,164,105 13,057,157 12,943,525
Ending Balance 108,647,202 103,146,594 97,224,416 92,131,450 86,658,502 80,778,512 74,484,944 67,747,842
Subordinated Debt A:
Beginning Balance 0 0 0 0 0 0 0 0
Interest 0 0 0 0 0 0 0 0
Principal 0 0 0 0 0 0 0 0
Debt Service 0 0 0 0 0 0 0 0
Ending Balance 0 0 0 0 0 0 0 0
TOTAL DEBT SERVICE
Interest 5,175,000 9,192,911 8,704,848 8,220,881 7,769,322 7,284,115 6,763,589 6,206,423
Principal 2,752,798 5,500,608 5,922,178 5,092,966 5,472,948 5,879,990 6,293,568 6,737,102
Debt Service 7,927,798 14,693,519 14,627,026 13,313,847 13,242,270 13,164,105 13,057,157 12,943,525
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
2004 2005 2006 2007 2008 2009 2010 2011
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Mortgage Bonds:
Beginning Balance 67,747,842 60,532,522 52,835,596 48,543,380 44,051,676 39,346,848 34,427,656 29,284,898
Interest 5,609,882 4,971,983 4,418,244 4,041,589 3,647,284 3,234,560 2,803,049 2,350,454
Principal 7,215,320 7,696,926 4,292,216 4,491,704 4,704,828 4,919,192 5,142,758 5,422,034
Debt Service 12,825,202 12,668,909 8,710,460 8,533,293 8,352,112 8,153,752 7,945,807 7,772,488
Ending Balance 60,532,522 52,835,596 48,543,380 44,051,676 39,346,848 34,427,656 29,284,898 23,862,864
Subordinated Debt A:
Beginning Balance 0 0 0 0 0 0 0 0
Interest 0 0 0 0 0 0 0 0
Principal 0 0 0 0 0 0 0 0
Debt Service 0 0 0 0 0 0 0 0
Ending Balance 0 0 0 0 0 0 0 0
TOTAL DEBT SERVICE
Interest 5,609,882 4,971,983 4,418,244 4,041,589 3,647,284 3,234,560 2,803,049 2,350,454
Principal 7,215,320 7,696,926 4,292,216 4,491,704 4,704,828 4,919,192 5,142,758 5,422,034
Debt Service 12,825,202 12,668,909 8,710,460 8,533,293 8,352,112 8,153,752 7,945,807 7,772,488
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
2012 2013 2014 2015
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
First Mortgage Bonds:
Beginning Balance 23,862,864 18,171,750 12,219,064 6,030,816
Interest 1,874,100 1,374,781 853,744 325,100 94,821,650
Principal 5,691,114 5,952,686 6,188,248 6,030,816 111,400,000
--------- --------- --------- ---------
Debt Service 7,565,214 7,327,467 7,041,992 6,355,916
Ending Balance 18,171,750 12,219,064 6,030,816 0
Subordinated Debt A:
Beginning Balance 0 0 0 0
Interest 0 0 0 0
Principal 0 0 0 0
- - - -
Debt Service 0 0 0 0
Ending Balance 0 0 0 0
TOTAL DEBT SERVICE
Interest 1,874,100 1,374,781 853,744 325,100
Principal 5,691,114 5,952,686 6,188,248 6,030,816
--------- --------- --------- ---------
Debt Service 7,565,214 7,327,467 7,041,992 6,355,916
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FUEL COSTS
Dispatch Operations 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760 8,760 8,760 8,760
Summer & VEPCO Capacity 165.0 165.0 165.0 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0 198.0 198.0 198.0
Summer Dispatch 0 0 0 0 0 0 0
Winter Gas Dispatch 0 0 0 0 0 0 0
Winter Oil Dispatch 0 0 0 0 0 0 0
VEPCO Gas Dispatch 0 0 0 0 0 0 0
--- --- --- --- --- --- ---
Total Dispatch Hour 0 0 0 0 0 0 0
Percentage 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Winter Starts 0 0 0 0 0 0 0
Winter Start Duration 40 40 40 40 40 40 40
Net Generation
Availability Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Equivalent Load Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Summer Output MWh 0 0 0 0 0 0 0
Winter Gas Output MWh 0 0 0 0 0 0 0
Winter Oil Dispatch MWh 0 0 0 0 0 0 0
VEPCO Gas Dispatch MWh 0 0 0 0 0 0 0
--- --- --- --- --- --- ---
Net Generation MWh 0 0 0 0 0 0 0
Fuel Usage - Electrical Generation
Net Electric
Heat Rate Btu/kWh 8900 8900 8900 8900 8900 8900 8900
Summer Gas Fuel MMBtu 0 0 0 0 0 0 0
Winter Gas Fuel MMBtu 0 0 0 0 0 0 0
Winter Oil Fuel MMBtu 0 0 0 0 0 0 0
VEPCO Gas Fuel MMBtu 0 0 0 0 0 0 0
--- --- --- --- --- --- ---
Total Fuel MMBtu 0 0 0 0 0 0 0
Fuel Cost - Electrical Generation
Summer Gas Fuel $/MMBtu $2.26 $2.28 $2.31 $2.34 $2.38 $2.47 $2.57
Winter Gas Fuel $/MMBtu $2.92 $2.97 $3.00 $3.03 $3.07 $3.20 $3.35
Winter Oil Fuel $/MMBtu $3.82 $3.96 $4.10 $4.25 $4.40 $4.43 $4.46
VEPCO Gas Fuel $/kWh $0.00000 $0.00000 $0.00000 $0.00000 $0.00000 $0.00000 $0.00000
Summer Gas Fuel $ 0 0 0 0 0 0 0
Winter Gas Fuel $ 0 0 0 0 0 0 0
Winter Oil Fuel $ 0 0 0 0 0 0 0
VEPCO Gas Fuel $ 0 0 0 0 0 0 0
--- --- --- --- --- --- ---
Total Fuel Cost $ 0 0 0 0 0 0 0
Total Fuel Costs - Cogen Plant
Summer Gas Fuel $ 0 0 0 0 0 0 0
Winter Gas Fuel $ 0 0 0 0 0 0 0
Winter Oil Fuel $ 0 0 0 0 0 0 0
VEPCO Gas Fuel $ 0 0 0 0 0 0 0
Fuel Usage - Thermal MMBtu 0 0 0 0 0 0 0
Fuel Cost - Thermal [1]$ 0 0 0 0 0 0 0
--- --- --- --- --- --- ---
Total Fuel Costs - Cogen Plant 0 0 0 0 0 0 0
Average Fuel Cost($/MMBtu) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Average Fuel Cost($/kWh) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
[1] Boiler fuel cost estimate below used to determine fuel cost allocation of
thermal production.
Steam/Chilled Water
Steam Production Hours 7,800 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production 4,000 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production Hours - Boiler 7,800 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production
Hours - Boil 4,000 4,000 4,000 4,000 4,000 4,000 4,000
Steam Fuel - Boiler MMBtu 668,460 668,460 668,460 668,460 668,460 668,460 668,460
C. Water Fuel - Boiler MMBtu 123,257 123,257 123,257 123,257 123,257 123,257 123,257
------- ------- ------- ------- ------- ------- -------
Total Boiler Fuel MMBtu 791,717 791,717 791,717 791,717 791,717 791,717 791,717
Boiler Fuel Cost $/MMBtu $2.05 $2.07 $2.10 $2.11 $2.15 $2.24 $2.34
Boiler Fuel Cost $ 1,622,000 1,642,000 1,662,000 1,672,000 1,701,000 1,770,000 1,853,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FUEL COSTS
Dispatch Operations 2003 2004 2005 2006 2007 2008 2009
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760 8,760 8,760 8,760
Summer & VEPCO Capacity 165.0 165.0 165.0 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0 198.0 198.0 198.0
Summer Dispatch 0 0 0 0 0 0 0
Winter Gas Dispatch 0 0 0 0 0 0 0
Winter Oil Dispatch 0 0 0 0 0 0 0
VEPCO Gas Dispatch 0 0 0 0 0 0 0
--- --- --- --- --- --- ---
Total Dispatch Hour 0 0 0 0 0 0 0
Percentage 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Winter Starts 0 0 0 0 0 0 0
Winter Start Duration 40 40 40 40 40 40 40
Net Generation
Availability Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Equivalent Load Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Summer Output MWh 0 0 0 0 0 0 0
Winter Gas Output MWh 0 0 0 0 0 0 0
Winter Oil Dispatch MWh 0 0 0 0 0 0 0
VEPCO Gas Dispatch MWh 0 0 0 0 0 0 0
--- --- --- --- --- --- ---
Net Generation MWh 0 0 0 0 0 0 0
Fuel Usage - Electrical Generation
Net Electric
Heat Rate Btu/kWh 8900 8900 8900 8900 8900 8900 8900
Summer Gas Fuel MMBtu 0 0 0 0 0 0 0
Winter Gas Fuel MMBtu 0 0 0 0 0 0 0
Winter Oil Fuel MMBtu 0 0 0 0 0 0 0
VEPCO Gas Fuel MMBtu 0 0 0 0 0 0 0
--- --- --- --- --- --- ---
Total Fuel MMBtu 0 0 0 0 0 0 0
Fuel Cost - Electrical Generation
Summer Gas Fuel $/MMBtu $2.69 $2.81 $2.94 $3.14 $3.35 $3.57 $3.82
Winter Gas Fuel $/MMBtu $3.48 $3.63 $3.78 $4.03 $4.29 $4.55 $4.85
Winter Oil Fuel $/MMBtu $4.48 $4.51 $4.54 $4.59 $4.64 $4.70 $4.76
VEPCO Gas Fuel $/kWh $0.00000 $0.00000 $0.00000 $0.00000 $0.00000 $0.00000 $0.00000
Summer Gas Fuel $ 0 0 0 0 0 0 0
Winter Gas Fuel $ 0 0 0 0 0 0 0
Winter Oil Fuel $ 0 0 0 0 0 0 0
VEPCO Gas Fuel $ 0 0 0 0 0 0 0
Total Fuel Cost $ --- --- --- --- --- --- ---
0 0 0 0 0 0 0
Total Fuel Costs - Cogen Plant
Summer Gas Fuel $ 0 0 0 0 0 0 0
Winter Gas Fuel $ 0 0 0 0 0 0 0
Winter Oil Fuel $ 0 0 0 0 0 0 0
VEPCO Gas Fuel $ 0 0 0 0 0 0 0
Fuel Usage - Thermal MMBtu 0 0 0 0 0 0 0
Fuel Cost - Thermal $ 0 0 0 0 0 0 0
--- --- --- --- --- --- ---
Total Fuel Costs - Cogen Plant 0 0 0 0 0 0 0
Average Fuel Cost($/MMBtu) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Average Fuel Cost($/kWh) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Steam/Chilled Water
Steam Production Hours 7,800 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production 4,000 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production Hours - Boiler 7,800 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production
Hours - Boil 4,000 4,000 4,000 4,000 4,000 4,000 4,000
Steam Fuel - Boiler MMBtu 668,460 668,460 668,460 668,460 668,460 668,460 668,460
C. Water Fuel - Boiler MMBtu 123,257 123,257 123,257 123,257 123,257 123,257 123,257
------- ------- ------- ------- ------- ------- -------
Total Boiler Fuel MMBtu 791,717 791,717 791,717 791,717 791,717 791,717 791,717
Boiler Fuel Cost $/MMBtu $2.45 $2.56 $2.68 $2.88 $3.10 $3.32 $3.57
Boiler Fuel Cost $ 1,939,000 2,029,000 2,123,000 2,280,000 2,457,000 2,630,000 2,825,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FUEL COSTS
Dispatch Operations 2010 2011 2012 2013 2014 2015
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760 8,760 8,760
Summer & VEPCO Capacity 165.0 165.0 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0 198.0 198.0
Summer Dispatch 0 0 0 0 0 0
Winter Gas Dispatch 0 0 0 0 0 0
Winter Oil Dispatch 0 0 0 0 0 0
VEPCO Gas Dispatch 0 0 0 0 0 0
--- --- --- --- --- ---
Total Dispatch Hour 0 0 0 0 0 0
Percentage 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Winter Starts 0 0 0 0 0 0
Winter Start Duration 40 40 40 40 40 40
Net Generation
Availability Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Equivalent Load Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Summer Output MWh 0 0 0 0 0 0
Winter Gas Output MWh 0 0 0 0 0 0
Winter Oil Dispatch MWh 0 0 0 0 0 0
VEPCO Gas Dispatch MWh 0 0 0 0 0 0
--- --- --- --- --- ---
Net Generation MWh 0 0 0 0 0 0
Fuel Usage - Electrical Generation
Net Electric
Heat Rate Btu/kWh 8900 8900 8900 8900 8900 8900
Summer Gas Fuel MMBtu 0 0 0 0 0 0
Winter Gas Fuel MMBtu 0 0 0 0 0 0
Winter Oil Fuel MMBtu 0 0 0 0 0 0
VEPCO Gas Fuel MMBtu 0 0 0 0 0 0
--- --- --- --- --- ---
Total Fuel MMBtu 0 0 0 0 0 0
Fuel Cost - Electrical Generation
Summer Gas Fuel $/MMBtu $4.08 $4.31 $4.54 $4.78 $5.05 $5.33
Winter Gas Fuel $/MMBtu $5.16 $5.44 $5.74 $6.06 $6.35 $6.68
Winter Oil Fuel $/MMBtu $4.82 $4.87 $4.93 $5.00 $5.06 $5.12
VEPCO Gas Fuel $/kWh $0.00000 $0.00000 $0.00000 $0.00000 $0.00000 $0.00000
Summer Gas Fuel $ 0 0 0 0 0 0
Winter Gas Fuel $ 0 0 0 0 0 0
Winter Oil Fuel $ 0 0 0 0 0 0
VEPCO Gas Fuel $ 0 0 0 0 0 0
Total Fuel Cost $ --- --- --- --- --- ---
0 0 0 0 0 0
Total Fuel Costs - Cogen Plant
Summer Gas Fuel $ 0 0 0 0 0 0
Winter Gas Fuel $ 0 0 0 0 0 0
Winter Oil Fuel $ 0 0 0 0 0 0
VEPCO Gas Fuel $ 0 0 0 0 0 0
Fuel Usage - Thermal MMBtu 0 0 0 0 0 0
Fuel Cost - Thermal $ 0 0 0 0 0 0
--- --- --- --- --- ---
Total Fuel Costs - 0 0 0 0 0 0
Cogen Plant
$0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Average Fuel Cost($/MMBtu) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Average Fuel Cost($/kWh)
Steam/Chilled Water
Steam Production Hours 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production Hours - Boiler 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production
Hours - Boil 4,000 4,000 4,000 4,000 4,000 4,000
Steam Fuel - Boiler MMBtu 668,460 668,460 668,460 668,460 668,460 668,460
C. Water Fuel - Boiler MMBtu 123,257 123,257 123,257 123,257 123,257 123,257
------- ------- ------- ------- ------- -------
Total Boiler Fuel MMBtu 791,717 791,717 791,717 791,717 791,717 791,717
Boiler Fuel Cost $/MMBtu $3.83 $4.04 $4.29 $4.53 $4.79 $5.07
Boiler Fuel Cost $ 3,029,000 3,201,000 3,395,000 3,583,000 3,794,000 4,016,000
</TABLE>
<PAGE>
PLANT OPERATING COSTS
<TABLE>
<CAPTION>
1995 1996
Estimated Actual Budget Escalation
---------------- ------ ----------
<S> <C> <C> <C>
Fuel Transportation Costs:
Firm Transportation - Transco $1,097,889 $1,080,316 0.00%
Less: Capacity Release Revenues [1] $0 ($132,000) 0.00%
Fuel Management Fee $240,000 $240,000 3.00%
-------- --------
Total Fuel Transportation Costs $1,337,889 $1,188,316
Operating Costs:
O&M Contract Fee $1,641,825 $681,248 [3] 3.00%
General Maintenance & Repairs $144,622 $16,083 [4] 8.00%
Planned Plant Maintenance Projects $156,972 $32,843 [4] 3.00%
Additional Maintenance Allowance $274,024 $15,500 [4] 0.00%
Parts Replacement $228,392 $16,794 [4] 3.00%
Other Plant Expenses $34,930 $10,420 [5] 3.00%
Panda Management Fee [2] $480,000 $0 0.00%
Office & Admin Expenses $231,061 $95,008 [6] 3.00%
Property Taxes $977,109 $972,000 -3.00%
Insurance $298,728 $300,000 3.00%
VEPCO Performance LOC $64,602 $66,232 Input Panda Forecast
------- -------
Total Operating Costs $4,532,265 $2,206,127
Total Plant Operating Costs $5,870,154 $3,394,442
</TABLE>
[1] Capacity release revenues based on estimated 1800 MMBtu/d and 50% recovery
of tariff rate starting in August 1996.
[2] Panda Management Fee will be subordinated to all Project costs.
[3] Cost @ 40% of base case.
[4] Cost @ 10% of base case.
[5] Cost @ 20% base case.
[6] Cost @ 50% base case.
<PAGE>
<TABLE>
<CAPTION>
Plant Operating Costs 1996 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Firm Transportation - Transco 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000
Capacity Release Revenues (132,000) (316,000) (316,000) (316,000) (316,000) (316,000) (316,000) (316,000)
Fuel Management Fee 240,000 247,000 255,000 262,000 270,000 278,000 287,000 295,000
O&M Contract Fee 681,000 702,000 1,807,000 1,861,000 1,917,000 1,974,000 2,034,000 2,095,000
General Maintenance & Repairs 16,000 174,000 188,000 203,000 219,000 236,000 255,000 276,000
Planned Plant Maintenanance 328,000 338,000 348,000 359,000 370,000 381,000 392,000 404,000
Additional Maintenance 155,000 155,000 155,000 155,000 155,000 155,000 155,000 155,000
Parts Replacement 168,000 173,000 178,000 184,000 189,000 195,000 201,000 207,000
Other Plant Expenses 52,000 54,000 55,000 57,000 59,000 60,000 62,000 64,000
Panda Management Fee [2] 0 0 0 0 0 0 0 0
Office & Admin Expenses 190,000 196,000 202,000 208,000 214,000 220,000 227,000 234,000
Property Taxes 972,000 943,000 915,000 887,000 861,000 835,000 810,000 785,000
Insurance 300,000 309,000 318,000 328,000 338,000 348,000 358,000 369,000
VEPCO Performance LOC 66,000 66,000 66,000 66,000 84,000 84,000 84,000 84,000
------ ------ ------ ------ ------ ------ ------ ------
Plant Operating Costs 5,283,000 5,173,000 5,251,000 5,334,000 5,440,000 5,530,000 5,629,000 5,732,000
Percent Change -10.00% -2.08% 1.51% 1.58% 1.99% 1.65% 1.79% 1.83%
</TABLE>
[1] Capacity release revenues based on estimated 1800 MMBtu/d and 50% recovery
of tariff rate starting in August 1996.
[2] Panda Management Fee will be subordinated to all Project costs.
<TABLE>
<CAPTION>
Plant Operating Costs 2004 2005 2006 2007 2008 2009 2010
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Firm Transportation - Transco 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000
Capacity Release Revenues (316,000) (316,000) (316,000) (316,000) (316,000) (316,000) (316,000)
Fuel Management Fee 304,000 313,000 323,000 332,000 342,000 352,000 363,000
O&M Contract Fee 2,157,000 2,222,000 2,289,000 2,358,000 2,428,000 2,501,000 2,576,000
General Maintenance & Repairs 298,000 321,000 347,000 375,000 405,000 437,000 472,000
Planned Plant Maintenanance 416,000 429,000 441,000 455,000 468,000 482,000 497,000
Additional Maintenance 155,000 155,000 155,000 155,000 155,000 155,000 155,000
Parts Replacement 213,000 219,000 226,000 232,000 239,000 247,000 254,000
Other Plant Expenses 66,000 68,000 70,000 72,000 74,000 77,000 79,000
Panda Management Fee [2] 0 0 0 0 0 0 0
Office & Admin Expenses 241,000 248,000 255,000 263,000 271,000 279,000 287,000
Property Taxes 762,000 739,000 717,000 695,000 674,000 654,000 635,000
Insurance 380,000 391,000 403,000 415,000 428,000 441,000 454,000
VEPCO Performance LOC 84,000 84,000 84,000 84,000 84,000 84,000 84,000
------ ------ ------ ------ ------ ------ ------
Plant Operating Costs 5,840,000 5,953,00 6,074,000 6,200,000 6,332,000 6,473,000 6,620,000
Percent Change 1.88% 1.93% 2.03% 2.07% 2.13% 2.23% 2.27%
</TABLE>
[1] Capacity release revenues based on estimated 1800 MMBtu/d and 50% recovery
of tariff rate starting in August 1996.
[2] Panda Management Fee will be subordinated to all Project costs.
<TABLE>
<CAPTION>
Plant Operating Costs 2011 2012 2013 2014 2015
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Firm Transportation - Transco 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000
Capacity Release Revenues (316,000) (316,000) (316,000) (316,000) (316,000)
Fuel Management Fee 374,000 385,000 397,000 409,000 421,000
O&M Contract Fee 2,653,000 2,733,000 2,815,000 2,899,000 2,986,000
General Maintenance & Repairs 510,000 551,000 595,000 643,000 694,000
Planned Plant Maintenanance 512,000 527,000 543,000 559,000 576,000
Additional Maintenance 155,000 155,000 155,000 155,000 155,000
Parts Replacement 262,000 269,000 278,000 286,000 294,000
Other Plant Expenses 81,000 84,000 86,000 89,000 91,000
Panda Management Fee [2] 0 0 0 0 0
Office & Admin Expenses 296,000 305,000 314,000 323,000 333,000
Property Taxes 616,000 597,000 579,000 562,000 545,000
Insurance 467,000 481,000 496,000 511,000 526,000
VEPCO Performance LOC 84,000 84,000 84,000 84,000 84,000
------ ------ ------ ------ ------
Plant Operating Costs 6,774,000 6,935,000 7,106,000 7,284,000 7,469,000
Percent Change 2.33% 2.38% 2.47% 2.50% 2.54%
</TABLE>
[1] Capacity release revenues based on estimated 1800 MMBtu/d and 50% recovery
of tariff rate starting in August 1996.
[2] Panda Management Fee will be subordinated to all Project costs.
<PAGE>
<TABLE>
<CAPTION>
Plant Operating Costs 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Firm Transportation - Transco 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000
Capacity Release Revenues (132,000) (316,000) (316,000) (316,000) (316,000) (316,000) (316,000)
Fuel Management Fee 240,000 247,000 255,000 262,000 270,000 278,000 287,000
O&M Contract Fee 681,000 702,000 723,000 744,000 767,000 790,000 813,000
General Maintenance & Repairs 16,000 17,000 19,000 20,000 22,000 24,000 26,000
Planned Plant Maintenance Projects 33,000 34,000 35,000 36,000 37,000 38,000 39,000
Additional Maintenance 16,000 16,000 16,000 16,000 16,000 16,000 16,000
Parts Replacement 17,000 17,000 18,000 18,000 19,000 19,000 20,000
Other Plant Expenses 10,000 11,000 11,000 11,000 12,000 12,000 12,000
Panda Management Fee [2] 0 0 0 0 0 0 0
Office & Admin Expenses 95,000 98,000 101,000 104,000 107,000 110,000 113,000
Property Taxes 972,000 943,000 915,000 887,000 861,000 835,000 810,000
Insurance 300,000 309,000 318,000 328,000 338,000 348,000 358,000
VEPCO Performance LOC 66,000 66,000 66,000 66,000 84,000 84,000 84,000
------ ------ ------ ------ ------ ------ ------
Plant Operating Costs 3,394,000 3,224,000 3,241,000 3,256,000 3,297,000 3,318,000 3,342,000
Percent Change -42.18% -5.01% 0.53% 0.46% 1.26% 0.64% 0.72%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Plant Operating Costs 2003 2004 2005 2006 2007 2008 2009
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Firm Transportation - Transco 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000
Capacity Release Revenues (316,000) (316,000) (316,000) (316,000) (316,000) (316,000) (316,000)
Fuel Management Fee 295,000 304,000 313,000 323,000 332,000 342,000 352,000
O&M Contract Fee 838,000 863,000 889,000 916,000 943,000 971,000 1,000,000
General Maintenance & Repairs 28,000 30,000 32,000 35,000 37,000 40,000 44,000
Planned Plant Maintenance Projects 40,000 42,000 43,000 44,000 45,000 47,000 48,000
Additional Maintenance 16,000 16,000 16,000 16,000 16,000 16,000 16,000
Parts Replacement 21,000 21,000 22,000 23,000 23,000 24,000 25,000
Other Plant Expenses 13,000 13,000 14,000 14,000 14,000 15,000 15,000
Panda Management Fee [2] 0 0 0 0 0 0 0
Office & Admin Expenses 117,000 120,000 124,000 128,000 132,000 135,000 140,000
Property Taxes 785,000 762,000 739,000 717,000 695,000 674,000 654,000
Insurance 369,000 380,000 391,000 403,000 415,000 428,000 441,000
VEPCO Performance LOC 84,000 84,000 84,000 84,000 84,000 84,000 84,000
------ ------ ------ ------ ------ ------ ------
Plant Operating Costs 3,370,000 3,399,000 3,431,000 3,467,000 3,500,000 3,540,000 3,583,000
Percent Change 0.84% 0.86% 0.94% 1.05% 0.95% 1.14% 1.21%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Plant Operating Costs 2010 2011 2012 2013 2014 2015
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Firm Transportation - Transco 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000
Capacity Release Revenues (316,000) (316,000) (316,000) (316,000) (316,000) (316,000)
Fuel Management Fee 363,000 374,000 385,000 397,000 409,000 421,000
O&M Contract Fee 1,030,000 1,061,000 1,093,000 1,126,000 1,160,000 1,195,000
General Maintenance & Repairs 47,000 51,000 55,000 60,000 64,000 69,000
Planned Plant Maintenance Projects 50,000 51,000 53,000 54,000 56,000 58,000
Additional Maintenance 16,000 16,000 16,000 16,000 16,000 16,000
Parts Replacement 25,000 26,000 27,000 28,000 29,000 29,000
Other Plant Expenses 16,000 16,000 17,000 17,000 18,000 18,000
Panda Management Fee [2] 0 0 0 0 0 0
Office & Admin Expenses 144,000 148,000 152,000 157,000 162,000 167,000
Property Taxes 635,000 616,000 597,000 579,000 562,000 545,000
Insurance 454,000 467,000 481,000 496,000 511,000 526,000
VEPCO Performance LOC 84,000 84,000 84,000 84,000 84,000 84,000
------ ------ ------ ------ ------ ------
Plant Operating Costs 3,628,000 3,674,000 3,724,000 3,778,000 3,835,000 3,892,000
Percent Change 1.26% 1.27% 1.36% 1.45% 1.51% 1.49%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VARIABLE PLANT COSTS
1995 1996
Actual Summary Escalation
------ ------- ----------
<S> <C> <C> <C>
Plant Electricity Usage
Hours Not Dispatched 7698 8760
Average Electric Load (kW) 1150 1150
Electric Rate ($/kWh) $0.0440 $0.0453 3.00%
------- -------
Total Plant Electricity Usage $389,519 $456,554
Water & Chemical Usage
Hours Dispatched 1062 0
Gallons per Hour Usage - Cogen 32,000 32,000
Steam/Chilled Water Production Hours 11,800 11,800
Gallons per Hour Usage - Boiler 8,000 8,000
Total Gallons (1000s) 128,384 94,400
Water & Chemical Cost ($/1000 gal) $1.34 $1.38 3.00%
----- -----
Total Water & Chemical Usage $172,035 $130,291
Water Discharge
Hours Dispatched 1062 0
Gallons per Hour Usage - Cogen 8,000 8,000
Steam/Chilled Water Production Hours 11,800 11,800
Gallons per Hour Usage - Boiler 2,000 2,000
Total Gallons (1000s) 32,096 32,600
Water Discharge Cost ($/1000 gal) $1.09 $1.12 3.00%
----- -----
Total Water Discharge $34,985 $26,496
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Plant Variable Costs 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hours Dispatched 0 0 0 0 0 0 0 0 0 0
Hours Not Dispatched 8760 8760 8760 8760 8760 8760 8760 8760 8760 8760
Steam/Chilled Water Production Hours 11,800 11,800 11,800 11,800 11,800 11,800 11,800 11,800 11,800 11,800
Plant Electricity Usage 457,000 470,000 484,000 499,000 514,000 529,000 545,000 562,000 578,000 596,000
Water & Chemical Usage 130,000 134,000 138,000 142,000 147,000 151,000 156,000 160,000 165,000 170,000
Water Discharge 26,000 27,000 28,000 29,000 30,000 31,000 32,000 33,000 34,000 35,000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Plant Variable Cost 613,000 631,000 650,000 670,000 691,000 711,000 733,000 755,000 777,000 801,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Plant Variable Costs 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hours Dispatched 0 0 0 0 0 0 0 0 0 0
Hours Not Dispatched 8760 8760 8760 8760 8760 8760 8760 8760 8760 8760
Steam/Chilled Water Production Hours 11,800 11,800 11,800 11,800 11,800 11,800 11,800 11,800 11,800 11,800
Plant Electricity Usage 614,000 632,000 651,000 670,000 691,000 711,000 733,000 755,000 777,000 801,000
Water & Chemical Usage 175,000 180,000 186,000 191,000 197,000 203,000 209,000 215,000 222,000 228,000
Water Discharge 36,000 37,000 38,000 39,000 40,000 41,000 43,000 44,000 45,000 46,000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Plant Variable Cost 825,000 849,000 875,000 900,000 928,000 955,000 985,000 1,014,000 1,044,000 1,075,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REVENUE GENERATION
Dispatch Operations 1996 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760 8,760 8,760 8,760 8,760
Summer & VEPCO Capacity 165.0 165.0 165.0 165.0 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0 198.0 198.0 198.0 198.0
Summer Dispatch 0 0 0 0 0 0 0 0
Winter Gas Dispatch 0 0 0 0 0 0 0 0
Winter Oil Dispatch 0 0 0 0 0 0 0 0
VEPCO Gas Dispatch 0 0 0 0 0 0 0 0
Total Dispatch Hours 0 0 0 0 0 0 0 0
Percentage 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Winter Starts 0 0 0 0 0 0 0 0
Winter Start Duration 40 40 40 40 40 40 40 40
Net Generation
Availability Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Load Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Summer Output MWh 0 0 0 0 0 0 0 0
Winter Gas Output MWh 0 0 0 0 0 0 0 0
Winter Oil Dispatch MWh 0 0 0 0 0 0 0 0
VEPCO Gas Dispatch MWh 0 0 0 0 0 0 0 0
Net Generation MWh 0 0 0 0 0 0 0 0
Capacity Revenues
Capacity Rate $/kw-mo $12.49 $11.65 $11.65 $10.82 $10.82 $10.82 $10.82 $10.82
Capacity Revenues - Summer 12,363,000 11,537,000 11,537,000 10,713,000 10,713,000 10,713,000 10,713,000 10,713,000
Capacity Revenues - Winter 14,836,000 13,845,000 13,845,000 12,855,000 12,855,000 12,855,000 12,855,000 12,855,000
Total Capacity Revenues 27,199,000 25,382,000 25,382,000 23,568,000 23,568,000 23,568,000 23,568,000 23,568,000
Energy Revenues
Summer Gas Charge $/kWh $0.0231 $0.0233 $0.0237 $0.0240 $0.0245 $0.0254 $0.0264 $0.0276
Winter Gas Charge $/kWh $0.0288 $0.0293 $0.0297 $0.0300 $0.0304 $0.0317 $0.0331 $0.0345
Winter Oil Charge $/kWh $0.0369 $0.0383 $0.0399 $0.0414 $0.0431 $0.0431 $0.0431 $0.0431
VEPCO Gas Chargee $/kWh $0.0039 $0.0040 $0.0041 $0.0042 $0.0043 $0.0044 $0.0045 $0.0046
Variable O&M Charge $/kWh $0.0022 $0.0023 $0.0024 $0.0024 $0.0025 $0.0026 $0.0027 $0.0027
Summer Gas Revenues $ 0 0 0 0 0 0 0 0
Winter Gas Revenues $ 0 0 0 0 0 0 0 0
Winter Oil Revenues $ 0 0 0 0 0 0 0 0
VEPCO Gas Revenues $ 0 0 0 0 0 0 0 0
Total Energy Revenues $ 0 0 0 0 0 0 0 0
Start Revenues
Winter Gas Start Payment $38,286 $38,286 $38,286 $38,286 $38,286 $38,286 $38,286 $38,286
Winter Gas Start Revenues 0 154,000 283,000 499,000 611,000 566,000 687,000 779,000
Thermal Revenues
Steam Production Hours 7,800 7,800 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production Hours 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production pph 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Chilled Water Production tph 1,010 1,010 1,010 1,010 1,010 1,010 1,010 1,010
Steam Production klbs 390,000 390,000 390,000 390,000 390,000 390,000 390,000 390,000
Chilled Water Productio ktons 4,040 4,040 4,040 4,040 4,040 4,040 4,040 4,040
Steam Charge $/klbs $1.15 $1.15 $1.15 $1.15 $1.15 $1.15 $1.15 $1.15
Chilled Water Charge $/ton $0.035 $0.035 $0.035 $0.035 $0.035 $0.040 $0.040 $0.040
Steam Revenues $ 449,000 449,000 449,000 449,000 449,000 449,000 449,000 449,000
Chilled Water Revenues $ 141,000 141,000 141,000 141,000 141,000 162,000 162,000 162,000
Total Thermal Revenues $ 590,000 590,000 590,000 590,000 590,000 611,000 611,000 611,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REVENUE GENERATION
Dispatch Operations 2004 2005 2006 2007 2008 2009 2010 2011
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760 8,760 8,760 8,760 8,760
Summer & VEPCO Capacity 165.0 165.0 165.0 165.0 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0 198.0 198.0 198.0 198.0
Summer Dispatch 0 0 0 0 0 0 0 0
Winter Gas Dispatch 0 0 0 0 0 0 0 0
Winter Oil Dispatch 0 0 0 0 0 0 0 0
VEPCO Gas Dispatch 0 0 0 0 0 0 0 0
Total Dispatch Hours 0 0 0 0 0 0 0 0
Percentage 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Winter Starts 0 0 0 0 0 0 0 0
Winter Start Duration 40 40 40 40 40 40 40 40
Net Generation
Availability Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Load Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Summer Output MWh 0 0 0 0 0 0 0 0
Winter Gas Output MWh 0 0 0 0 0 0 0 0
Winter Oil Dispatch MWh 0 0 0 0 0 0 0 0
VEPCO Gas Dispatch MWh 0 0 0 0 0 0 0 0
Net Generation MWh 0 0 0 0 0 0 0 0
Capacity Revenues
Capacity Rate $/kw-mo $10.82 $10.82 $8.32 $8.32 $8.32 $8.32 $8.32 $8.32
Capacity Revenues - Summer 10,713,000 10,713,000 8,238,000 8,238,000 8,238,000 8,238,000 8,238,000 8,238,000
Capacity Revenues - Winter 12,855,000 12,855,000 9,885,000 9,885,000 9,885,000 9,885,000 9,885,000 9,885,000
Total Capacity Revenues 23,568,000 23,568,000 18,123,000 18,123,000 18,123,000 18,123,000 18,123,000 18,123,000
Energy Revenues
Summer Gas Charge $/kWh $ $0.0288 $0.0300 $0.0320 $0.0340 $0.0362 $0.0386 $0.0411 $0.0433
Winter Gas Charge $/kWh $ $0.0359 $0.0373 $0.0397 $0.0421 $0.0446 $0.0475 $0.0504 $0.0530
Winter Oil Charge $/kWh $ $0.0431 $0.0431 $0.0431 $0.0431 $0.0431 $0.0431 $0.0431 $0.0431
VEPCO Gas Chargee $/kWh $ $0.0047 $0.0048 $0.0048 $0.0049 $0.0050 $0.0051 $0.0052 $0.0053
Variable O&M Charge $/kWh $ $0.0028 $0.0029 $0.0030 $0.0031 $0.0032 $0.0033 $0.0034 $0.0035
Summer Gas Revenues $ 0 0 0 0 0 0 0 0
Winter Gas Revenues $ 0 0 0 0 0 0 0 0
Winter Oil Revenues $ 0 0 0 0 0 0 0 0
VEPCO Gas Revenues $ 0 0 0 0 0 0 0 0
Total Energy Revenues $ 0 0 0 0 0 0 0 0
Start Revenues
Winter Gas Start Payment $38,286 $38,286 $38,286 $38,286 $38,286 $38,286 $38,286 $38,286
Winter Gas Start Revenues 881,000 934,000 515,000 124,000 498,000 421,000 345,000 421,000
Thermal Revenues
Steam Production Hours 7,800 7,800 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production Hours 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production pph 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Chilled Water Production tph 1,010 1,010 1,010 1,010 1,010 1,010 1,010 1,010
Steam Production klbs 390,000 390,000 390,000 390,000 390,000 390,000 390,000 390,000
Chilled Water Productio ktons 4,040 4,040 4,040 4,040 4,040 4,040 4,040 4,040
Steam Charge $/klbs $1.15 $1.15 $1.15 $1.15 $1.15 $1.15 $1.15 $1.15
Chilled Water Charge $/ton $0.040 $0.040 $0.045 $0.045 $0.045 $0.045 $0.045 $0.050
Steam Revenues $ 449,000 449,000 449,000 449,000 449,000 449,000 449,000 449,000
Chilled Water Revenues $ 162,000 162,000 182,000 182,000 182,000 182,000 182,000 202,000
Total Thermal Revenues $ 611,000 611,000 631,000 631,000 631,000 631,000 631,000 651,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REVENUE GENERATION
Dispatch Operations 2012 2013 2014 2015
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760
Summer & VEPCO Capacity 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0
Summer Dispatch 0 0 0 0
Winter Gas Dispatch 0 0 0 0
Winter Oil Dispatch 0 0 0 0
VEPCO Gas Dispatch 0 0 0 0
Total Dispatch Hours 0 0 0 0
Percentage 0.00% 0.00% 0.00% 0.00%
Winter Starts 0 0 0 0
Winter Start Duration 40 40 40 40
Net Generation
Availability Factor 100.0% 100.0% 100.0% 100.0%
Load Factor 100.0% 100.0% 100.0% 100.0%
Summer Output MWh 0 0 0 0
Winter Gas Output MWh 0 0 0 0
Winter Oil Dispatch MWh 0 0 0 0
VEPCO Gas Dispatch MWh 0 0 0 0
Net Generation MWh 0 0 0 0
Capacity Revenues
Capacity Rate $/kw-mo $8.32 $8.32 $8.32 $8.32
Capacity Revenues - Summer 8,238,000 8,238,000 8,238,000 8,238,000
Capacity Revenues - Winter 9,885,000 9,885,000 9,885,000 9,885,000
Total Capacity Revenues 18,123,000 18,123,000 18,123,000 18,123,000
Energy Revenues
Summer Gas Charge $/kWh $0.0455 $0.0479 $0.0505 $0.0532
Winter Gas Charge $/kWh $0.0558 $0.0588 $0.0616 $0.0647
Winter Oil Charge $/kWh $0.0431 $0.0431 $0.0431 $0.0431
VEPCO Gas Chargee $/kWh $0.0054 $0.0055 $0.0057 $0.0058
Variable O&M Charge $/kWh $0.0036 $0.0037 $0.0038 $0.0039
Summer Gas Revenues $ 0 0 0 0
Winter Gas Revenues $ 0 0 0 0
Winter Oil Revenues $ 0 0 0 0
VEPCO Gas Revenues $ 0 0 0 0
Total Energy Revenues $ 0 0 0 0
Start Revenues
Winter Gas Start Payment $38,286 $38,286 $38,286 $38,286
Winter Gas Start Revenues 459,000 536,000 574,000 651,000
Thermal Revenues
Steam Production Hours 7,800 7,800 7,800 7,800
Chilled Water Production Hours 4,000 4,000 4,000 4,000
Steam Production pph 50,000 50,000 50,000 50,000
Chilled Water Production tph 1,010 1,010 1,010 1,010
Steam Production klbs 390,000 390,000 390,000 390,000
Chilled Water Productio ktons 4,040 4,040 4,040 4,040
Steam Charge $/klbs $1.15 $1.15 $1.15 $1.15
Chilled Water Charge $/ton $0.050 $0.050 $0.050 $0.050
Steam Revenues $ 449,000 449,000 449,000 449,000
Chilled Water Revenues $ 202,000 202,000 202,000 202,000
Total Thermal Revenues $ 651,000 651,000 651,000 651,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL FORECAST
Revenues 7/96-12/96 [1] 1997 1998 1999 2000 2001 2002
-------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues from Electric Sales:
Total Capacity Revenues 13,599,500 25,382,000 25,382,000 23,568,000 23,568,000 23,568,000 23,568,000
Energy Charges
Summer Gas Charge 0 0 0 0 0 0 0
Winter Gas Charge 0 0 0 0 0 0 0
Winter Oil Charge 0 0 0 0 0 0 0
VEPCO Gas Charge 0 0 0 0 0 0 0
- - - - - - -
Total Energy Revenues 0 0 0 0 0 0 0
Winter Gas Start Revenues 0 0 0 0 0 0 0
Steam Sales Revenues 224,500 449,000 449,000 449,000 449,000 449,000 449,000
Chilled Water Sales Revenues 70,500 141,000 141,000 141,000 141,000 162,000 162,000
------ ------- ------- ------- ------- ------- -------
Total Thermal Revenues 295,000 590,000 590,000 590,000 590,000 611,000 611,000
Total Sales Revenues 13,894,000 25,972,000 25,972,000 24,158,000 24,158,000 24,179,000 24,179,000
Interest - D.S.R. 5.0% 194,000 371,000 354,000 336,000 335,000 333,000 330,000
------- ------- ------- ------- ------- ------- -------
Total Revenues 14,088,500 26,343,000 26,326,000 24,494,000 24,493,000 24,509,000 24,509,000
Expenses
Fuel Costs - Cogen Plant 0 0 0 0 0 0 0
Fuel Costs - Boiler 811,000 1,642,000 1,662,000 1,672,000 1,701,000 1,770,000 1,853,000
Plant Operating Costs 1,631,000 3,224,000 3,241,000 3,256,000 3,297,000 3,318,000 3,342,000
Plant Variable Costs 306,500 631,000 650,000 670,000 691,000 711,000 733,000
------- ------- ------- ------- ------- ------- -------
Total Operating Costs 2,748,500 5,497,000 5,553,000 5,598,000 5,689,000 5,799,000 5,928,000
Rev. Avail. for Debt Service 11,340,000 20,846,000 20,773,000 18,896,000 18,804,000 18,713,000 18,581,000
Debt Service
Total Interest Costs 5,175,000 9,193,000 8,705,000 8,221,000 7,769,000 7,284,000 6,764,000
Total Principal Payments 2,753,000 5,501,000 5,922,000 5,093,000 5,473,000 5,880,000 6,294,000
--------- --------- --------- --------- --------- --------- ---------
Total Debt Service 7,928,000 14,694,000 14,627,000 13,314,000 13,242,000 13,164,000 13,058,000
Operating Cashflow
Pre-Tax Cashflow from Operations 3,412,000 6,152,000 6,146,000 5,582,000 5,562,000 5,549,000 5,523,000
Overhaul Reserve Fund Additions 0 0 0 0 0 0 0
Expected Debt Service Reserve Releases 655,000 26,000 670,000 30,000 33,000 47,000 50,000
Debt Service Reserve Fund Additions 0 0 0 0 0 0 0
- - - - - - -
Net Balance from Operations [2] 4,067,000 6,178,000 6,816,000 5,612,000 5,595,000 5,596,000 5,573,000
Debt Service Coverage
Revenue Avail. for Debt Service 11,340,000 20,846,000 20,773,000 18,896,000 18,804,000 18,713,000 18,581,000
Total Interest Costs 5,175,000 9,193,000 8,705,000 8,221,000 7,769,000 7,284,000 6,764,000
Total Principal Payments 2,753,000 5,501,000 5,922,000 5,093,000 5,473,000 5,880,000 6,294,000
--------- --------- --------- --------- --------- --------- ---------
Total Debt Service Costs 7,928,000 14,694,000 14,627,000 13,314,000 13,242,000 13,164,000 13,058,000
Times Interest Coverage 2.19 2.27 2.39 2.30 2.42 2.57 2.75
Times Total Debt Coverage 1.43 1.42 1.42 1.42 1.42 1.42 1.42
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL FORECAST
Revenues 2003 2004 2005 2006 2007 2008 2009
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues from Electric Sales:
Total Capacity Revenues 23,568,000 23,568,000 23,568,000 18,123,000 18,123,000 18,123,000 18,123,000
Energy Charges
Summer Gas Charge 0 0 0 0 0 0 0
Winter Gas Charge 0 0 0 0 0 0 0
Winter Oil Charge 0 0 0 0 0 0 0
VEPCO Gas Charge 0 0 0 0 0 0 0
- - - - - - -
Total Energy Revenues 0 0 0 0 0 0 0
Winter Gas Start Revenues 0 0 0 0 0 0 0
Steam Sales Revenues 449,000 449,000 449,000 449,000 449,000 449,000 449,000
Chilled Water Sales Revenues 162,000 162,000 162,000 182,000 182,000 182,000 182,000
------- ------- ------- ------- ------- ------- -------
Total Thermal Revenues 611,000 611,000 611,000 631,000 631,000 631,000 631,000
Total Sales Revenues 24,179,000 24,179,000 24,179,000 18,754,000 18,754,000 18,754,000 18,754,000
Interest - D.S.R. 5.0% 328,000 325,000 272,000 219,000 215,000 210,000 205,000
------- ------- ------- ------- ------- ------- -------
Total Revenues 24,507,000 24,504,000 24,451,000 18,973,000 18,969,000 18,964,000 18,959,000
Expenses
Fuel Costs - Cogen Plant 0 0 0 0 0 0 0
Fuel Costs - Boiler 1,939,000 2,029,000 2,123,000 2,280,000 2,457,000 2,630,000 2,825,000
Plant Operating Costs 3,370,000 3,399,000 3,431,000 3,467,000 3,500,000 3,540,000 3,583,000
Plant Variable Costs 755,000 777,000 801,000 825,000 849,000 875,000 900,000
------- ------- ------- ------- ------- ------- -------
Total Operating Costs 6,064,000 6,205,000 6,355,000 6,572,000 6,806,000 7,045,000 7,308,000
Rev. Avail. for Debt Service 18,443,000 18,299,000 18,096,000 12,401,000 12,163,000 11,919,000 11,651,000
Debt Service
Total Interest Costs 6,206,000 5,610,000 4,972,000 4,418,000 4,042,000 3,647,000 3,235,000
Total Principal Payments 6,737,000 7,215,000 7,697,000 4,292,000 4,492,000 4,705,000 4,919,000
--------- --------- --------- --------- --------- --------- ---------
Total Debt Service 12,943,000 12,825,000 12,669,000 8,710,000 8,534,000 8,352,000 8,154,000
Operating Cashflow
Pre-Tax Cashflow from Operations 5,500,000 5,474,000 5,427,000 3,691,000 3,629,000 3,567,000 3,497,000
Overhaul Reserve Fund Additions 0 0 0 0 0 0 0
Expected Debt Service Reserve Releases 51,000 70,000 2,034,000 85,000 87,000 96,000 100,000
Debt Service Reserve Fund Additions 0 0 0 0 0 0 0
- - - - - - -
Net Balance from Operations [2] 5,551,000 5,544,000 7,461,000 3,776,000 3,716,000 3,663,000 3,597,000
Debt Service Coverage
Revenue Avail. for Debt Service 18,443,000 18,299,000 18,096,000 12,401,000 12,163,000 11,919,000 11,651,000
Total Interest Costs 6,206,000 5,610,000 4,972,000 4,418,000 4,042,000 3,647,000 3,235,000
Total Principal Payments 6,737,000 7,215,000 7,697,000 4,292,000 4,492,000 4,705,000 4,919,000
--------- --------- --------- --------- --------- --------- ---------
Total Debt Service Costs 12,943,000 12,825,000 12,669,000 8,710,000 8,534,000 8,352,000 8,154,000
Times Interest Coverage 2.97 3.26 3.64 2.81 3.01 3.27 3.60
Times Total Debt Coverage 1.42 1.43 1.43 1.42 1.43 1.43 1.43
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL FORECAST
Revenues 2010 2011 2012 2013 2014 2015
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues from Electric Sales:
Total Capacity Revenues 18,123,000 18,123,000 18,123,000 18,123,000 18,123,000 18,123,000
Energy Charges
Summer Gas Charge 0 0 0 0 0 0
Winter Gas Charge 0 0 0 0 0 0
Winter Oil Charge 0 0 0 0 0 0
VEPCO Gas Charge 0 0 0 0 0 0
- - - - - -
Total Energy Revenues 0 0 0 0 0 0
Winter Gas Start Revenues 0 0 0 0 0 0
Steam Sales Revenues 449,000 449,000 449,000 449,000 449,000 449,000
Chilled Water Sales Revenues 182,000 202,000 202,000 202,000 202,000 202,000
------- ------- ------- ------- ------- -------
Total Thermal Revenues 631,000 651,000 651,000 651,000 651,000 651,000
Total Sales Revenues 18,754,000 18,774,000 18,774,000 18,774,000 18,774,000 18,774,000
Interest - D.S.R. 5.0% 201,000 196,000 191,000 185,000 169,000 79,000
------- ------- ------- ------- ------- ------
Total Revenues 18,955,000 18,970,000 18,965,000 18,959,000 18,943,000 18,853,000
Expenses
Fuel Costs - Cogen Plant 0 0 0 0 0 0
Fuel Costs - Boiler 3,029,000 3,201,000 3,395,000 3,583,000 3,794,000 4,016,000
Plant Operating Costs 3,628,000 3,674,000 3,724,000 3,778,000 3,835,000 3,892,000
Plant Variable Costs 928,000 955,000 985,000 1,014,000 1,044,000 1,075,000
------- ------- ------- --------- --------- ---------
Total Operating Costs 7,585,000 7,830,000 8,104,000 8,375,000 8,673,000 8,983,000
Rev. Avail. for Debt Service 11,370,000 11,140,000 10,861,000 10,584,000 10,270,000 9,870,000
Debt Service
Total Interest Costs 2,803,000 2,350,000 1,874,000 1,375,000 854,000 325,000
Total Principal Payments 5,143,000 5,422,000 5,691,000 5,953,000 6,188,000 6,031,000
--------- --------- --------- --------- --------- ---------
Total Debt Service 7,946,000 7,772,000 7,565,000 7,328,000 7,042,000 6,356,000
Operating Cashflow
Pre-Tax Cashflow from Operations 3,424,000 3,368,000 3,296,000 3,256,000 3,228,000 3,514,000
Overhaul Reserve Fund Additions 0 0 0 0 0 0
Expected Debt Service Reserve Releases 82,000 99,000 115,000 139,000 476,000 3,145,000
Debt Service Reserve Fund Additions 0 0 0 0 0 0
- - - - - -
Net Balance from Operations [2] 3,506,000 3,467,000 3,411,000 3,395,000 3,704,000 6,659,000
Debt Service Coverage
Revenue Avail. for Debt Service 11,370,000 11,140,000 10,861,000 10,584,000 10,270,000 9,870,000
Total Interest Costs 2,803,000 2,350,000 1,874,000 1,375,000 854,000 325,000
Total Principal Payments 5,143,000 5,422,000 5,691,000 5,953,000 6,188,000 6,031,000
--------- --------- --------- --------- --------- ---------
Total Debt Service Costs 7,946,000 7,772,000 7,565,000 7,328,000 7,042,000 6,356,000
Times Interest Coverage 4.06 4.74 5.80 7.70 12.03 30.37
Times Total Debt Coverage 1.43 1.43 1.44 1.44 1.46 1.55
</TABLE>
[1] Project closing of July 1996 assumed. Reflects one-half year's operations
following refinancing.
[2] Available for capital expenditures or distributions to Project owners.
<PAGE>
<TABLE>
<CAPTION>
RESERVE FUNDS
Debt Service Reserve Fund 1996 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning Balance 8,090,714 7,435,714 7,409,285 6,739,285 6,709,642 6,677,142 6,630,356 6,580,713
Additions 0 0 0 0 0 0 0 0
Interest 5.00% 388,000 371,000 354,000 336,000 335,000 333,000 330,000 328,000
Withdrawals (388,000) (371,000) (354,000) (336,000) (335,000) (333,000) (330,000) (328,000)
Releases (655,000) (26,429) (670,000) (29,643) (32,500) (46,786) (49,643) (51,429)
-------- ------- -------- ------- ------- ------- ------- -------
Ending Balance 7,435,714 7,409,285 6,739,285 6,709,642 6,677,142 6,630,356 6,580,713 6,529,284
Overhaul Reserve Fund
Beginning Balance 942,632 (4,207,368) (4,207,368) (4,417,368) (4,633,368) (4,859,368) (5,096,368) (5,345,368)
Additions 0 0 0 0 0 0 0 0
Interest Earnings 5.00% 0 0 (210,000) (216,000) (226,000) (237,000) (249,000) (261,000)
Turbine Overhauls 0 0 0 0 0 0 0 0
Other Withdrawals 0 0 0 0 0 0 0 0
Interest Withdrawal 0 0 0 0 0 0 0 0
Releases (5,150,000) 0 0 0 0 0 0 0
---------- - - - - - - -
Ending Balance (4,207,368) (4,207,368) (4,417,368) (4,633,368) (4,859,368) (5,096,368) (5,345,368) (5,606,368)
Dispatch Hours 0 0 0 0 0 0 0 0
Reserve Addition 3.00% $260 $268 $276 $284 $293 $301 $310 $320
Reserve Addition 0 0 0 0 0 0 0 0
Overhaul Requirements
Frame 6 Operating Hours 4,863 4,863 4,863 4,863 4,863 4,863 4,863 4,863
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82 2.82 2.82 2.82
Frame 6 Factored Hours 14,056 13,714 13,714 13,714 13,714 13,714 13,714 13,714
Combustion Inspection (CI) [1]
Hot Gas Path Inspection (HGP) [2]
Major Overhaul (MO) [3]
Frame 7 Operating Hours 3,525 3,525 3,525 3,525 3,525 3,525 3,525 3,525
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82 2.82 2.82 2.82
Frame 7 Factored Hours 10,186 9,941 9,941 9,941 9,941 9,941 9,941 9,941
Combustion Inspection (CI) [4]
Hot Gas Path Inspection (HGP) [5]
Major Overhaul[6]
Steam Turbine Equiv. Hours 9,029 9,029 9,029 9,029 9,029 9,029 9,029 9,029
Limited ST Overhaul (LO) [7]
Major ST Overhaul (MO) [8] -
------------------------------------------------------------------------------------------------------
Total Overhaul Costs $0 $0 $0 $0 $0 $0 $0 $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Debt Service Reserve Fund 2004 2005 2006 2007 2008 2009 2010
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning Balance 6,529,284 6,458,927 4,424,641 4,339,284 4,252,141 4,156,427 4,056,070
Additions 0 0 0 0 0 0 0
Interest 5.00% 325,000 272,000 219,000 215,000 210,000 205,000 201,000
Withdrawals (325,000) (272,000) (219,000) (215,000) (210,000) (205,000) (201,000)
Releases (70,357) (2,034,286) (85,357) (87,143) (95,714) (100,357) (82,143)
------- ---------- ------- ------- ------- -------- -------
Ending Balance 6,458,927 4,424,641 4,339,284 4,252,141 4,156,427 4,056,070 3,973,927
Overhaul Reserve Fund
Beginning Balance (5,606,368) (5,880,368) (6,167,368) (6,468,368) (6,784,368) (7,115,368) (7,462,368)
Additions 0 0 0 0 0 0 0
Interest Earnings 5.00% (274,000) (287,000) (301,000) (316,000) (331,000) (347,000) (364,000)
Turbine Overhauls 0 0 0 0 0 0 0
Other Withdrawals 0 0 0 0 0 0 0
Interest Withdrawal 0 0 0 0 0 0 0
Releases 0 0 0 0 0 0 0
- - - - - - -
Ending Balance (5,880,368) (6,167,368) (6,468,368) (6,784,368) (7,115,368) (7,462,368) (7,826,368)
Dispatch Hours 0 0 0 0 0 0 0
Reserve Addition 3.00% $329 $339 $349 $360 $371 $382 $393
Reserve Addition 0 0 0 0 0 0 0
Overhaul Requirements
Frame 6 Operating Hours 4,863 4,863 4,863 4,863 4,863 4,863 4,863
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82 2.82 2.82
Frame 6 Factored Hours 13,714 13,714 13,714 13,714 13,714 13,714 13,714
Combustion Inspection (CI) [1]
Hot Gas Path Inspection (HGP)
Major Overhaul (MO) [3]
Frame 7 Operating Hours 3,525 3,525 3,525 3,525 3,525 3,525 3,525
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82 2.82 2.82
Frame 7 Factored Hours 9,941 9,941 9,941 9,941 9,941 9,941 9,941
Combustion Inspection (CI) [4]
Hot Gas Path Inspection (HGP) [5]
Major Overhaul[6]
------------------------------------------------------------------------------------------
Steam Turbine Equiv. Hours 9,029 9,029 9,029 9,029 9,029 9,029 9,029
Limited ST Overhaul (LO) [7]
Major ST Overhaul (MO) [8]
Total Overhaul Costs $0 $0 $0 $0 $0 $0 $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Debt Service Reserve Fund 2011 2012 2013 2014 2015
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Beginning Balance 3,973,927 3,874,641 3,759,998 3,621,069 3,145,447
Additions 0 0 0 0 0
Interest 5.00% 196,000 191,000 185,000 169,000 79,000
Withdrawals (196,000) (191,000) (185,000) (169,000) (79,000)
Releases (99,286) (114,643) (138,929) (475,622) (3,145,449)
------- -------- -------- -------- ----------
Ending Balance 3,874,641 3,759,998 3,621,069 3,145,447 (2)
Overhaul Reserve Fund
Beginning Balance (7,826,368) (8,208,368) (8,609,368) (9,029,368) (9,470,368)
Additions 0 0 0 0 0
Interest Earnings 5.00% (382,000) (401,000) (420,000) (441,000) (462,000)
Turbine Overhauls 0 0 0 0 0
Other Withdrawals 0 0 0 0 0
Interest Withdrawal 0 0 0 0 0
Releases 0 0 0 0 0
- - - - -
Ending Balance (8,208,368) (8,609,368) (9,029,368) (9,470,368) (9,932,368)
Dispatch Hours 0 0 0 0 0
Reserve Addition 3.00% $405 $417 $430 $443 $456
Reserve Addition 0 0 0 0 0
Overhaul Requirements
Frame 6 Operating Hours 4,863 4,863 4,863 4,863 4,863
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82
Frame 6 Factored Hours 13,714 13,714 13,714 13,714 13,714
Combustion Inspection (CI) [1]
Hot Gas Path Inspection (HGP)
Major Overhaul (MO) [3]
Frame 7 Operating Hours 3,525 3,525 3,525 3,525 3,525
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82
Frame 7 Factored Hours 9,941 9,941 9,941 9,941 9,941
Combustion Inspection (CI) [4]
Hot Gas Path Inspection (HGP) [5]
Major Overhaul[6]
Steam Turbine Equiv. Hours 9,029 9,029 9,029 9,029 9,029
Limited ST Overhaul (LO) [7]
Major ST Overhaul (MO) [8]
-----------------------------------------------------------------
Total Overhaul Costs $0 $0 $0 $0 $0
</TABLE>
<PAGE>
BURNS & MCDONNELL
Officer's Certificate
I, Michael W. McComas, Vice President of Burns & McDonnell, DO
HEREBY CERTIFY that:
Except as set forth below, since July 25, 1996, no event affecting
our report entitled "Panda-Rosemary Cogeneration Project Condition Assessment
Report for Potential Investors at the Request of Panda Energy Corporation"
(the "Independent Engineer's Report") or the matters referred to therein has
occurred (i) which makes untrue or incorrect in any material respect, as of
the date hereof, any information or statement contained in the Independent
Engineer's Report or in the Prospectus relating to the offering of Pooled
Project Bonds, Series A-1 due 2012 by Panda Funding Corporation (the
"Prospectus") under the caption "Independent Engineer's Report-Rosemary" in
the Prospectus Summary or (ii) which is not reflected in the Prospectus but
should be reflected therein in order to make the statements and information
contained in the Independent Engineer's Report or in the Prospectus under the
caption "Independent Engineer's Report-Rosemary" in the Prospectus Summary,
in light of the circumstances under which they were made, not misleading.
In September 1996, a transformer at the Panda-Rosemary Facility
sustained damage from a hurricane. A substitute transformer has been
temporarily installed pending repair of the damaged transformer. Burns &
McDonnell is assessing the situation and is not currently able to determine
the impact, if any, such event may have on the Independent Engineer's Report
and the information contained therein. Panda Interfunding Corporation has
informed Burns & McDonnell that it believes that such event will not have a
material adverse affect on the financial condition of the Panda-Rosemary
Facility.
WITNESS my hand this 11th day of October, 1996.
By: /s/ Michael W. McComas
Name: Michael W. McComas
Title: Vice President
<PAGE>
APPENDIX D
Assessment of Fuel Price,
Supply and Delivery Risks for the
Panda-RosemaryCogeneration Project
Prepared by:
Benjamin Schlesinger and Associates, Inc.
The Bethesda Gateway
7201 Wisconsin Avenue, Suite 740
Bethesda, MD 20814
Prepared for:
Panda Energy International, Inc.
4100 Spring Valley Road, Suite 1001
Dallas, Texas 75244
July 26, 1996
Updated September 20, 1996
[BENJAMIN SCHLESINGER AND ASSOCIATES, INC. LETTERHEAD]
Originally dated July 26, 1996
Updated September 20, 1996
Mr. Bryan J. Urban
Vice President and Controller
Panda Energy International, Inc.
4100 Spring Valley, Suite 1001
Dallas, TX 75244
Subject: Assessment of Fuel Price, Supply and Delivery Risks for the
Panda-Rosemary Cogeneration Project (the "Project").
Dear Bryan:
I am pleased to enclose Benjamin Schlesinger and Associates, Inc.'s
updated opinion report assessing the fuel supply and delivery arrangements
for the Project and the associated risk to bondholders. As before, the
section entitled "Opinions and Conclusions" contains our principal findings
based on our analysis and evaluation of the Project's fuel supply and
delivery arrangements. Portions of the report which we have brought up to
date pertain to Panda's firm gas transportation arrangements.
Please give me a call if you have any questions about this report.
Sincerely yours,
BENJAMIN SCHLESINGER AND ASSOCIATES, INC.
/s/ Benjamin Schlesinger
__________________________________________
Benjamin Schlesinger, Ph.D.
President
Enclosure
cc: Ben Schlesinger
ASSESSMENT OF FUEL PRICE, SUPPLY AND DELIVERY RISKS FOR THE
PANDA-ROSEMARY COGENERATION PROJECT (THE "PROJECT")
INTRODUCTION
Panda Energy International, Inc. (Panda) developed and owns an interest
in the Project, a 180 MW gas-fired, combined cycle cogeneration facility
located in Roanoke Rapids, NC. The Project has sold electric capacity and
energy on a fully dispatchable basis to Virginia Electric and Power Company
(VEPCO) since beginning commercial operations in late December 1990. The
Project also sells steam and chilled water to its thermal host, the Bibb
Company.
The Project facilities include an approximately 10 mile, 10 inch natural
gas pipeline that connects the plant in Roanoke Rapids to an interconnection
with the Transco and Columbia interstate pipeline systems and with the North
Carolina Natural Gas Company (NCNG) system in Pleasant Hill, NC. The Project
has contracted for firm gas supply, firm transportation, gas balancing, and
fuel management services in order to satisfy its daily fuel requirements and
is permitted to burn low sulfur distillate fuel oil (DFO) as a backup fuel
supply.
In connection with two bond offerings being undertaken by subsidiaries of
Panda, Panda has retained Benjamin Schlesinger and Associates, Inc. (BSA) to
provide a due diligence analysis and evaluation of the Project's fuel supply
and delivery arrangements, focusing on the appropriateness of the existing
fuel arrangements, the historic reliability of fuel to the Project, and the
extent to which fuel costs and energy revenues match.
OPINIONS AND CONCLUSIONS
Viability of the Fuel Supply Plan. The Project's overall fuel supply plan
remains reasonable and appropriate given the Project's record of operation and
its energy payment structure (see below). Panda's contract with Natural Gas
Clearinghouse (NGC) for fuel management services lies at the heart of the
Project's fuel supply plan. NGC sells and delivers gas on a firm basis to
satisfy the Project's baseload fuel requirements to produce steam and chilled
water for sale to Bibb. Additionally, NGC buys and delivers gas and DFO on a
best efforts basis to satisfy the Project's variable daily fuel requirements
related to VEPCO's electric dispatch requests. The fuel plan includes direct
access to two interstate pipeline systems, monthly balancing and backup gas
sales service from NCNG, and sufficient on-site DFO storage and permit
authorization to burn DFO whenever gas deliveries to the Project are
insufficient to satisfy its total fuel requirements on a daily basis. We
conclude that, provided VEPCO continues to dispatch the Project principally as
a summer peaker, the additional fixed costs required to increase the
Project's gas supply or delivery reliability are not warranted from an
economic or fuel reliability perspective.
The Project's energy revenues under its power sales agreement reflect the
Project's fuel plan. During the months of January and February, when the
Project is most likely to be forced to burn DFO due to spot gas curtailments,
the energy payments are based on delivered DFO prices, while during the rest
of the year the energy payments are based on the delivered price of Gulf Coast
spot gas in the summer months and Appalachia spot gas in the winter months.
While the Project's actual fuel consumed for dispatch operations has generally
followed the seasonal fuel availability structure assumed in the energy payment
mechanism, we note that the Project's energy payments and actual fuel costs are
not directly linked, i.e., the Project's energy payment margins are at some
risk for a mismatch between energy payments and fuel costs to produce
electricity. Specifically, given that delivered DFO prices historically have
exceeded delivered gas prices, the Project benefits if it is able to burn gas
in January and February, but could experience reduced margins on its energy
payments if forced to burn DFO in lieu of spot gas to satisfy dispatch requests
in any other month. This risk, however, is largely mitigated by a start-up fee
payable by VEPCO each time the Project is dispatched in November, December and
March, the months other than January and February during which the Project is
most likely to be forced to burn DFO. Although we believe the existing fuel
plan to be reasonable and appropriate, we recommend that Panda continue to
monitor on an annual basis the Project's actual and projected dispatch and
gas and DFO pricing for the months of November, December and March to assess
the need for modifications in the existing fuel plan.
Fuel Reliability. Although the Project buys firm gas supply and delivery
services to satisfy only its baseload fuel requirements, the Project has always
had enough fuel to satisfy VEPCO's dispatch requests. Moreover, from the start
of commercial operations through the end of 1995, the Project has been able to
secure gas sufficient to satisfy in excess of 90% of its total dispatch fuel
requirements, a record attributable to relatively low levels of winter
dispatch as well as the flexibility of its gas arrangements. We conclude that
the Project's existing gas supply and delivery arrangements provide an
appropriate degree of gas reliability for an electric peaking facility. In
addition, we conclude that the Project's two million gallon on-site DFO storage
capacity, ready access to oil terminals in four nearby locations, and
operational DFO resupply procedures with NGC that have proven to be effective
to provide an appropriate degree of backup DFO supply reliability, i.e., no
additional DFO supply or delivery contracts are necessary. However, the
Project may not be able to sustain a 90% gas reliability level in the future
under a scenario of significantly higher levels of dispatch in the months of
November, December and March and Panda should continue to monitor projected
dispatch for these months as described above.
Review of Pro Forma Fuel Costs. We have reviewed the fuel supply and
transportation pricing projections used by Burns & McDonnell in their report on
the Project (the "Independent Engineer's Report"). We have concluded from
our review that the Independent Engineer's Report employs reasonably
conservative assumptions for the costs of the Project's various gas supply and
transportation services, i.e., based on our assessment of the fuel contracts
and the cost of gas supply and transportation services, we believe that fuel
delivered to the Project is likely to cost less than the estimates contained
in the Independent Engineer's Report.
Contract Terms. The Project's fuel supply and transportation contracts have
original terms of approximately 15 years and thus will need to be extended or
replaced. We conclude that the Project should have little difficulty
extending the existing fuel arrangements or, if necessary, replacing the
current fuel contracts with alternate service arrangements that offer
comparable price, credit support and reliability provisions. We note that the
Independent Engineer's Report projects fuel costs through the year 2015 on the
basis of the existing fuel contracts and, based on the foregoing conclusion,
we believe such projection to be reasonable.
DESCRIPTION OF THE PROJECT'S FUEL SUPPLY AND DELIVERY ARRANGEMENTS
I. Fuel Management.
Panda has two agreements with Natural Gas Clearinghouse (NGC) that
together provide the Project with a full spectrum of fuel management services.
Pursuant to these agreements, NGC satisfies the Project's daily fuel
requirements for baseload and dispatch operations by procuring the most
economical combination of firm and best efforts gas supply available to the
Project and maintaining an adequate supply of DFO to backup curtailments of
best efforts gas supplies. In this section, we briefly describe the NGC
contracts:
Panda negotiated a Gas Purchase Contract with NGC in 1990 (as amended in
1993) in order to secure a firm, warranted gas supply to support its
baseload fuel requirements. As amended, the firm gas supply contract
provides for the following:
- The contract term extends through November 30, 2005, after which
either party can terminate the contract with 30 days notice (see
ANALYSIS OF POTENTIAL RISKS TO INVESTORS).
- Panda nominates each month a Minimum Daily Quantity of gas it
will buy each day in such month (the "MDQ") up to a maximum of
3,075 MMBtu/day. NGC has a firm obligation to deliver Panda's
MDQ and, provided the parties reach agreement on a sales price,
to deliver all gas nominated by Panda in excess of the MDQ up
to the 3,075 MMBtu/day maximum.
- The price for the MDQ gas delivered is a monthly Gulf Coast
spot index plus $0.04/MMBtu, with any volume delivered in
excess of the MDQ priced at NGC's actual acquisition cost plus
$0.04/MMBtu.
- NGC delivers the gas to the Project either via Panda's firm
transportation contract with Transco (see below) or via
interruptible transportation (IT) service on the Transco or
Columbia interstate pipeline systems, or alternate pipeline
routes to the extent IT service is available.
- If Panda buys less than its MDQ in any month, it must pay NGC a
deficiency fee of $0.14/MMBtu times the amount of the
deficiency. If NGC fails to deliver the volume Panda nominates
each day up to the contract maximum of 3,075 MMBtu, it is
obligated to pay damages equal to the difference, on a
delivered cost to the Project basis, between Panda's
replacement fuel cost and the applicable cost of gas pursuant
to the contract for the deficient volume. In addition, NGC is
obligated, annually, to provide any lender or lessor to the
Project with financial information sufficient to assure lenders
of NGC's continuing ability to meet its delivery obligations.
In October, 1990, Panda executed a Fuel Supply Management Agreement (FSMA)
with NGC in order to secure spot gas to satisfy the Project's dispatch
fuel requirements and to secure DFO for use as a backup fuel when the
Project's total daily fuel requirements exceed the availability of gas
under the firm gas supply and the FSMA. The FSMA has the same term as
the NGC firm gas supply contract and contains the following provisions:
- NGC buys spot gas on a best efforts basis at the lowest
available price and delivers it to Pleasant Hill on an IT basis
via either Transco or Columbia.
- NGC manages the purchase of DFO for the Project and arranges
price hedging arrangements (see DFO Supply and Delivery below).
- Panda pays NGC's actual acquisition cost of gas and oil purchased
pursuant to the FSMA plus $0.04/MMBtu for all gas and
$0.002/gallon for all DFO delivered to the Project. In addition,
NGC keeps 60% of all discounts that it negotiates on behalf of
the Project relative to a benchmark delivered gas price equal to
the sum of a published monthly spot gas index and Transco's
monthly posted rate for IT service to Pleasant Hill.
- NGC manages all communications and billings related to gas
deliveries between Panda, NCNG, the interstate pipelines and all
gas suppliers, including dispatching gas from the suppliers
through the pipelines, invoicing, and verifying flowing
Volumes.(1)
II. Gas Transportation.
In October, 1991, Panda executed a Service Agreement with Transco for firm
transportation service (the FT-NT contract). Panda negotiated this service to
assure firm deliveries of the firm gas supply purchased from NGC to satisfy its
baseload fuel requirements. Pursuant to the FT-NT contract, Panda may deliver
up to 3,075 Mcf/day of gas to Texas Gas Transmission, a Transco affiliate, at
various points in Texas and Louisiana and receive the gas from Transco at
Pleasant Hill.
In July 1996, the Project entered into separate contracts with Texas Gas
Transmission Corporation (TGT), CNG Transmission Corporation (CNG), and
Transco under which it converted its FT-NT contract with Transco into
generally-applicable Part 284 firm transportation (FT) agreements with each
pipeline.(2) The Project's FT contracts with TGT, CNG and Transco provide it
with firm, 365 day/year service from each pipeline, subject to curtailment
only in the event of force majeure as specified in the FERC-approved tariffs of
each pipeline. Moreover, the conversion to FT service has enhanced the
Project's operational flexibility since it is now able to switch receipt and
delivery points for the gas and resell its capacity to third parties when
unneeded. Transco has assured the Project that as part of its FT service it
will continue to be guaranteed gas deliveries on a backhaul basis delivered
to Transco at Leidy via TGT and CNG.
Each contract term extends through October 31, 2006 (as did the Project's
FT-NT contract) and then extend year to year thereafter unless terminated by
either party with 12 months notice (see ANALYSIS OF POTENTIAL RISKS TO
INVESTORS). Panda pays each pipeline's FERC-approved maximum rates for this
service and NGC manages all three FT contracts as agent on behalf of Panda
(see above).
- ---------------------------
(1) Panda and NGC clarified NGC's fuel management responsibilities in a
1992 General Agent Confirmation Letter that designates NGC as the Project's
agent for purpose of arranging all transportation services with interstate
pipelines and NCNG for all gas delivered to the Project. As agent, NGC is
responsible for communicating all required information between the gas
suppliers, the pipelines and the Project and in reconciling any imbalances
that may arise pursuant to Panda's firm transportation agreement with Transco
(see below). Panda is responsible for paying all transportation costs as
invoiced by NGC.
(2) Transco offers this conversion to all of its FT-NT customers pursuant
to its FERC-authorized tariff.
III. Local Delivery and Gas Balancing.
In February 1990, as amended in December 1991, Panda executed the Pipeline
Operating Agreement with NCNG. The term of this agreement extends 15 years
from the date the Project began commercial operations, i.e., December 27, 2005,
and may be extended for two additional five year periods with the consent of
both parties (see ANALYSIS OF POTENTIAL RISKS TO INVESTORS). The Pipeline
Operating Agreement provides for the following:
NCNG operates and maintains Panda's pipeline between Pleasant Hill and the
plant in Roanoke Rapids.
NCNG balances Panda's receipt of gas from Transco and Columbia with the
delivery and consumption of gas at the plant in Roanoke Rapids on a daily
and monthly basis. Panda has the right to carryover to the following
month an imbalance between its receipt of gas at Pleasant Hill and its
delivery to Roanoke Rapids in any month equal to the greater of 50,000
MMBtu or 25% of the greater of the receipt or delivery volume for that
month. Panda "cashes out" its monthly imbalance volume in excess of the
carryover amount based upon NCNG's average purchase price of gas for that
month.
To the extent Panda is unable to buy gas, NCNG will sell gas to Panda on
a best efforts basis to the extent it has gas available without
diminishing service to its other customers.
Panda pays a fixed monthly fee of $20,000 for NCNG's services.
IV. DFO Supply and Delivery.
The Project's air permit allows it to operate for up to 2,000 hours/year
on DFO. The Project facilities include on-site storage capacity sufficient to
store approximately two million gallons of DFO (eight days of Project
operation when dispatched at its rated capacity output for 24 hours/day) for
use when gas is unavailable to the Project. The Project includes two oil
unloading bays that can each unload one tank truck in approximately 30
minutes. When refilling its storage tank, the Project will typically unload
two trucks/hour but can unload three trucks/hour if necessary.
Pursuant to the FSMA, NGC is responsible for arranging DFO supply for the
Project. Panda reports that NGC has no long-term contracts for DFO supply and
delivery. Rather, Panda reports that its DFO resupply plan calls for the
Project to top off its 2,000,000 gallon tank in advance of each winter season.
If the Project burns DFO early in the winter, it typically will elect to
replenish the consumed DFO immediately. However, as the winter progresses and
the Project anticipates that gas will become increasingly reliable, it may
decide not to replenish the tank immediately after an oil burn, but wait for
late summer to top off the tank in preparation for the following winter.
Pursuant to Panda's instructions, NGC currently buys DFO on a spot basis
and does not hedge its purchase price because the Project's energy revenues are
based on a spot oil price index (for January and February only) and the Project
cannot predict in advance when or how much DFO it will burn in lieu of gas.
NGC buys DFO from major oil companies and independent jobbers with product in
storage at major terminals off the Colonial Pipeline in Richmond, VA, Selma,
NC, Greensboro, NC, and at Norfolk marine terminals. In the past, NGC has
arranged for the Project to buy 80-90% of its supply from suppliers active in
Richmond and Selma, including BP, Conoco, Amoco, Exxon, Sprague, and several
smaller jobbers. Since the suppliers either own trucks or have contracts with
local trucking firms for regional truck delivery, NGC does not independently
arrange trucking service from the terminals to the Project, i.e., the purchase
price includes delivery to the plant.
When Panda decides that it needs to purchase DFO, it notifies NGC of the
desired volume. The NGC contact person in Houston is a petroleum products
specialist who purchases products for several other power facilities as well
as the Project. The NGC specialist contacts a list of suppliers active in the
four regional terminal locations identified above and solicits price bids for
the desired volume and product quality. NGC evaluates the bids and verbally
accepts the winning bid at Panda's direction, but does not execute a written
purchase order for the DFO until it receives the results of independent
laboratory tests to confirm that the supplier's product in storage at the
terminal complies with the Project's quality specifications. NGC hires local
testing firms to take a sample of the winning supplier's product in storage at
the terminal. Within 48 hours, NGC gets confirmation of product quality from
the independent lab, executes a written purchase order, and the supplier begins
loading trucks. If the Project, typically during early winter refills,
indicates to NGC that it needs to replenish DFO quickly, NGC may skip the
independent terminal test, but Panda reserves the right to reject product
delivered to the Project that fails to meet the truck test at the plant, as
described below.
State regulation requires suppliers to seal each truck at the terminal
and Panda refuses to unload a truck and accept the product if a truck arrives
with seals broken. The drive time from Richmond and Selma is approximately
1.5 hours and the Project can receive trucks for unloading 24 hours/day.
Prior to unloading, Panda takes a sample from each truck and sends a blended
sample from all trucks unloaded each day to an independent lab for quality
testing. Panda receives the test results within 24 hours. If the test shows
that the delivered product failed to meet the Project's specifications, Panda
halts further shipments from that supplier. However, because Panda purchases
low sulfur (.05%) product in the late summer to top off its tank, it is able
to blend any low quality product received during a winter replenishment with
the high quality summer product and maintain its air permit requirement of
.2% sulfur product.
ASSESSMENT OF PRO FORMA FUEL COSTS
As part of the due diligence review of the Project's fuel arrangements,
BSA evaluated the fuel supply and transportation assumptions made by Burns &
McDonnell in the Executive Summary of and the Expected Fuel Costs section of
the Financial Assessment of the Project contained in the Independent
Engineer's Report. We have concluded from our review that the Independent
Engineer's Report employs conservative assumptions for the fixed costs of gas
transportation services to the Project and that it assumes the Project's
variable fuel costs will track those used to calculate VEPCO's energy payments
in the summer and winter gas months, even though NGC has a financial incentive
to beat the energy payment fuel prices. Based on our assessment of the fuel
contracts and the cost of spot gas(3) and pipeline transportation services, we
believe that the delivered cost of fuel to the Project is likely to be less
than the estimates contained in the Independent Engineer's Report. In
addition, we conclude that the Independent Engineer's Report contains
reasonable assumptions concerning the revenue that the Project may receive by
reselling transportation capacity that is excess to the Project's average
daily capacity utilization and/or reselling gas using its excess
transportation capacity.
ANALYSIS OF POTENTIAL RISKS TO INVESTORS
In this section, we identify and discuss areas of potential risk to
investors based on our review of the Project's fuel supply and delivery
arrangements and our assessment of the Project's operations through 1995.
I. Viability of Existing Fuel Supply and Delivery Arrangements.
Panda originally designed the Project's fuel plan to serve a summer
peaking electric generation facility. As such, the fuel plan accommodates the
variability in the Project's fuel requirements in the most cost-effective
manner by avoiding the fixed costs and premium prices attendant with firm gas
supply and transportation obligations and maximizing the operational
flexibility inherent in the Project's contracted services as well as in its
location, and facilities. The Project's flexible fuel arrangements include:
Panda has contracted for overall fuel management services (gas/DFO
supply and delivery) with NGC, one of the most diversified and
experienced firms providing fuel management services.
- -------------------------------
(3) While we believe that the long-term spot gas price projections
contained in the Independent Engineer's Report assume a reasonable degree of
average annual gas price escalation over the term of the refinancing, we note
that they fail to accurately capture the increase in gas prices experienced
to date in 1996.
The Project has direct pipeline access to two major interstate gas
pipeline systems that access gas supplies in two different supply
regions (Columbia serves the Appalachia supply region while Transco
accesses the U.S. Gulf Coast supply region). This structure
permits NGC, on behalf of the Project, to shop for the lowest cost
spot gas from either supply area when gas is available on both
systems and, when transportation curtailments shut down one of the
two pipeline routes, to access spot gas from the second pipeline
route rather than burning more expensive DFO.
The monthly balancing and backup sales provisions of Panda's
Pipeline Operating Agreement with NCNG permits the Project to avoid
DFO use during brief periods when gas is unavailable and permits the
Project to build up and carryover positive monthly imbalances in
anticipation of seasonal, e.g., winter, periods of gas curtailments.
In particular, after satisfying its baseload requirements, Panda is
able to use any daily excess capacity in its Transco FT and NGC firm
gas supply contracts to build up positive imbalances on NCNG during
winter days of no dispatch for use when the Project is dispatched
and no spot gas is available.
The Project may burn DFO as necessary to backup gas supplies for up
to 2,000 hours/year, well in excess of the actual and anticipated
future periods of gas unavailability.
Table One reviews the Project's operating history in summary form for the
first two years of operation and by month through the end of 1995. Table One
reveals that Gulf Coast gas delivered via the Transco system has been the
most economical fuel source for the majority of the Project's dispatch
requirements, satisfying 64% of total dispatch consumption in 1993-1995.
Over the same period, the Project has purchased relatively little (23% of
total dispatch fuel) spot gas via the Columbia system, generally supplementing
Transco spot deliveries in peak summer dispatch months for economic reasons.
Table Two reveals that, aside from the first year when the Project did not yet
have in place its full Transco FT service, the Project typically has burned
significant amounts of DFO for electric dispatch only in winter months when
spot gas was unavailable on either pipeline route, particularly starting in
1993 when, as described below, VEPCO used a revised formula for dispatching
the Project.(4)
The Project's power sales agreement with VEPCO originally compensated the
Project for energy produced based on an index of gas and oil prices. In
August 1993, the Project and VEPCO negotiated a revision to the energy payment
provision to better align the Project's energy revenues with its actual fuel
costs. As amended, the contract defines a Fuel Compensation Price
- -----------------------------
(4) Panda reports that in August of 1995, the Project burned DFO due to a
plant equipment problem that prohibited gas burn and in October of the same
year, the Project burned DFO in lieu of gas for three days due to hurricane-
related spot gas curtailments.
<PAGE>
<TABLE>
<CAPTION>
TABLE ONE
MONTHLY FUEL CONSUMPTION FOR ELECTRICITY GENERATION VERSUS FCP
MMBtu
Dispatch Oil Spot Gas Burn
Hours Burn Gulf Coast Appalachia FCP NCP Gas
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Jan. 93 0 57 207 0 WOP 0
Feb. 93 30 30,316 2,101 0 WOP 0
Mar. 93 8 302 6,722 0 WGCP 0
Apr. 93 0 63 183 0 SGCP 0
May 93 0 0 558 0 SGCP 0
June 93 26 44 33,090 0 SGCP 0
July 93 18 0 22,875 0 SGCP 0
Aug. 93 162 0 158,017 0 SGCP 0
Sept.93 55 0 24,076 0 SGCP 0
Oct. 93 6 57 5,298 0 SGCP 0
Nov. 93 19 96 21,104 0 WGCP 0
Dec. 93 0 67 365 0 WGCP 0
Jan. 94 90 117,546 6,603 0 WOP 0
Feb. 94 0 57 319 0 WOP 0
Mar. 94 0 57 225 0 WGCP 0
Apr. 94 4 12 2,644 0 SGCP 0
May 94 0 297 169 0 SGCP 0
June 94 289 0 269,678 0 SGCP 0
July 94 146 325 48,740 88,475 SGCP 0
Aug. 94 81 29 97,617 1,248 SGCP 0
Sept.94 36 1,467 26,409 0 SGCP 0
Oct. 94 101 673 45,899 0 SGCP 0
Nov. 94 5 716 2,188 0 WGCP 0
Dec. 94 0 605 1,266 0 WGCP 0
Jan. 95 0 21 318 0 WOP 0
Feb. 95 48 52,811 4,129 0 WOP 0
Mar. 95 15 125 14,119 0 WGCP 0
Apr. 95 102 0 133,543 0 SGCP 0
May 95 325 0 36,776 382,040(1) SGCP 0
June 95 251 0 28,548 0 SGCP 284,238
July 95 391 713 26,444 0 SGCP 415,735
Aug. 95 466 25,315 29,527 0 SGCP 373,342
Sept.95 152 465 32,370 0 SGCP 133,648
Oct. 95 387 24,952 181,846 0 SGCP 0
Nov. 95 72 169 30,048 0 WGCP 0
Dec. 95 0 318 188 0 WGCP 0
TOTAL 3,286 257,674 1,294,209 471,763 1,206,963
% TOTAL
FUEL(2) 12.7% 64.0% 23.3%
</TABLE>
1991-1992 1993-1995
% Oil Burned in WOP Months = 11.6% 77.9%
% Appalachian Gas Burned in WGCP Months = 22.5% 0.0%
% Gulf Coast Gas Burned in SGCP Months = 90.3% 93.1%
(1) Panda bought gas from Cape Fear Energy (NCNG) - cheaper than NGC
delivered price.
(2) Excludes NCP (VEPCO) supplied gas from 6/95-9/95 (delivered via Columbia).
"WOP": Winter Oil Price (regional #2 oil price index).
"WGCP": Winter Gas Compensation Price (Appal. spot gas index + interruptible
transportation).
"SGCP": Summer Gas Compensation Price (Gulf spot gas index + interruptible
transportation).
<PAGE>
<TABLE>
<CAPTION>
TABLE TWO
PANDA-ROSEMARY COGENERATION FACILITY
Oil Consumption by Fuel Compensation Price Period
MMBtu
Total Oil WOP WGP SGP
Burn Months % Months % Months %
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1991 141,628 9,327 6.6% 130,659 92.3% 1,643 1.2%
1992 11,500 8,437 73.4% 2,384 20.7% 680 5.9%
1993 31,002 30,374 98.0% 464 1.5% 164 0.5% (1)
1994 121,783 117,603 96.6% 1,378 1.1% 2,803 2.3%
1995 104,889 52,832 50.4% 612 0.6% 51,445 49.0%
TOTAL 410,803 218,572 53.2% 135,496 33.0% 56,735 13.8%
</TABLE>
SOURCE: Panda's Monthly Production Reports.
(1) Panda burned 50,267 MMBtu of oil in 8/95 and 10/95. Panda reports that
in 8/95, gas was available, but it had to burn oil due to equipment
problems. In 10/95, Panda reports that it burned DFO due to hurricane-
related gas curtailments.
(FCP) that adjusts monthly based on a Winter Oil Price (WOP) index of regional
DFO prices in January and February, a Summer Gas Compensation Price (SGCP)
index of spot gas prices delivered to the Project from the Gulf Coast for April
- -October (the summer gas months), and a Winter Gas Compensation Price (WGCP)
index of spot gas prices delivered to the Project from Appalachia for the
winter gas months of November, December, and March. In addition, VEPCO pays a
start-up fee equal to [$38,286 * (WOP-WGCP)] for every start-up request during
the winter gas months.
We conclude that, compared with the original FCP structure, the revised
FCP structure more closely mimics the actual seasonal availability of fuel to
the Project and therefore better links energy payments, dispatch and fuel
availability. However, we caution that the calculation of dispatch and energy
payments in the FCP are not directly tied to the Project's actual fuel costs,
i.e., while the revised FCP reduces, it does not eliminate the risk of a
mismatch between the fuel prices used to calculate FCP and the Project's
actual cost of fuel to produce electricity. More specifically, although the
Project benefits if it is able to burn gas in January and February when VEPCO
will compensate it for DFO, it is vulnerable to burning DFO in lieu of gas to
satisfy dispatch requests in any other month when VEPCO will compensate it for
gas. The fuel arrangements provide for burning gas whenever available.
However, operational experience suggests that while gas typically will be
available throughout the summer months, the Project should anticipate potential
gas curtailments during winter months. Therefore, the Project is most
vulnerable to dispatch and DFO burn during the WGCP months of November,
December and March.
As revealed in Figures One and Two, the operating history of the Project
confirms that the Project has indeed operated as a summer peaker through
1995. In contrast, we note that the Independent Engineer's Report is
projecting significantly greater dispatch during future WGCP months.
This increase in dispatch highlights the lack of FT service for WGCP
dispatch and the Project's vulnerability to DFO burn during those months.
We believe that the following factors mitigate the fuel risk associated
with significantly greater winter dispatch:
The FCP mechanism compensates the Project in part for DFO burn during
WGCP months through the start-up fee. Panda has provided us with analysis
that demonstrates that the start-up fee adequately compensates the Project
for the differential between delivered DFO cost and an energy payment indexed
to delivered gas prices for approximately 3-4 days of 24 hour/day operation
after each start-up. As a dispatchable facility, the Project typically has
not operated for longer than 3-4 days after a start-up during winter months.
FIGURE ONE
MONTHLY DISPATCH HOURS
GRAPH
FIGURE TWO
YEARLY DISPATCH HOURS
BAR CHART
From 1993-1995, NGC has been successful in securing spot gas from the
U.S. Gulf Coast to satisfy all of the Project's gas requirements
during the WGCP months (see Table One) at delivered costs less than
the Appalachian spot gas index used to calculate the WGCP.
Panda's connection with both the Transco and Columbia systems will
allow it the flexibility to seek out transportation service wherever
it is available. In particular, we note that Columbia's interruptible
transportation service typically is more reliable than Transco's
during the winter months.
If the Project begins to incur significant operation during the WGCP
months, Panda could explore opportunities for firming up spot gas deliveries
during such months, including:
Pre-arranged Released FT. Under this arrangement, the Project would
contract to share existing capacity on the Transco or Columbia systems
that another shipper, probably a gas utility, already holds. The
releasing shipper would have limited need for the capacity in the
shoulder months of November, December, and March, but would anticipate
needing the capacity during the peak months of January and February
when the Project would not need the capacity because VEPCO will fully
compensate it for DFO burn.
Existing FT with Pre-arranged Release. Under this arrangement, the
Project would buy new FT service on the Transco or Columbia systems
and would negotiate to share the capacity with a buyer that needs peak
period FT service, again probably a gas utility. The Project would
permit the released FT buyer to use the FT service any day during the
WOP months and any other day that the Project is not dispatched.
In assessing the above or similar options, we caution that the firmer the
level of desired service, the longer the time involved in negotiating an
agreement and the greater the degree of fixed cost obligation the Project
should anticipate incurring. For this reason, steps taken to firm up spot
gas deliveries are likely to be economic only if the Project anticipates
increases in dispatch during WGCP months. We have not conducted a detailed
assessment of the most cost effective fuel strategy for the Project under
alternate scenarios of future dispatch levels, i.e., whether to continue the
existing fuel arrangements and risk burning greater amounts of DFO during WGCP
months or to negotiate for firmer gas transportation service and reduce
potential future WGCP DFO burn. However, we recommend that Panda continue to
monitor on an annual basis the Project's actual annual and seasonal dispatch
as well as the updated projections of future dispatch to assess the continued
adequacy of the fuel plan and to determine when and if additional arrangements
are appropriate.
II. Fuel Reliability.
Panda has purchased firm gas supply and FT service sufficient to satisfy
only its baseload fuel requirements. Pursuant to the FSMA with NGC, Panda buys
spot gas and IT service on the pipelines to satisfy its fuel requirements to
produce power when dispatched. Therefore, the gas will not always be
available and the Project will be forced to burn DFO to satisfy dispatch
requirements, particularly in the winter months. However, we conclude that
the Project's existing gas supply and delivery arrangements provide an
appropriate degree of reliability for an electric peaking facility.
Table Three reveals that the Project has utilized its flexible fuel plan
to secure gas to satisfy in excess of 90% of its total dispatch fuel
requirements from the start of commercial operations through the end of 1995.
Moreover, over the same period, Panda confirms that the Project has never
failed to meet a dispatch request due to lack of fuel, that it has never had
less than a 1,000,000 gallon on-site inventory of DFO, that NGC has never
failed to purchase DFO within 48 hours of Panda's request for resupply, and
that the Project never failed to receive purchased DFO due to truck
unavailability. Based on this record of DFO reliability and the fact that the
Project enters each winter season with a DFO inventory sufficient to operate
the Project on oil for at least 8 days at a 24 hours/day dispatch level prior
to resupply, we conclude that no additional contracts are necessary for DFO
supply and delivery. However, we caution that the Project may not be able to
sustain a 90% gas reliability level in the future under a scenario of
significantly higher levels of winter dispatch.
III. Contract Terms.
The Project's fuel supply and transportation contracts have original terms
of approximately 15 years and thus will need to be extended or replaced. We
conclude that the Project should have little difficulty extending the existing
fuel arrangements or, if necessary, replacing the current fuel contracts with
alternate service arrangements that offer comparable price, credit support and
reliability provisions. We note that the Independent Engineer's Report
projects fuel costs through the year 2015 on the basis of the existing fuel
contracts and, based on the foregoing conclusion, we believe such projection
to be reasonable.
Gas Supply
The Project's firm gas supply contract with NGC is market-based, i.e., the
contract price of gas adjusts with the market value of spot gas in each month.
The contract provides for NGC to deliver a warranted supply into receipt points
on Texas Gas Transmission in East Texas and South Louisiana with the price
equal to a monthly spot gas index plus NGC's $0.04/MMBtu margin. We note that
the Panda receipt points are significant trading locations in the U.S. Gulf
Coast supply area and that NGC's margin is reasonably competitive in current
market conditions for a small volume, high load factor, long-term sale
obligation of this type.
<PAGE>
<TABLE>
<CAPTION>
TABLE THREE
PANDA-ROSEMARY COGENERATION FACILITY
Monthly Fuel Consumption for Electric Generation, 1991-1995
FUEL CONSUMPTION
Dispatch------------Oil---------- Gas Total % %
Hours Gallons MMBtu MMBtu MMBtu Oil Gas
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1991 1,174 1,021,184 141,628 1,145,122 1,286,750 11.0% 89.0%
1992 377 82,921 11,500 869,704 881,204 1.3% 98.7%
JAN-93 0 413 57 207 264 21.7% 78.3%
FEB-93 30 218,590 30,316 2,101 32,417 93.5% 6.5%
MAR-93 8 2,177 302 6,722 7,024 4.3% 95.7%
APR-93 0 452 63 183 246 25.5% 74.5%
MAY-93 0 0 0 558 558 0.0% 100.0%
JUN-93 26 317 44 33,090 33,134 0.1% 99.9%
JUL-93 18 0 0 22,875 22,875 0.0% 100.0%
AUG-93 162 0 0 158,017 158,017 0.0% 100.0%
SEP-93 55 0 0 24,076 24,076 0.0% 100.0%
OCT-93 6 414 57 5,298 5,355 1.1% 98.9%
NOV-93 19 690 96 21,104 21,200 0.5% 99.5%
DEC-93 0 480 67 365 432 15.4% 84.6%
JAN-94 90 847,540 117,546 6,603 124,149 94.7% 5.3%
FEB-94 0 410 57 319 376 15.1% 84.9%
MAR-94 0 410 57 225 282 20.2% 79.8%
APR-94 4 90 12 2,644 2,656 0.5% 99.5%
MAY-94 0 2,140 297 169 466 63.7% 36.3%
JUN-94 289 0 0 269,678 269,678 0.0% 100.0%
JUL-94 146 2,340 325 137,215 137,540 0.2% 99.8%
AUG-94 81 210 29 98,865 98,894 0.0% 100.0%
SEP-94 36 10,580 1,467 26,409 27,876 5.3% 94.7%
OCT-94 101 4,850 673 45,899 46,572 1.4% 98.6%
NOV-94 5 5,163 716 2,188 2,904 24.7% 75.3%
DEC-94 0 4,362 605 1,266 1,871 32.3% 67.7%
JAN-95 0 151 21 318 339 6.2% 93.8%
FEB-95 48 380,783 52,811 4,129 56,940 92.7% 7.3%
MAR-95 15 901 125 14,119 14,244 0.9% 99.1%
APR-95 102 0 0 133,543 133,543 0.0% 100.0%
MAY-95 325 0 0 418,816 418,816 0.0% 100.0%
JUN-95 251 0 0 312,786 312,786 0.0% 100.0%
JUL-95 391 5,141 713 442,179 442,892 0.2% 99.8%
AUG-95 466 182,529 25,315 402,869 428,184 5.9% 94.1%
SEP-95 152 3,353 465 166,018 166,483 0.3% 99.7%
OCT-95 387 179,911 24,952 181,846 206,798 12.1% 87.9%
NOV-95 72 1,219 169 30,048 30,217 0.6% 99.4%
DEC-95 0 2,293 318 188 506 62.8% 37.2%
TOTAL 257,674 2,972,935 3,230,609 8.0% 92.0%
</TABLE>
SOURCE: Panda's Monthly Production Reports.
For this reason, we believe that numerous credit worthy suppliers could access
the Pandareceipt points with warranted gas on a market plus $0.04/MMBtu basis.
We conclude that Panda should have little difficulty replacing the NGC firm
supply contract with another credit worthy firm supplier, if necessary.
Likewise, the cost of gas pursuant to the Project's FSMA is market based.
In addition, NGC delivers the FSMA supplies to the Project using non-firm
transportation service on interstate pipelines and the Project reimburses
NGC's transportation costs. NGC provides this service by maintaining a
portfolio of diverse gas supplies and delivery (transportation and
storage) service arrangements on numerous interconnecting pipelines and a
portfolio of diverse geographic and load requirement markets so that it
always has gas flowing at multiple pipeline locations on any given day.
By managing receipts and deliveries of gas at multiple locations, NGC
utilizes the flexibility in the interconnected pipeline network to satisfy
the Project's daily gas requirements. NGC is only one of several large,
integrated gas marketing firms that controls the necessary combination of
diverse supplies, markets, delivery arrangements and experience to provide
this type of fuel management service. Because Panda's FSMA is
market-based, we again conclude that Panda should have little difficulty
replacing the NGC FSMA with another experienced fuel management service
provider, if necessary.
Gas Transportation
A. Service Reliability.
Transco secured authorization from the FERC under Section 7(c) of the
Natural Gas Act to build new facilities on its system and the upstream
pipeline systems of CNG Transmission Corporation ("CNG"), and Texas Gas
Transmission Corporation ("TGT") so as to provide new FT-NT service to the
Project and other shippers. Panda recently converted service under its FT-NT
contract to three separate Part 284 FT service agreements with Transco, CNG
and TGT. As an FT shipper, the Project pays for service rates to on TGT, CNG
and Transco based on "rolled-in" rates by which each pipeline recovers the
overall embedded costs of its system cost of the specific facilities that the
three pipelines build and that Transco uses to provide firm service to the
shippers.(5) Transco, CNG and TGT also provide FT service to shippers
pursuant to Part 284 of the Natural Gas Policy Act utilizing their overall
system capacity, i.e., facilities not specifically dedicated to Section 7(c)
service. Part 284 FT shippers pay a "rolled-in" rate by which pipelines
recover the overall embedded costs of their systems, excluding the costs of
the specific facilities devoted to Section 7(c) service.
- -------------------------
(5) Pursuant to schedule FT-NT, Transco leases the new capacity from TGT
and CNG, bundles it with the new capacity on its own system, and manages the
aggregated capacity as if it were capacity solely on its own system, e.g.,
Transco bills the Project for the aggregated capacity.
This action has enhanced the Project's operational flexibility by
allowing it to switch receipt and delivery points for the gas and permit it
to access alternate supplies and markets for gas and release for sale capacity
that may be excess to the Project's needs on either a temporary or permanent
basis. However, the Project's Transco Part 284 FT service agreement with
Transco provides transportation through a different contract path than is
provided under the FT-NT contract, as follows:
Under Panda's FT-NT service agreement, Transco received gas from CNG at
Leidy, PA and redeliver the gas to Panda on a firm basis at Pleasant Hill.
For a portion of this route, Transco provided Panda with firm backhaul
service, i.e., the contractual flow of gas from the intersection of
Transco's "Leidy Line" with its mainline in Mercer County, NJ south to
Transco's Station 165 in VA is counter to the south-to-north physical flow
of gas on Transco's system.
In contrast, Transco's Part 284 FT tariff does not currently include firm
backhaul service. Hence, the proposed Project's replacement Part 284
service agreement specifies that Panda must nominate service from Mercer
County to Station 165 using its secondary firm capacity rights as a Part
284 FT shipper.
Pursuant to its tariff, Transco treats volumes scheduled between
secondary firm points as lower priority transactions than those scheduled
between primary firm points, i.e., Transco may interrupt secondary firm
shipments, although such transactions have higher priority than
interruptible transportation transactions. Consequently, the Part 284
replacement contract appeared at first to provide Panda with inferior
service relative to its previous existing FT-NT service agreement.
To address this risk issue, Transco provided BSA with documentation
explaining that any transaction scheduled between Mercer County and Station
165 offsets forward haul volumes between Station 165 and Mercer County and,
therefore, does not compete for scare south-to-north capacity on Transco's
system. Transco states that although Panda would have to schedule gas from
Mercer County to Station 165 on a secondary firm basis under its Part 284 FT
contract, Transco would curtail Panda's backhaul service only under the exact
same conditions that would force it to curtail Panda's FT-NT service, i.e.,
force majeure events restricting forward haul volumes from Station 165 to
Mercer County or Panda's failure to nominate and deliver gas as a forward haul
from Leidy to Mercer County on the Leidy Lane. Hence, we conclude that
Panda's Part 284 FT service agreement with Transco provides the project with
service reliability equivalent to its existing FT-NT agreement.(6)
- --------------------------
(6) Transco held the upstream capacity on TGT and CNG. Transco assigned
its capacity on the upstream pipelines to Panda and Panda entered into Part 284
FT service agreements with TGT and CNG providing terms equivalent to the FT-NT
service.
No such backhaul is involved with respect to the Project's gas transportation
on either TGT or CNG, thus we anticipate that its FT contracts with TGT and CNG
enable the Project to receive the identical service reliability on those
pipelines to the service it received on them under its previous FT-NT
agreement with Transco.
B. Cost.
Because the Project converted from FT-NT service to conventional Part 284
FT service, it no longer faces the risk that it could lose its FT capacity
when its FT contracts have expired after October 31, 2006. Under FERC rules,
the Project's willingness to continue paying Part 284 maximum FT rates to each
pipeline ensures that it will not be outbid by any other shipper at that time,
and will thereby preserve its ability to retain its FT service. We understand
that the FERC will permit the pipelines to charge Panda the higher of the
generally-applicable Part 284 FT rate or the existing Section 7(c) FT-NT
rate,(7) and that the expiration dates of each of its Part 284 FT contracts are
coincident with the term of its previous FT-NT contract, i.e., through
10/31/2006. Upon contract termination, the pipelines must make the physical
capacity that they used to serve the Project available to the shipper offering
the best price, subject to their maximum Part 284 FT rates. This implies that
a conservative case is one in which, starting 11/1/2006 and extending for the
duration of the financing, the Project would cease paying the existing FT-NT
rate and begin paying the maximum Part 284 FT rate on each of the three
pipelines in order to replicate the same service that Transco currently
provides on a packaged basis.
We conservatively estimate that, since the Project has replaced its FT-NT
service rate with Part 284 FT service rates on Transco, CNG and TGT, the cost
of the Project's FT service would increase in 2006 by approximately 22% over
the level assumed in the Project's financial model, i.e., up to the projected
2006 value of the pipelines' current Part 284 FT rates. Our analysis assumes
the following:
Transco, CNG and TGT built capacity under Section 7(c) of the Natural Gas
Act to serve the Project. This capacity will be available for much longer
than the 15 year term of the FT-NT service agreement.
When the Project's Part 284 service agreements expire in 2006, the
pipelines must make the capacity available to the shipper offering the
best price, subject to their maximum Part 284 FT rates. We therefore
assume that the pipelines will sell the capacity after 2006 to the highest
bidder and that the Project's ability to retain the capacity is a matter
of the Project's opting to maintain each of its three FT contracts in
force on a year-to-year basis, with termination provisions as
characterized above.
- --------------------------
(7) We estimate that the FT-NT rate is currently higher than the Part 284
FT rate. The Engineer's Report assumes that the Project pays the FT-NT rate.
Thus, we conservatively assume that the Project would have to pay the
maximum Part 284 FT rates to retain the Transco, CNG, TGT service after 2006.
We estimate that the sum of the Part 284 FT rates, although currently about 91%
of the cost of FT-NT service on a 100% load factor basis, would not exceed
FT-NT costs until after 1999, and could be approximately 22% higher than the
projected cost of FT-NT service by 2006. We note, however, that the foregoing
increase in estimated fuel expenses, were it to transpire, would apply only to
the firm component (3,075 Dth) of the Project's gas transportation
expenditures and would affect only the final years of the loan, thus we
conclude that itwould not represent a significant or material increase the
Project's overall fuel expenditures. In summary, the switch to Part 284 FT
rates enchances theProject's operational flexibility, is likely to provide
lower gas transportationcosts at least through 1999 and, under conservative
assumptions, would result in an immaterial increase in gas costs by the year
2006.
Gas Balancing
Pursuant to the Pipeline Operating Agreement, NCNG both maintains the
Project's pipeline from Pleasant Hill to Roanoke Rapids and provides the
Project with monthly carryover balancing service for one monthly fixed price.
Many parties are qualified to provide the former service. On the other hand,
the monthly carryover service provides a critical degree of operational
flexibility for a dispatchable electric generator and can only be accomplished
through the physical gas storage capability that exists on NCNG's system or on
the interstate pipelines. Therefore, we believe that NCNG or, possibly, NGC
are the only realistic providers of the latter service. At the appropriate
time, Panda intends to negotiate to extend the term of this agreement and
believes that its mutually beneficial relationship with NCNG will continue
under its current form.
CONCLUSION
Set forth above under Opinions and Conclusions are our principal findings
based on our analysis and evaluation of the Project's fuel supply and delivery
arrangements. For a more detailed description of the estimates and
assumptions upon which these opinions and conclusions are based, this report
should be read in its entirety.
<PAGE>
BENJAMIN SCHLESINGER AND ASSOCIATES, INC.
Officer's Certificate
I, Benjamin Schlesinger, Principal of Benjamin Schlesinger and
Associates, Inc., DO HEREBY CERTIFY that:
Since September 20, 1996, no event affecting our report entitled
"Assessment of Fuel Price, Supply and Delivery Risks for the Panda-Rosemary
Cogeneration Project" (the "Fuel Consultant's Report") or the matters referred
to therein has occurred (i) which makes untrue or incorrect in any material
respect, as of the date hereof, any information or statement contained in the
Fuel Consultant's Report or in the Prospectus relating to the offering of
Pooled Project Bonds, Series A-1 due 2012 by Panda Funding Corporation (the
"Prospectus") under the caption "Fuel Consultant's Report-Rosemary" in the
Prospectus Summary or (ii) which is not reflected in the Prospectus but
should be reflected therein in order to make the statements and information
contained in the Fuel Consultant's Report or in the Prospectus under the
caption "Fuel Consultant's Report-Rosemary" in the Prospectus Summary, in
light of the circumstances under which they were made, not misleading.
WITNESS my hand this 11th day of October, 1996.
By: /s/ Benjamin Schlesinger, Ph.D
Name: Benjamin Schlesinger
Title: President
<PAGE>
APPENDIX E
Independent Panda-Brandywine Pro Forma Projections
Prepared for:
Panda Energy International, Inc.
Prepared by:
ICF Resources Incorporated,
a subsidiary of ICF Kaiser International
July 26, 1996
TABLE OF CONTENTS
Page
TABLE OF CONTENTS E-i
EXECUTIVE SUMMARY E-1
Assumptions E-2
Conclusions E-5
INTRODUCTION E-7
Description of Brandywine E-7
ICF's Role E-7
SCHEDULE A-INCOME STATEMENT AND SCHEDULE B-CASH FLOW
STATEMENT E-9
SCHEDULE C-DEVELOPMENT ASSUMPTIONS E-9
SCHEDULE D-OPERATING ASSUMPTIONS E-10
Operating assumptions E-10
Electricity Revenues-Capacity E-10
Electricity Revenues - Energy E-12
Distilled Water Revenues and Costs E-12
Fixed Operating Expenses E-12
Turbine Overhaul and Lease Reserve E-12
SCHEDULE E-LEASE PAYMENTS AND CAPACITY ADJUSTMENTS E-13
SCHEDULE F-GAS SUPPLY INCOME STATEMENT AND
SCHEDULE G-GAS SUPPLY OPERATING ASSUMPTIONS E-13
Dispatch Hours E-13
Gas and Fuel Oil Volumes and Compensation Price E-14
Energy-Based Revenues (Gas Supply Income Statement) E-16
Fuel Costs E-16
Transportation E-17
CONCLUSIONS E-19
APPENDIX PANDA BRANDYWINE PRO FORMA E-20
This report was produced by ICF Resources
Incorporated (ICF) in accordance with an agreement
with Panda Energy International, Inc., who paid for
its services in producing the report and this report
is subject to the terms of that agreement. This report
is meant to be read as a whole and in conjunction with
this disclaimer. Any use of this report other than as a
whole and in conjunction with this disclaimer is forbidden.
Any use of this report, other than as provided for in ICF's
agreement with Panda Energy International, is forbidden.
This report may not be copied in whole or in part or
distributed to anyone outside Panda Energy International
without ICF's prior express and specific written permission.
This report and information and statements herein are
based in whole or in part on information obtained from various
sources. ICF makes no assurances as to the accuracy of any
such information or any conclusions based thereon. ICF bears
no responsibility for the results of any actions taken on the
basis of this Report.
EXECUTIVE SUMMARY
ICF Resources, Incorporated, a subsidiary of ICF Kaiser International
("ICF"), has prepared the independent pro forma projections (the "Project Pro
Forma") for the Panda-Brandywine Cogeneration Project (the "Project")
contained herein pursuant to a Consulting Agreement with Panda Energy
International, Inc. ("Panda"). In developing its projections, ICF reviewed
the Project's fuel supply and transportation contracts and its Power Purchase
Agreement, as amended ("PPA"), as well as the independent reports on the
Project prepared by the Project's independent engineer, Pacific Energy
Services, Inc. ("PES"), and its fuel consultant, C.C. Pace Resources, Inc.
("C.C. Pace").
In the preparation of this Report and the opinions that follow, we have made
certain assumptions with respect to conditions that may exist or events that
may occur in the future. Although we believe these assumptions to be
reasonable for the purpose of this Report, they are dependent on future
events, and actual conditions may differ from those assumed. In addition, we
have used and relied upon certain information provided to us by sources that
we believe to be reliable; however, we make no assurances as to the accuracy
of any such information or any conclusions based thereon. To the extent that
actual future conditions differ from those assumed herein, the actual results
will vary from those forecast. This Report summarizes our work up to the date
hereof; changed conditions occurring or becoming known after such date could
affect the material presented.
In developing the Project Pro Forma contained herein, ICF reviewed and assessed
the pro forma financial projections prepared in connection with the financial
closing of the Project (the "Closing Pro Forma") and determined that it
represented a reasonable model upon which to build its projections. We have
independently reviewed the assumptions used in the Closing Pro Forma and,
where relevant, we updated such assumptions using information that may not
have been available at the time of their preparation. This additional
information includes available macroeconomic data on the Gross National
Product ("GNP"), Gross Domestic Product ("GDP"), and Producer Price Index
("PPI") indices used in the PPA and fuel supply contracts. We also have
relied on the following sources of information in preparing the projections:
- Operating specifications and cost, construction cost and
projected completion, maintenance schedules and cost:
Pacific Energy Services' report, Independent Engineer's
Report: Panda-Brandywine Cogeneration Project (the "PES
Report"). Based on PES's expertise in undertaking similar
analyses, ICF believes that our use of PES's analysis in
preparing this Report is reasonable.
- Dispatch projections: ICF Resources Incorporated,
Independent Assessment of the Dispatchability of the Panda-
Brandywine Project, May 1996 ("the Dispatchability
Analysis").
- Fuel cost projections: the Dispatchability Analysis.
C.C. Pace has reviewed ICF's fuel cost assumptions contained
in the Dispatchability Analysis and has determined them to
be reasonable in its report, Panda-Brandywine, L.P.
Generating Facility - Fuel Consultants' Report - July 2,
1996 (the "Pace Report").
- Structure of terms in the Loan Agreement: Base pro
forma information from the Closing Pro Forma.
- Current macroeconomic escalators: Bureau of Labor
Statistics, Department of Commerce.(1)
Assumptions
The principal assumptions that we made in developing the Project Pro Forma
include:
Project Assumptions:
1. We have not evaluated the validity and enforceability of any
contract, agreement, rule or regulation applicable to the Project and have
assumed that they will be fully enforceable in accordance with their
terms and that all parties will comply with the provisions thereof.
2. Raytheon Engineers and Constructors ("the Contractor") and Ogden
Brandywine, Inc. ("the Operator") will construct and operate the Project
as required under their respective contracts with Panda-Brandywine LP,
the owner of the Project, which contracts have been reviewed by PES; and
we further assume that PES's conclusions as to those agreements contained
in the PES Report are correct.
3. Construction will be completed by the end of September, 1996, in time
for commercial operation to commence in October, 1996, as projected by
PES in the PES Report.
4. All permits and approvals necessary to construct and operate the
Project will be obtained on a timely basis, as projected by PES, and will
be maintained in full force and effect, and any changes in required
permits and approvals will not require changes in design resulting either
in material delays in achieving construction completion as scheduled or
in significant increases in the cost of constructing the facility.
5. PES's conclusion contained in the PES Report that the Project's
design will enable it to "perform at a level consistent with that
anticipated in the [Project Pro Forma]" is reasonable.
6. PES's conclusion contained in the PES Report that the construction
cost of the facility will not exceed the initial capital budget of $215
million is reasonable.
7. In projecting the energy payment, we have assumed a contractual heat
rate of 8,461 Btu/kWh (HHV), even though under many dispatch scenarios
the Project would be entitled to base the energy payment on a higher
(and therefore more favorable to the Project) contractual heat rate.
This results in a more conservative set of projections.
- ----------------------------
(1) BLS, http://stats.bls.gov. Data extracted June 28,1996.
8. Potomac Electric Power Company ("PEPCO") will fully reimburse
Panda-Brandywine, L.P. the costs associated with start-ups through the
energy payment provisions of the PPA. This is consistent with PES's
observation that the Project's energy payment is corrected for the cost
of fuel used for various startups during the month.
Operating Assumptions:
1. The Operator will employ qualified and competent personnel who will
properly operate and maintain the equipment in accordance with the
manufacturers' recommendations and good engineering practice, will make
all required renewals and replacements and will generally operate the
Project in a sound and businesslike manner.
2. Overhauls and major maintenance will be planned for and conducted in
accordance with manufacturers' recommendations and the expected cost
thereof estimated by PES using the dispatch projections contained in the
Dispatchability Analysis.
3. The Project will be dispatched as projected in our Dispatchability
Analysis.
4. Long-term fuel cost inputs will be as we have projected in our
Dispatchability Analysis, as found reasonable by C.C. Pace in the Pace
Report.
5. There is a strong linkage between changes in the Project's expected
fuel-related costs and energy revenues under the PPA, as found reasonable
by C.C. Pace in the Pace Report.
6. The fuel supply arrangements fulfill the contractual requirements of
the PPA, and variable fuel-related costs will be less than energy
payments, as found reasonable by C.C. Pace in the Pace Report.
7. The gas supply and transportation operational requirements will
satisfy electric dispatch operational requirements, as found reasonable
by C.C. Pace in the Pace Report.
8. Natural gas transportation rates will escalate at 1.5 percent
annually.
9. The Project will recover 50% of the cost of its unutilized firm
natural gas transportation in the capacity release market.
10. Operations and maintenance costs, consumables and administrative
expenses will increase at a rate equal to the GNP deflator, currently 3.5
percent per year. Insurance and purchased electricity will increase at a
rate equal to the CPI deflator, currently 3.0 percent per year. Property
taxes will decrease due to declining asset value according to a schedule
provided by Panda Brandywine, L.P.
11. Based on FERC Form 714 data and projections for generation growth in
the Mid-Atlantic Region PEPCO's peak demand will surpass 5,697 MW prior
to the end of 1997, and therefore PEPCO will not be entitled to reduce
the capacity payments to the Project pursuant to the First Amendment to
the PPA.
12. The levels of dispatch indicated in the Dispatch Analysis are
consistent with an operating pattern where the Project is dispatched only
during weekdays (i.e., approximately 260 times per year). Given the
uncertainty regarding dispatch, a possible range of 200 to 300 starts per
year is reasonable.
Steam Sales Assumptions:
1. As projected by PES in the PES Report, thermal energy in the form of
steam will be exported from the Project, operating in the cogeneration
mode, to Brandywine Water Company's distilled water plant such that the
"useful thermal energy" produced by the Project, as defined in PURPA and
the regulations promulgated thereunder, will be sufficient to meet the
operating and efficiency standards required to maintain the facility's
status as a qualifying cogeneration facility under PURPA.
2. Brandywine Water Company's distilled water plant will operate as
projected by its manufacturer.
3. The United States Navy will perform as indicated in its Purchase
Order for the purchase of the distilled water plant's total distilled
water output at a price of $1.50 per 1,000 gallons.
Financing Assumptions:
1. The total amount of the construction loan and leas commitment from
General Electric Capital Corporation ("GECC") is $215 million. The
construction loan bears interest at a Eurodollar base rate plus 250
basis points. Upon completion of construction, the construction loan
will be converted to permanent financing in the form of a single investor
lease. The fixed payment terms under the single investor lease will be
established at the time of conversion using "Basic Rent Factors" contained
in the lease agreement, subject to adjustment based on GECC's then-
applicable federal tax rate, the final cost of the Project, and a Treasury
Index Rate.
2. At the time of conversion, the applicable GECC federal tax rate will
be 35 percent and the Treasury Index Rate will be 6.83 percent.
3. The actual Project lease cost calculation will be as provided in the
Closing Pro Forma.
4. The CPI will increase at a rate of 3 percent per year, the Gross
National Product Implicit Price Deflator will increase at a rate of 3.5
percent per year, and the Producer Price Index for Oil and Gas Field
Services will increase at a rate of 3.5 percent per year.
5. The Project will maintain a lease reserve of the next two quarterly
payments consistent with the provisions of its Loan Agreement with GECC.
6. The Project will maintain a turbine overhaul reserve of $5 million,
escalated at the GNP deflator after the year 2000 consistent with the
provisions of its Loan Agreement with GECC.
7. Panda-Brandywine, L.P., as a limited partnership, will not be subject
to federal and state income tax.
Conclusions
Set forth below are the principal opinions that we have reached regarding our
review of the Project. For a complete understanding of the estimates,
assumptions and calculations upon which these opinions are based, this Report,
including the attached Project Pro Forma, should be read in its entirety.
On the basis of our review and analyses of the Project and the assumptions set
forth in this Report, we are of the opinion that:
1. The financial projections in the Project Pro Forma provide
a reasonable reflection of the Project's expected costs, revenues
and cash flows.
2. The energy and capacity revenue calculations contained in the
Project Pro Forma are appropriate and consistent with the PPA.
Expectations for capacity payment adjustments under the PPA are
reasonable given recent peak day demand on PEPCO.
3. The Project's net cash flow will average approximately $22.9
million per year, reflecting a range of $5.9 million in 1998 to
$33.8 million in 2016.
4. The estimated lease obligation coverage ratios (i.e. the ratio
of earnings before income taxes to lease payments) are presented in
Table ES-1. During the 20-year term of the GECC lease, the Project's
lease obligation coverages will range from 3.05:1.0 in 1997 to 1.61:1.0
in 2016. On average, the Project's lease coverage will be 1.84:1.0.
<TABLE>
<CAPTION>
TABLE ES-1
Summary of Panda Brandywine Debt Coverage Ratios
(Costs and Revenues in $000)
Year Total Total Total Fixed EBIT Annual Lease
Ended Revenues Variable Expenses Lease Coverages
Cost Payments
(a) (b) (c) (d) (e) = b- (f) (e)/(f)
(c+d)
<C> <C> <C> <C> <C> <C> <C>
1996 3,791 2,742 1,441 (392) 0 -
1997 44,144 14,077 8,907 21,160 6,935 3.05
1998 47,957 17,408 8,931 21,619 9,799 2.21
1999 67,472 19,572 8,953 38,948 18,214 2.14
2000 71,459 21,882 8,973 40,604 19,609 2.07
2001 82,590 22,238 8,992 51,360 26,705 1.92
2002 83,288 22,381 9,008 51,899 27,590 1.88
2003 84,898 23,413 9,022 52,462 28,140 1.86
2004 85,944 24,499 9,118 52,327 28,343 1.85
2005 88,110 26,357 9,300 52,453 28,672 1.83
2006 90,397 27,528 9.486 53,382 28,630 1.86
2007 94,741 28,362 9,661 56,718 29,534 1.92
2008 96,760 29,296 9,857 57,607 30,718 1.88
2009 99,338 30,287 10,058 58,993 31,628 1.87
2010 104,154 31,526 10,264 62,363 33,989 1.83
2011 109,688 32,367 10,476 66,845 35,665 1.87
2012 119,106 34,001 10,693 74,412 41,937 1.77
2013 123,167 35,275 10,916 76,975 43,866 1.75
2014 126,801 36,948 11,145 78,708 45,574 1.73
2015 124,948 37,758 11,380 75,810 45,401 1.67
2016 118,506 39,060 11,621 67,825 42,140 1.61
</TABLE>
INTRODUCTION
ICF was retained by Panda Energy International ("Panda") pursuant to a
Consulting Agreement develop pro forma financial projections for the Panda
Brandywine Project (the "Project"). This section describes the Project and
discusses the scope ICF's review.
Description of Brandywine
The Project is a 230 MW gas- and oil-fired power project located in Prince
George's County, Maryland being developed by Panda. The Project will sell
power under a 25-year Power Purchase Agreement with Potomac Electric Power
Company ("PEPCO") beginning on the Project's Commercial Operations Date. The
PPA was signed August 9, 1991 and was amended by the First Amendment to the
Power Purchase Agreement (the "Amendment", and collectively, the "PPA") on
September 16, 1994. The Project will also provide sufficient thermal energy
in the form of steam to enable Brandywine Water Company to sell up to 100,000
gallons of distilled water daily to a nearby naval station under a recently
completed purchase order.
The Project facility will consist of two combustion turbine generators and
one steam turbine generator producing a net electrical output of 230 MW. The
Project has a gas supply agreement with Cogen Development Company, a wholly
owned subsidiary of MCN Corporation, for up to the Project's full gas
requirements. On March 30, 1995, the Project closed a Construction Loan
Agreement and Lease Commitment (the "Loan Agreement") with General Electric
Capital Corporation ("GECC"). The Loan Agreement provides for conversion to
a Facility Lease between the Project and GECC upon the completion of
construction.
ICF's Role
Panda requested that ICF review and assess the financial projections
contained in the pro forma prepared in connection with Project's financial
closing (the "Closing Pro Forma") to determine whether it represented a
reasonable model of the Project's operations, taking into account the
Project's fuel supply, power sales and financing (i.e., lease) agreements.
After ICF determined that the Closing Pro Forma would provide a reasonable
basis for our projections, we updated assumptions where necessary based on
information from the following sources:
- Operating specifications and cost, construction cost and
projected completion, maintenance schedules and cost:
Pacific Energy Services' report, Independent Engineer's
Report: Panda-Brandywine Cogeneration Project (the "PES
Report"). Based on PES's expertise in undertaking similar
analyses, ICF believes that our use of PES's analysis in
preparing this Report is reasonable.
- Dispatch projections: ICF Resources Incorporated,,
Independent Assessment of the Dispatchability of the Panda-
Brandywine Project, May 1996 ("Dispatchability Analysis").
- Fuel cost projections: the Dispatchability Analysis.
C.C. Pace has reviewed ICF's fuel cost assumptions contained
in the Dispatchability Analysis and has determined them to
be reasonable in its report Panda-Brandywine, L.P.
Generating Facility - Fuel Consultants' Report - July 1,
1996 (the "Pace Report").
- Structure of terms in the Loan Agreement: Base pro
forma information from the Closing Pro Forma.
- Current macroeconomic escalators: Bureau of Labor
Statistics, Department of Commerce.(2)
Based on these updated assumptions, ICF prepared the attached pro forma
projections (the "Project Pro Forma"). ICF has based its work on an analysis
of the Closing Pro Forma, the Project's contracts, operational assumptions
provided by the developer and engineering firms, and conversations with
parties having specific relevant information. Statements of fact have been
obtained from sources considered reliable, but no warranty is made as to
their completeness or accuracy. ICF offers no legal opinion or interpretation
of the contracts or agreements that have been reviewed in the preparation of
this document.
The Project Pro Forma is divided into six schedules.
- Schedule A-Income Statement
- Schedule B-Cash Flow Statement
- Schedule C-Development Assumptions
- Schedule D-Operating Assumptions
- Schedule E-Lease Payments and Capacity Adjustments
- Schedule F-Gas Supply Income Statement
- Schedule G-Gas Supply Operating Assumptions
Schedules A and B provide a financial reporting of the revenues, costs, and
cash flows developed in the more detailed Schedules C through G. A copy of
the Project Pro Forma has been included as an appendix. This review focuses
on how the assumptions behind these latter schedules contribute to the
development of estimated Project earnings and cash flows.
- ------------------------
(2) BLS, http://stats.bls.gov. Data extracted June 28, 1996.
SCHEDULE A-INCOME STATEMENT AND
SCHEDULE B-CASH FLOW STATEMENT
Schedules A and B summarize the Project's revenues, costs, and cash flows as
developed in the later schedules. The calculations in Schedule A and B are
consistent with the assumptions contained in the supporting schedules. For
example;
- Contract capacity revenues are calculated as the contract
capacity price times the Project capacity. The GNP-escalated
capacity adjustment is calculated separately. The Project's
capacity price and GNP escalator are calculated separately in
Schedule D.
- The Project fuel costs are expressed in the income statement for
both "Unit #1" and "Unit #2." The section below on Schedule D
describes the distinctions between turbines while the Section on
Schedules G and F describes the fuel cost calculations.
Therefore, the reader should refer to the discussions of the relevant
supporting schedules to find descriptions of the assumptions behind the
development of the ultimate "bottom line" results and ICF's assessment
thereof.
SCHEDULE C-DEVELOPMENT ASSUMPTIONS
Schedule C contains the basic macroeconomic assumptions exogenous to the
Project as well as estimates of the overall Project costs. Many of these
assumptions are discussed more fully in the detailed review of the schedules
below.
Macroeconomic assumptions included in the Development Assumptions include the
Base and Current Treasury Index Rates for financing calculations, the 12-year
T-Bill rate for capacity price adjustments under the PPA, the GNP deflator and
tax rates.
The Estimated Project Costs in the Closing Pro Forma correspond to the
Project's Approved Budget under the Loan Agreement ($215 million). PES
reviewed this budget and found it "adequate to build the project."
This Schedule also provides the assumed Commercial Operations Date. This
assumption is used throughout the model to adjust contract year data to a
calendar year basis. The Project's Actual Commercial Operations Date is
expected to be on or before October 31, 1996. The Project Pro Forma assumes
that November 1996 is the first month of operations. PES indicates that "the
Project remains on schedule at this time with construction approximately 90
percent complete as of July 15, 1996."
SCHEDULE D-OPERATING ASSUMPTIONS
Schedule D provides the basis for calculating the costs and revenues once the
Project begins operating. It also provides some unit measures of the
Project's costs and rates.
Operating assumptions
The Project Pro Forma assumes Project capacity equals 230 MW, which corresponds
to the Project's capacity commitment under the PPA. This value is an input to
calculate capacity-based payments under the PPA in the Income Statement. PES
has provided annual estimates of expected generator performance (output and
heat rate) for the twin GE MS70001EA turbines being used by the Project in
conjunction with the Nooter Erikson Heat Recovery Steam Generator.
The Project performance factors are adjusted to reflect the expected operation
of the Project. Under average annual conditions, PES has estimated that the
two units together will not generate over 230 MW. Nevertheless, PES has
indicated that, given the limited performance standards of the PPA (i.e., the
requirement that there be two output tests conducted per year) it is
reasonable to assume that the Project will qualify for its full capacity
payment.
The Project Pro Forma distinguishes between "Unit 1" and "Unit 2" operation
and performance. When the two turbines operate concurrently, their collective
performance is somewhat below the size-adjusted performance of a single
turbine operating alone. Because operation of the Project under the terms of
the PPA can vary between single-turbine and dual-turbine, the Project Pro Forma
provides for the ability to distinguish operating conditions by differentiating
units.
Unit 1 represents the operational characteristics of a single turbine
operating alone. Unit 2 represents the residual operations of the facility
when both turbines are operating concurrently. Neither of the actual
turbines is identified as such (i.e., the Project could operate either of the
turbines during the periods when only one is dispatched).
Electricity Revenues-Capacity
The Project Pro Forma reflects the unadjusted capacity rate stated in
Appendix L of the PPA. Contractually, the capacity rate is adjusted by several
factors. The capacity rate is increased by the change in GNP from June 1, 1994
to the Actual Commercial Operation Date (PPA, Section 6.1(b) and Amendment
2.4(a)(2)). At the time of financial closing, the GNP escalator was estimated
at 3.5 percent per year. The actual escalation of the GNP between June 1, 1994
and the midpoint of the fourth quarter of 1995 equaled 3.5 percent total.(3)
Assuming a 3.5 percent annual escalator from the midpoint of the fourth quarter
of 1995 to the Actual Commercial Operation Date, the capacity rate would be
adjusted by 6.4 percent.
- -----------------------
(3) Survey of Current Business, May 1996.
The PPA also adjusts the Project's capacity rate based on the cost of
financing on the date the Project closed on its financing agreement with GECC
(PPA, Section 6.1(c)). On the "Commitment Date," the 12-year T-Bill rate was
7.72 percent, lowering the capacity rate based on a multiple of the adjustment
schedule in Appendix L.
The amendment creates two kinds of Scheduled Adjustments to capacity
payments: Section 2.4(a)(1) changes the starting date for capacity payments to
January 1, 1997. The Project Pro Forma implements this adjustment through an
equivalent offsetting adjustment derived from the income statement. In the
Amendment, the Project agreed to a scheduled adjustment of annual capacity
payments (Schedule Q). This adjustment reduces the Project's near-term
capacity revenues in return for increased revenues in years 11 through 25.
The net present value of this adjustment, at the contractual discount rate, is
approximately zero.
The capacity payment is also adjusted by what is referred to in the Project
Pro Forma as the "Contingent Adjustment." The Contingent Adjustment estimates
the net potential cost to PEPCO of having excess capacity due to the Project,
or the Cumulative Present Worth of Incremental Revenue Requirements (the
"CPWIRR") less the cost of terminating the PPA. The CPWIRR is a function of
when the Project begins commercial operation and when PEPCO's peak demand
surpasses a certain specified level (5,697 MW). The CPWIRR and the termination
costs are defined in Attachment C and D to the Amendment, respectively. If
the net potential cost is less than or equal to zero, there is no adjustment.
Because the Project's financial closing occurred in March 1995, termination
costs are set at $18.6 million dollars (Amendment, Attachment C) plus a fixed
fee of $3 million under Paragraph 2.4(g) of the Amendment. Currently, the
Project Pro Forma assumes that PEPCO reaches the 5,697 MW peak, adjusted for
weather, prior to the end of 1997, based on the Dispatchability Analysis.
Consistent with the planned Commercial Operation Date, the CPWIRR equals
approximately $15.3 million. Based on these assumptions, the net cost to
PEPCO is negative, so there is no Contingent Adjustment to the Project's
capacity revenues.
PEPCO's most recently available filings with the Federal Energy Regulatory
Commission indicate the utility's peak demand, unadjusted for weather, reached
5660 MW in the summer of 1994.(4) ICF's dispatch model of the Mid-Atlantic
region, on which the Dispatchability Analysis was based in large part,
estimates regional demand growth through 2000. This information is consistent
with the expectation that PEPCO's demand will increase sufficiently to
validate the Project Pro Forma's assumptions.
If the Contingent Adjustment were positive, the Project would owe PEPCO the NPV
of the net potential costs beginning in Contract Year 11. From Contract Year
11 through Contract Year 15, a ceiling is placed on cost recovery of no more
than the Scheduled Adjustment (Amendment, Paragraph 2.4(i)). After Year 15,
the ceiling is removed and all costs not recovered in the first five years are
recovered over the following ten years.
The Project Pro Forma expresses the capacity-based revenues on a per unit
basis based on the generation and capacity assumptions above. The capacity-
based unit costs are used to calculate capacity revenues in the Income
Statement.
- --------------------------
(4) FERC Form 714. PEPCO's filed peak demand forecasts are slightly below the
1994 summer peak: 5,483 MW in 1995, 5,524 in 1996 and 5,577 in 1997.
Electricity Revenues - Energy
Energy revenues are calculated on a per unit basis from the Income Statement.
These costs are calculated in the fuel supply and revenue schedules reviewed
below.
Distilled Water Revenues and Costs
Estimates of revenues from distilled water sales associated with the Project's
cogeneration function have been revised substantially from the Closing Pro
Forma. The Closing Pro Forma was completed prior to the execution of a
contract to sell the distilled water produced from the Project's thermal energy
output. It assumes 250 days of 80,000 gallons of water delivery per year at a
price of $2.00 per gallon. The Project has since executed a sales contract
with the U.S. Navy calling for up to 100,000 gallons of distilled water per
day at a price of $1.50 per thousand gallons. This reduces revenues from the
Closing Pro Forma from $40,000 to $30,000 per year.
The operating specifications for the distilled water unit are the
manufacturer's own. Operating costs, which are estimated to equal $200,000
escalating with the GNP, are based on operator estimates. The discharge and
chemical usage fees come from the manufacturer and the operator.
Fixed Operating Expenses
The Project's firm gas transportation costs are calculated in the fuel
schedules discussed below. Other fixed operating expenses are based on the
Project's proposed budget for financial closing. In the Project's O&M
contract with Ogden Brandywine Operations, Inc., O&M expenses begin at $1.5
million per year and are escalated by the GNP escalator for the contract's
three year term. The Project Pro Forma assumes continued escalation at the
same rate thereafter. The PES Report confirms the reasonableness of this
assumption.
Turbine Overhaul and Lease Reserve
The Loan Agreement requires that the Project maintain a Rent Reserve equal to
the greater of $2.4 million or the sum of the succeeding two rent payments.
The Project Pro Forma refers to the Rent Reserve as the "Lease Reserve." The
Lease requires that the Project maintain an O&M Reserve account with an
initial balance of $1 million increased at a rate of $125,000 per quarter over
the next two years and $375,000 per quarter for the two years thereafter until
it reaches $5 million. If the Project draws on the O&M Reserve, it must
replenish it to its required balance using up to 50 percent of the Project's
available cash flow. The Project Pro Forma refers to this reserve as the
Turbine Overhaul Reserve. PES provided this schedule.
The interest the Project earns on these reserves are credited to the Project
as income that is included in the Income Statement. This is consistent with
the terms of the Lease.
SCHEDULE E-LEASE PAYMENTS AND CAPACITY ADJUSTMENTS
The Project Lease Agreement was based on an estimated Project cost of $215
million. The Basic Rent Factors applied quarterly to the Project cost are
provided in Schedule 10 to the Loan Agreement.
Under the Project Lease Agreement, the Basic Rent Factors are subject to
change at the time of conversion based on the federal income tax to which GECC
is subject and the annual rate of U.S. Treasury Notes with constant maturaties
equal to the weighted average life of the lease for the four week period
ending on the most recent Friday which is at least 15 days prior to date of
closing for the lease ("Treasury Index Rate"). The Project Pro Forma adjusts
the base lease payment assuming that GECC's federal tax rate is 35 percent and
the Treasury Index Rate equals 6.83 percent.
The Project Pro Forma calculates annual lease payments on an operation year
basis (i.e., Year 1 begins November 1996). Lease payments are assumed to be
paid on a calendar year basis. This results in a shift of approximately one
year in the Project Pro Forma to account for the difference between calendar
years and operation years.
SCHEDULE F-GAS SUPPLY INCOME STATEMENT AND
SCHEDULE G-GAS SUPPLY OPERATING ASSUMPTIONS
In Schedules F and G reside the calculations that estimate the Project's fuel
related revenues and costs. Because the assumptions and calculations in
Schedule F ultimately determine the financial results reported in Schedule G,
it is best to consider the two together both within the Project Pro Forma and
in the context of the PPA and the GSA. C.C. Pace has reviewed the fuel-
related inputs components of the Project Pro Forma and in the Pace Report,
determined that they are reasonable.
The calculation of Project's energy payment costs are discussed below.
Dispatch Hours
The number of dispatch hours in the Closing Pro Forma were based on estimated
Project run times provided by PEPCO. These run times were allocated
seasonally consistent with the Must Run provisions of the Amendment. ICF has
provided an updated dispatch profile in the "Independent Assessment of the
Dispatchability of the Panda-Brandywine Project" based on the results of our
own model runs.(5) This dispatch profile provides the basis for the amount of
electricity sold and the amount of fuel used in the Project Pro Forma.
Dispatch hours have been designated as "Unit 1" and "Unit 2" based on the
conventions described above.
Gas and Fuel Oil Volumes and Compensation Price
As discussed in detail by C.C. Pace in the Pace Report, Project fuel supplies
can be divided conceptually into four pricing categories representing the four
different fuel recovery mechanisms in the PPA:
- the Firm Gas Reserve Rate ("FGRR")
- the Firm Gas Market Rate ("FGMR")
- the Interruptible Gas Rate ("IGR")
- the Oil Rate ("OR")
The application of each of these rates to a specific fuel price category is
described in the Pace Report.
The first category represents the 60 "Must Run" dispatch hours per week for
the first 85 percent of a single turbine's net electrical output (Amendment
2.6(a)). Under the conventions of the Project Pro Forma, this Must Run output
is defined as the first 60 hours per week of generation from Unit 1. For
calculation purposes, the ICF Dispatch Report converts the partially
dispatched Must Run generation from Unit 1 into equivalent "full load" hours
(i.e., the number of hours that the Project would have to operate at full load
to generate the same electrical output). The fuel price on which the energy
payment for the Must Run hours is based is calculated as the firm gas rate
(FGRa). The FGRa, under Appendix M in the Amendment, is equal to the Firm Gas
Reserve Rate ("FGRR") for the first 15 years of operation and the Firm Gas
Market Rate ("FGMR") thereafter.
The FGRR is defined in a fixed price stream in Appendix M subject to a one-
time adjustment based on the Producer Price Index for Oil and Gas Field
Services between June 1, 1994 and the Actual Commercial Operation Date. The
actual escalation between June 1, 1994 and May 31, 1996 was 12.2 percent (6
percent per year). Assuming an annual escalation rate of 3.5 percent
(consistent with the GNP inflator) between May 1, 1996 and November 1, 1996,
the one-time FGRR escalator in the Project Pro Forma equals 14.2 percent
providing a starting FGRR price of $2.95 in Year 1 escalating according to the
PPA to $4.36 in Year 15.
In the first four years of operation, the FGMR price is reduced by 10 percent
under the Amendment.
The initial FGMR was set at an initial June 1, 1990 price of $2.27 per MMBtu
plus the firm displacement tariff rate on Columbia LNG pipeline ($0.0231 per
MMBtu), which is now known as Cove Point LNG. This is adjusted by a weighted
average: 77 percent times the change in the cumulative cost of four gas
indices, two based on the Gulf Coast and two based in Appalachia, plus 23
percent times half the change in the Consumer Price Index, which is meant to
represent the transportation component of the price. For the commodity price
component of the FGRR, the Closing Pro Forma uses forecasted 1996 seasonal gas
prices escalated at 4.0 percent per year.
- ----------------------------
(5) For further information on the basis for ICF Resources' dispatch estimates
see ICF Resources Incorporated, Independent Assessment of the Dispatchability
of the Panda-Brandywine Project, dated May 1996.
The Project Pro Forma now uses ICF's gas price forecast to ensure consistency
with the dispatch forecast.
The actual escalation for the transportation/CPI portion of the FGMR between
June 1, 1990 and May 31, 1996 was 20.6 percent total (3.2 percent per year).
The Project Pro Forma assumes a 3.0 percent annual escalator after May 31,
1996.
The remaining (i.e., non-Must Run) hours that Unit 1 would operate are also
priced at the FGMR. These hours are calculated as the difference between the
dispatch hours and the Must Run full load equivalent hours.
The third pricing category, the Interruptible Gas Rate ("IGR") reflects the
cost of fuel to Unit 2 when it is operating on natural gas. The IGR is
calculated based on the same market basket of gas price indices and
transportation used in the FGMR. However, the IGR is weighted seasonally
71:29 commodity versus transportation March through November and 84:16
December through February.
The fourth segment, the Oil Rate ("OR"), applies to Unit 2 output when it
burns fuel oil. The Project Pro Forma assumes that Unit 2 will operate on
fuel oil for one-third of its winter hours. A more precise calculation of the
Project's fuel oil requirements is possible only with greater detail in the
expected dispatch profile. In actuality the Project will likely only burn
fuel oil on those days that its firm gas transportation capacity and balancing
capabilities are not sufficient to meet the Project's full dispatch
requirements.
The Project has a number of alternatives that enable it to shift gas supply
deliveries among days to match its constant daily firm transportation ("FT")
capacity on its transporters. This practice is known as balancing. Cove
Point LNG, previously Columbia LNG, allows for a shipper to be up to 20,000
MMBtu out of balance for any given day during any hour. Both Washington Gas
Light ("WGL") and Columbia offer balancing services for a fee - WGL under
its contract with the Project, Columbia under its Storage in Transit service.
These balancing services can be limited by the providers under circumstances
of capacity constraint on their systems.
We have estimated the number of days of constraint on Columbia LNG, the most
inexpensive of the balancing services as equal to the number of days Columbia
interrupts WGL (which between December 1995 and February 1996 equaled
48 days). During half those days (24) we have assumed WGL's service is
available. We assume the Project uses fuel oil (i.e., no balancing services
are available) during the remaining 24 days.(6) The availability of balancing
services from Cove Point LNG, WGL and Columbia as well as the Project's
dispatch profile obviate the need to use interruptible capacity.
OR equals $3.89 and is adjusted by the change in the average fuel oil price at
Baltimore, Norfolk and Philadelphia-"as reported in Platt's Oilgram Price
Report in the U.S. Tank Car/Truck Transport table"-between June 1, 1990 and
the relevant billing period (PPA, Section 6.2(b)(vi)). As of May 1, 1996 the
adjusted OR rate equaled $5.03 per MMBtu. For consistency with the dispatch
forecast, ICF has incorporated its own oil price forecast into the Project
Pro Forma. The Pace Report found the Project Pro Forma's modeling of fuel oil
prices to be reasonable.
- ------------------------------
(6) The Project may also opportunistically sell its capacity and fuel supplies
during periods when the value of gas supply and capacity exceeds its cost
and when operating on fuel oil has minimal effect on its dispatch. ICF
Resources has not accounted for this opportunity in the pro forma.
Energy-Based Revenues (Gas Supply Income Statement)
The PPA provides an elaborate series of formulas to calculate the Project's
energy payment from PEPCO. After the Project begins commercial operations,
PEPCO will pay it a Unit Commitment Payment ("UCP") and a Dispatch Payment
("DP"). The UCP is paid on the first 99 MW of each Unit's operation based on
the number of hours the Project operates, contractual heat rates for Unit 1
individually and Units 1 and 2 working together, contractual adjustments for
unit performance based on historical ambient conditions and the cost of fuel
and O&M. The UCP also provides heat rate-based payments for start-ups using
the cost of the appropriate interruptible fuel (IGR or OR). The DP provides
an incremental payment for all Project operations based on a contractually
defined relationship between level of operation and performance.
The Project Pro Forma simplifies the Project's energy payment calculation by
multiplying the four fuel segments (FGRR, FGMR, IGR, and OR) by the
appropriate hours of operation and a "contractual" heat rate of 8,461 Btu per
kWh. This simplification provides a conservative estimate of Project revenues
because:
- The heat rates implicit in the UCP and DP payments
considered together are greater than or equal to 8,461.
- The revenue calculation in the Project Pro Forma does
not include start-up payments under the UCP.
To add a more precise calculation of revenues would require adding, at least,
monthly estimates of dispatch, contractual performance and capability, and
number of hot, cold, and partial start-ups.(7) The Project Pro Forma meets
thegoal of providing a reasonable, conservative estimate of the Project's
energyrevenues without requiring additional assumptions about the details of
the Project's forecasted operations.
Fuel Costs
The cost of the Project's contracted firm supply is fixed in its gas supply
contract with MCN's Cogen Development Company at $2.33 per MMBtu escalated at
4 percent per year plus a $0.10 per MMBtu "ANR Charge" escalated at $0.005 per
year after the first five years. This cost escalation is reflected in the
Project Pro Forma.
The Project has a minimum contractual obligation to purchase 2,299,500 MMBtu
per year at a rate of between 6,000 and 8,000 per day. This gas, the
"Limited Dispatch Quantity," is applied to the delivered FGRR requirements in
the Project Pro Forma.
The FGRR volumes are delivered over 12 hours during weekdays accounting for
approximately 9,200 MMBtu per day while the contract provides that the
Limited Dispatch Quantity is delivered daily at a rate of between 6,000 and
8,000 MMBtu per day. However, the Project can avail itself to one of the
available balancing services, receiving Limited Dispatch gas over the weekend
if necessary to smooth the disparity between the rate of takes of FGRR
quantities.
- ----------------------------
(7) In essence, the Project Pro Forma assumes that start-up costs are
recovered as a pass-through in the calculation of the UCP and an
increase in the heat rate above the EPC guarantee. The ICF Resources
dispatch forecast does not estimate start-ups although in consultation
with PES, it was determined that start-ups for Unit 1 on 200 for Unit 2
were consistent with the dispatch forecast.
The Limited Dispatch Quantity has a Demand Charge of $21,292 associated with
it, escalating at $1,064 per year after the first five years. This charge is
offset, however, with a Price Credit that eliminates the demand charge during
any month in which over 7,000 MMBtu per day is purchased. This demand charge
is not represented in the Project Pro Forma, but given the Must Run
requirements of the Project and the Project's flexibility in Limited Dispatch
takes on Columbia, the Demand Charge is unlikely to be assessed.
The Project may purchase either Scheduled Dispatch Gas or Dispatchable Gas to
fuel its FGMR requirements. The Scheduled Dispatch Gas is priced at the
monthly NYMEX futures price averaged the over the three days prior to closing
plus $0.50 per MMBtu. This premium, to a certain degree, reflects the basis
differential between the NYMEX price and the price at the GSA delivery point
in Ohio. The Project is obligated to take 80 percent of the Scheduled
Dispatch Quantity that it nominates prior to the beginning of the month.
The GSA also provides interruptible gas at a $0.10 premium over the daily
price of gas into Columbia Transmission. The Project may also purchase
its interruptible requirements from Cogen Development.
The Project Pro Forma provides a variety of options to the user for
estimating gas purchase costs. The Closing Pro Forma relies on the Cogen
Development Scheduled Dispatch Gas for Winter FGMR deliveries. All other FGMR
and IGR supplies are assumed to come from the spot market in Appalachia.
These assumptions are reasonable considering the Project's transportation
arrangements. Those arrangement are described below.
Transportation
The transportation rates in the Closing Pro Forma for Columbia Transmission
and Columbia LNG were taken from their espective tariffs. Because the Closing
Pro Forma assumes that gas supply comes from Appalachia, transportation on ANR
(a Gulf Coast to Upper Midwest pipeline) is unnecessary, so its tariff rates
are not included. The transportation rate on the Washington Gas Light system
is set contractually at $0.05 per MMBtu.
Transportation rates under pipeline tariffs have tended to lag behind
inflation. Transportation rates are traditionally cost-based with a
significant portion of the costs represented in sunk capital investment. The
escalation rate of 1.5 percent applied to pipeline transportation (versus the
3 to 4 percent escalators elsewhere in the Project Pro Forma) is consistent
with this trend.
In addition to paying a monetary charge for transportation, shippers must also
pay an in-kind fuel use charge for any transportation capacity used. The
Project Pro Forma usesthe tariff fuel rates to build up the fuel purchase
requirements for the Project. For each of the three gas segments (FGRR, FGMR,
and IGR), the amount of gas purchased under the Project Pro Forma is properly
calculated as the Units' consumption plus the pipeline fuel requirements.
Transportation fuel for the Limited Dispatch Gas (the FGRR segment) is priced
under the GSA at the Scheduled Dispatch rate. In the Project Pro Forma,
however, transportation fuel for both Unit 1 gas supplies (FGRR and FGMR) is
calculated based on a weighted average of the FGRR (Limited Dispatch gas) and
the FGMR (Scheduled Dispatch gas) and spot gas. Because of the premium
associated with the FGRR, using the FGRR for FGR transportation fuel provides
a higher-than- expected, conservative estimate for that cost.
The Project Pro Forma assumes that the Project's unused firm capacity can be
resold for 50 percent of the tariff rate (Schedule A). The Project will be
most likely to resell its fir capacity during the winter when dispatch is the
lowest. This happens to be the period when interruption is most likely on
Columbia. According to U.S. Midwest Natural Gas Market Review, short term
capacity releases on Columbia between December 1995 and February 1996 were
priced from 60 to 82 percent of the Columbia tariff rate. Even adjusting for
the severity of last winter, a 50 percent recovery of transportation costs
appears reasonable.
The Project Pro Forma calculates the total cost of interruptible
transportation ("IT") based on the total IGR volumes. The IT Savings
adjustments for Commodity and Fuel reduce the Project's costs by the amount of
firm transportation used for IGR supplies. At the level of dispatch provided
in the dispatch forecast and with the available flexibility in firm
transportation utilization, IT is not used. As a result, savings in IT costs
associated with the Project using its IT offset the cost of IT used for the
IGR volumes.
C.C. Pace reviewed the transportation costs used in the Project Pro Forma and
found that the Project Pro Forma is based on a reasonable forecast of
transportation costs. C.C. Pace also concluded that both the gas
transportation volumes and amounts to be received from short-term releases of
pipeline capacity assumed for purposes of the Project Pro Forma are
reasonable.
The levels of dispatch indicated in the Dispatch Analysis are consistent with
an operating pattern where the Project is dispatched only during weekdays
(i.e., approximately 260 times per year). Given the uncertainty regarding
dispatch, a possible range of 200 to 300 starts per year is reasonable. PES
has assumed 200 start-ups for Unit 2 in estimating the Project's overhaul
schedule.
The Dispatch Analysis indicates that the Project operates at minimum load for
a number of hours each year. This is the result of the Project running under
the minimum load conditions in the PPA. Under those circumstances, only Unit
1 would be operating. It is reasonable to assume, therefore, that Unit 1 is
started more often than Unit 2. PES has assumed 225 start-ups for Unit 1 in
estimating the Project's overhaul schedule.
CONCLUSIONS
Based on our review, we find the Project Pro Forma a reasonable reflection of
the Project's expected costs, revenues and cash flows. The bases for this
assessment are as follows:
1. The financial projections in the Project Pro Forma
provide a reasonable reflection of the Project's expected
costs, revenues and cash flows.
2. The Project's net cash flow will average approximately
$22.9 million per year, reflecting a range of $5.9 million
in 1998 to $33.8 million in 2016.
3. The estimated lease coverage ratios (i.e. the ratio of
earnings before income taxes to lease payments) are
presented in Table ES-1. During the 20-year term of the
GECC lease, the Project's lease coverages will range from
3.05:1.0 in 1997 to 1.61:1.0 in 2016. On average, the
Project's lease coverage will be 1.84:1.0.
4. The energy and capacity revenue calculations are
appropriate given the PPA. Expectations for capacity
payment adjustments under the PPA are reasonable given
recent peak day demand on PEPCO.
Respectfully Submitted,
/s/ ICF Resources Incorporated
<PAGE>
APPENDIX
PANDA BRANDYWINE PRO FORMA
Panda-Brandywine L.P.
230MW PEPCO Project
Income Statement
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-1996 Dec-1997 Dec-1998 Dec-1999 Dec-2000 Dec-2001 Dec-2002
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales Revenue:
Capacity - Contract Amount $6,320,400 $38,005,200 $38,511,200 $39,067,800 $40,765,200 $47,324,800 $49,873,200
Capacity - GNP Adjustment 452,610 2,721,587 2,757,822 2,797,680 2,919,233 3,388,971 3,571,465
Capacity - Interest Rate Adjusment (139,104) (835,912) (844,928) (859,096) (866,824) (874,552) (882,280)
Capacity - Scheduled Adjustment (6,633,906) (15,000,000) (16,000,000) 0 (1,000,000) 2,000,000 0
Capacity - Contingent Adjustment 0 0 0 0 0 0 0
Energy Sales - Unit #1 1,785,251 10,161,812 11,897,405 12,832,774 13,917,801 15,134,834 15,644,569
Energy Sales - Unit #2 1,360,461 6,113,819 8,099,603 9,645,470 11,283,994 11,003,500 10,440,028
Energy - Variable O&M 405,826 2,252,437 2,804,184 3,188,760 3,594,974 3,639,736 3,606,478
Distilled Water Sales 5,000 30,000 30,000 30,000 30,000 30,000 30,000
Firm Transportation Capacity Release 72,511 467,838 331,680 250,751 166,927 195,984 236,702
Interest Income 162,347 227,334 370,123 518,227 648,146 746,457 767,928
------- ------- ------- ------- ------- ------- -------
Total Revenues 3,791,394 44,144,114 47,957,089 67,472,366 71,459,451 82,589,730 83,288,089
Cost of Sales:
Fuel Cost - Unit #1 1,518,967 8,660,634 10,291,425 11,138,397 12,037,436 12,603,086 13,133,024
Fuel Cost - Unit #2 1,081,509 4,623,765 6,186,231 7,414,754 8,736,243 8,540,172 8,166,897
Water Usage 59,497 324,078 391,614 431,521 471,506 455,830 440,133
Water Discharge & Chemical Usage 48,374 268,844 331,463 372,652 415,443 409,775 403,683
Distilled Water Operating Costs 33,333 200,000 207,000 214,245 221,744 229,505 237,537
------ ------- ------- ------- ------- ------- -------
Total Cost of Sales 2,741,681 14,077,321 17,407,734 19,571,570 21,882,372 22,238,368 22,381,273
Gross Profit 1,049,716 30,066,793 30,549,355 47,900,796 49,577,079 60,351,362 60,906,816
Fixed Expenses:
Firm Transportation 420,603 2,561,473 2,599,895 2,638,893 2,678,477 2,718,654 2,759,434
O&M Contract Costs 245,500 1,473,000 1,524,555 1,577,914 1,633,141 1,690,301 1,749,462
Consumables 125,000 750,000 776,250 803,419 831,538 860,642 890,765
Administrative Expenses 83,333 500,000 517,500 535,613 554,359 573,762 593,843
Insurance 83,333 500,000 515,000 530,450 546,364 562,754 579,637
Purchased Electricity 68,609 411,652 424,002 436,722 449,823 463,318 477,218
Letters of Credit Fee 15,000 90,000 90,000 90,000 90,000 90,000 90,000
Property Taxes 400,000 2,620,510 2,483,407 2,339,772 2,189,399 2,032,074 1,867,581
Depreciation & Amortization 0 0 0 0 0 0 0
- - - - - - -
Total Fixed Expenses 1,441,378 8,906,635 8,930,609 8,952,783 8,973,101 8,991,505 9,007,939
EBIT (391,663) 21,160,158 21,618,747 38,948,014 40,603,977 51,359,856 51,898,877
Annual Lease Payments 0 6,934,650 9,798,750 18,213,550 19,609,150 26,705,450 27,590,200
- --------- --------- ---------- ---------- ---------- ----------
Net Income ($391,663) $14,225,508 $11,819,997 $20,734,464 $20,994,827 $24,654,406 $24,308,677
========= =========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2003 Dec-2004 Dec-2005 Dec-2006 Dec-2007 Dec-2008 Dec-2009
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales Revenue:
Capacity - Contract Amount $50,425,200 $50,420,600 $50,397,600 $50,784,000 $52,716,000 $52,752,800 $53,323,200
Capacity - GNP Adjustment 3,610,994 3,610,664 3,609,017 3,636,688 3,775,040 3,777,675 3,818,522
Capacity - Interest Rate Adjusment (890,008) (897,736) (906,752) (920,920) (928,648) (936,376) (944,104)
Capacity - Scheduled Adjustment 0 0 0 275,000 1,850,000 3,050,000 4,250,000
Capacity - Contingent Adjustment 0 0 0 0 0 0 0
Energy Sales - Unit #1 15,947,720 16,249,366 17,272,272 17,935,498 18,343,586 18,814,713 19,268,820
Energy Sales - Unit #2 11,028,730 11,649,928 12,577,028 13,358,688 13,572,197 13,797,423 14,013,817
Energy - Variable O&M 3,722,071 3,841,677 4,108,795 4,233,182 4,255,503 4,286,666 4,321,333
Distilled Water Sales 30,000 30,000 30,000 30,000 30,000 30,000 30,000
Firm Transportation Capacity Release 240,186 243,406 215,526 241,268 274,759 304,464 332,215
Interest Income 782,830 795,782 806,540 823,334 852,674 882,368 924,144
------- ------- ------- ------- ------- ------- -------
Total Revenues 84,897,723 85,943,688 88,110,028 90,396,738 94,741,111 96,759,734 99,337,948
Cost of Sales:
Fuel Cost - Unit #1 13,608,860 14,102,578 15,098,073 15,646,920 16,281,692 16,963,559 17,676,584
Fuel Cost - Unit #2 8,706,472 9,280,775 10,115,976 10,708,581 10,912,119 11,166,265 11,445,052
Water Usage 440,230 440,335 445,798 451,280 440,110 429,628 419,832
Water Discharge & Chemical Usage 411,954 420,399 434,231 448,467 446,214 44,395 443,039
Distilled Water Operating Costs 245,851 254,456 263,362 272,579 282,120 291,994 302,214
------- ------- ------- ------- ------- ------- -------
Total Cost of Sales 223,413,367 24,498,543 26,357,440 27,527,827 28,362,255 29,295,841 30,286,721
Gross Profit 61,484,356 61,445,145 61,752,587 62,868,910 66,378,856 67,463,893 69,051,227
Fixed Expenses:
Firm Transportation 2,800,825 2,842,837 2,885,480 2,928,762 2,972,694 3,017,284 3,062,543
O&M Contract Costs 1,810,693 1,874,067 1,939,660 2,007,548 2,077,812 2,150,535 2,225,804
Consumables 921,941 954,209 987,607 1,022,173 1,057,949 1,094,977 1,133,301
Administrative Expenses 614,628 636,140 658,405 681,449 705,299 729,985 755,534
Insurance 597,026 614,937 633,385 652,387 671,958 692,117 712,880
Purchased Electricity 491,534 506,280 521,469 537,113 553,226 569,823 586,918
Letters of Credit Fee 90,000 90,000 90,000 90,000 90,000 90,000 90,000
Property Taxes 1,695,695 1,599,555 1,583,926 1,567,032 1,532,315 1,512,427 1,491,130
Depreciation & Amortization 0 0 0 0 0 0 0
- - - - - - -
Total Fixed Expenses 9,022,343 9,118,026 9,299,931 9,486,463 9,661,253 9,857,148 10,058,111
EBIT 52,462,013 52,327,119 52,452,656 53,382,447 56,717,603 57,606,744 58,993,116
Annual Lease Payments 28,140,300 28,343,300 28,672,450 28,629,500 29,534,450 30,717,600 31,628,350
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income $24,321,713 $23,983,819 $23,780,206 $24,752,947 $27,183,153 $26,889,144 $27,364,766
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2010 Dec-2011 Dec-2012 Dec-2013 Dec-2014 Dec-2015
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Sales Revenue:
Capacity - Contract Amount $55,508,200 $57,794,400 $63,158,000 $64,574,800 $64,786,400 $60,848,800
Capacity - GNP Adjustment 3,974,992 4,138,709 4,522,801 4,624,259 4,639,412 4,357,437
Capacity - Interest Rate Adjusment (950,544) (950,544) (950,544) (950,544) (950,544) (861,672)
Capacity - Scheduled Adjustment 5,450,000 6,650,000 7,850,000 9,050,000 10,250,000 11,450,000
Capacity - Contingent Adjustment 0 0 0 0 0 0
Energy Sales - Unit #1 20,002,633 21,517,421 23,559,238 24,504,792 25,971,074 26,843,104
Energy Sales - Unit #2 14,399,188 14,617,709 14,881,431 15,154,694 15,714,435 15,876,396
Energy - Variable O&M 4,412,867 4,442,955 4,489,177 4,540,719 4,680,416 4,705,291
Distilled Water Sales 30,000 30,000 30,000 30,000 30,000 30,000
Firm Transportation Capacity Release 352,351 384,341 410,331 436,021 451,619 493,653
Interest Income 973,889 1,063,079 1,155,141 1,201,907 1,228,018 1,204,820
------- --------- --------- --------- --------- ---------
Total Revenues 104,153,576 109,688,070 119,105,576 123,166,650 126,800,831 124,947,829
Cost of Sales:
Fuel Cost - Unit #1 18,495,575 19,138,672 20,454,130 21,415,036 22,525,484 23,103,617
Fuel Cost - Unit #2 11,864,581 12,061,244 12,377,243 12,686,758 13,243,122 13,467,875
Water Usage 410,720 401,811 393,506 385,794 378,665 372,113
Water Discharge & Chemical Usage 442,179 441,323 440,924 441,002 441,579 442,683
Distilled Water Operating Costs 312,791 323,739 335,070 346,797 358,935 371,498
------- ------- ------- ------- ------- -------
Total Cost of Sales 31,525,846 32,366,788 34,000,873 35,275,387 36,947,786 37,757,785
Gross Profit 72,627,730 77,321,282 85,104,703 87,891,263 89,853,046 87,190,044
Fixed Expenses:
Firm Transportation 3,108,481 3,155,109 3,202,435 3,250,472 3,299,229 3,348,717
O&M Contract Costs 2,303,707 2,384,337 2,467,789 2,554,161 2,643,557 2,736,082
Consumables 1,172,967 1,214,021 1,256,512 1,300,490 1,346,007 1,393,117
Administrative Expenses 781,978 809,347 837,674 866,993 897,338 928,745
Insurance 734,267 756,295 778,984 802,353 826,424 851,217
Purchased Electricity 604,525 622,661 641,341 660,581 680,398 700,810
Letters of Credit Fee 90,000 90,000 90,000 90,000 90,000 90,000
Property Taxes 1,468,376 1,444,116 1,418,298 1,390,870 1,361,777 1,330,965
Depreciation & Amortization 0 0 0 0 0 0
- - - - - -
Total Fixed Expenses 10,264,302 10,475,886 10,693,033 10,915,920 11,144,730 11,379,652
EBIT 62,363,428 66,845,397 74,411,671 76,975,343 78,708,316 75,810,392
Annual Lease Payments 33,989,000 35,664,950 41,937,300 43,866,450 45,574,050 45,401,250
---------- ---------- ---------- ---------- ---------- ----------
Net Income $28,374,428 $31,180,447 $32,474,371 $33,108,893 $33,134,266 $30,409,142
=========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Total
Dec-2016 Dec-2017 Dec-2018 Dec-2019 Dec-2020 Dec-2021
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Contract Sales Revenue:
Capacity - Contract Amount $52,113,400 $52,982,800 $53,925,800 $54,896,400 $55,903,800 $47,334,000 $1,304,514,000
Capacity - GNP Adjustment 3,731,887 3,794,146 3,861,675 3,931,181 4,003,321 3,389,630 93,417,420
Capacity - Interest Rate Adjustment (417,312) (417,312) (417,312) (417,312) (417,312) (347,760) (19,775,952)
Capacity - Scheduled Adjustment 12,650,000 13,850,000 15,050,000 16,250,000 17,450,000 15,375,000 114,116,094
Capacity - Contingent Adjustment 0 0 0 0 0 0 0
Energy Sales - Unit #1 27,812,826 28,857,807 29,966,410 31,582,358 32,731,962 28,042,023 526,598,069
Energy Sales - Unit #2 16,379,325 16,910,204 17,465,719 18,298,274 18,837,999 16,427,802 342,907,861
Energy - Variable O&M 4,766,657 4,833,587 4,903,449 5,046,573 5,105,456 4,353,193 104,541,961
Distilled Water Sales 30,000 30,000 30,000 30,000 30,000 25,000 750,000
Firm Transportation Capacity Release 525,970 554,546 580,824 599,756 627,817 535,622 9,527,070
Interest Income 913,110 654,412 666,762 679,545 692,775 555,695 20,297,386
------- ------- ------- ------- ------- ------- ----------
Total Revenues 118,505,862 122,050,189 126,033,327 130,896,774 134,965,818 115,690,204 2,496,893,909
Cost of Sales:
Fuel Cost - Unit #1 24,088,518 25,151,799 26,271,823 27,553,673 28,784,756 24,745,587 460,489,906
Fuel Cost - Unit #2 13,778,331 14,206,260 14,759,158 15,554,296 16,103,082 14,055,371 281,242,133
Water Usage 365,435 359,119 353,155 347,535 342,251 282,833 10,034,329
Water Discharge & Chemical Usage 443,494 444,600 446,011 447,737 449,787 379,163 10,559,413
Distilled Water Operating Costs 384,500 397,958 411,886 426,302 441,223 380,555 7,747,194
------- ------- ------- ------- ------- ------- ---------
Total Cost of Sales 39,060,279 40,559,736 42,242,033 44,329,543 46,121,098 39,843,508 762,325,780
Gross Profit 79,445,584 81,490,453 83,791,293 86,567,231 88,844,720 75,846,696 1,734,568,129
Fixed Expenses:
Firm Transportation 3,398,948 3,449,932 3,501,681 3,554,207 3,607,520 3,051,360 76,815,945
O&M Contract Costs 2,831,844 2,930,959 3,033,543 3,139,717 3,249,607 2,802,786 57,058,082
Consumables 1,441,876 1,492,342 1,544,574 1,598,634 1,654,586 1,427,080 29,051,976
Administrative Expenses 961,251 994,894 1,029,716 1,065,756 1,103,057 951,387 19,367,984
Insurance 876,753 903,056 930,147 958,052 986,793 846,998 18,143,566
Purchased Electricity 721,835 743,490 765,794 788,768 812,431 697,337 14,937,676
Letters of Credit Fee 90,000 90,000 90,000 90,000 90,000 75,000 2,250,000
Property Taxes 1,298,375 1,263,949 1,227,626 1,189,346 1,149,042 2,140,362 41,597,925
Depreciation & Amortization 0 0 0 0 0 0 0
- - - - - - -
Total Fixed Expenses 11,620,882 11,868,622 12,123,081 12,384,478 12,653,036 11,992,309 259,223,154
EBIT 67,824,702 69,621,831 71,668,213 74,182,752 76,191,685 63,854,387 1,475,344,974
Annual Lease Payments 42,140,350 15,077,276 15,077,276 15,077,276 15,077,276 15,077,276 678,477,431
---------- ---------- ---------- ---------- ---------- ---------- -----------
Net Income $25,684,352 $54,544,555 $56,590,936 $59,105,476 $61,114,408 $48,777,111 $796,867,543
=========== =========== =========== =========== =========== =========== ============
</TABLE>
<PAGE>
Panda-Brandywine L.P.
230MW PEPCO Project
Cash Flow Statement
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-1996 Dec-1997 Dec-1998 Dec-1999 Dec-2000 Dec-2001 Dec-2002 Dec-2003
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Income ($391,663) $14,225,508 $11,819,997 $20,734,464 $20,994,827 $24,654,406 $24,308,677 $24,321,713
+ Depreciation &
Amortization 0 0 0 0 0 0 0 0
+ Lease Payments 0 6,934,650 9,798,750 18,213,550 19,609,150 26,705,450 27,590,200 28,140,300
+ Contingency 8,750,274 0 0 0 0 0 0 0
--------- - - - - - - -
Cash Flow Available
for Lease Payment 8,358,611 21,160,158 21,618,747 38,948,014 40,603,977 51,359,856 51,898,877 52,462,013
Lease Payments 0 (6,934,650) (9,798,750) (18,213,550) (19,609,150) (26,705,450) (27,590,200) (28,140,300)
Reserves:
Net Overhaul Reserve (250,000) (1,196,000) (1,668,610) (2,245,573) (1,466,232) (3,215,936) (1,542,214) (981,563)
Lease Reserve (1,067,325) (1,432,050) (4,207,400) (697,800) (3,548,150) (442,375) (275,050) (101,500)
---------- ---------- ---------- -------- ---------- -------- -------- --------
Total Reserves (1,317,325) (2,628,050) (5,876,010) (2,943,373) (5,014,382) (3,658,311) (1,817,264) (1,083,063)
Net Cash Flow $7,041,286 $11,597,458 $5,943,987 $17,791,091 $15,980,446 $20,996,095 $22,491,413 $23,238,650
========== =========== ========== =========== =========== =========== =========== ===========
Lease Coverages 3.05 2.21 2.14 2.07 1.92 1.88 1.86
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2004 Dec-2005 Dec-2006 Dec-2007 Dec-2008 Dec-2009 Dec-2010 Dec-2011
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Income $23,983,819 $23,780,206 $24,752,947 $27,183,153 $26,889,144 $27,364,766 $28,374,428 $31,180,447
+ Depreciation &
Amortization 0 0 0 0 0 0 0 0
+ Lease Payments 28,343,300 28,672,450 28,629,500 29,534,450 30,717,600 31,628,350 33,989,000 35,664,950
+ Contingency 0 0 0 0 0 0 0 0
- - - - - - - -
Cash Flow Available
for Lease Payment 52,327,119 52,452,656 53,382,447 56,717,603 57,606,744 58,993,116 62,363,428 66,845,397
Lease Payments (28,343,300) (28,672,450) (28,629,500) (29,534,450) (30,717,600) (31,628,350) (33,989,000) (35,664,950)
Reserves:
Net Overhaul Reserve (1,079,532) (3,654,807) (3,850,870) (1,126,366) (1,895,774) (1,206,592) (2,855,006) (2,873,996)
Lease Reserve (164,575) 21,475 (452,475) (591,575) (455,375) (1,180,325) (837,975) (3,136,175)
-------- ------ -------- -------- -------- ---------- -------- ----------
Total Reserves (1,244,107) (3,633,332) (4,303,345) (1,717,941) (2,351,149) (2,386,917) (3,692,981) (6,010,171)
Net Cash Flow $22,739,712 $20,146,875 $20,449,603 $25,465,211 $24,537,995 $24,977,849 $24,681,448 $25,170,276
=========== =========== =========== =========== =========== =========== =========== ===========
Lease Coverages 1.85 1.83 1.86 1.92 1.88 1.87 1.83 1.87
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2012 Dec-2013 Dec-2014 Dec-2015 Dec-2016 Dec-2017 Dec-2018 Dec-2019
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Income $32,474,371 $33,108,893 $33,134,266 $30,409,142 $25,684,352 $54,544,555 $56,590,936 $59,105,476
+ Depreciation &
Amortization 0 0 0 0 0 0 0 0
+ Lease Payments 41,937,300 43,866,450 45,574,050 45,401,250 42,140,350 15,077,276 15,077,276 15,077,276
+ Contingency 0 0 0 0 0 0 0 0
- - - - - - - -
Cash Flow Available
for Lease Payment 74,411,671 76,975,343 78,708,316 75,810,392 67,824,702 69,621,831 71,668,213 74,182,752
Lease Payments (41,937,300) (43,866,450) (45,574,050) (45,401,250) (42,140,350) (15,077,276) (15,077,276) (15,077,276)
Reserves:
Net Overhaul Reserve (1,421,537) (1,384,592) (5,878,464) (1,483,210) (5,432,032) (1,588,851) (1,747,433) (4,850,260)
Lease Reserve (964,575) (853,800) 86,400 1,630,450 13,531,537 0 0 0
-------- -------- ------ --------- ---------- - - -
Total Reserves (2,386,112) (2,238,392) (5,792,064) 147,240 8,099,505 (1,588,851) (1,747,433) (4,850,260)
Net Cash Flow $30,088,258 $30,870,501 $27,342,202 $30,556,382 $33,783,857 $52,955,704 $54,843,504 $54,255,216
=========== =========== =========== =========== =========== =========== =========== ===========
Lease Coverages 1.77 1.75 1.73 1.67 1.61 4.62 4.75 4.92
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Total
Dec-2020 Dec-2021 Contract
-------- -------- --------
<S> <C> <C> <C>
Net Income $61,114,408 $48,777,111 $796,867,543
+ Depreciation &
Amortization 0 0 0
+ Lease Payments 15,077,276 15,077,276 678,477,431
+ Contingency 6,000,000 0 14,750,274
--------- - ----------
Cash Flow Available
for Lease Payment 82,191,685 63,854,387 1,490,095,248
Lease Payments (15,077,276) (15,077,276) (678,477,431)
Reserves:
Net Overhaul Reserve (1,871,893) (4,054,055) (60,821,397)
Lease Reserve 0 7,538,638 2,400,000
- --------- ---------
Total Reserves (1,871,893) 3,484,583 (58,421,397)
Net Cash Flow $65,242,515 $52,261,694 $753,196,420
=========== =========== ============
Lease Coverages 5.45 4.24
</TABLE>
<PAGE>
Panda-Brandywine L.P.
230MW PEPCO Project
Development Assumptions
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Lease Financing: * Estimated Project Costs
Leased Amount $215,000,000 * Cogen Construction Costs $118,258,816
Lease Term (Years) 20 * Distilled Water Construction Costs $3,400,000
Average Life 14.9 * Electrical Transmission Line & Fiber Optics $4,411,007
Implicit rate (Pre-tax) 10.20% * Effluent Water Pipeline $10,639,600
Treasury Index Rate (Base) 7.38% * Columbia Gas Pipeline Expansion $8,838,294
Treasury Index Rate (Current) 6.83% * PEPCO - Electrical Interconnect $2,200,000
* PEPCO - RTU/AGC Communications $250,000
Other Financing Assumptions: * Sales Tax on 10% of Construction Costs $434,000
--------------------------- * Water Wells on Site $348,095
Debt Service Reserve $2,400,000 * Building Permit $200,668
Letters of Credit (PEPCO, Fuel Supplier, etc.) $6,000,000 * Builder's Risk Insurance 579,645
Annual Letter of Credit Fee 1.50% * Other Construction Costs $25,000
Interest Income Rate 4.00% * Land Purchase Costs (Including Title Insurance) $4,180,669
12 Year Treasury Bill Rate (Capacity Adjustment) 7.72% * Right-of Way Payments $714,171
Annual GNP Deflator 3.50% * Outside Engineering Costs $2,896,553
Actual Commercial Operations Date Nov-96 * Permitting & Regulatory Costs $1,670,176
Months of Operation During 1996 (1st Calendar Year) 2 * Legal Costs $2,399,413
Months of Operation During 2021 (Last Calendar Year) 10 * Public Relations $331,131
Escalator Base Month Jun-94 * Interest During Development/Construction $19,218,038
Annual CPI Deflator 3.00% * Other Financing Costs $9,256,926
* Management & Administrative Costs $4,203,858
* Natural Gas Reserves Development $3,165,981
Tax Assumptions: * Furniture & Office Equipment $102,820
---------------- * O&M Contractor $1,006,200
Federal Tax Rate 0.00% * Fuel Purchased During Construction $550,000
State Tax Rate 0.00% * General Liability Insurance $88,838
Property Tax Rate (1994) 3.32% * Spare Parts Inventory $1,750,000
Annual Property Tax Rate Increase 3.00% * Fuel Oil Inventory $1,200,000
Assessed Property Value (Real Property) 50.00% * Initial Lease Reserve (Cash) $2,400,000
Initial Assessed Value (Real Property) $77,239,983 * Initial O&M Reserve (Cash) $1,000,000
Annual Assessed Property Depreciation Rate 4.00% * Initial Warranty Reserve (Cash) $750,000
Tax Depreciation Rate (Declining Value) 150.00% * Contingency $8,750,274
Tax Depreciation Period 20 * ------------
Amortization Period - Transaction Costs 102,820 *
* Total Project Costs $215,000,000
* ============
</TABLE>
<PAGE>
Panda-Brandywine L.P.
230MW PEPCO Project
Operating Assumptions
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-1996 Dec-1997 Dec-1998 Dec-1999 Dec-2000 Dec-2001 Dec-2002
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Assumptions:
Capacity in Kilowatts 230,000 230,000 230,000 230,000 230,000 230,000 230,000
Weighted Average Energy Output - Unit #1 120,040 118,280 117,840 117,600 117,340 118,840 117,940
Weighted Average Energy Output - Unit #2 120,040 118,280 117,840 117,600 117,340 118,840 117,940
Firm Dispatch Energy Production 99,000 99,000 99,000 99,000 99,000 99,000 99,000
Hours Per Year Running Unit #1 (Full Load) 616 3,482 4,024 4,249 4,474 4,475 4,476
Hours Per Year Running Unit #2 (Full Load) 420 2,154 2,782 3,244 3,705 3,425 3,145
Contract Heat Rate (BTU/KWH) 8,461 8,461 8,461 8,461 8,461 8,461 8,461
Weighted Average Heat Rate - Unit #1 (BTU/KWH) 7,939 8,048 8,075 8,106 8,141 8,086 8,141
Weighted Average Heat Rate - Unit #2 (BTU/KWH) 7,863 7,954 7,984 8,011 8,041 8,024 8,053
Actual Annual Energy - Unit #1 (MWH) 73,914 411,899 474,198 499,689 524,984 531,806 527,889
Actual Annual Energy - Unit #2 (MWH) 50,417 254,832 327,784 381,440 434,799 407,067 370,946
Annual Fuel Usage - Unit #1 (DT's) 586,804 3,314,965 3,829,146 4,050,482 4,273,892 4,300,182 4,297,542
Annual Fuel Usage - Unit #2 (DT's) 396,427 2,026,935 2,617,029 3,055,713 3,496,222 3,266,307 2,987,228
Electricity Revenues - Capacity:
Capital Costs/KW Month
(Unadjusted Contract Year) $13.74 $13.92 $14.12 $14.33 $16.97 $18.03 $18.27
Capital Costs/KW Year $27.48 $165.24 $167.44 $169.86 $177.24 $205.76 $216.84
Capital Costs Per KWH $0.04463 $0.04745 $0.04161 $0.03998 $0.03962 $0.04598 $0.04845
GNP Deflator Adjustment/KW Year $1.97 $11.83 $11.99 $12.16 $12.69 $14.73 $15.53
GNP Deflator Adjustment Per KWH $0.00320 $0.00340 $0.00298 $0.00286 $0.00284 $0.00329 $0.00347
Interest Rate Adjustment/KW Year ($0.60) ($3.63) ($3.67) ($3.74) ($3.77) ($3.80) ($3.84)
Interest Rate Adjustment Per KWH ($0.00098) ($0.00104) ($0.00091) ($0.00088) ($0.00084) ($0.00085) ($0.00086)
Scheduled Adjustment/KW Year ($28.84) ($65.22) ($69.57) $0.00 ($4.35) $8.70 $0.00
Scheduled Adjustment Per KWH ($0.04684) ($0.01873) ($0.01729) $0.00000 ($0.00097) $0.00194 $0.00000
Contingent Adjustment/KW Year $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Contingent Adjustment Per KWH $0.00000 $0.00000 $0.00000 $0.00000 $0.00000 $0.00000 $0.00000
Total Capacity Rate/KW Year $0.00 $108.22 $106.19 $178.29 $181.82 $225.39 $228.53
Total Capacity Rate/KW Month $0.00 $9.02 $8.85 $14.86 $15.15 $18.78 $19.04
Total Capacity Rate Per KWH $0.00000 $0.03108 $0.02639 $0.04196 $0.04064 $0.05037 $0.05106
Electricity Revenues - Energy Escalation
----------
Energy Rate Per KWH (Weighted Average) $0.02530 $0.02441 $0.02493 $0.02551 $0.02626 $0.02784 $0.02902
Variable O&M Rate Per KWH 3.50% $0.00326 $0.00338 $0.00350 $0.00362 $0.00375 $0.00388 $0.00401
Total Energy Rate Per KWH $0.02857 $0.02779 $0.02843 $0.02913 $0.03000 $0.03172 $0.03303
Total Electricity Revenues - Capacity & Energy $0.0286 $0.0589 $0.0548 $0.0711 $0.0706 $0.0821 $0.0841
Distilled Water Revenues:
Water Delivery (Days/Year) 42 250 250 250 250 250 250
Daily Distilled Water Sales Volume (Gal) 80,000 80,000 80,000 80,000 80,000 80,000 80,000
Distilled Water Sales Price ($/000 Gal) $1.50 $1.50 $1.50 $1.50 $1.50 $1.50 $1.50
Contract Fuel Rates (Energy Revenue):
FGRR - Firm Gas Reserve Rate ($/DT) $2.95 $3.06 $3.18 $3.31 $3.45 $3.58 $3.72
FGMR - Firm Gas Market Rate ($/DT) $2.75 $2.80 $2.85 $2.89 $2.94 $3.07 $3.20
IGR - Interruptible Gas Rate ($/DT) $2.53 $2.57 $2.62 $2.66 $2.75 $3.14 $3.28
OR - Oil Rate ($/DT) $4.60 $4.57 $4.73 $5.00 $5.28 $5.51 $5.75
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2003 Dec-2004 Dec-2005 Dec-2006 Dec-2007 Dec-2008 Dec-2009
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Assumptions:
Capacity in Kilowatts 230,000 230,000 230,000 230,000 230,000 230,000 230,000
Weighted Average Energy Output - Unit #1 117,690 117,450 120,000 118,120 117,760 117,530 117,270
Weighted Average Energy Output - Unit #2 117,690 117,450 120,000 118,120 117,760 117,530 117,270
Firm Dispatch Energy Production 99,000 99,000 99,000 99,000 99,000 99,000 99,000
Hours Per Year Running Unit #1 (Full Load) 4,432 4,388 4,450 4,513 4,450 4,393 4,342
Hours Per Year Running Unit #2 (Full Load) 3,184 3,222 3,247 3,271 3,133 3,002 2,877
Contract Heat Rate (BTU/KWH) 8,461 8,461 8,461 8,461 8,461 8,461 8,461
Weighted Average Heat Rate-Unit #1 (BTU/KWH) 8,174 8,209 8,166 8,051 8,085 8,119 8,153
Weighted Average Heat Rate-Unit #2 (BTU/KWH) 8,077 8,103 8,131 8,029 7,997 7,997 8,021
Actual Annual Energy - Unit #1 (MWH) 521,585 515,348 534,022 533,024 524,003 516,285 509,174
Actual Annual Energy - Unit #2 (MWH) 374,689 378,444 389,591 386,371 368,985 352,824 337,335
Annual Fuel Usage - Unit #1 (DT's) 4,263,440 4,230,492 4,360,825 4,291,374 4,236,562 4,191,718 4,151,297
Annual Fuel Usage - Unit #2 (DT's) 3,026,360 3,066,535 3,167,763 3,102,174 2,950,776 2,821,532 2,705,767
Electricity Revenues - Capacity:
Cap. Costs/KW Month -
Unadjusted Contract Year $18.27 $18.26 $18.26 $19.10 $19.10 $19.18 $20.02
Capital Costs/KW Year $219.24 $219.22 $219.12 $220.80 $229.20 $229.36 $231.84
Capital Costs Per KWH $0.04947 $0.04996 $0.04924 $0.04893 $0.05151 $0.05221 $0.05340
GNP Deflator Adjustment/KW Year $15.70 $15.70 $15.69 $15.81 $16.41 $16.42 $16.60
GNP Deflator Adjustment Per KWH $0.00354 $0.00358 $0.00353 $0.00350 $0.00369 $0.00374 $0.00382
Interest Rate Adjustment/KW Year ($3.87) ($3.90) ($3.94) ($4.00) ($4.04) ($4.07) ($4.10)
Interest Rate Adjustment Per KWH ($0.00087) ($0.00089) ($0.00089) ($0.00089) ($0.00091) ($0.00093) ($0.00095)
Scheduled Adjustment/KW Year $0.00 $0.00 $0.00 $1.20 $8.04 $13.26 18.48
Scheduled Adjustment Per KWH $0.00000 $0.00000 $0.00000 $0.00026 $0.00181 $0.00302 $0.00426
Contingent Adjustment/KW Year $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Contingent Adjustment Per KWH $0.00000 $0.00000 $0.00000 $0.00000 $0.00000 $0.00000 $0.00000
Total Capacity Rate/KW Year $231.07 $231.02 $230.87 $233.80 $249.62 $254.97 $262.82
Total Capacity Rate/KW Month $19.26 $19.25 $19.24 $19.48 $20.80 $21.25 $21.90
Total Capacity Rate Per KWH $0.05214 $0.05265 $0.05188 $0.05181 $0.05610 $0.05804 $0.06053
Electricity Revenues - Energy: Escalation
----------
Energy Rate Per KWH (Weighted Average) $0.03010 $0.03121 $0.03232 $0.03404 $0.03574 $0.03752 $0.03932
Variable O&M Rate Per KWH 3.50% $0.00415 $0.00430 $0.00445 $0.00460 $0.00477 $0.00493 $0.00510
Total Energy Rate Per KWH $0.03425 $0.03551 $0.03677 $0.03864 $0.04051 $0.04246 $0.04442
Total Electricity Revenues-Capacity & Energy $0.0864 $0.0882 $0.0886 $0.0905 $0.0966 $0.1005 $0.1050
Distilled Water Revenues:
Water Delivery (Days/Year) 250 250 250 250 250 250 250
Daily Distilled Water Sales Volume (Gal) 80,000 80,000 80,000 80,000 80,000 80,000 80,000
Distilled Water Sales Price ($/000 Gal) $1.50 $1.50 $1.50 $1.50 $1.50 $1.50 $1.50
Contract Fuel Rates (Energy Revenue):
FGRR - Firm Gas Reserve Rate ($/DT) $3.80 $3.88 $3.95 $4.03 $4.11 $4.20 $4.28
FGMR - Firm Gas Market Rate ($/DT) $3.35 $3.49 $3.65 $3.91 $4.18 $4.46 $4.76
IGR - Interruptible Gas Rate ($/DT) $3.43 $3.58 $3.75 $4.01 $4.29 $4.59 $4.90
OR - Oil Rate ($/DT) $6.00 $6.26 $6.53 $6.81 $7.10 $7.41 $7.72
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Dec-2010 Dec-2011 Dec-2012
-------- -------- --------
<S> <C> <C> <C>
Operating Assumptions:
Capacity in Kilowatts 230,000 230,000 230,000
Weighted Average Energy Output - Unit #1 118,400 117,860 117,620
Weighted Average Energy Output - Unit #2 118,400 117,860 117,620
Firm Dispatch Energy Production 99,000 99,000 99,000
Hours Per Year Running Unit #1 (Full Load) 4,297 4,224 4,157
Hours Per Year Running Unit #2 (Full Load) 2,757 2,669 2,586
Contract Heat Rate (BTU/KWH) 8,461 8,461 8,461
Weighted Average Heat Rate-Unit #1 (BTU/KWH) 8,118 8,151 8,183
Weighted Average Heat Rate-Unit #2 (BTU/KWH) 8,045 8,020 8,049
Actual Annual Energy - Unit #1 (MWH) 508,800 497,854 488,986
Actual Annual Energy - Unit #2 (MWH) 326,408 314,613 304,172
Annual Fuel Usage - Unit #1 (DT's) 4,130,438 4,058,005 4,001,373
Annual Fuel Usage - Unit #2 (DT's) 2,625,953 2,523,193 2,448,281
Electricity Revenues - Capacity:
Cap. Costs/KW Month -
Unadjusted Contract Year $20.57 $22.79 $23.35
Capital Costs/KW Year $241.34 $251.28 $274.60
Capital Costs Per KWH $0.05616 $0.05949 $0.06605
GNP Deflator Adjustment/KW Year $17.28 $17.99 $19.66
GNP Deflator Adjustment Per KWH $0.00402 $0.00426 $0.00473
Interest Rate Adjustment/KW Year ($4.13) ($4.13) ($4.13)
Interest Rate Adjustment Per KWH ($0.00096) ($0.00098) ($0.00099)
Scheduled Adjustment/KW Year $23.70 $28.91 $34.13
Scheduled Adjustment Per KWH $0.00551 $0.00684 $0.00821
Contingent Adjustment/KW Year $0.00 $0.00 $0.00
Contingent Adjustment Per KWH $0.00000 $0.00000 $0.00000
Total Capacity Rate/KW Year $278.19 $294.05 $324.26
Total Capacity Rate/KW Month $23.18 $24.50 $27.02
Total Capacity Rate Per KWH $0.06473 $0.06961 $0.07800
Electricity Revenues - Energy: Escalation
Energy Rate Per KWH (Weighted Average) $0.04119 $0.04448 $0.04847
Variable O&M Rate Per KWH 3.50% $0.00528 $0.00547 $0.00566
Total Energy Rate Per KWH $0.04647 $0.04994 $0.05413
Total Electricity Revenues-Capacity & Energy $0.1112 $0.1196 $0.1321
Distilled Water Revenues:
Water Delivery (Days/Year) 250 250 250
Daily Distilled Water Sales Volume (Gal) 80,000 80,000 80,000
Distilled Water Sales Price ($/000 Gal) $1.50 $1.50 $1.50
Contract Fuel Rates (Energy Revenue):
FGRR - Firm Gas Reserve Rate ($/DT) $4.36 $4.45 $4.54
FGMR - Firm Gas Market Rate ($/DT) $5.08 $5.37 $5.68
IGR - Interruptible Gas Rate ($/DT) $5.23 $5.54 $5.86
OR - Oil Rate ($/DT) $8.05 $8.40 $8.76
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2013 Dec-2014 Dec-2015 Dec-2016 Dec-2017 Dec-2018 Dec-2019
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Assumptions:
Capacity in Kilowatts 230,000 230,000 230,000 230,000 230,000 230,000 230,000
Weighted Average Energy Output- Unit #1 117,380 119,240 118,000 117,750 117,540 117,300 118,680
Weighted Average Energy Output- Unit #2 117,380 119,240 118,000 117,750 117,540 117,300 118,680
Firm Dispatch Energy Production 99,000 99,000 99,000 99,000 99,000 99,000 99,000
Hours Per Year Running Unit #1
(Full Load) 4,097 4,043 3,996 3,925 3,858 3,796 3,739
Hours Per Year Running Unit #2
(Full Load) 2,507 2,431 2,359 2,308 2,259 2,212 2,166
Contract Heat Rate (BTU/KWH) 8,461 8,461 8,461 8,461 8,461 8,461 8,461
Weighted Average Heat Rate - Unit #1
(BTU/KWH) 8,216 8,134 8,053 8,085 8,118 8,148 8,091
Weighted Average Heat Rate - Unit #2
(BTU/KWH) 8,067 8,087 8,108 8,008 7,968 7,986 8,006
Actual Annual Energy - Unit #1 (MWH) 480,905 482,099 471,493 462,141 453,510 445,312 443,705
Actual Annual Energy - Unit #2 (MWH) 294,230 289,865 278,329 271,774 265,543 259,467 257,116
Annual Fuel Usage - Unit #1 (DT's) 3,951,114 3,921,394 3,796,937 3,736,407 3,681,592 3,628,399 3,590,019
Annual Fuel Usage - Unit #2 (DT's) 2,373,555 2,344,135 2,256,692 2,176,367 2,115,847 2,072,103 2,058,470
Electricity Revenues - Capacity:
Capital Costs/KW Month
(Unadjusted Contract Year) $23.63 $22.69 $18.83 $19.14 $19.48 $19.83 $20.19
Capital Costs/KW Year $280.76 $281.68 $264.56 $226.58 $230.36 $234.46 $238.68
Capital Costs Per KWH $0.06853 $0.06967 $0.06621 $0.05773 $0.05970 $0.06176 $0.06384
GNP Deflator Adjustment/KW Year $20.11 $20.17 $18.95 $16.23 $16.50 $16.79 $17.09
GNP Deflator Adjustment Per KWH $0.00491 $0.00499 $0.00474 $0.00413 $0.00428 $0.00442 $0.00457
Interest Rate Adjustment/KW Year ($4.13) ($4.13) ($3.75) ($1.81) ($1.81) ($1.81) ($1.81)
Interest Rate Adjustment Per KWH ($0.00101) ($0.00102) ($0.00094) ($0.00046) ($0.00047) ($0.00048) ($0.00049)
Scheduled Adjustment/KW Year $39.35 $44.57 $49.78 $55.00 $60.22 $65.43 $70.65
Scheduled Adjustment Per KWH $0.00960 $0.01102 $0.01246 $0.01401 $0.01561 $0.01724 $0.01890
Contingent Adjustment/KW Year $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Contingent Adjustment Per KWH $0.00000 $0.00000 $0.00000 $0.00000 $0.00000 $0.00000 $0.00000
Total Capacity Rate/KW Year $336.08 $342.28 $329.54 $295.99 $305.26 $314.87 $324.61
Total Capacity Rate/KW Month $28.01 $28.52 $27.46 $24.67 $25.44 $26.24 $27.05
Total Capacity Rate Per KWH $0.08203 $0.08466 $0.08247 $0.07542 $0.07912 $0.08294 $0.08682
Electricity Revenues - Energy:
Energy Rate Per KWH (Weighted Average) $0.05116 $0.05400 $0.05697 $0.06021 $0.06365 $0.06730 $0.07117
Variable O&M Rate Per KWH $0.00586 $0.00606 $0.00628 $0.00649 $0.00672 $0.00696 $0.00720
Total Energy Rate Per KWH $0.05702 $0.06006 $0.06325 $0.06671 $0.07037 $0.07426 $0.07838
Total Electricity Revenues -
Capacity & Energy $0.1391 $0.1447 $0.1457 $0.1421 $0.1495 $0.1572 $0.1652
Distilled Water Revenues:
Water Delivery (Days/Year) 250 250 250 250 250 250 250
Daily Distilled Water Sales Volume (Gal) 80,000 80,000 80,000 80,000 80,000 80,000 80,000
Distilled Water Sales Price ($/000 Gal) $1.50 $1.50 $1.50 $1.50 $1.50 $1.50 $1.50
Contract Fuel Rates (Energy Revenue):
FGRR - Firm Gas Reserve Rate ($/DT) $4.63 $4.73 $4.82 $4.91 $5.00 $5.09 $5.18
FGMR - Firm Gas Market Rate ($/DT) $6.01 $6.35 $6.71 $7.09 $7.49 $7.92 $8.38
IGR - Interruptible Gas Rate ($/DT) $6.20 $6.56 $6.93 $7.33 $7.75 $8.19 $8.67
OR - Oil Rate ($/DT) $9.14 $9.53 $9.94 $10.37 $10.81 $11.28 $11.77
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended
Dec-2020 Dec-2021
-------- --------
<S> <C> <C>
Operating Assumptions:
Capacity in Kilowatts 230,000 230,000
Weighted Average Energy Output- Unit #1 117,950 117,740
Weighted Average Energy Output- Unit #2 117,950 117,740
Firm Dispatch Energy Production 99,000 99,000
Hours Per Year Running Unit #1
(Full Load) 3,685 3,008
Hours Per Year Running Unit #2
(Full Load) 2,123 1,785
Contract Heat Rate (BTU/KWH) 8,461 8,461
Weighted Average Heat Rate - Unit #1
(BTU/KWH) 8,139 8,167
Weighted Average Heat Rate - Unit #2
(BTU/KWH) 8,026 8,002
Actual Annual Energy - Unit #1 (MWH) 434,671 354,213
Actual Annual Energy - Unit #2 (MWH) 250,352 210,123
Annual Fuel Usage - Unit #1 (DT's) 3,537,787 2,892,855
Annual Fuel Usage - Unit #2 (DT's) 2,009,322 1,681,408
Electricity Revenues - Capacity:
Capital Costs/KW Month
(Unadjusted Contract Year) $20.58 $0.00
Capital Costs/KW Year $243.06 $205.80
Capital Costs Per KWH $0.06596 $0.06841
GNP Deflator Adjustment/KW Year $17.41 $14.74
GNP Deflator Adjustment Per KWH $0.00472 $0.00490
Interest Rate Adjustment/KW Year ($1.81) ($1.51)
Interest Rate Adjustment Per KWH ($0.00049) ($0.00050)
Scheduled Adjustment/KW Year $75.87 $66.85
Scheduled Adjustment Per KWH $0.02059 $0.02222
Contingent Adjustment/KW Year $0.00 $0.00
Contingent Adjustment Per KWH $0.00000 $0.00000
Total Capacity Rate/KW Year $334.52 $285.87
Total Capacity Rate/KW Month $27.88 $23.82
Total Capacity Rate Per KWH $0.09077 $0.09502
Electricity Revenues - Energy:
Energy Rate Per KWH (Weighted Average) $0.07528 $0.07880
Variable O&M Rate Per KWH $0.00745 $0.00771
Total Energy Rate Per KWH $0.08274 $0.08651
Total Electricity Revenues -
Capacity & Energy $0.1735 $0.1815
Distilled Water Revenues:
Water Delivery (Days/Year) 250 208
Daily Distilled Water Sales Volume (Gal) 80,000 80,000
Distilled Water Sales Price ($/000 Gal) $1.50 $1.50
Contract Fuel Rates (Energy Revenue):
FGRR - Firm Gas Reserve Rate ($/DT) $5.27 $5.37
FGMR - Firm Gas Market Rate ($/DT) $8.86 $9.37
IGR - Interruptible Gas Rate ($/DT) $9.17 $9.70
OR - Oil Rate ($/DT) $12.27 $12.80
</TABLE>
<PAGE>
Panda-Brandywine L.P.
230MW PEPCO Project
Operating Assumptions
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-1996 Dec-1997 Dec-1998 Dec-1999 Dec-2000 Dec-2001 Dec-2002
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Unit #1 - Fuel Cost:
FGRR (Reserves) % 78% 75% 65% 62% 59% 58% 59%
FGMR (Market) % 22% 25% 35% 38% 41% 42% 41%
Blended Unit #1 Rate ($/DT) $2.84 $2.92 $2.97 $3.04 $3.14 $3.37 $3.51
Blended Unit #1 Rate ($/KWH) $0.02256 $0.02353 $0.02397 $0.02463 $0.02553 $0.02723 $0.02855
Unit #2 - Fuel Cost:
IGR (Spot Gas) % 80% 95% 94% 94% 93% 93% 93%
OR (Fuel Oil) % 20% 5% 6% 6% 7% 7% 7%
Blended Unit #2 Rate ($/DT) $3.11 $2.89 $2.96 $3.02 $3.10 $3.23 $3.37
Blended Unit #2 Rate ($/KWH) $0.02444 $0.02296 $0.02363 $0.02421 $0.02489 $0.02592 $0.02715
Water Usage:
Gallons Per Hour - Cooling
Towers & Distilled Water 55,000 55,000 55,000 55,000 55,000 55,000 55,000
Gallons Per Hour -
Boiler Makeup 1,500 1,500 1,500 1,500 1,500 1,500 1,500
Charles County Waste
Water Rate 0.00% $2.00 $2.00 $2.00 $2.00 $2.00 $2.00 $2.00
WSSC Water Usage Rate
($/000 Gallons) 2.00% $3.26 $3.32 $3.39 $3.46 $3.53 $3.60 $3.67
Water Discharge & Chemical Usage:
Gallons Per Hour - Cooling
Towers & Distilled Water 16,000 16,000 16,000 16,000 16,000 16,000 16,000
Gallons Per Hour - Boiler Makeup 120 120 120 120 120 120 120
WSSC Water Discharge Rate
($/000 Gallons) 2.00% $5.12 $5.22 $5.32 $5.43 $5.54 $5.65 $5.76
Chemical Usage Rate
($/000 Gallons) 3.00% $0.68 $0.70 $0.72 $0.74 $0.76 $0.79 $0.81
Distilled Water Costs:
Annual Operating Costs 3.50% $33,333 $200,000 $207,000 $214,245 $221,744 $229,505 $237,537
Fixed Operating Expenses:
Firm Transportation $420,603 $2,561,473 $2,599,895 $2,638,893 $2,678,477 $2,718,654 $2,759,434
O&M Contract Costs 3.50% $245,500 $1,473,000 $1,524,555 $1,577,914 $1,633,141 $1,690,301 $1,749,462
Consumables 3.50% $125,000 $750,000 $776,250 $803,419 $831,538 $860,642 $890,765
Administrative Expenses 3.50% $83,333 $500,000 $517,500 $535,613 $554,359 $573,762 $593,843
Insurance 3.00% $83,333 $500,000 $515,000 $530,450 $546,364 $562,754 $579,637
Purchased Electricity 3.00% $68,609 $411,652 $424,002 $436,722 $449,823 $463,318 $477,218
Property Taxes 3.00% $400,000 $2,620,510 $2,483,407 $2,339,772 $2,189,399 $2,032,074 $1,867,581
Turbine Overhaul Reserve:
Overhaul Reserve -
Beginning of Year
($5,000,000 Required Balance) $1,000,000 $1,250,000 $1,750,000 $2,750,000 $4,250,000 $5,000,000 $5,175,000
Additions to Reserve
($0 Per Turbine Hour) $250,000 $1,196,000 $1,668,610 $2,245,573 $1,466,232 $3,215,936 $1,542,214
Turbine Overhauls
(100.00% of Contract Amount) $0 ($696,000) ($668,610) ($745,573) ($716,232) ($3,040,936) ($1,361,089)
Reserve Disbursement $0 $0 $0 $0 $0 $0 $0
Overhaul Reserve - End of Year $1,250,000 $1,750,000 $2,750,000 $4,250,000 $5,000,000 $5,175,000 $5,356,125
Lease Reserve:
Lease Reserve - Beginning
of Year $2,400,000 $3,467,325 $4,899,375 $9,106,775 $9,804,575 $13,352,725 $13,795,100
Additions to Reserve $1,067,325 $1,432,050 $4,207,400 $697,800 $3,548,150 $442,375 $275,050
Reserve Disbursement $0 $0 $0 $0 $0 $0 $0
Lease Reserve - End of Year $3,467,325 $4,899,375 $9,106,775 $9,804,575 $13,352,725 $13,795,100 $14,070,150
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2003 Dec-2004 Dec-2005 Dec-2006 Dec-2007 Dec-2008 Dec-2009
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Unit #1 - Fuel Cost:
FGRR (Reserves) % 59% 60% 58% 58% 59% 60% 61%
FGMR (Market) % 41% 40% 42% 42% 41% 40% 39%
Blended Unit #1 Rate ($/DT) $3.62 $3.73 $3.83 $3.98 $4.14 $4.31 $4.48
Blended Unit #1 Rate ($/KWH) $0.02956 $0.03060 $0.03124 $0.03206 $0.03349 $0.03501 $0.03650
Unit #2 - Fuel Cost:
IGR (Spot Gas) % 93% 93% 93% 92% 92% 92% 93%
OR (Fuel Oil) % 7% 7% 7% 8% 8% 8% 7%
Blended Unit #2 Rate ($/DT) $3.52 $3.68 $3.86 $4.13 $4.40 $4.69 $4.98
Blended Unit #2 Rate ($/KWH) $0.02846 $0.02983 $0.03138 $0.03318 $0.03520 $0.03747 $0.03997
Water Usage:
Gallons / Hour - Cooling
Towers & Dst. Water 55,000 55,000 55,000 55,000 55,000 55,000 55,000
Gallons Per Hour - Boiler Makeup 1,500 1,500 1,500 1,500 1,500 1,500 1,500
Charles Cty Waste Water Rate
($/000 Gallons) $2.00 $2.00 $2.00 $2.00 $2.00 $2.00 $2.00
WSSC Water Usage Rate
($/000 Gallons) $3.74 $3.82 $3.89 $3.97 $4.05 $4.13 $4.21
Water Discharge & Chemical Usage:
Gallons / Hour-Cooling Towers
& Dst. Water 16,000 16,000 16,000 16,000 16,000 16,000 16,000
Gallons Per Hour - Boiler Makeup 120 120 120 120 120 120 120
WSSC Water Discharge Rate
($/000 Gallons) $5.88 $5.99 $6.11 $6.24 $6.36 $6.49 $6.62
Chemical Usage Rate
($/000 Gallons) $0.84 $0.86 $0.89 $0.91 $0.94 $0.97 $1.00
Distilled Water Costs:
Annual Operating Costs $245,851 $254,456 $263,362 $272,579 $282,120 $291,994 $302,214
Fixed Operating Expenses:
Firm Transportation $2,800,825 $2,842,837 $2,885,480 $2,928,762 $2,972,694 $3,017,284 $3,062,543
O&M Contract Costs $1,810,693 $1,874,067 $1,939,660 $2,007,548 $2,077,812 $2,150,535 $2,225,804
Consumables $921,941 $954,209 $987,607 $1,022,173 $1,057,949 $1,094,977 $1,133,301
Administrative Expenses $614,628 $636,140 $658,405 $681,449 $705,299 $729,985 $755,534
Insurance $597,026 $614,937 $633,385 $652,387 $671,958 $692,117 $712,880
Purchased Electricity $491,534 $506,280 $521,469 $537,113 $553,226 $569,823 $586,918
Property Taxes $1,695,695 $1,599,555 $1,583,926 $1,567,032 $1,532,315 $1,512,427 $1,491,130
Turbine Overhaul Reserve:
Overhaul Reserve -
Beginning of Year $5,356,125 $5,543,589 $5,737,615 $5,938,432 $6,146,277 $6,361,396 $6,584,045
Additions to Reserve $981,563 $1,079,532 $3,654,807 $3,850,870 $1,126,366 $1,895,774 $1,206,592
Turbine Overhauls ($794,099) ($885,506) ($3,453,990) ($3,643,025) ($911,247) ($1,673,125) ($976,150)
Reserve Disbursement $0 $0 $0 $0 $0 $0 $0
Overhaul Reserve -
End of Year $5,543,589 $5,737,615 $5,938,432 $6,146,277 $6,361,396 $6,584,045 $6,814,487
Lease Reserve:
Lease Reserve - Beginning
of Year $14,070,150 $14,171,650 $14,336,225 $14,314,750 $14,767,225 $15,358,800 $15,814,175
Additions to Reserve $101,500 $164,575 $0 $452,475 $591,575 $455,375 $1,180,325
Reserve Disbursement $0 $0 ($21,475) $0 $0 $0 $0
Lease Reserve - End of Year $14,171,650 $14,336,225 $14,314,750 $14,767,225 $15,358,800 $15,814,175 $16,994,500
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Dec-2010 Dec-2011 Dec-2012
-------- -------- --------
<S> <C> <C> <C>
Unit #1 - Fuel Cost:
FGRR (Reserves) % 61% 26% 0%
FGMR (Market) % 39% 74% 100%
Blended Unit #1 Rate ($/DT) $4.65 $5.16 $5.72
Blended Unit #1 Rate ($/KWH) $0.03776 $0.04203 $0.04679
Unit #2 - Fuel Cost:
IGR (Spot Gas) % 93% 93% 93%
OR (Fuel Oil) % 7% 7% 7%
Blended Unit #2 Rate ($/DT) $5.30 $5.59 $5.90
Blended Unit #2 Rate ($/KWH) $0.04262 $0.04483 $0.04746
Water Usage:
Gallons / Hour - Cooling
Towers & Dst. Water 55,000 55,000 55,000
Gallons Per Hour - Boiler Makeup 1,500 1,500 1,500
Charles Cty Waste Water Rate
($/000 Gallons) $2.00 $2.00 $2.00
WSSC Water Usage Rate
($/000 Gallons) $4.30 $4.38 $4.47
Water Discharge & Chemical Usage:
Gallons / Hour-Cooling Towers
& Dst. Water 16,000 16,000 16,000
Gallons Per Hour - Boiler Makeup 120 120 120
WSSC Water Discharge Rate
($/000 Gallons) $6.75 $6.88 $7.02
Chemical Usage Rate
($/000 Gallons) $1.03 $1.06 $1.09
Distilled Water Costs:
Annual Operating Costs $312,791 $323,739 $335,070
Fixed Operating Expenses:
Firm Transportation $3,108,481 $3,155,109 $3,202,435
O&M Contract Costs $2,303,707 $2,384,337 $2,467,789
Consumables $1,172,967 $1,214,021 $1,256,512
Administrative Expenses $781,978 $809,347 $837,674
Insurance $734,267 $756,295 $778,984
Purchased Electricity $604,525 $622,661 $641,341
Property Taxes $1,468,376 $1,444,116 $1,418,298
Turbine Overhaul Reserve:
Overhaul Reserve -
Beginning of Year $6,814,487 $7,052,994 $7,299,849
Additions to Reserve $2,855,006 $2,873,996 $1,421,537
Turbine Overhauls ($2,616,498) ($2,627,141) ($1,166,043)
Reserve Disbursement $0 $0 $0
Overhaul Reserve -
End of Year $7,052,994 $7,299,849 $7,555,343
Lease Reserve:
Lease Reserve - Beginning
of Year $16,994,500 $17,832,475 $20,968,650
Additions to Reserve $837,975 $3,136,175 $964,575
Reserve Disbursement $0 $0 $0
Lease Reserve - End of Year $17,832,475 $20,968,650 $21,933,225
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2013 Dec-2014 Dec-2015 Dec-2016 Dec-2017 Dec-2018 Dec-2019
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Unit #1 - Fuel Cost:
FGRR (Reserves) % 0% 0% 0% 0% 0% 0% 0%
FGMR (Market) % 100% 100% 100% 100% 100% 100% 100%
Blended Unit #1 Rate ($/DT) $6.05 $6.39 $6.76 $7.15 $7.56 $7.99 $8.45
Blended Unit #1 Rate ($/KWH) $0.04969 $0.05202 $0.05443 $0.05777 $0.06133 $0.06511 $0.06839
Unit #2 - Fuel Cost:
IGR (Spot Gas) % 93% 94% 94% 94% 93% 93% 93%
OR (Fuel Oil) % 7% 6% 6% 6% 7% 7% 7%
Blended Unit #2 Rate ($/DT) $6.22 $6.56 $6.91 $7.30 $7.71 $8.15 $8.61
Blended Unit #2 Rate ($/KWH) $0.05017 $0.05303 $0.05605 $0.05848 $0.06146 $0.06510 $0.06897
Water Usage:
Gallons Per Hour - Cooling Towers
& Distilled Water 55,000 55,000 55,000 55,000 55,000 55,000 55,000
Gallons Per Hour - Boiler Makeup 1,500 1,500 1,500 1,500 1,500 1,500 1,500
Charles County Waste Water Rate
($/000 Gallons) $2.00 $2.00 $2.00 $2.00 $2.00 $2.00 $2.00
WSSC Water Usage Rate
($/000 Gallons) $4.56 $4.65 $4.75 $4.84 $4.94 $5.04 $5.14
Water Discharge & Chemical Usage:
Gallons Per Hour - Cooling Towers
& Distilled Water 16,000 16,000 16,000 16,000 16,000 16,000 16,000
Gallons Per Hour - Boiler Makeup 120 120 120 120 120 120 120
WSSC Water Discharge Rate
($/000 Gallons) $7.16 $7.31 $7.45 $7.60 $7.75 $7.91 $8.07
Chemical Usage Rate
($/000 Gallons) $1.12 $1.16 $1.19 $1.23 $1.26 $1.30 $1.34
Distilled Water Costs:
Annual Operating Costs $346,797 $358,935 $371,498 $384,500 $397,958 $411,886 $426,302
Fixed Operating Expenses:
Firm Transportation $3,250,472 $3,299,229 $3,348,717 $3,398,948 $3,449,932 $3,501,681 $3,554,207
O&M Contract Costs $2,554,161 $2,643,557 $2,736,082 $2,831,844 $2,930,959 $3,033,543 $3,139,717
Consumables $1,300,490 $1,346,007 $1,393,117 $1,441,876 $1,492,342 $1,544,574 $1,598,634
Administrative Expenses $866,993 $897,338 $928,745 $961,251 $994,894 $1,029,716 $1,065,756
Insurance $802,353 $826,424 $851,217 $876,753 $903,056 $930,147 $958,052
Purchased Electricity $660,581 $680,398 $700,810 $721,835 $743,490 $765,794 $788,768
Property Taxes $1,390,870 $1,361,777 $1,330,965 $1,298,375 $1,263,949 $1,227,626 $1,189,346
Turbine Overhaul Reserve:
Overhaul Reserve - Beginning
of Year $7,555,343 $7,819,780 $8,093,473 $8,376,744 $8,669,930 $8,973,378 $9,287,446
Additions to Reserve $1,384,592 $5,878,464 $1,483,210 $5,432,032 $1,588,851 $1,747,433 $4,850,260
Turbine Overhauls ($1,120,155) ($5,604,772) ($1,199,938) ($5,138,846) ($1,285,404) ($1,433,364) ($4,525,199)
Reserve Disbursement $0 $0 $0 $0 $0 $0 $0
Overhaul Reserve - End of Year $7,819,780 $8,093,473 $8,376,744 $8,669,930 $8,973,378 $9,287,446 $9,612,507
Lease Reserve:
Lease Reserve - Beginning
of Year $21,933,225 $22,787,025 $22,700,625 $21,070,175 $7,538,638 $7,538,638 $7,538,638
Additions to Reserve $853,800 $0 $0 $0 $0 $0 $0
Reserve Disbursement $0 ($86,400) ($1,630,450)($13,531,537) $0 $0 $0
Lease Reserve - End of Year $22,787,025 $22,700,625 $21,070,175 $7,538,638 $7,538,638 $7,538,638 $7,538,638
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended
Dec-2020 Dec-2021
-------- --------
<S> <C> <C>
Unit #1 - Fuel Cost:
FGRR (Reserves) % 0% 0%
FGMR (Market) % 100% 100%
Blended Unit #1 Rate ($/DT) $8.94 $9.46
Blended Unit #1 Rate ($/KWH) $0.07278 $0.07728
Unit #2 - Fuel Cost:
IGR (Spot Gas) % 93% 94%
OR (Fuel Oil) % 7% 6%
Blended Unit #2 Rate ($/DT) $9.10 $9.57
Blended Unit #2 Rate ($/KWH) $0.07307 $0.07656
Water Usage:
Gallons Per Hour - Cooling Towers
& Distilled Water 55,000 55,000
Gallons Per Hour - Boiler Makeup 1,500 1,500
Charles County Waste Water Rate
($/000 Gallons) $2.00 $2.00
WSSC Water Usage Rate
($/000 Gallons) $5.24 $5.34
Water Discharge & Chemical Usage:
Gallons Per Hour - Cooling Towers
& Distilled Water 16,000 16,000
Gallons Per Hour - Boiler Makeup 120 120
WSSC Water Discharge Rate
($/000 Gallons) $8.23 $8.39
Chemical Usage Rate
($/000 Gallons) $1.38 $1.42
Distilled Water Costs:
Annual Operating Costs $441,223 $380,555
Fixed Operating Expenses:
Firm Transportation $3,607,520 $3,051,360
O&M Contract Costs $3,249,607 $2,802,786
Consumables $1,654,586 $1,427,080
Administrative Expenses $1,103,057 $951,387
Insurance $986,793 $846,998
Purchased Electricity $812,431 $697,337
Property Taxes $1,149,042 $2,140,362
Turbine Overhaul Reserve:
Overhaul Reserve - Beginning
of Year $9,612,507 $9,948,944
Additions to Reserve $1,871,893 $4,054,055
Turbine Overhauls ($1,535,456) ($3,705,842)
Reserve Disbursement $0 $0
Overhaul Reserve - End of Year $9,948,944 $10,297,157
Lease Reserve:
Lease Reserve - Beginning
of Year $7,538,638 $7,538,638
Additions to Reserve $0 $0
Reserve Disbursement $0 ($7,538,638)
Lease Reserve - End of Year $7,538,638 $0
</TABLE>
<PAGE>
Panda-Brandywine L.P.
230MW PEPCO Project
Lease Payments and Capacity Adjustments
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-1995 Dec-1996 Dec-1997 Dec-1998 Dec-1999 Dec-2000
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Lease Payments: Average Pymt
GECC Base Case (1997 PEPCO Peak) 31,054,050 7,637,000 10,742,000 19,049,000 20,548,000 27,630,000
GECC Case #2 (1998 PEPCO Peak) 31,054,050 7,637,000 10,742,000 19,049,000 20,548,000 27,630,000
GECC Case #3 (1999 PEPCO Peak) 31,054,050 7,637,000 10,742,000 19,049,000 20,548,000 27,630,000
GECC T-Bill Adj.
(100 bp increase) (A) 32,836,600 8,646,000 12,108,000 20,591,000 22,128,000 29,350,000
GECC T-Bill Adj.
(100 bp decrease) (B) 29,418,600 6,360,000 9,027,000 17,530,000 18,841,000 25,949,000
GECC Base Case Annual
Lease Payment Pre-Tax Yield 10.20% 215,000,000 7,637,000 10,742,000 19,049,000 20,548,000 27,630,000
Lease Payment
Adjustment (per 100
basis pts) Base Rate 7.38% 13.21% 12.72% 8.09% 7.69% 6.23%
Interest Adjustment
(14.9 Yr T-Bill Rate) Current Rate 6.83% (702,350) (943,250) (835,450) (938,850) (924,550)
GECC Base Case Annual
Lease Payment Pre-Tax Yield 9.78% 215,000,000 6,934,650 9,798,750 18,213,550 19,609,150 26,705,450
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended
Dec-2001 Dec-2002
-------- --------
<S> <C> <C>
Lease Payments:
GECC Base Case (1997 PEPCO Peak) 28,611,000 29,050,000
GECC Case #2 (1998 PEPCO Peak) 28,611,000 29,050,000
GECC Case #3 (1999 PEPCO Peak) 28,611,000 29,050,000
GECC T-Bill Adj.
(100 bp increase) (A) 30,314,000 30,883,000
GECC T-Bill Adj.
(100 bp decrease) (B) 26,755,000 27,396,000
GECC Base Case Annual
Lease Payment 28,611,000 29,050,000
Lease Payment
Adjustment (per 100
basis pts) 5.95% 6.31%
Interest Adjustment
(14.9 Yr T-Bill Rate) (1,020,800) (909,700)
GECC Base Case Annual
Lease Payment 27,590,200 28,140,300
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2003 Dec-2004 Dec-2005 Dec-2006 Dec-2007 Dec-2008
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Lease Payments:
GECC Base Case (1997 PEPCO Peak) 29,275,000 29,619,000 29,592,000 30,503,000 31,690,000 32,609,000
GECC Case #2 (1998 PEPCO Peak) 29,275,000 29,619,000 29,592,000 30,503,000 31,690,000 32,609,000
GECC Case #3 (1999 PEPCO Peak) 29,275,000 29,619,000 29,592,000 30,503,000 31,690,000 32,609,000
GECC T-Bill Adj. (100 bp increase) (A) 31,035,000 31,417,000 31,409,000 32,350,000 33,574,000 34,510,000
GECC T-Bill Adj. (100 bp decrease) (B) 27,581,000 27,898,000 27,842,000 28,742,000 29,922,000 30,826,000
GECC Base Case Annual Lease Payment 29,275,000 29,619,000 29,592,000 30,503,000 31,690,000 32,609,000
Lease Payment Adjustment (per 100 basis pts) 6.01% 6.07% 6.14% 6.06% 5.95% 5.83%
Interest Adjustment (14.9 Yr T-Bill Rate) (931,700) (946,550) (962,500) (968,550) (972,400) (980,650)
GECC Base Case Annual Lease Payment 28,343,300 28,672,450 28,629,500 29,534,450 30,717,600 31,628,350
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended
Dec-2009 Dec-2010 Dec-2011 Dec-2012
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Lease Payments:
GECC Base Case (1997 PEPCO Peak) 34,979,000 36,639,000 42,902,000 44,813,000
GECC Case #2 (1998 PEPCO Peak) 34,979,000 36,639,000 42,902,000 44,813,000
GECC Case #3 (1999 PEPCO Peak) 34,979,000 36,639,000 42,902,000 44,813,000
GECC T-Bill Adj. (100 bp increase) (A) 36,942,000 38,631,000 45,009,000 46,955,000
GECC T-Bill Adj. (100 bp decrease) (B) 33,179,000 34,868,000 41,148,000 43,092,000
GECC Base Case Annual Lease Payment 34,979,000 36,639,000 42,902,000 44,813,000
Lease Payment Adjustment (per 100 basis pts) 5.61% 5.44% 4.91% 4.78%
Interest Adjustment (14.9 Yr T-Bill Rate) (990,000) (974,050) (964,700) (946,550)
GECC Base Case Annual Lease Payment 33,989,000 35,664,950 41,937,300 43,866,450
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2013 Dec-2014 Dec-2015 Dec-2016 Dec-2017 Dec-2018 Dec-2019 Dec-2020
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lease Payments:
GECC Base Case (1997 PEPCO Peak) 46,514,000 46,339,000 42,340,000 15,527,025 15,527,025 15,527,025 15,527,025 15,527,025
GECC Case #2 (1998 PEPCO Peak) 46,514,000 46,339,000 42,340,000 15,527,025 15,527,025 15,527,025 15,527,025 15,527,025
GECC Case #3 (1999 PEPCO Peak) 46,514,000 46,339,000 42,340,000 15,527,025 15,527,025 15,527,025 15,527,025 15,527,025
GECC T-Bill Adj.
(100 bp increase) (A) 48,688,000 48,501,000 43,691,000 16,418,300 16,418,300 16,418,300 16,418,300 16,418,300
GECC T-Bill Adj.
(100 bp decrease) (B) 44,805,000 44,634,000 41,977,000 14,709,300 14,709,300 14,709,300 14,709,300 14,709,300
GECC Base Case Annual
Lease Payment 46,514,000 46,339,000 42,340,000 15,527,025 15,527,025 15,527,025 15,527,025 15,527,025
Lease Payment Adjustment
(per 100 basis pts) 4.67% 4.67% 3.19% 5.74% 5.74% 5.74% 5.74% 5.74%
Interest Adjustment
(14.9 Yr T-Bill Rate) (939,950) (937,750) (199,650) (449,749) (449,749) (449,749) (449,749) (449,749)
GECC Base Case Annual
Lease Payment 45,574,050 45,401,250 42,140,350 15,077,276 15,077,276 15,077,276 15,077,276 15,077,276
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Calendar Year Lease Payments: 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
1st Quarter Lease Payment (Jan 31st) 0 1,733,663 2,449,688 4,553,388 4,902,288 6,676,363 6,897,550
2nd Quarter Lease Payment (April 30th) 0 1,733,663 2,449,688 4,553,388 4,902,288 6,676,363 6,897,550
3rd Quarter Lease Payment (July 31st) 0 1,733,663 2,449,688 4,553,388 4,902,288 6,676,363 6,897,550
4th Quarter Lease Payment (October 31st) 0 1,733,663 2,449,688 4,553,388 4,902,288 6,676,363 6,897,550
- --------- --------- --------- --------- --------- ---------
Total Annual Lease Pymts (Calendar Years) 0 6,934,650 9,798,750 18,213,550 19,609,150 26,705,450 27,590,200
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Calendar Year Lease Payments: 2003 2004 2005 2006 2007 2008 2009
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
1st Quarter Lease Payment (Jan 31st) 7,035,075 7,085,825 7,168,113 7,157,375 7,383,613 7,679,400 7,907,088
2nd Quarter Lease Payment (April 30th) 7,035,075 7,085,825 7,168,113 7,157,375 7,383,613 7,679,400 7,907,088
3rd Quarter Lease Payment (July 31st) 7,035,075 7,085,825 7,168,113 7,157,375 7,383,613 7,679,400 7,907,088
4th Quarter Lease Payment (October 31st) 7,035,075 7,085,825 7,168,113 7,157,375 7,383,613 7,679,400 7,907,088
--------- --------- --------- --------- --------- --------- ---------
Total Annual Lease Pymts (Calendar Years) 28,140,300 28,343,300 28,672,450 28,629,500 29,534,450 30,717,600 31,628,350
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Calendar Year Lease Payments: 2010 2011 2012 2013 2014 2015
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
1st Quarter Lease Payment (Jan 31st) 8,497,250 8,916,238 10,484,325 10,966,613 11,393,513 11,350,313
2nd Quarter Lease Payment (April 30th) 8,497,250 8,916,238 10,484,325 10,966,613 11,393,513 11,350,313
3rd Quarter Lease Payment (July 31st) 8,497,250 8,916,238 10,484,325 10,966,613 11,393,513 11,350,313
4th Quarter Lease Payment (October 31st) 8,497,250 8,916,238 10,484,325 10,966,613 11,393,513 11,350,313
--------- --------- ---------- ---------- ---------- ----------
Total Annual Lease Pymts (Calendar Years) 33,989,000 35,664,950 41,937,300 43,866,450 45,574,050 45,401,250
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Calendar Year Lease Payments: 2016 2017 2018 2019 2020 2021
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
1st Quarter Lease Payment (Jan 31st) 10,535,088 3,769,319 3,769,319 3,769,319 3,769,319 3,769,319
2nd Quarter Lease Payment (April 30th) 10,535,088 3,769,319 3,769,319 3,769,319 3,769,319 3,769,319
3rd Quarter Lease Payment (July 31st) 10,535,088 3,769,319 3,769,319 3,769,319 3,769,319 3,769,319
4th Quarter Lease Payment (October 31st) 10,535,088 3,769,319 3,769,319 3,769,319 3,769,319 3,769,319
---------- --------- --------- --------- --------- ---------
Total Annual Lease Pymts (Calendar Years) 42,140,350 15,077,276 15,077,276 15,077,276 15,077,276 15,077,276
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
Capacity Adjustments - Amendment #1: Dec-1996 Dec-1997 Dec-1998 Dec-1999 Dec-2000
- ------------------------------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Scheduled Adjustment:
Calendar Year Adj (Appendix Q - Column 2) (6,633,906) (15,000,000) (16,000,000) 0 (1,000,000)
Contract Year Adj (Appendix Q - Column 4) 0 0 0 0 0
- - - - -
Net Calendar Year Adjustment (6,633,906) (15,000,000) (16,000,000) 0 (1,000,000)
Contingent Adjustment Peak Yr
Levelized Adjustment - Contract Yr 1997 CPWIRR 11,571,429 0 0 0 0 0
Maximum Adjustment Cap - Contract Yr TC 21,600,000 0 0 0 0 0
Unrecovered Amount - Contract Yr PC 0 0 0 0 0 0
Carry Over Adjustment - Contract Yr 0 0 0 0 0
Contingent Adjustment - Contract Yr PV/Uncov 0 0 0 0 0 0
- - - - - -
Net Calendar Year Adjustment 0 0 0 0 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended
Capacity Adjustments - Amendment #1: Dec-2001 Dec-2002
- ------------------------------------ -------- --------
<S> <C> <C>
Scheduled Adjustment:
Calendar Year Adj (Appendix Q - Column 2) 2,000,000 0
Contract Year Adj (Appendix Q - Column 4) 0 0
Net Calendar Year Adjustment 2,000,000 0
Contingent Adjustment
Levelized Adjustment - Contract Yr 0 0
Maximum Adjustment Cap - Contract Yr 0 0
Unrecovered Amount - Contract Yr 0 0
Carry Over Adjustment - Contract Yr 0 0
Contingent Adjustment - Contract Yr 0 0
Net Calendar Year Adjustment 0 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Capacity Adjustments - Amendment #1: Dec-2003 Dec-2004 Dec-2005 Dec-2006 Dec-2007 Dec-2008 Dec-2009 Dec-2010
- ------------------------------------ -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Scheduled Adjustment:
Calendar Year Adj (Appendix Q - Column 2) 0 0 0 0 0 0 0 0
Contract Year Adj (Appendix Q - Column 4) 0 0 0 1,650,000 2,850,000 4,050,000 5,250,000 6,450,000
Net Calendar Year Adjustment 0 0 0 275,000 1,850,000 3,050,000 4,250,000 5,450,000
Contingent Adjustment:
Levelized Adjustment - Contract Yr 0 0 0 0 0 0 0 0
Maximum Adjustment Cap - Contract Yr 0 0 0 0 0 0 0 0
Unrecovered Amount - Contract Yr 0 0 0 0 0 0 0 0
Carry Over Adjustment - Contract Yr 0 0 0 0 0 0 0 0
Contingent Adjustment - Contract Yr 0 0 0 0 0 0 0 0
Net Calendar Year Adjustment 0 0 0 0 0 0 0 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended
Capacity Adjustments - Amendment #1: Dec-2011 Dec-2012
- ------------------------------------ -------- --------
<S> <C> <C>
Scheduled Adjustment:
Calendar Year Adj (Appendix Q - Column 2) 0 0
Contract Year Adj (Appendix Q - Column 4) 7,650,000 8,850,000
Net Calendar Year Adjustment 6,650,000 7,850,000
Contingent Adjustment:
Levelized Adjustment - Contract Yr 0 0
Maximum Adjustment Cap - Contract Yr 0 0
Unrecovered Amount - Contract Yr 0 0
Carry Over Adjustment - Contract Yr 0 0
Contingent Adjustment - Contract Yr 0 0
Net Calendar Year Adjustment 0 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Capacity Adjustments - Amendment #1: Dec-2013 Dec-2014 Dec-2015 Dec-2016 Dec-2017 Dec-2018 Dec-2019
- ------------------------------------ -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Scheduled Adjustment:
Calendar Year Adj (Appendix Q - Column 2) 0 0 0 0 0 0 0
Contract Year Adj (Appendix Q - Column 4) 10,050,000 11,250,000 12,450,000 13,650,000 14,850,000 16,050,000 17,250,000
Net Calendar Year Adjustment 9,050,000 10,250,000 11,450,000 12,650,000 13,850,000 15,050,000 16,250,000
Contingent Adjustment:
Levelized Adjustment - Contract Yr 0 0 0 0 0 0 0
Maximum Adjustment Cap - Contract Yr 0 0 0 0 0 0 0
Unrecovered Amount - Contract Yr 0 0 0 0 0 0 0
Carry Over Adjustment - Contract Yr 0 0 0 0 0 0 0
Contingent Adjustment - Contract Yr 0 0 0 0 0 0 0
Net Calendar Year Adjustment 0 0 0 0 0 0 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended
Capacity Adjustments - Amendment #1: Dec-2020 Dec-2021
- ------------------------------------ -------- --------
<S> <C> <C>
Scheduled Adjustment:
Calendar Year Adj (Appendix Q - Column 2) 0 0
Contract Year Adj (Appendix Q - Column 4) 18,450,000 0
Net Calendar Year Adjustment 17,450,000 15,375,000
Contingent Adjustment:
Levelized Adjustment - Contract Yr 0 0
Maximum Adjustment Cap - Contract Yr 0 0
Unrecovered Amount - Contract Yr 0 0
Carry Over Adjustment - Contract Yr 0 0
Contingent Adjustment - Contract Yr 0 0
Net Calendar Year Adjustment 0 0
</TABLE>
<PAGE>
Panda-Brandywine L.P.
230MW PEPCO Project
Gas Supply Income Statement
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-1996 Dec-1997 Dec-1998 Dec-1999 Dec-2000 Dec-2001 Dec-2002
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
FGRR (Unit #1) 1,443,217 8,017,460 8,346,535 8,675,610 9,034,600 9,393,591 9,752,582
FGMR (Unit #1) 342,036 2,144,352 3,550,871 4,157,164 4,883,200 5,741,242 5,891,987
IGR (Unit #2) 977,048 5,610,397 7,311,509 8,605,254 9,962,288 9,728,765 9,246,406
OR (Unit #2) 383,413 503,422 788,094 1,040,216 1,321,706 1,274,735 1,193,623
Firm Transportation Demand 420,603 2,561,473 2,599,895 2,638,893 2,678,477 2,718,654 2,759,434
3,566,316 18,837,104 22,596,903 25,117,136 27,880,271 28,856,987 28,844,031
Fuel Costs:
Firm Gas-Reserves(Unit #1) 1,117,283 6,289,569 6,553,093 6,831,337 7,125,181 7,362,630 7,711,235
Firm Gas - Market (Unit #1) 300,775 1,803,627 3,065,345 3,581,847 4,132,509 4,436,609 4,598,046
Interruptible Gas (Unit #2) 725,195 4,150,509 5,442,567 6,429,862 7,480,146 7,331,276 7,030,832
Delivered Fuel Oil (Unit #2) 356,314 473,256 743,664 984,892 1,256,097 1,208,896 1,136,065
Firm Transportation - Demand 420,603 2,561,473 2,599,895 2,638,893 2,678,477 2,718,654 2,759,434
Firm Transportation - Commodity 50,446 286,807 333,432 354,994 377,017 381,823 384,103
Firm Transportation - Fuel 47,785 277,891 326,339 353,351 382,020 400,493 418,044
Interruptible Transportation - Commodity 118,986 637,498 836,728 991,682 1,150,747 1,084,434 999,661
Interruptible Transportation - Fuel 23,729 145,740 189,830 223,516 259,327 254,469 244,445
IT Savings From FT Utilization - Commodity (118,986) (637,498) (836,728) (991,682) (1,150,747) (1,084,434) (999,661)
IT Savings From FT Utilization - Fuel (23,729) (145,740) (189,830) (223,516) (259,327) (254,469) (244,445)
Fuel Management Fee - Firm Gas 0 0 0 0 0 0 0
Fuel Management Fee - Interruptible Gas 0 0 0 0 0 0 0
WGL Balancing 2,678 2,740 13,216 16,868 20,709 21,532 21,595
Storage-In-Transit 0 0 0 0 0 0 0
Total Fuel Costs 3,021,079 15,845,872 19,077,551 21,192,044 23,452,156 23,861,913 24,059,354
</TABLE>
Year Ended Year Ended Year Ended
Dec-2003 Dec-2004 Dec-2005
Revenues:
FGRR (Unit #1) 9,961,993 10,171,404 10,350,900
FGMR (Unit #1) 5,985,727 6,077,962 6,921,373
IGR (Unit #2) 9,756,260 10,294,127 11,012,758
OR (Unit #2) 1,272,469 1,355,802 1,564,270
Firm Transportation Demand 2,800,825 2,842,837 2,885,480
29,777,275 30,742,132 32,734,781
Fuel Costs:
Firm Gas-Reserves(Unit #1) 8,053,712 8,412,742 8,703,927
Firm Gas - Market (Unit #1) 4,716,555 4,835,720 5,490,970
Interruptible Gas (Unit #2) 7,491,753 7,982,339 8,612,716
Delivered Fuel Oil (Unit #2) 1,214,719 1,298,436 1,503,260
Firm Transportation - Demand 2,800,825 2,842,837 2,885,480
Firm Transportation - Commodity 383,579 383,149 397,597
Firm Transportation - Fuel 433,330 449,187 481,233
Interruptible Transportation - Commodity 1,029,801 1,060,968 1,104,258
Interruptible Transportation - Fuel 259,582 275,668 297,038
IT Savings From FT Utilization - Commodity(1,029,801) (1,060,968) (1,104,258)
IT Savings From FT Utilization - Fuel (259,582) (275,668) (297,038)
Fuel Management Fee - Firm Gas 0 0 0
Fuel Management Fee - Interruptible Gas 0 0 0
WGL Balancing 21,684 21,780 24,345
Storage-In-Transit 0 0 0
Total Fuel Costs 25,116,157 26,226,190 28,099,529
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2006 Dec-2007 Dec-2008 Dec-2009 Dec-2010 Dec-2011 Dec-2012
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
FGRR (Unit #1) 10,560,311 10,769,722 11,009,049 11,218,461 11,427,872 4,852,276 0
FGMR (Unit #1) 7,375,187 7,573,864 7,805,664 8,050,360 8,574,761 16,665,144 23,559,238
IGR (Unit #2) 11,623,707 11,867,190 12,118,426 12,366,332 12,753,366 13,017,889 13,320,978
OR (Unit #2) 1,734,980 1,705,007 1,678,997 1,647,485 1,645,822 1,599,820 1,560,453
Firm Transportation Demand 2,928,762 2,972,694 3,017,284 3,062,543 3,108,481 3,155,109 3,202,435
34,222,948 34,888,477 35,629,420 36,345,181 37,510,302 39,290,239 41,643,104
Fuel Costs:
Firm Gas - Reserves (Unit #1) 8,924,606 9,320,286 9,732,854 10,163,042 10,522,178 4,568,567 0
Firm Gas - Market (Unit #1) 5,805,077 6,026,694 6,275,816 6,536,904 6,969,248 13,550,687 19,406,924
Interruptible Gas (Unit #2) 9,062,185 9,300,614 9,579,344 9,883,242 10,299,679 10,544,808 10,892,775
Delivered Fuel Oil (Unit #2) 1,646,396 1,611,505 1,586,921 1,561,810 1,564,903 1,516,435 1,484,468
Firm Transportation - Demand 2,928,762 2,972,694 3,017,284 3,062,543 3,108,481 3,155,109 3,202,435
Firm Transportation - Commodity 393,897 391,495 389,984 388,862 389,565 385,375 382,633
Firm Transportation - Fuel 499,529 520,448 542,853 566,252 592,892 613,778 645,162
Interruptible Transportation - Commodity 1,089,220 1,049,387 1,016,244 987,316 970,195 944,700 928,812
Interruptible Transportation - Fuel 311,864 319,707 328,961 339,092 353,114 361,526 373,482
IT Savings From FT Utilization - Commodity(1,089,220) (1,049,387) (1,016,244) (987,316) (970,195) (944,700) (928,812)
IT Savings From FT Utilization - Fuel (311,864) (319,707) (328,961) (339,092) (353,114) (361,526) (373,482)
Fuel Management Fee - Firm Gas 0 0 0 0 0 0 0
Fuel Management Fee - Interruptible Gas 0 0 0 0 0 0 0
WGL Balancing 23,811 22,769 22,052 21,524 21,692 20,265 19,411
Storage-In-Transit 0 0 0 0 0 0 0
Total Fuel Costs 29,284,264 30,166,505 31,147,108 32,184,179 33,468,638 34,355,024 36,033,808
</TABLE>
Year Ended Year Ended Year Ended
Dec-2013 Dec-2014 Dec-2015
Revenues:
FGRR (Unit #1) 0 0 0
FGMR (Unit #1) 24,504,792 25,971,074 26,843,104
IGR (Unit #2) 13,630,192 14,195,335 14,407,781
OR (Unit #2) 1,524,503 1,519,100 1,468,615
Firm Transportation Demand 3,250,472 3,299,229 3,348,717
42,909,958 44,984,738 46,068,217
Fuel Costs:
Firm Gas - Reserves (Unit #1) 0 0 0
Firm Gas - Market (Unit #1) 20,339,719 21,414,415 21,984,360
Interruptible Gas (Unit #2) 11,233,246 11,791,171 12,060,532
Delivered Fuel Oil (Unit #2) 1,453,512 1,451,951 1,407,343
Firm Transportation - Demand 3,250,472 3,299,229 3,348,717
Firm Transportation - Commodity 380,462 380,247 370,772
Firm Transportation - Fuel 676,343 712,213 731,260
Interruptible Transportation - Commodity 912,275 912,622 890,225
Interruptible Transportation - Fuel 385,201 404,399 413,707
IT Savings From FT Utilization - Commodity (912,275) (912,622) (890,225)
IT Savings From FT Utilization - Fuel (385,201) (404,399) (413,707)
Fuel Management Fee - Firm Gas 0 0 0
Fuel Management Fee - Interruptible Gas 0 0 0
WGL Balancing 18,513 18,610 17,225
Storage-In-Transit 0 0 0
Total Fuel Costs 37,352,266 39,067,835 39,920,209
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Total Contract
Dec-2016 Dec-2017 Dec-2018 Dec-2019 Dec-2020 Dec-2021
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
FGRR (Unit #1) 0 0 0 0 0 0 144,985,582
FGMR (Unit #1) 27,812,826 28,857,807 29,966,410 31,582,358 32,731,962 28,042,023 381,612,487
IGR (Unit #2) 14,840,357 15,307,895 15,786,471 16,514,233 16,988,630 15,139,871 306,383,464
OR (Unit #2) 1,538,967 1,602,309 1,679,248 1,784,041 1,849,369 1,287,931 36,524,398
Firm Transportation Demand 3,398,948 3,449,932 3,501,681 3,554,207 3,607,520 3,051,360 76,815,945
47,591,098 49,217,943 50,933,810 53,434,838 55,177,481 47,521,185 946,321,876
Fuel Costs:
Firm Gas - Reserves (Unit #1) 0 0 0 0 0 0 121,392,244
Firm Gas - Market (Unit #1) 22,942,666 23,975,877 25,063,498 26,305,665 27,500,916 23,646,003 314,706,469
Interruptible Gas (Unit #2) 12,321,760 12,697,314 13,174,183 13,866,194 14,348,793 12,837,308 246,570,344
Delivered Fuel Oil (Unit #2) 1,456,571 1,508,946 1,584,975 1,688,102 1,754,289 1,218,062 34,671,789
Firm Transportation - Demand 3,398,948 3,449,932 3,501,681 3,554,207 3,607,520 3,051,360 76,815,945
Firm Transportation - Commodity 367,445 364,631 361,933 360,679 358,000 294,863 9,293,790
Firm Transportation - Fuel 763,141 797,517 833,705 875,035 914,805 793,646 14,648,250
Interruptible Transportation - Commodity 868,602 854,842 847,029 851,387 841,388 710,795 23,689,799
Interruptible Transportation - Fuel 422,189 434,556 450,385 473,536 489,482 441,264 8,475,810
IT Savings From FT Utilization - Commodity (868,602) (854,842) (847,029) (851,387) (841,388) (710,795) (23,689,799)
IT Savings From FT Utilization - Fuel (422,189) (434,556) (450,385) (473,536) (489,482) (441,264) (8,475,810)
Fuel Management Fee - Firm Gas 0 0 0 0 0 0 0
Fuel Management Fee - Interruptible Gas 0 0 0 0 0 0 0
WGL Balancing 15,267 13,775 12,687 12,294 11,036 11,076 449,153
Storage-In-Transit 0 0 0 0 0 0 0
Total Fuel Costs 41,265,798 42,807,991 44,532,662 46,662,176 48,495,357 41,852,318 818,547,984
</TABLE>
<PAGE>
Panda-Brandywine L.P.
230MW PEPCO Project
Gas Supply Assumptions
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-1996 Dec-1997 Dec-1998 Dec-1999 Dec-2000 Dec-2001
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Dispatch Hours:
Unit #1
Summer Hours (Jun-Sept) 0 1,297 1,435 1,476 1,516 1,514
Shoulder Hours (Mar-May & Oct-Nov) 338 1,353 1,465 1,618 1,771 1,788
Winter Hours (Dec-Feb) 277 832 1,123 1,155 1,187 1,173
Total Unit #1 Hours 616 3,482 4,024 4,249 4,474 4,475
Unit #2
Summer Hours (Jun-Sept) 0 1,020 1,135 1,213 1,292 1,294
Shoulder Hours (Mar-May & Oct-Nov) 111 722 1,020 1,245 1,470 1,270
Winter Hours (Dec-Feb) 309 412 627 785 944 861
420 2,154 2,782 3,244 3,705 3,425
Gas & Fuel Oil Volumes (DT's):
Firm Transportation Fuel % Daily Yr 1
Demand Volumes at Wellhead - 24,824 1,510,138 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827
Demand Volumes through ANR 0.00% 24,824 1,510,138 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827
Demand Volumes through Columbia Gas 2.41% 24,240 1,474,600 8,847,600 8,847,600 8,847,600 8,847,600 8,847,600
Demand Volumes through CLNG & WGL 1.00% 24,000 1,460,000 8,760,000 8,760,000 8,760,000 8,760,000 8,760,000
Unit #1 - FGRR Supply 78% 75% 65% 62% 59% 58%
FGRR Volumes at Wellhead - 7,064 475,577 2,578,297 2,586,947 2,596,878 2,608,091 2,590,471
FGRR Volumes through ANR 0.00% 7,064 475,577 2,578,297 2,586,947 2,596,878 2,608,091 2,590,471
FGRR Volumes through Columbia Gas 2.41% 6,898 464,385 2,517,622 2,526,069 2,535,766 2,546,715 2,529,510
FGRR Volumes through CLNG & WGL 1.00% 6,829 459,787 2,492,696 2,501,058 2,510,660 2,521,500 2,504,465
Unit #1 - FGMR Supply 22% 25% 35% 38% 41% 42%
FGMR Volumes at Wellhead - 2,330 131,379 850,507 1,373,695 1,592,701 1,812,570 1,857,384
FGMR Volumes through ANR 0.00% 2,330 131,379 850,507 1,373,695 1,592,701 1,812,570 1,857,384
FGMR Volumes through Columbia Gas 2.41% 2,275 128,287 830,492 1,341,368 1,555,220 1,769,915 1,813,674
FGMR Volumes through CLNG & WGL 1.00% 2,253 127,017 822,270 1,328,087 1,539,822 1,752,391 1,795,717
Unit #2 - IGR Supply 80% 95% 94% 94% 93% 93%
IGR Volumes Dlvd Columbia - 5,451 329,985 1,989,501 2,544,385 2,956,990 3,370,350 3,151,621
IGR Volumes Dlvd to CLNG 2.41% 5,322 322,220 1,942,682 2,484,508 2,887,404 3,291,036 3,077,455
IGR Volumes Dlvd to Wash Gas 1.00% 5,270 319,030 1,923,447 2,459,909 2,858,816 3,258,452 3,046,985
IGR Volumes Dlvd to Brandywine 0.00% 5,270 319,030 1,923,447 2,459,909 2,858,816 3,258,452 3,046,985
Unit #2 - OR Supply 20% 5% 6% 6% 7% 7%
OR Volumes Delivered to Plant 77,398 103,488 157,119 196,898 237,770 219,322
</TABLE>
<PAGE>
Year Ended
Dec-2002
--------
Dispatch Hours:
Unit #1
Summer Hours (Jun-Sept) 1,511
Shoulder Hours (Mar-May & Oct-Nov) 1,806
Winter Hours (Dec-Feb) 1,159
Total Unit #1 Hours 4,476
Unit #2
Summer Hours (Jun-Sept) 1,297
Shoulder Hours (Mar-May & Oct-Nov) 1,070
Winter Hours (Dec-Feb) 778
3,145
Gas & Fuel Oil Volumes (DT's):
Firm Transportation
Demand Volumes at Wellhead 9,060,827
Demand Volumes through ANR 9,060,827
Demand Volumes through Columbia Gas 8,847,600
Demand Volumes through CLNG & WGL 8,760,000
Unit #1 - FGRR Supply 59%
FGRR Volumes at Wellhead 2,608,091
FGRR Volumes through ANR 2,608,091
FGRR Volumes through Columbia Gas 2,546,715
FGRR Volumes through CLNG & WGL 2,521,500
Unit #1 - FGMR Supply 41%
FGMR Volumes at Wellhead 1,837,033
FGMR Volumes through ANR 1,837,033
FGMR Volumes through Columbia Gas 1,793,802
FGMR Volumes through CLNG & WGL 1,776,042
Unit #2 - IGR Supply 93%
IGR Volumes Dlvd Columbia 2,885,476
IGR Volumes Dlvd to CLNG 2,817,572
IGR Volumes Dlvd to Wash Gas 2,789,676
IGR Volumes Dlvd to Brandywine 2,789,676
Unit #2 - OR Supply 7%
OR Volumes Delivered to Plant 197,552
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2003 Dec-2004 Dec-2005 Dec-2006 Dec-2007 Dec-2008 Dec-2009
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Dispatch Hours:
Unit #1
Summer Hours (Jun-Sept) 1,475 1,439 1,483 1,527 1,504 1,484 1,465
Shoulder Hours (Mar-May & Oct-Nov) 1,791 1,776 1,786 1,797 1,772 1,749 1,727
Winter Hours (Dec-Feb) 1,166 1,173 1,181 1,189 1,174 1,161 1,149
Total Unit #1 Hours 4,432 4,388 4,450 4,513 4,450 4,393 4,342
Unit #2
Summer Hours (Jun-Sept) 1,227 1,157 1,198 1,238 1,205 1,172 1,141
Shoulder Hours (Mar-May & Oct-Nov) 1,159 1,247 1,163 1,078 1,026 976 928
Winter Hours (Dec-Feb) 798 818 886 955 903 854 808
3,184 3,222 3,247 3,271 3,133 3,002 2,877
Gas & Fuel Oil Volumes (DT's):
Firm Transportation
Demand Volumes at Wellhead 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827
Demand Volumes through ANR 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827
Demand Volumes through Columbia Gas 8,847,600 8,847,600 8,847,600 8,847,600 8,847,600 8,847,600 8,847,600
Demand Volumes through CLNG & WGL 8,760,000 8,760,000 8,760,000 8,760,000 8,760,000 8,760,000 8,760,000
Unit #1 - FGRR Supply 59% 60% 58% 58% 59% 60% 61%
FGRR Volumes at Wellhead 2,618,663 2,629,876 2,616,100 2,579,258 2,590,151 2,601,043 2,611,936
FGRR Volumes through ANR 2,618,663 2,629,876 2,616,100 2,579,258 2,590,151 2,601,043 2,611,936
FGRR Volumes through Columbia Gas 2,557,039 2,567,987 2,554,536 2,518,561 2,529,197 2,539,833 2,550,469
FGRR Volumes through CLNG & WGL 2,531,721 2,542,562 2,529,244 2,493,625 2,504,156 2,514,686 2,525,217
Unit #1 - FGMR Supply 41% 40% 42% 42% 41% 40% 39%
FGMR Volumes at Wellhead 1,791,187 1,745,896 1,894,480 1,859,486 1,791,899 1,734,623 1,681,921
FGMR Volumes through ANR 1,791,187 1,745,896 1,894,480 1,859,486 1,791,899 1,734,623 1,681,921
FGMR Volumes through Columbia Gas 1,749,035 1,704,810 1,849,897 1,815,727 1,749,731 1,693,802 1,642,341
FGMR Volumes through CLNG & WGL 1,731,718 1,687,931 1,831,582 1,797,749 1,732,407 1,677,032 1,626,080
Unit #2 - IGR Supply 93% 93% 93% 92% 92% 92% 93%
IGR Volumes Dlvd Columbia 2,920,862 2,957,248 3,038,369 2,958,563 2,817,359 2,696,773 2,589,507
IGR Volumes Dlvd to CLNG 2,852,125 2,887,655 2,966,868 2,888,940 2,751,058 2,633,310 2,528,569
IGR Volumes Dlvd to Wash Gas 2,823,886 2,859,065 2,937,493 2,860,336 2,723,820 2,607,238 2,503,533
IGR Volumes Dlvd to Brandywine 2,823,886 2,859,065 2,937,493 2,860,336 2,723,820 2,607,238 2,503,533
Unit #2 - OR Supply 7% 7% 7% 8% 8% 8% 7%
OR Volumes Delivered to Plant 202,474 207,470 230,270 241,838 226,956 214,294 202,234
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Dec-2010 Dec-2011 Dec-2012
-------- -------- --------
<S> <C> <C> <C>
Dispatch Hours:
Unit #1
Summer Hours (Jun-Sept) 1,450 1,434 1,420
Shoulder Hours (Mar-May & Oct-Nov) 1,708 1,678 1,651
Winter Hours (Dec-Feb) 1,140 1,112 1,086
Total Unit #1 Hours 4,297 4,224 4,157
Unit #2
Summer Hours (Jun-Sept) 1,110 1,101 1,093
Shoulder Hours (Mar-May & Oct-Nov) 883 852 821
Winter Hours (Dec-Feb) 764 717 672
2,757 2,669 2,586
Gas & Fuel Oil Volumes (DT's):
Firm Transportation
Demand Volumes at Wellhead 9,060,827 9,060,827 9,060,827
Demand Volumes through ANR 9,060,827 9,060,827 9,060,827
Demand Volumes through Columbia Gas 8,847,600 8,847,600 8,847,600
Demand Volumes through CLNG & WGL 8,760,000 8,760,000 8,760,000
Unit #1 - FGRR Supply 61% 26% 0%
FGRR Volumes at Wellhead 2,600,723 1,086,012 0
FGRR Volumes through ANR 2,600,723 1,086,012 0
FGRR Volumes through Columbia Gas 2,539,520 1,060,455 0
FGRR Volumes through CLNG & WGL 2,514,377 1,049,956 0
Unit #1 - FGMR Supply 39% 74% 100%
FGMR Volumes at Wellhead 1,671,559 3,111,349 4,138,784
FGMR Volumes through ANR 1,671,559 3,111,349 4,138,784
FGMR Volumes through Columbia Gas 1,632,222 3,038,130 4,041,387
FGMR Volumes through CLNG & WGL 1,616,062 3,008,049 4,001,373
Unit #2 - IGR Supply 93% 93% 93%
IGR Volumes Dlvd Columbia 2,515,142 2,423,102 2,357,074
IGR Volumes Dlvd to CLNG 2,455,953 2,366,079 2,301,605
IGR Volumes Dlvd to Wash Gas 2,431,637 2,342,653 2,278,817
IGR Volumes Dlvd to Brandywine 2,431,637 2,342,653 2,278,817
Unit #2 - OR Supply 7% 7% 7%
OR Volumes Delivered to Plant 194,316 180,540 169,463
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended
Dec-2013 Dec-2014 Dec-2015 Dec-2016 Dec-2017 Dec-2018 Dec-2019 Dec-2020 Dec-2021
-------- -------- -------- -------- -------- -------- -------- -------- --------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dispatch Hours:
Unit #1
Summer Hours (Jun-Sept) 1,406 1,392 1,379 1,361 1,344 1,327 1,311 1,295 1,295
Shoulder Hours (Mar-May &
Oct-Nov) 1,627 1,607 1,589 1,552 1,519 1,489 1,462 1,439 1,079
Winter Hours (Dec-Feb) 1,064 1,044 1,027 1,011 995 980 965 951 634
Total Unit #1 Hours 4,097 4,043 3,996 3,925 3,858 3,796 3,739 3,685 3,008
Unit #2
Summer Hours (Jun-Sept) 1,084 1,076 1,068 1,046 1,024 1,002 981 960 960
Shoulder Hours (Mar-May &
Oct-Nov) 792 763 736 705 676 647 620 594 446
Winter Hours (Dec-Feb) 631 591 555 557 560 563 565 568 379
2,507 2,431 2,359 2,308 2,259 2,212 2,166 2,123 1,785
Gas & Fuel Oil Volumes (DT's):
Firm Transportation
Demand Volumes at Wellhead 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827 7,550,689
Demand Volumes through ANR 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827 7,550,689
Demand Volumes through
Columbia Gas 8,847,600 8,847,600 8,847,600 8,847,600 8,847,600 8,847,600 8,847,600 8,847,600 7,373,000
Demand Volumes through
CLNG & WGL 8,760,000 8,760,000 8,760,000 8,760,000 8,760,000 8,760,000 8,760,000 8,760,000 7,300,000
Unit #1 - FGRR Supply 0% 0% 0% 0% 0% 0% 0% 0% 0%
FGRR Volumes at Wellhead 0 0 0 0 0 0 0 0 0
FGRR Volumes through ANR 0 0 0 0 0 0 0 0 0
FGRR Volumes through
Columbia Gas 0 0 0 0 0 0 0 0 0
FGRR Volumes through
CLNG & WGL 0 0 0 0 0 0 0 0 0
Unit #1 - FGMR Supply 100% 100% 100% 100% 100% 100% 100% 100% 100%
FGMR Volumes at Wellhead 4,086,799 4,056,059 3,927,327 3,864,719 3,808,022 3,753,002 3,713,304 3,659,278 2,992,198
FGMR Volumes through ANR 4,086,799 4,056,059 3,927,327 3,864,719 3,808,022 3,753,002 3,713,304 3,659,278 2,992,198
FGMR Volumes through
Columbia Gas 3,990,625 3,960,608 3,834,906 3,773,771 3,718,408 3,664,683 3,625,919 3,573,165 2,921,784
FGMR Volumes through
CLNG & WGL 3,951,114 3,921,394 3,796,937 3,736,407 3,681,592 3,628,399 3,590,019 3,537,787 2,892,855
Unit #2 - IGR Supply 93% 94% 94% 94% 93% 93% 93% 93% 94%
IGR Volumes Dlvd Columbia 2,290,522 2,267,044 2,187,728 2,105,782 2,044,168 1,997,922 1,980,760 1,930,468 1,640,723
IGR Volumes Dlvd to CLNG 2,236,620 2,213,694 2,136,245 2,056,227 1,996,063 1,950,905 1,934,147 1,885,039 1,602,112
IGR Volumes Dlvd to Wash Gas 2,214,475 2,191,776 2,115,094 2,035,868 1,976,300 1,931,589 1,914,997 1,866,375 1,586,250
IGR Volumes Dlvd to Brandywine 2,214,475 2,191,776 2,115,094 2,035,868 1,976,300 1,931,589 1,914,997 1,866,375 1,586,250
Unit #2 - OR Supply 7% 6% 6% 6% 7% 7% 7% 7% 6%
OR Volumes Delivered to Plant 159,080 152,358 141,598 140,498 139,547 140,514 143,473 142,947 95,158
</TABLE>
<PAGE>
Panda-Brandywine L.P.
230MW PEPCO Project
Gas Supply Assumptions
<TABLE>
<CAPTION>
Year Ended
Dec1996 Dec1997 Dec1998 Dec1999 Dec2000 Dec2001 Dec-2002
--------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Fuel Compensation Price:
FGRR - PPI Oil and Gas Field Services
Fixed Contract Price Jun-94 May-96 Nov-96 $2.58 $2.68 $2.79 $2.90 $3.02 $3.14 $3.26
Adjusted Contract Price 103.20 115.80 117.81 $2.95 $3.06 $3.18 $3.31 $3.45 $3.58 $3.72
FGMR - Base Yr May-96
Commodity Index - Summer 6.46 0.00 4.00% 7.40 7.54 7.68 7.77 7.91 8.33 8.76
Commodity Index - Shoulder 6.46 0.00 4.00% 7.89 8.03 8.18 8.29 8.43 8.88 9.34
Commodity Index - Winter 6.46 0.00 4.00% 8.37 8.53 8.69 8.80 8.96 9.42 9.91
Transportation Index 129.9 156.6 3.00% 159.3 164.1 169.0 174.1 179.3 184.7 190.2
Contract Discount 1.206 90% 90% 90% 90% 92% 100% 100%
Calculated FGMR - Summer $2.29 $0.58 $2.35 $2.39 $2.44 $2.47 $2.56 $2.91 $3.05
Calculated FGMR - Shoulder $2.29 $0.58 $2.47 $2.51 $2.56 $2.59 $2.69 $3.06 $3.20
Calculated FGMR - Winter $2.29 $0.58 $2.59 $2.63 $2.68 $2.72 $2.82 $3.21 $3.36
IGR -
Calculated FGMR - Summer $2.29 $0.73 $2.61 $2.65 $2.70 $2.74 $2.79 $2.90 $3.03
Calculated FGMR - Shoulder $2.29 $0.73 $2.73 $2.78 $2.83 $2.87 $2.92 $3.04 $3.17
Calculated FGMR - Winter $2.29 $0.40 $2.90 $2.96 $3.01 $3.05 $3.11 $3.25 $3.41
OR -
Oil Index 151 179 178 184 195 206 215 224
Calculated OR $3.89 $4.60 $4.57 $4.73 $5.00 $5.28 $5.51 $5.75
Fuel Costs: Escalation
Firm Gas - Contract Price (Unit #1) 4.00% $2.43 $2.52 $2.62 $2.72 $2.83 $2.94 $3.06
Firm Gas - Market Price (Unit #1) Index Cost Options Option
Spot Price - Summer 1 - NGC - Columbia Gas 7 $1.90 $1.94 $1.98 $2.00 $2.04 $2.14 $2.25
Spot Price - Shoulder 2 - NGC - Tenn Gas 7 $2.05 $2.09 $2.13 $2.16 $2.20 $2.31 $2.43
Spot Price - Winter 3 - NGI - Columbia Gas 2 $1.99 $2.02 $2.06 $2.08 $2.12 $2.23 $2.35
FGMR Premium - Summer 4 - NGW - Columbia Gas $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
FGMR Premium - Shoulder 5 - Blended (Gulf & Appl) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
FGMR Premium - Winter 6 - Gulf Coast Avg $0.55 $0.55 $0.55 $0.55 $0.55 $0.56 $0.56
Firm Gas Market Cost - Weighted Avg 7 - Appalachian Avg $2.12 $2.16 $2.20 $2.22 $2.26 $2.37 $2.49
Interruptible Gas (Unit #2) Option
Spot Price - Summer 7 $1.90 $1.94 $1.98 $2.00 $2.04 $2.14 $2.25
Spot Price - Shoulder 7 $2.05 $2.09 $2.13 $2.16 $2.20 $2.31 $2.43
Spot Price - Winter 7 $2.20 $2.24 $2.28 $2.31 $2.36 $2.48 $2.61
IGR Premium - Summer $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
IGR Premium - Shoulder $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
IGR Premium - Winter $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
Interruptible Gas Cost - Weighted Average $2.09 $2.13 $2.17 $2.19 $2.23 $2.35 $2.47
Delivered Fuel Oil (Unit #2) $4.60 $4.57 $4.73 $5.00 $5.28 $5.51 $5.75
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended
Dec-2003 Dec2004 Dec-2005 Dec-2006 Dec-2007 Dec-2008 Dec-2009 Dec-2010 Dec-2011 Dec-2012
-------- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fuel Compensation Price:
FGRR -
Fixed Contract Price $3.33 $3.40 $3.46 $3.53 $3.60 $3.68 $3.75 $3.82 $3.90 $3.98
Adjusted Contract Price $3.80 $3.88 $3.95 $4.03 $4.11 $4.20 $4.28 $4.36 $4.45 $4.54
FGMR -
Commodity Index - Summer 9.22 9.70 10.20 11.05 11.96 12.91 13.92 14.98 15.96 17.00
Commodity Index - Shoulder 9.82 10.33 10.86 11.77 12.72 13.73 14.79 15.92 16.96 18.05
Commodity Index - Winter 10.43 10.96 11.52 12.48 13.49 14.55 15.67 16.85 17.95 19.11
Transportation Index 195.9 201.8 207.9 214.1 220.5 227.2 234.0 241.0 248.2 255.7
Contract Discount 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Calculated FGMR - Summer $3.18 $3.32 $3.47 $3.72 $3.98 $4.25 $4.54 $4.85 $5.13 $5.43
Calculated FGMR - Shoulder $3.35 $3.50 $3.65 $3.91 $4.19 $4.48 $4.78 $5.10 $5.40 $5.72
Calculated FGMR - Winter $3.51 $3.67 $3.84 $4.11 $4.40 $4.70 $5.02 $5.36 $5.67 $6.01
IGR -
Calculated FGMR - Summer $3.16 $3.29 $3.43 $3.67 $3.91 $4.17 $4.44 $4.72 $4.99 $5.27
Calculated FGMR - Shoulder $3.31 $3.45 $3.60 $3.85 $4.10 $4.37 $4.66 $4.96 $5.24 $5.54
Calculated FGMR - Winter $3.57 $3.74 $3.91 $4.21 $4.52 $4.84 $5.19 $5.55 $5.89 $6.24
OR -
Oil Index 234 244 254 265 276 288 301 313 327 341
Calculated OR $6.00 $6.26 $6.53 $6.81 $7.10 $7.41 $7.72 $8.05 $8.40 $8.76
Fuel Costs:
- -----------
Firm Gas - Contract Price (Unit #1) $3.18 $3.31 $3.44 $3.58 $3.72 $3.87 $4.02 $4.18 $4.35 $4.53
Firm Gas - Market Price (Unit #1)
Spot Price - Summer $2.37 $2.49 $2.62 $2.84 $3.07 $3.31 $3.56 $3.83 $4.08 $4.34
Spot Price - Shoulder $2.55 $2.68 $2.82 $3.05 $3.29 $3.55 $3.82 $4.10 $4.37 $4.65
Spot Price - Winter $2.47 $2.60 $2.74 $2.97 $3.22 $3.48 $3.76 $4.05 $4.32 $4.60
FGMR Premium - Summer $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
FGMR Premium - Shoulder $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
FGMR Premium - Winter $0.57 $0.57 $0.58 $0.58 $0.59 $0.59 $0.60 $0.60 $0.61 $0.61
Firm Gas Market Cost - Weighted Average $2.61 $2.74 $2.88 $3.11 $3.35 $3.60 $3.87 $4.15 $4.41 $4.69
Interruptible Gas (Unit #2)
Spot Price - Summer $2.37 $2.49 $2.62 $2.84 $3.07 $3.31 $3.56 $3.83 $4.08 $4.34
Spot Price - Shoulder $2.55 $2.68 $2.82 $3.05 $3.29 $3.55 $3.82 $4.10 $4.37 $4.65
Spot Price - Winter $2.74 $2.88 $3.02 $3.27 $3.52 $3.79 $4.08 $4.38 $4.66 $4.96
IGR Premium - Summer $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
IGR Premium - Shoulder $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
IGR Premium - Winter $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
Interruptible Gas Cost - Weighted Average $2.59 $2.72 $2.85 $3.08 $3.33 $3.58 $3.85 $4.13 $4.40 $4.67
Delivered Fuel Oil (Unit #2) $6.00 $6.26 $6.53 $6.81 $7.10 $7.41 $7.72 $8.05 $8.40 $8.76
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended December
2013 2014 2015 2016 2017 2018 2019 2020 2021
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fuel Compensation Price:
FGRR -
Fixed Contract Price $4.06 $4.14 $4.22 $4.30 $4.38 $4.46 $4.54 $4.62 $4.70
Adjusted Contract Price $4.63 $4.73 $4.82 $4.91 $5.00 $5.09 $5.18 $5.27 $5.37
FGMR -
Commodity Index - Summer 18.09 19.23 20.44 21.71 23.07 24.51 26.05 27.68 29.41
Commodity Index - Shoulder 19.21 20.42 21.69 23.04 24.48 26.00 27.62 29.35 31.18
Commodity Index - Winter 20.32 21.60 22.94 24.37 25.88 27.49 29.20 31.02 32.95
Transportation Index 263.3 271.2 279.4 287.8 296.4 305.3 314.4 323.9 333.6
Contract Discount 100% 100% 100% 100% 100% 100% 100% 100% 100%
Calculated FGMR - Summer $5.74 $6.07 $6.42 $6.78 $7.17 $7.58 $8.02 $8.49 $8.98
Calculated FGMR - Shoulder $6.05 $6.39 $6.76 $7.15 $7.56 $7.99 $8.45 $8.94 $9.46
Calculated FGMR - Winter $6.35 $6.72 $7.10 $7.51 $7.94 $8.40 $8.88 $9.40 $9.95
IGR -
Calculated FGMR - Summer $5.57 $5.87 $6.20 $6.54 $6.91 $7.29 $7.70 $8.14 $8.60
Calculated FGMR - Shoulder $5.85 $6.17 $6.51 $6.88 $7.26 $7.67 $8.10 $8.56 $9.04
Calculated FGMR - Winter $6.62 $7.01 $7.42 $7.86 $8.32 $8.81 $9.33 $9.89 $10.48
OR -
Oil Index 356 371 387 404 421 439 458 478 498
Calculated OR $9.14 $9.53 $9.94 $10.37 $10.81 $11.28 $11.77 $12.27 $12.80
Fuel Costs:
Firm Gas - Contract Price (Unit #1) $4.71 $4.89 $5.09 $5.29 $5.51 $5.73 $5.95 $6.19 $6.44
Firm Gas - Market Price (Unit #1)
Spot Price - Summer $4.61 $4.90 $5.21 $5.53 $5.87 $6.24 $6.63 $7.04 $7.48
Spot Price - Shoulder $4.94 $5.25 $5.57 $5.91 $6.28 $6.67 $7.08 $7.51 $7.98
Spot Price - Winter $4.90 $5.21 $5.54 $5.89 $6.26 $6.65 $7.07 $7.52 $7.99
FGMR Premium - Summer $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
FGMR Premium - Shoulder $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
FGMR Premium - Winter $0.62 $0.62 $0.63 $0.63 $0.64 $0.64 $0.65 $0.65 $0.66
Firm Gas Market Cost - Weighted Average $4.97 $5.28 $5.60 $5.94 $6.30 $6.68 $7.09 $7.52 $7.98
Interruptible Gas (Unit #2)
Spot Price - Summer $4.61 $4.90 $5.21 $5.53 $5.87 $6.24 $6.63 $7.04 $7.48
Spot Price - Shoulder $4.94 $5.25 $5.57 $5.91 $6.28 $6.67 $7.08 $7.51 $7.98
Spot Price - Winter $5.27 $5.59 $5.93 $6.30 $6.68 $7.09 $7.53 $7.99 $8.48
IGR Premium - Summer $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
IGR Premium - Shoulder $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
IGR Premium - Winter $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
Interruptible Gas Cost - Weighted Average $4.96 $5.27 $5.59 $5.93 $6.30 $6.68 $7.09 $7.52 $7.99
Delivered Fuel Oil (Unit #2) $9.14 $9.53 $9.94 $10.37 $10.81 $11.28 $11.77 $12.27 $12.80
</TABLE>
<PAGE>
Panda-Brandywine L.P.
230MW PEPCO Project
Gas Supply Assumptions
<TABLE>
<CAPTION>
Year Ended
Dec-1996 Dec-1997 Dec-1998 Dec-1999 Dec-2000 Dec-2001 Dec-2002
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Firm Transportation:
ANR Tariff Rates 1996 Rate Escalation
Demand $0.0000 0.00% $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Commodity $0.0000 0.00% $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Fuel % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Columbia Gas Tarriff Rates
Demand $0.2632 1.50% $0.26 $0.27 $0.27 $0.28 $0.28 $0.28 $0.29
Commodity $0.0267 1.50% $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03
Fuel % 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41%
CLNG & WGL Contract Rates
Demand - CLNG Only $0.0222 1.50% $0.02 $0.02 $0.02 $0.02 $0.02 $0.02 $0.02
Commodity - CLNG & WGL $0.0590 0.25% $0.06 $0.06 $0.06 $0.06 $0.06 $0.06 $0.06
Fuel % - CLNG Only 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Interruptible Transportation:
- -----------------------------
Columbia Gas Tarriff Rates 1996 Rate
Commodity - Summer $0.221 1.50% $0.22 $0.22 $0.23 $0.23 $0.23 $0.24 $0.24
Commodity - Shoulder $0.271 1.50% $0.27 $0.27 $0.28 $0.28 $0.29 $0.29 $0.30
Commodity - Winter $0.310 1.50% $0.31 $0.31 $0.32 $0.32 $0.33 $0.33 $0.34
Fuel % 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41%
Columbia (Cove Point)
LNG Tarriff Rates
Commodity - Summer $0.023 1.50% $0.02 $0.02 $0.02 $0.02 $0.02 $0.02 $0.03
Commodity - Shoulder $0.023 1.50% $0.02 $0.02 $0.02 $0.02 $0.02 $0.02 $0.03
Commodity - Winter $0.023 1.50% $0.02 $0.02 $0.02 $0.02 $0.02 $0.02 $0.03
Fuel % 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Washington Gas Contract Rates
Commodity - Summer $0.050 0.00% $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
Commodity - Shoulder $0.050 0.00% $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
Commodity - Winter $0.050 0.00% $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
Fuel % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Management Fee & SIT:
- ---------------------
Fuel Management Fee -
Firm Gas $0.000 0.00% $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Fuel Management Fee -
Interruptible Gas $0.000 0.00% $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
WGL Balancing $0.050 2.50% $0.05 $0.05 $0.05 $0.05 $0.06 $0.06 $0.06
Storage-In-Transit $0.050 2.50% $0.05 $0.05 $0.05 $0.05 $0.06 $0.06 $0.06
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended
Dec-2003 Dec2004 Dec-2005 Dec-2006 Dec-2007 Dec-2008 Dec-2009 Dec-2010 Dec-2011 Dec-2012
-------- ------- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Firm Transportation:
ANR Tariff Rates
Demand $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Commodity $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Fuel % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Columbia Gas Tarriff Rates
Demand $0.29 $0.30 $0.30 $0.31 $0.31 $0.31 $0.32 $0.32 $0.33 $0.33
Commodity $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03
Fuel % 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41%
CLNG & WGL Contract Rates
Demand - CLNG Only $0.02 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03
Commodity - CLNG & WGL $0.06 $0.06 $0.06 $0.06 $0.06 $0.06 $0.06 $0.06 $0.06 $0.06
Fuel % - CLNG Only 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Interruptible Transportation:
Columbia Gas Tarriff Rates
Commodity - Summer $0.25 $0.25 $0.25 $0.26 $0.26 $0.26 $0.27 $0.27 $0.28 $0.28
Commodity - Shoulder $0.30 $0.30 $0.31 $0.31 $0.32 $0.32 $0.33 $0.33 $0.34 $0.34
Commodity - Winter $0.34 $0.35 $0.35 $0.36 $0.36 $0.37 $0.38 $0.38 $0.39 $0.39
Fuel % 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41%
Columbia (Cove Point) LNG Tarriff Rates
Commodity - Summer $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03
Commodity - Shoulder $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03
Commodity - Winter $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03
Fuel % 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Washington Gas Contract Rates
Commodity - Summer $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
Commodity - Shoulder $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
Commodity - Winter $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
Fuel % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Management Fee & SIT:
Fuel Management Fee - Firm Gas $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Fuel Management Fee - Interruptible Gas $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
WGL Balancing $0.06 $0.06 $0.06 $0.06 $0.07 $0.07 $0.07 $0.07 $0.07 $0.07
Storage-In-Transit $0.06 $0.06 $0.06 $0.06 $0.07 $0.07 $0.07 $0.07 $0.07 $0.07
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended
Dec-2013 Dec-2014 Dec-2015 Dec-2016 Dec-2017 Dec-2018 Dec-2019 Dec-2020 Dec-2021
-------- ----------------------------------- ----------------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Firm Transportation:
ANR Tariff Rates
Demand $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Commodity $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Fuel % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Columbia Gas Tarriff Rates
Demand $0.34 $0.34 $0.35 $0.35 $0.36 $0.37 $0.37 $0.38 $0.38
Commodity $0.03 $0.03 $0.04 $0.04 $0.04 $0.04 $0.04 $0.04 $0.04
Fuel % 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41%
CLNG & WGL Contract Rates
Demand - CLNG Only $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03
Commodity - CLNG & WGL $0.06 $0.06 $0.06 $0.06 $0.06 $0.06 $0.06 $0.06 $0.06
Fuel % - CLNG Only 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Interruptible Transportation:
Columbia Gas Tarriff Rates
Commodity - Summer $0.28 $0.29 $0.29 $0.30 $0.30 $0.31 $0.31 $0.32 $0.32
Commodity - Shoulder $0.35 $0.35 $0.36 $0.36 $0.37 $0.38 $0.38 $0.39 $0.39
Commodity - Winter $0.40 $0.40 $0.41 $0.42 $0.42 $0.43 $0.44 $0.44 $0.45
Fuel % 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41%
Columbia (Cove Point)
LNG Tarriff Rates
Commodity - Summer $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03
Commodity - Shoulder $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03
Commodity - Winter $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03
Fuel % 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Washington Gas Contract Rates
Commodity - Summer $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
Commodity - Shoulder $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
Commodity - Winter $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
Fuel % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Management Fee & SIT:
Fuel Management Fee -
Firm Gas $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Fuel Management Fee -
Interruptible Gas $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
WGL Balancing $0.08 $0.08 $0.08 $0.08 $0.08 $0.09 $0.09 $0.09 $0.09
Storage-In-Transit $0.08 $0.08 $0.08 $0.08 $0.08 $0.09 $0.09 $0.09 $0.09
</TABLE>
<PAGE>
ICF RESOURCES INCORPORATED
Officer's Certificate
I, B. S. Venkateshware, Vice President of ICF Resources,
Incorporated, DO HEREBY CERTIFY that:
Except as set forth below, since July 25, 1996, to our knowledge,
no event affecting our reports entitled "Independent Panda-Brandywine Pro
Forma Projections" and "Summary of the Consolidated Pro Formas of Panda
Rosemary and Panda Brandywine Power Projects" (the "Pro Forma Reports") or
the matters referred to therein has occurred which makes untrue or incorrect
in any material respect, as of the date hereof, any information or statement
contained in the Pro Forma Reports or in the Prospectus relating to the
offering of Pooled Project Bonds, Series A-1 due 2012 by Panda Funding
Corporation (the "Prospectus") under the captions "Consolidating Engineer's
Pro Forma Report" and "Independent Pro Forma Analysis-Brandywine" in the
Prospectus Summary.
ICF notes that since July 25, 1996, the following events have occurred:
(i) More recent fuel price projections are available.
(ii) Virginia Power has announced in one case that it has reached an
agreement to terminate a Power Sales Agreement (PSA) with a
Qualifying Facility and replace that PSA with an agreement to
purchase at market-based prices.
ICF is currently assessing these events in connection with the Pro Forma
Reports and is not presently able to determine the impact, if any, such events
may have on the Pro Forma Reports and the information contained therein.
WITNESS my hand this 11th day of October, 1996.
By: /s/ B. S. Venkateshwara
Name: B. S. Venkateshwara
Title: Vice President
<PAGE>
APPENDIX F
INDEPENDENT ENGINEER'S REPORT
PANDA-BRANDYWINE COGENERATION PROJECT
Prepared for
PANDA-BRANDYWINE L.P.
Prepared by
PACIFIC ENERGY SYSTEMS, INC.
Portland, Oregon
July 22, 1996
PREFACE
Panda Energy International, Inc., retained Pacific Energy Systems, Inc., to
independently review available technical information on the design,
construction, and expected operation of the Panda-Brandywine Cogeneration
Project (the Project). The Project is being developed by Panda Energy
International through its affiliate, Panda-Brandywine Limited Partnership, and
is being designed and constructed by Raytheon Engineers & Constructors.
This report is intended for use in the Offering Circular for the issuance of
Pooled Project Bonds offered by Panda Funding Corporation for the Project.
Pacific Energy Systems understands that ICF Resources, Inc., will use the
technical information in this report to develop project projections. Pacific
Energy Systems, Inc., has not examined and makes no representations with
respect to any other document contained in the Offering Circular.
This review is intended to determine whether the Project is technically
feasible and based on competent engineering and construction practices. It is
not intended to check the detailed design nor to identify engineering design
errors. The review includes a number of documents prepared by others. Pacific
Energy Systems, Inc., cannot guarantee the accuracy of the information
contained in them. The ultimate success of the Project will depend not only
on the engineering design and construction, but also on the subsequent
operation, maintenance, management, and renewal of equipment as required in
the completed plant. Pacific Energy Systems, Inc., has no control over design,
construction, startup, operation, or maintenance of the plant and provides no
warranty, express or implied, concerning its success.
TABLE OF CONTENTS
Page
Section 1 INTRODUCTION. . . . . . . . . . . . . . . . . G-1
Section 2 EXECUTIVE SUMMARY AND CONCLUSIONS . . . . . . G-4
Introduction. . . . . . . . . . . . . . . . . G-4
Current Assessment of Project Status. . . . . G-5
Summary of Due Diligence. . . . . . . . . . . G-8
Facility Description. . . . . . . . . . . . . G-13
Facility Performance. . . . . . . . . . . . . G-15
Permits and Licenses. . . . . . . . . . . . . G-17
Construction Status . . . . . . . . . . . . . G-17
Ancillary Facilities. . . . . . . . . . . . . G-17
Section 3 ENGINEERING . . . . . . . . . . . . . . . . . G-19
Overall Plant Description . . . . . . . . . . G-19
Design Concepts and Technology Assessment . . G-20
Major Equipment Selection and
Vendor/Supplier Qualifications. . . . . . . G-22
Specifications. . . . . . . . . . . . . . . . G-22
Systems and Equipment Descriptions. . . . . . G-23
Civil/Structural/Architectural. . . . . . . . G-31
Section 4 ANCILLARY FACILITIES. . . . . . . . . . . . . G-31
Effluent Water Supply Line. . . . . . . . . . G-32
230-kV Electrical Transmission Line . . . . . G-32
Natural Gas Line. . . . . . . . . . . . . . . G-32
Distilled-Water Plant . . . . . . . . . . . . G-34
Betty Boulevard . . . . . . . . . . . . . . . G-34
Section 5 COST AND SCHEDULE ESTIMATES . . . . . . . . . G-35
Capital Costs . . . . . . . . . . . . . . . . G-35
Startup Costs . . . . . . . . . . . . . . . . G-36
ICF Projections . . . . . . . . . . . . . . . G-40
Schedule. . . . . . . . . . . . . . . . . . . G-45
Section 6 PERMITS AND LICENSES. . . . . . . . . . . . . G-45
Federal Approvals . . . . . . . . . . . . . . G-45
State Approvals . . . . . . . . . . . . . . . G-47
Right-of-Way Easements. . . . . . . . . . . . G-48
Section 7 CONTRACTS & AGREEMENTS. . . . . . . . . . . . G-50
Power Purchase Agreement. . . . . . . . . . . G-50
Engineering, Procurement, and Construction
Contract . . . . . . . . . . . . . . . . . . G-57
Treated Effluent Water Purchase Agreement . . G-62
Steam Sales Agreement . . . . . . . . . . . . G-63
Natural Gas Agreements. . . . . . . . . . . . G-65
Owner's Engineer. . . . . . . . . . . . . . . G-67
Effluent Line Construction. . . . . . . . . . G-68
Transmission Line Construction. . . . . . . . G-68
Section 8 OPERATIONS AND MAINTENANCE. . . . . . . . . . G-68
Operating Experience. . . . . . . . . . . . . G-68
Operations and Maintenance Costs. . . . . . . G-69
O&M Agreement . . . . . . . . . . . . . . . . G-71
Termination . . . . . . . . . . . . . . . . . G-73
Other Provisions. . . . . . . . . . . . . . . G-73
Section 9 PERFORMANCE GUARANTEES AND TESTING. . . . . . G-76
Completion Guarantees . . . . . . . . . . . . G-76
Performance Guarantees. . . . . . . . . . . . G-76
Plant Performance Testing . . . . . . . . . . G-79
Liquidated Damages and Bonuses. . . . . . . . G-80
Appendix A DOCUMENT LIST . . . . . . . . . . . . . . . . G-83
Appendix B PROJECT DRAWINGS. . . . . . . . . . . . . . . G-98
Appendix C LIST OF ABBREVIATIONS . . . . . . . . . . . . G-101
Appendix D PANDA GATECYCLE SUMMARY . . . . . . . . . . . G-105
List of Tables 1-1 Project Relationships . . . . . . . . . G-3
5-1 Capital Budget Details. . . . . . . . . G-38
5-2 Similar Gas Turbine Projects. . . . . . G-39
5-3 Commissioning Budget. . . . . . . . . . G-40
5-4A Unit 1. . . . . . . . . . . . . . . . . G-42
5-4B Unit 2. . . . . . . . . . . . . . . . . G-43
5-5 Maintenance Requirement . . . . . . . . G-44
7-1 PEPCO Dispatch Segments . . . . . . . . G-53
8-1 Operations and Maintenance Costs. . . . G-70
8-2 Comparisons of O&M Budgets for Gas
Turbine Projects. . . . . . . . . . . G-71
9-1 Performance Guarantees. . . . . . . . . G-76
9-2 Design Base Conditions for Plant
Operation . . . . . . . . . . . . . . G-77
9-3 Summary of Raytheon's Liquidated
Damages and Bonuses . . . . . . . . . G-81
List of Figures 8-1 Organization Chart. . . . . . . . . . . G-75
Section 1
INTRODUCTION
At the request of Panda Energy International (Panda), Pacific Energy Systems,
Inc., reviewed the Panda-Brandywine Cogeneration Project, which is located
south of Brandywine, Maryland, in Prince George's County. The Project is to
be built on industrialzoned property by the owner, Panda-Brandywine, L.P. It
is being developed by Panda Energy International, Inc. (Panda), of Dallas,
Texas, an affiliate of the owner. Steam from the cogeneration project will
be supplied to the adjacent distilled-water plant owned by Brandywine Water
Company, an affiliate of Panda Energy. The review included:
An examination of the available Project documents (listed in
Appendix A) and the Project drawings (listed in Appendix B)
Construction monitoring since April 1995,including monthly site
inspections and approval of funding draws
Several meetings at GE Capital in Stamford, Connecticut, to discuss
Project details, contract issues, pro forma development, and permit
issues
A detailed list of Project participants and their relationships to the Project
is presented in Table 1-1. An engineering, procurement, and construction (EPC)
contractor, Raytheon Engineers & Constructors (Raytheon), is responsible for
the Project design, engineering, procurement, and construction. The
cogeneration plant and the distilled-water plant will be operated by Ogden
Brandywine Operations, Inc. (operator), a subsidiary of Ogden Power
Corporation.
Panda Energy hired Gilbert/Commonwealth, Inc., as the owner's engineer to
review the engineering and design work performed by Raytheon. C.H. Guernsey
and Companyreviewed the electrical interconnect of the plant and will assist
Panda-Brandywine in the startup and testing of the facility.
General Electric Capital Corporation (GE Capital) has provided a $215 million
construction loan to the Project and has committed to provide long-term
financing under a single-investor lease with the owner.
The power plant is designed to deliver 230,000 kilowatts (kW)(1) of
electricity to Potomac Electric Power Company (PEPCO). The plant is a
combined-cycle cogeneration facility that, in addition to its electrical
output, will also provide up to 34,000 pounds per hour (lb/hr) of steam to
Brandywine Water for use in the distilled-water process. The primary fuel is
natural gas, but the plant will also be capable of burning oil during gas
curtailment periods.
Pacific Energy Systems has independently reviewed the areas of Project
engineering, cost, schedule, permits, contracts, operations and maintenance,
and performance estimates for completeness, risk, variation from practices
typical in the industry, and the ability of the Project to perform as
intended.
Because Panda-Brandywine is a partnership with no employees, Panda Energy
International (the developer) is supplying a project manager, project
engineer, and other key individuals on behalf of Panda-Brandywine. In order
to make this report easier to read, the term "Panda" is used in a generic
sense to mean both owner and developer. Where clarification is important,
specific terms or "owner" and "developer" will be used.
- -----------------------------
(1) A list of technical abbreviations used in this report may be found in
Appendix C.
Table 1-1
PROJECT RELATIONSHIPS
Party Project Remarks
Affiliation
- -------------------------------------------------------------------------------
Panda-Brandywine Project name Project is located south of
Cogeneration Brandywine, Maryland, in
Prince George's County.
Panda-Brandywine, L.P. Owner The limited partnership set
up to hold all project
assets.
Panda Energy International Developer The principal developer of
the project and an affiliate
of the owner.
Brandywine Water Steam host An affiliate of Panda Energy
International. Will
purchase steam to distill
water and sell it to local
users of highly pure water.
Ogden Brandywine Operator Will operate and maintain
Operations, Inc. the project under contract
with Panda-Brandywine, L.P.,
and is a subsidiary of
Ogden Power Corporation.
Gilbert/Commonwealth, Inc. Owner's Has responsibility for
engineer detailed design review and
construction quality
control on behalf of the
owner.
Raytheon Engineers EPC United Engineers &
Constructors contractor Constructors, Inc., dba
Raytheon Engineers &
Constructors, has a turnkey
contract for engineering,
procurement, and
construction of the
cogeneration facility.
General Electric Lender GE Capital has provided a
Capital Corporation $215 million construction
loan and a 20-year lease
commitment for long-term
financing.
Potomac Electric Power PEPCO has contracted to
Power Company purchaser purchase up to 230 MW of
dispatchable capacity and
associated energy from the
cogeneration plant.
Mattawoman Wastewater Cooling MWWTP will supply water for
Treatment Plant (MWWTP) water supply cooling tower makeup and
will operate the 17-mile
pipeline and pumping plant.
The MWWTP is part of the
Washington Suburban Sanitary
Commission (WSSC) and
provides treatment
requirements for Prince
George's County and Charles
County.
Public Service Permitting The Maryland Public Service
Commission (PSC) agency Commission has the primary
and exclusive right to
permit the project under a
Certificate of Public
Convenience and Necessity.
Power Plant Research Permitting The PPRP is part of the
Program (PPRP) support Maryland Department of
Natural Resources (DNR),
which provided key analysis
for the PSC during the
permitting process and
will have broad reporting
and review rights over the
operating plant.
Air and Radiation Permitting The ARMA is part of the
Management Administration support Maryland Department of
(ARMA) Environment, which
provided key analysis for
the PSC during the
permitting process and will
have broad reporting and
review rights over the
operating plant.
Southern Maryland Local SMECO will supply power for
Electrical Coop (SMECO) utility construction and for
operation of auxiliaries
during shutdown periods.
Section 2
EXECUTIVE SUMMARY AND CONCLUSIONS
INTRODUCTION
PROJECT BACKGROUND
The Panda-Brandywine Cogeneration Project is located on industrial-zoned
property south of Brandywine, Maryland, in Prince George's County. The Project
is a combined-cycle cogeneration facility designed to deliver 230,000 kilowatts
(kW) of electricity to Potomac Electric Power Company (PEPCO), and will supply
up to 34,000 lb/hr of steam to Brandywine Water for distilling water. Natural
gas is the primary fuel, but fuel oil may be used during gas curtailments. The
distilled-water plant is necessary as a steam host to ensure the Project's
status as a qualifying facility (QF).
Panda-Brandywine, L.P., is the project owner and Panda Energy, an affiliate of
the owner, is the developer. Ogden Brandywine Operations, Inc., a subsidiary
of Ogden Power Corporation, will operate both the cogeneration facility and
the distilled-water plant. Raytheon is responsible for the design,
engineering, procurement, and construction of the Project. GE Capital
provided construction financing to the Project and will provide long-term
financing under a single-investor lease with the owner. A list of Project
participants and their relationships to the Project appears in Table 1-1.
INDEPENDENT ENGINEER'S WORK
Pacific Energy Systems was retained by GE Capital to perform a due diligence
review of the Project. The review culminated in a Technical Review dated March
1995. The Technical Review included:
- An examination of the available Project documents (see listing
in Appendix A) and the Project drawings (listed in Appendix B)
- A visit to the proposed Project site
- Several meetings at GE Capital in Stanford, Connecticut to discuss
Project details, contract issues, pro forma development, and
permit issues
- Several conference calls among GE Capital, Panda Energy, Pacific
Energy Systems, and various legal counsels
Since March 1995, Pacific Energy Systems has monitored construction of the
Project. The latest visit to the Project site by Pacific Energy Systems
occurred June 19, 1996 (see photographs in Appendix F).
INDEPENDENT ENGINEER'S QUALIFICATIONS
Pacific Energy Systems has provided engineering services to approximately 50
power plants over the last seven years. Services included technical review,
construction monitoring, performance testing and certification, and operation
and maintenance audits. Approximately half of these plants utilized
combined-cycle combustion turbine technology with cogeneration, as does the
Panda-Brandywine Cogeneration Project.
Pacific Energy Systems served as the independent engineer on the Panda-
Brandywine Project for GE Capital. David G. Young and John R. Martin, who
performed that work, have over 50 years combined experience in power plant
design, siting, permitting, review, and evaluation.
STRUCTURE OF THIS REPORT
This report is based on the due diligence activities previously completed by
Pacific Energy Systems, as well as its ongoing construction monitoring of the
Project. The Executive Summary follows the format of the scope of work provided
by Panda Energy. Details and relevant documents are attached as appropriate.
CURRENT ASSESSMENT OF PROJECT STATUS
CONCLUSIONS AND RECOMMENDATIONS
On the basis of Pacific Energy Systems' review of available information,
Pacific Energy Systems concludes that the Panda-Brandywine Cogeneration
Project is technically feasible and that its design is similar to that of
several successfully operated combined-cycle gas turbine plants. The design
appears to be adequate to meet the contractual commitments specified in the
Power Purchase Agreement (PPA) with PEPCO and Steam Sales Agreement (SSA)
with Brandywine Water Company, environmental permit conditions, and qualifying
facility requirements.
The majority of the equipment components can be considered commercially
available and are widely used in similar utility and industrial applications.
If constructed, operated, and maintained according to the design criteria and
manufacturers' recommendations; and if critical parts are properly renewed and
replaced, the plant will perform as anticipated and with a projected life that
exceeds the 25-year primary term of the PPA.
CONSTRUCTION SCHEDULE
In the Construction Agreement, Raytheon guarantees that commercial operation
of the plant will occur no later than the Guaranteed Completion Date of October
31, 1996. Based on this completion date, construction is ahead of schedule.
As of July 15, 1996, construction was approximately 90 percent complete.
It is reasonable to expect commercial operation by the end of September 1996.
Final acceptance, is expected in April 1997, as scheduled.
CONSTRUCTION BUDGET
The budget for development of the Project is $215 million. This total includes
plant construction by Raytheon, the construction of a water supply line and
transmission line, and work performed by others. The $215 million budget also
includes interest during construction and other financing costs. Details of
the original budget are shown in Table 5-1. Cost overruns have occurred in
some budget items while other items have been completed under budget.
Overall, construction is expected to be completed at approximately $200,000 to
$300,000 below the original Project budget which included approximately $8.7
million for contingencies. As shown in Table 5-1, almost all the contingency
remains unspent.
Panda Energy budgeted $5.8 million for its expenses during startup and
commissioning. This budget is consistent with experience at other projects.
TECHNICAL PERFORMANCE
After its 1994-95 review of the Project design and the selected equipment,
Pacific Energy Systems concluded that all performance standards required under
the Construction Contract, including power and heat rate, could be met. The
guaranteed net power output is 230,000 kW. The guaranteed heat rate is 7,124
Btu/kWh (LHV). That conclusion remains valid.
AIR EMISSIONS
In the Construction Agreement, Raytheon guarantees air emissions from the plant
will meet the emission limits of the U.S. Environmental Protection Agency
(EPA), Prevention of Significant Deterioration (PSD) permit, the Certificate of
Public Convenience and Necessity (CPCN), and Maryland Public Services
Commission (PSC).
The Project, as originally designed, was capable of meeting the air emission
standards of the EPA and the Maryland PSC. Nothing has changed since the
design phase that would diminish this capability. General Electric Power
Systems has provided a letter guaranteeing that the turbines will meet CPCN
standards. Other projects that use similar GE turbines have complied with air
emission standards similar to those required of this Project.
POWER PURCHASE AGREEMENT
The PPA provides for a monthly capacity payment and a monthly energy payment.
Pacific Energy Systems has reviewed the sample calculations in the PPA for the
respective payments and found them to be correct based on the assumptions used
in the PPA. However, the actual payments will be based on the actual operation
of the plant in the future.
A "Joint Operating Procedure" has been agreed to by Panda and PEPCO. It
provides for coordination of dispatching and provides procedures for resolving
disagreements that may arise under the PPA during operation.
QUALIFYING FACILITY STATUS
To be a Qualifying Facility under PURPA, five percent of the useful energy
(i.e., the sum of the generated electrical energy plus the thermal energy sent
to a host) from a power plant must serve a thermal load. The thermal load for
this Project is a water distillation plant that is being constructed by
Raytheon under the Construction Agreement. Raytheon is contractually
committed to have the distilled-water plant ready for commercial operation
at the time the power plant begins commercial operation. The quantity of
steam exported to the distilled water plant is to average 34,000 lb/hr which
will ensure the five percent requirement is met.
The distilled water also must be used beneficially. The U.S. Navy, at its
Indian Head Naval Facility, has signed a purchase order for all the distilled
water produced by the plant.
A QF must also meet an efficiency standard that requires the net electric
energy plus half of the useful thermal energy to equal or exceed 45 percent of
the energy in the fuel. For this Project, the guaranteed heat rate limit of
7,124 Btu/kWh (LHV) equates to an efficiency of 48 percent. The efficiency
standard for QF status is, therefore, satisfied regardless of the thermal load.
SUMMARY OF DUE DILIGENCE
CONTRACTS
Pacific Energy Systems reviewed the six agreements described below in the
course of its due diligence work.
Power Purchase Agreement
Under the PPA, PEPCO has agreed to purchase all of the electricity generated by
the Project. The PPA places several restrictions and requirements on Panda and
allows for extensive monitoring of the Project before and during its operation.
If Panda fails to meet the requirements of the PPA, the agreement allows for
reduced payments or cancellations.
The plant will be fully dispatchable to meet PEPCO's requirements except for
the production of 99 MW for 60 hours per week which PEPCO must take from the
plant.
Under the PPA, the following deposits and reserves are required. All are in
place through letters of credit provided by GE Capital:
- Development Security ensures the Commercial Operation Date is met.
- Interconnection Security ensures PEPCO is paid for costs associated
with the interconnection facilities between the Project and the
PEPCO system.
- Performance Security covers damages resulting from termination of
the PPA after the Commercial Operation Date.
- Maintenance Reserve covers major overhaul costs incurred by the
Project.
Construction Agreement
The Amended and Restated Turnkey Cogeneration Facility Agreement between
Panda-Brandywine, L.P. and Raytheon is also referred to as the Construction
Agreement or the EPC Contract. The EPC contract is for a fixed fee of $118
million. It includes design, engineering, project management, labor, equipment,
and materials to construct, start up, and carry out performance tests (for
the power plant and distilled-water plant only) of the following project
components.
- The power plant and supporting facilities within the main fence
area
- A section of Betty Boulevard (an access road to the industrial
park)
- The distilled-water plant
- The fuel-oil storage tank
Utility support systems outside the fence (including the electric transmission
lines, effluent pipeline, and the gas supply line) are outside of Raytheon's
scope of work. The transmission line was constructed by C.W. Wright
Construction Company, Inc., and is complete. PEPCO has issued a letter stating
it will accept the line.
The effluent pipeline and the gas supply line are complete. The associated
pump station is 85 percent complete and is expected to be operational by the
anticipated commercialization date.
Completion of the plant and acceptance by Panda have the following two key
milestone dates:
- Commercial operation is scheduled to occur by October 31, 1996.
It occurs when the plant has passed the 48-hour test outlined
in Section 19.5.1 of Raytheon's scope of work. Penalties apply
for not passing the test on schedule. It is anticipated that
Raytheon will begin commercial operation by the end of September
1996.
- Final acceptance is anticipated by the end of April 1997.
In order to meet final acceptance, Raytheon must complete the
following:
- Pass performance tests and correct deficiencies
- Build the plant to final specifications
- Synchronize the plant to the PEPCO grid
- Complete all work affecting normal plant operation
- Ensure that punchlist work will not interrupt plant
operations
- Ensure that steam is going to the steam host
- Obtain a completion certificate from the owner
- Certify that construction is in accordance with
governmental requirements
The Construction Contract is a fixed turnkey agreement that provides for
liquidated damages to ensure Raytheon meets all performance guarantees and
bonuses if performance exceeds guarantees by specified amounts. It is expected
that guaranteed completion date of October 31, 1996, will be met and the
project will be completed within budget. Performance guarantees under the
Construction Contract are discussed in the sub-section entitled "Facility
Performance" in Section 2 of this report.
Liquidated damages are provided to ensure Raytheon's diligence in meeting all
guarantees. The contract provides for an $80,000 per day penalty for delay of
completion after October 31, 1996, up to a maximum penalty of $14.4 million.
The contract provides for performance bonuses if performance exceeds guarantees
by specified amounts.
The Construction Contract commits Raytheon to provide or obtain limited spare
parts, building occupancy permits, limited warranties against deficiencies, and
manuals and training for O&M personnel. Provisions are made for the
arbitration of disputes arising under the Construction Contract.
Operation and Maintenance Agreement
Panda-Brandywine, L.P. and Ogden Brandywine Operations, Inc., signed an
Operation and Maintenance Agreement on November 21, 1994. Ogden Brandywine
Operations is a wholly-owned subsidiary of Ogden Power Corporation which is a
subsidiary of Ogden Environmental and Energy Services of Fairfax, Virginia,
which is a wholly- owned subsidiary of Ogden Corporation (Ogden).
Ogden is a technical services company with more than $2 billion in annual sales
and more than 1,300 employees who operate and maintain power projects including
waste-to-energy, hydroelectric, and geothermal projects. Gas turbine operation
is relatively new to Ogden, but it has hired sufficiently skilled home-office
personnel to support the Project. Local hiring has been completed and the
experience level is substantially higher than Pacific Energy Systems has seen
in most other facilities.
The annual O&M budget for the Project is approximately 20 percent lower than
budgets for other recently-constructed gas turbine projects with which Pacific
Energy Systems is familiar. However, the budget is reasonable. Economies of
scale might explain, in part, its magnitude in comparison to other projects.
After the Actual Commercial Operation Date, operator compensation is fixed at
$117,750 per month, adjusted for performance, plus all reimbursable costs
incurred under the agreement. Performance adjustments are allowed for the
equivalent availability factor (EAF) and for the capacity performance.
The O&M Agreement provides for termination under several conditions Pacific
Energy Systems believes are reasonable. It also contains reasonable provisions
for force majeure, arbitration, renegotiation in case of substantial changes to
the facilities, and Owner oversight over unbudgeted purchase orders in excess
of $1,000.
Steam Sales Agreement
A steam sales agreement was entered into on March 30, 1995 between Panda-
Brandywine, L.P. and Brandywine Water Company. Panda will sublease the
distilled-water plant to Brandywine Water Co. Panda will sell steam (thermal
energy), cooling water, and feed water to Brandywine Water Co. Panda also will
provide operating, maintenance, and wastewater disposal services for the
distilled-water plant. Brandywine Water Co. will sell distilled water and must
purchase enough steam to maintain the Project's QF status. Panda has not
guaranteed any specific amounts or periods of time for thermal energy delivery.
Pacific Energy Systems believes that the SSA is sufficient to ensure the
continued QF status of the Project.
Water Purchase Agreement
A Treated Effluent Water Purchase Agreement between the county commissioners of
Charles County, Maryland, and Panda-Brandywine, L.P. was signed September 13,
1994. It allows the project to receive 2.7 million gallons of treated effluent
per day (mgd). The Agreement commits Panda to construct the 17-mile pipeline at
its own expense. The Project budget contains approximately $10.6 million for
this purpose. Upon completion, the portion of the pipeline in Charles County
is to be turned over to the county. The capacity of the line is to be 3.0 mgd.
Effluent not needed by the Project may be provided to other customers with
which the county may contract.
The Water Purchase Agreement is for a term of 25 years with options for three
5-year extensions. Panda will pay $1.00 per thousand gallons of effluent used
for the first 10 years with escalation occurring thereafter in accordance with
the Consumer PriceIndex. Panda must also pay certain fixed expenses associated
with maintaining the pipeline and its right-of-way. The effluent pipeline was
built by Flippo Construction Company. It has been completed from the wastewater
treatment plant to the cooling tower.
The pump station for pumping effluent through the pipeline is being built at
the sewage treatment plant by J.L.W. Construction. It is 85 percent complete.
Completion is expected by early August.
Natural Gas Agreements
A detailed study of the gas contracts has not been a part of Pacific Energy
Systems' past due diligence activities on the Project. C.C. Pace Resources,
Inc., conducted an independent review of the Project's fuel supply plan.
The required gas transmission line for the Project, which interconnects into
the Washington Gas and Light (WGL) system, is complete.
DESIGN FEASIBILITY
The basic plant design, gas-fired combined-cycle, has been used in numerous
similar installations and is well established in the utility industry.
PROJECT COSTS
The capital budget for the Project was $215 million including a contingency of
approximately $8.7 million. Details of the budget are shown in Table 5-1.
Actual capital expenditures are expected to be $200,000 to $300,000 less than
the budgeted amount. Cost overruns on some budgeted items have been more than
compensated for through savings on other cost items.
The ICF projections appear to reflect reasonable expectations of Project
expenses. Agreements for operating and maintaining the plant; for purchasing
fuel and water; and for selling electricity are structured to provide for
contingencies in a manner that is consistent with good practice in this
industry.
PERMITS
All required permits and licenses either have been obtained or are reasonably
expected to be obtained within a time frame that will not delay the planned
operation of the Project.
FACILITY DESCRIPTION
SITE
The Project is located in an industrial park south of Brandywine, Maryland in
Prince George's County. The site is located 2,000 feet east of Highway 301 on
Cedarville road, adjacent to the Conrail railroad tracks on the east, bounded
on the west by Betty Boulevard, which will be built as part of the Project.
Some of the site is in a wetland. All appropriate permits for use of that
area have been obtained.
FACILITY COMPONENTS
Mechanical Systems and Steam Generators
The project will use two GE-supplied PG7111EA combustion turbinegenerators,
each matched with its own three-pressure-level heat recovery steam generator
(HSRG). Each turbine-generator will have an output of 81.3 MW. The steam
from the two HSRGs will be used in a single GE steam turbine with a capacity
of 83.7 MW. The steam turbine can operate using steam from either of the HRSGs
individually or from both HSRGs. The combustion turbine-generators will fire
on natural gas with No. 2 fuel oil as an auxiliary fuel. The balance of plant
equipment includes a condenser, four-cell evaporative cooling tower, water
treatment system and fuel oil handling system.
Process steam to the distilled-water plant will be supplied from the low-
pressure section of the HRSGs and can be supplemented with steam turbine
extraction steam.
The exhaust steam from the steam turbine is condensed in a surface condenser.
Cooling tower makeup water will be supplied via a 17 mile pipeline from the
Mattawoman Wastewater Treatment Plant. Well water is available onsite as a
backup.
The gross plant electrical capacity is 246.3 MW during steam export to the
distilled-water plant at the rate of 34,000 pounds per hour (lb/hr) (i.e.,
two times 81.3 MW plus 83.7 MW). The guaranteed net output is 230 MW which
accounts for in-plant use of electric power and derating due to hot and humid
atmospheric conditions.
Gas will be supplied via a pipeline. Backup fuel oil will be stored in a tank
located adjacent to the site.
The design of the plant is proven in the electric utility industry. Design
features such as redundancy and backup that are in accordance with industry
practice have been included.
One notable feature of the plant is that it is highly dispatchable and will be
started and stopped frequently. Several features could be added to the plant
now or after startup that would make the cycling of the plant more reliable
and less costly. The current design, however, is sufficient to achieve the
performance assumed in the pro forma.
The plant is expected to be heavily dispatched by PEPCO from a minimum
guarantee dispatch of 99 MW on a 12-hour daily cycle, 5day week to full load at
230 MW.
Environmental Controls
The major air pollutant of concern is NOx. The turbines use dry, low-NOx
technology. Water injection will be required only when the plant is operating
on oil. No duct burners, gas compressors, or selective catalytic reduction
(SCR) is required now, but it can be added later if needed.
The project has obtained a CPCN from the Maryland PSC. To obtain a CPCN,
emissions were reviewed in accordance with PSD requirements. All associated
approvals have been obtained.
In developing the CPCN, the Maryland PSC included input from all other state
agencies and local governments that deal with environmental regulation, and
all permits required to date have been received. It is anticipated there will
be no problems obtaining other required permits.
Electrical Intertie
The interconnection of the Project to the PEPCO system is included in the PPA.
At Panda's expense, PEPCO will provide all required interconnection equipment,
safety devices, and metering at its Burches Hill Substation.
C. W. Wright has constructed a 7-mile long 230 kV transmission line from the
plant to the Burches Hill Substation. Ownership of the line will be
transferred to PEPCO. The transmission line has been completed and is
energized, and it is backfeeding the switch gear at the power plant. PEPCO
has issued a letter stating it will accept the transmission line.
FACILITY PERFORMANCE
POWER AND HEAT RATE
Under Article 5.0 of the EPC contract, Raytheon guarantees a net power output of
230,000 kW and a net heat rate of 7,124 Btu/kWh (LHV). These performance
parameters are to be met under a set of conditions including the export of
34,000-lb/hr steam. Pacific Energy Systems evaluated the plant using
"Gatecycle," a power plant design and performance software package. The
evaluation predicts the guarantees can be met. Nothing has changed during
construction to alter this conclusion.
The heat rate of 7,124 Btu/kWh (LHV) and capacity of 230,000 kW are for a new,
clean plant. Performance degrades during operation until the prime equipment
is overhauled and key parts are repaired or replaced. This is common for all
mechanical systems. As discussed in Section 5, Pacific Energy Systems provided
ICF with our estimates of the heat rate and plant output capacity for each
year from 1996 through 2021 for use in its Project projections. Pacific
Energy Systems' estimates are based on dispatch estimates provided by ICF
Resources and on performance degradation curves provided by General Electric
Power Systems. Our estimates are consistent with common industry practice.
However, they are dependent on the information provided by others and on
operating conditions and maintenance practices.
EMISSIONS
The turbines use dry, low- NOx control technology which is stateof-the-art for
this type of application. The Project has undergone review for PSD standards
and has been duly permitted.
Under the Construction Agreement, Raytheon guarantees that air emissions from
the plant will meet the emissions limits of the U.S. EPA PSD permit and the
permits by the Maryland CPCN proceedings. General Electric Power Systems has
issued a letter guaranteeing its turbines will meet these emission limits.
Emission limits for some power plants necessitate the use of SCR to control
NOx. SCR is not required for this project and is not included in the current
design. However, if needed in the future it can be added to the HRSGs.
RELIABILITY
Net power output, heat rate, emissions, and noise limits are guaranteed by
Raytheon and are achievable with the Project's technology and construction
standards.
The following plant performance tests for the Project will be completed before
final acceptance:
- 48-hour net electrical output performance test
- Net plant heat rate test
- 200-hour capacity test
- Stack test
- Noise test
The Operation and Maintenance Agreement promotes reliability by providing for
a full-time owner's representative to administer Panda-Brandywine's
responsibilities, to monitor the operation of the plant, and to direct
economic and financial matters.
Raytheon warrants, under the Construction Agreement, that the plant will be
free from defects or deficiencies until the later of: (a) one year from
commercial operation; or (b) one year from discovery or repair of defect or
deficiency, but no later than the second anniversary of final acceptance.
Furthermore, for any item that is repaired, replaced, or renewed more than
once, Raytheon will undertake a technical analysis of the problem and clear
the "root cause" of the problem. GE-supplied equipment is exempted from this
warranty and is the responsibility of Panda.
The factors given above and the soundness of the Project design lead Pacific
Energy Systems to conclude that the Project will perform as assumed in the pro
forma and with a reliability that is typical of similar successful plants of
its type.
AVAILABILITY
The PPA is based on a target availability in the range of 88 percent to 92
percent. Based on the design of the Project, Pacific Energy Systems believes
this is a reasonable target. The PPA provides for an increase in monthly
payments if the actual availability, as measured by the EAF is greater than 92
percent.
The PPA provides for a decrease in monthly payments if the EAF is less than 88
percent. Likewise, the O&M contract provides for bonuses and penalties if the
EAF falls outside of the targeted range.
The review of the Gas Supply Agreement by C.C. Pace presents a generally
favorable conclusion regarding the security of the gas supply.
USEFUL LIFE
The term of the PPA is 25 years. The anticipated useful life of projects
similar to this project is often 25 years or longer. If the plant is operated,
maintained, and renewed according to manufacturers' recommendations and
standard industry practices, Pacific Energy Systems expects it to have a
useful life of at least 25 years.
PERMITS AND LICENSES
All necessary permits and licenses have been obtained or can be obtained on a
schedule that will not delay commercial operation of the Project.
CONSTRUCTION STATUS
Construction is expected to be completed on time and within budget.
Construction is approximately 90 percent complete as of July 15, 1996. The
plant is in the preliminary startup phase. The expected completion date is the
end of September 1996.
Based on the construction progress report dated June 30, 1996 the construction
status of major components is as follows:
- Piping - 98.2 percent complete
- Control cable terminations - 94.1 percent complete
- Instrument installation - 94.7 percent complete
ANCILLARY FACILITIES
Five ancillary, or offsite, facilities either have been built or are under
construction. They are described in Section 4 of this report. A summary of
the current status of each follows.
Effluent Water Supply Line
A 16-inch-diameter 17-mile long pipeline will carry effluent from the
Mattawoman Wastewater Treatment Plant to the Facility. The treated wastewater
will be used as cooling water for the power plant and as feed water for the
distilled-water plant. The pipeline is currently complete from the wastewater
treatment plant to the cooling tower of the power plant.
The pump station that is being constructed at the wastewater treatment plant
is 85 percent complete.
230-kV Electrical Transmission Line
A 230-kV transmission line is needed to connect the project's dead-end tower to
PEPCO's Burches Hill Substation. The transmission line is complete and
energized.
Natural Gas Line
Washington Gas Light Company (WGL) is obligated to provide gas distribution
facilities from the interstate pipeline at Cove Point to the power plant. The
provision of metering, regulating, and appurtenant facilities required on the
project site are included in WGL's commitments.
The WGL pipeline is currently complete to the plant meter. Work on controls
is in progress and is expected to be finished by July 1, 1996.
One section of pipeline is being built by Columbia Pipeline Company at a cost
of $6.8 million. Completion is expected prior to commercialization of the
plant. However, if it is not complete by that time, gas is available from
other sources. Delays on this section of pipeline will not delay startup of
the Project.
Distilled-Water Plant
To maintain status as a QF, at least 5 percent of the useful energy output
from a power plant must be used by a thermal host. The thermal host for the
Project is a distilled-water plant owned by Brandywine Water, an affiliate of
Panda Energy. The distilledwater plant will start up with the power plant.
Raytheon is committed to accomplish this and Pacific Energy Systems believes
it is a reasonable expectation.
Betty Boulevard
Prince George's County requires Panda to construct the section of Betty
Boulevard that fronts the Project site. Construction is included in the EPC
contract and will be completed some time after commercialization of the
plant. Completion of Betty Boulevard is not crucial to the operation of the
plant and no major problems are anticipated.
Section 3
ENGINEERING
OVERALL PLANT DESCRIPTION
The Panda-Brandywine Cogeneration Project is a combined-cycle power plant
located south of Brandywine, Maryland, in Prince George's County, 2,000 feet
east of Highway 301 on Cedarville Road. The plant is adjacent to the Conrail
railroad tracks on the east and will be bounded on the west by Betty
Boulevard, which is to be built as part of the project.
The EPC contractor has guaranteed a net electrical output of 230 MW from the
plant, corrected to 92 degrees F dry bulb, 50 percent relative humidity, with
34,000 lb/hr saturated process steam at 15 pounds per square inch gauge (psig)
at the point of interconnection with 80 percent of the condensate returned and
no boiler blowdown. The plant will be dispatched daily by PEPCO at a minimum
of 12 hours per day during weekdays. There will be substantial additional
dispatch during high demand periods. Partial load operation of each gas turbine
will not drop below 80 percent of rated output.
The plant will use GE-supplied PG7111EA combustion turbinegenerators, equipped
with dry, low-NOx combusters as the plant's prime movers. It is capable of
being fired with either natural gas or No. 2 fuel oil. The Frame 7 has an
output of 81.3 MW at 59 degrees F ambient temperature without inlet
conditioning. The combustion turbine exhaust is routed from each unit through
separate three-pressure-level, unfired HRSGs. Each HRSG will have its own
stack.
A single steam turbine-generator, supplied by General Electric, will take steam
from the two HRSGs to produce an additional 83.7 MW. Process steam to the
distilled-water plant will be supplied from the low-pressure section of the
HRSGs, supplemented with steam turbine extraction steam. The exhaust steam
from the steam turbine is condensed in a surface condenser. Cooling tower
makeup will be from the MWWTP effluent and will require a 17-milelong pipeline.
Electricity from the plant will be transmitted over a 7.1-mile, 230-kV
transmission line built by the project and tying into the PEPCO system at the
Burches Hill Substation. The plant does not have black-starting capabilities
but receives startup power from backfeed through the 230-kV transmission line.
SMECO will provide auxiliary and startup power through the backfeed during
periods when the gas turbines are not operating. The maintenance and
administration buildings will be connected to SMECO by a feed from its local
distribution system at all times.
DESIGN CONCEPTS AND TECHNOLOGY ASSESSMENT
The Panda-Brandywine facility is being designed as a dispatchable
combined-cycle power plant. The GE frame units have very successfully met
utility needs for peaking in simple-cycle configuration and in base-loaded
combined-cycle configuration. The GE Frame 7s to be used at Panda-Brandywine
are heavy-duty, industrial-grade, packaged combustion turbine-generators
with a proven record of reliability in electric generation service. Overall,
it is Pacific Energy Systems' opinion that, if the plant is built as specified
in the EPC scope document, it will be capable of meeting all operating and
dispatch requirements. However, Pacific Energy Systems also believes that,
because of the daily cycling of the combustion and steam turbines, additional
design modifications could be made to enhance the operation and reliability of
the plant while lowering long-term operation and maintenance costs.
Pacific Energy Systems representatives have observed the use of several of the
following design modifications to enhance combinedcycle plants that are started
and stopped on a daily basis:
- Dampers in the HRSG stack to hold temperature in the HRSG overnight
- Sealing steam provided to the steam turbine from a small
auxiliary boiler
- Increased insulation on the HRSG outlet duct and stack to
where the damper is located
- Mechanical vacuum pump for condenser to pull vacuum quicker
and hold vacuum overnight
- Steam sparger to the condenser to assist in pulling vacuum
and warming up
- Auxiliary circulating water pump to hold vacuum on condenser
when plant is down
- Drainable superheater coils
- Steam or electric heat on steam turbine casing
- Use of more 100 percent capacity redundant pumps and
auxiliary equipment
Pacific Energy Systems believes that some or all of the above changes would
make operation and maintenance of a daily-cycled plant easier, less expensive,
and more reliable. If Panda decides after startup (as others have) that
installation of these items is cost effective in fuel savings, most of them can
be added at a later time.
The gas turbines are being equipped with GE's dry, low-NOx burners, which are
state of the art for primary emissions control technology. Early reports from
plants using these burners on similar Frame 7 units indicate that the gas
turbine can meet the permit requirements for NOx and carbon monoxide (CO)
emissions of 35 lb/hr [9 parts per million by volume, dry (ppmvd)] and 50
lb/hr, respectively. Oil firing requires some water injection to keep NOx
emissions at or under the 239 lb/hr (54 ppmvd) limit. The fuel oil burned in
the combustion turbines shall contain no more than 0.05 percent sulfur by
weight. All emissions are controlled without the use of an SCR system or
ammonia injection.
In order to prevent depletion of groundwater in Prince George's and Charles
Counties, Panda Energy has elected to use effluent from the MWWTP for cooling
tower makeup. While this is not a common practice throughout the industry, it
is done frequently enough that no major problems are anticipated with the use
of wastewater effluent. If setbacks at the MWWTP prevent use of the effluent
for periods of time, the plant has sufficient onsite well water capacity.
Most of the remaining plant equipment at Panda-Brandywine shows proper
redundancy and a conservative design philosophy. Most pump applications are
designed with three 50 percent capacity units, and critical applications, such
as the boiler feedwater, have two 100 percent capacity units. Contrary to
common practice in most combined-cycle cogeneration plants, no standby diesel
generator is included. Since auxiliary power will normally come from the
Southern Maryland Electrical Coop (SMECO) while the plant is off-line, it can
be backfed through the 230-kV intertie with PEPCO; therefore, a standby diesel
generator is not an important issue for redundancy. The design criteria for the
uninterruptible power supply (UPS) and battery system appear satisfactory to
meet any safety concerns required to shut down the plant safely should a total
loss of power (transmission line outage) occur. A modification in the design,
made shortly before financial closing, removed the alternate connection from
SMECO to the UPS. This could potentially hamper reclosing to the transmission
system if the batteries were to run down during the shutdown. Panda is
reviewing this and will correct it.
Overall, the Panda-Brandywine plant appears to have an adequate design
philosophy, uses technology and equipment that are consistent with most
combined-cycle cogeneration plants, and can be expected to operate as intended
to meet contract requirements. The design modifications discussed above would
improve the plant's operability and maintainability, but if they are not
implemented, the plant can still perform at a level consistent with that
anticipated in the ICF projections.
MAJOR EQUIPMENT SELECTION AND VENDOR/SUPPLIER QUALIFICATIONS
The suppliers of major equipment components are as follows:
Gas turbine(s) General Electric
Steam turbine General Electric
HRSG Nooter/Ericksen
Cooling tower Hamon Cooling
Distributed control system Westinghouse Electric Corp.
Water treatment system EMCO Engineering
Boiler feed, condensate and
circulating water pumps Byron Jackson Pumps
Main step-up transformer Schneider Canada (Federal Pioneer
Division)
All of the above suppliers are well recognized in the industry for supplying
reliable and high-quality equipment.
SPECIFICATIONS
Pacific Energy Systems reviewed several key specifications for equipment to be
supplied on the Panda-Brandywine project and found them to be adequate to
obtain the required equipment. Specification information and filled-in
manufacturers' data were used as the basis for the mass and energy balance
model of the plant, which is discussed in greater detail in Appendix D.
SYSTEMS AND EQUIPMENT DESCRIPTIONS
MECHANICAL SYSTEMS AND EQUIPMENT
Combustion Turbine
As previously stated, the Panda-Brandywine plant uses two GE PG7111EA
(Frame 7) combustion turbines as the prime movers. The Frame 7 is a
heavy-duty, single-shaft, simple-cycle gas turbine with a nominal capacity
of 84.6 MW.
The turbine uses natural gas as its primary fuel and No. 2 fuel oil as an
auxiliary fuel. Dry, low-NOx combusters are included to minimize NOx emissions
when firing natural gas. Water injection is used to reduce NOx emissions when
the gas turbine is operating on No. 2 fuel oil. The gas turbine-generator has
the capability to switch fuels while synchronized to the transmission system,
but not necessarily at full load. The natural gas fuel conditioning skid and
fuel oil system with dual fuel oil filters are included as part of the turbine.
Several similar installations using GE's dry, low-NOx combusters have had
serious combustion damage when transferring from gas to oil firing. GE has
traced these problems to a primary liquid purge air check valve that has stuck
in the open position during long periods of operation on gas prior to the
switch to oil. GE has proceeded to make a number of hardware, software, and
operational changes to units with the dry, low-NOx combuster. Pacific Energy
Systems does not consider this to be a major risk to the project. GE has
upgraded the check valve in all operating units, but is continuing to pursue
(with check valve suppliers) a lasting and durable check valve design.
A specific concern is that GE is requesting dual-fueled units with dry, low-
NOx combusters to switch to oil at least weekly for a short run on oil. This
may have an affect on a number of items at Panda-Brandywine, including
emission limits, hours available to operate on oil, and operating schedules.
The GE gas turbine-generator is furnished as a complete, packaged unit. It
includes a closed, force-fed lubricating and hydraulic oil system; electric
motor starting system; off-line compressor wash system; complete control
system; and an automatic, selfcleaning, inlet air filtration system in an
up-and-over orientation. Inlet evaporative coolers are provided on each gas
turbine.
Under normal conditions, the gas turbines will be operated in a cyclic mode,
being dispatched on and off daily, or more frequently if required by PEPCO.
Hourly dispatches between 80 and 100 percent full load on each gas turbine are
also expected.
Heat Recovery Steam Generators
Two HRSGs produce steam for use in the steam turbine-generator and for the
thermal host, using the waste heat in the gas turbine exhaust. A single HRSG
is matched to a single gas turbine. Each HRSG is a three-pressure-level,
water tube, natural circulation boiler. Each HRSG includes a high-pressure
superheater, evaporator steam drum, and economizer; an intermediate-pressure
evaporator, steam drum, and high-pressure/intermediate-pressure (HP/IP)
economizer; a low-pressure (LP) evaporator and steam drum; inlet and outlet
duct; interconnecting piping; and a stack. A spool for future SCR installation
is also included.
The HRSG has wall boxes and provisions for future installation of soot blowers
or a high-pressure water wash system. Sampling ports for the continuous
emissions monitoring system (CEMS) are included in the stack. The exhaust
gases from the HRSG exit through a 15-foot-diameter, free-standing stack that
is 165 feet above grade level.
The control of the HRSG is completely integrated with the distributed control
system.
Steam Turbine
One GE steam turbine with a nominal design output of 84 MW is used. The steam
turbine is an axial flow, base-mounted condensing steam turbine with two
uncontrolled admissions and one uncontrolled extraction designed for normal
inlet throttle steam conditions of 1,215 pounds per square inch (psia),
965 degrees F, exhausting to 2.9 inches mercury absolute (Hga).
The turbine is packaged complete with lube and hydraulic oil system, local
gauge board, gland seal system with condenser and exhauster, and a GE Mark V
Simplex control system.
Condenser
The condenser, supplied by Ecolaire Corporation, is designed to meet Heat
Exchange Institute (HEI) standards and American Society of Mechanical Engineers
(ASME) Boiler and Pressure Vessel Code. The water boxes are full-access,
bolted cover-plate type with inspection access provided to inlet and outlet
water boxes. The condenser is designed to maintain backpressure required by
the steam turbine guarantee rating (2.9 inches HgA) while operating with
circulating water temperatures based on cooling tower performance at design
ambient conditions of 92 degrees F dry bulb and 78 degrees F wet bulb.
The condenser also is capable of condensing full steam production from the HRSG
HP, IP, and LP sections (with steam turbine offline) while maintaining the
condenser pressure and temperature within the turbine manufacturer's limits for
operation. The system is designed for a steam turbine bypass as well as for
meeting startup and shutdown requirements.
The condenser system includes a single steam surface condenser and
accessories, such as 304SS-22 BWG condenser tubes, steam jet air ejectors for
normal operation, and hogging ejectors for startup with inter- and after-
condensers.
Cooling Tower and Closed Cooling System
The cooling tower provides the means for rejecting waste heat from the steam
turbine cycle and servicing plant equipment cooling loads. The cooling tower
is a four-cell, induced-draft, counterflow evaporation tower. It is designed
to operate under winter freezing conditions and to minimize the impact of
fogging and drift emissions on the adjacent roadways. The cooling tower will
operate on treated wastewater effluent. Circulating water is pumped by three
50 percent circulating water pumps.
The closed cooling system serves equipment cooling loads, such as lube oil
coolers, gas compressor intercooler, generator coolers, pump-bearing coolers,
and other equipment coolers. The closed cooling water system uses makeup
water from the condensate system and is pumped by two 100 percent capacity
cooling water pumps. Two 100 percent capacity heat exchangers are used for
heat rejection to the circulating water system.
Condensate-Feedwater System
The condensate-feedwater system consists of a single external deaerator and
six (three per train) boiler feed pumps.
The deaerator unit is a pressure-type, spray-tray deaerator with a horizontal
storage tank. The storage tank is sized to contain, at 85 percent level, a
volume of water to operate without makeup for a minimum of 10 minutes at
maximum design feedwater rate.
The feed pumps are horizontal, centrifugal, multistage, horizontally split
type. Each pump has an intermediate-pressure feedwater tap. One pump in each
train is arranged to supply feedwater to either HRSG.
Raw Water System
The raw water system consists of two deep wells and a 420,000gallon combined
raw water storage/fire protection tank. Each well has the capacity to provide
sufficient water to operate the entire plant, including cooling tower makeup.
The project is permitted to remove 64,000 gallons per day (gpd) from the ground
for non-cooling tower process needs, and it may use up to 1,322,000 gpd for
short-term periods if the MWWTP pipeline is unavailable. Of the raw water
storage capacity, 312,000 gallons are reserved for the fire protection system.
Boiler Water Makeup System
Raw water from the raw water tank is transferred to two 100 percent makeup
demineralizer trains by two 100 percent capacity makeup water pumps. The
demineralizer treats the raw water to achieve a purity level acceptable for use
in the HRSG. The demineralizer contains several components that perform the
water treatment process, including arbon filter units, cation units, anion
units, and mix-bed units. After treatment in the demineralizer, the water is
routed to and stored in a 100,000gallon demineralized water tank. Two 100
percent capacity demineralized water transfer pumps pump water to the deaerator
for boiler makeup, provide regeneration water for the demineralizer, and
provide dilution water for neutralization in the wastewater neutralization
process. Two 100 percent capacity condensate polishers remove iron, copper,
and residual hardness from condensate returned from the steam host.
Wastewater Disposal System
Boiler blowdown, boiler drains, neutralization tank effluent, washdown,
miscellaneous building waste, and sample lines are all routed to the cooling
tower basin through an oil/water separator. Blowdown from the cooling tower and
sanitary waste are disposed of through the tie to the local sewer
interconnection, which is tied to the MWWTP. Drainage from outdoor paved areas
is treated in a separate oil/water separator and disposed of through the
sanitary sewer. Local drainage is routed to a settlement pond and then to an
adjacent wetland area.
Fuel Gas Compressors
No fuel gas compressors are required for this project.
Auxiliary Systems
Fire Protection System. The fire protection system for the Panda-Brandywine
facility consists of a main fire loop, an automatic sprinkler system, two 100
percent capacity pumps, 312,000 gallons of deaerated water storage, and a
carbon dioxide (CO2) system. Each hydrant is rated at 500 gallons per minute
(gpm), and the system is sized to provide maximum demand to any fixture,
supplemented with 500 gpm from the nearest hydrant.
The automatic sprinkler system is supplied from the main fire loop. Areas
protected by the automatic sprinkler system include all buildings, areas of
building, and individual equipment systems, as required by NFPA 850. This
includes all transformers, lube oil equipment and piping, steam turbine
bearings, cooling tower, fire pump building, control room, maintenance
building, and fuel oil storage tank.
Pressure for the main fire loop is maintained by a single, electrically driven
jockey pump. One diesel-driven fire pump and one electrically driven pump
maintain the firewater flow rate during system use. The pumps are located in a
separate pumphouse adjacent to the raw water tank.
Two automatically activated CO2 fire suppression systems are part of the fire
protection system. One CO2 system protects the electrical and control
cabinets in the distributed control system (DCS) equipment room. The other
protects each of the gas turbinegenerators.
Fuel Oil Facilities. The No. 2 fuel oil facilities store and transfer fuel
oil to the gas turbines. Fuel oil is stored in a 2,000,000-gallon tank. The
tank is surrounded by a concrete containment dike designed to hold one and
one-half times the volume of the tank. A tanker-truck unloading station is
provided that is capable of unloading twice the maximum hourly fuel consumption
of the gas turbine. The fuel oil transfer and unloading pumps are located
inside the containment dike.
Miscellaneous. The plant includes other necessary auxiliary systems, such as
building heating, ventilating, and air conditioning (HVAC) and service and
instrument air systems; a 5,000-square-foot maintenance shop; and an
administration building containing approximately 15 offices, conference rooms,
and other support facilities, such as the control room, battery room, UPS room,
and other areas.
ELECTRICAL SYSTEMS AND EQUIPMENT
Generators
A combustion turbine-generator (CTG) is included as part of each GE PG7111EA
package. It has a synchronous machine enclosure for outdoor installation and
an open-ventilated air cooling system, and is rated at 13.8 kV, three-phase, 60
hertz (Hz), 3,600 revolutions per minute (rpm). The gross output of the
turbine-generator is 81.3 MW under International Standards Organization (ISO)
conditions.
The steam turbine-generator (STG) is also supplied by GE. It is a 13.8-kV,
three-phase synchronous machine with brushless excitation, neutral resistance
grounding, and surge protection. The generator is rated 96 MVA at 0.85 power
factor lagging. The generator rating is sufficient to support the steam
turbine rating of 47.1 MW.
Both generators are capable of producing rated megawatts at power factors
ranging from 0.85 lagging to 0.95 leading.
Both the CTG and the STG may be synchronized automatically or manually to the
PEPCO system from the control room.
High-Voltage System
The substation at the plant interconnects the 230-kV high-side windings of
each of the three generator transformers through separate 230-kV circuit
breakers and 230-kV air break switches to a common bus. From there one
230-kV circuit breaker connects the plant generators through a new 230-kV
airbreaker switch to a new 230-kV transmission line to PEPCO.
During normal operation, the plant auxiliary load will be supplied through the
two-unit auxiliary transformer with a 13.8kV primary and 4.16-kV secondary.
Exceptions are the maintenance and administration building which will be
supplied directly from SMECO. Standby power from SMECO will be backfed from
the PEPCO substation through the 230-kV transmission line.
Switchgear and Motor Control Centers
Auxiliary power will be distributed through 4,160-V metalclad switchgear and
4,160-V motor control centers. All large motors will be 4,160 V, including
boiler feed pumps and circulating water pumps. 480-V secondary unit
substations will supply the 480-V motor control centers. Both 4,160-V and
480-V systems will contain spare parts and provisions for future expansion.
Battery UPS System
A 125-V, direct current (dc) system and UPS will be provided to power circuits
required for startup, shutdown, emergency shutdown, and normal plant operation.
The batteries will be capable of safely shutting down the plant under emergency
conditions without a source of auxiliary power or station service power and of
continuing to operate critical systems for 1 hour following emergency shutdown.
The UPS will be sized to supply power for 110 percent of the plant's critical
120-V alternating current (ac) loads.
As previously described, Panda will receive standby and startup power from
SMECO via the PEPCO transmission line to the auxiliary power transformers,
and SMECO will supply the maintenance and administration buildings directly.
There is no backup to the UPS or battery charger. Therefore, if the plant
comes off-line because of a problem associated with the transmission line,
the balance of the plant has no power. Once the batteries are pulled down,
the plant has no way to recharge the 125-kV breaker system. This could cause
several problems, including the inability to reclose the 230-kV breakers in
the plant's switchyard.
Instrumentation and Control Systems
The integrated control of all plant systems is accomplished using a
distributed control system (DCS) that is designed to keep the number of plant
operators to a minimum (normally two), while providing sufficient monitoring
and control capabilities for continued safe and reliable plant operation.
The DCS alerts the operator to any abnormal conditions or situations that
require timely manual intervention; and its interlocks and safety systems
precipitate preplanned actions for those cases where unsafe conditions develop
faster than the modulating controls or the operator can be expected to
respond.
All instrumentation and control equipment is of recent proven design, selected
to achieve the highest level of plant availability, ease of maintenance, and
standardization throughout the project. The DCS is designed to provide
automatic supervisorycontrol of the combined-cycle cogeneration plant and the
distilled-water plant, as well as to initiate manual commands. The primary
functions of the DSC are as follows:
- Manage supervisory controls
- Monitor plant process operations
- Monitor plant operating conditions
- Advise (by display) operating personnel of plant's current
operating status
- Enable operators to operate plant manually from control room
The DCS will interface with package equipment to perform some or all of the
above functions for the gas turbines, steam turbine, HRSG, air compressor,
sampling and chemical injection, condensate polisher, and water treatment as
well as for the distilled-water plant, which in most cases will have local
control panels or control panels in the control room.
The project has a continuous emissions monitoring system (CEMS) for NOx and
oxygen (O2) installed, certified, and operational within 180 days of plant
startup. Installation, operation, and testing procedures must be submitted to
the Maryland Air and Radiation Management Administration (ARMA) and the
Maryland Power Plant Research Program (PPRP) at least 180 days before purchase
of the CEMS.
TELECOMMUNICATIONS
The Power Purchase Agreement requires telecommunications, such as an automatic
generation control (AGC) between the plant and PEPCO's control center. The
AGC will allow PEPCO to send a "desired generation" signal directly to the
plant's coordinated control system. Volt ampere reactive (VAR) loads will
also be sent by the AGC, which will monitor a number of other plant systems
as well.
ELECTRIC AND MAGNETIC FIELDS
In order to minimize Radio Frequency Interference (RFI) impact of the U.S. Air
Force's Globecom communication facility, which is located nearby, Panda had Met
Laboratories, Inc., review various systems within the plant that might be
modified to lower the potential for RFI. No modifications were required.
The use of bundled conductors on the transmission line is expected to minimize
RFI on the 230-kV transmission line even though it passes within 1000 feet of
the Globecom facility.
CIVIL/STRUCTURAL/ARCHITECTURAL
The project is located in a designated industrial park in Prince George's
County southeast of Washington, D.C. The facility will be served by a new
county road, to be built by the project along the project frontage.
Major buildings are the administration/maintenance building, gas turbine
enclosure, and steam turbine building. The remaining structures on the site
will include several small buildings such as the fire pumphouse and fuel oil
pumphouse, large tanks, distilled-water plant, and cooling tower. Building
siding will be steel wall panels with insulation between the exterior surface
panel and the interior surface panel. All buildings will have circulating
air ventilation fans and be fully heated during the winter. Administration
areas and offices also will be air conditioned and heated.
A security fence will be built along the perimeter of the main plant site and
around the switchyard. Motorized gates, video cameras, and a two-way voice
communication system will be at each of the two main entrances to the plant.
Freeze protection is designed to prevent water from freezing in pipes down to
minus 25 degrees C (-13 degrees F) with wind blowing at 15 miles per hour and
the plant completely shut down. Freeze protection will be by electric, self-
limiting, parallel heat-tracing cable along the pipes to be protected.
A cathodic protection system has been provided for underground carbon steel,
stainless steel, brass, and copper piping; the bottoms of bed-mounted steel
tanks; and the surface of the condenser and auxiliary cooling water heat
exchangers on the circulating water side.
Landscaping is provided to enhance the visual appearance of the site from
Betty Boulevard and to provide sound and visual protection for nearby
residences on the south and east.
Section 4
ANCILLARY FACILITIES
The Panda-Brandywine site was chosen because of the availability of the
property within a designated industrial zone more than because of its
convenience to water, fuel, power lines, or a steam host. Therefore, the
facilities required to sustain the project have taken on more importance.
Permitting, engineering, construction, operation, and budget are more
significant for these ancillary facilities than they might be for similar
cogeneration plants.
This section of the report will look at each of the five ancillary facilities:
effluent water supply line, electrical transmission line, natural gas line,
distilled-water plant, and Betty Boulevard. In this way, each facility can be
analyzed independently of the cogeneration facility for risks, alternatives,
and potential mitigation.
EFFLUENT WATER SUPPLY LINE
Cooling water and raw water for the distilled-water plant will be supplied to
the project through a 16-inch-diameter, ductile-iron pipe approximately 17
miles (91,000 feet) long. The line will carry treated effluent water from the
Mattawoman Wastewater Treatment Plant to the cogeneration plant's cooling
tower basin. The agreement between the project and the Charles County
commissioners requires the pipeline to be designed and sized to supply 3.0
million gallons per day (mgd). The project is entitled to use 2.7 mgd of
effluent. The mass and energy balance indicates that about 1.8 mgd is
actually required under continuous 230 MW production.
Quality control of the effluent will be closely monitored by both the county
and the Project. An intermediate chlorination point is planned near the end of
the pipeline. Control of the pipeline will be by telemetry to the
county-owned facility. A low pressure signal will start up the pumps as the
valves are opened at the cooling tower.
The project is responsible for permitting, design, and construction of the
pumping station at MWWTP, the 17-mile pipeline, the chlorination station, and
the intermediate pumping plants. Charles County will operate and maintain the
pipeline and associated facilities.
The Pipeline route follows the Navy railroad right-of-way east for about 10
miles, where it interconnects with the Conrail railroad and proceeds north to
the project site.
230-kV ELECTRICAL TRANSMISSION LINE
The project has built 7.1 miles of 230-kV transmission line from the project's
dead-end tower to PEPCO's Burches Hill Substation. The transmission line
facility was designed by Gilbert/Commonwealth, Inc., and constructed by C.W.
Wright. The line was permitted as part of the Phase II CPCN for the Project
(see Section 6). PEPCO has established general requirements for the line under
the PPA and has the right to review and approve the final design and
construction.
PEPCO will assume title to the transmission line upon the Schedule Commencement
Date (first energy generation by the plant) provided Panda has demonstrated
that the line meets all of PEPCO's requirements. These requirements include:
that its construction is consistent with prudent utility practices, all permits
have been received, and all rights-of-way have been obtained.
Only 4.3 miles of the line require new right-of-way, and nearly all of that is
along the Conrail railroad right-of-way. For the remainder of the 7.1 miles,
the transmission line will be added to towers on PEPCO's Burches Hill-Talbot
270-kV transmission line, which was designed for a double circuit but has one
side open. The transmission line was examined during the CPCN hearing process
to determine the impact it might have on homes, schools, and businesses along
the right-of-way. By raising the singlepole structures carrying the line along
the railroad right-of-way by 10 feet, Panda was able to demonstrate that
electric and magnetic fields at the edge of the right-of-way were reduced to
levels of one-fourth to one-fifth of any state regulations. The transmission
line was found to have little or no impact on wetlands and property values.
C. W. Wright's budget to build the transmission line was $3,425,807. The
transmission line was completed within that budget. Although it is not part of
the transmission line, SMECO will interconnect with the Project in several
places. It will provide construction power to Raytheon during the
construction period. SMECO will also interconnect with the cogeneration
facility to supply power to the administration/maintenance building during
normal operation. The distilled-water plant will also be directly
interconnected to SMECO for all electric power needs. Finally, all startup
and standby power requirements will be met by SMECO through a wheeling
agreement with PEPCO to backfeed the plant through the main transmission line.
NATURAL GAS LINE
In order to provide natural gas to the project site, Panda-Brandywine will
cause the construction of several looped sections of Columbia Gas'
transmission line and the local connection to the site by WGL.
Columbia Gas will loop three sections of their existing gas transmission line
in West Virginia. The new gas pipeline, 3 sections will total about
6.8 miles. Columbia Gas is presently building these sections, which are more
than 60 percent complete. The line should be completed by August 1996.
Startup gas to the project is not dependent on completion of the gas pipeline
by Columbia Gas.
WGL has completed the connection between its main transmission line and the
project site. Presently it is completing the metering controls and adding a
return line to its systems. WGL will complete the balance of its work by
July 1, 1996, several weeks before Raytheon will need gas for first fire.
DISTILLED-WATER PLANT
The steam host for the Panda-Brandywine project is a distilled-water plant
that will provide high-quality distilled water for use in industrial processes.
The distilled-water facility will be owned by Brandywine Water, an affiliate
of Panda Energy.
The heart of the distilled-water plant is a spray film evaporator, which uses
spray nozzles to uniformly distribute the makeup feed over a horizontal steam
tube bundle. Evaporation takes place as the steam inside the tubes condenses.
The vapor is condensed in a water-cooled condenser. The equipment and process
are used in a number of applications, including making distilled water. This
is a standard industrial process and represents no technological risk. Water
from the circulating water system will be used as makeup feed to the system.
The 220,000-gallon distilled-water tank provided has approximately 72 hours of
storage. A truck fill station will fill 6,000- to 8,000-gallon tanker trucks
in 20 to 30 minutes. Operation of the distilled-water plant will be through
the DCS in the main control room of the cogeneration plant. Ogden
Brandywine, the operator, will make daily checks on the equipment. The truck
fill station will be operated by the truck drivers.
The U.S. Navy has signed a purchase order for the entire output of the
distilled water plant. The distilled water will be used at the Indian Head
Naval Facility.
BETTY BOULEVARD
As part of the development process of the industrial park in which the project
is located, Prince George's County requires that each participant set aside
money for building an access road through the industrial park. Panda,
instead, arranged to build the section of Betty Boulevard that fronts the
project property. This allows the plant to complete its access road early and
provide for the trucks required to bring fuel oil to the site and to ship
ultra-pure water from the distilled-water plant.
Betty Boulevard will be built under the EPC contract according to Prince
George's County plans and specifications. In order to prevent mud and dust
problems and to ease congestion, the county required that the Project build a
temporary access road to the site. This temporary access road has become part
of the intersection of Cedarville Road and Betty Boulevard.
Section 5
COST AND SCHEDULE ESTIMATES
The project capital and startup budgets were reviewed for completeness and
accuracy and, where possible, were compared with those of similar projects.
The project schedule was reviewed to identify areas that were too optimistic
and areas where float requires close monitoring for changes that could affect
the required completion dates.
CAPITAL COSTS
The total project capital budget for permitting, design, construction,
startup, and financing is $215 million. A detailed budget breakdown is
presented in Table 5-1. On the basis of the project design guarantee of
230 MW, the cost is approximately $935 per kilowatt.
A comparison of similar gas turbine projects' costs is shown in Table 5-2.
Because there are so many variables associated with each project, a true
comparison of projects is virtually impossible. Pacific Energy Systems has
attempted only limited adjustments to correct these numbers for differences.
However, Table 5-2 does give a reasonable picture of the costs to build
similar projects. All costs in Table 5-1 were escalated at 3.5 percent
annually from the on-line date of the Panda-Brandywine project. Where
practical, the EPC scopes of all projects are nearly the same and include
adjustments for preliminary engineering, interconnection costs, and gas
pipelines.
The price per kilowatt for the EPC cost and project cost is the lowest of any
similar plant studied in this review, primarily for three reasons. First,
this is a two-gas-turbine plant, while plants A through D are all
single-gas-turbine plants. The savings in scale comes from making some of the
major equipment larger, rather than duplicating it. This includes the steam
turbine, cooling tower, water treatment plant, and support facilities.
Second, the other two-gas-turbine plant, E, is very complex and includes
several large diesel generator sets, an auxiliary boiler, and dry cooling
instead of a cooling tower. All of these items add substantially to the
capital and construction costs of Plant E.
Third, much of the Panda-Brandywine equipment was committed early and may have
missed some of the escalation in cost that has been used to bring the numbers
in Table 5-2 to a common year.
Nevertheless, the cost of developing Panda-Brandywine is low, whether it is
compared with similar projects or with any new power plant. This low cost
will give Panda-Brandywine an advantage in the future when PEPCO makes
economic dispatch decisions.
Pacific Energy Systems believes that the Panda-Brandywine capital budget is
adequate to build the project, and careful administration of the Raytheon
contract has held change orders to a minimum.
The contingency of $8,760,000 is about 4 percent of the overall project cost.
Again, through careful administration of the project, Panda has been able to
hold the contingency about the same. With nearly 81 percent of the budget
expended, there are no areas foreseen at this time that would be significant to
draw this number down.
STARTUP COSTS
The EPC contractor, Raytheon, is required to supply all labor, equipment, and
materials to test, start up, and commission the plant. The exceptions to this
include the operator's labor cost (O&M employees are available to assist and
receive training during startup, not to replace EPC contractor labor) and the
cost of natural gas and fuel oil starting with the first actual or attempted
performance test. All fuel needed in connection with the installation,
adjustment, and testing of the plant after the initial actual or attempted
performance test, will be paid for by Raytheon under terms of the EPC contract.
Operator training is to be provided by Raytheon, along with all O&M manuals.
The operator takes over care, custody, and control of the plant when the plant
reaches commercial operation (when it passes the 48hour test, not the
electrical output test).
The owner has established a budget for its expenses during commissioning, as
shown in Table 5-3. These costs appear to be consistent with other projects
similar in size and type of equipment.
<PAGE>
<TABLE>
<CAPTION>
Table 5-1
CAPITAL BUDGET DETAIL
Original Budget Current Budget(1)
<S> <C> <C>
Raytheon - Cogeneration Facility 71,499,816 72,060,000
Raytheon - GE Equipment 46,759,000 46,759,000
Raytheon - Distilled Water Facility 3,400,000 3,400,000
Raytheon - Change Orders 0 0
Electrical Transmission Line &
Fiber Optics 4,411,007 4,026,000
Effluent Water Pipeline 10,639,600 10,327,000
Columbia Gas Pipeline Expansion 8,560,725 9,020,952
PEPCO - Electrical Interconnect 2,200,000 2,650,000
PEPCO - RTU/AGC Communications 250,000 87,500
Sales Tax on 10% of Construction Costs 434,000 234,000
Water Wells on Site 348,095 413,437
Building Permit 180,668 299,999
Builder's Risk Insurance 579,645 611,948
Other Construction Costs 50,000 23,142
------------ -----------
Construction Costs 149,312,556 149,966,465
Land Purchase Costs 4,620,883 4,914,810
Gilbert - Owner's Engineer 1,476,067 1,326,067
Gilbert - Transmission Line Design 103,392 103,392
Eagleton - Gas & Water Pipeline Design 317,079 317,079
Greenhorne - Surveying & Pipeline Design 773,081 841,970
Environ - Site Environmental Engineering 41,061 41,061
Met Labs - RFI Engineering Review 22,500 22,500
Others Engineering Costs 163,374 163,374
----------- -----------
Engineering Costs 2,896,553 2,815,443
Permitting & Regulatory Costs 1,670,176 1,670,176
Project Legal Costs 2,380,914 2,576,168
Public Relations Costs 331,131 331,132
Construction Loan Interest 18,103,841 16,849,669
GE Capital Commitment &
Financing Fees 5,534,370 5,555,359
Closing Costs 2,066,757 2,227,340
Mortgage, Recording Tax 2,832,000 2,984,269
------------ ------------
Financing Costs 28,536,968 27,738,522
Project Management &
Development Costs 4,227,576 4,203,859
PEPCO Security Deposits 0 0
Natural Gas Reserves Development 3,165,981 3,165,981
Furniture & Office Equipment 102,820 121,831
O&M Contractor During Construction 1,006,200 1,006,200
Fuel Purchase During Construction, net 550,000 550,000
General Liability Insurance 88,838 88,838
Initial Spare Parts Purchases 2,000,000 1,700,000
Initial Fill of Fuel Oil Tank 1,200,000 1,200,000
Initial Lease Reserve 2,400,000 2,400,000
Initial O&M Reserve 1,000,000 1,000,000
Initial Warranty Reserve 750,000 250,000
Contingency 8,759,404 8,700,274
----------- ----------
Other Project Costs 21,023,243 20,283,125
TOTAL PROJECT COST 215,000,000 215,000,000
</TABLE>
1. Budget estimate as of June 2, 1996, with 81 percent actual expended.
<PAGE>
<TABLE>
<CAPTION>
Table 5-2
SIMILAR GAS TURBINE PROJECTS
Plant Unit Cycle Number MW On- EPC Cost EPC Project Project
Type Type of Gas Line ($1996x000's) Cost Cost Cost
Turbines Date Escalated $/kW ($1996x $/kW
at 3.5% 000's)
Escalated
at 3.5%
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A Frame 7 Combined 1 117 1992 79,122 676 123,733 1,058
B Frame 7 Combined 1 137 1993 96,892 707 150,786 1,101
C Frame 7 Combined 1 120.6 1994 86,387 716 140,166 1,162
D Frame 7 Combined 1 126 1995 85,660 679 144,900 1,150
E Frame 7 Combined 2 240 1994 163,561 682 348,150 1,451
Brandy-
wine Frame 7 Combined 2 230 1996 118,800 517 215,000 935
</TABLE>
Table 5-3
COMMISSIONING BUDGET
Furniture and office equipment $ 102,820
O&M Contractor 1,006,200
Fuel purchased during construction 1,500,000
Spare parts inventory 2,000,000
Fuel oil inventory 1,200,000
-----------
Total commissioning costs $5,809,020
ICF PROJECTIONS
Pacific Energy Systems reviewed the technical assumptions used in the ICF
Projections and as noted below, found them to be consistent with those of
similar projects and reflective of the equipment being used and the
requirements of the PPA. Because the project uses equipment that is similar to
that used in many other projects, estimates for capital costs, availabilities,
capacities, and operation and maintenance can be made with a relatively high
degree of confidence. Pacific Energy Systems' analyses of various assumptions
that went into the ICF Projections follow:
- Since the plant is dispatched, availability becomes a concern only if
the plant fails to meet PEPCO's dispatch requirements. While
starting and stopping equipment frequently will have a long-term
impact on the equipment, under PEPCO's dispatch plans there is
sufficient downtime for routine maintenance. Pacific Energy Systems
anticipates that the Panda-Brandywine project will have a high
availability in meeting the dispatch requirements of PEPCO. Pacific
Energy Systems believes the availability projected by ICF is a
reasonable assumption.
- Capacity payments are tied to twice-yearly demonstrated output
testing. On the basis of the results of Pacific Energy Systems'
modeling (see Appendix D), if the plant is operated and maintained as
specified by the equipment manufacturers and according to normal
industry practices, the project will have no difficulty meeting the
twice-yearly capacity test at the full 230 MW or more.
- Our estimate of the heat rate uses weighted averages based on a
model that considers the facility as a new, clean design that is
free of manufacturing and erection errors. Our estimate is also
based on average weather conditions and on the implementation of
operation and maintenance practices recommended by manufacturers and
typical of good industrial practice. Actual year-to-year heat rates
and capacities may vary from the model performance if operating
conditions are different from the assumptions used.
- For the purposes of this report, Pacific Energy Systems has
developed an estimate of the heat rate and capacity for each year
from 1996 through 2021. These are shown in Tables 5-4A and 5-4B.
Pacific Energy Systems, in the past, has employed the methodology of
converting each start cycle to an equivalent number of operating
hours with degradation, inspections, and maintenance intervals based
on the equivalent hours. General Electric no longer supports this
approach, but has developed a methodology based on independent
counts of starts and hours.
Because GE is the original equipment manufacturer (OEM) and will be
the primary advisor and technical support group to Panda during the
operation of the Brandywine units, Pacific Energy Systems has
chosen to use GE's methodology in determining the degradation and
maintenance schedules for the Panda-Brandywine gas turbines. The
anticipated maintenance schedules are shown in Table 5-5.
Notes on Tables 5-4A, 5-4B, and 5-5:
1. Assume 200 hours of oil firing per year on Unit 2 only
2. Uses GE's methodology on determining equivalent hours
3. Uses the greater of equivalent hours based on GE's
calculation of starts or hours
4. Assumes 5 forced outages per year
5. Steam turbine maintenance based on time, not hours of
operation
<PAGE>
<TABLE>
<CAPTION>
Table 5-4A
UNIT 1
Dispatched* Equivalent Annual Annual
Year Hours Fired Hours Average Average
Heat Rate Power
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 650 790 7,939 120,040
1997 3,869 4,769 8,048 118,280
1998 4,227 5,127 8,075 117,840
1999 4,434 5,334 8,106 117,600
2000 4,494 5,394 8,141 117,340
2001 4,653 5,553 8,086 118,840
2002 4,665 5,565 8,141 117,940
2003 4,616 5,516 8,174 117,690
2004 4,566 5,466 8,209 117,450
2005 4,646 5,546 8,166 120,000
2006 4,723 5,623 8,051 118,120
2007 4,671 5,571 8,085 117,760
2008 4,624 5,524 8,119 117,530
2009 4,584 5,484 8,153 117,270
2010 4,553 5,453 8,118 118,400
2011 4,489 5,389 8,151 117,860
2012 4,433 5,333 8,183 117,620
2013 4,384 5,284 8,216 117,380
2014 4,341 5,241 8,134 119,240
2015 4,308 5,208 8,053 118,000
2016 4,243 5,143 8,085 117,750
2017 4,184 5,084 8,118 117,540
2018 4,129 5,029 8,148 117,300
2019 4,079 4,979 8,091 118,680
2020 4,033 4,933 8,139 117,950
2021 3,400 4,300 8,167 117,740
</TABLE>
* Based on Table ES-1 from ICF Resources Incorporated, May 1996 report
"Independent Assessment of the Dispatchability of the Panda-Brandywine
Project."
<PAGE>
<TABLE>
<CAPTION>
Table 5-4B
UNIT 2
Dispatched* Equivalent Annual Annual
Year Hours Fired Hours Average Average
Heat Rate Power
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 450 778 7,863 120,040
1997 2,295 3,303 7,954 118,280
1998 2,973 3,961 7,984 117,840
1999 3,472 4,498 8,011 117,600
2000 3,972 4,980 8,041 117,340
2001 3,661 4,660 8,024 118,840
2002 3,353 4,361 8,053 117,940
2003 3,401 4,409 8,077 117,690
2004 3,450 4,458 8,103 117,450
2005 3,485 4,493 8,131 120,000
2006 3,484 4,492 8,029 118,120
2007 3,195 4,203 7,997 117,760
2008 3,195 4,203 7,997 117,530
2009 3,061 4,069 8,021 117,270
2010 2,933 3,941 8,045 118,400
2011 2,839 3,847 8,020 117,860
2012 2,751 3,759 8,049 117,620
2013 2,665 3,673 8,067 117,380
2014 2,584 3,592 8,087 119,240
2015 2,507 3,515 8,108 118,000
2016 2,452 3,460 8,008 117,750
2017 2,398 3,406 7,968 117,540
2018 2,347 3,355 7,986 117,300
2019 2,297 3,305 8,006 118,680
2020 2,250 3,258 8,026 117,950
2021 1,900 2,908 8,002 117,740
</TABLE>
* Based on Table ES-1 from ICF Resources Incorporated, May 1996 report
"Independent Assessment of the Dispatchability of the Panda-Brandywine
Project."
<PAGE>
<TABLE>
<CAPTION>
Table 5-5
MAINTENANCE REQUIREMENTS
Required
Unit 1 Unit 2 Steam Balance of
Year Required Required Turbine Plant
Maintenance Maintenance Maintenance Maintenance
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 NO
1997 CI CI VI YES
1998 CI CI YES
1999 CI CI VI YES
2000 CI CI YES
2001 HS HS VI YES
2002 CI CI MO YES
2003 CI CI YES
2004 CI CI VI YES
2005 MO CI YES
2006 CI MO VI YES
2007 CI CI YES
2008 CI CI MO YES
2009 CI CI YES
2010 HS CI VI YES
2011 CI HS YES
2012 CI CI VI YES
2013 CI CI YES
2014 MO CI MO YES
2015 CI CI YES
2016 CI MO VI YES
2017 CI CI YES
2018 CI CI VI YES
2019 HS CI MO YES
2020 CI CI YES
2021 CI HS VI YES
</TABLE>
VI = valve inspection, MO = major overhaul, CI - combustion inspection,
HS = hot section
Pacific Energy Systems believes that the heat rate and capacity estimates are
reasonable, consistent with common industry practice, and, when used in light
of the limitations given above, are properly reflected in the pro forma
provided by ICF Resources.
SCHEDULE
According to the PPA, the project must be completed before June 1, 1997, but
not before June 1, 1996. Both Raytheon and Panda have provided bar-chart
schedules (dated March 21, 1995, and March 27, 1995, respectively) that
indicate the project will become commercial on October 31, 1996. Some
initial activities were delayed between December 31, 1994, and April 10, 1995,
because of permitting and financing issues.
The project remains on schedule at this time with construction about 90 percent
complete as of July 15, 1996. Raytheon is presently targeting late September
1996 for commercial operation. This is approximately 5 to 6 weeks ahead of
schedule.
Section 6
PERMITS AND LICENSES
This section reviews the status and content of key environmental and regulatory
permits, licenses, approvals, rights-of-way, and authorizations required for
construction and operation of the Panda-Brandywine cogeneration project.
FEDERAL APPROVALS
FEDERAL ENERGY REGULATORY COMMISSION (FERC)
Qualifying Facilities (QF)
Initially, the Project filed for self-certification on December 1, 1993. In
order to enhance financing, FERC was later asked to certify the project.
Panda-Brandywine, L.P., received a FERC order granting its application for
certification as a qualifying cogeneration facility on May 23, 1994. Pacific
Energy Systems has reviewed the calculation on which certification was granted
and is of the opinion that, as long as the plant is operated in a manner
consistent with its design and that of the steam host, there should be little
problem in maintaining the Project's QF status.
Pipeline Permits
Because of the complex nature of the gas supply and transportation agreements,
a number of FERC approvals are required. Some of these approvals are for the
pipeline expansion project and are related only indirectly to the Panda-
Brandywine project; others require interconnection agreements and tariff
adjustments between utilities; still others relate to the takeover of a
pipeline from another utility. All applicable permits now have been applied
for and received. These permits include the required FERC approvals and
several state and county permits.
U.S. DEPARTMENT OF ENERGY (DOE)
Panda-Brandywine, L.P., has applied for and has received certification of
Compliance with the Power Plant and Industrial Fuel Use Act.
FEDERAL AVIATION ADMINISTRATION (FAA)
The project received FAA approval for stack height and location on September
16, 1993. A modification to the permit was required as a result of lowering
the baseline grade at the site. The top of the stack will be at the same
location, but the length of the stack will be greater.
U.S. ARMY CORPS OF ENGINEERS (COE)
On December 23, 1994, the U.S. Army Corps of Engineers authorized all proposed
work on the Panda-Brandywine project by a Nationwide Permit as required by
Section 10 of the Rivers and Harbors Act and Section 404 of the Clean Water
Act. This includes construction activities at the plant site and work on the
effluent water supply pipeline and electrical transmission line.
The permit contains all standard conditions for such work and operation, and
specifically ties all work and operation to all conditions required under the
state authorization as described below. Pacific Energy Systems finds the
conditions to be consistent with normal practices and does not believe that
project construction will be unduly affected by these conditions.
U.S. NAVY CATEGORICAL EXCLUSION
Panda has built a large portion of the effluent water supply pipeline along a
Navy-owned railroad. Approval by the U.S. Navy was required for the right-of-
way. As part of this approval, the Navy determined that the use of the right-
of-way was within National Environmental Policy Act (NEPA) limits in meeting
the criteria for Categorical Exclusion. The Categorical Exclusion was
obtained on November 28, 1994. It contains several recommendations to be
included in the right-of-way easement between the Navy and Panda. These are
discussed later in this section under Right-of-Way Easements.
STATE APPROVALS
CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY (CPCN)
Unlike many states, Maryland has placed the environmental and social/economic
permitting of power plants under the authority of its Public Service Commission
(PSC) rather than allow various state agencies to handle permitting in a
fractured manner. The Maryland PSC has been empowered to issue a Certificate
of Public Convenience and Necessity (CPCN) to allow for the construction and
operation of power plants and transmission lines.
The PSC divided the permitting for Panda-Brandywine into two parts. Phase I
covers the air emission control and Prevention of Significant Deterioration
(PSD). Phase II covers the remaining social/economic aspects, including
groundwater use, noise impacts, endangered species, and other relevant areas.
The Phase I and Phase II CPCNs were issued on October 6 and October 27, 1994,
respectively.
Panda requested an amendment to the CPCN to correct some inconsistencies and
to allow for the fact that the gas pipeline permitted under the CPCN was no
longer being built by Panda or along the route it had permitted. These permit
changes appear to be consistent with Pacific Energy Systems' understanding of
present construction and operation plans. Pacific Energy Systems believes
that the changes are favorable to the project overall and that they lessen
the direct requirements on Panda. The amendment to the CPCN was granted on
December 15, 1994.
The original CPCN contains 65 licensing conditions. While many of the
conditions set operating limits and reporting procedures on the operation of
the plant, a large number require Panda to submit construction plans and
procedures to various state agencies before starting construction.
In developing the CPCN, the Maryland PSC included the input of all other state
agencies and local governments in such a way that many of the approvals
required before starting construction are primarily administrative and depend
on Panda to supply sufficient details for approval. Pacific Energy Systems
believes that Panda and its EPC contractor (and other subcontractors) have
obtained all necessary approvals in a timely manner to support construction
and operation.
PREVENTION OF SIGNIFICANT DETERIORATION
A review of PSD requirements and approval that the project meets PSD
requirements are contained in the Phase I approval of the CPCN.
STATE WETLAND PERMIT
The Department of Natural Resources (DNR) for the State of Maryland approved a
Conditional Letter of Authorization on December 23, 1994, for construction of
the plant, utility lines, and stormwater outfall. This permit contains a number
of "conditions," including:
- The U.S. Army Corps of Engineers standards
- The requirement to meet Best Management Practices for
Working on Non-Tidal Wetlands
- Filing plans with the state
- Obtaining a sediment control permit from the Prince George's
and Charles Conservation District
Pacific Energy Systems' review of all the conditions did not identify any
requirements that would cause undue delay in starting or completing the project
or any ancillary facilities.
RIGHT-OF-WAY EASEMENTS
A number of right-of-way easements are required before construction of the
various pipelines and transmission facilities. Because of their significance
to the project, two of these easements are discussed briefly below.
CONRAIL EASEMENTS
There are two easements, under two separate agreements, in the Conrail
right-of-way: one for the transmission line and one for the effluent water
supply line.
The agreement to build and operate the 230-kV transmission line in the Conrail
right-of-way is dated September 6, 1994. Under the terms of the easement,
Panda can occupy the space for 25 years (with a 15-year possible extension)
for a total price of $686,700. Panda assumes all responsibility for project
risk and indemnifies Conrail.
The agreement to build and operate the effluent water supply line in the
Conrail right-of-way is dated November 9, 1994. Under the terms of this
easement, Panda can occupy the space for 25 years (with a 15-year possible
extension) for a total price of $253,755. Again, Panda assumes all
responsibility for project risk and indemnifies Conrail.
The remaining terms and conditions in both easement agreements appear to be
consistent with those of other railroad easements and represent no major risk
to the project.
U.S. NAVY EASEMENT
Panda has completed negotiations on the U.S. Navy easement for the effluent
pipeline along a section of railroad owned by the Navy. Several unique items
pertaining to this easement should be noted and are discussed below.
Since the pipeline will be owned by Charles County after it is built, the
county will become a co-grantee with Panda on the easement. This will allow
the county to assume the agreement without renegotiating it.
Under the terms of the easement, the Navy also requires that the grantee (Panda
or the County) maintain the right-of-way. This includes annual cleanup and
semi-annual cutting of grass, weeds, and brush. Pacific Energy Systems
believes that Panda should turn this activity over to the county, with the
cost included in the maintenance fee Panda will be paying to the county. The
county is better equipped to perform this work since it performs similar
activities along road rights-of-way.
Where Panda's contractor cannot reach the right-of-way areas for construction
(or future maintenance) on existing roads, the Navy is requesting the railroad
be used. In addition, the Navy wants those sections of rail repaired to
facilitate Panda's use. Panda has not provided an estimate for the cost of
rail repair.
Section 7
CONTRACTS AND AGREEMENTS
This section of the report reviews the dominant contracts and agreements
associated with the Panda-Brandywine Cogeneration Project that have been
identified by Pacific Energy Systems as having a direct impact on the
construction, operation, and technical performance of the completed power
plant. These documents were reviewed from a technical standpoint to assess the
sufficiency of their terms, conditions, and scopes to meet the desired outcome
of the project.
Contracts were evaluated, in comparison with contracts for similar projects, to
determine their consistency with acceptable industry standards and good
engineering practices. Several of these contracts, including the EPC contract,
were modified during the due diligence period to make them more consistent with
acceptable standards and practices. The following discussion is based on
contract documents that exist as of June 28, 1996. Contracts reviewed include
the Power Purchase Agreement, EPC contract, Treated Effluent Water Purchase
Agreement, Natural Gas Supply and Transportation Agreements, Steam Sales
Agreement, Owner's Engineer Agreement, Effluent Line Construction Contract, and
Transmission Line Construction Contract.
POWER PURCHASE AGREEMENT
Under terms of this contract, PEPCO has agreed to purchase all the electricity
generated by the Panda-Brandywine cogeneration plant. Except for electric
production of 99 MW between 8:00 a.m. and 8:00 p.m. on weekdays, the plant will
be fully dispatched by PEPCO. The plant will be interconnected to the PEPCO
system by a 7-mile-long, 230-kV transmission line that will be built by Panda
and turned over to PEPCO to own and operate. PEPCO will dispatch the plant on
an as-needed basis according to the utility's economic dispatch regulations.
In its original form, the PPA was more restrictive than is typical. It placed
a number of requirements on the Project that required extensive monitoring and
reporting before, during, and after construction. It contains punitive damages
for failure to perform under the contract terms. The contract requires PEPCO
to be very proactive in all aspects of the development, construction, and
operation of the Panda-Brandywine facility. If Panda fails to perform, the
agreement allows for reduced payments, cancellations, or, as a last resort,
assumption of the project by PEPCO. However, many of the concerns expressed in
this paragraph have been made less onerous through an Operating Agreement
between Panda and PEPCO. The Operating Agreement provides for means of
resolving disagreements and for preventing disputes before they occur.
CONDITIONS AND OBLIGATIONS
In addition to PSC approval, the agreement requires Panda to obtain all
appropriate permits and government approvals. This was somewhat simplified by
the Maryland PSC when it ruled that Panda-Brandywine, L.P., was an electric
company and, therefore, required to obtain a CPCN before starting construction
of the facilities. (The CPCN is discussed in greater detail in Section 6 of
this report.)
PEPCO's obligation to purchase capacity and electric nergy from the Project
under this agreement is predicated on Panda meeting a number of conditions
precedent. The conditions precedent require submittal of a number of permits,
agreements, engineering reviews, plans, designs, drawings, schedules, and
other proofs that Panda is capable of moving ahead and is making progress
toward the contract completion date.
The agreement requires Panda to make several security deposits to assure PEPCO
that Panda is proceeding with a project that meets PEPCO's needs (including
schedule, capacity, and reliability). These security deposits represent some
financial assurances to PEPCO that, if Panda fails to perform, money would be
available to purchase replacement power from other sources. Also, the
security deposits are large enough to give Panda the incentive to meet PEPCO's
contract requirements. These security deposits are or three different
events, as follows:
- Development Security is to ensure that the Commercial Operation Date
is met as agreed upon in the contract. This deposit takes the form of
a series of payments that equal $3.45 million, or the equivalent of
$15/kW for the 230,000kW facility.
- Interconnection Security is to ensure that PEPCO is paid for costs
associated with the study, planning, engineering, procurement, and
construction of the interconnection facilities between the Panda-
Brandywine facility and the PEPCO system. Panda has made payments to
PEPCO for the interconnection in the amount of $2,650,000 to date.
- Performance Security is to cover damages resulting from termination of
the agreement after the Commercial Operation Date. This security
amounts to $2 million.
All three of these security deposits have been made through an irrevocable
letter of credit, as allowed under the terms of the PPA.
PEPCO has the right to interrupt or suspend deliveries from the plant under
emergency conditions if the interconnection and protective equipment is found
to be unsafe, poorly maintained, lacking in maintenance records, or in
noncompliance with PEPCO guidelines and performance standards for parallel
operation.
In addition, PEPCO has the right to declare two other types of emergency
conditions. During a minimum generation emergency, light load period, PEPCO
can suspend delivery from Panda for a cumulative 200 hours per year during the
limited dispatch portions in a year. This is nearly 6.5 percent of the time
PEPCO is required to operate at least one combustion turbine in combined-cycle
mode, first dispatch segment. The other emergency condition is referred to as
a maximum generation emergency. When such a condition is declared by PEPCO,
Panda is required to use all reasonable efforts to deliver the maximum
attainable net electrical output from the plant without exceeding
manufacturers' recommended operating limits. Failure to do so is considered
a default under the contract.
COMPENSATION AND PAYMENT
Calculation of the capacity and energy payments made under the terms of the
contract is very complicated because of all the correction factors that have
been used. Pacific Energy Systems' scope of work does not include
identification of the need for, the reasoning behind, and source of some
corrections. The PPA provides for a monthly capacity payment and a monthly
energy payment. Pacific Energy Systems has reviewed sample calculations for
the payments as provided in the PPA and has found them to be correct based on
the assumptions used in the PPA. However, actual payments will be based on the
actual operation of the plant in the future. The capacity and energy payments
are described briefly below.
ICF has used a single heat rate of 8,461 Btu kWh (HHV) as an effective minimum
to simplify the projected energy payments. Pacific Energy Systems believes
that this is a reasonable value based on its review of the PPA.
Capacity Payment
PEPCO is to pay the project monthly for the dependable capacity (230 MW) at an
annual rate set forth in Appendix L of the PPA. The capacity is corrected for
the facility's equivalent availability compared with a target availability.
Capacity payments will be increased if availability is above 92 percent or
decreased if it falls below 88 percent.
The capacity rate, as set for each year of operation in Appendix L of the
agreement, is then adjusted by the gross national product (GNP) deflator based
on the change between June 1, 1994, and the actual Commercial Operation Date
and is also adjusted by the Treasury Bond rate. In addition to the above
adjustments, PEPCO has included two additional modifications to the capacity
payment. These were made under Amendment No. 1 and appear to reflect PEPCO's
concern for overpayment of capacity should PEPCO's load growth be less than
initially assumed. The first is a capacity payment adjustment, as stated in
Appendix Q of the agreement, which is based on the year of initial operation.
The second is a modification of potential costs and is tied to PEPCO reaching
a specific load level by 1997.
Energy Payment
PEPCO will pay the project for startup energy based on a simple formula tied
to the interruptible fuel rate and an assumed heat rate of 8,461 Btu/kWh.
Test energy will be calculated in basically the same way as the monthly
energy payment.
The monthly energy payment is composed of two parts: the unit commitment
payment and the dispatch payment. In calculating the monthly energy payment,
the net electrical output will be assigned on an hourly basis among the
dispatch segments shown in Table 7-1.
<PAGE>
<TABLE>
<CAPTION>
Table 7-1
PEPCO DISPATCH SEGMENTS
Number of Combustion Cumulative MW
Dispatch Turbines Operating With (at 59
Segment the Steam Turbine Also degrees F
Operating Description and 50%
Relative
Humidity)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
First 1 Up to minimum load 0 to 99 MW
Second 1 From minimum load to
full load 99 to 117 MW
Third 2 From full load with
one combustion turbine
operating to minimum
load with two combustion
turbines operating 117 to 199 MW
Fourth 2 From minimum load to
full load with two
combustion turbines
operating 199 to 237 MW
</TABLE>
The unit commitment payment associated with the first and third dispatch
segments is to be calculated using a formula that includes service hours in
both dispatch segments multiplied by the adjusted firm gas rate and
interruptible gas rate, respectively, and a variable operation and maintenance
rate. Service hours are corrected no-load and minimum-load fuel use and a heat
input adjustment is made based on average historical ambient conditions for
each billing period. The unit commitment payment is corrected for the cost of
fuel used for various startups during the month.
PEPCO will make a dispatch payment for the net electrical output associated
with the second and fourth dispatch segments. This payment is based on the
number of megawatt-hours generated above the first or third segments multiplied
by the incremental heat rate and the sum of the fuel cost for that segment and
the variable O&M costs.
The agreement provides formulas for the calculation of various correction
factors, firm and interruptible gas rates, and variable O&M rates as well as
sample calculations. As stated earlier, Pacific Energy Systems' scope of work
does not include the determination of how every correction factor was obtained
and its individual reasonableness. Taken as a whole, the formulas and the
results presented in the sample calculations appear to be reasonable.
COMMENCEMENT OF CONSTRUCTION AND OPERATION
Under the terms of the contract, Panda commenced construction onsite prior to
October 9, 1995, but actual commercial operation can be no sooner than June 1,
1996. During the construction and startup period, Panda provided additional
documentation to PEPCO, including schedules, design details, equipment
capability curves, and relay settings. PEPCO has the right to review the
plant design and to monitor plant construction, startup, testing, and
operation. The generation of electricity from the plant in parallel with
PEPCO will not take place until all interconnection safety devices specified
by PEPCO have been installed, inspected, and approved by PEPCO.
After the Actual Commercial Operation Date has been established, the contract
requires a Net Capability to be set semiannually (summer and winter). It is to
be based on temperature and humidity records for the last 15 years. Net
Capability sets the capacity payment for that period and can be less than or
equal to (but not greater than) 230,000 kW.
GENERATION DISPATCH
PEPCO is required to dispatch the limited-dispatch portion of the facility for
60 hours Monday through Friday (initially 8:00 a.m. to 8:00 p.m.). The
remaining block of power, the dispatchable portion of the project, will be
controlled at the sole discretion of the PEPCO dispatcher. PEPCO has made no
guarantee for any hourly generation levels beyond the 60 hours in the first
dispatch segment (see Table 7-1).
Through its operator, Panda-Brandywine must schedule maintenance outages with
PEPCO as well as meet certain notification requirements to support PEPCO's
system planning for routine maintenance and forced outages.
MAINTENANCE RESERVE
The project is required to establish a maintenance fund to pay for any repairs
or replacements that are necessary or appropriate to ensure that the facility
will continue to be operated and maintained in accordance with the performance
standards set forth in the agreement.
The lease requires that the project fund the maintenance reserve with an
initial payment of $1 million and increase at a rate of $125,000 per quarter
over the next two years and $375,000 per quarter for two years thereafter until
it reaches $5 million. If the project draws on the O&M reserve, it must also
replenish it to its required balance using up to 50 percent of the project's
available cash flow.
GE will provide, at a cost, a letter of credit to cover the minimum $5 million
required maintenance reserve under the PPA.
On Panda's request, Pacific Energy Systems has developed a model of expected
expenditures from the maintenance reserve account. Our estimate is to be
incorporated into the pro forma. It is based on "equivalent fired hours."
Equivalent fired hours accounts for time the plant is dispatched plus time
expended in starting and stopping equipment.
INTERCONNECTION
The interconnection of the plant to the PEPCO system is included in the PPA and
not in a separate agreement, which is more typical of the industry. The
agreement also covers the transmissionfacilities.
At Panda's expense, PEPCO will provide all required interconnection equipment,
safety devices, and metering at its Burches Hill Substation. Panda will
construct (to PEPCO's specifications) a transmission facility between the plant
and the Burches Hill Substation. Prior to the Actual Commercial Operation
Date, ownership of this transmission facility will be transferred to PEPCO.
Through the agreement and its appendixes, PEPCO has provided basic equipment,
safety, and meteringspecifications for the project. In addition, PEPCO has
the right of design review and testing to ensure that the plant, transmission
facility, and interconnections are safe to operate in parallel to the PEPCO
system.
OTHER CONDITIONS
Overall, the PPA appears to be complete in stating technical requirements,
administrative requirements, legal actions available, and general terms for
compliance. In addition to the agreement requirements already discussed,
several additional items should be highlighted. These are discussed below.
Default: There are more than a dozen ways for the Panda-Brandywine, L.P.,
plant to default under the agreement. Several important ways are as follows:
- Sale of any Dependable Capacity to any party except PEPCO
- Reduction of the Equivalent Availability below 50 percent or an
increase in the forced outage rate above 20 percent
- Closing date does not occur by October 1, 1995
- Failure to provide any of the security accounts or maintenance
reserves
- Failure to use supplemental methods or equipment to meet Dependable
Capacity.
Operating Committee: The agreement requires that an Operating Committee be
established, with one representative from each party, to facilitate
coordination and interaction between the two parties. The Operating Committee
must act only by unanimous agreement or consent.
Dispute Resolution: If a dispute arises under the agreement that cannot be
resolved by the Operating Committee, then the dispute shall be deferred to a
senior officer from each organization. Issues still unresolved are then to be
referred to the Maryland PSC.
Purchase Option: PEPCO has the right to purchase the project should Panda wish
to sell. If a third party wishes to purchase it, Panda must first give PEPCO
the option to purchase the project under the same terms being offered by the
third party.
Qualifying Facility: PEPCO is required to continue to make payments under the
contract if QF status is lost for less than 540 days. After 540 days, PEPCO
can terminate the contract. During the period that QF status is lost, PEPCO
will dispatch the full plant capacity under the Dispatch Portion requirement.
For that period, the Limited Dispatch Portion (60 hours per week) will not
exist. The four dispatch segments' pricing formulas will remain in effect.
Term: The term of the agreement is for 25 years from the Actual Commercial
Operation Date.
ENGINEERING, PROCUREMENT, AND CONSTRUCTION CONTRACT
The amended and restated EPC contract was signed on December 1, 1994, by
Panda-Brandywine, L.P., and Raytheon Engineers & Constructors, Inc. (The
original contract was signed on December 2, 1993, by Panda-Brandywine, L.P.,
and United Engineers & Constructors Inc., doing business as Raytheon Engineers
& Constructors, Inc.).
Raytheon has been around for many years, primarily as an engineer/constructor
in the petrochemicals field. In recent years, Raytheon has purchased several
engineering firms (EBASCO and United Engineers & Constructors) with well-known
track records in the power industry. The Panda-Brandywine project is being
engineered in Raytheon's Houston office.
The amended and restated EPC contract will be satisfactory for this project.
Following is a brief summary of the EPC contract as it now exists.
SCOPE
This is a turnkey, lump-sum, fixed-price contract with the EPC contractor
responsible for that part of the project which is considered to be within the
main fence area. Utility support systems outside the fence (including the
transmission lines, effluent pipeline, and gas line) do not fall within
Raytheon's scope. For convenience, the county road going past the plant, the
oil storage tank (which is outside the main plant area), and the distilled-
water plant have been added to Raytheon's scope. Raytheon is to supply the
design, engineering, project management, labor, equipment, and materials to
construct, start up, and carry out the performance tests on the power plant
and the distilled-water plant.
Raytheon is to perform all work in a proper, safe, and secure manner to
prevent loss, injury, or damage. All design, construction, operation, and
maintenance must be performed according to prudent utility practices. The
contractor is responsible for all risk of damage to or destruction of the
plant until commercial operation. Upon commercial operation, care, custody,
and control of the facility will pass to the owner.
Pacific Energy Systems has found that the responsibilities and scope of the
EPC contractor and those of the owner, as stated in the EPC contract, are
typical of similar combined-cycle cogeneration plants.
COMPENSATION AND PAYMENT
The work of the EPC contract is being performed on a turnkey basis for a fixed
fee of $118,258,816. This does not include the steam host distilled-water
plant, estimated at $3.4 million. The fixed fee also does not include other
construction contracts issued by Panda to build the transmission line intertie
with the utility, the 17-mile-long effluent water line, or the gas supply
pipeline.
The contractor is paid monthly for work completed during the preceding month
according to the milestone payment schedule (Exhibit D of the EPC contract).
The owner's and lender's independent engineers will review the documents
submitted to ensure that the invoice amount reflects the value of the work
indicated by the milestone payment schedule.
The contractor will provide a letter of credit equal to 10 percent of the
contract price. Panda will have the right to draw down on that letter 10
percent of the total milestone payments actually made at the time of the
drawdown. This replaces the retainage used in most construction contracts.
The value of the letter of credit may be reduced as specific milestones, such
as commercial operation and final acceptance, are reached.
Because of the nature of the milestone payment, the schedule allows for some
overpayment during the initial 9 months of the project. Raytheon has agreed
either to allow the drawdown to exceed 10 percent of the milestone schedule by
$3 million or to post a separate letter of credit for $3 million during this
period.
PERFORMANCE GUARANTEES
A detailed discussion of the plant performance, testing, and guarantees is
contained in Section 8 of this report. The performance guarantees are covered
by liquidated damages and performance bonuses. The liquidated damages are
sufficient to ensure the EPC contractor's diligence in meeting all guarantees.
Raytheon and the owner have elected to use a dead band tolerance of 4 percent
of the net plant heat rate guarantee. This is a plus or minus 2 percent
uncertainty band. If the actual corrected heat rate falls within the band,
neither a bonus nor liquidated damages will be paid. Bonuses or liquidated
damages will be calculated from the edge of the band not from the guaranteed
points. Instrument uncertainties will not be used.
The contractor has guaranteed that commercial operation of the plant will occur
no later than the Guaranteed Completion Date which is currently October 31,
1996. The contractor will pay a penalty of $80,000 per day for each day that
commercial operation of the plant occurs after the guaranteed completion date,
or a maximum of $14,400,000.
ACCEPTANCE
Completion of the plant by the EPC contractor and acceptance by Panda have two
key milestone dates as follows:
- Commercial operation occurs when the plant has passed the 48-hour
net electrical output performance test, as outlined in Section
19.5.1 of the scope of work and discussed in Section 8 of this
report. If the plant fails the 48-hour test, the contractor can
declare commercial operation by electing to make a contract
discount of $1,000 for each kilowatt that the test is below the net
power output guarantee. The net power output must exceed 210,000
kW in order for the contractor to declare commercial operation.
- Final acceptance occurs when:
- The performance test and other required tests have been
completed and all defects and deficiencies have been
corrected
- The plant has been built to the final plans and
specifications
- The plant has been synchronized to the PEPCO electrical
grid
- No work remains that would affect normal plant operation
or performance
- Punchlist work will not interrupt normal operation of
the plant
- Thermal energy is going to the steam host
- The owner issues a completion certificate
- The contractor has certified that the plant has been
constructed in accordance with all governmental
requirements identified either by the owner or the
contractor pursuant to the contract
OTHER CONTRACT CONDITIONS
Spare Parts
The EPC contractor is required to obtain an agreement with General Electric
that spare parts will be available for all GEsupplied equipment for a period of
at least 5 years. Raytheon must also attempt to obtain similar agreements from
other equipment suppliers or locate replacement part sources for those that do
not agree.
During construction, startup, and testing, the contractor is responsible for
obtaining and paying for all spare parts used. The contractor has the right
to use and replace any operating spare parts Panda may have on hand. The
current budget includes $1.7 million for the initial purchase of spare parts
(see Table 51).
The EPC contract requires the owner to have available at the plant, by the
commencement of plant startup operations, all spare parts that are required for
normal operation. Pacific Energy Systems has expressed a strong opinion that
this should be changed for two reasons:
- Failure by the owner to have any spare part needed by the
contractor during startup would allow the contractor to
declare a default and demand an extension of the Guaranteed
Completion Date until the replacement part can be obtained.
This is inconsistent with all other EPC contracts reviewed
by Pacific Energy Systems.
- Operating spare parts take time to evaluate, order, and receive.
It is not unusual for some spare parts to take a year to obtain
under normal circumstances. The O&M contractor will not have
sufficient employees onsite to order spare parts until near
commencement of startup.
Building Permits
The contractor is responsible for obtaining the standard building occupancy
permits. Panda will reimburse the EPC contractor for obtaining these permits
and for assisting in obtaining any of the owner-required permits.
Project Labor
The contract price reflects the use of union labor and the contractor, even
though required by the contract to use only workers in good standing with
their union, cannot seek a change order because of the use of union labor.
Warranties
The contractor warrants that the plant will be free from defects or
deficiencies until the later of: (a) 1 year from commercial operation or
(b) 1 year from discovery or repair of defect or deficiency, but no later than
the second anniversary of final acceptance. Furthermore, for any item that is
repaired, replaced, or renewed more than once, the contractor will undertake a
technical analysis of the problem and clear the "root cause" of the problem.
The contractor will promptly correct, repair, or replace such defect or
deficiency unless it occurs in the GE-supplied combustion turbine-generator
or steam turbinegenerator components, which will be at the owner's expense.
The GE exemption appears to result from the cost of a 1-year warranty from GE;
apparently, the owner decided the price was too high and elected to cover it.
Upon financial closing, GE Capital will establish an escrow account to hold
funds earmarked to cover any costs that might arise from a component failure.
There is no time limit on the Raytheon (not GE equipment) design and
engineering warranty.
Termination for Convenience
The owner may terminate the EPC contract, without cause, for convenience. As
mutually agreed upon andverified by supporting documents, the contractor will
be reimbursed for work completed under the milestone schedule, reasonable
demobilization costs, and cancellation costs for equipment and materials on
order.
Arbitration
Under the terms of the contract, all disputes or claims that cannot be resolved
must be submitted to binding arbitration. The disputes will be awarded on a
"winner takes all" basis. The losing party shall pay all costs, including the
winning party's attorneys' fees and arbitration expenses.
Manuals and Training
The contractor is responsible for supplying a complete set of O&M manuals for
each major piece of plant equipment and plant system. In addition, the
contractor is to provide a training program for O&M personnel that includes
classroom and field training, manuals, drawings, and other educational
materials necessary or desirable for the adequate training of O&M personnel.
Quality controls will be established to ensure that personnel are suitably
trained and capable of operating and maintaining the plant after commercial
operation.
TREATED EFFLUENT WATER PURCHASE AGREEMENT
On September 13, 1994, Panda-Brandywine, L.P., signed an agreement with the
county commissioners of Charles County for the Project to receive up to 2.7 mgd
of treated wastewater effluent from the Mattawoman Wastewater Treatment Plant.
Under terms of the agreement, Panda is required to:
- Build the 17-mile-long effluent pipeline and all related
facilities at its own expense
- Obtain all permits and rights-of-way, reimbursing the county
for any direct cost it might incur
- Design and size the pipeline to supply up to 3.0 mgd
- Upon completion of the pipeline, turn over to the county
(for operation at no cost) only that portion of the line
that is in Charles County, and retain ownership of the rest
of the line
The county will have the right to connect other customers and sell effluent,
provided it is at no cost to the operation of the Panda-Brandywine project and
in no way diminishes the amount of effluent transported to the Project.
WATER USAGE FEE
The project will pay a fee of $1.00 per 1,000 gallons of effluent used during
the initial 10 years of the project. Beginning in the 11th year, the price
will escalate according to the consumer price index, but no greater than 3
percent per year. In addition, the Project will make quarterly payments of all
actual and reasonable fixed expenses and variable expenses associated with
conveying the effluent to the project site. This does not include the cost of
conveying effluent to other users along the pipeline but does include
maintaining the U.S. Navy right-of-way as required in the Navy easement.
TERM
The term of the contract is parallel to the PEPCO PPA with an initial period of
25 years. Panda has the right to extend the agreement with 30 days written
notice for up to three successive 5-year terms.
WATER USAGE
Effluent supplied under this agreement will be closely monitored and must
comply with maximum discharge pollutant levels. Panda is to install a bypass
at the plant to return any effluent that does not meet minimum standards. The
bypass will be via the nearby sewer line that the project will use for all
wastewater and sewage from the plant.
Panda has developed a Risk Management Plan which addresses maintenance and
repair issues. The plan must be approved by the county commissioners.
STEAM SALES AGREEMENT
A Steam Sales Agreement was entered into as of March 30, 1995, between Panda-
Brandywine, L.P., and Brandywine Water Company. The purpose of this agreement
is to allow for the sale of thermal energy, cooling water, and feed water to
Brandywine Water from the project. A description of the distilled-water
facility can be found in Section 4 of the report.
SCOPE
As part of the EPC contract, Raytheon designed andis constructing a
distilled-water facility adjacent to the cogeneration facility which Panda will
lease to Brandywine Water. Panda will sell thermal energy, cooling water, and
feed water to Brandywine water as well as provide operating, maintenance, and
wastewater disposal services for the distilled-water plant. Raytheon is
committed to put the distilled-water plant into commercial operation before or
concurrent with the commercial operation of the power plant.
Brandywine Water is responsible for water sales and delivery from the onsite
storage tank to the customer. Brandywine Water must purchase enough steam to
maintain the cogeneration plant's QF status. Panda has not guaranteed any
specific amounts or periods of time for thermal energy delivery. At least one
of the HRSGs must be operating in order for Panda to deliver thermal energy to
the distilled-water plant.
As part of its agreement for the operation of the cogeneration plant, Ogden is
responsible for the day-to-day operation of the plant. No additional manpower
is expected to be required beyond the normal cogeneration staff.
Term
The sales agreement is for a term of 25 years eginning from the date of the
ontract. Panda can extend the term for additional 5year periods by notifying
Brandywine Water 30 days before the expiration of the prior term.
Price
Panda is responsible for metering all thermal energy, feed water, cooling
water, and wastewater quantities. Meters will be calibrated and maintained by
Ogden according to general practices. Brandywine Water will pay $1.00 per
1,000 pounds of thermal energy and $1.00 per 1,000 gallons of feed water and
cooling water. Brandywine Water will take title to all fluids at the intertie
point of the distilled water plant.
Other Contract Conditions
The SSA contains a number of terms and conditions covering various aspects such
as government approvals, insurance and indemnification, termination, default,
force majeure, and warranties. These terms and conditions are for the benefit
of GE Capital if it needs to take over operation of the distilled-water plant
or the power plant.
STEAM LEASE
Panda-Brandywine, L.P., and Brandywine Water will also enter into a sublease
allowing Panda to sublease the distilled-water facility to Brandywine Water.
(GE Capital will be leasing the entire project, including the distilled-water
plant, to Panda Brandywine, L.P., after construction and startup.) The term of
the Steam Lease expires on the earlier to occur of the expiration or
termination of the Facility Lease, the Site Sublease (as defined in the Steam
Lease, and the SSA.
NATURAL GAS AGREEMENTS
A detailed study of the gas contracts is not part of Pacific Energy Systems'
scope of work on this project. As part of Pacific Energy Systems' due
diligence, it is necessary to determine that gas can and will be delivered to
the project in sufficient quantities and at qualities (including pressures)
that will allow the project to meet its obligations under the PPA and SSA.
In addition to the scope described above, Pacific Energy Systems includes in
this section a brief description of the gas contracts to enhance the future use
of this report. Details of the Gas Agreements were evaluated for Panda by
C.C. Pace.
FUEL SUPPLY PLAN
Panda's fuel supply plan is to purchase natural gas from Cogen Development
Company under a Gas Sales Agreement (GSA) and transport that gas to the project
site via transportation agreements with Columbia Gas Transmission (CGT), Cove
Point LNG, L.P., and WGL. The GSA between Panda and Cogen Development Company
allows the flexibility needed in the fuel supply to meet the specific fuel
requirements of the dispatch plant. Panda can purchase up to 24,240 MMBtu per
day of "maximum daily firm quantity," or up to 24,240 MMBtu per day of
"maximum daily interruptible quantity."
Panda also has developed a Fuel Supply Management Agreement that stipulates
that Cogen Development will manage the purchase of the 8 million MMBtu per year
of natural gas, as well as the transportation of it to the project site as
needed. In addition, as fuel manager, Cogen Development will handle all
administrative services related to gas purchases and delivery; verify
quantities and qualities; advise on price hedging, marketing, and sale of
excess gas; and attempt to negotiate discount rates where available.
WGL can provide spot market merchant services and has the right to purchase
Panda's gas supply during peak periods to serve WGL's other loads.
TRANSPORTATION
Gas will be transported to the site under three pipeline transportation
contracts, with CGT, Cove Point LNG, L.P., and WGL. These contracts are
discussed below.
Columbia Gas Transmission
Panda has contracted CGT to transport up to 24,240 MMBtu/day of natural gas
between the Cogen Development delivery point and Cove Point LNG's pipeline.
This contract is for firm transportation services. In addition to
transportation costs, Panda will pay CGT a Contribution-in-Aid-of-Construction
of $6,772,590 per an amending agreement dated March 24, 1995, plus the
applicable gross-up for income tax.
This contribution will help CGT to parallel or rebuild three sections of its
pipeline to allow the increased flow for Panda. FERC has approved the pipeline
expansion, and CGT is currently obtaining local permits to start construction.
Cove Point LNG, L.P.
Panda has contracted Cove Point LNG, L.P., to transport Panda gas from the CGT
pipeline to the WGL pipeline.
Washington Gas Light Company
Panda has signed a 25-year agreement with WGL that has an initial term of 25
years from the Actual Commercial Operation Date under the PPA. This agreement
is for both gas transportation and gas supply. Under terms of the contract,
WGL will supplythe following services:
- It will construct a gas line from its interstate pipeline along
Highway 301 to the project site, a distance of less than 1 mile.
The line will contain all metering, regulating, and appurtenant
facilities necessary to serve the Panda plant.
- WGL will transport the daily nominated quantities of gas from
Cove Point LNG to the site on a firm basis.
- During peak gas use periods (as defined in the contract), WGL has
the right to use Panda's gas and the plant can run on oil. Various
cost adjustments are available to Panda.
- Panda can nominate a daily merchant quantity of gas from WGL,
which will then sell that gas to Panda at the agreedupon price.
- The final service that WGL supplies to Panda is a balancing
service. When Panda nominates for delivery too much or too little
gas to meet its needs, WGL will run an imbalance account, either
positive or negative. Its costs are resolved monthly by cash, by
making up volumes, or by carrying over portions of the balance as
agreed upon.
Gas supply arrangements for the Panda project are complex. It is our
understanding that C.C. Pace has provided a due diligence report on the
viability of the gas supplies, gas transmission, and management agreements.
Pacific Energy Systems believes that Panda has access to an adequate supply of
gas to meet the daily maximum full-load operation requirements and has
adequate flexibility to arrange for lesser quantities for periods that the
project is dispatched offline or operating only under the first dispatch
segment.
OWNER'S ENGINEER
During the course of developing this project, the owner used a number of
engineering and specialty firms. Pacific Energy Systems was not provided any
of these contracts for review or comment. While most of the work of these
various firms has been completed, the owner's engineer, Gilbert/Commonwealth,
Inc., has played and will continue to play a key role in the project.
Originally hired to review Raytheon's work as an "owner's engineer," Gilbert/
Commonwealth's activities have increased to include design of the transmission
line and a proactive role in the effluent pipeline design, estimate, and bid.
Gilbert/ Commonwealth also has provided a number of detailed design analyses
on behalf of Panda in negotiation change orders for the EPC contract.
Pacific Energy Systems believes that Gilbert/Commonwealth is a creditable,
well-established engineering firm that is capable of performing the services
it is supplying to Panda at a professional level.
EFFLUENT LINE CONSTRUCTION
The effluent line was designed by several firms, including Greenhorne & O'Mara
and Gilbert/Commonwealth. Pacific Energy Systems has received and reviewed
the sample construction contract that went out with the request for bids to
construct the pipeline and pumphouse.
TRANSMISSION LINE CONSTRUCTION
Panda has awarded the contract for construction of the 230-kV transmission
line to C. W. Wright Construction Company, Inc. The line was designed by
Gilbert/Commonwealth. The transmission line is complete and energized.
PEPCO has issued a letter of acceptance.
Section 8
OPERATIONS AND MAINTENANCE
Panda-Brandywine, L.P. (the owner) and Ogden Brandywine Operations, Inc. (the
operator) signed an Operation and Maintenance Agreement on November 21, 1994.
This section discusses Ogden Brandywine's experience, plant staffing, the O&M
Agreement, compensation and payments, and the term and termination of the
agreement.
OPERATING EXPERIENCE
Ogden Brandywine Operations, Inc., is a wholly owned subsidiary of Ogden Power
Corporation. Ogden Power is a subsidiary of Ogden Environmental and Energy
Services of Fairfax, Virginia, a wholly owned subsidiary of Ogden
Corporation. Ogden Corporation (Ogden) is a technical services company with
more than $2 billion in annual sales and more than 1,300 employees who operate
and maintain power projects, including waste energy, hydroelectric, and
geothermal projects.
Overall, Pacific Energy Systems believes that Ogden has an adequate base of
personnel experienced in heavy-frame, gas turbine dispatchable plants to
reliably operate and maintain the Panda-Brandywine project. Ogden plans to
use these experienced headquarters staff members to assist during the later
stages of construction and startup. Since theorganization is relatively
small, a key requirement is that the core staff be able to effectively hire,
train, and develop the additional personnel required to operate this plant.
PLANT STAFFING
Figure 8-1 is an overview of the management organization that will operate and
maintain the project. The plant staff consists of the following positions:
plant manager
1 operation supervisor
1 plant technician
1 maintenance supervisor
4 control room operators
4 equipment operators
1 relief operator
1 water plant technician
1 instrumentation and control (I&C) technician
1 mechanic
1 electrician
----
17 Total O&M staff members
Pacific Energy Systems believes that this level of staffing is adequate, with
the understanding that Panda also will be supplying a full-time owner's
representative and administrative assistant. The Panda personnel will be
responsible for purchasing and for other project administrative functions.
OPERATIONS AND MAINTENANCE COSTS
The annual pro forma O&M budget for the Panda-Brandywine Project is shown in
Table 8-1. The O&M costs shown are for 1997, which is the first full year of
operation.
Table 8-1
OPERATIONS AND MAINTENANCE COSTS
Fixed Costs 1997 $000
- --------------------------------------------------------------
O&M Agreement costs 1,473
Consumables 750
Administrative expenses 500
Insurance 500
Letter of Credit 90
Electricity purchase 411
Property taxes 2,621
VARIABLE COSTS
- --------------------------------------------------------------
Water usage 1,038
Water discharge & chemical usage 861
Distilled-water plant operating costs 200,000
PRO FORMA TOTAL $8,033
All of the O&M costs in Table 8-1 are annualized costs that increase according
to the assumed inflation rate, with the exception of the turbine overhaul
reserve. The annual contribution to the turbine overhaul reserve varies from
year to year. The cumulative reserve is projected to increase to approximately
$5 million by the year 2001 and remains at or above that level throughout the
life of the Project. The annualized equivalent of the annual reserve
contribution is about $1,585,000, assuming a 4 percent inflation rate.
Table 8-2 compares the O&M costs of Panda-Brandywine with those of other
gas-fired, combined-cycle power plants. Panda's overall O&M costs, while at
the low end of the range, appear to be reasonable for a plant of this scale.
<PAGE>
<TABLE>
<CAPTION>
Table 8-2
COMPARISONS OF O&M BUDGETS FOR GAS TURBINE PROJECTS
Number of On-Line Annualized Annualized
Gas Unit Cycle MW Date O&M O&M
Plant Turbines Type Type ($1997x000) ($19997/kW)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A 1 LM250 Combined 34.5 1990 2,369 69
B 2 LM600 Combined 90.0 1993 5,319 59
C 2 LM600 Combined 106. 1994 5,924 56
D 2 LM600 Combined 95.1 1996 6,299 66
E 1 LM600 Combined 56.7 1996 4,810 85
F 1 LM600 Combined 49.9 1996 4,307 86
G 2 Frame7E Combined 240. 1994 12,629 53
H 1 Frame7E Combined 120. 1995 6,082 50
I 1 Frame7E Combined 126. 1995 6,266 50
J (Panda-
Brandywine) 2 Frame7E Combined 230. 1996 9,976 43
</TABLE>
O&M AGREEMENT
The O&M Agreement is for full-service operation and maintenance of the plant
on a cost-reimbursable-plus-fee basis for a 3-year term. Under the agreement,
Ogden Brandywine will provide O&M services during several phases of the
project, including: preparation of the facility for commercial operation;
testing and acceptance; startup; and operation and maintenance following
commercial operation.
SERVICES PROVIDED
Ogden Brandywine is responsible for hiring, training, and providing a plant
manager; full-time, onsite staff; and additional engineering support,
maintenance, and management personnel as needed to perform the requirements of
the agreement. OgdenBrandywine is responsible for operating and maintaining
the facility 7 days per week and 24 hours per day. Under the agreement, it
also will develop maintenance and safety plans and procedures, and will
prepare and keep O&M records for the project. Ogden Brandywine also is
required to prepare and furnish a monthly operations report to the owner.
Panda will provide an initial inventory of tools, spare parts, equipment,
consumables, and other materials. Panda is responsible for reimbursing Ogden
Brandywine for the replacement of tools that deteriorate from normal use,
replacing spare parts as necessary, purchasing additional spare parts as
approved, repairing or replacing equipment, purchasing and installing
additional equipment, and purchasing consumables. Panda also will reimburse
Ogden Brandywine for purchased parts, for the services of factory personnel or
personnel trained and qualified to perform manufacturers' recommended service
procedures, and for third-party contracts to clean up and remove hazardous and
solid waste (accepted as a result of negligence or fault of the operator).
The agreement provides for a full-time owner's representative to administer
Panda-Brandywine's responsibilities, to monitor the operation of the plant,
and to direct economic and financial matters.
COMPENSATION AND PAYMENT
Before the Actual Commercial Operation Date, Ogden Brandywine will be
compensated in three ways: a fixed monthly payment in accordance with a set
schedule; a reimbursement for all reimbursable costs under the agreement; and a
reimbursement for the compensation and actual expenses of all Ogden Brandywine
personnel who are permanently assigned full-time to the facility, or the home
office, or who perform service in direct support of the site personnel as
approved by the owner. The fixed monthly payment ranges from $5,000 per month
through June 1995 to $10,000 per month until the ActualCommercial Operation
Date.
After the Actual Commercial Operation Date, operator compensation is a fixed
price of $117,750 per month as adjusted for performance, plus all reimbursable
costs incurred under the agreement. There are two performance adjustments to
the contract price. One is for the EAF, and one is for capacity performance.
The maximum increase or decrease for the EAF is $3,000 per month. If the EAF
is greater than or equal to 92 percent, Ogden Brandywine's monthly fixed fee
is adjusted by the amount of $100,000 x (EAF - 0.92). There is no adjustment
to the fixed fee if the EAF is greater than 88 percent but less than or equal
to 92 percent. If the EAF is less than 88 percent, the contract price is
decreased by the amount of $50,000 x (0.88 minus EAF) per month.
The second performance adjustment, the capacity performance contract price
adjustment, compares the lant's actual or tested Net Capability with its
Dependable Capacity. If Net Capability is greater than Dependable Capacity,
Ogden Brandywine's fixed fee is increased by $2,000 per month for the term of
the applicable summer-winter period. If the Net Capability is less than the
required Dependable Capacity, the fixed fee is decreased by $2,000 per month.
Compensation is on a calendar-month basis.
TERMINATION
In the event the owner chooses to terminate the O&M Agreement without cause,
the agreement requires that Panda pay Ogden Brandywine for outstanding costs
under the agreement, reasonable costs incurred by the operator to support
termination, and reasonable severance costs. If the lender should terminate
the agreement, compensation is to be provided to the operator based on a fixed
schedule ranging from $25,000 to $50,000 per month.
Panda-Brandywine may terminate the agreement for cause on the basis of a
number of specific conditions, including:
- Failure of the operator to provide adequate qualified personnel;
failure to produce adequate thermal and electrical energy
- Failure to perform material service or obligation
- Appointment of a receiver, liquidator, or trustee for the
operator
- Failure to maintain the project's QF status
- Failure to maintain an equivalent availability factor of at
least 80 percent; failure to maintain an equivalent forced
outage rate of less than 10 percent
- Continuance of a force majeure for more time than allowed
- Failure to reach agreement by renegotiation as provided by
the O&M Agreement
OTHER PROVISIONS
Other, miscellaneous provisions of the O&M Agreement that should be noted are
as follows:
- The agreement contains a number of force majeure provisions that
are typical for a project of this type.
- Unresolved disputes are to be settled by arbitration.
- Ogden Brandywine may request a retrospective and/or prospective
renegotiation of the monthly fees if the owner's actions make a
substantive, material, and adverse change to the configuration
or operational ability of the project, and which have a
demonstrable effect of increasing Ogden Brandywine's direct onsite
labor, overhead, payroll, and other related costs.
- Ogden Brandywine is required to receive written authorization from
Panda-Brandywine's representative before issuing purchase orders in
excess of $1,000 or for any items not in the authorized budget.
Figure 8-1
Organization Chart
Section 9
PERFORMANCE GUARANTEES AND TESTING
The purpose of this section is to evaluate and summarize the plant performance
guarantees and the proposed performance testing program. This section also
reviews the liquidated damages that result from failure of the plant to meet
the performance guarantees and the bonuses that result when it exceeds the
guarantees.
COMPLETION GUARANTEES
Raytheon guarantees that commercial operation of the plant will occur no later
than the Guaranteed Completion Date, October 31, 1996, or as may be adjusted
in accordance with terms of the EPC contract.
PERFORMANCE GUARANTEES
Table 9-1 summarizes the plant performance guarantees required of Raytheon
under Article 5.0 of the EPC contract. These guarantees are based on the
specific design conditions as shown in Table 92.
<PAGE>
<TABLE>
<CAPTION>
Table 9-1
PERFORMANCE GUARANTEES
Conditions
-------------------------------------------------
Host Boiler
Ambient Steam Condensate Blowdown
Parameter Value (Degrees F/%RH) (lb/hr) Return (%) (%)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Declaration of
Commercial 92 degrees not not not
Operation(1) 230,000 kW /50 applicable applicable applicable
Plant Net Power 92 degrees
Output - gas 230,000 kW /50 34,000 80 0
Plant Net Heat Rate - 92 degrees
gas (LHV) 7,124 Btu/kWh /50 34,000 80 0
Plant Net Power 92 degrees
Output - oil 230,000 kW /50 34,000 80 0
</TABLE>
Emissions compliance
Noise compliance(2)
(1) In accordance with the test procedure in Appendix D of the Power Purchase
Agreement.
(2) Compliance required "under all normal operating conditions in accordance
with Section 20.5 of the Scope of Work."
Table 9-2
DESIGN BASIS CONDITIONS FOR PLANT OPERATION
DESCRIPTION DESIGN CONDITIONS
- -----------------------------------------------------------------------------
Dry Bulb Temperature 92 degrees F
Wet Bulb Temperature 76.5 degrees F
Fuel Natural gas
Export Power - MW (net) 230 (minimum)
Process Condensate Return 80 percent
Export Steam 40,000 lb/hr
Boiler Blowdown 2 percent
Waterwell Makeup Water Tempature 45 degrees F
Graywater Temperature 80 degrees F
Barometric Pressure 14.68 psi
Site Elevation 215 feet above sea level
Average Annual Rainfall Per Asheville, NC, National
Climatic Center Standards for
the area
Basic Wind Load Per ASCE 7-88, 70 mph, 50-year
mean recurrence @ 10 meters
Seismic Factor Zone 0
Frost Penetration 13 inches
Snow Load ANSI, Ground - 25 lb/sf
Roof Live Load 20 lb/sf maximum
Winter Design Conditions +5 degrees F
NET POWER OUTPUT GUARANTEE
Raytheon guarantees that it will be able to declare commercial operation. As
defined by the PPA, commercial operation may be declared when the plant
establishes a Dependable Capacity of 230,000 kW under summer ambient
conditions of 92 degrees F and 50 percent relative humidity (RH).
Establishment of Dependable Capacity must be done in accordance with the test
procedures in Appendix D of the PPA which require a 12-hour test.
Raytheon also guarantees that the net power output of the plant will be
230,000 kW at commercial operation, corrected to 92 degrees F dry bulb and
50 percent relative humidity, with 34,000 lb/hr of saturated steam at 15 psig
at the process interface, with 80 percent of condensate returned, and with no
boiler blowdown.
NET PLANT HEAT RATE GUARANTEE
The net plant heat rate is guaranteed at 7,124 Btu/kWh (LHV) when firing
design basis natural gas, as determined by the net plant heat rate test,
corrected to 92 degrees F dry bulb and 50 percent relative humidity, with
34,000 lb/hr of saturated steam at 15 psig at the process interface, with
80 percent of condensate returned, and with no boiler blowdown.
EMISSIONS GUARANTEE
Raytheon guarantees that air emissions from the plant will meet the emissions
limits of the U.S. EPA PSD permit and the permits granted by the CPCN
proceeding.
NOISE GUARANTEE
Raytheon guarantees that, under all normal operating conditions for the plant,
noise levels at the property line will not exceed the requirements of the
state of Maryland and Prince George's County.
FUEL OIL NET POWER OUTPUT
Raytheon must demonstrate that the net power output when firing No. 2 fuel oil
is greater than or equal to the net power output under the same conditions
when firing on natural gas. The demonstration shall be a 6-hour test during
which the net power output is corrected to 92 degrees F dry bulb and 50
percent relative humidity, with 34,000 lb/hr of saturated steam at the
process interface, with 80 percent of condensate returned, and with no boiler
blowdown.
GUARANTEE EVALUATION
The net power output, heat rate, emissions, and noise guarantees described
above appear to be consistent with those of similar plants and should be
achievable. The guarantees provide adequate assurance that the plant will
operate as required by the PPA and are backed by a corporate guarantee from
Raytheon.
PLANT PERFORMANCE TESTING
The performance testing program for the Panda-Brandywine Cogeneration Project
consists of the following tests:
- 48-hour net electrical output performance test
- Net plant heat rate test
- 200-hour capacity test
- Stack test
- Noise test
These tests are described below.
48-HOUR NET ELECTRICAL OUTPUT PERFORMANCE TEST
This test will be performed to demonstrate the plant's net electrical output
for the following guarantees:
- Declaration of commercial operation
- Plant net power output - gas
- Plant net power output - oil
The tested net power output must be corrected to the guarantee conditions of
Article 5.04a of the EPC contract: ambient conditions of 92 degrees F dry bulb
and 50 percent relative humidity, with 34,000 lb/hr of saturated steam at the
process interface, with 80 percent of condensate returned, and with no boiler
blowdown. During this 48-hour test, Raytheon must maintain a net heat rate of
less than or equal to 7,836 Btu/kWh (LHV), corrected to the guarantee
conditions. In addition, the stack emissions must satisfy the requirements of
the applicable Maryland CPCN Permit for Air Emissions.
NET PLANT HEAT RATE TEST
The net plant heat rate will be tested during a 6-hour period while the plant
is being operated in its designed normal manner and in accordance with prudent
utility practices. The test results are to be corrected to the guarantee
conditions.
200-HOUR CAPACITY TEST
The 200-hour capacity test will be performed to demonstrate the plant's
ability to produce at least 42,782,000 kWh during a 200consecutive-hour
period. This corresponds to an output of 230,000 kW during 93 percent of the
test period. The plant is required to be tested in its normal manner and
mode, and in accordance with prudent utility practices, while maintaining a
heat rate of 7,836 Btu/kWh (LHV) corrected to guarantee conditions, and while
satisfying the requirements of the Maryland CPCN Permit for Air Emissions.
STACK TEST
Raytheon is to perform a stack emissions test using a certified
subcontractor. The emissions are not toexceed the requirements of the
Maryland CPCN Permit for Air Emissions. The emissions test protocol is to
be submitted to Panda forreview before the test.
NOISE TEST
The noise test will be performed to demonstrate compliance with the noise
abatement guarantee. As baseline reference data, Panda will provide Raytheon
with ambient background noise surveys taken before construction of the
facility. The noise test requires that Raytheon perform additional noise
surveys to determine the actual acoustical behavior of the facility under all
normal and abnormal operating conditions. Raytheon is required to provide, at
its own expense, any acoustic treatment required to bring the noise level of
the facility to within the specified levels.
LIQUIDATED DAMAGES AND BONUSES
The liquidated damages and bonuses specified in the EPC contract are
summarized in Table 9-3.
<PAGE>
<TABLE>
<CAPTION>
Table 9-3
SUMMARY OF RAYTHEON LIQUIDATED DAMAGES AND BONUSES
Guarantees Liquidated Damages Bonuses
- ------------------------------------------------------------------------------
<S> <C> <C>
Completion
Commercial Operation by $80,000/day to a None
the Completion Guaranteed maximum of
Date (June 1, 1996, or as $14,400,000.
adjusted)
Performance
Net Power Output - Gas $1,000/kW, $300/kW
210,000-kW minimum
Net Power Output - Oil $1,000/kW None
Net Plant Heat Rate - Gas $45,000/Btu/kWh if $22,500/Btu/kWh
more than 2% greater if more than
than the guarantee 2% less than
than the
guarantee
</TABLE>
COMPLETION
Raytheon is required to pay liquidated damages of $80,000 per day for each day
that commercialoperation of the plant occurs after the Guaranteed Completion
Date. This payment for late completion shall not exceed $14,400,000. Panda
has the right to offset this payment against any milestone payments, or to
draw upon the letter of credit. The Guaranteed Completion Date is June 1,
1996, or as adjusted. Raytheon earns no bonus for successful completion
before the Guaranteed Completion Date.
PERFORMANCE
Raytheon pays $1,000/kW for failure to achieve the guaranteed net power
output, whether firing on natural gas or No. 2 fuel oil. When firing on
natural gas, Raytheon must achieve a minimum net power output of 210,00 kW.
That is, buydown is only permitted to a minimum of 210,000 kW. In addition,
Raytheon must have achieved commercial operation. There is no bonus for
exceeding net power output on either natural gas or fuel oil.
Raytheon pays liquidated damages for failure to achieve the guaranteed net
plant heat rate. The amount is $44,000 per Btu/kWh when firing on natural
gas in excess of the net plant heat rate guarantee plus the dead-band
tolerance. The dead-band tolerance is defined as plus or minus 2 percent of
the guarantee. Raytheon earns a bonus on net plant heat rate in the amount
of $22,500/Btu/kWh that the net plant heat rate is less than the guarantee,
less the dead-band tolerance.
Appendix A
DOCUMENT LIST
GENERAL CORRESPONDENCE AND SUPPORT MATERIALS
CONTRACTS, AGREEMENTS, AND AMENDMENTS
Power Purchase Agreements
Constructio Agreements
Interconnection Agreements
Steam Supply Agreements
O&M Agreements
Fuel Supply Contracts
Other Contracts
PERMITS
Federal
State
Local
TECHNICAL
Scope of Work
Specifications
Heat Balance
DRAWINGS
GENERAL CORRESPONDENCE
- Letter August 29, 1994, (Hollon to Lorusso) re: transmitting
Brandywine permit schedule.
- G.E. letter of September 26, 1994, (Johnson to Lorusso) re:
GE gas turbine emission guarantees.
- Raytheon letter of October 12, 1994, (Jacobsohn to Hollon)
re: milestone payment schedule.
- Raytheon letter of November 15, 1994, (Jacobsohn to Hollon)
re: major sub-contractors and suppliers.
- Raytheon letter of November 15, 1994, (Jacobsohn to Hollon)
re: financial closing project schedule and approved budget.
- December 20, 1994, letter of transmittal of project summary
bar chart.
- Letter of transmittal of pro forma dated January 9, 1995,
from G.E. Capital.
- Letter January 12, 1995, (Jon Pawlow to various legal
counsels) re: transmitting updated Brandywine list of permits
and schedule-of-disclosure items on environmental matters.
- Pro formas dated - January 12, 1994
- January 14, 1994
- September 14, 1994
- January 6, 1995
- G.E. letter of January 10, 1995, (Johnson to Jacobsohn) re:
GE gas turbine emission guarantees.
- Project budgets with dates running through closing.
- Test case, increased capacity income statement, March 2, 1995.
- Owner's schedule with several updates through closing.
- Raytheon's Monthly Reports:
August 1994; issued September 27, 1994
October 1994; issued November 14, 1994
November 1994; issued December 12, 1995.
- Various issues of the Panda-Brandywine, L.P., 230-MW combined-cycle
power plant (BC-03 schedule) project activity scheduled.
- Various issues of the Raytheon Engineers & Constructors' project
milestone schedule.
- Various issues of the Raytheon milestones and schedule of values.
- Various issues of capital budget and pro formas.
CONTRACTS, AGREEMENTS AND AMENDMENTS
PPA AND INTERCONNECTION
- Order No. 70017, State of Maryland Public Service Commission, dated
July 21, 1992.
- Order No. 10077, State of Maryland Public Service Commission, dated
August 14, 1992.
- Order No. 10155, State of Maryland Public Service Commission, dated
February 1, 1993.
- Memo from Ted Hollon, May 11, 1993, listing all the PEPCO contract key
dates and payments.
- Power Purchase Agreement between Potomac Electric Power Company and
Panda-Brandywine, L.P., dated August 9, 1991.
- PEPCO letter of September 30, 1993, to Robert Carter re: confirmation of
scheduled deliverables to PEPCO from Panda.
- Operations and Maintenance Review by North American Energy Services dated
November 1993.
- First amendment to Power Purchase Agreement dated September 16, 1994.
- Operations and Maintenance Review update by North American Energy Services
dated October 1994.
- Panda letter October 19,1994, to Brian Ward re: available capacity
calculations.
- Letter from Ted Hollon to Mike Lorusso, December 9, 1994, re: PEPCO's
acceptance of the O&M Agreement with Ogden Brandywine Operations.
- PEPCO letter of December 8, 1994, as above.
- PEPCO letter December 26, 1994, re: Pacific Energy Systems' supplement to
Operations and Maintenance Review-update.
- PEPCO letter of November 1, 1995, re: North American's Operations and
Maintenance Review update.
- Power Purchase Agreement Appendixes:
Appendix A - Description of Facility and Site
Appendix B - Sample Calculations
Appendix C - Guidelines and Performance Standards for Parallel
Operation of Customer Generation Equipment on the
PEPCO system
Appendix D - Testing Procedures for Determining Net Capability
Appendix E - Metering Equipment
Appendix F - Interconnection and Communication Specification and
Revision A, July 22, 1993
Appendix G - Procedures for Determination of Fair Market Value of
Facility
Appendix H - Requirements with Respect to Fuel Supply Arrangements
Appendix I - Generating Unit Event Reporting
Appendix J - Summary Specification for 230-kV Overhead Transmission
Lines
Appendix K - Contributions to Maintenance Reserve Pursuant to
Subsection 8.7(b)(ii)
Appendix L - Capacity Rate
Appendix M - Natural Gas Reserve Commitment and Price
Appendix N - Equivalent Availability Factor ("EAF")
Appendix O - Equivalent Forced Outage Rate ("EFOR")
Appendix P - Valuation Procedures for PEPCO's Buy-out Right under
Subsection 18.6(b)(ii), including: Agreement with
respect to transfers of interests in Panda-Brandywine,
L.P., between Potomac Electric Power Company and Panda
Energy Company, and Panda-Brandywine Corporation,
dated August 8, 1991, with Appendix A.
CONSTRUCTION AGREEMENTS
EPC Contract
- Turnkey Cogeneration Facility Agreement between Panda-Brandywine, L.P.,
and United Engineers & Constructors, Inc.; dba Raytheon Engineers &
Constructors, date as of December 2, 1993. Includes Exhibit A through O.
- Simpson Thatcher & Bartlett EPC Contract markup of March 23, 1994; May, 12,
1994; May 16, 1994.
- GE Capital EPC contract word changes of April 15, 1994, and April 20, 1994.
- Panda word changes to Amendment No. 1 dated June 30, 1994.
- Raytheon letter August 2, 1994, to Ted Hollon, re: drafts of suggested
language changes to EPC contract.
- September 16, 1994, draft copy of the first amendment to the turnkey
Cogeneration Facility Agreement.
- EPC word changes from Raytheon dated September 16, 1994.
- Memo September 22, 1994, from Brian Dietz to Hollon, DeVoss, Young, and
Jacobsohn re: New York Technical meeting.
- EPC word changes from Raytheon dated October 6, 1994.
- Raytheon's October 13, 1994, Exhibit P, Scope of Work for Distilled-Water
Plant.
- Amended and Restated Turnkey Cogeneration Facility Agreement between
Panda-Brandywine, L.P., and Raytheon Engineers & Constructors, Inc., dated
as of December 1, 1994. Includes Exhibits A through R.
- Memo February 24, 1995, from Ted Hollon to Darrel DeVoss re: 16 pages of
changes to Raytheon EPC contract.
STEAM SUPPLY AGREEMENTS
- Letter of October 22, 1993 (Carter to Colonel Celmer), re: sales of water
to base for boiler makeup.
- Draft Steam Sales Agreements dated from May 26, 1994, to December 30,
1994, nine revisions in all.
- Brandywine Water Company Business Plan, January 4, 1995.
O&M AGREEMENTS
- ASME paper by William R. Alkema, "Operation of a Large Combined-Cycle
Facility as a Dispatchable Unit," 1991.
- Request for Proposal: Facility Operations and Maintenance Services, dated
July 22, 1994.
- Qualifications of Ogden Power, dated October 19, 1994.
- Operation and Maintenance Agreement between Panda-Brandywine, L.P., and
Ogden Brandywine Operations, Inc., dated November 21, 1994.
- Preliminary Operating Plan, December 16, 1994.
- Resumes of proposed plant manager dated December 22, 1994.
FUEL SUPPLY CONTRACTS
- Fuel Plan dated July 15, 1994, by Panda Energy Corporation for Panda-
Brandywine, L.P.
- Fuel Management Plan dated November 23, 1994.
- Gas Transportation and Supply Agreement between Panda-Brandywine, L.P.,
and Washington Gas Light Company dated November 1994.
- Letter of December 2, 1994, to Daniel Grahagan PSC of Maryland requesting
changes to the CPCN because of the Washington gas line extension replacing
Panda's approved gas line.
- Letter of December 2, 1994, to Daniel Grahagan PSC of Maryland from
Washington Gas Light Company requesting approval of the Gas Transportation
and Supply Agreement.
- Carmen D. Legato letter of December 6, 1994, re: burning LNG from Cove
Point.
- Simpson Thatcher & Bartlett memo of January 5,1995, re: consent and
agreement submitted to gas contractors.
- Ted Johnson (GE) letter dated January 17, 1995, re: burning out-of-spec
gas.
- Simpson Thatcher & Bartlett memo of February 17, 1995, updating January 5,
1995, memo.
- Precedent Agreement between Columbia Gas Transmission Corporation and
Panda-Brandywine, L.P., dated February 25, 1995.
- Gas Sales Agreements between Cogen Development Company and Panda-
Brandywine, L.P., dated March 1995.
- Fuel Supply Management Agreement between Cogen Development Company and
Panda-Brandywine, L.P., dated March 1995.
- Carmen D. Legato letter of March 19, 1995, re: use of gasified LNG.
- Prehm & Associates letter of March 22, 1995, re: gas processing plant for
LNG.
- C. C. Pace letter of March 24, 1995, re: Cover Point gas quality follow
up.
- Ted Johnson (GE) letter of March 30, 1995, re: thoughts on (out-of-spec)
LNG fuel.
OTHER CONTRACTS
Transmission Line
- Conrail Occupation Agreement dated September 6, 1994, for 230-kV
transmission line.
- Request for Proposal for furnishing and installing 230-kV transmission line
and alternate communications circuit for Panda-Brandywine, L.P.
- Gilbert/Commonwealth bid evaluation dated October 26, 1994.
- Contract dated November 17, 1994, with C. W. Wright Construction Company to
furnish and erect 230-kV transmission line.
Effluent Pipeline
- Treat Effluent Water Purchase Agreement between the County Commissioners of
Charles County, Maryland, and Panda-Brandywine, L.P.
- Conrail Occupancy Agreement, effluent pipeline, dated November 9, 1994.
- Panda letter of November 14, 1994, (Hollon to Lorusso) re: effluent line
right-of-way, Highway 301.
- Panda letter November 15, 1994, (Hollon to Lorusso) re: metes and bounds
description for Navy easement.
- Gilbert/Commonwealth February 28, 1995, conference notes/cost estimate.
- Panda letter of March 20, 1995, (Hollon to DeVoss) re: effluent line
budget.
- Draft Easement of pipeline right-of-way between Navy and Panda-Brandywine,
L.P., received March 21, 1995.
PERMITS
FEDERAL
- Wetlands Report by ECT, February 1993.
- Application for qualifying cogeneration facility dated December 28, 1993.
- FERC Notice of Application for QF status dated January 26, 1994.
- U.S. Army Corps of Engineers verification of delineation of wetlands,
April 29, 1994.
- Order granting certification as a qualifying cogeneration facility issued
May 23, 1994.
- Joint federal/state application for the alteration of any flood plain,
waterway, tidal, or nontidal wetland in Maryland, October 1994.
- Federal Notice of Qualification for Nationwide Permit #12, November 16,
1994.
- Categorical Exclusion for Easement and Installation of Effluent Wastewater
Pipeline along Naval Surface Warfare Center (NSWC) Indian Head Rail Line
Right-of-Way in Maryland, Navy memo November 28, 1994.
STATE
- Application for approval of a Prevention of Significant Deterioration
Source, September 1992.
- Letter of February 16, 1993, (ECT to DNR) re: wetland assessment.
- Letter of May 19, 1993, (DNR to ECT) re: wetland impact issues.
- Environmental Review Document for the Brandywine Cogeneration Facility
(application for CPCN) Volume 1 and Volume 2, August 1993.
- Letter to Joe Brinson from ECT, September 23, 1993, re: site walkover of
Jasper and Gemeny Properties.
- Phase I environmental site assessment of Gemeny site, October 18, 1993.
- Letter ECT to Joe Brinson, January 3, 1994, re: Phase I assessment efforts
at Jasper property.
- State recommendations for Panda-Brandywine's CPCN, June 17, 1994.
- Proposed order for CPCN Phase I, July 15, 1994.
- Proposed order for CPCN Phase II, August 3, 1994.
- Environmental Site Assessment of Conrail and military railroad right-
of-way, ECT September 1994.
- Phase II Reply Memorandum of Panda-Brandywine, L.P., September 21, 1994.
- Public Service Commission order approving the CPCN, Phase I, October 6,
1994.
- Public Service Commission order approving the CPCN, Phase II, October 27,
1994.
- Letter of December 6, 1994, (DNR to Brinson) re: eliminating several
license conditions as a result of Washington Gas to build & operate gas
line.
- Letter of December 14, 1994 (Brinson to DNR) re: erosion and sediment
control plans.
- State of Maryland Conditional Letter of Authorization to Construct
Utility Lines and Stormwater Outfall, December 23, 1994.
LOCAL
- Prince George's County approval of wetland delineations of site.
- Letter of June 15, 1993 (Thomas Haller to Joe Brinson) re: State and
County Noise Control regulations.
- Letter of August 6, 1993, (Thomas Haller to Joe Brinson) re: local
permitting requirements.
- Letter of November 2, 1993, (County to Carter) re: environmental concerns.
- Letter of November 10, 1993 (County to Brinson) re: additional data
request.
- Draft WSSC Discharge Application by ECT dated October 1994.
- Letter of October 19, 1994, (Hollon to Lorusso) transmitting soil
recycling certificate.
- Letter of November 10, 1994, Prince George's County Government, re: sewer
system capacity.
- Washington Suburban Sanitary Commission approval of 8,000 mg/1 maximum
daily limit date November 17, 1994.
- Application for Discharge Authorization Permit Application for Industrial
users, December 1994.
TECHNICAL
SCOPE OF WORK
- Exhibit A of the Turnkey Contract Agreement "Scope of Work" with
Appendixes A through J: various issues were received with dates between
December 1993 and March 1995.
- Change Order Requests for:
A-1 Agreement Amendment 04/11/94 Approved
001 RFI study 07/29/94 Approved
002 CTG lube oil reservoir and
transfer system 02/03/94 Voided
003 Differing subsurface conditions 05/09/94 Voided
004R2 Host facility guarantee impacts 10/10/94 Approved
005 Iron pretreatment 06/98/94 Approved
006R1 Increase cooling tower basin 06/27/94 Approved
007 Revise HRSG crossover walkway 07/12/94 Approved
008 Gas & gray water interface 09/30/94 Approved
009 Potable water supply source revised 08/29/94 Open
010 Schedule delay claim 08/09/94 Voided
011 PEPCO/SMECO interface 02/09/95 Approved
012 Clearing and grubbing 09/30/94 Approved
013 Temporary access road 11/16/94 Approved
014 Betty Boulevard upgrade 10/94 Open
015 Sample system changes 10/21/94 Approved
016 Circulation water intake screens 12/01/94 Approved
017 Fire protection changes 01/16/94 Approved
018 Well pump capacity 04/25/94 Open
019 PEPCO interfaces --- Open
020 Owner caused delay 03/22/95 Approved
SPECIFICATIONS
- GE Performance Specification for steam turbine-generator unit, July 1993.
- Contract Specification "Effluent Force Main," received October 12, 1994.
- Contract Specification "Effluent Pump Station and Secondary Chlorination,
" received October 12, 1994.
- Specification for "Heat Recovery Steam Generators," received October 12,
1994.
- Specification for "Deaerator," received October 12, 1994.
- Specification for a "Steam Turbine-Generator," received October 12, 1994.
- Specification for a "Cooling Tower," received October 12, 1994.
- Specification for a "Condenser and Accessories," received October 12, 1994.
- Specification for a "Combustion Turbine-Generator and accessories,"
received October 12, 1994.
GENERAL
- Technical Report on Feasibility Evaluation of Effluent for Cooling Water,
dated December 1993, by Greenhorne & O'Mara, Inc.
- Letter of February 17, 1994 (Brinson to SMECO), re: construction and
permanent power requirements.
- Subsurface exploration and geotechnical recommendations, dated March 1994.
- Panda letter of November 11, 1994, (Hollon to DeVoss) re: effluent line
routing.
- Panda letter of November 15, 1994, (Hollon to Lorusso) re: estimate for
zero discharge facility for Panda-Brandywine, L.P.
- November 18, 1994, Betz revised cooling tower blowdown waste
characterizations.
- PEPCO dispatch information, December 1994.
- The Prince George's County Government (DER) letter of December 9, 1994,
re: conditional acceptance of solid waste from a zero discharge system.
<PAGE>
<TABLE>
<CAPTION>
DRAWINGS
Number Rev Description Date
<S> <C> <C> <C>
17-SKE-003 - Water plant --
SK-12-01-01-301 - Betty Boulevard temporary
construction --
26-10-223 - P&ID distilled water plant --
SK11-10-302 - General arrangements distilled
water plant --
D00234-1 2 Nooter/Eriksen HP system P&ID 7/28/94
D00234-2 2 Nooter/Eriksen IP system P&ID 7/28/94
D00234-3 2 Nooter/Eriksen LP system P&ID 7/28/94
--- - Boundary survey of Jasper property 12/17/92
11-10-202 A General arrangement, steam turbine-
generator building --
11-10-301 A General arrangement, site plan 6/01/94
12-01-01-001 1 Civil, plot plan 7/08/94
17-01-20-001 P One-line diagram, 230 kV and 13.8 kV --
26-10-101 A Water balance --
26-10-102 P Process flow diagram, Sheet 1 of 3 --
26-10-103 A Process flow diagram, Sheet 2 of 3 --
26-10-104 A Process flow diagram, Sheet 3 of 3 --
26-10-201 A P&ID, symbol & nomenclature 5/26/94
26-10-202 A P&ID, high-pressure steam 5/26/94
26-10-203 A P&ID, intermediate-pressure steam 5/26/94
26-10-204 A P&ID, low-pressure & extraction steam 5/26/94
26-10-205 A P&ID, steam turbine & auxiliaries 5/26/94
26-10-206 A P&ID, condensate 5/25/94
26-10-207 A P&ID, feedwater 5/25/94
26-10-208 A P&ID, combustion turbine-generator A,
Sheet 1 5/25/94
26-10-209 A P&ID, combustion turbine-generator A,
Sheet 2 5/25/94
26-10-210 A P&ID, combustion turbine-generator B,
Sheet 1 5/25/94
26-10-211 A P&ID, combustion turbine-generator B,
Sheet 2 5/25/94
26-10-212 A P&ID, fuel gas and fuel oil 5/25/94
26-10-213 A P&ID, HRSG A vents & drains 5/25/94
26-19-214 A P&ID, HRSG B vents & drains 5/25/94
26-10-215 A P&ID, plant water 5/26/94
26-10-216 A P&ID, fire protection, Sheet 1 5/27/94
26-10-217 A P&ID, fire protection, Sheet 2 5/27/94
26-10-218 A P&ID, circulating & cooling water,
Sheet 1 5/26/94
26-19-219 A P&ID, circulating & cooling water,
Sheet 2 5/26/94
26-10-220 A P&ID, closed cooling water 5/27/94
26-10-221 A P&ID, condensate stor & transfer &
sampling 5/26/94
26-10-222 A P&ID, makeup water treatment 5/25/94
26-10-224 A P&ID, chemical feed 5/27/94
26-10-225 A P&ID, plant drains, Sheet 1 5/25/94
26-10-226 A P&ID, plant drains, Sheet 2 5/25/94
26-10-227 A P&ID, compressed air 5/25/94
54-DR-001 A Project Schedule, Sheets 1-8, (2 sets) 2/17/94
</TABLE>
<PAGE>
Appendix B
PROJECT DRAWINGS
<TABLE>
<CAPTION>
DRAWINGS
Number Rev Description Date
<S> <C> <C> <C>
17-SKE-003 - Water Plant --
SK-12-01-01-301 - Betty Boulevard temporary construction --
26-10-223 - P&ID distilled water plant --
SK11-10-302 - General arrangements distilled water
plant --
DOO234-1 2 Nooter/Eriksen HP system P&ID 07/28/94
DOO234-2 2 Nooter/Eriksen IP system P&ID 07/28/94
DOO234-3 2 Nooter/Eriksen LP system P&ID 07/28/94
--- - Boundary survey of Jasper property 12/17/92
11-10-202 A General arrangement, steam turbine-
generator building --
11-10-301 A General arrangement, site plan 06/01/94
12-01-01-001 1 Civil, plot plan 07/08/94
17-01-20-001 P One-line diagram, 230 kV and 12.8 kV --
26-10-101 A Water balance --
26-10-102 P Process flow diagram, Sheet 1 of 3 --
26-10-103 A Process flow diagram, Sheet 2 of 3 --
26-10-104 A Process flow diagram, Sheet 3 of 3 --
26-10-201 A P&ID, symbol & nomenclature 05/26/94
26-10-202 A P&ID, high-pressure steam 05/26/94
26-10-203 A P&ID, intermediate-pressure steam 05/26/94
26-10-204 A P&ID, low-pressure & extraction steam 05/26/94
26-10-205 A P&ID, steam turbine & auxiliaries 05/26/94
26-10-206 A P&ID, condensate 05/25/94
26-10-207 A P&ID, feedwater 05/25/94
26-10-208 A P&ID, combustion turbine-generator A,
Sheet 1 05/25/94
26-10-209 A P&ID, combustion turbine-generator A,
Sheet 2 05/25/94
26-10-210 A P&ID, combustion turbine-generator B,
Sheet 1 05/25/94
26-10-211 A P&ID, combustion turbine-generator B,
Sheet 2 05/25/94
26-10-212 A P&ID, fuel gas and fuel oil 05/25/94
26-10-213 A P&ID, HRSG A vents & drains 05/25/94
26-10-214 A P&ID, HRSG B vents & drains 05/25/94
26-19-215 A P&ID, plant water 05/26/94
26-10-216 A P&ID, fire protection, Sheet 1 05/27/94
26-10-217 A P&ID, fire protection, Sheet 2 05/27/94
26-10-218 A P&ID, circulating & cooling water,
Sheet 1 05/26/94
26-10-219 A P&ID, circulating & cooling water,
Sheet 2 05/26/94
26-19-220 A P&ID, closed cooling water 05/27/94
26-10-221 A P&ID, condensate store & transfer
& sampling 05/26/94
26-10-222 A P&ID, makeup water treatment 05/25/94
26-10-224 A P&ID, chemical feed 05/27/94
26-10-225 A P&ID, plant drains, Sheet 1 05/25/94
26-10-226 A P&ID, plant drains, Sheet 2 05/25/94
26-10-227 A P&ID, compressed air 05/25/94
54-DR-001 A Project Schedule, Sheets 1-8, (2 sets) 02/17/94
</TABLE>
Appendix C
LIST OF ABBREVIATIONS
LIST OF ABBREVIATIONS
ac alternating current
AGC automatic generation control
ARMA Air and Radiation Management Administration
ASCE American Society of Civil Engineers
ASME American Society of Mechanical Engineers
Btu British thermal unit
degrees C degree Centigrade
CEMS continuous emissions monitoring system
CO carbon monoxide
CO2 carbon dioxide
CPCN Certificate of Public Convenience and Necessity
CRT cathode ray tube
CT combustion turbine
CTG combustion turbine-generator
dBA decibel
dc direct current
DCS distributed control system
DNR Department of Natural Resources
EAF equivalent availability factor
EPC engineering/procurement/construction
EPA Environmental Protection Agency (U.S. unless noted)
degrees F degree Fahrenheit
FAA Federal Aviation Administration
FERC Federal Energy Regulatory Commission
gal gallon
GNP Gross National Product
gpd gallons per day
gpm gallons per minute
Hga mercury absolute
HHV higher heating value
HP high pressure
hp horsepower
hr hour(s)
HRSG heat recovery steam generator
HVAC heating, ventilating and air conditioning
Hz hertz
I&C instrumentation and control
in inch(es)
IP intermediate pressure
ISO International Standards Organization
kV kilovolt(s)
kVA kilovoltampere(s)
kW kilowatt(s)
kWh kilowatt-hour(s)
lb pound(s)
lb/hr pounds per hour
LHV lower heating value
LNG liquid natural gas
LP low pressure
mA milliampere(s)
MCC motor control center
MCR maximum continuous rating
mgd million gallons per day
MMBtu million British thermal units
MVA megavoltampere
MW megawatt(s)
MWa megawatt(s) average
MWe megawatt(s) electrical
MWh megawatt-hour
MWWTP Mattawoman Wastewater Treatment Plant
NO2 nitrogen dioxide
NEPA National Environmental Policy Act
NFPA National Fire Protection Association
NOx oxides of nitrogen
NSPS new source performance standards
O2 oxygen
O&M operation and maintenance
pf power factor
PM particulate matter
PM-10 particulate matter below 10 microns
ppm parts per million
ppmvd parts per million by volume, dry
PPRP Power Plant Research Program
PSC Public Service Commission
PSD Prevention of Significant Deterioration
psi pounds per square inch
psia pounds per square inch absolute
psig pounds per square inch gauge
PURPA Public Utility Regulatory Policy Act
QF qualifying facility
RH relative humidity
rpm revolutions per minute
scf standard cubic feet
SCR selective catalytic reduction
sf square foot
SMECO Southern Maryland Electrical Coop
SO2 sulfur dioxide
STG steam turbine-generator
TSP total suspended particulates
UL Underwriters Laboratory
UPS uninterruptible power supply
V volt
VAR volt ampere reactive
VOC volatile organic compounds
Appendix D
PANDA GATECYCLE SUMMARY
GATE CYCLE PROGRAM
Gate Cycle is a power plant design and analysis software package. It is used to
perform detailed steady-state design and off-design analysis of gas turbine,
combined-cycle, and conventional fossil fuel power systems. Gate Cycle can
be used to prepare complete plant heat and mass balances, perform
analytical checks on individual plant components, and predict the
effect of enhancements to existing plant systems.
DEVELOPMENT OF PANDA-BRANDYWINE GATE CYCLE MODEL
To use the Gate Cycle program for analysis of the Panda-Brandywine
cogeneration plant, a model of the plant was developed and entered into the
Gate Cycle program. The model includes all major plant components, such as
the gas turbines, HRSGs, steam turbine, condenser, and cooling tower. These
components are connected to represent the mass flows between them as in the
actual plant. Then, for each component, the design parameters are entered
into the model. From these, the Gate Cycle program develops the performance
of each component and mass flow relationships around the plant cycle. The
program then performs an iterative calculation process to achieve a complete
mass and energy balance for the plant model.
The design parameters used as inputs to the Gate Cycle model were obtained from
component specifications supplied by various vendors, and from the EPC
contract, project scope document and drawings by Raytheon, the project EPC
contractor.
The reference model developed for the Panda-Brandywine plant uses the guarantee
point conditions listed below:
Ambient Conditions
- 92 degrees F dry bulb temperature
- 14.59 psia barometric pressure
- 50 percent relative humidity
40,000 lb/hr process steam to host
80 percent condensate return
Natural gas fuel 20,845 Btu/lb (LHV)
CASE STUDIES
Three case studies were performed on the Panda-Brandywine plant using the Gate
Cycle program:
1. The first was the reference model-the plant modeled at the guarantee
conditions. The purpose was to check the plant net output and heat rate
at the guarantee point and compare these calculated results with the EPC
contract guarantees. This also serves as the basis for further off-design
case studies.
2. The first off-design case study was run to check the maximum power output
of the facility. The gas turbine exhaust temperature was allowed to rise
to 1,050 degrees F, approximately 40 degrees F above the base-load
condition. All other operating parameters remained unchanged.
3. The second off-design case study involved shutting down one of the two gas
turbines and checking the facility output and heat rate under this
operating scenario. The single operating gas turbine was run at 80
percent of rated load by modulating the inlet guide vanes. Two of the
cooling tower fans were operated at half speed because the condenser load
was only half of the reference case value. No other operating parameters
were changed.
SUMMARY OF RESULTS
The results of the three Gate Cycle case studies are presented below. The
reference case results, depicted graphically in Figure D-1, are compared with
the guarantee point results in Table D-1 below.
Table D-1
REFERENCE CASE RESULTS
Performance Measurements EPC Guarantee Gate Cycle Results
-------------------------------------------------------------------------------
Net Plant Output (MW) 230.0 238.27
Net Plant Heat Rate 7,124 7,041.6
(Btu/kWh) (LHV)
1. The reference model for the GateCycle calculation shows a margin of 3.5
percent in plant output over the guaranteed output. The calculated
results also show a margin of 1.2 percent below (favorable) the guaranteed
plant heat rate.
2. The first off-design case study (maximum power case) investigated the
potential maximum power output of the facility. At the elevated gas
turbine firing rate, the plant achieved 251.0 MW with a heat rate of
6,911.4 Btu/kWh (LHV). These calculated results can be considered
preliminary because no checks were made to see whether any component had
reached its maximum operating limit. This could be generator temperature
rise limits, STG steam flow rate limits, condenser limits, or a variety of
other component limits. This case study merely shows the plant to be
capable of elevated power output. The maximum power case results are
shown in Figure D-2.
3. Finally, the second off-design case study was performed with only a single
gas turbine operating at 80 percent of its base-load rating. At this
point, the combined-cycle plant output was 98.5 MW and a heat rate of
7,255 Btu/kWh (LHV). The single gas turbine 80 percent load case results
are shown in Figure D-3.
Figure D-1
PANDA-BRANDWYINE COGENERATION PLANT
DIAGRAM
Figure D-2
PANDA-BRANDWYINE COGENERATION PLANT
DIAGRAM
Figure D-3
PANDA-BRANDWYINE COGENERATION PLANT
DIAGRAM
<PAGE>
PACIFIC ENERGY SYSTEMS
Officer's Certificate
I, John R. Martin, President of Pacific Energy Systems, DO
HEREBY CERTIFY that to the best of my knowledge and belief since July 22,
1996, no event affecting our report entitled "Independent Engineer's
Report, Panda-Brandywine Cogeneration Project" (the "Independent Engineer's
Report") or the matters referred to therein has occurred (i) which makes
untrue or incorrect in any material respect, as of the date hereof, any
information or statement contained in the Independent Engineer's Report or
in the Prospectus relating to the offering of Pooled Project Bonds, Series
A-1 due 2012 by Panda Funding Corporation (the "Prospectus") under the caption
"Independent Engineer's Report-Brandywine" in the Prospectus Summary or (ii)
which is not reflected in the Prospectus but should be reflected therein
in order to make the statements and information contained in the Independent
Engineer's Report or in the Prospectus under the caption "Independent
Engineer's Report-Brandywine" in the Prospectus Summary, in light of the
circumstances under which they were made, not misleading.
WITNESS my hand this 11th day of October, 1996.
By: /s/ John R. Martin
Name: John R. Martin
Title: President
<PAGE>
APPENDIX G
CC PACE
R E S O U R C E S
PANDA-BRANDYWINE, L.P.
GENERATING FACILITY
FUEL CONSULTANT'S REPORT
FINAL REPORT
July 2, 1996
Prepared by:
C.C. Pace Resources, Inc.
Legal Notice
This report is meant to be read as a whole. In preparing this report, Pace
relied on information and statements obtained from various sources, including
Pacific Energy Systems, Inc., and ICF Resources, Inc. Pace makes no
assurances as to the accuracy of any such information or any conclusions based
thereon. Additionally, neither Pace, nor any Pace employee, a) makes any
warranty, expressed or implied, with respect to the use of any information
or methods disclosed in this report; or b) assumes any liability with
respect to the use of any information or methods disclosed in this report.
TABLE OF CONTENTS
I. EXECUTIVE SUMMARY H-1
INTRODUCTION H-1
FUEL PLAN OVERVIEW H-1
KEY CHARACTERISTICS H-3
POWER PURCHASE AGREEMENT H-4
GAS SUPPLY H-6
GAS TRANSPORTATION H-9
BACKUP FUEL OIL H-11
FUEL MANAGEMENT H-12
II. PPA REQUIREMENTS H-13
OPERATIONAL REQUIREMENTS H-13
PAYMENTS H-16
PPA SECTION 11.2 H-21
AVAILABILITY REQUIREMENTS H-22
III. NATURAL GAS SUPPLY H-23
FUEL REQUIREMENTS H-23
GAS SUPPLY CONTRACT TERMS H-25
GAS SUPPLY SECURITY H-28
GAS COST LINKAGE WITH PPA ENERGY PAYMENTS H-34
PRO FORMA MODEL H-39
IV. NATURAL GAS TRANSPORTATION H-40
CONTRACTUAL ARRANGEMENTS H-40
SUFFICIENCY OF CONTRACTED CAPACITY H-43
TRANSPORTATION COSTS H-44
OPERATIONAL ISSUES H-46
PEAK PERIOD RELEASE H-48
PRO FORMA MODEL H-49
V. BACK-UP FUEL OIL H-52
FUEL OIL REQUIREMENTS H-52
FUEL OIL AVAILABILITY H-54
AIR PERMIT H-53
FUEL OIL PRICING H-53
PRO FORMA MODEL H-54
VI. FUEL MANAGEMENT H-55
FUEL MANAGEMENT AGREEMENT AND PLAN H-55
EXPERTISE OF CDC FUEL MANAGEMENT H-58
EXHIBIT A: STATISTICAL ANALYSIS OF GSA AND
PPA FUELRELATED INDICES H-59
PRICE DIFFERENTIAL BETWEEN LOUISIANA AND
APPALACHIA SUPPLY H-60
FGMR REVENUE VERSUS TIER 2 GAS COST H-62
EXHIBIT B: LNG GAS QUALITY ISSUES H-68
EXHIBIT C: PEAK PERIOD RELEASE DETAILS H-70
I. EXECUTIVE SUMMARY
Introduction
This report is an independent description by C.C. Pace Resources, Inc.
("Pace") of the fuel supply and transportation arrangements of an electric and
steam generating facility located near Brandywine, MD ("the Facility").(1)
Pace was retained to provide this report by Panda Energy International, Inc.
for Panda-Brandywine, L.P. ("Panda") in connection with a planned offering of
securities.
Currently under construction, the Facility is expected to commence
commercial operation in the Fall of 1996. The Facility consists of two
combustion turbine generators ("Unit 1" and "Unit 2"), two heat recovery
steam generators, and one steam turbine generator arranged in combined cycle
configuration with process steam being exported for off-site use.(2) Total
generating capacity will be 230 megawatts ("MW").
Electricity will be sold to Potomac Electric Power Company ("PEPCO")
according to the terms and conditions of a Power Purchase Agreement dated
August 9, 1991, and as amended by a First Amendment dated September 16, 1994
(the "PPA"). The PPA has a term of 25 years from the date of the start of
commercial operation.
Fuel Plan Overview
Figure I-1 provides a schematic representation of the basic fuel plan as
developed by Panda. The Facility will be fueled primarily by natural gas,
with No. 2 fuel oil as backup supply. Unit 1, which the PPA specifies will
be dispatched at certain times, will be fueled with firm gas supply and
transportation as required by the PPA. Unit 2 is dispatchable under the PPA
and will be fueled with gas purchased at short-term market rates.
Interruptible transportation arrangements for Unit 2 fuel are in place to be
used, if required. Due to the expected hours and frequency of Facility
operation, Panda expects to deliver gas to Unit 2 using pipeline balancing
services and provisions available under Unit 1's firm transportation
arrangements.
Firm gas supply will be provided by Cogen Development Company ("CDC"),the
fuel supply subsidiary of MCN Corporation ("MCN") under a long-term Gas Supply
- ----------------------------
(1) This report describes only portions of the relevant contracts and
documents as neededfor the discussion at hand. A complete description or
legal evaluation of the contracts and documents related to the Facility is
beyond the scope of this report. Additionally, electric market evaluation is
beyond the scope of this report and is not included in the scope of Pace's
engagement with Panda.
(2) Steam will be sold to a distilled water plant.
Agreement ("GSA"). CDC also has a long-term contract with Panda to be the fuel
manager for the Facility. The GSA includes a corporate warranty from MCN.
Gas will be priced in tiers which are intended to correspond to the fixed and
market based energy payment pricing under the PPA. A portion of the firm gas
supply is provided under a fixed price schedule, with the volumes designed to
match the portion of the energy payments under the PPA which are subject to a
fixed price schedule. The contract has a minimum term of 15 years, which
matches the time during which the PPA provides a fixed-price energy payment.
Required volumes of interruptible supply can be purchased from CDC or another
supplier.
Panda has executed 25-year firm transportation contracts with three
pipelines: Columbia Gas Transmission Corporation ("TCO"), Cove Point LNG
Limited Partnership ("CLNG"), and Washington Gas Light Company ("WGL"). These
contracts provide sufficient pipeline capacity rights to serve 100% of the
requirements of Unit 1. Commencement of service under the TCO contract is
subject to completion of construction that has commenced. Interruptible
transportation arrangements are in place for service to Unit 2, if required.(3)
Backup fuel oil will be used to operate the Facility during periods of
gas service interruption. A 2 million gallon on-site storage tank will
provide 6 days of supply at full dispatch of both units. Panda plans to
contract for firm supply and transportation of fuel oil before the start of
the winter heating season and ensure that on-site storage levels are kept full
during winter.
FIGURE I-1
BASIC FUEL PLAN
DIAGRAM
- ---------------------------
(3) Interruptible transportation service contracts have been executed with TCO
and with CLNG sufficient for Unit 2 volumes. The WGL agreement provides
volumes for both Unit 1 and Unit 2.
Key Characteristics
Pace has identified a number of fuel-related risks associated with the
Facility. These risks are summarized within the Executive Summary and
discussed fully in the body of this report.
Certain statements below in this section and elsewhere in the report are
forward-looking statements are based on current expectations and consequently
involve risks and uncertainties. Consequently, Panda's actual results could
differ materially from the expectations expressed in the forward-looking
statements. The various factors that could cause Panda's actual results to
differ materially from the expected results are discussed in the body of the
report and should be carefully considered.
Pace has observed the following key characteristics concerning the fuel
plan, which must be considered in conjunction with the full report:
1. CDC, an experienced gas supplier with reserves sufficient to support the
fixed-price portion of the GSA, is required annually under the GSA to
ensure that its reserves continue to be adequate to meet that obligation,
and has ongoing gas marketing operations more than sufficient to support
the remaining contractual obligations with Panda. MCN also has
substantial assets backing its corporate warranty of CDC's gas supply
obligations.
2. The market-based pricing provided under the PPA corresponds to the
pricing at which gas supplies are generally available, and is similar
to the pricing at which gas supplies are available from CDC.
3. Gas transportation arrangements are in place for firm transportation for
100% of the fuel supply requirements for Unit 1 for the PPA term, subject
to the obligation of Panda under limited circumstances to release to WGL
all of Panda's firm gas supply. The regulatory approvals for these
arrangements have been received. Construction is completed on CLNG and
WGL. On TCO, the required pipeline construction has commenced and should
be completed before commencement of commercial operations of the Facility,
according to information from TCO.
4. There is a strong linkage between changes in the Facility's expected
variable fuel-related costs and revenues.(4) Several potential
delinkages re mitigated by significant initial positive margins in
energy payment components.
- ----------------------------
(4) Variable fuel costs do not include pipeline reservation charges.
5. PEPCO has approved the fuel supply arrangements as fulfilling the
contractual requirements of the PPA at this time. Under reasonable
assumptions (including reasonable and prudent action by Panda), the fuel
supply arrangements should continue to fulfill the contractual
requirements of the PPA. This includes the requirements that Panda
maintain a reliable fuel supply and that the fuel supply arrangements can
reasonably be expected to result in variable fuel-related costs that are
less than energy payments under the PPA.
6. The gas supply and transportation operational requirements are flexible
enough to satisfy electric dispatch operational requirements, provided
sound fuel management is employed. CDC and its affiliates have fuel
management experience, and CDC's fuel management performance is backed by
a corporate warranty from MCN.
7. The backup fuel plan provides Panda the capability to meet dispatch
requirements, assuming firm fuel oil supply and transportation contracts
are in place before each heating season and the Facility's air permit
allows use of fuel oil.
8. The pro forma modeling of Facility reflects the Facility's fuel supply
arrangements, using the gas and oil price projections of ICF Resources,
Inc. ("ICF"). ICF is a recognized forecaster of gas and oil prices and
reports that it used the same forecasts in ICF's dispatch study of the
Facility. As a consequence of the expected dispatch of the Facility
projected by ICF, the pro forma modeling reflects significant benefits of
certain pipeline balancing provisions under the assumption that these
provisions will continue over the term of the PPA. These balancing
provisions are not contractual rights and there is no guarantee that these
provisions will continue over the entire pro forma modeling term.
Power Purchase Agreement
Dispatch Segments
The PPA partitions the capacity of the Facility into four Dispatch
Segments as summarized in Table I-1. PEPCO must dispatch the Facility in
sequence from Segment 1 to Segment 4. These Dispatch Segments are used to
determine the operational requirements and level of payment for the Facility.
<TABLE>
<CAPTION>
Table I-1. Dispatch Segments
- ------------------------------------------------------------------------------
SEGMENT UNIT OUTPUT DISPATCH
<S> <C> <C> <C>
Segment 1 Unit 1 0 - 99 MW Limited Dispatch*
Segment 1 Unit 1 0 - 99 MW Dispatchable
Segment 2 Unit 1 99 - 117 MW Dispatchable
Segment 3 Unit 1 & Unit 2 117 - 199 MW Dispatchable
Segment 4 Unit 1 & Unit 2 199 - 237 MW Dispatchable
</TABLE>
- ----------------------------------------
*For Segment 1 (Limited Dispatch), the PPA establishes 60 hours per week as
"must-run" hours of plant operation, from 8 a.m. - 8 p.m. on the days Monday
through Friday.
Monthly Energy Payment
Payments from PEPCO to the Facility include a Monthly Energy Payment
("MEP") for electric generation. The MEP is a calculated based on the
dispatch segment under which the power was generated as shown in Table I-2.(5)
During contract years 1-15, the payment for certain portions of Unit 1
generation is based on fixed prices (the Firm Gas Reserve Rate or "FGRR"),
while at other times the payment is based on prices adjusted by a market index
(the Firm Gas Market Rate or "FGMR"). Unit 2 generation is paid for based on
prices adjusted by either a gas market index (the Interruptible Gas Rate or
"IGR") or an oil market index (the Oil Rate or "OR"). After the 15th year the
payment for all generation from the Facility is solely based on the FGMR for
Unit 1 and IGR or OR for Unit 2.
<TABLE>
<CAPTION>
Table I-2. Dispatch Segment Energy Payment
- ------------------------------------------------------------------------------
SEGMENT UNIT ENERGY PAYMENT
<S> <C> <C>
Segment 1-Limited Dispatch Unit 1 year 1-15 FGRR, year 16-25 FGMR
Segment 1-Dispatchable Unit 1 FGMR
Segment 2 Unit 1 FGMR
Segment 3 Unit 2 IGR or OR
Segment 4 Unit 2 IGR or OR
</TABLE>
The FGRR is $2.58 per MMBtu in the first contract year and escalates
annually tospecified prices. The prices will be adjusted one time for
inflation at the start of commercial operations.
The FGMR is comprised of an initial commodity price of $1.62/MMBtu
indexed by four monthly reported published natural gas spot prices, two from
Appalachia and two from the Gulf Coast, and an initial transportation price of
$0.65/MMBtu adjusted each month by one-half the change in an inflation index.
The cost of transportation on CLNG, calculated on a 100% load factor basis, is
passed-through by the Facility by adding this charge to the FGMR.
- -----------------------
(5) A special rate applies if the steam turbine is not in operation.
The IGR is based on a market price index similar to the FGMR.
The OR is based on an index using No. 2 fuel oil prices in the Facility's
geographic area. Under certain conditions, the OR is used in place of the IGR
if oil is used for electric generation in Unit 2.
PPA Section 11.2
Generally speaking, PPA Section 11.2 requires Panda to maintain a
reliable fuel supply that includes firm gas supply and transportation
arrangements for Unit 1, interruptible supply and transportation for Unit 2,
and fuel arrangements that will enable Panda to recover its variable fuel costs
from the MEP. PEPCO has approved the fuel plan under the arrangements
described in this report and has provided in a Consent and Agreement dated
April 10, 1995, additional restrictions on the impact of any notice by PEPCO
in the future that it believes Panda is not meeting the requirements of
Section 11.2. In light of these PEPCO actions and under a reasonable
implementation related to Section 11.2, the Facility's fuel arrangements
should continue to meet the requirements of Section 11.2.
Gas Supply
Delivery Obligations
Under the GSA, CDC is obligated to provide up to 24,240 MMBtu of gas per
day (plus fuel use on TCO) on a firm basis and up to an additional 24,240
MMBtu of gas per day (plus fuel use on TCO) on an interruptible basis into
TCO at an interconnect with ANR Pipeline Company ("ANR").(6)
Based on information from Pacific Energy Systems, Inc., ("Pacific
Energy") each turbine requires a maximum of 961 MMBtu per hour when operating
at full load and Panda would require 23,064 MMBtu for each turbine for a full
day at maximum dispatch. This is 1,176 MMBtu per turbine less than Panda's
maximum quantity under the CDC contract.
- ----------------------------
(6) MCN has executed a firm transportation agreement with ANR providing
sufficient firm capacity to deliver the 24,240 MMBtu of gas per day into TCO.
GSA Tiers
The GSA divides quantities into four volume and pricing tiers:
1) Limited Dispatch Gas.
2) Scheduled Dispatch Gas.
3) Dispatchable Gas.
4) Interruptible Gas.
For clarity, we will refer to Limited Dispatch Gas as Tier 1, Scheduled
Dispatch Gas as Tier 2, Dispatchable Gas as Tier 3 and Interruptible Gas as
Tier 4.
Tier 1 volumes are the first 6,000-8,000 MMBtu/day of firm scheduled gas.
Panda must take or pay for an average of 6,300 MMBtu per day. The Tier 1
price is comprised of a fixed commodity charge, a demand charge, an "ANR"
charge, and a price credit. The total charge for Tier 1 volumes as of June 1,
1996, was $2.43/MMBtu.
Tier 2 volumes are a firm quantity of scheduled gas up to 24,240 MMBtu
less the Tier 1 quantity. Panda must take or pay for 80% of the beginning of
the month nominated quantity of Tier 2 gas. Price is set monthly on a
market-based index comprised of a price based on NYMEX natural gas futures
contract prices for the delivery month and a price ceiling based on three
published natural gas spot prices for Louisiana into ANR pipeline. The 1995
average of the Tier 2 price was $2.13/MMBtu.
Tier 3 volumes are a quantity of firm gas up to 24,240 MMBtu less the
Tier 1 and Tier 2 volumes. A quantity of interruptible gas up to 24,240 MMBtu
can be obtained at Tier 4 prices. The price for Tier 3 and Tier 4 volumes is
set by CDC when gas is purchased based on current market conditions. At
Panda's option, Tier 3 volumes may be bought at a market index of the average
of that day's published price for natural gas in Appalachia on TCO. Panda may
also obtain Tier 3 and 4 volumes from another supplier.
Energy Payment Linkage
The GSA tiers are intended to correspond with the fixed and market-based
pricing under the PPA. Table I-3 shows the intended correspondence.
<TABLE>
<CAPTION>
Table I-3. GSA Tiers and PPA Payment Categories
GSA PPA
Tiers Description Dispatch Payment Description
- ------- ----------- -------- ------- -----------
<S> <C> <C> <C> <C>
Tier 1 fixed price Limited Dispatch FGRR fixed price
Tier 2 market price Dispatchable FGMR market price
Tier 3 market price Dispatchable FGMR market price
Tier 4 market price Dispatchable IGR market price
</TABLE>
Statistical analysis reveals that the pricing structures and indices
under the GSA are strongly linked with the pricing structures and indices under
the PPA. However, there are variances between the GSA pricing tiers and PPA
terms. The pricing tiers under the GSA operate based on the amount of volume
taken, while the pricing tiers of the PPA operate on the basis of specified
time periods and megawatts of electric output. This difference creates a
potential for delinkage in terms of gas supply volumes and price with the
revenue mechanisms of the PPA.
To satisfy Limited Dispatch requirements, Pace estimates the Facility
needs a maximum of 9,957 MMBtu Monday through Friday and 0 MMBtu on the
weekend. Under the GSA, Tier 1 gas is designated as the first 6,000-8,000
MMBtu taken per day. Additionally, on weekends, the first 6,000 MMBtu per day
(at a minimum) will be priced at the fixed rate while all weekend dispatch
will be compensated at market-based gas rates.
From this potential volume delinkage a potential price delinkage occurs.
After the first 8,000 MMBtu is taken during a day, the remaining volumes will
be priced at a market rate. Additionally, on weekends the first 6,000 MMBtu
(at a minimum will be priced at the fixed rate while all weekend dispatch will
be compensated at a market-based rate. The market prices of Tier 2 and Tier 3
may not correspond with the FGRR.
Sound fuel management using the flexibility in the transportation
arrangements will be required to keep Tier 1 synchronized with the Limited
Dispatch portion of the PPA.
Performance by CDC
CDC currently has sufficient producing reserves to support its fixed-
priced volume commitments under the GSA. The GSA obligates CDC to continue to
maintain sufficient reserves to service its fixed price contracts over the
term of the GSA. The GSA provides for a dedication of a portion of CDC's
reserves if necessary to ensure CDC can meet its supply obligations.
Additionally, CDC's exploration and production prospects appear excellent in
Michigan and CDC is pursuing these prospects.
CDC's gas supply obligations are backed by a corporate warranty. Pace
has reviewed available public information and finds MCN to be well positioned
in the market and in excellent financial health. MCN has steadily increased
net income from $35.1 million in 1991 to $96.8 million in 1995. Over this same
period, assets have grown from $1,517 million to $2,899 million and operating
revenues have expanded from $1,276 million to $1,585 million.
Availability of Gas Supply Through the PPA Term
The GSA term covers the PPA fixed-price energy payment period, but does
not extend through the PPA term (25 years). After expiration of the PPA fixed-
price energy payment period, all energy payments are based on published
short-term gas market indices.
Assuming Panda takes reasonable and prudent actions, it should be able to
obtain a reliable fuel supply after the GSA expires. The market price indices
provided in the PPA track the price of short-term gas purchases. Additionally,
gas supply fundamentals are such that market-priced gas will likely be
generally available in an orderly commodity market.
Gas Transportation
Three pipelines form the gas transportation route for the Facility. Each
is discussed in turn below. The gas transportation contracts for each of
those pipelines extends through the full term of the PPA.
TCO
The first stage of the transportation route uses TCO from an
interconnection with ANR to the CLNG interconnection with TCO. Panda has
executed a 25-year agreement with TCO for 24,240 MMBtu per day of firm
transportation capacity under TCO's FTS-1 tariff rate schedule.
TCO Construction
For service to commence under the firm TCO contract, TCO needs to
install 6.3 miles of pipeline. The construction is comprised of replacing
several segments of 26-inch pipe with 36-inch pipe and also laying a second
pipe alongside existing pipe to add capacity.
The Federal Energy Regulatory Commission ("FERC") has approved the
expansion and authorized TCO to begin construction on all phases of the
expansion. TCO has reported to FERC that construction was initiated on
May 13, 1996.
Absent any unusual occurrence, a pipeline construction project of this
scope would take no more than two months. This indicates that firm service
under the TCO contract will be available before the end of Summer 1996. TCO
has obtained all rights-of-way for the expansion, but has not yet obtained
desired rights-of-way for construction access. Based on discussions with TCO
about the access details, this matter is not expected to delay completion
of the expansion.
Panda has arranged alternative firm gas transportation arrangements in
the event that the TCO expansion is not completed prior to November 1996.
CLNG
The second stage of transportation is on CLNG pursuant to an executed
firm service agreement under CLNG's FTS tariff. Service will be provided at
the maximum tariff rate. CLNG has reported to FERC that all construction
required to serve Panda (minor construction at a metering site) has been
completed.
Risk of LNG Operations
In the future, CLNG may become an import facility for liquefied natural
gas ("LNG"). Historically, LNG imports through the CLNG facilities have
resulted in gas quality changes that in turn resulted in additional costs to
customers. There are a number of considerations that indicate a reoccurrence
of the historical problems is unlikely.
WGL
The final transportation stage involves WGL, a local distribution
company. WGL will provide firm transportation to the Facility for a
$.05/MMBtu fee according to an executed agreement between Panda and WGL. WGL
has reported in writing that it has completed construction of the less than
one mile of new pipe required to service the Facility.
WGL may use, under very limited circumstances, Panda's firm gas supply
and transportation capacity up to 24,000 MMBtu/d ("Peak Period Release").
WGL is limited in exercising a Peak Period Release to extremely cold days, for
no more than two days in any seven-day period and a maximum of five days each
month in December, January, and February. These limitations combined with
Panda's reliable back-up fuel supply for the Facility provide assurance that a
Peak Period Release will not result in a failure to meet PEPCO dispatch
orders.
WGL Balancing Provisions
The balancing provisions provided by the WGL agreement are generally
very favorable to the Facility. However, use of the balancing provision when
the temperature is under 30 F could impose restrictions on the Facility's
ability to meet its electric dispatch obligations. Panda has informed Pace
that it plans to use the balancing rights on WGL when the average daily
temperature is less than 30 F only after exhausting all other options on TCO
and CLNG. Weather analysis indicates that this restriction will not
significantly affect the Facility's ability to appropriately manage its fuel
operations, assuming Panda implements its plan.
Backup Fuel Oil
Panda will construct a 2 million gallon storage tank to serve as backup
fuel supply for the Facility. Fuel oil will be used primarily to meet dispatch
of Unit 2 when interruptible gas supply and transportation is unavailable.
Oil also may be used in Unit 1 in the case of a WGL Peak Period Release.
Under the most extreme conditions of no gas service, full dispatch, and no
refill, the on-site storage would be depleted in 6.17 days. There are no
fuel oil contracts in place at this time.
Panda has stated it plans to contract for No. 2 low sulfur fuel oil with
major suppliers in the Baltimore/Richmond area approximately 60 days before
the start of operations or before each winter season. Panda reports that it
will contract for firm supply and transportation of fuel oil before the start
of each winter heating season and ensure that on-site storage levels are kept
full during winter.
Pace has found that fuel oil supply and transportation is readily
available in the area. There are over 25 major suppliers within a 60 mile
radius of the Facility with a combined storage capacity of No. 2 low sulfur
fuel oil in excess of 1 million barrels. Numerous fuel oil trucking firms are
available.
In light of the PPA requirements and the rights of WGL to use the
Facility's gas supply and transportation during certain periods, a reliable
supply of fuel oil at the Facility is important. Because of the ready
availability of fuel oil and transportation, Panda should be able to execute
its fuel oil plan.
Panda will need to purchase low sulfur No. 2 fuel oil while the PPA
indices are based on regular No. 2 fuel oil, which generally is less
expensive. This potential cost/revenue delinkage is mitigated by a significant
initial positive margin.
Fuel Management
Capable fuel management will be important for Panda to meet the PPA
requirements. While the Facility has sufficient and, indeed, redundant rights
and services available to reasonably match gas dispatch with electric dispatch,
pipeline scheduling, balancing, and flow rate requirements create a fuel
management challenge.
A fuel management contract between Panda and CDC provides for CDC to
perform fuel management, and Panda maintains the ability to make arrangements
on its own behalf. CDC and its affiliates have fuel management experience
commensurate in scope with the demands of the Facility. Additionally, CDC's
fuel management performance is backed by a corporate warranty from MCN.
Panda has developed a draft Fuel Management Plan and has advised Pace
that the Plan is currently being completed and that it will be implemented the
start of commercial operations. Completion and implementation of such a plan
should provide the guidelines for adequate fuel management.
II. PPA REQUIREMENTS
The PPA contains four key fuel-related operational/contractual
requirements. These requirements are:
- The Facility must run when dispatched. Consequences of not performing
include loss of payments and possibly default under the PPA.
- Limited Dispatch operation is compensated at fixed gas prices until the
15th contract year.
- PPA payments for dispatch operation contain components related to the
current market price of gas in the Appalachian and Gulf Coast producing
regions.
- Panda must maintain a reliable fuel supply and the fuel supply
arrangements must reasonably be expected to result in variable fuel-
related costs that are less than PPA energy payments.
Operational Requirements
Dispatch
The Facility's power output is divided into four segments according to
the PPA as shown in Table II-1. The fuel requirements and payments are
determined differently for each segment. The segments track the level of
electrical output of the Facility as PEPCO orders dispatch. PEPCO must
dispatch the segments in sequence (e.g., PEPCO cannot dispatch Segment 4
without first having dispatched Segments 1 through 3).
<TABLE>
<CAPTION>
Table II-1. Dispatch Segments
- -------------------------------------------------------------------------------
SEGMENT UNIT OUTPUT DISPATCH
------- ---- ------ --------
<S> <C> <C> <C>
Segment 1 Unit 1 0 - 99 MW Limited Dispatch*
Segment 1 Unit 1 0 - 99 MW Dispatchable
Segment 2 Unit 1 99 - 117 MW Dispatchable
Segment 3 Unit 1 & Unit 2 117 - 199 MW Dispatchable
Segment 4 Unit 1 & Unit 2 199 - 237 MW Dispatchable
</TABLE>
*See body of report for explanation of Limited Dispatch.
The PPA divides the 230 MW Facility into baseload and dispatchable
portions as follows. The Limited Dispatch portion is defined as 85% of the
maximum capacity of Unit 1 which equals 99 MW. The Dispatchable portion is
all capacity in excess of the limited dispatch portion, or 138 MW.
PEPCO is required to dispatch the Limited Dispatch portion of the
Facility's capacity for a total of 60 hours per week. The must run hours are
from 8 a.m. Monday to 8 p.m. Friday each week, except holidays. Assuming 50
weeks per year (10 days of holiday accounting for the other two weeks), Unit 1
would operate a minimum of 3,000 hours annually. This schedule is subject to
change by the Operating Committee.(7)
Table II-2 presents a summary of the dispatch forecast of the Facility
prepared by ICF in May 1996.(8) The capacity factor is the ratio of hours of
dispatch over total available hours. Run hours include the mandatory run time
for Limited Dispatch as well as operation based on economic dispatch as
calculated by ICF.
Based on the ICF projections, PEPCO will dispatch Unit 1 an average of
4,165 hours annually. Given that 3,000 of these hours are for Limited
Dispatch, PEPCO will dispatch Unit 1 an additional 1,165 hours on average per
year.
ICF projects that Unit 2 will run 2,782 hours per year on average. This
means that Unit 2 will be dispatched approximately 67% of the time Unit 1 is
operating.
In its pro forma assessment, ICF finds a possible range of 200 to 300
starts per year to be reasonable.(9)
- ---------------------------
(7) PPA Section 8.10 establishes an Operating Committee which includes a Panda
representative and can act only by unanimous agreement.
(8) Independent Assessment of the Dispatchability of the Panda-Brandywine
Project.
(9) Independent Panda-Brandywine Pro Forma Projections.
<PAGE>
<TABLE>
<CAPTION>
Table II-2. ICF Dispatch Projections(10)
- ------------------------------------------------------------------------------
YEAR UNIT 1 UNIT 2
----- ------- -------
Capacity Run Capacity Run
Factor (%) Hours Factor (%) Hours
------------------ ------------------
<S> <C> <C> <C> <C>
1996 42 616 29 420
1997 40 3482 25 2154
1998 46 4024 32 2782
1999 49 4249 37 3244
2000 51 4474 42 3705
2001 51 4475 39 3425
2002 51 4476 36 3145
2003 51 4432 36 3184
2004 50 4388 37 3222
2005 51 4450 37 3247
2006 52 4513 37 3271
2007 51 4450 36 3133
2008 50 4393 34 3002
2009 50 4342 33 2877
2010 49 4297 31 2757
2011 48 4224 30 2669
2012 47 4157 30 2586
2013 47 4097 29 2507
2014 46 4043 28 2431
2015 46 3996 27 2359
2016 45 3925 26 2308
2017 44 3858 26 2259
2018 43 3796 25 2212
2019 43 3739 25 2166
2020 42 3685 24 2123
2021 34 3008 20 1785
</TABLE>
Note: ICF projects 200 to 300 starts per year.
Heat Rates
Pacific Energy modeled the heat rate of the Facility on a weighted average
basis. The heat rate degrades over time due to wear on the turbines. On
average, Pacific Energy expects Unit 1 to require 8,119 Btu/kWh and Unit 2
8,025 Btu/kWh. The maximum heat rates forecast by Pacific Energy are 8,216
Btu/kWh for Unit 1 and 8,131 for Unit 2.
Pace has estimated the fuel requirements of the Facility for Limited
Dispatch only by increasing the heat rate provided by Pacific Energy by 200
Btu/kWh. This was done to consider partial dispatch of Unit 1 (i.e., 99 MW).
Pacific Energy did not calculate heat rates for partial dispatch. Pace's
analysis assesses the fuel requirements under both a Limited Dispatch scenario
using the adjusted heat rates and a full dispatch scenario using the Pacific
Energy heat rates.
- -----------------------------
(10) Pace has not performed independent analysis of these or any other
dispatch projections.
Steam Sales Obligations
Panda has a Steam Sales Agreement with Brandywine Water Company regarding
the sale of steam generated by the Facility. The Steam Sales Agreement
contains the following language: "Supplier shall be under no obligation to
supply Thermal Energy, cooling water and feed water to the extent it is not
operating one or both of its Heat Recovery Steam Generators; or such operation
is for repair or testing of the Facility."
The Steam Sales Agreement ensures that Panda will not be required to run
the Facility for the sole reason of supplying steam to the Brandywine Water
Company. This mitigates the potential need for additional fuel during plant
shut-down periods.
Payments
The two ongoing types of payments Panda will receive from PEPCO are a
Monthly Energy Payment and a Monthly Capacity Payment.(11)
Monthly Energy Payment
The Monthly Energy Payment ("MEP") to compensate Panda for electric
generationis comprised of the following types of payments:
- When in Combined Cycle Mode:
* Unit Commitment Payment
* Dispatch Payment
- When in Simple Cycle Mode:
* Simple Cycle Energy Payment
Table II-3 shows the correlation of the MEP variations to the dispatch
segments when the Facility is operated in combined cycle mode. The terms and
abbreviations are detailed in the remainder of this section.
- ------------------------
(11) Panda also will receive a Start-Up Energy Payment following a formula
based on the IFR.
<TABLE>
<CAPTION>
Table II-3. Dispatch Segment Energy Payments
- ------------------------------------------------------------------------------
SEGMENT UNIT MEP ENERGY COMPONENT
-------- ----- FORMULA COMPONENT TYPE
-------- --------- ----------
<S> <C> <C> <C> <C>
Segment 1-Limited Unit 1 UCP FGR FGRR, then FGMR*
Dispatch
Segment 1-Dispatchable Unit 1 UCP FGR FGMR
Segment 2 Unit 1 DP FGR FGMR
Segment 3 Unit 2 UCP IFR IGR or OR
Segment 4 Unit 2 DP IFR IGR or OR
</TABLE>
Note: Combined Cycle Mode.
*FGRR in years 1-15, FGMR in years 16-25.
Unit Commitment Payment
The Unit Commitment Payment ("UCP") is the formula for calculating the
MEP for Segment 1 and Segment 3 operation.(12) During Segment 1, a
component of the formula is the Firm Gas Rate ("FGR") which is meant to
reflect the cost of the Facility's reserves or firm gas contract costs.
During Segment 3, the formula includes an Interruptible Fuel Rate ("IFR"),
which is meant to reflect the cost of natural gas or oil obtained on the
spot market.
Dispatch Payment
The Dispatch Payment ("DP") is the formula for calculating the MEP for
Segments 2 and Segment 4 operation.(13) The FGR is part of the DP formula
during Segment 2. For power generation during Segment 4, the DP formula
includes the IFR.
Simple Cycle Energy Payment
PEPCO may dispatch the Facility when the steam turbine is not operating
only under a Maximum Emergency Generation Condition.(14) During such a
dispatch a Simple Cycle Energy Payment ("SCEP") will apply. A component of
the SCEP is the IFR.
- --------------------------
(12) PPA Section 6.2(b)(ii) presents the UCP formual payment.
(13) PPA Section 6.2(b) (iii) provides the DP formula payment
(14) Maximum Emergency Generation Condition is defined in the PPA as "A period
in which PEPCO has determined that it needs the maximum attainable Net
Electrical Output from the Facility as a result of an emergency shortage of
electric capacity or energy as declared by the PEPCO dispatcher or for such
other periods as the Parties may mutually agree on".
Firm Gas Rate
The FGR consists of two components: the Firm Gas Reserve Rate ("FGRR")
and the Firm Gas Market Rate ("FGMR").(15) The FGRR is a fixed rate, while
the FGMR is a market index based on reported gas prices. The must-run hours
will be priced entirely by the FGRR until the 16th contract year and then
must-run hours will be priced according to the FGMR.
Table II-4 shows how the rates are applied for the segments of Unit 1.
<TABLE>
<CAPTION>
Table II-4. FGR Components
- -----------------------------------------------------------------------------
1st Segment 2nd Segment
Limited Dispatch Dispatchable
----------------- -------------
<S> <C> <C> <C>
year 1-15 FGRR FGMR FGMR
year 16+ FGMR FGMR FGMR
</TABLE>
Firm Gas Reserve Rate
The FGRR is $2.58 per MMBtu in the first contract year and escalates
annually to specified prices. The escalation rate is 4% during the first
seven contract years, and then approximately 2% for the remaining years. The
prices specified in the PPA will be adjusted for the change in the Producer
Price Index for oil and gas fields for the period June 1994 to the start of
commercial operations. No other adjustment is made for inflation.
- -------------------------
(15) The original terms of the PPA envisioned Panda obtaining natural gas
reserves for fueling the limited dispatch portion of the power plant capacity.
Table II-5 presents the FGRR, with an estimated Adjusted FGRR.
<TABLE>
<CAPTION>
Table II-5. Unit 1 Fixed Price Gas Rate
- ----------------------------------------------------
Unadjusted Estimated
Contract FGRR Adjusted FGRR
Year ($/MMBtu) ($/MMBtu)
- ----------------------------------------------------
<S> <C> <C>
1 2.58 2.95
2 2.68 3.06
3 2.79 3.18
4 2.90 3.31
5 3.02 3.45
6 3.14 3.58
7 3.26 3.72
8 3.33 3.80
9 3.40 3.88
10 3.46 3.95
11 3.53 4.03
12 3.60 4.11
13 3.68 4.20
14 3.75 4.28
15 3.82 4.36
</TABLE>
- -----------------------------------------------
Note: The adjusted FGRR rates are estimated using June 1990 through May 1996
data and an inflation estimate through November 1996. The actual adjusted FGRR
will be calculated using data through the start of commercial operations.
Firm Gas Market Rate
The FGMR applies to all non-must-run hours during Segment 1 and all
Segment 2 hours.
The FGMR is calculated according to the following formula:
FGMR = FGMRi x [(.77 x CIf ) + (.23 x TIf)] x P
This formula adjusts the initial market rate of gas ("FGMRi") for changes
in the cost of gas and gas transportation over time. The factor "P" is .9 in
contract years 1 through 4 and 1.0 thereafter. This factor lowers the effect
of price increases on the calculated payment during the first four years of the
contract. The FGMRi is set at $2.27/MMBtu plus the firm displacement tariff,
not to exceed $0.20/MMBtu, on CLNG.(16)
- ----------------------
(16) The PPA defines MBtu as 1 million Btu. In this report, Pace uses MMBtu
to mean 1 million Btu.
The commodity index ("CI") is comprised of the following reported prices:
- Natural Gas Clearinghouse--Columbia Gulf, Onshore Laterals, LA
- Natural Gas Clearinghouse--Tennessee Gas Pipeline, Vinton, LA
- Natural Gas Intelligence--Columbia Gas Transmission, Appalachian
- Natural Gas Week--Columbia Gas Transmission, Broad Run, WV.
The June 1990 average of the four reported prices is the base of the
index. The June 1990 average was $1.62, implying that $0.65 was added for
transportation, or approximately 30% of the initial FGMR. The CI is comprised
of two prices from the Gulf Coast region and two prices from the Appalachian
region. Panda's gas supply cost will reflect either Gulf Coast gas prices or
Appalachia prices depending on Panda's nomination. This issue is addressed in
Chapter III and Exhibit A.
The Transportation Index ("TI") is intended to measure changes in
transportation costs. The formula to calculate the TI uses one-half of the
change in the Consumer Price Index for All Urban Consumers ("CPI") to
approximate escalation of transportation costs.
The CI is given a weight of 77% of the FGMR, while the TI is weighted at
23%. The effect of this weighting is addressed in Chapter III of this report.
The PPA provides a mechanism for the Operating Committee to review and
revise the calculation of the FGMR, the CI, and/or the TI by written notice
from either PEPCO or Panda during the period between 150 and 120 days prior to
the sixth anniversary of the Actual Commercial Operation Date and every third
anniversary thereafter.
Interruptible Fuel Rate
The IFR uses the IGR for hours of generation fueled by natural gas and
the OR for hours of generation fueled by oil in Unit 2.
Unit 2 operation on oil must meet certain requirements, such as
interruption of gas service on interstate pipelines, for the payment to be
based on the OI. As the IFR only applies to Unit 2, there is no provision for
payment by PEPCO for Unit 1 based on oil consumption.
As with the FGMR, the method for determining the IFR for natural gas and
for fuel oil can be reviewed and revised by the Operating Committee if proposed
within guidelines by either PEPCO or Panda. The Operating Committee shall in
good faith undertake a review of the IFR to determine the current market price
of fuel to comparable users and to revise components of the IFR as necessary to
reflect the market price.
Interruptible Gas Rate
The IGR is similar to the FGMR in that the IGR contains a commodity index
("CI") component linked to reported spot prices and a transportation index
("TI") component indexed to the CPI. The IGR for natural gas is initially set
at $2.27/MMBtu plus the firm displacement tariff on CLNG, not to exceed
$0.20/MMBtu--identical to the FGMR.
The CI and TI portions of the IGR are calculated the same way as for the
FGMR. The weighting is different, however. In the summer period from March to
November, the CI is weighted as 71% of the IGR and the TI as 29%. In the
winter period from December to February the CI is weighted as 84% of the IGR
and the TI as 16%.
Oil Rate
The initial OR is $3.89/MMBtu and is adjusted according to an Oil Index
("OI"). The OI is based on reported oil price for No. 2 fuel oil delivered to
Baltimore, Norfolk and Philadelphia. A separate component for local
transportation is not included in the OR. The linkage between revenues based
on reported prices of oil delivered to Baltimore, Norfolk and Philadelphia and
burnertip cost at the Facility is addressed in Chapter IV of this report.
Monthly Capacity Payment
In addition to the MEP, Panda receives a Monthly Capacity Payment ("MCP")
for standing ready to deliver energy to PEPCO. The MCP is paid to Panda based
on Panda's ability to deliver energy. The payment does not include any
components tied to the cost of fuel or transportation.
PPA Section 11.2
Generally speaking, Section 11.2 requires Panda to maintain a reliable
fuel supply that includes firm gas supply and transportation arrangements for
Unit 1, interruptible supply and transportation for Unit 2, and fuel
arrangements that will enable Panda to recover its variable operating costs
from the MEP. Concerning Limited Dispatch operations, Section 11.2 requires
Panda's purchase of natural gas to be through " a firm gas supply contract
equivalent to natural gas reserves."
PEPCO has the right under certain circumstances to take action if it
believes Panda is not meeting the requirements of PPA Section 11.2. PEPCO has
approved the fuel plan under the arrangements described in this report and has
provided in a Consent and Agreement dated April 10, 1995, additional
restrictions on the impact of any notice by PEPCO in the future that it
believes Panda is not meeting the requirements of Section 11.2. In light of
these PEPCO actions and under a reasonable implementation related to Section
11.2 the Facility's fuel arrangements should meet the requirements of Section
11.2.
Availability Requirements
The PPA states that Panda "shall sell and deliver to PEPCO and PEPCO
shall purchase and accept the Dependable Capacity and the Net Electrical
Output from the Facility..."(17) This obligation must be met or payments to
Panda are reduced.
In the event that Panda does not deliver, the Facility's availability
is lowered. The Facility's availability is used in the calculation of the MCP.
Hours of dispatch in which Panda fails to deliver, Force Majeure events not
withstanding, are counted against the availability of the Facility. In this
way, nonperformance by Panda results in lower energy payments.
Several PPA provisions will help Panda meet PEPCO dispatch orders,
including:
- 8.3 Schedule and Dispatch of Generation:
* PEPCO is required to furnish an estimated dispatch schedule for the
Facility and any changes at the times and in the manner that PEPCO
provides such estimated schedules for its own generating
facilities.
* PEPCO shall dispatch the Facility in accordance with Prudent
Utility Practices.
- 8.10 Operating Committee:
* Panda and PEPCO shall establish an Operating Committee of one
representative each to develop and implement suitable operating,
maintenance, outage and capability reporting, accounting, and
recordkeeping policies and procedures. The Operating Committee
shall act only by unanimous agreement.
Further, PEPCO cannot dispatch the Facility at its sole discretion. PEPCO
must take Panda's fuel supply and other contractual obligations into account
when arranging dispatch to comply with prudent utility practices.
Additionally, many of the procedures governing the operation of the Facility
will be arranged through the Operating Committee. Decisions from the type of
forms to use for invoices to the notification procedure PEPCO will follow when
dispatching the Facility will thus be made in concert with Panda's ability.
- -------------------------
(17) PPA Article 5.1
III. NATURAL GAS SUPPLY
The main issues addressed in this chapter are:
- Whether the GSA fulfills the PPA's operational and contractual
requirements.
- The security of gas supply.
- Linkage between gas supply costs and energy payment revenues.
Fuel Requirements
Full Dispatch
Pace has been informed that each turbine requires a maximum of 957 MMBtu
per hour when operating at full load.(18) Panda would require 22,968 MMBtu for
each turbine for a full day at maximum dispatch.
Limited Dispatch
Table III-1 provides calculations for required volumes of fixed price gas,
using the heat rates detailed in Chapter II.
Using a heat rate of 8,416 Btu/kWh gives an hourly requirement of 833
MMBtu/hour. Based on Limited Dispatch Panda would require 9,996 MMBtu per day
Monday-Friday, or 2,598,960 MMBtu on a yearly basis. On an average daily
basis, Panda would be receiving 7,120 MMBtu at the Facility.
Additional fuel would be required for pipeline retainage. Assuming fuel
loss of 3.14%(19) Panda would need 7,344 MMBtu into TCO on an average daily
basis.
- -----------------------
(18) As discussed in Chapter II, heat rates used in this report are provided by
Pacific Energy.
(19) 0% on WGL, 1% on CLNG, and 2.41% on TCO.
<TABLE>
<CAPTION>
Table III-1. Panda Limited Dispatch Gas Requirements
- -------------------------------------------------------------------------------
Heat Heat
Rate Rate
at Ave. at Ave.
Contract 117 MW MMBtu MMBtu Daily 99 MW MMBtu MMBtu Daily
Year Btu/kWh /hr 12 hours MMBtu Btu/kWh /hr 12 hours MMBtu
- ------- -------- ------ -------- ----- ------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 7,939 786 9,432 6,718 8,139 806 9,669 6,888
2 8,046 797 9,559 6,809 8,246 816 9,796 6,978
3 8,075 799 9,593 6,833 8,275 819 9,831 7,003
4 8,106 802 9,630 6,860 8,306 822 9,868 7,029
5 8,141 806 9,672 6,889 8,341 826 9,909 7,059
6 8,086 801 9,606 6,843 8,286 820 9,844 7,012
7 8,141 806 9,672 6,889 8,341 826 9,909 7,059
8 8,174 809 9,711 6,917 8,374 829 9,948 7,086
9 8,209 813 9,752 6,947 8,409 832 9,990 7,116
10 8,166 808 9,701 6,910 8,366 828 9,939 7,080
11 8,051 797 9,565 6,813 8,251 817 9,802 6,982
12 8,085 800 9,605 6,842 8,285 820 9,843 7,011
13 8,119 804 9,645 6,871 8,319 824 9,883 7,040
14 8,153 807 9,686 6,899 8,353 827 9,923 7,069
15 8,118 804 9,644 6,870 8,318 823 9,882 7,039
Ave. 8,107 803 9,631 6,861 8,307 822 9,869 7,030
</TABLE>
- -------------------------------------------------------------------------------
NOTES: Heat rates for full dispatch provided by Pacific Energy. Partial
dispatch heat rates estimated by adding 200 Btu/kWh.
The above calculations indicate that the GSA should provide for Panda to
be able to burn approximately 9,500 MMBtu per day Monday-Friday of fixed-price
gas of fixed-price gas, assuming PEPCO fully dispatches Unit 1. On an average
daily basis, this would mean Panda would take about 7,000 MMBtu per day of
fixed price gas.
Rates
The gas rates used for payments to Panda are detailed in Chapter II. The three
basic types of rates are the FGRR, the FGMR, and the IGR. In summary:
The FGRR, a fixed rate schedule for 15 years, is listed in Table II-5.
The FGMR is comprised of an initial commodity price indexed monthly by
published natural gas spot prices, two from Appalachia and two from the Gulf
Coast, and an initial transportation price adjusted monthly by one-half the
change in the CPI. The cost of transportation on CLNG, calculated on a 100%
load factor basis, is passed-through by the Facility.
The IGR is similar to the FGMR in that the IGR contains a commodity index
component linked to reported spot prices and a transportation index component
linked to the CPI, plus a CLNG component. The IGR has different summer and
winter weighting between commodity and transportation.
Gas Supply Contract Terms
Table III-2 provides an overview of the fundamental contract terms. The
GSA requires CDC to, provide up to 24,240 MMBtu of gas per day (plus fuel use
on TCO) on a firm basis, and up to an additional 24,240 MMBtu of gas per day
(plus fuel use on TCO) on an interruptible basis.
CDC wil deliver gas into TCO at the Monclova interconnect with ANR
pipeline in Ohio.(20)
The primary term of the GSA is 15 years, which corresponds to the PPA's
requirements for fixed price gas. The GSA will be extended for two additional
years, unless either party objects.
- --------------------------
(20) MCN has exeucted a firm transportation agreement with ANR providing
sufficient firm capacity to deliver the 24,240 MMBtu of gas per day into TCO
at Monclova.
Table III-2. GSA Basic Terms
- -----------------------------------------------------------------------------
Term Primary term of 15 years with up to 2 year extension if mutually agreed.
Volume Maximum Daily Firm Quantity ("MDFQ") = 24,240 MMBtu*
Maximum Daily Interruptible Quantity ("MDIQ") = 24,240 MMBtu*
* plus fuel use on Columbia Gas Transmission
MDFQ comprised of three tiers:
1. Limited Dispatch Gas = Scheduled gas of at least 6,000 MMBtu per day
and no more than 8,000 MMBtu per day.
2. Scheduled Dispatch Gas = Scheduled gas up to difference between 24,240
MMBtu per day plus fuel use and the quantity of Limited Dispatch Gas.
3. Dispatchable Gas = Scheduled gas up to difference between 24,240 MMBtu
plus fuel use and the sum of Limited Dispatch Gas and Scheduled
Dispatch Gas.
MDIQ: Interruptible Gas, up to 24,240 MMBtu per day + fuel use.
Price
Limited Dispatch Gas charge composed of 4 components:
1. Demand Charge (approximately $0.10/MMBtu on 7,000 MMBtu per day).
2. Commodity Charge of $2.33/MMBtu with 4% annual escalation.
3. An "ANR Charge" of $0.10 per MMBtu with annual escalation of $0.005
after the fifth contract year.
4. A price credit paid to Panda of $0.10 per MMBtu with annual escalation of
$0.005 after the fifth contract year.
These rates translate to $2.43 per MMBtu on a 100% load factor basis in
year 1.
Take or pay requirement of 2,299,500 MMBtu per year (2,305,800 MMBtu if leap
year). This is equivalent to an average daily requirement of 6,300
MMBtu/day.
Scheduled Dispatch Gas charge comprised of 3 components:
1. Index Price of the average of the NYMEX settlement price for the
delivery month contract for the last three trading days of the month
plus a margin of $0.50 per MMBtu.
2. The margin will escalate annually by $0.005 per MMBtu after year 5.
3. The price is capped by a Gas Market Price Ceiling of $0.60 plus 1.02 the
average of three published gas price indices available for month.
Take or pay requirement of 80% of the first of month nomination.
Dispatchable Gas charge comprised of 3 options:
1. Market price set by CDC at time of order.
2. Index price of the average of the high and low prices published by Gas
Daily for Columbia Gas pipeline in Appalachia on the day of order.
3. Purchase from a third-party supplier.
Interruptible Gas Charge set by CDC or purchase from third-party
supplier.
Supply Security
1. Replacement cost of fuel plus liquidated damages.
2. Potential reserve dedication
3. MCN Corporate Guaranty
- ----------------------------------------------------------------------------
GSA Volumetric Tiers
The GSA divides quantities into four volumetric and pricing tiers:
1) Limited Dispatch Gas.
2) Scheduled Dispatch Gas.
3) Dispatchable Gas.
4) Interruptible Gas.
For clarity, we will refer to Limited Dispatch Gas as Tier 1, Scheduled
Dispatch Gas as Tier 2, Dispatchable Gas as Tier 3 and Interruptible Gas as
Tier 4. Tiers 1 through 3 are designed to meet the entire firm requirements
of Unit 1. Tier 4 is designed to meet the interruptible requirements of
Unit 2, at Panda's option.
Tier 1 volumes are the first 6,000-8,000 MMBtu/day of firm scheduled gas.
Panda must take or pay for 2,299,500 MMBtu (2,305,800 MMBtu in a leap year)
each year, an average of 6,300 MMBtu per day. The Tier 1 price is comprised
of a fixed commodity charge, a demand charge, an "ANR" charge, and a price
credit. Total charge for Tier 1 volumes as of June 1, 1996 would be
$2.43/MMBtu.
The demand charge is $21,292 per month through year five, and thereafter
the demand charge escalates $1,064 each year. This charge translates into a
cost of approximately $0.10/MMBtu on 7,000 MMBtu per day. The initial
commodity charge is $2.33/MMBtu and applies to the quantity of gas delivered in
the month. The charge escalates annually by 4%. The ANR charge is
$0.10/MMBtu and escalates annually by $0.005 after the fifth contract year.
Panda receives a price credit of $0.10/MMBtu on the first 7,000 MMBtu taken
per day which offsets the demand charge. The price credit escalates by $0.005
after the fifth contract year.
Tier 2 volumes are a firm quantity of scheduled gas up to 24,240 MMBtu
less the Tier 1 quantity. Panda must take or pay for 80% of the beginning of
the month nominated quantity of Tier 2 gas. The price is set monthly based on
NYMEX futures prices for the delivery month and a price ceiling based on
Louisiana spot gas prices into ANR pipeline. The 1995 average of the Tier 2
price was $2.13/MMBtu.
The price is calculated by using the average NYMEX settlement price
during the last three days of trading for the delivery month contract, plus a
margin of $0.50 per MMBtu. This price is compared against the current price
ceiling. The price ceiling is established each month as $0.60 plus 1.02 times
the average of three published spot prices which are the following:
1. Natural Gas Clearinghouse, "Survey of Domestic Spot Market Prices"
for markets accessed by ANR Pipeline, Eunice, Louisiana;
2. Natural Gas Intelligence Gas Price Index, "Spot Gas Price" delivered
to pipelines, 30 day supply transactions for the South Louisiana
Region, contract index price for ANR pipeline; and
3. Natural Gas Week, "Spot Prices on Gas Pipeline Systems," ANR pipeline,
Southeast: Patterson, Louisiana, Bid Week.
Tier 3 volumes are a quantity of firm gas up to 24,240 MMBtu less the
Tier 1 and Tier 2 volumes. The price for Tier 3 volumes is set by CDC when
gas is purchased based on current market conditions. At Panda's option,
Tier 3 volumes may be purchased at a market index of the average of that day's
published price for natural gas in Appalachia on TCO as reported in Gas Daily.
Panda may also obtain Tier 3 volumes from another supplier.
Tier 4 volumes are a quantity Panda may purchase up to 24,240 MMBtu per
day on an interruptible basis. The price is that established by CDC for Tier 3
volumes, or Panda may decline and purchase from a third-party supplier.
Gas Supply Security
Essential elements constituting the Facility's gas supply security
include the following:
- Contractual commitments.
- MCN's financial and operational strength.
- Gas market fundamentals.
Each of these are discussed below.
Contractual Commitments
The GSA creates four major contractual commitments which strengthen
Panda's rights with regard to natural gas supply. These contractual
commitments are:
- Cost of Replacement Fuel.
- Cost of Replacement Contract.
- Reserve Dedication.
- MCN's Corporate Guaranty.
Cost of Replacement Fuel
In the event of a failure by CDC to deliver a portion of the MDFQ
quantities, which failure is not excused by a force majeure, Panda may obtain
replacement fuel, gas or oil, from another supplier. Or, in the event that
Panda could not obtain replacement fuel, Panda may recover any reduction in
payments from PEPCO.
CDC is liable for liquidated damages equal to one of the following two
options:
- Positive difference, if any, between (x) the cost Panda, or WGL in the
event of a Peak Period Release, paid for replacement fuel (including
transportation cost and any imbalance charges resulting from the failure
to deliver) and (y) the sum of the price applicable under the GSA that
Panda would have paid had CDC delivered that portion of the MDFQ plus
transportation cost.
- Positive difference, if any, between (x) the extent of the reduction in
payments from PEPCO to Panda (including the Monthly Capacity Payment and
Monthly Energy Payment) due to the failure to deliver natural gas and
(y) net expenses saved by Panda or not incurred due to not operating
the Facility as a result of the failure to deliver.
Cost of Replacement Contract
In the event of default, CDC is obligated to provide Panda with a lump
sum payment to cover the cost, if any, of replacing the GSA. The payment is
equal to the positive difference, if any, between (x) the cost of replacement
gas supply and (y) the aggregate contract price of the remaining contract
obligations. The cost of replacement gas supply shall include any
transportation cost, such as the cost of obtaining receipt point capacity on
a natural gas pipeline, or the cost of any option or swap Panda incurs as a
result of obtaining replacement gas supply.
Reserve Dedication
The GSA provides for the potential dedication by CDC of its natural gas
reserves. Annually, CDC is required to provide a statement to Panda that, for
the remaining term of the GSA, the expected future gas production from natural
gas reserves owned by CDC will be greater than CDC's firm, fixedprice natural
gas commitments. The letter will be based on a reserve report prepared by an
independent petroleum engineer.
In the event that the expected future gas production from CDC's reserves
does not exceed the firm, fixed-price gas commitments of CDC, CDC shall
dedicate to the GSA specific gas reserves sufficient to fulfill the
obligations of the Limited Dispatch Gas for the remaining term of the GSA.
There are numerous provisions governing the release of reserves from
dedication, sales and use of gas produced from the dedicated reserves,
encumbering the dedicated reserves, and rededicating reserves. Failure to
conform with the provisions regarding the dedication of reserves is deemed a
material breach of the GSA.
MCN's Corporate Guaranty
Through a separate agreement, MCN has agreed to unconditionally and
irrevocably guaranty the prompt and complete performance and payment of CDC's
obligations under the GSA.
MCN's Financial and Operational Strength
MCN is the holding company for Michigan Consolidated Gas Company
("MichCon"), Citizens Gas Fuel Company and MCN Investment Corporation
("MCNIC"). MCN appears to be in excellent financial health, based on
available public information. MCN has steadily increased net income from
$35.1 million in 1991 to $96.8 million in 1995. Over this same period, assets
have grown from $1,517 million to $2,899 million and operating revenues have
expanded from $1,276 million to $1,585 million.
MichCon, the largest natural gas distributor in Michigan and one of the
largest in the U.S., controls distribution, transmission, and storage of
natural gas serving more than 1.3 million customers (750 Bcf/year). Citizens
is a gas utility serving 12,000 customer in Michigan. MCNIC owns subsidiaries
involved in gas services, computer operations services, and natural gas
technology.
The diversified gas services interests held by MCNIC include: CoEnergy
Trading Company, the principal gas marketing subsidiary; CDC, a cogeneration
development subsidiary; Supply Development Group, an exploration and production
subsidiary; gas gathering and processing interests; and the Storage Development
Company. MCNIC remarketed 171 Bcf of gas in 1995, with a majority of these
sales attributable to CoEnergy Trading Company. CoEnergy's principal markets
are Michigan end-users, Canadian LDCs, cogeneration facilities, and recently
markets in the Northeastern U.S.
CDC owns 50% of a 123 MW gas-fueled cogeneration plant in Ludington,
Michigan, that commenced operations in October 1995. CDC is the gas supplier
for the facility, requiring approximately 9 Bcf/year. CDC also markets gas to
several small cogeneration facilities as well as the 30 megawatt Ada facility
in western Michigan of which CDC is the principal owner.
In existence since 1992, by the end of 1995 Supply Development Group
("SDG") had 858 Bcf of proved natural gas reserves with an additional 599 Bcf
of possible reserves. The company invested $575 million in reserve acquisition
and development between 1992 and 1995. The majority (80%) of SDG's reserves
are from Antrim shale formations in Michigan and low-risk Appalachian
formations; the remaining supply comes from the mid-continent and Gulf Coast
U.S. SDG has increased gas production to 31.4 Bcf in 1995 from 2.3 Bcf in
1993. The company expects to double production in 1996.
SDG has acquired ownership interests in 1,972 gas and oil wells. MCN has
proposed significant further capital expenditure on exploration and production
in excess of $1 billion over the next five years. SDG has the capability to
drill in excess of 2,000 new wells on 1.4 million undeveloped acres.
Long-term fixed price swap agreements are in place for a substantial portion
of SDG's anticipated production over the next ten years, hedging the risk of
future gas price fluctuations.
The above information indicates that CDC should be able to supply the gas
requirements for the Facility. Limited Dispatch requirements are
approximately 2.4 Bcf per year, and the total Unit 1 requirements are
approximately 8 Bcf per year. Under reasonable assumptions, CDC's production
goals can be expected to meet these requirements.
Gas Market Fundamentals
The GSA term covers the PPA fixed-price energy payment period, but does
not extend through the PPA term (25 years). After expiration of the PPA fixed-
price energy payment period, all energy payments are based on published
short-term gas market indices. At this time, Panda may need to negotiate with
producers for additional gas supplies.
Pace believes there will be a ready supply of natural gas available for
the life of the Facility. There is an abundant supply of technically and
economically recoverable natural gas in North America. The latest U.S.
government estimates of technically recoverable domestic natural gas resources
onshore and in state water areas exceeded 1,000 Tcf-- over 200 years of supply
at current rates of consumption.(21) Proved U.S. reserves are 153Tcf.
- -----------------------
(21) 1995 National Assessment of United States Oil and Gas Resources, United
States Geological Survey estimated national total for undiscovered technically
recoverable conventional gas to be 1,073.8 Tcf. Other recognized estimates
have concluced that the resource is even larger: the National Petroleum
Council's ("NPC") 1993 report concluded that nearly 1,300 Tcf was recoverable
in the lower-48 alone. Additionally, the Canadian gas resource base was
assessed by the NPC at 740 Tcf.
U.S. production has steadily increased since 1986 during the same time
that producers have been getting lower prices than in the early 1980's and
drilling fewer wells. The driving forces behind this result are the technology
enhancements and the efficiency improvements in the gas industry. Efficiency
is up and cost is down, allowing producers to profitably find and develop new
gas even while prices are falling.(22)
Examples of these technology enhancements and efficiency improvements
include:
1. Increased Recovery per Well -- Exploration and drilling
technologies such as 3D seismic and horizontal drilling have led
to significant increases in the amount of gas discovered per
exploratory well.
2. Improved Success Rates -- Success rates for deeper targets have
improved dramatically due to advancing technology.
3. Lower Well and Equipment Costs -- The numbers of rigs, crews, and
service units peaked in 1982 and has sense fallen drastically. For
example, in 1995 the number of oil and gas rigs in operation
averaged 723 compared to the peak of 3,970. Due to improved
exploration and drilling techniques, the industry can maintain the
same levels of production with a fraction of the equipment and
manpower.
4. Focus on Recompletions -- While the total number of gas wells
drilled has declined since the early 1980's peaks, the number of
recompletions (drilling into a new reservoir from an existing well)
has stayed nearly constant as producers focus on low cost options
for increasing reserves.
5. Focus on Location and Depth -- In response to low prices, producers
have shifted from lower productivity areas to higher recovery
reservoirs, and the percentage of wells surpassing 5,000 feet in
depth increased from 40% to 62%.
6. Focus on Existing Fields -- Producers have been highly successful
at adding reserves to existing fields, especially in the Gulf of
Mexico.
- -------------------------
(22) Non-associated gas resource costs peaked in 1982 at over $4.00/MMBtu.
Finding and development costs have since declined drastically, averaging
$1.50/MMBtu since 1987.
As a result of significant improvements in production technology and
management, the North American gas industry has become much more efficient
and able to provide an expanding resource base even in a flat and competitive
price environment. This has resulted in a trend in lower reserve to production
ratios ("R/P ratios") that is seen as a sign of a healthy, efficient natural
gas industry. In the past, the U.S. typically had R/P ratios of more than 10
years. Currently, the R/P ratio is 8.3 years.(23)
The R/P ratio trend is synonymous with the "just-intime" inventory
approach that has revolutionized many industries. In today's competitive
natural gas production industry it is not efficient for reserves to remain
undeveloped and non-producing for long periods of time. The current trend is
to monetize reserves by tying in reserves to production soon after discovery.
Gas Cost Linkage With PPA Energy Payments
Table III-3 shows the correspondence between the GSA tiers and the PPA
energy payments. Pace has found, through analysis, that the pricing structures
and indices under the GSA are strongly linked with the pricing structures and
indices under the PPA.
<TABLE>
<CAPTION>
Table III-3. GSA Tiers and PPA Payment Categories
- -----------------------------------------------------------------------------
GSA PPA
----- -----
Tiers Description Dispatch Payment Description
- ---- ------------ -------- ------- -----------
<S> <C> <C> <C> <C>
Tier 1 fixed price Limited Dispatch FGRR fixed price
Tier 2 market price Dispatchable FGMR market price
Tier 3 market price Dispatchable FGMR market price
Tier 4 market price Dispatchable IGR market price
</TABLE>
While the GSA satisfies the PPA operational and contractual requirements
in most respects, the four supply tiers create a few potential delinkages with
the PPA energy payments. These potential delinkages stem from several
operational and contractual factors, including the daily 6,000-8,000 MMBtu
volume limit on Tier 1 supply, the difference in Tier 2 and Tier 3 pricing
indices from the FGMR indices, and limited requirements on PEPCO to provide
advance notice of dispatch. The GSA tiers apply to the amount of volume
taken, while the PPA pricing tiers apply to specified time periods and
megawatts of electric output. These differences create a potential delinkage
in terms of gas supply volumes and price with the PPA's revenue mechanisms.
- --------------------
(23) The R/P ratio is a measure in years of the existing volumeof proved
reserves divided by the current production per year expressed as follows:
R/P ratio (years) = Proved Reserves (Bcf) / Current Production (Bcf/year).
Tier 1 and Limited Dispatch Operation
Figure III-1 compares the Tier 1 to Limited Dispatch requirements.
Pipeline imbalance service and fuel management will be required to keep gas
supply at the burnertip synchronized with electric dispatch. To satisfy
Limited Dispatch requirements, the Facility requires a maximum of 9,996 MMBtu
Monday through Friday, and zero MMBtu on the weekend. Under the GSA, the
Tier 1 gas is designated as the first 6,000-8,000 MMBtu taken per day.
Figure III-1. Limited Dispatch Consumption vs. Tier I Supply
BAR CHART
Rider 1
From this potential volume delinkage a potential price delinkage also
occurs. After the first 8,000 MMBtu is taken during a day, the remaining
volumes will be priced at a market rate under Tier 2 and Tier 3 that may not
correspond with the FGRR.
Tier 1 will cost $2.43/MMBtu in year 1, with approximately 4% annual
escalation (an additional charge of $0.10/MMBtu levied as an ANR Charge
escalates 1% annually after year 5). There is also a demand charge of $21,292
per month or $0.10/MMBtu (assuming 7,000 MMBtu/d), but this demand charge
should be canceled out by a Buyer's Credit of $0.10/MMBtu, which Panda
receives for each MMBtu up to 7,000 MMBtu/d.
Tier 1 prices escalate at a higher rate than the FGRR. Figure III-2
presents a comparison of the escalation rates.
FIGURE III-2. ESCALATION OF FGRR & TIER I
LINE CHART
Based on the most recent inflation data which will be used for a one-time
adjustment of the FGRR, the FGRR will provide a significant although declining
per unit margin over Tier 1 prices.(24) Although the FGRR energy payment
does not contain an explicit component for transportation costs, the FGRR
margin over Tier 1 prices should cover the Facility's variable transportation
costs associated with the fuel required for Limited Dispatch operation.
Figure III-3, a comparisonof the FGRR and Tier 1 supply prices, examines the
margin available to Panda to pay for variable transportation costs.
FIGURE III-3. FGRR & TIER 1 PRICES
BAR CHART
- ----------------------
(24) Pace calculated the inflation adjustment using data through May 1996.
The actual calculations will use data through the start of commercial
operations.
Rider 1
Total Weekly Consumption = 49,840 MMBtu/d
Total Weekly Supply at 6,000/day = 42,000 MMBtu/d
Total Weekly Supply at 8,000/day = 56,000 MMBtu/d
Total Weekly Supply at 7,120/day = 49,840 MMBtu/d
Tier 2 and Tier 3 and Dispatchable Operation
Table III-4 presents the indices that make up the PPA and GSA market-
based revenue and cost components. As shown, the indices used in the GSA do
not directly match indices used in the PPA. Analysis is required to show if
there is a linkage.
The major component of the FGMR will be current spot prices of natural
gas in Appalachia and the Gulf Coast. 77% of the FGMR's index and 70% of the
initial FGMR are comprised of monthly spot gas prices.
The cost of gas for dispatchable operation in Unit 1 will be based on
spot prices of natural gas in the Gulf Coast, plus a fixed margin for
transportation (Tier 2), or spot prices of natural gas in Appalachia (Tier 3).
On the most basic level, the energy payment indices and gas costs are linked.
Both costs and revenues will reflect the then current prices of natural gas in
the Appalachian and Gulf Coast regions.
Because the PPA and GSA indices are not the same, Pace evaluated their
historical relationships and price movements. Our analysis found a strong,
historical relationship between Appalachian and Gulf Coast market prices--both
generally and between the specific indices of the GSA's Tier 2 gas cost and the
PPA's FGMR payment.
<TABLE>
<CAPTION>
Table III-4. Cost And Revenue Index Comparison
- ------------------------------------------------------------------------------
GSA
IGR FGMR Non-Limited
Publication, Pipeline, Location Commodity Commodity Dispatch Gas
Index Index
Index Ceiling
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NGC, ANR, LA X1
NGC, Col. Gulf, Onshore Lats, La X X
NGC, Tennessee, Vinton, LA X X
NGI, ANR, South LA X1
NGI, TCO, Appalachia X X
NGW, ANR, Southeast LA X1
NGW, TCO, Broad Run, WV X X
GAS DAILY, TCO, Appalachia X2
IFERC, Col. Gulf, LA
NYMEX near month futures X3
- -------------------------------------------------------------------------------
Index Reopened Claue: 150-120 days 150-120 days If Commodity
index under
In what year(s)? prior to 3, prior to 6th, PPA changes
every third every third
thereafter thereafter
Who initiates? By either By either Panda
PEPCO or PEPCO or proposes
Panda Panda
Who decides? Operating Operating
Committee Committee
</TABLE>
- -------------------------------------------------------------------------------
1 Three indices averaged, then multiplied by 1.02, plus $.60.
2 Used for determining Dispatchable and Interruptible Gas price.
3 Average of settle price over last 3 trading days for contract for delivery
month plus $.50.
Exhibit A provides a detailed description of Pace's statistical
analysis. In summary, Pace's findings are the following:
- The cost and revenue indices appear to track closely based on historical
and statistical analysis. The correlation between the historical
prices of the cost and revenue indices is strong. Regression estimates
of the FGMR as a function of Panda's marginal burnertip cost and of the
commodity portion of the FGMR and the gas commodity cost both capture
98% of the variation in the payment, respectively. There is an obvious
close linkage between the two series with the desired result that
payments generally exceed costs.
- Small trend effects may be present that are working against the
project, but these effects should not be overstated. Recently,
increases in the Appalachia/Louisiana commodity index (revenue) have
been less than increases in the Louisiana index (cost), with the
positive margin of the revenue index eroding by one cent ($0.01) per
year. Fundamental market linkages between the indices should not allow
this erosion to continue indefinitely. Further, the apparent erosion
may itself be illusory due to imperfections in the statistical tests.
Pro Forma Model
The gas commodity costs used in Facility's pro forma model accurately
model Tier 1 gas prices and project other fuel commodity prices, including gas
commodity, based on forecasts by ICF. ICF is a recognized forecaster of
energy prices and reports that it used the same forecasts in ICF's dispatch
study of the Facility.
Pace's forecasts of gas and oil prices average lower than those of ICF
as used in the pro forma model. Because the model is designed to
"pass-through" gas commodity costs to the FGMR and IGR energy payments, the pro
forma model results should not be materially affected if Pace fuel price
forecasts were used for the market-based portion of the Facility's gas supply.
In actuality, fuel price is likely to be a determinant of dispatch and will
therefore likely be a factor in determining economic performance of the
Facility.
IV. NATURAL GAS TRANSPORTATION
Figure IV-1 depicts the Facility's gas transportation route. For Unit 1
supplies, the transportation plan entails:
- Long-haul, interstate, firm transportation on TCO.
- Interstate, firm transportation on CLNG.
- Local transportation on WGL.
Fuel management.
For Unit 2 supplies, the transportation plan involves:
- Interruptible transportation on TCO, CLNG, and local
transportation on WGL.
- Fuel management.
FIGURE IV-1. TRANSPORTATION ROUTE & RECEIPT POINTS
DIAGRAM
Contractual Arrangements
Panda has executed firm gas transportation contracts with two interstate
pipelines and a local distribution company: TCO, CLNG, and WGL. Panda has
also executed interruptible gas transportation contracts with TCO and CLNG.
WGL has agreed in its service contract with Panda to deliver to the Facility
on a firm basis all volumes delivered to it at the CLNG interconnect; thus no
interruptible contract with WGL is required.
TCO
The first stage of the transportation route uses the TCO pipeline from
the Monclova interconnection with ANR in Maumee, OH to the CLNG
interconnection in Loudoun, VA. Panda has executed a 25-year agreement with
TCO for 24,240 MMBtu per day of firm transportation capacity under FTS-1
tariff rates.
For service under the firm TCO contract to take effect, TCO needs to
construct facilities. A total of 6.3 miles of new pipe is required, comprised
of replacing several segments of 26-inch pipe with 36-inch pipe and also
laying a second pipe alongside existing pipe to add capacity.(25)
FERC has approved the expansion and authorized TCO to begin construction
on all phases of the expansion. TCO has reported to FERC that construction
was initiated on May 13, 1996. Absent any unusual occurrence, a pipeline
construction project of this scope would take no more than two months. This
indicates that firm service under the TCO contract will be available before
the end of Summer 1996.
TCO has not yet obtained all required rights-of-way for construction
access. One landowner is opposing TCO. According to documents filed with
FERC and discussions with TCO, TCO has initiated condemnation proceedings in
the Circuit Court of Braxton County, WV to obtain desired access routes. TCO
has informed Pace that it does not expect this matter to delay completion of
the expansion.
Alternate Arrangements
Panda has arranged alternative firm gas transportation arrangements in
the event that the TCO expansion is not completed prior to November 1996.
Panda has entered into letter agreements with CoEnergy Trading Company, an
affiliate of CDC, to provide an option for firm TCO capacity during the months
of August, September, and October 1996.
- -----------------------------
(25) TCO estimates the construction will cost approximately $11 million and
Panda will provide over 50% of the funding.
CLNG
Second stage transportation is on CLNG. CLNG connects with TCO in
Loudoun, VA and extends east to Cove Point, MD where it terminates at a
liquefied natural gas ("LNG") terminal. Panda has executed a FTS service
agreement with CLNG for service to the project for 24,000 MMBtu/d of capacity.
All CLNG start-up construction was completed by December 15, 1995,
according to a final construction/recommissioning report filed with FERC by
CLNG. The Loudoun interconnect has been in operation since September 1, 1995.
The CLNG facilities were mothballed until recently. The regulatory
process surrounding the recommissioning of CLNG is now complete. CLNG
accepted a FERC ruling and submitted a compliance filing on July 31, 1995,
in accordance with FERC regulations. On August 18, 1995, FERC accepted the
tariff sheets governing service on CLNG.
WGL Contract
The final transportation stage involves WGL. WGL will provide firm
transportation for Unit 1 and Unit 2 volumes to the Facility for a $.05/MMBtu
fee, with no reservation charges according to an executed Gas Transportation
and Supply Agreement ("GTSA") between Panda and WGL.
WGL needed to construct less than one mile of pipe from an existing WGL
pipeline along route 301 in Prince George's County Maryland to the Facility.
In a letter dated June 19, 1996, WGL reported to Panda that construction was
completed.
Key provisions of the GTSA concerning firm transportation on WGL are:
- Panda shall allow a "Peak Period Release" to WGL up to 24,000 Dth on
any day at or below 20o F (Washington National Airport reference for
gas day average temperature) in any December, January and February.
Such releases shall not exceed 15 days in any heating season, and
shall not result in a violation of Panda's Air Permit.(26) No more
than 2 days in any 7-day period and 5 days in a month may be
released. Because the climatic conditions required for WGL to
exercise a Peak Period Release are conditions which contribute to
capacity constraints on other gas pipelines used by Panda, during
these occasions Panda would rely on backup fuel oil to meet electric
dispatch.
- -------------------------
(26) Exception exists that a Panda negative gas imbalance on a day below 30
degrees F results in WGL being able to perfomr a Peak Period Release regardless
of Panda's air permit situation.
- WGL shall provide service for $0.05/Dth contingent upon 500 psig from
CLNG.
- WGL shall offer merchant service at a price equal to a Merchant Fee of
$.05 per Dth plus a Commodity Fee negotiated at least 5 days prior to
the beginning of each month. If a Commodity Fee cannot be agreed to,
no merchant service shall be provided for that month. Service will be
on a bestefforts basis from April to October, and as-available
November through March.
Sufficiency Of Contracted Capacity
In this section Pace reviews the sufficiency of the firm contracted
pipeline capacity, focusing on hourly and daily restrictions.
Hourly Flow Rates
Panda's supply and transportation contracts generally require Panda to
take gas in a manner that provides for uniform hourly flows. Panda has some
flexibility in hourly flow: WGL does not specify any requirements for even
hourly flow and CLNG's tariff provides for wide tolerances in hourly flow. A
uniform hourly flow rate over 24 hours is equivalent to burning 4.17% of the
daily volume each hour. As the Facility operates for less hours per day, the
ability to fuel the Facility with even hourly flows decreases. Based on
general industry standards, a 6% hourly burn rate should be used for planning.
Table IV-1 shows that the calculated burn rates for the Facility are under
6% except for 12-hour dispatch. Panda expects that Unit 1 will be dispatched
for periods longer than 12 hours.(27) The lack of hourly flow provisions on
WGLand the wide latitude for shippers on CLNG provide flexibility more than
sufficient to cover the amount by which a 12-hour operation exceeds a 6%
hourly consumption rate.
Daily Capacity
Panda's transporters can generally impose penalties for exceeding daily
scheduled volumes. Panda has a degree of flexibility in service on WGL and
CLNG: WGL does not restrict Panda's ability to run an imbalance on days when
the temperature is above 30 F, CLNG's tariff provides for 20,000 Dth/day
flexibility.
- -----------------------
(27) PEPCO is under no obligation to dispatch the Facility for more than 12
hours due to the defintiona of Must-Run Hours.
Table IV-1 shows that even under 24-hour dispatch, Panda will have
sufficient daily pipeline capacity. Panda has contracted for 24,240 Dth of
capacity on TCO and 24,000 Dth on CLNG and is unrestricted on WGL (whatever
volumes Panda has delivered to WGL will be delivered on a firm basis to the
Facility).
<TABLE>
<CAPTION>
Table IV-1. Panda Gas Consumption (Fully Degraded)
- -------------------------------------------------------------------------------
12 16 17 18 19 24
Hour Hour Hour Hour Hour Hour
Day Day Day Day Day Day
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Operation (961 Dth/h) 11,532 15,376 16,337 17,298 18,259 23,064
Start Up/Shut Down
(900 Dth) 900 900 900 900 900 0
Not Operating
(5 Dth/h) 60 40 35 30 25 0
TOTAL 12,492 16,316 17,272 18,228 19,184 23,064
Even Hourly Flow
(4.17%) 521 680 720 760 800 962
6% Hourly Flow 750 979 1,036 1,094 1,151 1,384
Hourly Consumption
Rate* 7.66% 5.87% 5.54% 5.25% 4.99% 4.15%
</TABLE>
- -------------------------------------------------------------------------------
* Based on scheduled quantity and Facility's hourly consumption rate.
Note: Assumes fully degraded heat rate as estimated by Pacific Energy.
Transportation Costs
Table IV-2 presents the current transportation charges under Panda's
firm and interruptible agreements with TCO, CLNG, and WGL. The total firm
transportation cost expressed on a per-unit basis is approximately
$0.35/MMBtu. Only approximately $0.08/MMBtu of the total cost is from usage
charges, with the bulk of the cost from reservation charges. Also shown are
the maximum tariff rates for interruptible service.
These transportation rates have been used in calculations presented in
Chapter III to assess Panda's ability to recoup fuel costs and variable
transportation costs from the PPA's energy payments. The analysis shows that
on a historical basis Panda would have accomplished this. An element of
whether this will remain the case in the future is whether the Facility's
transportation costs will remain less than the portion of the energy payment
revenues remaining after consideration of commodity costs.
Table IV-2. Panda-Brandywine, L.P. Gas Transportation Rates
- ------------------------------------------------------------------------------
FIRM INTERRUPTIBLE
-------------------- ------------------------
COLUMBIA GAS Max.
Tariff Per Dth Tariff Per Dth
Reservation Charge 100% LF Charge 100% LF
Winter Usage
Base $6.8400 $0.2249 (Nov.-Mar) $0.2384 $0.2384
TCRA $0.1840 $0.0060 $0.0355 $0.0355
EPCA $0.0300 $0.0010 $0.0030 $0.0030
SFS $0.2470 $0.0081 $0.0118 $0.0118
GRI $0.2600 $0.0085 $0.0088 $0.0088
Total $7.5610 $0.2485 Total $0.3097* $0.3097
Usage Summer Usage
(Apr.-Oct.)
Base $0.0128 $0.0128 $0.1635 $0.1635
TCRA $0.0032 $0.0032 $0.0247 $0.0247
EPCA. $0.0020 $0.0020 $0.0027 $0.0027
ACA $0.0022 $0.0022 $0.0022 $0.0022
GRI $0.0088 $0.0088 $0.0088 $0.0088
Total $0.0290 $0.0290 Total $0.2210* $0.2210
Total $0.2775
COVE POINT LNG
Reservation
Base $0.6764 $0.0222 Base $0.0222 $0.0222
Total $0.6764 $0.0222 $0.0222
Usage
Base $0.0009 $0.0009 $0.0009 $0.0009
ACA $0.0024 $0.0024 $0.0024 $0.0024
Total $0.0033 $0.0033 $0.0033 $0.0033
Total $0.0255 $0.0255
WASHINGTON GAS LIGHT
PANDA CONTRACT
Total $0.0500 $0.0500
TOTAL $0.3530 WINTER $0.3852
SUMMER $0.2965
AVERAGE $0.3409
- ------------------------------------------------------------------------------
* includes additional surcharges not separately listed.
There are several factors relevant to this issue.
First, the FGMR energy payment's TI component of $0.65/MMBtu contains a
large margin over current variable transportation costs.
Second, the TI is adjusted according to one-half the rate of change in
the CPI. In reality, transportation costs tend to move in "blocks" following
the regulatory procedure, and at any one particular moment the current rate may
deviate from the value that was based on a linear model of CPI. For long-run
modeling purposes, Pace has found one-half CPI to be a fair predictor of
regulated transportation costs.
Third, the design of pipeline rates between fixed and variable
components is subject to policy determinations by regulatory agencies. At
present, the federal policy is to include only actual variable pipeline costs
in calculating variable transportation rates. The rates of TCO and CLNG
reflect this policy. Our findings rely on the continuation of this policy.
Operational Issues
As detailed in Chapter III, Panda's actual minimum gas requirements are
approximately 9,500 MMBtu per day on Monday-Friday and zero MMBtu on
weekends. The GSA requires that Panda take at least 6,000 MMBtu per day and
no more than 8,000 MMBtu per day of Tier 1 fixed price gas. Panda will
require flexibility in its transportation services to avoid volumetric and
price delinkage.
Panda's transportation arrangements offer a combination of pipeline
services to mitigate potential delinkages between gas supply needs and
requirements and the attendant price delinkages.
Pipeline Balancing Services
Panda's Tier 1 supply will flow into TCO every day (due to the minimum
daily take requirement of 6,000 MMBtu), while the PPA specifies that the
Facility's Limited Dispatch hours occur only on weekdays. Panda will rely on
pipeline services to maintain an operational linkage between its gas dispatch
and electric dispatch. Specifically, the balancing services offered by TCO and
CLNG in their tariffs and the balancing service in WGL's service contract will
be used by Panda.
CLNG Balancing Service
The most attractive pipeline service is the liberal balancing provisions
on CLNG. CLNG's tariff contains extremely liberal balancing provisions. A
shipper may go out of balance (meaning that unequal volumes of gas are put into
the pipeline as are taken out) by up to 20,000 Dth in any hour and by up to
20,000 Dth total for the day. Generally on other pipelines, shippers are
required to take gas at an even flow--if 24,000 Dth were nominated for the
day, 1,000 Dth should be taken each hour.
Even if a shipper is out of balance according to the CLNG tariff, the
shipper is subject to only relatively minor penalties and possibly no penalties
at all. For each dekatherm a shipper is above or below the 20,000 Dth
tolerance explained above, a penalty of $5.00 may be assessed. A penalty will
only be assessed if other shippers on the CLNG line were harmed as a result of
the shipper going out of balance. This "no harm no foul" rule is unique to our
knowledge.
PEPCO, half owner of CLNG, has major reasons to want such liberal
balancing provisions. Historically, the largest volumes have flowed on hot
summer days when PEPCO used its peaking units which draw supply off the CLNG
line. CLNG personnel informed us that the balancing provisions were designed
around the PEPCO peaking units' consumption. CLNG believes that the pipeline
could absorb up to 20,000 Dth per hour or 20,000 Dth total for the day
imbalances and still maintain 600 pounds of pressure on the line. Maintaining
line pressure is critical to the CLNG's operation because the 80-mile pipeline
works without a compressor station through displacement.
CLNG's operational status is important as well. CLNG will be less than
half subscribed when service to Panda begins, providing up to 500 MMcf of
capacity for shippers to build imbalances.
CLNG system flexibility may decrease as a result of new services being
offered, such as a peaking service. If a large amount of peaking service was
expected, balancing flexibility might be limited during winter. CLNG officials
have informed Pace that even on peak winter days the balancing tolerances
provided in the tariff will be maintained. This is possible due to the nature
of the deliveries and the large amount of displacement to be used to provide
service.
WGL Balancing Service
Secondary to using the balancing arrangements on CLNG, Panda may use
balancing service from WGL as provided in the GTSA for a total fee of $.05 per
dekatherm: $.025/Dth injection charge and $.025/Dth withdrawal charge. The
service on WGL is part of the service contract with Panda.
The availability of balancing service on WGL is temperature dependent. If
the temperature is above 30 F balancing service is made available to Panda.
Between 20 and 30 F balancing service is availabl only at WGL's option. Below
20F, balancing service is not available.
The amount of imbalance is determined on a monthly basis, with actual
receipts and deliveries compared to nominated quantities. Panda can
"roll-over" any imbalance quantities less than 10% of the nominated quantity
to the next month. Imbalance quantities in excess of this 10% tolerance
must be paid for according to "Cash out" provisions--either a Commodity Fee
if in effect, or by an index based on Louisiana spot prices, with maximum
IT rates on Columbia Gulf, TCO and CLNG added. Volumes below the tolerance
level can be carried over into next month and possibly made up then.
TCO Balancing Service
Further upstream, Panda has a number of options on TCO, including Storage
in Transit ("SIT") service, to aid in mitigating any potential delinkages in
gas supply requirements and the attendant price delinkages.
SIT is a service provided in TCO's tariff for daily balancing on TCO.
The current cost is $.044/Dth injection fee and $.044/Dth withdrawal fee. A
limitation on SIT service is the need to balance the account twice every 30
days. This service is more expensive than WGL's and provides less flexibility.
Panda may also be able to access supply pools maintained by marketers on
TCO, third-party supply to the primary or secondary receipt points on TCO, and
interruptible transportation on TCO. Panda's primary receipt point, Monclova,
OH, is a major pipeline interconnect and could provide Panda access to numerous
suppliers without having to change to a lower priority, secondary receipt
point on TCO.
CLNG Pressure and LNG Issues
An important operational issue is the ability of CLNG to maintain at
least 500 psig of pressure on the pipeline. If pressure falls below 500 psig,
the obligation for WGL to delivergas is reduced from firm to a best efforts
basis.
Pace has reviewed correspondence from pipeline officials at TCO and CLNG
who assert that the operating pressure will be maintained well above the 500
psig threshold.
Peak Period Release
WGL has the ability under the GTSA to use all of Panda's firm gas
supply under a Peak Period Release. The volume of gas taken by WGL through a
Peak Period Release is entered into a banking account on Panda's behalf. This
banking account is resolved through Panda electing one of three options. It
is through banking account resolution that Panda receives revenues from WGL.
WGL may elect a Peak Period Release during the months of December,
January, and February. A maximum of five days per month, and no more than two
days in every seven may be elected by WGL. A Peak Period Release is further
restricted to only those days for which the average daily temperature at
Washington National Airport ("WNA") is predicted to be 20 F or below.
These provisions work to severely limit the occurrence of a Peak Period
Release. First, it is rare for WNA to record an average daily temperature
below 20 F, even during January and February. Normal average daily
temperatures at WNA are all above 30 F. January and February 1995 were
particularly cold with several winter storms.(28) Records show that for 6
days in January and 1 day in February the actual average daily temperature at
WNA was at or below 20 F.
Second, only up to 2 days in every 7 may be elected for a Peak Period
Release, further limiting eligible days and requiring WGL to husband Peak
Period Releases. For example, the 6 days below 20 F in January occurred
within a stretch of 7 days, and according to the terms of the contract, for
only 2 of these days WGL could have elected a Peak Period Release.
The contract contains a provision that Peak Period Releases by WGL will
not result in Panda violating its air permit as result of having to burn fuel
oil. This right is impaired by section 5.1(f), in which WGL may permit Panda
to incur a daily negative imbalance when the temperature is less than 30 F if
Panda does not obtain enough gas to meet the needs of the Facility. If Panda
does incur a negative imbalance, Panda forfeits its right to deny release up to
the imbalance quantity to WGL due to air permit restrictions. This could
result in periods of plant shut down. This matter concerning section 5.1(f)
is clearly limited by the numerous restrictions on WGL's ability to call a peak
period release.
Pro Forma Model
Transportation Rates
Pace has found that, in general, the Facility's pro forma model uses a
conservative forecast of transportation costs, from a lender's perspective.
Overall, Pace finds the pro forma model slightly overstates current pipeline
rates. The pro forma pipeline rate methodology is to escalate at 1/2 CPI the
- -------------------
(28) January 1995 was the coldest month since December 1989 and the coldest
January in 14 years.
base year rates, except for WGL rates which are kept constant according to
contract. Using an escalation factor of 1/2 CPI is a generally accepted
practice for forecasting pipeline rates, and as used in the pro forma model
is applied to certain components of the pipeline rates that may remain
constant or decline over time.(29)
Gas Balancing Charges
The pro forma model includes a charge on TCO for SIT service of
$0.044/MMBtu applied to each unit of firm gas shipped on TCO. SIT charges
include a $0.044/MMBtu injection fee and a $0.044/MMBtu withdrawal fee. Thus,
the model can be seen as applying a balancing charge to half of the Facility's
firm volumes.
Pace finds this to be a reasonable assumption as a proxy for balancing
charges. Pace believes that Facility will be able to make use of the liberal
shipping tolerances of CLNG to avoid significant balancing charges, provided
sound fuel management is employed.
Gas Transportation Volumes
The pro forma model reflects significant benefits of certain pipeline
balancing provisions, especially on CLNG, under the assumption that these
provisions will continue over the term of the PPA. The pro forma model assumes
that all of the gas to be consumed by Unit 2 is shipped using Unit 1's firm
transportation capacity. This modeling assumption saves Panda the cost
difference between the TCO IT transportation rate and the variable portion of
TCO firm transportation rates.
Based on the current pipeline tariffs, the Facility's contract with WGL,
and ICF's estimate of the number of hours of operation(30) and ICF's estimate
of the number of times PEPCO dispatches the Facility(31), the pro forma
assumption is reasonable.(32) In the future, the pipelines may tighten their
tolerances, subject to FERC approval. These balancing provisions are not
contractual rights, so there is no guarantee that these provisions will
continue over the entire modeling term and that the Facility will be able to
use Unit 1 transportation capacity to the extent modeled.
- -----------------------------
(29) For example, the TCRA surcharge on TCO is likely to decline significantly
over the next several years due to the eventual full recovery of gas supply
contract settlement costs.
(30) For example, in 1997 ICF projects 3,482 Unit 1 operational hours and
2,154 Unit 2 operational hours.
(31) For pro forma modeling, ICF assumes 200 starts per year.
(32) On average, ICF projects Unit 1 is dispatched less than 30% in winter,
below 40% in summer, and under 50% in shoulder months, and that Unit 2 is
dispatched only a portion of the time Unit 1 is operating. Based on an
assumption that these percentages also apply to each month (e.g. January
dispatch will average under 30%), there is opportunity currently for Panda to
manage its balancing accounts on the pipelines as in the pro forma model.
Review of the Facility's economic performance should consider the
potential impact of the need to increase reliance on IT transportation for Unit
2 at some point in the future. It is difficult to predict if and when the
current pipeline balancing provisions, especially on CLNG, might be tightened.
CLNG officials have maintained to Pace that the pipeline intends to maintain
its current liberal shipping tolerances indefinitely. Additionally, PEPCO, a
50% owner of CLNG, derives significant benefit from the use of CLNG's balancing
provisions. Nevertheless, there is no guarantee that the advantageous
balancing provisions wil continue.
Capacity Release
The pro forma model assumes that for firm TCO capacity that is not used,
Panda receives 50% of the then current maximum firm tariff rate as a result of
short-term capacity releases. Because short-term capacity releases will most
likely occur in the winter when dispatch is lowest and transportation capacity
is at its highest value, Pace finds this assumption reasonable, assuming active
and proficient fuel management.
V. BACK-UP FUEL OIL
Panda will operate Unit 2 on No. 2 fuel oil when interruptible gas
supply or transportation capacity is not available. Unit 1 will operate on
fuel oil when WGL exercises its Peak Period Release rights.(33) Fuel oil for
these operations will be drawn from a storage facility to be constructed on
the plant site with a capacity of 2,000,000 gallons. The Facility will be
able to fuel each unit separately and each unit will be capable of switching
from natural gas to fuel oil within a few minutes.
Panda plans to contract for fuel oil approximately 60 days before the
start of commercial operations, or before each winter season. Panda maintains
that it will contract for firm supply and transportation of fuel oil before the
start of each winter heating season and ensure that on-site storage levels are
kept full during winter.
Fuel Oil Requirements
The most common scenario for fuel oil usage would be for supplying Unit 2
due to a lack of interruptible gas service. At an 80% - 90% dispatch level,
Unit 2 would require 130,000-145,000 gallons of fuel oil per day. Consuming
oil at this rate would require 17 to 20 truckloads per day at 7,500 gallons
per truckload to keep pace with consumption. Panda would need three
dedicated trucks operating approximately 18 hours per day making six to seven
round trips each from Baltimore.
Under the most extreme conditions of maximum continuous dispatch, no gas
service, and no refill, the Facility would burn a maximum of 332,598 gallons
of oil per day, equivalent to 3,885 gallons per hour.(34) At this rate, the
Facility would draw down its oil storage to zero in 6.17 days. Theoretically,
the Facility could maintain fuel oil operation at this level of dispatch
because we estimate that the Facility can fill the storage tank at a rate of
15,000 gallons per hour.35 Because Unit 1 gas supplies are firm, Pace does not
envision such use of fuel oil occurring. However, the example shows that even
under extreme conditions, the Facility will have time to begin refilling
on-site storage tanks in the event that oil is required and fill the tank at
the rate of withdrawal if necessary.
- ----------------------------
(33) Fuel oil could also be used to operate the Facility in the event of
force majeure interruption of gas service or failure of Panda or its fuel
manager toschedule sufficient gas service. These occurrences can be expected
to be extremely rare.
(34) 961 MMBtu/turbine hour x 48 turbine hours/day x.13869 MMBtu/gallon
(EIA conversion).
(35) A tanker truck contains 7,500 gallons and we estimate 2 trucks could be
unloaded per hour.
Pace has calculated a worst-case scenario for No. 2 fuel oil
requirements. This scenario involves the Facility being dispatched
continuously at full capacity while IT is unavailable for natural gas supplies
and WGL elects peak period releases to the full extent possible.
During a week under this scenario, the Facility would require
approximately 1,496,690 gallons of fuel oil. This would leave the Facility
with approximately 503,310 gallons of fuel oil remaining in on-site storage
tanks.(36)
The remaining storage is substantial, but not sufficient to supply the
Facility if WGL elects a Peak Period Release for an additional two days during
the next seven-day period. An additional two days of release would require the
Facility to burn 665,196 gallons of fuel oil.(37)
The major cause for fuel oil operation will be TCO's restriction of
interruptible transportation service ("IT") to Unit 2. IT is available during
most periods of the year. Typically, TCO interrupts IT to the Northeast 30-45
days each winter. During harsh winters, such as the '95-'96 winter, IT
interruptions can be greater. Last winter, which was extremely cold, IT was
interrupted in TCO's zone 10 (Virginia and Maryland) a total of 83 times. The
days fell in a predictable pattern according to the severity of the weather:
November-- 13 days of interruption
December-- 24 days of interruption
January-- 22 days of interruption
February-- 15 days of interruption
March-- 9 days of interruption.
Despite such extreme possibilities, Panda should not require fuel oil
for more than 20-30 days per year for the following reasons: (1) Unit 2 is
expected to be dispatched approximately 50% of total availability, (2) Most of
Unit 2 dispatch is expected to occur during summer when gas service to Unit
2 should not be constrained, and (3) Panda may have other options to deliver
gas for Unit 2 operation when TCO IT service is unavailable.
Fuel Oil Availability
The harsh weather conditions likely to spur a WGL Peak Period Release
are also conditions most likely to create spikes in demand for fuel oil in
the area.
- ---------------------------
(36) 961 MMBtu/turbine hour x 216 turbine hours x .13869 MMBtu/gallon =
1,496,690 gallons. 503,310 gallons remaining assumes that 2,000,000 gallon
capacity on-site storage tanks are full at start of heating season.
(37) 961 MMBtu/turbine hour x 96 turbine hours x .13869 MMBtu/gallon.
Attempting to arrange for supply during such a demand spike could prove
difficult and costly. Despite the plentiful supply of fuel oil in the region,
interviews conducted by Pace with several suppliers suggest that during harsh
weather conditions, such as the winter storm in February 1994, supplies of fuel
oil were tight, making "off the rack" or spot purchases of fuel oil difficult.
Further, it helps service to have a standing relationship with suppliers.
Under normal conditions there should be no problem obtaining fuel oil
supply. Baltimore is a major supply and processing center for petroleum
products. The Fairfax and Newington centers in Virginia are smaller, but
still host substantial fuel oil suppliers. These three terminals would provide
the Facility with over 25 major resellers within a 60-mile radius; among them
are Crown, Exxon, Amerada Hess, Amoco, B.P., Chevron, and Texaco. Most
suppliers in Baltimore obtain fuel oil from Colonial Pipeline, and some also
have facilities to be supplied by tankers off the Chesapeake Bay. Pace
interviews with four major Baltimore resellers totaled their storage capacity
of low sulfur No. 2 fuel oil at 822,000 barrels. Fairfax and Newington's
total capacity of low sulfur No. 2 fuel oil is estimated by Pace at 200,000
barrels each, and all of these supplies are provided from Colonial Pipeline.
Transportation of fuel oil to the Facility will be accomplished by tanker
trucks. Baltimore offers many fuel oil trucking firms such as Fleet
Transportation, Baltimore Tanklines, and Carrol Independent.
Air Permit
Under normal conditions, the Facility would be able within its air permit
restrictions to combust fuel oil up to 1,200 turbine hours per year, or
8,098,637 gallons per year. Panda's maximum of 2,400 turbine hours per year of
No. 2 distillate oil use only applies if certain events, such as a PJM
Emergency Condition, are declared.
Fuel Oil Pricing
Panda is reimbursed for Unit 2's operation on regular fuel oil, assuming
the PPA conditions are met, based on No. 2 fuel oil published spot prices in
the major East Coast regional markets. To meet environmental restrictions,
Panda is required to purchase a higher grade of oil which is generally more
expensive than regular No. 2 oil. Additionally, there is no explicit
reimbursement for local fuel oil transportation charges, which may cost between
3-5 cents per gallon, although the initial oil rate provides a margin of
approximately 3.5 cents per gallon (25 cents per MMBtu).
A possibility does exist that TCO would be interrupted, forcing Panda to
use fuel oil, but IT service was available on Transcontinental Gas Pipeline
("Transco"). The PPA includes availability of IT on Transco as well as on TCO
for determining whether gas is available on an interruptible basis for fueling
Unit 2.
Pace's analysis of recent Baltimore harbor No. 2 Low Sulfur oil prices
and the OI suggests that Panda's per-unit cost for fuel oil will be higher than
the per-unit price in the payment formula for fuel oil operation (although the
total payment will exceed fuel oil cost). The difference between the payment
index and Pace's estimate of burnertip cost averaged $0.09/MMBtu in 1994.
Our analysis indicates the costs and revenues for fuel oil operation
should be highly linked in movement over time. Based on this linkage, Panda
should be able to obtain fuel oil at a price similar to the regional prices
used in the PPA for payments.
Pro Forma Model
The pro forma model treats oil indices as parallel in the calculation of
revenues and costs. This is a simplification that may understate costs,
because the Panda will need to purchase low sulfur No. 2 fuel oil and revenues
will be based on regular No. 2 fuel oil (which generally is less expensive).
For the following reasons, Pace finds the pro forma modeling of fuel oil
prices to be reasonable: (1) The historicalprice differences between oils
observed by Pace tend to narrow in the winter when Panda expects to operate
Unit 2 on oil, and (2) the index disparity estimated by Pace of approximately
$0.09/MMBtu appears to not be significant to overall financial projections.
VI. FUEL MANAGEMENT
Sound fuel management will be required to ensure that the Facility
effectively and economically matches gas dispatch with electric dispatch. The
importance of fuel management stems from operational requirements, such as
meeting pipeline nomination deadlines, and from contractual obligations with
PEPCO. The PPA requires the Facility to meet most if not all dispatch orders,
maintain a highly reliable fuel supply, and ensure that variable costs are
below the energy payments.
Panda has executed a contract with CDC to provide fuel management and
has drafted a fuel management plan.
Fuel Management Agreement And Plan
Panda and CDC have executed a Fuel Supply Management Agreement ("FSMA")
to provide fuel management for the Facility. CDC and Panda have also
prepared a Fuel Management Plan (the "plan") which is not yet final. Through
these agreements, CDC will act as fuel manager for the Facility, managing and
administering Panda's gas supply and transportation to the Facility. CDC's
performance is backed by a corporate warranty from MCN.
Capacity Release
The FSMA contains provisions for CDC to act as Panda's agent in arranging
for the release of Panda's firm capacity on the project's interstate gas
pipelines when the capacity is not needed by the Facility. CDC can only act
with Panda's approval and the contract stipulates that all capacity releases
will be on a recallable basis. CDC will receive a fee of 5% of the reservation
charge recovered from the release of pipeline capacity.
The plan calls for capacity release to be directed by Panda personnel.
Panda will monitor the use of its capacity and determine the amount to be
released after consultation with CDC. The plan further states that capacity
releases will be consistent with PEPCO's dispatch of the Facility. In addition,
releases of capacity will not exceed a certain number (that is not yet
specified in the draft plan) of days without lender approval. If implemented
as proposed, these restrictions should allow capacity release without material
risk to the Facility.
Excess Gas Sales
The FSMA provides that quantities of gas supply not needed at the
Facility to meet dispatch may be marketed and sold by CDC. CDC will collect
a fee of 25% of any positive difference between the sale price and Panda's
weighted average cost of gas.
The plan envisions excess gas sales resulting after direction from Panda
personnel. This will occur after consideration of alternative action such as
building a positive imbalance on the pipelines or reducing the volume of gas
received from suppliers.
Oil Purchase
The FSMA does not create a substantive obligation on CDC in making fuel
oil arrangements. CDC's only role is as credit enhancement to Panda to help
Panda arrange fuel oil supply contracts with suppliers.
Nominations/Balancing
CDC is required to use its best efforts to successfully nominate gas
volumes at each pipeline receipt and delivery point to meet electric
dispatch. CDC is required to use reasonable efforts to maintain a balance
between pipeline receipts and deliveries.
The plan specifies that all nomination and volume changes will be
directed by Panda. After receiving direction from Panda, CDC will notify
all suppliers and transporters of nominations, scheduled volumes and dates.
Gas Supply Nominations
Panda has a great deal of flexibility in nominating gas supply. This
flexibilityprovides Panda with tools to minimize the cost of gas required to
operate the Facility. Minimizing gas cost is particularly important in light
of the PPA's requirements that variable costs not exceed energy payments. The
GSA specifies the following procedures for nominating supply:
- Tier 1: Two days prior to the earliest of first-of-month pipeline
nomination deadlines, Panda must submit supply nominations for each
day of the following month. On 24-hours notice, Panda may change the
nomination for that day within the 6,000-8,000 MMBtu range. Panda
may request a change of quantity on shorter notice, and CDC is to use
reasonable efforts to satisfy such requests.
- Tier 2: Two days prior to the earliest of first-of-the-month pipeline
nomination deadlines, Panda must submit supply nominations for each
day of the following month. On 24-hours notice, Panda may change the
nomination. Panda may request a change of quantity on shorter notice,
and CDC is to use reasonable efforts to satisfy such requests.
- Tier 3: Panda needs to provide 24-hour notice prior to the day of
delivery. Panda may request a change of quantity on shorter notice,
and CDC is to use reasonable efforts to satisfy such requests.
These nomination requirements essentially allow Panda to take advantage
of intramonth swings in gas commodity prices. Although Panda needs to avoid
making changes that would result in triggering the take-or-pay clauses in the
GSA, Panda is free to switch monthly gas requirements between Tier 2 and Tier 3
to take advantage of a lower price.
There is also flexibility in Tier 1 nominations. Panda must always take
at least 6,000 MMBtu of Tier 1 gas, but may change its nomination between 6,000
- - 8,000 MMBtu on 24 hours notice. This flexibility provides Panda with
approximately 2 hours of supply for Unit 1 dispatch, which is additional
assurance that Panda will be able to obtain gas supply to meet the must-run
portion of the Facility. This flexibility also provides Panda with a mechanism
for taking advantage of changes in the market for natural gas.
To serve the must-run hours, the Facility requires a maximum of 49,840
MMBtu per week. An even daily take to build up to this quantity would be
7,120 MMBtu per day--a figure within the 6,000-8,000 MMBtu range. If natural
gas market prices spike, Panda may be able to use the flexibility to obtain
relatively cheap gas to serve other dispatch of the Facility or build a
positive imbalance for use at a later time. This flexibility should not be
overstated--the 2,000 MMBtu range is about 8% of the total daily requirements
for Unit 1 at full dispatch.
Pipeline Nominations
Nominating for pipeline service generally requires making an estimate of
daily volumes before the start of the month and then confirming these
quantities on a daily basis by a certain deadline. Panda's nomination
requirements are fairly flexible and do not impose an unusual burden on the
Facility obtaining gas supply to meet electric dispatch. Panda's earliest
deadline is on CLNGwhich requires that nomination be received by 3 p.m. for
the following day. Thedetails on daily nomination requirements follow below:
- - TCO
Rolling nomination schedule on TCO requires nominations by 4:00 p.m. for gas
to flow starting at 8:00 a.m. the next day. Nominations made at 8:00 a.m. will
be effective for gas flowing at 12:00 p.m. that day.
- - CLNG
Nominations must be made by 3:00 p.m. for next day delivery.
- - WGL
Nominations need to be made by 8:00 a.m. for delivery during that day. One
intra-day change is permitted to the nominated quantity during the day.
Expertise of CDC Fuel Management
Pace finds that CDC has the expertise needed to fulfill its fuel
management obligations for the Facility. CDC's experience with the Ludington
gas-fired 123 MW cogeneration facility, of which it is a 50% owner and fuel
supplier, should provide a further understanding of the fuel supply and
transportation requirements of gas-fired cogeneration projects. CDC also has
other, smaller cogeneration facilities in operation. CDC's gas marketing
operations are growing rapidly, topping 140 Bcf in 1994, and show every
appearance of being well-managed and well-placed in the market.
Respectfully Submitted,
/S/
C.C. PACE RESOURCES, INC.
EXHIBIT A: STATISTICAL ANALYSIS OF GSA AND PPA FUEL-RELATED INDICES
The PPA's energy payment corresponding to Panda's firm market-priced gas
supplies is based upon a combination of Appalachian and Gulf Coast prices.
Panda's actual cost for firm market-priced gas supplies is based on Gulf Coast
gas prices (i.e., the Henry Hub. LA NYMEX price).(38) A fundamental linkage
issue is how a revenue index based on half Appalachian and half Gulf Coast
prices will compare with a cost index based solely on Gulf Coast gas prices.
Pace analyzed the historical relationships and price movements of the
Appalachian and Gulf Coast spot gas markets. Pace's findings, in summary, are
the following:
- The cost and revenue indices appear to track closely based on
historical and statistical analysis. The correlation between the
historical prices of the cost and revenue indices is strong.
Regression estimates of the FGMR energy payment as a function of
Panda's marginal burnertip cost and of the commodity portion of the
FGMR energy payment and the gas commodity cost both capture 98% of
the variation in the payment, respectively. There is an obvious
close linkage between the two series with the desired result that
payments generally exceed costs.
- Small trend effects may be present that are working against the
project, but these effects should not be overstated. Recently,
increases in the Appalachia/Louisiana commodity index (revenue)
have been less than increases in the Louisiana index (cost), with
the positive margin of the revenue index eroding by one cent ($0.01)
per year. Pace believes the fundamental market linkages between the
indices will not allow this erosion to continue indefinitely and that
the index differential will stabilize. Further, the apparent
erosion may itself be illusory due to imperfections in the
statistical tests.
- --------------------------
(38) Panda's cost could be based on Appalachian prices if Panda chooses to
take Tier 3 supplies instead of Tier 2. This possibility does not present
additional risk because Panda has the operational flexibility to choose
Tier 3 gas only when it presents an economic benefit.
Price Differential between Louisiana and Appalachia Supply
A fundamental linkage question is how a revenue index based on half
Appalachian and half Gulf Coast prices will compare with a cost index based
solely on Gulf Coast gas prices.
Historically, gas prices in the Appalachian producing region have been
higher than Gulf Coast gas prices. There are a number of reason for this. The
quality of the gas is not a reason, as gas quality between the basins does not
vary significantly. One factor is that per-unit production costs are higher
in Appalachia than in the Gulf Coast region. More importantly, Appalachian
gas is closer to the major Northeastern and Mid-Atlantic market regions. From
a common market price, Appalachian producers have, in effect, a higher netback
price because transportation costs are less.
The price differential between the basins is not constant. To a large
degree, this reflects the volatility in the value of transportation.
Transportation capacity is a "use it or lose it" commodity of limited supply.
During periods of high demand (which can be seasonally, daily, or even hourly)
its value can rise quickly. When demand is less than available capacity, the
value of transportation can drop to variable costs.
Other factors in addition to transportation also can affect the price
differential. Examples of these factors are production requirements based
on reservoir characteristics, weather differences between the producing
regions, and demands in markets served from the Gulf Coast region but not
Appalachia (e.g., California and Florida). The differential exhibits
seasonal patterns reflecting the value of transportation in winter periods,
but can also widen or shrink in difficult-to-predict ways.
Figure A-1 graphically presents Appalachian and Gulf Coast prices.
Appalachian prices hold a fairly consistent margin above Gulf prices until late
1992. After this point the relationship between the two regions becomes more
complex. The prices track together at some periods, but also diverge at
times. This increase in volatility and overall decrease in the margin between
the two regions can be more readily seen in Figure A-2, which graphs the
percent that the two Appalachian prices comprise the sum of the PPA commodity
index. The late 1992 price differential drop is clear (including the only
point in the five-year history that Appalachian prices were lower than
Louisiana prices), as well as the narrower margin of Appalachian prices over
Louisiana since that point. The historic differential returns in February-May
1994. Appalachia prices soared above Louisiana prices this past winter due to
severe weather conditions along the east coast.
FIGURE A-1. PPA COMMODITY INDEX: GULF & APPALACHIAN PORTION
GRAPH
FIGURE A-2. PERCENT OF CI FROM APPALACHIAN
LINE CHART
Simple correlation of an average of three Louisiana prices(39) and the
FGMR commodity index average (CI) over the past five years is .98, a very
strong indicator of a relationship between the indices. The mean of the CI
price
- --------------------------
(39) We used the Inside F.E.R.C.'s Gas Market Report Louisiana price point
for the following three pipelines. Tennessee Gas Pipeline, Columbia Gulf
Pipeline, Texas Eastern Pipeline. We avoided the particular Louisiana points
used in the PPA FGMR commodity index to show that all Louisiana prices are
highly correlated.
series was $1.91, while the mean of the Louisiana price series was $1.76--an
average positive margin of $0.15. The standard deviations were nearly
identical, approximately $0.39, meaning the variance is distributed in nearly
identical fashion for both the price series.
More sophisticated statistical analysis reveals some possible concerns.
The simple exponential growth rate of the FGMR commodity index was only 6.6%
per year over the past five years, compared to 8% per year for the Louisiana
prices. Simply put, Louisiana prices are rising faster than the Appalachian
prices. Additional analysis, using logs of the two series, shows similar
results. Over the past five years, the percentage increase in the FGMR
commodity index lagged behind the percentage increase in the Louisiana index.
For every 10% increase in the Louisiana price, the FGMR commodity index
increased only 8.6%. Although this result is not favorable for the project,
it is not a significant concern for two reasons. First, the apparent lag in
Appalachian prices does not refute the primary finding that the two series are
closely linked. Second, these findings may be a function of the high degree
of correlation between the two series--what statisticians refer to as
autocorrelation. The primary message is that the series are linked and the
relationship appears to be stable. A variable for time returned an extremely
small coefficient and was not statistically significant.
The type of relationship illustrated by the graphs and the statistical
analysis is complex, but stable enough to suggest that the project would not
be at risk by contracting for supply based solely on Louisiana prices. The
five-year history of the two series would suggest that over the long term, the
margin (FGMR commodity index greater than Louisiana average) will gradually
erode at approximately 1 cent ($0.01) per year.
Stepping back from historical statistics and considering market
structures, Pace believes the erosion of the margin between the basins will
not continue indefinitely. In other words, Louisiana prices cannot
indefinitely continue to increase at a higher rate than Appalachian prices.
We believe the changes in the price differential predominately reflect the
market dynamics of the restructuring of the gas transportation industry, and
the addition of new transportation capacity. Over time, the price
differential should stabilize at a level a few cents less than the historic
differential.
FGMR Revenue Versus Tier 2 Gas Cost
This section examines the relationship between the PPA's FGMR energy
payment and Panda's marginal burnertip cost, and the relationship between the
CI, the commodity subcomponent of the FGMR, and the commodity portion of the
GSA Tier 2 price (NYMEX-based or Louisiana spot-price based if price ceiling
in effect).
The GSA Tier 2 gas price is set according to the nearmonth NYMEX futures
contract (average of last three days of contract settlement prices) with an
additional margin of $0.50/MMBtu. This price is capped by a ceiling based on
delivered spot gas prices into ANR pipeline in Louisiana. The price ceiling is
calculated as 1.02 times the simple average of the spot prices plus
$0.60/MMBtu. Because we expect the NYMEX price to approach the price for
Louisiana spot gas (NYMEX price is based at Henry Hub, Louisiana) we do not
expect the price ceiling to be in effect except for rare circumstances.
Historical analysis of the price ceiling and the NYMEX price confirm this
expectation. While the ANR prices are often a few cents less than the NYMEX
price, the total price ceiling has almost always been above the NYMEX price
plus $0.50/MMBtu. The tendency for the average of the ANR prices to be lower
than the NYMEX price probably reflects the value of gas at the Henry Hub, a
major U.S. market center. Figure A-3 shows the gas commodity components of the
gas price ceiling and the NYMEX based price index. Figure A-4 compares the
total Tier 2 price indices: the gas price ceiling and the NYMEX price plus
$0.50/MMBtu.
FIGURE A-3. GAS COMMODITY COMPONENTS
BAR CHART
FIGURE A-4. PRICE CEILING
BAR CHART
During the 1991- 1994 period, the Tier 2 gas price would have been almost
always the NYMEX plus $0.50/MMBtu price. Occasionally, such as in June 1994,
the price ceiling would have been in effect. Even in these instances, the
difference between the NYMEX plus $0.50/MMBtu price and the price ceiling is
only a few cents.
A point not illustrated on the graph is that historically, the last
three days of NYMEX futures trading are usually flat--the price generally does
not change. This provides some assurance that the futures market--at least
for the near month contracts--is robust and is not prone to wide fluctuations.
This past winter this pattern did not hold due to the extreme tightness of
supply on the east coast.
Figure A-5 illustrates the PPA's FGMR payment and the marginal burnertip
cost of gas, which is the effective gas price (either the NYMEX-based price or
the price ceiling) plus variable transportation cost. There is obviously a
close linkage between the two series, witg the desired result that the payments
generally exceed the costs. Additionally, the margin, or "gap," between the
revenue and cost appears to be increasing slightly over time, and the gap
appears to be larger during winter periods when both series rise.
FIGURE A-5. F G M R & MARGINAL BURNERTIP COST
GRAPH
Regression analysis of the gas cost plus variable transportation
(marginal cost at the burnertip) with the FGMR energy payment produced
statistically significant results suggesting strong linkage. The revenue
payment was modeled as a function of the marginal burnertip cost of Tier 2 gas,
with a time variable to detect trend effects, and a winter variable to detect
seasonal effects. The estimated equation is:
FGMR = -.03 + .004*TIME + .075*WINTER + 1.003*COST.
The R2 was quite high, .98, meaning that 98% of the variance in the
payment was explained by the equation. The coefficients by the variables are
interpreted to mean that there is a slight increase in the payment relative to
the cost over time and a slight increase in the payment relative to cost during
winter periods. However, these effects are barely present--note the small size
of the coefficients--and the dominant message is that the two series are
closely linked. Care should be taken when making inferences regarding the
trend variables. The FGMR and COST are so highly related that the variables
TIME and WINTER may be returning high values which are spurious due to
autocorrelation.
The widening gap between the FGMR and the burnertip cost may be due in
part to changes in transportation cost. In 1990, variable transportation cost
on Columbia Gas was in excess of $0.18 per MMBtu. Variable transportation cost
has fallen consistently since that time and is now only $0.03 per MMBtu. A
driving factor in this change has been FERC Order 636, which mandated a switch
to Straight Fixed Variable pipeline rate design, which shifts costs from the
variable charge to the demand charge.
Backing the analysis "upstream," we also examined the relationship
between the cost of Tier 2 gas before the margin is added and without
variable transportation cost, and the gas commodity component of the energy
payment, the CI.
Figure A-6 portrays the CI, the commodity portion of the FGMR, and the
GSA Tier 2 gas price (without the GSA margin or variable transportation
cost). From the graph we can see what appear to be two very closely related
indices. The CI appears to peak higher during winter periods and generally be
above the gas cost.
FIGURE A-6. CI & GAS COMMODITY COST
GRAPH
A regression estimate of the CI payment as a function of the gas cost, a
time variable and a variable to capture seasonal effects, produced
statistically significant results highly suggestive of linkage. The equation
is as follows:
CI = .24 - .001*TIME + .10*WINTER + .96*COST
The equation returned an R2 of .98 and the coefficient for the COST
variable was highly statistically significant. Interpreting the coefficients
on the trend variables of TIME and WINTER is dangerous due to their small size.
As mentioned above, when two series are trending together upward over time
conclusion about trend effects can be spurious.
Although caution should be used in drawing inferences, the trend effects
that are present would suggest that the CI is falling slightly over time, or
closing the gap in the margin, while during winter the CI gets an additional
boost over cost. However, the main point is that the two series are closely
related. Further, we can conclude that the GSA should provide Panda the
ability to fulfill the PPA requirement that variable costs for fuel be
recovered through the energy payment.
EXHIBIT B: LNG GAS QUALITY ISSUES
CLNG's operational history reveals some potential problems with the use
of regassified liquefied natural gas ("LNG"). CLNG acknowledges that the LNG
operations 14 years ago resulted in widespread problems due to the Btu content
of the imported gas. Burners needed to be retrofitted as far away as West
Virginia. (The problem was particularly aggravating to customers because LNG
operations were shortlived and retrofitting needed to be reversed.) CLNG
stated that the problem then was primarily caused by high ethane content in
the Algerian gas supply, which was not processed prior to shipment.
CLNG stated that it recognizes a significant additional burden on it would
exist in any future LNG certificate proceeding because, unlike 14 years ago,
there are customers receiving non-LNG service directly off of CLNG. While the
contracts are confidential, CLNG stated that WGL has executed a firm peaking
service contract (which provides for firm transportation service along with
peaking service) for 50,000 MMBtu/d; other peaking service customers have made
long-term commitments for 220,000 MMBtu/d; and that PEPCO is expected to make
commitments for the Chalk Point plant after the open-access tariff is
established (right now PEPCO receives service through WGL.)
CLNG stated that its strategy would be to require the gas supplier to
provide gas with specifications which allow LNG operations to deliver normal
pipeline quality gas. CLNG was confident that such supplies are available, and
noted that the Algerian source originally used is now processed to remove the
ethane. CLNG further pointed out that their LNG marketing is currently
dormant.
The current CLNG certificate applications and rulings specifically do
not provide CLNG with the authorization to provide LNG import services. While
import authority for the gas molecules resides with DOE, not FERC, FERC has
jurisdiction over the facilities used to perform the import. This means that
CLNG would need to receive a certificate from FERC and DOE to provide an LNG
import service.
Such a proceeding at FERC would provide a full litigation forum in which
the details of the service would be determined. Panda-Brandywine, L.P. would
receive notice of the initiation of such a certificate proceeding, and also
there would be public notice provided. Any party could intervene and
participate fully. The impact of the proposed service on existing customers
would be a directly relevant consideration of such a proceeding.
An indication of FERC policy in such a proceeding is provided by the
tariff currently in place and governing LNG import service by Distrigas in
Massachusetts. The tariff provides a cap on Btu contact and brackets the gas
constituents to specific ranges. It seems reasonable to Pace to expect a
similar outcome in any CLNG proceeding, and perhaps even a more rigid
requirement to ensure the safety of the residential and commercial customers
served by WGL directly off of CLNG.
Pace has spoken to parties directly involved with LNG operations and
confirmed the statements of CLNG that LNG supplies are available which can,
with appropriate operations, provide acceptable gas supplies. Algerian LNG is
provided at 1,075 to 1,082 Btu/cf and other supplies are at 1,070 to 1,120
Btu/cf. We were informed that significant Btu increase occurs mainly if
"heavy weatherization" occurs and that this means that storing the LNG for
approximately 1 year can increase the Btu content to the range of 1200 to 1250
Btu/cf. Appropriate cycling of the supplies avoids this.
In summary:
- - The Project has regulatory protection. CLNG would be required to obtain a
certificate from FERC to import LNG. That permit proceeding would provide the
Project and all other parties full rights of participation and litigation, with
the impact on existing service a relevant issue. A policy "marker" is
provided by the existing Distrigas facility in Massachusetts, which is subject
to tariff terms which limit the Btu content to a 1150 Btu/cf cap and the
constituents to specific ranges.
- - Other customers have the same interests as the Project. CLNG has other
significant long-term customers who have service interests parallel to the
Project's. This includes a significant WGL residential and commercial load
service through five WGL taps into CLNG, as well as peaking service customers.
- - LNG operations can be performed within acceptable specifications. The
problems that occurred 14 years ago were caused by both the LNG operational
details and the particular gas supply. Processed LNG is available which has
high Btu constituents reduced when compared to the gas originally used at CLNG.
In fact, this is true for the Algerian source used originally. Operationally,
sources directly involved with LNG ongoing operations have reported to Pace
that heating content is not a systemic problem, but one which occurs only with
long storage periods.
EXHIBIT C: PEAK PERIOD RELEASE DETAILS
This Exhibit details the costs Panda will incur and the payments Panda
will receive from WGL. An additional issueis examined concerning a fuel
supply failure during a Peak Period Release.
PANDA COSTS
Panda will pay the supplier for the gas taken by WGL under a Peak Period
Release according the terms of the gas supply contract. Up to 8,000 MMBtu will
be priced according to the Tier 1 portion of the GSA. The Tier 1 rate is fixed
with an annual 4% escalation. The remaining portion of the 24,000 MMBtu/day
Panda can receive on a firm basis will be priced according to either the Tier
2 or Tier 3 portion of the GSA. The Tier 2 rate is set by a market index of
monthly published gas prices, while the Tier 3 rate is a "market based" rate
determined solely by CDC.
If Panda is dispatched during a Peak Period Release, most likely Panda
will have to fuel the Facility on No. 2 fuel oil. If Unit 1 was fully
dispatched and Panda intended to burn 24,000 MMBtu, but WGL elected a Peak
Period Release, Panda would burn 24,000 MMBtu of fuel oil assuming that
interruptible gas supply and transportation were not available. Pace believes
that this is highly likely given that the same climatic conditions that are
requirements for a Peak Period Release also contribute to interruptions of
service in the Northeast market area by pipelines.
Under the PPA, Panda is paid for energy from Unit 1 based on gas price
indices. Even though Panda will be running on No. 2 fuel oil, Panda will be
paid for electricity produced as if Panda had been operating using gas.
PANDA REVENUES FROM WGL
Panda receives payment from WGL for Peak Period Releases through the
banking mechanism. Section 5.2 of the WGL contract details three options for
resolving banked quantities of gas Panda may build up in account with WGL as a
result of WGL exercising Peak Period Release.
By the date March 31 following the occurrence of a peak period release,
Panda must elect one of three options for resolving the credit in Panda's
account for the volumes released to WGL. Panda may for a portion or all of
the banked quantity:
(1) Elect to receive payment based on 1.5 times the Commodity Fee in
effect during the month of the peak period release, or if no
Commodity Fee was in effect, 1.5 times a published Louisiana gas
price plus maximum interruptible effective FERC gas transportation
rates on Columbia Gulf, TCO Gas and CLNG
(2) Elect to receive payment based on the actual cost of fuel oil used
during the day of the peak period release
(3) Elect to have WGL transport and deliver a quantity of gas 1.5 times
the banked quantity.
Option 2 has the clear benefit of being tied directly to the cost Panda
has incurred, although as discussed below it is not clear exactly how the oil
will be priced. Short-term market changes in the movement of oil and gas
prices could make Option 1 more economically beneficial at times. Option 3
is advantageous in the sense that Panda could substitute the Option 3
quantities for fuel oil when Unit 2 is dispatched but interruptible
transportation is unavailable. Utilizing Option 3 would save the project
from burning fuel oil in this case, actually allowing the project to come out
ahead due to providing 1.5 times the banked quantity.
Option 1
There is little or no linkage between the rates under Option 1 and the
rates Panda will pay for gas supply. The Commodity Fee is determined at least
five days before the month through mutual negotiation by Panda and WGL. The
alternative to the Commodity Fee is a price index set at the start of the month
for Louisiana supplies into Columbia Gulf plus interruptible maximum rates on
Columbia Gulf, TCO Gas, and CLNG.
This option may be of value, depending on the relationship of gas and
No. 2 low sulfur oil prices.
Although Pace has found a historical link between the prices of natural
gas and oil, short term delinkages are possible due to temporary market
changes. The recent drop in gas prices is illustrative. The price under the
alternative gas index would have been $2.10/MMBtu in December 1994, making
Option 1 unattractive (1.5 times $2.01 = $3.02, $0.58 less than the price of
No. 2 low sulfur oil in the Washington/Baltimore market).
Option 2
Option 2 ensures that Panda will recover fuel oil based costs for running
on fuel oil due to a peak period release. Pace believes some logistical
problems remain to be settled with this option as Panda may use fuel oil from
storage and not purchase fuel oil on a day of a peak period release. It is
unclear whether the cost to replace the fuel oil used during the day would be
used or how this cost would be determined.
Option 3
This option provides Panda with the ability to substitute gas in Unit 2
for fuel oil in the event that Unit 2 is dispatched and transportation is
interrupted or gas supply is unavailable. However, as is the case with Option
1, it does not directly tie WGL payments to Panda's costs. Option 3 is also
restricted as detailed below.
According to the GSA, Panda must take a minimum 6,000 MMBtu every day,
one fourth of the maximum daily firm quantity. While not specifically stated
in the contract, the wording of Option 3 implies that the entire banked
quantity must be taken in one day. Adding to the daily minimum take a
quantity 1.5 times the banked quantity would likely result in more gas than
Panda could burn on a day for Unit 1. By using this option, Panda may create
a positive imbalance in a segment of its transportation or would sell the
excess gas supply. Only if Unit 2 was dispatched and transportation or gas
supply was unavailable would Panda be likely to use the entire quantity.
Option 3 also includes a provision that it can only be exercised on a day
above 21 degrees F, making it unavailable on days when Panda is most likely to
need supply due to IT transportation and gas supply interruption.
Historically, transportation capacity becomes constrained, even when the
temperature is in the 30s. There may be opportunities then, for Panda to use
Option 3 when the temperature is above 21 degrees F.
SUPPLY FAILURE DURING PEAK PERIOD RELEASE
In the event of a Peak Period Release, Panda's account with WGL is
credited for the quantity of gas taken by WGL during such release. The supply
intended for use by WGL may not arrive due to nonperformance by CDC or a
transporter. There would be no "banked quantity" in such a case because there
would be no gas supply for WGL to take. Figure F-1 presents a flow chart
description of the possible outcomes under such a scenario and is discussed
below.
FIGURE F-1. PEAK PERIOD RELEASE
CHART
Without a banked quantity, Panda will not recover costs of running on
fuel il through the resolution options in section 5.2 of the WGL agreement.
Panda may look to CDC to make up the additional cost of operating on fuel oil
through the liquidated damages provisions in the gas supply contract in the
case where CDC's failure to deliver is unexcused. However, Panda's recovery
may be partially or totally subordinated to damages WGL incurs due to the
provision in the WGL agreement in Section 5.1(b). The limitation on damages
under the supply contract may limit Panda's recovery.
Nonperformance could be due to an event of force majeure. Since
Panda was anticipating being without its gas supply due to the Peak Period
Release, Panda possibly could not declare a force majeure event under the PPA,
and would therefore run if dispatched, incurring additional costs for fuel
oil. Restrictions on when a peak period release under the WGL agreement
can be called limit the possibility of such occurrences.
<PAGE>
C.C. PACE RESOURCES, INC.
Officer's Certificate
I, Daniel E. White, Senior Vice President of C.C. Pace Resources,
Inc., DO HEREBY CERTIFY that:
Except as set forth below, to our knowledge, since July 2, 1996, no
event affecting our report entitled "Panda-Brandywine, L.P. Generating
Facility Fuel Consultant's Report" (the "Fuel Consultant's Report") or the
matters referred to therein has occurred which makes untrue or incorrect in
any material respect, as of the date hereof, any information or statement
contained in the Fuel Consultant's Report or in the Prospectus constituting
part of the registration statement on Form S-1 by Panda Interfunding
Corporation and Panda Funding Corporation relating to the offering of Pooled
Project Bonds, Series A-1 due 2012 by Panda Funding Corporation under the
caption "Independent Fuel Consultant's Report-Brandywine" in the Prospectus
Summary.
Pace notes that Panda-Brandywine, L.P.'s (the "Partnership") rights
to firm gas transportation service from Columbia Gas Transmission Corporation
("Columbia Gas") under its FTS Service Agreement with Columbia Gas dated
March 23, 1995 (the "Columbia Gas FT Agreement") are dependent upon
completion of construction of a pipeline, which may not be completed prior to
the expected commencment of a commercial operation of the Panda-Brandywine
Facility. Construction of the pipeline was delayed as a result of a dispute
with a land owner that has since been resolved. Columbia Gas has obtained
all required regulatory approvals and environmental permits and has resumed
construction. The Partnership has informed Pace that Columbia Gas has provided
a guaranty for firm gas transportation service to the Partnership commencing
November 1, 1996.
WITNESS my hand this 11th day of October, 1996.
By: /s/ Daniel E. White
Name: Daniel E. White
Title: Senior Vice President
No dealer, salesman or other
person has been authorized to $105,525,000
give any information or to make
any representations not [logo]
contained in this Prospectus,
and, if given or made, such
information or representations
must not be relied upon as
having been authorized by the OFFER TO EXCHANGE
does not constitute an offer to
sell, or a solicitation of an 11-5/8% Pooled Project Bonds,
offer to buy, the securities Series A-1 due 2012
offered hereby in any
jurisdiction where, or to any which have been registered under the
person to whom, it is unlawful Securities Act
to make such offer or for any and all outstanding
solicitation. The delivery of
this Prospectus at any time and 11-5/8% Pooled Project Bonds,
any sale made hereunder does Series A due 2012
not imply that the information
contained herein is correct as of
of any time subsequent to the date
hereof. PANDA FUNDING CORPORATION
Unconditionally Guaranteed By
PANDA INTERFUNDING CORPORATION
----------------
[TABLE OF CONTENTS] PROSPECTUS
----------------
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BANKERS TRUST COMPANY
By Facsimile:
(212) 250-6657
Until ____ (90 days after the date Confirmation by Telephone:
of this Prospectus, all dealers (212) 250-6657
effecting transactions in the
securities offered hereby, whether By registered Mail/Hand Delivery/
or not participating in this Overnight Courier:
distribution, may be required to
deliver a Prospectus. This delivery Bankers Trust Company
requirement is in addition to the 4 Albany Street
dealers to deliver a Prospectus New York, New York 10006
when acting as underwriters with
respect to their unsold allotments
or subscriptions. Attention: Mr. Mathew Seeley
_____________, 1996
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following is a statement of estimated expenses to be
incurred in connection with the offering of the 11-5/8% Pooled
Project Bonds, Series A-1 due 2012 of Panda Funding Corporation
(the "Registrant") covered by this Registration Statement, all of
which will be paid by the Registrant and Panda Interfunding
Corporation (the "Co-Registrant"):
Securities and Exchange Commission Registration Fee $ 36,388
Accounting Fees and Expenses 30,000
Legal Fees and Expenses 42,000
Exchange Agent and Trustee Fees and Expenses 7,000
Independent Engineers' Fees and Expenses 2,000
Fuel Consultants' Fees and Expenses 3,000
Miscellaneous 9,612
--------
Total $130,000
========
Item 14. Indemnification of Directors and Officers.
The Certificate of Incorporation of the Registrant and the
Amended and Restated Certificate of Incorporation of the Co-
Registrant provide that to the fullest extent permitted by the
Delaware General Corporation Law, a director thereof shall not be
liable to such corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director. The
Registrant's and the Co-Registrant's Bylaws provide for mandatory
indemnification to directors (including independent directors)
and officers of the corporation, except to the extent prohibited
by law, if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best
interest of the corporation and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful. No person shall be indemnified in
respect of any claim or matter as to which such person has been
adjudged to be liable to the corporation, unless otherwise
adjudged by the court.
Item 15. Recent Sales of Unregistered Securities
Information regarding the securities sold by the Registrant
and the Co-Registrant during the last three years is set forth
below. None of such securities have been registered under the
Securities Act of 1933, as amended (the "Securities Act").
Common Stock
On July 25, 1996, the Registrant issued 1,000 shares of its
common stock to the Co-Registrant for the consideration of $10.
Exemption from registration of the such shares of common stock is
claimed under Section 4(2) of the Securities Act.
On July 25, 1996, the Co-Registrant issued 1,000 shares of its
common stock to Panda Energy Corporation for the consideration of
$10. Exemption from registration of the such shares of common
stock is claimed under Section 4(2) of the Securities Act.
Series A Bonds and Guaranty
On July 31, 1996, the Registrant issued and sold for cash, at
par, to Jeffries & Company, Inc. $105,525,000 aggregate principal
amount of its 11-5/8% Pooled Project Bonds, Series A due 2012
(the "Series A Bonds"). Jeffries & Company, Inc. placed the
Series A Bonds with qualified institutional buyers and
institutional accredited investors. The Series A Bonds are
unconditionally guaranteed by the Co-Registrant. The Registrant
and Co-Registrant paid total commissions and underwriting
discounts equal to $2,110,500 to Jeffries & Company, Inc. in
connection with such transaction. Exemption from the registration
of the Series A Bonds and the guaranty thereof is claimed under
Section 4(2) of the Securities Act and Rule 144A promulgated
thereunder.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits:
Exhibit
Number Exhibit Description
3.01 Certificate ofIncorporation of Panda Funding Corporation.
3.02 Bylaws of Panda Funding Corporation.
3.03 Specimen of Panda Funding Corporation Common Stock
Certificate.
3.04 Amended and Restated Certificate of Incorporation
of Panda Interfunding Corporation.
3.05 Bylaws of Panda Interfunding Corporation.
3.06 Specimen of Panda Interfunding Corporation Common
Stock Certificate.
4.01 Trust Indenture dated July 31, 1996 among Panda
Funding Corporation, Panda Interfunding Corporation and
Bankers Trust Company, as Trustee.
4.02 First Supplemental Indenture to Trust Indenture
dated July 31, 1996, among Panda Funding Corporation,
Panda Interfunding Corporation and Bankers Trust
Company, as Trustee.
4.03 Form of Second Supplemental Indenture dated
______, among Panda Funding Corporation, Panda
Interfunding Corporation and Bankers Trust Company, as
Trustee.*
4.04 Form of 11-5/8% Pooled Project Bonds, Series A due
2012 of Panda Funding Corporation.
4.05 Form of 11-5/8% Pooled Project Bonds, Series A-1
due 2012 of Panda Funding Corporation.
4.06 Registration Rights Agreement dated July 31, 1996
among Panda Funding Corporation, Panda Interfunding
Corporation and Jefferies & Company Inc.
4.07 Collateral Agency Agreement dated July 31, 1996,
among Panda Interfunding Corporation, Panda Funding
Corporation and Bankers Trust Company, as Trustee under
the Indenture, dated as of July 31, 1996, and as
Collateral Agent.
4.08 Subrogation and Contribution Agreement dated July
31, 1995, among Panda Interfunding Corporation, Panda
Funding Corporation and Panda Interholding Corporation
and each PIC U.S. Entity that is a signatory thereto.
4.09 Guaranty Agreement (PIC U.S. Entity Subsidiaries)
dated July 31, 1996 by Panda Interholding Corporation
in favor of Bankers Trust Company, as Collateral Agent
for the benefit of the Secured Parties as thereafter
defined.
5.00 Legal Opinion of Chadbourne & Park, L.L.P.,
counsel for the Registrant and Co-Registrant.*
10.01 PIC Loan Agreement dated July 31, 1996
between Panda Funding Corporation, as Lender and Panda
Interfunding Corporation, as Borrower.
10.02 Loan Agreement dated July 31, 1996 between
Panda Interfunding Corporation, as Lender and Panda
Cayman Interfunding Company, as Borrower.
10.03 Promissory Note issued by Panda Interfunding
Corporation on July 31, 1996 to Panda Funding
Corporation in the original principal amount of
$105,525,000, endorsed to Bankers Trust Company, as
Collateral Agent.
10.04 Security Agreement dated July 31, 1996,
between Panda Interfunding Corporation and Bankers
Trust Company, as Collateral Agent.
10.05 Security Agreement dated July 31, 1996
between Panda Funding Corporation and Bankers Trust
Company, as Collateral Agent.
10.06 Security Agreement dated July 31, 1996
between Panda Cayman Interfunding Company, as Debtor
and Panda Interfunding Corporation, as Secured Party.
10.07 Stock Pledge Agreement (Panda Interfunding
Corporation Stock) dated July 31, 1996 between Panda
Energy Corporation and Bankers Trust Company, as
Collateral Agent.
10.08 Stock Pledge Agreement (Panda Funding
Corporation and PIC Entity Stock) dated July 31, 1996
between Panda Interfunding Corporation and Bankers
Trust Company, as Collateral Agent.
10.09 Trust Indenture dated July 31, 1996 among
Panda-Rosemary Funding Corporation, Panda-Rosemary,
L.P. and Fleet National Bank, As Trustee.
10.10 First Supplemental Indenture dated July 31,
1996 to Trust Indenture dated July 31, 1996 among Panda-
Rosemary Funding Corporation, Panda-Rosemary, L.P. and
Fleet National Bank, as Trustee.
10.11 Form of 8-5/8% First Mortgage Bonds due 2016
of Panda-Rosemary Funding Corporation.
10.12 Deposit and Disbursement Agreement dated July
31, 1996, among Panda-Rosemary Funding Corporation,
Panda-Rosemary, L.P., Fleet National Bank, as
Collateral Agent and Fleet National Bank, as Depositary
Agent.*
10.13 Collateral Agency and Intercreditor Agreement
dated July 31, 1996 among Panda Rosemary Funding
Corporation, Panda-Rosemary, L.P., The L/C Issuer, The
Trustee Under The Trust Indenture, The Depositary
Agent, The Collateral Agent and The Other Secured
Parties Named therein.
10.14 Deed of Trust and Security Agreement dated
July 31, 1996 by Panda-Rosemary, L.P., Grantor, Ross J.
Smyth, Trustee, and Fleet National Bank, as Collateral
Agent, the Beneficiary.
10.15 Security Agreement dated July 31, 1996 by
Panda-Rosemary, L.P. to Fleet National Bank, as
Collateral Agent.
10.16 Security Agreement dated July 31, 1996 by
Panda-Rosemary Funding Corporation to Fleet National
Bank, as Collateral Agent.
10.17 General Partner Pledge and Security Agreement
dated July 31, 1996 by Panda-Rosemary Corporation to
Fleet National Bank, as Collateral Agent.
10.18 Limited Partner Pledge and Security Agreement
dated July 31, 1996, by PRC II Corporation to Fleet
National Bank, as Collateral Agent.
10.19 Stock Pledge and Security Agreement dated
July 31, 1996, by Panda Interholding Corporation to
Fleet National Bank, as Collateral Agent.
10.20 Stock Pledge and Security Agreement dated
July 31, 1996 by Panda-Rosemary, L.P. to Fleet National
Bank, as Collateral Agent.
10.21 Partnership Guaranty dated July 31, 1996 by
Panda-Rosemary, L.P. in favor of Fleet National Bank,
as Trustee.
10.22 Reimbursement Agreement dated July 31, 1996,
between Panda-Rosemary, L.P., Panda-Rosemary Funding
Corporation and Bayerische Vereinsbank AG, New York
Branch.
10.23 Irrevocable Direct Pay Letter of Credit
issued by Bayerische Vereinsbank AG.
10.24 Construction Loan Agreement and Lease
Commitment dated March 30, 1996, between Panda-
Brandywine, L.P. and General Electric Capital
Corporation.*
10.25 Promissory Note issued by Panda-Brandywine,
L.P. on April 10, 1995 to General Electric Capital
Corporation in the original principal amount of
$215,000,000.*
10.26 Security Deposit Agreement dated March 30,
1995, among Panda-Brandywine, L.P., as Borrower and
Lessee, Panda Brandywine Corporation, as General
Partner, General Electric Capital Corporation, as
Construction Lender and Owner Participant, and Shawmut
Bank Connecticut, National Association, as Owner
Trustee, Lessor and as Security Agent.*
10.27 Deed of Trust and Security Agreement dated
March 30, 1995 by Panda-Brandywine, L.P., Grantor to
Chicago Title Insurance Company, Trustee for the use
and benefit of Shawmut Bank Connecticut, National
Association, as Security Agent, Beneficiary.
10.28 General Partner Pledge Agreement dated March
30, 1995 by Panda Brandywine Corporation to Shawmut
Bank Connecticut, National Association, as Security
Agent.
10.29 Limited Partner Pledge Agreement dated March
30, 1995 by Panda Energy Corporation to Shawmut Bank
Connecticut, National Association, as Security Agent.
10.30 Stock Pledge Agreement dated March 30, 1995,
by Panda Holdings, Inc. to Shawmut Bank Connecticut,
National Association, as Security Agent.
10.31 Amendment Number 1 to Stock Pledge Agreement
dated March 30, 1995, by Panda Holdings, Inc. to
Shawmut Bank Connecticut, National Association.
10.32 Amendment Number 2 to Stock Pledge Agreement
dated March 30, 1995, by Panda Holdings, Inc. to
Shawmut Bank Connecticut, National Association.
10.33 Security Agreement, dated March 30, 1995 by
Panda-Brandywine, L.P. in favor of Shawmut Bank
Connecticut, National Association, as Security Agent.
10.34 Trust Agreement dated March 30, 1995 between
General Electric Capital Corporation, as Owner
Participant, and Shawmut Bank Connecticut, National
Association, as Owner Trustee.
10.35 Steam Lessee Security Agreement dated March
30, 1996 by Brandywine Water Company in favor of
Shawmut Bank Connecticut, National Association, as
Security Agent.
10.36 Assumption Agreement and Release dated July
31, 1996, by Panda Interholding Corporation in favor of
General Electric Capital Corporation and Fleet National
Bank.
10.37 Power Purchase and Operating Agreement, dated
January 24, 1989, between Panda Energy Corporation and
Virginia Electric and Power Company.
10.38 Amendment No. 1 to The Power Purchase and
Operating Agreement, dated October 24, 1989, between
Panda Energy Corporation and Virginia Electric and
Power Company.
10.39 Amendment No. 2 to The Power Purchase and
Operating Agreement, dated July 30, 1993, between Panda-
Rosemary, L.P. and Virginia Electric and Power Company.
10.40 Fuel Supply Management Agreement, dated
October 10, 1990, between Panda-Rosemary Corporation
and Natural Gas Clearinghouse.
10.41 Amendment Number 1 to Fuel Supply Management
agreement, dated March 5, 1991, between Panda-Rosemary
Corporation and Natural Gas Clearinghouse.
10.42 Gas Purchase Contract, dated April 12, 1990,
between Panda-Rosemary Corporation and Natural Gas
Clearinghouse.
10.43 Amendment of Gas Purchase Contract, between
Panda-Rosemary Corporation and Natural Gas
Clearinghouse.
10.44 Pipeline Operating Agreement, dated February
14, 1990, between Panda Energy Corporation, Panda-
Rosemary Corporation and North Carolina Natural Gas
Corporation.
10.45 Amendment Number 1 to Pipeline Operating
Agreement, dated May 7, 1990, between Panda Energy
Corporation, Panda-Rosemary Corporation and North
Carolina Natural Gas Corporation.
10.46 Assignment Agreement, dated June 15, 1990,
between Panda Energy Corporation and Panda-Rosemary
Corporation.
10.47 Amendment Number 2 to Pipeline Operating
Agreement, dated November 19, 1991, between Panda
Energy Corporation, Panda-Rosemary Corporation and
North Carolina Natural Gas Corporation.
10.48 Real Property Lease and Easement Agreement
dated June 9, 1989, between The Bibb Company and Panda-
Rosemary Corporation.
10.49 First Amendment to Real Property Lease and
Easement Agreement dated October 1, 1989, between The
Bibb Company and Panda-Rosemary Corporation.
10.50 Second Amendment to Real Property Lease and
Easement Agreement dated January 31, 1990, between The
Bibb Company and Panda-Rosemary Corporation.
10.51 Leasehold and Real Property Assignment and
Assumption Agreement dated January 6, 1992, between
Panda-Rosemary Corporation and Panda-Rosemary, L.P.
10.52 Third Amendment to Real Property Lease and
Easement Agreement dated March 15, 1996, between The
Bibb Company and Panda-Rosemary, L.P.
10.53 Cogeneration Energy Supply Agreement, dated
January 12, 1989, between Panda Energy Corporation and
The Bibb Company.
10.54 First Amendment to Cogeneration Energy Supply
Agreement, dated October 1, 1989, between Panda Energy
Corporation, Panda-Rosemary Corporation and The Bibb
Company.
10.55 Service Agreement dated July 26, 1996,
between Transcontinental Gas Pipe Line Corporation and
Panda-Rosemary, L.P.
10.56 Service Agreement Applicable to Transportation of Natural Gas
Under Rate Schedule FT dated August 20, 1996, between CNG
Transmission Corporation and Panda-Rosemary, L.P.
10.57 Gas Transportation Agreement dated August 1,
1996, between Texas Gas Transmission Corporation and
Panda-Rosemary, L.P.
10.58 Assignment and Assumption Agreement dated May 15, 1989,
between Panda Energy Corporation and Panda-Rosemary Corporation.
10.59 Bill of Sale and Assignment and Assumption
Agreement dated January 6, 1992 between Panda-Rosemary
Corporation and Panda-Rosemary, L.P.
10.60 Assignment and Assumption Agreement dated
January 6, 1992, between Panda Energy Corporation and
Panda-Rosemary Corporation.
10.61 Power Purchase Agreement, dated August 9, 1991, between
Panda-Brandywine, L.P. and Potomac Electric Power Company.
10.62 First Amendment to Power Purchase Agreement,
dated September 16, 1994, between Panda-Brandywine,
L.P. and Potomac Electric Power Company.
10.63 Amended and Restated Turnkey Cogeneration
Facility Agreement, dated March 30, 1995, between Panda-
Brandywine, L.P. and Raytheon Engineers & Constructors,
Inc.*
10.64 Ratheon Parent Guaranty, dated May 18, 1994,
between Raytheon Company and Panda-Brandywine, L.P.
10.65 Steam Sales Agreement, dated March 30, 1995,
between Panda-Brandywine, L.P. and Brandywine Water
Company.
10.66 Gas Sales Agreement, dated March 30, 1995, between Cogen
Development Company and Panda Brandywine, L.P.*
10.67 Precedent Agreement, dated February 25, 1994,
between Columbia Gas Transmission Corporation and
Panda-Brandywine, L.P.
10.68 Amending Agreement, dated March 24, 1995,
between Columbia Gas Transmission Corporation and Panda-
Brandywine, L.P.
10.69 Amended and Restated FTS Service Agreement,
dated March 23, 1995, between Columbia Gas Transmission
Corporation and Panda-Brandywine, L.P.
10.70 FTS Service Agreement, dated of as March 30,
1995, between Cove Point LNG Limited Partnership and
Panda-Brandywine, L.P.
10.71 Gas Transportation and Supply Agreement, dated November 10,
1994, between Panda-Brandywine, L.P. and Washington Gas Light
Company.
10.72 Site Lease, dated March 30, 1995, between Panda-Brandywine,
L.P. and Shawmut Bank Connecticut, National Association (not
in its individual capacity but solely as Owner Trustee).
10.73 Site Sublease, dated March 30, 1995, between
Shawmut Bank Connecticut National Association (not in
its individual capacity but solely as Owner Trustee
under the Trust Agreement) and Panda-Brandywine, L.P.
10.74 Purchase Agreement, dated July 26, 1996,
between Panda Funding Corporation and Jefferies &
Company, Inc.
10.75 Additional Projects Contract dated July 31,
1996, among Panda Energy International, Inc., Panda
Energy Corporation, and Panda Interfunding Corporation.
10.76 Non-Petition Agreement dated July 31, 1996
among Panda Interfunding Corporation, Panda
Interholding Corporation, Panda-Rosemary Corporation,
PRC II Corporation, Panda-Rosemary Funding Corporation
and Panda-Rosemary, L.P.
10.77 Non-Petition Agreement dated July 31, 1996
among Panda Funding Corporation, Panda Interholding
Corporation, Panda Interfunding Corporation, and Panda
(Cayman) Interfunding Company.
12.00 Computation of Ratio of Earnings to Fixed
Charges.
21.00 Subsidiaries of Panda Interfunding
Corporation.
23.01 Consent of Price Waterhouse LLP.
23.02 Consent of Chadourne & Parke, L.L.P.*
23.03 Consent of ICF Resources, Incorporated.
23.04 Consent of Burns & McDonnell.
23.05 Consent of Benjamin Schlesinger and Associates, Inc.
23.06 Consent of Pacific Energy Systems, Inc.
23.07 Consent of C.C. Pace Resources, Inc.
24.00 Powers of Attorney (contained on pages II-9
and II-10 of this Registration Statement).
25.00 Statement of Eligibility of Trustee under
Indenture on Form T-1.
27.00 Financial Data Schedule.
99.01 Form of Transmittal Letter.*
99.02 Form of Notice of Guaranteed Delivery.*
____________
*To be filed by amendment.
(b) Financial Statement Schedules: None.
Item 17. Undertakings
(a) The undersigned Registrant and Co-Registrant hereby undertake:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
Registration Statement:
(i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the Registration Statement; and
(iii) to include any material information with respect
to the plan of distribution previously disclosed in the
Registration Statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(b) The undersigned Registrant and Co-Registrant
hereby undertake that, insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to
directors, officers, and controlling persons of the Registrant
and the Co-Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant and Co-Registrant have been advised
that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Registrant or Co-Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant or
Co-Registrant, as the case may be, in the successful defense of
any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the Registrant and the Co-Registrant will,
unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Dallas, State of Texas
on October 17, 1996.
PANDA FUNDING CORPORATION
(Registrant)
By:/s/Robert W.Carter
Robert W. Carter, President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and
appoints Robert W. Carter as his or her true and lawful attorney-
in-fact and agent, with full powers of substitution and
resubstitution, for him or her and in his or her name, place and
stead, in any and all capacities, to sign any or all amendments
(including post-effective amendments to this Registration
Statement and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every
act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes and he or she
might do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the
following persons in the capacities indicated on the dates
indicated
Signature Title Date
Chairman of the Board, Chief
/s/Robert W. Carter Executive and President October 17, 1996
Robert W. Carter (Principal Executive Officer)
Senior Vice President and
/s/Marjean Henderson Chief Financial Officer October 17, 1996
Marjean Henderson (Principal Financial and
Accounting Officer)
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Co-Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Dallas, State of Texas
on October 17, 1996.
PANDA INTERFUNDING CORPORATION
(Co-Registrant)
By:/s/Robert W. Carter
Robert W. Carter, President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and
appoints Robert W. Carter as his or her true and lawful attorney-
in-fact and agent, with full powers of substitution and
resubstitution, for him or her and in his or her name, place and
stead, in any and all capacities, to sign any or all amendments
(including post-effective amendments to this Registration
Statement and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every
act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes and he or she
might do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the
following persons in the capacities indicated on the dates
indicated
Signature Title Date
Chairman of the Board, Chief
/s/Robert W. Carter Executive and President October 17, 1996
Robert W. Carter (Principal Executive Officer)
Senior Vice President and
/s/Marjean Henderson Chief Financial Officer October 17, 1996
Marjean Henderson (Principal Financial and
Accounting Officer)
EXHIBIT 3.01
CERTIFICATE OF INCORPORATION
OF
PANDA FUNDING CORPORATION
The undersigned, in order to form a corporation pursuant to
the provisions of the General Corporation Law of the State of
Delaware, certifies:
FIRST: The name of the Corporation is Panda Funding
Corporation.
SECOND: The registered office of the Corporation in the
State of Delaware is located at 1209 Orange Street in the City of
Wilmington, County of New Castle, Delaware 19801. The name of
its registered agent at such address is The Corporation Trust
Company.
THIRD: The nature of the business of the Corporation and
its sole purposes are (a) to take such action as may be necessary
or desirable to enable or facilitate the issuance of securities
of the Corporation (the "Securities"), the proceeds of which will
be loaned or distributed to the stockholder or stockholders of
the Corporation, (b) to perform the Corporation's obligations
under all indentures, contracts and other agreements entered into
in connection with the issuance of the Securities, (c) to engage
in all other activities permitted under the terms of all
indentures, contracts and other agreements entered into in
connection with the issuance of the Securities and (d) to engage
in any other activities related or incidental thereto. Except as
stated above, the Corporation shall not engage in any business or
activity whatsoever.
FOURTH: The total number of shares of all classes of capital
stock which the Corporation shall have authority to issue is one
thousand (1,000) shares of Common Stock, par value $0.01 per
share.
FIFTH: The name and mailing address of the incorporator is
Cornelius J. Golden, Jr., Chadbourne & Parke LLP, 1101 Vermont
Avenue, N.W., Washington, D.C. 20005.
SIXTH: For the management of the business and for the
conduct of the affairs of the Corporation, and in further
definition, limitation and regulation of the powers of the
Corporation and of its directors and stockholders, it is further
provided that:
1. The election of directors of the Corporation need
not be by written ballot unless the By-Laws of the Corporation so
require.
2. In furtherance and not in limitation of the powers
conferred by the laws of the State of Delaware, the Board of
Directors is expressly authorized:
(a) to adopt, amend or repeal the By-Laws of the
Corporation;
(b) without the assent or vote of the
stockholders, to authorize and issue debt securities of the
Corporation, secured or unsecured, and to include therein such
provisions as to redeemability, convertibility or otherwise as
the Board of Directors, in its sole discretion, may determine;
and
(c) to exercise all other powers of the
Corporation except those which by law or this Certificate of
Incorporation expressly require the consent of the stockholders.
3. Any vote or votes of the stockholders authorizing
liquidation of the Corporation or proceedings for its dissolution
may provide, subject to the rights of creditors and preferred
stockholders, if any, for the distribution pro rata among the
stockholders of the Corporation of the assets of the Corporation,
wholly or in part, in cash or in kind, whether such assets be in
cash or in other property, and any such vote or votes may
authorize the Board of Directors of the Corporation to determine
the valuation of the different assets of the Corporation for the
purpose of such liquidation and may divide or authorize the Board
of Directors to divide such assets or any part thereof among the
stockholders of the Corporation, in such manner that every
stockholder will receive a proportionate amount in value
(determined as aforesaid) of cash and/or property of the
Corporation upon such liquidation or dissolution even though each
stockholder may not receive a strictly proportionate part of each
such asset.
4. The number of directors of the Corporation shall be
fixed in the manner provided in the By-Laws of the Corporation
and, until changed in the manner provided in the By-Laws, shall
be one (1); provided, in addition, that at all times the
Corporation shall have one (1) individual designated as the
"Independent Director" who shall be elected in the same manner as
the directors and who shall not have been, at the time of such
Independent Director's election, or at any time in the preceding
five (5) years:
(a) a direct or indirect legal or beneficial
owner in the Corporation or any of its Affiliates or a member of
the immediate family of any such owner;
(b) a creditor, supplier, officer, director,
promoter, underwriter, manager or contractor of the Corporation
or any of its Affiliates or a member of the immediate family of
any such officer or director; or
(c) a person, or a member of the immediate family
of a person, who is employed by the Corporation (other than in
his capacity as Independent Director) or its Affiliates or any
creditor, supplier, employee, stockholder, officer, director,
promoter, underwriter, manager or contractor of the Corporation
or its Affiliates; provided, that such Independent Director may
be an "independent director" of one or more other single purpose,
independent entities owned or controlled by Panda Energy
International, Inc. or any of its Affiliates. As used herein,
the term "Affiliate" shall mean, with respect to any person or
entity, any other person or entity which directly or indirectly
through one or more intermediaries controls, or is controlled by,
or is under common control with, such person or entity. The term
"control" (including the correlative term "controlled") means the
possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a person or
entity, whether through the ownership of voting stock, by
contract or otherwise.
The Independent Director shall be entitled to all rights and
benefits of a director of the Corporation (i) in respect of
indemnification by the Corporation as provided in this
Certificate of Incorporation, the By-Laws and the General
Corporation Law of the State of Delaware and (ii) under Article
EIGHTH of this Certificate of Incorporation. The Independent
Director shall also be subject to all duties imposed on a
director of the Corporation by the General Corporation Law of the
State of Delaware.
5. Pursuant to Section 141(a) of the General
Corporation Law of the State of Delaware, the Corporation and/or
the Board of Directors of the Corporation shall not, without the
affirmative vote or written consent of all of the directors of
the Corporation and the Independent Director:
(a) file a petition for relief under the United
States Bankruptcy Code, as amended, make an assignment for the
benefit of creditors, apply for the appointment of a custodian,
receiver or trustee for the Corporation or any of the
Corporation's property, consent to any other bankruptcy or
similar proceeding, consent to the filing of such proceeding or
admit in writing the Corporation's inability to pay its debts
generally as they become due;
(b) commence the dissolution, liquidation,
consolidation, merger or sale of all or substantially all of the
assets of the Corporation;
(c) amend this Certificate of Incorporation,
including without limitation Article THIRD, in such a manner as
either to broaden the business purpose of the Corporation or
otherwise adversely to affect the existence of the Corporation as
a single purpose, independent entity, or amend paragraph 4, 5, 6
or 7 of this Article SIXTH; or
(d) engage in any business or activity other than
as set forth in Article THIRD of this Certificate of
Incorporation.
6. In no circumstance shall the Independent Director
be entitled to consider or vote on any matter proposed at any
meeting of the Board of Directors or committee thereof, or
consent to action on any such matter, other than the matters set
forth in paragraph 5 of this Article SIXTH. For all other
matters a quorum shall be determined without taking the
Independent Director into account.
7. The Corporation shall:
(a) ensure that (i) the Corporation's funds and
other assets are identifiable and are not commingled with those
of any other person or entity, (ii) the Corporation maintains
bank accounts, records and books of account separate and apart
from any other person or entity, and (iii) the Corporation pays
from its assets all obligations and indebtedness of any kind
incurred by it;
(b) ensure that the assets and liabilities of the
Corporation are readily ascertainable and subject to segregation
without requiring substantial time or expense to effect and
account for such segregated assets and liabilities;
(c) conduct the Corporation's business solely in
its own name (including without limitation by use of its own
stationery and business forms) so as not to mislead others as to
the identity of the entity with which such others are concerned;
(d) not engage in any activities with the
Corporation's Affiliates (including without limitation appointing
any Affiliate of the Corporation an agent of the Corporation)
other than in connection with the activities set forth in Article
THIRD;
(e) not enter (or hold itself out as having
entered) into any agreement or arrangement to guarantee or, in
any way or under any condition, become obligated or liable (or
hold itself out as being obligated or liable) for all or any part
of any financial or other obligation of another person or entity
other than in connection with the activities set forth in Article
THIRD;
(f) not make or permit to exist loans or advances
to another person or entity other than in connection with the
activities set forth in Article THIRD;
(g) conduct its business in accordance with all
requisite corporate procedures and formalities; and
(h) neither control the decisions with respect to
the daily affairs of any other person or entity nor permit any
person or entity not a director, officer or stockholder of the
Corporation to direct or participate in the management of the
Corporation.
SEVENTH: No stockholder shall have any preemptive right to
subscribe to an additional issue of stock or to any security
convertible into such stock.
EIGHTH: To the fullest extent permitted by the Delaware
General Corporation Law, as the same exists or may hereafter
be amended, a director of this Corporation shall not be
liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director.
NINTH: Except as set forth in Article SIXTH, the
Corporation reserves the right to amend or repeal any provision
contained in this Certificate of Incorporation in the manner now
or hereafter prescribed by the laws of the State of Delaware, and
all rights herein conferred upon stockholders or directors are
granted subject to this reservation.
IN WITNESS WHEREOF, I subscribe this Certificate of
Incorporation and affirm that the statements made herein are true
under the penalties of perjury this 1st day of July 1996.
_____________________________
Cornelius J. Golden, Jr.
EXHIBIT 3.02
BY-LAWS
OF
PANDA FUNDING CORPORATION
ARTICLE I
Offices
The registered office of the Corporation in the State of
Delaware is located at 1209 Orange Street, Wilmington, Delaware
19801, and the name of the registered agent of the Corporation at
such office is The Corporation Trust Company. The corporation may
also have offices at such other places, within or without the
State of Delaware, as the Board of Directors (the "Board") may
from time to time determine.
ARTICLE II
Meetings of Stockholders
Section 1. Annual Meeting. The annual meeting of the
stockholders of the Corporation for the election of directors and
for the transaction of such other business as may properly come
before the meeting shall be held in Dallas, Texas, or at such
other place within or without the State of Delaware as may be
specified in the notice of meeting or the waiver thereof.
Section 2. Special Meetings. A special meeting of the
stockholders of the Corporation may be called by the President and
shall be called by the President, the Secretary or an Assistant
Secretary when directed to do so by resolution of the Board at a
duly convened meeting of the Board, or at the request in writing
of a majority of the Board. Such request shall state the purpose
or purposes of the proposed meeting. Special meetings shall be
held in Dallas, Texas, or at such place within or without the
State of Delaware as may be specified in the notice of meeting or
waiver thereof. Business transacted at all special meetings shall
be confined to the purposes stated in the notice of meeting.
Section 3. Notice of Meetings. Written notice of every
meeting of the stockholders shall be given by or under the
direction of the Secretary or an Assistant Secretary, either
personally or by mail, upon each stockholder of record entitled to
vote at such meeting, not less than ten (10) nor more than sixty
(60) days before the meeting. In the event of the death, absence,
incapacity or refusal of the specified officer, notice of a
meeting may be given by a person designated by the Secretary or an
Assistant Secretary, the person or persons requesting the meeting
or the Board. If mailed, the notice of a meeting shall be
directed to a stockholder at his address as it appears on the
records of the Corporation. The notice of every meeting of the
stockholders shall state the place, date and hour of the meeting
and the purpose or purposes for which the meeting is called.
Section 4. Quorum. At all meetings of stockholders, a
majority of the issued and outstanding stock entitled to vote
present in person or by proxy shall constitute a quorum. If such
quorum is not present, the stockholders present thereat may
adjourn the meeting from time to time without notice, other than
the announcement at the meeting of the date, time and place of the
adjourned meeting, until a quorum is present, and thereupon any
business may be transacted at the adjourned meeting which might
have been transacted at the meeting as originally called. If the
adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting,
a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 5. Voting. At every meeting of the stockholders,
except as may be otherwise provided in the Certificate of
Incorporation, every stockholder of the Corporation entitled to
vote thereat shall be entitled to one (1) vote for each share of
stock entitled to vote standing in his name on the books of the
Corporation on the record date as determined in accordance with
Article V, Section 4 of these By-Laws. Directors shall be elected
by a plurality of the votes cast at a meeting of stockholders (at
which a quorum is present) by the holders of shares entitled to
vote in the election, except as otherwise required by law or by
the Certificate of Incorporation of the Corporation. Whenever any
corporate action, other than the election of directors, is to be
taken by vote of the stockholders, it shall be authorized by a
majority of the votes cast at a meeting of stockholders (at which
a quorum is present) by the holders of shares entitled to vote
thereon (except as otherwise required by law, the Certificate of
Incorporation of the Corporation, these By-Laws or any regulations
of any security exchange). The stock ledger of the Corporation
shall be the only evidence as to who are the stockholders entitled
to examine such stock ledger, the list required by Article II,
Section 9 of these By-Laws or the books of the Corporation, or to
vote in person or by proxy at any meeting of stockholders. Upon
the demand of any stockholder entitled to vote, the vote at any
election of directors, or the vote upon any question before a
meeting, shall be by ballot, but otherwise the method of voting
shall be discretionary with the presiding officer at the meeting.
Section 6. Presiding Officer and Secretary. At all meetings
of the stockholders, the Chairman of the Board, or if such office
be vacant or such person be absent, the President of the
Corporation, or in such person's absence a Vice President, or if
none be present the appointee of the meeting, shall preside. The
Secretary of the Corporation, or in such person's absence an
Assistant Secretary, or if none be present the appointee of the
Presiding Officer of the meeting, shall act as Secretary of the
meeting.
Section 7. Proxies. Any stockholder entitled to vote at any
meeting of stockholders may vote either in person or by proxy, but
no proxy shall be voted after three (3) years from its date unless
such proxy provides for a longer period. Every proxy must be
executed in writing by the stockholder himself or by his duly
authorized attorney, and dated, but need not be sealed, witnessed
or acknowledged. Proxies shall be delivered to the Secretary of
the meeting before the meeting begins or to the Judges at the
meeting. A duly executed proxy shall be irrevocable if it states
that it is irrevocable and if, and only as long as, it is coupled
with an interest sufficient in law to support an irrevocable
power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock
itself or an interest in the Corporation generally.
Section 8. Judges. At each meeting of the stockholders at
which the vote for directors, or the vote upon any question before
the meeting, is taken by ballot, the polls shall be opened and
closed by, and the proxies and ballots shall be received and taken
in charge by, and all questions touching on the qualifications of
voters and the validity of proxies and the acceptance and
rejection of the same shall be decided by, two (2) Judges. Such
Judges may be appointed by the Board before the meeting but if no
such appointment shall have been made, they shall be appointed by
the meeting. If for any reason any Judge previously appointed
shall fail to attend or refuse or be unable to serve, a Judge in
his or her place shall be appointed by the meeting. Any
appointment of Judges by the meeting shall be by per capita vote
of the stockholders present and entitled to vote.
Section 9. List of Stockholders. At least ten (10) days
prior to every meeting of stockholders, a complete list of the
stockholders entitled to vote at such meeting, arranged in
alphabetical order and showing the address of each stockholder and
the number of shares registered in the name of each, shall be
prepared by the Secretary or an Assistant Secretary. Such list
shall be open to examination at a place within the city where the
meeting is to be held, which place shall be specified in the
notice of meeting, or, if not so specified, at the place where the
meeting is held and shall be open, during normal business hours
for a period of ten (10) days prior to the meeting, to the
examination of any stockholder for any purpose germane to the
meeting. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof and may be
inspected by any stockholder who is present.
Section 10. Consent of Stockholders in Lieu of Meeting.
Any action that may be taken at any annual or special meeting of
stockholders may be taken without a meeting, without prior notice
and without a vote if one or more consents in writing, setting
forth the action so taken and signed by the holders of outstanding
stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted,
are delivered to the Corporation by delivery to its registered
office in the State of Delaware by hand or by certified or
registered mail, return receipt requested, or to its principal
place of business, or to an officer or agent of the Corporation
having custody of the book in which proceedings of meetings of
stockholders are recorded. Every written consent shall bear the
date of signature of each stockholder signing the consent and no
written consent shall be effective to take the corporate action
referred to therein unless written consents signed by a sufficient
number of stockholders to take the action are delivered to the
Corporation, in the manner required by law, within sixty (60) days
of the earliest dated consent so delivered. Prompt notice of the
taking of such action shall be given to each stockholder that did
not consent in writing.
ARTICLE III
Directors
Section 1. Number and Election of Directors. The number of
directors may be increased or decreased from time to time by the
stockholders or by the Board; provided, that at all times the
Corporation shall have at least one (1) director (the "Independent
Director") who shall possess only those rights granted to such
Independent Director pursuant to this Article III and the
Certificate of Incorporation of the Corporation and who shall not
have been at the time of such Independent Director's appointment
or at any time in the preceding five (5) years (a) a direct or
indirect legal or beneficial owner in the Corporation or any of
its Affiliates or a member of the immediate family of any such
owner, (b) a creditor, supplier, officer, director, promoter,
underwriter, manager or contractor of the Corporation or any of
its Affiliates or a member of the immediate family of any such
officer or director or (c) a person, or a member of the immediate
family of a person, who is employed by the Corporation (other than
in his capacity as Independent Director) or its Affiliates or any
creditor, supplier, employee, stockholder, officer, director,
promoter, underwriter, manager or contractor of the Corporation or
its Affiliates; provided, that such Independent Director may be an
independent director of one or more single purpose, independent
entities owned or controlled by Panda Energy International, Inc.
or any of its Affiliates. As used herein, the term "Affiliate"
shall mean, with respect to any person or entity, any other person
or entity which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common
control with, such person or entity. The term "control"
(including the correlative term "controlled") means the
possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a person or
entity, whether through the ownership of voting stock, by contract
or otherwise. Except as provided by law or these By-Laws, the
members of the Board shall be elected at each annual meeting of
the stockholders. If for any reason any annual election of
directors shall not be held on the day designated by these By-
Laws, the directors shall cause such election to be held as soon
thereafter as convenient. Except as otherwise provided in the
Certificate of Incorporation or these By-Laws, at each meeting of
the stockholders for the election of directors at which a quorum
shall be present, the persons (not exceeding the then authorized
number of directors) receiving a plurality of the votes cast shall
be elected directors. Except as otherwise provided by law, the
term of office of each director shall be from the time of his
election and qualification until the annual meeting of
stockholders next succeeding his election and until his successor
shall have been duly elected and shall have qualified; provided,
that any director (other than the Independent Director) may be
removed without cause before the expiration of his term by the
vote of a majority of the issued and outstanding stock entitled to
vote at any special meeting called for the purpose. A director
need not be a stockholder.
Section 2. Vacancies. Any vacancy in the Board caused by
death, resignation, disqualification, removal, an increase in the
number of directors (caused by the Board or otherwise) or any
other cause may be filled by a majority of the directors then in
office although less than a quorum or by a sole remaining
director, or by the stockholders; provided, that if for any reason
there is a vacancy in the office of Independent Director, the
remaining directors shall promptly cause the office to be filled.
When one or more directors shall resign from the Board effective
at a future date, a majority of the directors (other than the
Independent Director) then in office, including those who have so
resigned, shall have the power to fill such vacancy or vacancies,
the vote thereon to take effect when such resignation or
resignations shall become effective.
Section 3. Resignations. Any director may resign from his
office at any time by delivering his resignation in writing to the
Corporation, and the acceptance of such resignation, unless
required by the terms thereof, shall not be necessary to make such
resignation effective.
Section 4. Meetings. The Board may hold its meetings in
such place or places within or without the State of Delaware as
the Board from time to time by resolution may determine or as
shall be specified in the respective notices or waivers of notice
thereof, and the directors may adopt such rules and regulations
for the conduct of their meetings and the management of the
Corporation not inconsistent with these By-Laws or the Certificate
of Incorporation as they may deem proper. The Board from time to
time by resolution may fix a time and place (or varying times and
places) for the annual and other regular meetings of the Board;
provided, that unless a time and place is so fixed for any annual
meeting of the Board, the same shall be held immediately following
the annual meeting of the stockholders at the same place at which
such meeting shall have been held; provided, further, that the
Independent Director shall have no right to notice of or to attend
any meeting of the Board, except that the Independent Director
shall be entitled to notice of and to attend that portion of any
meeting of the Board at which any matter is to be considered by
the Board upon which the approval of the Independent Director is
required. No notice of the annual or other regular meetings of
the Board need be given. Other meetings of the Board shall be
held whenever called by the Chairman of the Board or by the
President or by one-third (1/3) of the directors (other than the
Independent Director) then in office, and the Secretary or an
Assistant Secretary shall give notice of each such meeting to each
director not later than the day before the day of the meeting,
personally or by mailing, telecopying or telephoning such notice
to him at his address as it appears on the books of the
Corporation or by leaving such notice at his residence or usual
place of business. No notice of a meeting need be given if all
the directors are present in person. Any business may be
transacted at any meeting of the Board, whether or not specified
in a notice of the meeting.
Section 5. Meetings by Conference Telephone. Members of the
Board, or any committee designated by the Board, may participate
in a meeting of the Board or such committee by means of conference
telephone or similar communications equipment by which all persons
participating in the meeting can hear each other. Participation
in a meeting pursuant to this paragraph shall constitute presence
in person at such meeting. The Chairman of the Board or the
Secretary of the meeting shall make certain that all persons
participating in the meeting (i) can hear each other and (ii)
understand that their participation will constitute a meeting of
the Board or such committee.
Section 6. Unanimous Consent of Directors in Lieu of
Meeting. Any action required or permitted to be taken at any
meeting of the Board may be taken without a meeting if a written
consent thereto is signed by all of the members of the Board
entitled to vote on such action and such written consent is filed
with the minutes of proceedings of the Board.
Section 7. Quorum. Pursuant to Section 141(a) of the
General Corporation Law of the State of Delaware, in no
circumstance shall the Independent Director be entitled to
consider or vote on any matter proposed at a meeting of the Board
of Directors or committee thereof, or consent to action on any
such matter, other than the matters set forth in Article SIXTH of
the Certificate of Incorporation and Article III, Section 8 of
these By-Laws, and for all other matters a quorum shall be
determined without taking the Independent Director into account as
a member of the Board of Directors. If there be less than a
quorum at any meeting of the Board, a majority of those present
(or if only one (1) be present, then that one (1) may adjourn the
meeting from time to time, and no further notice thereof need be
given other than announcement at the meeting which shall be so
adjourned of the time of, and the place to which, the meeting is
adjourned.
Section 8. Voting. Except as otherwise required by law, the
Certificate of Incorporation or these By-Laws, the vote of a
majority of the directors present at a meeting at which a quorum
is present shall be the act of the Board of Directors.
Notwithstanding the foregoing, the Corporation and/or the Board
shall not, without the affirmative vote or written consent of all
of the directors (including the Independent Director):
(a) file a petition for relief under the United States
Bankruptcy Code, as amended, make an assignment for the benefit of
creditors, apply for the appointment of a custodian, receiver or
trustee for the Corporation or any of the Corporation's property,
consent to any other bankruptcy or similar proceeding, consent to
the filing of such proceeding or admit in writing the
Corporation's inability to pay its debts generally as they become
due;
(b) commence the dissolution, liquidation,
consolidation, merger or sale of all or substantially all of the
assets of the Corporation;
(c) amend the Certificate of Incorporation, including
without limitation Article THIRD thereof, in such a manner as
either to broaden the business purpose of the Corporation or
otherwise adversely to affect the existence of the Corporation as
a single purpose, independent entity, or amend paragraph 4, 5, 6
or 7 of Article SIXTH of the Certificate of Incorporation; or
(d) engage in any business or activity other than as
set forth in Article THIRD of the Certificate of Incorporation.
Section 9. Compensation of Directors. The Board shall have
authority to fix the compensation of directors for acting in
either that capacity or any other capacity.
Section 10. Committees. The Board may from time to time
designate one or more committees, each committee to consist of one
or more of the directors of the Corporation. The Board may
designate one or more directors as alternate members of any
committee who may replace any absent or disqualified member at any
meeting of the committee. To the extent provided in any such
resolution, any such committee shall have and may exercise all the
powers and authority of the Board in the management of the
business and affairs of the Corporation, including the power to
authorize the seal of the Corporation to be affixed to all papers
which may require it, and the power and authority to declare
dividends and to authorize the issuance of stock; provided, that
no such committee shall have any power or authority to amend the
Certificate of Incorporation, to adopt any agreement of merger or
consolidation, to recommend to the stockholders the sale, lease or
exchange of all or substantially all of the assets and properties
of the Corporation, to recommend to the stockholders a dissolution
of the Corporation or revocation of a dissolution or to amend
these By-Laws. Any action required or permitted to be taken at
any meeting of a committee may be taken without a meeting if a
written consent thereto is signed by all members of such committee
and such written consent is filed with the minutes of proceedings
of the committee.
ARTICLE IV
Officers and Agents
Section 1. General Provisions. The officers of the
Corporation shall be a President, a Treasurer and a Secretary, and
may include a Chairman of the Board, one or more Vice Presidents,
one or more Assistant Vice Presidents, one or more Assistant
Treasurers and one or more Assistant Secretaries, all of whom
shall be appointed by the Board as soon as may be practicable
after the election of directors in each year. Any two offices may
be held by the same person, but no officer shall execute,
acknowledge or verify any instrument in more than one capacity if
such instrument is required by law or by these By-Laws to be
executed, acknowledged or verified by any two or more officers.
Each of such officers shall serve until the annual meeting of the
Board next succeeding his appointment and until his successor
shall have been chosen and shall have qualified. The Board may
appoint such officers, agents and employees as it may deem
necessary or proper who shall respectively have such authority and
perform such duties as may from time to time be prescribed by the
Board. All officers, agents and employees appointed by the Board
shall be subject to removal at any time by the affirmative vote of
a majority of the Board. Other agents and employees may be
removed at any time by the Board, by the officer appointing them
or by any other superior officer upon whom such power of removal
may be conferred by the Board. The salaries of the officers of
the Corporation shall be fixed by the Board but this power may be
delegated to any officer. The Corporation may secure the fidelity
of any or all of its officers or agents by bond or otherwise.
Section 2. The Chairman of the Board. The Chairman of the
Board shall be a member of the Board and shall preside at its
meetings and at all meetings of stockholders. He shall keep in
close touch with the administration of the affairs of the
Corporation and supervise its general policies. He shall see that
the acts of the executive officers conform to the policies of the
Corporation as determined by the Board and shall perform such
other duties as may from time to time be assigned to him by the
Board.
Section 3. The President. The President shall, subject to
the direction and under the supervision of the Board, be the
principal executive officer of the Corporation and shall have
general charge of the business and affairs of the Corporation and
shall keep the Board fully advised. If the office of Chairman of
the Board be vacant or if the Chairman of the Board be absent, the
President shall preside at meetings of the stockholders and of the
Board. At the direction of the Board, he shall have power in the
name of the Corporation and on its behalf to execute any and all
deeds, mortgages, contracts, agreements and other instruments in
writing. He shall employ and discharge employees and agents of
the Corporation, except such as shall hold their offices by
appointment of the Board, but he may delegate these powers to
other officers as to employees under their immediate supervision.
He shall have such powers and perform such duties as generally
pertain to the office of President as well as such further powers
and duties as may be prescribed by the Board.
Section 4. Vice Presidents. Each Vice President shall have
such powers and perform such duties as the Board or the President
may from time to time prescribe and shall perform such other
duties as may be prescribed in these By-Laws. In the absence or
inability to act of the President, the Vice President next in
order as designated by the Board or, in the absence of such
designation, senior in length of service in such capacity, who
shall be present and able to act, shall perform all the duties and
may exercise any of the powers of the President, subject to the
control of the Board. The performance of any duty by a Vice
President shall be conclusive evidence of his power to act.
Section 5. The Treasurer. The Treasurer shall have the care
and custody of all funds and securities of the Corporation which
may come into his hands and shall deposit the same to the credit
of the Corporation in such bank or banks or other depositary or
depositaries as the Board may designate. He may endorse all
commercial documents requiring endorsements for or on behalf of
the Corporation and may sign all receipts and vouchers for
payments made to the Corporation. He shall render an account of
his transactions to the Board as often as it shall require the
same, shall at all reasonable times exhibit his books and accounts
to any director and shall cause to be entered regularly in books
kept for that purpose full and accurate account of all moneys
received and disbursed by him on account of the Corporation. He
shall, if required by the Board, give the Corporation a bond in
such sums and with such sureties as shall be satisfactory to the
Board, conditioned upon the faithful performance of his duties and
for the restoration to the Corporation in case of his death,
resignation, retirement or removal from office of all books,
papers, vouchers, money and other property of whatever kind in his
possession or under his control belonging to the Corporation. He
shall have such further powers and duties as are incident to the
position of Treasurer, subject to the control of the Board. The
Treasurer may also be the Secretary.
Section 6. The Secretary. The Secretary shall record the
proceedings of meetings of the Board and of the stockholders in a
book kept for that purpose and shall attend to the giving and
serving of all notices of the Corporation. He shall have custody
of the seal of the Corporation and shall affix the seal (if any)
to all certificates of shares of stock of the Corporation (if
required by the form of such certificates) and to such other
papers or documents as may be proper and, when the seal is so
affixed, he shall attest the same by his signature wherever
required. He shall have charge of the stock certificate book,
transfer book and stock ledger, and such other books and papers as
the Board may direct. He shall, in general, perform all duties of
Secretary, subject to the control of the Board. The Secretary may
also be the Treasurer.
Section 7. Assistant Treasurers. In the absence or
inability of the Treasurer to act, any Assistant Treasurer may
perform all of the duties and exercise all of the powers of the
Treasurer, subject to the control of the Board. The performance
of any such duty shall be conclusive evidence of his power to act.
An Assistant Treasurer shall also perform such other duties as the
Treasurer or the Board may from time to time assign to him.
Section 8. Assistant Secretaries. In the absence or
inability of the Secretary to act, any Assistant Secretary may
perform all of the duties and exercise all of the powers of the
Secretary, subject to the control of the Board. The performance
of any such duty shall be conclusive evidence of his power to act.
An Assistant Secretary shall also perform such other duties as the
Secretary or the Board may from time to time assign to him.
Section 9. Other Officers. Other officers shall perform
such duties and have such powers as may from time to time be
assigned to them by the Board.
Section 10. Delegation of Duties. In case of the absence of
any officer of the Corporation, or for any other reason that the
Board may deem sufficient, the Board may confer, for the time
being, the powers and duties, or any of them, of such officer upon
any other officer or upon any director.
Section 11. Proxies in Respect of Securities of Other
Corporations. Unless otherwise provided by resolution adopted by
the Board, the President or any Vice President may from time to
time appoint an attorney or attorneys or an agent or agents to
exercise in the name and on behalf of the Corporation the powers
and rights which the Corporation may have as the holder of stock
or other securities in any other corporation to vote or to consent
in respect of such stock or other securities, and the President or
any Vice President may instruct the person or persons so appointed
as to the manner of exercising such powers and rights, and the
President or any Vice President may execute or cause to be
executed in the name and on behalf of the Corporation and under
its corporate seal, or otherwise, all such written proxies, powers
of attorney or other written instruments as he may deem necessary
in order that the Corporation may exercise such powers and rights.
ARTICLE V
Capital Stock
Section 1. Certificates for Shares. Certificates for shares
of stock of the Corporation certifying the number and class of
shares owned shall be issued to each stockholder in such form, not
inconsistent with the Certificate of Incorporation and these By-
Laws, as shall be approved by the Board. The certificates for the
shares of each class shall be numbered and registered in the order
in which they are issued and shall be signed by the Chairman of
the Board or the President or a Vice President and by the
Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer. Any or all of the signatures on a
certificate may be a facsimile. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the
date of issue. All certificates exchanged or returned to the
Corporation shall be canceled.
Section 2. Transfer of Shares of Stock. Transfers of shares
shall be made only upon the books of the Corporation by the
holder, in person or by his attorney lawfully constituted in
writing, and on the surrender of the certificate or certificates
for such shares properly assigned. The Board shall have the power
to make all such rules and regulations, not inconsistent with the
Certificate of Incorporation and these By-Laws, as it may deem
expedient concerning the issue, transfer and registration of
certificates for shares of stock of the Corporation.
Section 3. Lost, Stolen or Destroyed Certificates. The
Board, in its discretion, may issue a new certificate of stock in
place of any certificate theretofore issued and alleged to have
been lost, stolen or destroyed, and may require the owner of any
certificate of stock alleged to have been lost, stolen or
destroyed, or his legal representative, to give the Corporation a
bond in such sum as the Board may direct to indemnify the
Corporation against any claim that may be made against it on
account of the alleged loss, theft or destruction of any
certificate or the issuance of such new certificate. Proper
evidence of such loss, theft or destruction shall be procured if
required by the Board. The Board in its discretion may refuse to
issue such new certificate save upon the order of a court having
jurisdiction in such matters.
Section 4. Record Date. In order that the Corporation
may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise
any rights in respect of any change, conversion or exchange of
stock or for the purpose of any other lawful action, the Board may
fix, in advance, a record date, which shall not be more than sixty
(60) nor fewer than ten (10) days before the date of such meeting,
nor more than sixty (60) days prior to any other action. If no
record date is fixed:
(a) The record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the date next preceding the
day on which notice is given or, if notice is waived, at the close
of business on the day next preceding the day on which the meeting
is held.
(b) The record date for determining stockholders
entitled to express consent to corporate action in writing without
a meeting, when no prior action by the Board is necessary, shall
be at the close of business on the day on which the first written
consent is expressed.
(c) The record date for determining stockholders
for any other purpose shall be at the close of business on
the day on which the Board adopts the resolution relating
thereto. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, that the Board
may fix a new record date for the adjourned meeting.
ARTICLE VI
Indemnification
Section 1. Mandatory Indemnification of Officers, Directors,
Employees and Agents. Except to the extent prohibited by law and
except as herein provided, the directors, officers, employees and
agents of the Corporation shall be entitled to the following
rights with respect to indemnification:
(a) The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to, or is or may
become involved in (as a party or otherwise), any threatened,
pending or completed action, suit or proceeding, or any appeal
taken therefrom, whether civil, criminal, administrative or
investigative (a "Proceeding") (other than an action by or in the
right of the Corporation), by reason of the fact that he or she
(i) is or was a director or officer of the Corporation, (ii) is or
was a director or officer of the Corporation and is or was serving
any other corporation or any partnership, joint venture, trust or
other enterprise (including service with respect to employee
benefit plans) in any capacity at the request of the Corporation
or (iii) is or was serving as a director or officer of any other
corporation or is or was serving any partnership, joint venture,
trust or other enterprise (including service with respect to
employee benefit plans) in a comparable capacity, at the request
of the Corporation, against all expenses, liability and loss
(including without limitation fees and disbursements of attorneys,
accountants and expert witnesses, court costs, judgments, fines,
ERISA excise taxes or penalties and amounts paid or to be paid in
settlement) (collectively, "Expenses, Liability and Loss")
actually and reasonably incurred by such person in connection with
such Proceeding if such person acted in good faith and in a manner
such person reasonably believed to be in or not opposed to the
best interest of the Corporation (or with respect to employee
benefit plans, in a manner such person reasonably believed to be
in the best interest of the participants and beneficiaries) and,
with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
(b) Except as provided in Section 4(a), the Corporation
shall indemnify any person who was or is a party or is threatened
to be made a party to, or is or may become involved in (as a party
or otherwise), any threatened, pending or completed action, suit
or proceeding, or any appeal taken therefrom by or in the right of
the Corporation to procure a judgment in its favor (a "Derivative
Action") by reason of the fact that he or she (i) is or was a
director or officer of the Corporation, (ii) is or was a director
or officer of the Corporation and is or was serving as a director
or officer of any other corporation, or is or was serving any
partnership, joint venture, trust or other enterprise (including
service with respect to employee benefit plans) in a comparable
capacity, at the request of the Corporation or (iii) is or was
serving as a director or officer of any other corporation, or is
or was serving any partnership, joint venture, trust or other
enterprise (including service with respect to employee benefit
plans) in a comparable capacity, at the request of the
Corporation, against expenses (including fees and disbursements of
attorneys, accountants and expert witnesses and court costs)
actually and reasonably incurred by such person in connection with
the defense or settlement of such action or suit if such person
acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interest of the Corporation
(or with respect to employee benefit plans, in a manner such
person believed to be in the best interest of the participants and
beneficiaries).
(c) The right of each director and officer of the
Corporation to indemnification hereunder (x) shall pertain both as
to action or omission to act in his or her official capacity and
as to action or omission to act in another capacity while holding
such office, (y) shall be a contract right and (z) shall include
the right to be paid by the Corporation the expenses incurred in
any such Proceeding or Derivative Action in advance of the final
disposition of such Proceeding or Derivative Action upon delivery
to the Corporation of an undertaking, by or on behalf of such
person, to repay all amounts so advanced if it should be
ultimately determined that such person is not entitled to
indemnification hereunder or otherwise.
(d) The right of each employee or agent of the
Corporation serving as a director or officer of any other
corporation or any partnership, joint venture, trust or other
enterprise (including service with respect to employee benefit
plans) in a comparable capacity, at the request of the
Corporation, to indemnification hereunder (x) shall pertain both
as to action or omission to act in his or her official capacity
and to action or omission to act in another capacity with respect
to the entity of which he or she is a director or officer and no
other entity, (y) shall be a contract right and (z) shall include
the right to be paid by the Corporation the expenses incurred in
any such Proceeding or Derivative Action in advance of the final
disposition of such proceeding or Derivative Action upon delivery
to the Corporation of an undertaking, by or on behalf of such
person, to repay all amounts so advanced if it should be
ultimately determined that such person is not entitled to
indemnification hereunder or otherwise.
Section 2. Additional (Permissive) Indemnification of
Employees and Agents. Except to the extent prohibited by law and
except as herein provided, the Corporation shall have the
authority (but not the obligation) to grant the following
indemnification to employees and agents of the Corporation and
employees and agents of other entities if serving as such at the
request of the Corporation:
(a) In addition to the indemnification provided in
Section 1(a)(iii) and Section 6, the Corporation may indemnify
(but shall not be required to indemnify) any person who was or is
a party or is threatened to be made a party to, or is or may
become involved in (as a party or otherwise) any Proceeding (other
than an action by or in the right of the Corporation) by reason of
the fact that he or she (i) is or was an employee or agent of the
Corporation or (ii) is or was an employee or agent of the
Corporation and is or was serving as an employee or agent of any
other corporation or any partnership, joint venture, trust or
other enterprise (including service with respect to employee
benefit plans) at the request of the Corporation, against all
Expenses, Liability and Loss actually and reasonably incurred by
such person in connection with such Proceeding if such person
acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interest of the Corporation
(or with respect to employee benefit plans, in a manner such
person reasonably believed to be in the best interest of the
participants and beneficiaries) and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful.
(b) In addition to the indemnification provided in
Section 1(b)(iii) and Section 6, but subject to Section 4(a), the
Corporation may indemnify (but shall not be required to indemnify)
any person who was or is a party or is threatened to be made a
party to or is or may become involved in (as a party or otherwise)
any Derivative Action by reason of the fact that he or she (i) is
or was an employee or agent of the Corporation or (ii) is or was
an employee or agent of the Corporation and is or was serving as
an employee or agent of any other corporation or any partnership,
joint venture, trust or other enterprise (including service with
respect to employee benefit plans) at the request of the
Corporation, against expenses (including fees and disbursements of
attorneys, accountants and expert witnesses and court costs)
actually and reasonably incurred by such person in connection with
the defense or settlement of such action or suit if such person
acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interest of the Corporation
(or with respect to employee benefit plans, in a manner such
person reasonably believed to be in the best interest of the
participants and beneficiaries).
(c) The power of the Corporation to indemnify each
employee and agent pursuant to Section 2(a) hereunder (x) shall
pertain both as to action or omission to act in such person's
official capacity and as to action or omission to act in another
capacity while holding such office and (y) shall include the power
(but not the obligation) to pay the expenses incurred in any
Proceeding or Derivative Action in advance of the final
disposition of such Proceeding or Derivative Action upon such
terms and conditions, if any, as the Board of Directors of the
Corporation deems appropriate.
Section 3. Right of Claimant to Bring Suit. If the
Corporation receives a written claim under Section 1 or Section 6
which it has not paid in full within the Applicable Period, as
hereafter defined, after the Corporation receives such claim, the
claimant may at any time thereafter bring an action against the
Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to
recover also the expense of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to
enforce a claim for expenses incurred in connection with (a) any
Proceeding or Derivative Action in advance of its final
disposition where the required undertaking has been tendered to
the Corporation or (b)any Proceeding or Derivative Action in which
the claimant was successful on the merits or otherwise) that the
claimant has not met the applicable standards of conduct set forth
herein for the Corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on
the Corporation. Neither the failure of the Corporation
(including its Board, independent legal counsel or its
stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant
is proper in the circumstances because he or she has met the
applicable standards of conduct set forth herein nor an actual
determination by the Corporation (including its Board, independent
legal counsel or its stockholders) that the claimant has not met
such applicable standards of conduct shall be a defense to the
action or create a presumption that the claimant has not met the
applicable standards of conduct.
Section 4. Limitations on Indemnification.
(a) No person shall be indemnified under Section 1(b)
or Section 2(b) in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of
Chancery of the State of Delaware or the court in which such
action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
(b) For purposes of Sections 1 and 2, the
termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that any
person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests
of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was
unlawful.
Section 5. Procedure for Obtaining Indemnification. Except
as set forth in Section 6, any indemnification under Sections 1
and 2 (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is
proper in the circumstances because he or she has met the
applicable standard of conduct set forth in Section 1 or 2 and, in
the case of any indemnification under Section 2, because the Board
in its discretion deems such indemnification to be appropriate.
Subject to Section 3, such determination shall be made (1) by the
Board by a majority vote of a quorum consisting of directors who
were not parties to such Proceeding or Derivative Action, (2) if
such a quorum is not obtainable, or, even if obtainable, if a
quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, (3) by the stockholders or (4) by
any court having jurisdiction.
Section 6. Indemnification of Expenses. To the extent that
any person described in Section 1 or 2 hereof has been successful
on the merits or otherwise in defense of any Proceeding or
Derivative Action, or in defense of any claim, issue or matter
described therein, he or she shall be indemnified by the
Corporation against expenses (including fees and disbursements of
attorneys, accountants, expert witnesses and court costs) actually
and reasonably incurred by him or her in connection therewith.
Section 7. Non-Exclusivity of Rights. The indemnification
and advancement of expenses provided by or granted pursuant to the
other Sections of this Article shall not be deemed exclusive of
any other rights to which those persons seeking indemnification or
advancement of expenses under this Article might be entitled under
any other bylaw, agreement, vote of stockholders or vote of
disinterested directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity
while holding such office.
Section 8. Benefits of Article. The indemnification and
advancement of expenses provided by or granted pursuant to this
Article shall, unless otherwise provided when authorized and
ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the
heirs, executors, administrators and other legal representatives
of such person.
Section 9. Definitions.
(a) For purposes of Section 3 of this Article, the
"Applicable Period" shall be:
(i) with respect to claims arising under
SectionE1(a) or Section 1(b), sixty (60) days; and
(ii) with respect to claims arising under
SectionE1(c), Section 1(d) or Section 6, ten (10) days.
(b) For the purposes of this Article, references to
the "Corporation" include all constituent corporations (including
any constituent of a constituent) absorbed in a consolidation or
merger as well as the resulting or surviving corporation so that
any person who is or was a director, officer, employee or agent
of such a constituent corporation or is or was serving as a
director, officer, employee or agent of any other corporation,
or is or was serving any partnership, joint venture, trust or other
enterprise (including service with respect to employee benefit
plans) in a comparable capacity, at the request of such constituent
corporation, shall stand in the same position under the provisions
of this Article with respect to the resulting or surviving corporation
as he or she would if he or she had served the resulting or surviving
corporation in the same capacity, but the Corporation shall be obligated
to make such indemnification only if and to the extent that such
director, officer, employee or agent would have had a right to
indemnification against the constituent corporation. The
Corporation may indemnify a director, officer, employee or agent
of a constituent corporation if the Corporation would be
authorized to indemnify (or would be required to indemnify) such
director, officer, employee or agent under the provisions of this
Article for acts or omissions arising prior to such consolidation
or merger.
Section 10. Severability. If any provision of this Article,
or portion thereof, or the application of any such provision to
any party or circumstance shall be determined by any court of
competent jurisdiction to be invalid or unenforceable to any
extent, the remainder of this Article or the application of such
provision to any person or circumstance other than those to which
it is so determined to be invalid and unenforceable shall not be
affected thereby, and each provision hereof shall remain in full
force and effect to the fullest extent permitted by law, and any
such invalidity in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
ARTICLE VII
Seal
The seal (if any) of the Corporation shall be circular in
form and shall contain the name of the Corporation, the year of
its incorporation and the words "Corporate Seal" and "Delaware"
inscribed thereon. The seal may be affixed to any instrument by
causing it, or a facsimile thereof, to be impressed or otherwise
reproduced thereon.
ARTICLE VIII
Waiver
Whenever any notice whatsoever is required to be given by
statute or under the provisions of the Certificate of
Incorporation or these By-Laws, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed
equivalent thereto. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting except when the
person attends a meeting for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither
the business to be transacted at nor the purpose of any regular or
special meeting of the stockholders, directors or members of a
committee of directors need be specified in any written waiver of
notice.
ARTICLE IX
Checks, Notes, Drafts, etc.
Checks, notes, drafts, acceptances, bills of exchange and
other orders or obligations for the payment of money shall be
signed by such officer or officers or person or persons as the
Board shall from time to time determine.
ARTICLE X
Amendments
These By-Laws or any of them may be amended or repealed and
new By-Laws may be adopted (a) by the stockholders, at any annual
meeting, or at any special meeting called for that purpose, by the
vote of a majority of the issued and outstanding stock entitled to
vote thereat or (b) by the Board at any duly convened meeting, but
any such action of the Board may be amended or repealed by the
stockholders at any annual meeting or any special meeting called
for that purpose; provided, that no amendment may be made which
will conflict with any provision of law or of the Certificate of
Incorporation.
EXHIBIT 3.03
INCORPORATED UNDER THE LAWS OF
THE STATE OF DELAWARE
No. 0001 Shares 1,000
PANDA FUNDING CORPORATION
Common Stock
This certifies that PANDA INTERFUNDING CORPORATION is the
owner of ONE THOUSAND (1,000) shares of the Capital Stock of
PANDA FUNDING CORPORATION transferable only on the books of the
Corporation by the holder hereof in person or by Attorney upon
surrender of this Certificate properly endorsed.
IN WITNESS WHEREOF, the said Corporation has caused this
Certificate to be signed by its duly authorized officers and to
be sealed with the Seal of the Corporation this 25th day of July
A.D. 1996.
Janice Carter Robert W. Carter
SHARES $0.01 EACH
EXHIBIT 3.04
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PANDA INTERFUNDING CORPORATION
FIRST: The name of the Corporation is Panda
Interfunding Corporation.
SECOND: The registered office of the Corporation in the
State of Delaware is located at 1209 Orange Street in the City of
Wilmington, County of New Castle, Delaware 19801. The name of
its registered agent at such address is The Corporation Trust
Company.
THIRD: The nature of the business of the Corporation
and its sole purposes are (a) to act as a holding company for
purposes of investing in and holding direct and indirect
interests in entities engaged in (i) the development,
construction, equipping, operation and management of, and
ownership (whether direct or indirect) of interests in, electric
generating facilities, sources of fuel, pipelines and other
infrastructure projects, (ii) the marketing of electric power,
thermal energy and fuel and (iii) the financing any of the
foregoing, (b) to engage in the borrowing and lending of funds in
connection with the purposes described in clause (a) above,
(c) to perform the Corporation's obligations under all
indentures, contracts and other agreements entered into in
connection with the purposes described in clauses (a) and (b)
above and (d) to engage in any other activities related or
incidental thereto, including without limitation pledging all or
part of the capital stock or partnership or other equity interest
owned by the Corporation in such entities as security for the
repayment of indebtedness of the Corporation or of any such
entities. Except as stated above, the Corporation shall not
engage in any business or activity whatsoever.
FOURTH: The total number of shares of all classes of
capital stock that the Corporation shall have authority to issue
is one thousand (1,000) shares of Common Stock, par value $0.01
per share.
FIFTH: The name and mailing address of the
incorporator is Cornelius J. Golden, Jr., Chadbourne & Parke LLP,
1101 Vermont Avenue, N.W., Washington, D.C. 20005.
SIXTH: For the management of the business and for the
conduct of the affairs of the Corporation, and in further
definition, limitation and regulation of the powers of the
Corporation and of its directors and stockholders, it is further
provided that:
1. The election of directors of the Corporation need
not be by written ballot unless the By-Laws of the
Corporation so require.
2. In furtherance and not in limitation of the powers
conferred by the laws of the State of Delaware, the Board of
Directors is expressly authorized:
(a) to adopt, amend or repeal the By-Laws of the
Corporation;
(b) without the assent or vote of the
stockholders, to authorize and issue debt securities of
the Corporation, secured or unsecured, and to include
therein such provisions as to redeemability,
convertibility or otherwise as the Board of Directors,
in its sole discretion, may determine; and
(c) to exercise all other powers of the
Corporation except those that by law or this
Certificate of Incorporation expressly require the
consent of the stockholders.
3. Any vote or votes of the stockholders authorizing
liquidation of the Corporation or proceedings for its
dissolution may provide, subject to the rights of creditors
and preferred stockholders, if any, for the distribution pro
rata among the stockholders of the Corporation of the assets
of the Corporation, wholly or in part, in cash or in kind,
whether such assets be in cash or in other property, and any
such vote or votes may authorize the Board of Directors of
the Corporation to determine the valuation of the different
assets of the Corporation for the purpose of such
liquidation and may divide or authorize the Board of
Directors to divide such assets or any part thereof among
the stockholders of the Corporation, in such manner that
every stockholder will receive a proportionate amount in
value (determined as aforesaid) of cash and/or property of
the Corporation upon such liquidation or dissolution even
though each stockholder may not receive a strictly
proportionate part of each such asset.
4. The number of directors of the Corporation shall
be fixed in the manner provided in the By-Laws of the
Corporation and, until changed in the manner provided in the
By-Laws, shall be one (1); provided, in addition, that at
all times the Corporation shall have one (1) individual
designated as the "Independent Director" who shall be
elected in the same manner as the directors and who shall
not have been, at the time of such Independent Director's
election, or at any time in the preceding five (5) years:
(a) a direct or indirect legal or beneficial
owner in the Corporation or any of its Affiliates or a
member of the immediate family of any such owner;
(b) a creditor, supplier, officer, director,
promoter, underwriter, manager or contractor of the
Corporation or any of its Affiliates or a member of the
immediate family of any such officer or director; or
(c) a person, or a member of the immediate family
of a person, who is employed by the Corporation (other
than in his capacity as Independent Director) or its
Affiliates or any creditor, supplier, employee,
stockholder, officer, director, promoter, underwriter,
manager or contractor of the Corporation or its
Affiliates; provided, that such Independent Director
may be an "independent director" of one or more other
special-purpose, independent entities owned or
controlled by Panda International or any of its
Affiliates. As used in this Certificate of
Incorporation, the term "Affiliate" shall mean, with
respect to any person or entity, any other person or
entity that, directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is
under common control with, such person or entity. The
term "control" (including the correlative term
"controlled") means the possession, directly or
indirectly, of the power to direct or cause the
direction of the management and policies of a person or
entity, whether through the ownership of voting stock,
by contract or otherwise.
The Independent Director shall be entitled to all
rights and benefits of a director of the Corporation (i) in
respect of indemnification by the Corporation as provided in
this Certificate of Incorporation, the By-Laws and the
General Corporation Law of the State of Delaware and (ii)
under Article EIGHTH of this Certificate of Incorporation.
The Independent Director shall also be subject to all duties
imposed on a director of the Corporation by the General
Corporation Law of the State of Delaware.
5. Pursuant to Section 141(a) of the General
Corporation Law of the State of Delaware, the Corporation
and/or the Board of Directors of the Corporation shall not,
without the affirmative vote or written consent of all of
the directors of the Corporation and the Independent
Director:
(a) file a petition for relief under the United
States Bankruptcy Code, as amended, make an assignment
for the benefit of creditors, apply for the appointment
of a custodian, receiver or trustee for the Corporation
or any of the Corporation's property, consent to any
other bankruptcy or similar proceeding, consent to the
filing of such proceeding or admit in writing the
Corporation's inability to pay its debts generally as
they become due;
(b) commence the dissolution, liquidation,
consolidation, merger or sale of all or substantially
all of the assets of the Corporation;
(c) amend this Certificate of Incorporation,
including without limitation Article THIRD, in such a
manner as either to broaden the business purpose of the
Corporation or otherwise adversely to affect the
existence of the Corporation as a special-purpose,
independent entity, or amend paragraph 4, 5, 6 or 7 of
this Article SIXTH;
(d) engage in any business or activity other than
as set forth in Article THIRD of this Certificate of
Incorporation; or
(e) authorize the Corporation, or any officer or
agent of the Corporation on behalf of the Corporation,
to vote, in the Corporation's capacity as a shareholder
or member of or other holder of a voting equity
interest in any subsidiary that has an independent
director having authority substantially similar to the
authority granted the Independent Director under this
Certificate of Incorporation, to authorize such
subsidiary to take any action in substance similar to
the actions set forth in clauses (a) through (d) of
this Article SIXTH with respect to the bankruptcy,
insolvency, dissolution, liquidation, consolidation,
merger, sale of assets, amendments to charter documents
or engaging in business or activity of such subsidiary.
6. In no circumstance shall the Independent Director
be entitled to consider or vote on any matter proposed at
any meeting of the Board of Directors or committee thereof,
or consent to action on any such matter, other than the
matters set forth in paragraph 5 of this Article SIXTH. For
all other matters a quorum shall be determined without
taking the Independent Director into account.
7. The Corporation shall:
(a) ensure that (i) the Corporation's funds and
other assets are identifiable and are not commingled
with those of any other person or entity, (ii) the
Corporation maintains bank accounts, records and books
of account separate and apart from any other person or
entity, and (iii) the Corporation pays from its assets
all obligations and indebtedness of any kind incurred
by it;
(b) ensure that the assets and liabilities of the
Corporation are readily ascertainable and subject to
segregation without requiring substantial time or
expense to effect and account for such segregated
assets and liabilities;
(c) conduct the Corporation's business solely in
its own name (including without limitation by use of
its own stationery and business forms) so as not to
mislead others as to the identity of the entity with
which such others are concerned;
(d) not engage in any activities with the
Corporation's Affiliates (including without limitation
appointing any Affiliate of the Corporation an agent of
the Corporation) other than in connection with the
activities set forth in Article THIRD;
(e) not enter (or hold itself out as having
entered) into any agreement or arrangement to guarantee
or, in any way or under any condition, become obligated
or liable (or hold itself out as being obligated or
liable) for all or any part of any financial or other
obligation of another person or entity other than in
connection with the activities set forth in Article
THIRD;
(f) not make or permit to exist loans or advances
to another person or entity other than in connection
with the activities set forth in Article THIRD;
(g) conduct its business in accordance with all
requisite corporate procedures and formalities; and
(h) neither control the decisions with respect to
the daily affairs of any other person or entity other
than in connection with the activities set forth in
Article THIRD nor permit any person or entity not a
director, officer or stockholder of the Corporation to
direct or participate in the management of the
Corporation.
SEVENTH: No stockholder shall have any preemptive
right to subscribe to an additional issue of stock or to any
security convertible into such stock.
EIGHTH: To the fullest extent permitted by the
General Corporation Law of the State of Delaware, as the same
exists or may hereafter be amended, a director of this
Corporation shall not be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as
a director.
NINTH: Except as set forth in Article SIXTH, the
Corporation reserves the right to amend or repeal any provision
contained in this Certificate of Incorporation in the manner now
or hereafter prescribed by the laws of the State of Delaware, and
all rights herein conferred upon stockholders or directors are
granted subject to this reservation.
EXHIBIT 3.05
BY-LAWS
OF
PANDA INTERFUNDING CORPORATION
ARTICLE I
Offices
The registered office of the Corporation in the State
of Delaware is located at 1209 Orange Street, Wilmington,
Delaware 19801, and the name of the registered agent of the
Corporation at such office is The Corporation Trust Company. The
Corporation may also have offices at such other places, within or
without the State of Delaware, as the Board of Directors (the
"Board") may from time to time determine.
ARTICLE II
Meetings of Stockholders
Section 1. Annual Meeting. The annual meeting of the
stockholders of the Corporation for the election of directors and
for the transaction of such other business as may properly come
before the meeting shall be held in Dallas, Texas, or at such
other place within or without the State of Delaware as may be
specified in the notice of meeting or the waiver thereof.
Section 2. Special Meetings. A special meeting of the
stockholders of the Corporation may be called by the President
and shall be called by the President, the Secretary or an
Assistant Secretary when directed to do so by resolution of the
Board at a duly convened meeting of the Board, or at the request
in writing of a majority of the Board. Such request shall state
the purpose or purposes of the proposed meeting. Special
meetings shall be held in Dallas, Texas, or at such place within
or without the State of Delaware as may be specified in the
notice of meeting or waiver thereof. Business transacted at all
special meetings shall be confined to the purposes stated in the
notice of meeting.
Section 3. Notice of Meetings. Written notice of
every meeting of the stockholders shall be given by or under the
direction of the Secretary or an Assistant Secretary, either
personally or by mail, upon each stockholder of record entitled
to vote at such meeting, not less than ten (10) nor more than
sixty (60) days before the meeting. In the event of the death,
absence, incapacity or refusal of the specified officer, notice
of a meeting may be given by a person designated by the Secretary
or an Assistant Secretary, the person or persons requesting the
meeting or the Board. If mailed, the notice of a meeting shall
be directed to a stockholder at his address as it appears on the
records of the Corporation. The notice of every meeting of the
stockholders shall state the place, date and hour of the meeting
and the purpose or purposes for which the meeting is called.
Section 4. Quorum. At all meetings of stockholders, a
majority of the issued and outstanding stock entitled to vote
present in person or by proxy shall constitute a quorum. If such
quorum is not present, the stockholders present thereat may
adjourn the meeting from time to time without notice, other than
the announcement at the meeting of the date, time and place of
the adjourned meeting, until a quorum is present, and thereupon
any business may be transacted at the adjourned meeting which
might have been transacted at the meeting as originally called.
If the adjournment is for more than thirty (30) days, or if after
the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 5. Voting. At every meeting of the
stockholders, except as may be otherwise provided in the
Certificate of Incorporation, every stockholder of the
Corporation entitled to vote thereat shall be entitled to one (1)
vote for each share of stock entitled to vote standing in his
name on the books of the Corporation on the record date as
determined in accordance with Article V, Section 4 of these By-
Laws. Directors shall be elected by a plurality of the votes
cast at a meeting of stockholders (at which a quorum is present)
by the holders of shares entitled to vote in the election, except
as otherwise required by law or by the Certificate of
Incorporation of the Corporation. Whenever any corporate action,
other than the election of directors, is to be taken by vote of
the stockholders, it shall be authorized by a majority of the
votes cast at a meeting of stockholders (at which a quorum is
present) by the holders of shares entitled to vote thereon
(except as otherwise required by law, the Certificate of
Incorporation of the Corporation, these By-Laws or any
regulations of any security exchange). The stock ledger of the
Corporation shall be the only evidence as to who are the
stockholders entitled to examine such stock ledger, the list
required by Article II, Section 9 of these By-Laws or the books
of the Corporation, or to vote in person or by proxy at any
meeting of stockholders. Upon the demand of any stockholder
entitled to vote, the vote at any election of directors, or the
vote upon any question before a meeting, shall be by ballot, but
otherwise the method of voting shall be discretionary with the
presiding officer at the meeting.
Section 6. Presiding Officer and Secretary. At all
meetings of the stockholders, the Chairman of the Board, or if
such office be vacant or such person be absent, the President of
the Corporation, or in such person's absence a Vice President, or
if none be present the appointee of the meeting, shall preside.
The Secretary of the Corporation, or in such person's absence an
Assistant Secretary, or if none be present the appointee of the
Presiding Officer of the meeting, shall act as Secretary of the
meeting.
Section 7. Proxies. Any stockholder entitled to vote
at any meeting of stockholders may vote either in person or by
proxy, but no proxy shall be voted after three (3) years from its
date unless such proxy provides for a longer period. Every proxy
must be executed in writing by the stockholder himself or by his
duly authorized attorney, and dated, but need not be sealed,
witnessed or acknowledged. Proxies shall be delivered to the
Secretary of the meeting before the meeting begins or to the
Judges at the meeting. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and if, and only
as long as, it is coupled with an interest sufficient in law to
support an irrevocable power. A proxy may be made irrevocable
regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the Corporation
generally.
Section 8. Judges. At each meeting of the
stockholders at which the vote for directors, or the vote upon
any question before the meeting, is taken by ballot, the polls
shall be opened and closed by, and the proxies and ballots shall
be received and taken in charge by, and all questions touching on
the qualifications of voters and the validity of proxies and the
acceptance and rejection of the same shall be decided by, two (2)
Judges. Such Judges may be appointed by the Board before the
meeting but if no such appointment shall have been made, they
shall be appointed by the meeting. If for any reason any Judge
previously appointed shall fail to attend or refuse or be unable
to serve, a Judge in his or her place shall be appointed by the
meeting. Any appointment of Judges by the meeting shall be by
per capita vote of the stockholders present and entitled to vote.
Section 9. List of Stockholders. At least ten (10)
days prior to every meeting of stockholders, a complete list of
the stockholders entitled to vote at such meeting, arranged in
alphabetical order and showing the address of each stockholder
and the number of shares registered in the name of each, shall be
prepared by the Secretary or an Assistant Secretary. Such list
shall be open to examination at a place within the city where the
meeting is to be held, which place shall be specified in the
notice of meeting, or, if not so specified, at the place where
the meeting is held and shall be open, during normal business
hours for a period of ten (10) days prior to the meeting, to the
examination of any stockholder for any purpose germane to the
meeting. The list shall also be produced and kept at the time
and place of the meeting during the whole time thereof and may be
inspected by any stockholder who is present.
Section 10. Consent of Stockholders in Lieu of
Meeting. Any action that may be taken at any annual or special
meeting of stockholders may be taken without a meeting, without
prior notice and without a vote if one or more consents in
writing, setting forth the action so taken and signed by the
holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon
were present and voted, are delivered to the Corporation by
delivery to its registered office in the State of Delaware by
hand or by certified or registered mail, return receipt
requested, or to its principal place of business, or to an
officer or agent of the Corporation having custody of the book in
which proceedings of meetings of stockholders are recorded.
Every written consent shall bear the date of signature of each
stockholder signing the consent and no written consent shall be
effective to take the corporate action referred to therein unless
written consents signed by a sufficient number of stockholders to
take the action are delivered to the Corporation, in the manner
required by law, within sixty (60) days of the earliest dated
consent so delivered. Prompt notice of the taking of such action
shall be given to each stockholder that did not consent in
writing.
ARTICLE III
Directors and the Independent Director
Section 1. Number and Election. The number of
directors may be increased or decreased from time to time by the
stockholders or by the Board; provided, in addition, that at all
times the Corporation shall have at least one (1) individual
designated as the "Independent Director" who shall possess only
those rights granted to, and be subject to those duties imposed
on, such Independent Director pursuant to this Article III and
the Certificate of Incorporation of the Corporation, who shall be
elected in the same manner as the directors and who shall not
have been at the time of such Independent Director's election or
at any time in the preceding five (5) years (a) a direct or
indirect legal or beneficial owner in the Corporation or any of
its Affiliates or a member of the immediate family of any such
owner, (b) a creditor, supplier, officer, director, promoter,
underwriter, manager or contractor of the Corporation or any of
its Affiliates or a member of the immediate family of any such
officer or director or (c) a person, or a member of the immediate
family of a person, who is employed by the Corporation (other
than in his capacity as Independent Director) or its Affiliates
or any creditor, supplier, employee, stockholder, officer,
director, promoter, underwriter, manager or contractor of the
Corporation or its Affiliates; provided, that such Independent
Director may be an "independent director" of one or more single
purpose, independent entities owned or controlled by Panda Energy
International, Inc. or any of its Affiliates. As used herein,
the term "Affiliate" shall mean, with respect to any person or
entity, any other person or entity which directly or indirectly
through one or more intermediaries controls, or is controlled by,
or is under common control with, such person or entity. The term
"control" (including the correlative term "controlled") means the
possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a person or
entity, whether through the ownership of voting stock, by
contract or otherwise. The Independent Director shall be
entitled to all rights and benefits of a director of the
Corporation (i) in respect of indemnification by the Corporation
as provided in the Certificate of Incorporation, these By-Laws
and the General Corporation Law of the State of Delaware and (ii)
under Article EIGHTH of the Certificate of Incorporation. The
Independent Director shall also be subject to all duties imposed
on a director of the Corporation by the General Corporation Law
of the State of Delaware. Except as provided by law or these By-
Laws, the members of the Board and the Independent Director shall
be elected at each annual meeting of the stockholders. If for
any reason any annual election shall not be held on the day
designated by these By-Laws, the Board shall cause such election
to be held as soon thereafter as convenient. Except as otherwise
provided in the Certificate of Incorporation or these By-Laws, at
each meeting of the stockholders for the election of directors
and the Independent Director at which a quorum shall be present,
the persons (not exceeding the then authorized number of
directors) receiving a plurality of the votes cast shall be
elected directors or the Independent Director, as the case may
be. Except as otherwise provided by law, the term of office of
each director and the Independent Director shall be from the time
of his election and qualification until the annual meeting of
stockholders next succeeding his election and until his successor
shall have been duly elected and shall have qualified; provided,
that any director and the Independent Director may be removed
without cause before the expiration of his term by the vote of a
majority of the issued and outstanding stock entitled to vote at
any special meeting called for the purpose; provided, further,
that in the case of a removal of the Independent Director, a
successor Independent Director shall at the same time be elected
by the stockholders. A director need not be a stockholder.
Section 2. Vacancies. Any vacancy in the Board caused
by death, resignation, disqualification, removal, an increase in
the number of directors (caused by the Board or otherwise) or any
other cause may be filled by a majority of the directors then in
office although less than a quorum or by a sole remaining
director, or by the stockholders. If for any reason there is a
vacancy in the office of Independent Director, the stockholders
shall promptly cause the office to be filled. When one or more
directors shall resign from the Board effective at a future date,
a majority of the directors (but not the Independent Director)
then in office, including those who have so resigned, shall have
the power to fill such vacancy or vacancies, the vote thereon to
take effect when such resignation or resignations shall become
effective.
Section 3. Resignations. Any director and the
Independent Director may resign from his office at any time by
delivering his resignation in writing to the Corporation, and the
acceptance of such resignation, unless required by the terms
thereof, shall not be necessary to make such resignation
effective.
Section 4. Meetings. The Board may hold its meetings
in such place or places within or without the State of Delaware
as the Board from time to time by resolution may determine or as
shall be specified in the respective notices or waivers of notice
thereof, and the directors may adopt such rules and regulations
for the conduct of their meetings and the management of the
Corporation not inconsistent with these By-Laws or the
Certificate of Incorporation as they may deem proper. The Board
from time to time by resolution may fix a time and place (or
varying times and places) for the annual and other regular
meetings of the Board; provided, that unless a time and place is
so fixed for any annual meeting of the Board, the same shall be
held immediately following the annual meeting of the stockholders
at the same place at which such meeting shall have been held;
provided, further, that the Independent Director shall have no
right to notice of or to attend any meeting of the Board, except
that the Independent Director shall be entitled to notice of and
to attend that portion of any meeting of the Board at which any
matter is to be considered by the Board upon which the approval
of the Independent Director is required. No notice of the annual
or other regular meetings of the Board need be given. Other
meetings of the Board shall be held whenever called by the
Chairman of the Board or by the President or by one-third (1/3)
of the directors then in office, and the Secretary or an
Assistant Secretary shall give notice of each such meeting to
each director not later than the day before the day of the
meeting, personally or by mailing, telecopying or telephoning
such notice to him at his address as it appears on the books of
the Corporation or by leaving such notice at his residence or
usual place of business. No notice of a meeting need be given if
all the directors are present in person. Any business may be
transacted at any meeting of the Board, whether or not specified
in a notice of the meeting.
Section 5. Meetings by Conference Telephone. Members
of the Board, or any committee designated by the Board, and, when
required, the Independent Director, may participate in a meeting
of the Board or such committee by means of conference telephone
or similar communications equipment by which all persons
participating in the meeting can hear each other. Participation
in a meeting pursuant to this paragraph shall constitute presence
in person at such meeting. The Chairman of the Board or the
Secretary of the meeting shall make certain that all persons
participating in the meeting (i) can hear each other and (ii)
understand that their participation will constitute a meeting of
the Board or such committee.
Section 6. Unanimous Consent in Lieu of Meeting. Any
action required or permitted to be taken at any meeting of the
Board may be taken without a meeting if a written consent thereto
is signed by all of the members of the Board entitled to vote on
such action and, if required, the Independent Director, and such
written consent is filed with the minutes of proceedings of the
Board.
Section 7. Quorum. In no circumstance shall the
Independent Director be entitled to consider or vote on any
matter proposed at a meeting of the Board of Directors or
committee thereof, or consent to action on any such matter, other
than the matters set forth in Article SIXTH of the Certificate of
Incorporation and Article III, Section 8 of these By-Laws. For
all other matters a quorum shall be determined without taking the
Independent Director into account. If there be less than a
quorum at any meeting of the Board, a majority of those present
(or if only one (1) be present, then that one (1) may adjourn
the meeting from time to time, and no further notice thereof need
be given other than announcement at the meeting which shall be so
adjourned of the time of, and the place to which, the meeting is
adjourned.
Section 8. Voting. Except as otherwise required by
law, the Certificate of Incorporation or these By-Laws, the vote
of a majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors.
Notwithstanding the foregoing, pursuant to Section 141(a) of the
General Corporation Law of the State of Delaware, the Corporation
and/or the Board shall not, without the affirmative vote or
written consent of all of the directors and the Independent
Director:
(a) file a petition for relief under the United States
Bankruptcy Code, as amended, make an assignment for the
benefit of creditors, apply for the appointment of a
custodian, receiver or trustee for the Corporation or any of
the Corporation's property, consent to any other bankruptcy
or similar proceeding, consent to the filing of such
proceeding or admit in writing the Corporation's inability
to pay its debts generally as they become due;
(b) commence the dissolution, liquidation,
consolidation, merger or sale of all or substantially all of
the assets of the Corporation;
(c) amend the Certificate of Incorporation, including
without limitation Article THIRD thereof, in such a manner
as either to broaden the business purpose of the Corporation
or otherwise adversely to affect the existence of the
Corporation as a single purpose, independent entity, or
amend paragraph 4, 5, 6 or 7 of Article SIXTH of the
Certificate of Incorporation; or
(d) engage in any business or activity other than as
set forth in Article THIRD of the Certificate of
Incorporation.
Section 9. Compensation. The Board shall have
authority to fix the compensation of directors and the
Independent Director for acting in either their respective
capacity or any other capacity.
Section 10. Committees. The Board may from time to
time designate one or more committees, each committee to consist
of one or more of the directors of the Corporation. The Board
may designate one or more directors as alternate members of any
committee who may replace any absent or disqualified member at
any meeting of the committee. To the extent provided in any such
resolution, any such committee shall have and may exercise all
the powers and authority of the Board in the management of the
business and affairs of the Corporation, including the power to
authorize the seal of the Corporation to be affixed to all papers
which may require it, and the power and authority to declare
dividends and to authorize the issuance of stock; provided, that
no such committee shall have any power or authority to amend the
Certificate of Incorporation, to adopt any agreement of merger or
consolidation, to recommend to the stockholders the sale, lease
or exchange of all or substantially all of the assets and
properties of the Corporation, to recommend to the stockholders a
dissolution of the Corporation or revocation of a dissolution or
to amend these By-Laws. Any action required or permitted to be
taken at any meeting of a committee may be taken without a
meeting if a written consent thereto is signed by all members of
such committee and such written consent is filed with the minutes
of proceedings of the committee.
ARTICLE IV
Officers and Agents
Section 1. General Provisions. The officers of the
Corporation shall be a President, a Treasurer and a Secretary,
and may include a Chairman of the Board, one or more Vice
Presidents, one or more Assistant Vice Presidents, one or more
Assistant Treasurers and one or more Assistant Secretaries, all
of whom shall be appointed by the Board as soon as may be
practicable after the election of directors in each year. Any
two offices may be held by the same person, but no officer shall
execute, acknowledge or verify any instrument in more than one
capacity if such instrument is required by law or by these By-
Laws to be executed, acknowledged or verified by any two or more
officers. Each of such officers shall serve until the annual
meeting of the Board next succeeding his appointment and until
his successor shall have been chosen and shall have qualified.
The Board may appoint such officers, agents and employees as it
may deem necessary or proper who shall respectively have such
authority and perform such duties as may from time to time be
prescribed by the Board. All officers, agents and employees
appointed by the Board shall be subject to removal at any time by
the affirmative vote of a majority of the Board. Other agents
and employees may be removed at any time by the Board, by the
officer appointing them or by any other superior officer upon
whom such power of removal may be conferred by the Board. The
salaries of the officers of the Corporation shall be fixed by the
Board but this power may be delegated to any officer. The
Corporation may secure the fidelity of any or all of its officers
or agents by bond or otherwise.
Section 2. The Chairman of the Board. The Chairman of
the Board shall be a member of the Board and shall preside at its
meetings and at all meetings of stockholders. He shall keep in
close touch with the administration of the affairs of the
Corporation and supervise its general policies. He shall see
that the acts of the executive officers conform to the policies
of the Corporation as determined by the Board and shall perform
such other duties as may from time to time be assigned to him by
the Board.
Section 3. The President. The President shall,
subject to the direction and under the supervision of the Board,
be the principal executive officer of the Corporation and shall
have general charge of the business and affairs of the
Corporation and shall keep the Board fully advised. If the
office of Chairman of the Board be vacant or if the Chairman of
the Board be absent, the President shall preside at meetings of
the stockholders and of the Board. At the direction of the
Board, he shall have power in the name of the Corporation and on
its behalf to execute any and all deeds, mortgages, contracts,
agreements and other instruments in writing. He shall employ and
discharge employees and agents of the Corporation, except such as
shall hold their offices by appointment of the Board, but he may
delegate these powers to other officers as to employees under
their immediate supervision. He shall have such powers and
perform such duties as generally pertain to the office of
President as well as such further powers and duties as may be
prescribed by the Board.
Section 4. Vice Presidents. Each Vice President shall
have such powers and perform such duties as the Board or the
President may from time to time prescribe and shall perform such
other duties as may be prescribed in these By-Laws. In the
absence or inability to act of the President, the Vice President
next in order as designated by the Board or, in the absence of
such designation, senior in length of service in such capacity,
who shall be present and able to act, shall perform all the
duties and may exercise any of the powers of the President,
subject to the control of the Board. The performance of any duty
by a Vice President shall be conclusive evidence of his power to
act.
Section 5. The Treasurer. The Treasurer shall have
the care and custody of all funds and securities of the
Corporation which may come into his hands and shall deposit the
same to the credit of the Corporation in such bank or banks or
other depositary or depositaries as the Board may designate. He
may endorse all commercial documents requiring endorsements for
or on behalf of the Corporation and may sign all receipts and
vouchers for payments made to the Corporation. He shall render
an account of his transactions to the Board as often as it shall
require the same, shall at all reasonable times exhibit his books
and accounts to any director and shall cause to be entered
regularly in books kept for that purpose full and accurate
account of all moneys received and disbursed by him on account of
the Corporation. He shall, if required by the Board, give the
Corporation a bond in such sums and with such sureties as shall
be satisfactory to the Board, conditioned upon the faithful
performance of his duties and for the restoration to the
Corporation in case of his death, resignation, retirement or
removal from office of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his
control belonging to the Corporation. He shall have such further
powers and duties as are incident to the position of Treasurer,
subject to the control of the Board. The Treasurer may also be
the Secretary.
Section 6. The Secretary. The Secretary shall record
the proceedings of meetings of the Board and of the stockholders
in a book kept for that purpose and shall attend to the giving
and serving of all notices of the Corporation. He shall have
custody of the seal of the Corporation and shall affix the seal
(if any) to all certificates of shares of stock of the
Corporation (if required by the form of such certificates) and to
such other papers or documents as may be proper and, when the
seal is so affixed, he shall attest the same by his signature
wherever required. He shall have charge of the stock certificate
book, transfer book and stock ledger, and such other books and
papers as the Board may direct. He shall, in general, perform
all duties of Secretary, subject to the control of the Board.
The Secretary may also be the Treasurer.
Section 7. Assistant Treasurers. In the absence or
inability of the Treasurer to act, any Assistant Treasurer may
perform all of the duties and exercise all of the powers of the
Treasurer, subject to the control of the Board. The performance
of any such duty shall be conclusive evidence of his power to
act. An Assistant Treasurer shall also perform such other duties
as the Treasurer or the Board may from time to time assign to
him.
Section 8. Assistant Secretaries. In the absence or
inability of the Secretary to act, any Assistant Secretary may
perform all of the duties and exercise all of the powers of the
Secretary, subject to the control of the Board. The performance
of any such duty shall be conclusive evidence of his power to
act. An Assistant Secretary shall also perform such other duties
as the Secretary or the Board may from time to time assign to
him.
Section 9. Other Officers. Other officers shall
perform such duties and have such powers as may from time to time
be assigned to them by the Board.
Section 10. Delegation of Duties. In case of the
absence of any officer of the Corporation, or for any other
reason that the Board may deem sufficient, the Board may confer,
for the time being, the powers and duties, or any of them, of
such officer upon any other officer or upon any director.
Section 11. Proxies in Respect of Securities of Other
Corporations. Unless otherwise provided by resolution adopted by
the Board, the President or any Vice President may from time to
time appoint an attorney or attorneys or an agent or agents to
exercise in the name and on behalf of the Corporation the powers
and rights which the Corporation may have as the holder of stock
or other securities in any other corporation to vote or to
consent in respect of such stock or other securities, and the
President or any Vice President may instruct the person or
persons so appointed as to the manner of exercising such powers
and rights, and the President or any Vice President may execute
or cause to be executed in the name and on behalf of the
Corporation and under its corporate seal, or otherwise, all such
written proxies, powers of attorney or other written instruments
as he may deem necessary in order that the Corporation may
exercise such powers and rights.
ARTICLE V
Capital Stock
Section 1. Certificates for Shares. Certificates for
shares of stock of the Corporation certifying the number and
class of shares owned shall be issued to each stockholder in such
form, not inconsistent with the Certificate of Incorporation and
these By-Laws, as shall be approved by the Board. The
certificates for the shares of each class shall be numbered and
registered in the order in which they are issued and shall be
signed by the Chairman of the Board or the President or a Vice
President and by the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer. Any or all of the
signatures on a certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the Corporation
with the same effect as if he were such officer, transfer agent
or registrar at the date of issue. All certificates exchanged or
returned to the Corporation shall be canceled.
Section 2. Transfer of Shares of Stock. Transfers of
shares shall be made only upon the books of the Corporation by
the holder, in person or by his attorney lawfully constituted in
writing, and on the surrender of the certificate or certificates
for such shares properly assigned. The Board shall have the
power to make all such rules and regulations, not inconsistent
with the Certificate of Incorporation and these By-Laws, as it
may deem expedient concerning the issue, transfer and
registration of certificates for shares of stock of the
Corporation.
Section 3. Lost, Stolen or Destroyed Certificates.
The Board, in its discretion, may issue a new certificate of
stock in place of any certificate theretofore issued and alleged
to have been lost, stolen or destroyed, and may require the owner
of any certificate of stock alleged to have been lost, stolen or
destroyed, or his legal representative, to give the Corporation a
bond in such sum as the Board may direct to indemnify the
Corporation against any claim that may be made against it on
account of the alleged loss, theft or destruction of any
certificate or the issuance of such new certificate. Proper
evidence of such loss, theft or destruction shall be procured if
required by the Board. The Board in its discretion may refuse to
issue such new certificate save upon the order of a court having
jurisdiction in such matters.
Section 4. Record Date. In order that the Corporation
may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise
any rights in respect of any change, conversion or exchange of
stock or for the purpose of any other lawful action, the Board
may fix, in advance, a record date, which shall not be more than
sixty (60) nor fewer than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
If no record date is fixed:
(a) The record date for determining stockholders
entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the date
next preceding the day on which notice is given or, if
notice is waived, at the close of business on the day next
preceding the day on which the meeting is held.
(b) The record date for determining stockholders
entitled to express consent to corporate action in writing
without a meeting, when no prior action by the Board is
necessary, shall be at the close of business on the day on
which the first written consent is expressed.
(c) The record date for determining stockholders for
any other purpose shall be at the close of business on the
day on which the Board adopts the resolution relating
thereto.
A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, that the Board may fix a
new record date for the adjourned meeting.
ARTICLE VI
Indemnification
Section 1. Mandatory Indemnification of Officers,
Directors, the Independent Director, Employees and Agents.
Except to the extent prohibited by law and except as herein
provided, the directors, officers, employees, agents and the
Independent Director of the Corporation shall be entitled to the
following rights with respect to indemnification:
(a) The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to, or is
or may become involved in (as a party or otherwise), any
threatened, pending or completed action, suit or proceeding,
or any appeal taken therefrom, whether civil, criminal,
administrative or investigative (a "Proceeding") (other than
an action by or in the right of the Corporation), by reason
of the fact that he or she (i) is or was a director,
Independent Director or officer of the Corporation, (ii) is
or was a director, Independent Director or officer of the
Corporation and is or was serving any other corporation or
any partnership, joint venture, trust or other enterprise
(including service with respect to employee benefit plans)
in any capacity at the request of the Corporation or (iii)
is or was serving as a director, "independent director" or
officer of any other corporation or is or was serving any
partnership, joint venture, trust or other enterprise
(including service with respect to employee benefit plans)
in a comparable capacity, at the request of the Corporation,
against all expenses, liability and loss (including without
limitation fees and disbursements of attorneys, accountants
and expert witnesses, court costs, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in
settlement) (collectively, "Expenses, Liability and Loss")
actually and reasonably incurred by such person in
connection with such Proceeding if such person acted in good
faith and in a manner such person reasonably believed to be
in or not opposed to the best interest of the Corporation
(or with respect to employee benefit plans, in a manner such
person reasonably believed to be in the best interest of the
participants and beneficiaries) and, with respect to any
criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful.
(b) Except as provided in Section 4(a), the
Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to, or is or may become
involved in (as a party or otherwise), any threatened,
pending or completed action, suit or proceeding, or any
appeal taken therefrom by or in the right of the Corporation
to procure a judgment in its favor (a "Derivative Action")
by reason of the fact that he or she (i) is or was a
director, Independent Director or officer of the
Corporation, (ii) is or was a director, Independent Director
or officer of the Corporation and is or was serving as a
director or officer of any other corporation, or is or was
serving any partnership, joint venture, trust or other
enterprise (including service with respect to employee
benefit plans) in a comparable capacity, at the request of
the Corporation or (iii) is or was serving as a director,
"independent director" or officer of any other corporation,
or is or was serving any partnership, joint venture, trust
or other enterprise (including service with respect to
employee benefit plans) in a comparable capacity, at the
request of the Corporation, against expenses (including fees
and disbursements of attorneys, accountants and expert
witnesses and court costs) actually and reasonably incurred
by such person in connection with the defense or settlement
of such action or suit if such person acted in good faith
and in a manner he or she reasonably believed to be in or
not opposed to the best interest of the Corporation (or with
respect to employee benefit plans, in a manner such person
believed to be in the best interest of the participants and
beneficiaries).
(c) The right of each director, Independent Director
and officer of the Corporation to indemnification hereunder
(x) shall pertain both as to action or omission to act in
his or her official capacity and as to action or omission to
act in another capacity while holding such office, (y) shall
be a contract right and (z) shall include the right to be
paid by the Corporation the expenses incurred in any such
Proceeding or Derivative Action in advance of the final
disposition of such Proceeding or Derivative Action upon
delivery to the Corporation of an undertaking, by or on
behalf of such person, to repay all amounts so advanced if
it should be ultimately determined that such person is not
entitled to indemnification hereunder or otherwise.
(d) The right of each employee or agent of the
Corporation serving as a director or officer of any other
corporation or any partnership, joint venture, trust or
other enterprise (including service with respect to employee
benefit plans) in a comparable capacity, at the request of
the Corporation, to indemnification hereunder (x) shall
pertain both as to action or omission to act in his or her
official capacity and to action or omission to act in
another capacity with respect to the entity of which he or
she is a director or officer and no other entity, (y) shall
be a contract right and (z) shall include the right to be
paid by the Corporation the expenses incurred in any such
Proceeding or Derivative Action in advance of the final
disposition of such proceeding or Derivative Action upon
delivery to the Corporation of an undertaking, by or on
behalf of such person, to repay all amounts so advanced if
it should be ultimately determined that such person is not
entitled to indemnification hereunder or otherwise.
Section 2. Additional (Permissive) Indemnification of
Employees and Agents. Except to the extent prohibited by law and
except as herein provided, the Corporation shall have the
authority (but not the obligation) to grant the following
indemnification to employees and agents of the Corporation and
employees and agents of other entities if serving as such at the
request of the Corporation:
(a) In addition to the indemnification provided in
Section 1(a)(iii) and Section 6, the Corporation may
indemnify (but shall not be required to indemnify) any
person who was or is a party or is threatened to be made a
party to, or is or may become involved in (as a party or
otherwise) any Proceeding (other than an action by or in the
right of the Corporation) by reason of the fact that he or
she (i) is or was an employee or agent of the Corporation or
(ii) is or was an employee or agent of the Corporation and
is or was serving as an employee or agent of any other
corporation or any partnership, joint venture, trust or
other enterprise (including service with respect to employee
benefit plans) at the request of the Corporation, against
all Expenses, Liability and Loss actually and reasonably
incurred by such person in connection with such Proceeding
if such person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best
interest of the Corporation (or with respect to employee
benefit plans, in a manner such person reasonably believed
to be in the best interest of the participants and
beneficiaries) and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
(b) In addition to the indemnification provided in
Section 1(b)(iii) and Section 6, but subject to Section
4(a), the Corporation may indemnify (but shall not be
required to indemnify) any person who was or is a party or
is threatened to be made a party to or is or may become
involved in (as a party or otherwise) any Derivative Action
by reason of the fact that he or she (i) is or was an
employee or agent of the Corporation or (ii) is or was an
employee or agent of the Corporation and is or was serving
as an employee or agent of any other corporation or any
partnership, joint venture, trust or other enterprise
(including service with respect to employee benefit plans)
at the request of the Corporation, against expenses
(including fees and disbursements of attorneys, accountants
and expert witnesses and court costs) actually and
reasonably incurred by such person in connection with the
defense or settlement of such action or suit if such person
acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interest of the
Corporation (or with respect to employee benefit plans, in a
manner such person reasonably believed to be in the best
interest of the participants and beneficiaries).
(c) The power of the Corporation to indemnify each
employee and agent pursuant to Section 2(a) hereunder (x)
shall pertain both as to action or omission to act in such
person's official capacity and as to action or omission to
act in another capacity while holding such office and (y)
shall include the power (but not the obligation) to pay the
expenses incurred in any Proceeding or Derivative Action in
advance of the final disposition of such Proceeding or
Derivative Action upon such terms and conditions, if any, as
the Board of Directors of the Corporation deems appropriate.
Section 3. Right of Claimant to Bring Suit. If the
Corporation receives a written claim under Section 1 or Section 6
which it has not paid in full within the Applicable Period, as
hereafter defined, after the Corporation receives such claim, the
claimant may at any time thereafter bring an action against the
Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to
recover also the expense of prosecuting such claim. It shall be
a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in connection with (a) any
Proceeding or Derivative Action in advance of its final
disposition where the required undertaking has been tendered to
the Corporation or (b) any Proceeding or Derivative Action in
which the claimant was successful on the merits or otherwise)
that the claimant has not met the applicable standards of conduct
set forth herein for the Corporation to indemnify the claimant
for the amount claimed, but the burden of proving such defense
shall be on the Corporation. Neither the failure of the
Corporation (including its Board, independent legal counsel or
its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant
is proper in the circumstances because he or she has met the
applicable standards of conduct set forth herein nor an actual
determination by the Corporation (including its Board,
independent legal counsel or its stockholders) that the claimant
has not met such applicable standards of conduct shall be a
defense to the action or create a presumption that the claimant
has not met the applicable standards of conduct.
Section 4. Limitations on Indemnification.
(a) No person shall be indemnified under Section 1(b)
or Section 2(b) in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable
to the Corporation unless and only to the extent that the
Court of Chancery of the State of Delaware or the court in
which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court
shall deem proper.
(b) For purposes of Sections 1 and 2, the termination
of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption
that any person did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the
best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
Section 5. Procedure for Obtaining Indemnification.
Except as set forth in Section 6, any indemnification under
Sections 1 and 2 (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a
determination that indemnification of the director, Independent
Director, officer, employee or agent is proper in the
circumstances because he or she has met the applicable standard
of conduct set forth in Section 1 or 2 and, in the case of any
indemnification under Section 2, because the Board in its
discretion deems such indemnification to be appropriate. Subject
to Section 3, such determination shall be made (1) by the Board
by a majority vote of a quorum consisting of directors who were
not parties to such Proceeding or Derivative Action, (2) if such
a quorum is not obtainable, or, even if obtainable, if a quorum
of disinterested directors so directs, by independent legal
counsel in a written opinion, (3) by the stockholders or (4) by
any court having jurisdiction.
Section 6. Indemnification of Expenses. To the extent
that any person described in Section 1 or 2 hereof has been
successful on the merits or otherwise in defense of any
Proceeding or Derivative Action, or in defense of any claim,
issue or matter described therein, he or she shall be indemnified
by the Corporation against expenses (including fees and
disbursements of attorneys, accountants, expert witnesses and
court costs) actually and reasonably incurred by him or her in
connection therewith.
Section 7. Non-Exclusivity of Rights. The
indemnification and advancement of expenses provided by or
granted pursuant to the other Sections of this Article shall not
be deemed exclusive of any other rights to which those persons
seeking indemnification or advancement of expenses under this
Article might be entitled under any other bylaw, agreement, vote
of stockholders or vote of disinterested directors or otherwise,
both as to action in such person's official capacity and as to
action in another capacity while holding such office.
Section 8. Benefits of Article. The indemnification
and advancement of expenses provided by or granted pursuant to
this Article shall, unless otherwise provided when authorized and
ratified, continue as to a person who has ceased to be a
director, Independent Director, officer, employee or agent and
shall inure to the benefit of the heirs, executors,
administrators and other legal representatives of such person.
Section 9. Definitions.
(a) For purposes of Section 3 of this Article, the
"Applicable Period" shall be:
(i) with respect to claims arising under
SectionE1(a) or Section 1(b), sixty (60) days; and
(ii) with respect to claims arising under
SectionE1(c), Section 1(d) or Section 6, ten (10) days.
(b) For the purposes of this Article, references to
the "Corporation" include all constituent corporations
(including any constituent of a constituent) absorbed in a
consolidation or merger as well as the resulting or
surviving corporation so that any person who is or was a
director, "independent director", officer, employee or agent
of such a constituent corporation or is or was serving as a
director, "independent director", officer, employee or agent
of any other corporation, or is or was serving any
partnership, joint venture, trust or other enterprise
(including service with respect to employee benefit plans)
in a comparable capacity, at the request of such constituent
corporation, shall stand in the same position under the
provisions of this Article with respect to the resulting or
surviving corporation as he or she would if he or she had
served the resulting or surviving corporation in the same
capacity, but the Corporation shall be obligated to make
such indemnification only if and to the extent that such
director, "independent director", officer, employee or agent
would have had a right to indemnification against the
constituent corporation. The Corporation may indemnify a
director, "independent director", officer, employee or agent
of a constituent corporation if the Corporation would be
authorized to indemnify (or would be required to indemnify)
such director, "independent director", officer, employee or
agent under the provisions of this Article for acts or
omissions arising prior to such consolidation or merger.
Section 10. Severability. If any provision of this
Article, or portion thereof, or the application of any such
provision to any party or circumstance shall be determined by any
court of competent jurisdiction to be invalid or unenforceable to
any extent, the remainder of this Article or the application of
such provision to any person or circumstance other than those to
which it is so determined to be invalid and unenforceable shall
not be affected thereby, and each provision hereof shall remain
in full force and effect to the fullest extent permitted by law,
and any such invalidity in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
ARTICLE VII
Seal
The seal (if any) of the Corporation shall be circular
in form and shall contain the name of the Corporation, the year
of its incorporation and the words "Corporate Seal" and
"Delaware" inscribed thereon. The seal may be affixed to any
instrument by causing it, or a facsimile thereof, to be impressed
or otherwise reproduced thereon.
ARTICLE VIII
Waiver
Whenever any notice whatsoever is required to be given
by statute or under the provisions of the Certificate of
Incorporation or these By-Laws, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed
equivalent thereto. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting except when the
person attends a meeting for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither
the business to be transacted at nor the purpose of any regular
or special meeting of the stockholders, directors or members of a
committee of directors need be specified in any written waiver of
notice.
ARTICLE IX
Checks, Notes, Drafts, etc.
Checks, notes, drafts, acceptances, bills of exchange
and other orders or obligations for the payment of money shall be
signed by such officer or officers or person or persons as the
Board shall from time to time determine.
ARTICLE X
Amendments
These By-Laws or any of them may be amended or repealed
and new By-Laws may be adopted (a) by the stockholders, at any
annual meeting, or at any special meeting called for that
purpose, by the vote of a majority of the issued and outstanding
stock entitled to vote thereat or (b) by the Board at any duly
convened meeting, but any such action of the Board may be amended
or repealed by the stockholders at any annual meeting or any
special meeting called for that purpose; provided, that no
amendment may be made which will conflict with any provision of
law or of the Certificate of Incorporation.
EXHIBIT 3.06
INCORPORATED UNDER THE LAWS OF
THE STATE OF DELAWARE
No. 0001 Shares 1,000
PANDA INTERFUNDING CORPORATION
Common Stock
This certifies that PANDA ENERGY CORPORATION is the
owner of ONE THOUSAND (1,000) shares of the Capital Stock of
PANDA INTERFUNDING CORPORATION transferable only on the
books of the Corporation by the holder hereof in person or
by Attorney upon surrender of this Certificate properly
endorsed.
IN WITNESS WHEREOF, the said Corporation has caused
this Certificate to be signed by its duly authorized
officers and to be sealed with the Seal of the Corporation
this 25th day of July A.D. 1996.
Janice Carter Robert W. Carter
SHARES $0.01 EACH
EXHIBIT 4.01
TRUST INDENTURE
dated as of July 31, 1996
among
PANDA FUNDING CORPORATION,
PANDA INTERFUNDING CORPORATION,
and
BANKERS TRUST COMPANY, AS TRUSTEE
Providing for the Issuance from Time to Time of
Bonds in One or More Series
___________________________
TABLE OF CONTENTS
This Table of Contents is not part of the Indenture to which it
is attached but is inserted for convenience only.
Page
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1 Definitions; Construction 1
SECTION 1.2 Compliance Certificates and Opinions 3
SECTION 1.3 Form of Documents Delivered to Trustee 3
SECTION 1.4 Acts of Holders 4
SECTION 1.5 Notices, etc. to Trustee, Panda Funding and PIC 6
SECTION 1.6 Notices to Holders; Waiver 6
SECTION 1.7 Effect of Headings 6
SECTION 1.8 Successors and Assigns 7
SECTION 1.9 Severability Clause 7
SECTION 1.10 Benefits of Indenture 7
SECTION 1.11 GOVERNING LAW 7
SECTION 1.12 Execution in Counterparts 7
SECTION 1.13 Agency 7
SECTION 1.14 Liability of PIC; Indemnification 7
SECTION 1.15 PIC Execution 8
SECTION 1.16 Conflict with Trust Indenture Act 8
ARTICLE II
THE BONDS
SECTION 2.1 Form of Bond to Be Established by Series Supplemental
Indenture 8
SECTION 2.2 Form of Trustee's Authentication 8
SECTION 2.3 Amount Unlimited; Issuable in Series 9
SECTION 2.4 Authentication and Delivery of Bonds 10
SECTION 2.5 Form 12
SECTION 2.6 Execution and Authentication of Bonds 12
SECTION 2.7 Temporary Bonds 13
SECTION 2.8 Registration, Restrictions on Transfer and
Exchange 13
SECTION 2.9 Book-Entry Provisions for Global Bond 20
SECTION 2.10 Mutilated, Destroyed, Lost and Stolen Bonds 21
SECTION 2.11 Payment of Principal, Premium, if any, and Interest;
Principal and Interest Rights Preserved 22
SECTION 2.12 Persons Deemed Owners 23
SECTION 2.13 Cancellation 23
SECTION 2.14 Dating of Bonds; Computation of Interest 23
SECTION 2.15 Source of Payments Limited: Rights and Liabilities
of Panda Funding 23
SECTION 2.1 Allocation of Principal and Interest 23
SECTION 2.17 Parity of Bonds 24
ARTICLE III
APPLICATION OF PROCEEDS FROM SALE
OF BONDS
SECTION 3.1 Application of Proceeds from Sale of Bonds 24
ARTICLE IV
ACCOUNTS, FUNDS AND PROJECT DISTRIBUTIONS
SECTION 4.1 Establishment of Accounts and Funds 24
SECTION 4.2 Project Accounts 25
SECTION 4.3 Debt Service Fund 29
SECTION 4.4 Capitalized Interest Fund 30
SECTION 4.5 Debt Service Reserve Fund 32
SECTION 4.6 PIC Expense Fund 34
SECTION 4.7 Distribution Suspense Funds 34
SECTION 4.8 Mandatory Redemption Accounts 35
SECTION 4.9 The Extraordinary Distribution Accounts 38
SECTION 4.10 Investment of U.S. and International Accounts
and Funds 41
SECTION 4.11 Resignation and Removal of Consolidating Engineer;
Appointment of Successor; Payment of Fees
and Expenses 42
SECTION 4.12 The U.S. Accounts and Funds as Collateral:
Trustee as Agent of the Collateral Agent 43
SECTION 4.13 Disposition of Accounts and Funds Upon Retirement
of Bonds and PIC International Entity Notes 44
SECTION 4.14 Procedures for Review by Consolidating
Engineer of Projections 44
ARTICLE V
IMMUNITY OF INCORPORATORS, STOCKHOLDERS
OFFICERS AND DIRECTORS
SECTION 5.1 Liability of Panda Funding and PIC Solely Corporate 44
ARTICLE VI
SATISFACTION AND DISCHARGE; DEFEASANCE
SECTION 6.1 Satisfaction and Discharge of Indenture 45
SECTION 6.2 Application of Trust Money 46
SECTION 6.3 Satisfaction, Discharge and Defeasance of Bonds
of any Series 47
ARTICLE VII
COVENANTS
SECTION 7.1 Reporting Requirements 50
SECTION 7.2 Maintenance of Existence, Properties, Etc. 53
SECTION 7.3 Compliance with Laws 53
SECTION 7.4 Payment of Taxes and Claims 53
SECTION 7.5 Books and Records 54
SECTION 7.6 Right of Inspection 54
SECTION 7.7 Use of Proceeds 54
SECTION 7.8 Further Assurances; Opinion of Counsel 54
SECTION 7.9 Debt 55
SECTION 7.10 Liens 56
SECTION 7.11 Guaranties 57
SECTION 7.12 Prohibition on Fundamental Changes and
Disposition of Assets 57
SECTION 7.13 Nature of Business; Acquisition of
Project Interests 59
SECTION 7.14 Transactions with Affiliates 60
SECTION 7.15 Limitations on Distributions 60
SECTION 7.16 Amendments Etc. 61
SECTION 7.17 Rule 144A Information 61
SECTION 7.18 Investments 62
SECTION 7.19 Investment Company Act 62
SECTION 7.20 Appointment to Fill a Vacancy in Office of Trustee 62
SECTION 7.21 Securityholders Lists 62
SECTION 7.22 Ownership of Projects 62
SECTION 7.23 Limitations on Project Debt and Project Agreements 63
SECTION 7.24 Distributions by Projects 63
SECTION 7.25 Event of Loss 64
SECTION 7.26 Additional Collateral 64
SECTION 7.27 Public Utility Holding Company Act 64
SECTION 7.28 Sales of Projects; Projects Interests 64
SECTION 7.29 PIC International Entity Loan Agreements 65
SECTION 7.30 PIC U.S. Entity Guaranties 65
SECTION 7.31 Other International Note 65
SECTION 7.32 Purchase of Securities Upon a Change of Control 65
ARTICLE VIII
REDEMPTION OF BONDS
SECTION 8.1 Applicability of Article 67
SECTION 8.2 Election to Redeem; Notice to Trustee 67
SECTION 8.3 Optional Redemption; Mandatory Redemption;
Selection of Bonds to be Redeemed 67
SECTION 8.4 Notice of Redemption 68
SECTION 8.5 Bonds Payable on Redemption Date 68
SECTION 8.6 Bonds Redeemed in Part 69
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES
SECTION 9.1 Events of Default 69
SECTION 9.2 Enforcement of Remedies 72
SECTION 9.3 Specific Remedies 74
SECTION 9.4 Judicial Proceedings Instituted by Trustee 74
SECTION 9.5 Holders May Demand Enforcement of Rights by
Trustee 76
SECTION 9.6 Control by Holders 76
SECTION 9.7 Waiver of Past Defaults 76
SECTION 9.8 Holder May Not Bring Suit Except Under Certain
Conditions 77
SECTION 9.9 Undertaking to Pay Court Costs 77
SECTION 9.10 Right of Holders to Receive Payment Not to be
Impaired 78
SECTION 9.11 Application of Monies Collected by Trustee 78
SECTION 9.12 Waiver of Appraisement, Valuation, Stay, Right
to Marshaling 79
SECTION 9.13 Remedies Cumulative; Delay or Omission Not
a Waiver 79
SECTION 9.14 Disqualification; Conflicting Interests 79
SECTION 9.15 Preferential Collection of Claims Against
Panda Funding or PIC 80
SECTION 9.16 The Collateral Agency Agreement 80
ARTICLE X
CONCERNING THE TRUSTEE
SECTION 10.1 Certain Rights and Duties of Trustee 80
SECTION 10.2 Trustee Not Responsible for Recitals, Etc. 82
SECTION 10.3 Trustee and Others May Hold Bonds 83
SECTION 10.4 Monies Held by Trustee or Paying Agent 83
SECTION 10.5 Compensation of Trustee and Its Lien 83
SECTION 10.6 Right of Trustee to Rely on Officer's
Certificates and Opinions of Counsel 84
SECTION 10.7 Persons Eligible for Appointment As Trustee 84
SECTION 10.8 Resignation and Removal of Trustee; Appointment
of Successor 84
SECTION 10.9 Acceptance of Appointment by Successor Trustee 85
SECTION 10.10 Merger, Conversion or Consolidation of Trustee 86
SECTION 10.11 Maintenance of Offices and Agencies 86
SECTION 10.12 Reports by Trustee 89
SECTION 10.13 Trustee Risk 89
SECTION 10.14 Trustee May Perform Certain Duties Through
Affiliates 89
ARTICLE XI
HOLDERS' MEETINGS
SECTION 11.1 Purposes for Which Holders' Meetings May Be Called 89
SECTION 11.2 Call of Meetings by Trustee 90
SECTION 11.3 Panda Funding, PIC and Holders May Call Meeting 90
SECTION 11.4 Persons Entitled to Vote at Meeting 90
SECTION 11.5 Determination of Voting Rights; Conduct and
Adjournment of Meeting 90
SECTION 11.6 Counting Votes and Recording Action of Meeting 91
ARTICLE XII
SUPPLEMENTAL INDENTURES
SECTION 12.1 Supplemental Indentures Without Consent of Holders 92
SECTION 12.2 Supplemental Indenture with Consent of Holders 93
SECTION 12.3 Documents Affecting Immunity or Indemnity 94
SECTION 12.4 Execution of Supplemental Indentures 94
SECTION 12.5 Effect of Supplemental Indentures 94
SECTION 12.6 Reference in Bonds to Supplemental Indentures 95
SECTION 12.7 Compliance with Trust Indenture Act 95
ARTICLE XIII
GUARANTEE OF SECURITIES
SECTION 13.1 Unconditional Guaranty 95
SECTION 13.2 Execution and Delivery of PIC Guaranty 97
SECTION 13.3 Right of Subrogation 97
Exhibit A - Form of Legend for Global Bonds
Exhibit B - Certificate to be Delivered upon Exchange or
Registration of Transfer of Bonds
Exhibit C - Form of Certificate to be Delivered in Connection
with Transfers to Institutional Accredited
Investors.
Exhibit D - Transferor Certificate for Regulation S Transfers
Exhibit E - Form of PIC International Entity Loan Agreement
Exhibit F - Form of PIC International Entity Security Agreement
Exhibit G - Form of PIC U.S. Entity Guaranty Agreement
Exhibit H - Form of Other International Loan Agreement
Appendix A -Definitions
Schedule I -Form of Collateral Agency Agreement
Schedule II - Form of Subordination Provisions
TRUST INDENTURE (this "Indenture"), dated as of July
31, 1996, among PANDA FUNDING CORPORATION, a Delaware corporation
("Panda Funding"), its executive office and mailing address being
at 4100 Spring Valley Road, Suite 1001, Dallas, Texas 75244,
PANDA INTERFUNDING CORPORATION, a Delaware corporation ("PIC"),
its executive office and mailing address being at 4100 Spring
Valley Road, Suite 1001, Dallas, Texas 75244, and Bankers Trust
Company, a New York state banking corporation (the "Trustee"),
its corporate trust office and mailing address being at 4 Albany
Street, New York, New York 10006.
W I T N E S S E T H :
WHEREAS, Panda Funding has duly authorized the creation
of its pooled project bonds or other evidences of indebtedness to
be issued in one or more series (the "Bonds"), and Panda Funding
has duly authorized the execution, delivery and performance by it
of this Indenture to provide for the authentication and delivery
of the Bonds by the Trustee; and
WHEREAS, Panda Funding wishes to use the proceeds of
the sale of the Bonds to make loans to PIC, which loans shall be
evidenced by the PIC Notes, and the proceeds of which will be
used by PIC as set forth in Article III and each Series
Supplemental Indenture; and
WHEREAS, PIC will benefit from the sale of the Bonds by
Panda Funding and the use of the net proceeds therefrom as
contemplated herein and accordingly has duly authorized the
guaranty of Panda Funding's obligations under this Indenture and
the execution, delivery and performance by it of this Indenture
and the Bonds;
WHEREAS, all acts necessary to make the Bonds, when
executed by Panda Funding and authenticated and delivered by the
Trustee, and the PIC Guaranty, when executed by PIC (by notation
on the Bonds) valid and binding legal obligations of Panda
Funding and PIC, respectively, and to make this Indenture a valid
and binding agreement, in accordance with the terms of this
Indenture and the Bonds (together with the PIC Guaranty), have
been done;
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that, for
and in consideration of the premises and of the covenants herein
contained and of the purchase of the Bonds by the holders
thereof, it is mutually covenanted and agreed, for the benefit of
the parties hereto and the equal and proportionate benefit of all
Holders of the Bonds, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1 Definitions; Construction. For all
purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(a) capitalized terms used herein shall have the
respective meanings ascribed thereto in this Indenture or in
Appendix A hereto;
(b) all other terms used herein that are defined in
the Trust Indenture Act, either directly or by reference
therein, shall have the respective meanings assigned to them
therein;
(c) except as otherwise expressly provided herein,
(i) all accounting terms used herein shall be interpreted,
(ii) all financial statements and all certificates and
reports as to financial matters required to be delivered to
the Trustee hereunder shall be prepared and (iii) all
calculations made for the purposes of determining compliance
with this Indenture shall (except as otherwise expressly
provided herein) be made in accordance with, or by
application of, GAAP applied on a basis consistent (except
inconsistencies that are disclosed in writing to the Trustee
and are in accordance with GAAP as certified by a firm of
independent certified public accountants of recognized
national standing, which may be the independent accountants
reviewing the applicable Person's financial statements
pursuant to Section 7.1(b)) with those used in the
preparation of the latest corresponding financial statements
furnished hereunder to the Initial Purchaser or the Trustee,
as the case may be;
(d) all references in this Indenture (including the
Appendices and Schedules hereto) to designated "Articles,"
"Sections" and other subdivisions are to the designated
Articles, Sections and other subdivisions of this Indenture;
(e) the words "herein," "hereof " and "hereunder" and
other words of similar import refer to this Indenture as a
whole and not to any particular Article, Section or other
subdivision;
(f) unless otherwise expressly specified or the
context otherwise requires, all references in this Indenture
or any appendix, schedule or exhibit hereto to any
agreement, contract or document (including this Indenture)
shall include reference to all appendices, schedules and
exhibits to such agreement, contract or document;
(g) unless otherwise expressly specified or the
context otherwise requires, any agreement, contract or
document defined or referred to herein shall mean such
agreement, contract or document as in effect as of the date
hereof, as the same may thereafter be amended, supplemented
or otherwise modified from time to time in accordance with
the terms of this Indenture and the other Transaction
Documents;
(h) unless otherwise expressly specified or the
context otherwise requires, (i) pronouns having a masculine
or feminine gender shall be deemed to include the other,
(ii) "or" shall not be exclusive and (iii) "including" shall
mean "including without limitation;"
(i) any reference to any Person shall include its
permitted successors and assigns in accordance with the
terms of this Indenture and the other Transaction Documents
and, in the case of any Government Authority, any Person
succeeding to its functions and capacities; and
(j) any reference to any Government Rule shall include
such Government Rule as amended, supplemented or modified
and as in effect from time to time, and any other Government
Rule in substance substituted therefor.
SECTION 1.2 Compliance Certificates and Opinions.
Except as otherwise expressly provided by this Indenture, upon
any application or request by Panda Funding or PIC to the Trustee
to take any action under any provision of this Indenture, Panda
Funding or PIC, as the case may be, shall furnish to the Trustee
an Officer's Certificate stating that all conditions precedent,
if any, provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel stating
that in the opinion of such counsel all such conditions
precedent, if any, have been complied with, except that in the
case of any particular application or request as to which the
furnishing of documents is specifically required by any provision
of this Indenture relating to such particular application or
request, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance
with a condition or covenant provided for in this Indenture
(other than pursuant to Section 7.1(e)) shall include:
(a) a statement that each individual signing such
certificate or opinion has read such covenant or condition
and the definitions herein relating thereto;
(b) a brief statement as to the nature and scope of
the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are
based;
(c) a statement that, in the opinion of each such
individual, he has made such examination or investigation as
is necessary to enable him to express an informed opinion as
to whether or not such covenant or condition has been
complied with; and
(d) a statement as to whether, in the opinion of each
such individual, such condition or covenant has been
complied with.
SECTION 1.3 Form of Documents Delivered to Trustee. In
any case where several matters are required to be certified by,
or covered by an opinion of, any specified Person, it is not
necessary that all such matters be certified by, or covered by
the opinion of, only one such Person, or that they be so
certified by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more
other such Persons as to other matters, and any such Person may
certify or give an opinion as to such matters in one or several
documents.
Any certificate or opinion of an officer of Panda
Funding or PIC may be based, insofar as it relates to legal
matters, upon a certificate or opinion of, or representations by,
counsel, unless such officer knows or has reason to believe that
the certificate or opinion or representations with respect to the
matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be
based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or
officers of Panda Funding or PIC, as the case may be, unless such
counsel knows or has reason to know that the certificate or
opinion or representations with respect to such matters are
erroneous.
Any Opinion of Counsel stated to be based on the
opinion of other counsel shall be accompanied by a copy of such
other opinion, which other opinion shall expressly permit
reliance thereon in connection with the giving of the Opinion of
Counsel.
Where any Person is required to make, give or execute
two or more applications, requests, consents, certificates,
statements, opinions or other instruments under this Indenture,
they may, but need not, be consolidated and form one instrument.
SECTION 1.4 Acts of Holders.
(a) Any request, demand, authorization, direction,
notice, consent, waiver or other action provided by this
Indenture to be given or taken by Holders (collectively, an "Act"
of such Holders, which term also shall refer to the instruments
or record evidencing or embodying the same) may be embodied in
and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by an agent duly
appointed in writing or, alternatively, may be embodied in and
evidenced by the record of Holders of Bonds voting in favor
thereof, either in person or by proxies duly appointed in
writing, at any meeting of Holders of Bonds duly called and held
in accordance with the provisions of Article XI, or a combination
of such instruments and any such record. Except as herein
otherwise expressly provided, such action shall become effective
when such instrument (or instruments) or record, or both, are
delivered to a Responsible Officer of the Trustee, and when it is
specifically required herein, to Panda Funding or PIC. Proof of
execution of any such instrument or of a writing appointing any
such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 10.1) conclusive in favor of the Trustee,
Panda Funding and PIC, if made in the manner provided in this
Section. The record of any meeting of Holders of Bonds shall be
proved in the manner provided in Section 11.6.
(b) The principal amount and serial numbers of Bonds
held by any Person, and the date or dates of holding the same,
shall be proved by the Security Register and the Trustee shall
not be affected by notice to the contrary.
(c) Any Act by the Holder of any Bond (i) shall bind
every future Holder of the same Bond and the Holder of every Bond
issued upon the transfer thereof or the exchange therefor or in
lieu thereof (including any transfer or exchange of a Bond
involving removal of a Private Placement Legend), whether or not
notation of such Act is made upon such Bond and (ii) shall be
valid notwithstanding that such Act is taken in connection with
the transfer of such Bond to any other Person, including Panda
Funding, PIC or any Affiliate thereof.
(d) Until such time as written instruments shall have
been delivered with respect to the requisite percentage of
principal amount of Bonds for the Act contemplated by such
instruments, any such instrument executed and delivered by or on
behalf of a Holder of Bonds may be revoked with respect to any or
all of such Bonds by written notice by such Holder (or its duly
appointed agent) or any subsequent Holder (or its duly appointed
agent), proven in the manner in which such instrument was proven,
unless such instrument is by its terms expressly irrevocable.
(e) Bonds of any series authenticated and delivered
after any Act of Holders may, and shall if required by the
Trustee or Panda Funding, bear a notation in the form approved by
Panda Funding and satisfactory to the Trustee as to any action
taken by such Act of Holders. If Panda Funding shall so
determine, new Bonds of any series so modified as to conform, in
the opinion of Panda Funding, to such action, may be prepared and
executed by Panda Funding and upon Company Order authenticated
and delivered by the Trustee in exchange for Outstanding Bonds of
such series.
Panda Funding may, but shall not be obligated to, fix a
record date for the purpose of determining the Holders entitled
to sign any instrument evidencing or embodying an Act of the
Holders. If a record date is fixed, those Persons who were
Holders at such record date (or their duly appointed agents), and
only those Persons, shall be entitled to sign any such instrument
evidencing or embodying an Act of Holders or to revoke any such
instrument previously signed, whether or not such Persons
continue to be Holders after such record date. Any such
instrument may be revoked as provided in paragraph (d) above.
(f) In determining whether the Holders of the
requisite aggregate principal amount of Bonds have concurred in
any Act under this Indenture, Bonds that are owned by Panda
Funding, PIC or any Affiliate of Panda Funding or PIC shall be
disregarded and deemed not to be Outstanding for the purpose of
any such determination except that for the purposes of
determining whether the Trustee shall be protected in relying on
any such Act, only Bonds that a Responsible Officer of the
Trustee has actual knowledge are so owned as conclusively
evidenced by the Security Register shall be so disregarded.
Panda Funding shall furnish the Trustee, upon its reasonable
request, with a written list of such Affiliates. Bonds so owned
that have been pledged in good faith may be regarded as
Outstanding for the purposes of this paragraph if the pledgee
shall establish to the satisfaction of the Trustee that the
pledgee has the right to vote such Bonds and that the pledgee is
not an Affiliate of Panda Funding or PIC. Subject to the
provisions of Section 315 of the Trust Indenture Act, in case of
a dispute as to such right, any decision by the Trustee, taken
upon the advice of counsel, shall be full protection to the
Trustee. Bonds that are owned by a Holder which is not Panda
Funding or PIC or an Affiliate of any thereof at the time such
Holder concurs in such Act shall not be disregarded or deemed not
to be Outstanding, notwithstanding that such Holder has agreed to
sell or transfer such Bonds to Panda Funding, PIC or an Affiliate
of any thereof immediately after or concurrent with such Act, in
response to a tender offer or otherwise.
(g) The fact and date of the execution by any Person
of any instrument or writing may be proved by the certificate of
any notary public or other officer of any jurisdiction authorized
to take acknowledgments of deeds or administer oaths that the
Person executing such instrument acknowledged to him the
execution thereof, or by an affidavit of a witness to such
execution sworn to before any such notary or other such officer,
and where such execution is by an officer of a corporation or
association or of a partnership, on behalf of such corporation,
association or partnership, such certificate or affidavit shall
also constitute sufficient proof of his authority. The fact and
date of the execution of any such instrument or writing, or the
authority of the Person executing the same, may also be proved in
any other manner which the Trustee deems sufficient.
SECTION 1.5 Notices, etc. to Trustee, Panda Funding and
PIC. Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or
permitted by this Indenture to be made upon, given or furnished
to, or filed with:
(a) the Trustee by any Holder, by Panda Funding, by
PIC or by an Authorized Agent shall be sufficient for every
purpose hereunder if in writing and mailed, first-class,
postage prepaid, or made, given or furnished by courier
service, cable or facsimile (confirmed by mail or courier in
the case of notice by cable or facsimile), to the mailing
address of the Trustee at its Corporate Trust Office
specified in the first paragraph of this instrument or at
any other address previously furnished in writing to Panda
Funding and PIC by the Trustee for such purpose, or
(b) Panda Funding by the Trustee, by any Holder, by
PIC or by an Authorized Agent shall be sufficient for every
purpose hereunder if in writing and mailed, first-class
postage prepaid, or made, given or furnished by courier
service, cable or facsimile (confirmed by mail or courier in
the case of notice by cable or facsimile), to Panda Funding
addressed to it at the address of its principal office
specified in the first paragraph of this instrument or at
any other address previously furnished in writing to the
Trustee and PIC by Panda Funding for such purpose, or
(c) PIC by the Trustee, by any Holder, by Panda
Funding or by an Authorized Agent shall be sufficient for
every purpose hereunder if in writing and mailed, first-
class postage prepaid, or made, given or furnished by
courier service, cable or facsimile (confirmed by mail or
courier in the case of notice by cable or facsimile), to the
address of its principal office specified in the first
paragraph of this instrument or at any other address
previously furnished in writing to the Trustee and Panda
Funding by PIC for such purpose.
SECTION 1.6 Notices to Holders; Waiver. Where this
Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, or made, given or furnished by courier service, to each
Holder, at its address as it appears in the Security Register,
not later than the latest date (if any), and not earlier than the
earliest date (if any), prescribed for the giving of such notice.
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive
such notice, either before or after the event, and such waiver
shall be the equivalent of such notice. Waivers of notice by
Holders shall be filed with the Trustee, but such filing shall
not be a condition precedent to the validity of any action taken
in reliance upon such waiver. In any case where notice to
Holders is given by mail or courier service, neither the failure
to give such notice, nor any defect in any notice so given, to
any particular Holder shall affect the sufficiency of such notice
with respect to other Holders, and any notice that is mailed or
sent by courier service in the manner herein provided shall be
conclusively presumed to have been duly given.
SECTION 1.7 Effect of Headings. The Article, Section
and other headings herein and the Table of Contents hereof are
for convenience only and shall not affect the construction
hereof.
SECTION 1.8 Successors and Assigns. All covenants,
agreements, representations and warranties in this Indenture by
the Trustee, PIC and Panda Funding shall bind and, to the extent
permitted hereby, shall inure to the benefit of and be
enforceable by their respective successors and assigns, whether
so expressed or not.
SECTION 1.9 Severability Clause. In case any provision
in this Indenture, the PIC Guaranty or the Bonds shall be
invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
SECTION 1.10 Benefits of Indenture. Nothing in this
Indenture, the PIC Guaranty or the Bonds, expressed or implied,
shall give to any Person, other than the parties hereto and their
successors hereunder and the Holders of Bonds, any benefit or any
legal or equitable right, remedy or claim under this Indenture.
SECTION 1.11 GOVERNING LAW. THIS INDENTURE, THE PIC
GUARANTY AND THE BONDS SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE CONFLICTS OF LAW RULES THEREOF (OTHER THAN SECTION 5-1401
OF THE NEW YORK GENERAL OBLIGATIONS LAW).
SECTION 1.12 Execution in Counterparts. This
instrument may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original, but all
such counterparts shall together constitute but one and the same
instrument.
SECTION 1.13 Agency. In executing the Bonds
(including the notation of the PIC Guaranty thereon) and this
Indenture, Panda Funding will be acting as agent for PIC to the
extent of PIC's obligations hereunder and under the Bonds and the
PIC Guaranty. PIC hereby appoints Panda Funding to so act as
agent and Panda Funding hereby accepts such appointment. As used
in this Indenture, references to "Panda Funding" shall be
interpreted to include Panda Funding in its capacity as principal
and Panda Funding in its capacity as agent with respect to PIC's
obligations under this Indenture, the Bonds and the PIC Guaranty.
SECTION 1.14 Liability of PIC; Indemnification.
Subject to Article V of this Indenture, PIC hereby acknowledges
that it shall be liable for all its obligations arising under
this Indenture. PIC hereby agrees to indemnify Panda Funding
from, and to hold Panda Funding harmless against, any and all
losses, liabilities, claims, damages or expenses incurred by
Panda Funding (including any and all Taxes) arising out of or by
any reason of any of the transactions contemplated herein or
otherwise whether through this Indenture, the other Transaction
Documents or the Agency Agreement. In agreeing to enter into
this Indenture and to issue the PIC Guaranty and the PIC Notes,
PIC agrees that Panda Funding will never have to make payments to
third parties that are not matched by a right at the same time to
receive at least equal payments under the PIC Notes (for the
application to the payment of or on the Bonds) or hereunder, and
that PIC will make such payments hereunder as are necessary to
insure that this remains true so long as any Bonds are
Outstanding. Without limiting the generality of the foregoing,
PIC will assume liability for, and indemnify and hold Panda
Funding harmless against, any and all Taxes imposed against or
payable by Panda Funding or imposed against any Property of Panda
Funding or PIC in connection with or relating to or on or with
respect to this Indenture or any other Transaction Document or
the Agency Agreement to which Panda Funding is a party or any
waiver, consent, amendment or supplement of this Indenture or
such Transaction Document or the Agency Agreement or the
execution, delivery or performance of this Indenture or any other
Transaction Document or the Agency Agreement to which Panda
Funding is a party or the payment or receipt or accrual of any
amounts pursuant to this Indenture or any other Transaction
Document or otherwise with respect to any of the transactions
contemplated by this Indenture or any other Transaction Document
or the Agency Agreement.
SECTION 1.15 PIC Execution. In furtherance of the
foregoing, PIC acknowledges and agrees that it executed this
Indenture in order to be bound by each of the covenants and other
provisions hereof applicable to it.
SECTION 1.16 Conflict with Trust Indenture Act. If
any provision of this Indenture limits, qualifies or conflicts
with another provision hereof which is required to be included in
this Indenture by any of the provisions of the Trust Indenture
Act, such required provision shall control. If any provision of
this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so
modified or to be excluded, as the case may be. Until such time
as this Indenture shall be qualified under the Trust Indenture
Act, this Indenture, Panda Funding, PIC and the Trustee shall be
deemed for all purposes hereof to be subject to and governed by
the Trust Indenture Act to the same extent as would be the case
if this Indenture were so qualified on the date hereof.
ARTICLE II
THE BONDS
SECTION 2.1 Form of Bond to Be Established by Series
Supplemental Indenture. The Bonds of each series shall be
substantially in the form (not inconsistent with this Indenture,
including Section 2.5) established in the Series Supplemental
Indenture relating to the Bonds of such series; provided,
however, that each such Bond shall bear the applicable legends
specified in Section 2.8 and Section 2.9.
SECTION 2.2 Form of Trustee's Authentication. The
Trustee's certificate of authentication on all Bonds shall be in
substantially the following form:
This Bond is one of the series of Bonds referred to in
the within-mentioned Indenture.
Bankers Trust Company, as Trustee
By:
Authorized Signatory
SECTION 2.3 Amount Unlimited; Issuable in Series. The
aggregate principal amount of Bonds that may be authenticated and
delivered under this Indenture is unlimited; provided, however,
that the provisions of this Section shall not be deemed to in any
way supersede the restrictions provided in Section 7.9.
The Bonds may be issued in one or more series. There
shall be established in one or more Series Supplemental
Indentures, prior to the issuance of Bonds of any series:
(a) the title of the Bonds of such series (which shall
distinguish the Bonds of such series from all other Bonds)
and the form or forms of Bonds of such series;
(b) any limit upon the aggregate principal amount of
the Bonds of such series that may be authenticated and
delivered under this Indenture (except for Bonds
authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Bonds of such
series pursuant to Sections 2.7, 2.8, 2.9, 2.10 or 8.6 and
except for Bonds that, pursuant to the last paragraph of
Section 2.4, are deemed never to have been authenticated and
delivered hereunder);
(c) the date or dates on which the principal of the
Bonds of such series is payable, the amounts of principal
payable on such date or dates and the Regular Record Date
for the determination of Holders to whom principal is
payable, and the date or dates on or as of which the Bonds
of such series shall be dated, if other than as provided in
Section 2.14;
(d) the rate or rates at which the Bonds of such
series shall bear interest, or the method by which such rate
or rates shall be determined, the date or dates from which
such interest shall accrue, the interest payment dates on
which such interest shall be payable and the Regular Record
Date for the determination of Holders to whom interest is
payable, and the basis of computation of interest, if other
than as provided in Section 2.14(b);
(e) if other than as provided in Section 10.11, the
place or places where (i) the principal of, premium, if any,
and interest on Bonds of such series shall be payable,
(ii) Bonds of such series may be surrendered for
registration of transfer or exchange and (iii) notices and
demands to or upon PIC and Panda Funding in respect of the
Bonds of such series and this Indenture may be served;
(f) the right, if any, of Panda Funding to redeem
Bonds of such series, the price or prices (including any
applicable premium) at which, the period or periods within
which and the terms and conditions upon which Bonds of such
series may be so redeemed, in whole or in part, at the
option of Panda Funding;
(g) the obligation, if any, of Panda Funding to
redeem, purchase or repay Bonds of such series pursuant to
any mandatory or optional redemption provision and the price
or prices at which and the period or periods within which
and the terms and conditions upon which Bonds of such series
shall be redeemed, purchased or repaid, in whole or in part,
pursuant to such obligations;
(h) the Capitalized Interest Requirement, if any
(including how any amounts in the Capitalized Interest Fund
in respect of such Capitalized Interest Requirement are to
be applied), and the Debt Service Reserve Requirement, if
any, and the PIC Expenses Amount, if any, with respect to
the Bonds of such series;
(i) if other than denominations of $100,000 and
integral multiples of $1,000 in excess thereof, the
denominations in which Bonds of such series shall be
issuable;
(j) the restrictions or limitations, if any, on the
transfer or exchange of the Bonds of such series;
(k) any requirements that Panda Funding issue a new
series of Bonds registered under the Securities Act in
exchange for such series;
(l) any deletions from, modifications of or additions
to the Events of Default or covenants of Panda Funding or
PIC with respect to such series, whether or not such Events
of Default or covenants are consistent with the Events of
Default or covenants set forth herein with respect to other
series, any change in the right of the Trustee or Holders to
declare the principal of, and premium, if any, and interest
on, such series due and payable and any additions to the
definitions currently set forth in this Indenture;
(m) a designation of the use of the proceeds of the
Bonds of such series; and
(n) any other terms of such series (which terms shall
not be inconsistent with the provisions of this Indenture).
SECTION 2.4 Authentication and Delivery of Bonds.
Subject to Section 2.3, at any time and from time to time after
the execution and delivery of this Indenture, Panda Funding may
deliver Bonds of any series executed by Panda Funding and having
the notation of the PIC Guaranty thereon executed by PIC to the
Trustee for authentication, together with a Company Order for the
authentication and delivery of such Bonds, and the Trustee shall
thereupon authenticate and make available for delivery such Bonds
in accordance with such Company Order, without any further action
by Panda Funding. No Bond shall be entitled to any benefit under
this Indenture or be valid or obligatory for any purpose unless
there appears on such Bond a certificate of authentication, in
the form provided for herein, executed by the Trustee by the
manual signature of any Authorized Signatory, and such
certificate upon any Bonds shall be conclusive evidence, and the
only evidence, that such Bond has been duly authenticated and
delivered thereunder. In authenticating such Bonds and accepting
the additional responsibilities under this Indenture in relation
to such Bonds, the Trustee shall be entitled to receive, and
(subject to Section 10.1) shall be fully protected in relying
upon:
(a) an executed Series Supplemental Indenture with
respect to the Bonds of such series;
(b) Officer's Certificates of each of Panda Funding
and PIC (i) certifying as to resolutions of the Board of
Directors of Panda Funding and PIC, as the case may be, by
or pursuant to which the terms of the Bonds of such series
were established, and (ii) certifying that all conditions
precedent under this Indenture to the Trustee's
authentication and delivery of such Bonds (including the PIC
Guaranty thereon) have been complied with;
(c) with respect to the authentication of the initial
issuance of any series of Bonds (other than the initial
series of Bonds issued pursuant to the first Series
Supplemental Indenture and any series of Bonds issued solely
in exchange for an equivalent aggregate principal amount of
Outstanding Bonds of another series), the Officer's
Certificate required by Section 7.9(a);
(d) an Opinion of Counsel to the effect that (i) the
form or forms and the terms of such Bonds have been
established by a Series Supplemental Indenture as permitted
by Sections 2.1 and 2.3 in conformity with the provisions of
this Indenture, including its requirements for the notation
thereon relating to the PIC Guaranty, (ii) the Bonds of such
series, when authenticated and made available for delivery
by the Trustee and issued by Panda Funding in the manner and
subject to any conditions specified in such Opinion of
Counsel, will constitute legal, valid and binding
obligations of Panda Funding and, as to the PIC Guaranty,
PIC, enforceable against Panda Funding and, as to the PIC
Guaranty, PIC, in accordance with their terms, and (iii) the
requirements of the Securities Act and the Trust Indenture
Act have been complied with in connection with the execution
and delivery of the Series Supplemental Indenture and the
authentication and issuance of the Bonds of such series,
except that such Opinion of Counsel may be qualified to the
effect that the opinions required pursuant to clause (ii)
above are subject to (A) applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other
similar laws affecting creditors' rights and remedies
generally and (B) general principles of equity (regardless
of whether enforceability is considered in a proceeding in
equity or at law); and
(e) such other documents and evidence with respect to
Panda Funding and PIC as the Trustee may reasonably request.
Prior to the authentication and delivery of a series of Bonds,
the Trustee shall receive such other monies, accounts, documents,
certificates, instruments or opinions as may be required by the
related Series Supplemental Indenture.
Notwithstanding the foregoing, if any Bond shall have
been authenticated and delivered hereunder but never issued and
sold by Panda Funding, and Panda Funding shall deliver such Bond
to the Trustee for cancellation as provided in Section 2.13
together with a written statement (which need not comply with
Section 1.2 and need not be accompanied by an Opinion of Counsel)
stating that such Bond has never been issued and sold by Panda
Funding, for all purposes of this Indenture such Bond shall be
deemed never to have been authenticated and delivered hereunder
and shall never have been or be entitled to the benefits hereof.
SECTION 2.5 Form. The definitive Bonds shall be
printed, lithographed, engraved, typewritten or photocopied or
may be produced in any other manner, all as determined by the
Authorized Representatives executing such Bonds or notations of
the PIC Guaranty, as the case may be, as evidenced by their
execution of such Bonds or notations of the PIC Guaranty, as the
case may be.
Except as indicated in the next succeeding paragraph, Bonds
(including the notations thereon relating to the PIC Guaranty)
shall be issued initially in the form of one or more permanent
global Bonds (each being herein called a "Global Bond") deposited
with the Trustee, as custodian for the Depository, duly executed
by Panda Funding and having the notation of the PIC Guaranty
thereon duly executed by PIC and authenticated by the Trustee as
hereinafter provided, and each shall bear the legend set forth on
Exhibit A hereto. Subject to the limitations set forth in the
applicable Series Supplemental Indenture, the principal amounts
of the Global Bonds may be increased or decreased from time to
time by adjustments made on the records of the Trustee, as
custodian for the Depository, as hereinafter provided.
Bonds (including the notations thereon relating to the PIC
Guaranty) originally issued and sold in reliance on any exemption
from registration under the Securities Act other than Rule 144A
shall be issued, and Bonds originally offered and sold in
reliance on Rule 144A may be issued, in the form of permanent
certificated bonds in registered form ("Physical Bonds").
The Bonds and the notations thereon relating to the PIC
Guaranty may have such appropriate insertions, omissions,
substitutions and other variations as are required or permitted
by this Indenture, and may have such letters, CUSIP or other
numbers or other marks of identification and such legends or
endorsements placed thereon as may be required by this Article II
or to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the Authorized
Representatives executing such Bonds or notations of the PIC
Guaranty, as the case may be, as evidenced by their execution of
the Bonds or notations of the PIC Guaranty, as the case may be.
Any portion of the text of any Bond may be set forth on the
reverse thereof, with an appropriate reference thereto on the
face of the Bond. The Bonds may also have set forth on the
reverse side thereof a form of assignment and forms to elect
purchase by Panda Funding pursuant to Section 7.32.
SECTION 2.6 Execution and Authentication of Bonds. The
Bonds shall be executed on behalf of Panda Funding by its
President or one of its Vice Presidents. The signature of any
such officers on the Bonds may be manual or facsimile.
Upon receipt of a Company Order, the Trustee shall
authenticate and make available for delivery Bonds of the
applicable series that are printed, lithographed, typewritten,
photocopied or otherwise produced, in any denomination authorized
hereunder.
Bonds bearing the manual or facsimile signatures of
individuals who were, at the time such signatures were affixed,
the proper officers of Panda Funding, shall bind Panda Funding,
notwithstanding that such individuals or any of them have ceased
to hold such offices prior to the authentication and delivery of
such Bonds or did not hold such offices at the date of such
Bonds.
SECTION 2.7 Temporary Bonds. Upon original issuance of
Bonds of a series or pending the preparation of definitive Bonds
of any series, Panda Funding may execute, and upon Company Order
the Trustee shall authenticate and make available for delivery,
Bonds or temporary Bonds, as the case may be, of such series that
are printed, lithographed, typewritten, photocopied or otherwise
produced, in any denomination authorized hereunder, substantially
of the tenor of the definitive Bonds in lieu of which they are
issued and having the notation of the PIC Guaranty thereon and
with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Bonds and
notation of the PIC Guaranty may determine, as evidenced by their
execution of such Bonds and notation of the PIC Guaranty.
If temporary Bonds of any series are issued, Panda
Funding will cause definitive Bonds of such series to be prepared
without unreasonable delay. After the preparation of definitive
Bonds of such series, the temporary Bonds of such series shall be
exchangeable for definitive Bonds of such series upon surrender
of the temporary Bonds of such series at the office or agency of
Panda Funding, for such purpose or at the Place of Payment,
without charge to the Holder. Upon surrender for cancellation of
any one or more temporary Bonds of any series, Panda Funding
shall execute, and the Trustee shall authenticate and make
available for delivery, in exchange therefor, definitive Bonds of
such series of authorized denominations and of like tenor and
aggregate principal amount and having the notation of the PIC
Guaranty thereon. Until so exchanged, such temporary Bonds of
any series shall in all respects be entitled to the same benefits
under this Indenture as definitive Bonds of such series.
SECTION 2.8 Registration, Restrictions on Transfer and
Exchange.
(a) Registration, Transfer and Exchange. Panda
Funding shall cause to be kept at the Corporate Trust Office of
the Trustee or at the office of another Security Registrar a
register which, subject to such reasonable regulations as Panda
Funding may prescribe and the requirements and restrictions on
transfer set forth in this Section and Section 2.9, shall provide
for the registration of Bonds and for the registration of
transfers and exchanges of Bonds. This register is herein
sometimes referred to as the "Security Register." The Trustee is
hereby appointed as the initial "Security Registrar" for the
purpose of registering Bonds and transfers and exchanges of Bonds
as herein provided.
If a Person other than the Trustee is appointed by
Panda Funding as Security Registrar, Panda Funding will give the
Trustee prompt written notice of the appointment of a Security
Registrar and of the location, and any change in the location, of
the Security Register, and the Trustee shall have the right to
inspect the Security Register at all reasonable times and to
obtain copies thereof, and the Trustee shall have the right to
rely upon an officer's certificate executed on behalf of the
Security Registrar as to the names and addresses of the Holders
of the Bonds and the principal amounts and numbers of such Bonds.
Subject to the provisions of this Section and
Section 2.9, upon due presentation for registration of transfer
of any Bonds of any series at any such office, Panda Funding
shall execute and the Trustee shall authenticate and deliver in
the name of the designated transferee or transferees a new Bond
or Bonds of like tenor and of any authorized denomination and of
a like aggregate principal amount and having a notation of the
PIC Guaranty thereon.
Furthermore, any Holder of a Global Bond shall, by
acceptance of such Global Bond, be deemed to have agreed that
transfers of beneficial interests in such Global Bond may be
effected only through a book-entry system maintained by the
Depository (or its agent), and that ownership of a beneficial
interest in a Global Bond shall be required to be reflected in a
book-entry.
Subject to this Section and Section 2.9, at the option
of the Holder, Bonds of any series may be exchanged for other
Bonds of like tenor and of any authorized denominations and of a
like aggregate principal amount. Bonds to be exchanged shall be
surrendered at any office or agency maintained by the Trustee for
the purpose as provided in this Section and Panda Funding shall
execute, PIC shall execute notations of the PIC Guaranty on, and
the Trustee shall authenticate and deliver in exchange therefor,
the Bonds of the applicable series which the Holder making the
exchange shall be entitled to receive, bearing numbers not
contemporaneously or previously outstanding.
All Bonds and the PIC Guaranty noted thereon issued
upon any registration of transfer or exchange of Bonds shall be
the valid obligations of Panda Funding and PIC, evidencing the
same debt, and entitled to the same security and benefits under
this Indenture, as the Bonds surrendered upon such registration
of transfer or exchange.
Every Bond presented or surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by
a written instrument of transfer in form satisfactory to Panda
Funding, the Trustee and the Security Registrar or any transfer
agent, duly executed by the Holder thereof or his attorney duly
authorized in writing.
No service charge shall be required of any Holders
participating in any transfer or exchange of Bonds in respect of
such transfer or exchange, but the Security Registrar may require
payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any
transfer or exchange of Bonds, other than exchanges pursuant to
Sections 2.7, 8.6 or 12.6 not involving any transfer.
The Security Registrar shall not be required (a) to
issue, register the transfer of or exchange any Physical Bond of
any series during a period (i) beginning at the opening of
business 15 days before the day of the mailing of a notice of
redemption of Bonds of such series selected for redemption under
Article VIII and ending at the close of business on the day of
such mailing and (ii) beginning on the Regular Record Date for
the Stated Maturity of any installment of principal of or payment
of interest on the Bonds of such series and ending on the Stated
Maturity of such installment of principal or payment of interest
or (b) to issue, register the transfer of or exchange any
Physical Bond so selected for redemption in whole or in part,
except the unredeemed portion of any Bond selected for redemption
in part.
Notwithstanding anything herein to the contrary, any
transfer of the Bonds of any series may be subject to additional
restrictions, if any, set forth in the Series Supplemental
Indenture relating to such series.
(b) Private Placement Legend. Subject to the
provisions of this Section and unless otherwise specified in the
applicable Series Supplemental Indenture, all Bonds shall bear
the following legend (the "Private Placement Legend"):
THIS BOND HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR
THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET
FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (I) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(a)(1), (2), (3) OR (7) UNDER REGULATION D OF
THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS BOND IN AN OFFSHORE TRANSACTION,
(II) AGREES THAT IT WILL NOT WITHIN THREE YEARS AFTER
THE ORIGINAL ISSUANCE OF THIS BOND RESELL OR OTHERWISE
TRANSFER THIS BOND EXCEPT (A) TO PANDA FUNDING,
(B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER
THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO BANKERS TRUST COMPANY, AS
TRUSTEE, OR A SUCCESSOR TRUSTEE, A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS BOND
(THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE), (D) OUTSIDE THE UNITED STATES TO FOREIGN
PURCHASERS IN OFFSHORE TRANSACTIONS MEETING THE
REQUIREMENTS OF RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
(III) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THIS BOND IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS BOND WITHIN THREE YEARS AFTER THE
ORIGINAL ISSUANCE OF THE BOND, THE HOLDER MUST CHECK
THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THE
CERTIFICATE TO BANKERS TRUST COMPANY, AS SECURITY
REGISTRAR. IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO PANDA FUNDING
CORPORATION AND BANKERS TRUST COMPANY, AS SECURITY
REGISTRAR, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS
LEGEND WILL BE REMOVED AFTER THE EXPIRATION OF THREE
YEARS FROM THE ORIGINAL ISSUANCE OF THIS BOND. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
(i) Upon the transfer, exchange or replacement
of Bonds bearing the Private Placement Legend, the Trustee
shall deliver only Bonds that bear the Private Placement
Legend unless, and the Trustee is hereby authorized to
deliver Bonds without the Private Placement Legend if, (A)
there is delivered to the Trustee an Opinion of Counsel to
the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain
compliance with the provisions of the Securities Act or (B)
such Bond has been sold pursuant to an effective
registration statement under the Securities Act. Upon the
transfer, exchange or replacement of Bonds not bearing the
Private Placement Legend, the Trustee shall deliver Bonds
that do not bear the Private Placement Legend. By its
acceptance of any Bond bearing the Private Placement Legend,
each Holder of such a Bond acknowledges the restrictions on
transfer of such Bond set forth in this Indenture and in the
Private Placement Legend and agrees that it will transfer
such Bond only as provided in this Indenture.
(ii) As a special condition to registration of
transfer or exchange of any Bonds involving removal of a
Private Placement Legend (other than pursuant to an
effective registration statement under the Securities Act),
the Holder requesting such registration of transfer or
exchange shall furnish the Opinion of Counsel called for by
this Section 2.8(b)(i). The following additional special
conditions shall apply to the indicated types of transfers
or exchanges:
(A) Respecting any requested
registration of transfer or exchange of Bonds in
the form of Physical Bonds, such Physical Bonds
shall be accompanied, in the sole discretion of
Panda Funding, by the following additional
information and documents, as applicable:
(1) if such Physical Bond is being
delivered to the Security Registrar by a
Holder for registration in the name of
such Holder, without transfer, a
certification from such Holder to that
effect (in substantially the form of
Exhibit B hereto); or
(2) if such Physical Bond is being
transferred to a Qualified Institutional
Buyer in accordance with Rule 144A under
the Securities Act, a certification to
that effect (in substantially the form of
Exhibit B hereto); or
(3) if such Physical Bond is being
transferred to an Institutional Accredited
Investor, delivery of a certification to
that effect (in substantially the form of
Exhibit B hereto), a Transferee
Certificate for Institutional Accredited
Investors in the form of Exhibit C hereto
and an Opinion of Counsel to the effect
that such transfer is in compliance with
the Securities Act; or
(4) if such Physical Bond is being
transferred in reliance on Regulation S,
delivery of a certification to that effect
(substantially in the form of Exhibit B
hereto), a Transferor Certificate for
Regulation S Transfers in the form of
Exhibit D hereto and an Opinion of Counsel
to the effect that such transfer is in
compliance with the Securities Act; or
(5) if such Physical Bond is being
transferred in reliance on Rule 144 under
the Securities Act, delivery of a
certification to that effect
(substantially in the form of Exhibit B
hereto) and an Opinion of Counsel to the
effect that such transfer is in compliance
with the Securities Act; or
(6) if such Physical Bond is being
transferred in reliance on another
exemption from the registration
requirements of the Securities Act, a
certification to that effect (in
substantially the form of Exhibit B
hereto) and an Opinion of Counsel to the
effect that such transfer is in compliance
with the Securities Act.
(B) Respecting any requested exchange
of a Physical Bond for a beneficial interest in a
Global Bond, such Physical Bond shall be
accompanied, in the sole discretion of Panda
Funding, by the following additional information
and documents:
(1) a certification, substantially in
the form of Exhibit B hereto, that such
Physical Bond is being transferred to a
Qualified Institutional Buyer; and
(2) written instructions directing the
Security Registrar to make, or to direct
the Depository to make, an endorsement on
the Global Bond to reflect an increase in
the aggregate amount of the Bonds
represented by the Global Bond;
whereupon the Trustee shall cancel such Physical
Bond and cause, or direct the Depository to cause,
in accordance with the standing instructions and
procedures existing between the Depository and the
Security Registrar, the aggregate principal amount
of Bonds represented by the Global Bond to be
increased accordingly. If no Global Bond is then
Outstanding, Panda Funding shall issue and the
Trustee shall upon Company Order authenticate a
new Global Bond in the appropriate amount.
(C) Any Person having a beneficial
interest in a Global Bond may upon request to the
Security Registrar exchange such beneficial
interest for a Physical Bond. Upon receipt by the
Security Registrar of written instructions (or
such other form of instructions as is customary
for the Depository) from the Depository or its
nominee on behalf of any Person having a
beneficial interest in a Global Bond and upon
receipt by the Security Registrar of a written
order or such other form of instructions as is
customary for the Depository or the Person
designated by the Depository as having such a
beneficial interest containing registration
instructions and, in the case of any such transfer
or exchange of a beneficial interest in Transfer
Restricted Securities, the following additional
information and documents:
(1) if such beneficial interest is
being transferred to the Person designated
by the Depository as being the beneficial
owner, a certification from such Person to
that effect (in substantially the form of
Exhibit B hereto); or
(2) if such beneficial interest is
being transferred to a Qualified
Institutional Buyer in accordance with
Rule 144A under the Securities Act, a
certification to that effect (in
substantially the form of Exhibit B
hereto); or
(3) if such beneficial interest is
being transferred to an Institutional
Accredited Investor, delivery of a
certification to that effect
(substantially in the form of Exhibit B
hereto), a Transferee Certificate for
Institutional Accredited Investors in the
form of Exhibit C hereto and an Opinion of
Counsel to the effect that such transfer
is in compliance with the Securities Act;
or
(4) if such beneficial interest is
being transferred in reliance on
Regulation S, delivery of a certification
to that effect (substantially in the form
of Exhibit B hereto), a Transferor
Certificate for Regulation S Transfers in
the form of Exhibit D hereto and an
Opinion of Counsel to the effect that such
transfer is in compliance with the
Securities Act; or
(5) if such beneficial interest is
being transferred in reliance on Rule 144
under the Securities Act, delivery of a
certification to that effect
(substantially in the form of Exhibit B
hereto) and an Opinion of Counsel to the
effect that such transfer is in compliance
with the Securities Act; or
(6) if such beneficial interest is
being transferred in reliance on another
exemption from the registration
requirements of the Securities Act, a
certification to that effect (in
substantially the form of Exhibit B
hereto) and an Opinion of Counsel to the
effect that such transfer is in compliance
with the Securities Act,
then the Security Registrar will cause, in
accordance with the standing instructions and
procedures existing between the Depository and the
Security Registrar, the aggregate principal amount
of the Global Bond to be reduced and, following
such reduction, Panda Funding will execute and,
upon receipt of a Company Order, the Trustee will
authenticate and deliver to the transferee a
Physical Bond. Bonds issued in exchange for a
beneficial interest in a Global Bond pursuant to
this Section shall be registered in such names and
in such authorized denominations as the
Depository, pursuant to instructions from Agent
Members or otherwise, shall instruct the Security
Registrar in writing. The Trustee shall deliver
such Physical Bonds to the Persons in whose names
such Physical Bonds are so registered.
(c) PIC Guaranty Legend. All Bonds shall bear the
following legend:
PIC GUARANTY
To the extent and subject to the limitations set
forth in the Indenture, PIC (as defined in the
Indenture referred to in the Bond upon which this
notation is endorsed, which term includes any successor
or permitted assigns under the Indenture) has
unconditionally guaranteed (a) the due and punctual
payment of the principal of (and premium, if any, on)
and interest on the Bonds, (b) the due and punctual
payment of all other amounts due and payable under the
Indenture and the Bonds by Panda Funding, and (c) the
due and punctual performance of all other obligations
of Panda Funding to the Holders or the Trustee, all in
accordance with the terms set forth in the Indenture.
Capitalized terms used herein shall have the meanings
assigned to them in the Indenture unless otherwise
indicated.
The obligations of PIC to the Holders of Bonds and
to the Trustee pursuant to the PIC Guaranty and the
Indenture are expressly set forth in the Indenture,
including Article XIII thereof, and reference is hereby
made to the Indenture for the precise terms of the PIC
Guaranty.
PANDA INTERFUNDING CORPORATION
By: ____________________________________
SECTION 2.9 Book-Entry Provisions for Global Bond.
Each Global Bond shall (i) be registered in the name of
the Depository for such Global Bond or the nominee of such
Depository, (ii) delivered to the Trustee as custodian for such
Depository and (iii) bear the legend set forth in Exhibit A
hereto.
Members of, or participants in, the Depository ("Agent
Members") shall have no rights under this Indenture with respect
to any Global Bond held on their behalf by the Depository, or the
Trustee as its custodian, or under such Global Bond, and the
Depository may be treated by Panda Funding, PIC, the Security
Registrar, the Trustee and any agent of Panda Funding, PIC, the
Security Registrar or the Trustee as the absolute owner of such
Global Bond for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent Panda Funding, PIC, the
Security Registrar, the Trustee or any agent of Panda Funding,
PIC, the Security Registrar or the Trustee from giving effect to
any written certification, proxy or other authorization furnished
by the Depository or shall impair, as between the Depository and
its Agent Members, the operation of customary practices governing
the exercise of the rights of a Holder of any Bond.
Transfers of a Global Bond shall be limited to
transfers of such Global Bond in whole, but not in part, to the
Depository, its successors or their respective nominees.
Interests of beneficial owners in a Global Bond may be
transferred or exchanged for Physical Bonds in accordance with
the rules and procedures of the Depository and the provisions of
this Section and Section 2.8. In addition, Physical Bonds shall
be transferred to all beneficial owners in exchange for their
beneficial interests in a Global Bond if, and only if, either
(a) the Depository notifies Panda Funding that it is unwilling or
unable to continue as depositary for the Global Bond and a
successor depositary is not appointed by Panda Funding within 90
days of such notice, (b) Panda Funding determines not to have the
Bonds represented by the Global Bond and notifies the Depository
and the Security Registrar thereof, or (c) after the occurrence
of an Event of Default with respect to a series of Bonds,
beneficial owners holding interests representing a majority of
the principal amount of Bonds of such series represented by a
Global Bond advise the Trustee through the Depository in writing
that the continuation of the book-entry system with respect to
the Bonds of such series is no longer in such beneficial owners'
best interests.
In connection with the transfer of an entire Global
Bond to beneficial owners pursuant to this Section, the Global
Bonds shall be deemed to be surrendered to the Trustee for
cancellation, and Panda Funding shall execute, and the Trustee
shall upon Company Order authenticate and deliver, to each
beneficial owner identified by the Depository, in exchange for
its beneficial interest in the Global Bond, an equal aggregate
principal amount of Physical Bonds of authorized denominations.
The Holder of a Global Bond may grant proxies and
otherwise authorize any Person, including Agent Members and
Persons that may hold interests through Agent Members, to take
any action which a Holder is entitled to take under this
Indenture or the Bonds.
SECTION 2.10 Mutilated, Destroyed, Lost and Stolen
Bonds. If (a) any mutilated Bond is surrendered to the Trustee,
PIC or Panda Funding and the Security Registrar and the Trustee
receive evidence to their satisfaction of the destruction, loss
or theft of any Bond, and (b) there is delivered to Panda
Funding, PIC, the Security Registrar and the Trustee evidence to
their satisfaction of the ownership and authenticity thereof, and
such security or indemnity as may be required by them to save
each of them and their agents harmless, then, in the absence of
notice to Panda Funding, PIC, the Security Registrar or the
Trustee that such Bond has been acquired by a bona fide
purchaser, Panda Funding shall execute, PIC shall execute the
notation of the PIC Guaranty, and upon Panda Funding's written
request by Company Order the Trustee shall authenticate and make
available for delivery, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Bond, and at the cost of the
Holder of the Bond, a new Bond of the same series and of like
tenor and principal amount, having the notation of the PIC
Guaranty thereon, bearing a number not then outstanding. If,
after the delivery of such new Bond, a bona fide purchaser of the
original Bond in lieu of which such new Bond was issued presents
for payment such original Bond, Panda Funding, PIC, the Security
Registrar and the Trustee shall be entitled to recover such new
Bond from the Person to whom it was delivered or any Person
taking therefrom, except a bona fide purchaser, and in any case
shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or
expense incurred by Panda Funding, PIC, the Security Registrar or
the Trustee in connection therewith.
Notwithstanding the foregoing, in case any such
mutilated, destroyed, lost or stolen Bond has become or is about
to become due and payable, Panda Funding, upon satisfaction of
the conditions set forth in clauses (a) and (b) of the preceding
paragraph may, instead of issuing a new Bond, pay such Bond.
Upon the issuance of any new Bond under this Section,
Panda Funding may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses connected therewith.
Every new Bond issued pursuant to this Section in lieu
of any destroyed, lost or stolen Bond shall constitute a
contractual obligation of Panda Funding and, to the extent of the
PIC Guaranty, PIC, whether or not the destroyed, lost or stolen
Bond shall be at any time enforceable by anyone, and shall be
entitled to all the benefits and security of this Indenture, the
PIC Guaranty, and the Security Documents equally and
proportionately with any and all other Bonds duly issued
hereunder (subject to the rights of Panda Funding and PIC
specified in the last sentence of the first paragraph of this
Section).
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies
with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Bonds.
SECTION 2.11 Payment of Principal, Premium, if any,
and Interest; Principal and Interest Rights Preserved. Principal
of (and premium, if any) or interest on any Bond that is payable,
and punctually paid or duly provided for, at any Stated Maturity
shall be paid to the Person in whose name that Bond (or one or
more Predecessor Bonds) is registered at the close of business on
the Regular Record Date for such principal or interest. Payment
of principal of (and premium, if any) and interest on the Bonds
of any series shall be made at the Place of Payment (or, if such
office is not in the Borough of Manhattan, the City of New York,
at either such office or an office to be maintained in such
Borough), or by check mailed on the applicable Payment Date, or
in another manner or manners if so provided in the Series
Supplemental Indenture creating the Bonds of such series, except
for the final installment of principal payable with respect to a
Bond, which shall be payable as provided in Section 8.5 (in the
case of Bonds redeemed or prepaid) or payable upon presentation
and surrender of such Bond at the Place of Payment.
Any principal of or interest on any Bond of any series
that is payable, but is not punctually paid or duly provided for,
at any Stated Maturity of an installment of principal or payment
of interest shall forthwith cease to be payable to the Holder on
the relevant Regular Record Date and such defaulted principal or
interest may be paid by Panda Funding as provided below:
Panda Funding may elect to make payment of all or any
portion of such defaulted principal or interest to the
Persons in whose names the Bonds of such series (or their
respective Predecessor Bonds) in respect of which principal
or interest is in default are registered at the close of
business on a Special Record Date for the payment of such
defaulted principal or interest, which shall be fixed by
Panda Funding in the following manner. At least twenty (20)
days prior to the date of proposed payment Panda Funding
shall notify the Trustee and the Paying Agent in writing of
the Special Record Date and the amount of defaulted
principal or interest proposed to be paid on each Bond of
such series and the date of the proposed payment, and
concurrently there shall be deposited with the Trustee an
amount of money equal to the aggregate amount proposed to be
paid in respect of such defaulted principal or interest or
there shall be made arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment,
such money when deposited to be held in trust for the
benefit of the Persons entitled to such defaulted principal
or interest as provided in this paragraph. The Special
Record Date for the payment of such defaulted principal or
interest (together with other amounts payable with respect
to such defaulted principal or interest) shall not be more
than fifteen (15) nor less than ten (10) days prior to the
date of the proposed payment and not less than ten (10) days
after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly, in the name
and at the expense of Panda Funding, cause notice of the
proposed payment of such defaulted principal or interest and
the Special Record Date therefor to be mailed, first class
postage prepaid, to each Holder of a Bond of such series at
his address as it appears in the Security Register, not less
than ten (10) days prior to such Special Record Date.
Notice of the proposed payment of such defaulted principal
or interest and the Special Record Date therefor having been
mailed as aforesaid, such defaulted principal or interest
shall be paid to the Persons in whose names the Bonds of
such series (or their respective Predecessor Bonds) are
registered on such Special Record Date.
Subject to the foregoing provisions of this Section,
each Bond delivered under this Indenture upon registration of
transfer of or in exchange for or in lieu of any other Bond shall
carry the rights to interest accrued and unpaid, and to accrue,
which were carried by such other Bond.
SECTION 2.12 Persons Deemed Owners. Subject to
Section 2.11, prior to due presentment of a Bond for registration
of transfer, the Person in whose name any Bond is registered
shall be deemed to be the owner of such Bond for the purpose of
receiving payment of principal of, and premium, if any, and
interest on, such Bond and for all other purposes whatsoever,
whether or not such Bond is overdue, regardless of any notice to
anyone to the contrary.
SECTION 2.13 Cancellation. All Bonds surrendered for
payment, any mandatory or optional redemption or registration of
transfer or exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee for cancellation.
Panda Funding may at any time deliver to the Trustee for
cancellation any Bonds previously authenticated and delivered
hereunder which Panda Funding may have acquired in any manner
whatsoever, and all Bonds so delivered shall be promptly canceled
by the Trustee. No Bonds shall be authenticated in lieu of or in
exchange for any Bonds canceled as provided in this
Section, except as expressly permitted by this Indenture. All
canceled Bonds held by the Trustee shall be destroyed and
certification of their destruction shall be delivered to Panda
Funding.
SECTION 2.14 Dating of Bonds; Computation of
Interest.
(a) Each Bond of a series shall be dated the date of
its authentication.
(b) Except as otherwise provided in the Series
Supplemental Indenture relating to the Bonds of a series,
interest on the Bonds of such series shall be computed on
the basis of a 360-day year consisting of twelve 30-day
months.
SECTION 2.15 Source of Payments Limited: Rights and
Liabilities of Panda Funding. All payments of principal and
interest and any other payments to be made in respect of the
Bonds and this Indenture shall be made only from the revenues and
assets of (i) Panda Funding (including any amounts payable to
Panda Funding pursuant to Section 1.14) and to the extent of the
PIC Guaranty, PIC, and (ii) the Collateral, the payments
therefrom and the income and proceeds received by the Trustee
therefrom. Each Holder, by its acceptance of a Bond, agrees that
(a) the Trustee shall not be liable to any Holder for any amounts
payable under any Bond or for any liability under this Indenture
and (b) recourse shall be otherwise limited in accordance with
Article V.
SECTION 2.16 Allocation of Principal and Interest.
Each payment of principal of and premium, if any, and interest on
each Bond shall be applied, first, to the payment of accrued but
unpaid interest on such Bond (as well as any interest on overdue
principal or, to the extent permitted by applicable Government
Rule, overdue interest) to the date of such payment and second,
to the payment of the principal amount of such Bond then due
(including any overdue installment of principal) thereunder.
SECTION 2.17 Parity of Bonds. All Bonds of a series
issued and Outstanding hereunder rank on a parity with each other
Bond of the same series and with all Bonds of each other series
and each Bond of a series shall constitute senior indebtedness of
Panda Funding and shall be secured equally and ratably by this
Indenture and the Security Documents with each other Bond of the
same series and with all Bonds of each other series, without
preference, priority or distinction of any one thereof over any
other by reason of difference in time of issuance or otherwise,
and each Bond of a series shall be entitled to the same benefits
and security in this Indenture and the Security Documents as each
other Bond of the same series and with all Bonds of each other
series.
ARTICLE III
APPLICATION OF PROCEEDS FROM SALE
OF BONDS
SECTION 3.1 Application of Proceeds from Sale of Bonds.
The proceeds from sales of the Bonds will be used by Panda
Funding to make loans to PIC evidenced by notes issued by PIC to
Panda Funding (the "PIC Notes"). The proceeds from the sale of
each series of Bonds shall be used for the purposes set forth in
the applicable Series Supplemental Indenture.
ARTICLE IV
ACCOUNTS, FUNDS AND PROJECT DISTRIBUTIONS
SECTION 4.1 Establishment of Accounts and Funds.
(a) The following accounts and funds (collectively,
the "U.S. Accounts and Funds") are hereby established and created
with and in the name of the Trustee acting as agent for the
Collateral Agent for the benefit of the Secured Parties:
(i) the U.S. Project Account;
(ii) the Debt Service Fund;
(iii) the Capitalized Interest Fund;
(iv) the Debt Service Reserve Fund;
(v) the PIC Expense Fund;
(vi) the U.S. Distribution Suspense Fund;
(vii) the U.S. Mandatory Redemption Account; and
(viii) the U.S. Extraordinary Distribution
Account.
(b) The following accounts and funds (collectively,
the "International Accounts and Funds") are hereby established
and created with and in the name of the International Collateral
Agent:
(i) the International Project Account;
(ii) the International Distribution Suspense
Fund;
(iii) the International Mandatory Redemption
Account; and
(iv) the International Extraordinary
Distribution Account.
(c) All U.S. Accounts and Funds shall be under the
exclusive dominion and control of the Trustee, and all
International Accounts and Funds shall be under the exclusive
dominion and control of the International Collateral Agent.
Except as expressly provided herein, Panda Funding, PIC, the PIC
Entities and any Affiliate thereof shall not have any right to
withdraw monies from any U.S. or International Account or Fund.
PIC, for itself and on behalf of each PIC U.S. Entity, hereby
irrevocably authorizes the Trustee to deposit monies into, and
withdraw and transfer monies from, each U.S. Account and Fund in
accordance with the terms of this Indenture. PIC, on behalf of
each PIC International Entity, hereby irrevocably authorizes the
International Collateral Agent to deposit monies into, and
withdraw and transfer monies from, each International Account and
Fund in accordance with the terms of this Indenture.
SECTION 4.2 Project Accounts.
(a) Without limitation of any other amounts required
under this Indenture to be deposited in the U.S. and
International Project Accounts (collectively, the "Project
Accounts"):
(i) PIC shall ensure that (A) all distributions
and other amounts received by PIC or any PIC U.S.
Entity or any other Person on behalf of PIC or any PIC
U.S. Entity from, or in connection with, the U.S.
Projects that may be legally distributed or paid to PIC
or any PIC U.S. Entity without contravention of any
Project Agreement, including (1) all distributions,
either directly or indirectly, from U.S. Project
Entities to PIC or any PIC U.S. Entity and (2) all
amounts received by PIC or any PIC U.S. Entity or any
other Person on behalf of PIC or any PIC U.S. Entity in
respect of PIC's or any such PIC U.S. Entity's
investments in or loans to U.S. Project Entities, in
each case other than Extraordinary Financial
Distributions and distributions received by or on
behalf of PIC or any PIC U.S. Entity that are required
to be deposited in the U.S. Mandatory Redemption
Account pursuant to Section 4.8(a), (B) all interest
earned on the amounts on deposit in the U.S. Accounts
and Funds, but only to the extent such interest has
been received, (C) unless otherwise expressly provided
in this Article, all payments of regularly scheduled
interest and, if applicable, principal on the PIC
International Entity Notes and (D) payments resulting
from the redemption or partial redemption of the
outstanding Other International Notes in respect of
which the Trustee has given notice of an International
Redemption Event (collectively, the "U.S. Project
Distributions") shall be deposited with the Trustee in
the U.S. Project Account. PIC shall, and shall cause
each PIC U.S. Entity to, instruct each Person from whom
it receives or is entitled to receive U.S. Project
Distributions to pay such U.S. Project Distributions
(together with instructions identifying them as such,
identifying the Project in respect of which they are
being paid, identifying the Project Account into which
they shall be deposited and giving account information
and transfer instructions for deposit in such Project
Account) directly to the Trustee for deposit in the
U.S. Project Account, and the Trustee shall be entitled
to receive directly all U.S. Project Distributions from
Persons owing the same. If any U.S. Project
Distributions are remitted directly to, or are
otherwise received by, PIC or any PIC U.S. Entity or
any other Person on behalf of PIC or any PIC U.S.
Entity, PIC, such PIC U.S. Entity or such other Person
shall hold such U.S. Project Distributions in trust for
the Trustee and shall promptly remit such U.S. Project
Distributions, in the form received (with any necessary
endorsement), to the Trustee for deposit in the U.S.
Project Account.
(ii) PIC shall cause each PIC International
Entity to ensure that (A) all distributions and other
amounts received by any PIC International Entity or any
other Person on behalf of any PIC International Entity
from, or in connection with, the Non-U.S. Projects that
may be legally distributed or paid to any PIC
International Entity without contravention of any
Project Agreement, including (1) all distributions,
either directly or indirectly, from International
Project Entities to any PIC International Entity and
(2) all amounts received by any PIC International
Entity or any other Person on behalf of any PIC
International Entity in respect of such PIC
International Entity's investments in or loans to
International Project Entities, in each case other than
Extraordinary Financial Distributions and distributions
received by or on behalf of any PIC International
Entity that are required to be deposited in the
International Mandatory Redemption Account pursuant to
Section 4.8(a) and (B) all interest earned on the
amounts on deposit in the International Accounts and
Funds, but only to the extent such interest has been
received (collectively, the "International Project
Distributions"), shall be deposited with the
International Collateral Agent in the International
Project Account. PIC shall cause each PIC
International Entity to instruct each Person from whom
such PIC International Entity receives or is entitled
to receive International Project Distributions to pay
such International Project Distributions (together with
instructions identifying them as such, identifying the
Project in respect of which they are being paid,
identifying the Project Account into which they shall
be deposited and giving account information and
transfer instructions for deposit in such Project
Account) directly to the International Collateral Agent
for deposit in the International Project Account, and
the International Collateral Agent shall be entitled to
receive directly all International Project
Distributions from the Persons owing the same. If any
International Project Distributions are remitted
directly to, or are otherwise received by, any PIC
International Entity or any other Person on behalf of
any PIC International Entity, such PIC International
Entity or such other Person shall hold such
International Project Distributions in trust for the
International Collateral Agent and shall promptly remit
such International Project Distributions, in the form
received (with any necessary endorsement), to the
International Collateral Agent for deposit in the
International Project Account.
(iii) If either the Trustee or the International
Collateral Agent receives, respectively, U.S. or
International Project Distributions (collectively, the
"Project Distributions") without the instructions
required in clauses (i) and (ii) of this Section
4.2(a), the Trustee or the International Collateral
Agent, as the case may be, shall provide notice of this
fact to PIC, who promptly after receiving such notice
shall provide written instructions to the Trustee or
the International Collateral Agent, as the case may be,
specifying the appropriate Project Account into which
such Project Distributions shall be deposited,
whereupon such Project Distributions shall be deposited
in the Project Account so specified.
(b) On each Monthly Distribution Date (subject, other
than in the case of transfers to be made pursuant to clauses (i),
(ii), (iii) and (iv) of this Section 4.2(b), to receipt of the
Applicable Distribution Certificate in accordance with Section
7.1(e)), the following transfers of monies then on deposit in the
U.S. Project Account (after giving effect to all transfers to be
made to the U.S. Project Account on such Monthly Distribution
Date and after withdrawing an amount equal to the agreed upon
fees and reasonable expenses of the Trustee and the Collateral
Agent and their respective agent and counsel then due to such
persons under this Indenture) shall be made by the Trustee in the
respective amounts, and in the order of priority, set forth
below:
(i) to the Debt Service Fund, for application to
the payment of principal of and interest on the Bonds,
an amount equal to the excess, if any, of (A) the
aggregate amount of interest (less any amount on
deposit in the Capitalized Interest Fund in respect of
such interest payment) and, if applicable, principal
due and payable on the PIC Notes (including any past
due amounts) on the Payment Date for each series of
Bonds then Outstanding next following the day
immediately preceding such Monthly Distribution Date
(other than in connection with a call for redemption),
over (B) the amount then on deposit in the Debt Service
Fund;
(ii) to the Capitalized Interest Fund, an amount
equal to the excess, if any, of (A) the Capitalized
Interest Requirement then in effect over (B) the amount
then on deposit in the Capitalized Interest Fund, after
giving effect to any withdrawals from such Fund made on
such Monthly Distribution Date;
(iii) to the Debt Service Reserve Fund, an
amount equal to the excess, if any, of (A) the Debt
Service Reserve Requirement then in effect over (B) the
sum of (1) the amount then on deposit in the Debt
Service Reserve Fund, after giving effect to any
withdrawals from such Fund made on such Monthly
Distribution Date pursuant to the Indenture, and (2)
the amount available to be drawn under any Letter of
Credit, after giving effect to any drawings under any
Letter of Credit on such Monthly Distribution Date;
(iv) to the PIC Expense Fund, an amount equal to
the excess, if any, of (A) the sum of (1) the PIC
Expenses Amount for the applicable calendar year plus
(2) the Annual Letter of Credit Fee, if any, for such
calendar year over (B) the aggregate amount deposited
in the PIC Expense Fund since the beginning of such
calendar year; and
(v) to the U.S. Distribution Suspense Fund, the
remaining balance, if any, on deposit in the U.S.
Project Account.
(c) On each Monthly Distribution Date (subject, other
than in the case of transfers to be made pursuant to clause (i)
of this Section 4.2(c), to receipt of the Applicable Distribution
Certificate in accordance with Section 7.1(e)), the following
transfers of monies then on deposit in the International Project
Account (after giving effect to all transfers to be made to the
International Project Account on such Monthly Distribution Date
and after withdrawing an amount equal to the agreed upon fees and
reasonable expenses of the International Collateral Agent and its
agents and counsel then due to such persons under this Indenture)
shall be made by the International Collateral Agent in the
respective amounts, and in the order of priority, set forth
below:
(i) to the payment of any amount due and payable
on any outstanding PIC International Entity Notes
(including any accrued interest thereon and any past
due amounts) on the payment date for regularly
scheduled installments of principal or interest thereon
next following the day immediately preceding such
Monthly Distribution Date; and
(ii) to the International Distribution Suspense
Fund, the remaining balance, if any, on deposit in the
International Project Account.
(d) Distributions received by or on behalf of PIC or
any PIC Entity as a result of Mandatory Redemption Events will be
initially deposited in the appropriate Mandatory Redemption
Account if so required by Section 4.8(a), and distributions
received by or on behalf of PIC or any PIC Entity that constitute
Extraordinary Financial Distributions will be initially deposited
in the appropriate Extraordinary Distribution Account as provided
in Section 4.9.
(e) Notwithstanding anything to the contrary in this
Section or in any other provision of this Indenture, any capital
contributions received by PIC, loans received by PIC from Panda
Funding evidenced by the PIC Notes and any capital contributions
or loans received by any PIC Entity from PIC or another PIC
Entity, will not be considered Project Distributions, will not be
required to be deposited into the U.S. and International Project
Accounts and may be used for any purpose not prohibited by this
Indenture.
SECTION 4.3 Debt Service Fund.
(a) All monies from time to time held on deposit in
the Debt Service Fund shall be applied by the Trustee solely to
pay (i) interest (whether at Stated Maturity or by acceleration
or otherwise, other than in connection with a call for
redemption) and (ii) principal (whether at Stated Maturity or by
acceleration or otherwise, other than in connection with a call
for redemption) due and payable on the PIC Notes including any
past due amounts (for application by the Trustee to the payment
of principal of and interest on the Bonds), as and when provided
in the PIC Notes. At the time any payment of interest or
principal on the PIC Notes is due, the Trustee, after first
transferring to the Debt Service Fund the amount of any monies
required to be transferred to the Debt Service Fund from the
Capitalized Interest Fund pursuant to any Series Supplemental
Indenture, shall withdraw the amount of such payment from the
Debt Service Fund and shall make such payment to the Holders,
which payment shall be deemed a payment of principal of or
interest on the PIC Notes by PIC, as the case may be.
(b) If on any Payment Date the amounts on deposit in
the Debt Service Fund (after giving effect to all transfers to
the Debt Service Fund to be made on such Payment Date pursuant to
Section 4.2(b)) are insufficient for the payment in full of the
interest and, if applicable, principal then due and payable on
the PIC Notes, including any past due amounts and all amounts
scheduled to be paid on such Payment Date (each such deficiency,
a "Debt Service Deficiency"), an amount equal to such Debt
Service Deficiency shall be withdrawn and transferred to the Debt
Service Fund by the Trustee from monies, if any, on deposit or to
be deposited on such Payment Date in the following U.S. Accounts
and Funds in the following order of priority:
first, from the U.S. Distribution Suspense Fund;
then, from the U.S. Extraordinary Distribution
Account (using Available Amounts only);
then, from the PIC Expense Fund;
then, from the Debt Service Reserve Fund, the
monies on deposit therein;
then, from the Debt Service Reserve Fund, the
proceeds received by the Trustee after making a
drawing on any Letter of Credit, if any;
then, from the Capitalized Interest Fund; and
then, from the U.S. Mandatory Redemption Account
(using Available Amounts only).
The Trustee shall transfer all amounts available in the foregoing
U.S. Accounts or Funds in accordance with the priorities set
forth in the preceding sentence before transferring any amounts
from any other U.S. Account or Fund with a subsequent priority as
set forth in such preceding sentence.
(c) (i) If, following the transfers to the Debt
Service Fund provided for in Section 4.3(b), a Debt
Service Deficiency still exists, the Trustee shall give
notice to PIC and the International Collateral Agent
that an International Redemption Event has occurred,
which notice shall be in writing and shall state the
amount of the existing Debt Service Deficiency. Upon
receipt of such notice, the International Collateral
Agent shall effect a redemption or partial redemption
of the Other International Notes by transferring from
the International Accounts and Funds to the U.S.
Project Account (as required in Section 4.2(a)(i) and
in the order of priority set forth in Section
4.3(c)(ii)) an amount equal to the lesser of (A) the
amounts then on deposit in the International Accounts
and Funds, (B) the outstanding balance of the Other
International Notes and (C) the amount of such Debt
Service Deficiency. Upon deposit in the U.S. Project
Account, such monies shall be transferred from the U.S.
Project Account to the Debt Service Fund by the
Trustee.
(ii) The monies deposited in the U.S. Project
Account as a result of a redemption or partial
redemption of the Other International Notes shall come
out of the following International Accounts and Funds
in the following order of priority:
first, from the International Distribution
Suspense Fund;
then, from the International Project Account;
then, from the International Extraordinary
Distribution Account (using Available Amounts
only); and
then, from the International Mandatory
Redemption Account (using Available Amounts
only).
The International Collateral Agent will transfer such
amounts in accordance with the priorities set forth in
the preceding sentence before transferring any amounts
from any other International Account or Fund with a
subsequent priority as set forth in such preceding
sentence.
SECTION 4.4 Capitalized Interest Fund.
(a) Except as otherwise provided in this Article or in
the Series Supplemental Indenture with respect to amounts held in
the Capitalized Interest Fund in satisfaction of any Capitalized
Interest Requirement credited therein, the Trustee shall transfer
monies held on deposit in the Capitalized Interest Fund to the
Debt Service Fund on each Interest Payment Date for which such a
transfer is required in any Series Supplemental Indenture in an
amount so required in any such Series Supplemental Indenture.
(b) Contemporaneously with the delivery of each PIC
Note, PIC shall deliver to the Trustee for deposit in the
Capitalized Interest Fund monies in an amount equal to the
excess, if any, of (A) the Capitalized Interest Requirement then
in effect over (B) the amount then on deposit in the Capitalized
Interest Fund.
(c) If on any Monthly Distribution Date the amount on
deposit in the Capitalized Interest Fund (after giving effect to
all transfers to the Capitalized Interest Fund pursuant to
Section 4.2(b) and to the Debt Service Fund pursuant to Section
4.3(c) to be made on such Monthly Distribution Date) is less than
the Capitalized Interest Requirement in effect on such Monthly
Distribution Date (each such deficiency, a "Capitalized Interest
Deficiency"), an amount equal to such Capitalized Interest
Deficiency shall be withdrawn and transferred to the Capitalized
Interest Fund by the Trustee from monies, if any, on deposit or
to be deposited on such Monthly Distribution Date in the
following U.S. Accounts and Funds in the following order of
priority:
first, from the U.S. Distribution Suspense Fund;
then, from the U.S. Extraordinary Distribution
Account (using Available Amounts only);
then, from the PIC Expense Fund;
then, from the Debt Service Reserve Fund, the
monies on deposit therein;
then, from the Debt Service Reserve Fund, the
proceeds received by the Trustee after making a
drawing on any Letter of Credit, if any; and
then, from the U.S. Mandatory Redemption Account
(using Available Amounts only).
The Trustee shall transfer all amounts available in the foregoing
U.S. Accounts or Funds in accordance with the priorities set
forth in the preceding sentence before transferring any amounts
from any other U.S. Account or Fund with a subsequent priority as
set forth in such preceding sentence.
(d) If, following the transfers to the Capitalized
Interest Fund provided for in Section 4.4(c), a Capitalized
Interest Deficiency still exists, the Trustee shall give notice
to PIC and the International Collateral Agent that an
International Redemption Event has occurred, which notice shall
be in writing and shall state the amount of the existing
Capitalized Interest Deficiency. Upon receipt of such notice,
the International Collateral Agent shall effect a redemption or
partial redemption of the Other International Notes by
transferring from the International Accounts and Funds to the
U.S. Project Account (as required in Section 4.2(a)(i) and in the
order of priority set forth in Section 4.3(c)(ii)) an amount
equal to the lesser of (A) the amounts then on deposit in the
International Accounts and Funds, (B) the outstanding principal
amount of the Other International Notes (after giving effect to
all redemptions thereof required to be made on such Monthly
Distribution Date pursuant to Section 4.3(c)(i)) and (C) the
amount of such Capitalized Interest Deficiency. Upon deposit in
the U .S. Project Account, such monies shall be transferred from
the U.S. Project Account to the Capitalized Interest Fund by the
Trustee.
(e) If, on any Monthly Distribution Date, PIC delivers
to the Trustee an Officer's Certificate (supported by a
certificate to the Trustee from the Consolidating Engineer
substantially in the form of the certificate required by Section
4.9(c)) (the "Capitalized Interest Fund Termination
Certificate"), stating that (i) the PIC Debt Service Coverage
Ratio and the Consolidated Debt Service Coverage Ratio (if then
applicable) for the twelve (12) months immediately preceding the
month in which such Monthly Distribution Date occurs equal or
exceed 1.7 to 1.0 and 1.25 to 1.0, respectively, and (ii) the
projected PIC Debt Service Coverage Ratio and the projected
Consolidated Debt Service Coverage Ratio (if then applicable)
will (after giving effect to any transfer from the Capitalized
Interest Fund to the U.S. Distribution Suspense Fund proposed to
be made on such Monthly Distribution Date) equal or exceed 1.7 to
1.0 and 1.25 to 1.0, respectively, in each case for each Future
Ratio Determination Period, then all monies held on deposit in
the Capitalized Interest Fund may be transferred to the U.S.
Distribution Suspense Fund. Upon any such transfer, the
Capitalized Interest Requirement shall be zero unless and until a
new Capitalized Interest Requirement is established by a
subsequent Series Supplemental Indenture.
SECTION 4.5 Debt Service Reserve Fund.
(a) The amounts held in the Debt Service Reserve Fund
shall be applied solely as provided in this Article to eliminate
any Debt Service Deficiency or Capitalized Interest Deficiency.
(b) Contemporaneously with the delivery of each PIC
Note, PIC shall deliver to the Trustee for deposit in the Debt
Service Reserve Fund monies in an amount equal to the excess, if
any, of (i) the Debt Service Reserve Requirement then in effect
over (ii) the sum of (A) the amount then on deposit in the Debt
Service Reserve Fund, after giving effect to any withdrawals from
such Fund on such date and (B) the amount available to be drawn
under any Letter of Credit, after giving effect to any drawings
under any Letter of Credit on such date.
(c) At any time when the Capitalized Interest
Requirement is zero, in lieu of maintaining monies in the Debt
Service Reserve Fund, all or a portion of the Debt Service
Reserve Requirement in respect of such series may be satisfied by
the delivery to the Trustee of one or more Letters of Credit.
Such Letter or Letters of Credit shall be with a Letter of Credit
Provider and shall contain terms and related agreements
(including with respect to the subordination of the related
reimbursement obligations) acceptable to a rating agency that is
currently rating the Bonds of such series and may be pursuant to
a reimbursement agreement which grants the provider of such
Letter of Credit a lien on the Collateral, provided such lien is
subordinated to the lien of the Collateral Agent in favor of the
Trustee on behalf of the Holders, and provided such subordinated
lien shall provide that in no event shall the beneficiary thereof
be entitled to take any action in respect of the enforcement
thereof until all amounts due in respect of the Bonds, this
Indenture, the PIC Notes and the Collateral Agency Agreement have
been paid in full in cash. Subject to the first two sentences of
this paragraph, on the date of the delivery to the Trustee of a
Letter of Credit which meets the requirements set forth in this
paragraph, an amount of cash equal to the excess, if any, of (i)
the sum of the undrawn face amount of all such Letters of Credit
and all monies then on deposit in the Debt Service Reserve Fund,
over (ii) the Debt Service Reserve Requirement will be
transferred by the Trustee to the U.S. Distribution Suspense
Fund.
(d) If on any Monthly Distribution Date the amount on
deposit in the Debt Service Reserve Fund (after giving effect to
all transfers to the Debt Service Reserve Fund pursuant to
Section 4.2(b), to the Debt Service Fund pursuant to Section
4.3(c) and to the Capitalized Interest Fund pursuant to Section
4.4(c), to be made on such Monthly Distribution Date) is less
than the Debt Service Reserve Requirement in effect on such
Monthly Distribution Date (each such deficiency, a "Debt Service
Reserve Deficiency"), an amount equal to such Debt Service
Reserve Deficiency shall be withdrawn and transferred to the Debt
Service Reserve Fund by the Trustee from monies, if any, on
deposit or to be deposited on such Monthly Distribution Date in
the following U.S. Accounts and Funds in the following order of
priority:
first, from the U.S. Distribution Suspense Fund;
then, from the U.S. Extraordinary Distribution
Account (using Available Amounts only);
then, from the PIC Expense Fund; and
then, from the U.S. Mandatory Redemption Account
(using Available Amounts only).
The Trustee shall transfer all amounts available in the foregoing
U.S. Accounts or Funds in accordance with the priorities set
forth in the preceding sentence before transferring any amounts
from any other U.S. Account or Fund with a subsequent priority as
set forth in such preceding sentence.
(e) If, following the transfers to the Debt Service
Reserve Fund provided for in Section 4.5(d), a Debt Service
Reserve Deficiency still exists, the Trustee shall give notice to
PIC and the International Collateral Agent that an International
Redemption Event has occurred, which notice shall be in writing
and shall state the amount of the existing Debt Service Reserve
Deficiency. Upon receipt of such notice, the International
Collateral Agent shall effect a redemption or partial redemption
of the Other International Notes by transferring from the
International Accounts and Funds to the U.S. Project Account (as
required in Section 4.2(a)(i) and in the order of priority set
forth in Section 4.3(c)(ii)) an amount equal to the lesser of (A)
the amounts then on deposit in the International Accounts and
Funds, (B) the outstanding balance of the Other International
Notes (after giving effect to all redemptions thereof required to
be made on such date pursuant to Sections 4.3(c)(i) and 4.4(d)
and (C) the amount of such Debt Service Reserve Deficiency. Upon
deposit in the U.S. Project Account, such monies shall be
transferred from the U.S. Project Account to the Debt Service
Reserve Fund by the Trustee.
(f) Any reference in this Indenture to the balance of
the Debt Service Reserve Fund or the amount of monies on deposit
therein shall be deemed to include the aggregate amount available
to be drawn by the Trustee under all Letters of Credit then in
the possession of the Trustee and in full force and effect. Any
provision in this Indenture instructing or authorizing the
transfer of monies from the Debt Service Reserve Fund shall be
deemed to instruct or authorize the Trustee to draw upon any
Letter of Credit, and to transfer the proceeds therefrom, in the
same manner and to the same extent as the Trustee would otherwise
draw on cash or Permitted Investments on deposit in the Debt
Service Reserve Fund, provided that all monies on deposit in the
Debt Service Reserve Fund in the form of cash or Permitted
Investments shall be exhausted before drawing upon any Letter of
Credit.
(g) If thirty (30) days prior to the expiration of any
Letter of Credit delivered in respect of the Debt Service Reserve
Requirement, such Letter of Credit has not been renewed, extended
or replaced, the Trustee shall make a drawing thereunder in an
amount equal to the lesser of (i) the excess, if any, of (A) the
Debt Service Reserve Requirement then in effect over (B) the sum
of the undrawn face amount of all other Letters of Credit, if
any, and the amount of monies then on deposit in the Debt Service
Reserve Fund and (ii) the maximum amount available to be drawn
under such Letter of Credit. The proceeds of such drawing shall
be deposited in the Debt Service Reserve Fund to be applied in
accordance with this Section.
SECTION 4.6 PIC Expense Fund.
(a) All monies from time to time held on deposit in
the PIC Expense Fund shall, except as otherwise provided in this
Article, be transferred to PIC on each Monthly Distribution Date
in an amount equal to, and for application towards, all
reasonable accrued and unpaid costs and expenses incurred by or
on behalf of Panda Funding, PIC or any PIC Entity in connection
with the management of Panda Funding, PIC or any PIC Entity and
general and administrative expenses of Panda Funding, PIC or any
PIC Entity (including the costs of complying with Section 13 or
15(d) of the Exchange Act) through such Monthly Distribution Date
plus any portion of the Annual Letter of Credit Fee that is due
and payable or past due on such Monthly Distribution Date, to the
extent distributions were not previously made to PIC from the PIC
Expense Fund for such costs, expenses and fees.
(b) PIC shall be entitled to receive transfers in
accordance with paragraph (a) of this Section from the PIC
Expense Fund on any Monthly Distribution Date solely to pay any
amounts specified in paragraph (a) of this Section, and the
Trustee shall on the applicable Monthly Distribution Date
transfer monies in the PIC Expense Fund as so directed by PIC
upon the receipt of an Officer's Certificate of PIC at least two
Business Days prior to such Monthly Distribution Date stating the
amount of all such costs, expenses and fees specified in
paragraph (a) of this Section.
(c) Contemporaneously with the delivery of the initial
PIC Note on the date the initial series of Bonds is issued, PIC
shall deliver to the Trustee for deposit in the PIC Expense Fund
$300,000, which shall constitute the PIC Expenses Amount for the
remainder of calendar year 1996.
SECTION 4.7 Distribution Suspense Funds. In
addition to such other applications as may be provided in this
Indenture for funds on deposit in the Distribution Suspense
Funds:
(a) All monies from time to time on deposit in the
U.S. and International Distribution Suspense Funds shall be
applied solely (i) as provided in paragraph (b) of this Section
and (ii) as otherwise expressly provided in this Article;
(b) On each Monthly Distribution Date,
(i) the Trustee shall, to the extent then
available in the U.S. Distribution Suspense Fund after
any transfers to the U.S. Distribution Suspense Fund
pursuant to Section 4.2 and from the U.S. Distribution
Suspense Fund pursuant to Sections 4.3(b), 4.4(c) and
4.5(d) required to be made on such Monthly Distribution
Date, transfer monies from the U.S. Distribution
Suspense Fund to the U.S. Distribution Fund in the
amount set forth in a Distribution Certificate as being
available for distribution, provided that no such
transfer to the U.S. Distribution Fund shall be made
unless the conditions of Section 7.15 are fully
complied with; and
(ii) the International Collateral Agent shall, to
the extent then available in the International
Distribution Suspense Fund after any transfers to the
International Distribution Suspense Fund pursuant to
Section 4.2 and from the International Distribution
Suspense Fund pursuant to Sections 4.3(c), 4.4(d) and
4.5(e) required to be made on such Monthly Distribution
Date, transfer monies from the International
Distribution Suspense Fund to the International
Distribution Fund in the amount set forth in a
Distribution Certificate as being available for
distribution, provided that no such transfer to the
International Distribution Fund shall be made unless
the conditions of Section 7.15 are fully complied with.
(c) The U.S. Distribution Fund shall be in the name
and sole control of PIC, and the International Distribution Fund
shall be in the name and sole control of the PIC International
Entities. In the event there is more than one PIC International
Entity, each such entity shall be entitled to monies in the
International Distribution Fund in proportion to its interest in
the International Accounts and Funds. None of the Trustee, the
International Collateral Agent, Panda Funding or any Holder of
Bonds shall have any interest in or right to monies on deposit in
the U.S. and International Distribution Funds.
SECTION 4.8 Mandatory Redemption Accounts.
(a) Subject to Section 4.8(b), PIC shall ensure that:
(i) all proceeds of any distributions received by
PIC, any PIC U.S. Entity or any Person on behalf of PIC
or any PIC U.S. Entity in excess of $2,000,000 in the
aggregate during any calendar year (net of related
unreimbursed reasonable costs and expenses which are
attributable to or incurred by PIC or any PIC U.S.
Entity) that may legally be distributed or paid to PIC
or any PIC U.S. Entity, or to any Person on behalf of
PIC or any PIC U.S. Entity, without contravention of
any Project Agreement, from (A) the sale or disposition
of any of the Collateral, any U.S. Project or portion
thereof, or any direct or indirect interest of PIC, any
PIC U.S. Entity or any U.S. Project Entity in any U.S.
Project or (B) any event of casualty, loss or
condemnation with respect to any U.S. Project (each, a
"U.S. Mandatory Redemption Event") shall promptly after
receipt be deposited by the Trustee in the U.S.
Mandatory Redemption Account; and
(ii) all proceeds of any distributions received by
any PIC International Entity or any Person on behalf of
any PIC International Entity in excess of $2,000,000 in
the aggregate during any calendar year (net of related
unreimbursed reasonable costs and expenses which are
attributable to or incurred by any PIC International
Entity) that may legally be distributed or paid to any
PIC International Entity, or to any Person on behalf of
any PIC International Entity, without contravention of
any Project Agreement, from (A) the sale or disposition
of any Non-U.S. Project or portion thereof, or any
direct or indirect interest of any PIC International
Entity or any International Project Entity in any
Non-U.S. Project or (B) any event of casualty, loss or
condemnation with respect to any Non-U.S. Project
(each, an "International Mandatory Redemption Event")
shall promptly after receipt be deposited by the
International Collateral Agent in the International
Mandatory Redemption Account.
(b) Proceeds from any distributions attributable to a
Mandatory Redemption Event shall not be deposited in the U.S.
Mandatory Redemption Account or the International Mandatory
Redemption Account, as the case may be, if (A) PIC provides an
Officer's Certificate to the Trustee (supported by a certificate
from the Consolidating Engineer substantially in the form of the
certificate required by Section 4.9(c)) stating that such
Mandatory Redemption Event (without giving effect to any
redemption that would be otherwise required in respect thereof)
would not result in either the projected PIC Debt Service
Coverage Ratio being less than 1.7 to 1.0 or the projected
Consolidated Debt Service Coverage Ratio (if then applicable)
being less than 1.25 to 1.0, in each case for each Future Ratio
Determination Period and (B) the rating of the Bonds in effect
immediately prior to the applicable Mandatory Redemption Event is
Reaffirmed. Notwithstanding the foregoing, the applicable
Consolidated Debt Service Coverage Ratio, for purposes of
determining whether amounts are to be deposited in the Mandatory
Redemption Accounts or for any other purpose under the Indenture,
need not be satisfied at any time that the Company holds Project
Interests in more than four Projects.
(c) (i) If on any Monthly Distribution Date, after
giving effect to any transfers required to be made from
the Mandatory Redemption Accounts on such Monthly
Distribution Date pursuant to Section 4.3(b), 4.3(c),
4.4(c), 4.4(d), 4.5(d) or 4.5(e), the U.S. Mandatory
Redemption Account or the International Mandatory
Redemption Account contains any amount of monies, the
Trustee shall give notice to PIC and the International
Collateral Agent, and the International Collateral
Agent shall give notice to PIC and the Trustee, as the
case may be, of the amount of monies therein.
(ii) If on any Monthly Distribution Date, after
giving effect to any transfers required to be made from
the Mandatory Redemption Accounts on such Monthly
Distribution Date pursuant to Section 4.3(b), 4.3(c),
4.4(c), 4.4(d), 4.5(d) or 4.5(e), there is an aggregate
amount of monies in excess of $2,000,000 in the U.S.
and International Mandatory Redemption Accounts, then
PIC shall deliver (A) a Company Order to the Trustee in
respect of a mandatory redemption pursuant to Section
8.2 stating the amount of the Bonds to be redeemed
(which shall be the amount necessary in order to
restore the coverage ratios referred to in Section
4.8(b) to the amounts set forth therein and to Reaffirm
the rating of the Bonds as referred to in Section
4.8(b), or, if such ratios would not be so restored and
rating Reaffirmed by application of the total amount of
monies in the U.S. and International Mandatory
Redemption Account, such total amount) and (B) if there
are any monies in the International Mandatory
Redemption Account, an Officer's Certificate to the
International Collateral Agent stating the amount of
the PIC International Entity Notes required to be
redeemed (which shall be in the amount necessary,
taking into account any monies then in the U.S.
Mandatory Redemption Account, to effect the transfer
into the U.S. Mandatory Redemption Account of
additional monies to provide the funds necessary to
comply with the Company Order). If, at the time the
Officer's Certificate referred to in this Section
4.8(c)(ii) is provided to the Trustee, there are monies
in both the U.S. and International Mandatory Redemption
Accounts, the certificate shall require the redemption
of an amount of PIC International Entity Notes equal to
the dollar amount of the Bonds to be redeemed as
provided in the Company Order multiplied by a fraction,
the numerator of which is the amount of monies in the
International Mandatory Redemption Account and the
denominator of which is the total of the monies in both
the U.S. and International Mandatory Redemption
Accounts.
(d) All monies from time to time on deposit in the
U.S. or International Mandatory Redemption Accounts shall be
applied solely (i) as provided in this Section 4.8(c) and (ii) as
otherwise expressly provided in this Article.
(i) Upon receipt of the Officer's Certificate of
PIC referred to in clause (ii) of Section 4.8(c), the
International Collateral Agent shall require that an
amount of PIC International Entity Notes equal to the
amount specified in such Officer's Certificate be
redeemed. Upon such redemption, the International
Collateral Agent shall transfer an amount equal to the
amount of such redemption from the International
Mandatory Redemption Account to the U.S. Mandatory
Redemption Account.
(ii) Upon receipt of the Company Order and after
any transfer required to be made to the U.S. Mandatory
Redemption Account on such date pursuant to clause (i)
of this Section 4.8(d) has been made, the Trustee shall
apply an amount of monies from the U.S. Mandatory
Redemption Account, as stated in the Company Order, as
a mandatory redemption of the Bonds at a redemption
price equal to 100% of the principal amount of the
Bonds to be redeemed plus accrued interest thereon to
the date of such redemption plus, if so provided in a
Series Supplemental Indenture under which any of the
Bonds to be redeemed were issued, a premium in respect
of the Bonds of such series. Such redemption shall
constitute a redemption of an equivalent aggregate
principal amount of the PIC Notes by PIC.
(iii) If, on any Monthly Distribution Date,
after giving effect to any transfers required to be
made out of the Mandatory Redemption Accounts on such
Monthly Distribution Date pursuant to Sections 4.3(b),
4.3(c), 4.4(c), 4.4(d), 4.5(d) and 4.5(e) and after
deducting any amounts required to effect a mandatory
redemption as specified in a Company Order but not yet
applied in accordance therewith, the sum of the
balances in the Mandatory Redemption Accounts is equal
to or less than $2,000,000 (or exceeds $2,000,000 due
only to funds on deposit therein not needed to comply
with such Company Order pursuant to clause (ii) of
Section 4.8(c)) and
(A) transfers to the Distribution Funds
would be permitted pursuant to Section 7.15, PIC
shall be entitled to direct the Trustee and the
International Collateral Agent, as the case may
be, to transfer such balances in the Mandatory
Redemption Accounts to the appropriate
Distribution Suspense Fund; or
(B) transfers to the Distribution Funds
would not be permitted pursuant to Section 7.15,
the Trustee and the International Collateral
Agent, as the case may be, shall hold such
balances in the Mandatory Redemption Accounts
(unless subsequently required to be transferred
pursuant to Sections 4.3(b), 4.3(c), 4.4(c),
4.4(d), 4.5(d) or 4.5(e)) until the next Monthly
Distribution Date on which transfers to the
Distribution Funds would be permitted pursuant to
Section 7.15, at which time PIC shall be entitled
to direct the Trustee and the International
Collateral Agent, as the case may be, to transfer
such balances to the appropriate Distribution
Suspense Fund.
SECTION 4.9 The Extraordinary Distribution Accounts.
(a) PIC shall ensure that (i) all Extraordinary
Financial Distributions relating to U.S. Projects shall promptly
after receipt by or on behalf of PIC or any PIC U.S. Entity be
deposited with the Trustee in the U.S. Extraordinary Distribution
Account and (ii) all Extraordinary Financial Distributions
relating to Non-U.S. Projects shall promptly after receipt by or
on behalf of any PIC International Entity be deposited with the
International Collateral Agent in the International Extraordinary
Distribution Account.
(b) All monies from time to time on deposit in the
U.S. and International Extraordinary Distribution Accounts shall
be applied solely (i) as provided in this Section and (ii) as
otherwise expressly provided in this Article.
(c) If, on any Monthly Distribution Date, after giving
effect to any transfers required to be made out of the
Extraordinary Distribution Accounts on such Monthly Distribution
Date pursuant to Section 4.3(b), 4.3(c), 4.4(c), 4.4(d), 4.5(d)
or 4.5(e), any amounts remain on deposit in either Extraordinary
Distribution Account and transfers to the Distribution Funds
would be permitted pursuant to Section 7.15, PIC shall be
entitled to direct the Trustee to transfer 100% of the monies on
deposit in the U.S. Extraordinary Distribution Account to the
U.S. Distribution Suspense Fund and PIC, on behalf of the PIC
International Entities, shall be entitled to direct the
International Collateral Agent to transfer 100% of the monies on
deposit in the International Extraordinary Distribution Account
to the International Distribution Suspense Fund upon receipt by
the Trustee, as the case may be, at least two Business Days prior
to such Monthly Distribution Date, of an Officer's Certificate
(with supporting calculations attached to such Officer's
Certificate) from PIC stating that, as of such Monthly
Distribution Date (after giving effect to any such proposed
transfer), (i) the conditions contained in clauses (i) through
(v) of Section 7.15(a) have been satisfied and (ii) the projected
PIC Debt Service Coverage Ratio and the projected Consolidated
Debt Service Coverage Ratio (if then applicable) equal or exceed
1.7 to 1.0 and 1.25 to 1.0, respectively, in each case for each
Future Ratio Determination Period. In addition, if the amount
on deposit in either Extraordinary Distribution Account is equal
to or greater than $5,000,000 on any Monthly Distribution Date
(after giving effect to any transfers required to be made out of
the Extraordinary Distribution Accounts on such Monthly
Distribution Date pursuant to Section 4.3(b), 4.3(c), 4.4(c),
4.4(d), 4.5(d) or 4.5(e)), no transfer to the appropriate
Distribution Suspense Fund pursuant this Section 4.9(c) shall be
made unless the Consolidating Engineer provides a certificate to
the Trustee affirming that the following requirements in clauses
(i) and (ii) of this Section 4.9(c) have been met:
(i) that the Consolidating Engineer has reviewed
and confirmed, in accordance with Section 4.14, the
reasonableness of the projections prepared by PIC of
Cash Available for Distribution and Cash Available from
Operations (if the projected Consolidated Debt Service
Coverage Ratio is then applicable) after giving effect
to the event or events which caused such Extraordinary
Financial Distribution which occurred on or prior to
such Monthly Distribution Date; and
(ii) that based on such review, the Consolidating
Engineer confirms the reasonableness of the
calculations and the assumptions underlying the
calculations supporting the certifications made by PIC
as set forth in clauses (iv) and (v) of Section 7.15
and in clause (ii) of the immediately preceding
sentence.
(d) On the Monthly Distribution Date following timely
receipt of the certificate or certificates complying with the
requirements of Section 4.9(c), PIC shall direct the Trustee to
transfer all amounts on deposit in the U.S. Extraordinary
Distribution Account to the U.S. Distribution Suspense Fund, and
PIC, on behalf of the PIC International Entities, shall direct
the International Collateral Agent to transfer all amounts on
deposit in the International Extraordinary Distribution Account
to the International Distribution Suspense Fund.
(e) If any balance in excess of $2,000,000 remains on
deposit in the U.S. Extraordinary Distribution Account for more
than 35 days (a " U.S. Unapplied Extraordinary Balance"), then
PIC shall, prior to the next Monthly Distribution Date, deliver
an Officer's Certificate to the Trustee setting forth its
election to either:
(i) prepay the PIC Notes (and cause the Trustee
to redeem Bonds in accordance with Article VIII),
whereupon the Trustee shall, pursuant to a Company
Order, withdraw such monies from the U.S. Extraordinary
Distribution Account in order to make a redemption of
such Bonds in a manner consistent with the provisions
of Article VIII, which redemption shall be deemed a
prepayment of the PIC Notes by PIC; or
(ii) have the amount of such U.S. Unapplied
Extraordinary Balance (after giving effect to any
transfers required to be made out of the U.S.
Extraordinary Distribution Account pursuant to Section
4.3(b), 4.4(c) or 4.5(d)) segregated and held in the
U.S. Extraordinary Distribution Account until the next
Monthly Distribution Date, if any, with respect to
which PIC is able to deliver a certificate, and, if
applicable, the Consolidating Engineer is able to
deliver a certificate, complying with the requirements
of Section 4.9(c), whereupon on such Monthly
Distribution Date the Trustee shall transfer such U.S.
Unapplied Extraordinary Balance to the U.S.
Distribution Suspense Fund.
(f) If any balance in excess of $2,000,000 remains on
deposit in the International Extraordinary Distribution Account
for more than 35 days (an "International Unapplied Extraordinary
Balance"), then PIC shall, prior to the next Monthly Distribution
Date thereafter, deliver an Officer's Certificate to the
International Collateral Agent setting forth its intention to
either:
(i) instruct one or more PIC International
Entities to redeem or partially redeem the PIC
International Entity Notes for the purpose of prepaying
the PIC Notes (and redemption of the Bonds in
accordance with Article VIII), whereupon the
International Collateral Agent shall, pursuant to a
Company Order, withdraw such monies from the
International Extraordinary Distribution Account in
order to make a prepayment to PIC, which monies shall
be transferred to the Trustee in order to make a
redemption of such Bonds in a manner consistent with
the provisions of Article VIII, which redemption shall
be deemed a prepayment of the PIC Notes by PIC; or
(ii) instruct one or more PIC International
Entities to have the amount of such International
Unapplied Extraordinary Balance (after giving effect to
any transfers required to be made out of the
International Extraordinary Distribution Account on
such Monthly Distribution Date pursuant to Section
4.3(c), 4.4(d) or 4.5(e)) segregated and held in the
International Extraordinary Distribution Account until
the next Monthly Distribution Date, if any, with
respect to which PIC is able to deliver a certificate
and, if applicable, the Consolidating Engineer is able
to deliver a certificate, complying with the
requirements of Section 4.9(c), whereupon on such
Monthly Distribution Date the International Collateral
Agent shall transfer such International Unapplied
Extraordinary Balance or portion thereof to the
International Distribution Suspense Fund.
(g) If, on any Monthly Distribution Date, after giving
effect to any transfers required to be made out of the
Extraordinary Distribution Accounts on such Monthly Distribution
Date pursuant to Section 4.3(b), 4.3(c), 4.4(c), 4.4(d), 4.5(d),
or 4.5(e) the Unapplied Extraordinary Balance in either
Extraordinary Distribution Account is equal to or less than
$2,000,000 and transfers to the Distribution Funds would not be
permitted pursuant to Section 7.15, such Unapplied Extraordinary
Balance shall be held in such Extraordinary Distribution Account
until the next Monthly Distribution Date, if any, on which
transfers to the Distributions Funds would be permitted pursuant
to Section 7.15, whereupon the Trustee shall transfer any such
U.S. Unapplied Extraordinary Balance, if any, to the U.S.
Distribution Suspense Fund, and the International Collateral
Agent shall transfer any such International Unapplied
Extraordinary Balance, if any, to the International Distribution
Suspense Fund.
SECTION 4.10 Investment of U.S. and International
Accounts and Funds.
(a) Monies held in any Account or Fund created by or
pursuant to this Indenture shall be invested and reinvested by
the Trustee or International Collateral Agent, as the case may
be, as directed in writing by PIC or any PIC International
Entity, as the case may be, in Permitted Investments with a
maturity of one year or less from, or which allow unrestricted
redemption at the option of the holder thereof within one year
of, the date of investment or reinvestment at the written
direction of an Authorized Representative of PIC or any PIC
International Entity; provided, however, that at any time when an
Event of Default shall have occurred and be continuing, the
Trustee and the International Collateral Agent, as the case may
be, shall only select investments to be made by the Trustee or
International Collateral Agent, as the case may be, in a manner
such that, in the reasonable opinion of PIC or any PIC
International Entity, investments shall mature in such amounts
and have maturity dates or be subject to redemption at the option
of the holder thereof on or prior to maturity as needed for the
purposes of the monies so invested.
(b) In the event any such investments are redeemed
prior to the maturity thereof, the Trustee or the International
Collateral Agent, as the case may be, shall not be liable for any
penalties relating thereto.
(c) Any earnings received from such investments shall
be deposited in the U.S. Project Account if earned on amounts on
deposit in the U.S. Accounts and Funds, and in the International
Project Account if earned on amounts on deposit in the
International Accounts and Funds and treated as Project
Distributions; and any loss shall be charged to the applicable
Account or Fund. Neither the Trustee nor the International
Collateral Agent shall be liable for any such loss (including
loss of principal), except to the extent caused by the gross
negligence or willful misconduct of the Trustee or International
Collateral Agent, respectively.
(d) Monies of any Account or Fund that are invested in
a Permitted Investment shall be deemed, for all purposes of this
Indenture, to be on deposit in such Account or Fund in an amount
equal to the lesser of (i) the face amount of such Permitted
Investment and (ii) the purchase price thereof. Accrued and
unpaid interest or profit in any Permitted Investment shall not
be deemed to be on deposit in any Account or Fund until such
interest or profit is actually paid and received by the Trustee
or International Collateral Agent, as the case may be, whereupon
such interest or profit shall be deposited in the appropriate
Project Account.
(e) PIC hereby expressly authorizes the Trustee, and
PIC on behalf of all PIC International Entities, expressly
authorizes the International Collateral Agent, to sell or make
any transfer or withdrawal required or contemplated by this
Agreement or the Collateral Agency Agreement and neither the
Trustee, the International Collateral Agent, nor any Secured
Party shall have any liability by reason of any loss suffered
upon the sale or disposition of an investment or on account of
the fact that the proceeds realized upon any such sale or
disposition were less than might otherwise have been obtainable,
except to the extent caused by the gross negligence or willful
misconduct of the Trustee or International Collateral Agent,
respectively.
(f) Without limitation of the preceding sentence, if
the Trustee or International Collateral Agent shall receive
instructions from an Authorized Representative of PIC or any PIC
International Entity, respectively, regarding the sale or other
disposition of investments, then the Trustee or International
Collateral Agent, as the case may be, shall make such sales and
dispositions in accordance with such instructions before making
any other necessary sales or dispositions.
SECTION 4.11 Resignation and Removal of Consolidating
Engineer; Appointment of Successor; Payment of Fees and Expenses.
(a) In case at any time any Consolidating Engineer
shall fail to be independent (within the meaning specified in the
definition of "Eligible Successor" in Appendix A) from PIC or any
Affiliates of PIC or shall become incapable of acting or
otherwise fails to perform the functions of the Consolidating
Engineer in the manner contemplated hereunder and under the other
Transaction Documents or shall be adjudged bankrupt or insolvent
or a receiver is appointed, or any public officer shall take
charge or control of such Consolidating Engineer or its property
or its affairs for the purpose of rehabilitation, conservation or
liquidation, then, in any such case, the Trustee may (and shall,
if requested to do so by the Holders of a majority of the
aggregate principal amount of all series of Outstanding Bonds,
considered as one class) remove the Consolidating Engineer by
written instrument, one copy of which instrument shall be
delivered to the Consolidating Engineer and one copy of which
instrument shall be delivered to PIC.
(b) Subject to the proviso below, PIC may at any time
remove the Consolidating Engineer by delivering written notice of
such removal to a Responsible Officer of the Trustee and to the
Consolidating Engineer; provided, that PIC may not remove any
Consolidating Engineer if such Consolidating Engineer has served
as the Consolidating Engineer for a period of less than twelve
(12) months immediately preceding such proposed removal, unless
such Consolidating Engineer' s removal is due to its failure to
be independent (within the meaning specified in Appendix A in the
definition of "Eligible Successor") from PIC or any Affiliate of
PIC or such Consolidating Engineer shall become incapable of
acting or otherwise fails to perform the functions of the
Consolidating Engineer in the manner contemplated under this
Indenture and under the other Transaction Documents or shall be
adjudged bankrupt or insolvent or a receiver is appointed, or any
public officer shall take charge or control of such Consolidating
Engineer or its property or its affairs for the purpose of
rehabilitation, conservation or liquidation. Notwithstanding the
foregoing, PIC may remove the entity that is the Consolidating
Engineer on the Initial Closing Date at any time, provided that
if such entity is ever reinstated as the Consolidating Engineer,
the proviso in the immediately preceding sentence shall apply.
Any removal of a Consolidating Engineer by PIC pursuant to this
Section 4.11(b) shall not be effective until the applicable
Eligible Successor accepts its appointment in accordance with
Section 4.11(d).
(c) Upon giving or receiving written notice of the
removal or resignation of any Consolidating Engineer, PIC shall
promptly appoint a successor from among the applicable Eligible
Successors by written instrument executed by order of PIC, one
copy of which shall be delivered to the applicable Eligible
Successor, and one copy of which shall be delivered to the
Trustee. If no successor is so appointed within thirty (30) days
after the giving or receipt of such notice of removal or
resignation, the Trustee shall appoint a successor from among the
applicable Eligible Successors.
(d) Any successor Consolidating Engineer appointed
under this Section shall execute, acknowledge and deliver to
Panda Funding, PIC and the Trustee an instrument accepting such
appointment. Such instrument shall include a statement that such
Consolidating Engineer is a nationally recognized engineering
firm or a nationally recognized consulting firm with expertise in
engineering and financial analysis and that it is independent
(within the meaning specified in the definition of "Eligible
Successor" in Appendix A) from PIC and any Affiliates of PIC.
Such Consolidating Engineer shall further state in such
instrument that, if at the time of its appointment it is
currently providing any services to PIC or any Affiliate thereof
and may continue to do so during the course of the preparation of
any report or certificate contemplated hereunder or under any of
the other Transaction Documents, the performance of such services
does not compromise its ability to provide engineering and
financial analysis of the Projects in the Project Portfolio and
the Cash Available from Operations and the Cash Available for
Distribution relating thereto.
(e) To the extent not provided for out of the PIC
Expense Fund, for so long as any of the Bonds shall remain
Outstanding, PIC covenants and agrees to pay to the Consolidating
Engineer compensation for its services, and reimbursement of its
expenses incurred in connection with such services, in accordance
with such arrangements as may be agreed to by PIC with the
Consolidating Engineer, and neither the Trustee nor any Holder
shall be liable therefor. All such compensation and expense
reimbursement payments shall constitute reasonable expenses
related to the management of PIC.
(f) The Trustee shall not be liable for any action
taken, suffered or omitted by it in good faith with respect to
the removal or appointment of any Consolidating Engineer or
Eligible Successor hereunder.
SECTION 4.12 The U.S. Accounts and Funds as
Collateral: Trustee as Agent of the Collateral Agent.
(a) All monies held in the U.S. Accounts and Funds
shall be subject to the Lien of the Security Documents and the
Trustee shall hold all such monies in the U.S. Accounts and Funds
solely in its capacity as the Trustee as agent for the benefit of
the Collateral Agent. All monies held in the International
Accounts and Funds shall be subject to the lien provided for in
the agreements pursuant to which the PIC International Entity
Loans are made and the Trustee shall hold all such monies in the
International Accounts and Funds solely in its capacity as the
International Collateral Agent. If there is more than one PIC
International Entity, each such entity shall retain an interest
in the International Accounts and Funds in proportion to its
deposits into such accounts, minus payments of principal and
interest on any PIC International Entity Notes and Other
International Notes on which it is the borrower and its share of
expenses of the International Collateral Agent, as if there were
a separate accounting. If any PIC International Entity has a
deficit in its notional separate account, the deficit will be
treated as a loan from the other PIC International Entities to
the PIC International Entity to be repaid out of the first
available earnings released to such PIC International Entity from
the International Distribution Fund and to accrue interest until
repaid at the minimum rate permitted under the Code.
(b) If an Event of Default shall have occurred and be
continuing, then, as and to the extent contemplated pursuant to
the Collateral Agency Agreement and in addition to the remedies
provided in Article IX, the Trustee may (but shall be under no
obligation to) or, if the Trustee is so directed in writing by
the Collateral Agent, shall (i) hold all monies on deposit in the
U.S. Accounts and Funds as collateral security for the Secured
Parties or (ii) as and to the extent contemplated in the
Collateral Agency Agreement, apply all or any of such monies in
the manner and in the order of priority set forth therein.
SECTION 4.13 Disposition of Accounts and Funds Upon
Retirement of Bonds and PIC International Entity Notes.
(a) After payment in full of (i) the principal of and
premium, if any, and interest on all the Bonds Outstanding and
(ii) all fees, charges and expenses of the Trustee and all other
amounts required to be paid hereunder, all amounts remaining in
all U.S. Accounts and Funds established in Section 4.1(a) shall
be paid to PIC.
(b) After payment in full of (i) the principal of and
premium, if any, and interest on all the PIC International Entity
Notes outstanding and (ii) all fees, charges and expenses of the
International Collateral Agent and all other amounts required to
be paid hereunder, and after payment of all amounts under
Section 4.13(a) has been made, all amounts remaining in the
International Accounts and Funds established in Section 4.1(b)
shall be paid to the PIC International Entities.
SECTION 4.14 Procedures for Review by Consolidating
Engineer of Projections. Whenever this Indenture provides for
any review or determination to be made by the Consolidating
Engineer, such review shall be based upon such investigation and
assumptions that the Consolidating Engineer determines is
reasonable under the circumstances. In addition, the
Consolidating Engineer shall be entitled to rely on reports,
certificates and other information supplied to it by or on behalf
of any Project Engineer.
ARTICLE V
IMMUNITY OF INCORPORATORS, STOCKHOLDERS
OFFICERS AND DIRECTORS
SECTION 5.1 Liability of Panda Funding and PIC
Solely Corporate. No recourse shall be had for the payment of
the principal of (or premium, if any) or the interest on any
Bond, or any part thereof, or for any claim based thereon or
otherwise in respect thereof, or of the indebtedness represented
thereby, or upon any obligation, covenant or agreement of this
Indenture or any other Transaction Document, against any
Affiliate of Panda Funding (including any PIC Entity, PEC or PEI,
but excluding PIC) or any incorporator, partner, stockholder,
agent, officer, employee or director, as such, past, present or
future, of Panda Funding, PIC or of any Affiliate of Panda
Funding or PIC (including any PIC Entity, PEC or PEI) or of any
predecessor or successor (either directly or through Panda
Funding, PIC or any such Affiliate of Panda Funding or PIC or any
such predecessor or successor) whether by virtue of any
constitutional provision, statute or rule of law or by the
enforcement of any assessment or penalty or otherwise; it being
expressly agreed and understood that the sources of payment on
the Bonds are limited as provided in Section 2.15 and that Panda
Funding's and PIC's obligations under this Indenture, the Bonds,
the PIC Guaranty, the PIC Notes and the other Transaction
Documents are solely corporate obligations of Panda Funding and
PIC, as the case may be, and that no personal liability
whatsoever shall attach to, or be incurred by, any Affiliate of
Panda Funding (including any PIC Entity, PEC or PEI, but
excluding PIC) or any incorporator, partner, stockholder,
officer, agent, employee or director, past, present or future, of
Panda Funding, PIC or of any Affiliate of Panda Funding or PIC
(including any PIC Entity, PEC or PEI) or of any such predecessor
or successor (either directly or indirectly through Panda
Funding, PIC or any such Affiliate or any such predecessor or
successor), because of the indebtedness hereby authorized or
under or by reason of any of the obligations, covenants, promises
or agreements contained in this Indenture, the Bonds, the PIC
Guaranty, the PIC Notes or any other Transaction Document or to
be implied herefrom or therefrom; and that any such personal
liability is hereby expressly waived and released as a condition
of, and as part of the consideration for, the execution of this
Indenture, the execution of the notation of the PIC Guaranty and
the issue of Bonds and no judgment for any deficiency upon the
obligations of Panda Funding or PIC contained in this Indenture,
the Bonds, the PIC Guaranty, the PIC Notes or any other
Transaction Documents, as the case may be, shall be obtainable by
the Holders, the Trustee or the Collateral Agent against any
Affiliate of Panda Funding (including any PIC Entity, PEC or PEI,
but excluding PIC) or any incorporator, partner, stockholder,
officer, agent, employee or director, past, present or future, of
Panda Funding, PIC or of any Affiliate of Panda Funding or PIC or
of any predecessor or successor of Panda Funding, PIC or any
Affiliate of Panda Funding or PIC; provided, however, that
nothing herein or in the Bonds contained shall be taken to
prevent the institution of proceedings against any Person solely
to the extent necessary to realize the benefit of the Collateral
granted hereunder or under the Security Documents; and provided,
further, however, that nothing in this Section shall relieve any
Person of its obligations under any Transaction Document to which
such Person is a party or limit or otherwise prejudice in any way
the right of the Holders, the Trustee or the Collateral Agent to
proceed against any such Person with respect to the enforcement
of such obligations.
ARTICLE VI
SATISFACTION AND DISCHARGE; DEFEASANCE
SECTION 6.1 Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further
effect (except as hereinafter expressly provided), and the
Trustee, at the expense of Panda Funding, shall execute
instruments in form and substance satisfactory to the Trustee and
Panda Funding acknowledging satisfaction and discharge of this
Indenture, when:
(a) either
(i) all Bonds theretofore authenticated and delivered
(other than (A) Bonds which have been destroyed, lost or
stolen and which have been replaced or paid as provided in
Section 2.10 and (B) Bonds deemed to have been paid in
accordance with Section 6.3(a)) have been delivered to the
Trustee for cancellation; or
(ii) all Bonds not theretofore delivered to the Trustee
for cancellation shall be deemed to have been paid in
accordance with Section 6.3(a);
(b) all other sums due and payable hereunder have been
paid; and
(c) Panda Funding has delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel, each
stating that all conditions precedent herein provided for
relating to the satisfaction and discharge of this Indenture
have been complied with.
Upon satisfaction of the aforesaid conditions, the
Trustee shall, upon receipt of a Company Request, acknowledge in
writing the satisfaction and discharge of this Indenture and take
all other action reasonably requested by Panda Funding to
evidence the termination of any and all Liens created by or with
respect to this Indenture.
Notwithstanding the satisfaction and discharge of this
Indenture as aforesaid, if at the time of such satisfaction and
discharge any Bonds are deemed to have been paid in accordance
with Section 6.3(a), but have not actually been fully paid, then
the rights and obligations of Panda Funding, PIC and the Trustee
under this Indenture and, with respect to PIC, the PIC Guaranty,
shall survive to the extent provided in such Section until all
such Bonds have actually been repaid in full; provided, however,
that the obligations of PIC and Panda Funding pursuant to
Section 10.5 shall survive the satisfaction and discharge of this
Indenture.
Upon satisfaction and discharge of this Indenture as
provided in this Section, the Trustee shall (i) assign, transfer
and turn over to or upon the order of PIC, any and all money,
securities and other property then held by the Trustee for the
benefit of the Holders, and the International Collateral Agent
shall assign, transfer and turn over to or upon the order of any
PIC International Entity, any and all money, securities and other
property then held by the International Collateral Agent for the
benefit of PIC, other than money and U.S. Government Obligations
deposited with the Trustee pursuant to Section 6.3(a)(v) and
interest and other amounts earned or received on the U.S.
Government Obligations referred to in Section 6.3(a)(v)(B), and
(ii) deliver to the issuers thereof any Letters of Credit
previously delivered to the Trustee.
SECTION 6.2 Application of Trust Money.
(a) All money or U.S. Government Obligations
deposited with the Trustee pursuant to Section 6.3 and all money
received by the Trustee in respect of U.S. Government Obligations
deposited with the Trustee pursuant to Section 6.3, shall be held
in trust and applied by it, in accordance with the provisions of
the Bonds and this Indenture, to the payment, either directly or
through any Paying Agent (including Panda Funding acting as its
own Paying Agent), to the Holders of the Bonds for whose payment
such money has been deposited with or received by the Trustee of
all sums due and to become due thereon for principal (and
premium, if any) and interest, including any mandatory sinking
fund payments or analogous payments as contemplated by
Section 6.3, but such money need not be segregated from other
monies except to the extent required by law.
(b) Panda Funding shall pay and shall indemnify
the Trustee against any tax, fee or other charge imposed on or
assessed against U.S. Government Obligations deposited pursuant
to Section 6.3 or the interest and principal received in respect
of such obligations other than any such tax, fee or other charge
payable by or on behalf of Holders.
(c) The Trustee shall deliver or pay to Panda
Funding from time to time upon Company Request any U.S.
Government Obligations or money held by it as provided in Section
6.3 which, in the opinion of a nationally recognized firm of
independent certified public accountants expressed in a written
certification thereof delivered to the Trustee, are then in
excess of the amount thereof which then would have been required
to be deposited for the purpose for which such U.S. Government
Obligations or money was deposited or received. This provision
shall not authorize the sale by the Trustee of any U.S.
Government Obligations held under this Indenture.
SECTION 6.3 Satisfaction, Discharge and Defeasance
of Bonds of any Series.
(a) Panda Funding and PIC shall be deemed to have paid
and discharged the entire indebtedness on all the Outstanding
Bonds of any series on the 123rd day after the date of the
deposit referred to in subparagraph (v) of this Section 6.3(a),
and each of the provisions of this Indenture and the PIC
Guaranty, as it relates to such Outstanding Bonds of such series,
shall no longer be in effect (and the Trustee, at the expense of
Panda Funding, shall at Company Request execute instruments in
form and substance satisfactory to the Trustee and Panda Funding
acknowledging the same), except as to:
(i) the rights of Holders of Bonds of such series to
receive, solely from the trust funds described in
subparagraph (v) of this Section, payment of the principal
of (and premium, if any) and each installment of principal
of (and premium, if any) or interest, if any, on the
Outstanding Bonds of such series on the Stated Maturity of
such principal or installment of principal or interest (to
and including the Redemption Date, if any, irrevocably
designated by Panda Funding pursuant to subparagraph (viii)
of this Section 6.3(a));
(ii) the rights and obligations of Panda Funding, PIC
and the Trustee under this Article and with respect to such
Bonds of such series under Sections 2.7, 2.8, 2.9, 2.10,
2.11, 2.12, 2.13 and 2.16 and, if Panda Funding shall have
irrevocably designated a Redemption Date pursuant to
subparagraph (viii) of this Section 6.3(a), Article VIII as
such Article applies to the redemption to be made on such
Redemption Date;
(iii) Panda Funding's and PIC's obligations with
respect to the Trustee under Section 10.5; and
(iv) the rights, powers, trusts and immunities of the
Trustee hereunder;
provided that, the following conditions shall have been
satisfied:
(v) Panda Funding irrevocably has deposited or caused
to be deposited (except as provided in Section 6.2(c)) with
the Trustee as trust funds in trust, specifically pledged as
security for and dedicated solely to the benefit of the
Holders of the Bonds of such series, (A) monies in an
amount, or (B) U.S. Government Obligations which through the
payment of interest and principal in respect thereof in
accordance with their terms will provide not later than the
due date of any payment, monies in an amount or (C) a
combination thereof, sufficient, in the opinion of a firm of
independent certified public accountants of recognized
national standing expressed in a written certification
thereof delivered to the Trustee, to pay when due the
principal of (and premium, if any) and each installment of
principal (and premium, if any) and interest, if any, on the
Outstanding Bonds of such series on each Stated Maturity of
such principal or installment of principal or interest (to
and including the Redemption Date, if any, irrevocably
designated by Panda Funding pursuant to subparagraph (viii)
of this Section 6.3(a));
(vi) no Event of Default or Default (including by
reason of such deposit) with respect to the Bonds of such
series shall have occurred and be continuing on the date of
such deposit or during the period ending on the 123rd day
after such date;
(vii) Panda Funding has delivered to the Trustee
(A) either (1) a ruling directed to the Trustee received
from the Internal Revenue Service to the effect that the
Holders will not recognize income, gain or loss for federal
income tax purposes as a result of Panda Funding's exercise
of its option under this Section and will be subject to
federal income tax on the same amount and in the same manner
and at the same times as would have been the case if such
option had not been exercised or (2) an Opinion of Counsel
(who may not be an employee of Panda Funding or any
Affiliate thereof) to the same effect as the ruling
described in clause (1) accompanied by a ruling to that
effect published by the Internal Revenue Service, unless
there has been a change in the applicable federal income tax
law since the date of this Indenture such that a ruling from
the Internal Revenue Service is no longer required and
(B) an Opinion of Counsel to the effect that (l) the
creation of the defeasance trust does not violate the
Investment Company Act of 1940, as amended, (2) after the
passage of 123 days following the deposit (except, with
respect to any trust funds for the account of any Holder who
may be deemed to be an "insider" for purposes of Title 11 of
the United States Code, after one year following the
deposit), the trust funds will not be subject to the effect
of Section 547 of the United States Bankruptcy Code or
Section 15 of the New York Debtor and Creditor Law in a case
commenced by or against Panda Funding under either such
statute, and either (x) the trust funds will no longer
remain the property of Panda Funding (and, therefore, will
not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting
creditors' rights generally) or (y) if a court were to rule
under any such law in any case or proceeding that the trust
funds remained property of Panda Funding, (I) assuming such
trust funds remained in the possession of the Trustee prior
to such court ruling to the extent not paid to Holders, the
Trustee will hold, for the benefit of the Holders, a valid
and perfected security interest in such trust funds that is
not avoidable in bankruptcy or otherwise except for the
effect of Section 552(b) of the United States Bankruptcy
Code on interest on the trust funds accruing after the
commencement of a case under such statute and (II) the
Holders will be entitled to receive adequate protection of
their interests in such trust funds if such trust funds are
used in such case or proceeding;
(viii) if Panda Funding has deposited or caused to
be deposited monies or U.S. Government Obligations (or a
combination thereof) to pay or discharge the principal of
(and premium, if any) and interest, if any, on the
Outstanding Bonds of a series to and including a Redemption
Date on which all of the Outstanding Bonds of such series
are eligible for optional redemption and on which all of the
Outstanding Bonds of such series are to be redeemed, such
Redemption Date shall be irrevocably designated by a Board
Resolution delivered to the Trustee on or prior to the date
of deposit of such monies or U.S. Government Obligations,
and such Board Resolution shall be accompanied by an
irrevocable Company Request that the Trustee give notice of
such redemption in the name and at the expense of Panda
Funding not less than 30 nor more than 60 days prior to such
Redemption Date in accordance with Section 8.4; and
(ix) Panda Funding has delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel, each
stating that all conditions precedent herein provided for
relating to the satisfaction and discharge of the Bonds of
such series have been complied with.
(b) If (x) each of the conditions set forth in
subparagraphs (v), (vi) and (viii) of Section 6.3(a) shall have
been satisfied with respect to the Outstanding Bonds of any
series (but the conditions set forth in subparagraphs (vii) and
(ix) thereof are not satisfied), (y) Panda Funding has delivered
to the Trustee an Opinion of Counsel to the effect that the
Holders of the Outstanding Bonds will not recognize any income,
gain, or loss for federal income tax purposes as a result of the
consequences specified in this Section 6.3(b) with respect to
such series of Bonds and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as
would have been the case if such consequences had not been
effected, and (z) Panda Funding has delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel, each stating
that all conditions precedent herein provided for which are
necessary to achieve the consequences specified in this
Section 6.3(b) with respect to such series of Bonds have been
complied with, then, effective upon the date of the deposit
referred to in subparagraph (v) of Section 6.3(a):
(i) with respect to the Bonds of such series, except
as otherwise expressly provided herein Panda Funding and PIC
shall be released from their covenants and other obligations
contained in Article IV, Article VII and Section 2.17 of
this Indenture, and all their covenants and obligations
under the other Transaction Documents, and may omit to
comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such covenant
or obligation, whether directly or indirectly, by reason of
any reference elsewhere herein to any such covenant or
obligation or by reason of any reference in any such
covenant or obligation to any other provision of this
Indenture or any other document, and any failure to comply
with any such covenant or obligation shall not constitute a
Default or an Event of Default with respect to the Bonds of
such series;
(ii) the occurrence of any event specified in
clause (b), (c), (d), (e), (f), (g), or (h) of Section 9.1
shall not constitute a Default or an Event of Default with
respect to the Bonds of such series;
(iii) the Bonds of such series shall thereafter be
deemed not to be "Outstanding" solely for purposes of
determining whether the Holders of the requisite aggregate
principal amount of Bonds have concurred in any Act under
this Indenture with respect to any covenant or obligation
from which Panda Funding and PIC have been released pursuant
to subparagraph (i) above, or with respect to any event that
shall have ceased to constitute a Default or Event of
Default with respect to Bonds of such series pursuant to
subparagraph (ii) above (or the consequences thereof); and
(iv) the Bonds of such series shall cease to be secured
by or to be entitled to any benefit under the Security
Documents or any other Lien upon any Collateral, including
any monies, securities or other property held by the Trustee
pursuant to Article IV or otherwise (other than monies and
U.S. Government Obligations deposited with the Trustee
pursuant to subparagraph (v) of Section 6.3(a) in respect of
Bonds of such series and interest and other amounts earned
and received thereon);
provided that the provisions of this Section 6.3(b) shall not be
deemed to relieve Panda Funding or, through the PIC Guaranty, PIC
of its obligations with respect to the payment of the principal
of (and premium, if any) or interest, if any, on the Outstanding
Bonds of such series. In furtherance of the foregoing, it is
understood and agreed that:
(A) satisfaction by Panda Funding of the
conditions necessary to achieve the consequences
specified in this Section 6.3(b) with respect to any
series of Bonds shall not be construed to preclude
Panda Funding from achieving the consequences specified
in Section 6.3(a) with respect to such Bonds at a later
date upon satisfaction of the condition set forth in
subparagraph (vii) of Section 6.3(a); and
(B) if at any time the only Outstanding Bonds are
Bonds with respect to which the conditions described in
this Section 6.3(b) have been satisfied, the Trustee
shall, upon receipt of a Company Request, take the
actions specified in the last paragraph of Section 6.1
notwithstanding the failure to satisfy and discharge
this Indenture as provided in Section 6.1.
ARTICLE VII
COVENANTS
Each of Panda Funding and PIC hereby covenants and
agrees that so long as this Indenture is in effect and any Bonds
remain Outstanding:
SECTION 7.1 Reporting Requirements. Panda Funding
and PIC shall furnish to the Trustee:
(a) as soon as practicable and in any event within 60
days after the end of each of the first three quarters of
each fiscal year (commencing with the quarter ending
September 30, 1996), or, so long as PIC shall be obligated
to file reports with the SEC under Section 13 or 15(d) of
the Exchange Act, at the time of filing its Quarterly Report
on Form 10-Q thereunder, if earlier, the unaudited
consolidated balance sheet of PIC as of the last day of such
quarterly period and the related consolidated statements of
income, cash flows and retained earnings of PIC (or, in the
case of any Successor Entity, a comparable statement) for
such quarter setting forth in each case in comparative form
corresponding unaudited figures from the corresponding
quarter in the preceding fiscal year, all in accordance with
GAAP, and accompanied by a written statement of its
Authorized Representative to the effect that such financial
statements fairly represent its financial condition and
results of operations at their respective dates, and for the
period presented, in accordance with GAAP and, to the
extent in existence, comparable financial statements for
Panda Funding;
(b) as soon as practicable and in any event within 120
days after the end of its fiscal year (commencing with the
fiscal year ended December 31, 1996), or, so long as PIC
shall be obligated to file reports with the SEC under
Section 13 or 15(d) of the Exchange Act, at the time of
filing its Annual Report on Form 10-K thereunder, if
earlier, the consolidated balance sheet of PIC as of the
end of such year and the related consolidated statements of
income, cash flow and retained earnings of PIC (or, in the
case of any Successor Entity, a comparable statement) for
such year setting forth in each case in comparative form
corresponding audited figures from the preceding fiscal
year, all in accordance with GAAP, accompanied by an audit
opinion thereon of a firm of independent certified public
accountants of recognized national standing, which opinion
shall state that said financial statements of PIC present
fairly (with such qualifications as such firm deems
appropriate in the event PIC has not received financial
information from one or more Projects in which PIC has an
interest), in all material respects, the financial position
of such entities as at the end of, and for, such fiscal year
in accordance with GAAP, and (unless such accountants are
prohibited from doing so by the American Institute of
Certified Public Accountants or any successor entity
governing the practice of certified public accountants) a
certificate of such accountants stating that, in the course
of making the examinations necessary for their opinion, they
obtained no knowledge, except as specifically stated, of any
Default (it being understood that any statement by such
accountants that they shall not have any liability in
connection with the delivery of such certificate for a
failure to obtain knowledge of a Default shall not be deemed
to be a breach of this covenant or result in any Default or
Event of Default) and, to the extent in existence,
comparable financial statements for Panda Funding, which
need not be audited;
(c) at the time of the filing thereof, all reports
required to be filed by Panda Funding or PIC with the SEC
under Section 13 or 15(d) of the Exchange Act;
(d) each of the following items:
(i) promptly after Panda Funding or PIC becomes
aware of the occurrence thereof, written notice of the
occurrence of any event or condition which constitutes
a Default, specifically stating that such event or
condition has occurred and describing it and any action
being or proposed to be taken with respect thereto; and
(ii) promptly after Panda Funding or PIC becomes
aware of the occurrence thereof, written notice of the
occurrence of any Event of Loss involving a loss in an
amount greater than $2,000,000 and an Officer's
Certificate of PIC setting forth the details thereof
and the action which PIC is taking or proposes to take
with respect thereto;
(e) on or prior to 10:00 am., New York City time, at
least two Business Days prior to each Monthly Distribution
Date and each Payment Date, an Officer's Certificate (the
"Applicable Distribution Certificate") of PIC, either for
itself or on behalf of a PIC International Entity, as the
case may be, setting forth the information required pursuant
to Article IV in order to enable the Trustee or the
International Collateral Agent, as the case may be, to
effect transfers and withdrawals from the Accounts and Funds
contemplated under such Article to be made on such Monthly
Distribution Date or Payment Date; and
(f) with each financial statement submitted by PIC
pursuant to clause (a) or (b) above, an Officer's
Certificate of PIC stating that (i) no Default has occurred
and is continuing (or if any such Default has occurred and
is continuing, describing the same in reasonable detail and
describing the steps being taken to remedy the same) and
(ii) no default by PIC, Panda Funding or any PIC Entity, or
to the knowledge of such officer, PEI or PEC has occurred
and is continuing under any Transaction Document or
Governmental Approval (whether or not such default would
constitute a Default) which could reasonably be expected to
result in a Material Adverse Change (or, if any such default
has occurred and is continuing, describing the same in
reasonable detail and describing the steps being taken to
remedy the same); and
(g) at the time PIC is not required to file reports
with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act, then within five (5) Business Days after the time that
PIC would have been required to file such information with
the SEC (but not earlier than 181 days after the date on
which the initial series of Bonds is issued), (i) all
information with respect to the business, financial
condition and results of operations (including management's
discussion and analysis thereof) and changes in and
disagreements with accountants of PIC which PIC would be
required to file with the SEC in annual and quarterly
reports and (ii) all information that PIC would be required
to file with the SEC in current reports to the extent
currently required in SEC Form 8-K (as prescribed by such
form as in effect on the date of this Indenture);
SECTION 7.2 Maintenance of Existence, Properties,
Etc.
(a) Each of Panda Funding and PIC shall preserve and
maintain its legal existence and form (other than as provided in
Section 7.12).
(b) Each of Panda Funding and PIC shall preserve and
maintain, and PIC shall cause each PIC Entity to preserve and
maintain, all of its licenses, rights, privileges and franchises
necessary for the conduct of its business, the due performance of
all of its obligations under the Transaction Documents and the
maintenance of its existence, except to the extent failure to do
so could not reasonably be expected to result in a Material
Adverse Change.
(c) Each of Panda Funding and PIC shall, and PIC shall
cause each PIC Entity to (i) perform or cause to be performed all
of its covenants and agreements contained in any of the
Transaction Documents to which it is a party, except to the
extent failure to do so could not reasonably be expected to
result in a Material Adverse Change, and (ii) do or cause to be
done all things necessary to comply with its organizational
documents and agreements.
(d) Neither Panda Funding nor PIC shall, nor shall PIC
permit any PIC Entity to, modify or amend its Certificate of
Incorporation, By-laws or other organizational documents except
in the manner therein provided and in a manner that (i) does not
modify in any material respect the Special Purposes Provisions
and (ii) could not reasonably be expected to result in a Material
Adverse Change. PIC shall not organize, or cause or permit to be
organized, any new PIC Entity the Certificate of Incorporation or
other organization documents of which do not contain Special
Purpose Provisions.
(e) PIC shall notify the Trustee in writing of any
amendment, supplement or modification to any Transaction
Document, and promptly after request therefor, PIC shall furnish
the Trustee with certified copies of all such amendments,
supplements or modifications.
SECTION 7.3 Compliance with Laws. Each of Panda
Funding and PIC shall do or cause to be done all things necessary
to comply in all material respects with all Requirements of Law
and Governmental Approvals applicable to Panda Funding, PIC, any
PIC Entity or Project Entity (and shall use all commercially
reasonable efforts to cause each Project to so comply) except any
thereof that are the subject of a Good Faith Contest or the
noncompliance with which could not reasonably be expected to
result in a Material Adverse Change.
SECTION 7.4 Payment of Taxes and Claims. Each of
Panda Funding and PIC shall, prior to the time penalties may
attach thereto, pay and discharge or cause to be paid and
discharged all taxes, assessments and other governmental charges
or levies lawfully imposed upon it or any PIC Entity or Project
Entity or upon its or any PIC Entity's or Project Entity's income
or profits or upon any of its or any PIC Entity's or Project
Entity's property and all lawful claims or obligations that, in
each such case, if unpaid, would become a Lien (other than a
Permitted Lien) upon the Collateral or upon any part thereof;
provided that no such tax, assessment, charge, levy, claim or
obligation shall be required to be paid or discharged if there is
a Good Faith Contest thereof by PIC, Panda Funding, any PIC
Entity or any Project Entity and, in respect of any Project
Entity, such tax assessment, charge, levy, claim or obligation
could not reasonably be expected to result in a Material Adverse
Change.
SECTION 7.5 Books and Records. Each of Panda
Funding and PIC shall, and PIC shall cause each PIC Entity and
Project Entity to, at all times keep proper books of account and
records, in accordance with good accounting practices, concerning
its business and financial affairs.
SECTION 7.6 Right of Inspection.
(a) Subject to requirements of applicable Government
Rules and upon reasonable notice from the Trustee, each of
PIC and Panda Funding shall, and shall cause each PIC U.S.
Entity and U.S. Project Entity to, permit the Trustee, or
any agents or representatives thereof, and the Consolidating
Engineer from time to time during normal business hours to
conduct reasonable inspections and examinations at all
reasonable times of the books and records of PIC, Panda
Funding, each PIC U.S. Entity and each U.S. Project Entity
and, if requested by the Trustee or the Consolidating
Engineer, as the case may be, PIC shall use its best efforts
to obtain the consents required to allow such Persons to
conduct reasonable inspections and examinations at all
reasonable times of each of the U.S. Projects.
(b) Subject to requirements of applicable Government
Rules and upon reasonable notice from the International
Collateral Agent, PIC shall, and shall cause each PIC
International Entity and International Project Entity to,
permit the International Collateral Agent, or any agents or
representatives thereof, and the Consolidating Engineer from
time to time during normal business hours to conduct
reasonable inspections and examinations at all reasonable
times of the books and records of each PIC International
Entity and each International Project Entity and, if
requested by the International Collateral Agent or the
Consolidating Engineer, as the case may be, PIC shall use
its best efforts to obtain the consents required to allow
such Persons to conduct reasonable inspections and
examinations at all reasonable times of each of the
International Projects.
SECTION 7.7 Use of Proceeds. Panda Funding shall
use the proceeds from the sale of Bonds issued hereunder solely
to purchase PIC Notes from PIC. PIC shall use the proceeds of
the loans from Panda Funding made pursuant to the PIC Notes
solely for the purposes specified in the applicable Series
Supplemental Indenture.
SECTION 7.8 Further Assurances; Opinion of Counsel.
(a) Each of Panda Funding and PIC shall take or cause
to be taken all action reasonably required to maintain and
preserve the Liens purported to be provided for in the Security
Documents, and shall from time to time execute or cause to be
executed any and all further instruments (including financing
statements, continuation statements and similar statements with
respect to the Liens granted herein) reasonably required to
maintain and preserve such Liens.
(b) Promptly after the execution and delivery of this
Indenture and of each Series Supplemental Indenture or other
supplemental indenture or other instrument of further assurance,
and prior to any transfer contemplated by Section 7.12(a), Panda
Funding shall furnish to the Trustee an Opinion or Opinions of
Counsel either reciting the details of the actions taken with
respect to the recording, registering and filing of the Security
Documents, this Indenture and all such Series Supplemental
Indentures, other supplemental indentures and other instruments
of further assurance or stating that, in the opinion of such
counsel, no such action is necessary to make such Liens effective
or referring to prior Opinions of Counsel in which such details
are given, and stating that, in the opinion of such counsel, no
further recording, registration or filing is necessary to be
taken to make effective the Liens purported to be created by the
Security Documents.
(c) On or before the date in each year on which
financial statements must be delivered to the Trustee pursuant to
Section 7.1(b), beginning with the first calendar year commencing
more than three months after the date of authentication and
delivery of any Bonds, Panda Funding and PIC shall furnish to the
Trustee an Opinion or Opinions of Counsel either reciting the
details of the actions taken with respect to the recording,
registering, filing, re-recording and re-filing of the Security
Documents and any other requisite documents and with respect to
the execution and filing of any financing statements and
continuation statements, and stating that, in the opinion of such
counsel, no further recording, registration or filing is
necessary to maintain the Liens purported to be created by the
Security Documents, or stating that, in the opinion of such
counsel, no such action is necessary to be taken to maintain such
Liens. Such Opinion of Counsel shall also describe the
recording, filing, re-recording and re-filing of the Security
Documents and any other requisite documents and the execution and
filing of any financing statements and continuation statements
that will, in the opinion of such counsel, be required to
maintain the Liens created by the Security Documents during the
year following the date of such opinion.
SECTION 7.9 Debt. Neither Panda Funding nor PIC
shall, nor shall PIC permit any PIC Entity or Project Entity to,
create or incur or suffer to exist any Debt except:
(a) in the case of Panda Funding (i) the initial
series of Bonds issued pursuant to the first Series
Supplemental Indenture, and (ii) additional series of Bonds
issued pursuant to one or more Series Supplemental
Indentures, provided that at the time of the creation of
each series of Bonds (other than the initial series of Bonds
issued pursuant to the first Series Supplemental Indenture
and any series of Bonds issued solely in exchange for an
equivalent aggregate principal amount of Outstanding Bonds
of another series) (A) PIC provides an Officer's Certificate
to the Trustee (supported by a certificate to the Trustee
from the Consolidating Engineer) stating that, after giving
effect to the issuance of such additional series of Bonds
and the application of the proceeds therefrom, the projected
PIC Debt Service Coverage Ratio and the projected
Consolidated Debt Service Coverage Ratio (if then
applicable) equal or exceed 1.7 to 1.0 and 1.25 to 1.0,
respectively, in each case for each Future Ratio
Determination Period and (B) the rating of the Outstanding
Bonds in effect immediately prior to the issuance of such
additional series of Bonds is Reaffirmed after giving effect
to the issuance of such additional series of Bonds,
provided, further, that a Reaffirmation of the rating of the
Outstanding Bonds shall not be required if (1) neither PIC
nor any PIC Entity has acquired (or is acquiring in
connection with the issuance of such additional series of
Bonds), sold or otherwise disposed of, since the last date
upon which the Bonds of any series were rated or a
Reaffirmation of rating was given in respect thereof, any
amount of direct or indirect interests in one or more
Projects with respect to which the sum of (w) the aggregate
purchase prices of all such acquisitions and (x) the
aggregate sales prices and proceeds received in connection
with any such disposition of all such sales or other
dispositions, exceeds the greater of (y) $50 million and
(z) 25% of the aggregate principal amount of the Bonds then
Outstanding and (2) the aggregate principal amount of
additional series of Bonds to be issued is less than the
lesser of (x) $50 million and (y) 25% of the aggregate
principal amount of the Bonds then Outstanding;
(b) in the case of PIC, the following Debt:
(i) the PIC Guaranty;
(ii) the PIC Notes; and
(iii) allocations among PIC and its Affiliates
of overhead expenses not in excess at any one time of
the PIC Expenses Amount;
(c) in the case of the PIC International Entities, (i)
the PIC International Entity Notes and (ii) Subordinated
Debt (including Other International Notes) payable to PIC or
any PIC Entity which shall not have independent rights of
acceleration or remedies without the occurrence of rights of
acceleration or remedies on the PIC Notes;
(d) in the case of the PIC U.S. Entities, (i) the PIC
U.S. Entity Guaranties and (ii) Subordinated Debt payable to
PIC, or any PIC Entity which shall not have independent
rights of acceleration or remedies without the occurrence of
rights of acceleration or remedies on the PIC Notes; and
(e) in the case of Project Entities, Project Debt and
Debt arising under Guaranties permitted in accordance with
Section 7.11.
SECTION 7.10 Liens. Panda Funding and PIC shall not,
and PIC shall not permit any PIC Entity to, create or suffer to
exist or permit any Lien upon or with respect to any of their
respective Property or any Project Distributions, except for the
following:
(a) Liens created or otherwise expressly permitted or
required to exist by this Indenture or any Transaction
Document;
(b) Liens for taxes, assessments, charges, levies,
claims or obligations which are either not yet due, are due
but payable without penalty or are the subject of a Good
Faith Contest by Panda Funding, PIC or any PIC Entity, as
the case may be;
(c) legal or equitable encumbrances deemed to exist by
reason of the existence of any litigation or other legal
proceeding if the same are the subject of a Good Faith
Contest;
(d) with respect to Property of, or Project
Distributions to, any PIC Entity, Liens required or
permitted to exist by the Project Agreements if such Liens
were required to exist or existed (i) on the date the
initial series of Bonds is issued or (ii) with respect to
Liens upon or with respect to Property or Project
Distributions relating to a particular Project, at the time
PIC or any PIC Entity makes its initial capital contribution
or purchase price payment with respect to such Project or
receives interests in such Project acquired subsequent to
such initial contribution or payment, or any replacement or
successor Lien created in connection with the refinancing of
any Project, provided such replacement or successor Lien
shall not secure any monetary obligation materially greater
than the Lien it replaces or succeeds or encumber any
Property not subject to the Lien it replaces or succeeds
unless (and only to the extent that) the provisions for
incurring or refinancing Project Debt contained in Section
7.23 have been satisfied;
(e) Liens in connection with worker's compensation,
unemployment insurance or other social security or pension
obligations; and
(f) with respect to Property of, or Project
Distributions to, any PIC Entity, Liens other than to secure
Debt, provided such Lien could not reasonably be expected to
(i) result in a Material Adverse Change or (ii), in the case
of any Lien on the Collateral, materially diminish the value
of, or the security offered by, the Property subject to such
Lien.
SECTION 7.11 Guaranties.
(a) Panda Funding shall not contingently or otherwise
be or become liable, directly or indirectly, in connection with
any Guaranty.
(b) PIC shall not, and shall not permit any PIC Entity
or Project Entity to, contingently or otherwise, be or become
liable, directly or indirectly, in connection with any Guaranty,
except (i) Guaranties by endorsement of negotiable instruments
for deposit or collection in the ordinary course of business;
(ii) in the case of PIC, the PIC Guaranty; (iii) in the case of
any PIC U.S. Entity, the PIC U.S. Entity Guaranties; and (iv) in
the case of any Project Entity, Guaranties by Project Entities of
Project Debt, and Guaranties of payment or performance created,
required or expressly permitted to exist under any Project
Agreement.
SECTION 7.12 Prohibition on Fundamental Changes and
Disposition of Assets.
(a) None of Panda Funding, PIC or any PIC Entity shall
enter into any transaction of merger, consolidation, sale, lease,
transfer or other disposition of all or substantially all of its
assets (including the Project Portfolio), change its form of
organization or its business or liquidate or dissolve itself (or
suffer any liquidation or dissolution); provided, however, that
Panda Funding, PIC or any PIC Entity may merge or consolidate or
sell, lease, transfer or otherwise dispose of all or
substantially all of its assets, if:
(i) (A) in the case of Panda Funding, the
successor or transferee entity is a wholly-owned
Subsidiary of PIC and such successor or transferee
entity expressly assumes, by an instrument in form and
substance reasonably satisfactory to the Trustee, all
of Panda Funding's obligations under this Indenture,
the Bonds and other Transaction Documents to which
Panda Funding is a party (B) in the case of PIC, the
successor or transferee entity shall be an entity
organized and existing under the laws of any State of
the United States or the District of Columbia and shall
expressly assume, by an instrument in form and
substance satisfactory to the Trustee, all of the
obligations of PIC under this Indenture, the PIC
Guaranty, the PIC Notes and the other Transaction
Documents to which PIC is a party, and (C) in the case
of any PIC U.S. Entity or PIC International Entity, the
successor or transferee entity shall be organized under
the laws of any State of the United States or the
District of Columbia, or, in the case of a PIC
International Entity, an appropriate foreign tax
jurisdiction, and shall expressly assume, by an
instrument in form and substance satisfactory to the
Trustee, all the obligations of such PIC Entity, if
any, under the PIC International Entity Notes or other
Transactional Documents to which such PIC Entity is a
party;
(ii) immediately before and immediately after
giving effect to such transaction on a pro forma basis
(and after giving effect to any modifications made to
the terms of this Indenture in order to reflect the
particular characteristics of the purchasing or
surviving entity, provided that the rating on the Bonds
in effect immediately prior to such modifications is
Reaffirmed), no Event of Default shall have occurred
and be continuing;
(iii) PIC shall have delivered, or caused to
be delivered, to the Trustee an Officer's Certificate
and, as to legal matters, an Opinion of Counsel, each
in form and substance reasonably satisfactory to the
Trustee, each stating that such consolidation, merger,
sale, lease, transfer or other transaction and such
supplemental indenture, if any, comply with this
Indenture and that all conditions precedent herein
provided for relating to such transaction have been
complied with; and
(iv) the rating on the Bonds then in effect is
Reaffirmed, after giving effect to such merger,
consolidation, sale, lease, transfer or other
transaction.
Notwithstanding the foregoing, (i) in no event shall PIC be
permitted to merge or consolidate with or into, or sell, lease,
transfer or otherwise dispose of all or substantially all of its
assets to, Panda Funding and (ii) in no event shall Panda Funding
be permitted to merge or consolidate with or into, or sell,
transfer, lease or otherwise dispose of all or substantially all
of its assets, to PIC. Notwithstanding anything in this Section
7.12 to the contrary, PIC or a PIC Entity may sell its direct or
indirect interests in a Project or Projects to the extent
permitted by Section 7.28.
(b) Upon any such consolidation, merger, sale, lease,
transfer or other disposition in accordance with Section 7.12(a)
the Successor Entity shall succeed to and be substituted for
Panda Funding, PIC or any PIC Entity, as the case may be, under
this Indenture, the Bonds, the PIC Guaranty, the PIC Notes, the
PIC International Entity Notes, the Other International Notes and
the other Transaction Documents to which such Person is a party,
as applicable, and except as to a merger or consolidation, Panda
Funding, PIC or such PIC Entity, respectively, shall thereupon be
released from all obligations hereunder and under any such
instruments or documents and may thereupon or at any time
thereafter be dissolved, wound up or liquidated; provided that
such dissolution or liquidation shall not cause a Change of
Control under clause (d) of the definition thereof to occur
unless such sale, lease, transfer or other disposition of all or
substantially all of the Properties of such Person otherwise
results in a Change of Control. The Successor Entity to Panda
Funding thereupon may cause to be signed, and may issue either in
its own name or in the name of Panda Funding, all or any of the
Bonds issuable hereunder which theretofore shall not have been
signed by Panda Funding and delivered to the Trustee; and, upon
the order of the Successor Entity instead of Panda Funding and
subject to all the terms, conditions and limitations prescribed
in this Indenture, the Trustee shall authenticate and shall
deliver Bonds which the Successor Entity thereafter shall cause
to be signed and delivered to the Trustee for that purpose. All
the Bonds so issued shall in all respects have the same legal
rank and benefit under this Indenture as the Bonds theretofore or
thereafter issued in accordance with the terms of this Indenture
as though all such Bonds had been issued at the date of execution
hereof.
(c) Except in connection with any merger,
consolidation, sale, transfer, lease or other transaction
satisfying the applicable requirements of Section 7.12(a) and
Section 7.28 or as otherwise contemplated by the Security
Documents, PIC may not transfer all or any portion of its
ownership interest in Panda Funding or any PIC Entity.
(d) None of Panda Funding, PIC or any PIC Entity shall
purchase or otherwise acquire all or substantially all of the
assets of any Person except (i) that PIC and the PIC Entities
may acquire direct or indirect interests in Project Entities and
Projects to the extent permitted by this Indenture, (ii) in
connection with any merger, consolidation, sale, lease, transfer
or other transaction satisfying the applicable requirements of
Section 7.12(a) and Section 7.28, (iii) for the creation or
acquisition by PIC of a PIC Entity or by a PIC Entity of a
Project Entity or (iv) any purchase or other acquisition of
interests in or held by PIC's or any PIC Entity's existing
investments if after giving effect to any such purchase or
acquisition no Default or Event of Default shall exist or result
therefrom.
SECTION 7.13 Nature of Business; Acquisition of
Project Interests.
(a) Panda Funding shall not engage in any business
other than (i) the issuance of the Bonds in accordance with the
terms hereof, (ii) the performance of its obligations under the
Transaction Documents to which it is a party, (iii) the
enforcement of its rights under the Security Documents and the
PIC Notes and (iv) activities reasonably related to the
foregoing.
(b) PIC shall not engage in any business other than
(i) the direct or indirect ownership of PIC Entities, Project
Entities and Projects, (ii) the making of loans to its
controlling Affiliates, PIC Entities and Project Entities, (iii)
the issuance of the PIC Notes and the PIC Guaranty, (iv)
Distributions and Investments permitted by this Indenture and (v)
activities reasonably necessary, in the judgment of PIC, to
preserve, protect or enhance the value of PIC's investments in
the Projects.
(c) Panda Funding shall not have any Subsidiaries.
PIC shall not create, acquire or purchase (i) any direct
Subsidiary other than the PIC Entities or (ii) any indirect
Subsidiary other than the Project Entities, in each case for the
purposes contemplated by Section 7.13(b) or in connection with
the acquisition of interests in Project Entities permitted under
this Indenture.
SECTION 7.14 Transactions with Affiliates. Panda
Funding and PIC shall not, and PIC shall not permit any PIC
Entity or Project Entity (collectively, the "PIC Group") to,
engage in transactions with Affiliates of PIC, other than members
of the PIC Group, except for (a) transactions which are on terms
no less favorable to the PIC Group than the PIC Group could
obtain in arms-length transactions from third parties which are
not Affiliates of PIC, (b) Distributions, loans and Investments
permitted by this Indenture, and (c) transactions required by
this Indenture or the Transaction Documents.
SECTION 7.15 Limitations on Distributions.
(a) Except as otherwise set forth in this Indenture,
PIC shall not, and PIC shall not permit any PIC International
Entity to, instruct or permit the Trustee and the International
Collateral Agent to transfer monies to U.S. or the International
Distribution Funds, except from, and to the extent of, monies on
deposit in the corresponding Distribution Suspense Fund. Subject
to the satisfaction of the following conditions on the applicable
Monthly Distribution Date, PIC may instruct the Trustee to, and
upon receipt of such instructions and a Distribution Certificate
the Trustee shall, transfer monies from the U.S. Distribution
Suspense Fund to the U.S. Distribution Fund and PIC, on behalf of
any PIC International Entity, may instruct the International
Collateral Agent to, and upon receipt of such instructions and a
Distribution Certificate the International Collateral Agent
shall, transfer monies from the International Distribution
Suspense Fund to the International Distribution Fund. At least
two Business Days prior to such Monthly Distribution Date, PIC
shall provide the Trustee or the International Collateral Agent
with an Officer's Certificate (with supporting calculations
attached to such certificate) stating that, after giving effect
to any such proposed transfers, the conditions set forth in
clauses (i) through (v) below have been satisfied on such Monthly
Distribution Date (such certificate, a "Distribution
Certificate"):
(i) the amount on deposit in the Debt Service
Fund is equal to or greater than the aggregate amount
of interest (less amounts on deposit in the Capitalized
Interest Fund in respect of such interest payment) and,
if applicable, principal due and payable on the PIC
Notes (including any past due amounts) on the Payment
Date for each series of Bonds then Outstanding next
following the day immediately preceding such Monthly
Distribution Date (other than in connection with a call
for redemption);
(ii) the amount on deposit in each of the
Capitalized Interest Fund, the Debt Service Reserve
Fund, the PIC Expense Fund, the Mandatory Redemption
Accounts and the Extraordinary Distribution Accounts
is equal to or greater than the amount then required to
be on deposit in each such Fund and Account as of such
date;
(iii) no Default (to the knowledge of any
officer of PIC) or Event of Default has occurred and is
continuing;
(iv) the PIC Debt Service Coverage Ratio is equal
to or greater than 1.4 to 1.0 for the twelve (12)
months immediately preceding the month in which such
Monthly Distribution Date is to occur (or for such
shorter period as the Bonds have been Outstanding); and
(v) the projected PIC Debt Service Coverage Ratio
is equal to or greater than 1.4 to 1.0 for the twelve
(12) months immediately succeeding the month in which
such Monthly Distribution Date is to occur (or for such
shorter period as the series of Bonds with the latest
Final Stated Maturity is scheduled to be Outstanding).
(b) Notwithstanding the foregoing, subject to the
first two sentences of Section 4.5(c), on the Monthly
Distribution Date immediately succeeding the delivery to the
Trustee of any Letter of Credit, any amounts on deposit in the
Debt Service Reserve Fund in excess of the difference between (i)
the Debt Service Reserve Requirement minus (ii) the undrawn face
amount of all such Letters of Credit shall be transferred by the
Trustee to the U.S. Distribution Suspense Fund.
(c) Except as otherwise provided in Article IV,
neither PIC nor any PIC Entity shall make any payments or
distributions to PEC or any other Affiliate of PIC or payments to
any subordinated lender with respect to any Subordinated Debt,
and Panda Funding shall not distribute any dividends to PIC (such
payments, distributions and dividends being herein referred to as
"Distributions") out of Project Distributions or any Collateral
except from, and to the extent of, in the case of PIC or any PIC
U.S. Entity, monies on deposit in the U.S. Distribution Fund and,
in the case of any PIC International Entity, monies on deposit in
the International Distribution Fund.
SECTION 7.16 Amendments Etc. Except as otherwise
expressly permitted by the terms of this Indenture, neither Panda
Funding nor PIC shall, and PIC shall not permit any PIC Entity
to, (a) terminate, amend or modify any Transaction Document
except as expressly permitted by such Transaction Document or
(b) enter into or otherwise become bound by any contract or
agreement with any Person subsequent to the closing date of the
initial series of Bonds, unless, in each such case referred to in
this clause (b), such new contract or agreement (i) is reasonably
and necessarily related to the issuance of the Bonds in
accordance with the terms hereof, including the PIC International
Entity Notes and the Other International Notes, or is necessary
due to a change in U.S. tax laws pursuant to an Opinion of
Counsel from a nationally recognized tax counsel to preserve the
deferral of U.S. taxes for International Project Entities and
International PIC Entities, and (ii) could not reasonably be
expected to result in a Material Adverse Change.
SECTION 7.17 Rule 144A Information. At any time when
Panda Funding is not subject to Section 13 or 15(d) of the
Exchange Act, upon the written request of a Holder, Panda Funding
shall promptly furnish to such Holder or to a prospective
purchaser of such Bond designated by such Holder, as the case may
be, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act ("Rule 144A Information") in
order to permit compliance by such Holder with Rule 144A under
the Securities Act in connection with the resale of such Bond by
such Holder; provided, however, that Panda Funding shall not be
required to furnish Rule 144A Information in connection with any
request made on or after the date which is three years from the
later of (a) the date such Bond (or any Predecessor Bond) was
acquired from Panda Funding or (b) the date such Bond (or any
Predecessor Bond) was last acquired from an "affiliate" of Panda
Funding within the meaning of Rule 144 under the Securities Act;
and provided, further, that Panda Funding shall not be required
to furnish such information at any time to a prospective
purchaser located outside the United States who is not a "United
States Person" within the meaning of Regulation S under the
Securities Act if such Bond may then be sold to such prospective
purchaser in accordance with Rule 904 under the Securities Act
(or any successor provision thereto).
SECTION 7.18 Investments. Neither Panda Funding nor
PIC shall make any Investments, and PIC shall not permit any PIC
Entity to make any Investments, other than (a) Permitted
Investments, (b) in the case of Panda Funding, the PIC Notes, (c)
in the case of PIC, the PIC International Entity Notes, the Other
International Notes, its Investments in the PIC Entities and its
Investments with respect to the Projects and such other
Investments which are permitted to be acquired pursuant to this
Indenture, (d) in the case of the PIC Entities, Investments in
Project Entities, and (e) in the case of the PIC International
Entities, loans made to PEI or any of its Affiliates.
SECTION 7.19 Investment Company Act. Neither Panda
Funding nor PIC shall, and PIC shall not permit any PIC Entity
to, take or consent to any action that would result in the
requirement that either Panda Funding or PIC be registered as an
"investment company" under the Investment Company Act.
SECTION 7.20 Appointment to Fill a Vacancy in Office
of Trustee. Panda Funding, whenever necessary to avoid or fill a
vacancy in the office of Trustee, shall appoint, in the manner
provided in Section 10.8, a Trustee, so that there shall at all
times be a Trustee hereunder.
SECTION 7.21 Securityholders Lists. Unless the
Trustee is acting as Security Registrar at that time, Panda
Funding shall furnish or cause to be furnished to the Trustee a
list in such form as the Trustee may reasonably require of the
names and addresses of the Holders of Bonds pursuant to
Section 312 of the Trust Indenture Act (a) semiannually not more
than fifteen (15) days after each record date for the payment of
interest on the Bonds, as hereinabove specified, as of such date,
and (b) at such other times as the Trustee may request in
writing, within thirty (30) days after receipt by Panda Funding
of any such request, as of a date not more than fifteen (15) days
prior to the time such information is furnished.
SECTION 7.22 Ownership of Projects. PIC shall
maintain (a) at least a 50% (direct or indirect) ownership or
equivalent interest in each Project or (b) (i) at least a 25%
(direct or indirect) ownership or equivalent interest in each
Project not meeting the requirements of clause (a) above and (ii)
a controlling influence over the management and policies with
respect to each Project, directly or indirectly, whether through
the ownership of voting securities, by contract, or otherwise,
provided that no other Person has greater control than PIC over
the management and policies of such Project. Notwithstanding the
foregoing, nothing in this Section shall prohibit the sale,
lease, transfer or other disposition of all interests in a
Project, or a reduction in ownership or equivalent interest of,
or control over, a Project occurring pursuant to the terms of a
build-operate-transfer arrangement at least ten years after the
entering into of such arrangement.
SECTION 7.23 Limitations on Project Debt and Project
Agreements. PIC shall not, nor shall it permit any PIC Entity to
incur or refinance any Project Debt or enter into any Project
Agreement (other than in connection with Liens permitted pursuant
to Section 7.10), and PIC shall not permit any Project Entity to,
(a) incur any Project Debt other than that existing or created on
the date that the Project to which such Project Debt relates is
transferred to the Project Portfolio or on the date that PIC or
any PIC Entity makes its initial investment in the Project to
which such Project Debt relates, (b) refinance any Project Debt,
(c) enter into any Project Agreements other than any Project
Agreement existing or created on the date that the Project to
which such Project Agreement relates is transferred to the
Project Portfolio or on the date that PIC or any PIC Entity makes
its initial contribution with respect to the Project to which
such Project Agreement relates, or (d) amend or modify any
Project Agreement, if in the case of clause (a), (b), (c) or (d)
such action could reasonably be expected to:
(i) reduce Cash Available for Distribution by
decreasing Total Cash Flow from all Project Entities on a
consolidated basis by increasing any amount described in
clause (i), (ii) or (iii) of the definition of Cash
Available for Distribution or otherwise decreasing amounts
legally available to be distributed to the Company without
contravention of any Project Agreement (including any such
action that could (A) decrease the amount of, or postpone
the receipt of, any revenues, distributions or other amounts
to be received by or on behalf of PIC, such PIC Entity or
such Project Entity, (B) increase the amount of, or
accelerate the date for payment of, any fees, prepayments,
costs, expenses, liabilities or other amounts payable by or
on behalf of PIC, such PIC Entity or such Project Entity, or
(C) create any additional conditions precedent to, or modify
existing conditions precedent if such modification could
impair, the right of PIC or any PIC Entity to receive
distributions or other amounts directly or indirectly from
any PIC Entity or Project Entity) by ten percent (10%) or
more in the aggregate during any Future Ratio Determination
Period; or
(ii) materially diminish the value of, or the security
offered by, the Collateral;
unless at the time of such action (A) PIC provides an Officer's
Certificate to the Trustee (supported by a certificate to the
Trustee from the Consolidating Engineer) stating that, after
giving effect to such action, the projected PIC Debt Service
Coverage Ratio and the projected Consolidated Debt Service
Coverage Ratio (if then applicable) equal or exceed 1.7 to 1.0
and 1.25 to 1.0, respectively, in each case for each Future Ratio
Determination Period and (B) the rating of the Outstanding Bonds,
after giving effect to such action, has been Reaffirmed.
SECTION 7.24 Distributions by Projects. Subject to
reasonable working capital and capital improvement requirements
(taking into account reasonable currency exchange and tax
planning requirements), PIC shall cause each Project Entity to
distribute to the PIC Entities all distributions and other
amounts received, directly or indirectly, by such PIC Entity or
by any other Person on behalf of PIC or any PIC Entity from, or
in connection with, the Project Portfolio that may be legally
distributed or paid to PIC or any PIC U.S. Entity (in the case of
U.S. Project Distributions) or any PIC International Entity (in
the case of International Project Distributions) without
contravention of any Project Agreement.
SECTION 7.25 Event of Loss. Panda Funding and PIC
shall, and PIC shall cause each PIC Entity and each Project
Entity to, pursue diligently (to the extent commercially
reasonable) all rights to compensation (including Insurance
Proceeds) with respect to any Event of Loss.
SECTION 7.26 Additional Collateral. If U.S. federal
income tax laws are amended to permit the International Accounts
and Funds or any shares of the capital stock or other ownership
interests in the PIC International Equities that have not been
pledged to the Collateral Agent pursuant to the Security
Documents to be included as part of the Collateral without
adversely affecting PEI's ability to defer U.S. federal income
taxes on earnings from Non-U.S. Projects, then (i) Panda Funding
and PIC shall enter into a supplemental indenture with the
Trustee in accordance with Article XII to include such
International Accounts and Funds and such stock or other
ownership interest as part of the Collateral and (ii) PIC shall,
and shall cause the PIC International Entities to, execute
appropriate Security Documents pledging to the Collateral Agent
as Collateral such International Accounts and Funds and such
stock or other ownership interests, as the case may be.
SECTION 7.27 Public Utility Holding Company Act.
Neither Panda Funding nor PIC shall, and PIC shall not permit any
PIC Entity to, take or consent to any action that would result in
Panda Funding or PIC being a "holding company," or an "affiliate"
of a "holding company" or of a "subsidiary company" of a "holding
company," or a "public utility" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
SECTION 7.28 Sales of Projects; Projects Interests.
PIC shall not, and PIC shall not permit any PIC Entity or Project
Entity to, sell any direct or indirect interests in Projects for
aggregate consideration in excess of $2,000,000 in any calendar
year; provided, however, that any such sale may be made (i) if
after giving effect to any such sale, PIC complies with Section
7.22, (ii) the proceeds of any such sale are applied in
accordance with Section 4.8 to effect a mandatory redemption of
any Bonds or PIC International Entity Notes, as the case may be,
(iii) PIC provides an Officer's Certificate to the Trustee
(supported by a certificate to the Trustee from the Consolidating
Engineer) stating that, after giving effect to such sale and the
application of the proceeds therefrom (including through a
mandatory redemption), the projected PIC Debt Service Coverage
Ratio and the projected Consolidated Debt Service Coverage Ratio
(if then applicable) equal or exceed 1.7 to 1.0 and 1.25 to 1.0,
respectively, in each case for each Future Ratio Determination
Period and (iv) if the proceeds of such sale to be received by
PIC or any PIC Entity exceed the lesser of (x) $50 million and
(y) 25% of the aggregate principal amount of the Bonds then
Outstanding, the rating on the Bonds immediately prior to such
sale is Reaffirmed (after giving effect to such sale and the
application of the proceeds therefrom).
SECTION 7.29 PIC International Entity Loan
Agreements. PIC shall cause each PIC International Entity that
is created, acquired or purchased after the date of this
Indenture to execute and deliver a copy to the Trustee of a PIC
International Entity Loan Agreement, any PIC International Entity
issued thereunder and a PIC International Entity Security
Agreement, at the time such PIC International Entity is so
created, acquired or purchased.
SECTION 7.30 PIC U.S. Entity Guaranties. PIC shall
cause each PIC U.S. Entity that is created, acquired or purchased
after the date of this Indenture to execute and deliver to the
Trustee a PIC U.S. Entity Guaranty Agreement, at the time such
PIC U.S. Entity is so created, acquired or purchased.
SECTION 7.31 Other International Note. PIC shall
notify the Trustee and the International Collateral Agent
immediately of (i) the issuance of any Other International Note,
(ii) the principal amount of such Other International Note and
(iii) any change in the outstanding principal amount of such
Other International Note.
SECTION 7.32 Purchase of Securities Upon a Change of
Control.
(a) Upon the occurrence of a Change of Control, Panda
Funding shall be obligated to make an offer to purchase (a
"Change of Control Offer") all of the then Outstanding Bonds, in
whole or in part, from the Holders of such Bonds in integral
multiples of $1,000, at a purchase price (the "Change of Control
Purchase Price") equal to 101% of the principal amount of such
Bonds, plus accrued and unpaid interest, if any, to the Change of
Control Purchase Date (as defined below), in accordance with the
procedures set forth in paragraphs (b), (c) and (d) of this
Section. Panda Funding shall, subject to the provisions
described below, be required to purchase all Bonds properly
tendered into the Change of Control Offer and not withdrawn.
Panda Funding will not be required to make a Change of Control
Offer upon a Change of Control if another Person makes the Change
of Control Offer at the same purchase price, at the same times
and otherwise in substantial compliance with the requirements
applicable to a Change of Control Offer to be made by Panda
Funding and purchases all Bonds validly tendered and not
withdrawn under such Change of Control Offer.
(b) The Change of Control Offer is required to remain open
for at least 20 Business Days and until the close of business on
the fifth Business Day prior to the Change of Control Purchase
Date (as defined below).
(c) Not later than the 30th day following any Change of
Control, Panda Funding shall give to the Trustee in the manner
provided in Section 1.5 and each Holder of the Bonds in the
manner provided in Section 1.6, a notice (the "Change of Control
Notice") governing the terms of the Change of Control Offer and
stating:
(i) that a Change of Control has occurred and that
such Holder has the right to require Panda Funding to
repurchase such Holder's Bonds, or portion thereof, at the
Change of Control Purchase Price;
(ii) any information regarding such Change of Control
required to be furnished pursuant to Rule 13e-1 under the
Exchange Act and any other securities laws and regulations
thereunder;
(iii) a purchase date (the "Change of Control
Purchase Date") which shall be on a Business Day and no
earlier than 30 days nor later than 60 days from the date
the Change of Control occurred;
(iv) that any Bond, or portion thereof, not tendered or
accepted for payment will continue to accrue interest:
(v) that unless Panda Funding defaults in depositing
money with the Paying Agent in accordance with the last
paragraph of clause (d) of this Section, or payment is
otherwise prevented, any Bond, or portion thereof, accepted
for payment pursuant to the Change of Control Offer shall
cease to accrue interest after the Change of Control
Purchase Date; and
(vi) the instructions a Holder must follow in order to
have such Holder's Bonds repurchased in accordance with
paragraph (d) of this Section.
(d) Holders electing to have Bonds purchased will be
required to surrender such Bonds to the Paying Agent at the
address specified in the Change of Control Notice at least five
Business Days prior to the Change of Control Purchase Date.
Holders will be entitled to withdraw their election if the Paying
Agent receives, not later than three Business Days prior to the
Change of Control Purchase Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the
certificate number(s) (in the case of Physical Bonds) and
principal amount of the Bonds delivered for purchase by the
Holder as to which his election is to be withdrawn and a
statement that such Holder is withdrawing such Holder's election
to have such Bonds purchased. Holders whose Bonds are purchased
only in part will be issued new Bonds equal in principal amount
to the unpurchased portion of the Bonds surrendered.
On the Change of Control Purchase Date, Panda Funding shall
(i) accept for payment Bonds or portions thereof validly tendered
pursuant to a Change of Control Offer, (ii) irrevocably deposit
with the Paying Agent money sufficient to pay the purchase price
of all Bonds or portions thereof so tendered, and (iii) deliver
or cause to be delivered to the Trustee the Bonds so accepted.
The Paying Agent shall promptly mail or deliver to Holders of the
Bonds so tendered payment in an amount equal to the purchase
price for the Bonds, and Panda Funding shall execute and the
Trustee shall authenticate and mail or make available for
delivery to such Holders a new Bond having the notation of the
PIC Guaranty thereon executed by PIC and equal in principal
amount to any unpurchased portion of the Bond which any such
Holder did not surrender for purchase. Panda Funding shall
announce the results of a Change of Control Offer on or as soon
as practicable after the Change of Control Purchase Date. For
purposes of this Section, the Trustee will act as the Paying
Agent.
(e) Panda Funding shall comply with Rule 14e-1 under the
Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are
applicable, if a Change of Control occurs and Panda Funding is
required to purchase Bonds as described in this Section.
ARTICLE VIII
REDEMPTION OF BONDS
SECTION 8.1 Applicability of Article. Bonds of any
series that are subject to redemption before their Stated
Maturity (or, if the principal of the Bonds of any series is
payable in installments, the Stated Maturity of the final
installment of the principal thereof) shall be redeemed or
prepaid in accordance with their terms and (except as otherwise
specified in the Series Supplemental Indenture creating such
series) in accordance with this Article.
SECTION 8.2 Election to Redeem; Notice to Trustee.
(a) If PIC shall elect to prepay the PIC Notes (and to
cause the Trustee to redeem the Bonds), then the election of
Panda Funding to redeem any Bonds shall be evidenced by a Company
Order. If Panda Funding determines or is required to redeem any
Bonds, Panda Funding shall, at least thirty (30) days prior to
the date upon which notice of redemption is required to be given
to the Holders pursuant to Section 8.4 (unless a shorter notice
period shall be satisfactory to the Trustee), deliver to the
Trustee a Company Order specifying the date on which such
redemption shall occur (the "Redemption Date", as the case may
be) and the series and principal amount of Bonds to be redeemed
or prepaid. Upon receipt of any such Company Order, the Trustee
shall establish a special purpose account into which shall be
deposited, not later than the Redemption Date, amounts to be held
by the Trustee and applied to the redemption of such Bonds. In
the case of any redemption of Bonds pursuant to an election of
Panda Funding that is subject to a condition specified in the
terms of such Bonds or in the Series Supplemental Indenture
relating thereto, Panda Funding shall furnish the Trustee with an
Officer's Certificate and, if applicable, Opinion of Counsel as
to compliance with such restriction or condition.
SECTION 8.3 Optional Redemption; Mandatory
Redemption; Selection of Bonds to be Redeemed.
(a) The Bonds of any series shall not be subject to
optional redemption at the option of Panda Funding unless
otherwise provided in the Series Supplemental Indenture relating
thereto or pursuant to this Section. The Bonds of any series may
be subject to Mandatory Redemption if so provided in the Series
Supplemental Indenture relating thereto or pursuant to this
Section.
(b) Unless otherwise provided in a Series Supplemental
Indenture, the Outstanding Bonds shall be redeemed as provided in
Sections 4.8 and 4.9.
(c) If less than all the Bonds of any series are to be
redeemed pursuant to paragraph (a) of this Section, the
particular Bonds of such series to be redeemed shall be selected
not more than sixty (60) days prior to the Redemption Date by the
Trustee from the Outstanding Bonds of such series not previously
called for redemption in whole, pro rata.
(d) The Trustee shall promptly notify Panda Funding in
writing of the Bonds selected for redemption and, in the case of
any Bonds to be redeemed in part, the principal amount thereof to
be redeemed.
(e) For all purposes of this Indenture, unless the
context otherwise requires, all provisions relating to the
redemption of Bonds shall relate, in the case of any Bonds
redeemed or to be redeemed only in part, to the portion of the
principal amount of such Bonds that has been or is to be
redeemed.
SECTION 8.4 Notice of Redemption. Except as
otherwise specified in the Series Supplemental Indenture relating
to the Bonds of a series to be redeemed, notice of redemption
shall be given in the manner provided in Section 1.6 to the
Holders of Bonds of such series to be redeemed at least thirty
(30) days but not more than sixty (60) days prior to the
Redemption Date. All notices of redemption shall state:
(a) the Redemption Date;
(b) the premium payable on redemption, if any;
(c) if less than all of the Outstanding Bonds of any
series are to be redeemed in whole, (i) the identification
of the particular Bonds of such series to be redeemed in
whole, or (ii) the portion of the principal amount of each
Bond of such series to be redeemed in part, and a statement
that, on and after the Redemption Date, upon surrender of
such Bond, a new Bond or Bonds of such series in principal
amount equal to the remaining unpaid principal amount
thereof will be issued;
(d) that on the Redemption Date, interest thereon will
cease to accrue on and after said date; and
(e) the Place or Places of Payment where such Bonds
are to be surrendered for payment of the amount in respect
of such redemption.
Notice of redemption of Bonds to be redeemed at the
election of Panda Funding shall be given by Panda Funding or, at
Panda Funding's request, by the Trustee in the name and at the
expense of Panda Funding. The Trustee shall be given a copy of
the form of notice of redemption of the Bonds at the time Panda
Funding delivers to the Trustee the Company Order relating to
such redemption pursuant to Section 8.2.
SECTION 8.5 Bonds Payable on Redemption Date.
Notice of redemption having been given as aforesaid, and the
conditions, if any, set forth in such notice having been
satisfied, the Bonds or portions thereof so to be redeemed, on
the Redemption Date shall become due and payable, and from and
after such date such Bonds or portions thereof shall cease to
bear interest, except as otherwise provided in the last sentence
in this Section. Upon surrender of any such Bond for redemption
in accordance with such notice, an amount in respect of such Bond
or portion thereof shall be paid as provided therein; provided,
however, that any payment of interest on any Bond the Stated
Maturity of which is on or prior to the Redemption Date, shall be
payable to the Holder of such Bond or one or more Predecessor
Bonds, registered as such at the close of business on the related
Regular Record Date according to the terms of such Bond and
subject to the provisions of Section 2.11. If any Bond called
for redemption shall not be so paid upon surrender thereof for
redemption (unless the failure to make such payment is
attributable to the failure by the Trustee to comply with its
obligations under this Indenture), the principal and premium, if
any, shall, until paid, bear interest from the Redemption Date at
the rate prescribed for in the Bond.
SECTION 8.6 Bonds Redeemed in Part. Any Bond that
is to be redeemed only in part shall be surrendered at a Place of
Payment therefor (with, if Panda Funding or the Trustee so
requires, due endorsement by, or a written instrument of transfer
in form satisfactory to Panda Funding and the Trustee duly
executed by, the Holder thereof or his attorney duly authorized
in writing), and Panda Funding shall execute, and the Trustee
shall authenticate and make available for delivery to the Holder
of such Bond without service charge, a new Bond or Bonds of the
same series, of any authorized denomination requested by such
Holder and of like tenor and in aggregate principal amount equal
to and in exchange for the remaining unpaid principal amount of
the Bond so surrendered.
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES
SECTION 9.1 Events of Default. The term "Event of
Default", whenever used herein, shall mean any of the following
events (whatever the reason for such event and whether it shall
be voluntary or involuntary or come about or be affected by
operation of Government Rule, or be pursuant to or in compliance
with any applicable Government Rule), and any such event shall
continue to be an Event of Default if and for so long as it shall
not have been remedied:
(a) Panda Funding shall fail to pay or cause to be
paid any principal of, or premium, if any, or interest on
any Bond when the same becomes due and payable, whether by
scheduled maturity, required prepayment, redemption, upon
repurchase pursuant to a Change of Control Offer or by
acceleration or otherwise, and the continuation of such
failure for fifteen (15) or more days;
(b) any representation, warranty or statement made by
PEI, PEC, PIC, Panda Funding or any PIC Entity in any
certificate, financial statement or other document furnished
to the Trustee by or on behalf of PEI, PEC, PIC, Panda
Funding or any PIC Entity under this Indenture or any
Security Document or any other Transaction Document, proves
to have been false or misleading in any material respect as
of the time made, confirmed or furnished and the fact, event
or circumstance that gave rise to such inaccuracy has
resulted in a Material Adverse Change, and the fact, event
or circumstance that gave rise to such Material Adverse
Change shall continue uncured for thirty (30) or more days
after the earlier to occur of (i) any officer of such Person
obtaining actual or constructive knowledge thereof and (ii)
written notice thereof being given to such Person; provided
that if such Person commences and diligently pursues efforts
to cure such fact, event or circumstance within such thirty
(30) day period, such Person may continue to effect such
cure of the fact, event or circumstance (and such
misrepresentation shall not be deemed an "Event of Default")
for an additional sixty (60) days so long as such Person is
diligently pursuing such cure;
(c) failure by PIC or Panda Funding to perform or
observe its respective covenants contained in Sections 7.2,
7.9, 7.10, 7.11, 7.12, 7.13, 7.14, 7.15, 7.19, 7.22, 7.23,
7.24, 7.26, 7.28, 7.29 or 7.30 of this Indenture and such
failure continues uncured for thirty (30) or more days;
(d) failure by PIC or Panda Funding to perform or
observe any of the covenants contained in this Indenture and
not listed in Section 9.1(c) or 9.1(p) and such failure
continues uncured for thirty (30) or more days after the
earlier of (i) any officer of PIC or Panda Funding, as the
case may be, obtaining actual or constructive knowledge of
such failure and (ii) written notice thereof being given to
PIC or Panda Funding by the Trustee or to PIC, Panda Funding
or the Trustee by Holders of at least 10% in aggregate
principal amount of the Bonds then Outstanding; provided
that if PIC or Panda Funding, as the case may be, commences
and diligently pursues efforts to cure such default within
such thirty (30) day period, PIC or Panda Funding, as the
case may be, may continue to effect such cure of the default
(and such default shall not be deemed an "Event of Default")
for an additional sixty (60) days so long as PIC or Panda
Funding, as the case may be, is diligently pursuing the
cure;
(e) failure by PEI, PEC, PIC, Panda Funding or any PIC
Entity to observe or perform any of their respective
covenants or agreements contained in any Transaction
Document other than this Indenture, and such failure
continues unremedied beyond the expiration of any applicable
grace period which may be expressly allowed under such
Transaction Document;
(f) the entry of one or more final and non-appealable
judgment or judgments for the payment of money in excess of
$2,000,000 against any of PIC, Panda Funding, or any PIC
Entity which remain unpaid or unstayed for a period of sixty
(60) or more consecutive days;
(g) failure by PIC, Panda Funding , or any PIC Entity
to make any payment when due (subject to any applicable
grace period) in respect of any Debt, which Debt is in an
amount exceeding $2,000,000 (other than the Debt (i) which
is Subordinated Debt, and (ii) the Debt specified in clause
(a) of this Section), which failure shall continue unwaived
beyond any applicable grace period;
(h) failure by any PIC Entity to make any payment when
due (subject to any applicable grace period) in respect of
any outstanding Subordinated Debt, which Subordinated Debt
is in an amount exceeding $2,000,000 and a default and
acceleration is declared with respect to such Debt;
(i) any grant of a Lien contained in the Security
Documents ceases to be effective to grant a perfected Lien
to the Collateral Agent on any of the Collateral described
therein, or shall cease to be perfected or to have the
priority required by the applicable Security Documents,
which cessation results in a Material Adverse Change;
provided that the creation of Liens permitted under Section
7.10 shall not constitute an Event of Default hereunder;
(j) the PIC Guaranty or the PIC U.S. Entity Guaranties
shall for any reason cease to be, or be asserted by Panda
Funding, PIC or any PIC U.S. Entity not to be, in full force
and effect and enforceable in accordance with its terms;
(k) (i) Panda Funding shall cease to have ownership of
the PIC Notes free and clear of all Liens and other
encumbrances on title thereto or (ii) PIC shall cease to
have ownership of the PIC International Entity Notes free
and clear of all Liens and other encumbrances on title
thereto;
(l) (i) PIC shall cease to own and control 100% of the
capital stock or other ownership interest (including 100% of
the Voting Stock) of (A) Panda Funding, except as provided
pursuant to Section 7.12, or (B) all PIC Entities (excluding
any qualifying director's shares required to be held by
third parties pursuant to any applicable Government Rule)
that hold direct or indirect ownership interests in any
Project, or (ii) PEC or PEI shall cease to own and control
directly or indirectly 100% of the capital stock (including
100% of the Voting Stock) of PIC;
(m) Panda Funding, PIC or any PIC Entity shall
(i) apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part of its
property, (ii) admit in writing its inability, or be
generally unable, to pay its debts as such debts become due,
(iii) make a general assignment for the benefit of its
creditors, (iv) commence a voluntary case under the Federal
Bankruptcy Code, (v) file a petition seeking to take
advantage of any other law relating to bankruptcy,
insolvency, reorganization, dissolution (other than a
dissolution which is cured within fifteen (15) days and
which does not result in a Material Adverse Change and
which, prior to such cure, would not reasonably be expected
to result in a Material Adverse Change), winding-up, or
composition or readjustment of debts, (vi) fail to
controvert in a timely and appropriate manner, or acquiesce
in writing to, any petition filed against such Person in an
involuntary case under the Federal Bankruptcy Code, or
(vii) take any corporate or other action for the purpose of
effecting any of the foregoing;
(n) a proceeding or case shall be commenced without
the application or consent of Panda Funding, PIC or any PIC
Entity in any court of competent jurisdiction, seeking
(i) its liquidation, reorganization, dissolution (other than
a dissolution which is cured within fifteen (15) days and
which does not result in a Material Adverse Change and
which, prior to such cure, would not reasonably be expected
to result in a Material Adverse Change), winding-up, or the
composition or readjustment of debts, or (ii) the
appointment of a trustee, receiver, custodian, liquidator or
the like of such Person under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, and such proceeding or
case shall continue undismissed, or any order, judgment or
decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of
ninety (90) or more consecutive days, or any order for
relief against such Person shall be entered in an
involuntary case under the Federal Bankruptcy Code;
(o) any Letter of Credit ceases to be in full force
and effect and valid, binding and enforceable in accordance
with its terms and is not replaced within ten (10) days,
unless the amount on deposit in the Debt Service Reserve
Fund (without giving effect to such Letter of Credit) at
such time equals or exceeds the Debt Service Reserve
Requirement then applicable; or
(p) the failure to make or consummate a Change of
Control Offer in accordance with the provisions of Section
7.32.
SECTION 9.2 Enforcement of Remedies. If one or more
Events of Default shall have occurred and be continuing, then:
(a) in the case of an Event of Default with respect to
Panda Funding, PIC or any PIC Entity described in
Section 9.1(m) or 9.1(n), the entire principal amounts of
the Outstanding Bonds, all interest accrued and unpaid
thereon, premium, if any, and all other amounts payable
under the Bonds and this Indenture, if any, shall
automatically become due and payable without presentment,
demand, protest or notice of any kind, all of which are
hereby waived; or
(b) in the case of an Event of Default described in
Section 9.1(a), upon the written direction of the Holders of
not less than 33 1/3% in aggregate principal amount of all
series of Outstanding Bonds (considered as one class), the
Trustee shall, by notice to Panda Funding (with a copy to
PIC), declare the entire principal amount of the Bonds
Outstanding, all interest accrued and unpaid thereon,
premium, if any, and all other amounts payable under the
Bonds and this Indenture, if any, to be due and payable,
whereupon the same shall become immediately due and payable
without presentment, demand, protest or further notice of
any kind, all of which are hereby waived; or
(c) in the case of an Event of Default other than as
referred to in clause (a) or (b) above, upon the written
direction of the Holders of not less than 50% in aggregate
principal amount of all series of Outstanding Bonds
(considered as one class), by notice to Panda Funding (with
a copy to PIC), the Trustee shall declare the entire
principal amount of the Bonds Outstanding, all interest
accrued and unpaid thereon, premium, if any, and all other
amounts payable under the Bonds and this Indenture, if any,
to be due and payable, whereupon the same shall become
immediately due and payable without presentment, demand,
protest or further notice of any kind, all of which are
hereby waived.
If an Event of Default occurs and is continuing and
written notice thereof is received by a Responsible Officer of
the Trustee, the Trustee shall mail to each Holder notice of the
Event of Default within thirty (30) days after the occurrence
thereof. Except in the case of an Event of Default in payment of
principal of or interest on any Bond, the Trustee may withhold
the notice to the Holders if a committee of its Responsible
Officers in good faith determines that withholding the notice is
in the interest of Holders.
In addition, if one or more of the Events of Default
referred to in clause (b) or (c) above shall have occurred and be
continuing, the Trustee may, but shall not be obligated to,
accelerate the maturity of the Bonds as provided in said
clause (b) or (c) notwithstanding the absence of direction from
the Holders if in the judgment of the Trustee such action is
necessary to protect the interests of the Holders.
At any time after the principal of the Bonds shall have
become due and payable upon a declared acceleration as provided
herein, and before any judgment or decree for the payment of the
money so due, or any portion thereof, shall be entered, the
Holders of not less than a majority in aggregate principal amount
of the Outstanding Bonds, by written notice to Panda Funding and
the Trustee, may rescind and annul such declaration and its
declaration and its consequences if,
(A) there shall have been paid to or deposited with
the Trustee a sum sufficient to pay:
(i) all overdue installments of interest on the Bonds
(other than interest that shall have become due by such
declaration of acceleration);
(ii) the principal of any Bonds that have become due
other than by such declaration of acceleration, including
any Bonds required to have been purchased on a Change of
Control Date pursuant to a Change of Control Offer, and
interest thereon and premium, if any, at the respective
rates provided in the Bonds for late payments of principal;
(iii) to the extent that payment of such interest
is lawful, interest upon overdue installments of interest
referred to in (i) above at the respective rates provided in
the Bonds for late payments of interest; and
(iv) all sums paid or advanced by the Trustee hereunder
and the reasonable compensation, expenses, disbursements,
and advances of the Trustee, its agents and counsel; and
(B) all Events of Default, other than the nonpayment
of the principal of and interest on the Bonds that has
become due solely by such acceleration, have been cured or
waived as provided in Section 9.7.
No such rescission shall affect any subsequent default or impair
any right consequent thereon.
SECTION 9.3 Specific Remedies. If any Event of
Default shall have occurred and be continuing and an acceleration
shall have occurred pursuant to Section 9.2, subject to the
provisions of Sections 9.2, 9.5 and 9.6, the Trustee, by such
officer or agent as it may appoint, may deliver notice to the
Collateral Agent in accordance with the Collateral Agency
Agreement requesting that the Collateral Agent sell, without
recourse, for cash, or credit or for other property, for
immediate or future delivery, and for such price or prices and on
such terms as the Collateral Agent in its discretion may
determine, the Collateral or the Collateral Agent's Security
Rights as an entirety, or in any such portions as the Holders of
a majority in aggregate principal amount of all series of
Outstanding Bonds (considered as one class) shall request by an
Act of Holders, or, in the absence of such request, as the
Trustee in its discretion shall deem expedient in the interest of
the Holders, at public or private sale.
SECTION 9.4 Judicial Proceedings Instituted by
Trustee.
(a) Trustee May Bring Suit. If there shall be an
Event of Default, then the Trustee, in its own name, and as
trustee of an express trust, subject to the provisions of
Article V and Sections 2.15, 9.2 and 9.6, shall be entitled
and empowered to institute any suits, actions or proceedings
at law, in equity or otherwise, for the collection of the
sums so due and unpaid on the Bonds, and may prosecute any
such claim or proceeding to judgment or final decree, and
may enforce any such judgment or final decree and collect
the monies adjudged or decreed to be payable in any manner
provided by law, whether before or after or during the
pendency of any proceedings for the enforcement of any of
the Trustee's rights or the rights of the Holders under this
Indenture, and such power of the Trustee shall not be
affected by any sale hereunder or by the exercise of any
other right, power or remedy for the enforcement of the
provisions of this Indenture.
(b) Trustee May Recover Unpaid Indebtedness after Sale
of Collateral. Subject to Article V and Section 2.15, in
the case of a sale of the Collateral and of the application
of the proceeds of such sale to the payment of the
indebtedness secured by this Indenture, the Trustee in its
own name, and as trustee of an express trust, shall be
entitled and empowered, by any appropriate means, legal,
equitable or otherwise, to enforce payment of, and to
receive all amounts then remaining due and unpaid upon, all
or any of the Bonds, for the benefit of the Holders thereof,
and upon any other portion of the indebtedness remaining
unpaid, with interest at the rates specified in the
respective Bonds on the overdue principal of and premium, if
any, and (to the extent that payment of such interest is
legally enforceable) on the overdue installments of
interest.
(c) Recovery of Judgment Does Not Affect Rights. No
recovery of any such judgment or final decree by the Trustee
and no levy of any execution under any such judgment upon
any of the Collateral, or upon any other property, shall in
any manner or to any extent affect any rights, powers or
remedies of the Trustee, or any liens, rights, powers or
remedies of the Holders, but all such liens, rights, powers
or remedies shall continue unimpaired as before.
(d) Trustee May File Proofs of Claim; Appointment of
Trustee as Attorney-in-Fact in Judicial Proceedings. The
Trustee in its own name, or as trustee of an express trust,
or as attorney-in-fact for the Holders, or in any one or
more of such capacities (irrespective of whether the
principal of the Bonds shall then be due and payable as
therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any
demand for the payment of overdue principal, premium, if
any, or interest), shall be entitled and empowered to file
such proofs of claim and other papers or documents as may be
necessary or advisable in order to have the claims of the
Trustee and of the Holders (whether such claims be based
upon the provisions of the Bonds or of this Indenture)
allowed in any equity, receivership, insolvency, bankruptcy,
liquidation, readjustment, reorganization or any other
judicial proceedings relating to Panda Funding or PIC or any
obligor on the Bonds (within the meaning of the Trust
Indenture Act), the creditors of Panda Funding or PIC or any
such obligor, the Collateral or any other property of Panda
Funding or PIC or any such obligor and any receiver,
assignee, trustee, liquidator, sequestrator (or other
similar official) in any such judicial proceeding is hereby
authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to
the making of such payments directly to the Holders, to pay
to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel and any other amounts due
the Trustee under Section 10.5. The Trustee is hereby
irrevocably appointed (and successive respective Holders of
the Bonds, by taking and holding the same, shall be
conclusively deemed to have so appointed the Trustee) the
true and lawful attorney-in-fact of the respective Holders,
with authority to (i) make and file in the respective names
of the Holders (subject to deduction from any such claims of
the amounts of any claims filed by any of the Holders
themselves) any claim, proof of claim or amendment thereof,
debt, proof of debt or amendment thereof, petition or other
document in any such proceedings and to receive payment of
any amounts distributable on account thereof, (ii) execute
any such other papers and documents and to do and perform
any and all such acts and things for and on behalf of such
Holders, as may be necessary or advisable in order to have
the respective claims of the Trustee and of the Holders
against Panda Funding, PIC or any such obligor, the
Collateral or any other property of Panda Funding, PIC or
any such obligor allowed in any such proceeding and
(iii) receive payment of or on account of such claims and
debt; provided, however, that nothing contained in this
Indenture shall be deemed to give to the Trustee any right
to accept or consent to any plan of reorganization or
otherwise by action of any character in any such proceeding
to waive or change in any way any right of any Holder. Any
monies collected by the Trustee under this Section shall be
applied as provided in Section 9.11.
(e) Trustee Need Not Have Possession of Bonds. All
proofs of claim, rights of action and rights to assert
claims under this Indenture or under any of the Bonds may be
enforced by the Trustee without the possession of the Bonds
or the production thereof at any trial or other proceedings
instituted by the Trustee. In any proceedings brought by
the Trustee (and also any proceedings involving the
interpretation of any provision of this Indenture to which
the Trustee shall be a party) the Trustee shall be held to
represent all the Holders of the Bonds and it shall not be
necessary to make any such Holders parties to such
proceedings.
(f) Suit to Be Brought for Ratable Benefit of Holders.
Any suit, action or other proceeding at law, in equity or
otherwise which shall be instituted by the Trustee under any
of the provisions of this Indenture shall be for the equal,
ratable and common benefit of all the Holders, subject to
the provisions of this Indenture.
(g) Trustee May Be Restored to Former Position and
Rights in Certain Circumstances. In case the Trustee shall
have instituted any proceeding to enforce any right, power
or remedy under this Indenture by foreclosure, entry or
otherwise, and such proceedings shall have been discontinued
or abandoned for any reason or shall have been determined
adversely to the Trustee, then and in every such case Panda
Funding, PIC and the Trustee shall be restored to their
former positions and rights hereunder, and all rights,
powers and remedies of the Trustee shall continue as if no
such proceedings had been taken.
SECTION 9.5 Holders May Demand Enforcement of Rights
by Trustee. If an Event of Default shall have occurred and shall
be continuing, the Trustee shall, upon the written request of the
Holders of a majority in aggregate principal amount of all series
of Outstanding Bonds (considered as one class) and upon the
offering of indemnity as provided in Section 10.1(d), proceed to
institute one or more suits, actions or proceedings at law, in
equity or otherwise, or take any other appropriate remedy, to
enforce payment of the principal of, or premium, if any, or
interest on, the Bonds, or to deliver notice to the Collateral
Agent in accordance with the Collateral Agency Agreement
requesting that the Collateral Agent foreclose under the Security
Documents or to sell the Collateral under a judgment or decree of
a court or courts of competent jurisdiction or under the power of
sale granted in the Security Documents, or take such other
appropriate legal, equitable or other remedy, as the Trustee,
being advised by counsel, shall deem most effectual to protect
and enforce any of the rights or powers of the Trustee or the
Holders, or, in case such Holders shall have requested a specific
method of enforcement permitted hereunder, in the manner
requested, provided that such action shall not be otherwise than
in accordance with law and the provisions of this Indenture and
the Security Documents, and the Trustee, subject to such
indemnity provisions, shall have the right to decline to follow
any such request if the Trustee in good faith shall determine
that the suit, proceeding or exercise of the remedy so requested
would involve the Trustee in personal liability or expense.
SECTION 9.6 Control by Holders. The Holders of not
less than a majority in aggregate principal amount of all series
of Outstanding Bonds (considered as one class) shall have the
right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee, provided that
(a) such direction shall not be in conflict with any rule of law
or with this Indenture or be prejudicial to any Holder not
joining therein, and (b) the Trustee may take any other action
deemed proper by the Trustee which is not inconsistent with such
direction.
SECTION 9.7 Waiver of Past Defaults. The Holders of
not less than a majority in aggregate principal amount of all
series of Outstanding Bonds (considered as one class) may on
behalf of the Holders of all Bonds waive any past Default and its
consequences except that only the Holders of all Bonds affected
thereby may waive a Default (a) in the payment of the principal
of or premium, if any, or interest on, or other amounts due
under, any Bond then outstanding, or (b) in respect of a covenant
or provision hereof that under Article XIII cannot be modified or
amended without the consent of the Holder of each Bond
outstanding affected. Upon any such waiver such Default shall
cease to exist and any Event of Default arising therefrom shall
be deemed to have been cured for every purpose of this Indenture,
but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
SECTION 9.8 Holder May Not Bring Suit Except Under
Certain Conditions. A Holder shall not have the right to
institute any suit, action or proceeding at law or in equity or
otherwise for the appointment of a receiver or for the
enforcement of any other remedy under or upon this Indenture or
the Security Documents, unless:
(a) such Holder previously shall have given written
notice to the Trustee of a continuing Event of Default;
(b) the Holders of at least 33 1/3% in aggregate
principal amount of all series of Outstanding Bonds
(considered as one class) shall have requested the Trustee
in writing to institute such action, suit or proceeding and
shall have offered to the Trustee an indemnity as provided
in Section 10.1(d);
(c) the Trustee shall have refused or neglected to
institute any such action, suit or proceeding for sixty (60)
days after receipt of such notice, request and offer of
indemnity; and
(d) no direction inconsistent with such written
request has been given to the Trustee during such sixty (60)
day period by the Holders of a majority in principal amount
of all series of Outstanding Bonds (considered as one
class).
It is understood and intended that no one or more of
the Holders shall have any right in any manner whatever hereunder
or under the Bonds to (x) surrender, impair, waive, affect,
disturb or prejudice the Lien of the Security Documents on any
property subject thereto or the rights of the Holders of any
other Bonds, (y) obtain or seek to obtain priority or preference
over any other Holder or (z) enforce any right under this
Indenture, except in each case in the manner herein provided and
for the equal, ratable and common benefit of all the Holders
subject to the provisions of this Indenture.
SECTION 9.9 Undertaking to Pay Court Costs. All
parties to this Indenture, and each Holder by his acceptance of a
Bond, shall be deemed to have agreed that any court may in its
discretion require, in any suit brought under this Indenture or
against the Trustee for any action taken or omitted by it as
Trustee hereunder, the filing by any party litigant in such suit
of an undertaking to pay the costs of such suit, and that such
court may, in its discretion, assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in such
suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; provided,
however, that the provisions of this Section shall not apply to
(a) any suit instituted by the Trustee, (b) any suit instituted
by any Holder or group of Holders holding in the aggregate more
than 10% in aggregate principal amount of all series of
Outstanding Bonds (considered as one class) or (c) any suit
instituted by any Holder for the enforcement of the payment of
the principal of, or premium, if any, or interest on, any of the
Bonds, on or after the respective due dates expressed therein or,
in the case of redemption, on or after the Redemption Date.
SECTION 9.10 Right of Holders to Receive Payment Not
to be Impaired. Anything in this Indenture to the contrary
notwithstanding, the right of any Holder to receive payment of
the principal of, and premium, if any, and interest on, such
Bond, on or after the respective due dates expressed in such Bond
(or, in case of redemption, on the Redemption Date fixed for such
Bond), or to institute suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired
or affected without the consent of such Holder.
SECTION 9.11 Application of Monies Collected by
Trustee. Following the application of monies as provided in the
Collateral Agency Agreement, any money collected or to be applied
by the Trustee pursuant to this Article in respect of the Bonds
of a series, together with any other monies which may then be
held by the Trustee under any of the provisions of this Indenture
as security for the Bonds of such series (other than monies at
the time required to be held for the payment of specific Bonds of
such series at their Stated Maturities or at a time fixed for the
redemption thereof) shall be applied in the following order from
time to time, on the date or dates fixed by the Trustee and, in
the case of a distribution of such monies on account of
principal, premium, if any, or interest, upon presentation of the
Outstanding Bonds of such series, and stamping thereon of
payment, if only partially paid, and upon surrender thereof, if
fully paid:
FIRST: to the payment of all amounts due the Trustee
or any predecessor Trustee under Section 10.5 and to the payment
of all taxes, assessments or liens prior to the Lien of the
Security Documents, except those subject to which any sale shall
have been made, all reasonable costs and expenses of collection,
including the reasonable costs and expenses of handling the
Collateral and of any sale thereof pursuant to the provisions of
the Security Documents and of the enforcement of any remedies
hereunder and all other amounts due the Trustee hereunder or
under any other Security Document or Transaction Document;
SECOND: in case the unpaid principal amount of the
Outstanding Bonds of such series or any of them shall not have
become due, to the payment of any interest in default, in the
order of the maturity of the payments thereof, with interest at
the rates specified in the respective Bonds of such series in
respect of overdue payments (to the extent that payment of such
interest shall be legally enforceable) on the payments of
interest then overdue;
THIRD: in case the unpaid principal amount of all the
Outstanding Bonds of such series shall have become due and any
such Bonds shall not have been paid in full, to the payment of
the whole amount then due and unpaid upon the Outstanding Bonds
of such series for principal, premium, if any, and interest,
together with interest at the respective rates specified in the
Bonds of such series for overdue payments on principal, premium,
if any, and (to the extent that payment of such interest shall be
legally enforceable) interest then overdue; and
FOURTH: any surplus then remaining shall be paid to
the Collateral Agent (to be applied pursuant to the terms and
conditions of the Collateral Agency Agreement), or to whomsoever
may be lawfully entitled to receive the same, or as a court of
competent jurisdiction may direct;
provided, however, that all payments in respect of the Bonds of
any series to be made pursuant to clauses "SECOND" and "THIRD" of
this Section shall be made ratably to the Holders of Bonds of
such series entitled thereto, without discrimination or
preference, based upon the ratio of the unpaid principal amount
of the Bonds of such series in respect of which such payments are
to be made held by each such Holder to the unpaid principal
amount of all Bonds of such series.
SECTION 9.12 Waiver of Appraisement, Valuation, Stay,
Right to Marshaling. To the full extent it may lawfully do so,
each of Panda Funding and PIC, for itself and for any other
Person who may claim through or under it, hereby:
(a) agrees that neither it nor any such Person will
set up, plead, claim or in any manner whatsoever take
advantage of, any appraisal, valuation, stay, extension,
usury or redemption laws, now or hereafter in force in any
jurisdiction which may delay, prevent or otherwise hinder
(i) the performance or enforcement of this Indenture,
(ii) the foreclosure of the Security Documents, (iii) the
sale of any of the Collateral or (iv) the putting of the
purchaser or purchasers thereof into possession of such
Collateral immediately after the sale thereof;
(b) waives all benefit or advantage of any such laws;
(c) consents and agrees that the Collateral may be
sold by the Collateral Agent as an entirety or in parts; and
(d) waives and releases all rights to have the
Collateral marshaled upon any foreclosure, sale or other
enforcement of this Indenture or the Security Documents.
SECTION 9.13 Remedies Cumulative; Delay or Omission
Not a Waiver. Each and every right, power and remedy herein
specifically given to the Trustee shall be cumulative and shall
be in addition to every other right, power and remedy herein
specifically given or now or hereafter existing at law, in equity
or by statute, and each and every right, power and remedy whether
specifically herein given or otherwise existing may be exercised
from time to time and as often and in such order as may be deemed
expedient by the Trustee and the exercise or the commencement of
the exercise of any right, power or remedy shall not be construed
to be a waiver of the right to exercise at the same time or
thereafter any other right, power or remedy, and no delay or
omission by the Trustee in the exercise of any right, power or
remedy or in the pursuance of any remedy shall impair any such
right, power or remedy or be construed to be a waiver of any
default on the part of Panda Funding or PIC or to be an
acquiescence therein.
SECTION 9.14 Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within
the meaning of the Trust Indenture Act, the Trustee shall either
eliminate such interest or resign, to the extent and in the
manner provided by, and subject to the provisions of, the Trust
Indenture Act and this Indenture.
SECTION 9.15 Preferential Collection of Claims
Against Panda Funding or PIC. If and when the Trustee shall be
or become a creditor of Panda Funding or PIC (or any other
obligor upon the Bonds), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of
claims against Panda Funding or PIC (or any such other obligor).
SECTION 9.16 The Collateral Agency Agreement. By
their purchase of the Notes, the Holders hereby expressly direct
and authorize the Trustee to enter into the Collateral Agency
Agreement and the other Security Documents. Simultaneously with
the execution and delivery of this Indenture, the Trustee shall
enter into the Collateral Agency Agreement. All rights and
remedies available to the Holders of the Outstanding Bonds, and
all future Holders of any of the Bonds, with respect to the
Collateral, or otherwise pursuant to the Security Documents,
shall be subject to the Collateral Agency Agreement.
ARTICLE X
CONCERNING THE TRUSTEE
SECTION 10.1 Certain Rights and Duties of Trustee.
Except as otherwise provided in Section 315 of the Trust
Indenture Act:
(a) The Trustee may conclusively rely and shall be
protected in acting, or refraining from acting, upon any
resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture or other paper or document believed by it to be
genuine and to have been signed or presented by the proper
party or parties or with respect to any action it takes or
omits to take in good faith in accordance with a direction
received by it from Holders holding a sufficient percentage
of Bonds to give such direction as permitted by this
Indenture or any other Transaction Document to which it is a
party.
(b) Any request, direction, order or demand of Panda
Funding or PIC mentioned herein shall be sufficiently
evidenced by (i) in the case of Panda Funding, an Officer's
Certificate in the name of Panda Funding, a Company Request
or a Company Order (unless other evidence in respect thereof
be herein specifically prescribed) and (ii) in the case of
PIC, an Officer's Certificate in the name of PIC (unless
other evidence in respect thereof be herein specifically
prescribed); and any resolution of the Board of Directors of
a Person may be evidenced to the Trustee by a copy thereof
certified by the Secretary or an Assistant Secretary of such
Person.
(c) The Trustee may consult with counsel and the
advice of counsel or any Opinion of Counsel shall be full
and complete authorization and protection in respect of any
action taken, suffered or omitted by it hereunder or under
any other Transaction Document to which it is a party in
good faith and in reliance thereon.
(d) The Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this
Indenture or the other Transaction Documents to which it is
a party, and may refuse to perform any duty or exercise any
such rights or powers unless it shall have been offered
reasonable security or indemnity against the costs, expenses
and liabilities which may be incurred therein or thereby.
(e) The Trustee shall not be liable for any action
taken, suffered or omitted by it in good faith and believed
by it to be authorized or within the discretion or rights or
powers conferred upon it by this Indenture or the other
Transaction Documents to which it is a party or with respect
to any action it takes or omits to take in good faith in
accordance with a direction received by it from Holders
holding a sufficient percentage of Bonds to give such
direction as permitted by this Indenture or the other
Transaction Documents to which it is a party.
(f) Prior to the occurrence of an Event of Default
with respect to any series of Bonds hereunder and after the
curing or waiving of all Events of Default with respect to
such series of Bonds, the Trustee shall not be bound to make
any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval,
appraisal, bond, debenture or other paper or document with
respect to such series of Bonds unless requested in writing
so to do by the Holders of not less than a majority in
aggregate principal amount of all series of Outstanding
Bonds (considered as one class); provided, that, if the
prompt payment to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of
such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded
to it by the terms of this Indenture, the Trustee may
require reasonable indemnity against such expenses or
liabilities as a condition to so proceeding. The reasonable
expenses of every such investigation shall be paid by Panda
Funding and PIC, and if paid by the Trustee, shall be repaid
by Panda Funding and PIC upon demand.
(g) The Trustee may execute any of the trusts or
powers hereunder or under any of the other Transaction
Documents to which it is a party or perform any duties
hereunder or under any of the other Transaction Documents to
which it is a party either directly or by or through agents
or attorneys, and the Trustee shall not be responsible for
any misconduct or negligence on the part of any agent or
attorney appointed with due care by it hereunder or under
any such other Transaction Document to which it is a party.
(h) If an Event of Default as to which a Responsible
Officer of the Trustee has received written notice has
occurred and is continuing, the Trustee shall exercise such
of the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances
in the conduct of his own affairs.
(i) Except during the continuance of an Event of
Default known to the Trustee,
(i) the Trustee need perform only those duties as
are specifically set forth in this Indenture and no
others and no implied covenants or obligations shall be
read into this Indenture against the Trustee, and
(ii) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions
expressed therein, upon certificates or opinions
furnished to the Trustee and conforming on their face
to the requirements of this Indenture or any other
Transaction Document to which it is a party; however,
in the case of any such certificates or opinions which
by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall examine
such certificates and opinions to determine whether or
not they conform on their face to the requirements of
this Indenture.
(j) No provision of this Indenture shall be construed
to relieve the Trustee from liability for its own negligent
action, its own negligent failure to act, or its own willful
misconduct, except that
(i) the Trustee shall not be liable for any error
of judgment made in good faith by a Responsible
Officer, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts, and
(ii) the Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in
good faith in accordance with the direction of the
Holders of a majority in aggregate principal amount of
all series of Outstanding Bonds (considered as one
class) relating to the time, method and place of
conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Indenture or any other
Transaction Documents to which it is a party.
(k) Whenever in the administration of this Indenture
or any other Transaction Document to which it is a party the
Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any
action hereunder, the Trustee (unless other evidence be
herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officer's Certificate of
Panda Funding or PIC.
(l) Every provision of this Indenture that in any
manner relates to the Trustee is subject to this Section.
SECTION 10.2 Trustee Not Responsible for Recitals,
Etc. The recitals contained herein, in the Bonds and in the
other Transaction Documents to which it is a party, except the
Trustee's certificate of authentication, shall be taken as the
statements of Panda Funding or PIC, as the case may be, and the
Trustee assumes no responsibility for the correctness of the
same. The Trustee makes no representations as to the validity or
sufficiency of this Indenture, the Bonds or any other Transaction
Document to which it is a party. The Trustee shall not be
accountable for the use or application by Panda Funding or PIC or
any Paying Agent other than the Trustee of any of the Bonds or of
the proceeds of such Bonds.
SECTION 10.3 Trustee and Others May Hold Bonds. The
Trustee or any Paying Agent or Security Registrar or any other
Authorized Agent or any Affiliate thereof, in its individual or
any other capacity, may become the owner or pledgee of Bonds and
may otherwise interact with Panda Funding, any other obligor of
the Bonds or PIC with the same rights it would have if it were
not Trustee, Paying Agent, Security Registrar or such other
Authorized Agent.
SECTION 10.4 Monies Held by Trustee or Paying Agent.
All monies received by the Trustee or any Paying Agent shall,
until used or applied as herein provided, be held in trust for
the purposes for which they were received, but need not be
segregated from other monies except to the extent required by
law. Neither the Trustee nor any Paying Agent shall be under any
liability for interest on any monies received by it hereunder
except such as it may agree in writing with Panda Funding or PIC
to pay thereon.
SECTION 10.5 Compensation of Trustee and Its Lien.
For so long as any of the Bonds or any indebtedness under this
Indenture shall remain outstanding, Panda Funding and PIC
covenant and agree, jointly and severally, to pay to the Trustee
(all references in this Section to the Trustee shall be deemed to
apply to the Trustee in its capacities as Trustee, Paying Agent
and Security Registrar) from time to time, and the Trustee shall
be entitled to, compensation for all services rendered by it
hereunder (which shall be agreed to from time to time by Panda
Funding, PIC and the Trustee and which shall not be limited by
any provision of law in regard to the compensation of a trustee
of an express trust), and Panda Funding and PIC, jointly and
severally, will pay or reimburse the Trustee upon its request for
all reasonable expenses and disbursements incurred or made by the
Trustee in accordance with any of the provisions of this
Indenture and the other Transaction Documents to which it is a
party (including the reasonable compensation and the reasonable
expenses and disbursements of its counsel and of all persons not
regularly in its employ) except any such expense or disbursement
as may arise from its negligence or bad faith. If any property
other than cash shall at any time be subject to the Lien of this
Indenture, the Trustee, if and to the extent authorized by a
receivership or bankruptcy court of competent jurisdiction or by
the supplemental instrument subjecting such property to such
Lien, shall be entitled but shall not be obligated to make
advances for the purpose of preserving such property or of
discharging tax liens or other prior liens or encumbrances
thereon. PIC and Panda Funding, jointly and severally, also
covenant and agree to indemnify the Trustee (in its individual
capacity and in its capacity as Trustee), its officers,
directors, attorneys-in-fact and agents for, and to hold each
such person harmless against, any loss, liability, claim, damage
or expense incurred without negligence or bad faith on the part
of any such indemnified person, arising out of or in connection
with the acceptance or administration of the trust or trusts
hereunder and the other Transaction Documents to which it is a
party, including liability which the Trustee may incur as a
result of failure to withhold, pay or report taxes and including
the costs and expenses of defending itself against any claim or
liability in the premises. The obligations of PIC and Panda
Funding under this Section (including with respect to the other
Transaction Documents to which the Trustee is a party) shall
constitute additional indebtedness hereunder and shall survive
the satisfaction and discharge of this Indenture, including any
termination under any Bankruptcy Law and the resignation or
removal of the Trustee. Notwithstanding anything contained in
this Indenture to the contrary, such additional indebtedness
shall be secured by a Lien prior to that of the Bonds upon all
property and monies held or collected by the Trustee or the
Collateral Agent as such and the Trustee shall have the right to
satisfy such obligations of PIC and Panda Funding from all such
property or monies if not otherwise paid by Panda Funding or PIC.
If the Trustee renders any services or incurs any expenses
hereunder or under any of the other Transaction Documents to
which it is a party after an Event of Default under
Section 9.1(m) or 9.1(n), the Holders by their acceptance of the
Bonds hereby agree that such compensation and expenses of the
Trustee are intended to constitute expenses of administration
under any Bankruptcy Law.
SECTION 10.6 Right of Trustee to Rely on Officer's
Certificates and Opinions of Counsel. Before the Trustee acts or
refrains from acting with respect to any matter contemplated by
this Indenture or any of the other Transaction Documents to which
it is a party, it may require an Officer's Certificate or an
Opinion of Counsel, which shall conform to the provisions of
Section 1.2. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on such
certificate or opinion.
SECTION 10.7 Persons Eligible for Appointment As
Trustee. There shall at all times be a Trustee hereunder which
shall be a corporation organized and doing business under the
laws of the United States of America, any State thereof or the
District of Columbia, authorized under such laws to exercise
corporate trust powers, having a combined capital, surplus and
undivided profits of at least $50,000,000 to the extent there is
an institution willing and eligible to serve in such capacity.
SECTION 10.8 Resignation and Removal of Trustee;
Appointment of Successor.
(a) The Trustee, or any Trustee hereafter appointed,
may at any time resign with respect to any one or more or
all series of Bonds by giving written notice to Panda
Funding and PIC and by giving written notice (at the expense
of Panda Funding and PIC) of such resignation to the Holders
of the Bonds in the manner provided in Section 1.6.
(b) In case at any time any of the following shall
occur:
(i) the Trustee shall cease to be eligible under
Section 10.7 and shall fail to resign after written
request therefor by Panda Funding or by any such
Holder, or
(ii) the Trustee shall become incapable of acting,
or shall be adjudged bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be
appointed, or any public officer shall take charge or
control of the Trustee or of its property or affairs
for the purpose of rehabilitation, conservation or
liquidation;
then, in any such case, (i) Panda Funding may remove the
Trustee by written instrument, in duplicate, executed by
order of the Board of Directors of Panda Funding, or
(ii) subject to the requirements of Section 315(e) of the
Trust Indenture Act, any Holder who has been a bona fide
Holder of a Bond or Bonds of any such series for at least
six months may, on behalf of himself and all others
similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee. Such court may
thereupon after such notice, if any, as it may deem proper,
prescribe the removal of the Trustee.
(c) The Holders of a majority in aggregate principal
amount of the Bonds of any series at the time Outstanding
may at any time remove the Trustee with respect to that
series by delivering to the Trustee so removed and to Panda
Funding, the evidence provided for in Section 11.6 of the
action taken by the Holders.
(d) Any resignation or removal of the Trustee and any
appointment of a successor Trustee pursuant to this Section
shall become effective only upon acceptance of appointment
by the successor Trustee as provided in Section 10.9.
(e) If the Trustee shall resign, be removed, or become
incapable of acting or if a vacancy shall occur in the
office of Trustee for any cause, Panda Funding shall
promptly appoint a successor Trustee or Trustees with
respect to the applicable series by written instrument
executed by order of its Board of Directors, one copy of
which instrument shall be delivered to the former Trustee
and one copy to the successor Trustee. If no successor
Trustee shall have been so appointed with respect to a
particular series and have accepted such appointment
pursuant to Section 10.9 within sixty (60) days after the
mailing of such notice of resignation or removal, the former
Trustee may petition any court of competent jurisdiction for
the appointment of a successor Trustee; or any Holder who
has been a bona fide Holder of a Bond or Bonds of the
applicable series for at least six months may, subject to
the requirements of Section 315(e) of the Trust Indenture
Act, on behalf of himself and all others similarly situated,
petition any such court for the appointment of a successor
Trustee. Such court may thereupon after such notice, if
any, as it may deem proper and prescribe, appoint a
successor Trustee.
(f) The Trustee shall not resign until either (i) the
trusts created hereby have been completely liquidated and
the proceeds of the liquidation distributed to the security
holders entitled thereto or (ii) a successor Trustee, having
the qualifications prescribed in Section 10.7, has been
designated and has accepted such trusteeship hereunder.
SECTION 10.9 Acceptance of Appointment by Successor
Trustee. Any successor Trustee appointed under Section 10.8
shall execute, acknowledge and deliver to Panda Funding and to
its predecessor Trustee with respect to any or all applicable
series of Bonds an instrument in form and substance satisfactory
to Panda Funding and the predecessor Trustee accepting such
appointment hereunder, and thereupon the resignation or removal
of the predecessor Trustee shall become effective and such
successor Trustee, without any further act, deed or conveyance,
shall become vested with all the rights, powers, trusts, duties
and obligations with respect to such series of its predecessor
Trustee hereunder, with like effect as if originally named as
Trustee herein; but, nevertheless, on the written request of
Panda Funding or of the successor Trustee, the Trustee ceasing to
act shall, upon payment of any such amounts then due it pursuant
to the provisions of Section 10.5, execute and deliver an
instrument transferring to such successor Trustee all the rights,
powers and trusts with respect to such series of the Trustee so
ceasing to act. Upon request of any such successor Trustee,
Panda Funding shall execute any and all instruments in writing
for more fully and certainly vesting in and confirming to such
successor Trustee all such rights and powers. Any Trustee
ceasing to act shall, nevertheless, retain a lien upon all
property or monies held or collected by such Trustee to secure
any amounts then due it pursuant to Section 10.5.
In the case of the appointment hereunder of a successor
Trustee with respect to the Bonds of one or more (but not all)
series, Panda Funding, the predecessor Trustee and each successor
Trustee with respect to the Bonds of any applicable series shall
execute and deliver an indenture supplemental hereto which shall
contain such mutually agreeable provisions as shall be deemed
necessary or desirable to confirm that all the rights, powers,
trusts and duties of the predecessor Trustee with respect to the
Bonds of any series as to which the predecessor Trustee is not
retiring shall continue to be vested in the predecessor Trustee,
and shall, by mutual agreement, add to or change any of the
provisions of this Indenture as shall be necessary to provide for
or facilitate the administration of the trusts hereunder by more
than one Trustee, it being understood that nothing herein or in
such supplemental Indenture shall constitute such Trustees co-
Trustees of the same trust and that each such Trustee shall be
Trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such
Trustee.
No successor Trustee with respect to any series of
Bonds shall accept appointment as provided in this Section unless
at the time of such acceptance such successor Trustee shall with
respect to such series be qualified under the Trust Indenture Act
and eligible under Section 10.7.
Upon acceptance of appointment by a successor Trustee
with respect to the Bonds of any series, Panda Funding shall give
notice of the succession of such Trustee hereunder to the Holders
of Bonds in the manner provided in Section 1.6. If Panda Funding
fails to give such notice within ten (10) days after acceptance
of appointment by the successor Trustee, the successor Trustee
shall cause such notice to be given at the expense of Panda
Funding.
SECTION 10.10 Merger, Conversion or Consolidation of
Trustee. Any Person into which the Trustee may be merged or
converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any
Person succeeding to all or substantially all the corporate trust
business of the Trustee, shall be the successor of the Trustee
hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided
that such successor Trustee shall be qualified under the Trust
Indenture Act and eligible under the provisions of Section 10.7
and Section 310(a) of the Trust Indenture Act.
SECTION 10.11 Maintenance of Offices and Agencies.
(a) There shall at all times be maintained in the
Borough of Manhattan, the City of New York, and in such
other Places of Payment, if any, as shall be specified for
the Bonds of any series in the related Series Indenture
Supplement, an office or agency where Bonds may be presented
or surrendered for registration of transfer or exchange and
for payment of principal, premium, if any, and interest, and
where notices and demands to or upon the Trustee in respect
of the Bonds or this Indenture may be served. Such office
or agency shall be initially at the Corporate Trust Office.
Written notice of the location of each of such other office
or agency and of any change of location thereof shall be
given by Panda Funding to the Trustee and by the Trustee, at
the expense of Panda Funding, to the Holders in the manner
specified in Section 1.6. In the event that no such office
or agency shall be maintained or no such notice of location
or change of location shall be given, presentations,
surrenders and demands may be made and notices may be served
at the Corporate Trust Office.
(b) There shall at all times be a Security Registrar
and a Paying Agent (which may be the Trustee) hereunder. In
addition, at any time when any Bonds remain Outstanding, the
Trustee may appoint an Authenticating Agent or Agents with
respect to the Bonds of one or more series which shall be
authorized to act on behalf of the Trustee to authenticate
Bonds of such series issued upon original issuance,
exchange, registration of transfer or partial redemption
thereof or pursuant to Section 2.10, and Bonds so
authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes
as if authenticated by the Trustee hereunder (it being
understood that wherever reference is made in this Indenture
to the authentication and delivery of Bonds by the Trustee
or the Trustee's certificate of authentication, such
reference shall be deemed to include authentication and
delivery on behalf of the Trustee by an Authenticating Agent
and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent). If an appointment
of an Authenticating Agent with respect to the Bonds of one
or more series shall be made pursuant to this Section, the
Bonds of such series may have endorsed thereon, in addition
to the Trustee's certificate of authentication, an alternate
certificate of authentication in the following form:
This Bond is one of the series of Bonds referred to in
the within-mentioned Indenture.
BANKERS TRUST COMPANY,
Trustee
By:
Authenticating Agent
By:
Authorized Signatory
Any Authorized Agent shall be a corporation organized
and doing business under the laws of the United States or any
State thereof or the District of Columbia, with a combined
capital and surplus of at least $50,000,000, and shall be
authorized under such laws to exercise corporate trust powers,
subject to supervision by Federal or state or the District of
Columbia authorities. If at any time an Authorized Agent shall
cease to be eligible in accordance with the provisions of this
Section, such Authorized Agent shall resign immediately in the
manner and with the effect specified in this Section. The
Trustee at its office specified in the first paragraph of this
Indenture, is hereby appointed as Paying Agent and Security
Registrar hereunder.
(c) Any Paying Agent (other than the Trustee) from
time to time appointed hereunder shall execute and deliver
to the Trustee an instrument in which said Paying Agent
shall agree with the Trustee, subject to the provisions of
this Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of
principal of, and premium, if any, and interest on Bonds in
trust for the benefit of the Persons entitled thereto until
such sums shall be paid to such Persons or otherwise
disposed of as herein provided;
(ii) give the Trustee within five (5) days thereafter
notice of any default by any obligor upon the Bonds in the
making of any such payment of principal, premium, if any, or
interest; and
(iii) at any time during the continuance of any
such default, upon the written request of the Trustee,
forthwith pay to the Trustee all sums so held in trust by
such Paying Agent.
Notwithstanding any other provision of this Indenture, any
payment required to be made to or received or held by the Trustee
may, to the extent authorized by written instructions of the
Trustee, be made to or received or held by a Paying Agent in the
Borough of Manhattan, the City of New York, for the account of
the Trustee.
(d) Any Person into which any Authorized Agent may be
merged or converted or with which it may be consolidated, or
any Person resulting from any merger, consolidation or
conversion to which any Authorized Agent shall be a party,
or any corporation succeeding to the corporate trust
business of any Authorized Agent, shall be the successor of
such Authorized Agent hereunder, if such successor Person is
otherwise eligible under this Section, without the execution
or filing of any paper or any further act on the part of the
parties hereto or such Authorized Agent or such successor
Person.
(e) Any Authorized Agent may at any time resign by
giving written notice of resignation to the Trustee and
Panda Funding. Panda Funding may, and at the request of the
Trustee shall, at any time, terminate the agency of any
Authorized Agent by giving written notice of such
termination to the Authorized Agent and to the Trustee.
Upon the resignation or termination of an Authorized Agent
or in case at any time any such Authorized Agent shall cease
to be eligible under this Section (when, in either case, no
other Authorized Agent performing the functions of such
Authorized Agent shall have been appointed), Panda Funding
shall promptly appoint one or more qualified successor
Authorized Agents approved by the Trustee to perform the
functions of the Authorized Agent which has resigned or
whose agency has been terminated or who shall have ceased to
be eligible under this Section. Panda Funding shall give
written notice of any such appointment to all Holders as
their names and addresses appear on the Security Register.
SECTION 10.12 Reports by Trustee. On or before May 15
in every year, so long as any Bonds are Outstanding hereunder,
the Trustee shall transmit to the Holders a brief report, dated
as of the preceding December 31, to the extent required by
Section 313 of the Trust Indenture Act in accordance with the
procedures set forth in said Section. A copy of such report at
the time of its mailing to Holders shall be filed with the SEC
and each stock exchange, if any, on which the Bonds are listed.
Panda Funding shall promptly notify the Trustee in writing if the
Bonds become listed on any stock exchange, and the Trustee shall
comply with Section 313(d) of the Trust Indenture Act.
SECTION 10.13 Trustee Risk. None of the provisions
contained in this Indenture or any of the other Transaction
Documents to which it is a party shall require the Trustee to
expend or risk its own monies or otherwise incur personal
financial liability in the performance of any of its duties or in
the exercise of any of its rights or powers, if it shall have
reasonable ground for believing that the repayment of such monies
or liability is not reasonably assured to it. Whether or not
expressly provided herein, every provision of this Indenture
relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to this
Section, Section 10.1 and the requirements of the Trust Indenture
Act.
SECTION 10.14 Trustee May Perform Certain Duties
Through Affiliates. The Trustee shall be entitled to perform
its rights and obligations in its capacity as the International
Collateral Agent through any of its Affiliates or through any
of its branch offices or agencies.
ARTICLE XI
HOLDERS' MEETINGS
SECTION 11.1 Purposes for Which Holders' Meetings May
Be Called. A meeting of Holders may be called at any time and
from time to time pursuant to this Article for any of the
following purposes:
(a) to give any notice to Panda Funding or PIC or to
the Trustee, or to give any directions to the Trustee, or to
waive or to consent to the waiving of any default hereunder
and its consequences, or to take any other action authorized
to be taken by Holders pursuant to Article IX;
(b) to remove the Trustee pursuant to Article X;
(c) to consent to the execution of an indenture or
indentures supplemental hereto pursuant to Section 12.2; or
(d) to take any other action authorized to be taken by
or on behalf of the Holders of any specified aggregate
principal amount of the Bonds under any other provision of
this Indenture or under applicable law.
SECTION 11.2 Call of Meetings by Trustee. The
Trustee may at any time call a meeting of Holders of any series
to be held at such time and at such place in the Borough of
Manhattan, The City of New York, as the Trustee shall determine.
Notice of every meeting of Holders, setting forth the time and
the place of such meeting and in general terms the action
proposed to be taken at such meetings shall be given by the
Trustee, in the manner provided in Section 1.6, not less than
twenty (20) nor more than one hundred twenty (120) days prior to
the date fixed for the meeting, to the Holders of Bonds of such
series.
SECTION 11.3 Panda Funding, PIC and Holders May Call
Meeting. In case Panda Funding or PIC, pursuant to a resolution
of its Board of Directors, or the Holders of at least 10% in
aggregate principal amount of all series of Outstanding Bonds
(considered as one class) shall have requested the Trustee to
call a meeting of Holders of such series, by written request
setting forth in general terms the action proposed to be taken at
the meeting, and the Trustee shall not have made the mailing of
the notice of such meeting within twenty (20) days after receipt
of such request, then Panda Funding and PIC or the Holders of
such Bonds in the amount above specified may determine the time
and the place in the Borough of Manhattan, The City of New York,
for such meeting and may call such meeting to take any action
authorized in Section 11.1 by giving notice thereof as provided
in Section 11.2.
SECTION 11.4 Persons Entitled to Vote at Meeting. To
be entitled to vote at any meeting of Holders a person shall be
(a) Holder of one or more Bonds with respect to which such
meeting is being held or (b) a person appointed by an instrument
in writing as proxy for the Holder or Holders of such Bonds by a
Holder of one or more such Bonds. The only persons who shall be
entitled to be present or to speak at any meeting of Holders
shall be the persons entitled to vote at such meeting and their
counsel and any representatives of the Trustee and its counsel
and any representatives of Panda Funding and PIC and their
respective counsel.
SECTION 11.5 Determination of Voting Rights; Conduct
and Adjournment of Meeting.
(a) Notwithstanding any other provisions of this
Indenture, the Trustee may make such reasonable regulations
as it may deem advisable for any meeting of Holders, in
regard to proof of the holding of Bonds and of the
appointment of proxies, and in regard to the appointment and
duties of inspectors of votes, the submission and
examination of proxies, certificates and other evidence of
the right to vote, and such other matters concerning the
conduct of the meeting as it shall think fit. Such
regulations may provide that written instruments appointing
proxies, regular on their face, may be presumed valid and
genuine without the proof specified in Section 1.4 or other
proof. Except as otherwise permitted or required by any
such regulations, the holding of Bonds shall be proved in
the manner specified in Section 1.4 and the appointment of
any proxy shall be proved in the manner specified in said
Section 1.4 or by having the signature of the person
executing the proxy witnessed or guaranteed by any bank,
banker, trust company or firm satisfactory to the Trustee.
(b) The Trustee shall, by an instrument in writing,
appoint a temporary chairman of the meeting, unless the
meeting shall have been called by Panda Funding or PIC or by
Holders as provided in Section 11.3, in which case Panda
Funding, PIC or the Holders calling the meeting, as the case
may be, shall in like manner appoint a temporary chairman.
A permanent chairman and a permanent secretary of the
meeting shall be elected by vote of the Holders of a
majority in principal amount of the Bonds represented at the
meeting and entitled to vote.
(c) Subject to the provisions of Section 1.4(f), at
any meeting each Holder of a series or proxy shall be
entitled to one vote for each $1,000 principal amount of
Bonds of such series held or represented by him; provided,
however, that no vote shall be cast or counted at any
meeting in respect of any Bond challenged as not Outstanding
and determined by the Trustee to be not Outstanding. The
chairman of the meeting shall have no right to vote other
than by virtue of Bonds of such series held by him or
instruments in writing as aforesaid duly designating him as
the person to vote on behalf of other Holders of such
series. Any meeting of Holders duly called pursuant to
Section 11.2 or 11.3 may be adjourned from time to time to a
place, date and time announced at such meeting, and the
meeting may be held as so adjourned without further notice.
(d) At any meeting, the presence of persons holding or
representing Bonds with respect to which such meeting is
being held in an aggregate principal amount sufficient to
take action upon the business for the transaction of which
such meeting was called shall be necessary to constitute a
quorum; but, if less than a quorum be present, the persons
holding or representing a majority of the Bonds represented
at the meeting may adjourn such meeting with the same
effect, for all intents and purposes, as though a quorum had
been present.
SECTION 11.6 Counting Votes and Recording Action of
Meeting. The vote upon any resolution submitted to any meeting
of Holders of a series shall be by written ballots on which shall
be subscribed the signatures of the Holders of Bonds of such
series or of their representatives by proxy and the serial
numbers and principal amounts of the Bonds of such series held or
represented by them. The permanent chairman of the meeting shall
appoint two inspectors of votes who shall count all votes cast at
the meeting for or against any resolution and who shall make and
file with the secretary of the meeting their verified written
reports in duplicate of all votes cast at the meeting. A record
in duplicate of the proceedings of each meeting of Holders shall
be prepared by the secretary of the meeting and there shall be
attached to said record the original reports of the inspectors of
votes on any vote by ballot taken thereat and affidavits by one
or more persons having knowledge of the facts setting forth a
copy of the notice of the meeting and showing that said notice
was given as provided in Section 11.2. The record shall show the
serial numbers of the Bonds voting in favor of or against any
resolution. The record shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting
and one of the duplicates shall be delivered to Panda Funding and
the other to the Trustee to be preserved by the Trustee, the
latter to have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive
evidence of the matters therein stated.
ARTICLE XII
SUPPLEMENTAL INDENTURES
SECTION 12.1 Supplemental Indentures Without Consent
of Holders. Without the consent of the Holders of any Bonds,
Panda Funding, PIC and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto
for any of the following purposes:
(a) to establish the form and terms of Bonds of any
series permitted by Sections 2.1 and 2.3;
(b) to evidence the succession of another entity to
Panda Funding or PIC, and the assumption by any such
successor of the covenants of Panda Funding or PIC herein,
as the case may be, and in the Bonds contained;
(c) to evidence the succession of a new Trustee
hereunder pursuant to Section 10.9;
(d) to add to the covenants of Panda Funding or PIC,
for the benefit of the Holders, or to surrender any right or
power herein conferred upon Panda Funding or PIC;
(e) to convey, transfer and assign to the Trustee
properties or assets to secure the Bonds, and to correct or
amplify the description of any property at any time subject
to this Indenture or to assure, convey and confirm unto the
Trustee or the Collateral Agent any property subject or
required to be subject to this Indenture;
(f) to permit or facilitate the issuance of Bonds in
uncertificated form;
(g) to change or eliminate any provision of this
Indenture; provided, however, that if such change or
elimination shall adversely affect the interests of the
Holders of Bonds of any series, such change or elimination
shall become effective with respect to such series only when
no Bond of such series remains Outstanding;
(h) to comply with any requirement of the SEC in
connection with qualifying this Indenture under the Trust
Indenture Act or maintaining such qualification thereafter;
(i) to provide for the issuance of a new series of
Bonds registered under the Securities Act in exchange for a
series of Bonds if such exchange is contemplated by any
registration rights agreement entered into in connection
with the issuance of a series of Bonds or any other exchange
securities pursuant to any other agreement to register any
series of Bonds under the Securities Act, and to make such
other changes in this Indenture or the Transaction Documents
as the Board of Directors of PIC determines are necessary or
appropriate in connection therewith, provided such action
shall not adversely affect the interests of the Holders of
Bonds of any series in any material respect;
(j) to cure any ambiguity or to correct or supplement
any provision herein that may be defective or inconsistent
with any other provision herein; or
(k) to make any other provisions with respect to
matters or questions arising under this Indenture, provided
such action shall not adversely affect the interest of the
Holders of any series in any material respect.
SECTION 12.2 Supplemental Indenture with Consent of
Holders. With the consent of the Holders of not less than a
majority in aggregate principal amount of all series of
Outstanding Bonds (considered as one class) by Act of said
Holders delivered to Panda Funding, PIC and the Trustee, Panda
Funding and PIC when authorized by a Board Resolution or a
resolution of the Board of Directors of Panda Funding or PIC, as
the case may be, may, and the Trustee, subject to Sections 12.3
and 12.4, shall, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to
or changing in any manner or eliminating or waiving any of the
provisions of, this Indenture; provided, however, that if there
shall be Bonds of more than one series Outstanding hereunder and
if a proposed supplemental indenture shall directly affect the
rights of the Holders of one or more, but less than all, of such
series, then the consent only of the Holders of not less than a
majority in aggregate principal amount of the Outstanding Bonds
of all series so directly affected (considered as one class)
shall be required; and provided, further, that no such
supplemental indenture shall, without the consent of the Holder
of each Outstanding Bond directly affected thereby,
(a) change the Stated Maturity of any Bond (or, if the
principal thereof is payable in installments, the Stated
Maturity of any such installment), or of any payment of
interest thereon, or the dates or circumstances of payment
of premium, if any, on, any Bond, or change the principal
amount thereof or the interest thereon or any premium
payable upon the redemption thereof, or change the place of
payment where, or the coin or currency in which, any Bond or
the premium, if any, or the interest thereon is payable, or
impair the right to institute suit for the enforcement of
any such payment of principal or interest on or after the
Stated Maturity thereof (or, in the case of redemption, on
or after the Redemption Date) or such payment of premium, if
any, on or after the date such premium becomes due and
payable or change the dates or the amounts of payments to be
made through the operation of the sinking fund in respect of
such Bonds, if any;
(b) permit the creation of any Lien prior to or,
except as expressly permitted by the terms of this Indenture
or any of the Security Documents, pari passu with the Lien
of the Security Documents with respect to any of the
property pledged under the Security Documents or terminate
the Lien of the Security Documents of any property pledged
thereunder or deprive any Holder of the security afforded by
the Lien of the Security Documents, except to the extent
expressly permitted by this Indenture or any of the Security
Documents;
(c) reduce the percentage in principal amount of the
Outstanding Bonds, the consent of whose Holders is required
for any such supplemental indenture, or the consent of whose
Holders is required for any waiver (of compliance with
certain provisions of this Indenture or certain defaults
hereunder and their consequences) provided for in this
Indenture, or reduce the requirements with respect to quorum
or voting;
(d) modify any of the provisions of Section 9.7 or of
this Section; or
(e) amend, change or modify the obligation of Panda
Funding to make and consummate a Change of Control Offer in
the event of a Change of Control, or amend, change or modify
any of the provisions or definitions with respect thereto.
A supplemental indenture that changes or eliminates any
covenant or other provision of this Indenture which has expressly
been included solely for the benefit of one or more particular
series of Bonds, or which modifies the rights of the Holders of
Bonds of such series with respect to such covenant or other
provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Bonds of any other series.
Upon receipt by the Trustee of Board Resolutions of
Panda Funding and PIC and such other documentation as the Trustee
may reasonably require and upon the filing with the Trustee of
evidence of the Act of said Holders, the Trustee shall join in
the execution of such supplemental indenture or other instrument,
as the case may be, subject to the provisions of Sections 12.3
and 12.4.
It shall not be necessary for any Act of Holders under
this Section to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such Act
shall approve the substance thereof.
SECTION 12.3 Documents Affecting Immunity or
Indemnity. If in the opinion of Panda Funding, PIC or the
Trustee any document required to be executed by it pursuant to
the terms of Section 12.2 affects any interest, right, duty,
immunity or indemnity in favor of it under this Indenture, it may
in its discretion decline to execute such document.
SECTION 12.4 Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
Series Supplemental Indenture or other supplemental indenture
permitted by this Article or the modifications thereby of the
trusts created by this Indenture, the Trustee shall be entitled
to receive, and (subject to Section 10.1) shall be fully
protected in relying upon, an Opinion of Counsel stating that the
execution of such supplemental indenture is authorized or
permitted by this Indenture, that all consents necessary for the
execution of the supplemental indenture have been obtained and
that such supplemental indenture constitutes the legal, valid and
binding obligation of each of PIC and Panda Funding enforceable
against each of them in accordance with its terms, subject to
customary exceptions.
SECTION 12.5 Effect of Supplemental Indentures. Upon
the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and
such supplemental indenture shall form a part of this Indenture
for all purposes; and every Holder of Bonds theretofore or
thereafter authenticated and delivered hereunder shall be bound
thereby.
SECTION 12.6 Reference in Bonds to Supplemental
Indentures. Bonds authenticated and delivered after the
execution of any supplemental indenture pursuant to this
Article may, and shall if required by Panda Funding, bear a
notation in form approved by Panda Funding and the Trustee as to
any matter provided for in such supplemental indenture; and, in
such case, suitable notation may be made upon Outstanding Bonds
after proper presentation and demand. If Panda Funding shall so
determine, new Bonds so modified as to conform, in the opinion of
Panda Funding and the Trustee, to any such supplemental indenture
may be prepared and executed by Panda Funding, with the notation
of the PIC Guaranty thereon executed by PIC, and authenticated
and delivered by the Trustee in exchange for Outstanding Bonds.
SECTION 12.7 Compliance with Trust Indenture Act.
Every Series Supplemental Indenture executed pursuant to this
Article shall conform to the requirements of the Trust Indenture
Act.
ARTICLE XIII
GUARANTEE OF SECURITIES
SECTION 13.1 Unconditional Guaranty.
(a) For value received, PIC hereby fully, unconditionally
and absolutely guarantees to the Holders and to the Trustee the
due and punctual payment of the principal of, and premium, if
any, and interest on the Bonds and all other amounts due and
payable under this Indenture and Bonds by Panda Funding when and
as such principal, premium, if any, and interest shall become due
and payable, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise, according to the
terms of Bonds and this Indenture.
(b) Failing payment when due of any amount guaranteed
pursuant to the PIC Guaranty, for whatever reason, PIC will be
obligated to pay the same immediately. The PIC Guaranty
hereunder is intended to be a general, secured, senior obligation
of PIC and will rank pari passu in right of payment with all
indebtedness of PIC that is not, by its terms, expressly
subordinated in right of payment to the PIC Guaranty or any other
indebtedness of PIC. PIC hereby agrees that its obligations
hereunder shall be full, unconditional and absolute, irrespective
of the validity, regularity or enforceability of the Bonds, the
PIC Guaranty or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of Bonds
with respect to any provisions hereof or thereof, the recovery of
any judgment against Panda Funding, any action to enforce the
same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of PIC. PIC hereby
agrees that in the event of a default in payment of the principal
of, or premium, if any, or interest on the Bonds, whether at the
Stated Maturity or by declaration of acceleration, call for
redemption or otherwise, legal proceedings may be instituted by
the Trustee on behalf of the Holders or, subject to Section 9.8,
by the Holders, on the terms and conditions set forth in this
Indenture, directly against PIC to enforce the PIC Guaranty
without first proceeding against Panda Funding.
(c) The obligations of PIC under this Article shall be as
aforesaid full, unconditional and absolute and shall not be
impaired, modified, released or limited by any occurrence or
condition whatsoever, including (i) any compromise, settlement,
release, waiver, renewal, extension, indulgence or modification
of, or any change in, any of the obligations and liabilities of
Panda Funding or PIC contained in the Bonds or this Indenture,
(ii) any impairment, modification, release or limitation of the
liability of Panda Funding, PIC or any of their estates in
bankruptcy, or any remedy for the enforcement thereof, resulting
from the operation of any present or future provision of any
applicable bankruptcy law, as amended, or other statute or from
the decision of any court, (iii) the assertion or exercise by
Panda Funding, PIC or the Trustee of any rights or remedies under
the Bonds or this Indenture or their delay in or failure to
assert or exercise any such rights or remedies, (iv) the
assignment or the purported assignment of any property as
security for the Bonds or the release of any such security,
including all or any part of the rights of Panda Funding or PIC
under this Indenture, (v) the extension of the time for payment
by Panda Funding or PIC of any payments or other sums or any part
thereof owing or payable under any of the terms and provisions of
the Bonds or this Indenture or of the time for performance by
Panda Funding or PIC of any other obligations under or arising
out of any such terms and provisions or the extension or the
renewal of any thereof, (vi) the modification or amendment
(whether material or otherwise) of any duty, agreement or
obligation of Panda Funding or PIC set forth in this Indenture,
(vii) the voluntary or involuntary liquidation, dissolution, sale
or other disposition of all or substantially all of the assets,
marshaling of assets and liabilities, receivership, insolvency,
bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition or readjustment of, or
other similar proceeding affecting, Panda Funding or PIC or any
of their respective assets, or the disaffirmance of the Bonds,
the PIC Guaranty or this Indenture in any such proceeding, (viii)
the release or discharge of Panda Funding or PIC from the
performance or observance of any agreement, covenant, term or
condition contained in any of such instruments by operation of
law or otherwise, (ix) the unenforceability of the Bonds, the PIC
Guaranty or this Indenture or (x) any other circumstance which
might otherwise constitute a legal or equitable discharge of a
surety or guarantor.
(d) PIC and Panda Funding each hereby (i) waives diligence,
presentment, demand of payment, filing of claims with a court in
the event of the merger, insolvency or bankruptcy of Panda
Funding or PIC, and all demands whatsoever, (ii) acknowledges
that any agreement, instrument or document evidencing the PIC
Guaranty may be transferred and that the benefit of its
obligations hereunder shall extend to each holder of any
agreement, instrument or document evidencing the PIC Guaranty
without notice to them and (iii) covenants that the PIC Guaranty
will not be discharged except by complete performance of the PIC
Guaranty. PIC and Panda Funding further agree that if at any
time all or any part of any payment theretofore applied by any
Person to the PIC Guaranty is, or must be, rescinded or returned
for any reason whatsoever including the insolvency, bankruptcy or
reorganization of Panda Funding or PIC, the PIC Guaranty shall,
to the extent that such payment is or must be rescinded or
returned, be deemed to have continued in existence
notwithstanding such application, and the PIC Guaranty shall
continue to be effective or be reinstated, as the case may be, as
though such application had not been made.
PIC hereby agrees that the PIC Guaranty set forth in this
Section shall remain in full force and effect notwithstanding any
failure to endorse on each Bond a notation relating to the PIC
Guaranty.
If an Authorized Representative of PIC whose signature is on
this Indenture or a Bond no longer holds that office at the time
the Trustee authenticates such Bond or at any time thereafter,
the PIC Guaranty of such Bond shall be valid nevertheless.
The delivery of any Bond by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery
of the PIC Guaranty set forth in this Indenture on behalf of PIC.
SECTION 13.2. Execution and Delivery of PIC Guaranty.
To further evidence the PIC Guaranty set forth in Section 13.1,
PIC hereby agrees that a notation relating to the PIC Guaranty
shall be endorsed on each Bond authenticated and delivered by the
Trustee in the form provided in Section 2.8 and executed on
behalf of PIC by either manual or facsimile signature by an
Authorized Representative of PIC.
SECTION 13.3. Right of Subrogation. PIC waives its
respective right of subrogation that it might now have or
hereafter acquire against the Holders of the Bonds that arise
from the existence or performance of PIC's obligations under the
PIC Guaranty until the Bonds have been paid in full.
IN WITNESS WHEREOF, the parties have caused this
Indenture to be duly executed by their respective officers duly
authorized as of the day and year first above written.
PANDA FUNDING CORPORATION
Name:
Title:
PANDA INTERFUNDING CORPORATION
Name:
Title:
BANKERS TRUST COMPANY, Trustee
By:
Name:
Title:
EXHIBIT A
FORM OF LEGEND FOR GLOBAL BONDS
Any Global Bond authenticated and delivered hereunder shall
bear a legend in addition to the Private Placement Legend, if
required by Section 2.8, in substantially the following form:
THIS BOND IS A GLOBAL BOND WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE
NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A
SUCCESSOR DEPOSITORY. THIS BOND IS NOT EXCHANGEABLE FOR
BONDS REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF
THIS BOND (OTHER THAN A TRANSFER OF THIS BOND AS A WHOLE BY
THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A
NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO PANDA FUNDING OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY BOND
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF BONDS
Re: ____% Pooled Project Bonds, Series ____ due ___________
(the "Bonds"), of Panda Funding Corporation
This Certificate relates to $______ principal amount of
Bonds held in the form of *______ a beneficial interest in a Global
Bond or *______ a Physical Bond by ________________ (the
"Transferor").
The Transferor:*
______ has requested by written order that the Security Registrar
deliver in exchange for its beneficial interest in the Global
Bond held by the Depository a Physical Bond or Physical Bonds in
definitive, registered form of authorized denominations and in an
aggregate principal amount equal to its beneficial interest in
such Global Bond (or the portion thereof indicated above); or
______ has requested that the Security Registrar by written order
exchange or register the transfer of a Physical Bond or Physical
Bonds.
In connection with such request and in respect of each
such Bond, the Transferor does hereby certify that the Transferor
is familiar with the Indenture relating to the above captioned
Bonds and the restrictions on transfers thereof as provided in
Section 2.8 of such Indenture, and that the transfer of these
Bonds does not require registration under the Securities Act of
1933, as amended (the "Securities Act") because *:
______ Such Bond is being acquired for the Transferor's own
account, without transfer (in satisfaction of subparagraph (A)(1)
or (C)(1) of Section 2.8(b)(ii) of the Indenture).
______ Such Bond is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the
Securities Act), in reliance on Rule 144A under the Securities
Act.
______ Such Bond is being transferred to an institutional
"accredited investor" (within the meaning of subparagraphs
(a)(1), (2), (3) or (7) of Rule 501 under the Securities Act).
______ Such Bond is being transferred in reliance on Regulation S
under the Securities Act.
______ Such Bond is being transferred in reliance on Rule 144A
under the Securities Act.
______ Such Bond is being transferred in reliance on and in
compliance with an exemption from the registration requirements
of the Securities Act other than Rule 144A or Regulation S or
Rule 144 under the Securities Act to a person other than an
institutional "accredited investor."
___________________________
[Name of Transferor]
By:________________________
[Authorized Signatory]
Date: ________________________
* Check Appicable Box.
EXHIBIT C
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION WITH
TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS
[Date] ___________,_____
Bankers Trust Company, Trustee
4 Albany Street
New York, New York 10006
Re: Panda Funding Corporation Indenture (the "Indenture")
relating to ____ percent Pooled Project Bonds, Series __
due ________
Ladies and Gentlemen:
In connection with our proposed purchase of ____percent Pooled
Project Bonds due ________, Series ___ due _________ (the"Bonds")
of Panda Funding Corporation (the "Company"), we confirm that:
1. We have received such information as we deem necessary
in order to make our investment decision.
2. We understand that any subsequent transfer of the Bonds
is subject to certain restrictions and conditions set forth in
the Indenture and the undersigned agrees to be bound by, and not
to resell, pledge or otherwise transfer the Bonds except in
compliance with, such restrictions and conditions and the
Securities Act of 1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Bonds have
not been registered under the Securities Act, and that the Bonds
may not be offered or sold within the United States or to, or for
the account or benefit of, U.S. persons except as permitted in
the following sentence. We agree, on our own behalf and on
behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell any Bonds, we will do so only (A)
to the Company, (B) inside the United States in accordance with
Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (C) inside the United States to an
institutional "accredited investor" (as defined below) that,
prior to such transfer, furnishes (or has furnished on its behalf
by a U.S. broker-dealer) to the Trustee a signed letter
substantially in the form hereof, (D) outside the United States
in accordance with Regulation S under the Securities Act, (E)
pursuant to the exemption from registration provided by Rule 144
under the Securities Act (if available), or (F) pursuant to an
effective registration statement under the Securities Act, and we
further agree to provide to any person purchasing Bonds from us a
notice advising such purchaser that resales of the Bonds are
restricted as stated herein.
4. We understand that, on any proposed resale of Bonds, we
will be required to furnish to you and the Company, such
certification, legal opinions and other information as you and
the Company may reasonably require to confirm that the proposed
sale complies with the foregoing restrictions. We further
understand that the Bonds purchased by us will bear a legend to
the foregoing effect.
5. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under
the Securities Act) and have such knowledge and experience in
financial and business matters as to be capable of evaluating the
merits and risks of our investment in the Bonds, and we and any
accounts for which we are acting are each able to bear the
economic risk of our or their investment, as the case may be, for
an indefinite period.
6. We are acquiring the Bonds purchased by us for our
account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we
exercise sole investment discretion, for investment purposes and
not with a view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act.
You and the Company and your and their respective counsel
are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby.
Very truly yours,
__________________________
[Name of Transferee]
By:________________________
[Authorized Signatory]
EXHIBIT D
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION
WITH REGULATION S TRANSFERS
[Date]___________,_____
Bankers Trust Company
4 Albany Street
New York, New York 10006
Re: Panda Funding Company (the "Company")
____Percent Pooled Project Bonds, Series ___ due ______
(the "Bonds")
Ladies and Gentlemen:
In connection with our proposed sale of $______________
aggregate principal amount of the Bonds, we confirm that such
sale has been effected pursuant to and in accordance with
Regulation S under the Securities Act of 1933, as amended (the
"Securities Act"), and, accordingly, we represent that:
(1) the offer of the Bonds was not made to a person in
the United States;
(2) either (a) at the time the buy offer was
originated, the transferee was outside the United States or
we and any person acting on our behalf reasonably believed
that the transferee was outside the United States, or
(b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and
neither we nor any person acting on our behalf knew that the
transaction had been pre-arranged with a buyer in the United
States;
(3) no directed selling efforts have been made in the
United States in contravention of the requirements of Rule
903(b) or Rule 904(b) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act;
and
(5) we have advised the transferee of the transfer
restrictions applicable to the Bonds.
You and the Company and your and their respective counsel
are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby.
Defined terms used herein without definition have the respective
meanings provided in Regulation S.
Very truly yours,
___________________________
[Name of Transferor]
By:________________________
[Authorized Signature]
EXHIBIT E
FORM OF PIC INTERNATIONAL ENTITY LOAN AGREEMENT
[SEE EXHIBITS 10.01 AND 10.02 FILED WITH THIS REGISTRATION STATEMENT]
EXHIBIT F
FORM OF PIC INTERNATIONAL ENTITY SECURITY AGREEMENT
[SEE EXHIBITS 10.04 AND 10.06 FILED WITH THIS REGISTRATION STATEMENT]
EXHIBIT G
FORM OF PIC U.S. ENTITY GUARANTY AGREEMENT
[SEE EXHIBIT 4.09 FILED WITH THIS REGISTRATION STATEMENT]
EXHIBIT H
OTHER INTERNATIONAL LOAN AGREEMENT
by and between
PANDA INTERFUNDING CORPORATION,
as Lender
and
[PIC International Entity],
as Borrower
Dated
as of
___________, _____
TABLE OF CONTENTS
(The Table of Contents is not a part of the Loan Agreement but
for convenience of reference only.)
ARTICLE I DEFINITIONS AND INTERPRETATIONS 1
SECTION 1.1. DEFINITIONS 1
SECTION 1.2. INTERPRETATIONS 3
ARTICLE II THE LOANS 3
SECTION 2.1. LOANS 3
SECTION 2.2. USE OF PROCEEDS 3
ARTICLE III LOAN PAYMENTS 3
SECTION 3.1. INTEREST PAYMENTS 3
SECTION 3.2. PRINCIPAL REPAYMENT 4
SECTION 3.3. REDEMPTION BY INTERNATIONAL COLLATERAL AGENT 4
SECTION 3.4. NATURE OF OBLIGATIONS OF THE BORROWER 4
SECTION 3.5. USURY 5
ARTICLE IV SPECIAL COVENANTS 5
SECTION 4.1. REPRESENTATIONS OF BORROWER;
MAINTENANCE OF CORPORATE EXISTENCE 5
SECTION 4.2. REPRESENTATIONS OF PIC 5
SECTION 4.3. REMOVAL OF LIENS 6
SECTION 4.4. NET AGREEMENT 6
ARTICLE V EVENTS OF DEFAULT AND REMEDIES 6
SECTION 5.1. ENUMERATION OF EVENTS OF DEFAULT 6
SECTION 5.2. REMEDIES 7
SECTION 5.3. NO REMEDY EXCLUSIVE 7
ARTICLE VI GENERAL 7
SECTION 6.1 WAIVER OF RIGHTS 7
SECTION 6.2. NO THIRD-PARTY BENEFICIARIES 8
SECTION 6.3. NOTICES 8
SECTION 6.4. COUNTERPARTS, AMENDMENTS, GOVERNING LAW, ETC. 9
SECTION 6.5. TERM OF AGREEMENT 9
EXHIBIT A - FORM OF OTHER INTERNATIONAL NOTE A-1
OTHER INTERNATIONAL LOAN AGREEMENT
THIS OTHER INTERNATIONAL LOAN AGREEMENT, dated as of
__________(together with any amendments or supplements hereto,
this "Agreement"), between PANDA INTERFUNDING CORPORATION, a
Delaware corporation (together with any permitted successor or
assigns, "PIC"), and [PIC International Entity], a
____________________ (together with any permitted successor or
assigns, the "Borrower").
W I T N E S S E T H:
WHEREAS, the Trust Indenture (the "Indenture"), dated as of
July 31, 1996, by and among PIC, Panda Funding Corporation, a
Delaware corporation, and Bankers Trust Company, as Trustee
thereunder (the "Trustee"), contemplates that PIC may make loans
to certain of its non-U.S. subsidiaries evidenced by promissory
notes ("Other International Notes"); and
WHEREAS, PIC and the Borrower desire to enter into this Agreement
to provide for the lending by PIC and the borrowing by the
Borrower of funds from time to time upon the terms and conditions
set forth herein, each such loan to be evidenced by an Other
International Note substantially in the form of Exhibit A hereto;
NOW THEREFORE, in consideration of the mutual covenants and
agreements herein contained and of the loans, extensions of
credit and commitments hereinafter referred to, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATIONS
Section 1.1. Definitions. The following terms shall have the
meanings assigned to them below whenever they are used in this
Agreement, unless the context clearly otherwise requires. Except
where the context otherwise requires, words imparting the
singular number shall include the plural number and vice versa
and words imparting the masculine gender shall include the
feminine. Capitalized terms contained but not otherwise defined
herein bear the meaning assigned to such terms in the Indenture.
"Agreement" means this Other International Loan Agreement.
"Borrower" is defined on page 1 of this Agreement.
"Applicable Federal Rate" has the meaning specified in Section
7872(f)(2) of the Code.
"Event of Default" or "Default" has the meaning specified in
Section 6.1.
"Indenture" is defined in the recitals of this Agreement.
"Interest Payment Date" has the meaning specified in Section 3.1.
"Interest Rate" means the rate of interest specified for each
Other International Loan in the Other International Note
evidencing such loan. [Note: Interest rate to be specified for
each Other International Loan to be the Applicable Federal Rate
in effect on the date on which such loan is made.]
"International Collateral Agent" has the meaning ascribed to such
term in the Indenture.
"Loan Payments" means the payments to be made by the Borrower
pursuant to Sections 3.1 and 3.2 and any redemption effected
pursuant to Section 3.3 of this Agreement.
"Maturity Date" means the Stated Maturity of the final
installment of principal on the Series A Bonds or such other date
as may be agreed to between PIC and the Borrower.
"Other International Loan" means a loan made by PIC to the
Borrower under this Agreement.
"Other International Note" means a note issued by the Borrower to
PIC evidencing an Other International Loan as provided in Section
2.1 of this Agreement.
"PIC" means the party defined as such on page 1 of this
Agreement.
"Redemption Amount" has the meaning specified in Section 3.3.
"Redemption Payment Date" has the meaning specified in Section
3.3.
"Trustee" means Bankers Trust Company, a New York banking
corporation, serving as trustee under the Indenture, or any
successor trustee.
Section 1.2. Interpretations. The table of contents and article
and section headings of this Agreement are for reference purposes
only and shall not affect its interpretation in any respect.
References in this agreement to "Sections" or "Articles" refer to
sections or articles of this Agreement.
ARTICLE II
THE LOANS
Section 2.1. Loans. Pursuant to and subject to the terms and
conditions of this Agreement, PIC shall make a loan in an amount
of [$____] (the "Required Other International Loan") and may from
time to time loan funds to the Borrower in amounts to be agreed
by PIC and the Borrower (each such loan, together with the
Required Other International Loan, an "Other International
Loan"). Each Other International Loan shall be evidenced by the
Borrower's creation and issuance of an Other International Note,
substantially in the form of Exhibit A attached hereto, payable
to the order of PIC.
Section 2.2. Use Of Proceeds. The Borrower may use the proceeds
of each Other International Loan for its general corporate
purposes or may on-lend such proceeds to non-U.S. Affiliates of
PEI that are developing, constructing, operating or owning
electric power generation projects (including businesses
substantially related thereto, such as a steam host affiliated
therewith) outside the U.S.
ARTICLE III
LOAN PAYMENTS
Section 3.1. Interest Payments. With respect to each Other
International Note then outstanding, the Borrower shall, subject
to the limitations of Section 3.5 hereof, make interest payments
in annual installments as provided therein (the date of each such
installment, an "Interest Payment Date"), in an aggregate amount
equal to the interest accrued from the preceding Interest Payment
Date coming due on such Interest Payment Date, calculated at the
Interest Rate, provided that on any Redemption Payment Date with
respect to any Other International Note, all interest accrued
from the most recent Interest Payment Date to such Redemption
Payment Date, as applicable to such Other International Note,
shall be due and payable and the interest due on the next
Interest Payment Date, if any principal amount remains
outstanding, shall be accrued from such Redemption Payment Date.
Interest shall be compounded as provided in the applicable Other
International Note and shall be based on a 365 day year.
Interest payments shall be made in U.S. dollars and, except in
the event of a redemption pursuant to Section 3.3, should be
remitted to PIC at the address specified for notices to PIC
herein, as such address may be changed from time to time pursuant
to the terms hereof.
Section 3.2 Principal Repayment. Except as provided in Section
3.3 or Section 4.1, all Other International Loans and all accrued
and unpaid interest thereon shall be repaid in full in a single
installment on the Maturity Date. Principal payments shall be
remitted to PIC in U.S. dollars at the address for notices to PIC
specified herein, as such address may be changed from time to
time.
Section 3.3. Redemption by International Collateral Agent. Upon
receipt by the International Collateral Agent of notice of an
International Redemption Event, and as contemplated under the
Indenture, the International Collateral Agent may effect a full
or partial redemption of the outstanding principal balance of
each and any Other International Note then outstanding. Such
redemption shall be in the amount which is the least of (i) the
amount set forth in such notice, (ii) the amount that is equal to
the aggregate principal amount of all Other International Notes
outstanding (after giving effect to any other redemptions, if
any, required to be made of the Other International Notes on the
same date pursuant to the Indenture), or (iii) the total amount
contained in the International Accounts and Funds at such time
that such notice is received (the "Redemption Amount") and shall
be effected by the withdrawal by the International Collateral
Agent of funds equal to the Redemption Amount from the
International Accounts and Funds, in the order to priority
required pursuant to the Indenture, for transfer to the Trustee
for deposit in the U.S. Project Account. The day on which such a
redemption is effected is a "Redemption Payment Date." Interest
on the principal balance redeemed on any Other International Note
shall be due and payable to the International Collateral Agent on
any Redemption Payment Date pursuant to Section 3.1.
Section 3.4. Nature of Obligations of the Borrower. Until each
Other International Note has been paid or redeemed in full, the
obligations of the Borrower to pay the principal of and interest
on such Other International Note shall be absolute and
unconditional, irrespective of any rights of set-off, recoupment
or counterclaim the Borrower might otherwise have against PIC,
the International Collateral Agent or any other person or
persons, and the Borrower will not suspend or discontinue any
such payment or terminate this Agreement for any cause.
Section 3.5. Usury. Notwithstanding any provision of this
Agreement to the contrary, it is hereby agreed by and between PIC
and the Borrower that (i) in no event shall the interest
contracted for, charged, received, reserved or taken in
connection with any Other International Loan (including interest
on each Other International Note pursuant to Section 3.1 of this
Agreement together with any other costs or considerations that
constitute interest under any applicable law that are contracted
for, charged, received, reserved or taken pursuant to this
Agreement) exceed the maximum rate of non-usurious interest
allowed under applicable laws as presently in effect, and (ii) to
the extent allowed by such applicable laws as they may be amended
from time to time to change such maximum rate, any excess
interest provided for in this Agreement, any Other International
Note or otherwise, shall be canceled automatically as of the date
such maximum rate is exceeded or, if theretofore paid, shall be
credited on the principal amount of any Other International Note.
ARTICLE IV
SPECIAL COVENANTS
Section 4.1. Representations of Borrower; Maintenance of
Corporate Existence. The Borrower represents that it is duly
incorporated and existing under the laws of
_________________________, that it has duly accomplished all
conditions precedent necessary to be accomplished by it prior to
execution and delivery of this Agreement, that it is not in
default under any agreement or other instrument in any manner
that would impair its ability to carry out its obligations
hereunder, that it has power to enter into the transactions
contemplated by this Agreement, that it has been duly authorized
by all requisite corporate action to execute and deliver this
Agreement and that, until the entire amount of each Other
International Note outstanding shall be paid in full or redeemed
in full and all other obligations of the Borrower under this
Agreement are satisfied, the Borrower or its successor hereunder
will maintain its corporate existence.
Section 4.2. Representations of PIC. PIC represents that it is
duly incorporated and existing under the laws of the State of
Delaware, that it has duly accomplished all conditions precedent
necessary to be accomplished by it prior to execution and
delivery of this Agreement, that it is not in default under any
agreement, indenture or other instrument in any manner that would
impair its ability to carry out its obligations hereunder, that
it has power to enter into the transactions contemplated by this
Agreement, and that it has been duly authorized by all requisite
corporate action to execute and deliver this Agreement.
Section 4.3. Removal of Liens. If any lien, encumbrance or
charge of any kind based on any claim of any kind (including,
without limitation, any claim for income, franchise or other
taxes, whether federal, state, foreign or otherwise), shall be
asserted or filed against any amount paid or payable by the
Borrower under or pursuant to this Agreement or any order
(whether or not valid) of any court shall be entered with respect
to any such amount by virtue of any claim of any kind, in either
case so as to:
(a) interfere with the due payment of such amount, or
(b) result in the refusal of PIC or the International
Collateral Agent, as applicable, to make due application of such
amount because of its reasonable determination that liability
might be incurred if such due application were made, then the
Borrower will promptly take such action (including, but not
limited to, the payment of money) as may be necessary to prevent
or to nullify the cause or result of such interference or such
refusal, as the case may be.
Section 4.4. Net Agreement. This Agreement shall be deemed and
construed to be a "net agreement", and the Borrower shall during
its term pay absolutely net the Loan Payments and all other
payments required hereunder, free of any deductions, without
abatement, deduction or set-off other than those herein expressly
provided.
ARTICLE V
EVENTS OF DEFAULT AND REMEDIES
Section 5.1. Enumeration of "Events of Default". The term
"Event of Default" shall mean, whenever it is used in this
Agreement, any one or more of the following events:
(a) failure by the Borrower to pay when due in accordance
with 3.2 of this Agreement the portion of any Loan Payments
representing payment of the principal of any Other International
Note, which failure continues for 30 days from the giving of
notice by PIC to the Borrower of such non-payment; or
(b) failure by the Borrower to pay when due in accordance
with Sections 3.1 and 3.2 of this Agreement the portion of any
Loan Payments representing payment of interest on any Other
International Note, which failure continues for 270 days from the
giving of notice by PIC to Borrower of such nonpayment.
Section 5.2. Remedies. Whenever any Event of Default referred
to in Section 5.1 shall have occurred and be continuing, PIC (if
the Borrower is the defaulting party) or the Borrower (if PIC is
the defaulting party) may take any action at law or in equity to
collect amounts then due and thereafter to become due, or to
enforce performance and observance of any obligation, agreement
or covenant of the defaulting party under this Agreement.
Section 5.3. No Remedy Exclusive. No remedy conferred upon or
reserved to PIC, the Borrower or the International Collateral
Agent by this Agreement is intended to be exclusive of any other
available remedy or remedies, but each and every such remedy
shall be cumulative and shall be in addition to every other
remedy given under this Agreement or now or hereafter existing at
law or in equity. No delay or omission to exercise any right or
power accruing hereunder shall impair any such right or power or
shall be construed to be a waiver thereof, nor shall any single
or partial exercise of any other right, power or privilege, but
every such right and power may be exercised from time to time and
as often as may be deemed expedient. In order to entitle the
International Collateral Agent to exercise any remedy reserved to
it in this Article, it shall not be necessary to give any notice
other than such notices as may be herein expressly required.
ARTICLE VI
GENERAL
Section 6.1 Waiver of Rights. Failure by PIC, the Borrower or
the International Collateral Agent to insist upon the strict
performance of any of the covenants and agreements contained in
this Agreement or to exercise any rights or remedies upon Default
shall not be considered a waiver or relinquishment of the right
to insist upon and to enforce by any appropriate legal remedy a
strict compliance by the defaulting party with all of the
covenants and conditions binding on it, or of the right to
exercise any such rights or remedies if such Default be continued
or repeated.
Section 6.2. No Third-Party Beneficiaries. This Agreement shall
not be deemed to create any right of subrogation or otherwise in
any person who is not a party hereto (other than the permitted
successors and assigns of a party) and shall not be construed in
any respect to be a contract in whole or in part for the benefit
of any third party (other than the permitted successors or
assigns of a party hereto).
Section 6.3. Notices. All notices or other communications
hereunder shall be in writing and shall be deemed to have been
given or made if delivered personally to the person who is to
receive the same or if mailed to such person by certified mail,
return receipt requested, postage prepaid (or another method
reasonably believed to provide actual notice if certified mail is
not then available), addressed:
if to PIC, Panda Interfunding Corporation
4100 Spring Valley Road, Suite 1001
Dallas, Texas 75244
if to the Borrower, [PIC International Entity]
if to the International Collateral Agent,
Bankers Trust Company Luxembourg S.A.
[address] Luxembourg
Attention: [Corporate Trust Department]
or, in each case, at such other address as may have been
designated most recently in writing by the addressee to the
parties; provided, however, that in order to be considered duly
made, a duplicate copy of any notice or other communication to
PIC, the Borrower, or the International Collateral Agent shall be
sent at the same time and in like manner to each of the others.
Whenever this Agreement provides for the delivery by PIC or the
Borrower of a notice or communication, the person receiving the
same shall be entitled to rely and act upon such notice or
communication if it is signed by an authorized representative or
any other authorized officer of PIC or the Borrower.
Section 6.4. Counterparts, Amendments, Governing Law, Etc. This
Agreement (a) may be executed in several counterparts, each of
which shall be deemed an original and all of which shall
constitute one and the same instrument; (b) may be modified or
amended only by an instrument in writing signed by an authorized
representative of each party hereto (or their
respective successors or assigns); and (c) SHALL BE GOVERNED, IN
ALL RESPECTS INCLUDING VALIDITY, INTERPRETATION AND EFFECT BY,
AND SHALL BE ENFORCEABLE IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY APPLICABLE
PRINCIPLES OF CONFLICTS OF LAWS (OTHER THAN THE PROVISIONS OF
SECTION 5-1401 OF THE GENERAL OBLIGATION LAW OF THE STATE OF NEW
YORK).
In the event that any clause or provision of this Agreement shall
be held to be invalid by any court of competent jurisdiction, the
invalidity of such clause or provision shall not affect any of
the remaining provisions hereof.
Section 6.5. Term of Agreement. This Agreement shall remain in
full force and effect from the date of execution and delivery
hereof until terminated by mutual agreement of PIC and the
Borrower, each Other International Note has been paid or redeemed
in full and all other obligations of the Borrower hereunder are
satisfied.
IN WITNESS WHEREOF, PIC and the Borrower have caused this
Agreement to be signed in their behalf by their duly authorized
representatives as of the date set forth above.
[PIC International Entity]
By:_________________________
Name:
Title:
PANDA INTERFUNDING CORPORATION
By:_________________________
Name:
Title:
Exhibit A
FORM OF OTHER INTERNATIONAL NOTE
Amount: ___________ Dated: ______________
FOR VALUE RECEIVED, [PIC International Entity], a
____________________________ (the "Borrower"), does hereby
promise to pay to the order of the PANDA INTERFUNDING
CORPORATION, a Delaware corporation (hereinafter called "PIC"),
at the location specified in the Other International Loan
Agreement hereinafter referenced in lawful money of the United
States of America, the principal sum of ______________
($_____________), and to pay interest on the unpaid principal
amount hereof, in like money, at such office at the following
rate: [Applicable Federal Rate in effect on the date hereof]
compounded [ ] (the "Interest Rate"), on the following
days (each an "Interest Payment Date"): [one Interest Payment
Date per year].
ALL SUMS paid hereon shall be applied first to the satisfaction
of accrued interest and the balance to the unpaid principal.
Principal on this Other International Note is due and payable on
the Maturity Date in the amounts and on the dates specified in
Section 3.2 of the Other International Loan Agreement. Interest
on the Other International Note is due and payable on each
Interest Payment Date, on each Principal Payment Date, and on
each Redemption Payment Date in the amounts and at the rate
specified herein. Principal on this Other International Note is
subject to redemption on the date specified in Section 3.3 of the
Other International Loan Agreement.
THIS NOTE is one of the Other International Notes referred
to in the Other International Loan Agreement ("Other
International Loan Agreement") dated as of July 31, 1996 by and
between the Borrower and PIC, and is subject to, and is executed
in accordance with, all of the terms, conditions and provisions
thereof, including those respecting prepayment, all as provided
in the Other International Loan Agreement. Capitalized terms
used and not otherwise defined in this Note shall have the
meaning given to such terms in the Other International Loan
Agreement.
THIS NOTE is a contract made under and shall be construed in
accordance with and governed by the laws of the State of New
York.
[PIC International Entity]
By:_________________________
Name:
Title:
SCHEDULE I
FORM OF COLLATERAL AGENCY AGREEMENT
[SEE ATTACHED EXHIBIT 4.07 ATTACHED HEREWITH]
SCHEDULE II
SUBORDINATION PROVISIONS
All capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed thereto in the Trust
Indenture, dated as of July 31, 1996 (as amended, supplemented or
modified from time to time, the "Indenture") among Panda Funding
Corporation ("Panda Funding"), Panda Interfunding Corporation
("PIC") and Bankers Trust Company, as Trustee (in such capacity,
the "Trustee").
[NAME OF SUBORDINATED LENDER] (together with its successors and
assigns, the "Subordinated Lender") hereby agrees for the benefit
of the Holders of the Bonds and the Trustee that all [DESCRIBE
SUBORDINATED LIABILITIES] (the "Subordinated Obligations") are
and shall be junior and subordinate, to the extent and in the
manner set forth hereinafter, in right of payment to the prior
indefeasible payment or satisfaction in full of all obligations
of Panda Funding under the Indenture and PIC under the PIC Notes
and the PIC Guaranty (collectively "Financing Liabilities"). In
furtherance thereof, each of the Trustee, and the Trustee acting
on behalf of the Holders of the Bonds, the Collateral Agent (as
defined in the Collateral Agency Agreement) and the Subordinated
Lender further agrees that:
(a) (i) The Subordinated Lender shall not ask, demand, sue
for, take or receive from either Panda Funding or PIC, directly
or indirectly, in cash or other property or by setoff or in any
manner (including, without limitation, from or by way of the
Collateral or any guaranty of payment or performance), payment of
all or any of the Subordinated Obligations unless and until all
the Financing Liabilities shall have been paid or otherwise
satisfied in full in cash or Cash Equivalents. For the purposes
of these provisions, the Financing Liabilities shall not be
deemed to have been paid or satisfied in full until those
Financing Liabilities shall have been indefeasibly so paid to the
Secured Parties (after the passage of any relevant preference
periods).
(ii) Upon any distribution of all or any of the assets
of Panda Funding or PIC to creditors of Panda Funding or PIC, as
the case may be, upon the dissolution, winding up, liquidation,
arrangement, reorganization or composition of Panda Funding or
PIC, as the case may be, whether in any bankruptcy, insolvency,
arrangement, reorganization, receivership or similar proceedings
or upon an assignment for the benefit of creditors or any other
marshalling of the assets and liabilities of Panda Funding or
PIC, as the case may be, or otherwise, any payment or
distribution of any kind (whether in cash, property or
securities) which otherwise would be payable or deliverable upon
or with respect to the Subordinated Obligations shall be paid or
delivered directly to the Collateral Agent for application (in
the case of cash) to or as Collateral (in the case of non-cash
property or securities) for the payment or prepayment of
Financing Liabilities until the Financing Liabilities have been
paid in full in cash or Cash Equivalents.
(iii) Each of the Holders of the Bonds and the
Trustee may demand specific performance of these terms of
subordination, whether or not Panda Funding or PIC, as the case
may be, shall have complied with any of the provisions hereof
applicable to them at any time when the Subordinated Lender shall
have failed to comply with any of such provisions applicable to
it. The Subordinated Lender hereby irrevocably waives any defense
based on the adequacy of a remedy at law, which might be asserted
as a bar to such remedy of specific performance.
(iv) So long as any of the Financing Liabilities shall
remain unpaid or otherwise unsatisfied, the Subordinated Lender
shall not commence or join with any creditor other than the
Collateral Agent in commencing any proceeding referred to in
subsection (ii) above for the payment of any amounts which
otherwise would be payable or deliverable upon or with respect to
the Subordinated Obligations. The foregoing provisions regarding
subordination are for the benefit of the Holders of the Bonds and
the Trustee and shall be enforceable by them directly against the
Subordinated Lender, and neither the Holders of the Bonds nor the
Trustee shall be prejudiced in its right to enforce subordination
of any of the Subordinated Obligations by any act or failure to
act by Panda Funding or PIC, as the case may be, or anyone in
custody of its assets or property.
Notwithstanding anything to the contrary contained in the
foregoing provisions, the Subordinated Lender may receive
Distributions in respect of the Subordinated Obligations from the
Panda Funding or PIC from or amounts on deposit in or available
for deposit in the Distribution Funds; provided that if the
Subordinated Lender is the Letter of Credit Provider, such
Subordinated Lender shall also be entitled to fees from amounts
on deposit in the PIC Expense Fund.
(b) So long as any Secured Obligations (as defined in the
Collateral Agency Agreement) remain outstanding, the following
provisions shall apply:
(i) If a Default or Event of Default shall have
occurred and be continuing, the Collateral Agent, on behalf of
the Secured Parties, shall be permitted and is hereby authorized
to take any and all actions to exercise any and all rights,
remedies and options which it may have under the Security
Documents or the Collateral Agency Agreement.
(ii) Until the payment in full in cash or Cash
Equivalents of all Financing Liabilities, the Subordinated Lender
shall not, without the prior written consent of the Trustee, on
behalf of each of the Holders of the Bonds, (A) exercise any
rights or enforce any remedies or assert any claim with respect
to the Collateral, (B) seek to foreclose any Lien on or sell the
Collateral, or (C) take any action, directly or indirectly, or
institute any proceedings, directly or indirectly, with respect
to any of the foregoing.
(iii) The Subordinated Lender hereby waives:
(A) notice of the existence, creation or non-
payment of all or any of the Financing Liabilities and (B) to the
fullest extent permitted by law, any right it may have to require
the Collateral Agent to marshall assets.
(c) The Holders of the Bonds or the Trustee may, at any
time and from time to time, without any consent of or notice to
the Subordinated Lender and without impairing or
releasing the obligations of the Subordinated Lender:
(i) amend in any manner any agreement under which any
of the Financing Liabilities is outstanding in accordance with
the terms thereof; (ii) sell, exchange, release, not perfect and
otherwise deal with any property at any time pledged, assigned or
mortgaged to secure the Financing Liabilities in accordance with
the Security Documents; (iii) release anyone liable in any manner
under or in respect of the Financing Liabilities; (iv) exercise
or refrain from exercising any rights against Panda Funding or
PIC, as the case may be, and others; and (v) apply any sums from
time to time received to payment or satisfaction of the
Financing
Liabilities; provided that if the Letter of Credit Provider is
the Subordinated Lender, neither the holders of the Bonds nor the
Trustee shall reduce the order of priority of the PIC Expense
Fund in Section 4.2 of the Indenture without the prior written
consent of the Subordinated Lender.
_______________________________
Check applicable box
APPENDIX A
The definitions stated herein shall equally apply to
both the singular and plural form of the terms defined.
"Act" when used with respect to any Holder, shall have
the meaning ascribed thereto in Section 1.4 of the Indenture.
"Additional Projects Contract" shall mean that certain
Additional Projects Contract dated as of July 31, 1996 among PEI,
PEC and PIC, as the same may be modified and supplemented and in
effect from time to time.
"Affiliate" of another Person shall mean (a) any Person
directly or indirectly owning, controlling, or holding with power
to vote 25 percent or more of the outstanding Voting Stock of
such other Person; (b) any Person 25 percent or more of whose
outstanding Voting Stock is directly or indirectly owned,
controlled, or held with power to vote, by such other Person; (c)
any Person directly or indirectly controlling, controlled by, or
under common control with, such other Person; or (d) if such
other Person is an investment company, any investment adviser
thereof or any investment company advised by such advisor.
"Agent Members" shall have the meaning ascribed thereto
in Section 2.9 of the Indenture.
"Annual Letter of Credit Fee" shall mean the annual
fee, or the cumulative fee charged over one year, charged by the
Letter of Credit Provider.
"Applicable Distribution Certificate" shall have the
meaning ascribed thereto in Section 7.1(e) of the Indenture.
"Authenticating Agent" shall mean any Person acting as
Authenticating Agent under the Indenture pursuant to Section
10.11 thereof.
"Authorized Agent" shall mean any Paying Agent,
Authenticating Agent or Security Registrar or other agent
appointed by Panda Funding or the Trustee, as the case may be, in
accordance with the Indenture to perform any function that the
Indenture authorizes the Trustee or such agent to perform.
"Authorized Representative" shall mean as to Panda
Funding, PIC or the Consolidating Engineer, the Person or Persons
authorized to act on behalf of such entity by its Board of
Directors or any other governing body of such entity for which
the Trustee shall have received an incumbency certificate with
specimen signatures.
"Authorized Signatory" shall mean any officer of the
Trustee or any other individual who shall be duly authorized by
appropriate corporate action on the part of the Trustee to
authenticate Bonds.
"Available Amounts" shall mean, as of any date of
determination, amounts held in the Extraordinary Distribution
Accounts and the Mandatory Redemption Accounts, as the case may
be, that have not been set aside and reserved to effect a
redemption as specified in a Company Order given on or prior to
such date.
"Board of Directors" shall mean, when used with respect
to a corporation, the board of directors of such corporation, or
any committee of that board duly authorized to act for it under
any Transaction Document.
"Board Resolution" shall mean a copy of a resolution
certified by the Secretary or an Assistant Secretary of Panda
Funding or PIC, as the case may be, to have been adopted by the
Board of Directors of Panda Funding or PIC, as the case may be,
and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Bonds" shall have the meaning ascribed thereto in the
recitals of the Indenture.
"Business Day" shall mean any day other than (i) a
Saturday or Sunday or (ii) a day on which commercial banks in New
York, New York, Dallas, Texas, or any city in which the Trustee's
Corporate Trust Office or the Collateral Agents's principal
office or, at any time when funds are on deposit in any of the
International Accounts and Funds, or the International Collateral
Agent's principal office are located, are authorized or required
to be closed.
"Capital Lease" shall mean any lease of property, real
or personal, which in accordance with GAAP, would be required to
be capitalized on the balance sheet of the lessee thereof.
"Capital Stock" shall mean, with respect to any Person,
any and all shares, interests, participations, rights or other
equivalents in the equity interests (however designated) in such
Person, and any rights (other than debt securities convertible
into an equity interest), warrants or options exercisable for,
exchangeable for or convertible into such an equity interest in
such Person.
"Capitalized Interest Deficiency" shall have the
meaning ascribed thereto in Section 4.4 of the Indenture.
"Capitalized Interest Fund" shall mean the fund
entitled "Capitalized Interest Fund" described in and maintained
by the Trustee pursuant to Article IV of the Indenture.
"Capitalized Interest Fund Termination Certificate"
shall have the meaning ascribed thereto in Section 4.4 of the
Indenture
"Capitalized Interest Requirement" shall mean an amount
equal to the aggregate amounts required to be on deposit in the
Capitalized Interest Fund on any date as set forth in all Series
Supplemental Indentures, as the same may be reduced pursuant to
Section 4.4(e) of the Indenture.
"Cash Available for Distribution" shall mean, for any
period, Total Cash Flow from all Project Entities on a
consolidated basis less (i) regularly scheduled payments of
principal and interest on Project Debt, (ii) additions to
reserves required by Project Agreements, (iii) Trustee's fees
under the Indenture, plus interest earned on reserves required
by Transaction Documents entered into by PIC, and (iv) the NNW
Participation Interest that at the time of determination is
available to be legally distributed from the Project Entities to
the PIC Entities without contravention of any Project Agreement;
provided that Cash Available for Distribution shall not include
any Extraordinary Financial Distributions and distributions
received as a result of Mandatory Redemption Events.
"Cash Available from Operations" shall mean, for any
period, Total Cash Flow from all Project Entities on a
consolidated basis prior to all Consolidated Debt Service, less
(i) additions to reserves required by Project Agreements, (ii)
Trustee's fees under the Indenture, plus interest earned on
reserves required by Transaction Documents entered into by PIC
and (iii) the NNW Participation Interest; provided that Cash
Available from Operations shall not include Extraordinary
Financial Distributions and distributions received as a result of
Mandatory Redemption Events.
"Change of Control" shall mean the occurrence of any
event or series of events by which: (a) any "person" or "group"
(as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
more than 50% of the total Voting Stock of PIC; (b) PIC
consolidates with or merges into another person or any person
consolidates with, or merges into, PIC, in any such event
pursuant to a transaction in which the outstanding Voting Stock
of PIC is changed into or exchanged for cash, securities or other
property, other than any such transaction where (i) the
outstanding Voting Stock of PIC is changed into or exchanged for
Voting Stock of the surviving or resulting person that is
Qualified Capital Stock and (ii) the holders of the Voting Stock
of the Company immediately prior to such transaction own,
directly or indirectly, not less than a majority of the Voting
Stock of the surviving or resulting person immediately after such
transaction; (c) PIC, either individually or in conjunction with
one or more of its Subsidiaries, sells, assigns, conveys,
transfers, leases or otherwise disposes of, or the Subsidiaries
of PIC sell, assign, convey, transfer, lease or otherwise dispose
of, all or substantially all of the properties of PIC and its
Subsidiaries, taken as a whole (either in one transaction or a
series of related transactions), including Capital Stock of such
Subsidiaries, to any Person (other than PIC or a Wholly-Owned
Subsidiary of PIC); or (d) the liquidation or dissolution of PIC.
"Change of Control Notice" shall have the meaning
ascribed thereto in Section 7.32 of the Indenture.
"Change of Control Offer" shall have the meaning
ascribed thereto in Section 7.32 of the Indenture.
"Change of Control Purchase Price" shall have the
meaning ascribed thereto in Section 7.32 of the Indenture.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Collateral" shall mean all of the Property and
interests in Property now owned or hereafter acquired in or upon
which a Lien has been or is purported or intended to have been
granted to the Collateral Agent pursuant to the Security
Documents.
"Collateral Agency Agreement" shall mean the Collateral
Agency Agreement dated as of July 31, 1996 among the Collateral
Agent, the Trustee, Panda Funding, PIC, PEC and the Letter of
Credit Provider (when and if a Letter of Credit is provided), as
the same shall be modified and supplemented and in effect from
time to time.
"Collateral Agent" shall mean Bankers Trust Company, a
New York banking corporation, together with its successors, as
collateral agent pursuant to the Collateral Agency Agreement.
"Collateral Agent's Security Rights" shall mean the
Collateral Agent's security rights with respect to Collateral
pursuant to the Security Documents.
"Commercial Operations" shall mean, with respect to a
Project, (i) the completion of construction and testing and the
functioning of such Project and (ii) the satisfaction and
discharge of all completion requirements of, and commencement of
regular capacity or reservation payments under the purchase,
transportation or other off-take or use contracts for such
Project.
"Company Request" and "Company Order" shall mean,
respectively, a written request or order signed in the name of
Panda Funding or PIC by its President or one of its Vice
Presidents, and by its Treasurer, Secretary, or one of its
Assistant Treasurers or Assistant Secretaries, and delivered to
the Trustee.
"Consolidated Debt Service" shall mean, for any period,
the PIC Debt Service plus scheduled principal and interest
payments on all Project Debt.
"Consolidated Debt Service Coverage Ratio" shall mean,
as of any date of determination, the ratio of (i) Cash Available
from Operations during the relevant period to (ii) Consolidated
Debt Service for such period; provided, however, that at any time
that PIC holds Project Interests in more than four (4) Projects,
then the Consolidated Debt Service Coverage Ratio shall not be
applied in respect of any event or requirement.
"Consolidating Engineer" shall mean ICF Resources
Incorporated, a Florida corporation, or its Eligible Successor.
"Corporate Trust Office" shall mean the principal
office of the Trustee at which at any particular time corporate
trust business of the Trustee shall be administered, which at the
date of this Indenture is at 4 Albany Street, New York, New York
10006, or such other office as may be designated by the Trustee
to Panda Funding, PIC and each Holder, at the expense of Panda
Funding and PIC.
"Debt" of any Person shall mean at any date, without
duplication, (i) all obligations of such Person for borrowed
money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all
obligations of such Person to pay the deferred purchase price of
property or services, (iv) all obligations under Capital Leases
of such Person, (v) all Debt of others secured by a Lien on any
asset of such Person, whether or not such Debt is assumed by such
Person, (vi) all Debt of others to the extent Guaranteed by such
Person, (vii) all obligations under letters of credit issued for
the account of such Person, (viii) all obligations of such Person
under trade or bankers' acceptances and (ix) all obligations of
such Person under any Interest Rate Protection Agreement.
"Debt Service Deficiency" shall have the meaning
ascribed thereto in Section 4.3 of the Indenture.
"Debt Service Fund" shall mean the fund entitled "Debt
Service Fund" described in and maintained by the Trustee pursuant
to Article IV of the Indenture.
"Debt Service Reserve Deficiency" shall have the
meaning ascribed thereto in Section 4.5 of the Indenture.
"Debt Service Reserve Fund" shall mean the fund
entitled "Debt Service Reserve Fund" described in and maintained
by the Trustee pursuant to Article IV.
"Debt Service Reserve Requirement" shall mean, on the
closing date for the initial series of Bonds, an amount equal to
$6,413,483.00, and, except as may be otherwise provided in any
Series Supplemental Indenture, at any time thereafter, an amount
equal to the scheduled principal and interest payments on the
Bonds created by such Series Supplemental Indenture due pursuant
to the Indenture during the twelve-month period immediately
following the date of determination, except that, if less than
twelve months remain before the Final Stated Maturity of the
Bonds, then an amount equal to the scheduled principal and
interest payments on the Bonds due pursuant to the Indenture for
such period shall be maintained; provided that the Debt Service
Reserve Requirement, as determined at any time, shall be reduced
by the amount then on deposit in the Capitalized Interest Fund in
respect of interest payments scheduled to be made during the
twelve-month period immediately following the date of
determination.
"Default" shall mean, as used in relation to the
Indenture or the PIC Notes, an Event of Default thereunder or an
event which with notice or lapse of time or both would become an
Event of Default thereunder.
"Depository" shall mean The Depository Trust Company,
its nominees and their respective successors.
"Disqualified Capital Stock" shall mean any Capital
Stock that, either by its terms, by the terms of any security
into which it is convertible or exchangeable or by contract or
otherwise, is, or upon the happening of an event or passage of
time would be, required to be redeemed or repurchased prior to
the Final Stated Maturity of the Bonds or is redeemable at the
option of the holder thereof at any time prior to such Final
Stated Maturity, or is convertible into or exchangeable for debt
securities at any time prior to such Final Stated Maturity.
"Distribution Certificate" shall have the meaning
ascribed thereto in Section 7.15 of the Indenture.
"Distribution Funds" shall mean the U.S. Distribution
Fund and the International Distribution Fund.
"Distribution Suspense Funds" shall mean the U.S.
Distribution Suspense Fund and the International Distribution
Suspense Fund.
"Distributions" shall have the meaning ascribed thereto
in Section 7.15 of the Indenture.
"Dollars" and "$" shall mean lawful money of the United
States.
"Duff & Phelps" shall mean Duff & Phelps Credit Rating
Co.
"Eligible Successor" shall mean any nationally
recognized independent engineering firm or any nationally
recognized independent consulting firm with expertise in
engineering and financial analysis that is selected by PIC and
not objected to by the Trustee within ten (10) days after receipt
of notice of such selection (which firm shall make the statements
contemplated by Section 4.11(d) of the Indenture). For purposes
of the foregoing, a Person shall be considered "independent" if
from the date which was six months prior to the date of such
instrument, neither such Person nor any Member of such Person
(i) had, or was committed to acquire, any direct financial
interest or material indirect financial interest in PIC or any
Affiliate thereof or (ii) was, or will be connected as a
promoter, underwriter, voting trustee, director, officer or
employee of PIC or any Affiliate thereof. "Member" shall mean
(a) all partners, shareholders or other Persons holding 5% or
more of the capital stock and other principals of the applicable
Person, (b) any professional employee of the Person involved in
providing any professional service to PIC or any Affiliate
thereof and (c) any professional employee having managerial
responsibilities and located in an office of such Person which
will participate in a significant portion of the services to be
performed by such Person.
"Event of Default" as used in relation to the Indenture
shall have the meaning ascribed thereto in Section 9.1 of the
Indenture.
"Event of Loss" shall mean an event which causes a
requisition of title to a Project or all or a portion of a
Project to be condemned, damaged, destroyed, confiscated or
rendered unfit for normal use for any reason whatsoever.
"Exchange Act" shall mean the Securities and Exchange
Act of 1934, as amended.
"Extraordinary Distribution Accounts" shall mean the
U.S. Extraordinary Distribution Account and the International
Extraordinary Distribution Account.
"Extraordinary Financial Distribution" shall mean all
distributions and other amounts received by PIC, any PIC Entity,
or any Person on behalf of PIC or any PIC Entity, directly or
indirectly, in respect of any of the Projects (including all
distributions from Project Entities directly or indirectly to PIC
or any PIC Entity), net of related unreimbursed costs and
expenses which are attributable to or incurred by PIC or any PIC
Entity, that may be legally distributed or paid to PIC or any PIC
Entity without contravention of any Project Agreement, resulting
or arising out of (i) settlements, judgments or other payments
received in respect of a Project in connection with any
litigation, arbitration or similar proceeding at law or in equity
or any administrative proceeding, except to the extent that any
such proceeding is in connection with a Mandatory Redemption
Event, (ii) any monies released from an escrow or similar account
established by or on behalf of a Project in connection with the
financing or contractual arrangements of such Project (other than
(A) monies held in an escrow or similar account established under
the Project's financing arrangements for the purpose of governing
the disbursement of such Project's revenue either before or
subsequent to a default by a Project under any of such Project's
contractual obligations, (B) monies held in operating or similar
reserve accounts established for Project operating contingencies
and funded out of the Project's operating cash flow and (c)
monies held in an escrow or similar account as a construction
contingency or for the payment of development or similar fees),
(iii) any buy-out or settlement of a contract to which a Project
is a party or (iv) any transaction that results in the receipt of
cash or other property upon the sale, transfer or other
disposition (other than as set forth in clause (iii) of this
definition) of any contractual rights of a Project except to the
extent that such transaction is in connection with a Mandatory
Redemption Event.
"Federal Bankruptcy Code" shall mean Title 11 of the
United States Code or any other federal bankruptcy code hereafter
in effect.
"Final Stated Maturity" shall mean, as of any date of
determination, the latest Stated Maturity of any Bond then
Outstanding.
"Future Ratio Determination Period" shall mean, as of
the date of determination, each of the following: (i) the period
beginning with the date of determination through December 31 of
that calendar year; (ii) each period consisting of a calendar
year thereafter through the calendar year immediately prior to
the calendar year in which the Final Stated Maturity occurs and
(iii) the period thereafter beginning with January 1 and ending
with the Final Stated Maturity.
"GAAP" shall mean, as of any date of determination,
generally accepted accounting principles then in effect in the
United States of America.
"GAAP Reserves" shall mean, with respect to any item
which is the subject of a Good Faith Contest, accounting reserves
which are established and maintained pursuant to GAAP.
"Global Bonds" shall have the meaning ascribed thereto
in Section 2.5 of the Indenture.
"Good Faith Contest" means the contest of an item if:
(i) the item is diligently contested in good faith by appropriate
proceedings timely instituted, GAAP Reserves are established and
maintained to the extent required by GAAP with respect to the
contested item and, during the period of such contest, the
enforcement of any contested item is effectively stayed; or (ii)
the failure to pay or comply with the contested item during the
period of such contest could not reasonably be expected to result
in a Material Adverse Change.
"Governmental Approval" shall mean (i) any
authorization, consent, approval, license, ruling, permit,
certification, exemption, filing, variance, order, judgment,
decree or publication of, by or with, (ii) any notice to, (iii)
any declaration of or with or (iv) any registration by or with,
any Governmental Authority required to be obtained or made.
"Government Authority" shall mean any nation, state,
sovereign, municipal, local, territorial, or other governmental
subdivision, department, commission, board, bureau, agency,
regulatory authority, instrumentality, judicial or administrative
body, domestic or foreign.
"Government Rule" shall mean any statute, law,
regulation, ordinance, rule, judgment, order, decree, permit,
concession, grant, franchise, code, license, directive,
guideline, policy or rule of common law, requirement of, or other
governmental restriction or any judicial or administrative
interpretation thereof by a Governmental Authority, including any
judicial or administrative order, consent decree or judgment or
similar form of decision of or determination by, or any
interpretation or administration of any of the foregoing by, any
Governmental Authority, whether now or hereafter in effect.
"Guaranty" by any Person shall mean any guaranty,
surety, note or other obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing in any manner any
Debt or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct
or indirect, contingent or otherwise, of such Person: (i) to
purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by
virtue of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, notes or services, to take-or-pay, or to
maintain financial statement conditions or otherwise); (ii)
entered into for the purpose of assuring in any other manner the
obligee of such Debt or other obligation of the payment thereof
or to protect such obligee against loss in respect thereof (in
whole or in part); or (iii) to reimburse any Person for the
payment by such Person under any letter of credit, surety, note
or other guaranty issued for the benefit of such other Person,
but excluding (x) endorsements for collection or deposit in the
ordinary course of business or (y) indemnity or hold harmless
provisions included in contracts entered into in the ordinary
course of business. The term "Guaranty" or "Guaranteed" used as
a verb shall have a correlative meaning.
"Holder" shall mean a Person in whose name a Bond is
registered in the Security Register.
"Indenture" shall mean the Trust Indenture, dated as of
July 31, 1996 among Panda Funding, PIC and the Trustee, as
amended or supplemented from time to time pursuant to the terms
thereof.
"Inflated" shall mean, as of any date, with respect to
any amount of Dollars (which amount shall, for the purposes of
this definition, be deemed to be expressed in January 1, 1996
Dollars), such amount of Dollars adjusted to reflect changes from
January 1, 1996 to such date in the Gross National Product
Implicit Price Deflator as published from time to time in the
United States Department of Commerce Bureau of Economic Analysis
publication entitled "Survey of Current Business"; provided that
such Gross National Project Implicit Price Deflator as published
from time to time is unavailable, the Gross National Project
Implicit Price Deflator shall mean an index, in substance similar
thereto, selected by the Fund.
"Initial Purchaser" shall mean Jefferies & Company,
Inc., a Delaware corporation.
"Institutional Accredited Investor" shall mean an
institution that is an "accredited investor" as that term is
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act.
"Insurance Proceeds" shall mean all amounts and
proceeds (including instruments) in respect of the proceeds of
any casualty insurance policy or title insurance policy, except
proceeds of delayed opening or business interruption insurance.
"Interest Payment Date" shall mean the Stated Maturity
of an installment of interest on any series of the Bonds.
"Interest Rate Protection Agreements" shall mean, for
any Person, any agreements or options providing for swaps,
ceiling rates, floor rates, contingent participation or other
hedging mechanisms with respect to the payment of interest.
"International Accounts and Funds" shall have the
meaning ascribed thereto in Section 4.1(b) of the Indenture.
"International Collateral Agent" shall mean the
Trustee, or an Affiliate of the Trustee appointed by the
Trustee, acting in its capacity as agent for the PIC
International Entities.
"International Distribution Fund" shall mean the fund
entitled "International Distribution Fund" maintained in the name
of the PIC International Entities and described in Article IV of
the Indenture.
"International Distribution Suspense Fund" shall mean
the fund entitled "International Distribution Suspense Fund"
described in and maintained by the International Collateral Agent
pursuant to Article IV of the Indenture.
"International Extraordinary Distribution Account"
shall mean the account entitled "International Extraordinary
Distribution Account" described in and maintained by the
International Collateral Agent pursuant to Article IV of the
Indenture.
"International Mandatory Redemption Account" shall mean
the account entitled "International Mandatory Redemption Account"
described in and maintained by the International Collateral Agent
pursuant to Article IV of the Indenture.
"International Mandatory Redemption Event" shall have
the meaning ascribed thereto in Section 4.8 of the Indenture.
"International Project Account" shall mean the account
entitled "International Project Account" described in and
maintained by the International Collateral Agent pursuant to
Article IV of the Indenture.
"International Project Agreement" shall mean any
contract, indenture or agreement entered into in connection with,
and reasonably necessary for, the development, acquisition,
construction, financing, ownership or operation of a Non-U.S.
Project, including fuel and other supply agreements and power
sales and other off-take agreements, guaranties of payment or
performance and security agreements related to any of the
foregoing.
"International Project Debt" shall mean any
indebtedness created, incurred or assumed by an International
Project Entity or secured by the assets of a Non-U.S. Project.
"International Project Distributions" shall have the
meaning ascribed thereto in Section 4.2 of the Indenture.
"International Project Entity" shall mean any Person
that is (i) directly or indirectly owned by a PIC Entity and (ii)
(A) that is the direct or indirect owner of a Non-U.S. Project or
(B) that is obligated under or a guarantor of International
Project Debt or that has granted a security interest in any of
its assets (including Non-U.S. Project cash flows), other than
the capital stock of any of its Subsidiaries (and any dividends
or other distributions on such capital stock and proceeds
therefrom), to secure the payment of International Project Debt
or the performance of any International Project Agreement.
"International Redemption Event" shall mean an event
requiring the redemption of Other International Notes.
"Investment" shall mean, for any Person: (i) the
acquisition (whether for cash, Property of such Person, services
or securities or otherwise) of capital stock, bonds, notes,
debentures, joint venture, partnership or other ownership
interests or other securities of any other Person or any
agreement to make any such acquisition (including, without
limitation, any "short sale" or any sale of any securities at a
time when such securities are not owned by the Person entering
into such short sale), or (ii) the making of any deposit with, or
advance, loan or other extension of credit to, any other Person
(including the purchase of Property from another Person subject
to an understanding or agreement, contingent or otherwise, to
resell such Property to such Person, but excluding (x) any such
deposit, account receivable, advance, loan or extension of credit
representing the purchase price of goods or services sold in the
ordinary course of business and (y) any deposit which constitutes
a Permitted Lien).
"Investment Company Act" shall mean the Investment
Company Act of 1940, as amended.
"Letter of Credit" shall mean an irrevocable standby
letter of credit (a) issued by a commercial bank whose long-term
unsecured debt obligations are rated (or whose bank holding
company has long-term unsecured debt obligations rated) at least
"A" by S&P or "A2" by Moody's (or an equivalent rating by another
nationally recognized credit rating agency of similar standing if
either of such corporations is not in the business of rating long-
term obligations of commercial banks) at the time of issuance,
(b) with a minimum term of one year (or shorter period ending on
or after the Final Stated Maturity), (c) for the benefit of the
Trustee, (d) which shall provide that no reimbursement
obligations or payments in respect of interest on such
reimbursement obligations shall be made out of Project
Distributions or any Collateral to the bank issuing such letter
of credit until the Holders have been paid all outstanding
amounts of principal and interest and other amounts due on the
Bonds and under the Indenture in full, in cash, except from
monies available in the Distribution Funds, and (e) providing for
the amount thereof to be available to the Trustee in multiple
drawings, including a final drawing at any time within thirty
(30) days prior to the expiration of such letter of credit for
the full face amount thereof in the event such letter of credit
is not renewed or substituted with one or more other Letters of
Credit at such time, conditioned only upon presentation of sight
drafts accompanied by the applicable drawing certificate in the
form attached to such letter of credit (and reasonably acceptable
in form to the Trustee).
"Letter of Credit Provider" shall mean any commercial
bank that issues a Letter of Credit and that enters into a
reimbursement agreement and a Collateral Agency Agreement in
substantially the form attached as Schedule I to the Indenture,
provided that any required consents shall have been obtained.
"Liens" shall mean any mortgage, pledge, security
interest, hypothecation, collateral assignment, lien (statutory
or other), or preference, priority or other security agreement or
payment arrangement or encumbrance of any kind or nature
whatsoever which has the practical effect of constituting a
security interest (including, without limitation, any conditional
sale or other title retention agreement, any financing lease
having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement or similar
instrument under the Uniform Commercial Code or comparable law of
any jurisdiction, domestic or foreign).
"Mandatory Redemption Accounts" shall mean the U.S.
Mandatory Redemption Account and the International Mandatory
Redemption Account.
"Mandatory Redemption Event" shall have the meaning
ascribed thereto in Section 4.8 of the Indenture.
"Material Adverse Change" shall mean (a) a material
adverse change in the business, results of operations, condition
(financial or otherwise) or property of (1) PIC, (2) Panda
Funding (3) any PIC Entity, (4) any Project Entity or (5) any
Project, in each case to the extent that such change could be
reasonably expected to have a material adverse effect on Panda
Funding or its ability to make payment on the Bonds, or on PIC or
its ability to make payment on the PIC Notes or to perform its
obligations under the PIC Guaranty or (b) any event or occurrence
of whatever nature, which in any case has a material adverse
effect on (A) the ability of PEC, PIC, Panda Funding or any PIC
Entity to perform its obligations under any agreement governing
the rights and obligations of such entity, including any
Transaction Document, or any Project Entity's ability to perform
its obligations under any agreement governing the rights and
obligations of such entity, in each such case, to the extent that
such event or occurrence could be reasonably expected to have a
material adverse effect on Panda Funding or its ability to make
payment on the Bonds, or on PIC or its ability to make payment on
the PIC Notes or to perform its obligations under the PIC
Guaranty or (B) the validity or priority of the Trustee's or
Collateral Agent's Lien on the Collateral.
"Member" shall have the meaning ascribed thereto in the
definition of "Eligible Successor" in Appendix A of the
Indenture.
"monies"shall mean, with respect to any International
Account or Fund or U.S. Account or Fund, cash and Permitted
Investments on deposit in such Account or Fund.
"Monthly Distribution Date" shall mean the first
Business Day of each calendar month.
"Moody's" shall mean Moody's Investors Service, Inc.
"Non-U.S. Projects" shall mean the Projects owned by
PIC International Entities and located outside the United States
in respect of which deferral of U.S. federal income taxes is
being sought.
"NNW Participation Interest" shall mean NNW, Inc.'s
cash flow participation in distributions from the Panda-Rosemary
Partnership.
"Officer's Certificate" shall mean a certificate
satisfying the requirements of Section 1.2 of the Indenture of an
Authorized Representative of either PIC or Panda Funding, as the
case may be, and signed by the president or any vice president
and by the treasurer, an assistant treasurer, the secretary or an
assistant secretary, of PIC or Panda Funding, as applicable, and
delivered to the Trustee or the International Collateral Agent,
as the case may be.
"Opinion of Counsel" shall mean a written opinion of
counsel satisfying the requirements of Section 1.2 of the
Indenture for any reason either expressly referred to in the
Indenture or other counsel, which counsel and opinion shall be
reasonably satisfactory to the Trustee and which may include,
without limitation, counsel for Panda Funding or PIC, whether or
not such counsel is an employee of any of them.
"Other International Note" shall mean any loan to a PIC
International Entity from PIC made pursuant to a loan agreement
in the form of Exhibit H to the Indenture, which is not evidenced
by a PIC International Entity Note.
"Outstanding", when used with respect to Bonds, shall
mean, as of the date of determination, all Bonds theretofore
authenticated and delivered under the Indenture, except:
(i) Bonds theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Bonds or portions thereof deemed to have been
paid within the meaning of Section 6.3(a) of the Indenture;
and
(iii) Bonds that have been exchanged for other
securities or securities in lieu of which other Bonds have
been authenticated and delivered pursuant to this Indenture
other than any Bonds in respect of which there shall have
been presented to the Trustee proof satisfactory to it that
such Bonds are held by a bona fide purchaser in whose hands
such Bonds constitute valid obligations of Panda Funding;
provided, however, that in determining whether the Holders of the
requisite principal amount of Bonds outstanding have given any
request, demand, authorization, direction, notice, consent or
waiver hereunder or whether or not a quorum is present at a
meeting of Holders, Bonds owned by Panda Funding, PIC or an
Affiliate of either thereof shall be disregarded and deemed not
to be outstanding as provided in Section 1.4 of the Indenture.
"Panda Funding" shall have the meaning ascribed thereto
in the first paragraph of the Indenture.
"Panda Funding Security Agreement" shall mean that
certain Security Agreement dated July 31, 1996 between Panda
Funding and the Collateral Agent which provides for the
collateral assignment of all of Panda Funding's personal property
to the Collateral Agent.
"Paying Agent" shall mean any Person acting as Paying
Agent pursuant to Section 10.11 of the Indenture.
"Payment Date" shall mean a Principal Payment Date or
an Interest Payment Date.
"PEC" shall mean Panda Energy Corporation, a Texas
corporation.
"PEC Stock Pledge Agreement" shall mean the Stock
Pledge Agreement dated July 31, 1996 between PEC and the
Collateral Agent, pursuant to which PEC pledges 100% of the
capital stock of PIC to the Collateral Agent as Collateral.
"PEI" shall mean Panda Energy International, Inc., a
Texas corporation.
"Permitted Investments" shall mean:
(i) direct obligations of the United States of
America, or of any agency or instrumentality thereof, or
obligations guaranteed or insured as to principal and
interest by the United States of America or by any agency or
instrumentality thereof; or
(ii) commercial paper or banker's acceptances having
(on the date of acquisition thereof) a rating from S&P of at
least "A-2" or from Moody's of at least "P-2" (or an
equivalent rating from another nationally recognized credit
rating agency if neither of such corporations is then in the
business of rating commercial paper); or
(iii) certificates of deposit and other time deposits
issued by, and demand deposits with, any commercial bank
organized under the laws of the United States of America or
any state thereof or the District of Columbia having (or
whose holding company has) on the date of such deposit long-
termed unsecured obligations rated "A" or better by S&P or
"A-2" or better by Moody's (or an equivalent rating from
another nationally recognized credit rating agency if one or
more of such corporations are not then in the business of
rating such obligations); or
(iv) debt securities denominated in Dollars and having
(on the date of acquisition thereof) a rating of "A" or
better by S&P or "A-2" or better by Moody's (or an
equivalent rating from another nationally recognized credit
rating agency if one or more of such corporations are not in
the business of rating debt securities); or
(v) repurchase agreements with respect to (and secured
by a pledge of) securities described in clause (i) above and
entered into with any commercial bank described in clause
(iii) above or any securities broker-dealer of recognized
national standing; or
(vi) money market or mutual funds sponsored by any
securities broker-dealer of recognized national standing (or
an Affiliate thereof), including funds for which the Trustee
or any of its affiliates is investment manager or advisor
having an investment policy that requires substantially all
the invested assets of such fund to be invested in
Investments described in any one or more of the foregoing
clauses.
"Permitted Liens" shall mean Liens permitted under
Section 7.10 of the Indenture.
"Person" shall mean any individual, sole
proprietorship, corporation, partnership, joint venture, limited
liability company, trust, estate, unincorporated association,
institution, Governmental Authority or any other entity.
"Physical Bonds" shall have the meaning ascribed
thereto in Section 2.5 of the Indenture.
"PIC" shall have the meaning ascribed to it in the
first paragraph of the Indenture.
"PIC Debt Service" shall mean, for any period,
scheduled principal and interest payments on the Bonds.
"PIC Debt Service Coverage Ratio" shall mean, as of any
date of determination, the ratio of (i) Cash Available for
Distribution during the relevant period to (ii) PIC Debt Service
for such period.
"PIC Entity or Entities" shall mean one or more Persons
(i) that are not Project Entities, (ii) 100% of the Voting Stock
or other voting equity interest of which is directly owned by
PIC, other than any director's qualifying shares mandated by
applicable Governmental Rule, and (iii) through which PIC owns
indirect interests in Project Entities.
"PIC Expense Fund" shall mean the fund entitled "PIC
Expense Fund" described in and maintained by the Trustee pursuant
to Article IV of the Indenture.
"PIC Expenses Amount" shall mean for each calendar year
commencing with 1997, an amount equal to $300,000 (Inflated
annually commencing January 1, 1997 and adjusted as of January of
each year ratably for each partial calendar year in which Bonds
shall be Outstanding); provided, however, that this amount may be
increased by delivery by PIC to the Trustee of an Officer's
Certificate requesting such increase, provided further that such
increase during any calendar year shall not exceed 40% of the
amount in effect on January 1 of such calendar year..
"PIC Guaranty" shall mean the guaranty made by PIC
pursuant to Article XIII of the Indenture.
"PIC International Entities" shall mean PIC Entities
that own, through Project Entities, Non-U.S. Projects.
"PIC International Entity Loan" shall mean any loan by
PIC to a PIC International Entity of the proceeds of the issuance
of a series of Bonds (issued by Panda Funding to PIC and
represented by a PIC Note), the payments on which are to be made
from distribution from a Non-U.S. Project to be held by such PIC
International Entity as part of the Project Portfolio.
"PIC International Entity Loan Agreement" shall mean
the loan agreement, substantially in the form of Exhibit E to the
Indenture, between the PIC International Entities and PIC.
"PIC International Entity Note" shall mean a note
evidencing a PIC International Entity Loan.
"PIC International Entity Security Agreement" shall
mean the Security Agreement(s), substantially in the form of
Exhibit F to the Indenture, executed by a PIC International
Entity in favor of PIC, as the same may be modified or
supplemented from time to time.
"PIC Loan Agreement" shall mean the Loan Agreement,
dated July 31, 1996, between PIC and Panda Funding.
"PIC Note" shall have the meaning ascribed thereto in
Section 3.1 of the Indenture.
"PIC Security Agreement" shall mean the Security
Agreement dated July 31, 1996 between PIC and the Collateral
Agent.
"PIC Stock Pledge Agreement" shall mean the Stock
Pledge Agreement dated July 31, 1996 between PIC and the
Collateral Agent, pledging as Collateral (i) 60% of the stock or
other ownership interests of each PIC International Entity and
(ii) 100% of the stock or other ownership interests of Panda
Funding and each PIC U.S. Entity to the Collateral Agent.
"PIC U.S. Entities" shall mean PIC Entities that,
through Project Entities, own U.S. Projects.
"PIC U.S. Entity Guaranty" shall mean that certain
guaranty agreement, substantially in the form of Exhibit G to the
Indenture, among the PIC U.S. Entities and the Collateral Agent.
"Place of Payment" when used with respect to the Bonds
of any series shall mean the office or agency maintained pursuant
to Section 10.11 of the Indenture and such other place or places,
if any, where the principal of, and premium, if any, and interest
on the Bonds of such series are payable as specified in the
Series Supplemental Indenture setting forth the terms of the
Bonds of such series.
"Predecessor Bond" with respect to any particular Bond,
shall mean any previous Bond evidencing all or a portion of the
same debt as that evidenced by such particular Bond; for the
purposes of this definition, any Bond authenticated and delivered
under Section 2.9 of the Indenture in lieu of a lost, destroyed
or stolen Bond shall be deemed to evidence the same debt as the
lost, destroyed or stolen Bond.
"Principal Payment Date" shall mean the Stated Maturity
of an installment of principal on any series of the Bonds.
"Private Placement Legend" shall mean the legend
initially set forth on the Bonds in the form set forth in
Section 2.8 of the Indenture.
"Project" or "Projects" shall mean one or more electric
power generation projects (including businesses substantially
related thereto, such as a steam host affiliated therewith) that
have been or will be transferred to PIC or a PIC Entity pursuant
to the Additional Projects Contract.
"Project Accounts" shall have the meaning ascribed
thereto in Section 4.2 of the Indenture.
"Project Agreements" shall mean U.S. Project Agreements
and International Project Agreements.
"Project Debt" shall mean U.S. Project Debt and
International Project Debt.
"Project Distributions" shall have the meaning ascribed
thereto in Section 4.2 of the Indenture.
"Project Engineer" shall mean a nationally recognized
engineering firm that is "independent" (as defined in the
definition of Eligible Successors") and provides engineering
services for any Project.
"Project Entity" shall mean a U.S. Project Entity or an
International Project Entity.
"Project Interests" shall mean an equity or similar
ownership interest in a Project.
"Project Portfolio" shall mean the portfolio of
Projects owned, directly or indirectly, by PIC.
"Property" shall mean any right or interest in or to
property or assets of any kind whatsoever, whether real, personal
or mixed and whether tangible or intangible.
"Purchase Agreement" shall mean the Purchase Agreement
dated July 26, 1996 between Panda Funding and the Initial
Purchaser relating to the initial series of Bonds.
"Qualified Capital Stock" shall mean, as to any Person,
any and all Capital Stock of such Person other than Disqualified
Capital Stock.
"Qualified Institutional Buyer" has the meaning
attributed thereto in Rule 144A under the Securities Act.
"Rating Agencies" shall mean Moody's, S&P and Duff &
Phelps or another nationally recognized credit rating agency of
similar standing if any of the foregoing corporations is not in
the business of rating the subject of such rating.
"Reaffirmation" shall mean, with respect to any event,
a confirmation by any two of the three Rating Agencies that then
maintain a rating on the Bonds (all of which Rating Agencies
shall be requested to provide such confirmation) to the effect
that the rating of the Bonds in effect immediately prior to such
event will be maintained or improved after giving effect to such
event. The terms "Reaffirm" or "Reaffirmed" used as a verb shall
have correlative meaning.
"Redemption Date" shall have the meaning ascribed
thereto in Section 8.2 of the Indenture.
"Regular Record Date", for the Stated Maturity of any
Bond of a series, or for the Stated Maturity of any installment
of principal thereof or payment of interest thereon, shall mean
the 15th day (whether or not a Business Day) next preceding such
Stated Maturity, or any other date specified for such purpose in
the Series Supplemental Indenture relating to the Bonds of such
series or in the form of Bond of such series attached to the
Series Supplemental Indenture relating to the Bonds of such
series.
"Regulation S" shall mean Regulation S under the
Securities Act.
"Requirement of Law" shall mean, as to any Person, the
Certificate of Incorporation and by-laws or partnership agreement
or other organizational or governing documents of such Person,
and any Government Rule applicable to or binding upon such Person
or any of its properties or to which such Person or any of its
properties is subject, and, as to Panda Funding, PIC, PIC Entity,
Project Entity or the Projects, any Government Rule applicable to
or binding on such entity or any properties of such entity or to
which such entity or any properties of such entity is subject,
including, without limitation, relevant environmental laws,
restrictive land use covenants and zoning, use and building
codes, laws, regulations and ordinances.
"Responsible Officer" when used with respect to the
Trustee, shall mean any officer in the corporate trust and agency
group (or any successor group) of the Trustee including without
limitation, any vice president, assistant vice president,
assistant secretary or any other officer of the Trustee
customarily performing functions similar to those performed by
any of the above designated officers and also means with respect
to a particular corporate trust matter, any other officer to whom
such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Rule 144A Information" shall have the meaning ascribed
thereto in Section 7.17 of the Indenture.
"S&P shall mean Standard & Poor's Ratings Service, a
division of The McGraw Hill Companies, Inc.
"SEC" shall mean the Securities and Exchange Commission
of the United States or any successor agency or commission.
"Secured Parties" shall have the meaning ascribed
thereto in the Collateral Agency Agreement.
"Securities Act" shall mean the Securities Act of 1933,
as amended.
"Security Documents" shall mean, collectively, (i) the
Collateral Agency Agreement, (ii) the Panda Funding Security
Agreement, (iii) the PEC Stock Pledge Agreement, (iv) the PIC
Stock Pledge Agreement, (v) the PIC Security Agreement, and all
financing statements executed in connection therewith, and any
and all other agreements or instruments now or hereafter executed
by Panda Funding, PIC, any PIC Entity, PEC, PEI or any other
Person as security for the payment or performance of the Bonds.
"Security Register" shall have the meaning ascribed
thereto in Section 2.8 of the Indenture.
"Security Registrar" shall mean any Person acting as
Security Registrar pursuant to Section 10.11.
"Series Supplemental Indenture" shall mean an indenture
supplemental to the Indenture entered into by Panda Funding, PIC
and the Trustee for the purpose of establishing, in accordance
with the Indenture, the title, form and terms of the Bonds of any
series; "Series Supplemental Indentures" shall mean each and
every Series Supplemental Indenture.
"Special Purpose Provisions" shall mean provisions in
the Certificate of Incorporation or other charter documents of
Panda Funding, PIC or any PIC Entity (i) restricting the purposes
of such entity to substantially the purposes provided in "Article
Third" of the Certificate of Incorporation of Panda Funding, PIC
or Panda Interholding Corporation, respectively, as in effect on
the date on which the initial series of Bonds is issued and (ii)
providing for an independent director, for the affirmative vote
of the independent director on specified matters and for the
entity to ensure its independence through certain actions, in
substance as provided in "Article Sixth" of such Certificate of
Incorporation of Panda Funding, PIC or Panda Interholding
Corporation, respectively, as in effect on the date on which the
initial series of Bonds is issued.
"Special Record Date" for the payment of any defaulted
principal or interest shall mean a date fixed by Panda Funding
pursuant to Section 2.11 of the Indenture.
"Stated Maturity" when used with respect to any Bond or
any installment of principal thereof or payment of interest
thereon, shall mean the date specified in such Bond as the fixed
date on which the last installment of principal of such Bond, or
such installment of principal or such payment of interest,
respectively, is due and payable.
"Subordinated Debt" shall mean all Debt of any PIC
Entity subordinated with respect to the payments of the PIC
Notes and the Bonds in accordance with the subordination
provisions set forth in Schedule II to the Indenture.
"Subsidiary" shall mean, in respect of any Person, a
corporation, partnership, limited liability company or other
entity, (i) at least a 50% (direct or indirect) ownership or
equivalent interest of the outstanding Voting Stock of which is
owned, directly or indirectly, by such Person or (ii) (a) at
least a 25% (direct or indirect) ownership or equivalent interest
of the outstanding Voting Stock is owned, directly or indirectly,
by such Person and (b) such Person exercises a controlling
influence over the management and policies with respect to such
corporation, partnership, limited liability company or other
entity, directly or indirectly, whether through the ownership of
Voting Stock, by contract or otherwise, provided that no other
entity has greater control than such Person over the management
and policies of such corporation, partnership, limited liability
company or other entity.
"Successor Entity" shall mean a Person complying with
the requirements set forth in Section 7.12 of the Indenture.
"Taxes" shall mean any and all present or future
liabilities, losses, expenses and costs of any kind whatsoever
that are license fees, documentation fees, taxes (including,
without limitation, gross or net income, gross or net receipts,
sales, use, value-added, franchise, business, transfer, capital,
property (tangible and intangible), excise and stamp taxes),
levies, imposts, duties, charges or withholdings, together with
any penalties, fines or interest thereon or additions thereto,
imposed on Panda Funding by any Governmental Authority.
"Total Cash Flow" shall mean, as to any Person, the sum
of the net income of such Person for any period plus, to the
extent deducted from net income, all non-cash items, including,
but not limited to, depreciation, depletion and impairment,
amortization of intangibles and deferred taxes, in each case for
such period and determined as to such Person minus, to the extent
included in net income, all non-cash income, calculated on a cash
basis in accordance with GAAP (except to the extent that a cash
basis is inconsistent with GAAP).
"Transaction Documents" shall mean, collectively, the
Security Documents, PIC Notes, the Bonds, PIC Guaranty, the
Indenture, the PIC Loan Agreement, and the PIC International
Entity Loan Agreement, the PIC U.S. Entity Guaranties, the PIC
International Entity Pledge Agreement, the Non-Petition Agreement
and the Additional Projects Contract, together with any other
document, instrument or agreement now or hereafter entered into
in connection with the Indenture, the Bonds, the indebtedness
evidenced thereby or the Collateral, as such documents,
instruments or agreements may be amended, modified or
supplemented from time to time.
"Transfer" shall mean a sale, transfer, assignment,
exchange, hypothecation, pledge or other disposition and, when
used as a verb, shall have a correlative meaning.
"Trust Indenture Act" shall mean the Trust Indenture
Act of 1939, as amended, as in effect at the date as of which the
Indenture was executed, until such time as the Indenture is
qualified under the Trust Indenture Act and thereafter as in
effect on the date on which this Indenture is qualified under the
Trust Indenture Act; except (i) as provided in Section 12.7 and
(ii) in the event the Trust Indenture Act of 1939 is amended
after such date, "Trust Indenture Act" shall mean, to the extent
required by any such amendment, the Trust Indenture Act of 1939,
as so amended.
"Trustee" shall mean the Person named as the "Trustee"
in the Recitals of the Indenture until a successor Trustee shall
have become such pursuant to the applicable provisions of the
Indenture, and thereafter shall mean such successor Trustee.
"Unapplied Extraordinary Balance" shall have the
meaning ascribed thereto in Section 4.9 of the Indenture.
"Uniform Commercial Code" or "UCC" shall mean the
Uniform Commercial Code as in effect from time to time in the
State of New York and any other jurisdiction the laws of which
control the creation or perfection of security interests under
the Security Documents.
"United States" and "U.S." shall mean the United States
of America.
"U.S. Accounts and Funds" shall have the meaning
described thereto in Section 4.1(a) of the Indenture.
"U.S. Distribution Fund" shall mean the fund entitled
"U.S. Distribution Fund" described in and maintained in the name
of PIC pursuant to Article IV of the Indenture.
"U.S. Distribution Suspense Fund" shall mean the fund
entitled "U.S. Distribution Suspense Fund" described in and
maintained by the Trustee pursuant to Article IV of the
Indenture.
"U.S. Extraordinary Distribution Account" shall mean
the account entitled "U.S. Extraordinary Distribution Account"
described in and maintained by the Trustee pursuant to Article IV
of the Indenture.
"U.S. Government Obligations" shall mean direct
obligations of the United States for the payment of which its
full faith and credit is pledged, or obligations of a Person
controlled or supervised by and acting as an agency or
instrumentality of the United States and the payment of which is
unconditionally guaranteed by the United States, and shall also
include a depository receipt issued by a bank or trust company as
custodian with respect to any such U.S. Government Obligation or
a specific payment of interest on or principal of any such U.S.
Government Obligation held by such custodian for the account of a
holder of a depository receipt; provided that (except as required
by law) such custodian is not authorized to make any deduction
from the amount payable to the holder of such depository receipt
from any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of interest on or
principal of the U.S. Government Obligation evidenced by such
depository receipt.
"U.S. Mandatory Redemption Account" shall mean the
account entitled "U.S. Mandatory Redemption Account" described in
and maintained by the Trustee pursuant to Article IV of the
Indenture.
"U.S. Mandatory Redemption Event" shall have the
meaning ascribed in Section 4.8 of the Indenture.
"U.S. Project Account" shall mean the account entitled
"U.S. Project Account" described in and maintained by the Trustee
pursuant to Article IV of the Indenture.
"U.S. Project Agreement" shall mean any contract,
indenture or agreement entered into in connection with and
reasonably necessary for the development, acquisition,
construction, financing, ownership or operation of a U.S.
Project, including fuel and other supply agreements and power
sales and other off-take agreements, guaranties of payment or
performance and security agreements related to any of the
foregoing.
"U.S. Project Debt" shall mean any indebtedness
created, incurred or assumed by a U.S. Project Entity or secured
by the assets of a U.S. Project.
"U.S. Project Distributions" shall have the meaning
ascribed thereto in Section 4.2 of the Indenture.
"U.S. Project Entity" shall mean any Person that is (i)
directly or indirectly owned by a PIC Entity and (ii) (A) that is
the direct or indirect owner of a U.S. Project or (B) that is
obligated under or a guarantor of U.S. Project Debt or that has
granted a security interest in any of its assets (including U.S.
Project cash flows), other than the capital stock of any of its
Subsidiaries (and any dividends or other distributions on such
capital stock and proceeds therefrom), to secure the payment of
U.S. Project Debt or the performance of any U.S. Project
Agreement.
"U.S. Projects" shall mean the Projects owned by PIC
U.S. Entities and located in the United States, and certain other
Projects located outside of the United States in respect of which
deferral of U.S. federal income taxes is not being sought.
"Voting Stock" shall mean (i) all capital stock of a
corporation normally entitled to vote in the election of
directors or other governing body of such corporation (without
regard to any contingency, whether or not such contingency has
occurred) and (ii) in respect of a partnership or other entity
that is not a corporation, all ownership interests therein
normally entitled to vote in the election of persons analogous to
directors or, if there are no analogous persons, then normally
entitled to participate in the direction of the management of
such entity (without regard to any contingency, whether or not
such contingency has occurred).
"Wholly-Owned Subsidiary of PIC" shall mean a
Subsidiary of PIC 100% of the Voting Stock or other voting equity
interests of which is owned, directly or indirectly, by PIC other
than any director's qualifying shares mandated by applicable
Governmental Rule.
FIRST SUPPLEMENTAL INDENTURE
dated as of July 3l, 1996
to
TRUST INDENTURE
dated as of July 31, 1996
among
PANDA FUNDING CORPORATION,
PANDA INTERFUNDING CORPORATION
and
BANKERS TRUST COMPANY, AS TRUSTEE
________________________________________________________________
FIRST SUPPLEMENTAL INDENTURE, dated as of July 31, 1996
(this First Supplemental Indenture"), to the Trust Indenture
dated as of July 31, 1996 (together with any amendments or
supplements permitted thereunder, the "Original Indenture") among
PANDA FUNDING CORPORATION, a Delaware corporation ("Panda
Funding"), its executive office and mailing address being at 4100
Spring Valley Road, Suite 1001, Dallas, Texas 75244, PANDA
INTERFUNDING CORPORATION, a Delaware corporation ("PIC"), its
executive office and mailing address being at 4100 Spring Valley
Road, Suite 1001, Dallas, Texas 75244, and BANKERS TRUST COMPACT,
a New York state banking corporation (the "Trustee"), its
corporate trust office and mailing address being at 4
AlbanyStreet, New York, New York 10006.
WHEREAS, Panda Funding, PIC and the Trustee have heretofore
executed and delivered the Original Indenture to provide for the
issuance by Panda Funding of Bonds (as defined in the Original
Indenture) to be issued in one or more series;
WHEREAS, Sections 2.l, 2.3 and 12.1 of the Original
Indenture provide, among other things, that Panda Funding, PIC
and the Trustee may enter into indentures supplemental to the
Original Indenture without the consent of the holders of the
Bonds for, among other things. the purpose of establishing the
designation, form, terms and provisions of the Bonds of any
series as permitted by Sections 2.1, 2.3 and 12.1 of the Original
Indenture;
WHEREAS, Panda Funding has requested the Trustee and PIC to
enter into this First Supplemental Indenture for the purpose of
establishing the designation, form, terms and provisions of the
Bonds to be issued hereunder;
WHEREAS, the Series A Bonds (as hereinafter defined) are to
be issued and sold in transactions exempt from registration under
the Securities Act pursuant to the Purchase Agreement and the
Series A-l Bonds (as hereinafter defined) are to be issued in
exchange for the Series A Bonds pursuant to the Registration
Rights Agreement;
WHEREAS, all action on the part of Panda Funding necessary
to authorize the issuance of said Bonds under the Original
Indenture and this First Supplemental Indenture (the Original
Indenture, as supplemented by this First Supplemental Indenture,
being hereinafter called the "Indenture") has been duly taken;
and
WHEREAS, all acts necessary to make said Bonds, when
executed by Panda Funding and having the notation of the PIC
Guaranty thereon executed by PIC and authenticated and delivered
by the Trustee as provided in the Original Indenture, the valid
and binding legal obligations of Panda Funding and PIC, and to
make this First Supplemental Indenture a valid and binding
agreement in accordance with its terms and the terms of the
Original Indenture upon each of Panda Funding and PIC, have been
done and performed, and the execution of this First Supplemental
Indenture and the creation and issuance under the Indenture of
said Bonds (including the notation of the PIC Guaranty thereon)
have in all respects been duly authorized, and each of Panda
Funding and PIC, in the exercise of the legal right and power
vested in it, executes this First Supplemental Indenture and
proposes to create, execute, issue and deliver said Bonds;
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE
WITNESSETH:
That, in order to establish the designation, form, terms and
provisions of, and to authorize the authentication and delivery
of, said Bonds, and in consideration of the acceptance of said
Bonds by the Holders thereof and of other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
(a) Terms used herein and not otherwise defined herein
shall have the respective meanings assigned thereto in the
Original Indenture or in Appendix A thereto. All rules of
construction set forth in the Original Indenture (including
Article I of the Original Indenture) shall apply to this First
Supplemental Indenture.
(b) For all purposes of this First Supplemental Indenture,
except as otherwise expressly provided or unless the context
otherwise requires, the following terms shall have the following
respective meanings (such meanings shall apply equally to both
the singular and plural forms of the respective teas):
"Additional Interest" shall have the meaning ascribed
thereto in Section 2.1 hereof.
"Called Principal" shall mean, with respect to any Initial
Bond, the principal of such Initial Bond that is to be redeemed
pursuant to Section 2.5(b) of the First Supplemental Indenture.
"Discounted Value" shall mean, with respect to the Called
Principal of any Initial Bond, the amount obtained by discounting
all Remaining Scheduled Payments with respect to such Called
Principal from their respective scheduled due dates to the
applicable Redemption Date with respect to such Called Principal,
in accordance with accepted financial practice and at a discount
factor (applied on the same periodic basis as that on which
interest on the Initial Bonds payable) equal to the Reinvestment
Yield with respect to such Called Principal.
"Exchange Offer" shall mean the offer by Panda Funding,
pursuant to an effective registration statement filed with the
SEC, to exchange Series A-1 Bonds for Outstanding Series A Bonds
in accordance with the terms and provisions of the Registration
Rights Agreement.
"Exchange Offer Consummation Date" shall mean the date on
which the Exchange Offer is consummated in accordance with the
terms and provisions of the Registration Rights Agreement.
"Final Maturity Date" shall mean August 20, 2012.
"Initial Bonds" shall mean. collectively the Series A Bonds
and the Series A-l Bonds.
"Interest Payment Dates" shall mean each February 20 and
August 20 of each year commencing on February 20, 1997, or if
such day is not a Business Day, the next succeeding Business Day.
"Issue Date" shall mean the date of the first issuance of
the Series A Bonds hereunder.
"Make-Whole Amount" shall mean' with respect to any Initial
Bond, an amount equal to the excess, if any, of the Discounted
Value of the Remaining Scheduled Payments with respect to the
Called Principal of such Initial Bond over the amount of such
Called Principal, provided that the Make-Whole Amount may in no
event be less than zero. Two Business Days prior to the
redemption of the Initial Bonds pursuant to Section 2.5(b) of the
First Supplemental Indenture, Panda Funding shall deliver to the
Trustee an Officer's Certificate specifying the calculation of
such Make-Whole Amount as of the specified mandatory redemption
date.
"Principal Payment Dates" shall mean the dates on which
regularly scheduled installments of principal are due on the
Initial Bonds as set forth in the form of the Initial Bond
attached hereto as Exhibit A.
"Registration Default" shall have the meaning ascribed
thereto in the Registration Rights Agreement.
"Registration Rights Agreement" shall mean the Registration
Rights Agreement to be dated on or about the Issue Date, among
Panda Funding, PIC and the Initial Purchaser.
"Reinvestment Yield" shall mean, with respect to the Called
Principal of any Initial Bond, 0.50 percent over the yield to
maturity multiplied by (i) the yields reported, as of 10:00 A.M.
(New York City time) on the second Business Day preceding the
applicable mandatory redemption date with respect to such Called
Principal, on the display designated as "Page 678 on the Telerate
Access Service (or such other display as may replace 678 on
Telerate Access Service), for actively traded U.S. Treasury
securities having a maturity equal to the remaining term of the
Initial Bonds as of such mandatory redemption date, or (ii) if
such yields are not reported as of such time or the yields
reported as of such time are not ascertainable, the Treasury
Constant Maturity Series Yields reported, for the latest day for
which such yields have been so reported as of the second Business
Day preceding the Redemption Date with respect to such Called
Principal, in U.S. Federal Reserve Statistical Release H.15 (519)
(or any comparable successor publication) for actively traded
U.S. Treasury securities having a constant maturity equal to the
remaining term of the Initial Bonds as of such Redemption Date.
Such implied yield will be determined, if necessary, by (a)
converting U.S. Treasury bill quotations to bond-equivalent
yields in accordance with accepted financial practice and (b)
interpolating linearly between (1) the actively traded U.S.
Treasury security with the duration closest to and greater than
the remaining tend of the Initial Bonds and (2) the actively
traded U.S. Treasury security with the duration closest to and
less than the remaining term of the Initial Bonds.
"Remaining Scheduled Payments" shall mean, with respect to
the Called Principal of any Initial Bond, all payments of such
Called Principal and interest thereon that should be due after
the Redemption Date with respect to such Called Principal if no
redemption of such Called Principal were made prior to its
scheduled due date, provided that if such mandatory redemption
date is not a date on which interest payments are due to be made
under the terms of the Initial Bonds, then the amount of the next
succeeding scheduled interest payment will be reduced by the
amount of interest accrued to such mandatory redemption date and
required to be paid on such mandatory redemption date pursuant to
Section 2.5(b) of the First Supplemental Indenture.
"Series A Bonds" shall have the meaning ascribed hereto in
Section 2.1 (a) hereof.
"Series A-1 Bonds" shall have the meaning ascribed thereto
in Section 2.1(a) hereof.
"Transfer Restricted Securities" shall have the meaning
ascribed thereto in the Registration Rights Agreement; provided,
however, that the Trustee shall be entitled to request and
conclusively rely upon an Opinion of Counsel with respect to
whether or not any Series A Bond is a Transfer Restricted
Security.
ARTICLE II
THE TERMS OF THE BONDS
Section 2.1. Terms and Conditions of the Initial Bonds.
(a) Title and Date. There is hereby created a series of
Bonds designated as the "11 5/8 percent Pooled Project Bonds,
Series A due 2012" (the "Series A Bonds"). The Series A Bonds
shall mature on the Final Maturity Date.
In addition, there is hereby created a series of Bonds
designated as the "11 5/8 percent Pooled Project Bonds, Series A-
1 due 2012" (the "Series A-l Bonds"). The Series A-1 Bonds shall
mature on the Final Maturity Date.
(b) Limitation on Aggregate Principal Amount. The aggregate
principal amount of Series A Bonds that may be authenticated and
delivered under the Indenture for original issue is limited to
$105,525,000 and the aggregate principal amount of Series A-1
Bonds that may be authenticated and delivered under the Indenture
for original issue is limited to $105,525,000. The aggregate
principal amount of Initial Bonds Outstanding at any one time may
not exceed $105,525,000 except as provided in Section 2.10 of the
Original Indenture.
(c) Interest and Principal. The Series A Bonds shall bear
interest at the rate of 11 5/8 percent per annum from the Issue
Date, or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, payable semiannually
on each Interest Payment Date and at the Final Maturity Date,
until the principal thereof is paid or duly provided for. The
principal amount of each Series A Bond created hereby shall be
due and payable semiannually in installments on each Principal
Payment Date as set forth in the form of the Initial Bond
attached hereto as Exhibit A to the Holders of record as of the
dates set forth in such form of Initial Bond.
The Series A-1 Bonds shall bear interest at the rate of 11
5/8 percent per annum from the date thereof, or from the most
recent Interest Payment Date to which interest has been paid or
duly provided for, payable semiannually on each Interest Payment
Date and at the Final Maturity Date, until the principal thereof
is paid or duly provided for. The principal amount of each Series
A I Bond created hereby shall be due and payable semiannually in
installments on each principal Payment Date as set forth in the
form of the Initial Bond attached hereto as Exhibit A to the
Holders of record as of the dates set forth in such form of
Initial Bond.
Accrued but unpaid interest on any Series A Bond that is
exchanged for a Series A-l Bond pursuant to the Registration
Rights Agreement shall be paid on or before the first Interest
Payment Date on the Series A-1 Bonds.
(d) Additional interest. Upon the occurrence of a
Registration Default, the interest rate on Transfer Restricted
Securities shall increase ("Additional Interest") by 0.50% per
annum effective on the 181st day following the Issue Date and
Additional Interest shall accrue until all Registration Defaults
have been cured. Following the cure of all Registration Defaults,
the accrual of Additional Interest will cease and the interest
rate shall revert to the original rate; provided, however, if all
Registration Defaults are not cured within two (2) years
following the Issue Date, such increase in the interest rate
shall become permanent. Any Additional Interest due on any
Initial Bond shall be payable on the appropriate Interest Payment
Date to the Holder entitled to receive the interest payment to be
made on such date. Each obligation to pay Additional Interest
shall be deemed to accrue from and including the date of the
applicable Registration Default.
(e) Initial Bonds Considered a Single Class. The Series A
Bonds and the Series A-l Bonds shall be considered collectively
to be a single class for all purposes of this Indenture,
including, without limitation, waivers, amendments, redemptions
and offers to purchase.
(f) Defeasance. The Initial Bonds shall be subject to
defeasance at the option of Panda Funding as provided in Article
VI of the Original Indenture.
(g) PIC Guaranty. The Initial Bonds shall be guaranteed by
PIC as provided in Article XIII of the Original Indenture.
(h) Form of Initial Bonds. The Initial Bonds shall be
issued in definitive form, shall be substantially in the form of
and have the terms and conditions set forth in the form of
Initial Bond attached hereto as Exhibit A and each shall have and
be subject to such other terms as provided herein and in the
Original Indenture, including without limitation Section 2.3
thereof.
Section 2.2. Delivery. At any time after the execution and
delivery of this First Supplemental Indenture, Panda Funding may
deliver Series A Bonds executed by Panda Funding and having the
notation of the PIC Guaranty executed by PIC to the Trustee for
authentication, together with a Company Order for the
authentication and delivery of such Series A Bonds, and the
Trustee in accordance with such Company Order shall authenticate
and deliver such Series A Bonds with the notation of the PIC
Guaranty thereon as provided in the Indenture. In addition, on or
prior to the Exchange Offer Consummation Date, Panda Funding may
deliver Series A-1 Bonds executed by Panda Funding and having the
notation of the PIC Guaranty executed by PIC to the Trustee for
authentication together with a Company Order for the
authentication and delivery of such Series A-1 Bonds, and the
Trustee in accordance with such Company Order shall authenticate
and deliver such Series A-1 Bonds with the notations of the PIC
Guaranty thereon as provided in the Indenture.
Section 2.3. Restrictions on Transfer and Exchange of
Initial Bonds.
All Series A Bonds issued hereunder shall be restricted
securities (within the meaning of Rule 144 under the Securities
Act) and shall be subject to the restrictions on transfer
provided in Section 2.8 of the Original Indenture and the legends
set forth on the Series A Bonds.
As provided in the Registration Rights Agreement and subject
to the limitations set forth therein, at the option of the
Holders, the Series A Bonds shall be exchangeable for Series A-l
Bonds of like aggregate principal amount pursuant to the Exchange
Offer.
Section 2.4 Method of Payment.
Payment of principal of (and premium, if any, on) and
interest on each Initial Bond created hereby shall be made (a) if
Panda Funding so elects, by check mailed to the Holder at his or
her registered address, (b) notwithstanding any such election by
Panda Funding, if a Holder of $2,000,000 or more in aggregate
principal amount (or such lesser principal amount as results from
all payments of principal and redemptions in respect of an
Initial Bond in the original principal amount of $2,000,000) of
Initial Bonds requests in writing, by wire transfer of
immediately available funds pursuant to written wire instructions
delivered to the Trustee on or before the applicable Regular
Record Date or (c) otherwise as provided in Section 2.11 of the
Original Indenture; provided that the final installment of
principal payable with respect to each Initial Bond created
hereby shall be payable as provided in Section 8.5 of the
Original Indenture (in the case of any such Initial Bond redeemed
or prepaid) or payable upon presentation and surrender of each
such Initial Bond at the Place of Payment.
Section 2.5 Redemption.
(a) Optional Redemption. The Initial Bonds created hereby
are subject to optional redemption on the terms set forth in
Section 4.9 of the Original Indenture.
In addition, subject to the provision of Article VIII of the
Original Indenture, the Initial Bonds are subject to redemption
by Panda Funding prior to Stated Maturity, in whole or in part on
any Business Day on or after August 20, 2001, and if in part in
integral multiples of $1,000. Any such redemption shall be at the
redemption prices (expressed as percentages of principal amount)
set forth in the table below plus accrued interest if any, to the
redemption date, if redeemed during the 12-month period
commencing on or after August 20 of years set forth below:
Year Redemption Price
2001 105.8125%
2002 104.3594%
2003 102.9063%
2004 101.4532%
2005 100.0000%
(b) Mandatory Redemption. Subject to the provisions of
Section 8.3 of the Original Indenture, the Initial Bonds created
hereby are subject to mandatory redemption under the conditions
and on the terms set forth in Section 4.8 of the Original
Indenture. In addition, Panda Funding shall pay a premium on all
Initial Bonds subject to such mandatory redemption in an amount
equal to the premium, if any, payable were the Initial Bonds to
be redeemed at Panda Funding's option (or, if no optional
redemption is available with respect to the Initial Bonds, plus
the Make-Whole amount determined for the mandatory redemption
date with respect to such principal "amount"), to the extent such
mandatory redemption results from a sale or other voluntary
disposition of any Collateral or any interest in a Project.
(c) Offer to Purchase. In the event of a Change of Control
and subject to the conditions and limitations set forth in
Section 7.32 of the Original Indenture, Panda Funding shall be
obligated to make an offer to the Holders to purchase on a
Business Day not more than 60 or less than 30 days following the
occurrence of a Change of Control, all of the then Outstanding
Initial Bonds at a purchase price equal to 101% of the principal
amount thereof, together with accrued and unpaid interest, if
any, to the change of Control Purchase Date, as provided in
Section 7.32.
Section 2.6. Use of Proceeds. Panda Funding shall lend all
of the proceeds received by it from the sale of the Initial Bonds
to PIC which shall use such proceeds (i) to fund the Capitalized
Interest Fund in the amount of $9,834,109.78; (ii) to fund the
Debt Service Reserve Fund in the amount of $6,413,483.00; (iii)
to fund the PIC Expense Fund in the amount of approximately
$300,000; (iv) to pay transaction expenses, commissions and fees
incurred in connection with the issuance and offering of the
Initial Bonds, estimated to be approximately $900,000; (v) to
fund in the amount of approximately $25,100,000 a portion of the
redemption by Panda-Rosemary L.P., a Delaware limited
partnership, of the limited partnership interest therein held by
Ford Motor Credit Company, a Delaware corporation; and (vi) to
distribute approximately $60,900,000 to PEI, of which
approximately $26,400,000 shall be used by PEI to prepay senior
indebtedness held by Trust Company of the West, and the balance
of which Panda International intends to use for the development
of Projects and for general corporate purposes.
Section 2.7. Service Reserve Fund. On the Issue Date, PIC
shall deliver to the Trustee for deposit in the Debt Service
Reserve Fund $6,413,483.00, out of the loan by Panda Funding to
PIC of the proceeds of the Series A Bonds, which amount shall
constitute the Debt Service Reserve Requirement with respect to
the Initial Bonds on the Issue Date..
Section 2.8. Capitalized Interest Fund On the Issue Date,
PIC shall deliver to the Trustee for deposit in the Capitalized
Interest Fund $9,834,109.78 out of the loan by Panda Funding to
PIC of the proceeds of the Series A Bonds. Subject to Section
4.4(e) of the Original Indenture, the Capitalized Interest
Requirement with respect to the Initial Bonds shall be an amount
equal to:(i) during the period beginning on the Issue Date to and
including February 19, 1997, $9,834,109.77, (ii) during the
period beginning February 20, 1997 to and including August
19,1997, $9,216,660.48, (iii) during the period beginning on
August 20, 1997 to and including February 19, 1998,
$8,028,359.78, (iv) during the period beginning on February 20,
1998 to and including August 19, 1998, $6,795,312.78, (v) during
the period beginning August 20,1998 to and including February 19,
1998, $3,410,003.73, (vi) during the period beginning February
20, 1999 to and including February 19, 2001, $106,613.80, (vii)
during the period beginning on February 20, 2001 to and including
August 19, 2001 $35,286.92 and (viii) thereafter the Capitalized
Interest Requirement with respect to the Initial Bonds shall be
zero. Monies from time to time held on deposit in the Capitalized
Interest Fund shall be transferred to the Debt Service Fund on
the Interest Payment Dates on February 20, 1997, August 20, 1997,
February 20, 1998, August 20, 1998, February 20, 1999, August 20,
2000 and February 20, 2001 in the amounts of $617,449.30,
$1,188,300.70, $1,233,047.00, $3,385,309.05, $3,303,389.93,
$7l,326.88 and $35,286.92, respectively.
Section 2.9. Additional Covenant. Panda Funding shall notify
the Trustee in writing and any Paying Agent immediately upon the
occurrence of any Registration Default and, with respect to
Additional Interest payments made pursuant to Section 2.1(c), PIC
shall notify the Trustee and any Paying Agent of the amount of
Additional Interest payable to each Holder.
ARTICLE III
MISCELLANEOUS
Section 3.1. Execution of Supplemental Indenture. This First
Supplemental Indenture is executed and shall be constructed as an
indenture supplemental to the Original Indenture and, as provided
in the Original Indenture, this First Supplemental Indenture
forms a part thereof.
Section 3.2. Concerning the Trustee. The recitals contained
herein and in the Series A Bonds created hereby, except with
respect to the Trustee's certificate of authentication, shall be
taken as the statements of Panda Funding and PIC and the Trustee
assumes no responsibility for the correctness of same. The
Trustee makes no representation as to the validity or sufficiency
of the First Supplemental Indenture or of the Bonds created
hereby.
Section 3.3. Counterparts. This First Supplemental Indenture
may be executed in any number of counterparts, each of which when
so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same
instrument.
Section 3.4. GOVERNING LAW. THIS FIRST SUPPLEMENTAL
INDENTURE AND EACH BOND (INCLUDING THE RELATED PIC GUARANTY
THEREON) CREATED HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE CONFLICTS OF LAW RULES THEREOF (OTHER THAN SECTION 5-1401
OF THE NEW YORK GENERAL OBLIGATIONS LAWS).
IN WITNESS WHEREOF, the parties have caused this First
Supplemental Indenture to be duly executed by their respective
officers thereunto duly authorized as of the day and year first
above written.
PANDA FUNDING
By:
Name: Robert W. Carter
Title: Chairman of the Board, President
and Chief Executive Officer
PANDA INTERFUNDING CORPORATION
By:
Name: Robert W. Carter
Title: Chairman of the Board, President
and Chief Executive Officer
BANKERS TRUST COMPANY, AS TRUSTEE
By:
Name: Scott Thiel
Title: Assistant Vice President
EXHIBIT A
[If a Series A or Series A-1 Bond constituting a Transfer
Restricted Bond-THIS BOND HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWINGS
SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (I) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR
(7) UNDER REGULATION D OF THE SECURITIES ACT) (AN "INSTITUTIONAL
ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS BOND IN AN OFFSHORE TRANSACTION, (II) AGREES THAT
IT WILL NOT WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF
THIS BOND RESELL OR OTHERWISE TRANSFER THIS BOND EXCEPT (A) TO
PANDA FUNDING, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO
BANKERS TRUST COMPANY, AS TRUSTEE, OR A SUCCESSOR TRUSTEE, A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS BOND (THE FORM
OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE
THE UNITED STATES TO FOREIGN PURCHASERS IN OFFSHORE TRANSACTIONS
MEETING THE REQUIREMENTS OF RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR
(F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (III) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THIS BOND IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THIS BOND WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THE
BOND, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT
THE CERTIFICATE TO BANKERS TRUST COMPANY, AS SECURITY REGISTRAR.
IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO
PANDA FUNDING CORPORATION AND BANKERS TRUST COMPANY, AS SECURITY
REGISTRAR, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THIS LEGEND WILL BE REMOVED AFTER THE EXPIRATION
OF THREE YEARS FROM THE ORIGINAL ISSUANCE OF THIS BOND. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.]
[If a Global Bond - THIS BOND IS A GLOBAL BOND WITHIN THE
MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A
DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS BOND IS NOT
EXCHANGEABLE FOR BONDS REGISTERED IN THE NAME OF A PERSON OTHER
THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS
BOND (OTHER THAN A TRANSFER OF THIS BOND AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO PANDA FUNDING OR ITS AGENT FOR
REGISTRATION OF TRANSFER EXCHANGE, OR PAYMENT, AND ANY BOND
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE
& CO., HAS AN INTEREST HEREIN.]
PANDA FUNDING CORPORATION
11 5/8% POOLED PROJECT BOND, SERIES A DUE 2012
NO. CUSIP NUMBER
PRINCIPAL AMOUNT FINAL MATURITY DATE ISSUE DATE INTEREST RATE
$ AUGUST 20, 2012 JULY ,1996 115/8 percent
Panda Funding Corporation, a Delaware corporation
(hereinafter called "Panda Funding", which term includes any
successor or assign under the Trust Indenture referred to below),
for_______ value received hereby promises to pay _______ to _______
or its registered assigns, the principal sum of (the "Principal
Amount"), such payment to be made in semiannual installments on
February 20 and August 20 of each year [If a Series A Bond-
(commencing February 20, 1997)][If a Series A-1 Bond-- (commencing
on the February 20 or August 20 following the original issuance
of the Series A-l Bonds)] and ending on the Final Maturity Date
set forth above, each such installment to be in an amount equal
to the Principal Amount multiplied by the percentage set forth
opposite the applicable payment date on the reverse hereof
(provided that the portion of the Principal Amount remaining
unpaid on the Final Maturity Date, together with all interest
accrued thereon, shall in any and all cases be due and payable on
the Final Maturity Date), and to pay interest on the unpaid
portion of the Principal Amount at the Interest Rate set forth
above from the most recent Interest Payment Date to which
interest has been paid or duly provided for or, if no interest
has been paid or duly provided for, from the Issue Date set forth
above, semiannually on February 20 and August 20 in each year [If
a Series A Bond --(commencing February 20, 1997)]If a Series A-1
Bond -- Commencing on the February 20 or August 20 following the
original issuance of the Series A-1 Bonds)], until the Principal
Amount is paid in full or payment thereof is duly provided for.
Panda Funding also promises to pay any Additional Interest
required by Section 2.1 (c) of the First Supplemental Indenture,
upon the conditions, at the rate and for the periods specified
therein. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in
such Indenture, be paid to the Person in whose name this Bond (or
one or more Predecessor Bonds) is registered at the close of
business on the Regular Record Date for such interest, which
shall be the February 6 or August 6 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment
Date. Except as otherwise provided in the Indenture, any such
interest not so punctually paid or duly provided for will cease
to be payable to the Holder on such Regular Record Date and may
either be paid to the Person in whose name this Bond (or one or
more Predecessor Bonds) is registered at the close of business on
a Special Record Date for the payment of such defaulted interest
to be fixed by the Trustee, notice whereof shall be given to the
Holders of Bonds of this series not less than 10 days prior to
such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any
securities exchange on which the Bonds of this series may be
listed, and upon such notice as may be required by such exchange,
all as more fully provided in the Indenture. Accrued but unpaid
interest on any Bond that is exchanged for a Series A-1 Bond
pursuant to the Registration Rights Agreement shall be paid on or
before the first Interest Payment Date on the Series A-1 Bonds.
Payment of the principal of and interest on this Bond will be
made at the corporate trust office of the Trustee, or such other
office or agency of Panda Funding as may be designated by it for
such purpose in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the
payment of public and private debts; provided, however, that (a)
at the option of Panda Funding payment of interest may be made by
check mailed to the address of the Person entitled thereto as
such address shall appear in the Security Register, (b)
notwithstanding such election by Panda Funding, if a Holder of
$2,000,000 or more in aggregate principal amount (or such lesser
amount as results from all payments of principal and redemptions
in respect of a Bond in the original principal amount of
$2,000,000) of Bonds requests in writing, payments of money may
be made by wire transfer of immediately as available funds
pursuant to written wire transfer instructions delivered to the
Trustee on or before the applicable Regular Record Date.
Reference is made to the further provisions of this Bond set
forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
executed by the Trustee by manual signature, this Bond shall not
be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, Panda Funding has caused this
instrument to be duly executed.
PANDA FUNDING CORPORATION
By:
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This Bond is one of the series of Bonds referred to in the
within-mentioned Indenture.
Bankers Trust Company, as Trustee
By:
Authorized Signatory
[Form of Reverse of Bond]
This bond is one of an authorized issue of Bonds of Panda
Funding known as its 11 5/8% Pooled Project Bonds, Series A due
2012 (the "Bonds"). The Bonds are issued under the Trust
Indenture dated as of July 31, 1996 (the "Original Indenture")
among Panda Funding, Panda Interfunding Corporation, a Delaware
corporation ("PIC"), and Bankers Trust Company, a New York state
banking corporation, as trustee (in such capacity, together with
its successors in such capacity, the "Trustee"), as supplemented
by the First Supplemental Indenture dated as of July 31, 1996
(the "First Supplemental Indenture") to the Original Indenture
among Panda Funding, PIC and the Trustee (the Original Indenture,
as so supplemented and as the same may be further supplemented,
amended or modified, the "Indenture"). All capitalized terms used
herein, unless otherwise defined herein, shall have the meanings
ascribed to them in the Indenture.
All Bonds of any series issued and outstanding under the
Indenture rank on a parity with each other Bond of the same
series and with all Bonds of each other series. Reference is
hereby made to the Indenture for a description of the nature and
extent of the Bonds and the respective rights, limitations of
rights, duties and immunities thereunder of the Holders of the
Bonds and of the Trustee and Panda Funding and PIC in respect of
the Bonds and the terms upon which the Bonds are made and are to
be authenticated and delivered.
The principal of, and premium, if any, and interest on, this
Bond are (i) payable only from the revenues and assets of Panda
Funding, the Collateral and, through the PIC Guaranty, PIC and
the payments therefrom and the income and proceeds received by
the Trustee therefrom and (ii) secured by assets subject to the
Lien of the Security Documents, and all payments of principal and
interest shall be made in accordance with the terms of the Trust
Indenture.
The Bonds are subject to a Collateral Agency Agreement dated
as of July 31, 1996 pursuant to which the rights of the Secured
Parties (including the Holders of the Bonds) in respect of the
Collateral will be shared among the Secured Parties and will be
exercised by the Collateral Agent in accordance with the
Collateral Agency Agreement.
The Indenture permits, with certain exceptions, as therein
provided, the amendment thereof and the modification of the
rights and obligations of Panda Funding, PIC and the rights of
the Holders of the Bonds under the Indenture at any time by Panda
Funding and PIC with the consent of the Holders of not less than
a majority in aggregate principal amount of the Bonds of all
series then outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate
principal amount of the Bonds of all series then outstanding, on
behalf of the Holders of all the Bonds, to waive compliance by
Panda Funding or PIC with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences.
Any Act (as such term is defined in the Indenture), including,
but not limited to, such a consent, waiver or direction by the
Holder of this Bond shall be conclusive and binding upon the
Holder and upon all future Holders of this Bond and the Holder of
every Bond issued upon the transfer hereof or the exchange
therefor or in lieu hereof whether or not notation of such Act is
made upon this Bond.
This Bond is one of the series designated on the face
hereof, limited in aggregate principal amount of $105,525,000.
This Bond and all Bonds issued or to be issued in series created
under the First Supplemental Indenture are (i) not subject to any
sinking fund, (ii) are subject to optional redemption on the
terms set forth in Section 4.9 of the Original Indenture and
(iii) are, in accordance with the provisions of Article VIII of
the Original Indenture, subject to redemption by Panda Funding
prior to the Final Maturity Date, in whole or in part on any
Business Day on or after August 20, 2001, and if in part in
integral multiples of $1,000. Any such redemption shall be at the
redemption prices (expressed as percentages of principal amount)
set forth in the table below plus accrued interest, if any, to
the redemption date, if redeemed during the 12-month period
commencing on or after August 20 of years set forth below:
Year Redemption Price
2001 105.8125%
2002 104.3594%
2003 102.9063%
2004 101.4532%
2005 100.0000%
In the event of a Change of Control of PIC, and subject to
certain conditions and limitations provided in the Indenture,
Panda Funding will be obligated to make an offer to purchase, on
a Business Day not more than 60 nor less than 30 days following
the occurrence of a Change of Control of PIC, all of the then
Outstanding Bonds at a purchase price equal to 101% of the
principal amount thereof, together with accrued and unpaid
interest, if any, to the Change of Control Purchase Date, all as
provided in the Indenture.
The Bonds are, under certain conditions, subject to
mandatory redemption as set forth in Sections 4.8 and 8.3 of the
Original Indenture. Notice of any redemption of Bonds will be
given at least 30 days but not more than 60 days before the
Redemption Date to each Holder at its address as it appears in
the Security Register.
Bonds (or portions thereof as aforesaid) for the redemption
of which provision is made in accordance with the Indenture shall
cease to bear interest from and after any Redemption Date.
The Indenture contains provisions for, upon compliance by
Panda Funding with certain conditions set forth in the Indenture,
the defeasance of (a) the entire indebtedness of this Bond and
(b) certain restrictive covenants and agreements.
The unpaid portion of the Principal Amount, together with
any interest accrued and unpaid thereon and all other amounts due
hereunder, if any, may become due and payable upon the occurrence
and continuation of any Event of Default, but only as provided in
the Indenture.
The Holder hereof, by its acceptance of this Bond, agrees
that each payment received by it hereunder shall be applied in
the manner set forth in Section 2.16 of the Indenture relating to
the allocation of principal and interest.
The Bonds are issuable only as registered Bonds without
coupons in denominations of $100,000 (or such lesser principal
amount as results from all payments of principal and redemptions
in respect of a Bond in the original principal amount of
$100,000) and any integral multiple of $1,000 in excess thereof.
As provided in, and subject to the provisions of, the Indenture,
Bonds are exchangeable at the option of the Holder thereof for
other Bonds of the same series, of authorized denomination and of
like tenor and aggregate principal amount, to be registered in
the name of such Holder, upon surrender thereof by such Holder.
[If a Series A Bond -- At the option of the Holders thereof,
the Bonds may be exchanged pursuant to the Registration Rights
Agreement for a like aggregate principal amount of Series A-1
Bonds.]
No service charge will be required of any Holder of Bonds
participating in any such transfer or exchange of Bonds in
respect of such transfer or exchange, but the Security Registrar
may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
Prior to due presentment of this Bond for registration of
transfer, the person in whose name this Bond is registered shall
be deemed to be the owner and holder thereof for the purpose of
receiving payment as herein provided and for all other purposes
whether or not this Bond be overdue regardless of any notice to
anyone to the contrary.
THE INDENTURE AND THIS BOND SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO THE CONFLICTS OF LAW RULES THEREOF, OTHER THAN
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
PRINCIPAL PAYMENTS
Payment Date Percentage of Principal
February 20, 1997 0.2045%
August 20, 1997 0.0000%
February 20, 1998 0.0000%
August 20, 1998 0.0000%
February 20, 1999 0.0000%
August 20, 1999 0.5933%
February 20, 2000 0.6129%
August 20, 2000 0.0000%
February 20, 2001 0.0000%
August 20, 2001 1.3753%
February 20, 2002 1.4691%
August 20, 2002 2.2184%
February 20, 2003 2.3565%
August 20,2003 2.9328%
February 20, 2004 3.1031%
August 20,2004 3.2796%
February 20,2005 3.4687%
August 20,2005 3.5977%
February 20,2006 3.7820%
August 20,2006 2.8098%
February 20,2007 3.0076%
August 20,2007 4.8415%
February 20,2008 5.1145%
August 20,2008 5.0057%
February 20,2009 5.2949%
August 20,2009 5.5185%
February 20,2010 5.8300%
August 20,2010 5.7248%
February 20,2011 6.0590%
August 20,2011 6.4800%
February 20,2012 6.8808%
August 20,2012 8.4390%
PIC GUARANTY
To the extent and subject to the limitations set forth in
the Indenture, PIC (as defined in the Indenture referred to in
the Bond upon which this notation is endorsed, which term
includes any successor or permitted assigns under the Indenture)
has unconditionally guaranteed (a) the due and punctual payment
of the principal of (and premium, if any, on) and interest on the
Bonds, (b) the due and punctual payment of all other amounts due
and payable under the Indenture and the Bonds by Panda Funding,
and (c) the due and punctual performance of all other obligations
of Panda Funding to the Holders or the Trustee, all in accordance
with the terms set forth in the Indenture. Capitalized terms used
herein shall have the meanings assigned to them in the Indenture
unless otherwise indicated.
The obligations of PIC to the Holders of Bonds and to the
Trustee pursuant to the PIC Guaranty and the Indenture are
expressly set forth in the Indenture, including Article XIII
thereof, and reference is hereby made to the Indenture for the
precise terms of the PIC Guaranty.
PANDA INTERFUNDING CORPORATION
By:
ABBREVIATIONS
The following abbreviations when used in the inscription on the
face of this instrument shall be construed as though they were
written out in full according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship
and not as tenants in common
UNIF GIFT MIN ACT
(___________) (Minor)
under Uniform Gift to Minors Act
(State)
Additional abbreviations may also be used though not in the
above list FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s)
and transfer(s) unto
Tax Identification Number or Other
Identifying Number of Assignee
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
(Please print or typewrite name and address, including zip code
of Assignee)
the within Bond and all rights thereunder, hereby irrevocably
constituting and appointing ____________________________________
attorney to transfer said bond on the books of Panda Funding, with
full power of substitution in the premises.
Dated:
NAME:
NOTICE: The signature to this assignment must correspond with
the name as written upon the first page of the within instrument
in every particular, without alteration or enlargement or any
change whatsoever.
EXHIBIT 4.04
THIS BOND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,
U.S. PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWINGS SENTENCE. BY
ITS ACQUISITION HEREOF, THE HOLDER (I) REPRESENTS THAT (A) IT IS
A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER
REGULATION D OF THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
BOND IN AN OFFSHORE TRANSACTION, (II) AGREES THAT IT WILL NOT
WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THIS BOND
RESELL OR OTHERWISE TRANSFER THIS BOND EXCEPT (A) TO PANDA
FUNDING, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO
BANKERS TRUST COMPANY, AS TRUSTEE, OR A SUCCESSOR TRUSTEE, A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS BOND (THE FORM
OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE
THE UNITED STATES TO FOREIGN PURCHASERS IN OFFSHORE TRANSACTIONS
MEETING THE REQUIREMENTS OF RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR
(F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (III) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THIS BOND IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THIS BOND WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THE
BOND, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT
THE CERTIFICATE TO BANKERS TRUST COMPANY, AS SECURITY REGISTRAR.
IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO
PANDA FUNDING CORPORATION AND BANKERS TRUST COMPANY, AS SECURITY
REGISTRAR, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THIS LEGEND WILL BE REMOVED AFTER THE EXPIRATION
OF THREE YEARS FROM THE ORIGINAL ISSUANCE OF THIS BOND. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
[If a Global Bond - THIS BOND IS A GLOBAL BOND WITHIN THE
MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A
DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS BOND IS NOT
EXCHANGEABLE FOR BONDS REGISTERED IN THE NAME OF A PERSON OTHER
THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS
BOND (OTHER THAN A TRANSFER OF THIS BOND AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO PANDA FUNDING OR ITS AGENT FOR
REGISTRATION OF TRANSFER EXCHANGE, OR PAYMENT, AND ANY BOND
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE
& CO., HAS AN INTEREST HEREIN.]
PANDA FUNDING CORPORATION
11-5/8% POOLED PROJECT BOND, SERIES A DUE 2012
NO. CUSIP NUMBER
69833DAA7
PRINCIPAL AMOUNT FINAL MATURITY DATE ISSUE DATE INTEREST RATE
$ AUGUST 20, 2012 JULY 31,1996 11-5/8 percent
Panda Funding Corporation, a Delaware
corporation(hereinafter called "Panda Funding", which term includes any
successor or assign under the Trust Indenture referred to below),
for_______ value received hereby promises to pay _______ to
_______ or its registered assigns, the principal sum of (the
"Principal Amount"), such payment to be made in semiannual
installments on February 20 and August 20 of each year
(commencing February 20, 1997) and ending on the Final Maturity
Date set forth above, each such installment to be in an amount
equal to the Principal Amount multiplied by the percentage set
forth opposite the applicable payment date on the reverse hereof
(provided that the portion of the Principal Amount remaining
unpaid on the Final Maturity Date, together with all interest
accrued thereon, shall in any and all cases be due and payable on
the Final Maturity Date), and to pay interest on the unpaid
portion of the Principal Amount at the Interest Rate set forth
above from the most recent Interest Payment Date to which
interest has been paid or duly provided for or, if no interest
has been paid or duly provided for, from the Issue Date set forth
above, semiannually on February 20 and August 20 in each year
(commencing February 20, 1997), until the Principal Amount is
paid in full or payment thereof is duly provided for. Panda
Funding also promises to pay any Additional Interest required by
Section 2.1 (c) of the First Supplemental Indenture, upon the
conditions, at the rate and for the periods specified therein.
The interest so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in such
Indenture, be paid to the Person in whose name this Bond (or one
or more Predecessor Bonds) is registered at the close of business
on the Regular Record Date for such interest, which shall be the
February 6 or August 6 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date. Except as
otherwise provided in the Indenture, any such interest not so
punctually paid or duly provided for will cease to be payable to
the Holder on such Regular Record Date and may either be paid to
the Person in whose name this Bond (or one or more Predecessor
Bonds) is registered at the close of business on a Special Record
Date for the payment of such defaulted interest to be fixed by
the Trustee, notice whereof shall be given to the Holders of
Bonds of this series not less than 10 days prior to such Special
Record Date, or be paid at any time in any other lawful manner
not inconsistent with the requirements of any securities exchange
on which the Bonds of this series may be listed, and upon such
notice as may be required by such exchange, all as more fully
provided in the Indenture. Accrued but unpaid interest on any
Bond that is exchanged for a Series A-1 Bond pursuant to the
Registration Rights Agreement shall be paid on or before the
first Interest Payment Date on the Series A-1 Bonds. Payment of
the principal of and interest on this Bond will be made at the
corporate trust office of the Trustee, or such other office or
agency of Panda Funding as may be designated by it for such
purpose in such coin or currency of the United States of America
as at the time of payment shall be legal tender for the payment
of public and private debts; provided, however, that (a) at the
option of Panda Funding payment of interest may be made by check
mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register, (b)
notwithstanding such election by Panda Funding, if a Holder of
$2,000,000 or more in aggregate principal amount (or such lesser
amount as results from all payments of principal and redemptions
in respect of a Bond in the original principal amount of
$2,000,000) of Bonds requests in writing, payments of money may
be made by wire transfer of immediately as available funds
pursuant to written wire transfer instructions delivered to the
Trustee on or before the applicable Regular Record Date.
Reference is made to the further provisions of this Bond set
forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
executed by the Trustee by manual signature, this Bond shall not
be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, Panda Funding has caused this instrument
to be duly executed.
PANDA FUNDING CORPORATION
By:
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This Bond is one of the series of Bonds referred to in the
within-mentioned Indenture.
Bankers Trust Company, as Trustee
By:
Authorized Signatory
[Form of Reverse of Bond]
This bond is one of an authorized issue of Bonds of Panda
Funding known as its 11-5/8 percent Pooled Project Bonds, Series
A due 2012 (the "Bonds"). The Bonds are issued under the Trust
Indenture dated as of July 31, 1996 (the "Original Indenture")
among Panda Funding, Panda Interfunding Corporation, a Delaware
corporation ("PIC"), and Bankers Trust Company, a New York state
banking corporation, as trustee (in such capacity, together with
its successors in such capacity, the "Trustee"), as supplemented
by the First Supplemental Indenture dated as of July 31, 1996
(the "First Supplemental Indenture") to the Original Indenture
among Panda Funding, PIC and the Trustee (the Original Indenture,
as so supplemented and as the same may be further supplemented,
amended or modified, the "Indenture"). All capitalized terms used
herein, unless otherwise defined herein, shall have the meanings
ascribed to them in the Indenture.
All Bonds of any series issued and outstanding under the
Indenture rank on a parity with each other Bond of the same
series and with all Bonds of each other series. Reference is
hereby made to the Indenture for a description of the nature and
extent of the Bonds and the respective rights, limitations of
rights, duties and immunities thereunder of the Holders of the
Bonds and of the Trustee and Panda Funding and PIC in respect of
the Bonds and the terms upon which the Bonds are made and are to
be authenticated and delivered.
The principal of, and premium, if any, and interest on, this
Bond are (i) payable only from the revenues and assets of Panda
Funding, the Collateral and, through the PIC Guaranty, PIC and
the payments therefrom and the income and proceeds received by
the Trustee therefrom and (ii) secured by assets subject to the
Lien of the Security Documents, and all payments of principal and
interest shall be made in accordance with the terms of the Trust
Indenture.
The Bonds are subject to a Collateral Agency Agreement dated
as of July 31, 1996 pursuant to which the rights of the Secured
Parties (including the Holders of the Bonds) in respect of the
Collateral will be shared among the Secured Parties and will be
exercised by the Collateral Agent in accordance with the
Collateral Agency Agreement.
The Indenture permits, with certain exceptions, as therein
provided, the amendment thereof and the modification of the
rights and obligations of Panda Funding, PIC and the rights of
the Holders of the Bonds under the Indenture at any time by Panda
Funding and PIC with the consent of the Holders of not less than
a majority in aggregate principal amount of the Bonds of all
series then outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate
principal amount of the Bonds of all series then outstanding, on
behalf of the Holders of all the Bonds, to waive compliance by
Panda Funding or PIC with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences.
Any Act (as such term is defined in the Indenture), including,
but not limited to, such a consent, waiver or direction by the
Holder of this Bond shall be conclusive and binding upon the
Holder and upon all future Holders of this Bond and the Holder of
every Bond issued upon the transfer hereof or the exchange
therefor or in lieu hereof whether or not notation of such Act is
made upon this Bond.
This Bond is one of the series designated on the face
hereof, limited in aggregate principal amount of $105,525,000.
This Bond and all Bonds issued or to be issued in series created
under the First Supplemental Indenture are (i) not subject to any
sinking fund, (ii) are subject to optional redemption on the
terms set forth in Section 4.9 of the Original Indenture and
(iii) are, in accordance with the provisions of Article VIII of
the Original Indenture, subject to redemption by Panda Funding
prior to the Final Maturity Date, in whole or in part on any
Business Day on or after August 20, 2001, and if in part in
integral multiples of $1,000. Any such redemption shall be at the
redemption prices (expressed as percentages of principal amount)
set forth in the table below plus accrued interest, if any, to
the redemption date, if redeemed during the 12-month period
commencing on or after August 20 of years set forth below:
Year Redemption Price
2001 105.8125 percent
2002 104.3594 percent
2003 102.9063 percent
2004 101.4532 percent
2005
and thereafter 100.0000 percent
In the event of a Change of Control of PIC, and subject to
certain conditions and limitations provided in the Indenture,
Panda Funding will be obligated to make an offer to purchase, on
a Business Day not more than 60 nor less than 30 days following
the occurrence of a Change of Control of PIC, all of the then
Outstanding Bonds at a purchase price equal to 101% of the
principal amount thereof, together with accrued and unpaid
interest, if any, to the Change of Control Purchase Date, all as
provided in the Indenture.
The Bonds are, under certain conditions, subject to
mandatory redemption as set forth in Sections 4.8 and 8.3 of the
Original Indenture. Notice of any redemption of Bonds will be
given at least 30 days but not more than 60 days before the
Redemption Date to each Holder at its address as it appears in
the Security Register.
Bonds (or portions thereof as aforesaid) for the
redemption of which provision is made in accordance with the
Indenture shall cease to bear interest from and after any
Redemption Date.
The Indenture contains provisions for, upon compliance by
Panda Funding with certain conditions set forth in the Indenture,
the defeasance of (a) the entire indebtedness of this Bond and
(b) certain restrictive covenants and agreements.
The unpaid portion of the Principal Amount, together
with any interest accrued and unpaid thereon and all other
amounts due hereunder, if any, may become due and payable upon
the occurrence and continuation of any Event of Default, but only
as provided in
the Indenture.
The Holder hereof, by its acceptance of this Bond, agrees
that each payment received by it hereunder shall be applied in
the manner set forth in Section 2.16 of the Indenture relating to
the allocation of principal and interest.
The Bonds are issuable only as registered Bonds without
coupons in denominations of $100,000 (or such lesser principal
amount as results from all payments of principal and redemptions
in respect of a Bond in the original principal amount of
$100,000) and any integral multiple of $1,000 in excess thereof.
As provided in, and subject to the provisions of, the Indenture,
Bonds are exchangeable at the option of the Holder thereof for
other Bonds of the same series, of authorized denomination and of
like tenor and aggregate principal amount, to be registered in
the name of such Holder, upon surrender thereof by such Holder.
At the option of the Holders thereof, the Bonds may be
exchanged pursuant to the Registration Rights Agreement for a
like aggregate principal amount of Series A-1 Bonds.
No service charge will be required of any Holder of Bonds
participating in any such transfer or exchange of Bonds in
respect of such transfer or exchange, but the Security Registrar
may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
Prior to due presentment of this Bond for registration of
transfer, the person in whose name this Bond is registered shall
be deemed to be the owner and holder thereof for the purpose of
receiving payment as herein provided and for all other purposes
whether or not this Bond be overdue regardless of any notice to
anyone to the contrary.
THE INDENTURE AND THIS BOND SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO THE CONFLICTS OF LAW RULES THEREOF, OTHER THAN
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
PRINCIPAL PAYMENTS
Payment Date Percentage of Principal
February 20, 1997 0.2045 percent
August 20, 1997 0.0000 percent
February 20, 1998 0.0000 percent
August 20, 1998 0.0000 percent
February 20, 1999 0.0000 percent
August 20, 1999 0.5933 percent
February 20, 2000 0.6129 percent
August 20, 2000 0.0000 percent
February 20, 2001 0.0000 percent
August 20, 2001 1.3753 percent
February 20, 2002 1.4691 percent
August 20, 2002 2.2184 percent
February 20, 2003 2.3565 percent
August 20,2003 2.9328 percent
February 20, 2004 3.1031 percent
August 20,2004 3.2796 percent
February 20,2005 3.4687 percent
August 20,2005 3.5977 percent
February 20,2006 3.7820 percent
August 20,2006 2.8098 percent
February 20,2007 3.0076 percent
August 20,2007 4.8415 percent
February 20,2008 5.1145 percent
August 20,2008 5.0057 percent
February 20,2009 5.2949 percent
August 20,2009 5.5185 percent
February 20,2010 5.8300 percent
August 20,2010 5.7248 percent
February 20,2011 6.0590 percent
August 20,2011 6.4800 percent
February 20,2012 6.8808 percent
August 20,2012 8.4390 percent
PIC GUARANTY
To the extent and subject to the limitations set forth in
the Indenture, PIC (as defined in the Indenture referred to in
the Bond upon which this notation is endorsed, which term
includes any successor or permitted assigns under the Indenture)
has unconditionally guaranteed (a) the due and punctual payment
of the principal of (and premium, if any, on) and interest on the
Bonds, (b) the due and punctual payment of all other amounts due
and payable under the Indenture and the Bonds by Panda Funding,
and (c) the due and punctual performance of all other obligations
of Panda Funding to the Holders or the Trustee, all in accordance
with the terms set forth in the Indenture. Capitalized terms used
herein shall have the meanings assigned to them in the Indenture
unless otherwise indicated.
The obligations of PIC to the Holders of Bonds and to the
Trustee pursuant to the PIC Guaranty and the Indenture are
expressly set forth in the Indenture, including Article XIII
thereof, and reference is hereby made to the Indenture for the
precise terms of the PIC Guaranty.
PANDA INTERFUNDING CORPORATION
By:
ABBREVIATIONS
The following abbreviations when used in the inscription on the
face of this instrument shall be construed as though they were
written out in full according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship
and not as tenants in common
UNIF GIFT MIN ACT
(___________) (Minor) under Uniform Gift to Minors Act
(State)
Additional abbreviations may also be used though not in the
above list FOR VALUE RECEIVED the undersigned hereby sell(s),
assign(s) and transfer(s) unto
Tax Identification Number or Other
Identifying Number of Assignee
________________________________________________________________
________________________________________________________________
________________________________________________________________
(Please print or typewrite name and address, including zip code
of Assignee)
the within Bond and all rights thereunder, hereby irrevocably
constituting and appointing ____________________________________
attorney to transfer said bond on the books of Panda Funding,
with full power of substitution in the premises.
Dated:
NAME:
NOTICE: The signature to this assignment must correspond with
the name as written upon the first page of the within instrument
in every particular, without alteration or enlargement or any
change whatsoever.
EXHIBIT 4.05
[If a Global Bond - THIS BOND IS A GLOBAL BOND WITHIN THE
MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A
DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS BOND IS NOT
EXCHANGEABLE FOR BONDS REGISTERED IN THE NAME OF A PERSON OTHER
THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS
BOND (OTHER THAN A TRANSFER OF THIS BOND AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO PANDA FUNDING OR ITS AGENT FOR
REGISTRATION OF TRANSFER EXCHANGE, OR PAYMENT, AND ANY BOND
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE
& CO., HAS AN INTEREST HEREIN.]
PANDA FUNDING CORPORATION
11-5/8% POOLED PROJECT BOND, SERIES A-1 DUE 2012
NO. CUSIP NUMBER
PRINCIPAL AMOUNT FINAL MATURITY DATE ISSUE DATE INTEREST RATE
$ AUGUST 20, 2012 11-5/8%
Panda Funding Corporation, a Delaware corporation
(hereinafter called "Panda Funding", which term includes any
successor or assign under the Trust Indenture referred to below),
for value received hereby promises to pay to________________or
its registered assigns, the principal sum of _________________
(the "Principal Amount"), such payment to be made in semiannual
installments on February 20 and August 20 of each year
(commencing on the February 20 or August 20 following the original
issuance of the Series A-l Bonds) and ending on the Final Maturity
Date set forth above, each such installment to be in an amount
equal to the Principal Amount multiplied by the percentage set
forth opposite the applicable payment date on the reverse hereof
(provided that the portion of the Principal Amount remaining
unpaid on the Final Maturity Date, together with all interest
accrued thereon, shall in any and all cases be due and payable on
the Final Maturity Date), and to pay interest on the unpaid
portion of the Principal Amount at the Interest Rate set forth
above from the most recent Interest Payment Date to which
interest has been paid or duly provided for or, if no interest
has been paid or duly provided for, from the Issue Date set forth
above, semiannually on February 20 and August 20 in each year
(commencing on the February 20 or August 20 following the
original issuance of the Series A-1 Bonds), until the Principal
Amount is paid in full or payment thereof is duly provided for.
Panda Funding also promises to pay any Additional Interest
required by Section 2.1 (c) of the First Supplemental Indenture,
upon the conditions, at the rate and for the periods specified
therein. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in
such Indenture, be paid to the Person in whose name this Bond (or
one or more Predecessor Bonds) is registered at the close of
business on the Regular Record Date for such interest, which
shall be the February 6 or August 6 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment
Date. Except as otherwise provided in the Indenture, any such
interest not so punctually paid or duly provided for will cease
to be payable to the Holder on such Regular Record Date and may
either be paid to the Person in whose name this Bond (or one or
more Predecessor Bonds) is registered at the close of business on
a Special Record Date for the payment of such defaulted interest
to be fixed by the Trustee, notice whereof shall be given to the
Holders of Bonds of this series not less than 10 days prior to
such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any
securities exchange on which the Bonds of this series may be
listed, and upon such notice as may be required by such exchange,
all as more fully provided in the Indenture.
Payment of the principal of and interest on this Bond will be
made at the corporate trust office of the Trustee, or such other
office or agency of Panda Funding as may be designated by it for
such purpose in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the
payment of public and private debts; provided, however, that (a)
at the option of Panda Funding payment of interest may be made by
check mailed to the address of the Person entitled thereto as
such address shall appear in the Security Register, (b)
notwithstanding such election by Panda Funding, if a Holder of
$2,000,000 or more in aggregate principal amount (or such lesser
amount as results from all payments of principal and redemptions
in respect of a Bond in the original principal amount of
$2,000,000) of Bonds requests in writing, payments of money may
be made by wire transfer of immediately as available funds
pursuant to written wire transfer instructions delivered to the
Trustee on or before the applicable Regular Record Date.
Reference is made to the further provisions of this Bond set
forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
executed by the Trustee by manual signature, this Bond shall not
be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, Panda Funding has caused this
instrument to be duly executed.
PANDA FUNDING CORPORATION
By:_______________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This Bond is one of the series of Bonds referred to in the
within-mentioned Indenture.
Bankers Trust Company, as Trustee
By:
Authorized Signatory
[Form of Reverse of Bond]
This bond is one of an authorized issue of Bonds of Panda
Funding known as its 11-5/8 percent Pooled Project Bonds, Series
A-1 due 2012 (the "Bonds"). The Bonds are issued under the Trust
Indenture dated as of July 31, 1996 (the "Original Indenture")
among Panda Funding, Panda Interfunding Corporation, a Delaware
corporation ("PIC"), and Bankers Trust Company, a New York state
banking corporation, as trustee (in such capacity, together with
its successors in such capacity, the "Trustee"), as supplemented
by the First Supplemental Indenture dated as of July 31, 1996
(the "First Supplemental Indenture") to the Original Indenture
among Panda Funding, PIC and the Trustee (the Original Indenture,
as so supplemented and as the same may be further supplemented,
amended or modified, the "Indenture"). All capitalized terms used
herein, unless otherwise defined herein, shall have the meanings
ascribed to them in the Indenture.
All Bonds of any series issued and outstanding under the
Indenture rank on a parity with each other Bond of the same
series and with all Bonds of each other series. Reference is
hereby made to the Indenture for a description of the nature and
extent of the Bonds and the respective rights, limitations of
rights, duties and immunities thereunder of the Holders of the
Bonds and of the Trustee and Panda Funding and PIC in respect of
the Bonds and the terms upon which the Bonds are made and are to
be authenticated and delivered.
The principal of, and premium, if any, and interest on, this
Bond are (i) payable only from the revenues and assets of Panda
Funding, the Collateral and, through the PIC Guaranty, PIC and
the payments therefrom and the income and proceeds received by
the Trustee therefrom and (ii) secured by assets subject to the
Lien of the Security Documents, and all payments of principal and
interest shall be made in accordance with the terms of the Trust
Indenture.
The Bonds are subject to a Collateral Agency Agreement dated
as of July 31, 1996 pursuant to which the rights of the Secured
Parties (including the Holders of the Bonds) in respect of the
Collateral will be shared among the Secured Parties and will be
exercised by the Collateral Agent in accordance with the
Collateral Agency Agreement.
The Indenture permits, with certain exceptions, as therein
provided, the amendment thereof and the modification of the
rights and obligations of Panda Funding, PIC and the rights of
the Holders of the Bonds under the Indenture at any time by Panda
Funding and PIC with the consent of the Holders of not less than
a majority in aggregate principal amount of the Bonds of all
series then outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate
principal amount of the Bonds of all series then outstanding, on
behalf of the Holders of all the Bonds, to waive compliance by
Panda Funding or PIC with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences.
Any Act (as such term is defined in the Indenture), including,
but not limited to, such a consent, waiver or direction by the
Holder of this Bond shall be conclusive and binding upon the
Holder and upon all future Holders of this Bond and the Holder of
every Bond issued upon the transfer hereof or the exchange
therefor or in lieu hereof whether or not notation of such Act is
made upon this Bond.
This Bond is one of the series designated on the face
hereof, limited in aggregate principal amount of $105,525,000.
This Bond and all Bonds issued or to be issued in series
created under the First Supplemental Indenture are (i) not
subject to any sinking fund, (ii) are subject to optional
redemption on the terms set forth in Section 4.9 of the Original
Indenture and (iii) are, in accordance with the provisions of
Article VIII of the Original Indenture, subject to redemption by
Panda Funding prior to the Final Maturity Date, in whole or in
part on any Business Day on or after August 20, 2001, and if in
part in integral multiples of $1,000. Any such redemption shall
be at the redemption prices (expressed as percentages of
principal amount) set forth in the table below plus accrued
interest, if any, to the redemption date, if redeemed during the
12-month period commencing on or after August 20 of years set
forth below:
Year Redemption Price
2001 105.8125 percent
2002 104.3594 percent
2003 102.9063 percent
2004 101.4532 percent
2005
and thereafter 100.0000 percent
In the event of a Change of Control of PIC, and subject to
certain conditions and limitations provided in the Indenture,
Panda Funding will be obligated to make an offer to purchase, on
a Business Day not more than 60 nor less than 30 days following
the occurrence of a Change of Control of PIC, all of the then
Outstanding Bonds at a purchase price equal to 101% of the
principal amount thereof, together with accrued and unpaid
interest, if any, to the Change of Control Purchase Date, all as
provided in the Indenture.
The Bonds are, under certain conditions, subject to
mandatory redemption as set forth in Sections 4.8 and 8.3 of the
Original Indenture. Notice of any redemption of Bonds will be
given at least 30 days but not more than 60 days before the
Redemption Date to each Holder at its address as it appears in
the Security Register.
Bonds (or portions thereof as aforesaid) for the
redemption of which provision is made in accordance with the
Indenture shall cease to bear interest from and after any
Redemption Date.
The Indenture contains provisions for, upon compliance by
Panda Funding with certain conditions set forth in the Indenture,
the defeasance of (a) the entire indebtedness of this Bond and
(b) certain restrictive covenants and agreements.
The unpaid portion of the Principal Amount, together with
any interest accrued and unpaid thereon and all other amounts due
hereunder, if any, may become due and payable upon the occurrence
and continuation of any Event of Default, but only as provided in
the Indenture.
The Holder hereof, by its acceptance of this Bond, agrees
that each payment received by it hereunder shall be applied in
the manner set forth in Section 2.16 of the Indenture relating to
the allocation of principal and interest.
The Bonds are issuable only as registered Bonds without
coupons in denominations of $100,000 (or such lesser principal
amount as results from all payments of principal and redemptions
in respect of a Bond in the original principal amount of
$100,000) and any integral multiple of $1,000 in excess thereof.
As provided in, and subject to the provisions of, the Indenture,
Bonds are exchangeable at the option of the Holder thereof for
other Bonds of the same series, of authorized denomination and of
like tenor and aggregate principal amount, to be registered in
the name of such Holder, upon surrender thereof by such Holder.
No service charge will be required of any Holder of Bonds
participating in any such transfer or exchange of Bonds in
respect of such transfer or exchange, but the Security Registrar
may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
Prior to due presentment of this Bond for registration of
transfer, the person in whose name this Bond is registered shall
be deemed to be the owner and holder thereof for the purpose of
receiving payment as herein provided and for all other purposes
whether or not this Bond be overdue regardless of any notice to
anyone to the contrary.
THE INDENTURE AND THIS BOND SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO THE CONFLICTS OF LAW RULES THEREOF, OTHER THAN
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
PRINCIPAL PAYMENTS
Payment Date Percentage of Principal
February 20, 1997 0.2045 percent
August 20, 1997 0.0000 percent
February 20, 1998 0.0000 percent
August 20, 1998 0.0000 percent
February 20, 1999 0.0000 percent
August 20, 1999 0.5933 percent
February 20, 2000 0.6129 percent
August 20, 2000 0.0000 percent
February 20, 2001 0.0000 percent
August 20, 2001 1.3753 percent
February 20, 2002 1.4691 percent
August 20, 2002 2.2184 percent
February 20, 2003 2.3565 percent
August 20,2003 2.9328 percent
February 20, 2004 3.1031 percent
August 20,2004 3.2796 percent
February 20,2005 3.4687 percent
August 20,2005 3.5977 percent
February 20,2006 3.7820 percent
August 20,2006 2.8098 percent
February 20,2007 3.0076 percent
August 20,2007 4.8415 percent
February 20,2008 5.1145 percent
August 20,2008 5.0057 percent
February 20,2009 5.2949 percent
August 20,2009 5.5185 percent
February 20,2010 5.8300 percent
August 20,2010 5.7248 percent
February 20,2011 6.0590 percent
August 20,2011 6.4800 percent
February 20,2012 6.8808 percent
August 20,2012 8.4390 percent
PIC GUARANTY
To the extent and subject to the limitations set forth in
the Indenture, PIC (as defined in the Indenture referred to in
the Bond upon which this notation is endorsed, which term
includes any successor or permitted assigns under the Indenture)
has unconditionally guaranteed (a) the due and punctual payment
of the principal of (and premium, if any, on) and interest on the
Bonds, (b) the due and punctual payment of all other amounts due
and payable under the Indenture and the Bonds by Panda Funding,
and (c) the due and punctual performance of all other obligations
of Panda Funding to the Holders or the Trustee, all in accordance
with the terms set forth in the Indenture. Capitalized terms used
herein shall have the meanings assigned to them in the Indenture
unless otherwise indicated.
The obligations of PIC to the Holders of Bonds and to the
Trustee pursuant to the PIC Guaranty and the Indenture are
expressly set forth in the Indenture, including Article XIII
thereof, and reference is hereby made to the Indenture for the
precise terms of the PIC Guaranty.
PANDA INTERFUNDING CORPORATION
By:
ABBREVIATIONS
The following abbreviations when used in the inscription on the
face of this instrument shall be construed as though they were
written out in full according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship
and not as tenants in common
UNIF GIFT MIN ACT
(___________) (Minor)
under Uniform Gift to Minors Act
(State)
Additional abbreviations may also be used though not in the
above list FOR VALUE RECEIVED the undersigned hereby sell(s),
assign(s) and transfer(s) unto
Tax Identification Number or Other
Identifying Number of Assignee
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(Please print or typewrite name and address, including zip code
of Assignee)
the within Bond and all rights thereunder, hereby irrevocably
constituting and appointing ____________________________________
attorney to transfer said bond on the books of Panda Funding,
with full power of substitution in the premises.
Dated:
NAME:
NOTICE: The signature to this assignment must correspond with the
name as written upon the first page of the within instrument in
every particular, without alteration or enlargement or any change
whatsoever.
EXHIBIT 4.06
_________________________________________________________________
11-5/8% POOLED PROJECT BONDS, SERIES A DUE 2012
REGISTRATlON RIGHTS AGREEMENT
Dated July 3 1, 1996
by and among
PANDA FUNDING CORPORATION
PANDA INTERFUNDING CORPORATION
and
JEFFERIES & COMPANY, INC.,
_________________________________________________________________
This Registration Rights Agreement is made and entered into this
31st day of July, 1996, by and among Panda Funding Corporation,
a Delaware corporation (the "Issuer"), Panda Interfunding
Corporation' a Delaware corporation (the "Company") and Jefferies
& Company, Inc. (the "Initial Purchaser").
This Agreement is made pursuant to the Purchase Agreement, dated
July 26, 1996, among the Issuer, the Company, Panda Energy
International, Inc., a Texas corporation, and the Initial
Purchaser (the "Purchase Agreement"). In order to induce the
Initial Purchaser to enter into the Purchase Agreement, the
Issuer and the Company have agreed to provide the registration
rights provided for in this Agreement to the Initial Purchaser
and its respective direct and indirect transferees. The
execution and delivery of this Agreement is a condition to the
closing of the transactions contemplated by the Purchase
Agreement.
The parties hereby agree as follows:
1.Definitions:
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: As defined in Section 4(a) hereof.
Advice: As defined in the last paragraph of Section 5 hereof.
Affiliate: With respect to any specified person, "Affiliate"
shall mean any other person directly or indirectly controlling
or controlled by or under direct or indirect common control
with such specified person. For the purposes of this
definition, "control," when used with respect to any person,
means the power to direct the management and policies of such
person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise and the terms
"affiliated," "controlling" and "controlled" have meanings
correlative to the forgoing.
Agreement: This Registration Rights Agreement, as the same
may be amended, supplemented or modified from time to time in
accordance with the terms hereof.
Bonds: The 11-5/8% Pooled Project Bonds, Series A, due 2012,
of the Issuer, unconditionally guaranteed the Company and,
issued pursuant to the Indenture.
Business Day: Any day except a Saturday, a Sunday or a day on
which banking institutions in New York, New York generally are
required or authorized by law or other government action to be
closed.
Company: As defined in the preamble hereof.
Consummate or consummate: When used to qualify the term
"Exchange Offer" shall mean validly and lawfully to issue and
deliver the Exchange Bonds pursuant to the Exchange Offer for
all Bonds validly tendered and not validly withdrawn pursuant
thereto in accordance with the terms of this Agreement.
Consummation Date: The date that is 30 Business Days
immediately following the date that the Exchange Registration
Statement shall have been declared effective by the SEC.
Effectiveness Period: As defined in Section 3(a) hereof.
Exchange Act: The Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC
pursuant thereto.
Exchange Date: As defined in Section 2(d) hereof.
Exchange Bonds: The _____% Pooled Project Bonds, Series B,
due 2011, of the Issuer, unconditionally guaranteed by the
Company, issued pursuant to the Indenture, and that are
identical to the Bonds in all material respects, except that
the provisions regarding restrictions on transfer shall be
modified, as appropriate, and the issuance thereof pursuant to
the Exchange Offer shall have been registered pursuant to an
effective Registration Statement in compliance with the
Securities Act.
Exchange Offer: An offer to issue, in exchange for any and
all of the Bonds, a like aggregate principal amount of
Exchange Bonds, which offer shall be made by the Issuer and
the Company pursuant to Section 2 hereof.
Exchange Registration Statement: As defined in Section 2(a)
hereof.
Indemnified Person: As defined in Section 7(a) hereof.
Indenture: The Indenture, dated as of July 3l, 1996, among
the Issuer, the Company and Fleet National Bank, as trustee
thereunder, pursuant to which the Bonds are issued, as amended
or supplemented from time to time in accordance with the terms
thereof.
Initial Purchaser: Jefferies & Company, Inc.
Issue Date: As defined in Section 2(a).
Issuer: As defined in the preamble hereof.
Participating Broker-Dealer: As defined in Section 2(e)
hereof.
Private Exchange: As defined in Section 2(c) hereof.
Private Exchange Bonds: As defined in Section 2(c) hereof.
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, a prospectus that
discloses information previously omitted from a prospectus
filed as part of an effective registration statement in
reliance upon Rule 430A promulgated pursuant to the Securities
Act), as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of
the Bonds, Exchange Bonds or Private Exchange Bonds covered by
such Registration Statement, and all other amendments and
supplements to any such prospectus, including post-effective
amendments, and all material incorporated by reference or
deemed to be incorporated by reference, if any, in such
prospectus.
Registration Default: As defined in Section 4(a) hereof.
Registration Statement: Any registration statement of the
Issuer and the Company that covers any of the Bonds, Exchange
Bonds or Private Exchange Bonds pursuant to the provisions of
this Agreement, including the Prospectus, amendments and
supplements to such registration statement or Prospectus,
including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference or deemed
to be incorporated by reference, if any, in such registration
statement.
Rule 144: Rule 144 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the SEC
as a replacement thereto having substantially the same effect
as such Rule.
Rule 144A: Rule 144A promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the SEC
as a replacement thereto having substantially the same effect
a such Rule.
Rule 158: Rule 158 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the SEC
as a replacement thereto having substantially the same effect
as such Rule.
Rule 174: Rule 174 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the SEC
as a replacement thereto having substantially the same effect
as such Rule.
Rule 415: Rule 415 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the SEC
as a replacement thereto having substantially the same effect
as such Rule.
Rule 424: Rule 424 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the SEC
as a replacement thereto having substantially the same effect
as such Rule.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations promulgated by the SEC thereunder.
Shelf Registration: As defined in Section 3 hereof.
Shelf Registration Statement: As defined in Section 3 hereof.
Special Counsel: Vinson & Elkins L.L.P., special counsel to
the holders of Transfer Restricted Securities, or such other
counsel (but not more than one such counsel) as shall be
agreed upon by the Issuer, the Company and holders of a
majority in aggregate principal amount of Transfer Restricted
Securities, the expenses of which holders of Transfer
Restricted Securities will be reimbursed by the Issuer and the
Company pursuant to Section 6.
TIA: The Trust Indenture Act of 1939, as amended.
Transfer Restricted Securities: The Bonds, upon original
issuance thereof, and at all times subsequent thereto, each
Exchange Bond as to which Section 3(a)(ii) hereof is
applicable upon original issuance and at all times subsequent
thereto and each Private Exchange Bond upon original issuance
thereof and at all times subsequent thereto, until in the case
of any such Bond, Exchange Bond or Private Exchange Bond, as
the case may be, the earliest to occur of (i) the date on
which any such Bond has been exchanged by a person other than
a Participating Broker-Dealer for an Exchange Bond (other than
with respect to an Exchange Bond as to which Section 3(a)(ii)
hereof applies) pursuant to the Exchange Offer, (ii) with
respect to Exchange Bonds received by Participating
Broker-Dealers in the Exchange Offer, the earlier of (x) the
date on which such Exchange Bond has been sold by such
Participating Broker-Dealer by means of the Prospectus
contained in the Exchange Registration Statement and (y) the
date on which the Exchange Registration Statement has been
effective under the Securities Act for a period of 6 months
after the Consummation Date, (iii) a Shelf Registration
Statement covering such Bond, Exchange Bond or Private
Exchange Bond has been declared effective by the SEC and such
Bond, Exchange Bond or Private Exchange Bond, as the case may
be, has been disposed of in accordance with such effective
Shelf Registration Statement, (iv) the date on which such
Bond, Exchange Bond or Private Exchange Bond, as the case may
be, is distributed to the public pursuant to Rule 144 (or any
similar provisions then in effect) or is saleable pursuant to
Rule 144(k) promulgated by the SEC pursuant to the Securities
Act or (v) the date on which such Bond, Exchange Bond or
Private Exchange Bond, as the case may be, ceases to be
outstanding for purposes of the Indenture or any other
indenture under which such Exchange Bond or Private Exchange
Bond was issued.
Trustee: The trustee under the Indenture.
Underwritten Registration or Underwritten Offering: A
registration in connection with which securities are sold to
an underwriter for re-offering to the public pursuant to an
effective Registration Statement.
2. Exchange Offer
(a) To the extent not prohibited by any applicable law or
applicable interpretation of the SEC or the staff of the
SEC, the Issuer and the Company shall (A) prepare and, on or
prior to 90 days after the date of original issuance of the
Bonds (the "Issue Date"), file with the SEC a Registration
Statement under the Securities Act with respect to an offer
by the Issuer and the Company to the holders of the Bonds to
issue and deliver to such holders, in exchange for Bonds, a
like principal amount of Exchange Bonds, (B) use their best
efforts to cause the Registration Statement relating to the
Exchange Offer to be declared effective by the SEC under the
Securities Act on or prior to 180 days after the Issue Date,
and (C) commence the Exchange Offer and use best efforts to
issue, on or prior to the Consummation Date, the Exchange
Bonds. The offer and sale of the Exchange Bonds pursuant to
the Exchange Offer shall be registered pursuant to the
Securities Act on the appropriate form (the "Exchange
Registration Statement") and duly registered or qualified
under state securities or Blue Sky laws in accordance with
Section 5(h) and will comply with all applicable tender
offer rules and regulations under the Exchange Act and such
state securities or Blue Sky laws. The Exchange Offer shall
not be subject to any condition, other than that the
Exchange Offer does not violate any applicable law or
interpretation of the SEC or the staff of the SEC. Upon
consummation of the Exchange Offer in accordance with this
Section 2, the Issuer and the Company shall have no further
registration obligations other than with respect to (i)
Private Exchange Bonds, (ii) Exchange Bonds held by
Participating Broker-Dealers and (iii) Bonds or Exchange
Bonds as to which Section 3(a)(ii) hereof applies. No
securities shall be included in the Exchange Registration
Statement other than the Exchange Bonds.
(b) The Issuer and the Company may require each holder of
Bonds as a condition to its participation in the Exchange
Offer to represent to the Issuer and the Company and their
counsel in writing (which may be contained in the applicable
letter of transmittal) that at the time of the consummation
of the Exchange Offer (i) any Exchange Bonds received by
such holder will be acquired in the ordinary course of its
business, (ii) such holder will have no arrangement or
understanding with any person to participate in the
distribution (within the meaning of the Securities Act) of
the Exchange Bonds and (iii) such holder is not an Affiliate
of the Issuer or the Company, or if it is an Affiliate of
the Issuer or the Company, it will comply with the
registration and prospectus delivery requirements of the
Securities Act, to the extent applicable.
(c) To the extent not prohibited by any applicable law or
applicable interpretation of the SEC or the staff of the
SEC, if, prior to consummation of the Exchange Offer, the
Initial Purchaser holds any Bonds acquired by it and having,
or which are reasonably likely to be determined to have, the
status of an unsold allotment in the initial distribution,
or any other holder of Bonds is not entitled to participate
in the Exchange Offer, the Issuer and the Company upon the
request of the Initial Purchaser or any such holder shall,
simultaneously with the delivery of the Exchange Bonds in
the Exchange Offer, issue and deliver to the Initial
Purchaser and any such holder, in exchange (the "Private
Exchange") for such Bonds held by the Initial Purchaser and
any such holder, a like principal amount of debt securities
of the Issuer and the Company that are identical in all
material respects to the Exchange Bonds (the "Private
Exchange Bonds") (and which are issued pursuant to the same
indenture as the Exchange Bonds). The Private Exchange
Bonds shall bear the same CUSIP number as the Exchange
Bonds.
(d) Unless the Exchange Offer would not be permitted by any
applicable law or interpretation of the SEC or the staff of
the SEC, the Issuer and the Company shall mail the Exchange
Offer Prospectus and appropriate accompanying documents,
including appropriate letters of transmittal, to each holder
of Bonds providing, in addition to such other disclosure as
are required by applicable law:
(i) that the Exchange Offer is being made pursuant to this
Agreement and that all Bonds validly tendered will be
accepted for exchange;
(ii) the date of acceptance for exchange (the "Exchange
Date"), which date shall in no event be later than the
Consummation Date (unless otherwise required by
applicable law);
(iii) that holders of Bonds electing to have a Bond
exchanged pursuant to the Exchange Offer will be
required to surrender such Bond, together with the
enclosed letters of transmittal, to the institution and
at the address (located in the city of New York)
specified in the notice prior to the close of business
on the Exchange Date; and
(iv) that holders of Bonds that do not tender all such
securities pursuant to the Exchange Offer may no longer
have any registration rights hereunder with respect to
Bonds not tendered.
Promptly after the Exchange Date, the Issuer and the Company
shall:
(i) accept for exchange all Bonds or portions thereof
validly tendered and not validly withdrawn pursuant to
the Exchange Offer or the Private Exchange; and
(ii) deliver, or cause to be delivered, to the Trustee
for cancellation all Bonds or portions thereof so
accepted for exchange by the Issuer and the Company, and
issue, cause the Trustee under the Indenture (or the
indenture pursuant to which the Exchange Bonds are
issued) to authenticate, and mail to each holder of
Bonds, Exchange Bonds equal in principal amount to the
principal amount of the Bonds surrendered by such
holder.
(e) The Issuer, the Company and the Initial Purchaser
acknowledge that the staff of the SEC has taken the position
that any broker-dealer that owns Exchange Bonds that were
received by such broker-dealer for its own account in the
Exchange Offer (a "Participating Broker-Dealer") may be
deemed to be an "underwriter" within the meaning of the
Securities Act and must deliver a prospectus meeting the
requirements of the Securities Act in connection with any
resale of such Exchange Bonds (other than a resale of an
unsold allotment resulting from the original offering of the
Bonds).
The Issuer, the Company and the Initial Purchaser also
acknowledge that it is the SEC staff's position that if the
Prospectus contained in the Exchange Registration Statement
includes a plan of distribution containing a statement to
the above effect and the means by which Participating Broker-
Dealers may resell the Exchange Bonds, without naming the
Participating Broker-Dealers or specifying the amount of
Exchange Bonds owned by them, such Prospectus may be
delivered by Participating Broker-Dealers to satisfy their
prospectus delivery obligations under the Securities Act In
connection with re-sales of Exchange Bonds for their own
accounts, so long as the Prospectus otherwise meets the
requirements of the Securities Act.
In light of the foregoing, if requested by a Participating
Broker-Dealer, the Issuer and the Company agree (x) to use
their best efforts to keep the Exchange Registration
Statement continuously effective for a period of up to 6
months or such earlier date as each Participating Broker-
Dealer shall have notified the Company in writing that such
Participating Broker-Dealer has resold all Exchange Bonds
acquired Exchange Offer, (y) to comply with the provisions
of Section 5 of this Agreement, as they relate to the
Exchange Offer and the Exchange Registration Statement, and
(z) to deliver to such Participating Broker-Dealer a "cold
comfort" letter of the independent public accountants of the
Issuer and the Company and a legal opinion as to matters
reasonably requested by such Participating Broker-Dealer
relating to the Exchange Registration Statement and the
related Prospectus and any amendments or supplements
thereto.
(f) The Initial Purchaser shall have no liability to any
Participating Broker-Dealer with respect to any request made
pursuant to Section 2(e).
(g) Accrued but unpaid interest on any Bond that is
exchanged for an Exchange Bond or a Private Exchange Bond
pursuant to this Agreement shall be paid on or before the
first interest payment date on the Exchange Bonds and the
Private Exchange Bonds, as the case may be.
(h) The Exchange Bonds and the Private Exchange Bonds may
be issued under (i) the Indenture or (ii) an indenture
identical in all material respects to the Indenture, which
in either event shall provide that the Exchange Bonds shall
not be subject to the transfer restrictions set forth in the
Indenture, except in any case where an Exchange Bond
constitutes a Transfer Restricted Security. The Indenture
or such indenture shall provide that the Exchange Bonds, the
Private Exchange Bonds and the Bonds shall vote and consent
together on all matters as one class and that neither the
Exchange Bonds, the Private Exchange Bonds nor the Bonds
will have the right to vote or consent as a separate class
on any matter.
3. Shelf Registration.
(a) If (i) the Issuer or the Company is not permitted to
file the Exchange Offer Registration Statement or to
consummate the Exchange Offer because the Exchange Offer Is
not permitted by any applicable law or applicable
interpretation of the SEC or the staff of the SEC or (ii)
any holder of a Bond notifies the Issuer or the Company on
or prior to the Exchange Date that (A) due to a change in
law or SEC policy it is not entitled to participate in the
Exchange Offer, (B) due to a change in law or SEC policy it
may not resell the Exchange Bonds acquired by it in the
Exchange Offer to the public without delivering a prospectus
and the Prospectus contained in the Exchange Registration
Statement is not legally available for such re-sales by such
holder or (C) it is a broker-dealer that owns Bonds
(including the Initial Purchaser that holds Bonds as a part
of an unsold allotment from the original offering of the
Bonds) acquired directly from the Issuer, the Company or an
affiliate of the Issuer or the Company or (iii) any holder
of Private Exchange Bonds so requests within 120 days after
the consummation of the Private Exchange (each such event
referred to in clauses (i) through (iii), a "Shelf Filing
Event"), the Issuer and the Company shall cause to be filed
with the SEC pursuant to Rule 415 a shelf registration
statement (the "Shelf Registration Statement") on or prior
to the later of (x) 90 days after the Issue Date and (y) 30
days after the occurrence of such Shelf Filing Event,
relating to all Transfer Restricted Securities (the "Shelf
Registration") the holders of which have provided the
information required pursuant to Section 3(b) hereof, and
shall use their best efforts to have the Shelf Registration
Statement declared effective by the SEC on or prior to 90
days after the occurrence of such Shelf Filing Event,
provided that if the Issuer and the Company have not
consummated the Exchange Offer within 180 days of the Issue
Date, then the Issuer and the Company shall cause the Shelf
Registration Statement to be filed with the SEC on or prior
to the 181st day after the Issue Date and shall use their
best efforts to have the Shelf Registration Statement
declared effective by the SEC within 60 days of the date of
filing thereof. In such circumstances, the Issuer and the
Company shall use their best efforts to keep the Shelf
Registration Statement continuously effective under the
Securities Act, until (A) the third anniversary of the Issue
Date (subject to extension pursuant to Section 5 hereof) or
(B) if sooner, the date immediately following the date that
all Transfer Restricted Securities covered by the Shelf
Registration Statement have been sold pursuant thereto (the
"Effectiveness Period"); provided, however, that the
Effectiveness Period shall be extended to the extent
required to permit dealers to comply with the applicable
prospectus delivery requirements of Rule 174 and as
otherwise provided herein.
(b) No holder of Transfer Restricted Securities may include
any of its Transfer Restricted Securities in any Shelf
Registration Statement pursuant to this Agreement unless and
until such holder furnishes to the Company in writing,
within 15 days after receipt of a request therefor, such
information as the Company may reasonably request for use in
connection with any Shelf Registration Statement or
Prospectus or preliminary prospectus included therein. No
holder of Transfer Restricted Securities shall be entitled
to Additional Interest pursuant to Section 4 hereof unless
and until such holder shall have provided all such
reasonably requested information. Each holder of Transfer
Restricted Securities as to which any Shelf Registration
Statement is being effected agrees to furnish promptly to
the Company all information required to be disclosed in
order to make the information previously furnished to the
Company by such holder not materially misleading.
4. Additional Interest
(a) The parties hereto agree that the holders of Transfer
Restricted Securities will suffer damages if the Issuer and
the Company fail to fulfill their obligations pursuant to
Section 2 or Section 3, as applicable, and that it would not
be feasible to ascertain the extent of such damages.
Accordingly, in the event that (i) the applicable
Registration Statement is not filed with the SEC on or prior
to the date specified herein for such filing, (ii) the
applicable Registration Statement has not been declared
effective by the SEC on or prior to the date specified
herein for such effectiveness after such obligation arises,
(iii) if the Exchange Offer is required to be Consummated
hereunder, the Issuer and the Company have not exchanged
Exchange Bonds for all bonds validly tendered and not
validly withdrawn in accordance with the terms of the
Exchange Offer by the Consummation Date or (iv) the
applicable Registration Statement is filed and declared
effective but shall thereafter cease to be effective without
being succeeded immediately by any additional Registration
Statement covering the Bonds, the Exchange Bonds or the
Private Exchange Bonds, as the case may be, which has been
filed and declared effective (each such event referred to in
clauses (i) through (iv), a "Registration Default"), the
interest in addition to the interest otherwise payable with
respect to the Transfer Restricted Securities subject to
such registration (the "Additional Interest") shall accrue
with respect to such Transfer Restricted Securities through
and including the date on which such Registration Default
shall cease to exist (and provided no other Registration
Default with respect to such Transfer Restricted Securities
shall then be continuing) at the rate of one-half of one
percent (0.50%) per annum, as though the interest rate
provided in such Transfer Restricted Securities had been
increased by one-half of one percent (0.50%) per annum.
Following the cure of a Registration Default, the accrual of
Additional Interest with respect to such Registration
Default will cease and upon the cure of all Registration
Defaults the obligation of the Issuer and the Company to pay
Additional Interest will cease; provided, however, if the
Registration Defaults are not cured within two years
following the Issue Date, the obligation of the Issuer and
the Company to pay Additional Interest shall become
permanent.
(b) The Issuer and the Company shall notify the Trustee and
paying agent under the Indenture (or the trustee and paying
agent under such other indenture under which the Transfer
Restricted Securities are issued) immediately upon the
happening of each and every Registration Default. The
Issuer and the Company shall pay the Additional Interest due
on the Transfer Restricted Securities by depositing with the
paying agent (which shall not be the Issuer or the Company
for these purposes) for the Transfer Restricted Securities,
in trust, for the benefit of the holders thereof, prior to
11:00 A.M. on the next interest payment date specified by
the Indenture (or such other indenture), sums sufficient to
pay the Additional Interest then due. The Additional
Interest due shall be payable on each interest payment date
specified by the Indenture (or such other indenture) to the
record holder entitled to receive the interest payment to be
made on such date. Each obligation to pay Additional
Interest shall be deemed to accrue from and including the
date of the applicable Registration Default.
(c) The parties hereto agree that the Additional Interest
provided for in this Section 4 constitutes a reasonable
estimate of the damages that will be suffered by holders of
Transfer Restricted Securities by reason of the happening of
any Registration Default.
5. Registration Procedures
In connection with the registration obligations of the Issuer
and the Company hereunder, the Issuer and the Company shall
effect such registrations on the appropriate form available
for the sale of the Bonds, the Exchange Bonds or Private
Exchange Bonds, as applicable, to (i) in the case of the
Exchange Offer, permit the exchange of Exchange Bonds for
Bonds in the Exchange Offer and, if applicable, re-sales of
Exchange Bonds by Participating Broker-Dealers and (ii) in the
case of a Shelf Registration, permit the sale of the
applicable Transfer Restricted Securities in accordance with
the method or methods of disposition thereof specified by the
holders of such Transfer Restricted Securities, and pursuant
thereto the Issuer and the Company shall as expeditiously as
reasonably possible:
(a) in the case of a Shelf Registration, a reasonable
period of time prior to the initial filing of a Shelf
Registration Statement or Prospectus and a reasonable period
of time prior to the filing of any amendment or supplement
thereto (including any document that would be incorporated
or deemed to be incorporated therein by reference), furnish
to the holders of the Transfer Restricted Securities
included In such Shelf Registration Statement, their Special
Counsel and the managing underwriters, if any, copies of all
such documents proposed to be filed, which documents (other
than those incorporated or deemed to be incorporated by
reference) will be subject to the review of such holders,
their Special Counsel and such underwriters, if any, and
cause the officers and directors of the Issuer and the
Company, counsel to the Issuer and the Company and
independent certified public accountants to the Issuer and
the Company to respond to such reasonable inquiries as shall
be necessary, in the opinion of respective counsel to such
holders and such underwriters, to conduct a reasonable
investigation within the meaning of the Securities Act;
provided, however, that the Issuer and the Company shall not
be deemed to have kept a Shelf Registration Statement
effective during the applicable period if any of them
voluntarily takes or fails to take any reasonable action
that results in holders of the Transfer Restricted
Securities covered thereby not being able to sell such
Transfer Restricted Securities pursuant to federal
securities laws during that period (and the time period
during which such Shelf Registration Statement is required
to remain effective hereunder shall be extended by the
number of days during which such holders of Transfer
Restricted Securities are not able to sell such Transfer
Restricted Securities). The Issuer and the Company shall
not file any such Shelf Registration Statement or related
Prospectus or any amendments or supplements thereto to which
the holders of a majority in aggregate principal amount of
the Transfer Restricted Securities included in such Shelf
Registration Statement shall reasonably object on a timely
basis;
(b) prepare and file with the SEC such amendments,
including post-effective amendments, to each Registration
Statement as may be necessary to keep such Registration
Statement continuously effective for the applicable time
period required hereunder, cause the related Prospectus to
be supplemented by any Prospectus supplement required by
law, and as so supplemented to be filed pursuant to Rule
424; and comply with the provisions of the Securities Act
and the Exchange Act with respect to the disposition of all
securities covered by such Registration Statement during
such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such
Registration Statement as so amended or in such Prospectus
as so supplemented;
(c) notify the holders of Transfer Restricted Securities to
be sold or, in the case of Transfer Restricted Securities
tendered for in an Exchange Offer, their Special Counsel and
the managing underwriters, if any, promptly, and (if
requested by any such person), confirm such notice in
writing, (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment is proposed to be
filed, and (B) with respect to a Registration Statement or
any post-effective amendment, when the same has become
effective, (ii) of any request by the SEC or any other
federal or state governmental authority for amendments or
supplements to a Registration Statement or related
Prospectus or for additional information, (iii) of the
issuance by the SEC, any state securities commission, any
other governmental agency or any court of any stop order,
order or injunction suspending or enjoining the use of a
Prospectus or the effectiveness of a Registration Statement
or the initiation of any proceedings for that purpose, (iv)
of the receipt by the Issuer or the Company of any
notification with respect to the suspension of the
qualification or exemption from qualification of any of the
Bonds, Exchange Bonds or Private Exchange Bonds for sale in
any jurisdiction, or the initiation or threatening of any
proceeding for such purpose, and (v) of the happening of any
event or information becoming known that makes any statement
made in a Registration Statement or related Prospectus or
any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that
requires the making of any changes in such Registration
Statement, Prospectus or documents so that it will not
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and
that in the case of a Prospectus, it will not contain any
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading;
(d) use their best efforts to avoid the issuance of or, if
issued, obtain the withdrawal of any order enjoining or
suspending the use of a Prospectus or the effectiveness of a
Registration Statement or the lifting of any suspension of
the qualification (or exemption from qualification) of any
of the Bonds, Exchange Bonds or Private Exchange Bonds for
sale in any jurisdiction, at the earliest practicable
moment, subject, however, to the proviso in Section 5(h);
(e) if a Shelf Registration Statement is filed pursuant to
Section 3 hereof and if requested by the managing
underwriters, if any, or the holders of a majority in
aggregate principal amount of the Transfer Restricted
Securities being sold pursuant to such Shelf Registration
Statement, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment such information as
the managing underwriters, if any, and such holders
reasonably believe should be Included therein, and (ii) make
all required filings of such Prospectus supplement or such
post-effective amendment under the Securities Act as soon as
practicable after the Issuer or the Company has received
notification of the matters to be incorporated in such
Prospectus supplement or post-effective amendment; provided,
however, that the Issuer and the Company shall not be
required to take any action pursuant to this Section 5(e)
that would, in the opinion of counsel for the Issuer and the
Company, violate applicable law;
(f) upon written request to the Issuer or the Company,
furnish to each holder of Bonds, Exchange Bonds or Private
Exchange Bonds to be exchanged or sold pursuant to a
Registration Statement, their Special Counsel and each
managing underwriter, if any, without charge, at least one
conformed copy of such Registration Statement and each
amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the
extent requested (including those previously furnished or
incorporated by reference) as soon as practicable after the
filing of such documents with the SEC;
(g) deliver to each holder of Bonds, Exchange Bonds or
Private Exchange Bonds to be exchanged or sold pursuant to a
Registration Statement, their Special Counsel, and the
underwriters, if any, without charge, as many copies of the
Prospectus (including each form of prospectus) and each
amendment or supplement thereto as such persons reasonably
request; and the Issuer and the Company hereby consent to
the use of such Prospectus and each amendment or supplement
thereto by each of the selling holders of Transfer
Restricted Securities and the underwriters, if any, in
connection with the offering and sale of the Transfer
Restricted Securities covered by such Prospectus and any
amendment or supplement thereto;
(h) prior to any public offering of Bonds, Exchange Bonds
or Private Exchange Bonds, use their best efforts to
register or qualify or cooperate with the holders of Bonds,
Exchange Bonds or Private Exchange Bonds to be sold or
tendered for the underwriters, if any, and their respective
counsel in connection with the registration or qualification
(or exemption from such registration or qualification) of
such Bonds, Exchange Bonds or Private Exchange Bonds for
offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any such holder or
underwriter reasonably requests in writing; keep each such
registration or qualification (or exemption therefrom)
effective during the period such Registration Statement is
required to be kept effective hereunder and do any and all
other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Bonds, Exchange
Bonds or Private Exchange Bonds covered by the applicable
Registration Statement; provided, however, that the Issuer
arid the Company shall not be required to (i) qualify
generally to do business in any jurisdiction where they are
not then so qualified or (ii) take any action which would
subject them to general service of process or to taxation in
any jurisdiction where they are not so subject;
(i) in connection with any sale or transfer of Transfer
Restricted Securities that will result in such securities no
longer being Transfer Restricted Securities, cooperate with
the holders thereof and the managing underwriters, if any,
to facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Securities to
be sold, which certificates shall not bear any restrictive
legends and shall be in a form eligible for deposit with The
Depository Trust Company and to enable such Transfer
Restricted Securities to be in such authorized denominations
and registered in such names as the managing underwriters,
if any, or such holders may request at least two Business
Days prior to any sale of Transfer Restricted Securities;
(j) upon the occurrence of any event contemplated by
Section 5(c)(v), as promptly as reasonably practicable,
prepare a supplement or amendment, including, if
appropriate, a post-effective amendment, to each
Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be
incorporated therein by reference, and file any other
required document so that, as thereafter delivered, such
Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to
be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading;
(k) prior to the effective date of the Exchange
Registration Statement, to provide a CUSIP number for the
Exchange Bonds (and Private Exchange Bonds if applicable);
(l) if a Shelf Registration Statement is filed pursuant to
Section 3 hereof, enter into such agreements (including an
underwriting agreement in form, scope and substance as is
customary In underwritten offerings) and take all such other
reasonable actions in connection therewith (including those
reasonably requested by the managing underwriters, if any,
or the holders of a majority in aggregate principal amount
of the Transfer Restricted Securities being sold) in order
to expedite or facilitate the disposition of such Transfer
Restricted Securities, and, whether or not an underwriting
agreement is entered into and whether or not the
registration is an underwritten registration, (i) make such
representations and warranties to the holders of such
Transfer Restricted Securities and the underwriters, if any,
with respect to the business of the Issuer, Company and its
subsidiaries (including with respect to businesses or assets
acquired or to be acquired by any of them), and the Shelf
Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference
therein, in each case, with respect to such matters as are
customarily addressed in representations and warranties made
by issuers to underwriters in underwritten offerings, and
confirm the same if and when requested; (ii) obtain opinions
of counsel to the Issuer and the Company and updates thereof
(which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the managing
underwriters, if any, and Special Counsel to the holders of
the Transfer Restricted Securities being sold), addressed to
each selling holder of Transfer Restricted Securities and
each of the underwriters, if any, covering the matters
customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably
requested by such Special Counsel and underwriters; (iii)
use their best efforts to obtain customary "cold comfort"
letters and updates thereof from the independent certified
public accountants of the Issuer and the Company (and, if
necessary, any other independent certified public
accountants of any subsidiary of the Company or of any
business acquired by the Company for which financial
statements and financial data is, or is required to be,
included in the Shelf Registration Statement), addressed
(where reasonably possible) to each selling holder of
Transfer Restricted Securities and each of the underwriters,
if any, such letters to be in customary form and covering
matters of the type customarily covered In "cold comfort"
levels in connection with underwritten offerings; (iv) if an
underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures no less
favorable to the selling holders and the underwriters, if
any, than those set forth in Section 7 hereof (or such other
provisions and procedures acceptable to holders of a
majority in aggregate principal amount of Transfer
Restricted Securities covered by such Shelf Registration
Statement and the managing underwriters, if any); and (v)
deliver such documents and certificates as may be reasonably
requested by the holders of a majority in aggregate
principal amount of the Transfer Restricted Securities being
sold, their Special Counsel and the managing underwriters,
if any, to evidence the continued validity of the
representations and warranties made pursuant to clause (i)
above and to evidence compliance with any customary
conditions contained in the underwriting agreement or other
agreement entered into by the Issuer and the Company;
(m) in the case of a Shelf Registration, make available for
inspection by a representative of the holders of Transfer
Restricted Securities being sold, any underwriter
participating in any such disposition of Transfer Restricted
Securities, and any attorney, consultant or accountant
retained by such selling holders or underwriter, at the
offices where normally kept, during reasonable business
hours, all financial and other records, pertinent corporate
documents and properties of the Issuer, the Company and its
subsidiaries (including with respect to businesses and
assets acquired or to be acquired to the extent that such
information is available to the Issuer of the Company), and
cause the officers, directors, agents and employees of the
Issuer, the Company and its subsidiaries (including with
respect to businesses and assets acquired or to be acquired
to the extent that such information is available to the
Issuer or the Company) to supply all information in each
case reasonably requested by any such representative,
underwriter, attorney, consultant or accountant in
connection with such Shelf Registration; provided, however,
that such persons shall first agree in writing with the
Issuer and the Company that any information that is
reasonably and in good faith designated by the Issuer and
the Company in writing as confidential at the time of
delivery of such information shall be kept confidential by
such persons, unless (i) disclosure of such information is
required by court or administrative order or is necessary to
respond to inquiries of regulatory authorities, (ii)
disclosure of such information is required by law (including
any disclosure requirements pursuant to Federal securities
laws in connection with the filing of the Shelf Registration
Statement or the use of any Prospectus), (iii) such
information becomes generally available to the public other
than as a result of a disclosure or failure to safeguard
such information by such person or (iv) such information
becomes available to such person from a source other than
the Issuer, the Company and its subsidiaries and such source
is not bound by a confidentiality agreement;
(n) provide an indenture trustee for the Bonds and/or the
Exchange Bonds and Private Exchange Bonds, as the case may
be, and cause an indenture to be qualified under the TIA not
later than the effective date of the first Registration
Statement relating to the Bonds and/or the Exchange Bonds
and Private Exchange Bonds, as the case may be; and if such
indenture shall be the Indenture, in connection therewith,
cooperate with the Trustee and the holders of the Bonds
and/or the Exchange Bonds and Private Exchange Bonds, to
effect such changes to the Indenture as may be required for
the Indenture to be (or to remain) so qualified in
accordance with the terms of the TIA; and execute, and use
its best efforts to cause the Trustee to execute, all
customary documents as may be required to effect such
changes, and all other forms and documents required to be
filed with the SEC to enable the Indenture to be (or to
remain) so qualified in a timely manner;
(o) comply with all applicable rules and regulations of the
SEC and make generally available to their security holders
earning statements satisfying the provisions of Section
11(a) of the Securities Act and Rule 158, no later than 45
days after the end of any 12-month period (or 90 days after
the end of any 12-month period if such period is a fiscal
year) (i) commencing at the end of any fiscal quarter in
which Transfer Restricted Securities are sold to
underwriters in a firm commitment or reasonable efforts
underwritten offering and (ii) if not sold to underwriters
in such an offering, commencing on the first day of the
first fiscal quarter after the effective date of a
Registration Statement, which statement shall cover said
period, consistent with the requirements of Rule 158; and
(p) cooperate with each seller of Transfer Restricted
Securities covered by any Registration Statement and each
underwriter, if any, participating in the disposition of
such Transfer Restricted Securities and their respective
counsel in connection with any filings required to be made
with the National Association of Securities Dealers, Inc.
The Issuer and the Company may require a holder of Transfer
Restricted Securities to be included in a Registration
Statement to furnish to the Issuer and the Company such
information regarding the distribution of such Transfer
Restricted Securities as is required by law to be disclosed
such Registration Statement and the Issuer and the Company may
exclude from such Registration Statement the Transfer
Restricted Securities of any holder who unreasonably fails to
furnish such information within a reasonable time after
receiving such request
If any such Registration Statement refers to any holder by
name or otherwise as the holder of any securities of an
Issuer, then such holder shall have the right to require
(i) the insertion therein of language, in form and substance
reasonably satisfactory to such holder, to the effect that the
holding by such holder of such securities is not to be
construed as a recommendation by such holder of the investment
quality of the securities covered thereby and that such
holding does not imply that such holder will assist in meeting
any future financial requirements of the Issuer or the
Company, or (ii) in the event that such reference to such
holder by name or otherwise is not required by the Securities
Act, the deletion of the reference to such holder in any
amendment or supplement to the Registration Statement filed or
prepared subsequent to the time that such reference ceases to
be required.
In the case of a Shelf Registration pursuant to Section 3
hereof, each holder of Transfer Restricted Securities agrees
by acquisition of such Transfer Restricted Securities that,
upon receipt of any notice from the Issuer and the Company of
the happening of any event of the kind described in Section
5(c)(ii), 5(c)(iii), 5(c)(iv) or 5(c)(v) hereof, such holder
will forthwith discontinue disposition of such Transfer
Restricted Securities covered by such Registration Statement
or Prospectus until such holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section
5(j) hereof, or until it is advised in writing (the "Advice")
by the Issuer or the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received
copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such
Prospectus. If the Issuer or the Company shall give any such
notice, the Effectiveness Period shall be extended by the
number of days during such period from and including the date
of the giving of such notice to and including the date when
each holder of Transfer Restricted Securities covered by such
Registration Statement shall have received (x) the copies of
the supplemented or amended Prospectus contemplated by Section
5(j) hereof or (y) the Advice, and, in either case, has
received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in
such Prospectus.
6. Registration Expenses
All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuer and the Company
shall be borne by the Issuer and the Company whether or not
any Registration Statement is filed or becomes effective and
whether or not any Bonds, Exchange Bonds or Private Exchange
Bonds are issued or sold pursuant to any Registration
Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all
registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be
made with the National Association of Securities Dealers, Inc.
(the "NASD") and (B) in compliance with securities or Blue Sky
laws), (ii) printing expenses (including, without limitation,
expenses of printing Prospectuses), (iii) reasonable fees and
disbursements of counsel for the Issuer and the Company and
the Special Counsel, (iv) fees and disbursements of all
Independent certified public accountants referred to In
Section 2(e) and Section 5(1)(iii) hereof (including, without
limitation, the expenses of any special audit and "cold
comfort" letters required by or incident to such
performance), (v) if required by applicable law, including the
rules of the NASD, the reasonable fees and expenses of any
"qualified independent underwriter" and its counsel and (vi)
fees and expenses of all other persons retained by the Issuer
and the Company. In addition, the Issuer and the Company
shall pay their internal expenses (including, without
limitation, all salaries and expenses of their respective
officers and employees performing legal or accounting duties),
the expense of any annual audit, and the fees and expenses
incurred in connection with the listing of the Bonds, Exchange
Bonds or Private Exchange Bonds to be registered on any
securities exchange. Notwithstanding the foregoing or
anything in this Agreement to the contrary, each holder of
Transfer Restricted Securities shall pay all underwriting
discounts and commissions of any underwriters or dealers with
respect to any Bonds, Exchange Bonds or Private Exchange Bonds
sold by it.
7. Indemnification
(a) The Issuer and the Company agree, jointly and
severally, to indemnify and hold harmless (i) the Initial
Purchaser, each holder of Bonds, Exchange Bonds and Private
Exchange Bonds and each Participating Broker-Dealer, (ii)
each person, if any, who controls (within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act) any
of the foregoing (any of the persons referred to in this
clause (ii) being hereinafter referred to as a ("controlling
person")) and (iii) the respective officers, directors,
partners, employees, representatives and agents of the
Initial Purchaser, each holder of Bonds, Exchange Bonds and
Private Exchange Bonds, each Participating Broker-Dealer and
any controlling person (any person referred to in clause
(i), (ii) or (iii) may hereinafter be referred to as an
"Indemnified Person"), from and against any and all losses,
claims, damages, liabilities and judgments arising out of or
relating to any untrue statement or alleged untrue statement
of a material fact contained in any Registration Statement,
Prospectus or preliminary prospectus or in any amendment or
supplement thereto, or arising out of or relating to any
omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or
preliminary prospectus or supplement thereto, in light of
the circumstances under which they were made) not
misleading, except insofar as such losses, claims, damages,
liabilities or judgments are caused by any such untrue
statement or omission or alleged untrue statement or
omission that is based upon information relating to any
Indemnified Person furnished in writing to the Issuer and
the Company by or on behalf of such Indemnified Person
expressly for use therein; provided, that the indemnity
agreement contained in this Section 7(a) with respect to any
preliminary prospectus or amended preliminary prospectus
shall not inure to the benefit of any Indemnified Person
from whom the person asserting any such loss, expense,
liability or claim purchased the securities which is the
subject thereof, if the Prospectus corrected any such
alleged untrue statement or omission and if such Indemnified
Person failed to send or give a copy of the Prospectus,
excluding any documents incorporated by reference, to such
person at or prior to the written confirmation of the sale
of securities to such person, provided that the Issuer and
the Company have delivered the Prospectus to the Initial
Purchaser in requisite quantity on a timely basis to permit
such delivery or sending.
(b) In case any action shall be brought against any
Indemnified Person, based upon any Registration Statement or
any such Prospectus or preliminary prospectus or any
amendment or supplement thereto and with respect to which
indemnity may be sought against the Issuer or the Company
hereunder, such Indemnified Person shall promptly notify the
Issuer and the Company in writing and the Issuer and the
Company shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such
Indemnified Person and payment of all fees end expenses.
Any Indemnified Person shall have the right to employ
separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Person, unless
(i) the employment of such counsel shall have been
specifically authorized in writing by the Issuer or the
Company, (ii) the Issuer or the Company shall have failed to
assume the defense and employ counsel or pay all such fees
and expenses or (iii) the named parties to any such action
(including any impleaded parties) include both such
Indemnified Person and the Issuer or the Company and such
Indemnified Person shall have been advised by counsel that
there may be one or more legal defenses available to it
which are different from or additional to those available to
the Issuer or the Company (in which case the Issuer and the
Company shall not have the right to direct the defense of
such action on behalf of such Indemnified Person, it being
understood, however, that the Issuer and the Company shall
not, in connection with any one such action or separate but
substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all such Indemnified
Persons, which firm shall be designated in writing by such
Indemnified Persons, and that all such reasonable fees and
expenses shall be reimbursed as they are incurred). The
Issuer and the Company shall not be liable for any
settlement of any such action effected without their written
consent but if settled with the written consent of the
Issuer or the Company, the Issuer and the Company agree,
jointly and severally, to indemnify and hold harmless each
Indemnified Person from and against any loss or liability by
reason of such settlement. Neither the Issuer nor the
Company shall, without the prior written consent of each
Indemnified Person, effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified
Person is a party and indemnity could have been sought
hereunder by such Indemnified Person, unless such settlement
includes an unconditional release of such Indemnified Person
from all liability on claims that are the subject matter of
such proceeding.
(c) In connection with any Registration Statement pursuant
to which a holder of Transfer Restricted Securities offers
or sells Transfer Restricted Securities, such holder agrees,
severally and not jointly, to indemnify and hold harmless
the Issuer, the Company, their respective directors and
officers and any person controlling the Issuer and the
Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, to the same extent as
the foregoing indemnity from the Issuer and the Company to
each Indemnified Person but only with respect to information
relating to such holder furnished in writing by or on behalf
of such holder expressly for use in such Registration
Statement. In any such case in which any action shall be
brought against an Issuer, the Company, any director or
officer of the Issuer, the Company or any person controlling
the Issuer or the Company based on such Registration
Statement and in respect of which indemnity may be sought
against a holder of Transfer Restricted Securities, such
holder shall have the rights and duties given to the Issuer
and the Company (except that if the Issuer or the Company
shall have assumed the defense thereof, such holder shall
not be required to do so, but may employ separate counsel
therein and participate in the defense thereof but the fees
and expenses of such counsel shall be at the expense of such
holder), and the Issuer, the Company, their respective
directors and officers and any person controlling the Issuer
or the Company shall have the rights and duties given to the
Indemnified Persons by Section 7(b) hereof.
(d) If the indemnification provided for in this Section 7
is unavailable to an indemnified party in respect of any
losses, claims, damages, liabilities or judgments referred
to herein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result
of such losses, claims, damages liabilities and judgments
(i) in such proportion as is appropriate to reflect the
relative benefits received by each indemnifying party on the
one hand and the indemnified party on the other hand from
the offering of the Bonds, the Exchange Bonds or the Private
Exchange Bonds, as the case may be (it being expressly
understood and agreed that the relative benefits received by
the Issuer and the Company from the offering of the Bonds,
Exchange Bonds or Private Exchange Bonds, as the case may
be, shall be the amount of the net proceeds received by the
Issuer from the sale of the Bonds to the Initial Purchaser),
or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault
of each indemnifying party on the one hand and the
indemnified party on the other hand in connection with the
statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any
other relevant equitable considerations. The relative fault
of each indemnifying party on the one hand and the
indemnified party on the other hand shall be determined by
reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission
to state a material fact relates to information supplied by
an indemnifying party or such indemnified party and the
parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or
omission
The Issuer, the Company and the Initial Purchaser agree that
it would not be just and equitable if contribution pursuant to
this Section 7(d) were determined by pro rata allocation (even
if the Indemnified Person were treated as one entity for such
purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in
the immediately preceding paragraph. The amount paid or
payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this Section 7, no
Indemnified Person shall be required to contribute any amount
in excess of the amount by which the net profits received by
it in connection with the sale of the Bonds, Exchange Bonds or
Private Exchange Bonds contemplated by this Agreement exceeds
the amount of any damages which such Indemnified Person has
otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Indemnified Person's
obligations to contribute pursuant to this Section 7(d) are
several in proportion to the respective amount of Bonds,
Exchange Bonds or Private Exchange Bonds included in any such
Registration Statement by each Indemnified Person and not
joint.
8. Rules 144 and 144A
Each of the Issuer and the Company shall use its best efforts
to file the reports required to be filed by it under the
Securities Act and the Exchange Act in a timely manner and, if
at any time it is not required to file such reports but in the
past had been required to or did file such reports, it will,
upon the request of any holder of Transfer Restricted
Securities, make available other information as required by,
and so long as necessary to permit sales of its Transfer
Restricted Securities pursuant to Rule 144A. Notwithstanding
the foregoing, nothing in this Section 8 shall be deemed to
require the Issuer or the Company to register any of its
securities pursuant to the Exchange Act.
9. Underwritten Registrations
If any of the Transfer Restricted Securities covered by any
Shelf Registration are to be sold in an underwritten offering,
the investment banker or investment bankers and manager or
managers that will administer the offering will be selected by
the holders of a majority in aggregate principal amount of
such Transfer Restricted Securities included in such offering,
subject to the consent of the Issuer and the Company (which
will not be unreasonably withheld or delayed).
No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such Transfer
Restricted Securities on the basis reasonably provided in any
underwriting arrangements approved by the persons entitled
hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the
terms of such underwriting arrangements.
10. Miscellaneous
(a) Remedies. In the event of a breach by the Issuer, the
Company or by a holder of Bonds, Exchange Bonds or Private
Exchange Bonds of any of its obligations under this
Agreement, each holder of Bonds, Exchange Bonds or Private
Exchange Bonds and the Issuer and the Company, in addition
to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. Subject to
Section 4 hereof, the Issuer, the Company and each holder of
Bonds, Exchange Bonds and Private Exchange Bonds agree that
monetary damages would not be adequate compensation for any
loss incurred by reason of a breach of any of the provisions
of this Agreement and each hereby further agrees that, in
the event of any action for specific performance in respect
of such breach, it shall waive the defense that a remedy at
law would be adequate.
(b) No Inconsistent Agreements. The Issuer and the Company
will not enter into any agreement with respect to securities
issued by either of them that is inconsistent with the
rights granted to the holders of Bonds, Exchange Bonds and
Private Exchange Bonds and Indemnified Persons in this
Agreement or otherwise conflicts with the provisions hereof.
Without the written consent of the holder of a majority in
aggregate principal amount of the outstanding Transfer
Restricted Securities, the Issuer and the Company shall not
grant to any person any rights which conflict with or are
inconsistent with the provisions of this Agreement.
(c) No Piggyback on Registrations. The Issuer and the
Company shall not grant to any of their security holders
(other than the holders of Transfer Restricted Securities in
such capacity) the right to include any of their securities
in any Registration Statement other than Transfer Restricted
Securities.
(d) Amendments and Waiver. The provisions of this
Agreement, including the provisions of this sentence, may
not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be
given, otherwise than with the prior written consent of the
holders of not less than a majority of the then outstanding
aggregate principal amount of Transfer Restricted
Securities; provided, however, that, for the purposes of
this Agreement, Transfer Restricted Securities that are
owned, directly or indirectly, by the Issuer, the Company or
any of their Affiliates are not deemed outstanding.
Notwithstanding the foregoing, a waiver or consent to depart
from the provisions hereof with respect to a matter that
relates exclusively to the rights of holders of Transfer
Restricted Securities whose securities are being sold
pursuant to a Registration Statement and that does not
directly or indirectly affect the rights of other holders of
Transfer Restricted Securities may be given by holders of a
majority in aggregate principal amount of the Transfer
Restricted Securities being sold by such holders pursuant to
such Registration Statement; and provided, further, that the
provisions of this sentence may not be amended, modified or
supplemented except in accordance with the provisions of the
immediately preceding sentence. Notwithstanding the
foregoing, no amendment, modification, supplement, waiver or
comment with respect to Section 7 shall be made or given
otherwise than with the prior written consent of each
Indemnified Person affected thereby.
(e) Notices. All notices and other communications provided
for herein shall be made in writing by hand delivery, next
day air courier, certified first class mail, return receipt
requested, telex or telecopier:
(i) if to the Issuer or the Company, as provided in the
Purchase Agreement,
(ii) if to the Initial Purchaser, as provided in the
Purchase Agreement, or
(iii) if to any other person who Is then the registered
holder of Bonds, Exchange Bonds or Private Exchange
Bonds, to the address of such holder as it appears in the
register therefor of the Issuer.
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; one
Business Day after being timely delivered to a next-day air
courier, five Business Days afar being deposited in the
mail, postage prepaid, if mailed; when answered back, if
telexed; and when receipt is acknowledged by the recipient's
telecopier machine, if telecopied.
(f) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and
permitted assigns of each of the parties and shall inure to
the benefit of each holder of Bonds, Exchange Bonds and
Private Exchange Bonds. The Issuer and the Company may not
assign any of their rights or obligations hereunder without
the prior written consent of each holder of Transfer
Restricted Securities and each Indemnified Person.
Notwithstanding the foregoing, no successor or assignee of
an Issuer shall have any of the rights granted under this
Agreement until such person shall acknowledge its rights and
obligations hereunder by a signed written statement of such
person's acceptance of such rights and obligations.
(g) Counterparts. This Agreement may be executed in any
number of counterparts and by the 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.
(h) Governing Law; Submission to Jurisdiction. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK.
THE ISSUER AND THE COMPANY HEREBY IRREVOCABLY SUBMIT TO THE
NON-EXCLUSIVE JURISDICTION OF ANY COMPETENT NEW YORK STATE
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW
YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF
MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, AND EACH IRREVOCABLY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS.
(i) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use
their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result
as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
(j) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or
otherwise affect the meaning hereof. All references made in
this Agreement to "Section" and "paragraph" refer to such
Section or paragraph of this Agreement, unless expressly
stated otherwise.
IN WITNESS WHEREOF, the parties have caused this Registration
Rights Agreement to be duly executed as of the date first written
above.
PANDA FUNDING CORPORATION
By: __________________________________
Name: William C. Nordlund
Title: Vice President, General Counsel
and Assistant Secretary
PANDA INTERFUNDING CORPORATION
By: __________________________________
Name: William C. Nordlund
Title: Vice President, General Counsel
and Assistant Secretary
JEFFERIES & COMPANY, INC.
By: __________________________________
Name: __________________________________
Title: __________________________________
EXHIBIT 4.07
COLLATERAL AGENCY AGREEMENT
Dated as of July 31, 1996
among
PANDA INTERFUNDING CORPORATION,
PANDA FUNDING CORPORATION
and
BANKERS TRUST COMPANY,
as Trustee under the Indenture,
dated as of July 31, 1996,
and as Collateral Agent
___________________
TABLE OF CONTENTS
Page
SECTION 1. Definitions 3
SECTION 2. Subordination 5
SECTION 3. Exercise of Rights Under Security Documents 9
SECTION 4. Distribution of Proceeds 10
SECTION 5 Appointment and Duties of Collateral Agent 11
SECTION 6. Rights of Collateral Agent 11
SECTION 7. Lack of Reliance on the Collateral Agent 13
SECTION 8. Indemnification 14
SECTION 9. Resignation or Removal of the Collateral Agent 14
SECTION 10. Representations and Warranties 14
SECTION 11. No Warranties 15
SECTION 12. Amendments, Etc. 15
SECTION 13. Addresses for Notices 15
SECTION 14. Counterparts 15
SECTION 15. Severability 15
SECTION 16. Reinstatement 16
SECTION 17. No Impairments of Other Rights 16
SECTION 18. LIMITATION ON LIABILITY 16
SECTION 19. Governing Law; Terms 16
SECTION 20. Submission to Jurisdiction 16
SECTION 21. No Third Party Beneficiaries 16
SECTION 22. WAIVER OF JURY TRIAL 17
SECTION 23. Headings 17
SECTION 24. Admission of Letter of Credit Provider 17
COLLATERAL AGENCY AGREEMENT
COLLATERAL AGENCY AGREEMENT dated as of July 31, 1996 (this
"Agreement") among Panda Interfunding Corporation, a Delaware
corporation ("PIC"), Panda Funding Corporation, a Delaware
corporation ("Panda Funding"), and Bankers Trust Company, a New
York banking corporation, as trustee under the Indenture referred
to below (in such capacity, together with its successors and
assigns in such capacity, the "Trustee"), and as collateral agent
for the Trustee and the Letter of Credit Provider (as defined
below) (in such capacity together with its successors and assigns
in such capacity, the "Collateral Agent").
W I T N E S S E T H :
WHEREAS, PIC has formed Panda Funding as a special purpose,
wholly-owned finance subsidiary to issue debt securities
constituting the Bonds described below;
WHEREAS, Panda Funding, PIC and the Trustee (as trustee for
the holders of the Bonds described below) are party to an
Indenture dated as of July 31, 1996 (as amended, supplemented or
otherwise modified and in effect from time to time, the
"Indenture"), providing, subject to the terms and conditions
thereof, for the issuance by Panda Funding from time to time of
certain Pooled Project Bonds (the "Bonds"), including, without
limitation, $105,525,000 initial aggregate principal amount of 11
5/8% Pooled Project Bonds, Series A due 2012 (the "Series A
Bonds");
WHEREAS, Panda Funding will loan the entire proceeds of the
issuance of the Series A Bonds (the "Loan") to PIC, which Loan
will be made under a Loan Agreement dated of even date with the
Indenture by and between Panda Funding and PIC (the "PIC Loan
Agreement") and evidenced by a promissory note (the "Initial PIC
Note") of PIC dated July 31, 1996, and payable to Panda Funding;
WHEREAS, Panda Funding may from time to time loan the
proceeds of subsequent series of Bonds (the "Additional Loans")
to PIC, which Additional Loans will be made under the PIC Loan
Agreement and evidenced by promissory notes (the "Additional PIC
Notes") of PIC payable to Panda Funding;
WHEREAS, one or more Letters of Credit (as defined in the
Indenture) may be substituted for cash funds in the Debt Service
Reserve Fund (as defined in the Indenture) pursuant to
Section 4.5(c) of the Indenture under a reimbursement agreement
to be entered into between PIC or PIC's controlling affiliate and
a financial institution (the "Letter of Credit Provider") (to the
extent so entered into and as amended, supplemented or modified
and in effect from time to time, together with any substitution
or replacement thereof, the "Reimbursement Agreement"), and in
such event this Agreement shall be amended to admit the Letter of
Credit Provider as a party hereto;
WHEREAS, to induce the purchase of the Bonds and to secure
Panda Funding's obligations to the holders (from time to time) of
such Bonds (the "Holders" and, together with the Trustee, and the
Letter of Credit Provider, if any, the "Secured Parties"), and to
induce the issuance of any letters of credit by the Letter of
Credit Provider and to secure PIC's or PIC's controlling
affiliate's obligations to the Letter of Credit Provider under
the Reimbursement Agreement (if entered into), Panda Funding has,
pursuant to a Security Agreement dated as of July 31, 1996,
between Panda Funding and the Collateral Agent (the "Panda
Funding Security Agreement"), granted to the Collateral Agent for
the benefit of the Secured Parties, a security interest in all of
Panda Funding's assets, including, without limitation, the
Initial PIC Note, the Additional PIC Notes, and Panda Funding's
other personal property;
WHEREAS, PIC has agreed to guarantee Panda Funding's
obligations to the Holders and the Trustee pursuant to certain
terms and covenants in the Indenture (the "PIC Guaranty");
WHEREAS, to induce the purchase of the Bonds by the Holders,
which PIC acknowledges is of substantial benefit to it (as
ultimate recipient, pursuant to the Loan evidenced by the Initial
PIC Note and pursuant to Additional Loans evidenced by Additional
PIC Notes, of the proceeds of the issuance of the Bonds), PIC
has, pursuant to the Security Agreement dated as of July 31,
1996, between PIC and the Collateral Agent (the "PIC Security
Agreement"), granted to the Collateral Agent for the benefit of
the Secured Parties a security interest in (i) the U.S. Accounts
and Funds (as defined in the Indenture) and all balances therein,
(ii) PIC's interest in the Additional Projects Contract, and
(iii) PIC's interest in U.S. Project Distributions, and pursuant
to the Stock Pledge Agreement dated as of July 31, 1996, between
PIC and the Collateral Agent (the "PIC Stock Pledge Agreement"),
pledged to the Collateral Agent for the benefit of the Secured
Paries (i) all of the capital stock of Panda Funding and of each
PIC U.S. Entity and (ii) 60% of the capital stock of each PIC
International Entity, all such assets to secure (A) Panda
Funding's obligations to the Holders and the Trustee under the
Indenture, (B) PIC's guarantee of Panda Funding's obligations to
the Holders and the Trustee under the PIC Guaranty and (C) PIC's
or PIC's controlling affiliate's obligations, if any, to the
Letter of Credit Provider under any Reimbursement Agreement;
WHEREAS, to induce the purchase of the Bonds, Panda Energy
Corporation, a Texas corporation ("PEC") and corporate parent of
PIC, has, pursuant to a Stock Pledge Agreement dated as of July
31, 1996, between PEC and the Collateral Agent (the "PEC Stock
Pledge Agreement"), pledged to the Collateral Agent for the
benefit of the Secured Parties, all of the capital stock of PIC;
WHEREAS, the Series A Bonds are being sold to the Initial
Purchaser (as defined below) pursuant to the Purchase Agreement
dated as of July 26, 1996 (the "Purchase Agreement") among Panda
Funding, PIC, Panda Energy International, Inc., and Jefferies &
Company, Inc. (the "Initial Purchaser");
WHEREAS, it is a condition precedent to the purchase of the
Series A Bonds by the Initial Purchaser that PIC shall have
pledged the Collateral as defined in, and granted the assignment
and security interest contemplated by, the PIC Stock Pledge
Agreement and the PIC Security Agreement, and that Panda Funding
shall have pledged the Collateral as defined in, and granted the
assignment and security interest contemplated by, the Panda
Funding Security Agreement and that PEC shall have pledged the
Collateral as defined in, and granted the assignment and security
interest contemplated by, the PEC Stock Pledge Agreement; and
WHEREAS, in connection with the Indenture, and any
Reimbursement Agreement entered into by PIC or a controlling
affiliate of PIC with a Letter of Credit Provider, the parties
hereto desire to enter into this Agreement to provide for, among
other things, (a) the exercise by the Collateral Agent of certain
rights and remedies under this Agreement and the other Security
Documents (as defined in the Indenture) on behalf of the Secured
Parties, (b) the priority of payments and application of funds
received by the Collateral Agent, (c) the priority of their
respective security interests created by the Security Documents
and (d) the appointment of the Collateral Agent to act as
collateral agent for the Secured Parties.
NOW, THEREFORE, to secure the Bonds, the PIC Guaranty and
the performance of the agreements in the Indenture and in the
Reimbursement Agreement (if entered into) and in consideration of
the premises and in order to induce the Initial Purchaser to
purchase the Series A Bonds, and for other good and valuable
consideration, the receipt and the adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Definitions. Capitalized terms used herein
and not defined in this Agreement shall have the respective
meanings assigned thereto in the Indenture, whether specifically
set forth therein or by reference to another document. Each such
definition shall be equally applicable to both the singular and
the plural forms of each such term so defined. Unless the
context otherwise requires, any reference in this Agreement to
any agreement, contract or document shall mean such agreement,
contract or document and all schedules, exhibits and attachments
thereto as amended, supplemented or otherwise modified and in
effect from time to time. Unless otherwise stated, any reference
in this Agreement to any Person shall include its successors and
permitted assigns and, in the case of any Government Authority,
any Person succeeding to its functions and capacities. Unless
otherwise specified herein, (i) all references to Sections,
paragraphs or other subdivisions herein are to this Agreement and
(ii) the words "include", "includes", and "including" are deemed
to be followed by "without limitation" whether or not they are,
in fact, followed by such words or words of like import.
(a) In addition, as used herein:
"Bond Obligations" shall mean all Senior Obligations at any
time owing to the Holders.
"Collateral" shall mean, collectively, the "Collateral" as
defined in the Panda Funding Security Agreement, the PIC Stock
Pledge Agreement, the PIC Security Agreement and the PEC Stock
Pledge Agreement.
"Collateral Agent Claims" shall mean, at any time, all
obligations of PIC or Panda Funding, now or hereafter existing,
to pay fees, costs, expenses, indemnities and other amounts to
the Collateral Agent pursuant to Sections 6(f), 8 or 16 hereof or
pursuant to any Security Document or Transaction Document.
"Event of Default" shall mean an "Event of Default" as such
term is defined in the Indenture or an "Event of Default" as such
term is defined in the Reimbursement Agreement (if entered into).
"Responsible Officer" when used with respect to the Trustee
or to the Collateral Agent, shall mean any officer in the
corporate trust and agency group (or any successor group) of the
Trustee or the Collateral Agent including without limitation, any
vice president, assistant vice president, assistant secretary or
any other officer of the Trustee or the Collateral Agent
customarily performing functions similar to those performed by
any of the above designated officers and also means with respect
to a particular corporate trust matter, any other officer to whom
such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Secured Obligations" shall mean all indebtedness,
liabilities and other obligations of PIC and Panda Funding
(including, but not limited to, all such obligations in respect
of principal, premiums, interest, fees, reimbursement
obligations, Collateral Agent Claims, Trustee Claims, penalties,
indemnities, costs and other expenses, whether due after
acceleration or otherwise) to the Collateral Agent or the Secured
Parties (of whatsoever nature and howsoever evidenced) under or
pursuant to the Bonds, the Indenture, this Agreement, the other
Security Documents and the Reimbursement Agreement (if entered
into), in each case, direct or indirect, primary or secondary,
fixed or contingent, now or hereafter arising therefrom or
relating thereto.
"Secured Party Direction" shall mean a written direction
from the Trustee (acting in accordance with the requirements of
the Indenture) or the Letter of Credit Provider, if any, to the
Collateral Agent.
"Security Interest" shall mean any Lien on the Collateral
granted to the Collateral Agent for the benefit of a Secured
Party pursuant to any Security Document or the Indenture.
"Senior Obligations" shall mean all Secured Obligations,
except in respect of the Reimbursement Agreement (if entered
into).
"Subordinated Obligations" shall mean all Secured
Obligations in respect of any Reimbursement Agreement.
"Transaction Documents" shall mean all agreements, documents
and instruments evidencing and/or securing any of the Secured
Obligations.
"Transfer Restrictions" shall have the meaning ascribed
thereto in the PIC Security Agreement.
"Trustee Claims" shall mean, at any time, all obligations of
PIC and Panda Funding, now or hereafter existing, to pay fees,
costs, expenses, indemnities or other amounts to the Trustee
pursuant to the Indenture.
(b) Each of PIC and Panda Funding agrees that (i) any
Reimbursement Agreement shall provide for the issuance of letters
of credit with an aggregate available amount not in excess of an
amount equal to the Debt Service Reserve Requirement as it may
exist from time to time for the sole purpose of substituting for
all or a portion of the monies otherwise required by the
Indenture to be maintained in the Debt Service Reserve Fund,
(ii) any Reimbursement Agreement (or any replacement or
substitute Reimbursement Agreement) shall be on terms reasonably
acceptable to the Secured Parties (other than the Letter of
Credit Provider), PIC and Panda Funding and shall provide that
all parties thereto agree to be bound by the terms of this
Agreement and the Letter of Credit Provider thereunder shall
execute an amendment to this Agreement in accordance with
Section 24 hereof, on behalf of itself and any other financial
institution party to the Reimbursement Agreement then in effect,
which amendment shall state the address for notices hereunder to
such Person and (iii) immediately upon the substitution or
replacement of a Letter of Credit Provider (or any successor
thereto) as a result of a replacement of a Reimbursement
Agreement or otherwise, such substitute or replacement Letter of
Credit Provider shall execute an amendment to this Agreement in
accordance with Section 24 hereof pursuant to which it, on behalf
of itself and any other financial institution party to the
Reimbursement Agreement then in effect, agrees to be bound by
this Agreement and, together with PIC and Panda Funding, deliver
a written notice to the Collateral Agent stating the address for
notices hereunder to such Person. PIC and Panda Funding shall
deliver to the Trustee an incumbency certificate with specimen
signatures for designated Authorized Representatives.
(c) The Letter of Credit Provider, upon its execution of
this Agreement, shall deliver to the Trustee an incumbency
certificate with specimen signatures for its designated
Authorized Representatives.
SECTION 2. Subordination.
(a) General. To the extent and in the manner set forth
herein, any payment of the Subordinated Obligations (except for
(i) any payment from assets of PIC other than the Collateral,
(ii) amounts on deposit in the U.S. Distribution Fund and
(iii) with respect to payments to be made to the Letter of Credit
Provider, fees from amounts on deposit in the PIC Expense Fund)
is expressly made subordinate and subject in right of payment to
the prior payment in full of all Senior Obligations due to the
Secured Parties, other than the Letter of Credit Provider, in
cash or cash equivalents (including, for all purposes of these
subordination terms, all interest accruing on Senior Obligations
after the filing of a petition in bankruptcy or the commencement
of any insolvency or bankruptcy proceedings with respect to PIC
or Panda Funding, and all commissions, fees, indemnities and
other amounts payable under the Transaction Documents to the
Collateral Agent and the Secured Parties other than the Letter of
Credit Provider). The Letter of Credit Provider agrees that it
will not take or receive from PIC, by set-off or in any other
manner, or retain, or, ask, demand or sue for, payment (in whole
or in part) of the Subordinated Obligations, or any security
therefor (except for (i) any payment from assets of PIC other
than the Collateral, (ii) amounts on deposit in the U.S.
Distribution Fund and (iii) with respect to payments to be made
to the Letter of Credit Provider, fees from amounts on deposit in
the PIC Expense Fund) unless and until all of the Senior
Obligations due to the Secured Parties other than the Letter of
Credit Provider have been paid in full in cash or cash
equivalents. The Letter of Credit Provider shall direct PIC and
Panda Funding to make, and PIC and Panda Funding have agreed to
make, such prior payment of the Senior Obligations due to the
Secured Parties other than the Letter of Credit Provider.
(b) Payment Upon Dissolution, Etc. In the event of (i) any
insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or proceeding
in connection therewith, relating to PIC or Panda Funding or its
creditors as such, or to its assets, or (ii) any liquidation,
dissolution (other than dissolution of PIC that is cured within
15 days and which, prior to such cure, would not reasonably be
expected to result in a Material Adverse Change) or other winding
up of PIC or Panda Funding, whether partial or complete and
whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy or (iii) any assignment for the benefit
of creditors or any other marshalling of assets and liabilities
of PIC or Panda Funding, then and in any such event the
Collateral Agent, for the equal and ratable benefit of the
holders of the Senior Obligations, shall be entitled to receive
payment in full of all amounts due or to become due on or in
respect of all Senior Obligations before the Letter of Credit
Provider shall be entitled to receive any payment on account of
the Subordinated Obligations, and to that end, any payment or
distribution of any kind or character (except for (A) any payment
from assets of PIC other than the Collateral, (B) amounts on
deposit in the U.S. Distribution Fund and (C) with respect to
payments to be made to the Letter of Credit Provider, fees from
amounts on deposit in the PIC Expense Fund), whether in cash,
property or securities which may be payable or deliverable in
respect of the Subordinated Obligations in any such case,
proceeding, dissolution, liquidation or other winding up or event
shall instead be paid or delivered directly to the Collateral
Agent for application to the Senior Obligations, whether or not
due, until the Senior Obligations shall have first been fully
paid and satisfied in cash or cash equivalents.
(c) No Proceedings; No Collateral. Whether or not any
default in payment of any Senior Obligation shall exist or any
Default shall have occurred and be continuing, the Letter of
Credit Provider shall not, without prior written consent of the
Trustee (acting at the direction of the Holders under the
Indenture), (i) commence any action or proceeding against PIC or
Panda Funding to demand or enforce the payment of any principal
of, interest or premium on or other amount payable in respect of
the Subordinated Obligations, or exercise any right of set off in
respect thereof, (ii) commence any insolvency or bankruptcy case
or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding in connection therewith
relating to PIC or Panda Funding or its assets or creditors or
(iii) request, demand or accept any collateral security for the
Subordinated Obligations, other than as provided herein and in
the other Security Documents; provided that the Letter of Credit
Provider may, if it is otherwise permitted to take such action
under the Reimbursement Agreement, take any action against PIC
described in clauses (i) and (iii) above if such action is
restricted to the assets of PIC not constituting Collateral.
(d) Payment to Collateral Agent of Certain Amounts Received
by the Letter of Credit Provider. If , notwithstanding the terms
hereof, the Letter of Credit Provider receives on account or in
respect of the Subordinated Obligations any distribution of
assets by PIC or Panda Funding or payment by or on behalf of PIC
or Panda Funding of any kind or character (except for (i) any
payment from assets of PIC other than the Collateral,
(ii) amounts on deposit in the U.S. Distribution Fund and
(iii) with respect to payments to be made to the Letter of Credit
Provider, fees from amounts on deposit in the PIC Expense Fund),
whether in cash, securities or other property, prior to the
payment in full in cash or cash equivalents of all Senior
Obligations due to the Secured Parties other than the Letter of
Credit Provider, the Letter of Credit Provider shall hold such
distribution or payment in trust as property of the Collateral
Agent for the benefit of the holders of the Senior Obligations,
and shall, immediately upon receipt thereof, pay over or deliver
to the Collateral Agent such distribution or payment in precisely
the form received (except for the endorsement or assignment by
the Letter of Credit Provider where necessary) for application
pursuant to Section 4 hereof. In the event of failure of the
Letter of Credit Provider to make any such endorsement or
assignment, the Collateral Agent is irrevocably authorized to
make the same.
(e) Authorization of the Collateral Agent. Each of the
Trustee (acting at the direction of the Holders) and the Letter
of Credit Provider hereby (i) irrevocably authorizes and empowers
(without imposing any obligation on) the Collateral Agent to
demand, sue for, collect and receive all payments and
distributions (except for (A) any payment from assets of PIC
other than the Collateral, (B) amounts on deposit in the U.S.
Distribution Fund and (C) with respect to payments to be made to
the Letter of Credit Provider, fees from amounts on deposit in
the PIC Expense Fund) on or in respect of the Secured Obligations
which are required to be paid or delivered to the Collateral
Agent, as provided herein, and to file and prove all claims
therefor and take all such other action, in the name of the
Trustee and/or the Letter of Credit Provider or otherwise, as the
Collateral Agent may be directed by the Trustee acting pursuant
to Article IX of the Indenture, (ii) irrevocably authorizes and
empowers (without imposing any obligation on) the Collateral
Agent, after the occurrence of any event described in clause (i),
(ii) or (iii) of Section 2(b) hereof and after the Collateral
Agent has been directed to do so by the Trustee acting pursuant
to Article IX of the Indenture, to vote the Senior Obligations
and the Subordinated Obligations (except to the extent, if any,
that such Subordinated Obligations are secured by assets of PIC
other than the Collateral) during the pendency of any insolvency
or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or proceeding
in connection therewith or relating to PIC or Panda Funding in
such manner as the Trustee acting pursuant to Article IX of the
Indenture shall instruct and (iii) agree to execute and deliver
to the Collateral Agent all such further instruments confirming
the above authorization, and all such powers of attorney, proofs
of claim, assignments of claim and other instruments, and to take
all such other action, as may be requested by the Collateral
Agent in order to enable the Collateral Agent to enforce all
claims upon or in respect of the Secured Obligations whenever the
Collateral Agent is authorized and permitted to do so under the
Security Documents.
(f) Notice; Legend. The Letter of Credit Provider agrees,
for the benefit of the Collateral Agent, the Trustee and each
Holder, that it will give the Collateral Agent and the Trustee
prompt written notice of any default by PIC or Panda Funding in
respect of the Subordinated Obligations. The Letter of Credit
Provider agrees that any note, bond or other instrument held by
it evidencing the Subordinated Obligations shall bear a prominent
legend specifying that payment of principal of, interest on or
other amount in respect of such note, bond or other instrument
(except for (i) any payment from assets of PIC other than the
Collateral, (ii) amounts on deposit in the U.S. Distribution Fund
and (iii) with respect to payments to be made to the Letter of
Credit Provider, fees from amounts on deposit in the PIC Expense
Fund) is subordinated to the Senior Obligations on the terms and
conditions set forth herein.
(g) No Waiver; Modification of Senior Obligations. No
failure on the part of the Collateral Agent, the Trustee or the
Holders, and no delay in exercising, any right, remedy or power
hereunder shall operate as a waiver thereof by the Collateral
Agent or the Trustee or the Holders, nor shall any single or
partial exercise by the Collateral Agent or the Trustee of any
right, remedy or power hereunder preclude any other or future
exercise of any other right, remedy or power. Each and every
right, remedy and power hereby granted to the Collateral Agent or
the Trustee or allowed to the Collateral Agent, the Trustee or
the Holders by law or other agreement shall be cumulative and not
exclusive, and may be exercised by the Collateral Agent or the
Trustee, for the equal and ratable benefit of the holders of the
Senior Obligations, from time to time.
Without in any way limiting the generality of the foregoing
paragraph, the Trustee, acting at the direction of the Holders as
provided in the Indenture, may, at any time and from time to
time, without the consent of or notice to the Letter of Credit
Provider, without incurring responsibility to the Letter of
Credit Provider, and without impairing or releasing the
subordination provided herein or the obligations hereunder of the
Letter of Credit Provider, do any one or more of the following:
(i) change the manner, place or terms of payment of or extend the
time of payment of, or renew or alter, any Senior Obligation, or
otherwise amend or supplement in any manner any Senior Obligation
or any instrument evidencing the same or any agreement under
which any Senior Obligation is outstanding or the Indenture or
the Bonds to the extent permitted by the terms of such documents
or instruments; (ii) sell, exchange, release or otherwise deal
with any property pledged, mortgaged or otherwise securing any
Senior Obligation; (iii) release any Person liable in any manner
for any Senior Obligation; and (iv) exercise or refrain from
exercising any right against PIC, Panda Funding or any other
Person. The Letter of Credit Provider unconditionally waives
notice of the incurring of the Senior Obligations or any part
thereof. Notwithstanding the foregoing, the Trustee shall not
reduce the order of priority of the PIC Expense Fund in
Section 4.2 of the Indenture without the prior written consent of
the Letter of Credit Provider.
(h) Subrogation. The Letter of Credit Provider shall be
subrogated to the rights of the holders of the Senior Obligations
against PIC and Panda Funding and their respective Property in
respect of the Senior Obligations; provided that the Letter of
Credit Provider shall not be entitled to enforce or to receive
any payments arising out of, or based upon, such right of
subrogation until all Senior Obligations have been paid in full.
(i) Benefit of Subordination Provisions. These
subordination provisions are intended solely to define the
relative rights of the Letter of Credit Provider and its
successors and permitted assigns on the one hand and the holders
of the Senior Obligations and each of their respective successors
and permitted assigns on the other hand.
(j) Further Assurances. The Letter of Credit Provider, at
its own cost, shall take all further action as the Collateral
Agent or the Trustee may reasonably request in order more fully
to carry out the intent and purpose of these subordination
provisions.
(k) Priority of Security Interests. The priorities
specified herein are applicable irrespective of any statement in
any Security Document or in any other agreement to the contrary,
the time or order or method of attachment or perfection of any of
the Security Interests or the time or order of filing of
financing statements or the giving or failure to give notice of
the acquisition or expected acquisition of any type of security
interest. The parties hereto hereby agree that, as among the
Secured Parties, the Security Interest of the Secured Parties
other than the Letter of Credit Provider shall constitute a first
priority security interest in the Collateral and the Security
Interest of the Letter of Credit Provider shall constitute a
second priority Security Interest in the Collateral.
(l) Demand of Specific Performance. The Trustee, acting at
the direction of the Holders pursuant to the Indenture, hereby
authorizes and directs the Collateral Agent on its behalf to
demand specific performance of these terms of subordination,
whether or not PIC or Panda Funding shall have complied with any
of the provisions hereof applicable to PIC or Panda Funding at
any time when the Letter of Credit Provider shall have failed to
comply with any of such provisions applicable to the Letter of
Credit Provider. The Letter of Credit Provider hereby
irrevocably waives any defense based on the adequacy of a remedy
at law which might be asserted as a bar to such remedy of
specific performance.
SECTION 3. Exercise of Rights Under Security Documents.
So long as any Secured Obligation remains outstanding, the
following provisions shall apply:
(a) If any Event of Default shall have occurred and be
continuing, upon the written request of the Trustee acting
pursuant to Article IX of the Indenture, the Collateral Agent, on
behalf of the Secured Parties, shall be permitted and is hereby
authorized to take any and all actions and to exercise any and
all rights, remedies and options which it may have under this
Agreement or any of the other Security Documents (as directed in
such request).
(b) Each of the Trustee, the Letter of Credit Provider and
the Collateral Agent hereby agrees to give to the others written
notice of the occurrence of any Event of Default promptly after a
Responsible Officer of such Person receives written notice of the
occurrence thereof, provided, however, that the failure to
provide such notice shall not limit or impair the rights of any
of the Collateral Agent or the Secured Parties hereunder or under
the Transaction Documents or result in any liability to the
Secured Party failing to do so.
(c) The Trustee, on behalf of and at the direction of the
Bondholders pursuant to the Indenture, hereby acknowledges and
agrees that all U.S. Accounts and Funds held by the Trustee in
accordance with Article IV of the Indenture are held for the
benefit of the Secured Parties and that the Trustee shall hold
such U.S. Accounts and Funds as agent for the Collateral Agent
(and each of the Letter of Credit Provider and the Collateral
Agent agrees that the provisions of this Section 3 (to the extent
applicable) and of Sections 5, 6, 7 and 8 hereof shall inure to
the benefit of the Trustee as to any actions taken or omitted to
be taken by it as such agent with respect to the U.S. Accounts
and Funds). If any Event of Default shall have occurred and be
continuing, the Trustee, when required to do so pursuant to the
Indenture, shall deliver all (or any portion of, as so directed)
the monies, instruments or other property in such U.S. Accounts
and Funds to the Collateral Agent to be distributed by the
Collateral Agent in accordance with Section 4 hereof. The
Trustee hereby acknowledges and agrees (acting as agent of the
Collateral Agent) that it shall make all payments to the other
Secured Parties required to be made by it under the Indenture and
shall take all actions for the benefit of the other Secured
Parties required to be taken by it pursuant to the Indenture in
accordance with the terms and provisions of the Indenture.
(d) Each of the Secured Parties hereby acknowledges and
agrees that the Collateral Agent shall administer the Collateral
in the manner contemplated by this Agreement and the other
Security Documents and the Collateral Agent shall take and
exercise, as directed by the Trustee in accordance with
Section 3(a) hereof, such actions, rights, remedies and options
with respect to the Collateral as are granted or permitted to it
under this Agreement, the other Security Documents and applicable
law. No Secured Party shall have any right (i) to direct the
Collateral Agent to take any action in respect of the Collateral
other than in accordance with this Section 3 or (ii) to take any
action with respect to the Collateral (A) independently of the
Collateral Agent or (B) other than to direct the Collateral Agent
to take action in accordance with this Section 3.
SECTION 4. Distribution of Proceeds.
(a) Subject to Section 4(b) hereof, the proceeds of any
sale, disposition or other realization by the Collateral Agent or
by any other Secured Party upon the Collateral (or any portion
thereof), or other receipt by the Collateral Agent of cash,
securities or other property, pursuant to the Security Documents
shall be distributed in the following order of priority:
first, to the Collateral Agent and Trustee, ratably, in
an amount equal to the amounts due in respect of the
Collateral Agent Claims and the Trustee Claims due and
payable as of the date of such distribution; provided that,
prior to any such distribution to the Trustee, the
Collateral Agent shall have received a certificate signed by
the Trustee, in form and substance satisfactory to the
Collateral Agent, setting forth the amount of unpaid Trustee
Claims as of the date of such distribution;
second, to the Trustee for distribution in accordance
with the Indenture, an amount equal to the unpaid amount of
Bond Obligations (whether or not then due);
third, to the Letter of Credit Provider, an amount
equal to the unpaid amount of Subordinated Obligations (if
any) (whether or not then due); and
fourth, to the applicable grantors, pledgors or
mortgagors under the applicable Security Documents as their
interest may appear or their successors or assigns or to
whomever may be lawfully entitled to receive the same or as
a court of competent jurisdiction may direct, any surplus
then remaining from such proceeds,
it being understood that Panda Funding (and PIC pursuant to the
PIC Guaranty), subject to the limitations on recourse contained
in the Indenture and the Reimbursement Agreement (if entered
into) shall remain liable to the extent of any deficiency between
the amount of the proceeds of the Collateral and the aggregate of
the sums referred to in clauses first through third of this
Section 4. As used in this Section 4(a), "proceeds" of
Collateral shall mean cash, securities and other property
realized in respect of, and distribution in kind of, Collateral,
including any thereof received under any reorganization,
liquidation or adjustment of debt of PIC or Panda Funding or any
issuer of or obligor on any of the Collateral.
(b) Notwithstanding Section 4(a) above, if the Collateral
Agent receives any proceeds resulting from a Mandatory Redemption
Event, after deducting the amount of any outstanding Collateral
Agent Claims, the Collateral Agent shall pay such proceeds to the
Trustee for application in accordance with the terms of the
Indenture.
SECTION 5. Appointment and Duties of Collateral Agent.
(a) Each of the Trustee and the Letter of Credit Provider
hereby designates and appoints Bankers Trust Company, as Trustee,
to act as the Collateral Agent hereunder, under the Security
Documents and the other Transaction Documents to which it is a
party, and authorizes the Collateral Agent to take such actions
on the Secured Parties' behalf under the provisions of the
Security Documents and the other Transaction Documents to which
it is a party and to exercise such powers and perform such duties
as are expressly delegated to the Collateral Agent by the terms
of the Security Documents and the other Transaction Documents to
which it is a party. Notwithstanding any provision to the
contrary elsewhere in the Security Documents and the other
Transaction Documents to which it is a party, the Collateral
Agent shall not have any duties or responsibilities, except those
expressly set forth in the Security Documents and the other
Transaction Documents to which it is a party, or any fiduciary
relationship with any Secured Party, and no implied covenants,
functions or responsibilities shall be read into the Security
Documents or the other Transaction Documents to which it is a
party or otherwise exist against the Collateral Agent.
(b) The Collateral Agent will give notice to the Secured
Parties of any action taken by it under any Security Document or
any other Transaction Document to which it is a party; such
notice shall be given prior to the taking of such action unless
the Collateral Agent determines upon advice of counsel that
failure to take immediate action would be detrimental to the
interests of the Secured Parties, in which event such notice
shall be given promptly after the taking of such action.
(c) Notwithstanding anything to the contrary in any
Security Document or any other Transaction Document to which it
is a party, the Collateral Agent shall not be required to
exercise any discretionary rights or remedies under any of the
Security Documents or the other Transaction Documents to which it
is a party or give any consent under any of the Security
Documents or the other Transaction Documents to which it is a
party or enter into any agreement amending, modifying,
supplementing or waiving any provision of any Security Document
or any other Transaction Document to which it is a party unless
it shall have been directed to do so by the Trustee acting
pursuant to the Indenture.
SECTION 6. Rights of Collateral Agent.
(a) The Collateral Agent may execute any of its duties
under the Security Documents and the other Transaction Documents
to which it is a party by or through agents or attorneys-in-fact
and shall be entitled to advice of counsel concerning all matters
pertaining to such duties.
(b) Neither the Collateral 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 under or in connection with any Security Document
or any other Transaction Document to which it is a party (except
for its gross negligence or willful misconduct), or
(ii) responsible in any manner to any of the Secured Parties for
any recitals, statements, representations or warranties (other
than those made by the Collateral Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates)
contained in any Security Document or any other Transaction
Document to which it is a party or in any certificate, report,
statement or other document referred to or provided for in, or
received by the Collateral Agent under or in connection with, any
Security Document for any other Transaction Document to which it
is a party or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of the Security
Documents or any other Transaction Document to which it is a
party or for any failure of PIC or Panda Funding to perform their
obligations thereunder. The Collateral Agent shall not be under
any obligation to any Secured Party to ascertain or to inquire as
to the observance or performance of any of the agreements
contained in, or conditions of, any Security Document or any
other Transaction Document to which it is a party, or to inspect
the properties, books or records of PIC or Panda Funding.
(c) The Collateral Agent shall be entitled to rely, and
shall be fully protected in relying, upon any Secured Party
Direction, note, writing, resolution, notice, consent,
certificate, direction, 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 or
Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to PIC or Panda Funding),
independent accountants and other experts selected by the
Collateral Agent. In connection with any request of the Trustee,
the Collateral Agent shall be fully protected in relying on a
certificate of the Trustee, signed by an authorized
representative of the Trustee, stating specifically the Security
Document or the Transaction Document and provision thereof
pursuant to which the Collateral Agent is being directed to act.
The Collateral Agent shall be entitled to rely, and shall be
fully protected in relying, on such certificate. The Collateral
Agent shall be fully justified in failing or refusing to take any
action under any Security Document or any other Transaction
Document if (i) such action would, in the opinion of the
Collateral Agent, be contrary to law or the terms of the Security
Documents or the other Transaction Documents, (ii) such action is
not specifically provided for in such Security Document or other
Transaction Document or any other Security Document or other
Transaction Document, and it shall not have received an Officers'
Certificate and an Opinion of Counsel, or (iii) it shall not
first be indemnified to its satisfaction by the Secured Parties
(other than the Trustee) against any and all liabilities and
expenses that may be incurred by it by reason of taking or
continuing to take any such action. The Collateral Agent shall
in all cases be fully protected in acting, or in refraining from
acting, under any Security Document or any other Transaction
Document in accordance with a request of the Trustee, and such
request and any action taken or failure to act pursuant thereto
shall be binding upon all the Secured Parties.
(d) If, with respect to a proposed action to be taken by
it, the Collateral Agent shall determine in good faith that the
provisions of any Security Document or any other Transaction
Document relating to the functions or responsibilities or
discretionary powers of the Collateral Agent are or may be
ambiguous or inconsistent, the Collateral Agent shall notify the
Secured Parties, identifying the proposed action and the
provisions that it considers are or may be ambiguous or
inconsistent, and may decline either to perform such function or
responsibility or to exercise such discretionary power unless it
has received the written confirmation of the Trustee that the
Trustee (acting pursuant to the Indenture) concurs in the
circumstances that the action proposed to be taken by the
Collateral Agent is consistent with the terms of this Agreement
or such other Security Document or such other Transaction
Document or is otherwise appropriate. The Collateral Agent shall
be fully protected in acting or refraining from acting upon the
confirmation of the Trustee in this respect, and such
confirmation shall be binding upon the Collateral Agent and all
the Secured Parties.
(e) The Collateral Agent shall not be deemed to have
actual, constructive, direct or indirect knowledge or notice of
the occurrence of any Event of Default unless and until a
Responsible Officer (as such term is defined in the Indenture
with respect to the Trustee) of the Collateral Agent has received
a written notice or a certificate from a Responsible Officer of
the Trustee, or an Authorized Representative of the Letter of
Credit Provider, PIC or Panda Funding stating that an Event of
Default has occurred. The Collateral Agent shall have no
obligation whatsoever either prior to or after receiving such
notice or certificate to inquire whether an Event of Default has
in fact occurred and shall be entitled to rely conclusively, and
shall be fully protected in so relying, on any notice or
certificate so furnished to it. Notwithstanding any provision
hereof or of any Security Document or any other Transaction
Document to which it is a party, the Collateral Agent shall not
be required to expend or risk its own funds or otherwise incur
any financial liability in the performance of any of its duties
hereunder or under any Security Document or any other Transaction
Document to which it is a party or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it.
If the Collateral Agent receives a notice of the occurrence of
any Event of Default, the Collateral Agent shall forward a copy
of such notice to the Trustee and the Letter of Credit Provider.
The Collateral Agent shall take such action with respect to such
Event of Default as directed pursuant to Section 3(a) hereof.
(f) PIC and Panda Funding jointly and severally agree to
pay to the Collateral Agent all reasonable fees, costs and
expenses of the Collateral Agent (including without limitation,
reasonable fees and expenses of legal counsel, accountants,
agents or other persons not regularly in its employ), in
connection with or incident to (i) the acceptance and
administration of this Agreement, the Security Documents and the
other Transaction Documents to which it is a party, (ii) the
custody or preservation of, or the sale of, collection from, or
other realization upon, any of the Collateral, (iii) the exercise
or enforcement (whether through negotiations, legal proceedings
or otherwise) of any of the rights of the Collateral Agent or the
Secured Parties under the Security Documents and the other
Transaction Documents to which it is a party or (iv) the failure
by either PIC or Panda Funding to perform or observe any of the
provisions of the Security Documents or any Transaction Documents
to which it is a party.
(g) The Collateral Agent hereby designates and appoints the
Trustee to hold all U.S. Accounts and Funds as agent for the
Collateral Agent for the benefit of the Secured Parties.
SECTION 7. Lack of Reliance on the Collateral Agent.
Each of the Secured Parties expressly acknowledges that neither
the Collateral Agent nor any of its officers, directors,
employees, agents or attorneys-in-fact has made any
representations or warranties to it and that no act by the
Collateral Agent hereinafter taken shall be deemed to constitute
any representation or warranty by the Collateral Agent to any
Secured Party. Except for notices, reports and other documents
expressly required to be furnished to any Secured Party by the
Collateral Agent hereunder, the Collateral Agent shall not have
any duty or responsibility to provide any Secured Party with any
credit or other information concerning the business, operations,
property, financial and other condition or creditworthiness of
any Project, PIC or Panda Funding which may come into the
possession of the Collateral Agent or any of its officers,
directors, employees, agents or attorneys-in-fact.
SECTION 8. Indemnification. PIC and Panda Funding
jointly and severally agree to indemnify the Collateral Agent and
each Secured Party from and against any and all claims, losses,
liabilities and damages of any kind or nature whatsoever
(including indirect, incidental and consequential damages)
arising out of or resulting from (i) this Agreement, any Security
Document and any other Transaction Document to which it is a
party, but excluding any such claims, losses, liabilities or
damages arising out of or resulting from the Collateral Agent's
or such Secured Party's gross negligence or willful misconduct or
(ii) any refund or adjustment of any amount paid or payable to
the Collateral Agent or any Secured Party under or in respect of
any Collateral, or any interest thereon, which may be ordered or
otherwise required by any Person. The provisions of this
Section 8 and of Sections 6(f) and 16 shall survive the
resignation or removal of the Collateral Agent and the
termination of this Agreement.
SECTION 9. Resignation or Removal of the Collateral
Agent. The Collateral Agent may resign as Collateral Agent upon
ten days' notice to the Trustee, the Letter of Credit Provider
(if any), PIC and Panda Funding and may be removed at any time
with or without cause by the Trustee, with any such resignation
or removal to become effective only upon the appointment of a
successor Collateral Agent under this Section 9. If the
Collateral Agent shall resign or be removed as Collateral Agent,
then the Trustee (acting at the direction of the Bondholders
pursuant to the Indenture) shall (and if no such successor shall
have been appointed within 30 days of the Collateral Agent's
resignation or removal, the Collateral Agent may) appoint a
successor agent for the Secured Parties, which successor agent
shall be reasonably acceptable to the Bondholders, the Letter of
Credit Provider (if any), PIC and Panda Funding (and which
successor agent shall meet the standards required for successors
to the Trustee, as provided in the Indenture) whereupon such
successor agent shall succeed to the rights, powers and duties of
the "Collateral Agent", and the term "Collateral Agent" shall
mean such successor agent effective upon its appointment, and,
except as expressly provided herein, the former Collateral
Agent's rights, powers and duties as Collateral Agent shall be
terminated, without any other or further act or deed on the part
of such former Collateral Agent (except that the resigning
Collateral Agent shall deliver all Collateral then in its
possession to the successor Collateral Agent) or any of the other
Secured Parties. If no successor is appointed within 60 days,
the Collateral Agent (at the expense of Panda Funding and PIC)
may petition any court of competent jurisdiction to appoint a
successor.
After resignation or removal hereunder as Collateral Agent,
the provisions of this Agreement shall inure to the former
Collateral Agent's benefit as to any actions taken or omitted to
be taken by it while it was Collateral Agent.
SECTION 10. Representations and Warranties. Each of PIC
and Panda Funding hereby makes the following representations and
warranties with respect to itself for the benefit of the Secured
Parties:
(i) Each of PIC and Panda Funding has all necessary
corporate power and authority to execute, deliver and
perform under this Agreement. All action on the part of PIC
and Panda Funding that is required for the authorization,
execution, delivery and performance of this Agreement, in
each case has been duly and effectively taken; and the
execution, delivery and performance of this Agreement does
not require the approval or consent of any holder or trustee
of any debt or other obligations of PIC and Panda Funding
which has not been obtained.
(ii) This Agreement has been duly executed and
delivered by PIC and Panda Funding. This Agreement
constitutes a legal, valid and binding obligation of each of
PIC and Panda Funding enforceable against such Person in
accordance with its terms, except as such enforceability
(A) may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting
the enforcement of creditors' rights and remedies generally
and (B) is subject to the application of general principles
of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
SECTION 11. No Warranties. Except as otherwise expressly
provided herein, the Secured Parties have not made any warranty,
express or implied, or assumed any liability with respect to the
enforceability, validity, value or collectability of the
Collateral (or any portion thereof). No Secured Party shall be
liable to any other Secured Party for any action or failure to
act or any error of judgment, negligence, or mistake, or
oversight whatsoever on the part of any Secured Party or any
Secured Party's agents, officers, employees or attorneys with
respect to any transaction relating to any of the Security
Documents or the Collateral.
SECTION 12. Amendments. Etc. No amendment or waiver of
any provision of this Agreement nor consent to any departure
herefrom shall in any event be effective unless the same shall be
in writing and duly executed by the Trustee, the Letter of Credit
Provider (if any) and the Collateral Agent, and then such waiver
or consent shall be effective only in the specific instance and
for the specified purpose for which given. No delay on the part
of any Secured Party in the exercise of any right, power or
remedy shall operate as a waiver by such Secured Party of any
right, power or remedy or preclude any further exercise thereof,
or the exercise of any other right, power or remedy.
SECTION 13. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing
(including telecopy communication) and shall be mailed,
telecopied or delivered to PIC, Panda Funding, the Trustee, the
Letter of Credit Provider (if any) and the Collateral Agent at
its address specified on the signature page hereof or as to any
party at such other address as shall be designated by such party
in a written notice to each other party complying as to delivery
with the terms of this Section 13. All such notices and other
communication shall, when mailed or telecopied, respectively, be
effective when deposited in the mails or telecopied,
respectively, addressed as aforesaid.
SECTION 14. Counterparts. This Agreement may be executed
in any number of counterparts, all of which together shall
constitute one and the same instrument and any of the parties
hereto may execute this Agreement by signing any such
counterpart.
SECTION 15. Severability. If any provision hereof is
invalid and unenforceable in any jurisdiction, then, to the
fullest extent permitted by law, (i) the other provisions hereof
shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Collateral Agent and
the Trustee in order to carry out the intentions of the parties
hereto as nearly as may be possible and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction
shall not affect the validity or enforceability of such provision
in any other jurisdiction.
SECTION 16. Reinstatement. This Agreement shall
automatically be reinstated if and to the extent that for any
reason payment in respect of the Secured Obligations is rescinded
or must otherwise be restored by any holder of the Secured
Obligations, whether as a result of any proceeding in bankruptcy
or reorganization or otherwise, and PIC and Panda Funding shall
jointly and severally indemnify the Collateral Agent and each
Secured Party on demand for all reasonable fees, costs and
expenses (including reasonable counsel's fees) incurred by the
Collateral Agent or such Secured Party in connection with such
rescission or restoration.
SECTION 17. No Impairments of Other Rights. Nothing in
this Agreement is intended or shall be construed to impair,
diminish or otherwise adversely affect any other rights the
Collateral Agent or Secured Parties may have or may obtain
against PIC or Panda Funding.
SECTION 18. LIMITATION ON LIABILITY. Notwithstanding
anything herein to the contrary, recourse to PIC and Panda
Funding (and any affiliate of PIC or Panda Funding or any
incorporator, partner, stockholder, agent, officer, employee or
director of PIC, Panda Funding or any such affiliate) for the
payment and performance of the Secured Obligations (including,
without limitation, all costs and expenses to be borne by PIC or
Panda Funding hereunder) shall be limited to the extent provided
in section 5.1 of the Indenture, which provisions are hereby
incorporated into this Agreement in their entirety.
SECTION 19. Governing Law; Terms. This Agreement shall
be governed by, and construed in accordance with, the laws of the
State of New York, except as required by mandatory provisions of
law and except to the extent that the validity of remedies
provided hereunder are governed by the laws of any jurisdiction
other than the State of New York. Unless otherwise defined
herein or in the Indenture, terms used in Article 9 of the UCC
are used herein as therein defined.
SECTION 20. Submission to Jurisdiction. Each of PIC,
Panda Funding, the Trustee, the Letter of Credit Provider (upon
its execution of this Agreement) and the Collateral Agent hereby
submits to the nonexclusive jurisdiction of the United States
District Court for the Southern District of New York and of any
New York State court sitting in New York County for the purposes
of all legal proceedings arising out of or relating to this
Agreement or any of the transactions contemplated hereby. Each
of PIC, Panda Funding, the Trustee, the Letter of Credit Provider
(upon its execution of this Agreement) and the Collateral Agent
hereby irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the
laying of the venue of any such proceeding brought in such a
court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.
SECTION 21. No Third Party Beneficiaries. The agreements
of the parties hereto are solely for the benefit of the
Collateral Agent and the Secured Parties, and no Person (other
than the parties hereto, and their successors and assigns
permitted hereunder) shall have any rights hereunder.
SECTION 22. WAIVER OF JURY TRIAL. Each of PIC, Panda
Funding, the Trustee, the Letter of Credit Provider (upon its
execution of this Agreement) and the Collateral Agent hereby
irrevocably waives, to the fullest extent permitted by law, any
and all right to trial by jury in any legal proceeding arising
out of or relating to this agreement or the transactions
contemplated hereby.
SECTION 23. Headings. Headings used in this Agreement
are for convenience of reference only and are not intended to
affect the interpretation of any provision of this Agreement.
SECTION 24. Admission of Letter of Credit Provider. Upon
written notice from PIC that it will, pursuant to Section 4.5(c)
of the Indenture, exercise its right to substitute a Letter of
Credit for all or a portion of the funds in the Debt Service
Reserve Fund under the terms of a Reimbursement Agreement with a
Letter of Credit Provider, in each case reasonably acceptable to
the Trustee and in accordance with the Indenture, the parties
hereto will amend this Agreement to admit the Letter of Credit
Provider as a party hereto in such capacity with the rights and
obligations set forth herein.
IN WITNESS WHEREOF, the parties hereto, by their officers
duly authorized, have caused this Agreement to be duly executed
and delivered as of the date first above written.
PANDA FUNDING CORPORATION
By:
Name: Robert W. Carter
Title: Chairman of the Board, President
and Chief Executive Officer
Address: 4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
PANDA INTERFUNDING CORPORATION
By:
Name: Robert W. Carter
Title: Chairman of the Board, President
and Chief Executive Officer
Address: 4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
BANKERS TRUST COMPANY,
as Trustee and as Collateral Agent
By:
Name: Marie C. Rasch
Title: Vice President
Address: 4 Albany Street
New York, New York 10006
EXHIBIT 4.08
SUBROGATION AND CONTRIBUTION AGREEMENT
Among
PANDA INTERFUNDING CORPORATION
PANDA FUNDING CORPORATION
and
PANDA INTERHOLDING CORPORATION
and
EACH PIC U.S. ENTITY
that is a signatory hereto
Dated as of July 31, 1996
____________________
SUBROGATION AND CONTRIBUTION AGREEMENT
THIS SUBROGATION AND CONTRIBUTION AGREEMENT (this
"Agreement") is made and entered into, effective as of July 31,
1996 among PANDA INTERFUNDING CORPORATION, a Delaware corporation
("PIC"), PANDA FUNDING CORPORATION, a Delaware corporation
("Panda Funding"), and PANDA INTERHOLDING CORPORATION, a Delaware
corporation, and each PIC U.S. Entity that is or shall in the
future be organized as a direct subsidiary of PIC, which PIC U.S.
Entity shall become a party hereto upon its incorporation
(collectively, the "Guarantors").
R E C I T A L S
WHEREAS, PIC has formed Panda Funding as a special purpose,
wholly-owned finance subsidiary to issue debt securities
constituting the Bonds described below;
WHEREAS, Panda Funding, PIC and the Trustee (as trustee for
the holders of the Bonds described below) are party to an
Indenture dated as of July 31, 1996 (as amended, supplemented or
otherwise modified and in effect from time to time, the
"Indenture"), providing, subject to the terms and conditions
thereof, for the issuance by Panda Funding from time to time of
certain Pooled Project Bonds (the "Bonds"), including, without
limitation, $105,525,000 initial aggregate principal amount of 11
5/8% Pooled Project Bonds, Series A due 2012 (the "Series A
Bonds");
WHEREAS, Panda Funding will loan the entire proceeds of the
issuance of the Series A Bonds (the "Loan") to PIC, which Loan
will be made under a Loan Agreement dated of even date with the
Indenture by and between Panda Funding and PIC (the "PIC Loan
Agreement") and evidenced by a promissory note (the "Initial PIC
Note") of PIC dated July 31, 1996, and payable to Panda Funding;
WHEREAS, Panda Funding may from time to time loan the
proceeds of subsequent series of Bonds (the "Additional Loans")
to PIC, which Additional Loans will be made under the PIC Loan
Agreement and evidenced by promissory notes (the "Additional PIC
Notes") of PIC payable to Panda Funding;
WHEREAS, one or more Letters of Credit may be substituted
for cash funds in the Debt Service Reserve Fund (as defined in
the Indenture) pursuant to Section 4.5(c) of the Indenture under
a reimbursement agreement to be entered into between PIC or its
controlling affiliate and a financial institution (the "Letter of
Credit Provider") (to the extent so entered into and as amended,
supplemented or modified and in effect from time to time,
together with any substitution or replacement thereof, the
"Reimbursement Agreement"), and in such event this Agreement
shall be amended to admit the Letter of Credit Provider as a
party hereto;
WHEREAS, to induce the purchase of the Bonds and to secure
Panda Funding's obligations to the holders (from time to time) of
such Bonds (the "Holders" and, together with the Trustee, and the
Letter of Credit Provider, if any, the "Secured Parties"), and to
induce the issuance of any letters of credit by the Letter of
Credit Provider and to secure PIC's or PIC's controlling
affiliate's obligations to the Letter of Credit Provider under
the Reimbursement Agreement (if entered into), Panda Funding has,
pursuant to a Security Agreement dated as of July 31, 1996,
between Panda Funding and the Collateral Agent (the "Panda
Funding Security Agreement"), granted to the Collateral Agent for
the benefit of the Secured Parties, a security interest in all of
Panda Funding's assets, including, without limitation, the
Initial PIC Note, the Additional PIC Notes, and Panda Funding's
other personal property;
WHEREAS, PIC has agreed to guarantee Panda Funding's
obligations to the Holders and the Trustee pursuant to certain
terms and covenants in the Indenture (the "PIC Guaranty");
WHEREAS, to induce the purchase of the Bonds, Panda Energy
Corporation, a Texas corporation ("PEC") and corporate parent of
PIC, has, pursuant to a Stock Pledge Agreement dated as of July
31, 1996, between PEC and the Collateral Agent (the "PEC Stock
Pledge Agreement"), pledged to the Collateral Agent for the
benefit of the Secured Parties, all of the capital stock of PIC;
WHEREAS, to induce the purchase of the Bonds by the Holders,
which the Guarantors acknowledge is of substantial benefit to
them (as the ultimate recipients of certain assets to be
transferred to them in connection with the issuance of the Bonds)
and of substantial benefit to their parent, PIC, as the recipient
of the Loan evidenced by the Initial PIC Note and pursuant to the
Additional Loans evidenced by Additional PIC Notes, of the
proceeds of the issuance of the Bonds, each Guarantor has
executed and delivered the Guaranty Agreement dated as of
July 31, 1996 (such agreement the "Subsidiary Guaranty"),
pursuant to which each Guarantor has jointly and severally
guaranteed the Guaranteed Obligations (as defined in such
Subsidiary Guaranty) in favor of the Collateral Agent for the
benefit of the Secured Parties;
WHEREAS, the Series A Bonds are being sold to the Initial
Purchaser (as defined below) pursuant to the Purchase Agreement
dated as of July 26, 1996 (the "Purchase Agreement") among Panda
Funding, PIC, Panda Energy International, Inc., and Jefferies &
Company, Inc. (the "Initial Purchaser"); and
WHEREAS, it is a condition precedent to the purchase of the
Series A Bonds by the Initial Purchaser that the Guarantors shall
have executed and delivered this Agreement by each of the
Guarantors existing at the time of the purchase of the Series A
Bonds.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as
follows:
1. Each capitalized term used, but not defined, herein
shall have the meaning assigned such term in, or by reference in,
the Indenture or the Subsidiary Guaranty.
2. (a) If any Guarantor makes a payment in respect of the
Guaranteed Obligations, it shall be subrogated to the rights of
the Collateral Agent and the Secured Parties, as applicable, (or
any other payee) against PIC or Panda Funding with respect to
such payment and shall have the rights of contribution set forth
below against the other Guarantors; provided that such Guarantor
shall not enforce its rights to any payment by way of subrogation
or by exercising its rights of contribution until all the
Guaranteed Obligations shall have been paid in full. If any
Guarantor makes a payment in respect of the Guaranteed
Obligations so that the amount of its then current Net Payments
is less than the amount of its then current Contribution
Obligation, any Guarantor making such proportionately smaller
payment shall, when permitted by the preceding sentence, pay to
the other Guarantors an amount such that the Net Payments made by
the Guarantors in respect of the Guaranteed Obligations shall be
shared among the Guarantors pro rata in proportion to their
respective Contribution Percentage. If any Guarantor receives
any payment by way of subrogation or contribution so that the
amount of its then current Net Payments is greater than the
amount of its then current Contribution Obligation, the Guarantor
receiving such proportionately greater payment shall, when
permitted by the second preceding sentence, pay to the other
Guarantors an amount such that the Net Payments received by the
Guarantors shall be shared among the Guarantors pro rata in
proportion to their respective Contribution Percentage. If any
Guarantor makes a payment in respect of the Guaranteed
Obligations so that the amount of its then current Net Payments
is greater than the amount of its then current Contribution
Obligation, any Guarantor making such proportionately larger
payment shall, when permitted by the third preceding sentence,
receive from the other Guarantors an amount such that the Net
Payments made by the Guarantors in respect of the Guaranteed
Obligations shall be shared among the Guarantors pro rata in
proportion to their respective Contribution Percentage.
(b) As used herein, the term "Contribution Obligation"
shall mean an amount equal, at any time and from time to time and
for each respective Guarantor, to the product of (i) such
Guarantor's Contribution Percentage, times (ii) the sum of all
payments made previous to or at the time of calculation by all
Guarantors in respect of the Guaranteed Obligations (less the
amount of any such payments previously returned to any Guarantor
by operation of law or otherwise, but not including payments
received by any Guarantor by way of its rights of subrogation and
contribution hereunder). Notwithstanding anything to the
contrary contained in this Section or in this Agreement, no
liability or obligation of any Guarantor that shall accrue
pursuant to this Agreement shall be paid nor shall it be deemed
owed pursuant to this Agreement until all of the Guaranteed
Obligations shall be paid in full.
(c) As used herein, the term "Net Payments" shall mean an
amount equal, at any time and from time to time and for each
respective Guarantor, to the difference of (i) the sum of all
payments made previous to or at the time of calculation by such
Guarantor in respect of the Guaranteed Obligations and in respect
of its obligations contained in this Agreement, less (ii) the sum
of all such payments previously returned to such Guarantor by
operation of law or otherwise and including payments received by
such Guarantor by way of its rights of subrogation and
contribution hereunder.
(d) As used herein, the term "Contribution Percentage"
shall mean, for any applicable date as of which such percentage
is being determined an amount equal to the quotient of (i) the
Net Worth of such Guarantor as of such date, divided by (ii) the
sum of the Net Worth of all the Guarantors as of such date. The
amount set forth opposite each Guarantor's name on Annex 1 hereto
was calculated and agreed to among PIC, Panda Funding and the
Guarantors to be the Contribution Percentage in effect on the
date hereof or as may be amended from time to time to reflect the
addition as a party hereto of any PIC U.S. Entity created as a
direct subsidiary of PIC subsequent to the date of this
Agreement.
(e) As used herein, the term "Net Worth" shall mean for any
Guarantor, calculated on and as of any applicable date on which
such amount is being determined, the difference between (A) the
sum of all such Guarantor's property, at a fair valuation and as
of such date, minus (B) the sum of all such Guarantor's debts, at
a fair valuation and as of such date, excluding the Guaranteed
Obligations.
3. Each party hereto represents and warrants to each other
party hereto and to their respective successors and permitted
assigns that the execution, delivery and performance by such
party of this Agreement are within such party's powers, have been
duly authorized by all necessary action, require no action by or
in respect of, or filing with, any Governmental Authority and do
not contravene, or constitute a default under, any provision of
any applicable Government Rule or of the certificate or articles
of incorporation, bylaws or partnership agreement, as applicable
of such party or of any agreement, judgment, injunction, order,
decree or other instrument binding upon such party or result in
the creation or imposition of any Lien on any asset of such
party.
4. No failure or delay by any Guarantor in exercising any
right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein
provided shall be cumulative and non-exclusive of any rights or
remedies provided by law.
5. Any provision of this Agreement may be amended or
waived if, but only if, such amendment or waiver is in writing
and is signed by the parties hereto and consented to by the
Collateral Agent.
6. The provisions of this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
7. This Agreement and the rights and obligations of the
parties hereunder and under the Bonds and the PIC Guaranty shall
be construed in accordance with and be governed by the laws of
the State of New York (including Section 5-1401 of the New York
General Obligations Law, or any similar successor provision
thereto, but excluding all other conflict-of-laws rules)and to
the extent controlling, laws of the United States of America.
8. Any legal action or proceeding with respect to this
Agreement, the Notes or the other Transaction Documents may be
brought in the courts of the State of New York or of the United
States of America for the Southern District of New York, and, by
execution and delivery of this Agreement, each of the parties
hereto accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid
courts. Each of the Parties hereto irrevocably waives any
objection, including, but not limited to, any objection to the
laying of venue or based on the grounds of forum non conveniens,
which it may now or hereafter have to the bringing of any such
action or proceeding in such respective jurisdictions.
9. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one
and the same instrument and any of the parties hereto may execute
this Agreement by signing any such counterpart. This Agreement
shall become effective when a counterpart hereof shall have been
signed by all the parties hereto.
WITNESS THE EXECUTION HEREOF, by the parties hereto as of
the date first above written.
PIC: PANDA INTERFUNDING CORPORATION
By:
Name: William C. Nordlund
Title: Vice President, General Counsel
and Assistant Secretary
PANDA FUNDING: PANDA FUNDING CORPORATION
By:
Name: William C. Nordlund
Title: Vice President, General Counsel
and Assistant Secretary
GUARANTOR[S]: PANDA INTERHOLDING CORPORATION
By:
Name: William C. Nordlund
Title: Vice President, General Counsel
and Assistant Secretary
__________________
ANNEX I
TO
SUBROGATION AND CONTRIBUTION AGREEMENT
GUARANTOR CONTRIBUTION PERCENTAGE
PANDA INTERHOLDING CORPORATION 100%
_______________
100%
EXHIBIT 4.09
GUARANTY AGREEMENT
(PIC U.S. Entity Subsidiaries)
By
PANDA INTERHOLDING CORPORATION
in favor of
BANKERS TRUST COMPANY,
as Collateral Agent
for the benefit of the Secured Parties as hereafter defined
Dated as of July 31, 1996
_______________
GUARANTY AGREEMENT
(PIC U.S. Entity Subsidiaries)
THIS GUARANTY AGREEMENT, dated as of July 31, 1996 (this
"Guaranty") is made and entered into by Panda Interholding
Corporation, a Delaware corporation, and each PIC U.S. Entity
that is or shall in the future be organized as a direct
subsidiary of PIC, which PIC U.S. Entity shall become a party
hereto upon its incorporation (collectively the "Guarantors"), in
favor of Bankers Trust Company, a New York banking corporation,
as Collateral Agent pursuant to that certain Collateral Agency
Agreement dated as of even date herewith (the "Collateral Agency
Agreement") by and among Panda Interfunding Corporation, a
Delaware corporation ("PIC"), Panda Funding Corporation, a
Delaware corporation, ("Panda Funding"),and Bankers Trust
Company, a New York banking corporation, as trustee under the
Indenture referred to below (in such capacity, together with its
successors and assigns in such capacity, the "Trustee"), and as
collateral agent for the Trustee in such capacity, the Trustee on
behalf of the Bondholders under the Indenture and the Letter of
Credit Provider (as defined below) (in such capacity together
with its successors and assigns in such capacity, the "Collateral
Agent").
RECITALS
WHEREAS, PIC has formed Panda Funding as a special purpose,
wholly-owned finance subsidiary to issue debt securities
constituting the Bonds described below;
WHEREAS, Panda Funding, PIC and the Trustee (as trustee for
the holders of the Bonds described below) are party to an
Indenture dated as of July 31, 1996 (as amended, supplemented or
otherwise modified and in effect from time to time, the
"Indenture"), providing, subject to the terms and conditions
thereof, for the issuance by Panda Funding from time to time of
certain Pooled Project Bonds (the "Bonds"), including, without
limitation, $105,525,000 initial aggregate principal amount of 11
5/8% Pooled Project Bonds, Series A due 2012 (the "Series A
Bonds");
WHEREAS, Panda Funding will loan the entire proceeds of the
issuance of the Series A Bonds (the "Loan") to PIC, which Loan
will be made under a Loan Agreement dated of even date with the
Indenture by and between Panda Funding and PIC (the "PIC Loan
Agreement") and evidenced by a promissory note (the "Initial PIC
Note") of PIC dated July 31, 1996, and payable to Panda Funding;
WHEREAS, Panda Funding may from time to time loan the
proceeds of subsequent series of Bonds (the "Additional Loans")
to PIC, which Additional Loans will be made under the PIC Loan
Agreement and evidenced by promissory notes (the "Additional PIC
Notes") of PIC payable to Panda Funding;
WHEREAS, one or more Letters of Credit may be substituted
for cash funds in the Debt Service Reserve Fund (as defined in
the Indenture) pursuant to Section 4.5(c) of the Indenture under
a reimbursement agreement to be entered into between PIC or its
controlling affiliate and a financial institution (the "Letter of
Credit Provider") (to the extent so entered into and as amended,
supplemented or modified and in effect from time to time,
together with any substitution or replacement thereof, the
"Reimbursement Agreement"), and in such event this Agreement
shall be amended to admit the Letter of Credit Provider as a
party hereto;
WHEREAS, to induce the purchase of the Bonds and to secure
Panda Funding's obligations to the holders (from time to time) of
such Bonds (the "Holders" and, together with the Trustee, and the
Letter of Credit Provider, if any, the "Secured Parties"), and to
induce the issuance of any letters of credit by the Letter of
Credit Provider and to secure PIC's or PIC's controlling
affiliate's obligations to the Letter of Credit Provider under
the Reimbursement Agreement (if entered into), Panda Funding has,
pursuant to a Security Agreement dated as of July 31, 1996,
between Panda Funding and the Collateral Agent (the "Panda
Funding Security Agreement"), granted to the Collateral Agent for
the benefit of the Secured Parties, a security interest in all of
Panda Funding's assets, including, without limitation, the
Initial PIC Note, the Additional PIC Notes, and Panda Funding's
other personal property;
WHEREAS, PIC has agreed to guarantee Panda Funding's
obligations to the Holders and the Trustee pursuant to certain
terms and covenants in the Indenture (the "PIC Guaranty");
WHEREAS, to induce the purchase of the Bonds, Panda Energy
Corporation, a Texas corporation ("PEC") and corporate parent of
PIC, has, pursuant to a Stock Pledge Agreement dated as of July
31, 1996, between PEC and the Collateral Agent (the "PEC Stock
Pledge Agreement"), pledged to the Collateral Agent for the
benefit of the Secured Parties, all of the capital stock of PIC;
WHEREAS, to induce the purchase of the Bonds by the Holders,
which each Guarantor acknowledges is of substantial benefit to
them (as the ultimate recipient of certain assets to be
transferred to them in connection with the issuance of the Bonds)
and of substantial benefit to their parent, PIC, as the recipient
of the Loan evidenced by the Initial PIC Note and pursuant to the
Additional Loans evidenced by Additional PIC Notes, of the
proceeds of the issuance of the Bonds, each Guarantor has to
execute and deliver this Guaranty in favor of the Collateral
Agent for the benefit of the Secured Parties;
WHEREAS, the Series A Bonds are being sold to the Initial
Purchaser (as defined below) pursuant to the Purchase Agreement
dated as of July 26, 1996 (the "Purchase Agreement") among Panda
Funding, PIC, Panda Energy International, Inc., and Jefferies &
Company, Inc. (the "Initial Purchaser"); and
WHEREAS, it is a condition precedent to the purchase of the
Series A Bonds by the Initial Purchaser that each Guarantor shall
have guaranteed the obligations of PIC with respect to the PIC
Guaranty and the obligations of Panda Funding with respect to the
Bonds.
NOW, THEREFORE, to secure the Bonds and the PIC Guaranty,
and the performance by PIC and Panda Funding of the agreements in
the Indenture and in the Reimbursement Agreement (if entered
into) and by PEC of the agreements under the PEC Stock Pledge
Agreement and in consideration of the premises and in order to
induce the Initial Purchaser to purchase the Series A Bonds, and
for other good and valuable consideration, the receipt and the
adequacy of which are hereby acknowledged, each Guarantor hereby
agrees, with and for the benefit of the Collateral Agent on
behalf of the Secured Parties, as follows:
AGREEMENT
1. Defined Terms. Each capitalized term used herein, and
not otherwise defined herein, shall have the meaning ascribed to
such term in the Indenture, or in the Collateral Agency Agreement
if not found in the Indenture. The following capitalized terms
shall have the following meanings:
"Event of Default" shall mean an "Event of Default" as
such term is defined in the Indenture or an "Event of
Default" as such term is defined in the Reimbursement
Agreement (if entered into).
"Guaranteed Obligations" shall mean all indebtedness,
liabilities and other obligations of PIC and Panda Funding
(including, but not limited to, all such obligations in
respect of principal, premiums, interest, fees,
reimbursement obligations, Collateral Agent Claims, Trustee
Claims, penalties, indemnities, costs and other expenses,
whether due after acceleration or otherwise) to the
Collateral Agent or the Secured Parties (of whatsoever
nature and howsoever evidenced) under or pursuant to the
Bonds, the Indenture, this Agreement, the Collateral Agency
Agreement, the other Security Documents and the obligations
of PIC or its controlling affiliate under the Reimbursement
Agreement (if entered into), in each case, direct or
indirect, primary or secondary, fixed or contingent, now or
hereafter arising therefrom or relating thereto.
"Maximum Guaranteed Amount" shall mean, for each
Guarantor, the greater of (a) the "reasonably equivalent
value" or "fair consideration" (or equivalent concept)
received by such Guarantor in exchange for the obligation
incurred hereunder by such Guarantor, within the meaning of
any state or federal fraudulent conveyance or transfer laws
applicable to such Guarantor; or (b) the lesser of (i) the
maximum amount that will not render such Guarantor
insolvent, or (ii) the maximum amount that will not leave
such Guarantor (after giving effect to this Guaranty) with
Property deemed an unreasonably small capital. Clauses (i)
and (ii) are and shall be determined pursuant to and as of
the appropriate date mandated by such applicable state or
federal fraudulent conveyance or transfer laws.
"Subrogation and Contribution Agreement" shall mean
that certain Subrogation and Contribution Agreement dated as
of July 31, 1996 by and among PIC, Panda Funding and the
Guarantors.
2. Guarantee.
(a) Each Guarantor hereby unconditionally and irrevocably
and severally guarantees to the Collateral Agent the prompt and
complete payment when due (whether at the stated maturity, by
acceleration or otherwise) of the Guaranteed Obligations, and
each Guarantor further agrees, severally, to pay any and all
reasonable expenses which may be paid or incurred by the
Collateral Agent in enforcing any rights with respect to, or
collecting, any or all of the Guaranteed Obligations and/or
enforcing any rights with respect to, or collecting against, such
Guarantor under this Guaranty; provided, however, that,
notwithstanding anything herein or in any other Transaction
Document to the contrary, the maximum liability of each
Guarantor hereunder and under the other Transaction Documents
shall in no event exceed the Maximum Guaranteed Amount for such
Guarantor; provided, further, that to the extent that applicable
state or federal fraudulent conveyance or transfer laws would so
permit or require, the Maximum Guaranteed Amount for each
Guarantor (to the extent not previously adjusted for such
amounts) shall be (i) increased by the aggregate fair value of
such Guarantor's rights to contribution, reimbursement, or
subrogation pursuant to the Subrogation and Contribution
Agreement, if any, or applicable laws relating to contribution,
reimbursement or subrogation rights and (ii) decreased by the
aggregate amount of such Guarantor's liabilities with respect to
contribution rights pursuant to the Subrogation and Contribution
Agreement or applicable laws relating to contribution rights and
(iii) multiplied by the Probability Factor (as defined in
subsection (d) below) to reflect the likelihood of a demand being
made hereunder or against the assets of such Guarantor.
(b) Each Guarantor agrees that the Guaranteed Obligations
may at any time and from time to time exceed the Maximum
Guaranteed Amount for such Guarantor without impairing this
Guaranty or affecting the rights and remedies of the Collateral
Agent.
(c) No payment or payments made by PIC or Panda Funding,
any other guarantor or any other Person or received or collected
by the Collateral Agent from PIC, Panda Funding, any other
guarantor or any other Person by virtue of any action or
proceeding or any set-off or appropriation or application at any
time or from time to time in reduction of or in payment of the
Guaranteed Obligations shall be deemed to modify, reduce, release
or otherwise affect the liability of each Guarantor hereunder,
which shall, notwithstanding any such payment or payments, other
than payments made by such Guarantor in respect of the Guaranteed
Obligations or payments received or collected from such Guarantor
in respect of the Guaranteed Obligations, each remain liable for
the Guaranteed Obligations up to the Maximum Guaranteed Amount
for such Guarantor until the Guaranteed Obligations are paid in
full.
(d) It is the intention of each Guarantor that the
obligations and transfers of each Guarantor under this Guaranty
and any other Transaction Documents, if applicable, are not
obligations or transfers that violate the provisions of
applicable federal and state fraudulent conveyance or transfer
laws resulting in such obligations or transfers being subject to
avoidance under any such laws. In that regard each Guarantor
intends that such obligations and transfers be in an amount that
results in the Guarantors guaranteeing the Guaranteed Obligations
in an amount that is equal to the maximum amount that is below
the amount that such applicable fraudulent conveyance or transfer
laws establish as the threshold amount for such Guarantor and for
such obligations and transfers that would not be subject to
avoidance under such laws. Accordingly, due to uncertainties in
calculation and in the status of various judicial decisions and
interpretations of such laws, each Guarantor and the Collateral
Agent have agreed upon the limitation of such Guarantor's
liability hereunder with the good faith intention of complying
with such laws. Under many interpretations of such laws,
contingent claims are deemed to be properly valued at the time of
each relevant determination based on a percentage (the
"Probability Factor") that is reasonably reflective of the
probability at the time of determination that a demand or call on
or against a guaranty obligation or collateral will be made in
light of the financial conditions of Panda Funding, PIC and other
liable parties and other relevant facts that were available at
such time, all as subsequently decided by the appropriate
judicial authority enforcing the rights under this Guaranty or
the other Transaction Documents. For purposes of the limitations
on the maximum liability of each Guarantor in Subparagraph (a)
above, if a court in enforcing the rights of the Collateral Agent
shall determine that the use of such a Probability Factor is
appropriate, then the Probability Factor determined by such court
shall be used to calculate the Maximum Guaranteed Amount. In
light of the expense and difficulty in determining the Maximum
Guaranteed Amount at any particular time, the amount equal to the
product of the Guaranteed Obligations multiplied by each
Guarantor's Contribution Percentage as set forth on Annex I to
the Subrogation and Contribution Agreement, shall be presumed to
be the Maximum Guaranteed Amount for all purposes, including the
filing of a proof of claim in any bankruptcy proceeding with
respect to such Guarantor, or any foreclosure sale or any similar
proceeding with respect to Property of such Guarantor, unless and
until either such Guarantor or the Collateral Agent shall have
demonstrated to the satisfaction of the relevant judicial
authority the fact that the actual calculation of the Maximum
Guaranteed Amount results in a different amount.
(e) It is the intention of the parties hereto that all
intercompany indebtedness either owed to or by any Guarantor not
be included as either an asset or a liability, respectively, in
determining the solvency or capital of any Guarantor.
Accordingly, each Guarantor agrees that in connection with any
determination of the Maximum Guaranteed Amount, such intercompany
indebtedness may be treated in the manner that would achieve the
result intended by the first sentence of this Subsection (e).
(f) Each of PIC, Panda Funding and the Guarantors is
personally obligated and fully liable for the amounts due under
the Bonds. The Collateral Agent shall have the right to sue on
the Notes and the Bonds and obtain a personal judgment against
PIC, Panda Funding and the Guarantors for satisfaction of the
amounts due under the Bonds either before or after a judicial
foreclosure of any Security Instrument.
(g) The liability of each of Guarantors for the payment of
the Guaranteed Obligations guaranteed hereby shall be primary,
and not secondary, and joint and several with each of the other
Guarantors.
3. Right of Contribution. Each Guarantor hereby agrees
that to the extent that any Guarantor shall have paid more than
its proportionate share of any payments made under any of the
Guaranty, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor who has not
paid its proportionate share of any such payments. Each
Guarantor's right of contribution shall be subject to the terms
and conditions of the Subrogation and Contribution Agreement and
Paragraph 5 hereof. The provisions of this Paragraph 3 shall in
no respect limit the obligations and liabilities of any Guarantor
to the Collateral Agent and each Guarantor shall remain liable to
the Collateral Agent for the full amount guaranteed by such
Guarantor hereunder.
4. Right of Set-off. The Collateral Agent is hereby
irrevocably authorized upon the occurrence of an Event of Default
without notice to the Guarantors, any such notice being expressly
waived by each Guarantor, to set-off and credit against any
credits, indebtedness, or claims, in any currency, in each case
whether direct or indirect or contingent or matured or unmatured,
at any time held or owing by the Collateral Agent for the credit
or the account of any Guarantor, or any part thereof in such
amounts as the Collateral Agent may elect, against and on account
of the obligations and liabilities of the applicable Guarantor to
the Collateral Agent hereunder and claims of every nature and
description of the Collateral Agent against such Guarantor, in
any currency, whether arising hereunder, under the Indenture, the
Loan Agreement, any other Transaction Document or otherwise, as
the Collateral Agent may elect, whether or not the Collateral
Agent has made any demand for payment and although such
obligations, liabilities and claims may be contingent or
unmatured. The Collateral Agent agrees to notify the applicable
Guarantor of any such set-off and the application made by the
Collateral Agent, provided that the failure to give such notice
shall not affect the validity of such set-off and application.
The rights of the Collateral Agent under this paragraph are in
addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Collateral Agent
may have.
5. Limited Right of Subrogation. Notwithstanding any
payment or payments made by any Guarantor hereunder or any
set-off or application of funds of any Guarantor by the
Collateral Agent, such Guarantor shall not be entitled to be
subrogated to any of the rights of the Collateral Agent against
PIC or Panda Funding or any collateral security or guaranty or
right of offset held by the Collateral Agent for the payment of
the Guaranteed Obligations, nor shall any Guarantor seek or be
entitled to seek any contribution or reimbursement from PIC or
Panda Funding or any other guarantor in respect of payments made
by such Guarantor hereunder, until all Guaranteed Obligations are
paid in full. If any amount shall be paid to any Guarantor on
account of such subrogation rights at any time when all of the
Guaranteed Obligations shall not have been paid in full, such
amount shall be held by such Guarantor in trust for the
Collateral Agent, segregated from other funds of such Guarantor,
and shall, forthwith upon receipt by such Guarantor, be turned
over to the Collateral Agent in the exact form received by such
Guarantor (duly indorsed by such Guarantor to the Collateral
Agent, if required), to be applied against the Guaranteed
Obligations, whether matured or unmatured in such order as the
Collateral Agent may determine.
6. Amendments, etc. with respect to the Guaranteed
Obligations; Waiver of Rights. Each Guarantor shall remain
obligated hereunder notwithstanding that, without any reservation
of rights against the Guarantors and without notice to or further
assent by the Guarantors, any demand for payment of any of the
Guaranteed Obligations made by the Collateral Agent or the
Trustee may be rescinded and any of the Guaranteed Obligations
continued, and the Guaranteed Obligations, or the liability of
any other party upon or for any part thereof, or any collateral
security or guaranty therefor or right of offset with respect
thereto, may, from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Collateral Agent or the Trustee
and the Indenture, the Bonds, the Loan Agreement, the PIC Notes,
and any collateral security document or other guaranty or
document in connection therewith (including, without limitation,
the other Transaction Documents) may be amended, modified,
supplemented or terminated, in whole or in part, as the
Collateral Agent or the Trustee may deem advisable from time to
time, and any collateral security or guaranty or right of offset
at any time held by the Collateral Agent or the Trustee for the
payment of the Guaranteed Obligations may be sold, exchanged,
waived, surrendered, or released, all without the necessity of
any reservation of rights against the Guarantors and without
notice to or further assent by the Guarantors which will remain
bound hereunder, notwithstanding any such renewal, extension,
modification, acceleration, compromise, amendment, supplement,
termination, sale, exchange, waiver, surrender, or release.
Neither the Collateral Agent or the Trustee shall have an
obligation to protect, secure, perfect, or insure any Lien at any
time held as security for the Guaranteed Obligations or this
Guaranty or any Property subject thereto. When making any demand
hereunder against any Guarantor, the Collateral Agent may, but
shall be under no obligation to, make a similar demand on Panda
Funding or PIC and any failure by the Collateral Agent or the
Trustee to make any such demand or to collect any payments from
Panda Funding or PIC or any release of Panda Funding or PIC shall
not relieve any such Guarantor of its obligations or liabilities
hereunder, and shall not impair or affect the rights and
remedies, express or implied, or as a matter of law, of the
Collateral Agent against each Guarantor. For the purposes hereof
"demand" shall include the commencement and continuance of any
legal proceedings.
7. Guaranty Absolute and Unconditional; Waivers. Each
Guarantor waives any and all notice of the creation, renewal,
extension or accrual of any of the Guaranteed Obligations and
notice of or proof of reliance by the Collateral Agent or the
Trustee upon this Guaranty or acceptance of this Guaranty, and
the Guaranteed Obligations (and any of them) shall conclusively
be deemed to have been created, contracted or incurred and
extended, amended and waived in reliance upon this Guaranty, and
all dealings between Panda Funding, PIC, the Guarantors and
either the Collateral Agent or the Trustee shall likewise be
conclusively presumed to have been had or consummated in reliance
upon this Guaranty. Each Guarantor waives diligence,
presentment, protest, demand for payment and notice of default or
nonpayment, notice of intention to accelerate maturity and notice
of acceleration of maturity to or upon Panda Funding or PIC with
respect to the Guaranteed Obligations. Each Guarantor
understands and agrees that this Guaranty shall be construed as a
continuing, absolute, completed, unconditional (except as
expressly conditioned pursuant to the terms hereof) and
irrevocable guarantee of payment (and not of collection) without
regard to (a) the validity, regularity or enforceability of the
Indenture, the other Transaction Documents, any of the Guaranteed
Obligations or any collateral security or guaranty therefor or
right of offset with respect thereto at any time or from time to
time held by the Collateral Agent, (b) any defense, set-off or
counterclaim which may at any time be available to or be asserted
by Panda Funding, PIC or any other Person liable for the
Guaranteed Obligations against the Collateral Agent or the
Trustee, or (c) any other circumstance whatsoever (with or
without notice to or knowledge of Panda Funding or PIC) which
constitutes, or might be construed to constitute, an equitable or
legal discharge of Panda Funding, PIC or any other Person liable
for the Guaranteed Obligations, under this Guaranty, in
bankruptcy or in any other instance. When pursuing any of its
rights and remedies against Panda Funding and PIC hereunder, the
Collateral Agent may, but shall be under no obligation to, pursue
such rights and remedies as they may have against any Guarantor
or any other Person or against any collateral security or
guaranty for the Guaranteed Obligations or any right of offset
with respect thereto, and any failure by the Collateral Agent to
pursue such other rights or remedies or to collect any payments
from Panda Funding, PIC or any such other Person or to realize
upon any such collateral security or guaranty or to exercise any
such right of offset, or any release of Panda Funding, PIC or any
such other Person or any such collateral security, guaranty or
right of offset, shall not relieve any Guarantor of any liability
hereunder, and shall not impair or affect the rights and
remedies, whether express, implied or available as a matter of
law, of the Collateral Agent against any Guarantor. This
Guaranty shall remain in full force and effect and be binding in
accordance with and to the extent of its terms upon each
Guarantor and its successors and assigns, and shall inure to the
benefit of the Collateral Agent and its successors, indorses,
transferees, and assigns, until all the Guaranteed Obligations
and the obligations of the Guarantors under this Guaranty shall
have been satisfied by payment in full.
8. Reinstatement. This Guaranty shall continue to be
effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Guaranteed
Obligations is rescinded or must otherwise be restored or
returned by the Collateral Agent or the Trustee upon the
insolvency, bankruptcy, dissolution, liquidation or
reorganization of Panda Funding or PIC, or upon or as a result of
the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, Panda Funding or PIC or any
substantial part of such Person's property, or otherwise, all as
though such payments had not been made.
9. Maturity of Guaranteed Obligations; Payment. Each
Guarantor agrees that if the maturity of any of the Guaranteed
Obligations is accelerated by bankruptcy or otherwise, such
maturity shall also be deemed accelerated for the purpose of this
Guaranty without demand or notice to any Guarantor, and each
Guarantor shall, upon such acceleration, be obligated to pay to
the Collateral Agent the amount due and unpaid by Panda Funding
or PIC and guaranteed hereby, which payment shall be made
immediately upon demand thereof by the Collateral Agent.
10. Payments. Each Guarantor hereby guarantees that
payments hereunder will be paid, without set-off or counterclaim
and in immediately available funds and in lawful currency of the
United States of America, to the Collateral Agent in New York,
New York at the Collateral Agent's principal trust offices
located at 4 Albany Street, New York, New York 10006, not later
than 11:00 A.M., New York time.
11. Representations and Warranties. Each Guarantor hereby
represents and warrants that:
(a) Corporate Existence. Each Guarantor (i) is a
corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its
incorporation, (ii) is duly qualified as a foreign
corporation in all jurisdictions wherein the Property owned
or the business transacted makes such qualification
necessary, except where the failure to be so qualified would
not have a Material Adverse Effect, and (iii) has the
corporate power and authority and the legal right to own and
lease its property and to conduct its business.
(b) Corporate Power; Authorization. Each Guarantor is
duly authorized and empowered to execute, deliver and
perform this Guaranty; and all corporate action on each
Guarantor's part requisite for the due execution, delivery
and performance of this Guaranty has been duly and
effectively taken.
(c) Binding Obligations. This Guaranty constitutes a
legal, valid, and binding obligation of each Guarantor, and,
upon execution and delivery to the Collateral Agent on
behalf of the Secured Parties will be enforceable against
each Guarantor in accordance with its terms, except that
enforcement may be subject to any applicable bankruptcy,
insolvency or similar laws generally affecting the
enforcement of creditors' rights and subject to the
availability of equitable remedies.
12. No Waiver: Cumulative Remedies. The Collateral Agent
shall not by any act, delay, indulgence, omission or otherwise be
deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of
any of the terms and conditions hereof. No failure to exercise
and no delay in exercising, on the part of the Collateral Agent,
any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right,
power or privilege preclude any other or further exercise
thereof, or the exercise of any other power, privilege or right.
A waiver by the Collateral Agent of any right or remedy hereunder
on any one occasion shall not be construed as a bar to any right
or remedy which the Collateral Agent would have on any future
occasion. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently, and are not
exclusive of any rights or remedies provided by law.
13. Notices. All notices, requests and other
communications to any party hereunder shall be in writing
(including bank wire, telecopy or similar teletransmission or
writing) and, in the case of any Guarantor, shall be given to
such Guarantor at the address or telecopy number of PIC now or
hereafter provided for in the Indenture and in the case of the
Collateral Agent, at the address or telecopy number for such
Person now or hereafter provided for in the Collateral Agency
Agreement. Each such notice, request or other communication
shall be effective (i) if given by telecopier during regular
business hours, once such telecopy is transmitted to the telecopy
number specified in the applicable Indenture or Collateral Agency
Agreement, (ii) if given by mail, seventy-two (72) hours after
such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid, or (iii) if given by any
other means (including, without limitation, by air courier), when
delivered at the address specified in the Indenture or the
Collateral Agency Agreement, as applicable.
14. Entire Agreement. This Guaranty embodies the entire
agreement and understanding between all Guarantors and the
Collateral Agent and supersede all prior agreements and
understandings between such parties relating to the subject
matter hereof and thereof. There are no unwritten oral
agreements between the parties. Any conflict or ambiguity
between the terms and provisions of this Guaranty and the terms
and provisions in any other Transaction Document shall be
controlled by the terms and provisions hereof.
15. Governing Law; Submission to Jurisdiction, Etc.
(a) This Guaranty and the rights and obligations of the
parties hereunder shall be construed in accordance with and be
governed by the laws of the State of New York (including
Section 5-1401 of the New York General Obligations Law, or any
similar successor provision thereto, but excluding all other
conflict-of-laws rules)and to the extent controlling, laws of the
United States of America.
(b) Any legal action or proceeding with respect to this
Guaranty, the Notes or the other Financing Documents may be
brought in the courts of the State of New York or of the United
States of America for the Southern District of New York, and, by
execution and delivery of this Guaranty, EACH Guarantor hereby
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. EACH
Guarantor hereby irrevocably waives any objection, including, but
not limited to, any objection to the laying of venue or based on
the grounds of forum non conveniens, which it may now or
hereafter have to the bringing of any such action or proceeding
in such respective jurisdictions.
(c) EACH Guarantor and the Collateral Agent (i)
irrevocably and unconditionally waives, to the fullest extent
permitted by law, trial by jury in any legal action or proceeding
relating to any Transaction Document and for any counterclaim
therein; (ii) irrevocably waives, to the maximum extent not
prohibited by law, any right it may have to claim or recover in
any such litigation any special, exemplary, punitive or
consequential damages, or damages other than, or in addition to,
actual damages; (iii) certifies that no party hereto nor any
representative or counsel for any party hereto has represented,
expressly or otherwise, or implied that such party would not, in
the event of litigation, seek to enforce the foregoing waivers;
and (iv) acknowledges that it has been induced to enter into this
Guaranty, the other Transaction Documents and the transactions
contemplated hereby and thereby based upon, among other things,
the mutual waivers and certifications contained in this section.
(d) Each Guarantor hereby irrevocably designates CT
Corporation as the designee, appointee and process agent of such
Guarantor to receive, for and on behalf of such Guarantor,
service of process in such respective jurisdictions in any legal
action or proceeding with respect to this Guaranty. It is
understood that a copy of such process served on such agent will
be promptly forwarded by mail to the Guarantor at its address set
forth opposite its signature below, but the failure of the
Guarantor to receive such copy shall not affect in any way the
service of such process. Each Guarantor further irrevocably
consents to the service of process of any of the aforementioned
courts in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to the
Guarantor at its said address, such service to become effective
on the earlier to occur of (i) actual receipt of such service of
process and (ii) the thirtieth day after such mailing.
(e) Nothing herein shall affect the right of the Collateral
Agent to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against any
Guarantor in any other jurisdiction.
16. Severability. Any provision of this Guaranty which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
17. Paragraph Headings. The Paragraph headings used in
this Guaranty are for convenience of reference only and are not
to affect the construction hereof or be taken into consideration
in the interpretation hereof.
18. Interest. It is the intention of the parties hereto to
conform strictly to usury laws applicable to the Collateral Agent
and the Transactions. Accordingly, if the Transactions would be
usurious as to the Collateral Agent under applicable law, then,
notwithstanding anything to the contrary in the PIC Notes or the
Bonds, this Guaranty, or in any Transaction Document or agreement
entered into in connection with the Transactions or as security
for the Guaranteed Obligations, it is agreed as follows: (i) the
aggregate of all consideration which constitutes interest as to
the Collateral Agent under applicable law that is contracted for,
taken, reserved, charged, or received by the Collateral Agent
under the PIC Notes, this Guaranty or under any of the
Transaction Documents or agreements or otherwise in connection
with the Transactions shall under no circumstances exceed the
maximum amount allowed by such applicable law, (ii) if the
maturity of the PIC Notes or the Bonds is accelerated for any
reason, or in the event of any required or permitted prepayment,
then such consideration that constitutes interest as to the
Collateral Agent under applicable law may never include more than
the maximum amount allowed by such applicable law, and (iii)
excess interest, if any, provided for in this Guaranty or
otherwise in connection with the Transactions shall be canceled
automatically and, if theretofore paid, shall be credited by the
Collateral Agent on the principal amount of the Guaranteed
Obligations (or, to the extent that the principal amount of the
Guaranteed Obligations shall have been or would thereby be paid
in full, refunded by the Collateral Agent to Panda Funding or
PIC, as applicable). The right to accelerate the maturity of the
PIC Notes or the Bonds does not include the right to accelerate
any interest which has not otherwise accrued on the date of such
acceleration, and the Collateral Agent does not intend to collect
any unearned interest in the event of acceleration. All sums
paid or agreed to be paid to the Collateral Agent for the use,
forbearance, or detention of sums included in the Guaranteed
Obligations shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full
term of the PIC Notes or the Bonds until payment in full so that
the rate or amount of interest on account of the Guaranteed
Obligations does not exceed the applicable usury ceiling, if any.
As used in this Section, the term "applicable law" shall mean the
laws of the State of New York (or of any other jurisdiction whose
laws may be mandatorily applicable notwithstanding other
provisions of this Guaranty) or laws of the United States of
America applicable to such Person and the Transactions, which
would permit such Person to contract for, charge, take, reserve,
or receive a greater amount of interest than under New York (or
such other jurisdiction's) law.
18. Counterparts. This Guaranty may be executed in any
number of counterparts and by the different parties hereto on
separate counterparts, which when so executed and delivered
shall be an original but all of which shall together constitute
one and the same instrument.
IN WITNESS WHEREOF, the undersigned has caused this Guaranty
to be duly executed and delivered by its duly authorized officer
on the day and year first above written.
PANDA INTERHOLDING CORPORATION
By:
Name: Robert W. Carter
Title: Chairman of the Board, President
and Chief Executive Officer
BANKERS TRUST COMPANY,
as Collateral Agent
By:
Name: Marie C. Rasch
Title: Vice President
EXHIBIT 10.01
PIC LOAN AGREEMENT
by and between
PANDA FUNDING CORPORATION,
as Lender
and
PANDA INTERFUNDING CORPORATION,
as Borrower
Dated
as of
July 31, 1996
TABLE OF CONTENTS
(The Table of Contents is not a part of the Loan Agreement
but for convenience of reference only.)
Page
Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Preliminary Recitals . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I DEFINITIONS AND INTERPRETATIONS
Section 1.1. Definitions 2
Section 1.2. Interpretations 4
ARTICLE II SALE OF THE BONDS; LOAN; DISPOSITION OF LOAN PROCEEDS
Section 2.1. Issuance of the Bonds 4
Section 2.2. Loans 4
Section 2.3. Redemption of Bonds 5
ARTICLE III LOAN PAYMENTS
Section 3.1. Loan Payments 5
Section 3.2. Debt Service Fund 6
Section 3.3. Excess Funds 6
Section 3.4. Nature of Obligations of the Borrower 6
Section 3.5. Usury 7
ARTICLE IV PREPAYMENT OF THE LOAN PAYMENTS
Section 4.1. Prepayment and Payment of Loan 7
ARTICLE V SPECIAL COVENANTS
Section 5.1. Representations of Borrower; Maintenance of
Corporate Existence 8
Section 5.2. Representations of Panda Funding 8
Section 5.3. Special Covenants 8
Section 5.4 Net Agreement 9
ARTICLE VI ASSIGNMENT
Section 6.1. Consolidation, Merger and Assignment by
the Borrower 9
Section 6.2. Panda Funding's Rights of Assignment 9
ARTICLE VII EVENTS OF DEFAULT AND REMEDIES
Section 7.1. Enumeration of "Events of Default" 9
Section 7.2. Remedies 10
Section 7.3. No Remedy Exclusive 10
ARTICLE VIII GENERAL
Section 8.1 Waiver of Rights 10
Section 8.2. The Trustee; Paying Agent 11
Section 8.3. Third Party Beneficiaries 11
Section 8.4. Notices and Communications 11
Section 8.5. Counterparts, Amendments, Governing
Law, Etc. 11
Section 8.6. Term of Agreement 12
Signatures . . . . . . . . . . . . . . . . . [Signature Page -1]
Exhibit A - Form of PIC Note
PIC LOAN AGREEMENT
THIS PIC LOAN AGREEMENT, dated as of July 31, 1996 (together
with any amendments or supplements hereto, this "Agreement"), is
by and between PANDA FUNDING CORPORATION (together with any
permitted successor or assign under the Indenture referred to
below, "Panda Funding"), a Delaware corporation, as lender, and
PANDA INTERFUNDING CORPORATION (together with any permitted
successor or assign under the Indenture, the "Borrower"), a
Delaware corporation.
W I T N E S S E T H:
WHEREAS, Panda Funding has determined to issue its
$105,525,000 aggregate principal amount of 11 5/8% Pooled Project
Bonds, Series A due 2012 (the "Series A Bonds") pursuant to a
Trust Indenture dated as of July 31, 1996, together with any
amendments or supplements permitted under the Indenture (the
"Master Indenture") among Panda Funding, the Borrower and Bankers
Trust Company, a New York banking corporation, as trustee, as
supplemented by a first supplemental indenture dated as of July
31, 1996 (the "Series A Supplemental Indenture") (collectively,
the "Indenture"). Terms used but not defined herein shall have
the meanings ascribed thereto in the Indenture; and
WHEREAS, Panda Funding proposes hereby to lend the proceeds
of the Series A Bonds to the Borrower and the Borrower desires to
borrow the proceeds of the Series A Bonds upon the terms and
conditions set forth herein; and
WHEREAS, Panda Funding may, from time to time, determine to
issue additional Series of Pooled Project Bonds (collectively
with the Series A Bonds, the "Bonds") pursuant to the Indenture
and Series Supplemental Indentures relating to such additional
Bonds; and
WHEREAS, Panda Funding proposes to lend the proceeds of any
additional Series of Bonds to the Borrower and the Borrower
desires to borrow the proceeds of such additional Series of Bonds
upon the terms and conditions set forth herein; and
WHEREAS, the conditions precedent to the obligations of the
Initial Purchaser to purchase the Series A Bonds include the
execution and delivery of this Agreement; and
NOW THEREFORE, in consideration of the mutual covenants and
agreements herein contained and of the loans, extensions of
credit and commitments hereinafter referred to, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATIONS
Section 1.1. Definitions. The following terms shall have
the meanings assigned to them below whenever they are used in
this Agreement, unless the context clearly otherwise requires.
Except where the context otherwise requires, words imparting the
singular number shall include the plural number and vice versa.
"Additional Note" means each additional promissory
note issued by the Borrower to Panda Funding evidencing
a Loan relating to an additional Series of Bonds made on
behalf of Panda Funding to the Borrower under this
Agreement pursuant to Section 2.2(b) , substantially in
the form of the note attached hereto as Exhibit A.
"Agreement" is defined on page 1 of this Agreement.
"Authorized Representative" has the meaning ascribed
thereto in the Indenture.
"Bondholder" or "holder" has the meaning ascribed
thereto in the Indenture.
"Bonds" has the meaning ascribed thereto in the
Indenture.
"Borrower" is defined in the recitals of this
Agreement.
"Collateral Agent" has the meaning ascribed thereto
in the Indenture.
"Debt Service Fund" has the same meaning as that
specified in the Indenture.
"event of default" or "default" is defined in Section
10.1 of this Agreement.
"Financing Documents" means this Agreement, the
Series A Bonds, the Bonds, the Indenture, the Notes,
the PIC Guaranty, the Security Documents, and the all
other agreements, certificates, documents and
instruments ever delivered in connection with any of
such documents.
"Governmental Authority" has the meaning ascribed
thereto in the Indenture.
"Indenture" is defined in the recitals of this
Agreement.
"Initial Note" means the promissory note issued by
the Borrower to Panda Funding evidencing the Loan
relating to the Series A Bonds made on behalf of Panda
Funding to the Borrower under this Agreement pursuant to
Section 2.2(a), substantially in the form of the note
attached hereto as Exhibit A.
"Interest Payment Date" means, with respect to the
Initial Note, each date upon which an interest payment
on the Series A Bonds becomes due and payable under the
Indenture, and with respect to each Additional Note,
each date upon which an interest payment on the
applicable Series of Bonds becomes due and payable under
the Series Supplemental Indenture authorizing such
Series of Bonds.
"Loan or Loans" means each loan made by Panda
Funding to the Borrower under this Agreement.
"Loan Payments" means the payments to be made by the
Borrower pursuant to Section 3.1 of this Agreement.
"Material Adverse Change" has the meaning ascribed
thereto in the Indenture.
"Notes" means the promissory notes issued by the
Borrower payable to the order of Panda Funding
evidencing the Loans relating to the Bonds made on
behalf of Panda Funding to the Borrower under this
Agreement, substantially in the form of the note
attached hereto as Exhibit A. "Notes" shall include the
Initial Note and each Additional Note.
"outstanding" when used with respect to the Bonds
has the same meaning as that specified in the Indenture
when used with respect to the Notes has a corollary
meaning.
"Panda Funding" means the party defined as such on
page 1 of this Agreement.
"Paying Agent" has the meaning ascribed thereto in
the Indenture.
"person" means any individual, sole proprietorship,
corporation, partnership, joint venture, limited
liability company, trust, estate, unincorporated
association, institution, Governmental Authority, or
other organization or entity.
"PIC Guaranty" has the meaning ascribed thereto in
the Indenture.
"Projects" has the meaning ascribed thereto in the
Indenture.
"Series A Bonds" means the Bonds defined as such in
the recitals of this Agreement, which are issued, sold
and delivered pursuant to Article II of the Indenture.
"Trustee" means Bankers Trust Company, as trustee, a
New York banking corporation, having the powers of a
trust company, serving as trustee pursuant to the
Indenture, or any successor trustee.
"U.S. Government Obligations" has the meaning
ascribed thereto in the Indenture.
Section 1.2. Interpretations. The table of contents and
article and section headings of this Agreement are for reference
purposes only and shall not affect its interpretation in any
respect.
ARTICLE II
SALE OF THE BONDS; LOAN; DISPOSITION OF LOAN PROCEEDS
Section 2.1. Issuance of the Bonds. (a) Panda Funding
agrees that immediately following the delivery of this Agreement,
it will execute and deliver the Series A Supplemental Indenture
and issue, sell and deliver the Series A Bonds in the aggregate
principal amount of $105,525,000. The Series A Bonds shall be
limited obligations of Panda Funding and shall be payable by
Panda Funding solely as provided in the Indenture.
(b) Upon the conditions and as permitted or required by the
terms of the Indenture, Panda Funding agrees that it will, from
time to time, execute and deliver Series Supplemental Indentures
and issue, sell and deliver additional Series of Bonds. Such
additional Series of Bonds shall be the limited obligations of
Panda Funding and shall be payable by Panda Funding solely as
provided in the Indenture.
Section 2.2. Loans. (a) The proceeds of the sale of the
Series A Bonds (which proceeds shall be disbursed in accordance
with the Indenture) are hereby lent by Panda Funding to the
Borrower as the initial Loan hereunder. The initial Loan shall
be evidenced by the Borrower's creation and issuance of the
Initial Note dated as of the date of the Series A Bonds and
payable to the order of Panda Funding.
(b) The proceeds of the sale of any additional Series of
Bonds (which proceeds shall be disbursed in accordance with the
Indenture and the applicable Series Supplemental Indenture) shall
be lent by Panda Funding to the Borrower as Loans hereunder.
Such Loans shall be evidenced by the Borrower's creation and
issuance of Additional Notes dated the date of the related Series
of Bonds and payable to the order of Panda Funding.
Section 2.3. Redemption of Bonds. Panda Funding agrees
that, at the request at any time of the Borrower and if permitted
by the Indenture, it will forthwith take all steps that may be
necessary under the applicable redemption provisions of the
Indenture to effect redemption of all or part of the then
outstanding Series of Bonds, as may be specified by the Borrower,
on the redemption date designated by the Borrower and on which
such redemption may be made under such applicable provisions, and
if for any reason Panda Funding shall fail promptly to take such
steps upon the request of the Borrower, the Borrower may take
such steps on behalf and in the name of Panda Funding.
ARTICLE III
LOAN PAYMENTS
Section 3.1. Loan Payments. To repay the Loans evidenced
by the Notes, the Borrower shall, subject to the limitations of
Section 3.5 hereof, make Loan Payments in installments, so as to
provide amounts for the timely payment of the principal of and
premium, if any, and interest on the related Series of Bonds in
the amounts and at or before the opening of business on the dates
as follows: (a) on each Interest Payment Date, an aggregate
amount equal to the accrued interest coming due on such date on
all outstanding Bonds of such Series, (b) on each Principal
Payment Date, the principal amount of all outstanding Bonds of
such Series maturing on such date; (c) on each date on which any
of the Bonds of such Series are to be redeemed, the principal
amount of and premium, if any, and interest (including interest
accrued or to be accrued to such date) on the related Series of
Bonds to be redeemed on such date in accordance with the
provisions of the Indenture; and (d) on any date on which all the
Bonds or all the Bonds of any Series shall be declared to be and
shall become due and payable prior to their stated maturities
pursuant to the provisions of the Indenture, the aggregate amount
of principal, premium, if any, and interest so becoming due and
payable on all the Bonds or all the Bonds of any Series in
accordance with the terms of the Indenture. Any amount in cash
held in or concurrently paid to the Debt Service Fund or
otherwise held by the Trustee which may, pursuant to the
provisions of the Indenture, be applied to the payment of the
principal of and interest and premium, if any, on the related
Series of Bonds and which is in excess of the amount, if any,
required for payment of any past due principal of (whether by
maturity or redemption) and premium, if any, on any Bonds of such
Series theretofore matured or called for redemption and any past
due interest, if any, on the Bonds of such Series shall be
credited against the installment of the Loan Payments then
required to be made by the Borrower. If on any date of payment
referred to in clause (a), (b), (c) or (d) of this Section 3.1,
the amount in cash held in the Debt Service Fund or otherwise
held by the Trustee and available in accordance with the
provisions of the Indenture for the payment of the principal of
and interest and premium, if any, on the related Series of Bonds
shall not be sufficient to pay all principal, interest and
premium, if any, then due or overdue, the Borrower forthwith
shall also pay the amount of such deficiency on such date to the
Trustee in immediately available funds.
Section 3.2. Debt Service Fund. The Borrower shall pay
the Loan Payments required of it under this Agreement by
remitting the same directly to the Trustee for deposit in the
Debt Service Fund or by causing a transfer to be made to the Debt
Service Fund from the other Accounts and Funds (as defined in the
Indenture) as provided in the Indenture.
Section 3.3. Excess Funds. After all of the Bonds have
been retired and all interest and applicable premiums, if any,
due thereon have been paid or provision for such retirement and
payment has been made, and all compensation and expenses of the
Trustee, the Collateral Agent and any Paying Agent have been paid
or provision for such payment has been made, any excess moneys
remaining in the Accounts and Funds (other than the International
Accounts and Funds) shall forthwith be paid by the Trustee to the
Borrower in the manner prescribed by the last sentence of Section
6.1 of the Indenture.
Section 3.4. Nature of Obligations of the Borrower.
Until all of the Bonds shall be deemed to have been paid within
the meaning of Section 6.1 of the Indenture, the obligations of
the Borrower to pay the Loan Payments as provided in this
Agreement and to make all other payments required herein shall be
absolute and unconditional, irrespective of any rights of
set-off, recoupment or counterclaim the Borrower might otherwise
have against Panda Funding, the Trustee or any other person or
persons, and the Borrower will not suspend or discontinue any
such payment or (except in accordance with Article IV of this
Agreement) terminate this Agreement for any cause including,
without limiting the generality of the foregoing, any event
constituting force majeure, any acts or circumstances that may
constitute an eviction or constructive eviction, failure of
consideration, failure of title, or commercial frustration of
purpose, or any damage to or destruction of all or part of the
Projects, or the failure to obtain any permit or order from any
governmental agency which is required to be obtained in
connection with the operation of the Projects or the taking or
condemnation of title to or the use or possession of all or any
part of the Projects, or any change in the laws of the United
States, or any state, or any political subdivision thereof, or
any failure of Panda Funding to perform and observe any agreement
or covenant, whether express or implied, or to discharge any
duty, liability or obligation arising out of or connected with
this Agreement or any other agreement between the Borrower and
Panda Funding. The preceding sentence shall not be construed to
release Panda Funding from the performance of any of its
agreements contained in this Agreement, or except to the extent
provided in this Section 3.4, prevent or restrict the Borrower
from asserting any rights which it may have against Panda
Funding, the Trustee or any other persons under this Agreement or
under any provision of law or prevent or restrict the Borrower,
at its own cost and expense, from prosecuting or defending any
action or proceeding against or by third parties or taking any
other action to secure or protect its rights of purchase,
acquisition, possession and use of the Projects and its rights
under this Agreement.
Section 3.5. Usury. Notwithstanding any provision of
this Agreement to the contrary, it is hereby agreed by and
between Panda Funding and the Borrower that in no event shall the
interest contracted for, charged, received, reserved or taken in
connection with the Loans (including interest on the Notes
pursuant to Section 3.1 of this Agreement together with any other
costs or considerations that constitute interest under the law of
the State which are contracted for, charged, received, reserved
or taken pursuant to this Agreement) exceed the maximum rate of
nonusurious interest allowed under applicable law as presently in
effect and to the extent allowed by such laws as such laws may be
amended from time to time to increase such rate; and in the event
that the maturity of any Note is accelerated pursuant to Section
7.1 hereof, or redeemed in accordance with the provisions hereof
requiring mandatory redemption, then such amounts that constitute
payments of interest on the Notes, together with any costs or
considerations which constitute interest under applicable law,
may never exceed an amount which would result in payment of
interest at a rate in excess of the maximum rate of nonusurious
interest allowed by applicable law as presently in effect and to
the extent allowed by such laws as such laws may be amended from
time to time to increase such rate, and excess interest, if any,
provided for in this Agreement, the Notes or otherwise, shall be
canceled automatically as of the date of such acceleration or, if
theretofore paid, shall be credited on the principal amount of
the Notes.
ARTICLE IV
PREPAYMENT OF THE LOAN PAYMENTS
Section 4.1. Prepayment and Payment of Loan. The
Borrower may at any time deliver monies or U.S. Government
Obligations to the Trustee with instructions to the Trustee to
hold such monies or U.S. Government Obligations in the special
segregated fund referred to in Article VI of the Indenture in
connection with a discharge of the Indenture.
No payment of or on account of the Loan Payments need be
made during the term of this Agreement or thereafter when and so
long as the amount in the Debt Service Fund, together with any
other amounts then held by the Trustee and available for the
purpose, is sufficient to retire all of the Bonds then
outstanding in accordance with the Indenture, including any
applicable redemption premium on such Bonds and the amount of
interest due and thereafter to become due on the Bonds on and
prior to such retirement. However, if, subsequent to a date on
which the Borrower is not obligated to pay the Loan Payments or
any installment thereof pursuant to the preceding sentence,
losses (net of gains) shall be incurred in respect of the in
vestments in Permitted Investments as defined in the Indenture
and such net losses or any other event shall have reduced the
amounts in the Debt Service Fund, together with any other amounts
then held by the Trustee and available for the purpose, below the
amount sufficient at the time of such occurrence or other event
to redeem or pay, in accordance with the provisions of the
Indenture, on the next date on which redemption or payment is to
be effected, the principal amount of the Bonds, and the amount of
interest and premium, if any, due or to become due on the Bonds
on and prior to such redemption or payment, the Trustee shall
notify the Borrower of such fact and thereafter, the Borrower, as
and when required for purposes of such Debt Service Fund, shall
pay to the Trustee for deposit in the Debt Service Fund the
amount of any such reduction below such sufficient amount.
ARTICLE V
SPECIAL COVENANTS
Section 5.1. Representations of Borrower; Maintenance of
Corporate Existence. The Borrower represents that it is duly
incorporated and existing under the laws of the State of
Delaware, that it has duly accomplished all conditions precedent
necessary to be accomplished by it prior to issuance and delivery
of the Series A Bonds and execution and delivery of this
Agreement, that it is not in default under any agreement, in
denture or other instrument in any manner which would impair the
Borrower's ability to carry out its obligations hereunder, that
it has power to enter into the transactions contemplated by this
Agreement, that it has been duly authorized to execute and
deliver this Agreement and that it will not, except as provided
in this Section, voluntarily take any action that would result in
a Material Adverse Change.
Until all of the Bonds shall be deemed to have been paid
within the meaning of Section 6.1 of the Indenture, the Borrower
or its successor hereunder shall maintain its legal existence and
except to the extent otherwise permitted under Section 7.12 of
the Indenture.
Section 5.2. Representations of Panda Funding. Panda
Funding represents that it is duly incorporated and existing
under the laws of the State of Delaware, that it has duly
accomplished all conditions precedent necessary to be
accomplished by it prior to issuance and delivery of the Series A
Bonds and execution and delivery of this Agreement, that it is
not in default under any agreement, indenture or other instrument
in any manner which would impair the Panda Funding's ability to
carry out its obligations hereunder, that it has power to enter
into the transactions contemplated by this Agreement, that it has
been duly authorized to execute and deliver this Agreement and
that it will not, except as provided in the Section 7.12 of the
Indenture, voluntarily take any action that would result in a
Material Adverse Change.
Section 5.3. Special Covenants. Panda Funding and the
Borrower agree that all proceeds received from the sale of the
Series A Bonds or any additional Series of Bonds, as well as all
Loan Payments paid by the Borrower and other monies received by
Panda Funding pursuant to this Agreement, shall be applied solely
in the manner and for the purposes specified in this Agreement
and the Indenture. Each of Panda Funding and the Borrower
further agrees that it will observe the covenants made by it in
the Indenture.
Section 5.4 Net Agreement. This Agreement shall be
deemed and construed to be a "net agreement", and the Borrower
shall during its term pay absolutely net the Loan Payments and
all other payments required hereunder, free of any deductions,
without abatement, deduction or setoff other than those herein
expressly provided.
ARTICLE VI
ASSIGNMENT
Section 6.1. Consolidation, Merger and Assignment by the
Borrower. The Borrower shall not enter into any transaction of
merger, consolidation sale, lease, transfer or other disposition
of all or substantially all of its assets (including the Project
Portfolio, as such term is defined in the Indenture) change its
form or organization or its business or liquidate or dissolve
itself (or suffer any liquidation or dissolution) except as
provided in the Indenture.
Section 6.2. Panda Funding's Rights of Assignment. Panda
Funding may, only in accordance with the Indenture and the
Security Documents, assign this Agreement and the Notes as
security for payment of the principal of and premium, if any, and
interest on the Series A Bonds and additional Series of Bonds.
The Borrower hereby assents to such assignments and agrees that
the Trustee may exercise and enforce in accordance with the
Indenture any of the rights of Panda Funding under this Agreement
or the Notes.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1. Enumeration of "Events of Default". The
terms "event of default" or "default" shall mean, whenever they
are used in this Agreement, any one or more of the following
events:
(a) Failure by the Borrower to pay when due in
accordance with Section 3.1 of this Agreement the
portion of the Loan Payments representing payment of the
principal of and premium, if any, on the Bonds, and the
continuation of such failure for 15 or more days;
(b) Failure by the Borrower to pay when due in
accordance with Section 3.1 of this Agreement the
portion of the Loan Payments representing payment of
interest on the Bonds, and the continuation of such
failure for 15 or more days; or
(c) The occurrence of one or more of the events
specified in Section 9.1 of the Indenture.
Section 7.2. Remedies. Upon any acceleration of the
principal of the related Series of Bonds under the Indenture, all
Loan Payments with respect to the related Loan shall be
immediately due and payable under this Agreement. In addition,
whenever any event of default referred to in Section 7.1 shall
have occurred and be continuing, the Trustee, or Panda Funding
with the prior written consent of the Trustee, may take any
action at law or in equity to collect amounts then due and
thereafter to become due, or to enforce performance and
observance of any obligation, agreement or covenant of the
Borrower under this Agreement. Any amounts collected pursuant to
action taken under this Section 7.2 shall be applied in
accordance with the provisions of the Indenture.
A waiver by the Trustee of any "events of default" as that
term is defined in the Indenture, in accordance with the terms
and provisions of Section 9.7 of the Indenture, shall also
constitute a waiver of the corresponding event of default and its
consequences hereunder.
Section 7.3. No Remedy Exclusive. No remedy conferred
upon or reserved to Panda Funding or the Trustee by this
Agreement is intended to be exclusive of any other available
remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given
under this Agreement or now or hereafter existing at law or in
equity or by statute. No delay or omission to exercise any right
or power accruing hereunder shall impair any such right or power
or shall be construed to be a waiver thereof, nor shall any
single or partial exercise of any other right, power or
privilege, but every such right and power may be exercised from
time to time and as often as may be deemed expedient. In order
to entitle the Trustee to exercise any remedy reserved to it in
this Article, it shall not be necessary to give any notice other
than such notices as may be herein expressly required.
ARTICLE VIII
GENERAL
Section 8.1 Waiver of Rights. Failure by Panda Funding,
the Borrower or the Trustee to insist upon the strict performance
of any of the covenants and agreements contained in this Agreement
or to exercise any rights or remedies upon default shall not be
considered a waiver or relinquishment of the right to insist upon
and to enforce by any appropriate legal remedy a strict
compliance by the defaulting party with all of the covenants and
conditions binding on it, or of the right to exercise any such
rights or remedies if such default be continued or repeated.
Section 8.2. The Trustee; Paying Agent. For so long as
any of the Bonds and the Notes shall remain outstanding, the
Borrower covenants and agrees to pay to the Trustee (all
references in this Section 8.2 to the Trustee shall be deemed to
apply to the Trustee in its capacities as Trustee, Paying Agent
and Security Registrar) from time to time, and the Trustee shall
be entitled to, compensation for all its services rendered by it
under the Indenture and such other costs and expenses as agreed
to by the Borrower under the Indenture. Each reference herein to
the Trustee shall include any successor Trustee.
Section 8.3. Third Party Beneficiaries. This instrument
is executed in part to induce the purchase by others of the
Series A Bonds, and for the further securing of the Series A
Bonds and additional Series of Bonds, and accordingly, so long as
any Bonds are outstanding, all respective covenants and
agreements of the parties herein contained are hereby declared to
be for the benefit of the holders from time to time of the Bonds,
and may be enforced by or on behalf of such holders only by the
Trustee in accordance with the provisions of the Indenture. This
Agreement shall not be deemed to create any right of subrogation
or otherwise in any person who is not a party hereto (other than
the permitted successors and assigns of a party) and shall not be
construed in any respect to be a contract in whole or in part for
the benefit of any third party (other than the permitted
successors or assigns of a party hereto), except in each case the
holders from time to time of the Bonds and the Trustee, but such
rights shall be enforceable only as provided in the Indenture.
Section 8.4. Notices and Communications. Any request,
demand, authorization, direction, notice, consent or waiver
provided or permitted under this Agreement to be made upon, given
or furnished to, or filed with the Borrower or Panda Funding
shall be so made upon, given or furnished to, or filed with, such
parties hereto in accordance with Section 1.5 of the Indenture.
Section 8.5. Counterparts, Amendments, Governing Law,
Etc. This Agreement (a) may be executed in several counterparts,
each of which shall be deemed an original, and all of which shall
constitute one and the same instrument; (b) except as otherwise
provided in this Agreement or in the Indenture, may be modified
or amended only by an instrument in writing signed by an
Authorized Representatives of all parties (or their respective
successors or assigns) and, so long as any Series of Bonds are
outstanding, only with the consent of the Trustee given in
accordance with the applicable provisions of the Indenture; and
(c) shall be governed, in all respects including validity,
interpretation and effect by, and shall be enforceable in
accordance with, the law of the State of New York. The parties
agree that they will appropriately amend this Agreement to
increase the payments to be made by the Borrower hereunder if for
any reason such payments, if made, are not sufficient to pay the
principal of and interest and premium, if any, on the Bonds as
the same become due but, in no event shall the Borrower be
obligated to pay interest on the principal amount of the Loan in
excess of the maximum amount allowed by law.
The section and other headings contained in this Agreement
are for reference purposes only and shall not control or affect
its interpretation in any respect. In the event that any clause
or provision of this Agreement shall be held to be invalid by any
court of competent jurisdiction, the invalidity of such clause or
provision shall not affect any of the remaining provisions
hereof.
Section 8.6. Term of Agreement. Except as provided in
Article IV of this Agreement, this Agreement shall remain in full
force and effect from the date of execution and delivery hereof
until the Indenture has been discharged in accordance with the
provisions thereof; provided, however, that the provisions of
Sections 8.2 and the last paragraph of Section 4.1 of this
Agreement shall survive any expiration or termination of this
Agreement.
IN WITNESS WHEREOF, Panda Funding and the Borrower have
caused this Agreement to be signed in their behalf by their duly
authorized representatives as of the date set forth above.
PANDA FUNDING CORPORATION
By:_____________________________
Name: Robert W. Carter
Title: Chairman of the Board,
President and Chief
Executive Officer
PANDA INTERFUNDING CORPORATION
By:________________________________
Name: Robert W. Carter
Title: Chairman of the Board,
President and Chief
Executive Officer
Exhibit A
FORM OF NOTE
NOTICE: This Note has been endorsed, pledged and assigned by
PANDA FUNDING CORPORATION to BANKERS TRUST COMPANY, as trustee,
in its capacity as the Collateral Agent under the Collateral
Agency Agreement (as defined in the Indenture referred to below),
and this Note is held in trust by such Collateral Agent.
$___________________ [Date of issuance]
FOR VALUE RECEIVED, PANDA INTERFUNDING CORPORATION, a
Delaware corporation (the "Borrower"), does hereby promise to pay
to the order of the PANDA FUNDING CORPORATION (hereinafter called
the "Panda Funding") at the principal corporate trust office of
BANKERS TRUST COMPANY, as trustee, a New York banking corporation
(hereinafter called the "Trustee"), or any successor trustee
acting as such under that certain Trust Indenture (the
"Indenture") dated as of July 31, 1996, among Panda Funding, the
Borrower and the Trustee in lawful money of the United States of
America, the principal sum of ____________________________
DOLLARS ($____________), and to pay interest on the unpaid
principal amount hereof, in like money, at such office in the
amounts specified in Section 3.1 of the Loan Agreement
hereinafter referenced.
ALL SUMS paid hereon shall be applied first to the
satisfaction of accrued interest and the balance to the unpaid
principal.
Principal on this Note is due and payable on each Principal
Payment Date and at maturity in the amounts and on the dates
specified in Section 3.1 of the Loan Agreement. Interest on this
Note is due and payable on each Interest Payment Date and at
maturity in the amounts and at the rate specified in Section 3.1
of the Loan Agreement.
THIS NOTE is [the Initial Note] [an Additional Note]
referred to in that certain Loan Agreement dated as of July 31,
1996 by and between the Borrower and Panda Funding, and is
subject to, and is executed in accordance with, all of the terms,
conditions and provisions thereof, including those respecting
prepayment and the acceleration of maturity and is further
subject to all of the terms, conditions and provisions of the
Indenture, all as provided in the Loan Agreement.
THIS NOTE is a contract made under and shall be construed in
accordance with and governed by the laws of the State of New
York.
PANDA INTERFUNDING CORPORATION
By:________________________________
Name:
Title:
FORM OF ENDORSEMENT
(To be set forth on back of PIC Note)
Pay to the order of Bankers Trust Company, as Collateral
Agent, without recourse or warranty, except warranty of good
title and warranty that Panda Funding has not assigned this Note
to any person other than the Collateral Agent and that the
principal amount of $_______________ remains unpaid under this
Note.
PANDA FUNDING CORPORATION
By_______________________________
Name:
Title:
EXHIBIT 10.02
L O A N A G R E E M E N T
Between
PANDA INTERFUNDING CORPORATION,
as Lender
and
PANDA CAYMAN INTERFUNDING COMPANY,
as Borrower
Dated as July 31, 1996
TABLE OF CONTENTS
ARTICLE 1 GENERAL TERMS 2
Section 1.01 Terms Defined Above 2
Section 1.02 Certain Definitions 2
Section 1.03 Accounting Principles 7
ARTICLE 2 AMOUNT AND TERMS OF LOAN 7
Section 2.01 Loans and Notes 7
Section 2.02 Interest Rate 7
Section 2.03 Computation 7
Section 2.04 Prepayments; Redemptions 8
Section 2.05 Payment Procedure 8
Section 2.06 Business Days 8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES 9
Section 3.01 Corporate Existence. 9
Section 3.02 Corporate Power and Authorization 9
Section 3.03 Binding Obligations 9
Section 3.04 No Consent; Legal Bar or Resultant Lien 9
Section 3.05 Titles, etc. 10
Section 3.06 Defaults 10
Section 3.07 Use of Proceeds 10
Section 3.08 Compliance with Law 10
ARTICLE 4 AFFIRMATIVE COVENANTS 11
Section 4.01 Maintenance 11
Section 4.02 Further Assurances 11
Section 4.03 Performance of Obligations 11
Section 4.04 Reimbursement of Expenses 11
ARTICLE 5 NEGATIVE COVENANT 12
ARTICLE 6 EVENTS OF DEFAULT 12
Section 6.01 Events 12
Section 6.02 Remedies 12
Section 6.03 Right of Set-off 12
ARTICLE 7 CONDITIONS OF LENDING 13
Section 7.01 Loans 13
ARTICLE 8 MISCELLANEOUS 14
Section 8.01 Notices 14
Section 8.02 Amendments and Waivers 14
Section 8.03 Invalidity 14
Section 8.04 Survival of Agreements 14
Section 8.05 Successors and Assigns 14
Section 8.06 Renewal, Extension or Rearrangement 14
Section 8.07 Cumulative Rights 14
Section 8.08 Singular and Plural 15
Section 8.09 Construction 15
Section 8.10 Interest 15
Section 8.11 Entire Agreement 16
Section 8.12 Exhibits 16
Section 8.13 Titles of Articles, Sections and Subsections 16
Section 8.14 Counterparts 16
Exhibit A - Form of Note
LOAN AGREEMENT
THIS LOAN AGREEMENT is made and entered into as of July 31,
1996, by and between PANDA CAYMAN INTERFUNDING COMPANY, a Cayman
Islands exempted company, with a principal address of in care of
Maples and Calder, Ugland House, South Church Street, Grand
Cayman, Cayman Islands, British West Indies (the "Borrower"), and
PANDA INTERFUNDING CORPORATION, a Delaware corporation, with
offices at 4100 Spring Valley Road, Suite 1001, Dallas, Texas
75244 ("PIC").
RECITALS
WHEREAS, PIC has formed Panda Funding Corporation, a Delaware
corporation ("Panda Funding") as a special purpose, wholly-owned
finance subsidiary to issue debt securities constituting the
Bonds described below;
WHEREAS, Panda Funding, PIC and Bankers Trust Company, as
Trustee, a New York banking corporation (the "Trustee"), (as
trustee for the holders of the Bonds described below) are party
to an Indenture dated as of July 31, 1996 (as amended,
supplemented or otherwise modified and in effect from time to
time, the "Indenture"), providing, subject to the terms and
conditions thereof, for the issuance by Panda Funding from time
to time of certain Pooled Project Bonds (the "Bonds"), including,
without limitation, $105,525,000 initial aggregate principal
amount of 11 5/8% Pooled Project Bonds, Series A due 2012 (the
"Series A Bonds");
WHEREAS, Panda Funding will loan the entire proceeds of the
issuance of the Series A Bonds (the "PIC Loan") to PIC, which PIC
Loan will be made under a Loan Agreement dated of even date with
the Indenture by and between Panda Funding and PIC (the "PIC Loan
Agreement") and evidenced by a promissory note (the "Initial PIC
Note") of PIC dated July 31, 1996, and payable to Panda Funding;
WHEREAS, Panda Funding may from time to time loan the proceeds
of subsequent series of Bonds (the "Additional PIC Loans") to PIC,
which Additional PIC Loans will be made under the PIC Loan
Agreement and evidenced by promissory notes (the "Additional PIC
Notes") of PIC payable to Panda Funding;
WHEREAS, PIC may from time to time, on-lend the proceeds of the
PIC Loan or the Additional PIC Loans to the Borrower pursuant to
the terms of this Agreement;
WHEREAS, to induce the purchase of the Bonds by the Holders,
which Borrower acknowledges is of substantial benefit to it (as a
potential ultimate recipient of certain proceeds of the Bonds via
loans made by PIC to it hereunder) and of substantial benefit to
its parent, PIC, as the recipient of the PIC Loan evidenced by
the Initial PIC Note and pursuant to Additional PIC Loans
evidenced by Additional PIC Notes, of the proceeds of the
issuance of the Bonds, Borrower has agreed to enter into this
Agreement;
NOW THEREFORE, in consideration of the mutual covenants and
agreements herein contained and of the loans hereinafter referred
to, the Borrower and PIC agree as follows:
ARTICLE 1
GENERAL TERMS
Section 1.01 Terms Defined Above. As used in this Loan
Agreement, the terms "Borrower" and "PIC" and the capitalized
terms defined in the Recitals shall have the meanings indicated
above. Certain other capitalized terms used herein that are not
defined herein shall have the meanings given such terms in the
Indenture.
Section 1.02 Certain Definitions. As used in this Agreement,
the following terms shall have the following meanings, unless the
context otherwise requires:
"Agreement" shall mean this Loan Agreement, as the same may
from time to time be amended or supplemented.
"Business Day" shall mean a day other than (i) a Saturday or
Sunday or (ii) a day on which commercial banks in New York,
New York, Dallas Texas, the Cayman Islands or any city in
which the Trustee's corporate trust office, the Collateral
Agent's principal office or the International Collateral
Agent's principal office is located, are authorized or
required to be closed.
"Capital Lease" shall mean any lease of property, real or
personal, which in accordance with GAAP, would be required
to be capitalized on the balance sheet of the lessee
thereof.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Debt" of any Person shall mean at any date, without
duplication, (i) all obligations of such Person for borrowed
money, (ii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase
price of property or services, (iv) all obligations under
Capital Leases of such Person, (v) all Debt of others
secured by a Lien on any asset of such Person, whether or
not such Debt is assumed by such Person, (vi) all Debt of
others to the extent Guaranteed by such Person, (vii) all
obligations under letters of credit issued for the account
of such Person, (viii) all obligations of such Person under
trade or bankers' acceptances and (ix) all obligations of
such Person under any agreements or options providing for
swaps, ceiling rates, floor rates, contingent participation
or other hedging mechanisms with respect to the payment of
interest.
"Default" shall mean the occurrence of any of the events
specified in Section 6.01, whether or not any requirement
for notice or lapse of time or other condition precedent has
been satisfied.
"Event of Default" shall mean the occurrence of any of the
events specified in Section 6.01, provided that any
requirement for notice or lapse of time or any other
condition precedent has been satisfied.
"Excepted Liens" shall mean: (i) Liens created or otherwise
expressly permitted or required to exist by this Agreement
or any other Transaction Document (as defined in the
Indenture); (ii) Liens for taxes, assessments, charges,
levies, claims or obligations which are either not yet due,
are due but payable without penalty or are the subject of a
Good Faith Contest by the Borrower; (iii) legal or equitable
encumbrances deemed to exist by reason of the existence of
any litigation or other legal proceeding if the same are the
subject of a Good Faith Contest; (iv) with respect to
Property of the Borrower or any Subsidiary or the Project
Distributions (as defined in the Indenture) of the Borrower
or any Subsidiary, Liens required or permitted to exist by
the Project Agreements if such Liens were required to exist
or existed (A) on the date the Series A Bonds are issued or
(B) with respect to Liens upon or with respect to Property
or the Project Distributions relating to a particular
Project (as defined in the Indenture), at the time PIC or
any PIC Entity (as defined in the Indenture) makes its
initial capital contribution or purchase price payment with
respect to such Project or receives interests in such
Project acquired subsequent to such initial contribution or
payment, or any replacement or successor Lien created in
connection with the refinancing of any Project, provided
such replacement or successor Lien shall not secure any
monetary obligation materially greater than the Lien it
replaces or succeeds or encumber any Property not subject to
the Lien it replaces or succeeds unless (and only to the
extent that) the provisions for incurring or refinancing
Project Debt (as defined in the Indenture) contained in
Section 7.23 of the Indenture have been satisfied; (v) Liens
in connection with worker's compensation, unemployment
insurance or other social security or pension obligations;
and (vi) with respect to Property of, or Project
Distributions to, the Borrower or any of its Subsidiaries,
Liens other than to secure Debt, provided such Lien could
not reasonably be expected to (A) result in a Material
Adverse Change or (B) materially diminish the value of, or
the security offered by, the Property subject to such Lien.
"GAAP" shall mean, as of any date of determination,
generally accepted accounting principles then in effect in
the United States of America.
"GAAP Reserves" shall mean, with respect to any item which
is the subject of a Good Faith Contest, accounting reserves
which are established and maintained pursuant to GAAP.
"Good Faith Contest" means the contest of an item if: (i)
the item is diligently contested in good faith by
appropriate proceedings timely instituted, GAAP Reserves are
established and maintained to the extent required by GAAP
with respect to the contested item and, during the period of
such contest, the enforcement of any contested item is
effectively stayed; or (ii) the failure to pay or comply
with the contested item during the period of such contest
could not reasonably be expected to result in a Material
Adverse Change.
"Government Rule" shall mean any statute, law, regulation,
ordinance, rule, judgment, order, decree, permit,
concession, grant, franchise, code, license, directive,
guideline, policy or rule of common law, requirement of, or
other governmental restriction or any judicial or
administrative interpretation thereof by a Governmental
Authority, including any judicial or administrative order,
consent decree or judgment or similar form of decision of or
determination by, or any interpretation or administration of
any of the foregoing by, any Governmental Authority, whether
now or hereafter in effect.
"Guaranty" by any Person shall mean any guaranty, surety,
note or other obligation, contingent or otherwise, of such
Person directly or indirectly guaranteeing in any manner any
Debt or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation,
direct or indirect, contingent or otherwise, of such Person:
(i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation
(whether arising by virtue of partnership arrangements, by
agreement to keep-well, to purchase assets, goods, notes or
services, to take-or-pay, or to maintain financial statement
conditions or otherwise); (ii) entered into for the purpose
of assuring in any other manner the obligee of such Debt or
other obligation of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in
part); or (iii) to reimburse any Person for the payment by
such Person under any letter of credit, surety, note or
other guaranty issued for the benefit of such other Person,
but excluding (x) endorsements for collection or deposit in
the ordinary course of business or (y) indemnity or hold
harmless provisions included in contracts entered into in
the ordinary course of business. The term "Guaranty" or
"Guaranteed" used as a verb shall have a correlative
meaning.
"Highest Lawful Rate" shall mean the lesser of 15% per annum
and the maximum nonusurious interest rate, if any, that at
any time or from time to time may be contracted for, taken,
reserved, charged or received on any Note or on other
Indebtedness, as the case may be, under the law of the
State of New York (or the law of any other jurisdiction
whose laws may be mandatorily applicable notwithstanding
other provisions of this Agreement), or law of the United
States of America applicable to PIC and the Transactions
which would permit PIC to contract for, charge, take,
reserve or receive a greater amount of interest than under
New York (or such other jurisdiction's) law.
"Indebtedness" shall mean any and all amounts owing or to be
owing by the Borrower to PIC in connection with the Notes or
any Security Instruments, including this Agreement.
"Lien" shall mean any mortgage, pledge, security interest,
hypothecation, collateral assignment, lien (statutory or
other), or preference, priority or other security agreement
or payment arrangement or encumbrance of any kind or nature
whatsoever which has the practical effect of constituting a
security interest (including, without limitation, any
conditional sale or other title retention agreement, any
financing lease having substantially the same economic
effect as any of the foregoing, and the filing of any
financing statement or similar instrument under the Uniform
Commercial Code of the State of New York or comparable law
of any jurisdiction, domestic or foreign).
"Loan or Loans" shall mean any loan or loans made by PIC to
the Borrower pursuant to the terms of this Agreement and
evidenced by the Notes.
"Material Adverse Change" shall mean (i) a material adverse
change in the business, results of operations, condition
(financial or otherwise) or property of the Borrower, in
each case to the extent that such change could be reasonably
expected to have a material adverse effect on the Borrower
or the Borrower's ability to make payment on the Notes or
(ii) any event or occurrence of whatever nature, which in
any case has a material adverse effect on the ability of the
Borrower individually or of the Borrower on a consolidated
basis to carry out its business as at the date of this
Agreement or as proposed at the date of this Agreement to be
conducted or meet its obligations under the Notes, this
Agreement or the other Security Instruments on a timely
basis.
"Notes" shall mean the promissory note or notes (whether one
or more) of the Borrower described in Section 2.01 and being
respectively in the form of note attached as Exhibit A,
together with any and all renewals, extensions for any
period, increases or rearrangements thereof.
"Person" shall mean any individual, corporation,
partnership, joint venture, association, joint stock
company, trust, unincorporated organization, government or
any agency or political subdivision thereof, or any other
form of entity.
"Property" shall mean any interest in any kind of property
or asset, whether real, personal or mixed, or tangible or
intangible.
"Security Instruments" shall mean this Agreement, the
agreements or instruments described or referred to in
Section 7.01(c) and any and all other agreements or
instruments now or hereafter executed and delivered by the
Borrower or any other Person in connection with, or as
security for the payment or performance of, the Loans, the
Notes or this Agreement, as such agreements may be amended
or supplemented from time to time.
"Subsidiary" shall mean, in respect of any Person, a
corporation, partnership, limited liability company or other
entity, (i) at least a 50% (direct or indirect) ownership or
equivalent interest of the outstanding Voting Stock of which
are owned, directly or indirectly, by such Person or (ii)
(a) at least a 25% (direct or indirect) ownership or
equivalent interest of the outstanding Voting Stock are
owned, directly or indirectly, by such Person and (b) such
Person exercises a controlling influence over the management
and policies with respect to such corporation, partnership,
limited liability company or other entity, directly or
indirectly, whether through the ownership of Voting Stock,
by contract or otherwise, provided that no other entity has
greater control than such Person over the management and
policies of such corporation, partnership, limited liability
company or other entity.
"Transactions" shall mean the transactions provided for in
and contemplated by this Agreement, the other Security
Instruments and the Notes.
"Voting Stock" shall mean (i) all capital stock of a
corporation normally entitled to vote in the election of
directors or other governing body of such corporation
(without regard to any contingency, whether or not such
contingency has occurred) and (ii) in respect of a
partnership or other entity that is not a corporation, all
ownership interests therein normally entitled to vote in the
election of persons analogous to directors or, if there are
no analogous persons, then normally entitled to participate
in the direction of the management of such entity (without
regard to any contingency, whether or not such contingency
has occurred).
Section 1.03 Accounting Principles. Where the character or
amount of any asset or liability or item of income or expense is
required to be determined or any consolidation or other account
ing computation is required to be made for the purposes of this
Agreement, this shall be done in accordance with GAAP applied on
a basis consistent, except where such principles are inconsistent
with the requirements of this Agreement.
ARTICLE 2
AMOUNT AND TERMS OF LOAN
Section 2.01 Loans and Notes. Subject to the terms and
conditions and relying on the representations and warranties
contained in this Agreement, PIC agrees to make from time to time
Loans to the Borrower out of the proceeds of the Initial PIC Loan
and Additional PIC Loans. Each Loan made by PIC to the Borrower
hereunder shall be evidenced by the Borrower's issuance,
execution and delivery of a Note dated the date of such Loan and
in the form set forth as Exhibit A attached hereto. The payment
terms of each Note shall provide for payments of interest and
principal upon the same terms as the PIC Loan providing the
proceeds for such Loan and in such amounts necessary to reflect
the pro rata portion that such Loan constitutes of the
applicable PIC Loan. The terms of each Loan shall provide for
payments sufficient to allow PIC to make payments of interest and
principal due and owing on the applicable PIC Note to Panda
Funding. It is the intent of PIC and the Borrower that payments
made with respect to any Note issued and delivered hereunder
shall be ultimately used to retire the indebtedness evidenced by
the corresponding Series of Bonds issued by Panda Funding under
the Indenture.
Section 2.02 Interest Rate. The Notes shall bear interest
from the date thereof until maturity at the rate set forth in such
Notes (but in no event to exceed the Highest Lawful Rate).
Section 2.03 Computation. All payments of interest shall be
computed on the per annum basis of a year of 365 or 366 days, as
the case may be, and for the actual number of days (including the
first day but excluding the last day) elapsed.
Section 2.04 Prepayments; Redemptions. The Borrower shall not
be permitted to prepay the principal amount of the Notes out
standing hereunder at any time in whole or in part, except that
the Borrower shall: (a) make mandatory prepayments on the Notes
outstanding hereunder to correspond with any mandatory
prepayments required to be made by PIC on the applicable Initial
PIC Loan or Additional PIC Loans pursuant to the PIC Loan
Agreement and (b) on the first Business Day of each month, pay to
PIC an amount equal to the lesser of (i) the amount on deposit in
the International Project Account, as defined in the Indenture,
and (ii) the amount of principal due and payable on any
outstanding Note (including accrued interest thereon and any past
due amounts) on the payment date for regularly scheduled
installments of principal or interest thereon next following the
day immediately preceding such monthly prepayment date
immediately the first Business Day of such month. With respect
to prepayments made pursuant to Section 2.04(b), the Borrower
shall pay to PIC on the regularly scheduled payment date for
payments of principal and interest on the applicable Notes a
prepayment premium in an amount equal to the difference between
the amount of interest that would have accrued on such Notes
during such period if such prepayments had not been made and the
actual amount of interest paid as a component of such
prepayments.
In addition, upon the occurrence of an Event of Default as
defined in the Indenture, PIC shall have the right, but not the
obligation, to require that the Borrower make a redemption of the
outstanding principal balance of the Notes, plus all accrued
interest thereon, upon Borrower's receipt of written notice from
PIC electing such right of redemption.
Section 2.05 Payment Procedure. All payments and prepayments
made by the Borrower under the Notes or this Agreement shall be
made by making, or causing to be made, such transfers of sums on
deposit in the International Project Account in the manner set
forth in, and as required by, Section 4.2 of the Indenture.
After all of the Bonds of any Series have been retired and all
interest and applicable premiums, if any, due thereon have been
paid or provision for such retirement and payment has been made,
and all compensation and expenses of the Trustee, the Collateral
Agent (as defined in the Indenture) and any Paying Agent (as
defined in the Indenture) have been paid or provision for such
payment has been made, any excess moneys remaining in the
International Accounts and Funds shall forthwith be paid by the
Trustee to PIC in the manner prescribed by the last sentence of
Section 6.1 of the Indenture.
Section 2.06 Business Days. If the date for any payment or
prepayment with respect to any Note or this Agreement falls on a
day which is not a Business Day, then for all purposes of the
Notes and this Agreement the same shall be deemed to have fallen
on the immediately preceding Business Day.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
In order to induce PIC to enter into this Agreement, the Borrower
represents and warrants to PIC (which representations and
warranties will survive the delivery of the Notes and the making
of the Loans thereunder) that:
Section 3.01 Corporate Existence. The Borrower is an exempted
company duly organized and validly existing under the laws of the
Cayman Islands. The Borrower has full power, authority and legal
right to enter into this Agreement and perform hereunder. The
Borrower is duly qualified as a foreign corporation in all
jurisdictions wherein the Property owned or the business
transacted by it makes such qualification necessary.
Section 3.02 Corporate Power and Authorization. The Borrower
is duly authorized and empowered to create and issue the Notes;
and the Borrower is duly authorized and empowered to execute,
deliver and perform the Security Instruments, including this
Agreement, to which it is a party; and all corporate action on
the Borrower's part requisite for the due creation and issuance
of the Notes and for the due execution, delivery and performance
of the Security Instruments, including this Agreement, to which
the Borrower is a party has been duly and effectively taken.
Section 3.03 Binding Obligations. This Agreement does, and
the Notes and other Security Instruments to which the Borrower is
a party upon their creation, issuance, execution and delivery will,
constitute the legal, valid and binding obligation of the
Borrower enforceable against the Borrower in accordance with its
terms except as enforceability may be limited by applicable
bankruptcy, insolvency, moratorium or other similar laws
affecting creditor's rights generally and except as
enforceability may be limited by general principles of equity
(whether considered in a suit at law or in equity).
Section 3.04 No Consent; Legal Bar or Resultant Lien.
No authorization, consent, approval or other action by, and no
notice to or filing with, any Governmental Authority or
regulatory body is required that has not been obtained for the
due execution, delivery and performance by the Borrower of this
Agreement, the Notes, and the Security Instruments.
The execution, delivery and performance of this Agreement,
the Notes and the Security Instruments will not (i) require any
consent or approval of the Board of Directors or stockholders of
the Borrower that has not been obtained; (ii) violate the
provisions of the Borrower's Memorandum of Association or
Articles of Association; (iii) violate the provisions of any law
(including, without limitation, any usury law), regulation or
order of any Governmental Authority applicable to the Borrower;
(iv) conflict with, result in a breach or constitute a default
under any agreement relating to the management or affairs of the
Borrower, or any indenture or loan or credit agreement or any
other material agreement, lease or instrument to which the
Borrower is a party or by which the Borrower or any of their
material properties may be bound; or (v) result in or create any
Lien (other than Excepted Liens) under, or require any consent
under, any indenture or loan or credit agreement or any other
material agreement, instrument or award of any Governmental
Authority binding upon the Borrower or any of its properties.
Section 3.05 Titles, etc. The Borrower has good title to
its (individually or in the aggregate) Properties, free and clear
of all Liens except (i) Liens and minor irregularities in title
which do not materially interfere with the occupation, use and
enjoyment by the Borrower of any of its Properties in the normal
course of business as presently conducted or materially impair
the value thereof for such business, or (ii) Excepted Liens and
Liens otherwise permitted or contemplated by this Agreement or
the other Security Instruments.
Section 3.06 Defaults. The Borrower is not in default nor
has any event or circumstance occurred which, but for the passage
of time or the giving of notice, or both, would constitute a default
(in any respect which would have a Material Adverse Change) under
any loan or credit agreement, indenture, mortgage, deed of trust,
security agreement or other agreement or instrument evidencing or
pertaining to any Debt of the Borrower, or under any material
agreement or other instrument to which the Borrower is a party or
by which the Borrower is bound. No Default hereunder has
occurred and is continuing.
Section 3.07 Use of Proceeds. The Borrower will use
the proceeds of the Loans and Notes to make loan or contribute equity
to non-U.S. electric generation projects (including businesses
substantially related thereto, such as a steam host affiliated
therewith), to pay expenses of the Borrower and, to the extent
that proceeds are thereafter available, to make loans to non-U.S.
Affiliates (as defined in the Indenture) of Panda Energy
International, Inc. for use in non-U.S. electric generation
projects (including businesses substantially related thereto,
such as a steam host affiliated therewith).
Section 3.08 Compliance with Law. The Borrower:
(a) is not in violation of any Government Rule; or
(b) has not failed to obtain any license, permit, franchise
or other governmental authorization necessary to the
ownership of any of its Properties or the conduct of its
business;
which violation or failure would have (in the event such
violation or failure were asserted by any Person through
appropriate action) a Material Adverse Change.
ARTICLE 4
AFFIRMATIVE COVENANTS
The Borrower will at all times comply with the covenants
contained in this Article 4, from the date hereof and for so long
as any part of the Indebtedness is outstanding.
Section 4.01 Maintenance. The Borrower will (i) maintain
its legal existence, rights and franchises; (ii) observe and comply
with all Government Rules; and (iii) maintain its Properties (and
any Properties leased by or consigned to it or held under title
retention or conditional sales contracts) in good and workable
condition at all times and make all repairs, replacements,
additions, betterments and improvements to its Properties as are
needful and proper so that the business carried on in connection
therewith may be conducted properly and efficiently at all times.
Section 4.02 Further Assurances. The Borrower will cure
promptly any defects in the creation and issuance of the Notes
and the execution and delivery of the Security Instruments,
including this Agreement. The Borrower will promptly execute and
deliver to PIC, or its successor or assigns, upon request all
such other and further documents, agreements and instruments (or
cause any of its Subsidiaries to take such action) in compliance
with or accomplishment of the covenants and agreements of the
Borrower in the Security Instruments, including this Agreement,
or to further evidence and more fully describe the collateral
intended as security for the Notes, or to correct any omissions
in the Security Instruments, or more fully to state the security
obligations set out herein or in any of the Security Instruments,
or to perfect, protect or preserve any Liens created pursuant to
any of the Security Instruments, or to make any recordings, to
file any notices, or obtain any consents, all as may be necessary
or appropriate in connection therewith.
Section 4.03 Performance of Obligations. The Borrower will
pay the Notes according to the reading, tenor and effect thereof
(subject to Section 6.01 hereof); and the Borrower will do and
perform every act and discharge all of the obligations provided
to be performed and discharged by the Borrower under the Security
Instruments, including this Agreement, at the time or times and
in the manner specified.
Section 4.04 Reimbursement of Expenses. The Borrower will,
upon request, promptly reimburse PIC or the holder of the Notes
for all amounts expended, advanced or incurred by PIC or such
holder to satisfy any obligation of the Borrower under this
Agreement or any other Security Instrument, or to collect the
Notes, or to enforce the rights of PIC under this Agreement or
any other Security Instrument, which amounts will include all
court costs, attorneys' fees (including, without limitation, for
trial, appeal or other proceedings), fees of auditors and
accountants, and investigation expenses reasonably incurred by
the PIC or such holder in connection with any such matters.
ARTICLE 5
NEGATIVE COVENANT
From the date hereof and for so long as any part of the
Indebtedness is outstanding, the Borrower will not permit the
proceeds of the Notes to be used for any purpose other than those
permitted by Section 3.07.
ARTICLE 6
EVENTS OF DEFAULT
Section 6.01 Events. It shall constitute an Event of Default
under this Agreement if default is made in the payment or
prepayment when due of any installment of principal or interest
on the Notes or of any fee provided for herein or other
Indebtedness; provided, however, that any failure to make
payments or prepayments when due as required by this Agreement
(other than redemptions pursuant to the last sentence of Section
2.04) shall not be an Event of Default hereunder if there are no
funds on deposit in the International Project Account as of such
date (as defined in the Indenture).
Section 6.02 Remedies. Upon the occurrence and at any time
during the continuance of any other Event of Default specified in
Section 6.01, PIC may by written notice to the Borrower
(i) declare the entire principal amount of all Indebtedness then
outstanding together with interest then accrued thereon to be
immediately due and payable without presentment, demand, notice
of intent to accelerate, notice of acceleration, protest, notice
of protest or dishonor or other notice of default of any kind,
all of which are hereby expressly waived by the Borrower, and/or
(ii) terminate the lending obligations, if any, of PIC hereunder.
Section 6.03 Right of Set-off. Upon the occurrence and during
the continuance of any Event of Default, or if the Borrower
becomes insolvent, however evidenced, PIC is hereby authorized at
any time and from time to time, without notice to the Borrower
(any such notice being expressly waived by the Borrower), to set-
off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebted
ness at any time owing by PIC to or for the credit or the account
of the Borrower against any and all of the Indebtedness of the
Borrower, irrespective of whether or not PIC shall have made any
demand under this Agreement or the Notes and although such
obligations may be unmatured. PIC agrees promptly to notify the
Borrower after any such set-off and application, provided that
the failure to give such notice shall not affect the validity of
such set-off and application. The rights of PIC under this
Section are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which PIC may have.
ARTICLE 7
CONDITIONS OF LENDING
The obligations of PIC to make the Loans pursuant to this
Agreement are subject to the conditions precedent stated in this
Article 7.
Section 7.01 Loans. The obligation of PIC to make the Loans
under this Agreement is subject to the following conditions
precedent wherein each document to be delivered to PIC shall be
in form and substance satisfactory to it:
(a) Notes - the Borrower shall have duly and validly
issued, executed and delivered the applicable Note to PIC
evidencing the Debt of such Loan;
(b) Secretary's Certificate - PIC shall have received a certificate
of the Secretary or Assistant Secretary of the Borrower setting
forth resolutions of its board of directors with respect to the
authorization of such Note, this Agreement and any other Security
Instruments provided herein and the officers of the Borrower
authorized to sign such instruments, and specimen signatures of
the officers so authorized;
(c) No Event of Default - the fact that immediately after
such Loan, no Event of Default shall have occurred and be
continuing;
(d) Representations and Warranties - the fact that the representations
and warranties of the Borrower contained in this Agreement or any
other Security Instrument (other than those representations and
warranties which are by their terms limited to the date of the
agreement in which they are initially made) are true and correct
in all material respects on and as of the date of such loan; and
(e) Proceeds of PIC Loans - PIC shall have received the
proceeds of each applicable PIC Loan from Panda Funding
constituting the proceeds of a Series of Bonds relating to
the Loan or Loans made hereunder.
Each borrowing hereunder shall be deemed to be a representation
and warranty by the Borrower on the date of such borrowing as to
the facts specified in Subsections (c) and (d) of this Section.
ARTICLE 8
MISCELLANEOUS
Section 8.01 Notices. Any notice required or permitted to
be given under or in connection with this Agreement, the other
Security Instruments (except as may otherwise be expressly
required therein) or the Notes shall be in accordance with the
terms of Section 1.5 of the Indenture; provided, however, that
the address for the Borrower for such purpose shall be its
address shown at the beginning of this Agreement, or to such
other address or to such individual's or department's attention
as it may have furnished PIC in writing.
Section 8.02 Amendments and Waivers. Any provision of
this Agreement, the other Security Instruments or the Notes may
be amended or waived if, but only if, such amendment or waiver is in
writing and is signed by the Borrower and PIC.
Section 8.03 Invalidity. In the event that any one or more
of the provisions contained in the Notes, this Agreement or in any
other Security Instrument shall, for any reason, be held invalid,
illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other
provision of the Notes, this Agreement or any other Security
Instrument.
Section 8.04 Survival of Agreements. All representations
and warranties of the Borrower herein or in the other Security
Instruments, and all covenants and agreements herein not fully
performed before the effective date or dates of this Agreement
and of the other Security Instruments, shall survive such date or
dates.
Section 8.05 Successors and Assigns. All covenants and
agreements contained by or on behalf of the Borrower in the
Notes, this Agreement and any other Security Instrument shall
bind its successors and assigns and shall inure to the benefit of
PIC and its successors and assigns.
Section 8.06 Renewal, Extension or Rearrangement. All
provisions of this Agreement and of any other Security
Instruments relating to the Notes or other Indebtedness shall
apply with equal force and effect to each and all promissory
notes hereinafter executed which in whole or in part represent a
renewal, extension for any period, increase or rearrangement of
any part of the Indebtedness originally represented by the Notes
or of any part of such other Indebtedness.
Section 8.07 Cumulative Rights. Rights and remedie of PIC
under the Notes, this Agreement and each other Security
Instrument shall be cumulative, and the exercise or partial
exercise of any such right or remedy shall not preclude the
exercise of any other right or remedy.
Section 8.08 Singular and Plural. Words used herein in
the singular, where the context so permits, shall be deemed
to include the plural and vice versa. The definitions of words
in the singular herein shall apply to such words when used in the
plural where the context so permits and vice versa.
Section 8.09 Construction. This Agreement is, and each of
the Notes will be, a contract made under and shall be construed
in accordance with and governed by the laws of the United States
of America and the State of New York, as such laws are now in effect
and, with respect to usury laws, if any, applicable to PIC and to
the extent allowed thereby, as such laws may hereafter be in
effect which allow a higher maximum nonusurious interest rate
than such laws now allow.
Section 8.10 Interest. It is the intention of the parties
hereto to conform strictly to usury laws applicable to PIC and
the Transactions. Accordingly, if the Transactions would be
usurious under applicable law, then, notwithstanding anything to
the contrary in the Notes, this Agreement or in any other
Security Instrument or agreement entered into in connection with
the Transactions or as security for the Notes, it is agreed as
follows: (i) the aggregate of all consideration which consti
tutes interest under applicable law that is contracted for,
taken, reserved, charged or received under the Notes, this
Agreement or under any of such other Security Instruments or
agreements or otherwise in connection with the Transactions shall
under no circumstances exceed the maximum amount allowed by such
applicable law, (ii) in the event that the maturity of any Note
is accelerated for any reason, or in the event of any required or
permitted prepayment, then such consideration that constitutes
interest under applicable law may never include more than the
maximum amount allowed by such applicable law, and (iii) excess
interest, if any, provided for in this Agreement or otherwise in
connection with the Transactions shall be cancelled automatically
and, if theretofore paid, shall be credited by PIC on the
principal amount of the Indebtedness (or, to the extent that the
principal amount of the Indebtedness shall have been or would
thereby be paid in full, refunded by PIC to the Borrower to the
extent that PIC has received such payments from the Trustee under
the terms of the Indenture). The right to accelerate the
maturity of the Notes does not include the right to accelerate
any interest which has not otherwise accrued on the date of such
acceleration, and PIC does not intend to collect any unearned
interest in the event of acceleration. All sums paid or agreed
to be paid to PIC for the use, forbearance or detention of sums
included in the Indebtedness shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread
throughout the full term of the Notes until payment in full so
that the rate or amount of interest on account of the
Indebtedness does not exceed the applicable usury ceiling, if
any. As used in this Section 8.10, the term "applicable law"
shall mean the law of the State of New York (or the law of any
other jurisdiction whose laws may be mandatorily applicable
notwithstanding other provisions of this Agreement), or law of
the United States of America applicable to PIC and the
Transactions which would permit PIC to contract for, charge,
take, reserve or receive a greater amount of interest than under
New York (or such other jurisdiction's) law.
Section 8.11 Entire Agreement. The Notes, this Agreement
and the Security Instrument referred to in Section 7.01(c) embody
the entire agreement and understanding between PIC and the Borrower
and supersede all prior agreements and understandings between
such parties relating to the subject matter hereof and thereof.
Section 8.12 Exhibits. The exhibits attached to this Agreement
are incorporated herein and shall be considered a part of this
Agreement for the purposes stated herein, except that in the
event of any conflict between any of the provisions of such
exhibits and the provisions of this Agreement, the provisions of
this Agreement shall prevail.
Section 8.13 Titles of Articles, Sections and Subsections.
All titles or headings to articles, sections, subsections or other
divisions of this Agreement or the exhibits hereto are only for
the convenience of the parties and shall not be construed to have
any effect or meaning with respect to the other content of such
articles, sections, subsections or other divisions, such other
content being controlling as to the agreement between the parties
hereto.
Section 8.14 Counterparts. This Agreement may be executed
in two or more counterparts, and it shall not be necessary that the
signatures of all parties hereto be contained on any one counter
part hereof; each counterpart shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be duly executed as of the date first above
written.
BORROWER: PANDA CAYMAN INTERFUNDING COMPANY
By /S/
Name: William C. Nordlund
Title:Vice President
LENDER: PANDA INTERFUNDING CORPORATION
By /s/
Name: William C. Nordlund
Title:Vice President
Exhibit A
FORM OF NOTE
$___________________ [Date of Issuance]
FOR VALUE RECEIVED, PANDA CAYMAN INTERFUNDING CORPORATION, a
Cayman Islands exempted company (the "Borrower"), does hereby
promise to pay to the order of the PANDA INTERFUNDING CORPORATION
(hereinafter called the "PIC") at the principal corporate trust
office of BANKERS TRUST COMPANY, as trustee, a New York banking
corporation (hereinafter called the "Trustee"), or any successor
trustee acting as such under that certain Trust Indenture (the
"Indenture") dated as of July 31, 1996, among Panda Funding
Corporation, PIC and the Trustee in lawful money of the United
States of America, the principal sum of
____________________________ DOLLARS ($____________), and to pay
interest on the unpaid principal amount hereof, in like money, at
such office at the following rate [insert terms of interest
payment to correspond to the terms contained in the applicable
PIC Note] all as required in Article 2 of the Loan Agreement
hereinafter referenced.
ALL SUMS paid hereon shall be applied first to the satisfaction
of accrued interest and the balance to the unpaid principal.
Principal on this Note is due and payable on [insert terms of
payment for principal to correspond to the terms contained in the
applicable PIC Note] all as required in Article 2 of the Loan
Agreement.
THIS NOTE is a Note referred to the Loan Agreement dated as of
July 31, 1996 by and between the Borrower and PIC (the "Loan
Agreement"), and is subject to, and is executed in accordance
with, all of the terms, conditions and provisions thereof,
including those respecting prepayment and the acceleration of
maturity and is further subject to all of the terms, conditions
and provisions of the Indenture, all as provided in the Loan
Agreement. Capitalized terms used and not otherwise defined in
this Note shall have the meanings given to such terms in the Loan
Agreement.
Page 1 of 2 Pages
THIS NOTE is a contract made under and shall be construed in
accordance with and governed by the laws of the State of New
York.
PANDA CAYMAN INTERFUNDING
COMPANY
By:_____________________________________
Name:
Title:
EXHIBIT 10.03
PROMISSORY NOTE
NOTICE: This Note has been endorsed, pledged and assigned by
PANDA FUNDING CORPORATION to BANKERS TRUST COMPANY, as trustee,
in its capacity as the Collateral Agent under the Collateral
Agency Agreement (as defined in the Indenture referred to below),
and this Note is held in trust by such Collateral Agent.
$105,525,000 July 31, 9916
FOR VALUE RECEIVED, PANDA INTERFUNDING CORPORATION, a Delaware
corporation (the "Borrower"), does hereby promise to pay to the order
of the PANDA FUNDING CORPORATION (hereinafter called the "Panda Funding")
at the principal corporate trust office of BANKERS TRUST COMPANY, as
trustee, a New York banking corporation (hereinafter called the "Trustee"),
or any successor trustee acting as such under that certain Trust Indenture
(the "Indenture") dated as of July 31, 1996, among Panda Funding, the
Borrower and the Trustee in lawful money of the United States of America,
the principal sum of ONE HUNDRED FIVE MILLION FIVE HUNDRED TWENTY-FIVE
THOUSAND DOLLARS ($105,525,000), and to pay interest on the unpaid
principal amount hereof, in like money, at such office in the amounts
specified in Section 3.1 of the Loan Agreement hereinafter referenced.
ALL SUMS paid hereon shall be applied first to the satisfaction of
accrued interest and the balance to the unpaid principal.
Principal on this Note is due and payable on each Principal Payment
Date and at maturity in the amounts and on the dates specified in Section
3.1 of the Loan Agreement. Interest on this Note is due and payable on
each Interest Payment Date and at maturity in the amounts and at the rate
specified in Section 3.1 of the Loan Agreement.
THIS NOTE is the Initial Note referred to in that certain Loan
Agreement dated as of July 31, 1996 by and between the Borrower and
Panda Funding, and is subject to, and is executed in accordance with,
all of the terms, conditions and provisions thereof, including those
respecting prepayment and the acceleration of maturity and is further
subject to all of the terms, conditions and provisions of the Indenture,
all as provided in the Loan Agreement.
THIS NOTE is a contract made under and shall be construed in
accordance with and governed by the laws of the State of New York.
PANDA INTERFUNDING CORPORATION
By: /s/ Robert W. Carter
Name: Robert W. Carter
Title: Chairman of the Board, President
and Chief Executive Officer
<PAGE>
ENDORSEMENT
Pay to the order of Bankers Trust Company, as Collateral Agent,
without recourse or warranty, except warranty of good title and warranty
that Panda Funding has not assigned this Note to any person other than
the Collateral Agent and that the principal amount of $105,525,000
remains unpaid under this Note.
PANDA FUNDING CORPORATION
By: /s/ Robert W. Carter
Name: Robert W. Carter
Title: Chairman of the Board, President
and Chief Executive Officer
EXHIBIT 10.04
SECURITY AGREEMENT
Between
PANDA INTERFUNDING CORPORATION
and
BANKERS TRUST COMPANY, as Collateral Agent
Dated as of July 31, 1996
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made as of
July 31, 1996, by Panda Interfunding Corporation, a Delaware
corporation with principal offices at 4100 Spring Valley Road,
Suite 1001, Dallas, Texas 75244 ("Debtor"); for Bankers Trust
Company, a New York banking corporation, with offices at 4 Albany
Street, New York, New York 10006, as collateral agent (the
"Collateral Agent") for the benefit of itself, the Trustee,
individually (as hereinafter defined), the Trustee on behalf of
the Bondholders (as hereinafter defined) and for the Letter of
Credit Provider (as hereinafter defined), if any, (collectively,
the "Secured Parties").
RECITALS
A. On even date herewith, Debtor and Panda Funding
Corporation, a Delaware corporation (hereinafter called "Panda
Funding"), and Bankers Trust Company, as trustee (hereinafter
called the "Trustee"), are executing a Trust Indenture (such
agreement, as may from time to time be amended, supplemented or
otherwise modified, being hereinafter called the "Indenture")
providing, subject to the terms and conditions stated therein,
for the issuance by Panda Funding from time to time of certain
Pooled Project Bonds (the "Bonds"), including without limitation,
$105,525,000 in initial aggregate principal amount of 11-5/8%
Pooled Project Bonds, Series A due 2012 (the "Series A Bonds").
B. Panda Funding will loan the entire proceeds of the
issuance of the Series A Bonds to Debtor (the "Loan"), which Loan
will be made under a Loan Agreement dated as of even date with
this Agreement by and between Panda Funding and Debtor (the "PIC
Loan Agreement") and evidenced by a promissory note (the "Initial
PIC Note") of Debtor dated July 31, 1996, and payable to Panda
Funding.
C. Panda Funding may from time to time loan the proceeds
of subsequent series of Bonds (the "Additional Loans") to Debtor,
which Additional Loans will be made under the PIC Loan Agreement
and evidenced by promissory notes of Debtor payable to Panda
Funding (the "Additional PIC Notes").
D. Debtor, pursuant to the terms of the Indenture, has
guaranteed the obligations of Panda Funding (the "PIC Guaranty")
to the purchasers from time to time of the Bonds, including the
Series A Bonds (collectively, the "Bondholders") and the Trustee
under the Indenture.
E. Panda Funding is a wholly owned, special purpose
finance subsidiary of Debtor and Debtor is a wholly owned,
special purpose finance subsidiary of Panda Energy Corporation, a
Texas corporation ("PEC").
F. One or more Letters of Credit (as defined in the
Indenture) may be substituted for cash funds in the Debt Service
Reserve Fund (as defined in the Indenture) pursuant to Section
4.5(c) of the Indenture under a reimbursement agreement to be
entered into between PIC or PIC's controlling affiliate and a
financial institution (the "Letter of Credit Provider") (to the
extent so entered into and as amended, supplemented or otherwise
modified from time to time, together with any substitution or
replacement thereof, the "Reimbursement Agreement").
G. To induce the purchase from time to time of the Bonds
by the Bondholders, which Debtor acknowledges is of substantial
benefit to it (as the ultimate recipient of the proceeds of the
Bonds in the form of the Loan and the Additional Loans) and to
secure Panda Funding's obligations to the Bondholders and the
Trustee and the PIC Guaranty and to induce the issuance of any
Letters of Credit by a Letter of Credit Provider and to secure
PIC's or PIC's controlling affiliate's obligations to such Letter
of Credit Provider under a Reimbursement Agreement (to the extent
entered into), Debtor desires to enter into this Agreement with
the Collateral Agent for the benefit of the Secured Parties.
H. It is a condition precedent to the issuance and
purchase of the Series A Bonds that Debtor shall have pledged the
Collateral as defined in this Agreement to the Collateral Agent
for the benefit of the Secured Parties.
I. Therefore, in order to comply with the terms and
conditions of the Indenture and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, Debtor hereby agrees with the Collateral Agent for
the benefit of the Secured Parties as follows:
ARTICLE 1
SECURITY INTEREST
Section 1.01 Grant of Security Interest. Debtor hereby
pledges, assigns and grants to the Collateral Agent for the
benefit of the Secured Parties a security interest in and right
of set-off against the assets referred to in Section 1.02 (the
"Collateral") to secure the prompt payment and performance of the
"Obligations" (as defined in Section 2.02) and the performance by
Debtor of this Agreement.
Section 1.02 Collateral. The Collateral consists of the
following types or items of property:
(a) All of Debtor's rights and interests in the
following Accounts and Funds established under the
Indenture: the U.S. Project Account; the Debt Service Fund;
the Capitalized Interest Fund; the Debt Service Reserve
Fund; the PIC Expense Fund; the U.S. Distribution Suspense
Fund; the U.S. Mandatory Redemption Account; and the U.S.
Extraordinary Distribution Account (all as defined in the
Indenture);
(b) (i) All deposit accounts, passbooks, certificates
of deposit, commercial paper and other instruments relating
to the Accounts and Funds referred to in this Section 1.02;
(ii) all sums now or at any time hereafter on deposit in
such Accounts or Funds or evidenced by such passbooks,
certificates of deposit or other instruments; (iii) any and
all renewals, rearrangements or reissues thereof, whether
in respect of the value thereof, interest paid thereon,
dividends declared thereon or otherwise together with all
shares, deposits and interests of every kind of Debtor
therein and all investments made therefrom; and (iv) all
interest, dividends, income and profits from any of the
property referred to in Section 1.02(a) and other sums due
or to become due on account of any of the property referred
to in Section 1.02(a);
(c) All of Debtor's rights and interest in and to (i)
all distributions and other amounts received by Debtor or
any PIC U.S. Entity or any other Person on behalf of Debtor
or any PIC U.S. Entity from, or in connection with, the
U.S. Projects that may be legally distributed or paid to
Debtor or any PIC U.S. Entity without contravention of any
Project Agreement, including (A) all distributions, either
directly or indirectly, from U.S. Project Entities to
Debtor or any PIC U.S. Entity and (B) all amounts received
by Debtor or any PIC U.S. Entity or any other Person on
behalf of Debtor or any PIC U.S. Entity in respect of
Debtor's or any such PIC U.S. Entity's investments in or
loans to U.S. Project Entities, in each case other than
Extraordinary Financial Distributions and distributions
received by or on behalf of Debtor or any PIC U.S. Entity
that are required to be deposited in the U.S. Mandatory
Redemption Account pursuant to Section 4.8(a) of the
Indenture and (ii) all interest earned on the amounts on
deposit in the U.S. Accounts and Funds, but only to the
extent such interest has been received (all capitalized
terms used in this paragraph not otherwise defined in this
Agreement have the meanings given such terms in the
Indenture);
(d) All of Debtor's rights and interests in and under
the Additional Projects Contract dated as of even date
herewith by and between Debtor, PEC and Panda Energy
International, Inc., a Texas corporation, relating to the
Projects (as defined in the Indenture);
(e) All of the Debtor's general intangibles relating
to the Debtor's personal property described in Sections
1.02(c) and (d) above, including, without limitation, any
of the foregoing which may be more specifically indicated
in the remainder of this Section 1.02;
(f) (i) Any related or additional property from time
to time delivered to or deposited with the Collateral Agent
by or for the account of Debtor; (ii) all property used or
usable in connection with any property referred to in this
Section 1.02; (iii) all proceeds, replacements, additions
to and substitutions for any of the property referred to in
this Section 1.02 and claims against third parties; and
(iv) all books and records related to any of the property
referred to in this Section 1.02; and
(g) All general intangibles related to any property
referred to in this Section 1.02, including, without
limitation, all (i) letters of credit, bonds, guaranties,
purchase or sales agreements and other contractual rights,
rights to performance, and claims for damages, refunds
(including tax refunds) or other monies due or to become
due; (ii) orders, franchises, permits, certificates,
licenses, consents, exemptions, variances, authorizations
or other approvals by any governmental agency or court;
(iii) business records, computer tapes and computer
software; (iv) goodwill; and (v) other intangible personal
property, whether similar or dissimilar to the property
referred to in this Section 1.02.
It is expressly contemplated that additional securities or other
property may from time to time be pledged, assigned or granted to
the Collateral Agent for the benefit of the Secured Parties as
additional security for the Obligations, and the term
"Collateral" as used herein shall be deemed for all purposes
hereof to include all such additional securities and property,
together with all other property of the types described above
related thereto.
Section 1.03 Transfer of Collateral. All passbooks,
certificates of deposit and instruments representing or
evidencing the Collateral shall be delivered to and held pursuant
hereto by the Collateral Agent for the benefit of the Secured
Parties or a Person designated by the Collateral Agent or, in the
case of certificated or uncertificated securities, the Collateral
Agent shall have been provided with an Opinion of Counsel that,
in the opinion of such Counsel, such action has been taken with
respect to the recording, registering, filing and all other
actions necessary to make effective the lien intended by this
Agreement and to perfect the security interest granted herein
with respect to such certificated or uncertificated securities
and that there is a valid and perfected security interest in such
Collateral, enforceable against Debtor and all third parties and
securing payment of the Obligations.
Section 1.04 Institutions Holding Deposits. If the
Collateral consists of any deposit accounts, passbooks,
certificates of deposit or other instruments issued by one or
more depository institutions other than the Collateral Agent
("Institutions"), then the remaining provisions contained in this
Section 1.04 shall apply. Debtor hereby irrevocably authorizes
and directs each Institution to hold such Collateral as bailee
and custodian for the benefit of the Collateral Agent for the
benefit of the Secured Parties, to indicate on such Institution's
records this assignment of the Collateral in favor of the
Collateral Agent, to provide the Collateral Agent, at the
Collateral Agent's request, with information concerning the
amount on deposit in the accounts, passbooks, certificates of
deposit and other instruments constituting such Collateral, and
at the request of the Collateral Agent (without notice to or
further consent from Debtor) to deliver to the Collateral Agent
any or all funds representing such Collateral. The Institutions
shall have no duty to make any inquiry as to the status of or the
amount owing in respect of the Obligations. Debtor hereby agrees
to indemnify each Institution and hold it harmless from all
expenses and losses it incurs or suffers as a result of any
delivery to the Collateral Agent of funds in respect of such
Collateral. The Collateral Agent is authorized to notify the
Institutions of the Collateral Agent's interest in such
Collateral under this Agreement.
ARTICLE 2
DEFINITIONS
Section 2.01 Terms Defined Above. As used in this
Agreement, the terms defined above shall have the meanings
respectively assigned to them. Other capitalized terms that are
defined in the Indenture but that are not defined herein shall
have the same meanings as defined in the Indenture.
Section 2.02 Certain Definitions. As used in this
Agreement, the following terms shall have the following meanings,
unless the context otherwise requires:
"Agreement" means this Security Agreement, as the same
may from time to time be amended or supplemented.
"Code" means the Uniform Commercial Code as presently
in effect in the State of New York. Unless otherwise
indicated by the context herein, all uncapitalized terms
that are defined in the Code shall have their respective
meanings as used in Articles 8 and 9 of the Code.
"Collateral Agent Claims" means, at any time, all
obligations of Panda Funding and Debtor, now or hereafter
existing, to pay fees, costs, expenses, indemnities and
other amounts to the Collateral Agent pursuant to Sections
6(f), 8 or 16 of the Collateral Agency Agreement or
pursuant to any Security Document or Transaction Document.
"Event of Default" means any event specified in
Section 6.01.
"Highest Lawful Rate" means the lesser of 15% per
annum and the maximum rate of nonusurious interest allowed
from time to time by applicable law.
"Obligations" means all indebtedness, liabilities and
other obligations of Panda Funding and Debtor (including,
but not limited to, all such obligations in respect of
principal, premiums, interest, fees, Collateral Agent
Claims, Trustee Claims, penalties, indemnities, costs and
other expenses, whether due after acceleration or
otherwise) to the Collateral Agent, the Trustee or the
Bondholders (of whatsoever nature and howsoever evidenced)
under and pursuant to the Bonds, the Indenture, this
Agreement, the Collateral Agency Agreement, the other
Security Documents and the obligations of Debtor or its
controlling affiliate to a Letter of Credit Provider under
and pursuant to a Reimbursement Agreement (if entered
into), in each case, direct or indirect, primary or
secondary, fixed or contingent, now or hereafter arising
therefrom or relating thereto.
"Obligor" means any Person, other than Debtor, liable
(whether directly or indirectly, primarily or secondarily)
for the payment or performance of any of the Obligations
whether as maker, co-maker, endorser, guarantor,
accommodation party, general partner or otherwise.
"Trustee Claims" means, at any time, all obligations
of Panda Funding and Debtor, now or hereafter existing, to
pay fees, costs, expenses, indemnities or other amounts to
the Trustee pursuant to the Indenture.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
In order to induce the Collateral Agent to accept this
Agreement, Debtor represents and warrants to the Collateral Agent
(which representations and warranties will survive the creation
and payment of the Obligations) that:
Section 3.01 Ownership of Collateral; Encumbrances. Debtor
is the owner of, and has good and marketable title to, the
Collateral free and clear of any Lien except for the pledge and
security interest granted to the Collateral Agent for the benefit
of the Secured Parties and Liens for Taxes not yet due or that
are subject to a Good Faith Contest. No financing statement
covering the Collateral is on file in any public office other
than terminated financing statements and the financing statements
filed pursuant to this Agreement or in connection with the
transactions contemplated by the Indenture. The Collateral is
not subject to any law (except as may be required in connection
with any disposition of the Collateral by laws affecting the
offering and sale of securities generally) or contractual
obligation that would be violated by or that would prohibit the
grant of the security interest in the Collateral granted pursuant
hereto or the disposition of the Collateral by or to the
Collateral Agent upon the occurrence and continuance of an Event
of Default.
Section 3.02 Debtor. Debtor is a corporation duly
organized and validly existing under the laws of the State of
Delaware. Debtor has full power, authority and legal right to
enter into this Agreement and perform hereunder and to pledge and
deliver all of the Collateral pursuant to this Agreement. The
pledge of the Collateral and the granting of a security interest
in the Collateral has been duly authorized by Debtor and this
Agreement has been duly authorized, executed and delivered by
Debtor and constitutes the legal, valid and binding obligation of
Debtor enforceable against Debtor in accordance with its terms
except as enforceability may be limited by applicable bankruptcy,
insolvency, moratorium or other similar laws affecting creditor's
rights generally and except as enforceability may be limited by
general principles of equity (whether considered in a suit at law
or in equity).
Section 3.03 No Required Consent. No authorization,
consent, approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required
that has not been obtained for (i) the due execution, delivery
and performance by Debtor of this Agreement, (ii) the grant by
Debtor of the security interest granted by this Agreement,
(iii) the perfection of such security interest or (iv) the
exercise by the Collateral Agent of its rights and remedies under
this Agreement (except as may be required (x) in connection with
such disposition by laws affecting the offering and sale of
securities generally, (y) under federal and state laws, rules and
regulations and applicable interpretations thereof providing for
the supervision or regulation of the banking and trust businesses
generally and applicable to the Collateral Agent or any Secured
Party and (z) with respect to the Collateral Agent or any Secured
Party as a result of any relationship which such Person may have
with Persons not parties to, or any activity or business such
Person may conduct other than pursuant to, any of the Financing
Documents).
The execution, delivery and performance of this Agreement
will not (i) require any consent or approval of the Board of
Directors or stockholders of Debtor that has not been obtained;
(ii) violate the provisions of Debtor's Certificate of
Incorporation or By-Laws; (iii) violate the provisions of any law
(including, without limitation, any usury law), regulation or
order of any governmental authority applicable to Debtor or any
of its subsidiaries; (iv) conflict with, result in a breach or
constitute a default under any agreement relating to the
management or affairs of Debtor or any of its subsidiaries, or
any indenture or loan or credit agreement or any other material
agreement, lease or instrument to which Debtor is a party or by
which Debtor or any of its subsidiaries or any of their material
properties may be bound; or (v) result in or create any Lien
(other than Permitted Liens) under, or require any consent under,
any indenture or loan or credit agreement or any other material
agreement, instrument or award of any governmental authority
binding upon Debtor or any of its subsidiaries or any of their
properties.
Section 3.04 Genuineness of Collateral; Descriptions.
Each deposit account, passbook, certificate of deposit,
commercial paper or other instrument constituting Collateral
hereunder is genuine in all respects and what it purports to be,
and any representation made by Debtor to the Collateral Agent
concerning the principal balance of and interest, dividends or
other income accrued or payable on the deposit accounts,
passbooks, certificates of deposit, commercial paper or other
instruments representing the Collateral are true and correct.
Section 3.05 First Priority Security Interest. The grant
of the security interest in the Collateral pursuant to this
Agreement creates a valid and perfected first priority security
interest in the Collateral, enforceable against Debtor and all
third parties and securing payment of the Obligations subject to
no Liens other than those Liens created by this Agreement.
Section 3.06 No Filings By Third Parties. No financing
statement or other public notice or recording covering the
Collateral is on file in any public office (other than any
financing statement or other public notice or recording naming
the Collateral Agent, as agent, as the secured party therein),
and Debtor will not execute any such financing statement or other
public notice or recording so long as any of the Obligations are
outstanding (other than any financing statement or other public
notice or recording naming the Collateral Agent, as agent, as the
secured party therein).
Section 3.07 No Name Changes. Debtor has not, during the
preceding five years, entered into any contract, agreement,
security instrument or other document using a name other than, or
been known by or otherwise used any name other than, the name
used by Debtor herein.
Section 3.08 Location of Debtor. Debtor's chief executive
office and Debtor's records concerning the Collateral are located
at the address or location set forth in the opening paragraph
hereof.
Section 3.09 No Suits. There is no action, suit or
proceeding at law or in equity or by or before any governmental
authority, arbitral tribunal or other body now pending or, to the
best knowledge of Debtor, threatened against Debtor or its
subsidiaries that question the validity or legality of or seeks
damages in connection with this Agreement or any action to be
taken pursuant to this Agreement that could reasonably be
expected to have a material adverse effect on Debtor.
Section 3.10 Regulatory Status. Debtor is not (i) an
"investment company"or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of
1940, as amended, or (ii) a "holding company" or a "subsidiary
company" of a "holding company" or an "affiliate" of a "holding
company" or a "subsidiary company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended ("PUHCA")
or (iii) a "registered holding company" or a "subsidiary company"
of a "registered holding company" or an "affiliate" of a
"registered holding company" or a "subsidiary company" of a
"registered holding company" within the meaning of PUHCA.
Section 3.11 Benefits. Debtor has derived and will
continue to derive direct and indirect benefits from the
incurrence of its obligations under this Agreement.
Section 3.12 Collateral. All statements or other
information provided by Debtor to the Collateral Agent or any
Secured Party describing or with respect to the Collateral is or
(in the case of subsequently furnished information) will be when
provided correct and complete in all material respects. The
delivery at any time by Debtor to the Collateral Agent of
additional Collateral or of additional descriptions of Collateral
shall constitute a representation and warranty by Debtor to the
Collateral Agent hereunder that the representations and
warranties of this Article 3 are correct insofar as they would
pertain to such Collateral or the descriptions thereof.
Section 3.13 Delivery of Letters of Credit. With respect
to any Collateral supported by letters of credit, each of such
letters of credit has been delivered to the Collateral Agent
(provided that all letters of credit referred to in Section 1.02
shall be subject to the security interest created by this
Agreement irrespective of whether or not such delivery shall have
been made).
ARTICLE 4
COVENANTS AND AGREEMENTS
Debtor will at all times comply with the covenants and
agreements contained in this Article 4, from the date hereof and
for so long as any part of the Obligations are outstanding.
Section 4.01 Change in Location of Debtor. Debtor will
give the Collateral Agent 30 days' prior written notice of
(i) the opening or closing of any place of Debtor's business or
(ii) any change in the location of Debtor's chief executive
office or address.
Section 4.02 Change in Debtor's Name or Corporate
Structure. Debtor will not change its name, identity or
corporate structure (including, without limitation, any merger,
consolidation or sale of substantially all of its assets) without
notifying the Collateral Agent of such change in writing at least
30 days prior to the effective date of such change. Without the
express written consent of the Collateral Agent, however, Debtor
will not engage in any other business or transaction under any
name other than Debtor's name hereunder.
Section 4.03 Delivery of Letters of Credit and
Instruments. Debtor will deliver each letter of credit, if any,
included in the Collateral to Collateral Agent, in each case
forthwith upon receipt by or for the account of Debtor.
Section 4.04 Sale, Disposition or Encumbrance of
Collateral. Except as permitted under the Indenture, Debtor will
not in any way encumber any of the Collateral (or permit or
suffer any of the Collateral to be encumbered) or sell, pledge,
assign, lend or otherwise dispose of or transfer any of the
Collateral to or in favor of any Person other than the Collateral
Agent for the benefit of the Secured Parties. Except with the
prior written consent of the Collateral Agent or as permitted
pursuant to the terms of the Indenture, Debtor will not execute
any check, instrument or other document relating to and will not
otherwise make or attempt to make any withdrawal from any
Account, Fund, deposit account, passbook, certificate of deposit
or other instrument evidencing the Collateral.
Section 4.05 Proceeds of Collateral. Debtor will deliver
to the Collateral Agent promptly upon receipt all proceeds
delivered to Debtor from the sale or disposition of any
Collateral. If chattel paper, documents or instruments are
received as proceeds, that are required to be delivered to the
Collateral Agent, they will be, immediately upon receipt,
properly endorsed or assigned and delivered to the Collateral
Agent as Collateral. This Section 4.05 shall not be construed to
permit sales or dispositions of Collateral except as may be
elsewhere expressly permitted by this Agreement.
Section 4.06 Records and Information. Debtor shall keep
accurate and complete records of the Collateral (including
proceeds, payments, distributions, income and profits). The
Collateral Agent may at any time have access to, examine, audit,
make extracts from and inspect without hindrance or delay
Debtor's records, files and the Collateral. Debtor will promptly
provide written notice to the Collateral Agent of all information
that in any way relates to or affects the filing of any financing
statement or other public notices or recordings, or the delivery
and possession of items of Collateral for the purpose of
perfecting a security interest in the Collateral. Debtor will
also promptly furnish such information as the Collateral Agent
may from time to time reasonably request regarding (i) the
business, affairs or financial condition of Debtor or (ii) the
Collateral or the Collateral Agent's rights or remedies with
respect thereto.
Section 4.07 Reimbursement of Expenses. Debtor will pay
to the Collateral Agent all reasonable advances, charges, costs
and expenses (including, without limitation, all reasonable costs
and expenses of holding, preparing for sale and selling,
collecting or otherwise realizing upon the Collateral if an Event
of Default occurs and all reasonable attorneys' fees, legal
expenses and court costs) incurred by the Collateral Agent in
connection with the exercise of the Collateral Agent's rights and
remedies hereunder on behalf of the Secured Parties. Debtor
agrees to indemnify and hold the Collateral Agent and the Secured
Parties harmless from and against and covenants to defend the
Collateral Agent and the Secured Parties against any and all
losses, damages, claims, costs, penalties, liabilities and
expenses, including, without limitation, court costs and
reasonable attorneys' fees, incurred because of, incident to, or
with respect to this Agreement or the Collateral (including,
without limitation, any exercise of rights or remedies in
connection therewith). All amounts for which Debtor is liable
pursuant to this Section 4.07 shall be due and payable by Debtor
to the Collateral Agent upon demand. If Debtor fails to make
such payment upon demand (or if demand is not made due to an
injunction or stay arising from bankruptcy or other proceedings)
and the Collateral Agent or any Secured Party pays such amount,
the same shall be due and payable by Debtor to the Collateral
Agent, plus interest thereon from the date of the Collateral
Agent's or Secured Party's demand (or from the date of the
Collateral Agent's payment or such Secured Party's payment if
demand is not made due to such proceedings) at the Highest Lawful
Rate.
Section 4.08 Further Assurances. Upon the request of the
Collateral Agent, Debtor shall (at Debtor's expense) execute and
deliver all such assignments, certificates, instruments,
securities, financing statements, notifications to financial
intermediaries, clearing corporations, issuers of securities or
other third parties or other documents and give further
assurances and do all other acts and things as the Collateral
Agent may reasonably request to perfect the Collateral Agent's
interest in the Collateral or to protect, enforce or otherwise
effect the Collateral Agent's rights and remedies hereunder.
Section 4.09 Investments. No investments will be made
from the Collateral except as permitted and directed by the
Indenture. All income, distributions, profits and proceeds of
such investments shall be part of the Collateral and may be
credited to any deposit account included in the Collateral.
ARTICLE 5
RIGHTS, DUTIES AND POWERS OF COLLATERAL AGENT
The following rights, duties and powers of the Collateral
Agent are applicable irrespective of whether an Event of Default
occurs and is continuing:
Section 5.01 Discharge Encumbrances. The Collateral Agent
may, at its option, discharge any taxes, liens, security
interests or other encumbrances at any time levied or placed on
the Collateral. Debtor agrees to reimburse the Collateral Agent
upon demand for any payment so made, plus interest thereon from
the date of the Collateral Agent's demand at the Highest Lawful
Rate.
Section 5.02 Transfer of Collateral. The Collateral Agent
may transfer any or all of the Obligations, and upon any such
transfer the Collateral Agent may transfer its interest in any or
all of the Collateral and shall be fully discharged thereafter
from all liability therefor. Any transferee of the Collateral
shall be vested with all rights, powers and remedies of the
Collateral Agent hereunder.
Section 5.03 Cumulative and Other Rights. The rights,
powers and remedies of the Collateral Agent hereunder are in
addition to all rights, powers and remedies given by law or in
equity. The exercise by the Collateral Agent of any one or more
of the rights, powers and remedies herein shall not be construed
as a waiver of any other rights, powers and remedies, including,
without limitation, any other rights of set-off. If any of the
Obligations are given in renewal, extension for any period or
rearrangement, or applied toward the payment of debt secured by
any lien, the Collateral Agent shall be, and is hereby,
subrogated to all the rights, titles, interests and liens
securing the debt so renewed, extended, rearranged or paid. The
Collateral Agent shall also be entitled to all of the rights,
remedies and protections set forth in the Collateral Agency
Agreement, as if expressly set forth herein.
Section 5.04 Disclaimer of Certain Duties.
(a) The powers conferred upon the Collateral Agent by this
Agreement are to protect its interest in the Collateral and shall
not impose any duty upon the Collateral Agent or any Secured
Party to exercise any such powers. Debtor hereby agrees that the
Collateral Agent shall not be liable for, nor shall the
indebtedness evidenced by the Obligations be diminished by, the
Collateral Agent's delay or failure to collect upon, foreclose,
sell, take possession of or otherwise obtain value for the
Collateral.
(b) The Collateral Agent shall be under no duty whatsoever
to make or give any presentment, notice of dishonor, protest,
demand for performance, notice of non-performance, notice of
intent to accelerate, notice of acceleration, or other notice or
demand in connection with any Collateral or the Obligations, or
to take any steps necessary to preserve any rights against any
Obligor or other Person. Debtor waives any right of marshalling
in respect of any and all Collateral, and waives any right to
require the Collateral Agent or any Secured Party to proceed
against any Obligor or other Person, exhaust any Collateral or
enforce any other remedy which the Collateral Agent or any
Secured Party now has or may hereafter have against any Obligor
or other Person.
Section 5.05 Modification of Obligations; Other Security.
Debtor waives (i) any and all notice of acceptance, creation,
modification, rearrangement, renewal or extension for any period
of any instrument executed by any Obligor in connection with the
Obligations and (ii) any defense of any Obligor by reason of
disability, lack of authorization, cessation of the liability of
any Obligor or for any other reason. Debtor authorizes the
Collateral Agent, without notice or demand and without any
reservation of rights against Debtor and without affecting
Debtor's liability hereunder or on the Obligations, from time to
time to (x) take and hold other property, other than the
Collateral, as security for the Obligations, and exchange,
enforce, waive and release any or all of the Collateral,
(y) apply the Collateral in the manner permitted by this
Agreement, the Collateral Agency Agreement or the Indenture and
(z) renew, extend for any period, accelerate, amend or modify,
supplement, enforce, compromise, settle, waive or release the
obligations of any Obligor or any instrument or agreement of such
other Person with respect to any or all of the Obligations or
Collateral.
Section 5.06 Waiver of Notice; Demand and Presentment.
Debtor hereby waives any demand, notice of default, notice of
acceleration of the maturity of the Obligations, notice of
intention to accelerate the maturity of the Obligations,
presentment, protest and notice of dishonor as to any action
taken by the Collateral Agent or any Secured Party in connection
with this Agreement, or any instrument or document.
Section 5.07 Custody and Preservation of the Collateral.
The Collateral Agent shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment substantially
equal to that which comparable secured parties accord comparable
collateral, it being understood and agreed, however, that neither
the Collateral Agent nor any Secured Party shall have
responsibility for (i) ascertaining or taking action with respect
to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not the Collateral
Agent has or is deemed to have knowledge of such matters, or
(ii) taking any necessary steps to preserve rights against
Persons or entities with respect to any Collateral.
ARTICLE 6
EVENTS OF DEFAULT
Section 6.01 Events. It shall constitute an Event of
Default under this Agreement if an Event of Default occurs and is
continuing under the Indenture.
Section 6.02 Remedies. Upon the occurrence and during the
continuance of any Event of Default, the Collateral Agent may
take any or all of the following actions without notice (except
where expressly required below or in the Indenture) or demand to
Debtor:
(a) Declare all or part of the indebtedness pursuant
to the Obligations immediately due and payable and enforce
payment of the same by Debtor or any Obligor.
(b) Sell, in one or more sales and in one or more
parcels, or otherwise dispose of any or all of the
Collateral in any commercially reasonable manner as the
Collateral Agent may elect, in a public or private
transaction, at any location as deemed reasonable by the
Collateral Agent either for cash or credit or for future
delivery at such price as the Collateral Agent may deem
fair, and (unless prohibited by the Code, as adopted in any
applicable jurisdiction) the Collateral Agent or Secured
Party may be the purchaser of any or all Collateral so sold
and may apply upon the purchase price therefor any
Obligations secured hereby. Any such sale or transfer by
the Collateral Agent either to itself or to any other
Person shall be absolutely free from any claim of right by
Debtor, including any equity or right of redemption, stay
or appraisal which Debtor has or may have under any rule of
law, regulation or statute now existing or hereafter
adopted. Upon any such sale or transfer, the Collateral
Agent shall have the right to deliver, assign and transfer
to the purchaser or transferee thereof the Collateral so
sold or transferred. If the Collateral Agent deems it
advisable to do so, it may restrict the bidders or
purchasers of any such sale or transfer to Persons or
entities who will represent and agree that they are
purchasing the Collateral for their own account and not
with the view to the distribution or resale of any of the
Collateral. The Collateral Agent may, at its discretion,
provide for a public sale, and any such public sale shall
be held at such time or times within ordinary business
hours and at such place or places as the Collateral Agent
may fix in the notice of such sale. The Collateral Agent
shall not be obligated to make any sale pursuant to any
such notice. The Collateral Agent may, without notice or
publication, adjourn any public or private sale by
announcement at any time and place fixed for such sale, and
such sale may be made at any time or place to which the
same may be so adjourned. If any sale or transfer hereunder
is not completed or is defective in the opinion of the
Collateral Agent, such sale or transfer shall not exhaust
the rights of the Collateral Agent hereunder, and the
Collateral Agent shall have the right to cause one or more
subsequent sales or transfers to be made hereunder. If
only part of the Collateral is sold or transferred such
that the Obligations remain outstanding (in whole or in
part), the Collateral Agent's rights and remedies hereunder
shall not be exhausted, waived or modified, and the
Collateral Agent is specifically empowered to make one or
more successive sales or transfers until all the Collateral
shall be sold or transferred and all the Obligations are
paid. If the Collateral Agent elects not to sell the
Collateral, the Collateral Agent retains its rights to
dispose of or utilize the Collateral or any part or parts
thereof in any manner authorized or permitted by law or in
equity, and to apply the proceeds of the same towards
payment of the Obligations. Each and every method of
disposition of the Collateral described in this subsection
or in subsection (d) shall constitute disposition in a
commercially reasonable manner.
(c) Take possession of all books and records of
Debtor pertaining to the Collateral. The Collateral Agent
shall have the authority to enter upon any real property or
improvements thereon in order to obtain any such books or
records, or any Collateral located thereon, and remove the
same therefrom without liability.
(d) Apply proceeds of the disposition of the
Collateral to the Obligations in accordance with the
Collateral Agency Agreement and as permitted by the Code or
otherwise permitted by law or in equity. Such application
may include, without limitation, the reasonable attorneys'
fees and legal expenses incurred by the Collateral Agent
and the Secured Parties.
(e) Appoint any Person as agent to perform any act or
acts necessary or incident to any sale or transfer by the
Collateral Agent of the Collateral.
(f) Receive or withdraw any or all funds in any
Accounts or Funds or any deposit account, passbook,
certificate of deposit, commercial paper or other
instrument representing the Collateral and apply such funds
towards the Obligations.
(g) Receive, change the address for delivery, open
and dispose of mail addressed to Debtor, and to execute,
assign and endorse negotiable and other instruments for the
payment of money, documents of title or other evidences of
payment, shipment or storage for any form of Collateral on
behalf of and in the name of Debtor.
(h) Exercise all other rights and remedies permitted
by law or in equity.
Section 6.03 Attorney-in-Fact. Debtor hereby irrevocably
appoints the Collateral Agent as Debtor's attorney-in-fact, with
full authority in the place and stead of Debtor and in the name
of Debtor or otherwise, from time to time in the Collateral
Agent's discretion upon the occurrence and during the continuance
of an Event of Default, but at Debtor's cost and expense and
without notice to Debtor, to take any action and to execute any
assignment, certificate, financing statement, stock power,
notification, document or instrument that the Collateral Agent
may deem necessary or advisable to accomplish the purposes of
this Agreement, including, without limitation, to receive,
endorse and collect all instruments made payable to Debtor
representing any dividend, interest payment or other distribution
in respect of the Collateral or any part thereof and to give full
discharge for the same.
Section 6.04 Liability for Deficiency. If any sale or
other disposition of Collateral by the Collateral Agent or any
other action of the Collateral Agent or any Secured Party
hereunder results in reduction of the Obligations, such action
will not release Debtor from its liability to the Collateral
Agent and the Secured Parties for any unpaid Obligations,
including costs, charges and expenses incurred in the liquidation
of Collateral, together with interest thereon, and the same shall
be immediately due and payable to the Collateral Agent at the
Collateral Agent's address set forth in the opening paragraph
hereof.
Section 6.05 Reasonable Notice. If any applicable
provision of any law requires the Collateral Agent or any Secured
Party to give reasonable notice of any sale or disposition or
other action, Debtor hereby agrees that five days' prior written
notice shall constitute reasonable notice thereof. Such notice,
in the case of public sale, shall state the time and place fixed
for such sale and, in the case of private sale, the time after
which such sale is to be made.
Section 6.06 Non-judicial Enforcement. The Collateral
Agent may enforce its rights hereunder without prior judicial
process or judicial hearing, and to the extent permitted by law
Debtor expressly waives any and all legal rights which might
otherwise require the Collateral Agent to enforce its rights by
judicial process.
ARTICLE 7
MISCELLANEOUS PROVISIONS
Section 7.01 Notices. Any notice required or permitted to
be given under or in connection with this Agreement shall be
given in accordance with the notice provisions of the Indenture
with respect to Debtor and in accordance with the notice
provisions of the Collateral Agency Agreement with respect to the
Collateral Agent.
Section 7.02 Amendments and Waivers. The Collateral
Agent's acceptance of partial or delinquent payments or any
forbearance, failure or delay by the Collateral Agent in
exercising any right, power or remedy hereunder shall not be
deemed a waiver of any obligation of Debtor or any Obligor, or of
any right, power or remedy of the Collateral Agent; and no
partial exercise of any right, power or remedy shall preclude any
other or further exercise thereof. The Collateral Agent may
remedy any Event of Default hereunder or in connection with the
Obligations without waiving the Event of Default so remedied.
Debtor hereby agrees that if the Collateral Agent agrees to a
waiver of any provision hereunder, or an exchange of or release
of the Collateral, or the addition or release of any Obligor or
other Person, any such action shall not constitute a waiver of
any of the Collateral Agent's other rights or of Debtor's
obligations hereunder. This Agreement may be amended only by an
instrument in writing executed jointly by Debtor and the
Collateral Agent and may be supplemented only by documents
delivered or to be delivered in accordance with the express terms
hereof.
Section 7.03 Copy as Financing Statement. A photocopy or
other reproduction of this Agreement or any financing statement
covering the Collateral is sufficient as a financing statement,
and the same may be filed with the appropriate filing authority
for the purpose of perfecting the Collateral Agent's security
interest in the Collateral.
Section 7.04 Possession of Collateral. The Collateral
Agent shall be deemed to have possession of any Collateral in
transit to it or set apart for it (or, in either case, any of its
agents, affiliates or correspondents).
Section 7.05 Redelivery of Collateral. If any sale or
transfer of Collateral by the Collateral Agent results in full
satisfaction of the Obligations, and after such sale or transfer
and discharge there remains a surplus of proceeds, the Collateral
Agent will deliver to Debtor such excess proceeds in a
commercially reasonable time; provided, however, that neither the
Collateral Agent nor any Secured Party shall have any liability
for any interest, cost or expense in connection with any delay in
delivering such proceeds to Debtor.
Section 7.06 Governing Law; Jurisdiction. This Agreement
and the security interest granted hereby shall be construed in
accordance with and governed by the laws of the State of New York
(except to the extent that the laws of any other jurisdiction
govern the perfection and priority of the security interests
granted hereby).
Section 7.07 Continuing Security Agreement.
(a) Except as may be expressly applicable pursuant to
Section 9-505 of the Code, no action taken or omission to act by
the Collateral Agent or the Secured Parties hereunder, including,
without limitation, any other action taken or inaction pursuant
to Section 6.02, shall be deemed to constitute a retention of the
Collateral in satisfaction of the Obligations or otherwise to be
in full satisfaction of the Obligations, and the Obligations
shall remain in full force and effect, until the Collateral Agent
and the Secured Parties shall have applied payments (including,
without limitation, collections from Collateral) towards the
Obligations in the full amount then outstanding or until such
subsequent time as is hereinafter provided in subsection (b)
below.
(b) To the extent that any payments on the Obligations or
proceeds of the Collateral are subsequently invalidated, declared
to be fraudulent or preferential, set aside or required to be
repaid to a trustee, debtor in possession, receiver or other
Person under any bankruptcy law, common law or equitable cause,
then to such extent the Obligations so satisfied shall be revived
and continue as if such payment or proceeds had not been received
by the Collateral Agent or the Secured Parties, and the
Collateral Agent's and the Secured Parties' security interests,
rights, powers and remedies hereunder shall continue in full
force and effect. In such event, this Agreement shall be
automatically reinstated if it shall theretofore have been
terminated pursuant to Section 7.08.
Section 7.08 Termination. The grant of a security
interest hereunder and all of the Collateral Agent's and the
Secured Parties' rights, powers and remedies in connection
therewith shall remain in full force and effect until the
Collateral Agent has (i) retransferred and delivered all
Collateral in its possession to Debtor, and (ii) executed a
written release or termination statement and reassigned to Debtor
without recourse or warranty any remaining Collateral and all
rights conveyed hereby. Upon the complete payment of the
Obligations and the compliance by Debtor with all covenants and
agreements hereof, the Collateral Agent, at the written request
and expense of Debtor, and upon receipt of an Officer's
Certificate of Debtor stating that all conditions precedent have
been complied with, will release, reassign and transfer the
Collateral to Debtor and declare this Agreement to be of no
further force or effect. Notwithstanding the foregoing, the
reimbursement and indemnification provisions of Section 4.07 and
the provisions of subsection 7.07(b) shall survive the
termination of this Agreement.
Section 7.09 Counterparts, Effectiveness. This Agreement
may be executed in two or more counterparts, and it shall not be
necessary that the signatures of all parties hereto be contained
on any one counterpart hereof. Each counterpart is deemed an
original, but all such counterparts taken together constitute one
and the same instrument.
DEBTOR: PANDA INTERFUNDING CORPORATION
By:________________________________
Name: Robert W. Carter
Title: Chairman of the Board, President
and Chief Executive Officer
SECURED PARTY: BANKERS TRUST COMPANY,
as Collateral Agent
By:________________________________
Name: Marie C. Rasch
Title: Vice President
EXHIBIT 10.05
SECURITY AGREEMENT
Between
PANDA FUNDING CORPORATION
and
BANKERS TRUST COMPANY, as Collateral Agent
Dated as of July 31, 1996
______________________
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made as of
July 31, 1996, by Panda Funding Corporation, a Delaware
corporation with principal offices at 4100 Spring Valley Road,
Suite 1001, Dallas, Texas 75244 ("Debtor"); for Bankers Trust
Company, a New York banking corporation, with offices at 4 Albany
Street, New York, New York 10006, as collateral agent (the
"Collateral Agent") for the benefit of itself, the Trustee,
individually (as hereinafter defined), the Trustee on behalf of
the Bondholders (as hereinafter defined) and for the Letter of
Credit Provider (as hereinafter defined), if any, (collectively,
the "Secured Parties").
RECITALS
A. On even date herewith, Debtor and Panda Interfunding
Corporation, a Delaware corporation (hereinafter called "PIC"),
and Bankers Trust Company, as trustee (hereinafter called the
"Trustee"), are executing a Trust Indenture (such agreement, as
may from time to time be amended, supplemented or otherwise
modified, being hereinafter called the "Indenture") providing,
subject to the terms and conditions stated therein, for the
issuance by Debtor from time to time of certain Pooled Project
Bonds (the "Bonds"), including without limitation, $105,525,000
in initial aggregate principal amount of 11 5/8% Pooled Project
Bonds, Series A due 2012 (the "Series A Bonds").
B. Debtor will loan the entire proceeds of the issuance
of the Series A Bonds to PIC (the "Loan"), which Loan will be
made under a Loan Agreement dated as of even date with this
Agreement by and between Debtor and PIC (the "PIC Loan
Agreement") and evidenced by a promissory note (the "Initial PIC
Note") of PIC dated July 31, 1996, and payable to Debtor.
C. Debtor may from time to time loan the proceeds of
subsequent series of Bonds (the "Additional Loans") to PIC, which
Additional Loans will be made under the PIC Loan Agreement and
evidenced by promissory notes of PIC payable to Debtor (the
"Additional PIC Notes").
D. PIC, pursuant to the terms of the Indenture, has
guaranteed the obligations of Debtor (the "PIC Guaranty") to the
purchasers from time to time of the Bonds, including the Series A
Bonds (collectively, the "Bondholders") and the Trustee under the
Indenture.
E. Debtor is a wholly owned, special purpose finance
subsidiary of PIC and PIC is a wholly owned, special purpose
finance subsidiary of Panda Energy Corporation, a Texas
corporation ("PEC").
F. One or more Letters of Credit (as defined in the
Indenture) may be substituted for cash funds in the Debt Service
Reserve Fund (as defined in the Indenture) pursuant to Section
4.5(c) of the Indenture under a reimbursement agreement to be
entered into between PIC or PIC's controlling affiliate and a
financial institution (the "Letter of Credit Provider") (to the
extent so entered into and as amended, supplemented or otherwise
modified from time to time, together with any substitution or
replacement thereof, the "Reimbursement Agreement").
G. To induce the purchase from time to time of the Bonds
by the Bondholders, and to secure Debtor's obligations to the
Bondholders and the Trustee and to induce the issuance of any
Letters of Credit by a Letter of Credit Provider and to secure
PIC's or PIC's controlling affiliate's obligations to such Letter
of Credit Provider under a Reimbursement Agreement (to the extent
entered into), Debtor desires to enter into this Agreement with
the Collateral Agent for the benefit of the Secured Parties.
H. It is a condition precedent to the issuance and
purchase of the Series A Bonds that Debtor shall have pledged the
Collateral as defined in this Agreement to the Collateral Agent
for the benefit of the Secured Parties.
I. Therefore, in order to comply with the terms and
conditions of the Indenture and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, Debtor hereby agrees with the Collateral Agent for
the benefit of the Secured Parties as follows:
ARTICLE 1
SECURITY INTEREST
Section 1.01 Grant of Security Interest. Debtor hereby
pledges, assigns and grants to the Collateral Agent for the
benefit of the Secured Parties a security interest in and right
of set-off against the assets referred to in Section 1.02 (the
"Collateral") to secure the prompt payment and performance of the
"Obligations" (as defined in Section 2.02) and the performance by
Debtor of this Agreement.
Section 1.02 Collateral. The Collateral consists of the
following types or items of property:
(a) The following securities: any and all Notes, as
defined in the PIC Loan Agreement dated as of July 31, 1996
by and between Debtor and PIC (the "PIC Loan Agreement");
(b) (i) The certificates or instruments, if any,
representing such Notes and (ii) all interest or dividends
(cash, stock or otherwise), cash, instruments and all other
rights and property from time to time received, receivable
or otherwise paid in respect of or in exchange for any or
all of such Notes;
(c) All of Debtor's chattel paper, instruments and
general intangibles, including, without limitation, any of
the foregoing which may be more specifically indicated in
the remainder of this Section 1.02;
(d) All of Debtor's rights and interests in and under
the PIC Loan Agreement;
(e) (i) Any related or additional property from time
to time delivered to or deposited with the Collateral Agent
by or for the account of Debtor; (ii) all property used or
usable in connection with any property referred to in this
Section 1.02; (iii) all proceeds, replacements, additions
to and substitutions for any of the property referred to in
this Section 1.02 and claims against third parties; and
(iv) all books and records related to any of the property
referred to in this Section 1.02; and
(f) All general intangibles related to any property
referred to in this Section 1.02, including, without
limitation, all (i) letters of credit, bonds, guaranties,
purchase or sales agreements and other contractual rights,
rights to performance, and claims for damages, refunds
(including tax refunds) or other monies due or to become
due; (ii) orders, franchises, permits, certificates,
licenses, consents, exemptions, variances, authorizations
or other approvals by any governmental agency or court;
(iii) business records, computer tapes and computer
software; (iv) goodwill; and (v) other intangible personal
property, whether similar or dissimilar to the property
referred to in this Section 1.02.
It is expressly contemplated that additional securities or other
property may from time to time be pledged, assigned or granted to
the Collateral Agent for the benefit of the Secured Parties as
additional security for the Obligations, and the term
"Collateral" as used herein shall be deemed for all purposes
hereof to include all such additional securities and property,
together with all other property of the types described above
related thereto.
Section 1.03 Transfer of Collateral. All certificates or
instruments representing or evidencing the Pledged Securities (as
defined in Section 2.02 below) shall be delivered to and held
pursuant hereto by the Collateral Agent for the benefit of the
Secured Parties or a Person designated by the Collateral Agent
and shall be in suitable form for transfer by delivery, or shall
be accompanied by duly executed instruments of transfer or
assignment in blank, or (in the case of either certificated or
uncertificated securities) the Collateral Agent shall have been
provided with an Opinion of Counsel that, in the opinion of such
Counsel, such action has been taken with respect to the
recording, registering, filing and all other actions necessary to
make effective the lien intended by this Agreement and to perfect
the security interest granted herein with respect to such
certificated or uncertificated securities and that there is a
valid and perfected security interest in such Collateral,
enforceable against Debtor and all third parties and securing
payment of the Obligations. The Collateral Agent shall have the
right, at any time in its discretion and without notice to
Debtor, to transfer to or to register in the name of the
Collateral Agent or any of its nominees any or all of the Pledged
Securities. In addition, the Collateral Agent shall have the
right at any time to exchange certificates or instruments
representing or evidencing Pledged Securities for certificates or
instruments of smaller or larger denominations.
ARTICLE 2
DEFINITIONS
Section 2.01 Terms Defined Above. As used in this
Agreement, the terms defined above shall have the meanings
respectively assigned to them. Other capitalized terms that are
defined in the Indenture but that are not defined herein shall
have the same meanings as defined in the Indenture.
Section 2.02 Certain Definitions. As used in this
Agreement, the following terms shall have the following meanings,
unless the context otherwise requires:
"Agreement" means this Security Agreement, as the same
may from time to time be amended or supplemented.
"Code" means the Uniform Commercial Code as presently
in effect in the State of New York. Unless otherwise
indicated by the context herein, all uncapitalized terms
that are defined in the Code shall have their respective
meanings as used in Articles 8 and 9 of the Code.
"Collateral Agent Claims" means, at any time, all
obligations of Debtor, now or hereafter existing, to pay
fees, costs, expenses, indemnities and other amounts to the
Collateral Agent pursuant to Sections 6(f), 8 or 16 of the
Collateral Agency Agreement or pursuant to any Security
Document or Transaction Document.
"Event of Default" means any event specified in
Section 6.01.
"Highest Lawful Rate" means the lesser of 15% per
annum and the maximum rate of nonusurious interest allowed
from time to time by applicable law.
"Obligations" means all indebtedness, liabilities and
other obligations of Debtor (including, but not limited to,
all such obligations in respect of principal, premiums,
interest, fees, Collateral Agent Claims, Trustee Claims,
penalties, indemnities, costs and other expenses, whether
due after acceleration or otherwise) to the Collateral
Agent, the Trustee or the Bondholders (of whatsoever nature
and howsoever evidenced) under and pursuant to the Bonds,
the Indenture, this Agreement, the Collateral Agency
Agreement, the other Security Documents and the obligations
of PIC or its controlling affiliate to a Letter of Credit
Provider under and pursuant to a Reimbursement Agreement
(if entered into), in each case, direct or indirect,
primary or secondary, fixed or contingent, now or hereafter
arising therefrom or relating thereto.
"Obligor" means any Person, other than Debtor, liable
(whether directly or indirectly, primarily or secondarily)
for the payment or performance of any of the Obligations
whether as maker, co-maker, endorser, guarantor,
accommodation party, general partner or otherwise.
"Pledged Securities" means all of the securities and
other property (whether or not the same constitutes a
"security" under the Code) referred to in Section 1.02 and
all additional securities (as that term is defined in the
Code), if any, constituting Collateral under this
Agreement.
"Trustee Claims" means, at any time, all obligations
of Debtor, now or hereafter existing, to pay fees, costs,
expenses, indemnities or other amounts to the Trustee
pursuant to the Indenture.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
In order to induce the Collateral Agent to accept this
Agreement, Debtor represents and warrants to Secured Party (which
representations and warranties will survive the creation and
payment of the Obligations) that:
Section 3.01 Ownership of Collateral; Encumbrances.
Debtor is the owner of, and has good and marketable title to, the
Collateral free and clear of any Lien except for the pledge and
security interest granted to the Collateral Agent for the benefit
of the Secured Parties and Liens for Taxes not yet due or that
are subject to a Good Faith Contest. No financing statement
covering the Collateral is on file in any public office other
than terminated financing statements and the financing statements
filed pursuant to this Agreement or in connection with the
transactions contemplated by the Indenture. The Collateral is
not subject to any law (except as may be required in connection
with any disposition of the Collateral by laws affecting the
offering and sale of securities generally) or contractual
obligation that would be violated by or that would prohibit the
grant of the security interest in the Collateral granted pursuant
hereto or the disposition of the Collateral by or to the
Collateral Agent upon the occurrence and continuance of an Event
of Default.
Section 3.02 Debtor. Debtor is a corporation duly
organized and validly existing under the laws of the State of
Delaware. Debtor has full power, authority and legal right to
enter into this Agreement and perform hereunder and to pledge and
deliver all of the Collateral pursuant to this Agreement. The
pledge of the Collateral and the granting of a security interest
in the Collateral has been duly authorized by Debtor and this
Agreement has been duly authorized, executed and delivered by
Debtor and constitutes the legal, valid and binding obligation of
Debtor enforceable against Debtor in accordance with its terms
except as enforceability may be limited by applicable bankruptcy,
insolvency, moratorium or other similar laws affecting creditor's
rights generally and except as enforceability may be limited by
general principles of equity (whether considered in a suit at law
or in equity).
Section 3.03 No Required Consent. No authorization,
consent, approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required
that has not been obtained for (i) the due execution, delivery
and performance by Debtor of this Agreement, (ii) the grant by
Debtor of the security interest granted by this Agreement,
(iii) the perfection of such security interest or (iv) the
exercise by the Collateral Agent of its rights and remedies under
this Agreement (except as may be required (x) in connection with
such disposition by laws affecting the offering and sale of
securities generally, (y) under federal and state laws, rules and
regulations and applicable interpretations thereof providing for
the supervision or regulation of the banking and trust businesses
generally and applicable to the Collateral Agent or any Secured
Party and (z) with respect to the Collateral Agent or any Secured
Party as a result of any relationship which such Person may have
with Persons not parties to, or any activity or business such
Person may conduct other than pursuant to, any of the Financing
Documents).
The execution, delivery and performance of this Agreement
will not (i) require any consent or approval of the Board of
Directors or stockholders of Debtor that has not been obtained;
(ii) violate the provisions of Debtor's Certificate of
Incorporation or By-Laws; (iii) violate the provisions of any law
(including, without limitation, any usury law), regulation or
order of any governmental authority applicable to Debtor or any
of its subsidiaries; (iv) conflict with, result in a breach or
constitute a default under any agreement relating to the
management or affairs of Debtor or any of its subsidiaries, or
any indenture or loan or credit agreement or any other material
agreement, lease or instrument to which Debtor is a party or by
which Debtor or any of its subsidiaries or any of their material
properties may be bound; or (v) result in or create any Lien
(other than Permitted Liens) under, or require any consent under,
any indenture or loan or credit agreement or any other material
agreement, instrument or award of any governmental authority
binding upon Debtor or any of its subsidiaries or any of their
properties.
Section 3.04 Pledged Securities. The Pledged Securities
have been duly authorized and validly issued, and, as applicable,
are fully paid and non-assessable.
Section 3.05 First Priority Security Interest. The grant
of the security interest in the Collateral and the pledge of the
Pledged Securities delivered to the Collateral Agent pursuant to
this Agreement concurrently with the execution and delivery of
this Agreement and the filing of UCC-1 financing statements with
the Secretary of State of Texas and the Secretary of State of the
State of Delaware create a valid and perfected first priority
security interest in the Collateral, enforceable against Debtor
and all third parties and securing payment of the Obligations,
assuming continuous possession of the Pledged Securities by the
Collateral Agent, subject to no Liens other than those Liens
created by this Agreement.
Section 3.06 No Filings By Third Parties. No financing
statement or other public notice or recording covering the
Collateral is on file in any public office (other than any
financing statement or other public notice or recording naming
the Collateral Agent, as agent, as the secured party therein),
and Debtor will not execute any such financing statement or other
public notice or recording so long as any of the Obligations are
outstanding (other than any financing statement or other public
notice or recording naming the Collateral Agent, as agent, as the
secured party therein).
Section 3.07 No Name Changes. Debtor has not, during the
preceding five years, entered into any contract, agreement,
security instrument or other document using a name other than, or
been known by or otherwise used any name other than, the name
used by Debtor herein.
Section 3.08 Location of Debtor. Debtor's chief
executive office and Debtor's records concerning the Collateral
are located at the address or location set forth in the opening
paragraph hereof.
Section 3.09 No Suits. There is no action, suit or
proceeding at law or in equity or by or before any governmental
authority, arbitral tribunal or other body now pending or, to the
best knowledge of Debtor, threatened against Debtor or its
subsidiaries that question the validity or legality of or seeks
damages in connection with this Agreement or any action to be
taken pursuant to this Agreement that could reasonably be
expected to have a material adverse effect on Debtor.
Section 3.10 Regulatory Status. Debtor is not (i) an
"investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of
1940, as amended, or (ii) a "holding company" or a "subsidiary
company" of a "holding company" or an "affiliate" of a "holding
company" or a "subsidiary company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended ("PUHCA")
or (iii) a "registered holding company" or a "subsidiary company"
of a "registered holding company" or an "affiliate" of a
"registered holding company" or a "subsidiary company" of a
"registered holding company" within the meaning of PUHCA.
Section 3.11 Benefits. Debtor has derived and will
continue to derive direct and indirect benefits from the
incurrence of its obligations under this Agreement.
Section 3.12 Collateral. All statements or other
information provided by Debtor to the Collateral Agent or any
Secured Party describing or with respect to the Collateral is or
(in the case of subsequently furnished information) will be when
provided correct and complete in all material respects. The
delivery at any time by Debtor to the Collateral Agent of
additional Collateral or of additional descriptions of Collateral
shall constitute a representation and warranty by Debtor to the
Collateral Agent hereunder that the representations and
warranties of this Article 3 are correct insofar as they would
pertain to such Collateral or the descriptions thereof.
Section 3.13 Delivery of Letters of Credit. With respect
to any Collateral supported by letters of credit, each of such
letters of credit has been delivered to the Collateral Agent
(provided that all letters of credit referred to in Section 1.02
shall be subject to the security interest created by this
Agreement irrespective of whether or not such delivery shall have
been made).
ARTICLE 4
COVENANTS AND AGREEMENTS
Debtor will at all times comply with the covenants and
agreements contained in this Article 4, from the date hereof and
for so long as any part of the Obligations are outstanding.
Section 4.01 Change in Location of Debtor. Debtor will
give the Collateral Agent 30 days' prior written notice of
(i) the opening or closing of any place of Debtor's business or
(ii) any change in the location of Debtor's chief executive
office or address.
Section 4.02 Change in Debtor's Name or Corporate
Structure. Debtor will not change its name, identity or
corporate structure (including, without limitation, any merger,
consolidation or sale of substantially all of its assets) without
notifying the Collateral Agent of such change in writing at least
30 days prior to the effective date of such change. Without the
express written consent of the Collateral Agent, however, Debtor
will not engage in any other business or transaction under any
name other than Debtor's name hereunder.
Section 4.03 Delivery of Letters of Credit and
Instruments. Debtor will deliver each letter of credit, if any,
included in the Collateral to Collateral Agent, in each case
forthwith upon receipt by or for the account of Debtor.
Section 4.04 Sale, Disposition or Encumbrance of
Collateral. Debtor will not in any way encumber any of the
Collateral (or permit or suffer any of the Collateral to be
encumbered) or sell, pledge, assign, lend or otherwise dispose of
or transfer any of the Collateral to or in favor of any Person
other than the Collateral Agent for the benefit of the Secured
Parties.
Section 4.05 Proceeds of Collateral. Debtor will deliver
to the Collateral Agent promptly upon receipt all proceeds
delivered to Debtor from the sale or disposition of any
Collateral. If chattel paper, documents or instruments are
received as proceeds, that are required to be delivered to the
Collateral Agent, they will be, immediately upon receipt,
properly endorsed or assigned and delivered to the Collateral
Agent as Collateral. This Section 4.05 shall not be construed to
permit sales or dispositions of Collateral except as may be
elsewhere expressly permitted by this Agreement.
Section 4.06 Records and Information. Debtor shall keep
accurate and complete records of the Collateral (including
proceeds, payments, distributions, income and profits). The
Collateral Agent may at any time have access to, examine, audit,
make extracts from and inspect without hindrance or delay
Debtor's records, files and the Collateral. Debtor will promptly
provide written notice to the Collateral Agent of all information
that in any way relates to or affects the filing of any financing
statement or other public notices or recordings, or the delivery
and possession of items of Collateral for the purpose of
perfecting a security interest in the Collateral. Debtor will
also promptly furnish such information as the Collateral Agent
may from time to time reasonably request regarding (i) the
business, affairs or financial condition of Debtor or (ii) the
Collateral or the Collateral Agent's rights or remedies with
respect thereto.
Section 4.07 Reimbursement of Expenses. Debtor will pay
to the Collateral Agent all reasonable advances, charges, costs
and expenses (including, without limitation, all reasonable costs
and expenses of holding, preparing for sale and selling,
collecting or otherwise realizing upon the Collateral if an Event
of Default occurs and all reasonable attorneys' fees, legal
expenses and court costs) incurred by the Collateral Agent in
connection with the exercise of the Collateral Agent's rights and
remedies hereunder on behalf of the Secured Parties. Debtor
agrees to indemnify and hold the Collateral Agent and the Secured
Parties harmless from and against and covenants to defend the
Collateral Agent and the Secured Parties against any and all
losses, damages, claims, costs, penalties, liabilities and
expenses, including, without limitation, court costs and
reasonable attorneys' fees, incurred because of, incident to, or
with respect to this Agreement or the Collateral (including,
without limitation, any exercise of rights or remedies in
connection therewith). All amounts for which Debtor is liable
pursuant to this Section 4.07 shall be due and payable by Debtor
to the Collateral Agent upon demand. If Debtor fails to make
such payment upon demand (or if demand is not made due to an
injunction or stay arising from bankruptcy or other proceedings)
and the Collateral Agent or any Secured Party pays such amount,
the same shall be due and payable by Debtor to the Collateral
Agent, plus interest thereon from the date of the Collateral
Agent's or Secured Party's demand (or from the date of the
Collateral Agent's payment or such Secured Party's payment if
demand is not made due to such proceedings) at the Highest Lawful
Rate.
Section 4.08 Further Assurances. Upon the request of the
Collateral Agent, Debtor shall (at Debtor's expense) execute and
deliver all such assignments, certificates, instruments,
securities, financing statements, notifications to financial
intermediaries, clearing corporations, issuers of securities or
other third parties or other documents and give further
assurances and do all other acts and things as the Collateral
Agent may reasonably request to perfect the Collateral Agent's
interest in the Collateral or to protect, enforce or otherwise
effect the Collateral Agent's rights and remedies hereunder.
Section 4.09 Note Powers. Debtor shall furnish to the
Collateral Agent such endorsements, note powers and other
instruments as may be required by the Collateral Agent to assure
the transferability of the Notes and the other Collateral, if
applicable, when and as often as may be requested by the
Collateral Agent.
ARTICLE 5
RIGHTS, DUTIES AND POWERS OF COLLATERAL AGENT
The following rights, duties and powers of the Collateral
Agent are applicable irrespective of whether an Event of Default
occurs and is continuing:
Section 5.01 Discharge Encumbrances. The Collateral
Agent may, at its option, discharge any taxes, liens, security
interests or other encumbrances at any time levied or placed on
the Collateral. Debtor agrees to reimburse the Collateral Agent
upon demand for any payment so made, plus interest thereon from
the date of the Collateral Agent's demand at the Highest Lawful
Rate.
Section 5.02 Transfer of Collateral. The Collateral
Agent may transfer any or all of the Obligations, and upon any
such transfer the Collateral Agent may transfer its interest in
any or all of the Collateral and shall be fully discharged
thereafter from all liability therefor. Any transferee of the
Collateral shall be vested with all rights, powers and remedies
of the Collateral Agent hereunder.
Section 5.03 Cumulative and Other Rights. The rights,
powers and remedies of the Collateral Agent hereunder are in
addition to all rights, powers and remedies given by law or in
equity. The exercise by the Collateral Agent of any one or more
of the rights, powers and remedies herein shall not be construed
as a waiver of any other rights, powers and remedies, including,
without limitation, any other rights of set-off. If any of the
Obligations are given in renewal, extension for any period or
rearrangement, or applied toward the payment of debt secured by
any lien, the Collateral Agent shall be, and is hereby,
subrogated to all the rights, titles, interests and liens
securing the debt so renewed, extended, rearranged or paid. The
Collateral Agent shall also be entitled to all of the rights,
remedies and protections set forth in the Collateral Agency
Agreement, as if expressly set forth herein.
Section 5.04 Disclaimer of Certain Duties.
(a) The powers conferred upon the Collateral Agent by this
Agreement are to protect its interest in the Collateral and shall
not impose any duty upon the Collateral Agent or any Secured
Party to exercise any such powers. Debtor hereby agrees that the
Collateral Agent shall not be liable for, nor shall the
indebtedness evidenced by the Obligations be diminished by, the
Collateral Agent's delay or failure to collect upon, foreclose,
sell, take possession of or otherwise obtain value for the
Collateral.
(b) The Collateral Agent shall be under no duty
whatsoever to make or give any presentment, notice of dishonor,
protest, demand for performance, notice of non-performance,
notice of intent to accelerate, notice of acceleration, or other
notice or demand in connection with any Collateral or the
Obligations, or to take any steps necessary to preserve any
rights against any Obligor or other Person. Debtor waives any
right of marshalling in respect of any and all Collateral, and
waives any right to require the Collateral Agent or any Secured
Party to proceed against any Obligor or other Person, exhaust any
Collateral or enforce any other remedy which the Collateral Agent
or any Secured Party now has or may hereafter have against any
Obligor or other Person.
Section 5.05 Modification of Obligations; Other Security.
Debtor waives (i) any and all notice of acceptance, creation,
modification, rearrangement, renewal or extension for any period
of any instrument executed by any Obligor in connection with the
Obligations and (ii) any defense of any Obligor by reason of
disability, lack of authorization, cessation of the liability of
any Obligor or for any other reason. Debtor authorizes the
Collateral Agent, without notice or demand and without any
reservation of rights against Debtor and without affecting
Debtor's liability hereunder or on the Obligations, from time to
time to (x) take and hold other property, other than the
Collateral, as security for the Obligations, and exchange,
enforce, waive and release any or all of the Collateral,
(y) apply the Collateral in the manner permitted by this
Agreement, the Collateral Agency Agreement or the Indenture and
(z) renew, extend for any period, accelerate, amend or modify,
supplement, enforce, compromise, settle, waive or release the
obligations of any Obligor or any instrument or agreement of such
other Person with respect to any or all of the Obligations or
Collateral.
Section 5.06 Waiver of Notice; Demand and Presentment.
Debtor hereby waives any demand, notice of default, notice of
acceleration of the maturity of the Obligations, notice of
intention to accelerate the maturity of the Obligations,
presentment, protest and notice of dishonor as to any action
taken by the Collateral Agent or any Secured Party in connection
with this Agreement, or any instrument or document.
Section 5.07 Custody and Preservation of the Collateral.
The Collateral Agent shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment substantially
equal to that which comparable secured parties accord comparable
collateral, it being understood and agreed, however, that neither
the Collateral Agent nor any Secured Party shall have
responsibility for (i) ascertaining or taking action with respect
to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not the Collateral
Agent has or is deemed to have knowledge of such matters, or
(ii) taking any necessary steps to preserve rights against
Persons or entities with respect to any Collateral.
ARTICLE 6
EVENTS OF DEFAULT
Section 6.01 Events. It shall constitute an Event of
Default under this Agreement if an Event of Default occurs and is
continuing under the Indenture.
Section 6.02 Remedies. Upon the occurrence and during
the continuance of any Event of Default, the Collateral Agent may
take any or all of the following actions without notice (except
where expressly required below or in the Indenture) or demand to
Debtor:
(a) Declare all or part of the indebtedness pursuant
to the Obligations immediately due and payable and enforce
payment of the same by Debtor or any Obligor.
(b) Sell, in one or more sales and in one or more
parcels, or otherwise dispose of any or all of the
Collateral in any commercially reasonable manner as the
Collateral Agent may elect, in a public or private
transaction, at any location as deemed reasonable by the
Collateral Agent either for cash or credit or for future
delivery at such price as the Collateral Agent may deem
fair, and (unless prohibited by the Code, as adopted in any
applicable jurisdiction) the Collateral Agent or Secured
Party may be the purchaser of any or all Collateral so sold
and may apply upon the purchase price therefor any
Obligations secured hereby. Any such sale or transfer by
the Collateral Agent either to itself or to any other
Person shall be absolutely free from any claim of right by
Debtor, including any equity or right of redemption, stay
or appraisal which Debtor has or may have under any rule of
law, regulation or statute now existing or hereafter
adopted. Upon any such sale or transfer, the Collateral
Agent shall have the right to deliver, assign and transfer
to the purchaser or transferee thereof the Collateral so
sold or transferred. If the Collateral Agent deems it
advisable to do so, it may restrict the bidders or
purchasers of any such sale or transfer to Persons or
entities who will represent and agree that they are
purchasing the Collateral for their own account and not
with the view to the distribution or resale of any of the
Collateral. The Collateral Agent may, at its discretion,
provide for a public sale, and any such public sale shall
be held at such time or times within ordinary business
hours and at such place or places as the Collateral Agent
may fix in the notice of such sale. The Collateral Agent
shall not be obligated to make any sale pursuant to any
such notice. The Collateral Agent may, without notice or
publication, adjourn any public or private sale by
announcement at any time and place fixed for such sale, and
such sale may be made at any time or place to which the
same may be so adjourned. If any sale or transfer
hereunder is not completed or is defective in the opinion
of the Collateral Agent, such sale or transfer shall not
exhaust the rights of the Collateral Agent hereunder, and
the Collateral Agent shall have the right to cause one or
more subsequent sales or transfers to be made hereunder.
If only part of the Collateral is sold or transferred such
that the Obligations remain outstanding (in whole or in
part), the Collateral Agent's rights and remedies hereunder
shall not be exhausted, waived or modified, and the
Collateral Agent is specifically empowered to make one or
more successive sales or transfers until all the Collateral
shall be sold or transferred and all the Obligations are
paid. If that the Collateral Agent elects not to sell the
Collateral, the Collateral Agent retains its rights to
dispose of or utilize the Collateral or any part or parts
thereof in any manner authorized or permitted by law or in
equity, and to apply the proceeds of the same towards
payment of the Obligations. Each and every method of
disposition of the Collateral described in this subsection
or in subsection (d) shall constitute disposition in a
commercially reasonable manner.
(c) Take possession of all books and records of
Debtor pertaining to the Collateral. The Collateral Agent
shall have the authority to enter upon any real property or
improvements thereon in order to obtain any such books or
records, or any Collateral located thereon, and remove the
same therefrom without liability.
(d) Apply proceeds of the disposition of the
Collateral to the Obligations in accordance with the
Collateral Agency Agreement and as permitted by the Code or
otherwise permitted by law or in equity. Such application
may include, without limitation, the reasonable attorneys'
fees and legal expenses incurred by the Collateral Agent
and the Secured Parties.
(e) Appoint any Person as agent to perform any act or
acts necessary or incident to any sale or transfer by the
Collateral Agent of the Collateral.
(f) Receive, change the address for delivery, open
and dispose of mail addressed to Debtor, and to execute,
assign and endorse negotiable and other instruments for the
payment of money, documents of title or other evidences of
payment, shipment or storage for any form of Collateral on
behalf of and in the name of Debtor.
(g) Exercise all other rights and remedies permitted
by law or in equity.
Section 6.03 Attorney-in-Fact. Debtor hereby irrevocably
appoints the Collateral Agent as Debtor's attorney-in-fact, with
full authority in the place and stead of Debtor and in the name
of Debtor or otherwise, from time to time in the Collateral
Agent's discretion upon the occurrence and during the continuance
of an Event of Default, but at Debtor's cost and expense and
without notice to Debtor, to take any action and to execute any
assignment, certificate, financing statement, stock power,
notification, document or instrument that the Collateral Agent
may deem necessary or advisable to accomplish the purposes of
this Agreement, including, without limitation, to receive,
endorse and collect all instruments made payable to Debtor
representing any dividend, interest payment or other distribution
in respect of the Collateral or any part thereof and to give full
discharge for the same.
Section 6.04 Liability for Deficiency. If any sale or
other disposition of Collateral by the Collateral Agent or any
other action of the Collateral Agent or any Secured Party
hereunder results in reduction of the Obligations, such action
will not release Debtor from its liability to the Collateral
Agent and the Secured Parties for any unpaid Obligations,
including costs, charges and expenses incurred in the liquidation
of Collateral, together with interest thereon, and the same shall
be immediately due and payable to the Collateral Agent at the
Collateral Agent's address set forth in the opening paragraph
hereof.
Section 6.05 Reasonable Notice. If any applicable
provision of any law requires the Collateral Agent or any Secured
Party to give reasonable notice of any sale or disposition or
other action, Debtor hereby agrees that five days' prior written
notice shall constitute reasonable notice thereof. Such notice,
in the case of public sale, shall state the time and place fixed
for such sale and, in the case of private sale, the time after
which such sale is to be made.
Section 6.06 Non-judicial Enforcement. The Collateral
Agent may enforce its rights hereunder without prior judicial
process or judicial hearing, and to the extent permitted by law
Debtor expressly waives any and all legal rights which might
otherwise require the Collateral Agent to enforce its rights by
judicial process.
ARTICLE 7
MISCELLANEOUS PROVISIONS
Section 7.01 Notices. Any notice required or permitted
to be given under or in connection with this Agreement shall be
given in accordance with the notice provisions of the Indenture
with respect to Debtor and in accordance with the notice
provisions of the Collateral Agency Agreement with respect to the
Collateral Agent.
Section 7.02 Amendments and Waivers. The Collateral
Agent's acceptance of partial or delinquent payments or any
forbearance, failure or delay by the Collateral Agent in
exercising any right, power or remedy hereunder shall not be
deemed a waiver of any obligation of Debtor or any Obligor, or of
any right, power or remedy of the Collateral Agent; and no
partial exercise of any right, power or remedy shall preclude any
other or further exercise thereof. The Collateral Agent may
remedy any Event of Default hereunder or in connection with the
Obligations without waiving the Event of Default so remedied.
Debtor hereby agrees that if the Collateral Agent agrees to a
waiver of any provision hereunder, or an exchange of or release
of the Collateral, or the addition or release of any Obligor or
other Person, any such action shall not constitute a waiver of
any of the Collateral Agent's other rights or of Debtor's
obligations hereunder. This Agreement may be amended only by an
instrument in writing executed jointly by Debtor and the
Collateral Agent and may be supplemented only by documents
delivered or to be delivered in accordance with the express terms
hereof.
Section 7.03 Copy as Financing Statement. A photocopy or
other reproduction of this Agreement may be delivered by Debtor
or the Collateral Agent to any financial intermediary or other
third party for the purpose of transferring or perfecting any or
all of the Pledged Securities to the Collateral Agent or its
designee or assignee and a photocopy or other reproduction of
this Agreement or any financing statement covering the Collateral
is sufficient as a financing statement, and the same may be filed
with the appropriate filing authority for the purpose of
perfecting the Collateral Agent's security interest in the
Collateral.
Section 7.04 Possession of Collateral. The Collateral
Agent shall be deemed to have possession of any Collateral in
transit to it or set apart for it (or, in either case, any of its
agents, affiliates or correspondents).
Section 7.05 Redelivery of Collateral. If any sale or
transfer of Collateral by the Collateral Agent results in full
satisfaction of the Obligations, and after such sale or transfer
and discharge there remains a surplus of proceeds, the Collateral
Agent will deliver to Debtor such excess proceeds in a
commercially reasonable time; provided, however, that neither the
Collateral Agent nor any Secured Party shall have any liability
for any interest, cost or expense in connection with any delay in
delivering such proceeds to Debtor.
Section 7.06 Governing Law; Jurisdiction. This Agreement
and the security interest granted hereby shall be construed in
accordance with and governed by the laws of the State of New York
(except to the extent that the laws of any other jurisdiction
govern the perfection and priority of the security interests
granted hereby).
Section 7.07 Continuing Security Agreement.
(a) Except as may be expressly applicable pursuant to
Section 9-505 of the Code, no action taken or omission to act by
the Collateral Agent or the Secured Parties hereunder, including,
without limitation, any other action taken or inaction pursuant
to Section 6.02, shall be deemed to constitute a retention of the
Collateral in satisfaction of the Obligations or otherwise to be
in full satisfaction of the Obligations, and the Obligations
shall remain in full force and effect, until the Collateral Agent
and the Secured Parties shall have applied payments (including,
without limitation, collections from Collateral) towards the
Obligations in the full amount then outstanding or until such
subsequent time as is hereinafter provided in subsection (b)
below.
(b) To the extent that any payments on the Obligations or
proceeds of the Collateral are subsequently invalidated, declared
to be fraudulent or preferential, set aside or required to be
repaid to a trustee, debtor in possession, receiver or other
Person under any bankruptcy law, common law or equitable cause,
then to such extent the Obligations so satisfied shall be revived
and continue as if such payment or proceeds had not been received
by the Collateral Agent or the Secured Parties, and the
Collateral Agent's and the Secured Parties' security interests,
rights, powers and remedies hereunder shall continue in full
force and effect. In such event, this Agreement shall be
automatically reinstated if it shall theretofore have been
terminated pursuant to Section 7.08.
Section 7.08 Termination. The grant of a security
interest hereunder and all of the Collateral Agent's and the
Secured Parties' rights, powers and remedies in connection
therewith shall remain in full force and effect until the
Collateral Agent has (i) retransferred and delivered all
Collateral in its possession to Debtor, (ii) executed a
registration of release with respect to all Pledged Securities,
if any, as to which the Collateral Agent held a registered
pledge; and (iii) executed a written release or termination
statement and reassigned to Debtor without recourse or warranty
any remaining Collateral and all rights conveyed hereby. Upon
the complete payment of the Obligations and the compliance by
Debtor with all covenants and agreements hereof, the Collateral
Agent, at the written request and expense of Debtor, and upon
receipt of an Officer's Certificate of Debtor stating that all
conditions precedent have been complied with, will release,
reassign and transfer the Collateral to Debtor and declare this
Agreement to be of no further force or effect. Notwithstanding
the foregoing, the reimbursement and indemnification provisions
of Section 4.07 and the provisions of subsection 7.07(b) shall
survive the termination of this Agreement.
Section 7.09 Counterparts, Effectiveness. This Agreement
may be executed in two or more counterparts, and it shall not be
necessary that the signatures of all parties hereto be contained
on any one counterpart hereof. Each counterpart is deemed an
original, but all such counterparts taken together constitute one
and the same instrument.
DEBTOR: PANDA FUNDING CORPORATION
By:________________________________
Name: Robert W. Carter
Title: Chairman of the Board, President
and Chief Executive Officer
SECURED PARTY: BANKERS TRUST COMPANY,
as Collateral Agent
By:________________________________
Name: Marie C. Rasch
Title: Vice President
EXHIBIT 10.06
SECURITY AGREEMENT
Between
PANDA CAYMAN INTERFUNDING COMPANY,
as Debtor
and
PANDA INTERFUNDING CORPORATION, as Secured Party
Dated as of July 31, 1996
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made as of
July 31, 1996, by Panda Cayman Interfunding Company, a Cayman
Islands exempted company with a principal address in care of
Maples and Calder, Ugland House, South Church Street, Grand
Cayman, Cayman Islands, British West Indies ("Debtor"); for Panda
Interfunding Corporation, with offices at 4100 Spring Valley
Road, Suite 1001, Dallas, Texas 75244 (as hereinafter defined)
and for the Letter of Credit Provider (as hereinafter defined),
if any, (collectively, the "Secured Party").
RECITALS
A. On even date herewith, the Secured Party and Panda
Funding Corporation, a Delaware corporation (hereinafter called
"Panda Funding"), and Bankers Trust Company, a New York banking
corporation, as Trustee (hereinafter called the "Trustee") are
executing a Trust Indenture (such agreement, as may from time to
time be amended, supplemented or otherwise modified, being
hereinafter called the "Indenture") providing, subject to the
terms and conditions stated therein, for the issuance by Panda
Funding from time to time of certain Pooled Project Bonds (the
"Bonds"), including without limitation, $105,525,000 in initial
aggregate principal amount of 11 5/8% Pooled Project Bonds,
Series A due 2012 (the "Series A Bonds").
B. Panda Funding will loan the entire proceeds of the
issuance of the Series A Bonds to the Secured Party (the "PIC
Loan"), which Loan will be made under a Loan Agreement dated as
of even date with this Agreement by and between Panda Funding and
Secured Party (the "PIC Loan Agreement") and evidenced by a
promissory note (the "Initial PIC Note") of Secured Party dated
July 31, 1996, and payable to Panda Funding.
C. Panda Funding may from time to time loan the proceeds
of subsequent series of Bonds (the "Additional PIC Loans") to the
Secured Party, which Additional Loans will be made under the PIC
Loan Agreement and evidenced by promissory notes of Secured Party
payable to Panda Funding (the "Additional PIC Notes").
D. The Secured Party and Debtor have entered into a Loan
Agreement dated as of July 31, 1996 (the "Cayman Loan
Agreement"), pursuant to which the Secured Party may from time to
time make loans to Debtor.
E. The Secured Party, as a precondition to making any
loans under the Cayman Loan Agreement requires that Debtor
execute and deliver this Agreement.
G. To induce the purchase from time to time of the Bonds,
which Debtor acknowledges is of substantial benefit to it (as
the ultimate recipient of the proceeds of the Bonds in the form
of the Loans pursuant to the Cayman Loan Agreement) and to secure
Debtor's obligations to Secured Party under the Cayman Loan
Agreement, Debtor desires to enter into this Agreement with
Secured Party.
H. It is a condition precedent to the issuance and
purchase of the Series A Bonds that Debtor shall have pledged the
Collateral as defined in this Agreement to the Secured Party.
I. Therefore, in order to comply with the terms and
conditions of the Cayman Loan Agreement and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Debtor hereby agrees with the Secured Party
as follows:
ARTICLE 1
SECURITY INTEREST
Section 1.01 Grant of Security Interest. Debtor hereby
pledges, assigns and grants to the Secured Party a security
interest in and right of set-off against all of the Debtor's
right, title and interest in the assets referred to in
Section 1.02 (the "Collateral") to secure the prompt payment and
performance of the "Obligations" (as defined in Section 2.02) and
the performance by Debtor of this Agreement.
Section 1.02 Collateral. The Collateral consists of the
following types or items of property:
(a) All of Debtor's rights and interests in the
following International Accounts and Funds established
under the Indenture: the International Project Account; the
International Distribution Suspense Fund; the International
Mandatory Redemption Account; and the International
Extraordinary Distribution Account (all as defined in the
Indenture);
(b) (i) All deposit accounts, passbooks, certificates
of deposit, commercial paper and other instruments relating
to the Accounts and Funds referred to in this Section 1.02;
(ii) all sums now or at any time hereafter on deposit in
such Accounts or Funds or evidenced by such passbooks,
certificates of deposit or other instruments; (iii) any and
all renewals, rearrangements or reissues thereof, whether
in respect of the value thereof, interest paid thereon,
dividends declared thereon or otherwise together with all
shares, deposits and interests of every kind of Debtor
therein and all investments made therefrom; and (iv) all
interest, dividends, income and profits from any of the
property referred to in Section 1.02(a) and other sums due
or to become due on account of any of the property referred
to in Section 1.02(a);
(c) All of Debtor's rights and interest in and to (i)
all distributions and other amounts received by any PIC
International Entity or any other Person on behalf of any
PIC International Entity from, or in connection with, the
Non-U.S. Projects that may be legally distributed or paid
to any PIC International Entity without contravention of
any Project Agreement, including (A) all distributions,
either directly or indirectly, from International Project
Entities to any PIC International Entity and (B) all
amounts received by any PIC International Entity or any
other Person on behalf of any PIC International Entity in
respect of such PIC International Entity's investments in
or loans to International Project Entities, in each case
other than Extraordinary Financial Distributions and
distributions received by or on behalf of any PIC
International Entity that are required to be deposited in
the International Mandatory Redemption Account pursuant to
Section 4.8(a) and (ii) all interest earned on the amounts
on deposit in the International Accounts and Funds, but
only to the extent such interest has been received.
(d) All of the Debtor's general intangibles relating
to the Debtor's personal property described in Sections
1.02(c) and (d) above, including, without limitation, any
of the foregoing which may be more specifically indicated
in the remainder of this Section 1.02.
(e) (i) Any related or additional property from time
to time delivered to or deposited by or for the account of
Debtor; (ii) all property used or usable in connection with
any property referred to in this Section 1.02; (iii) all
proceeds, replacements, additions to and substitutions for
any of the property referred to in this Section 1.02 and
claims against third parties; and (iv) all books and
records related to any of the property referred to in this
Section 1.02.
(f) All general intangibles related to any property
referred to in this Section 1.02, including, without
limitation, all (i) letters of credit, bonds, guaranties,
purchase or sales agreements and other contractual rights,
rights to performance, and claims for damages, refunds
(including tax refunds) or other monies due or to become
due; (ii) orders, franchises, permits, certificates,
licenses, consents, exemptions, variances, authorizations
or other approvals by any governmental agency or court;
(iii) business records, computer tapes and computer
software; (iv) goodwill; and (v) other intangible personal
property, whether similar or dissimilar to the property
referred to in this Section 1.02.
It is expressly contemplated that additional securities or other
property may from time to time be pledged, assigned or granted to
Secured Party as additional security for the Obligations, and the
term "Collateral" as used herein shall be deemed for all purposes
hereof to include all such additional securities and property,
together with all other property of the types described above
related thereto.
Section 1.03 Transfer of Collateral. All passbooks,
certificates of deposit and instruments representing or
evidencing the Collateral shall be delivered to the Secured
Party.
Section 1.04 Institutions Holding Deposits. If the
Collateral consists of any deposit accounts, passbooks,
certificates of deposit or other instruments issued by one or
more depository institutions other than the Secured Party
("Institutions"), then the remaining provisions contained in this
Section 1.04 shall apply. Debtor hereby irrevocably authorizes
and directs each Institution to hold such Collateral as bailee
and custodian for the benefit of the Secured Party, to indicate
on such Institution's records this assignment of the Collateral
in favor of the Secured Party, with information concerning the
amount on deposit in the accounts, passbooks, certificates of
deposit and other instruments constituting such Collateral,
(without notice to or further consent from Debtor) to deliver to
the Secured Party any or all funds representing such Collateral.
The Institutions shall have no duty to make any inquiry as to the
status of or the amount owing in respect of the Obligations.
Debtor hereby agrees to indemnify each Institution and hold it
harmless from all expenses and losses it incurs or suffers as a
result of any delivery to the Secured Party of funds in respect
of such Collateral. The Secured Party is authorized to notify
the Institutions of the Secured Party's interest in such
Collateral under this Agreement.
ARTICLE 2
DEFINITIONS
Section 2.01 Terms Defined Above. As used in this
Agreement, the terms defined above shall have the meanings
respectively assigned to them. Other capitalized terms that are
defined in the Cayman Loan Agreement but that are not defined
herein shall have the same meanings as defined in the Cayman Loan
Agreement.
Section 2.02 Certain Definitions. As used in this
Agreement, the following terms shall have the following meanings,
unless the context otherwise requires:
"Agreement" means this Security Agreement, as the same
may from time to time be amended or supplemented.
"Code" means the Uniform Commercial Code as presently
in effect in the State of New York. Unless otherwise
indicated by the context herein, all uncapitalized terms
which are defined in the Code shall have their respective
meanings as used in Articles 8 and 9 of the Code.
"Event of Default" means any event specified in the
Cayman Loan Agreement.
"Highest Lawful Rate" means the lesser of 15% per
annum and the maximum rate of nonusurious interest allowed
from time to time by applicable law.
"Obligations" means all indebtedness, liabilities and
other obligations of Debtor (including, but not limited to,
all such obligations in respect of principal, premiums,
interest, fees, penalties, indemnities, costs and other
expenses, whether due after acceleration or otherwise) to
the Secured Party (of whatsoever nature and howsoever
evidenced) under and pursuant to the Cayman Loan Agreement,
the Notes and this Agreement, in each case, direct or
indirect, primary or secondary, fixed or contingent, now or
hereafter arising therefrom or relating thereto.
"Obligor" means any Person, other than Debtor, liable
(whether directly or indirectly, primarily or secondarily)
for the payment or performance of any of the Obligations
whether as maker, co-maker, endorser, guarantor,
accommodation party, general partner or otherwise.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Debtor represents and warrants to the Secured Party (which
representations and warranties will survive the creation and
payment of the Obligations) that:
Section 3.01 Ownership of Collateral; Encumbrances.
Debtor is the owner of, and has good and marketable title to, the
Collateral free and clear of any Lien except for the pledge and
security interest granted to the Secured Party and Liens for
Taxes not yet due or that are subject to a Good Faith Contest.
No financing statement covering the Collateral is on file in any
public office other than terminated financing statements and the
financing statements filed pursuant to this Agreement or in
connection with the transactions contemplated by the Cayman Loan
Agreement. The Collateral is not subject to any law (except as
may be required in connection with any disposition of the
Collateral by laws affecting the offering and sale of securities
generally) or contractual obligation that would be violated by or
that would prohibit the grant of the security interest in the
Collateral granted pursuant hereto or the disposition of the
Collateral by or to the Secured Party upon the occurrence and
continuance of an Event of Default.
Section 3.02 Debtor. Debtor is an exempted company duly
organized and validly existing under the laws of the Cayman
Islands. Debtor has full power, authority and legal right to
enter into this Agreement and perform hereunder and to pledge and
deliver all of the Collateral pursuant to this Agreement. The
pledge of the Collateral and the granting of a security interest
in the Collateral has been duly authorized by Debtor and this
Agreement has been duly authorized, executed and delivered by
Debtor and constitutes the legal, valid and binding obligation of
Debtor enforceable against Debtor in accordance with its terms
except as enforceability may be limited by applicable bankruptcy,
insolvency, moratorium or other similar laws affecting creditor's
rights generally and except as enforceability may be limited by
general principles of equity (whether considered in a suit at law
or in equity).
Section 3.03 No Required Consent. No authorization,
consent, approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required
that has not been obtained for (i) the due execution, delivery
and performance by Debtor of this Agreement, (ii) the grant by
Debtor of the security interest granted by this Agreement,
(iii) the perfection of such security interest or (iv) the
exercise by the Secured Party of its rights and remedies under
this Agreement
The execution, delivery and performance of this Agreement
will not (i) require any consent or approval of the Board of
Directors or stockholders of Debtor that has not been obtained;
(ii) violate the provisions of Debtor's Memorandum of Association
or Articles of Association; (iii) violate the provisions of any
law (including, without limitation, any usury law), regulation or
order of any governmental authority applicable to Debtor or any
of its subsidiaries; (iv) conflict with, result in a breach or
constitute a default under any agreement relating to the
management or affairs of Debtor or any of its subsidiaries, or
any indenture or loan or credit agreement or any other material
agreement, lease or instrument to which Debtor is a party or by
which Debtor or any of its subsidiaries or any of their material
properties may be bound; or (v) result in or create any Lien
(other than Excepted Liens) under, or require any consent under,
any indenture or loan or credit agreement or any other material
agreement, instrument or award of any governmental authority
binding upon Debtor or any of its subsidiaries or any of their
properties.
Section 3.04 Genuineness of Collateral; Descriptions.
Each deposit account, passbook, certificate of deposit,
commercial paper or other instrument constituting Collateral
hereunder is genuine in all respects and what it purports to be,
and any representation made by Debtor to the Secured Party
concerning the principal balance of and interest, dividends or
other income accrued or payable on the deposit accounts,
passbooks, certificates of deposit, commercial paper or other
instruments representing the Collateral are true and correct.
Section 3.05 First Priority Security Interest. The grant
of the security interest in the Collateral pursuant to this
Agreement creates a valid and enforceable first priority security
interest in the Collateral, enforceable against Debtor and all
third parties and securing payment of the Obligations subject to
no Liens other than the Liens created by this Agreement.
Section 3.06 No Name Changes. Debtor has not, during the
preceding five years, entered into any contract, agreement,
security instrument or other document using a name other than, or
been known by or otherwise used any name other than, the name
used by Debtor herein.
Section 3.07 Location of Debtor. Debtor's chief
executive office and Debtor's records concerning the Collateral
are located at the address or location set forth in the opening
paragraph hereof.
Section 3.08 No Suits. There is no action, suit or
proceeding at law or in equity or by or before any governmental
authority, arbitral tribunal or other body now pending or, to the
best knowledge of Debtor, threatened against Debtor or its
subsidiaries that question the validity or legality of or seeks
damages in connection with this Agreement or any action to be
taken pursuant to this Agreement that could reasonably be
expected to have a material adverse effect on Debtor.
Section 3.09 Regulatory Status. Debtor is not (i) an
"investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of
1940, as amended, or (ii) a "holding company" or a "subsidiary
company" of a "holding company" or an "affiliate" of a "holding
company" or a "subsidiary company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended ("PUHCA")
or (iii) a "registered holding company" or a "subsidiary company"
of a "registered holding company" or an "affiliate" of a
"registered holding company" or a "subsidiary company" of a
"registered holding company" within the meaning of PUHCA.
Section 3.10 Benefits. Debtor has derived and will
continue to derive direct and indirect benefits from the
incurrence of its obligations under this Agreement.
Section 3.11 Collateral. All statements or other
information provided by Debtor to the Secured Party describing or
with respect to the Collateral is or (in the case of subsequently
furnished information) will be when provided correct and complete
in all material respects. The delivery at any time by Debtor to
the Secured Party of additional Collateral or of additional
descriptions of Collateral shall constitute a representation and
warranty by Debtor to the Secured Party hereunder that the
representations and warranties of this Article 3 are correct
insofar as they would pertain to such Collateral or the
descriptions thereof.
Section 3.12 Delivery of Letters of Credit. With respect
to any Collateral supported by letters of credit, each of such
letters of credit has been delivered to the Secured Party
(provided that all letters of credit referred to in Section 1.02
shall be subject to the security interest created by this
Agreement irrespective of whether or not such delivery shall have
been made).
ARTICLE 4
COVENANTS AND AGREEMENTS
Debtor will at all times comply with the covenants and
agreements contained in this Article 4, from the date hereof and
for so long as any part of the Obligations are outstanding.
Section 4.01 Change in Location of Debtor. Debtor will
give the Secured Party 30 days' prior written notice of (i) the
opening or closing of any place of Debtor's business or (ii) any
change in the location of Debtor's chief executive office or
address.
Section 4.02 Change in Debtor's Name or Corporate
Structure. Debtor will not change its name, identity or
corporate structure (including, without limitation, any merger,
consolidation or sale of substantially all of its assets) without
notifying the Secured Party of such change in writing at least 30
days prior to the effective date of such change. Without the
express written consent of the Secured Party, however, Debtor
will not engage in any other business or transaction under any
name other than Debtor's name hereunder.
Section 4.03 Delivery of Letters of Credit and
Instruments. Debtor will deliver each letter of credit, if any,
included in the Collateral to Secured Party, in each case
forthwith upon receipt by or for the account of Debtor.
Section 4.04 Sale, Disposition or Encumbrance of
Collateral. Debtor will not in any way encumber any of the
Collateral (or permit or suffer any of the Collateral to be
encumbered) or sell, pledge, assign, lend or otherwise dispose of
or transfer any of the Collateral to or in favor of any Person
other than the Secured Party, except for Excepted Liens. Except
with the prior written consent of the Secured Party or as
permitted pursuant to the terms of the Indenture or the Cayman
Loan Agreement, Debtor will not execute any check, instrument or
other document relating to and will not otherwise make or attempt
to make any withdrawal from any Account, Fund, deposit account,
passbook, certificate of deposit or other instrument evidencing
the Collateral.
Section 4.05 Proceeds of Collateral. Debtor will deliver
to the Secured Party promptly upon receipt all proceeds delivered
to Debtor from the sale or disposition of any Collateral. If
chattel paper, documents or instruments are received as proceeds,
which are required to be delivered to the Secured Party, they
will be, immediately upon receipt, properly endorsed or assigned
and delivered to the Secured Party as Collateral. This
Section 4.05 shall not be construed to permit sales or
dispositions of Collateral except as may be elsewhere expressly
permitted by this Agreement.
Section 4.06 Records and Information. Debtor shall keep
accurate and complete records of the Collateral (including
proceeds, payments, distributions, income and profits). The
Secured Party may at any time have access to, examine, audit,
make extracts from and inspect without hindrance or delay
Debtor's records, files and the Collateral. Debtor will promptly
provide written notice to the Secured Party of all information
which in any way relates to or affects the filing of any
financing statement or other public notices or recordings, or the
delivery and possession of items of Collateral for the purpose of
perfecting a security interest in the Collateral. Debtor will
also promptly furnish such information as the Secured Party may
from time to time reasonably request regarding (i) the business,
affairs or financial condition of Debtor or (ii) the Collateral
or the Secured Party's rights or remedies with respect thereto.
Section 4.07 Reimbursement of Expenses. Debtor will pay
to the Secured Party all advances, charges, costs and expenses
(including, without limitation, all reasonable costs and expenses
of holding, preparing for sale and selling, collecting or
otherwise realizing upon the Collateral if an Event of Default
occurs and all reasonable attorneys' fees, legal expenses and
court costs) incurred by the Secured Party in connection with the
exercise of the Secured Party's rights and remedies hereunder.
Debtor agrees to indemnify and hold the Secured Party harmless
from and against and covenants to defend the Secured Party
against any and all losses, damages, claims, costs, penalties,
liabilities and expenses, including, without limitation, court
costs and attorneys' fees, incurred because of, incident to, or
with respect to the Collateral (including, without limitation,
any exercise of rights or remedies in connection therewith). All
amounts for which Debtor is liable pursuant to this Section 4.07
shall be due and payable by Debtor to the Secured Party upon
demand. If Debtor fails to make such payment upon demand (or if
demand is not made due to an injunction or stay arising from
bankruptcy or other proceedings) and the Secured Party pays such
amount, the same shall be due and payable by Debtor to the
Secured Party, plus interest thereon from the date of Secured
Party's demand (or from the date of the Secured Party's payment
or such Secured Party's payment if demand is not made due to such
proceedings) at the Highest Lawful Rate.
Section 4.08 Further Assurances. Upon the request of the
Secured Party, Debtor shall (at Debtor's expense) execute and
deliver all such assignments, certificates, instruments,
securities, financing statements, notifications to financial
intermediaries, clearing corporations, issuers of securities or
other third parties or other documents and give further
assurances and do all other acts and things as the Secured Party
may reasonably request to perfect the Secured Party's interest in
the Collateral or to protect, enforce or otherwise effect the
Secured Party's rights and remedies hereunder.
Section 4.09 Investments. No investments will be made
from the Collateral except as permitted and directed by the
Indenture and the Cayman Loan Agreement. All income,
distributions, profits and proceeds of such investments shall be
part of the Collateral and may be credited to any deposit account
included in the Collateral.
ARTICLE 5
RIGHTS, DUTIES AND POWERS OF SECURED PARTY
The following rights, duties and powers of the Secured
Party are applicable irrespective of whether an Event of Default
occurs and is continuing:
Section 5.01 Discharge Encumbrances. The Secured Party
may, at its option, discharge any taxes, liens, security
interests or other encumbrances at any time levied or placed on
the Collateral. Debtor agrees to reimburse the Secured Party
upon demand for any payment so made, plus interest thereon from
the date of the Secured Party's demand at the Highest Lawful
Rate.
Section 5.02 Transfer of Collateral. The Secured Party
may transfer any or all of the Obligations, and upon any such
transfer the Secured Party may transfer its interest in any or
all of the Collateral and shall be fully discharged thereafter
from all liability therefor. Any transferee of the Collateral
shall be vested with all rights, powers and remedies of the
Secured Party hereunder.
Section 5.03 Cumulative and Other Rights. The rights,
powers and remedies of the Secured Party hereunder are in
addition to all rights, powers and remedies given by law or in
equity. The exercise by the Secured Party of any one or more of
the rights, powers and remedies herein shall not be construed as
a waiver of any other rights, powers and remedies, including,
without limitation, any other rights of set-off. If any of the
Obligations are given in renewal, extension for any period or
rearrangement, or applied toward the payment of debt secured by
any lien, the Secured Party shall be, and is hereby, subrogated
to all the rights, titles, interests and liens securing the debt
so renewed, extended, rearranged or paid.
Section 5.04 Disclaimer of Certain Duties.
(a) The powers conferred upon the Secured Party by this
Agreement are to protect its interest in the Collateral and shall
not impose any duty upon the Secured Party to exercise any such
powers. Debtor hereby agrees that the Secured Party shall not be
liable for, nor shall the indebtedness evidenced by the
Obligations be diminished by, the Secured Party's delay or
failure to collect upon, foreclose, sell, take possession of or
otherwise obtain value for the Collateral.
(b) The Secured Party shall be under no duty whatsoever
to make or give any presentment, notice of dishonor, protest,
demand for performance, notice of non-performance, notice of
intent to accelerate, notice of acceleration, or other notice or
demand in connection with any Collateral or the Obligations, or
to take any steps necessary to preserve any rights against any
Obligor or other Person. Debtor waives any right of marshaling
in respect of any and all Collateral, and waives any right to
require the Secured Party to proceed against any Obligor or other
Person, exhaust any Collateral or enforce any other remedy which
the Secured Party now has or may hereafter have against any
Obligor or other Person.
Section 5.05 Modification of Obligations; Other Security.
Debtor waives (i) any and all notice of acceptance, creation,
modification, rearrangement, renewal or extension for any period
of any instrument executed by any Obligor in connection with the
Obligations and (ii) any defense of any Obligor by reason of
disability, lack of authorization, cessation of the liability of
any Obligor or for any other reason. Debtor authorizes the
Secured Party, without notice or demand and without any
reservation of rights against Debtor and without affecting
Debtor's liability hereunder or on the Obligations, from time to
time to (x) take and hold other property, other than the
Collateral, as security for the Obligations, and exchange,
enforce, waive and release any or all of the Collateral,
(y) apply the Collateral in the manner permitted by this
Agreement and (z) renew, extend for any period, accelerate, amend
or modify, supplement, enforce, compromise, settle, waive or
release the obligations of any Obligor or any instrument or
agreement of such other Person with respect to any or all of the
Obligations or Collateral.
Section 5.06 Custody and Preservation of the Collateral.
The Secured Party shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment substantially
equal to that which comparable Secured Party accord comparable
collateral, it being understood and agreed, however, that neither
the Secured Party shall have responsibility for (i) ascertaining
or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Collateral,
whether or not the Secured Party has or is deemed to have
knowledge of such matters, or (ii) taking any necessary steps to
preserve rights against Persons or entities with respect to any
Collateral.
ARTICLE 6
REMEDIES
Section 6.01 Remedies. Upon the occurrence and during the
continuance of any Event of Default, the Secured Party may take
any or all of the following actions without notice (except where
expressly required below or in the Indenture) or demand to
Debtor:
(a) Declare all or part of the indebtedness pursuant
to the Obligations immediately due and payable and enforce
payment of the same by Debtor or any Obligor.
(b) Sell, in one or more sales and in one or more
parcels, or otherwise dispose of any or all of the
Collateral in any commercially reasonable manner as the
Secured Party may elect, in a public or private
transaction, at any location as deemed reasonable by the
Secured Party either for cash or credit or for future
delivery at such price as the Secured Party may deem fair,
and (unless prohibited by the Code, as adopted in any
applicable jurisdiction) the Secured Party may be the
purchaser of any or all Collateral so sold and may apply
upon the purchase price therefor any Obligations secured
hereby. Any such sale or transfer by the Secured Party
either to itself or to any other Person shall be absolutely
free from any claim of right by Debtor, including any
equity or right of redemption, stay or appraisal which
Debtor has or may have under any rule of law, regulation or
statute now existing or hereafter adopted. Upon any such
sale or transfer, the Secured Party shall have the right
to deliver, assign and transfer to the purchaser or
transferee thereof the Collateral so sold or transferred.
If the Secured Party deems it advisable to do so, it may
restrict the bidders or purchasers of any such sale or
transfer to Persons or entities who will represent and
agree that they are purchasing the Collateral for their own
account and not with the view to the distribution or resale
of any of the Collateral. The Secured Party may, at its
discretion, provide for a public sale, and any such public
sale shall be held at such time or times within ordinary
business hours and at such place or places as the Secured
Party may fix in the notice of such sale. The Secured
Party shall not be obligated to make any sale pursuant to
any such notice. The Secured Party may, without notice or
publication, adjourn any public or private sale by
announcement at any time and place fixed for such sale, and
such sale may be made at any time or place to which the
same may be so adjourned. If sale or transfer hereunder is
not completed or is defective in the opinion of the Secured
Party, such sale or transfer shall not exhaust the rights
of the Secured Party hereunder, and the Secured Party shall
have the right to cause one or more subsequent sales or
transfers to be made hereunder. If only part of the
Collateral is sold or transferred such that the Obligations
remain outstanding (in whole or in part), the Secured
Party's rights and remedies hereunder shall not be
exhausted, waived or modified, and the Secured Party is
specifically empowered to make one or more successive sales
or transfers until all the Collateral shall be sold or
transferred and all the Obligations are paid. If the
Secured Party elects not to sell the Collateral, the
Secured Party retains its rights to dispose of or utilize
the Collateral or any part or parts thereof in any manner
authorized or permitted by law or in equity, and to apply
the proceeds of the same towards payment of the
Obligations. Each and every method of disposition of the
Collateral described in this subsection or in
subsection (d) shall constitute disposition in a
commercially reasonable manner.
(c) Take possession of all books and records of
Debtor pertaining to the Collateral. The Secured Party
shall have the authority to enter upon any real property or
improvements thereon in order to obtain any such books or
records, or any Collateral located thereon, and remove the
same therefrom without liability.
(d) Apply proceeds of the disposition of the
Collateral to the Obligations in any manner elected by the
Secured Party and permitted by the Code or otherwise
permitted by law or in equity. Such application may
include, without limitation, the reasonable attorneys' fees
and legal expenses incurred by the Secured Party.
(e) Appoint any Person as agent to perform any act or
acts necessary or incident to any sale or transfer by the
Secured Party of the Collateral.
(f) Receive or withdraw any or all funds in any
Accounts or Funds or any deposit account, passbook,
certificate of deposit, commercial paper or other
instrument representing the Collateral and apply such funds
towards the Obligations.
(g) Receive, change the address for delivery, open
and dispose of mail addressed to Debtor, and to execute,
assign and endorse negotiable and other instruments for the
payment of money, documents of title or other evidences of
payment, shipment or storage for any form of Collateral on
behalf of and in the name of Debtor.
(h) Exercise all other rights and remedies permitted
by law or in equity.
Section 6.02 Attorney-in-Fact. Debtor hereby irrevocably
appoints the Secured Party as Debtor's attorney-in-fact, with
full authority in the place and stead of Debtor and in the name
of Debtor or otherwise, from time to time in the Secured Party's
discretion upon the occurrence and during the continuance of an
Event of Default, but at Debtor's cost and expense and without
notice to Debtor, to take any action and to execute any
assignment, certificate, financing statement, stock power,
notification, document or instrument that the Secured Party may
deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation, to receive, endorse and
collect all instruments made payable to Debtor representing any
dividend, interest payment or other distribution in respect of
the Collateral or any part thereof and to give full discharge for
the same.
Section 6.03 Liability for Deficiency. If any sale or
other disposition of Collateral by the Secured Party or any
other action of the Secured Party hereunder results in reduction
of the Obligations, such action will not release Debtor from its
liability to the Secured Party for any unpaid Obligations,
including costs, charges and expenses incurred in the liquidation
of Collateral, together with interest thereon, and the same shall
be immediately due and payable to the Secured Party at the
Secured Party's address set forth in the opening paragraph
hereof.
Section 6.04 Reasonable Notice. If any applicable
provision of any law requires the Secured Party to give
reasonable notice of any sale or disposition or other action,
Debtor hereby agrees that five days' prior written notice shall
constitute reasonable notice thereof. Such notice, in the case
of public sale, shall state the time and place fixed for such
sale and, in the case of private sale, the time after which such
sale is to be made.
Section 6.05 Non-judicial Enforcement. The Secured Party
may enforce its rights hereunder without prior judicial process
or judicial hearing, and to the extent permitted by law Debtor
expressly waives any and all legal rights which might otherwise
require the Secured Party to enforce its rights by judicial
process.
ARTICLE 7
MISCELLANEOUS PROVISIONS
Section 7.01 Notices. Any notice required or permitted
to be given under or in connection with this Agreement shall be
given in accordance with the notice provisions of the Indenture
with respect to Debtor and in accordance with the notice
provisions of the International Collateral Agency Agreement with
respect to the Secured Party.
Section 7.02 Amendments and Waivers. The Secured Party's
acceptance of partial or delinquent payments or any forbearance,
failure or delay by the Secured Party in exercising any right,
power or remedy hereunder shall not be deemed a waiver of any
obligation of Debtor or any Obligor, or of any right, power or
remedy of the Secured Party; and no partial exercise of any
right, power or remedy shall preclude any other or further
exercise thereof. The Secured Party may remedy any Event of
Default hereunder or in connection with the Obligations without
waiving the Event of Default so remedied. Debtor hereby agrees
that if the Secured Party agrees to a waiver of any provision
hereunder, or an exchange of or release of the Collateral, or the
addition or release of any Obligor or other Person, any such
action shall not constitute a waiver of any of the Secured
Party's other rights or of Debtor's obligations hereunder. This
Agreement may be amended only by an instrument in writing
executed jointly by Debtor and the Secured Party and may be
supplemented only by documents delivered or to be delivered in
accordance with the express terms hereof.
Section 7.03 Copy as Financing Statement. A photocopy or
other reproduction of this Agreement or any financing statement
covering the Collateral is sufficient as a financing statement,
and the same may be filed with the appropriate filing authority
for the purpose of perfecting the Secured Party's security
interest in the Collateral.
Section 7.04 Possession of Collateral. The Secured Party
shall be deemed to have possession of any Collateral in transit
to it or set apart for it (or, in either case, any of its agents,
affiliates or correspondents).
Section 7.05 Redelivery of Collateral. If any sale or
transfer of Collateral by the Secured Party results in full
satisfaction of the Obligations, and after such sale or transfer
and discharge there remains a surplus of proceeds, the Secured
Party will deliver to Debtor such excess proceeds in a
commercially reasonable time; provided, however, that neither the
Secured Party shall have any liability for any interest, cost or
expense in connection with any delay in delivering such proceeds
to Debtor.
Section 7.06 Governing Law; Jurisdiction. This Agreement
and the security interest granted hereby shall be construed in
accordance with and governed by the laws of the State of New York
(except to the extent that the laws of any other jurisdiction
govern the perfection and priority of the security interests
granted hereby).
Section 7.07 Continuing Security Agreement.
(a) Except as may be expressly applicable pursuant to
Section 9-505 of the Code, no action taken or omission to act by
the Secured Party hereunder, including, without limitation, any
exercise of voting or consensual rights pursuant to Section 4.07
or any other action taken or inaction pursuant to Section 6.02,
shall be deemed to constitute a retention of the Collateral in
satisfaction of the Obligations or otherwise to be in full
satisfaction of the Obligations, and the Obligations shall remain
in full force and effect, until the Secured Party shall have
applied payments (including, without limitation, collections from
Collateral) towards the Obligations in the full amount then
outstanding or until such subsequent time as is hereinafter
provided in subsection (b) below.
(b) To the extent that any payments on the Obligations or
proceeds of the Collateral are subsequently invalidated, declared
to be fraudulent or preferential, set aside or required to be
repaid to a trustee, debtor in possession, receiver or other
Person under any bankruptcy law, common law or equitable cause,
then to such extent the Obligations so satisfied shall be revived
and continue as if such payment or proceeds had not been received
by the Secured Party and the Secured Party's security interests,
rights, powers and remedies hereunder shall continue in full
force and effect. In such event, this Agreement shall be
automatically reinstated if it shall theretofore have been
terminated pursuant to Section 7.08.
Section 7.08 Termination. The grant of a security
interest hereunder and all of the Secured Party's rights, powers
and remedies in connection therewith shall remain in full force
and effect until the Secured Party has (i) retransferred and
delivered all Collateral in its possession to Debtor, and (ii)
executed a written release or termination statement and
reassigned to Debtor without recourse or warranty any remaining
Collateral and all rights conveyed hereby. Upon the complete
payment of the Obligations and the compliance by Debtor with all
covenants and agreements hereof, the Secured Party, at the
written request and expense of Debtor, and upon receipt of an
Officer's Certificate of Debtor stating that all conditions
precedent have been complied with, will release, reassign and
transfer the Collateral to Debtor and declare this Agreement to
be of no further force or effect. Notwithstanding the foregoing,
the reimbursement and indemnification provisions of Section 4.04
and the provisions of subsection 7.07(b) shall survive the
termination of this Agreement.
Section 7.09 Counterparts, Effectiveness. This Agreement
may be executed in two or more counterparts, and it shall not be
necessary that the signatures of all parties hereto be contained
on any one counterpart hereof. Each counterpart is deemed an
original, but all such counterparts taken together constitute one
and the same instrument.
DEBTOR:
PANDA CAYMAN INTERFUNDING COMPANY
By:_______________________________
Name: Robert W. Carter
Title: Chairman of the Board, President
and Chief Executive Officer
SECURED PARTY:
PANDA INTERFUNDING CORPORATION
By:_______________________________
Name: Robert W. Carter
Title: Chairman of the Board, President
and Chief Executive Officer
EXHIBIT 10.07
STOCK PLEDGE AGREEMENT
(Panda Interfunding Corporation Stock)
Between
and
BANKERS TRUST COMPANY,
as Collateral Agent
Dated as of July 31, 1996
________________________________________________________________
STOCK PLEDGE AGREEMENT
(Panda Interfunding Corporation Stock)
THIS STOCK PLEDGE AGREEMENT (this "Agreement") is made as of
July 31, 1996, by PANDA ENERGY CORPORATION, a Texas corporation
with principal offices at 4100 Spring Valley Road, Suite 1001,
Dallas, Texas 75244 ("Pledgor"); for BANKERS TRUST COMPANY, a New
York banking corporation, with offices at 4 Albany Street, New
York, New York 10006, as collateral agent (the "Collateral
Agent") for the benefit of itself, the Trustee, individually (as
hereinafter defined), the Trustee on behalf of the Bondholders
(as hereinafter defined) and for the Letter of Credit Provider
(as hereinafter defined), if any, (collectively, the "Secured
Parties").
RECITALS
A. On even date herewith, Panda Funding Corporation, a
Delaware corporation (hereinafter called "Panda Funding") and
Panda Interfunding Corporation, a Delaware corporation
(hereinafter called "PIC"), and Bankers Trust Company, as trustee
(hereinafter called the "Trustee"), are executing a Trust
Indenture (such agreement, as may from time to time be amended,
supplemented or otherwise modified, being hereinafter called the
"Indenture") providing, subject to the terms and conditions
stated therein, for the issuance by Panda Funding from time to
time of certain Pooled Project Bonds (the "Bonds"), including
without limitation, $105,525,000 in initial aggregate principal
amount of 11 5/8% Pooled Project Bonds, Series A due 2012 (the
"Series A Bonds").
B. Panda Funding will loan the entire proceeds of the
issuance of the Series A Bonds to PIC (the "Loan"), which Loan
will be made under a Loan Agreement dated as of even date with
this Agreement by and between Panda Funding and PIC (the "PIC
Loan Agreement") and evidenced by a promissory note (the "Initial
PIC Note") of PIC dated July 31, 1996, and payable to Panda
Funding.
C. Panda Funding may from time to time loan the
proceeds of subsequent series of Bonds (the "Additional Loans")
to PIC, which Additional Loans will be made under the PIC Loan
Agreement and evidenced by promissory notes of PIC payable to
Panda Funding (the "Additional PIC Notes").
D. PIC, pursuant to the terms of the Indenture, has
guaranteed the obligations of Panda Funding (the "PIC Guaranty")
to the purchasers from time to time of the Bonds, including the
Series A Bonds (collectively, the "Bondholders") and the Trustee
under the Indenture.
E. Panda Funding is a wholly owned, special purpose
subsidiary of PIC and PIC is a wholly owned, special purpose
subsidiary of Pledgor.
F. One or more Letters of Credit (as defined in the
Indenture) may be substituted for cash funds in the Debt Service
Reserve Fund (as defined in the Indenture) pursuant to Section
4.5(c) of the Indenture under a reimbursement agreement to be
entered into between PIC or Pledgor and a financial institution
(the "Letter of Credit Provider") (to the extent so entered into
and as amended, supplemented or otherwise modified from time to
time, together with any substitution or replacement thereof, the
"Reimbursement Agreement").
G. To induce the purchase from time to time of the
Bonds by the Bondholders, which Pledgor acknowledges is of
substantial benefit to it (as the parent corporation of PIC who
will receive the proceeds of the Bonds in the form of the Loan
and the Additional Loans) and to secure Panda Funding's
obligations to the Bondholders and the Trustee and to secure the
PIC Guaranty, and to induce the issuance of any Letters of Credit
by a Letter of Credit Provider and to secure PIC or Pledgor's
obligations to such Letter of Credit Provider under a
Reimbursement Agreement (to the extent entered into), Pledgor
desires to enter into this Agreement with the Collateral Agent
for the benefit of the Secured Parties.
H. It is a condition precedent to the issuance and
purchase of the Series A Bonds that Pledgor shall have pledged
the Collateral as defined in this Agreement to the Collateral
Agent for the benefit of the Secured Parties.
I. Therefore, in order to comply with the terms and
conditions of the Indenture and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor hereby agrees with the Collateral Agent for
the benefit of the Secured Parties as follows:
ARTICLE 1
SECURITY INTEREST
Section 1.01 Pledge. Pledgor hereby pledges, assigns and
grants to the Collateral Agent for the benefit of the Secured
Parties a security interest in and right of set off against the
assets referred to in Section 1.02 (the "Collateral") to secure
the prompt payment and performance of the "Obligations" (as
defined in Section 2.02) and the performance by Pledgor of this
Agreement.
Section 1.02 Collateral. The Collateral consists of the
following types or items of property:
(a) The following securities: 100% of the issued and
outstanding capital stock of Panda Interfunding Corporation, a
Delaware corporation; and (b) (i) the certificates or
instruments, if any, representing, and any interest of Pledgor in
the entries on the books of any financial intermediary pertaining
to, such securities, (ii) all dividends (cash, stock or
otherwise), cash, instruments, rights to subscribe, purchase or
sell and all other rights and property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of such securities, (iii) all
replacements, additions to and substitutions for any of the
property referred to in this Section 1.02, including, without
limitation, claims against third parties, (iv) the proceeds,
interest, profits and other income of or on any of the property
referred to in this Section 1.02 and (v) all books and records
relating to any of the property referred to in this Section 1.02.
It is expressly contemplated that additional securities or other
property may from time to time be pledged, assigned or granted to
the Collateral Agent for the benefit of the Secured Parties as
additional security for the Obligations, and the term
"Collateral" as used herein shall be deemed for all purposes
hereof to include all such additional securities and property,
together with all other property of the types described above
related thereto.
Section 1.03 Transfer of Collateral. All certificates or
instruments representing or evidencing the Pledged Securities (as
defined in Section 2.02) shall be delivered to and held pursuant
hereto by the Collateral Agent for the benefit of the Secured
Parties or a Person designated by the Collateral Agent and shall
be in suitable form for transfer by delivery, or shall be
accompanied by duly executed instruments of transfer or
assignment in blank, or (in the case of either certificated or
uncertificated securities) the Collateral Agent shall have been
provided with an Opinion of Counsel that, in the opinion of such
Counsel, such action has been taken with respect to the
recording, registering, filing and all other actions necessary to
make effective the lien intended by this Agreement and to perfect
the security interest granted herein with respect to such
certificated or uncertificated securities and that there is a
valid and perfected security interest in such Collateral,
enforceable against Debtor and all third parties and securing
payment of the Obligations. The Collateral Agent shall have the
right, at any time in its discretion and without notice to
Pledgor, to transfer to or to register in the name of the
Collateral Agent, the Trustee, or any of the Collateral Agent's
nominees any or all of the Pledged Securities, subject only to
the revocable rights specified in Section 6.05. In addition, the
Collateral Agent shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged
Securities for certificates or instruments of smaller or larger
denominations.
ARTICLE 2
DEFINITIONS
Section 2.01 Terms Defined Above or in the Indenture. As
used in this Agreement, the terms defined above shall have the
meanings respectively assigned to them. Other capitalized terms
that are defined in the Indenture but that are not defined herein
shall have the same meanings as defined in the Indenture.
Section 2.02 Certain Definitions. As used in this
Agreement, the following terms shall have the following meanings,
unless the context otherwise requires:
"Agreement" means this Stock Pledge Agreement, as the
same may from time to time be amended or supplemented.
"Code" means the Uniform Commercial Code as presently in
effect in the State of New York. Unless otherwise indicated by
the context herein, all uncapitalized terms that are defined in
the Code shall have their respective meanings as used in Articles
8 and 9 of the Code.
"Collateral Agent Claims" means, at any time, all
obligations of Panda Funding and PIC, now or hereafter existing,
to pay fees, costs, expenses, indemnities and other amounts to
the Collateral Agent pursuant to Sections 6(f), 8 or 16 of the
Collateral Agency Agreement or pursuant to any Security Document
or Transaction Document.
"Event of Default" means any event specified in Section
6.01.
"Highest Lawful Rate" means the lesser of 15% per annum and
the maximum rate of nonusurious interest allowed from time to
time by applicable law.
"Obligations" means all indebtedness, liabilities and other
obligations of Panda Funding and PIC (including, but not limited
to, all such obligations in respect of principal, premiums,
interest, fees, Collateral Agent Claims, Trustee Claims,
penalties, indemnities, costs and other expenses, whether due
after acceleration or otherwise) to the Collateral Agent, the
Trustee or the Bondholders (of whatsoever nature and howsoever
evidenced) under and pursuant to the Bonds, the Indenture, this
Agreement, the Collateral Agency Agreement, the other Security
Documents and the obligations of PIC or Pledgor to a Letter of
Credit Provider under and pursuant to a Reimbursement Agreement
(if entered into), in each case, direct or indirect, primary or
secondary, fixed or contingent, now or hereafter arising
therefrom or relating thereto.
"Obligor" means Panda Funding and PIC and any Person, other
than Pledgor, liable (whether directly or indirectly, primarily
or secondarily) for the payment or performance of any of the
Obligations whether as maker, comaker, endorser, guarantor,
accommodation party, general partner or otherwise.
"Pledged Securities" means all of the securities and other
property (whether or not the same constitutes a "security" under
the Code) referred to in Section 1.02 and all additional
securities (as that term is defined in the Code), if any,
constituting Collateral under this Agreement.
"Trustee Claims" means, at any time, all obligations of PIC
and Panda Funding, now or hereafter existing, to pay fees, costs,
expenses, indemnities or other amounts to the Trustee pursuant to
the Indenture.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
In order to induce the Collateral Agent to accept this
Agreement on behalf of the Secured Parties, Pledgor represents
and warrants to the Collateral Agent for the benefit of the
Secured Parties (which representations and warranties will
survive the creation and payment of the Obligations) that:
Section 3.01 Ownership of Collateral; Encumbrances. Pledgor
is the owner of, and has good and marketable title to, the
Collateral free and clear of any Lien except for the pledge and
security interest granted to the Collateral Agent for the benefit
of the Secured Parties and Liens for Taxes not yet due or that
are subject to a Good Faith Contest. No financing statement
covering the Collateral is on file in any public office other
than terminated financing statements and the financing statements
filed pursuant to this Agreement or in connection with the
transactions contemplated by the Indenture. The Collateral is not
subject to any law (except as may be required in connection with
any disposition of the Collateral by laws affecting the offering
and sale of securities generally) or contractual obligation that
would be violated by or that would prohibit the grant of the
security interest in the Collateral granted pursuant hereto or
the disposition of the Collateral by or to the Collateral Agent
upon the occurrence and continuance of an Event of Default.
Section 3.02 Pledgor. Pledgor is a corporation duly
organized and validly existing under the laws of the State of
Texas. Pledgor has full power, authority and legal right to enter
into this Agreement and perform hereunder and to pledge and
deliver all of the Collateral pursuant to this Agreement. The
pledge of the Collateral and the granting of a security interest
in the Collateral has been duly authorized by Pledgor and this
Agreement has been duly authorized, executed and delivered by
Pledgor and constitutes the legal, valid and binding obligation
of Pledgor enforceable against Pledgor in accordance with its
terms except as enforceability may be limited by applicable
bankruptcy, insolvency, moratorium or other similar laws
affecting creditor's rights generally and except as
enforceability may be limited by general principles of equity
(whether considered in a suit at law or in equity).
Section 3.03 No Required Consent. No authorization, consent,
approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required that has
not been obtained for (i) the due execution, delivery and
performance by Pledgor of this Agreement, (ii) the grant by
Pledgor of the security interest granted by this Agreement, (iii)
the perfection of such security interest or (iv) the exercise by
the Collateral Agent of its rights and remedies under this
Agreement (except as may be required (x) in connection with such
disposition by laws affecting the offering and sale of securities
generally, (y) under federal and state laws, rules and
regulations and applicable interpretations thereof providing for
the supervision or regulation of the banking and trust businesses
generally and applicable to the Collateral Agent or any Secured
Party and (z) with respect to the Collateral Agent or any Secured
Party as a result of any relationship which such Person may have
with Persons not parties to, or any activity or business such
Person may conduct other than pursuant to, any of the Financing
Documents). The execution, delivery and performance of this
Agreement will not (i) require any consent or approval of the
Board of Directors or stockholders of Pledgor that has not been
obtained; (ii) violate the provisions of Pledgor's Certificate of
Incorporation or By-Laws; (iii) violate the provisions of any law
(including, without limitation, any usury law), regulation or
order of any governmental authority applicable to Pledgor or any
of its subsidiaries; (iv) conflict with, result in a breach or
constitute a default under any agreement relating to the
management or affairs of Pledgor or any of its subsidiaries, or
any indenture or loan or credit agreement or any other material
agreement, lease or instrument to which Pledgor is a party or by
which Pledgor or any of its subsidiaries or any of their material
properties may be bound; or (v) result in or create any Lien
(other than Permitted Liens) under, or require any consent under,
any indenture or loan or credit agreement or any other material
agreement, instrument or award of any governmental authority
binding upon Pledgor or any of its subsidiaries or any of their
properties.
Section 3.04 Pledged Securities. The Pledged Securities
have been duly authorized and validly issued, and are fully
paid and non-assessable. The Pledged Securities constitute
100% of the issued and outstanding shares of the capital stock of
the issuer thereof.
Section 3.05 First Priority Security Interest. The pledge of
the Collateral and the Pledged Securities delivered to the
Collateral Agent pursuant to this Agreement concurrently with the
execution and delivery of this Agreement and the filing of UCC-1
financing statements with the Secretary of State of Texas and the
Secretary of State of the State of Delaware create a valid and
perfected first priority security interest in the Collateral,
enforceable against Pledgor and all third parties and securing
payment of the Obligations assuming continuous possession thereof
by the Collateral Agent subject to no Liens other than those
Liens created by this Agreement.
Section 3.06 No Suits. There is no action, suit or
proceeding at law or in equity or by or before any governmental
authority, arbitral tribunal or other body now pending or, to the
best knowledge of Pledgor, threatened against Pledgor or its
subsidiaries that question the validity or legality of or seeks
damages in connection with this Agreement or any action to be
taken pursuant to this Agreement that could reasonably be
expected to have a material adverse effect on Pledgor.
Section 3.07 Regulatory Status. Pledgor is not (i) an
"investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940,
as amended, or (ii) a "holding company" or a "subsidiary company" of
a "holding company" or an "affiliate" of a "holding company" or a
"subsidiary company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended ("PUHCA") or (iii) a
"registered holding company" or a "subsidiary company" of a
"registered holding company" or an "affiliate" of a "registered
holding company" or a "subsidiary company" of a "registered
holding company" within the meaning of PUHCA.
Section 3.08 Benefits. Pledgor has derived and will
continue to derive direct and indirect benefits from the
incurrence of its obligations under this Agreement.
Section 3.09 Financial Statements; Collateral.
(a) All financial statements of Pledgor provided by Pledgor
to the Collateral Agent or any Secured Party in connection with this
Agreement or the Obligations fairly present, in conformity with
generally accepted accounting principles, Pledgor's financial
position and results of operations as of the dates and for the
periods stated therein (on a consolidated basis where so
indicated). Except such changes that have been disclosed in
writing to the Collateral Agent and the Secured Parties, there
has been no material adverse change from the financial position
or results of operations reflected by the most recent of such
financial statements, or any action, suit or proceeding pending
against Pledgor before any court or arbitrator or any
governmental body, agency or official in which there is a
reasonable possibility of an adverse decision that could have any
such material adverse effect, or that could draw into question
the validity of this Agreement or the attachment, perfection or
priority of the security interests or liens created hereunder.
(b) All statements or other information provided by
Pledgor to the Collateral Agent or any Secured Party describing
or with respect to the Collateral is or (in the case of
subsequently furnished information) will be when provided correct
and complete in all material respects. The delivery at any time
by Pledgor to the Collateral Agent of additional Collateral or
of additional descriptions of Collateral shall constitute a
representation and warranty by Pledgor to the Collateral Agent
and the Secured Parties hereunder that the representations and
warranties of this Article 3 are correct insofar as they would
pertain to such Collateral or the descriptions thereof.
Section 3.10 No Filings By Third Parties. No financing
statement or other public notice or recording covering the
Collateral is on file in any public office (other than any
financing statement or other public notice or recording naming
the Collateral Agent, as agent, as the secured party therein),
and Pledgor will not execute any such financing statement or
other public notice or recording so long as any of the
Obligations are outstanding (other than any financing statement
or other public notice or recording naming the Collateral Agent,
as agent, as the secured party therein).
ARTICLE 4
COVENANTS AND AGREEMENTS
Pledgor will at all times comply with the covenants and
agreements contained in this Article 4, from the date hereof and
for so long as any part of the Obligations are outstanding.
Section 4.01 Sale, Disposition or Encumbrance of Collateral.
Pledgor will not in any way encumber any of theCollateral (or
permit or suffer any of the Collateral to be encumbered) or sell,
pledge, assign, lend or otherwise dispose of or transfer any of
the Collateral to or in favor of any Person other than the
Collateral Agent for the benefit of the Secured Parties.
Section 4.02 Dividends or Distributions. So long as no Event
of Default shall have occurred and be continuing: Pledgor shall
be entitled to receive, retain and distribute any and all
dividends and interest paid in respect of the Collateral,
provided, however, that any and all (a) dividends and interest
paid or payable other than in cash in respect of, and instruments
and other property received, receivable or otherwise distributed
in respect of, or in exchange for (including, without limitation,
any certificate or share purchased or exchanged in connection
with a tender offer or merger agreement), any Collateral, (b)
dividends and other distributions paid or payable in cash in
respect of any Collateral in connection with a partial or total
liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in surplus, or reclassification,
and (c) cash paid, payable or otherwise distributed in respect of
principal of, or in redemption of, or in exchange for, any
Collateral, shall be, and shall be forthwith delivered to the
Collateral Agent for the benefit of the Secured Parties to hold
as Collateral, and shall, if received by Pledgor, be received in
trust for the benefit of the Secured Parties, be segregated from
the other property or funds of Pledgor, and be forthwith
delivered to the Collateral Agent for the benefit of the Secured
Parties as Collateral in the same form as so received (with any
necessary endorsement).
Section 4.03 Payment of Taxes and Liens. Pledgor will pay
prior to delinquency all taxes, charges, liens and assessments
against the Collateral.
Section 4.04 Records and Information. Pledgor shall keep
accurate and complete records of the Collateral (including
proceeds, payments, distributions, income and profits). The
Collateral Agent may, but shall not be required to, at any time
have access to, examine, audit, make extracts from and inspect
without hindrance or delay Pledgor's records, files and the
Collateral. Pledgor will promptly provide written notice to the
Collateral Agent of all information that in any way relates to or
affects the filing of any financing statement or other public
notices or recordings, or the delivery and possession of items of
Collateral for the purpose of perfecting a security interest in
the Collateral. Pledgor will also promptly furnish such
information as the Collateral Agent may from time to time
reasonably request regarding (i) the business, affairs or
financial condition of Pledgor or (ii) the Collateral or the
Secured Parties' rights or remedies with respect thereto. Any
balance sheets or financial statements requested by the
Collateral Agent pursuant to this Section 4.04 shall conform to
generally accepted accounting principles.
Section 4.05 Performance of Obligations. Pledgor will
promptly and properly perform all of its obligations under this
Agreement and any other agreement or contract of any kind now or
hereafter existing as security for or in connection with the
payment of the Obligations.
Section 4.06 Reimbursement of Expenses. Pledgor will pay to
the Collateral Agent all reasonable advances, charges, costs and
expenses (including,without limitation, all reasonable costs and
expenses of holding, preparing for sale and selling, collecting
or otherwise realizing upon the Collateral if an Event of Default
occurs and all reasonable attorneys' fees, legal expenses and
court costs) incurred by the Collateral Agent in connection with
the exercise of the Collateral Agent's rights and remedies
hereunder on behalf of the Secured Parties. Pledgor agrees to
indemnify and hold the Collateral Agent and the Secured Parties
harmless from and against and covenants to defend the Collateral
Agent and the Secured Parties against any and all losses,
damages, claims, costs, penalties, liabilities and expenses,
including, without limitation, court costs and reasonable
attorneys' fees, incurred because of, incident to, or with
respect to this Agreement or the Collateral (including, without
limitation, any exercise of rights or remedies in connection
therewith). All amounts for which Pledgor is liable pursuant to
this Section 4.06 shall be due and payable by Pledgor to the
Collateral Agent upon demand. If Pledgor fails to make such
payment upon demand (or if demand is not made due to an
injunction or stay arising from bankruptcy or other proceedings)
and the Collateral Agent or any Secured Party pays such amount,
the same shall be due and payable by Pledgor to the Collateral
Agent, plus interest thereon from the date of the Collateral
Agent's or Secured Party's demand (or from the date of the
Collateral Agent's payment or such Secured Party's payment if
demand is not made due to such proceedings) at the Highest Lawful
Rate.
Section 4.07 Further Assurances. Upon the request of the
Collateral Agent, Pledgor shall (at Pledgor's expense) execute
and deliver all such assignments, certificates, instruments,
securities, financing statements, notifications to financial
intermediaries, clearing corporations, issuers of securities or
other third parties or other documents and give further
assurances and do all other acts and things as the Collateral
Agent may reasonably request to perfect the Collateral Agent's
interest in the Collateral or to protect, enforce or otherwise
effect the Collateral Agent's rights and remedies hereunder for
the benefit of the Secured Parties.
Section 4.08 Stock Powers. Pledgor shall furnish to the
Collateral Agent such stock powers and other instruments as may
be required by the Collateral Agent to assure the transferability
of the Collateral when and as often as may be requested by the
Collateral Agent.
Section 4.09 Voting and Other Consensual Rights. Except to
the extent otherwise provided in subsection 6.05(d), Pledgor
shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Collateral or any part
thereof for any purpose not inconsistent with the terms of this
Agreement; provided however, that Pledgor shall not exercise or
refrain from exercising any such right if such action would have
a material adverse effect on the value of the Collateral or any
part thereof, and, provided, further, that upon request of the
Collateral Agent at any time or from time to time, Pledgor shall
give the Collateral Agent prompt written notice of the manner in
which Pledgor has exercised, or the reasons for refraining from
exercising, any such right.
Section 4.10 Pledged Securities Percentage. The Pledged
Securities will at all times constitute 100% of the issued and
outstanding shares of the capital stock of the issuer thereof,
including all stock issued by such issuer subsequent to the date
of this Agreement.
Section 4.11 PEC Contributions. Pledgor shall cause PIC to
loan $6,400,000 to a PIC International Entity to be evidenced by
an Other International Note, on or prior to the earlier of (i)
the first date on which Commercial Operations have been achieved
by any Non-U.S. Project in the Project Portfolio and (ii) the
date of transfer to the Project Portfolio of any Non U.S. Project
that has already achieved Commercial Operations. If PIC does not
possess sufficient funds to make such loan, Pledgor shall
contribute to PIC an amount up to $6,400,000 to enable PIC to
make the loan required by this Section 4.11.
ARTICLE 5
RIGHTS, DUTIES AND POWERS OF COLLATERAL AGENT
The following rights, duties and powers of the Collateral
Agent are applicable irrespective of whether an Event of Default
occurs and is continuing:
Section 5.01 Non-judicial Enforcement. The Collateral Agent
may enforce its rights hereunder held on behalf of the Secured
Parties without prior judicial process or judicial hearing, and
to the extent permitted by law Pledgor expressly waives any and
all legal rights which might otherwise require the Collateral
Agent to enforce its rights by judicial process.
Section 5.02 Discharge Encumbrances. The Collateral Agent
may, at its option, discharge any taxes, liens, security
interests or other encumbrances at any time levied or placed on
the Collateral. Pledgor agrees to reimburse the Collateral Agent
upon demand for any payment so made, plus interest thereon from
the date of the Collateral Agent's demand at the Highest Lawful
Rate.
Section 5.03 Attorney-in-Fact. Pledgor hereby irrevocably
appoints the Collateral Agent as Pledgor's attorney-in-fact, with
full authority in the place and stead of Pledgor and in the name
of Pledgor or otherwise, from time to time in the Collateral
Agent's discretion, but at Pledgor's cost and expense and without
notice to Pledgor, to take any action and to execute any
assignment, certificate, financing statement, stock power,
notification, document or instrument that the Collateral Agent
may deem necessary or advisable to accomplish the purposes of
this Agreement, including, without limitation, to receive,
endorse and collect all instruments made payable to Pledgor
representing any dividend, interest payment or other distribution
in respect of the Collateral or any part thereof and to give full
discharge for the same.
Section 5.04 Transfer of Collateral. The Collateral Agent
may transfer any or all of the Obligations, and upon any such
transfer the Collateral Agent may transfer its interest in any or
all of the Collateral held on behalf of the Secured Parties and
shall be fully discharged thereafter from all liability therefor.
Any transferee of the Collateral shall be vested with all rights,
powers and remedies of the Collateral Agent hereunder.
Section 5.05 Cumulative and Other Rights. The rights, powers
and remedies of the Collateral Agent for the benefit of the
Secured Parties hereunder are in addition to all rights, powers
and remedies given by law or in equity. The exercise by the
Collateral Agent of any one or more of the rights, powers and
remedies herein shall not be construed as a waiver of any other
rights, powers and remedies, including, without limitation, any
other rights of setoff. If any of the Obligations are given in
renewal, extension for any period or rearrangement, or applied
toward the payment of debt secured by any lien, the Collateral
Agent shall be, and is hereby, subrogated to all the rights,
titles, interests and liens securing the debt so renewed,
extended, rearranged or paid. The Collateral Agent shall also be
entitled to all of the rights, remedies and protections set forth
in the Collateral Agency Agreement, as if expressly set forth
herein.
Section 5.06 Disclaimer of Certain Duties.
(a) The powers conferred upon the Collateral Agent by
this Agreement are to protect its interest in the Collateral held
on behalf of the Secured Parties and shall not impose any duty
upon the Collateral Agent or any Secured Party to exercise any
such powers. Pledgor hereby agrees that the Collateral Agent
shall not be liable for, nor shall the indebtedness evidenced by
the Obligations be diminished by, the Collateral Agent's delay or
failure to collect upon, foreclose, sell, take possession of or
otherwise obtain value for the Collateral.
(b) The Collateral Agent shall be under no duty
whatsoever to make or give any presentment, notice of dishonor,
protest, demand for performance, notice of non performance,
notice of intent to accelerate, notice of acceleration, or other
notice or demand in connection with any Collateral or the
Obligations, or to take any steps necessary to preserve any
rights against any Obligor or other Person. Pledgor waives any
right of marshalling in respect of any and all Collateral, and
waives any right to require the Collateral Agent or any Secured
Party to proceed against any Obligor or other Person, exhaust any
Collateral or enforce any other remedy that the Collateral Agent
or any Secured Party now has or may hereafter have against any
Obligor or other Person.
Section 5.07 Modification of Obligations; Other Security.
Pledgor waives (i) any and all notice of acceptance, creation,
modification, rearrangement, renewal or extension for any period
of any instrument executed by any Obligor in connection with the
Obligations and (ii) any defense of any Obligor by reason of
disability, lack of authorization, cessation of the liability of
any Obligor or for any other reason. Pledgor authorizes the
Collateral Agent, without notice or demand and without any
reservation of rights against Pledgor and without affecting
Pledgor's liability hereunder or on the Obligations, from time
to time to (x) take and hold other property, other than the
Collateral, as security for the Obligations, and exchange,
enforce, waive and release any or all of the Collateral, (y)
apply the Collateral in the manner permitted by this Agreement,
the Collateral Agency Agreement or the Indenture and (z) renew,
extend for any period, accelerate, amend or modify, supplement,
enforce, compromise, settle, waive or release the obligations of
any Obligor or any instrument or agreement of such other Person
with respect to any or all of the Obligations or Collateral.
Section 5.08 Waiver of Notice; Demand and Presentment.
Pledgor hereby waives any demand, notice of default, notice of
acceleration of the maturity of the Obligations, notice of
intention to accelerate the maturity of the Obligations,
presentment, protest and notice of dishonor as to any action
taken by the Collateral Agent or any Secured Party in connection
with this Agreement, or any instrument or document.
Section 5.09 Custody and Preservation of the Collateral. The
Collateral Agent shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment substantially
equal to that which comparable secured parties accord comparable
collateral, it being understood and agreed, however, that neither
the Collateral Agent nor any Secured Party shall have responsibility
for (i) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any
Collateral, whether or not the Collateral Agent has or is deemed
to have knowledge of such matters, or (ii) taking any necessary
steps to preserve rights against Persons or entities with respect
to any Collateral.
ARTICLE 6
EVENTS OF DEFAULT
Section 6.01 Events. Any of the following events shall
constitute an Event of Default under this Agreement:
(a) Termination, Insolvency, etc.
(i) Pledgor shall (A) apply for or consent to the
appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a
substantial part of its property, (B) admit in writing its
inability, or be generally unable, to pay its debts as such debts
become due, (C) make a general assignment for the benefit of its
creditors, (D) commence a voluntary case under the Federal
Bankruptcy Code, (E) file a petition seeking to take advantage of
any other law relating to bankruptcy, insolvency, reorganization,
dissolution (other than a dissolution which is cured within
fifteen (15) days and which does not result in a Material Adverse
Change and which, prior to such cure, would not reasonably be
expected to result in a Material Adverse Change), windingup, or
composition or readjustment of debts, (F) fail to controvert in a
timely and appropriate manner, or acquiesce in writing to, any
petition filed against such Person in an involuntary case under
the Federal Bankruptcy Code, or (G) take any corporate or other
action for the purpose of effecting any of the foregoing; and
(ii) a proceeding or case shall be commenced
without the application or consent of Pledgor in any court of
competent jurisdiction, seeking (A) its liquidation,
reorganization, dissolution (other than a dissolution which is
cured within fifteen (15) days and which does not result in a
Material Adverse Change and which, prior to such cure, would not
reasonably be expected to result in a Material Adverse Change),
winding up, or the composition or readjustment of debts, or (B)
the appointment of a trustee, receiver, custodian, liquidator or
the like of such Person under any law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case shall continue
undismissed, or any order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of ninety (90) or more
consecutive days, or any order for relief against such Person
shall be entered in an involuntary case under the Federal
Bankruptcy Code; (b) Defaults on Other Obligations failure by
Pledgor to make any payment when due (subject to any applicable
grace period) in respect of any Debt, which Debt is in an amount
exceeding $2,000,000 (other than the Debt (i) which is
Subordinated Debt, and (ii) the Debt specified in clause (a) of
this Section), which failure shall continue unwaived beyond any
applicable grace period; or (c) Indenture an Event of Default
occurs and is continuing under the Indenture.
Section 6.02 Remedies. Upon the occurrence and during the
continuance of any Event of Default, the Collateral Agent or, in
the case of subsection (e), the Collateral Agent or any Secured
Party may take any or all of the following actions without notice
(except where expressly required below) or demand to Pledgor:
(a) Declare all or part of the indebtedness pursuant to
the Obligations immediately due and payable and enforce payment
of the same by Pledgor or any Obligor.
(b) Sell, in one or more sales and in one or more
parcels, or otherwise dispose of any or all of the Collateral in
any commercially reasonable manner as the Collateral Agent may
elect, in a public or private transaction, at any location as
deemed reasonable by the Collateral Agent either for cash or
credit or for future delivery at such price as the Collateral
Agent may deem fair, and (unless prohibited by the Code, as
adopted in any applicable jurisdiction) the Collateral Agent or
any Secured Party may be the purchaser of any or all Collateral
so sold and may apply upon the purchase price therefor any
Obligations secured hereby. Any such sale or transfer by the
Collateral Agent either to itself or to any other Person shall be
absolutely free from any claim of right by Pledgor, including any
equity or right of redemption, stay or appraisal which Pledgor
has or may have under any rule of law, regulation or statute now
existing or hereafter adopted. Upon any such sale or transfer,
the Collateral Agent shall have the right to deliver, assign and
transfer to the purchaser or transferee thereof the Collateral so
sold or transferred. If the Collateral Agent deems it advisable
to do so, it may restrict the bidders or purchasers of any such
sale or transfer to Persons or entities who will represent and
agree that they are purchasing the Collateral for their own
account and not with the view to the distribution or resale of
any of the Collateral. The Collateral Agent may, at its
discretion, provide for a public sale, and any such public sale
shall be held at such time or times within ordinary business
hours and at such place or places as the Collateral Agent may fix
in the notice of such sale. The Collateral Agent shall not be
obligated to make any sale pursuant to any such notice. The
Collateral Agent may, without notice or publication, adjourn any
public or private sale by announcement at any time and place
fixed for such sale, and such sale may be made at any time or
place to which the same may be so adjourned. If any sale or
transfer hereunder is not completed or is defective in the
opinion of the Collateral Agent, such sale or transfer shall not
exhaust the rights of the Collateral Agent hereunder, and the
Collateral Agent shall have the right to cause one or more
subsequent sales or transfers to be made hereunder. If only part
of the Collateral is sold or transferred such that the
Obligations remain outstanding (in whole or in part), the
Collateral Agent's rights and remedies hereunder shall not be
exhausted, waived or modified, and the Collateral Agent is
specifically empowered to make one or more successive sales or
transfers until all the Collateral shall be sold or transferred
and all the Obligations are paid. If the Collateral Agent elects
not to sell the Collateral, the Collateral Agent retains its
rights to dispose of or utilize the Collateral or any part or
parts thereof in any manner authorized or permitted by law or in
equity, and to apply the proceeds of the same towards payment of
the Obligations. Each and every method of disposition of the
Collateral described in this subsection or in subsection (d)
shall constitute disposition in a commercially reasonable manner.
(c) Apply proceeds of the disposition of the Collateral
to the Obligations in accordance with the Collateral Agency
Agreement and as permitted by the Code or otherwise permitted by
law or in equity. Such application may include, without
limitation, the reasonable attorneys' fees and legal expenses
incurred by the Collateral Agent and the Secured Parties.
(d) Appoint any Person as agent to perform any act or
acts necessary or incident to any sale or transfer by the
Collateral Agent of the
Collateral.
(e) Apply and set-off (i) any deposits of Pledgor now
or hereafter held by the Collateral Agent or any Secured Party;
(ii) all claims of Pledgor against the Collateral Agent or any
Secured Party, now or hereafter existing; (iii) any other
property, rights or interests of Pledgor which come into the
possession or custody or under the control of the Collateral
Agent or any Secured Party; and (iv) the proceeds of any of the
foregoing as if the same were included in the Collateral. The
Collateral Agent agrees to notify Pledgor promptly after any such
set-off or application (or after learning thereof in the case of
such action by a Secured Party); provided, however, the failure
of the Collateral Agent to give any notice shall not affect the
validity of such setoff or application.
(f) Exercise all other rights and remedies permitted by
law or in equity.
Section 6.03 Liability for Deficiency. If any sale or other
disposition of Collateral by the Collateral Agent or any other
action of the Collateral Agent or any Secured Party hereunder
results in reduction of the Obligations, such action will not
release Pledgor from its liability to the Collateral Agent and
the Secured Parties for any unpaid Obligations, including costs,
charges and expenses incurred in the liquidation of Collateral,
together with interest thereon, and the same shall be immediately
due and payable to the Collateral Agent at the Collateral Agent's
address set forth in the opening paragraph hereof.
Section 6.04 Reasonable Notice. If any applicable provision
of any law requires the Collateral Agent or any Secured Party to
give reasonable notice of any sale or disposition or other
action, Pledgor hereby agrees that five days' prior written
notice shall constitute reasonable notice thereof. Such notice,
in the case of public sale, shall state the time and place fixed
for such sale and, in the case of private sale, the time after
which such sale is to be made.
Section 6.05 Pledged Securities. Upon the occurrence and
during the continuance of an Event of Default:
(a) All rights of Pledgor to receive the dividends and
interest payments that it would otherwise be authorized to
receive and retain pursuant to Section 4.02 shall cease, and all
such rights shall thereupon become vested in the Collateral Agent
who shall thereupon have the sole right to receive and hold as
Collateral such dividends and interest payments, but the
Collateral Agent shall have no duty to receive and hold such
dividends and interest payments and shall not be responsible for
any failure to do so or delay in so doing.
(b) All dividends and interest payments that are
received by Pledgor contrary to the provisions of this Section
6.05 shall be received in trust for the benefit of the Collateral
Agent on behalf of the Secured Parties, shall be segregated from
other funds of Pledgor and shall be forthwith paid over to the
Collateral Agent as Collateral in the same form as so received
(with any necessary indorsement).
(c) The Collateral Agent may exercise any and all
rights of conversion, exchange, subscription or any other rights,
privileges or options pertaining to any of the Pledged Securities
as if it were the absolute owner thereof, including without
limitation, the right to exchange at its discretion, any and all
of the Pledged Securities upon the merger, consolidation,
reorganization, recapitalization or other readjustment of any
issuer of such Pledged Securities or upon the exercise by any
such issuer or the Collateral Agent of any right, privilege or
option pertaining to any of the Pledged Securities, and in
connection therewith, to deposit and deliver any and all of the
Pledged Securities with any committee, depository, transfer
agent, registrar or other designated agency upon such terms and
conditions as it may determine, all without liability except to
account for property actually received by it, but the Collateral
Agent shall have no duty to exercise any of the aforesaid rights,
privileges or options and shall not be responsible for any
failure to do so or delay in so doing.
(d) If the issuer of any Pledged Securities is the
subject of bankruptcy, insolvency, receivership, custodianship or
other proceedings under the supervision of any court or
governmental agency or instrumentality, then all rights of
Pledgor to exercise the voting and other consensual rights that
Pledgor would otherwise be entitled to exercise pursuant to
Section 4.09 with respect to the Pledged Securities issued by
such issuer shall cease, and all such rights shall thereupon
become vested in the Collateral Agent who shall thereupon have
the sole right to exercise such voting and other consensual
rights, but the Collateral Agent shall have no duty to exercise
any such voting or other consensual rights and shall not be
responsible for any failure to do so or delay in so doing.
ARTICLE 7
MISCELLANEOUS PROVISIONS
Section 7.01 Notices. Any notice required or permitted to be
given under or in connection with this Agreement shall be in
writing and shall be mailed by first class or express mail,
postage prepaid, or sent by telex, telegram, telecopy or other
similar form of rapid written transmission or personally
delivered to the receiving party. All such communications shall
be mailed, sent or delivered at the address respectively
indicated in the opening paragraph hereof or at such other
address as either party may have furnished the other party in
writing. Any communication so addressed and mailed shall be
deemed to be given when so mailed, any notice so sent by rapid
written transmission shall be deemed to be given when receipt of
such transmission is acknowledged by the receiving operator or
equipment, and any communication so delivered in person shall be
deemed to be given when receipted for or actually received by
Pledgor or the Collateral Agent as the case may be.
Section 7.02 Amendments and Waivers. The Collateral Agent's
acceptance of partial or delinquent payments or any forbearance,
failure or delay by the Collateral Agent in exercising any right,
power or remedy hereunder shall not be deemed a waiver of any
obligation of Pledgor or any Obligor, or of any right, power or
remedy of the Collateral Agent; and no partial exercise of any
right, power or remedy shall preclude any other or further
exercise thereof. The Collateral Agent may remedy any Event of
Default hereunder or in connection with the Obligations without
waiving the Event of Default so remedied. Pledgor hereby agrees
that if the Collateral Agent agrees to a waiver of any provision
hereunder, or an exchange of or release of the Collateral, or the
addition or release of any Obligor or other Person, any such
action shall not constitute a waiver of any of the Collateral
Agent's other rights or of Pledgor's obligations hereunder. This
Agreement may be amended only by an instrument in writing
executed jointly by Pledgor and the Collateral Agent and may be
supplemented only by documents delivered or to be delivered in
accordance with the express terms hereof.
Section 7.03 Copy as Financing Statement. A photocopy or
other reproduction of this Agreement may be delivered by Pledgor
or the Collateral Agent to any financial intermediary or other
third party for the purpose of transferring or perfecting any or
all of the Pledged Securities to the Collateral Agent or its
designee or assignee.
Section 7.04 Possession of Collateral. The Collateral Agent
shall be deemed to have possession of any Collateral in transit
to it or set apart for it (or, in either case, any of its agents,
affiliates or correspondents).
Section 7.05 Redelivery of Collateral. If any sale or
transfer of Collateral by the Collateral Agent results in full
satisfaction of the Obligations, and after such sale or transfer
and discharge there remains a surplus of proceeds, Collateral
Agent will deliver to Pledgor such excess proceeds in a
commercially reasonable time; provided, however, that neither the
Collateral Agent nor any Secured Party shall have any liability
for any interest, cost or expense in connection with any delay in
delivering such proceeds to Pledgor.
Section 7.06 Interest. It is the intention of the parties
hereto to conform strictly to usury laws applicable to the
Collateral Agent and the Secured Parties. Accordingly, if the
transactions contemplated hereby would be usurious under
applicable state or federal law, then, notwithstanding anything
to the contrary in this Agreement or in any other agreement
entered into in connection with or as security for the
Obligations, it is agreed as follows: (i) the aggregate of all
consideration which constitutes interest under law applicable to
the Collateral Agent or any Secured Party that is contracted for,
taken, reserved, charged or received under the Obligations, this
Agreement or under any of such other agreements or otherwise in
connection with the Obligations shall under no circumstances
exceed the maximum amount allowed by such applicable law, (ii) if
the maturity of the Obligations is accelerated for any reason, or
in the event of any required or permitted prepayment, then such
consideration that constitutes interest under law applicable to
the Collateral Agent or any Secured Party may never include more
than such maximum amount, and (iii) excess interest, if any,
provided for in this Agreement or otherwise shall be cancelled
automatically and, if theretofore paid, shall be credited by the
Collateral Agent or such Secured Party on the principal amount of
the Obligations (or, to the extent that the principal amount of
the Obligations shall have been or would thereby be paid in full,
refunded by the Collateral Agent or such Secured Party to
Pledgor, Panda Funding or PIC, as the case may be). The right to
accelerate the maturity of the Obligations does not include the
right to accelerate any interest that has not otherwise accrued
on the date of such acceleration, and the Collateral Agent and
the Secured Parties do not intend to collect any unearned
interest in the event of acceleration. All sums paid or agreed to
be paid to the Collateral Agent or any Secured Party for the use,
forbearance or detention of sums included in the initial
Obligations shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full
term of the Obligations until payment in full so that the rate or
amount of interest on account of the initial Obligations does not
exceed the applicable usury ceiling, if any.
Section 7.07 Governing Law; Jurisdiction. This Agreement and
the security interest granted hereby shall be construed in
accordance with and governed by the laws of the State of New York
(except to the extent that the laws of any other jurisdiction
govern the perfection and priority of the security interests
granted hereby). Pledgor consents to and submits to in personam
jurisdiction and venue in the courts of the State of New York and
the United States District Court for the Southern District of New
York, and, by execution and delivery of this Agreement, Pledgor
hereby accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid
courts. This submission to jurisdiction is nonexclusive and does
not preclude the Collateral Agent or any Secured Party from
obtaining jurisdiction over Pledgor or the Collateral in any
court otherwise having jurisdiction.
Section 7.08 Subrogation. Until all indebtedness in
connection with the Obligations shall have been paid in full,
Pledgor shall have no right to subrogation or to enforce any
remedy or participate in any Collateral or security whatsoever
now or hereafter held by the Collateral Agent.
Section 7.09 Continuing Security Agreement.
(a) This Agreement shall constitute a continuing
security agreement, and all representations and warranties,
covenants and agreements shall, as applicable, apply to all
future as well as existing transactions. Provisions of this
Agreement, unless by their terms exclusive, shall be in addition
to other agreements between the parties.
(b) Except as may be expressly applicable pursuant to
Section 9-505 of the Code, no action taken or omission to act by
the Collateral Agent or the Secured Parties hereunder, including,
without limitation, any exercise of voting or consensual rights
pursuant to Section 4.09 or any other action taken or inaction
pursuant to Section 6.02, shall be deemed to constitute a
retention of the Collateral in satisfaction of the Obligations or
otherwise to be in full satisfaction of the Obligations, and the
Obligations shall remain in full force and effect, until the
Collateral Agent and the Secured Parties shall have applied
payments (including, without limitation, collections from
Collateral) towards the Obligations in the full amount then
outstanding or until such subsequent time as is hereinafter
provided in subsection (c) below.
(c) To the extent that any payments on the Obligations
or proceeds of the Collateral are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required
to be repaid to a trustee, debtor in possession, receiver or
other Person under any bankruptcy law, common law or equitable
cause, then to such extent the Obligations so satisfied shall be
revived and continue as if such payment or proceeds had not been
received by the Collateral Agent or the Secured Parties, and the
Collateral Agent's and the Secured Parties' security interests,
rights, powers and remedies hereunder shall continue in full
force and effect. In such event, this Agreement shall be
automatically reinstated if it shall theretofore have been
terminated pursuant to Section 7.10.
(d) If the Obligations are structured such that there
are times when no Indebtedness is owing thereunder, this
Agreement shall remain valid and in full force and effect as to
all subsequent indebtedness included in the Obligations, provided
the Collateral Agent has not in the interim period executed a
written release or termination statement or returned possession
of or reassigned the Collateral to Pledgor.
Section 7.10 Termination. The grant of a security interest
hereunder and all of the Collateral Agent's and the Secured
Parties' rights, powers and remedies in connection therewith
shall remain in full force and effect until the Collateral Agent
has (i) retransferred and delivered all Collateral in its
possession to Pledgor, (ii) executed a registration of release
with respect to all Pledged Securities, if any, as to which the
Collateral Agent held a registered pledge; and (iii) executed a
written release or termination statement and reassigned to
Pledgor without recourse or warranty any remaining Collateral and
all rights conveyed hereby. Upon the complete payment of the
Obligations and the compliance by Pledgor with all covenants and
agreements hereof, the Collateral Agent, at the written request
and expense of Pledgor, and upon receipt of an Officer's
Certificate of Pledgor stating that all conditions precedent have
been complied with, will release, reassign and transfer the
Collateral to Pledgor and declare this Agreement to be of no
further force or effect. Notwithstanding the foregoing, the
reimbursement and indemnification provisions of Section 4.06 and
the provisions of subsection 7.09(c) shall survive the
termination of this Agreement.
Section 7.11 Counterparts, Effectiveness. This Agreement may
be executed in two or more counterparts, and it shall not be
necessary that the signatures of all parties hereto be contained
on any one counterpart hereof. Each counterpart is deemed an
original, but all such counterparts taken together constitute one
and the same instrument.
PLEDGOR:
PANDA ENERGY CORPORATION
By:________________________________
Name: Robert W. Carter
Title: Chairman of the Board, President and Chief Executive Officer
SECURED PARTY:
BANKERS TRUST COMPANY, as
Collateral Agent
By:________________________________
Name: Marie C. Rasch
Title: Vice President
EXHIBIT 10.08
STOCK PLEDGE AGREEMENT
(Panda Funding Corporation and PIC Entity Stock)
Between
PANDA INTERFUNDING CORPORATION
and
BANKERS TRUST COMPANY, as Collateral Agent
Dated as of July 31, 1996
________________________
STOCK PLEDGE AGREEMENT
Panda Funding Corporation and PIC Entity Stock
THIS STOCK PLEDGE AGREEMENT (this "Agreement") is made as
of July 31, 1996, by Panda Interfunding Corporation, a Delaware
corporation with principal offices at 4100 Spring Valley Road,
Suite 1001, Dallas, Texas 75244 ("Pledgor"); for Bankers Trust
Company, a New York banking corporation, with offices at 4 Albany
Street, New York, New York, 10006, as collateral agent (the
"Collateral Agent") for the benefit of itself, the Trustee,
individually (as hereinafter defined), the Trustee on behalf of
the Bondholders (as hereinafter defined) and for the Letter of
Credit Provider (as hereinafter defined), if any, (collectively,
the "Secured Parties").
RECITALS
A. On even date herewith, Panda Funding Corporation, a
Delaware corporation (hereinafter called "Panda Funding") and
Pledgor, and Bankers Trust Company, as trustee (hereinafter
called the "Trustee"), are executing a Trust Indenture (such
agreement, as may from time to time be amended, supplemented or
otherwise modified, being hereinafter called the "Indenture")
providing, subject to the terms and conditions stated therein,
for the issuance by Panda Funding from time to time of certain
Pooled Project Bonds (the "Bonds"), including without limitation,
$105,525,000 in initial aggregate principal amount of 11-5/8%
Pooled Project Bonds, Series A due 2012 (the "Series A Bonds").
B. Panda Funding will loan the entire proceeds of the
issuance of the Series A Bonds to Pledgor (the "Loan"), which
Loan will be made under a Loan Agreement dated as of even date
with this Agreement by and between Panda Funding and Pledgor (the
"PIC Loan Agreement") and evidenced by a promissory note (the
"Initial PIC Note") of Pledgor dated July 31, 1996, and payable
to Panda Funding.
C. Panda Funding may from time to time loan the proceeds
of subsequent series of Bonds (the "Additional Loans") to
Pledgor, which Additional Loans will be made under the PIC Loan
Agreement and evidenced by promissory notes of Pledgor payable to
Panda Funding (the "Additional PIC Notes").
D. Pledgor, pursuant to the terms of the Indenture, has
guaranteed the obligations of Panda Funding (the "PIC Guaranty")
to the purchasers from time to time of the Bonds, including the
Series A Bonds (collectively, the "Bondholders") and the Trustee
under the Indenture.
E. Panda Funding is a wholly owned, special purpose
subsidiary of Pledgor and Pledgor is a wholly owned, special
purpose subsidiary of Panda Energy Corporation, a Texas
corporation ("PEC").
F. One or more Letters of Credit (as defined in the
Indenture) may be substituted for cash funds in the Debt Service
Reserve Fund (as defined in the Indenture) pursuant to Section
4.5(c) of the Indenture under a reimbursement agreement to be
entered into between Pledgor or Pledgor's controlling affiliate
and a financial institution (the "Letter of Credit Provider") (to
the extent so entered into and as amended, supplemented or
otherwise modified from time to time, together with any
substitution or replacement thereof, the "Reimbursement
Agreement").
G. To induce the purchase from time to time of the Bonds
by the Bondholders, which Pledgor acknowledges is of substantial
benefit to it (as ultimate recipient of the proceeds of the Bonds
in the form of the Loan and the Additional Loans) and to secure
Panda Funding's obligations to the Bondholders and the Trustee
and to secure the PIC Guaranty, and to induce the issuance of any
Letters of Credit by a Letter of Credit Provider and to secure
Pledgor's or Pledgor's controlling affiliate's obligations to
such Letter of Credit Provider under a Reimbursement Agreement
(to the extent entered into), Pledgor desires to enter into this
Agreement with the Collateral Agent for the benefit of the
Secured Parties.
H. It is a condition precedent to the issuance and
purchase of the Series A Bonds that Pledgor shall have pledged
the Collateral as defined in this Agreement to the Collateral
Agent for the benefit of the Secured Parties.
I. Therefore, in order to comply with the terms and
conditions of the Indenture and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor hereby agrees with the Collateral Agent for
the benefit of the Secured Parties as follows:
ARTICLE 1
SECURITY INTEREST
Section 1.01 Pledge. Pledgor hereby pledges, assigns and
grants to Secured Party a security interest in and right of
set-off against the assets referred to in Section 1.02 (the
"Collateral") to secure the prompt payment and performance of the
"Obligations" (as defined in Section 2.02) and the performance by
Pledgor of this Agreement.
Section 1.02 Collateral. The Collateral consists of the
following types or items of property:
(a) The following securities: (i) 100% of the issued
and outstanding capital stock of Panda Funding Corporation,
a Delaware corporation, and of each and every PIC U.S.
Entity that is or shall in the future be organized as a
direct subsidiary of Pledgor, including, without limitation
Panda Interholding Corporation, a Delaware corporation; and
(ii) 60% of the issued and outstanding capital stock of
each and every PIC International Entity that is or shall in
the future be organized as a direct subsidiary of Pledgor,
including, without limitation, Panda Cayman Interfunding
Company, a Cayman Islands exempted company.
(b) (i) the certificates or instruments, if any,
representing, and any interest of Pledgor in the entries on
the books of any financial intermediary pertaining to, such
securities, (ii) all dividends (cash, stock or otherwise),
cash, instruments, rights to subscribe, purchase or sell
and all other rights and property from time to time
received, receivable or otherwise distributed in respect of
or in exchange for any or all of such securities, (iii) all
replacements, additions to and substitutions for any of the
property referred to in this Section 1.02, including,
without limitation, claims against third parties, (iv) the
proceeds, interest, profits and other income of or on any
of the property referred to in this Section 1.02 and
(v) all books and records relating to any of the property
referred to in this Section 1.02.
It is expressly contemplated that additional securities or other
property may from time to time be pledged, assigned or granted to
the Collateral Agent for the benefit of the Secured Parties as
additional security for the Obligations, and the term
"Collateral" as used herein shall be deemed for all purposes
hereof to include all such additional securities and property,
together with all other property of the types described above
related thereto.
Section 1.03 Transfer of Collateral. All certificates or
instruments representing or evidencing the Pledged Securities
shall be delivered to and held pursuant hereto by the Collateral
Agent for the benefit of the Secured Parties or a Person
designated by the Collateral Agent and shall be in suitable form
for transfer by delivery, or shall be accompanied by duly
executed instruments of transfer or assignment in blank, or (in
the case of either certificated or uncertificated securities) the
Collateral Agent shall have been provided with an Opinion of
Counsel that, in the opinion of such Counsel, such action has
been taken with respect to the recording, registering, filing and
all other actions necessary to make effective the lien intended
by this Agreement and to perfect the security interest granted
herein with respect to such certificated or uncertificated
securities and that there is a valid and perfected security
interest in such Collateral, enforceable against Debtor and all
third parties and securing payment of the Obligations. The
Collateral Agent shall have the right, at any time in its
discretion and without notice to Pledgor, to transfer to or to
register in the name of the Collateral Agent, the Trustee, or any
of the Collateral Agent's nominees any or all of the Pledged
Securities, subject only to the revocable rights specified in
Section 6.06. In addition, the Collateral Agent shall have the
right at any time to exchange certificates or instruments
representing or evidencing Pledged Securities for certificates or
instruments of smaller or larger denominations.
ARTICLE 2
DEFINITIONS
Section 2.01 Terms Defined Above. As used in this
Agreement, the terms defined above shall have the meanings
respectively assigned to them. Other capitalized terms that are
defined in the Indenture but that are not defined herein shall
have the same meanings as defined in the Indenture.
Section 2.02 Certain Definitions. As used in this
Agreement, the following terms shall have the following meanings,
unless the context otherwise requires:
"Agreement" means this Stock Pledge Agreement, as the
same may from time to time be amended or supplemented.
"Code" means the Uniform Commercial Code as presently
in effect in the State of New York. Unless otherwise
indicated by the context herein, all uncapitalized terms
that are defined in the Code shall have their respective
meanings as used in Articles 8 and 9 of the Code.
"Collateral Agent Claims" means, at any time, all
obligations of Panda Funding and Pledgor, now or hereafter
existing, to pay fees, costs, expenses, indemnities and
other amounts to the Collateral Agent pursuant to Sections
6(f), 8 or 16 of the Collateral Agency Agreement or
pursuant to any Security Document or Transaction Document.
"Event of Default" means any event specified in
Section 6.01.
"Highest Lawful Rate" means the lesser of 15% per
annum and the maximum rate of nonusurious interest allowed
from time to time by applicable law.
"Obligations" means all indebtedness, liabilities and
other obligations of Panda Funding and Pledgor (including,
but not limited to, all such obligations in respect of
principal, premiums, interest, fees, Collateral Agent
Claims, Trustee Claims, penalties, indemnities, costs and
other expenses, whether due after acceleration or
otherwise) to the Collateral Agent, the Trustee or the
Bondholders (of whatsoever nature and howsoever evidenced)
under and pursuant to the Bonds, the Indenture, this
Agreement, the Collateral Agency Agreement, the other
Security Documents and the obligations of Debtor or its
controlling affiliate to a Letter of Credit Provider under
and pursuant to a Reimbursement Agreement (if entered
into), in each case, direct or indirect, primary or
secondary, fixed or contingent, now or hereafter arising
therefrom or relating thereto.
"Obligor" means any Person, other than Pledgor, liable
(whether directly or indirectly, primarily or secondarily)
for the payment or performance of any of the Obligations
whether as maker, co-maker, endorser, guarantor,
accommodation party, general partner or otherwise.
"Pledged Securities" means all of the securities and
other property (whether or not the same constitutes a
"security" under the Code) referred to in Section 1.02 and
all additional securities (as that term is defined in the
Code), if any, constituting Collateral under this
Agreement.
"Trustee Claims" means, at any time, all obligations
of Pledgor and Panda Funding, now or hereafter existing, to
pay fees, costs, expenses, indemnities or other amounts to
the Trustee pursuant to the Indenture.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
In order to induce the Collateral Agent to accept this
Agreement, Pledgor represents and warrants to the Collateral
Agent for the benefit of the Secured Parties (which
representations and warranties will survive the creation and
payment of the Obligations) that:
Section 3.01 Ownership of Collateral; Encumbrances.
Pledgor is the owner of, and has good and marketable title to,
the Collateral free and clear of any Lien except for the pledge
and security interest granted to the Collateral Agent for the
benefit of the Secured Parties and Liens for Taxes not yet due or
that are subject to a Good Faith Contest. No financing statement
covering the Collateral is on file in any public office other
than terminated financing statements and the financing statements
filed pursuant to this Agreement or in connection with the
transactions contemplated by the Indenture. The Collateral is
not subject to any law (except as may be required in connection
with any disposition of the Collateral by laws affecting the
offering and sale of securities generally) or contractual
obligation that would be violated by or that would prohibit the
grant of the security interest in the Collateral granted pursuant
hereto or the disposition of the Collateral by or to the
Collateral Agent upon the occurrence and continuance of an Event
of Default.
Section 3.02 Pledgor. Pledgor is a corporation duly
organized and validly existing under the laws of the State of
Delaware. Pledgor has full power, authority and legal right to
enter into this Agreement and perform hereunder and to pledge and
deliver all of the Collateral pursuant to this Agreement. The
pledge of the Collateral and the granting of a security interest
in the Collateral has been duly authorized by Pledgor and this
Agreement has been duly authorized, executed and delivered by
Pledgor and constitutes the legal, valid and binding obligation
of Pledgor enforceable against Pledgor in accordance with its
terms except as enforceability may be limited by applicable
bankruptcy, insolvency, moratorium or other similar laws
affecting creditor's rights generally and except as
enforceability may be limited by general principles of equity
(whether considered in a suit at law or in equity).
Section 3.03 No Required Consent. No authorization,
consent, approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required
that has not been obtained for (i) the due execution, delivery
and performance by Pledgor of this Agreement, (ii) the grant by
Pledgor of the security interest granted by this Agreement,
(iii) the perfection of such security interest or (iv) the
exercise by the Collateral Agent of its rights and remedies under
this Agreement (except as may be required (x) in connection with
such disposition by laws affecting the offering and sale of
securities generally, (y) under federal and state laws, rules and
regulations and applicable interpretations thereof providing for
the supervision or regulation of the banking and trust businesses
generally and applicable to the Collateral Agent or any Secured
Party and (z) with respect to the Collateral Agent or any Secured
Party as a result of any relationship which such Person may have
with Persons not parties to, or any activity or business such
Person may conduct other than pursuant to, any of the Financing
Documents).
The execution, delivery and performance of this Agreement
will not (i) require any consent or approval of the Board of
Directors or stockholders of Pledgor that has not been obtained;
(ii) violate the provisions of Pledgor's Certificate of
Incorporation or By-Laws; (iii) violate the provisions of any law
(including, without limitation, any usury law), regulation or
order of any governmental authority applicable to Pledgor or any
of its subsidiaries; (iv) conflict with, result in a breach or
constitute a default under any agreement relating to the
management or affairs of Pledgor or any of its subsidiaries, or
any indenture or loan or credit agreement or any other material
agreement, lease or instrument to which Pledgor is a party or by
which Pledgor or any of its subsidiaries or any of their material
properties may be bound; or (v) result in or create any Lien
(other than Permitted Liens) under, or require any consent under,
any indenture or loan or credit agreement or any other material
agreement, instrument or award of any governmental authority
binding upon Pledgor or any of its subsidiaries or any of their
properties.
Section 3.04 Pledged Securities. The Pledged Securities
have been duly authorized and validly issued, and are fully paid
and non-assessable. The Pledged Securities constitute 100% of
the issued and outstanding shares of capital stock of each and
every PIC U.S. Entity that is organized as a direct subsidiary of
Pledgor and 60% of the issued and outstanding shares of capital
stock of each and every PIC International Entity that is
organized as a direct subsidiary of Pledgor.
Section 3.05 First Priority Security Interest. The
pledge of the Collateral and the Pledged Securities delivered to
the Collateral Agent pursuant to this Agreement concurrently with
the execution and delivery of this Agreement and the filing of
UCC-1 financing statements with the Secretary of State of Texas
and the Secretary of State of the State of Delaware create a
valid and perfected first priority security interest in the
Collateral, enforceable against Pledgor and all third parties and
securing payment of the Obligations assuming continuous
possession thereof by the Collateral Agent subject to no Liens
other than those Liens created by this Agreement.
Section 3.06 No Suits. There is no action, suit or
proceeding at law or in equity or by or before any governmental
authority, arbitral tribunal or other body now pending or, to the
best knowledge of Pledgor, threatened against Pledgor or its
subsidiaries that question the validity or legality of or seeks
damages in connection with this Agreement or any action to be
taken pursuant to this Agreement that could reasonably be
expected to have a material adverse effect on Pledgor.
Section 3.07 Regulatory Status. Pledgor is not (i) an
"investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of
1940, as amended, or (ii) a "holding company" or a "subsidiary
company" of a "holding company" or an "affiliate" of a "holding
company" or a "subsidiary company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended ("PUHCA")
or (iii) a "registered holding company" or a "subsidiary company"
of a "registered holding company" or an "affiliate" of a
"registered holding company" or a "subsidiary company" of a
"registered holding company" within the meaning of PUHCA.
Section 3.08 Benefits. Pledgor has derived and will
continue to derive direct and indirect benefits from the
incurrence of its obligations under this Agreement.
Section 3.09 Collateral. All statements or other
information provided by Pledgor to the Collateral Agent or any
Secured Party describing or with respect to the Collateral is or
(in the case of subsequently furnished information) will be when
provided correct and complete in all material respects. The
delivery at any time by Pledgor to the Collateral Agent of
additional Collateral or of additional descriptions of Collateral
shall constitute a representation and warranty by Pledgor to the
Collateral Agent hereunder that the representations and
warranties of this Article 3 are correct insofar as they would
pertain to such Collateral or the descriptions thereof.
Section 3.10 No Filings By Third Parties. No financing
statement or other public notice or recording covering the
Collateral is on file in any public office (other than any
financing statement or other public notice or recording naming
the Collateral Agent, as agent, as the secured party therein),
and Pledgor will not execute any such financing statement or
other public notice or recording so long as any of the
Obligations are outstanding (other than any financing statement
or other public notice or recording naming the Collateral Agent,
as agent, as the secured party therein).
ARTICLE 4
COVENANTS AND AGREEMENTS
Pledgor will at all times comply with the covenants and
agreements contained in this Article 4, from the date hereof and
for so long as any part of the Obligations are outstanding.
Section 4.01 Sale, Disposition or Encumbrance of
Collateral. Pledgor will not in any way encumber any of the
Collateral (or permit or suffer any of the Collateral to be
encumbered) or sell, pledge, assign, lend or otherwise dispose of
or transfer any of the Collateral to or in favor of any Person
other than the Collateral Agent for the benefit of the Secured
Parties. Pledgor will not subject the remaining 40% shares of
capital stock of Panda Cayman Interfunding Company and each other
PIC International Entity that is organized as a direct subsidiary
of Pledgor to any Lien except Permitted Liens as permitted under
the Indenture.
Section 4.02 Dividends or Distributions. So long as no
Event of Default shall have occurred and be continuing: Pledgor
shall be entitled to receive, retain and distribute any and all
dividends and interest paid in respect of the Collateral,
provided, however, that any and all
(a) dividends and interest paid or payable other than
in cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect
of, or in exchange for (including, without limitation, any
certificate or share purchased or exchanged in connection
with a tender offer or merger agreement), any Collateral,
(b) dividends and other distributions paid or payable
in cash in respect of any Collateral in connection with a
partial or total liquidation or dissolution or in
connection with a reduction of capital, capital surplus or
paid-in surplus, or reclassification, and
(c) cash paid, payable or otherwise distributed in
respect of principal of, or in redemption of, or in
exchange for, any Collateral,
shall be, and shall be forthwith delivered to the Collateral
Agent for the benefit of the Secured Parties to hold as,
Collateral and shall, if received by Pledgor, be received in
trust for the benefit of the Secured Parties, be segregated from
the other property or funds of Pledgor, and be forthwith
delivered to the Collateral Agent for the benefit of the Secured
Parties as Collateral in the same form as so received (with any
necessary endorsement).
Section 4.03 Records and Information. Pledgor shall keep
accurate and complete records of the Collateral (including
proceeds, payments, distributions, income and profits). The
Collateral Agent may at any time have access to, examine, audit,
make extracts from and inspect without hindrance or delay
Pledgor's records, files and the Collateral. Pledgor will
promptly provide written notice to the Collateral Agent of all
information that in any way relates to or affects the filing of
any financing statement or other public notices or recordings, or
the delivery and possession of items of Collateral for the
purpose of perfecting a security interest in the Collateral.
Pledgor will also promptly furnish such information as the
Collateral Agent may from time to time reasonably request
regarding (i) the business, affairs or financial condition of
Pledgor or (ii) the Collateral or Secured Parties' rights or
remedies with respect thereto.
Section 4.04 Reimbursement of Expenses. Pledgor will pay
to the Collateral Agent all reasonable advances, charges, costs
and expenses (including, without limitation, all reasonable costs
and expenses of holding, preparing for sale and selling,
collecting or otherwise realizing upon the Collateral if an Event
of Default occurs and all reasonable attorneys' fees, legal
expenses and court costs) incurred by the Collateral Agent in
connection with the exercise of the Collateral Agent's rights and
remedies hereunder on behalf of the Secured Parties. Pledgor
agrees to indemnify and hold the Collateral Agent and the Secured
Parties harmless from and against and covenants to defend the
Collateral Agent and the Secured Parties against any and all
losses, damages, claims, costs, penalties, liabilities and
expenses, including, without limitation, court costs and
reasonable attorneys' fees, incurred because of, incident to, or
with respect to this Agreement or the Collateral (including,
without limitation, any exercise of rights or remedies in
connection therewith). All amounts for which Pledgor is liable
pursuant to this Section 4.04 shall be due and payable by Pledgor
to the Collateral Agent upon demand. If Pledgor fails to make
such payment upon demand (or if demand is not made due to an
injunction or stay arising from bankruptcy or other proceedings)
and the Collateral Agent or any Secured Party pays such amount,
the same shall be due and payable by Pledgor to the Collateral
Agent, plus interest thereon from the date of the Collateral
Agent's or Secured Party's demand (or from the date of the
Collateral Agent's payment or such Secured Party's payment if
demand is not made due to such proceedings) at the Highest Lawful
Rate.
Section 4.05 Further Assurances. Upon the request of the
Collateral Agent, Pledgor shall (at Pledgor's expense) execute
and deliver all such assignments, certificates, instruments,
securities, financing statements, notifications to financial
intermediaries, clearing corporations, issuers of securities or
other third parties or other documents and give further
assurances and do all other acts and things as the Collateral
Agent may reasonably request to perfect the Collateral Agent's
interest in the Collateral or to protect, enforce or otherwise
effect the Collateral Agent's rights and remedies hereunder for
the benefit of the Secured Parties.
Section 4.06 Stock Powers. Pledgor shall furnish to the
Collateral Agent such stock powers and other instruments as may
be required by the Collateral Agent to assure the transferability
of the Collateral when and as often as may be requested by the
Collateral Agent.
Section 4.07 Voting and Other Consensual Rights. Except
to the extent otherwise provided in subsection 6.06(d), Pledgor
shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Collateral or any part
thereof for any purpose not inconsistent with the terms of this
Agreement; provided however, that Pledgor shall not exercise or
refrain from exercising any such right if such action would have
a material adverse effect on the value of the Collateral or any
part thereof, and, provided, further, that upon request of the
Collateral Agent at any time or from time to time, Pledgor shall
give the Collateral Agent prompt written notice of the manner in
which Pledgor has exercised, or the reasons for refraining from
exercising, any such right.
Section 4.08 Pledged Securities Percentage. The Pledged
Securities will at all times constitute 100% of the issued and
outstanding shares of capital stock, including all stock issued
subsequent to the date hereof, of each and every PIC U.S. Entity
that is or shall in the future be organized as a direct
subsidiary of Pledgor and at least 60% of the issued and
outstanding capital stock of each and every PIC International
Entity that is or shall in the future be organized as a direct
subsidiary of Pledgor. Promptly upon the organization by Pledgor
of any PIC U. S. Entity or any PIC International Entity, Pledgor
shall execute and deliver to the Collateral Agent all Collateral,
together with certificates and other instruments evidencing such
Collateral in the percentages specified in this Section 4.08.
ARTICLE 5
RIGHTS, DUTIES AND POWERS OF COLLATERAL AGENT
The following rights, duties and powers of the Collateral
Agent are applicable irrespective of whether an Event of Default
occurs and is continuing:
Section 5.01 Discharge Encumbrances. The Collateral Agent
may, at its option, discharge any taxes, liens, security
interests or other encumbrances at any time levied or placed on
the Collateral. Pledgor agrees to reimburse the Collateral Agent
upon demand for any payment so made, plus interest thereon from
the date of the Collateral Agent's demand at the Highest Lawful
Rate.
Section 5.02 Transfer of Collateral. The Collateral Agent
may transfer any or all of the Obligations, and upon any such
transfer the Collateral Agent may transfer its interest in any or
all of the Collateral and shall be fully discharged thereafter
from all liability therefor. Any transferee of the Collateral
shall be vested with all rights, powers and remedies of the
Collateral Agent hereunder.
Section 5.03 Cumulative and Other Rights. The rights,
powers and remedies of the Collateral Agent for the benefit of
the Secured Parties hereunder are in addition to all rights,
powers and remedies given by law or in equity. The exercise by
the Collateral Agent of any one or more of the rights, powers and
remedies herein shall not be construed as a waiver of any other
rights, powers and remedies, including, without limitation, any
other rights of set-off. If any of the Obligations are given in
renewal, extension for any period or rearrangement, or applied
toward the payment of debt secured by any lien, the Collateral
Agent shall be, and is hereby, subrogated to all the rights,
titles, interests and liens securing the debt so renewed,
extended, rearranged or paid. The Collateral Agent shall also be
entitled to all of the rights, remedies and protections set forth
in the Collateral Agency Agreement, as if expressly set forth
herein.
Section 5.04 Disclaimer of Certain Duties.
(a) The powers conferred upon the Collateral Agent by this
Agreement are to protect its interest in the Collateral and shall
not impose any duty upon the Collateral Agent or any Secured
Party to exercise any such powers. Pledgor hereby agrees that
the Collateral Agent shall not be liable for, nor shall the
indebtedness evidenced by the Obligations be diminished by, the
Collateral Agent's delay or failure to collect upon, foreclose,
sell, take possession of or otherwise obtain value for the
Collateral.
(b) The Collateral Agent shall be under no duty whatsoever
to make or give any presentment, notice of dishonor, protest,
demand for performance, notice of non-performance, notice of
intent to accelerate, notice of acceleration, or other notice or
demand in connection with any Collateral or the Obligations, or
to take any steps necessary to preserve any rights against any
Obligor or other Person. Pledgor waives any right of marshalling
in respect of any and all Collateral, and waives any right to
require the Collateral Agent or any Secured Party to proceed
against any Obligor or other Person, exhaust any Collateral or
enforce any other remedy that the Collateral Agent or any Secured
Party now has or may hereafter have against any Obligor or other
Person.
Section 5.05 Modification of Obligations; Other Security.
Pledgor waives (i) any and all notice of acceptance, creation,
modification, rearrangement, renewal or extension for any period
of any instrument executed by any Obligor in connection with the
Obligations and (ii) any defense of any Obligor by reason of
disability, lack of authorization, cessation of the liability of
any Obligor or for any other reason. Pledgor authorizes the
Collateral Agent, without notice or demand and without any
reservation of rights against Pledgor and without affecting
Pledgor's liability hereunder or on the Obligations, from time to
time to (x) take and hold other property, other than the
Collateral, as security for the Obligations, and exchange,
enforce, waive and release any or all of the Collateral,
(y) apply the Collateral in the manner permitted by this
Agreement, the Collateral Agency Agreement or the Indenture and
(z) renew, extend for any period, accelerate, amend or modify,
supplement, enforce, compromise, settle, waive or release the
obligations of any Obligor or any instrument or agreement of such
other Person with respect to any or all of the Obligations or
Collateral.
Section 5.06 Waiver of Notice; Demand and Presentment.
Pledgor hereby waives any demand, notice of default, notice of
acceleration of the maturity of the Obligations, notice of
intention to accelerate the maturity of the Obligations,
presentment, protest and notice of dishonor as to any action
taken by the Collateral Agent or any Secured Party in connection
with this Agreement, or any instrument or document.
Section 5.07 Custody and Preservation of the Collateral.
The Collateral Agent shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment substantially
equal to that which comparable secured parties accord comparable
collateral, it being understood and agreed, however, that neither
the Collateral Agent nor any Secured Party shall have
responsibility for (i) ascertaining or taking action with respect
to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not the Collateral
Agent has or is deemed to have knowledge of such matters, or
(ii) taking any necessary steps to preserve rights against
Persons or entities with respect to any Collateral.
ARTICLE 6
EVENTS OF DEFAULT
Section 6.01 Events. It shall constitute an Event of
Default under this Agreement if an Event of Default occurs and is
continuing under the Indenture.
Section 6.02 Remedies. Upon the occurrence and during
the continuance of any Event of Default, the Collateral Agent may
take any or all of the following actions without notice (except
where expressly required below or in the Indenture) or demand to
Pledgor:
(a) Declare all or part of the indebtedness pursuant
to the Obligations immediately due and payable and enforce
payment of the same by Pledgor or any Obligor.
(b) Sell, in one or more sales and in one or more
parcels, or otherwise dispose of any or all of the
Collateral in any commercially reasonable manner as the
Collateral Agent may elect, in a public or private
transaction, at any location as deemed reasonable by the
Collateral Agent either for cash or credit or for future
delivery at such price as the Collateral Agent may deem
fair, and (unless prohibited by the Code, as adopted in any
applicable jurisdiction) the Collateral Agent or any
Secured Party may be the purchaser of any or all Collateral
so sold and may apply upon the purchase price therefor any
Obligations secured hereby. Any such sale or transfer by
the Collateral Agent either to itself or to any other
Person shall be absolutely free from any claim of right by
Pledgor, including any equity or right of redemption, stay
or appraisal which Pledgor has or may have under any rule
of law, regulation or statute now existing or hereafter
adopted. Upon any such sale or transfer, the Collateral
Agent shall have the right to deliver, assign and transfer
to the purchaser or transferee thereof the Collateral so
sold or transferred. If the Collateral Agent deems it
advisable to do so, it may restrict the bidders or
purchasers of any such sale or transfer to Persons or
entities who will represent and agree that they are
purchasing the Collateral for their own account and not
with the view to the distribution or resale of any of the
Collateral. The Collateral Agent may, at its discretion,
provide for a public sale, and any such public sale shall
be held at such time or times within ordinary business
hours and at such place or places as the Collateral Agent
may fix in the notice of such sale. The Collateral Agent
shall not be obligated to make any sale pursuant to any
such notice. The Collateral Agent may, without notice or
publication, adjourn any public or private sale by
announcement at any time and place fixed for such sale, and
such sale may be made at any time or place to which the
same may be so adjourned. If any sale or transfer
hereunder is not completed or is defective in the opinion
of the Collateral Agent, such sale or transfer shall not
exhaust the rights of the Collateral Agent hereunder, and
the Collateral Agent shall have the right to cause one or
more subsequent sales or transfers to be made hereunder.
If only part of the Collateral is sold or transferred such
that the Obligations remain outstanding (in whole or in
part), the Collateral Agent's rights and remedies hereunder
shall not be exhausted, waived or modified, and the
Collateral Agent is specifically empowered to make one or
more successive sales or transfers until all the Collateral
shall be sold or transferred and all the Obligations are
paid. If that the Collateral Agent elects not to sell the
Collateral, the Collateral Agent retains its rights to
dispose of or utilize the Collateral or any part or parts
thereof in any manner authorized or permitted by law or in
equity, and to apply the proceeds of the same towards
payment of the Obligations. Each and every method of
disposition of the Collateral described in this subsection
or in subsection (d) shall constitute disposition in a
commercially reasonable manner.
(c) Apply proceeds of the disposition of the
Collateral to the Obligations in accordance with the
Collateral Agency Agreement and as permitted by the Code or
otherwise permitted by law or in equity. Such application
may include, without limitation, the reasonable attorneys'
fees and legal expenses incurred by the Collateral Agent
and the Secured Parties.
(d) Appoint any Person as agent to perform any act or
acts necessary or incident to any sale or transfer by the
Collateral Agent of the Collateral.
(e) Receive, change the address for delivery, open
and dispose of mail addressed to Pledgor, and to execute,
assign and endorse negotiable and other instruments for the
payment of money, documents of title or other evidences of
payment, shipment or storage for any form of Collateral on
behalf of and in the name of Pledgor.
(g) Exercise all other rights and remedies permitted
by law or in equity.
Section 6.03 Attorney-in-Fact. Pledgor hereby
irrevocably appoints the Collateral Agent as Pledgor's
attorney-in-fact, with full authority in the place and stead of
Pledgor and in the name of Pledgor or otherwise, from time to
time in the Collateral Agent's discretion upon the occurrence and
during the continuance of an Event of Default, but at Pledgor's
cost and expense and without notice to Pledgor, to take any
action and to execute any assignment, certificate, financing
statement, stock power, notification, document or instrument that
the Collateral Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without
limitation, to receive, endorse and collect all instruments made
payable to Pledgor representing any dividend, interest payment or
other distribution in respect of the Collateral or any part
thereof and to give full discharge for the same.
Section 6.04 Liability for Deficiency. If any sale or
other disposition of Collateral by the Collateral Agent or any
other action of the Collateral Agent or any Secured Party
hereunder results in reduction of the Obligations, such action
will not release Pledgor from its liability to the Collateral
Agent and the Secured Parties for any unpaid Obligations,
including costs, charges and expenses incurred in the liquidation
of Collateral, together with interest thereon, and the same shall
be immediately due and payable to the Collateral Agent at the
Collateral Agent's address set forth in the opening paragraph
hereof.
Section 6.05 Reasonable Notice. If any applicable
provision of any law requires the Collateral Agent or any Secured
Party to give reasonable notice of any sale or disposition or
other action, Pledgor hereby agrees that five days' prior written
notice shall constitute reasonable notice thereof. Such notice,
in the case of public sale, shall state the time and place fixed
for such sale and, in the case of private sale, the time after
which such sale is to be made.
Section 6.06 Pledged Securities. Upon the occurrence and
during the continuance of an Event of Default:
(a) All rights of Pledgor to receive the dividends
and interest payments that it would otherwise be authorized
to receive and retain pursuant to Section 4.02 shall cease,
and all such rights shall thereupon become vested in the
Collateral Agent who shall thereupon have the sole right to
receive and hold as Collateral such dividends and interest
payments, but the Collateral Agent shall have no duty to
receive and hold such dividends and interest payments and
shall not be responsible for any failure to do so or delay
in so doing.
(b) All dividends and interest payments that are
received by Pledgor contrary to the provisions of this
Section 6.06 shall be received in trust for the benefit of
the Collateral Agent on behalf of the Secured Parties,
shall be segregated from other funds of Pledgor and shall
be forthwith paid over to the Collateral Agent as
Collateral in the same form as so received (with any
necessary indorsement).
(c) The Collateral Agent may exercise any and all
rights of conversion, exchange, subscription or any other
rights, privileges or options pertaining to any of the
Pledged Securities as if it were the absolute owner
thereof, including without limitation, the right to
exchange at its discretion, any and all of the Pledged
Securities upon the merger, consolidation, reorganization,
recapitalization or other readjustment of any issuer of
such Pledged Securities or upon the exercise by any such
issuer or the Collateral Agent of any right, privilege or
option pertaining to any of the Pledged Securities, and in
connection therewith, to deposit and deliver any and all of
the Pledged Securities with any committee, depository,
transfer agent, registrar or other designated agency upon
such terms and conditions as it may determine, all without
liability except to account for property actually received
by it, but the Collateral Agent shall have no duty to
exercise any of the aforesaid rights, privileges or options
and shall not be responsible for any failure to do so or
delay in so doing.
(d) If the issuer of any Pledged Securities is the
subject of bankruptcy, insolvency, receivership,
custodianship or other proceedings under the supervision of
any court or governmental agency or instrumentality, then
all rights of Pledgor to exercise the voting and other
consensual rights that Pledgor would otherwise be entitled
to exercise pursuant to Section 4.07 with respect to the
Pledged Securities issued by such issuer shall cease, and
all such rights shall thereupon become vested in the
Collateral Agent who shall thereupon have the sole right to
exercise such voting and other consensual rights, but the
Collateral Agent shall have no duty to exercise any such
voting or other consensual rights and shall not be
responsible for any failure to do so or delay in so doing.
Section 6.07 Non-judicial Enforcement. The Collateral
Agent may enforce its rights hereunder without prior judicial
process or judicial hearing, and to the extent permitted by law
Pledgor expressly waives any and all legal rights which might
otherwise require the Collateral Agent to enforce its rights by
judicial process.
ARTICLE 7
MISCELLANEOUS PROVISIONS
Section 7.01 Notices. Any notice required or permitted
to be given under or in connection with this Agreement shall be
given in accordance with the notice provisions of the Indenture.
Section 7.02 Amendments and Waivers. The Collateral
Agent's acceptance of partial or delinquent payments or any
forbearance, failure or delay by the Collateral Agent in
exercising any right, power or remedy hereunder shall not be
deemed a waiver of any obligation of Pledgor or any Obligor, or
of any right, power or remedy of the Collateral Agent; and no
partial exercise of any right, power or remedy shall preclude any
other or further exercise thereof. The Collateral Agent may
remedy any Event of Default hereunder or in connection with the
Obligations without waiving the Event of Default so remedied.
Pledgor hereby agrees that if the Collateral Agent agrees to a
waiver of any provision hereunder, or an exchange of or release
of the Collateral, or the addition or release of any Obligor or
other Person, any such action shall not constitute a waiver of
any of the Collateral Agent's other rights or of Pledgor's
obligations hereunder. This Agreement may be amended only by an
instrument in writing executed jointly by Pledgor and the
Collateral Agent and may be supplemented only by documents
delivered or to be delivered in accordance with the express terms
hereof.
Section 7.03 Copy as Financing Statement. A photocopy or
other reproduction of this Agreement may be delivered by Pledgor
or the Collateral Agent to any financial intermediary or other
third party for the purpose of transferring or perfecting any or
all of the Pledged Securities to the Collateral Agent or its
designee or assignee.
Section 7.04 Possession of Collateral. The Collateral
Agent shall be deemed to have possession of any Collateral in
transit to it or set apart for it (or, in either case, any of its
agents, affiliates or correspondents).
Section 7.05 Redelivery of Collateral. If any sale or
transfer of Collateral by the Collateral Agent results in full
satisfaction of the Obligations, and after such sale or transfer
and discharge there remains a surplus of proceeds, the Collateral
Agent will deliver to Pledgor such excess proceeds in a
commercially reasonable time; provided, however, that neither the
Collateral Agent nor any Secured Party shall have any liability
for any interest, cost or expense in connection with any delay in
delivering such proceeds to Pledgor.
Section 7.06 Governing Law; Jurisdiction. This Agreement
and the security interest granted hereby shall be construed in
accordance with and governed by the laws of the State of New York
(except to the extent that the laws of any other jurisdiction
govern the perfection and priority of the security interests
granted hereby).
Section 7.07 Continuing Security Agreement.
(a) Except as may be expressly applicable pursuant to
Section 9-505 of the Code, no action taken or omission to act by
the Collateral Agent or the Secured Parties hereunder, including,
without limitation, any exercise of voting or consensual rights
pursuant to Section 4.07 or any other action taken or inaction
pursuant to Section 6.02, shall be deemed to constitute a
retention of the Collateral in satisfaction of the Obligations or
otherwise to be in full satisfaction of the Obligations, and the
Obligations shall remain in full force and effect, until the
Collateral Agent and the Secured Parties shall have applied
payments (including, without limitation, collections from
Collateral) towards the Obligations in the full amount then
outstanding or until such subsequent time as is hereinafter
provided in subsection (b) below.
(b) To the extent that any payments on the Obligations or
proceeds of the Collateral are subsequently invalidated, declared
to be fraudulent or preferential, set aside or required to be
repaid to a trustee, debtor in possession, receiver or other
Person under any bankruptcy law, common law or equitable cause,
then to such extent the Obligations so satisfied shall be revived
and continue as if such payment or proceeds had not been received
by the Collateral Agent or the Secured Parities, and the
Collateral Agent's and the Secured Parties' security interests,
rights, powers and remedies hereunder shall continue in full
force and effect. In such event, this Agreement shall be
automatically reinstated if it shall theretofore have been
terminated pursuant to Section 7.08.
Section 7.08 Termination. The grant of a security
interest hereunder and all of the Collateral Agent's and the
Secured Parties' rights, powers and remedies in connection
therewith shall remain in full force and effect until the
Collateral Agent has (i) retransferred and delivered all
Collateral in its possession to Pledgor, (ii) executed a
registration of release with respect to all Pledged Securities,
if any, as to which the Collateral Agent held a registered
pledge; and (iii) executed a written release or termination
statement and reassigned to Pledgor without recourse or warranty
any remaining Collateral and all rights conveyed hereby. Upon
the complete payment of the Obligations and the compliance by
Pledgor with all covenants and agreements hereof, the Collateral
Agent, at the written request and expense of Pledgor, and upon
receipt of an Officer's Certificate of Pledgor stating that all
conditions precedent have been complied with, will release,
reassign and transfer the Collateral to Pledgor and declare this
Agreement to be of no further force or effect. Notwithstanding
the foregoing, the reimbursement and indemnification provisions
of Section 4.04 and the provisions of subsection 7.07(b) shall
survive the termination of this Agreement.
Section 7.09 Counterparts, Effectiveness. This Agreement
may be executed in two or more counterparts, and it shall not be
necessary that the signatures of all parties hereto be contained
on any one counterpart hereof. Each counterpart is deemed an
original, but all such counterparts taken together constitute one
and the same instrument.
PLEDGOR: PANDA INTERFUNDING CORPORATION
By:________________________________
Name: Robert W. Carter
Title: Chairman of the Board, President
and General Counsel
SECURED PARTY: BANKERS TRUST COMPANY,
as Collateral Agent
By:________________________________
Name: Marie C. Rasch
Title: Vice President
EXHIBIT 10.9
TRUST INDENTURE
dated as of July 31, 1996
AMONG
PANDA-ROSEMARY FUNDING CORPORATION,
PANDA-ROSEMARY, L.P.
and
FLEET NATIONAL BANK, As Trustee
Providing for the Issuance from Time to Time of
Debt Securities in One or More Series
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.1 Definitions; Construction 2
Section 1.2 Compliance Certificates and Opinions 30
Section 1.3 Form of Documents Delivered to Trustee 31
Section 1.4 Act of Holders 31
Section 1.5 Notices, etc. to Trustee, Company and Partnership 33
Section 1.6 Notices to Holders; Waiver 33
Section 1.7 Conflict with Trust Indenture Act 34
Section 1.8 Effect of Reading and Heading and Table of Contents 34
Section 1.9 Successor and Assigns 34
Section 1.10 Severability Clause 34
Section 1.11 Benefits of Indenture 34
Section 1.12 Governing Law 34
Section 1.13 Legal Holidays 34
Section 1.14 Execution in Counterparts 35
Section 1.15 Agency 35
Section 1.16 Liability of the Partnership; Indemnification 35
ARTICLE 2 THE BONDS
Section 2.1 Form of Bond to Be Established by Series
Supplemental Indenture 35
Section 2.2 Form of Trustee's Authentication 35
Section 2.3 Amount; Issuable in Series 36
Section 2.4 Authentication and Delivery of Bonds 37
Section 2.5 Form 39
Section 2.6 Execution of Bonds 39
Section 2.7 Temporary Bonds 39
Section 2.8 Registration; Transfer and Exchange 40
Section 2.9 Mutilated, Destroyed, Lost and Stolen Bonds 41
Section 2.10 Payment of Principal and Interest; Principal and
Interest Rights Preserved 42
Section 2.11 Persons Deemed Owners 43
Section 2.12 Cancellation 43
Section 2.13 Dating of Bonds; Computation of Interest 43
Section 2.14 Bonds Issued in the Form of a Global Bond 43
Section 2.15 Source of Payments Limited; Rights and Liabilities
of the Company and the Partnership 46
Section 2.16 Allocation of Principal and Interest 46
Section 2.17 Parity of Bonds 46
Section 2.18 CUSIP Numbers 46
ARTICLE 3 APPLICATION OF PROCEEDSFROM SALE OF BONDS
Section 3.1 Application of Proceeds from Sale of Bonds 47
ARTICLE 4 INDEPENDENT ENGINEER, INSURANCE CONSULTANTAND GAS CONSULTANT
Section 4.1 Resignation and Removal of Independent Engineer,
Insurance Consultant and Gas Consultant 47
Section 4.2 Payment of Fees and Expenses 48
Section 4.3 Consultation with Other Consultants 48
Section 4.4 Delivery of Certificates, Confirmations,
Concurrences and Approvals 49
ARTICLE 5 REPRESENTATIONS AND WARRANTIES
Section 5.1 Organization, Power and Status of the Partnership
and the Company 49
Section 5.2 Authorization; Enforceability; Execution and
Delivery 49
Section 5.3 No Conflicts; Laws and Contracts; No Default 50
Section 5.4 Governmental Approvals 51
Section 5.5 Litigation 51
Section 5.6 Qualifying Facility Status; Other Utility Regulation 51
Section 5.7 Collateral; Security Interest and Liens 52
Section 5.8 Taxes 53
Section 5.9 Environmental Matters 53
Section 5.10 Useful Life 54
Section 5.11 Utility Services 54
Section 5.12 Employee Benefit Plans 54
Section 5.13 Not an Investment Company 54
ARTICLE 6 COVENANTS
Section 6.1 Reporting Requirements 54
Section 6.2 Maintenance of Existence, Properties and
Governmental Approvals 58
Section 6.3 Compliance with Laws 59
Section 6.4 Insurance 59
Section 6.5 Payment of Taxes and Claims 63
Section 6.6 Books and Records 64
Section 6.7 Right of Inspection 64
Section 6.8 Use of Bond Proceeds or Proceeds of Additional
Permitted Debt 64
Section 6.9 Compliance With Environmental Laws 65
Section 6.10 Event of Eminent Domain; Event of Loss; Title Event 65
Section 6.11 Annual Independent Engineer's Report 68
Section 6.12 Taxes 69
Section 6.13 Performance of Project Documents 69
Section 6.14 Operating Plan and Operating Budget 70
Section 6.15 Further Assurances; Opinions of Counsel 70
Section 6.16 Debt 71
Section 6.17 Liens 73
Section 6.18 Guaranties 75
Section 6.19 Prohibition on Disposition of Assets 76
Section 6.20 Amendments 76
Section 6.21 Prohibition on Fundamental Changes 79
Section 6.22 Distributions 80
Section 6.23 Nature of Business 82
Section 6.24 Plans 83
Section 6.25 Transactions with Affiliates 83
Section 6.26 Governmental Regulation 83
Section 6.27 Letters of Credit 85
Section 6.28 Rule 144A Information 85
Section 6.29 Site Taxes 85
ARTICLE 7 REDEMPTION OF BONDS
Section 7.1 Applicability of Article 86
Section 7.2 Election or Requirement to Redeem; Notice to Trustee 86
Section 7.3 Mandatory and Optional Redemption;
Selection of Bonds to Be Redeemed 87
Section 7.4 Notice of Redemption 88
Section 7.5 Bonds Payable on Redemption Date 89
Section 7.6 Bonds Redeemed in Part 89
ARTICLE 8 EVENTS OF DEFAULT AND REMEDIES
Section 8.1 Events of Default 90
Section 8.2 Enforcement of Remedies 94
Section 8.3 Specific Remedies 95
Section 8.4 Judicial Proceedings Instituted by Trustee 95
Section 8.5 Holders May Demand Enforcement of Rights by Trustee 97
Section 8.6 Control by Holders 98
Section 8.7 Waiver of Past Defaults or Events of Default 98
Section 8.8 Holder May Not Bring Suit Except Under Certain
Conditions 98
Section 8.9 Undertaking to Pay Court Costs 99
Section 8.10 Right of Holders to Receive Payment Not to
be Impaired 99
Section 8.11 Application of Moneys Collected by Trustee 99
Section 8.12 Bonds Held by Certain Persons Not to Share
in Distribution 100
Section 8.13 Waiver of Appraisement, Valuation, Stay, Right
to Marshaling 100
Section 8.14 Remedies Cumulative; Delay or Omission Not a Waiver 101
Section 8.15 The Intercreditor Agreement 101
Section 8.16 The Depositary Agreement 101
ARTICLE 9 CONCERNING THE TRUSTEE
Section 9.1 Certain Rights and Duties of Trustee 102
Section 9.2 Trustee Not Responsible for Recitals, Etc 104
Section 9.3 Trustee and Others May Hold Bonds 104
Section 9.4 Moneys Held by Trustee or Paying Agent 104
Section 9.5 Compensation of Trustee and Its Lien 104
Section 9.6 Right of Trustee to Rely on Officer's
Certificates and Opinions of Counsel 105
Section 9.7 Persons Eligible for Appointment as Trustee 105
Section 9.8 Resignation and Removal of Trustee; Appointment
of Successor 105
Section 9.9 Acceptance of Appointment by Successor Trustee 106
Section 9.10 Merger, Conversion or Consolidation of Trustee 107
Section 9.11 Maintenance of Offices and Agencies 107
Section 9.12 Reports by Trustee 109
Section 9.13 Trustee Risk 109
Section 9.14 Notice of Defaults 110
Section 9.15 Disqualification; Conflicting Interests 110
Section 9.16 Preferential Collection of Claims Against Company 110
ARTICLE 10 CONCERNING THE HOLDERS
Section 10.1 Evidence of Action Taken by Holders 110
Section 10.2 Proof of Execution of Instruments and of
Holding Bonds 111
Section 10.3 Bonds Owned by Company Deemed Not Outstanding 111
Section 10.4 Right of Revocation of Action Taken 112
ARTICLE 11 HOLDERS' MEETINGS
Section 11.1 Purposes for Which Holders' Meetings May
Be Called 112
Section 11.2 Call of Meetings by Trustee 113
Section 11.3 Company and Holders May Call Meeting 113
Section 11.4 Persons Entitled to Vote at Meeting 113
Section 11.5 Determination of Voting Rights; Conduct and
Adjournment of Meetings 113
Section 11.6 Counting Votes and Recording Action of Meeting 114
ARTICLE 12 SUPPLEMENTAL INDENTURES
Section 12.1 Supplemental Indentures and Collateral
Document Consents Without Consent of Holders 115
Section 12.2 Supplemental Indentures and Collateral
Documents Consents with Consent of Holders 116
Section 12.3 Documents Affecting Immunity or Indemnity 117
Section 12.4 Execution of Supplemental Indentures 118
Section 12.5 Effect of Supplemental Indentures 118
Section 12.6 Conformity with Trust Indenture Act 118
Section 12.7 Reference in Bonds to Supplemental Indentures 118
ARTICLE 13 SATISFACTION AND DISCHARGE
Section 13.1 Satisfaction and Discharge of Bonds 118
Section 13.2 Satisfaction and Discharge of Indenture 120
Section 13.3 Application of Trust Money 121
Section 13.4 Reinstatement 121
ARTICLE 14 DEFEASANCE
Section 14.1 Defeasance 121
Section 14.2 Conditions to Defeasance 122
Section 14.3 Reinstatement 123
ARTICLE 15 EXCULPATION; HOLDERS LISTS AND REPORTS
Section 15.1 Exculpation 123
Section 15.2 Company to Furnish Trustee Names and Addresses
of Holders 124
Section 15.3 Preservation of Information 124
Schedules:
Schedule 1.1 Principal Amortization of the Initial Bonds
Schedule 6.16 Subordination Provisions
Schedule 6.20 Consent and Agreement
TRUST INDENTURE, dated as of July 31, 1996, among PANDA-
ROSEMARY FUNDING CORPORATION, a Delaware corporation (the
"Company"), its executive office being at 4100 Spring Valley
Road, Suite 1001, Dallas, Texas 75244, PANDA-ROSEMARY, L.P., a
Delaware limited partnership (the "Partnership"), its executive
office being at 4100 Spring Valley Road, Suite 1001, Dallas,
Texas 75244, and FLEET NATIONAL BANK, a national banking
association established under the laws of the United States (the
"Trustee"), its corporate trust office at the time of the
execution of this Indenture being at 777 Main Street, Hartford,
Connecticut 06115.
W I T N E S S E T H:
WHEREAS, the Company has duly authorized the creation of an
issue of its bonds, debentures, promissory notes or other
evidences of indebtedness to be issued in one or more series (the
"Bonds") up to such principal amount or amounts as may from time
to time be authorized in accordance with the terms of this
Indenture; and the Company has duly authorized the execution and
delivery of this Indenture to secure the Bonds and to provide for
the authentication and delivery thereof by the Trustee;
WHEREAS, the Company wishes to lend, and will lend, all of
the proceeds of the sale of the Bonds of the initial series to
the Partnership to be used, along with other funds available to
the Partnership, to defease another indenture pursuant to which
bonds were issued to finance the cost of constructing the
Partnership's cogeneration facility located in Roanoke Rapids,
North Carolina and for the purpose of, among other things,
redeeming the limited partnership interests in the Partnership
owned by Ford Motor Credit Company, funding certain reserve
funds, and paying closing costs;
WHEREAS, the Partnership wishes to provide its guaranty to
secure the payment of the principal of, premium, if any, and
interest on all the Bonds authenticated and delivered hereunder
and the performance of the covenants therein and herein contained
and to mortgage, pledge and assign substantially all of its
assets to secure such guaranty and the loans from the Company to
the Partnership; and
WHEREAS, all acts necessary to make this Indenture a valid
instrument for the security of the Bonds, in accordance with its
and their terms, have been taken.
NOW, THEREFORE, for and in consideration of the premises and
of the covenants herein contained and of the purchase of the
Bonds by the holders thereof, it is mutually covenanted and
agreed, for the benefit of the parties hereto and the equal and
proportionate benefit of all Holders of the Bonds, as follows:
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
Section 1.1 Definitions; Construction. For all purposes of
this Indenture, except as otherwise expressly provided or unless
the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well
as the singular;
(b) all other terms used herein that are defined in the
Trust Indenture Act (as hereinafter defined), either directly or
by reference therein, have the meanings assigned to them therein;
(c) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with GAAP (as
hereinafter defined);
(d) all references in this Indenture to designated
"Articles," "Sections" and other subdivisions are to the
designated Articles, Sections and other subdivisions of this
Indenture;
(e) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and
not to any particular Article, Section or other subdivision;
(f) unless otherwise expressly specified, any agreement,
contract or document defined or referred to herein shall mean
such agreement, contract or document (including any clarification
letters relating thereto and any tariffs or similar publicly
promulgated rates applicable thereto and incorporated therein) as
in effect as of the date hereof, as the same may thereafter be
amended, supplemented or otherwise modified from time to time in
accordance with the terms of this Indenture and the other Project
Documents (as hereinafter defined) and including any agreement,
contract or document in substitution or replacement of any of the
foregoing;
(g) unless the context clearly intends to the contrary,
pronouns having a masculine or feminine gender shall be deemed to
include the other;
(h) any reference to any Person (as hereinafter defined)
shall include its successors and assigns, and in the case of any
Government Authority (as hereinafter defined), any Person
succeeding to its functions and capacities;
(i) each reference to a Project Agreement or a Project
Participant shall be deemed to exclude (i) after the date on
which any Project Agreement may have been terminated in
accordance with Sections 6.20 (Amendments), 6.22(d) (Replacement
Gas Contracts) or 8.1(j) (Event of Default - Project Agreements),
shall have reached its stated termination date (if any) or shall
have been fully and finally performed, such Project Agreement
(and the Consent relating thereto, if any) and the Project
Participant party thereto (in such capacity) and (ii) after the
date of any disposition of a Project Agreement in accordance with
Section 6.19 (Prohibition on Disposition of Assets), such Project
Agreement (and the Consent related thereto, if any) and the
Project Participant party thereto (in such capacity); and
(j) each direct or indirect reference to a Governmental
Approval shall be deemed to exclude any Governmental Approval
relating solely to any agreement that, by operation of the
immediately preceding clause (i) or otherwise, has ceased to be
an agreement binding upon the Company or the Partnership.
"Acceptable Fuel Management Contracts" shall mean contracts
or agreements entered into by or on behalf of the Partnership
having a period of effectiveness of one year or less (exclusive
of extensions) or that are terminable at will upon thirty-one
(31) days or less notice without penalty, in a form typical for
transactions of the relevant type in the fuel industry for the
purchase, sale, or resale of natural gas or fuel oil or for
transportation services or storage services for natural gas or
fuel oil, including but not limited to Capacity Release
Arrangements, Fuel Hedges, Fuel Oil Contracts, Gas Resale
Agreements, Short Term Transportation Contracts and Spot Gas
Contracts.
"Act" when used with respect to any Holder, shall have the
meaning specified in Section 1.4.
"Additional Contract" shall mean any contract or undertaking
to which the Partnership is a party relating to the Project,
entered into after the Closing Date, including, but not limited
to, (a) any such contract or undertaking relating to the supply,
procurement, handling or transportation of Fuel to the Project,
(b) any such contract or undertaking relating to the design,
construction, operation or maintenance of the Project or the
management of the construction thereof or (c) any Consent which
constitutes an Ancillary Document and is delivered in connection
with an Additional Contract, but excluding (i) any contract or
undertaking entered into in respect of Permitted Investments,
(ii) any contract or undertaking entered into in connection with
Debt permitted under Section 6.16, Liens permitted under Section
6.17 and Guaranties permitted under Section 6.18 and any note or
other evidence of indebtedness entered into thereunder and (iii)
any Non-Material Agreements.
"Additional Mortgages" shall mean one or more mortgages
given by the Partnership in favor of the Collateral Agent, as
mortgagee, for the benefit of the relevant Secured Party,
securing any Additional Permitted Debt incurred by the
Partnership or the Company after the Closing Date.
"Additional Notes" shall mean one or more promissory notes
made by the Partnership to the order of the Company evidencing
the loan of the proceeds of Additional Permitted Debt issued by
the Company.
"Additional Permitted Debt" shall mean all Debt of the
Company or the Partnership ranking pari passu as to payment with
the Bonds and permitted pursuant to Sections 6.16(a)(v) and
(b)(ii).
"Additional Permitted Debt Documents" shall mean all
agreements, documents and instruments evidencing and/or securing
the Additional Permitted Debt.
"Affiliate" with respect to any Person, shall mean any other
Person directly or indirectly controlling or controlled by, or
under direct or indirect common control with, such Person. For
purposes of this definition, the term "control" (including the
correlative meanings of the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management policies of such
Person, whether through the ownership of voting securities or by
contract or otherwise. In any event, each general partner of the
Partnership shall be deemed to be an Affiliate of the
Partnership, each member and manager of a limited liability
company shall be deemed to be an Affiliate of such limited
liability company and no individual shall be deemed to be an
Affiliate of a Person solely by reason of his or her being a
director, committee member, officer or employee of such Person
or, if such Person is a partnership, a limited partner of such
Person.
"Ancillary Documents" shall mean, with respect to each
Additional Contract, (i) each security instrument (which may
consist of an amendment to a Collateral Document) necessary to
grant to the Collateral Agent a perfected Lien in such Additional
Contract and all property interests received by the Partnership
or the Company in connection therewith, (ii) all recorded
financing statements and other filings required to perfect such
Liens, (iii) a Consent of each Project Participant party to such
Additional Contract and (iv) an Opinion of Counsel to the extent
obtained as set forth in Section 6.20(c)(i).
"Annual Projected Debt Service Coverage Ratio" shall mean,
on any date of determination, a projection of the Debt Service
Coverage Ratios for each consecutive twelve month period
commencing on the last day of the calendar month ending on, or
most recently ended prior to, such date of determination over the
remaining term of the Bonds Outstanding having the longest Stated
Maturity prepared by the Partnership in good faith based upon
assumptions consistent in all material respects with the Project
Agreements and the historical operating results of the Project
(without giving effect to any historical non-recurring
extraordinary event). Whenever this Indenture provides for the
determination of an Annual Projected Debt Service Coverage Ratio,
the full calculation of the Annual Projected Debt Service
Coverage Ratio (including any supporting documentation) shall be
set forth in an Officer's Certificate of the Partnership filed
with the Trustee and, in connection with Distributions pursuant
to Section 6.22, with the Depositary Agent, accompanied by an
Independent Engineer's Certificate, dated within five (5) days of
the date of the Officer's Certificate, stating that, based upon
reasonable investigation and review, the Annual Projected Debt
Service Coverage Ratio is based on reasonable assumptions
consistent in all material respects with the Project Agreements
and the historical operating results of the Project and that the
Independent Engineer believes the Annual Projected Debt Service
Coverage Ratio to be reasonable in light of such assumptions;
provided, however, that in connection with Distributions under
Section 6.22(b) if the Partnership certifies to the Trustee and
the Depositary Agent in an Officer's Certificate of the
Partnership that the assumptions used in calculating the Annual
Projected Debt Service Coverage Ratio have not materially changed
since the annual calculation of such ratio made in connection
with the most recent Engineer's Annual Report, then the
Partnership shall not be required to deliver the Independent
Engineer's Certificate as described above.
"Asbestos" shall have the meaning provided under any
relevant Environmental Laws and shall include, without
limitation, asbestos fibers and friable asbestos, as such terms
are defined under the relevant Environmental Laws.
"Authenticating Agent" shall mean any Person acting as
Authenticating Agent hereunder pursuant to Section 9.11.
"Authorized Agent" shall mean any Paying Agent,
Authenticating Agent or Security Registrar or other agent
appointed by the Trustee in accordance with this Indenture to
perform any function that this Indenture authorizes the Trustee
or such agent to perform.
"Authorized Representative" of any of the Partnership, the
Company, the Independent Engineer, the Gas Consultant or the
Insurance Consultant shall mean the person or persons authorized
to act on behalf of such entity by its, or its managing general
partner's, Board of Directors, or, if such entity is a limited
liability company, by its manager or members, or by any other
governing body of such entity.
"Authorized Signatory" shall mean any officer of the Trustee
or any other individual who shall be duly authorized by
appropriate corporate action on the part of the Trustee to
authenticate Bonds.
"Board of Directors", when used with respect to a
corporation, shall mean either the board of directors of such
corporation or any committee of that board duly authorized to act
for it hereunder.
"Board Resolution" shall mean a copy of a resolution
certified by the Secretary or an Assistant Secretary of the
Company to have been adopted by the Board of Directors of the
Company and to be in full force and effect on the date of such
certification.
"Bonding Arrangements" shall have the meaning set forth in
Section 6.18.
"Bonds" shall have the meaning ascribed thereto in the
Preamble.
"Bullet Maturity" shall mean, with respect to Additional
Permitted Debt, Debt with a single principal payment due in full
at final maturity.
"Bullet Maturity Amount" shall have the meaning set forth in
Section 1.2 of the Depositary Agreement.
"Business Day" shall mean any day other than (i) a Saturday
or Sunday or (ii) a day on which banks in New York, New York or
Dallas, Texas, or any city in which the Trustee's Corporate Trust
Office, the Collateral Agent's principal office or the Depositary
Agent's principal office is located, are authorized or required
to be closed.
"Capacity Release Arrangement" shall mean any arrangement
pursuant to which the Partnership assigns (other than as
security) to a third-party its right to utilize pipeline
transportation capacity contracted for, but not utilized, by the
Partnership under a Firm Gas Transportation Contract and which
assignment is made pursuant to the terms and conditions of the
effective FERC gas tariff of a firm gas transporter contained in
and made part of a Gas Transportation Contract.
"Capital Lease" shall mean any lease of personal property,
which, in accordance with GAAP, would be required to be
capitalized on a balance sheet of the lessee thereof.
"Casualty Proceeds" shall mean all Insurance Proceeds or
other amounts received on account of any Event of Loss, except
proceeds of business interruption insurance.
"Closing Date" shall mean July 31, 1996.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Collateral" shall mean all property and interests in
property now owned or hereafter acquired in or upon which a Lien
has been or is purported or intended to have been granted to the
Collateral Agent pursuant to the Collateral Documents.
"Collateral Agent" shall mean Fleet National Bank, a
national banking association established under the laws of the
United States, with its principal office at the time of the
execution of this Indenture at 777 Main Street, Hartford
Connecticut 06115, or such other office as may be designated by
the Collateral Agent to the Company, the Partnership, the
Depositary Agent and the Secured Parties, as collateral agent for
the benefit of the Secured Parties under the Collateral
Documents, and its permitted successors and assigns.
"Collateral Documents" shall mean the Mortgages, the
Security Agreements, the Stock Pledge Agreement, the Partnership
Interest Pledge Agreements, the Company Pledge Agreement, the
Intercreditor Agreement, the Depositary Agreement, each security
instrument referred to in clause (i) of the definition of
"Ancillary Documents", and each Consent.
"Commercially Feasible Basis" shall mean that, following an
Event of Loss, an Event of Eminent Domain or Title Event, (i) the
sum of the proceeds of the business interruption insurance, the
moneys held in the Debt Service Fund, any amounts that the
Partners are irrevocably committed to contribute and the
anticipated Project Revenues during the estimated period of
rebuilding, repair or restoration will be sufficient to pay all
Debt Service and Operating Expenses during the estimated period
of rebuilding, repair or restoration and (ii) the Project upon
being rebuilt, repaired or restored can be reasonably expected to
produce Project Revenues adequate to pay all Debt Service and
Operating Expenses over the remaining terms of the Bonds
Outstanding having the longest Stated Maturity, taking into
account any change in projected operating results due to the
impairment of any portion of the Project.
"Commonly Controlled Entity" as applied to the Partnership
or the Company, as the case may be, shall mean any Person who is
a member of a group which is under common control with the
Partnership or the Company, as the case may be, who together with
the Partnership or the Company, as the case may be, is treated as
a single employer within the meaning of Section 414(b), (c), (m)
or (o) of the Code or Section 4001(b) of ERISA.
"Company" shall have the meaning set forth in the Preamble.
"Company Loan Agreement" shall mean the Loan Agreement,
dated as of July 31, 1996, between the Company and the
Partnership.
"Company Order" means a written order of the Company, signed
by its Chairman of the Board, President or any Vice President and
by its Treasurer, Secretary, any Assistant Treasurer or any
Assistant Secretary.
"Company Pledge Agreement" shall mean the Stock Pledge and
Security Agreement, dated as of July 31, 1996, from the
Partnership to the Collateral Agent providing for the pledge of
all of the capital stock of the Company to the Collateral Agent.
"Company Request" shall mean a written request or order
signed in the name of the Company by its Chairman of the Board,
President or one of its Vice Presidents, and by its Treasurer,
Secretary, or one of its Assistant Treasurers or Assistant
Secretaries.
"Consent" shall mean a consent and agreement of a Person
with respect to the assignment by the Partnership of the
Partnership's rights and interest under each Project Agreement or
Additional Contract entered into by the Partnership with such
Person as security pursuant to a Collateral Document.
"Corporate Trust Office" shall mean the principal office of
the Trustee at which at any particular time corporate trust
business of the Trustee shall be administered, which at the time
of the execution of this Indenture is 777 Main Street, Hartford
Connecticut 06115, or such other office as may be designated by
the Trustee to the Company, the Partnership, the Depositary
Agent, the Collateral Agent and each Holder.
"Coverage Test" shall have the meaning set forth in Section
6.22(d).
"Credit Bank Documents" shall mean the Credit Bank
Reimbursement Agreement, any note or other evidence of
indebtedness thereunder and any letter of credit issued pursuant
thereto.
"Credit Bank Reimbursement Agreement" shall mean (i) any
credit agreement or similar agreement with the Partnership or any
replacement agreement entered into in substitution therefor (or
for relevant portions thereof) providing for the issuance of
letters of credit in an aggregate face amount not to exceed an
amount determined in accordance with Section 6.16(a)(iv) (less
amounts available under a Credit Bank Working Capital Agreement)
and which is designated as such in a Designation Letter, and (ii)
the VEPCO Reimbursement Agreement.
"Credit Bank Working Capital Agreement" shall mean any
credit agreement or similar agreement with the Partnership or any
replacement agreement entered into in substitution therefor (or
for relevant portions thereof) providing for revolving working
capital loans in a principal amount not to exceed an amount
determined in accordance with Section 6.16(a)(iv) (less amounts
available under a Credit Bank Reimbursement Agreement) and which
is designated as such in a Designation Letter.
"Credit Banks" shall mean, collectively, any bank or other
financial institution from time to time party to a Credit Bank
Reimbursement Agreement or a Credit Bank Working Capital
Agreement, including any bank or other financial institution
which has executed a counterpart to the Intercreditor Agreement
and has been designated as a "Secured Party" acting in the
capacity as agent for such banks or financial institutions and
its permitted successors and assigns; provided, however, that any
Credit Bank issuing a letter of credit under a Credit Bank
Reimbursement Agreement shall, at the time of the initial
issuance of such letter of credit, have a long-term unsecured
senior debt rating of at least "A" or its equivalent from the
Rating Agencies.
"Debt" shall mean, with respect to any Person, without
duplication, (i) all obligations of such Person, whether
contingent or otherwise, for borrowed money, (ii) all obligations
of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all obligations of such Person,
whether contingent or otherwise, to pay the deferred purchase
price of property or services, (iv) all obligations of such
Person as lessee under Capital Leases, (v) all Debt of others to
the extent guaranteed directly or indirectly by such Person, (vi)
all Debt and reimbursement obligations, whether contingent or
otherwise, under letters of credit issued for the account of such
Person, (vii) all obligations of such Person, whether contingent
or otherwise, under trade or bankers' acceptances, (viii) all
obligations of others, whether contingent or otherwise, secured
by any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangements, encumbrance,
security agreement, or Lien of any kind or nature whatsoever upon
property owned by any such Person whether or not assumed and
(ix) all obligations of such Person, whether contingent or
otherwise, under any Interest Rate Protection Agreement, but
excluding Fuel Hedges.
"Debt Service" shall mean, for any period, an amount equal
to the aggregate of, without duplication (i) all payments of
principal of and premium, if any, on the Bonds and Additional
Permitted Debt (including any mandatory sinking fund payment) due
and payable during such period, (ii) all interest on the Bonds
Outstanding due and payable during such period, (iii) all
Interest Expense and (iv) all principal payments in respect of
obligations to cash collateralize letters of credit and interest
payments in respect of such obligations under the Credit Bank
Reimbursement Agreement for such period.
"Debt Service Coverage Ratio" for any period, shall mean,
without duplication, the ratio of (i) (A) the sum of all Project
Revenues of the Project for such period less (B) the sum of (1)
the aggregate amount of Operating Expenses for such period plus
(2) the Major Maintenance Requirement for each Funding Date
during such period plus (3) the aggregate of (a) reimbursement
obligations and interest, fees and other amounts under each
Credit Bank Reimbursement Agreement, during such period, and (b)
principal of, interest on and fees and other amounts with respect
to loans under each Credit Bank Working Capital Agreement, during
such period, plus (4) the Property Tax Requirement for each
Funding Date during such period to (ii) the sum of (A) Debt
Service payable by the Partnership for such period, plus (B) the
aggregate amount of overdue Debt Service payments from previous
periods, all as determined on a cash basis. Whenever the
Partnership is required to calculate the Debt Service Coverage
Ratio under this Indenture, the full calculation of the Debt
Service Coverage Ratio (including any supporting documentation)
shall be set forth in an Officer's Certificate of the Partnership
filed with the Independent Engineer and the Trustee.
"Debt Service Letter of Credit" shall mean one or more
irrevocable direct pay letters of credit available for the
purpose of drawing to pay principal and interest on the Bonds and
the Additional Permitted Debt in an amount up to the Debt Service
Reserve Requirement and any extensions thereof or any substitute
letter of credit therefor in the stated amount contained in such
extension or substitute, subject to the limitations set forth in,
and permitting draws thereon as contemplated by, Section 3.5 of
the Depositary Agreement, (i) issued to the Depositary Agent by a
financial institution having a long-term unsecured senior debt
rating of at least "A" or its equivalent by the Rating Agencies
at the time of issuance, (ii) in form and substance reasonably
acceptable to the Depositary Agent, (iii) with a minimum term of
one (1) year, (iv) for the benefit of the Depositary Agent,
(v) providing for the amount thereof to be available to the
Depositary Agent in multiple drawings conditioned only upon
presentation of sight drafts accompanied by the applicable
certificate in the form attached to such letter of credit, (vi)
which the Partnership certifies in an Officer's Certificate does
not constitute Debt of the Company or the Partnership and is not
secured by a Lien on any of the properties of the Company or the
Partnership and (vii) automatically extending for not less than
six (6) months unless the issuing bank provides at least thirty
(30) days prior written notice of termination or non-renewal to
the Depositary Agent.
"Debt Service Fund" shall mean the fund described in Section
2.2(c) of the Depositary Agreement .
"Debt Service Reserve Fund" shall mean the fund described in
Section 3.5 of the Depositary Agreement.
"Debt Service Reserve Requirement" shall mean at any given
time an amount equal to the sum, without duplication, of (i) the
maximum aggregate principal payments due on the Bonds Outstanding
on any two consecutive quarterly payment dates in the immediately
succeeding three-year period from the date of determination (such
principal payments for the Initial Bonds being described in
Schedule 1.1 hereto subject to reduction pursuant to Section
7.3(e)), and the maximum aggregate principal payments due on the
Additional Permitted Debt during any semiannual period in the
immediately succeeding three-year period from the date of
determination or, with respect to Additional Permitted Debt with
a Bullet Maturity in the three-year period immediately prior to
final maturity, the Bullet Maturity Amounts for six Funding
Dates, and (ii) the maximum aggregate interest payment due on the
Bonds Outstanding on any two consecutive quarterly payment dates
in the immediately succeeding three-year period from the date of
determination and the maximum aggregate interest payments due on
the Additional Permitted Debt (including the net amounts payable
or receivable under the Interest Rate Protection Agreements with
respect to such Additional Permitted Debt) during any semiannual
period in the immediately succeeding three-year period from the
date of determination. For the purposes of determining the Debt
Service Reserve Requirement, with respect to Additional Permitted
Debt with a floating interest rate and without a related Interest
Rate Protection Agreement, the interest rate in effect at the
time of calculation for such Additional Permitted Debt shall be
assumed to apply for such three-year period.
"Default" shall mean an event or condition that, with the
giving of notice, lapse of time or failure to satisfy certain
specified conditions, or any combination thereof, would become an
Event of Default.
"Depositary Agreement" shall mean the Deposit and
Disbursement Agreement, dated as of July 31, 1996, among the
Partnership, the Company, the Collateral Agent and the Depositary
Agent.
"Depositary Agent" shall mean Fleet National Bank, a
national banking association established under the laws of the
United States, with its principal office at the time of the
execution of this Indenture at 777 Main Street, Hartford,
Connecticut 06115, or such other office as may be designated by
the Depositary Agent to the Company, the Partnership, the
Trustee, the Credit Banks and the Collateral Agent, as depositary
agent under the Depositary Agreement, and its permitted
successors and assigns.
"Designation Letter" shall have the meaning set forth in
Section 1.2 of the Intercreditor Agreement.
"Distribution" shall have the meaning set forth in Section
6.22.
"Distribution Sub-Fund" shall mean the sub-fund described in
Section 3.9(a) of the Depositary Agreement.
"Easements" shall mean all easements and rights, if any,
required to provide the Partnership access to the Site and, to
the extent required to be obtained in the name of the
Partnership, such other easements and rights, if any, required to
provide the Fuel, water, transportation, utilities and other
services at or from the Site necessary for the construction,
operation and maintenance of the Project.
"Eligible Successors" shall mean (i) with respect to the
Independent Engineer, Burns & McDonald, R.W. Beck, C.H.
Guernsey & Co., Parsons Brickerhoff Energy Services, Inc.,
Pacific Energy Systems, Inc, Resource Management International,
Inc., C.C. Pace Resources, Stone & Webster and Brown & Root, Inc.
or, in the event that none of them is willing or able to serve as
Independent Engineer, such other nationally recognized
engineering firm of similar standing that is acceptable to the
Partnership and whose selection is concurred with by the Trustee,
(ii) with respect to the Insurance Consultant, Aon Corporation,
Johnson & Higgins of Massachusetts, Inc., and Marsh & McLennan
or, in the event that neither of them is willing or able to serve
as Insurance Consultant, such other nationally recognized
insurance consultant of similar standing that is acceptable to
the Partnership and whose selection is concurred with by the
Trustee or (iii) with respect to the Gas Consultant, Benjamin
Schlesinger Associates, Inc., C.C. Pace Resources, ICF Resources,
Inc., Muse, Stancil & Co., ESBI Energy Company, Hagler Bailey and
R.W. Beck or, in the event that none of them are willing or able
to serve as Gas Consultant, such other nationally recognized gas
consultant of similar standing that is acceptable to the
Partnership and whose selection is concurred with by the Trustee.
"Eminent Domain Proceeds" shall have the meaning ascribed
thereto in Section 6.10.
"Engineer's Annual Report" shall have the meaning set forth
in Section 6.11.
"Environmental Approvals" shall mean Governmental Approvals
required under applicable Environmental Laws.
"Environmental Claim" shall mean any complaint, order,
citation, decree, demand, judgment or written notice actually
received by either the Partnership or the Company or an Affiliate
of the Partnership from any Person (a) relating to any matters of
Environmental Law affecting or relating to any activity or
operations at any time conducted by either the Partnership or the
Company or their agents on or in connection with the Project or
(b) relating to Releases or the presence of Hazardous Materials
on- or off-Site and related to Project operations or that could
impact the Site, including, without limitation:
(i) the existence of any Hazardous Materials at the
Site or any part thereof in violation of any Environmental
Law;
(ii) the release or threatened release of any
Hazardous Materials generated at the Site in violation
of any Environmental Law;
(iii) remediation of any Release at the Site or
any part thereof; and
(iv) any violation or alleged violation of any
relevant Environmental Law in connection with the Site
or any part thereof.
"Environmental Laws" shall mean any and all Federal, state
and local Laws (as well as obligations, duties and requirements
relating thereto under common law) relating to (a) emissions,
discharges, spills, releases or threatened releases of
pollutants, contaminants, Hazardous Materials, materials
containing Hazardous Materials, or hazardous or toxic materials
or wastes into ambient air, surface water, groundwater,
watercourses, publicly- or privately-owned treatment works,
drains, sewer systems, wetlands, septic systems or onto land
surface or subsurface strata, (b) the use, treatment, storage,
disposal, handling, manufacturing, transportation, or shipment of
Hazardous Materials, materials containing Hazardous Materials or
hazardous and/or toxic wastes, material, products or by-products
(or of equipment or apparatus containing Hazardous Materials) or
(c) pollution or the protection of human health, the environment
or natural resources, but excluding the Occupational Safety and
Health Act or similar law relating to worker health or safety.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time. Section references to
ERISA are to ERISA, as in effect at the date of this Indenture
and any subsequent provisions of ERISA, amendatory thereof,
supplemental thereto or substituted therefor.
"Escrow Deposit Agreement" shall mean the Escrow Deposit
Agreement, dated as of July 31, 1996, between the Partnership and
Bank of New York, as escrow agent.
"Event of Default" shall have the meaning specified in
Section 8.1.
"Event of Eminent Domain" shall mean any compulsory transfer
or taking or transfer under threat of compulsory transfer or
taking of any material part of the Collateral by any Governmental
Authority.
"Event of Loss" shall mean an event which causes all or a
portion of the Project to be damaged, destroyed or rendered unfit
for normal use for any reason whatsoever, other than an Event of
Eminent Domain or a Title Event.
"Facility" or "Project" shall mean the approximately 180
megawatt electrical generating facility, the Site on which such
Facility is located and all related equipment and facilities.
"Federal Bankruptcy Code" shall mean Title 11 of the United
States Code or any other federal bankruptcy code hereafter in
effect.
"FERC" shall mean the Federal Energy Regulatory Commission
or any successor agency or commission.
"Final Determination" shall mean a judgment, order or other
binding decision of any court, agency or other tribunal having
jurisdiction in the premises which is not subject to further
appeal, rehearing or reconsideration or for which the applicable
rehearing, reconsideration and appeal periods, if any, have
expired without any rehearing, reconsideration or appeal being
brought.
"Financing Documents" shall have the meaning set forth in
Section 1.2 of the Intercreditor Agreement.
"Financing Liabilities" shall have the meaning set forth in
Section 1.2 of the Intercreditor Agreement.
"Firm Gas Transportation Contract" shall mean (i) the
Service Agreement, dated October 22, 1991, between the
Partnership and Transcontinental Gas Pipe Line Corporation, as it
may exist at the time, (ii) any firm transportation agreement or
agreements entered into by the Partnership that replaces the
agreement referred to in the preceding clause (i) pursuant to a
Transportation Service Conversion including, without limitation,
the Service Agreement, dated July 26, 1996, between the
Partnership and Transcontinental Gas Pipe Line Corporation and
the related agreements to be entered into with Texas Gas
Transmission Corporation and CNG Transmission Corporation, and
(iii) any other firm transportation agreement having a term
(including all renewal or extension periods) of greater than one
year entered into by the Partnership which is needed to transport
natural gas supplied under the Gas Supply Contracts.
"First Mortgage" shall mean the Leasehold Deed of Trust and
Security Agreement, dated as of July 31, 1996, between the
Partnership, as Grantor, and the Collateral Agent, as mortgagee,
as it may exist at the time .
"First Note" shall mean the Promissory Note made by the
Partnership to the order of the Company, dated July 31, 1996, in
the principal amount of $111,400,000.
"First Series Supplemental Indenture" shall mean the First
Supplemental Indenture, dated as of July 31, 1996, among the
Trustee, the Company and the Partnership.
"FPA" shall mean the Federal Power Act, as amended.
"Fuel" shall mean natural gas, fuel oil or any other fuel to
be supplied to the Project by the Gas Suppliers or any other
Person.
"Fuel Hedges" shall mean any future or forward contract or
option or similar arrangements with respect to or relating to
natural gas or fuel oil providing for the transfer or mitigation
of commodity or price risks with respect to Fuel either generally
or under specific contingencies.
"Fuel Oil Contracts" shall mean any contract or agreement
entered into by or on behalf of the Partnership for the purchase
of fuel oil and the delivery of such fuel oil to the Facility.
"Fuel Supply Management Agreement" shall mean (i) the Fuel
Supply Management Agreement, effective as of October 10, 1990,
between the Partnership and Natural Gas Clearinghouse, as it may
exist at the time, and (ii) any other contract having a term
(including all renewal or extension periods) greater than one
year entered into by the Partnership to provide fuel management
activities comparable to those provided under the agreement
referred to in the preceding clause (i).
"Funding Date" shall mean the fifteenth day of each month,
or in each case if such day is not a Business Day, the next
succeeding Business Day.
"Funds" shall mean the funds established by Section 2.2 of
the Depositary Agreement.
"GAAP" shall mean generally accepted accounting principles
in the United States as in effect from time to time.
"Gas Consultant" shall mean Benjamin Schlesinger and
Associates, Inc. or its Eligible Successor.
"Gas Contracts" shall mean the Gas Supply Contracts and the
Gas Transportation Contracts.
"Gas Resale Agreements" shall mean any contract or agreement
entered into by or on behalf of the Partnership for the resale to
third parties of natural gas purchased under the Gas Supply
Contract, the Fuel Supply Management Agreement or any Spot Gas
Contract, which natural gas (i) is not required to meet the
natural gas supply needs at the Facility or (ii) must be
purchased in amounts necessary to satisfy minimum take
obligations under the Gas Supply Contract or any Spot Gas
Contract during periods of low dispatch at the Facility.
"Gas Supply Contracts" shall mean (i) the Gas Purchase
Contract, dated April 12, 1990 and amended on April 23, 1993,
between the Partnership and Natural Gas Clearinghouse, as it may
exist at the time and (ii) any firm natural gas supply contract
having a term (including all renewal or extension periods)
greater than one year entered into by the Partnership (including,
without limitation, a Replacement Gas Contract) to supply natural
gas to the Project as a part of the Project's primary gas supply,
other than a Fuel Supply Management Agreement.
"Gas Suppliers" shall mean Natural Gas Clearinghouse and any
other Person which shall supply natural gas to the Project
pursuant to a Gas Supply Contract.
"Gas Transportation Contracts" shall mean, collectively, (i)
the Firm Gas Transportation Contract, dated October 22, 1991,
between the Partnership and Transcontinental Gas Pipe Line
Corporation, as it may exist at the time, (ii) the Service
Agreement for Services Under ITS Rate Schedule, dated April 4,
1991, between the Partnership and Columbia Gas Transmission
Corporation, as it may exist at the time, and (iii) the ITS-1
Service Agreement, dated as of June 13, 1996, between the
Partnership and Columbia Gulf Transmission Company, as it may
exist at the time.
"Gas Transporters" shall mean Transcontinental Gas Pipe Line
Corporation, Texas Gas Transmission Corporation, Columbia Gas
Transmission Corporation, Columbia Gulf Transmission Company, CNG
Transmission Corporation and any other Person which shall
transport natural gas to the Project pursuant to a Gas
Transportation Contract, a Firm Gas Transportation Contract or a
Replacement Gas Transportation Contract.
"General Partner" shall mean Panda-Rosemary Corporation, a
Delaware corporation, the general partner of the Partnership, or
any successor general partner(s) permitted by Section 8.1(o).
"Global Bonds" shall mean one or more global securities in
registered form representing all or a portion of the Bonds.
"Good Faith Contest" means the contest of an item if (i) the
item is diligently contested in good faith by appropriate
proceedings timely instituted, (ii) adequate reserves are
established in accordance with GAAP with respect to the contested
item and held in cash or Permitted Investments, (iii) during the
period of such contest, the enforcement of such contested item is
effectively stayed, (iv) obligations with respect to such item
are effectively stayed or suspended by, or any Lien filed in
connection therewith shall have been removed from the record by,
Bonding Arrangements by a reputable surety company, or title
insurance under the Title Policy or cash deposits are otherwise
provided to assure the discharge of the Partnership's or the
Company's obligation thereunder and of any additional charge,
penalty or expense arising from or incurred as a result of such
contest, provided that the aggregate exposure of the Company and
the Partnership in connection with such cash deposits is less
than $1,000,000, (v) it becomes necessary to prevent the delivery
of tax deed or other similar instrument conveying the Mortgaged
Property or any portion thereof because of non-payment of such
item, then the Partnership or the Company shall pay the same in
sufficient time to prevent the delivery of such tax deed or other
similar instrument and (vi) neither the Partnership nor the
Company has knowledge of any actual or proposed deficiency or
additional assessment in connection therewith not otherwise
satisfying the requirements of clauses (i) through (v).
"Governmental Approvals" shall mean any authorization,
consent, approval, order, consent decree, license, franchise,
lease, ruling, permit, tariff, rate, certification, exemption,
filing (other than purely ministerial filings) or registration by
or with any Governmental Authority (including, without
limitation, Environmental Approvals, zoning variances, special
exceptions and nonconforming uses) relating to the ownership,
operation or maintenance of the Project or to the execution,
delivery or performance of any Project Document.
"Governmental Authority" shall mean any nation, state,
sovereign or government, any federal, regional, state, local or
political subdivision and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of
or pertaining to government.
"Guaranty" shall mean, with respect to any Person, any
obligation, contingent or otherwise, of such Person directly or
indirectly guaranteeing in any manner any Debt or other
obligation of any other Person and, without limiting the
generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of such Person (i) to purchase or pay
(or advance or supply funds for the purchase or payment of) such
Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase
assets, goods, bonds or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obligee of
such Debt or other obligation of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or
in part), provided, that the term "Guaranty", shall not include
endorsements for collection or deposit in the ordinary course of
business. The term "Guaranty" or "Guaranteed" used as a verb has
a correlative meaning.
"Hazardous Materials" shall mean (i) hazardous materials,
hazardous wastes, hazardous substances, extremely hazardous
wastes, restricted hazardous wastes, toxic substances, toxic
pollutants, contaminants, pollutants or words of similar import,
as used under Environmental Laws, including but not limited to
the following: the Hazardous Materials Transportation Act, 49
U.S.C. 1801 et seq., the Resource Conservation and Recovery
Act, 42 U.S.C. 6901 et seq., the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. 9601
et. seq., the Clean Water Act, 33 U.S.C. 1231 et seq., the
Clean Air Act, 42 U.S.C. 7401 et seq, the Toxic Substances
Control Act, 15, U.S.C. 2601 et seq., the Safe Drinking Water
Act, 42 U.S.C. 3808 et seq. and the Oil Pollution Act, 33
U.S.C. 2701 et seq., as each may be amended from time to time,
and their state and local counterparts or equivalents; (ii)
petroleum and petroleum products including crude oil and any
fractions thereof; (iii) natural gas, synthetic gas and any
mixtures thereof; (iv) Asbestos and/or any material which
contains any hydrated mineral silicate, including, but not
limited to, chrysolite, amosite, crocidolite, tremolite,
anthophylite and/or actinolite, whether friable or nonfriable;
(v) polychlorinated biphenyls ("PCBs"), or PCB-containing
materials or fluids; (vi) any other hazardous radioactive or
toxic substance, material, pollutant, or solid, liquid or gaseous
waste; and (vii) any substance that, whether by its nature or its
use, is subject to regulation under any Environmental Law or with
respect to which any Federal, state or local Environmental Law or
governmental agency requires environmental investigation,
monitoring or remediation.
"Holder" or "Securityholder" shall mean a Person in whose
name a Bond is registered in the Security Register.
"Indenture" shall mean this instrument entered into by the
Company, the Partnership and the Trustee.
"Independent Engineer" shall mean Burns & McDonnell or its
Eligible Successor.
"Independent Engineer's Certificate" shall mean a
certificate of an Authorized Representative of the Independent
Engineer,
"Initial Bonds" shall mean the $111,400,000 principal amount
of 8-5/8% First Mortgage Bonds due 2016 issued on the Closing
Date under the First Series Supplemental Indenture.
"Initial Interest Payment Date", with respect to Bonds of
any series, shall mean the date of the Stated Maturity for the
initial installment of interest on Bonds of such series.
"Insufficiency" shall mean, with respect to any employee
benefit plan, the amount, if any, by which the present value of
the vested and non-vested benefits under such plan (determined as
of the latest actuarial valuation date for such plan and
determined in accordance with the same assumptions and methods
as used in the most recent actuarial valuation for such plan)
exceeds the fair market value of the assets of such plan
allocable to such benefits.
"Insurance Consultant" shall mean Aon Corporation or its
Eligible Successor.
"Insurance Proceeds" shall mean all amounts and proceeds
(including instruments) in respect of the proceeds of any
casualty insurance policy required to be maintained under Section
6.4, except proceeds of business interruption insurance or title
insurance.
"Interconnection Agreement" shall mean the Letter Agreement,
dated March 6, 1991, between the Partnership and Columbia Gas
Transmission Corporation, as it may exist at the time.
"Intercreditor Agreement" shall mean the Collateral Agency
and lntercreditor Agreement, dated as of July 31, 1996, among the
Company, the Partnership, Baverische Vereinsbank AG, as a Credit
Bank, the Trustee, and the Collateral Agent, in the capacities
stated and any other Person (or an agent or trustee on their
behalf) designated a "Secured Party" under the Intercreditor
Agreement and executing a counterpart to the Intercreditor
Agreement.
"Interest Expense" shall mean, for any period, the sum,
without duplication, of the following: (i) all interest on the
Additional Permitted Debt due and payable during such period plus
(ii) the net amount payable (or minus the net amount receivable,
as the case may be) under the Interest Rate Protection Agreements
(if any) with respect to Additional Permitted Debt during such
period (whether or not actually paid or received during such
period).
"Interest Rate Protection Agreements" shall mean any
agreements providing for swaps, ceiling rates, ceiling and floor
rates, contingent participation or other hedging mechanisms with
respect to the payment of interest.
"Investment Grade" shall mean a rating in one of the four
highest rating categories (without regard to subcategories within
such rating categories) by the Rating Agencies as in effect on
the Closing Date (and the correlative ratings categories of the
Rating Agencies after the Closing Date in the event that the
ratings categories of the Rating Agencies change after the
Closing Date.
"Law" shall mean, with respect to any Governmental
Authority, any constitutional provision, law, statute, rule,
regulation, ordinance, treaty, order, decree, judgment, decision,
certificate, holding, injunction, registration, license,
franchise, permit, authorization, guideline, approval, consent or
requirement of such Governmental Authority, enforceable at law or
in equity, along with the interpretation and administration
thereof by any Governmental Authority charged with the
interpretation or administration thereof. Unless the context
clearly requires otherwise, the term "Law" shall include each of
the foregoing (and each provision thereof) as in effect at each,
every and any of the times in question, including any amendments,
replacements, supplements, extensions, codifications,
consolidations, restatements, revisions or reenactments thereto
or thereof, and whether or not in effect at the date of this
indenture.
"Lien" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority or other security agreement of any
kind or nature whatsoever, including, without limitation, any
conditional sale or other title retention agreement, any
financing lease having substantially the same effect as any of
the foregoing and the filing of any financing statement or
similar instrument under the Uniform Commercial Code or
comparable law of any jurisdiction, domestic or foreign.
"Limited Partners" shall mean, collectively, PRC II
Corporation, a Delaware corporation, and any other Persons
admitted to the Partnership as a limited partner pursuant to the
Partnership Agreement.
"Loans" shall have the meaning specified in Section 3.1.
"Major Maintenance Expenses" shall mean all expenditures by
the Partnership on regularly scheduled (or reasonably
anticipated) maintenance of the Project in accordance with good
utility practice and vendor and supplier requirements
constituting major maintenance (including, without limitation,
teardowns, overhauls, capital improvements, replacements and/or
refurbishments of major components of the Project).
"Major Maintenance Requirement" shall mean, for any Funding
Date, either (i) if, on any Funding Date, the amount then on
deposit in the Overhaul Fund is $1,000,000 or less, an amount
equal to the sum of (a) the product obtained by multiplying the
total number of hours that each of the combustion turbines
constituting the Project has operated during the 30-day period
immediately preceding such Funding Date by $130, and (b) the
aggregate amount, not to exceed $1,000,000, of the Major
Maintenance Requirements for previous Funding Dates which has not
been funded or has been withdrawn from the Overhaul Fund pursuant
to Section 3.12 of the Depositary Agreement, or (ii) if, on any
Funding Date, the amount then on deposit in the Overhaul Fund
exceeds $1,000,000, then the Major Maintenance Requirement of
such Funding Date shall be zero, in each case as such amount
shall be revised annually pursuant to Section 6.11(a)(ii);
provided, however, that no such revision shall reduce such amount
below the then current Major Maintenance Requirement without the
consent of the Credit Bank that issues the VEPCO Letter of
Credit.
"Make-Whole Amount" shall mean, with respect to any Initial
Bond, an amount equal to the excess, if any, of the Discounted
Value of the Remaining Scheduled Payments with respect to the
Called Principal of such Initial Bond over the amount of such
Called Principal, provided that the Make-Whole Amount may in no
event be less than zero. For the purposes of determining the
Make-Whole Amount, the following terms have the following
meanings:
"Called Principal" means, with respect to any Initial
Bond, the principal of such Initial Bond that is to be
redeemed pursuant to Section 7.3(c) or 7.3(d), whichever is
applicable.
"Discounted Value" means, with respect to the Called
Principal of any Initial Bond, the amount obtained by
discounting all Remaining Scheduled Payments with respect to
such Called Principal from their respective scheduled due
dates to the applicable Redemption Date with respect to such
Called Principal, in accordance with accepted financial
practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Initial
Bonds is payable) equal to the Reinvestment Yield with
respect to such Called Principal.
"Reinvestment Yield" means, with respect to the Called
Principal of any Initial Bond, 0.50% over the yield to
maturity implied by (i) the yields reported, as of 10:00
A.M. (New York City time) on the second Business Day
preceding the applicable Redemption Date with respect to
such Called Principal, on the display designated as "Page
678 on the Telerate Access Service (or such other display as
may replace 678 on Telerate Access Service), for actively
traded U.S. Treasury securities having a maturity equal to
the remaining average life of the Initial Bonds as of such
Redemption Date, or (ii) if such yields are not reported as
of such time or the yields reported as of such time are not
ascertainable, the Treasury Constant Maturity Series Yields
reported, for the latest day for which such yields have been
so reported as of the second Business Day preceding the
Redemption Date with respect to such Called Principal, in
U.S. Federal Reserve Statistical Release H.15 (519) (or any
comparable successor publication) for actively traded U.S.
Treasury securities having a constant maturity equal to the
remaining average life of the Initial Bonds as of such
Redemption Date. Such implied yield will be determined, if
necessary, by (a) converting U.S. Treasury bill quotations
to bond-equivalent yields in accordance with accepted
financial practice and (b) interpolating linearly between
(1) the actively traded U.S. Treasury security with the
duration closest to and greater than the remaining average
life of the Initial Bonds and (2) the actively traded U.S.
Treasury security with the duration closest to and less than
the remaining average life of the Initial Bonds.
"Remaining Scheduled Payments" means, with respect to
the Called Principal of any Initial Bond, all payments of
such Called Principal and interest thereon that would be due
after the Redemption Date with respect to such Called
Principal if no redemption of such Called Principal were
made prior to its scheduled due date, provided that if such
Redemption Date is not a date on which interest payments are
due to be made under the terms of the Initial Bonds, then
the amount of the next succeeding scheduled interest payment
will be reduced by the amount of interest accrued to such
Redemption Date and required to be paid on such Redemption
Date pursuant to Section 7.3(c) or 7.3(d), whichever is
applicable.
Two Business Days prior to the redemption of the Initial
Bonds pursuant to Section 7.3(c) or 7.3(d), the Company shall
deliver to the Trustee an Officer's Certificate of the
Partnership specifying the calculation of such Make-Whole Amount
as of the specified Redemption Date.
"Material Adverse Change" or "Material Adverse Effect" shall
mean a change, or effect that results in a change, in the
business, operations, properties or condition (financial or
otherwise) of the Project, the Partnership or the Company, which
could reasonably be expected to have a material adverse effect on
(i) the ability of the Partnership to perform its obligations in
all material respects under the Project Agreements, (ii) the
ability of the Partnership or the Company to perform their
respective obligations in all material respects under this
Indenture, the Partnership Guarantee or the Loans or (iii) the
validity or the priority of the Collateral Agent's and the
Depositary Agent's Liens on the Collateral.
"Mortgaged Property" shall have the meaning set forth
collectively in each of the Mortgages.
"Mortgages" shall mean (i) the First Mortgage and (ii) any
Additional Mortgages, if, as and when entered into by the
Partnership.
"Multiemployer Plan" shall mean a Plan which is a
multiemployer plan as defined in Section 4001(a)(3) of ERISA.
"Non-Material Agreements" shall mean (i) Acceptable Fuel
Management Contracts and (ii) any contract or undertaking entered
into by the Partnership (whether before or after the Closing
Date) in the ordinary course of business under which the
Partnership could not reasonably be expected to have monetary
obligations in excess of $1,000,000 under any such contract or
undertaking or related contracts or undertakings. For purposes
of this definition, indemnity or similar obligations of the
Partnership subject to a maximum dollar amount shall be computed
at such amount, and all other indemnity or similar obligations of
the Partnership shall be computed at the amount thereof which
would, at the time such contract or undertaking is entered into,
reasonably be expected to become due and payable.
"Obligations" shall have the meaning set forth in Section
14.2.
"Officer's Certificate" shall mean a certificate of an
Authorized Representative of the Partnership or the Company, as
the case may be, and signed by the Chairman, the President, a
Vice President, the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary, of the General Partner or
the Company, as applicable.
"Operating Budget" shall mean a budget of Operating Expenses
(excluding fuel and fuel transportation expenses) and capital
expenditures and a maintenance program with respect to the
Project for any given fiscal year, or part thereof, of the
Partnership and prepared by the Partnership or, on the basis of
estimated monthly requirements, showing the amounts budgeted for
operation and maintenance expenses by category for each month
during such fiscal year, or part thereof, and approved in writing
by the Independent Engineer prior to adoption by the Partnership.
"Operating Expenses" shall mean, for any period, the
operating and maintenance expenses of the Project for such period
(determined without duplication), calculated on a cash basis,
both paid or required to be paid during such period, including,
without limitation, the following: (i) costs incurred or amounts
payable by the Partnership under any Project Agreement or Non-
Material Agreement (other than amounts payable as Debt Service),
including, without limitation, the Operation and Maintenance
Agreement, the Gas Supply Contracts, the Gas Transportation
Contracts, the Power Purchase Agreements, the Steam Sales
Agreement, the Pipeline Operating Agreement, the Fuel Supply
Management Agreement, the Site Lease, and any Additional
Contract; (ii) general and administrative and management expenses
and major maintenance costs with regard to the Project, including
the repair, replacement or rebuilding of the Project in
connection with an Event of Eminent Domain, an Event of Loss or
Title Event (to the extent not paid from the moneys held in the
Overhaul Fund and the Restoration Fund); (iii) labor costs; (iv)
insurance premiums; (v) sales, receipts, franchise, licensing,
excise, property and other taxes imposed at the Partnership level
to which the Project may be subject; (vi) costs and fees incurred
in connection with obtaining and maintaining in effect
Governmental Approvals; (vii) utilities costs payable in
connection with the Project; (viii) costs relating to any
registration statement in respect of the Bonds or any other costs
incurred by the Company or the Partnership in connection with the
performance hereunder and under the Collateral Documents and
other agreements anticipated thereby; (ix) legal, accounting and
other professional fees incurred in connection with any of the
foregoing or the Project; (x) fees and expenses payable during
such period in connection with the Bonds, the VEPCO Letter of
Credit and other Additional Permitted Debt (other than Debt
Service and principal of, interest on and other amounts payable
by the Partnership or the Company with respect to such other
Additional Permitted Debt); (xii) cash deposits in connection
with Bonding Arrangements permitted by Section 6.18 and Good
Faith Contests; (xii) other expenses included in any Operating
Budget; and (xiii) any other expenses approved in writing by the
Independent Engineer as part of the Operating Budget or
otherwise.
"Operating Plan" shall have the meaning set forth in Section
6.1(g).
"Operation and Maintenance Agreement" or "O&M Agreement"
shall mean (i) the Amended and Restated Operation and Maintenance
Agreement, dated as of December 27, 1993, between the Partnership
and University Technical Services, Inc., as amended by the First
Amendment to Operation and Maintenance Agreement entered into
July 15, 1996, as it may exist at the time and (ii) any other
operation and maintenance agreement entered into by the
Partnership that provides for substantially all of the ordinary
course operation and maintenance services for the Project.
"Operation and Maintenance Procedures" shall mean the
procedures established (i) by the Operator under the Operation
and Maintenance Agreement with respect to the operation and
maintenance services and provided by the Operator in accordance
with the design engineer's recommendations, the equipment
manufacturers' recommendations, and Prudent Engineering and
Operating Practices and (ii) by any other Project Participant
with respect to the operation and maintenance of the Project in
accordance with the equipment manufacturers recommendations and
Prudent Engineering and Operating Practices.
"Operator" shall mean University Technical Services, Inc.
and its permitted successors and assigns and any other operator
under an Operation and Maintenance Agreement.
"Opinion of Counsel" shall mean a written opinion of counsel
for any Person either expressly referred to herein or otherwise
reasonably satisfactory to the Trustee which may include, without
limitation, counsel for the Company or the Partnership, whether
or not such counsel is an employee of any of them.
"Outstanding" when used with respect to Bonds, shall mean,
as of the date of determination, all Bonds theretofore
authenticated and delivered under this Indenture, except:
(i) Bonds theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Bonds or portions thereof deemed to have
been paid within the meaning of Section 13.1; and
(iii) Bonds that have been exchanged for other
securities or securities in lieu of which other Bonds
have been authenticated and delivered pursuant to this
Indenture other than any Bonds in respect of which
there shall have been presented to the Trustee proof
satisfactory to it that such Bonds are held by a bona
fide purchaser in whose hands such Bonds constitute
valid obligations of the Company;
provided, however, that in determining whether the Holders of the
requisite principal of Bonds outstanding have given any request,
demand, authorization, direction, notice, consent or waiver
hereunder or whether or not a quorum is present at a meeting of
Holders, Bonds owned by the Company, the Partnership, any Partner
or an Affiliate of the Company, the Partnership or any Partner
shall be disregarded and deemed not to be outstanding as provided
in Section 10.3.
"Overhaul Fund" shall mean the fund described in Section 3.6
of the Depositary Agreement.
"Partners" shall mean the Limited Partner, the General
Partner and such other Persons who may from time to time become
partners of the Partnership in accordance with the provisions of
the Partnership Agreement and, in the case of the General
Partners, Section 8.1(o) hereof and the Partnership Interests
Pledge Agreement.
"Partner's Income Tax Deficiency" shall mean for any
Partner, for any period, the excess (if any) of (a) the aggregate
amount of Partner's Income Taxes (including estimated Partner's
Income Taxes) in respect of such period due and payable by a
Partner (or the Affiliates of such Partner which are members of
the same consolidated group for income tax purposes) as a result
of the income of the Partnership allocable to such Partner or its
Affiliates or the investment of such Partner in the Partnership
over (b) the aggregate amount of all distributions made to that
Partner in respect of such period. Such Partner's Income Tax
Deficiency shall be set forth in a certificate executed by an
Authorized Representative of the Partnership and delivered to the
Depositary Agent.
"Partner's Income Taxes" shall mean any taxes that are based
on or measured by gross or net income or receipts (including,
without limitation, capital gains taxes, minimum taxes, income
taxes collected by withholding and taxes on preference items) and
any taxes which are capital, doing business, franchise,
accumulated earnings, personal holding company, excess profits or
net worth taxes, and interest, additions to tax, penalties or
other charges in respect of any of the foregoing.
"Partnership" shall have the meaning set forth in the
Preamble.
"Partnership Agreement" shall mean the Second Amended and
Restated Agreement of Limited Partnership, dated as of July 31,
1996, among the Partners.
"Partnership Distribution Fund" shall mean the fund
described in Section 3.9 of the Depositary Agreement.
"Partnership Guarantees" shall mean (a) collectively, the
Partnership Guarantee, dated as of July 31, 1996, of the
Partnership to the Trustee, for its own benefit and the benefit
of the Holders of the Initial Bonds guaranteeing the obligations
of the Company under this Indenture and the First Series
Supplemental Indenture, including, but not limited to, the full
and prompt payment of the principal of and premium, if any, on
the Initial Bonds and the indebtedness represented thereby, when
and as the same shall become due and payable, whether at the
Stated Maturity thereof, by acceleration, call for redemption or
otherwise and the full and prompt payment of interest on the
Initial Bonds when and as the same shall become due and payable,
(b) each unconditional guaranty of the Partnership to the
Trustee, for its own benefit and the benefit of the Holders, of
the obligations of the Company under this Indenture and the
related Series Supplemental Indenture for each other series of
Bonds, including, but not limited to, the full and prompt payment
of the principal of and premium, if any, on such Bonds and the
indebtedness represented thereby, when and as the same shall
become due and payable, whether at the Stated Maturity thereof,
by acceleration, call for redemption or otherwise and the full
and prompt payment of interest on such Bonds when and as the same
shall become due and payable and (c) each unconditional guaranty
of the Partnership to the holders of Additional Permitted Debt
permitted by Section 6.16(b), or any agent or trustee an behalf
of such holders, of the obligations of the Company under the
Financing Documents for each such Additional Permitted Debt,
including, but not limited to the full and prompt payment of the
principal of and premium, if any, on such Additional Permitted
Debt and the indebtedness represented thereby, when and as the
same shall become due and payable, whether at the stated maturity
thereof, by acceleration, call for redemption or otherwise and
the full and prompt payment of interest on such Additional
Permitted Debt when and as the same shall become due and payable.
"Partnership Interest Pledge Agreements" shall mean (a) the
General Partner Pledge and Security Agreement, dated as of
July 31, 1996, between Panda-Rosemary Corporation and the
Collateral Agent providing for the pledge of all of the general
partnership interests of the Partnership to the Collateral Agent,
as it may exist at the time, and (b) the Limited Partner Pledge
and Security Agreement, dated as of July 31, 1996, between PRC II
Corporation and the Collateral Agent providing for the pledge of
all the limited partnership interests of the Partnership to the
Collateral Agent, as it may exist at the time.
"Partnership Notes" shall mean, collectively, the First Note
and any Additional Notes.
"Partnership Request" or "Partnership Order" shall mean,
respectively, a written request or a written order signed in the
name of the General Partner by any Authorized Representative of
the Partnership.
"Paying Agent" shall mean any Person acting as Paying Agent
hereunder pursuant to Section 9.11.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Counterparty" shall mean, in connection with an
Interest Rate Protection Agreement, a financial institution, the
long-term unsecured senior debt of which is rated at least "A" or
its equivalent by the Rating Agencies at the time of the
execution of this Indenture with respect to Interest Rate
Protection Agreements (if any) or at the time of execution of any
other Interest Rate Protection Agreement.
"Permitted Investments" shall mean investments in securities
that are: (i) direct obligations of the United States, or any
agency thereof; (ii) obligations fully guaranteed by the United
States or any agency thereof; (iii) certificates of deposit
issued by commercial banks under the laws of the United States or
any political subdivision thereof having a combined capital and
surplus of at least $500,000,000 and having long-term unsecured
debt securities having a rating assigned by each of the Rating
Agencies equal to the highest rating assigned thereby to long-
term unsecured debt securities (but at the time of investment not
more than $10,000,000 may be invested in such certificates of
deposit from any one bank); (iv) repurchase obligations with a
term of not more than seven days for underlying securities of the
types described in clauses (i) and (ii) above, entered into with
any financial institution meeting the qualifications specified in
clause (iii) above; (v) open market commercial paper of any
corporation incorporated or doing business under the laws of the
United States or of any political subdivision thereof having a
rating assigned by each of the Rating Agencies equal to the
highest rating assigned thereby to commercial paper (but at the
time of investment not more than $10,000,000 may be invested in
such commercial paper from any one company); (vi) investments in
money market funds having a rating assigned by each of the Rating
Agencies equal to the highest rating assigned thereby to money
market funds (including money market funds for which the
Depositary Agent in its individual capacity or any of its
affiliates is investment manager or adviser); or
(vii) investments in money market funds registered under the
Investment Company Act of 1940, as from time to time amended, the
portfolio of which is limited to direct obligations of the United
States and agencies of the United States government.
"Permitted Liens" shall have the meaning set forth in
Section 6.17.
"Person" shall mean any individual, sole proprietorship,
corporation, partnership, joint venture, limited liability
company, trust, unincorporated association, institution,
Governmental Authority or any other entity.
"Pipeline" shall mean the approximately 10.25-mile lateral
natural gas pipeline connecting the pipelines owned by Columbia
Gas Transmission Corporation and Transcontinental Gas Pipe Line
Corporation and the Project.
"Pipeline Operating Agreement" shall mean the Pipeline
Operating Agreement, effective as of February 14, 1990, as
amended by Amendment Number 1, dated May 7, 1990, and Amendment
Number 2, dated November 19, 1991, between the Partnership and
North Carolina Natural Gas Corporation, as it may exist at the
time.
"Place of Payment" when used with respect to the Bonds of
any series shall mean the office or agency maintained pursuant to
Section 9.11 hereof and such other place or places, if any, where
the principal of, and premium, if any, and interest on the Bonds
of such series are payable as specified in the Series
Supplemental Indenture setting forth the terms of the Bonds of
such series.
"Power Purchasers" shall mean Virginia Electric and Power
Company and any other Person that purchases electricity from the
Project pursuant to a Power Purchase Agreement.
"Power Purchase Agreement" shall mean the Vepco Power
Purchase Agreement and any other contract having a term greater
than one year providing for the purchase of electricity from the
Project.
"PRC" means Panda-Rosemary Corporation, a Delaware
corporation.
"Predecessor Bonds" with respect to any particular Bond,
shall mean any previous Bond evidencing all or a portion of the
same debt as that evidenced by such particular Bond; for the
purposes of this definition, any Bond authenticated and delivered
under Section 2.9 in lieu of a lost, destroyed or stolen Bond
shall be deemed to evidence the same debt as the lost, destroyed
or stolen Bond.
"Project" shall have the same meaning as the "Facility".
"Project Agreements" shall mean, individually and
collectively, the Steam Sales Agreement, the Vepco Power Purchase
Agreement, the Pipeline Operating Agreement, the Site Lease, the
Gas Supply Contracts, the Transco Facilities Agreement, the
Operation and Maintenance Agreement, the Interconnection
Agreement, the Gas Transportation Contracts, any Firm Gas
Transportation Contract, any Fuel Supply Management Agreement and
any Additional Contract if, when or as entered into by the
Partnership.
"Project Documents" shall mean each of the Project
Agreements, this Indenture, any Series Supplemental Indenture,
the Bonds, the Company Loan Agreement, the Partnership Notes, the
Partnership Guarantees, the Collateral Documents, the Credit Bank
Documents and the Partnership Agreement.
"Project Participant" shall mean any Person who is a party
to a Project Agreement, other than the Company and the
Partnership.
"Project Revenue Fund" shall mean the fund described in
Section 3.1 of the Depositary Agreement.
"Project Revenues" shall mean, for any period, the sum of
the following (without duplication) received by the Partnership
or amounts credited to the Project Revenue Fund representing
monetary amounts immediately available, as described in clause
(iii) below during such period: (i) all revenues under the Power
Purchase Agreement and the Steam Sales Agreement, plus (ii) all
other revenues, whether from the sale of electrical capacity or
electricity, thermal energy byproducts of the operation of the
Project or assets permitted by Section 6.19 or otherwise, plus
(iii) investment earnings on amounts in the Funds, plus (iv) the
proceeds of any delayed opening or business interruption
insurance and other payments received for delayed opening or
interruption of operations, plus (v) refunds of deposits, plus
(vi) all rental and other payments received by the Partnership
from the lease or sale of any portion of the Site, plus (vii) all
revenue received by the Partnership from fuel management
activities, plus (viii) all other income, howsoever earned,
received by the Partnership during such period. Project Revenues
shall exclude, to the extent included, proceeds of the Bonds,
proceeds of all Debt of the Partnership or the Company, Casualty
Proceeds, Eminent Domain Proceeds, Title Insurance Proceeds and
any proceeds of other insurance maintained by the Partnership or
the Company and contributions to capital.
"Projected Debt Service Coverage Ratio (Three Month)" shall
mean, on any date of determination, a projection of the Debt
Service Coverage Ratio for the three month period specified or,
if no period is specified, for any three month period commencing
on the first day of the calendar month which includes such date
of determination, in each case prepared by the Partnership in
good faith based upon assumptions consistent in all material
respects with the Project Agreements and the historical operating
results of the Project (without giving effect to any historical
non-recurring extraordinary event). Whenever this Indenture
provides for the determination of a Projected Debt Service
Coverage Ratio (Three Month), the full calculation of the
Projected Debt Service Coverage Ratio (Three Month) (including
any supporting documentation) shall be set forth in an Officer's
Certificate of the Partnership filed with the Trustee and, in
connection with Distributions pursuant to Section 6.22, with the
Depositary Agent, accompanied by an Independent Engineer's
Certificate, dated within five (5) days of the date of the
Officer's Certificate, stating that, based upon reasonable
investigation and review, the Projected Debt Service Coverage
Ratio (Three Month) is based on reasonable assumptions consistent
in all material respects with the Project Agreements and the
historical operating results of the Project and that the
Independent Engineer believes the Projected Debt Service Coverage
Ratio (Three Month) to be reasonable in light of such
assumptions; provided, however, that in connection with
Distributions under Section 6.22(b) if the Partnership certifies
to the Trustee and the Depositary Agent in an Officer's
Certificate of the Partnership that the assumptions used in
calculating the Projected Debt Service Coverage Ratio (Three
Month) have not materially changed since the annual calculation
of such ratio made in connection with the most recent Engineer's
Annual Report, then the Partnership shall not be required to
deliver the Independent Engineer's Certificate as described
above.
"Property Tax Fund" shall mean the fund described in Section
3.11 of the Depositary Agreement.
"Property Tax Requirement" shall mean, for any Funding Date,
(i) until the date that the Partnership delivers to the
Depositary Agent the Officer's Certificate referred to in Section
6.29(b), an amount equal to 8.33% of the amount of real property
taxes assessed in the tax year immediately preceding the year in
which such Funding Date occurs against the real property owned by
The Bibb Company (or any successor owner of such property) that
includes the Site, provided, however, that if the Partnership
delivers to the Depositary Agent the Officer's Certificate and
other documents referred to in Section 3.11(e) of the Depositary
Agreement, the Property Tax Requirement for any Funding Date
occurring during the period commencing on the date of such
delivery and ending on the last day of the tax year with respect
to which such Officer's Certificate is delivered shall be zero,
and (ii) after the delivery of such Officer's Certificate, zero.
"Prudent Engineering and Operating Practices" shall mean the
practices, methods and acts generally engaged in or approved by
the electric utility industry, for electrical and steam
generating facilities of similar design and construction as, and
otherwise similarly situated to, the Project, that in the
exercise of reasonable judgment in light of the facts known or
that reasonably should have been known at the time a decision was
made, would have been expected to accomplish the desired result
in a manner consistent with law, regulation, reliability, safety,
environmental protection, economy and expedition.
"Prudent Expert Practices" shall mean, with respect to the
Independent Engineer, the Insurance Consultant and the Gas
Consultant (for purposes of this definition, each an "expert"),
advice, judgments or determinations furnished on a timely and
professional basis and substantively consistent with prudent
commercial practices, methods and acts including, without
limitation, to the extent relevant, Prudent Engineering and
Operating Practices for the relevant area of expertise generally
engaged in or recognized by the electric utility industry as such
practices, methods and acts are applied, in the exercise of
reasonable judgment to the matter at issue (in light of the facts
known or that reasonably should have been known by such expert at
the time such advice, judgment or determination was rendered), to
the ownership, construction, operation, maintenance, repair or
restoration, as relevant, of a co-generation facility of similar
design and construction as, and otherwise, at the time such
advice, judgment or determination was rendered, similarly
situated to, the Project.
"PUHCA" shall mean the Public Utility Holding Company Act of
1935, as amended.
"PURPA" shall mean the Public Utility Regulatory Policies
Act of 1978, as amended.
"Qualifying Facility" shall mean a cogeneration facility
that has satisfied the definition of "qualifying facility" as
set forth in 18 C.F.R. 292.102(b)(1), as the same may be
amended or supplemented from time to time.
"Rating Agencies" shall mean Moody's Investor Services, Inc.
(or any successor) and Duff & Phelps Credit Rating Co. (or any
successor), or another nationally recognized credit rating agency
of similar standing if either of the foregoing corporations is
not in the business of rating the subject of such rating.
"Redemption Date" shall have the meaning set forth in
Section 7.2.
"Registered Depositary" shall mean The Depository Trust
Company, having a principal office at 55 Water Street, New York,
New York 10041-0099, together with any Person succeeding thereto
by merger, consolidation or acquisition of all or substantially
all of its assets, including substantially all of its securities
payment and transfer operations.
"Regular Record Date", for the Stated Maturity of any Bond
of a series, or for the Stated Maturity of any installment of
principal thereof or payment of interest thereon, shall mean the
15th day (whether or not a Business Day) next preceding such
Stated Maturity, or any other date specified for such purpose in
the form of Bond of such series attached to the Series
Supplemental Indenture relating to the Bonds of such series.
"Release", when used in connection with any Hazardous
Material, shall mean and include any release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration, where such release is either
regulated by applicable Environmental Law or reasonably may be
expected to serve as the basis for liability.
"Replacement Gas Contract" shall mean any gas supply
contract or contracts providing for (i) substantially the same
volumes of gas as the Gas Supply Contract or Contracts it is
replacing and upon terms and conditions that are commercially
reasonable in light of then current circumstances and (ii) a
termination date no earlier than the longest Stated Maturity of
the Bonds.
"Replacement Gas Transportation Activities" shall mean the
sale, assignment or permanent release of all or a portion of firm
transportation services and related firm storage rights under a
Firm Gas Transportation Contract that is no longer required as a
result of the entering into of a Replacement Gas Contract or a
Replacement Gas Transportation Contract pursuant to
Section 6.22(d), but shall not include a Capacity Release
Arrangement pursuant to a Non-Material Agreement.
"Replacement Gas Transportation Contract" shall mean any one
or more firm natural gas transportation contracts having a term
greater than one year entered into by the Partnership required in
connection with any Replacement Gas Contract entered into
pursuant to Section 6.22(d) to transport natural gas under the
Replacement Gas Contract to the Project.
"Responsible Officer", when used with respect to the
Trustee, shall mean any officer in the Corporate Trust Office (or
any successor group of the Trustee) including any vice president,
assistant vice president, assistant secretary, assistant
treasurer any other officer of the Trustee customarily performing
functions similar to those performed by the persons who at the
time shall be such officers, respectively, or to whom any
corporate trust matter is referred because of his knowledge and
familiarity with the particular subject.
"Restoration Fund" shall mean the fund described in Section
3.8 of the Depositary Agreement.
"SEC" shall mean the Securities and Exchange Commission of
the United States or any successor agency or commission.
Secured Obligations" shall have the same meaning as
"Financing Liabilities" set forth in Section 1.2 of the
Intercreditor Agreement.
"Secured Parties" shall have the meaning set forth in
Section 1.2 of the Intercreditor Agreement.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Security" shall mean any shares, stock, bonds, debentures,
notes, evidences of indebtedness or any other instruments
commonly known as "securities".
"Security Agreements" shall mean (i) the Security Agreement,
dated as of July 31, 1996, made by the Partnership in favor of
the Collateral Agent as it may exist at the time and (ii) the
Security Agreement, dated as of July 31, 1996, made by the
Company in favor of the Collateral Agent as it may exist at the
time.
"Security Register" shall have the meaning specified in
Section 2.8.
"Security Registrar" shall mean any Person acting as
Security Registrar pursuant to Section 9.11.
"Series Supplemental Indenture" shall mean an indenture
supplemental to this Indenture entered into by the Company, the
Partnership and the Trustee for the purpose of establishing, in
accordance with this Indenture, the title, form and terms of the
Bonds of any series; "Series Supplemental Indentures" shall mean
each and every Series Supplemental Indenture.
"Short Term Transportation Contracts" shall mean any
contract or arrangements for the firm or interruptible
transportation or storage of natural gas, other than a Firm Gas
Transportation Contract.
"Site" shall mean the tracts of land or interests therein
located in Roanoke Rapids, North Carolina, which are more
particularly described in the Site Lease.
"Site Lease" shall mean the Real Property Lease and Easement
Agreement, dated as of June 9, 1989, between The Bibb Company and
the Partnership, as amended as of October 1, 1989, as of January
31, 1990, and as of March 15, 1996, and as it may be further
amended or supplemented from time to time.
"Special Record Date" for the payment of any defaulted
principal or interest shall mean a date fixed by the Trustee
pursuant to Section 2.10.
"Spot Gas Contract" shall mean any contract or Agreement
entered into by or on behalf of the Partnership for the purchase
of natural gas for the operation of the Facility, other than the
Gas Supply Contract.
"Stated Maturity" shall mean, with respect to any Bond or
any installment of principal thereof or payment of interest
thereon, the date specified in such Bond as the fixed date on
which such Bond or such installment of principal or payment of
interest is due and payable.
"Steam Sales Agreement" shall mean the Cogeneration Energy
Supply Agreement, dated January 12, 1989, and amended on October
1, 1989 and January 3, 1990, between the Partnership and The Bibb
Company.
"Stock Pledge Agreement" shall mean the Stock Pledge and
Security Agreement, dated as of July 31, 1996, between Panda
Interholding Corporation, a Delaware corporation, and the
Collateral Agent providing for the pledge of all of the capital
stock of Panda-Rosemary Corporation and PRC II Corporation to the
Collateral Agent.
"Subsidiary" shall mean, with respect to any Person, (i) any
corporation 50% or more of whose stock of any class or classes
having by the terms thereof ordinary voting power to elect a
majority of the directors of such corporation (irrespective of
whether or not at the time stock of any class or classes of such
corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time owned by such
Person directly or indirectly through Subsidiaries and (ii) any
partnership, association, joint venture or other entity in which
such Person, directly or indirectly through Subsidiaries, has a
50% or greater equity interest at the time.
"Suspension Sub-Fund" shall have the meaning set forth in
Section 3.9(b) of the Depositary Agreement.
"Title Company" shall mean Chicago Title Insurance Company.
"Title Event" shall mean the existence of any defect of
title or lien or encumbrance on the Mortgaged Property (other
than Permitted Liens) that entitles the Collateral Agent to make
a claim under the Title Policy.
"Title Insurance Proceeds" shall mean all amounts and
proceeds (including instruments) in respect of the proceeds of
the Title Policy.
"Title Policy" shall mean collectively, the policy or
policies of title insurance required pursuant to Section
6.4(a)(viii) insuring the mortgages constituting the First
Mortgage and certain Additional Mortgages.
"Transco Facilities Agreement" shall mean the Lateral Line
Interconnect and Reimbursement Agreement, dated August 1, 1990,
between the Partnership and Transcontinental Gas Pipe Line
Corporation, as it may exist at the time.
"Transfer" shall mean a sale, transfer, assignment,
hypothecation, pledge, or other disposition and, when used as a
verb, shall have a correlative meaning.
"Transportation Service Conversion" shall mean an election
by the Partnership to convert service under a Firm Gas
Transportation Contract from firm transportation pursuant to Part
157 of the rules and regulations of FERC, 18 C.F.R. 157.1 et
seq., to firm transportation pursuant to Part 284 of the rules
and regulations of FERC, 18 C.F.R. 284.1 et seq.
"Trust Indenture Act" shall mean the Trust Indenture Act of
1939 as in force at the date as of which this instrument was
executed; provided, however, that in the event the Trust
Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such
amendment, the Trust Indenture Act of 1939 as so amended.
"Trustee" shall mean the person named as the "Trustee" in
the Preamble of this Indenture and its successors, and any
corporation resulting from or surviving any consolidation or
merger to which it or its successors may be a party, or any
successor to all or substantially all of its corporate trust
business provided that any such successor or surviving
corporation shall be eligible for appointment as trustee pursuant
to Section 10.7, until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and
thereafter shall mean such successor Trustee.
"Uniform Commercial Code" shall mean the Uniform Commercial
Code as in effect from time to time in the State of New York and
any other jurisdiction the laws of which control the creation or
perfection of security interests under the Collateral Documents.
"United States" shall mean the United States of America.
"VEPCO Letter of Credit" shall mean the letter of credit
required to be issued in favor of the Virginia Electric and Power
Company for the account of Partnership pursuant to Sections 13.4
of the VEPCO Power Purchase Agreement.
"VEPCO Power Purchase Agreement" shall mean the Power
Purchase and Operating Agreement, dated as of January 24, 1989,
as amended on October 24, 1989 and July 30, 1993, between the
Partnership and Virginia Electric and Power Company, as it may
exist at the time.
"VEPCO Reimbursement Agreement" shall mean the Reimbursement
Agreement, dated as of July 31, 1996, among the Company, the
Partnership and Bayerische Verinsbank AG pursuant to which a
Credit Bank shall issue the VEPCO Letter of Credit, and any
amendment, supplement, or modification thereof.
Section 1.2 Compliance Certificates and Opinions. Except as
otherwise expressly provided by this Indenture, upon any
application or request by the Company or the Partnership to the
Trustee that the Trustee take any action under any provision of
this Indenture, the Company or the Partnership, as the case may
be, shall furnish to the Trustee an Officer's Certificate stating
that all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with
and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied
with, except that in the case of any particular application or
request as to which the furnishing of documents is specifically
required by any provision of this Indenture relating to such
particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with
a condition or covenant provided for in this Indenture shall
include:
(a) a statement that each individual signing such
certificate or opinion has read such covenant or
condition and the definitions herein relating thereto;
(b) a brief statement as to the nature and scope
of the examination or investigation upon which the
statements or opinions contained in such certificate or
opinion are based;
(c) a statement that, in the opinion of each such
individual, he has made such examination or
investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant
or condition has been complied with;
(d) a statement as to whether, in the opinion of
each such individual, such condition or covenant has
been complied with; and
(e) in the case of an Officer's Certificate, a
statement that no Event of Default under this Indenture
has occurred and is continuing (unless such Officer's
Certificate relates to an Event of Default).
Section 1.3 Form of Documents Delivered to Trustee. In any
case where several matters are required to be certified by, or
covered by an opinion of any specified Person, it is not
necessary that all such matters be certified by, or covered by
the opinion of, only one such Person, or that they be so
certified by only one document, but one such Person may certify
or give an opinion with respect to other matters and one or more
other such Persons as to other matters, and any such Person may
certify or give an opinion as to such matters in one or several
documents.
Any certificate or opinion of an officer of the Company or
of the Partnership may be based, insofar as it relates to legal
matters, upon a certificate or opinion of, or representations
by, counsel, unless such officer knows or has reason to believe
that the certificate or opinion or representations with respect
to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be
based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an Authorized
Representative of the Company or of the Partnership, unless such
counsel knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect
to such matters are erroneous.
Any Opinion of Counsel stated to be based on the opinion of
other counsel shall be accompanied by a copy of such other
opinion.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements,
opinions or other instruments under this Indenture, they may, but
need not, be consolidated and form one instrument.
Section 1.4 Act of Holders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be given or taken by Holders may be
embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or
by an agent duly appointed in writing or, alternatively, may be
embodied in and evidenced by the record of Holders of Bonds
voting in favor thereof, either in person or by proxies duly
appointed in writing, at any meeting of Holders of Bonds duly
called and held in accordance with the provisions of Article 11,
or a combination of such instruments and any such record. Except
as otherwise expressly provided herein, such action shall become
effective when such instrument or instruments or record, or both,
are delivered to the Trustee, and when it is specifically
required herein, to the Company and/or Partnership. Such
instrument or instruments and any such record (and the action
embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holders signing such instrument
or instruments and so voting at any such meeting. Proof of
execution of any such instrument or of a writing appointing any
such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 9.1) conclusive in favor of the Trustee,
the Company and the Partnership, if made in the manner provided
in this Section 1.4. The record of any meeting of Holders of
Bonds shall be proved in the manner provided in Section 11.6.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the certificate of
any public or other officer of any jurisdiction authorized to
take acknowledgments of deeds or administer oaths that the Person
executing such instrument acknowledged to him the execution
thereof or by an affidavit of a witness to such execution sworn
to before any such notary or other such officer, and where such
execution is by an officer of a corporation or association or of
a partnership, on behalf of such corporation, association or
partnership, such certificate or affidavit shall also constitute
sufficient proof of his authority. The fact and date of the
execution of any such instrument or writing, or the authority of
the Person executing the same, may also be proved in any other
manner which the Trustee deems sufficient.
(c) The principal amount and serial numbers of Bonds held
by any Person, and the date or dates of holding the same, shall
be proved by the Security Register and the Trustee shall not be
affected by notice to the contrary.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Bond shall
bind every future Holder of the same Bond and the Holder of every
Bond issued upon the transfer thereof or the exchange therefor or
in lieu thereof, whether or not notation of such action is made
upon such Bond.
(e) Until such time as written instruments shall have been
delivered with respect to the requisite percentage of principal
amount of Bonds for the action contemplated by such instruments,
any such instrument executed and delivered by or on behalf of a
Holder of Bonds may be revoked with respect to any or all of such
Bonds by written notice by such Holder or any subsequent Holder,
proven in the manner in which such instrument was proven.
(f) Bonds of any series authenticated and delivered after
any Act of Holders may, and shall if required by the Trustee,
bear a notation in form approved by the Trustee as to any action
taken by such Act of Holders. If the Company shall so determine,
new Bonds of any series so modified as to conform, in the opinion
of the Trustee and the Company, to such action, may be prepared
and executed by the Company and authenticated and delivered by
the Trustee in exchange for outstanding Bonds of such series.
(g) The Company may, but shall not be obligated to, fix a
record date for the purpose of determining the Holders entitled
to sign any instrument evidencing or embodying an Act of the
Holders. If a record date is fixed, those Persons who were
Holders at such record date (or their duly appointed agents) and
only those Persons, shall be entitled to sign any such instrument
evidencing or embodying an Act of Holders or to revoke any such
instrument previously signed, whether or not such persons
continue to be Holders after such record date. No such
instrument shall be valid or effective if signed more than 90
days after such record date, and may be revoked as provided in
paragraph (e) above.
Section 1.5 Notices, etc. to Trustee, Company and
Partnership. Any request, demand, authorization, direction,
notice, consent, waiver or Act of Holders or other document
provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with,
(a) the Trustee by any Holder, by the Company, by
the Partnership or by an Authorized Agent shall be
sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Trustee at
its Corporate Trust Office, or telecopied to the
Corporate Trust Office at (860) 986-7920, or at any
other telecopy number as may be designated by the
Trustee to the Company, the Partnership, the Depositary
Agent, the Collateral Agent and each Holder, or
(b) the Company by the Trustee, by any Holder, by
the Partnership or by an Authorized Agent shall be
sufficient for every purpose hereunder if in writing
and mailed, registered or certified mail with return
receipt requested and postage prepaid, to the Company
addressed to it at the address of its principal office
specified in the first paragraph of this Indenture or
telecopied to such principal office at (214) 980-6815,
Attention: Chief Financial Officer or at any other
address or telecopy number previously furnished in
writing to the Trustee, each Holder and the Partnership
by the Company for such purpose, or
(c) the Partnership by the Trustee, by any Holder,
by the Company or by an Authorized Agent shall be
sufficient for every purpose hereunder if in writing
and mailed registered or certified mail with return
receipt requested and first-class postage prepaid, to
the Partnership addressed to it at the address of its
principal office specified in the first paragraph of
this Indenture or telecopied to such principal office
at (214) 980-6815, Attention: Chief Financial Officer,
General Partner or at any other address or telecopy
number previously furnished in writing to the Trustee,
each Holder and the Company by the Partnership for such
purpose.
A copy of any request, demand or similar communication by
the Trustee to the Holders, or by a Holder to the Trustee, shall
be furnished to the Partnership.
Section 1.6 Notices to Holders; Waiver. Where this
Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to each Holder, at its address as it appears in the
Security Register, not later than the latest date, and not
earlier than the earliest date, prescribed for the giving of such
notice. Where this Indenture provides for notice in any manner,
such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice. Waivers of notice
by Holders shall be filed with the Trustee, but such filing shall
not be a condition precedent to the validity of any action taken
in reliance upon such waiver. In any case where notice to
Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular
Holder shall affect the sufficiency of such notice with respect
to other Holders, and any notice that is mailed in the manner
herein provided shall be conclusively presumed to have been duly
given.
Section 1.7 Conflict with Trust Indenture Act. If any
provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this
Indenture by any of the provisions of the Trust Indenture Act,
such required provision shall control. If any provision of this
Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so
modified or to be excluded, as the case may be. Until such time
as this Indenture shall be qualified under the Trust Indenture
Act, this Indenture, the Company, the Partnership and the Trustee
shall be deemed for all purposes hereof to be subject to and
governed by the Trust Indenture Act to the same extent as would
be the case if this Indenture were so qualified on the date
hereof.
Section 1.8 Effect of Reading and Heading and Table of
Contents. The Article and Section headings herein and the Table
of Contents are for convenience only and shall not affect the
construction hereof.
Section 1.9 Successor and Assigns. All covenants,
agreements, representations and warranties in this Indenture by
the Trustee, the Partnership and the Company shall bind and, to
the extent permitted hereby, shall inure to the benefit of and be
enforceable by their respective successor and assigns, whether so
expressed or not.
Section 1.10 Severability Clause. In case any provision
in this Indenture or in the Bonds shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired
thereby.
Section 1.11 Benefits of Indenture. Nothing in this
Indenture or in the Bonds, expressed or implied, shall give to
any Person, other than the parties hereto and their successors
hereunder and the Holders of Bonds, any benefit or any legal or
equitable right, remedy or claim under this Indenture.
Section 1.12 Governing Law. THIS INDENTURE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK.
Section 1.13 Legal Holidays. In any case where the
Redemption Date or the Stated Maturity of any Bond or of any
installment of principal thereof or payment of interest thereon,
or any date on which any defaulted interest is proposed to be
paid, shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or such Bond) payment of
interest and/or principal, and/or premium, if any, need not be
made on such date, but may he made on the next succeeding
Business Day with the same force and effect as if made on the
Redemption Date or at the Stated Maturity, or on the date on
which the defaulted interest is proposed to be paid, and, except
as provided in the Series Supplemental Indenture setting forth
the terms of such Bond, if such payment is timely made, no
interest shall accrue for the period from and after such
Redemption Date or Stated Maturity, or date for the payment of
defaulted interest, as the case may be, to the date of such
payment.
Section 1.14 Execution in Counterparts. This instrument
may be executed in any number of counterparts, each of which when
so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same
instrument.
Section 1.15 Agency. In executing the Bonds and this
Indenture, the Company will be acting both as principal and as
agent for the Partnership to the extent of the Partnership's
obligations under the Bonds. The Partnership hereby appoints the
Company to so act as agent and the Company hereby accepts such
appointment. As used in this Indenture, references to the
"Company" shall be interpreted to include the Company in its
capacity as principal and the Company in its capacity as agent
with respect to the Partnership's obligations under this
Indenture.
Section 1.16 Liability of the Partnership;
Indemnification. Subject to Sections 2.15 and 15.1 of this
Indenture, the Partnership hereby acknowledges that it shall be
liable for all its obligations arising under this Indenture. The
Partnership hereby agrees to indemnify the Company from, and to
hold the Company harmless against, any and all losses,
liabilities, claims, damages or expenses incurred by the Company
(including any and all taxes) arising out of or by any reason of
any of the transactions contemplated herein or otherwise whether
through this Indenture, the other Project Documents or otherwise.
In agreeing to enter into this Indenture and to issue the
Partnership Guarantee and the Partnership Notes, the Partnership
agrees that the Company will never have to make payments to third
parties that are not matched by a right at the same time to
receive at least equal payments under the Partnership Notes (for
the application to the payment of or on the Bonds) or hereunder,
and that the Partnership will make such payments hereunder as are
necessary to insure that this remains true so long as any Bonds
are Outstanding. Without limiting the generality of the
foregoing, the Partnership will assume liability for, and
indemnify and hold the Company harmless against, any and all
taxes imposed against or payable by the Company or imposed
against any property of the Company or the Partnership in
connection with or relating to or on or with respect to this
Indenture or any other Project Document to which the Company is a
party or any waiver, consent, amendment or supplement of this
Indenture or such Project Document or the execution, delivery or
performance of this Indenture or any other Project Document to
which the Company is a party or the payment or receipt or accrual
of any amounts pursuant to this Indenture or any other Project
Document or otherwise with respect to any of the transactions
contemplated by this Indenture or any other Project Document.
ARTICLE 2
THE BONDS
Section 2.1 Form of Bond to Be Established by Series
Supplemental Indenture. The Bonds of each series shall be
substantially in the form (not inconsistent with this Indenture,
including Section 2.5 hereof) established in the Series
Supplemental Indenture relating to the Bonds of such series.
Section 2.2 Form of Trustee's Authentication. Trustee's
certificate of authentication on all Bonds shall be in
substantially the following form:
This Bond is one of the Bonds referred to in the within-
mentioned Indenture.
___________________________
as Trustee
By:__________________________
Authorized Signature
Section 2.3 Amount; Issuable in Series. The aggregate
principal amount of Bonds that may be authenticated and delivered
under this Indenture is unlimited.
The Bonds may be issued in one or more series. There shall
be established in one or more Series Supplemental Indentures,
prior to the issuance of Bonds of any series:
(a) the title of the Bonds of such series (which
shall distinguish the Bonds of such series from all
other Bonds) and the form or forms of Bonds of such
series;
(b) any limit upon the aggregate principal amount
of the Bonds of such series that may be authenticated
and delivered under this Indenture (except for Bonds
authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other
Bonds of such series pursuant to Section 2.7, 2.8, 2.9,
7.6 or 12.7 and except for Bonds that, pursuant to the
last paragraph of Section 2.4 hereof, are deemed never
to have been authenticated and delivered hereunder);
(c) the date or dates on which the principal of
the Bonds of such series is payable, the amounts of
principal payable on such date or dates and the Regular
Record Date for the determination of Holders to whom
principal is payable; and the date or dates on or as of
which the Bonds of such series shall be dated, if other
than as provided in Section 2.13(a);
(d) the rate or rates at which the Bonds of such
series shall bear interest, or the method by which such
rate or rates shall be determined, the date or dates
from which such interest shall accrue, the interest
payment dates on which such interest shall be payable
and the Regular Record Date for the determination of
Holders to whom interest is payable; and the basis of
computation of interest, if other than as provided in
Section 2.13(b);
(e) if other than as provided in Section 9.11, the
place or places where (i) the principal of, premium, if
any, and interest on Bonds of such series shall be
payable, (ii) Bonds of such series may be surrendered
for registration of transfer or exchange and (iii)
notices and demands to or upon the Company in respect
of the Bonds of such series and this Indenture may be
served;
(f) the price or prices at which, the period or
periods within which and the terms and conditions upon
which Bonds of such series may be redeemed, in whole or
in part, at the option of the Company;
(g) the obligation, if any, of the Company to
redeem, purchase or repay Bonds of such series pursuant
to any sinking fund or analogous provision or at the
option of a Holder thereof and the price or prices at
which and the periods or periods within which and the
terms and conditions upon which Bonds of such series
shall be redeemed, purchased or repaid, in whole or in
part, pursuant to such obligations;
(h) if other than denominations of $100,000 and
any integral multiple thereof, the denominations in
which Bonds of such series shall be issuable;
(i) if the Bonds of such series shall be issued in
whole or in part in the form of a Global Bond or Bonds,
the terms and conditions, if any, upon which such
Global Bond or Bonds may be exchanged in whole or in
part for other individual Bonds in definitive
registered form; and the form of any legend or legends
to be borne by any such Global Bond or Bonds in
addition to or in lieu of the legend referred to in
Section 2.14;
(j) the restrictions or limitations, if any, on
the transfer or exchange of the Bonds of such series
and any requirements that the Company issue a new
series of Bonds registered under the Securities Act in
exchange for such series;
(k) any deletions from, modifications of or
additions to the Events of Default or covenants of the
Company or the Partnership with respect to such series,
whether or not such Events of Default or covenants are
consistent with the Events of Default or covenants set
forth herein with respect to other series, any change
in the right of the Trustee or Holders to declare the
principal of, and premium, if any, and interest on,
such series due and payable and any additions to the
definitions currently set forth in this Indenture;
(l) the obligation of the Partnership to execute
and deliver a Partnership Guarantee, an Additional
Mortgage and a Designation Letter with respect to the
Bonds of such series;
(m) any trustees, authenticating or paying agents,
warrant agents, transfer agents or registrars with
respect to the Bonds of such series; and
(n) any other terms of such series (which terms
shall not be inconsistent with the provisions of this
Indenture).
All Bonds of any one series shall be substantially identical
except as to the date or dates from which interest, if any, shall
accrue and denomination and except as may otherwise be provided
in the terms of such Bonds determined or established as provided
above. All Bonds of any one series need not be issued at the
same time and, unless otherwise provided, a series may be
reopened for issuance of additional Bonds of such series.
Section 2.4 Authentication and Delivery of Bonds. Subject
to Section 2.3, at any time and from time to time after the
execution and delivery of this Indenture, the Company may deliver
Bonds of any series executed by the Company to the Trustee for
authentication, together with a Company Order for the
authentication and delivery of such Bonds, and the Trustee shall
thereupon authenticate and make available for delivery such Bonds
in accordance with such Company Order, without any further action
by the Company. No Bond shall be secured by or entitled to any
benefit under this Indenture or be valid or obligatory for any
purpose unless there appears on such Bond a certificate of
authentication, in the form provided for herein, executed by the
Trustee by the manual signature of any Authorized Signatory, and
such certificate upon any Bonds shall be conclusive evidence, and
the only evidence, that such Bond has been duly authenticated and
delivered thereunder. In authenticating such Bonds and accepting
the additional responsibilities under this Indenture in relation
to such Bonds, the Trustee shall be entitled to receive, and
(subject to Section 9.1) shall be fully protected in relying
upon:
(a) an executed Series Supplemental Indenture with
respect to the Bonds of such series;
(b) an Officer's Certificate of the Company (i)
certifying as to resolutions of the Board of Directors
of the Company by or pursuant to which the terms of the
Bonds of such series were established and (ii)
certifying that all conditions precedent under this
Indenture to the Trustee's authentication and delivery
of such Bonds have been complied with;
(c) an Officer's Certificate of the Partnership to
the effect of clause (b) above;
(d) an Opinion of Counsel to the effect that (i)
the form or forms and the terms of such Bonds have been
established by a Series Supplemental Indenture as
permitted by Sections 2.1 and 2.3 in conformity with
the provisions of this Indenture and (ii) the Bonds of
such series, when authenticated and made available for
delivery by the Trustee and issued by the Company in
the manner and subject to any conditions specified in
such Opinion of Counsel, will constitute legal, valid
and binding obligations of the Company, enforceable
against the Company in accordance with their terms,
except as enforceability (A) may be limited by
applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the
enforcement of creditors, rights and remedies generally
and (B) is subject to general principles of equity
(regardless of whether enforceability is considered in
a proceeding in equity or at law); and
(e) such other documents and evidence with respect
to the Company and the Partnership as the Trustee may
reasonably request.
Prior to the authentication and delivery of a series of
Bonds the Trustee shall also receive such other funds, accounts,
documents, certificates, instruments or opinions as may be
required by the related Series Supplemental Indenture.
Notwithstanding the foregoing, if any Bond shall have been
authenticated and delivered hereunder but never issued and sold
by the Company, and the Company shall deliver such Bond to the
Trustee for cancellation as provided in Section 2.12 together
with a written statement (which need not comply with Section 1.2
and need not be accompanied by an Opinion of Counsel) stating
that such Bond has never been issued and sold by the Company, for
all purposes of this Indenture such Bond shall be deemed never to
have been authenticated and delivered hereunder and shall never
have been or be entitled to benefits hereof.
Section 2.5 Form. The Bonds of each series shall be in
registered form and may have such letters, numbers or other marks
of identification or such legends or endorsements printed,
lithographed, engraved, typewritten or photocopied thereon, as
may be required to comply with the rules of any securities
exchange upon which the Bonds of any such series are to be listed
(if any) or to conform to any usage in respect thereof, or as
may, consistently herewith, be prescribed by the Board of
Directors of the Company or by the officers executing such Bonds,
such determination by such officers to be evidenced by their
signing the Bonds.
The Bonds of each series shall be issued in the form of one
or more Global Bonds or individually registered Bonds, whichever
form is specified in the Series Supplemental Indenture creating
such series.
The Bonds shall be printed, lithographed, engraved,
typewritten, photocopied or produced by any combination of these
methods or may be produced in any other manner permitted by the
rules of any securities exchange upon which the Bonds of any such
series are to be listed (if any), all as determined by the
officers executing such Bonds, as evidenced by their execution of
such Bonds.
Section 2.6 Execution of Bonds. The Bonds shall be executed
on behalf of the Company by its President or one of its Vice
Presidents under its corporate seal reproduced thereon. The
signature of any such officers on the Bonds may be manual or
facsimile.
Bonds bearing the manual or facsimile signatures of
individuals who were, at the time such signatures were affixed,
the proper officers of the Company, shall bind the Company,
notwithstanding that such individuals or any of them have ceased
to hold such offices prior to the authentication and delivery of
such Bonds or did not hold such offices at the date of such
Bonds.
Section 2.7 Temporary Bonds. Pending the preparation of
definitive Bonds of any series pursuant to Section 2.8, the
Company may execute, and upon Company Order the Trustee shall
authenticate and make available for delivery, temporary Bonds of
such series that are printed, lithographed, typewritten,
photocopied or otherwise produced, in any denomination,
substantially of the tenor of the definitive Bonds in lieu of
which they are issued and with such appropriate insertions,
omissions, substitutions and other variations as the officers
executing such Bonds may determine, as evidenced by their
execution of such Bonds.
If temporary Bonds of any series are issued, the Company
will cause definitive Bonds of such series to be prepared without
unreasonable delay. After the preparation of definitive Bonds of
such series, the temporary Bonds of such series shall be
exchangeable for definitive Bonds of such series upon surrender
of the temporary Bonds of such series at the office or agency of
the Company, for such purpose, at the Place of Payment, without
charge to the Holder. Upon surrender for cancellation of any one
or more temporary Bonds of any series, the Company, shall
execute, and the Trustee shall authenticate and make available
for delivery, in exchange therefor, definitive Bonds of such
series of authorized denominations and of like tenor and
aggregate principal amounts. Until so exchanged, such temporary
Bonds of any series shall in all respects be entitled to the same
benefits under this Indenture as definitive Bonds of such series.
Section 2.8 Registration; Transfer and Exchange. (a) The
Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register which, subject to such reasonable
regulations as the Company may prescribe, shall provide for the
registration of Bonds and for the registration of transfers and
exchanges of Bonds. This register and, if there shall be more
than one Security Registrar, the combined registers maintained by
all such Security Registrars are herein sometimes referred to as
the "Security Register." The Trustee is hereby appointed
Security Registrar for the purpose of registering Bonds and
transfers of Bonds as herein provided.
If a Person other than the Trustee is appointed by the
Company as Security Registrar, the Company will give the Trustee
prompt written notice of the appointment of a Security Registrar
and of the location, and any change in the location of the
Security Register, and the Trustee shall have the right to
inspect the Security Register at all reasonable times and to
obtain copies thereof, and the Trustee shall have the right to
rely upon an officer's certificate executed on behalf of the
Security Registrar as to the names and addresses of the Holders
of the Bonds and the principal amounts and numbers of such Bonds.
(b) Subject to Sections 2.8(d) and 2.14 and any
restrictions on transfer that may be established by a Series
Supplemental Indenture, upon due presentment for registration of
transfer of any Bond at the office of the Security Registrar, the
Company shall execute and the Trustee shall authenticate and
deliver in the name of the transferee or transferees a new Bond
of the same series of authorized denominations for a like
aggregate principal amount.
(c) Bonds of any series (other than a Global Bond, except
as set forth below) may be exchanged for a like aggregate
principal amount of Bonds of the same series in other authorized
denominations. Subject to Section 2.14, Bonds to be exchanged
shall be surrendered at the office or agency to be maintained by
the Company as provided in Section 2.8(a), and the Company shall
execute and the Trustee shall authenticate and deliver in
exchange therefor the Bond or Bonds which the Holder making the
exchange shall be entitled to receive.
(d) All Bonds issued upon any registration of transfer or
exchange of Bonds shall be the valid obligations of the Company,
evidencing the same debt, and shall be entitled to the same
security and benefits under this Indenture, as the Bonds
surrendered upon such registration of transfer or exchange.
Every Bond presented or surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by
a written instrument of transfer in form satisfactory to the
Company and the Security Registrar or any transfer agent, duly
executed by the Holder thereof or his attorney duly authorized in
writing.
No service charge shall be required of any Holders
participating in any transfer or exchange of Bonds in respect of
such transfer or exchange, but the Security Registrar may require
payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any
transfer or exchange of Bonds, other than exchanges pursuant to
Section 2.7, 7.6 or 12.7 not involving any transfer.
The Security Registrar shall not be required (a) to issue,
register the transfer of or exchange any Bond of any series
during a period (i) beginning at the opening of business 15 days
before the date upon which notice of redemption of Bonds of such
series selected for redemption under Section 7.2 is given to the
Holders and ending at the close of business on such date and (ii)
beginning on the Regular Record Date for the Stated Maturity of
any installment of principal of or payment of interest on the
Bonds of such series and ending on the Stated Maturity of such
installment of principal or payment of interest or (b) to issue,
register the transfer of or exchange any Bond so selected for
redemption, in whole or in part, except the unredeemed portion of
any Bond redeemed in part.
Section 2.9 Mutilated, Destroyed, Lost and Stolen Bonds. If
(a) any mutilated Bond is surrendered to the Trustee, or the
Company and the Security Registrar and the Trustee receive
evidence to their satisfaction of the destruction, loss or theft
of any Bond and (b) there is delivered to the Company, the
Security Registrar and the Trustee evidence to their satisfaction
of the ownership and authenticity thereof, and such security or
indemnity as may be required by them to save each of them
harmless, then, in the absence of notice to the Company, the
Security Registrar or the Trustee that such Bond has been
acquired by a bona fide purchaser, the Company shall execute and
upon the Company's request the Trustee shall authenticate and
make available for delivery, in exchange for or in lieu of any
such mutilated, destroyed, lost or stolen Bond, a new Bond of the
same series and of like tenor and principal amount, bearing a
number not then outstanding. If, after the delivery of such new
Bond, a bona fide purchaser of the original Bond in lieu of which
such new Bond was issued presents for payment such original Bond,
the Company, the Trustee and the Security Registrar shall be
entitled to recover such new Bond from the Person to whom it was
delivered or any Person taking therefrom, except a bona fide
purchaser, and shall be entitled to recover upon the security or
indemnity provided for the original Bond to the extent of any
loss, damage, cost or expenses incurred by the Company, the
Trustee or the Security Registrar in connection therewith.
Notwithstanding the foregoing, in case any such mutilated,
destroyed, lost or stolen Bond has become or is about to become
due and payable, the Company, upon satisfaction of the conditions
set forth in clauses (a) and (b) of the preceding paragraph may,
instead of issuing a new Bond, pay such Bond.
Upon the issuance of any new Bond under this Section 2.9,
the Company may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in
relation thereto and any other expenses incurred in connection
therewith.
Every new Bond issued pursuant to this Section 2.9 in lieu
of any mutilated, destroyed, lost or stolen Bond shall constitute
an original additional contractual obligation of the Company,
whether or not the mutilated, destroyed, lost or stolen Bond
shall be at any time enforceable by anyone, and shall be entitled
to all the security and benefits of this Indenture equally and
proportionately with any and all other Bonds duly issued
hereunder.
The provisions of this Section 2.9 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies
with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Bonds.
Section 2.10 Payment of Principal and Interest; Principal
and Interest Rights Preserved. The principal of or interest on
any Bond of any Series that is payable, and punctually paid or
duly provided for, at any Stated Maturity of an installment of
principal or a payment of interest shall be paid to the Holder of
such Bond (or one or more Predecessor Bonds) on the Regular
Record Date for such principal or interest. Payment of principal
of and interest on the Bonds of any series shall be made at the
Place of Payment or by check or in another manner or manners
provided in the Series Supplemental Indenture creating the Bonds
of such series, except for the final installment of principal
payable with respect to a Bond, which shall be payable as
provided in Section 7.5 (in the case of Bonds redeemed) or
payable upon presentation and surrender of such Bond at the Place
of Payment.
The principal of or interest on any Bond of any series that
is payable, but is not punctually paid or duly provided for, at
any Stated Maturity of an installment of principal or payment of
interest shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date and such defaulted principal or
interest (together with other amounts payable with respect to
such defaulted principal or interest) may be paid by the Company,
at its election in each case, as provided in paragraph (a) or
paragraph (b) below:
(a) The Company may make, or cause to be made,
payment of all or any portion of such defaulted
principal or interest (together with other amounts
payable with respect to such defaulted principal or
interest) to the Holder of such Bond (or its
Predecessor Bond) on a Special Record Date, which shall
be fixed in the following manner. The Company shall
notify the Trustee and the Paying Agent in writing of
the amount of defaulted principal or interest proposed
to be paid on each Bond of such series and the date of
the proposed payment, and concurrently there shall be
deposited with the Trustee an amount of money equal to
the aggregate amount proposed to be paid in respect of
such defaulted principal or interest or there shall be
made arrangements satisfactory to the Trustee for such
deposit prior to the date of the proposed payment, such
money when deposited to be held in trust for the
benefit of the Persons entitled to such defaulted
principal or interest as provided in this paragraph.
Thereupon, the Trustee shall fix a Special Record Date
for the payment of such defaulted principal or interest
(together with other amounts payable with respect to
such defaulted principal or interest) which shall not
be more than 15 nor less than 10 days prior to the date
of the proposed payment and not less than 10 days after
the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify
the Company and the Security Registrar of such Special
Record Date and, in the name and at the expense of the
Company, shall cause notice of the proposed payment of
such defaulted principal or interest and the Special
Record Date therefor to be mailed, first class postage
prepaid, to each Holder of a Bond of such series at his
address as it appears in the Security Register, not
less than 10 days prior to such Special Record Date.
Notice of the proposed payment of such defaulted
principal or interest and the Special Record Date
therefor having been mailed as aforesaid, such
defaulted principal or interest shall be paid to the
Holders of such Bonds (or their respective Predecessor
Bonds) on such Special Record Date and shall no longer
be payable pursuant to the following paragraph (b); or
(b) The Company may make, or cause to be made,
payment of all or any portion of such defaulted
principal or interest (together with other amounts
payable with respect to such defaulted principal or
interest) in any other lawful manner not inconsistent
with the requirements of any securities exchange on
which such Bond may be listed, and, upon such notice as
may be required by such exchange, if, after notice
given by the Company to the Trustee of the proposed
payment pursuant to this paragraph, such payment shall
be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section 2.10,
each Bond delivered under this Indenture upon registration of
transfer of or in exchange for or in lieu of any other Bond shall
carry the rights to interest accrued and unpaid, and to accrue,
which were carried by such other Bond.
Section 2.11 Persons Deemed Owners. Subject to Section
2.10, prior to due presentment of a Bond for registration of
transfer, the Person in whose name any Bond is registered shall
be deemed to be the owner of such Bond for the purpose of
receiving payment of principal of, and premium, if any, and
interest on, such Bond and for all other purposes whatsoever,
whether or not such Bond be overdue, regardless of any notice to
anyone to the contrary.
Section 2.12 Cancellation. All Bonds surrendered for
payment, redemption, credit against any sinking fund payment or
registration of transfer or exchange shall, if surrendered to any
Person other than the Trustee, be delivered to the Trustee for
cancellation. The Company may at any time deliver to the Trustee
for cancellation any Bonds previously authenticated and delivered
hereunder which the Company may have acquired in any manner
whatsoever, and all Bonds so delivered shall be promptly canceled
by the Trustee. No Bonds shall be authenticated in lieu of or in
exchange for any Bonds canceled as provided in this Section,
except as expressly permitted by this Indenture. All canceled
Bonds held by the Trustee shall be destroyed and certification of
their destruction shall be delivered to the Company unless, by
Company Request, the Company otherwise directs.
Section 2.13 Dating of Bonds; Computation of Interest.
(a) Except as otherwise provided in the Series Supplemental
Indenture relating to the Bonds of a series, each Bond shall be
dated the date of its authentication.
(b) Except as otherwise provided in the Series Supplemental
Indenture relating to the Bonds of a series, interest on each
Bond shall be computed on the basis of a 360-day year consisting
of twelve 30-day months.
Section 2.14 Bonds Issued in the Form of a Global Bond.
(a) If a Series Supplemental Indenture shall establish that the
Bonds of a particular series are to be issued in whole or in part
in the form of one or more Global Bonds, then the Company shall
execute and the Trustee or its agent shall, in accordance with
Section 2.4, authenticate and deliver, such Global Bond or Bonds,
which (i) shall represent, and shall be denominated in an amount
equal to the aggregate principal amount of, the Outstanding Bonds
of such series to be represented by such Global Bond or Bonds, or
such portion thereof as shall be specified in the Series
Supplemental Indenture, (ii) shall be registered in the name of
the Registered Depositary for such Global Bond or Bonds or its
nominee, (iii) shall be delivered by the Trustee or its agent to
the Depositary or pursuant to the Depositary's instruction and
(iv) shall bear a legend substantially to the following effect:
"Unless and until it is exchanged in whole or in part for the
individual Bonds represented hereby, this Global Bond may not be
transferred except as a whole by the Depositary to a nominee of
the Depositary or by a nominee of the Depositary to the
Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a
nominee of such successor Depositary," or such other legend as
may then be required by the Registered Depositary for such Global
Bond or Bonds.
(b) Notwithstanding any other provision of this Section
2.14 or of Section 2.8 to the contrary, and subject to the
provisions of paragraph (c) below, unless the terms of a Global
Bond expressly permit such Global Bond to be exchanged in whole
or in part for individual Bonds in registered form, a Global Bond
may be transferred, in whole but not in part and in the manner
provided in Section 2.8, only by the Depositary to a nominee of
the Registered Depositary for such Global Bond, or by a nominee
of the Depositary to the Depositary or another nominee of the
Depositary, or by the Depositary or a nominee of the Depositary
to a successor Depositary for such Global Bond selected or
approved by the Company, or to a nominee of such successor
Depositary.
(c) (i) If at any time the Registered Depositary for a
Global Bond or Bonds notifies the Company that it is
unwilling or unable to continue as Registered Depositary for
such Global Bond or Bonds or if at any time the Registered
Depositary for the Bonds for such series shall no longer be
eligible or in good standing under the Securities Exchange
Act of 1934, as amended, or other applicable statutes, rule
or regulation, the Company shall appoint a successor
Registered Depositary with respect to such Global Bond or
Bonds. If a successor Registered Depositary for such Global
Bond or Bonds is not appointed by the Company within 90 days
after the Company receives such notice or becomes aware of
such ineligibility, the Company shall execute, and the
Trustee or its agent, upon receipt of a Company Order for
the authentication and delivery of such individual Bonds of
such series in exchange for such Global Bond, will
authenticate and deliver, individual Bonds of such series of
like tenor and terms in definitive form in an aggregate
principal amount equal to the principal amount of the Global
Bond in exchange for such Global Bond or Bonds.
(ii) The Company may at any time and in its sole
discretion determine that the Bonds of any series or portion
thereof issued or issuable in the form of one or more Global
Bonds shall no longer be represented by such Global Bond or
Bonds. In such event the Company will execute, and the
Trustee or its agent, upon receipt of a Company Order for
the authentication and delivery of individual Bonds of such
series in exchange in whole or in part for such Global Bond,
will authenticate and deliver individual Bonds of such
series of like tenor and terms and in an authorized
denomination in an aggregate principal amount equal to the
principal amount of such series or portions thereof in
exchange for such Global Bond or Bonds.
(iii) After the occurrence of an Event of Default with
respect to a series of Bonds, beneficial owners holding
interests representing a majority of the principal amount of
Bonds represented by a Global Bond of such series may advise
the Trustee through the Registered Depositary in writing
that the continuation of a book-entry system through the
Registered Depositary with respect to the Bonds of such
series is no longer in such owners' best interests.
Thereupon, the Company shall execute, and the Trustee or its
agent, upon receipt of a Company Order for the
authentication and delivery of definitive Bonds of such
series, shall authenticate and deliver, without service
charge, to each Person specified by such Registered
Depositary a new Bond or Bonds of the same series of like
tenor and terms and in any authorized denomination as
requested by such Person in aggregate principal amount equal
to and in exchange for such Person's beneficial interest in
the Global Bond.
(iv) In any exchange provided for in any of the
preceding three paragraphs, the Company will execute and the
Trustee or its agent will authenticate and deliver
individual Bonds. Upon the exchange of the entire principal
amount of a Global Bond for individual Bonds, such Global
Bond shall be canceled by the Trustee or its agent. Except
as provided in the preceding paragraph, Bonds issued in
exchange for a Global Bond pursuant to this Section 2.14
shall be registered in such names and in such authorized
denominations as the Registered Depositary for such Global
Bond, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee or the
Security Registrar. The Trustee or the Security Registrar
shall deliver such Bonds to the Persons in whose names such
Bonds are so registered.
(v) Payments in respect of the principal of and
interest on any Bonds registered in the name of the
Registered Depositary or its nominee will be payable to the
Registered Depositary or such nominee in its capacity as the
registered owner of such Global Bond. The Company and the
Trustee may treat the person in whose names the Bonds,
including the Global Bond, are registered as the owner
thereof for the purposes of receiving such payments and for
any and all other purposes whatsoever. None of the Company,
the Trustee, any Security Registrar, the paying agent or any
agent of the Company or the Trustee will have any
responsibility or liability for (a) any aspect of the
records relating to or payments made on account of the
beneficial ownership interests of the Global Bond by the
Registered Depositary or its nominee or any of the
Registered Depositary's direct or indirect participants, or
for maintaining, supervising or reviewing any records of the
Depositary, its nominee or any of its direct or indirect
participants relating to the beneficial ownership interests
of the Global Bond, (b) the payments to the beneficial
owners of the Global Bond of amounts paid to the Registered
Depositary or its nominee or (c) any other matter relating
to the actions and practices of the Registered Depositary,
its nominee or any of its direct or indirect participants.
None of the Company, the Trustee or any such agent will be
liable for any delay by the Registered Depositary, its
nominee, or any of its direct or indirect participants in
identifying the beneficial owners of the Bonds, and the
Company and the Trustee may conclusively rely on, and will
be protected in relying on, instructions from the Registered
Depositary or its nominee for all purposes (including with
respect to the registration and delivery, and the respective
principal amounts, of the Bonds to be issued).
Section 2.15 Source of Payments Limited; Rights and
Liabilities of the Company and the Partnership. All payments of
principal and premium, if any, and interest to be made in respect
of the Bonds and this Indenture shall be made only from the
payments from the Partnership, the Company and the Collateral and
the income and proceeds received by the Trustee therefrom. Each
Holder, by its acceptance of a Bond, agrees that (a) it will look
solely to the payments from the Partnership, the Company and the
Collateral and the income and proceeds received by the Trustee
therefrom to the extent available for distribution to such Holder
as herein provided or provided in the Collateral Documents, (b)
subject to Section 15.1, none of the Partners, or any of their
respective past, present or future partners, officers, directors
or shareholders or other related Persons, and the Trustee shall
be liable to any Holder, nor shall any of the Partners, or any of
their respective past present or future partners, officers,
directors or shareholders or other related Persons, be liable to
the Trustee, for any amounts payable under any Bond or for any
liability under this Indenture and (c) recourse shall be
otherwise limited in accordance with Section 15.1.
Section 2.16 Allocation of Principal and Interest. Each
payment of principal of and premium, if any, and interest on each
Bond shall be applied, first, to the payment of accrued but
unpaid interest on such Bond (as well as any interest on overdue
principal or, to the extent permitted by applicable Law, overdue
interest) to the date of such payment, second, to the payment of
the principal amount of and premium, if any, on such Bond then
due (including any overdue installment of principal) thereunder,
and third, the balance, if any, to the payment of the principal
amount of such Bond remaining unpaid.
Section 2.17 Parity of Bonds. Except as otherwise
provided in this Indenture and the Collateral Documents, all
Bonds of a series issued and outstanding hereunder rank on a
parity with each other Bond of the same series and with all Bonds
of each other series and each Bond of a series shall be secured
equally and ratably by this Indenture and the Collateral
Documents with each other Bond of the same series and with all
Bonds of each other series, without preference, priority or
distinction of any one thereof over any other by reason of
difference in time of issuance or otherwise, and each Bond of a
series shall be entitled to the same benefits and security, in
this Indenture and the Collateral Documents as each other Bond of
the same series and with all Bonds of each other series.
Section 2.18 CUSIP Numbers. The Company in issuing Bonds
may use "CUSIP" numbers (if then generally in use) in addition to
serial numbers. If so, the Trustee shall use such CUSIP numbers
in addition to serial numbers in notices of redemption as a
convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness of such
CUSIP numbers either as printed on the Bonds or as contained in
any notice of a redemption and that reliance may be placed only
on the serial or other identification numbers printed on the
Bonds, and any such redemption shall not be affected by any
defect in or omission of such CUSIP numbers.
ARTICLE 3
APPLICATION OF PROCEEDS
FROM SALE OF BONDS
Section 3.1 Application of Proceeds from Sale of Bonds.
Promptly upon receipt by the Company of the proceeds from any
sale of Bonds of a series, the Company shall, directly, or
through the acquisition of Debt of the Partnership, make one or
more loans ("Loans") of all such proceeds to the Partnership
pursuant to one or more promissory notes in an aggregate
principal amount equal to the principal amount of the Bonds of
such series for the purposes permitted under Section 6.8.
ARTICLE 4
INDEPENDENT ENGINEER, INSURANCE CONSULTANT
AND GAS CONSULTANT
Section 4.1 Resignation and Removal of Independent Engineer,
Insurance Consultant and Gas Consultant. (a) Upon receiving
written notice of the resignation, or the expiration of the term,
of the Independent Engineer, the Insurance Consultant or the Gas
Consultant, the Partnership shall promptly appoint a successor
from among the Eligible Successors by written instrument executed
by order of the Board of Directors of the General Partner, one
copy of which shall be delivered to the Independent Engineer, the
Insurance Consultant or the Gas Consultant, as the case may be,
and one copy of which shall be delivered to the Trustee. If no
successor is so appointed within 30 days after the mailing of
such notice of resignation or the expiration of such term, as the
case may be, the Trustee shall appoint the next available
Eligible Successor as successor to the resigning Independent
Engineer, Insurance Consultant or Gas Consultant, as the case may
be.
(b) In case at any time the Independent Engineer, the
Insurance Consultant or the Gas Consultant shall become incapable
of acting or otherwise fails to perform the functions of the
Independent Engineer, the Insurance Consultant or the Gas
Consultant in accordance with Prudent Expert Practices in the
manner contemplated hereunder and under the applicable engagement
letter and the other Project Documents or shall file as a
bankrupt or insolvent, or a bankruptcy or insolvency petition
shall be filed against it, or a receiver is appointed, or any
public officer shall take charge or control of the Independent
Engineer, the Insurance Consultant or the Gas Consultant or their
respective property or affairs for the purpose of rehabilitation,
conservation or liquidation, then, in any such case, the
Partnership or the Trustee may (but shall not be obligated to)
remove the Independent Engineer, the Insurance Consultant or the
Gas Consultant, as the case may be, and appoint a successor from
among the Eligible Successors (other than the Person removed) by
written instrument, one copy of which instrument shall be
delivered to the Independent Engineer, the Insurance Consultant
or the Gas Consultant, as the case may be, one copy of which
instrument shall be delivered to the successor Independent
Engineer, Insurance Consultant or Gas Consultant, as the case may
be, and one copy of which instrument shall be delivered to the
Trustee or the Partnership, as the case may be.
(c) The Holders of a majority in the aggregate principal
amount of all of the Bonds outstanding may, at any time after the
30th day following the date on which such Holders give notice to
the Partnership that such Holders desire to remove the
Independent Engineer, the Insurance Consultant or the Gas
Consultant, remove the Independent Engineer, the Insurance
Consultant or the Gas Consultant, as the case may be, and appoint
a successor from among the Eligible Successors (other than the
Person removed) by delivering to the Trustee, the Partnership and
the Independent Engineer, the Insurance Consultant or the Gas
Consultant, as the case may be, and the successor Independent
Engineer, Insurance Consultant or Gas Consultant, as the case may
be, the evidence provided for in Section 1.4 of the action taken
by the Holders.
(d) Any successor Independent Engineer, Insurance
Consultant or Gas Consultant appointed under this Section 4.1
shall execute, acknowledge and deliver to the Partnership and the
Trustee an instrument accepting such appointment.
(e) The Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith with respect to the
removal or appointment of any Eligible Successor or Independent
Engineer, Insurance Consultant or Gas Consultant hereunder.
Section 4.2 Payment of Fees and Expenses. For so long as
any of the Bonds shall remain outstanding, the Partnership
covenants and agrees to pay to the Independent Engineer, the
Insurance Consultant and the Gas Consultant from time to time,
and the Independent Engineer, the Insurance Consultant and the
Gas Consultant shall be entitled to, reasonable compensation for
all services rendered by them hereunder as set forth in their
respective engagement letters. The Partnership will pay or
reimburse the Independent Engineer, the Insurance Consultant and
the Gas Consultant, respectively, upon a request by any of them
for all reasonable expenses, disbursements and advances incurred
or made by the Independent Engineer, the Insurance Consultant or
the Gas Consultant in connection with rendering services
hereunder. The Company and the Partnership, jointly and
severally, also covenant and agree to indemnify each of the
Independent Engineer, the Gas Consultant and the Insurance
Consultant for, and to hold each of them harmless against, any
loss, liability, claim, damage and expense incurred without
negligence or willful misconduct on the part of each of the
Independent Engineer, the Gas Consultant and the Insurance
Consultant, as the case may be, arising out of or in connection
with the performance of any of their respective duties provided
in this Indenture or the Collateral Documents.
Section 4.3 Consultation with Other Consultants. Each of
the Independent Engineer, the Gas Consultant, the Insurance
Consultant and any other independent consultant selected after
consultation with the Partnership and the Trustee may consult
with any of the others, at the expense of the Partnership and the
Company, in connection with the performance of its duties under
this Indenture and the Project Documents. In any case where the
Independent Engineer is requested to determine whether or not a
Material Adverse Effect could reasonably be expected to occur,
the Independent Engineer may rely, as to matters of law, upon an
Opinion of Counsel, and, as to determinations of financial
condition, upon an opinion of independent public accountants or
an independent investment banking firm of nationally recognized
standing. The Independent Engineer is authorized to engage such
counsel, accountants or firm at its own expense or the expense of
the Partnership, as may be mutually agreed by the Independent
Engineer and the Partnership, in making any such determination of
Material Adverse Effect.
Section 4.4 Delivery of Certificates, Confirmations,
Concurrences and Approvals. Whenever the Independent Engineer,
the Gas Consultant, the Insurance Consultant or any other
independent consultant is required by any provision of this
Indenture or the Collateral Documents to deliver a certificate or
to concur with or confirm or approve any matter as required
pursuant to the terms of this Indenture, such certificate,
confirmation, concurrence or approval shall be in writing and
shall not be unreasonably withheld or delayed.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Each of the Partnership and the Company represents and
warrants to the Trustee, for the benefit of the Holders, as
follows:
Section 5.1 Organization, Power and Status of the
Partnership and the Company. The Partnership (a) is a limited
partnership duly formed, validly existing and in good standing
under the laws of the State of Delaware and (b) is duly qualified
as a foreign limited partnership in the State of North Carolina
and is duly authorized to do business in each other jurisdiction
where the character of its properties or the nature of its
activities makes such qualification necessary and where the
failure to so qualify could reasonably be expected to have a
Material Adverse Effect. The Company (a) is a corporation duly
formed, validly existing and in good standing under the laws of
the State of Delaware and (b) is duly authorized, to the extent
necessary, to do business in the State of North Carolina and in
each other jurisdiction where the character of its properties or
the nature of its activities makes such qualification necessary
and where the failure to so qualify could reasonably be expected
to have a Material Adverse Effect. Neither the Partnership nor
the Company has engaged in any business or activity other than in
connection with the development, acquisition, construction,
ownership, operation and financing of the Project as contemplated
by the Project Documents. Each of the Partnership and the
Company has all requisite partnership or corporate power and
authority, as the case may be, to own and operate the property it
purports to own and to carry on its business as now being
conducted and as proposed to be conducted in respect of the
Project.
Section 5.2 Authorization; Enforceability; Execution and
Delivery. (a) Each of the Partnership and the Company has all
necessary partnership or corporate power and authority, as the
case may be, to execute, deliver and perform under, this
Indenture, the Initial Bonds, if, as and when executed, delivered
and authorized, any other Bonds issued under Series Supplemental
Indentures after the Closing Date and each other Project
Document and Non-Material Agreement to which it is a party.
(b) All action on the part of the Partnership and the
Company that is required for the authorization, execution,
delivery and performance of this Indenture, the Initial Bonds,
if, as and when executed, delivered and authorized, any other
Bonds issued under Series Supplemental Indentures after the
Closing Date and each other Project Document and Non-Material
Agreement to which either the Partnership or the Company is a
party, in each case has been duly and effectively taken; and the
execution, delivery and performance of this Indenture, the
Initial Bonds, if, as and when executed, delivered and
authorized, any other Bonds issued under Series Supplemental
Indentures after the Closing Date and each such other Project
Document and Non-Material Agreement does not require the approval
or consent of any holder or trustee of any Debt or other
obligations of either the Partnership or the Company which has
not been obtained.
(c) Each Project Agreement and Non-Material Agreement to
which PRC or Panda Energy Corporation (or its predecessor in
interest) was the original party thereto was duly and validly
assigned by PRC or Panda Energy Corporation to the Partnership.
Such assignments were duly and validly consented to by the other
party or parties to such Project Agreement or Non-Material
Agreement and such assignments are not subject to recision. The
obligations of PRC under such Project Agreement and Non-Material
Agreements were duly and validly assumed by the Partnership;
provided, however, PRC remains obligated for performance under
the VEPCO Power Purchase Agreement, the Steam Sales Agreement and
the Site Lease.
(d) This Indenture and each other Project Document and Non-
Material Agreement to which either the Partnership or the Company
is a party has been duly executed and delivered by such party.
Each of this Indenture, the Initial Bonds, if, as and when
executed, delivered and authorized, any other Bonds issued under
Series Supplemental Indentures after the Closing Date and each
other Project Document and Non-Material Agreement to which the
Partnership or the Company is a party constitutes a legal, valid
and binding obligation of the Partnership or the Company, as the
case may be, enforceable against it in accordance with the terms
thereof, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting the enforcement of creditors rights
and remedies generally and is subject to general principles of
equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).
Section 5.3 No Conflicts; Laws and Contracts; No Default.
(a) Neither the execution, delivery and performance of this
Indenture and each other Project Document and Non-Material
Agreement to which either the Partnership or the Company is a
party nor the consummation of any of the transactions
contemplated hereby or thereby nor performance of or compliance
with the terms and conditions hereof or thereof (i) contravenes
any provision of Law applicable to the Partnership, the Company
or any of the Collateral except any contravention which could not
reasonably be expected to have a Material Adverse Effect, (ii)
conflicts or is inconsistent with or constitutes a default under
or results in the violation of the provisions of the Partnership
Agreement or Certificate of Incorporation or by-laws of the
Company, as the case may be, any other terms of any other Project
Documents or any indenture, mortgage, deed of trust or agreement
or other instrument to which the Partnership or the Company is a
party or by which the Company or the Partnership or any of their
property or assets is bound or to which either may be subject
except any such conflict, inconsistency, default or violation
which could not reasonably be expected to have a Material Adverse
Effect or (iii) results in the creation or imposition of (or the
obligation to create or impose) any Liens (other than Permitted
Liens) on any of the property or assets of the Partnership or the
Company under, or results in the acceleration of, any obligation.
(b) Each of the Partnership, the Company and the Project is
in compliance with all Laws applicable to the Partnership, the
Company or the Project, as the case may be, in conducting its
business pursuant to the Project Documents and the Non-Material
Agreements, except any such noncompliance which could not
reasonably be expected to have a Material Adverse Effect.
(c) The Partnership is not in default in the performance in
any material respect of any term, covenant or obligation under
any Project Document (other than a possible technical default
under the Steam Sales Agreement that could not reasonably be
expected to have a Material Adverse Effect). To the best of the
Partnership's knowledge, no Project Participant is in default in
the performance of any material term, covenant or obligation
under any Project Document, except that the Project Participant
under the Steam Sales Agreement has not been timely in making the
payments due under such Agreement and is currently in Chapter 11
bankruptcy proceedings. To the best of the Partnership's
knowledge, there is no dispute between the Partnership or any
Project Participant with respect to any Project Agreement.
Section 5.4 Governmental Approvals. All Governmental
Approvals which are required to be obtained by or on behalf of
the Partnership or the Company or, to the best knowledge of the
Partnership or the Company, any other Project Participant, in
connection with (a) the operation and maintenance of the Project
(including the sale and delivery of electricity under the Power
Purchase Agreement and the sale of thermal energy under the Steam
Sales Agreement), (b) the issuance of the Initial Bonds and (c)
the execution, delivery and performance by the Partnership, the
Company and any other Project Participant of the Project
Documents have been duly obtained or made. Each of such
Governmental Approvals was validly issued and is in full force
and effect and a Final Determination has been made thereon. Each
of such Governmental Approvals that was originally obtained by
PRC (or its predecessor in interest) has been duly and validly
transferred to the Partnership in compliance with all laws or the
Partnership has been duly and validly been made a permittee with
respect thereto. The Partnership and the Company are in
compliance with all such Governmental Approvals except any such
noncompliance which could not reasonably be expected to have a
Material Adverse Effect. There is no proceeding pending or, to
the Partnership's knowledge, threatened which seeks, or may
reasonably be expected, to rescind, terminate, modify or suspend
any such Governmental Approval, the transfer thereof to the
Partnership or the making of the Partnership as a permittee with
respect thereto.
Section 5.5 Litigation. Except for the litigation involving
NNW, Inc. described in the Offering Circular, dated July 26,
1996, relating to the Initial Bonds, there are no claims,
actions, suits, investigations or proceedings at law or in equity
(including any Environmental Claims) or by or before an
arbitrator or Governmental Authority now pending against the
Partnership or the Company or, to the best knowledge of the
Partnership or the Company, pending against any of the Partners
or threatened against the Partnership, the Company, or any
property or other assets or rights of the Partnership or the
Company with respect to the Project, this Indenture, any other
Project Document or any of the transactions contemplated hereby
or thereby that could reasonably be expected to have a Material
Adverse Effect. The Partnership does not believe that such NNW,
Inc. litigation will have a Material Adverse Effect.
Section 5.6 Qualifying Facility Status; Other Utility
Regulation. (a) The Project satisfies, and has satisfied from
the initial delivery of energy by the Facility, the requirements
for a Qualifying Facility.
(b) Except as permitted in accordance with Section 6.26
after the Closing Date, neither the Partnership nor the Company
is, or will be, as a result of the ownership, operation or
maintenance of the Project in accordance with the Project
Agreements and the Non-Material Agreements, subject to regulation
by any Governmental Authority (i) under PUHCA as a "public
utility company or an "affiliate" or "subsidiary company" or a
"holding company" or a "registered holding company" or a company
subject to registration under PUHCA, (ii) under the FPA, other
than as contemplated by 18 C.F.R. 292.601, (iii) except with
respect to the resale of natural gas in interstate commerce or
the release of firm capacity rights held by the Partnership on an
interstate pipeline, as a "natural gas company" under the Natural
Gas Act of 1938, as amended, (iv) with regard to rates, financial
or organizational matters under the North Carolina Public
Utilities Act, N.C.G.S. 62-1, et seq., except that the Company
and the Partnership are subject to continuing oversight by the
North Carolina Utilities Commission, and the jurisdiction of the
North Carolina Utilities Commission, particularly with regard to
organizational and operational matters, under N.C.G.S. 62-110.1
and 156 and North Carolina Utilities Commission Rule R1-37(d)(3),
under the terms and conditions imposed by such Commission in the
CPCNs issued or transferred to them, and the terms and conditions
imposed by such Commission in its Order Not to Reconsider but to
Impose New Conditions issued regarding PRC in Docket No. SP-73,
Sub 1 on October 2, 1989, or (v) under any other similar federal
or state law regulating the generation, transmission or sale of
electricity under which the Partnership or the Company would be
deemed to be the generator, transmitter or seller of such
electricity (including, but not limited to, treatment as an
"electric utility," "electric corporation," "electrical company,"
"public utility," "public utility holding company" or any similar
entity under any existing law or an "affiliate" or "subsidiary
company" of a "registered holding company").
(c) The Partnership, and PRC during the period in which it
owned the Project, has complied with the applicable provisions of
the Power Plant and Industrial Fuel Use Act of 1978, as amended.
(d) A FERC Order granting PRC's application for
certification of the Project as a qualifying cogeneration
facility was issued on August 4, 1989 and the Partnership has
filed with FERC a Notice of Self Recertification as Qualifying
Cogeneration Facility indicating that the ownership of the
Project was transferred from PRC to the Partnership. No facts
contained in PRC's original application for certification of the
Project as a Qualifying Facility or stated in such original
certification order by FERC have changed since the date of their
issuance (other than any such fact that would not adversely
affect the Project status as a Qualifying Facility).
Section 5.7 Collateral; Security Interest and Liens.
(a) Each of the Partnership, the Company and Panda Interholding
Corporation has good, marketable and valid title in and to all of
the Collateral which it purports to own and is the owner and
holder of a valid and subsisting leasehold estate in all of the
Collateral it purports to lease, free and clear of all Liens
other than Permitted Liens.
(b) With respect to the personal property forming a part of
the Collateral, all filings, recordings, registrations and other
actions have been made, obtained and taken in all relevant
jurisdictions that are necessary to create and perfect the Liens
in all right, title, estate and interest of the Partnership in
the Collateral covered thereby, subject to no prior, equal or
junior Liens other than Permitted Liens.
(c) The Collateral Documents create, in favor of the
Collateral Agent for the benefit of the Holders, legal valid and
enforceable Liens on or security interests in all of the
Collateral, subject to no Liens other than Permitted Liens. No
financing statement or other document creating, perfecting or
recording any Lien on any Collateral (other than Permitted Liens
or Liens securing the Fuji Bank and Trust Company for the payment
of certain reimbursement obligations which shall be discharged
and terminated on the Closing Date) are on file in any
jurisdictions. Appropriate termination statements and releases
reflecting the discharge of the Lien of The Fuji Bank and Trust
Company have been filed where such filing is required to evidence
the termination of such Lien.
(d) The Partnership or the Company, as applicable, has
obtained and holds in full force and effect all patents,
trademarks, copyrights and other such rights or adequate licenses
therein, which are necessary for the ownership, operation and
maintenance of the Project and free from restrictions that would
materially impair the use of such patents, trademarks, copyrights
and other rights or licenses. To the best knowledge of the
Partnership or the Company, no product, process, method,
substance, part, or other material presently employed by or
contemplated to be sold by or employed by, the Partnership or the
Company in connection with the Project does or will infringe any
patent, trademark, copyright, license, or other similar right
owned by any other Person.
Section 5.8 Taxes. Each of the Partnership and the Company
has filed, or caused to be filed, all tax and information returns
that are required to have been filed by it in any jurisdiction,
and has paid (prior to their delinquency dates) all taxes shown
to be due and payable on such returns and all other taxes and
assessments payable by it, to the extent the same have become due
and payable, except to the extent there is a Good Faith Contest
thereof by the Partnership or the Company.
Section 5.9 Environmental Matters. (a) (i) The Partnership,
the Company, the Project and the Site are in compliance with all
applicable Environmental Laws except any such noncompliance which
could not reasonably be expected to have a Material Adverse
Effect, (ii) all Environmental Approvals have been obtained which
are currently required to be obtained by the Partnership or the
Company, or, to the best knowledge of the Partnership or the
Company, by any, other Project Participant, in order to maintain
and operate the business of the Partnership and the Company as
presently conducted, (iii) the Partnership and the Company are in
compliance with the terms and conditions of such Environmental
Approvals except any such noncompliance which could not
reasonably be expected to have a Material Adverse Effect and (iv)
there are no facts, circumstances or conditions which under any
applicable Environmental Law could reasonably be expected to have
a Material Adverse Effect.
(b) No Hazardous Material or underground storage tank is
currently located on, under or about, nor has there been a
Release of any Hazardous Material to or from, the Site (or any
other property with respect to which the Partnership or the
Company has or may have retained or assumed liability for
environmental conditions or compliance) in a manner (i) which in
any material respect violates any Environmental Law, (ii) for
which cleanup or remedial action of any kind that could
reasonably be expected to have a Material Adverse Effect is
required under any Environmental Law or (iii) which could
reasonably be expected to result in the imposition of a Lien
other than a Permitted Lien on the Project or the Site.
Section 5.10 Useful Life. As of the Closing Date, the
useful life of the Facility as a whole, with the contemplated
maintenance customarily associated with similar operations, will
be not less than the remaining term of the VEPCO Power Purchase
Agreement (without giving effect to any extension of such term
provided for in Section 5.2 of such agreement).
Section 5.11 Utility Services. All electricity, water,
water rights and other utilities (including natural gas
utilities) necessary for the operation of the Project as
contemplated by the Project Agreements have, since the
commencement of operation of the Project, been available, and the
Company and the Partnership have no reason to believe that they
will not continue to be available, in adequate amounts and on a
timely basis to meet the requirements necessary for the operation
and maintenance of the Facility during the period in which any
Bond is Outstanding; provided, however, that natural gas supply
and transportation may be subject to interruption from time to
time.
Section 5.12 Employee Benefit Plans. Each employee
benefit plan (including without limitation each employee benefit
plan of a Commonly Controlled Entity) as to which the Partnership
or the Company may have any liability complies in all material
respects with all applicable requirements of law and regulations,
and (i) no Reportable Event (as defined in Section 4043 of ERISA)
has occurred with respect to any such plan, (ii) there has been
no withdrawal from any such plan or steps taken to do so which
have resulted or could result in liability for the Partnership or
the Company, (iii) no steps have been taken to terminate any such
plan, (iv) no contribution failure has occurred with respect to
any such plan sufficient to give rise to a lien under Section
302(f) of ERISA or Section 412 of the Code and (v) no condition
exists or event or transaction has occurred with respect to any
such plan which could result in material liability for the
Partnership or the Company.
Section 5.13 Not an Investment Company. Neither the
Company nor the Partnership is an "investment company" or a
company "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
ARTICLE 6
COVENANTS
Each of the Partnership and the Company hereby covenants and
agrees that so long as this Indenture is in effect and any Bonds
remain Outstanding:
Section 6.1 Reporting Requirements. The Partnership and the
Company shall each:
(a) furnish, to the Trustee as soon as practicable and in
any event within 75 days after the end of the first, second and
third quarterly accounting periods of each fiscal year
(commencing with the quarter ending September 30, 1996) of the
Partnership, an unaudited consolidated balance sheet of the
Partnership as of the last day of such quarterly period and the
related consolidated statements of operations, including, cash
flows and partners' capital of the Partnership for such quarterly
period and (in the case of the first, second and third quarterly
periods) for the portion of the fiscal year ending with the last
day of such quarterly period (prepared on a basis consistent with
that used in the preparation of corresponding figures for the
preceding fiscal year), setting forth in each case in comparative
form corresponding unaudited figures from the preceding fiscal
year and accompanied by an Officer's Certificate of the
Partnership to the effect that such consolidated financial
statements fairly present the financial condition and results of
operations of the Partnership on the dates and for the periods
indicated in accordance with GAAP, subject to normally recurring
year-end adjustments;
(b) furnish to the Trustee as soon as practicable and in
any event within 135 days after the end of each fiscal year of
each of the Partnership, a consolidated balance sheet of the
Partnership as of the end of such year and the related
consolidated statements of operations, income, cash flows and
partners, capital of the Partnership for such fiscal year
(prepared an a basis consistent with that used in the preparation
of corresponding figures for the preceding fiscal year) setting
forth in each case in comparative form corresponding figures from
the preceding fiscal year and with the opinion thereon by Price
Waterhouse LLP, or another firm of independent public accountants
of recognized national standing, accompanied by a report of such
accounting firm stating that in the course of its regular audit
of the consolidated financial statements of the Partnership,
which audit was conducted in accordance with GAAP, such
accounting firm has obtained no knowledge of any Default or Event
of Default, or if in the opinion of such accounting firm a
Default or Event of Default has occurred and is continuing, a
statement as to the nature thereof;
(c) furnish to the Trustee with each quarterly and annual
financial statement submitted pursuant to clauses (a) and (b)
above:
(i) Officer's Certificates of the Partnership and
the Company to the effect that no Default or Event of
Default has occurred and is continuing or if such
statement cannot be so certified, specifying in
reasonable detail the Default or Event of Default and
the actions being or proposed to be taken with respect
thereto;
(ii) an Officer's Certificate of the Partnership
stating that all routine maintenance to the Project has
been performed substantially in accordance with the
Operation and Maintenance Procedures during such
quarter or year or if such statement cannot be so
certified, specifying in reasonable detail such routine
maintenance to the Project which has been so performed
and the actions being or proposed to be taken with
respect to any such routine maintenance not yet
performed; and
(iii) if prepared and in existence, financial
statements of the Company comparable to those referred
to in clause (a), in the case of delivery of quarterly
statements, and financial statements of the Company
comparable to those referred to in clause (b), in the
case of fiscal year statements, in each case which need
not be audited but, if not audited, shall be
accompanied by an Officer's Certificate of the Company
to the effect that such financial statements fairly
present the financial condition and results of
operation of the Company on the dates and for the
periods indicated in accordance with GAAP (subject to
normally recurring adjustments in the case of quarterly
statements);
(d) furnish to the Trustee with each annual financial
statement submitted pursuant to clause (b) above:
(i) an Officer's Certificate of the Partnership
(A) confirming that all insurance policies required
pursuant to Section 6.4 are in full force and effect on
the date thereof, (B) confirming the names of the
companies issuing such policies, (C) confirming the
amounts and expiration dates of such policies, and (D)
stating that such policies comply with the requirements
of Section 6.4; and
(ii) Officer's Certificates of the Partnership
and the Company as to compliance with all conditions
and covenants under this Indenture in compliance with
Section 314(a)(4) of the Trust Indenture Act;
(e) furnish to the Trustee as soon as practicable following
the performance of scheduled major maintenance of the Project, an
Officer's Certificate of the Partnership stating that such work
was performed substantially in accordance with the Operation and
Maintenance Procedures and an Independent Engineer's Certificate
verifying the information contained in the Officer's Certificate;
and
(f) furnish to the Trustee each of the following items:
(i) promptly after the Partnership or the Company
becomes aware of the occurrence and continuance
thereof, written notice of the occurrence of any event
or condition which constitutes a Default or Event of
Default, specifically stating that such event or
condition has occurred and describing it and any action
being or proposed to be taken with respect thereto;
(ii) promptly after the Partnership or the
Company becomes aware of the occurrence and continuance
thereof, written notice of the occurrence of any Event
of Eminent Domain, Event of Loss or Title Event that
could reasonably be expected to give rise to Eminent
Domain Proceeds, Casualty Proceeds or Title Insurance
Proceeds, as the case may be, in an amount in excess of
$500,000 and an Officer's Certificate of the
Partnership setting forth the details of such Event of
Eminent Domain, Event of Loss or Title Event and the
action which the Partnership is taking or proposes to
take with respect thereto, with copies of such notice
and Officer's Certificate delivered concurrently to the
Collateral Agent and the Depositary Agent;
(iii) promptly after the Partnership or the
Company becomes aware of the existence thereof, written
notice of the existence of any defect of title, any
Lien or any encumbrance on the Mortgaged Property that
could reasonably be expected to give rise to Title
Insurance Proceeds in an amount in excess of $500,000
and an Officer's Certificate of the Partnership setting
forth the details of such defect of title, Lien or
encumbrance and the action which the Partnership or the
Title Company is taking or proposes to take with
respect thereto, with copies of such notice and
Officer's Certificate delivered concurrently to the
Collateral Agent and the Depositary Agent;
(iv) promptly and in any event within five (5)
Business Days after receipt thereof by the Partnership
or the Company, written notice and copies of all
notices, complaints, summons, or any other
notifications received by the Partnership or the
Company from any Governmental Authority relating to
alleged violations of any Environmental Law or
potential adverse actions in any way involving
environmental, health or safety matters affecting the
Site (or any other property with respect to which the
Partnership or the Company has or may have retained or
assumed liability for environmental conditions or
compliance) in which the cleanup obligations or
corrective action or the liability under any
Environmental Law could reasonably be expected to
exceed $500,000, and copies of all material
communications with any Governmental Authority or other
Persons regarding such notices, complaints, summons or
other notifications with copies delivered concurrently
to the Independent Engineer;
(v) promptly after the Partnership or the Company,
becomes aware thereof, (A) written notice of any
Release of any Hazardous Material, whether or not such
Release occurred prior to, on or after the date of this
Indenture, at, in, on, under or from the Site (or any
other property with respect to which the Partnership or
the Company has or may have retained or assumed
liability for environmental conditions or compliance),
or any part thereof that is required to be reported to
any Governmental Authority or that could reasonably be
expected to result in any ordered remediation or
corrective action or obligation and (B) copies of all
communications with any Governmental Authority or other
Persons regarding the Release of any Hazardous
Materials;
(vi) promptly after the Partnership or the
Company becomes aware of the occurrence thereof,
written notice of the occurrence of any event or
condition which constitutes a default under any Project
Agreement, specifically stating that such event or
condition has occurred and describing it and any action
being proposed to be taken with respect thereto;
(vii) promptly after receipt thereof, a copy of
each notice, demand or other communication delivered to
the Partnership pursuant to any Project Agreement to
which the Partnership is a party relating to the
assertion of nonperformance of any covenant of or a
default under any Project Agreement;
(viii) promptly and in any event within five (5)
Business Days after the Partnership or the Company
becomes aware of the occurrence of any of the following
with respect to any employee benefit plan (including
without limitation any employee benefit plan of a
Commonly Controlled Entity) as to which the Partnership
or the Company may have liability, written notice
thereof, describing the same and steps being taken by
the Partnership or the Company, as the case may be,
with respect thereto: (A) the acquisition of a Commonly
Controlled Entity, (B) the occurrence of a Reportable
Event (as defined in Section 4043 of ERISA) with
respect to any such plan, (C) the institution of steps
to withdraw from any such plan, (D) the institution of
any steps to terminate any such plan, (E) the failure
to make a required contribution to any such plan if
such failure is sufficient to give rise to a Lien under
Section 302(f) of ERISA or Section 412 of the Code, (F)
the taking of any action with respect to any such plan
which could result in the requirement that the
Partnership or the Company furnish a bond or other
security to the PBGC or such plan or (G) the occurrence
of any event or events with respect to any such plan or
plans which individually or in the aggregate could
result in material liability for the Partnership or the
Company; and
(ix) from time to time, such other information
or documents (financial or otherwise) as the Trustee
may reasonably request;
(g) furnish to the Independent Engineer annually in
connection with the preparation of the Engineer's Annual Report,
at least sixty (60) days prior to the beginning of each fiscal
year of the Partnership for which an Operating Plan and an
Operating Budget is required pursuant to Section 6.14, a plan of
the schedule of operation of the Facility (an "Operating Plan")
and an Operating Budget for such fiscal year, provided that if
the Partnership has not adopted an annual Operating Budget before
the beginning of such fiscal year, the Operating Budget for the
preceding fiscal year shall, until the adoption of an annual
Operating Budget, be deemed to be in full force and effect as the
annual Operating Budget for such fiscal year.
Section 6.2 Maintenance of Existence, Properties and
Governmental Approvals. (a) Each of the Partnership and the
Company shall preserve and maintain (i) its legal existence and
form, except as permitted by Section 6.21(a) and (ii) all of its
rights, privileges and franchises necessary for the maintenance
of its existence, and in the case of the Partnership, the
ownership, operation and maintenance of the Project.
(b) Each of the Partnership and the Company shall comply
with the Partnership Agreement or the Certificate of
Incorporation and by-laws of the Company, as the case may be.
(c) The Partnership will maintain and operate the Project,
or cause the Project to be maintained and operated, (i) in good
order and repair, ordinary wear and tear excepted and (ii)
substantially in accordance with Prudent Engineering and
Operating Practices.
(d) Each of the Partnership and the Company shall obtain
and maintain, or cause to be obtained and maintained, in full
force and effect all Governmental Approvals required to be
obtained by or on behalf of the Partnership or the Company (i) to
conduct its business pursuant to the Project Documents and the
Non-Material Agreements and (ii) to perform its obligations under
the Project Documents, except, in either case, where failure to
so obtain or maintain such Governmental Approval could not
reasonably be expected to have a Material Adverse Effect. Each
of the Partnership and the Company shall use commercially
reasonable efforts to obtain or cause to be obtained all
Governmental Approvals necessary in connection with the
Additional Contracts to conduct its business pursuant to the
Project Documents and the Non-Material Agreements, in each case
as promptly as practicable but in any event no later than the
date required to be obtained hereunder or under any other Project
Documents.
(e) The Partnership shall preserve good title or valid
leasehold rights to the interests in the Site and the tangible
personal property forming a part of the Collateral purported to
be subject to the Lien of the Collateral Documents to which it is
a party (other than property subject to an Event of Loss, an
Event of Eminent Domain or a Title Event or property disposed of
pursuant to Section 6.19), subject only to Permitted Liens.
Section 6.3 Compliance with Laws. Each of the Partnership
and the Company shall comply in all respects with all Laws
applicable to the Partnership, the Company or the Project in
conducting its business pursuant to the Project Documents and the
Non-Material Agreements except any such noncompliance which is
the subject of a Good Faith Contest or could not reasonably be
expected to result in a Material Adverse Effect.
Section 6.4 Insurance. (a) Subject to Section 6.4(f), the
Partnership shall at all times effect, maintain and keep in
force, or cause to be effected, maintained and kept in force, the
insurance sufficient to satisfy the limits and coverage
provisions listed below. Such insurance shall be with
responsible insurance carriers which are authorized to do
business in the State of North Carolina and have an Insurance
Reports Rating from A.M. Best Company, Inc. of "A" or better and
a financial size category of "VIII" or higher:
(i) Workers' Compensation Insurance: Workers'
compensation insurance as required by applicable state
laws, and employer's liability insurance with a
$500,000 minimum limit per accident; provided that such
insurance shall only be required to be maintained to
the extent the Partnership has any employees or may be
deemed to have any employees under applicable law.
(ii) General Liability Insurance: Comprehensive
general liability insurance on an occurrence basis
against claims for personal injury (including bodily
injury and death) and property damage liability. Such
insurance policy shall include insurance with respect
to product/completed operations, blanket contractual,
broad form property damage, explosion, collapse and
underground hazards, contractor's protective, owner's
protective and personal injury liability with minimum
limits of liability of at least $1,000,000 per
occurrence for combined single limit bodily injury and
property damage and at least $2,000,000 in the
aggregate.
(iii) Automobile Liability Insurance:
Comprehensive automobile liability insurance against
claims for bodily injury and death and property damage
liability covering all owned, non-owned and hired
vehicles with limits of liability of $1,000,000 per
occurrence for combined single limit bodily injury and
property damage, including a Motor Carrier's Act
Endorsement, if required by applicable law.
(iv) Excess Insurance: Umbrella liability or
excess liability insurance with a limit of $9,000,000
per occurrence and $9,000,000 aggregate in excess of
and following the terms of the underlying insurance set
forth in clauses (i), (ii) and (iii) above.
(v) Physical Damage Insurance: Property damage
insurance on an "All Risk" basis including coverage
against damage or loss caused by earth movement and
flood and providing (x) coverage for the Facility in a
minimum aggregate amount equal to the "full insurable
value" of the Facility, (y) transit coverage, with sub-
limits sufficient to insure the full replacement value
of all property or equipment removed from the Facility,
and (z) coverage for foundations and other property
below the surface of the ground. For purposes of this
clause (v) and clauses (vi) and (vii) below, (A) the
Facility shall be deemed to include steam and
electrical transmission lines, gas pipeline
interconnection facilities (but excluding below-ground
gas pipelines), fuel storage and handling facilities,
and all equipment related to any of the foregoing in
which the Company has an insurable interest and (B)
"full insurable value" shall mean the full replacement
value of the Facility, including any improvements,
equipment, fuel and supplies, without deduction for
physical depreciation and/or obsolescence. All such
policies may have deductibles of not greater than
$50,000 (except that with respect to the 40 Megawatt
Gas Turbine Generator, the 80 Megawatt Gas Turbine
Generator, and the 60 Megawatt Steam Turbine
Generator, such deductible amount may exceed $50,000
but shall not exceed $150,000) in each case for any one
loss except for earth movement and flood which will
have the lowest deductible available (in the opinion of
the Insurance Consultant) on commercially reasonable
terms in the insurance market place. Such insurance
shall provide for increased cost of construction,
debris removal, and loss to undamaged property as the
result of enforcement of building laws or ordinances.
(vi) Boilers and Machinery: Boiler and
machinery insurance on the Facility (as described in
clause (v) above), on a comprehensive form in an amount
necessary to insure all equipment on a replacement
value basis subject to a deductible amount determined
by the Company and the Insurance Consultant to be
reasonably and commercially available, not to exceed
$150,000, (except that with respect to the 60 Megawatt
Steam Turbine Generator such deductible amount may
exceed $150,000 but shall not exceed $250,000) in each
case for any one loss. The insurance limits are to be
determined with reference to the maximum foreseeable
loss.
(vii) Business Interruption Insurance: Business
interruption insurance covering debt service and other
fixed expenses attributable to the Facility by reason
of total or partial suspension or delay of, or
interruption in, the operation of the Facility caused
by loss or damage to, or destruction of, the Facility,
the Project or equipment as a result of the perils
covered in clauses (v) through (vi) above. The policy
is to include contingent coverage to insure debt
service. This policy is to be subject to a deductible
amount determined to be reasonably and commercially
available, not to exceed thirty (30) days. Coverage
will be in a minimum amount required to cover a period
of suspension or delay of at least twelve (12) calendar
months.
(viii) Title Insurance: Title insurance policies
covering the Mortgaged Property in the following
amounts: (A) with respect to the First Mortgage, in an
initial amount of at least $116,350,000, and (B) with
respect to Additional Permitted Debt and any related
Interest Rate Protection Agreements secured by any
Additional Mortgages, in an amount equal to no less
than 75% of the principal amount of the Additional
Permitted Debt and the related Interest Rate Protection
Agreements then outstanding.
(ix) Inflated Liability Limits: Notwithstanding
the above, commencing January 1, 2001 and on each fifth
anniversary of such date, the minimum limits of the
general, automobile, employer's and excess liability
insurance required by this Section 6.4(a) shall be
inflated by the total percentage increases in the
Consumer Price Index during the five year period
commencing on January 1 of the fifth year preceding
such January 1, 2001 or fifth anniversary, as the case
may be.
(b) The Collateral Agent shall be named as sole loss payee,
under a standard lenders loss payable clause or mortgage
endorsement substantially equivalent to the North Carolina
standard mortgage endorsement or lenders loss payable endorsement
form 438 BFU, without contribution, under insurance policies
required by Sections 6.4(a)(v), (vi) and (vii). The Collateral
Agent, the Trustee and the Credit Banks shall be added as
additional insureds with respect to the coverage required by
Sections 6.4(a)(ii), (iii) and (iv) and such insurance shall be
primary without right of contribution of any other insurance or
self-insurance carried by or on behalf of the Collateral Agent,
the Independent Engineer, the Trustee, or the Credit Banks with
respect to its interest as such in the Project and each policy
shall contain a severability-of-interests or cross-liability
provision. Insurance policies required under Sections 6.4(a)(v),
(vi) and (vii) shall be endorsed with an agreed amount clause or
waiver of co-insurance.
(c) The insurance carried in accordance with Section 6.4(a)
(other than title insurance) shall be endorsed as follows:
(i) All insurers shall waive all rights of
subrogation against the Collateral Agent and its
officers, employees, agents, successors and assigns,
and shall waive any right of set-off and counterclaim
and any other right to deduction whether by attachment
or otherwise; and
(ii) If, at any time, such insurance is
canceled, or any substantial change is made in the
coverage which affects the interests of the Collateral
Agent such cancellation or change shall not be
effective as to the Collateral Agent for thirty
(30) days, except for nonpayment of premium, which
shall be ten (10) days, after receipt by the Collateral
Agent of written notice from such insurer of such
cancellation or change.
(d) Upon procurement by the Partnership of the insurance
set forth in Section 6.4(a), the Partnership shall furnish to the
Collateral Agent and the Trustee certification of all required
insurance. Such certification by the Partnership shall be
executed by each insurer or by an authorized representative of
each insurer, where it is not practical for such insurer to
execute the certificate itself. Such certification shall
identify underwriters, the type of insurance, the insurance
limits, the risks covered thereby and the policy term. Upon
request by the Collateral Agent or the Trustee, the Partnership
will promptly furnish to the Collateral Agent or the Trustee, as
the case may be, copies of all insurance policies, binders and
cover notes or other evidence of such insurance relating to the
Project.
(e) Within ten (10) days after the certification referred
to in Section 6.4(d) above, the Partnership shall furnish to the
Collateral Agent and the Trustee a report of its insurance broker
stating that all premiums then due have been paid and a
certificate of the Insurance Consultant stating that, in the
opinion of Insurance Consultant, the insurance then carried and
maintained is in accordance with the terms hereof.
(f) If at any time any of the insurance required pursuant
to Section 6.4(a) shall no longer be available on commercially
reasonable terms, the Partnership shall as promptly as
practicable procure substitute insurance coverage that is the
most equivalent to the required coverage and available on
commercially reasonable terms. The Partnership shall deliver to
the Collateral Agent and the Trustee a certificate of the
Insurance Consultant stating that the required insurance coverage
is no longer available on commercially reasonable terms and that
the proposed substitute insurance coverage is the most equivalent
to the required coverage available on commercially reasonable
terms. For purposes of this Section 6.4, insurance shall be
deemed to be available on "commercially reasonable terms" if it
is obtainable in the insurance marketplace, unless it is
obtainable only at excessive costs which are not justified in
terms of the risk to be insured and is generally not being
carried by or applicable to co-generation facilities similarly
situated to the Project because of such excessive costs.
Anything in this Indenture to the contrary notwithstanding,
failure to maintain insurance coverage in accordance with any of
the requirements of Section 6.4(a) shall not constitute a Default
or an Event of Default, and the Partnership and the Company shall
be deemed to be in full compliance with such requirements, if the
Partnership or the Company complies with this clause (f) in
respect of such failure.
(g) The loss, if any, under any insurance required to be
carried under Sections 6.4(a) (v), (vi), (vii) and (viii) shall
be adjusted with the insurance companies or otherwise collected,
including the filing in a timely manner of appropriate
proceedings, by the Partnership, subject to the approval of the
Insurance Consultant if such loss is in excess of $500,000. In
addition, the Partnership shall take all other steps necessary,
or if such loss is in excess of $500,000 the steps requested by
the Insurance Consultant, to collect from insurers any loss
covered by any of the insurance policies in Section 6.4(a). All
such policies shall provide that the loss, if any, under such
insurance shall be adjusted and paid as provided in this Section
6.4.
(h) The Partnership shall promptly notify the Collateral
Agent and the Trustee of any loss covered by any insurance
required by Section 6.4(a) in excess of $500,000. The
Partnership, the Collateral Agent and the Trustee shall cooperate
and consult with each other in all matters pertaining to the
settlement or adjustment of any and all claims and demands for
damages on account of any Event of Eminent Domain or pertaining
to the settlement, compromise or arbitration of any claim on
account of any Event of Loss or Title Event. The Partnership may
in its reasonable judgment compromise, settle or consent to the
settlement of any proceeding arising out of any Event of Loss,
Event of Eminent Domain or Title Event, provided that, in the
event that the amount of the related claim exceeds $500,000, the
terms of such compromise, settlement or consent to settlement are
concurred with by the Independent Engineer and the Insurance
Consultant; provided, further, that if an Event of Default has
occurred and is continuing, the Partnership will not settle,
compromise or consent to the settlement of any proceeding arising
out of such Event of Loss, Event of Eminent Domain or Title
Event without the prior written consent of the Collateral Agent
and the Trustee.
(i) No provision of this Section or any other provision of
this Indenture shall impose on the Collateral Agent or the
Trustee any duty or obligation to verify the existence or
adequacy of the insurance coverage maintained by the Partnership
or the Company nor shall the Collateral Agent or the Trustee be
responsible for any representations or warranties made by or on
behalf of the Partnership to any insurance company or
underwriter.
(j) The Partnership and the Company hereby waive any and
every claim for recovery from the Collateral Agent and the
Trustee for any and all loss or damage coverage by any of the
insurance policies to be maintained under this Indenture to the
extent that such loss or damage is recovered under any such
policy. Inasmuch as the foregoing waiver will preclude the
assignment of any such claim to the extent of such recovery, by
subrogation (or otherwise), to an insurance company (or other
Person), the Partnership shall give written notice of the terms
of such waiver to each insurance company which has issued, or
which may issue in the future, any such insurance policy to be
properly endorsed by the issuer thereof to, or to otherwise
contain one or more provisions that, prevent the invalidation of
the insurance coverage provided thereby by reason of such waiver.
(k) The Partnership shall cause the Operator to procure and
maintain in full force and effect at all times, or shall procure
and maintain on behalf of the Operator, liability and worker's
compensation insurance for coverage and limits not less than what
is currently required in the O&M Agreement.
(l) Notwithstanding anything to the contrary set forth in
this Section 6.4 (except as expressly provided herein), except
with respect to business interruption insurance, no insurance
required to be maintained hereunder shall be subject to a
deductible in excess of $50,000 per occurrence or in such other
amount determined to be reasonably and commercially available and
reasonably acceptable to the Insurance Consultant.
(m) The Company will comply, or cause compliance, at all
times with the insurance requirements contained in the Project
Documents to which it is a party.
Section 6.5 Payment of Taxes and Claims. Each of the
Partnership and the Company shall, prior to the time penalties
shall attach thereto, pay and discharge or cause to be paid and
discharged all taxes, assessments and governmental charges or
levies lawfully imposed upon it or upon its income or profits or
upon any of the Collateral and all lawful claim or obligations
that, if unpaid, would become a Lien upon the Collateral, real or
personal, or upon any part thereof; provided that neither the
Partnership nor the Company shall be required to pay any such
tax, assessment, charge, levy, claim or obligation if there is a
Good Faith Contest thereof by either the Partnership or the
Company. The Partnership and the Company shall promptly pay or
cause to be paid any valid, final judgment enforcing any such
tax, assessment, charge, levy or claim and cause the same to be
satisfied of record unless such judgment is then the subject of a
Good Faith Contest.
Section 6.6 Books and Records. Each of the Partnership and
the Company shall at all times keep proper books and records of
all of its business and financial affairs and all of the business
and financial affairs of the Project in accordance with GAAP.
Each of the Partnership and the Company shall keep books of
account or records concerning its accounts, inventory, contract
rights, equipment and proceeds at its offices identified in the
preamble hereof. The Partnership shall at all times cause a
complete set of the Operation and Maintenance Procedures,
including, without limitation, documents relating to preventative
maintenance, spare parts and operating hours, relating to the
Project to be maintained at the Project.
Section 6.7 Right of Inspection. (a) Subject to
requirements of applicable Law and safety requirements, the
Partnership and the Company shall permit the Trustee, the
Independent Engineer, the Collateral Agent, the Depositary Agent,
the Gas Consultant or any agents or representatives of any of the
foregoing, from time to time during normal business hours (i) to
conduct reasonable inspections and examinations of the Project
and the records of the Partnership and the Company relating to
the Project and (ii) to discuss the affairs, finances and
accounts of the Partnership or Company with the officers of the
General Partner or the Company and independent accountants of the
Partnership and the Company, all upon reasonable notice (which,
in any period in which a Default does not exist, shall be at
least five Business Days prior to the inspection or meeting) and
at such reasonable times as the Trustee, the Independent
Engineer, the Collateral Agent, the Depositary Agent or the Gas
Consultant may desire.
(b) On the Trustee's or the Collateral Agent's written
request, at any time and from time to time during any period in
which a Default exists, the Partnership and the Company will
provide, at their sole cost and expense, an environmental site
assessment report in scope reasonably acceptable to the Trustee
or the Collateral Agent concerning the Site and any operations
thereon, prepared by an environmental consulting firm approved by
the Trustee or the Collateral Agent, indicating the presence or
absence of Hazardous Materials and compliance with Environmental
Laws including the potential cost of any removal or remedial
action in connection with any Hazardous Materials on or under
such Site and the potential cost for coming into compliance. If
the Partnership or the Company fails to provide the same, after
forty-five (45) days' notice, the Trustee or the Collateral Agent
may order the same, and the Partnership and the Company shall
grant and hereby grants to the Trustee and the Collateral Agent
and their agents access to the Site and specifically grants the
Trustee or the Collateral Agent and their agents, as the case may
be, an irrevocable non-exclusive license to undertake such an
assessment. No more than one such request may be made during any
single Default period.
Section 6.8 Use of Bond Proceeds or Proceeds of Additional
Permitted Debt. The Company will lend the proceeds from the sale
of the Bonds and the proceeds from the incurrence of additional
Debt permitted under Section 6.16(b)(ii) to the Partnership and
the Partnership will use such proceeds (a) in the case of the
Initial Bonds, along with other funds available to the
Partnership, (i) to defease the Indenture of Trust, dated as of
October 1, 1989, between the Halifax Regional Economic
Development Corporation and NCNB National Bank of North Carolina,
as trustee, (ii) to pay the costs associated with the closing of
the transaction, (iii) to fund on the Closing Date, to the extent
required by the Depositary Agreement, the Debt Service Reserve
Fund, and (iv) to redeem the limited partnership interests in the
Partnership owned by Ford Motor Credit Company, and (b) in the
case of any subsequent issuance of Bonds or additional Debt
permitted under Section 6.16, for the purposes permitted in
accordance with Section 6.16(b)(ii).
Section 6.9 Compliance With Environmental Laws. (a) The
Partnership and the Company (i) shall comply with all
Environmental Laws and Environmental Approvals applicable to the
ownership, operation or use of the Site (or other property with
respect to which the Partnership or the Company has or may have
retained or assumed liability for environmental conditions or
compliance) or the Project, and shall use commercially reasonable
efforts to cause all tenants, operators, lessees, employees,
invitees, licensees, contractors, subcontractors, agents,
representatives, affiliates, consultants and other persons
occupying the Site (or other property with respect to which the
Partnership or the Company has or may have retained or assumed
liability for environmental conditions or compliance) or the
Project to comply with all such Environmental Laws, in either
case except any such noncompliance which could not reasonably be
expected to result in a Material Adverse Effect and (ii) shall
promptly pay or cause to be paid when due all costs and expenses
incurred in connection with such compliance as such costs and
expenses become due and payable (unless the payment of any such
costs or expenses is the subject of a Good Faith Contest by the
Partnership or the Company).
(b) Neither the Partnership nor the Company shall generate,
use, treat, store, release, dispose of, arrange for the disposal
of or transport or permit the generation, treatment, storage,
release, disposal or transportation of Hazardous Materials in,
on, at, under, from or to the Site (or other property with
respect to which the Partnership or the Company has or may have
retained or assumed liability for environmental conditions or
compliance) or the Project or onto any other property, except, in
all events, in compliance with all applicable Environmental Laws,
except any such noncompliance which could not reasonably be
expected to have a Material Adverse Effect.
(c) The Partnership and the Company shall conduct any
investigation, study, sampling and testing, and undertake any
cleanup, removal, remedial or other action necessary to remove
and clean up all Hazardous Materials from the Site (or other
property with respect to which the Partnership or the Company has
or may have retained or assumed liability for environmental
conditions or compliance) and any operations thereon in
accordance with the requirements of all applicable Environmental
Laws, and in accordance with orders and directives of all
Governmental Authorities (unless such action is the subject of a
Good Faith Contest by the Partnership or the Company).
Section 6.10 Event of Eminent Domain; Event of Loss; Title
Event. (a) If an Event of Eminent Domain shall occur with
respect to any Collateral, the Partnership shall (i) diligently
pursue all its rights to compensation against the appropriate
Governmental Authority in respect of such Event of Eminent
Domain, (ii) compromise, settle or consent to the settlement of
any claim against the appropriate Governmental Authority in
accordance with the provisions of Section 6.4(h), and (iii) hold
all amounts and proceeds (including instruments) received in
respect of any Event of Eminent Domain (after deducting all
reasonable expenses incurred by it in litigating, arbitrating,
compromising, settling or consenting to the settlement of any
claims against the appropriate Governmental Authority) ("Eminent
Domain Proceeds") in trust for the benefit of the Collateral
Agent segregated from other funds of the Partnership and the
Company and promptly deposit all such Eminent Domain Proceeds in
the Project Revenue Fund, segregated from all other moneys
pending the determination pursuant to Section 6.10(c).
(b) If (i) an Event of Loss shall occur with respect to any
Collateral, the Partnership shall (A) diligently pursue all its
rights to compensation against any Person with respect to such
Event of Loss, (B) compromise, settle or consent to the
settlement of any claim against any Person with respect to such
Event of Loss in accordance with the provisions of Section
6.4(h), and (C) hold all Casualty Proceeds (including
instruments) received in respect of any Event of Loss (after
deducting all reasonable expenses incurred by it in litigating,
arbitrating, compromising, settling or consenting to the
settlement of any claims) in trust for the benefit of the
Collateral Agent segregated from other funds of the Partnership
and the Company and promptly deposit all such Casualty Proceeds
in the Project Revenue Fund, segregated from all other moneys
pending the determination pursuant to Section 6.10(c) or (ii) a
Title Event shall occur with respect to the Mortgaged Property,
the Partnership shall (A) diligently pursue all its rights to
compensation against the Title Company with respect to such Title
Event pursuant to Section 6.4(g), (B) compromise, settle or
consent to the settlement of any claim against the Title Company
with respect to such Title Event in accordance with the
provisions of Section 6.4(h), and (C) hold all Title Insurance
Proceeds (including instruments) received in respect of any Title
Event (after deducting all reasonable expenses incurred by it in
litigating, arbitrating, compromising, settling or consenting to
the settlement of any claims) in trust for the benefit of the
Collateral Agent segregated from other funds of the Partnership
and the Company and promptly deposit all such Title Insurance
Proceeds in the Project Revenue Fund, segregated from all other
moneys pending the determination pursuant to Section 6.10(c).
(c) If an Event of Loss, an Event of Eminent Domain or a
Title Event shall occur, as soon as reasonably practicable, but
no later than fifteen (15) days after the date of receipt by the
Partnership or the Collateral Agent of Eminent Domain Proceeds,
Casualty Proceeds or Title Insurance Proceeds, as the case may
be, the Partnership shall make a reasonable good faith
determination as to whether (i) the Project can be rebuilt,
repaired or restored to permit operation of the entire Project or
a portion thereof on a Commercially Feasible Basis, and (ii) the
Casualty Proceeds, the Eminent Domain Proceeds or the Title
Insurance Proceeds, as the case may be, together with any other
amounts that the Partnership is willing to commit to such
rebuilding, repair or restoration are sufficient to permit such
rebuilding, repair or restoration of the Project. The
determination of the Partnership shall be evidenced by an
Officer's Certificate filed with the Trustee and the Collateral
Agent which, in the event the Partnership determines that the
Project can be rebuilt, repaired or restored to permit operation
of the entire Project or a portion thereof on a Commercially
Feasible Basis and that the Casualty Proceeds, the Eminent Domain
Proceeds or the Title Insurance Proceeds, as the case may be,
together with any other amounts that the Partnership is willing
to commit to such rebuilding, repair or restoration are
sufficient, shall also set forth a reasonable good faith estimate
by the Partnership of the total cost of such rebuilding, repair
or restoration. The Officer's Certificate shall be accompanied
by an Independent Engineer's Certificate, dated within five (5)
days of the date of the Officer's Certificate, stating that,
based upon reasonable investigation and review of the
determination made by the Partnership, the Independent Engineer
believes the determination and the estimate of the total cost, if
any, set forth in the Officer's Certificate to be reasonable.
(d) (i) In the event that the determination is made
pursuant to Section 6.10(c) above that the Project
cannot be rebuilt, repaired or restored to permit
operation of the entire Project on a Commercially
Feasible basis or that the Casualty Proceeds, the
Eminent Domain Proceeds or the Title Insurance Proceeds
together with any other amounts that the Partnership is
willing to commit to such rebuilding, repair or
restoration are not sufficient to permit such
rebuilding, repair or restoration, then, unless Section
6.10(d)(iii) applies, all of the Casualty Proceeds, the
Eminent Domain Proceeds or the Title Insurance
Proceeds, as the case may be, segregated in the Project
Revenue Fund in accordance with Section 3.1(a)(ii) of
the Depositary Agreement, shall be distributed among
the Secured Parties in accordance with Section
3.1(a)(iii) of the Depositary Agreement and the Trustee
shall redeem the Bonds Outstanding in whole, but not in
part, in accordance with Section 7.3(a).
(ii) In the event that the determination is made
pursuant to Section 6.10(c) above that the Project can
be rebuilt, repaired or restored to permit operation of
the entire Project on a Commercially Feasible Basis and
that the Casualty Proceeds, the Eminent Domain Proceeds
or the Title Insurance Proceeds together with any other
amounts that the Partnership is willing, in its sole
discretion, to commit to such rebuilding, repair or
restoration are sufficient to permit such rebuilding,
repair or restoration, all of the Casualty Proceeds,
the Eminent Domain Proceeds or the Title Insurance
Proceeds, as the case may be, segregated in the Project
Revenue Fund in accordance with Section 3.1(a)(ii) of
the Depositary Agreement, shall be transferred from the
Project Revenue Fund and, together with such other
amounts as the Partnership is willing to commit to such
rebuilding, repair or restoration, shall be deposited
in the Restoration Fund in accordance with Section 3.8
of the Depositary Agreement. Upon completion of any
rebuilding, repair or restoration of the Project, the
excess, if any, of the remaining Casualty Proceeds,
Eminent Domain Proceeds or Title Insurance Proceeds, as
the case may be, over the amounts to be retained in the
Restoration Fund in accordance with Section 3.8(d) of
the Depositary Agreement, shall be distributed in
accordance with Section 3.8(d) of the Depositary
Agreement.
(iii) In the event that the determination is made
pursuant to Section 6.10(c) above that the Project can
only be rebuilt, repaired or restored to permit
operation of a portion of the Project on a Commercially
Feasible Basis and that the Casualty Proceeds, the
Eminent Domain Proceeds or the Title Insurance Proceeds
together with any other amounts that the Partnership
is, in its sole discretion, willing to commit to such
rebuilding, repair or restoration are sufficient to
permit such rebuilding, repair or restoration, all of
the Casualty Proceeds, the Eminent Domain Proceeds or
the Title Insurance Proceeds, as the case may be,
segregated in the Project Revenue Fund in accordance
with Section 3.1(a)(ii) of the Depositary Agreement
shall be transferred from the Project Revenue Fund and,
together with such other amounts that the Partnership
is willing to commit to such rebuilding, repair or
restoration, shall be deposited in the Restoration Fund
in accordance with Section 3.8 of the Depositary
Agreement. Upon completion of any rebuilding, repair
or restoration of the Project, the excess, if any, of
the remaining Casualty Proceeds, Eminent Domain
Proceeds or Title Insurance Proceeds, as the case may
be, over the amounts to be retained in the Restoration
Fund in accordance with Section 3.8(d) of the
Depositary Agreement, shall be distributed in
accordance with Section 3.8(d) of the Depositary
Agreement.
(e) Notwithstanding any other provision of this Section
6.10, in the event the Casualty Proceeds, the Eminent Domain
Proceeds or the Title Insurance Proceeds, as the case may be,
from an Event of Loss or an Event of Eminent Domain or Title
Event do not exceed $500,000 in the aggregate, the Partnership
shall not have to comply with the provisions of the third
sentence of Section 6.10(c) requiring the delivery of an
Independent Engineer's Certificate and the Casualty Proceeds, the
Eminent Domain Proceeds or the Title Insurance Proceeds, as the
case may be, segregated in the Project Revenue Fund in accordance
with Section 3.1(a)(ii) of the Depositary Agreement shall be paid
to the Partnership for payment of the cost of rebuilding, repair
or restoration pursuant to the Depositary Agreement.
(f) In the event the Casualty Proceeds, the Eminent Domain
Proceeds or the Title Insurance Proceeds, as the case may be,
from an Event of Loss, an Event of Eminent Domain or a Title
Event exceed the principal amount of the Bonds Outstanding, the
Additional Permitted Debt and all other Secured Obligations (as
defined in the Intercreditor Agreement) and any applicable
interest thereon, the Partnership, at its option, may determine
not to rebuild, repair or restore the Project. Upon delivery of
an Officer's Certificate of the Partnership to the Trustee and
the Collateral Agent certifying that the Partnership will not
rebuild, repair or restore the Project, all Casualty Proceeds,
Eminent Domain Proceeds or Title Insurance Proceeds, as the case
may be, segregated in the Project Revenue Fund in accordance with
Section 3.1(a)(ii) of the Depositary Agreement, shall be
distributed in accordance with the Depositary Agreement and the
Trustee shall redeem the Bonds Outstanding in whole, but not in
part, in accordance with Section 7.3(a).
Section 6.11 Annual Independent Engineer's Report. (a)
The Partnership shall cooperate with the Independent Engineer who
shall deliver to the Trustee, the Collateral Agent and the
Depositary Agent annually no less than thirty (30) days before
the end of the then current fiscal year of the Partnership, a
report (the "Engineer's Annual Report") containing the following:
(i) an Operating Plan and an Operating Budget for
the next fiscal year if such a Plan and Budget is
required pursuant to Section 6.14;
(ii) the schedule of the Major Maintenance
Requirement and the schedule of major overhaul for the
next five fiscal years, as determined by the
Partnership and concurred with by the Independent
Engineer, including any change in the timing of the
scheduled major overhaul from that originally estimated
at the time of the issuance of the Initial Bonds;
(iii) a calculation of the Property Tax Requirement
for the next fiscal year;
(iv) a calculation of the Projected Debt Service
Coverage Ratio (Three Months) for the next four
succeeding quarterly periods of the Partnership and the
Annual Projected Debt Service Coverage Ratio ;
(v) a comparison of actual plant performance to
expected performance, including, without limitation, a
comparison of output, heat rate and on-line
availability;
(vi) an analysis of the causes for equipment,
component and station forced outages;
(vii) an evaluation of the Project's conformance
with scheduled maintenance, preventative predictive
maintenance and the spare parts program;
(viii) a review of the operations and outage
plans;
(ix) a review of the results of all performance
tests;
(x) a review of revenue records of the Project;
(xi) a review of all reports of Governmental
Authorities and environmental compliance matters with
respect to the Project; and
(xii) any other reports, information, or
Officer's certificates as may be reasonably requested
by the Trustee, the Depositary Agent or the Collateral
Agent.
(b) In connection with the preparation of the Engineer's
Annual Report and any certification or information the
Independent Engineer is required by this Indenture to deliver to
the Trustee, the Partnership shall cooperate with and provide to
the Independent Engineer an Operating Plan and Operating Budget
when required pursuant to Section 6.14, an estimate of the Major
Maintenance Requirement, a calculation of the Annual Projected
Debt Service Ratio and all other information regarding the
Project reasonably requested by the Independent Engineer.
Section 6.12 Taxes. Each of the Company and the
Partnership shall pay and discharge all taxes, assessments and
governmental charges or levies imposed on it or on its income or
profits or on any of its property prior to the date on which
penalties attach thereto, and all lawful claims which, if unpaid,
could reasonably be expected to become a Lien (other than a
Permitted Lien) upon its property. The Company and the
Partnership shall have the right, however, to contest in good
faith the validity or amount of any such tax, assessment, charge,
levy or claim by proper proceedings timely instituted, and may
permit the taxes, assessments, charges, levies or claim so
contested to remain unpaid during the period of such contest if:
(i) the Company or the Partnership diligently prosecutes such
contest; (ii) the Company or the Partnership sets aside on its
books adequate reserves with respect to such amount as is
required to be reserved in accordance with GAAP; and (iii) during
the period of such contest the enforcement of any contested item
is effectively stayed. The Company and the Partnership will
promptly pay or cause to be paid any valid, final adjustment
enforcing any such tax, assessment, charge, levy or claim and
cause the same to be satisfied of record.
Section 6.13 Performance of Project Documents. Each of
the Company and the Partnership shall perform and observe all of
its covenants and agreements contained in any of the Financing
Documents, and shall perform and observe in all material respects
all of its covenants and agreements contained in any of the
Project Documents to which it is a party.
Section 6.14 Operating Plan and Operating Budget. If, on
any Funding Date occurring within any calendar year, the amounts
in the Project Revenue Fund are not sufficient to make all of the
deposits in the Operating Fund, the Debt Service Fund, the Debt
Service Reserve Fund, the Property Tax Fund, the Overhaul Fund
and the other funds established pursuant to the Depositary
Agreement required to be made on such Funding Date and to make
the other payments contemplated by Sections 3.1(b)(ii), (iii),
(iv) and (v) of the Depositary Agreement, then, not less than
sixty (60) days prior to the beginning of the next succeeding
fiscal year (or if such Funding Date shall occur within such 60-
day period, then no later than 60 days after such Funding Date),
the Partnership shall prepare an Operating Plan and Operating
Budget for such succeeding fiscal year and submit the Operating
Plan and Operating Budget to the Independent Engineer for its
approval. Within fifteen (15) days after its receipt of the
Operating Plan and Operating Budget, the Independent Engineer
shall approve the same or notify the Partnership of the
amendments that it wishes to make and the reasons therefor. If
the Independent Engineer requests an amendment, the Partnership
and the Independent Engineer shall endeavor in good faith to
agree upon an Operating Plan and an Operating Budget within 15
days after receipt by the Partnership of the Independent
Engineer's notification that it desires an amendment. If no
agreement is reached within such 15-day period, the Operating
Plan and Operating Budget, as amended by the Independent
Engineer, shall constitute the Operating Plan and Operating
Budget.
Section 6.15 Further Assurances; Opinions of Counsel. (a)
The Partnership and the Company shall take or cause to be taken
all action reasonably required to maintain and preserve the Lien
in favor of the Collateral Agent provided for in the Collateral
Documents. The Partnership and the Company shall from time to
time execute or cause to be executed any and all further
instruments (including financing statements, continuation
statements and similar statements with respect to the Liens
granted in the Collateral Documents) reasonably required to
maintain and preserve the Lien in favor of the Collateral Agent
provided for in the Collateral Documents.
(b) Promptly after the execution and delivery of this
Indenture and of each Series Supplemental Indenture or other
supplemental indenture or other instrument of further assurance,
the Company and the Partnership shall furnish to the Trustee such
Opinion or Opinions of Counsel stating that, in the opinion of
such counsel, this Indenture and all such Series Supplemental
Indentures, other supplemental indentures and other instruments
of further assurance have been properly recorded, registered and
filed to the extent necessary to establish, maintain, protect,
perfect and continue the perfection of the Lien intended to be
created by the Collateral Documents, and reciting the details of
such action or referral to prior opinions of Counsel in which
such details are given, and stating that all financing statements
and continuation statements have been executed and filed that are
necessary fully to preserve and protect the rights of the
Collateral Agent for the benefit of the Secured Parties, or
stating that, in the opinion of such counsel, no such action is
necessary to establish, maintain, protect, perfect and continue
the perfection of such Lien and security interest.
(c) (i) On or before each anniversary of the Closing Date
and (ii) at any other time as the Collateral Agent may reasonably
request in writing, including, but not limited to, in connection
with a change or amendment in the Laws affecting any Lien created
by the Collateral Documents, the Company and the Partnership
shall furnish to the Collateral Agent such Opinion or Opinions of
Counsel as the Collateral Agent may reasonably request in writing
(on or prior to the date ninety (90) days prior to each of the
dates referred to in clause (i) above in the case of said clause
(i)) either stating that, in the opinion of such counsel, such
action has been taken with respect to the recording, filing, re-
recording and re-filing of the Collateral Documents and any other
requisite documents and with respect to the execution and filing
of any financing statements and continuation statements as is
necessary to maintain the Lien created by the Collateral
Documents and reciting the details of such action or stating
that, in the opinion of such counsel, no such action is necessary
to maintain such Lien and security interest. Such Opinion of
Counsel shall also describe the recording, filing, re-recording
and re-filing of the Collateral Documents and any other requisite
documents and the execution and filing of any financing
statements and continuation statements that will, in the opinion
of such counsel, be required to maintain the Lien created by the
Collateral Documents at least until the next regularly scheduled
date set forth in clause (i) above on which an Opinion of Counsel
may be required to be delivered pursuant to this Section 6.15(c).
Section 6.16 Debt. (a) The Partnership shall not create
or incur or suffer to exist any Debt except:
(i) the Initial Bonds, the Loans, the Partnership
Guarantees, the Partnership Notes or Debt arising under
the other Project Agreements and the Escrow Deposit
Agreement;
(ii) purchase money or Capital Lease obligations
incurred to finance assets of the Project that are
readily replaceable personal property with a principal
amount and capitalized portion not exceeding $1,000,000
in the aggregate outstanding at any time;
(iii) trade accounts payable (other than for
borrowed money) arising, and accrued expenses incurred,
in the ordinary course of business of operating or
maintaining the Project on customary terms, so long as
such trade accounts are payable within 90 days of the
date the respective goods are delivered or the
respective services are rendered;
(iv) Debt under a Credit Bank Working Capital
Agreement and Credit Bank Reimbursement Agreement, so
long as after giving effect to such additional Debt,
the aggregate principal amount of such Debt outstanding
(excluding the VEPCO Reimbursement Agreement and the
Debt referred to in clause (x) of this Section 6.17(a))
shall not exceed $12,000,000 and then minimum (or the
lowest) of the Annual Projected Debt Service Coverage
Ratios for the remaining term of the Bonds will be
equal to or exceed 1.5:1 and the average of the Annual
Projected Debt Service Coverage Ratios for the
remaining term of the Bonds will be equal to or exceed
1.75:1; provided, however, that, if such Debt is to be
secured by the Collateral, the Credit Banks under the
Credit Bank Working Capital Agreement (or an agent for
such Credit Banks) or the Credit Bank Reimbursement
Agreement (or an agent for such Credit Banks), as the
case may be, shall have executed and delivered a
counterpart of the Intercreditor Agreement and been
designated a "Secured Party" and the Partnership shall
have executed and delivered an Additional Mortgage, if
applicable, with respect to such Debt;
(v) Debt (including, without limitation, Bonds)
incurred to finance enhancements or modifications to
the Project (which may include, without limitation, a
distilled water facility or other thermal operation),
provided, that (A) the proceeds of such Debt are used
for enhancements or modifications to the Project, (B)
such proceeds are deposited with the Depositary Agent
by the Partnership in accordance with Section 3.1 of
the Depositary Agreement, (C) the holders of such Debt
or their agent shall execute a counterpart to the
Intercreditor Agreement and be designated as a "Secured
Party", (D) the Partnership certifies to the Trustee in
an Officer's Certificate of the Partnership that (1) no
event or condition has occurred and is continuing which
constitutes a Default or Event of Default, (2) there
are no Liens other than Permitted Liens, as evidenced
by a title search report and a UCC financing statement
search report provided to the Trustee and (3) the
Partnership has obtained the title insurance required
by Section 6.4(a)(viii) with respect to such Debt, and
(E)(1) in the case of such enhancements or
modifications to the Project required to comply with
any applicable Law, to obtain, maintain or comply with
the terms and conditions of, any Governmental Approval
necessary for the Partnership to conduct its business
pursuant to the Project Documents and the Non-Material
Agreements or any approval required to construct the
enhancement or modification or to permit the Project to
maintain its certification as a Qualifying Facility,
after giving effect to the issuance of such Debt, the
minimum (or lowest) and the average of the Annual
Projected Debt Service Coverage Ratios for the
remaining term of the Bonds will be equal to or exceed
1.2:1 and the Independent Engineer confirms in writing
the estimates of the cost of the proposed enhancements
or modifications and (2) in the case of enhancements or
modifications to the Project other than those described
in clause (E)(l) above, after giving effect to the
issuance of such Debt, the minimum (or lowest) of the
Annual Projected Debt Service Coverage Ratios (after
giving effect to the projected revenues from or related
expenses of the proposed enhancements or modifications)
will be equal to or exceed 1.5:1 and the average of the
Annual Projected Debt Service Coverage Ratios (after
giving effect to the projected revenues from or related
expenses of the proposed enhancements or modifications)
for the remaining term of the Bonds will be equal to or
exceed 1.75:1, and the Independent Engineer confirms in
writing the estimates of the cost of the proposed
enhancements or modifications to the Project; provided,
further, that the Partnership shall have executed and
delivered an Additional Mortgage with respect to such
Debt and the lender of such Additional Permitted Debt
(or an agent or trustee on behalf of such lender) shall
have executed and delivered a counterpart of the
Intercreditor Agreement and been designated a "Secured
Party";
(vi) Debt constituting Loans from the Company of
the proceeds of the Additional Permitted Debt of the
Company;
(vii) Interest Rate Protection Agreements entered
into with a Permitted Counterparty in connection with
the Additional Permitted Debt of the Partnership,
provided that, if the Interest Rate Protection
Agreement is to be secured by the Collateral, the
Permitted Counterparty under any such Interest Rate
Protection Agreement shall have executed and delivered
a counterpart of the Intercreditor Agreement and been
designated a "Secured Party" and the Partnership shall
have executed and delivered an Additional Mortgage, if
applicable, with respect to such Debt;
(viii) Guaranties permitted in accordance with
Section 6.18;
(ix) unsecured Debt not to exceed an aggregate
principal amount of $10,000,000 outstanding at any time, the
proceeds of which are applied to the payment of enhancements
and modifications to the Project or which Debt represents
unsecured Loans from the Partners which, in either case, is
subordinated to the Bonds on terms substantially the same as
those set forth in Schedule 6.16; or
(x) Debt consisting of the obligation to reimburse
NationsBank of Texas, N.A. for any draws on a letter of
credit issued pursuant to a Letter of Credit and
Reimbursement Agreement, dated July 31, 1996, between the
Partnership and NationsBank of Texas, N.A. and obligations
under the forward purchase contract entered into in
connection with such Letter of Credit and Reimbursement
Agreement.
(b) The Company shall not create or incur or suffer to
exist any Debt except:
(i) the Bonds; or
(ii) Debt (including, without limitation, Bonds)
incurred to finance enhancements or modifications of
the Project meeting the criteria set forth in Section
6.16(a)(v) above, provided, however, that the proceeds
of such Debt are loaned to the Partnership to pay the
costs of such enhancements or modifications; and
provided, further, that the Partnership shall have
executed and delivered an Additional Mortgage and a
Partnership Guarantee with respect to such Debt and the
lender of such Additional Permitted Debt (or an agent
or trustee for such lenders) shall have executed and
delivered a counterpart of the Intercreditor Agreement
and been designated a "Secured Party" pursuant to the
Designation Letter.
Section 6.17 Liens. Neither the Partnership nor the
Company shall create or suffer to exist or permit any Lien upon
or with respect to any of their respective properties (including
the Collateral), except for the following, which collectively
shall constitute "Permitted Liens":
(a) Liens specifically permitted or required by, or
created by, this Indenture or any Collateral Document;
(b) with respect to the Partnership, Liens on the
Collateral with respect to Debt permitted pursuant to
Sections 6.16(a)(i), (iv), (v), (vi) and (vii);
(c) Liens on the assets referred to in Section
6.16(a)(ii) with respect to Debt permitted by such Section;
(d) with respect to the Company, Liens on the
Collateral with respect to Debt permitted pursuant to
Sections 6.16(b);
(e) Liens for taxes which are either not yet due, are
due but payable without penalty or are the subject of a Good
Faith Contest by the Partnership or the Company;
(f) any exceptions to title which are contained in the
Title Policy delivered to the Collateral Agent;
(g) Liens in connection with workmen's compensation,
unemployment insurance or other social security or pension
obligations;
(h) mechanic's, workmen's, materialmen's, construction
or other like Liens arising in the ordinary course of
business or incident to the construction, repair or
restoration of the Project (i) in respect of obligations
which are not yet due or which are the subject of a Good
Faith Contest or (ii) which are subject in full to Bonding
Arrangements or fully insured by the Title Policy;
(i) deposits or pledges to secure statutory obligations
or appeals; releases of attachments, stays of execution or
injunctions; performance bids, tenders, contracts (other
than for the repayment of borrowed money) or leases, or for
purposes of like general nature in the ordinary course of
business;
(j) The Bibb Company's rights as a lessor of the Site
under the Site Lease;
(k) Permitted Encumbrances (as defined in the
Mortgages);
(l) the right of first refusal in favor of VEPCO under
the VEPCO Power Purchase Agreement;
(m) the right of first refusal in favor of The Bibb
Company under the Steam Sales Agreement;
(n) the option of North Carolina Natural Gas
Corporation to purchase the Pipeline under the Pipeline
Operating Agreement;
(o) judgment Liens, so long as (i) such judgment shall
have been duly stayed, fully bonded or discharged prior to
the earlier of the commencement of proceedings for the
enforcement thereof or 60 days after such Lien attached,
(ii) such judgment shall have been discharged before the
expiration of any such stay and (iii) such proceedings could
not reasonably be expected to have a Material Adverse
Effect;
(p) Liens for utilities or similar purposes, provided
that any such Lien could not reasonably be expected to have
a Material Adverse Effect; and
(q) the cash flow participation interest held by NNW,
Inc. (formerly known as Nova Northwest, Inc.) in certain
distributions from (but not any property of) the Partnership
as set forth in the Credit, Term Loan and Security
Agreement, dated as of August 31, 1993, among Panda Energy
Corporation, Panda-Rosemary Corporation and PRC II
Corporation, as borrowers, and Nova Northwest, Inc., as
lender.
Neither this Section 6.17 nor any other provision of this
Indenture shall restrict or otherwise affect the rights of the
Partners (or any parent of the Partners) to assign, pledge,
create a security interest in, or otherwise encumber, their
rights to receive distributions from the Partnership Distribution
Fund or to the moneys distributed from the Distribution Fund in
accordance with Section 6.22, but no such encumbrance shall
attach to moneys that are on deposit in the Partnership
Distribution Fund or any other funds established pursuant to the
Depositary Agreement, which have been pledged pursuant to the
Depositary Agreement to secure the Bonds and other Secured
Obligations. In the event of any conflict between any provision
of the Indenture and the preceding sentence, the latter shall
control.
Section 6.18 Guaranties. (a) The Partnership shall not
contingently or otherwise be or become liable, directly or
indirectly, in connection with any Guaranty except:
(i) the Partnership Guarantees;
(ii) Guaranties arising in the ordinary course
of business in an amount not to exceed $1,000,000 in
the aggregate;
(iii) indemnities or similar obligations with
respect to unfiled materialmen's, mechanics, workmen's,
repairmen's, employee's or other like Liens arising in
the course of construction, repair or restoration of
the Project or in the ordinary course of operations or
maintenance of the Project;
(iv) (A) indemnities, Guaranties for obligations
other than Debt or similar obligations, each as
provided under or required by the Project Documents and
any contract or undertaking entered into in connection
with Debt permitted under Section 6.16 and (B) such
additional indemnities, Guaranties or similar
obligations, each as provided under or required by the
Project Agreements after the Closing Date, provided
that such indemnity, Guaranty, or similar obligation
could not reasonably be expected to have a Material
Adverse Effect (assuming such indemnity, Guaranty or
similar obligation is computed at the amount thereof
which would reasonably be expected to become due and
payable);
(v) indemnities or similar obligations to federal,
state or local governmental agencies or authorities
relating to any expenses incurred that are incidental
to obtaining easements, rights of way or other
approvals for the benefit of the Project; and
(vi) surety bonds, performance bonds or similar
arrangements with third-party sureties or indemnitors
or similar Persons ("Bonding Arrangements"); provided,
that the aggregate exposure of the Partnership and the
Company in connection with all Bonding Arrangements
shall not exceed $5,000,000.
(b) The Company shall not contingently or otherwise be or
become liable directly or indirectly in connection with any
Guaranty except indemnities or similar obligations in connection
with Debt permitted under Section 6.16(b).
Section 6.19 Prohibition on Disposition of Assets. Except
as permitted pursuant to this Indenture or the Collateral
Documents, neither the Partnership nor the Company shall lease
(as lessor) or Transfer (as transferor) any property or assets
except (i) in the ordinary course of business, to the extent that
(A) such property is worn out or no longer useful or usable in
connection with the operation of the Project and such property is
replaced by property having a fair market value equal to or
greater than the fair market value of the property being leased
or Transferred or (B) such lease or Transfer is required to
comply with any applicable Law, to obtain, maintain or comply
with the terms and conditions of, any Governmental Approval
necessary for the Partnership to conduct its business pursuant to
the Project Documents or to maintain the Project's certification
as a Qualifying Facility, (ii) the sale of natural gas or rights
to the supply, transportation and storage of natural gas under
any Acceptable Fuel Management Contracts, the Gas Supply
Contracts, the Gas Transportation Contracts and the Fuel Supply
Management Agreement, (iii) the sale of electricity and steam
under and in accordance with the Project Agreements and the Non-
Material Agreements or (iv) subject to the provisions of the
Collateral Documents, property with a fair market value not in
excess of (A) $3,000,000 in the aggregate in any one calendar
year or (B) with respect to any single item of property,
$1,000,000, provided that the Partnership certifies to the
Collateral Agent in an Officer's Certificate of the Partnership
that such lease or Transfer could not reasonably be expected to
have a Material Adverse Effect. The Partnership shall not
Transfer all or any portion of its ownership interest in the
Company except pursuant to the Collateral Documents.
Section 6.20 Amendments. (a) Except as permitted in
connection with any extension of the term of a Gas Contract or
any termination of a Gas Supply Contract in connection with a
Replacement Gas Contract pursuant to Section 6.22(d) or any
termination, amendment or modification of a Gas Transportation
Contract in connection with Replacement Gas Transportation
Activities or a Transportation Service Conversion, the
Partnership may terminate, amend or modify any Project Agreement
to which it is a party only if:
(i) except as a result of an event described in
Section 6.20(a)(iii), either (A) such termination,
amendment or modification will not materially adversely
change the pricing (or other payment) or volume
provisions or reduce the duration of any of the Gas
Supply Contracts, the Power Purchase Agreement, a Firm
Gas Transportation Contract, the Steam Sales Agreement,
the Interconnection Agreement or the Fuel Supply
Management Agreement, as certified by an Authorized
Representative of the Partnership to the Trustee and
such termination, amendment or modification could not
reasonably be expected to have a Material Adverse
Effect, or (B) such termination, amendment or
modification will materially change the pricing (or
other payment) or volume provisions or reduce the
duration of any of the Gas Supply Contracts, the Power
Purchase Agreement, a Firm Gas Transportation Contract,
the Steam Sales Agreement, the Interconnection
Agreement or the Fuel Supply Management Agreement but
the Independent Engineer (or with respect to the Gas
Contracts, the Fuel Supply Management Agreement or the
Power Purchase Agreement, the Gas Consultant) confirms
in writing to the Trustee that such termination,
amendment or modification could not reasonably be
expected to have a Material Adverse Effect; or
(ii) an Authorized Representative of the
Partnership or the Company, as the case may be,
certifies to the Trustee, and such certification is
concurred with in writing by the Independent Engineer,
that after giving effect to such proposed termination,
amendment or modification, the minimum (or lowest) of
the Annual Projected Debt Service Coverage Ratios for
the remaining term of the Bonds will be equal to or
exceed 1.5:1 and the average of the Annual Projected
Debt Service Coverage Ratios for the remaining term of
the Bonds will be equal to or exceed 1.75:1; or
(iii) as a result of a change in tariffs or
similar publicly promulgated rates or terms and
conditions of service approved by any Governmental
Authority which are incorporated by reference into a
Project Agreement or as a result of implementation of
provisions requiring adjustments to price or volume
under, and in accordance with, the terms of Project
Agreements; or
(iv) the termination results from the term of
the Project Agreement expiring by its terms; or
(v) the termination consists of the termination of
a Gas Transportation Contract which is not a Firm Gas
Transportation Contract.
Additionally, in the case of any termination, amendment or
modification of a Project Agreement other than those described in
clauses (iii), (iv) and (v) of this Section 6.20(a), an
Authorized Representative of the Partnership or the Company, as
the case may be, shall certify to the Trustee, and such
certification shall be accompanied by an Opinion of Counsel
stating, that as a result of such proposed termination, amendment
or modification, the Partnership will be able to obtain or
maintain, or comply with the terms and conditions of, any
Governmental Approval necessary for the Partnership to conduct
its business as currently conducted or as proposed to be
conducted or to permit the Project to maintain its certification
as a Qualifying Facility to the extent required under Section
6.26 of this Indenture.
(b) If a Non-Material Agreement that is not an Acceptable
Fuel Management Agreement is proposed to be amended or modified
such that the Partnership could reasonably be expected to have
monetary obligations in excess of $500,000 under such agreement
or related agreements, prior to entering into such amendment or
modification, the Partnership shall certify and the Independent
Engineer shall confirm in writing to the Trustee that such
amendment or modification could not reasonably be expected to
have a Material Adverse Effect. Furthermore, if a Non-Material
Agreement is amended or modified such that the Partnership could
reasonably be expected to have monetary obligations in excess of
$1,000,000 under such agreement or related agreements, such Non-
Material Agreement shall constitute a Project Agreement and the
Partnership or the Company shall, upon the effectiveness of such
amendment or modification, comply with the provisions of Section
6.20(c) with respect to such Non-Material Agreement as if such
Non-Material Agreement were an Additional Contract referred to in
Section 6.20(c).
(c) Neither the Partnership nor the Company shall:
(i) enter into any Additional Contract (except as
contemplated by Sections 6.22(d)(Replacement Gas
Contracts and Replacement Gas Transportation Contracts)
and 8.1(j) (Event of Default-Termination of Project
Agreements)), unless (A) an Authorized Representative
of the Partnership or the Company, as the case may be,
certifies to the Trustee, and such certification is
concurred with in writing by the Independent Engineer
or the Gas Consultant, as the case may be, that the
transactions contemplated by such Additional Contract
would not impair the ability of the Partnership or the
Company, as the case may be, to perform its obligations
under the other Project Agreements and that either (i)
such Additional Contract could not reasonably be
expected to have a Material Adverse Effect or (ii)
after giving effect to such Additional Contract, the
minimum (or lowest) of the Annual Projected Debt
Service Coverage Ratios for the remaining term of the
Bonds will be equal to or exceed 1.5:1 and the average
of the Annual Projected Debt Service Coverage Ratios
for the remaining term of the Bonds will be equal to or
exceed 1.75:1, and (B) the Partnership or the Company,
as the case may be, furnishes to the Collateral Agent
all related Ancillary Documents within a reasonable
period, including, to the extent obtained by the
Company or the Partnership, using commercially
reasonable efforts, a Consent and/or an Opinion of
Counsel covering the substance of the matters described
in Schedule 6.20; provided that (x) if after using
commercially reasonable efforts the Partnership or the
Company is unable to obtain an Opinion of Counsel
addressing the matters listed in Part B of Schedule
6.20, then in lieu thereof an officer's certificate of
the Project Participant to such Additional Contract
certifying such matters may be delivered,(y) if after
using commercially reasonable efforts the Partnership
or the Company is unable to obtain a Consent, then in
lieu thereof the Company or the Partnership may cause
such Additional Contract to include provisions pursuant
to which the Project Participant consents to the
assignment to the Collateral Agent of such Additional
Contract as security and such other additional
provisions addressing the matters listed in Part A of
Schedule 6.20, and (z) if the Company or the
Partnership, as the case may be, was unable to obtain a
Consent or Opinion of Counsel as to the matters of
Schedule 6.20 or any substitutes therefor, the Company
or the Partnership shall deliver an Officer's
Certificate of the Company or the Partnership, as the
case may be, certifying that after using commercially
reasonable efforts it was unable to obtain such Consent
or Opinion of Counsel or any substitutes therefor; or
(ii) assign any of its rights or obligations
under any Project Agreement to any other Person, except
to the Collateral Agent and except as contemplated by
Sections 6.17, 6.19 and 6.21, or through a Capacity
Release Arrangement.
(d) The Partnership and the Company, as the case may be,
may amend or modify the interest rate, principal and any other
payment terms of any Additional Permitted Debt if (i) such
amendment or modification reduces the rate of interest payable,
reduces the amounts of principal payable, defers the payment of
any interest, principal or such other payments or relates to
incidental payments of typical fees or expenses required by the
Additional Permitted Debt provider in connection with such
permitted amendment or modification or (ii) after giving effect
to such amendment or modification, the minimum (or lowest) of the
Annual Projected Debt Service Coverage Ratios shall be equal to
or exceed 1.5:1 and the average of the Annual Projected Debt
Service Coverage Ratios shall be equal to or exceed 1.75:1 and
the Partnership or the Company, as the case may be, certifies to
the Trustee, and the Independent Engineer confirms in writing to
the Trustee, that such amendment or modification could not
reasonably be expected to have a Material Adverse Effect.
Section 6.21 Prohibition on Fundamental Changes. (b)
Neither the Partnership nor the Company shall enter into any
transaction of merger or consolidation, change its form of
organization or its business, liquidate, wind-up or dissolve
itself (or suffer any liquidation or dissolution, unless
contemporaneously, reconstituted) or discontinue its business;
provided, that the Partnership may change its form of
organization if (i) such change could not reasonably be expected
to have a Material Adverse Effect, (ii) the Rating Agencies by
letters addressed to the Partnership and delivered to the Trustee
confirm that the rating of such agency then in effect for any of
the Bonds Outstanding will not be reduced as a result of the
Partnership changing its form of organization, (iii) the
Partnership delivers to the Trustee an Opinion of Counsel to the
effect that such change could not reasonably be expected to have
an adverse tax effect on the Holders, (iv) the new entity assumes
all obligations of the Partnership, including, without
limitation, its obligation under the Project Documents, (v) no
event or condition has occurred and is continuing which
constitutes a Default or Event of Default and (vi) the
Partnership delivers to the Trustee an Officer's Certificate of
the Partnership certifying that the conditions described in
clauses (i) through (v) have been satisfied.
(b) Neither the Partnership nor the Company shall (i)
acquire, by purchase or otherwise, all or substantially all of
the property or assets of, any Person, except in the ordinary
course of the business of the Partnership and the Company, (ii)
enter into any partnership or joint venture, (iii) make any
equity or capital contribution to any Person other than the
Company or any Subsidiary created in accordance with clause (iv)
below, or (iv) create or acquire any Subsidiary, other than the
Company unless (A) such Subsidiary is created for a limited
purpose and that can only engage in business permitted for the
Partnership or the Company in Section 6.23 (including the
ownership and operation of a distilled water or other thermal
operation), (B) the capital stock of such Subsidiary and any
assets transferred to such Subsidiary are made subject to a Lien
in favor of the Collateral Agent, (C) such Subsidiary is
prohibited from incurring or suffering to exist Debt (other than
Debt of the type permitted under Sections 6.16(a)(ii) and (iii)),
Guaranties (other than Guaranties of the type permitted under
Sections 6.18(a)(iii), (iv), (v) and (vi)) or Liens (other than
Liens of the type permitted under Sections 6.17(e), (f) (solely
to the extent such exceptions relate to minor defects in title),
(g), (h), (i), (j), (l), (m), (o) and (p)), (D) the minimum of
the Annual Projected Debt Service Coverage Ratios for the
remaining term of the Bonds shall be equal to or exceed 1.5:1 and
the average of the Annual Projected Debt Service Coverage Ratios
for the remaining term of the Bonds shall be equal to or exceed
1.75:1, (E) the Independent Engineer confirms in writing to the
Partnership and the Trustee that the creation of such Subsidiary
could not reasonably be expected to have a Material Adverse
Effect, (F) no event or condition has occurred and is continuing
which constitutes a Default or Event of Default and (G) the
Partnership delivers an Officer's Certificate of the Partnership
certifying that the conditions described in clauses (A) through
(F) been have satisfied.
Section 6.22 Distributions. (a) Except as provided in
Sections 3.5(a), 3.9(a) and 3.9(b) of the Depositary Agreement,
the Partnership shall not declare or pay any distributions or
return any capital to, the Partners, pay any fee to any Partner
for management services, or authorize or make any other
distribution, payment or delivery of property or cash to the
Partners as such, or redeem, retire, purchase or otherwise
acquire, directly or indirectly, any partnership or other equity
interest of the Partnership now or hereafter outstanding, or any
options or warrants issued with respect thereto (other than the
redemption of the limited partnership interest in the Partnership
owned by Ford Motor Credit Company on the Closing Date), or set
aside any funds for any of the foregoing purposes (all the
foregoing being herein referred to as "Distributions") except
from, and to the extent of, moneys then on deposit in the
Partnership Distribution Fund. Subject to the preceding sentence
and the remaining provisions of this Section 6.22, the
Partnership may make Distributions on each Funding Date on which
each of the following conditions is satisfied:
(i) amounts deposited in the Interest Account of
the Debt Service Fund shall be equal to or greater than
the aggregate interest payments due on all of the Bonds
and Additional Permitted Debt within the next
succeeding six month period;
(ii) amounts deposited in the Principal Account
of the Debt Service Fund shall be equal to or greater
than the aggregate principal and premium, if any,
payments due on all of the Bonds and Additional
Permitted Debt within the next succeeding six month
period;
(iii) amounts deposited in the Debt Service
Reserve Fund, together with the aggregate amounts then
available to be drawn under any Debt Service Letter of
Credit, shall be equal to or greater than the then
current Debt Service Reserve Requirement;
(iv) amounts deposited in the Overhaul Fund
shall be equal to or greater than the then current
Major Maintenance Requirement;
(v) amounts deposited in the Property Tax Fund shall be
equal to or greater than the then current Property Tax
Requirement;
(vi) no event or condition has occurred and is
continuing which constitutes a Default or an Event of
Default;
(vii) following the loss by the Project of its
certification as a Qualifying Facility, if such loss
occurred, the Partnership has achieved a permitted
alternative utility status; and
(viii) the Trustee shall have received an
Officer's Certificate of the Partnership stating that
the conditions described in clauses (i) through (vii)
above have been satisfied or if the condition described
in clause (vii) above is not satisfied, that the
conditions described in the remaining clauses above
have been satisfied and setting forth the amount of the
requested Distribution and the calculations of the Debt
Service Coverage Ratios and Projected Debt Service
Coverage Ratio (Three Month) required by clause (b)
below.
(b) Notwithstanding the foregoing, the Partnership may not
make Distributions on any Funding Date if (i) the average of the
Debt Service Coverage Ratios for the four quarterly payment
periods on the Initial Bonds immediately preceding such Funding
Date (or, in the case of any Funding Date occurring before the
expiration of the fourth quarterly payment period, for the period
commencing on the Closing Date and ending on the first day of the
month in which such Funding Date occurs) is less than 1.2:1 or
(ii) after giving effect to the Distributions, the average of the
Projected Debt Service Coverage Ratios (Three Month) for the
current quarterly payment period and the next succeeding three
quarterly payment periods is less than 1.2:1; provided, however,
that notwithstanding the requirements of the immediately
preceding sentence, the Partnership shall be permitted to make
distributions to a Partner or Partners in respect of such
Partner's Income Tax Deficiency so long as (1) the average of the
Debt Service Coverage Ratios for the four quarterly payment
periods immediately prior to the Funding Date (or, in the case of
any Funding Date occurring before the expiration of the fourth
quarterly payment period, for the period commencing on the
Closing Date and ending on the first day of the month in which
such Funding Date occurs) is equal to at least 1.1:1 and (2) the
average of the Projected Debt Service Coverage Ratios (Three
Month) for the current quarterly payment period and the next
succeeding three quarterly payment periods is at least 1.1:1. In
calculating the Debt Service Coverage Ratio and the Projected
Debt Service Coverage Ratio (Three Month), the proceeds of any
delayed opening or business interruption insurance and other
payments received for delayed opening or interruption of
operations received by the Partnership or credited to its account
during the relevant quarterly period shall be subtracted from
Project Revenues. If the FERC has issued an order setting a
hearing on the reasonableness of the rates under the Power
Purchase Agreements, in calculating the Projected Debt Service
Coverage Ratio (Three Month) there shall be used (A) the rates
which the FERC staff sets forth in the preliminary published
staff analysis of the appropriate rate level or, (B) if such
analysis is not prepared, the rates which a nationally recognized
independent accounting firm with a utility consulting group,
engaged by the Partnership and acceptable to the Independent
Engineer, projects as the appropriate rate level consistent with
the then current FERC practice and GAAP.
(c) If on a Funding Date on which the conditions precedent
to a Distribution described in Sections 6.22(a) and (b) above and
any other conditions to Distributions under any other Financing
Document are satisfied except the conditions in Section
6.22(a)(vi), 6.22(a)(vii) or 6.22(b) above or any other condition
to Distributions under any other Financing Document that is not a
condition for Distributions under the Indenture, then on any day
thereafter on which all such outstanding conditions are satisfied
and the Trustee and the Depositary Agent have received an
Officer's Certificate of the Partnership certifying (i) that the
conditions in Sections 6.22(a)(vi), 6.22(a)(vii), and 6.22(b)
(computed as of the date of such Officer's Certificate) and such
other conditions to Distributions set forth in the other
Financing Documents are satisfied and (ii) that no other event or
condition has occurred and is continuing which constitutes a
Default or Event of Default, the Partnership may take
Distributions from the Suspension Sub-Fund in the amount that
would have been made on such Funding Date had all conditions
precedent to the Distribution been satisfied on such date.
(d) The Partnership shall not make any Distributions to the
Partners after November 30, 2005 unless (i) each of the Gas
Supply Contracts and Firm Gas Transportation Contracts has been
extended on substantially the same terms and conditions
(including any amendments or modifications permitted by Section
6.20) to have an expiration date no earlier than the longest
Stated Maturity of the Initial Bonds as certified by the
Partnership to the Trustee and concurred with in writing by the
Gas Consultant, (ii) any Gas Purchase Contract or Firm Gas
Transportation Contract not extended as provided in clause (i)
shall have been extended to have an expiration date no earlier
than the longest Stated Maturity of the Initial Bonds as
certified by the Partnership to the Trustee and concurred with in
writing by the Gas Consultant upon terms and conditions as
amended or modified otherwise than as permitted by Section 6.20
and the Rating Agencies by letters addressed to the Partnership
and delivered to the Trustee confirm that the then-current rating
of such agency then in effect for any of the Bonds Outstanding
will not be reduced as a result of the Partnership so amending or
modifying such Gas Supply Contract or Firm Gas Transportation
Contract, or (iii) any Gas Supply Contract or Firm Gas
Transportation Contract not extended as provided in clause (i) or
(ii) shall have been replaced with a Replacement Gas Contract or
a Replacement Gas Transportation Contract or, in the case of gas
transportation, a gas transportation plan the assumptions for
which are certified as reasonable by the Gas Consultant, provided
that (A) the Partnership certifies to the Trustee in an Officer's
Certificate concurred with in writing by the Independent Engineer
or the Gas Consultant (in the case of a gas transportation plan)
that the effect of any Replacement Gas Contract, Replacement Gas
Transportation Contract or gas transportation plan, as the case
may be, would not reduce the average of the Annual Projected Debt
Service Coverage Ratios (taking into account the terms of such
Replacement Gas Contract, Replacement Gas Transportation Contract
or gas transportation plan, as the case may be) for the remaining
term of the Bonds below 1.2:1 (the "Coverage Test") and (B) (x)
the Rating Agencies by letters addressed to the Partnership and
delivered to the Trustee confirm that the then-current rating of
such agency then in effect for any of the Bonds Outstanding will
not be reduced as a result of the Partnership entering into the
Replacement Gas Contract, Replacement Gas Transportation Contract
or gas transportation plan, as the case may be, or (y) in the
case of a Replacement Gas Contract, Replacement Gas
Transportation Contract or gas transportation plan, as the case
may be, that does not take effect immediately after expiration or
termination of the Gas Purchase Contract or the Firm Gas
Transportation Contract that is to be replaced, the Rating
Agencies by letters addressed to the Partnership and delivered to
the Trustee confirm that the rating of such agency in effect for
any of the Bonds Outstanding at the time the Gas Purchase
Contract or the Firm Gas Transportation Contract expires or
terminates will not be reduced as a result of the Partnership
entering into the Replacement Gas Contract, the Replacement Gas
Transportation Contract or gas transportation plan, as the case
may be. If none of the conditions set forth in clause (i), (ii)
or (iii) above have been satisfied as of November 30, 2005, no
Distributions shall be made until such time as the conditions
described in clause (i), (ii) or (iii) above have been met.
Section 6.23 Nature of Business. The Partnership shall
not engage in any business other than owning its interest in the
Company and the development, acquisition, construction,
ownership, operation, administration, maintenance and financing
of the Project as contemplated by the Project Documents and the
Non-Material Agreements to which either the Partnership or the
Company is a party. The Company shall not engage in any business
other than the financing of the Project through, among other
things, issuance of the Bonds and the issuance of the Additional
Permitted Debt.
Section 6.24 Plans. With respect to any employee benefit
plan (including, without limitation, any employee benefit plan of
a Commonly Controlled Entity) as to which the Partnership or the
Company may have liability, (a) in the event there exists an
Insufficiency with respect to such plan which could result in a
material liability to the Partnership or the Company, no steps
shall be taken by the Company or the Partnership to terminate
such plan, such plan shall not be terminated, neither the
Partnership nor the Company shall withdraw from or institute
steps to withdraw from such plan and no Reportable Event (as
defined in Section 4043 of ERISA) with respect to such plan shall
occur, (b) neither the Partnership nor the Company shall permit a
lien under Section 302(f) of ERISA or Section 412 of the Code,
(c) with respect to any such plan that is a multiemployer plan
(as defined in Section 4001(a)(3) of ERISA), neither the
Partnership nor the Company shall incur withdrawal liability to
such plan which, when aggregated with the present value of all
other amounts required to be paid to multiemployer plans in
connection with withdrawal liabilities (determined as of the date
of notification of withdrawal liability), exceeds $500,000 in the
aggregate or requires payments exceeding $500,000 per year in the
aggregate and (d) neither the Partnership nor the Company shall
permit any event or events to exist or transaction to occur with
respect to any such plan or plans which individually or in the
aggregate could result a material liability to the Partnership or
the Company.
Section 6.25 Transactions with Affiliates. Neither the
Partnership nor the Company shall make loans or advances to, or
investments in, any other entities or enter into any transaction
or arrangement, whether or not in the ordinary course of
business, with any Partner or other Affiliate that is not on
terms and conditions at least as favorable as would be obtained
in a comparable arm's-length transaction with a Person other than
a Partner or other Affiliate except that the Partnership and the
Company, as the case way be, may perform its obligations under
and engage in the transactions contemplated by the Project
Documents and Non-Material Agreements.
Section 6.26 Governmental Regulation. (a) Except as
provided in Sections 6.26(b), (c) or (d), neither the Partnership
nor the Company shall be, as a result of the construction,
ownership, operation or maintenance of the Project or the
performance of their respective obligations under the Project
Documents or Non-Material Agreements, subject to regulation by
any Governmental Authority having jurisdiction (i) under PUHCA as
a "public-utility company" or an "affiliate" or "subsidiary
company" or a "holding company" or a "registered holding company"
or of a company subject to registration under PUHCA, (ii) under
the FPA, other than as contemplated by 18 C.F.R. 292.601, (iii)
as a "gas corporation," "steam corporation," "electric
corporation," "utility corporation" or "public utility
corporation" under any law of the State of North Carolina or the
equivalent under the applicable laws of any state relating to
public utilities and/or public service corporations, (iv) except
with respect to the resale or transportation of natural gas in
interstate commerce, or the release of firm capacity rights held
by the Partnership on an interstate pipeline, as a "natural gas
company" under the Natural Gas Act of 1938, as amended, or (v)
under any other similar federal or state law regulating the
generation, transmission or sale of electricity under which the
Partnership or the Company would be deemed to be the generator,
transmitter or seller of such electricity (including, but not
limited to, treatment as an "electric utility," "electric
corporation," "electrical company," "public utility," "public
utility holding company" or any similar entity under an existing
law or an "affiliate" or "subsidiary company" of a "registered
holding company").
(b) The Project shall maintain its certification as a
Qualifying Facility; provided, however, that it shall not be
deemed a breach of this covenant if the Project involuntarily
loses its certification as a Qualifying Facility (and if as a
result thereof the Partnership and the Company would become
subject to regulation not permitted by Section 6.26(a)), if (i)
on the day the loss of Qualifying Facility status becomes
effective, if such loss can reasonably be anticipated, or within
the next succeeding five Business Days if such loss cannot
reasonably be anticipated, the Partnership shall have made a
filing at the FERC to qualify as an exempt wholesale generator
within the meaning of Section 32(a)(2) of PUHCA ("Exempt
Wholesale Generator") and the Partnership shall have ceased
making any retail electric sales as necessary to obtain Exempt
Wholesale Generator status until such time as the Partnership
shall have received the approvals required by clause (ii)(A)
below or regained Qualifying Facility status and (ii) within 360
days of such loss of certification either (A)(1) all requisite
Governmental Approvals necessary for the Partnership to own,
operate and maintain the Project and perform its obligations
under the VEPCO Power Purchase Agreement and the other Project
Documents then in effect (after giving effect to such loss of
certification) have been duly obtained or made, were validly
issued, are in full force and effect (which Governmental
Approvals shall include, unless the Partnership is otherwise
exempt from regulation under PUHCA, the Governmental Approvals
contemplated by Section 6.26(c) below), (2) the Partnership shall
have delivered an Opinion of Counsel satisfactory to the Trustee
that all such requisite Governmental Approvals have been duly
obtained or made, were validly issued, are in full force and
effect, (3) Project Revenues under the Project Documents then in
effect (after giving effect to such loss of certification) are
sufficient to maintain a minimum and an average of the Annual
Projected Debt Service Coverage Ratios for the remaining term of
the Bonds equal to or exceeding 1.2:1 and (4) the Partnership
shall have filed with the Trustee an Independent Engineer's
Certificate, dated the date of filing, verifying the occurrence
of the matters described in clause (3) or (B)(1) the Partnership
shall have restored the Project's certification as a Qualifying
Facility and shall be in compliance with Section 6.26(a), (2) the
Partnership shall have delivered to the Trustee an Opinion of
Counsel satisfactory to the Trustee that the Project is a
Qualifying Facility and that the Partnership is in compliance
with Section 6.26(a) and (3) the Partnership shall have
demonstrated that the Partnership has regained the right to the
contract rate under the VEPCO Power Purchase Agreement chargeable
prior to the Project's loss of certification as a Qualifying
Facility, as evidenced by the written acknowledgment of the Power
Purchasers or the payment by the Power Purchasers of such
contract rate or as otherwise evidenced to the reasonable
satisfaction of the Trustee.
(c) Prior to becoming subject to regulation under PUHCA as
a "public utility company" or an "affiliate" or "subsidiary
company" of a "registered holding company" or of a company
subject to registration under PUHCA, (i) all requisite
Governmental Approvals under PUHCA for the Partnership to conduct
its business as then being conducted or proposed to be conducted
in accordance with the Project Documents and to continue the
Project Documents in full force and effect and to permit the
exercise by the Secured Parties of the remedies permitted under
the Project Documents without further action or approval by any
Governmental Authority shall have been duly obtained or made, be
validly issued, be in full force and effect and Final
Determinations shall have been made thereon, (ii) all requisite
Governmental Approvals under PUHCA for each of the Partners to
hold its partnership interest in the Partnership and to permit it
to take any action required under the Project Documents have been
duly obtained or made, were validly issued, are in full force and
effect and a Final Determination have been made thereon and (iii)
the Partnership shall have delivered to the Trustee an Opinion of
Counsel satisfactory to the Trustee that all requisite
Governmental Approvals under PUHCA as described in clauses (i)
and (ii) above have been duly obtained or made, were validly
issued, are in full force and effect and Final Determinations
have been made thereon.
(d) Except as provided in Sections 6.26(b) or (c), prior to
becoming subject to regulation not otherwise permitted pursuant
to Section 6.26(a), (i) all requisite Governmental Approvals
necessary for the Partnership to own, operate and maintain the
Project and perform its obligations under the Project Documents
then in effect (after giving effect to such additional
regulation) shall have been duly obtained or made, be validly
issued, be in full force and effect and Final Determinations
shall have been made thereon, (ii) the Partnership shall have
delivered an Opinion of Counsel satisfactory to the Trustee that
all such requisite Governmental Approvals have been duly obtained
or made, were validly issued, are in full force and effect and
Final Determinations have been made thereon, (iii) the estimated
Project Revenues under the Project Documents then in effect
(after giving effect to such additional regulation) shall be
sufficient to maintain a minimum of the Annual Projected Debt
Service Coverage Ratios for the remaining term of the Bonds equal
to or exceeding 1.5:1 and an average of the Annual Projected Debt
Service Coverage Ratios for the remaining term of the Bonds equal
to or exceeding 1.75:1 and (iv) the Partnership shall have filed
with the Trustee an Independent Engineer's Certificate, dated the
date of filing, verifying the occurrence of the matters described
in clause (iii).
Section 6.27 Letters of Credit. At least sixty (60) days
before the expiration date of any letter of credit issued under
the Credit Bank Reimbursement Agreement to a Project Participant
in connection with any Project Agreement, the Partnership and the
Company shall use commercially reasonable efforts to cause the
issuer of the expiring letter of credit to extend or renew such
letter of credit or shall use commercially reasonable efforts to
replace such letter of credit by another letter of credit in an
amount equal to the maximum amount available to be drawn under
the expiring letter of credit.
Section 6.28 Rule 144A Information. So long as any of the
Bonds are outstanding and are "restricted securities" within the
meaning of Rule 144(a)(3) under the Securities Act or, if
earlier, until three years after the date such Bonds were
originally issued, and during any period in which the Company is
not subject to Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended, the Company will furnish to holders of the
Bonds and prospective purchasers of Bonds designated by such
holders, upon request of such holders or such prospective
purchasers, the information required to be delivered pursuant to
Rule 144A(d)(4) under the Securities Act to permit compliance
with Rule 144A in connection with resales of the Bonds.
Section 6.29 Site Taxes. (a) The Partnership shall use
its best efforts to (i) cause the Site to be replatted, as
promptly as practicable after the Closing Date, as a parcel
separate and distinct, for tax assessment purposes, from the real
property of The Bibb Company which includes, or is contiguous to,
the Site, or (ii) obtain, as soon as practicable after the
Closing Date, a nondisturbance agreement from each taxing
authority that assesses or collects real property taxes on such
real property in which such taxing authority covenants that (A)
in the event of the foreclosure of any Lien arising from the
failure to pay such real property taxes, it will not disturb the
Site Lease and (B) before any such foreclosure, it shall first
notify the Partnership and provide an opportunity to the
Partnership to discharge such Lien.
(b) Upon the occurrence of either of the events described
in clause (i) or (ii) of the preceding Section 6.29(a), the
Partnership shall deliver to the Collateral Agent and the
Depositary Agent an Officer's Certificate stating that such event
shall have occurred, together with appropriate evidence of the
applicable replatting or an executed copy of the nondisturbance
agreement. Prior to the delivery of such Officer's Certificate,
the Partnership shall also deliver to the Collateral Agent and
the Depositary Agent any notification or other written
communication it may receive from a tax authority or The Bibb
Company concerning the assessment of, or failure to pay, real
property taxes on the real property of The Bibb Company referred
to in such clauses promptly after receipt of such notification or
other written communication.
ARTICLE 7
REDEMPTION OF BONDS
Section 7.1 Applicability of Article. Bonds of any series
that are subject to redemption before their Stated Maturity (or,
if the principal of the Bonds of any series is payable in
installments, the Stated Maturity of the final installment of the
principal thereof) shall be redeemed in accordance with their
terms and (except as otherwise specified in the Series
Supplemental Indenture creating such series) in accordance with
this Article 7.
Section 7.2 Election or Requirement to Redeem; Notice to
Trustee. The election or requirement of the Company to redeem
any Bonds shall be evidenced by a Company Order. If the Company
determines or is required to redeem any Bonds, the Company shall,
at least fifteen (15) days prior to the date upon which notice of
redemption is required to be given to the Holders pursuant to
Section 7.4 hereof (unless a shorter notice period shall be
satisfactory to the Trustee), deliver to the Trustee and the
Depositary Agent a Company Order specifying the date on which
such redemption shall occur (the "Redemption Date") as determined
in accordance with this Article 7, the series and principal
amount of Bonds to be redeemed and evidence satisfactory to the
Trustee that the moneys necessary for such redemption will be
delivered to the Trustee by the Business Day prior to the
Redemption Date. In the case of a redemption pursuant to Section
7.3(c) or 7.3(d), such Company Order shall be accompanied by an
Officer's Certificate of the Partnership as to the estimated Make-
Whole Amount due in connection with such redemption (calculated
as if the date of such Company Order were the date of the
redemption), setting forth the details of such computation. Upon
receipt of any such Company Order, the Trustee shall establish a
non interest bearing special purpose trust fund (the "Redemption
Fund") into which shall be deposited by the Partnership, the
Company or the Depositary Agent, as the case may be, not later
than one Business Day prior to the Redemption Date, immediately
available amounts to be held by the Trustee and applied to the
redemption of such Bonds. As collateral security for the prompt
and complete payment and performance when due of all their
respective obligations with respect to the Bonds and under this
Indenture, the Partnership and the Company have pledged,
assigned, hypothecated and transferred to the Trustee for the
benefit of the Holders a Lien on and security interest in to the
Redemption Fund. The Redemption Fund shall at all times be in
the exclusive possession of, and under the exclusive domain and
control of, the Trustee. In the case of any redemption of Bonds
(a) prior to the expiration of any restriction on such redemption
provided in the terms of such Bonds, the Series Supplemental
Indenture relating thereto or elsewhere in this Indenture or (b)
pursuant to an election of the Company that is subject to a
condition specified in the terms of such Bonds or in the Series
Supplemental Indenture relating thereto, the Company shall
furnish the Trustee with an Officer's Certificate and Opinion of
Counsel evidencing compliance with such restriction or condition.
Section 7.3 Mandatory and Optional Redemption; Selection of
Bonds to Be Redeemed. (a) Unless otherwise provided in a Series
Supplemental Indenture with respect to a particular series of
Bonds, all Outstanding Bonds of each series shall be redeemed in
whole, but not in part, prior to maturity, at a redemption price
equal to the principal amount thereof, together with interest on
the principal amount of the Bonds accrued through the Redemption
Date, if an Event of Loss, an Event of Eminent Domain or a Title
Event shall occur and the Partnership has either (ii) determined
in accordance with Section 6.10(d)(i) that the Project cannot be
rebuilt, repaired or restored to permit operation of the entire
Project on a Commercially Feasible Basis or (ii) determined in
accordance with Section 6.10(f) not to rebuild, repair or restore
the Project. All Casualty Proceeds, Eminent Domain Proceeds or
Title Insurance Proceeds, as the case may be, segregated in the
Project Revenue Fund in accordance with Section 3.1(a)(ii) of the
Depositary Agreement shall be distributed ratably among the
Secured Parties, pursuant to Section 3.1(a)(iii) of the
Depositary Agreement or applied as provided in Section 3.1(a)(iv)
of the Depositary Agreement, as the case may be. Any such moneys
received by the Trustee from the Depositary Agent with respect to
such Event of Loss, Event of Eminent Domain or Title Event, as
the case may be, shall be applied by the Trustee to the pro rata
redemption of the Bonds in whole, but not in part, pursuant to
this Article 7. The Redemption Date shall be any date during the
ninety (90) day period following the date of the Partnership's
determination that (x) the Project cannot be rebuilt, repaired or
restored to permit operation of the entire Project or a portion
thereof on a Commercially Feasible Basis pursuant to Section
6.10(d)(i) or (y) not to rebuild, repair or restore pursuant to
Section 6.10(f), as the case may be, (taking into account the
notice requirements set forth in Section 7.4).
(b) Unless otherwise provided in a Series Supplemental
Indenture with respect to a particular series of Bonds, the
Outstanding Bonds of each series shall be redeemed in whole or in
part prior to maturity at a redemption price equal to the
principal amount thereof, together with interest on the principal
amount of the Bonds accrued through the Redemption Date, if an
Event of Loss, an Event of Eminent Domain or a Title Event, as
the case may be, shall occur and it has been determined in
accordance with Section 6.10(c) that the Project can only be
rebuilt, repaired or restored to permit operation of a portion of
the Project on a Commercially Feasible Basis and the amount of
the Casualty Proceeds, Eminent Domain Proceeds or Title Insurance
Proceeds, as the case may be, remaining after the payment of the
actual total cost of such rebuilding, repair or restoration
allocated to the Trustee for the benefit of the Holders pursuant
to Section 3.8(d) of the Depositary Agreement exceeds $500,000.
The amount by which all of the Casualty Proceeds, the Eminent
Domain Proceeds or the Title Insurance Proceeds, as the case may
be, exceeds the actual total cost of rebuilding, repairing or
restoring the Project in accordance with Section 6.10(c), shall
be distributed ratably among the Secured Parties pursuant to
Section 3.8(d) of the Depositary Agreement. Any such moneys
received by the Trustee from the Depositary Agent with respect to
such Event of Loss, Event of Eminent Domain or Title Event, as
the case may be, shall be applied by the Trustee to the pro rata
redemption of the Bonds in whole or in part pursuant to this
Article. The Redemption Date shall be any date during the ninety
(90) days period following the date of the delivery of an
Officer's Certificate of the Partnership to the Trustee pursuant
to Section 3.8(d) of the Depositary Agreement certifying
completion of the rebuilding, repair or restoration of the
Project (taking into account the notice requirements set forth in
Section 7.4).
(c) The Initial Bonds will be subject to redemption, at the
option of the Company, prior to maturity in whole, but not in
part, at a redemption price equal to the principal amount of the
Initial Bonds to be redeemed, plus the Make-Whole Amount
determined for the Redemption Date with respect to such principal
amount, together with interest on the principal amount of the
Initial Bonds to be redeemed accrued through the Redemption Date,
if by November 30, 2005, the Partnership, after exercising
commercially reasonable efforts, shall not have satisfied any of
the conditions set forth in clauses (i), (ii) and (iii) of
Section 6.22(d) with respect to the extension of the Gas Purchase
Contracts and Firm Gas Transportation Contracts or the
Partnership's entering into the Replacement Gas Contracts and
Replacement Gas Transportation Contracts (or, in the case of gas
transportation, a gas transportation plan). The Redemption Date
for any such redemption shall be any date selected by the Company
during the one year period commencing on January 1, 2006 and
ending on December 31, 2006.
(d) The Initial Bonds will be subject to redemption at the
option of the Company, in whole or in part, at any time at a
redemption price equal to the principal amount to be redeemed,
plus the Make-Whole Amount determined for the Redemption Date
with respect to such principal amount, together with interest on
the principal amount of Initial Bonds to be redeemed through the
Redemption Date.
(e) Upon any redemption of the Bonds in accordance with
this Section 7.3, the scheduled principal amortization of the
Bonds shall be reduced by an amount equal to the product of (x)
the scheduled principal amortization of the Bonds then in effect
multiplied by (y) a fraction, the numerator of which is equal to
the principal amount of the Outstanding Bonds to be redeemed and
the denominator of which is the principal amount of all
Outstanding Bonds immediately prior to such redemption.
(f) Except as otherwise specified in the Series
Supplemental Indenture relating to the Bonds of a series, if less
than all the Bonds of such series are to be redeemed pursuant to
Section 7.3(b) or 7.3(d), the Bonds of such series shall be
redeemed ratably by the Trustee from the Outstanding Bonds of
such series not previously called for redemption in whole.
(g) For all purposes of this Indenture unless the context
otherwise requires, all provisions relating to the redemption of
Bonds shall relate, in the case of any Bonds redeemed or to be
redeemed only in part, to the portion of the principal amount of
such Bonds that has been or is to be redeemed.
Section 7.4 Notice of Redemption. Except as otherwise
specified in the Series Supplemental Indenture relating to the
Bonds of a series to be redeemed, notice of redemption shall be
given in the manner provided in Section 1.6 to the Holders of
Bonds of such series to be redeemed at least 30 days but not more
than 60 days prior to the Redemption Date. All notices of
redemption shall state:
(a) the Redemption Date;
(b) the premium payable on redemption, if any or,
in the case of a redemption pursuant to Section 7.3(c)
or 7.3(d), the estimated Make-Whole Amount set forth in
the Officer's Certificate referred to in Section 7.2;
(c) if less than all of the Outstanding Bonds of
any series are to be redeemed, the portion of the
principal amount of each Bond of such series to be
redeemed in part, and a statement that, on and after
the Redemption Date, upon surrender of such Bond, a new
Bond or Bonds of such series in principal amount equal
to the remaining unredeemed principal amount thereof
will be issued;
(d) that on the Redemption Date, interest on the
Bonds redeemed will cease to accrue on and after such
date;
(e) the Place or Places of Payment where such
Bonds are to be surrendered for payment of the amount
in respect of such redemption; and
(f) that the deposit by the Company, the
Partnership or the Depositary Agent, as the case may
be, with the Trustee of an amount of immediately
available funds to pay the Bonds to be redeemed in full
is a condition precedent to the redemption.
Notice of redemption of Bonds to be redeemed at the election
of the Company shall be given by the Company or, at the Company's
request, by the Trustee at the expense of the Company. The
Trustee shall be given notice of redemption of the Bonds at the
time the Company delivers to the Trustee the Company Order
relating to such redemption pursuant to Section 7.2 hereof.
Section 7.5 Bonds Payable on Redemption Date. Notice of
redemption having been given as aforesaid, and the conditions, if
any, set forth in such notice having been satisfied, the Bonds or
portions thereof so to be redeemed shall, on the Redemption Date
become due and payable, and from and after such date such Bonds
or portions thereof shall cease to bear interest. Upon surrender
of any such Bond for redemption in accordance with such notice,
an amount in respect of such Bond or portion thereof shall be
paid as provided therein; provided, however, that any payment of
interest on any Bond the Stated Maturity of which is on or prior
to the Redemption Date shall be payable to the Holder of such
Bond or one or more Predecessor Bonds, registered as such at the
close of business on the related Regular Record Date according to
the terms of such Bond and subject to the provisions of Section
2.10.
Section 7.6 Bonds Redeemed in Part. Any Bond that is to be
redeemed only in part shall be surrendered at a Place of Payment
therefor (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the
Holder thereof or his attorney duly authorized in writing), and
the Company shall execute and the Trustee shall authenticate and
make available for delivery to the Holder of such Bond, without
service charge, a new Bond or Bonds of the same series. of any
authorized denomination requested by such Holder and of like
tenor and in aggregate principal amount equal to and in exchange
for the remaining unpaid principal amount of the Bond so
surrendered.
ARTICLE 8
EVENTS OF DEFAULT AND REMEDIES
Section 8.1 Events of Default. The term "Event of Default",
whenever used herein, shall mean any of the following events
(whatever the reason for such event and whether it shall be
voluntary or involuntary or come about or be affected by
operation of law, or be pursuant to or in compliance with any
applicable Law), and any such event shall continue to be an Event
of Default if and for so long as it shall not have been remedied:
(a) The Company shall fail to pay any interest on any Bond
when the same becomes due and payable, whether by scheduled
maturity or required prepayment or by acceleration or otherwise,
for a period of fifteen (15) days or more;
(b) The Company shall fail to pay any principal or premium
on any Bond when the same becomes due and payable, whether by
scheduled maturity or required prepayment or by acceleration or
otherwise; or
(c) Any representation or warranty made by either the
Partnership or the Company herein or any representation, warranty
or statement in any certificate, financial statement or other
document furnished to the Trustee by or on behalf of either the
Partnership or the Company hereunder, shall prove to have been
untrue or misleading in any material respect as of the time made,
confirmed or furnished and the fact, event or circumstance that
gave rise to such inaccuracy has had a Material Adverse Effect
and that fact, event or circumstance shall continue to be uncured
for thirty (30) or more days after the date the Partnership or
the Company, as the case may be, has actual or constructive
notice of such inaccuracy; provided that if such fact, event or
circumstance is capable of being cured and if the Partnership or
the Company commences efforts to cure such fact, event or
circumstance within such thirty (30) day period and delivers
written notice to the Trustee thereof, the Partnership or the
Company may continue to effect such cure of such fact, event or
circumstance and such misrepresentation shall not be deemed an
"Event of Default" hereunder for an additional sixty (60) days so
long as the Partnership or the Company is diligently pursuing the
cure; or
(d) Either the Partnership or the Company shall fail to
perform or observe any covenant or agreement contained in (i)
Section 6.2(a) (Maintenance of Existence), 6.16 (Debt), 6.17
(Liens), 6.18 (Guaranties), 6.19 (Disposition of Assets), 6.21
(Fundamental Changes), 6.22 (Distributions) or 6.26 (Governmental
Regulation), (ii) Section 6.4(a), (b), (f), (k) and (1)
(Insurance) or 6.10 (Eminent Domain) and such failure shall
continue uncured for fifteen (15) days or more, or (iii) Section
6.20, (Amendments), 6.23 (Nature of Business) or 6.27 (Letters of
Credit) and such failure shall continue uncured for thirty (30)
or more days; or
(e) Either the Partnership or the Company shall fail to
perform or observe any of its covenants contained in this
Indenture (other than those referred to in Section 8.1(d)) or any
Collateral Document to which the Partnership or the Company is a
party (other than any such failure subject to the terms of
Section 8.1(k)) and such failure shall continue uncured for
thirty (30) or more days; provided that if such failure is
capable of being cured and the Partnership or the Company
commences efforts to cure such default within such thirty (30)
day period, the Partnership or the Company, as the case may be,
may continue to effect such cure of the default and such default
shall not be deemed an "Event of Default" hereunder for an
additional sixty (60) days so long as the Partnership or the
Company is diligently pursuing the cure; or
(f) Either the Partnership or the Company shall (i) apply
for or consent to the appointment of, or the taking of possession
by, a receiver, custodian, trustee or liquidator of itself or of
all or a substantial part of its property, (ii) admit in writing
its inability, or be generally unable, to pay its debts as such
debts become due, (iii) make a general assignment for the benefit
of its creditors, (iv) commence a voluntary case under the
Federal Bankruptcy Code, (v) file a petition seeking to take
advantage of any other law relating to, bankruptcy, insolvency,
reorganization, winding-up, or composition or readjustment of
debts, (vi) fail to controvert in a timely and appropriate
manner, or acquiesce in writing to any petition filed against
such Person in an involuntary case under the Federal Bankruptcy
Code, (vii) dissolve (other than a dissolution of the Partnership
caused solely by a withdrawal of the General Partner and the
conditions set forth in Section 8.1(o) are satisfied) or
(viii) take any corporate or other action for the purpose of
effecting any of the foregoing; or
(g) A proceeding or case shall be commenced without the
application or consent of either the Partnership or the Company
in any court of competent jurisdiction, seeking (i) its
liquidation, reorganization, dissolution, winding-up, or the
composition or readjustment of debts and (ii) the appointment of
a trustee, receiver, custodian, liquidator or the like of such
Person under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or readjustment of
debts, and such proceeding or case shall continue undismissed or
any order, judgment or decree approving or ordering any of the
foregoing shall be entered and continue unstayed and in effect
for a period of ninety (90) or more consecutive days, or any
order for relief against such person shall be entered in an
involuntary case under the Federal Bankruptcy Code; or
(h) A final and non-appealable judgment or judgments for
the payment of money in excess of $1,000,000 (exclusive of
judgment amounts to the extent covered by insurance or indemnity
provisions under Project Agreements by third parties) shall be
rendered against either the Partnership or the Company, and the
same shall remain unpaid, unbonded or unstayed for a period of
ninety (90) or more consecutive days; or
(i) Either the Partnership or the Company shall (i) fail to
make any payment in an amount in respect of any Debt under the
Credit Working Capital Agreement when due, or fail to make any
payment in respect of any Debt incurred under the Credit Bank
Reimbursement Agreement due as a result of a drawing under a
letter of credit issued thereunder, or fail to make any payment
in respect of any Additional Permitted Debt, in each case, with a
principal or face amount exceeding $500,000 which it has incurred
and which shall remain outstanding when due, which failure
continues unwaived beyond any applicable grace period, (ii) fail
to perform any obligation in respect of any Debt under the Credit
Bank Working Capital Agreement or the Credit Bank Reimbursement
Agreement or fail to perform any obligation in respect of any
Additional Permitted Debt, in each case, with a principal or face
amount exceeding $1,000,000 which it has incurred and which shall
remain outstanding, which failure, in each such case, results in
the acceleration of the maturity of such Debt (or a requirement
to furnish cash collateral in an amount exceeding $1,000,000 in
respect of any letters of credit that remains unsatisfied) and
such acceleration shall not have been rescinded (or such
requirement shall not have been waived) or (iii) fail to perform
any obligation in respect of any Debt (other than Debt referred
to in clause (i) or (ii) above) with a principal amount exceeding
$1,000,000 which it has incurred and which shall remain
outstanding if the effect of such failure is to accelerate the
maturity of such Debt and such acceleration shall not have been
rescinded; or
(j) Either (i) any Project Agreement shall expire,
terminate or at any time for any reason cease to be valid and
binding (other than as permitted by Section 6.20) and in full
force and effect or any Project Participant shall deny that it
has any liability or obligation under any such Project Agreement
and such Project Participant ceases performance thereunder and in
either case such cessation has had a Material Adverse Effect or
(ii) any Project Participant (other than the Partnership or the
Company) shall fail to perform or observe any of its covenants or
obligations contained in any of the Project Agreements for a
period in excess of the grace period, if any, provided for in
such Project Agreements and which failure has had a Material
Adverse Effect; provided that neither such event shall be deemed
an "Event of Default" hereunder if within 180 days from the
occurrence of either such event, the Partnership shall have (A)
caused such Project Participant to resume performance in
accordance with the relevant Project Agreement or (B) entered
into an Additional Contract in substitution therefore which (x)
contains, as certified by the Partnership in an Officer's
Certificate filed with the Trustee and as confirmed by the
Independent Engineer in an Independent Engineer's Certificate
filed with the Trustee, substantially equivalent terms and
conditions or (y) if such terms and conditions are not available
in light of then current circumstances on a commercially
reasonable basis (as certified by the Partnership in an Officer's
Certificate filed with the Trustee), the Partnership shall, after
giving effect to the alternative agreement, maintain a minimum of
the Annual Projected Debt Service Coverage Ratios for the
remaining term of the Bonds equal to or greater than l.5:l and an
average of the Annual Projected Debt Service Coverage Ratios for
the remaining term of the Bonds equal to or greater than 1.75:1;
provided, however, if the Steam Sales Agreement ceases to be
valid and binding and in full force and effect or The Bibb
Company shall cease performance thereunder or shall fail to
perform or observe any covenant or obligation contained therein
for a period in excess of the grace period provided for therein,
it will not be deemed an Event of Default hereunder unless the
Project as a result thereof loses its certification as a
Qualifying Facility and such loss is not otherwise permitted by
Section 6.26; provided, further, if any Gas Supply Contract
representing less than 25% of the aggregate maximum daily supply
obligation of natural gas under all the Gas Supply Contracts in
effect immediately prior to such cessation ceases to be valid and
binding and in full force and effect or any Project Participant
denies that it has any liability under such Gas Supply Contract
and ceases performance thereunder or shall fail to perform or
observe any covenant or obligation contained therein for a period
in excess of the grace period provided for therein and which
failure has had a Material Adverse Effect, it will not be deemed
an "Event of Default" hereunder if the Project shall maintain at
all times a minimum of the Annual Projected Debt Service Coverage
Ratios for the remaining term of the Bonds (disregarding such Gas
Supply Contract and the related Gas Transportation Contracts, but
including an estimate of the cost of purchasing replacement
natural gas and transportation) equal to or exceeding 1.5:l and
an average of the Annual Projected Debt Service Coverage Ratios
for the remaining term of the Bonds (disregarding such Gas Supply
Contract and the related Gas Transportation Contracts but
including an estimate of the cost of purchasing replacement
natural gas and transportation) equal to or exceeding 1.75:1 and
so long as (1) the Partnership delivers to the Trustee an
Officer's Certificate setting forth the full calculation of the
Annual Projected Debt Service Coverage Ratios and the assumptions
used in making such calculations and certifying that such ratios
equal or exceed the required minimums, accompanied by a
certificate of the Gas Consultant concurring with the
reasonableness of the assumptions used in making the estimates of
the cost of purchasing replacement natural gas and an Independent
Engineer's Certificate concurring with the calculation of the
Annual Projected Debt Service Coverage Ratios and the assumptions
used, and on each monthly anniversary date thereafter, the
Partnership delivers to the Trustee an Officer's Certificate
setting forth the full calculation of the required Annual
Projected Debt Service Coverage Ratios and that the assumptions
on which such ratios are based are unchanged and if such
assumptions have changed. the Officer's Certificate shall be
accompanied by an Independent Engineer's Certificate concurring
with the calculation of the Annual Projected Debt Service
Coverage Ratios and the reasonableness of such assumptions and
(2) the Partnership is diligently pursuing a Replacement Gas
Contract providing for the supply of volumes of natural gas at
least equal to the volumes of natural gas provided for under the
Gas Supply Contract it would replace and, to the extent
necessary, has or is diligently pursuing a Replacement Gas
Transportation Contract or other Additional Contract to transport
such volumes of natural gas to the Project; or
(k) The Partnership shall fail to perform or observe any of
its material covenants or obligations contained in any of the
Project Agreements and such failure shall continue unremedied and
unwaived until the end of the applicable grace period, if any,
contained in the applicable Project Agreements; provided,
however, if the failure to perform or observe the covenants or
obligations with respect to the Project Agreements has not
resulted in the receipt of a notice of termination of such
Project Agreements or otherwise has had a Material Adverse Effect
and is capable of being cured and if the Partnership or the
Company has commenced efforts to cure such failure within the
period provided in this clause (k) and has delivered written
notice to the Trustee thereof, then the Partnership or the
Company may continue to effect such cure and such failure shall
not be deemed an "Event of Default" hereunder for an additional
ninety (90) days so long as the Partnership or the Company, as
the case may be, is diligently pursuing the cure; or
(l) Any of the Collateral Documents shall cease to be in
full force and effect or any Lien purported to be granted in any
Collateral Document shall cease to be a perfected Lien to
Collateral Agent on the Collateral described therein with the
priority purported to be created thereby; provided, however, that
the Partnership shall have fifteen (15) days to cure such
cessation, if curable, or to furnish to the Collateral Agent all
documents or instruments required to cure any such cessation, if
curable; or
(m) The Partners shall amend or modify, or otherwise
supplement, any provision of the Partnership Agreement (i) in any
manner detrimental to the rights of the Collateral Agent under
the Collateral Documents or otherwise adverse to the interests of
the Secured Parties or (ii) in any other manner and an Authorized
Representative of the Partnership shall be unable to certify in
an Officer's Certificate that such amendment, modification or
supplement could not reasonably be expected to have a Material
Adverse Effect; provided that any amendment, modification or
supplement described in clauses (i) and (ii) shall not be deemed
an "Event of Default" hereunder if within sixty (60) days from
the adoption of such amendment, modification or supplement, the
Partners shall have rescinded, nullified or revoked such
amendment or modification; or
(n) Panda Energy International, Inc. shall cease to own
directly or indirectly at least 51% of the capital stock of PRC
or PRC II Corporation; or
(o) PRC shall withdraw or be removed as general partner of
the Partnership or shall sell, assign, transfer, exchange, grant
an option with respect to or otherwise dispose of all or any
portion of its general partnership interest in the Partnership to
any Person, provided that PRC may withdraw, or be withdrawn or
removed, from the Partnership and replaced with another Person
acting as general partner if (i) required (A) to comply with
applicable Law, (B) to comply with the terms and conditions of
any Governmental Approval necessary for the Partnership to
conduct its business pursuant to the Project Documents or (C) to
maintain the Project's certification as a Qualifying Facility,
(ii) the Collateral Agent receives a pledge of the general
partnership interest and capital stock of such replacement
general partner and (iii) the Rating Agencies by letters
addressed to the Partnership and delivered to the Trustee confirm
that the rating of such agency then in effect for any of the
Bonds will not be reduced as a result of such replacement.
Section 8.2 Enforcement of Remedies. (a) If one or more
Events of Default shall have occurred and be continuing, then:
(i) in the case of an Event of Default described
in Sections 8.1(f) or 8.1(g) (an "Automatic
Acceleration Default"), the entire principal amounts of
the Bonds Outstanding, all interest accrued and unpaid
thereon, and all premium and other amounts payable
under the Bonds and this Indenture, if any, shall
automatically become due and payable without
presentment, demand, protest or notice of any kind, all
of which are hereby waived; or
(ii) in the case of any other Event of Default,
the Trustee may and upon the direction of the Holders
of no less than 25% in aggregate principal amount of
the Outstanding Bonds, the Trustee shall, by notice to
the Company (with a copy to the Partnership), declare
the entire principal amount of the Bonds outstanding,
all interest accrued and unpaid thereon, and all
premium, and other amounts payable under the Bonds and
this Indenture, if any, to be due and payable,
whereupon the same shall become immediately due and
payable without presentment, demand, protest or further
notice of any kind, all of which are hereby waived.
If an Event of Default occurs and is continuing and is known
to the Trustee, the Trustee shall mail to each Holder notice of
the Event of Default within thirty (30) days after the occurrence
thereof. Except in the case of an Event of Default in payment of
principal of or interest on any Bond, the Trustee may withhold
the notice to the Holders if a committee of its trust officers in
good faith determines that withholding the notice is in the
interest of Holders.
(b) At any time after the principal of the Bonds shall have
become due and payable upon a declared acceleration as provided
herein, and before any judgment or decree for the payment of the
money so due, or any portion thereof, shall be entered, the
Holders of not less than a majority in aggregate principal amount
of the Outstanding Bonds, by written notice to the Company and
the Trustee, may rescind and annul such declaration and its
consequences if:
(i) there shall have been paid to or deposited
with the Trustee a sum sufficient to pay
(A) all overdue installments of
interest on the Bonds,
(B) the principal of and premium, if
any, on any Bonds that have become due other
than by such declaration of acceleration and
interest thereon at the respective rates
provided in the Bonds for late payments of
principal or premium,
(C) to the extent that payment of such
interest is lawful, interest upon overdue
installments of interest at the respective
rates provided in the Bonds for late payments
of interest, and
(D) all sums paid or advanced by
the Trustee hereunder and the reasonable
compensation, expenses, disbursements, and
advances of the Trustee, its agents and
counsel, and
(ii) all Events of Default, other than the
nonpayment of the principal of the Bonds that has
become due solely by such acceleration, have been cured
or waived as provided in Section 8.7.
No such rescission shall affect any subsequent default or
impair any right consequent thereon.
Section 8.3 Specific Remedies. If any Event of Default
shall have occurred and be continuing and an acceleration shall
have occurred pursuant to Section 8.2, subject to the provisions
of Sections 8.2, 8.5 and 8.6, a Responsible Officer of the
Trustee shall deliver a notice to the Collateral Agent in
accordance with the Intercreditor Agreement and the Trustee may
pursue the other remedies specified in Section 8.15.
Section 8.4 Judicial Proceedings Instituted by Trustee.
(a) Trustee May Bring Suit. Subject to the terms of the
Intercreditor Agreement, if there shall be an Event of Default,
then the Trustee, in its own name, and as trustee of an express
trust subject to the provisions of Sections 2.14 and 8.2, shall
be entitled and empowered to institute any suits, actions or
proceedings at law, in equity or otherwise, for the collection of
the sums so due and unpaid on the Bonds, and may prosecute any
such claim or proceeding to judgment or final decree, and,
subject to the Intercreditor Agreement with respect to the
Collateral, may enforce any such judgment or final decree and
collect the moneys adjudged or decreed to be payable in any
manner provided by law, whether before or after or during the
pendency of any proceedings for the enforcement of any of the
Trustee's rights or the rights of the Holders under this
Indenture, and such power of the Trustee shall not be affected by
any sale hereunder or by the exercise of any other right, power
or remedy for the enforcement of the provisions of this
Indenture.
(b) Trustee May Recover Unpaid Debt after Sale of
Collateral. Subject to Section 2.14 and the terms of the
Intercreditor Agreement, in the case of a sale of the Collateral
and of the application of the proceeds of such sale to the
payment of the Debt secured by this Indenture, the Trustee in its
own name, and as trustee of an express trust, shall be entitled
and empowered, by any appropriate means, legal, equitable or
otherwise, to enforce payment of, and to receive all amounts then
remaining due and unpaid upon, all or any of the Bonds, for the
benefit of the Holders thereof, and upon any other portion of the
Debt remaining unpaid, with interest at the rates specified in
the respective Bonds on the over-due principal of and premium, if
any, and (to the extent that payment of such interest is legally
enforceable) on the overdue installments of interest.
(c) Recovery of Judgment Does Not Affect Rights. No
recovery of any such judgment or final decree by the Trustee and
no levy of any execution under any such judgment upon any of the
Collateral, or upon any other property, shall in any manner or to
any extent affect any rights, powers or remedies of the Trustee,
or any liens, rights, powers or remedies of the Holders, but all
such liens, rights, powers or remedies shall continue unimpaired
as before.
(d) Trustee May File Proofs of Claims; Appointment of
Trustee as Attorney-in-Fact in Judicial Proceedings. Subject to
the terms of the Intercreditor Agreement, the Trustee in its own
name, or as trustee of an express trust, or as attorney-in-fact
for the Holders, or in any one or more of such capacities
(irrespective of whether the principal of the Bonds shall then be
due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made
any demand for the payment of overdue principal, premium, if any,
or interest), shall be entitled and empowered to file such proofs
of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and of the
Holders (whether such claims be based upon the provisions of the
Bonds or of this indenture) allowed in any equity, receivership,
insolvency, bankruptcy liquidation, readjustment, reorganization
or any other judicial proceedings relating to the Company or any
obligor on the Bonds (within the meaning of the Trust Indenture
Act), the creditors of the Company or any such obligor, the
Collateral or any other property of the Company or any such
obligor and any receiver, assignee, trustee, liquidator,
sequestrator (or other similar official) in any such judicial
proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders,
to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel. Subject to the terms of the
Intercreditor Agreement, the Trustee is hereby irrevocably
appointed (and the successive respective Holders of the Bonds, by
taking and holding the same, shall be conclusively deemed to have
so appointed the Trustee) the true and lawful attorney-in-fact of
the respective Holders, with authority to (i) make and file in
the respective names of the Holders (subject to deduction from
any such claims of the amounts of any claims filed by any of the
Holders themselves), any claim, proof of claim or amendment
thereof, debt, proof of debt or amendment thereof, petition or
other document in any such proceedings and to receive payment of
any amounts distributable on account thereof, (ii) execute any
such other papers and documents and to do and perform any and all
such acts and things for and on behalf of such Holders, as may be
necessary or advisable in order to have the respective claims of
the Trustee and of the Holders against the Company or any such
obligor, the Collateral or any other property of the Company or
any such obligor allowed in any such proceeding and (iii) receive
payment of or on account of such claims and debt; provided,
however, that nothing contained in this Indenture shall be deemed
to give to the Trustee any right to accept or consent to any plan
or reorganization or otherwise by action of any character in any
such proceeding to waive or change in any way any right of any
Holder. Any moneys collected by the Trustee under this Section
shall be applied as provided in Section 8.11.
(e) Trustee Need Not Have Possession of Bonds. All proofs
of claim, rights of action and rights to assert claims under this
Indenture or under any of the Bonds may be enforced by the
Trustee without the possession of the Bonds or the production
thereof at any trial or other proceedings instituted by the
Trustee. In any proceedings brought by the Trustee (and also any
proceedings involving the interpretation of any provision of this
Indenture to which the Trustee shall be a party) the Trustee
shall be held to represent all the Holders of the Bonds and it
shall not be necessary to make any such Holders parties to such
proceedings.
(f) Suit to Be Brought for Ratable Benefit of Holders. Any
suit, action or other proceeding at law, in equity or otherwise
which shall be instituted by the Trustee under any of the
provisions of this Indenture shall be for the equal, ratable and
common benefit of all the Holders, subject to the provisions of
this Indenture.
(g) Trustee May Be Restored to Former Position and Rights
in Certain Circumstances. In case the Trustee shall have
instituted any proceeding to enforce any right, power or remedy
under this Indenture by foreclosure, entry or otherwise, and such
proceedings shall have been discontinued, or abandoned for any
reason or shall have been determined adversely to the Trustee,
then and in every such case the Company, the Partnership and the
Trustee shall be restored to their former positions and rights
hereunder, and all rights, powers and remedies of the Trustee
shall continue as if no such proceedings had been taken.
Section 8.5 Holders May Demand Enforcement of Rights by
Trustee. If an Event of Default shall have occurred and shall be
continuing, the Trustee shall, subject to the terms of the
Intercreditor Agreement, upon the written request of the Holders
of a majority in aggregate principal amount of the Bonds then
Outstanding and upon the offering of indemnity as provided in
Section 9.1(d), proceed to institute one or more suits, actions
or proceedings at law, in equity or otherwise, or take any other
appropriate remedy, to enforce payment of the principal of, or
premium, if any, or interest on, the Bonds, or to deliver notice
to the Collateral Agent in accordance with the Intercreditor
Agreement requesting that the Collateral Agent foreclose under
the Collateral Documents or to sell the Collateral under a
judgment or decree of a court or courts of competent jurisdiction
or under the power of sale granted in the Collateral Documents,
or, subject to the terms of the Intercreditor Agreement, take
such other appropriate legal, equitable or other remedy, as the
Trustee, which may be advised by counsel, shall deem most
effectual to protect and enforce any of the rights or powers of
the Trustee or the Holders, or, in case such Holders shall have
requested a specific method of enforcement permitted hereunder,
in the manner requested, subject to the terms of the
Intercreditor Agreement, provided that such action shall not be
otherwise than in accordance with law and the provisions of this
Indenture, and the Trustee, subject to such indemnity provisions,
shall have the right to decline to follow any such request if the
Trustee in good faith shall determine that the suit, proceeding
or exercise of the remedy so requested would involve the Trustee
in personal liability or expense.
Section 8.6 Control by Holders. The Holders of not less
than a majority in aggregate principal amount of the Outstanding
Bonds shall have the right to direct the time, method and place
of conducing any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the
Trustee, provided that (i) such direction shall not be in
conflict with any rule of law or with this Indenture or the
lntercreditor Agreement, and (ii) the Trustee may take any other
action deemed proper by the Trustee which is not inconsistent
with such direction.
Section 8.7 Waiver of Past Defaults or Events of Default.
The Holders of not less than a majority in aggregate principal
amount of the Bonds outstanding may on behalf of the Holders of
all Bonds waive any past Default or Event of Default and its
consequences except (i) a Default or Event of Default in the
payment of the principal of or premium, if any, and interest on,
or other amounts due under any Bond Outstanding unless
theretofore paid in full and (ii) only the Holders of all Bonds
Outstanding may waive a Default or Event of Default in respect of
a covenant or provision hereof that under Article 12 cannot be
modified or amended without the consent of the Holder of each
Bond outstanding affected. Upon any such waiver such Default
shall cease to exist and any Event of Default arising therefrom
shall be deemed to have been cured for every purpose of this
Indenture or the lntercreditor Agreement, but no such waiver
shall extend to any subsequent or other Default or impair any
right consequent thereon.
Section 8.8 Holder May Not Bring Suit Except Under Certain
Conditions. A Holder shall not have the right to institute any
suit, action or proceeding at law or in equity or otherwise for
the appointment of a receiver or for the enforcement of any other
remedy under or upon this Indenture, unless:
(a) such Holder previously shall have given
written notice to the Trustee of a continuing Event of
Default;
(b) the Holders of at least 25% in aggregate
principal amount of the outstanding Bonds shall have
requested the Trustee in writing to institute such
action, suit or proceeding and shall have offered to
the Trustee an indemnity as provided in Section 9.1(e);
(c) the Trustee shall have refused or neglected to
institute any such action, suit or proceeding for 60
days after receipt of such notice by a Responsible
Officer of the Trustee, request and offer of indemnity;
(d) no direction inconsistent with such written
request has been given to the Trustee during such 60-
day period by the Holders of a majority in principal
amount of Outstanding Bonds; and
(e) the institution of such suit, action or
proceeding is not prohibited by the Intercreditor
Agreement.
It is understood and intended that no one or more of the
Holders shall have any right in any manner whatever hereunder or
under the Bonds to (i) surrender, impair, waive, affect, disturb
or prejudice the Lien of the Collateral Documents on any property
subject thereto or the rights of the Holders of any other Bonds,
(ii) obtain or seek to obtain priority or preference over any
other such Holder or (iii) enforce any right under this
Indenture, except in the manner herein provided and for the equal
and ratable benefit of all the Holders.
Section 8.9 Undertaking to Pay Court Costs. All parties to
this Indenture, and each Holder by his acceptance of a Bond,
shall be deemed to have agreed that any court may in its
discretion require, in any suit, action or proceeding against the
Trustee for any action taken or omitted by it as Trustee
hereunder, the filing by any party litigant in such suit, action
or proceeding of an undertaking to pay the costs of such suit,
action or proceeding, and that such court may, in its discretion,
assess reasonable costs, including reasonable attorneys, fees,
against any party litigant in such suit, action or proceeding
having due regard to the merits and good faith of the claims or
defenses made by such party litigant; provided, however, that the
provisions of this Section 8.9 shall not apply to (a) any suit,
action or proceeding instituted by the Trustee, (b) any suit,
action or proceeding instituted by any Holder or group of Holders
holding in the aggregate more than 10% in aggregate principal
amount of the Outstanding Bonds or (c) any suit, action or
proceeding instituted by any Holder for the enforcement of the
payment of the principal of, or premium, if any, or interest on,
any of the Bonds, on or after the respective due dates expressed
therein.
Section 8.10 Right of Holders to Receive Payment Not to be
Impaired. Anything in this Indenture to the contrary
notwithstanding, the right of any Holder to receive payment of
the principal of, and premium, if any, and interest on, such
Bond, on or after the respective due dates expressed in such Bond
(or, in case of redemption, on the Redemption Date fixed for such
Bond), or to institute suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired
or affected without the consent of such Holder.
Section 8.11 Application of Moneys Collected by Trustee.
Following the application of funds as provided in the
Intercreditor Agreement, any money collected or to be applied by
the Trustee pursuant to this Article 8 in respect of the Bonds of
a series, together with any other moneys which may then be held
by the Trustee under any of the provisions of this Indenture as
security for the Bonds of such series (other than moneys at the
time required to be held for the payment of specific Bonds of
such series at their Stated Maturities or at a time fixed for the
redemption thereof) shall be applied in the following order from
time to time, on the date or dates fixed by the Trustee and, in
the case of a distribution of such moneys on account of
principal, premium, if any, or interest, upon presentation of the
Outstanding Bonds of such series, and stamping thereon of
payment, if only partially paid, and upon surrender thereof, if
fully paid:
FIRST: to the payment of all amounts due the
Trustee or any predecessor Trustee under Section 9.5;
SECOND: in case the unpaid principal amount of the
outstanding Bonds of such series or any of them shall
not have become due, to the payment of any interest in
default, in the order of the maturity of the payments
thereof, with interest at the rates specified in the
respective Bonds of such series in respect of overdue
payments (to the extent that payment of such interest
shall be legally enforceable) on the payments of
interest then overdue;
THIRD: in case the unpaid principal amount of a
portion of the Outstanding Bonds of such series shall
have become due, first to the payment of accrued
interest on all Outstanding Bonds of such series in the
order of the maturity of the payments thereof, with
interest at the respective rates specified in the Bonds
of such series for overdue payments of principal,
premium, if any, and (to the extent that payment of
such interest shall be legally enforceable) interest
then overdue, and next to the payment of the unpaid
principal amount of all Bonds of such series then due;
FOURTH: in case the unpaid principal amount of all
the Outstanding Bonds of such series shall have become
due, first to the payment of the whole amount then due
and unpaid upon the Outstanding Bonds of such series
for principal, premium, if any, and interest, together
with interest at the respective rates specified in the
Bonds of such series for overdue payments on principal,
premium, if any, and (to the extent that payment of
such interest shall be legally enforceable) interest
then overdue; and
FIFTH: in case the unpaid principal amount of all
the Outstanding Bonds of such series shall have become
due, and all of the Outstanding Bonds of such series
shall have been fully paid; any surplus then remaining
shall be paid to Collateral Agent (to be applied
pursuant to the terms and conditions of the
Intercreditor Agreement), or to whomsoever may be
lawfully entitled to receive the same, or as a court of
competent jurisdiction may direct;
provided, however, that all payments in respect of the Bonds of a
series to be made pursuant to clauses "SECOND" through "FOURTH"
of this Section 8.11 shall be made ratably to the Holders of
Bonds of such series entitled thereto, without discrimination or
preference, based upon the ratio of the unpaid principal amount
of the Bonds of such series in respect of which such payments are
to be made held by each such Holder to the unpaid principal
amount of all Bonds of such series.
Section 8.12 Bonds Held by Certain Persons Not to Share in
Distribution. Any Bonds known to a Responsible Officer of the
Trustee to be owned or held by, or for the account or benefit of,
the Company, the Partnership, any Partner, or an Affiliate of any
of the foregoing shall not be entitled to share in any payment or
distribution provided for in this Article 8 until all Bonds held
by other Persons have been indefeasibly paid in full.
Section 8.13 Waiver of Appraisement, Valuation, Stay,
Right to Marshaling. To the full extent it may lawfully do so,
each of the Company and the Partnership, for itself and for any
other Person who may claim through or under it, hereby:
(a) agrees that neither it nor any such Person
will set up, plead, claim or in any manner whatsoever
take advantage of, any appraisal, valuation, stay,
extension, usury, or redemption laws, now or hereafter
in force in any jurisdiction which may delay, prevent
or otherwise hinder (i) the performances or
enforcement of this Indenture, (ii) the foreclosure of
the Collateral Documents, (iii) the sale of any of the
Collateral or (iv) the putting of the purchaser or
purchasers thereof into possession of such Collateral
immediately after the sale thereof;
(b) waives all benefit or advantage of any such
laws;
(c) consents and agrees that the Collateral may be
sold by Collateral Agent as an entirety or in parts;
and
(d) waives and releases all rights to have the
Collateral marshaled upon any foreclosure, sale or
other enforcement of this Indenture or the Collateral
Documents.
Section 8.14 Remedies Cumulative; Delay or Omission Not a
Waiver. Each and every right, power and remedy herein
specifically given to the Trustee shall be cumulative and shall
be in addition to every other right, power and remedy herein
specifically given or now or hereafter existing at law, in equity
or by statute, and each and every right, power and remedy whether
specifically herein given or otherwise existing may be exercised
from time to time and as often and in such order as may be deemed
expedient by the Trustee and the exercise or the commencement of
the exercise of any right, power or remedy shall not be construed
to be a waiver of the right to exercise at the same time or
thereafter any other right, power or remedy, and no delay or
omission by the Trustee in the exercise of any right, power or
remedy or in the pursuance of any remedy shall impair any such
right, power or remedy or to be construed to be a waiver of any
default on the part of the Company, or the Partnership or to be
an acquiescence therein.
Section 8.15 The Intercreditor Agreement. Simultaneously
with the execution and delivery of this Indenture and the
Depositary Agreement, the Trustee shall enter into the
Intercreditor Agreement on behalf of itself and all Holders of
the Outstanding Bonds and all future Holders of any of the Bonds.
All rights, powers and remedies available to the Trustee and the
Holders of the Outstanding Bonds, and all future Holders of any
of the Bonds, with respect to the Collateral, or otherwise
pursuant to the Collateral Documents, shall be subject to the
Intercreditor Agreement. In the event of any conflict or
inconsistency between the terms and provisions of this Indenture
and the terms and provisions of the Intercreditor Agreement, the
terms and provisions of the Intercreditor Agreement shall govern
control.
Section 8.16 The Depositary Agreement. On the Closing
Date, the Collateral Agent shall enter into the Depositary
Agreement on behalf of the Trustee, all Holders of the
Outstanding Bonds, all future Holders of any Bonds and all other
present and future Secured Parties. In the event of any conflict
or inconsistency between the terms and provisions of this
Indenture and terms and provisions of the Depositary Agreement,
the terms and provisions of the Depositary Agreement shall govern
and control.
ARTICLE 9
CONCERNING THE TRUSTEE
Section 9.1 Certain Rights and Duties of Trustee. Except as
otherwise provided in Section 315 of the Trust Indenture Act:
(a) The Trustee may rely and shall be protected in
acting, or refraining from acting, upon any resolution,
certificate, statement, instrument, opinion, report,
notice, request, consent, order, bond, debenture or
other paper or document believed by it to be genuine
and to have been signed or presented by the proper
party or parties or with respect to any action it takes
or omits to take in good faith in accordance with a
direction received by it from Holders holding a
sufficient percentage of Bonds to give such direction
as permitted by this Indenture.
(b) Any request, direction, order or demand of the
Company or the Partnership mentioned herein shall be
sufficiently evidenced by an instrument signed in the
name of the Company or the General Partner of the
Partnership, as the case may be, by their respective
Chairman of the Board of Directors, a Vice Chairman of
the Board of Directors, the President or any Vice
President and the Secretary or an Assistant Secretary
or the Treasurer or an Assistant Treasurer (unless
other evidence in respect thereof be herein
specifically prescribed); and any resolution of the
Board of Directors may be evidenced to the Trustee by a
copy thereof certified by the Secretary or an Assistant
Secretary of the Company or the General Partner.
(c) The Trustee may consult with counsel and the
advice of counsel or any Opinion of Counsel shall be
full and complete authorization and protection in
respect of any action taken, suffered or permitted by
it hereunder in good faith and in reliance thereon.
(d) No provision of this Indenture shall be
construed to relieve the Trustee from liability for its
own negligent action, its own negligent failure to act,
or its own wilful misconduct, except that
(i) this Subsection shall not be construed
to limit the effect of Subsection (h) of this
Section;
(ii) the Trustee shall not be liable for any
error of judgment made in good faith by a
Responsible Officer, unless it shall be proved
that the Trustee was negligent in ascertaining the
pertinent facts; and
(iii)the Trustee shall not be liable with
respect to any action taken or omitted to be taken
by it with respect to Bonds of any series in good
faith in accordance with the direction of the
Holders of a majority in principal amount of the
Outstanding Bonds of such series, relating to the
time, method and place of conducting any
proceeding for any remedy available to the
Trustee, or exercising any trust or power
conferred upon the Trustee, under this Indenture
with respect to the Securities of such series.
(e) Prior to the occurrence of an Event of Default
with respect to any series of Bonds hereunder and after
the curing or waiving of all Events of Default with
respect to such series of Bonds, the Trustee shall not
be bound to make any investigation into the facts or
matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice,
request, consent, order, approval, appraisal, bond,
debenture or other paper or document with respect to
such series of Bonds unless requested in writing to do
so by the Holders of not less than a majority in
aggregate principal amount of the Bonds of such series
then outstanding; provided, that, if the payment within
a reasonable time to the Trustee of the costs, expenses
or liabilities likely to be incurred by it in the
making of such investigation is, in the opinion of the
Trustee, not reasonably assured to the Trustee by the
security afforded to it by the terms of this Indenture,
the Trustee may require reasonable indemnity against
such expenses or liabilities as a condition to so
proceeding. The reasonable expense of every such
investigation shall be paid by the Company or, if paid
by the Trustee, shall be repaid by the Company.
(f) The Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys, and the
Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney
appointed with due care by it hereunder.
(g) If an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the
rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise
as a prudent person would exercise or use under the
circumstances in the conduct of such person's own
affairs.
(h) Except during the continuance of an Event of
Default,
(i) the Trustee need perform only those
duties as are specifically set forth in this
Indenture and no others and no implied
covenants or obligations shall be read into
this Indenture against the Trustee; and
(ii) in the absence of bad faith on its
part, the Trustee may conclusively rely, as
to the truth of the statements and the
correctness of the opinions expressed
therein, upon certificates or opinions
furnished to the Trustee and conforming on
their face to the requirements of this
Indenture. However, in the case of any such
certificates or opinions which by any
provision hereof are specifically required to
be furnished to the Trustee, the Trustee
shall examine such certificates and opinions
to determine whether or not they conform on
their face to the requirements of this
Indenture.
(i) Every provision of this Indenture that in any
way relates to the Trustee is subject to this Section
9.1.
Section 9.2 Trustee Not Responsible for Recitals, Etc. The
recitals contained herein and in the Bonds, except the Trustee's
certificate of authentication, shall be taken as the statements
of the Company or the Partnership, as applicable, and the Trustee
assumes no responsibility for the correctness of the same. The
Trustee makes no representations as to the validity or
sufficiency of this Indenture, the Collateral or of the Bonds.
The Trustee shall not be accountable for the use or application
by the Company of any of the Bonds or of the proceeds of such
Bonds.
Section 9.3 Trustee and Others May Hold Bonds. The Trustee
or any Paying Agent or Security Registrar or any other Authorized
Agent of the Trustee, or any Affiliate thereof, in its individual
or any other capacity, may become the owner or pledgee of Bonds
and may otherwise deal with the Company, the Partnership, or any
other obligor on the Bonds with the same rights it would have if
it were not Trustee, Paying Agent, Security Registrar or such
other Authorized Agent.
Section 9.4 Moneys Held by Trustee or Paying Agent. All
moneys received by the Trustee or any Paying Agent shall, until
used or applied as herein provided, be held in trust for the
purposes for which they were received, but, other than the
Redemption Fund, need not be segregated from other funds except
to the extent required by law. Neither the Trustee nor any
Paying Agent shall be under any liability for interest on any
moneys received by it hereunder except such as it may agree in
writing with the Company to pay thereon.
Section 9.5 Compensation of Trustee and Its Lien. For so
long as any of the Bonds shall remain Outstanding, the Company
covenants and agrees to pay to the Trustee (all references in
this Section 9.5 to the Trustee shall be deemed to apply to the
Trustee in its capacities as Trustee, Paying Agent and Security
Registrar) from time to time, and the Trustee shall be entitled
to, reasonable compensation for all services rendered by it
hereunder (which shall be agreed to from time to time by the
Company and the Trustee and which shall not be limited by any
provision of law in regard to the compensation of a trustee of an
express trust), and, except as herein otherwise expressly
provided, the Company will pay or reimburse the Trustee upon its
request for all reasonable expenses and disbursements incurred or
made by the Trustee in accordance with any of the provisions of
this Indenture (including the reasonable compensation and the
reasonable expenses and disbursements of its counsel and of all
persons not regularly in its employ) except any such expense or
disbursement as may arise from its gross negligence or bad faith.
If any property other than cash shall at any time be subject to
the lien of this Indenture, the Trustee, if and to the extent
authorized by a receivership or bankruptcy court of competent
jurisdiction or by the supplemental instrument subjecting such
property to such lien, shall be entitled to make advances for the
purpose of preserving such property or of discharging tax liens
or other prior liens or encumbrances thereon. The Company and
the Partnership, jointly and severally, also covenant and agree
to indemnify the Trustee for, and to hold it harmless against,
any loss, liability, claim, damage or expense incurred without
gross negligence or bad faith on the part of the Trustee, arising
out of or in connection with the acceptance or administration of
the trust or trusts hereunder, this Indenture and in the
performance of any provisions of the Intercreditor Agreement,
including liability which the Trustee may incur as a result of
failure to withhold, pay or report taxes and including the costs
and expenses of defending itself against any claim or liability
in the premises and including, without limitation, any loss,
liability, claim, damage or expense relating to or arising out of
any Environmental Law (including any Environmental Claim). The
obligations of the Company under this Section shall constitute
additional Debt hereunder. Notwithstanding anything contained in
this Indenture to the contrary, such additional Debt shall be
paid by the Company or the Partnership in accordance with the
Depositary Agreement.
The obligations of the Company and the Partnership under
this Section 9.5 shall survive payment in full of the Bonds, the
resignation or removal of the Trustee and the termination of this
Indenture.
Section 9.6 Right of Trustee to Rely on Officer's
Certificates and Opinions of Counsel. Before the Trustee acts or
refrains from acting with respect to any matter contemplated by
this Indenture, it may require an Officer's Certificate or an
Opinion of Counsel, which shall conform to the provisions of
Section 1.3. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on such
certificate or opinion.
Section 9.7 Persons Eligible for Appointment as Trustee.
The Trustee hereunder shall at all times be a corporation which
complies with the requirements of the Trust Indenture Act, that
is eligible pursuant to the Trust Indenture Act to act as Trustee
hereunder, having a combined capital and surplus of at least
$50,000,000. If such corporation publishes reports of condition
at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of
such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published, in case at any time the Trustee shall cease to be
eligible in accordance with this Section, the Trustee shall
resign immediately in the manner and with the effect specified in
Section 9.8.
Section 9.8 Resignation and Removal of Trustee; Appointment
of Successor. (a) The Trustee, or any trustee or trustees
hereafter appointed, may at any time resign with respect to any
one or more or all series of Bonds by giving written notice to
the Company and by giving notice of such resignation to the
Holders of Bonds in the manner provided in Section 1.6. Upon
receiving such notice of resignation, the Company shall promptly
appoint a successor trustee or trustees with respect to the
applicable series by written instrument executed by order of the
Board of Directors of the Company, one copy of which instrument
shall be delivered to the resigning trustee and one copy to the
successor trustee. If no successor trustee shall have been so
appointed with respect to a particular series and have accepted
appointment within 30 days after the mailing of such notice of
resignation, the resigning trustee may petition any court of
competent jurisdiction for the appointment of a successor
trustee, or any Holder who has been a bona fide Holder of a Bond
or Bonds of the applicable series for at least six months may,
subject to the requirements of Section 315(e) of the Trust
Indenture Act, on behalf of himself and all others similarly
situated, petition any such court for the appointment of a
successor trustee. Such court may thereupon after such notice,
if any, as it may deem proper and prescribe, appoint a successor
trustee.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall cease to be eligible under
Section 9.7 and shall fail to resign after written
request therefor by the Company or by any such Holder,
or
(2) the Trustee shall become incapable of acting,
or shall be adjudged bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be
appointed, or any public officer shall take charge or
control of the Trustee or of its property or affairs
for the purpose of rehabilitation, conservation or
liquidation;
then, in any such case, the Company may remove the Trustee with
respect to the applicable series of Bonds, and appoint a
successor trustee by written instrument, in duplicate, executed
by order of the Board of Directors of the Company, one copy of
which instrument shall be delivered to the Trustee so removed and
one copy to the successor Trustee, or, subject to the
requirements of Section 315(e) of the Trust Indenture Act, any
Holder who has been a bona fide Holder of a Bond or Bonds of any
such series for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment
of a successor Trustee with respect to such series. Such court
may thereupon after such notice, if any, as it may deem proper
and prescribe, remove the Trustee and appoint a successor Trustee
with respect to such series.
(c) The Holders of a majority in aggregate principal amount
of the Bonds of any series at the time outstanding may at any
time remove the Trustee with respect to that series and appoint
with respect to such series a successor Trustee by delivering to
the Trustee so removed, to the successor Trustee so appointed and
to the Company, the evidence provided for in Section 10.1 of the
action taken by the Holders.
(d) Any resignation or removal of the Trustee and any
appointment of a successor Trustee pursuant to this Section shall
become effective only upon acceptance of appointment by the
successor Trustee as provided in Section 9.9.
Section 9.9 Acceptance of Appointment by Successor Trustee.
Any successor Trustee appointed under Section 9.8 shall execute,
acknowledge and deliver to the Company and to its predecessor
Trustee with respect to any or all applicable series of Bonds an
instrument accepting such appointment hereunder, and thereupon
the resignation or removal of the predecessor Trustee shall
become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights,
powers, trusts, duties and obligations with respect to such
series of its predecessor Trustee hereunder, with like effect as
if originally named as Trustee herein; but, nevertheless, on the
written request of the Company or of the successor Trustee, the
Trustee ceasing to act shall, upon payment of any such amounts
then due it pursuant to the provisions of Section 9.5, execute
and deliver an instrument transferring to such successor Trustee
all the rights, powers and trusts with respect to such series of
the Trustee so ceasing to act. Upon request of any such
successor Trustee, the Company shall execute any and all
instruments in writing for more fully and certainly vesting in
and confirming to such successor Trustee all such rights and
powers. Any Trustee ceasing to act shall, nevertheless, retain a
lien upon all property or funds held or collected by such Trustee
to secure any amounts then due it pursuant to Section 9.5.
In the case of the appointment hereunder of a successor
Trustee with respect to the Bonds of one or more (but not all)
series, the Company, the predecessor Trustee and each successor
Trustee with respect to the Bonds of any applicable series shall
execute and deliver an indenture supplemental hereto which shall
contain such mutually agreeable provisions as shall be deemed
necessary or desirable to confirm that all the rights, powers,
trusts and duties of the predecessor Trustee with respect to the
Bonds of any series as to which the predecessor Trustee is not
retiring shall continue to be vested in the predecessor Trustee,
and shall, by mutual agreement, add to or change any of the
provisions of this Indenture as shall be necessary to provide for
or facilitate the administration of the trusts hereunder by more
than one Trustee, it being understood that nothing herein or in
such supplemental indenture shall constitute such Trustees co-
Trustees of the same trust and that each such Trustee shall be
Trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such
Trustee.
No successor Trustee with respect to any series of Bonds
shall accept appointment as provided in this Section unless at
the time of such acceptance such successor Trustee shall with
respect to such series be qualified under the Trust Indenture Act
and eligible under Section 9.7.
Upon acceptance of appointment by a successor Trustee with
respect to the Bonds of any series, the Company shall give notice
of the succession of such Trustee hereunder to the Holders of
Bonds in the manner provided in Section 1.6. If the Company fails
to give such notice within 10 days after acceptance of
appointment by the successor Trustee, the successor Trustee shall
cause such notice to be given at the expense of the Company.
Section 9.10 Merger, Conversion or Consolidation of
Trustee. Any Person into which the Trustee may be merged or
converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any
Person succeeding to all or substantially all the corporate trust
business of the Trustee, shall be the successor of the Trustee
hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided
that such successor Trustee shall be qualified under the Trust
Indenture Act and eligible under the provisions of Section 9.7
hereof and Section 310(a) of the Trust Indenture Act.
Section 9.11 Maintenance of Offices and Agencies. (a)
There shall at all times be maintained in such Place of Payment
as shall be specified for the Bonds of any series in the related
Series Supplemental Indenture, an office or agency where Bonds
may be presented or surrendered for registration of transfer or
exchange and for payment of principal, premium, if any, and
interest. Such office shall be initially the Corporate Trust
Office for delivery by hand or by mail. Notices and demands to
or upon the Trustee in respect of the Bonds or this Indenture may
be served at the Corporate Trust Office. Written notice of the
location of each of such other office or agency and of any change
of location thereof shall be given by the Company or the
Partnership to the Trustee and by the Trustee to the Holders in
the manner specified in Section 1.6. In the event that no such
office or agency shall be maintained or no such notice of
location or of change of location shall be given, presentations,
surrenders and demands may be made and notices may be served at
the Corporate Trust Office.
(b) There shall at all times be a Security Registrar and a
Paying Agent hereunder. In addition, at any time when any Bonds
remain Outstanding, the Trustee may appoint an Authenticating
Agent or Agents with respect to the Bonds of one or more series
which shall be authorized to act on behalf of the Trustee to
authenticate Bonds of such series issued upon original issuance,
exchange, registration of transfer or partial redemption thereof
or pursuant to Section 2.9, and Bonds so authenticated shall be
entitled to the benefits of this Indenture and shall be valid and
obligatory for all purposes as if authenticated by the Trustee
hereunder (it being understood that wherever reference is made in
this Indenture to the authentication and delivery of Bonds by the
Trustee or the Trustee's certificate of authentication, such
reference shall be deemed to include authentication and delivery
on behalf of the Trustee by an Authenticating Agent and a
certificate of authentication executed on behalf of the Trustee
by an Authenticating Agent). If an appointment of an
Authenticating Agent with respect to the Bonds of one or more
series shall be made pursuant to this Section 9.11(b), the Bonds
of such series may have endorsed thereon, in addition to the
Trustee's certificate of authentication, an alternate certificate
of authentication in the following form:
This Bond is one of the series of Bonds referred to in the
within-mentioned Indenture.
____________________, Trustee
By____________________________
Authenticating Agent
By____________________________
Authorized Signatory
Any Authorized Agent shall be a bank or trust company, shall
be a Person organized and doing business under the laws of the
United States or any State thereof, with a combined capital and
surplus of at least $50,000,000, and shall be authorized under
such laws to exercise corporate trust powers, subject to
supervision by Federal or state authorities. If such Authorized
Agent establishes reports of its condition at least annually,
pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purposes of this
Section 9.11, the combined capital and surplus of such Authorized
Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published.
If at any time an Authorized Agent shall cease to be eligible in
accordance with the provisions of this Section 9.11, such
Authorized Agent shall resign immediately in the manner and with
the effect specified in this Section 9.11. The Trustee at its
office specified in the first paragraph of this Indenture, is
hereby appointed as Paying Agent and Security Registrar
hereunder.
(c) Any Paying Agent (other than the Trustee) from time to
time appointed hereunder shall execute and deliver to the Trustee
an instrument in which such Paying Agent shall agree with the
Trustee, subject to the provisions of this Section 9.11, that
such Paying Agent will:
(i) hold all sums held by it for the payment of
principal of, and premium, if any, and interest on
Bonds in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons
or otherwise disposed of as herein provided;
(ii) give the Trustee within five days
thereafter notice of any default by any obligor upon
the Bonds in the making of any such payment of
principal, premium, if any, or interest; and
(iii) at any time during the continuance of any
such default, upon the written request of the Trustee
in compliance with the terms of this Indenture,
forthwith pay to the Trustee all sums so held in trust
by such Paying Agent.
Notwithstanding any other provision of this Indenture, any
payment required to be made to or received or held by the Trustee
may, to the extent authorized by written instructions of the
Trustee, be made to or received or held by a Paying Agent in the
Borough of Manhattan, the City of New York, for the account of
the Trustee.
(d) Any Person into which any Authorized Agent may be
merged or converted or with which it may be consolidated, or any
Person resulting from any merger, consolidation or conversion to
which any Authorized Agent shall be a party, or any corporation
succeeding to the corporate trust business of any Authorized
Agent, shall be the successor of such Authorized Agent hereunder,
if such successor Person is otherwise eligible under this Section
without the execution or filing of any paper or any further act
on the part of the parties hereto or such Authorized Agent or
such successor Person.
(e) Any Authorized Agent may at any time resign by giving
written notice of resignation to the Trustee. the Partnership and
the Company. The Company may, and at the request of the Trustee
shall, at any time, terminate the agency of any Authorized Agent
by giving written notice of such termination to the Authorized
Agent and to the Trustee. Upon the resignation or termination of
an Authorized Agent or in case at any time any such Authorized
Agent shall cease to be eligible under this Section 9.11 (when,
in either case, no other Authorized Agent performing the
functions of such Authorized Agent shall have been appointed),
the Company shall promptly appoint one or more qualified
successor Authorized Agents approved by the Trustee to perform
the functions of the Authorized Agent which has resigned or whose
agency has been terminated or who shall have ceased to be
eligible under this Section 9.11. The Company shall give written
notice of any such appointment to all Holders as their names and
addresses appear on the Security Register.
Section 9.12 Reports by Trustee. On or before March 15 in
every year, so long as any Bonds are Outstanding hereunder, the
Trustee shall transmit to the Holders a brief report, dated as of
the preceding December 31, to the extent required by Section 313
of the Trust Indenture Act in accordance with the procedures set
forth in such Section. A copy of such report at the time of its
mailing to Holders shall be filed with the SEC and each stock
exchange, if any, on which the Bonds are listed. The Company
shall promptly notify the Trustee if the Bonds become listed on
any stock exchange, and the Trustee shall comply with Section
313(d) of the Trust Indenture Act.
Section 9.13 Trustee Risk. None of the provisions
contained in this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the
exercise of any of its rights or powers, if it shall have
reasonable ground for believing that the repayment of such funds
or liability is not reasonably assured to it. Whether or not
expressly provided herein, every provision of this Indenture
relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to Section
9.1 and the requirements of the Trust Indenture Act.
Section 9.14 Notice of Defaults. Within 90 days after the
occurrence of any default hereunder with respect to the Bonds of
any series, the Trustee shall transmit by mail to all Holders of
Bonds of such series, as their names and addresses appear in the
Security Register, notice of such default hereunder known to the
Trustee, unless such default shall have been cured or waived;
provided, however, that, except in the case of a default in the
payment of the principal of, premium (if any), or interest on any
Bonds of such series or in the payment of any sinking fund
installment with respect to Bonds of such series, the Trustee
shall be protected in withholding such notice if any so long as
the board of directors, the executive committee, or a trust
committee of directors or Responsible Officers of the Trustee in
good faith determines that the withholding of such notice is in
the interest of the Holders of Securities of such series. For
the purpose of this Section, the term "default" means any event
which is, or after notice or lapse of time or both would become,
an Event of Default with respect to Bonds of such series. Except
with respect to an Event of Default pursuant to Section 8.1(a) or
(b), the Trustee shall not be charged with knowledge of any
default or Event of Default hereunder unless written notice
thereof shall have been given to a Responsible Officer at the
Corporate Trust Office by the Company, the Partnership, a Paying
Agent, any Holder or an agent of any Holder.
Section 9.15 Disqualification; Conflicting Interests. If
the Trustee has or shall acquire a conflicting interest within
the meaning of the Trust Indenture Act, the Trustee shall either
eliminate such interest or resign, to the extent and in the
manner provided by, and subject to the provisions of, the Trust
Indenture Act and this Indenture.
Section 9.16 Preferential Collection of Claims Against
Company. If and when the Trustee shall be or become a creditor
of the Company or the Partnership (or any other obligor upon the
Bonds), the Trustee shall be subject to the provisions of the
Trust Indenture Act regarding the collection of claims against
the Company or the Partnership (or any such other obligor).
ARTICLE 10
CONCERNING THE HOLDERS
Section 10.1 Evidence of Action Taken by Holders.
Whenever in this Indenture it is provided that the Holders of a
specified percentage or a majority in aggregate principal amount
of the Bonds or of any series of Bonds may take any action
(including the making of any demand or request, the giving of any
notice, consent or waiver or the taking of any other action) the
fact that at the time of taking any such action the Holders of
such specified percentage or majority have joined therein may be
evidenced (a) by any instrument or any number of instruments of
similar tenor executed by Holders in person or by agent or proxy
appointed in writing, or (b) by the record of the Holders of
Bonds voting in favor thereof at any meeting of Holders duly
called and held in accordance with the provisions of Article 11,
or (c) by a combination of such instrument or instruments and any
such record of such a meeting of Holders, and except as herein
otherwise expressly provided, such action shall become effective
when such instrument or instruments and/or such record are
delivered to the Trustee, and where expressly required, to the
Company.
Section 10.2 Proof of Execution of Instruments and of
Holding Bonds. Subject to the provisions of Sections 9.1 and
11.5 hereof and Section 315 of the Trust Indenture Act, proof of
the execution of any instrument by a Holder or his agent or proxy
and proof of the holding by any person of any of the Bonds shall
be sufficient if made in the following manner:
The fact and date of the execution by any such
person of any instrument may be proved by the
certificate of any notary public or other officer
authorized to take acknowledgments of deeds to be
recorded in any State within the United States, that
the person executing such instrument acknowledged to
him the execution thereof, or by an affidavit of a
witness to such execution sworn to before any such
notary or other such officer. Where such execution is
by an officer of a corporation or association or a
member of a partnership on behalf of such corporation,
association or partnership, such certificate or
affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any
such instrument may also be proved in any other manner
which the Trustee may deem sufficient.
The ownership of Bonds may be proved by the
Security Register or by a certificate of the Security
Registrar.
If the Company shall solicit from the Holders of
Bonds of any series any request, demand, authorization,
direction, notice, consent, waiver or other act, the
Company may, at its option, by Board Resolution, fix in
advance a record date for the determination of Holders
of Bonds entitled to give such request, demand,
authorization, direction, notice, consent, waiver or
other act, but the Company shall have no obligation to
do so. Any such record date shall be fixed at the
Company's discretion in accordance with Section 316(c)
of the Trust Indenture Act. If such a record date is
fixed, such request, demand, authorization, direction,
notice, consent and waiver or other act may be sought
or given before or after the record date, but only the
Holders of Bonds of record at the close of business on
such record date shall be deemed to be the Holders of
Bonds for the purpose of determining whether Holders of
the requisite proportion of Bonds of such series
outstanding have authorized or agreed or consented to
such request, demand, authorization, direction, notice,
consent, waiver or other act, and for that purpose the
Bonds of such series Outstanding shall be computed as
of such record date.
The Trustee may require such additional proof, if
any, of any matter referred to in this Section 10.2 as
it shall deem necessary.
The record of any Holders meeting shall be proved
as provided in Section 11.6.
Section 10.3 Bonds Owned by Company Deemed Not
Outstanding. In determining whether the Holders of the requisite
aggregate principal amount of Bonds have concurred in any
request, demand, authorization, direction, notice, consent and
waiver or other act under this Indenture, Bonds which are owned
by the Company, the Partnership, any Partner or any Affiliate of
any of the foregoing shall be disregarded and deemed not to be
outstanding for the purpose of any such determination except that
for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, consent or waiver,
only Bonds for which a Responsible Officer of the Trustee has
received written notice of such ownership as conclusively
evidenced by the Security Register shall be so disregarded. The
Company shall furnish the Trustee, upon its reasonable request,
with a list of such Affiliates. Bonds so owned which have been
pledged in good faith may be regarded as Outstanding for the
purposes of this Section, if the pledgee shall establish to the
satisfaction of the Trustee that the pledgee has the right to
vote such Bonds and that the pledgee is not an Affiliate of the
Company or the Partnership. Subject to the provisions of Section
315 of the Trust indenture Act, in case of a dispute as to such
right, any decision by the Trustee, taken upon the advice of
counsel, shall be full protection to the Trustee.
Section 10.4 Right of Revocation of Action Taken. At any
time prior to (but not after) the evidencing to the Trustee, as
provided in Section 10.1, of the taking of any action by the
Holders of the percentage in aggregate principal amount of the
Bonds or of any series of Bonds specified in this Indenture in
connection with such action, any Holder of a Bond the serial
number of which is shown by the evidence to be included in the
Bonds the Holders of which have consented to such action may, by
filing written notice with the Trustee at its principal office
and upon proof of holding as provided in Section 10.2, revoke
such action so far as concerns such Bond. Except as aforesaid,
any such action taken by the Holder of any Bond shall be
conclusive and binding upon such Holder and upon all future
holders and owners of such Bond, and of any Bond issued in
exchange therefor or in place thereof, irrespective of whether or
not any notation in regard thereto is made upon such Bond or any
Bond issued in exchange therefor or in place thereof. Any action
taken by the Holders of the percentage in aggregate principal
amount of the Bonds specified in this Indenture in connection
with such action shall be conclusively binding upon the Company,
the Partnership, the Trustee and the Holders of all the Bonds.
ARTICLE 11
HOLDERS' MEETINGS
Section 11.1 Purposes for Which Holders' Meetings May Be
Called. A meeting of Holders may be called at any time and from
time to time pursuant to this Article 11 for any of the following
purposes:
(a) to give any notice to the Company, the
Partnership or to the Trustee, or to give any
directions to the Trustee, or to waive or to consent to
the waiving of any default hereunder and its
consequences, or to take any other action authorized to
be taken by Holders pursuant to Article 8;
(b) to remove the Trustee and appoint a successor
Trustee pursuant to Article 9;
(c) to consent to the execution of an indenture or
indentures supplemental hereto pursuant to Section
12.2; or
(d) to take any other action authorized to be
taken by or on behalf of the Holders of any specified
aggregate principal amount of the Bonds under any other
provision of this Indenture or under applicable law.
Section 11.2 Call of Meetings by Trustee. The Trustee may
at any time call a meeting of Holders of any series to be held at
such time and at such place in the Borough of Manhattan, The City
of New York, or such other city located in the United States, as
the Trustee shall determine. Notice of every meeting of Holders,
setting forth the time and the place of such meeting and in
general terms the action proposed to be taken at such meeting,
shall be given by the Trustee, in the manner provided in Section
1.6, not less than 20 nor more than 90 days prior to the date
fixed for the meeting, to the Holders of Bonds of such series.
Section 11.3 Company and Holders May Call Meeting. In
case the Company, pursuant to a resolution of its Board of
Directors, or the Holders of at least 10% in aggregate principal
amount of the Bonds of any series then outstanding, shall have
requested the Trustee to call a meeting of Holders of such
series, by written request setting forth in general terms the
action proposed to be taken at the meeting, and the Trustee shall
not have made the mailing of the notice of such meeting within 20
days after receipt of such request, then the Company or the
Holders of such Bonds in the amount above specified may determine
the time and the place in the Borough of Manhattan, The City of
New York, or the city in which the Corporate Trust Office is
located, or such other city as may be satisfactory to such
Holders, for such meeting and may call such meeting to take any
action authorized in Section 11.1 by giving notice thereof as
provided in Section 11.2.
Section 11.4 Persons Entitled to Vote at Meeting. To be
entitled to vote at any meeting of Holders a person shall be (a)
Holder of one or more Bonds with respect to which such meeting is
being held or (b) a person appointed by an instrument in writing
as proxy for the Holder or Holders of such Bonds by a Holder of
one or more such Bonds. The only persons who shall be entitled
to be present or to speak at any meeting of Holders shall be the
persons entitled to vote at such meeting and their counsel and
any representatives of the Trustee and its counsel and any
representatives of the Company, the Partnership and their
respective counsel.
Section 11.5 Determination of Voting Rights; Conduct and
Adjournment of Meetings. Notwithstanding any other provisions of
this Indenture, the Trustee may make such reasonable regulations
as it may deem advisable for any meeting of Holders, in regard to
proof of the holding of Bonds and of the appointment of proxies,
and in regard to the appointment and duties of inspectors of
votes, the submission and examination of proxies, certificates
and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall think fit.
Such regulations may provide that written instruments appointing
proxies, regular on their face, may be presumed valid and genuine
without the proof specified in Section 10.2 or other proof.
Except as otherwise permitted or required by any such
regulations, the holding of Bonds shall be proved in the manner
specified in Section 10.2 and the appointment of any proxy shall
be proved in the manner specified in said Section 10.2 or by
having the signature of the person executing the proxy witnessed
or guaranteed by any bank, banker, trust company or firm
satisfactory to the Trustee.
The Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have
been called by the Company or by Holders as provided in Section
11.3, in which case the Company or the Holders calling the
meeting, as the case may be, shall in like manner appoint a
temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by vote of the Holders
of a majority in principal amount of the Bonds represented at the
meeting and entitled to vote.
Subject to the provisions of Section 10.3, at any meeting
each Holder of a series or proxy shall be entitled to one vote
for each $100,000 principal amount of Bonds of such series held
or represented by him; provided, however, that no vote shall be
cast or counted at any meeting in respect of any Bond challenged
as not Outstanding and ruled by the chairman of the meeting to be
not Outstanding. The chairman of the meeting shall have no right
to vote other than by virtue of Bonds of such series held by him
or instruments in writing as aforesaid duly designating him as
the person to vote an behalf of other Holders of such series.
Any meeting of Holders duly called pursuant to Section 11.2 or
11.3 may be adjourned from time to time, and the meeting may be
held as so adjourned without further notice.
At any meeting, the presence of persons holding or
representing Bonds with respect to which such meeting is being
held in an aggregate principal amount sufficient to take action
upon the business for the transaction of which such meeting was
called shall be necessary to constitute a quorum; but, if less
than a quorum be present, the persons holding or representing a
majority of the Bonds represented at the meeting may adjourn such
meeting with the same effect, for all intents and purposes, as
though a quorum had been present.
Section 11.6 Counting Votes and Recording Action of
Meeting. The vote upon any resolution submitted to any meeting
of Holders of a series shall be by written ballots on which shall
be subscribed the signatures of the Holders of Bonds of such
series or of their representatives by proxy and the serial
numbers and principal amounts of the Bonds of such series held or
represented by them. The permanent chairman of the meeting shall
appoint two inspectors of votes who shall count all votes cast at
the meeting for or against any resolution and who shall make and
file with the secretary of the meeting their verified written
reports in duplicate of all votes cast at the meeting. A record
in duplicate of the proceedings of each meeting of Holders shall
be prepared by the secretary of the meeting and there shall be
attached to said record the original reports of the inspectors of
votes an any vote by ballot taken thereat and affidavits by one
or more persons having knowledge of the facts setting forth a
copy of the notice of the meeting and showing that said notice
was given as provided in Section 11.2. The record shall show the
serial numbers of the Bonds voting in favor of or against any
resolution. The record shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting
and one of the duplicates shall be delivered to the Company and
the other to the Trustee to be preserved by the Trustee, the
latter to have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive
evidence of the matters therein stated.
ARTICLE 12
SUPPLEMENTAL INDENTURES
Section 12.1 Supplemental Indentures and Collateral
Document Consents Without Consent of Holders. Without the
consent of the Holders of any Bonds, the Company and the
Partnership, when authorized by a Board Resolution, and the
Trustee, at any time and from time to time, may enter into one or
more indentures supplemental hereto in form satisfactory to the
Trustee, enter into any amendment of the Intercreditor Agreement
or enter into any consent with respect to the Collateral
Documents, subject to the terms of the Intercreditor Agreement,
for any of the following purposes:
(a) to establish the form and terms of bonds of
any series permitted by Sections 2.1 and 2.3; or
(b) to evidence the succession of another entity
to the Company, and the assumption by any such
successor of the covenants of the Company herein and in
the Bonds contained, or to evidence the succession of
another entity to the Partnership, and the assumption
by any such successor of the covenants of the
Partnership herein contained; or
(c) to evidence the succession of a new Trustee
hereunder pursuant to Section 9.9 or a new Collateral
Agent or Depositary Agent; or
(d) to add to the covenants of the Company or the
Partnership for the benefit of the Holders of all or
any series of Bonds (and if such covenants are to be
for the benefit of less than all series of Bonds,
stating that such covenants are expressly being
included solely for the benefit of such series), or to
surrender any right or power conferred in this
Indenture or the Collateral Documents upon the Company
or the Partnership; or
(e) to convey, transfer and assign to the Trustee,
the Collateral Agent or the Depositary Agent properties
or assets to secure the Bonds, and to correct or
amplify the description of any property at any time
subject to this Indenture or the Collateral Documents
or to assure, convey and confirm unto the Trustee or
the Collateral Agent any property subject or required
to be subject to this Indenture; or
(f) to modify, eliminate or add to the provisions
of this Indenture or the Collateral Documents to such
extent as shall be necessary to qualify, requalify or
continue the qualification of this Indenture (including
any supplemental indenture) under the Trust Indenture
Act, or under any similar federal statute hereafter
enacted, and to add to this Indenture such other
provisions as may be expressly permitted by the Trust
Indenture Act, excluding, however, the provisions
referred to in Section 316(a)(2) of the Trust Indenture
Act as in effect at the date as of which this
instrument was executed or any corresponding provision
in any similar Federal statute hereafter enacted; or
(g) to permit or facilitate the issuance of Bonds
in uncertificated form; or
(h) to cure any ambiguity, to correct or
supplement any provision in the Indenture or the
Collateral Documents that may be defective or
inconsistent with any other provision herein, or to
make any other provisions with respect to matters or
questions arising under this Indenture or the
Collateral Documents, provided such action shall not
adversely affect the interests of the Holders of any
series of Bonds in any material respect; or
(i) to provide for the issuance of exchange bonds
or other exchange securities pursuant to any agreement
to register any series of Bonds under the Securities
Act, and to make such other changes to the Indenture or
the Collateral Documents as the Board of Directors of
the Company determines are necessary or appropriate in
connection therewith, provided such action shall not
adversely affect the interests of the Holders of Bonds
of any series in any material respect; or
(j) to add any additional Events of Default with
respect to all or any series of Bonds; or
(k) to add to, change or eliminate any of the
provisions of this Indenture in respect of one or more
series of Bonds, provided that any such addition,
change or elimination not otherwise permitted under
this Section 12.1 shall (i) become effective only when
there is no Bond Outstanding of any series created
prior to the execution of such supplemental indenture
which is entitled to the benefit of such provision or
(ii) not apply to any Bond then Outstanding; or
(l) to make any other change to the Collateral
Documents, provided that such change shall not
adversely affect the interests of the Holders of any
series of Bonds in any material respect.
Section 12.2 Supplemental Indentures and Collateral
Documents Consents with Consent of Holders. With the consent of
the Holders of not less than a majority in aggregate principal
amount of the Bonds of all series then Outstanding, considered as
one class, by Act of such Holders delivered to the Company, the
Partnership and the Trustee, the Company and the Partnership, in
each case, when authorized by a Board Resolution, may, and the
Trustee, subject to Sections 12.3 and 12.4, shall, enter into an
indenture or indentures supplemental hereto, an amendment of the
Intercreditor Agreement or a consent to an amendment of a
Collateral Documents for the purpose of adding any mutually
agreeable provisions to or changing in any manner or eliminating
any of the provisions of, this Indenture, the Intercreditor
Agreement or a Collateral Document; provided, however, that if
there shall be Bonds of more than one series Outstanding
hereunder and if a proposed supplemental indenture shall affect
the rights of the Holders of one or more, but less than all, of
such series, then the consent only of the Holders of not less
than a majority in aggregate principal amount of the Outstanding
Bonds of all series so affected, considered as one class, shall
be required; and provided, further, that no such supplemental
indenture, amendment to the Intercreditor Agreement or change in
a Collateral Document shall, without the consent of the Holder of
each Outstanding Bond affected thereby,
(a) change the Stated Maturity of any Bond (or, if
the principal thereof is payable in installments, the
Stated Maturity of any such installment), or of any
payment of interest or premium thereon, or the dates or
circumstances of payment of premium, if any, on any
Bond, or change the principal amount thereof or the
interest thereon or any premium payable upon the
redemption thereof, or change the place of payment
where, or the coin or currency in which, any Bond or
the premium, if any, or the interest thereon is
payable, or impair the right to institute suit for the
enforcement of any such payment of principal or
interest on or after the Stated Maturity thereof (or,
in the case of redemption, on or after the Redemption
Date) or such payment of premium, if any, on or after
the date such premium becomes due and payable in
respect of such Bonds; or
(b) except to the extent expressly permitted by
this Indenture or any of the Collateral Documents,
permit the creation of any Lien prior to or, except as
contemplated by Section 6.17, pari passu with the Lien
of the Collateral Documents with respect to any of the
Collateral, terminate the Lien of the Collateral
Documents on any Collateral or deprive any Holder of
the security afforded by the Lien of the Collateral
Documents; or
(c) reduce the percentage in principal amount of
the Outstanding Bonds, the consent of whose Holders is
required for any such supplemental indenture, or the
consent of whose Holders is required for any waiver (of
compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences)
provided for in this Indenture; or
(d) modify any of the provisions of Section 8.7 or
of this Section 12.2 or, except as provided in Section
12.1, of any Collateral Documents.
A supplemental indenture that changes or eliminates any
covenant or other provision of this Indenture which has expressly
been included solely for the benefit of one or more particular
series of Bonds, or which modifies the rights of the Holders of
Bonds of such series with respect to such covenant or other
provision, shall be deemed not to affect the right under this
Indenture of the Holders of Bonds of any other series.
Upon receipt by the Trustee of Board Resolutions of the
Company and the Partnership and such other documentation as the
Trustee may reasonably require and upon the filing with the
Trustee of evidence of the Act of said Holders, the Trustee shall
execute such supplemental indenture or other instrument, as the
case may be, subject to the provisions of Sections 12.3 and 12.4.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such Act
shall approve the substance thereof.
Section 12.3 Documents Affecting Immunity or Indemnity.
If in the opinion of the Company, the Partnership or the Trustee
any document required to be executed by it pursuant to the terms
of Section 12.2 affects any interest, right, duty, immunity or
indemnity in favor of the Company, the Partnership or the Trustee
under this Indenture, the Company, the Partnership or the
Trustee, as the case may be, may in its discretion decline to
execute such document.
Section 12.4 Execution of Supplemental Indentures. In
executing, or accepting the additional trusts created by any
Series Supplemental Indenture or other supplemental indenture
permitted by this Article 12 or the modifications thereby of the
trusts created by this Indenture or in executing an amendment of
the Intercreditor Agreement or consenting to any amendment of a
Collateral Document, the Trustee shall be entitled to receive,
and (subject to Section 9.1) shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such
supplemental indenture or consent is authorized or permitted by
this Indenture.
Section 12.5 Effect of Supplemental Indentures. Upon the
execution of any supplemental indenture under this Article 12,
this Indenture shall be modified in accordance therewith, and
such supplemental indenture shall form a part of this Indenture
for all purposes; and every Holder of Bonds theretofore or
thereafter authenticated and delivered hereunder shall be bound
thereby.
Section 12.6 Conformity with Trust Indenture Act. Every
supplemental indenture executed pursuant to this Article 12 shall
conform to the requirements of the Trust Indenture Act as then in
effect.
Section 12.7 Reference in Bonds to Supplemental
Indentures. Bonds authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article
12 may, and shall if required by the Company or the Partnership,
bear a notation in form approved by the Company, the Partnership
and the Trustee as to any matter provided for in such
supplemental indenture; and, in such case, suitable notation may
be made upon outstanding Bonds after proper presentation and
demand. If the Company or the Partnership shall so determine,
new Bonds so modified as to conform, in the opinion of the
Company, the Partnership and the Trustee, to any such
supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in
exchange for outstanding Bonds.
ARTICLE 13
SATISFACTION AND DISCHARGE
Section 13.1 Satisfaction and Discharge of Bonds. Except
as otherwise provided with respect to the Bonds of any series in
the Series Supplemental Indenture relating thereto, the Bonds of
such series shall, prior to the Stated Maturity thereof (or, if
principal is payable in installments, the Stated Maturity of the
final installment of principal thereof), be deemed to have been
paid for all purposes of this Indenture, and the entire Debt of
the Company in respect thereof shall be deemed to have been
satisfied and discharged, upon satisfaction of the following
conditions:
(a) the Company shall have irrevocably deposited
with the Trustee, in trust, money in an amount which
shall be sufficient to pay when due the principal of
and premium, if any, and interest due and to become due
on the Bonds of such series on and prior to the Stated
Maturity of principal thereof (or, if principal is
payable in installments, the Stated Maturity of the
final installment of principal thereof) or upon
redemption or prepayment;
(b) if any such deposit of money shall have been
made prior to the Stated Maturity (or, if principal is
payable in installments, the Stated Maturity of the
final installment of principal) or Redemption Date of
such Bonds, the Company shall have delivered to the
Trustee a Company Order stating that such money shall
be held by the Trustee, in trust, as provided in
Section 13.3;
(c) in the case of redemption or prepayment of
Bonds, the notice requisite to the validity of such
redemption or prepayment shall have been given, or
irrevocable authority shall have been given by the
Company to the Trustee to give such notice, under
arrangements satisfactory to the Trustee;
(d) there shall have been delivered to the Trustee
an Opinion of Counsel to the effect that such
satisfaction and discharge of the Debt of the Company
with respect to the Bonds of such series shall not be
deemed to be, or result in, a taxable event with
respect to the Holders of such series for purposes of
United States Federal income taxation and such Holders
will be subject to federal income tax on the same
amounts, in the same manner and at the same times as
would have been the case if such discharge had not
occurred;
(e) no Event of Default or event which with notice
or lapse of time or both would become an Event of
Default with respect to any series of Bonds shall have
occurred, at any time during the period ending on the
91st day after the date of such deposit (it being
understood that this condition shall not be deemed
satisfied until the expiration of such period);
(f) such discharge shall not result in a breach or
violation of, or constitute a default under, this
Indenture or any other material agreement or instrument
to which the Company or the Partnership is a party or
by which the Company or the Partnership is bound; and
(g) the Company delivers to the Trustee an
Officer's Certificate stating that all conditions
precedent to the discharge of the Bond of such series
as contemplated by this Article 13 have been satisfied.
Upon satisfaction of the aforesaid conditions with respect
to the Bonds of any series, the Trustee shall, upon receipt of a
Company Request, acknowledge in writing that the Bonds of such
series are deemed to have been paid for all purposes of this
Indenture and that the entire Debt of the Company in respect
thereof is deemed to have been satisfied and discharged.
In the event that Bonds which shall be deemed to have been
paid as provided in this Section 13.1 do not mature and are not
to be redeemed within the 60-day period commencing on the date of
the deposit with the Trustee of moneys, the Company shall, as
promptly as practicable, give a notice, in the same manner as a
notice of redemption with respect to such Bonds, to the Holders
of such Bonds to the effect that such Bonds are deemed to have
been paid and the circumstances thereof.
Notwithstanding the satisfaction and discharge of any Bonds
as aforesaid, the obligations of the Company and the Trustee in
respect of such Bonds under Sections 2.7. 2.8, 2.9 and 9.5 and
this Article 13 shall survive.
Section 13.2 Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further
effect (except as hereinafter expressly provided), and the
Trustee, at the expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of this
Indenture, when:
(a) either
(i) all Bonds theretofore authenticated
and delivered (other than (A) Bonds which
have been destroyed, lost or stolen and which
have been replaced or paid as provided in
Section 2.9 and (B) Bonds deemed to have been
paid in accordance with Section 13.1) have
been delivered to the Trustee for
cancellation; or
(ii) all Bonds not theretofore delivered
to the Trustee for cancellation shall be
deemed to have been paid in accordance with
Section 13.1;
(b) all other sums due and payable hereunder have
been paid; and
(c) the Company has delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel, each
stating that all conditions precedent herein provided
for relating to the satisfaction and discharge of this
Indenture have been complied with.
Upon satisfaction of the aforesaid conditions, the Trustee
shall, upon receipt of a Company Request, acknowledge in writing
the satisfaction and discharge of this Indenture and take all
other action reasonably requested by the Company and/or the
Partnership to evidence the termination of any and all Liens
created by or with respect to this Indenture.
Notwithstanding the satisfaction and discharge of this
Indenture as aforesaid, the obligations of the Company and the
Trustee under Sections 2.7, 2.8, 2.9 and 9.5 and this Article 13
shall survive.
Upon satisfaction and discharge of this Indenture as
provided in this Section 13.2, the Trustee shall assign, transfer
and turn over to or upon the order of the Company, any and all
money, securities and other property then held by the Trustee for
the benefit of the Holders, other than money deposited with the
Trustee pursuant to Section 13.1(a) and interest and other
amounts earned or received thereon.
Section 13.3 Application of Trust Money. The money
deposited with the Trustee pursuant to Section 13.1 shall not be
withdrawn or used for any purpose other than, and shall be held
in trust for, the payment of the principal of and premium, if
any, and interest on the Bonds or portions of principal amount
thereof in respect of which such deposit was made.
Section 13.4 Reinstatement. If the Trustee is unable to
apply any money in accordance with this Article 13 by reason of
any legal proceeding or by reason of any order or judgment of any
court or government authority enjoining, restraining or otherwise
prohibiting such application, the Company's obligations under the
Bonds of the discharged series shall be revived and reinstated as
though no deposit had occurred pursuant to this Article 13 until
such time as the Trustee is permitted to apply all such money in
accordance with this Article 13.
ARTICLE 14
DEFEASANCE
Section 14.1 Defeasance. (a) Subject to Sections 14.1(b)
and 14.2 hereof, the Partnership and the Company at any time way
terminate (i) all their respective obligations under this
Indenture, the Bonds, the Loans, the Partnership Guarantee and
the Collateral Documents (a "Legal Defeasance") or (ii) their
respective obligations under Sections 6.16 (Debt), 6.17 (Liens),
6.16 (Guaranties), 6.19 (Disposition of Assets), 6.20
(Amendments), 6.21 (Fundamental Changes), 6.22 (Distributions),
6.25 (Transactions with Affiliates) and 6.29 (Site Taxes) (a
"Covenant Defeasance"). With respect to any Covenant Defeasance,
except as specified in clause (ii) of the preceding sentence, the
reminder of this Indenture, the Bonds, the Loans and the
Partnership Guarantee shall be unaffected thereby. The
Partnership and the Company may exercise a Legal Defeasance
notwithstanding the prior exercise of a Covenant Defeasance. If
the Partnership and the Company exercise a Legal Defeasance,
payment of the Bonds may not be accelerated due to an Event of
Default upon satisfaction of the conditions set forth herein and
on demand of the Partnership and the Company, the Trustee (x)
shall acknowledge in writing the discharge of the obligations
terminated by the Partnership and the Company, (y) shall execute
documents and deliver such instruments in writing as shall be
required to reconvey, release, assign and deliver to the
Partnership and the Company any and all of the Trustee's interest
in the Collateral and the right, title and interest in and to any
and all rights conveyed, assigned or pledged to the Trustee or
otherwise subject to this Indenture and (z) shall turn over to
the Partnership or the Company or to any such person, body or
authority as may be entitled to receive the same all balances
then held by it hereunder (other than amounts held pursuant to
Article 13 or the Article 14).
(b) Notwithstanding Section 14.1(a) above, the obligations
of the Partnership and the Company pursuant to Sections 2.8
(Registration), 2.9 (Mutilated, Destroyed, Lost and Stolen
Bonds), Section 2.10 (Payment) and 9.5 (Compensation of Trustee)
shall survive until the Bonds have been paid in full.
Thereafter, the obligations of the Partnership and the Company
pursuant to Section 9.5 (Compensation of Trustee) shall survive.
Section 14.2 Conditions to Defeasance. Either the Legal
Defeasance or the Covenant Defeasance may be exercised only if:
(a) The Partnership and the Company shall have irrevocably
deposited in trust with the Trustee (i) cash in an amount which,
when added to any other moneys held by the Trustee and available
for such payment, would be sufficient to pay (A) the principal
of, and any premium and interest on, all Bonds issued hereunder
and under any Series Supplemental Indenture when due, whether at
Stated Maturity or upon redemption, acceleration, or otherwise,
and (B) all other sums payable hereunder and under any Series
Supplemental Indenture, (ii) non-callable direct obligations of,
or obligations guaranteed by, the United States, maturing on or
before the date or dates when the payments specified in clause
(i) above shall become due, the principal amount of which and the
interest thereon, when due, is or will be, in the aggregate,
sufficient to make all such payments, (iii) securities evidencing
ownership interest in obligations or in specified portions
thereof (which shall consist of specified portions of the
principal of or interest on such obligations) of the character
described in clause (ii), sufficient to make all the payments
specified in clause (i) above, or (iv) any combination of such
cash and such obligations (the "Obligations") specified in (ii)
or (iii) above, the aggregate amount of which and interest
thereon, when due, are or will be sufficient to make all the
payments specified in clause (i) above, and such deposit shall
not cause the Trustee to have a conflicting interest as defined
in and for the purposes of the Trust Indenture Act;
(b) The Partnership and the Company shall have delivered to
the Trustee a certificate from a nationally recognized firm of
independent accountants expressing their opinion that the
deposited cash and/or the Obligations without any reinvestment
thereof will provide cash at such times and in such amounts as
will be sufficient to pay principal of, and any premium and
interest on, all Outstanding Bonds when due, whether at Stated
Maturity or upon redemption, acceleration, or otherwise;
(c) The Partnership and the Company shall have delivered to
the Trustee an Opinion of Counsel to the effect that (i) all
preference periods applicable to the defeasance trust have
expired under any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights
generally, (ii) the trust resulting from the deposit does not
constitute, or is qualified as, a regulated investment company
under the Investment Company Act of 1940, as amended, and (iii)
the Holders shall have a perfected security interest under
applicable law in the Obligations so deposited;
(d) No Default or Event of Default shall have occurred and
be continuing on the date of such deposit or insofar as Events of
Default from bankruptcy or insolvency events are concerned, at
any time in the period ending on the 91st day after the date of
deposit;
(e) Such Legal Defeasance or Covenant Defeasance, as the
case may be, shall not result in a breach or violation of or
constitute a Default under this Indenture or any other material
agreement or instrument to which the Partnership or the Company
is a party or by which the Partnership or the Company is bound;
(f) In the case of a Legal Defeasance, the Partnership and
the Company shall have delivered to the Trustee an Opinion of
Counsel confirming that (i) the Partnership or the Company has
received from, or there has been published by, the Internal
Revenue Service a ruling or (ii) since the date of this Indenture
there has been a change in the applicable federal income tax law,
in either case to the effect that, and based thereon such Opinion
of Counsel shall confirm that the Holders will not recognize
income, gain or loss for federal income tax purposes as a result
of such Legal Defeasance and will be subject to federal income
tax on the same amount, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not
occurred;
(g) In the case of a Covenant Defeasance, the Partnership
and the Company shall have delivered to the Trustee an Opinion of
Counsel reasonably acceptable to the Trustee confirming that the
Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and
will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred; and
(h) The Partnership and the Company shall have delivered to
the Trustee an Officer's Certificate and Opinion of Counsel, each
stating that all conditions precedent provided for relating to
either the Legal Defeasance or the Covenant Defeasance, as the
case may be, have been complied with.
Neither the obligations nor moneys deposited with the
Trustee pursuant to this Section shall be substituted, withdrawn,
reinvested or used for any purpose other than, and shall be
segregated and held in trust for the payment of the principal of,
and premium, if any and interest on, the Bonds.
Section 14.3 Reinstatement. If the Trustee is unable to
apply any money or Obligations in accordance with this Article 14
by reason of any legal proceeding or by reason of any order or
judgment of any court or government authority enjoining,
restraining or otherwise prohibiting such application, the
Company's obligations under this Indenture and the Bonds of the
defeased series shall be revived and reinstated as though no
deposit had occurred pursuant to this Article 14 until such time
as the Trustee is permitted to apply all such money or
Obligations in accordance with this Article 14.
ARTICLE 15
EXCULPATION; HOLDERS LISTS AND REPORTS
Section 15.1 Exculpation. Notwithstanding anything to the
contrary contained in this Indenture or the Bonds, the liability
and obligation of the Partnership or the Company to perform and
observe and make good the obligations contained in this Indenture
and the Bonds and the Collateral Documents and to pay the Debt
issued hereunder in accordance with the provisions of this
Indenture and the Bonds shall not be enforced by any action or
proceeding wherein damages or any money judgment or any
deficiency judgment or any judgment establishing any personal
obligation or liability shall be sought, collected or otherwise
obtained against any Partner, any past, present or future
partner, officer, director or shareholder or related Person of
any Partner or the Company (other than the Partnership and the
Company). Each Holder, and the Trustee, for itself and its
successors and assigns, irrevocably waives any and all right to
sue for, seek or demand any such damages, money, judgment,
deficiency judgment or personal judgment against any Partner or
any past, present or future partner, officer, director or
shareholder or related Person of any Partner or the Company
(other than the Partnership and the Company) under or by reason
of or in connection with this Indenture and the Bonds and agrees
to look solely to the Company and the Partnership and the
security and Collateral held under or in connection with the
Collateral Documents for the enforcement of such liability and
obligation of the Company or the Partnership.
Nothing contained in this paragraph shall be construed (i)
as preventing the Trustee from naming the Company or the
Partnership, any Partner or any past, present or future partner,
officer, director or shareholder or related Person of any Partner
or the Company in any action or proceeding brought by the Trustee
to enforce and to realize upon the security and Collateral
provided under or in connection with the Collateral Documents so
long as no judgment, order, decree or other relief in the nature
of a personal or deficiency judgment or otherwise establishing
any personal obligation shall be asked for, taken, entered or
enforced against any Partner or any past, present or future
partner, officer, director or shareholder or related Person of
any Partner or the Company (other than the Partnership and the
Company), in any such action or proceeding, (ii) as modifying,
qualifying or affecting in any manner whatsoever the lien and
security interests created by this Indenture and the Collateral
Documents and the other Project Documents or the enforcement
thereof by the Trustee, (iii) as modifying, qualifying or
affecting in any manner whatsoever the personal recourse
undertakings, obligations and liabilities of any person, party or
entity under any guaranty of payment, other guaranty or
indemnification agreement now or hereafter executed and delivered
to the Trustee in connection with the Collateral Documents or
(iv) as modifying, qualifying or affecting in any manner
whatsoever the personal recourse liability of any Partner, any
past, present or future partner. officer, director or shareholder
or related Person of any Partner or the Company or any other
person, party or entity for fraud or willful misrepresentation or
any wrongful misappropriation or diversion of any portion of the
Collateral.
Section 15.2 Company to Furnish Trustee Names and
Addresses of Holders. The Company will furnish or cause to be
furnished to the Trustee:
(a) semi-annually, not more than 15 days after the Regular
Record Date, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders of Bonds as of
such Regular Record Date, and
(b) at such other times as the Trustee may reasonably
request in writing, within 30 days after the receipt by the
Company of any such request, a list of similar form and content
as of a date not more than 15 days prior to the time such list is
furnished;
excluding from any such list names and addresses received by the
Trustee in its capacity as Security Registrar.
Section 15.3 Preservation of Information.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders
contained in the most recent list furnished to the Trustee as
provided in Section 15.2 and the names and addresses of Holders
received by the Trustee in its capacity as Security Registrar.
The Trustee may destroy any list furnished to it as provided in
Section 15.2 upon receipt of a new list so furnished.
(b) Every Holder of Bonds, by receiving and holding the
same, agrees with the Company and the Trustee that neither the
Company nor the Trustee nor any agent of either of them shall be
held accountable by reason of any disclosure of information as to
names and addresses of Holders made pursuant to the Trust
Indenture Act.
IN WITNESS WHEREOF, the parties have caused this Indenture
to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
PANDA-ROSEMARY FUNDING CORPORATION
By:
Name:
Title:
PANDA-ROSEMARY, L.P.
By: PANDA-ROSEMARY CORPORATION, as its
general partner
By:
Name:
Title:
FLEET NATIONAL BANK,
as Trustee
By:
Name:
Title:
Schedule 1.1 to
Trust Indenture
PRINCIPAL AMORTIZATION OF THE
INITIAL BONDS
Principal of the Initial Bonds is payable in semiannual
installments as follows:
Percentage of Percentage of
Original Principal Original Principal
Payment Date Amount Payable Payment Date Amount Payable
November 15, 1.2356% August 15, 0.9632%
1996 2006
February 15, 1.2356% November 15, 0.9632%
1997 2006
May 15, 1997 1.2344% February 15, 0.9632%
2007
August 15, 1.2344% May 15, 2007 1.0081%
1997
November 15, 1.2344% August 15, 1.0081%
1997 2007
February 15, 1.2344% November 15, 1.0081%
1998 2007
May 15, 1998 1.3291% February 15, 1.0081%
2008
August 15, 1.3291% May 15, 2008 1.0558%
1998
November 15, 1.3291% August 15, 1.0558%
1998 2008
February 15, 1.3291% November 15, 1.0558%
1999 2008
May 15, 1999 1.1429% February 15, 1.0558%
2009
August 15, 1.1429% May 15, 2009 1.1039%
1999
November 15, 1.1429% August 15, 1.1039%
1999 2009
February 15, 1.1429% November 15, 1.1039%
2000 2009
May 15, 2000 1.2282% February 15, 1.1039%
2010
August 15, 1.2282% May 15, 2010 1.1541%
2000
November 15, 1.2282% August 15, 1.1541%
2000 2010
February 15, 1.2282% November 15, 1.1541%
2001 2010
May 15, 2001 1.3196% February 15, 1.1541%
2011
August 15, 1.3196% May 15, 2011 1.2168%
2001
November 15, 1.3196% August 15, 1.2168%
2001 2011
February 15, 1.3196% November 15, 1.2168%
2002 2011
May 15, 2002 1.4124% February 15, 1.2168%
2012
August 15, 1.4124% May 15, 2012 1.2772%
2002
November 15, 1.4124% August 15, 1.2772%
2002 2012
February 15, 1.4124% November 15, 1.2772%
2003 2012
May 15, 2003 1.5119% February 15, 1.2772%
2013
August 15, 1.5119% May 15, 2013 1.3359%
2003
November 15, 1.5119% August 15, 1.3359%
2003 2013
February 15, 1.5119% November 15, 1.3359%
2004 2013
May 15, 2004 1.6192% February 15, 1.3359%
2014
August 15, 1.6192% May 15, 2014 1.3888%
2004
November 15, 1.6192% August 15, 1.3888%
2004 2014
February 15, 1.6192% November 15, 1.3888%
2005 2014
May 15, 2005 1.7273% February 15, 1.3888%
2015
August 15, 1.7273% May 15, 2015 1.3534%
2005
November 15, 1.7273% August 15, 1.3534%
2005 2015
February 15, 1.7273% November 15, 1.3534%
2006 2015
May 15, 2006 0.9632% February 15, 1.3534%
2016
Upon any redemption of the Initial Bonds, the scheduled
principal amortization of the Bonds will be reduced
proportionately.
Schedule 6.16 to
Trust Indenture
SUBORDINATION PROVISIONS
All capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed thereto in the Collateral
Agency and Intercreditor Agreement, dated as of July 31, 1996 (as
amended, supplemented or modified from time to time, the
"Intercreditor Agreement") among Fleet National Bank, as trustee
(the "Trustee") under a certain Trust Indenture, dated as of July
31, 1996 (as amended, supplemented or modified from time to time,
the "Indenture"), Panda-Rosemary, L.P., Panda-Rosemary Funding
Corporation, Beyerische Vereinsbank AG, Fleet National Bank, as
depositary agent under a certain Deposit and Disbursement
Agreement, dated as of July 31, 1996, and Fleet National Bank, as
collateral agent.
[NAME OF SUBORDINATED LENDER] (together with its successors
and assigns, the "Subordinated Lender") hereby agrees for the
benefit of the Secured Parties that all [DESCRIBE SUBORDINATED
LIABILITIES] (the "Subordinated Obligations") are and shall be
junior and subordinate, to the extent and in the manner set forth
hereinafter, in right of payment to the prior indefeasible
payment of satisfaction in full of all Financing Liabilities. In
furtherance thereof, each of the Secured Parties, the Collateral
Agent and the Subordinated Lender further agrees that:
(a)(i) The Subordinated Lender shall not ask, demand,
sue for, take or receive from any Borrower, directly or
indirectly, in cash or other property or by set-off or
in any other manner (including, without limitation,
from or by way of the Collateral or any guaranty of
payment of performance), payment of all or any of the
Subordinated Obligations unless and until the Financing
Commitments shall have been terminated and the
Financial Liabilities shall have been paid or otherwise
satisfied in full. For the purposes of these
provisions, the Financing Liabilities shall not be
deemed to have been paid or satisfied in full until
those Financing Liabilities shall have been
indefeasibly so paid to the Secured Parties or so
otherwise satisfied (after the passage of any relevant
preference periods).
(ii) Upon any distribution of all or any of the assets
of any Borrower to creditors of such Borrower upon the
dissolution, winding up, liquidation, arrangement,
reorganization or composition of such Borrower, whether
in any bankruptcy, insolvency, arrangement,
reorganization, receivership or similar proceedings or
upon an assignment for the benefit of creditors or any
other marshaling of the assets and liabilities of such
Borrower or otherwise, any payment or distribution of
any kind (whether in cash, property or securities)
which otherwise would be payable or deliverable upon or
with respect to the Subordinated Obligations shall be
paid or delivered directly to the Collateral Agent for
application (in the case of cash) to, or as Collateral
(in the case of non-cash property or securities) for,
the payment or prepayment of the Financing Liabilities
until the Financing Liabilities have been paid or
otherwise satisfied in full.
(iii) Each of the Secured Parties may demand
specific performance of these terms of subordination,
whether or not the Borrowers shall have complied with
any of the provisions hereof applicable to them at any
time when the Subordinated Lender shall have failed to
comply with any of such provisions applicable to it.
The Subordinated Lender hereby irrevocably waives any
defense based on the adequacy of a remedy at law, which
might be asserted as a bar to such remedy of specific
performance.
(iv) So long as there are any Financing Commitments or
any of the Financing Liabilities shall remain unpaid or
otherwise unsatisfied, the Subordinated Lender shall
not commence or join with any creditor other than the
Collateral Agent in commencing any proceeding referred
to in subsection (ii) above for the payment of any
amounts which otherwise would be payable or deliverable
upon or with respect to the Subordinated Obligations.
(v) Subject to the termination of the Financing
Commitments and the indefeasible payment or
satisfaction in full of all of the Financing
Liabilities, the Subordinated Lender shall be
subrogated to the rights of the Secured Parties to
receive payments or distributions of assets of the
Borrowers made on the Financing Liabilities until the
Subordinated Obligations have been satisfied in full.
The foregoing provisions regarding subordination are for the
benefit of the Secured Parties and shall be enforceable by them
directly against the Subordinated Lender, and no Secured Party
shall be prejudiced in its right to enforce subordination of any
of the Subordinated Obligations by any act or failure to act by
either Borrower or anyone in custody of its assets or property.
Notwithstanding anything to the contrary contained in the
foregoing provisions, the Subordinated Lender may receive
Distributions in respect of the Subordinated Obligations from the
Borrowers to the extent that such Distributions are permitted
pursuant to Section 6.22 of the Indenture and Section 3.9 of the
Depositary Agreement.
(b) So long as any Secured Obligations remain
outstanding, the following provisions shall apply:
(i) If a Trigger Event shall have occurred and be
continuing, the Collateral Agent, on behalf of the
Secured Parties, shall be permitted and is hereby
authorized to take any and all actions to exercise any
and all rights, remedies and options which it may have
under the Security Documents or the Intercreditor
Agreement.
(ii) Until the Debt Termination Date, the
Subordinated Lender shall not, without the prior
written consent of the Secured Parties, (a) exercise
any rights or enforce any remedies or assert any claim
with respect to the Collateral, (b) seek to foreclose
any Lien or sell any collateral, or (c) take any
action, directly or indirectly, or institute any
proceedings, directly or indirectly, with respect to
any of the foregoing.
(iii) The Subordinated Lender hereby waives: (i)
notice of the existence, creation or non-payment of all
or any of the Financing Liabilities and (ii) to the
fullest extent permitted by law, any right it may have
to require the Collateral Agent to marshall assets.
(c) Subject to the terms of the Intercreditor
Agreement, the Secured Parties may, at any time and
from time to time, without any consent of or notice to
the Subordinated Lender and without impairing or
releasing the obligations of the Subordinated Lender:
(i) amend in any manner any agreement under which any
of the Financing Liabilities is outstanding in
accordance with the terms thereof; (ii) sell, exchange,
release, not perfect and otherwise deal with any
Collateral or other property at any time pledged,
assigned or mortgaged to secure the Financing
Liabilities in accordance with the Security Documents;
(iii) release anyone liable in any manner under or in
respect of the Financing Liabilities; (iv) exercise or
refrain from exercising any rights against the
Borrowers and others; and (v) apply any sums from time
to time received to payment or satisfaction of the
Financing Liabilities.
Schedule 6.20 to
Trust Indenture
CONSENT AND OPINION OF COUNSEL
Part A. Consent
1. The Additional Contract is in full force and effect
and there are no amendments, modifications or supplemental
thereto not covered by the Consent or any substitute therefor.
2. The consenting party has not assigned, transferred,
pledged or hypothecated the Additional Contract or any interest
therein.
3. The consenting party has no knowledge of any
default by the Partnership under the Additional Contract.
4. None of the Partnership's rights under the
Additional Contract have been waived.
5. The assignment of the Additional Contract to the
Collateral Agent as security and the consent to such assignment
will not cause or constitute a default under the additional
contract or an event or condition which would lead to a default
under the Additional Contract.
6. The consenting party agrees not to terminate or
suspend the performance of its obligations under the Additional
Contract unless it gives the Collateral Agent notice of the
default by the Partnership and the opportunity to cure the
default.
7. Additional provisions mutually acceptable to the
Partnership, the Company, the Collateral Agent and the consenting
party, including, if acceptable to the consenting party, a
provision to the effect that if the Additional Contract is
terminated by any bankruptcy or insolvency proceeding of the
Partnership and the Collateral Agent or its proposed assignee
certifies its intention to assume the future liabilities and
obligations of the Partnership, the consenting party agrees to
enter into a new Additional Contract with the Collateral Agent or
its assignee for the remaining term of, and on the same terms and
conditions as, the terminated Additional Contract.
Part B. Opinion of Counsel
1. The consenting party's power, authority and legal
right to execute, deliver and perform such Additional Contract.
2. The execution and delivery of the Additional
Contract by the consenting party and the performance of its
obligations thereunder have been duly authorized by all necessary
corporate or partnership action and do not (1) require any
consent or approval of the any shareholder or partner, except
those consents and approvals which have been already obtained,
(2) violate any provision of the applicable partnership agreement
or charter, (3) result in a breach or constitute a default under
any indenture or loans or credit agreement or any other
agreement, lease or instrument of the consenting party known to
counsel, or (4) result in or require the creation or imposition
of any mortgage, deed of trust, pledge, lien, security interest,
charge or encumbrance of any nature upon any of the properties
now owned or hereafter acquired by the consenting party.
3. The Additional Contract has been duly executed and
delivered, is in full force and effect and constitutes the legal,
valid and binding obligation of the consenting party, enforceable
in accordance with its terms, except for standard bankruptcy and
equitable principles exclusions.
4. All Governmental Approvals required to be obtained
by the consenting party with respect to the execution and
delivery of the Additional Contract and the performance of the
consenting party's obligations under the Additional Contract have
been obtained.
EXHIBIT 10.10
FIRST SUPPLEMENTAL INDENTURE
dated as of July 31, 1996
to
TRUST INDENTURE
dated as of July 31, 1996
among
PANDA-ROSEMARY FUNDING CORPORATION,
PANDA-ROSEMARY, L.P.,
and
FLEET NATIONAL BANK, AS TRUSTEE
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS
ARTICLE II THE TERMS OF THE INITIAL BONDS
Section 2.1 Initial Bonds 2
Section 2.2 Interest and Principal 4
Section 2.3 Redemption 5
Section 2.4 Restrictions on Transfer and Exchange of
Initial Bonds 5
ARTICLE III MISCELLANEOUS
Section 3.1 Execution of Supplemental Indenture 6
Section 3.2 Concerning the Trustee 6
Section 3.3 Counterparts 7
Section 3.4 Governing Law 7
Schedule I Form of Initial Bonds in Global Form
Schedule II Form of Compliance Certificate for Restricted
Securities
Schedule III Form of Certificate to be Delivered in Connection
with Transfers to Persons Other Than Qualified
Institutional Buyers
FIRST SUPPLEMENTAL INDENTURE, dated as of July 31, 1996, to
the Trust Indenture, dated as of July 31, 1996 (the "Original
Indenture"), among PANDA-ROSEMARY FUNDING CORPORATION, a Delaware
corporation (the "Company"), its executive office and mailing
address being at 4100 Spring Valley Road, Suite 1001, Dallas,
Texas 75244, PANDA-ROSEMARY, L.P., a Delaware limited
partnership (the "Partnership"), its executive office and mailing
address being at 4100 Spring Valley Road, Suite 1002, Dallas,
Texas 75244, and FLEET NATIONAL BANK, a national banking
association established under the laws of the United States (the
"Trustee"), its corporate trust office and mailing address being
at 777 Main Street, Hartford, Connecticut 06115.
WHEREAS, the Company, the Partnership and the Trustee have
heretofore executed and delivered the Original Indenture to
provide for the issuance from time to time of the Company's Bonds
(as defined in the Original Indenture) to be issued in one or
more series;
WHEREAS, Sections 2.1, 2.3 and 12.1 of the Original
Indenture provide, among other things, that the Company, the
Partnership and the Trustee may enter into indentures
supplemental to the Original Indenture for, among other things,
the purpose of establishing the designation, form, terms and
provisions of bonds of any series as permitted by Sections 2.1,
2.3 and 12.1 of the Original Indenture;
WHEREAS, the Company (i) desires the issuance of a series of
Bonds to be designated as hereinafter provided and (ii) has
requested the Trustee and the Partnership to enter into this
First Supplemental Indenture for the purpose of establishing the
designation, form, terms and provisions of the Bonds of such
series;
WHEREAS, all action on the part of the Company necessary to
authorize the issuance of such Bonds under the Original Indenture
and this First Supplemental Indenture (the Original Indenture, as
supplemented by this First Supplemental Indenture, being
hereinafter called the "Indenture") has been duly taken; and
WHEREAS, all acts and things necessary to make such Bonds,
when executed by the Company and authenticated and delivered by
the Trustee as provided in the Original Indenture, the legal,
valid and binding obligations of the Company, and to constitute
these presents as a valid and binding supplemental indenture
according to its terms, have been done and performed, and the
execution of this First Supplemental Indenture and the creation
and issuance under the Indenture of such Bonds have in all
respects been duly authorized, and the Company, in the exercise
of the legal right and power vested in it, has executed this
First Supplemental Indenture and proposes to create, execute,
issue and deliver such Bonds.
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE
WITNESSETH:
That, in order to establish the designation, form, terms and
provisions of, and to authorize the authentication and delivery
of, such Bonds, and in consideration of the acceptance of such
Bonds by the Holders thereof and of other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
When used in the First Supplemental Indenture, the term
"Initial Bonds" shall mean the 8-5/8% First Mortgage Bonds due
2016 being issued under the Indenture and sold to the Purchaser
(as defined in the Purchase Agreement referred to below) pursuant
to the Purchase Agreement, dated July 26, 1996, among the
Company, the Partnership and the Purchaser named therein.
Capitalized terms not otherwise defined herein shall have
the meanings set forth in the Original Indenture. Such
definitions shall be equally applicable to the singular and
plural forms of the terms defined.
ARTICLE II
THE TERMS OF THE INITIAL BONDS
Section II.1 Initial Bonds.
(a) There is hereby created an initial series of Bonds
designated 8-5/8% First Mortgage Bonds due 2016, in the aggregate
principal amount of $111,400,000. The Initial Bonds may
forthwith be executed by the Company and delivered to the Trustee
for authentication and delivery by the Trustee in accordance with
the provisions of Section 2.4 of the Original Indenture.
(b) The Initial Bonds shall be issued in the form of one or
more Global Bonds substantially in the form of Schedule I hereto
(which may have a certificate substantially in the form of
Schedule II attached or typed or printed thereon), except that
Initial Bonds (i) originally purchased by Institutional
Accredited Investors (as such term is defined in the Purchase
Agreement) or transferred to Institutional Accredited Investors
or certain foreign purchasers who are not Qualified Institutional
Buyers (as such term is defined in the Purchase Agreement), or
(ii) held by Qualified Institutional Buyers who elect to take
physical delivery of their Bonds, will be issued in registered
certificated form. Initial Bonds originally issued in registered
certificated form or Initial Bonds initially issued as a Global
Bond that is exchanged for individual registered certificated
Initial Bonds pursuant to Section 2.14 of the Indenture shall be
substantially in the form of Schedule I except that:
(i) the legend set forth on the Initial Bond
immediately below the title of the Initial Bonds shall read
as follows:
THIS BOND HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS, AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR
TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS,
EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (I) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(a)(1), (2), (3) OR (7) UNDER REGULATION D OF
THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS BOND IN AN OFFSHORE TRANSACTION,
(II) AGREES THAT IT WILL NOT WITHIN THREE YEARS AFTER
THE ORIGINAL ISSUANCE OF THIS BOND RESELL OR OTHERWISE
TRANSFER THIS BOND EXCEPT (A) TO PANDA-ROSEMARY FUNDING
CORPORATION OR ANY AFFILIATE THEREOF, (B) INSIDE THE
UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT,
(C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES TO FLEET NATIONAL BANK, AS TRUSTEE, OR A
SUCCESSOR TRUSTEE, A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS BOND (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE),
(D) OUTSIDE THE UNITED STATES TO FOREIGN PURCHASERS IN
OFFSHORE TRANSACTIONS MEETING THE REQUIREMENTS OF
RULE 904 OF REGULATION S UNDER THE SECURITIES ACT,
(E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
(III) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THIS BOND IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS BOND WITHIN THREE YEARS AFTER THE
ORIGINAL ISSUANCE OF THE BOND, THE HOLDER MUST CHECK
THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THE
CERTIFICATE TO FLEET NATIONAL BANK, AS SECURITY
REGISTRAR. IF THE PROPOSED TRANSFEREE IS OTHER THAN A
QUALIFIED INSTITUTIONAL BUYER, THE HOLDER MUST, PRIOR
TO SUCH TRANSFER, FURNISH TO PANDA-ROSEMARY FUNDING
CORPORATION AND FLEET NATIONAL BANK, SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
THEY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND MAY BE
REMOVED AFTER THE EXPIRATION OF THREE YEARS FROM THE
ORIGINAL ISSUANCE OF THIS BOND. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
(ii) the fourth sentence of the first paragraph of the
Initial Bond (after the legend) shall be deleted; and
(iii) the seventeenth paragraph of the Initial Bond
(after the legend) which is in bold face on Schedule I shall
be deleted.
(c) If a Person requests an exchange of an Initial Bond for
a beneficial interest in a Global Bond, such Initial Bond shall
be accompanied by the following additional information and
documents:
(i) a certification, substantially in the form of
Schedule II hereto, that such Initial Bond is being
transferred to a Qualified Institutional Buyer; and
(ii) written instructions directing the Security
Registrar to make, or to direct the Registered Depository to
make an endorsement on the Global Bond to reflect, an
increase in the aggregate amount of the Initial Bonds
represented by the Global Bond;
whereupon the Security Registrar shall cancel such Initial Bond
issued in certificated form and cause, or direct the Registered
Depository to cause, in accordance with the standing instructions
and procedures existing between the Registered Depositary and the
Security Registrar, the aggregate principal amount of Initial
Bonds represented by the Global Bond to be increased accordingly.
If no Global Bond is then outstanding, the Company shall issue
and the Trustee shall upon Company Request authenticate a new
Global Bond in the appropriate amount.
(d) Any Person having a beneficial interest in a Global
Bond may exchange such beneficial interest for an Initial Bond in
certificated form only as provided in Section 2.14 of the
Indenture.
Section II.2 Interest and Principal.
Each Initial Bond shall bear interest on the unpaid
principal amount thereof from time to time outstanding from the
date thereof until such amount is paid in full at the rate of
interest set forth in the form of the Initial Bonds. The
principal amount of each Initial Bond shall be due and payable in
installments as set forth in the form of Initial Bond attached
hereto.
The Place of Payment for the Initial Bonds shall be the
Corporate Trust Office. Payment of principal of and interest on
each Initial Bond shall be made, if the Company so elects, by
check mailed to the Holder at his registered address or, if
arrangements satisfactory to the Company, the Trustee and the
registered Holder are made, by wire transfer to an account
designated by such Holder, except that the final payment of
principal shall be made on the due date therefor to the account
of the Holder as such account shall appear in the Security
Register, which shall be payable upon presentation and surrender
of the Initial Bond at the Corporate Trust Office.
Section II.3 Redemption.
The Initial Bonds are subject to an optional redemption and
mandatory redemption on the terms set forth in Section 7.3 of the
Original Indenture.
Section II.4 Restrictions on Transfer and Exchange of
Initial Bonds.
All Initial Bonds issued hereunder and all Initial Bonds
issued upon registration of transfer of, or in exchange for, such
Initial Bonds, shall be restricted securities ("Restricted
Securities") and shall be subject to the restrictions on transfer
provided in the legend set forth on the Initial Bonds, unless
such restrictions on transfer shall be waived by the written
consent of the Company. In addition, in the event that a
Restricted Security is sold outside the United States in
compliance with Rule 904 under the Securities Act, any Initial
Bond or Initial Bonds issued upon registration of transfer of
such Restricted Security shall continue to bear the legend set
forth on the face of the Restricted Security, until such time as
the transfer restrictions applicable to such Restricted Security
shall cease and terminate as described below. The Holder of each
Restricted Security, by such Holder's acceptance thereof, agrees
to be bound by such restrictions on transfer. Subject to
Section 2.1 hereof, all Restricted Securities shall bear the
legend set forth on the Initial Bonds.
Whenever any Restricted Security is presented or surrendered
for registration of transfer or exchange for an Initial Bond
registered in a name other than that of the Holder, such
Restricted Security must be accompanied by (i) a certificate in
substantially the form set forth in Schedule II hereto, dated the
date of such surrender and signed by such Holder, as to
compliance with such restrictions on transfer, upon which the
Company, the Security Registrar and the Trustee may rely as to
its accuracy with respect to such Holder and (ii) if the proposed
transferee is a person other than a Qualified Institutional
Buyer, such certifications (which may be in the form of Schedule
III), legal opinions or other information as the Company and the
Security Registrar may reasonably require to confirm that such
transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act. The Security Registrar shall not be required to
accept for registration of transfer or exchange any Restricted
Security not so accompanied by a properly completed certificate
or certificates and, if requested by the Company in the case of
transfer to persons who are not Qualified Institutional Buyers,
an opinion of counsel.
Notwithstanding the foregoing, a properly completed
certificate or opinion of counsel shall not be required in
connection with any transfer of any Restricted Security through
the facilities of the Registered Depositary or any other United
States securities clearance and settlement organization, provided
that such transfer does not require a change in the name (other
than to another nominee of the Registered Depositary or such
other securities clearance and settlement organization) in which
such Restricted Security is then registered.
The restrictions imposed by this Section upon the
transferability of any particular Restricted Security shall cease
and terminate upon the expiration of three years from the Closing
Date and when such Restricted Security has been sold pursuant to
an effective registration statement under the Securities Act or
transferred pursuant to Rule 144 under the Securities Act (or any
successor provision thereto), unless the Holder thereof is an
affiliate of the Company within the meaning of Rule 144 (or such
successor provisions). Any Restricted Security as to which such
restrictions on transfer shall have expired in accordance with
their terms or shall have terminated may, upon surrender of such
Restricted Security for exchange to the Security Registrar or
Trustee in accordance with the provisions of this Section
(accompanied, in the event that such restrictions on transfer
have terminated by reason of a transfer pursuant to Rule 144 (or
any successor provisions), by an opinion of counsel having
substantial experience in practice under the Securities Act, and
otherwise reasonably acceptable to the Company, addressed to the
Company, the Security Registrar and the Trustee and in form
acceptable to the Company, to the effect that the transfer of
such Restricted Security has been made in compliance with Rule
144 (or such successor provision)), be exchanged for a new
Initial Bond, of like tenor and aggregate principal amount, which
shall not bear the restrictive legend required by the Initial
Bonds. The Company shall promptly inform the Security Registrar
and the Trustee in writing of the effective date of any
registration statements registering the Initial Bonds under the
Securities Act. The Security Registrar and the Trustee shall not
be liable for any action taken or omitted to be taken by it in
good faith in accordance with the aforementioned opinion of
counsel or registration statement.
As used in the preceding two paragraphs of this Section, the
term "transfer" encompasses any sale, transfer or other
disposition of any Initial Bonds referred to herein except for
transfers from any Holder to an Affiliate of such Holder;
provided, that such transferring Holder shall deliver a letter to
the Trustee stating that the transferee is an Affiliate of such
Holder. The Trustee shall be entitled to rely on and be fully
protected in its reliance on such letter.
ARTICLE III
MISCELLANEOUS
Section III.1 Execution of Supplemental Indenture.
This First Supplemental Indenture is executed and shall be
construed as an indenture supplemental to the Original Indenture
and, as provided in the Original Indenture, this First
Supplemental Indenture forms a part thereof.
Section III.2 Concerning the Trustee.
The Trustee accepts the amendment of the Indenture effected
by this First Supplemental Indenture and agrees to execute the
trust created by the Indenture as hereby amended, but only upon
the terms and conditions set forth in the Indenture, including
the terms and provisions defining and limiting the liabilities
and responsibilities of the Trustee, which terms and provisions
shall in like manner define and limit its liabilities and
responsibilities in the performance of the trust created by the
Indenture as hereby amended. Without limiting the generality of
the foregoing, the Trustee has no responsibility for the
correctness of the recitals of fact herein contained which shall
be taken as the statements of the Company and the Partnership,
and makes no representations as to the validity or sufficiency of
this First Supplemental Indenture and shall incur no liability or
responsibility in respect of the validity thereof.
Section III.3 Counterparts.
This First Supplemental Indenture may be executed in any
number of counterparts, each of which when so executed shall be
deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.
Section III.4 Governing Law.
THIS FIRST SUPPLEMENTAL INDENTURE AND EACH INITIAL BOND
ISSUED HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN THE STATE OF
NEW YORK.
IN WITNESS WHEREOF, the parties have caused this First
Supplemental Indenture to be duly executed by their respective
officers thereunto duly authorized as of the day and year first
above written.
PANDA-ROSEMARY FUNDING CORPORATION
By:
Name:
Title:
PANDA-ROSEMARY, L.P.
By: Panda-Rosemary Corporation, as
its General Partner
By:
Name:
Title:
FLEET NATIONAL BANK, as Trustee
By:
Name:
Title:
SCHEDULE I
PANDA-ROSEMARY FUNDING CORPORATION
8-5/8% FIRST MORTGAGE
BOND DUE 2016
THIS BOND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (I) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER
REGULATION D OF THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
BOND IN AN OFFSHORE TRANSACTION, (II) AGREES THAT IT WILL NOT
WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THIS BOND
RESELL OR OTHERWISE TRANSFER THIS BOND EXCEPT (A) TO PANDA-
ROSEMARY FUNDING CORPORATION OR ANY AFFILIATE THEREOF, (B) INSIDE
THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE
THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO FLEET NATIONAL BANK, AS
TRUSTEE, OR A SUCCESSOR TRUSTEE, A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS BOND (THE FORM OF WHICH LETTER
CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES
TO FOREIGN PURCHASERS IN OFFSHORE TRANSACTIONS MEETING THE
REQUIREMENTS OF RULE 904 OF REGULATION S UNDER THE SECURITIES
ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY
RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND (III) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
BOND IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS BOND WITHIN
THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THE BOND, THE HOLDER
MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THE
CERTIFICATE TO FLEET NATIONAL BANK, AS SECURITY REGISTRAR. IF
THE PROPOSED TRANSFEREE IS OTHER THAN A QUALIFIED INSTITUTIONAL
BUYER, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO PANDA-
ROSEMARY FUNDING CORPORATION AND FLEET NATIONAL BANK, SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THEY MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS
LEGEND MAY BE REMOVED AFTER THE EXPIRATION OF THREE YEARS FROM
THE ORIGINAL ISSUANCE OF THIS BOND. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE
THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT.
THIS BOND IS A REGISTERED GLOBAL BOND AND IS REGISTERED IN THE
NAME OF CEDE & CO., AS NOMINEE OF THE DEPOSITORY TRUST COMPANY
("DTC").
UNLESS THIS REGISTERED GLOBAL BOND IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC TO PANDA-ROSEMARY FUNDING CORPORATION OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY BOND ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR
OTHER USE IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR THE
INDIVIDUAL BONDS REPRESENTED HEREBY, THIS GLOBAL BOND MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY DTC TO A NOMINEE OF DTC, OR BY A
NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC, OR BY DTC OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITORY.
Number CUSIP NUMBER
R-_____ _____________
Principal Amount Maturity Date Issue Date
$___________ February 15, 2016 ____________
REGISTERED HOLDER: ____________________________________
PRINCIPAL AMOUNT: ____________________________ DOLLARS
INTEREST RATE: EIGHT AND FIVE-EIGHTHS PERCENT (8-5/8%) PER ANNUM
PANDA-ROSEMARY FUNDING CORPORATION, a Delaware corporation
(hereinafter called the "Company", which term includes any
successor or assign under the Trust Indenture referred to below),
for value received hereby promises to pay to
____________________________________, or its registered assigns,
the outstanding Principal Amount hereof, such payment to be made
in quarterly installments on February 15, May 15, August 15, and
November 15 of each year (commencing November 15, 1996) and
ending on the Maturity Date set forth above, each such
installment to be in an amount equal to the Principal Amount
multiplied by the percentage set forth opposite the applicable
payment date on Annex A attached hereto (provided that the
portion of the Principal Amount remaining unpaid on the Maturity
Date, together with all interest accrued thereon, shall in any
and all cases be due and payable on the Maturity Date), and to
pay interest on the unpaid portion of the Principal Amount at the
Interest Rate set forth above from the most recent interest
payment date to which interest has been paid or duly provided for
or, if no interest has been paid or duly provided for, from the
Issue Date set forth above, quarterly on February 15, May 15,
August 15, and November 15 in each year (commencing November 15,
1996), until the Principal Amount is paid in full or payment
thereof is duly provided for. Any installment of principal and,
to the extent permitted by applicable law, any payment of
interest not punctually paid or duly provided for shall continue
to bear interest at a rate equal to the Interest Rate set forth
above. The principal and interest so payable on any payment date
shall, as provided in the Trust Indenture, be paid to the person
in whose name this Bond (or one or more Predecessor Securities)
is registered in the Security Register at the close of business
on the Regular Record Date for such payment of principal and
interest, which shall be the preceding February 1, May 1,
August 1, and November 1, respectively. Any such principal and
interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the person in whose name this
Bond (or one or more Predecessor Securities) was registered in
the Security Register at the close of business on such Regular
Record Date, and may be paid to the person in whose name this
Bond is registered at the close of business on a Special Record
Date for the payment of such defaulted principal and interest, to
be fixed by the Trustee, notice of which shall be given to the
Holder hereof no more than 15 nor less than 10 days prior to such
Special Record Date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any
securities exchange on which this Bond may be listed, and upon
such notice as may be required by such exchange, all as more
fully provided in the Trust Indenture. This being a Global Bond
(as that term is defined in the Trust Indenture) deposited with
Depository Trust Company ("DTC") acting as depository, and
registered in the name of Cede & Co. ("CEDE"), a nominee of DTC,
CEDE, as holder of record of this Bond shall be entitled to
receive payment of principal and interest, other than principal
and interest due at the maturity date, by wire transfer of
immediately available funds. Payment of the principal amount of,
and premium, if any, on this Bond (or any outstanding installment
thereof) upon final maturity (whether by redemption, acceleration
or otherwise) shall be made only upon presentation and surrender
of this Bond. All payments in respect of this Bond shall be made
in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of debts.
Whenever any amount to be paid hereunder is stated to due on
a day that is not a Business Day, such amount shall be payable on
the next succeeding Business Day and shall continue to bear
interest at the rate set forth herein until paid.
This Bond is one of an authorized issue of Bonds of the
Company known as its 8-5/8% First Mortgage Bonds due 2016 (the
"Bonds"). The Bonds are issued under the Trust Indenture, dated
as of July 31, 1996, (the "Original Indenture"), among the
Company, Panda-Rosemary, L.P. (the "Partnership") and Fleet
National Bank (the "Trustee", which term includes any successor
Trustee under the Trust Indenture), as supplemented by the First
Supplemental Indenture, dated as of July 31, 1996 ("First
Supplemental Indenture"), among such parties (the Original
Indenture, as so supplemented, and as the same may be amended,
modified and further supplemented, the "Trust Indenture"). All
capitalized terms used herein, unless defined herein, shall have
the meanings ascribed to them in the Trust Indenture.
All Bonds are secured equally and ratably with one another.
Reference is hereby made to the Trust Indenture for a description
of the nature and extent of the Bonds and the respective rights
of the Holders of the Bonds and of the Trustee and the Company in
respect of the Bonds and the terms upon which the Bonds are made
and are to be authenticated and delivered.
The principal of, and interest on, this Bond are payable
only from, and secured by, assets subject to the Lien of the
Collateral Documents, and all payments of principal and interest
shall be made in accordance with the terms of the Trust
Indenture.
The obligations of the Company to pay the principal of,
premium, if any, and interest on the Bonds when due are
unconditionally guaranteed by the Partnership pursuant to a
Partnership Guarantee. The Partnership Guarantee will be secured
by the Lien of the Collateral Documents.
The Bonds are subject to a Collateral Agency and
Intercreditor Agreement, dated as of July 31, 1996.
The Trust Indenture permits, with certain exceptions, as
therein provided, the amendment thereof and the modification of
the rights and obligations of the Company and the rights of the
Holders of the Bonds under the Trust Indenture at any time by the
Company with the consent of the Holders of not less than a
majority in aggregate principal amount of the Bonds at the time
Outstanding. The Trust Indenture also contains provisions
permitting the Holders of specified percentages in aggregate
principal amount of the Bonds at the time Outstanding, on behalf
of the Holders of all the Bonds, to waive compliance by the
Company with certain provisions of the Trust Indenture and
certain past defaults under the Trust Indenture and their
consequences. Any such consent or waiver or direction by the
Holders of this Bond shall be conclusive and binding upon the
Holder and upon all future Holders of this Bond and of any
security issued upon the transfer hereof or in exchange hereof or
in lieu hereof whether or not notation of such consent or waiver
is made upon this Bond.
As provided in the Trust Indenture, the aggregate principal
amount of Bonds which may be issued thereunder is unlimited. The
Bonds are limited in aggregate principal amount as provided in
the First Supplemental Indenture.
The Bonds are, under certain conditions, subject to optional
redemption by the Company as set forth in Section 7.3 of the
Trust Indenture.
The Bonds are, under certain conditions, subject to
mandatory redemption as set forth in Section 7.3 of the Trust
Indenture.
Any payment of interest on any Bond, the Stated Maturity of
which payment is on or prior to any Redemption Date referred to
above, shall be payable to the Holder of such Bond, or one or
more Predecessor Securities, registered as such at the close of
business on the related Regular Record Date or Special Record
Date.
Notice of any redemption of Bonds will be given at least 30
days but not more than 60 days before the Redemption Date to each
Holder at its registered address.
Bonds (or portions thereof as aforesaid) for the redemption
of which provision is made in accordance with the Trust Indenture
shall thereupon cease to be entitled to the Lien of the
Collateral Documents and shall cease to bear interest from and
after the Redemption Date.
The unpaid portion of the Principal Amount together with all
interest accrued thereon and all other amounts due hereunder (but
without premium or penalty), shall be due and payable in full
upon the occurrence of any Event of Default, but only as provided
in the Trust Indenture.
The Holder hereof, by its acceptance of this Bond, agrees
that each payment received by it hereunder shall be applied in
the manner set forth in Section 2.16 of the Trust Indenture.
Unless And Until It Is Exchanged In Whole Or In Part For The
Individual Bonds Represented Hereby, This Global Bond May Not Be
Transferred Except As A Whole By DTC, Or By A Nominee Of DTC To
DTC Or Another Nominee Of DTC, Or By DTC Or Any Such Nominee To A
Successor Depository Or A Nominee Of Such Successor Depository.
The Bonds are issuable only as registered Bonds without
coupons in denominations of $100,000 and any integral multiple of
$1,000 in excess thereof.
No service charge will be made to any Holder of Bonds for
any transfer or exchange but the Security Registrar may require
payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
The person in whose name this Bond is registered shall be
deemed to be the owner and holder hereof for the purpose of
receiving payment as herein provided for all other purposes
whether or not this Bond be overdue regardless of any notice to
anyone to the contrary.
THIS BOND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK.
Unless the certificate of authentication hereon has been
executed by the Trustee by manual or facsimile signature, this
Bond shall not be entitled to any benefit under such Trust
Indenture, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument
to be duly executed.
PANDA-ROSEMARY FUNDING CORPORATION
By:
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds referred to in the within-
mentioned Indenture.
FLEET NATIONAL BANK, as Trustee
By:______________________
Authorized Signature
ABBREVIATIONS
The following abbreviations when used in the inscription on
the face of this instrument shall be construed as though they
were written out in full according to applicable laws or
regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of
survivorship and not as tenants in
common
UNIF GIFT MIN ACT_____________________
(Cust) (Minor)
under Uniform Gift to Minors Act
____________________________________
(State)
Additional abbreviations may also be used though not in
the above list
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s)
and transfer(s) unto
Social Security Number or other
Identifying Number of Assignee______________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
(Please print or typewrite name and address, including
zip code of Assignee)
the within Bond and all rights thereunder, hereby irrevocably
constituting and appointing ______________________________
attorney to transfer said Bond on the book of the Company, with
full power of substitution in the premises.
Dated:_________________________
________________________________
NOTICE: The signature to this assignment must correspond with
the name as written upon the first page of the within
instrument in every particular, without alteration or
enlargement or any change whatsoever
ANNEX A TO
8-5/8% FIRST MORTGAGE BOND DUE 2016
Percentage of Percentage of
Original Principal Original Principal
Payment Date Amount Payable Payment Date Amount Payable
November 15, 1996 1.2356% August 15, 2006 0.9632%
February 15, 1997 1.2356% November 15, 2006 0.9632%
May 15, 1997 1.2344% February 15, 2007 0.9632%
August 15, 1997 1.2344% May 15, 2007 1.0081%
November 15, 1997 1.2344% August 15, 2007 1.0081%
February 15, 1998 1.2344% November 15, 2007 1.0081%
May 15, 1998 1.3291% February 15, 2008 1.0081%
August 15, 1998 1.3291% May 15, 2008 1.0558%
November 15, 1998 1.3291% August 15, 2008 1.0558%
February 15, 1999 1.3291% November 15, 2008 1.0558%
May 15, 1999 1.1429% February 15, 2009 1.0558%
August 15, 1999 1.1429% May 15, 2009 1.1039%
November 15, 1999 1.1429% August 15, 2009 1.1039%
February 15, 2000 1.1429% November 15, 2009 1.1039%
May 15, 2000 1.2282% February 15, 2010 1.1039%
August 15, 2000 1.2282% May 15, 2010 1.1541%
November 15, 2000 1.2282% August 15, 2010 1.1541%
February 15, 2001 1.2282% November 15, 2010 1.1541%
May 15, 2001 1.3196% February 15, 2011 1.1541%
August 15, 2001 1.3196% May 15, 2011 1.2168%
November 15, 2001 1.3196% August 15, 2011 1.2168%
February 15, 2002 1.3196% November 15, 2011 1.2168%
May 15, 2002 1.4124% February 15, 2012 1.2168%
August 15, 2002 1.4124% May 15, 2012 1.2772%
November 15, 2002 1.4124% August 15, 2012 1.2772%
February 15, 2003 1.4124% November 15, 2012 1.2772%
May 15, 2003 1.5119% February 15, 2013 1.2772%
August 15, 2003 1.5119% May 15, 2013 1.3359%
November 15, 2003 1.5119% August 15, 2013 1.3359%
February 15, 2004 1.5119% November 15, 2013 1.3359%
May 15, 2004 1.6192% February 15, 2014 1.3359%
August 15, 2004 1.6192% May 15, 2014 1.3888%
November 15, 2004 1.6192% August 15, 2014 1.3888%
February 15, 2005 1.6192% November 15, 2014 1.3888%
May 15, 2005 1.7273% February 15, 2015 1.3888%
August 15, 2005 1.7273% May 15, 2015 1.3534%
November 15, 2005 1.7273% August 15, 2015 1.3534%
February 15, 2006 1.7273% November 15, 2015 1.3534%
May 15, 2006 0.9632% February 15, 2016 1.3534%
SCHEDULE II
(Form of Compliance Certificate for Restricted Securities)
CERTIFICATE
PANDA-ROSEMARY FUNDING CORPORATION
PANDA-ROSEMARY, L.P.
8-5/8% FIRST MORTGAGE BONDS DUE 2016
This is to certify that as of the date hereof with respect
to U.S. $____________ principal amount of the above-captioned
securities presented or surrendered on the date hereof (the
"Surrendered Bond") for registration of transfer or for exchange
where the securities issuable upon such exchange are to be
registered in a name other than that of the undersigned Holder
(each such transaction being a "transfer") the undersigned Holder
(as defined in the Trust Indenture) of the Surrendered Bonds
represents and certifies for the benefit of the Company and the
Partnership that the transfer of Surrendered Bonds associated
with such transfer complies with the restrictive legend set forth
on the face of the Surrendered Bonds for the reason checked
below:
__ The transfer of the Surrendered Bonds complies with Rule 144
under the U.S. Securities Act of 1933, as amended (the
"Securities Act"); or
__ The transfer of the Surrendered Bonds complies with Rule
144A under the Securities Act, or
__ The transfer of the Surrendered Bonds complies with Rule 904
under the Securities Act; or
__ The transfer of the Surrendered Bonds complies with another
applicable exemption from the registration requirements of
the Securities Act.
________________________________
(Name of Holder)
Dated: ___________________, ________ (To be dated the date of
presentation or surrender)
______________________________
These transfers may require an opinion of counsel.
SCHEDULE III
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION WITH
TRANSFERS TO PERSONS OTHER THAN
QUALIFIED INSTITUTIONAL BUYERS
[Date]
Fleet National Bank, as Trustee
Corporate Trust Department
777 Main Street
CTM 00238
Hartford, Connecticut 06115
Ref.: Panda-Rosemary 1996
Re: Trust Indenture relating to Bonds of Panda-
Rosemary Funding
Corporation (the Indenture")
Ladies and Gentlemen:
In connection with our proposed purchase of 8-5/8% First
Mortgage Revenue due 2016 (the "Bonds") of Panda-Rosemary Funding
Corporation (the "Company"), we confirm that:
1. We have received such information as we deem necessary
in order to make our investment decision.
2. We understand that any subsequent transfer of the Bonds
is subject to certain restrictions and conditions set forth in
the Indenture and the undersigned agrees to be bound by, and not
to resell, pledge or otherwise transfer the Bonds except in
compliance with, such restrictions and conditions and the
Securities Act of 1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Bonds have
not been registered under the Securities Act, and that the Bonds
may not be offered or sold within the United States or to, or for
the account or benefit of, U.S. persons except as permitted in
the following sentence. We agree, on our own behalf and on
behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell any Bonds, we will do so only
(a) to the Company or Panda-Rosemary, L.P. (the "Partnership")
referred to in the Indenture, (b) inside the United States in
accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined therein), (c) inside
the United States to an institutional "accredited investor" (as
defined below) that, prior to such transfer, furnishes or has
furnished on its behalf by a broker-dealer to the Trustee a
signed letter substantially in the form hereof, (d) outside the
United States in accordance with Regulation S under the
Securities Act, (e) pursuant to the exemption from registration
provided by Rule 144 under the Securities Act (if available), or
(f) pursuant to an effective registration statement under the
Securities Act, and we further agree to provide to any person
purchasing Bonds from us a notice advising such purchaser that
resales of the Bonds are restricted as stated herein.
4. We understand that, on any proposed resale of Bonds, we
will be required to furnish to you and the Company, such
certification, legal opinions and other information as you and
the Company may reasonably require to confirm that the proposed
sale complies with the foregoing restrictions. We further
understand that the Bonds purchased by us will bear a legend to
the foregoing effect.
5. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under
the Securities Act) and have such knowledge and experience in
financial and business matters as to be capable of evaluating the
merits and risks of our investment in the Bonds, and we and any
accounts for which we are acting are each able to bear the
economic risk of our or their investment, as the case may be, for
an indefinite period.
6. We are acquiring the Bonds purchased by us for our
account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we
exercise sole investment discretion, for investment purposes and
not with a view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act.
You, the Company and the Partnership and yours and their
respective counsel are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to
any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:_________________________
[Authorized Signatory]
EXHIBIT 10.11
PANDA-ROSEMARY FUNDING CORPORATION
8-5/8% FIRST MORTGAGE
BOND DUE 2016
THIS BOND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER
(I) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR
(B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501(a)(1), (2), (3) OR (7) UNDER REGULATION D OF THE
SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR
(C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS BOND IN AN
OFFSHORE TRANSACTION, (II) AGREES THAT IT WILL NOT WITHIN
THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THIS BOND RESELL
OR OTHERWISE TRANSFER THIS BOND EXCEPT (A) TO PANDA-ROSEMARY
FUNDING CORPORATION OR ANY AFFILIATE THEREOF, (B) INSIDE THE
UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO FLEET
NATIONAL BANK, AS TRUSTEE, OR A SUCCESSOR TRUSTEE, A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS BOND (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D)
OUTSIDE THE UNITED STATES TO FOREIGN PURCHASERS IN OFFSHORE
TRANSACTIONS MEETING THE REQUIREMENTS OF RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
AND (III) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THIS BOND IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THIS BOND WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF
THE BOND, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET
FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THE CERTIFICATE TO FLEET NATIONAL BANK,
AS SECURITY REGISTRAR. IF THE PROPOSED TRANSFEREE IS OTHER
THAN A QUALIFIED INSTITUTIONAL BUYER, THE HOLDER MUST, PRIOR
TO SUCH TRANSFER, FURNISH TO PANDA-ROSEMARY FUNDING
CORPORATION AND FLEET NATIONAL BANK, SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS THEY MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT
TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS
LEGEND MAY BE REMOVED AFTER THE EXPIRATION OF THREE YEARS
FROM THE ORIGINAL ISSUANCE OF THIS BOND. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT. THIS BOND IS A REGISTERED
GLOBAL BOND AND IS REGISTERED IN THE NAME OF CEDE & CO., AS NOMINEE
OF THE DEPOSITORY TRUST COMPANY ("DTC").
UNLESS THIS REGISTERED GLOBAL BOND IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC TO PANDA-ROSEMARY FUNDING CORPORATION OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY BOND ISSUED IS REGISTERED IN THE NAME OF CEDE & CO., OR SUCH
OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR
OTHER USE IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR THE
INDIVIDUAL BONDS REPRESENTED HEREBY, THIS GLOBAL BOND MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY DTC TO A NOMINEE OF DTC, OR BY
A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC, OR BY DTC OR
ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITORY.
Number CUSIP NUMBER
R-1 697927-AA-9
Principal Maturity Issue
Amount Date Date
$111,400,000 February 15, 2016 July 31, 1996
REGISTERED HOLDER: CEDE & CO.
PRINCIPAL AMOUNT: ONE HUNDRED ELEVEN MILLION FOUR HUNDRED
THOUSAND DOLLARS
INTEREST RATE: EIGHT AND FIVE-EIGHTHS PERCENT (8-5/8%)
PER ANNUM
PANDA-ROSEMARY FUNDING CORPORATION, a Delaware corporation
(hereinafter called the "Company", which term includes any successor
or assign under the Trust Indenture referred to below), for value
received, hereby promises to pay to Cede & Co., or its registered
assigns, the outstanding Principal Amount hereof, such payment to be
made in quarterly installments on February 15, May 15, August I5,
and November 15 of each year (commencing November 15, 1996) and
ending on the Maturity Date set forth above, each such installment
to be in an amount equal to the Principal Amongst multiplied by the
percentage set forth opposite the applicable payment date on Annex A
attached hereto (provided that the portion of the Principal Amount
remaining unpaid on the Maturity Date, together with all interest
accrued thereon, shall in any and all cases be due and payable on the
Maturity Date), and to pay interest on the unpaid portion of the
Principal Amount at the Interest Rate set forth above from the
most recent interest payment date to which interest has been paid
or duly provided for or, if no interest has been paid or duly
provided for, from the Issue Date set forth above, quarterly on
February 15, May 15, August 15, and November 15 in each year
(commencing November 15, 1996), until the Principal Amount is
paid in full or payment thereof is duly provided for. Any
installment of principal and, to the extent permitted by
applicable law, any payment of interest not punctually paid or
duly provided for shall continue to bear interest at a rate equal
to the Interest Rate set forth above. The principal and interest
so payable on any payment date shall, as provided in the Trust
Indenture, be paid to the person in whose name this Bond (or one
or more Predecessor Securities) is registered in the Security
Register at the close of business on the Regular Record Date for
such payment of principal and interest, which shall be the
preceding February 1, May 1, August 1, and November 1,
respectively. Any such principal and interest not so punctually
paid or duly provided for shall forthwith cease to be payable to
the person in whose name this Bond (or one or more Predecessor
Securities) was registered in the Security Register at the close
of the business on such Regular Record Date, and may be paid to
the person in whose name this Bond is registered at the close of
business on a Special Record Date for the payment of such
defaulted principal and interest, to be fixed by the Trustee,
notice of which shall be given to the Holder hereof no more than
15 nor less than 10 days prior to such Special Record Date, or
may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on
which this Bond may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in the
Trust Indenture. This being a Global Bond (as that term is
defined in the Trust Indenture) deposited with Depository Trust
Company ("DTC") acting as depository, and registered in the name
of Cede & Co. ("CEDE"), a nominee of DTC, CEDE, as holder of
record of this Bond shall be entitled to receive payment of
principal and interest, other than principal and interest due at
the maturity date, by wire transfer of imediately available
funds. Payment of the principal amount of, and premium, if any,
on this Bond (or any outstanding installment thereof) upon final
maturity (whether by redemption, acceleration or otherwise) shall
be made only upon presentation and surrender of this Bond. All
payments in respect of this Bond shall be made in such coin or
currency of the United States of America as at the time of
payment is legal tender for payment of debts.
Whenever any amount to be paid hereunder is stated to
be due on a day that is not a Business Day, such amount shall be
payable on the next succeeding Business Day and shall continue to
bear interest at the rate set forth herein until paid.
This Bond is one of an authorized issue of Bonds of the
Company known as its 8-5/8% First Mortgage Bonds due 2016 (the
"Bonds"). The Bonds are issued under the Trust Indenture, dated
as of July 31, 1996 (the "Original Indenture"), among the
Company, Panda-Rosemary, L.P. (the "Partnership") and Fleet
National Bank (the "Trustee", which term includes any successor
Trustee under the Trust Indenture), as supplemented by the First
Supplemental Indenture, dated as of July 31, 1996 ("First
Supplemental Indenture"), among such parties (the Original
Indenture, as so supplemented, and as the same may be amended,
modified and further supplemented, the "Trust Indenture"). All
capitalized terms used herein, unless defined herein, shall have
the meanings ascribed to them in the Trust Indenture.
All Bonds are secured equally and ratably with one
another. Reference is hereby made to the Trust Indenture for a
description of the nature and extent of the Bonds and the
respective rights of the Holders of the Bonds and of the Trustee
and the Company in respect of the Bonds and the terms upon which
the Bonds are made and are to be authenticated and delivered.
The principal of, and interest on, this Bond are
payable only from, and secured by, assets subject to the Lien of
the Collateral Documents, and all payments of principal and
interest shall be made in accordance with the terms of the Trust
Indenture.
The obligations of the Company to pay the principal of,
premium, if any, and interest on the Bonds when due are
unconditionally guaranteed by the Partnership pursuant to a
Partnership Guarantee. The Partnership Guarantee will be secured
by the Lien of the Collateral Documents.
The Bonds are subject to a Collateral Agency and
Intercreditor Agreement, dated as of July 31, 1996.
The Trust Indenture permits, with certain exceptions,
as therein provided, the amendment thereof and the
modification of the rights and obligations of the Company and
the rights of the Holders of the Bonds under the Trust
Indenture at any time by the Company with the consent of the
Holders of not less than a majority in aggregate principal
amount of the Bonds at the time Outstanding. The Trust
Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the
Bonds at the time Outstanding, on behalf of the Holders of all
the Bonds, to waive compliance by the Company with certain
provisions of the Trust Indenture and certain past defaults
under the Trust Indenture and their consequences. Any such
consent or waiver or direction by the Holders of this Bond
shall be conclusive and binding upon the Holder and upon all
future Holders of this Bond and of any security issued upon
the transfer hereof or in exchange hereof or in lieu hereof
whether or not notation of such consent or waiver is made upon
this Bond.
As provided in the Trust Indenture, the aggregate
principal amount of Bonds which may be issued thereunder is
unlimited. The Bonds are limited in aggregate principal amount as
provided in the First Supplemental Indenture.
The Bonds are, under certain conditions, subject to
optional redemption by the Company as set forth in Section 7.3 of
the Trust Indenture.
The Bonds are, under certain conditions, subject to
mandatory redemption as set forth in Section 7.3 of the Trust
Indenture.
Any payment of interest on any Bond, the Stated
Maturity of which payment is on or prior to any Redemption Date
referred to above, shall be payable to the Holder of such Bond,
or one or more Predecessor Securities, registered as such at the
close of business on the related Regular Record Date or Special
Record Date.
Notice of any redemption of Bonds will be given at
least 30 days but not more than 60 days before the Redemption
Date to each Holder at its registered address.
Bonds (or portions thereof as aforesaid) for the
redemption of which provision is made in accordance with the
Trust Indenture shall thereupon cease to be entitled to the Lien
of the Collateral Documents and shall cease to bear interest from
and after the Redemption Date.
The unpaid portion of the Principal Amount together
with all interest accrued thereon and all other amounts due
hereunder (but without premium or penalty), shall be due and
payable in full upon the occurrence of any Event of Default, but
only as provided in the Trust Indenture.
The Holder hereof, by its acceptance of this Bond,
agrees that each payment received by it hereunder shall be
applied in the manner set forth in Section 2.16 of the Trust
Indenture.
Unless And Until It Is Exchanged In Whole Or In Part
For The Individual Bonds Represented Hereby, This Global Bond May
Not Be Transferred Except As A Whole By DTC, Or By A Nominee Of
DTC To DTC Or Another Nominee Of DTC, Or By DTC Or Any Such
Nominee To A Successor Depository Or A Nominee Of Such Successor
Depository.
The Bonds are issuable only as registered Bonds without
coupons in denominations of $100,000 and any integral multiple of
$1,000 in excess thereof.
No service charge will be made to any Holder of Bonds
for any transfer or exchange but the Security Registrar may
require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
The person in whose name this Bond is registered
shall be deemed to be the owner and holder hereof for the
purpose of receiving payment as herein provided and for all
other purposes whether or not this Bond be overdue regardless
of any notice to anyone to the contrary.
THIS BOND SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN THE STATE OF
NEW YORK.
Unless the certificate of authentication hereon has
been executed by the Trustee by manual or facsimile signature,
this Bond shall not be entitled to any benefit under such Trust
Indenture, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this
instrument to be duly executed.
PANDA-ROSEMARY FUNDING CORPORATION
By:
Name: Robert W. Carter
Title: President and Chief
Executive Officer
ABBREVIATIONS
The following abbreviations when used in the
inscription on the face of this instrument shall be construed as
though they were written out in full according to applicable laws
or regulations:
TEN COMMA -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship
and not as tenants in common
UNIF GIFT MIN ACT ___________________
(Cust) (Minor)
under Uniform Gift to Minors Act
________________________________
(State)
Additional abbreviations may also be used though not in the above
list
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s)
and transfer(s) unto
Social Security Number or Other
Identifying Number of Assignee
(Please print or typewrite name and address, including zip code of Assignee)
the within Bond and all rights thereunder, hereby irrevocably constituting
and appointing attorney to transfer said Bond on the book of the Company,
with full power of substitution in the premises.
Dated:
NOTICE: The signature to this assignment must correspond with
the name as written upon the first page of the within
instrument in every particular, without alteration or
enlargement or any change whatsoever
ANNEX A TO
8-5/8% FIRST MORTGAGE BOND DUE 2016
Percentage of
Payment Principal
Date Amount Payable
November 15, 1996 1.2356%
February15, 1997 1.2356%
May 15, 1997 1.2344%
August 15, 1997 1.2344%
November 15, 1997 1.2344%
February 15, 1998 1.2344%
May 15, 1998 1.3291%
August 15, 1998 1.3291%
November 15, 1998 1.3291%
February 15, 1999 1.3291%
May 15, 1999 1.1429%
August 15, 1999 1.1429%
November 15, 1999 1.1429%
February 15, 2000 1.1429%
May 15, 2000 1.2282%
August 15, 2000 1.2282%
November 15, 2000 1.2282%
February 15, 2001 1.2282%
May 15, 2001 1.3196%
August 15, 2001 1.3196%
November 15, 2001 1.3196%
February 15, 2002 1.3196%
May I5, 2002 1.4124%
August 15, 2002 1.4124%
November 15, 2002 1.4124%
February 15, 2003 1.4124%
May 15, 2003 1.5119%
August 15, 2003 1.5119%
November 15, 2003 1.5119%
February 15, 2004 1.5119%
May I5, 2004 1.6192%
August 15, 2004 1.6192%
November I5, 2004 1.6192%
February 15, 200 1.6192%
May 15, 2005 1.7273%
August 15, 2005 1.7273%
November 15, 2005 1.7273%
February 15, 2006 1.7273%
May 15, 2006 0.9632%
August 15, 2006 0.9632%
November 15, 2006 0.9632%
February I5, 2007 0.9632%
May 15, 2007 1.0081%
August I5, 2007 1.0081%
November I5, 2007 1.0081%
February 15, 2008 1.0081%
May 15, 2008 1.0558%
August 15, 2008 1.0558%
November 15, 2008 1.0558%
February 15, 2009 1.0558%
May 15, 2009 1.1039%
August 15, 2009 1.1039%
November 15, 2009 1.1039%
February 15, 2010 1.1039%
May 15, 2010 1.1541%
August 15, 2010 1.1541%
November 15, 2010 1.1541%
February 15, 2011 1.1541%
May 15, 2011 1.2168%
August 15, 2011 1.2168%
November 15, 2011 1.2168%
February 15, 2012 1.2168%
May 15, 2012 1.2772%
August 15, 2012 1.2772%
November 15, 2012 1.2772%
February 15, 2013 1.2772%
May 15, 2013 1.3359%
August 15, 2013 1.3359%
November 15, 2013 1.3359%
February 15, 2014 1.3359%
May 15, 2014 1.3888%
August 15, 2014 1.3888%
November 15, 2014 1.3888%
February 15, 2015 1.3888%
May 15, 2035 1.3534%
August 15, 2015 1.3534%
November 15, 2015 1.3534%
February I5, 2016 1.3534%
(Form of Compliance Certificate for Restricted Securities)
CERTIFICATE
PANDA-ROSEMARY FUNDING CORPORATION
PANDA-ROSEMARY, L.P.
8-5/8% FIRST MORTGAGE BONDS DUE 2016
This is to certify that as of the date hereof with
respect to U.S. $_______ principal amount of the above-captioned
securities presented or surrendered on the date hereof (the
"Surrendered Bond") for registration of transfer or for
exchange where the securities issuable upon such exchange
are to be registered in a name other than that of the
undersigned Holder (each such transaction being a
"transfer") the undersigned Holder (as defined in the Trust
Indenture) of the Surrendered Bonds represents and certifies
for the benefit of the Company and the Partnership that the
transfer of Surrendered Bonds associated with such transfer
complies with the restrictive legend set forth on the face
of the Surrendered Bonds for the reason checked below:
- --- The transfer of the Surrendered Bonds complies with Rule 144
under the U.S. Securities Act of 1933, as amended (the "Securities
Act"); or
___ The transfer of the Surrendered Bonds complies with Rule 144A
under the Securities Act; or
- --- The transfer of the Surrendered Bonds complies with
Rule 904 under the Securities Act; or
The transfer of the Surrendered Bonds complies with
another applicable exemption from the registration
requirements of the Securities Act.
(Name of Holder)_____________________________
Dated:__________,_____, (To be dated the date of presentation or surrender)
These transfers may require an opinion of counsel.
CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds referred to in the
within-mentioned Indenture.
FLEET NATIONAL BANK,
as Trustee
By:________________________
Authorized Signature
EXHIBIT 10.12
DEPOSIT AND DISBURSEMENT AGREEMENT
among
PANDA-ROSEMARY FUNDING CORPORATION,
PANDA-ROSEMARY, L.P.,
FLEET NATIONAL BANK,
as Collateral Agent
and
FLEET NATIONAL BANK,
as Depositary Agent
Dated as of July 31, 1996
EXHIBIT B RESTORATION FUND REQUISITION
DEPOSIT AND DISBURSEMENT AGREEMENT (this "Depositary
Agreement"), dated as of July 31, 1996, among PANDA-ROSEMARY
FUNDING CORPORATION, a Delaware corporation (the "Company"),
PANDA-ROSEMARY, L.P., a Delaware limited partnership (the
"Partnership"), FLEET NATIONAL BANK, a national banking
association established under the laws of the United States, in
its capacity as collateral agent (together with its successors
and permitted assigns in such capacity, the "Collateral Agent"),
and FLEET NATIONAL BANK, in its capacity as depositary agent
(together with its successors and permitted assigns in such
capacity, the "Depositary Agent").
W I T N E S S E T H:
WHEREAS, the Partnership owns a natural gas-fired 180
megawatt electrical generating facility in Roanoke Rapids, North
Carolina (the "Project");
WHEREAS, the Company is a wholly-owned subsidiary of the
Partnership, formed for the purposes of facilitating the
refinancing of the Project;
WHEREAS, the Company has duly authorized the creation and
issuance of its bonds to be issued in one or more series from
time to time (the "Bonds") pursuant to the Trust Indenture, dated
as of July 31, 1996 (the "Indenture"), among the Company, the
Partnership and Fleet National Bank, in its capacity as trustee
(together with its successors and permitted assigns in such
capacity, the "Trustee");
WHEREAS, the Company will lend all of the proceeds of the
sale of the Bonds of the initial series to the Partnership to
defease another indenture pursuant to which bonds were issued to
finance the cost of constructing the Project and for the purpose
of, among other things, funding certain reserve funds, redeeming
the limited partnership interests in the Partnership owned by
Ford Motor Credit Company, and paying closing costs;
WHEREAS, all of the Company's obligations under the Bonds
will be unconditionally guaranteed by the Partnership under one
or more guarantees (the "Partnership Guarantees"), which,
together with the above-mentioned loans, will be secured, in
accordance with the Collateral Documents referred to in the
Indenture, by substantially all the assets of the Partnership and
certain other collateral;
WHEREAS, the Partnership may finance certain working capital
requirements of the Project and intends to arrange for the
issuance of letters of credit as may be required by the Project
pursuant to a Credit Bank Working Capital Agreement and/or a
Credit Bank Reimbursement Agreement (as each such term is defined
in the Indenture), which may also be secured by substantially all
the assets of the Partnership and certain other collateral;
WHEREAS, in that connection, pursuant to Section 13.4 of the
VEPCO Power Purchase Agreement referred to in the Indenture, the
Partnership is required to post a letter of credit in the amount
of $4,950,000 for the benefit of Virginia Electric and Power
Company and the L/C Issuer referred to below has agreed to
provide such letter of credit for the account of the Partnership
under a Credit Bank Reimbursement Agreement;
WHEREAS, the Partnership and the Company may incur
additional debt permitted by Sections 6.16(a)(v) and 6.16(b)(ii)
of the Indenture ("Additional Permitted Debt"), to finance
certain modifications and enhancements to the Project in the
future and may incur certain other Financing Liabilities (as
defined in the Intercreditor Agreement, referred to below), that
may be secured in accordance with the Collateral Documents by
substantially all the assets of the Partnership and certain other
collateral;
WHEREAS, the Secured Parties (as defined below), the
Company, the Partnership and the Collateral Agent have entered
into a Collateral Agency and Intercreditor Agreement, dated as of
July 31, 1996 (the "Intercreditor Agreement"), appointing the
Collateral Agent as collateral agent and setting forth certain
rights and remedies of the Collateral Agent acting on behalf of
the Secured Parties with respect to the Collateral, including,
without limitation, the Funds created herein; and
WHEREAS, the Collateral Agent, the Partnership and the
Company desire to appoint the Depositary Agent as depositary
agent to hold and administer money deposited in the various Funds
established pursuant to this Depositary Agreement and funded
with, among other things, the transfer of moneys held under the
Existing Reimbursement Agreement referred to below, the proceeds
of the issuance of the Bonds and the related loans, proceeds of
Additional Permitted Debt, proceeds under the Credit Bank Working
Capital Agreement, proceeds of insurance and condemnation, and
revenues generated by the Project.
NOW, THEREFORE, in consideration of the premises and for
other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
Definitions
Section I.1 Capitalized Terms. Each capitalized term used
herein and not otherwise defined herein shall have the definition
assigned to such term in the Indenture, as such definition exists
on the Closing Date, or in the Intercreditor Agreement.
Section I.2 Definitions; Construction. For all purposes
of this Depositary Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the
meanings assigned to them in this Article, and include the
plural as well as the singular;
(b) all references in this Depositary Agreement to
designated "Articles," "Sections" and other subdivisions are
to the designated Articles, Sections and other subdivisions
of this Depositary Agreement;
(c) the words "herein," "hereof" and "hereunder" and
other words of similar import refer to this Depositary
Agreement as a whole and not to any particular Article,
Section or other subdivision;
(d) unless otherwise expressly specified, any
agreement, contract or document defined or referred to
herein shall mean such agreement, contract or document
(including any clarification letters relating thereto) as in
effect as of the date hereof, as the same may thereafter be
amended, supplemented or otherwise modified from time to
time in accordance with the terms of the Indenture, the
other Project Documents and any other Financing Documents
and including any agreement, contract or document in
substitution or replacement of any of the foregoing;
(e) unless the context clearly intends to the
contrary, pronouns having a masculine or feminine gender
shall be deemed to include the other; and
(f) any reference to any Person shall include its
successors and assigns.
"Additional Permitted Debt Fund" shall mean the fund
described in Section 3.10.
"Administrative Claims" shall mean all obligations of the
Partnership and the Company, now or hereafter existing, to pay
fees, costs and expenses (including the reasonable fees and
expenses of counsel) to any trustee or agent of any Secured
Party, or, if any Secured Party is not represented by a trustee
or agent, to such Secured Party for fees, costs and expenses
incurred in connection with administration of the applicable
Financing Document and the enforcement of its rights thereunder
(including any rights to indemnification of the Partnership or
the Company), excluding Collateral Agent Claims, Depositary Agent
Claims and Trustee Claims.
"Bullet Maturity" shall mean with respect to Additional
Permitted Debt, Debt with a single principal payment due in full
at final maturity.
"Bullet Maturity Amount" shall mean with respect to a
Funding Period for any Additional Permitted Debt with a Bullet
Maturity, an amount equal to the principal amount of such
Additional Permitted Debt due at final maturity divided by the
number of Funding Periods between the date of issuance and the
final maturity of such Additional Permitted Debt plus the
aggregate of the Bullet Maturity Amounts not funded in prior
periods.
"Collateral Agent Claims" shall mean all obligations of the
Secured Parties, the Partnership and the Company, now or
hereafter existing, to pay fees, costs and expenses to the
Collateral Agent pursuant to Section 3.4 of the Intercreditor
Agreement and the Security Documents.
"Company Loan Agreement" shall mean the Loan Agreement,
dated as of July 31, 1996, between the Company and the
Partnership.
"Debt Service Letter of Credit" shall mean one or more
irrevocable direct pay letters of credit available for the
purpose of drawing to pay principal and interest on the Bonds and
the Additional Permitted Debt in an amount up to the Debt Service
Reserve Requirement and any extensions thereof or any substitute
letter of credit therefor in the stated amount contained in such
extension or substitute, subject to the limitations set forth in,
and permitting draws therein as contemplated by, Section 3.4 of
this Depositary Agreement, (i) issued to the Depositary Agent by
a financial institution having a long-term unsecured senior debt
rating of at least "A" or its equivalent by the Rating Agencies
at the time of issuance, (ii) in form and substance reasonably
acceptable to the Depositary Agent, (iii) with a minimum term of
one (1) year, (iv) for the benefit of the Depositary Agent, (v)
providing for the amount thereof to be available to the
Depositary Agent in multiple drawings conditioned only upon
presentation of sight drafts accompanied by the applicable
certificate in the form attached to such letter of credit, (vi)
which the Partnership certifies in an Officer's Certificate does
not constitute Debt of that Company or the Partnership and is
not secured by a Lien on any of the properties of the Company or
the Partnership and (vii) automatically extending for not less
than six (6) months unless the issuing bank provides at least
thirty (30) days prior written notice of termination or non-
renewal to the Depositary Agent
"Debt Service Fund" shall mean the fund established pursuant
to Section 2.2(c).
"Debt Service Reserve Fund" shall mean the fund described in
Section 3.5.
"Debt Service Reserve Requirement" shall mean at any given
time an amount equal to the sum, without duplication, of (i) the
maximum aggregate principal payments due on the Bonds Outstanding
on any two consecutive quarterly payment dates in the immediately
succeeding three-year period from the date of determination (such
principal payments for the Initial Bonds being attached to the
Indenture on Schedule 1.1 thereto, subject to reduction pursuant
to Section 7.3 of the Indenture) and the maximum aggregate
principal payments due on the Additional Permitted Debt during
any semiannual period in the immediately succeeding three-year
period from the date of determination or, with respect to
Additional Permitted Debt with a Bullet Maturity in the three-
year period immediately prior to final maturity, the Bullet
Maturity Amounts for six Funding Periods and (ii) the maximum
aggregate interest payment due on the Bonds Outstanding on any
two consecutive quarterly payment dates in the immediately
succeeding three-year period from the date of determination and
the maximum aggregate interest payments due on the Additional
Permitted Debt (including the net amounts payable or receivable
under the Interest Rate Protection Agreements with respect to
such Additional Permitted Debt) during any semiannual period in
the immediately succeeding three-year period from the date of
determination. For the purposes of determining the Debt Service
Reserve Requirement, with respect to Additional Permitted Debt
with a floating interest rate and without a related Interest Rate
Protection Agreement, the interest rate in effect at the time of
calculation for such Additional Permitted Debt shall be assumed
to apply for such three-year period.
"Depositary Agent Claims" shall mean all obligations of the
Secured Parties, the Partnership and the Company, now or
hereafter existing, to pay fees, costs and expenses to the
Depositary Agent pursuant to Sections 5.1 and 5.3 of this
Depositary Agreement and the Security Documents.
"Depositary Agreement" shall have the meaning set forth in
the preamble.
"Disbursement Date" shall mean the date specified in a
Requisition as the date on which moneys are requested by the
Partnership to be withdrawn and transferred from the Fund to
which such Requisition relates for the purpose set forth in such
Requisition.
"Distribution Sub-Fund" shall mean the sub-fund described in
Section 3.9(a).
"Existing Reimbursement Agreement" shall mean the Second
Amended and Restated Letter of Credit and Reimbursement
Agreement, dated as of January 6, 1992, between the Partnership
and The Fuji Bank, Limited.
"Funding Date" shall be the fifteenth day of each month, or
in each case if such day is not a Business Day, the next
succeeding Business Day.
"Funding Period" shall mean a period commencing on a Funding
Date and ending on the day preceding the next succeeding Funding
Date.
"Funds" shall have the meanings assigned to such term in
Section 2.2.
"Interest Account" shall mean the account in the Debt
Service Fund described in Section 3.3.
"L/C Issuer" shall mean the issuer of the VEPCO Letter of
Credit and its successor and assigns.
"Maintenance Requisition" shall have the meaning assigned to
that term in Section 3.6(b).
"Major Maintenance Requirement" shall mean, for any Funding
Date, either (i) if, on any Funding Date, the amount then on
deposit in the Overhaul Fund is $1,000,000 or less, an amount
equal to the sum of (a) the product obtained by multiplying the
total number of hours that each of the combustion turbines
constituting a part of the Project has operated during the 30-day
period immediately preceding such Funding Date by $130, and
(b) the aggregate amount, not to exceed $1,000,000, of the
amounts of the Major Maintenance Requirements for previous
Funding Dates which has not been funded or has been withdrawn
from the Overhaul Fund to pay a deficiency in other Funds
pursuant to Section 3.12, or (ii) if, on any Funding Date, the
amount then on deposit in the Overhaul Fund exceeds $1,000,000,
then the Major Maintenance Requirement for such Funding Date
shall be zero, in each case as such amount shall be revised
annually pursuant to Section 6.11(a)(ii) of the Indenture;
provided, however, that no such revision shall reduce such amount
below the then current Major Maintenance Requirement without the
consent of the L/C Issuer.
"Modification Requisition" shall have the meaning assigned
to that term in Section 3.10(b).
"Operating Fund" shall mean the fund described in
Section 3.2.
"Overhaul Fund" shall mean the fund described in Section
3.6.
"Partnership Distribution Fund" shall mean the fund
described in Section 3.9.
"Pollution Control Finance Fund" shall mean the fund
described in Section 3.7.
"Principal Account" shall mean the account in the Debt
Service Fund described in Section 3.4.
"Project Revenue Fund" shall mean the fund described in
Section 3.1.
"Property Tax Fund" shall mean the fund described in Section
3.11.
"Property Tax Requirement" shall mean, for any Funding Date,
(i) until the date that the Partnership delivers to the
Depositary Agent the Officer's Certificate referred to in Section
6.29(b) of the Indenture, an amount equal to 8.33% of the amount
of real property taxes assessed in the tax year immediately
preceding such Funding Date against the real property owned by
The Bibb Company (or any successor owner of such property) that
includes the Site; provided, however, that if the Partnership
delivers to the Depositary Agent the Officer's Certificate and
other documents referred to in Section 3.11(e) of this Agreement,
the Property Tax Requirement for any Funding Date occurring
during the period commencing on the date of such delivery and
ending on the last day of the tax year with respect to which such
Officer's Certificate is delivered shall be zero, and (ii) after
the delivery of the Officer's Certificate referred to in Section
6.29(b) of the Indenture, zero.
"Requisition" shall mean a Maintenance Requisition,
Restoration Requisition, Modification Requisition or a
requisition by the Partnership from one of the other Funds.
"Responsible Officer", when used with respect to the
Depositary Agent, shall mean any officer in the Corporate Trust
Office (or any successor group of the Depositary Agent) including
any vice president, assistant vice president, assistant
secretary, assistant treasurer or any other officer of the
Depositary Agent customarily performing functions similar to
those performed by the persons who at the time shall be such
officers, respectively, or to whom any corporate trust matter is
referred because of his knowledge and familiarity with the
particular subject.
"Restoration Budget" shall have the meaning assigned to that
term in Section 3.8(a).
"Restoration Progress Payment Schedule" shall have the
meaning assigned to that term in Section 3.8(a).
"Restoration Fund" shall mean the fund described in Section
3.8.
"Restoration Requisition" shall have the meaning assigned to
that term in Section 3.8(b)(i).
"Secured Parties" shall have the meaning assigned to such
term in the Indenture.
"Suspension Sub-Fund" shall mean the sub-fund described in
Section 3.9(b).
"Trustee Claims" shall mean all obligations of the
Partnership and the Company, now or hereafter existing, to pay
fees, costs and expenses to the Trustee under the Indenture and
any supplemental indentures entered into pursuant to the terms
thereof.
ARTICLE II
Appointment of Depositary Agent;
Establishment of Funds
Section II.1 Acceptance of Appointment of Depositary
Agent. (a) The Depositary Agent hereby agrees to act as such
and to accept all cash, payments, other amounts and Permitted
Investments to be delivered to or held by the Depositary Agent
pursuant to the terms of this Depositary Agreement. The
Depositary Agent shall hold and safeguard the Funds during the
term of this Depositary Agreement and shall treat the cash,
instruments and securities in the Funds as moneys, instruments
and securities pledged by the Partnership and the Company to the
Collateral Agent for the benefit of the Secured Parties to be
held in the custody of the Depositary Agent, as agent solely for
the Collateral Agent, in trust in accordance with the provisions
of this Depositary Agreement. In performing its functions and
duties under this Depositary Agreement, the Depositary Agent
shall act solely as agent for the Collateral Agent and, except in
such capacity, does not assume and shall not be deemed to have
assumed any obligation toward or relationship of agency or trust
with or for the Partnership or the Company.
(b) Neither the Partnership nor the Company shall have any
rights against or to moneys held in the Funds, as third party
beneficiary or otherwise, except the right to receive or make
requisitions of moneys held in the Funds, as permitted by this
Depositary Agreement , and to direct the investment of moneys
held in the Funds as permitted by Section 3.13.
Section II.2 Establishment of Funds and Sub-Funds. The
Depositary Agent hereby establishes the following special,
segregated and irrevocable cash collateral funds (collectively,
the "Funds") in the form of interest-bearing accounts which shall
be maintained at all times until the termination of this
Depositary Agreement:
(a) Project Revenue Fund;
(b) Operating Fund;
(c) Debt Service Fund;
(d) Debt Service Reserve Fund;
(e) Overhaul Fund;
(f) Pollution Control Finance Fund
(g) Restoration Fund;
(h) Partnership Distribution Fund;
(i) Property Tax Fund; and
(j) Additional Permitted Debt Fund.
The following two sub-accounts are hereby established and
created within the Debt Service Fund:
(a) Principal Account; and
(b) Interest Account.
The following two sub-funds are hereby established and
created within the Partnership Distribution Fund:
(a) Distribution Sub-Fund; and
(b) Suspension Sub-Fund.
Certain additional sub-funds within certain of the Funds may
be established and created from time to time in accordance with
this Depositary Agreement.
On the Closing Date, the Partnership shall deliver to the
Depositary Agent an Officer's Certificate setting forth the
amounts held on such date by The Fuji Bank, Limited under the
Existing Reimbursement Agreement and the allocation of such
amounts to the Funds. Upon the transfer of such amounts by The
Fuji Bank, Limited to the Depositary Agent, the Depositary Agent
shall allocate such amounts among the Funds in accordance with
such Officer's Certificate.
All amounts from time to time held in each Fund shall be
held (i) in the name of the Depositary Agent, as agent for the
Collateral Agent for the benefit of the Secured Parties and (ii)
in the custody of the Depositary Agent for the purposes and on
the terms set forth in this Depositary Agreement. All such
amounts shall constitute a part of the Collateral and shall not
constitute payment of any Debt or any other obligation of the
Partnership or the Company until applied as hereinafter provided.
Section II.3 Security Interest. As collateral security
for the prompt and complete payment and performance when due of
all their respective obligations, the Partnership and the Company
has, pursuant to the Security Agreements, pledged, assigned,
hypothecated and transferred to the Collateral Agent for the
benefit of the Secured Parties, and hereby grants to the
Depositary Agent, as agent for the Collateral Agent, a Lien and
security interest in and to, (i) each Fund and (ii) all cash,
investments and securities at any time on deposit in any Fund,
including all income or gain earned thereon. The Depositary
Agent is the agent of the Collateral Agent for the purpose of
receiving payments contemplated hereunder and for the purpose of
perfecting the Lien of the Collateral Agent for the benefit of
the Secured Parties in and to the Funds and all cash, investments
and securities and any proceeds thereof at any time on deposit in
the Funds; provided that the Depositary Agent shall not be
responsible to take any action to perfect such Lien except
through the performance of its express obligations hereunder or
upon the written direction of the Collateral Agent. Each of the
Funds shall at all times be in the exclusive possession of, and
under the exclusive domain and control of, the Depositary Agent,
as agent for the Collateral Agent.
Section II.4 Termination. This Depositary Agreement shall
remain in full force and effect until the termination of the
Intercreditor Agreement pursuant to Section 4.10 thereof.
ARTICLE III
The Funds
Section III.1 Project Revenue Fund. (a) (i) The following
amounts shall be deposited into the Project Revenue Fund
directly, or if received by the Partnership or the Company,
as soon as practicable upon receipt, in either case in
accordance with this Section 3.1(a): (A) all Project
Revenues received by the Partnership and any revenue from
any source received by the Company, (B) the proceeds of the
Debt under the Credit Bank Working Capital Agreement, (C)
any income from the investment of the moneys in any of the
Funds pursuant to Section 3.13, (D) all proceeds from the
sale of assets by the Partnership or the Company, (E) all
amounts, if any, required to be deposited in the Project
Revenue Fund pursuant to the Escrow Deposit Agreement, dated
July 31, 1996, among the Partnership, the Company and
NationsBank of Texas, N.A., and (F) all other amounts
collected or received by any lender of Debt or by the
Collateral Agent, in each case, under the Collateral
Documents (including, without limitation, all Casualty
Proceeds, Eminent Domain Proceeds and Title Insurance
Proceeds) and not at the time of receipt required to be
transferred to or deposited in the Restoration Fund, the
Debt Service Reserve Fund, or the Additional Permitted Debt
Fund. Each of the Partnership and the Company hereby agrees
and confirms that it has irrevocably instructed each Project
Participant to each Project Agreement in effect as of the
Closing Date pursuant to which payments may be made to or
received by the Partnership or the Company and that it will
so instruct all Project Participants to Project Agreements
and, to the extent practicable, parties to the Non-Material
Agreements, entered into after the Closing Date, to be made
directly to the Depositary Agent for deposit into the
Project Revenue Fund. If, notwithstanding the foregoing,
any Project Revenues or any other amounts required to be
deposited in the Project Revenue Fund are remitted directly
to the Partnership or the Company (or any Affiliate of the
Partnership or the Company), the Partnership or the Company,
as the case may be, shall (or shall cause any such Affiliate
to) hold such payments in trust for the Collateral Agent and
shall promptly remit such payments to the Depositary Agent
for deposit in the Project Revenue Fund, in the form
received, with any necessary endorsements.
(ii) Upon the deposit into the Project Revenue Fund of
the proceeds of any payment in respect of any Casualty
Proceeds, any Eminent Domain Proceeds or any Title Insurance
Proceeds, the Depositary Agent shall separately segregate
such Casualty Proceeds, Eminent Domain Proceeds or Title
Insurance Proceeds, as the case may be, from any other
amounts on deposit in the Project Revenue Fund.
(iii) In the event that pursuant to Section 6.10(d)
of the Indenture the Partnership determines that the Project
cannot be rebuilt, repaired or restored to permit operation
of all or a portion of the Project on a Commercially
Feasible Basis following an Event of Eminent Domain, Event
of Loss or Title Event, or, if pursuant to Section 6.10(f)
of the Indenture, the Partnership determines not to rebuild,
repair or restore the Project, then, upon delivery to the
Depositary Agent of an Officer's Certificate of the
Partnership certifying that the Project cannot be rebuilt,
repaired or restored to permit operation of all or a portion
of the Project on a Commercially Feasible Basis or that the
Partnership determines not to rebuild, repair or restore the
Project, the Collateral Agent shall deliver to the
Depositary Agent a certificate setting forth the allocation
of Casualty Proceeds, Eminent Domain Proceeds or Title
Insurance Proceeds, as the case may be, segregated in the
Project Revenue Fund among the Secured Parties (to the
extent the Secured Obligations of such Secured Parties may
be redeemed or prepaid under the applicable Financing
Documents) pursuant to the Intercreditor Agreement as if
such Casualty Proceeds, Eminent Domain Proceeds or Title
Insurance Proceeds, as the case may be, were to be ratably
distributed among such Secured Parties. Upon receipt of
such certificate of the Collateral Agent, the Depositary
Agent shall withdraw, transfer or distribute the moneys
representing the Casualty Proceeds, the Eminent Domain
Proceeds or the Title Insurance Proceeds, as the case may
be, segregated in the Project Revenue Fund ratably among (a)
the Trustee no later than one Business Day prior to the
Redemption Date, as instructed by the Company Order
delivered by the Partnership to the Depositary Agent, for
the redemption of Bonds Outstanding in accordance with
Section 7.3(a) of the Indenture and (b) the other Secured
Parties for prompt redemption or prepayment of Secured
Obligations pursuant to the applicable Financing Documents
in accordance with the allocation set forth in the
certificate of the Collateral Agent.
(iv) If the Partnership has determined to rebuild,
repair or restore the Project and has otherwise complied
with the requirements of Section 6.10(d)(ii) or (iii) of the
Indenture, then such segregated Casualty Proceeds, Eminent
Domain Proceeds or Title Insurance Proceeds shall be
deposited in the Restoration Fund in accordance with Section
3.8.
(b) The Partnership and the Company hereby irrevocably
authorize the Depositary Agent, on each Funding Date, to make
withdrawals and transfers of moneys to the extent then available
in the Project Revenue Fund and not segregated for any specific
purpose as provided in this Section 3.1, upon the delivery of an
Officer's Certificate of the Partnership to the Depositary Agent
at least five (5) days prior to the Funding Date (or such fewer
days as may be acceptable to the Depositary Agent) setting forth
the amounts to be withdrawn, transferred or segregated pursuant
to this clause (b) pursuant to the terms of this Depositary
Agreement in the following order of priority:
(i) First: Withdraw from the Project Revenue Fund for
payment to the Operating Fund the amount set forth in the
Officer's Certificate of the Partnership and certified by
such Officer's Certificate to be the good faith estimate of
the amounts payable for Operating Expenses (other than Debt
Service and amounts referred to in clauses (ii) and (iii)
below to the extent that the same are Operating Expenses)
during the Funding Period commencing on such Funding Date,
less the aggregate of the amounts previously transferred on
any prior Funding Date for the payment of such Operating
Expenses;
(ii) Second: After making the withdrawals specified in
clause (i), withdraw from the Project Revenue Fund the
amount set forth in the Officers' Certificate of the
Partnership for payment to the Credit Banks of an amount
equal to (A) the unpaid principal amount of, interest on,
and fees and other amounts due and payable at any time
during the Funding Period commencing on such Funding Date
with respect to reimbursement obligations and other amounts
owed under a Credit Bank Reimbursement Agreement, and (B)
the principal of, interest, and fees and other amounts due
and payable at any time during the Funding Period commencing
on such Funding Date with respect to loans under the Credit
Bank Working Capital Agreement to the extent not paid (or to
the extent provision for such payment is not made) pursuant
to clause (i) above; provided, however, that the Depositary
Agent shall segregate such amounts from any other amounts on
deposit in the Project Revenue Fund until such time as
payment is made to the Credit Banks;
(iii) Third: After making the withdrawals specified
in clauses (i) and (ii), if applicable, withdraw from the
Project Revenue Fund the amount set forth in the Officer's
Certificate of the Partnership for payment, without
duplication, of interest due and payable at any time during
the Funding Period commencing on such Funding Date with
respect to the Bonds, the Additional Permitted Debt
(including ordinary course settlement amounts (other than
termination payments) under any related Interest Rate
Protection Agreements) and Debt permitted under Sections
6.16(a)(ii) and (iii) of the Indenture (taking into account
payments from the Interest Account allocated thereto);
provided, however, that the Depositary Agent shall segregate
such amounts from any other amounts on deposit in the
Project Revenue Fund until such time as payment is made to
the Persons entitled thereto;
(iv) Fourth: After making the withdrawals specified in
clauses (i), (ii) and (iii), withdraw from the Project
Revenue Fund the amount set forth in the Officer's
Certificate of the Partnership for the payment, without
duplication, of the principal and premium, if any, due and
payable at any time during the Funding Period commencing on
such Funding Date (A) with respect to the Bonds, the
Additional Permitted Debt, and Debt permitted under Sections
6.16(a)(ii) and (iii) of the Indenture (in each case, taking
into account payments from the Principal Account allocated
thereto), and (B) termination payments under Interest Rate
Protection Agreements; provided, however, that the
Depositary Agent shall segregate such amounts from any other
amounts on deposit in the Project Revenue Fund until such
time as payment is made to the Persons entitled thereto;
(v) Fifth: After making the withdrawals specified in
clauses (i), (ii), (iii) and (iv), withdraw from the Project
Revenue Fund the amount set forth in the Officer's
Certificate of the Partnership for the payment, without
duplication, of other amounts due and payable at any time
during the Funding Period commencing on such Funding Date
with respect to the Bonds, the Additional Permitted Debt,
and Debt permitted under Sections 6.16(a)(ii) and (iii) of
the Indenture (in each case, taking into account payments,
if any, from the Debt Service Fund allocated thereto);
provided, however, that the Depositary Agent shall segregate
such amounts from any other amounts on deposit in the
Project Revenue Fund until such time as payment is made to
Persons entitled thereto;
(vi) Sixth: After making the withdrawals and transfers
specified in clauses (i), (ii), (iii), (iv) and (v),
transfer from the Project Revenue Fund to the Interest
Account of the Debt Service Fund, an amount equal to the
excess of (i) the sum of the interest payments due and
payable on all of the Bonds Outstanding on the next
succeeding interest payment dates falling on or within six
months following such Funding Date and the interest
payment(s) due and payable on Additional Permitted Debt
(including ordinary course settlement amounts, but not
termination payments, under any related Interest Rate
Protection Agreement) on the next interest payment date(s)
falling on or within six months following such Funding Date,
over (ii) the amount then on deposit in the Interest
Account, after giving effect to any withdrawals from the
Interest Fund made on such date; provided, however, that for
the purposes of determining the amount to transfer from the
Project Revenue Fund to the Interest Fund with respect to
Additional Permitted Debt with a floating interest rate and
without a related Interest Rate Protection Agreement, the
interest rate in effect at the time of such determination
for such Additional Permitted Debt shall be assumed to apply
for such six-month period;
(vii) Seventh: After making the withdrawals and
transfers specified in clauses (i), (ii), (iii), (iv), (v)
and (vi), transfer from the Project Revenue Fund to the
Principal Account of the Debt Service Fund, an amount equal
to the excess of (i) the sum of the principal and premium,
if any, payment next due and payable on the Bonds
Outstanding at the next succeeding principal payment dates
falling on or within six months following such Funding Date
and the principal and premium, if any, payment(s) due and
payable on the Additional Permitted Debt on the next
principal payment date(s) falling on or within six months
following such Funding Date over (ii) the amount then on
deposit in the Principal Account, after giving effect to any
withdrawals from the Principal Account made on such date;
(viii) Eighth: After making the withdrawals and
transfers specified in clauses (i), (ii), (iii), (iv), (v),
(vi) and (vii), transfer from the Project Revenue Fund to
the Property Tax Fund an amount equal to the excess, if any,
of the Property Tax Requirement for such Funding Date over
the amount then on deposit in the Property Tax Fund, after
giving effect to any disbursement from the Property Tax Fund
made on such Funding Date;
(ix) Ninth: After making the withdrawals and transfers
specified in clauses (i), (ii), (iii), (iv), (v), (vi),
(vii) and (viii), transfer from the Project Revenue Fund to
the Debt Service Reserve Fund an amount equal to the excess,
if any, of the then current Debt Service Reserve Requirement
over the sum of (A) the moneys held in the Debt Service
Reserve Fund as of such date, plus (B) the aggregate amount
available to be drawn under the Debt Service Letter of
Credit after giving effect to any withdrawals from the Debt
Service Reserve Fund and drawn on the Debt Service Letter of
Credit made on such date;
(x) Tenth: After making the withdrawals and transfers
specified in clauses (i), (ii), (iii), (iv), (v), (vi),
(vii), (viii) and (ix), transfer from the Project Revenue
Fund to the Overhaul Fund, an amount equal to the excess, if
any, of the Major Maintenance Requirement for such Funding
Date over the amount then on deposit in the Overhaul Fund as
of such Funding Date, after giving effect to any
disbursements from the Overhaul Fund made on such Funding
Date; and
(xi) Eleventh: After making the withdrawals and
transfers specified in the preceding clauses (i) through
(x), transfer to the Distribution Sub-Fund the balance, if
any, remaining in the Project Revenue Fund and not otherwise
segregated for a specified purpose.
If an Event of Default (as defined in the Intercreditor
Agreement), shall have occurred and be continuing and the
Partnership shall have failed to deliver an Officers' Certificate
setting forth the amounts to be withdrawn or transferred pursuant
to clause (ii), (iii), (iv), (v), (vi), (vii), or (ix) of this
Section 3.1(b), then the Depository Agent shall make such
withdrawals and transfers:
(A) upon receipt of a certificate from an
authorized representative of the appropriate Credit Bank
under a Credit Bank Reimbursement Agreement in the case of
clause (ii)(A);
(B) upon receipt of a certificate from an
authorized representative of the appropriate Credit Bank
under a Credit Bank Working Capital Agreement in the case of
clause (ii)(B); and
(C) upon receipt of a certificate of Responsible
Officer of the Trustee or a certificate of an authorized
representative of the holder or holders of any Additional
Permitted Debt or Debt permitted under Sections 6.16(a)(ii)
or (iii) of the Indenture approved by a Responsible Officer
of the Trustee in the case of clauses (iii), (iv), (v),
(vi), (vii), or (ix).
Section III.2 Operating Fund. (a) On the Closing Date, the
amounts then held in the Operating Account established under the
Existing Reimbursement Agreement, if any, shall be made available
to the Depository Agent and deposited in the Operating Fund
established pursuant to this Depositary Agreement. Amounts held
in the Operating Fund shall be applied to pay Operating Expenses.
(b) Before any withdrawal and transfer shall be made from
the Operating Fund, there shall be deposited with the Depositary
Agent:
(i) a requisition from the Partnership, dated not more
than five (5) days prior to Disbursement Date set forth
therein on which such withdrawal and transfer is requested
to be made, signed by an Authorized Representative of the
Partnership and stating whether the circumstances described
in the next succeeding clause (ii) exist; and;
(ii) if the Partnership shall have prepared an
Operating Budget pursuant to Section 6.14 of the Indenture
and if the amount set forth in the Partnership's
requisition, when added to the amounts previously withdrawn
from the Operating Fund in the fiscal year of the
Partnership in which such Distribution Date occurs, exceeds
by ten percent (10%) or more the amount of Operating
Expenses budgeted for in the Operating Budget through the
month in which such Distribution Date occurs, then an
Independent Engineer's Certificate dated not more than five
(5) days prior to such Disbursement Date, approving of the
withdrawal and transfer requested to be made.
(c) On the Disbursement Date referred to in Section 3.2(b)
following the receipt of the documents described in such Section,
the Depositary Agent shall withdraw and transfer from the
Operating Fund and shall remit to the Partnership the amount set
forth in the Partnership's requisition (which, if required by
Section 3.2(b)(ii), shall have been approved by the Independent
Engineer), and thereafter the Partnership shall remit to the
applicable payees any amounts the Partnership receives.
Section III.3 Interest Account. (a) Moneys deposited in
the Interest Account of the Debt Service Fund on any Funding Date
shall be allocated ratably among sub-funds of the Interest
Account established for each series of Bonds and each issuance of
Additional Permitted Debt based on the aggregate interest due and
payable on the Bonds and on the Additional Permitted Debt on the
next interest payment dates falling on or within six months
following such Funding Date (calculated in accordance with the
applicable amortization schedules provided to the Depositary
Agent by the Partnership). Except as otherwise provided in this
Depositary Agreement, moneys in such sub-funds shall be used for
the payment, when due and payable (whether at the stated maturity
or upon redemption or by acceleration or otherwise), of interest
on the related series of Bonds and issuances of Additional
Permitted Debt.
(b) On any Funding Date that amounts of interest on any
given series of Bonds or issuance of Additional Permitted Debt
are due and payable and have been requisitioned in accordance
with Section 3.1(b)(iii) (or if such day is not a Business Day,
then on the next Business Day), the Depositary Agent shall
withdraw the moneys on deposit in the sub-fund of the Interest
Fund allocated for such series of Bonds or issuance of Additional
Permitted Debt and remit such moneys to the Persons entitled
thereto for the payment of such interest.
(c) In the event that moneys in the Interest Account exceed
the amount of money required by this Depositary Agreement to be
deposited therein, on the next Funding Date prior to making the
distributions pursuant to Section 3.1(b), the Depositary Agent
shall transfer such excess moneys from the Interest Account to
the Project Revenue Fund.
Section III.4 Principal Account. (a) Moneys deposited in
the Principal Account on any Funding Date shall be allocated
ratably among sub-funds of the Principal Account established for
each series of Bonds and each issuance of Additional Permitted
Debt based on the aggregate principal and premium, if any, due
and payable on the Bonds and on the Additional Permitted Debt on
next principal payment dates falling on or within six months
following such Funding Date. Except as otherwise provided in
this Depositary Agreement, moneys in such sub-funds shall be used
for the payment, when due and payable (whether at the stated
maturity or upon redemption or by acceleration or otherwise), of
principal and premium, if any, with respect to the related series
of Bonds and issuances of Additional Permitted Debt.
(b) On any Funding Date that amounts for the payment of
principal of and premium on, if any, any given series of Bonds or
issuance of Additional Permitted Debt are due and payable and
have been requisitioned in accordance with Section 3.1(b)(iv),
the Depositary Agent shall withdraw the moneys on deposit in the
sub-fund of the Principal Account allocated for such series of
Bonds or issuance of Additional Permitted Debt and remit such
moneys to the Persons entitled thereto for the payment of such
principal and premium, if any.
(c) In the event that moneys in the Principal Account
exceed the amount of money required by this Depositary Agreement
to be deposited therein on the next Funding Date prior to making
the distributions pursuant to Section 3.1(b), the Depositary
Agent shall transfer such excess moneys from the Principal
Account to the Project Revenue Fund.
Section III.5 Debt Service Reserve Fund. (a) On the
Closing Date, certain amounts specified in the Officer's
Certificate referred to in the next to last paragraph of Section
2.2 shall be made available to the Depositary Agent through a
transfer of amounts held in one or more funds established under
the Existing Reimbursement Agreement for ultimate deposit into
the Debt Service Reserve Fund. Additionally, on the Closing
Date, a portion (which shall be specified in such Officer's
Certificate) of the proceeds of the sale of the Initial Bonds
shall be deposited into the Debt Service Reserve Fund. The
amounts referred to in the two preceding sentences shall be
allocated solely to the Initial Bonds. At any time, the
Partnership may deliver to the Depositary Agent a Debt Service
Letter of Credit in an aggregate maximum amount available to be
drawn thereunder equal to all or any portion of the then current
Debt Service Reserve Requirement. Promptly following delivery of
a Debt Service Letter of Credit to the Depositary Agent, the
Depositary Agent shall remit to the Partner or Partners
furnishing such Debt Service Letter of Credit (as set forth in an
Officer's Certificate of the Partnership delivered
contemporaneously with such Debt Service Letter of Credit) an
amount from the Debt Service Reserve Fund equal to the lesser of
(i) the minimum amount to be drawn under such Debt Service Letter
of Credit and (ii) the moneys then held in the Debt Service
Reserve Fund, and such payment shall not constitute a
Distribution for purposes of Section 3.9 of this Depositary
Agreement, Section 6.22 of the Indenture or any other Financing
Document. Upon receipt by the Depositary Agent of an Officer's
Certificate of the Partnership instructing it to draw on the Debt
Service Reserve Letter of Credit or certifying that the Debt
Termination Date (as defined in the Intercreditor Agreement) has
occurred under the Intercreditor Agreement, the Depositary Agent
shall deliver to the issuer of such Debt Service Letter of
Credit, a draft in an amount equal to the lesser of the amount
set forth in such Officer's Certificate or the aggregate maximum
amount available to be drawn under such letter of credit and
deposit the moneys received into the Debt Service Reserve Fund.
(b) Moneys deposited in the Debt Service Reserve Fund on
any Funding Date or, subject to clause (a), otherwise available
to be drawn on the Debt Service Letter of Credit shall be
allocated ratably (i) among sub-funds of the Debt Service Reserve
Fund established for the principal of and premium, if any, on
each series of the Bonds and each issuance of Additional
Permitted Debt based on the maximum aggregate principal and
premium, if any, payments due and payable on the Bonds on any two
consecutive quarterly payment dates in the immediately succeeding
three-year period from the date of determination and the maximum
principal payments due on the Additional Permitted Debt during
any six-month period in the immediately succeeding three-year
period from the date of determination or, with respect to
Additional Permitted Debt with a Bullet Maturity, in the three-
year period immediately prior to final maturity, the Bullet
Maturity Amounts for six Funding Periods, and (ii) among sub-
funds of the Debt Service Reserve Fund established for the
interest on each series of the Bonds and each issuance of
Additional Permitted Debt based on the maximum aggregate interest
payments due and payable on the Bonds Outstanding due on any two
consecutive quarterly payment dates in the immediately succeeding
three-year period from the date of determination and the maximum
aggregate interest payments due on the Additional Permitted Debt
during any six-month period in the immediately succeeding three-
year period from the date of determination. For the purposes of
allocating the moneys deposited in the Debt Service Reserve Fund
among the sub-funds with respect to Additional Permitted Debt
with a floating interest rate and without a related Interest Rate
Protection Agreement, the interest rate in effect at the time of
calculation for such Additional Permitted Debt shall be assumed
to apply for such three-year period. Except as otherwise
provided in this Depositary Agreement, moneys in such sub-funds
shall be used for the payment, when due and payable (whether at
the stated maturity or upon redemption or by acceleration, or
otherwise), of principal and premium, if any, or interest with
respect to the related series of Bonds and issuances of
Additional Permitted Debt.
(c) On any Funding Date that amounts have been
requisitioned in accordance with Section 3.1(b)(iii) or (iv) and
amounts are to be withdrawn from the Debt Service Reserve Fund in
accordance with this Depositary Agreement, the Depositary Agent
shall withdraw the moneys on deposit in the sub-fund of the Debt
Service Reserve Fund allocated for such series of Bonds or
issuance of Additional Permitted Debt. To the extent that moneys
then held in the sub-fund of the Debt Service Reserve Fund
allocated for such series of Bonds or issuance of Additional
Permitted Debt are insufficient to fund such payment, as
evidenced by the Officer's Certificate delivered in accordance
with Section 3.1(b), one day prior to the Funding Date, the
Depositary Agent shall draw on the Debt Service Letter of Credit
in an amount equal to the lesser of (x) the amount necessary to
make up such deficiency and (y) the amounts available to be drawn
under such Debt Service Letter of Credit allocated for such
series of Bonds or issuance of Additional Permitted Debt. On
such Funding Date, the Depositary Agent shall apply the moneys
withdrawn from the Debt Service Reserve Fund or drawn under the
Debt Service Letter of Credit to the payments of such principal,
premium, if any, or interest then due and payable.
(d) A determination as to the moneys held in the Debt
Service Reserve Fund and/or the aggregate maximum amount at the
time available to be drawn under any Debt Service Letter of
Credit and the then current Debt Service Reserve Requirement
shall be made by the Partnership prior to each Funding Date and
immediately following any withdrawal of amounts in the Debt
Service Reserve Fund pursuant to clause (b) above. As soon as
practicable after making any such determination, the Partnership
shall deliver to the Depositary Agent and the Collateral Agent an
Officer's Certificate of the Partnership setting forth such
determination and the then current Debt Service Reserve
Requirement and the Depositary Agent shall confirm such
determination and Debt Service Reserve Requirement. If such
determination, as confirmed by the Depositary Agent, indicates
that the amount of the moneys held in the Debt Service Reserve
Fund plus the aggregate maximum amount at the time available to
be drawn under the outstanding Debt Service Letter of Credit
exceeds the then current Debt Service Reserve Requirement, on the
next succeeding Funding Date prior to making the distributions
pursuant to Section 3.1(b), the Depositary Agent shall transfer
such excess moneys held in the Debt Service Reserve Fund to the
Project Revenue Fund.
(e) Thirty (30) days prior to the expiration of the Debt
Service Letter of Credit delivered to the Depositary Agent,
provided that the Debt Service Letter of Credit has not been
renewed, extended or replaced, the Depositary Agent shall deliver
to the issuer of such Debt Service Letter of Credit on such date
(i) a draft on the issuer of such Debt Service Letter of Credit
in an amount equal to the maximum amount available to be drawn
under the expiring Debt Service Letter of Credit and (ii) an
appropriate certificate with respect thereto in the form required
by the Debt Service Letter of Credit. The Depositary Agent shall
deposit the moneys received from the issuer of such Debt Service
Letter of Credit in payment of such draft in the Debt Service
Reserve Fund to be applied in accordance with this Section 3.5.
Section III.6 Overhaul Fund. (a) On the Closing Date,
amounts held in an overhaul account established under the
Existing Reimbursement Agreement shall be made available to the
Depositary Agent for ultimate deposit in the Overhaul Fund.
Except as otherwise provided in this Depositary Agreement,
amounts held in the Overhaul Fund shall be applied to pay Major
Maintenance Expenses.
(b) Before any withdrawal and transfer shall be made from
the Overhaul Fund for the purpose of paying Major Maintenance
Expenses, there shall be filed with the Depositary Agent with
respect to each Disbursement Date:
(i) a requisition from the Partnership in the form
attached hereto as Exhibit A (a "Maintenance Requisition")
dated no more than five (5) days prior to such Disbursement
Date as set forth in the Maintenance Requisition on which
such withdrawal and transfer is requested to be made, signed
by an Authorized Representative of the Partnership; and
(ii) an Independent Engineer's Certificate dated no
more than five (5) days prior to such Disbursement Date
approving of the withdrawal and transfer requested to be
made.
(c) On the Disbursement Date referred to in Section 3.6(b)
following receipt of the documents described in Sections
3.6(b)(i) and (ii) above, the Depositary Agent shall withdraw and
transfer from the Overhaul Fund and remit to the Partnership the
amount set forth in the Maintenance Requisition, and thereafter
the Partnership shall remit to the applicable payee any such
amounts the Partnership receives.
(d) Pursuant to Section 6.11(b) of the Indenture, a
determination of the Major Maintenance Requirement shall be
delivered to the Depositary Agent annually in connection with the
Engineer's Annual Report setting forth the then current schedule
of the Major Maintenance Reserve Requirement. The Depositary
Agent shall be entitled to rely on the last determination of the
Major Maintenance Requirement received by it.
Section III.7 Pollution Control Finance Fund. (a) On the
Closing Date, amounts held in the Pollution Control Finance
Account established under the Existing Reimbursement Agreement
shall be made available to the Depositary Agent for ultimate
deposit in the Pollution Control Finance Fund established
pursuant to this Depositary Agreement. Amounts held in the
Pollution Control Finance Fund shall be applied to pay the cost
of installing pollution control facilities at the Project.
(b) Before any withdrawal and transfer shall be made from
the Pollution Control Finance Fund, there shall be deposited with
the Depositary Agent:
(i) a requisition from the Partnership, in the form
satisfactory to the Independent Engineer, dated not more
than five (5) days prior to Disbursement Date set forth
therein on which such withdrawal and transfer is requested
to be made, signed by an Authorized Representative of the
Partnership; and
(ii) an Independent Engineer's Certificate dated not
more than five (5) days prior to such Disbursement Date,
approving of the withdrawal and transfer requested to be
made.
(c) On the Disbursement Date referred to in Section 3.7(b)
following the receipt of the documents described in such section,
the Depositary Agent shall withdraw and transfer from the
Pollution Control Finance Fund and shall remit to the Partnership
the amount set forth in the Partnership's requisition approved by
the Independent Engineer, and thereafter the Partnership shall
remit to the applicable payees any amounts the Partnership
receives.
(d) Upon completion of the installation of pollution
control facilities at the Project, there shall be filed with the
Depositary Agent (i) an Officer's Certificate of the Partnership
certifying the completion of the installation of pollution
control facilities at the Project and the amount, if any,
required in its opinion to be retained in the Pollution Control
Finance Fund for the payment of any remaining costs of
installation not then due and payable or the liability for
payment of which is being contested or disputed by the
Partnership and for the payment of reasonable contingencies
following completion of the installation and (ii) an Independent
Engineer's Certificate stating that completion of the
installation of pollution control facilities at the Project has
occurred and concurring with the amounts to be retained in the
Pollution Control Finance Fund. Upon receipt of the documents
described in clauses (i) and (ii) above, the Depositary Agent
shall transfer the amount, if any, remaining in the Pollution
Control Finance Fund in excess of the amounts, if any, to remain
in the Pollution Control Finance Fund as stated in the Officer's
Certificate of the Partnership to the Project Revenue Fund.
Section III.8 Restoration Fund. (a) In the event that
pursuant to Section 6.10(d)(ii) or (iii) of the Indenture the
Partnership has determined to rebuild, repair or restore the
Project to permit operation of all or a portion of the Project on
a Commercially Feasible Basis, upon delivery to the Depositary
Agent of an Officer's Certificate of the Partnership certifying
that the Project will be rebuilt, repaired or restored to permit
operation of all or a portion of the Project on a Commercially
Feasible Basis, the Depositary Agent shall withdraw and transfer
the Casualty Proceeds, Eminent Domain Proceeds and Title
Insurance Proceeds, as the case may be, segregated in the Project
Revenue Fund to the Restoration Fund. Amounts held in the
Restoration Fund shall be applied solely for the payment of the
costs of rebuilding, repair or restoration of the Project as set
forth below. If the amount initially deposited in the
Restoration Fund with respect to any Event of Loss, Event of
Eminent Domain or Title Event, as the case may be, exceeds
$500,000 per Event of Loss, Event of Eminent Domain or Title
Event, the Partnership shall deliver to the Depositary Agent, the
Collateral Agent, the Trustee, and the L/C Issuer (x) a
restoration budget (the "Restoration Budget") prepared by the
Partnership identifying all costs reasonably anticipated to be
incurred in connection with the rebuilding, restoration or
repair, together with a statement of uses of proceeds of the
Restoration Fund and any other moneys necessary to complete the
rebuilding, repair or restoration and (y) a restoration progress
payment schedule (the "Restoration Progress Payments Schedule")
for the projected requisitions to be made from the Restoration
Fund based on the percentage of rebuilding, repair or restoration
completed.
(b) Before any withdrawal and transfer may be made from the
Restoration Fund, there shall be filed with the Depositary Agent
and the Collateral Agent with respect to each Disbursement Date:
(i) a requisition from the Partnership in the form
attached hereto as Exhibit B (a "Restoration Requisition"),
dated not more than five (5) days prior to such Disbursement
Date as set forth therein on which such withdrawal and
transfer is requested to be made, signed by an Authorized
Representative of the Partnership; and
(ii) if the amount of Casualty Proceeds, Eminent Domain
Proceeds or Title Insurance Proceeds, as the case may be,
initially deposited in the Restoration Fund with respect to
any Event of Loss, Event of Eminent Domain or Title Event,
as the case may be, exceeds $500,000, an Independent
Engineer's Certificate dated not more than five (5) days
prior to the Disbursement Date approving of the withdrawal
and transfer requested to be made.
(c) On the Disbursement Date referred to in Section 3.8(b)
following receipt of the documents described in Sections
3.8(b)(i) and(ii) above, the Depositary Agent shall withdraw and
transfer from the Restoration Fund and shall remit to the
Partnership the amount set forth in the Restoration Requisition,
and thereafter the Partnership shall remit to the applicable
payees any amounts the Partnership receives.
(d) Upon completion of any rebuilding, repair or
restoration of the Project, there shall be filed with the
Depositary Agent and the Collateral Agent (i) an Officer's
Certificate of the Partnership certifying the completion of the
rebuilding, repair or restoration of the Project and the amount,
if any, required in its opinion to be retained in the Restoration
Fund for the payment of any remaining costs of rebuilding, repair
or restoration not then due and payable or the liability for
payment of which is being contested or disputed by the
Partnership and for the payment of reasonable contingencies
following completion of the rebuilding, repair or restoration and
(ii) if the amount of Casualty Proceeds, Eminent Domain Proceeds
or Title Insurance Proceeds, as the case may be, initially
deposited in the Restoration Fund in respect of such Event of
Loss, Event of Eminent Domain or Title Event, as the case may be,
exceeded $500,000, an Independent Engineer's Certificate stating
that completion of the rebuilding, repair or restoration of the
Project has occurred and concurring with the amounts to be
retained in the Restoration Fund. Upon receipt of the documents
described in clauses (i) and (ii) above, the Depositary Agent
shall transfer the amount, if any, remaining in the Restoration
Fund in excess of the amounts, if any, to remain in the
Restoration Fund as stated in the Officer's Certificate of the
Partnership, first, to the Partnership to the extent of any
amounts the Partnership has expended in connection with such
rebuilding, repair or restoration (as set forth in such officer's
Certificate of the Partnership) and not previously reimbursed
(and such payment shall not constitute a Distribution for
purposes of Section 3.9 of this Depositary Agreement or Section
6.22 of the Indenture or any other Financing Document) and
second, segregate the remainder in the Restoration Fund from any
other amounts therein. Upon the segregation of such excess in
the Restoration Fund, the Collateral Agent shall deliver to the
Depositary Agent and the Trustee a certificate setting forth the
allocation of such excess among the Secured Parties pursuant to
the Intercreditor Agreement as if such excess were to be ratably
distributed to the Secured Parties. If the amount allocated to
the Trustee for the benefit of the Holders set forth in the
certificate of the Collateral Agent exceeds $500,000, the
Depositary Agent shall transfer such moneys segregated in the
Project Revenue Fund ratably among (x) the Trustee no later than
one Business Day prior to the Redemption Date, as instructed by
the Company Order delivered by the Partnership to the Depositary
Agent, for the redemption of the Bonds outstanding in whole or in
part in accordance with the Section 7.3(b) of the Indenture and
(y) the other Secured Parties for prompt redemption or prepayment
of Secured Obligations pursuant to the applicable Financing
Document in accordance with the allocation set forth in the
certificate of the Collateral Agent. If the amount allocated to
the Trustee for the benefit of the Holders set forth in the
certificate of the Collateral Agent is less than $500,000, the
Depositary Agent shall transfer the moneys representing the
excess of the Restoration Fund segregated in the Restoration
Fund, first, to the Overhaul Fund until an amount equal to the
then current Major Maintenance Requirement has been deposited
therein, second, to the Debt Service Reserve Fund until the
amount held in the Debt Service Reserve Fund equals the then
current Debt Service Reserve Requirement, and third, to the
Project Revenue Fund. Thereafter, upon receipt of an Officer's
Certificate of the Partnership certifying payment of all costs of
rebuilding, repair or restoration of the Project and an
Independent Engineer's Certificate concurring with such
certification, the Depositary Agent shall transfer any amounts
remaining in the Restoration Fund in the same order and manner as
described in the immediately preceding sentence.
Section III.9 Partnership Distribution Fund. (a) On any
Funding Date that all of the conditions for Distributions set
forth in Section 6.22 of the Indenture and the other Financing
Documents are satisfied, provided that the Depositary Agent shall
not have received within five (5) days of receipt by the
Depositary Agent of the Officer's Certificate of the Partnership
a written objection from the Collateral Agent setting forth the
conditions to Distributions not satisfied under the relevant
Financing Document, the Depositary Agent shall make payment from
the Distribution Sub-Fund to the Partnership for use as
Distributions and any other lawful purpose.
(b) On any Funding Date on which all the conditions
precedent to Distributions are satisfied except (i) the
conditions to Distributions in Section 6.22(a)(vi) of the
Indenture, (ii) the conditions to Distributions in Section
6.22(a)(vii) of the Indenture, (iii) the conditions to
Distributions in Section 6.22(b) of the Indenture, or (iv) the
conditions to Distributions set forth in any other Financing
Document, after giving effect to Distributions otherwise
permitted by Section 6.22(b) of the Indenture, the Depositary
Agent shall transfer all moneys held in the Distribution Sub-Fund
to the Suspension Sub-Fund. The moneys deposited in the
Suspension Sub-Fund and designated for the Funding Date on which
such money is deposited shall be segregated from other amount on
deposit in the Suspension Sub-Fund. On any day thereafter on
which the Partnership is entitled to make a Distribution pursuant
to Section 6.22(c) of the Indenture and all other conditions to
Distributions set forth in the other Financing Documents have
been satisfied, upon delivery to the Trustee, the Collateral
Agent and the Depositary Agent of an Officer's Certificate of the
Partnership certifying either that the Event of Default which had
occurred and was continuing on a previous Funding Date has been
cured or that the conditions set forth in Section 6.22(a)(vii) or
6.22(b) of the Indenture (whichever was previously not satisfied)
are now satisfied and, in either case, all other conditions to
Distributions set forth in the other Financing Documents have
been satisfied, the Depositary Agent shall withdraw and transfer
moneys in the Suspension Sub-Fund designated for such Funding
Date to the Partnership to make Distributions and any other
lawful purpose.
(c) Upon receipt of an Officer's Certificate of the
Partnership (or, if an Event of Default (as defined in the
Intercreditor Agreement) shall have occurred and be continuing, a
certificate of a Responsible Officer of the Trustee, approved by
an authorized representative of the L/C Issuer, or a certificate
of an authorized representative of the L/C Issuer approved by a
Responsible Officer of the Trustee) requesting transfer of moneys
held in the Partnership Distribution Fund to any other Fund, the
Depositary Agent shall promptly transfer from the sub-finds of
the Partnership Distribution Fund the specified amount to the
specified Fund in accordance with the Officer's Certificate.
Section III.10 Additional Permitted Debt Fund. (a) If the
Partnership or the Company incurs any Additional Permitted Debt
or the Company makes Loans to the Partnership of the proceeds of
Additional Permitted Debt of the Company permitted under Sections
6.16(a)(v) and (vi) of the Indenture, respectively, the
Partnership and the Company shall deposit with the Depositary
Agent the proceeds of such Additional Permitted Debt or Loans to
be held in the Additional Permitted Debt Fund. Except as
otherwise provided in this Depositary Agreement, amounts held in
the Additional Permitted Debt Fund shall be applied solely for
the payment of the costs of enhancements and modifications to the
Project as set forth below.
(b) Before any withdrawal and transfer shall be made from
the Additional Permitted Debt Fund, there shall be filed with the
Depositary Agent and the Collateral Agent with respect to each
Disbursement Date:
(i) a requisition from the Partnership in the form
satisfactory to the Independent Engineer and the holders of
such Additional Permitted Debt (a "Modification
Requisition"), dated not more than five (5) days prior to
such Disbursement Date as set forth therein on which such
withdrawal and transfer is requested to be made, signed by
an Authorized Representative of the Partnership;
(ii) an Officer's Certificate of the Partnership in the
form satisfactory to the Independent Engineer and the
holders of such Additional Permitted Debt dated not more
than five (5) days prior to such Disbursement Date;
(iii) a budget prepared by the Partnership
identifying all costs reasonably anticipated to be incurred
in connection with the enhancement or modification, together
with a statement of reasonably anticipated use of proceeds
of the Additional Permitted Debt Fund and any other moneys
necessary to complete the enhancement or modification and a
progress payment schedule for the projected requisitions to
be made from the Additional Permitted Debt Fund; and
(iv) an Independent Engineer's Certificate in the form
satisfactory to the holders of such Additional Permitted
Debt, dated not more than five (5) days prior to such
Disbursement Date.
(c) On the Disbursement Date referred to in Section 3.10(b)
following receipt of the documents described in Sections
3.10(b)(i) through (iv) above, the Depositary Agent shall
withdraw and transfer from the Additional Permitted Debt Fund and
shall remit to the Partnership the amount set forth in the
Modification Requisition, and thereafter the Partnership shall
remit to the applicable payees any amounts the Partnership
receives.
Section III.11 Property Tax Fund. (a) Amounts held in the
Property Tax Fund shall be applied to pay property taxes assessed
against the property of The Bibb Company that includes, or is
contiguous to, the Site.
(b) Before any withdrawal and transfer shall be made from
the Property Tax Fund, there shall be deposited with the
Depositary Agent:
(i) a requisition from the Partnership, in a form
satisfactory to the Depositary Agent, dated not more than
five (5) days prior to Disbursement Date set forth therein
on which such withdrawal and transfer is requested to be
made, signed by an Authorized Representative of the
Partnership stating that the taxes to be paid with the
amount requisitioned are due and it is anticipated that, if
such taxes are not paid, a Lien on the Site will be
foreclosed or otherwise realized upon; and
(ii) any notice or other written communication received
by the Partnership evidencing the possible enforcement of
such Lien.
(c) On the Disbursement Date referred to in Section 3.11(b)
and following the receipt of the documents described in such
Section, the Depositary Agent shall withdraw and transfer from
the Property Tax Fund and shall remit to the Partnership the
amount set forth in the Partnership's requisition, and thereafter
the Partnership shall remit to the applicable taxing authority or
appropriate payees any amounts the Partnership receives.
(d) Reference is made to Section 6.29 of the Indenture,
which provides that upon the occurrence of either of the events
described therein, the Partnership shall deliver to the
Depositary Agent, an Officer's Certificate of the Partnership
certifying that such event has occurred. Upon receipt of such
Officer's Certificate and the other documents described in
Section 6.29 of the Indenture, the Depositary Agent shall
transfer the amount, if any, remaining in the Property Tax Fund
in excess of the amounts, if any, to remain in the Property Tax
Fund as stated in the Officer's Certificate of the Partnership to
the Project Revenue Fund.
(e) Upon the payment of The Bibb Company of the property
taxes against the property that includes the Site for a
particular tax year, the Partnership may submit to the Depositary
Agent:
(i) an Officer's Certificate of the Partnership
certifying that the property taxes for such year have been
paid in full, and
(ii) such other documents as the Depositary Agent may
reasonably request to evidence that such payment has been
made.
Upon receipt of such Officer's Certificate and other
documents, the Depositary Agent shall transfer the amount, if
any, remaining in the Property Tax Fund that is in excess of the
then current Property Tax Requirement with respect to any tax
year that has not been paid in full to the Project Revenue Fund.
Section III.12 Payment Deficiencies; Invasion of Funds. (a)
If on any Funding Date the aggregate amount of moneys withdrawn
from the Project Revenue Fund pursuant to Section 3.1(b)(i) are
not sufficient to pay in full all Operating Expenses
requisitioned in accordance with Section 3.1(b)(i) and the
Partnership is unable to borrow moneys under a Credit Bank
Working Capital Agreement, the Depositary Agent shall forthwith
make up such deficiency by withdrawing cash for such purpose from
the Distribution Sub-Fund, the Suspension Sub-Fund, the Overhaul
Fund, the Pollution Control Finance Fund, the Additional
Permitted Debt Fund, the Property Tax Fund, ratably from the
Principal Account sub-funds, and ratably from the Interest
Account sub-funds, ratably from the Debt Service Reserve sub-
funds (including any draws on the Debt Service Letter of Credit),
in such order, until such deficiency is satisfied and by
depositing such cash into the Operating Fund for transfer to the
Partnership in accordance with Section 3.2. If, after giving
effect to the immediately preceding sentence, there shall be
insufficient moneys to pay in full the whole amount of such
requisition, the aggregate amount withdrawn from the Project
Revenue Fund, the Distribution Sub-Fund, the Suspension Sub-Fund,
the Overhaul Fund, the Pollution Control Finance Fund, the
Additional Permitted Debt Fund, the Property Tax Fund, and
ratably from the Principal Account, the Interest Account, the
Debt Service Reserve Fund shall be applied to the ratable payment
of such amount.
(b) If on any Funding Date the aggregate amount of moneys
withdrawn from the Project Revenue Fund pursuant to Section
3.1(b)(ii) are not sufficient to pay in full amounts
requisitioned in accordance with Section 3.1(b)(ii), the
Depositary Agent shall forthwith make up such deficiency by
withdrawing cash for such purpose from the Distribution Sub-Fund,
the Suspension Sub-Fund, the Overhaul Fund, the Pollution Control
Finance Fund, and the Additional Permitted Debt Fund, in such
order, until such deficiency is satisfied and by depositing such
cash into the Project Revenue Fund for transfer to the Credit
Banks in accordance with Section 3.1(b)(ii). If, after giving
effect to the immediately preceding sentence, there shall be
insufficient moneys to pay in full the whole amount of such
requisition, the aggregate amount withdrawn from the Project
Revenue Fund, the Distribution Sub-Fund, the Suspension Sub-Fund,
the Overhaul Fund, the Pollution Control Finance Fund, and the
Additional Permitted Debt Fund, shall be applied to the ratable
payment of such amount.
(c) If on any Funding Date the aggregate amount of moneys
withdrawn from the Project Revenue Fund pursuant to Section
3.1(b)(iii) and the Interest Fund sub-funds (to the extent
allocated to such payments) pursuant to Section 3.3(b) are not
sufficient to pay in full all amounts requisitioned in accordance
with Section 3.1(b)(iii), the Depositary Agent shall forthwith
make up such deficiency by withdrawing moneys for such purpose
from the Distribution Sub-Fund, the Suspension Sub-Fund, the
Overhaul Fund, the Pollution Control Finance Fund, the Property
Tax Fund, the Debt Service Reserve Fund sub-funds (to the extent
allocated to such payments) and the Additional Permitted Debt
Fund, in such order, until such deficiency is satisfied and by
depositing such moneys into the Project Revenue Fund for payment
in accordance with Section 3.1(b)(iii). If, after giving effect
to the immediately preceding sentence, there shall be
insufficient moneys to pay in full the whole amount of such
requisition, the aggregate amount withdrawn from the Project
Revenue Fund, the Interest Account, the Distribution Sub-Fund,
the Suspension Sub-Fund, the Overhaul Fund, the Pollution Control
Finance Fund, the Property Tax Fund, the Debt Service Reserve
Fund, and the Additional Permitted Debt shall be applied to the
ratable payment of such interest.
(d) If on any Funding Date the aggregate amount of moneys
withdrawn from the Project Revenue Fund pursuant to Section
3.1(b)(iv) and the Principal Account sub-funds (to the extent
allocated to such payments) pursuant to Section 3.4(b) are not
sufficient to pay in full all amounts requisitioned in accordance
with Section 3.1(b)(iv), the Depositary Agent shall forthwith
make up such deficiency by withdrawing moneys for such purpose
from the Distribution Sub-Fund, the Suspension Sub-Fund, the
Overhaul Fund, the Pollution Control Finance Fund, the Property
Tax Fund, the Debt Service Reserve Fund sub-funds (to the extent
allocated to such payment) in accordance with Section 3.5(c),
and the Additional Permitted Debt Fund, in such order, until such
deficiency is satisfied and by depositing such moneys into the
Project Revenue Fund for payment in accordance with Section
3.1(b)(iv). If, after giving effect to the immediately preceding
sentence, there shall be insufficient moneys to pay in full the
whole amount of such requisition, the aggregate amount withdrawn
from the Project Revenue Fund, the Principal Account, the
Distribution Sub-Fund, the Suspension Sub-Fund, the Overhaul
Fund, the Pollution Control Finance Fund, the Property Tax Fund,
the Debt Service Reserve Fund, and the Additional Permitted Debt
Fund shall be applied to the ratable payment of such principal.
(e) If on any Funding Date the aggregate moneys withdrawn
from the Project Revenue Fund pursuant to Section 3.1(b)(v) are
not sufficient to pay in full all amounts requisitioned in
accordance with Section 3.1(b)(v), the Depositary Agent shall
forthwith make up such deficiency by withdrawing moneys for such
purpose from the Distribution Sub-Fund, the Suspension Sub-Fund,
the Overhaul Fund, the Pollution Control Finance Fund, the
Property Tax Fund, and the Additional Permitted Debt Fund, in
such order, until such deficiency is satisfied and by depositing
such amount into the Project Revenue Fund for payment in
accordance with Section 3.1(b)(v). If, after giving effect to the
immediately preceding sentence, there shall be insufficient
moneys to pay in full the whole amount of such requisition, the
aggregate amount withdrawn from the Project Revenue Fund, the
Distribution Sub-Fund, the Suspension Sub-Fund, the Overhaul
Fund, the Pollution Control Finance Fund, the Property Tax Fund,
and the Additional Permitted Debt Fund shall be applied to the
ratable payment of such amounts.
(f) If on any Funding Date the aggregate amount of moneys
withdrawn from the Project Revenue Fund pursuant to Section
3.1(b)(vi) or (vii) are not sufficient to pay in full all amounts
to be transferred to the Debt Service Fund in accordance with
Section 3.1(b)(vi) or (vii), the Depositary Agent shall forthwith
make up such deficiency by withdrawing cash for such purpose from
the Distribution Sub-Fund, the Suspension Sub-Fund, the Overhaul
Fund, the Pollution Control Finance Fund, the Property Tax Fund,
and the Additional Permitted Debt Fund, in such order, until such
deficiency is satisfied and by depositing such cash into the
Project Revenue Fund for transfer to the Debt Service Fund in
accordance with Section 3.1(b)(vi) or (vii). If, after giving
effect to the immediately preceding sentence, there shall be
insufficient moneys to pay in full the whole amount required to
be transferred to the Debt Service Fund on such Funding Date, the
aggregate amount withdrawn from the Project Revenue Fund, the
Distribution Sub-Fund, the Suspension Sub-Fund, the Overhaul
Fund, the Pollution Control Finance Fund, the Property Tax Fund,
and the Additional Permitted Debt Fund shall be applied to the
ratable payment of such amount.
(g) If on any Funding Date the aggregate amount of moneys
withdrawn from the Project Revenue Fund pursuant to Section
3.1(b)(viii) are not sufficient to pay in full amounts to be
transferred to the Property Tax Fund in accordance with Section
3.1(b)(viii), the Depositary Agent shall forthwith make up such
deficiency by withdrawing cash for such purpose from the
Distribution Sub-Fund, the Suspension Sub-Fund, the Overhaul
Fund, the Pollution Control Finance Fund, and the Additional
Permitted Debt Fund, in such order, until such deficiency is
satisfied and by depositing such cash into the Project Revenue
Fund for transfer to the Property Tax Fund in accordance with
Section 3.1(b)(viii). If, after giving effect to the immediately
preceding sentence, there shall be insufficient moneys to pay in
full the whole amount that is required to be transferred to the
Property Tax Fund on such Funding Date, the aggregate amount
withdrawn from the Project Revenue Fund, the Distribution Sub-
Fund, the Suspension Sub-Fund, the Overhaul Fund, the Pollution
Control Finance Fund and the Additional Permitted Debt Fund shall
be applied to the ratable payment of such amount.
(h) If on any Funding Date the aggregate amount of moneys
withdrawn from the Project Revenue Fund pursuant to Section
3.1(b)(ix) are not sufficient to pay in full amounts to be
transferred to the Debt Service Reserve Fund in accordance with
Section 3.1(b)(ix), the Depositary Agent shall forthwith make up
such deficiency by withdrawing cash for such purpose from the
Distribution Sub-Fund, the Suspension Sub-Fund, the Overhaul
Fund, the Pollution Control Finance Fund and the Additional
Permitted Debt Fund, in such order, until such deficiency is
satisfied and by depositing such cash into the Project Revenue
Fund for transfer to the Debt Service Reserve Fund in accordance
with Section 3.1(b)(ix). If, after giving affect to the
immediately preceding sentence, there shall be insufficient
moneys to pay in full the whole amount required to be transferred
to the Debt Service Reserve Fund on such Funding Date, the
aggregate amount withdrawn from the Project Revenue Fund, the
Distribution Sub-Fund, the Suspension Sub-Fund, the Overhaul
Fund, the Pollution Control Finance Fund and the Additional
Permitted Debt Fund shall be applied to the ratable payment of
such amount.
Section III.13 Investment of Funds. Moneys held in any Fund
created by and held under this Depositary Agreement shall be
invested and reinvested in Permitted Investments at the written
direction (which may be in the form of a standing instruction) of
an Authorized Representative of the Partnership; provided,
however, that at any time when (a) a Responsible Officer of the
Depositary Agent has received written notice that an Event of
Default shall have occurred and be continuing or (b) an
Authorized Representative of the Partnership has not timely
furnished such a written direction or, after a request by the
Depositary Agent, has not so confirmed a standing instruction to
the Depositary Agent, the Depositary Agent shall invest such
moneys only in Permitted Investments of a maturity of thirty (30)
days or less. Such investments shall mature in such amounts and
have maturity dates or be subject to redemption at the option of
the holder thereof on or prior to maturity as needed for the
purposes of such Funds, but in no event shall such investments
mature more than one year after the date acquired. Any income or
gain realized from such investments shall be deposited, first,
into the Fund from which such moneys came, until the amount in
such Fund equals the amount then required to be deposited in such
Fund and, second, into the Project Revenue Fund. Any loss shall
be charged to the applicable Fund. The Depositary Agent shall
not be liable for any such loss other than by reason of its
willful misconduct or gross negligence. For purposes of any
income tax payable on account of any income or gain on an
investment, such income or gain shall be for the account of the
Partnership and the Company.
Section III.14 Disposition of Funds Upon Retirement of Bonds
and Additional Permitted Debt. (a) Upon the payment in full of
the principal, premium, if any, and interest on any series of
Bonds or issuance of Additional Permitted Debt such that such
series of Bonds or issuance of Additional Permitted Debt is no
longer Outstanding, all amounts held in the sub-funds of the
Interest Account, the Principal Account and the Debt Service
Reserve Fund allocated to such series of Bonds or issuance of
Additional Permitted Debt, as the case may be, shall be
transferred to the Project Revenue Fund.
(b) Upon termination of the Intercreditor Agreement and
after payment in full of the principal of, premium, if any, and
interest on all the Additional Permitted Debt and Bonds
Outstanding, all amounts payable to the Credit Banks under the
Credit Bank Documents and all to payable to the Permitted
Counterparties under the Interest Rate Protection Agreements, and
after payment in full of all Administrative Claims, Trustee
Claims, Collateral Agent Claims, the Depositary Agent Claims, and
all fees, charges and expenses of the Independent Engineer, the
Gas Consultant and the Insurance Consultant and after payment in
full of all other amounts required to be paid hereunder, all
amounts remaining in any Fund established in Section 2.2 shall be
paid by the Depositary Agent to the Partnership upon receipt of a
certificate of the Collateral Agent authorizing such payments
from the Funds.
Section III.15 Fund Balance Statements. The Depositary Agent
shall, on a monthly basis and at such other times as the
Collateral Agent, the Partnership or the Company may from time to
time reasonably request, provide to the Collateral Agent, the
Partnership and the Company, fund balance statements in respect
of each of the Funds, accounts, sub-funds and amounts segregated
in any of the Funds. Such balance statement shall also include
deposits, withdrawals and transfers from and to any Fund,
account, sub-fund and segregated amounts.
Section III.16 Trigger Events. (a) On and after any date
on which the Depositary Agent receives written notice from the
Collateral Agent pursuant to Section 2.4(a) of the Intercreditor
Agreement that a Trigger Event has occurred (the date of receipt
of such notice, the "Trigger Event Day"), the Depositary Agent
shall thereafter accept all notices and instructions required to
be given to the Depositary Agent pursuant to the terms of this
Depositary Agreement only from the Collateral Agent and not from
any other Person and the Depositary Agent shall not withdraw,
transfer, pay or otherwise distribute any moneys in any of the
Funds except pursuant to such notices and instructions from the
Collateral Agent.
(b) On the Trigger Event Date, the Depositary Agent shall
(i) draw on the Debt Service Letter of Credit and deposit the
proceeds thereof into the Debt Service Reserve Fund and (ii)
render to the Collateral Agent an accounting of all moneys in the
Funds as of the Trigger Event Date.
(c) On and after the Trigger Event Date, the Depositary
Agent shall (A) distribute all money then held in the Project
Revenue Fund in accordance with clauses (i) through (vii) of
Section 3.1(b) (except that it shall not make any withdrawal,
transfer or payment in accordance with Section 3.1(b)(i) unless
the Depositary Agent receives written notice from the Collateral
Agent to make such withdrawal, transfer or payment) and (B) make
any or all of the following transfers and withdrawals as directed
in a notice from the Collateral Agent:
(i) to the Trustee for redemption of the Bonds
Outstanding in accordance with Section 7.3 of the Indenture,
or if the maturity of the Bonds have been accelerated
pursuant to Section 8.2 of the Indenture, for payment of the
Bonds and to each holder of Additional Permitted Debt, any
moneys held in the Principal Account sub-funds, the Interest
Account sub-funds, the Additional Permitted Debt Fund and
the Debt Service Reserve Fund sub-funds, in each case,
allocated to the Bonds and such Additional Permitted Debt,
respectively; and
(ii) to the Trustee (for redemption of the Bonds
outstanding in accordance with Section 7.3 of the Indenture
or, if the maturity of the Bonds has been accelerated, for
payment of the Bonds), and to the other Secured Parties,
ratably, any moneys held in the Operating Fund, the Overhaul
Fund, the Pollution Control Finance Fund, the Property Tax
Fund, the Partnership Distribution Fund and the Restoration
Fund and any moneys remaining in the Funds described in
clause (i) above after making the withdrawals specified
therein;
provided that if the Depositary Agent has not received a notice
authorizing the Depositary Agent to distribute all amounts in the
Project Revenue Fund as provided in Section 3.16(c)(A) from the
Collateral Agent following the Trigger Event Date, the Depositary
Agent shall distribute all moneys then held in the Project
Revenue Fund in accordance with Section 3.1(b) (except that it
shall not make any withdrawal, transfer or payment in accordance
with Section 3.1(b)(i)) on each one-month anniversary of the
Trigger Event Date until the Depositary Agent receives such
notice from the Collateral Agent and thereafter the Depositary
Agent shall follow the instructions set forth in such notice
until notified otherwise by the Collateral Agent.
(d) Upon receipt from the Collateral Agent of any cash
proceeds resulting from liquidation of the Collateral, the
Depositary Agent shall (i) first, deposit such cash proceeds
resulting from liquidation of the Collateral into the Project
Revenue Fund, (ii) second, pay to each of the Collateral Agent,
the Trustee, the Credit Banks (if there is no agent(s) for the
Credit Banks or, if there is an agent or agents for the Credit
Banks, then the agent(s) for the Credit Banks) and any other
trustees or agents that are Secured Parties under the Security
Documents, and the Depositary Agent, as the case may be, ratably,
in an amount equal to the amounts due in respect of the
Administrative Claims, the Collateral Agent Claims, the Trustee
Claims and the Depositary Agent Claims, respectively, due and
payable as of the date of such distribution; provided that, prior
to any such distribution to any such Persons, the Depositary
Agent shall have received a certificate signed by each such
Person setting forth the amount payable to such Person as of the
date of such distribution, including any supporting materials for
such claims and (iii) third, distribute the balance of such
proceeds in accordance with Section 3.16(c)(A).
ARTICLE IV
Depositary Agent
Section IV.1 Appointment of Depositary Agent, Powers and
Immunities. The Collateral Agent, on behalf of the Secured
Parties under the Intercreditor Agreement, hereby irrevocably
appoints and authorizes the Depositary Agent to act as its agent
hereunder, with such powers as are expressly delegated to the
Depositary Agent by the terms of this Depositary Agreement,
together with such other powers as are reasonably incidental
thereto. The Depositary Agent shall not have any duties or
responsibilities except those expressly set forth in this
Depositary Agreement. Without limiting the generality of the
foregoing, the Depositary Agent shall take all actions as the
Collateral Agent shall direct it to perform in accordance with
the express provisions of this Depositary Agreement or as the
Collateral Agent may otherwise direct it to perform in accordance
with the provisions of this Depositary Agreement.
Notwithstanding anything to the contrary contained herein, the
Depositary Agent shall not be required to take any action which
is contrary to this Depositary Agreement or applicable law.
Neither the Depositary Agent nor any of its Affiliates shall be
responsible to any Secured Party for any recitals, statements,
representations or warranties made by the Partnership or the
Company contained in this Depositary Agreement or any other
Project Document or Financing Document or in any certificate or
other document referred to or provided for in, or received by any
Secured Party under, the Indenture, this Depositary Agreement or
any other Project Document or Financing Document for the value,
validity, effectiveness, genuineness, enforceability or
sufficiency of this Depositary Agreement or any other Project
Document or any other document referred to or provided for herein
or therein or for any failure by the Partnership or the Company
to perform their respective obligations hereunder or thereunder,
the Depositary Agent shall not be required to ascertain or
inquire as to the performance by the Partnership or the Company
of any of their respective obligations under the Indenture, any
other Financing Document, this Depositary Agreement or any other
Project Document or any other document or agreement contemplated
hereby or thereby. The Depositary Agent shall not be (a)
required to initiate or conduct any litigation or collection
proceeding hereunder or under any other Collateral Document or
(b) responsible for any action taken or omitted to be taken by it
hereunder (except for its own gross negligence or willful
misconduct) or in connection with any other Collateral Document.
Except as otherwise provided under this Depositary Agreement, the
Depositary Agent shall take action under this Depositary
Agreement only as it shall be directed in writing by the
Collateral Agent. Whenever in the administration of this
Depositary Agreement the Depositary Agent shall deem it necessary
or desirable that a factual matter be proved or established in
connection with the Depositary Agent taking, suffering or
omitting to take any action hereunder, such matter (unless other
evidence in respect thereof is herein specifically prescribed)
may be deemed to be conclusively proved or established by a
certificate of any Authorized Representative of the Partnership
or the Company, as the case may be, or the Collateral Agent, if
appropriate. The Depositary Agent shall have the right at any
time to seek instructions concerning the administration of this
Depositary Agreement from the Collateral Agent or any court of
competent jurisdiction.
Section IV.2 Reliance by Depositary Agent. The Depositary
Agent shall be entitled to rely upon any certificate, Officer's
Certificate of the Partnership, Independent Engineer's
Certificate, notice or other document (including any electric
mail, cable, telegram, telecopy or telex) believed by it to be
genuine and to have been signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statement of legal
counsel, independent accountants and other experts selected by
the Depositary Agent and shall have no liability for its actions
taken thereupon, unless due to the Depositary Agent's willful
misconduct or gross negligence. The Depositary Agent's duties
and responsibilities hereunder are entirely administrative and
not discretionary and are to be determined only with reference to
this Depositary Agreement and applicable law. Without limiting
the foregoing, the Depositary Agent shall be required to make
payment to the Secured Parties only as set forth herein. As to
any matters not expressly provided for by this Depositary
Agreement, the Depositary Agent shall not be required to take any
action or exercise any discretion, but shall be required to act
or to refrain from acting upon the instructions of the Collateral
Agent and shall in all such cases be fully protected in acting,
or in refraining from acting, hereunder in accordance with or
pursuant to the terms of this Depositary Agreement or the
instructions of the Collateral Agent, and such instructions of
the Collateral Agent and any action taken or failure to act
pursuant thereto shall be binding on all of the Secured Parties.
The Depositary Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Depositary
Agreement in accordance with a request of the Collateral Agent,
and such request and any action taken or failure to act pursuant
thereto shall be binding upon the Collateral Agent and the
Secured Parties.
Section IV.3 Court Orders. The Depositary Agent is hereby
authorized, in its exclusive discretion, to obey and comply with
all writs, orders, judgments or decrees issued by any court or
administrative agency affecting any money, documents or things
held by the Depositary Agent. The Depositary Agent shall not be
liable to any of the parties hereto or any other Secured Party,
their successors, heirs or personal representatives by reason of
the Depositary Agent's compliance with such writs, orders,
judgments or decrees, notwithstanding such writ, order, judgment
or decree is later reversed, modified, set aside or vacated.
Section IV.4 Resignation or Removal of Depositary Agent.
Subject to the appointment and acceptance of a successor
Depositary Agent as provided below, the Depositary Agent may
resign at any time by giving thirty (30) days written notice
thereof to the Collateral Agent, the Partnership and the Company.
The Depositary Agent may be removed at any time with cause by the
holders of 25% or more of the Combined Exposure and, if not the
same Person as the Depositary Agent, by the Trustee or the
Collateral Agent. In the event that the Depositary Agent shall
decline to take any action without first receiving an indemnity
from the Partnership, the Company, the Secured Parties or the
Collateral Agent, as the case may be, and, having received an
indemnity, shall continue to decline to take such action, the
Collateral Agent, the Trustee and the holders of 25% or more of
the Combined Exposure shall be deemed to have sufficient cause to
remove the Depositary Agent. In the event the Depository Agent
is also the Trustee, the Collateral Agent (if it is not the same
Person as the Depositary Agent) and such holders shall have the
right to remove the Depositary Agent with or without cause. Upon
any such resignation or removal, the Collateral Agent shall have
the right to appoint a successor Depositary Agent, which
Depositary Agent shall be reasonably acceptable to the
Partnership and the Company. If no successor Depositary Agent
shall have been appointed by the Collateral Agent and shall have
accepted such appointment within 30 days after the retiring
Depositary Agent's giving of notice of resignation or the removal
of the retiring Depositary Agent, then the retiring Depositary
Agent may appoint a successor Depositary Agent, which shall be a
bank or trust company reasonably acceptable to the Collateral
Agent, the Partnership and the Company. Upon the acceptance of
any appointment as Depositary Agent hereunder by the successor
Depositary Agent, (a) such successor Depositary Agent shall
thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Depositary Agent,
and the retiring Depositary Agent shall be discharged from its
duties and obligations hereunder and (b) the retiring Depositary
Agent shall promptly transfer the Funds within its possession or
control to the possession or control of the successor Depositary
Agent and shall execute and deliver such notices, instructions
and assignments as may be necessary or desirable to transfer the
rights of the Depositary Agent with respect to the Funds to the
successor Depositary Agent. After the retiring Depositary Agents
resignation or removal hereunder as Depositary Agent, the
provisions of this Article IV and of Article V shall continue in
effect for its benefit in respect of any actions taken or omitted
to be taken by it while it was acting as Depositary Agent.
ARTICLE V
Expenses; Indemnification; Fees
Section V.1 Expenses. The Partnership and the Company
agree to pay or reimburse all out-of-pocket expenses of the
Depositary Agent (including reasonable fees and expenses for
legal services of every kind) in respect of, or incident to, the
administration or enforcement of any of the provisions of this
Depositary Agreement or in connection with any amendment, waiver
or consent relating to this Depositary Agreement.
Section V.2 Indemnification. The Partnership and the
Company jointly and severally agree to indemnify the Depositary
Agent from and against any and all claims, losses, liabilities
and expenses (including the fees and expenses of counsel) growing
out of or resulting from (a) this Depositary Agreement
(including, without limitation, performance under or enforcement
of this Depositary Agreement, but excluding any such claims,
losses or liabilities resulting from the Depositary Agent's gross
negligence or willful misconduct) or (b) any refund or adjustment
of any amount paid or payable to the Depositary Agent under or in
respect of this Depositary Agreement which may be ordered or
otherwise required by any Person. This indemnity shall survive
the termination of this Depositary Agreement, and the resignation
or removal of the Depositary Agent.
Section V.3 Fees. On the Closing Date, and on each
anniversary of the Closing Date to and including the Maturity
Date, the Partnership and the Company shall pay the Depositary
Agent a fee in an amount mutually agreed on by the Partnership,
the Company and the Depositary Agent.
ARTICLE VI
Exculpation
Section VI.1 Exculpation. Notwithstanding anything to the
contrary contained in this Depositary Agreement, the liability
and obligation of the Partnership or the Company to perform and
observe and make good the obligations contained in this
Depositary Agreement shall not be enforced by any action or
proceeding wherein damages or any money judgment or any
deficiency judgment or any judgment establishing any personal
obligation or liability shall be sought, collected or otherwise
obtained against any Partner, any past, present or future
partner, officer, director or shareholder or related Person of
any Partner or the Company (other than the Partnership and the
Company), and the Depositary Agent, for itself and its successors
and assigns, and the Collateral Agent, for itself and its
successors and assigns, irrevocably waive any and all right to
sue for, seek or any such damages. money judgment, deficiency
judgment or personal judgment against any Partner, any past,
present or future partner, officer, director or shareholder or
related Person of any Partner or the Company (other than the
Partnership and the Company) under or by reason of or in
connection with this Depositary Agreement and agrees to look
solely to the Company and the Partnership and the security and
collateral held under or in connection with the Collateral
Documents for the enforcement of such liability and obligation of
the Company or the Partnership. Nothing contained in this
paragraph shall be construed (i) as preventing the Depositary
Agent or the Collateral Agent from naming the Company or the
Partnership, any Partner, any past, present or future partner,
officer, director or shareholder or related Person of any Partner
or the Company in any action or proceeding brought by the
Collateral Agent to enforce and to realize upon the security and
collateral provided under or in connection with the Collateral
Documents so long as no judgment, order, decree or other relief,
in each came, in the nature of a personal or deficiency judgment
or otherwise establishing any personal obligation shall be asked
for, taken, entered or enforced against any Partner or any past,
present or future partner, officer, director or shareholder or
related Person of any Partner or the Company (other than the
Partnership and the Company), in any such action or proceeding,
(ii) as modifying, qualifying or affecting in any manner
whatsoever the lien and security interests created by this
Depositary Agreement and the other Project Documents or the
enforcement thereof by the Collateral Agent, (iii) as modifying,
qualifying or affecting in any manner whatsoever the personal
recourse undertakings, obligations and liabilities of any person,
party or entity under any guaranty of payment. completion
guaranty, other guaranty or indemnification agreement now or
hereafter executed and delivered to the Collateral Agent in
connection with the Collateral Documents, or (iv) as modifying.
qualifying or affecting in any manner whatsoever the personal
recourse liability of any Partner, any past, present or future
partner, officer, director or shareholder or related Person of
any Partner or the Company or any other person, party or entity
for fraud or willful misrepresentation or any wrongful
misappropriation or diversion of any portion of the Collateral.
ARTICLE VII
Miscellaneous
Section VII.1 Amendments; Etc. No amendment or waiver of
any provision of this Depositary Agreement nor consent to any
departure by the Partnership and the Company here from shall in
any event be effective unless the same shall be in writing and
signed by the Collateral Agent, the Depositary Agent, the
Partnership and the Company and such amendment or waiver shall
have been consented to by the Trustee. Any such amendment,
waiver or consent shall be effective only in the specific
instance and for the specified purpose for which given.
Section VII.2 Addresses for Notices. All notices, requests
and other communications provided for hereunder shall be in
writing and, except as otherwise required by the provisions of
this Depositary Agreement, shall be given to the Company and the
Partnership as provided in Section 1.5 of the Indenture, and in
the case of notices, requests, or communications to or with the
Depositary Agent, to the following address, or such other address
as the Depositary Agent may from time to time designate in
writing to the others as herein required:
Fleet National Bank
Corporate Trust Department
777 Main Street
CTM00238
Hartford, Connecticut 06115
Ref: Panda-Rosemary 1996
Telecopier Number: (860) 986-7920
and, in the came of notices, requests or communications to or
with the Collateral Agent, to the following address, or such
other address as the Collateral Agent may from time to time
designate in writing to the others as herein required:
Fleet National Bank
Corporate Trust Department
777 Main Street
CTM00238
Hartford, Connecticut 06115
Ref: Panda-Rosemary 1996
Telecopier Number: (860) 986-7920
Except as may be otherwise required by Section 1.5 of the
Indenture with respect to the Partnership and the Company,
notices, requests and other communications shall be delivered
personally, telecopied or transmitted by another customary form
of electronic transmission, or mailed, postage prepaid. Each
such notice, request and other communication shall be deemed to
have been given if and when received by an officer, manager or
supervisor in the department of the addressee specified for
attention (unless the addressee refuses to accept delivery, in
which case they shall be deemed to have been given when first
presented to the addressee for acceptance); provided, however,
that notices to the Depository Agent must be received by a
Responsible Officer.
Section VII.3 Governing Law. THIS DEPOSITARY AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW
OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS (OTHER THAN THE PROVISIONS OF SECTION 5-1401 OF
THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).
Section VII.4 Headings. The headings used in this
Depositary Agreement are for convenience of reference only and do
not constitute part of this Depositary Agreement for any purpose.
Section VII.5 No Third Party Beneficiaries. The agreements
of the parties hereto are solely for the benefit of the
Partnership, the Company, the Collateral Agent, the Depositary
Agent and the Secured Parties and their respective successors and
assigns and no Person (other than the parties hereto and such
Secured Parties) shall have any rights hereunder.
Section VII.6 No Waiver. No failure an the part of the
Depositary Agent, the Collateral Agent or any Secured Party or
any of their nominees or representatives to exercise, and no
course of dealing with respect to, and no delay in exercising,
any right, power or remedy hereunder shall be construed as a
waiver thereof; nor shall any single or partial exercise by the
Depositary Agent, the Collateral Agent or any Secured Party or
any of their nominees or representatives of any right, power or
remedy preclude the exercise of any other right, remedy or power.
Section VII.7 Severability. If any provision of this
Depositary Agreement or the application thereof shall be invalid
or unenforceable to any extent, (a) the remainder of this
Depositary Agreement and the application of such remaining
provisions shall not be affected, and (b) each such remaining
provision shall be enforced to the fullest extent permitted by
law.
Section VII.8 Successors and Assigns. All covenants,
agreements, representations and warranties in this Depositary
Agreement by the Depositary Agent, the Collateral Agent, the
Partnership and the Company shall bind and, to the extent
permitted hereby, shall inure to the benefit of and be
enforceable by their respective successors and assigns, whether
so expressed or not.
Section VII.9 Execution in Counterparts. This instrument
may be executed in any number of counterparts, each of which when
so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Depositary Agreement to be duly executed as of the date first
written above.
PANDA-ROSEMARY, L.P.
BY: PANDA-ROSEMARY CORPORATION,
as general partner
By:
Name: Robert W. Carter
Title:
PANDA-ROSEMARY FUNDING CORPORATION
By:
Name: Robert W. Carter
Title:
FLEET NATIONAL BANK,
as Collateral Agent
By:
Name: Kathy A. Larimore
Title: Assistant Vice President
FLEET NATIONAL BANK,
as Depositary Agent
By:
Name: Kathy A. Larimore
Title: Assistant Vice President
Exhibit A to
Depositary Agreement
MAINTENANCE REQUISITION
NO. ________
[Date]
Fleet National Bank, as Depositary Agent
under the Depositary Agreement
referred to below
Corporate Trust Department
777 Main Street
CTM00238
Hartford, Connecticut 06115
Ref: Panda-Rosemary 1996
Attention:
Re: Deposit and Disbursement Agreements dated as of July
31, 1996 (as amended, supplemented or modified and in
effect, the "Depositary Agreement"), among Panda-
Rosemary Funding Corporation, a Delaware corporation
(the "Company"), Panda-Rosemary, L.P., a Delaware
limited partnership (the "Partnership") and Fleet
National Bank, a national banking association organized
under the laws of the United States in its capacity as
depositary agent (in such capacity, together with its
successors in such capacity, the "Depositary Agent")
and Trust Indenture, dated as of July 31, 1996 (as
amended, supplemented or modified and in effect, the
"Indenture") among the Company, the Partnership and
Fleet National Bank, in its capacity as trustee (in
such capacity, together with its successor in such
capacity, the "Trustee")
Ladies and Gentlemen:
This requisition (this "Maintenance Requisition") is
delivered to you pursuant to Section 3.6 of the Depositary
Agreement. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned thereto in the
Depositary Agreement and the Indenture. The information relating
to the Maintenance Requisition is as follows:
1. The aggregate amount to be withdrawn from the Overhaul
Fund in accordance with this Maintenance Requisition is
$_____________.
2. The Disbursement Date on which the withdrawals and
transfer from the Overhaul Fund pursuant to this
Maintenance Requisition are to be made is
_____________, _______.
3. Set forth on Schedule 1 attached hereto is the name of
each Person to whom any payment is to be made, the
aggregate amount due and payable on the Disbursement
Date or reasonably expected to be due and payable
within the thirty (30) day period following the
Disbursement Date to such Person and an accurate
description of the work performed, services rendered,
materials, equipment or supplies delivered or any other
purpose for which each payment was or is to be made,
with invoices with respect thereto attached (except for
invoices reasonably expected to be received by the
Partnership during the thirty (30) day period following
the Disbursement Date).
4. The proceeds of this Maintenance Requisition withdrawn
from the Overhaul Fund will be used to pay Major
Maintenance Expenses and the Depositary Agent may
properly charge such Major Maintenance Expenses against
the Overhaul Fund.
5. The Partnership has reviewed the work performed,
services rendered and materials, equipment or supplies
delivered (either directly or, in the case of offsite
work or services, in reliance on sources of information
deemed reliable by the Independent Engineer) for which
payment is requested under this Maintenance
Requisition, and the Depositary Agent may properly
charge such Major Maintenance Expenses against the
Overhaul Fund.
6. The Major Maintenance Expenses for which payment is
requested under this Maintenance Requisition from the
Overhaul Fund have not been the basis for any prior
requisition by the Partnership.
7. As of the date hereof, the Partnership has not received
any written notice of any lien, right to lien or
attachment upon, or claim affecting the Partnership's
right to receive any portion of the amount of this
Maintenance Requisition (other than in respect of
Permitted Liens), or in the event that the Partnership
has received notice of any such lien, attachment or
claim (other than a Permitted Lien), such lien,
attachment or claim has been released or discharged as
of the date hereof or will be released or discharged
upon payment of the Major Maintenance Expenses for
which payment is requested under this Maintenance
Requisition.
8. This Maintenance Requisition contains no items which
represent payment on account of any retained
percentages which the Partnership is entitled to retain
on the date hereof or which will be used to make a
payment of an amount in dispute which the Partnership
is entitled to retain or withhold.
9. Except as set forth on Schedule 2 hereto, the major
overhaul of the Project is in accordance with the
current schedule of major overhaul, as delivered to the
Depositary Agent pursuant to Section 6.11 of the
Indenture, and the exceptions set forth on Schedule 2
hereto could not reasonably be expected to result in a
Material Adverse Change.
10. Attached hereto as Appendix I is an Independent
Engineer's Certificate approving this Maintenance
Requisition.
Very truly yours,
PANDA-ROSEMARY, L.P.
By: Panda-Rosemary Corporation,
its General Partner
By:
Name:
Title:
Schedule 1 to Exhibit A
Amount
Name of Payment Purpose
Schedule 2 to Exhibit A
Maintenance
Exhibit B to
Depositary Agreement
RESTORATION REQUISITION
NO. ______
[Date]
Fleet National Bank, as Depositary Agent
under the Depositary Agreement
referred to below
Corporate Trust Department
777 Main Street
CTM00238
Hartford, Connecticut 06115
Ref: Panda-Rosemary 1996
Attention:
Re: Deposit and Disbursement Agreement, dated as of
July 31, 1996 (as amended, supplemented or modified and
in effect, the "Depositary Agreement"), among Panda-
Rosemary Funding Corporation, a Delaware corporation
(the "Company"), Panda-Rosemary, L.P., a Delaware
limited partnership (the "Partnership") and Fleet
National Bank, a national banking association organized
under the laws of the United States in its capacity as
depositary agent (in such capacity, together with its
successors in such capacity, the "Depositary Agent")
and Trust Indenture, dated as of July 31, 1996 (as
amended, supplemented or modified and in effect, the
"Indenture") among the Company, the Partnership and
Fleet National Bank, in its capacity as trustee (in
such capacity, together with its successor in such
capacity, the "Trustee")
Ladies and Gentlemen:
This requisition (this "Restoration Requisition") is
delivered to you pursuant to Section 3.8(b) of the Depositary
Agreement. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned thereto in the
Depositary Agreement and the Indenture. The information relating
to the Maintenance Requisition is as follows:
1. The aggregate amount to be withdrawn from the
Restoration Fund in accordance with this Restoration
Requisition is $_____________.
2. The Disbursement Date on which the withdrawals and
transfers pursuant to this Restoration Requisition are
to be made is _____________, _____.
3. Set forth on Schedule 1 attached hereto is the name of
each Person to whom any payment is to be made, the
aggregate amount due and payable on the Disbursement
Date or reasonably expected to be due and payable
within the thirty (30) day period following the
Disbursement Date to such Person and an accurate
description of the work performed, services rendered,
materials, equipment or supplies delivered or any other
purpose for which each payment was or is to be made,
with invoices with respect thereto attached (except for
invoices of, or other evidences of payment required to,
third parties paid or to be paid by the general
contractor or invoices reasonably expected to be
received during the thirty (30) day period following
the Disbursement Date).
4. The proceeds of this Restoration Requisition withdrawn
from the Restoration Fund will be used to pay the costs
of rebuilding, repair or restoration ("Restoration
Costs") and the Depositary Agent may properly charge
such costs against the Restoration Fund.
5. The Partnership has reviewed the work performed,
services rendered and materials, equipment or supplies
delivered (either directly or, in the case of offsite
work or services, in reliance on sources of information
deemed reliable by the Independent Engineer) for which
payment is requested under this Restoration
Requisition, and the Restoration Costs which have been
paid or for which payment is requested under this
Restoration Requisition are in accordance with the
Restoration Budget and the Restoration Progress Payment
Schedule.
6. The Restoration Costs for which payment is requested
under this Restoration Requisition from the Restoration
Fund have not been the basis of any prior requisition
by the Partnership.
7. As of the date hereof, the Partnership has not received
any written notice of any lien, right to lien or
attachment upon, or claim affecting the Partnership's
right to receive any portion of the amount of this
Restoration Requisition (other than in respect of
Permitted Liens), or in the event that the Partnership
has received notice of any such lien, attachment or
claim (other than a Permitted Lien), such lien,
attachment or claim has been released or discharged as
of the date hereof or will be released or discharged
upon payment of the Restoration Costs for which payment
is requested under this Restoration Requisition.
8. This Restoration Requisition contains no items which
represent payment on account of any retained
percentages which the Partnership is entitled to retain
on the date hereof or which will be used to make a
payment of an amount in dispute which the Partnership
is entitled to retain or withhold.
9. Attached hereto as Appendix I is an Independent
Engineer's Certificate approving this Restoration
Requisition.
Very truly yours,
PANDA-ROSEMARY, L.P.
By: Panda-Rosemary Corporation,
its General Partner
By:
Name:
Title:
Schedule 1 to Exhibit B
Amount
Name of Payment Purpose
EXHIBIT 10.13
COLLATERAL AGENCY AND
INTERCREDITOR AGREEMENT
Dated as of July 31, 1996
among
PANDA-ROSEMARY FUNDING CORPORATION,
PANDA-ROSEMARY, L.P.,
THE L/C ISSUER,
THE TRUSTEE UNDER THE TRUST INDENTURE,
THE DEPOSITARY AGENT,
THE COLLATERAL AGENT,
and
THE OTHER SECURED PARTIES NAMED HEREIN
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
Section 1.1. Capitalized Terms 3
Section 1.2 Definitions; Construction 3
ARTICLE II
Priority and Administration of Collateral
Section 2.1 Priority of Security Interests 5
Section 2.2 Controlling Provisions 5
Section 2.3 Exercise of Rights 6
Section 2.4 Actions Upon a Trigger Event 7
Section 2.5 Instructions to Depositary Agent 7
Section 2.6 Receipt of Money or Proceeds 8
Section 2.7 Additional Secured Parties 8
ARTICLE III
Right and Duties of Collateral Agent
Section 3.1 Appointment and Duties of Collateral Agent 8
Section 3.2 Rights of Collateral Agent 9
Section 3.3 Lack of Reliance on the Collateral Agent 11
Section 3.4 Indemnification 12
Section 3.5 Resignation or Removal of the Collateral Agent 13
Section 3.6 Court Orders 13
ARTICLE IV
General
Section 4.1 Agreement for Benefit of Parties Hereto 14
Section 4.2 Severability 14
Section 4.3 Notices 14
Section 4.4 Successors and Assigns 15
Section 4.5 Counterparts 15
Section 4.6 Governing Law 15
Section 4.7 No Impairments of Other Rights 15
Section 4.8 Amendment; Waiver 15
Section 4.9 Headings 15
Section 4.10 Termination 16
Section 4.11 Entire Agreement 16
Section 4.12 Limitation of Liability 16
Section 4.13 Execution in Lieu of Agent 17
Section 4.14 Representations 17
Section 4.15 Conflicts With Other Security Documents 17
Schedule 1 Form of Designation Letter
COLLATERAL AGENCY AND
INTERCREDITOR AGREEMENT
This COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT, dated
as of July 31, 1996 (this "Agreement"), among Panda-Rosemary
Funding Corporation, a Delaware corporation (together with its
successors and assigns, the "Company"), Panda-Rosemary, L.P.,
a Delaware limited partnership (together with its successors
and assigns, the "Partnership," the Partnership collectively
with the Company referred to as the "Borrowers"), Bayerische
Vereinsbank AG, the agent or issuer under a Credit Bank
Reimbursement Agreement (as defined in the Indenture (referred
to below)) (together with its successors and assigns, the "L/C
Issuer"), Fleet National Bank, a national banking association
established under the laws of the United States, the trustee
under the Denture (together with its successors and assigns,
the "Trustee") on behalf of the holders of the Bonds (as
defined in the Indenture), Fleet National Bank, the agent
under the Depositary Agreement (as defined in the Indenture)
(together with its successors and assigns, the "Depositary
Agent"), any trustees, agents or creditors under any other
Financing Documents (as defined below) that becomes a party
hereto pursuant to Section 2.7 hereof, and Fleet National
Bank, the collateral agent appointed hereunder for the Secured
Parties (as defined below) (together with its successors and
assigns, the "Collateral Agent").
W I T N E S S E T H:
WHEREAS, the Partnership owns a natural gas-fired 180
megawatt electrical generating facility in Roanoke Rapids,
North Carolina (the "Project");
WHEREAS, the Company is a wholly-owned subsidiary of the
Partnership, formed for the purposes of facilitating the
refinancing of the Project;
WHEREAS, the Company has duly authorized the creation and
issuance of its bonds to be issued in one or more series from
time to time (the "Bonds") pursuant to the Trust Indenture,
dated as of July 31, 1996 (the "Indenture"), among the
Company, the Partnership and the Trustee;
WHEREAS, the Company will lend all of the proceeds of the
sale of the Bonds of the initial series to the Partnership to
decease another indenture pursuant to which bonds were issued
to finance the cost of constructing the Project and for the
purpose of, among other things, finding certain reserve funds,
redeeming the limited partnership interests in the Partnership
owned by Ford Motor Credit Company, and paying closing costs;
WHEREAS, all of the Company's obligations under the Bonds
will be unconditionally guaranteed by the Partnership under
one or more guarantees (the "Partnership Guarantees");
WHEREAS, in order to satisfy certain requirements of the
Partnership under the Project Agreements (as defined in the
Indenture), the Partnership may incur indebtedness as
permitted under the Indenture in connection with the issuance
of letters of credit by the Credit Banks (as defined in the
Indenture) pursuant to a Credit Bank Reimbursement Agreement;
WHEREAS, in that connection, pursuant to Section 13.4 of
the Vepco Power Purchase Agreement referred to in the
Indenture, the Partnership is required to post a letter of
credit in the amount of $4,950,000 for the benefit of Virginia
Electric and Power Company and the L/C Issuer has agreed to
provide such letter of credit for the account of the
Partnership under a Credit Bank Reimbursement Agreement;
WHEREAS, in order to pay Operating Expenses (as defined
in the Indenture), the Partnership may incur indebtedness as
permitted under the Indenture in the form of working capital
loans made by the Credit Banks under a Credit Bank Working
Capital Agreement;
WHEREAS, the Partnership may incur additional debt,
including, without limitation, any bonds, debenture,
promissory notes or other evidences of such indebtedness, as
permitted under the Indenture, either directly or indirectly
through the Company, to finance certain modifications and
enhancements to the Project in the fixture ("Additional
Permitted Debt," as that term is defined In the Indenture);
WHEREAS, the Partnership may enter into Interest Rate
Protection Agreements (as defined in the Indenture) with a
Permitted Counterparty (as defined in the Indenture), either
directly or indirectly through the Company, in connection with
the Additional Permitted Debt of the Partnership;
WHEREAS, the Partnership, the Company, the Depositary
Agent and the Collateral Agent have entered into the
Depositary Agreement in order to, among other things, appoint
the Depositary Agent to hold and administer the proceeds of
insurance and revenues generated by the Project and other
amounts;
WHEREAS, all obligations of the Partnership and the
Company under a Credit Bank Reimbursement Agreement, a Credit
Bank Working Capital Agreement, the Indenture, the Company
Loan Agreement (as defined in the Depositary Agreement), the
Partnership Guarantees, the Interest Rate Protection
Agreements, and the Additional Permitted Debt documents will
be secured as set forth in the Security Documents (as
hereinafter defined); and
WHEREAS, the parties hereto desire to enter into this
Agreement to set forth their mutual understanding with respect
to (a) the exercise of certain rights, remedies and options by
the respective parties hereto under the above described
documents, (b) the priority of their respective security
interests created by the Security Documents and (c) the
appointment of the Collateral Agent.
NOW, THEREFORE, for and in consideration of the premises
and mutual covenants herein contained and for other good and
valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto, intending to be
legally bound, do hereby covenant and agree as follows:
ARTICLE I
Definitions
Section 1.1 Capitalized Terms. Each capitalized term used
herein and not otherwise defined herein shall have the
definition assigned to such term in the Indenture, as such
definition exists on the Closing Date.
Section 1.2 Definitions; Construction. For all purposes
of this Agreement, except as otherwise expressly provided or
unless the context otherwise requires:
(a) the terms defined in this Article have the
meanings assigned to them In this Article, and include
the plural as well as the singular;
(b) all references in this Agreement to designate
"Articles," "Sections" and other subdivisions are to the
designated Articles, Sections and other subdivisions of
this Agreement;
(c) the words "herein," "hereof" and "hereunder" and
other words of similar import refer to this Agreement as
a whole and not to any particular Article, Section or
other subdivision;
(d) unless otherwise expressly specified, any
agreement, contract or document defined or referred to
herein shall mean such agreement, contract or document
(including any classification letters relating thereto)
as in effect as of the date hereof, as the same may
thereafter be amended, supplemented or otherwise modified
from time to time in accordance with the terms of the
Indenture, the other Project Documents and any other
Financing Documents and including any agreement, contract
or document in substitution or replacement of any of the
foregoing;
(e) unless the context clearly intends to the
contrary, pronouns having a masculine or feminine gender
shall be deemed to include the other; and
(f) any reference to any Person shall include its
successors and assigns.
"Agreement" shall have the meaning specified in the first
paragraph of this Agreement.
"Authorized Representative" of any entity means the
person or persons authorized to act on behalf of such entity
by its or its general partner's Board of Directors, as the
case may be, or any other governing body of such entity.
"Borrowers", shall have the meaning specified in the
first paragraph of this Agreement.
"Collateral Agent Claims" means all obligations of the
Secured Parties and the Borrowers, now or hereafter existing,
to pay fees, costs and expenses to the Collateral Agent
pursuant to Sections 3.2(g) and 3.4 hereof and the Security
Documents.
"Combined Exposure" means, as of any date of calculation,
the sum of (i) the aggregate principal amount of all Bonds
Outstanding and Additional Permitted Debt (if any) outstanding
as of such calculation date, (ii) the aggregate principal
amount of all loans outstanding and any other amounts owed as
of such calculation date under the Credit Bank Working Capital
Agreement, (iii) the aggregate amount of all undrawn Financing
Commitments as of such calculation date under the Credit Bank
Working Capital Agreement, if any, which, as of such
calculation date, the Credit Banks have no right to terminate;
(iv) the maximum amount available to be drawn as of such
calculation date under the letter of credit issued pursuant to
a Credit Bank Reimbursement Agreement; (v) the aggregate amount
of the reimbursement obligation outstanding, and the aggregate
principal amount of all loans made and still outstanding and
any other amounts owed, in each case as of such calculation
date pursuant to a Credit Bank Reimbursement Agreement in
connection with drawings made, or available to be made, on
letters of credit issued under a Credit Bank Reimbursement
Agreement; and (vi) the termination payment due and owing as of
such calculation date or which the Permitted Counterparty
thereunder has a right to cause to be due and owing as of such
calculation date under any Interest Rate Protection Agreements.
"Debt Termination Date" means the date on which all
Financing Liabilities, other than contingent liabilities and
obligations which are unassorted at such date, have been paid
and satisfied in full and all Financing Commitments have been
terminated.
"Designation Lender" means any lender executed and
delivered pursuant to Section 2.7 hereof and substantially in
the form of Schedule I hereto.
"Event of Default" shall mean an "event of default" (or
correlative term) under any Financing Document.
"Financing Commitment" means any commitment pursuant to
the Financing Documents to provide credit to the Borrowers or
either of them.
"Financing Documents" means all agreements, documents and
instruments evidencing and/or securing the Financing
Liabilities.
"Financing Liabilities" means all indebtedness
liabilities and obligations of the Borrowers (including, but
not limited to, principal, interest, fees, reimbursement
obligations, penalties, indemnities and legal and other
expenses, whether due after acceleration or otherwise) to the
Secured Parties (of whatsoever nature and howsoever evidenced)
under or pursuant to the Indenture, the Partnership
Guarantees, the Partnership Notes, the Bonds, any Credit Bank
Working Capital Agreement, any Credit Bank Reimbursement
Agreement, any Additional Permitted Debt Documents, any
Interest Rate Protection Agreements and the Security
Documents, to the extent arising on or prior to the Debt
Termination Date, in each case, direct or indirect, primary or
secondary, fixed or contingent, now or hereafter arising out
of or relating to any such agreements.
"Required Creditors" means, at any time, Persons that at
such time hold (or act as a trustee, agent or other
representative for Persons that hold) at least 50.1% of the
Combined Exposure.
"Responsible Officer", when used with respect to the
Collateral Agent, shall mean any officer the Corporate Trust
Office (or any successor group of the Collateral Agent)
including any vice president, assistant vice president,
assistant secretary, assistant treasurer or any other officer
of the Collateral Agent customarily performing functions
similar to those performed by the persons who at the time shall
be such officers, respectively, or to whom any corporate trust
matter is referred because of his knowledge and familiarity
with the particular subject.
"Secured Parties" means, subject to the second sentence
of Section 4.10, the Trustee (as agent for and representative
of the Holders of the Bonds), the L/C Issuer (for itself as a
Credit Bank), and any trustee, agent or creditor under any of
the other Financing Documents that becomes a party to this
Agreement pursuant to Section 2.7.
"Secured Party" means, as appropriate, any one of the
Secured Parties.
"Security Documents" means, collectively, the Collateral
Documents (not including this Agreement) and any other
document or agreement evidencing a Security Interest.
"Security Interest" means any perfected and enforceable
Lien on Collateral granted to the Collateral Agent pursuant to
the requirements of any applicable Financing Document.
"Trigger Event" means at least 50.1% of the Combined
Exposure shall have been declared to be, or shall
automatically have become, due and payable (and shall not have
been rescinded) under the Financing Documents, as determined
by the Collateral Agent based upon the written notices
provided to the Collateral Agent by the Secured Parties
pursuant to Section 2.4 hereof.
"Trigger Event Date" shall have the meaning set forth in
Section 2.5 hereof.
ARTICLE II
Priority and Administration of Collateral
Section 2.1 Priority of Security Interests. Each Secured
Party agrees that the Security Interest of each Secured Party
in any Collateral ranks and will rank equally in priority with
the Security Interest of the other Secured Parties in the same
Collateral.
Section 2.2 Controlling Provisions. Notwithstanding
anything to the contrary in Section 2.1, the priorities
specified in this Agreement and in the Depositary Agreement
with respect to (i) the Collateral, (ii) all proceeds of the
Collateral (including without limitation all Casualty
Proceeds, Eminent Domain Proceeds and Title Insurance
Proceeds) and (iii) all amounts and funds retained in
accordance with the Depositary Agreement, in each case are
applicable irrespective of any statement to the contrary in
any Financing Document, Security Document or any other
agreement, the time or order or method of attachment or
perfection of Liens, the time or order of filing of financing
statements, or the giving or failure to give notice of the
acquisition or expected acquisition of purchase money or other
security interests and, to the extent not provided for in this
Agreement, the rights and priorities of the Secured Parties
shall be determined in accordance with applicable law.
Section 2.3 Exercise of Rights. So long as any Financing
Liabilities remain outstanding in respect of more than one
Secured Party, each of the Secured Parties hereby acknowledges
and agrees as follows:
(a) The Collateral shall administer the Collateral in the
manner contemplated by the Security Documents and this
Agreement and, upon the occurrence and continuance of a
Trigger Event, the Collateral Agent shall exercise, upon the
written instruction of the Required Creditors in accordance
with Sections 2.3, 2.4 and 2.5 hereof, such rights and
remedies with respect to the Collateral as are granted to it
under the Security Documents, this Agreement and applicable
law; provided, however, that, in exercising such rights and
remedies, the Collateral Agent shall not amend, modify or
supplement (or agree or consent to any such amendment,
modification or supplement), directly or indirectly or in the
name of the Borrowers, any Project Agreement if such
amendment, modification or supplement shall adversely affect
any Secured Party in any material respect unless the
Collateral Agent shall have obtained the prior written consent
of such Secured Party to such amendment, modification or
supplement. The Partnership or the Company shall provide
written notice of any such proposed amendment, modification,
or supplement of any Project Agreement that is to be made
after a Trigger Event to the Collateral Agent (other than
those initiated by the Collateral Agent) at least 20 days
prior to the effective date of the same and the Collateral
Agent shall provide each Secured Party with at least 15 days
prior written notice of all such proposed amendments,
modification or supplements to the Project Agreements. No
Secured Party shall be required to respond to any request for
a proposed amendment, modification or supplement of a Project
Agreement prior to the 15th day after the giving of such
written notice.
(b) No Secured Party and no class or classes of Secured
Parties shall have any right, other than in accordance with
Sections 2.3, 2.4 and 2.5 hereof, to (i) sell, exchange,
release, not perfect and otherwise clear with any property at
any time pledged, assigned or mortgaged to secure the
Financing Liabilities in accordance with the Security
Documents, (ii) exercise or refrain from exercising any rights
to direct the Collateral Agent to take any action in respect
of the Collateral, or (iii) to take any other action with
respect to the Collateral (A) independently of the Collateral
Agent or (B) other than to direct the Collateral Agent to take
action in accordance with Sections 2.3, 2.4 and 2.5 hereof.
Any of the Secured Parties or the Collateral Agent may, at any
time and from time to time, (i) amend in any manner any
outstanding Financing Documents to which they are a party in
accordance with the terms thereof, (ii) release anyone liable
in any manner under or in respect of such Secured Party's
Financing Liabilities in accordance with the terms of the
Financing Documents to which they are a party, (iii) sell,
exchange, assign, redeem or transfer all or any part of its
interest in the Financing Documents to which it is a party and
(iv) apply any sums from time to time received for payment or
satisfaction of such Secured Party's Financing Liabilities
except as otherwise provided in Section 2.5 hereof.
(c) Each Secured Party hereby agrees that, upon the
request of the Collateral Agent, it will give the Collateral
Agent notice of the outstanding Debt amount owed by the
Partnership or the Company to such Secured Party under the
Financing Documents and any other information that the
Collateral Agent may reasonably request. The Partnership and
the Company agree that, whenever this Agreement requires the
calculation of the amount of the Combined Exposure and
whenever requested by the Collateral Agent, the Partnership
shall deliver to the Collateral Agent a certificate setting
forth in reasonable detail a calculation of the amount of the
Combined Exposure.
Section 2.4 Actions Upon a Trigger Event. So long as any
Financing Liabilities remain outstanding in respect of more
than one Secured Party, the following provisions shall apply:
(a) Each Secured Party hereby agrees to give each
other Secured Party and the Collateral Agent written
notice of the occurrence of an Event of Default under
such Secured Party's Financing Documents and of the
occurrence of an acceleration under such Secured Party's
Financing Documents wherein such Secured Party's
Financing Liabilities have been declared to be or have
automatically become due and payable earlier than the
scheduled maturity thereof and setting forth the
aggregate amount of Financing liabilities that have been
so accelerated under such Financing Documents, in each
case as soon as practicable after the occurrence thereof;
provided, however, that the failure to provide such
notice shall not limit or impair the rights of the
Secured Parties hereunder or under the Financing
Documents or the Security Documents. No Secured Party
shall be deemed to have knowledge or notice of the
occurrence of any Event of Default for the purpose of
this Agreement until such Secured Party has received a
written notice of such Event of Default from the
Borrowers or any other Person for whom such Secured Party
is acting as agent or trustee.
(b) Each of the Borrowers hereby agrees that if a
Trigger Event shall have occurred and is continuing, the
Collateral Agent is hereby irrevocably authorized and
empowered to act as the attorney-in-fact for the
Borrowers with respect to the giving of any instructions
or notices under the Depositary Agreement. The Collateral
Agent hereby agrees that, upon the written request of the
Required Creditors, it shall give such notices and
instructions under the Depositary Agreement to the
Depositary Agent. The Depositary Agent hereby agrees that
it shall accept such notices and instructions from the
Collateral Agent.
Section 2.5 Instructions to Depositary Agent. So long as
any Financing Liabilities remain outstanding, the following
provisions shall apply:
(a) If a Trigger Event shall have occurred, upon the
written request of the Required Creditors, the Collateral
Agent, on behalf of the Secured Parties, shall give the
Depositary Agent a written notice that a Trigger Event
has occurred (the date of such notice, the "Trigger Event
Date") and direct the Depositary Agent to render an
accounting of the current balance of each Fund and of any
other monies of the Borrowers administered by such
Depositary Agent.
(b) At any time on and after the Trigger Event Date,
upon the written request of the Required Creditors, the
Collateral Agent shall deliver a written notice to the
Depositary Agent directing the Depositary Agent to
distribute monies then held in the Project Revenue Fund
in accordance with Section 3.16(c) of the Depositary
Agreement and to distribute monies then held in any or
all of the other Funds in accordance with Section 3.16(c)
of the Depositary Agreement; provided that (i) all
distributions pursuant to Section 3.16(c)(ii) shall be
ratable among the Secured Parties, and (ii) monies held
in the Project Revenue Fund shall not be applied to any
withdrawal, transfer or payment in accordance with
Section 3.1(b)(i) of the Depositary Agreement unless all
the Secured Parties shall direct the Collateral Agent to
deliver the notice to the Depositary Agent referred
to in Section 3.16(c)(A) of the Depositary Agreement.
(c) If a Trigger Event shall have occurred, upon the
written request of the Required Creditors, the Collateral
Agent shall realize and foreclose upon the Collateral
(other than the Funds and any monies of the Borrowers
administered by the Depositary Agent, which shall be
governed exclusively by Sections 2.5(a), 2.5(b) and
2.5(d) hereof and Section 3.16 of the Depositary
Agreement) and take any and all other actions and
exercise any and all rights, remedies and options which
it may have under the Security Documents and which the
Required Creditors direct it to take under this
Agreement.
(d) The proceeds of any sale, disposition or other
realization or foreclosure by the Collateral Agent upon
the Collateral or any portion thereof pursuant to the
Security Documents shall be governed by this Section
2.5(d). Any noncash proceeds resulting from such
liquidation of the Collateral shall be held by the
Collateral Agent for the benefit of the Secured Parties
until later sold or otherwise converted into cash, at
which time the Collateral Agent shall apply such cash in
accordance with the next sentence of this Section 2.5(d).
The Collateral Agent shall transfer any cash proceeds
resulting from liquidation of the Collateral to the
Depositary Agent for application of such proceeds in
accordance with Section 3.16(d) of the Depositary
Agreement.
Section 2.6 Receipt of Money or Proceeds. The Secured
Parties and the Depositary Agent hereby agree that if, at any
time during the term of this Agreement, any Secured Party
receives any payment or distribution of assets of the
Borrowers of any kind or character, whether monies or cash
proceeds resulting from liquidation of the Collateral, other
than in accordance with the terms of this Agreement and the
Depositary Agreement, the Secured Party shall hold such
payment or distribution in trust for the benefit of the
Secured Parties and shall immediately remit such payment or
distribution to the Depositary Agent and the Depositary Agent
shall deposit such monies or proceeds in the Project Revenue
Fund for application or distribution, as the case may be, in
accordance with the terms of this Agreement and the Depositary
Agreement.
Section 2.7 Additional Secured Parties. Any person which
executes and delivers a counterpart to this Agreement and is
designated as a Secured Party pursuant to the terms of the
Designation Letter, shall become a party hereto, shall be
bound by and subject to the term and conditions hereof and the
covenants stipulations and agreements contained herein.
ARTICLE III
Right and Duties of Collateral Agent
Section 3.1 Appointment and Duties of Collateral Agent.
(a) The Secured Parties hereby designate and appoint
Fleet National Bank to act as the Collateral Agent under the
Security Documents and this Agreement, and each of the Secured
Parties hereby authorizes Fleet National Bank, as the
Collateral Agent, to take such actions on its behalf under the
provisions of the Security Documents and this Agreement and to
exercise such powers and perform such duties as are expressly
delegated to the Collateral Agent by the terms of the Security
Documents and this Agreement, together with such other powers
as are reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere in the Security Documents
and this Agreement, the Collateral Agent's duties and
responsibilities under this Agreement shall be entirely
administrative and not discretionary and it shall not have any
duties or responsibilities, except those expressly set forth
in the Security Documents and this Agreement, or any fiduciary
relationship with any Secured Party, and no implied covenants,
functions or responsibilities shall be read into the Security
Documents, this Agreement or otherwise exist against the
Collateral Agent. The Collateral Agent shall not be liable for
any action taken or omitted to be taken by it hereunder or
under any Security Document, or in connection herewith or
therewith, or in connection with the Collateral, unless caused
by its gross negligence or willful misconduct.
(b) The Secured Parties hereby authorize the Collateral
Agent to appoint Fleet National Bank to act as the Depositary
Agent under the Depositary Agreement. The Secured Parties
hereby authorize and empower the Collateral Agent to remove
and replace the Depositary Agent pursuant to the terms and
conditions of Article IV of the Depositary Agreement and to
direct such Depositary Agent according to the terms of this
Agreement.
(c) Notwithstanding anything to the contrary in this
Agreement or any Security Document, the Collateral Agent shall
not exercise any rights or rights under any of the Security
Documents or this Agreement or give any consent (except
consents given in conjunction with partial releases of
Collateral expressly permitted by the Security Documents)
under any of the Security Documents or this Agreement or enter
into any agreement amending, modifying, supplementing or
waiving any provision of any Security Document or this
Agreement unless it shall have been directed to do so in
writing by the Required Creditors.
Section 3.2 Rights of Collateral Agent.
(a) The Collateral Agent may execute any of its duties
under the Security Documents or this Agreement by or through
agents or attorneys-in-fact and shall be entitled to advice of
counsel, accountants and experts concerning all matters
pertaining to such duties and it shall not be liable for any
action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or
experts.
(b) Neither the Collateral Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates
shall (i) be liable for any action lawfully taken or omitted
to be taken by it under or in connection with any Security
Document or this Agreement (except for its gross negligence or
willful misconduct) or (ii) be responsible in any manner to
any of the Secured Parties for any recitals, statements,
representations or warranties made by the Borrowers or any
representative thereof contained in any Security Document or
this Agreement or in any certificate, report, statement or
other document referred to or provided for in, or received by
the Collateral Agent under or in connection with, any Security
Document or this Agreement or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of
the Security Documents or this Agreement or for any failure of
the Borrowers to perform their obligations thereunder. The
Collateral Agent shall not be under any obligation to any
Secured Party to ascertain or to inquire as to the observance
or performance of any of the agreements contained in, or
conditions of, any Security Document or to inspect the
properties, books or records of the Borrowers.
(c) The Collateral Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, 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 or Persons and upon advice and
statements of legal counsel (including, without limitation,
counsel to the Borrowers), independent accountants and other
experts selected by the Collateral Agent. In connection with
any request of the Required Creditors, the Collateral Agent
shall be fully protected in relying on a certificate of any
Person, signed by an Authorized Representative of such Person,
setting forth the Combined Exposure held by such Person as of
the date of such certificate, which certificate shall state
that the Person signing such certificate is an Authorized
Representative of such Person and shall state specifically the
Security Document and provision thereof pursuant to which the
Collateral Agent is being directed to act. The Collateral
Agent shall be entitled to rely, and shall be fully protected
in relying on such certificate. The Collateral Agent shall be
fully justified in failing or refusing to take any action
under any Security Document or this Agreement (i) if such
action would, in the opinion of the Collateral Agent, be
contrary to law or the terms of this Agreement or the other
Security Documents, (ii) if such action is not specifically
provided for in such Security Document or this Agreement, it
shall not have received any such advice or concurrence of the
Required Creditors as it deems appropriate, (iii) if, in
connection with the taking of any such action that would
constitute an exercise of remedies under such Security
Document or this agreement, it shall not first be indemnified
to its satisfaction by the Borrowers or the Secured Parties
(other than the Trustee (in its individual capacity), the
Collateral Agent (in its individual capacity), the Depositary
Agent (in its individual capacity) or any other agent or
trustee under any of the Financing Documents (in their
individual capacity)) against any and all liability and
expense which may be incurred by it by reason of taking or
continuing to take any such action, or (iv) if,
notwithstanding anything to the contrary contained in Section
3.2(e) of this Agreement, in connection with the taking of any
such action that would constitute a payment due under any
Project Agreement pursuant to the terms of any Consent, it
shall not first have received from the Secured Parties funds
equal to the amount payable. The Collateral Agent shall in all
cases be fully protected in acting, or in refraining from
acting, under any Security Document or this Agreement in
accordance with a request of the Required Creditors (to the
extent that the Required Creditors are expressly authorized to
direct the Collateral Agent to take or refrain from taking
such action), and such request and any action taken or failure
to act pursuant thereto shall be binding upon all the Secured
Parties.
(d) if, with respect to a proposed action to be taken by
it, the Collateral Agent shall determine in good faith in its
sole discretion that the provisions of any Security Document
or this Agreement relating to the functions or
responsibilities or powers of the Collateral Agent are or may
be ambiguous or inconsistent or would require the Collateral
Agent to exercise its own judgment, the Collateral Agent shall
notify the Secured Parties, identifying the proposed action
and the provisions that it considers are or may be ambiguous
or inconsistent, and shall not perform such function or
responsibility or exercise such discretionary power unless it
has received the written confirmation of the Secured Parties
constituting the Required Creditors that the Secured Parties
concur in the circumstances that the action proposed to be
taken by the Collateral Agent is consistent with the terms of
this Agreement or such Security Document or is otherwise
appropriate. The Collateral Agent shall be fully protected
in acting or refraining from acting upon the
confirmation of the Secured Parties in this respect, and such
confirmation shall be binding upon the Collateral Agent.
(e) The Collateral shall not be deemed to have actual,
constructive direct or indirect knowledge or notice of the
occurrence of any Event of Default or Trigger Event unless and
until a Responsible Officer of the Collateral Agent has
received a written notice or a certificate from a Secured
Party stating that an Event of Default has occurred under its
Financing Documents. The Collateral Agent shall have no
obligation whatsoever either prior to or after receiving such
notice or certificate to inquire whether a Trigger Event has
in fact occurred and shall be entitled to rely conclusively,
and shall be fully protected in so relying, on any such notice
or certificate so furnished to it. No provision of this
Agreement, any Financing Document or any Security Document
shall require the Collateral Agent to expend or risk its own
funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or under any
Security Document or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to it. In the
event that the Collateral Agent receives such a notice of or
certificate regarding the occurrence of any Trigger Event, the
Collateral Agent shall give notice thereof to the Secured
Parties. The Collateral Agent shall take such action with
respect to such Trigger Event as so requested pursuant to
Sections 2.3, 2.4 and 2.5 hereof.
(f) The Collateral Agent shall be under no obligation or
duty to take any action under this Agreement or the other
Security Documents if taking such action (i) would subject the
Collateral Agent to a tax in any jurisdiction where it is not
then subject to a tax or (ii) would require the Collateral
Agent to qualify to do business in any jurisdiction where it
is not then so qualified, unless in the case of (i) or (ii)
the Collateral Agent receives security or indemnity
satisfactory to it against such tax (or equivalent liability),
or any liability resulting from such lack of qualification, in
each case as results from the taking of such action under this
Agreement or the Security Documents.
(g) The Borrowers will pay, no later than 30 days
following a request and invoice therefor, to the Collateral
Agent the amount of any and all reasonable out-of-pocket
expenses, including the reasonable fees and expenses of its
counsel (and any local counsel) and of any experts and agents,
which the Collateral Agent may incur in connection with (i)
the administration of this Agreement and the other Security
Documents, (ii) the custody or preservation of, or the sale
of, collection from, or other realization upon, any of the
Collateral, (iii) the exercise or enforcement (whether through
negotiations, legal proceedings or otherwise) of any of the
rights of the Collateral Agent or the Secured Parties
hereunder or under the other Security Documents or (iv) the
failure by the Borrowers to perform or observe any of the
provisions hereof or of any of the other Security Documents.
Section 3.3 Lack of Reliance on the Collateral Agent.
Each of the Secured Parties expressly acknowledges that
neither the Collateral Agent nor any of its officers,
directors employees, agents or attorneys-in-fact has made any
representations or warranties to it and that no act by the
Collateral Agent hereinafter taken, including, without
limitation, any review of the Project or of the affairs of the
Borrowers, shall be deemed to constitute any representation or
warranty the Collateral Agent to any Secured Party. Each
Secured Party also acknowledges that it (or the lenders
represented by the Secured Party) will independently and
without reliance upon the Collateral Agent, 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 any action under the Security Documents. Except for
notices, reports and other documents expressly required to be
furnished to the Secured Parties by the Collateral Agent
hereunder, the Collateral Agent shall not have any duty or
responsibility to provide any Secured Party with any credit or
other information concerning the business, operations,
property, financial and other condition or creditworthiness of
the Project and the Borrowers which may come into the
possession of the Collateral Agent or any of its officers,
directors, employees, agents or attorneys-in-fact.
Section 3.4 Indemnification.
(a) The Secured Parties jointly and severally agree to
indemnify the Collateral Agent and its directors, officers,
employees and agents (collectively, an "Indemnified Party") as
such (to the extent not reimbursed by the Borrowers and
without limiting the obligation of the Borrowers to do so),
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
be imposed on, incurred by or asserted against the Indemnified
Party in any way relating to or arising out of the Security
Documents or this Agreement, or the performance by the
Collateral Agent of its duties hereunder or thereunder or any
action taken or omitted by the Collateral Agent in its
capacity as such under or in connection with any of the
foregoing (including, but not limited to, any claim that the
Collateral Agent is the owner or operator of the Project and
liable as such pursuant to the Comprehensive Environmental
Response Compensation Liability Act or any other Environmental
[Laws); provided that the Secured Parties shall not be liable
for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements to the extent that any
of the foregoing result from an Indemnified Party's gross
negligence or willful misconduct. If a Secured Party pays more
than its pro rata (based on the respective Financing
Liabilities outstanding on the date of payment) share of the
amount payable to an Indemnified Party pursuant to this
Section 3.4(a), such Secured Party shall be entitled to
contribution from the Secured Party or Parties that have paid
less than its or their pro rata share.
(b) Each of the Borrowers jointly and severally
indemnifies the Collateral Agent and each Secured Party and,
in their capacity as such, their officers, directors,
shareholders, controlling persons, employees, agents and
servants (each an "Indemnified Party") from and against any
and all claims, damages, losses, liabilities, obligations,
penalties, actions, causes of action, judgments, suits, costs,
expenses or disbursements (including, without limitation,
reasonable attorneys' and consultants' fees and expenses)
(collectively "Damages") of any kind or nature whatsoever
which may at any time be imposed on, incurred by or asserted
against any Indemnified Party (or which may be claimed against
any Indemnified Party by any Person) by reason of, in
connection with or any way relating to or arising out of any
Project Document, Collateral Documents, Financing Documents,
any Collateral, the Site, the Project, or any other documents
or transactions in connection with or relating thereto
(including, without limitation, Damages in connection with the
presence, Release or threatened Release of Hazardous Materials
at, on, under, to or from the Site, the Project or any
disposal sites to which wastes from the Project have been
taken), unless due to the gross negligence or willful
misconduct of such Indemnified Party. Each Borrower further
shall, within 30 days following demand by any Indemnified
Party, pay to such Indemnified Party all reasonable costs and
expenses incurred by such Indemnified Party in enforcing any
rights under the Project Documents, Financing Documents and
Collateral Documents including reasonable fees and expenses of
counsel.
(c) The agreements in this entire Section 3.4 shall
survive the payment or satisfaction in full of the Financing
Liabilities and the resignation or removal of the Collateral
Agent or the termination of this Agreement.
Section 3.5 Resignation or Removal of the Collateral
Agent. The Collateral Agent may resign as Collateral Agent
upon thirty (30) days' notice to the Secured Parties and may
be removed at any time with or without cause by the Required
Creditors, with any such resignation or removal to become
effective only upon the appointment of a successor Collateral
Agent under this Section 3.5, provided, however, that if no
successor Collateral Agent shall have been so appointed within
thirty (30) days, the resigning Collateral Agent may petition
any court of competent jurisdiction for the appointment of a
new Collateral Agent; and provided, further, however, that if
at any time the Collateral Agent is the same Person as the
Trustee, the holders of 25% or more of the Combined Exposure
shall have the right to remove the Collateral Agent upon
thirty (30) days' notice to the Secured Parties with or
without cause, effective upon the appointment of a successor
Collateral Agent under this Section 3.5 by the Required
Creditors. If the Collateral Agent shall resign or be removed
as Collateral Agent by the Required Creditors or by such
holders, as applicable, then the Required Creditors shall (and
if no such successor shall have been appointed within thirty
(30) days of the Collateral Agent's resignation or removal,
the Collateral Agent may) appoint a successor agent for the
Secured Parties, which successor agent shall be reasonably
acceptable to the Borrowers, whereupon such successor agent
shall succeed to the rights, powers and duties of the
"Collateral Agent," and the term "Collateral Agent" shall mean
such successor agent effective upon its appointment, and the
former Collateral Agent's rights, powers and duties as
Collateral Agent shall be terminated, without any other or
further act or deed on the part of such former Collateral
Agent (except that the resigning Collateral Agent shall
deliver all Collateral then in its possession to the successor
Collateral Agent) or any of the other Secured Parties. After
any retiring Collateral Agent's resignation or removal
hereunder as Collateral Agent, the provisions of this
Agreement shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Collateral Agent.
Section 3.6 Court Orders. The Collateral Agent is hereby
authorized, in its exclusive discretion, to obey and comply
with all writs, orders, judgments, or decrees issued by any
court or administrative agent affecting any money, documents
or things held by the Collateral Agent. The Collateral Agent
shall not be liable to any of the parties hereto, their
successors, heirs or personal representatives by reason of the
Collateral Agent's compliance with such writs, orders,
judgments or decrees, notwithstanding such writ, order,
judgment or decree is later reversed, modified, set aside or
vacated.
ARTICLE IV
General
Section 4.1 Agreement for Benefit of Parties Hereto.
Nothing in this Agreement, express or implied, is intended or
shall be construed to confer upon, or to give to, any Person
other than the parties hereto and their respective successors
and assigns and Persons for whom the parties hereto are acting
as agents or representatives, any right, remedy or claim under
or by reason of this Agreement or any covenant, condition or
stipulation hereof; and the covenants, stipulations and
agreements contained in this Agreement are and shall be for
the sole and exclusive benefit of the parties hereto and their
respective successors and assigns and Persons, if any, for
whom the parties hereto are acting as agents or
representatives.
Section 4.2 Severability. In case any one or more of the
provisions contained in this Agreement shall be invalid,
illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions
contained herein shall not in any way be affected and/or
impaired thereby.
Section 4.3 Notices. All notices, demands, certificates
or other communications hereunder shall be in writing and
shall be deemed sufficiently given or served for all purposes
when delivered personally, when sent by certified or
registered mail, postage prepaid, return receipt requested, or
by private courier service, or, if followed and confirmed by
mail or courier service notice, when telecopied, in each case,
with the proper address as indicated below or as set forth in
any elective Designation Letter. Each party may, by written
notice given to the other parties, designate any other address
or addresses to which notices, certificates or other
communications to them shall be sent as contemplated by this
Agreement. Notices shall be deemed to have been given if and
when received by an officer, manager or supervisor in the
department of the addressee specified for attention (unless
the addressee refuses to accept delivery, in which case they
shall be deemed to have been given when first presented to the
addressee for acceptance); provided, however, that notices to
the Collateral Agent must be received by a Responsible
Officer. Until otherwise so provided by the respective
parties, all notices, certificates and communications to each
of them shall be addressed as follows:
Company: Panda-Rosemary Funding Corporation
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Telecopier Number: (214) 980-6815
Partnership: Panda-Rosemary,L.P.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Telecopier Number: (214) 980-6815
Trustee, Collateral Fleet National Bank
Agent or Depositary Corporate Trust Department
Agent: 777 Main Street
CTM00238
Hartford, Connecticut 06115
Ref: Panda-Rosemary 1996
Telecopier Number: (860) 986-7920
L/C Issuer: Bayerische Vereinsbank AG
355 Madison Avenue, 19th Floor
New York, New York 10017-4679
Telecopier Number: (212) 210-0354
Section 4.4 Successors and Assigns. Whenever in
this Agreement any of the parties hereto is named or referred to, the
successors and assigns of such party shall be deemed to be
included and all covenants, promises and agreements in this
Agreement by or on behalf of the respective parties hereto shall bind
and inure to the benefit of the respective successors and assigns
of such parties, whether so expressed or not.
Section 4.5 Counterparts. This Agreement may be executed
in any number of counterparts, each executed counterpart
constituting an original but all counterparts together
constituting only one instrument.
Section 4.6 Governing Law. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY
CONTLICTS OF LAWS PROVISIONS (OTHER THAN SECTION 5-1401 OF
THE GENERAL OBLIGATIONS LAW OF NEW YORK) THAT MIGHT CAUSE
THIS AGREEMENT TO BE GOVERNED BY OR CONSTRUED OR ENFORCED IN
ACCORDANCE WITH THE LAWS OF ANY OTHER JURISDICTION.
Section 4.7 No Impairments of Other Rights. Nothing in
this Agreement is intended or shall be construed to impair,
diminish or otherwise adversely affect any other rights the
Secured Parties may have or may obtain against the Borrowers.
Section 4.8 Amendment; Waiver. No amendment or waiver of
any provision of this Agreement shall be effective unless the
same shall be in writing and signed by all the Secured
Parties, and any such waiver or consent shall be effective
only in the specific instance and for the specific purpose
for which given. No delay on the part of any Secured Party in
the exercise of any right, power or remedy shall operate as a
waiver thereof, nor shall any single or partial waiver by
such Secured Party of any right, power or remedy preclude any
further exercise thereof, or the exercise of any other right,
power or remedy.
Section 4.9 Headings. Headings herein are for
convenience only and shall not be relied upon in interpreting
or enforcing this Agreement.
Section 4. 10 Termination. This Agreement shall remain in
full force and effect until the Debt Termination Date.
Following the Debt Termination Date, Sections 3.4(a) and 3.4(b)
of this Agreement shall continue in full force and effect.
Notwithstanding anything to the contrary contained herein, upon
the payment in full by the Borrowers of all principals interest
and other amounts owed to a Secured Party, (i) all references
herein to such Secured Party, automatically and without further
action or amendment, shall be null and void and without effect
and (ii) such Secured Party shall have no rights or duties
(other than under Section 3.4(a)) hereunder and shall not be
deemed to be a Secured Party or a party to this Agreement.
Section 4.11 Entire Agreement. This Agreement, including
the documents referred to herein, embodies the entire
agreement and understanding of the parties hereto and
supersedes all prior agreements and understandings of the
parties hereto relating to the subject matter herein
contained.
Section 4.12 Limitation of Liability. Notwithstanding
anything to the contrary contained in this Agreement, the
liability and obligation of the Partnership or the Company to
perform and observe and make good the obligations contained in
this Agreement and the Collateral Documents shall not be
enforced by any action or proceeding wherein damages or any
money judgment or any deficiency judgment or any judgment
establishing any personal obligation or liability shall be
sought, collected or otherwise obtained against any Partner,
any past, present or future partner, officer, director or
shareholder or related Person of any Partner or the Company
(other than the Partnership and the Company) or any Secured
Party, and the Collateral Agent, for itself and its successors
and assigns, irrevocably waives any and all right to sue for,
seek or demand any such damages, money judgment, deficiency
judgment or personal judgment against any Partner or any past,
present or future partner, officer, director or shareholder or
related Person of any Partner or the Company (other than the
Partnership and the Company) under or by reason of or in
connection with this Agreement and agrees to look solely to
the Company and the Partnership and the security and
Collateral held under or in connection with the Collateral
Documents for the enforcement of such liability and obligation
of the Company or the Partnership. Nothing contained in this
paragraph shall be construed (i) as preventing the Collateral
Agent from naming the Company or the Partnership, any Partner
or any past, present or future partner, officer, director or
shareholder or related Person of any Partner or the Company in
any action or proceeding brought by the Collateral Agent to
enforce and to realize upon the security and Collateral
provided under or in connection with the Collateral Documents
so long as no judgment, order, decree or other relief in the
nature of a personal or deficiency judgment or otherwise
establishing any personal obligation shall be asked for,
taken, entered or enforced against any Partner any past,
present or future partner, officer, director or shareholder or
related Person of any Partner or the Company (other than the
Partnership and the Company), in any such action or
proceeding, (ii) as modifying, qualifying or affecting in any
manner whatsoever the lien and security interests created by
this Agreement and the Collateral Documents and the other
Project Documents or the enforcement thereof by the Collateral
Agent, (iii) as modifying, qualifying or affecting in any
manner whatsoever the personal recourse undertakings,
obligations and liabilities of any person, party or entity
under any guaranty of payment, completion guaranty, other
guaranty or indemnification agreement now or hereafter
executed and delivered to the Collateral Agent in connection
with the Collateral Documents or (iv) as modifying, qualifying
or affecting in any manner whatsoever the personal recourse
liability of any Partner, any past, present or future partner,
officer, director or shareholder or related Person of any
Partner or the Company or any other person, party or entity
for fraud or willful misrepresentation or any wrongful
misappropriation or diversion of any portion of the
Collateral.
Section 4. 13 Execution in Lieu of Agent. To the extent
that any of the Credit Banks or the holders of Additional
Permitted Debt are not represented by any agent or trustee,
such Credit Bank or holder of Additional Permitted Debt shall
be permitted to execute this Agreement and the Designation
Letter on its own behalf in lieu of any agent or trustee on
its behalf.
Section 4.14 Representations. Each of the parties hereto,
including any party that executes and delivers a counterpart
of this Agreement and is designated as a Secured Party
pursuant to the Designation Letter, represents and warrants
that this Agreement has been duly executed and delivered by
it, and constitutes the valid and binding obligation of it,
enforceable against it in accordance with the terms hereof,
except as such enforceability (i) may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other
similar laws affecting the enforcement of creditors, rights
and remedies generally and (ii) is subject to general
principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
Section 4.15 Conflicts With Other Security Documents.
Notwithstanding any other provision hereof, in the event of
any conflict between the terms of this Agreement and the
other Security Documents, the provisions of this Agreement
shall control.
IN WITNESS WHEREOF, the undersigned have caused this Agreement
to be duly executed by their duly authorized officers, all as of the
date first written above.
PANDA-ROSEMARY FUNDING
CORPORATION
By: /s/ William C. Nordlund
Name:
Title:
PANDA-ROSEMARY, L.P.
By: Panda-Rosemary Corporation, its
General Partner
By: /s/ William C. Nordlund
Name:
Title:
FLEET NATIONAL BANK, as the Trustee
By: /s/ K. Larimore
Name: Kathy A. Larimore
Title: Assistant Vice President
FLEET NATIONAL BANK, as the Depositary Agent
By: /s/ K. Larimore
Name: Kathy A. Larimore
Title: Assistant Vice President
FLEET NATIONAL BANK, as the Collateral Agent
By: /s/ K. Larimore
Title: Assistant Vice President
Schedule I
to Collateral Agency and
Intercreditor Agreement
[FORM OF DESIGNATION LETTER]
[Date]
Fleet National Bank
Corporate Trust Department
777 Main Street
CMT00238
Hartford, Connecticut 06115
Ref. Panda-Rosemary 1996
Re: Panda-Rosemary, L. P.
Ladies and
Gentlemen:
Reference is made to (i) the Collateral Agency and
Intercreditor Agreement, dated as of July 3l, 1996 (the
"Intercreditor Agreement") among Panda-Rosemary Funding
Corporation (the "Company"), Panda-Rosemary, L.P. (the
"Partnership" Bayerische Vereinsbank AG, the Depositary Agent
(as defined in the Indenture referred to below), any trustees
or agents under any other Financing Documents (as defined in
the Intercreditor Agreement) and the Collateral Agent (as
defined in the Intercreditor Agreement) and (ii) [Describe
New Credit Documents]. Capitalized terms used herein and not
defined herein shall have the meanings set forth in the Trust
Indenture, dated as of July 31, 1996 (the "Indenture"), among
the Partnership, the Company and Fleet National Bank.
The undersigned is the [Bank/Lender] [Agent for the
[Banks] [Lenders]] under the [New Credit Document].
The undersigned is delivering this Designation Letter
pursuant to Section 2.7 of the Intercreditor Agreement in
order to permit the undersigned [and the [Banks] [Lenders]]
under the New Credit Document] to become Secured Parties
under the Intercreditor Agreement and the Collateral
Documents and to benefit from the Collateral under the
Collateral Documents in accordance with the terms of the
Intercreditor Agreement and the Collateral Documents.
Attached hereto is a copy of the certificate to be
delivered by the Partnership.
The undersigned [on behalf of itself and the Bank]
[Lenders]] accedes to and agrees to be bound by all of the
terms and provisions of the Intercreditor Agreement and the
Collateral Documents. in furtherance thereof, the undersigned
[on behalf of itself and the [Bank] [Lenders]] agrees to
execute a counterpart of the Intercreditor Agreement.
Our address for notices is:
(Insert Information]
We agree that any extensions of credit under the [New
Credit Documents] shall be deposited with the Depositary
Agent, to the extent required by the Depositary Agreement.
This Designation Letter may be executed in any number of
counterparts, each executed counterpart constituting an
original but all counterparts together constituting only one
instrument.
THIS DESIGNATION LETTER SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CONFLICTS OF
LAWS PROVISIONS (OTHER THAN SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF NEW YORK) THAT MIGHT CAUSE THIS DESIGNATION
LETTER TO BE GOVERNED BY OR CONSTRUED OR ENFORCED IN
ACCORDANCE WITH THE LAWS OF ANY OTHER JURISDICTION.
The undersigned officer executing the documents on behalf
of it undersigned is duly authorized to do so.
[CREDITOR]
By:
Name:
Title:
Acknowledged
By:
FLEET NATIONAL BANK
as Collateral Agent
By:
Name:
Title:
CERTIFICATE OF PANDA-ROSEMARY, L.P.
I, [Name], [Title] of Panda-Rosemary Corporation (the
"Company"), the general partner of Panda-Rosemary, L.P., a
Delaware limited partnership (the "Partnership"), DO HEREBY
CERTIFY on behalf of the Partnership in its capacity as
general partner of the Partnership that:
1. The debt incurred pursuant to [New Credit
Document] is permitted to be incurred in accordance with
Section 6.16(a) of the Indenture referred to below and
Section _____ of the Credit Bank Reimbursement Agreement of
the L/C Issuer referred to in the Intercreditor Agreement.
[2. No event or condition has occurred and is
continuing which constitutes a Default or an Event of
Default.]
[3. A title search report and a UCC financing
statement report have been prepared and such reports
identify no Liens other than Permitted Liens.]
[4. The Partnership has obtained the title insurance
required by Section 6.4(a)(viii) of the Indenture with
respect to the Debt incurred pursuant to [New Credit
Document]. ]
Capitalized terms used herein and not defined herein shall
have the meaning assigned thereto in the Trust Indenture (as
amended, modified and supplemented and in effect on the date
hereof, the "Indenture") dated as of July 3l, 1996 among the
Partnership, Panda-Rosemary Funding Corporation and Fleet
National Bank, as trustee:
WITNESS my hand this _____ day of ______________________.
PANDA-ROSEMARY, L.P.
By: Panda-Rosemary Corporation, its General Partner
Name:
Title:
IN WITNESS WHEREOF, the undersigned have caused this Agreement
to be duly executed by their duly authorized officers, all as
of the date first written above.
PANDA-ROSEMARY FUND1NG
CORPORATION
By: /s/ William C. Nordlund
Name:
Title:
PANDA-ROSEMARY, L.P.
By: Panda-Rosemary Corporation, its
General Partner
By: /s/ William C. Nordlund
Name:
Title:
FLEET NATIONAL BANK, as the Trustee
By: /s/ K. Larimore
Name: Kathy A. Larimore
Title: Assistant Vice President
FLEET NATIONAL BANK, as the Depositary Agent
By: /s/ K. Larimore
Name: Kathy A. Larimore
Title: Assistant Vice President
FLEET NATIONAL BANK, as the Collateral Agent
By: /s/ K. Larimore
Name: Kathy A. Larimore
Title: Assistant Vice President
EXHIBIT 10.14
COLLATERAL IS OR INCLUDES FIXTURES
STATE OF NORTH CAROLINA
COUNTY OF HALIFAX AND COUNTY OF NORTHAMPTON
DEED OF TRUST AND SECURITY AGREEMENT
BY AND AMONG
PANDA-ROSEMARY, L.P. (doing business in the State of North
Carolina as Panda-Rosemary, Limited Partnership),
Grantor,
ROSS J. SMYTH,
the Trustee,
AND
FLEET NATIONAL BANK, AS COLLATERAL AGENT,
the Beneficiary
Dated: As of July 30, 1996
Drawn by and mail to: Richard Sonkin, Esq.
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
TABLE OF CONTENTS
ARTICLE I THE OBLIGATIONS 6
1.1 Loan 6
1.2 Use of Loan Funds 7
1.3 Definition of Terms 7
1.4 Obligations Secured 7
ARTICLE II GRANTOR'S COVENANTS, REPRESENTATIONS AND
AGREEMENTS 7
2.1 Title to Property 7
2.4 Taxes and Fees 7
2.5 Reimbursement 8
2.6 Additional Documents 8
2.7 Hold Harmless 8
2.8 Recording and Filing 9
2.9 Payment of Fees 9
2.10 Leases and Other Agreements 9
2.11 Prepayment of Rent 10
2.12 Maintenance and Modification of Mortgaged Property 10
2.13 Identity of Grantor 10
2.14 Compliance with Law 10
2.15 Inspection 11
2.16 Release and Waivers 11
2.17 Insurance 11
2.18 Eminent Domain 12
2.19 No Hazardous Material 11
2.21 Ground Lease 12
2.22 Estoppel Certificate 14
ARTICLE III ASSIGNMENT OF RENTS AND LEASES 15
3.1 Assignment of Rents, Profits, Etc 15
3.2 Assignment of Subleases 15
3.3 Warranties Concerning Subleases and Rents 16
3.4 Grantor's Covenants of Performance 16
3.5 Prior Approval for Actions Affecting Subleases 16
3.6 Rejection of Leases 17
3.7 Beneficiary in Possession 17
3.8 Appointment of Attorney 17
3.9 Indemnification 18
3.10 Records 18
3.11 Merger 18
3.12 Right to Rely 18
ARTICLE IV EVENTS OF DEFAULT 18
4.1 Events of Default 18
4.2 Trust Indenture; Intercreditor Agreement 18
4.3 Encroachments 18
ARTICLE V FORECLOSURE 19
5.1 Foreclosure 19
5.2 Power of Sale 19
5.3 Proceeds of Sale 19
5.4 Trustees Fee 20
ARTICLE VI ADDITIONAL RIGHTS AND REMEDIES
OF THE BENEFICIARY 20
6.1 Rights Upon an Event of Default 20
6.2 Appointment of Receiver 21
6.3 Environmental Investigation and Assessment 21
6.4 Waivers 21
ARTICLE VII GENERAL CONDITIONS 21
7.1 Substitution of Trustee 21
7.2 Terms 22
7.3 Notices 22
7.4 Greater Estate 22
7.5 Imposition of Tax 23
7.6 Invalidation of Provisions 23
7.7 Headings 23
7.8 Governing Law 23
7.9 Controlling Agreement 23
DEED OF TRUST AND SECURITY AGREEMENT
COLLATERAL IS OR INCLUDES FIXTURES
This DEED OF TRUST AND SECURITY AGREEMENT (the "Deed of
Trust") is made and entered into as of the 30th day of July,
1996, by and among PANDA-ROSEMARY, L.P., a Delaware limited
partnership, doing business in the State of North Carolina as
Panda-Rosemary, Limited Partnership ("Grantor"), ROSS J. SMYTH,
an individual residing in Mecklenburg County, North Carolina (the
"Trustee"), and FLEET NATIONAL BANK, a national banking
association organized and existing under the laws of the United
States of America, as collateral agent (together with its
successors and assigns, the "Beneficiary") for the benefit of the
Secured Parties (as defined in the Trust Indenture referred to
below).
W I T N E S S E T H:
WHEREAS, Grantor is the owner of the fee estate in and
to the parcel of real property described on Exhibit A attached
hereto (the "Fee Premises");
WHEREAS, Grantor is also the owner of a leasehold
estate in the parcel of real property described on Exhibit B
attached hereto (the "Leasehold Premises") pursuant to that
certain Real Property Lease and Easement Agreement, dated as of
June 9, 1989, between The Bibb Company, as lessor, and Panda -
Rosemary Corporation, as lessee (the "Original Ground Lease"),
which Original Ground Lease was recorded on June 13, 1989 in Book
1452, page 205, Halifax County Registry, and which Original
Ground Lease was amended pursuant to (i) First Amendment to Real
Property Lease and Easement Agreement, dated as of October 1,
1989, between The Bibb Company and Panda - Rosemary Corporation
and recorded on October 27, 1989 in Book 1461, page 475, Halifax
County Registry, (ii) Second Amendment to Real Property Lease and
Easement Agreement, dated as of January 31, 1990, between The
Bibb Company and Panda - Rosemary Corporation and recorded on
March 26, 1990 in Book 1472, page 465, Halifax County Registry
and (iii) Third Amendment to Real Property Lease and Easement
Agreement, dated as of March 15, 1996, between The Bibb Company
and Grantor and recorded on May 1,1996 in Book 1670, page 16,
Halifax County Registry (the Original Ground Lease, as so
amended, and as the same may hereafter be modified, amended or
extended, being referred to as the "Ground Lease");
WHEREAS, Grantor is also the holder of certain easement
interests created pursuant to the Ground Lease (the "Ground Lease
Easements"), as more particularly described therein;
WHEREAS, Grantor is, additionally, the holder of
certain easements or rights of encroachment more particularly
described in Exhibit C attached hereto (the "Separately Granted
Easements", and, together with the Ground Lease Easements, the
"Easements");
WHEREAS, the interests of Panda - Rosemary Corporation
in and to the Ground Lease, the leasehold estate created thereby,
the Ground Lease Easements created thereunder and the Separately
Granted Easements were acquired by Grantor pursuant to that
certain (i) Leasehold and Real Property Assignment and Assumption
Agreement, dated January 6, 1992, between Panda - Rosemary
Corporation and Grantor, recorded on January 6, 1992 in Book
1520, page 564, Halifax County Registry and on January 6, 1992 in
Book 681, page 243, Northampton County Registry and (ii) Real
Property Assignment and Assumption Agreement, dated July 30,
1996, between Panda - Rosemary Corporation and Grantor, intended
to be duly recorded in the Halifax County Registry;
WHEREAS, Grantor is the legal and beneficial owner of
all of the shares of common stock issued by Panda-Rosemary
Funding Corporation, a Delaware corporation (the "Company");
WHEREAS, the Company, Grantor and Fleet National Bank,
as trustee (the "Indenture Trustee"), are parties to that certain
Trust Indenture, dated as of July 30, 1996 (as the same may be
amended, modified or supplemented, the "Trust Indenture"),
providing for the issuance by the Company of certain debt
securities (the "Bonds");
WHEREAS, Grantor has made that certain Partnership
Guaranty, dated the date hereof (as the same may be amended,
modified or supplemented, the "Partnership Guaranty"), in favor
of the Indenture Trustee to guaranty the performance by the
Company of its obligations under the Bonds and the Trust
Indenture;
WHEREAS, the Company and Grantor are parties to that
certain Loan Agreement, dated as of the date hereof (as the same
may be amended, modified or supplemented, the "Company Loan
Agreement"), pursuant to which the Company has loaned the
proceeds of the Bonds to Grantor;
WHEREAS, the Company and the Beneficiary are parties to
that certain Pledge and Security Agreement, dated the date
hereof, pursuant to which the Company has assigned to the
Beneficiary, and created a security interest in, all of its
right, title and interest in, to and under the Company Loan
Agreement and the related promissory note;
WHEREAS, in order to satisfy certain requirements of
Grantor under the Project Agreements (as defined in the Trust
Indenture), Grantor may incur indebtedness as permitted under the
Trust Indenture in connection with the issuance of letters of
credit by Bayerische Vereinsbank AG, NationsBank of Texas, N.A.,
or other Credit Banks (as defined in the Trust Indenture)
pursuant to a Credit Bank Reimbursement Agreement (as defined in
the Trust Indenture);
WHEREAS, Grantor may incur indebtedness as permitted
under the Trust Indenture in the form of working capital loans
made by the Credit Banks under a Credit Bank Working Capital
Agreement (as defined in the Trust Indenture);
WHEREAS, Grantor may also incur additional debt, as
permitted under the Trust Indenture, either directly or
indirectly through the Company, to finance certain modifications
and enhancements to the Project in the future ("Additional
Permitted Debt", as that term is defined in the Trust Indenture)
and may enter into interest rate protection agreements in
connection with the Additional Permitted Debt of Grantor;
WHEREAS, the Grantor shall receive direct and indirect
financial and other benefits from the issuance of the Bonds by
the Company pursuant to the Trust Indenture and the incurrence of
any indebtedness pursuant to any Credit Bank Reimbursement
Agreement, any Credit Bank Working Capital Agreement, and the
documents relating to any Additional Permitted Debt or interest
rate protection transactions;
WHEREAS, the Company, Grantor, Bayerische Vereinsbank
AG, the Indenture Trustee, Fleet National Bank, as depositary
agent, and the Beneficiary are parties to that certain Collateral
Agency and Intercreditor Agreement, dated as of the date hereof
(the "Intercreditor Agreement"), providing for the Beneficiary to
act as collateral agent for the Secured Parties (as defined in
the Trust Indenture); and
WHEREAS, the Beneficiary and the Secured Parties are
willing to enter into the transactions contemplated by, among
other things, the Trust Indenture and the Credit Bank Documents
(as defined in the Trust Indenture) only upon the condition,
among others, that the Grantor executes and delivers this Deed of
Trust to secure the Obligations (as hereinafter defined);
NOW THEREFORE, Grantor, in consideration of the
foregoing premises, the indebtedness herein recited and in
further consideration of the sum of ten dollars ($10.00) and
other valuable consideration paid by the Trustee to Grantor, the
receipt and sufficiency of which is hereby acknowledged,
irrevocably gives, grants, bargains, sells, transfers, assigns
and conveys to the Trustee and the Trustee's heirs, successors
and assigns, in trust, with power of sale for the benefit and
security of the Beneficiary, all of the following described land,
real property interests, buildings, leasehold interests,
easements, improvements, fixtures, furniture, appliances and
other tangible or intangible personal property:
(a) (i) All of Grantor's right, title and interest
in, to and under the Ground Lease;
(ii) All of Grantor's leasehold estate and
occupancy rights in and to the Leasehold Premises and all of
Grantor's interest, whether now existing or hereafter
arising, contingent or non-contingent, in and to the
Easements, and in and to any and all other easements,
appurtenances, servitudes, covenants and other rights or
licenses benefiting the Leasehold Premises or the Fee
Premises (the "Other Easements");
(iii) All of Grantor's right, title and interest in
and to the Fee Premises (the Fee Premises, the Leasehold
Premises and the lands covered by the Easements and Other
Easements being hereinafter collectively referred to as the
"Premises"); and
(b) All of Grantor's right, title and interest in and
to all buildings and improvements of every kind and
description now or hereafter erected or placed on the
Premises including, without limitation, the Facility and all
transformers, breakers, lines, poles, guy wires, anchors and
any other equipment and materials associated with the
Interconnection Facilities (as defined in the Ground Lease)
(collectively, the "Improvements") and all materials
intended for construction, reconstruction, alteration and
repair of such Improvements now or hereafter erected
thereon, all of which materials shall be deemed to be
included within the premises hereby conveyed immediately
upon the delivery thereof to the aforesaid Premises, and all
fixtures and articles of personal property now or hereafter
owned by Grantor and attached to or contained in and used in
connection with the aforesaid Premises and Improvements
including, without limitation, all furniture, furnishings,
apparatus, machinery, equipment, motors, elevators,
fittings, radiators, ranges, refrigerators, awnings, shades,
screens, blinds, carpeting, office equipment and other
furnishings and all plumbing, heating, lighting, cooking,
laundry, ventilating, refrigerating, incinerating, air
conditioning and sprinkler equipment, telephone systems,
televisions, television systems, computer systems and
fixtures and appurtenances thereto and all renewals or
replacements thereof or articles in substitution thereof,
whether or not the same are or shall be attached to the
Premises and Improvements in any manner (collectively, the
"Tangible Personalty"). It is intended that this Deed of
Trust shall be effective as a financing statement filed as a
fixture filing from the date of its filing for record in the
real estate records of each county in which the Mortgaged
Property is situated. Information concerning the security
interest created by this instrument may be obtained from the
Beneficiary, as secured party, at the address of the
Beneficiary stated herein, and the mailing address of
Grantor, as debtor, is as stated herein;
And, as additional security for said indebtedness,
Grantor hereby assigns to the Beneficiary the Rents (as such term
is defined in Section 3.1 hereof) and the rights described in
Sections 2.21(i) and (j) hereof.
As additional collateral and further security for the
indebtedness, Grantor does hereby assign to the Beneficiary and
grants to the Beneficiary a security interest in all of the
right, title and interest of Grantor in and to any and all leases
(including equipment leases), subleases, rental agreements,
management contracts, franchise agreements, construction
contracts, architects' contracts, technical services agreements,
licenses and permits now or hereafter affecting the Mortgaged
Property (collectively, the "Intangible Personalty") or any part
thereof, and Grantor agrees to execute and deliver to the
Beneficiary such additional instruments, in form and substance
reasonably satisfactory to the Beneficiary, as may hereafter be
requested by the Beneficiary to evidence and confirm said
assignment; provided, that acceptance of any such assignment
shall not be construed as a consent by the Beneficiary to any
lease, sublease, rental agreement, management contract, franchise
agreement, construction contract, technical services agreement or
other contract, license or permit, or to impose upon the
Beneficiary any obligation with respect thereto.
TO HAVE AND TO HOLD the same, together with all rights,
privileges, hereditaments, easements and appurtenances thereunto
belonging, subject to the Permitted Encumbrances (as such term is
defined in Section 2.1 hereof), to the Trustee and the Trustee's
heirs, successors and assigns to secure the indebtedness herein
recited and upon the trusts and for the uses and purposes
hereinafter set out and, upon this special trust: that should
the indebtedness secured hereby be paid according to the tenor
and effect thereof when the same shall be due and payable and
should Grantor timely and fully discharge its obligations secured
hereby in accordance with their respective terms, and comply with
all the covenants, terms and conditions of this Deed of Trust,
then this conveyance of the Premises, Improvements, Tangible
Personalty and Intangible Personalty (collectively referred to as
the "Mortgaged Property") shall be null and void and may be
cancelled of record at the request and at the expense of Grantor.
With respect to the Tangible Personalty not affixed to
the aforesaid Premises and conveyed herein and the Intangible
Personalty, this Deed of Trust shall be considered to be a
security agreement which creates a security interest in such
items for the benefit of the Beneficiary. In that regard,
Grantor grants to the Beneficiary all of the rights and remedies
of a secured party under the North Carolina Uniform Commercial
Code. This Deed of Trust secures a refinance of an obligation
incurred for the construction of an improvement on the land and
as such constitutes a mortgage "given to refinance a construction
mortgage" under Section 25-9-313, North Carolina General
Statutes.
Grantor, the Trustee and the Beneficiary covenant,
represent and agree as follows:
ARTICLE I
THE OBLIGATIONS
1.1 Loan. The indebtedness secured by this Deed of
Trust consists of (x) the loan in the principal amount of ONE
HUNDRED ELEVEN MILLION FOUR HUNDRED THOUSAND and no/100 dollars
($111,400,000.00) (the "Loan") from the Company to Grantor and
(y) (i) all obligations of Grantor or the Company to the
Beneficiary, the Depositary Agent or the Secured Parties now or
hereafter existing under the Trust Indenture, the Partnership
Notes, any Additional Permitted Debt, any Credit Bank Working
Capital Agreement, any Credit Bank Reimbursement Agreement, any
Interest Rate Protection Agreement, this Deed of Trust or the
Collateral Documents, whether for principal, interest (including,
without limitation, interest accruing following the filing by or
against Grantor or the Company of a bankruptcy petition, whether
or not allowed as a claim in a bankruptcy proceeding), fees,
indemnification, expenses or otherwise, and (ii) all other
liabilities, obligations, covenants and duties owing to the
Beneficiary, the Depositary Agent or the Secured Parties, from or
by Grantor or the Company of any kind or nature, present or
future, whether or not evidenced by any note, guaranty or other
instrument, arising under or in connection with the Trust
Indenture, each Partnership Guaranty, the Partnership Notes, any
Additional Permitted Debt, any Credit Bank Working Capital
Agreement, any Credit Bank Reimbursement Agreement, any Interest
Rate Protection Agreement, this Deed of Trust or the Collateral
Documents, whether or not for the payment of money, whether
direct or indirect (including those acquired by assignment),
joint or several, absolute or contingent, liquidated or
unliquidated, due or to become due, now existing or hereafter
arising, renewed or restructured, whether or not from time to
time decreased or extinguished and later increased, created or
incurred, and including, without limitation, all indebtedness of
Grantor or the Company under any instrument now or hereafter
evidencing or securing any of the foregoing and however acquired
(all such indebtedness, collectively, the "Obligations").
1.2 Use of Loan Funds. The proceeds of the Loan shall
be used to (a) refinance certain of Grantor's outstanding
indebtedness, (b) fund a debt service reserve fund, (c) pay
certain transaction costs in connection with the Loan and other
related transactions described in the Trust Indenture and (d)
partially fund the redemption of a limited partnership interest
in the Grantor held or owned by Ford Motor Credit Company.
1.3 Definition of Terms. All terms capitalized in
this Deed of Trust but not defined in this Deed of Trust shall
have the meanings ascribed to those terms in the Intercreditor
Agreement (or in the Trust Indenture and included in the
Intercreditor Agreement).
1.4 Obligations Secured. This Deed of Trust secures
the payment and performance in full when due, whether at stated
maturity, by acceleration or otherwise (including the payment of
amounts which would become due but for the operation of the
automatic stay under Section 362(a) of the Bankruptcy Code, 11
U.S.C. 362(a)), of all Obligations now or hereafter existing.
The amount of present advance secured by this Deed of Trust is
ONE HUNDRED ELEVEN MILLION FOUR HUNDRED THOUSAND and no/100
dollars ($111,400,000.00), and the maximum principal amount which
may be secured hereby at any one time is ONE HUNDRED TWENTY-FIVE
MILLION and no/100 dollars ($125,000,000.00). All future
obligations shall be incurred within fifteen years of the date of
this agreement. Disbursements secured hereby shall not be
required to be evidenced by a "written instrument or notation" as
described in Section 45-68(2) of the North Carolina General
Statutes, it being the intent of the parties that the
requirements of Section 45-68(2) for a "written instrument or
notation" for each advance shall not be applicable to
disbursements made under the Loan Agreement. This paragraph is
intended to be in conformance with the provisions of Article 7 of
Chapter 45 of the North Carolina General Statutes.
ARTICLE II
GRANTOR'S COVENANTS, REPRESENTATIONS AND AGREEMENTS
2.1 Title to Property. Grantor represents and
warrants that it is seised of the Mortgaged Property and has the
right to convey the same, that title to the Mortgaged Property is
marketable and free and clear of all encumbrances except for the
matters shown on the attached Exhibit D (the "Permitted
Encumbrances"), and that it shall warrant and defend such title
against the claims of all persons or parties except for the
Permitted Encumbrances. As to the Rents and the Intangible
Personalty, Grantor represents and warrants that it has title to
such property, that it has the right to convey such property, and
that it shall warrant and defend the title to such property
against the claims of all persons or parties.
2.2 Taxes and Fees. Grantor shall pay before they
become delinquent all taxes, general and special assessments,
insurance premiums, permit fees, inspection fees, license fees,
water and sewer charges, franchise fees and equipment rents
against it or the Mortgaged Property, and Grantor, immediately
upon request of the Beneficiary, shall submit to the Beneficiary
receipts evidencing said payments, and if Grantor fails to pay
such taxes, assessments, premiums, fees, charges or rents, the
Beneficiary may pay them, together with all costs and penalties
thereon, at Grantor's expense; provided, that Grantor may in good
faith, in lieu of paying such taxes, assessments, premiums and
fees before they become delinquent and payable, by appropriate
proceedings, contest the validity thereof as provided in the
Trust Indenture.
2.3 Reimbursement. Grantor agrees that if it shall
fail to pay when due any tax, assessment or charge levied or
assessed against the Mortgaged Property or any utility charge,
whether public or private, or any insurance premium or if it
shall fail to procure the insurance coverage and deliver the
insurance certificates required hereunder, or if it shall fail to
pay any other charge, fee or other payment described in Section
2.2, 2.6, 2.7, 2.8 or 3.9 or in the acquisition or maintenance of
such insurance as may be required or desirable, then the
Beneficiary, at its option, may pay or procure the same. Grantor
shall reimburse the Beneficiary upon demand for any sums of money
paid by the Beneficiary pursuant to this Section and all such
sums shall be a part of the Obligations and shall be secured
hereby.
2.4 Additional Documents. Grantor agrees to execute
and deliver or cause to be executed and delivered to the
Beneficiary, concurrently with the execution of this Deed of
Trust and upon the request of the Beneficiary from time to time
hereafter, all financing statements, consents and other documents
reasonably required to perfect and maintain the security interest
created hereby. Grantor hereby irrevocably (as long as the
Obligations remain unpaid) makes, constitutes and appoints the
Beneficiary as the true and lawful attorney of Grantor to sign
the name of Grantor on any financing statement, continuation of
financing statement or similar document required to perfect or
continue such security interest.
2.5 Hold Harmless. Without in any way limiting
Grantor's obligations under the Trust Indenture, Grantor hereby
agrees to defend, at its own cost and expense, indemnify and hold
the Beneficiary and the Trustee harmless from, any proceeding or
claim, except those based solely on the gross negligence or
willful misconduct of the Beneficiary or the Trustee, affecting
the Mortgaged Property. All costs and expenses incurred by the
Beneficiary or the Trustee in protecting its interest hereunder,
including all court costs and reasonable attorneys' fees, shall
be borne by Grantor and any such amounts paid by the Beneficiary
or the Trustee shall be due and payable from Grantor to the
Beneficiary or the Trustee upon written demand, shall be a part
of the Obligations and shall be secured hereby. To the extent
this paragraph is in conflict with, or inconsistent with, any
provision in the Trust Indenture, the Trust Indenture shall
govern and control. The provisions of this paragraph shall
survive the payment in full of the Obligations and the release of
this Deed of Trust as to events occurring and causes of action
arising before such payment and release.
2.6 Recording and Filing. Grantor shall cause this
instrument and all amendments, supplements and extensions thereto
and substitutions therefor and financing statements relating
thereto to be recorded, filed, re-recorded and re-filed in such
manner and in such places as the Beneficiary shall reasonably
request, and shall pay all such recording, filing, re-recording
and re-filing fees, title insurance premiums and other charges.
2.7 Payment of Fees. Grantor shall pay all appraisal
fees, inspection fees, recording and filing fees, taxes,
brokerage fees and commissions, abstract fees, title policy fees,
survey fees, uniform commercial code search fees, escrow fees,
reasonable attorneys' fees actually incurred and all other costs
and expenses of every character reasonably incurred by Grantor or
the Beneficiary in connection with the execution and delivery of
this Deed of Trust or otherwise attributable to Grantor as owner
of the Mortgaged Property, and shall reimburse, indemnify and
hold harmless the Beneficiary for all such costs and expenses
reasonably incurred by it.
2.8 Leases and Other Agreements. Without first
obtaining on each occasion the written approval of the
Beneficiary, which approval shall not be unreasonably withheld or
delayed, Grantor shall not, except as expressly permitted by the
Trust Indenture, cancel, surrender or modify or permit the
cancellation of any lease (including any equipment lease), rental
agreement, management contract, franchise agreement, construction
contract, technical services agreement or other contract, license
or permit now or hereafter affecting the Mortgaged Property, or
modify any of said instruments, or accept or permit to be made,
any prepayment of any installment or rent or fees thereunder
except to the extent permitted in Section 2.9 hereof. Except as
expressly permitted by the Trust Indenture, Grantor shall
faithfully keep and perform, or cause to be kept and performed,
all of the covenants, conditions and agreements contained in each
of said instruments, now or hereafter existing, on the part of
Grantor to be kept and performed (including performance of all
covenants to be performed under any and all leases of the
Mortgaged Property or any part thereof) and shall at all times do
all things necessary and appropriate to compel performance by
each other party to said instruments of all obligations,
covenants and agreements by such other party to be performed
thereunder. Upon demand Grantor shall furnish the Beneficiary
with copies of any lease of the Mortgaged Property or any part
thereof or any other instrument or agreement described in this
Section.
2.9 Prepayment of Rent. Grantor, with respect to the
Subleases (hereinafter defined), shall not accept any prepayment
of rent or installments of rent for more than one month in
advance without the prior written consent of the Beneficiary.
2.10 Maintenance and Modification of Mortgaged
Property. The Trustee and the Beneficiary shall not be under any
obligation to operate, maintain or repair the Mortgaged Property.
Grantor shall abstain from and shall not permit the commission of
waste in or about the Mortgaged Property and, except as provided
in the Trust Indenture, shall maintain the Mortgaged Property in
good condition and repair, reasonable wear and tear excepted
until payment and performance of the Obligations. Grantor may
make, also at its own expense, from time to time any additions,
modifications or improvements to the Mortgaged Property in
accordance with the terms of the Trust Indenture. All such
additions, modifications and improvements so made by Grantor
within the boundaries of the Premises shall become a part of the
Mortgaged Property.
2.11 Identity of Grantor. Grantor hereby acknowledges
to the Beneficiary that (i) the identity of Grantor and the
expertise available to Grantor were and continue to be material
circumstances upon which the Beneficiary has relied in connection
with, and which constitute valuable consideration to the
Beneficiary for, the entering into by the Beneficiary of the
transactions described in the Trust Indenture and (ii) any change
in such identity or expertise could materially impair or
jeopardize the security for the payment of the Obligations.
Grantor therefore covenants and agrees with the Beneficiary that
Grantor shall not sell, transfer, convey, mortgage, encumber,
lease or otherwise dispose of the Mortgaged Property, the Rents
or the Intangible Personalty or any part thereof or any interest
therein or engage in subordinate financing with respect thereto
during the term of this Deed of Trust without the prior written
consent of the Beneficiary except as provided in the Trust
Indenture.
2.12 Compliance with Law. The Mortgaged Property, and
the use thereof by Grantor, shall comply in all material respects
with all laws, rules, ordinances, building codes, regulations,
covenants, conditions, restrictions, orders and decrees of any
governmental authority or court applicable to Grantor, or the
Mortgaged Property and its use, and Grantor shall pay all fees or
charges of any kind in connection therewith. Grantor shall not
use or occupy or allow the use or occupancy of the Mortgaged
Property in any manner which violates any applicable law, rule,
regulation or order or which constitutes a public or private
nuisance or which makes void, voidable or cancellable any
insurance then in force with respect thereto. Grantor shall not
cause or permit the lien of this Deed of Trust to be impaired in
any way.
2.13 Inspection. Grantor shall permit the Beneficiary
(and others as permitted by the Trust Indenture) at all
reasonable times to enter and pass through or over the Mortgaged
Property for the purpose of inspecting the same or the Facility.
2.14 Release and Waivers. Grantor agrees that no
release by the Beneficiary of any of Grantor's successors in
title from liability on the Obligations, no release by the
Beneficiary of any portion of the Mortgaged Property, the Rents
or the Intangible Personalty, no subordination of lien, no
forbearance on the part of the Beneficiary to collect on the
Obligations, or any part thereof, no waiver of any right granted
or remedy available to the Beneficiary and no action taken or not
taken by the Beneficiary shall in any way diminish Grantor's
obligation to the Beneficiary or have the effect of releasing
Grantor, or any successor to Grantor, from full responsibility to
the Beneficiary for the complete discharge of the Trust Indenture
or any other Project Document.
2.15 Insurance. Grantor shall maintain insurance on
the Mortgaged Property against such risks, in such amounts, with
such companies and in such form as required by the Trust
Indenture. In case of loss, the Beneficiary shall be entitled to
receive and retain the proceeds of the insurance policies and
apply the same as provided in the Trust Indenture. If any loss
shall occur at any time when Grantor shall be in default in the
performance of this covenant, the Beneficiary shall be entitled
to the benefit of all insurance held by or for Grantor, to the
same extent as if it had been made payable to the Beneficiary,
and upon foreclosure hereunder the Beneficiary shall become the
owner thereof.
2.16 Eminent Domain. Except as may be required by
applicable law, all proceeds of any condemnation, eminent domain
or similar taking, whether by public, quasi-public or private
entity, shall be distributed according to the Trust Indenture.
2.17 No Hazardous Material. Grantor shall not cause
or permit any chemical, pollutant, contaminant, waste, toxic
substance, petroleum or petroleum product (hereafter "Hazardous
Material") to be brought upon, stored or used in or about the
Mortgaged Property except for such Hazardous Material as is
necessary to Grantor's operation of the Facility. Any Hazardous
Material permitted on the Mortgaged Property and all containers
therefor shall be used, stored and disposed of in a manner that
complies with all Laws applicable to such Hazardous Material.
Grantor shall not discharge, leak or emit, or permit to be
discharged, leaked or emitted, any Hazardous Material into the
environment where such discharge, leak or emission is in
violation of any Environmental Law, could materially adversely
affect the Mortgaged Property or Grantor's use thereof, could
impose a material liability on Grantor or the Beneficiary or
could jeopardize the interest of the Beneficiary in the Mortgaged
Property under the Collateral Documents.
2.18 Ground Lease. Grantor represents, warrants,
covenants and agrees as follows:
(a) The Ground Lease is in full force and
effect, unmodified by any writing or otherwise, except as
indicated herein;
(b) All rent, additional rent and/or other
charges reserved in or payable under the Ground Lease have
been paid to the extent they are payable on or before the
date hereof;
(c) Grantor enjoys the quiet and peaceful
possession of the Leasehold Premises;
(d) Grantor is not in default under any of the
terms of the Ground Lease and there are no circumstances
which, with the passage of time or the giving of notice or
both, would constitute a default under the Ground Lease;
(e) To the best knowledge of Grantor, the
landlord under the Ground Lease is not in default under any
of the terms of the Ground Lease on its part to be observed
or performed;
(f) Grantor has delivered to the Beneficiary a
true, accurate and complete copy of the Ground Lease and all
amendments, modifications and supplements thereto;
(g) Grantor shall promptly and faithfully pay
all rent and other sums due and payable under the Ground
Lease and shall observe, perform and otherwise comply with
all the terms, covenants and provisions of the Ground Lease
(including, without limitation, the giving of notice to the
landlord under the Ground Lease regarding the nature and
existence of the lien of this Deed of Trust and the identity
of the Beneficiary) on Grantor's part to be paid, observed,
performed and complied with, at periods or within the times
to cure provided therein;
(h) Grantor shall not do, permit, suffer or
refrain from doing anything as a result of which there could
be a default under or breach of any of the terms, covenants
or provisions of the Ground Lease or which could constitute
grounds for termination of the Ground Lease and shall do all
things necessary to preserve and keep unimpaired its rights,
powers and privileges under the Ground Lease and to prevent
any termination of the Ground Lease;
(i) Grantor shall not terminate (including a
termination pursuant to the express provisions thereof),
cancel, surrender (including, without limitation, any
election by Grantor not to remain in possession of the
property demised by the Ground Lease in case the Ground
Lease shall be rejected, terminated or annulled by any
trustee appointed for the landlord's assets in debtor relief
proceedings), modify, elect any option, including, without
limitation, any option not to continue the Ground Lease for
a renewal term, amend or in any way alter or permit the
alteration of any of the terms, covenants or provisions of
the Ground Lease, or suffer to exist any such termination or
alteration, without the prior written consent of the
Beneficiary, all of such rights being hereby assigned to the
Beneficiary as further collateral security for the
Obligations secured hereby, and any action taken by Grantor
in violation of such agreement shall be null and void and of
no force or effect whatsoever;
(j) Grantor shall not waive, excuse or
discharge any of the obligations and agreements of the
landlord under the Ground Lease or subordinate or consent to
the subordination of the Ground Lease to any mortgage or
deed of trust on any party's interest in the property
demised by the Ground Lease or consent to any restriction,
covenant or agreement affecting the leasehold estate created
by the Ground Lease without the prior written consent of the
Beneficiary, which consent shall be given only in the
reasonable discretion of the Beneficiary, all of such rights
being hereby assigned to the Beneficiary as further
collateral security for the Obligations secured hereby, so
that any action taken by Grantor in violation of such
agreement shall be null and void and of no force or effect
whatsoever and Grantor shall enforce the obligations of the
landlord under the Ground Lease to the end that Grantor may
enjoy all of the rights granted to it under the Ground
Lease;
(k) Grantor shall immediately notify the
Beneficiary, in writing, of any default by Grantor in the
observance or performance of any of the terms, covenants and
conditions to be observed or performed by Grantor under the
Ground Lease or of any notice of any such default received
by Grantor under the Ground Lease or other notice asserting
lack of compliance with the Ground Lease, or any notice from
any party of termination or purported termination thereof,
without giving effect to any grace periods or times to cure,
and shall promptly deliver to the Beneficiary copies of each
such notice of default or notice of termination and all
other notices, communications, plans, specifications and
other similar instruments received or delivered by Grantor
in connection with the Ground Lease; and
(l) Grantor shall furnish to the Beneficiary
such information and evidence as the Beneficiary may
reasonably require concerning the due observance,
performance and compliance with the terms, covenants and
provisions of the Ground Lease.
In the event of any default in the observance or
performance of any of the terms, covenants or conditions to be
observed or performed under the Ground Lease, the Beneficiary
may, at its option and without notice and without any obligation
so to do, cause the default or defaults to be remedied and
otherwise exercise any and all of the rights of Grantor under the
Ground Lease in the name of and on behalf of Grantor.
So long as the Obligations shall remain unpaid, unless
the Beneficiary shall otherwise consent, the fee title and the
leasehold estate in the property demised by the Ground Lease
shall not merge but shall always be kept separate and distinct,
notwithstanding the union of said estates in any of the landlord
under the Ground Lease, the Beneficiary, Grantor or any third
party, whether by purchase or otherwise.
2.19 Estoppel Certificate. Grantor, within ten (10)
days after the written request by the Beneficiary and at
Grantor's expense, shall furnish the Beneficiary or such other
person or persons as the Beneficiary shall designate with a
statement, duly acknowledged and certified, (i) setting forth the
amount of the indebtedness which Grantor acknowledges to be due
on the Obligations and under this Deed of Trust and the defenses,
offsets or counterclaims thereto claimed or asserted by Grantor,
if any (and, if there are any defenses, offsets or counterclaims,
setting them forth in reasonable detail and describing the basis
therefor in reasonable detail), (ii) setting forth any
obligations to be paid or performed hereunder and the then state
of facts relative to the condition of the Mortgaged Property,
and/or (iii) stating that the Ground Lease is unmodified since
the date of this Deed of Trust and in full force and effect and
that Grantor has no defenses, offsets or counterclaims against
its obligations under the Ground Lease (or, if there have been
any modifications, that the same is in full force and effect as
modified and stating the modifications and, if there are any
defenses, offsets or counterclaims, setting them forth in
reasonable detail), the dates to which the rent and other charges
under the Ground Lease have been paid and a statement that the
landlord is not in default thereunder (or if in default, the
nature of such default, in reasonable detail). In the event that
Grantor fails to give the Beneficiary satisfactory evidence of
the payment of all basic rent, additional rent and other charges
required to be paid by Grantor under the Ground Lease within said
10-day period, the Beneficiary may require Grantor to pay to the
Beneficiary, together with and in addition to any installments of
principal and interest required to be paid under the Trust
Indenture, a sum equal to all basic rent, additional rent and
other charges next due under the Ground Lease at least five (5)
Business Days prior to the date on which such amounts shall be
due and payable, which sums, to the extent received, shall be
held without interest and applied by the Beneficiary to the
payment of such basic rent, additional rent and other charges, as
the same become due and payable.
ARTICLE III
ASSIGNMENT OF RENTS AND LEASES
3.1 Assignment of Rents, Profits, Etc. All of the
rents, royalties, bonuses, issues, profits, revenue, income and
other benefits derived from the Mortgaged Property or arising
from the use or enjoyment of any portion thereof or from any
sublease or agreement pertaining thereto and liquidated damages
following default under such subleases, and all proceeds payable
under any policy of insurance covering loss of rents resulting
from untenantability caused by damage to any part of the
Mortgaged Property, together with any and all rights that Grantor
may have against any tenant under such subleases or any
subtenants or occupants of any part of the Mortgaged Property
(the "Rents"), are hereby absolutely and unconditionally assigned
to the Beneficiary to be applied by the Beneficiary in payment of
the Obligations. Notwithstanding any provision of this Deed of
Trust or any other Project Document which might be construed to
the contrary, the assignment in this paragraph is an absolute
assignment and not merely a security interest. However, the
Beneficiary's rights as to the assignment shall be exercised only
upon the occurrence of an Event of Default (as defined in Section
4.1 hereof). Prior to an Event of Default, Grantor shall have a
license to collect and receive all Rents as trustee for the
benefit of the Beneficiary and Grantor and Grantor shall apply
the funds so collected first to the payment of the Obligations as
the same become due in such manner as the Beneficiary elects and
thereafter to the account of Grantor.
3.2 Assignment of Subleases. Grantor hereby assigns
to the Beneficiary all existing and future leases, including
subleases thereof, and any and all extensions, renewals,
modifications and replacements thereof, upon any part of the
Mortgaged Property (the "Subleases"). Grantor hereby further
assigns to the Beneficiary all guaranties of tenants' performance
under the Subleases. Prior to an Event of Default, Grantor shall
have the right, without joinder of the Beneficiary, to enforce
the Subleases, unless the Beneficiary directs otherwise.
3.3 Warranties Concerning Subleases and Rents.
Grantor represents and warrants that:
(a) Grantor has good title to the Subleases and
Rents hereby assigned, if any, and authority to assign such
Subleases and Rents, and no other person or entity has any
right, title or interest therein;
(b) All existing Subleases are valid,
unmodified and in full force and effect, except as indicated
herein, and no default exists thereunder;
(c) Except as provided herein, no Rents have
been or shall be assigned, mortgaged or pledged;
(d) No Rents have been or shall be waived,
released, discounted, set off or compromised; and
(e) Except as indicated in the Subleases,
Grantor has not received any funds or deposits from any
tenant for which credit has not already been made on account
of accrued Rents.
3.4 Grantor's Covenants of Performance. Grantor
covenants to:
(a) Perform all of its obligations under the
Subleases and give prompt notice to the Beneficiary of any
failure to do so;
(b) Give immediate notice to the Beneficiary of
any notice Grantor receives from any tenant or subtenant
under any Subleases, specifying any claimed default by any
party under such Subleases;
(c) Enforce the tenant's obligations under the
Subleases;
(d) Defend, at Grantor's expense, any
proceeding pertaining to the Subleases, including, if the
Beneficiary so requests, any such proceeding to which the
Beneficiary is a party; and
(e) Neither create nor permit any encumbrance
upon its interest as sublessor of the Subleases, except this
Deed of Trust and any other encumbrances permitted by this
Deed of Trust, the Trust Indenture or the other Project
Documents.
3.5 Prior Approval for Actions Affecting Subleases.
Grantor shall not without the prior written consent of the
Beneficiary:
(a) Receive or collect Rents more than one
month in advance;
(b) Encumber or assign future Rents;
(c) Waive or release any obligation of any
tenant under the Subleases;
(d) Cancel, terminate or modify any of the
Subleases, cause or permit any cancellation, termination or
surrender of any of the Subleases, or commence any
proceeding for dispossession of any tenant under any of the
Subleases;
(e) Renew or extend any of the Subleases,
except pursuant to terms in existing Subleases;
(f) Permit any assignment of the Subleases or
any subletting thereunder; or
(g) Enter into any Sublease.
3.6 Rejection of Leases. Grantor agrees that no
settlement for damages for termination of any of the Subleases
under the Bankruptcy Code, or under any other federal, state or
local statute, shall be made without the prior written consent of
the Beneficiary, and any check in payment of such damages shall
be made payable to both Grantor and the Beneficiary. Grantor
hereby assigns any such payment to the Beneficiary to be applied
to the Obligations in accordance with the terms of the Trust
Indenture and agrees to endorse any check for such payment to the
order of the Beneficiary.
3.7 Beneficiary in Possession. The Beneficiary's
acceptance of this assignment shall not, prior to entry upon and
taking possession of the Mortgaged Property by the Beneficiary,
be deemed to constitute the Beneficiary a "mortgagee in
possession" nor obligate the Beneficiary to appear in or defend
any proceeding relating to any of the Subleases or to the
Mortgaged Property, to take any action hereunder, expend any
money, incur any expenses or perform any obligation for any
deposits delivered to Grantor by any lessee and not delivered to
the Beneficiary. The Beneficiary shall not be liable for any
injury or damage to person or property in or about the Mortgaged
Property.
3.8 Appointment of Attorney. Grantor hereby appoints
the Beneficiary its attorney-in-fact, coupled with an interest,
empowering the Beneficiary to subordinate any Subleases to this
Deed of Trust.
3.9 Indemnification. Without limiting Grantor's
obligations under Section 2.5 hereof and in addition to such
obligations, unless attributable solely to the gross negligence
or willful misconduct of the Beneficiary, Grantor hereby agrees
to indemnify and hold the Beneficiary harmless from all
liability, damage or expense incurred by the Beneficiary from any
claims under the Subleases, including, without limitation, claims
by tenants for security deposits or for rental payments more than
one (1) month in advance and not delivered to the Beneficiary.
All amounts indemnified against hereunder, including reasonable
attorneys' fees, if paid by the Beneficiary, shall be payable by
Grantor immediately upon demand and shall be secured hereby. To
the extent this paragraph is in conflict with, or inconsistent
with, any provision in the Trust Indenture, the Trust Indenture
shall govern and control.
3.10 Records. Upon written request by the
Beneficiary, Grantor shall deliver to the Beneficiary executed
originals (or certified copies) of all Subleases and copies of
all records relating thereto.
3.11 Merger. There shall be no merger of the
leasehold estates created by the Subleases with the leasehold
estate created by the Ground Lease without the prior written
consent of the Beneficiary.
3.12 Right to Rely. Grantor hereby authorizes and
directs the tenants under the Subleases to pay Rents to the
Beneficiary upon written demand by the Beneficiary without
further consent of Grantor, and the tenants may rely upon any
written statement delivered by the Beneficiary to the tenants.
Any such payment to the Beneficiary shall constitute payment to
Grantor under the Subleases.
ARTICLE IV
EVENTS OF DEFAULT
4.1 Events of Default. An "Event of Default" shall be
the occurrence or existence of any of the events or conditions
described in the subsequent sections of this Article IV.
4.2 Trust Indenture; Intercreditor Agreement. The
occurrence of an "Event of Default", as defined in the Trust
Indenture, or a "Trigger Event", as defined in the Intercreditor
Agreement, shall constitute an Event of Default hereunder.
4.3 Encroachments. The appearance on any survey
required under the Trust Indenture of easements or encroachments
which have occurred without the prior written approval of the
Beneficiary. The Beneficiary acknowledges that the Permitted
Encumbrances have occurred with the prior written approval of the
Beneficiary.
ARTICLE V
FORECLOSURE
5.1 Foreclosure. Upon the occurrence and during the
continuance of any Event of Default (including, without
limitation, the failure to pay the Obligations in full at any
stated or accelerated maturity), then, in addition to any other
rights or remedies which the Beneficiary, the Indenture Trustee
or the Secured Parties may have under this Deed of Trust, the
other Project Documents or applicable law, the Beneficiary may
direct the Trustee to foreclose the lien of this Deed of Trust
pursuant to the power of sale hereby granted or by judicial
proceeding.
5.2 Power of Sale. The Trustee is hereby granted a
power of sale and may sell the Mortgaged Property (together with
the Rents and Intangible Personalty), at public auction for cash,
or such part or parts thereof or interests therein as the
Beneficiary may select, after first having given such notice of
hearing as to commencement of foreclosure proceedings and
obtained such findings or leave of court as then may be required
by North Carolina law, and then having given such notice and
advertised the time and place of such sale in such manner as then
may be provided by North Carolina law, and upon such sale and any
resale and upon compliance with the North Carolina law then
relating to foreclosure proceedings, to convey title to the
purchaser. The Beneficiary shall be entitled to bid for the
Mortgaged Property at such sale. In the event the Trustee is
prohibited from foreclosing the lien of this Deed of Trust by
exercising the power of sale granted herein under the provisions
of Article 2A of Chapter 45, North Carolina General Statutes, as
amended from time to time, the Trustee may proceed to foreclose
under the judicial sale provisions of Article 29A of Chapter 1,
North Carolina General Statutes. Each legal, equitable or
contractual right, power or remedy of the Trustee now or
hereafter provided herein or by statute or otherwise shall be
cumulative and concurrent and shall be in addition to every other
right, power and remedy, and the exercise or beginning of the
exercise by the Trustee of any one or more of such rights, powers
and remedies shall not preclude the simultaneous or later
exercise of any or all such other rights, powers and remedies.
5.3 Proceeds of Sale. Following a foreclosure sale
and expiration of the time for submitting any upset bid, the
Trustee shall deliver to the purchaser the Trustee's assignment
of lease and/or bill of sale conveying the property so sold
without any covenant or warranty, expressed or implied. The
recitals in the Trustee's assignment of lease and/or bill of sale
shall be prima facie evidence of the statements made therein.
The Trustee shall apply the proceeds of such sale pursuant to
Section 45-21.31, North Carolina General Statutes.
5.4 Trustee's Fee. If a foreclosure proceeding is
commenced by the Trustee but terminated prior to its completion,
the Trustee's fee shall be reasonable but (a) not more than the
lesser of one percent (1%) of the Obligations or ten thousand
dollars ($10,000.000) if the termination occurs prior to the
foreclosure hearing and (b) not more than the lesser of two
percent (2%) of the Obligations or ten thousand dollars
($10,000.00) if the termination occurs after the foreclosure
hearing.
ARTICLE VI
ADDITIONAL RIGHTS AND REMEDIES OF THE BENEFICIARY
6.1 Rights Upon an Event of Default. Upon the
occurrence of an Event of Default, the Beneficiary, immediately
and without additional notice and without liability therefor to
Grantor, except for its own gross negligence or willful
misconduct, shall have the right (in addition to its rights under
the other Project Documents and any other right or remedy of the
Beneficiary), but not the obligation, to do or cause to be done
any or all of the following: (a) take physical possession of the
Mortgaged Property; (b) exercise its right to collect the Rents;
(c) enter into contracts for the completion, repair and
maintenance of the Improvements; (d) expend the Loan or other
funds and any rents, income and profits derived from the
Mortgaged Property for payment of any taxes, insurance premiums,
assessments and charges for the completion, repair and
maintenance of the Improvements, the preservation of the lien of
this Deed of Trust and the satisfaction and fulfillment of any
liabilities or obligations of Grantor arising out of or in any
way connected with the construction of the Improvements, whether
or not such liabilities and obligations in any way affect, or may
affect, the lien of this Deed of Trust; (e) enter into leases
demising the Mortgaged Property or any part thereof; (f) take
such steps to protect and enforce the specific performance of any
covenant, condition or agreement in this Deed of Trust, the Trust
Indenture or the other Project Documents or to aid the execution
of any power herein granted; and (g) generally, supervise, manage
and contract with reference to the Mortgaged Property as if the
Beneficiary were the equitable owner of the Mortgaged Property.
Notwithstanding the occurrence of an Event of Default or
acceleration of the Obligations, the Beneficiary shall continue
to have the right, but not the obligation, to pay money, whether
or not Loan funds, for the purposes described in Sections 2.2,
2.5 and 2.7 and in the maintenance or acquisition of required or
desirable insurance coverage, and all such sums and interest
thereon shall be added to the Obligations and shall be secured
hereby. Grantor also agrees that any of the foregoing rights and
remedies of the Beneficiary may be exercised at any time
independently of the exercise of any other such rights and
remedies and the Beneficiary may continue to exercise any or all
such rights and remedies until the Event(s) of Default of Grantor
are cured with the consent of the Beneficiary or until
foreclosure and the conveyance of the Mortgaged Property to the
high bidder or until the Obligations are otherwise satisfied or
paid in full.
6.2 Appointment of Receiver. Upon the occurrence of
an Event of Default, Grantor agrees that the Beneficiary shall be
entitled, without additional notice and without regard to the
adequacy of any security for the Obligations or the solvency of
any party bound for its payment, to seek the appointment of a
receiver to take possession of and to operate the Mortgaged
Property, and to collect the rents, issues, profits and income
therefrom, all expenses of which shall be added to the
Obligations and secured hereby. If such receiver should be
appointed or if there should be a sale of the Mortgaged Property,
as provided herein, Grantor or any person in possession of the
Mortgaged Property as tenant or otherwise shall become a tenant
at will of the receiver or of the purchaser and may be removed by
a writ of ejectment, summary ejectment or other lawful remedy.
6.3 Environmental Investigation and Assessment. Upon
the occurrence of an Event of Default, Grantor agrees that the
Beneficiary shall be entitled, without additional notice, to
cause an environmental investigation and assessment to be
performed for the purpose of determining whether there exists on
the Mortgaged Property any environmental condition which could
result in any liability to the owner or occupier of such
property.
6.4 Waivers. No waiver of any Event of Default shall
at any time thereafter be held to be a waiver of any right of the
Beneficiary stated anywhere in this Deed of Trust, the Trust
Indenture or any other Project Document, nor shall any waiver of
a prior Event of Default operate to waive any subsequent Event(s)
of Default. All remedies provided in this Deed of Trust, in the
Trust Indenture and in the other Project Documents are cumulative
and may, at the election of the Beneficiary, be exercised
alternatively, successively or in any manner and are in addition
to any other rights provided by law.
ARTICLE VII
GENERAL CONDITIONS
7.1 Substitution of Trustee. If, for any reason, with
or without cause, the Beneficiary shall elect to substitute for
the Trustee (or for any successor to the Trustee), the
Beneficiary shall have the right to appoint successor Trustee(s)
by duly acknowledged written instruments recorded in the Public
Registries of Halifax County and Northampton County, North
Carolina, and each new Trustee immediately upon recordation of
the instrument so appointing him or her shall become successor in
title to the Mortgaged Property for the uses and purposes of this
Deed of Trust, with all the powers, duties and obligations
conferred on the Trustee in the same manner and to the same
effect as though he or she were named herein as the Trustee.
7.2 Terms. The singular used herein shall be deemed
to include the plural; the masculine deemed to include the
feminine and neuter; and the named parties deemed to include
their permitted successors and assigns.
7.3 Notices. Any request, demand, authorization,
direction, notice, consent, waiver or other document provided or
permitted by this Deed of Trust to be made upon, given or
furnished to, or filed with,
(a) the Beneficiary shall be sufficient for every
purpose hereunder if made, given, furnished or filed in
writing to or with the Beneficiary at its Corporate
Trust Office at Corporate Trust Administration,
CTM00238, 777 Main Street, Hartford, Connecticut 06115,
Ref.: Panda-Rosemary 1996, or telecopied to such
Corporate Trust Office at (860) 986-7920, or at any
other address or telecopy number as may be designated
by the Beneficiary to the other parties hereto, or
(b) Grantor shall be sufficient for every purpose
hereunder if in writing and mailed by registered or
certified mail with return receipt requested and
postage prepaid, to Grantor addressed to it at its
principal office at 4100 Spring Valley Road, Suite
1001, Dallas, Texas 75244, or telecopied to such
principal office at (214) 980-6815, Attention: Chief
Financial Officer, or at any other address or telecopy
number previously furnished in writing to the other
parties hereto, or
(c) the Trustee shall be sufficient for every
purpose hereunder if in writing and mailed by
registered or certified mail with return receipt
requested and postage prepaid, to the Trustee addressed
to it at its office at Kennedy Covington Lobdell &
Hickman, L.L.P., NationsBank Corporate Center, 100 N.
Tryon Street, Suite 4200, Charlotte, North Carolina
28202-4006, or telecopied to such principal office at
(704) 331-7598, or at any other address or telecopy
number previously furnished in writing to the other
parties hereto.
7.4 Greater Estate. In the event that Grantor is the
owner of a leasehold estate with respect to any portion of the
Mortgaged Property and, prior to the satisfaction of the
Obligations and the cancellation of this Deed of Trust of record,
Grantor obtains a fee estate in such portion of the Mortgaged
Property, Grantor shall immediately execute and deliver to the
Beneficiary in recordable form a deed of trust or such other
instrument as the Beneficiary may reasonably require to subject
such portion of the Mortgaged Property to the terms, provisions
and conditions of this Deed of Trust.
7.5 Imposition of Tax. In the event of the passage of
any state, federal, municipal or other governmental law, order,
rule or regulation, in any manner changing or modifying the laws
now in force governing the taxation of debts secured by deeds of
trust or the manner of collecting taxes so as to affect adversely
the Beneficiary, Grantor shall promptly pay any such tax on or
before the due date thereof.
7.6 Invalidation of Provisions. .Invalidation of any
one or more of the provisions of this Deed of Trust shall not
invalidate or affect in any way any of the other provisions
hereof, which shall remain in full force and effect.
7.7 Headings. The captions and headings herein are
inserted only as a matter of convenience and for reference and in
no way define, limit or describe the scope of this Deed of Trust
or the intent of any provision hereof.
7.8 GOVERNING LAW. THIS DEED OF TRUST SHALL BE
GOVERNED BY, ENFORCED AND CONSTRUED IN ACCORDANCE WITH THE LAW OF
THE STATE OF NORTH CAROLINA AND THE LAWS OF THE UNITED STATES
APPLICABLE TO TRANSACTIONS IN THE STATE OF NORTH CAROLINA. THE
PARTIES HERETO AGREE THAT THE FOREGOING IS "BOLD-FACE" TYPE.
7.9 Controlling Agreement. Except as otherwise
provided in this Deed of Trust and except as otherwise provided
in the Trust Indenture or any other Project Document by specific
reference to the applicable provisions of this Deed of Trust, if
any provision in this Deed of Trust is in conflict with or
inconsistent with any provision in the Trust Indenture or any
Project Document, the provision in the Trust Indenture or such
Project Document, as the case may be, shall govern and control.
IN WITNESS WHEREOF, Grantor has caused this Deed of
Trust to be executed under seal by its duly authorized
representatives as of the above written date.
GRANTOR:
PANDA-ROSEMARY, L.P.
(doing business in the
State of North Carolina
as Panda-Rosemary,
Limited Partnership) [SEAL]
ATTEST: By: PANDA - ROSEMARY CORPORATION,
its general partner
By:
Name: Kim R. Knightstep Name: Robert W. Carter
Title: Title: Chairman of the Board
President and Chief
Executive Officer
[CORPORATE SEAL]
STATE OF NEW YORK)
:ss:
COUNTY OF NEW YORK)
I, the undersigned Notary Public of the aforesaid State
and County, certify that Kim R. Knightstep personally came before
me this day and acknowledged that s/he is the Assistant Secretary of
PANDA - ROSEMARY CORPORATION, a Delaware corporation, the general
partner of PANDA-ROSEMARY, L.P., a Delaware limited partnership
(doing business in the State of North Carolina as Panda-Rosemary
Limited Partnership), and that, by authority duly given and as
the act of said corporation, the foregoing instrument was
executed in its name by its President, sealed with its
corporate seal, and attested by him/herself, as its
Assistant Secretary, all as the act of said limited partnership.
Witness my hand and notorial seal this the 31st day of
July, 1996.
Thomas A. Scott
Notary Public
No. 31-4792491
[SEAL]
My Commission Expires: 8/31/97
EXHIBIT A
(Description of the Fee Premises)
That certain tract or parcel of land lying and being situate
in Pleasant Hill Township, Northampton County, North
Carolina, and more particularly described as follows:
BEGINNING at a point marked by a found one-inch iron pipe
located on the South edge of the right of way for NC.
Highway 48, said point also being the Northwest corner of
that certain 20.34 acre tract now or formerly owned by
Columbia Gas Transmission Corporation by Deed recorded in
Book 661, page 101, Northampton County Registry; THENCE
from said Beginning point and along the edge of the right of
way for NC. Highway 48, S 87 degrees 16' 36" E, 205.2 feet to a
point marked by a set one-half inch iron rod; THENCE
turning S 10 degrees 53' 15" W 283.7 feet to a point marked by a
set one-half inch iron rod; THENCE turning N 77 degrees 50' 27" W
208.8 feet to a point marked by a set one-half inch iron
rod; THENCE turning N 12 degrees 10' 00" E 250.0 feet to the point
of Beginning, and containing 1.26 acres, more or less, as
shown in survey by Cyril C. Waters, R.L.S., dated July 9,
1996, entitled "Panda-Rosemary Limited Partnership, Pleasant
Hill Station."
EXHIBIT B
(Description of the Leasehold Premises)
TRACT NO. 1
That certain tract or parcel of land lying and being situate
in the City of Roanoke Rapids, Halifax County, North
Carolina, and more particularly described as follows:
BEGINNING at a point located at the intersection of the
Northern edge of the 60 foot right of way for West 13th
Street and the Western edge of a 20 foot right of way for an
alley, said Beginning point being marked by a chiseled "X"
on a concrete slab; THENCE from said Beginning point N 63 degrees
30' W 219.78 feet to a railroad spike on the Eastern edge of
a 55 foot right of way for the spur track of CSX
Transportation, Inc.; THENCE along said 55 foot right of
way the following courses and distances: N 2 degrees 34' 31" E
364.30 feet, N 2 degrees 47' 00" E 100.00 feet, N 4 degrees 54' 00" E
50.00 feet, and N 7 degrees 11' 30" E 50.00 feet, N 9 degrees 33' 00" E
49.00 feet, and N 10 degrees 46' 10" E 36.26 feet to an iron pipe
located on the Southern edge of (undeveloped) 12th Street;
THENCE along the Southern edge of (undeveloped) 12th Street
right of way S 63 degrees 30' E 466.77 feet to an iron pipe located
at the intersection of the Southern edge of (undeveloped)
12th Street and the Western edge of the right of way for the
20 foot alley previously referred to herein; THENCE along
the Western edge of the 20 foot right of way for said alley
S 26 degrees 30' W 600.00 feet to the point of Beginning and
containing 4.83 acres, more or less, and being the property
shown on survey by Cyril C. Waters, R.L.S., dated January 8,
1992, and last updated July 10, 1996, entitled "Plat showing
Property Leased to Panda-Rosemary Limited Partnership."
TRACT NO. 2
That certain tract or parcel of land lying and being situate
in the City of Roanoke Rapids, Halifax County, North
Carolina, and more particularly described as follows:
BEGINNING at the Northwest corner of the intersection of
right of way for Roanoke Avenue and West 13th Street;
THENCE N 63 degrees 30' W 379.78 feet along the North right of way
line of West 13th Street to a railroad spike on the East
right of way line of CSX Transportation, Inc.; THENCE along
the Eastern right of way line of CSX Transportation, Inc. N
2 degrees 34' 31" E 364.30 feet to a point; THENCE in a Westerly
direction across the railroad right of way N 70 degrees 27' 11" W
85.68 feet to a point on the Western right of way line of
CSX Transportation, Inc., the same being the point of
Beginning for the tract of land hereinafter described;
THENCE along the Western right of way line of CSX
Transportation, Inc. S 23 degrees 16' 53" W 61.32 feet and S 30 degrees
11' 32" W 49.15 feet and S 34 degrees 14' 33" W 48.53 feet and S
38 degrees 48' 23" W 14.93 feet to an iron pipe at the Southeast
corner of the property herein described; THENCE a new made
line through the lands of the Bibb Company parallel with and
150 feet North of 13th Street, N 63 degrees 30' 00" W 160.90 feet
to an iron pipe; THENCE another new made line through lands
of the Bibb Company N 26 degrees 30' 00" E 175.00 feet to an iron
pipe; THENCE another new made line through lands of the
Bibb Company S 67 degrees 49' 23" E 167.91 feet to an iron pipe on
the West right of way line of CSX Transportation, Inc.;
THENCE along and with the West right of way of CSX
Transportation, Inc. S 15 degrees 18' 14" W 15.00 feet to the point
of Beginning. Said tract of land containing 0.71 acres,
more or less, and being the property shown on survey by
Cyril C. Waters, R.L.S., dated January 8, 1992, and last
updated July 10, 1996, entitled "Plat showing Property
Leased to Panda-Rosemary Limited Partnership."
EXHIBIT 10.15
SECURITY AGREEMENT
Dated July 31, 1996
by
PANDA-ROSEMARY, L.P.
to
FLEET NATIONAL BANK,
as Collateral Agent
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated July 31, 1996, is
made by PANDA-ROSEMARY, L.P., a Delaware limited partnership
(the "Grantor"), to FLEET NATIONAL BANK, a national banking
association established under the laws of the United States of
America, as collateral agent (in such capacity, together with
its successors, assigns and designees in such capacity, the
"Collateral Agent") for the benefit of the Secured Parties (as
defined herein).
W I T N E S S E T H :
WHEREAS, the Grantor owns a natural gas-fired
cogeneration facility with approximately 180 MW of electric
generating capacity located in Roanoke Rapids, North Carolina
(the "Project");
WHEREAS, the Grantor has caused Panda-Rosemary
Funding Corporation, a Delaware corporation (the "Company") to
be formed as a wholly-owned subsidiary for the purposes of
facilitating the refinancing of the Project;
WHEREAS, the Company has duly authorized the
creation and issuance of its First Mortgage Bonds to be issued
in one or more series (the "Bonds") pursuant to the Trust
Indenture, dated as of July 31, 1996 (as amended, restated,
supplemented or otherwise modified from time to time, the
"Indenture"), among the Grantor, the Company and Fleet
National Bank, as trustee;
WHEREAS, the proceeds of the sale of the Bonds will,
together with other funds available to the Grantor, be used,
among other things, to refinance the Grantor's outstanding
indebtedness incurred in connection with the construction and
initial financing of the Project, to fund a debt service
reserve fund for the Bonds, to redeem a limited partner
interest in the Grantor, to pay certain transaction costs
associated with the offering of the Bonds and to fund certain
modification costs in the future, if necessary, some of the
foregoing being financed by the loan by the Company of the
proceeds from the issuance of the Bonds to the Grantor, which
loan, as well as loans by the Company to the Grantor with
respect to Additional Permitted Debt (as defined
below)(collectively, the "Loans"), will be secured by
substantially all the assets of the Partnership and certain
other collateral;
WHEREAS, in order to satisfy certain requirements of
the Partnership under the Project Agreements (as defined in
the Indenture) and for other purposes permitted under the
Indenture, the Grantor may incur additional debt permitted by
Sections 6.16(a)(v) and 6.16(b)(ii) of the Indenture
("Additional Permitted Debt"), either directly or indirectly
through the Company, the obligations under which shall be
secured by substantially all the assets of the Grantor and
certain other collateral;
WHEREAS, all of the Company's obligations under the
Bonds will be unconditionally guaranteed by the Grantor
pursuant to a guaranty of the Grantor, the performance of
which will be secured by substantially all the assets of the
Grantor;
WHEREAS, the Grantor intends to arrange for the
issuance of certain letters of credit pursuant to one or more
Credit Bank Reimbursement Agreements (as defined in the
Indenture) and may finance certain working capital
requirements of the Project pursuant to one or more Credit
Bank Working Capital Agreements (as defined in the Indenture),
the obligations under which may be secured by substantially
all the assets of the Grantor and certain other collateral;
WHEREAS, at the closing, certain moneys held by The
Fuji Bank and Trust Company, as collateral agent, in
connection with an existing letter of credit facility, will be
transferred into the appropriate Funds (as defined in a
certain Deposit and Disbursement Agreement, dated as of
July 31, 1996 (as amended, restated, supplemented or otherwise
modified from time to time, the "Depositary Agreement"), by
and among the Grantor, the Company, the Collateral Agent and
Fleet National Bank, as depositary agent thereunder (in such
capacity, together with its successors, assigns and designees
in such capacity, the "Depositary Agent"));
WHEREAS, the Secured Parties signatories thereto
(the "Secured Parties"), the Grantor, the Company, the
Collateral Agent and the Depositary Agent have entered into a
Collateral Agency and Intercreditor Agreement, dated as of
July 31, 1996 (as amended, restated, supplemented or otherwise
modified from time to time, the "Intercreditor Agreement"),
appointing the Collateral Agent as collateral agent and
setting forth certain rights and obligations of the Collateral
Agent acting on behalf of the Secured Parties with respect to
the Collateral, including, without limitation, the Funds; and
WHEREAS, the execution and delivery of this Security
Agreement (as amended, supplemented, restated or otherwise
modified from time to time, this "Security Agreement" or this
"Agreement") by the Grantor are conditions precedent to the
Collateral Agent and the Secured Parties entering into the
transactions contemplated by, among other things, the
Indenture and the Credit Bank Documents (as each such term is
defined in the Indenture).
NOW, THEREFORE, in consideration of the premises and
in order to induce the Collateral Agent and the Secured
Parties to enter into the transactions contemplated by, among
other things, the Indenture and the Credit Bank Documents, the
Grantor hereby agrees with the Collateral Agent, for the
benefit of the Secured Parties, as follows:
1. Defined Terms.
(a) Unless otherwise defined herein, all
capitalized terms used herein shall have the meanings set
forth in, and the interpretations applicable thereto, under
the Intercreditor Agreement (including the definitions in the
Indenture incorporated in the Intercreditor Agreement).
Unless otherwise specified herein, (i) all references to
Sections, paragraphs or other subdivisions herein are to this
Agreement and (ii) the words "include," "includes," and
"including" are deemed to be followed by "without limitation"
whether or not they are, in fact, followed by such words or
words of like import. Unless otherwise defined herein or in
the Indenture, terms defined in Article 9 of the Uniform
Commercial Code as in effect from time to time in the State of
New York are used herein as therein defined. The following
terms shall have the following meanings, unless the context
otherwise requires:
"Accounts Receivable" means all accounts (as defined
in the Code) now or hereafter owned by the Grantor and in any
event shall include, but not be limited to, (i) accounts
receivable, instruments (as defined in the Code), documents,
contract rights (including any rights to liquidated damages
payments) and chattel paper (as defined in the Code), created
by or arising from sales of electricity, steam, output, fuel,
capacity or recoverable materials and/or thermal energy or
other services in connection with the Project, and all
accounts (as defined in the Code) arising from any sale or
rendition of services made under any trade name or style,
whether or not earned by performance, (ii) guarantees,
warranties, endorsements, indemnifications or collateral on,
of or for any of the foregoing and any rents, revenues, income
and profits in respect of the Site or the Project,
(iii) insurance policies or rights relating to any of the
foregoing, (iv) cash and non-cash Proceeds of any and all of
the foregoing and (v) all powers of attorney for the execution
of any evidence of indebtedness or security or other writings
in connection therewith.
"Assigned Agreements" means those agreements set
forth in Schedule A hereto, as the same may be amended,
modified, restated, replaced, substituted or otherwise
supplemented from time to time.
"Code" means the Uniform Commercial Code as the same
may from time to time be in effect in the State of New York.
"Collateral" shall have the meaning set forth in
Section 2.
"Collateral Records" means (a) all original copies
of all documents, instruments or other writings evidencing any
of the other Collateral and (b) all books, correspondence,
credit or other files and records.
"Copyrights" means, collectively, all of the
following now owned or hereafter created or acquired by
Grantor: (a) all copyrights, rights and interests in
copyrights, works protectable by copyright, copyright
registrations and copyright applications; (b) all renewals of
any of the foregoing; (c) all income, royalties, damages and
payments now or hereafter due and/or payable under any of the
foregoing or with respect to any of the foregoing, including,
without limitation, damages or payments for past or future
infringements of any of the foregoing; (d) the right to sue
for past, present and future infringements of any of the
foregoing; (e) all rights corresponding to any of the
foregoing throughout the world; and (f) all goodwill
associated with any symbolized by any of the foregoing.
"Default Rate" means two percent (2%) in excess of
the "prime rate" from time to time publicly quoted by the
Collateral Agent in its individual capacity, or any successor
thereto.
"Equipment" means any equipment or fixtures located
on the Site now or hereafter owned by the Grantor or used in
connection with the Project and, in any event, means and
includes, but shall not be limited to, all machinery,
packaging, processing, manufacturing, distribution, selling,
data processing, computer, office, furnishing, fixtures,
appliances, trade fixtures, vehicles, vessels, aircraft,
rolling stock, tools, tooling, molds, dies, supplies and other
equipment of any kind and nature, wherever situated, and any
and all additions, substitutions and replacements of any of
the foregoing, wherever located, together with all
attachments, components, parts, equipment, improvements,
upgrades and accessories installed thereon or affixed thereto
and all designs, plans and specifications relating to the Site
or the Project owned by Grantor on the date hereof or
hereafter acquired.
"Excluded Collateral" means, collectively, the
collateral subject to (i) the LOC Security Agreement, dated as
of July 31, 1996, between the Grantor and NationsBank of
Texas, N.A., (ii) the Bond Security Agreement, dated as of the
same date, between the Partnership and The Bank of New York,
and (iii) the Forward Security Agreement, dated as of the same
date, between the Grantor and NationsBank of Texas, N.A., as
such agreements exist on the date hereof.
"General Intangibles" means all general intangibles
now or hereafter owned by the Grantor, and, in any event,
means and includes, but shall not be limited to, all contract
rights, interests, choses in action, causes of action and all
other intangible personal property of the Grantor of every
kind and nature (other than Accounts Receivable), now owned or
hereafter acquired by the Grantor, including, without
limitation, corporate or other business records, loans and
other obligations receivable, inventions, designs, patents,
patent applications, service marks, service mark applications,
trademarks, trademark applications, trade names, trade
secrets, goodwill, registrations, licenses, leasehold
interests in real and personal property, franchises,
dealership agreements, customer lists, customer and supplier
contracts, firm sale orders, partnership and joint venture
interests, other contracts and contract rights, tax refund
claims, deposit accounts (general or special) with, and all
credits and claims against, any financial institution, rights
and claims against carriers and shippers, rights to
indemnification, all compensation, awards, damages, rights of
action and proceeds arising from any taking by any lawful
power and or authority by exercise of the right of
condemnation or eminent domain with respect to any of the
Collateral or the Project, reversionary interests in pension
and profit sharing plans and reversionary, beneficial and
residual interests in trusts, rights to proceeds of insurance
of which the Grantor is beneficiary, any letters of credit,
including, without limitation, guaranties, warranties,
security interests or liens of any kind held by or granted to
the Grantor to secure payment of any obligation owing by any
person or entity to the Grantor, and the like, however and
whenever arising and all pollution allowances, offsets and
similar rights, including, without limitation, all acid rain
allowances under the Clean Air Amendment of 1990 and any
implementing state Laws.
"Insurance Policies" means all Proceeds of all
insurance policies in which the Grantor is named as owner or
beneficiary.
"Inventory" means all of the Grantor's inventory (as
defined in the Code), goods, merchandise and other personal
property furnished or to be furnished under any contract of
service or intended for sale or lease, including, without
limitation, all raw materials, components, whole goods and
materials and supplies of any kind which are used or consumed
in the Grantor's business, and all documents of title or
documents representing the same, in each instance whether now
owned or hereafter acquired by the Grantor and wherever
located, whether in the possession of the Grantor or of a
bailee or other person for sale, storage, transit, processing,
use or otherwise.
"Marks" means any trademarks, trademark
registrations and trademark applications pending, now held or
hereafter acquired by the Grantor including, without
limitation, registrations, recordings and applications of or
with the United States Patent and Trademark Office or any
similar agency in any foreign jurisdiction (which the Grantor
has adopted and used and is using or hereafter acquires or
under which the Grantor is licensed), as well as all other
trademarks, trade names, fictitious business names, business
names, company names, business identifiers, prints, labels,
trade styles and service marks not registered, and trade
dress, including logos and/or designs related to the
foregoing.
"Money" means "money" as such term is defined in
Section 1-201(24) of the Code.
"Obligations" means, (i) all obligations of the
Grantor or the Company to the Collateral Agent, the Depositary
Agent or the Secured Parties now or hereafter existing under
the Bonds, the Indenture, the Partnership Notes, the
Partnership Guarantee, any Additional Permitted Debt, any
Credit Bank Working Capital Agreement, any Credit Bank
Reimbursement Agreement, any Interest Rate Protection
Agreement, this Agreement or the Collateral Documents, whether
for principal, interest (including, without limitation,
interest accruing following the filing by or against the
Grantor or the Company of a bankruptcy petition, whether or
not allowed as a claim in a bankruptcy proceeding), fees,
indemnification, expenses or otherwise, and (ii) all other
liabilities, obligations, covenants and duties owing to the
Collateral Agent, the Depositary Agent or the Secured Parties
from or by the Grantor or the Company of any kind or nature,
present or future, whether or not evidenced by any note,
guaranty or other instrument, arising under, or in connection
with the Indenture, each Partnership Guarantee, the
Partnership Notes, any Additional Permitted Debt, any Credit
Bank Working Capital Agreement, any Credit Bank Reimbursement
Agreement, any Interest Rate Protection Agreements, the
Foreign Exchange Protection Agreement, this Agreement or the
Collateral Documents, whether or not for the payment of money,
whether direct or indirect (including those acquired by
assignment), joint or several, absolute or contingent,
liquidated or unliquidated, due or to become due, now existing
or hereafter arising, renewed or restructured, whether or not
from time to time decreased or extinguished and later
increased, created or incurred, and including, without
limitation, all indebtedness of the Grantor or the Company
under any instrument now or hereafter evidencing or securing
any of the foregoing and however acquired.
"Patent" means any letter patent and any patent
registration and any patent application pending, including,
without limitation, registrations, recordings and applications
registered or recorded in the United States Patent and
Trademark Office or any similar agency in any foreign
jurisdiction in respect to which the Grantor has any rights
whatsoever.
"Permits" means all applicable authorizations,
certificates, licenses, approvals, waivers, exemptions,
variances, franchises, permissions and permits of any
Governmental Authority required or obtained in connection with
the purchase, acquisition, design, construction, installation,
ownership and/or operation of the Project or in connection
with any transaction contemplated by the Indenture and the
Project Documents.
"Proceeds" means all proceeds (as defined in the
Code) of any Collateral and, in any event, shall include,
without limitation, (i) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to the Grantor from
time to time with respect to any of the Collateral, (ii) any
and all payments (in any form whatsoever) made or due and
payable to the Grantor from time to time in connection with
any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral or the Project
by any Governmental Authority (or any Person acting under
color of Governmental Authority), (iii) any and all other
amounts from time to time paid or payable under or in
connection with any of the Collateral or the Project and
(iv) any Proceeds of Proceeds.
"Project Bank Deposits" means (i) the Funds (and any
sub-funds opened within any Fund) and each cash collateral
account established by the Depositary Agent, as agent for the
Collateral Agent for the benefit of the Secured Parties (and
designated by the Depositary Agent, as agent for the
Collateral Agent, as a Fund) on behalf of the Grantor or the
Company in connection with the Depositary Agreement, all sums
of money, from any source whatsoever, now or hereafter
transferred to and comprising the Funds, including, without
limitation, all credit balances therein, any and all funds,
cash, investments, instruments and securities at any time on
deposit in the Funds, and any and all interest and dividends
or other income derived from any such monies, credit balances,
funds, cash, investments, instruments and securities, (ii) all
statements, certificates, passbooks and instruments
representing the Funds and all other property from time to
time received, receivable or otherwise distributed in respect
of or in exchange for the Funds; and (iii) all deposits, cash,
notes, certificates of deposit or other instruments or
documents from time to time credited to the Funds for or on
behalf of the Grantor or the Company, and all additions
thereto and substitutions therefor, and all interest and
dividends thereon, including, without limitation, Permitted
Investments and Proceeds thereof.
(b) Any reference in this Agreement to a Project
Document or an Assignment Agreement shall include only such
documents that have been entered into and have not reached
their stated termination date (if any), have not been fully
and finally performed in accordance with their respective
terms or have not been replaced, terminated or canceled in
accordance with the terms of the Indenture or the
Intercreditor Agreement.
2. Assignment and Grant of Security.
(i) As collateral security for the prompt and
complete payment and performance when due (whether at stated
maturity, by redemption, acceleration or otherwise) of all of
the Obligations, the Grantor hereby assigns, pledges,
transfers, conveys and sets over to the Collateral Agent for
the benefit of the Secured Parties, and grants to the
Collateral Agent for the benefit of the Secured Parties a
security interest in and continuing lien on, all of its
estate, right, title and interest in, to and under the
following property of the Grantor, whether now owned or
existing or hereafter acquired or arising and wherever located
(all of which being herein collectively referred to as the
"Collateral"):
(a) the Assigned Agreements, including, without
limitation, (i) all amounts and claims for amounts
payable to or for the account of the Grantor under the
Assigned Agreements, (ii) all claims, rights, privileges
and remedies on the part of the Grantor, whether arising
under the Assigned Agreements or by statute or at law or
in equity or otherwise, arising out of or in connection
with any failure by any party to any Assigned Agreement
to make any payment assigned hereunder, including,
without limitation, all claims of the Grantor for damages
arising out of or for breach of or a default under the
Assigned Agreements, (iii) all amounts payable by any
party pursuant to any Assigned Agreement as a result of
the exercise of any such claim, right, privilege or
remedy, including all rights and claims of the Grantor
under any bonding, insurance, indemnity, guarantee,
warranty and liquidated damages arising out of or in
connection therewith, (iv) all rights of the Grantor to
take any action to terminate, amend, supplement, modify
or waive performance of the Assigned Agreements, to
perform thereunder and to compel performance thereunder,
and (v) all rights of the Grantor to exercise any
election or option or to give or receive any notice,
consent, waiver or approval under or in respect of the
Assigned Agreements, and the right (but not the
obligation) to exercise or enforce any and all covenants,
remedies, powers and privileges thereunder and to do any
and all other things the Grantor is entitled to do
thereunder together with full power and authority, in the
name of the Grantor or otherwise, to enforce, collect,
receive and give receipt for any and all of the
foregoing;
(b) all Accounts Receivable;
(c) all Copyrights;
(d) all documents, instruments, letters of credit
and chattel paper other than the Excluded Collateral;
(e) all Equipment;
(f) all General Intangibles;
(g) all goods;
(h) all Fuel Hedges and Interest Rate Protection
Agreements;
(i) all Insurance Policies;
(j) all Inventory;
(k) all Marks;
(l) all Money other than the Excluded Collateral;
(m) all Patents;
(n) to the extent permitted by applicable law, all
Permits owned by or granted to or for the benefit of the
Grantor or the Project;
(o) all Project Bank Deposits and all deposits and
accounts with other financial institutions other than the
Excluded Collateral;
(p) any and all property in the possession of or
under the control of the Collateral Agent or any Secured
Party;
(q) all other tangible and intangible personal
property other than the Excluded Collateral;
(r) all Collateral Records;
(s) all replacements, substitutions, additions or
accessions to or for any of the foregoing;
(t) all Proceeds and products of any or all of the
foregoing; and
(u) to the extent not included in the foregoing,
all Permitted Investments (other than the Excluded
Collateral) of the Grantor and proceeds, products and
accessions of and to any and all of the foregoing
Collateral, including, without limitation, "proceeds," as
defined in Section 9-306(l) of the Code, including,
without limitation, whatever is received upon any
collection, exchange, sale or other disposition of any of
the Collateral, and any property into which any of the
Collateral is converted, whether cash or non-cash
proceeds, and any and all other amounts paid or payable
under or in connection with any of the Collateral.
The assignment of the payments and rights provided
for in this Section 2 shall be effective immediately upon the
execution and delivery of this Agreement and shall not be
conditioned upon the occurrence of any default hereunder or of
any other contingency or event.
(ii) It is the intention of the parties hereto that
the description of the Collateral set forth in
Sections 2(i)(a) through 2(i)(u), above be sufficient to
enable the Collateral Agent, on behalf of the Secured Parties,
to take possession of, and foreclose upon, all of the right,
title and interest of the Grantor, if any, in and to the Site
and the Project and any and all real property and personal
property, tangible and intangible, used or usable in
connection therewith, and to enable the Collateral Agent or
its designee to operate, sell or otherwise dispose of the
entire interest of the Grantor, if any, in and to the Site and
the Project or any part thereof, in each case upon the
occurrence and during the continuance of an Event of Default
or a Trigger Event.
3. Delivery of Collateral; Perfection of Accounts;
Assigned Agreements.
(a) Delivery of Collateral. All sums of money,
funds and cash, from time to time constituting the Collateral,
together with all certificates, instruments, investments and
securities representing or evidencing the Collateral, shall be
delivered to, dealt with and held by the Collateral Agent
pursuant to the terms of the Indenture and the terms hereof;
provided, that all such sums, certificates, investments,
securities or instruments representing or evidencing any Fund
shall be delivered to, dealt with and held by the Depositary
Agent, as agent for the Collateral Agent, for the benefit of
the Secured Parties. All such certificates, investments,
securities and instruments shall be in suitable form for
transfer by delivery or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form
and substance satisfactory to the Depositary Agent or the
Collateral Agent.
(b) Perfection of Accounts. For the purpose of
perfecting the security interest of the Secured Parties in and
to the Funds and all funds, cash, investments, instruments and
securities at any time on deposit in the Funds, the Depositary
Agent shall be deemed to be holding the Funds and all such
funds, cash, investments, instruments and securities as agent
for the Collateral Agent and the Secured Parties.
(c) Assigned Agreements. So long as no Event of
Default or a Trigger Event has occurred and is continuing, the
Grantor may exercise all of the Grantor's rights, powers,
privileges, elections, options and remedies under the Assigned
Agreements (including, without limitation, lending the
proceeds of any Additional Permitted Debt to the Partnership)
and any other contract or agreement included in the
Collateral, subject to the terms of the Indenture and the
other Project Documents. Except as provided in Section 4,
upon the occurrence and during the continuance of an Event of
Default or a Trigger Event, the Collateral Agent may exercise
any right, remedy, election or option or give any notice,
consent, waiver or approval under, or deliver any requisition
for payment under, or take any other action in respect of, any
Assigned Agreement or other such agreement without any
approval of or action by the Grantor, but the Grantor will
nevertheless execute and deliver any instrument requested by
the Collateral Agent to be executed and delivered by the
Grantor in connection with the exercise by the Collateral
Agent of any such right, remedy, election or option or the
giving by the Collateral Agent of any such notice, consent,
waiver or approval or the taking by the Collateral Agent of
any such other action.
4. Rights and Duties of Grantor under Assigned
Agreements. Notwithstanding any other provision of this
Agreement, the Grantor shall have the right, but not to the
exclusion of the Collateral Agent, to receive from the parties
to the Assigned Agreements all notices and other
communications and copies of all documents and all information
which such parties are permitted or required to give or
furnish to the Grantor. The Grantor at its expense will
perform and comply with all of the terms of each Assigned
Agreement to be performed or complied with by it, will do all
things necessary on its part to maintain each Assigned
Agreement in full force and effect, will do all things
necessary to keep unimpaired all of its rights, powers and
remedies thereunder and to prevent any forfeiture or
impairment thereof, will enforce each Assigned Agreement in
accordance with its terms and will take all such action to
that end or to enforce any Assigned Agreement as from time to
time may be requested by the Collateral Agent, except as
otherwise expressly limited under or permitted by, or to the
extent that the failure to so do would not result in an Event
of Default under, the Indenture.
5. Grantor Remains Liable. Anything herein to the
contrary notwithstanding, except to the extent expressly
limited under or permitted by, or to the extent that the
failure to so do would not result in an Event of Default
under, the Indenture and except as set forth in the next
succeeding sentence, the Grantor shall remain liable under the
Assigned Agreements and the other contracts and agreements
included in the Collateral to the extent set forth therein and
shall perform all of its duties and obligations thereunder to
the same extent as if this Agreement had not been executed.
The exercise by the Collateral Agent of any of its rights
hereunder shall not release the Grantor from any of its duties
or obligations under the Assigned Agreements and the other
contracts and agreements included in the Collateral, except in
the event of foreclosure upon the Collateral (and only to the
extent of such foreclosure on the particular items of
Collateral) by the Collateral Agent, the exercise by the
Collateral Agent of its rights to sell the Collateral or the
conveyance of the Collateral by the Collateral Agent in lieu
of foreclosure, in which event the Grantor shall be released
from obligations arising under the Assigned Agreements and the
other contracts and agreements constituting Collateral after
such event (but only to the extent such obligations arise
after such exercise of rights). Neither the Collateral Agent
nor any of the Secured Parties shall have any obligation or
liability under any of the Assigned Agreements or other
contracts and agreements included in the Collateral by reason
of or arising out of this Agreement or the receipt of any
payment relating to the Assigned Agreements or any other
Collateral pursuant hereto (except as provided under the first
sentence of Section 9-207(l) of the Code), nor shall the
Collateral Agent or any of the Secured Parties be obligated to
perform any of the obligations or duties of the Grantor
thereunder, to make any payment required thereunder, to make
any inquiry as to the sufficiency of any payment received by
it or as to the sufficiency of any performance by any party
thereunder, to present or file any claim or to take any action
to collect or enforce any claim for payment assigned
hereunder.
6. Representations and Warranties. The Grantor
hereby makes the following representations and warranties,
which shall survive the Closing Date:
(a) The Grantor has good, marketable and valid
title in and to all of the Collateral, free and clear of all
Liens, rights or claims of all other Persons, other than
Permitted Liens, and the Grantor has full power and authority
to grant the liens and security interests in and to the
Collateral hereunder. The Grantor has full power and
authority to own its property and to carry on its business as
now being conducted and as proposed to be conducted.
(b) No security agreement, financing statement,
mortgage, equivalent security or lien instrument or
continuation statement covering all or any part of the
Collateral is on file or of record in any public office,
except for the financing statements filed by the Grantor in
the public offices listed on Schedule B hereto or as otherwise
permitted by the Indenture.
(c) Appropriate financing statements or other
appropriate instruments have been or will be filed pursuant to
the Code in the public offices listed on Schedule A attached
hereto as may be necessary to perfect any security interest
granted or purported to be granted hereby (to the extent such
security interest may be perfected by the filing of a
financing statement) and no other filings are necessary to
perfect the security interests granted herein, except for
Copyrights, Marks and Patents registered or otherwise located
outside of the United States. Upon the Grantor's execution
and delivery of this Security Agreement, the Collateral Agent,
on behalf of the Secured Parties, will have a valid and
continuing Lien on and, upon (i) the filing of appropriate
financing statements in the public offices listed on
Schedule B attached hereto and (ii) the taking of possession
by the Collateral Agent of the Collateral in which a security
interest is perfected by possession, perfected security
interest in the Collateral, except for Copyrights, Marks and
Patents registered or otherwise located outside of the United
States, superior and prior to all other Liens and security
interests, existing or future (except for Permitted Liens) and
the security interests herein granted shall be enforceable as
such against creditors of and purchasers from the Grantor
(except for Permitted Liens) and against any owner or
mortgagee of the real property where any of the Collateral is
located and against any purchaser of real property and any
present or future creditor obtaining a Lien on such real
property, except to the extent otherwise expressly permitted
by the Indenture. All action that can be taken by the Grantor
necessary or desirable to protect and perfect such Lien on and
security interest in each item of the Collateral, except for
Copyrights, Marks and Patents registered or otherwise located
outside of the United States, has been or will be duly taken
and the Grantor shall defend the Collateral against all claims
and demands of all Persons at any time claiming the same or
any interest therein adverse to the Collateral Agent.
(d) The principal place of business and the chief
executive office of the Grantor is located at 4100 Spring
Valley Road, Suite 1001, Dallas, Texas 75244. The originals
of the Collateral Records are located at the chief executive
office of the Grantor. All Accounts Receivable and Assigned
Agreements (other than those in the possession of the
Collateral Agent) are maintained at, and controlled and
directed, including, without limitation, for general
accounting purposes, from the chief executive office of the
Grantor.
(e) On the date each Account Receivable is created,
each such Account Receivable (i) is and thereafter will be the
genuine, legal, valid and binding obligation of the account
debtor in respect thereof, representing an unsatisfied
obligation of such account debtor, (ii) is and thereafter will
be enforceable in accordance with its terms, (iii) is not and
thereafter will not be subject to any setoff, defense, tax or
counterclaim (except (x) with respect to refunds, defenses,
returns and allowances in the ordinary course of business,
(y) to the extent that such Account Receivable may not yet
have been earned by performance and (z) common law rights of
setoff or other rights, defenses or counterclaims arising by
application of law as the result of contracts or agreements
between the Grantor and an account debtor and under which the
Grantor may owe an obligation) and (iv) is and will be in
compliance with all applicable laws, whether federal, state,
local or foreign. None of the account debtors in respect of
any Account Receivable is the government of the United States
or an instrumentality thereof. No Accounts Receivable which
are evidenced by chattel paper require the consent of the
account debtor in respect thereof in connection with their
assignment hereunder (other that such as to which required
consents have been obtained).
(f) The correct name of the Grantor is Panda-
Rosemary, L.P. and the Grantor has conducted business only
under that name and the name Panda-Rosemary Limited
Partnership. The Grantor does not have any other corporate,
partnership, trade or fictitious name.
(g) All Inventory now or from time to time included
in the Collateral is kept only at the Site or at such
locations as may be designated by the Grantor from time to
time pursuant to and subject to the terms and conditions of
Section 7(d) hereof. None of such Inventory is in the
possession of an issuer of a negotiable document (as defined
in Section 7-104 of the Uniform Commercial Code) therefor or
otherwise in the possession of a bailee.
7. Affirmative Covenants. The Grantor covenants
and agrees with the Collateral Agent for the benefit of the
Secured Parties that from and after the date hereof and until
the Debt Termination Date:
(a) Further Documentation, Pledge of Instruments.
At any time and from time to time, upon the request of the
Collateral Agent and at the sole expense of the Grantor, the
Grantor will promptly execute and deliver any and all such
further instruments and documents and take such further action
as the Collateral Agent may deem desirable in order to obtain
the full benefits of this Security Agreement and of the rights
and powers granted or purported to be granted hereby,
including, without limitation, (i) the filing of any financing
or continuation statements under the Uniform Commercial Code
in effect in any jurisdiction necessary or advisable (in the
Collateral Agent's sole discretion) to perfect, or to maintain
the perfection of, the liens and security interests granted
hereby, and (ii) placing the interest of the Collateral Agent
as lien holder on the certificate of title of any vehicle.
The Grantor also hereby authorizes the Collateral Agent to
file any such financing or continuation statement without the
signature of the Grantor to the extent permitted by applicable
Law. A photocopy or other reproduction of this Agreement
shall be sufficient as a financing statement and may be filed
in lieu of the original to the extent permitted by applicable
Law. The Grantor will pay or reimburse the Collateral Agent
for all filing fees and related expenses (including reasonable
attorneys' fees) and will make or reimburse the Collateral
Agent for making all searches deemed reasonably necessary by
the Collateral Agent to establish and determine the priority
of the security interests of the Collateral Agent or to
determine the presence or priority of other secured parties.
If any amount payable under or in connection with any of the
Collateral shall be or become evidenced by any chattel paper
or any promissory note or other instrument, such chattel
paper, promissory note or instrument shall be immediately
pledged and delivered to the Collateral Agent for the benefit
of the Secured Parties hereunder, duly endorsed in a manner
satisfactory to the Collateral Agent.
(b) Maintenance of Records. The Grantor will keep
and maintain, at its chief executive office and at its own
cost and expense, complete records of the Collateral
including, without limitation, a record of all payments
received and all credits granted with respect to Assigned
Agreements and Accounts Receivable and all other dealings with
the Collateral, including, without limitation, Collateral
Records. The Grantor will mark its Collateral Records and any
chattel paper held by the Grantor to evidence this Agreement
and the security interests granted hereby.
(c) Further Identification of Collateral. The
Grantor will furnish to the Collateral Agent from time to time
statements and schedules further identifying and describing
the Collateral and such other reports in connection with the
Collateral as the Collateral Agent or any Secured Party
(through the Collateral Agent) may request, all in reasonable
detail and in form satisfactory to the Collateral Agent.
(d) Continuous Perfection. The Grantor will not
change its corporate structure, principal place of business,
chief executive office, name or identity in any manner or use
any fictitious or trade names without obtaining the express
prior written consent of the Collateral Agent and without
taking, at the Grantor's own expense, all actions necessary or
reasonably requested by the Collateral Agent in order to
continue the perfection and priority of the Liens and security
interests in the Collateral created and intended to be created
by this Security Agreement. The Inventory will continue to be
located and kept at the Site, and the Grantor will not remove
any part of the Inventory from the Site without the prior
written consent of the Collateral Agent.
(e) Letters of Credit. Upon receipt by the Grantor
of any letter of credit naming it as beneficiary and
constituting Collateral hereunder, the Grantor shall
(i) pledge and deliver the original of such letter of credit
to the Collateral Agent, (ii) if such letter of credit is
transferable, cause such letter of credit to be transferred
into the name of the Collateral Agent and (iii) if such letter
of credit is non-transferable, either use its best efforts to
cause the letter of credit to be re-issued with the Collateral
Agent to be named the sole beneficiary under such letter of
credit or use its best efforts to cause such letter of credit
to be reissued in transferable form. The Grantor shall do all
things necessary to cause each such letter of credit not
theretofore transferred to be drawn upon when available in
accordance with its terms and to cause all proceeds thereof to
be paid directly into the Funds as provided in the Depositary
Agreement.
(f) Right of Inspection. Upon reasonable notice
and at such reasonable times as the Collateral Agent or any
Secured Party shall reasonably request, the Collateral Agent
and the other Secured Parties shall have full and free access
during normal business hours to all the books, correspondence
and records of the Grantor relating to the Collateral and the
Collateral Agent and the other Secured Parties and their
respective representatives may examine the same, take extracts
therefrom and make photocopies thereof, and the Grantor agrees
to render to the Collateral Agent and the other Secured
Parties, at the Grantor's cost and expense, such clerical and
other assistance as may be reasonably requested with regard
thereto. The Collateral Agent and the other Secured Parties
and their respective representatives shall at all times, upon
reasonable notice, also have the right to enter into and upon
any premises where any of the Inventory is located for the
purpose of inspecting the same, observing its use or otherwise
protecting its interests therein.
(g) Notice of Adverse Claims. The Grantor shall,
promptly and in no event later than five (5) days after the
Grantor becomes aware of any information or has knowledge of
any claim against the Collateral adverse to the interest of
the Secured Parties, deliver to the Collateral Agent notice of
each such claim.
(h) Warehouse Receipts. The Grantor agrees that if
any warehouse receipt or receipt in the nature of a warehouse
receipt or other document is issued with respect to any of its
Inventory, such warehouse receipt or receipt in the nature
thereof or other document shall not be "negotiable" (as such
term is used in Section 7-104 of the Uniform Commercial Code
or under other relevant law) or, if "negotiable", shall be
delivered promptly to the Collateral Agent as Collateral
hereunder.
(i) Maintenance of Properties. Except as otherwise
permitted under the Indenture, the Grantor shall do or cause
to be done, all things necessary to preserve and keep in full
force and effect its existence and its Patents, Marks,
Copyrights and franchises which are necessary for the
ownership and operation of the Project.
8. Negative Covenants. The Grantor covenants and
agrees with the Collateral Agent, for the benefit of the
Secured Parties, that from and after the date hereof and until
the Debt Termination Date:
(a) No Impairment. The Grantor will not take or
permit to be taken any action which could impair the
Collateral Agent's rights in the Collateral.
(b) Negative Pledge. The Grantor will not create,
incur or permit to exist, will defend the Collateral and all
of the Grantor's right, title and interest thereto against,
and will take such other action as is necessary to remove, any
Lien or claim on or to the Grantor's right, title or interest
in, to or under the Collateral, other than the Liens created
hereby and other than the Permitted Liens, and will defend the
right, title and interest of the Collateral Agent in and to
any of the Collateral against the claims and demands of all
Persons whomsoever.
(c) Modification of Terms of Accounts Receivable.
Except as may be otherwise permitted under, or would not
result in an Event of Default under, the Indenture, the
Grantor shall not rescind or cancel any indebtedness evidenced
by any Accounts Receivable or modify any term thereof or make
any adjustment with respect thereto, or extend or renew the
same, or compromise or settle any dispute, claim, suit or
legal proceeding relating thereto, or sell any Accounts
Receivable or interest therein, without the prior written
consent of the Collateral Agent. The Grantor will duly
fulfill all obligations on its part to be fulfilled under or
in connection with the Accounts Receivable and will do nothing
to impair the rights of the Secured Parties in the Accounts
Receivable.
(d) Collection of Accounts Receivable. The Grantor
shall endeavor to cause to be collected from the account
debtor named in each of its Accounts Receivable, as and when
due (in accordance with generally accepted collection
procedures in accordance with all applicable laws), any and
all amounts owing under or on account of such Accounts
Receivable, and apply forthwith upon receipt thereof all such
amounts as are so collected to the outstanding balance of such
Accounts Receivable. The costs and expenses (including,
without limitation, attorneys' fees) of collection, whether
incurred by the Grantor or the Collateral Agent, shall be
borne by the Grantor.
9. Appointment of Collateral Agent as Attorney-in-
Fact.
(a) The Grantor hereby irrevocably constitutes and
appoints the Collateral Agent and any officer or agent
thereof, with full power of substitution, as its true and
lawful attorney-in-fact, with full irrevocable power and
authority in the place and stead of the Grantor and in the
name of the Grantor or in its own name, from time to time,
after an Event of Default has occurred and so long as it is
continuing, in its sole discretion, to take any and all
appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish
the purposes of this Agreement or cause performance or
compliance with the terms of this Agreement and, without
limiting the generality of the foregoing, hereby gives the
Collateral Agent the power and right, on behalf of the
Grantor, without notice to or assent by the Grantor, to do the
following:
(i) to pay or discharge taxes, Liens,
security interests or other encumbrances levied or
placed on or threatened against the Collateral, to
effect any repairs or any insurance called for by
the terms of the Indenture or the other Project
Documents and to pay all or any part of the
premiums therefor and the costs thereof;
(ii) to require, demand, receive and give
acquittance for any sums of money due or received
in connection with the Assigned Agreements or any
other Collateral, to exercise the rights, powers
and remedies relating thereto, to take possession
of and endorse and collect any checks, drafts,
notes, acceptances or other instruments or orders
in connection therewith or to file any claims or
take any action or institute any proceedings which
the Collateral Agent may deem to be necessary or
advisable and to exercise any election or option
or give any notice, consent, waiver or approval
under, or deliver any requisition for payment
under, or take any other action in respect of, any
of the Assigned Agreements;
(iii) to prepare, sign and file any
financing statement in the name of the Grantor as
debtor; and
(iv) (A) to direct any party liable for any
payment under any Collateral to make payment of
any and all monies due or to become due thereunder
directly to the Collateral Agent (or to any Person
as the Collateral Agent may direct), (B) to ask,
demand, collect, receive and give acquittance and
receipts for any and all monies due and to become
due under, arising out of, in respect of, or in
connection with any Collateral and, in the name of
the Grantor or its own name or otherwise, to take
possession of and endorse and collect any checks,
drafts, notices, acceptances or other instruments
for the payment of monies due under any
Collateral, (C) to sign and endorse any invoice,
freight or express bill, bill of lading, storage
or warehouse receipt, draft against a debtor,
assignment, verification and notice in connection
with accounts and other documents relating to the
Collateral, (D) to commence and prosecute any
suits, actions or proceedings at law or in equity
in any court of competent jurisdiction or to take
any other action deemed appropriate by the
Collateral Agent to enforce any Assigned Agreement
or to collect the Collateral or any portion
thereof or any amounts due thereunder whenever
payable and to enforce any other right in respect
of any Collateral, (E) to defend any suit, action
or proceeding brought against the Grantor with
respect to any Collateral, (F) to settle,
compromise or adjust any suit, action or
proceeding described above and, in connection
therewith, to give such discharges or releases as
the Collateral Agent may deem appropriate, and (G)
generally to sell, transfer, pledge, make any
agreement with respect to or otherwise deal with
any of the Collateral as fully and completely as
though the Collateral Agent was the absolute owner
thereof for all purposes, and to do, at the
Collateral Agent's option and the Grantor's
expense, at any time, or from time to time, all
acts and things which the Collateral Agent deems
necessary to protect, preserve or realize upon the
Collateral and the Collateral Agent's security
interest therein in order to effect the intent of
this Agreement, all as fully and effectively as
the Grantor might do.
The Grantor hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof. This power
of attorney is a power coupled with an interest and shall be
irrevocable so long as any of the Collateral is subject to the
security interest granted hereunder. The Collateral Agent
shall be accountable only for amounts that it actually
receives as a result of the exercise of such powers and
neither it nor any of its officers, directors, employees or
agents shall be responsible to the Grantor or any Partner for
any act or failure to act hereunder, except for its or their
own gross negligence or willful misconduct.
(b) The Grantor hereby acknowledges and agrees that
the Collateral Agent shall have no duties as fiduciary or,
except as expressly provided in the Code, otherwise to the
Grantor, and the Grantor hereby waives any claims to the
rights of a beneficiary or a fiduciary relationship hereunder.
(c) Upon the occurrence of an Event of Default or a
Trigger Event, the Grantor also authorizes the Collateral
Agent (i) to communicate in its own name with any party to any
contract, agreement or instrument included in the Collateral
with regard to the assignment of such contract, agreement or
instrument and other matters relating to such assignment and
(ii) to execute, in connection with any foreclosure or sale
provided for in this Agreement, any endorsement, assignment,
bill of sale or other instrument of conveyance or transfer
with respect to the Collateral on behalf of Grantor.
(d) The powers conferred on the Collateral Agent
hereunder are solely to protect the Collateral Agent's
interests in the Collateral and shall not impose any duty upon
it to exercise any such powers. The Collateral Agent shall be
accountable only for amounts that it actually receives as a
result of the exercise of such powers.
(e) Anything herein to the contrary
notwithstanding, the Grantor shall remain liable under the
Project Documents to which it is a party to the extent set
forth therein to perform all of its duties and obligations
thereunder to the same extent as if this Agreement had not
been executed. The exercise by the Collateral Agent of any
right or remedy hereunder shall not release the Grantor from
any of its duties or obligations under the Project Documents
to which it is a party, except in the event of foreclosure
upon the Collateral (and only to the extent of such
foreclosure on the particular Collateral). All of the
Collateral is hereby assigned to the Collateral Agent solely
as security and the Collateral Agent shall have no duty,
liability or obligation whatsoever with respect to any of the
Collateral unless the Collateral Agent so elects consistent
with its rights under this Agreement.
10. Performance by the Collateral Agent of the
Grantor's Obligations. If the Grantor fails to perform or
comply with any agreement contained herein, the Collateral
Agent shall be authorized (but in no event required) in its
sole discretion to so perform or comply or to cause such
performance or compliance for the Grantor's benefit and
account, and the reasonable expenses (including reasonable
attorneys' fees) of the Collateral Agent incurred in
connection with such performance or compliance, together with
interest thereon at the Default Rate, shall be payable by the
Grantor to the Collateral Agent on demand and shall constitute
a part of the Obligations secured hereby.
11. Remedies Upon Event of Default.
(a) If any Event of Default or a Trigger Event
shall occur and be continuing, the Collateral Agent may
exercise, in addition to all other rights and remedies granted
to the Collateral Agent in this Agreement and in any other
Project Document or other instrument or agreement securing,
evidencing or relating thereto, all rights and remedies of a
secured party under the Code and shall have all rights now or
hereafter existing under all other applicable Laws. No
enumeration of rights in this Section 11 or elsewhere in this
Security Agreement or in any other Project Document or other
agreement shall be deemed to in any way limit the rights of
the Collateral Agent as described in this Section. Without
limiting the generality of the foregoing, the Grantor
expressly agrees that in any such event the Collateral may be
sold or otherwise disposed of in one or more parcels at one or
more public or private sales conducted by any officer or agent
of, or auctioneer or attorney for, the Collateral Agent, at
any exchange or broker's board or at the Collateral Agent's
place of business or elsewhere, for cash, upon credit or for
other property, for immediate or future delivery, and at such
price or prices and on such terms as the Collateral Agent
shall, in its sole discretion, deem commercially reasonable.
The Collateral Agent or any Secured Party may be the purchaser
of any or all of the Collateral so sold at a public sale and
thereafter hold the same absolutely free from any right or
claim of whatsoever kind. The Collateral Agent may, in its
sole discretion, at any such sale restrict the prospective
bidders or purchasers as to their number, nature of business
and investment intention. Upon any such sale the Collateral
Agent shall have the right to deliver, assign and transfer to
the purchaser thereof (including the Collateral Agent or any
Secured Party) the Collateral so sold. Each purchaser
(including the Collateral Agent or any Secured Party) at any
such sale shall hold the Collateral so sold absolutely free
from any claim or right of whatsoever kind, including any
equity or right of redemption of the Grantor, and the Grantor
hereby specifically waives, to the full extent it may lawfully
do so, all rights of redemption, stay or appraisal which it
has or may have under any rule of law or statute now existing
or hereafter adopted. The Collateral Agent shall give the
Grantor at least ten (10) days' written notice (which the
Grantor agrees is reasonable notification within the meaning
of Section 9-504(c) of the Code) of any such public or private
sale. Such notice shall state the time and place fixed for
any public sale and the time after which any private sale is
to be made. Any such public sale shall be held at such time
or times within ordinary business hours as the Collateral
Agent shall fix in the notice of such sale. At any such sale,
the Collateral may be sold in one lot as an entirety or in
separate parcels. The Collateral Agent shall not be obligated
to make any sale pursuant to any such notice. The Collateral
Agent may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to
time by announcement at the time and place fixed for such sale
and any such sale may be made at any time or place to which
the same may be so adjourned without further notice or
publication. In the case of any sale of all or any part of
the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Collateral Agent
until the full selling price is paid by the purchaser thereof,
but the Collateral Agent shall not incur any liability in case
of the failure of such purchaser to take up and pay for the
Collateral so sold, and, in case of any such failure, such
Collateral may again be sold pursuant to the provisions
hereof. In the payment of the purchase price of the
Collateral, the purchaser shall be entitled to have credit on
account of the purchase price thereof of amounts owing to such
purchaser on account of any of the Obligations and any such
purchaser may deliver notes, claims for interest or claims for
other payment with respect to such Obligations in lieu of cash
up to the amount which would, upon distribution of the net
proceeds of such sale, be payable thereon. Such notes, if the
amount payable hereunder shall be less than the amount due
thereon, shall be returned to the holder thereof after being
appropriately stamped to show partial payment.
(b) Instead of exercising the power of sale
provided in Section 11(a), the Collateral Agent may proceed by
a suit or suits at law or in equity to foreclose the security
interest under this Agreement and sell the Collateral or any
portion thereof under a judgment or decree of a court or
courts of competent jurisdiction.
(c) The Collateral Agent and the Secured Parties
shall incur no liability as a result of the sale of the
Collateral, or any part thereof, at any private sale conducted
in a commercially reasonable manner. The Grantor hereby
waives, to the full extent permitted by applicable law, all
claims, damages and demands against the Collateral Agent
arising out of the repossession, retention or sale of the
Collateral, including, without limitation, any claim against
the Collateral Agent arising by reason of the fact that the
price at which the Collateral, or any part thereof, was sold
was less than may have been obtained at a public sale or was
less than the aggregate amount of the Obligations, even if the
Collateral Agent accepts the first offer received which the
Collateral Agent in good faith deems to be commercially
reasonable under the circumstances and does not offer the
Collateral to more than one offeree.
(d) No sale or other disposition of all or any part
of the Collateral by the Collateral Agent pursuant to this
Section 11 shall be deemed to relieve the Grantor or the
Company of its obligations in respect of any Obligations
except to the extent the proceeds thereof are applied by the
Collateral Agent to the payment of such Obligations and except
to the extent provided in Section 11(a).
(e) The Grantor agrees to pay all costs of the
Collateral Agent, including all reasonable attorneys' fees and
legal expenses, incurred with respect to the collection of any
of the Obligations and the enforcement of any of its rights
hereunder.
(f) The proceeds of any Collateral obtained or
disposed of pursuant hereto shall be applied to the payment of
the Obligations as set forth in the Intercreditor Agreement
and the Depositary Agreement.
12. Discontinuance of Proceedings. In case the
Collateral Agent shall have instituted any proceeding to
enforce any right, power or remedy under this Security
Agreement by foreclosure, sale, entry or otherwise, and such
proceeding shall have been discontinued or abandoned for any
reason or shall have been determined adversely to the
Collateral Agent, then and in every such case, subject to the
terms of any judgment rendered in any such proceeding, the
Grantor and the Collateral Agent shall be returned to their
former positions and rights hereunder with respect to the
Collateral subject to the security interest created under this
Security Agreement and all rights, remedies and powers of the
Collateral Agent shall continue as if no such proceeding had
been instituted.
l3. Notices. All notices, requests and demands to
or upon the respective parties hereto shall be effective as
provided in the Indenture.
14. The Collateral Agent's Duties. The powers
conferred on the Collateral Agent and the Secured Parties
hereunder are solely to protect its and the Secured Parties'
interest in the Collateral and shall not impose any duty on it
or them to exercise any such powers. The Collateral Agent
shall have no duty as to any Collateral (except to the extent
expressly provided in the first sentence of Section 9-207(11)
of the Code) or as to the taking of any necessary steps to
preserve rights against prior parties pertaining to any
Collateral. Neither the Collateral Agent nor any of its
directors, officers, employees or agents shall be liable for
failure to demand, collect or realize upon all or any part of
the Collateral or for any delay in doing so or shall be under
any obligation to sell or otherwise dispose of any Collateral
upon the request of the Grantor or otherwise. When Collateral
is in the Collateral Agent's possession, the risk of
accidental loss or damage shall be on the Grantor.
15. Limitation on the Duty of Collateral Agent in
Respect of Collateral. The Collateral Agent shall be deemed
to have exercised reasonable care as to any Collateral in its
possession or control if such Collateral is accorded treatment
substantially equal to that which the Collateral Agent accords
its own property.
16. Severability. In case any provision in or
obligation under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or
of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.
l7. No Waiver, Remedies Cumulative. No failure or
delay on the part of the Collateral Agent or the Secured
Parties in exercising any right, power or privilege under this
Agreement and no course of dealing between the Grantor and the
Collateral Agent or any Secured Party shall operate as a
waiver thereof, nor shall any single or partial exercise of
any right, power or privilege under this Agreement preclude
any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder. The rights and
remedies herein expressly provided are cumulative and not
exclusive of any right or remedy which the Collateral Agent or
any Secured Party would otherwise have. No notice to or
demand on the Grantor in any case shall entitle the Grantor to
any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the
Collateral Agent or any Secured Party to any other or further
action in any circumstances without notice or demand. The
Collateral Agent or any Secured Party shall not by any act,
delay, omission or otherwise be deemed to have waived any of
its rights or remedies hereunder and no waiver shall be valid
unless in writing, signed by the Collateral Agent or Secured
Party as to which such waiver is to be enforced, and then only
to the extent therein set forth. A waiver by the Collateral
Agent of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which
the Collateral Agent would otherwise have or have had on any
other occasion.
18. Amendments, etc. No amendment or waiver of any
provision of this Agreement, nor any consent to any departure
by the Grantor herefrom, shall in any event be effective
unless the same shall be in writing and signed by the
Collateral Agent and the Grantor and, with respect to any such
waiver or consent, such waiver or consent shall be effective
only in the specific instance and for the specific purpose for
which given.
l9. Successors and Assigns; Governing Law;
Submission to Jurisdiction.
(a) This Agreement and all obligations hereunder
shall be binding upon the successors and assigns of the
Grantor and shall inure, together with the rights and remedies
of the Collateral Agent hereunder, to the benefit of the
Collateral Agent and the Secured Parties and their respective
successors and assigns.
(b) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH
AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW
(EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW).
(c) Any legal action or proceeding with respect to
this Agreement and any action for enforcement of any judgment
in respect thereof may be brought in the courts of the State
of New York or of the United States of America for the
Southern District of New York and, by execution and delivery
of this Agreement, the Grantor hereby accepts for itself and
in respect of its property, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts and
appellate courts from any appeal thereof. The Grantor
irrevocably consents to the service of process out of any of
the aforementioned courts in any such action or proceeding by
the mailing of copies thereof by registered or certified mail,
postage prepaid, to the Grantor at its address specified for
notices in the Indenture. The Grantor hereby irrevocably
waives any objection which it may now or hereafter have to the
laying of venue of any of the aforesaid actions or proceedings
arising out of or in connection with this Agreement brought in
the courts referred to above and hereby further irrevocably
waives and agrees not to plead or claim in any such court that
any such action or proceeding brought in any such court has
been brought in an inconvenient forum. Nothing herein shall
affect the right of the Collateral Agent to serve process in
any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Grantor in any
other jurisdiction.
20. Waiver. The Grantor hereby waives, to the
extent permitted by law, all rights of redemption,
appraisement, valuation, diligence, stay, extension,
moratorium and all right to have the Collateral marshaled upon
any foreclosure hereof, now or hereafter in force under any
applicable law in order to stay or delay the enforcement of
this Security Agreement, including the absolute sale of the
Collateral or any portion thereof, and the Grantor, for itself
and all who may claim under it, insofar as it or they now or
hereafter lawfully may, hereby waives the benefit of all such
laws and agrees that any court having jurisdiction to
foreclose this Agreement may order the sale of the Collateral
as an entirety.
Without limiting the generality of the foregoing,
the Grantor hereby: (i) authorizes the Collateral Agent and
the Secured Parties, in their sole discretion and without
notice to or demand upon the Grantor and without otherwise
affecting the obligations of the Grantor hereunder or in
respect of the Obligations, from time to time to take and hold
other collateral (in addition to the Collateral) for payment
of any Obligations, or any part thereof, and to exchange,
enforce or release such other collateral or any part thereof
and to accept and hold any endorsement or guarantee of payment
of the Obligations or any part thereof and to release or
substitute any endorser or guarantor or any other person
granting security for or in any other way obligated upon any
Obligations or any part thereof, and (ii) waives and releases
any and all right to require the Collateral Agent or any
Secured Party to collect any of the Obligations from any
specific item or items of the Collateral or from any other
party liable as guarantor or in any other manner in respect of
any of the Obligations or from any collateral (other than the
Collateral) for any of the Obligations.
2l. Termination and Reinstatement.
(a) This Agreement shall terminate on the Debt
Termination Date. At the time of such termination or upon any
release of Collateral in accordance with the express
provisions of this Agreement (it being acknowledged by the
Grantor that any such release is permitted only to the extent
any such disposition of the Collateral is permitted under the
terms and provisions of this Agreement and all other Project
Documents), the Collateral Agent, at the request and expense
of the Grantor, will execute and deliver to the Grantor a
proper instrument or instruments acknowledging the
satisfaction and termination of this Agreement or, in the case
of a release of a portion of the Collateral, that such
Collateral is to be released from the Lien of this Agreement.
In the case of the termination of this Agreement as provided
above, the Collateral Agent will duly assign, transfer and
deliver at the Grantor's expense to the Grantor such of the
Collateral as has not yet theretofore been sold or otherwise
applied or released pursuant to this Agreement, together with
any moneys at the time held by the Collateral Agent pursuant
to this Agreement.
(b) This Agreement shall continue to be effective
or be reinstated, as the case may be, if at any time any
amount received by the Collateral Agent or any Secured Party
in respect of the Obligations is rescinded or must otherwise
be restored or returned by the Collateral Agent or such
Secured Party upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Grantor or upon the
appointment of any intervenor or conservator of, or receiver
or similar official for, the Grantor or any substantial part
of its assets, or otherwise, all as though such payments had
not been made.
(c) The security interest created hereunder shall
be automatically released with respect to any portion of the
Collateral that is sold, transferred or otherwise disposed of
in accordance with the terms of the Indenture and the
Collateral Agent will, upon the request and at the expense of
the Grantor, execute and deliver such documents as the Grantor
shall reasonably request to evidence such release.
22. Security Interest Absolute. All rights of the
Collateral Agent and security interests hereunder, and all
obligations of the Grantor hereunder, shall, subject to the
terms of this Agreement, be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the
Indenture, any other Project Document or any other
agreement or instrument relating thereto;
(b) any change in the time, manner or place of
payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any
consent to any departure from the Indenture or any other
Project Document;
(c) any exchange, release or non-perfection of any
other collateral, or any release or amendment or waiver
of or consent to departure from any guaranty, for all or
any of the Obligations; or
(d) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, the
Grantor, the Company or a third party surety or pledgor.
23. Payments Set Aside. To the extent that the
Grantor or any other Person on behalf of the Grantor makes a
payment or payments to the Collateral Agent and/or any Secured
Party, or the Collateral Agent and/or any Secured Party
enforce their security interests or exercise their rights of
set-off, and such payment or payments or the proceeds of such
enforcement or set-off or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set
aside and/or required to be repaid to a Collateral Agent,
receiver or any other party under any bankruptcy law, state or
federal law, common law or equitable cause, then to the extent
of such recovery, the Obligations or any part thereof
originally intended to be satisfied, and this Agreement and
all Liens, rights and remedies therefor, shall be revived and
continued in full force and effect as if such payment had not
been made or such enforcement or set-off had not occurred.
24. Waiver of Jury Trial. TO THE EXTENT PERMITTED
BY APPLICABLE LAW, EACH OF THE GRANTOR, THE COLLATERAL AGENT
AND EACH OF THE SECURED PARTIES HEREBY IRREVOCABLY WAIVES ALL
RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
25. Limitation of Liability. Notwithstanding
anything to the contrary contained herein, the liability and
obligation of the Grantor or any past, present or future
partner, officer, director or stockholder of the Grantor under
or by reason of this Agreement shall be limited as provided in
Section 4.12 of the Intercreditor Agreement and the provisions
of said Section 4.12 are incorporated herein by reference.
26. Conflicts with the Intercreditor Agreement or
the Depositary Agreement. Notwithstanding any other provision
hereof, in the event of any conflict between the terms of this
Agreement and the Intercreditor Agreement or the Depositary
Agreement, the provisions of the Intercreditor Agreement or
the Depositary Agreement, as the case may be, will apply.
27. Exculpatory Provisions; Reliance by Collateral
Agent.
(a) Neither the Collateral Agent nor any Secured
Party, nor any of their respective officers, employees,
servants, controlling persons, executives, directors, agents,
authorized representatives, attorneys-in-fact or affiliates,
shall be liable to the Grantor for any action taken or omitted
to be taken by it or them under or in connection with this
Agreement or any other Project Document to which the Grantor
is a party, or responsible in any manner to any Person for any
recital, statement, representation or warranty made by the
Grantor or any officer thereof contained in this Agreement or
any other Project Document to which the Grantor is a party or
in any certificate, report, statement or other document
referred to or provided for in, or received by the Collateral
Agent or any Secured Party under or in connection with, this
Agreement or any other Project Document to which the Grantor
is a party or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement
or any other Project Document to which the Grantor is a party
or for any failure of the Grantor to perform any of the
Obligations. Neither the Collateral Agent nor any Secured
Party shall be under any obligation to any Person 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 Project Document to which the Grantor is a party,
or to inspect the properties or records of the Grantor.
(b) The Collateral Agent shall be entitled to rely,
and shall be fully protected in relying, upon any note,
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 or Persons and upon
advice and statements of legal counsel (including, without
limitation, counsel to the Grantor), independent accountants
and other experts selected by the Collateral Agent. The
Collateral Agent shall have no obligation to any Person to act
or refrain from acting or exercising any of its rights under
this Agreement.
IN WITNESS WHEREOF, each of the Grantor and the
Collateral Agent has caused this Security Agreement to be
executed by its duly authorized officer as of the date first
above written.
PANDA-ROSEMARY, L.P.,
a Delaware limited partnership
By: Panda - Rosemary Corporation,
General Partner
By:
Name: Robert W. Carter
Title: Chairman of the Board,
President and Chief
Executive Officer
FLEET NATIONAL BANK,
as Collateral Agent
By:
Name: Kathy A. Larimore
Title: Assistant Vice President
SCHEDULE A
ASSIGNED AGREEMENTS
1. Power Purchase and Operating Agreement, dated
as of January 24, 1989, as amended on October 24, 1989 and
July 30, 1993, between the Grantor and Virginia Electric and
Power Company.
2. Fuel Supply Management Agreement, effective as
of October 10, 1990, between the Grantor and Natural Gas
Clearinghouse, and any other contract entered into by the
Grantor to provide fuel management activities comparable to
those provided under such agreement.
3. Pipeline Operating Agreement, effective as of
February 14, 1990, as amended by Amendment Number 1, dated
May 7, 1990, and Amendment Number 2, dated November 19, 1991,
between the Grantor and North Carolina Natural Gas
Corporation.
4. Gas Purchase Contract, dated April 12, 1990 and
amended on April 23, 1993, between the Grantor and Natural Gas
Clearinghouse and any natural gas supply contract entered into
by the Grantor to supply natural gas to the Project as a part
of the Project's primary gas supply.
5. Lateral Line Interconnect and Reimbursement
Agreement, dated August 1, 1990, between the Grantor and
Transcontinental Gas Pipe Line Corporation.
6. Firm Gas Transportation Contract, dated
October 27, 1991, between the Grantor and Transcontinental Gas
Pipe Line Corporation.
7. Service Agreement for Services Under ITS Rate
Schedule, dated April 4, 1991, between the Grantor and
Columbia Gas Transmission Corporation.
8. ITS-1 Service Agreement, dated as of June 13,
1996, between the Grantor and Columbia Gulf Transmission
Company.
9. Amended and Restated Operation and Maintenance
Agreement, dated as of December 27, 1993, between the Grantor
and University Technical Services, Inc., as amended by the
First Amendment to Operation and Maintenance Agreement entered
into July 15, 1996, and any other operation and maintenance
agreement entered into by the Grantor that provides for
substantially all of the ordinary course operation and
maintenance services for the Project.
10. Cogeneration Energy Supply Agreement, dated
January 12, 1989, and amended on October 1, 1989 and
January 3, 1990, between the Grantor and The Bibb Company.
11. Real Property Lease and Easement Agreement,
dated as of June 9, 1989, between The Bibb Company and the
Grantor, as amended as of October 1, 1989, as of January 31,
1990, and as of March 15, 1996.
12. Service Agreement, dated October 22, 1991,
between the Grantor and Transcontinental Gas Pipe Line
Corporation.
13. Service Agreement, dated July 26, 1996, between
the Grantor and Transcontinental Gas Pipe Line Corporation and
the related agreements to be entered into by the Grantor with
Texas Gas Transmission Corporation and CNG Transmission
Corporation and any other transportation agreement entered
into by the Grantor.
14. Letter Agreement, dated March 6, 1991, between
the Grantor and Columbia Gas Transmission Corporation.
15. All Fuel Oil Contracts, Power Purchase
Agreements, Replacement Gas Contracts, Replacement Gas
Transportation Contracts, Gas Resale Contracts, Fuel Hedges,
Additional Contracts and Project Agreements, as those terms
are defined in the Indenture, entered into by the Grantor.
SCHEDULE B
UNIFORM COMMERCIAL CODE FILINGS
1. Halifax County, North Carolina.
2. Northampton County, North Carolina.
3. North Carolina Secretary of State.
4. Texas Secretary of State.
EXHIBIT 10.16
SECURITY AGREEMENT
Dated July 31, 1996
by
PANDA-ROSEMARY FUNDING CORPORATION
to
FLEET NATIONAL BANK,
as Collateral Agent
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated July 31, 1996, is made by PANDA-
ROSEMARY FUNDING CORPORATION, a Delaware corporation (the
"Grantor"), to FLEET NATIONAL BANK, a national banking
association established under the laws of the United States of
America, as collateral agent (in such capacity, together with
its successors, assigns and designees in such capacity, the
"Collateral Agent") for the benefit of the Secured Parties (as
defined herein).
W I T N E S S E T H :
WHEREAS, Panda-Rosemary, L.P., a Delaware limited partnership
(the "Partnership"), owns a natural gas-fired cogeneration
facility with approximately 180 MW of electric generating
capacity located in Roanoke Rapids, North Carolina (the
"Project");
WHEREAS, the Partnership has caused the Grantor to be formed
as a wholly-owned subsidiary for the purposes of facilitating
the refinancing of the Project;
WHEREAS, the Grantor has duly authorized the creation and
issuance of its First Mortgage Bonds to be issued in one or
more series (the "Bonds") pursuant to the Trust Indenture,
dated as of July 31, 1996 (as amended, restated, supplemented
or otherwise modified from time to time, the "Indenture"),
among the Grantor, the Partnership and Fleet National Bank, as
trustee;
WHEREAS, the proceeds of the sale of the Bonds will, together
with other funds available to the Partnership, be used, among
other things, to refinance the Partnership's outstanding
indebtedness incurred in connection with the construction and
initial financing of the Project, to fund a debt service
reserve fund for the Bonds, to redeem a limited partner
interest in the Partnership, to pay certain transaction costs
associated with the offering of the Bonds and to fund certain
modification costs in the future, if necessary, some of the
foregoing being financed by the loan by the Grantor of the
proceeds from the issuance of the Bonds to the Partnership,
which loan, as well as loans by the Grantor to the Partnership
with respect to Additional Permitted Debt (as defined
below)(collectively, the "Loans"), will be secured by
substantially all the assets of the Partnership and certain
other collateral;
WHEREAS, in order to satisfy certain requirements of the
Partnership under the Project Agreements (as defined in the
Indenture) and for other purposes permitted under the
Indenture, the Partnership may incur additional debt permitted
by Sections 6.16(a)(v) and 6.16(b)(ii) of the Indenture
("Additional Permitted Debt"), either directly or indirectly
through the Grantor, the obligations under which shall be
secured by substantially all the assets of the Partnership and
certain other collateral;
WHEREAS, all of the Grantor's obligations under the Bonds will
be unconditionally guaranteed by the Partnership pursuant to a
guaranty of the Partnership, the performance of which will be
secured by substantially all the assets of the Partnership;
WHEREAS, the Partnership intends to arrange for the issuance
of certain letters of credit pursuant to one or more Credit
Bank Reimbursement Agreements (as defined in the Indenture),
the obligations under which may be secured by substantially
all the assets of the Partnership and certain other
collateral;
WHEREAS, at the closing, certain moneys held by The Fuji Bank
and Trust Company, as collateral agent, in connection with an
existing letter of credit facility, will be transferred into
the appropriate Funds (as defined in a certain Deposit and
Disbursement Agreement, dated as of July 31, 1996 (as amended,
restated, supplemented or otherwise modified from time to
time, the "Depositary Agreement"), by and among the Grantor,
the Partnership, the Collateral Agent and Fleet National Bank,
as depositary agent thereunder (in such capacity, together
with its successors, assigns and designees in such capacity,
the "Depositary Agent"));
WHEREAS, the Secured Parties signatories thereto (the "Secured
Parties"), the Grantor, the Partnership, the Collateral Agent
and the Depositary Agent have entered into a Collateral Agency
and Intercreditor Agreement, dated as of July 31, 1996 (as
amended, restated, supplemented or otherwise modified from
time to time, the "Intercreditor Agreement"), appointing the
Collateral Agent as collateral agent and setting forth certain
rights and obligations of the Collateral Agent acting on
behalf of the Secured Parties with respect to the Collateral,
including, without limitation, the Funds; and
WHEREAS, the execution and delivery of this Security Agreement
(as amended, supplemented, restated or otherwise modified from
time to time, this "Security Agreement" or this "Agreement")
by the Grantor are conditions precedent to the Collateral
Agent and the Secured Parties entering into the transactions
contemplated by, among other things, the Indenture and the
Credit Bank Documents (as each such term is defined in the
Indenture).
NOW, THEREFORE, in consideration of the premises and in order
to induce the Collateral Agent and the Secured Parties to
enter into the transactions contemplated by, among other
things, the Indenture and the Credit Bank Documents, the
Grantor hereby agrees with the Collateral Agent, for the
benefit of the Secured Parties, as follows:
l. Defined Terms.
(a) Unless otherwise defined herein, all capitalized terms
used herein shall have the meanings set forth in, and the
interpretations applicable thereto, under the Intercreditor
Agreement (including the definitions in the Indenture
incorporated in the Intercreditor Agreement). Unless
otherwise specified herein, (i) all references to Sections,
paragraphs or other subdivisions herein are to this Agreement
and (ii) the words "include," "includes," and "including" are
deemed to be followed by "without limitation" whether or not
they are, in fact, followed by such words or words of like
import. Unless otherwise defined herein or in the Indenture,
terms defined in Article 9 of the Uniform Commercial Code as
in effect from time to time in the State of New York are used
herein as therein defined. The following terms shall have the
following meanings, unless the context otherwise requires:
"Accounts Receivable" means all accounts (as defined in the
Code) now or hereafter owned by the Grantor and in any event
shall include, but not be limited to, (i) accounts receivable,
instruments (as defined in the Code), documents, contract
rights (including any rights to liquidated damages payments)
and chattel paper (as defined in the Code), created by or
arising from sales of electricity, steam, output, fuel,
capacity or recoverable materials and/or thermal energy or
other services in connection with the Project, and all
accounts (as defined in the Code) arising from any sale or
rendition of services made under any trade name or style,
whether or not earned by performance, (ii) guarantees,
warranties, endorsements, indemnifications or collateral on,
of or for any of the foregoing and any rents, revenues, income
and profits in respect of the Site or the Project,
(iii) insurance policies or rights relating to any of the
foregoing, (iv) cash and non-cash Proceeds of any and all of
the foregoing and (v) all powers of attorney for the execution
of any evidence of indebtedness or security or other writings
in connection therewith.
"Assigned Agreements" means (i) the Loan Agreement, dated as
of July 31, 1996, between the Grantor and the Partnership (as
amended, supplemented, restated or otherwise modified from
time to time, the "Company Loan Agreement"); (ii) the
Promissory Note made by the Partnership to the order of the
Grantor, dated July 31, 1996, in the original principal amount
of $111,400,000; (iii) the Grantor's interest in the
Intercreditor Agreement; (iv) the Grantor's interest in the
Depositary Agreement and (vi) the Grantor's interest, if any,
in any Additional Permitted Debt Document, as items (i)
through (vi), above, may be amended, modified, restated,
replaced, substituted or otherwise supplemented from time to
time.
"Code" means the Uniform Commercial Code as the same may from
time to time be in effect in the State of New York.
"Collateral" shall have the meaning set forth in Section 2.
"Collateral Records" means (a) all original copies of all
documents, instruments or other writings evidencing any of the
other Collateral and (b) all books, correspondence, credit or
other files and records.
"Copyrights" means, collectively, all of the following now
owned or hereafter created or acquired by Grantor: (a) all
copyrights, rights and interests in copyrights, works
protectable by copyright, copyright registrations and
copyright applications; (b) all renewals of any of the
foregoing; (c) all income, royalties, damages and payments now
or hereafter due and/or payable under any of the foregoing or
with respect to any of the foregoing, including, without
limitation, damages or payments for past or future
infringements of any of the foregoing; (d) the right to sue
for past, present and future infringements of any of the
foregoing; (e) all rights corresponding to any of the
foregoing throughout the world; and (f) all goodwill
associated with any symbolized by any of the foregoing.
"Default Rate" means two percent (2%) in excess of the "prime
rate" from time to time publicly quoted by the Collateral
Agent in its individual capacity, or any successor thereto.
"Equipment" means any equipment or fixtures located on the
Site now or hereafter owned by the Grantor or used in
connection with the Project and, in any event, means and
includes, but shall not be limited to, all machinery,
packaging, processing, manufacturing, distribution, selling,
data processing, computer, office, furnishing, fixtures,
appliances, trade fixtures, vehicles, vessels, aircraft,
rolling stock, tools, tooling, molds, dies, supplies and other
equipment of any kind and nature, wherever situated, and any
and all additions, substitutions and replacements of any of
the foregoing, wherever located, together with all
attachments, components, parts, equipment, improvements,
upgrades and accessories installed thereon or affixed thereto
and all designs, plans and specifications relating to the Site
or the Project owned by Grantor on the date hereof or
hereafter acquired.
"General Intangibles" means all general intangibles now or
hereafter owned by the Grantor, and, in any event, means and
includes, but shall not be limited to, all contract rights,
interests, choses in action, causes of action and all other
intangible personal property of the Grantor of every kind and
nature (other than Accounts Receivable), now owned or
hereafter acquired by the Grantor, including, without
limitation, corporate or other business records, loans and
other obligations receivable, inventions, designs, patents,
patent applications, service marks, service mark applications,
trademarks, trademark applications, trade names, trade
secrets, goodwill, registrations, licenses, leasehold
interests in real and personal property, franchises,
dealership agreements, customer lists, customer and supplier
contracts, firm sale orders, partnership and joint venture
interests, other contracts and contract rights, tax refund
claims, deposit accounts (general or special) with, and all
credits and claims against, any financial institution, rights
and claims against carriers and shippers, rights to
indemnification, all compensation, awards, damages, rights of
action and proceeds arising from any taking by any lawful
power and or authority by exercise of the right of
condemnation or eminent domain with respect to any of the
Collateral or the Project, reversionary interests in pension
and profit sharing plans and reversionary, beneficial and
residual interests in trusts, rights to proceeds of insurance
of which the Grantor is beneficiary, any letters of credit,
including, without limitation, guaranties, warranties,
security interests or liens of any kind held by or granted to
the Grantor to secure payment of any obligation owing by any
person or entity to the Grantor, and the like, however and
whenever arising and all pollution allowances, offsets and
similar rights, including, without limitation, all acid rain
allowances under the Clean Air Amendment of 1990 and any
implementing state Laws.
"Insurance Policies" means all Proceeds of all insurance
policies in which the Grantor is named as owner or
beneficiary.
"Inventory" means all of the Grantor's inventory (as defined
in the Code), goods, merchandise and other personal property
furnished or to be furnished under any contract of service or
intended for sale or lease, including, without limitation, all
raw materials, components, whole goods and materials and
supplies of any kind which are used or consumed in the
Grantor's business, and all documents of title or documents
representing the same, in each instance whether now owned or
hereafter acquired by the Grantor and wherever located,
whether in the possession of the Grantor or of a bailee or
other person for sale, storage, transit, processing, use or
otherwise.
"Marks" means any trademarks, trademark registrations and
trademark applications pending, now held or hereafter acquired
by the Grantor including, without limitation, registrations,
recordings and applications of or with the United States
Patent and Trademark Office or any similar agency in any
foreign jurisdiction (which the Grantor has adopted and used
and is using or hereafter acquires or under which the Grantor
is licensed), as well as all other trademarks, trade names,
fictitious business names, business names, company names,
business identifiers, prints, labels, trade styles and service
marks not registered, and trade dress, including logos and/or
designs related to the foregoing.
"Money" means "money" as such term is defined in Section
1-201(24) of the Code.
"Obligations" means, (i) all obligations of the Grantor or the
Partnership to the Collateral Agent, the Depositary Agent or
the Secured Parties now or hereafter existing under the Bonds,
the Indenture, the Partnership Notes, the Partnership
Guarantee, any Additional Permitted Debt, any Credit Bank
Working Capital Agreement, any Credit Bank Reimbursement
Agreement, any Interest Rate Protection Agreement, this
Agreement or the Collateral Documents, whether for principal,
interest (including, without limitation, interest accruing
following the filing by or against the Grantor or the
Partnership of a bankruptcy petition, whether or not allowed
as a claim in a bankruptcy proceeding), fees, indemnification,
expenses or otherwise, and (ii) all other liabilities,
obligations, covenants and duties owing to the Collateral
Agent, the Depositary Agent or the Secured Parties from or by
the Grantor or the Partnership of any kind or nature, present
or future, whether or not evidenced by any note, guaranty or
other instrument, arising under, or in connection with the
Indenture, each Partnership Guarantee, the Partnership Notes,
any Additional Permitted Debt, any Credit Bank Working Capital
Agreement, any Credit Bank Reimbursement Agreement, any
Interest Rate Protection Agreements, the Foreign Exchange
Protection Agreement, this Agreement or the Collateral
Documents, whether or not for the payment of money, whether
direct or indirect (including those acquired by assignment),
joint or several, absolute or contingent, liquidated or
unliquidated, due or to become due, now existing or hereafter
arising, renewed or restructured, whether or not from time to
time decreased or extinguished and later increased, created or
incurred, and including, without limitation, all indebtedness
of the Grantor or the Partnership under any instrument now or
hereafter evidencing or securing any of the foregoing and
however acquired.
"Patent" means any letter patent and any patent registration
and any patent application pending, including, without
limitation, registrations, recordings and applications
registered or recorded in the United States Patent and
Trademark Office or any similar agency in any foreign
jurisdiction in respect to which the Grantor has any rights
whatsoever.
"Permits" means all applicable authorizations, certificates,
licenses, approvals, waivers, exemptions, variances,
franchises, permissions and permits of any Governmental
Authority required or obtained in connection with the
purchase, acquisition, design, construction, installation,
ownership and/or operation of the Project or in connection
with any transaction contemplated by the Indenture and the
Project Documents.
"Proceeds" means all proceeds (as defined in the Code) of any
Collateral and, in any event, shall include, without
limitation, (i) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to the Grantor from
time to time with respect to any of the Collateral, (ii) any
and all payments (in any form whatsoever) made or due and
payable to the Grantor from time to time in connection with
any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral or the Project
by any Governmental Authority (or any Person acting under
color of Governmental Authority), (iii) any and all other
amounts from time to time paid or payable under or in
connection with any of the Collateral or the Project and
(iv) any Proceeds of Proceeds.
"Project Bank Deposits" means (i) the Funds (and any sub-funds
opened within any Fund) and each cash collateral account
established by the Depositary Agent, as agent for the
Collateral Agent for the benefit of the Secured Parties (and
designated by the Depositary Agent, as agent for the
Collateral Agent, as a Fund) on behalf of the Grantor in
connection with the Depositary Agreement, all sums of money,
from any source whatsoever, now or hereafter transferred to
and comprising the Funds, including, without limitation, all
credit balances therein, any and all funds, cash, investments,
instruments and securities at any time on deposit in the
Funds, and any and all interest and dividends or other income
derived from any such monies, credit balances, funds, cash,
investments, instruments and securities, (ii) all statements,
certificates, passbooks and instruments representing the Funds
and all other property from time to time received, receivable
or otherwise distributed in respect of or in exchange for the
Funds; and (iii) all deposits, cash, notes, certificates of
deposit or other instruments or documents from time to time
credited to the Funds for or on behalf of the Grantor, and all
additions thereto and substitutions therefor, and all interest
and dividends thereon, including, without limitation,
Permitted Investments and Proceeds thereof.
(b) Any reference in this Agreement to a Project Document
shall include only such documents that have been entered into
and have not reached their stated termination date (if any),
have not been fully and finally performed in accordance with
their respective terms or have not been replaced, terminated
or canceled in accordance with the terms of the Indenture or
the Intercreditor Agreement.
2. Assignment and Grant of Security.
(i) As collateral security for the prompt and complete payment
and performance when due (whether at stated maturity, by
redemption, acceleration or otherwise) of all of the
Obligations, the Grantor hereby assigns, pledges, transfers,
conveys and sets over to the Collateral Agent for the benefit
of the Secured Parties, and grants to the Collateral Agent for
the benefit of the Secured Parties a security interest in and
continuing lien on, all of its estate, right, title and
interest in, to and under the following property of the
Grantor, whether now owned or existing or hereafter acquired
or arising and wherever located (all of which being herein
collectively referred to as the "Collateral"):
(a) the Assigned Agreements, including, without limitation,
(i) all amounts and claims for amounts payable to or for the
account of the Grantor under the Assigned Agreements, (ii) all
claims, rights, privileges and remedies on the part of the
Grantor, whether arising under the Assigned Agreements or by
statute or at law or in equity or otherwise, arising out of or
in connection with any failure by any party to any Assigned
Agreement to make any payment assigned hereunder, including,
without limitation, all claims of the Grantor for damages
arising out of or for breach of or a default under the
Assigned Agreements, (iii) all amounts payable by any party
pursuant to any Assigned Agreement as a result of the exercise
of any such claim, right, privilege or remedy, including all
rights and claims of the Grantor under any bonding, insurance,
indemnity, guarantee, warranty and liquidated damages arising
out of or in connection therewith, (iv) all rights of the
Grantor to take any action to terminate, amend, supplement,
modify or waive performance of the Assigned Agreements, to
perform thereunder and to compel performance thereunder, and
(v) all rights of the Grantor to exercise any election or
option or to give or receive any notice, consent, waiver or
approval under or in respect of the Assigned Agreements, and
the right (but not the obligation) to exercise or enforce any
and all covenants, remedies, powers and privileges thereunder
and to do any and all other things the Grantor is entitled to
do thereunder together with full power and authority, in the
name of the Grantor or otherwise, to enforce, collect, receive
and give receipt for any and all of the foregoing;
(b) all Accounts Receivable;
(c) all Copyrights;
(d) all documents, instruments, letters of credit and chattel
paper;
(e) all Equipment;
(f) all General Intangibles;
(g) all goods;
(h) all Fuel Hedges and Interest Rate Protection Agreements;
(i) all Insurance Policies;
(j) all Inventory;
(k) all Marks;
(l) all Money;
(m) all Patents;
(n) to the extent permitted by applicable law, all Permits
owned by or granted to or for the benefit of the Grantor or
the Project;
(o) all Project Bank Deposits and all deposits and accounts
with other financial institutions;
(p) any and all property in the possession of or under the
control of the Collateral Agent or any Secured Party;
(q) all other tangible and intangible personal property;
(r) all Collateral Records;
(s) all replacements, substitutions, additions or accessions
to or for any of the foregoing;
(t) all Proceeds and products of any or all of the foregoing;
and
(u) to the extent not included in the foregoing, all
Permitted Investments of the Grantor and proceeds, products
and accessions of and to any and all of the foregoing
Collateral, including, without limitation, "proceeds," as
defined in Section 9-306(l) of the Code, including, without
limitation, whatever is received upon any collection,
exchange, sale or other disposition of any of the Collateral,
and any property into which any of the Collateral is
converted, whether cash or non-cash proceeds, and any and all
other amounts paid or payable under or in connection with any
of the Collateral.
The assignment of the payments and rights provided for in this
Section 2 shall be effective immediately upon the execution
and delivery of this Agreement and shall not be conditioned
upon the occurrence of any default hereunder or of any other
contingency or event.
(ii) It is the intention of the parties hereto that the
description of the Collateral set forth in Sections 2(i)(a)
through 2(i)(u), above be sufficient to enable the Collateral
Agent, on behalf of the Secured Parties, to take possession
of, and foreclose upon, all of the right, title and interest
of the Grantor, if any, in and to the Site and the Project and
any and all real property and personal property, tangible and
intangible, used or usable in connection therewith, and to
enable the Collateral Agent or its designee to operate, sell
or otherwise dispose of the entire interest of the Grantor, if
any, in and to the Site and the Project or any part thereof,
in each case upon the occurrence and during the continuance of
an Event of Default or a Trigger Event.
3. Delivery of Collateral; Perfection of Accounts; Assigned
Agreements.
(a) Delivery of Collateral. All sums of money, funds and
cash, from time to time constituting the Collateral, together
with all certificates, instruments, investments and securities
representing or evidencing the Collateral, shall be delivered
to, dealt with and held by the Collateral Agent pursuant to
the terms of the Indenture and the terms hereof; provided,
that all such sums, certificates, investments, securities or
instruments representing or evidencing any Fund shall be
delivered to, dealt with and held by the Depositary Agent, as
agent for the Collateral Agent, for the benefit of the Secured
Parties. All such certificates, investments, securities and
instruments shall be in suitable form for transfer by delivery
or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance
satisfactory to the Depositary Agent or the Collateral Agent.
(b) Perfection of Accounts. For the purpose of perfecting
the security interest of the Secured Parties in and to the
Funds and all funds, cash, investments, instruments and
securities at any time on deposit in the Funds, the Depositary
Agent shall be deemed to be holding the Funds and all such
funds, cash, investments, instruments and securities as agent
for the Collateral Agent and the Secured Parties.
(c) Assigned Agreements. So long as no Event of Default or a
Trigger Event has occurred and is continuing, the Grantor may
exercise all of the Grantor's rights, powers, privileges,
elections, options and remedies under the Assigned Agreements
(including, without limitation, lending the proceeds of any
Additional Permitted Debt to the Partnership) and any other
contract or agreement included in the Collateral, subject to
the terms of the Indenture and the other Project Documents.
Except as provided in Section 4, upon the occurrence and
during the continuance of an Event of Default or a Trigger
Event, the Collateral Agent may exercise any right, remedy,
election or option or give any notice, consent, waiver or
approval under, or deliver any requisition for payment under,
or take any other action in respect of, any Assigned Agreement
or other such agreement without any approval of or action by
the Grantor, but the Grantor will nevertheless execute and
deliver any instrument requested by the Collateral Agent to be
executed and delivered by the Grantor in connection with the
exercise by the Collateral Agent of any such right, remedy,
election or option or the giving by the Collateral Agent of
any such notice, consent, waiver or approval or the taking by
the Collateral Agent of any such other action.
4. Rights and Duties of Grantor under Assigned Agreements.
Notwithstanding any other provision of this Agreement, the
Grantor shall have the right, but not to the exclusion of the
Collateral Agent, to receive from the parties to the Assigned
Agreements all notices and other communications and copies of
all documents and all information which such parties are
permitted or required to give or furnish to the Grantor. The
Grantor at its expense will perform and comply with all of the
terms of each Assigned Agreement to be performed or complied
with by it, will do all things necessary on its part to
maintain each Assigned Agreement in full force and effect,
will do all things necessary to keep unimpaired all of its
rights, powers and remedies thereunder and to prevent any
forfeiture or impairment thereof, will enforce each Assigned
Agreement in accordance with its terms and will take all such
action to that end or to enforce any Assigned Agreement as
from time to time may be requested by the Collateral Agent,
except as otherwise expressly limited under or permitted by,
or to the extent that the failure to so do would not result in
an Event of Default under, the Indenture.
5. Grantor Remains Liable. Anything herein to the contrary
notwithstanding, except to the extent expressly limited under
or permitted by, or to the extent that the failure to so do
would not result in an Event of Default under, the Indenture
and except as set forth in the next succeeding sentence, the
Grantor shall remain liable under the Assigned Agreements and
the other contracts and agreements included in the Collateral
to the extent set forth therein and shall perform all of its
duties and obligations thereunder to the same extent as if
this Agreement had not been executed. The exercise by the
Collateral Agent of any of its rights hereunder shall not
release the Grantor from any of its duties or obligations
under the Assigned Agreements and the other contracts and
agreements included in the Collateral, except in the event of
foreclosure upon the Collateral (and only to the extent of
such foreclosure on the particular items of Collateral) by the
Collateral Agent, the exercise by the Collateral Agent of its
rights to sell the Collateral or the conveyance of the
Collateral by the Collateral Agent in lieu of foreclosure, in
which event the Grantor shall be released from obligations
arising under the Assigned Agreements and the other contracts
and agreements constituting Collateral after such event (but
only to the extent such obligations arise after such exercise
of rights). Neither the Collateral Agent nor any of the
Secured Parties shall have any obligation or liability under
any of the Assigned Agreements or other contracts and
agreements included in the Collateral by reason of or arising
out of this Agreement or the receipt of any payment relating
to the Assigned Agreements or any other Collateral pursuant
hereto (except as provided under the first sentence of
Section 9-207(l) of the Code), nor shall the Collateral Agent
or any of the Secured Parties be obligated to perform any of
the obligations or duties of the Grantor thereunder, to make
any payment required thereunder, to make any inquiry as to the
sufficiency of any payment received by it or as to the
sufficiency of any performance by any party thereunder, to
present or file any claim or to take any action to collect or
enforce any claim for payment assigned hereunder.
6. Representations and Warranties. The Grantor hereby makes
the following representations and warranties, which shall
survive the Closing Date:
(a) The Grantor has good, marketable and valid title in and
to all of the Collateral, free and clear of all Liens, rights
or claims of all other Persons, other than Permitted Liens,
and the Grantor has full power and authority to grant the
liens and security interests in and to the Collateral
hereunder. The Grantor has full power and authority to own
its property and to carry on its business as now being
conducted and as proposed to be conducted.
(b) No security agreement, financing statement, mortgage,
equivalent security or lien instrument or continuation
statement covering all or any part of the Collateral is on
file or of record in any public office, except for the
financing statements filed by the Grantor in the public
offices listed on Schedule A hereto or as otherwise permitted
by the Indenture.
(c) Appropriate financing statements or other appropriate
instruments have been or will be filed pursuant to the Code in
the public offices listed on Schedule A attached hereto as may
be necessary to perfect any security interest granted or
purported to be granted hereby (to the extent such security
interest may be perfected by the filing of a financing
statement) and no other filings are necessary to perfect the
security interests granted herein, except for Copyrights,
Marks and Patents registered or otherwise located outside of
the United States. Upon the Grantor's execution and delivery
of this Security Agreement, the Collateral Agent, on behalf of
the Secured Parties, will have a valid and continuing Lien on
and, upon (i) the filing of appropriate financing statements
in the public offices listed on Schedule A attached hereto and
(ii) the taking of possession by the Collateral Agent of the
Collateral in which a security interest is perfected by
possession, perfected security interest in the Collateral,
except for Copyrights, Marks and Patents registered or
otherwise located outside of the United States, superior and
prior to all other Liens and security interests, existing or
future (except for Permitted Liens) and the security interests
herein granted shall be enforceable as such against creditors
of and purchasers from the Grantor (except for Permitted
Liens) and against any owner or mortgagee of the real property
where any of the Collateral is located and against any
purchaser of real property and any present or future creditor
obtaining a Lien on such real property, except to the extent
otherwise expressly permitted by the Indenture. All action
that can be taken by the Grantor necessary or desirable to
protect and perfect such Lien on and security interest in each
item of the Collateral, except for Copyrights, Marks and
Patents registered or otherwise located outside of the United
States, has been or will be duly taken and the Grantor shall
defend the Collateral against all claims and demands of all
Persons at any time claiming the same or any interest therein
adverse to the Collateral Agent.
(d) The principal place of business and the chief executive
office of the Grantor is located at 4100 Spring Valley Road,
Suite 1001, Dallas, Texas 75244. The originals of the
Collateral Records are located at the chief executive office
of the Grantor. All Accounts Receivable and Assigned
Agreements (other than those in the possession of the
Collateral Agent) are maintained at, and controlled and
directed, including, without limitation, for general
accounting purposes, from the chief executive office of the
Grantor.
(e) On the date each Account Receivable is created, each such
Account Receivable (i) is and thereafter will be the genuine,
legal, valid and binding obligation of the account debtor in
respect thereof, representing an unsatisfied obligation of
such account debtor, (ii) is and thereafter will be
enforceable in accordance with its terms, (iii) is not and
thereafter will not be subject to any setoff, defense, tax or
counterclaim (except (x) with respect to refunds, defenses,
returns and allowances in the ordinary course of business,
(y) to the extent that such Account Receivable may not yet
have been earned by performance and (z) common law rights of
setoff or other rights, defenses or counterclaims arising by
application of law as the result of contracts or agreements
between the Grantor and an account debtor and under which the
Grantor may owe an obligation) and (iv) is and will be in
compliance with all applicable laws, whether federal, state,
local or foreign. None of the account debtors in respect of
any Account Receivable is the government of the United States
or an instrumentality thereof. No Accounts Receivable which
are evidenced by chattel paper require the consent of the
account debtor in respect thereof in connection with their
assignment hereunder (other that such as to which required
consents have been obtained).
(f) The only name under which the Grantor has conducted
business, and the correct name of the Grantor, is Panda-
Rosemary Funding Corporation. The Grantor does not have any
other corporate, partnership, trade or fictitious name.
7. Affirmative Covenants. The Grantor covenants and agrees
with the Collateral Agent for the benefit of the Secured
Parties that from and after the date hereof and until the Debt
Termination Date:
(a) Further Documentation, Pledge of Instruments. At any
time and from time to time, upon the request of the Collateral
Agent and at the sole expense of the Grantor, the Grantor will
promptly execute and deliver any and all such further
instruments and documents and take such further action as the
Collateral Agent may deem desirable in order to obtain the
full benefits of this Security Agreement and of the rights and
powers granted or purported to be granted hereby, including,
without limitation, (i) the filing of any financing or
continuation statements under the Uniform Commercial Code in
effect in any jurisdiction necessary or advisable (in the
Collateral Agent's sole discretion) to perfect, or to maintain
the perfection of, the liens and security interests granted
hereby, and (ii) placing the interest of the Collateral Agent
as lien holder on the certificate of title of any vehicle.
The Grantor also hereby authorizes the Collateral Agent to
file any such financing or continuation statement without the
signature of the Grantor to the extent permitted by applicable
Law. A photocopy or other reproduction of this Agreement
shall be sufficient as a financing statement and may be filed
in lieu of the original to the extent permitted by applicable
Law. The Grantor will pay or reimburse the Collateral Agent
for all filing fees and related expenses (including reasonable
attorneys' fees) and will make or reimburse the Collateral
Agent for making all searches deemed reasonably necessary by
the Collateral Agent to establish and determine the priority
of the security interests of the Collateral Agent or to
determine the presence or priority of other secured parties.
If any amount payable under or in connection with any of the
Collateral shall be or become evidenced by any chattel paper
or any promissory note or other instrument, such chattel
paper, promissory note or instrument shall be immediately
pledged and delivered to the Collateral Agent for the benefit
of the Secured Parties hereunder, duly endorsed in a manner
satisfactory to the Collateral Agent.
(b) Maintenance of Records. The Grantor will keep and
maintain, at its chief executive office and at its own cost
and expense, complete records of the Collateral including,
without limitation, a record of all payments received and all
credits granted with respect to Assigned Agreements and
Accounts Receivable and all other dealings with the
Collateral, including, without limitation, Collateral Records.
The Grantor will mark its Collateral Records and any chattel
paper held by the Grantor to evidence this Agreement and the
security interests granted hereby.
(c) Further Identification of Collateral. The Grantor will
furnish to the Collateral Agent from time to time statements
and schedules further identifying and describing the
Collateral and such other reports in connection with the
Collateral as the Collateral Agent or any Secured Party
(through the Collateral Agent) may request, all in reasonable
detail and in form satisfactory to the Collateral Agent.
(d) Continuous Perfection. The Grantor will not change its
corporate structure, principal place of business, chief
executive office, name or identity in any manner or use any
fictitious or trade names without obtaining the express prior
written consent of the Collateral Agent and without taking, at
the Grantor's own expense, all actions necessary or reasonably
requested by the Collateral Agent in order to continue the
perfection and priority of the Liens and security interests in
the Collateral created and intended to be created by this
Security Agreement.
(e) Letters of Credit. Upon receipt by the Grantor of any
letter of credit naming it as beneficiary and constituting
Collateral hereunder, the Grantor shall (i) pledge and deliver
the original of such letter of credit to the Collateral Agent,
(ii) if such letter of credit is transferable, cause such
letter of credit to be transferred into the name of the
Collateral Agent and (iii) if such letter of credit is non-
transferable, either use its best efforts to cause the letter
of credit to be re-issued with the Collateral Agent to be
named the sole beneficiary under such letter of credit or use
its best efforts to cause such letter of credit to be reissued
in transferable form. The Grantor shall do all things
necessary to cause each such letter of credit not theretofore
transferred to be drawn upon when available in accordance with
its terms and to cause all proceeds thereof to be paid
directly into the Funds as provided in the Depositary
Agreement.
(f) Right of Inspection. Upon reasonable notice and at such
reasonable times as the Collateral Agent or any Secured Party
shall reasonably request, the Collateral Agent and the other
Secured Parties shall have full and free access during normal
business hours to all the books, correspondence and records of
the Grantor relating to the Collateral and the Collateral
Agent and the other Secured Parties and their respective
representatives may examine the same, take extracts therefrom
and make photocopies thereof, and the Grantor agrees to render
to the Collateral Agent and the other Secured Parties, at the
Grantor's cost and expense, such clerical and other assistance
as may be reasonably requested with regard thereto. The
Collateral Agent and the other Secured Parties and their
respective representatives shall at all times, upon reasonable
notice, also have the right to enter into and upon any
premises where any of the Inventory is located for the purpose
of inspecting the same, observing its use or otherwise
protecting its interests therein.
(g) Notice of Adverse Claims. The Grantor shall, promptly
and in no event later than five (5) days after the Grantor
becomes aware of any information or has knowledge of any claim
against the Collateral adverse to the interest of the Secured
Parties, deliver to the Collateral Agent notice of each such
claim.
8. Negative Covenants. The Grantor covenants and agrees with
the Collateral Agent, for the benefit of the Secured Parties,
that from and after the date hereof and until the Debt
Termination Date:
(a) No Impairment. The Grantor will not take or permit to be
taken any action which could impair the Collateral Agent's
rights in the Collateral.
(b) Negative Pledge. The Grantor will not create, incur or
permit to exist, will defend the Collateral and all of the
Grantor's right, title and interest thereto against, and will
take such other action as is necessary to remove, any Lien or
claim on or to the Grantor's right, title or interest in, to
or under the Collateral, other than the Liens created hereby
and other than the Permitted Liens, and will defend the right,
title and interest of the Collateral Agent in and to any of
the Collateral against the claims and demands of all Persons
whomsoever.
(c) Modification of Terms of Accounts Receivable. Except as
may be otherwise permitted under, or would not result in an
Event of Default under, the Indenture, the Grantor shall not
rescind or cancel any indebtedness evidenced by any Accounts
Receivable or modify any term thereof or make any adjustment
with respect thereto, or extend or renew the same, or
compromise or settle any dispute, claim, suit or legal
proceeding relating thereto, or sell any Accounts Receivable
or interest therein, without the prior written consent of the
Collateral Agent. The Grantor will duly fulfill all
obligations on its part to be fulfilled under or in connection
with the Accounts Receivable and will do nothing to impair the
rights of the Secured Parties in the Accounts Receivable.
(d) Collection of Accounts Receivable. The Grantor shall
endeavor to cause to be collected from the account debtor
named in each of its Accounts Receivable, as and when due (in
accordance with generally accepted collection procedures in
accordance with all applicable laws), any and all amounts
owing under or on account of such Accounts Receivable, and
apply forthwith upon receipt thereof all such amounts as are
so collected to the outstanding balance of such Accounts
Receivable. The costs and expenses (including, without
limitation, attorneys' fees) of collection, whether incurred
by the Grantor or the Collateral Agent, shall be borne by the
Grantor.
9. Appointment of Collateral Agent as Attorney-in-Fact.
(a) The Grantor hereby irrevocably constitutes and appoints
the Collateral Agent and any officer or agent thereof, with
full power of substitution, as its true and lawful attorney-in-
fact, with full irrevocable power and authority in the place
and stead of the Grantor and in the name of the Grantor or in
its own name, from time to time, after an Event of Default has
occurred and so long as it is continuing, in its sole
discretion, to take any and all appropriate action and to
execute any and all documents and instruments which may be
necessary or desirable to accomplish the purposes of this
Agreement or cause performance or compliance with the terms of
this Agreement and, without limiting the generality of the
foregoing, hereby gives the Collateral Agent the power and
right, on behalf of the Grantor, without notice to or assent
by the Grantor, to do the following:
(i) to pay or discharge taxes, Liens, security
interests or other encumbrances levied or placed on or
threatened against the Collateral, to effect any
repairs or any insurance called for by the terms of the
Indenture or the other Project Documents and to pay all
or any part of the premiums therefor and the costs
thereof;
(ii) to require, demand, receive and give acquittance
for any sums of money due or received in connection
with the Assigned Agreements or any other Collateral,
to exercise the rights, powers and remedies relating
thereto, to take possession of and endorse and collect
any checks, drafts, notes, acceptances or other
instruments or orders in connection therewith or to
file any claims or take any action or institute any
proceedings which the Collateral Agent may deem to be
necessary or advisable and to exercise any election or
option or give any notice, consent, waiver or approval
under, or deliver any requisition for payment under, or
take any other action in respect of, any of the
Assigned Agreements;
(iii) to prepare, sign and file any financing
statement in the name of the Grantor as debtor; and
(iv) (A) to direct any party liable for any payment
under any Collateral to make payment of any and all
monies due or to become due thereunder directly to the
Collateral Agent (or to any Person as the Collateral
Agent may direct), (B) to ask, demand, collect, receive
and give acquittance and receipts for any and all
monies due and to become due under, arising out of, in
respect of, or in connection with any Collateral and,
in the name of the Grantor or its own name or
otherwise, to take possession of and endorse and
collect any checks, drafts, notices, acceptances or
other instruments for the payment of monies due under
any Collateral, (C) to sign and endorse any invoice,
freight or express bill, bill of lading, storage or
warehouse receipt, draft against a debtor, assignment,
verification and notice in connection with accounts and
other documents relating to the Collateral, (D) to
commence and prosecute any suits, actions or
proceedings at law or in equity in any court of
competent jurisdiction or to take any other action
deemed appropriate by the Collateral Agent to enforce
any Assigned Agreement or to collect the Collateral or
any portion thereof or any amounts due thereunder
whenever payable and to enforce any other right in
respect of any Collateral, (E) to defend any suit,
action or proceeding brought against the Grantor with
respect to any Collateral, (F) to settle, compromise or
adjust any suit, action or proceeding described above
and, in connection therewith, to give such discharges
or releases as the Collateral Agent may deem
appropriate, and (G) generally to sell, transfer,
pledge, make any agreement with respect to or otherwise
deal with any of the Collateral as fully and completely
as though the Collateral Agent was the absolute owner
thereof for all purposes, and to do, at the Collateral
Agent's option and the Grantor's expense, at any time,
or from time to time, all acts and things which the
Collateral Agent deems necessary to protect, preserve
or realize upon the Collateral and the Collateral
Agent's security interest therein in order to effect
the intent of this Agreement, all as fully and
effectively as the Grantor might do.
The Grantor hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof. This power
of attorney is a power coupled with an interest and shall be
irrevocable so long as any of the Collateral is subject to the
security interest granted hereunder. The Collateral Agent
shall be accountable only for amounts that it actually
receives as a result of the exercise of such powers and
neither it nor any of its officers, directors, employees or
agents shall be responsible to the Grantor or any Partner for
any act or failure to act hereunder, except for its or their
own gross negligence or willful misconduct.
(b) The Grantor hereby acknowledges and agrees that the
Collateral Agent shall have no duties as fiduciary or, except
as expressly provided in the Code, otherwise to the Grantor,
and the Grantor hereby waives any claims to the rights of a
beneficiary or a fiduciary relationship hereunder.
(c) Upon the occurrence of an Event of Default or a Trigger
Event, the Grantor also authorizes the Collateral Agent (i) to
communicate in its own name with any party to any contract,
agreement or instrument included in the Collateral with regard
to the assignment of such contract, agreement or instrument
and other matters relating to such assignment and (ii) to
execute, in connection with any foreclosure or sale provided
for in this Agreement, any endorsement, assignment, bill of
sale or other instrument of conveyance or transfer with
respect to the Collateral on behalf of Grantor.
(d) The powers conferred on the Collateral Agent hereunder
are solely to protect the Collateral Agent's interests in the
Collateral and shall not impose any duty upon it to exercise
any such powers. The Collateral Agent shall be accountable
only for amounts that it actually receives as a result of the
exercise of such powers.
(e) Anything herein to the contrary notwithstanding, the
Grantor shall remain liable under the Project Documents to
which it is a party to the extent set forth therein to perform
all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed. The
exercise by the Collateral Agent of any right or remedy
hereunder shall not release the Grantor from any of its duties
or obligations under the Project Documents to which it is a
party, except in the event of foreclosure upon the Collateral
(and only to the extent of such foreclosure on the particular
Collateral). All of the Collateral is hereby assigned to the
Collateral Agent solely as security and the Collateral Agent
shall have no duty, liability or obligation whatsoever with
respect to any of the Collateral unless the Collateral Agent
so elects consistent with its rights under this Agreement.
10. Performance by the Collateral Agent of the Grantor's
Obligations. If the Grantor fails to perform or comply with
any agreement contained herein, the Collateral Agent shall be
authorized (but in no event required) in its sole discretion
to so perform or comply or to cause such performance or
compliance for the Grantor's benefit and account, and the
reasonable expenses (including reasonable attorneys' fees) of
the Collateral Agent incurred in connection with such
performance or compliance, together with interest thereon at
the Default Rate, shall be payable by the Grantor to the
Collateral Agent on demand and shall constitute a part of the
Obligations secured hereby.
11. Remedies Upon Event of Default.
(a) If any Event of Default or a Trigger Event shall occur
and be continuing, the Collateral Agent may exercise, in
addition to all other rights and remedies granted to the
Collateral Agent in this Agreement and in any other Project
Document or other instrument or agreement securing, evidencing
or relating thereto, all rights and remedies of a secured
party under the Code and shall have all rights now or
hereafter existing under all other applicable Laws. No
enumeration of rights in this Section 11 or elsewhere in this
Security Agreement or in any other Project Document or other
agreement shall be deemed to in any way limit the rights of
the Collateral Agent as described in this Section. Without
limiting the generality of the foregoing, the Grantor
expressly agrees that in any such event the Collateral may be
sold or otherwise disposed of in one or more parcels at one or
more public or private sales conducted by any officer or agent
of, or auctioneer or attorney for, the Collateral Agent, at
any exchange or broker's board or at the Collateral Agent's
place of business or elsewhere, for cash, upon credit or for
other property, for immediate or future delivery, and at such
price or prices and on such terms as the Collateral Agent
shall, in its sole discretion, deem commercially reasonable.
The Collateral Agent or any Secured Party may be the purchaser
of any or all of the Collateral so sold at a public sale and
thereafter hold the same absolutely free from any right or
claim of whatsoever kind. The Collateral Agent may, in its
sole discretion, at any such sale restrict the prospective
bidders or purchasers as to their number, nature of business
and investment intention. Upon any such sale the Collateral
Agent shall have the right to deliver, assign and transfer to
the purchaser thereof (including the Collateral Agent or any
Secured Party) the Collateral so sold. Each purchaser
(including the Collateral Agent or any Secured Party) at any
such sale shall hold the Collateral so sold absolutely free
from any claim or right of whatsoever kind, including any
equity or right of redemption of the Grantor, and the Grantor
hereby specifically waives, to the full extent it may lawfully
do so, all rights of redemption, stay or appraisal which it
has or may have under any rule of law or statute now existing
or hereafter adopted. The Collateral Agent shall give the
Grantor at least ten (10) days' written notice (which the
Grantor agrees is reasonable notification within the meaning
of Section 9-504(c) of the Code) of any such public or private
sale. Such notice shall state the time and place fixed for
any public sale and the time after which any private sale is
to be made. Any such public sale shall be held at such time
or times within ordinary business hours as the Collateral
Agent shall fix in the notice of such sale. At any such sale,
the Collateral may be sold in one lot as an entirety or in
separate parcels. The Collateral Agent shall not be obligated
to make any sale pursuant to any such notice. The Collateral
Agent may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to
time by announcement at the time and place fixed for such sale
and any such sale may be made at any time or place to which
the same may be so adjourned without further notice or
publication. In the case of any sale of all or any part of
the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Collateral Agent
until the full selling price is paid by the purchaser thereof,
but the Collateral Agent shall not incur any liability in case
of the failure of such purchaser to take up and pay for the
Collateral so sold, and, in case of any such failure, such
Collateral may again be sold pursuant to the provisions
hereof. In the payment of the purchase price of the
Collateral, the purchaser shall be entitled to have credit on
account of the purchase price thereof of amounts owing to such
purchaser on account of any of the Obligations and any such
purchaser may deliver notes, claims for interest or claims for
other payment with respect to such Obligations in lieu of cash
up to the amount which would, upon distribution of the net
proceeds of such sale, be payable thereon. Such notes, if the
amount payable hereunder shall be less than the amount due
thereon, shall be returned to the holder thereof after being
appropriately stamped to show partial payment.
(b) Instead of exercising the power of sale provided in
Section 11(a), the Collateral Agent may proceed by a suit or
suits at law or in equity to foreclose the security interest
under this Agreement and sell the Collateral or any portion
thereof under a judgment or decree of a court or courts of
competent jurisdiction.
(c) The Collateral Agent and the Secured Parties shall incur
no liability as a result of the sale of the Collateral, or any
part thereof, at any private sale conducted in a commercially
reasonable manner. The Grantor hereby waives, to the full
extent permitted by applicable law, all claims, damages and
demands against the Collateral Agent arising out of the
repossession, retention or sale of the Collateral, including,
without limitation, any claim against the Collateral Agent
arising by reason of the fact that the price at which the
Collateral, or any part thereof, was sold was less than may
have been obtained at a public sale or was less than the
aggregate amount of the Obligations, even if the Collateral
Agent accepts the first offer received which the Collateral
Agent in good faith deems to be commercially reasonable under
the circumstances and does not offer the Collateral to more
than one offeree.
(d) No sale or other disposition of all or any part of the
Collateral by the Collateral Agent pursuant to this Section 11
shall be deemed to relieve the Grantor or the Partnership of
its obligations in respect of any Obligations except to the
extent the proceeds thereof are applied by the Collateral
Agent to the payment of such Obligations and except to the
extent provided in Section 11(a).
(e) The Grantor agrees to pay all costs of the Collateral
Agent, including all reasonable attorneys' fees and legal
expenses, incurred with respect to the collection of any of
the Obligations and the enforcement of any of its rights
hereunder.
(f) The proceeds of any Collateral obtained or disposed of
pursuant hereto shall be applied to the payment of the
Obligations as set forth in the Intercreditor Agreement and
the Depositary Agreement.
12. Discontinuance of Proceedings. In case the Collateral
Agent shall have instituted any proceeding to enforce any
right, power or remedy under this Security Agreement by
foreclosure, sale, entry or otherwise, and such proceeding
shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Collateral Agent,
then and in every such case, subject to the terms of any
judgment rendered in any such proceeding, the Grantor and the
Collateral Agent shall be returned to their former positions
and rights hereunder with respect to the Collateral subject to
the security interest created under this Security Agreement
and all rights, remedies and powers of the Collateral Agent
shall continue as if no such proceeding had been instituted.
l3. Notices. All notices, requests and demands to or upon
the respective parties hereto shall be effective as provided
in the Indenture.
14. The Collateral Agent's Duties. The powers conferred on
the Collateral Agent and the Secured Parties hereunder are
solely to protect its and the Secured Parties' interest in the
Collateral and shall not impose any duty on it or them to
exercise any such powers. The Collateral Agent shall have no
duty as to any Collateral (except to the extent expressly
provided in the first sentence of Section 9-207(11) of the
Code) or as to the taking of any necessary steps to preserve
rights against prior parties pertaining to any Collateral.
Neither the Collateral Agent nor any of its directors,
officers, employees or agents shall be liable for failure to
demand, collect or realize upon all or any part of the
Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon
the request of the Grantor or otherwise. When Collateral is
in the Collateral Agent's possession, the risk of accidental
loss or damage shall be on the Grantor.
15. Limitation on the Duty of Collateral Agent in Respect of
Collateral. The Collateral Agent shall be deemed to have
exercised reasonable care as to any Collateral in its
possession or control if such Collateral is accorded treatment
substantially equal to that which the Collateral Agent accords
its own property.
16. Severability. In case any provision in or obligation
under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or
of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.
l7. No Waiver, Remedies Cumulative. No failure or delay on
the part of the Collateral Agent or the Secured Parties in
exercising any right, power or privilege under this Agreement
and no course of dealing between the Grantor and the
Collateral Agent or any Secured Party shall operate as a
waiver thereof, nor shall any single or partial exercise of
any right, power or privilege under this Agreement preclude
any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder. The rights and
remedies herein expressly provided are cumulative and not
exclusive of any right or remedy which the Collateral Agent or
any Secured Party would otherwise have. No notice to or
demand on the Grantor in any case shall entitle the Grantor to
any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the
Collateral Agent or any Secured Party to any other or further
action in any circumstances without notice or demand. The
Collateral Agent or any Secured Party shall not by any act,
delay, omission or otherwise be deemed to have waived any of
its rights or remedies hereunder and no waiver shall be valid
unless in writing, signed by the Collateral Agent or Secured
Party as to which such waiver is to be enforced, and then only
to the extent therein set forth. A waiver by the Collateral
Agent of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which
the Collateral Agent would otherwise have or have had on any
other occasion.
18. Amendments, etc. No amendment or waiver of any provision
of this Agreement, nor any consent to any departure by the
Grantor herefrom, shall in any event be effective unless the
same shall be in writing and signed by the Collateral Agent
and the Grantor and, with respect to any such waiver or
consent, such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which
given.
l9. Successors and Assigns; Governing Law; Submission to
Jurisdiction.
(a) This Agreement and all obligations hereunder shall be
binding upon the successors and assigns of the Grantor and
shall inure, together with the rights and remedies of the
Collateral Agent hereunder, to the benefit of the Collateral
Agent and the Secured Parties and their respective successors
and assigns.
(b) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW (EXCEPT
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
(c) Any legal action or proceeding with respect to this
Agreement and any action for enforcement of any judgment in
respect thereof may be brought in the courts of the State of
New York or of the United States of America for the Southern
District of New York and, by execution and delivery of this
Agreement, the Grantor hereby accepts for itself and in
respect of its property, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts and
appellate courts from any appeal thereof. The Grantor
irrevocably consents to the service of process out of any of
the aforementioned courts in any such action or proceeding by
the mailing of copies thereof by registered or certified mail,
postage prepaid, to the Grantor at its address specified for
notices in the Indenture. The Grantor hereby irrevocably
waives any objection which it may now or hereafter have to the
laying of venue of any of the aforesaid actions or proceedings
arising out of or in connection with this Agreement brought in
the courts referred to above and hereby further irrevocably
waives and agrees not to plead or claim in any such court that
any such action or proceeding brought in any such court has
been brought in an inconvenient forum. Nothing herein shall
affect the right of the Collateral Agent to serve process in
any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Grantor in any
other jurisdiction.
20. Waiver. The Grantor hereby waives, to the extent
permitted by law, all rights of redemption, appraisement,
valuation, diligence, stay, extension, moratorium and all
right to have the Collateral marshaled upon any foreclosure
hereof, now or hereafter in force under any applicable law in
order to stay or delay the enforcement of this Security
Agreement, including the absolute sale of the Collateral or
any portion thereof, and the Grantor, for itself and all who
may claim under it, insofar as it or they now or hereafter
lawfully may, hereby waives the benefit of all such laws and
agrees that any court having jurisdiction to foreclose this
Agreement may order the sale of the Collateral as an entirety.
Without limiting the generality of the foregoing, the Grantor
hereby: (i) authorizes the Collateral Agent and the Secured
Parties, in their sole discretion and without notice to or
demand upon the Grantor and without otherwise affecting the
obligations of the Grantor hereunder or in respect of the
Obligations, from time to time to take and hold other
collateral (in addition to the Collateral) for payment of any
Obligations, or any part thereof, and to exchange, enforce or
release such other collateral or any part thereof and to
accept and hold any endorsement or guarantee of payment of the
Obligations or any part thereof and to release or substitute
any endorser or guarantor or any other person granting
security for or in any other way obligated upon any
Obligations or any part thereof, and (ii) waives and releases
any and all right to require the Collateral Agent or any
Secured Party to collect any of the Obligations from any
specific item or items of the Collateral or from any other
party liable as guarantor or in any other manner in respect of
any of the Obligations or from any collateral (other than the
Collateral) for any of the Obligations.
2l. Termination and Reinstatement.
(a) This Agreement shall terminate on the Debt Termination
Date. At the time of such termination or upon any release of
Collateral in accordance with the express provisions of this
Agreement (it being acknowledged by the Grantor that any such
release is permitted only to the extent any such disposition
of the Collateral is permitted under the terms and provisions
of this Agreement and all other Project Documents), the
Collateral Agent, at the request and expense of the Grantor,
will execute and deliver to the Grantor a proper instrument or
instruments acknowledging the satisfaction and termination of
this Agreement or, in the case of a release of a portion of
the Collateral, that such Collateral is to be released from
the Lien of this Agreement. In the case of the termination of
this Agreement as provided above, the Collateral Agent will
duly assign, transfer and deliver at the Grantor's expense to
the Grantor such of the Collateral as has not yet theretofore
been sold or otherwise applied or released pursuant to this
Agreement, together with any moneys at the time held by the
Collateral Agent pursuant to this Agreement.
(b) This Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time any amount
received by the Collateral Agent or any Secured Party in
respect of the Obligations is rescinded or must otherwise be
restored or returned by the Collateral Agent or such Secured
Party upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Grantor or upon the
appointment of any intervenor or conservator of, or receiver
or similar official for, the Grantor or any substantial part
of its assets, or otherwise, all as though such payments had
not been made.
(c) The security interest created hereunder shall be
automatically released with respect to any portion of the
Collateral that is sold, transferred or otherwise disposed of
in accordance with the terms of the Indenture and the
Collateral Agent will, upon the request and at the expense of
the Grantor, execute and deliver such documents as the Grantor
shall reasonably request to evidence such release.
22. Security Interest Absolute. All rights of the Collateral
Agent and security interests hereunder, and all obligations of
the Grantor hereunder, shall, subject to the terms of this
Agreement, be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Indenture,
any other Project Document or any other agreement or
instrument relating thereto;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations, or any
other amendment or waiver of or any consent to any departure
from the Indenture or any other Project Document;
(c) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or
consent to departure from any guaranty, for all or any of the
Obligations; or
(d) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Grantor, the
Partnership or a third party surety or pledgor.
23. Payments Set Aside. To the extent that the Grantor or
any other Person on behalf of the Grantor makes a payment or
payments to the Collateral Agent and/or any Secured Party, or
the Collateral Agent and/or any Secured Party enforce their
security interests or exercise their rights of set-off, and
such payment or payments or the proceeds of such enforcement
or set-off or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or
required to be repaid to a Collateral Agent, receiver or any
other party under any bankruptcy law, state or federal law,
common law or equitable cause, then to the extent of such
recovery, the Obligations or any part thereof originally
intended to be satisfied, and this Agreement and all Liens,
rights and remedies therefor, shall be revived and continued
in full force and effect as if such payment had not been made
or such enforcement or set-off had not occurred.
24. Waiver of Jury Trial. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EACH OF THE GRANTOR, THE COLLATERAL AGENT AND
EACH OF THE SECURED PARTIES HEREBY IRREVOCABLY WAIVES ALL
RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
25. Limitation of Liability. Notwithstanding anything to the
contrary contained herein, the liability and obligation of the
Grantor or any past, present or future partner, officer,
director or stockholder of the Grantor under or by reason of
this Agreement shall be limited as provided in Section 4.12 of
the Intercreditor Agreement and the provisions of said Section
4.12 are incorporated herein by reference.
26. Conflicts with the Intercreditor Agreement or the
Depositary Agreement. Notwithstanding any other provision
hereof, in the event of any conflict between the terms of this
Agreement and the Intercreditor Agreement or the Depositary
Agreement, the provisions of the Intercreditor Agreement or
the Depositary Agreement, as the case may be, will apply.
27. Exculpatory Provisions; Reliance by Collateral Agent.
(a) Neither the Collateral Agent nor any Secured Party, nor
any of their respective officers, employees, servants,
controlling persons, executives, directors, agents, authorized
representatives, attorneys-in-fact or affiliates, shall be
liable to the Grantor for any action taken or omitted to be
taken by it or them under or in connection with this Agreement
or any other Project Document to which the Grantor is a party,
or responsible in any manner to any Person for any recital,
statement, representation or warranty made by the Grantor or
any officer thereof contained in this Agreement or any other
Project Document to which the Grantor is a party or in any
certificate, report, statement or other document referred to
or provided for in, or received by the Collateral Agent or any
Secured Party under or in connection with, this Agreement or
any other Project Document to which the Grantor is a party or
for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other
Project Document to which the Grantor is a party or for any
failure of the Grantor to perform any of the Obligations.
Neither the Collateral Agent nor any Secured Party shall be
under any obligation to any Person 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
Project Document to which the Grantor is a party, or to
inspect the properties or records of the Grantor.
(b) The Collateral Agent shall be entitled to rely, and shall
be fully protected in relying, upon any note, 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 or Persons and upon advice and
statements of legal counsel (including, without limitation,
counsel to the Grantor), independent accountants and other
experts selected by the Collateral Agent. The Collateral
Agent shall have no obligation to any Person to act or refrain
from acting or exercising any of its rights under this
Agreement.
IN WITNESS WHEREOF, each of the Grantor and the Collateral
Agent has caused this Security Agreement to be executed by its
duly authorized officer as of the date first above written.
PANDA-ROSEMARY FUNDING CORPORATION,
a Delaware corporation
By
Name: Robert W. Carter
Title: Chairman of the Board,
President and Chief
Executive Officer
FLEET NATIONAL BANK,
as Collateral Agent
By
Name: Kathy A. Larimore
Title: Assistant Vice President
SCHEDULE A
UNIFORM COMMERCIAL CODE FILINGS
1. Halifax County, North Carolina.
2. Northampton County, North Carolina.
3. North Carolina Secretary of State.
4. Texas Secretary of State.
GENERAL PARTNER PLEDGE AND SECURITY AGREEMENT
This GENERAL PARTNER PLEDGE AND SECURITY AGREEMENT, dated July
31, 1996 (this "Agreement"), is made by PANDA - ROSEMARY CORPORATION, a
Delaware corporation (together with its successors and assigns, the
"Pledgor") and the sole general partner of Panda-Rosemary, L.P., a Delaware
limited partnership (together with its successors and assigns, the
"Partnership"), to FLEET NATIONAL BANK, a national banking association
established under the laws of the United States of America, as collateral
agent pursuant to Intercreditor Agreement (as defined below) (together with
its successors and assigns, the "Collateral Agent") and grantee hereunder
for the benefit of the Secured Parties (as defined in the Trust Indenture
referred to below).
W I T N E S S E T H:
WHEREAS, the Partnership is the legal and beneficial owner of all
of the shares of common stock issued by Panda-Rosemary Funding Corporation,
a Delaware corporation (the "Company");
WHEREAS, the Company, the Partnership and Fleet National Bank, as
trustee (the "Trustee"), are parties to that certain Trust Indenture, dated
as of July 31, 1996 (as the same may be amended, modified or supplemented,
the "Trust Indenture"), providing for the issuance by the Company of
certain debt securities (the "Bonds");
WHEREAS, the Partnership has made that certain Partnership
Guaranty, dated the date hereof (as the same may be amended, modified or
supplemented, the "Partnership Guaranty"), in favor of the Trustee to
guarantee the performance by the Company of its obligations under the Bonds
and the Trust Indenture;
WHEREAS, the Company and the Partnership are parties to that
certain Loan Agreement, dated as of the date hereof (as the same may be
amended, modified or supplemented, the "Company Loan Agreement"), pursuant
to which the Company has loaned the proceeds of the Bonds to the
Partnership;
WHEREAS, the Company and the Collateral Agent are parties to that
certain Security Agreement, dated the date hereof, pursuant to which the
Company has assigned to the Collateral Agent, and created a security
interest in, all of its right, title and interest in, to and under the
Company Loan Agreement and the related promissory note;
WHEREAS, in order to satisfy certain requirements of the
Partnership under the Project Agreements (as defined in the Trust
Indenture) or for other purposes, the Partnership may incur indebtedness as
permitted under the Trust Indenture in connection with the issuance of
letters of credit by Bayerische Vereinsbank AG or other Credit Banks (as
defined in the Trust Indenture) pursuant to a Credit Bank Reimbursement
Agreement (as defined in the Trust
Indenture);
WHEREAS, the Partnership may incur indebtedness as permitted
under the Trust Indenture in the form of working capital loans made by
the Credit Banks under a Credit Bank Working Capital Agreement (as defined
in the Trust Indenture);
WHEREAS, the Partnership may also incur additional debt, as
permitted under the Trust Indenture, either directly or indirectly through
the Company, to finance certain modifications and enhancements to the
Project in the future ("Additional Permitted Debt", as that term is defined
in the Trust Indenture) and may enter into interest rate protection
agreements in connection with the Additional Permitted Debt of the
Partnership;
WHEREAS, the Pledgor will receive direct and indirect financial and
other benefits from the issuance of the Bonds by the Company pursuant to
the Trust Indenture and the incurrence of any indebtedness pursuant to any
Credit Bank Reimbursement Agreement, any Credit Bank Working Capital
Agreement and the documents relating to any Additional Permitted Debt or
interest rate protection transactions; and
WHEREAS, the Funding Company, the Partnership, Bayerische Vereinsbank
AG, the Trustee, Fleet National Bank, as depository agent, and the
Collateral Agent are parties to that certain Collateral Agency and
Intercreditor Agreement, dated as of the date hereof (the "Intercreditor
Agreement"), providing for the Collateral Agent to act as collateral agent
for the Secured Parties (as defined in the Trust Indenture); and
WHEREAS, the Collateral Agent and the Secured Parties are willing to
enter into the transactions contemplated by, among other things, the Trust
Indenture and the Credit Bank Documents (as defined in the Trust Indenture)
only upon the condition, among others, that the Pledgor executes and
delivers this Agreement, in favor of the Collateral Agent for the benefit
of the Secured Parties, which grants to the Collateral Agent for the
benefit of the Secured Parties a security interest in the Collateral
referred to below, to secure the Obligations (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Defined Terms. Unless otherwise defined
herein, terms defined in the Intercreditor Agreement (including terms
defined in the Trust Indenture and incorporated in the Intercreditor
Agreement) shall have such defined meanings when used herein.
"Additional Pledged Interests" shall mean (i) all interests of
certificates representing a distribution in connection with any
reclassification, increase or reduction of capital of the Partnership or
issued in connection with any reorganization of the Partnership, whether as
an addition to, in substitution or redemption of or in exchange for, any
other Collateral or otherwise, (ii) any sums paid upon or in respect of the
Collateral as distributions upon the liquidation or dissolution of the
Partnership and (iii) any distribution of capital made on or in respect of
the Collateral or any property distributed upon or with respect to the
Collateral pursuant to the recapitalization or reclassification of the
capital of the Partnership or pursuant to the reorganization thereof.
"Collateral" shall have the meaning ascribed thereto in Section 2.
"Control Notice" shall have the meaning ascribed thereto in Section
6(c).
"Indemnitee" shall have the meaning ascribed thereto in Section 21.
"Obligations" means (i) all obligations of the Pledgor under this
Agreement or the Collateral Documents, (ii) all obligations of the
Partnership or the Company to the Collateral Agent, the Depositary Agent or
the Secured Parties now or hereafter existing under the Bonds, the Trust
Indenture, each Partnership Guarantee, the Partnership Notes, any Additional
Permitted Debt, any Credit Bank Working Capital Agreement, any Credit Bank
Reimbursement Agreement, any Interest Rate Protection Agreement, this
Agreement or the Collateral Documents, whether for principal, interest
(including, without limitation, interest accruing following the filing by
or against the Partnership or the Company of a bankruptcy petition, whether
or not allowed as a claim in a bankruptcy proceeding), fees,
indemnification, expenses or otherwise, and (iii) all other liabilities,
obligations, covenants and duties owing to the Collateral Agent, the
Depositary Agent or the Secured Parties, from or by the Pledgor, the
Partnership or the Company of any kind or nature, present or future,
whether or not evidenced by any note, guaranty or other instrument, arising
under or in the connection with the Trust Indenture, each Partnership
Guarantee, the Partnership Notes, any Additional Permitted Debt, any Credit
Bank Working Capital Agreement, any Credit Bank Reimbursement Agreement,
any Interest Rate Protection Agreement, this Agreement or the Collateral
Documents, whether or not for the payment of money, whether direct or
indirect (including those acquired by assignment), joint or several,
absolute or contingent, liquidated or unliquidated, due or to become due,
now existing or hereafter arising, renewed or restructured, whether or not
from time to time decreased or extinguished and later increased, created or
incurred, and including, without limitation, all indebtedness of the
Pledgor, the Partnership or the Company under any instrument now or
hereafter evidencing or securing any of the foregoing and however acquired.
"Prime Rate" means, as of any day, the interest rate per annum
established by the Collateral Agent from time to time as its "Prime Rate".
SECTION 2. Pledge. As security for the Obligations and subject to
and in accordance with the provisions of this Agreement, including without
limitation Section 6 hereof, the Pledgor hereby pledges, grants, assigns,
hypothecates, transfers and delivers to the Collateral Agent, for its
benefit and the benefit of the Secured Parties, a first priority security
interest in the following whether now owned or existing or hereafter
acquired or arising and wherever located (the "Collateral"):
(a) all of the Pledgor's general partnership interests in the
Partnership and all of the Pledgor's rights, privileges, authority and
powers as general partner of the Partnership under the Partnership
Agreement (including without limitation, all of the Pledgor's rights,
privileges, authority and powers as managing general partner of the
Partnership to manage the business and affairs of the Partnership), but
excluding all rights of the Pledgor to (i)Indemnification from (x) the
Partnership for any claims, liabilities, damages, losses, costs or other
amounts incurred in connection with the performance of its responsibilities
as the managing general partner of the Partnership or otherwise as the sole
general partner of the Partnership, or (y) any Partner pursuant to the
provisions of the Partnership Agreement in respect of any claim thereunder,
or (ii) any liability insurance maintained by the Pledgor or any Person for
the benefit of the Pledgor; provided, that the foregoing exclusion shall
not exclude the Collateral Agent (or a Person designated by the Collateral
Agent to exercise the remedies provided herein) from the benefits of such
indemnification and liability insurance upon the exercise of any the
remedies provided herein;
(b) subject to Section 6(b), all monies and property representing a
distribution in respect of the property described in the preceding clause
(a), including, without limitation, (i) all income, cash flow, revenues,
issues, profits, losses, distributions, payments, proceeds and other
property of every kind and variety due, accruing or owing to, or to be
turned over to, or disbursed to the Pledgor by the Partnership in
connection with, the Pledgor's general partnership interests therein, and
(ii) all Additional Pledged Interests;
(c) all of the Pledgor's right, title and interest to the
Governmental Approvals; provided, that any Governmental Approval which by
its terms or by operation of law would become void, voidable, terminable or
revocable if mortgaged, pledged or assigned hereunder or if a security
interest therein were granted hereunder is expressly excepted and excluded
from the Lien and the terms of this Agreement to the extent necessary so as
to avoid such voidness, voidability, terminability or revocability;
(d) the Pledgor's interest under any agreement, now or hereafter in
effect, with any other Partner in the Partnership providing for the right
of the Pledgor to acquire or exercise the partnership interest in the
Partnership now or hereafter owned or held by any such other Partner in the
Partnership;
(e) any other claim which the Pledgor now has or may in the future
acquire in the Pledgor's capacity as a general partner of the Partnership
against the Partnership and its property; and
(f) all proceeds, products and accessions of and to any of the
property described in the preceding clauses (a), (b), (c), (d) and (e).
SECTION 3. Security for Obligations.
(a) This Agreement secures, and the Collateral is collateral security
for, the payment and performance in full when due, whether at stated
maturity, by acceleration or otherwise (including the payment of amounts
which would become due but for the operation of the automatic stay under
Section 362(a) of the Bankruptcy Code, 11 U.S.C. E362(a)), of all
Obligations now or hereafter existing.
(b) This Agreement and the grant of the security interest contained
herein is for collateral purposes only and neither the Collateral Agent nor
any Secured Party shall, by virtue of this Agreement, their receipt of
distributions from the Partnership or their exercise of any right
hereunder, be deemed to (i) have acquired any interest in or responsibility
for the Pledgor's obligations contained in the Partnership Agreement, (ii)
be liable for any contribution to the Partnership under the Partnership
Agreement or the applicable limited partnership act or (iii) have any other
liability for the debts, obligations or liabilities of the Partnership or
the Pledgor, except in the event of foreclosure upon the Collateral (and
only to the extent of such foreclosure on the particular Collateral).
SECTION 4. Representations and Warranties. On and as of the date
hereof, the Pledgor represents and warrants to the Collateral Agent and the
Secured Parties as follows:
(a) The Pledgor is the owner of, and has good and marketable title
to, the general partnership interest and the other Collateral pledged
pursuant to this Agreement, free and clear of any Lien except for the
pledge and security interest granted to the Collateral Agent for the
benefit of the Secured Parties hereunder and Liens for Taxes not yet due or
which are subject to a Good Faith Contest. No financing statement covering
the Collateral is on file in any public office other than terminated
financing statements and the financing statements filed pursuant to this
Agreement or in connection with the transactions contemplated by the Trust
Indenture. The Collateral is not subject to any law (except as may be
required in connection with any disposition of the Collateral by laws
affecting the offering and sale of securities generally) or contractual
obligation that would be violated by or that would prohibit the grant of
the security interest in the Collateral granted pursuant hereto or the
disposition of the Collateral by or to the Collateral Agent upon the
occurrence and continuance of an Event of Default or a Trigger Event.
(b) The Pledgor is a corporation duly organized and validly existing
under the laws of the State of Delaware and is qualified to own property
and transact business in the State of North Carolina, the State of Texas
and in every other jurisdiction where the ownership of its property and the
nature of its business as currently conducted and as contemplated to be
conducted under each Project Document to which the Pledgor or the
Partnership is a party requires it to be qualified.
(c) The Pledgor has full power, authority and legal right to enter
into this Agreement and each other Project Document to which it is a party
and to perform its obligations hereunder and thereunder and to pledge all
of the Collateral pursuant to this Agreement. The pledge of the Collateral
pursuant to this Agreement has been duly authorized by the Pledgor. This
Agreement and each other Project Document to which the Pledgor is a party
have been duly authorized, executed and delivered by the Pledgor and
constitute legal, valid and binding obligations of the
Pledgor enforceable against the Pledgor in accordance with their terms
except as enforceability may be limited by applicable bankruptcy,
insolvency, moratorium or other similar laws affecting creditors' rights
generally and except as enforceability may be limited by general principles
of equity (whether considered in a suit at law or in equity).
(d) No consent of any other party (including, without limitation,
stockholders or creditors of the Pledgor) and no Governmental Approval is
required which has not been obtained (i)for the execution, delivery and
performance by the Pledgor of this Agreement and each other Project
Document to which the Pledgor is a party, (ii)for the pledge by the Pledgor
of the Collateral pursuant to this Agreement or (iii)for the exercise by
the Collateral Agent of the rights provided for in this Agreement or the
remedies in respect of the Collateral pursuant to this Agreement (except as
may be required (x) in connection with any disposition of all or any part
of the Collateral under any laws affecting the offering and sale of
securities generally, (y)under federal and state laws, rules and
regulations and applicable interpretations thereof providing for the
supervision or regulation of the banking or trust businesses generally and
applicable to the Collateral Agent or any Secured Party and (z)with respect
to the Collateral Agent or any Secured Party as a result of any
relationship which such Person may have with Persons not parties to, or any
activity or business such Person may conduct other than pursuant to, any of
the Financing Documents).
(e) The execution and delivery of this Agreement concurrently with
the filing of Form UCC-1 financing statements with the Secretary of State
of the State of Texas, the Secretary of State of the State of Delaware, the
Secretary of State of the State of North Carolina, the appropriate officer
of Halifax County, North Carolina, and the appropriate officer of
Northampton County, North Carolina create a valid and perfected first
priority security interest in the Collateral securing the payment of the
Obligations subject to no Liens other than those created by this Agreement.
(f) The Pledgor is the sole general partner of the Partnership. The
Pledgor is not engaged in any transaction or activity unrelated to the
management, financing, operation and/or maintenance of the Partnership and
the Project.
(g) The execution, delivery and performance of this Agreement and
each other Project Document to which the Pledgor is a party will not (i)
require any consent or approval of the Board of Directors or stockholders
of the Pledgor which has not been obtained; (ii) violate the provisions of
the Pledgor's Certificate of Incorporation or By-Laws; (iii) violate the
provisions of any law (including, without limitation, any usury law),
regulation or order of any Governmental Authority applicable to the Pledgor
or the Partnership; (iv) conflict with result in a breach of or constitute
a default under the Partnership Agreement or any other material agreement
relating to the management or affairs of the Pledgor or the Partnership, or
any indenture or loan or credit agreement or any other material agreement,
lease or instrument to which the Pledgor or the Partnership is a party or
by which the Pledgor or the Partnership or any of their material properties
may be bound (which default or breach has not been permanently waived by
the other party to such document); or (v) result in or create any Lien
(other than Permitted Liens) under, or require any consent which has not
been obtained under, any indenture or loan or credit agreement or any other
material agreement, instrument or document, or the provisions of any order,
writ, judgment, injunction, decree, determination or award of any
Governmental Authority binding upon the Pledgor or the Partnership or any
of their properties.
(h) There is no action, suit or proceeding at law or in equity or by
or before any Governmental Authority, arbitral tribunal or other body now
pending or, to the best knowledge of the Pledgor, threatened against the
Pledgor or the Partnership which questions the validity or legality of or
seeks damages in connection with this Agreement or any other Project
Document to which the Pledgor or the Partnership is a party or which could
reasonably be expected to have a material adverse effect on the Pledgor or
the Partnership, other than those actions, suits or proceedings which have
been previously disclosed in the Offering Circular, dated July 26, 1996,
relating to the Initial Bonds.
(i) Each of the financial statements of the Pledgor for its most
recently ended fiscal year and quarter has been heretofore furnished to the
Collateral Agent and each of such financial statements is complete and
correct in all material respects and fairly presents the financial
condition of the Pledgor as at said dates in conformity with GAAP applied
on a consistent basis.
(j) The chief executive office of the Pledgor is located at 4100
Spring Valley Road, Suite 1001, Dallas, Texas 75244.
(k) All contributions currently required to be paid to the
Partnership by the Pledgor have been paid.
(l) The copy of the Partnership Agreement delivered to the Collateral
Agent on the date hereof is a true, complete and correct copy of the
Partnership Agreement.
(m) The Pledgor has not changed its name or done business under any
other name within the last five years.
(n) The Pledgor is not (i) an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or (ii) a "holding company" or
a "subsidiary company" of a "holding company" or an "affiliate" of a
"holding company" or a "subsidiary company" within the meaning of PUHCA or
(iii) a "registered holding company" or a "subsidiary company" of a
"registered holding company" or an "affiliate" of a "registered holding
company" or a "subsidiary company" of a "registered holding company" within
the meaning of PUHCA.
(o) The Pledgor has derived and will continue to derive direct and
indirect benefits from the incurrence of its obligations under this
Agreement and from the incurrence by the Partnership of its obligations
under the Partnership Guaranty, the Trust Indenture, the Company Loan
Agreement and the other Financing Documents.
SECTION 5. Supplements; Further Assurances.
(a) The Pledgor agrees that, at any time and from time to time, the
Pledgor will at its expense promptly execute and deliver all further
instruments and documents, and take all further action, that may be
necessary or desirable, or that the Collateral Agent may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Collateral Agent to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral.
(b) All Additional Pledged Interests shall be pledged and, to the
extent such Additional Pledged Interests constitute certificates,
instruments or monies, delivered to the Collateral Agent to be held by it
as additional collateral security for the prompt and complete payment and
performance when due of the Obligations. All Additional Pledged Interests
which are received by the Pledgor shall, until pledged, paid or delivered
to the Collateral Agent, be held by the Pledgor in trust for the benefit of
the Collateral Agent and shall be segregated from the other funds and
property of the Pledgor and the Pledgor agrees to pledge and deliver the
same forthwith to the Collateral Agent in the exact form received (if
applicable), with the endorsement of the Pledgor when necessary and/or
appropriate undated stock powers duly executed in blank, to be held by the
Collateral Agent subject to the terms hereof.
SECTION 6. Rights of Pledgor; Etc.
(a) Generally. The Pledgor shall be entitled to exercise any and all
rights pertaining to the Collateral or any part thereof (including, without
limitation, the right to manage and direct the affairs of the Partnership
and the right to receive distributions in respect of its partnership
interests) so long as (i) no Event of Default or Trigger Event shall have
occurred and be continuing and no Control Notice (as defined in Section
6(c) below) shall have been delivered to it and (ii) the exercise of such
rights would not otherwise result in an Event of Default or Trigger Event.
(b) Distributions. Unless an Event of Default or Trigger Event shall
have occurred and be continuing, the Pledgor shall be entitled to receive,
retain and distribute any and all distributions paid in respect of the
Collateral in compliance with the terms of the Intercreditor Agreement;
provided, that any and all
(i) distributions paid or payable in respect of any Collateral
(whether paid in cash, securities or other property) in connection with a
partial or total liquidation or dissolution of the Partnership (other than
in connection with any deemed liquidation on account of a termination of
the Partnership under Section 708(b)(1)(B) of the Code), and
(ii) distributions of all property (whether cash, securities or
other property) paid, payable or otherwise distributed in redemption of, or
in exchange for, the property described in Section 2(a) above, shall be,
and shall be forthwith delivered to the Collateral Agent to hold as,
Collateral and shall, if received by the Pledgor, be received in trust for
the benefit of the Collateral Agent, be segregated from the other property
or funds of the Pledgor and be forthwith delivered to the Collateral Agent
as Collateral in the same form as so received (with any necessary
endorsement). Upon the occurrence and during the continuance of an Event
of Default or Trigger Event, all rights of the Pledgor to receive the
distributions which it would otherwise be authorized to receive and retain
pursuant to the preceding sentence shall cease and all such rights shall
thereupon become vested in the Collateral Agent which shall thereupon have
the sole right to receive and hold as Collateral such distributions;
provided, that if and when an Event of Default or Trigger Event is cured in
accordance with the applicable provisions of the Financing Documents, all
rights of the Pledgor shall be restored and the Collateral Agent shall
promptly turn over to the Pledgor all distributions so received during the
period of the continuance of the applicable Event of Default or Trigger
Event(less the amount thereof applied by the Collateral Agent in accordance
with Section 12(c) below).
(c) Management Rights. Upon the occurrence and during the
continuance of an Event of Default or a Trigger Event, after the Collateral
Agent delivers a notice to the Pledgor indicating its determination to
assume control of the business and affairs of the Partnership (the "Control
Notice"), all rights of the Pledgor to manage and direct the affairs of the
Partnership which it would otherwise be entitled to exercise pursuant to
Section 6(a) above shall cease and all such rights shall thereupon become
vested in the Collateral Agent which shall thereupon have the sole right
(subject to the provisions of the Partnership Agreement and applicable law)
to manage and direct the affairs of the Partnership; provided, that if
after the delivery of the Control Notice the Event of Default or a Trigger
Event giving rise thereto is cured in accordance with the applicable
provisions of the Financing Documents, all rights of the Pledgor shall be
restored.
SECTION 7. Covenants.
(a) Without the prior written consent of the Collateral Agent, or as
otherwise permitted under the Intercreditor Agreement, the Pledgor shall
not (i) vote to enable, or take any other action to permit, the Partnership
(x) to issue any additional general partnership interests of any nature,
(y) to issue any other securities convertible into or exchangeable for any
general partnership interests of the Partnership, or (z) to issue any other
securities that grant the right to purchase any partnership interests of
the Partnership, (ii) sell, assign, transfer, exchange or otherwise dispose
of, or grant any option with respect to, the Collateral or (iii) create,
incur or permit to exist any Liens or options in favor of, or any claims of
any Person with respect to, any of the Collateral or any interest therein,
except for Permitted Liens and the Liens provided for by this Agreement;
provided, that, subject to Section 7(i) hereof, the issuance, transfer,
conversion or sale of any of the Collateral may occur notwithstanding the
foregoing if such issuance, transfer, conversion or sale would not result
in an Event of Default or Trigger Event (such issuance, transfer,
conversion or sale being herein referred to as a "Permitted Transfer") and
(x) the purchaser or transferee of such Collateral (including, without
limitation, any Partner of the Partnership to whom the partnership
interests of the Pledgor are transferred following the withdrawal of
the Pledgor as a Partner of the Partnership) shall pledge such Collateral
pursuant to a pledge agreement substantially similar hereto and take
such additional actions as the Collateral Agent may reasonably
request in connection therewith (including, without limitation,
executing and delivering such agreements, certificates, legal opinions,
instruments or other documents as may be reasonably requested by the
Collateral Agent), (y) no Default or Event of Default or Trigger Event
would result therefrom and (z) none of the representations and warranties
set forth in the Trust Indenture shall be untrue or incorrect in any
material respect solely as a result of the occurrence of a Permitted
Transfer.
(b) The Pledgor agrees that it will pledge hereunder,
immediately upon its acquisition (directly or indirectly) thereof,
any and all additional general partnership interests issued to it
by the Partnership.
(c) The Pledgor shall preserve and maintain its legal existence as a
corporation in good standing under the laws of the State of Delaware and
(ii)its qualification to do business in the State of Texas and the State of
North Carolina and in every other jurisdiction where the ownership of its
property and the nature of its business require it to be so qualified.
(d) The Pledgor shall obtain, maintain and comply with all
Governmental Approvals as shall now or hereafter be necessary under
applicable law, rule or regulation, in each case in connection with the
making and performance by the Pledgor of any material provision of the
Project Documents to which it is a party. The Pledgor shall comply in all
material respects with all applicable laws with respect to which
noncompliance could reasonably be expected to have a material adverse
affect on the Collateral or the Pledgor's ability to perform its
obligations under any Project Document.
(e) The Pledgor shall pay and discharge all taxes, assessments and
governmental charges or levies imposed on it or on its income or profits or
on any of its property prior to the date on which penalties attach thereto
and all lawful claims which, if unpaid, could reasonably be expected to
become a Lien (other than Permitted Liens) upon the Collateral. The
Pledgor shall have the right, however, to contest in good faith the
validity or amount of any such tax, assessment, charge, levy or claim by
proper proceedings timely instituted, and may permit the taxes,
assessments, charges, levies or claim so contested to remain unpaid during
the period of such contest if (i)the Pledgor diligently prosecutes such
contest, (ii)the Pledgor sets aside on its books adequate reserves in
accordance with GAAP plus an amount equal to 50% of the difference between
the amount being contested and the amount required to be reserved by GAAP
and (iii)during the period of such contest the enforcement of any contested
item is effectively stayed. The Pledgor will promptly pay or cause to be
paid any valid, final judgment enforcing any such tax, assessment, charge,
levy or claim and cause the same to be satisfied of record.
(f) The Pledgor shall furnish to the Collateral Agent the following
documents:
(i) unaudited financial statements of the Pledgor within one
hundred twenty (120) days of the close of each fiscal year of the Pledgor;
and
(ii) from time to time, such further information (whether or
not of the kind mentioned above) regarding the business, affairs,
operations and financial condition of the Pledgor as the Collateral Agent
may reasonably request.
(g) The Pledgor shall keep proper books of record and account in
which full, true and correct entries in accordance with GAAP are made and
permit representatives of the Collateral Agent, upon the giving of
reasonable notice, to visit and inspect its properties, to examine its
books of record and account and to discuss its affairs, finances and
accounts with its principal officers, engineers and independent
accountants, all at such reasonable times during business hours and at such
intervals as the Collateral Agent may desire.
(h) The Pledgor shall perform and observe all of its covenants and
agreements contained in any of the Project Documents to which it is a
party.
(i) The Pledgor shall remain a general partner of the Partnership and
shall not withdraw from the Partnership.
(j) The Pledgor shall not (i)Emerge or consolidate with or into any
other Person, (ii)sell, lease, transfer or otherwise dispose of all or
substantially all of its assets, (iii)create, acquire or operate any
Subsidiary (other than the Partnership and the Company), (iv)be a partner
in any partnership or a participant in any cost sharing arrangement or
joint venture except for the Partnership, (v) directly or indirectly
purchase or acquire any stock, obligations or securities of, or any other
interests in any Person other than the Partnership and Permitted
Investments, (vi) create or become or be liable with respect to any
Guaranty, other than a Guaranty of the Partnership permitted under Section
6.18 of the Trust Indenture for which the Pledgor may become liable as a
general partner of the Partnership or (vii) lend money or credit or make
advances or any capital contribution to any Person other than contributions
to the Partnership.
(k) The Pledgor shall not create, incur, assume or suffer to exist
any Debt other than up to Two Hundred Fifty Thousand Dollars ($250,000)
aggregate principal amount of Debt outstanding at any time and other than
Debt of the Partnership permitted by Section 6.16 of the Trust Indenture
and on which the Pledgor is liable solely by virtue of being a general
partner of the Partnership.
(l) The Pledgor shall not engage in any business other than (i)
holding a general partnership interest in the Partnership and (ii) managing
and directing the affairs of the Partnership as the general partner of the
Partnership.
(m) The Pledgor shall not, without the prior written consent of the
Trustee, agree to or permit (i) the cancellation or termination of the
Partnership Agreement, except upon the expiration of the stated term
thereof, or (ii)any amendment, supplement, modification or waiver with
respect to any of the provisions of the Partnership Agreement if such
amendment, supplement, modification or waiver would have a material adverse
effect on the value of the Collateral, on the rights of the Collateral
Agent or Secured Parties or on the financial condition of the Partnership.
(n) The Pledgor shall not enter into or carry out any transaction
with any Affiliate on a basis less favorable than the Pledgor would obtain
in a comparable arm's-length transaction unless such transaction has been
approved by the Collateral Agent in writing, except that the Pledgor may
carry out transactions with the Partnership on terms less favorable to the
Pledgor than arm's-length terms.
(o) The Pledgor shall not establish a new
location for its chief executive office or change its name until (i) it has
given to the Collateral Agent no less than sixty (60) days' prior written
notice of its intention so to do, clearly describing such new location or
specifying such new name, as the case may be, and (ii)with respect to such
new location or such new name, as the case may be, it shall have taken all
action, satisfactory to the Collateral Agent, to maintain the security
interest of the Collateral Agent in the Collateral intended to be granted
hereby at all times fully perfected and in full force and effect.
(p) The Pledgor shall pay or cause to be paid, and shall hold the
Collateral Agent and the Secured Parties harmless from, any and all
liabilities with respect to, or resulting from any delay in paying, any and
all stamp, excise, sales or other taxes which may be payable or determined
to be payable with respect to any of the Collateral.
(q) Except as permitted under Section 7(a) hereof, the Pledgor shall
cause the Partnership not to issue any partnership interests or other
securities in addition to or in substitution for the Collateral or any
warrants, options or other rights to acquire its partnership interests or
other Collateral to any Person other than the Pledgor.
SECTION 8. Collateral Agent Appointed Attorney-In-Fact.
(a) Upon the occurrence and during the continuance of an Event of
Default or a Trigger Event, subject to the Pledgor's rights under Section 6
hereof, the Pledgor hereby appoints the Collateral Agent as the Pledgor's
attorney-in-fact, with full authority in the place and stead of the Pledgor
and in the name of the Pledgor or otherwise (i) to exercise all voting,
consent, managerial and other rights related to the Collateral, including,
without limitation, any right to manage the operations and the business and
affairs of the Partnership and any right to dispose of or sell all or any
part of the assets of the Partnership, (ii) to execute and deliver, at any
time and from time to time, any instrument or instruments providing for the
approval of the identity and admission to the Partnership of any person or
entity who becomes a substituted or additional partner in the Partnership
pursuant to the exercise by the Collateral Agent of its rights and remedies
hereunder, under the Trust Indenture or any of the other Project Documents
and (iii), from time to time in the Collateral Agent's discretion, to take
any action and to execute any instrument which the Collateral Agent may
deem necessary or advisable to enforce its rights under this Agreement,
including, without limitation, authority to receive, endorse and collect
all instruments made payable to the Pledgor representing any distribution,
interest payment or other payment in respect of the Collateral or any part
thereof and to give full discharge for the same. The Pledgor hereby
ratifies all that such attorney shall lawfully do or cause to be done by
virtue hereof. This power of attorney is coupled with an interest and
shall be irrevocable for the term of this Agreement. Nevertheless, the
Pledgor shall, if so requested by the Collateral Agent, ratify and confirm
all that the Collateral Agent shall lawfully do or cause to be done by
virtue hereof as the Pledgor's attorney-in-fact by executing and delivering
to the Collateral Agent, or to such other Person as the Collateral Agent
shall direct, all documents and instruments as may be necessary or, in the
judgment of the Collateral Agent, advisable for such purpose.
(b) The Pledgor further authorizes the Collateral Agent, at any time
and from time to time, (i) to execute, in connection with any sale provided
for hereunder, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral and (ii) to the full
extent permitted by applicable law, to file one or more financing or
continuation statements, and amendments thereto, relative to all or any
part of the Collateral without the signature of the Pledgor.
SECTION 9. Collateral Agent May Perform. If the Pledgor fails to
perform any agreement contained herein after receipt of a written request
to do so from the Collateral Agent, the Collateral Agent may itself
perform, or cause performance of, such agreement, and the reasonable
expenses of the Collateral Agent, including the reasonable fees and
expenses of its counsel, incurred in connection therewith shall be payable
by the Pledgor pursuant to Section 14 hereof.
SECTION 10. Reasonable Care. The Collateral Agent shall be deemed to
have exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equivalent to that which the Collateral Agent accords its own
property of the type of which the Collateral consists, it being understood
that subject to the exercise of such reasonable care the Collateral Agent
shall have no responsibility for (i) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not the Collateral Agent has
or is deemed to have knowledge of such matters or (ii)taking any necessary
steps to preserve rights against
any parties with respect to any Collateral.
SECTION 11. No Liability.
(a) Until such time as the Collateral Agent shall deliver a Control
Notice pursuant to Section 6(c) above, none of the Collateral Agent or the
Secured Parties or any of their directors, officers, employees or agents
shall be deemed to have assumed any of the liabilities or obligations of a
partner of the Partnership as a result of the pledge and security interest
granted under or pursuant to this Agreement. None of the Collateral Agent
or the Secured Parties or any of their directors, officers, employees or
agents shall be liable for any failure to collect or realize upon the
Obligations or any collateral security or guarantee therefor, or any part
thereof, or for any delay in so doing, nor shall any of them be under any
obligation to take any action whatsoever with regard thereto.
(b) Anything herein to the contrary notwithstanding, the Pledgor
shall remain liable under the Partnership Agreement and any other Project
Document to which it is a party to the extent set forth therein to perform
all of its duties and obligations thereunder to the same extent as if this
Agreement had not been executed. The exercise by the Collateral Agent of
any of the rights or remedies hereunder shall not release the Pledgor from
any of its duties or obligations under the Partnership Agreement or any
other Project Document to which it is a party.
SECTION 12. Remedies Upon Default. If an Event of Default or a
Trigger Event shall have occurred and be continuing:
(a) The Collateral Agent may (i) as provided in and in accordance
with the terms of the Partnership Agreement and applicable law, become a
substitute or additional general partner in the Partnership or designate
another Person to become such substitute or additional general partner,
(ii)manage the business and affairs of the Partnership as provided in
Section 6(c), (iii)exercise the power of attorney described in Section 8,
(iv) grant an option or options to purchase all or any part of the
Collateral and/or (v) exercise any other right or remedy available
hereunder, at law or in equity.
(b) (i) The Collateral Agent may exercise in respect of the
Collateral, in addition to all other rights and remedies provided for
herein or otherwise available to it, all of the rights and remedies of a
secured party on default under the Uniform Commercial Code then in effect
in the State of New York, or unless prohibited by applicable law, the
Uniform Commercial Code then in effect in any other applicable
jurisdiction, and the Collateral Agent may also in its sole discretion,
without advertisement or notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private
sale or at any of the Collateral Agent's offices or elsewhere, for cash, on
credit or for future delivery, and at such price or prices and upon such
other terms as the Collateral Agent may reasonably deem commercially
reasonable, irrespective of the impact of any such sales on the market
price of the Collateral at any such sale. The Collateral Agent may, in
its sole discretion, at any such sale, restrict the prospective bidders or
purchasers as to their number, nature of business and investment intention.
Upon any such sale the Collateral Agent shall have the right to deliver,
assign and transfer to the purchaser thereof (including the Collateral
Agent or any Secured Party) the Collateral. Each purchaser at any such
sale shall hold the property sold free from any claim or right on the part
of the Pledgor and the Pledgor hereby waives (to the extent permitted by
law) all rights of redemption, stay and/or appraisal which it now has or
may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. The Pledgor agrees that, to the extent
notice of sale shall be required bylaw, at least ten (10) days' notice to
the Pledgor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable
notification. The Collateral Agent shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given. The
Collateral Agent may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. At any such sale, the Collateral may be sold in one lot, as an
entirety or in separate units. Assuming that such sales are made in
compliance with federal and state securities laws, the Collateral Agent
shall incur no liability as a result of the sale of the Collateral, or any
part thereof, at any public or private sale. The Pledgor hereby waives any
claims against the Collateral Agent arising by reason of the fact that the
price at which any Collateral may have been sold at such a private sale, if
commercially reasonable, was less than the price which might have been
obtained at a public sale, even if the Collateral Agent accepts the first
offer received and does not offer such Collateral to more than one offeree.
(ii) The Pledgor recognizes that the Collateral Agent may elect
in its sole discretion to sell all or a part of the Collateral to one or
more purchasers in privately negotiated transactions in which the
purchasers will be obligated to agree, among other things, to acquire the
Collateral for their own account, for investment and not with a view to the
distribution or resale thereof. The Pledgor acknowledges that any such
private sales may be at prices and on terms less favorable than those
obtainable through a public sale (including, without limitation, a public
offering made pursuant to a registration statement under the Securities Act
of 1933, as amended (the "Securities Act")) and the Pledgor and the
Collateral Agent agree that such private sales shall be made in a
commercially reasonable manner and that the Collateral Agent has no
obligation to engage in public sales and no obligation to delay sale of any
Collateral to permit the issuer thereof to register the Collateral for a
form of public sale requiring registration under the Securities Act.
(iii) In case of any sale of all or any part of the Collateral
on credit or for future delivery, the Collateral so sold may be retained by
the Collateral Agent until the full selling price is paid by the purchaser
thereof, but the Collateral Agent shall not incur any liability in case of
the failure of such purchaser to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may again be sold
pursuant to the provisions hereof.
(iv) The receipt by the Collateral Agent of the purchase money
paid at any such sale made by it shall be a sufficient discharge of all
obligations of the purchaser thereof. No purchaser (or the representatives
or assigns of any purchaser), after paying such purchase money and
receiving such receipt, shall be bound to see to the application of such
purchase money or any part thereof or in any manner whatsoever be
answerable for any loss, misapplication or nonapplication of any such
purchase money, or any part thereof, or be bound to inquire as to the
authorization, necessity, expediency or regularity of any such sale.
(v) Instead of exercising the power of sale provided in Section
12b(i) hereof, the Collateral Agent may proceed by a suit or suits at law
or in equity to foreclose the security interest under this Agreement and
sell the Collateral or any portion thereof under a judgment or decree of a
court or courts of competent jurisdiction.
(vi) No sale or other disposition of all or any part of the
Collateral by the Collateral Agent pursuant to this Section 12 shall be
deemed to relieve the Partnership, the Company or the Pledgor of any
Obligation except to the extent the proceeds thereof are applied by the
Collateral Agent to the payment of such Obligations.
(vii) The Pledgor hereby waives presentment, demand, protest or
notice (to the extent permitted by applicable law) of any kind in
connection with this Agreement or any Collateral.
(c) The proceeds of any Collateral obtained or disposed of hereunder
shall be applied as set forth in the Intercreditor Agreement and the
Depositary Agreement.
SECTION 13. Purchase of the Collateral. The Pledgor may be a
purchaser of the Collateral or any part thereof or any right or interest
therein at any sale thereof, whether pursuant to foreclosure, power of sale
or otherwise hereunder. Any purchaser of all or any part of the Collateral
shall, upon any such purchase, acquire good title to the Collateral so
purchased, free of the security interests created by this Agreement.
SECTION 14. Expenses. The Pledgor will upon demand pay to the
Collateral Agent and the Secured Parties the amount of any and all
reasonable expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, and any transfer taxes which the
Collateral Agent or the Secured Parties may incur in connection with (i)
the custody or preservation of, or the sale of, collection from or other
realization upon, any of the Collateral pursuant to the exercise or
enforcement of any of the rights of the Collateral Agent hereunder or (ii)
the failure by the Pledgor to perform or observe any of the provisions
hereof, together with interest thereon at the rate per annum equal to the
Prime Rate plus two percent (2%). Any amount payable by the Pledgor
pursuant to this Section 14 shall be payable on demand and shall constitute
Obligations secured hereby.
SECTION 15. No Waiver. No failure or delay on the part of the
Collateral Agent to exercise, and no course of dealing with respect to, and
no delay in exercising, any right, power or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise by the
Collateral Agent of any right, power or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
remedy. The remedies herein provided are to the fullest extent permitted
by law cumulative and are not exclusive of any remedies provided by law.
No notice to or demand on the Pledgor in any case shall entitle the Pledgor
to any other or further notice or demand in similar or other circumstances.
SECTION 16. Amendments; Etc. No waiver, amendment, modification or
termination of any provision of this Agreement, or consent to any departure
by the Pledgor therefrom, shall in any event be effective without the
written concurrence of the Collateral Agent and none of the Collateral
shall be released without the written consent of the Collateral Agent. Any
such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given.
SECTION 17. Release. Subject to Section 25 hereof, upon the
indefeasible payment in full or performance of the Obligations and the
occurrence of the Debt Termination Date, the Collateral Agent, upon request
by the Pledgor, shall execute and deliver all such documentation necessary
to release the Liens created pursuant to this Agreement.
SECTION 18. Notices. Any notice to the Collateral Agent shall be
deemed effective only if sent to and received at the office of the
Collateral Agent at 777 Main Street, Hartford, Connecticut 06115 or sent by
confirmed telecopy to telecopy number (860) 986-7920. Any notice to the
Pledgor hereunder shall be deemed to have been duly given only if sent to
and received at the office of the Pledgor at 4100 Spring Valley Road, Suite
1001, Dallas, Texas 75244, Attention: President, or sent by confirmed
telecopy to telecopy number (214) 980-6815, or at such other address of
which such Person shall have notified in writing the other party hereto.
SECTION 19. Continuing Security Interest. This Agreement shall
create a continuing Lien on the Collateral until the release thereof
pursuant to Section 17 hereof.
SECTION 20. Security Interest Absolute. All rights of the Collateral
Agent and security interests hereunder, and all obligations of the Pledgor
hereunder, shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability
of any of the Project Documents or any other agreement or instrument
relating thereto (other than against the Collateral Agent);
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the Project Documents or any
other agreement or instrument relating thereto; provided, that the
aggregate amount of the Obligations shall not be increased other than in
accordance with the Trust Indenture without the consent of the Pledgor;
(c) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to any departure from
any guaranty, for all or any of the Obligations; or
(d) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, the Pledgor.
SECTION 21. Indemnity.
(a) The Pledgor agrees to indemnify, reimburse and hold the
Collateral Agent and the Secured Parties and their respective officers,
directors, employees and agents (each individually, an "Indemnitee", and
collectively, "Indemnitees") harmless from any and all liabilities,
obligations, damages, injuries, penalties, claims, demands, actions, suits,
judgments and any and all costs and expenses (including reasonable
attorneys' fees and disbursements) (such expenses, for purposes of this
Section 21, hereinafter "expenses") of whatsoever kind and nature imposed
on, asserted against or incurred by any Indemnitee in any way relating to
or arising out of (i)this Agreement or the documents executed in connection
herewith or in any other way connected with the administration of the
transactions contemplated hereby, or the enforcement of any of the terms
hereof, or the preservation of any rights hereunder or (ii)the ownership,
purchase, delivery, control, acceptance, financing, possession, condition,
sale, return or other disposition, or use of, the Collateral (including,
without limitation, latent or other defects, whether or not discoverable).
Each Indemnitee agrees to use its best efforts promptly to notify the
Pledgor of any assertion of any such liability, damage, injury, penalty,
claim, demand, action, judgment or suit of which such Indemnitee has
knowledge.
(b) Without limiting the application of Section 21(a), the Pledgor
agrees to pay or reimburse the Collateral Agent for any and all reasonable
fees, costs and expenses of whatever kind or nature incurred in connection
with the creation, preservation, protection or validation of the Collateral
Agent's Liens on, and security interest in, the Collateral, including,
without limitation, all fees and taxes in connection with the recording or
filing of instruments and documents in public offices, payment or discharge
of any taxes or Liens upon or in respect of the Collateral, premiums for
insurance with respect to the Collateral and all other fees, costs and
expenses in connection with protecting, maintaining or preserving the
Collateral and the Collateral Agent's interest therein, whether through
judicial proceedings or otherwise, or in defending or prosecuting any
actions, suits or proceedings arising out of or relating to the Collateral.
(c) Without limiting the application of Section 21(a), the Pledgor
agrees to pay, indemnify and hold each Indemnitee harmless from and against
any loss, costs, damages and expenses which such Indemnitee may suffer,
expend or incur in consequence of or growing out of any failure of the
Pledgor to comply with its obligations under this Agreement or any
misrepresentation by the Pledgor in this Agreement or in any statement or
writing contemplated by or made or delivered pursuant to or in connection
with this Agreement.
(d) If and to the extent that the obligations of the Pledgor under
this Section 21 are unenforceable for any reason, the Pledgor hereby agrees
to make the maximum contribution to the payment and satisfaction of such
obligations permissible under applicable law.
SECTION 22. Obligations Secured by Collateral. Any amount paid by any
Indemnitee as to which such Indemnitee has the right to reimbursement, and
any amount paid by the Collateral Agent in preservation of any of its
rights or interest in the Collateral, together with interest on such
amounts from the date paid until reimbursement in full at a rate per annum
equal at all times to the Prime Rate plus two percent (2%), shall
constitute Obligations secured by the Collateral.
SECTION 23. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction. Where provisions of any law or regulation resulting in such
prohibition or unenforceability may be waived, they are hereby waived by
the parties hereto to the full extent permitted by law so that this
Agreement shall be deemed a valid and binding agreement in accordance with
its terms.
SECTION 24. Counterparts; Effectiveness. This Agreement and any
amendment, waiver, consent or supplement may be executed in counterparts,
each of which when so executed and delivered shall be deemed an original,
but all such counterparts together shall constitute but one and the same
instrument. This Agreement shall become effective upon the execution and
delivery of a counterpart hereof by each of the parties hereto.
SECTION 25. Reinstatement. This Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time any amount
received by the Collateral Agent or any Secured Party hereunder or pursuant
hereto is rescinded or must otherwise be restored or returned by the
Collateral Agent or such Secured Party, as the case may be, upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Pledgor or the Partnership or upon the appointment of any intervenor or
conservator of, or trustee or similar official for, the Pledgor or the
Partnership or any substantial part of their respective assets, or upon the
entry of an order by a bankruptcy court avoiding the payment of such
amount, or otherwise, all as though such payments had not been made.
SECTION 26. WAIVER OF SUBROGATION; SUBMISSION TO JURISDICTION; WAIVER
OF JURY TRIAL.
(a) THE PLEDGOR IRREVOCABLY WAIVES ALL RIGHTS OF SUBROGATION (WHETHER
CONTRACTUAL, UNDER SECTION 509 OF TITLE 11 OF THE UNITED STATES CODE, 11
U.S.C. 101, ET SEQ. (THE "BANKRUPTCY CODE"), UNDER COMMON LAW OR OTHERWISE)
TO THE CLAIMS OF THE COLLATERAL AGENT AND THE SECURED PARTIES AGAINST THE
PLEDGOR WHICH ARISE IN CONNECTION WITH, OR AS A RESULT OF, THIS AGREEMENT.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY DOCUMENT RELATED HERETO MAY BE BROUGHT IN THE COURTS OF THE STATE OF
NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF
NEW YORK AND THE PLEDGOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF
THE AFORESAID COURTS. THE PLEDGOR AND THE COLLATERAL AGENT HEREBY
IRREVOCABLY WAIVE TRIAL BY JURY, AND THE PLEDGOR HEREBY IRREVOCABLY WAIVES
ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING
OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH
RESPECTIVE JURISDICTIONS.
(c) THE PLEDGOR IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY
OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID,
TO THE PLEDGOR AT ITS ADDRESS SPECIFIED IN SECTION 18, SUCH SERVICE TO
BECOME EFFECTIVE FOUR (4) BUSINESS DAYS AFTER SUCH MAILING.
(d) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE COLLATERAL AGENT TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE PLEDGOR IN ANY OTHER
JURISDICTION.
SECTION 27. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF
LAW EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW) EXCEPT
TO THE EXTENT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST
HEREUNDER, OR THE REMEDIES HEREUNDER, ARE GOVERNED BY THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK. UNLESS OTHERWISE DEFINED
HEREIN OR IN THE TRUST INDENTURE, TERMS DEFINED IN ARTICLE 8 OR ARTICLE 9
OF THE NEW YORK UNIFORM COMMERCIAL CODE ARE USED HEREIN AS THEREIN DEFINED.
SECTION 28. Recourse Limited to Collateral. Notwithstanding anything
to the contrary contained herein, the liability and obligation of the
Pledgor as of past, present or future partner, officer, director or
stockholder of the Pledgor under or by reason of this Agreement shall be
limited as provided in Section 4.12 of the Intercreditor Agreement and the
provisions of said Section 4.12 are incorporated herein by reference.
Section 29. Exculpatory Provisions. None of the Collateral Agent or
any Secured Party, or any of their respective officers, employees,
servants, controlling persons, executives, directors, agents, authorized
representatives, attorneys-in-fact or affiliates shall be liable to the
Pledgor for any action taken or omitted to be taken by it or them (other
than actions arising from or relating to any gross negligence or willful
misconduct of any such Person) under or in connection with this Agreement
or any other Project Document to which the Pledgor is a party, or
responsible in any manner to any Person for any recital, statement,
representation or warranty made by the Pledgor or any officer thereof
contained in this Agreement or any other Project Document to which the
Pledgor is aparty or in any certificate, report, statement or other
document referred to or provided for in, or received by the Collateral
Agent or any Secured Party under or in connection with, this Agreement or
any other Project Document to which the Pledgor is a party or for the
value, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Project Document or for any failure of the Pledgor
to perform any of the Obligations.
Section 30. Waiver. To the fullest extent it may lawfully so agree,
the Pledgor agrees that it will not at any time insist upon, claim, plead
or take any benefit or advantage of any appraisement, valuation, stay,
extenuation, moratorium, redemption or similar law now or hereafter in
force in order to prevent, delay or hinder the enforcement hereof or the
absolute sale of any part of the Collateral. The Pledgor, for itself and
all who claim through it, so far as it or they now or hereafter lawfully
may do so, hereby waives the benefit of all such laws and all right to have
the Collateral marshaled upon any foreclosure hereof, and agrees that any
court having jurisdiction to foreclose this Agreement may order the sale of
the Collateral as an entirety. Without limiting the generality of the
foregoing, the Pledgor hereby (i) authorizes the Collateral Agent, in its
sole discretion and without notice to or demand upon the Pledgor and
without otherwise affecting the obligations of the Pledgor hereunder, from
time to time to take and hold other collateral (in addition to the
Collateral) for payment of any Obligations, or any part thereof, and to
exchange, enforce or release such other collateral or any part thereof and
to enforce or release such other collateral or any part thereof and to
accept and hold any endorsement or guarantee of payment of the Obligations
or any part thereof and to release or substitute any endorser or guarantor
or any other Person granting security for or in any other way obligated
upon any Obligations or any part thereof and (ii) waives and releases any
and all right to require the Collateral Agent to collect any of the
Obligations from any specific item or items of the Collateral or from any
other party liable as a guarantor or in any other manner in respect of any
of the Obligations or from any other security for any of the Obligations.
Section 31. Consent. By its execution hereof, the Pledgor hereby
consents to the transfer of the Collateral to any designee of the
Collateral Agent in accordance with this Agreement and the admission to the
Partnership of such designee as a general partner in accordance with this
Agreement.
Section 32. Conflicts with the Intercreditor Agreement or the
Depositary Agreement. In the event of any conflict between the terms of
this Agreement and the Intercreditor Agreement or the Depositary Agreement,
the provisions of the Intercreditor Agreement or the Depositary Agreement,
as the case may be, will apply.
IN WITNESS WHEREOF, each party hereto has caused this General Partner
Pledge and Security Agreement to be duly executed and delivered by its
officer thereunto duly authorized on the date first above written.
PANDA - ROSEMARY CORPORATION
By
Name: Robert W. Carter
Title: Chairman of the Board,
President and Chief Executive Officer
FLEET NATIONAL BANK,
as collateral agent
By
Name:
Title:
ACKNOWLEDGMENT AND CONSENT
The Partnership referred to in the foregoing Agreement hereby
acknowledges receipt of a copy thereof and agrees to be bound thereby and
to comply with the terms thereof insofar as such terms are applicable to
it. The Partnership agrees to notify the Collateral Agent promptly in
writing of the issuance of any Additional Pledged Interests.
PANDA-ROSEMARY, L.P.,
a Delaware limited partnership
By: Panda - Rosemary Corporation,
a Delaware corporation,
its general partner
By
Name:
Title:
CONSENT
The undersigned corporation, being the sole limited partner of the
Partnership referred to in the foregoing Agreement, hereby consents to the
pledge of the general partner interest in the Partnership owned by
Panda Rosemary Corporation pursuant to such Agreement.
PRC II CORPORATION,
a Delaware corporation
By
Name:
Title:
LIMITED PARTNER PLEDGE AND SECURITY AGREEMENT
This LIMITED PARTNER PLEDGE AND SECURITY
AGREEMENT, dated July 31, 1996 (this "Agreement"), is made
by PRC II CORPORATION, a Delaware corporation (together with
its successors and assigns, the "Pledgor") and the sole
limited partner of Panda-Rosemary, L.P., a Delaware limited
partnership (together with its successors and assigns, the
"Partnership"), to FLEET NATIONAL BANK, a national banking
association established under the laws of the United States
of America, as collateral agent pursuant to Intercreditor
Agreement (as defined below) (together with its successors
and assigns, the "Collateral Agent") and grantee hereunder
for the benefit of the Secured Parties (as defined in the
Trust Indenture referred to below).
W I T N E S S E T H:
WHEREAS, the Partnership is the legal and
beneficial owner of all of the shares of common stock issued
by Panda-Rosemary Funding Corporation, a Delaware
corporation (the "Company");
WHEREAS, the Company, the Partnership and Fleet
National Bank, as trustee (the "Trustee"), are parties to
that certain Trust Indenture, dated as of July 31, 1996 (as
the same may be amended, modified or supplemented, the
"Trust Indenture"), providing for the issuance by the
Company of certain debt securities (the "Bonds");
WHEREAS, the Partnership has made that certain
Partnership Guaranty, dated the date hereof (as the same may
be amended, modified or supplemented, the "Partnership
Guaranty"), in favor of the Trustee to guarantee the
performance by the Company of its obligations under the
Bonds and the Trust Indenture;
WHEREAS, the Company and the Partnership are
parties to that certain Loan Agreement, dated as of the date
hereof (as the same may be amended, modified or
supplemented, the "Company Loan Agreement"), pursuant to
which the Company has loaned the proceeds of the Bonds to
the Partnership;
WHEREAS, the Company and the Collateral Agent are
parties to that certain Security Agreement, dated the date
hereof, pursuant to which the Company has assigned to the
Collateral Agent, and created a security interest in, all of
its right, title and interest in, to and under the Company
Loan Agreement and the related promissory note;
WHEREAS, in order to satisfy certain requirements
of the Partnership under the Project Agreements (as defined
in the Trust Indenture) or for other purposes, the
Partnership may incur indebtedness as permitted under the
Trust Indenture in connection with the issuance of letters
of credit by Bayerische Vereinsbank AG or other Credit Banks
(as defined in the Trust Indenture) pursuant to a Credit
Bank Reimbursement Agreement (as defined in the Trust
Indenture);
WHEREAS, the Partnership may incur indebtedness as
permitted under the Trust Indenture in the form of working
capital loans made by the Credit Banks under a Credit Bank
Working Capital Agreement (as defined in the Trust
Indenture);
WHEREAS, the Partnership may also incur additional
debt, as permitted under the Trust Indenture, either
directly or indirectly through the Company, to finance
certain modifications and enhancements to the Project in the
future ("Additional Permitted Debt", as that term is defined
in the Trust Indenture) and may enter into interest rate
protection agreements in connection with the Additional
Permitted Debt of the Partnership;
WHEREAS, the Pledgor will receive direct and
indirect financial and other benefits from the issuance of
the Bonds by the Company pursuant to the Trust Indenture and
the incurrence of any indebtedness pursuant to any Credit
Bank Reimbursement Agreement, any Credit Bank Working
Capital Agreement and the documents relating to any
Additional Permitted Debt or interest rate protection
transactions; and
WHEREAS, the Funding Company, the Partnership,
Bayerische Vereinsbank AG, the Trustee, Fleet National Bank,
as depositary agent, and the Collateral Agent are parties to
that certain Collateral Agency and Intercreditor Agreement,
dated as of the date hereof (the "Intercreditor Agreement"),
providing for the Collateral Agent to act as collateral
agent for the Secured Parties (as defined in the Trust
Indenture); and
WHEREAS, the Collateral Agent and the Secured
Parties are willing to enter into the transactions
contemplated by, among other things, the Trust Indenture and
the Credit Bank Documents (as defined in the Trust
Indenture) only upon the condition, among others, that the
Pledgor executes and delivers this Agreement, in favor of
the Collateral Agent for the benefit of the Secured Parties,
which grants to the Collateral Agent for the benefit of the
Secured Parties a security interest in the Collateral
referred to below, to secure the Obligations (as hereinafter
defined).
NOW, THEREFORE, in consideration of the foregoing
premises and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the
parties hereto hereby agree as follows:
SECTION 1. Defined Terms. Unless otherwise
defined herein, terms defined in the Intercreditor Agreement
(including terms defined in the Trust Indenture and
incorporation in the Intercreditor Agreement) shall have
such defined meanings when used herein.
"Additional Pledged Interests" shall mean (i) all
interests of certificates representing a distribution in
connection with any reclassification, increase or reduction
of capital of the Partnership or issued in connection with
any reorganization of the Partnership, whether as an
addition to, in substitution or redemption of or in exchange
for, any other Collateral or otherwise, (ii) any sums paid
upon or in respect of the Collateral as distributions upon
the liquidation or dissolution of the Partnership and
(iii) any distribution of capital made on or in respect of
the Collateral or any property distributed upon or with
respect to the Collateral pursuant to the recapitalization
or reclassification of the capital of the Partnership or
pursuant to the reorganization thereof.
"Collateral" shall have the meaning ascribed
thereto in Section 2.
"Default Notice" shall have the meaning ascribed
thereto in Section 6(c).
"Indemnitee" shall have the meaning ascribed
thereto in Section 21.
"Obligations" means (i) all obligations of the
Pledgor under this Agreement or the Collateral Documents,
(ii) all obligations of the Partnership or the Company to
the Collateral Agent, the Depositary Agent or the Secured
Parties now or hereafter existing under the Bonds, the Trust
Indenture, each Partneship Guarantee the Partnership Notes,
any Additional Permitted Debt, any Credit Bank Working
Capital Agreement, any Credit Bank Reimbursement Agreement,
any Interest Rate Protection Agreement, this Agreement or
the Collateral Documents, whether for principal, interest
(including, without limitation, interest accruing following
the filing by or against the Partnership or the Company of a
bankruptcy petition, whether or not allowed as a claim in a
bankruptcy proceeding), fees, indemnification, expenses or
otherwise, and (iii) all other liabilities, obligations,
covenants and duties owing to the Collateral Agent, the
Depositary Agent or the Secured Parties, from or by the
Pledgor, the Partnership or the Company of any kind or
nature, present or future, whether or not evidenced by any
note, guaranty or other instrument, arising under or in the
connection with the Trust Indenture, each Partnership
Guarantee, the Partnership Notes, any Additional Permitted
Debt, any Credit Bank Working Capital Agreement, any Credit
Bank Reimbursement Agreement, any Interest Rate Protection
Agreement, this Agreement or the Collateral Documents,
whether or not for the payment of money, whether direct or
indirect (including those acquired by assignment), joint or
several, absolute or contingent, liquidated or unliquidated,
due or to become due, now existing or hereafter arising,
renewed or restructured, whether or not from time to time
decreased or extinguished and later increased, created or
incurred, and including, without limitation, all
indebtedness of the Pledgor, the Partnership or the Company
under any instrument now or hereafter evidencing or securing
any of the foregoing and however acquired.
"Prime Rate" means, as of any day, the interest
rate per annum established by the Collateral Agent from time
to time as its "Prime Rate".
SECTION 2. Pledge. As security for the
Obligations and subject to and in accordance with the
provisions of this Agreement, including without limitation
Section 6 hereof, the Pledgor hereby pledges, grants,
assigns, hypothecates, transfers and delivers to the
Collateral Agent, for its benefit and the benefit of the
Secured Parties, a first priority security interest in the
following whether now owned or existing or hereafter
acquired or arising and wherever located (the "Collateral"):
(a) all of the Pledgor's limited partnership
interests in the Partnership and all of the Pledgor's
rights, privileges, authority and powers as a limited
partner of the Partnership under the Partnership Agreement,
but excluding all rights of the Pledgor to
(i) indemnification from (x) the Partnership for any claims,
liabilities, damages, losses, costs or other amounts
incurred in connection with the performance of its
responsibilities as a limited partner of the Partnership or
otherwise or (y) any Partner pursuant to the provisions of
the Partnership Agreement in respect of any claim
thereunder, or (ii) any liability insurance maintained by
the Pledgor or any Person for the benefit of the Pledgor;
provided, that the foregoing exclusion shall not exclude the
Collateral Agent (or a Person designated by the Collateral
Agent to exercise the remedies provided herein) from the
benefits of such indemnification and liability insurance
upon the exercise of any the remedies provided herein;
(b) subject to Section 6(b), all monies and
property representing a distribution in respect of the
property described in the preceding clause (a), including,
without limitation, (i) all income, cash flow, revenues,
issues, profits, losses, distributions, payments, proceeds
and other property of every kind and variety due, accruing
or owing to, or to be turned over to, or disbursed to the
Pledgor by the Partnership in connection with, the Pledgor's
limited partnership interests therein, and (ii) all
Additional Pledged Interests;
(c) all of the Pledgor's right, title and
interest to the Governmental Approvals; provided, that any
Governmental Approval which by its terms or by operation of
law would become void, voidable, terminable or revocable if
mortgaged, pledged or assigned hereunder or if a security
interest therein were granted hereunder is expressly
excepted and excluded from the Lien and the terms of this
Agreement to the extent necessary so as to avoid such
voidness, voidability, terminability or revocability;
(d) the Pledgor's interest under any agreement,
now or hereafter in effect, with any other Partner in the
Partnership providing for the right of the Pledgor to
acquire or exercise the partnership interest in the
Partnership now or hereafter owned or held by any such other
Partner in the Partnership;
(e) any other claim which the Pledgor now has or
may in the future acquire in the Pledgor's capacity as a
limited partner of the Partnership against the Partnership
and its property; and
(f) all proceeds, products and accessions of and
to any of the property described in the preceding clauses
(a), (b), (c), (d) and (e).
SECTION 3. Security for Obligations.
(a) This Agreement secures, and the Collateral is
collateral security for, the payment and performance in full
when due, whether at stated maturity, by acceleration or
otherwise (including the payment of amounts which would
become due but for the operation of the automatic stay under
Section 362(a) of the Bankruptcy Code, 11 U.S.C. E362(a)),
of all Obligations now or hereafter existing.
(b) This Agreement and the grant of the security
interest contained herein is for collateral purposes only
and neither the Collateral Agent nor any Secured Party
shall, by virtue of this Agreement, their receipt of
distributions from the Partnership or their exercise of any
right hereunder, be deemed to (i) have acquired any interest
in or responsibility for the Pledgor's obligations contained
in the Partnership Agreement, (ii) be liable for any
contribution to the Partnership under the Partnership
Agreement or the applicable limited partnership act or
(iii) have any other liability for the debts, obligations or
liabilities of the Partnership or the Pledgor, except in the
event of foreclosure upon the Collateral (and only to the
extent of such foreclosure on the particular Collateral).
SECTION 4. Representations and Warranties. On
and as of the date hereof, the Pledgor represents and
warrants to the Collateral Agent and the Secured Parties as
follows:
(a) The Pledgor is the owner of, and has good and
marketable title to, the limited partnership interest and
the other Collateral pledged pursuant to this Agreement,
free and clear of any Lien except for the pledge and
security interest granted to the Collateral Agent for the
benefit of the Secured Parties hereunder and Liens for Taxes
not yet due or which are subject to a Good Faith Contest.
Such general partnerhship interest is not evidenced by a
certificate. No financing statement covering the
Collateral is on file in any public office other than
terminated financing statements and the financing statements
filed pursuant to this Agreement or in connection with the
transactions contemplated by the Trust Indenture. The
Collateral is not subject to any law (except as may be
required in connection with any disposition of the
Collateral by laws affecting the offering and sale of
securities generally) or contractual obligation that would
be violated by or that would prohibit the grant of the
security interest in the Collateral granted pursuant hereto
or the disposition of the Collateral by or to the Collateral
Agent upon the occurrence and continuance of an Event of
Default or a Trigger Event.
(b) The Pledgor is a corporation duly organized
and validly existing under the laws of the State of Delaware
and is qualified to own property and transact business in
the State of Texas and in every other jurisdiction where the
ownership of its property and the nature of its business as
currently conducted and as contemplated to be conducted
under each Project Document to which the Pledgor or the
Partnership is a party requires it to be qualified.
(c) The Pledgor has full power, authority and
legal right to enter into this Agreement and each other
Project Document to which it is a party and to perform its
obligations hereunder and thereunder and to pledge all of
the Collateral pursuant to this Agreement. The pledge of
the Collateral pursuant to this Agreement has been duly
authorized by the Pledgor. This Agreement and each other
Project Document to which the Pledgor is a party have been
duly authorized, executed and delivered by the Pledgor and
constitute legal, valid and binding obligations of the
Pledgor enforceable against the Pledgor in accordance with
their terms except as enforceability may be limited by
applicable bankruptcy, insolvency, moratorium or other
similar laws affecting creditors' rights generally and
except as enforceability may be limited by general
principles of equity (whether considered in a suit at law or
in equity).
(d) No consent of any other party (including,
without limitation, stockholders or creditors of the
Pledgor) and no Governmental Approval is required which has
not been obtained (i) for the execution, delivery and
performance by the Pledgor of this Agreement and each other
Project Document to which the Pledgor is a party, (ii) for
the pledge by the Pledgor of the Collateral pursuant to this
Agreement or (iii) for the exercise by the Collateral Agent
of the rights provided for in this Agreement or the remedies
in respect of the Collateral pursuant to this Agreement
(except as may be required (x) in connection with any
disposition of all or any part of the Collateral under any
laws affecting the offering and sale of securities
generally, (y) under federal and state laws, rules and
regulations and applicable interpretations thereof providing
for the supervision or regulation of the banking or trust
businesses generally and applicable to the Collateral Agent
or any Secured Party and (z) with respect to the Collateral
Agent or any Secured Party as a result of any relationship
which such Person may have with Persons not parties to, or
any activity or business such Person may conduct other than
pursuant to, any of the Financing Documents).
(e) The execution and delivery of this Agreement
concurrently with the filing of Form UCC-1 financing
statements with the Secretary of State of the State of
Texas, the Secretary of State of the State of Delaware, the
Secretary of State of the State of North Carolina, the
appropriate officer of Halifax County, North Carolina, and
the appropriate officer of Northampton County, North
Carolina create a valid and perfected first priority
security interest in the Collateral securing the payment of
the Obligations subject to no Liens other than those created
by this Agreement.
(f) The execution, delivery and performance of
this Agreement and each other Project Document to which the
Pledgor is a party will not (i) require any consent or
approval of the Board of Directors or stockholders of the
Pledgor which has not been obtained; (ii) violate the
provisions of the Pledgor's Certificate of Incorporation or
By-Laws; (iii) violate the provisions of any law (including,
without limitation, any usury law), regulation or order of
any Governmental Authority applicable to the Pledgor or the
Partnership; (iv) conflict with, result in a breach of or
constitute a default under the Partnership Agreement or any
other material agreement relating to the management or
affairs of the Pledgor or the Partnership, or any indenture
or loan or credit agreement or any other material agreement,
lease or instrument to which the Pledgor or the Partnership
is a party or by which the Pledgor or the Partnership or any
of their material properties may be bound (which default or
breach has not been permanently waived by the other party to
such document); or (v) result in or create any Lien (other
than Permitted Liens) under, or require any consent which
has not been obtained under, any indenture or loan or credit
agreement or any other material agreement, instrument or
document, or the provisions of any order, writ, judgment,
injunction, decree, determination or award of any
Governmental Authority binding upon the Pledgor or the
Partnership or any of their properties.
(g) There is no action, suit or proceeding at law
or in equity or by or before any Governmental Authority,
arbitral tribunal or other body now pending or, to the best
knowledge of the Pledgor, threatened against the Pledgor or
the Partnership which questions the validity or legality of
or seeks damages in connection with this Agreement or any
other Project Document to which the Pledgor or the
Partnership is a party or which could reasonably be expected
to have a material adverse effect on the Pledgor or the
Partnership, other than those actions, suits or proceedings
which have been previously disclosed in the Offering
Circular, dated July 26, 1996, relating to the Bonds.
(h) Each of the financial statements of the
Pledgor for its most recently ended fiscal year and quarter
heretofore furnished to the Collateral Agent is complete and
correct in all material respects and fairly presents the
financial condition of the Pledgor as at said dates in
conformity with GAAP applied on a consistent basis.
(i) The chief executive office of the Pledgor is
located at 4100 Spring Valley Road, Suite 1001, Dallas,
Texas 75244.
(j) All contributions currently required to be
paid to the Partnership by the Pledgor have been paid.
(k) The copy of the Partnership Agreement
delivered to the Collateral Agent on the date hereof is a
true, complete and correct copy of the Partnership
Agreement. After giving effect to the redemption on the
date hereof by the Partnership of the limited partnership
interest in the Partnership of Ford Motor Credit Company,
the Pledgor is the sole limited partner of the Partnership.
(l) The Pledgor has not changed its name or done
business under any other name within the last five years,
except that the Pledgor is registered to do business in the
State of Texas under thename "Rosemary II Corporation."
(m) The Pledgor is not (i) an "investment
company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of
1940, as amended, or (ii) a "holding company" or a
"subsidiary company" of a "holding company" or an
"affiliate" of a "holding company" or a "subsidiary company"
within the meaning of PUHCA or (iii) a "registered holding
company" or a "subsidiary company" of a "registered holding
company" or an "affiliate" of a "registered holding company"
or a "subsidiary company" of a "registered holding company"
within the meaning of PUHCA.
(n) The Pledgor has derived and will continue to
derive direct and indirect benefits from the incurrence of
its obligations under this Agreement and from the incurrence
by the Partnership of its obligations under the Partnership
Guaranty, the Trust Indenture, the Company Loan Agreement
and the other Financing Documents.
SECTION 5. Supplements; Further Assurances.
(a) The Pledgor agrees that, at any time and from
time to time, the Pledgor will at its expense promptly
execute and deliver all further instruments and documents,
and take all further action, that may be necessary or
desirable, or that the Collateral Agent may reasonably
request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to
enable the Collateral Agent to exercise and enforce its
rights and remedies hereunder with respect to any
Collateral.
(b) All Additional Pledged Interests shall be
pledged and, to the extent such Additional Pledged Interests
constitute certificates, instruments or monies, delivered to
the Collateral Agent to be held by it as additional
collateral security for the prompt and complete payment and
performance when due of the Obligations. All Additional
Pledged Interests which are received by the Pledgor shall,
until pledged, paid or delivered to the Collateral Agent, be
held by the Pledgor in trust for the benefit of the
Collateral Agent and shall be segregated from the other
funds and property of the Pledgor and the Pledgor agrees to
pledge and deliver the same forthwith to the Collateral
Agent in the exact form received (if applicable), with the
endorsement of the Pledgor when necessary and/or appropriate
undated stock powers duly executed in blank, to be held by
the Collateral Agent subject to the terms hereof.
SECTION 6. Rights of Pledgor; Etc.
(a) Generally. The Pledgor shall be entitled to
exercise any and all rights pertaining to the Collateral or
any part thereof (including, without limitation, the right
to receive distributions in respect of its partnership
interests) so long as (i) no Event of Default or Trigger
Event shall have occurred and be continuing and no Default
Notice (as defined in Section 6(c) below) shall have been
delivered to it and (ii) the exercise of such rights would
not otherwise result in an Event of Default or Trigger
Event.
(b) Distributions. Unless an Event of Default or
Trigger Event shall have occurred and be continuing, the
Pledgor shall be entitled to receive and retain any and all
distributions paid in respect of the Collateral in
compliance with the terms of the Intercreditor Agreement;
provided, that any and all
(i) distributions paid or payable in respect
of any Collateral (whether paid in cash, securities or
other property) in connection with a partial or total
liquidation or dissolution of the Partnership (other
than in connection with any deemed liquidation on
account of a termination of the Partnership under
Section 708(b)(1)(B) of the Code), and
(ii) distributions of all property (whether
cash, securities or other property) paid, payable or
otherwise distributed in redemption of, or in exchange
for, the property described in Section 2(a) above,
shall be, and shall be forthwith delivered to the Collateral
Agent to hold as, Collateral and shall, if received by the
Pledgor, be received in trust for the benefit of the
Collateral Agent, be segregated from the other property or
funds of the Pledgor and be forthwith delivered to the
Collateral Agent as Collateral in the same form as so
received (with any necessary endorsement). Upon the
occurrence and during the continuance of an Event of Default
or Trigger Event, all rights of the Pledgor to receive the
distributions which it would otherwise be authorized to
receive and retain pursuant to the preceding sentence shall
cease and all such rights shall thereupon become vested in
the Collateral Agent which shall thereupon have the sole
right to receive and hold as Collateral such distributions;
provided, that if and when an Event of Default or a Trigger
Event is cured in accordance with the applicable provisions
of the Financing Documents, all rights of the Pledgor shall
be restored and the Collateral Agent shall promptly turn
over to the Pledgor all distributions so received during the
period of the continuance of the applicable Event of Default
or Trigger Event (less the amount thereof applied by the
Collateral Agent in accordance with Section 12(c) below).
(c) Other Rights. Upon the occurrence and during
the continuance of an Event of Default or a Trigger Event,
after the Collateral Agent delivers a notice to the Pledgor
indicating its determination to exercise the Pledgor's
rights with respect to the Pledgor's limited partnership
interest in the Partnership (the "Default Notice"), all
rights of the Pledgor as a limited partner of the
Partnership which it would otherwise be entitled to exercise
pursuant to Section 6(a) above shall cease and all such
rights shall thereupon become vested in the Collateral Agent
(subject to the provisions of the Partnership Agreement and
applicable law); provided, that if after the delivery of the
Default Notice the Event of Default or Trigger Event giving
rise thereto is cured in accordance with the applicable
provisions of the Financing Documents, all rights of the
Pledgor shall be restored.
SECTION 7. Covenants.
(a) Without the prior written consent of the
Collateral Agent, or as otherwise permitted under the
Intercreditor Agreement, the Pledgor shall not (i) vote to
enable, or take any other action to permit, the Partnership
(x) to issue any additional limited partnership interests of
any nature, (y) to issue any other securities convertible
into or exchangeable for any limited partnership interests
of the Partnership or (z) to issue any other securities that
grant the right to purchase any partnership interests of the
Partnership, (ii) sell, assign, transfer, exchange or
otherwise dispose of, or grant any option with respect to,
the Collateral or (iii) create, incur or permit to exist any
Liens or options in favor of, or any claims of any Person
with respect to, any of the Collateral or any interest
therein, except for Permitted Liens and the Liens provided
for by this Agreement; provided, that, subject to Section
7(i) hereof, the issuance, transfer, conversion or sale of
any of the Collateral may occur notwithstanding the
foregoing if such issuance, transfer, conversion or sale
would not result in an Event of Default or Trigger Event
(such issuance, transfer, conversion or sale being herein
referred to as a "Permitted Transfer") and (x) the purchaser
or transferee of such Collateral (including, without
limitation, any Partner of the Partnership to whom the
partnership interests of the Pledgor are transferred
following the withdrawal of the Pledgor as a Partner of the
Partnership) shall pledge such Collateral pursuant to a
pledge agreement substantially similar hereto and take such
additional actions as the Collateral Agent may reasonably
request in connection therewith (including, without
limitation, executing and delivering such agreements,
certificates, legal opinions, instruments or other documents
as may be reasonably requested by the Collateral Agent),
(y) no Default or Event of Default or Trigger Event would
result therefrom and (z) none of the representations and
warranties set forth in the Trust Indenture shall be untrue
or incorrect in any material respect solely as a result of
the occurrence of a Permitted Transfer.
(b) The Pledgor agrees that it will pledge
hereunder, immediately upon its acquisition (directly or
indirectly) thereof, any and all additional limited
partnership interests issued to it by the Partnership.
(c) The Pledgor shall preserve and maintain its
legal existence as a corporation in good standing under the
laws of the State of Delaware and (ii) its qualification to
do business in the State of Texas and in every other
jurisdiction where the ownership of its property and the
nature of its business require it to be so qualified.
(d) The Pledgor shall obtain, maintain and comply
with all Governmental Approvals as shall now or hereafter be
necessary under applicable law, rule or regulation, in each
case in connection with the making and performance by the
Pledgor of any material provision of the Project Documents
to which it is a party. The Pledgor shall comply in all
material respects with all applicable laws with respect to
which noncompliance could reasonably be expected to have a
material adverse affect on the Collateral or the Pledgor's
ability to perform its obligations under any Project
Document.
(e) The Pledgor shall pay and discharge all
taxes, assessments and governmental charges or levies
imposed on it or on its income or profits or on any of its
property prior to the date on which penalties attach thereto
and all lawful claims which, if unpaid, could reasonably be
expected to become a Lien (other than Permitted Liens) upon
the Collateral. The Pledgor shall have the right, however,
to contest in good faith the validity or amount of any such
tax, assessment, charge, levy or claim by proper proceedings
timely instituted, and may permit the taxes, assessments,
charges, levies or claim so contested to remain unpaid
during the period of such contest if (i) the Pledgor
diligently prosecutes such contest, (ii) the Pledgor sets
aside on its books adequate reserves in accordance with GAAP
plus an amount equal to 50% of the difference between the
amount being contested and the amount required to be
reserved by GAAP and (iii) during the period of such contest
the enforcement of any contested item is effectively stayed.
The Pledgor will promptly pay or cause to be paid any valid,
final judgment enforcing any such tax, assessment, charge,
levy or claim and cause the same to be satisfied of record.
(f) The Pledgor shall furnish to the Collateral
Agent the following documents:
(i) unaudited financial statements of the
Pledgor within one hundred twenty (120) days of the
close of each fiscal year of the Pledgor; and
(ii) from time to time, such further
information (whether or not of the kind mentioned
above) regarding the business, affairs, operations and
financial condition of the Pledgor as the Collateral
Agent may reasonably request.
(g) The Pledgor shall keep proper books of record
and account in which full, true and correct entries in
accordance with GAAP are made and permit representatives of
the Collateral Agent, upon the giving of reasonable notice,
to visit and inspect its properties, to examine its books of
record and account and to discuss its affairs, finances and
accounts with its principal officers, engineers and
independent accountants, all at such reasonable times during
business hours and at such intervals as the Collateral Agent
may desire.
(h) The Pledgor shall perform and observe all of
its covenants and agreements contained in any of the Project
Documents to which it is a party.
(i) The Pledgor shall remain a limited partner of
the Partnership and shall not withdraw from the Partnership.
(j) The Pledgor shall not (i) merge or
consolidate with or into any other Person, (ii) sell, lease,
transfer or otherwise dispose of all or substantially all of
its assets, (iii) create, acquire or operate any Subsidiary
(other than the Partnership and the Company), (iv) be a
partner in any partnership or a participant in any cost
sharing arrangement or joint venture except for the
Partnership, (v) directly or indirectly purchase or acquire
any stock, obligations or securities of, or any other
interests in any Person other than the Partnership and
Permitted Investments, (vi) create or become or be liable
with respect to any Guaranty or (vii) lend money or credit
or make advances or any capital contribution to any Person
other than contributions to the Partnership.
(k) The Pledgor shall not create, incur, assume
or suffer to exist any Debt other than up to Two Hundred
Fifty Thousand Dollars ($250,000) aggregate principal amount
of Debt outstanding at any time.
(l) The Pledgor shall not engage in any business
other than holding a limited partnership interest in the
Partnership.
(m) The Pledgor shall not, without the prior
written consent of the Trustee, agree to or permit (i) the
cancellation or termination of the Partnership Agreement,
except upon the expiration of the stated term thereof, or
(ii) any amendment, supplement, modification or waiver with
respect to any of the provisions of the Partnership
Agreement if such amendment, supplement, modification or
waiver would have a material adverse effect on the value of
the Collateral, on the rights of the Collateral Agent or
Secured Parties or on the financial condition of the
Partnership.
(n) The Pledgor shall not enter into or carry out
any transaction with any Affiliate on a basis less favorable
than the Pledgor would obtain in a comparable arm's-length
transaction unless such transaction has been approved by the
Collateral Agent in writing, except that the Pledgor may
carry out transactions with the Partnership on terms less
favorable to the Pledgor than arm's-length terms.
(o) The Pledgor shall not establish a new
location for its chief executive office or change its name
until (i) it has given to the Collateral Agent no less than
sixty (60) days' prior written notice of its intention so to
do, clearly describing such new location or specifying such
new name, as the case may be, and (ii) with respect to such
new location or such new name, as the case may be, it shall
have taken all action, satisfactory to the Collateral Agent,
to maintain the security interest of the Collateral Agent in
the Collateral intended to be granted hereby at all times
fully perfected and in full force and effect.
(p) The Pledgor shall pay or cause to be paid,
and shall hold the Collateral Agent and the Secured Parties
harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all stamp,
excise, sales or other taxes which may be payable or
determined to be payable with respect to any of the
Collateral.
(q) Except as permitted under Section 7(a)
hereof, the Pledgor shall cause the Partnership not to issue
any partnership interests or other securities in addition to
or in substitution for the Collateral or any warrants,
options or other rights to acquire its partnership interests
or other Collateral to any Person other than the Pledgor.
SECTION 8. Collateral Agent Appointed Attorney-In-
Fact.
(a) Upon the occurrence and during the
continuance of an Event of Default or a Trigger Event,
subject to the Pledgor's rights under Section 6 hereof, the
Pledgor hereby appoints the Collateral Agent as the
Pledgor's attorney-in-fact, with full authority in the place
and stead of the Pledgor and in the name of the Pledgor or
otherwise (i) to exercise all voting, consent, managerial
and other rights related to the Collateral, (ii) to execute
and deliver, at any time and from time to time, any
instrument or instruments providing for the approval of the
identity and admission to the Partnership of any person or
entity who becomes a substituted or additional partner in
the Partnership pursuant to the exercise by the Collateral
Agent of its rights and remedies hereunder, under the Trust
Indenture or any of the other Project Documents and (iii)
from time to time in the Collateral Agent's discretion, to
take any action and to execute any instrument which the
Collateral Agent may deem necessary or advisable to enforce
its rights under this Agreement, including, without
limitation, authority to receive, endorse and collect all
instruments made payable to the Pledgor representing any
distribution, interest payment or other payment in respect
of the Collateral or any part thereof and to give full
discharge for the same. The Pledgor hereby ratifies all
that such attorney shall lawfully do or cause to be done by
virtue hereof. This power of attorney is coupled with an
interest and shall be irrevocable for the term of this
Agreement. Nevertheless, the Pledgor shall, if so requested
by the Collateral Agent, ratify and confirm all that the
Collateral Agent shall lawfully do or cause to be done by
virtue hereof as the Pledgor's attorney-in-fact by executing
and delivering to the Collateral Agent, or to such other
Person as the Collateral Agent shall direct, all documents
and instruments as may be necessary or, in the judgment of
the Collateral Agent, advisable for such purpose.
(b) The Pledgor further authorizes the Collateral
Agent, at any time and from time to time, (i) to execute, in
connection with any sale provided for hereunder, any
endorsements, assignments or other instruments of conveyance
or transfer with respect to the Collateral and (ii) to the
full extent permitted by applicable law, to file one or more
financing or continuation statements, and amendments
thereto, relative to all or any part of the Collateral
without the signature of the Pledgor.
SECTION 9. Collateral Agent May Perform. If the
Pledgor fails to perform any agreement contained herein
after receipt of a written request to do so from the
Collateral Agent, the Collateral Agent may itself perform,
or cause performance of, such agreement, and the reasonable
expenses of the Collateral Agent, including the reasonable
fees and expenses of its counsel, incurred in connection
therewith shall be payable by the Pledgor pursuant to
Section 14 hereof.
SECTION 10. Reasonable Care. The Collateral
Agent shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment
substantially equivalent to that which the Collateral Agent
accords its own property of the type of which the Collateral
consists, it being understood that subject to the exercise
of such reasonable care the Collateral Agent shall have no
responsibility for (i) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities,
tenders or other matters relative to any Collateral, whether
or not the Collateral Agent has or is deemed to have
knowledge of such matters or (ii) taking any necessary steps
to preserve rights against any parties with respect to any
Collateral.
SECTION 11. No Liability.
(a) Until such time as the Collateral Agent shall
deliver a Default Notice pursuant to Section 6(c) above,
none of the Collateral Agent or the Secured Parties or any
of their directors, officers, employees or agents shall be
deemed to have assumed any of the liabilities or obligations
of a partner of the Partnership as a result of the pledge
and security interest granted under or pursuant to this
Agreement. None of the Collateral Agent or the Secured
Parties or any of their directors, officers, employees or
agents shall be liable for any failure to collect or realize
upon the Obligations or any collateral security or guarantee
therefor, or any part thereof, or for any delay in so doing,
nor shall any of them be under any obligation to take any
action whatsoever with regard thereto.
(b) Anything herein to the contrary
notwithstanding, the Pledgor shall remain liable under the
Partnership Agreement and any other Project Document to
which it is a party to the extent set forth therein to
perform all of its duties and obligations thereunder to the
same extent as if this Agreement had not been executed. The
exercise by the Collateral Agent of any of the rights or
remedies hereunder shall not release the Pledgor from any of
its duties or obligations under the Partnership Agreement or
any other Project Document to which it is a party.
SECTION 12. Remedies Upon Default. If an Event
of Default or a Trigger Event shall have occurred and be
continuing:
(a) The Collateral Agent may (i) as provided in
and in accordance with the terms of the Partnership
Agreement and applicable law, become a substitute or
additional limited partner in the Partnership or designate
another Person to become such substitute or additional
limited partner, (ii) exercise the Pledgor's rights as a
limited partner of the Partnership as provided in Section
6(c), (iii) exercise the power of attorney described in
SectionE8, (iv) grant an option or options to purchase all
or any part of the Collateral and/or (v) exercise any other
right or remedy available hereunder, at law or in equity.
(b) (i) The Collateral Agent may exercise
in respect of the Collateral, in addition to all
other rights and remedies provided for herein or
otherwise available to it, all of the rights and
remedies of a secured party on default under the
Uniform Commercial Code then in effect in the
State of New York, or unless prohibited by
applicable law, the Uniform Commercial Code then
in effect in any other applicable jurisdiction,
and the Collateral Agent may also in its sole
discretion, without advertisement or notice except
as specified below, sell the Collateral or any
part thereof in one or more parcels at public or
private sale or at any of the Collateral Agent's
offices or elsewhere, for cash, on credit or for
future delivery, and at such price or prices and
upon such other terms as the Collateral Agent may
reasonably deem commercially reasonable,
irrespective of the impact of any such sales on
the market price of the Collateral at any such
sale. The Collateral Agent may, in its sole
discretion, at any such sale, restrict the
prospective bidders or purchasers as to their
number, nature of business and investment
intention. Upon any such sale the Collateral
Agent shall have the right to deliver, assign and
transfer to the purchaser thereof (including the
Collateral Agent or any Secured Party) the
Collateral. Each purchaser at any such sale shall
hold the property sold free from any claim or
right on the part of the Pledgor and the Pledgor
hereby waives (to the extent permitted by law) all
rights of redemption, stay and/or appraisal which
it now has or may at any time in the future have
under any rule of law or statute now existing or
hereafter enacted. The Pledgor agrees that, to
the extent notice of sale shall be required by
law, at least ten (10) days' notice to the Pledgor
of the time and place of any public sale or the
time after which any private sale is to be made
shall constitute reasonable notification. The
Collateral Agent shall not be obligated to make
any sale of Collateral regardless of notice of
sale having been given. The Collateral Agent may
adjourn any public or private sale from time to
time by announcement at the time and place fixed
therefor, and such sale may, without further
notice, be made at the time and place to which it
was so adjourned. At any such sale, the
Collateral may be sold in one lot, as an entirety
or in separate units. Assuming that such sales
are made in compliance with federal and state
securities laws, the Collateral Agent shall incur
no liability as a result of the sale of the
Collateral, or any part thereof, at any public or
private sale. The Pledgor hereby waives any
claims against the Collateral Agent arising by
reason of the fact that the price at which any
Collateral may have been sold at such a private
sale, if commercially reasonable, was less than
the price which might have been obtained at a
public sale, even if the Collateral Agent accepts
the first offer received and does not offer such
Collateral to more than one offeree.
(ii) The Pledgor recognizes that the
Collateral Agent may elect in its sole discretion
to sell all or a part of the Collateral to one or
more purchasers in privately negotiated
transactions in which the purchasers will be
obligated to agree, among other things, to acquire
the Collateral for their own account, for
investment and not with a view to the distribution
or resale thereof. The Pledgor acknowledges that
any such private sales may be at prices and on
terms less favorable than those obtainable through
a public sale (including, without limitation, a
public offering made pursuant to a registration
statement under the Securities Act of 1933, as
amended (the "Securities Act")) and the Pledgor
and the Collateral Agent agree that such private
sales shall be made in a commercially reasonable
manner and that the Collateral Agent has no
obligation to engage in public sales and no
obligation to delay sale of any Collateral to
permit the issuer thereof to register the
Collateral for a form of public sale requiring
registration under the Securities Act.
(iii) In case of any sale of all or any
part of the Collateral on credit or for future
delivery, the Collateral so sold may be retained
by the Collateral Agent until the full selling
price is paid by the purchaser thereof, but the
Collateral Agent shall not incur any liability in
case of the failure of such purchaser to take up
and pay for the Collateral so sold and, in case of
any such failure, such Collateral may again be
sold pursuant to the provisions hereof.
(iv) The receipt by the Collateral Agent
of the purchase money paid at any such sale made
by it shall be a sufficient discharge of all
obligations of the purchaser thereof. No
purchaser (or the representatives or assigns of
any purchaser), after paying such purchase money
and receiving such receipt, shall be bound to see
to the application of such purchase money or any
part thereof or in any manner whatsoever be
answerable for any loss, misapplication or
nonapplication of any such purchase money, or any
part thereof, or be bound to inquire as to the
authorization, necessity, expediency or regularity
of any such sale.
(v) Instead of exercising the power of
sale provided in Section 12b(i) hereof, the
Collateral Agent may proceed by a suit or suits at
law or in equity to foreclose the security
interest under this Agreement and sell the
Collateral or any portion thereof under a judgment
or decree of a court or courts of competent
jurisdiction.
(vi) No sale or other disposition of all
or any part of the Collateral by the Collateral
Agent pursuant to this Section 12 shall be deemed
to relieve the Partnership, the Company or the
Pledgor of any Obligation except to the extent the
proceeds thereof are applied by the Collateral
Agent to the payment of such Obligations.
(vii) The Pledgor hereby waives
presentment, demand, protest or notice (to the
extent permitted by applicable law) of any kind in
connection with this Agreement or any Collateral.
(c) The proceeds of any Collateral obtained or
disposed of hereunder shall be applied as set forth in the
Intercreditor Agreement and the Depositary Agreement.
SECTION 13. Purchase of the Collateral. The
Pledgor may be a purchaser of the Collateral or any part
thereof or any right or interest therein at any sale
thereof, whether pursuant to foreclosure, power of sale or
otherwise hereunder. Any purchaser of all or any part of
the Collateral shall, upon any such purchase, acquire good
title to the Collateral so purchased, free of the security
interests created by this Agreement.
SECTION 14. Expenses. The Pledgor will upon
demand pay to the Collateral Agent and the Secured Parties
the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any
experts and agents, and any transfer taxes which the
Collateral Agent or the Secured Parties may incur in
connection with (i) the custody or preservation of, or the
sale of, collection from or other realization upon, any of
the Collateral pursuant to the exercise or enforcement of
any of the rights of the Collateral Agent hereunder or
(ii) the failure by the Pledgor to perform or observe any of
the provisions hereof, together with interest thereon at the
rate per annum equal to the Prime Rate plus two percent
(2%). Any amount payable by the Pledgor pursuant to this
SectionE14 shall be payable on demand and shall constitute
Obligations secured hereby.
SECTION 15. No Waiver. No failure or delay on
the part of the Collateral Agent to exercise, and no course
of dealing with respect to, and no delay in exercising, any
right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise by the
Collateral Agent of any right, power or remedy hereunder
preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. The remedies
herein provided are to the fullest extent permitted by law
cumulative and are not exclusive of any remedies provided by
law. No notice to or demand on the Pledgor in any case
shall entitle the Pledgor to any other or further notice or
demand in similar or other circumstances.
SECTION 16. Amendments; Etc. No waiver,
amendment, modification or termination of any provision of
this Agreement, or consent to any departure by the Pledgor
therefrom, shall in any event be effective without the
written concurrence of the Collateral Agent and none of the
Collateral shall be released without the written consent of
the Collateral Agent. Any such waiver or consent shall be
effective only in the specific instance and for the specific
purpose for which given.
SECTION 17. Release. Subject to Section 25
hereof, upon the indefeasible payment in full or performance
of the Obligations and the occurrence of the Debt
Termination Date, the Collateral Agent, upon request by the
Pledgor, shall execute and deliver all such documentation
necessary to release the Liens created pursuant to this
Agreement.
SECTION 18. Notices. Any notice to the
Collateral Agent shall be deemed effective only if sent to
and received at the office of the Collateral Agent at
777 Main Street, Hartford, Connecticut 06115 or sent by
confirmed telecopy to telecopy number (860) 986-7920. Any
notice to the Pledgor hereunder shall be deemed to have been
duly given only if sent to and received at the office of the
Pledgor at 4100 Spring Valley Road, Suite 1001, Dallas,
Texas 75244, Attention: President, or sent by confirmed
telecopy to telecopy number (214) 980-6815, or at such other
address of which such Person shall have notified in writing
the other party hereto.
SECTION 19. Continuing Security Interest. This
Agreement shall create a continuing Lien on the Collateral
until the release thereof pursuant to Section 17 hereof.
SECTION 20. Security Interest Absolute. All
rights of the Collateral Agent and security interests
hereunder, and all obligations of the Pledgor hereunder,
shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability
of any of the Project Documents or any other
agreement or instrument relating thereto (other
than against the Collateral Agent);
(b) any change in the time, manner or place
of payment of, or in any other term of, all or any
of the Obligations, or any other amendment or
waiver of or any consent to any departure from the
Project Documents or any other agreement or
instrument relating thereto; provided, that the
aggregate amount of the Obligations shall not be
increased other than in accordance with the Trust
Indenture without the consent of the Pledgor;
(c) any exchange, release or non-perfection
of any other collateral, or any release or
amendment or waiver of or consent to any departure
from any guaranty, for all or any of the
Obligations; or
(d) any other circumstance which might
otherwise constitute a defense available to, or a
discharge of, the Pledgor.
SECTION 21. Indemnity.
(a) The Pledgor agrees to indemnify, reimburse
and hold the Collateral Agent and the Secured Parties and
their respective officers, directors, employees and agents
(each individually, an "Indemnitee", and collectively,
"Indemnitees") harmless from any and all liabilities,
obligations, damages, injuries, penalties, claims, demands,
actions, suits, judgments and any and all costs and expenses
(including reasonable attorneys' fees and disbursements)
(such expenses, for purposes of this Section 21, hereinafter
"expenses") of whatsoever kind and nature imposed on,
asserted against or incurred by any Indemnitee in any way
relating to or arising out of (i) this Agreement or the
documents executed in connection herewith or in any other
way connected with the administration of the transactions
contemplated hereby, or the enforcement of any of the terms
hereof, or the preservation of any rights hereunder or
(ii) the ownership, purchase, delivery, control, acceptance,
financing, possession, condition, sale, return or other
disposition, or use of, the Collateral (including, without
limitation, latent or other defects, whether or not
discoverable). Each Indemnitee agrees to use its best
efforts promptly to notify the Pledgor of any assertion of
any such liability, damage, injury, penalty, claim, demand,
action, judgment or suit of which such Indemnitee has
knowledge.
(b) Without limiting the application of
Section 21(a), the Pledgor agrees to pay or reimburse the
Collateral Agent for any and all reasonable fees, costs and
expenses of whatever kind or nature incurred in connection
with the creation, preservation, protection or validation of
the Collateral Agent's Liens on, and security interest in,
the Collateral, including, without limitation, all fees and
taxes in connection with the recording or filing of
instruments and documents in public offices, payment or
discharge of any taxes or Liens upon or in respect of the
Collateral, premiums for insurance with respect to the
Collateral and all other fees, costs and expenses in
connection with protecting, maintaining or preserving the
Collateral and the Collateral Agent's interest therein,
whether through judicial proceedings or otherwise, or in
defending or prosecuting any actions, suits or proceedings
arising out of or relating to the Collateral.
(c) Without limiting the application of
Section 21(a), the Pledgor agrees to pay, indemnify and hold
each Indemnitee harmless from and against any loss, costs,
damages and expenses which such Indemnitee may suffer,
expend or incur in consequence of or growing out of any
failure of the Pledgor to comply with its obligations under
this Agreement or any misrepresentation by the Pledgor in
this Agreement or in any statement or writing contemplated
by or made or delivered pursuant to or in connection with
this Agreement.
(d) If and to the extent that the obligations of
the Pledgor under this Section 21 are unenforceable for any
reason, the Pledgor hereby agrees to make the maximum
contribution to the payment and satisfaction of such
obligations permissible under applicable law.
SECTION 22. Obligations Secured by Collateral.
Any amount paid by any Indemnitee as to which such
Indemnitee has the right to reimbursement, and any amount
paid by the Collateral Agent in preservation of any of its
rights or interest in the Collateral, together with interest
on such amounts from the date paid until reimbursement in
full at a rate per annum equal at all times to the Prime
Rate plus two percent (2%), shall constitute Obligations
secured by the Collateral.
SECTION 23. Severability. Any provision of this
Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision
in any other jurisdiction. Where provisions of any law or
regulation resulting in such prohibition or unenforceability
may be waived, they are hereby waived by the parties hereto
to the full extent permitted by law so that this Agreement
shall be deemed a valid and binding agreement in accordance
with its terms.
SECTION 24. Counterparts; Effectiveness. This
Agreement and any amendment, waiver, consent or supplement
may be executed in counterparts, each of which when so
executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the
same instrument. This Agreement shall become effective upon
the execution and delivery of a counterpart hereof by each
of the parties hereto.
SECTION 25. Reinstatement. This Agreement shall
continue to be effective or be reinstated, as the case may
be, if at any time any amount received by the Collateral
Agent or any Secured Party hereunder or pursuant hereto is
rescinded or must otherwise be restored or returned by the
Collateral Agent or such Secured Party, as the case may be,
upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Pledgor or the Partnership or upon the
appointment of any intervenor or conservator of, or trustee
or similar official for, the Pledgor or the Partnership or
any substantial part of their respective assets, or upon the
entry of an order by a bankruptcy court avoiding the payment
of such amount, or otherwise, all as though such payments
had not been made.
SECTION 26. WAIVER OF SUBROGATION; SUBMISSION TO
JURISDICTION; WAIVER OF JURY TRIAL.
(a) THE PLEDGOR IRREVOCABLY WAIVES ALL RIGHTS OF
SUBROGATION (WHETHER CONTRACTUAL, UNDER SECTION 509 OF
TITLEE11 OF THE UNITED STATES CODE, 11 U.S.C. 101, ET SEQ.
(THE "BANKRUPTCY CODE"), UNDER COMMON LAW OR OTHERWISE) TO
THE CLAIMS OF THE COLLATERAL AGENT AND THE SECURED PARTIES
AGAINST THE PLEDGOR WHICH ARISE IN CONNECTION WITH, OR AS A
RESULT OF, THIS AGREEMENT.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT
TO THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE
UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW
YORK AND THE PLEDGOR HEREBY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. THE
PLEDGOR AND THE COLLATERAL AGENT HEREBY IRREVOCABLY WAIVE
TRIAL BY JURY, AND THE PLEDGOR HEREBY IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO
THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS.
(c) THE PLEDGOR IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
THE PLEDGOR AT ITS ADDRESS SPECIFIED IN SECTIONE18, SUCH
SERVICE TO BECOME EFFECTIVE FOUR (4) BUSINESS DAYS AFTER
SUCH MAILING.
(d) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE
COLLATERAL AGENT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST THE PLEDGOR IN ANY OTHER
JURISDICTION.
SECTION 27. GOVERNING LAW; TERMS. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW EXCEPT
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW)
EXCEPT TO THE EXTENT THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR THE REMEDIES HEREUNDER, ARE
GOVERNED BY THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF NEW YORK. UNLESS OTHERWISE DEFINED HEREIN OR IN
THE TRUST INDENTURE, TERMS DEFINED IN ARTICLEE8 OR ARTICLEE9
OF THE NEW YORK UNIFORM COMMERCIAL CODE ARE USED HEREIN AS
THEREIN DEFINED.
SECTION 28. Recourse Limited to Collateral.
Notwithstanding anything to the contrary contained herein,
the liability and obligation of the Pledgor or any past,
present or future partner, officer, director or stockholder
of the Pledgor under or by reason of this Agreement shall be
limited as provided in Section 4.12 or the Intercreditor
Agreement, and the provisions of said Section 4.12 are
incorporated herein by reference.
Section 29. Exculpatory Provisions. None of the
Collateral Agent or any Secured Party, or any of their
respective officers, employees, servants, controlling
persons, executives, directors, agents, authorized
representatives, attorneys-in-fact or affiliates shall be
liable to the Pledgor for any action taken or omitted to be
taken by it or them (other than actions arising from or
relating to any gross negligence or willful misconduct of
any such Person) under or in connection with this Agreement
or any other Project Document to which the Pledgor is a
party, or responsible in any manner to any Person for any
recital, statement, representation or warranty made by the
Pledgor or any officer thereof contained in this Agreement
or any other Project Document to which the Pledgor is a
party or in any certificate, report, statement or other
document referred to or provided for in, or received by the
Collateral Agent or any Secured Party under or in connection
with, this Agreement or any other Project Document to which
the Pledgor is a party or for the value, effectiveness,
genuineness, enforceability or sufficiency of this Agreement
or any other Project Document or for any failure of the
Pledgor to perform any of the Obligations.
Section 30. Waiver. To the fullest extent it may
lawfully so agree, the Pledgor agrees that it will not at
any time insist upon, claim, plead or take any benefit or
advantage of any appraisement, valuation, stay, extenuation,
moratorium, redemption or similar law now or hereafter in
force in order to prevent, delay or hinder the enforcement
hereof or the absolute sale of any part of the Collateral.
The Pledgor, for itself and all who claim through it, so far
as it or they now or hereafter lawfully may do so, hereby
waives the benefit of all such laws and all right to have
the Collateral marshaled upon any foreclosure hereof, and
agrees that any court having jurisdiction to foreclose this
Agreement may order the sale of the Collateral as an
entirety. Without limiting the generality of the foregoing,
the Pledgor hereby (i) authorizes the Collateral Agent, in
its sole discretion and without notice to or demand upon the
Pledgor and without otherwise affecting the obligations of
the Pledgor hereunder, from time to time to take and hold
other collateral (in addition to the Collateral) for payment
of any Obligations, or any part thereof, and to exchange,
enforce or release such other collateral or any part thereof
and to enforce or release such other collateral or any part
thereof and to accept and hold any endorsement or guarantee
of payment of the Obligations or any part thereof and to
release or substitute any endorser or guarantor or any other
Person granting security for or in any other way obligated
upon any Obligations or any part thereof and (ii) waives and
releases any and all right to require the Collateral Agent
to collect any of the Obligations from any specific item or
items of the Collateral or from any other party liable as a
guarantor or in any other manner in respect of any of the
Obligations or from any other security for any of the
Obligations.
Section 31. Consent. By its execution hereof,
the Pledgor hereby consents to the transfer of the
Collateral to any designee of the Collateral Agent in
accordance with this Agreement and the admission to the
Partnership of such designee as a limited partner in
accordance with this Agreement.
Section 32. Conflicts with the Intercreditor
Agreement or the Depositary Agreement. In the event of any
conflict between the terms of this Agreement and the
Intercreditor Agreement or the Depositary Agreement, the
provisions of the Intercreditor Agreement or the Depositary
Agreement, as the case may be, will apply.
IN WITNESS WHEREOF, each party hereto has caused
this Limited Partner Pledge and Security Agreement to be
duly executed and delivered by its officer thereunto duly
authorized on the date first above written.
PRC II CORPORATION
By
Name:
Title:
FLEET NATIONAL BANK,
as collateral agent
By
Name:
Title:
ACKNOWLEDGMENT AND CONSENT
The Partnership referred to in the foregoing
Agreement hereby acknowledges receipt of a copy thereof and
agrees to be bound thereby and to comply with the terms
thereof insofar as such terms are applicable to it. The
Partnership agrees to notify the Collateral Agent promptly
in writing of the issuance of any Additional Pledged
Interests.
PANDA-ROSEMARY, L.P.,
a Delaware limited partnership
By: Panda - Rosemary Corporation,
a Delaware corporation,
its general partner
By
Name:
Title:
CONSENT
The undersigned corporation, being the sole
general partner of the Partnership referred to in the
foregoing Agreement, hereby consents to the pledge of the
limited partner interest in the Partnership owned by PRC II
Corporation pursuant to such Agreement.
PANDA - ROSEMARY CORPORATION
a Delaware corporation
By
Name:
Title:
STOCK PLEDGE AND SECURITY AGREEMENT
This STOCK PLEDGE AND SECURITY AGREEMENT (this
"Agreement"), dated July 31, 1996, is made by PANDA
INTERHOLDING CORPORATION, a Delaware corporation (together
with its successors and assigns, the "Pledgor"), to FLEET
NATIONAL BANK, a national banking association established
under the laws of the United States of America, as
collateral agent pursuant to the Intercreditor Agreement (as
defined below) (together with its successors and assigns,
the "Collateral Agent") and grantee hereunder for the
benefit of the Secured Parties (as defined in the Trust
Indenture referred to below).
W I T N E S S E T H:
WHEREAS, the Pledgor is the legal and beneficial
owner of all of the shares of common stock described in
Schedule I annexed hereto issued by Panda - Rosemary
Corporation, a Delaware corporation ("PRC"), and PRC II
Corporation, a Delaware corporation ("PRC II"; PRC and
PRC II are sometimes referred to herein as the "Companies")
(such shares of common stock, together with any additional
shares, stock options or rights received pursuant to
Section 4 hereof, the "Pledged Shares");
WHEREAS, PRC is the sole general partner and
PRCEII is the sole limited partner of Panda-Rosemary, L.P.,
a Delaware limited partnership (the "Partnership");
WHEREAS, the Partnership is the legal and
beneficial owner of all of the shares of common stock issued
by Panda-Rosemary Funding Corporation, a Delaware
corporation (the "Funding Company");
WHEREAS, the Funding Company, the Partnership and
Fleet National Bank, as trustee (the "Trustee") are parties
to that certain Trust Indenture, dated as of July 31, 1996
(as the same may be amended, modified or supplemented, the
"Trust Indenture"), providing for the issuance by the
Funding Company of certain debt securities (the "Bonds");
WHEREAS, the Partnership has made that certain
Partnership Guaranty, dated the date hereof (as the same may
be amended, modified or supplemented, the "Partnership
Guaranty"), in favor of the Trustee to guarantee the
performance by the Funding Company of its obligations under
the Bonds and the Trust Indenture;
WHEREAS, the Funding Company and the Partnership
are parties to that certain Loan Agreement, dated as of the
date hereof (as the same may be amended, modified or
supplemented, the "Funding Company Loan Agreement"),
pursuant to which the Funding Company has loaned the
proceeds of the Bonds to the Partnership;
WHEREAS, the Funding Company and the Collateral
Agent are parties to that certain Security Agreement, dated
the date hereof, pursuant to which the Funding Company has
assigned to the Collateral Agent, and created a security
interest in, all of its right, title and interest in, to and
under the Funding Company Loan Agreement and the related
promissory note;
WHEREAS, in order to satisfy certain requirements
of the Partnership under the Project Agreements (as defined
in the Trust Indenture) or for other purposes, the
Partnership may incur indebtedness as permitted under the
Trust Indenture in connection with the issuance of letters
of credit by Bayerische Vereinsbank AG or other Credit Banks
(as defined in the Trust Indenture) pursuant to a Credit
Bank Reimbursement Agreement (as defined in the Trust
Indenture);
WHEREAS, the Partnership may incur indebtedness as
permitted under the Trust Indenture in the form of working
capital loans made by the Credit Banks under a Credit Bank
Working Capital Agreement (as defined in the Trust
Indenture);
WHEREAS, the Partnership may also incur additional
debt, as permitted under the Trust Indenture, either
directly or indirectly through the Funding Company, to
finance certain modifications and enhancements to the
Project in the future ("Additional Permitted Debt", as that
term is defined in the Trust Indenture) and may enter into
interest rate protection agreements in connection with the
Additional Permitted Debt of the Partnership;
WHEREAS, the Pledgor will receive direct and
indirect financial and other benefits from the issuance of
the Bonds by the Funding Company pursuant to the Trust
Indenture and the incurrence of any indebtedness pursuant to
any Credit Bank Reimbursement Agreement, any Credit Bank
Working Capital Agreement and the documents relating to any
Additional Permitted Debt or interest rate protection
transactions;
WHEREAS, the Funding Company, the Partnership,
Bayerische Vereinsbank AG, the Trustee, Fleet National Bank,
as depositary agent, and the Collateral Agent are parties to
that certain Collateral Agency and Intercreditor Agreement,
dated as of the date hereof (the "Intercreditor Agreement"),
providing for the Collateral Agent to act as collateral
agent for the Secured Parties (as defined in the Trust
Indenture); and
WHEREAS, the Collateral Agent and the Secured
Parties are willing to enter into the transactions
contemplated by, among other things, the Trust Indenture and
the Credit Bank Documents (as defined in the Trust
Indenture) only upon the condition, among others, that the
Pledgor executes and delivers this Agreement, in favor of
the Collateral Agent for the benefit of the Secured Parties,
which grants to the Collateral Agent for the benefit of the
Secured Parties a security interest in the Collateral
referred to below, to secure the Obligations (as hereinafter
defined).
NOW, THEREFORE, in consideration of the foregoing
premises and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the
parties hereto hereby agree as follows:
SECTION 1. Defined Terms. Unless otherwise
defined herein, terms defined in the Intercreditor Agreement
(including terms in the Trust Indenture and incorporated in
the Intercreditor Agreement) shall have such defined
meanings when used herein.
"Additional Collateral" shall mean (i) all stock
certificates representing a stock dividend in respect of any
Collateral or a distribution in connection with any
reclassification, increase or reduction of capital of PRC or
PRC II, or issued in connection with any reorganization of
PRC or PRC II, whether as an addition to, in substitution or
redemption of, or in exchange for any shares of any other
Collateral, or otherwise, (ii) any sums paid upon or in
respect of the other Collateral as dividends or other
distributions upon the liquidation or dissolution of PRC or
PRC II and (iii) any distribution of capital made on or in
respect of the other Collateral or any property distributed
upon or with respect to the other Pledged Shares pursuant to
the recapitalization or reclassification of the capital of
PRC or PRC II or pursuant to the reorganization of either
thereof.
"Collateral" shall have the meaning provided that
term in Section 2.
"Indemnitee" shall have the meaning provided that
term in Section 22.
"Obligations" means (i) all obligations of the
Pledgor under this Agreement, (ii) all obligations of the
Partnership or the Funding Company to the Collateral Agent,
the Depositary Agent or the Secured Parties now or hereafter
existing under the Bonds, the Trust Indenture, each
Partnership Guarantee, the Partnership Notes, any Additional
Permitted Debt, any Credit Bank Working Capital Agreement,
any Credit Bank Reimbursement Agreement, any Interest Rate
Protection Agreement, this Agreement or the Collateral
Documents, whether for principal, interest (including,
without limitation, interest accruing following the filing
by or against the Partnership or the Funding Company of a
bankruptcy petition, whether or not allowed as a claim in a
bankruptcy proceeding), fees, indemnification, expenses or
otherwise, and (iii) all other liabilities, obligations,
covenants and duties owing to the Collateral Agent, the
Depositary Agent or the Secured Parties, from or by the
Pledgor, the Partnership or the Funding Company of any kind
or nature, present or future, whether or not evidenced by
any note, guaranty or other instrument, arising under or in
the connection with the Trust Indenture, each Partnership
Guarantee, the Partnership Notes, any Additional Permitted
Debt, any Credit Bank Working Capital Agreement, any Credit
Bank Reimbursement Agreement, any Interest Rate Protection
Agreement, this Agreement or the Collateral Documents,
whether or not for the payment of money, whether direct or
indirect (including those acquired by assignment), joint or
several, absolute or contingent, liquidated or unliquidated,
due or to become due, now existing or hereafter arising,
renewed or restructured, whether or not from time to time
decreased or extinguished and later increased, created or
incurred, and including, without limitation, all
indebtedness of the Pledgor, the Partnership or the Funding
Company under any instrument now or hereafter evidencing or
securing any of the foregoing and however acquired.
"Pledged Shares" shall have the meaning provided
that term in the first recital hereto.
"Proceeds" means all proceeds paid or payable,
directly or indirectly, to or for the account of the Pledgor
in respect of the Collateral and, in any event, shall
include, but not be limited to, (i) any and all proceeds of
any insurance, indemnity, warranty or guaranty payable to
the Collateral Agent or the Pledgor from time to time with
respect to any of the Collateral, (ii) any and all payments
(in any form whatsoever) made or due and payable to the
Pledgor from time to time in connection with any
requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any
Governmental Authority (or any Person acting under color of
Governmental Authority), (iii) any and all other amounts
from time to time paid or payable under or in connection
with any of the Collateral and (iv) any proceeds of
proceeds.
"Prime Rate" means, as of any day, the interest
rate per annum established by the Collateral Agent from time
to time as its "Prime Rate".
SECTION 2. Pledge. As security for the
Obligations and subject to and in accordance with the
provisions of this Agreement, including without limitation
Section 7 hereof, the Pledgor hereby pledges, grants,
assigns, hypothecates, transfers and delivers to the
Collateral Agent, for its benefit and the benefit of the
Secured Parties, a first priority security interest in the
following, whether now owned or existing or hereafter
acquired or arising or wherever located (the "Collateral"):
(a) the Pledged Shares and each certificate
representing the Pledged Shares and any interest of the
Pledgor in the entries on the books of any financial
intermediary pertaining to the Pledged Shares, and, subject
to Section 7 hereof, all dividends, cash, options, warrants,
rights, instruments and other property or proceeds from time
to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged
Shares;
(b) all additional shares of stock of the
Companies from time to time acquired by the Pledgor in any
manner (which shares shall be deemed to be part of the
Pledged Shares) and each certificate representing such
additional shares and any interest of the Pledgor in the
entries on the books of any financial intermediary
pertaining to such additional shares, and, subject to
Section 7 hereof, all dividends, cash, options, warrants,
rights, instruments and other property from time to time
received, receivable or otherwise distributed in respect of
or in exchange for any or all of such shares;
(c) all Additional Collateral acquired by the
Pledgor; and
(d) subject to Section 7 hereof, all Proceeds of
the items described in clauses (a), (b) and (c) above.
SECTION 3. Security for Obligations. This
Agreement secures, and the Pledged Shares and the other
Collateral are collateral security for, the payment and
performance in full when due, whether at stated maturity, by
acceleration or otherwise (including the payment of amounts
which would become due but for the operation of the
automatic stay under Section 362(a) of the Bankruptcy Code,
11 U.S.C. 362(a)), of all Obligations now or hereafter
existing.
SECTION 4. Delivery of Collateral. All
certificates or instruments representing or evidencing the
Collateral shall be delivered to and held by or on behalf of
the Collateral Agent pursuant hereto and shall be in
suitable form for transfer by delivery, or shall be
accompanied by duly executed undated instruments of transfer
or assignment in blank, all in form and substance reasonably
satisfactory to the Collateral Agent. If the Pledgor shall
become entitled to receive or shall receive any other
Collateral, then the Pledgor shall, except as otherwise
provided in Section 7 hereof, accept and hold the same in
trust for the Collateral Agent and segregated from the other
property or funds of Pledgor, and shall deliver to the
Collateral Agent forthwith all such other Collateral (except
as provided in Section 7 hereof) in the form received by the
Pledgor, to be held by the Collateral Agent, subject to the
terms hereof, as part of the Collateral. Upon the
occurrence and during the continuance of an Event of Default
or a Trigger Event, the Collateral Agent shall have the
right, at any time in its discretion and without notice to
the Pledgor, to transfer to or to register in the name of
the Collateral Agent or any of its nominees any or all of
the Collateral. Subject to Section 7 hereof, all Additional
Collateral that is received by the Pledgor shall, until paid
or delivered to the Collateral Agent, be held by the Pledgor
in trust for the benefit of the Collateral Agent and shall
be segregated from the other funds of the Pledgor and the
Pledgor shall deliver the same forthwith to the Collateral
Agent in the exact form received, with the endorsement of
the Pledgor when necessary and/or appropriate undated stock
powers duly executed in blank, or, if requested by the
Collateral Agent, an additional pledge agreement or security
agreement executed and delivered by the Pledgor, all in form
and substance satisfactory to the Collateral Agent, to be
held by the Collateral Agent subject to the terms hereof, as
additional collateral security for the Obligations.
SECTION 5. Representations and Warranties. On
and as of the date hereof, the Pledgor represents and
warrants to the Collateral Agent and the Secured Parties as
follows:
(a) The Pledgor is the owner of, and has good and
marketable title to, the Collateral pledged pursuant to this
Agreement, free and clear of any Lien except for the pledge
and security interest granted to the Collateral Agent for
the benefit of the Secured Parties hereunder and Liens for
Taxes not yet due or which are subject to a Good Faith
Contest. No financing statement covering the Collateral is
on file in any public office other than terminated financing
statements and the financing statements filed pursuant to
this Agreement or in connection with the transactions
contemplated by the Trust Indenture. The Collateral is not
subject to any law (except as may be required in connection
with any disposition of the Collateral by laws affecting the
offering and sale of securities generally) or contractual
obligation that would be violated by or that would prohibit
the grant of the security interest in the Collateral granted
pursuant hereto or the disposition of the Collateral by or
to the Collateral Agent upon the occurrence and continuance
of an Event of Default.
(b) The Pledgor is a corporation duly organized
and validly existing under the laws of the State of
Delaware. The Pledgor has full power, authority and legal
right to enter into this Agreement and perform hereunder and
to pledge and deliver all of the Collateral pursuant to this
Agreement. The pledge of the Collateral pursuant to this
Agreement has been duly authorized by the Pledgor and this
Agreement has been duly authorized, executed and delivered
by the Pledgor and constitutes the legal, valid and binding
obligation of the Pledgor enforceable against the Pledgor in
accordance with its terms except as enforceability may be
limited by applicable bankruptcy, insolvency, moratorium or
other similar laws affecting creditors' rights generally and
except as enforceability may be limited by general
principles of equity (whether considered in a suit at law or
in equity).
(c) No consent of any other party (including,
without limitation, stockholders or creditors of the
Pledgor) and no consent, authorization, approval or other
action by, and no notice to or filing with, any Governmental
Authority is required which has not been obtained either
(i) for the pledge by the Pledgor of the Collateral pursuant
to this Agreement or for the execution, delivery or
performance of this Agreement by the Pledgor or (ii) for the
exercise by the Collateral Agent of the voting or other
rights provided for in this Agreement or the remedies in
respect of the Collateral pursuant to this Agreement (except
as may be required (x) in connection with such disposition
by laws affecting the offering and sale of securities
generally, (y) under federal and state laws, rules and
regulations and applicable interpretations thereof providing
for the supervision or regulation of the banking or trust
businesses generally and applicable to the Collateral Agent
or any Secured Party and (z) with respect to the Collateral
Agent or any Secured Party as a result of any relationship
which such Person may have with Persons not parties to, or
any activity or business such Person may conduct other than
pursuant to, any of the Financing Documents).
(d) All of the Pledged Shares have been duly
authorized and validly issued and are fully paid and non-
assessable. None of the Pledged Shares constitutes "margin
stock" within the meaning of Regulations G, T, U or X of the
Board of Governors of the Federal Reserve System.
(e) The pledge of the Collateral delivered to the
Collateral Agent pursuant to this Agreement concurrently
with the execution and delivery of this Agreement and the
filing of Form UCC-1 financing statements with the Secretary
of State of the State of Texas and the Secretary of State of
the State of Delaware create a valid and perfected first
priority security interest in the Collateral securing the
payment of the Obligations assuming continued possession
thereof by the Collateral Agent subject to no Liens other
than those created by this Agreement.
(f) The Pledged Shares constitute all of the
issued and outstanding shares of stock of the Companies.
The Pledgor shall cause the Collateral to constitute at all
times not less than all of the total number of shares of
capital stock of the Companies then issued and outstanding
(including treasury shares, if any).
(g) The execution, delivery and performance of
this Agreement will not (i) require any consent or approval
of the Board of Directors or stockholders of the Pledgor
which has not been obtained; (ii) violate the provisions of
the Pledgor's or the Companies' Certificate of Incorporation
or By-Laws; (iii) violate the provisions of any law
(including, without limitation, any usury law), regulation
or order of any Governmental Authority applicable to the
Pledgor or any of its Subsidiaries; (iv) conflict with,
result in a breach of or constitute a default under any
agreement relating to the management or affairs of the
Pledgor or any of its Subsidiaries, or any indenture or loan
or credit agreement or any other material agreement, lease
or instrument to which the Pledgor is a party or by which
the Pledgor or any of its Subsidiaries or any of their
material properties may be bound; or (v) result in or create
any Lien (other than Permitted Liens) under, or require any
consent under, any indenture or loan or credit agreement or
any other material agreement, instrument or document, or the
provisions of any order, writ, judgment, injunction, decree,
determination or award of any Governmental Authority binding
upon the Pledgor or any of its Subsidiaries or any of their
properties.
(h) There is no action, suit or proceeding at law
or in equity or by or before any Governmental Authority,
arbitral tribunal or other body now pending or, to the best
knowledge of the Pledgor, threatened against the Pledgor or
its Subsidiaries which questions the validity or legality of
or seeks damages in connection with this Agreement or any
action taken or to be taken pursuant to this Agreement,
which could reasonably be expected to have a material
adverse effect on the Pledgor.
(i) The chief executive office of the Pledgor is
located at 4100 Spring Valley Road, Suite 1001, Dallas,
Texas 75244.
(j) The Pledgor is not (i) an "investment
company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of
1940, as amended, or (ii) a "holding company" or a
"subsidiary company" of a "holding company" or an
"affiliate" of a "holding company" or a "subsidiary company"
within the meaning of PUHCA or (iii) a "registered holding
company" or a "subsidiary company" of a "registered holding
company" or an "affiliate" of a "registered holding company"
or a "subsidiary company" of a "registered holding company"
within the meaning of PUHCA.
(k) The Pledgor shall not permit the Companies to
merge or consolidate with or into any other Person or
liquidate, wind-up, or dissolve or dispose of all or
substantially all of their property, business or assets.
(l) Without the prior written consent of the
Secured Parties, the Pledgor shall not exchange, sell,
transfer, pledge, hypothecate, assign, convey or otherwise
dispose of, or permit to be exchanged, sold, transferred,
pledged, hypothecated, assigned, conveyed or disposed of,
any of the Collateral.
(m) The Pledgor shall not authorize, cause or
permit the Companies (i)(A) to commence a voluntary case or
other proceeding seeking liquidation, reorganization or
other relief with respect to the Companies or the Company's
debts or under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of
a Collateral Agent, receiver, custodian or other similar
official of the Companies or any substantial part of the
Companies' property or (B) to consent to any such relief or
to the appointment of or taking possession by such official
in an involuntary case or other proceeding commenced against
the Company, or (C) to make a general assignment for the
benefit of the Companies' creditors. Neither the Pledgor
nor any of its Affiliates shall commence or join with any
other Person (other than the Secured Parties) in commencing
any proceeding agaainst the Companies under any bankruptcy,
reorganization, liquidation or insolvency law or statute now
or hereafter in effect in any jurisdiction.
(n) The Pledgor has derived and will continue to
derive direct and indirect benefits from the incurrence of
its obligations under this Agreement and from the incurrence
by the Partnership of its obligations under the Partnership
Guaranty, the Trust Indenture, the Company Loan Agreement
and the other Financing Documents.
SECTION 6. Supplements; Further Assurances. The
Pledgor agrees that, at any time and from time to time, the
Pledgor will at its expense promptly execute and deliver all
further instruments and documents, and take all further
action, that may be necessary or desirable, or that the
Collateral Agent may reasonably request, in order to perfect
and protect any security interest granted or purported to be
granted hereby or to enable the Collateral Agent to exercise
and enforce its rights and remedies hereunder with respect
to any Collateral.
SECTION 7. Voting Rights; Dividends; Etc.
(a) So long as no Event of Default or Trigger
Event shall have occurred and be continuing, the Pledgor
shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Collateral or any part
thereof; provided, that the Pledgor shall not (i) exercise
or fail to exercise any such right if such exercise or
failure to exercise would, in the reasonable judgment of the
Pledgor, have a material adverse effect on the value of the
Collateral or any part thereof or (ii) vote such Collateral
in any manner that is inconsistent with the terms of this
Agreement, the Trust Indenture or any other Project Document
or that would cause an Event of Default or Trigger Event to
occur. It is understood, however, that the voting by the
Pledgor of any Pledged Shares for, or the Pledgor's consent
to, the election of directors at a regularly scheduled
annual or other meeting of stockholders, or with respect to
incidental matters at any such annual meeting, shall not be
deemed inconsistent with the terms of this Agreement within
the meaning of this Section 7(a).
(b) The Pledgor shall be entitled to receive,
retain and distribute any and all distributions paid in
respect of the Collateral; provided, that any and all
(i) distributions paid or payable in shares
(or rights to shares) in the Companies,
(ii) distributions paid or payable in cash,
securities or other property in respect of any
Collateral in connection with a partial or total
liquidation or dissolution, and
(iii) cash, securities or other property paid,
payable or otherwise distributed in redemption of, or
in exchange for, any Collateral,
shall be, and shall be forthwith delivered to the Collateral
Agent to hold as, Collateral and shall, if received by the
Pledgor, be received in trust for the benefit of the
Collateral Agent, be segregated from the other property or
funds of the Pledgor and be forthwith delivered to the
Collateral Agent as Collateral in the same form as so
received (with any necessary endorsement).
(c) In order to permit the Pledgor to exercise
the voting and other rights which it is entitled to exercise
pursuant to Section 7(a) above and to receive the
distributions which it is authorized to receive and retain
pursuant to Section 7(b) above, the Collateral Agent shall,
if necessary, execute and deliver (or cause to be executed
and delivered) to the Pledgor all such proxies, dividend
payment orders and other instruments as the Pledgor may
reasonably request.
(d) Upon the occurrence and during the
continuance of an Event of Default or a Trigger Event, after
the Collateral Agent delivers a notice to the Pledgor to the
following effect, all rights of the Pledgor to exercise the
voting and other consensual rights which it would otherwise
be entitled to exercise pursuant to Section 7(a) above shall
cease and all such rights shall thereupon become vested in
the Collateral Agent, which shall thereupon have the sole
right to exercise such voting and other consensual rights;
provided, that if and when an Event of Default or Trigger
Event is cured in accordance with the applicable provisions
of the Financing Documents, all rights of the Pledgor shall
resume.
(e) Upon the occurrence and during the
continuance of an Event of Default or Trigger Event, all
rights of the Pledgor to thereafter receive the
distributions which it would otherwise be authorized to
receive pursuant to Section 7(b) above shall cease and all
such rights shall thereupon become vested in the Collateral
Agent, which shall thereupon have the sole right to receive
and hold as Collateral such distributions; provided, that if
and when an Event of Default or Trigger Event is cured in
accordance with the applicable provisions of the Financing
Documents, all rights of the Pledgor shall resume.
(f) In order to permit the Collateral Agent to
receive all distributions to which it may be entitled
pursuant to Section 7(e) above and to exercise the voting
and other consensual rights which it may be entitled to
exercise pursuant to Section 7(d) above, the Pledgor shall,
if necessary, upon written notice from the Collateral Agent,
from time to time execute and deliver to the Collateral
Agent appropriate dividend payment orders and other
instruments as the Collateral Agent may reasonably request.
(g) All distributions and other amounts which are
received by the Pledgor contrary to the provisions of
Section 7(e) above shall be received in trust for the
benefit of the Collateral Agent, shall be segregated from
other funds of the Pledgor and shall be forthwith paid over
to the Collateral Agent as Collateral in the same form as so
received (with any necessary endorsement).
SECTION 8. Covenants.
(a) Transfers and Other Liens. Without the prior
written consent of the Collateral Agent, or as otherwise
permitted under the Intercreditor Agreement, the Pledgor
shall not (i) vote to enable, or take any other action to
permit, PRC or PRC II (x) to issue any additional capital
stock, (y) to issue any other securities convertible into or
exchangeable for any capital stock of such company, or (z)
to issue any other securities that grant the right to
purchase any capital stock of such company, (ii) sell,
assign, transfer, exchange or otherwise dispose of, or grant
any option with respect to, the Pledged Shares,
(iii) create, incur or permit to exist any Liens or options
in favor of, or any claims of any Person with respect to,
any of the Pledged Shares or any interest therein, except
for Permitted Liens and the Liens provided for by this
Agreement; provided, that Pledgor may sell or transfer up to
49% of the Pledged Shares if such transfer or sale would not
result in an Event of Default (such transfer or sale being
herein referred to as a "Permitted Transfer") and (x) the
purchaser or transferee of such Collateral shall pledge such
Collateral pursuant to a pledge agreement substantially
similar hereto and take such additional actions as the
Collateral Agent may reasonably request in connection
therewith (including, without limitation, executing and
delivering such agreements, certificates, legal opinions,
instruments or other documents as may be reasonably
requested by the Collateral Agent), (y) no Default or Event
of Default would result therefrom and (z) none of the
representations and warranties set forth in the Indenture
shall be untrue or incorrect in any matierial respect solely
as a result of the occurrence of a Permitted Transfer.
(b) Change of Address. The Pledgor shall not
establish a new location for its chief executive office or
change its name until (i) it has given to the Collateral
Agent no less than sixty (60) days' prior written notice of
its intention so to do, clearly describing such new location
or specifying such new name, as the case may be, and
(ii) with respect to such new location or such new name, as
the case may be, it shall have taken all action,
satisfactory to the Collateral Agent, to maintain the
security interest of the Collateral Agent in the Collateral
intended to be granted hereby at all times fully perfected
and in full force and effect.
(c) Payment of Taxes, etc. The Pledgor shall pay
or cause to be paid, and shall hold the Collateral Agent and
the Secured Parties harmless from, any and all liabilities
with respect to, or resulting from any delay in paying, any
and all stamp, excise, sales or other taxes which may be
payable or determined to be payable with respect to any of
the Collateral.
SECTION 9. Collateral Agent Appointed Attorney-In-
Fact.
(a) Upon the occurrence and during the
continuance of an Event of Default or Trigger Event, subject
to the Pledgor's rights under Section 7 hereof, the Pledgor
hereby appoints the Collateral Agent as the Pledgor's
attorney-in-fact, with full authority in the place and stead
of the Pledgor and in the name of the Pledgor or otherwise
(i) to exercise all voting, consent other rights related to
the Collateral and (ii) from time to time in the Collateral
Agent's discretion, to take any action and to execute any
instrument which the Collateral Agent may deem necessary or
advisable to enforce its rights under this Agreement,
including, without limitation, authority to receive, endorse
and collect all instruments made payable to the Pledgor
representing any distribution, interest payment or other
payment in respect of the Collateral or any part thereof and
to give full discharge for the same. The Pledgor hereby
ratifies all that such attorney shall lawfully do or cause
to be done by virtue hereof. This power of attorney is
coupled with an interest and shall be irrevocable for the
term of this Agreement. Nevertheless, the Pledgor shall, if
so requested by the Collateral Agent, ratify and confirm all
that the Collateral Agent shall lawfully do or cause to be
done by virtue hereof as the Pledgor's attorney-in-fact by
executing and delivering to the Collateral Agent, or to such
other Person as the Collateral Agent shall direct, all
documents and instruments as may be necessary or, in the
judgment of the Collateral Agent, advisable for such
purpose.
(b) The Pledgor further authorizes the Collateral
Agent, at any time and from time to time, (i) to execute, in
connection with any sale provided for hereunder, any
endorsements, assignments or other instruments of conveyance
or transfer with respect to the Collateral and (ii) to the
full extent permitted by applicable law, to file one or more
financing or continuation statements, and amendments
thereto, relative to all or any part of the Collateral
without the signature of the Pledgor.
SECTION 10. Collateral Agent May Perform. If the
Pledgor fails to perform any agreement contained herein
after receipt of a written request to do so from the
Collateral Agent, the Collateral Agent may itself perform,
or cause performance of, such agreement, and the reasonable
expenses of the Collateral Agent, including the reasonable
fees and expenses of its counsel, incurred in connection
therewith shall be payable by the Pledgor pursuant to
Section 15 hereof.
SECTION 11. Reasonable Care. The Collateral
Agent shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment
substantially equivalent to that which the Collateral Agent
accords its own property consisting of negotiable
securities, cash or other forms of property as applicable,
it being understood that subject to the exercise of such
reasonable care the Collateral Agent shall have no
responsibility for (i)Eascertaining or taking action with
respect to calls, conversions, exchanges, maturities,
tenders or other matters relative to any Collateral, whether
or not the Collateral Agent has or is deemed to have
knowledge of such matters, or (ii) taking any necessary
steps to preserve rights against any parties with respect to
any Collateral.
SECTION 12. No Liability. None of the Collateral
Agent, the Secured Parties or any of their directors,
officers, employees or agents shall be deemed to have
assumed any of the liabilities or obligations of a
shareholder of the Companies, or of the owner of any Pledged
Shares or any other security included in the Collateral from
time to time as a result of the pledge and security interest
granted under or pursuant to this Agreement. None of the
Collateral Agent, the Secured Parties or any of their
directors, officers, employees or agents shall be liable for
any failure to collect or realize upon the Obligations or
any collateral security or guarantee therefor, or any part
thereof, or for any delay in so doing, nor shall any of them
be under any obligation to take any action whatsoever with
regard thereto.
SECTION 13. Remedies Upon Default. If an Event
of Default or Trigger Event shall have occurred and be
continuing:
(a) (i) The Collateral Agent may exercise in
respect of the Collateral, in addition to all other
rights and remedies provided for herein or otherwise
available to it, all of the rights and remedies of a
secured party on default under the Uniform Commercial
Code in effect in the State of New York at that time,
and the Collateral Agent may also in its sole
discretion, without advertisement or notice except as
specified below, sell the Collateral or any part
thereof in one or more parcels at public or private
sale, at any exchange, broker's board or at any of the
Collateral Agent's offices or elsewhere, for cash, on
credit or for future delivery, and at such price or
prices and upon such other terms as the Collateral
Agent may reasonably deem commercially reasonable,
irrespective of the impact of any such sales on the
market price of the Collateral at any such sale. The
Collateral Agent may, in its sole discretion, at any
such sale, restrict the prospective bidders or
purchasers as to their number, nature of business and
investment intention. Upon any such sale the
Collateral Agent shall have the right to deliver,
assign and transfer to the purchaser thereof (including
the Collateral Agent or any Secured Party) the
Collateral. Each purchaser at any such sale shall hold
the property sold free from any claim or right on the
part of the Pledgor, and the Pledgor hereby waives (to
the extent permitted by law) all rights of redemption,
stay and/or appraisal which it now has or may at any
time in the future have under any rule of law or
statute now existing or hereafter enacted. The Pledgor
agrees that, to the extent notice of sale shall be
required by law, at least ten (10) days' notice to the
Pledgor of the time and place of any public sale or the
time after which any private sale is to be made shall
constitute reasonable notification. The Collateral
Agent shall not be obligated to make any sale of
Collateral regardless of notice of sale having been
given. The Collateral Agent may adjourn any public or
private sale from time to time by announcement at the
time and place fixed therefor, and such sale may,
without further notice, be made at the time and place
to which it was so adjourned. At any such sale, the
Collateral may be sold in one lot, as an entirety or in
separate units. Assuming that such sales are made in
compliance with federal and state securities laws, the
Collateral Agent shall incur no liability as a result
of the sale of the Collateral, or any part thereof, at
any public or private sale. The Pledgor hereby waives
any claims against the Collateral Agent arising by
reason of the fact that the price at which any
Collateral may have been sold at such a private sale,
if commercially reasonable, was less than the price
which might have been obtained at a public sale, even
if the Collateral Agent accepts the first offer
received and does not offer such Collateral to more
than one offeree.
(ii) The Pledgor recognizes that the
Collateral Agent may elect in its sole discretion to
sell all or a part of the Collateral to one or more
purchasers in privately negotiated transactions in
which the purchasers will be obligated to agree, among
other things, to acquire the Collateral for their own
account, for investment and not with a view to the
distribution or resale thereof. The Pledgor
acknowledges that such private sales may be at prices
and on terms less favorable than those obtainable
through a public sale (including, without limitation, a
public offering made pursuant to a registration
statement under the Securities Act of 1933, as amended
(the "Securities Act")) and the Pledgor and the
Collateral Agent agree that such private sales shall be
made in a commercially reasonable manner and that the
Collateral Agent has no obligation to engage in public
sales and no obligation to delay sale of any Collateral
to permit the issuer thereof to register the Pledged
Shares for a form of public sale requiring registration
under the Securities Act.
(iii) In case of any sale of all or any part
of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Collateral
Agent until the full selling price is paid by the
purchaser thereof, but the Collateral Agent shall not
incur any liability in case of the failure of such
purchaser to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may
again be sold pursuant to the provisions hereof.
(iv) The receipt by the Collateral Agent of
the purchase money paid at any such sale made by it
shall be a sufficient discharge of all obligations of
the purchaser thereof. No purchaser (or the
representatives or assigns of any purchaser), after
paying such purchase money and receiving such receipt,
shall be bound to see to the application of such
purchase money or any part thereof or in any manner
whatsoever be answerable for any loss, misapplication
or nonapplication of any such purchase money, or any
part thereof, or be bound to inquire as to the
authorization, necessity, expediency or regularity of
any such sale.
(v) Instead of exercising the power of
sale provided in Section 13(a)(i) hereof, the
Collateral Agent may proceed by a suit or suits at law
or in equity to foreclose the security interest under
this Agreement and sell the Collateral or any portion
thereof under a judgment or decree of a court or courts
of competent jurisdiction.
(vi) Upon notice to the Pledgor, the
Collateral Agent may register the Collateral or any
part thereof in the name of the Collateral Agent or its
nominee as pledgee or otherwise take such action as the
Collateral Agent shall in its sole discretion deem
necessary or desirable with respect to the Collateral
and the Collateral Agent or its nominee may thereafter,
in its sole discretion, without notice, exercise all
voting and other rights relating to the Collateral and
exercise any and all rights, privileges or options
pertaining to the Collateral as if it were the absolute
owner thereof, and exchange, at its sole discretion,
any and all of the Collateral upon the merger,
consolidation, reorganization, recapitalization or
other readjustment of the Company, all without
liability except to account for property actually
received by it, but the Collateral Agent shall have no
duty to exercise any of the aforesaid rights,
privileges or options and shall not be responsible for
any failure to do so or delay in so doing, except to
the extent that such failure or delay constitutes gross
negligence or willful misconduct.
(vii) The Collateral Agent may exercise such
voting and other consensual rights and rights to
receive and hold as Collateral dividends and other
payments which the Pledgor would otherwise be entitled
to receive or exercise, as the case may be, pursuant to
Section 7 and all such voting and consensual rights and
rights to receive the dividends and other payments
which the Pledgor would otherwise be authorized to
exercise, receive and retain pursuant to Section 7
shall cease and all such rights shall thereupon become
vested in the Collateral Agent.
(viii) No sale or other disposition of all or
any part of the Collateral by the Collateral Agent
pursuant to this Section 13 shall be deemed to relieve
the Funding Company, the Partnership or the Pledgor of
any Obligation except to the extent the proceeds
thereof are applied by the Collateral Agent to the
payment of such Obligations.
(ix) The Pledgor hereby waives presentment,
demand, protest or notice (to the extent permitted by
applicable law) of any kind in connection with this
Agreement or any Collateral.
(b) The proceeds of any Collateral obtained or
disposed of hereunder shall be applied as set forth in the
Intercreditor Agreement and the Depositary Agreement.
SECTION 14. Purchase of the Shares by the
Pledgor. The Pledgor may be a purchaser of the Pledged
Shares or any part thereof or any right or interest therein
at any sale thereof, whether pursuant to foreclosure, power
of sale or otherwise hereunder and the Collateral Agent may
apply the purchase price to the payment of the Obligations
and any other indebtedness and obligations secured hereby.
Any such purchaser shall, upon any such purchase, acquire
good title to the Pledged Shares so purchased, free of the
security interests created by this Agreement.
SECTION 15. Expenses. The Pledgor will upon
demand pay to the Collateral Agent and the Secured Parties
the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any
experts and agents, and any transfer taxes which the
Collateral Agent or the Secured Parties may incur in
connection with (i) the custody or preservation of, or the
sale of, collection from, or other realization upon, any of
the Collateral pursuant to the exercise or enforcement of
any of the rights of the Collateral Agent hereunder or (ii)
the failure by the Pledgor to perform or observe any of the
provisions hereof, together with interest thereon at the
rate per annum equal to the Prime Rate plus two percent
(2%). Any amounts payable by the Pledgor pursuant to this
SectionE15 shall be payable on demand and shall constitute
Obligations secured hereby.
SECTION 16. No Waiver. No failure or delay on
the part of the Collateral Agent to exercise, and no course
of dealing with respect to, and no delay in exercising, any
right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise by the
Collateral Agent of any right, power or remedy hereunder
preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. The remedies
herein provided are to the fullest extent permitted by law
cumulative and are not exclusive of any remedies provided by
law. No notice to or demand on the Pledgor in any case
shall entitle the Pledgor to any other or further notice or
demand in similar or other circumstances.
SECTION 17. Amendments; Etc. No waiver,
amendment, modification or termination of any provision of
this Agreement, or consent to any departure by the Pledgor
therefrom, shall in any event be effective without the
written concurrence of each party hereto and none of the
Collateral shall be released without the written consent of
the Collateral Agent. Any such waiver or consent shall be
effective only in the specific instance and for the specific
purpose for which given.
SECTION 18. Release. Subject to Section 27
hereof, upon the indefeasible payment in full or performance
of the Obligations and the occurrence of the Debt
Termination Date, the Collateral Agent, upon request by the
Pledgor, shall execute and deliver all such documentation
necessary to release the Lien in its favor and to terminate
this Agreement.
SECTION 19. Notices. Any notice to the
Collateral Agent shall be deemed effective only if sent to
and received at the office of the Collateral Agent at
777 Main Street, Hartford, Connecticut 06115, or sent by
confirmed telecopy to telecopy number (860) 986-7920. Any
notice to the Pledgor hereunder shall be deemed to have been
duly given only if sent to and received at the office of the
Pledgor at 4100 Spring Valley Road, Suite 1001, Dallas,
Texas 75244, Attention: President, or sent by confirmed
telecopy to telecopy number (214) 980-6815, or at such other
address of which such Person shall have notified in writing
to each other party hereto.
SECTION 20. Continuing Security Interest.
(a) This Agreement shall create a continuing Lien
on the Collateral until the release thereof pursuant to
Section 18 hereof. Upon termination of this Agreement
pursuant to the terms of Section 18 hereof, the Pledgor
shall be entitled to the return, promptly upon its request
and at its expense, of such of the Collateral as shall not
have been sold or otherwise applied pursuant to the terms
hereof.
(b) Except as may expressly applicable pursuant
to Section 9-505 of the Uniform Commercial Code, no action
taken or omission to act by the Collateral Agent or the
Secured Parties hereunder, including, without limitation,
any exercise of voting or consensual rights or any other
action taken or inaction pursuant to this Agreement shall be
deemed to constitute a retention of the Collateral in
satisfaction of the Obligations or otherwise to be in full
satisfaction of the Obligations, and the Obligations shall
remain in full force and effect, until the Collateral Agent
and the Secured Parties shall have applied payments
(including, without limitation, collections from Collateral)
towards the Obligations in the full amount then outstanding
or until such subsequent time as is hereinafter provided in
subsection (c) below.
(c) To the extent any payments on the Obligations
or proceeds of the Collateral are subsequently invalidated,
declared to be fraudulent or preferential, set aside or
required to be repaid to a trustee, debtor in posssession,
receiver or other Person under any bankruptcy law, common
law or equitable cause, then to such extent the Obligations
so satisfied shall be revived and continue as if such
payment or proceeds had not been received by the Collateral
Agent or the Secured Parties, and the Collateral Agent's and
the Secured Parties' security interests, rights, powers and
remedies hereunder shall continue in full force and effect.
In such event, this Agreement shall be automatically
reinstated if it shall theretofore have been terminated
pursuant to Section 27.
SECTION 21. Security Interest Absolute. All
rights of the Collateral Agent and security interests
hereunder, and all obligations of the Pledgor hereunder,
shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of any
of the Project Documents, or any other agreement or
instrument relating thereto (other than against the
Collateral Agent);
(b) any change in the time, manner or place of
payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any
consent to any departure from the Project Documents, or any
other agreement or instrument relating thereto; provided,
that the aggregate amount of the Obligations shall not be
increased other than in accordance with the Trust Indenture
without the consent of the Pledgor;
(c) any exchange, release or non-perfection of
any other collateral, or any release or amendment or waiver
of or consent to any departure from any guaranty, for all or
any of the Obligations; or
(d) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, the
Pledgor.
SECTION 22. Indemnity.
(a) The Pledgor agrees to indemnify, reimburse
and hold the Collateral Agent and the Secured Parties and
their respective officers, directors, employees and agents
(each individually, an "Indemnitee", and collectively,
"Indemnitees") harmless from any and all liabilities,
obligations, damages, injuries, penalties, claims, demands,
actions, suits, judgments and any and all costs and expenses
(including reasonable attorneys' fees and disbursements)
(such expenses, in this Section 22, the "expenses") of
whatsoever kind and nature imposed on, asserted against or
incurred by any Indemnitee in any way relating to or arising
out of (i) this Agreement or the documents executed in
connection herewith or in any other way connected with the
administration of the transactions contemplated hereby, or
the enforcement of any of the terms hereof, or the
preservation of any rights hereunder or (ii) the ownership,
purchase, delivery, control, acceptance, financing,
possession, condition, sale, return or other disposition, or
use of, the Collateral, including, without limitation,
latent or other defects, whether or not discoverable. Each
Indemnitee agrees to use its best efforts promptly to notify
the Pledgor of any assertion of any such liability, damage,
injury, penalty, claim, demand, action, judgment or suit of
which such Indemnitee has knowledge.
(b) Without limiting the application of
Section 22(a), the Pledgor agrees to pay, or reimburse the
Collateral Agent for, any and all reasonable fees, costs and
expenses of whatever kind or nature incurred in connection
with the creation, preservation, protection or validation of
the Collateral Agent's Liens on, and security interest in,
the Collateral, including, without limitation, all fees and
taxes in connection with the recording or filing of
instruments and documents in public offices, payment or
discharge of any taxes or Liens upon or in respect of the
Collateral, premiums for insurance with respect to the
Collateral and all other fees, costs and expenses in
connection with protecting, maintaining or preserving the
Collateral and the Collateral Agent's interest therein,
whether through judicial proceedings or otherwise, or in
defending or prosecuting any actions, suits or proceedings
arising out of or relating to the Collateral.
(c) Without limiting the application of Section
22(a) or (b), the Pledgor agrees to pay, indemnify and hold
each Indemnitee harmless from and against any loss, costs,
damages and expenses which such Indemnitee may suffer,
expend or incur in consequence of or growing out of any
failure of the Pledgor to comply with its obligations under
this Agreement or any misrepresentation by the Pledgor in
this Agreement or in any statement or writing contemplated
by or made or delivered pursuant to or in connection with
this Agreement.
(d) If and to the extent that the obligations of
the Pledgor under this Section 22 are unenforceable for any
reason, the Pledgor hereby agrees to make the maximum
contribution to the payment and satisfaction of such
obligations permissible under applicable law.
SECTION 23. No Responsibility of Certain Parties.
None of the Collateral Agent or any Secured Party, or any of
their respective officers, employees, servants, controlling
persons, executives, directors, agents, authorized
representatives, attorneys-in-fact or affiliates shall be
liable to the Pledgor for any action taken or omitted to be
taken by it or them (other than actions arising from or
relating to any gross negligence or willful misconduct of
any such Person) under or in connection with this Agreement
or any other Project Document to which the Pledgor is a
party, or responsible in any manner to any Person for any
recital, statement, representation or warranty made by the
Pledgor or any officer thereof contained in this Agreement
or any other Project Document to which the Pledgor is a
party or in any certificate, report, statement or other
document referred to or provided for in, or received by the
Collateral Agent or any Secured Party under or in connection
with, this Agreement or any other Project Document to which
the Pledgor is a party or for the value, effectiveness,
genuineness, enforceability or sufficiency of this Agreement
or any other Project Document or for any failure of the
Pledgor to perform any of the Obligations.
SECTION 24. Obligations Secured by Collateral.
Any amount paid by any Indemnitee as to which such
Indemnitee has the right to reimbursement, and any amount
paid by the Collateral Agent in preservation of any of its
rights or interest in the Collateral, together with interest
on such amounts from the date paid until reimbursement in
full at a rate per annum equal at all times to the Prime
Rate plus two percent (2%) shall constitute Obligations
secured by the Collateral.
SECTION 25. Severability. Any provision of this
Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision
in any other jurisdiction. Where provisions of any law or
regulation resulting in such prohibition or unenforceability
may be waived, they are hereby waived by the parties hereto
to the full extent permitted by law so that this Agreement
shall be deemed a valid and binding agreement, and the
security interest created hereby shall constitute a
continuing first Lien on and first perfected security
interest in the Collateral, assuming continued possession
thereof by the Collateral Agent or its agent, in each case
enforceable in accordance with its terms.
SECTION 26. Counterparts; Effectiveness. This
Agreement and any amendment, waiver, consent or supplement
may be executed in counterparts, each of which when so
executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the
same instrument. This Agreement shall become effective upon
the execution and delivery of a counterpart hereof by each
of the parties hereto.
SECTION 27. Reinstatement. This Agreement shall
continue to be effective or be reinstated, as the case may
be, if at any time any amount received by the Collateral
Agent or any Secured Party hereunder or pursuant hereto is
rescinded or must otherwise be restored or returned by the
Collateral Agent or such Secured Party upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of
the Companies or the Pledgor or upon the appointment of any
intervenor or conservator of, or trustee or similar official
for, the Companies or the Pledgor or any substantial part of
their respective assets, or upon the entry of an order by a
bankruptcy court avoiding the payment of such amount, or
otherwise, all as though such payments had not been made.
SECTION 28. WAIVER OF SUBROGATION; SUBMISSION TO
JURISDICTION; WAIVER OF JURY TRIAL.
(a) THE PLEDGOR IRREVOCABLY WAIVES ALL RIGHTS OF
SUBROGATION (WHETHER CONTRACTUAL, UNDER SECTION 509 OF TITLE
11 OF THE UNITED STATES CODE, 11 U.S.C. 101 ET SEQ. (THE
"BANKRUPTCY CODE"), UNDER COMMON LAW OR OTHERWISE) TO THE
CLAIMS OF THE COLLATERAL AGENT AND THE SECURED PARTIES
AGAINST THE PLEDGOR WHICH ARISE IN CONNECTION WITH, OR AS A
RESULT OF, THIS AGREEMENT.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT
TO THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE
UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW
YORK, AND THE PLEDGOR HEREBY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. THE
PLEDGOR AND THE COLLATERAL AGENT HEREBY IRREVOCABLY WAIVE
TRIAL BY JURY, AND THE PLEDGOR HEREBY IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO
THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS.
(c) THE PLEDGOR IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
THE PLEDGOR AT ITS ADDRESS SPECIFIED IN SECTIONE19, SUCH
SERVICE TO BECOME EFFECTIVE FOUR (4) BUSINESS DAYS AFTER
SUCH MAILING.
(d) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE
COLLATERAL AGENT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST THE PLEDGOR IN ANY OTHER
JURISDICTION.
SECTION 29. GOVERNING LAW; TERMS. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW OTHER THAN
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
UNLESS OTHERWISE DEFINED HEREIN OR IN THE TRUST INDENTURE,
TERMS DEFINED IN ARTICLE 8 OR ARTICLE 9 OF THE NEW YORK
UNIFORM COMMERCIAL CODE ARE USED HEREIN AS THEREIN DEFINED.
SECTION 30. Recourse Limited to Collateral.
Notwithstanding anything to the contrary contained herein,
the liability and obligation of the Pledgor or any past,
present or future partner, officer, director or stockholder
of the Pledgor under or by reason of this Agreement shall
not be enforced by any action or proceeding wherein damages
or any money judgment or any deficiency judgment or any
judgment establishing any personal obligation or liability
shall be sought, collected or otherwise obtained against any
past, present or future officer, director, stockholder or
related Person (other than the Companies) of the Pledgor.
The Collateral Agent and each Secured Party, for itself and
its successors and assigns, irrevocably waives any and all
right to sue for, seek or demand any such damages, money,
judgment, deficiency judgment or personal judgment against
any past, present or future officer, director, stockholder
or related Person (other than the Companies) of the Pledgor
under or by reason of or in connection with this Agreement
and agrees to look solely to the Collateral for the
enforcement of such liability and obligation of the Pledgor.
Nothing contained in this Section 30 shall be
construed (i) as preventing the Trustee, the Secured Parties
or the Collateral Agent from naming the Pledgor or any past,
present or future partner, officer, director or stockholder
or related Person in any action or proceeding brought by the
Trustee or the Collateral Agent to enforce and to realize
upon the security and Collateral provided under or in
connection with the Agreement so long as no judgment, order,
decree or other relief in the nature of a personal or
deficiency judgment or otherwise establishing any personal
obligation shall be asked for, taken, entered or enforced
against any past, present or future partner, officer,
director or shareholder or related Person (other than the
Funding Company or the Partnership), in any such action or
proceeding, (ii) as modifying, qualifying or affecting in
any manner whatsoever the lien and security interests
created by this Agreement and the other Project Documents or
the enforcement thereof by the Trustee or the Collateral
Agent, (iii) as modifying, qualifying or affecting in any
manner whatsoever the personal recourse undertakings,
obligations and liabilities of any person, party or entity
under any guaranty of payment, other guaranty or
indemnification agreement now or hereafter executed and
delivered to the Trustee in connection with the Collateral
Documents or (iv) as modifying, qualifying or affecting in
any manner whatsoever the personal recourse liability of any
past, present or future partner, officer, director or
shareholder or related Person or any other person, party or
entity for fraud or willful misrepresentation or any
wrongful misappropriation or diversion of any portion of the
Collateral.
Section 31. Waiver. To the fullest extent it may
lawfully so agree, the Pledgor agrees that it will not at
any time insist upon, claim, plead or take any benefit or
advantage of any appraisement, valuation, stay, extenuation,
moratorium, redemption or similar law now or hereafter in
force in order to prevent, delay or hinder the enforcement
hereof or the absolute sale of any part of the Collateral.
The Pledgor, for itself and all who claim through it, so far
as it or they now or hereafter lawfully may do so, hereby
waives the benefit of all such laws and all right to have
the Collateral marshaled upon any foreclosure hereof, and
agrees that any court having jurisdiction to foreclose this
Agreement may order the sale of the Collateral as an
entirety. Without limiting the generality of the foregoing,
the Pledgor hereby (i) authorizes the Collateral Agent, in
its sole discretion and without notice to or demand upon the
Pledgor and without otherwise affecting the obligations of
the Pledgor hereunder, from time to time to take and hold
other collateral (in addition to the Collateral) for payment
of any Obligations, or any part thereof, and to exchange,
enforce or release such other collateral or any part thereof
and to enforce or release such other collateral or any part
thereof and to accept and hold any endorsement or guarantee
of payment of the Obligations or any part thereof and to
release or substitute any endorser or guarantor or any other
Person granting security for or in any other way obligated
upon any Obligations or any part thereof and (ii) waives and
releases any and all right to require the Collateral Agent
to collect any of the Obligations from any specific item or
items of the Collateral or from any other party liable as a
guarantor or in any other manner in respect of any of the
Obligations or from any other security for any of the
Obligations.
Section 32. Consent. By its execution hereof,
the Pledgor hereby consents to the transfer of the
Collateral to any designee of the Collateral Agent in
accordance with this Agreement.
IN WITNESS WHEREOF, each party hereto has caused
this Stock Pledge and Security Agreement to be duly executed
and delivered by its officer thereunto duly authorized on
the date first above written.
PANDA INTERHOLDING CORPORATION
By
Name: Robert W. Carter
Title: Chairman of the Board,
President and Chief
Executive Officer
FLEET NATIONAL BANK, as
collateral agent
By
Name:
Title:
Schedule I
Shares of Common Stock of the Companies
Panda - Rosemary Corporation
Par Value Stock
No. of Shares per Share Certificate Number
1,000 $0.01 1
PRC II Corporation
Par Value Stock
No. of Shares of Shares Certificate Number
1,000 $0.01 1
STOCK PLEDGE AND SECURITY AGREEMENT
This STOCK PLEDGE AND SECURITY AGREEMENT (this
"Agreement"), dated July 31, 1996, is made by PANDA-
ROSEMARY, L.P., a Delaware limited partnership (together
with its successors and assigns, the "Pledgor"), to FLEET
NATIONAL BANK, a national banking association established
under the laws of the United States of America, as
collateral agent pursuant to the Intercreditor Agreement (as
defined below) (together with its successors and assigns,
the "Collateral Agent") and grantee hereunder for the
benefit of the Secured Parties (as defined in the Trust
Indenture referred to below).
W I T N E S S E T H:
WHEREAS, the Pledgor is the legal and beneficial
owner of all of the shares of common stock described in
Schedule I annexed hereto issued by Panda-Rosemary Funding
Corporation, a Delaware corporation (the "Company")(such
shares of common stock, together with any additional shares,
stock options or rights received pursuant to Section 4
hereof, the "Pledged Shares");
WHEREAS, the Company, the Pledgor and Fleet
National Bank, as trustee (the "Trustee") are parties to
that certain Trust Indenture, dated as of July 31, 1996 (as
the same may be amended, modified or supplemented, the
"Trust Indenture"), providing for the issuance by the
Company of certain debt securities (the "Bonds");
WHEREAS, the Pledgor has made that certain
Partnership Guaranty, dated the date hereof (as the same may
be amended, modified or supplemented, the "Partnership
Guaranty"), in favor of the Trustee to guarantee the
performance by the Company of its obligations under the
Bonds and the Trust Indenture;
WHEREAS, the Company and the Pledgor are parties
to that certain Loan Agreement, dated as of the date hereof
(as the same may be amended, modified or supplemented, the
"Company Loan Agreement"), pursuant to which the Company has
loaned the proceeds of the Bonds to the Pledgor;
WHEREAS, the Company and the Collateral Agent are
parties to that certain Security Agreement, dated the date
hereof, pursuant to which the Company has assigned to the
Collateral Agent, and created a security interest in, all of
its right, title and interest in, to and under the Company
Loan Agreement and the related promissory note;
WHEREAS, in order to satisfy certain requirements
of the Pledgor under the Project Agreements (as defined in
the Trust Indenture) or for other purposes, the Pledgor may
incur indebtedness as permitted under the Trust Indenture in
connection with the issuance of letters of credit by
Bayerische Vereinsbank AG or other Credit Banks (as defined
in the Trust Indenture) pursuant to a Credit Bank
Reimbursement Agreement (as defined in the Trust Indenture);
WHEREAS, the Pledgor may incur indebtedness as
permitted under the Trust Indenture in the form of working
capital loans made by the Credit Banks under a Credit Bank
Working Capital Agreement (as defined in the Trust
Indenture);
WHEREAS, the Pledgor may also incur additional
debt, as permitted under the Trust Indenture, either
directly or indirectly through the Company, to finance
certain modifications and enhancements to the Project in the
future ("Additional Permitted Debt", as that term is defined
in the Trust Indenture) and may enter into interest rate
protection agreements in connection with the Additional
Permitted Debt of the Pledgor;
WHEREAS, the Pledgor will receive direct and
indirect financial and other benefits from the issuance of
the Bonds by the Company pursuant to the Trust Indenture and
the incurrence of any indebtedness pursuant to any Credit
Bank Reimbursement Agreement, any Credit Bank Working
Capital Agreement and the documents relating to any
Additional Permitted Debt or interest rate protection
transactions;
WHEREAS, the Company, the Pledgor, Bayerische
Vereinsbank AG, the Trustee, Fleet National Bank, as
depositary agent, and the Collateral Agent are parties to
that certain Collateral Agency and Intercreditor Agreement,
dated as of the date hereof (the "Intercreditor Agreement"),
providing for the Collateral Agent to act as collateral
agent for the Secured Parties (as defined in the Trust
Indenture); and
WHEREAS, the Collateral Agent and the Secured
Parties are willing to enter into the transactions
contemplated by, among other things, the Trust Indenture and
the Credit Bank Documents (as defined in the Trust
Indenture) only upon the condition, among others, that the
Pledgor executes and delivers this Agreement, in favor of
the Collateral Agent for the benefit of the Secured Parties,
which grants to the Collateral Agent for the benefit of the
Secured Parties a security interest in the Collateral
referred to below, to secure the Obligations (as hereinafter
defined).
NOW, THEREFORE, in consideration of the foregoing
premises and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the
parties hereto hereby agree as follows:
SECTION 1. Defined Terms. Unless otherwise
defined herein, terms defined in the Intercreditor Agreement
(including terms in the Trust Indenture and incorporated in
the Intercreditor Agreement) shall have such defined
meanings when used herein.
"Additional Collateral" shall mean (i) all stock
certificates representing a stock dividend in respect of any
Collateral or a distribution in connection with any
reclassification, increase or reduction of capital of the
Company, or issued in connection with any reorganization of
the Company, whether as an addition to, in substitution or
redemption of, or in exchange for any shares of any other
Collateral, or otherwise, (ii) any sums paid upon or in
respect of the other Collateral as dividends or other
distributions upon the liquidation or dissolution of the
Company and (iii) any distribution of capital made on or in
respect of the other Collateral or any property distributed
upon or with respect to the other Pledged Shares pursuant to
the recapitalization or reclassification of the capital of
the Company or pursuant to the reorganization thereof.
"Collateral" shall have the meaning provided that
term in Section 2.
"Indemnitee" shall have the meaning provided that
term in Section 22.
"Obligations" means (i) all obligations of the
Pledgor under this Agreement, (ii) all obligations of the
Pledgor or the Company to the Collateral Agent, the
Depositary Agent or the Secured Parties now or hereafter
existing under the Bonds, the Trust Indenture, each
Partnership Guarantee, the Partnership Notes, any Additional
Permitted Debt, any Credit Bank Working Capital Agreement,
any Credit Bank Reimbursement Agreement, any Interest Rate
Protection Agreement, this Agreement or the Collateral
Documents, whether for principal, interest (including,
without limitation, interest accruing following the filing
by or against the Pledgor or the Company of a bankruptcy
petition, whether or not allowed as a claim in a bankruptcy
proceeding), fees, indemnification, expenses or otherwise,
and (iii) all other liabilities, obligations, covenants and
duties owing to the Collateral Agent, the Depositary Agent
or the Secured Parties, from or by the Pledgor, the Pledgor
or the Company of any kind or nature, present or future,
whether or not evidenced by any note, guaranty or other
instrument, arising under or in the connection with the
Trust Indenture, each Partnership Guarantee, the Partnership
Notes, any Additional Permitted Debt, any Credit Bank
Working Capital Agreement, any Credit Bank Reimbursement
Agreement, any Interest Rate Protection Agreement, this
Agreement or the Collateral Documents, whether or not for
the payment of money, whether direct or indirect (including
those acquired by assignment), joint or several, absolute or
contingent, liquidated or unliquidated, due or to become
due, now existing or hereafter arising, renewed or
restructured, whether or not from time to time decreased or
extinguished and later increased, created or incurred, and
including, without limitation, all indebtedness of the
Pledgor or the Company under any instrument now or hereafter
evidencing or securing any of the foregoing and however
acquired.
"Pledged Shares" shall have the meaning provided
that term in the first recital hereto.
"Proceeds" means all proceeds paid or payable,
directly or indirectly, to or for the account of the Pledgor
in respect of the Collateral and, in any event, shall
include, but not be limited to, (i) any and all proceeds of
any insurance, indemnity, warranty or guaranty payable to
the Collateral Agent or the Pledgor from time to time with
respect to any of the Collateral, (ii) any and all payments
(in any form whatsoever) made or due and payable to the
Pledgor from time to time in connection with any
requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any
Governmental Authority (or any Person acting under color of
Governmental Authority), (iii) any and all other amounts
from time to time paid or payable under or in connection
with any of the Collateral and (iv) any proceeds of
proceeds.
"Prime Rate" means, as of any day, the interest
rate per annum established by the Collateral Agent from time
to time as its "Prime Rate".
SECTION 2. Pledge. As security for the
Obligations and subject to and in accordance with the
provisions of this Agreement, including without limitation
Section 7 hereof, the Pledgor hereby pledges, grants,
assigns, hypothecates, transfers and delivers to the
Collateral Agent, for its benefit and the benefit of the
Secured Parties, a first priority security interest in the
following, whether now owned or existing or hereafter
acquired or arising or wherever located (the "Collateral"):
(a) the Pledged Shares and each certificate
representing the Pledged Shares and any interest of the
Pledgor in the entries on the books of any financial
intermediary pertaining to the Pledged Shares, and, subject
to Section 7 hereof, all dividends, cash, options, warrants,
rights, instruments and other property or proceeds from time
to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged
Shares;
(b) all additional shares of stock of the Company
from time to time acquired by the Pledgor in any manner
(which shares shall be deemed to be part of the Pledged
Shares) and each certificate representing such additional
shares and any interest of the Pledgor in the entries on the
books of any financial intermediary pertaining to such
additional shares, and, subject to Section 7 hereof, all
dividends, cash, options, warrants, rights, instruments and
other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any
or all of such shares;
(c) all Additional Collateral acquired by the
Pledgor; and
(d) subject to Section 7 hereof, all Proceeds of
the items described in clauses (a), (b) and (c) above.
SECTION 3. Security for Obligations. This
Agreement secures, and the Pledged Shares and the other
Collateral are collateral security for, the payment and
performance in full when due, whether at stated maturity, by
acceleration or otherwise (including the payment of amounts
which would become due but for the operation of the
automatic stay under Section 362(a) of the Bankruptcy Code,
11 U.S.C. 362(a)), of all Obligations now or hereafter
existing.
SECTION 4. Delivery of Collateral. All
certificates or instruments representing or evidencing the
Collateral shall be delivered to and held by or on behalf of
the Collateral Agent pursuant hereto and shall be in
suitable form for transfer by delivery, or shall be
accompanied by duly executed undated instruments of transfer
or assignment in blank, all in form and substance reasonably
satisfactory to the Collateral Agent. If the Pledgor shall
become entitled to receive or shall receive any other
Collateral, then the Pledgor shall, except as otherwise
provided in Section 7 hereof, accept and hold the same in
trust for the Collateral Agent and segregated from the other
property or funds of Pledgor, and shall deliver to the
Collateral Agent forthwith all such other Collateral (except
as provided in Section 7 hereof) in the form received by the
Pledgor, to be held by the Collateral Agent, subject to the
terms hereof, as part of the Collateral. Upon the
occurrence and during the continuance of an Event of Default
or a Trigger Event, the Collateral Agent shall have the
right, at any time in its discretion and without notice to
the Pledgor, to transfer to or to register in the name of
the Collateral Agent or any of its nominees any or all of
the Collateral. Subject to Section 7 hereof, all Additional
Collateral that is received by the Pledgor shall, until paid
or delivered to the Collateral Agent, be held by the Pledgor
in trust for the benefit of the Collateral Agent and shall
be segregated from the other funds of the Pledgor and the
Pledgor shall deliver the same forthwith to the Collateral
Agent in the exact form received, with the endorsement of
the Pledgor when necessary and/or appropriate undated stock
powers duly executed in blank, or, if requested by the
Collateral Agent, an additional pledge agreement or security
agreement executed and delivered by the Pledgor, all in form
and substance satisfactory to the Collateral Agent, to be
held by the Collateral Agent subject to the terms hereof, as
additional collateral security for the Obligations.
SECTION 5. Representations and Warranties. On
and as of the date hereof, the Pledgor represents and
warrants to the Collateral Agent and the Secured Parties as
follows:
(a) The Pledgor is the owner of, and has good and
marketable title to, the Collateral pledged pursuant to this
Agreement, free and clear of any Lien except for the pledge
and security interest granted to the Collateral Agent for
the benefit of the Secured Parties hereunder and Liens for
Taxes not yet due or which are subject to a Good Faith
Contest. No financing statement covering the Collateral is
on file in any public office other than the financing
statements filed pursuant to this Agreement or in connection
with the transactions contemplated by the Trust Indenture.
The Collateral is not subject to any law (except as may be
required in connection with any disposition of the
Collateral by laws affecting the offering and sale of
securities generally) or contractual obligation that would
be violated by or that would prohibit the grant of the
security interest in the Collateral granted pursuant hereto
or the disposition of the Collateral by or to the Collateral
Agent upon the occurrence and continuance of an Event of
Default.
(b) The Pledgor is a limited partnership duly
formed and validly existing under the laws of the State of
Delaware. The Pledgor has full power, authority and legal
right to enter into this Agreement and perform hereunder and
to pledge and deliver all of the Collateral pursuant to this
Agreement. The pledge of the Collateral pursuant to this
Agreement has been duly authorized by the Pledgor and this
Agreement has been duly authorized, executed and delivered
by the Pledgor and constitutes the legal, valid and binding
obligation of the Pledgor enforceable against the Pledgor in
accordance with its terms except as enforceability may be
limited by applicable bankruptcy, insolvency, moratorium or
other similar laws affecting creditors' rights generally and
except as enforceability may be limited by general
principles of equity (whether considered in a suit at law or
in equity).
(c) No consent of any other party (including,
without limitation, Partners or creditors of the Pledgor)
and no consent, authorization, approval or other action by,
and no notice to or filing with, any Governmental Authority
is required which has not been obtained either (i) for the
pledge by the Pledgor of the Collateral pursuant to this
Agreement or for the execution, delivery or performance of
this Agreement by the Pledgor or (ii) for the exercise by
the Collateral Agent of the voting or other rights provided
for in this Agreement or the remedies in respect of the
Collateral pursuant to this Agreement (except as may be
required (x) in connection with such disposition by laws
affecting the offering and sale of securities generally,
(y) under federal and state laws, rules and regulations and
applicable interpretations thereof providing for the
supervision or regulation of the banking or trust businesses
generally and applicable to the Collateral Agent or any
Secured Party and (z) with respect to the Collateral Agent
or any Secured Party as a result of any relationship which
such Person may have with Persons not parties to, or any
activity or business such Person may conduct other than
pursuant to, any of the Financing Documents).
(d) All of the Pledged Shares have been duly
authorized and validly issued and are fully paid and non-
assessable. None of the Pledged Shares constitutes "margin
stock" within the meaning of Regulation G, T, U or X of the
Board of Governors of the Federal Reserve System.
(e) The pledge of the Collateral delivered to the
Collateral Agent pursuant to this Agreement concurrently
with the execution and delivery of this Agreement and the
filing of Form UCC-1 financing statements with the Secretary
of State of the State of Texas and the Secretary of State of
the State of Delaware create a valid and perfected first
priority security interest in the Collateral securing the
payment of the Obligations assuming continued possession
thereof by the Collateral Agent subject to no Liens other
than those created by this Agreement.
(f) The Pledged Shares constitute all of the
issued and outstanding shares of stock of the Company. The
Pledgor shall cause the Collateral to constitute at all
times not less than all of the total number of shares of
capital stock of the Company then issued and outstanding
(including treasury shares, if any).
(g) The execution, delivery and performance of
this Agreement will not (i) require any consent or approval
of the Partners of the Pledgor which has not been obtained;
(ii) violate the provisions of the Pledgor's Certificate of
Limited Partnership or Second Amended and Restated Agreement
of Limited Partnership or the Certificate of Incorporation
and By-Laws of the Company; (iii) violate the provisions of
any law (including, without limitation, any usury law),
regulation or order of any Governmental Authority applicable
to the Pledgor or any of its Subsidiaries; (iv) conflict
with, result in a breach of or constitute a default under
any agreement relating to the management or affairs of the
Pledgor or any of its Subsidiaries, or any indenture or loan
or credit agreement or any other material agreement, lease
or instrument to which the Pledgor is a party or by which
the Pledgor or any of its Subsidiaries or any of their
material properties may be bound; or (v) result in or create
any Lien (other than Permitted Liens) under, or require any
consent under, any indenture or loan or credit agreement or
any other material agreement, instrument or document, or the
provisions of any order, writ, judgment, injunction, decree,
determination or award of any Governmental Authority binding
upon the Pledgor or any of its Subsidiaries or any of their
properties.
(h) There is no action, suit or proceeding at law
or in equity or by or before any Governmental Authority,
arbitral tribunal or other body now pending or, to the best
knowledge of the Pledgor, threatened against the Pledgor or
its Subsidiaries which questions the validity or legality of
or seeks damages in connection with this Agreement or any
action taken or to be taken pursuant to this Agreement,
which could reasonably be expected to have a material
adverse effect on the Pledgor.
(i) The chief executive office of the Pledgor is
located at 4100 Spring Valley Road, Suite 1001, Dallas,
Texas 75244.
(j) The Pledgor is not (i) an "investment
company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of
1940, as amended, or (ii) a "holding company" or a
"subsidiary company" of a "holding company" or an
"affiliate" of a "holding company" or a "subsidiary company"
within the meaning of PUHCA or (iii) a "registered holding
company" or a "subsidiary company" of a "registered holding
company" or an "affiliate" of a "registered holding company"
or a "subsidiary company" of a "registered holding company"
within the meaning of PUHCA.
(k) The Pledgor shall not permit the Company to
merge or consolidate with or into any other Person or
liquidate, wind-up, or dissolve or dispose of all or
substantially all of its property, business or assets.
(l) Without the prior written consent of the
Secured Parties, the Pledgor shall not exchange, sell,
transfer, pledge, hypothecate, assign, convey or otherwise
dispose of, or permit to be exchanged, sold, transferred,
pledged, hypothecated, assigned, conveyed or disposed of,
any of the Collateral.
(m) The Pledgor shall not authorize, cause or
permit the Company (i)(A) to commence a voluntary case or
other proceeding seeking liquidation, reorganization or
other relief with respect to the Company or the Company's
debts or under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of
a Collateral Agent, receiver, custodian or other similar
official of the Company or any substantial part of the
Company's property or (B) to consent to any such relief or
to the appointment of or taking possession by such official
in an involuntary case or other proceeding commenced against
the Company, or (C) to make a general assignment for the
benefit of the Company's creditors. Neither the Pledgor nor
any of its Affiliates shall commence or join with any other
Person (other than the Secured Parties) in commencing any
proceeding against the Company under any bankruptcy,
reorganization, liquidation or insolvency law or statute now
or hereafter in effect in any jurisdiction.
(n) The Pledgor has derived and will continue to
derive direct and indirect benefits from the incurrence of
its obligations under this Agreement and from the incurrence
by the Pledgor of its obligations under the Partnership
Guaranty, the Trust Indenture, the Company Loan Agreement
and the other Financing Documents.
SECTION 6. Supplements; Further Assurances. The
Pledgor agrees that, at any time and from time to time, the
Pledgor will at its expense promptly execute and deliver all
further instruments and documents, and take all further
action, that may be necessary or desirable, or that the
Collateral Agent may reasonably request, in order to perfect
and protect any security interest granted or purported to be
granted hereby or to enable the Collateral Agent to exercise
and enforce its rights and remedies hereunder with respect
to any Collateral.
SECTION 7. Voting Rights; Dividends; Etc.
(a) So long as no Event of Default or Trigger
Event shall have occurred and be continuing, the Pledgor
shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Collateral or any part
thereof; provided, that the Pledgor shall not (i) exercise
or fail to exercise any such right if such exercise or
failure to exercise would, in the reasonable judgment of the
Pledgor, have a material adverse effect on the value of the
Collateral or any part thereof or (ii) vote such Collateral
in any manner that is inconsistent with the terms of this
Agreement, the Trust Indenture or any other Project Document
or that would cause an Event of Default or Trigger Event to
occur. It is understood, however, that the voting by the
Pledgor of any Pledged Shares for, or the Pledgor's consent
to, the election of directors at a regularly scheduled
annual or other meeting of stockholders, or with respect to
incidental matters at any such annual meeting, shall not be
deemed inconsistent with the terms of this Agreement within
the meaning of this Section 7(a).
(b) The Pledgor shall be entitled to receive,
retain and distribute any and all distributions paid in
respect of the Collateral; provided, that any and all
(i) distributions paid or payable in shares
(or rights to shares) in the Company,
(ii) distributions paid or payable in cash,
securities or other property in respect of any
Collateral in connection with a partial or total
liquidation or dissolution, and
(iii) cash, securities or other property paid,
payable or otherwise distributed in redemption of, or
in exchange for, any Collateral,
shall be, and shall be forthwith delivered to the Collateral
Agent to hold as, Collateral and shall, if received by the
Pledgor, be received in trust for the benefit of the
Collateral Agent, be segregated from the other property or
funds of the Pledgor and be forthwith delivered to the
Collateral Agent as Collateral in the same form as so
received (with any necessary endorsement).
(c) In order to permit the Pledgor to exercise
the voting and other rights which it is entitled to exercise
pursuant to Section 7(a) above and to receive the
distributions which it is authorized to receive and retain
pursuant to Section 7(b) above, the Collateral Agent shall,
if necessary, execute and deliver (or cause to be executed
and delivered) to the Pledgor all such proxies, dividend
payment orders and other instruments as the Pledgor may
reasonably request.
(d) Upon the occurrence and during the
continuance of an Event of Default or Trigger Event, after
the Collateral Agent delivers a notice to the Pledgor to the
following effect, all rights of the Pledgor to exercise the
voting and other consensual rights which it would otherwise
be entitled to exercise pursuant to Section 7(a) above shall
cease and all such rights shall thereupon become vested in
the Collateral Agent, which shall thereupon have the sole
right to exercise such voting and other consensual rights;
provided, that if and when an Event of Default or Trigger
Event is cured in accordance with the applicable provisions
of the Financing Documents, all rights of the Pledgor shall
resume.
(e) Upon the occurrence and during the
continuance of an Event of Default or Trigger Event, all
rights of the Pledgor to thereafter receive the
distributions which it would otherwise be authorized to
receive pursuant to Section 7(b) above shall cease and all
such rights shall thereupon become vested in the Collateral
Agent, which shall thereupon have the sole right to receive
and hold as Collateral such distributions; provided, that if
and when an Event of Default or Trigger Event is cured in
accordance with the applicable provisions of the Financing
Documents, all rights of the Pledgor shall resume.
(f) In order to permit the Collateral Agent to
receive all distributions to which it may be entitled
pursuant to Section 7(e) above and to exercise the voting
and other consensual rights which it may be entitled to
exercise pursuant to Section 7(d) above, the Pledgor shall,
if necessary, upon written notice from the Collateral Agent,
from time to time execute and deliver to the Collateral
Agent appropriate dividend payment orders and other
instruments as the Collateral Agent may reasonably request.
(g) All distributions and other amounts which are
received by the Pledgor contrary to the provisions of
Section 7(e) above shall be received in trust for the
benefit of the Collateral Agent, shall be segregated from
other funds of the Pledgor and shall be forthwith paid over
to the Collateral Agent as Collateral in the same form as so
received (with any necessary endorsement).
SECTION 8. Covenants.
(a) Transfers and Other Liens. Without the prior
written consent of the Collateral Agent, or as otherwise
permitted under the Intercreditor Agreement, the Pledgor
shall not (i) vote to enable, or take any other action to
permit, the Company (x) to issue any additional capital
stock, (y) to issue any other securities convertible into or
exchangeable for any capital stock of the Company or (z) to
issue any other securities that grant the right to purchase
any capital stock of the Companysuch company, (ii) sell,
assign, transfer, exchange or otherwise dispose of, or grant
any option with respect to, the Pledged Shares,
(iii) create, incur or permit to exist any Liens or options
in favor of, or any claims of any Person with respect to,
any of the Pledged Shares or any interest therein, except
for Permitted Liens and the Liens provided for by this
Agreement.
(b) Change of Address. The Pledgor shall not
establish a new location for its chief executive office or
change its name until (i) it has given to the Collateral
Agent no less than sixty (60) days' prior written notice of
its intention so to do, clearly describing such new location
or specifying such new name, as the case may be, and
(ii) with respect to such new location or such new name, as
the case may be, it shall have taken all action,
satisfactory to the Collateral Agent, to maintain the
security interest of the Collateral Agent in the Collateral
intended to be granted hereby at all times fully perfected
and in full force and effect.
(c) Payment of Taxes, etc. The Pledgor shall pay
or cause to be paid, and shall hold the Collateral Agent and
the Secured Parties harmless from, any and all liabilities
with respect to, or resulting from any delay in paying, any
and all stamp, excise, sales or other taxes which may be
payable or determined to be payable with respect to any of
the Collateral.
SECTION 9. Collateral Agent Appointed Attorney-In-
Fact.
(a) Upon the occurrence and during the
continuance of an Event of Default or Trigger Event, subject
to the Pledgor's rights under Section 7 hereof, the Pledgor
hereby appoints the Collateral Agent as the Pledgor's
attorney-in-fact, with full authority in the place and stead
of the Pledgor and in the name of the Pledgor or otherwise
(i) to exercise all voting, consent other rights related to
the Collateral and (ii) from time to time in the Collateral
Agent's discretion, to take any action and to execute any
instrument which the Collateral Agent may deem necessary or
advisable to enforce its rights under this Agreement,
including, without limitation, authority to receive, endorse
and collect all instruments made payable to the Pledgor
representing any distribution, interest payment or other
payment in respect of the Collateral or any part thereof and
to give full discharge for the same. The Pledgor hereby
ratifies all that such attorney shall lawfully do or cause
to be done by virtue hereof. This power of attorney is
coupled with an interest and shall be irrevocable for the
term of this Agreement. Nevertheless, the Pledgor shall, if
so requested by the Collateral Agent, ratify and confirm all
that the Collateral Agent shall lawfully do or cause to be
done by virtue hereof as the Pledgor's attorney-in-fact by
executing and delivering to the Collateral Agent, or to such
other Person as the Collateral Agent shall direct, all
documents and instruments as may be necessary or, in the
judgment of the Collateral Agent, advisable for such
purpose.
(b) The Pledgor further authorizes the Collateral
Agent, at any time and from time to time, (i) to execute, in
connection with any sale provided for hereunder, any
endorsements, assignments or other instruments of conveyance
or transfer with respect to the Collateral and (ii) to the
full extent permitted by applicable law, to file one or more
financing or continuation statements, and amendments
thereto, relative to all or any part of the Collateral
without the signature of the Pledgor.
SECTION 10. Collateral Agent May Perform. If the
Pledgor fails to perform any agreement contained herein
after receipt of a written request to do so from the
Collateral Agent, the Collateral Agent may itself perform,
or cause performance of, such agreement, and the reasonable
expenses of the Collateral Agent, including the reasonable
fees and expenses of its counsel, incurred in connection
therewith shall be payable by the Pledgor pursuant to
Section 15 hereof.
SECTION 11. Reasonable Care. The Collateral
Agent shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment
substantially equivalent to that which the Collateral Agent
accords its own property consisting of negotiable
securities, cash or other forms of property as applicable,
it being understood that subject to the exercise of such
reasonable care the Collateral Agent shall have no
responsibility for (i) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities,
tenders or other matters relative to any Collateral, whether
or not the Collateral Agent has or is deemed to have
knowledge of such matters, or (ii) taking any necessary
steps to preserve rights against any parties with respect to
any Collateral.
SECTION 12. No Liability. None of the Collateral
Agent, the Secured Parties or any of their directors,
officers, employees or agents shall be deemed to have
assumed any of the liabilities or obligations of a
shareholder of the Company, or of the owner of any Pledged
Shares or any other security included in the Collateral from
time to time as a result of the pledge and security interest
granted under or pursuant to this Agreement. None of the
Collateral Agent, the Secured Parties or any of their
directors, officers, employees or agents shall be liable for
any failure to collect or realize upon the Obligations or
any collateral security or guarantee therefor, or any part
thereof, or for any delay in so doing, nor shall any of them
be under any obligation to take any action whatsoever with
regard thereto.
SECTION 13. Remedies Upon Default. If an Event
of Default or a Trigger Event shall have occurred and be
continuing:
(a) (i) The Collateral Agent may exercise in
respect of the Collateral, in addition to all other
rights and remedies provided for herein or otherwise
available to it, all of the rights and remedies of a
secured party on default under the Uniform Commercial
Code in effect in the State of New York at that time,
and the Collateral Agent may also in its sole
discretion, without advertisement or notice except as
specified below, sell the Collateral or any part
thereof in one or more parcels at public or private
sale, at any exchange, broker's board or at any of the
Collateral Agent's offices or elsewhere, for cash, on
credit or for future delivery, and at such price or
prices and upon such other terms as the Collateral
Agent may reasonably deem commercially reasonable,
irrespective of the impact of any such sales on the
market price of the Collateral at any such sale. The
Collateral Agent may, in its sole discretion, at any
such sale, restrict the prospective bidders or
purchasers as to their number, nature of business and
investment intention. Upon any such sale the
Collateral Agent shall have the right to deliver,
assign and transfer to the purchaser thereof (including
the Collateral Agent or any Secured Party) the
Collateral. Each purchaser at any such sale shall hold
the property sold free from any claim or right on the
part of the Pledgor, and the Pledgor hereby waives (to
the extent permitted by law) all rights of redemption,
stay and/or appraisal which it now has or may at any
time in the future have under any rule of law or
statute now existing or hereafter enacted. The Pledgor
agrees that, to the extent notice of sale shall be
required by law, at least ten (10) days' notice to the
Pledgor of the time and place of any public sale or the
time after which any private sale is to be made shall
constitute reasonable notification. The Collateral
Agent shall not be obligated to make any sale of
Collateral regardless of notice of sale having been
given. The Collateral Agent may adjourn any public or
private sale from time to time by announcement at the
time and place fixed therefor, and such sale may,
without further notice, be made at the time and place
to which it was so adjourned. At any such sale, the
Collateral may be sold in one lot, as an entirety or in
separate units. Assuming that such sales are made in
compliance with federal and state securities laws, the
Collateral Agent shall incur no liability as a result
of the sale of the Collateral, or any part thereof, at
any public or private sale. The Pledgor hereby waives
any claims against the Collateral Agent arising by
reason of the fact that the price at which any
Collateral may have been sold at such a private sale,
if commercially reasonable, was less than the price
which might have been obtained at a public sale, even
if the Collateral Agent accepts the first offer
received and does not offer such Collateral to more
than one offeree.
(ii) The Pledgor recognizes that the
Collateral Agent may elect in its sole discretion to
sell all or a part of the Collateral to one or more
purchasers in privately negotiated transactions in
which the purchasers will be obligated to agree, among
other things, to acquire the Collateral for their own
account, for investment and not with a view to the
distribution or resale thereof. The Pledgor
acknowledges that such private sales may be at prices
and on terms less favorable than those obtainable
through a public sale (including, without limitation, a
public offering made pursuant to a registration
statement under the Securities Act of 1933, as amended
(the "Securities Act")) and the Pledgor and the
Collateral Agent agree that such private sales shall be
made in a commercially reasonable manner and that the
Collateral Agent has no obligation to engage in public
sales and no obligation to delay sale of any Collateral
to permit the issuer thereof to register the Pledged
Shares for a form of public sale requiring registration
under the Securities Act.
(iii) In case of any sale of all or any part
of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Collateral
Agent until the full selling price is paid by the
purchaser thereof, but the Collateral Agent shall not
incur any liability in case of the failure of such
purchaser to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may
again be sold pursuant to the provisions hereof.
(iv) The receipt by the Collateral Agent of
the purchase money paid at any such sale made by it
shall be a sufficient discharge of all obligations of
the purchaser thereof. No purchaser (or the
representatives or assigns of any purchaser), after
paying such purchase money and receiving such receipt,
shall be bound to see to the application of such
purchase money or any part thereof or in any manner
whatsoever be answerable for any loss, misapplication
or nonapplication of any such purchase money, or any
part thereof, or be bound to inquire as to the
authorization, necessity, expediency or regularity of
any such sale.
(v) Instead of exercising the power of
sale provided in Section 13(a)(i) hereof, the
Collateral Agent may proceed by a suit or suits at law
or in equity to foreclose the security interest under
this Agreement and sell the Collateral or any portion
thereof under a judgment or decree of a court or courts
of competent jurisdiction.
(vi) Upon notice to the Pledgor, the
Collateral Agent may register the Collateral or any
part thereof in the name of the Collateral Agent or its
nominee as pledgee or otherwise take such action as the
Collateral Agent shall in its sole discretion deem
necessary or desirable with respect to the Collateral
and the Collateral Agent or its nominee may thereafter,
in its sole discretion, without notice, exercise all
voting and other rights relating to the Collateral and
exercise any and all rights, privileges or options
pertaining to the Collateral as if it were the absolute
owner thereof, and exchange, at its sole discretion,
any and all of the Collateral upon the merger,
consolidation, reorganization, recapitalization or
other readjustment of the Company, all without
liability except to account for property actually
received by it, but the Collateral Agent shall have no
duty to exercise any of the aforesaid rights,
privileges or options and shall not be responsible for
any failure to do so or delay in so doing, except to
the extent that such failure or delay constitutes gross
negligence or willful misconduct.
(vii) The Collateral Agent may exercise such
voting and other consensual rights and rights to
receive and hold as Collateral dividends and other
payments which the Pledgor would otherwise be entitled
to receive or exercise, as the case may be, pursuant to
Section 7 and all such voting and consensual rights and
rights to receive the dividends and other payments
which the Pledger would otherwise be authorized to
exercise, receive and retain pursuant to Section 7
shall cease and all such rights shall thereupon become
vested in the Collateral Agent.
(viii) No sale or other disposition of all or
any part of the Collateral by the Collateral Agent
pursuant to this Section 13 shall be deemed to relieve
the Company, the Pledgor or the Pledgor of any
Obligation except to the extent the proceeds thereof
are applied by the Collateral Agent to the payment of
such Obligations.
(ix) The Pledgor hereby waives presentment,
demand, protest or notice (to the extent permitted by
applicable law) of any kind in connection with this
Agreement or any Collateral.
(b) The proceeds of any Collateral obtained or
disposed of hereunder shall be applied as set forth in the
Intercreditor Agreement and the Depositary Agreement.
SECTION 14. Purchase of the Shares by the
Pledgor. The Pledgor may be a purchaser of the Pledged
Shares or any part thereof or any right or interest therein
at any sale thereof, whether pursuant to foreclosure, power
of sale or otherwise hereunder and the Collateral Agent may
apply the purchase price to the payment of the Obligations
and any other indebtedness and obligations secured hereby.
Any such purchaser shall, upon any such purchase, acquire
good title to the Pledged Shares so purchased, free of the
security interests created by this Agreement.
SECTION 15. Expenses. The Pledgor will upon
demand pay to the Collateral Agent and the Secured Parties
the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any
experts and agents, and any transfer taxes which the
Collateral Agent or the Secured Parties may incur in
connection with (i) the custody or preservation of, or the
sale of, collection from, or other realization upon, any of
the Collateral pursuant to the exercise or enforcement of
any of the rights of the Collateral Agent hereunder or (ii)
the failure by the Pledgor to perform or observe any of the
provisions hereof, together with interest thereon at the
rate per annum equal to the Prime Rate plus two percent
(2%). Any amounts payable by the Pledgor pursuant to this
Section 15 shall be payable on demand and shall constitute
Obligations secured hereby.
SECTION 16. No Waiver. No failure or delay on
the part of the Collateral Agent to exercise, and no course
of dealing with respect to, and no delay in exercising, any
right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise by the
Collateral Agent of any right, power or remedy hereunder
preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. The remedies
herein provided are to the fullest extent permitted by law
cumulative and are not exclusive of any remedies provided by
law. No notice to or demand on the Pledgor in any case
shall entitle the Pledgor to any other or further notice or
demand in similar or other circumstances.
SECTION 17. Amendments; Etc. No waiver,
amendment, modification or termination of any provision of
this Agreement, or consent to any departure by the Pledgor
therefrom, shall in any event be effective without the
written concurrence of each party hereto and none of the
Collateral shall be released without the written consent of
the Collateral Agent. Any such waiver or consent shall be
effective only in the specific instance and for the specific
purpose for which given.
SECTION 18. Release. Subject to Section 27
hereof, upon the indefeasible payment in full or performance
of the Obligations and the occurrence of the Debt
Termination Date, the Collateral Agent, upon request by the
Pledgor, shall execute and deliver all such documentation
necessary to release the Lien in its favor and to terminate
this Agreement.
SECTION 19. Notices. Any notice to the
Collateral Agent shall be deemed effective only if sent to
and received at the office of the Collateral Agent at
777 Main Street, Hartford, Connecticut 06115, or sent by
confirmed telecopy to telecopy number (860) 986-7920. Any
notice to the Pledgor hereunder shall be deemed to have been
duly given only if sent to and received at the office of the
Pledgor at 4100 Spring Valley Road, Suite 1001, Dallas,
Texas 75244, Attention: General Partner, or sent by
confirmed telecopy to telecopy number (214) 980-6815, or at
such other address of which such Person shall have notified
in writing to each other party hereto.
SECTION 20. Continuing Security Interest.
(a) This Agreement shall create a continuing Lien
on the Collateral until the release thereof pursuant to
Section 18 hereof. Upon termination of this Agreement
pursuant to the terms of Section 18 hereof, the Pledgor
shall be entitled to the return, promptly upon its request
and at its expense, of such of the Collateral as shall not
have been sold or otherwise applied pursuant to the terms
hereof.
(b) Except as may be expressly applicable
pursuant to Section 9-505 of the Uniform Commercial Code, no
action taken or omission to act by the Collateral Agent or
the Secured Parties hereunder, including, without
limitation, any exercise of voting or consensual rights or
any other action taken or inaction pursuant to this
Agreement shall be deemed to constitute a retention of the
Collateral in satisfaction of the Obligations or otherwise
to be in full satisfaction of the Obligations, and the
Obligations shall remain in full force and effect, until the
Collateral Agent and the Secured Parties shall have applied
payments (including, without limitation, collections from
Collateral) towards the Obligations in the full amount then
outstanding or until such subsequent time as is hereinafter
provided in subsection (c) below.
(c) To the extent that any payment on the
Obligations or proceeds of the Collateral are subsequently
invalidated, declared to be fraudulent or preferential, set
aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any bankruptcy
law, common law or equitable cause, then to such extent the
Obligations so satisfied shall be revived and continue as if
such payment or proceeds had not been received by the
Collateral Agent or the Secured Parties, and the Collateral
Agent's and the Secured Parties' security interests, rights,
powers and remedies hereunder shall continue in full force
and effect. In such event, this Agreement shall be
automatically reinstated if it shall theretofore have been
terminated pursuant to Section 27.
SECTION 21. Security Interest Absolute. All
rights of the Collateral Agent and security interests
hereunder, and all obligations of the Pledgor hereunder,
shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of any
of the Project Documents, or any other agreement or
instrument relating thereto (other than against the
Collateral Agent);
(b) any change in the time, manner or place of
payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any
consent to any departure from the Project Documents, or any
other agreement or instrument relating thereto; provided,
that the aggregate amount of the Obligations shall not be
increased other than in accordance with the Trust Indenture
without the consent of the Pledgor;
(c) any exchange, release or non-perfection of
any other collateral, or any release or amendment or waiver
of or consent to any departure from any guaranty, for all or
any of the Obligations; or
(d) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, the
Pledgor.
SECTION 22. Indemnity.
(a) The Pledgor agrees to indemnify, reimburse
and hold the Collateral Agent and the Secured Parties and
their respective officers, directors, employees and agents
(each individually, an "Indemnitee", and collectively,
"Indemnitees") harmless from any and all liabilities,
obligations, damages, injuries, penalties, claims, demands,
actions, suits, judgments and any and all costs and expenses
(including reasonable attorneys' fees and disbursements)
(such expenses, in this Section 22, the "expenses") of
whatsoever kind and nature imposed on, asserted against or
incurred by any Indemnitee in any way relating to or arising
out of (i) this Agreement or the documents executed in
connection herewith or in any other way connected with the
administration of the transactions contemplated hereby, or
the enforcement of any of the terms hereof, or the
preservation of any rights hereunder or (ii) the ownership,
purchase, delivery, control, acceptance, financing,
possession, condition, sale, return or other disposition, or
use of, the Collateral, including, without limitation,
latent or other defects, whether or not discoverable. Each
Indemnitee agrees to use its best efforts promptly to notify
the Pledgor of any assertion of any such liability, damage,
injury, penalty, claim, demand, action, judgment or suit of
which such Indemnitee has knowledge.
(b) Without limiting the application of
Section 22(a), the Pledgor agrees to pay, or reimburse the
Collateral Agent for, any and all reasonable fees, costs and
expenses of whatever kind or nature incurred in connection
with the creation, preservation, protection or validation of
the Collateral Agent's Liens on, and security interest in,
the Collateral, including, without limitation, all fees and
taxes in connection with the recording or filing of
instruments and documents in public offices, payment or
discharge of any taxes or Liens upon or in respect of the
Collateral, premiums for insurance with respect to the
Collateral and all other fees, costs and expenses in
connection with protecting, maintaining or preserving the
Collateral and the Collateral Agent's interest therein,
whether through judicial proceedings or otherwise, or in
defending or prosecuting any actions, suits or proceedings
arising out of or relating to the Collateral.
(c) Without limiting the application of Section
22(a) or (b), the Pledgor agrees to pay, indemnify and hold
each Indemnitee harmless from and against any loss, costs,
damages and expenses which such Indemnitee may suffer,
expend or incur in consequence of or growing out of any
failure of the Pledgor to comply with its obligations under
this Agreement or any misrepresentation by the Pledgor in
this Agreement or in any statement or writing contemplated
by or made or delivered pursuant to or in connection with
this Agreement.
(d) If and to the extent that the obligations of
the Pledgor under this Section 22 are unenforceable for any
reason, the Pledgor hereby agrees to make the maximum
contribution to the payment and satisfaction of such
obligations permissible under applicable law.
SECTION 23. No Responsibility of Certain Parties.
None of the Collateral Agent or any Secured Party, or any of
their respective officers, employees, servants, controlling
persons, executives, directors, agents, authorized
representatives, attorneys-in-fact or affiliates shall be
liable to the Pledgor for any action taken or omitted to be
taken by it or them (other than actions arising from or
relating to any gross negligence or willful misconduct of
any such Person) under or in connection with this Agreement
or any other Project Document to which the Pledgor is a
party, or responsible in any manner to any Person for any
recital, statement, representation or warranty made by the
Pledgor or any officer thereof contained in this Agreement
or any other Project Document to which the Pledgor is a
party or in any certificate, report, statement or other
document referred to or provided for in, or received by the
Collateral Agent or any Secured Party under or in connection
with, this Agreement or any other Project Document to which
the Pledgor is a party or for the value, effectiveness,
genuineness, enforceability or sufficiency of this Agreement
or any other Project Document or for any failure of the
Pledgor to perform any of the Obligations.
SECTION 24. Obligations Secured by Collateral.
Any amount paid by any Indemnitee as to which such
Indemnitee has the right to reimbursement, and any amount
paid by the Collateral Agent in preservation of any of its
rights or interest in the Collateral, together with interest
on such amounts from the date paid until reimbursement in
full at a rate per annum equal at all times to the Prime
Rate plus two percent (2%) shall constitute Obligations
secured by the Collateral.
SECTION 25. Severability. Any provision of this
Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision
in any other jurisdiction. Where provisions of any law or
regulation resulting in such prohibition or unenforceability
may be waived, they are hereby waived by the parties hereto
to the full extent permitted by law so that this Agreement
shall be deemed a valid and binding agreement, and the
security interest created hereby shall constitute a
continuing first Lien on and first perfected security
interest in the Collateral, assuming continued possession
thereof by the Collateral Agent or its agent, in each case
enforceable in accordance with its terms.
SECTION 26. Counterparts; Effectiveness. This
Agreement and any amendment, waiver, consent or supplement
may be executed in counterparts, each of which when so
executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the
same instrument. This Agreement shall become effective upon
the execution and delivery of a counterpart hereof by each
of the parties hereto.
SECTION 27. Reinstatement. This Agreement shall
continue to be effective or be reinstated, as the case may
be, if at any time any amount received by the Collateral
Agent or any Secured Party hereunder or pursuant hereto is
rescinded or must otherwise be restored or returned by the
Collateral Agent or such Secured Party upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of
the Company or the Pledgor or upon the appointment of any
intervenor or conservator of, or trustee or similar official
for, the Company or the Pledgor or any substantial part of
their respective assets, or upon the entry of an order by a
bankruptcy court avoiding the payment of such amount, or
otherwise, all as though such payments had not been made.
SECTION 28. WAIVER OF SUBROGATION; SUBMISSION TO
JURISDICTION; WAIVER OF JURY TRIAL.
(a) THE PLEDGOR IRREVOCABLY WAIVES ALL RIGHTS OF
SUBROGATION (WHETHER CONTRACTUAL, UNDER SECTION 509 OF TITLE
11 OF THE UNITED STATES CODE, 11 U.S.C. 101 ET SEQ. (THE
"BANKRUPTCY CODE"), UNDER COMMON LAW OR OTHERWISE) TO THE
CLAIMS OF THE COLLATERAL AGENT AND THE SECURED PARTIES
AGAINST THE PLEDGOR WHICH ARISE IN CONNECTION WITH, OR AS A
RESULT OF, THIS AGREEMENT.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT
TO THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE
UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW
YORK, AND THE PLEDGOR HEREBY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. THE
PLEDGOR AND THE COLLATERAL AGENT HEREBY IRREVOCABLY WAIVE
TRIAL BY JURY, AND THE PLEDGOR HEREBY IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO
THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS.
(c) THE PLEDGOR IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
THE PLEDGOR AT ITS ADDRESS SPECIFIED IN SECTIONE19, SUCH
SERVICE TO BECOME EFFECTIVE FOUR (4) BUSINESS DAYS AFTER
SUCH MAILING.
(d) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE
COLLATERAL AGENT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST THE PLEDGOR IN ANY OTHER
JURISDICTION.
SECTION 29. GOVERNING LAW; TERMS. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW OTHER THAN
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
UNLESS OTHERWISE DEFINED HEREIN OR IN THE TRUST INDENTURE,
TERMS DEFINED IN ARTICLE 8 OR ARTICLE 9 OF THE NEW YORK
UNIFORM COMMERCIAL CODE ARE USED HEREIN AS THEREIN DEFINED.
SECTION 30. Recourse Limited to Collateral.
Notwithstanding anything to the contrary contained herein,
the liability and obligation of the Pledgor or any past,
present or future Partner, or any officer, director or
stockholder of any Partner under or by reason of this
Agreement shall not be enforced by any action or proceeding
wherein damages or any money judgment or any deficiency
judgment or any judgment establishing any personal
obligation or liability shall be sought, collected or
otherwise obtained against any past, present or future
Partner or any officer, director, stockholder or related
Person (other than the Company and the Pledgor) of any
Partner. The Collateral Agent and each Secured Party, for
itself and its successors and assigns, irrevocably waives
any and all right to sue for, seek or demand any such
damages, money, judgment, deficiency judgment or personal
judgment against any past, present or future Partner or any
officer, director, stockholder or related Person (other than
the Company and the Pledgor) of any Partner under or by
reason of or in connection with this Agreement and agrees to
look solely to the Collateral for the enforcement of such
liability and obligation of the Pledgor.
Nothing contained in this Section 30 shall be
construed (i) as preventing the Trustee, the Secured Parties
or the Collateral Agent from naming the Pledgor, any past,
present or future partner, officer, director or stockholder
or related Person in any action or proceeding brought by the
Trustee, the Secured Parties or the Collateal Agent to
enforce and to realize upon the security and Collateral
provided under or in connection with this Agreement so long
as no judgment, order, decree or other relief in the nature
of a personal or deficiency judgment or otherwise
establishing any personal obligation shall be asked for,
taken, entered or enforced against any past, present or
future partner, officer, director or shareholder or related
Person (other than the Company or the Partnership), in any
such action or proceeding, (ii) as modifying, qualifying or
affecting in any manner whatsoever the lien and security
interests created by this Agreement and the other Project
Documents or the enforcement thereof by the Trustee, (iii)
as modifying, qualifying or affecting in any manner
whatsoever the personal recourse undertakings, obligations
and liabilities of any person, party or entity under any
guaranty of payment, other guaranty or indemnification
agreement now or hereafter executed and delivered to the
Trustee in connection with the Collateral Documents, or (iv)
as modifying, qualifying or affecting any any manner
whatsoever the personal recourse liability of any past,
present or future partner, officer, director or stockholder
or related Person or any other person, party or entity for
fraud or willful misrepresentation or any wrongful
misappropriation or diversion of any portion of the
Collateral.
Section 31. Waiver. To the fullest extent it may
lawfully so agree, the Pledgor agrees that it will not at
any time insist upon, claim, plead or take any benefit or
advantage of any appraisement, valuation, stay, extenuation,
moratorium, redemption or similar law now or hereafter in
force in order to prevent, delay or hinder the enforcement
hereof or the absolute sale of any part of the Collateral.
The Pledgor, for itself and all who claim through it, so far
as it or they now or hereafter lawfully may do so, hereby
waives the benefit of all such laws and all right to have
the Collateral marshaled upon any foreclosure hereof, and
agrees that any court having jurisdiction to foreclose this
Agreement may order the sale of the Collateral as an
entirety. Without limiting the generality of the foregoing,
the Pledgor hereby (i) authorizes the Collateral Agent, in
its sole discretion and without notice to or demand upon the
Pledgor and without otherwise affecting the obligations of
the Pledgor hereunder, from time to time to take and hold
other collateral (in addition to the Collateral) for payment
of any Obligations, or any part thereof, and to exchange,
enforce or release such other collateral or any part thereof
and to enforce or release such other collateral or any part
thereof and to accept and hold any endorsement or guarantee
of payment of the Obligations or any part thereof and to
release or substitute any endorser or guarantor or any other
Person granting security for or in any other way obligated
upon any Obligations or any part thereof and (ii) waives and
releases any and all right to require the Collateral Agent
to collect any of the Obligations from any specific item or
items of the Collateral or from any other party liable as a
guarantor or in any other manner in respect of any of the
Obligations or from any other security for any of the
Obligations.
Section 32. Consent. By its execution hereof,
the Pledgor hereby consents to the transfer of the
Collateral to any designee of the Collateral Agent in
accordance with this Agreement.
IN WITNESS WHEREOF, each party hereto has caused
this Stock Pledge and Security Agreement to be duly executed
and delivered by its officer thereunto duly authorized on
the date first above written.
PANDA-ROSEMARY, L.P.
By Panda - Rosemary Corporation,
its general partner
By
Name: Robert W. Carter
Title: Chairman of the Board,
President and Chief
Executive Officer
FLEET NATIONAL BANK, as
collateral agent
By
Name:
Title:
Schedule I
Shares of Common Stock of the Company
Panda-Rosemary Funding Corporation
Par Value Stock
No. of Shares per Share Certificate Number
1,000 $0.01 1
PARTNERSHIP GUARANTY
THIS PARTNERSHIP GUARANTY (this "Guaranty"), dated
July 31, 1996, is made by Panda-Rosemary, L.P., a Delaware
limited partnership (the "Partnership"), in favor of Fleet
National Bank, a national banking association established
under the laws of the United States of America, as trustee
(in such capacity, and including its successors, endorsees,
transferees and assigns, the "Trustee").
WHEREAS, Panda-Rosemary Funding Corporation, a
Delaware corporation (the "Company"), the Partnership and
the Trustee have entered into a Trust Indenture, dated as of
July 31, 1996 (as the same may be amended, modified or
supplemented from time to time, the "Indenture"), pursuant
to which the Company may issue one or more series of bonds
(collectively, the "Bonds") in such principal amount or
amounts as may be authorized in accordance with the terms of
the Indenture;
WHEREAS, the Company has authorized, as the first
series of Bonds, the issuance of its 8 5/8% First Mortgage
Bonds due 2016 in the aggregate principal amount of
$111,400,000;
WHEREAS, the Company is a wholly-owned subsidiary
of the Partnership and was established as a special purpose
funding corporation;
WHEREAS, the Company will use the proceeds of any
sale of the Bonds to, directly and indirectly, make loans
(the "Loans") to the Partnership pursuant to a promissory
note or notes in an aggregate principal amount equal to the
principal amount of the Bonds; and
WHEREAS, the Indenture requires as a condition
precedent to the issuance of any series of Bonds that the
Company's obligations thereunder be guaranteed by the
Partnership as set forth herein;
NOW, THEREFORE, in consideration of the foregoing
premises and the purchase of the Bonds by the holders
thereof (the "Holders") and for other good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, the Partnership, intending to be
legally bound, hereby agrees for the equal and proportionate
benefit of all Holders from time to time of the Bonds as
follows:
1. Definitions
1.01 As used in this Guaranty, the terms defined
in the preamble and recitals hereto shall have the
respective meanings specified therein. Capitalized terms
used and not otherwise defined herein shall have the
meanings set forth in the Indenture and the following term
shall have the following meaning:
"Obligations" shall mean all obligations and
liabilities of the Company to the Trustee or the Holders,
whether direct or indirect, absolute or contingent, due or
to become due, now existing or hereafter incurred, which may
arise under or in connection with the Indenture, any Series
Supplemental Indenture, the Bonds, the Collateral Documents
or any other document made, delivered or given in connection
therewith, including the principal of, premium, if any, and
interest on each series of Bonds and the indebtedness
represented thereby, and each other obligation and
liability, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or
hereafter incurred, of the Company to the Trustee or the
Holders, whether on account of principal, premium (if any),
interest, reimbursement obligations, fees, indemnities,
costs, expenses (including, without limitation, all fees and
disbursements of Trustee's counsel) or otherwise (including,
without limitation, such interest or other charges as would
have accrued on any portion of the Obligations but for the
commencement of any bankruptcy or insolvency proceedings),
it being the intention of the parties that the Obligations
that are guaranteed by the Partnership pursuant to this
Guaranty should be determined without regard to any rule of
law or order that may relieve the Company of any portion of
such Obligations.
2. Guaranty
2.01 Unconditional Guaranty. The Partnership
hereby unconditionally and irrevocably guarantees, as a
primary obligor and not merely as a surety, to the Trustee
for its own benefit and the benefit of the Holders from time
to time of the Bonds, the prompt, punctual and complete
payment when due, whether at the stated maturity, on
acceleration, call for redemption or otherwise, and the
prompt, punctual and complete performance when owing, of the
Obligations, irrespective of (i) the validity of the
Obligations or any other agreement or instrument relating
thereto, or (ii) any other circumstance that might otherwise
constitute a defense to this Guaranty. Each and every
default in the payment or performance of the Obligations
shall give rise to a separate cause of action hereunder, and
separate suits may be brought hereunder as each cause of
action arises.
2.02 No Subrogation. Notwithstanding any payment
or payments made by the Partnership hereunder or any set-off
or application of funds of the Partnership by the Trustee,
the Partnership hereby waives any and all right to which it
may be entitled, by operation of law or otherwise, upon
making any payment hereunder (a) to be subrogated to any of
the rights of the Trustee or the Holders from time to time
of the Bonds against the Company or any other guarantor or
in any Collateral or other collateral security or guaranty
or right of offset held by the Trustee for the payment of
any Obligations, or (b) to seek any reimbursement or
contribution from the Company or any other guarantor in
respect to any payment, set-off or application of funds made
by or for the account of the Partnership hereunder.
2.03 No Effect on Guaranty. The obligations of
the Partnership under this Guaranty shall not be altered,
limited, impaired or otherwise affected by:
(a) any rescission of any demand for payment or
performance of any of the Obligations or any failure by the
Trustee to make any such demand on the Company or any other
guarantor or to collect any payments from the Company or any
other guarantor or any release of the Company or any other
guarantor;
(b) any renewal, extension, modification,
amendment, acceleration, compromise, waiver, indulgence,
rescission, discharge, surrender or release, in whole or in
part, of the Indenture or the Obligations or any other
instrument or agreement evidencing, relating to, securing or
guaranteeing any of the Obligations, or the liability of any
party to any of the foregoing or for any part thereof or any
collateral security therefor or guaranty thereof;
(c) the validity, legality or enforceability of
any of the Obligations or of the Indenture or any other
instrument or agreement evidencing, relating to, securing or
guaranteeing any of the Obligations at any time or from time
to time held by the Trustee;
(d) any failure by the Trustee to protect,
secure, perfect, record, insure or enforce any security
document or collateral subject thereto at any time
constituting security for the Obligations;
(e) any act or omission of the Trustee relating
in any way to the Obligations or to the Company, including,
without limitation, any failure to bring an action against
any party liable on the Obligations, or any party liable on
any guaranty of the Obligations, or any party that has
furnished security for the Obligations, or to apply any
funds of any such party held by the Trustee, or to resort to
any collateral or collateral of any other guarantor;
(f) any defense, set-off or counterclaim which
may at any time be available to or be asserted by or on
behalf of the Company or the Partnership against the Trustee
or any circumstance that constitutes, or might be construed
to constitute, an equitable or legal discharge of the
Company or any other guarantor for any of the Obligations,
in bankruptcy or in any other instance;
(g) any proceeding, voluntary or involuntary,
involving the bankruptcy, insolvency, receivership,
reorganization, liquidation or arrangement of the Company or
any other guarantor or any defense which the Company or any
other guarantor may have by reason of the order, decree or
decision of any court or administrative body resulting from
any such proceeding;
(h) any change, whether direct or indirect, in
the Partnership's relationship to the Company, including,
without limitation, any such change by reason of any merger
or any sale, transfer, issuance, or other disposition of any
stock of or other equity interest in the Company, the
Partnership or any other entity; or
(i) the absence of any notice to, or knowledge
by, the Partnership of the existence or occurrence of any of
the matters or events set forth in this Section 2.03.
2.04 Continuing Guaranty. The Partnership
further agrees that this Guaranty constitutes a present,
absolute, and continuing guaranty of prompt, punctual and
complete payment and performance when due of the
Obligations, and not of collection only, and waives any
right to require that any resort be had by the Trustee or
the Holders from time to time of the Bonds, after demand for
such payment being made upon the Company by the Trustee, to
the Trustee's or any Holder's rights against any other
Person, or any other right or remedy available to the
Trustee or any Holder from time to time of the Bonds by
contract, applicable law or otherwise. The obligations of
the Partnership under this Guaranty are unconditional,
direct and completely independent of the obligations of any
other Person and shall not be conditioned or contingent upon
the pursuit by the Trustee at any time of any right or
remedy against the Company or against any other Person that
may be or become liable in respect of all or any part of the
Obligations or against any collateral security or guaranty
therefor. A separate cause of action or separate causes of
action may be brought and prosecuted against the
Partnership, after demand for payment being made upon the
Company by the Trustee, without the necessity of joining the
Company or any other party or previously proceeding with or
exhausting any other remedy against any other Person who
might have become liable for the Obligations or any part
thereof or of realizing upon any security held by or for the
benefit of the Holders from time to time of the Bonds.
2.05 Obligations Unconditional. The obligations
of the Partnership under this Guaranty shall be absolute and
unconditional irrespective of (i) any lack of validity of
the Obligations or any other agreement or instrument
relating thereto or (ii) any other circumstance that might
otherwise constitute a defense to the Guaranty, and shall
remain in full force and effect until the Obligations shall
have been satisfied by payment and performance in full, or
release by the Trustee, notwithstanding any defeasance under
the Indenture, and, to the extent permitted by law, such
Obligations shall not be affected, modified, released, or
impaired by any state of facts or the happening from time to
time of any event, whatsoever, whether or not with notice
to, or the consent of, the Partnership.
2.06 Reinstatement of Guaranty. This Guaranty
shall continue in full force and effect, or be reinstated,
as the case may be, until the Partnership shall have made
payment or performance of the Obligations to the Trustee, if
at any time any payment or performance hereunder, or any
part thereof, of the Obligations is subsequently
invalidated, declared to be fraudulent or preferential,
avoided, rescinded, set aside and/or must otherwise be
restored or returned by the Trustee to the Company or its
representative or to a trustee, receiver, assignee for the
benefit of creditors or any other party under any bankruptcy
act or code, state or federal law or common law or equitable
doctrine, for any reason including as a result of any
insolvency, bankruptcy or reorganization proceeding with
respect to the Company or the Partnership, all as though
such payment had not been made.
2.07 Subordination of Other Indebtedness. Any
indebtedness of the Company for borrowed money now or
hereafter held by the Partnership is hereby subordinated in
right of payment to the prior indefeasible payment in full
in cash hereunder of the Obligations.
2.08 Financial Condition of the Company has no
Effect on Guaranty. The sale of Bonds under the Indenture
may be made by the Company without notice to or
authorization from the Partnership regardless of the
financial or other condition of the Company at the time of
any such sale. The Trustee shall not have any obligation to
disclose or discuss with the Partnership its assessment of
the financial or other condition of the Company.
2.09 No Waiver or Set-off. No act of commission
or omission of any kind or at any time upon the part of the
Company, its successors and assigns or the Trustee in
respect of any matter whatsoever shall in any way impair the
rights of the Trustee to enforce any right, power or benefit
under this Guaranty, and no set-off, counterclaim,
reduction, or diminution of any obligation, or any defense
of a surety or guarantor that the Partnership has or may
have against the Company, the Trustee or any holder of the
Bonds or any assignee or successor thereof shall be
available hereunder to the Partnership.
2.10 Demands for Payment; Payment. Demands by
the Trustee for payment hereunder may be made on any number
of occasions and without any demand for payment given to the
Company. Each demand shall be in writing, shall state the
amount owing and shall be effective as of the date given in
accordance with Section 4.07 hereof. Within five Business
Days of giving such a demand in accordance with Section 4.07
hereof, dated and signed by an authorized officer of the
Trustee setting forth the amount of the Obligations at the
time owing to the Trustee, the Partnership shall make such
payment to the Trustee and such payment shall not be
withheld for any reason.
3. Security and Recourse
3.01 Security. As security for the obligations
of the Partnership under this Guaranty, the Company, the
Partnership and its Partners have entered into the
Collateral Documents to pledge, assign, hypothecate,
bargain, sell, convey, mortgage and grant to the Collateral
Agent a security interest in and general lien upon all of
the Collateral. The pledge and assignment by the Company,
the Partnership and the Partners of the Collateral is
collateral and security for the prompt payment and
performance of the obligations of the Partnership under this
Guaranty.
3.02 No Recourse Against Partners.
Notwithstanding anything to the contrary contained in this
Guaranty, the liability and obligation of the Partnership or
the Company to perform and observe and make good the
obligations contained in this Guaranty and the Collateral
Documents and to pay the Debt issued under the Indenture and
the Bonds in accordance with the provisions of this Guaranty
shall not be enforced by any action or proceeding wherein
damages or any money judgment or any deficiency judgment or
any judgment establishing any personal obligation or
liability shall be sought, collected or otherwise obtained
against any Partner, any past, present or future partner,
officer, director or shareholder or related Person of any
Partner or the Company (other than the Partnership), and the
Trustee, for itself and its successors and assigns,
irrevocably waives any and all right to sue for, seek or
demand any such damages, money judgment, deficiency judgment
or personal judgment against any Partner or any past,
present or future partner, officer, director or shareholder
or related Person of any Partner or the Company (other than
the Partnership) under or by reason of or in connection with
this Guaranty and agrees to look solely to the Company and
the Partnership and the security and Collateral held under
or in connection with the Collateral Documents for the
enforcement of such liability and obligation of the Company
or the Partnership. Nothing contained in this paragraph
shall be construed (i) as preventing the Trustee from naming
the Company or the Partnership, any Partner or any past,
present or future partner, officer, director or shareholder
or related Person of any Partner or the Company in any
action or proceeding brought by the Trustee to enforce and
to realize upon the security and Collateral provided under
or in connection with the Collateral Documents so long as no
judgment, order, decree or other relief in the nature of a
personal or deficiency judgment or otherwise establishing
any personal obligation shall be asked for, taken, entered
or enforced against any Partner or any past, present or
future partner, officer, director or shareholder or related
Person of any Partner or the Company (other than the
Partnership), in any such action or proceeding, (ii) as
modifying, qualifying or affecting in any manner whatsoever
the Lien and security interests created by this Guaranty and
the Collateral Documents and the other Project Documents or
the enforcement thereof by the Trustee, (iii) as modifying,
qualifying or affecting in any manner whatsoever the
personal recourse undertakings, obligations and liabilities
of any Person, party or entity under any guaranty of
payment, completion guaranty, other guaranty or
indemnification agreement now or hereafter executed and
delivered to the Trustee in connection with the Collateral
Documents, or (iv) as modifying, qualifying or affecting in
any manner whatsoever the personal recourse liability of any
Partner, any past, present or future partner, officer,
director or shareholder or related Person of any Partner or
the Company (other than the Partnership) or any other
person, party or entity for fraud or willful
misrepresentation or any wrongful misappropriation or
diversion of any portion of the Collateral.
3.03 Right of Set-off by Trustee. Upon the
occurrence of any Event of Default specified in the
Indenture, the Trustee is hereby authorized 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 Trustee to or for the
credit or the account of the Partnership against any and all
of the obligations of the Partnership now or hereafter
existing under this Guaranty, irrespective of whether or not
the Trustee shall have made any demand under this Guaranty
and although such deposits, indebtedness, or obligations may
be unmatured or contingent. The Trustee shall notify the
Partnership promptly of any such set-off and the application
thereof, provided that the failure to give such notice shall
not affect the validity of such set-off and application.
4. Miscellaneous
4.01 Costs and Expenses. The Partnership
covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to, reasonable
compensation for, and, except as herein otherwise expressly
provided, the Partnership will pay or reimburse the Trustee
upon its request for all reasonable expenses, disbursements,
fees, costs and commissions incurred or made by the Trustee
(including the reasonable compensation and the reasonable
expenses and disbursements of its counsel and of persons not
regularly in its employ) in connection with, (i) the
enforcement of or attempt to enforce, or collection of or
attempt to collect any amounts due under, this Guaranty,
(ii) any waiver, extension, amendment or modification of any
provision of this Guaranty, or (iii) the administration of
this Guaranty.
4.02 Indemnity. The Partnership covenants and
agrees to indemnify the Trustee and its officers, directors,
employees, representatives and agents for, and to hold the
Trustee, its officers, directors, employees, representatives
and agents harmless against, any loss, liability, claim,
damage or expense incurred without gross negligence or bad
faith on the part of the Trustee or its officers, directors,
employees, representatives and agents, arising out of or in
connection with this Guaranty (including the costs and
expenses referred to in Section 4.01 hereof). The
obligation of the Partnership under this Section 4.02 shall
survive payment in full of the Obligations, the resignation
or removal of the Trustee and the termination of the
Guaranty.
4.03 Election of Remedies. Each and every right,
power and remedy herein given to the Trustee, or otherwise
existing, shall be cumulative and not exclusive, and shall
be in addition to all other rights, powers and remedies now
or hereafter granted or otherwise existing. Each and every
right, power and remedy, whether specifically herein given
or otherwise existing, may be exercised, from time to time
and as often and in such order as may be deemed expedient by
the Trustee.
4.04 Effect of Delay or Omission to Pursue
Remedy. No single or partial waiver by the Trustee of any
right, power or remedy, or delay or omission by the Trustee
in the exercise of any right, power or remedy that it may
have shall impair any such right, power or remedy or operate
as a waiver thereof or of any other right, power or remedy
then or thereafter existing. Any waiver given by the
Trustee of any right, power or remedy in any one instance
shall only be effective in that specific instance and only
for the purpose for which given, and will not be construed
as a waiver of any right, power or remedy on any future
occasion.
4.05 Partnership's Waivers. The Partnership
waives any and all notice of the creation, renewal,
extension or accrual of any of the Obligations and notice of
or proof of reliance by the Trustee or the Holders from time
to time of the Bonds upon this Guaranty or acceptance of
this Guaranty or any action taken or omitted in reliance
hereon. The Obligations, and any of them, shall
conclusively be deemed to have been created, contracted,
incurred, renewed, extended, amended or waived in reliance
upon this Guaranty, and all dealings between the Partnership
and the Trustee shall likewise be conclusively presumed to
have been had or consummated in reliance upon this Guaranty.
The Partnership further waives diligence, presentment,
demand for payment or performance, notice, any requirement
that any right or power be exhausted or any action be taken
against the Company or the Partnership or against any
Collateral, protest of all promissory notes or other
instruments included in or evidencing any of the Obligations
or Collateral, and all other demands in connection with the
delivery, acceptance, performance, default or enforcement of
any such promissory note or other instrument or this
Guaranty.
4.06 Amendment. This Guaranty may not be
modified, amended, terminated or revoked, in whole or in
part, except by an agreement in writing signed by the
Trustee and the Partnership. No waiver of any term,
covenant or provision of this Guaranty, or consent given
hereunder, shall be effective unless given in writing by the
Trustee.
4.07 Notices. All notices and other
communications required or permitted hereunder shall be in
writing and shall be deemed to have been sufficiently given
to any party hereto if personally delivered or if sent by
fax, telegram, telecopy or telex, or by registered or
certified mail, return receipt requested, or by recognized
courier service, postage or other charges prepaid, addressed
as follows:
If to the Partnership:
Panda-Rosemary, L.P.
4100 Spring Valley, Suite 1001
Dallas, Texas 75244
Attention: Chief Financial Officer
Tel.: (214) 980-7159
Fax: (214) 980-6815
with a copy to:
Chadbourne & Parke, L.L.P.
1101 Vermont Avenue, N.W.
Washington, D.C. 20005
Attn: Cornelius J. Golden, Jr., Esq.
Tel: (202) 289-3000
Fax: (202) 289-3002
If to the Trustee:
Fleet National Bank of Connecticut
Corporate Trust Office
777 Main Street
CTM00238
Hartford, Connecticut 06115
Attn: Corporate Trust Office
Tel.: (860) 986-7835
Fax: (860) 986-7920
with a copy to:
Shipman and Goodwin
One American Row
Hartford, Connecticut 06103-2819
Attn: Deborah S. Frisone
Tel.: (860) 251-5000
Fax: (860) 251-5800
or to such other address or fax number as may be specified
from time to time by the Partnership or the Trustee in a
notice to the other party given as herein provided. Such
notice or communication will be deemed to have been given as
of the date so personally delivered, telegraphed,
telecopied, telexed, mailed or sent by courier.
4.08 Successors and Assigns. This Guaranty shall
be binding upon and shall inure to the benefit of the
Partnership and the Trustee and their respective successors
and permitted assigns. Notwithstanding the foregoing, the
Partnership shall not have the right to assign its rights or
obligations hereunder (whether by operation of law or
otherwise) without the prior written consent of the Trustee,
and any purported transfer without such prior written
consent shall be void. No assignment by the Partnership of
any rights or obligations under this Guaranty shall release
the Partnership therefrom unless the Trustee shall have
consented to such release in a writing specifically
referring to the obligation from which the Partnership is to
be released.
4.09 Section Headings. The section headings used
in this Guaranty are for convenience of reference only and
are not to affect the construction hereof or be taken into
consideration in the interpretation hereof.
4.10 CONSENT TO JURISDICTION. ALL LEGAL ACTIONS
OR PROCEEDINGS BROUGHT AGAINST THE PARTNERSHIP WITH RESPECT
TO THIS GUARANTY MAY BE BROUGHT IN ANY STATE OR FEDERAL
COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK,
AND BY EXECUTION AND DELIVERY OF THIS GUARANTY THE
PARTNERSHIP ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, THE JURISDICTION OF THE AFORESAID COURTS, AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THIS GUARANTY. THE PARTNERSHIP
HEREBY EXPRESSLY AND IRREVOCABLY WAIVES ANY CLAIM OR DEFENSE
IN ANY SUCH ACTION OR PROCEEDING BASED ON ANY ALLEGED LACK
OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON
CONVENIENS OR ANY SIMILAR BASIS. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF THE TRUSTEE TO BRING PROCEEDINGS AGAINST
THE PARTNERSHIP IN THE COURTS OF ANY OTHER JURISDICTION OR
TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.
4.11 GOVERNING LAW. THIS GUARANTY SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO
BE PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK.
4.12 WAIVER OF JURY TRIAL. THE PARTNERSHIP
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR COUNTERCLAIM
ARISING IN CONNECTION WITH THIS GUARANTY.
4.13 AGENT FOR SERVICE OF PROCESS. THE
PARTNERSHIP HEREBY AGREES TO DESIGNATE, APPOINT AND EMPOWER
CT CORPORATION SYSTEM AS ITS AUTHORIZED AGENT TO RECEIVE FOR
AND ON ITS BEHALF SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER
LEGAL PROCESS IN ANY ACTION, SUIT OR PROCEEDING IN THE STATE
OF NEW YORK. AS LONG AS THIS GUARANTY REMAINS IN FORCE, THE
PARTNERSHIP SHALL MAINTAIN A DULY APPOINTED AGENT FOR THE
SERVICE OF SUMMONS, COMPLAINT AND OTHER LEGAL PROCESS IN NEW
YORK, NEW YORK FOR PURPOSES OF ANY LEGAL ACTION, SUIT OR
PROCEEDING THE TRUSTEE MAY BRING IN RESPECT OF THIS
GUARANTY. THE PARTNERSHIP SHALL KEEP THE TRUSTEE ADVISED OF
THE IDENTITY AND LOCATION OF SUCH AGENT. THE PARTNERSHIP
ALSO IRREVOCABLY CONSENTS, IF FOR ANY REASON THE
PARTNERSHIP'S AUTHORIZED AGENT FOR SERVICE OF PROCESS OF
SUMMONS, COMPLAINT AND OTHER LEGAL PROCESS IN ANY SUCH
ACTION, SUIT OR PROCEEDING IS NOT PRESENT IN NEW YORK, NEW
YORK, THAT SERVICE OF SUCH PAPERS MAY BE MADE OUT OF THOSE
COURTS BY MAILING COPIES OF THE PAPERS BY DELIVERY THEREOF
TO IT BY HAND OR BY MAIL TO THE ADDRESS SET FORTH IN SECTION
4.07 HEREOF. SERVICE IN THE MANNER PROVIDED IN THIS SECTION
4.13 IN ANY SUCH ACTION, SUIT OR PROCEEDING WILL BE DEEMED
PERSONAL SERVICE, WILL BE ACCEPTED BY THE PARTNERSHIP AS
SUCH AND WILL BE VALID AND BINDING UPON THE PARTNERSHIP FOR
ALL PURPOSES OF ANY SUCH ACTION, SUIT OR PROCEEDING.
4.14 Severability. If any provision hereof or of
any promissory note or other instruments evidencing part or
all of the Obligations is invalid or unenforceable in any
jurisdiction, the other provisions hereof or thereof shall
remain in full force and effect in such jurisdiction and the
remaining provisions hereof shall be liberally construed in
favor of the Trustee in order to carry out the provisions
hereof. The invalidity or unenforceability of any provision
of this Guaranty in any jurisdiction shall not affect the
validity or enforceability of any such provision in any
other jurisdiction.
4.15 Entire Agreement. This Guaranty constitutes
the entire agreement and understanding of the Partnership
with respect to the subject matter hereof and supersedes any
and all prior and contemporaneous contracts, negotiations,
agreements and understandings of the Partnership relating to
the subject matter herein contained, whether oral or
written. The Partnership hereby expressly acknowledges that
it has not relied, in making this Guaranty, upon any
statement or representation, not contained herein, made by
any other party, including, without limitation, the Trustee,
the Collateral Agent and the Company.
IN WITNESS WHEREOF, the Partnership has caused
this Guaranty to be executed and delivered on its behalf on
the date first written above.
PANDA-ROSEMARY, L.P.
By: Panda - Rosemary
Corporation, as its
General Partner
By:
Name:
Title:
EXHIBIT 10.22
REIMBURSEMENT AGREEMENT
AGREEMENT, dated as of July 31, 1996, between Panda-
Rosemary, L.P., a Delaware limited partnership (the "Company"),
Panda-Rosemary Funding Corporation, a Delaware corporation
("Funding Corp."), and Bayerische Vereinsbank AG, New York Branch
(the "Bank").
WHEREAS, the Company and VEPCO are parties to the VEPCO
Power Purchase Agreement;
WHEREAS, pursuant to Section 13.4 of the VEPCO Power
Purchase Agreement, the Company is required to provide security
in the amount of $4,950,000 in a form acceptable to VEPCO to
secure the Company's performance obligations under the VEPCO
Power Purchase Agreement;
WHEREAS, the Company, The Fuji Bank Limited and the
Bank (among others) are parties to the Second Amended and
Restated Letter of Credit and Reimbursement Agreement (the
"Existing Reimbursement Agreement") dated as of January 6, 1992
pursuant to which there has been issued a letter of credit to
satisfy the requirements of Section 13.4 of the VEPCO Power
Purchase Agreement;
WHEREAS, the Company and Funding Corp. desire to repay
all of the Company's obligations under the Existing Reimbursement
Agreement and terminate such Agreement (other than the obligation
of the financing parties thereto to provide a letter of credit to
satisfy such requirements) and have requested that the Bank issue
the Letter of Credit to satisfy such requirements;
WHEREAS, the Bank is willing to issue the Letter of
Credit on the terms and subject to the conditions set forth in
this Agreement;
NOW, THEREFORE, in consideration of the premises and
for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Bank, the
Company and Funding Corp. intending to be legally bound do hereby
agree as follows:
Section 1. (a) Definitions. Capitalized terms used herein and not
otherwise defined herein shall have the respective meanings
assigned thereto in the Indenture as in effect on the date
hereof. The following terms, as used herein, have the following
respective meanings:
"Acceptable Fuel Management Contracts" means contracts
or agreements entered into by or on behalf of the Company having
a period of effectiveness of one year or less (exclusive of
extensions) or that are terminable at will upon thirty-one (31)
days or less notice without penalty, in a form typical for
transactions of the relevant type in the fuel industry for the
purchase, sale, or resale of natural gas or fuel oil or for
transportation services or storage services for natural gas or
fuel oil.
"Additional Contract" means any contract or undertaking
to which the Company is a party, entered into after the Issuance
Date, (i) related to the supply, procurement, handling or
transportation of Fuel to the Project, (ii) related to the
design, construction, operation or maintenance of the Project or
the management of the construction thereof or (iii) which is an
Ancillary Document and is delivered in connection with an
Additional Contract, in each case reasonably acceptable to the
Bank and (iv) any Non-Material Agreement.
"Agreement" means this Amended and Restated
Reimbursement Agreement, as the same may from time to time be
further amended, supplemented or modified.
"Ancillary Documents" means, with respect to each
Additional Contract, (i) each security instrument (which may
consist of an amendment to a Collateral Document) necessary to
grant to the Collateral Agent a perfected Lien in such Additional
Contract and all property interests received by the Company or
Funding Corp. in connection therewith, (ii) all recorded
financing statements and other filings required to perfect such
Liens, (iii) a Consent of each Project Participant party to such
Additional Contract and (iv) an Opinion of Counsel to the extent
obtained as set forth in Section 7(p).
"Annual Projected Debt Service" has the meaning set
forth in the Indenture.
"Authorized Representative" of a Person means the
individuals or entities authorized to act on behalf of such
Person by the governing body of such entity.
"Bond Purchase Agreement" means the Purchase Agreement
dated as of July 26, 1996 among the Company, Funding Corp., Panda
Energy International, Inc. and Jefferies & Company, Inc.
"Bonds" means the bonds issued under the Indenture.
"Business Day" means any day except a Saturday, Sunday
or other day on which commercial banks in New York, New York, are
authorized by law to close.
"Casualty Proceeds" means all Insurance Proceeds or
other amounts received on account of any Event of Loss, except
proceeds of business interruption insurance.
"Code" means the United States Internal Revenue Code of
1986, as amended.
"Collateral" means all property and interests in
property now owned or hereafter acquired in or upon which a Lien
has been or is purported or intended to have been granted to the
Collateral Agent pursuant to the Collateral Documents.
"Collateral Agent" means Fleet National Bank, a
national banking association established under the laws of the
United States, as collateral agent for the benefit of the Secured
Parties under the Collateral Documents, and its permitted
successors and assigns.
"Collateral Documents" means the Mortgages, the
Security Agreement, the Stock Pledge Agreement, the Partnership
Interests Pledge Agreement, the Company Pledge Agreement, the
Intercreditor Agreement, the Depositary Agreement, each security
instrument referred to in clause (i) of the definition of
"Ancillary Documents" and each Consent.
"Commercially Feasible Basis" means that, following an
Event of Loss, an Event of Eminent Domain or Title Event, (i) the
sum of the proceeds of business interruption insurance, moneys
held in the Debt Service Fund, any amounts that the Partners are
irrevocably committed to contribute and anticipated Project
Revenues during the estimated period of rebuilding, repair or
restoration will be sufficient to pay all Debt Service and
Operating Expenses during such estimated period and (ii) the
Project upon being rebuilt, repaired or restored can be
reasonably expected to produce Project Revenues adequate to pay
all Debt Service and Operating Expenses over the term of the
VEPCO Power Purchase Agreement taking into account any change in
projected operating results due to the impairment of any portion
of the Project and any reduction in Debt Service.
"Company Loan Agreement" means the Loan Agreement,
dated as of July __, 1996, between the Company and Funding Corp.
"Company Pledge Agreement" means the Stock Pledge and
Security Agreement, dated as of July 31, 1996, from the Company
to the Collateral Agent providing for the pledge of all the
capital stock of Funding Corp. to the Collateral Agent.
"Consent" means a consent and agreement of a Person
with respect to the assignment by the Company of its rights and
interest under each Project Agreement or Additional Contract
entered into by the Company with such Person as security pursuant
to a Collateral Document.
"Controlled Group" means all members of a controlled
group of corporations and all trades or businesses (whether or
not incorporated) under common control which, together with the
Company, are treated as a single employer under Section 414(b) or
414(c) of the Code.
"Date of Early Termination" means 30 days after the
Bank has delivered a notice to VEPCO that a Reimbursement Event
of Default has occurred.
"Debt Service" means, for any period, an amount equal
to the aggregate of, without duplication, (i) all payments of
principal and premium, if any, (including any mandatory sinking
fund payments) on any Indebtedness of the Company due and payable
during such period and (ii) all Interest Expense.
"Debt Service Coverage Ratio" for any period, means,
without duplication, the ratio of (i) (x) Project Revenues for
such period less (y) the sum of (1) Operating Expenses for such
period plus (2) the Major Maintenance Requirement required to be
funded on any day during such period plus (3) the aggregate of
(A) reimbursement obligations, interest, fees and other amounts
under this Agreement during such period, and (B) principal of,
interest on and fees and other amounts with respect to all other
Indebtedness of the Company during such period, plus (4) the
Property Tax Requirement required to be funded on any day during
such period to (ii) the sum of (A) Debt Service payable by the
Company for such period, plus (B) the aggregate amount of overdue
Debt Service payments from previous periods, all as determined on
a cash basis. Whenever the Company is required to calculate the
Debt Service Coverage Ratio, the full calculation of the Debt
Service Coverage Ratio (including any supporting documentation)
shall be set forth in a certificate of the Company to the Bank.
"Debt Termination Date" has the meaning set forth in
the Intercreditor Agreement.
"Depositary Agent" means Fleet National Bank, a
national banking association established under the laws of the
United States as depositary agent for the benefit of the Secured
Parties under the Collateral Documents, and its permitted
successors and assigns.
"Depositary Agreement" means the Deposit and
Disbursement Agreement, dated as of July 31, 1996, among the
Company, Funding Corp., the Collateral Agent and the Depositary
Agent.
"Duff & Phelps" means Duff & Phelps Credit Rating Co.
(or any successor).
"Early Termination Date" means any Business Day prior
to the Termination Date on which (i) all the Obligations
hereunder have been paid in full, (ii) the Company and VEPCO have
delivered a certificate acceptable to the Bank to the effect that
either the Company is no longer required to maintain a letter of
credit or other security pursuant to the VEPCO Power Purchase
Agreement or that the Company has delivered to VEPCO a
replacement letter of credit or other security in satisfaction of
its obligations under Section 13.4 of such Agreement and (iii)
VEPCO shall have surrendered the Letter of Credit to the Bank for
cancellation without requesting a draw in connection therewith.
"Eminent Domain Proceeds" has the meaning set forth in
Section 7(k).
"Engineer's Annual Report" has the meaning set forth in
Section 7(l).
"Environmental Claim" means any complaint, order,
citation, decree, demand, judgment or written notice actually
received by the Company, Funding Corp. or any of their respective
Affiliates from any Person (a) relating to any matters of
Environmental Law affecting or relating to any activity or
operations at any time conducted by the Company, funding any of
their respective Affiliates or their agents on or in connection
with the Project, or (b) relating to Releases or the presence of
Hazardous Materials on or off-Site and related to operations of
the Project or that could impact the Site, including, without
limitation:
(i) the existence of any Hazardous Materials at the
Site or any part thereof in violation of any Environmental Law;
(ii) the release or threatened release of any
Hazardous Materials generated at the Site in violation of any
Environmental Law;
(iii) remediation of any Release at the Site or any
part thereof; and
(iv) any violation or alleged violation of any
relevant Environmental Law in connection with the Site or any
part thereof.
"Environmental Laws" means any Federal, state and local
Laws (as well as obligations, duties and requirements under
common law) relating; (i) to emissions, discharges, spills,
releases or threatened releases of pollutants, contaminants,
Hazardous Materials, materials containing Hazardous Materials, or
hazardous or toxic materials or wastes into ambient air, surface
water, groundwater, watercourses, publicly or privately-owned
treatment works, drains, sewer systems, wetlands, septic systems
or onto land surface or subsurface strata; (ii) to the use,
treatment, storage, disposal, handling, manufacturing,
transportation, or shipment of Hazardous Materials, materials
containing Hazardous Materials or hazardous and/or toxic wastes,
materials, products or by-products (or of equipment or apparatus
containing Hazardous Materials); or (iii) to pollution or the
protection of human health and/or safety, the environment or
natural resources.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"Event of Eminent Domain" means any compulsory transfer
or taking or transfer under threat of compulsory transfer or
taking of any material part of the Collateral by any Governmental
Authority.
"Event of Loss" means an event which causes all or a
portion of the Project to be damaged, destroyed or rendered unfit
for normal use for any reason whatsoever, other than an Event of
Eminent Domain or a Title Event.
"Existing VEPCO Consent" means the Consent to
Assignment, Delegation and Assumption Agreement dated as of
January 6, 1992 among PRC, the Company, VEPCO and the Fuji Bank
and Trust Company.
"FERC" means the Federal Energy Regulatory Commission.
"Financing Documents" means the meaning set forth in
Section 1.2 of the Intercreditor Agreement.
"Firm Gas Transportation Contract" means (i) the
Service Agreement, dated October 22, 1991, between the Company
and Transcontinental Gas Pipe Line Corporation, as in effect on
the date hereof, (ii) any firm transportation agreement entered
into by the Company that replaces the agreement referred to in
the preceding clause (i) pursuant to a Transportation Service
Conversion, and (iii) any other firm transportation agreement
having a term (including all renewal or extension periods) of
greater than one year entered into by the Company which is needed
to transport natural gas supplied under the Gas Supply Contracts.
"First Mortgage" means the Leasehold Deed of Trust and
Security Agreement, dated as of July 15, 1996, between the
Company as Grantor, and the Collateral Agent, as mortgagee, as it
may exist at the time.
"First Series Supplemental Indenture" means the First
Supplemental Indenture, dated as of July 31, 1996, among the
Trustee, the Company and Funding Corp.
"FPA" means the Federal Power Act, as amended.
"Fuel" means natural gas, fuel oil or any other fuel to
be supplied to the Project by the Gas Suppliers or any other
Person.
"Fuel Hedges" means any future or forward contract or
option or similar arrangements with respect to or relating to
natural gas or fuel oil providing for the transfer or mitigation
of commodity or price risks with respect to Fuel either generally
or under specific contingencies.
"Fuel Oil Contracts" means any contract or agreement
entered into by or on behalf of the Company for the purchase of
fuel oil and the delivery of such fuel oil to the Project.
"Fuel Supply Management Agreement" means the Fuel
Supply Management Agreement, effective as of October 10, 1990,
between the Company and Natural Gas Clearinghouse as in effect on
the date hereof.
"Funding Date" means the fifteenth day of each month,
or in each case if such day is not a Business Day, the next
succeeding Business Day.
"Funds" means the funds established by Section 2.1 of
the Depositary Agreement.
"GAAP" means generally accepted accounting principles
as in effect from time to time consistent with those utilized in
preparing the audited financial statements referred to in Section
6(g) except insofar as (i) the Company shall have elected (with
the concurrence of its independent public accountant) to adopt
more recently promulgated generally accepted accounting
principles (which election shall continue to be effective for
subsequent years) and (ii) the Bank shall have consented to such
election (it being understood that such consent may be
conditional upon negotiation of changes to Section 8(l).)
"Gas Consultant" means Benjamin Schlesinger and
Associates, Inc.
"Gas Contracts" means the Gas Supply Contracts and the
Gas Transportation Contracts.
"Gas Resale Agreements" means any contract or agreement
entered into by or on behalf of the Company for the resale to
third parties of natural gas purchased under the Gas Supply
Contract, the Fuel Supply Management Agreement or any Spot Gas
Contract, which natural gas (i) is not required to meet the
natural gas supply needs at the Project, or (ii) must be
purchased in amounts necessary to satisfy minimum take
obligations under the Gas Supply Contract or any Spot Gas
Contract during periods of low dispatch at the Project.
"Gas Suppliers" means Natural Gas Clearinghouse and any
other Person which shall supply natural gas to the Project
pursuant to a Gas Supply Contract.
"Gas Supply Contracts" means (i) the Gas Purchase
Contract, dated April 12, 1990 and amended on April 23, 1993,
between the Company and Natural Gas Clearinghouse, as it may
exist at the time and (ii) any firm natural gas supply contract
having a term (including all renewal or extension periods)
greater than one year entered into by the Company to supply
natural gas to the Project as a part of the Project's primary gas
supply, which is acceptable to the Bank.
"Gas Transportation Contracts" means, collectively,
(i) the Finn Gas Transportation Contract, dated October 22, 1991,
between the Company and Transcontinental Gas Pipe Line
Corporation, as in effect on the date hereof, (ii) the Service
Agreement for Services Under ITS Rate Schedule, dated April 4,
1991, between the Company and Columbia Gas Transmission
Corporation, as in effect on the date hereof, and (iii) the ITS-1
Service Agreement, dated as of June 13, 1991 between the Company
and Columbia Gulf Transmission Company, as in effect on the date
hereof.
"General Partner" means Panda-Rosemary Corporation, a
Delaware corporation, the general partner of the Company.
"Good Faith Contest" means the contest of an item if
(i) the item is diligently contested in good faith by appropriate
proceedings timely instituted, (ii) adequate reserves are
established in accordance with GAAP with respect to the contested
item and held in cash or Permitted Investments, (iii) during the
period of such contest, the enforcement of such contested item is
effectively stayed, (iv) any obligations with respect to such
item are effectively stayed or suspended by, or any Lien filed in
connection therewith shall have been removed from the record by
surety bonds, performance bonds or similar arrangements provided
by a reputable surety company or similar Person, or title
insurance under the Title Policy or cash deposits are otherwise
provided to assure the discharge of the Company's or Funding
Corp.'s obligation thereunder and of any additional charge,
penalty or expense arising from or incurred as a result of such
contest; provided that the aggregate exposure of the Company and
Funding Corp. in connection with such cash deposits is less than
$250,000, (v) it becomes necessary to prevent the delivery of a
tax deed or other similar instrument conveying the Mortgaged
Property or any portion thereof because of non-payment of such
item, then the Company or Funding Corp. shall pay the same in
sufficient time to prevent the delivery of such tax deed or other
similar instrument and (vi) neither the Company nor Funding Corp.
has any knowledge of any actual or proposed deficiency or
additional assessment in connection therewith not otherwise
satisfying the requirements of clauses (i) through (v).
"Governmental Approvals" means any authorization,
consent, approval, order, consent decree, license, franchise,
lease, ruling, permit, tariff, rate, certification, exemption,
filing (other than purely ministerial filings) or registration by
or with any Governmental Authority relating to the ownership,
operation or maintenance of the Project or to the execution,
delivery or performance of any Project Document or Transaction
Document.
"Governmental Authority" means any national, state,
sovereign or government, any federal, regional, state, local or
political subdivision and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of
or pertaining to government.
"Guarantee" of any Person means any obligation,
contingent or otherwise, of such Person directly or indirectly
guaranteeing in any manner any Indebtedness or other obligation
of any other Person including without limitation any obligation
or agreement of such Person contingent or otherwise, that
directly, indirectly or in effect constitutes a guaranty by such
Person (i) to pay or purchase such Indebtedness or to advance or
supply funds for the payment or purchase of such Indebtedness, or
(ii) to purchase, sell or lease (as lessee or lessor) property,
or to purchase or sell services, primarily for the purpose of
enabling such other Person to make payment of such Indebtedness
or to assure the holder of such Indebtedness against loss, or
(iii) to supply funds to or in any other manner invest in the
debtor (including any agreement to pay for property or services
irrespective of whether or not such property is received or such
services are rendered), or (iv) otherwise to assure a creditor
against loss.
"Hazardous Materials" means (i) hazardous materials,
hazardous wastes, hazardous substances, extremely hazardous
wastes, restricted hazardous wastes, toxic substances, toxic
pollutants, contaminants, pollutants or words of similar import,
as used under Environmental Laws; (ii) petroleum and petroleum
products including crude oil and any fractions thereof;
(iii) natural gas, synthetic gas and any mixtures thereof,
(iv) asbestos and/or any material which contains any hydrated
mineral silicate, including, but not limited to, chrysolite,
amosite, crocidolite, tremolite, anthophylite and/or actinolite,
whether friable or nonfriable; (v) polychlorinated biphenyls
("PCBs"), or PCB-containing materials or fluids; (vi) any other
hazardous, radioactive or toxic substance, material, pollutant,
or solid, liquid or gaseous waste; and (vii) any substance that,
whether by its nature or its use, is subject to regulation under
any Environmental Law or with respect to which any Federal, state
or local Environmental Law or governmental agency requires
environmental investigation, monitoring or remediation.
"Indebtedness" of any Person means (i) all obligations
of such Person for borrowed money or for the deferred purchase
price of property or services, (ii) all obligations of such
Person created or arising under any conditional sale or other
title retention agreement with respect to property acquired by
such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of a default are limited
to repossession or sale of such property), (iii) all obligations
of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iv) all non-contingent obligations of such
Person to reimburse any bank or other Person in respect of
amounts paid under a letter of credit or similar instrument, (v)
all outstanding obligations of others secured by a Lien on any
asset of such Person, whether or not such obligations are assumed
by such Person, (vi) all obligations under leases which shall
have been or should be, in accordance with generally accepted
accounting principles, recorded as capital leases in respect of
which such Person is liable as lessee, (vii) all Guarantees,
(viii) all payments under interest rate swaps, caps, collars and
other hedging arrangements, (viii) all obligations referred to in
clause (i), (ii), (iii), (iv), (v), (vi) or (vii) above secured
by (or for which the holder of such obligations has an existing
right, contingent or otherwise, to be secured by) any Lien upon
or 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.
"Indenture" means the Trust Indenture dated as of July
31, 1996 among Funding Corp., the Company and the Trustee.
"Independent Engineer" means Burns & McDonnell.
"Independent Engineer's Certificate" means a
certificate of an Authorized Representative of the Independent
Engineer.
"Insufficiency" means, with respect to any employee
benefit plan, the amount, if any, by which the present value of
the vested and non-vested benefits under such plan (determined as
of the latest actuarial valuation date for such plan and
determined in accordance with the same assumptions and methods as
used in the most recent actuarial valuation for such plan)
exceeds the fair market value of the assets of such plan
allocable to such benefits.
"Insurance Consultant" means Aon Corporation.
"Insurance Proceeds" means all amounts and proceeds
(including instruments) in respect of the proceeds of any
casualty insurance policy required to be maintained under Section
7(g), except proceeds of business interruption or title
insurance.
"Interconnection Agreement" means the Letter Agreement,
dated March 7, 1991, between the Company and Columbia Gas
Transmission Corporation.
"Intercreditor Agreement" means the Collateral Agency
and Intercreditor Agreement dated as of July 31, 1996 among the
Company, Funding Corp., the Bank, the Trustee and the Collateral
Agent.
"Interest Expense" means, for any period, all interest
on the Indebtedness of the Company due and payable during such
period.
"Interim Financing Documents" means the collective
reference to (i) Letter of Credit and Reimbursement Agreement
dated, as of July 31, 1996, among the Company, the General
Partner and Nationsbank of Texas, N.A., (ii) Collateral Agency
and Intercreditor Agreement, dated as of July 31, 1996, among the
Company, Funding Corp., Nationsbank of Texas, N.A., The Bank of
New York, as trustee, and The Bank of New York as escrow agent,
(iii) Unconditional Guaranty Agreement, dated as of July 31,
1996, of the General Partner in favor of Nationsbank of Texas,
N.A., (iv) LOC Security Agreement, dated as of July 31, 1996,
between the Company and Nationsbank of Texas, N.A. and (v)
Security Bond Agreement, dated as of July 31, 1996, between the
Company and Nationsbank of Texas, N.A.
"Issuance Date" means the date on which the Letter of
Credit is issued upon request of the Company pursuant to Section
3(a).
"Law" means, with respect to any Governmental
Authority, any constitutional provision, law, statute, rule,
regulation, ordinance, treaty, order, decree, judgment, decision,
certificate, holding, injunction, registration, license,
franchise, permit, authorization, guideline, approval, consent or
requirement of such Governmental Authority, enforceable at law or
in equity, along with the interpretation and administration
thereof by any Governmental Authority charged with the
interpretation or administration thereof.
"Letter of Credit" means the letter of credit issued by
the Bank in favor of VEPCO for the account of the Company in a
stated amount equal to the Maximum Credit Amount substantially in
the form of Exhibit A hereto.
"Lien" means, with respect to any asset, any mortgage,
lien, pledge, charge, security interest or encumbrance of any
kind in respect of such asset.
"Limited Partner" means PRC II Corporation, a Delaware
corporation.
"Major Maintenance Expenses" means all expenditures by
the Company on regularly scheduled (or reasonably anticipated)
maintenance of the Project in accordance with good utility
practice and vendor and supplier requirements constituting major
maintenance (including, without limitation, teardowns, overhauls,
capital improvements, replacements and/or refurbishment of major
components of the Project).
"Major Maintenance Requirement" means, for any Funding
Date, (i) if, on such Funding Date, the amount then on deposit in
the Overhaul Fund is $1,000,000 or less, an amount equal to the
sum of (x) the product obtained by multiplying the total number
of hours that each of the turbines constituting the Project has
operated during the 30-day period immediately preceding such
Funding Date by $100, and (y) the aggregate amount, not to exceed
$1,000,000, of the Major Maintenance Requirements for previous
Funding Dates which has not been funded or has been withdrawn
from other Funds pursuant to Section 3.12 of the Depositary
Agreement, or (ii) if, on such Funding Date, the amount then on
deposit in the Overhaul Fund exceeds $1,000,000, then the Major
Maintenance Requirement of such Funding Date shall be zero, in
each case as such amount shall be revised annually pursuant to
Section 7(l).
"Material Adverse Change" means a material change in
the business, operations, properties or condition (financial or
otherwise) of the Project, the Company, Funding Corp. or any of
their respective Affiliates, which could reasonably be expected
to have a material adverse effect on (i) the ability of the
Company to perform its obligations in all material respects under
the Project Agreements, (ii) the ability of the Company or
Funding Corp. to perform their respective obligations in all
material respects under this Agreement, any other Financing
Documents or any other agreement evidencing the financing
transactions between Funding Corp. and the Company or (iii) the
validity or the priority of the Collateral Agent's and the
Depositary Agent's Liens on the Collateral.
"Maximum Credit Amount" means $4,950,000.
"Moody's" means Moody's Investment Services, Inc. or
any successor thereto.
"Mortgaged Property" has the meaning set forth
collectively in each of the Mortgages.
"Mortgages" means (i) the First Mortgage, and (ii) any
Additional Mortgages, if, as and when entered into by the
Company.
"Multiemployer Plan" means a Plan which is a
multiemployer plan as defined in Section 4001(a)(3) of ERISA.
"Non-Material Agreements" means (i) Acceptable Fuel
Management Contracts and (ii) any contract or undertaking entered
into by the Company (whether before or after the Issuance Date)
in the ordinary course of business under which the Company could
not reasonably be expected to have monetary obligations in excess
of $1,000,000 under any such contract or undertaking or related
contracts or undertakings. For purposes of this definition,
indemnity or similar obligations of the Company subject to a
maximum dollar amount shall be computed at such amount, and all
other indemnity or similar obligations of the Company shall be
computed at the amount thereof which would, at the time of such
contact or undertaking is entered into, reasonably be expected to
become due and payable.
"Obligations" means all amounts owed under this
Agreement and interest thereon (including, without limitation,
interest accruing after the filing of any petition in bankruptcy
or the commencement of any insolvency, reorganization or like
proceeding, relating to the Company or Funding Corp., as
applicable, whether or not a claim for post-filing or post-
petition interest is allowed in such proceeding), all other
obligations and liabilities of the Company to the Bank, whether
direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter incurred, which may arise under, out
of, or in connection with this Agreement, the Letter of Credit,
the Intercreditor Agreement or any other document made or
delivered or given in connection therewith or herewith, whether
on account of principal, interest, fees, indemnities, costs,
expenses (including, without limitation, all fees and
disbursements of counsel to the Bank or otherwise).
"Operating Budget" means a budget of Operating Expenses
(excluding fuel and fuel transportation expenses) and capital
expenditures and a long-term maintenance program with respect to
the Project for any given fiscal year, or part thereof, of the
Company that is prepared by the Company or, on the basis of
estimated monthly requirements, showing the amounts budgeted for
operation and maintenance expenses by category for each month
during such fiscal year, or part thereof, and approved in writing
by the Bank, prior to adoption by the Company.
"Operating Expenses" means, for any period, the
operating and maintenance expenses of the Project for such period
(determined without duplication), calculated on a cash basis with
GAAP, both paid or required to be paid during such period,
including, without limitation, the following: (i) costs incurred
or amounts payable by the Company under any Project Agreement or
Non-Material Agreement (other than amounts payable as Debt
Service), (ii) general and administrative and management expenses
and major maintenance costs with respect to the Project,
including the repair, replacement or rebuilding of the Project in
connection with an Event of Eminent Domain, an Event of Loss or
Title Event (to the extent not paid from the moneys held in the
Overhaul Fund and the Restoration Fund), (iii) labor costs,
(iv) insurance premiums, (v) sales, receipts, franchise,
licensing, excise, property and other taxes imposed on the
Company (but not any partner thereof) to which the Project may be
subject, (vi) costs and fees incurred in connection with
obtaining and maintaining in effect any Governmental Approvals,
(vii) utilities costs, (viii) costs incurred by the Company or
Funding Corp. in connection with the performance hereunder and
under the Collateral Documents and other agreements anticipated
thereby, (ix) legal, accounting and other professional fees
incurred in connection with any of the foregoing or the Project,
(x) fees and expenses payable during such period in connection
with this Agreement, the Bonds and other Indebtedness of the
Company permitted under Section 8(c) (other than Debt Service and
principal of, interest on and other amounts payable by the
Company or Funding Corp. with respect to such other
Indebtedness), (xii) cash deposits in connection with any surety
bonds or similar arrangements permitted by Section 7(e)(i)(z) and
Good Faith Contests.
"Operating Plan" has the meaning set forth in
Section 7(e)(vii).
"Operation and Maintenance Agreement" means (i) the
Amended and Restated Operation and Maintenance Agreement, dated
as of December 27, 1993, between the Company and University
Technical Services, Inc., as in effect on the date hereof.
"Operation and Maintenance Procedures" means the
procedures established (i) by the Operator under the Operation
and Maintenance Agreement with respect to operation and
maintenance services and provided by the Operator in accordance
with the design engineer's recommendations, the equipment
manufacturers' recommendations, and Prudent Engineering and
Operating Practices and (ii) by any other Project Participant
with respect to the operation and maintenance of the Project in
accordance with the equipment manufacturers recommendations and
Prudent Engineering and Operating Practices.
"Operator" means University Technical Services, Inc.
"Opinion of Counsel" means a written opinion of counsel
for any Person satisfactory to the Bank which may include,
without limitation, counsel for the Company or Funding Corp.,
whether or not such counsel is an employee of any of them.
"Overhaul Fund" has the meaning ascribed thereto in
Section 3.6 of the Depositary Agreement.
"Participant" has the meaning set forth in Section 13
hereof.
"Partners" means the Limited Partner, the General
Partner and such other Persons who may from time to time become
partners of the Company in accordance with the provisions of the
Partnership Agreement.
"Partnership Agreement" means the Second Amended and
Restated Agreement of Limited Partnership, dated as of July 31,
1996, among the Partners.
"Partnership Distribution Fund" means the fund
described in Section 3.9 of the Depositary Agreement.
"Partnership Guarantee" means the Partnership
Guarantee, dated as of July 31, 1996, of the Company in favor of
the Trustee, guaranteeing the obligations of Funding Corp. under
the Indenture and the First Series Supplemental Indenture.
"Partnership Interest Pledge Agreements" means (a) the
General Partner Pledge and Security Agreement, dated as of
July 31, 1996, between Panda-Rosemary Corporation and the
Collateral Agent providing for the pledge of all the general
partnership interest of the Company to the Collateral Agent, and
(b) the Limited Partner Pledge and Security Agreement dated as of
July 31, 1996, between PRC II Corporation and the Collateral
Agent providing for the pledge of all the limited partnership
interest of the Company to the Collateral Agent.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Investments" means investments in securities
that are: (i) direct obligations of the United States, or any
agency thereof; (ii) obligations fully guaranteed by the United
States or any agency thereof; (iii) certificates of deposit
issued by commercial banks under the laws of the United States or
any political subdivision thereof having a combined capital and
surplus of at least $500,000,000 and having long-term unsecured
debt securities having a rating assigned by each of the Moody's
and Duff & Phelps equal to the highest rating assigned thereby to
long-term unsecured debt securities (but at the time of
investment not more than $10,000,000 may be invested in such
certificates of deposit from any one bank); (iv) repurchase
obligations with a term of not more than seven days for
underlying securities of the types described in clauses (i) and
(ii) above, entered into with any financial institution meeting
the qualifications specified in clause (iii) above; (v) open
market commercial paper of any corporation (other than an
Affiliate of the Company or Funding Corp.) incorporated or doing
business under the laws of the United States or any political
subdivision thereof having a rating assigned by each of Moody's
and Duff & Phelps equal to the highest rating assigned thereby to
commercial paper (but at the time of investment not more than
$10,000,000 may be invested in such commercial paper from any one
company); (vi) investments in money market funds having a rating
assigned by each of Moody's and Duff & Phelps equal to the
highest rating assigned thereby to money market funds (including
money market funds for which the Depositary Agent in its
individual capacity or any of its affiliates is investment
manager or adviser); or (vii) investments in money market funds
registered under the Investment Company Act of 1940, the
portfolio of which is limited to direct obligations of the United
States and agencies of the United States government.
"Permitted Liens" means the Liens permitted under
Section 8(d).
"Person" means any individual, sole proprietorship,
corporation, partnership, joint venture, limited liability
company, trust, unincorporated association, institution,
Governmental Authority or any other entity.
"Pipeline" means the approximately 10.25 mile lateral
natural gas pipeline connecting the pipelines owned by Columbia
Gas Transmission Corporation and Transcontinental Gas Pipe Line
Corporation and the Project.
"Pipeline Operating Agreement" means the Pipeline
Operating Agreement, effective as of February 14, 1990, as
amended by Amendment Number 1, dated May 7, 1990, and Amendment
Number 2, dated November 19, 1991, between the Company and North
Carolina Natural Gas Corporation.
"Plan" means at any time an employee pension benefit
plan which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code and is
either (i) maintained by a member of the Controlled Group for
employees of a member of the Controlled Group or (ii) maintained
pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes
contributions and to which a member of the Controlled Group is
then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions.
"PRC" means Panda-Rosemary Corporation, a Delaware
corporation.
"Process Agent" means CT Corporation.
"Project" means the approximately 180 megawatt
electrical generating facility, the Site on which such facility
is located and all related equipment and facilities.
"Project Agreements" means, individually and
collectively, the Steam Sales Agreement, the VEPCO Power Purchase
Agreement, the Pipeline Operating Agreement, the Site Lease, the
Gas Supply Contracts, the Transco Facilities Agreement, the
Operation and Maintenance Agreement, the Interconnection
Agreement, the Gas Transportation Contracts, the Fuel Supply
Management Agreement, any Firm Gas Transportation Contract, and
any Additional Contract.
"Project Participant" means any Person who is a party
to a Project Agreement, other than the Company and the Funding
Corp.
"Project Revenue Fund" means the fund described in
Section 3.1 of the Depositary Agreement.
"Project Revenues" means, for any period, the sum of
the following (without duplication) received by the Company or
amounts credited to the Project Revenue Fund representing
monetary amounts immediately available, as described in clause
(iii) below during such period: (i) all revenues under the VEPCO
Power Purchase Agreement and the Steam Sales Agreement plus
(ii) all other revenues, whether from the sale of electrical
capacity or electricity, thermal energy byproducts of the
operation of the Project on assets of the Company otherwise, plus
(iii) investment earnings on amounts in the Funds, plus (iv) the
proceeds of any delayed opening or business interruption
insurance and other payments received for delayed opening or
interruption of operations, plus (v) refunds of deposits, plus
(vi) all rental and other payments received by the Company from
the lease or sale of any portion of the Site, plus (vii) all
revenue received by the Company from fuel management activities,
plus (viii) all other income, received by the Company during such
period. Project Revenues shall exclude, to the extent included,
proceeds of the Bonds, proceeds of all Indebtedness of the
Company or Funding Corp. Casualty Proceeds, Eminent Domain
Proceeds, Title Insurance Proceeds, any proceeds of other
insurance maintained by or the Company or Funding Corp. and
contributions to capital.
"Projected Debt Service Coverage Ratio (Three Month)"
means, on any date of determination, a projection of the Debt
Service Coverage Ratio for the three month period specified or,
if no period is specified, for any three month period commencing
on the first day of the calendar month which includes such date
of determination, in each case, prepared by the Company in good
faith based upon assumptions consistent in all material respects
with the Project Agreements and the historical operating results
of the Project (without giving effect to any historical non-
recurring extraordinary event). Whenever the Company is required
to provide a determination of a Projected Debt Service Coverage
Ratio (Three Month), the full calculation of the Projected Debt
Service Coverage Ratio (Three Month) (including any supporting
documentation) shall be set forth in such Certificate of the
Company delivered to the Bank, accompanied by an Independent
Engineer's Certificate, dated within five (5) days of the date of
such Certificate, stating that, based upon reasonable
investigation and review, the Projected Debt Service Coverage
Ratio (Three Month) is based on reasonable assumptions consistent
in all material respects with the Project Agreements and the
historical operating results of the Project and that the
Independent Engineer believes the Projected Debt Service Coverage
Ratio (Three Month) to be reasonable in light of such
assumptions.
"Property Tax Fund" means the fund described in Section
3.11 of the Depositary Agreement.
"Property Tax Requirement" means, for any Funding Date,
(i) until the date that the Company delivers to the Depositary
Agent the certificate referred to in Section 7(f), an amount
equal to 8.33% of the amount of real property taxes assessed in
the tax year immediately preceding the year in which such Funding
Date occurs against the real property owned by The Bibb Company
(or any successor owner of such property) that includes the Site;
provided that if the Company delivers to the Depositary Agent the
documentation required under Section 3.11(e) of the Depositary
Agreement, the Property Tax Requirement for any Funding Date
occurring during the period commencing on the date of such
delivery and ending on the last day of the tax year for which
such documents are delivered shall be zero and (ii) after the
delivery of such certificate, zero.
"Prudent Engineering and Operating Practices" means the
practices, methods and acts generally engaged in or approved by
the electric utility industry for electrical and steam generating
facilities of similar design and construction as, and otherwise
at such time similarly situated to, the Project, that in the
exercise of reasonable judgment in light of the facts known or
that reasonably should have been known at the time a decision was
made, would have been expected to accomplish the desired result
in a manner consistent with law, regulation, reliability, safety,
environmental protection, economy and expedition.
"PUHCA" means the Public Utility Holding Company Act of
1935, as amended.
"PURPA" means the Public Utility Regulatory Policies
Act of 1978, as amended.
"Qualifying Facility" means a cogeneration facility
that has satisfied the definition of "qualifying facility" as set
forth in 18 C.F.R. 292.102(b)(1), as the same may be amended or
supplemented from time to time.
"Redemption Agreement" means the Redemption Agreement,
dated as of July 31, 1996, among the Company, the General
Partner, the Limited Partner and Ford Motor Credit Company.
"Reimbursement Default" means any event or condition
which constitutes a Reimbursement Event of Default or which with
the giving of notice or the lapse of time or both would, unless
cured or waived, become a Reimbursement Event of Default.
"Reimbursement Event of Default" has the meaning set
forth in Section 9.
"Release", when used in connection with any Hazardous
Material, means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or
migration, where such release is either regulated by applicable
Environmental Law or reasonably may be expected to serve as the
basis for liability.
"Restoration Fund" means the fund described in Section
3.8 of the Depositary Agreement.
"SEC" means the Securities and Exchange Commission.
"Secured Parties" shall have the meaning set forth in
Section 1.2 of the Intercreditor Agreement.
"Security Agreements" means the Assignment and Security
Agreement, dated as of July 31, 1996, made by the Company in
favor of the Collateral Agent and (ii) the Assignment and
Security Agreement, dated as of July 31, 1996, made by Funding
Corp. in favor of the Collateral Agent.
"Site" means the tracts of land or interests therein
located in Roanoke Rapids, North Carolina, which are more
particularly described in the Site Lease.
"Site Lease" means the Real Property Lease and Easement
Agreement, dated as of June 9, 1989, between The Bibb Company and
the Company, as amended as of October 1, 1989, as of January 31,
1990, and as of March 15, 1996, and as it may be further amended
or supplemented from time to time.
"Spot Gas Contract" means any contract or agreement
entered into by or on behalf of the Company for the purchase of
natural gas for the operation of the Project, other than the Gas
Supply Contract.
"Steam Sales Agreement" means the Cogeneration Energy
Supply Agreement, dated January 11, 1989, and amended on October
1, 1989 and January 3, 1990, between the Company and The Bibb
Company.
"Stock Pledge Agreement" means the Stock Pledge and
Security Agreement, dated as of July 31, 1996, between Panda
Interholding Corporation, a Delaware corporation, and the
Collateral Agent providing for the pledge of all the capital
stock of Panda-Rosemary Corporation and PRC II Corporation to the
Collateral Agent.
"Subsidiary" means any corporation or other entity of
which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time
directly or indirectly owned by the Company or one or more
Subsidiaries, or by the Company and one or more Subsidiaries.
"Successor Participant" means each Person to whom a
Participant transfers all or a part of its participation with the
consent of the Company.
"Tax" and "Taxes" have the meanings set forth in
Section 2(c)(iii).
"Termination Date" means the earliest of (i) the date
on which the Bank pays a drawing under the Letter of Credit for
the Maximum Credit Amount, (ii) if a drawing is not requested by
VEPCO after a notice of termination is given under the Letter of
Credit, the Date of Early Termination, (iii) if a drawing is
requested by VEPCO after a notice of termination is given under
the Letter of Credit, the date on which the Bank pays such
drawing and (iv) the seventh anniversary of the Issuance Date of
the Letter of Credit.
"Title Company" means Chicago Title Insurance Company.
"Title Event" means the existence of any defect of
title or lien or encumbrance on the Mortgaged Property (other
than Permitted Liens) that entitles the Collateral Agent to make
a claim under the Title Policy.
"Title Insurance Proceeds" means all amounts and
proceeds (including instruments) in respect of the proceeds of
the Title Policy.
"Title Policy" means collectively, the policy or
policies of title insurance required pursuant to Section 7( )
insuring the mortgages constituting the First Mortgage and
certain Additional Mortgages.
"Transaction Documents" means the Project Agreements,
the Finance Agreements, the Bond Purchase Agreement, the Project
Documents, the Interim Financing Documents and the Redemption
Agreement.
"Transco Facilities Agreement" means the Lateral Line
Interconnect and Reimbursement Agreement, dated August 1, 1990,
between the Company and Transcontinental Gas Pipe Line
Corporation.
"Transfer" means a sale, transfer, assignment
hypothecation, pledge, or other disposition and, when used as a
verb, shall have a correlative meaning.
"Transportation Service Conversion" means an election
by the Company to convert service under a Firm Gas Transportation
Contact from firm transportation pursuant to Part 157 of the
rules and regulations of FERC, 18 C.F.R. 157.1 et seq., to firm
transportation pursuant to Part 284 of the rules and regulations
of FERC, 18 C.F.R. 281.4 et seq.
"Trustee" means Fleet National Bank as Trustee under
the Indenture.
"VEPCO" means Virginia Electric and Power Company, a
Virginia public service corporation.
"VEPCO Power Purchase Agreement" means the Power
Purchase and Operating Agreement, dated as of January 24, 1989,
as amended on October 24, 1989 and July 30, 1993, between the
Company and VEPCO.
(a) Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be
made, and all financial statements required to be delivered
hereunder shall be prepared in accordance with GAAP.
Section 2. Reimbursement. (a) Subject to the terms and conditions
set forth herein, on the Issuance Date, the Bank shall issue the
Letter of Credit in favor of VEPCO for the account of the Company
in an amount equal to the Maximum Credit Amount.
(a) The Company agrees to pay to the Bank (i) not later
than 4:00 p.m. New York City time on the same Business Day on
which the Bank shall pay any draft under the Letter of Credit a
sum equal to the amount so paid under the Letter of Credit and
(ii) interest on any and all amounts unpaid by the Company when
due under clause (i) above from and including the date such
amount is paid by the Bank under the Letter of Credit until
payment in full, payable on demand, at a fluctuating interest
rate per annum equal to 4% per annum above the rate of interest
publicly announced by the Bank in New York City from time to time
as its prime rate, but such fluctuating interest rate shall in no
event be higher (with respect to each amount due and payable
hereunder, from the date such amount is due and payable until the
date such amount is paid in full) than the maximum rate permitted
by applicable law.
(b) (i) The Company agrees to pay to the Bank on the
Issuance Date an initial fee equal to .5% of the Maximum Drawing
Amount.
(ii) The Company agrees to pay to the Bank a fee with
respect to the Letter of Credit equal to 1.5% per annum of the
Maximum Credit Amount from the Issuance Date to, but excluding,
the Termination Date payable quarterly in arrears on each
March 31, June 30, September 30 and December 31, and the accrued
portion of such annual fee on the Termination Date, commencing
September 30, 1996 (for the amount of such fee that shall have
accrued since the Issuance Date); provided that if Moody's shall
rate the Bonds or any series thereof lower than Baa3 (or an
equivalent rating if the rating system used by Moody's is
revised) or Duff & Phelps shall rate the Bonds or any series
thereof less than BBB- (or an equivalent rating if the rating
system used by Duff & Phelps is revised) the fee payable pursuant
to this subsection (b) shall be increased by .50% per annum
during the period commencing on the day on which such rating is
so lowered to, but excluding, the first day thereafter on which
such ratings are at least Baa3 and BBB-, respectively.
(c) (i) If after the date hereof, the adoption of any
applicable law, rule or regulation, or any change therein, or any
change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance
by the Bank with any request or directive (whether or not having
the force of Law) of any such Authority, central bank or
comparable agency shall impose, modify or deem applicable any
reserve, special deposit or similar requirement (including,
without limitation, any such requirement imposed by the Board of
Governors of the Federal Reserve System) against letters of
credit issued by or assets of, deposits with or for the account
of the Bank or shall impose on the Bank any other condition
regarding this Agreement or the Letter of Credit and the result
of the foregoing shall be to increase the cost to the Bank of
issuing or maintaining the Letter of Credit (which increase in
cost shall be the result of the Bank's reasonable allocation of
the aggregate of such cost increases resulting from such events)
then, within 15 days after demand by the Bank, the Company shall
pay to the Bank all additional amounts which are necessary to
compensate the Bank for such increased cost.
(i) If, after the date hereof, the Bank shall have determined
that the adoption of any applicable Law regarding capital
adequacy, or any change therein, or any change in the
interpretation or administration thereof by any Governmental
Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the
Bank with any request or directive regarding capital adequacy
(whether or not having the force of Law) of any such Authority,
central bank or comparable agency, has or would have the effect
of reducing the rate of return on the Bank's capital as a
consequence of its obligations hereunder to a level below that
which the Bank would have achieved but for such adoption, change
or compliance (taking into consideration the Bank's policies with
respect to capital adequacy) by an amount deemed by the Bank to
be material, then within 15 days after demand by the Bank, the
Company shall pay to the Bank such additional amount or amounts
as will compensate the Bank for such reduction.
(ii) All payments made by the Company under this Agreement
shall be made free and clear of, and without reduction for or on
account of, any stamp or other taxes, levies, imposts, duties,
charges, fees, deductions, withholdings, restrictions or
conditions of any nature whatsoever hereafter imposed, levied,
collected, withheld or assessed by any country (or by any
political subdivision or taxing authority thereof or therein),
except for franchise taxes and taxes based on the overall net
income of the Bank (such nonexcluded taxes being called "Tax" or
"Taxes"). If any Taxes are required to be withheld from any
amounts payable to the Bank, the amounts so payable to the Bank
shall be increased to the extent necessary to yield to the Bank
(after payment of all Taxes) interest or any such other amounts
payable hereunder at the rates or in the amounts specified in
this Agreement; provided that the Company shall not be obligated
to pay such amounts with respect to any period in which the Bank
has failed (x) to file any form or certificate that it was
entitled to file which would have exempted the Bank from such
Taxes or (y) to take other action which would entitle the Bank to
an exemption from such Taxes, if such action would not, in the
reasonable judgement of the Bank, be otherwise disadvantageous to
it. Whenever any Tax is payable by the Company, as promptly as
possible thereafter, the Company shall send the Bank a receipt or
other evidence of payment thereof.
(iii) A certificate as to the nature of the occurrence
giving rise to, and the calculation (in reasonable detail) of,
compensation to the Bank pursuant to clauses (i), (ii) and (iii)
of this Section 2(d) above shall be submitted by the Bank to the
Company and shall be conclusive (absent demonstrable error) as to
the amount thereof.
(iv) The Company agrees that its obligations to pay
compensation pursuant to this Section 2(d) shall inure to the
benefit of each Participant and each Successor Participant with
respect to its respective participation to the same extent as if
such Participant or Successor Participant were named instead of
the Bank in this Section 2(d); provided that any certificate
presented by the Bank on behalf of a Participant or Successor
Participant pursuant to Section 2(d)(iv) shall provide the
identity of such Participant or Successor Participant and an
estimate of the total additional compensation which would be
payable to such Participant or Successor Participant on an annual
basis.
(v) No law, rule or regulation in the form in which it is
in effect on the Issuance Date, but excluding changes in the
interpretation or administration thereof after the Issuance Date,
or Tax to which the Bank is subject on Issuance Date shall be
used by the Bank as the basis of a claim for compensation
pursuant to Section 2(d). No law, rule or regulation in the form
in which it is in effect on the Issuance Date, but excluding
changes in the interpretation or administration thereof after the
Issuance Date, or Tax to which a Participant is subject on the
Issuance Date shall be used as the basis of a claim for
compensation pursuant to Section 2(d) by such Participant.
(d) All payments by the Company to the Bank under this
Section 2 shall be made in lawful currency of the United States
and in immediately available funds at the Bank's principal New
York office, which on the date hereof is located at 335 Madison
Avenue, New York, New York 10017. Whenever any payment under
this Section 2 shall be due on a day which is not a Business Day,
the date for payment thereof shall be extended to the next
succeeding Business Day, and any interest payable thereon shall
be payable for such extended time at the specified rate.
(e) Interest payable under subsection (b) shall be computed
on the basis of a year of 360 days. The fees payable under
subsection (c) shall be computed on the basis of a year of 365
days (or 366 days in a leap year) and paid for the actual number
of days elapsed (including the first day but excluding the last
day).
Section 3. Issuance of the Letter of Credit; Conditions
Precedent to Issuance. (a) Subject to satisfaction of the conditions
precedent set forth in subsections (b), (c) and (d) of this
Section, the Bank shall issue the Letter of Credit on the date
set forth in the notice referred to in Section 3(b)(viii) (such
date or such later date on which the conditions precedent are
satisfied and the Letter of Credit is issued being herein called
the "Issuance Date"). The Letter of Credit shall be effective on
the Issuance Date and shall expire on the Termination Date.
(a) As a condition precedent to the issuance of the Letter
of Credit, the Bank shall have received on or before the Issuance
Date the following, each dated such date, in form and substance
satisfactory to the Bank:
(i) opinions of counsel for the Company, substantially in the
form of Exhibit B hereto;
(ii) copies of each of the Transaction Documents duly executed
by each Person party thereto and certified by an authorized
officer of each of Funding Corp. and the Company (including all
opinions of counsel (other than opinions delivered by counsel to
parties other than the Company and its affiliates in connection
with the Redemption Agreement and opinions delivered solely to
Jefferies & Company, Inc. in connection with the Bond Purchase
Agreement) delivered in connection therewith either addressed to
the Bank or permitting the Bank to rely on such opinions as if
such opinions were addressed to it and all other documents or
instruments delivered in connection with the consummation of the
transactions contemplated under the Financing Documents, the
Interim Financing Documents and the Collateral Documents);
(iii) copies of the resolutions of the Board of Directors
of the General Partner of the Company authorizing the execution,
delivery and performance by the Company of this Agreement, each
of the Transaction Documents to which the Company is a party,
certified by the Secretary or an Assistant Secretary of the
Company (which certificate shall state that such resolutions are
in full force and effect on the Issuance Date);
(iv) certified copies of all approvals, authorizations, orders
or consents of, or notices to or registrations with, any
governmental body or agency required for the Company to enter
into this Agreement and of all such approvals, authorizations,
orders, consents, notices or registrations required to be
obtained or made prior to the Issuance Date in connection with
the transactions contemplated by any of the Transaction Documents
to which the Company is a party;
(v) a certificate of the Secretary or an Assistant Secretary
of the Company certifying the names and true signatures of the
officers of the Company authorized to sign this Agreement and the
other documents to be delivered by the Company hereunder;
(vi) letters from the Company to each of the Insurance
Consultant, the Gas Consultant and the Independent Engineer
authorizing each of the foregoing to serve in such capacity on
behalf of the Bank.
(vii) a notice from the Company requesting issuance of
the Letter of Credit and stating the date on which the Company
desires such Letter of Credit be issued.
(viii) evidence that CT Corporation has been appointed as
agent for service of process for the Company and Funding Corp.
(ix) such other documents, instruments, approvals (and, if
requested by the Bank, certified duplicates of executed copies
thereof) or opinions as the Bank may reasonably request in
writing.
(b) The following statements shall be true and correct on
the Issuance Date and the Bank shall have received a certificate
signed by a duly authorized officer of the General Partner of the
Company, dated the Issuance Date, stating that:
(i) the representations and warranties contained in Section 6
are correct on and as of the Issuance Date as though made on and
as of such date; and
(ii) no Reimbursement Default shall have occurred and be
continuing and no Reimbursement Default shall result from the
issuance of the Letter of Credit.
(c) On or before the Issuance Date:
(i) each of the Transaction Documents shall have been duly
authorized and executed by the respective parties thereto and
shall be in full force and effect;
(ii) all conditions precedent to closing set forth in Section 7
of the Bond Purchase Agreement shall have been fulfilled.
Section 4. Adjustment of Maximum Drawing Amount; Terms of Drawing.
The Maximum Drawing Amount shall be modified as specified in the
fourth paragraph of the Letter of Credit and drawings under the
Letter of Credit shall be subject to the other terms and
conditions set forth in the Letter of Credit.
Section 5. Obligations Absolute. The payment obligations of the
Company under this Agreement shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with
the terms of this Agreement, under all circumstances whatsoever,
including, without limitation, the following circumstances:
(a) any lack of validity or enforceability of the Letter of
Credit or any of the Transaction Documents;
(b) any amendment or waiver of or any consent to departure
from all or any of the Transaction Documents;
(c) the existence of any claim, set-off, defense or other
rights which the Company may have at any time against VEPCO (or
any persons or entities for whom any of the foregoing may be
acting), the Bank or any other person or entity, whether in
connection with this Agreement, the Transaction Documents or any
unrelated transactions;
(d) any statement or any other document presented under the
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue
or inaccurate in any respect whatsoever;
(e) payment by the Bank under the Letter of Credit against
presentation of a draft or certificate which does not comply with
the terms of such Letter of Credit; or
(f) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing.
6. Representations and Warranties. The Company and Funding
Corp. jointly and severally represent and warrant as follows:
(a) Existence and Authority. The Company is a limited
partnership duly organized and validly existing under the laws of
the State of Delaware, and is qualified to own property and
transact business in North Carolina and in every other
jurisdiction where the ownership of its property and the nature
of its business as currently conducted and as contemplated to be
conducted under each Project Document to which the Company is a
party requires it to be so qualified. The Company is not in
violation of the Partnership Agreement or its Certificate of
Limited Partnership. Each of Funding Corp. and the General
Partner, is a corporation duly organized and validly existing
under the laws of the state of its incorporation. Each of
Funding Corp. and the General Partner is qualified to own
property and transact business in North Carolina and in every
other jurisdiction where the ownership of its property and the
nature of its business as currently conducted and as contemplated
to be conducted under each Project Document to which such Person
is a party requires it to be qualified. Neither Funding Corp.
nor the General Partner is in violation of its certificate of
incorporation and by-laws. Each of the Company, Funding Corp.
and the General Partner has all powers and all material
governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
(b) Corporate Authorization. The execution, delivery and
performance by the Company and Funding Corp. of this Agreement
and each Transaction Document to which it is, or is to become, a
party, have been duly authorized by all necessary partnership
action on the part of the Company, all necessary corporate action
on the part of the General Partner and all necessary corporate
action on the part of Funding Corp. and do not, and will not,
require the consent or approval of any Partner of the Company,
any stockholder of Funding Corp. or any trustee or holder of any
indebtedness or other obligation of the Company or Funding Corp.,
other than such consents and approvals as have been, or on or
before the Issuance Date will be duly obtained, given or
accomplished.
(c) No Violation, etc. Neither the execution, delivery or
performance by the Company or Funding Corp. of this Agreement or
any Transaction Document to which it is, or is to become, a
party, nor the consummation by the Company and Funding Corp. of
the transactions contemplated hereby or thereby, nor compliance
by the Company and Funding Corp. with the provisions hereof or
thereof, conflicts or will conflict with, or results or will
result in a breach or contravention of any of the provisions of,
the Partnership Agreement of the Company, or the certificate of
incorporation or by-laws of Funding Corp., or any applicable law,
or any indenture, mortgage, lease or any other agreement or
instrument to which the Company or Funding Corp. or any of their
respective Affiliates is a party or by which the property of the
Company, Funding Corp. or any of their respective Affiliates is
bound, or result or will result in the creation or imposition of
any Lien (other than Permitted Liens) upon any property of the
Company and Funding Corp. or any of their respective Affiliates.
There is no provision of the Partnership Agreement of the
Company, or any applicable Law, or any such indenture, mortgage,
lease or other agreement or instrument which materially adversely
affects, or in the future is likely (so far as the Company can
now foresee) to have a Material Adverse Change on the Company or
Funding Corp.
(d) Governmental Actions. No Governmental Action under
any Federal, North Carolina or New York law or the General
Corporation Law of Delaware is or will be required in connection
with the execution, delivery or performance by the Company and
Funding Corp. of, or the consummation by the Company and Funding
Corp. of the transactions contemplated by, this Agreement or any
Transaction Document to which it is, or is to become, a party,
except such Governmental Actions (i) as have been, or will have
been, duly obtained, given or accomplished, (ii) as may be
required under existing Federal, Delaware, North Carolina or New
York law to be obtained, given or accomplished from time to time
after the Issuance Date in connection with the maintenance, use,
possession or operation of the Project or otherwise with respect
to the Project and the Company's involvement therewith and which
are routine in nature and which neither the Company nor Funding
Corp. has any reason to believe will not be timely obtained, and
(iii) as may be required under Applicable Law not now in effect.
No Governmental Action by any Federal, Delaware, North Carolina
or New York Governmental Authority is required including without
limitation any Governmental Action relating to the Securities Act
of 1933, the Securities Exchange Act of 1934, the Trust Indenture
Act of 1939, the Federal Power Act, the Investment Company Act,
PUHCA, Environmental Law, any energy matters or public utilities,
or the Project or is or will be required (x) in connection with
the participation by the Bank or any Participant in the
consummation of the transactions contemplated by this Agreement,
or in connection with the participation by the Trustee, Funding
Corp. or any Person in the consummation of the transactions
contemplated by the Transaction Documents or (y) to be obtained
by any of such Persons prior to the Termination Date, except such
Governmental Actions (A) as have been, or on or before the
Issuance Date, will be, duly obtained, given or accomplished, (B)
as may be required by Applicable Law not now in effect.
(e) Execution and Delivery. This Agreement, in Collateral
Documents and the other Transaction Documents to which the
Company and/or Funding Corp. is, or is to become, a party on or
prior to the Issuance Date have been or on or before the Issuance
Date will have been duly executed and delivered by the Company
and Funding Corp., as applicable, and this Agreement is and upon
execution and delivery thereof each such Collateral Document and
other Transaction Document will be the legal, valid and binding
obligations of the Company and Funding Corp., as applicable, in
accordance with their respective terms, subject to the
application by a court of general principles of equity and to the
effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally.
(f) Litigation. Except for the litigation between Panda
Energy Corporation and NNW, Inc. described in the Offering
Circular dated July 26, 1996 relating to the bonds issued under
the Bond Purchase Agreement, there is no pending action or
proceeding (including any Environmental Claim) before any court,
governmental agency or arbitrator against or directly involving
the Company, Funding Corp., or any of their respective Affiliates
and, to the best of the Company's and Funding Corp.'s knowledge,
there is no pending or threatened action or proceeding affecting
the Company, Funding Corp. or any of their respective Affiliates
before any court, governmental agency or arbitrator (A) in which
any question is raised as to the validity of this Agreement, any
Collateral Document, any other Transaction Document or any
Governmental Approval, or (B) in which there is any material
likelihood of an outcome which may materially and adversely
affect the ability of the Company, Funding Corp. or any such
Affiliate to perform its obligations hereunder, under any Project
Agreement, or under any of the other Transaction Documents.
There has been no determination (interim or final) in any action
or proceeding so disclosed which determination may materially and
adversely affect the ability of the Company or Funding Corp. to
perform its obligations hereunder under any Project Agreement,
any Collateral Document or any other Transaction Document.
(g) Material Adverse Change. The balance sheet of the
Company as at December 31, 1995, and the related statements of
income, of retained earnings and of changes in financial position
of the Company for the fiscal year then ended, copies of which
have been furnished to the Bank, present fairly the financial
position of the Company as at such date and the results of the
operations of the Company for the year ended on such date, in
accordance with GAAP. Since December 31, 1995, there has been no
Material Adverse Change.
(h) Compliance with ERISA. The Company and each member of
the Controlled Group have fulfilled their obligations under the
minimum funding standards of ERISA and the Code with respect to
each Plan (or, with respect to each Plan which is a multiemployer
plan as defined in section 4001(a)(3) of ERISA, have made all
required contributions), are in compliance (other than any
instance of non-compliance the liability for which is not
material to the Company's or the Controlled Group's financial
condition) with the presently applicable provisions of ERISA and
the Code, and no events have occurred which have or could result
in the imposition of any liability to the PBGC or a Plan under
Title IV of ERISA.
(i) Titles; Liens. The Company owns and has good and, in
the case of the Mortgaged Property, marketable title to the
Collateral pledged by it to the Collateral Agent in each case
free and clear of all Liens other than Permitted Encumbrances.
(j) Material Agreements and Licenses. The Company
possesses all licenses, franchises, trademarks, trade names,
copyrights, patents and agreements necessary for the ownership,
operation and maintenance of the Project. No licenses,
franchises, trademarks, trade names, copyrights, patents or
agreements with respect to the use of technology or other permits
not in the possession of the Company (other than those
constituting Government Approvals referred to in Section 3.03
hereof) are necessary for the construction, ownership, operation
and maintenance of the Project.
(k) No Default. Neither the Company, nor Funding Corp. nor
any of their respective Affiliates is in default under or with
respect to any Collateral Document, Financing Document, Interim
Financing Document or any provision of any other Project Document
or other agreement, lease or instrument to which it is a party or
by which it or its properties may be bound (which default or
breach has not been permanently waived by the other party to such
document). No Reimbursement Default or Reimbursement Event of
Default has occurred and is continuing.
(l) Payment of Taxes. Each of the Company, Funding Corp.
and their respective Affiliates has filed or caused to be filed
all tax returns which are required to be filed by it, and has
paid all taxes shown to be due and payable on said returns or on
any assessments made against it or any of its assets and all
other taxes, fees or other charges imposed on it by any
Governmental Authority, other than taxes and assessments the
payment of which are subject to a Good Faith Contest.
(m) Collateral Documents. Upon execution and delivery
thereof, the provisions of the Collateral Documents create, in
favor of the Collateral Agent, legal, valid and enforceable Liens
on or security interest in all of the Collateral covered thereby,
and on or prior to the Issuance Date all necessary and
appropriate recordings and filings will have been effected in all
necessary and appropriate public offices so that on the Issuance
Date each Collateral Documents will constitute a perfected Lien
on all right, title, estate and interest of the Company, Funding
Corp. and the Partners in the Collateral covered thereby, prior
and superior to all other Liens other than Permitted Liens.
(n) Delivery of Project Agreements. The Bank has received
a complete copy of each Project Agreement in effect on the
Issuance Date (including all exhibits, schedules and disclosure
letters referred to therein or delivered pursuant thereto, if
any, and all amendments and supplements thereto, if any) which
have been executed and delivered prior to or on the Issuance
Date. None of such Project Agreements has been otherwise
amended, modified or terminated, and all such Project Agreements
are in full force and effect. Each Project Agreement assigned to
the Company has been duly and validly assigned. Such assignments
are not subject to rescission and have been duly and validly
consented to by the parties to such Agreement and the obligations
thereunder have been duly and validly assumed by the Company.
(o) Disclosure. No representation, warranty or other
statement made by the Company or Funding Corp. in this Agreement,
in any other Transaction Document or in any document provided by
the Company or Funding Corp. or any of their respective
Affiliates to the Bank, the Independent Engineer, the Gas
Consultant or the Insurance Consultant contains any untrue
statement of a material fact or omits (as of the date made or
furnished) any material fact necessary to make the statements
herein or therein not misleading in light of the circumstances
under which they were made and nothing has occurred since the
date on which such representations, warranties or statements were
made to render them untrue or misleading (other than in any such
case, with respect to the identity of the Person making such
representation, warranty or statement). There is no fact known
to the Company, Funding Corp. or any of their respective
affiliates with respect to the Project, the Company, Funding
Corp. the General Partner, any Limited Partner or the Project
Documents which has been disclosed in writing to the Bank and
which materially adversely affects, or which could reasonably be
expected to material affects, or which could reasonably be
expected to materially adversely affect, the Company, Funding
Corp., the General Partner, the Project or the value of
Collateral Agent's security interest in the Collateral in the
future.
(p) Status. (i) The FERC Order granting PRC's application
for certification of the Project as a qualifying cogeneration
facility was issued on August 4, 1989. The Company's Self
Certification Filing has been filed with FERC. Except as set
forth in the Self Certification Filing, no facts contained in
PRC's original application for certification of the Project as a
Qualifying Facility or stated in such original certification
order by the FERC have changed (other than any such fact that
would not adversely affect the Project's status as a Qualifying
Facility). The Project is a Qualifying Facility.
(i) Neither the Company, Funding Corp., the General Partner,
nor any Limited Partner is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(ii) Neither the Company, Funding Corp., the General Partner,
nor any Limited Partner is a "holding company" or a "subsidiary
company" of a "holding company" within the meaning of PUHCA.
(iii) Neither the General Partner nor the Limited Partner
is an "electric utility," an "electric utility holding company,"
or a wholly- or partially-owned subsidiary of an "electric
utility" or an "electric utility holding company," within the
meaning of PURPA and the regulations promulgated thereunder, or a
person primarily engaged in the generation or sale of electric
power (other than electric power from qualifying cogeneration
facilities or qualifying small power production facilities)
within the meaning of PURPA and the regulations promulgated
thereunder.
(iv) The Company is exempt from the provisions of the Federal
Power Act, as amended, except for the provisions set forth in
Subpart F of 18 C.F.R. Part 292.601, and neither the Company nor
the General Partner is a public utility under the laws of the
State or North Carolina and each of the Company and PRC has
complied with the applicable provisions of the Power Plant and
Industrial Fuel Use Act of 1978, as amended.
(v) The Bank will not be deemed, by reason of any transaction
contemplated by any of the Transaction Documents, to be subject
to regulation under (i) PUHCA, (ii) the Federal Power Act, (iii)
PURPA, (iv) any other Federal law regulating the generation,
transmission or sale of electricity under which the Bank would be
deemed to be the generator, transmitter or seller of such
electricity, or (v) any laws of the State of North Carolina
respecting the rates of public utilities and the financial and
organizational activities of utilities.
(q) Useful Life. As of the Closing Date, the useful life
of the Project as a whole, with the contemplated maintenance
customarily associated with similar operations, will be not less
than the remaining term of the VEPCO Power Purchase Agreement
(without giving effect to any extension of such term provided for
in Section 5.2 of such agreement).
(r) Utility Services. All electricity, water, water rights
and other utilities (including natural gas utilities) necessary
for the operation of the Project as contemplated by the Project
Agreements will be available in adequate amounts and on a timely
basis to meet the requirements necessary for the operation and
maintenance of the Project for its useful life consistent with
cash flows for the Company previously delivered to the Bank;
provided, that natural gas supply and transportation may be
subject to interruption from time to time.
(s) Solvency. On the Issuance Date, after giving effect to
the transactions contemplated by this Agreement and each of the
Transaction Documents, each of the Company and Funding Corp. is
solvent. For purposes of the foregoing, "solvent" as to any
Person shall mean that (i) the sum of the assets of such Person,
both at a fair valuation and at present fair salable value, will
exceed its liabilities, including contingent liabilities, (ii)
such Person will have sufficient capital with which to conduct
its business as presently conducted and as proposed to be
conducted, and (iii) such Person has not incurred debts, and does
not intend to incur debts, beyond its ability to pay such debts
as they mature. For purposes of the foregoing definition, "debt"
means any liability on a claim, and "claim" means (x) a right to
payment, whether or not such right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured, or unsecured, or
(y) a right to an equitable remedy for breach of performance if
such breach gives rise to a payment, whether or not such right to
an equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured, or unsecured.
With respect to any such contingent liabilities, such liabilities
shall be computed at the amount which, in light of all the facts
and circumstances existing at the time, represents the amount
which can reasonably be expected to become an actual or matured
liability.
(t) Additional Documents. On the Issuance Date, all the
representations and warranties contained in the Bond Purchase
Agreement, the Collateral Documents and the Interim Financing
Documents are true and correct in all material respects.
(u) Environmental. The Company, Funding Corp., the Project
and the Site are in compliance with all applicable Environmental
Laws except where such non-compliance could not reasonably be
expected to result in a Material Adverse Change or in remediation
costs in excess of $150,000 and could not reasonably be expected
to result in the imposition of a Lien by any Government Authority
or in any enforcement action by any Governmental Authority
seeking damages in excess of $150,000 or seeking remediation the
cost of which is reasonably estimated to be in excess of
$150,000. No Hazardous Material or underground storage tank is
located on, under or about, nor has there been a Release of any
Hazardous Material to or from the Site (or any other property
with respect to which the Company or Funding Corp. has or may
have retained or assumed liability for environmental conditions
or compliance) in a manner (i) which violates any Environmental
Law, (ii) for which cleanup or remedial action of any kind that
could reasonably be expected to result in a Material Adverse
Change or in remediation costs in excess of $150,000 is required
under any Environmental Law or (iii) which could reasonably be
expected to result in the imposition of a Lien by any
Governmental Authority or in any enforcement action by any
Governmental Authority seeking damages in excess of $150,000 or
seeking remediation the cost of which is reasonably estimated to
be in excess of $150,000.
7. Affirmative Covenants. The Company and Funding Corp.,
jointly and severally, covenant and agree that, so long as the
Letter of Credit shall remain outstanding hereunder and until
payment in full of all the Obligations of the Company:
(a) Maintenance of Existence, Properties, Etc. (i) The
Company shall preserve and maintain (x) its legal existence, as a
limited partnership in good standing under the laws of the State
of Delaware, (y) its qualification to do business and good
standing as a foreign limited partnership in North Carolina and
in every other jurisdiction where the ownership of its property
and the nature of its business require it to be so qualified and
(z) all its rights, licenses, patents, exemptions, privileges and
franchises necessary for the proper operation of the Project and
the maintenance of its existence except, in each case, where the
failure to so preserve and maintain could not reasonably be
expected to result in a Material Adverse Change.
(i) Each of Funding Corp. and the General Partner shall
preserve and maintain (x) its legal existence, as a corporation
organized and in good standing under the laws of the State of
Delaware, (y) its qualification to do business and good standing
as a foreign corporation in North Carolina and in every other
jurisdiction where the ownership of its property and the nature
of its business require it to be so qualified and (z) all its
rights, licenses, patents, exemptions, privileges and franchises
necessary for the maintenance of its existence except, in each
case, where the failure to so preserve and maintain could not
reasonably be expected to result in a Material Adverse Change.
(ii) Each of the Company and Funding Corp. shall comply with
the Partnership Agreement of the Company or the Certificate of
Incorporation and by-laws of Funding Corp., as the case may be.
(iii) The Company will maintain and operate the Project, or
cause the Project to be maintained and operated, in good order
and repair, ordinary wear and tear excepted, and, substantially
in accordance with Prudent Engineering and Operating Practices.
(iv) Each of the Company and Funding Corp. shall obtain and
maintain, or cause to be obtained and maintained in full force
and effect all Governmental Approvals required to be obtained by
or on behalf of the Company or Funding Corp., as applicable, (x)
to conduct its business pursuant to the Project Documents and the
Non-Material Agreements and (y) to perform its obligations under
the Project Documents, except, in either case, where failure to
so obtain or maintain such Governmental Approval could not
reasonably be expected to result in a Material Adverse Change.
Each of the Company and Funding Corp. shall use its best efforts
to obtain or cause to be obtained all Governmental Approvals
necessary in connection with the Additional Contracts to conduct
its business pursuant to the Project Documents and the Non-
Material Agreements, in each case as promptly as practicable but
in any event no later than the date required to be obtained
hereunder or under any other Project Documents.
(v) The Company shall preserve good title or valid leasehold
rights to the interests in the Site and the tangible personal
property forming a part of the Collateral purported to be subject
to the Lien of the Collateral Documents to which it is a party
(other than property subject to an Event of Loss, an Event of
Eminent Domain or a Title Event or property disposed of pursuant
to Section 8(f)), subject only to Permitted Liens.
(b) Compliance with Laws. Each of the Company and Funding
Corp. (i) shall comply with all Laws applicable to it (except
where the failure to do so, could not reasonably be expected to
result in a Material Adverse Change) and (ii) shall obtain,
maintain and comply with all Government Approvals as shall now or
hereafter be necessary under applicable Law in each case in
connection with the ownership, operation or maintenance of the
Project or the making and performance by the Company of any
material provision of the Project Documents to which it is a
party (except where the failure to do so, could not reasonably be
expected to result in a Material Adverse Change), and the Company
shall, upon request, promptly furnish copies of each such
Government Approval to the Bank.
(c) Litigation. Each of the Company and Funding Corp.
shall promptly furnish to the Bank after the Company becomes
aware of the commencement thereof, written notice of all actions,
suits and proceedings before any court or governmental
department, commission, board, bureau, agency, or
instrumentality, domestic or foreign, affecting the Company
which, if determined adversely to the Company and when aggregated
with any other such pending actions could result in a judgment
against the Company of $50,000 or more. Each of the Company and
Funding Corp. shall also notify the Bank if any such action, suit
or proceeding against it is threatened.
(d) Maintenance of Project. The Company shall cause the
Project and any properties now or hereafter owned or leased by it
to be operated and maintained (i) in good repair, working order
and condition and in accordance with Prudent Engineering and
Operating Practices as approved by the Independent Engineer, and
(ii) in accordance with the terms and conditions of the Project
Agreements; provided, that the Company's obligations under this
subsection (d) shall be suspended so long as such obligations are
relieved pursuant to the Force Majeure provisions, if any, of the
Project Agreements.
(e) Reporting Requirements. The Company shall:
(i) furnish, to the Bank as soon as practicable and in any
event within 75 days (or, if such statements are filed with or
incorporated into financial statements filed with the SEC, within
five days of such filing) after the end of the first, second and
third fiscal quarters of each fiscal year of the Company, an
unaudited consolidated and consolidating balance sheet of the
Company and its Subsidiaries as of the last day of such quarter
and the related consolidated and consolidating statements of
operations, including cash flows and partners' capital of the
Company for such quarter and (in the case of the first, second
and third fiscal quarters) for the portion of the fiscal year
ending with the last day of such quarter (prepared on a basis
consistent with that used in the preparation of corresponding
figures for the preceding fiscal year), setting forth in each
case in comparative form corresponding unaudited figures from the
preceding fiscal year and accompanied by a certificate of the
chief financial officer of the General Partner of the Company to
the effect that such consolidated financial statements fairly
present the financial condition and results of operations of the
Company on the dates and for the periods indicated in accordance
with GAAP, subject to normal recurring year-end adjustments;
(ii) furnish to the Bank as soon as practicable and in any
event within 135 days (or, if such statements is filed with or
incorporated into financial statements filed with the SEC, within
five days of such filing) after the end of each fiscal year of
the Company, a consolidated and consolidating balance sheet of
the Company and its Subsidiaries as of the end of such year and
the related consolidated and consolidating statements of
operations, income, cash flows and partners' capital of the
Company for such fiscal year (prepared on a basis consistent with
that used in the preparation of corresponding figures from the
preceding fiscal year) setting forth in each case in comparative
form corresponding figures from the preceding fiscal year and
with the opinion thereon (which shall not contain any "going
concern" or similar limitation) by Price Waterhouse LLP, or
another firm of independent public accountants of recognized
national standing, accompanied by a report of such accounting
firm stating that, in the course of its regular audit of the
consolidated financial statements of the Company, which audit was
conducted in accordance with GAAP, such accounting firm has
obtained no knowledge of any Reimbursement Default or
Reimbursement Event of Default, or, if in the opinion of such
accounting firm a Reimbursement Default or Reimbursement Event of
Default has occurred and is continuing, a statement as to the
nature thereof;
(iii) furnish to the Bank with each quarterly and annual
financial statement submitted pursuant to clauses (i) and (ii)
above:
(x) calculations of the Debt Service Coverage Ratio
for such fiscal quarter or fiscal year and for the
immediately preceding three fiscal quarters (commencing
September 30, 1996); and
(y) a certificate of an authorized officer of the
General Partner of the Company stating that all routine
maintenance to the Project has been performed substantially
in accordance with the operation and maintenance procedures
during such quarter or year; and
(z) a certificate of the chief financial officer of
the General Partner of the Company and the chief financial
officer of Funding Corp. stating that no Reimbursement
Default or Reimbursement Event of Default has occurred and
is continuing or, if such statement cannot be so certified,
specifying in reasonable detail such Default or Event of
Default and the actions taken or proposed to be taken with
respect thereto;
(iv) furnish to the Bank with each annual financial statement
submitted pursuant to clause (ii) above a certificate from an
authorized officer of the General Partner of the Company and an
authorized officer of Funding Corp. (w) confirming that all
insurance policies required pursuant to Section 7(g) are in full
force and effect on the date thereof, (x) confirming the names of
the companies issuing such policies, (y) confirming the amounts
and expiration dates of such policies, and (z) stating that such
policies comply with the requirements of Section 7(g);
(v) furnish to the Bank, as soon as practicable following the
performance of scheduled major maintenance of the Project, a
certificate of an authorized officer of the General Partner of
the Company stating that such work was performed substantially in
accordance with the Operation and Maintenance Procedures and a
certificate of the Independent Engineer verifying the information
contained in such officer's certificate; and
(vi) furnish to the Bank each of the following items:
(q) promptly after the Company or Funding
Corp. becomes aware of the occurrence and continuance
thereof, written notice of the occurrence of any event
or condition which constitutes a Reimbursement Default
or Reimbursement Event of Default, specifically
describing such Default or Event of Default and
describing any action being or proposed to be taken
with respect thereto;
(r) promptly after the Company or Funding
Corp. becomes aware of the occurrence and continuance
thereof, written notice of the occurrence of any Event
of Eminent Domain, Event of Loss or Title Event that
could reasonably be expected to give rise to Eminent
Domain Proceeds, Casualty Proceeds or Title Insurance
Proceeds, as the case may be, in an amount in excess of
$100,000 and a certificate of an authorized officer of
the General Partner of the Company setting forth the
details of such Event of Eminent Domain, Event of Loss
or Title Event and the action which the Company and
Funding Corp. are taking or propose to take with
respect thereto;
(s) promptly after the Company or Funding
Corp. becomes aware of the existence thereof, written
notice of the existence of any defect of title, any
Lien or any encumbrance on the Mortgaged Property that
could reasonably be expected to give rise to Title
Insurance Proceeds in an amount in excess of $250,000
and a certificate of an authorized officer of the
General Partner of the Company and Funding Corp.
setting forth the details of such defect of title, Lien
or encumbrance and the action which the Company and
Funding Corp. or the Title Company is taking or
proposes to take with respect thereto;
(t) promptly and in any event within five
Business Days after receipt thereof by the Company or
Funding Corp., written notice and copies of all
notices, complaints, summons, or any other
notifications received by the Company from any
Governmental Authority relating to Environmental Claims
that could reasonably be expected to exceed $50,000,
and copies of all material communications with any
Governmental Authority or other Persons regarding such
notices, complaints, summons or other notifications
with copies delivered concurrently to the Independent
Engineer;
(u) promptly after the Company or Funding
Corp. becomes aware thereof, (1) written notice of any
Release of any Hazardous Material, regardless of the
date of such Release, at, in, on, under or from the
Site, or any part thereof that is required to be
reported to any Governmental Authority or that could
reasonably be expected to result in any ordered
remediation or corrective action or obligation and (2)
copies of all communications with any Governmental
Authority or other Persons regarding the Release of any
Hazardous Materials;
(v) promptly after the Company or Funding
Corp. becomes aware of the occurrence thereof, written
notice of the occurrence of any event or condition
which constitutes a default under any Project
Agreement, specifically stating that such event or
condition has occurred and describing it and any action
being proposed to be taken with respect thereto;
(w) promptly after receipt thereof, a copy
of each notice, demand or other communication delivered
to the Company or Funding Corp. pursuant to any Project
Agreement to which the Company or Funding Corp. is a
party relating to the assertion of nonperformance of
any covenant of or a default under any Project
Agreement;
(x) promptly and in any event within five
Business Days after the Company or Funding Corp.
becomes aware of the occurrence of any of the following
with respect to any Plan (including without limitation
any Plan of a Commonly Controlled Entity) as to which
the Company or Funding Corp. may have liability,
written notice thereof, describing the same and steps
being taken by the Company or Funding Corp., as
applicable, with respect thereto: (1) the acquisition
of a Commonly Controlled Entity, (2) the occurrence of
a Reportable Event (as defined in Section 4043 of
ERISA) with respect to any such Plan, (3) the
institution of steps to withdraw from any such Plan,
(4) the institution of any steps to terminate any such
Plan, (5) the failure to make a required contribution
to any such Plan if such failure is sufficient to give
rise to a lien under Section 302(f) of ERISA or Section
412 of the Code, (6) the taking of any action with
respect to any such Plan which could result in the
requirement that the Company furnish a bond or other
security to the PBGC or such Plan, or (7) the
occurrence of any event or events with respect to any
such Plan or Plans which individually or in the
aggregate could result in material liability for the
Company;
(y) each document delivered to the Trustee
or any holder under the Indenture and not otherwise
delivered to the Bank; and
(z) from time to time, such other
information or documents (financial or otherwise) as
the Bank may reasonably request.
(vii) furnish to the Bank and the Independent Engineer
annually, at least sixty (60) days prior to the beginning of each
fiscal year for which an Operating Plan and an Operating Budget
is required pursuant to Section 7(n), a plan of the schedule
operation of the Project (an "Operating Plan") and an Operating
Budget for such fiscal year; provided that if the Company has not
adopted an annual Operating Budget before the beginning of fiscal
year of the Company, the Operating Budget for the preceding
fiscal year shall, until the adoption of an annual Operating
Budget, be deemed to be in full force and effect as the annual
Operating Budget.
(f) Site Taxes. (i) The Company shall use its best efforts
(x) to cause the Site to be replatted, as promptly as practicable
after the Issuance Date, as a parcel separate and distinct for
tax assessment purposes, from the real property of The Bibb
Company which includes, or is contiguous to, the Site, or (y) to
obtain, as soon as practicable after the Issuance Date, a
nondisturbance agreement, satisfactory in form and substance to
the Bank from each taxing authority that assesses or collects
real property taxes on such real property in which such taxing
authority covenants that (A) if the event of the foreclosure of
any Lien arising from the failure to pay such real property
taxes, it will not disturb the Site Lease and (B) before any such
foreclosure, it shall first notify the Company and provide an
opportunity to the Company to discharge such Lien.
(ii) Upon the occurrence of either of the events
described in clauses (x) or (y) of Section 7(f), the Company
shall deliver to the Bank a certificate of an authorized officer
of the General partner of the Company stating that such event
shall have occurred, together with appropriate evidence of the
applicable replatting or an executed copy of the nondisturbance
agreement. Prior to the delivery of such certificate, the
Company shall also deliver to the Bank any notification or other
written communication it may receive from a tax authority or The
Bibb Company concerning the assessment of, or failure to pay,
real property taxes on the real property of The Bibb Company
referred to in such clauses promptly after receipt of such
notification or other written communication.
(g) Insurance. (i) Subject to clause (vi), the Company
shall at all times effect, maintain and keep in force, or cause
to be effected, maintained and kept in force, insurance
sufficient to satisfy the limits and coverage provisions listed
below and the requirements, if any, set forth in the Project
Documents. Such insurance shall be with responsible insurance
carriers which are authorized to do business in the State of
North Carolina and have an Insurance Reports Rating from A.M.
Best Company, Inc. of "A" or better and a financial size category
of "VIII" or higher:
(r) Workers' Compensation Insurance:
Workers' compensation insurance as required by
applicable state laws, and employer's liability
insurance with a $1,000,000 minimum limit per accident.
(s) General Liability Insurance:
Comprehensive general liability insurance on an
occurrence basis against claims for personal injury
(including bodily injury and death) and property damage
liability. Such insurance policy shall include
insurance with respect to product/completed operations,
blanket contractual, broad form property damage,
explosion, collapse and underground hazards,
contractor's protective, owner's protective and
personal injury liability with minimum limits of
liability of at least $1,000,000 per occurrence for
combined single limit bodily injury and property damage
and at least $2,000,000 in the aggregate.
(t) Automobile Liability Insurance:
Comprehensive automobile liability insurance against
claims for bodily injury and death and property damage
liability covering all owned, non-owned and hired
vehicles with limits of liability of $1,000,000 each
occurrence for combined single limit bodily injury and
property damage, including a Motor Carrier's Act
Endorsement, if required by applicable law.
(u) Excess Insurance: Umbrella liability or
excess liability insurance with a limit of $9,000,000
per occurrence and $9,000,000 aggregate in excess of
and following the terms of the underlying insurance set
forth in clauses (r), (s) and (t) above.
(v) Physical Damage Insurance: Property
damage insurance on an "All Risk" basis including
coverage against damage or loss caused by earth
movement and flood and providing (1) coverage for the
Project in a minimum aggregate amount equal to the
"full insurable value" of the Project, (2) transit
coverage, with sub-limits sufficient to insure the full
replacement value of all property or equipment removed
from the Project, and (3) coverage for foundations and
other property below the surface of the ground. For
purposes of this clause (v) and clauses (w) and (x)
below, (A) the Project shall be deemed to include steam
and electrical transmission lines, gas pipeline
interconnection facilities (but excluding below-ground
gas pipelines), fuel storage and handling facilities,
and all equipment related to any of the foregoing in
which the Company has an insurable interest and (B)
"full insurable value" shall mean the full replacement
value of the Project, including any improvements,
equipment, fuel and supplies, without deduction for
physical depreciation and/or obsolescence. All such
policies may have deductibles of not greater than
$50,000 (except that with respect to the 40 Megawatt
Gas Turbine Generator, the 80 Megawatt Gas Turbine
Generator, and the 60 Megawatt Steam Turbine Generator,
such deductible amount may exceed $50,000 but shall not
exceed $150,000) in each case for any one loss except
for earth movement and flood which will have the lowest
deductible available (in the opinion of the Bank) on
commercially reasonable terms in the insurance market
place. Such insurance shall provide for increased cost
of construction, debris removal, and loss to undamaged
property as the result of enforcement of building laws
or ordinances.
(w) Boiler and Machinery: Boiler and
machinery insurance on the Project (as described in
clause (v) above), on a comprehensive form in an amount
necessary to insure all equipment on a replacement
value basis subject to a deductible amount determined
by the Agent to be reasonably and commercially
available, not to exceed $150,000 (except that with
respect to the 60 Megawatt Steam Turbine Generator such
deductible amount may exceed $150,000 but shall not
exceed $250,000) in each case for any one loss. The
insurance limits are to be determined with reference to
the maximum foreseeable loss.
(x) Business Interruption Insurance:
Business interruption insurance covering debt service
and other fixed expenses attributable to the Project by
reason of total or partial suspension or delay of, or
interruption in, the operation of the Project caused by
loss or damage to, or destruction of, the Project, or
equipment as a result of the perils covered in clauses
(v) through (vi) above. The policy is to include
contingent coverage to insure debt service. This
policy is to be subject to a deductible amount
determined to be reasonably and commercially available,
not to exceed thirty days. Coverage will be in a
minimum amount required to cover a period of suspension
or delay of at least twelve (12) calendar months.
(y) Title Insurance: Title insurance
policies covering the Project in the following amounts:
(A) with respect to the First Mortgage, in an initial
amount of $116,350,000 and (B) with respect to any
other Indebtedness permitted hereunder and secured by
any Additional Mortgages, in an amount equal to not
less than 75% of the principal amount of such
additional outstanding permitted Indebtedness.
(z) Liability Limits: Notwithstanding the
above, in no event shall the insurance maintained under
this Agreement cover fewer risks or have coverage in
amounts less than that required under the Indenture.
(i) The Collateral Agent shall be named as sole loss payee,
under a standard lenders loss payable clause or mortgage
endorsement substantially equivalent to the North Carolina
standard mortgage endorsement or lenders loss payable endorsement
form 438 BFU, without contribution, under insurance policies
required by clauses (w) and (x) of Section 7(g)(i). The
Collateral Agent, the Bank and the Trustee shall be added as
additional insured with respect to the coverage required by
clauses (s), (t) and (u) of Section 7(g)(i) and such insurance
shall be primary without right of contribution of any other
insurance or self-insurance carried by or on behalf of the
Collateral Agent, the Independent Engineer, the Bank or the
Trustee, with respect to its interest as such in the Project and
each policy shall contain a severability-of-interests or cross-
liability provisions. Insurance policies required under clauses
(v), (w) and (x) of Section 7(g)(i) shall be endorsed with an
agreed amount clause or waiver of co-insurance.
(ii) The insurance carried in accordance with Section 7(g)(i)
(other than title insurance) shall be endorsed as follows:
(x) All insurers shall waive all rights of
subrogation against the Collateral Agent and its
officers, employees, agents, successors and assigns,
and shall waive any right of set-off and counterclaim
and any other right to deduction whether by attachment
or otherwise; and
(y) if, at any time, such insurance is
canceled, or any substantial change is made in the
coverage which affects the interests of the Collateral
Agent, such cancellation or change shall not be
effective as to the Collateral Agent for thirty days,
except for nonpayment of premium, which shall be ten
days, after receipt by the Collateral Agent of written
notice from such insurer of such cancellation or
change.
(iii) Upon procurement by the Company of the insurance set
forth in Section 7(g)(i), the Company shall furnish to the
Collateral Agent, the Bank and the Trustee certification of all
required insurance. Such certification shall be executed by each
insurer or by an authorized representative of each insurer, where
it is not practical for such insurer to execute the certificate
itself. Such certification shall identify underwriters, the type
of insurance, the insurance limits, the risks covered thereby and
the policy term. The Company will promptly furnish to the Bank
copies of all insurance policies, binders and cover notes or
other evidence of such insurance relating to the Project.
(iv) Within ten (10) days after the certification referred to
in clause (iv) above, the Company shall furnish to the Collateral
Agent and the Trustee a report of its insurance broker stating
that all premiums then due have been paid and a certificate of
the Insurance Consultant stating that, in the opinion of
Insurance Consultant, the insurance then carried and maintained
is in accordance with the terms hereof.
(v) If at any time any of the insurance required pursuant to
Section 7(g)(i) shall no longer be available on commercially
reasonable terms, the Company, as promptly as practicable, shall
procure substitute insurance coverage that is the most equivalent
to the required coverage and available on commercially reasonable
terms. The Company shall deliver to the Bank a certificate of
the Insurance Consultant stating that the required insurance
coverage is no longer available on commercially reasonable terms
and that the proposed substitute insurance coverage is the most
equivalent to the required coverage available on commercially
reasonable terms. For purposes of this Section 7(g), insurance
shall be deemed to be available on "commercially reasonable
terms", unless the Bank (in consultation with the Insurance
Consultant) reasonably concludes that such insurance is
obtainable only at excessive cost which is not justified in terms
of the risk to be insured and such insurance is generally not
being carried by or applicable to cogeneration facilities
similarly situated to the Project because of such excessive
costs.
(vi) The loss, if any, under any insurance required to be
carried under clauses (v), (w), (x) and (y) of Section 7(g)(i)
shall be adjusted with the insurance companies or otherwise
collected, including the filing in a timely manner of appropriate
proceedings, by the Company, subject to the approval of the Bank
if such loss is in excess of $250,000. In addition, the Company
shall take all other steps necessary, or, if such loss is in
excess of $250,000, requested by the Bank in consultation with
the Insurance Consultant, to collect from insurers any loss
covered by any of the insurance policies in Section 7(g)(i). All
such policies shall provide that the loss, if any, under such
insurance shall be adjusted and paid as provided in this Section
7(g).
(vii) The Company and Funding Corp. shall promptly notify
the Bank of any loss covered by any insurance required by Section
7(g)(i) in excess of $100,000. The Company and the Bank shall
cooperate and consult with each other in all matters pertaining
to the settlement or adjustment of any and all claims and demands
for damages on account of any Event of Eminent Domain or
pertaining to the settlement, compromise or arbitration of any
claim on account of any Event of Loss or Title Event. The
Company will not compromise, settle or consent to the settlement
of any proceeding arising out of any Event of Loss, Event of
Eminent Domain or Title Event, if the amount of the related claim
exceeds $100,000, unless the terms of such compromise, settlement
or consent to settlement are concurred with by the Bank (in
consultation with the Independent Engineer and the Insurance
Consultant); provided that if a Reimbursement Default has
occurred and is continuing, the Company will not settle,
compromise or consent to the settlement of any proceeding arising
out of such Event of Loss, Event of Eminent Domain or Title Event
without the prior written consent of the Bank.
(viii) Nothing contained in this Agreement shall impose on
the Bank any duty or obligation to verify the existence or
adequacy of the insurance coverage maintained by the Company nor
shall the Bank be responsible for any representations or
warranties made by or on behalf of the Company to any insurance
company or underwriter.
(ix) The Company hereby waives any and every claim for recovery
from the Bank for any and all loss or damage coverage by any of
the insurance policies to be maintained hereunder to the extent
that such loss or damage is recovered under any such policy.
Inasmuch as the foregoing waiver will preclude the assignment of
any such claim to the extent of such recovery, by subrogation (or
otherwise), to an insurance company (or other Person), the
Company shall give written notice of the terms of such waiver to
each insurance company which has issued, or which may issue in
the future, any such insurance policy to be properly endorsed by
the issuer thereof to, or to otherwise contain one or more
provisions that prevent the invalidation of the insurance
coverage provided thereby by reason of such waiver.
(x) The Company shall cause the Operator to procure and
maintain in full force and effect at all times, or shall procure
and maintain on behalf of the Operator, liability and worker's
compensation insurance for coverage and limits not less than what
is currently required in the Operations and Maintenance
Agreement.
(xi) Notwithstanding anything to the contrary set forth in this
Section 7(g), except with respect to business interruption
insurance, no insurance required to be maintained hereunder shall
be subject to a deductible in excess of $50,000 per occurrence or
in such other amount determined to be reasonably and commercially
available and acceptable to the Bank.
(xii) The Company will comply, or cause compliance, at all
times with the insurance requirements contained in the Project
Documents to which it is a party.
(xiii) The Company will deliver to the Bank, on or prior to
the expiration date of each insurance policy required to be
maintained by it pursuant to this Section 7(g), a certificate
executed by the insurer or its duly authorized agent evidencing
the continuance of such insurance policy (or, upon request, a
certified copy of such insurance policy).
(xiv) If at any time the Company fails to maintain
insurance of the type and in the amounts required under this
Section 7(g), without otherwise limiting the Bank's rights under
Section 9, the Bank may elect to purchase such insurance on
behalf of the Company and any amounts so expended together with
interest thereon at a rate of 4% in excess of the prime rate
announced from time to time by the Bank shall be additional
Obligations of the Company.
(h) Books and Records. The Company and Funding Corp. shall
at all times keep proper books and records of all its business
and financial affairs in accordance with GAAP. The Company shall
keep books of account or records concerning its accounts,
inventory, contract rights, equipment and proceeds at its
principal offices located at 4100 Spring Valley, Dallas, Texas
75244. The Company shall not change its name or the location of
its principal office without providing at least 60 days prior
notice thereof to the Bank and the Collateral Trustee. The
Company shall at all times cause a complete set of the Operation
and Maintenance Procedures, including, without limitation,
documents relating to preventive maintenance, spare parts and
operating hours, relating to the Project to be maintained at the
Project.
(i) Right of Inspection. (i) Subject to requirements of
applicable Law and safety requirements, the Company and Funding
Corp. shall permit the Bank, the Independent Engineer, the
Collateral Agent, the Depositary Agent, the Gas Consultant or any
agents or representatives of any of the foregoing, from time to
time during normal business hours (x) to conduct reasonable
inspections and examinations of the Project and the records the
Company and Funding Corp. relating to the Project and (y) to
discuss the affairs, finances and accounts of the Company and
Funding Corp. with the officers of the General Partner of the
Company and officers of Funding Corp. and independent accountants
of the Company and Funding Corp., all upon reasonable notice
(which, in any period in which a Reimbursement Default does not
exist, shall be at least five Business Days prior to the
inspection or meeting) and at such reasonable times as the Bank,
the Independent Engineer, the Collateral Agent, the Depositary
Agent or the Gas Consultant may desire.
(i) On the written request of the Bank or the Collateral
Agent, at any time and from time to time during any period in
which a Reimbursement Default exists, the Company and Funding
Corp. will provide, at their sole cost and expense, an
environmental site assessment report in scope reasonably
acceptable to the Bank concerning the Site and any operations
thereon, prepared by an environmental consulting firm approved by
the Bank indicating the presence or absence of Hazardous
Materials and compliance with Environmental Laws including the
potential cost of any removal or remedial action in connection
with any Hazardous Materials on or under such Site and the
potential cost for coming into compliance. If the Company or
Funding Corp. fails to provide such information, after forty-five
(45) days notice, the Bank or the Collateral Agent may order the
same, and the Company and Funding Corp. shall each grant and do
hereby each grant to the Bank and the Collateral Agent and their
agents access to the Site and specifically grant the Bank and the
Collateral Agent and their agents, as the case may be, an
irrevocable non-exclusive license to undertake such an
assessment.
(j) Compliance With Environmental Laws. (i) The Company
(x) shall comply with all Environmental Laws and Governmental
Approvals applicable to the ownership, operation or use of the
Site (or other property with respect to which the Company or
Funding Corp. has or may have retained or assumed liability for
environmental conditions or compliance) or the Project, and shall
use commercially reasonable efforts to cause all tenants,
operators, lessees, employees, invitees, licensees, contractors,
sub-contractors, agents, representatives, affiliates, consultants
and other persons occupying the Site (or other property with
respect to which the Company or Funding Corp. has or may have
retained or assumed liability for environmental conditions or
compliance) or the Project to comply with all such Environmental
Laws, in either case except any such noncompliance which could
not reasonably be expected to result in a Material Adverse Change
and (y) shall promptly pay or cause to be paid when due all costs
and expenses incurred in connection with such compliance as such
costs and expenses become due and payable (unless the payment of
any such costs or expenses is being contested in good faith by
the Company and the Company has set adequate reserves as required
by GAAP and such contest does not subject the Company or the
Project to civil or criminal sanctions, and could not reasonably
be anticipated to cause a Material Adverse Change.
(i) Neither the Company nor any of its Affiliates shall
generate, use, treat, store, release, dispose of, arrange for the
disposal of or transport or permit the generation, treatment,
storage, release, disposal or transportation of Hazardous
Materials in, on, at, under, from or to the Site (or other
property with respect to which the Company or Funding Corp. has
or may have retained or assumed liability for environmental
conditions or compliance) or the Project or onto any other
property, except, in all events, in compliance with all
applicable Environmental Laws.
(ii) The Company shall conduct any investigation, study,
sampling and testing, and undertake any cleanup, removal,
remedial or other action necessary to remove and clean up all
Hazardous Materials from the Site (or other property with respect
to which the Company or Funding Corp. has or may have retained or
assumed liability for environmental conditions or compliance) and
any operations thereon in accordance with the requirements of all
applicable Environmental Laws, and in accordance with orders and
directives of all Governmental Authorities (unless such action is
being contested in good faith by the Company and the Company has
set adequate reserves as required by GAAP and such contest does
not subject the Company or the Project to civil or criminal
sanctions, and could not reasonably be anticipated to cause a
Material Adverse Change).
(k) Event of Eminent Domain; Event of Loss; Title Event.
(i) If an Event of Eminent Domain shall occur with respect to any
Collateral, the Company (w) shall promptly, upon receipt of any
such threat, provide written notice to the Bank, (x) shall
diligently pursue all its rights to compensation against the
appropriate Governmental Authority in respect of such Event of
Eminent Domain, (y) shall not, without the consent of the Bank,
compromise, settle or consent to the settlement of any claim
against the appropriate Governmental Authority, and (z) shall
hold all amounts and proceeds (including instruments) received in
respect of any Event of Eminent Domain (after deducting all
reasonable expenses incurred by it in litigating, arbitrating,
compromising, sealing or consenting to the settlement of any
claims against the appropriate Governmental Authority) ("Eminent
Domain Proceeds") in trust for the benefit of the Collateral
Agent segregated from other funds of the Company or any
Affiliate.
(i) If (x) an Event of Loss shall occur with respect to any
Collateral, the Company shall (1) diligently pursue all its
rights to compensation against any Person with respect to such
Event of Loss, (2) with the consent of the Bank shall compromise,
settle or consent to the settlement of any claim against any
Person with respect to such Event of Loss, and (3) hold all
Casualty Proceeds (including instruments) received in respect of
any Event of Loss (after deducting all reasonable expenses
incurred by it in litigating, arbitrating, compromising, settling
or consenting to the settlement of any claims) in trust for the
benefit of the Collateral Agent segregated from other funds of
the Company and its Affiliates and promptly deposit all such
Casualty Proceeds in the Project Revenue Fund, segregated from
all other moneys or (y) a Title Event shall occur with respect to
the Mortgaged Property, the Company shall (1) diligently pursue
all its rights to compensation against the Title Company with
respect to such Title Event, (2) with the consent of the Bank
shall compromise, settle or consent to the settlement of any
claim against the Title Company with respect to such Title Event,
and (3) hold all Title Insurance Proceeds (including instruments)
received in respect of any Title Event (after deducting all
reasonable expenses incurred by it in litigating, arbitrating,
compromising, settling or consenting to the settlement of any
claims) in trust for the benefit of the Collateral Agent
segregated from other funds of the Company, Funding Corp. and
their respective Affiliates and promptly deposit all such Title
Insurance Proceeds in the Project Revenue Fund, segregated from
all other moneys.
(ii) If an Event of Loss, an Event of Eminent Domain or a Title
Event shall occur, as soon as reasonably practicable, but no
later than fifteen days after the date of receipt by the Company
or the Collateral Agent of Eminent Domain Proceeds, Casualty
Proceeds or Title Insurance Proceeds, as the case may be, the
Company shall make a reasonable good faith determination as to
whether (x) the Project can be rebuilt, repaired or restored to
permit operation of the entire Project on a Commercially Feasible
Basis, and (y) the Casualty Proceeds, the Eminent Domain Proceeds
or the Title Insurance Proceeds, as the case may be, together
with any other amounts that the Company is willing to commit to
such rebuilding, repair or restoration are sufficient to permit
such rebuilding, repair or restoration of the Project. The
determination of the Company shall be evidenced by a certificate
of an officer of the General Partner of the Company which, in the
event the Company determines that the Project can be rebuilt,
repaired or restored to permit operation of the entire Project or
a portion thereof on a Commercially Feasible Basis and that the
Casualty Proceeds, the Eminent Domain Proceeds or the Title
Insurance Proceeds, as the case may be, together with any other
amounts that the Company and Funding Corp. are willing to commit
to such rebuilding, repair or restoration are sufficient, shall
also set forth a reasonable good faith estimate by the Company of
the total cost of such rebuilding, repair or restoration. Such
certificate shall be accompanied by an Independent Engineer's
Certificate, dated within five days of the date of such officer's
certificate, stating that, based upon reasonable investigation
and review of the determination made by the Company, the
Independent Engineer believes the determination and the estimate
of the total cost, if any, set forth in such officer's
certificate to be reasonable.
(iii) If the Casualty Proceeds, the Eminent Domain Proceeds
or the Title Insurance Proceeds, as the case may be, from an
Event of Loss or an Event of Eminent Domain or Title Event do not
exceed $500,000 in the aggregate and such amount is sufficient to
rebuild, repair or restore the Project to permit operation of the
Project on a Commercially Feasible Basis, the Company shall not
have to comply with the provisions of the third sentence of
clause (iii) above and any Casualty Proceeds, the Eminent Domain
Proceeds or the Title Insurance Proceeds, as the case may be,
segregated in the Project Revenue Fund in accordance with
Section 3.1(a)(ii) of the Depositary Agreement shall be paid to
the Company for payment of the cost of rebuilding, repair or
restoration pursuant to the Depositary Agreement.
(l) Annual Independent Engineer's Report. The Company
shall cooperate with the Independent Engineer who shall deliver
to the Bank, the Collateral Agent and the Depositary Agent
annually, no less than thirty days before the end of the then
current fiscal year of the Company, a report (the "Engineer's
Annual Report") containing the following:
(i) an Operating Budget for the next fiscal year and an
Operating Plan for the next fiscal year if such Plan is required
pursuant to Section 7(o);
(ii) the schedule of the Major Maintenance Requirement and the
schedule of major overhaul for the next five fiscal years, as
determined by the Company and concurred with by the Independent
Engineer, including any change in the timing of the scheduled
major overhaul;
(iii) a calculation of the projected Property Tax
Requirement for the next fiscal year;
(iv) a calculation of the Projected Debt Service Coverage Ratio
(Three Months) for the next four succeeding three-month periods
of the Company and the Annual Projected Debt Service Coverage
Ratio;
(v) a comparison of actual plant performance to expected
performance, including, without limitation, a comparison of
output, heat rate and on-line availability;
(vi) an analysis of the causes for equipment, component and
station forced outages;
(vii) an evaluation of the Project's conformance with
scheduled maintenance, preventive predictive maintenance and the
spare parts program;
(viii) a review of the operations and outage plans;
(ix) a review of the results of all performance tests;
(x) a review of revenue records of the Project;
(xi) a review of all reports of Governmental Authorities and
environmental compliance matters with respect to the Project; and
(xii) any other reports, information, or certificates as
may be reasonably requested by the Bank.
In connection with the preparation of the Engineer's
Annual Report and any certification or information the
Independent Engineer is required to deliver to the Bank, the
Company shall cooperate with and provide to the Independent
Engineer an Operating Plan and Operating Budget when required,
pursuant to Section 7(o), an estimate of the Major Maintenance
Requirement, a calculation of the Annual Projected Debt Service
Ratio and all other information regarding the Project reasonably
requested by the Independent Engineer.
(m) Taxes. Each of Funding Corp. and the Company shall pay
and discharge all taxes, assessments and governmental charges or
levies imposed on it or on its income or profits or on any of its
property prior to the date on which penalties attach thereto, and
all lawful claims which, if unpaid, could reasonably be expected
to become a Lien (other than a Permitted Lien) upon its property.
Funding Corp. and the Company may permit the taxes, assessments,
charges, levies or claims so contested to remain unpaid during
the period of any Good Faith Contest. Funding Corp. and the
Company will promptly pay or cause to be paid any valid, final
adjustment enforcing any such tax, assessment, charge, levy or
claim and cause the same to be satisfied of record.
(n) Performance of Project Documents. Each of Funding
Corp. and the Company (i) shall perform and observe in all
material respects all its covenants and agreements contained in
each of the Interim Financing Documents, the Collateral Documents
the Steam Sales Agreement and the VEPCO Power Purchase Agreement
and (ii) shall perform and observe in all material respects its
covenants and agreements contained in each of the other
Transaction Documents to which it is a party except where the
failure to do so could not reasonably be expected to result in a
Material Adverse Change.
(o) Operating Plan and Operating Budget. If, on any
Funding Date occurring within any calendar year, the amounts in
the Project Revenue Fund are not sufficient to make all the
deposits in the Operating Fund, the Debt Service Fund, the Debt
Service Reserve Fund, the Property Tax Fund, the Overhaul Fund
and the other funds established pursuant to the Depositary
Agreement required to be made on such Funding Date and to make
the other payments contemplated by Section 3.1(b)(ii), (iii),
(iv) and (v) of the Depositary Agreement, then, not less than
sixty days prior to the beginning of the next succeeding fiscal
year (or if such Funding Date shall occur within such 60-day
period, then no later than 60 days after such Funding Date), the
Company shall prepare an Operating Plan and Operating Budget for
such succeeding fiscal year and submit the Operating Plan and
Operating Budget to the Bank for its approval. Within fifteen
days after its receipt of the Operating Plan and Operating
Budget, the Bank shall approve the same or notify the Company of
the amendments that it wishes to make and the reasons therefor.
If the Bank requests an amendment, the Company and the Bank shall
endeavor in good faith to agree upon an Operating Plan and an
Operating Budget within 15 days after receipt by the Company of
the Bank's notification that it desires an amendment. If no
agreement is reached within such 15-day period, the Operating
Plan and Operating Budget, as amended by the Bank, shall
constitute the Operating Plan and Operating Budget.
(p) Further Assurances: Opinions of Counsel. (i) The
Company and the Funding Corp. shall take or cause to be taken all
action reasonably required to maintain and preserve the Lien in
favor of the Collateral Agent provided for in the Collateral
Documents. The Company and the Funding Corp. shall from time to
time execute or cause to be executed any and all further
instruments (including financing statements, continuation
statements and similar statements with respect to the Liens
granted in the Collateral Documents) reasonably required to
maintain and preserve the Lien in favor of the Collateral Agent
provided for in the Collateral Documents.
(i) If requested by the Bank, the Company and Funding Corp.
shall furnish to the Bank such Opinion or Opinions of Counsel
stating that, in the opinion of such counsel, all filings
necessary to establish, maintain, protect, perfect and continue
the perfection of the Lien intended to be created by the
Collateral Documents have been properly recorded, registered and
filed and that all financing statements and continuation
statements have been executed and filed that are necessary fully
to preserve and protect the rights of the Collateral Agent for
the benefit of the Secured Parties, or stating that, in the
opinion of such counsel, no such action is necessary to
establish, maintain, protect, perfect and continue the perfection
of such Lien and security interest.
(ii) (x) On or before each anniversary of the Issuance Date
and (y) at any other time as the Bank may reasonably request in
writing, including, but not limited to, in connection with a
change or amendment in the Laws affecting any Lien created by the
Collateral Documents, the Company and Funding Corp. shall furnish
to the Bank, such Opinion or Opinions of Counsel as the Bank may
reasonably request in writing (on or prior to the date ninety
days prior to each of the dates referred to in clause (x) above
with respect to the Opinion delivered thereunder either stating
that, in the opinion of such counsel, such action has been taken
with respect to the recording, filing, re-recording and re-filing
of the Collateral Documents and any other requisite documents and
with respect to the execution and filing of any financing
statements and continuation statements as is necessary to
maintain the Lien created by the Collateral Documents and
reciting the details of such action or stating that, in the
opinion of such Counsel, no such action is necessary to maintain
such Lien and security interest. Such Opinion of Counsel shall
also describe the recording, filing, re-recording and re-filing
of the Collateral Documents and any other requisite documents and
the execution and filing of any financing statements and
continuation statements that will, in the opinion of such
Counsel, be required to maintain the Lien created by the
Collateral Documents at least until the next regularly scheduled
date set forth in clause (x) above on which an Opinion of Counsel
may be required to be delivered pursuant to this Section
7(p)(iii).
Section 8. Negative Covenants. The Company and Funding Corp. each
agree jointly and severally that, so long as the Letter of Credit
is outstanding hereunder and until payment in full of all the
Obligations, the Company and Funding Corp. shall not:
(a) Prohibition of Fundamental Changes. (i) Enter into any
transaction of merger or consolidation, change its form of
organization or its business, liquidate, wind-up or dissolve
itself or discontinue its business;
(ii) Neither the Company nor Funding Corp. shall
acquire, by purchase or otherwise, all or substantially all the
property or assets of, any Person, enter into any partnership or
joint venture or make any equity or capital contribution to any
Person.
(b) Compliance with ERISA. (i) Enter into any prohibited
transaction (as defined in Section 4975 of the Code, as amended,
and in ERISA) involving any Plan which results in any liability
of the Company or Funding Corp. to any Person which (in the
reasonable opinion of the Bank) is material to the financial
position or operations of the company or (ii) allow or suffer to
exist any other event or condition known to the Company or
Funding Corp. which results in any liability of the Company or
Funding Corp. to the PBGC which (in the reasonable opinion of the
Bank) is material to the financial position or operations of the
Company or Funding Corp. For purposes of this Section 8(b),
"liability" shall not include the contingent liability described
in Sections 4201 and 4062 of ERISA or termination insurance
premiums payable under Section 4007 of ERISA.
(i) With respect to any Plan (including, without
limitation, any Plan of a Commonly Controlled Entity) as to which
Funding Corp. or the Company may have liability, (i) in the event
there exists an Insufficiency with respect to such Plan which
could result in a material liability to the Company or Funding
Corp., no steps shall be taken by the Company or Funding Corp. to
terminate such Plan, such Plan shall not be terminated, neither
Funding Corp. nor the Company shall withdraw from or institute
steps to withdraw from such Plan and no Reportable Event (as
defined in Section 4043 of ERISA) with respect to such Plan shall
occur, (b) neither Funding Corp. nor the Company shall permit a
lien under Section 302(f) of ERISA or Section 412 of the Code,
(c) with respect to any such Plan that is a Multiemployer Plan,
neither Funding Corp. nor the Company shall incur withdrawal
liability to such Plan which, when aggregated with the present
value of all other amounts required to be paid to Multiemployer
Plans in connection with withdrawal liabilities (determined as of
the date of notification of withdrawal liability), exceeds
$100,000 in the aggregate or requires payments exceeding $100,000
per year in the aggregate and (d) neither Funding Corp. nor the
Company shall permit any event or events to exist or transaction
to occur with respect to any such plan or plans which
individually or in the aggregate could result a material
liability to Funding Corp. or the Company.
(c) Indebtedness. Create or incur or suffer to exist any
Indebtedness except:
(i) the Obligations; and
(ii) Indebtedness permitted under the Indenture;
provided that after giving effect to any additional Indebtedness
not outstanding on the date hereof (x) no Reimbursement Default
or Reimbursement Event of Default shall have occurred that is
continuing and (y) the Debt Service Coverage Ratio of the Company
on a pro forma basis for the prior four fiscal quarters is not
less than 1.20:1.0.
(d) Liens. Create or suffer to exist or permit any Lien
upon or with respect to any of their respective properties,
except for:
(i) Liens specifically permitted or required by, or created
by, the Indenture or any Collateral Document;
(ii) Liens for taxes which are either not yet due, are due
but payable without penalty or are being contested by Good Faith
Contest;
(iii) any exceptions to title which are contained in the
Title Policy delivered to the Collateral Agent; and
(iv) Liens in connection with worker's compensation,
unemployment insurance or other social security or pension
obligations;
(v) mechanic's, worker's, materialmen's, construction or
other like Liens arising in the ordinary course of business or
incident to the construction, repair or restoration of the
Project (x) in respect of obligations which are not yet due or
which are subject to Good Faith Contest or (ii) which are subject
in full to surety bond or other similar arrangements or fully
insured by the Title Policy;
(vi) deposits or pledges to secure statutory obligations or
appeals, releases of attachments, stays of execution or
injunctions; performance bids, tenders, contracts (other than for
the repayment of borrowed money) or leases, or for purposes of
like general nature in the ordinary course of business;
(vii) The Bibb Company's rights as lessor of the Site
under the Site Lease;
(viii) Permitted Encumbrances (as defined in the
Mortgages);
(ix) the right of first refusal in favor of VEPCO under the
VEPCO Power Purchase Agreement;
(x) the right of first refusal in favor of The Bibb Company
under the Steam Sales Agreement;
(xi) the option of North Carolina Natural Gas Corporation to
purchase the Pipeline under the Pipeline Operating Agreement;
(xii) judgment Liens, so long as (x) such judgment shall
have been duly stayed, fully bonded or discharged prior to the
earlier of the commencement of proceedings for the enforcement
thereof or 60 days after such lien attached, (y) such judgment
shall have been discharged before the expiration of any such stay
and (z) such proceedings could not reasonably be expected to
result in a Material Adverse Change; and
(xiii) Liens for utilities or similar purposes;
provided that, in each case, any such Lien could not reasonably
be expected to result in a Material Adverse Change.
(e) Guarantees. (i) Contingently or otherwise be or
become liable, directly or indirectly, in connection with any
Guarantee except:
(u) the Partnership Guarantee;
(v) Guarantees arising in the ordinary course of
business in an amount not to exceed $1,000,000 in the
aggregate;
(w) indemnities or similar obligations with
respect to unfilled materialmen's, mechanics, worker's,
repairmen's, employee's or other like Liens arising in the
course of construction, repair or restoration of the Project
or in the ordinary course of operations or maintenance of
the Project;
(x) (1) indemnities, Guarantees for obligations
other than Indebtedness or similar obligations, each as
provided under or required by the Project Documents, and (2)
such additional indemnities, Guarantees or similar
obligations, each as provided under or required by the
Project Agreements after the Issuance Date, provided that
such indemnity, Guarantee, or similar obligation could not
reasonably be expected to result in a Material Adverse
Change (assuming such indemnity, Guarantee or similar
obligation is computed at the amount thereof which would
reasonably be expected to become due and payable);
(y) indemnities or similar obligations to
federal, state or local governmental agencies or authorities
relating to any expenses incurred that are incidental to
obtaining easements, rights of way or other approvals for
the benefit of the Project; and
(z) surety bonds, performance bonds or similar
arrangements with third-party sureties or similar Persons
and the aggregate exposure of the Company and Funding Corp.
in connection with all such arrangements shall not exceed
$5,000,000.
(i) Funding Corp. shall not contingently or otherwise be or
become liable directly or indirectly in connection with any
Guarantee except indemnities or similar obligations in connection
with Indebtedness permitted under the Indenture.
(f) Prohibition on Disposition of Assets. Except as
permitted pursuant to the Collateral Documents, lease (as lessor)
or Transfer (as transferor) any property or assets except (i) in
the ordinary course of business, to the extent that (x) such
property is worn out or no longer useful or usable in connection
with the operation of the Project and such property is replaced
by property having a fair market value equal to or greater than
the fair market value of the property being leased or Transferred
or (y) such lease or Transfer is required to comply with any
applicable Law, to obtain, maintain or comply with the terms and
conditions of, any Governmental Approval necessary for the
Company to conduct its business pursuant to the Project Documents
or to maintain the Project's certification as a Qualifying
Facility, (ii) the sale of natural gas or rights to the supply,
transportation and storage of natural gas under the Gas Supply
Contracts, the Gas Transportation Contracts and the Fuel Supply
Management Agreement, (iii) the sale of electricity and steam
under and in accordance with the Project Agreements and the Non-
Material Agreements or (iv) subject to the provisions of the
Collateral Documents, (x) in connection with a replacement of The
Bibb Company as the purchaser of steam for the Project, in any
calendar year, property with a fair market value not in excess of
$3,000,000 in the aggregate or $1,000,000 with respect to any
single item of property or (y) other than in connection with such
replacement, sell in any calendar year, property with a fair
market value not in excess of $500,000; provided that, in each
case, the Company certifies to the Bank and the Collateral Agent
that such lease or Transfer could not reasonably be expected to
result in a Material Adverse Change.
(g) Amendments. Without the consent of the Bank (which
consent shall not be unreasonably withheld), terminate, amend or
modify any Project Agreement to which it is a party other than:
(x) any termination resulting from the terms of a
Project Agreement expiring by its terms; or
(y) the termination of a Gas Transportation
Contract which is not a Firm Gas Transportation Contract;
provided that, in each case, the Company shall certify to
the Bank, and if requested by the Bank, such certification
shall be accompanied by an Opinion of Counsel stating that,
as a result of such proposed termination, amendment or
modification, the Company will be able to obtain or
maintain, or comply with the terms and conditions of any
Governmental Approval necessary for the Company to conduct
its business as currently conducted or as proposed to be
conducted or to permit the Project to maintain its
certification as a Qualifying Facility.
(z) A Non-Material Agreement that is not an
Acceptable Fuel Management Agreement; provided that (i) as a
result of such proposed amendment or modification the
Company could not reasonably be expected to have monetary
obligations in excess of $500,000 under such agreement or
related agreements and prior to entering into such amendment
or modification, the Company shall certify and the Bank
shall conclude that such amendment or modification could not
reasonably be expected to result in a Material Adverse
Change.
(h) Subsidiaries. Create, maintain or cause to exist any
Subsidiaries other than Funding Corp.
(i) Distributions. Except as provided in Sections 3.5(a),
3.9(a) and 3.9(b) of the Depositary Agreement, declare or pay any
distributions or return any capital to, the Partners, pay any fee
to any Partner for management services (other then services that
as of the date hereof are provided by a third-party provider), or
authorize or make any other distribution, payment or delivery of
property or cash to the Partners as such, or redeem, retire,
purchase or otherwise acquire, directly or indirectly, any
partnership or other equity interest of the Company now or
hereafter outstanding, or any options or warrants issued with
respect thereto (other than the limited partnership interest in
the Company owned by Ford Motor Credit Company), or set aside any
funds for any of the foregoing purposes (all the foregoing being
herein referred to as "Distributions") except from, and to the
extent of, moneys then on deposit in the Partnership Distribution
Fund. Subject to the preceding sentence and the remaining
provisions of this Section, the Company may make Distributions on
each Funding Date on which each of the following conditions is
satisfied:
(i) the conditions set forth in Section 6.22(a)
of the Indenture have been satisfied;
(ii) no event or condition has occurred and is
continuing which constitutes a Reimbursement Default or
a Reimbursement Event of Default; and
(iii) after giving effect to such Distribution,
Debt Service Coverage on a pro-forma basis for the
prior four fiscal quarters shall not be less than
1.20:1.
(j) Nature of Business. In the case of the Company, engage
in any business other than owning its interest in Funding Corp.
and the development, acquisition, construction, ownership,
operation, administration, maintenance and financing of the
Project as contemplated by the Project Documents and the Non-
Material Agreements to which either the Company or Funding Corp.
is a party. Funding Corp. shall not engage in any business other
than the financing of the Project.
(k) Transactions with Affiliates. Make loans or advances
to, or investments in, any other entities or enter into any
transaction or arrangement, whether or not in the ordinary course
of business, with any Affiliate that is not on terms and
conditions at least as favorable as would be obtained in a
comparable arm's-length transaction with a Person other than an
Affiliate.
(l) Governmental Regulation. (i) Neither the Company nor
Funding Corp. shall be, as a result of the construction,
ownership, operation or maintenance of the Project or the
performance of their respective obligations under the Project
Documents or Non-Material Agreements, subject to regulation by
any Governmental Authority having jurisdiction (v) under PUHCA as
a "public utility company" or an "affiliate" or "subsidiary
company" of a "registered holding company" or of a company
subject to registration under PUHCA, (w) under the FPA, other
than as contemplated by C.F.R. 292.601, (x) as a "gas
corporation", "electric corporation", "steam corporation",
"utility corporation" or "public utility corporation" under any
law of the State of North Carolina or the equivalent under the
applicable laws of any state relating to public utilities and/or
public service corporations (y) except with respect to the resale
or transportation of natural gas in interstate commerce, or the
release of firm capacity rights held by the Company on an
interstate pipeline as a "natural gas company" under the Natural
Gas Act of 1938, as amended or (z) under any other similar
federal or state law regulating the generation, transmission or
sale of electricity under which the Company or Funding Corp.
would be deemed to be the generator, transmitter or seller of
such electricity (including, but not limited to, treatment as an
"electricity utility", "electric corporation", "electrical
company", "public utility", "public utility holding company" or
any similar entity under an existing law or an "affiliate" or
"subsidiary company" of a "registered holding company").
(i) The Project shall maintain its certification as a
Qualifying Facility; provided that it shall not be deemed a
breach of this covenant if the Project involuntarily loses its
certification as a Qualifying Facility (and if as a result
thereof the Company and Funding Corp. would become subject to
regulation not permitted by clause (i)), if (x) on the day the
loss of Qualifying Facility status becomes effective, if such
loss can reasonably be anticipated, or within the next five
Business Days if such loss cannot reasonably be anticipated the
Company shall have made a filing at the FERC to qualify as an
exempt wholesale generator within the meaning of Section 32(a)(2)
of PUHCA ("Exempt Wholesale Generator") and the Company shall
have ceased making any retail electric sales as necessary to
obtain Exempt Wholesale Generator status until such time as the
Partnership shall have received the approvals required by clause
(y)(1) below or regained Qualifying Facility status and (y)
within 360 days of such loss of certification either (1)(A) all
requisite Governmental Approvals necessary for the Partnership to
own, operate and maintain the Project and perform its obligations
under the VEPCO Power Purchase Agreement and the other Project
Documents then in effect (after giving effect to such loss of
certification) have been duly obtained or made, were validly
issued, are in full force and effect, (B) the Company shall have
delivered an Opinion of Counsel satisfactory to the Bank that all
such requisite Governmental Approvals have been duly obtained or
made, were validly issued, are in full force and effect, (C)
Project Revenues under the Project Documents then in effect
(after giving effect to such loss of certification) are
sufficient to maintain a minimum Annual Projected Debt Service
Coverage Ratios for the remaining term of the VEPCO Power
Purchase Agreement equal to or exceeding 1.2:1 and an average
Annual Projected Debt Service Coverage Ratio for such term equal
to or exceeding 1.35:1 and (D) the Partnership shall have filed
with the Bank an Independent Engineer's Certificate, dated the
date of filing, verifying the occurrence of the matters described
in clause (C) or (2)(A) the Company shall have restored the
Project's certification as a Qualifying Facility and shall be in
compliance with clause (i), (B) the Company shall have delivered
to the Bank an Opinion of Counsel satisfactory to the Bank that
the Project is a Qualifying Facility and that the Company is in
compliance with clause (i) and (C) the Company shall have
demonstrated that the Company has regained the right to the
contract rate under the VEPCO Power Purchase Agreement chargeable
prior to the Project's loss of certification as a Qualifying
Facility, as evidenced by the written acknowledgment of the VEPCO
or as otherwise evidenced to the reasonable satisfaction of the
Bank.
(m) Debt Service Coverage. Permit the Debt Service
Coverage Ratio for any period of four fiscal quarters to be less
than 1.20:1.
9. Reimbursement Events of Default. The following events
shall be Reimbursement Events of Default hereunder unless waived
by the Bank pursuant to Section 10 hereof:
(a) the Company shall fail to pay when due any amount payable
under Section 2 hereunder; or
(b) the Company or Funding Corp. shall fail to observe or
perform any covenant or agreement contained in this Agreement
(other than those covered by clause (a) above or Section 7(a),
(g) and (j), Section 8 and Section 18) for 30 days after written
notice thereof has been given to the Company by the Bank; or
(c) any representation, warranty, certification or statement
made by the Company or Funding Corp. in this Agreement or in any
certificate, financial statement or other document delivered
pursuant to this Agreement or any representation, warranty,
certification or statement made by the Company or Funding Corp.
under any Interim Financing Document or Financing Document shall
prove to have been incorrect in any material respect when made or
any representation, warranty, certification or statement made by
the Company under any other Transaction Document shall prove to
have been incorrect in any material respect and results in a
Material Adverse Change; or
(d) any material provision of this Agreement, the Depositary
Agreement or the Intercreditor Agreement shall at any time for
any reason cease to be valid and binding upon the Company, or
shall be declared to be null and void, or the validity or enfor
ceability thereof shall be contested by the Company, Funding
Corp. or any Governmental Authority, or the Company or Funding
Corp. shall deny that it has any or further liability or
obligation under this Agreement or any Financing Document to
which the Bank is a Party; or
(e) the Company or Funding Corp. shall (x) fail to make any
payment, with respect to any Indebtedness in a principal amount
of $500,000, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) and such failure
shall continue after the applicable grace period, if any,
specified in such agreement or instrument relating to the
Indebtedness, or (y) fail to perform or observe any other term,
covenant or condition on its part to be performed or observed
under any agreement or instrument relating to any Indebtedness
when required to be performed or observed, and such failure shall
continue after the applicable grace period, if any, specified in
such agreement or instrument, if the effect of such failure to
perform or observe is to accelerate, or to permit the
acceleration of, the maturity of any Indebtedness, the unpaid
principal amount of which then equals or exceeds $500,000; or
(f) the Company, Funding Corp. or any Subsidiary shall (i)
apply for or consent to the appointment of a receiver, trustee,
liquidator or custodian or the like of itself or of its property,
(ii) admit in writing its inability to pay its debts generally as
they become due, (iii) make a general assignment for the benefit
of creditors, (iv) be adjudicated a bankrupt or insolvent, or (v)
commence a voluntary case under the bankruptcy laws of the United
States or file a voluntary petition or answer seeking
reorganization, an arrangement with creditors or any order for
relief or seeking to take advantage of any insolvency law or file
an answer admitting the material allegations of a petition filed
against it in any bankruptcy, reorganization or insolvency
proceeding; or corporate action shall be taken by it for the
purpose of effecting any of the foregoing, or if without the
application, approval or consent of the Company, Funding Corp. or
any Subsidiary a proceeding shall be instituted in any court of
competent jurisdiction, seeking in respect of the Company an
adjudication in bankruptcy, reorganization, dissolution, winding
up, liquidation, a composition or arrangement with creditors, a
readjustment of debts, the appointment of a trustee, receiver,
liquidator or custodian or the like of the Company or such
Subsidiary or in either case of all or any substantial part of
its assets, or other like relief in respect thereof under any
bankruptcy or insolvency law, and, if such proceeding is being
contested by the Company or such Subsidiary in good faith, the
same shall (i) result in the entry of an order for relief of any
such adjudication or appointment or (ii) continue undismissed, or
pending and unstayed, for any period of thirty (30) consecutive
days; or
(g) any judgment or order for the payment of money exceeding
any applicable insurance coverage by more than $1,000,000 shall
be rendered against the Company or Funding Corp. 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 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
(h) Any Person shall engage in any "prohibited transaction"
(as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan, (ii) any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, shall
exist with respect to any Plan, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a
trustee appointed, or a trustee shall be appointed, to administer
or to terminate, any Plan, which Reportable Event or commencement
of proceedings or appointment of a trustee is, in the reasonable
opinion of the Bank, likely to result in the termination of such
Plan for purposes of Title IV of ERISA, (iv) any Plan shall
terminate for purposes of Title IV of ERISA, (v) the Company or
any Commonly Controlled Entity shall, or is, in the reasonable
opinion of the Required Banks, likely to, incur any liability in
connection with a withdrawal from, or the ERISA insolvency or
reorganization of, a Multiemployer Plan or (vi) any other event
or condition shall occur or exist with respect to a Plan; and in
each case in clauses (i) through (vi) above, as a result of such
event or condition, together with all other such events or
conditions, the Company has incurred or, in the reasonable
opinion of the Required Banks, is likely to incur any tax,
penalty or other liabilities (other than any tax, penalty or
other liability resulting from the reversion of surplus funds to
the Company, the General Partner or a Commonly Controlled Entity
upon the termination of an overfunded Single Employer Plan) which
in the aggregate are material in relation to the business,
operations, property or financial or other condition of the
Company; or
(i) an Event of Loss, an Event of Eminent Domain or a Title
Event shall occur and the Company or the Bank shall determine
that the Project (or any material portion thereof) cannot be
rebuilt, repaired or restored to permit operation of the Project
on a Commercially Feasible Basis or that the Casualty Proceeds,
Eminent Domain Proceeds or Title Insurance Proceeds together with
any other amounts that the Company is well to commit to such
rebuilding, repair or restoration are not sufficient to permit
such rebuilding, repair or restoration or the Company elects not
to so rebuild, repair or restore;
(j) any event specified in Section 5.3 of the VEPCO Power
Purchase Agreement shall occur; or
(k) any Project Agreement shall be terminated prior to its
stated termination date, and the affected agreement is not
replaced by a replacement agreement acceptable to the Bank;
provided that it shall not be a Reimbursement Event of Default if
such termination would not constitute a Material Adverse Change
or materially adversely affect the transactions contemplated by
this Agreement and the Company shall have entered into such
replacement agreement within 120 days from the date of such
termination and, provided further, that it shall not be a
Reimbursement Event of Default hereunder if the Project Agreement
which has been terminated is one which by reason of the amounts
payable thereunder and the duration and nature thereof is not
material to the design, construction, operation or maintenance of
the Project (which shall in no event be deemed to include any
Project Agreement with the Operator, VEPCO or The Bibb Company in
existence on the Issuance Date); or
(l) any of the Company, the General Partner, the Limited
Partner, Funding Corp., VEPCO, Operator or The Bibb Company shall
breach any representation or warranty contained in any of the
Transaction Documents to which its is a party or shall fail to
perform or observe any of its covenants or obligations contained
in any of the Transaction Documents (other than the
representations, warranties, covenants and obligations referred
to in clauses (a), (b) and (c) above) within the grace period, if
any, provided for in such Documents and which failure would
result in a Material Adverse Change or would materially adversely
affect the interest of the Bank under the Transaction Documents
provided that if (i) such default cannot be cured by the payment
of money, (ii) such default is not cured, despite due diligence
and good faith in attempting to cure, within 30 days, (iii) such
Person, the Company or Funding Corp. is proceeding with due
diligence and good faith to cure such default and such Person,
the Company or Funding Corp. specifies in writing what action
such Person, the Company or Funding Corp. proposes to take to
cure such default, and (iv) such default would be cured by the
program outlined by such Person, the Company or Funding Corp. and
would not have a material adverse effect on the Project, the
transactions contemplated by this Agreement or the Bank, such
default shall not constitute a Reimbursement Event of Default
hereunder if such Person, the Company, or Funding Corp. shall at
all times diligently and in good faith attempt to cure such
default until the expiration of a period of 90 days from the date
on which such default occurred (by which time such default must
have been cured); or
(m) any material provision of any Financing Document or Interim
Financing Document shall at any time for any reason cease to be
valid and binding or in full force and effect (other than by
expiration pursuant to its terms); or any material provisions of
any Financing Document or Interim Financing Document shall be
declared to be null and void; or the validity or enforceability
of any material provision of any Financing Document or Interim
Financing Document shall be contested by any party thereto (other
than the Bank) or any Government Authority and such contest
continues for more than 30 days; or any of the Company, any
Partner, Funding Corp., VEPCO, or The Bibb Company shall deny
that it has any liability or obligation under any material
provision of any Financing Document except upon fulfillment of
its obligations thereunder, in each case the effect of which is
either to materially adversely affect (i) the interest of the
Bank under the Financing Documents or (ii) the ability of such
Person to perform its obligations under such Financing Document
or Interim Financing Document; or
(n) any Collateral Document shall cease to be effective to
grant the Lien purported to be granted to the secured party
thereunder, or on any material portion of the Collateral
described therein to the extent and with the priority purported
to be created thereby.
(o) (i) if at any time all the shares of the Partners are not
pledged to the Collateral Agent for the benefit of the Bank
pursuant to the Stock Pledge Agreement, (ii) if at any time all
the shares of Funding Corp. are not pledged to the Collateral
Agent for the benefit of the Bank pursuant to the Company Pledge
Agreement, and (iii) if at any time all the partnership interests
in the Company are not pledged to the Collateral Agent for the
benefit of the Bank pursuant to the Partnership Interests Pledge
Agreement.
If any Reimbursement Event of Default shall have
occurred and continuing, the Bank may (i) by notice to the
Company, declare all or a portion of the Reimbursement
Obligations to be due and payable forthwith, whereupon the same
shall immediately become due and payable, and/or (ii) proceed to
enforce all other remedies available to it under this Agreement,
any other Financing Documents and applicable law. Anything to
the contrary in this paragraph notwithstanding, if such event is
a Reimbursement Event of Default specified in clause (f) above
that relates to the Company, such Reimbursement Obligations shall
immediately and automatically become due and payable. Except as
expressly provided above in this Section 9, presentment, demand,
protest and all other notices of any kind are expressly waived.
If any Reimbursement Event of Default shall have
occurred and is continuing, the Bank may (A) exercise remedies or
direct the Collateral Agent to exercise remedies which the Banks
and the Collateral Agent may have under this Agreement or any
Collateral Document or by statute or by rule of law or (B) take
whatever action at law or in equity as may appear necessary or
desirable to collect the amounts due and payable under this
Agreement or to enforce performance or observance of any
obligation, agreement or covenant of the Company, or Funding
Corp., whether for specific performance or in aid of execution of
any power granted to the Bank or the Collateral Agent. The Bank
may cure such Reimbursement Event of Default, either in the name
of and as agent for the Company or, at the option of the Bank, in
its name or in the name of its designee, pursuant to one or more
existing contracts with the Company or otherwise, and any monies
so expended in curing such Event of Default shall, to the extent
advanced by the Banks, constitute Obligations hereunder and be
repayable hereunder together with interest thereon at the rate
set forth in Section 2(b), regardless of whether or not such
amount, as thus increased, exceeds the Maximum Credit Amount.
The Bank shall have the right at any and all times to change any
course of action undertaken by it and shall not be bound by any
limitations or requirements of time except as expressly set forth
herein.
Upon the occurrence of a Reimbursement Event of
Default, the Bank may take any of the following steps with
respect to the Letter of Credit: (i) by notice to Virginia
Power, pursuant to the terms of such Letter of Credit, instruct
Virginia Power to draw down the full Stated Amount remaining
under such Letter of Credit, or (ii) by notice to the Company,
require the Company to pay into a cash collateral account to be
held by the Collateral Agent an amount equal to the Bank's
contingent liability under such Letter of Credit as collateral
security for the obligation of the Company to reimburse drawings
thereunder.
For the purpose of carrying out the provisions and
exercising the rights, powers and privileges granted by this
Section, the Company and Funding Corp. each hereby irrevocably
constitutes and appoints the Bank its true and lawful attorney-in-
fact to execute, acknowledge and deliver any instruments and to
do and to perform any acts such as are referred to in this
paragraph in the name and on behalf of the Company and Funding
Corp. This power of attorney is a power coupled with an interest
and cannot be revoked.
Section 10. Amendments and Waivers. No amendment or waiver of any
provision of this Agreement, nor consent to any departure by the
Company therefrom nor any consent to the assignment of the
Company's obligations under the Transaction Documents shall in
any event be effective unless the same shall be in writing and
signed by the Bank. Any such waiver or consent shall be
effective only in the specific instance and for the specific
purpose for which given.
Section 11. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile
or similar writing) and shall be given to such party, addressed
to it, at its address or telecopier number set forth below or
such other address or telecopier number as such party may
hereafter specify for the purpose by notice to the other party.
Each such notice, request or communication shall be effective (i)
if given by facsimile to the number specified below, (ii) if
given by mail upon receipt or (iii) if given by any other means,
when delivered at the address specified below.
If to the Company:
Panda Rosemary L.P.
4100 Spring Valley
Dallas, Texas 75244
Attention: General Counsel
Telecopier: (214) 980-7159
If to the Bank:
Bayerische Vereinsbank AG
335 Madison Avenue
New York, NY 10017
Attention: Project Finance Group
Telecopier:
Section 12. No Waiver; Remedies. No failure on the part of the Bank
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 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 13. Sales of Participations. The Bank may grant
participations under this Agreement and the Letter of Credit
(each person to which a participation is granted being called a
"Participant") and in such event the Bank will in its own name
and as agent for any Participant, enforce all rights and
interests of any Participant under this Agreement, and accept all
performances required of the Company under this Agreement;
provided that (a) the Bank shall not agree to a substitution or
replacement of a Participant or a change in the proportionate
amount of any Participant's participation after the Issuance Date
unless the Bank shall have received the Company's prior written
consent thereto, which consent shall not be unreasonably withheld
and (b) in the event that a claim for compensation is made
pursuant to Section 2(c) on behalf of a Participant, the Company
shall have the right, with the assistance of the Bank, to seek a
substitute participant or participants, satisfactory to the Bank,
to assume the participation of such Participant.
Section 14. Continuing Obligation. The obligations of the Company and
Funding Corp. under this Agreement shall continue until the
earlier to occur of (a) the Early Termination Date and (b) the
later of (i) the Termination Date and (ii) the date upon which
all Obligations to the Bank hereunder shall have been paid in
full and shall be binding upon the Company and its successors and
assigns and inure to the benefit of and be enforceable by the
Bank and its successors, transferees and assigns; provided that
the Company may not assign all or any part of this Agreement
without the prior written consent of the Bank.
Section 15. Extension of Letter of Credit. At least 90 but not more
than 180 days before the sixth anniversary of the Issuance Date,
the Company may request the Bank in writing to extend for not
less than three years, nor more than five years, the Termination
Date of the Letter of Credit, specifying the terms and
conditions, including fees, to be applicable to such extension.
No later than the sixth anniversary of the Issuance Date, the
Bank shall notify the Company of its consent or nonconsent to
such extension request and if the Bank shall give no such notice,
the Bank shall be deemed not to have consented to such extension
request. The Bank's consent shall be conditional upon the
preparation, execution and delivery of legal documentation in
form and substance satisfactory to the Bank and its counsel
incorporating substantially the terms and conditions contained in
the extension request as the same may be modified by agreement
between the Company and the Bank.
Section 16. Limited Liability of the Bank. The Company assumes all
risks of the acts or omissions of VEPCO and any advising and
negotiating bank (including Crestar Bank) with respect to its use
of the Letter of Credit. Neither the Bank nor any of its
officers or directors shall be liable or responsible for: (a)
the use which may be made of the Letter of Credit or for any acts
or omissions of VEPCO in connection therewith; (b) the validity,
sufficiency or genuineness of documents, or of any endorsements
thereon, even if such documents should in fact prove to be in any
or all respects invalid, insufficient, fraudulent or forged; (c)
payment by the Bank against presentation of documents which do
not comply with the terms of the Letter of Credit, including
failure of any documents to bear any reference or adequate
reference to the Letter of Credit; or (d) any other circumstances
whatsoever in making or failing to make payment under the Letter
of Credit, except only that the Company shall have a claim
against the Bank, and the Bank shall be liable to the Company to
the extent, but only to the extent, of any direct, as opposed to
consequential, damages suffered by the Company which the Company
proves were caused by (i) the Bank's willful misconduct or gross
negligence in determining whether documents presented under the
Letter of Credit comply with the terms thereof or (ii) the Bank's
willful failure to pay under the Letter of Credit after the
presentation to it by VEPCO of a draft and certificate strictly
complying with the terms and conditions of the Letter of Credit.
In furtherance and not in limitation of the foregoing, the Bank
may accept documents that appear on their face to be in order,
without responsibility for further investigation, regardless of
any notice or information to the contrary unless VEPCO and the
Company have notified the Bank in writing prior to a drawing
under the Letter of Credit that such documents do not comply with
the Letter of Credit.
Section 17. Costs, Expenses and Taxes. The Company agrees to pay on
demand therefor all reasonable costs and expenses in connection
with the preparation, execution, delivery, filing and
administration of this Agreement 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 Bank with respect thereto and with
respect to advising the Bank as to its rights and
responsibilities under this Agreement or any waiver or amendment
of, or the enforcement of, this Agreement and such other
documents which may be delivered in connection with this
Agreement. In addition, the Company 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 and such other documents and agrees to save the
Bank 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; provided that the Bank agrees promptly
to notify the Company of any such taxes and fees which are
incurred by the Bank.
Section 18. Indemnification. The Company and Funding Corp., jointly
and severally, hereby agree to indemnify and hold harmless the
Bank from and against any and all claims, damages, losses,
liabilities, costs or expenses whatsoever which the Bank may
incur (or which may be claimed against the Bank by any person or
entity whatsoever) (i) by reason of any inaccuracy in any
material respect, or untrue statement or alleged untrue statement
of any material fact contained or incorporated by reference in
any material delivered to the Bank by or on behalf of the Company
or Funding Corp. in connection with the issuance of any
Indebtedness for the Project, or the omission or alleged omission
to state a material fact necessary to make such statements, in
the light of the circumstances under which they are or were made,
not misleading; (ii) by reason of or in connection with the
execution, delivery and performance of the Transaction Documents;
or (iii) by reason of or in connection with the execution and
delivery or transfer of, or payment or failure to make lawful
payment under, the Letter of Credit; provided that the Company
shall not be required to indemnify the Bank for any claims,
damages, losses, liabilities, costs or expenses to the extent,
but only to the extent, caused by the willful misconduct or gross
negligence of the Bank in determining whether a draft or
certificate presented under the Letter of Credit complied with
the terms of the Letter of Credit or the Bank's willful failure
to make lawful payment under the Letter of Credit after the
presentation to it by VEPCO of a draft and certificate strictly
complying with the terms and conditions of the Letter of Credit.
Nothing in this Section 18 is intended to limit the Company's
reimbursement obligation contained in paragraph (a) of Section 2
hereof. Without prejudice to the survival of any other
obligation of the Company or Funding Corp. hereunder, the
indemnitees and obligations of the Company and Funding Corp.
contained in this Section 18 shall survive the payment in full of
amounts payable under Section 2 and the termination of the Letter
of Credit.
Section 19. 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 20. Governing Law. This Agreement shall be governed by, and
construed and interpreted in accordance with, the laws of the
State of New York.
Section 21. 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.
Section 22. Submission to Jurisdiction. Any litigation based hereon,
or arising out of, under, or in connection with, this Agreement,
or any course of conduct, course of dealing, statements (whether
oral or written) or actions of the Bank or the Company shall be
brought and maintained in the courts of the state of New York or
in the United States District Court for the Southern District of
New York. The Company and Funding Corp. hereby expressly and
irrevocably submits to the jurisdiction of such courts for the
purpose of any such litigation as set forth above and irrevocably
agrees to be bound by any final judgment rendered thereby in
connection with such litigation. Service of process may be made
upon Company or Funding Corp. by mailing or delivering a copy of
such process to it in care of the Process Agent at the Process
Agent's address and the Company and Funding Corp. hereby further
irrevocably consents to the service of process in any suit,
action or proceeding in New York arising out of this agreement by
the mailing of copies of such process to it at its address for
notices set forth in Section 11 hereto. The Company and Funding
Corp. each hereby expressly and irrevocably waives, to the
fullest extent permitted by law, any objection which it may have
or hereafter may have to the laying of venue of any such
litigation brought in any such court referred to above and any
claim that any such litigation has been brought in an
inconvenient forum.
Section 23. Waiver of Jury Trial. The Bank, the Company and Funding
Corp. hereby knowingly, voluntarily and intentionally waive any
rights they may have to a trial by jury in respect of any
litigation based hereon, or arising out of, under, or in
connection with, this Agreement or the Letter of Credit, or any
course of conduct, course of dealing, statements (whether oral or
written), or actions of the Bank, the Company or Funding Corp.
Section 24. Limitation of Liabilities. No past, present or future
officer, director or stockholder of Funding Corp., no past,
present of future partner in the Company (including, without
limitation, the General Partner) or any officer, employee,
controlling Person, stockholder, executive, director, agent,
representative or affiliate of Funding Corp., the Company or such
partner (herein referred to as "Non-recourse Persons") shall be
personally liable for payments due hereunder or under any
Collateral Document or for the performance of any obligation
hereunder of thereunder. Except as expressly provided in another
Collateral Document, the sole recourse of the Bank for
satisfaction of the obligations of the Company and Funding Corp.
hereunder and under the Collateral Documents shall be against the
assets of the Company and not against any assets or property of
any such Non-Recourse Person. In the event that a default occurs
in connection with such obligations of the Company or Funding
Corp., no action shall be brought against any such Non-Recourse
Person by virtue solely of its direct or indirect ownership
interest in the Company or Funding Corp., except that this
provision shall not restrict the Collateral Agent on behalf of
the Bank from taking action to enforce any such Non-Recourse
Person's obligations under any Collateral Document to which it is
a party in its individual capacity. In the event of foreclosure
or other sale or disposition of properties, no judgment for any
deficiency upon the obligations hereunder shall be obtainable by
the Bank against any such Non-Recourse Party by virtue solely of
its direct or indirect ownership interest in the Company or
Funding Corp. This provision shall not be deemed to waive any
cause of action the Bank may have against any Person for fraud or
willful misconduct by such Person.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their proper and duly authorized
officers as of the date first above written.
PANDA-ROSEMARY, L.P.
By Panda-Rosemary Corporation
By: William C. Nordlund
Vice President
PANDA-ROSEMARY FUNDING
CORPORATION
By: William C. Nordlund
Vice President
BAYERISCHE VEREINSBANK AG
By: Claire Simonelli
Vice President
_________________________
Andrew G. Mathews
Vice President
EXHIBIT 10.23
BAYERISCHE VEREINSBANK AG
355 MADISON AVENUE
19TH FLOOR
NEW YORK, NY 10017-4679
IRREVOCABLE DIRECT PAY
LETTER OF CREDIT
We hereby establish our irrevocable direct pay letter of
credit number SB 102482 (this "Letter of Credit").
Beneficiary: Virginia Electric and Power Company
("Beneficiary")
P.O. Box 26666
Richmond, Virginia 23261
Attention: Manager Capacity Acquisition
OR
701 East Cary Street
Richmond, Virginia 23219
Attention: Manager Capacity Acquisition
For the account of: Panda-Rosemary, L.P.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
For an amount not exceeding a total of U.S.$4,950,000.00
(Four Million Nine Hundred Fifty Thousand and No/100s United
States Dollars) (the "Stated Amount").
Issue Date: July 31, 1996
Date and Place of Expiry: On the Termination Date (as
such term is defined below) at
Crestar Bank's counter,
Richmond, Virginia
Advising and Negotiating Bank: Crestar Bank
919 East Main Street
Richmond, Virginia 23219
Credit Available with:Crestar Bank, Richmond, Virginia, by
negotiation against presentation of
the documents detailed herein and of
Beneficiary's draft(s) drawn on the
Issuing Bank.
Such drafts shall purportedly be signed by one (1) duly
authorized officer of Beneficiary and shall be accompanied
by a certificate in the form of Exhibit A (the
"Certificate") purportedly signed by one (1) duly authorized
officer of Beneficiary. Each draft presented under this
Letter of Credit must bear the clause "drawn under the
Bayerische Vereinsbank AG Irrevocable Direct Pay Letter of
Credit Number SB 102482, dated July 31, 1996, for the
account of Panda-Rosemary, L.P."
The Certificate and the original of this Letter of
Credit shall accompany any drawing hereunder and the draft
shall not be for an amount greater than the amount specified
in the accompanying Certificate or the Stated Amount. If
any drawing under this Letter of Credit is made prior to the
Termination Date (as such term is defined below), this
Letter of Credit shall be returned to Beneficiary.
We hereby agree that drafts drawn under and in
compliance with the terms and conditions of this Letter of
Credit shall be duly honored on due presentation at the
office of the Advising and Negotiating Bank listed above.
Drafts presented to the Advising and Negotiating Bank, with
copies of such drafts transmitted to us by telecopier at the
address given below, in each case, prior to 9:30 a.m. New
York City time on a day that both we and the Advising and
Negotiating Bank are open for business, will be paid the
same day as presented. Drafts presented to the Advising and
Negotiating Bank, with copies of such drafts transmitted to
us at the address given below, after 9:30 a.m. New York City
time on a day that both we and the Advising and Negotiating
Bank are open for business, will be paid the next day that
both we and the Advising and Negotiating Bank are open for
business. All bank charges will be for the account of Panda-
Rosemary, L.P.
Partial drawings are permitted under this Letter of
Credit and, upon payment by the Advising and Negotiating
Bank, the Stated Amount shall be reduced by the amount of
such drawing and shall not be reinstated.
This Letter of Credit is not assignable or transferable
except that this Letter of Credit may be transferred to a
successor by law to the Beneficiary or any permitted
assignee or transferee of the Agreement (as such term is
defined in paragraph 1 of Exhibit A hereto). Such a
transfer may only be effected by us upon our receipt of an
acceptable application for transfer accompanied by the
original Letter of Credit and payment of any transfer
commission in effect at the time of transfer. A copy of
such application for transfer will be sent by the
beneficiary to the Advising and Negotiating bank.
This Letter of Credit shall automatically terminate on
the earliest to occur of (i) the Termination Date (as such
term is defined below), (ii) the date on which the
drawing(s) made by Beneficiary under this Letter of Credit
equal, in the aggregate, the Stated Amount, or (iii) thirty
(30) days after Beneficiary has received notice from us that
a "Reimbursement Event of Default" has occurred under the
Reimbursement Agreement, dated as of July 31, 1996, between
Panda-Rosemary, L.P. and Bayerische Vereinsbank AG, New York
Branch, which notice shall have instructed Beneficiary to
draw the full amount remaining under this Letter of Credit.
For purposes of this Letter of Credit, the term
"Termination Date" shall mean July 30, 2003, unless you
shall have received from us a written notice, delivered via
registered mail at least three hundred sixty-five (365) days
prior to such date, that this Letter of Credit will be
renewed for any additional period set forth therein.
This Letter of Credit sets forth in full our
undertaking and such undertaking shall not in any way be
modified, amended, amplified or limited by reference to any
document, instrument or agreement referred to herein, except
only the Certificate and draft referred to herein, and any
such reference shall not be deemed to incorporate herein by
reference any document, instrument or agreement except for
such Certificate and draft.
Except so far as otherwise expressly stated, this
Letter of Credit is subject to the Uniform Customs and
Practice for Commercial Documentary Credits (1993 Revision),
International Chamber of Commerce Publication 500. This
Letter of Credit shall be deemed to be issued under the laws
of the State of New York and shall, as to matters not
governed by said Uniform Customs and Practice, be governed
by and construed in accordance with the laws of the State of
New York.
Communications with respect to this Letter of Credit
shall be in writing, may be transmitted by tested telex
(promptly confirmed in writing), or telecopier and shall be
addressed to us at 335 Madison Avenue, 19th floor, New York,
NY 10017), telecopier number: 212-210-0330 Attention: L/C
Department, specifically referring thereon to this Letter of
Credit by number.
This Letter of Credit is an operative instrument and no
mail confirmation will follow.
BAYERISCHE VEREINSBANK AG
By: Claire E. Simonelli
Title: Vice President
By: Andrew G. Mathews
Title: Vice President
EXHIBIT A
BAYERISCHE VEREINSBANK AG
IRREVOCABLE DIRECT PAY LETTER OF CREDIT
NO. SB 102482
CERTIFICATE OF VIRGINIA ELECTRIC AND POWER COMPANY
I am a duly authorized officer of Virginia Electric and
Power Company. Demand is hereby made for payment in the
amount of U.S.$______________(1) drawn under the Bayerische
Vereinsbank AG Irrevocable Direct Pay Letter of Credit
Number SB 102482 dated July 31, 1996, for the account of
Panda-Rosemary, L.P. (the "Letter of Credit"). In
connection with such demand, I hereby certify as follows on
behalf of Virginia Electric and Power Company:
1. On January 24, 1989, Virginia Electric and
Power Company and Panda Energy Corporation entered into
that certain Power Purchase and Operating Agreement
(the "Agreement") whereby Panda Energy Corporation
agreed to deliver, and Virginia Electric and Power
Company agreed to purchase, the net electrical output
of a cogeneration facility located in Roanoke Rapids,
North Carolina. Panda Energy Corporation, pursuant to
Article 17.1 of the Agreement, assigned all of its
right and interest in, to and under the Agreement to
its subsidiary, Panda - Rosemary Corporation, by means
of that certain Assignment and Assumption Agreement,
dated May 15, 1989, between Panda Energy Corporation
and PandaE- Rosemary Corporation. Panda - Rosemary
Corporation, pursuant to Article 17.1 of the Agreement,
assigned all of its right and interest in, to and under
the Agreement to its subsidiary, Panda-Rosemary, L.P.
by means of that certain Bill of Sale and Assumption
Agreement, dated January 6, 1992, between Panda -
Rosemary Corporation and Panda-Rosemary, L.P.
2. Under the terms of the Agreement, Panda-
Rosemary, L.P. is required to provide security to
Virginia Electric and Power Company with respect to the
continued availability of the facility and Panda-
Rosemary, L.P.'s performance under the Agreement.
3. Virginia Electric and Power Company is making
a drawing under the Letter of Credit because:
A. Panda-Rosemary, L.P. has failed to perform in
accordance with the Agreement Section _____.
B. Virginia Electric and Power Company has
received notice from Bayerische Vereinsbank
AG that a "Reimbursement Event of Default"
has occurred under the Reimbursement
Agreement, dated as of July 31, 1996, between
Panda-Rosemary, L.P. and Bayerische
Vereinsbank AG, which notice instructed
Virginia Electric and Power Company to draw
the full amount remaining under the Letter of
Credit; or
C. The term of such Letter of Credit will expire
within five (5) business days of the date of
this Certificate and Panda-Rosemary, L.P. has
failed to deliver a replacement or renewal
Letter or Credit or other security reasonably
acceptable to Virginia Electric and Power
Company, and security is still required under
the terms of Article 13 of the Agreement.
4. The amount of this demand for payment is in
accordance with the terms and conditions of the
Agreement.
This Certificate is presented under the Letter of
Credit. The draft accompanying this Certificate is drawn in
the amount specified above.
IN WITNESS WHEREOF, Virginia Electric and Power Company
has executed and delivered this Certificate as of the
_______ day of ____________, ____.
VIRGINIA ELECTRIC AND POWER COMPANY
By:
Title:
_______________________________
(1) An amount not to exceed (i) $4,950,000 less (ii) the
aggregate amount of all prior draws under this Letter of
Credit.
EXHIBIT 10.24
PANDA-BRANDYWINE, L. P.
CONSTRUCTION LOAN AGREEMENT
AND LEASE COMMITMENT
Dated as of March 30, 1995
GENERAL ELECTRIC CAPITAL CORPORATION
(230 MW Natural Gas-Fired Qualifying Cogeneration Facility
located in Brandywine, Maryland)
[TABLE OF CONTENTS AT BOTTOM OF DOCUMENT]
CONSTRUCTION LOAN AGREEMENT AND LEASE COMMITMENT (this
"Agreement"), dated as of March 30, 1995 among PANDA-
BRANDYWINE, L.P., a Delaware limited partnership (the
"Partnership"), PANDA BRANDYWINE CORPORATION, a Delaware
corporation and the sole general partner of the Partnership
(the "General Partner"), and GENERAL ELECTRIC CAPITAL
CORPORATION, a New York corporation ("GE Capital").
W I T N E S S E T H :
WHEREAS, (a) the Partnership desires that GE
Capital (i) provide construction financing for the Project
hereinafter referred to, (ii) issue the Letters of Credit as
collateral security for certain obligations of the
Partnership under the Power Purchase Agreement hereinafter
referred to, (iii) acting through the Owner Trustee, lease
the Site from the Partnership and sublease the Site back to
the Partnership (iv) upon completion of the Project, acting
through the Owner Trustee, purchase the Facility hereinafter
referred to from the Partnership and lease the Facility back
to the Partnership, and (v) upon completion of the Project,
make Equity Loans to the Partnership or the Partners, and
(b) GE Capital is willing, either directly or through the
Owner Trustee, as the case may be, to provide such
financing, issue the Letters of Credit, lease and sublease
the Site, purchase and lease the Facility and make the
Equity Loans subject to and upon the terms and conditions
set forth herein;
NOW, THEREFORE, it is agreed:
Section 1. DEFINITIONS
1.1 Defined Terms. Capitalized terms used in
this Agreement shall, unless otherwise defined herein, have
the respective meanings assigned thereto in Appendix A.
1.2 Other Definitional Provisions. (a) All
terms defined in this Agreement shall have the defined
meanings when used in the Note or in any certificate or
other document made or delivered pursuant hereto.
(b) As used herein and in any certificate or
other document made or delivered pursuant hereto, accounting
terms not defined in Appendix A, and accounting terms partly
defined in Appendix A, to the extent not defined, shall have
the respective meanings given to them under GAAP.
(c) The words "hereof," "herein" and "hereunder"
and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and section,
schedule and exhibit references are to this Agreement unless
otherwise specified.
(d) Any term defined by reference to an
agreement, instrument or other document shall have the
meaning so assigned to it whether or not such agreement,
instrument or document is in effect.
Section 2. AMOUNTS AND TERMS OF LOANS
2.1 Loans. (a) Subject to the terms and
conditions of this Agreement, GE Capital agrees to make
construction loans (collectively, the "Loans") to the
Partnership from time to time during the Loan Commitment
Period in an aggregate principal amount not to exceed the
Loan Commitment. If the Loan Commitment Period shall expire
on the Lease Closing Date, on the Lease Closing Date the
Partnership may, subject to the terms and conditions of this
Agreement, nonetheless borrow an amount up to the available
Loan Commitment equal to the amount required to be deposited
on the Lease Closing Date in the Rent Reserve Account, the
Operation and Maintenance Reserve Account and the Warranty
Maintenance Reserve Account pursuant to Section 7 of the
Facility Lease and an amount equal to the Success Fee, if
any, payable on the Lease Closing Date. Such borrowing
shall be repaid on such date from the proceeds received from
the sale of the Facility to the Owner Trustee pursuant to
Section 5 hereof.
(b) Each Loan shall be payable on the
Construction Loan Maturity Date without further action on
the part of GE Capital.
(c) Unless required to be converted pursuant to
the terms of this Agreement, the Loans shall be Eurodollar
Loans.
2.2 Procedure for Borrowing. Whenever the
Partnership desires GE Capital to make a Loan, the
Partnership shall give GE Capital irrevocable notice to be
received by GE Capital prior to 10:00 A.M., New York City
time, at least three Business Days prior to the requested
Borrowing Date, which notice shall be in substantially the
form of Exhibit C-2 (a "Notice of Borrowing") and shall
specify (i) the amount to be borrowed, (ii) the proposed
Borrowing Date, (iii) wire transfer instructions for the
disbursement of the proceeds of the Loan and (iv) the length
of the initial Interest Period with respect thereto. The
Borrowing Date shall be the next-to last Business Day of
each calendar month, or such other Business Day as GE
Capital and the Partnership shall mutually agree. Each Loan
shall be in the minimum amount of $100,000. No more than
one Borrowing shall be made in any calendar month.
2.3 Disbursement of Loans. Not later than 1:00
p.m., New York City time, on the Borrowing Date specified in
the Notice of Borrowing given by the Partnership pursuant to
subsection 2.2, if the conditions precedent to the requested
Loan listed in Section 4 have been satisfied, GE Capital
will make available the requested Loan on such date in
Dollars and in immediately available funds, by wire transfer
in accordance with the instructions set forth in such
notice.
2.4 Note. The Loans made by GE Capital pursuant
to subsection 2.1 shall be evidenced by a promissory note of
the Partnership, substantially in the form of Exhibit A,
with appropriate insertions, payable to the order of GE
Capital (the "Note"). The Note shall (a) be dated the
Initial Loan Funding Date, (b) represent the Partnership's
obligation to pay the amount of the Loan Commitment or, if
less, the aggregate unpaid principal amount of all
outstanding Loans, (c) be stated to mature on the
Construction Loan Maturity Date, (d) bear interest for the
period from the date thereof until paid in full on the
unpaid principal amount thereof from time to time
outstanding in accordance with subsection 2.7 and (e) be
entitled to the benefits of this Agreement and the
Collateral Security Documents. GE Capital is hereby
authorized to record the date and amount of each Loan, each
continuation or conversion thereof, the length of
each Interest Period with respect thereto and the date and
amount of each payment or prepayment of principal or
interest in respect thereof, on the schedules annexed to and
constituting a part of the Note (or, at GE Capital's option,
in its books and records), and any such recordation shall
constitute prima facie evidence of the accuracy of the
information so recorded. Failure by
GE Capital to make any such recordation shall not limit or
otherwise affect the obligations of the Partnership
hereunder or under the Note.
2.5 Fees. (a) The Partnership agrees to pay to
GE Capital, on the Initial Loan Funding Date, an origination
fee in an amount equal to 1.50% of the Loan Commitment.
(b) The Partnership agrees to pay to GE Capital a
commitment fee for the period commencing on the Initial Loan
Funding Date and ending on the Loan Commitment Termination
Date, computed at the rate of 1/2 of 1% per annum on the
average daily unused amount of the Loan Commitment. Such
commitment fee shall be payable on the next-to-last Business
Day of each calendar month occurring during the Loan
Commitment Period and on the Loan Commitment Termination
Date.
2.6 Mandatory Prepayments; Special Payments. (a)
If an Event of Loss shall occur, unless the Project is being
repaired in accordance with Section 9(c)(i) of the Facility
Lease, (i) the Commitment shall terminate forthwith and (ii)
on the earlier of (A) the date occurring 90 days after the
date of such Event of Loss and (B) the date on which
insurance proceeds are received with respect to such Event
of Loss, the Partnership shall (x) prepay in full the unpaid
principal amount of the then outstanding Loans and LOC
Reimbursement Obligations, together with accrued interest
thereon to the date of prepayment, and all fees and other
amounts owing with respect thereto by the Partnership
hereunder and under the other Loan Documents and (y) cash
collateralize all undrawn and outstanding Letters of Credit
in the manner provided in the introductory paragraph of
Section 8.
(b) If the Partnership receives any payments in
respect of liquidated damages (Contract Price Discounts)
pursuant to Section 5.04 of the Construction Contract, the
Partnership shall promptly deposit such payments in the
Special Payment Account. On the Construction Loan Maturity
Date, such amounts on deposit in the Special Payment Account
shall be applied to the repayment of the principal of the
Loans, provided that all such amounts received after the
Lease Closing Date shall be applied to the retroactive
reduction of Lessor's Cost. If the Partnership receives any
payments in respect of liquidated damages (Contract Price
Discounts) pursuant to Section 5.02 of the Construction
Contract, the Partnership shall, subject to the provisions
of Section 4.14 of the Security Deposit Agreement, promptly
apply such amounts to the payment of accrued and unpaid
interest on the Loans and to such other items which are due
and owing as GE Capital may specify in writing.
(c) If the Partnership receives any payments from
the Power Purchaser pursuant to Subsection 15.3(b) of the
Power Purchase Agreement, the Partnership shall promptly
deposit all such payments in the Special Payment Account.
Such amounts shall be promptly applied to (i) the repayment
in full of the principal amount of the Loans and the LOC
Reimbursement Obligations, together with accrued interest
thereon and all fees and other amounts owing with respect
thereto by the Partnership hereunder and under the other
Loan Documents and (ii) the cash collateralization of all
undrawn and outstanding Letters of Credit (or the termination
thereof without liability to GE Capital) in the manner provided
in the introductory paragraph of Section 8. Any amounts remaining
in the Special Payment Account after such application shall be
distributed to the Partnership in accordance with the terms
of the Security Deposit Agreement.
(d) Except as required by this subsection 2.6,
the Partnership shall not be permitted to prepay the Loans.
2.7 Computation of Interest and Fees. (a) (i)
The Loans that are Eurodollar Loans shall bear interest for
each day during each Interest Period with respect thereto on
the unpaid principal amount thereof at the rate per annum
equal to the Interest Rate set forth in clause "(a)" of the
definition of "Interest Rate" and (ii) the Loans that are
Base Rate Loans shall bear interest on the unpaid principal
amount thereof at the Interest Rate then in effect as set
forth in clause "(b)" of the definition of "Interest Rate".
Interest in respect of Eurodollar Loans and all fees
hereunder shall be calculated on the basis of a 360-day year
for the actual days elapsed. Interest in respect of Base
Rate Loans shall be calculated on the basis of a 365/366 day
year for the actual days elapsed.
(b) Interest on the aggregate unpaid principal
amount of the Loans shall be payable in arrears on each
Interest Payment Date, provided that interest accruing
pursuant to paragraph (c) of this subsection 2.7 shall be
payable from time to time on demand.
(c) In the event that, and for so long as, any
Event of Default shall have occurred and be continuing, the
outstanding principal amount of all Loans and, to the extent
permitted by Applicable Law, accrued interest in respect of
all Loans, and all fees and other amounts payable hereunder
shall bear interest at a rate per annum equal to the Default
Rate from the date of such Event of Default until such
amount is paid in full (as well after as before judgment).
(d) GE Capital shall as soon as practicable
notify the Partnership of each determination of a Eurodollar
Rate and a Base Rate and of the effective date and amount of
each change in the Base Rate. Each determination of an
interest rate by GE Capital pursuant to any provision of
this Agreement shall be conclusive and binding on the
Partnership in the absence of manifest error. GE Capital
shall, at the request of the Partnership, deliver to the
Partnership a statement showing the quotations, if any, used
by GE Capital in determining any interest rate pursuant to
paragraph (a) of this subsection 2.7. In the event that GE
Capital shall have determined that by reason of
circumstances affecting the interbank eurodollar market,
adequate and reasonable means do not exist for ascertaining
the Eurodollar Rate applicable for any Interest Period with
respect to (a) proposed Loans or (b) the continuation of
Eurodollar Loans beyond the expiration of the then current
Interest Period therefor, GE Capital shall give notice of
such event to the Partnership. Within 30 days following the
date of such notice by GE Capital, GE Capital and the
Partnership shall enter into negotiations in good faith with
a view to agreeing to an alternative basis acceptable to the
Partnership and GE Capital for determining the interest rate
(the "Substitute Eurodollar Rate") which shall be applicable
during such Interest Period for the Eurodollar Loans to
which such Interest Period applies and which shall reflect
the cost to GE Capital of funding such Eurodollar Loans for
such Interest Period from alternate sources plus the margin
for Eurodollar Loans set forth in the definition of
"Interest Rate". At the expiration of 30 days from the
giving of such notice by GE Capital, (i) if GE Capital and the
Partnership have agreed to such Substitute Eurodollar Rate, such
Substitute Eurodollar Rate shall take effect with respect to such
Interest Period from the beginning of such Interest Period
or (ii) if GE Capital and the Partnership have not agreed to
a Substitute Eurodollar Rate, (A) any requested Loans shall
be deemed to have been made as Base Rate Loans, and (B) any
outstanding Eurodollar Loans shall be converted, on the last
day of the then current Interest Period therefor, to Base
Rate Loans. Until such notice has been withdrawn by GE
Capital, no further Eurodollar Loans shall be made.
(e) The Partnership shall select the duration of
the initial Interest Period with respect to each Eurodollar
Loan in the Notice of Borrowing. Unless the Partnership
otherwise elects pursuant to the proviso to this sentence,
the Partnership shall be deemed to have elected to continue
such Eurodollar Loan at the expiration of the Interest
Period with respect thereto as a loan having an Interest
Period of the same duration as such expiring Interest
Period; provided that the Partnership may elect to convert
such Eurodollar Loan, on the last day of the then current
Interest Period with respect thereto, to a loan having an
Interest Period of any other authorized duration by
providing irrevocable notice to GE Capital not less than
three Business Days prior to the last day of the then
current Interest Period with respect thereto; and provided,
further, that no Eurodollar Loan will be continued as such
when any Default or Event of Default has occurred and is
continuing, but shall be automatically converted to a Base
Rate Loan on the last day of the Interest Period with
respect thereto.
(f) It is the intention of the parties hereto to
conform strictly to applicable usury laws and, anything
herein or elsewhere to the contrary notwithstanding, the
Obligations shall be subject to the limitation that the
Partnership shall not be required to pay, and GE Capital
shall not be entitled to charge or receive, any interest to
the extent that such interest exceeds the maximum rate of
interest which GE Capital is permitted by any applicable law
to contract for, charge or receive and which would not give
rise to any claim or defense of usury. If, as a result of
any circumstances whatsoever, performance of any provision
hereof or of any of the Loan Documents shall, at the time
performance of such provision is due, violate applicable
usury law, then, ipso facto, the obligation to be performed
shall be reduced to the highest lawful rate, and if, from
any such circumstance, GE Capital shall ever receive
interest or anything which might be deemed interest under
applicable law which would exceed the highest lawful rate,
the amount of such excess interest shall be applied to the
reduction of the principal amount owing on account of the
Note or the amounts owing on other Obligations and not to
the payment of interest, or if such excessive interest
exceeds the unpaid principal balance of the Obligations,
such excess shall be refunded to the Partnership.
(g) (A) Any other provision of this Agreement to
the contrary notwithstanding, if any Law or any change
therein or in the interpretation or the application thereof
by any Governmental Authority charged with interpretation or
administration thereof shall make it unlawful for GE Capital
to make or maintain Eurodollar Loans as contemplated by this
Agreement, GE Capital shall give written notice thereof to
the Partnership and the commitment of GE Capital hereunder
to make Eurodollar Loans shall forthwith be suspended so
long as such Law, interpretation or application shall
continue, and all Loans then outstanding as Eurodollar
Loans, if any, shall be converted automatically to Base Rate
Loans on the last day of the then current Interest
Period therefor or within such earlier period as may be
required by Law and all Loans made thereafter by GE Capital
shall bear interest based upon the Base Rate. If any such
conversion of Eurodollar Loans is made on a day which is not
the last day of an Interest Period, the Partnership shall
pay to GE Capital upon such request, such amount or amounts
as may be necessary to compensate GE Capital for any loss or
expense sustained or incurred by GE Capital in respect of
the Eurodollar Loans as a result of such conversion,
including but not limited to any interest or fees payable by
GE Capital to lenders of funds obtained by it in order to
make or maintain the Eurodollar Loans hereunder, and shall
pay to GE Capital the Eurodollar Rate on such Eurodollar
Loans to the date of such automatic conversion.
(B) In the event that any Law or any change
therein or in the interpretation or application thereof by
any Governmental Authority charged with the administration
or interpretation thereof, or compliance by GE Capital with
any request or directive (whether or not having the force of
Law) received from any central bank or monetary authority or
other Governmental Authority:
(1) does or shall subject GE Capital to any tax
of any kind whatsoever or change therein with respect
to this Agreement, or any Loan hereunder, or the
performance by GE Capital of its obligations hereunder,
or change the basis of taxation of payments to GE
Capital of principal, interest, or any other amount
payable hereunder (except for changes in the rate of
tax on the overall net income of GE Capital); or
(2) does or shall impose, modify or hold applicable
or change any reserve (including, without limitation,
basic, supplemental, marginal and emergency
reserves), special deposit, compulsory loan or
similar requirement against assets held by, deposits
or other liabilities in or for the account of,
advances or loans by, or other credit extended by, or
any other acquisition of funds by (including, without
limitation, all eurocurrency funding by and all
eurocurrency liabilities), any office of GE Capital
which is not otherwise included in the determination
of the Eurodollar Rate; or
(3) does or shall impose on GE Capital any
other condition, or change therein;
and the result of any of the foregoing is to increase the cost
to GE Capital (as compared to the Initial Loan Funding Date) of
making, committing to make, renewing, converting or maintaining
Loans, or to reduce any amount receivable by GE Capital
hereunder or thereunder (as compared to the Initial Loan
Funding Date), then, in any such case, the Partnership shall
promptly pay GE Capital, upon its demand, such additional
amount which will compensate GE Capital for such additional
cost or reduced amount receivable.
(C) In the event that the adoption of any Law, rule,
regulation or guideline regarding capital adequacy, or any
change therein or in the interpretation or application thereof
by any Governmental Authority charged with the administration
or interpretation thereof or compliance by GE Capital with any
request or directive regarding capital adequacy (whether or not
having the force of Law) from any central bank or Governmental
Authority including, without limitation, the issuance of any
final rule, regulation or guideline, does or shall have the
effect of reducing the rate of return on GE Capital's capital
as a consequence of its obligations hereunder to a level below
that which GE Capital could have achieved but for such
adoption, change or compliance (taking into consideration GE
Capital's policies with respect to capital adequacy) by any
material amount, then from time to time, upon demand by GE
Capital, the Partnership shall pay to GE Capital such
additional amount or amounts as will compensate GE Capital for
such reduction.
(D) If circumstances arise that would entitle GE
Capital to claim any additional amounts pursuant to this
paragraph (g) of this subsection 2.7, GE Capital shall promptly
notify the Partnership thereof and consult in good faith with
the Partnership with a view toward avoiding such circumstance
to the extent reasonably practicable; provided that the failure
of GE Capital to so notify or consult the Partnership shall not
act as a waiver of the right of GE Capital to receive
additional amounts pursuant to this paragraph (g) when GE
Capital provides the required notice to the Partnership. A
certificate as to any additional amounts payable pursuant to
this paragraph (g) submitted by GE Capital to the Partnership
shall be conclusive absent manifest error. The provisions of
this paragraph (g) shall accrue to the benefit of each Assignee
of GE Capital and shall survive the termination of this
Agreement, payment of the outstanding Notes and all other
amounts payable hereunder.
2.8 Payments. All payments (including prepayments)
to be made by the Partnership on account of principal,
interest, reimbursement obligations and fees shall be made
without set-off or counterclaim and shall be made not later
than 12:00 Noon New York City time on the date when due and
shall be sent by wire transfer to GE Capital's account no. 50-
205-776 (GECC Depositary Account) at Bankers Trust Company, New
York, New York 10017, ABA Number: 0210-0103-3 (Re: Panda
Brandywine) in lawful money of the United States of America and
in immediately available funds. Any payment received by GE
Capital after 12:00 Noon shall be deemed to have been paid on
the next succeeding Business Day. If any payment hereunder
becomes due and payable on a day other than a Business Day,
such payment shall be extended to the next succeeding Business
Day and, with respect to payments of principal, interest
thereon shall be due and payable at the then applicable rate
during such extension.
2.9 Letter of Credit Commitment. (a) Subject to
the terms and conditions of this Agreement, GE Capital agrees
to issue and deliver certain stand-by letters of credit during
the Letter of Credit Commitment Period, substantially in the
form of Exhibits B-1, B-2, B-3 and B-4 hereto, as applicable,
for the account of the Partnership in favor of the Power
Purchaser to secure the following obligations of the
Partnership under the Power Purchase Agreement: (i) its
obligation to post development security (the "Development
Security Letter of Credit") as required by Section 4.1 of the
Power Purchase Agreement, (ii) its obligation to post security
in respect of interconnection costs (the "Interconnection
Letter of Credit") as required by Section 4.2 of the Power
Purchase Agreement, (iii) the Partnership's performance
obligations under the Power Purchase Agreement after the
Commercial Operation Date (the "Performance Letter of Credit")
as required by Section 4.5 of the Power Purchase Agreement and
(iv) its obligation to provide for operating and maintenance
cost reserves pursuant to Section 8.7 of the Power Purchase
Agreement (the "O&M Letter of Credit"; collectively with the
other letters of credit described in this paragraph (a), the
"PEPCO Letters of Credit" or the "Letters of Credit"). The
commitment of GE Capital to issue Letters of Credit, or
increase the stated amount of any Letter of Credit, shall
terminate on the Letter of Credit Issuance Termination Date.
(b) (i) Subject to the satisfaction of the
conditions precedent set forth in Section 4 hereof, the
Development Security Letter of Credit shall initially be issued
on the Initial Loan Funding Date in the stated amount of
$3,450,000 and shall expire on the earlier to occur of (A) the
date occurring forty (40) days after the Commercial Operation
Date and (B) June 30, 1998.
(ii) Subject to the satisfaction of the
conditions precedent set forth in Section 4 hereof, the
Interconnection Letter of Credit shall initially be issued on
the Initial Loan Funding Date in the stated amount of
$2,003,460. Upon the receipt of a certificate of the Power
Purchaser (attached as Annex 1 to the Interconnection Letter of
Credit) detailing the interconnection costs incurred by the
Power Purchaser and paid by the Partnership during the
preceding month, the stated amount of the Interconnection
Letter of Credit shall decrease by the amount shown in such
certificate; provided that the stated amount of such Letter of
Credit shall never be less than $330,000. The Interconnection
Letter of Credit shall expire on the earlier to occur of (A)
the date occurring forty (40) days after the Commercial
Operation Date and (B) June 30, 1998.
(iii) Subject to the satisfaction of the
conditions precedent set forth in Section 4 hereof, the
Performance Letter of Credit shall initially be issued on the
Commercial Operation Date in the stated amount of $2,000,000
and shall expire on the earlier to occur of (A) the next
succeeding December 31 and (B) the Letter of Credit Commitment
Termination Date.
(iv) Subject to the satisfaction of the
conditions precedent set forth in Section 4 hereof, the O&M
Letter of Credit shall initially be issued on the later of
December 31, 1998 and the second anniversary of the Commercial
Operation Date in the stated amount of $1,000,000 and shall
expire on the earlier to occur of (A) the next succeeding
December 31 and (B) the Letter of Credit Commitment Termination
Date. So long as no Default, Event of Default, Lease Default
or Lease Event of Default shall have occurred and be continuing
at such time, the O&M Letter of Credit shall be amended on the
later of December 31, 1999 and the third anniversary of the
Commercial Operation Date to increase the stated amount to
$2,000,000 and shall be amended on the later of December 31,
2000 and the fourth anniversary of the Commercial Operation
Date to increase the stated amount to $5,000,000.
(c) Intentionally Left Blank.
(d) Intentionally left blank.
(e) On or prior to October 31 of each calendar year
after the occurrence of the Commercial Operation Date, the
Partnership shall deliver a certificate to GE Capital
confirming that the Partnership continues to have obligations
to the LOC Beneficiary and requesting GE Capital to renew the
Letters of Credit referred to in paragraphs (b)(iii) and (iv)
above. So long as no Default, Event of Default, Lease Default
or Lease Event of Default shall have occurred and be
continuing, on or prior to the November 30 next succeeding the
delivery of the notice specified in the immediately preceding
sentence, GE Capital shall deliver to the LOC Beneficiary a replacement
Letter of Credit in a stated amount equal to the amount
requested and having an effective date on the next succeeding
January 1 and an expiration date the following December 31. GE
Capital's obligation to renew Letters of Credit pursuant to
this paragraph (e) shall expire pursuant to this paragraph on
the Letter of Credit Commitment Termination Date.
(f) Prior to the Commercial Operation Date, the Letter
of Credit Commitment shall automatically decrease on the last
Business Day of each month by an amount equal to any decrease
in the stated amount of the Interconnection Letter of Credit
(as set forth in the certificate of the Power Purchaser
referred to in paragraph (b)(ii) of this subsection 2.9) since
the last Business Day of the preceding month. After the
Commercial Operation Date, the Letter of Credit Commitment
shall automatically decrease (on a dollar for dollar basis)
with any corresponding decrease in the stated amount of any
Letter of Credit or with any termination of any Letter of
Credit.
(g) The aggregate stated amount of the Letters of
Credit at any time shall not exceed the lesser of (i)
$12,453,460 and (ii) the then applicable Letter of Credit
Commitment.
2.10 Partnership's Obligations in Respect of
Drawings Under Letters of Credit.
(a) If GE Capital makes any payment to a LOC
Beneficiary with respect to a Letter of Credit, the Partnership
shall reimburse GE Capital for the amount thereof not later than
the close of business on the Business Day on which payment by
GE Capital was made and shall pay all charges and expenses
relating to such payment and, if such payment is not made when
due, shall pay upon demand interest at the Interest Rate
applicable to one month Eurodollar Loans plus an additional
265 basis points on the amount of such payment for the period
commencing on and including the date of any such payment and
ending on but not including the date reimbursement is received
by GE Capital (after as well as before judgment). The obligation
of the Partnership to reimburse GE Capital for Letter of Credit
payments (such obligation being herein called the "LOC
Reimbursement Obligation") is absolute, unconditional and
irrevocable and shall be observed strictly in accordance with
the terms of this Agreement under all circumstances whatsoever
including, without limitation, the following circumstances:
(i) any lack of legality, validity, enforceability or
regularity of any Letter of Credit, this Agreement or any other
Transaction Document; (ii) any amendment, waiver of or any
consent to or departure from all or any of the Transaction
Documents; (iii) the existence of any claim, set-off, defense,
counterclaim or other right which the Partnership may have at
any time against GE Capital, the Owner Trustee, the Security
Agent, any LOC Beneficiary or any other person, whether in
connection with this Agreement, any Letter of Credit, the other
Loan Documents, the Lease Documents, the Project Documents or
any unrelated transaction; (iv) any statement or any other
document presented under any Letter of Credit proving to be
forged, fraudulent or invalid in any respect or any statement
therein being untrue or inaccurate in any respect whatsoever;
(v) payment by GE Capital under any Letter of Credit against
presentation of a sight draft or certificate that does not
comply with the terms of such Letter of Credit; (vi) the
existence of any dispute between the Partnership and any LOC
Beneficiary or any transferee thereof; (vii) 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; and (viii) any other
circumstance or happening whatsoever, whether or not similar to
any of the foregoing.
(b) Without limiting the effect of paragraph (a)
above, the Partnership agrees with GE Capital that:
(i) GE Capital is authorized to make payments
under each Letter of Credit upon the presentation of the
documents provided for therein and without regard to
whether the Partnership has failed to fulfill any of its
obligations with respect to any Project Document or Loan
Document or Lease Document or any other default has
occurred thereunder.
(ii) GE Capital is authorized to take such
action on its behalf under the provisions of this
Agreement and to exercise such powers and perform such
duties as are specifically delegated to or required of it
by the terms hereof, together with such powers as are
reasonably incidental thereto.
(iii) GE Capital shall be entitled to rely upon
any certificate, notice, demand or other communication
(whether by cable, telegram, telecopy, telex or other
written communication) believed by it to be genuine and to
have been signed or sent by the proper Person or Persons
(and no such reliance or failure shall place it under any
liability to the Partnership or limit or otherwise affect
the Partnership's obligations under this Agreement).
(iv) Any action, inaction or omission on the
part of GE Capital under or in connection with any Letter
of Credit or the instruments or documents related thereto,
if in good faith and in conformity with such laws,
regulations or customs as GE Capital may reasonably deem
to be applicable, shall be binding upon the Partnership
(and shall not place GE Capital under any liability to the
Partnership or limit or otherwise affect the Partnership's
obligations under this Agreement).
(v) Notwithstanding any change or modification,
with or without the consent of the Partnership, in any
instruments or documents called for in any Letter of
Credit, including waiver of noncompliance of any such
instruments or documents with the terms of any Letter of
Credit, this Agreement shall be binding on the Partnership
with regard to each Letter of Credit and to any action
taken by GE Capital relative thereto.
(vi) The Partnership will indemnify and hold
harmless GE Capital from any loss or expense arising from
or in connection with any Letter of Credit (exclusive of
any loss or expense arising directly from the gross
negligence or wilful misconduct of GE Capital).
2.11 Letter of Credit Fees. (a) On the initial
date of issuance of each Letter of Credit hereunder, the
Partnership agrees to pay to GE Capital a letter of credit
issuance fee in an amount equal to one and three-quarters
percent (1.75%) of the stated amount thereof.
(b) So long as a Letter of Credit shall be
outstanding, the Partnership agrees to pay to GE Capital an
annual letter of credit fee in an amount equal to one and one
half percent (1.50%) of the stated amount of the then
outstanding Letter of Credit. From the date hereof to and
including the Basic Term Commencement Date, such fee shall be
payable in arrears on the next-to-last Business Day of each
March, June, September and December, commencing with the first
such date to occur following the initial issuance date of a
Letter of Credit hereunder. From the Basic Term Commencement
Date to and including the end of the Basic Term, such fee shall
be payable in arrears on each Rent Payment Date (each such
payment date, an "LOC Fee Payment Date").
(c) During the Letter of Credit Commitment Period,
the Partnership shall pay to GE Capital an annual letter of credit
commitment fee in an amount equal to one-hundred and twenty-
five basis points (1.25%) multiplied by the amount by which the
Letter of Credit Commitment exceeds the aggregate stated amount
of the then outstanding Letter(s) of Credit. The letter of
credit commitment fee shall be payable on each LOC Fee Payment
Date.
2.12 Funding Indemnity. The Partnership agrees to
indemnify GE Capital and to hold GE Capital harmless from any
loss or expense which GE Capital may sustain or incur as a
consequence of (a) a default by the Partnership in making a
borrowing or a continuation of Eurodollar Loans after the
Partnership has given a notice requesting the same in
accordance with the provisions of this Agreement, (b) a default
by the Partnership in making any prepayment after the
Partnership has given a notice thereof in accordance with the
provisions of this Agreement or (c) the making of a prepayment
of Eurodollar Loans on a day which is not the last day of the
Interest Period with respect thereto. Such indemnification may
include an amount equal to the excess, if any, of (i) the
amount of interest which would have accrued on the amount so
prepaid, or not so borrowed or continued, for the period from
the date of such prepayment or of such failure to borrow to the
last day of the current Interest Period for such Loan in the
case of such prepayment (or to the last day of the Interest
Period that would have commenced on the date of such failure in
the case of a failure to borrow), in each case at the
applicable rate of interest for such Loans provided for herein
over (ii) the amount of interest (as reasonably determined by
GE Capital) which would have accrued on such amount by placing
such amount on deposit for a comparable period with a leading
bank in the interbank eurodollar market. This provision shall
accrue to the benefit of each Assignee of GE Capital and shall
survive the termination of this Agreement and payment of the
Note and all other amounts payable hereunder.
2.13 Use of Proceeds. The proceeds of the Loans
shall be used by the Partnership only to pay, or to reimburse
itself for having paid, Project Costs due and owing by it.
2.14 Taxes. All payments made by the Partnership
under this Agreement shall be made free and clear of, and
without reduction 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 (all such taxes, levies, imposts,
deductions, charges or withholdings being hereinafter called
"Withholding Taxes"). If any Withholding Taxes are required to
be withheld from any amounts payable to GE Capital hereunder or
under the Note, the amounts so payable to GE Capital shall be
increased to the extent necessary to yield to GE Capital (after
payment of all Withholding Taxes) interest or any such other
amounts payable hereunder at the rates and in the amounts
specified in this Agreement and the Note. Notwithstanding the
preceding two sentences, the Partnership will have no duty to
compensate GE Capital for amounts that the Partnership is
required to withhold under Section 1441 or 1442 of the Code.
Whenever any Withholding Taxes are payable by the Partnership,
as promptly as possible thereafter, the Partnership shall send
to GE Capital a certified copy of an original official receipt
received by the Partnership showing payment thereof. If the
Partnership fails to pay any Withholding Taxes when due to the
appropriate taxing authority or fails to remit to GE Capital
the required receipts or other required documentary evidence,
the Partnership shall indemnify GE Capital for (i) any
incremental taxes, interest or penalties that may become
payable by GE Capital as a result of any such failure and (ii) any
expenses incurred by GE Capital arising from or with respect to
such Withholding Taxes. This indemnification shall be made within
30 days from the date GE Capital makes written demand therefor.
The agreements in this subsection 2.14 shall accrue to the benefit
of each Assignee under subsection 9.6 and shall survive the termination
of this Agreement and the payment of the Note and all other
Obligations.
2.15 Maximum Number of Tranches. All borrowings,
conversions and continuations of Eurodollar Loans hereunder and
all selections of Interest Periods hereunder shall be made so
that, after giving effect thereto, there shall not be more than
three Eurodollar Tranches outstanding at any one time. As used
in this subsection 2.15, a "Eurodollar Tranche" shall mean and
refer to Eurodollar Loans made by GE Capital pursuant to a
single borrowing and having interest periods which begin on the
same date and end on the same later date (whether or not such
Eurodollar Loans shall originally have been made on the same
day).
Section 3. REPRESENTATIONS AND WARRANTIES
In order to induce GE Capital to make the Loans and
to issue the Letters of Credit hereunder and to enter into and
to cause the Owner Trustee to enter into the transactions
contemplated by Section 5, each of the Partnership and the
General Partner represents and warrants to GE Capital and the
Owner Trustee that:
3.1 Financial Statements. (a) The balance sheets
of the Partnership delivered pursuant to subsection 4.1(dd) are
complete and correct in all material respects, and fairly
present the financial condition of the Partnership on such
date, and were prepared in conformity with GAAP applied on a
consistent basis. All liabilities, direct and contingent, of
the Partnership on such date are disclosed in such balance
sheets.
(b) The balance sheets of the General Partner,
Holdings and Panda delivered pursuant to subsection 4.1(dd) are
complete and correct in all material respects, fairly present
the financial condition of the General Partner, Holdings and
Panda as of such date, and were prepared in conformity with
GAAP applied on a consistent basis. All liabilities, direct
and contingent, of the General Partner, Holdings and Panda on
such date are disclosed in such balance sheets.
(c) Since the respective dates of the balance sheets
of the Partnership, the General Partner, Holdings and Panda
referred to in paragraphs (a) and (b) above, no material
adverse change has occurred in (i) the financial condition of
the Partnership, the General Partner, Holdings or Panda, (ii)
the properties, business, prospects, operations or financial
condition of the Partnership, the General Partner, Holdings,
Panda or the Project, or (iii) the Partnership's ability to
perform its obligations under this Agreement, the Note and the
other Transaction Documents to which it is a party or will
become a party.
3.2 Partnership Existence and Business; Partners.
(a) The Partnership is a limited partnership duly organized
and validly existing under the laws of the State of Delaware
and is duly qualified to do business in the States of Delaware
and Maryland, the only jurisdictions in which the conduct of
its business or the ownership or lease of its assets requires
such qualification. The Certificate of Limited Partnership of
the Partnership has been duly filed in the office of the
Secretary of State of Delaware and no other filing, recording,
publishing or other act is necessary or appropriate in connection
with the existence or the business of the Partnership except those
which have been duly made or performed. Prior to the date hereof,
the Partnership has engaged in no business other than the
development of the Project, and the negotiation, execution,
delivery and performance of the Development Loan Agreement, the
documents related thereto and the Transaction Documents to
which it is a party or will become a party, and the Partnership
has no obligations or liabilities other than those directly
related to the conduct of such business. The Partnership is
and will be engaged solely in the business of constructing,
owning (and, after the Lease Closing Date, leasing) and
operating the Project and activities reasonably incidental
thereto.
(b) Each of the General Partner and the Limited
Partner is a corporation duly organized and validly existing in
good standing under the laws of the State of Delaware, the
General Partner is duly qualified to do business and is in good
standing in the State of Maryland and each of the General
Partner and the Limited Partner is qualified to do business in
each other jurisdiction in which the nature of its business
requires it to be so qualified. The General Partner is the
sole general partner of the Partnership, and is engaged solely
in the business of being the general partner of the
Partnership. The Limited Partner is the sole limited partner
of the Partnership, and is engaged solely in the business of
being the limited partner of the Partnership.
(c) The only partners of the Partnership are the
General Partner, as the sole general partner, and the Limited
Partner as the sole limited partner.
(d) None of the Partnership, the General Partner nor
the Limited Partner has any Subsidiaries.
3.3 Compliance With Law. Each of the Partnership
and the General Partner is in compliance with all Applicable
Laws except to the extent that the failure to comply therewith
would not, in the aggregate, have a Material Adverse Effect.
3.4 Power and Authorization; Enforceable
Obligations. (a) The Partnership has full power and authority
and the legal right to construct, own (and, after the Lease
Closing Date, hold under lease) and operate the Project, to
conduct its business as now conducted and as proposed to be
conducted by it, to execute, deliver and perform this
Agreement, the Note, the Collateral Security Documents, the
Lease Documents and the other Transaction Documents to which it
is or is to become a party, to take all action as may be
necessary to complete the transactions contemplated hereunder
and thereunder, to grant the liens and security interests
provided for in the Collateral Security Documents to which it
is a party and to borrow hereunder. The Partnership has taken
all necessary partnership and legal action to authorize the
borrowings hereunder on the terms and conditions of this
Agreement, the Note and the other Transaction Documents to
which it is a party, to grant the liens and security interests
provided for in the Collateral Security Documents to which it
is a party and to authorize the execution, delivery and
performance of this Agreement, the Note, the Lease Documents
and the other Transaction Documents to which it is a party or
is to become a party. No consent or authorization of, filing
with, or other act by or in respect of any other Person is
required in connection with the borrowings hereunder or with
the execution, delivery or performance by the Partnership or
the validity or enforceability as to the Partnership of this
Agreement, the Note, the Lease Documents or the other Transaction
Documents except the Governmental Actions and other consents and
approvals referred to in subsection 3.5. Each of this Agreement
and the other Transaction Documents to which the Partnership is a
party has been duly executed and delivered by the Partnership and
constitutes, and each of the other Transaction Documents to
which the Partnership is to become a party will, upon execution
and delivery thereof by the Partnership and the other parties
thereto (if any), constitute, a legal, valid and binding
obligation of the Partnership enforceable against the
Partnership in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally and by general
principles of equity. None of the Project Documents to which
the Partnership is a party has been amended or modified except
in accordance with subsection 6.10 of the Development Loan
Agreement or subsection 7.6 hereof (which amendments or
modifications have been duly delivered to GE Capital), and all
such Project Documents are in full force and effect.
(b) Each of the General Partner and the Limited
Partner has full power and authority and the legal right to own
its properties and to conduct its business as now conducted and
proposed to be conducted by it, to execute, deliver and perform
the Transaction Documents to which it is or is to become a
party, to take all action as may be necessary to complete the
transactions contemplated thereunder, and, in the case of the
General Partner, to act as the general partner of the
Partnership. Each of the General Partner and the Limited
Partner has taken all necessary corporate action to authorize
the execution, delivery and performance of the Transaction
Documents to which it is or is to become a party. No consent
or authorization of, filing with, or other act by or in respect
of any other Person (including any stockholder of the General
Partner or the Limited Partner) is required in connection with
the execution, delivery or performance by the General Partner
or the Limited Partner, or the validity or enforceability as to
the General Partner or the Limited Partner, of the Transaction
Documents to which it is a party or is to become a party except
the Governmental Actions and other consents and approvals
referred to in subsection 3.5. Each of the Transaction
Documents to which the General Partner or the Limited Partner
is a party has been duly executed and delivered by the General
Partner or the Limited Partner, as the case may be, and
constitutes, and each of the other Transaction Documents to
which the General Partner or the Limited Partner is to become a
party will upon execution and delivery thereof by the General
Partner or the Limited Partner, as the case may be, and the
other parties thereto (if any), constitute, a legal, valid and
binding obligation of the General Partner or the Limited
Partner, as the case may be, enforceable against the General
Partner or the Limited Partner, as the case may be, in
accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity.
(c) The Partnership Agreement has been duly
authorized, executed and delivered by each of the Partners and
constitutes a legal, valid and binding obligation of each of
the Partners enforceable in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally and by general
principles of equity.
3.5 Governmental Actions and Other Consents and
Approvals. No Governmental Actions or other consents or
approvals are required in connection with (a) the participation
by the Partnership or the Partners in the transactions
contemplated by this Agreement and the other Transaction
Documents, (b) the construction, use, ownership (and, after the
Lease Closing Date, lease) or operation of the Project
(including the Transmission Facilities and all pipelines to be
used to transport Fuel or water to the Facility) in accordance
with the applicable provisions of the Transaction Documents and
in compliance with all applicable Environmental Laws, (c) the
validity and enforceability of this Agreement, the Facility
Lease, the Power Purchase Agreement, the Gas Contracts and the
other Transaction Documents, (d) the use of the Fuel for
operation of the Facility, (e) the grant by the Partnership,
the Partners and Holdings of the Liens created pursuant to the
Collateral Security Documents and the validity and
enforceability thereof and the perfection of and the exercise
by GE Capital of its rights and remedies thereunder or (f) the
participation by GE Capital or the Owner Trustee in the
transactions contemplated by this Agreement, the Lease
Documents and the other Transaction Documents (other than any
Governmental Actions under any law, rule or regulation of (or
administered by) any federal or state regulatory body primarily
responsible for regulating the activities of GE Capital or the
Owner Trustee) to which either is a party, except in each case
for those Governmental Actions and other consents and approvals
which are set forth in Schedule 2. Each of the Governmental
Actions and other consents and approvals listed in Part A of
Schedule 2 has, as of the Initial Loan Funding Date, been duly
obtained or made, is in full force and effect, is final and is
not subject to appeal or judicial, governmental or other
review. None of the Governmental Actions and other consents
and approvals listed in Part B of Schedule 2 are obtainable
prior to the Initial Loan Funding Date. The Partnership
reasonably believes that each of the Governmental Actions and
other consents and approvals listed in Part B of Schedule 2
will be duly obtained or made on or prior to the date required
therefore in Schedule 2, will be in full force and effect, will
be final and will not then be subject to appeal or judicial,
governmental or other review. The Partnership has no reason to
believe that any of the Governmental Actions and other consents
and approvals listed in Part B of Schedule 2 cannot or will not
be obtained or made in the normal course of business as and
when required hereunder. There is no (i) action, suit,
investigation or proceeding pending, or to the best knowledge
of the Partnership or the General Partner, threatened, against
the Partnership, any Participant or the Project, (ii) condition
that could reasonably be expected to result in an action, suit,
investigation or proceeding referred to in clause (i) above,
nor (iii) any other action, suit, investigation or proceeding
not involving the Partnership, any Participant or the Project,
that, in the case of clause (i) or (ii), could result in (or,
in the case of clause (iii), could reasonably be expected to
result in) the modification, rescission, termination, or
suspension of any Governmental Action referred to in Schedule 2
obtained prior to the date this representation is made or
deemed made.
3.6 No Legal Bar. The execution, delivery and
performance of this Agreement, the Note and the other
Transaction Documents, the borrowings by the Partnership
hereunder and the use of the proceeds thereof, (i) will not
violate any Applicable Law applicable to, or any Contractual
Obligation of, the Partnership, the General Partner or the
Limited Partner or any Affiliate of any thereof, (ii) will not
result in, or require, the creation or imposition of any Lien
on any of the properties or revenues of the Partnership or the
General Partner pursuant to any Applicable Law or Contractual
Obligation, except for Permitted Liens, (iii) will not violate
any provision of the Certificate of Limited Partnership of the
Partnership or the Partnership Agreement of the Partnership or
he Certificate of Incorporation or Bylaws of the General Partner
or the Limited Partner, or any other organizational documents of the
Partnership, the General Partner or the Limited Partner.
3.7 No Proceeding or Litigation. Except for the
Columbia Proceeding and the Columbia Bankruptcy Proceeding, no
litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the best
knowledge of the Partnership, threatened against or affecting
the Partnership or the General Partner or against or affecting
any of their respective properties, rights, revenues or assets,
or the Project, which, if adversely determined, could
reasonably be expected to have a Material Adverse Effect.
3.8 No Default or Event of Loss. Neither the
Partnership nor the General Partner is in default in any
material respect under or with respect to any Contractual
Obligation, including without limitation, any Transaction
Document; and no notice of default has been given to the
Partnership or the General Partner under any of the Project
Documents. To the best knowledge of the Partnership and the
General Partner, no other party to a Project Document is in
default thereunder. No Default or Event of Default has
occurred and is continuing; no Event of Loss has occurred; and
no Event of Regulation has occurred.
3.9 Ownership of Property; Liens. The Partnership
(which shall use the proceeds of the initial Loan to acquire
the Site) will, as of the Initial Loan Funding Date, have good,
marketable and indefeasible title to the Site and all other
Collateral owned by it, in each case free and clear of all
Liens except Permitted Liens. No mortgage or financing
statement or other instrument or recordation covering all or
any part of the Collateral which has been executed by, or with
the permission of, the Partnership or the General Partner is on
file in any recording office, except as such has been filed in
favor of GE Capital or the Security Agent.
3.10 Taxes. (a) Each of the Partnership and the
General Partner has filed or caused to be filed all tax returns
which are required to be filed by it, and has paid or caused to
be paid all taxes shown to be due and payable on such returns
(and such amounts thereon adequately reflect the respective tax
liability of the Partnership and the General Partner) or on any
assessments made against it or any of its property and all
other taxes, fees or other charges imposed on it or any of its
property by any Governmental Authority, except taxes, fees and
other charges arising after the date hereof which are subject
to a Contest.
(b) Except for (i) transfer taxes and registration,
recordation and other fees and taxes payable in connection with
the recordation of the Deed of Trust and Security Agreement and
the filing of financing statements required to perfect the
Security Agent's and GE Capital's rights under the Collateral
Security Documents, all of which taxes and fees will have been
paid in full by the Partnership on or before the first
Borrowing Date hereunder, (ii) other taxes or fees, if any,
which are indemnified against by the Partnership pursuant to
subsection 2.7(g) and which shall have been paid in full by the
Partnership on or before each Borrowing Date hereunder to the
extent then required and (iii) income, capital, receipts or
franchise taxes imposed with respect to GE Capital (or the
Owner Trustee or the Security Agent) by the federal government or the
jurisdiction in which GE Capital (or the Owner Trustee or the
Security Agent) is organized or in which an office of
GE Capital(or the Owner Trustee or the Security Agent) is
located or any political subdivision or taxing authority
thereof or therein, neither the execution and delivery of this
Agreement, the Note or any other Transaction Document, nor the
consummation of any of the transactions contemplated hereby or
thereby, will result in any tax, levy, impost, duty, charge or
withholding imposed by the United States or any agency or
taxing authority thereof, or by the State of Delaware or any
political subdivision or taxing authority thereof or therein,
on or with respect to such execution, delivery or consummation,
or upon or with respect to GE Capital, the Owner Trustee or the
Security Agent.
3.11 Federal Regulations. Neither the Partnership
nor the General Partner is engaged or will engage in the
business of extending credit for the purpose of "purchasing" or
"carrying" any "margin stock" within the respective meanings of
each of the quoted terms under Regulations G, U and X of the
Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect. No part of the proceeds
of the Loans will be used for "purchasing" or "carrying" any
"margin stock" as so defined or for any purpose which violates,
or which would be inconsistent with, the provisions of the
Regulations of such Board of Governors.
3.12 ERISA. The Partnership is not in violation of
applicable provisions of ERISA and the regulations and
published interpretations thereunder with respect to any Plan.
Neither the Partnership nor the General Partner maintains, or
is required under ERISA to maintain, any Plan.
3.13 Investment Company Act; etc. None of the
Partnership, the General Partner, the Limited Partner, Panda or
Holdings is (i) an "investment company" or a company
"controlled" by an "investment company," within the meaning of
the Investment Company Act of 1940, as amended, (ii) subject to
regulation under the Holding Company Act as a "holding company"
or a "subsidiary company" of a "holding company" or an
"affiliate" of either a "holding company" or a "subsidiary
company" of a "holding company", or (iii) subject to any other
Law which purports to restrict or regulate its ability to
borrow money.
3.14 Collateral Security Documents; Lease Documents.
Upon execution and delivery thereof, the Collateral Security
Documents will be effective to create, in favor of the Security
Agent, for the benefit of the Owner Trustee and GE Capital,
legal, valid and enforceable liens on and security interests in
all right, title, estate and interest of the Partnership, the
Partners or Holdings, as the case may be, in and to the
Collateral and, prior to the Initial Loan Funding Date, all
necessary and appropriate recordings and filings will have been
duly effected in all appropriate public offices so that the
liens and security interests created by each of the Collateral
Security Documents will constitute perfected first liens on and
prior perfected security interests in all right, title, estate
and interest of the Partnership, the Partners or Holdings, as
the case may be, in and to the Collateral described therein
prior and superior to all other Liens, existing or future,
except Permitted Liens. The recordings and filings shown on
Part A of Schedule 3 are all the recordings, filings and other
action necessary and appropriate to establish, protect and
perfect the Security Agent's Lien on and security interest in
and to the Collateral for the benefit of the Owner Trustee and
GE Capital.
3.15 Full Disclosure. No representation, warranty
or other statement made by the Partnership or the General
Partner in any Project Document or in any certificate, written
statement or other document furnished to GE Capital or GE
Capital's Representative by or on behalf of the Partnership, or
the General Partner, contains, at the time made, any untrue
statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein or
therein, in light of the circumstances under which they were
made, and at the time so made, not misleading, unless such
misstatement or omission has been corrected or disclosed prior
to the Initial Loan Funding Date. There is neither any fact
known to the Partnership or the General Partner which it has
not disclosed to GE Capital in writing prior to the Initial
Loan Funding Date nor any Contractual Obligation which
materially adversely affects, or which could reasonably be
expected in the future to affect, materially and adversely, the
Project or the properties, business, prospects, operations or
financial condition of the Partnership or the General Partner
or the ability of the Partnership or the General Partner to
perform its obligations under any Transaction Document to which
it is or is to become a party. Neither the Partnership nor the
General Partner is aware of any pending, proposed or
contemplated changes (other than changes of a routine or
immaterial nature or changes to the Construction Contract set
forth in Exhibit B of the Consent delivered by the Contractor)
to the Project Documents after the Initial Loan Funding Date.
The Operating Projections were prepared by the Partnership in
good faith based on reasonable assumptions consistently
applied.
3.16 Property Rights, Utilities, etc. All utility
services, means of transportation, facilities and other
materials that can reasonably be expected to be necessary for
the construction and operation of the Facility (including,
without limitation, gas, electrical, water and sewage services
and facilities) are available to the Facility and, to the
extent appropriate, arrangements have been made on commercially
reasonable terms for such services, means of transportation,
facilities and other materials.
3.17 Compliance with Building Codes, Zoning Laws,
etc. The Project is in all material respects in compliance
with all applicable zoning, environmental protection, use and
building codes, laws, regulations and ordinances. The
Partnership has no knowledge of any material violations of any
laws, ordinances, codes, requirements or orders of any
Governmental Authority affecting the Project.
3.18 Principal Place of Business, etc. The
principal place of business and chief executive office of each
of the Partnership and the General Partner and the office where
each of the Partnership and the General Partner keeps its
records concerning the Project and all contracts relating
thereto is located at 4100 Spring Valley, Suite 1001, Dallas,
Texas 75244; provided that certain records concerning the
Project and certain contracts relating thereto are kept at the
Partnership's office at 6433 S. Crain Highway, Upper Marlboro
(Prince George's County), Maryland 20772 or at the Site.
3.19 Description of Property. The descriptions set
forth in the Deed of Trust and Security Agreement of the Site,
the Easements and the Facility are true and accurate in all
material respects, and are adequate for the purpose of
establishing, preserving, protecting and perfecting the
interests and rights, and the first priority of the liens
(subject only to Permitted Liens), intended to be created and
provided in such property by the Deed of Trust and Security Agreement.
3.20 Public Utility Status. (a) As long as the
Facility is a Qualifying Facility, neither the Partnership nor
the General Partner nor the Limited Partner will, solely by
reason of (i) the ownership (or leasing), operation or
maintenance of the Project by the Partnership (including
operation or maintenance by an agent of the Partnership) or
(ii) any other transaction contemplated by this Agreement or
any other of the Transaction Documents, be: (i) subject to
regulation under Part II or III of the Federal Power Act,
except for Sections 202(c), 210, 211, 212, 213, 214 and 305(c)
of the Federal Power Act (16 U.S.C. 824a(c), 824i, 824j, 824k,
824l, 824m and 825d(c), respectively) and the enforcement
provisions of Part III of the Federal Power Act relating
thereto; (ii) an "electric utility company" for purposes of the
Holding Company Act; (iii) subject to state law or regulation
respecting the rates of electric utilities or state law or
regulation respecting the financial and organizational
regulation of electric utilities (except for state law or
regulation implementing Subpart C of 18 C.F.R. Part 292); or
(iv) subject to regulation as a "steam heating company" under
Article 78, Public Service Commission Law, of the Annotated
Code of Maryland.
(b) As long as the Facility is a Qualifying
Facility, none of the Owner Trustee nor GE Capital nor any of
GE Capital's Affiliates will be a Public Utility solely by
reason of (i) the ownership (or leasing), operation or
maintenance of the Project by the Partnership (including
operation or maintenance by an agent of the Partnership), (ii)
the making of the Loans, (iii) the securing of the Obligations
by Liens on the Collateral, (iv) the Owner Trustee's ownership
of the Facility as contemplated by subsection 5.2 hereof or (v)
any other transaction contemplated by this Agreement or any
other Transaction Document (other than any transaction
described in subsection 3.20(c) hereof).
(c) None of the Owner Trustee, the Security Agent,
GE Capital nor any of GE Capital's Affiliates will, solely by
reason of the Security Agent's, the Owner Trustee's, GE
Capital's or any such Affiliate's ownership or operation of the
Project upon the exercise of remedies under the Collateral
Security Documents, be: (i) subject to regulation under Part II
or III of the Federal Power Act, except for Sections 202(c),
210, 211, 212, 213, 214 and 305(c) of the Federal Power Act (16
U.S.C. 824a(c), 824i, 824j, 824k, 824l, 824m and 825d(c),
respectively) and the enforcement provisions of Part III of the
Federal Power Act relating thereto; (ii) an "electric utility
company" for purposes of the Holding Company Act; (iii) subject
to state law or regulation respecting the rates of electric
utilities or state law or regulation respecting the financial
and organizational regulation of electric utilities (except for
state law or regulation implementing Subpart C of 18 C.F.R.
Part 292); or (iv) subject to regulation as a "steam heating
company" under Article 78, Public Service Commission Law, of
the Annotated Code of Maryland; provided, that (x) (as a result
of any transaction other than the transactions contemplated by
the Transaction Documents) none of the Owner Trustee, the
Security Agent nor GE Capital nor any such Affiliate owning or
operating the Project is for purposes of the PURPA Regulations
an "electric utility" or an "electric utility holding company"
or a wholly or partially-owned direct or indirect subsidiary of
an "electric utility" or "electric utility holding company" and
(y) the Facility is operated in compliance with the
requirements set forth in the PURPA Regulations for the
Facility to be a Qualifying Facility.
3.21 Material Agreement and Licenses. No licenses,
trademarks, patents or agreements with respect to the usage of
technology (other than any thereof which have been obtained and
are in full force and effect and have been assigned to the
Security Agent) are necessary for the construction, ownership,
operation and maintenance of the Project.
3.22 Sufficiency of Project Documents. The services
to be performed, the materials to be supplied and the leasehold
and other property interests, license agreement(s), easement(s)
and other rights granted pursuant to the Project Documents and
the Easement Agreements:
(a) will comprise substantially all of the services,
materials and property interests required for the
acquisition, development, construction, installation,
completion, operation and maintenance of the Project in
accordance with all Applicable Laws and the Project
Documents; and
(b) will provide adequate ingress and egress from
the Site for any reasonable purpose in connection with the
construction, operation and maintenance of the Facility
(including, without limitation, access for transportation
of Fuel and water to, and electricity, water and steam
from, the Site).
There will then be no services, materials or rights required
for the construction, operation or maintenance of the Facility
in accordance with the Project Documents, other than (x) those
granted by or to be provided by or on behalf of the Partnership
pursuant to the Project Documents or (y) those that can
reasonably be expected to be commercially available at the Site
when required.
3.23 Representations and Warranties. The
representations and warranties of the Reporting Participants
contained in the Transaction Documents other than this
Agreement are true and correct, and the Partnership and the
General Partner hereby confirm each such representation and
warranty with the same effect as if set forth in full herein.
3.24 Location of Site. Except as disclosed in
Schedule 8, the Site and the Easements do not lie within an
area of "special flood hazard" as that term is defined in 44
Code of Federal Regulations Section 59.1.
3.25 Environmental Matters. (a) Except as
disclosed in Schedule 8 or in the Environmental Audit on or
prior to the execution and delivery of this Agreement:
(i) no Environmental Proceeding, notice,
notification, demand, request for information, citation,
summons or order has been issued, no complaint has been
filed, no penalty has been assessed, and to the actual or
constructive knowledge of the Partnership, no
investigation or review is pending or threatened by any
Governmental Authority or other Person:
(A) with respect to any violation or
alleged violation of any Environmental Law in
connection with the property, operations or conduct
of business of the Partnership or of the Project; or
(B) with respect to any failure to have
any Governmental Action relating to Hazardous
Substances or any Environmental Law required in
connection with the property, operations or conduct of
the business of the Partnership or of the Project in
violation of any Environmental Law; or
(C) with respect to the presence, use,
handling generation, treatment, storage, recycling,
transportation, emission, spill, leak, seepage,
discharge, release, threatened release or disposal of
any Hazardous Substance generated by the operations or
business of the Partnership or the Project or located
on, under or at any property of the Partnership or the
Project.
(ii) neither the Partnership nor the businesses
conducted by the Partnership has committed any material
violation of any applicable Environmental Law or engaged in
any conduct which would give rise to any material liability
to the Project, any Participant, the Owner Trustee or GE
Capital under any applicable Environmental Law and there are
no circumstances which could reasonably be expected to
prevent or interfere with material compliance by the
Partnership or the Project with any applicable Environmental
Law in the future;
(iii) no Person has committed any violation of any
applicable Environmental Law or engaged in any conduct which
would give rise to any material liability to the Partnership,
any Participant, the Owner Trustee, GE Capital or the Project
under any applicable Environmental Law while owning,
operating, leasing or occupying the Project;
(iv) neither the Partnership nor the businesses
conducted by the Partnership, nor any other Person, has
placed, held, located, released or disposed of any Hazardous
Substance on, under or at any property now or previously
owned, operated, leased, occupied or otherwise used by the
Partnership (including the Project) in such quantities or
conditions so as to require any material investigation,
study, sampling, testing, removal, response, remediation or
other action of any kind which has not yet been taken, or
result in any material liability to the Partnership, any
Participant, GE Capital, the Owner Trustee or the Project
under any applicable Environmental Law and none of such
properties has been used by the Partnership, or any other
Person, as a site for the material dumping or other disposal
of any kind of any Hazardous Substance or in material
violation of any applicable Law or Environmental Law,
including, without limitation, any such law relating to use
of a property as a storage site (whether permanent or
temporary) for any Hazardous Substance;
(v) no Hazardous Substance is or has been present
at any property now or previously owned, operated, leased,
occupied or otherwise used by the Partnership (including the
Project) in such quantities or conditions so as to require
any material investigation, study, sampling, testing,
removal, response, remediation or other material action of
any kind which has not yet been taken or result in any
material liability to the Partnership, any Participant, GE
Capital, the Owner Trustee or the Project under any
applicable Environmental Law;
(vi) there are no underground storage tanks,
active or abandoned or removed, which have been used to store
or have contained any Hazardous Substance at any property now
or previously owned, operated, leased or occupied by the Partnership
(including the Project);
(vii) no Hazardous Substance has been released at,
on or under any property now or previously owned, operated,
leased, occupied or otherwise used by the Partnership
(including the Project) in such quantities or conditions so
as to require any material investigation, study, sampling,
testing, removal, response, remediation or other material
action of any kind which has not yet been taken or result in
any material liability to the Partnership, any Participant,
GE Capital, the Owner Trustee or the Project under any
applicable Environmental Law; and
(viii) no Hazardous Substance is present in a
reportable or threshold planning quantity, where such a
quantity has been established by Applicable Law as a quantity
sufficient to require any reporting or notification to any
Governmental Authority, investigation, study, sampling,
testing, removal, response, remediation or other action of
any kind at, or result in any material liability to the
Partnership, any Participant, GE Capital, the Owner Trustee
or the Project under any applicable Environmental Law, on or
under any property now or previously owned, operated, leased,
occupied or otherwise used by the Partnership (including the
Project).
(b) Neither the Partnership nor any business conducted
by it has generated, transported, disposed or arranged for the
transportation or disposal (directly or indirectly) of any
Hazardous Substance to any location which is listed or proposed
for listing under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA") National
Priorities List ("NPL"), the Comprehensive Environment Response,
Compensation and Liability Information System ("CERCLIS") or any
similar state list or which is the subject of federal, state or
local enforcement actions or other investigations or to any other
location or in any manner that could result in material liability
to the Partnership under any applicable Environmental Law.
(c) No property now or previously owned, operated,
leased, occupied or otherwise used by the Partnership (including
the Project) is listed or, to the knowledge of the Partnership,
proposed for listing on the NPL promulgated pursuant to CERCLA, or
CERCLIS, or any similar state list of sites requiring
investigation or cleanup, nor does the Partnership know of any
facts or circumstances which would support any such listing of any
such property.
(d) There are no environmental liens on the
Partnership's interest in any property owned or leased by the
Partnership (including the Project) and the Partnership has not
received any written notice of any actions taken by any
Governmental Authority which could subject any of such properties
to such liens.
(e) Notwithstanding the foregoing, the disclosure, if
any, in any Environmental Audit of any fact or circumstance which
would render any of the foregoing representations untrue shall not
otherwise relieve the Partnership of its obligations under
subsections 6.24, 6.25 and 7.20.
(f) The Partnership has not assumed, contractually or
by operation of Law (other than pursuant to Subsection 16.1(c) of
the Power Purchase Agreement and certain of the other Project
Documents), any liabilities or obligations under any Environmental
Law.
(g) There are no past or present actions, activities,
events, conditions or circumstances relating to the Partnership,
the Site or the Project, including without limitation the release,
threatened release, emission, discharge, generation, treatment,
storage or disposal of Hazardous Substances, that could give rise
to any material liability under any Environmental Law or any
contract or agreement.
3.26 Fuel Supply. The amount and quality of natural
gas which the Gas Supplier is obligated to deliver to the Facility
pursuant to the Gas Supply Contract satisfy the requirements of
Subsection 11.2 of the Power Purchase Agreement and are sufficient
to permit the operation of the Facility in accordance with the
obligations of the Partnership under the Power Purchase Agreement
for a period of at least 15 years.
3.27 Qualifying Facility. FERC has issued an order
(the "QF Certification Order") granting the Partnership's
application (the "QF Certification Application") for certification
of the Facility as a Qualifying Facility, and the QF Certification
Order is in full force and effect and is not the subject of any
pending or, to the Partnership's knowledge, threatened
administrative or judicial proceedings. The Facility, when
constructed, owned and operated in the manner contemplated by the
Transaction Documents, the QF Certification Order and the QF
Certification Application, will be a Qualifying Facility and will
be eligible for the benefit of the exemptions provided by 18
C.F.R. 292.601(c), 292.602(b) and 292.602(c). The manner in
which the QF Certification Order and the QF Certification
Application contemplate that the Facility will be constructed,
owned and operated does not differ in any material respect from
the manner in which the Transaction Documents contemplate that the
Facility will be constructed, owned and operated, except for the
Owner Trustee's ownership of the Facility as contemplated by
subsection 5.2 hereof.
3.28 Completion of Project. The Partnership has no
reason to believe that (a) Substantial Completion of the Facility
will not occur on or before the Construction Loan Maturity Date or
(b) Project Costs for any Budget Category will exceed amounts
budgeted therefor in the Approved Budget.
The Partnership and the General Partner shall make (or
be deemed to have made) the representations and warranties set
forth in this Section 3 as of the Initial Loan Funding Date, each
Borrowing Date (or other date on which an extension of credit is
requested hereunder) thereafter, on the Lease Closing Date and on
the Date of Final Completion (and on each other date on which a
Partnership Equity Loan is requested to be made thereafter).
Section 4. CONDITIONS PRECEDENT TO LOANS
4.1 Conditions of Initial Loan. The obligation of GE
Capital to make its initial Loan hereunder and to issue the
Letters of Credit is subject to the fulfillment to the
satisfaction in form and substance of, or waiver by, GE Capital of
each of the conditions precedent set forth in subsection 4.2 and
each of the following conditions precedent:
(a) Notice of Initial Loan Funding. GE Capital shall
have received the Notice of Initial Loan Funding, duly
executed by an Authorized Officer of the Partnership, three
Business Days prior to the proposed Initial Loan Funding
Date.
(b) Note. GE Capital shall have received the Note
conforming to the requirements hereof, dated as of the
Initial Loan Funding Date and duly executed and delivered by
the Partnership.
(c) Title Insurance; Survey. GE Capital shall have
received (i) a policy of title insurance issued by the Title
Company, in form and substance satisfactory to GE Capital,
with such endorsements and affirmative coverage as
GE Capital may reasonably request and with such reinsurance
(with direct access provisions) and/or coinsurance as
GE Capital may request, insuring the Security Agent, for the
benefit of the Owner Trustee and GE Capital, in the amount of
$130,000,000, that the Deed of Trust and Security Agreement
constitutes a valid first mortgage lien on the Partnership's
interest in the Site and the Partnership's interest in the
Easements, subject only to Permitted Liens; and (ii) a survey
of the Site by a licensed surveyor satisfactory to GE Capital
and the Title Company, certified to GE Capital and the Title
Company, showing no state of facts unsatisfactory to GE
Capital, which survey shall be made in accordance with the
"Minimum Standard Detail Requirements" for ALTA/ACSM Land
Title Surveys jointly established and adopted by the American
Title Association and the American Congress on Surveying and
Mapping in 1992 and shall include all of the specifications
included in "Table A-Optional Survey Responsibilities and
Specifications." GE Capital shall have received evidence
that the premium in respect of such policy has been paid.
(d) Legal Opinions. GE Capital shall have received
the following opinions of counsel, each dated the Initial
Loan Funding Date:
(i) the opinion of Chadbourne & Parke, counsel to
the Partnership, the General Partner, the Limited Partner
and Holdings, substantially in the form of Exhibit Y-1;
(ii) the opinion of Gibbs & Haller, special Maryland
counsel to the Partnership, the General Partner, the Limited
Partner and Holdings, substantially in the form of Exhibit Y-2;
(iii) the opinion of Piper & Marbury, special Maryland
counsel to GE Capital, substantially in the form of Exhibit Y-3;
(iv) the opinion of Thompson and Knight, special Texas
counsel to GE Capital, substantially in the form of Exhibit Y-4;
(v) the opinion of counsel to each Participant (other
than the Partnership and its Affiliates) with respect to its
obligations under the Project Document to which it is a party,
substantially in the form of Exhibit Y-5;
(vi) the opinion of Venable, Baetjer, Howard & Civiletti,
special counsel to the Partnership, substantially in the form
of Exhibit Y-6;
(vii) the opinion of Simpson Thacher & Bartlett, special
tax counsel to GE Capital, substantially in the form of Exhibit Y-7;
(viii) the opinion of Swidler and Berlin, special regulatory
counsel to GE Capital, substantially in the form of Exhibit Y-8; and
(ix) the opinion of Shipman & Goodwin, counsel to the Owner
Trustee and the Security Agent, substantially in the form of Exhibit Y-9.
Such opinions shall also cover such other matters incident
to the transactions contemplated by this Agreement and the
other Transaction Documents as GE Capital may reasonably
request.
(e) Trust Agreement. GE Capital shall have received
the Trust Agreement, in form and substance satisfactory to
it, duly executed and delivered by the Owner Trustee.
(f) Collateral Security Documents. GE Capital shall
have received each of the following, in form and substance
satisfactory to it, duly executed and delivered by the
Security Agent and the Partnership (or the Partners or
Holdings, as the case may be) or, in the case of the
Consents to Assignment, the appropriate Participant:
(i) the Deed of Trust and Security Agreement;
(ii) the Security Deposit Agreement;
(iii) the General Partner Pledge Agreement;
(iv) the Limited Partner Pledge Agreement;
(v) the Stock Pledge Agreement;
(vi) each Assignment of the agreements set forth below:
(A) Construction Contract (together with the Parent
Guaranty of Raytheon Company)
(B) Power Purchase Agreement (and Transfer Agreement)
(C) Gas Supply Contract and Fuel Management Agreement
and Gas Supply Guaranty and Fuel Management Guaranty
(D) Columbia Precedent Agreement (together with a
supplementary letter regarding payments) and Columbia FTS
Agreement
(E) CLNG Agreement
(F) Washington LDC Agreement
(G) Steam Agreements
(H) Operation and Maintenance Agreement
(I) Effluent Water Agreement;
(vii) each Consent to Assignment of the agreements set forth below:
(A) Construction Contract
(B) Power Purchase Agreement (and Transfer Agreement)
(C) Gas Supply Contract and Fuel Management Agreement
(D) Gas Supply Guaranty and Fuel Management Guaranty
(E) Columbia Precedent Agreement and Columbia FTS Agreement
(F) CLNG Agreement
(G) Washington LDC Agreement
(H) Steam Agreements
(I) Operation and Maintenance Agreement
(J) Effluent Water Agreement; and
(viii) the Security Agreement.
(g) Power Purchase Agreement. GE Capital shall have
received a true and complete copy of the Power Purchase
Agreement in form and substance satisfactory to it, certified
by the Partnership as such on the Initial Loan Funding Date.
The Maryland Commission shall have issued an order approving
the First Amendment, dated as of September 16, 1994, to the
Power Purchase Agreement between the Partnership and the Power
Purchaser (the "First Amendment"), and such order shall have
become final and nonappealable, and the Power Purchaser shall
have notified the Partnership pursuant to Section 3.1(b)(iii)
of the First Amendment that such order is satisfactory in form and
substance to the Power Purchaser. GE Capital shall have
received from the Power Purchaser the PEPCO Closing Certificate,
satisfactory in form and substance to GE Capital.
(h) Construction Contract. GE Capital shall have
received a true and complete copy of the Construction
Contract (together with the executed Parent Guaranty of
Raytheon Company) in form and substance satisfactory to it,
certified by the Partnership as such on the Initial Loan
Funding Date. Raytheon Company shall have executed an
acknowledgment of assignment of its Parent Guaranty to GE
Capital.
(i) Steam Agreements. GE Capital shall have received a
true and complete copy of each of the Steam Sales Agreement
and the Steam Lessee Security Agreement in form and substance
satisfactory to it, certified by the Partnership as such on
the Initial Loan Funding Date.
(j) Gas Contracts. GE Capital shall have received true
and complete copies of the Gas Supply Contract, the Gas
Supply Guaranty, the Fuel Management Agreement (together with
the Fuel Management Guaranty) and the Gas Transportation
Contracts, certified by the Partnership as such on the
Initial Loan Funding Date.
(k) Operation and Maintenance Agreement. GE Capital
shall have received a true and complete copy of the Operation
and Maintenance Agreement in form and substance satisfactory
to it, certified by the Partnership as such on the Initial
Loan Funding Date.
(l) Effluent Water Agreement. GE Capital shall have
received a true and complete copy of the Effluent Water
Agreement in form and substance satisfactory to it, certified
by the Partnership as such on the Initial Loan Funding Date.
(m) Partnership Agreement; Formation Documents.
GE Capital shall have received a true and complete copy of
each of the Partnership Agreement, the Certificate of
Limited Partnership of the Partnership and the Certificate of
Incorporation and By-laws of each of the Partners, certified
by the Partnership as such on the Initial Loan Funding Date.
(n) Project Schedule; Approved Budget. GE Capital
shall have received from the Partnership (a) the Project
Schedule, in form and substance satisfactory to it (after
consultation with GE Capital's Representative), and (b) the
Approved Budget, in form and substance satisfactory to it
(after consultation with GE Capital's Representative), for
all anticipated costs to be incurred in connection with the
construction and start-up of the Project, including in such
budget all construction and non-construction costs, and
including, without limitation, all interest, taxes and other
carrying costs, and such other information as GE Capital may
request. The Approved Budget will contain an appropriate
number of budget categories (each such category a "Budget
Category") and will detail the drawdowns to date in each
Budget Category and the projected timing and value of each of
the remaining drawdowns in each Budget Category and the total
amount for each Budget Category (the "Budget Category
Amount").
(o) Letter of Credit Pledge Agreements; Ascending
Letter of Credit and Overfunding Letter of Credit. GE
Capital shall have received the Ascending Letter of Credit
Pledge Agreement and the Overfunding Letter of Credit Pledge
Agreement, each in form and substance satisfactory to GE
Capital and duly executed and delivered by the Partnership
and the Security Agent. The Ascending Letter of Credit and
the Overfunding Letter of Credit shall have been issued and
assigned to the Security Agent for the benefit of the Owner
Trustee and GE Capital pursuant to the Ascending Letter of
Credit Pledge Agreement and the Overfunding Letter of Credit
Pledge Agreement, respectively, and a Transfer Certificate in
respect of each thereof shall have been delivered to the
Security Agent.
(p) Site Lease; Site Sublease. GE Capital shall have
received each of the Site Lease and Site Sublease, duly
executed and delivered by the Partnership and the Owner
Trustee.
(q) GE Capital's Representative's Report. GE Capital
shall have received a report, in form and substance
satisfactory to GE Capital, of GE Capital's Representative,
in form and substance satisfactory to GE Capital, with
respect to the construction and operation of the Facility,
covering the Approved Budget, the Project Schedule, the
construction plan and responsibilities, equipment selection,
probable performance of the Facility, the expected operating
specifications of the Facility (including expected operating
and maintenance costs, capacity, downtime and generating
efficiencies of the Facility), the major maintenance and
overhaul plan for the Facility, the water supply for the
Facility, the technical ability of the Facility to respond to
the dispatch requirements contained in the Power Purchase
Agreement, the permitting requirements of the Facility and
such other matters with respect to the Facility and the
Project as shall be requested by GE Capital.
(r) Perfection of Liens and Security Interests. All
filings, recordings and other actions (including all filings
and recordings set forth in Schedule 3) that are necessary or
desirable in order to establish, protect, preserve and
perfect the Security Agent's lien on and perfected security
interest in all right, title, estate and interest of the
Partnership, the Partners and Holdings in and to the
Collateral, prior and superior to all other Liens, existing
or future, except Permitted Liens, shall have been duly made
or taken and all fees, taxes and other charges relating to
such filings and recordings and other actions shall have been
paid by the Partnership. The Security Agent shall have a
first lien on and prior perfected security interest in all
right, title, estate and interest of the Partnership in and
to the Collateral prior and superior to all other Liens
including existing mechanics' and materialmen's liens, except
Permitted Liens. GE Capital shall have received
authenticated copies or other evidence of all filings,
recordings and other actions obtained or made in order to
create and perfect such first lien on and perfected security
interest in the right, title, estate and interest of the
Partnership in and to the Collateral.
(s) Fees. GE Capital shall have received the fees
referred to in subsections 2.5(a) and 2.11(a).
(t) Insurance Coverage. GE Capital shall have received
binders for, or other evidence satisfactory to
GE Capital (including, if requested by GE Capital,
certificates of insurers, independent brokers and the
Partnership) of the maintenance of and payment of premiums
with respect to the insurance required to be maintained by
the Partnership pursuant to the provisions of this Agreement,
the Deed of Trust and Security Agreement, the Security
Agreement, the Power Purchase Agreement and the other
Transaction Documents.
(u) Preliminary Appraisal. GE Capital shall have
received the preliminary written appraisal from Appraisal
Economics, Inc. which shall state that (i) Lessor's Cost (as
assumed on Schedule 6) is equal to the Fair Market Sales
Value of the Facility, (ii) the Facility has an estimated
useful life of at least 25 years, (iii) the Facility will
have a residual value at the end of the Basic Term of not
less than twenty percent (20%) of Lessor's Cost (without
giving effect to inflation or deflation) and (iv) it is
commercially feasible for a party other than Lessee to use
the Facility at the end of the Basic Term.
(v) Notice to Proceed. The Partnership shall have
notified the Contractor of the occurrence of the Initial Loan
Funding Date pursuant to Section 2.02 of the Construction
Contract (the "Notice to Proceed").
(w) Easement Agreements. GE Capital shall have
received a true and complete copy of each Easement Agreement
(except for those set forth on Part B of Schedule 2 which are
to be obtained after the Initial Loan Funding Date) in form
and substance satisfactory to it, certified by the
Partnership as such on the Initial Loan Funding Date. Each
counterparty to an Easement Agreement shall have executed a
consent to assignment of its Easement Agreement to the
Security Agent, for the benefit of GE Capital and the Owner
Trustee.
(x) Steam Host Arrangements; Qualifying Facility
Status. GE Capital shall have received information from the
Partnership, to its satisfaction, as to the steam host
arrangements of the Project and available mitigation to the
risk of the Facility losing its status as a Qualifying
Facility.
(y) Subcontractors; Suppliers. GE Capital shall have
received from the Partnership a list of all major
subcontractors and suppliers for the construction and
operation of the Project, which list shall be satisfactory to
GE Capital.
(z) Governmental Actions. GE Capital shall have
received originals (or copies certified to be true copies by
an Authorized Officer of the Partnership) of (i) all
Governmental Actions set forth in Part A of Schedule 2 and
(ii) such other Governmental Actions as GE Capital may
reasonably request and that in the reasonable opinion of GE
Capital are necessary or desirable under Applicable Law in
connection with the transactions contemplated by the
Transaction Documents. GE Capital shall have received an
Officer's Certificate of the Partnership to the effect that
(A) the copies of such Governmental Actions, if any,
delivered to GE Capital are true, correct and complete copies
of such Governmental Actions (B) each Governmental Action set
forth in Part A of Schedule 2 is in full force and effect and
final and non-appealable and (c) the Partnership expects that
each Governmental Action set forth in Part B of Schedule 2
that has not been obtained will be obtainable in due course
prior to the date set forth with respect to such Governmental
Action in Part B of Schedule 2.
(aa) No Material Adverse Change. In the opinion of GE
Capital, (i) no material adverse change in the financial
condition, business or operations or prospects of the Project
or any Participant shall have occurred since the Development
Loan Closing Date, and (ii) no other event shall have
occurred since the Development Loan Closing Date which could
reasonably be expected to have a Material Adverse Effect.
(bb) No Material Tax Change. In the opinion of GE
Capital, no material tax change shall have occurred since the
Development Loan Closing Date which might reasonably be
expected to affect the Lease Financing in a manner adverse to
the Lessor.
(cc) Litigation. No litigation, proceeding or
investigation shall be pending, entered or threatened by any
Governmental Authority or any person (i) against the
Partnership, the Project, any Participant or any related
party or (ii) which could reasonably be expected to prevent
or enjoin any Participant from performing its obligations
under any Transaction Document.
(dd) Financial Statements. GE Capital shall have
received and be satisfied with (i) unaudited financial
statements for the Partnership, the General Partner and
Holdings and audited financial statements for Panda, in each
case for the most recently completed fiscal year of such
Person, (ii) financial statements for such Person for the
most recently completed fiscal quarter of such Person, and
(iii) such other financial information regarding such Person
as GE Capital may reasonably request.
(ee) Pledged Stock. The Security Agent shall have
received the original stock certificates evidencing the stock
pledged pursuant to the Stock Pledge Agreement, together with
undated stock powers duly executed in blank in connection
therewith.
(ff) Record Searches. A search, made no more than 30
days prior to the Initial Loan Funding Date, of the Uniform
Commercial Code filing offices or other registers in each
jurisdiction in which any of the Partnership, the Partners,
the Steam Host or Panda has an office or in which assets of
the Partnership, the Partners or Panda are located, as
certified by an Authorized Officer of the Partnership, shall
have revealed no filings or recordings with respect to any of
the Collateral in favor of any Person other than GE Capital,
as Agent under the Development Loan Agreement. GE Capital
shall have received a copy of the search reports received as
a result of such search. GE Capital shall have also received
satisfactory reports of federal and state tax lien searches
conducted by a search firm acceptable to GE Capital with
respect to the Partners and Holdings.
(gg) Taxes. GE Capital shall have received evidence
satisfactory to it that all Taxes, if any, payable on or
prior to the Initial Loan Funding Date in connection with the
execution, delivery, recording and filing of the Transaction
Documents and the documents and instruments described in
Schedule 3 (including all applicable transfer, sales and
recordation taxes) or in connection with the consummation of
any other transaction contemplated hereby or by the other
Transaction Documents shall have been paid in full.
(hh) Gas Supply Assessment. GE Capital shall have
received a satisfactory review of the fuel supply and
transportation arrangements, prepared by the Fuel Consultant
covering such matters with respect to the fuel supply to the
Project as GE Capital may request.
(ii) Projections. GE Capital shall have received from
the Partnership operating projections for the Project (the
"Operating Projections"), setting forth projections of
revenues, operating and other expenses and cash flows of the
Project for each operating year, in such detail and based
upon such assumptions as shall be satisfactory to GE Capital
(after consultation with GE Capital's Representative), which
Operating Projections shall be substantially in the form of
Schedule 9 and otherwise satisfactory in substance to GE
Capital.
(jj) Environmental Information. GE Capital shall have
received such information (including, without limitation, the
Environmental Audit and a letter of reliance entitling GE
Capital to rely on the Environmental Audit as if it had been
delivered to GE Capital) as to the past ownership and use of
the Site and environmental conditions at and about the Site,
and as to any Governmental Action as GE Capital may have
requested; and such information shall not disclose any
environmental risks associated with the Site or the Project
unacceptable to GE Capital.
(kk) Authorizing Actions. All partnership and
corporate proceedings in connection with the transactions
contemplated by this Agreement and the other Transaction
Documents, and all documents and instruments incident
thereto, shall be satisfactory in form and substance to
GE Capital and its counsel; and GE Capital and its counsel
shall have received such counterpart originals or certified
or other copies of all such documents and instruments and of
all records of partnership and corporate proceedings in
connection with such transactions, and such incumbency and
signature certificates of officers of the Participants, as GE
Capital or its counsel may reasonably request.
(ll) Distilled Water Facility Business Plan. GE
Capital shall have received from the Partnership the
Distilled Water Facility Business Plan, in form and substance
satisfactory to GE Capital.
(mm) Fuel Management Plan. GE Capital shall have
received from the Partnership the Fuel Management Plan, in
form and substance satisfactory to GE Capital.
4.2 Conditions to All Loans. The obligation of
GE Capital to make any Loan (including, without limitation, the
initial Loan), to issue the Letter(s) of Credit and to make any
other extension of credit hereunder is subject to (in addition to
the fulfillment of the conditions precedent set forth in
subsection 4.1) the fulfillment to the satisfaction of, or waiver
by, GE Capital on the Borrowing Date with respect to such Loan of
the following conditions precedent:
(a) Governmental Actions and Other Consents and
Approvals. All Governmental Actions and other consents and
approvals referred to in subsection 3.5, including, without
limitation, those listed in Part B of Schedule 2 which were
not required to be obtained prior to the Initial Loan Funding
Date but which were required to be obtained by the respective
dates specified in Schedule 2, shall have been duly obtained
or made and shall be in full force and effect on or prior to
any Borrowing Date occurring on or after the date specified
for the receipt of such consent or approval in Schedule 2,
and shall not then be subject to appeal or judicial,
governmental or other review and a copy of each such
Governmental Action, consent and approval shall have been
delivered to GE Capital.
(b) Qualifying Facility. The representation made in
subsection 3.27 hereof shall continue to be true and correct.
(c) No Change in Law. No change shall have occurred
after the Initial Loan Funding Date in any Law or in the
interpretation thereof by any Governmental Authority charged
with the administration or interpretation thereof (i) which,
in the reasonable judgment of GE Capital, would make
GE Capital's or the Owner Trustee's participation in the
transactions contemplated hereby illegal or subject the Owner
Trustee or GE Capital or any of its Affiliates to any
material incremental governmental regulation in connection
with such transactions or (ii) which, in the reasonable
judgment of GE Capital, would require the cancellation,
suspension or termination of any of the Transaction
Documents, which cancellation, suspension or termination, in
the reasonable judgment of GE Capital, could reasonably be
expected to have a Material Adverse Effect.
(d) No Material Adverse Change, etc. In the reasonable
judgment of GE Capital, (i) no material adverse change in the
financial condition, business or operations or prospects of
the Partnership or the General Partner or the Project
(including, without limitation, no material adverse change in
the Approved Budget or the Operating Projections) shall have
occurred since the Initial Loan Funding Date, and (ii) no
other event (including, without limitation, a material
adverse change in the financial condition, business or
operations of any Participant) shall have occurred since
the Initial Loan Funding Date which might reasonably be
expected to have a Material Adverse Effect.
(e) Payment of Project Costs. The amount of the Loan
requested by the Partnership on such Borrowing Date shall not
exceed the Project Costs due and to be paid on such Borrowing
Date as such Project Costs are set forth in the relevant Cost
Certificate, and all Project Costs specified as due and
payable in the Borrowing Certificate and the Cost Certificate
with respect to such Loan or disbursement shall be paid with
the proceeds thereof.
(f) Evidence of Project Costs; Lien Waivers; Ascending
Letter of Credit. At least ten Business Days prior to such
Borrowing Date, GE Capital and GE Capital's Representative
shall have received a copy of the Contractor's monthly
application for payment under the Construction Contract,
together with (i) copies of all third-party invoices and
other statements of charges with respect to the payment to be
made to the Contractor pursuant to the Construction Contract
on such Borrowing Date and with respect to all other items of
Project Costs to be paid on such Borrowing Date, (ii) such
evidence as GE Capital or GE Capital's Representative may
reasonably require that such payments and items of Project
Cost have been properly incurred and are due and payable and
(iii) in the case of GE Capital, a new or amended Ascending
Letter of Credit with an increase in the stated amount
thereof equal to ten percent of the amount shown to be due
and owing to the Contractor in such application (together
with an appropriately completed Transfer Certificate), which
Letter of Credit and Transfer Certificate shall be promptly
delivered to the Security Agent in accordance with the
Ascending Letter of Credit Pledge Agreement. GE Capital and
the Title Company shall have received sworn statements as to
lien waivers from the Contractor and such of its
subcontractors as it shall reasonably require.
(g) Representations and Warranties. The
representations and warranties made by the Partnership or the
General Partner or any other Reporting Participant herein or
in any other Transaction Document to which it is a party, or
which are contained in any certificate, document, financial
or other statement furnished by the Partnership or the
General Partner or any other Reporting Participant hereunder
or thereunder or in connection herewith or therewith shall be
true and correct in all material respects, on and as of such
Borrowing Date as if made on and as of such date, except to
the extent that such representations and warranties relate
solely to an earlier date; provided that if any
representation or warranty made pursuant to subsection 3.25
hereof is not true and correct solely because of the action
or inaction of the Contractor or a sub-contractor then, so
long as (i) the Partnership shall not have contributed to or
otherwise be responsible for such action or inaction, (ii)
there is no material liability to the Project, the
Partnership, GE Capital, the Owner Trustee or any other
Participant (other than the Contractor or such sub-
contractor), (iii) such action or inaction has not caused,
nor could it reasonably be expected to cause, a Material
Adverse Effect and (iv) the Person whose action or inaction
is responsible for the incorrectness of such representation
or warranty is liable for any such matter and, in the
reasonable opinion of GE Capital, is capable of curing such
matter and is diligently proceeding to cure the same, then
the incorrectness of such representation shall not prevent
the Partnership from satisfying the conditions of this
paragraph (g).
(h) No Default or Event of Default; Event of Loss. No
Default or Event of Default shall be in existence on such
Borrowing Date, or shall occur after giving effect to the
Loan to be made on such Borrowing Date. No Event of Loss
shall have occurred.
(i) No Force Majeure, Cancellation, Suspension,
Termination, etc. No event of force majeure, default or
other event or condition shall exist which permits or
requires any party to any of the Project Documents to cancel,
suspend or terminate its performance thereunder in accordance
with the terms thereof or which could excuse any such party
from liability for non-performance thereunder, unless (i) the
parties to such Project Document shall have effectively
waived such right or requirement with respect to such
cancellation, suspension, termination or release from
liability or (ii) in the judgment of GE Capital, such
cancellation, suspension, termination or release from
liability would not have a Material Adverse Effect or delay
the Substantial Completion beyond the Construction Loan
Maturity Date.
(j) Report of GE Capital's Representative. GE Capital
shall have received a report of GE Capital's Representative
dated not more than five days prior to the relevant Borrowing
Date, satisfactory to GE Capital, to the effect that (v)
construction of the Facility is proceeding in accordance with
the Construction Contract and each other EPC Contract, (w) as
of the date of such report, sufficient funds are available
under the Loan Commitment to complete the Project, (x) in its
reasonable judgment, the Commercial Operation Date can and
should occur on or before the Scheduled Commercial Operation
Date and Substantial Completion can and should occur prior to
the Construction Loan Maturity Date, (y) no events or changes
have occurred since the date of the last such report that
would have a material adverse effect on the Project, the
Project Schedule, the Approved Budget or the Contract Sum,
(z) GE Capital's Representative has received and approved each
Borrowing Certificate and each Cost Certificate due in
respect of such Borrowing and (A) does not disagree in any
material respect with any of the statements or calculations
relating to the construction or operation of the Project
contained therein or timely completion of the Project within
the Approved Budget and (B) in the reasonable judgment of GE
Capital's Representative, payments made to each EPC
Contractor and/or any major equipment vendors are customary
and reasonable based upon construction progress, delivery of
equipment and contractual terms.
(k) Borrowing Certificate. GE Capital shall have
received from the Partnership a Borrowing Certificate (with a
Cost Certificate and Project Schedule attached) dated such
Borrowing Date.
(l) Notice of Borrowing. GE Capital shall have
received from the Partnership a Notice of Borrowing
conforming to the requirements of subsection 2.2 hereof three
Business Days prior to the proposed Borrowing Date.
(m) Approved Budget Amount. GE Capital shall be
reasonably satisfied that the proceeds of any such Loan will
not be used to pay Project Costs incurred by or on behalf of
the Project in respect of any Budget Category in excess of
the Budget Category Amount for such Budget Category.
(n) Sufficient Financing. GE Capital shall not have
in good faith determined that the available Loan Commitment
is insufficient to fund the balance of the Project Costs
necessary to achieve Final Completion.
(o) Interest Payments and Fees. The Partnership shall
have paid (or will pay from the proceeds of the Loans to be
made on such Borrowing Date) to GE Capital (i) all accrued
interest and fees to the extent required on such Borrowing
Date, (ii) such other expenses as the Partnership is
obligated to pay pursuant to the Transaction Documents as may
then be due and payable, and (iii) any funds required by GE
Capital to be deposited or delivered to GE Capital pursuant
to this Agreement.
(p) Taxes and Assessments. The Partnership shall have
paid in full (or will pay from the proceeds of Loans)
(i) all installments of special assessments, if any, then due
or payable within 30 days thereafter and (ii) all
installments of general real estate or personal property
taxes not less than 10 days prior to the delinquency date
thereof.
(q) Project Documents. Except as otherwise permitted
pursuant to subsection 7.6, there has been no change,
modification or amendment to any of the Project Documents
without GE Capital's prior written consent and approval.
There shall have been no assignment of Assigned Contracts
other than to the Security Agent, for the benefit of
GE Capital and the Owner Trustee.
(r) Major Subcontractors. GE Capital shall have
received an updated listing of all major subcontractors.
(s) Additional Project Documents. If the Partnership
shall have entered into any Additional Project Document on or
prior to such Borrowing Date, GE Capital shall have received
(i) a true and complete copy of each such Additional Project
Document, certified by the Partnership as such, (ii) an
Assignment relating thereto, (iii) the Consent to Assignment
relating to such Additional Project Document, and (iv) an
opinion of counsel of the parties thereto (unless such
opinion is not available after diligent attempts to procure
the same), in each case in form and substance satisfactory to
GE Capital.
(t) Final Completion, etc. GE Capital shall have
determined that (i) no disputes exist with any EPC Contractor
which could reasonably be expected to have a material adverse
effect on (A) Project Costs or (B) the Partnership's ability
to attain Substantial Completion by the Construction Loan
Maturity Date or to attain Final Completion no later than six
months after the Date of Substantial Completion, and (ii)
there have been no substantial delays which would result in
failure to attain the foregoing.
(u) Notices, Stop-Work Orders. GE Capital shall have
determined that none of the following events will (i) have a
material adverse impact on the construction of the Project or
the cost thereof, or (ii) delay Substantial Completion beyond
the Construction Loan Maturity Date (or delay Final
Completion beyond the date required hereunder):
(A) any assertion or notice by any
Governmental Authority or other Person that the work in
connection with the Project does not comply with any
Applicable Law;
(B) the institution or notice of any
Environmental Proceeding or Adverse Proceeding;
(C) any material delays for any reason in (1)
construction of the Facility or (2) the delivery of
materials or equipment to be supplied under the
Construction Contract; or
(D) any cessation or suspension in the Work
or the construction of the Facility for any reason by
any EPC Contractor.
(v) Title Insurance Continuation. On any Borrowing
Date, GE Capital shall have received from the Title Company a
continuation endorsement (a "Continuation Endorsement") of
the mortgagee's title insurance policy referred to in
subsection 4.1(c) covering the Loan to be made on such date
and indicating that since the date of the most recent
Continuation Endorsement (or the date of the title insurance
policy referred to in subsection 4.1(c) if the Loan to be
made on such date is the first Loan to be made since the
initial Loan made hereunder), there has been no change in the
state of title of the Project (other than a change which
benefits the Partnership) and that there are no Liens
affecting the Project (except Liens for real estate taxes not
yet due and other Permitted Liens) which may take priority
over the Loan then being made or the other Loans made
hereunder; if requested by GE Capital, the Partnership shall
have prepared and shall furnish to the Title Company a survey
of the Site or, if acceptable to the Title Company, an update
to the existing survey of the Site, in form and substance
satisfactory to the Title Company, if the Title Company
requires the same in order to issue the Continuation
Endorsement.
(w) Liens. The Partnership (or the Partners or
Holdings, as the case may be), will, on such Borrowing Date,
have good, marketable and indefeasible title to the Site and
all other Collateral owned by it, in each case free and clear
of all Liens, except Permitted Liens. GE Capital shall have
received lien waivers from each contractor which has provided
goods or services to the Project in an amount greater than
$150,000 prior to such Borrowing Date.
(x) No Notice Under Section 15.3 of Power Purchase
Agreement. The Partnership shall not have received from the
Power Purchaser a notice pursuant to Subsection 15.3(a) of
the Power Purchase Agreement.
(y) Confirmation Certificate. GE Capital shall have
received a Confirmation Certificate in respect of the
proceeds of the Borrowing which was made on the immediately
preceding Borrowing Date.
(z) Additional Matters. All other documents and legal
matters in connection with the transactions contemplated
hereby shall be reasonably satisfactory in form and substance
to GE Capital and its counsel.
Section 5. SALE AND LEASE OF THE FACILITY
5.1 Lease Closing Date. When Substantial Completion has
occurred, the Partnership shall deliver to GE Capital and the
Owner Trustee a Closing Notice in the form of Exhibit G, selecting
a date (the "Lease Closing Date") for the conveyance and transfer
of the Facility to the Owner Trustee which date shall not be
earlier than fifteen Business Days from the date of the Lease
Closing Notice and not later than the Construction Loan Maturity
Date (and, to the extent possible, shall be the last day of a
calendar month). The Lease Closing Notice shall be accompanied by
a Certificate of Lessor's Cost in the form of Exhibit H, setting
forth Lessor's Cost. The closing of the sale and lease of the
Facility on the Lease Closing Date shall take place at the offices
of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New
York 10017, or at such other place as the parties hereto may
agree. The Lease Closing Date specified in the Lease Closing
Notice may be adjourned from time to time as the parties hereto
may agree.
5.2 Actions by the Partnership on the Lease Closing Date.
Upon the satisfaction of all conditions precedent set forth in
subsection 5.6, on the Lease Closing Date, the Partnership shall
assign, bargain and sell to the Owner Trustee all of its right,
title and interest in and to the Facility, by executing and
delivering to the Owner Trustee the Bill of Sale, the Lease
Documents to which it is a party and such other documents,
consents, opinions and assignments as are required by this
Agreement to be delivered on the Lease Closing Date. The
obligation of the Partnership to sell the Facility to the Owner
Trustee in accordance with the terms hereof and to otherwise enter
into the transactions contemplated by the Lease Documents shall
survive the payment in full of the Loans and all other amounts
owing hereunder (whether upon the occurrence of an Event of
Default or otherwise), shall be secured by the Collateral Security
Documents and shall be specifically enforceable.
5.3 Actions by GE Capital on the Lease Closing Date. When
all conditions precedent to GE Capital's obligations under this
Section 5 have been satisfied, on the Lease Closing Date, GE
Capital shall (a) on behalf of the Owner Trustee, pay Lessor's
Cost to the Partnership by discharging the principal amount of and
accrued interest on the Note in an amount equal to Lessor's Cost
and (b) cause the Owner Trustee to execute and deliver all of the
Lease Documents to which it is to be a party.
5.4 Lease of Facility. On the Lease Closing Date, the Owner
Trustee and the Partnership will enter into the Facility Lease
pursuant to which the Owner Trustee will lease to the Partnership
and the Partnership will lease from the Owner Trustee, subject to
all of the terms and conditions hereof and of the Facility Lease,
the Facility for the Basic Term, and subject to the exercise by
the Partnership of its renewal option as provided in Sections 12
and 13 of the Facility Lease for one or more renewal terms.
5.5 Conditions Precedent to Obligations of GE Capital. The
obligations of GE Capital to cause the Owner Trustee to purchase
the Facility from the Partnership and lease the same to the
Partnership and the obligation of GE Capital to make available the
Equity Loan Facility pursuant to subsection 5.9 shall be subject
to the fulfillment to the satisfaction of, or waiver by, GE
Capital of the following conditions precedent on or prior to the
Lease Closing Date (and, in the case of the Equity Loan Facility,
on or prior to the Date of Final Completion):
(a) Substantial Completion. The Date of Substantial
Completion shall have occurred, and the Partnership shall
have executed and delivered the Substantial Completion
Certificate.
(b) Closing Notice; Certificate of Lessor's Cost.
GE Capital and the Owner Trustee shall have received the
Lease Closing Notice and the Certificate of Lessor's Cost.
(c) Lease Documents. The following documents shall
have been duly authorized, executed and delivered by the
respective parties thereto (other than GE Capital), and an
executed counterpart of each thereof shall have been
delivered to GE Capital:
(i) Bill of Sale;
(ii) Present Assignment;
(iii) Facility Lease;
(iv) Steam Lease; and
(v) Tax Indemnity Agreement.
(d) Legal Opinions. GE Capital shall have received
the following opinions of counsel, each dated the Lease
Closing Date (and, in the case of the Equity Loan Facility,
dated the Date of Final Completion):
(i) the opinion of Chadbourne & Parke, counsel to
the Partnership, the General Partner, the Limited Partner
and Holdings, in form and substance satisfactory to GE Capital;
(ii) the opinion of Gibbs & Haller or Venable, Baetjer,
Howard & Civiletti, special Maryland counsel to the Partnership
and the General Partner, in form and substance satisfactory to
GE Capital;
(iii) the opinion of Shipman & Goodwin, counsel to the Owner
Trustee, in form and substance satisfactory to GE Capital; and
(iv) the opinion of Piper and Marbury, special Maryland counsel
to GE Capital, in form and substance satisfactory to GE Capital,
as to such matters as GE Capital shall request.
Such opinions also shall cover such other matters incident to
the transactions contemplated by this Agreement, the Lease
Documents and the other Transaction Documents as
GE Capital may reasonably request, including with respect to
the opinions of counsel set forth in clauses (i) and (ii), an
opinion that neither GE Capital (nor any Affiliate of GE
Capital) nor the Owner Trustee would be or become a Public
Utility as a result of the execution, delivery and
performance of the Lease Documents and opinions confirming
the validity and perfection of all interests of GE Capital
and the Owner Trustee (and any leveraged lease lenders, if
applicable) and the payment of all applicable filing and
recordation taxes.
(e) Title. The Owner Trustee shall have received from
the Partnership good, valid and indefeasible title in and to
the Facility under the Bill of Sale and shall have been
conveyed a valid leasehold interest in the Site and the
Easements pursuant to the Site Lease (except for those
Easements which have been transferred to PEPCO or the County
Commissioners of Charles County, Maryland as contemplated by
subsection 9.15 hereof), in all cases free and clear of all
Liens except Permitted Liens.
(f) Requirements under the Power Purchase Agreement.
The "Actual Commercial Operation Date" shall have occurred
under the Power Purchase Agreement and the operation of the
Project shall comply in all other material respects with all
requirements set forth in the Power Purchase Agreement.
(g) Operating Budget. GE Capital shall have received
the Operating Budget for the Project, which shall be in form
and substance reasonably satisfactory to GE Capital.
(h) Title Insurance; Survey. GE Capital shall have
received (i) a policy of title insurance issued by the Title
Company, in form and substance satisfactory to GE Capital,
with such endorsements and affirmative coverage as
GE Capital may reasonably request and with such reinsurance
(with direct access provisions) and/or coinsurance as
GE Capital may request, insuring the Security Agent for the
benefit of the Owner Trustee and GE Capital, in an amount
equal to the maximum secured amount of the Deed of Trust and
Security Agreement, that the Owner Trustee has a valid
leasehold interest in the Site and the Easements pursuant to
the Site Lease, subject only to Permitted Liens; and (ii) an
as-built survey of the Site by a licensed surveyor
satisfactory to GE Capital and the Title Company, certified
to GE Capital and the Title Company, showing no state of
facts which GE Capital reasonably determines to have a
materially adverse effect on the value of the Owner Trustee's
leasehold interest in the Site and the Easements which survey
shall be made in accordance with the standards set forth in
subsection 4.1(c). GE Capital shall have received evidence
that the premium in respect of such policy has been paid.
(i) Authorizing Actions. All partnership, corporate
and other proceedings in connection with the transactions
contemplated by this Agreement and the other Transaction
Documents, and all documents and instruments incident
thereto, shall be satisfactory in form and substance to
GE Capital and its counsel; and GE Capital and its counsel
shall have received such counterpart originals or certified
or other copies of all such documents and instruments and of
all records of partnership and corporate proceedings in
connection with such transactions, and such incumbency and
signature certificates of officers of the Participants, as GE
Capital or its counsel may reasonably request.
(j) Filings and Recordings. All filings, recordings
and other actions that are necessary or desirable in order to
establish, protect, preserve and perfect the Security
Agent's, the Owner Trustee's and GE Capital's right, title,
estate and interest in and to the Facility and the other
Collateral shall have been duly made or taken (including,
without limitation, the Facility Lease, the Site Lease, the
Site Sublease, or memoranda thereof) and all fees, taxes
(including transfer and recordation taxes) and other charges
relating to such filings and recordings and other actions
shall have been paid by the Partnership. The Security Agent,
for the benefit of the Owner Trustee and GE Capital,
shall have a first lien on and prior perfected security
interest in all right, title, estate and interest of the
Partnership in and to the Collateral prior and superior to
all other Liens including existing mechanics' and
materialmens' liens, except Permitted Liens. GE Capital
shall have received authenticated copies or other evidence of
all filings, recordings and other actions obtained or made in
order to create and perfect such first lien on and perfected
security interest in the right, title, estate and interest of
the Partnership in and to the Collateral.
(k) Insurance Coverage. GE Capital shall have received
(i) certified copies of all policies evidencing the insurance
required to be maintained pursuant to the provisions of this
Agreement, the Facility Lease, the Deed of Trust and Security
Agreement, the Security Agreement, the Power Purchase
Agreement and the other Project Documents and (ii) evidence
(including certificates of insurers and independent brokers)
of the payment of all premiums due thereon and that such
insurance complies in all material respects with the
requirements of this Agreement, the Facility Lease, the Deed
of Trust and Security Agreement, the Security Agreement, the
Power Purchase Agreement and the other Project Documents.
(l) Governmental Actions and Other Consents and
Approvals. All Governmental Actions and other consents and
approvals referred to in subsection 3.5, including, without
limitation, those listed on Schedule 2, shall have been duly
obtained or made, shall be in full force and effect and shall
be final and no longer subject to appeal, and a copy of each
such Governmental Action, consent and approval shall have
been delivered to GE Capital.
(m) Qualifying Facility. PURPA shall be in full force
and effect on the Lease Closing Date (and, with respect to
the Equity Loan Facility, on the Date of Final Completion)
without modification in any respect materially adverse to GE
Capital; and the Facility, upon acquisition by the Owner
Trustee and operation as contemplated by the Transaction
Documents, shall be a Qualifying Facility.
(n) No Change in Law. No change shall have occurred
after the Initial Loan Funding Date in any Applicable Law or
in the interpretation thereof by any Governmental Authority
charged with the administration or interpretation thereof (i)
which, in the reasonable judgment of GE Capital, would make
GE Capital's or the Owner Trustee's participation in the
transactions contemplated hereby illegal or subject GE
Capital or the Owner Trustee or any of their respective
Affiliates to any material incremental governmental
regulation in connection with such transactions or (ii)
which, in the reasonable judgment of GE Capital, would
require the cancellation, suspension or termination of any of
the Transaction Documents, which cancellation, suspension or
termination, in the reasonable judgment of GE Capital, could
reasonably be expected to have a Material Adverse Effect.
(o) No Material Adverse Change, etc. In the reasonable
judgment of GE Capital, (i) no material adverse change in the
financial condition, business, operations or prospects of the
Partnership or the General Partner or the Project (including
without limitation, no material adverse change in the
Operating Projections) shall have occurred since the Initial
Loan Funding Date, and (ii) no other event
(including, without limitation, a material adverse change in
the financial condition, business or operations of any
Specified Participant) shall have occurred since the Initial
Loan Funding Date which could reasonably be expected to have
a Material Adverse Effect.
(p) Representations and Warranties. The
representations and warranties made by (i) the Partnership
herein or by the Partnership or any other Reporting
Participant in any other Transaction Document to which it is
a party, or which are contained in any certificate, document,
financial or other statement furnished by the Partnership or
any other Reporting Participant hereunder or thereunder or in
connection herewith or therewith and (ii) each Affiliate of the
Partnership, and to the best knowledge of the Partnership, each
other Specified Participant, in any other Transaction Document or
in any other certificate, document, financial or other statement
furnished by such Affiliate or Specified Participant to the
Partnership or GE Capital in connection with the transaction
herein contemplated, shall be true and correct in all
material respects, on and as of the Lease Closing Date (and,
with respect to the Equity Loan Facility, on and as of the
Date of Final Completion) as if made on and as of such date,
except to the extent that such representations and warranties
relate solely to an earlier date.
(q) No Default or Event of Default; Event of Loss;
Event of Regulation. No Default or Event of Default shall be
in existence. No Event of Loss shall have occurred. No
Event of Regulation shall have occurred.
(r) No Force Majeure, Cancellation, Suspension,
Termination, etc. The Project Documents shall be in full
force and effect. No event of force majeure or other event
or condition shall exist which permits or requires any party
to any of the Project Documents to cancel, suspend or
terminate its performance thereunder in accordance with the
terms thereof or which could excuse any such party from
liability for non-performance thereunder, unless (i) the
parties to such Project Document shall have effectively
waived such right or requirement with respect to such
cancellation, suspension, termination or release from
liability or (ii) in the reasonable judgment of GE Capital,
such cancellation, suspension, termination or release from
liability would not have a Material Adverse Effect.
(s) Tax Opinion. GE Capital shall have received an
opinion, dated the Lease Closing Date, from Simpson Thacher &
Bartlett, special tax counsel for GE Capital, as to such tax
matters as GE Capital may reasonably request.
(t) Lien Searches. GE Capital shall have received UCC
and other lien searches relating to the Project and the
Collateral, showing no Liens other than Permitted Liens and
Liens discharged concurrently with the closing of the
transactions contemplated by the Lease Documents.
(u) Appraisal. GE Capital shall have received the
final written appraisal of a firm chosen by GE Capital, which
appraisal shall be in form and substance satisfactory to it.
(v) Project Costs. Project Costs shall not have
exceeded $215,000,000.
(w) Engineer's Report. GE Capital shall have received
an engineer's report from GE Capital's Representative,
satisfactory in form and substance to it, in respect of the
completion of construction and the operation of the Facility.
(x) Reserve Account. Each Reserve Account shall have
been funded in the amount required pursuant to Section 7 of
the Facility Lease.
(y) Working Capital. GE Capital shall have received
evidence satisfactory to it that the Partnership has on hand
sufficient cash necessary to meet the working capital and
debt service needs of the Project during the period from the
Basic Term Commencement Date through the initial Basic Rent
Payment Date.
(z) Transfer and Recordation Taxes. GE Capital shall
have received evidence satisfactory to it that the
Partnership has paid all applicable Maryland sales, transfer,
filing and recordation taxes.
(aa) Payment of Project Costs. All Project Costs shall
have been paid in full, or escrow arrangements which are
satisfactory to GE Capital shall have been made for the
payment thereof.
(bb) Maryland Commission Order. The Partnership shall
have received the Maryland Commission Order in form and
substance satisfactory to GE Capital.
(cc) GE Capital shall have received an updated Fuel
Management Plan, which plan shall be in form and substance
satisfactory to GE Capital and the Power Purchaser.
5.6 Conditions Precedent to the Obligations of the
Partnership. The obligations of the Partnership to sell the
Facility to the Owner Trustee and to lease the Facility from the
Owner Trustee shall be subject to the fulfillment to the
satisfaction of, or waiver by, the Partnership of the following
conditions precedent on or prior to the Lease Closing Date:
(a) Lease Documents. Each of the Lease Documents shall
have been duly authorized, executed and delivered by the
party or parties thereto (other than the Partnership) and
shall be in full force and effect on the Lease Closing Date,
and the Partnership shall have received an executed
counterpart of each such Lease Document.
(b) No Change in Law. No change shall have occurred
after the date hereof in any Applicable Law or regulation or
in the interpretation thereof by an Governmental Authority
charged with the administration or interpretation thereof
which would make the Partnership's participation in the
transactions contemplated hereby illegal.
5.7 Basic Rent Factors; Stipulated Loss Values; Adjustments.
(a) Based on the assumptions stated in Schedule 6,
the Basic Rent Factors and Stipulated Loss Values from the Basic
Term Commencement Date through the end of the Basic Term shall be
as set forth in Schedule 10.
(b) To the extent that (i) any of the assumptions
stated in Schedule 6 or Section 1(b) of the Tax Indemnity
Agreement are incorrect on the Lease Closing Date, (ii) a Change
in Tax Law occurs on or prior to the Lease Closing Date or
(iii) a Change in Accounting Treatment occurs on or prior to the
Lease Closing Date, the Basic Rent Factors and Stipulated Loss
Values set forth in Schedule 10 shall be adjusted as of the Lease
Closing Date so as to preserve GE Capital's Net Economic Return.
(c) In making any adjustment pursuant to this
subsection 5.7, GE Capital, consistent with the provisions of
Section 3(d) of the Facility Lease (including the preservation of
GE Capital's Net Economic Return), shall compute such adjustment
(except in the case of an adjustment resulting from an increase in
Lessor's Cost from that set forth in Schedule 6) in a manner
designed to maintain level Operating Cash Flow Ratios for each
Quarterly Measurement Period during the Basic Term and to minimize
any resulting increase and to maximize any resulting decrease in
the present value of the installments of Basic Rent. GE Capital
shall certify, and, at the Partnership's request and expense, KPMG
Peat Marwick (or such other independent auditors as may be
selected by GE Capital and reasonably satisfactory to the
Partnership) shall verify, that each adjustment made pursuant to
this Section 5.7 was calculated in accordance with the same
methodology as was applicable to the Basic Rent Factors and
Stipulated Loss Values set forth in Schedule 10; provided,
however, that in the event that the amount of the rent adjustment
is changed by the greater of (i) five percent of the rent
adjustment or (ii) one half percent of the rent as adjusted, in
each case in present value terms following such audit, then the
cost of performing such audit shall be borne by GE Capital.
5.8 Leverage Option; Adjustment of Basic Rent. At the
sole option of GE Capital, the Facility Lease may be funded at any
time with non-recourse indebtedness ("Lease Debt") as a leveraged
lease rather than a single investor lease. In such event, the
Partnership shall reasonably cooperate with GE Capital and the
Owner Trustee in effecting any such leveraging, including
negotiating and executing amendments to the Transaction Documents
to provide for terms and conditions customary for leveraged lease
transactions. In the event GE Capital so decides to leverage the
Facility Lease, the installments of Basic Rent shall be
recalculated and reduced in the manner set forth in Schedule 13.
Such adjustment shall be computed by GE Capital on the closing of
the Lease Debt financing consistent with the methodology set forth
in Schedule 13, and GE Capital shall promptly certify, and, at the
Partnership's request and expense, KPMG Peat Marwick or such other
independent financial advisors expert in leasing transactions
selected by GE Capital and reasonably satisfactory to the
Partnership shall verify the same to the Partnership.
5.9 Equity Loan Facility. (a) Subject to the
satisfaction of the conditions precedent set forth in subsections
5.5 (on the Date of Final Completion), 5.9(b) and in Schedule 7
(with respect to each drawing), on the Date of Final Completion,
GE Capital shall make available to the Partnership or, at the
option of GE Capital, to the Partners jointly and severally, a
multiple draw credit facility (the "Equity Loan Facility") on
substantially the terms and conditions set forth in Schedule 7.
(b) The obligation of GE Capital to make available the
Equity Loan Facility shall be subject to the fulfillment to the
satisfaction of, or waiver by, GE Capital of the following
conditions precedent and the conditions precedent set forth in
subsection 5.5 and in Schedule 7 (with respect to each drawing) on
or prior to the Date of Final Completion:
(i) the occurrence of the Date of Final Completion
and the delivery by the Partnership to GE Capital of the
Final Completion Certificate;
(ii) the execution and delivery of a loan
agreement, or an appropriate amendment of this Agreement, in
each case in form and substance satisfactory to GE Capital
and reflecting the terms set forth in Schedule 7;
(iii) the execution and delivery by the Partnership
(or the General Partners, as the case may be) of a note, in
form and substance satisfactory to GE Capital, and in an
amount equal to the Equity Loan Commitment;
(iv) the delivery by the Partnership of updated
Operating Projections which shall be satisfactory in form and
substance to GE Capital and shall show, among other things,
an Operating Cash Flow Ratio (for this purpose, taking into
account (A) required debt service on the Equity Loans,
assuming the drawing in full of all amounts available under
the Equity Loan Facility on the Date of Final Completion and
the amortization thereof in accordance with Schedule VII, (B)
required deposits into the Rent Reserve Account and the
Maintenance Reserve Account and (C) the effect of the
capacity payment clawback under the Power Purchase Agreement
and, if the actual amount thereof has not yet been
determined, assuming the maximum clawback) of at least 1.35
to 1.0 for each Quarterly Measurement Period to occur during
the Basic Term and an average Operating Cash Flow Ratio of
not less than 1.40 to 1.0 for the Basic Term; provided that
to the extent the foregoing restrictions would prevent the
Equity Loan Facility from being made available in the full
amount of the Equity Loan Commitment, the Partnership shall
nevertheless have the right to establish the Equity Loan
Facility in a lesser amount meeting the foregoing
restrictions; and
(v) the execution and delivery of all amendments
to the Loan Documents reasonably required by GE Capital to
reflect the making of the Equity Loans, including any
necessary modifications to the Collateral Security Documents
to secure the payment obligations of the borrower of the
Equity Loans.
5.10 Adjustments of Supplemental Rent. In the event
that the Panda Transfer Event does not occur on or prior to
December 31, 1995, the Facility Lease shall be amended to provide
for the payment of Supplemental Rent to GE Capital on each Basic
Rent Payment Date of an amount equal to twenty-five percent (25%)
of Distributable Cash Flow for the Quarterly Measurement Period
ended one-month prior to such Basic Rent Payment Date and to
provide for the payment to GE Capital of twenty-five percent (25%)
of the amounts on deposit in each Reserve Account upon the
liquidation of any such Account pursuant to Section 7(e) of the
Facility Lease (the "Contingent GE Capital Distributions"). GE
Capital hereby consents to (x) the transfer to Panda by Holdings
of 100% of the capital stock of the General Partner and the
Limited Partner under the circumstances described in clause (b) of
the definition of "Panda Transfer Event" and (y) the merger of
Holdings into Panda, so long as the surviving corporation of such
merger is obligated to perform all of the respective obligations
of each of Panda and Holdings under the Transaction Documents and
all necessary actions as may be reasonably requested by GE Capital
are taken to preserve the Liens on the Collateral in favor of the
Security Agent (including the execution of a new stock pledge
agreement by Panda).
Section 6. AFFIRMATIVE COVENANTS
So long as the Commitment remains in effect or any Note
remains outstanding and unpaid, any Letter of Credit remains
outstanding, any obligations are owing to the Owner Trustee under
the Facility Lease or any other amount is owing to GE Capital or
the Owner Trustee hereunder or under the Collateral Security
Documents, each of the Partnership and the General Partner hereby
agrees, for the benefit of the Owner Trustee and GE Capital, that:
6.1 Completion of Facility; Monthly Reports. The
Partnership shall cause the Project to be constructed and
completed in substantial compliance with all applicable national,
state and local engineering, construction, safety and electrical
generation codes and standards, the terms of the Construction
Contract (and any other EPC Contract) and in accordance with the
provisions of the Power Purchase Agreement, and shall cause
Substantial Completion of the Facility to occur on or before the
Construction Loan Maturity Date, and shall cause Final Completion
to occur no later than six months after the Commercial Operation
Date. The Partnership shall provide GE Capital's Representative
and GE Capital with a monthly Construction Progress Report, a copy
of each report furnished by each EPC Contractor to the Partnership
pursuant to each EPC Contract, and shall respond, and shall cause
the Contractor to respond, to GE Capital's Representative's
inquiries regarding each EPC Contractor's performance of its work
under each EPC Contract. The Partnership shall provide to GE
Capital and GE Capital's Representative, promptly upon delivery of
the same to the Power Purchaser, a copy of the monthly progress
report required to be delivered to the Power Purchaser pursuant to
Section 7.1(b) of the Power Purchase Agreement.
6.2 Conduct of Business, Maintenance of Existence, etc.
The Partnership shall at all times (i) engage solely in the
business of developing, constructing, financing and owning (until
the Lease Closing Date), and leasing and operating the Project,
and activities incident thereto, (ii) preserve and maintain in
full force and effect its existence as a limited partnership under
the laws of the State of Delaware, its qualification to do
business in the States of Delaware and Maryland and in each other
jurisdiction in which the conduct of its business requires such
qualification and all of its rights, privileges and franchises
necessary for the construction, ownership (and, after the Lease
Closing Date, leasing) and operation of the Project, (iii) obtain
and maintain in full force and effect all Governmental Actions and
other consents and approvals required at any time in connection
with the construction, ownership or operation of the Project, and
(iv) maintain the Facility as a Qualifying Facility. Each of the
Partnership and the General Partner agrees that the General
Partner will (i) engage solely in the business of being the sole
general partner of the Partnership, and (ii) preserve and maintain
its existence as a validly existing corporation and in good
standing under the laws of the State of Delaware and its
qualification to do business in the States of Delaware and
Maryland and in each other jurisdiction in which the conduct of
its business requires such qualification.
6.3 Payment of Obligations. The Partnership will pay,
discharge or otherwise satisfy at or before maturity or before
they become delinquent, as the case may be, all of its obligations
under the Transaction Documents and all of its Indebtedness and
other obligations of whatever nature, except in the case of such
other obligations, those obligations which are subject to a
Contest.
6.4 Performance Under Other Agreements. The
Partnership shall duly perform and observe all of the covenants,
agreements and conditions on its part to be performed and observed
hereunder and under the Note, under the Facility Lease (from and
after the Lease Closing Date) and the Collateral Security
Documents, and shall duly perform and observe in all material
respects all of the covenants, agreements and conditions on its
part to be performed and observed under the Project Documents and
the Easement Agreements to which it is a party. The Partnership
shall diligently enforce all of its rights under each Assigned
Contract.
6.5 General Partner. The General Partner shall remain
at all times the sole general partner of the Partnership.
6.6 Insurance Coverage. Without limiting any of the
other obligations or liabilities of the Partnership under this
Agreement, the Partnership shall at all times carry and maintain
or cause to be carried and maintained at its own expense such
insurance as is customarily maintained by constructors, owners,
operators, and lessees of electric generating facilities and in
all events shall carry and maintain at least the minimum insurance
coverage set forth in this subsection relating to the operation or
construction of the Facility. The Partnership shall also carry
and maintain any other insurance that GE Capital may reasonably
require from time to time. All insurance carried pursuant to this
subsection shall be with such insurers, in such amounts and in
such form and with deductibles as shall be reasonably satisfactory
to GE Capital.
(a) During the period from and including the Initial
Loan Funding Date to and including the Commercial Operation Date,
the Partnership shall maintain or cause to be maintained all risk
builder's risk insurance, covering physical loss or damage to the
Facility and transmission lines (related to the interconnection
facilities) including, but not limited to, fire and extended
coverage, collapse, liquid damage, earthquake, flood and
comprehensive boiler and machinery (including electrical
malfunction and mechanical breakdown). Such insurance shall cover
all property during construction and testing as well as any and
all materials, equipment and machinery intended for the Facility
during offsite storage and inland transit and, if any, ocean and
air transit. The ocean/air transit policy shall be on a
"warehouse to warehouse" basis. The all risk builder's risk
coverage shall not contain an exclusion for testing or an
exclusion for resultant damage caused by faulty workmanship,
design or materials. Coverage shall be written on a replacement
cost basis and in an amount acceptable to GE Capital, but in no
event less than the replacement cost of the Facility, except for
(i) offsite storage and transit where sublimits equal to the
maximum storage value or transit value shall be acceptable and
(ii) loss due to floods or earth movement, where sublimits of $75
million shall be acceptable. Such policy shall contain a valid
agreed amount endorsement waiving any coinsurance penalty. The
policy may be subject to deductibles not to exceed $100,000 per
occurrence.
(b) During the period from and including the Initial
Loan Funding Date to and including the Commercial Operation Date,
the Partnership shall maintain or cause to be maintained cost of
delayed opening insurance in an amount equal to one year projected
continuing expense, debt service and profit of the Partnership.
Any such extension or policy shall include coverage for delays
resulting from (i) damage to the Facility, (ii) damage to
equipment while in transit, including any marine or air transit
and (iii) damage to any equipment while at manufacturers'
locations or in storage away from the Site. Any such extension or
policy shall also include coverage for expediting expenses with a
sublimit of not less than $1,000,000. Any such extension or
policy shall have a deductible not to exceed 30 days' delay except
for expediting expense which deductible shall not exceed $100,000.
Contingent cost for delayed opening shall be written on critical
path items while at the manufacturer's site and on the Distilled
Water Facility.
(c) From and after the Commercial Operation Date, the
Partnership shall maintain or cause to be maintained all-risk
property and boiler and machinery insurance, covering physical
loss or damage to the Facility and the transmission lines related
to the interconnection facilities, including, but not limited to,
fire and extended coverage, collapse, liquid damage, earthquake,
flood and comprehensive boiler and machinery (including electrical
malfunction and mechanical breakdown). Such insurance shall cover
each and every component of the Facility and the interconnection
facilities. The all-risk property and boilers and machinery
coverage shall not contain an exclusion for resultant damage
caused by faulty workmanship, design or materials. Coverage shall
be written on a replacement cost basis and in an amount acceptable
to GE Capital, but in no event less than the replacement cost of
the Project; sublimits of not less than $75,000,000 are acceptable
for loss or damage due to flood or earthquake. Such policy shall
contain a valid agreed amount endorsement waiving any coinsurance
penalty. The policy may be subject to deductibles not to exceed
$100,000 per occurrence (or $250,000 in the case of gas
turbine/generator packages). At the time when and to the extent
that, the sum of (i) the face amount of outstanding Letters of
Credit, (ii) the principal of and interest on the Equity Loans and
(iii) the Stipulated Loss Value exceeds the limits of coverage
under the property and boiler and machinery policy specified in
this subsection 6.6(c), the Partnership shall include as a part of
this policy or procure a special policy known as a "Lender's
Single Interest Excess of Loss Coverage" or "Stipulated Loss
Coverage" covering all the perils provided by the property and
boiler and machinery policy. Such policy shall provide limits
equal to the difference between (A) the sum of the amounts
specified in clauses (i), (ii) and (iii) of the immediately
preceding sentence and (B) the property and boiler and machinery
limits, or equal to such other amount as may be mutually agreed
between the Partnership and GE Capital. The insureds and loss
payees under this "Lender's Single Interest Excess of Loss
Coverage" or "Stipulated Loss Coverage" policy shall be GE
Capital, the Owner Trustee and the Security Agent.
(d) As an extension of the policy referred to in
subsection 6.6(c) or as a separate policy, the Partnership shall
maintain or cause to be maintained business interruption insurance
in an amount equal to 12 months projected net operating profits of
the Partnership and contingent business interruption insurance in
an amount equal to 12 months projected net operating profits of
the Partnership. This extension or separate policy shall include
coverage for (i) business interruption arising from loss or damage
to the Project, including a service interruption endorsement with
a limit of $5,000,000 and a deductible period of not more than 72
hours and (ii) contingent business interruption arising from
damage to the property and equipment of customers and suppliers of
the Project, which is not covered by the insurance specified in
subsection 6.6(c). Such customers and suppliers shall include but
not be limited to the purchasers of steam and electricity and the
suppliers of natural gas. This extension or separate policy shall
also include coverage for expediting expenses and extra expense
with a sublimit of $1,000,000. This extension or separate policy
shall have a deductible not to exceed 30 days' business interruption,
except for expediting expenses and extra expense, which deductible shall
not exceed $100,000.
(e) The Partnership shall maintain or cause to be
maintained comprehensive (or commercial) general liability
insurance written on an occurrence basis and with a combined
single limit of not less than $1,000,000. Such coverage shall
include premises/operations, explosion, collapse and underground
hazards, broad form contractual, independent contractors,
products/completed operations, broad form property damage and
personal injury. Such policy shall be written on a project
specific basis and shall apply solely to the construction, use,
operation and maintenance of the Facility. It shall also contain
a drop down provision in the event of exhaustion of underlying
limits or aggregates and apply on a following form basis.
(f) The Partnership shall maintain or cause to be
maintained (i) Workers' Compensation insurance with statutory
limits and (ii) employers liability insurance coverage with limits
of not less than $1,000,000 including occupational disease
coverage.
(g) The Partnership shall maintain or cause to be
maintained comprehensive (or business) automobile liability
insurance for owned (if any), nonowned, hired and borrowed
vehicles with combined single limits of not less than $1,000,000.
(h) The Partnership shall maintain or cause to be
maintained excess (or umbrella) liability insurance written on an
occurrence basis and providing coverage limits in excess of the
insurance required to be maintained pursuant to subsections
6.6(e), (f)(ii) and (g). The limits of such insurance and such
excess insurance (or umbrella) coverage, when combined, shall be
not less than $25,000,000 on a project-specific basis or shall be
not less than $50,000,000 over all with not less than $10,000,000
on a project-specific basis. Such policy shall be written on a
project-specific basis naming the Partnership as the insured and
GE Capital, the Owner Trustee and the Security Agent as additional
named insureds and shall apply solely to the construction, use,
operation and maintenance of the Facility.
(i) The Partnership shall maintain such insurance as
the Partnership is required to maintain pursuant to the provisions
of any Project Document.
(j) The Partnership shall cause (i) the Contractor to
obtain and maintain in full force and effect such insurance as the
Contractor is required to maintain pursuant to Sections 3.08 and
4.16 of the Construction Contract and (ii) the Operator to
obtain and maintain such insurance as the Operator is required to
maintain pursuant to Section 9.01 of the Operation and Maintenance
Agreement.
(k) The insurance carried in accordance with this
subsection 6.6 shall be endorsed as follows:
(i) the Partnership shall be the named insured and
GE Capital and the Owner Trustee and the Security Agent shall
be additional named insureds with respect to the insurance
required to be maintained pursuant to subsections 6.6(a),
(b), (c) and (d). The Partnership shall be the named insured
and GE Capital and the Owner Trustee and the Security Agent
shall be additional insureds with respect to the insurance
required to be maintained pursuant to subsections 6.6(e),
(f)(ii), (g) and (h). The Partnership and GE Capital and the
Owner Trustee and the Security Agent shall be additional insureds
with respect to insurance maintained pursuant to subsection 6.6(j)
(in respect of any liability policy);
(ii) the interest of the Security Agent as security
agent, of GE Capital as lender and of the Owner Trustee as
lessor shall not be invalidated by any action or inaction of
the Partnership or any other Person and of any breach or
violation by the Partnership or any other Person of any
warranties, declarations or conditions in such policies;
(iii) the insurer thereunder shall waive all rights
of subrogation against GE Capital and the Owner Trustee and
the Security Agent, any right of setoff or counterclaim and
any other right to deduction, whether by attachment or
otherwise;
(iv) such insurance shall be primary without right
of contribution of any other insurance carried by or on
behalf of GE Capital and the Owner Trustee and the Security
Agent with respect to their respective interests as such in
the Facility;
(v) if such insurance is canceled for any reason
whatsoever, including nonpayment of premium, or any
substantial change is made in the coverage which affects the
interest of GE Capital or the Owner Trustee or the Security
Agent, such cancellation or change shall not be effective as
to GE Capital or the Owner Trustee or the Security Agent, for
60 days, except for nonpayment of premium which shall be 10
days, after receipt by GE Capital and the Owner Trustee and
the Security Agent of written notice sent by registered mail
from such insurer of such cancellation or change;
(vi) any insurance carried in accordance with
subsections 6.6(e), (f)(ii), (g), (h) and (j) (in respect of
any liability policy) shall be endorsed to provide that,
inasmuch as the policy is written to cover more than one
insured, all terms, conditions, insuring agreements and
endorsements, with the exception of limits of liability,
shall operate in the same manner as if there were a separate
policy covering each insured; and
(vii) any insurance carried in accordance with
subsections 6.6(a), (b), (c) and (d) shall include a standard
lender's loss payable endorsement in favor of
GE Capital and the Owner Trustee and the Security Agent and
shall name GE Capital and the Owner Trustee and the Security
Agent as the sole loss payees. Deductibles or self insured
retentions shall be subject to approval by GE Capital.
(l) The Partnership shall deliver to GE Capital and the
Owner Trustee and the Security Agent on or prior to the expiration
date of each insurance policy required to be maintained by it
pursuant to this subsection 6.6, a certificate executed by the
insurer or its duly authorized agent evidencing the continuance of
such insurance policy (or, upon request, a certified copy of such
insurance policy).
(m) All payments received by GE Capital, the Owner
Trustee, the Security Agent or the Partnership from any insurer
with respect to loss or damage to the Facility or other Collateral
shall promptly be deposited in the Insurance and Condemnation
Proceeds Account for application in accordance with
the provisions of Section 4.11 of the Security Deposit Agreement.
(n) No provision of this subsection 6.6 or any
provision of any other Transaction Document shall impose on
GE Capital or the Owner Trustee or the Security Agent any duty or
obligation to verify the existence or adequacy of the insurance
coverage maintained by the Partnership, nor shall GE Capital or
the Owner Trustee or the Security Agent be responsible for any
representations or warranties made by or on behalf of the
Partnership to any insurance company or underwriter.
(o) Concurrently with the furnishing of all
certificates referred to in paragraph (l), the Partnership shall
furnish GE Capital and the Owner Trustee and the Security Agent
with an opinion of an independent insurance broker stating that
all premiums then due have been paid and that, in the opinion of
such broker, the insurance then carried and maintained is in
accordance with subsection 6.6. Furthermore, the Partnership
shall cause each insurer or such broker to advise GE Capital and
the Owner Trustee and the Security Agent promptly in writing of
any default in the payment of any premiums or any other act or
omission on the part of the Partnership or the Contractor which
might invalidate or render unenforceable, in whole or part, any
insurance provided hereunder. GE Capital or the Owner Trustee or
the Security Agent may, at its sole option, obtain such insurance
if not provided by the Partnership and in such event the
Partnership shall reimburse GE Capital or the Owner Trustee or the
Security Agent upon presentation of a certificate of insurance
setting forth the cost thereof.
6.7 Inspection of Property; Books and Records;
GE Capital's Representative; Discussions. (a) The Partnership
shall keep proper books of records and accounts in which full,
true and correct entries shall be made of all of its transactions
in accordance with sound accounting practice. The Partnership
agrees that a representative of GE Capital ("GE Capital's
Representative") (at the expense of the Partnership, based on
invoices for the reasonable actual costs thereof) may visit the
Facility and the other properties of the Partnership (or, if
requested by GE Capital, may be located on the Site) at any and
all times during normal business hours and, if such representative
is not located on the Site, upon reasonable prior notice, during
the period from the Initial Loan Funding Date until Final
Completion. GE Capital and GE Capital's Representative will be
given access to (a) all Plans and Specifications (including,
without limitation, data relating to design changes in the
Facility), (b) quality control data, (c) invoices relating to
construction progress and to services to be performed and materials
to be supplied on a cost reimbursement basis, and invoices relied on
by the Contractor in verifying construction progress, (d) contracts
relating to the engineering of, the procurement of services, equipment,
supplies or other materials for, or the construction of, the Facility
and (e) all other data relating to the Project Schedule and construction
progress as may be reasonably requested by GE Capital's
Representative. The Partnership shall permit representatives of
GE Capital and GE Capital's Representative to examine its books of
records and accounts and to discuss its affairs, finances and
accounts with its principal officers, engineers and independent
accountants, all at such reasonable times during business hours
and at such reasonable intervals as GE Capital or GE Capital's
Representative may request. GE Capital's Representative shall
also have the right to monitor, witness and appraise the Work,
review and audit the records specified in clauses (a) through (e)
above and verify the costs submitted in any Notice of Borrowing or
Cost Certificate which relate to the costs specified in
clauses (a) through (e) above. The Partnership shall at all times
cause an accurate and complete set of the Plans and Specifications
to be maintained at the Facility. At least once each calendar
month, the Partnership shall notify GE Capital's Representative of
any change made to the Plans and Specifications since the last
such notice and shall meet with GE Capital's Representative (and
GE Capital, should GE Capital so request) to discuss such changes.
Without GE Capital's prior written consent, no such amendment or
modification of the Plans and Specifications shall be made, nor
shall any change, change order or change bulletin or other change
to the Construction Contract be made which would, in any such
case, (a) result in costs (or an increase in price) in excess of
$50,000 individually, or $250,000 in the aggregate, (b) impair or
reduce the operating capacity, output, cost efficiency, utility,
reliability, value, useful life or cost of the Facility, (c)
extend the Project Schedule or (d) violate any law or present an
additional risk in maintaining the effectiveness of any applicable
permit or other Governmental Action. Notwithstanding the
foregoing, the Partnership shall not enter into any agreement to
modify or change the Plans and Specifications as the result of or
in conjunction with any final settlement of any EPC Contract
without the prior written consent of GE Capital. The Partnership
will make such changes to the Plans and Specifications as GE
Capital may, on or prior to the completion of the engineering work
under the Construction Contract, reasonably suggest; provided that
such changes are consistent with the provisions of the Power
Purchase Agreement.
(b) Anything to the contrary herein or in any other
Project Document notwithstanding, no act or omission of
GE Capital or GE Capital's Representative shall in any way affect
the obligations of the Partnership, the Contractor, any other EPC
Contractor or any other Person under any contract relating to the
Construction Contract, any other EPC Contract, or the Work, be
deemed to be the acceptance of any defective work performed by the
Contractor, any other such EPC Contractor or any other Person
under the Construction Contract or any other such EPC Contract or
be deemed to be a waiver of any rights against the Contractor,
such other EPC Contractor or any other Person under the
Construction Contract or any such EPC Contract or otherwise.
(c) The Partnership shall provide at least five
Business Days' advance notice to GE Capital and GE Capital's
Representative of any planned Site or other meetings between the
Partnership and any EPC Contractor.
6.8 Compliance With Laws. The Partnership shall comply
with all Applicable Laws including, without limitation, all
applicable Environmental Laws, and shall from time to time obtain
and comply with all applicable Governmental Actions as shall now
or hereafter be necessary under all Applicable Laws, in connection
with the construction, ownership (and, after the Lease Closing
Date, leasing), operation or maintenance of the Project, except if
such non-compliance would not have a Material Adverse Effect.
6.9 Financial Statements. The Partnership shall
furnish or cause to be furnished to GE Capital:
(a) as soon as available, but in any event within 120
days after the end of each fiscal year of each of the
Partnership, the General Partner, Holdings and Panda, a copy
of the unaudited balance sheet of the Partnership, Holdings
and the General Partner and the audited balance sheet of
Panda as of the end of such fiscal year and the related
statements of income, retained earnings (or partners'
capital) and changes in cash flows of the Partnership, the
General Partner, Holdings and Panda (and audited in the case
of Panda), for such fiscal year, setting forth in each case
in comparative form the figures for the previous fiscal year
(provided, that during the Lease Term, all of the financial
statements required to be furnished pursuant to this
subsection 6.9(a) shall be audited) and each of the audited
financial statements delivered pursuant to this subsection
6.9(a) shall be certified without qualification or exception
as to the scope of its audit by Price Waterhouse or other
independent public accountants of national standing
reasonably acceptable to GE Capital;
(b) as soon as available, but in any event within
60 days after the end of each quarterly period of each fiscal
year of each of the Partnership, the General Partner,
Holdings and Panda (other than the last quarterly period of
each such fiscal year), the unaudited balance sheet of each
of the Partnership, the General Partner, Holdings and Panda
as of the end of such quarterly period and the related
unaudited statements of income and retained earnings (or
partners' capital) and changes in cash flows of the
Partnership, the General Partner, Holdings and Panda for such
quarterly period and for the portion of the fiscal year then
ended, setting forth in each case in comparative form the
figures for the previous period, certified by the chief
accounting officer or chief financial officer of the
Partnership, the General Partner, Holdings and Panda (subject
to normal year-end audit adjustments); and
(c) to the extent and within 30 days after becoming
publicly available, a copy of the audited, yearly balance
sheet and unaudited quarterly balance sheet of each Specified
Participant other than the Partnership and its Affiliates, in
such form as the same have been made publicly available;
(d) as soon as practicable, but in any event within 30
days after the end of each calendar month, an operating
report of the Partnership as at the end of such period and
for the period of such fiscal year then ended, containing
such information as shall be agreed to by GE Capital and the
Partnership and setting forth in comparative form the
corresponding figures for the corresponding periods in the
preceding fiscal year (and in the then current Operating
Budget), certified by the chief accounting officer or chief
financial officer of the Partnership and the General Partner;
(e) as soon as available, but in any event 60 days
prior to the end of each fiscal year of the Partnership
during the Lease Term, an annual operating budget (the
"Operating Budget") for the Project, satisfactory in form and
substance to GE Capital, setting forth projected operating
expenses and cash flow for the Project for the upcoming
fiscal year; all such financial statements (other than those required to be
furnished pursuant to subsection (c) hereof) to be complete and
correct in all material respects and to be prepared in reasonable
detail and in accordance with GAAP applied consistently throughout
the periods reflected therein (except for changes approved or
required by the independent public accountants certifying such
statements and disclosed therein).
6.10 Certificates; Other Information. The Partnership
shall furnish or cause to be furnished to GE Capital and, on and
after the Lease Closing Date, the Owner Trustee:
(a) concurrently with the delivery of the financial statements of
the Partnership referred to in subsection 6.9(a), a certificate of the
independent public accountants which certified such financial statements
(which certificate may be limited to accounting matters and may disclaim
responsibility for legal interpretations) stating that in making the
examination necessary for the audit thereof no knowledge was obtained of
any Default, Event of Default, Lease Default or Lease Event of Default,
except as specified in such certificate;
(b) concurrently with the delivery of the financial statements of
the Partnership referred to in subsections 6.9(a) and 6.9(b), a certificate
of an Authorized Officer of the General Partner stating that, to the best
of such officer's knowledge after due inquiry, each of the Partnership and
the General Partner, during the period covered by such financial statements
has observed and performed all of its covenants and other agreements
hereunder, and satisfied every condition, contained in this Agreement and
the other Transaction Documents to be observed, performed or satisfied by it,
and that such Authorized Officer has obtained no knowledge of any Lease
Default, Lease Event of Default, Default or Event of Default hereunder at
any time during such period or on the date of such certificate and no
knowledge of any default or event which with the giving of notice or the
lapse of time or both would constitute a default under any of the other
Transaction Documents at any time during such period or on the date of
such certificate (or, if any such Lease Default, Lease Event of Default,
Default or Event of Default or default or event shall have occurred, a
statement setting forth the nature thereof and the steps being taken by
the Partnership to remedy the same);
(c) promptly after the same are sent, copies of all financial
statements and reports which the Partnership sends to its Partners;
(d) promptly after the filing thereof, the "Annual
Returns" (Form 5500 series) and attachments filed annually
with the Internal Revenue Service with respect to each Single
Employer Plan, if any, of the Partnership;
(e) with respect to any Single Employer Plan adopted or
amended by the Partnership or the General Partner or any
Commonly Controlled Entity on or after the first Borrowing
Date, any determination letters received from the Internal
Revenue Service with respect to the qualification of such
Plan, as initially adopted or amended under Section 401(a) of
the Code;
(f) promptly after delivery or receipt thereof, a copy
of each material notice, demand or other communication
delivered by or received by the Partnership pursuant to any
Project Document;
(g) copies of each Governmental Action or other consent
or approval obtained or made by the Partnership or the
General Partner, or obtained or made by any EPC Contractor
and delivered to the Partnership pursuant to each EPC
Contract;
(h) fifteen days prior to each Basic Rent Payment Date,
a certificate of an Authorized Officer of the General
Partner, in form and substance satisfactory to GE Capital,
stating the Available Cash Flow, the Distributable Cash Flow,
Cash Available for Distributions and the Operating Cash Flow
Ratio for the 3-month period ending on the date 30 days prior
to such Basic Rent Payment Date (each such quarterly period,
a "Quarterly Measurement Period") and setting forth
reasonably sufficient information to permit GE Capital to
confirm the accuracy of such amounts;
(i) promptly after any material interruption in the
supply of natural gas to the Facility (other than any (A)
normal interruptions caused by a Gas Transporter with respect
to that portion of the natural gas supply for which firm
transportation capacity has not been arranged or (B)
occasional interruptions caused by a supplier providing for
the delivery of natural gas on an interruptible basis), a
notice describing the circumstances of such interruption;
provided that such notice shall be delivered with respect to
any interruption (whether or not excused or whether or not
material) that results in the Partnership using fuel oil to
operate the Facility or that could give rise to a "Fuel
Default" (as defined in the Consent of the Power Purchaser);
(j) fifteen days prior to each Basic Rent Payment Date,
a report for the 3-month period ending on the date 30 days
prior to such Basic Rent Payment Date setting forth the
amount of distilled water produced by the Steam Host during
such period and the amount of distilled water sold by the
Steam Host during such period;
(k) promptly, notice of any failure by the Partnership
to deliver Net Electrical Output (as defined in the Power
Purchase Agreement) in satisfaction of the dispatch
requirements of the Power Purchaser under the Power Purchase
Agreement and a report describing the circumstances of such
failure; and
(l) promptly, such additional financial and other
information with respect to the Partnership, the General
Partner or the Project as GE Capital may from time to time
reasonably request.
6.11 Taxes. The Partnership shall pay and discharge
all taxes, assessments and governmental charges or levies imposed
on it or on its income or profits or on any of its property,
including, without limitation, any property that it leases prior
to the date on which penalties attach thereto, and all lawful
claims which, if unpaid, might become a Lien upon the property of
the Partnership, except to the extent the payment of any such tax,
assessment, charge or levy is subject to a Contest. The
Partnership will promptly pay or cause to be paid any valid, final
judgment enforcing any such tax, assessment, charge, levy or claim
and cause the same to be satisfied of record.
6.12 Maintenance of Property. (a) The Partnership, at
its expense, shall keep the Facility in good working order and
condition and make all repairs, replacements and renewals with
respect thereto and additions and betterments thereto which are
necessary for the Facility to operate in strict compliance with
the terms of the Power Purchase Agreement and in material
compliance with all Applicable Laws affecting the Project.
(b) If, after any loss, destruction or damage with
respect to the Project referred to in the definition of "Event of
Loss", the conditions specified in clause (i) of Section 9(c) of
the Facility Lease are satisfied, the Partnership at all times
thereafter will proceed diligently with all work necessary to
correct such loss, destruction or damage to the extent of the
insurance proceeds or other funds received by it.
6.13 Notices. The Partnership will, promptly upon
obtaining knowledge of any of the following, give notice to
GE Capital and, on and after the Lease Closing Date, the Owner
Trustee:
(a) of the occurrence of any Default, Event of Default, Lease
Default or Lease Event of Default;
(b) of any default or event of default under any Assigned Contract;
(c) of any litigation, investigation or proceeding which may exist
or, to the best knowledge of the Partnership or the General Partner, which
may be threatened) at any time between the Partnership and any Governmental
Authority;
(d) of any litigation or proceeding against the Partnership or
affecting the Project of which the Partnership is aware in which the amount
involved is $50,000 or more or in which injunctive or similar relief is
sought;
(e) of the following events, as soon as possible and in
any event within 30 days after the Partnership knows or has
reason to know thereof: (i) the occurrence or expected
occurrence of any Reportable Event with respect to any Plan,
or (ii) the institution of proceedings or the taking or
expected taking of any other action by PBGC or the
Partnership to terminate, withdraw or partially withdraw from
any Plan, or (iii) the reorganization or insolvency of any
Multiemployer Plan, and, in addition to such notice, deliver
to GE Capital and, on and after the Lease Closing Date, the
Owner Trustee whichever of the following may be applicable:
(A) a certificate of the chief financial officer of the
Partnership setting forth details as to such Reportable Event
and the action that the Partnership proposes to take with
respect thereto, together with a copy of any notice of such
Reportable Event that may be required to be filed with PBGC,
or (B) any notice delivered by PBGC evidencing its intent to
institute such proceedings or any notice to PBGC that such
Plan is to be terminated, or (C) any notice of the
reorganization or insolvency of a Multiemployer Plan received
by the Partnership;
(f) of any change, event or condition (including any
actual or prospective change of law, rule or regulation)
which has or could have a Material Adverse Effect;
(g) of any loss or damage to the Facility or the other
Collateral in excess of $50,000;
(h) of any delays for any reason in construction of the
Facility which could reasonably be expected to affect the
Project Schedule;
(i) of any event or condition which would change any
matter represented to in subsection 3.27;
(j) of the proposed execution and delivery of any
Additional Project Document;
(k) of any material event constituting force majeure
under any of the Project Documents or any claim by any party
to any Project Document alleging that a force majeure event
thereunder has occurred;
(l) of any litigation, investigation or proceeding
affecting any Affiliate of the Partnership or, to the best
knowledge of the Partnership or the General Partner, any
Specified Participant which, if adversely determined, would
have a Material Adverse Effect;
(m) of any material violation of any applicable
Environmental Law, or any event or condition that could be
reasonably expected to result in a material liability under
any applicable Environmental Law or any litigation or
proceeding relating to environmental matters concerning the
Partnership or the Project and affecting the Partnership or
any other Person on or in connection with the assets of the
Partnership or any part thereof (including, but not limited
to, receipt by Partnership of any notice of any Environmental
Proceeding or any Reportable Spill);
(n) of any assertion by any Governmental Authority or
other Person that the Work does not comply with any
Applicable Law;
(o) of the institution of any Adverse Proceeding;
(p) of any material delays for any reason in the
delivery of materials or equipment to be supplied under any
EPC Contract;
(q) of any Stop-Work Order;
(r) of any cessation or suspension in the Work for any
reason by any EPC Contractor;
(s) of any Change Order or requested or required
change in the Plans and Specifications;
(t) of the cancellation or expiration (without renewal
or replacement) of any insurance required to be maintained
under this Agreement or any other Transaction Document;
(u) of the initiation of any condemnation proceedings
against any of the Collateral;
(v) of any Lien or claim against any Collateral other
than Permitted Liens;
(w) at least 30 days prior to the Lease Closing Date,
preliminary notice of such anticipated Lease Closing Date,
together with notice of any of the conditions precedent set
forth in subsection 5.5 which the Partnership will be unable
to satisfy as of the Lease Closing Date;
(x) of any order, notice or declaration by a
Governmental Authority that could result in the Facility
ceasing to be a Qualifying Facility; and
(y) of any order, notice or declaration by any
Governmental Authority that could result in GE Capital, the
Owner Trustee or any of their respective Affiliates becoming
a Public Utility.
Each notice pursuant to this subsection shall be accompanied by a
statement of an Authorized Officer of the General Partner setting
forth details of the occurrence referred to therein and stating
what action the Partnership proposes to take with respect thereto
and, with respect to a notice given pursuant to clause (j), shall
be accompanied by a copy of the Additional Project Document. For
all purposes of clause (e) of this subsection, the Partnership
shall be deemed to have all knowledge or knowledge of all facts
attributable to the administrator of such Plan.
6.14 Assignments of Additional Project Documents;
Maintenance of Liens of the Collateral Security Documents; Future
Mortgages. The Partnership will:
(a) after the execution and delivery of any Additional
Project Document and promptly upon the request of
GE Capital, execute and deliver to the Security Agent, for the
benefit of GE Capital and the Owner Trustee, an Assignment
with respect to such Additional Project Document and cause the
other party or parties to such Additional Project Document to
execute and deliver to GE Capital and the Security Agent, for
the benefit of GE Capital and the Owner Trustee, a Consent to
Assignment with respect to such Assignment;
(b) promptly upon the request of GE Capital, and at the
Partnership's expense, execute and deliver, or cause the
execution and delivery of, and thereafter register, file or
record in each appropriate governmental office, any document
or instrument supplemental to or confirmatory of the
Collateral Security Documents or otherwise deemed by
GE Capital to be necessary or desirable for the creation or
perfection of the liens and security interests purported to be
created by the Collateral Security Documents; and
(c) if the Partnership shall at any time acquire any
real property or leasehold or other interests therein not
covered by the Deed of Trust and Security Agreement, promptly
upon such acquisition execute, deliver and record a supplement
to the Deed of Trust and Security Agreement, satisfactory in
form and substance to GE Capital, subjecting such real
property or leasehold or other interests to the loan and
security interest created by the Deed of Trust and Security
Agreement.
6.15 Annual Opinion of Counsel. The Partnership shall
furnish to GE Capital within 90 days after the end of each calendar
year, beginning with the calendar year ending December 31, 1995, an
opinion of counsel addressed to GE Capital (a) stating that such action
has been taken with respect to the filing, recording, re-filing and
re-recording of (i) the Collateral Security Documents and/or financing
statements and continuation statements with respect thereto as is necessary
to protect and preserve the rights and interests of the Partnership (or any
Partner or Holdings, as the case may be) in and to the Collateral
and the liens on and security interests in the rights and interests
of the Partnership (or any Partner or Holdings, as the case may be)
in and to the Collateral created by the Collateral Security
Documents and (ii) the Lease Documents and/or financing statements
and continuation statements with respect thereto as is necessary to
protect and preserve the rights and interests of the Owner Trustee
and GE Capital in and to the Facility, and in the case of clauses
(i) and (ii) above, reciting the details of such action or
referring to prior opinions of counsel in which such details are
given and (b) stating what, if any, action of the foregoing nature
may reasonably be expected to become necessary during the next succeeding
twelve months in order to protect and preserve the rights and interests
of (i) the Partnership (or any Partner or Holdings, as the case may be)
in and to the Collateral and the liens on and security interests in the
Collateral created by the Collateral Security Documents and (ii)
the Owner Trustee and GE Capital in and to the Facility.
6.16 Employee Plans. For each Plan adopted by the
Partnership, the Partnership shall (a) use its best efforts to seek
and receive determination letters from the Internal Revenue Service
to the effect that such Plan is qualified within the meaning of
Section 401(a) of the Code; and (b) from and after the date of
adoption of any Plan, cause such Plan to be qualified within the
meaning of Section 401(a) of the Code and to be administered in all
material respects in accordance with the requirements of ERISA and
Section 401(a) of the Code.
6.17 Management Letters. The Partnership shall promptly
deliver to GE Capital a copy of each report delivered to the
Partnership by its independent public accountants in connection
with any annual or interim audit of its books, including, without
limitation, any letters or reports addressed to the Partnership or
to the General Partner or any of its officers relating to internal
controls, adequacy of records or the like.
6.18 Documentation of Project Costs. No later than the
16th day of each calendar month, the Partnership shall submit to GE
Capital's Representative and GE Capital a proposed Cost Certificate
listing all Project Costs incurred since the date of the last Cost
Certificate, signed by an Authorized Officer of the General Partner
and accompanied by invoices properly documenting all Project Costs
covered by the proposed Cost Certificate. The Partnership shall
include all invoices for Project Costs received since the date of
the last Cost Certificate submitted to GE Capital's Representative
including, in the case of payments to EPC Contractors, a certificate
of an Authorized Officer of such EPC Contractor satisfactory to GE
Capital certifying equipment costs and progress in the construction
of the Facility. Not later than the 22nd day of such calendar month,
and, in any event, at least five Business Days prior to the next
Borrowing Date, the Partnership shall deliver to GE Capital a Cost
Certificate based on the items in the proposed Cost Certificate submitted
to GE Capital's Representative and accompanied by all invoices verified
by GE Capital's Representative.
6.19 Disputes. Any disputes between GE Capital or GE
Capital's Representative and the Partnership as to any Project Cost
shall be reduced to writing and submitted to GE Capital and the
Partnership, with such evidence as each may deem appropriate. If GE
Capital and the Partnership cannot agree on a mutually acceptable
resolution within 30 days, the parties may pursue any remedies
afforded by law. Until the dispute is resolved, this Agreement and
all other Transaction Documents shall remain in full force and
effect without regard to such dispute, but
GE Capital shall not have any obligation to make any Loan in
respect of any amount in dispute. If requested by GE Capital or GE
Capital's Representative, the Partnership shall diligently
prosecute any dispute with third parties.
6.20 Lists and Approval of Contractors, Subcontractors
and Materialmen. (a) Partnership shall furnish to GE Capital and
GE Capital's Representative from time to time as requested by GE
Capital a listing which is accurate in all material respects, of
all EPC Contractors and first tier subcontractors employed in
connection with the construction of the Facility. Each such list
shall show the name, address and telephone number of each EPC
Contractor or first tier subcontractor and a general statement of
the nature of the work to be done and the labor and materials to be
supplied. GE Capital shall have the right (to the extent of
Owner's rights under the Construction Contract) to dismiss any EPC
Contractor (other than the Contractor) or first tier subcontractor
for cause.
(b) Failure by GE Capital to disapprove an EPC
Contractor, subcontractor or materialman shall not constitute a
warranty or representation by GE Capital that any contractor,
subcontractor and materialman not so disapproved is in fact
qualified.
(c) GE Capital shall have the right to make direct
contact (to the extent of Owner's rights under the Construction
Contract) with each EPC Contractor, subcontractor and materialman
to verify the facts disclosed by the list.
(d) The Partnership shall notify GE Capital of any
changes in such lists within five days of the time that the
Partnership learns of the occurrence of such change. All contracts
entered into by the Partnership or its contractors after the
Initial Loan Funding Date hereof relating to the design,
engineering, or construction of the Facility shall require
disclosure to GE Capital of information reasonably sufficient to
make such verification.
6.21 Easements. The Partnership agrees to submit to GE
Capital for GE Capital's approval copies of all prospective
Easement Agreements (other than the easement for the Power
Purchaser's Interconnection Facilities, the form of which has
already been approved), easements, licenses, restrictive covenants
or other similar agreements affecting the Site and the Easements
(including all reciprocal easement agreements with parties
interested in the Site and the Easements or with parties interested
in adjacent property) prior to their execution, together with a
drawing or survey showing the location thereof.
6.22 Use of Project Cash Flow Prior to the Lease Closing
Date. Any other provision of this Agreement or any other Loan
Document to the contrary notwithstanding, prior to the Lease
Closing Date the Partnership shall promptly apply all Project
Revenues to the payment of Project Costs or to such other costs,
amounts or purposes (which may include a working capital reserve)
relating to the Project as GE Capital may specify in writing.
6.23 Further Assurances. The Partnership shall cause to
be promptly and duly taken, executed, acknowledged and delivered
all such further acts, documents and assurances as may be necessary
or as GE Capital from time to time may reasonably request in order
to carry out more effectively the intent and purposes of this
Agreement, the other Loan Documents and the Project Documents, and
the transactions contemplated hereby and thereby. The Partnership
shall cause the financing statements (and continuation statements
with respect thereto) and the documents enumerated and described in
Schedule 3, and all other documents necessary in that connection,
to be recorded or filed at such places and times, and in such
manner, and shall take, or shall cause to be taken, all such other
action as may be necessary or reasonably requested by GE Capital in
order to establish, preserve, protect and perfect the title of the
Owner Trustee and GE Capital to the Project and the interest of the
Owner Trustee and GE Capital in the Site and the Liens of the
Security Agent, for the benefit of GE Capital and the Owner
Trustee, on the Collateral.
6.24 Storage of Materials. The Partnership will cause
all materials owned or controlled by the Partnership and supplied
for, or intended to be utilized in, the construction of the
Project, but not affixed to or incorporated into the Project, to be
suitably stored on the Site (or stored in the proximity of
construction of the Transmission Facilities or the Effluent
Pipeline) after delivery to the vicinity of the Site (or such other
construction site) or at such other location as may be approved by
GE Capital in writing, with adequate safeguards as required by GE
Capital, to prevent loss, theft, damage or commingling with other
materials.
6.25 Hazardous Substances. (a) The Partnership agrees
to manage, handle, store, transport, label and provide information
as reasonably requested by GE Capital about all Hazardous
Substances which may exist at the Site and which are involved in
the Project, and to store, contain, label and provide information
about, and provide for the removal and disposition of all Hazardous
Substances which may exist at the Site and which are involved in
the Project in accordance in all material respects with any
Applicable Law including, but not limited to, any applicable
Environmental Law.
(b) The Partnership shall cause the transportation
and/or disposal of Hazardous Substances (whether with its own
employees or through the services of third-party independent
contractors) to comply in all material respects with any Applicable
Law including, but not limited to, any applicable
Environmental Law. The Partnership shall retain only those third
party independent contractors who are properly licensed by each
applicable Governmental Authority and any other applicable
licensing authority to provide the services they are retained to
perform.
(c) The Partnership shall comply in all material
respects with all Applicable Laws including, but not limited to,
all applicable Environmental Laws in connection with the
generation, management, handling, labeling, containing, treatment,
storage, transportation or disposal of Hazardous Substances,
including without limitation, proper and complete preparation of
any required manifests, maintenance of Material Safety Data Sheets,
preparation of a hazardous materials business plan if required by
any Applicable Law including, but not limited to, any applicable
Environmental Law and maintenance of safe working conditions. The
Partnership shall establish a regular schedule for transfer of all
Hazardous Substances off the Site as soon as practicable after its
generation and, in any event, the Partnership shall not allow any
Hazardous Substance to be maintained at the Site for a period
exceeding that permitted by any Applicable Law including, but not
limited to, any applicable Environmental Law. The Partnership
shall monitor the disposition of all Hazardous Waste by contractors
engaged in connection with the transportation and disposal thereof.
6.26 Development Security Letter of Credit Proceeds.
Subject to the prior issuance and continuing effectiveness of the
Development Security Letter of Credit in form and substance
satisfactory to the Power Purchaser, the Partnership shall, on the
Initial Loan Funding Date, use the proceeds of the cash collateral
released to it by the provider of the letter of credit in respect
of the Development Security (as such term is defined in Section 4.1
of the Power Purchase Agreement), together with the proceeds of the
initial Loan to be made on such date, to pay the Project Costs then
shown to be due and owing in the Borrowing Certificate presented to
GE Capital in connection with the
Initial Loan Funding Date.
6.27 Distilled Water Facility Business Plan. The
Partnership shall comply, and shall cause the Steam Host to
comply, in all material respects with the Distilled Water Facility
Business Plan. The Partnership will itself operate the Distilled
Water Facility if the Steam Lease is terminated.
6.28 Fuel Management Plan. The Partnership shall
comply in all material respects with the Fuel Management Plan.
6.29 Qualifying Facility Recertification. Within 180
days after the Initial Loan Funding Date, the Partnership shall
obtain from the FERC an order recertifying the Facility as a
Qualifying Facility (the "QF Recertification Order"), which order
shall be a result of the Partnership's filing of an application,
after review and comment by GE Capital, to the FERC for such
recertification, pursuant to section 292.207(b) of the PURPA
Regulations, describing the Facility as the Transaction Documents
contemplate it will be constructed, owned and operated prior to
and during the Lease Term, and conforming to the Distilled Water
Facility Business Plan.
6.30 Qualifying Facility Status Certificates. (a)
Within five days after the last day of each calendar month during
the Initial QF Standards Measurement Period, the Partnership shall
furnish or cause to be furnished to GE Capital and the Owner
Trustee a Monthly QF Status Certificate covering the period
beginning on the first day of the Initial QF Standards Measurement
Period and ending on the last day of such calendar month.
(b) No later than 25 days prior to the last day of the
Initial QF Standards Measurement Period, the Partnership shall
furnish or cause to be furnished to GE Capital and the Owner
Trustee an Annual QF Status Certificate covering the period
beginning on the first day of the Initial QF Standards Measurement
Period and ending on the day that is 30 days prior to the last day
of the Initial QF Standards Measurement Period.
(c) Within five days after the last day of each
calendar month of each QF Standards Measurement Period, the
Partnership shall furnish or cause to be furnished to GE Capital
and the Owner Trustee a Monthly QF Status Certificate covering the
period beginning on the first day of such QF Standards Measurement
Period and ending on the last day of such calendar month.
(d) No later than 25 days prior to the last day of each
QF Standards Measurement Period, the Partnership shall furnish or
cause to be furnished to GE Capital and the Owner Trustee an
Annual QF Status Certificate covering the period beginning on the
first day of such QF Standards Measurement Period and ending on
the day that is 30 days prior to the last day of such QF Standards
Measurement Period.
Each Monthly QF Status Certificate and Annual QF Status
Certificate furnished to GE Capital and the Owner Trustee pursuant
to this subsection 6.30 shall contain sufficient data and
calculations necessary to verify the statements made in such
certificate.
6.31 Final Completion. The Partnership shall cause the
Date of Final Completion to occur no later than six months
following the Commercial Operation Date.
6.32 Additional Oil Requirement. If the Power
Purchaser shall deliver a notice of Fuel Default to the
Partnership, the Partnership shall thereafter at all times
maintain as much oil as practicable (but never less than 1,300,000
gallons) in storage at the Facility until the Power Purchaser
agrees, in writing, that such Fuel Default and any related
Fuel/Performance Failure has been cured ("Fuel Default" and
"Fuel/Performance Failure" shall have the meanings given such
terms in the Consent of the Power Purchaser).
6.33 LNG Reserve. If at any time CLNG shall file with
a Governmental Authority for authorization to import and/or ship
LNG, the Partnership will promptly notify GE Capital and take such
action with respect to such filing as GE Capital shall reasonably
request, including, without limitation, opposing such filing
and/or petitioning FERC to establish specifications in CLNG's
tariff for such LNG that are satisfactory to GE Capital (the
"Requested Specifications"). At the time of such filing by CLNG,
there shall be established a reserve account (the "LNG Account")
under the Security Deposit Agreement, and all Cash Available for
Distributions shall be deposited in the LNG Account until the LNG
Account contains such amount as GE Capital's Representative
reasonably advises as being required to acquire and install
monitoring and processing equipment necessary for the Facility to
safely and efficiently burn gas from LNG. At such time as CLNG's
request to import LNG is denied by a final nonappealable order
from the appropriate Governmental Authority or FERC establishes
the Requested Specifications as part of CLNG's tariff, GE Capital
shall instruct the Security Agent to release all funds in the LNG
Account as Cash Available for Distributions. If CLNG obtains
permission to import and/or ship LNG and FERC does not establish
the Requested Specifications as part of CLNG's tariff, the
Partnership shall acquire and install the monitoring and
processing equipment recommended by GE Capital's Representative
and may use funds in the LNG Account to pay for the cost (or a
portion thereof) of such equipment and installation.
6.34 Pipeline Facilities. If at any time GE Capital
shall have reason to believe that any of the Pipeline Facilities
shall not be completed in a timely manner (including, without
limitation, by the Commercial Operation Date) or any Gas
Transportation Contract will otherwise not become, or cease to be,
effective by the Commercial Operation Date, the Partnership shall
promptly take all such actions as may be necessary to arrange
alternative firm gas transportation satisfactory to GE Capital to
the extent GE Capital deems such actions necessary.
6.35 Fuel Oil Arrangements. By October 10 of each
year, the Partnership will have signed contracts satisfactory to
GE Capital (which may be a pre-approved standard form) providing
for the firm supply and transportation of fuel oil for the
Facility for the period commencing on November 1 of such year
through March 30 of the following year (the "Winter Heating
Period"). Such contracts shall contain a provision confirming
that they are assigned to the Security Agent as Collateral. At
all times during the Winter Heating Period the Partnership shall
use its best efforts to maintain the oil storage tank at its
maximum level, but in any event it shall maintain at least
1,300,000 gallons at all times.
Section 7. NEGATIVE COVENANTS
So long as the Commitment remains in effect, any Note
remains outstanding and unpaid, the Letter(s) of Credit remain
outstanding, any obligations are owing to the Owner Trustee under
the Lease Documents or any other amount is owing to GE Capital or
the Owner Trustee hereunder or under the Collateral Security
Documents, each of the General Partner and the Partnership hereby
agrees, for the benefit of GE Capital and the Owner Trustee that:
7.1 Merger, Sale of Assets, Purchases, etc. The
Partnership shall not merge into or consolidate with any other
Person, change its form of organization or its business, or
liquidate or dissolve itself (or suffer any liquidation or
dissolution), or sell, lease, transfer or otherwise dispose of any
assets other than sales of electric power or steam pursuant to the
Power Purchase Agreement or the Steam Sales Agreement, sales of
natural gas permitted by the Fuel Management Plan, the sale of the
Facility to the Owner Trustee pursuant to Section 5 hereof and
sales, transfers and other dispositions of assets permitted by
Section 8(f) of the Facility Lease. The Partnership will not
purchase or acquire any assets other than (x) the purchase of
assets in connection with the completion of the Project, (y) the
purchase of assets in the ordinary course of business reasonably
required in connection with the operation and maintenance of the
Project and (z) Permitted Investments. The Partnership will not
create any Subsidiaries.
7.2 Indebtedness. The Partnership shall not create,
incur, assume or suffer to exist any Indebtedness, except
(i) Indebtedness in respect of the Note and the other
Obligations, and (ii) Indebtedness for ordinary course legal and
consulting fees incurred in connection with the development of
the Project.
7.3 Distributions, etc. The Partnership shall not
make any distributions to the Partners or to any other Person in
respect of any interests of the Partners in the Partnership,
whether in cash or other property, or redeem, purchase or
otherwise acquire any interests of the Partners in the
Partnership, or permit any Partner to withdraw any capital from
the Partnership, except for (a) prior to the Lease Closing Date,
the construction management fee and the monthly management fees
and the Success Fee to the extent the same constitute Project
Costs, and (b) after the Lease Closing Date, after delivery to GE
Capital of the certificate referred to in subsection 6.10(h),
on each Basic Rent Payment Date, the making of cash distributions
to the Partners in accordance with the Partnership Agreement and
the Security Deposit Agreement out of Cash Available for
Distributions for the immediately preceding Quarterly Measurement
Period to the extent there is cash available in the Partnership
Security Account and if (i) all amounts then required to be
deposited in the Rent Reserve Account, the Operation and
Maintenance Reserve Account and the Warranty Maintenance Reserve
Account shall have been deposited therein, (ii) all Supplemental
Rent then due and owing shall have been paid, (iii) all
principal, interest and other amounts due in respect of the
Equity Loans have been paid in full, (iv) the Operating Cash Flow
Ratio for the immediately preceding Quarterly Measurement Period
shall be greater than 1.2 to 1.0 and (v) at the time of such
distribution, and immediately after giving effect thereto, no
Lease Default, Lease Event of Default, Default or Event of
Default shall have occurred and be continuing.
7.4 Liens. The Partnership shall not create or suffer
to exist any Lien on any of its properties or assets securing any
Indebtedness or other obligation of the Partnership or any other
Person, other than Permitted Liens. Notwithstanding the
foregoing, the Partnership shall protect and defend (a) its
interest in, and the Security Agent's Liens on, the Collateral
and (b) after the Lease Closing Date, the right, title and
interest of the Owner Trustee in and to the Facility against any
Lien for the performance of work or the supply of materials filed
against the Collateral or the Facility, as the case may be.
The Partnership will promptly pay or cause to be paid
any valid, final judgment enforcing any item, cause the Lien
relating thereto to be removed and otherwise cause such item to
be satisfied of record. The Partnership hereby indemnifies and
holds GE Capital and the Owner Trustee harmless from and against
any loss, costs, expense or damages which may be suffered by any
of them as the result of the failure of the Partnership to
discharge and satisfy any such Lien.
7.5 Nature of Business. The Partnership shall not
engage in any business other than the development, construction
and operation of the Project (and activities incidental thereto),
and the General Partner shall not engage in any business other
than the business of being the managing general partner of the
Partnership.
7.6 Amendment of Contracts, etc. The Partnership will
not, without the prior written consent of GE Capital (and, to the
extent required by the Power Purchase Agreement, the Power
Purchaser), agree to or permit (a) the cancellation, suspension
or termination of any Project Document or Easement Agreement
(except upon the expiration of the stated term thereof), (b) the
assignment of the rights or obligations of any party to any
Project Document or Easement Agreement except (i) as contemplated
by this Agreement or the Collateral Security Documents or (ii) as
permitted without the consent of the Partnership by the terms of
such Project Document or Easement Agreement, or (c) any
amendment, supplement or modification of, or waiver with respect
to any of the provisions of, the CPCN or any Easement Agreement
or Project Document to which the Partnership or the General
Partner is a party or with respect to which the consent of the
Partnership or the General Partner is required (other than any
amendment or modification to a tariff on file with and approved
by a Governmental Authority which sets forth rates, terms and
conditions of utility service and which is incorporated by
reference into a Project Document); provided, however, that the
Partnership or the General Partner may, upon prior written notice
to GE Capital (but without its consent), amend, supplement, waive
or otherwise modify any agreement to which it is a party (other
than the Construction Contract, any other EPC Contract, the Power
Purchase Agreement, any Gas Contract or any other Assigned
Contract) in any manner which does not alter in any material
respect the rights or obligations of the respective parties
thereto. The Partnership shall not, without the prior written
approval of GE Capital (which approval or disapproval shall not
be unreasonably delayed), exercise any election or option, or
give any approval or material notice or demand with respect to
any obligation of any Participant under any Project Document. The
Partnership shall not, without the prior written consent of GE
Capital, enter into any Change Order, change bulletin or other
change to the Construction Contract except in accordance with
subsection 6.7(a). The Partnership will notify GE Capital of all
proposed change orders and promptly deliver copies thereof to GE
Capital. GE Capital agrees to promptly respond to all such
change order requests.
7.7 Investments. The Partnership shall not make any
investments (whether by purchase of stock, bonds, notes or other
securities, loan, advance or otherwise) other than Permitted
Investments.
7.8 Qualifying Facility. Neither the Partnership nor
the General Partner nor the Limited Partner shall take or omit to
take any action, or permit any Person to take or omit to take any
action, which action or omission could foreseeably result in (i)
GE Capital, the Owner Trustee or any of their respective
Affiliates becoming a Public Utility, (ii) the Project ceasing to
be a Qualifying Facility or (iii) the Partnership, the General
Partner or the Limited Partner becoming (A) subject to regulation
under Part II or III of the Federal Power Act to which such
Person would not otherwise be subject, (B) an "electric utility
company" for purposes of the Holding Company Act, (C) subject to
state law or regulation respecting the rates of electric
utilities or state law or regulation respecting the financial and
organizational regulation of electric utilities (except for state
law or regulation implementing Subpart C of 18 C.F.R. Part 292),
(D) subject to regulation as a "steam heating company" under
Article 78, Public Service Commission Law, of the Annotated Code
of Maryland, or (E) subject under any Law to financial,
organizational or rate regulation (except for state law or
regulation implementing Subpart C of 18 C.F.R. Part 292) related
to electric utilities or steam utilities.
7.9 Leases. The Partnership shall not enter into, or
be or become liable under, any agreement for the lease, hire or
use of any real property or of any personal property, except for
(i) the Facility Lease, the Site Lease, the Site Sublease, the
Steam Lease and the Easements and (ii) other leases of personal
property which are not Capital Leases, the aggregate annual
rental under which shall not exceed $150,000 in any fiscal year
of the Partnership.
7.10 Change of Office. The Partnership shall not
change the location of its chief executive office or principal
place of business or the offices where it keeps its records
concerning the Project and all contracts relating thereto from
that existing on the date of this Agreement and specified in
subsection 3.18, unless the Partnership shall have given
GE Capital at least 30 days' prior written notice thereof and all
action necessary or advisable in GE Capital's opinion to protect
and perfect the Liens and security interests with respect to the
right, title, estate and interest of the Partnership in and to
the Collateral created by the Collateral Security Documents is a
party shall have been taken, and GE Capital shall have confirmed
the same in writing.
7.11 Change of Name. The Partnership shall not change
its name without the prior written consent of GE Capital.
7.12 Compliance With ERISA. The Partnership shall not
(a) terminate any Single Employer Plan so as to result in any
material liability to PBGC, (b) engage in or permit any Affiliate
to engage in any "prohibited transaction" (as defined in Section
406 of ERISA or Section 4975 of the Code) involving any Plan
which would subject the Partnership to any material tax, penalty
or other liability, (c) incur or suffer to exist any material
"accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived, involving any Plan
subject to Section 412 of the Code or Part 3 of Title I(b) of
ERISA, (d) allow or permit to exist any event (including a
Reportable Event) or condition which represents a material risk
of incurring a material liability to PBGC, or (e) permit the
present value of all benefits vested under all Single Employer
Plans subject to Title IV of ERISA, based on those assumptions
used to fund the Plans, as of any valuation date with respect to
such Plans to exceed the value of the assets of the Plans
allocable to such benefits.
7.13 Transactions With Affiliates and Others. The
Partnership shall not, directly or indirectly, purchase, acquire,
exchange or lease any property from, or sell, transfer or lease
any property to, or borrow any money from, or enter into any
management or similar fee arrangement with, any Affiliate or any
officer, director or employee of the Partnership or the General
Partner, except for (a) the transactions specifically contemplated
by the Project Documents and the Fuel Management Plan and (b)
transactions in the ordinary course of business and upon fair and
reasonable terms no less favorable than the Partnership could
obtain, or could become entitled to, in an arm's length
transaction with a Person which is not an Affiliate.
7.14 Acceptance of Facility. The Partnership shall
not, without the prior written consent of GE Capital, which shall
not be unreasonably withheld or delayed, accept the Facility as
"substantially complete" under the Construction Contract or issue
to the Contractor the "Completion Certificate" (as defined in the
Construction Contract) for the Facility. The Partnership will
promptly forward to GE Capital any notice it receives from the
Contractor pursuant to the Construction Contract requesting that
the Facility be accepted as complete or as substantially complete.
7.15 Payment of Project Costs. The Partnership shall
not pay any Project Cost or expense or any amount otherwise due to
any EPC Contractor or any other Person based on any cost or
expense or any percentage thereof except such Project Costs as are
set forth in a Cost Certificate duly signed by the Partnership,
verified by GE Capital's Representative and accompanied by
invoices and other supporting documentation as GE Capital may deem
necessary to properly document such Project Costs.
7.16 Approval of Additional Project Documents. The
Partnership shall not enter into any Additional Project Document
without the prior written approval of GE Capital and, to the
extent required under the Power Purchase Agreement, the Power
Purchaser.
7.17 Alteration of the Site or Project. Except after
the Lease Closing Date, as permitted or required by the Facility
Lease, the Partnership shall not, without the prior written
consent of GE Capital, alter, remodel, add to, reconstruct,
improve or demolish any material part of the Project or Site or
any other Collateral covered by the Collateral Security Documents,
except as contemplated by or in accordance with the Plans and
Specifications (including any permitted amendments thereto).
7.18 Changes in Plans and Budgets. The Partnership
shall not modify or supplement in any material respect the
Approved Budget or the Plans and Specifications then in effect,
without the prior written consent of GE Capital.
7.19 Capital Expenditures. Except, after the Lease
Closing Date, as permitted or required by the Facility Lease, the
Partnership shall not directly or indirectly make or commit to
make any expenditure in respect of the purchase or other
acquisition (including installment purchases or financing leases)
of fixed or capital assets (excluding normal replacements and
maintenance which are properly charged to current operations),
except for expenditures covered by the Approved Budget.
7.20 Hazardous Substances and Compliance with
Environmental Law. The Partnership shall not cause or permit the
location, production, handling, treatment, generation, recycling,
transportation, incorporation, discharge, emission, release,
storage, deposit or disposal of any Hazardous Substance in, upon,
under, over or from any part of the Project, or permit or engage
in any other conduct or permit the existence of any condition
except in material compliance with all Applicable Laws including,
without limitation, all applicable Environmental Laws. At any
time after the Initial Loan Funding Date when a material liability
under applicable Environmental Laws to the Partnership or the
Project could reasonably be expected to result from any activity,
event or condition, the Partnership, upon request by GE Capital,
shall have additional Environmental Audits and other reports
related to environmental issues, including, but not limited to,
Governmental Actions, prepared by a consultant acceptable to GE
Capital relating to the Project or any issue relating to the
Project in such detail as GE Capital shall reasonably specify, all
at the cost of the Partnership. The Partnership acknowledges and
agrees that GE Capital shall not have any liability or
responsibility for either:
(i) costs, liabilities, expenses, penalties,
damage, loss or injury to human health, property, the
environment or natural resources caused by the presence of
Hazardous Substances on any part of the Site or the Project,
or any violation of any applicable Environmental Law related
in any way to the Partnership, the Site or the Project, or
(ii) abatement and/or clean-up required under any
applicable Environmental Law, including, without limitation,
CERCLA, of any Hazardous Substances located at or in any way
related to the Project, whether by virtue of the interest of
GE Capital in the Site, the Easements, the Facility or the
other Collateral or as the result of the enforcement of its
rights or remedies hereunder with respect to the Project
(including, but not limited to, becoming the owner thereof by
foreclosure or conveyance in lieu of foreclosure) or for any
other reason.
7.21 Sale of Electricity. The Partnership will not
sell any electricity generated by the Facility to any Person other
than the Power Purchaser.
7.22 O&M Letter of Credit. The Partnership shall not
draw upon, or request the Power Purchaser to draw upon, the O&M
Letter of Credit.
7.23 Increased Gas Quantity. The Partnership shall not
establish the "Maximum Daily Quantity" nor the "Minimum Daily
Quantity" pursuant to Section 3(a)(ii) of Appendix I to the Gas
Supply Contract without the prior written consent of GE Capital.
7.24 Washington Gas Balancing. The Partnership will
only exercise its rights to incur a "Daily Negative Imbalances"
pursuant to Section 5.1(f) of the Washington LDC Agreement when
Columbia pipeline and CLNG pipeline balancing services are not
available.
7.25 Capacity Releases. The Partnership shall not
release any of its firm transportation capacity for periods
greater than specified in the Fuel Management Plan without the
prior written consent of GE Capital. At the same time that the
Partnership is obligated to furnish the financial statements
pursuant to subsection 6.9 hereof, the Partnership shall furnish
an annual report on transportation management, specifically
focusing on the use of the Partnership's gas transportation
capacity. The Partnership shall immediately report to GE Capital
any adverse impact on its ability to meet Power Purchaser's
dispatch orders due to any gas transportation capacity release.
Section 8. EVENTS OF DEFAULT
If any of the Events of Default listed below in this
Section 8 shall occur and be continuing, GE Capital may (i) by
notice to the Partnership, declare the Commitment to be
terminated, whereupon the same shall forthwith terminate; and/or
(ii) declare the entire unpaid principal amount of the Loans and
the Note, all interest accrued and unpaid thereon, and all other
Obligations to be forthwith due and payable, whereupon such
amounts shall become and be forthwith due and payable, without
presentment, demand, protest, or notice of any kind, all of which
are hereby expressly waived by the Partnership; and/or
(iii) demand that the Partnership immediately pay to GE Capital an
amount equal to the full amount available to be drawn under the
Letter(s) of Credit whereupon the Partnership shall immediately
make such payment to GE Capital which shall hold such payment as
collateral security for the LOC Reimbursement Obligations of the
Partnership; and/or (iv) foreclose on any or all of the
Collateral; and/or (v) proceed to enforce all other remedies
available to it under Applicable Law. Notwithstanding the
foregoing, if an Event of Default referred to in paragraph (g) or
(h) below shall occur with respect to the Partnership, the General
Partner, the Limited Partner, Panda or Holdings, automatically and
without notice the actions described in clauses (i), (ii) and
(iii) above shall be deemed to have occurred.
Such Events of Default are the following:
(a) Any principal of or interest on the Loans or under
the Note shall not be paid when due; or any fee or any other
amount payable to GE Capital hereunder shall not be paid when
due and shall remain unpaid for five or more days; or any LOC
Reimbursement Obligation shall not be paid when due and shall
remain unpaid for five or more days; or any liquidated damage
amount payable pursuant to the Construction Contract or any
other EPC Contract shall not be offset against amounts owed
to the EPC Contractor by the Partnership under the relevant
EPC Contract or paid when due and shall remain unpaid for 15
or more Business Days; or
(b) Any representation or warranty made by the
Partnership herein or by the Partnership, any Partner or
Holdings in any Transaction Document to which the
Partnership, such Partner or Holdings is a party, or any
representation, warranty or statement in any certificate,
financial statement or other document furnished to
GE Capital by or on behalf of the Partnership hereunder or
the Partnership, any Partner or Holdings under any
Transaction Document, shall prove to have been false or
misleading in any material respect as of the time made or
deemed made and, if such misrepresentation is capable of
being corrected as of a subsequent date and if such
correction is being sought diligently, such misrepresentation
shall not have been corrected as of a day within thirty
calendar days following notice thereof being given to the
Partnership, any Partner or Holdings, as the case may be; or
any of the representations contained in clause (ii) of
subsection 3.13, subsection 3.20 or subsection 3.27 shall
cease to be true and correct at any time; or the Facility
shall at any time cease to be a Qualifying Facility (unless
such event constitutes a Special QF Loss Event); or
(c) (i) The Partnership or the General Partner shall
fail to perform or observe any of its covenants contained in
subsection 6.2(iv) (unless such failure is due solely to the
occurrence of a Special QF Loss Event) or in subsection 6.6;
(ii) the Partnership or the General Partner shall fail to
perform or observe any of its covenants in Section 7 of this
Agreement; or (iii) the Partnership or the General Partner
shall fail to perform or observe any other of its covenants
contained in this Agreement (other than those referred to in
paragraphs (a) and (b) above and in clauses (i) and (ii) of
this paragraph (c)) and each such failure shall continue
unremedied or unwaived for a period of 30 days after written
notice thereof from GE Capital to the Partnership or the
General Partner, or in the event that such failure cannot be
cured during such 30-day period despite the Partnership's or
the General Partner's best efforts to do so, the cure period
shall be extended by an additional 30 days, for a total of 60
days, as long as the failure cannot be cured by the payment of
money, the Partnership or the General Partner has
promptly commenced cure of the default within the initial 30
day period and thereafter diligently and continuously
prosecutes such cure and the failure is of such a nature that
is capable of being cured with 60 days; provided that no cure
period shall be provided for a failure to comply with any such
covenant or obligation if providing such cure period could
reasonably be expected to have a Material Adverse Effect; or
(d) The Partnership, any Partner, Panda, Holdings or
any Affiliate of any thereof, shall fail to perform or observe
any of its covenants or obligations contained in any of the
Loan Documents to which it is a party (except those described
in paragraphs (a), (b) and (c)) or shall breach or otherwise
be in default under any such Loan Document (except to the
extent that the applicable grace period, if any, under such
Loan Document has not expired). The Partnership or any
Participant shall fail to perform or observe in any material
respect the terms or conditions of any Project Document to
which it is a party or shall materially breach or otherwise be
in default under any such Project Document; provided that any
such failure or breach by a Participant (other than any
Specified Participant) shall not constitute an Event of
Default hereunder so long as such failure or breach (i) does
not give rise to a default under the Power Purchase Agreement
and (ii) does not have (nor could it reasonably be expected to
have) a Material Adverse Effect.
(e) The Partnership or the General Partner or any other
Specified Participant shall (i) default in any payment of
principal of or interest on any Indebtedness (other than the
Note) beyond the period of grace, if any, provided in the
instrument or agreement under which such Indebtedness was
created; or (ii) default in the observance or performance of
any other agreement or condition relating to any such
Indebtedness or contained in any instrument or agreement
evidencing, securing or relating thereto, in each case beyond
the period of grace, if any, provided therein, or any other
event shall occur or condition exist, the effect of which
default or other event or condition is to cause, or to permit
the holder or holders of such Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause, such
Indebtedness to become due prior to its stated maturity or to
realize upon any collateral given as security therefor;
provided, however, with respect to any Specified Participant
other than the Partnership (or any Affiliate thereof) or the
Power Purchaser, any such event described in clause (i) or (ii)
shall not constitute an Event of Default hereunder unless such
event would (x) give rise to a default under the Power Purchase
Agreement or (y) have (or could reasonably be expected to have)
a Material Adverse Effect; or
(f) Any Governmental Action, consent or approval set
forth in Part B of Schedule 2 shall not have been obtained on
or prior to the date specified for receipt of such
approval in Schedule 2; provided, that in the case of a "non
critical" Governmental Action, consent or approval specified
in Part B of Schedule 2, such failure to obtain such "non
critical" Governmental Action, consent or approval would (i)
give rise to a default under the Power Purchase Agreement or
(ii) have (or could reasonably be expected to have) a Material
Adverse Effect; or
(g) Any Specified Participant shall (i) apply for or
consent to the appointment of, or the taking of possession by,
a receiver, custodian, trustee or liquidator of itself or of
all or a substantial part of its property, (ii) admit in
writing its inability, or be generally unable, to pay its
debts as such debts become due, (iii) make a general
assignment for the benefit of its creditors, (iv) commence a
voluntary case under the Bankruptcy Code (as now or hereafter
in effect), (v) file a petition seeking to take advantage of
any other law relating to bankruptcy, insolvency,
reorganization, winding up, or composition or readjustment of
debts, (vi) fail to controvert in a timely and appropriate
manner, or acquiesce in writing to, any petition filed against
such Specified Participant in an involuntary case under such
Bankruptcy Code, or (vii) take any partnership or corporate
action for the purpose of effecting any of the foregoing;
provided that, with respect to any Specified Participant other
than the Partnership (or any Affiliate thereof) or the Power
Purchaser, any such action or failure to act shall not
constitute an Event of Default hereunder unless such action or
failure to act would (x) give rise to a default under the
Power Purchase Agreement or (y) would have (or could
reasonably be expected to have) a Material Adverse Effect; or
(h) A proceeding or case shall be commenced after the
date hereof without the application or consent of any
Specified Participant in any court of competent jurisdiction,
seeking (i) its liquidation, reorganization, dissolution,
winding-up, or the composition or readjustment of debts, (ii)
the appointment of a trustee, receiver, custodian, liquidator
or the like of such Specified Participant under any law
relating to bankruptcy, insolvency, reorganization, winding-
up, or composition or adjustment of debts or (iii) a warrant
of attachment, execution or similar process against all or a
substantial part of the assets of such Specified Participant,
and such proceeding or case shall continue undismissed, or any
order, judgment or decree approving or ordering any of the
foregoing shall be entered and continue unstayed and in
effect, for a period of 60 or more days, or any order for
relief against such Specified Participant shall be entered in
an involuntary case under such Bankruptcy Code; provided that,
with respect to any Specified Participant other than the
Partnership (or any Affiliate thereof) or the Power Purchaser,
such proceeding or appointment shall not constitute an Event
of Default hereunder unless such action
or failure to act would (x) give rise to a default under the
Power Purchase Agreement or (y) would have (or could
reasonably be expected to have) a Material Adverse Effect; or
(i) A judgment or judgments for the payment of money
in excess of $150,000 shall be rendered against the
Partnership, the Steam Host or the General Partner, and (x)
such judgment or judgments shall remain in effect and
unstayed and unbonded for a period of 30 or more consecutive
days or (y) enforcement proceedings shall be commenced by any
creditor on any such judgments; or
(j) Any material provision of any Project Document
shall at any time for any reason cease to be valid and
binding or in full force and effect or any party thereto
shall so assert in writing; or any material provision of any
Project Document shall be declared to be null and void or the
validity or enforceability thereof shall be contested by any
party thereto or any Governmental Authority; or any
Participant shall deny that it has any further liability or
obligation under any Project Document to which it is a party,
except upon fulfillment of its obligations thereunder;
provided, that with respect to any Project Document (other
than the Gas Contracts, the Power Purchase Agreement and the
Construction Contract), it shall not constitute an Event of
Default under this paragraph if (i) the Partnership shall
obtain a replacement agreement satisfactory in form and
substance to GE Capital (and, to the extent required under
the Power Purchase Agreement, the Power Purchaser) with a
Person reasonably satisfactory to GE Capital (and, to the
extent required, the Power Purchaser) within 30 days after
such invalidity, contest or denial shall have occurred and
(ii) such event does not give rise to a default under the
Power Purchase Agreement; or
(k) Any Collateral Security Document shall cease, for
any reason, to be in full force and effect, or any party
thereto shall so assert in writing; or any Collateral
Security Document shall cease to be effective to grant a
perfected Lien to the Security Agent, for the benefit of the
Owner Trustee and GE Capital, on the Collateral described
therein with the priority purported to be created thereby; or
(l) (i) The General Partner shall at any time cease to
be the managing general partner of the Partnership, or (ii)
the General Partner or the Limited Partner shall transfer,
sell, assign, mortgage, pledge or otherwise dispose of all or
any part of its equity interest in the Partnership or the
Project or (iii) Holdings shall transfer, sell, assign,
mortgage, pledge or otherwise dispose of its interest in any
Partner or (iv) Panda shall cease to directly own 100% of the
capital stock of Holdings or indirectly own 100% of the
capital stock of the General Partner and the Limited Partner,
in each case without GE Capital's prior written consent; provided,
that, the provisions of clauses (iii) and (iv) notwithstanding,
Holdings and Panda may transfer interests in the General
Partner and the Limited Partner so long as (x) any such
transfer is not prohibited by and is made in accordance with
the applicable provisions of the Power Purchase Agreement,
(y) Panda and Holdings (or, if Panda and Holdings merge into
each other, the surviving company of such merger) each
continues to directly or indirectly own at least 51% of the
capital stock of the General Partner and the Limited Partner
and (z) any such transfer is made subject to the Liens in
favor of the Security Agent under the Collateral Security
Documents (and any transferee shall so confirm the same); or
(m) The Partnership shall abandon the Project for a
period longer than 30 consecutive days; or
(n) (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section
4975 of the Code) involving any Plan, (ii) any "accumulated
funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, shall exist with respect to any Plan,
or (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a
trustee shall be appointed, to administer or to terminate any
Single Employer Plan, which Reportable Event or institution
of proceedings is, in the reasonable opinion of GE Capital,
likely to result in the termination of such Plan for purposes
of Title IV of ERISA, or (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, or (v) the
Partnership or any Commonly Controlled Entity shall, or is,
in the reasonable opinion of GE Capital, likely to incur any
liability in connection with a withdrawal from, or the
insolvency or reorganization of, a Multiemployer Plan, or
(vi) any other event or condition shall occur or exist with
respect to a Plan; and in each case in clauses (i) through
(vi) above, such event or condition, together with all other
such events or conditions, if any, could subject the
Partnership to any tax, penalty or other liabilities in the
aggregate material in relation to the business, operations,
property or financial or other condition of the Partnership;
or
(o) A Lease Event of Default shall have occurred and
be continuing; or
(p) Any Governmental Action required for (i) the
execution, delivery or performance by the Partnership, any
General Partner or any Reporting Participant of its
respective rights and obligations under any of the
Transaction Documents or (ii) the construction, ownership,
leasing or operation of the Project as contemplated by the
Transaction Documents (including, without limitation, the QF
Recertification Order), shall be revoked, terminated,
withdrawn, modified, suspended or withheld or shall cease to
be in full force or effect, or any proceeding shall be
commenced by or before any Governmental Authority for the
purpose of so revoking, terminating, withdrawing, modifying,
suspending or withholding any such Governmental Action and
such proceeding is not dismissed within 60 days of the
commencement thereof; and such revocation, termination,
withdrawal, modification, suspension, withholding or
cessation or such proceedings have or could reasonably be
expected to have a Material Adverse Effect; or
(q) The Limited Partner or the General Partner shall
breach any of its obligations under the Transfer Agreement;
or the Power Purchaser shall have given the Partnership a
notice of a "Fuel Default" (as defined in the Consent of the
Power Purchaser), which shall have given rise to a
"Fuel/Performance Failure" (as defined in the Consent of the
Power Purchaser); or an "Event of Default" shall occur under
Subsection 15.1 of the Power Purchase Agreement; or
(r) The Partnership shall (i) fail to furnish to GE
Capital an Annual QF Status Certificate pursuant to subsection 6.30(b)
or (d) on the day such certificate is due or (ii) any Annual QF Status
Certificate furnished pursuant to subsection 6.30(b) or (d) shall indicate
that, during the period covered by such certificate, the Steam Host purchased
an amount of steam under the Steam Sales Agreement which was less than the
QF Minimum Steam Take set forth in such certificate; provided, that an Event
of Default shall not be deemed to have occurred so long as either:
(A)(i) such Annual QF Status Certificate
indicates that the Facility met the QF Operating
Standard for the period covered by such certificate and
(ii) on or prior to the day that is 7 days after the
last day of the period covered by such certificate, the
Steam Host shall have purchased under the Steam Sales
Agreement, during the period covered by such certificate
plus this additional 7-day period, an amount of steam at
least equal to the QF Minimum Steam Take as determined
for purposes of such certificate; or
(B)(i) the Partnership shall have obtained from
FERC an order granting the Partnership a waiver of the
QF Operating Standard for the Initial QF Standards
Measurement Period or the QF Standards Measurement
Period, as the case may be, for which such certificate
was furnished and (ii) such order shall have become
final and not subject to appeal and shall not have
become the subject of any judicial or administrative
proceedings.
If any Event of Default shall have occurred and be
continuing, GE Capital may, in addition to any other remedies
which it, the Owner Trustee or the Security Agent may have under
this Agreement, the Facility Lease or any Collateral Security
Document or by statute or by rule of law, upon ten Business Days'
prior written notice to the Partnership, enter upon the Project
and construct, equip and complete the Project in accordance with
the plans and specifications therefor with such changes therein as
GE Capital may from time to time and in its sole discretion deem
appropriate, all at the risk, cost and expense of the Partnership.
GE Capital shall have the right at any and all times to
discontinue any work commenced by it in respect of the Project or
to change any course of action undertaken by it and shall not be
bound by any limitations or requirements of time except as
expressly set forth herein. GE Capital shall have the right and
power (but shall not be obligated) to take over and use all or any
part of the labor, materials, supplies and equipment contracted
for by or on behalf of the Partnership, whether or not previously
incorporated into the Project, all in the sole and absolute
discretion of GE Capital. In connection with any construction of
the Project undertaken by GE Capital pursuant to the provisions of
this paragraph, GE Capital may (a) engage builders, contractors,
architects, engineers and others for the purpose of furnishing
labor, materials and equipment in connection with any construction
of the Project, (b) pay, settle or compromise all bills or claims
which may become Liens against any part of the Project, or which
have been or may be incurred in any manner in connection with the
construction, completion and equipping of the Facility or any
other part of the Project or for the discharge of Liens or defects
in the title of the Site and/or the leasehold estate in the
Facility and/or any other part of the Project, and (c) take such
other action (including the employment of watchmen to protect the
Project) or refrain from acting under this Agreement as GE Capital
may in its sole and absolute discretion from time to time
determine without any limitation whatsoever. The Partnership
shall be liable to GE Capital for all sums paid or incurred for the
construction, completion and equipping of the Project whether the same
shall be paid or incurred pursuant to the provisions of this paragraph or
otherwise, and all payments made or liabilities incurred by
GE Capital under this Agreement of any kind whatsoever shall be
paid by the Partnership to GE Capital upon demand with interest at
the Default Rate to the date of payment to GE Capital. Upon the
occurrence of and during the continuance of any Event of Default,
the rights, powers and privileges provided in this paragraph and
all other remedies available to GE Capital, the Owner Trustee or
the Security Agent under this Agreement, the Facility Lease or any
Collateral Security Document or by statute or by rule of law may
be exercised by GE Capital or such other Person at any time and
from time to time whether or not the Loans shall be due and
payable, and whether or not GE Capital shall have instituted any
foreclosure or other action for the enforcement of any of the
Transaction Documents. For the purpose of carrying out the
provisions and exercising the rights, powers and privileges
granted by this paragraph, the Partnership hereby irrevocably
constitutes and appoints GE Capital its true and lawful attorney-
in-fact to execute, acknowledge and deliver any instruments and to
do and to perform any acts such as are referred to in this
paragraph in the name and on behalf of the Partnership. This
power of attorney is a power coupled with an interest and cannot
be revoked.
Section 9. MISCELLANEOUS
9.1 Amendments and Waivers. Neither this Agreement,
the Note, any other Loan Document nor any of the terms hereof or
thereof may be changed, waived, discharged or terminated unless
such change, waiver, discharge or termination is in writing signed
by the Partnership, GE Capital, the Security Agent (with respect
to any Collateral Security Document) and, to the extent required
by Subsection 8.9(b) of the Power Purchase Agreement, consented to
by the Power Purchaser.
9.2 Notices. All notices, requests and demands to or
upon the respective parties hereto to be effective shall be in
writing, by telecopier or by telex and, unless otherwise expressly
provided herein, shall be deemed to have been duly given or made
when delivered by hand, or three days after being deposited in the
mail, first class postage prepaid, or, in the case of a nationally
recognized overnight courier service, one Business Day after
delivery to such courier service, or in the case of transmission
by telecopier, when confirmation of receipt is obtained, or in the
case of telex notice, when sent, answerback received, addressed as
follows, or to such other address as may be hereafter notified by
the respective parties hereto and any future holders of the Note:
The Partnership: Panda-Brandywine, L.P.
4100 Spring Valley
Suite 1001
Dallas, Texas 75244
Telephone: (214) 980-7159
Telecopy: (214) 980-6815
Attention: Chairman,
with a copy to the General Counsel
GE Capital: General Electric Capital Corporation
1600 Summer Street
Stamford, Connecticut 06905
Telecopy: (203) 357-6970
Attention: Vice President,
Energy Project Operations
except that any notice, request or demand to or upon GE Capital
pursuant to subsection 2.2 shall not be effective until received
by GE Capital.
9.3 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of GE Capital,
any right, remedy, power or privilege hereunder, shall operate as
a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
9.4 Survival. All representations and warranties made
hereunder and in any document, certificate or statement delivered
pursuant hereto or in connection herewith shall survive the
execution and delivery of this Agreement and the Note. All
covenants and agreements of the Partnership and the General
Partner contained in Sections 6 and 7 hereof shall survive the
payment in full of amounts outstanding hereunder and under the
Note in accordance with the provisions of such Sections 6 and 7.
The obligation of the Partnership to sell the Facility to the
Owner Trustee in accordance with the terms hereof and to otherwise
enter into the transactions contemplated by the Lease Documents
shall survive the payment in full of the Loans and all other
amounts owing hereunder (whether upon the occurrence of an Event
of Default or otherwise).
9.5 Payment of Expenses and Indemnity. (a) The
Partnership shall, whether or not any Loan is made or any of the
other transactions contemplated by this Agreement are consummated,
pay all reasonable out-of-pocket expenses incurred by GE Capital,
the Security Agent and the Owner Trustee with respect to the
negotiation, preparation, execution and delivery of this Agreement
and the other Loan Documents, any and all transactions
contemplated hereby or thereby and the preparation of any document
reasonably required hereunder or thereunder, including (without
limiting the generality of the foregoing) all reasonable fees and
expenses of Simpson Thacher & Bartlett, counsel for GE Capital,
Thompson & Knight, special Texas counsel for GE Capital, Piper &
Marbury, special Maryland counsel for GE Capital, Swidler &
Berlin, special regulatory counsel for GE Capital, all reasonable
fees and expenses of GE Capital's engineering consultant,
environmental consultant, fuel consultant and each other
professional consultant retained by it, all fees and expenses of
the Owner Trustee and the Security Agent (including their
reasonable legal fees and expenses), all title and conveyancing
charges, recording and filing fees and taxes, mortgage taxes,
intangible personal property taxes, escrow fees, revenue and tax
stamp expenses, insurance premiums, court costs, surveyors',
appraisers', architects', engineers', consultants', accountants'
and reasonable attorneys' fees and disbursements, and will
reimburse to GE Capital, the Owner Trustee and the Security Agent
all expenses paid by them of the nature described in this
subsection 9.5 which have been or may be incurred by GE Capital,
the Owner Trustee or the Security Agent with respect to any and
all of the transactions contemplated herein. GE Capital may pay
or deduct from the Loan proceeds any of such expenses (but shall
nevertheless be required to provide the Partnership with a
statement itemizing such expenses), and any Loan proceeds so
applied shall be deemed advances under this Agreement and secured
by the Collateral Security Documents.
(b) The Partnership shall pay all reasonable out-of
pocket costs and expenses of GE Capital, the Owner Trustee and the
Security Agent in connection with the preservation of rights
under, and enforcement of, the Loan Documents and the Lease
Documents and the documents and instruments referred to therein or
in connection with any restructuring or rescheduling of the
Obligations (including, without limitation, the reasonable fees
and disbursements of counsel.
(c) The Partnership shall indemnify each Indemnitee
from, and hold each of them harmless against, any and all losses,
liabilities, claims, damages, expenses, obligations, penalties,
actions, judgments, suits, costs or disbursements of any kind or
nature whatsoever (including, without limitation, the reasonable
fees and disbursements of counsel for such Indemnitee in
connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not such Indemnitee
shall be designated a party thereto) that may at any time
(including, without limitation, at any time following the payment
of the Obligations) be imposed on, asserted against or incurred by
any Indemnitee as a result of, or arising out of, or in any way
related to or by reason of, (i) any of the transactions
contemplated hereby or the execution, delivery or performance of
any Transaction Document, (ii) any violation by the Partnership or
its Affiliates of any applicable Environmental Law, (iii) any
environmental claim arising out of the management, use, control,
ownership or operation of property or assets by the Partnership or
any of its Affiliates, including, without limitation, all on-Site
and off-Site activities involving Hazardous Substances, (iv) the
breach of any environmental representation or warranty set forth
in subsection 3.25, (v) the grant to the Security Agent of any
Lien in any property or assets of the Partnership or any equity
interest in the Partnership, and (vi) the exercise by GE Capital,
the Owner Trustee or the Security Agent of its rights and remedies
(including, without limitation, foreclosure) under any agreements
creating any such Lien (but excluding, as to any Indemnitee, any
such losses, liabilities, claims, damages, expenses, obligations,
penalties, actions, judgments, suits, costs or disbursements
incurred solely by reason of the gross negligence or willful
misconduct of such Indemnitee). The Partnership's obligations
under this subsection 9.5 shall survive the repayment of all
Obligations and the termination of this Agreement.
9.6 Successors and Assigns. (a) This Agreement shall
be binding upon and inure to the benefit of the Partnership,
GE Capital, all future holders of the Notes and their respective
successors and assigns, except that the Partnership may not assign
or transfer any of its rights or obligations under this Agreement
without the prior written consent of GE Capital. Any assignment
or transfer made by the Partnership without the prior written
consent of GE Capital shall be void and of no effect.
(b) The Partnership acknowledges that GE Capital may,
in the ordinary course of its business and in accordance with
Applicable Law, at any time sell, assign, transfer, grant
participations in, or otherwise dispose of all or any portion of
its Commitment or the Loans (or participations in the Letters of
Credit) or of its right, title and interest therein or in this
Agreement and the Collateral Security Documents (collectively,
"Participations") to one or more banks or other financial
institutions or other entities ("Assignees"); provided that (i) no
such Participation shall, at the time of such Participation,
subject the Partnership to any increased costs or taxes for which
the Partnership has agreed to indemnify GE Capital hereunder and
(ii) such Assignee executes a supplement to this Agreement in
which it agrees to be bound by the provisions of this Agreement
and the provisions of the Consent of the Power Purchaser. The
Partnership agrees that each Assignee shall possess all rights of
"GE Capital" hereunder with respect to its Participation and
further agrees that it will enter into any necessary or desirable
amendment hereto to specifically provide for the same and to
otherwise give effect to such Participation (i.e., to provide for
GE Capital as the agent for the lenders hereunder).
(c) The Partnership authorizes GE Capital to disclose
to any prospective Assignee all financial information in
GE Capital's possession concerning the Partnership, the General
Partner or the Project which has been delivered to GE Capital by
or on behalf of the Partnership pursuant to this Agreement or any
other Transaction Document or which has been delivered to
GE Capital by or on behalf of the Partnership in connection with
GE Capital's credit evaluation of the Partnership and the Project
prior to or after entering into this Agreement; provided, however,
that prior to furnishing any information marked in writing as
being confidential information, GE Capital shall either (i) obtain
Panda's or the Partnership's consent to the furnishing of such
information or (ii) require the prospective Assignee to execute a
reasonably satisfactory confidentiality agreement with respect to
such confidential information in favor of the Partnership.
9.7 Severability. Any provision hereof which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof and without affecting the validity or enforceability of any
provision in any other jurisdiction.
9.8 Headings. The headings of the various sections and
paragraphs of this Agreement are for convenience of reference
only, do not constitute a part hereof and shall not affect the
meaning or construction of any provision hereof.
9.9 Counterparts. This Agreement may be executed by
one or more of the parties hereto on any number of separate
counterparts and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
9.10 GE Capital Sole Beneficiary. All conditions of
the obligations of GE Capital to make Loans, to issue the
Letter(s) of Credit and, acting through the Owner Trustee, to
enter into the sale and leaseback of the Facility or to make
available the Equity Loan Facility hereunder are imposed solely
and exclusively for the benefit of GE Capital and its assigns
(including each Assignee) and no other Person shall have standing
to require satisfaction of such conditions in accordance with
their terms or be entitled to assume that GE Capital will refuse
to make Loans in the absence of strict compliance with any or all
thereof and no Person shall, under any circumstances, be deemed to
be a beneficiary of such conditions, any or all of which may be
freely waived in whole or in part by GE Capital at any time if in
its sole discretion it deems it advisable to do so. Inspections
and approvals of plans and specifications, the Project and the
workmanship and materials used therein impose no responsibility or
liability of any nature whatsoever on GE Capital, and no Person shall,
under any circumstances, be entitled to rely upon such inspections and
approvals by GE Capital for any reason. GE Capital is obligated hereunder
solely to make Loans if and to the extent required by this
Agreement.
9.11 Signs. GE Capital shall be permitted to erect and
maintain on the Site until the Date of Final Completion of the
Facility a sign indicating the source of construction financing.
9.12 GOVERNING LAW. THIS AGREEMENT, THE LETTER(S) OF
CREDIT AND THE NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS AGREEMENT, THE LETTER(S) OF CREDIT AND THE NOTE SHALL
BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
9.13 SUBMISSION TO JURISDICTION; WAIVERS. (a) EACH OF
THE PARTNERSHIP AND THE GENERAL PARTNER HEREBY IRREVOCABLY AND
UNCONDITIONALLY:
(i) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, OR ANY
OTHER LOAN DOCUMENT 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;
(ii) 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;
(iii) 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 IT AT ITS ADDRESS
SPECIFIED IN SUBSECTION 9.2 AND, IF APPLICABLE, TO GE CAPITAL
AT ITS ADDRESS SET FORTH IN SUBSECTION 9.2 HERETO OR AT SUCH
OTHER ADDRESS OF WHICH GE CAPITAL OR THE PARTNERSHIP OR THE
GENERAL PARTNER, IF APPLICABLE, SHALL HAVE BEEN NOTIFIED PURSUANT
HERETO; AND
(iv) AGREES THAT NOTHING HEREIN OR THEREIN 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.
(b) EACH OF THE PARTNERSHIP, THE GENERAL PARTNER AND GE
CAPITAL HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO OR ARISING OUT
OF THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
9.14 Limitation of Liability. There shall be full
recourse to the Partnership and all of its assets for the
liabilities of the Partnership under this Agreement, the Letters
of Credit and the Note and its other Obligations, but in no event
shall any Partner, Affiliate of any Partner, or any officer,
director or employee of the Partnership, any Partner or their
Affiliates or any holder of any equity interest in any Partner be
personally liable or obligated for such liabilities and
Obligations of the Partnership, except as may be specifically
provided herein or in any other Loan Document to which such
Partner is a party or in the event of fraudulent actions, knowing
misrepresentations, gross negligence or willful misconduct by the
Partnership, any Partner or any of their Affiliates in connection
with the financing contemplated by this Agreement. Subject to the
foregoing limitation on liability, GE Capital may sue or
commence any suit, action or proceeding against any Partner or any
Affiliate thereof in order to obtain jurisdiction over the
Partnership in order to enforce its rights and remedies hereunder.
Nothing herein contained shall limit or be construed to limit the
liabilities and obligations of any Partner or any Affiliate
thereof in accordance with the terms of any other Loan Document
creating such liabilities and obligations to which such Partner or
Affiliate is a party.
9.15 Release of Easements on Transmission Facilities
and Effluent Pipeline. (a) Upon the transfer by the Partnership
to the Power Purchaser of the Transmission Facilities and the
Easements relating thereto in accordance with the terms of the
Power Purchase Agreement, GE Capital agrees to execute (and cause
the Owner Trustee and the Security Agent to execute) a supplement
to the Deed of Trust and Security Agreement, Security Agreement,
Site Lease and Site Sublease releasing such property from the Lien
thereon granted in favor of the Security Agent (or from the
leasehold interest therein in favor of the Owner Trustee) pursuant
to the terms of such agreements.
(b) Upon the transfer by the Partnership to the County
Commissioners of Charles County, Maryland of the Effluent Pipeline
and the Easements relating thereto in accordance with the terms of
the Effluent Water Agreement, GE Capital agrees to execute (and
cause the Owner Trustee and the Security Agent to execute) a
supplement to the Deed of Trust and Security Agreement, Security
Agreement, Site Lease and Site Sublease releasing such property
from the Lien thereon granted in favor of the Security Agent (or
from the leasehold interest therein in favor of the Owner Trustee)
pursuant to the terms of such agreements.
9.16 Personal Property. It is the intention of GE
Capital and the Partnership that the Facility, each Modification
and every portion thereof is severed, and shall be and remain
severed, to the maximum extent permitted by Applicable Law, from
the real estate constituting the Site and the Easements and even
if physically attached thereto, shall retain the character of
personal property, shall be treated as personal property with
respect to the rights of all Persons, shall be removable (subject
to the provisions of the Transaction Documents) and shall not be
or become fixtures or part of the real estate constituting the
Site and the Easements.
9.17 Special Exculpation. No claim may be made by the
Partnership, the General Partner or any other Person claiming by
or through the Partnership or the General Partner against GE
Capital or any of its successors, assigns, Affiliates, directors,
officers, employees, attorneys or agents for any special,
indirect, consequential or punitive damages in respect of any
claim for breach of contract or any other theory of liability
arising out of or related to the transactions contemplated by this
Agreement, or any act, omission or event occurring in connection
therewith; and the Partnership hereby waives, releases and agrees
not to sue upon any claim for any such damages, whether or not
accrued and whether or not known or suspected to exist in its
favor.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and
duly authorized officers as of the day and year first above
written.
PANDA-BRANDYWINE, L.P.
By: Panda Brandywine Corporation, its
General Partner
By:
Name: Robert W. Carter
Title: President, Chairman and
Chief Executive Officer
PANDA BRANDYWINE CORPORATION, as the
General Partner
By:
Name: Robert W. Carter
Title: President, Chairman and
Chief Executive Officer
GENERAL ELECTRIC CAPITAL CORPORATION
By:
Name: Michael E. Stewart
Title: Attorney-in-Fact
Consented and Agreed:
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, not in its
individual capacity, but solely as
Owner Trustee
By:________________________________
Name: Kathy A. Larimore
Title: Assistant Vice President
<PAGE>
TABLE OF CONTENTS
Page
Section 1. DEFINITIONS 1
1.1 Defined Terms 1
1.2 Other Definitional Provisions 1
Section 2. AMOUNTS AND TERMS OF LOANS 2
2.1 Loans 2
2.2 Procedure for Borrowing 2
2.3 Disbursement of Loans 3
2.4 Note 3
2.5 Fees 3
2.6 Mandatory Prepayments; Special Payments 3
2.7 Computation of Interest and Fees 4
2.8 Payments 8
2.9 Letter of Credit Commitment 9
2.10 Partnership's Obligations in Respect of
Drawings Under Letters of Credit 11
2.11 Letter of Credit Fees 13
2.12 Funding Indemnity 13
2.13 Use of Proceeds 14
2.14 Taxes 14
2.15 Maximum Number of Tranches 14
Section 3. REPRESENTATIONS AND WARRANTIES 15
3.1 Financial Statements 15
3.2 Partnership Existence and Business; Partners 15
3.3 Compliance With Law 16
3.4 Power and Authorization; Enforceable
Obligations 16
3.5 Governmental Actions and Other Consents and
Approvals 18
3.6 No Legal Bar 19
3.7 No Proceeding or Litigation 19
3.8 No Default or Event of Loss 19
3.9 Ownership of Property; Liens 20
3.10 Taxes 20
3.11 Federal Regulations 21
3.12 ERISA 21
3.13 Investment Company Act; etc. 21
3.14 Collateral Security Documents;
Lease Documents 21
3.15 Full Disclosure 22
3.16 Property Rights, Utilities, etc 22
3.17 Compliance with Building Codes, Zoning
Laws, etc. 22
3.18 Principal Place of Business, etc. 23
3.19 Description of Property 23
3.20 Public Utility Status 23
3.21 Material Agreement and Licenses 24
3.22 Sufficiency of Project Documents 24
3.23 Representations and Warranties 25
3.24 Location of Site 25
3.25 Environmental Matters 25
3.26 Fuel Supply 28
3.27 Qualifying Facility 28
3.28 Completion of Project 29
Section 4. CONDITIONS PRECEDENT TO LOANS 29
4.1 Conditions of Initial Loan 29
(a) Notice of Initial Loan Funding 29
(b) Note 29
(c) Title Insurance; Survey 29
(d) Legal Opinions 30
(e) Trust Agreement 31
(f) Collateral Security Documents 31
(g) Power Purchase Agreement 32
(h) Construction Contract 32
(i) Steam Agreements 32
(j) Gas Contracts 32
(k) Operation and Maintenance Agreement 32
(l) Effluent Water Agreement 33
(m) Partnership Agreement; Formation
Documents 33
(n) Project Schedule; Approved Budget 33
(o) Letter of Credit Pledge Agreements;
Ascending Letter of Credit and
Overfunding Letter of Credit 33
(p) Site Lease; Site Sublease 34
(q) GE Capital's Representative's Report 34
(r) Perfection of Liens and Security
Interests 34
(s) Fees 34
(t) Insurance Coverage 34
(u) Preliminary Appraisal 35
(v) Notice to Proceed 35
(w) Easement Agreements 35
(x) Steam Host Arrangements; Qualifying
Facility Status 35
(y) Subcontractors; Suppliers 35
(z) Governmental Actions 35
(aa) No Material Adverse Change 36
(bb) No Material Tax Change 36
(cc) Litigation 36
(dd) Financial Statements 36
(ee) Pledged Stock 36
(ff) Record Searches 37
(gg) Taxes 37
(hh) Gas Supply Assessment 37
(ii) Projections 37
(jj) Environmental Information 37
(kk) Authorizing Actions 38
(ll) Distilled Water Facility Business Plan 38
(mm) Fuel Management Plan 38
4.2 Conditions to All Loans 38
(a) Governmental Actions and Other Consents
and Approvals 38
(b) Qualifying Facility 38
(c) No Change in Law 39
(d) No Material Adverse Change, etc. 39
(e) Payment of Project Costs 39
(f) Evidence of Project Costs; Lien Waivers;
Ascending Letter of Credit 39
(g) Representations and Warranties 40
(h) No Default or Event of Default; Event
of Loss 40
(i) No Force Majeure, Cancellation,
Suspension, Termination, etc. 40
(j) Report of GE Capital's Representative 41
(k) Borrowing Certificate 41
(l) Notice of Borrowing 41
(m) Approved Budget Amount 41
(n) Sufficient Financing 42
(o) Interest Payments and Fees 42
(p) Taxes and Assessments 42
(q) Project Documents 42
(r) Major Subcontractors 42
(s) Additional Project Documents 42
(t) Final Completion, etc. 42
(u) Notices, Stop-Work Orders 43
(v) Title Insurance Continuation 43
(w) Liens 44
(x) No Notice Under Section 15.3 of Power
Purchase Agreement 44
(y) Confirmation Certificate 44
(z) Additional Matters 44
Section 5. SALE AND LEASE OF THE FACILITY 44
5.1 Lease Closing Date 44
5.2 Actions by the Partnership on the Lease
Closing Date 44
5.3 Actions by GE Capital on the Lease Closing
Date 45
5.4 Lease of Facility 45
5.5 Conditions Precedent to Obligations of GE
Capital 45
(a) Substantial Completion 45
(b) Closing Notice; Certificate of Lessor's
Cost 45
(c) Lease Documents 45
(d) Legal Opinions 46
(e) Title 46
(f) Requirements under the Power Purchase
Agreement 47
(g) Operating Budget 47
(h) Title Insurance; Survey 47
(i) Authorizing Actions 47
(j) Filings and Recordings 47
(k) Insurance Coverage 48
(l) Governmental Actions and Other Consents
and Approvals 48
(m) Qualifying Facility 48
(n) No Change in Law 49
(o) No Material Adverse Change, etc. 49
(p) Representations and Warranties 49
(q) No Default or Event of Default; Event of
Loss; Event of Regulation 49
(r) No Force Majeure, Cancellation,
Suspension, Termination, etc. 50
(s) Tax Opinion 50
(t) Lien Searches 50
(u) Appraisal 50
(v) Project Costs 50
(w) Engineer's Report 50
(x) Reserve Account 50
(y) Working Capital 50
(z) Transfer and Recordation Taxes 51
(aa) Payment of Project Costs 51
(bb) Maryland Commission Order 51
5.6 Conditions Precedent to the Obligations of
the Partnership 51
(a) Lease Documents 51
(b) No Change in Law 51
5.7 Basic Rent Factors; Stipulated Loss Values;
Adjustments 51
5.8 Leverage Option; Adjustment of Basic Rent 52
5.9 Equity Loan Facility 52
5.10 Adjustments of Supplemental Rent 53
Section 6. AFFIRMATIVE COVENANTS 54
6.1 Completion of Facility; Monthly Reports 54
6.2 Conduct of Business, Maintenance of
Existence, etc. 55
6.3 Payment of Obligations 55
6.4 Performance Under Other Agreements 55
6.5 General Partner 55
6.6 Insurance Coverage 55
6.7 Inspection of Property; Books and Records;
GE Capital's Representative; Discussions 61
6.8 Compliance With Laws 62
6.9 Financial Statements 63
6.10 Certificates; Other Information 64
6.11 Taxes 66
6.12 Maintenance of Property 66
6.13 Notices 67
6.14 Assignments of Additional Project Documents;
Maintenance of Liens of the Collateral
Security Documents; Future Mortgages 69
6.15 Annual Opinion of Counsel 70
6.16 Employee Plans 70
6.17 Management Letters 70
6.18 Documentation of Project Costs 71
6.19 Disputes 71
6.20 Lists and Approval of Contractors,
Subcontractors and Materialmen 71
6.21 Easements 72
6.22 Use of Project Cash Flow Prior to the Lease
Closing Date 72
6.23 Further Assurances 72
6.24 Storage of Materials 73
6.25 Hazardous Substances 73
6.26 Development Security Letter of Credit
Proceeds 74
6.27 Distilled Water Facility Business Plan 74
6.28 Fuel Management Plan 74
6.29 Qualifying Facility Recertification 74
6.30 Qualifying Facility Status Certificates 74
Section 7. NEGATIVE COVENANTS 76
7.1 Merger, Sale of Assets, Purchases, etc 77
7.2 Indebtedness 77
7.3 Distributions, etc 77
7.4 Liens 78
7.5 Nature of Business 78
7.6 Amendment of Contracts, etc 78
7.7 Investments 79
7.8 Qualifying Facility 79
7.9 Leases 79
7.10 Change of Office 79
7.11 Change of Name 80
7.12 Compliance With ERISA 80
7.13 Transactions With Affiliates and Others 80
7.14 Acceptance of Facility 80
7.15 Payment of Project Costs 81
7.16 Approval of Additional Project Documents 81
7.17 Alteration of the Site or Project 81
7.18 Changes in Plans and Budgets 81
7.19 Capital Expenditures 81
7.20 Hazardous Substances and Compliance with
Environmental Law 81
7.21 Sale of Electricity 82
7.22 O&M Letter of Credit 82
Section 8. EVENTS OF DEFAULT 83
Section 9. MISCELLANEOUS 91
9.1 Amendments and Waivers 91
9.2 Notices 91
9.3 No Waiver; Cumulative Remedies 91
9.4 Survival 92
9.5 Payment of Expenses and Indemnity 92
9.6 Successors and Assigns 93
9.7 Severability 94
9.8 Headings 94
9.9 Counterparts 95
9.10 GE Capital Sole Beneficiary 95
9.11 Signs 95
9.12 GOVERNING LAW 95
9.13 SUBMISSION TO JURISDICTION; WAIVERS 95
9.14 Limitation of Liability 96
9.15 Release of Easements on Transmission
Facilities and Effluent Pipeline 96
9.16 Personal Property 97
9.17 Special Exculpation 97
APPENDIX A Definitions
SCHEDULES
Schedule 1 Description of the Site and Easements
Schedule 2 Governmental Actions
Schedule 3 Recordings and Filings
Schedule 4 Approved Budget
Schedule 5 Project Schedule
Schedule 6 Assumptions
Schedule 7 Equity Loan Terms
Schedule 8 Environmental Matters
Schedule 9 Operating Projections
Schedule 10 Basic Rent Factors and Stipulated Loss Value
Schedule 11 Fuel Management Plan
Schedule 12 Distilled Water Facility Business Plan
Schedule 13 Leverage Option Adjustment
EXHIBITS
Exhibit A Form of Note
Exhibit B-1 Form of Development Security Letter of Credit
Exhibit B-2 Form of Interconnection Letter of Credit
Exhibit B-3 Form of Performance Letter of Credit
Exhibit B-4 Form of O&M Letter of Credit
Exhibit C-1 Form of Borrowing Certificate
Exhibit C-2 Form of Notice of Borrowing
Exhibit C-3 Form of Cost Certificate
Exhibit C-4 Form of Confirmation Certificate
Exhibit D Form of Notice of Initial Loan Funding
Exhibit E Form of Assignment
Exhibit F Form of Consent
Exhibit G Form of Lease Closing Notice
Exhibit H Form of Certificate of Lessor's Cost
Exhibit I-1 Form of Substantial Completion Certificate
Exhibit I-2 Form of Final Completion Certificate
Exhibit J Form of Bill of Sale and Severance Agreement
Exhibit K Form of Deed of Trust and Security Agreement
Exhibit L Form of Facility Lease
Exhibit M Form of Site Lease
Exhibit N Form of Site Sublease
Exhibit O Form of Security Deposit Agreement
Exhibit P-1 Form of General Partner Pledge Agreement
Exhibit P-2 Form of Limited Partner Pledge Agreement
Exhibit Q Form of Stock Pledge Agreement
Exhibit R Form of Present Assignment of Power Purchase
Agreement
Exhibit S-1 Form of Ascending Letter of Credit Pledge
Agreement
Exhibit S-2 Form of Overfunding Letter of Credit Pledge
Agreement
Exhibit T-1 Form of Ascending Letter of Credit
Exhibit T-2 Form of Overfunding Letter of Credit
Exhibit U Form of Tax Indemnity Agreement
Exhibit V Form of Security Agreement
Exhibit W Form of Steam Lease
Exhibit X Form of Steam Lessee Security Agreement
Exhibit Y-1 Form of Opinion of Chadbourne & Parke
Exhibit Y-2 Form of Opinion of Gibbs & Haller
Exhibit Y-3 Form of Opinion of Piper & Marbury
Exhibit Y-4 Form of Opinion of Thompson & Knight
Exhibit Y-5 Form of Opinion of Counsel to Participants
Exhibit Y-6 Form of Opinion of Venable, Baetjer,
Howard & Civiletti
Exhibit Y-7 Form of Opinion of Simpson Thacher & Bartlett
Exhibit Y-8 Form of Opinion of Swidler and Berlin
Exhibit Y-9 Form of Opinion of Shipman & Goodwin
Exhibit Z Form of Trust Agreement
<PAGE>
Exhibit A
to
Construction Loan Agreement and Lease Commitment
Form of Note
[See Exhibit 10.245 filed with this Registration Statement]
Exhibit K
to
Construction Loan Agreement and Lease Commitment
Form of Deed of Trust and Security Agreement
[See Exhibit 10.27 filed with this Registration Statement]
Exhibit M
to
Construction Loan Agreement and Lease Commitment
Form of Site Lease
[See Exhibit 10.72 filed with this Registration Statement[
Exhibit N
to
Construction Loan Agreement and Lease Commitment
Form of Site Sublease
[See Exhibit 10.73 filed with this Registration Statement]
Exhibit O
to
Construction Loan Agreement and Lease Commitment
Form of Security Deposit Agreement
[See Exhibit 10.26 filed with this Registration Statement]
Exhibit P-1
to
Construction Loan Agreement and Lease Commitment
Form of General Partner Pledge Agreement
[See Exhibit 10.28 filed with this Registration Statement]
Exhibit P-2
to
Construction Loan Agreement and Lease Commitment
Form of Limited Partner Pledge Agreement
[See Exhibit 10.29 filed with this Registration Statement]
Exhibit Q
to
Construction Loan Agreement and Lease Commitment
Form of Stock Pledge Agreement
[See Exhibit 10.30 filed with Registration Statement]
Exhibit V
to
Construction Loan Agreement and Lease Commitment
Form of Security Agreement
[See Exhibit 10.33 filed with this Registration Statement]
Exhibit X
to
Construction Loan Agreement and Lease Commitment
Form of Steam Leasee Security Agreement
[See Exhibit 10.35 filed with this Registration Statement]
Exhibit Z
to
Construction Loan Agreement and Lease Commitment
Form of Trust Agreement
[See Exhibit 10.34 filed with this Registration Statement]
APPENDIX A to
Construction Loan Agreement
and Lease Commitment
DEFINITIONS
Whenever used in (i) the Construction Loan Agreement
and Lease Commitment, dated as of March 30, 1995 among
Panda-Brandywine, L.P., Panda Brandywine Corporation and General
Electric Capital Corporation, (ii) the Deed of Trust and Security
Agreement, dated as of March 30, 1995, between Panda-Brandywine,
L.P. and Chicago Title Insurance Company, as trustee, (iii) the
Security Deposit Agreement, dated as of March 30, 1995, among
Panda-Brandywine, L.P., Panda Brandywine Corporation, General
Electric Capital Corporation and Shawmut Bank Connecticut,
National Association, as Owner Trustee and Security Agent or (iv)
any of the other Loan Documents or Lease Documents referred to
therein, the following terms shall have the following meanings,
unless otherwise defined therein:
"Accounts": the collective reference to the Operation
and Maintenance Reserve Account, the Rent Reserve Account,
the Insurance and Condemnation Proceeds Account, the
Warranty Maintenance Reserve Account, the Revenue Account,
the Special Payment Account, the Current Account, the
Distribution Reserve Account and the Partnership Security
Account and each other established by the Security Agent
pursuant to the terms of the Security Deposit Agreement.
"Accrued Maintenance Payment": as defined in Section
5(e) of the Lease.
"Additional Construction Contract": direct order
contracts for miscellaneous project facilities and
additional construction contracts, other than the
Construction Contract, entered into by the Partnership with
the consent of GE Capital for the provision of labor,
services and/or material in connection with the design,
engineering, construction, equipping and/or testing of the
Project or any part thereof, including the Effluent Pipeline
and the Transmission Facilities.
"Additional Project Documents": any contract,
agreement or instrument (but excluding Governmental Actions)
related to the development, ownership, construction,
testing, maintenance, repair, operation or use of the
Project entered into by the Partnership and any other Person
subsequent to the Initial Loan Funding Date (including each
Additional Construction Contract) and any consent and
agreement which constitutes an Ancillary Document and is
delivered in connection therewith, but excluding Non-
Material Agreements.
"Adverse Proceedings": any action, investigation, law
or proceeding which seeks to revoke, suspend, delay or
adversely modify any of the Governmental Actions.
"Affiliate": of any designated Person, each Person
which, directly or indirectly, controls or is controlled by
or is under common control with such designated Person. For
the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person,
shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of
voting securities or by contract or otherwise; provided that
for purposes of Section 8(e) of the Stock Pledge Agreement
"control" (and its correlative meanings), as used with
respect to any Person, shall also mean the ownership,
directly or indirectly, of any equity securities of or any
interests in such Person, whether or not it has the power to
direct or cause the direction of the management and policies
of such Person.
"After-Tax Basis": with respect to any payment to be
received by any Person, the amount of such payment
supplemented by a further payment or payments so that, after
deducting from such payments the amount of all Taxes imposed
by any Governmental Authority with respect to such payments
(whether or not such Taxes are payable), the sum of such
payments shall be equal to the original payment to be
received by such Person.
"Ancillary Documents": with respect to each Additional
Project Document, (i) an Assignment in substantially the
form of Exhibit E to the Loan Agreement, together with any
amendments to the Collateral Security Documents necessary or
desirable to grant to the Security Agent, for the benefit of
GE Capital and the Owner Trustee, a first priority perfected
Lien in such Additional Project Document and all property
interests received by the Partnership in connection
therewith, (ii) all recorded financing statements and other
filings required to perfect such Liens, (iii) opinions of
counsel for the Partnership and, to the extent reasonably
required by GE Capital (and to the extent available after
diligent attempts to procure the same) the other parties to
such Additional Project Document, (iv) a Consent to
Assignment with respect to such Additional Project Document
from such other parties substantially in the form of Exhibit
F to the Loan Agreement or otherwise in form and substance
reasonably satisfactory to GE Capital, and (v) evidence of
the Partnership's authorization of such Additional Project
Document, all in form and substance satisfactory to GE
Capital.
"Annual QF Status Certificate": a certificate of an
Authorized Officer of the General Partner setting forth (a)
the QF Minimum Steam Take for the period covered by such
certificate, and (b) whether, during the period covered by
such certificate, the Steam Host has purchased an amount of
steam under the Steam Sales Agreement at least equal to such
QF Minimum Steam Take.
"Applicable Law" or "Law": with respect to any
Governmental Authority, any constitutional provision, law,
statute, rule, regulation, ordinance, treaty, order, decree,
judgment, decision, certificate, holding, injunction,
Governmental Action or requirement of such Governmental
Authority along with the interpretation and administration
thereof by any Governmental Authority charged with the
interpretation or administration thereof. Unless the
context clearly requires otherwise, the term "Applicable
Law" or "Law" shall include each of the foregoing (and each
provision thereof) as in effect at the time in question,
including any amendments, supplements, replacements, or
other modifications thereto or thereof, and whether or not
in effect as of the date of the Loan Agreement.
"Appraisal Procedure": a procedure whereby two
independent appraisers, one appointed by GE Capital and one
by the Lessee, shall agree upon the value, period, amount or
determination then the subject of an appraisal. If either
GE Capital or the Lessee shall determine that a value,
period, amount or determination to be determined under the
Facility Lease or any other Transaction Document cannot
timely be established by agreement, such party shall appoint
its appraiser and give notice thereof to the other party,
which shall appoint its appraiser within 30 days thereafter.
If such other party does not appoint its appraiser within
such thirty-day period, the determination of the first
appraiser made within 60 days thereafter shall be conclusive
and binding. If within 60 days after appointment of the
second of the two appraisers, such appraisers are unable to
agree upon the value, period, amount or determination in
question, they jointly shall appoint a third appraiser
within 10 days thereafter, or, if they do not do so, either
GE Capital or the Lessee may request the American
Arbitration Association, or any organization successor
thereto, to appoint the third appraiser from a panel of
arbitrators knowledgeable on the subject of natural gas-
fired cogeneration plants and the equipment used or operated
in connection therewith. The decision of the third
appraiser shall be given within 60 days after the
appointment thereof. If three appraisers shall be so
appointed, the average of all three determinations shall be
conclusive and binding on GE Capital and the Lessee unless
the determination of one appraiser is disparate from the
middle determination by more than twice the amount by which
the third determination is disparate from the middle
determination, in which case the determination of the most
disparate appraiser shall be excluded and the average of the
remaining two determinations shall be conclusive and binding
on GE Capital and the Lessee. The obligation to pay the
fees and expenses of appraisers incurred in connection with
any Appraisal Procedure relating to any transaction
contemplated by any provision of the Facility Lease or any
other Transaction Document shall be divided equally between
GE Capital and the Lessee (except the obligation to pay such
fees and expenses in connection with any Appraisal Procedure
pursuant to Section 15 of the Facility Lease, which shall be
solely that of the Lessee).
"Approved Budget": the budget prepared by the
Partnership in form and substance satisfactory to GE Capital
and attached to the Loan Agreement as Schedule 4, which sets
forth in reasonable detail all Project Costs anticipated to
be incurred in connection with the development and
construction of the Project, as such Approved Budget may be
amended from time to time with the prior written consent of
GE Capital.
"Ascending Letter of Credit": the letter of credit
issued by Deutsche Bank pursuant to the terms of Section
3.14(a) of the Construction Contract as security for the
performance by the Contractor of its obligations under the
Construction Contract, together with any amendments or
supplements thereto and any successor letters of credit
issued pursuant to such Section 3.14(a), each substantially
in the form of Exhibit T-1 to the Loan Agreement.
"Ascending Letter of Credit Pledge Agreement": the
Ascending Letter of Credit Pledge Agreement to be entered
into by the Partnership in favor of the Security Agent, for
the benefit of GE Capital and the Owner Trustee,
substantially in the form of Exhibit S-1 to the Loan
Agreement, as the same may be amended, supplemented or
otherwise modified from time to time.
"Assigned Contracts": the collective reference to the
Construction Contract, the Raytheon Parent Guaranty, the
Power Purchase Agreement, the Gas Supply Contract, the Gas
Supply Guaranty, the Fuel Management Agreement, the Fuel
Management Guaranty, the Gas Transportation Contracts, the
Effluent Water Agreement, the Steam Sales Agreement, the
Steam Lease, the Steam Lessee Security Agreement, the
Operation and Maintenance Agreement and, from and after the
date any Additional Project Document is executed by the
Partnership, such Additional Project Document.
"Assignee": as defined in subsection 9.6(b) of the
Loan Agreement.
"Assignments": the collective reference to the
Assignments of each of the Assigned Contracts, each
substantially in the form of Exhibit E to the Loan
Agreement, to be executed by the Partnership in favor of the
Security Agent for the benefit of GE Capital and the Owner
Trustee.
"Authorized Officer": shall mean (i) with respect to
any Person that is a corporation, the president, any vice
president, the treasurer, or the chief financial officer of
such Person, (ii) with respect to any Person that is a
partnership, the president, any vice president, the
treasurer or the chief financial officer of a general
partner of such Person, or (iii) with respect to the Owner
Trustee, any officer in its Corporate Trust Administration
department, or (iv) with respect to any Person, such other
representative of such Person that is approved by GE Capital
in writing. No Person shall be deemed to be an Authorized
Officer unless named on a certificate of incumbency of such
Person delivered to GE Capital on or after the Initial Loan
Funding Date.
"Available Cash Flow": for any period (including any
Quarterly Measurement Period), the amount, if any, by which
Project Revenues for such period exceed the sum of (i)
Project Expenses of the Partnership for such period, plus
(ii) payments of Rent for such period, plus (iii) payments
of fees in respect of the Letter(s) of Credit for such
period, plus (iv) debt service (exclusive of any mandatory
prepayments of principal) on the Partnership Equity Loans,
if any, for such period.
"Bankruptcy Code": Title 11 of the United States Code
titled "Bankruptcy," as amended from time to time, and any
successor statute thereto.
"Base Rate": with respect to any Base Rate Loan (or
other amount owing under the Transaction Documents with
respect to which interest is payable at the Base Rate), the
interest equivalent of the 30-day rate on commercial paper
placed on behalf of issuers whose corporate bonds are rated
"AA" by Standard and Poor's Corporation ("S&P"), as made
available on a discount basis or otherwise by the Federal
Reserve Bank of New York for the Business Day immediately
preceding the applicable Reset Date for such Base Rate Loan
(or, with respect to other amounts owing with respect to
which interest is payable at the Base Rate, the Business Day
immediately preceding the date on which such interest begins
to accrue) or (b) in the event that the Federal Reserve Bank
of New York does not make available such a rate, then the
arithmetic average of the interest equivalent of the 30-day
rate on commercial paper placed on behalf of such issuers,
as quoted on a discount basis or otherwise by commercial
paper dealers to GE Capital for the close of business on the
Business Day immediately preceding the applicable Reset Date
for such Base Rate Loan. For purposes of this definition,
the "interest equivalent" of a rate stated on a discount
basis (a "discount rate") for commercial paper of a given
days' maturity shall be equal to the quotient (rounded
upwards to the next higher one-thousandth (.001) of 1%) of
(A) the discount rate divided by (B) the difference between
(x) 1.00 and (y) a fraction the numerator of which shall be
the product of the discount rate times the number of days in
which such commercial paper matures and the denominator of
which shall be 365.
"Base Rate Loans": the Loans that are made or
maintained at an interest rate based on the Base Rate.
"Basic Rent": as defined in Section 3(a) of the
Facility Lease.
"Basic Rent Factors": the percentages set forth in
Schedule C to the Facility Lease as such percentages may be
adjusted from time to time in accordance with the provisions
of Section 3(d) of the Facility Lease.
"Basic Rent Payment Dates": initially, (a) the last
Business Day of the calendar month which is three months
after the Basic Term Commencement Date and thereafter during
the Lease Term, (b) the last Business Day of each calendar
month occurring three months after the immediately preceding
Basic Rent Payment Date.
"Basic Term" or "Basic Lease Term": the period from
and including the Basic Term Commencement Date to and
including the last Business Day of the calendar month which
occurs twenty years after the Basic Term Commencement Date.
"Basic Term Commencement Date": the Lease Closing
Date.
"Bill of Sale": the Bill of Sale and Severance
Agreement substantially in the form of Exhibit J to the Loan
Agreement.
"Borrowing": a borrowing under the Loan Agreement of
one or more Loans.
"Borrowing Certificate": a certificate of the
Partnership substantially in the form of Exhibit C-1 to the
Loan Agreement.
"Borrowing Date": each date on which GE Capital makes
a Loan under the Loan Agreement.
"Budget Category": as defined in subsection 4.1(n) of
the Loan Agreement.
"Budget Category Amount": as defined in subsection
4.1(n) of the Loan Agreement.
"Business Day": a day other than a Saturday, a Sunday
or any other day on which commercial banks in New York City
or Hartford, Connecticut are required or authorized by Law
to be closed and which is also a day on which dealings in
Dollar deposits are carried out in the London interbank
market.
"Capital Lease": any lease of property, real or
personal, which, in accordance with GAAP, would be required
to be capitalized on a balance sheet of the lessee thereof.
"Cash Available for Distributions": for any period
(including any Quarterly Measurement Period), the amount, if
any, by which Distributable Cash Flow for such period
exceeds the sum of (i) contributions to the Rent Reserve
Account for such period plus (ii) any required prepayments
of principal of the Partnership Equity Loans for such period
plus (iii) debt service on the Partner Equity Loans for such
period.
"Change in Accounting Treatment": any amendment to or
revision or official interpretation of the Statements of
Financial Accounting Standards applicable to lease
transactions by the Financial Accounting Standards Board
that shall become effective subsequent to March 23, 1994 and
on or prior to the Lease Closing Date.
"Change in Tax Law": any amendment to the Code that
shall be enacted into law, become effective or is
promulgated (including any technical correction to any such
effective amendment that subsequently shall be enacted into
law) or any change in the Treasury Regulations (including
any proposed or temporary Treasury Regulations) or any other
administrative interpretation of the Code that shall be
adopted or promulgated, as the case may be, subsequent to
March 23, 1994 and through the end of the session of the
United States Congress which is in office during and
including the later of (a) the year in which the Facility is
placed in service or (b) the year in which the Lease Closing
Date occurs, that causes GE Capital to experience tax
consequences more or less favorable than those assumed in
the Tax Indemnity Agreement, provided, however, a Change in
Tax Law shall not include any favorable change with respect
to investment tax credits or allowances of any kind except
to the extent that GE Capital actually realizes tax benefits
therefrom, and in such case, only to the extent of such
benefits actually realized (which, in both cases, shall be
determined by GE Capital in its reasonable discretion).
"Change Order": a change in the Construction Contract
pursuant to Section 2.15 of the Construction Contract.
"CLNG": Cove Point LNG Limited Partnership, a limited
partnership organized under the laws of the State of
Delaware.
"CLNG Agreement": the FTS Service Agreement dated as
of March 30, 1995 between the Partnership and CLNG, as
supplemented by the letter dated as of March 30, 1995, as
the same may be amended, supplemented or otherwise modified
from time to time in accordance with the terms of such
agreement and the Loan Agreement.
"Closing Date": the Initial Loan Funding Date.
"Code": the Internal Revenue Code of 1986, as amended
from time to time.
"Collateral": the collective reference to all real and
personal property, tangible and intangible, and the proceeds
thereof, subjected from time to time to the Liens intended
to be created by the Collateral Security Documents.
"Collateral Security Documents": the collective
reference to the Deed of Trust and Security Agreement, the
Security Agreement, the Security Deposit Agreement, the
Ascending Letter of Credit Pledge Agreement, the Overfunding
Letter of Credit Pledge Agreement, the Pledge Agreements,
the Steam Lessee Security Agreement, the Assignments, the
Consents to Assignment, each assignment (or consent to
assignment) of an Easement Agreement, and any other
agreement or instrument hereafter entered into by the
Partnership or any other Person which secures the payment of
the indebtedness evidenced by the Notes, the payment of Rent
or the payment or performance of any other covenant or
obligation or liability of the Partnership to GE Capital, or
the Owner Trustee or the Security Agent under the Loan
Agreement, the Facility Lease or any other Transaction
Document.
"Columbia": the Columbia Gas Transmission
Corporation, a corporation organized under the laws of
the State of Delaware.
"Columbia Bankruptcy Proceeding": the proceeding
before the United States Bankruptcy Court for the
District of Delaware captioned as In re: The Columbia
Gas System Inc., and Columbia Gas Transmission
Corporation, Case Nos. 91-803 and 91-804.
"Columbia Facilities": the pipeline improvements and
other facilities to be constructed by Columbia pursuant to
the Columbia Precedent Agreement.
"Columbia FTS Agreement": the Amended and
Restated FTS Service Agreement, dated as of March 23,
1995, between Columbia and the Partnership, as the same
may be amended, supplemented or otherwise modified from
time to time in accordance with the terms of such
agreement and the Loan Agreement.
"Columbia Precedent Agreement": the Precedent
Agreement between Columbia and the Partnership, dated
as of February 25, 1994, as amended by the Amending
Agreement, dated as of March 24, 1995 and supplemented
by a letter dated as of March 30, 1995, as the same may
be amended, supplemented or otherwise modified from
time to time in accordance with the terms of such
agreement and the Loan Agreement.
"Columbia Proceeding": shall mean the proceeding
before FERC in which Columbia will request the issuance of a
certificate of public convenience and necessity, pursuant to
Section 7(c) of the Natural Gas Act (15 U.S.C. 717f(c)),
for authority to construct pipeline facilities to provide
transportation service to the Project under the Columbia FTS
Agreement.
"Commercial Operation Date": the "Actual Commercial
Operation Date", as defined in the Power Purchase Agreement.
"Commitment": GE Capital's obligation to (a) make
Loans to the Partnership pursuant to subsection 2.1 of the
Loan Agreement in an aggregate amount not to exceed the Loan
Commitment and (b) issue the Letters of Credit pursuant to
subsection 2.9 of the Loan Agreement in an aggregate stated
amount not to exceed the Letter of Credit Commitment.
"Commonly Controlled Entity": an entity, whether or
not incorporated, which is under common control with the
Partnership within the meaning of Section 414(b) or (c) of
the Code.
"Confirmation Certificate": a certificate of Price
Waterhouse or such other nationally recognized accounting
firm as GE Capital shall reasonably approve, substantially
in the form of Exhibit C-4 to the Loan Agreement.
"Consent of the Power Purchaser": the Consent and
Agreement, dated April 10, 1995, entered into by the Power
Purchaser, the Partnership, GE Capital, the Security Agent
and the Owner Trustee.
"Consents to Assignment": the collective reference to
each Consent, substantially in the form of Exhibit F to the
Loan Agreement, to be executed and delivered by each party
(other than the Partnership) to each Assigned Contract in
respect of the Assignments.
"Construction Contract": the Amended and Restated
Turnkey Cogeneration Facility Agreement, dated as of
March 30, 1995 between the Contractor and the Partnership in
the form (including all amendments and clarification letters
relating thereto) delivered to GE Capital on the Initial
Loan Funding Date, together with the Raytheon Parent
Guaranty, as the same may thereafter be amended,
supplemented or otherwise modified from time to time in
accordance with the terms of such agreement and the Loan
Agreement.
"Construction Loan Maturity Date": the earliest to
occur of (i) the Lease Closing Date, (ii) the date which
occurs six months prior to the latest required commercial
operations date in the Power Purchase Agreement (which
latest required commercial operations date is, as of the
Initial Loan Funding Date, June 1, 1997), as such date may
be extended pursuant to the terms thereof, and (iii) the
date which occurs 22 months after the Initial Loan Funding
Date.
"Construction Progress Report": a monthly report from
the Partnership to GE Capital and GE Capital's
Representative providing (a) an assessment by the
Partnership of the overall construction progress of the
Project and the Pipeline Facilities and the PEPCO
Interconnection Facility since the date of the last such
report and since the Initial Loan Funding Date, together
with an assessment of how such progress compares to the
Project Schedule, (b) a detailed description of any and all
material problems (including, but not limited to, actual and
anticipated cost overruns, if any) encountered or
anticipated in connection with the Project and the Pipeline
Facilities and the PEPCO Interconnection Facility since the
date of the last such report, together with an assessment of
how such problems may impact the Project Schedule, (c) a
detailed description of the proposed solutions to the
problems referred to in clause (b) above, (d) a statement as
to the anticipated delivery dates of major equipment for the
Project, together with an assessment of how such delivery
dates will impact the Project Costs, Contract Sum and the
Project Schedule and (e) a discussion and/or analysis of
such other matters related to the Project and the Pipeline
Facilities and the PEPCO Interconnection Facility and the
Project Schedule as GE Capital shall reasonably request.
Each such Construction Progress Report shall be executed by
the project manager and certified by an Authorized Officer
of the Partnership.
"Contest": with respect to any Tax, Lien, or claim, a
contest pursued in good faith and by appropriate proceedings
diligently conducted, so long as (i) adequate cash reserves
have been established with respect thereto, (ii) any Lien
filed in connection therewith shall have been removed from
the record by the bonding of such Lien by a reputable surety
company satisfactory to GE Capital, or security satisfactory
to GE Capital is otherwise provided to assure the discharge
of the obligation thereunder and of any additional charge,
penalty or expense arising from or incurred as a result of
such contest, (iii) the failure to pay any such Tax, Lien or
claim during the pendency of such contest would not
otherwise have (nor could it reasonably be expected to have)
a Material Adverse Effect and (iv) the Person subject to any
such Tax, Lien or claim has no knowledge of any material
actual or proposed deficiency or additional assessment that
there is a substantial likelihood of being imposed if a
contest is pursued (but which might otherwise be avoided if
such contest were not pursued).
"Contingent GE Capital Distributions": as defined in
subsection 5.10 of the Loan Agreement.
"Contingent Obligation": with respect to any Person,
any obligation of such Person guaranteeing or intended to
guarantee any Indebtedness, leases, dividends or other
obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of
such Person, whether or not contingent, (i) to purchase any
such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply
funds (a) for the purchase or payment of any such primary
obligation or (b) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of
such primary obligation, or (iv) otherwise to assure or hold
harmless the owner of such primary obligation against loss
in respect thereof; provided, however, that the term
Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course
of business.
"Continuation Endorsement": as defined in subsection
4.2(v) of the Loan Agreement.
"Contract Sum": $121,658,816.
"Contractor": Raytheon Engineers & Constructors, Inc.
(formerly known as United Engineers & Constructors Inc.
d/b/a Raytheon Engineers & Constructors), a Delaware
corporation.
"Contractual Obligation": as to any Person, any
provision of any security issued by such Person or of any
agreement, instrument or undertaking to which such Person is
a party or by which it or any of its property is bound.
"Cost Certificate": a certificate of an Authorized
Officer of the Partnership substantially in the form of
Exhibit C-3 to the Loan Agreement setting forth in detail
specific work items for which payment is being requested,
such Cost Certificate to be accompanied by invoices and
other supporting documents as may be necessary to properly
document all Project Costs identified therein and to
otherwise include sufficient detail to (x) reconcile to the
Approved Budget; (y) verify that sufficient amounts are
available under the Loan Commitment to complete the Project;
and (z) specify any appropriate increase in the stated
amount of the Ascending Letter of Credit.
"CPCN": the Certificate of Public Convenience and
Necessity granted to the Partnership pursuant to Sections
54A and 54B of Article 78, Public Service Commission Law, of
the Annotated Code of Maryland, by Order No. 71487 dated
October 6, 1994 and by Order No. 71529 dated October 27,
1994, as amended by Order No. 71644 dated December 16, 1994,
of the Maryland Commission, and as such certificate may be
further amended from time to time by the Maryland
Commission.
"Current Account: the special account designated by
that name established by the Security Agent pursuant to
subsection 2.2 of the Security Deposit Agreement.
"Date of Final Completion": the date on which:
(a) the Facility has achieved final
acceptance under the Construction Contract;
(b) no defects and/or deficiencies exist
that adversely affect the performance of the Facility
under the performance standards set forth in the
Construction Contract;
(c) the Partnership has received all as-
built drawings of the Facility, test data, and other
technical information required for the Partnership or
operator to operate and maintain the Facility;
(d) the Partnership has received all manuals
and instruction books necessary to operate and maintain
the Facility in a safe, efficient and effective manner;
(e) all special tools to be supplied by any
EPC Contractor or the Partnership have been delivered
to the Site;
(f) all EPC Contractors', contractors' and
subcontractors' personnel, supplies, equipment, waste
materials, rubbish and temporary facilities have been
removed from the Site;
(g) the Partnership has received from each
EPC Contractor (i) any waivers of liens and claims
relating to the Work which were not previously
delivered by such EPC Contractor, and (ii) final
waivers of all liens and claims by each subcontractor
or materialman of such EPC Contractor relating to the
Work;
(h) there are no significant unresolved
disputes, litigation or arbitration proceedings with
respect to any of the EPC Contracts;
(i) each EPC Contractor has performed all
provisions of and delivered all items required by the
relevant EPC Contract in a manner reasonably
satisfactory to the Partnership;
(j) GE Capital has received a Final
Completion Certificate, and if requested by GE Capital,
the Partnership and GE Capital have received from each
EPC Contractor an executed copy of a completion
certificate, such completion certificate to be in form
and substance satisfactory to GE Capital and
GE Capital's Representative;
(k) all Project Costs incurred in connection
with Final Completion of the Facility have been paid;
and
(l) the Commercial Operation Date has
occurred under the Power Purchase Agreement.
"Date of Substantial Completion": the date on
which:
(a) the Facility has achieved "Substantial Completion"
under Section 6.04 of the Construction Contract;
(b) no defects and/or deficiencies exist that
materially adversely affect the performance of the
Facility under the performance standards set forth in
the Construction Contract;
(c) the Partnership has received all manuals and
instruction books necessary to operate and maintain the
Facility in all material respects in a safe, efficient
and effective manner;
(d) all special tools to be supplied by any EPC
Contractor or the Partnership necessary to operate and
maintain the Facility in all material respects have
been delivered to the Site; and
(e) there are no significant unresolved disputes,
litigation or arbitration proceedings with respect to
any of the EPC Contracts.
"Deed of Trust and Security Agreement": the Deed of
Trust and Security Agreement to be entered into between the
Partnership and Chicago Title Insurance Company, as trustee
for the use and benefit of the Security Agent (for the
benefit of GE Capital and the Owner Trustee), substantially
in the form of Exhibit K to the Loan Agreement, as the same
may be amended, supplemented or otherwise modified in
accordance with its terms from time to time.
"Default": any of the events specified in Section 8 of
the Loan Agreement, whether or not any requirement for the
giving of notice, the lapse of time, or both, or for the
happening of any other condition, has been satisfied.
"Default Rate": as to any Loans or other amounts, the
sum of (i) the Interest Rate otherwise applicable to such
Loans or other amounts (which, in the case of other amounts,
shall be deemed to be the Base Rate) plus (ii) two hundred
basis points (2.0%) per annum.
"Development Loan Agreement": the Development Loan
Agreement, dated as of March 23, 1994, among the
Partnership, the General Partner, GE Capital (as agent and
as a lender) and the Contractor, as amended through the
Initial Loan Funding Date.
"Development Loan Closing Date": March 23, 1994.
"Development Security Letter of Credit": the Letter of
Credit referred to by that name in subsection 2.9(a) of the
Loan Agreement.
"Discount Rate": the Treasury Index Rate.
"Distilled Water Facility": the distilled water
facility to be constructed on the Distilled Water Facility
Premises pursuant to the Construction Contract, as more
particularly described in Schedule A to the Steam Lease.
"Distilled Water Facility Business Plan": the
Distilled Water Facility Business Plan set forth in Schedule
12 to the Loan Agreement.
"Distilled Water Facility Premises": that portion of
the Site described in Schedule B to the Steam Lease, on
which the Distilled Water Facility is to be located.
"Distributable Cash Flow": for any period (including
any Quarterly Measurement Period), the amount, if any, by
which Project Revenues of the Partnership for such period
exceed the sum of (i) Project Expenses of the Partnership
for such period, plus (ii) payments of Rent for such period
plus (iii) payments of fees in respect of the Letter(s) of
Credit for such period, plus (iv) contributions to the
Operation and Maintenance Reserve Account for such period,
plus (v) debt service (exclusive of any mandatory
prepayments of principal) on the Partnership Equity Loans
for such period.
"Distribution Reserve Account": the special account
designated by that name established by the Security Agent
pursuant to subsection 2.2 of the Security Deposit
Agreement.
"Dollars" and "$": dollars in lawful currency of the
United States of America.
"Easements": any easement, license, right-of-way or
similar real property interest or right that is the subject
of an Easement Agreement.
"Easement Agreements": each agreement set forth in
Schedule 1 to the Loan Agreement entered into prior to the
Initial Loan Funding Date and each similar agreement entered
into subsequent thereto granting or assigning to the
Partnership ownership of or other rights in respect of any
easement, license, right-of-way or similar real property
interest or right relating to the Facility or the Site or to
the transportation and delivery of Fuel, water, electricity
or steam to or from the Facility or the Site or to ingress
or egress to or from the Facility or the Site, each such
agreement to be satisfactory in form and substance to GE
Capital.
"Effluent Pipeline": the pipeline to be constructed
pursuant to the terms of the Effluent Water Agreement to
transport water to the Facility.
"Effluent Water Agreement": the Treated Effluent Water
Purchase Agreement dated as of September 13, 1994 between
the Partnership and the County Commissioners of Charles
County, Maryland, together with the Water Easement
Maintenance Agreement, in the form (including all amendments
and clarification letters relating thereto) delivered to GE
Capital on the Initial Loan Funding Date, as the same may be
amended, supplemented or otherwise modified from time to
time in accordance with the terms of such agreement and the
Loan Agreement.
"Environmental Audit": each report or audit relating
to environmental conditions at the Site (including the
environmental reports of (i) Environmental Consulting &
Technology, Inc. ("ECT") dated September 23, 1993, October
18, 1993 January 3, 1994, March 21, 1994 and September 1994,
(ii) International Engineers, Inc. dated July 13, 1992 and
December 17, 1992, (iii) CSC, Inc. dated April 13, 1994 and
October 10, 1994 and (iv) TPS Technologies dated April 14,
1994 and the audit thereof by ENVIRON Corporation dated
January 11, 1995), each such report or audit to be
satisfactory in form and substance to GE Capital and to be
performed by an engineering firm satisfactory to GE Capital.
"Environmental Law": as to any Person, any current or
future law, treaty, rule, code, ordinance, regulation,
permit, certificate, order, interpretation or license of any
Governmental Authority or any determination of an arbitrator
or a court or other Governmental Authority, relating to the
presence, use, generation, handling, treatment, storage,
transport, recycling, emission, spill, leak, seepage,
discharge, release, threatened release or disposal of
Hazardous Substances, the occurrence or remediation of any
discharge of Hazardous Substances, environmental protection
or any other environmental matter.
"Environmental Proceeding":
(a) any litigation, proceeding, consent order or
agreement under any Environmental Law whether judicial or
administrative (including receipt by the Partnership or
General Partner of any document) relating to:
(i) the happening of any event
involving the use, recycling, emission, spill, leak,
seepage, discharge, release, threatened release, clean-
up or remediation of any Hazardous Substance in such
quantities or under such conditions so as to require
under any Environmental Law removal or other remedial
actions which have not yet been taken; or
(ii) any complaint, order, citation
or notice filed or issued under any Environmental Law
by any Person (including, without limitation, the
United States Environmental Protection Agency) alleging
violation of any Environmental Law; or
(b) any notice from any Person of:
(i) any violation or alleged
violation of any Environmental Law or any allegation
that the Partnership may have any liability under any
Environmental Law; or
(ii) the commencement of any
environmental remediation or other similar remedial or
corrective activity pursuant to or in accordance with
any Environmental Law.
"EPA": the United States Environmental Protection
Agency.
"EPC Contractor": the collective reference to the
Contractor and each party (other than the Partnership) to an
Additional Construction Contract.
"EPC Contracts": the collective reference to the
Construction Contract and each Additional Construction
Contract.
"Equity Borrower": either the Partnership or the
Partners, as the case may be, as borrower under the Equity
Loan Facility.
"Equity Loan Facility": as such term is defined in
subsection 5.9 of the Loan Agreement.
"Equity Loans": as such term is defined in subsection
5.9 of the Loan Agreement.
"ERISA": the Employee Retirement Income Security Act
of 1974, as amended from time to time.
"Eurocurrency Reserve Requirements": for any day as
applied to a Eurodollar Loan, the aggregate (without
duplication) of the rates (expressed as a decimal fraction)
of reserve requirements in effect on such day (including,
without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board or
other Governmental Authority having jurisdiction with
respect thereto), as now and from time to time hereafter in
effect, dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency
Liabilities" in Regulation D of the Board) maintained by a
member bank of the Federal Reserve System; provided, that
the Eurocurrency Reserve Requirements shall be deemed to be
zero, unless GE Capital has, in accordance with subsection
9.6 of the Loan Agreement assigned any portion of its rights
and obligations under the Loan Agreement to any financial
institution which is a member of the Federal Reserve System
and is required to maintain reserve requirements prescribed
for eurocurrency funding by any regulation of the Board or
any other Governmental Authority having jurisdiction with
respect thereto, in which event the Eurocurrency Reserve
Requirements shall be as set forth above. Eurodollar Loans
shall be deemed to constitute Eurocurrency Liabilities and
to be subject to such reserve requirements without benefit
of or credit for proration, exceptions or offsets which may
be available from time to time to a lender under
Regulation D.
"Eurodollar Base Rate": with respect to any Interest
Period, (a) the rate per annum determined on the basis of
the offered rates for deposits in Dollars for a period equal
to such Interest Period reported by Telerate News Service on
the day that is two Business Days prior to the beginning of
such Interest Period or (b) in the event that the rate
described in clause (a) of this definition ceases to be
available, the rate as determined from such financial
reporting service or other information as shall be mutually
acceptable to GE Capital and the Partnership.
"Eurodollar Loan": the Loans that are made or
maintained at an interest rate based on the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during
each Interest Period pertaining to a Eurodollar Loan, a rate
per annum (rounded upwards to the nearest whole multiple of
1/16th of one percent) determined for such day in accordance
with the following formula:
Eurodollar Base Rate
1.00 - Eurocurrency Reserve Requirements
"Eurodollar Tranche": as defined in subsection 2.15 of
the Loan Agreement.
"Event of Default": any of the events specified in
Section 8 of the Loan Agreement, provided that any
requirement for the giving of notice, the lapse of time, or
both, or for the happening of any other condition, has been
satisfied.
"Event of Loss": (i) the actual or constructive total
loss of all or substantially all of the Facility, or the
condemnation, confiscation or seizure of, or requisition of
title to, or requisition by any Governmental Authority (for
a period exceeding the lesser of six months or the remainder
of the Basic Term or any Renewal Term then in effect) of the
use of all or substantially all of the Facility; (ii) the
cessation or material impairment of the operation of the
Facility as a result of damage to the Facility or (iii) the
loss, theft, destruction or damage of, or condemnation,
confiscation or seizure of, or requisition of title to, or
requisition by any Governmental Authority of the use of,
such portion of the Project as shall render the Facility
unable to operate at the level of operation prior to the
occurrence of such event or as a Qualifying Facility (in a
situation in which clause (i) is not applicable).
"Event of Regulation": GE Capital or any of its
Affiliates becoming a Public Utility solely by reason of the
execution, delivery and performance of the Lease Documents
or the ownership or leasing of the Facility by the Owner
Trustee under the Lease Documents; provided, that no event
resulting solely from a Special QF Loss Event shall be
deemed an Event of Regulation.
"Expenses": liabilities, obligations, losses, damages,
penalties, claims (including, without limitation, claims
involving liability in tort, strict or otherwise), actions,
suits, judgments, out-of-pocket costs, expenses and
disbursements (including reasonable legal and other
professional fees and expenses and costs of investigation)
of any kind and nature whatsoever.
"Facility": the (a) gas-fired cogeneration facility
having a net rating of approximately 230 megawatts (measured
at the Site) to be constructed on the Site pursuant to the
Construction Contract, including all equipment and systems
set forth in the Construction Contract and any other EPC
Contract, if any, and (b) the Distilled Water Facility, all
as more particularly described in Schedule A to the Facility
Lease.
"Facility Lease": the Facility Lease to be entered
into between Lessor and the Lessee, substantially in the
form of Exhibit L to the Loan Agreement, as the same may be
amended, supplemented or otherwise modified from time to
time in accordance with its terms.
"Fair Market Rental Value": the value, which shall not
in any event be less than zero, that would be obtained in an
arm's-length transaction for cash between an informed and
willing lessee and an informed and willing lessor, neither
of whom is under any compulsion to lease, for the use of the
Facility for the appropriate period. Except as required to
be determined pursuant to Section 15 of the Facility Lease,
Fair Market Rental Value shall be determined on the
assumptions that: (i) the Facility is in at least the
condition and state of repair required under Section 8(a) of
the Facility Lease; (ii) the Partnership is in compliance
with the requirements of the Transaction Documents; and
(iii) during such lease period, Basic Rent will be payable
in equal quarterly installments in arrears.
"Fair Market Sales Value": the value, which shall not
in any event be less than zero, that would be obtained in an
arm's-length transaction for cash between an informed and
willing purchaser and an informed and willing seller,
neither of whom is under any compulsion to purchase or sell,
respectively, for the ownership of the Facility. Except as
required to be determined pursuant to Sections 9 and 15 of
the Facility Lease, Fair Market Sales Value of the Facility
shall be determined on the assumptions that: (i) the
Facility is in at least the condition and state of repair
required under Section 8(a) of the Facility Lease and
(ii) the Partnership is in compliance with the requirements
of the Transaction Documents.
"Federal Power Act": the Federal Power Act of 1935, as
amended from time to time.
"FERC": the Federal Energy Regulatory Commission or
any successor or analogous federal Governmental Authority.
"Final Completion": final completion of the Facility,
which shall be deemed to have occurred when the Date of
Final Completion for the Facility shall have occurred and
the conditions described in clauses (a) through (l) of the
definition of "Date of Final Completion" shall have been
satisfied.
"Final Completion Certificate": a certificate
substantially in the form of Exhibit I-2 to the Loan
Agreement, signed by the Partnership.
"First Amendment": as defined in subsection 4.1(g) of
the Loan Agreement.
"Fixed Rate Renewal Basic Rent": for each three-month
period during the Fixed Rate Renewal Term, if any, an amount
equal to 50% of the average of the installments of Basic
Rent payable by the Lessee during the Basic Term.
"Fixed Rate Renewal Option": as defined in
Section 12(a) of the Facility Lease.
"Fixed Rate Renewal Term": as defined in Section 12(a)
of the Facility Lease.
"Fuel": all fuel purchased or acquired by the
Partnership, or on the Partnership's behalf, as fuel for the
operation of the Facility, including without limitation all
natural gas purchased, acquired or transported pursuant to
the Gas Contracts.
"Fuel Consultant": C.C. Pace Resources, Inc.
"Fuel Management Agreement": the Fuel Supply
Management Agreement, dated as of March 30, 1995, between
Cogen Development Company, a Michigan corporation, and the
Partnership in the form (including all amendment and
clarification letters relating thereto) delivered to GE
Capital on the Initial Loan Funding Date, as such Fuel
Supply Management Agreement may thereafter be amended,
supplemented, or otherwise modified from time to time in
accordance with the terms of such agreement and the Loan
Agreement.
"Fuel Management Guaranty": the Guaranty of the Fuel
Supply Management Agreement, dated as of March 30, 1995, by
MCN Investment Corporation, a Michigan corporation, in favor
of the Partnership, as such Guaranty may thereafter be
amended, supplemented or otherwise modified from time to
time in accordance with the terms of such agreement and the
Loan Agreement.
"GAAP": generally accepted accounting principles as in
effect from time to time in the country under whose laws the
relevant Person is organized.
"Gas Contracts": the collective reference to the Gas
Supply Contract, the Fuel Management Agreement, the Gas
Supply Guaranty , the Fuel Management Guaranty and the Gas
Transportation Contracts.
"Fuel Management Plan": the Fuel Management Plan set
forth in Schedule 11 to the Loan Agreement.
"Gas Supplier": Cogen Development Company, a Michigan
corporation.
"Gas Supply Contract": the Gas Sales Agreement, dated
as of March 30, 1995, between the Gas Supplier and the
Partnership, in the form (including all amendments and
clarification letters relating thereto) delivered to GE
Capital on the Initial Loan Funding Date, as such Gas Sales
Agreement may thereafter be amended, supplemented or
otherwise modified from time to time in accordance with the
terms of such agreement and the Loan Agreement.
"Gas Supply Guaranty": the Guaranty of the Gas Sales
Agreement, dated as of March 30, 1995, by MCN Corporation, a
Michigan corporation, in favor of the Partnership, as such
Guaranty may thereafter be amended, supplemented or
otherwise modified from time to time in accordance with the
terms of such agreement and the Loan Agreement.
"Gas Transportation Contracts": the Columbia Precedent
Agreement, the Columbia FTS Agreement, the CLNG Agreement
and the Washington LDC Agreement.
"Gas Transporters": the collective reference to
Columbia, CLNG and Washington.
"GE Capital": General Electric Capital Corporation, a
New York corporation.
"GE Capital's Representative": as defined in
subsection 6.7 of the Loan Agreement.
"General Partner": Panda Brandywine Corporation, a
Delaware corporation.
"General Partner Pledge Agreement": the General
Partner Pledge Agreement to be entered into between the
General Partner and the Security Agent, for the benefit of
GE Capital and the Owner Trustee, substantially in the form
of Exhibit P-1 to the Loan Agreement, as the same may be
amended, supplemented or otherwise modified from time to
time in accordance with the terms of such agreement and the
Loan Agreement.
"GNP Deflator": as defined in the Power Purchase
Agreement.
"Governmental Action": all permits, authorizations,
registrations, consents, approvals, waivers, exceptions,
variances, claims, orders, judgments and decrees, licenses,
exemptions, publications (to the extent legally binding upon
the Partnership, any other Participant or the Project),
filings (other than filings of a purely ministerial nature),
notices to and declarations of or with any Governmental
Authority and shall include, without limitation, all siting,
environmental, construction and operating permits and
licenses that are required for the construction, use and
operation of the Project.
"Governmental Authority": 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 Substance": (a) any toxic, caustic or
otherwise hazardous substance, including, without
limitation, petroleum, its derivatives, by-products and
other hydrocarbons, solid wastes, contaminants,
polychlorinated biphenyls, paint containing lead, urea,
formaldehyde foam insulation, asbestos and discharge of
sewage or effluent, whether or not regulated under Federal,
state or local environmental statutes, ordinance, rules,
regulations or orders; (b) any "hazardous substance,"
"extremely hazardous substance," "hazardous waste," "solid
waste," "pollutant," "toxic pollutant," "toxic substance,"
"oil" or "contaminant" as those terms are used in or defined
pursuant to any Environmental Law of the United States, the
State of Maryland, the District of Columbia or relevant
local government, including, without limitation, the
Comprehensive Environmental Response, Compensation, and
Liability Act, as amended, 42 U.S.C. 9601 et seq., the
Safe Drinking Water Act, as amended, 42 U.S.C. 300f et
seq., the Oil Pollution Act, as amended, 33 U.S.C. 2701
et seq., the Federal Clean Air Act, as amended, 42 U.S.C.
7401 et seq., the Solid Waste Disposal Act, as amended,
42 U.S.C. 6901 et seq., the Toxic Substances Control Act,
as amended, 15 U.S.C. 2601 et seq., the Federal Water
Pollution Control Act, as amended, 33 U.S.C. 1251 et
seq., the Emergency Planning and Community Right to-Know
Act, as amended, 42 U.S.C. 11001 et seq., and any
regulations promulgated pursuant to the foregoing statutes;
and (c) any other substance, waste, pollutant, or material,
the presence, use, handling, generation, treatment, storage,
disposal, transport, recycling, emission, spill, leak,
seepage, discharge, release or threatened release of which
is regulated by, or could result in the imposition of
liability under, any statute, ordinance, rule or regulation
of the United States, the State of Maryland, the District of
Columbia, relevant local government or other applicable
Governmental Authority, including, but not limited to, the
foregoing cited statutes and rules.
"Holding Company Act": the Public Utility Holding
Company Act of 1935, as amended from time to time.
"Holdings": Panda Holdings, Inc., a Delaware
corporation. If Holdings merges into Panda, all references
in the Transaction Documents to "Holdings" shall be deemed
references to Panda from and after the time of such merger.
"Indebtedness": as to any Person, (a) indebtedness of
such Person for borrowed money or for the deferred purchase
price of property or services (other than obligations under
agreements for the purchase of goods and services in the
normal course of business which are not more than 60 days
past due); (b) obligations of such Person under Capital
Leases; (c) Contingent Obligations of such Person, including
obligations of such Person under direct or indirect
guarantees 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 clause
(a) or (b) above (other than endorsements of negotiable
instruments in the ordinary course of business); and (d) any
obligation of such Person or a Commonly Controlled Entity to
a MultiEmployer Plan.
"Indemnitees": GE Capital, any Affiliate thereof,
Shawmut Bank Corporation, National Association, in its
individual capacity, as Owner Trustee and as Security Agent,
and their respective successors, assigns (including any
Assignee), agents, officers, shareholders, directors and
employees.
"Initial Loan Funding Date": the date set forth in the
Notice of Initial Loan Funding as the date on which GE
Capital is to make its initial Loan under the Loan
Agreement.
"Initial Operation and Maintenance Reserve Deposit":
$1,000,000.
"Initial QF Standards Measurement period": (a) the 12-
month period beginning with the date the Facility first
produces electricity or (b) any successor or analogous
period specified under the PURPA Regulations for the purpose
of determining whether the Facility is in compliance with
the QF Operating Standard and the QF Efficiency Standard and
that includes the date the Facility first produces
electricity.
"Initial Rent Reserve Deposit": $2,400,000.
"Insurance and Condemnation Proceeds": as such term is
defined in the Security Deposit Agreement.
"Insurance and Condemnation Proceeds Account": the
special account designated by that name established by the
Security Agent pursuant to subsection 2.2 of the Security
Deposit Agreement.
"Insurance and Condemnation Proceeds Deposits": as
such term is defined in the Security Deposit Agreement.
"Interconnection Letter of Credit": the Letter of
Credit referred to by that name in subsection 2.9(a) of the
Loan Agreement.
"Interest Payment Date": (a) as to any Base Rate Loan,
the next-to-last Business Day of each March, June, September
and December to occur while such Loan is outstanding, (b) as
to any Eurodollar Loan having an Interest Period of three
months or less, the last day of such Interest Period, and
(c) as to any Eurodollar Loan having an Interest Period of
six months, the next-to-last Business Day of the calendar
month ending three months after the first day of such
Interest Period and the last day of such Interest Period.
"Interest Period": with respect to each Eurodollar
Loan:
(a) initially, the period from and including
the Borrowing Date with respect to such Eurodollar Loan
to but excluding the next-to-last Business Day of the
calendar month ending one, two, three or six months
thereafter, as selected by the Partnership in its
Notice of Borrowing given with respect thereto; and
(b) thereafter, each period from and
including the last day of the next preceding Interest
Period applicable to such Eurodollar Loan to but
excluding the next-to-last Business Day of the calendar
month ending one, two, three or six months thereafter,
as selected by the Partnership by irrevocable notice to
GE Capital in accordance with subsection 2.7(e) of the
Loan Agreement not less than three Business Days prior
to the last day of the then current Interest Period
with respect thereto;
provided that the foregoing provisions are subject to the
following:
any Interest Period that would otherwise
extend beyond the Construction Loan Maturity Date shall
end on the Construction Loan Maturity Date or, if such
day shall not be a Business Day, on the preceding
Business Day.
"Interest Rate": (a) as to Eurodollar Loans for any
applicable Interest Period, the rate of interest per annum
equal to the sum of (i) the Eurodollar Rate for such
Interest Period and (ii) two hundred fifty basis points
(2.50%) and (b) as to Base Rate Loans for any monthly
period, the rate of interest per annum equal to the sum of
(i) the Base Rate for the applicable monthly period and
(ii) two hundred fifty basis points (2.50%).
"Law": see "Applicable Law".
"Lease Closing Date": as defined in subsection 5.1 of
the Loan Agreement.
"Lease Closing Notice": the notice of closing to be
delivered pursuant to subsection 5.1 of the Loan Agreement
substantially in the form of Exhibit G to the Loan
Agreement.
"Lease Debt": as defined in subsection 5.8 of the Loan
Agreement.
"Lease Default": any of the events specified in
Section 14 of the Facility Lease, whether or not any
requirement for the giving of notice, the lapse of time, or
both, or for the happening of any other condition has been
satisfied.
"Lease Documents": the collective reference to the
Bill of Sale, the Site Lease, the Site Sublease, the Present
Assignment and the Facility Lease.
"Lease Event of Default": as defined in Section 14 of
the Facility Lease.
"Lease Financing": the lease of the Facility pursuant
to the Facility Lease and consummation of the transactions
contemplated by the Lease Documents.
"Lease Term": the Basic Term and, if the Facility
Lease is renewed pursuant to Sections 12 and 13 of the
Facility Lease, each Renewal Term.
"Lease Termination Date": the last day of the Lease
Term (whether occurring by reason of a termination or
expiration of the Lease Term).
"Lease Transaction Expenses": the expenses,
disbursements and costs incurred in connection with (i) the
preparation, execution and delivery of the Transaction
Documents and the consummation of the transactions
contemplated thereby for the Borrowing Dates and the Lease
Closing Date and (ii) any other costs relating to the
transactions contemplated by the Transaction Documents which
may not, for tax purposes, be borne by Lessee.
"Lease Year": initially, the period commencing on the
Lease Closing Date and ending on the first anniversary
thereof and, thereafter, each yearly period commencing on
the last day of the prior Lease Year and ending twelve
months thereafter, until the Lease Termination Date.
"Lessee": the Partnership, as lessee under the
Facility Lease.
"Lessor": the Owner Trustee, as lessor under the
Facility Lease.
"Lessor's Cost": the least of (a) all Project Costs,
(b) the outstanding amount of the Loans (excluding the
Equity Loans, if any) on the Lease Closing Date not repaid
in cash on such date and (c) $215,000,000; provided that in
no event shall Lessor's Cost exceed the appraised value of
the Facility as set forth in the appraisal referred to in
subsection 5.5(u) of the Loan Agreement.
"Lessor's Liens": Liens against the Facility or the
Site that result from acts of, or any failure to act by, or
as a result of claims against, the Lessor unrelated to the
ownership of the Facility or any other part of the Project,
its status as Lessor under the Facility Lease, its interest
in the Site Lease or the transactions contemplated by the
Transaction Documents.
"Letters of Credit": the PEPCO Letters of Credit.
"Letter of Credit Commitment": $12,453,460 as the same
may be reduced pursuant to subsection 2.9(f) of the Loan
Agreement.
"Letter of Credit Commitment Period": the period from
and including the date of the Loan Agreement to and
including the Letter of Credit Commitment Termination Date.
"Letter of Credit Commitment Termination Date": the
fifteenth anniversary of the Basic Term Commencement Date or
such earlier date on which the Letter of Credit Commitment
shall terminate.
"Letter of Credit Issuance Termination Date": the date
occurring ten days after the later of December 31, 2000 and
the fourth anniversary of the Commercial Operation Date, or
such earlier date on which the Letter of Credit Commitment
shall terminate.
"Lien": any mortgage, security interest, pledge,
hypothecation, encumbrance or lien (statutory or other) of
any kind or nature whatsoever (including, without
limitation, any agreement to give any of the foregoing, any
conditional sale or other title retention agreement, any
Maryland construction lien or any financing lease having
substantially the same economic effect as any such
agreement, the filing of any statement under the Uniform
Commercial Code or comparable law of any jurisdiction and
any right of first refusal or option to purchase granted to
the Power Purchaser in the Power Purchase Agreement or the
Transfer Agreement).
"Limited Partner": Panda Energy Corporation, a
Delaware corporation.
"Limited Partner Pledge Agreement": the Limited
Partner Pledge Agreement to be entered into between the
Limited Partner and the Security Agent, for the benefit of
GE Capital and the Owner Trustee, substantially in the form
of Exhibit P-2 to the Loan Agreement, as the same may be
amended, supplemented or otherwise modified from time to
time in accordance with the terms of such agreement and the
Loan Agreement.
"LNG": liquified natural gas.
"LNG Account": as defined in subsection 6.33 of the
Loan Agreement.
"Loan Agreement": the Construction Loan Agreement and
Lease Commitment, dated as of March 30, 1995, among the
Partnership, the General Partner and GE Capital, as amended,
supplemented or otherwise modified from time to time.
"Loan Commitment": $215,000,000.
"Loan Commitment Period": the period from and
including the Initial Loan Funding Date to and including the
Loan Commitment Termination Date.
"Loan Commitment Termination Date": the Construction
Loan Maturity Date or such earlier date on which the
Commitment shall terminate.
"Loan Documents": the collective reference to the Loan
Agreement, the Note, the Trust Agreement and the Collateral
Security Documents.
"Loans": the loans to be made by GE Capital to the
Partnership pursuant to subsection 2.1 of the Loan
Agreement. In the event Partnership Equity Loans are made
to the Partnership pursuant to the Loan Agreement, the term
"Loans" shall include the Partnership Equity Loans.
"LOC Beneficiary": the Power Purchaser.
"LOC Fee Payment Date": as defined in subsection 2.11
(b) of the Loan Agreement.
"LOC Reimbursement Obligations": as defined in
subsection 2.10 of the Loan Agreement.
"Maryland Commission": the Maryland Public Service
Commission.
"Maryland Commission Order": an order from the
Maryland Commission in form and substance satisfactory to GE
Capital (a) declaring that neither the Owner Trustee nor GE
Capital nor any Affiliate of GE Capital could, solely as a
result of the Owner Trustee's ownership of the Facility as
contemplated by subsection 5.2 of the Loan Agreement, become
a Public Utility for any purpose under Maryland law
(including, without limitation, for purposes of compliance
with any condition of the CPCN), (b) permitting under the
CPCN the Owner Trustee's ownership of the Facility as
contemplated by subsection 5.2 of the Loan Agreement (unless
the Partnership supplies evidence satisfactory to GE Capital
that no such order is required to permit under the CPCN the
Owner Trustee's ownership of the Facility as contemplated by
subsection 5.2 of the Loan Agreement) and (c) permitting
under the CPCN, as appropriately modified, without the need
for any future action by the Maryland Commission, the
operation of the Project by the Security Agent, the Owner
Trustee, GE Capital or any Affiliate of GE Capital upon the
exercise of remedies under the Collateral Security Documents
(unless the Partnership supplies evidence satisfactory to GE
Capital that no such order is required to permit under the
CPCN, without the need for any action by the Maryland
Commission, the operation of the Project by the Security
Agent, the Owner Trustee, GE Capital or any Affiliate of GE
Capital upon the exercise of remedies under the Collateral
Security Documents), and such order shall have become final
and nonappealable and shall not be the subject of any
judicial or administrative proceedings.
"Material Adverse Effect": a material adverse effect
upon (i) the business, operations, properties, assets,
prospects or condition (financial or otherwise) of the
Partnership, any Partner or the Project, (ii) the Project
Schedule, (iii) the value, validity, perfection and
enforceability of the Liens granted to the Security Agent,
for the benefit of GE Capital and the Owner Trustee, under
the Collateral Security Documents, (iv) the ability of GE
Capital, the Owner Trustee or the Security Agent to enforce
any of the Obligations or any of its rights and remedies
under the Transaction Documents or (v) the ability of any
Specified Participant to perform any of its material
obligations under the Transaction Documents to which it is a
party.
"Modification": (a) any addition, alteration,
improvement or modification to the Facility, other than
original, substitute or replacement parts incorporated into
the Facility, and (b) the addition, betterment or
enlargement of any property constituting part of the
Facility or the replacement of any such property with other
property, irrespective of whether (i) such replacement
property constitutes an enlargement or betterment of the
property that it replaces, (ii) the cost of such addition,
betterment, enlargement or replacement is or may be
capitalized, or (iii) such addition, betterment or
enlargement is or is not included or reflected in the plans
and specifications for the Facility, as built.
"Monthly QF Status Certificate": a certificate of an
Authorized Officer of the General Partner stating whether
the Facility met the QF Efficiency Standard and the QF
Operating Standard for the period covered by such
certificate.
"Monthly Transfer Date": as defined in subsection 4.2
of the Security Deposit Agreement.
"Multiemployer Plan": a Plan which is a multiemployer
plan as defined in Section 4001(a)(3) of ERISA.
"Net Economic Return": GE Capital's expected net after-
tax return on investment and after-tax net income resulting
from the transactions described in and contemplated by the
Loan Agreement and the Lease Documents based on the amount
of Basic Rent during the Basic Term equal to the percentages
of Lessor's Cost set forth on Schedule 10 to the Loan
Agreement and based on the assumptions set forth in Schedule
6 to the Loan Agreement and the Tax Indemnity Agreement;
provided, however, that in determining the amount of
increase or decrease required to preserve GE Capital's Net
Economic Return, it is intended that GE Capital's net
after-tax return on investment and after-tax net income
shall each be maintained (or where one such component must
be enhanced to preserve the other component, enhanced).
"Non-Material Agreements": (i) short term agreements
entered into in the ordinary course of business in
accordance with the provisions of the Fuel Management Plan,
(ii) agreements entered into by the Partnership in the
ordinary course of business with environmental consultants,
public relations consultants, financial consultants,
engineering consultants and legal counsel for the Project,
and (iii) agreements (other than those described in (i) and
(ii)) entered into by the Partnership in the ordinary course
of business under which the Partnership shall have
obligations not in excess of $25,000 under any such
agreement or $50,000 in the aggregate as to all such
agreements in any fiscal year, excluding, however, any
agreement providing for non-monetary obligations of the
Partnership the performance of which could reasonably be
expected to have a Material Adverse Effect. For purposes of
this definition, indemnity obligations of the Partnership
subject to a maximum dollar amount shall be computed at such
amount, and all other indemnity obligations of the
Partnership shall be computed at the amount thereof which
could, at the time such agreement is entered into,
reasonably be expected to become due and payable.
"Non-Severable Modification": any Modification that is
not a Severable Modification.
"Note" or "Notes": as defined in subsection 2.4 of the
Loan Agreement. In the event GE Capital assigns a portion
of the Loan to an Assignee pursuant to subsection 9.6 of the
Loan Agreement, the note issued to such Assignee to evidence
its portion of the Loan shall constitute a "Note". The term
"Note" shall also include any note issued to GE Capital to
evidence any Partnership Equity Loans.
"Notice of Borrowing": the notice of borrowing to be
delivered pursuant to subsection 2.2 of the Loan Agreement
substantially in the form of Exhibit C-2 of the Loan
Agreement.
"Notice of Initial Loan Funding": the notice of
Initial Loan Funding to be delivered pursuant to subsection
4.1(a) of the Loan Agreement substantially in the form of
Exhibit D to the Loan Agreement.
"Notice to Proceed": as defined in subsection 4.1(v)
of the Loan Agreement.
"O&M Letter of Credit": the Letter of Credit referred
to by that name in subsection 2.9(a) of the Loan Agreement.
"Obligations": all the unpaid principal amount of, and
accrued interest on (including, without limitation, interest
accruing after the maturity of the Loans and interest
accruing after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like
proceeding, relating to the Partnership, whether or not a
claim for post-filing or post-petition interest is allowed
in such proceeding) the Notes, the Letter of Credit
Obligations, all Rent and other obligations payable by the
Partnership under the Facility Lease and all other
obligations and liabilities of the Partnership and the
Partners to GE Capital, the Owner Trustee or the Security
Agent (including, without limitation, pursuant to subsection
5.2 of the Loan Agreement, but excluding any Partner Equity
Loans), whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, the
Loan Agreement, the Note, the Facility Lease, the Collateral
Security Documents or any other Transaction Document and any
other document made, delivered or given in connection
therewith or herewith, whether on account of principal,
interest, reimbursement obligations, fees, indemnities,
costs, expenses (including, without limitation, all fees and
disbursements of counsel to GE Capital) or otherwise.
"Operating Budget": as defined in subsection 6.9(e) of
the Loan Agreement.
"Operating Cash Flow": for any three month period
(including any Quarterly Measurement Period), the amount by
which Project Revenues for such period exceed the sum of (i)
Project Expenses and (ii) fees payable pursuant to
subsections 2.11(b) and (c) of the Loan Agreement for such
period.
"Operating Cash Flow Ratio": as of any date of
determination, the quotient obtained by dividing Operating
Cash Flow for the rolling three-month period ending on the
last calendar day of the preceding month by the sum of the
Basic Rent payable on the next succeeding Basic Rent Payment
Date plus the principal and interest payments due in respect
of the Equity Loans, if any, on such Basic Rent Payment
Date.
"Operating Projections": as such term is defined in
subsection 4.1(ii) of the Loan Agreement.
"Operation and Maintenance Agreement": the Operation
and Maintenance Agreement, dated as of December 7, 1994
between the Operator and the Partnership, in the form
(including all amendments and clarification letters relating
thereto) delivered to GE Capital on the Initial Loan Funding
Date, as the same may thereafter be amended, supplemented or
otherwise modified from time to time in accordance with the
terms of such agreement and the Loan Agreement and the Power
Purchase Agreement.
"Operation and Maintenance Reserve Account": the
special account designated by that name established by the
Security Agent pursuant to subsection 2.2 of the Security
Deposit Agreement.
"Operator": Ogden Brandywine Operations, Inc., a
corporation organized under the laws of the State of
Delaware.
"Overdue Rate": at any time, the highest of (i) 12.0%
per annum, (ii) the rate of interest then applicable to the
Lease Debt plus 200 basis points and (iii) the Base Rate
plus 750 basis points.
"Overfunding Letter of Credit": the letter of credit
issued by Deutsche Bank pursuant to the terms of
Section 3.14(c) of the Construction Contract as security for
the performance by the Contractor of its obligations under
the Construction Contract, substantially in the form of
Exhibit T-2 to the Loan Agreement.
"Overfunding Letter of Credit Pledge Agreement": the
Overfunding Letter of Credit Pledge Agreement to be entered
into by the Partnership in favor of the Security Agent, for
the benefit of GE Capital and the Owner Trustee,
substantially in the form of Exhibit S-2 to the Loan
Agreement, as the same may be amended, supplemented or
otherwise modified from time to time.
"Owner Trustee": Shawmut Bank Connecticut, National
Association, a national banking association, in its capacity
as trustee under the Trust Agreement, and any successor
trustee thereunder.
"Panda": Panda Energy Corporation, a corporation
organized under the laws of the State of Texas.
"Panda Transfer Event": the earliest to occur of (a)
the date on which 100% of the capital stock of
Panda-Rosemary Corporation and PRC II Corporation has been
duly transferred to Holdings, (b) the date on which 100% of
the capital stock of all Subsidiaries of Panda (including
the General Partner and the Limited Partner) then directly
owned by Holdings has been duly transferred by Holdings to
Panda (or the date on which Holdings has been merged into
Panda such that each of Panda-Rosemary Corporation, PRC II
Corporation, the General Partner and the Limited Partner are
directly owned by the surviving company of such merger) and
(c) the date on which financial closing (and initial
funding) occurs by any Subsidiary or Subsidiaries of
Holdings (other than the Partnership or the General Partner
or the Limited Partner) with respect to the construction
financing of power project(s) having an aggregate net
capability rating of at least 225 megawatts and which, in
the reasonable judgment of GE Capital (and based upon pro
forma cash flows for such Projects(s) prepared by Panda and
reasonably acceptable to GE Capital), provide for equity
distributions to Holdings and/or Subsidiaries of Holdings
(in the case of non-wholly-owned Subsidiaries of Holdings,
counting only that portion of equity distributions
attributable to Holdings' ownership interest) in an amount
equal (on a net present value basis at a discount rate of
9%) to the equity distributions to Holdings and/or
Subsidiaries of Holdings for the Rosemary Project (based
upon actual and pro forma cash flows for the Rosemary
Project prepared by Panda and reasonably acceptable to GE
Capital). For the purposes of this definition, the term
"Subsidiary(ies) of Holdings" shall mean (i) any
corporation, partnership, association, joint venture,
limited liability company, or other business entity of which
more than 50% of the total voting power of shares of stock
or other ownership interests entitled to vote in the
election of the Person or Persons (whether directors,
managers, trustees or other Persons performing similar
functions) having the power to direct or cause the direction
of management and policies thereof, is owned or controlled,
directly or indirectly, by Holdings, (ii) any partnership of
which Holdings or any Subsidiary of Holdings is the sole
general partner, and (iii) any corporation, partnership,
association, joint venture, limited liability company or
other business entity organized outside the United States of
which Holdings or any Subsidiary of Holdings has the
contractual right (whether by agreement of the owners of
such entity or by the charter, articles of association or
other organizational document of such entity) (A) to elect
or appoint the Person or Persons (whether directors,
managers, trustees or other Persons performing similar
functions) having the power to direct or cause the direction
of management and policies thereof or (B) otherwise to
direct or cause the direction of management and policies
thereof.
"Participants": collectively, the Partnership, the
Limited Partner, the General Partner, Panda, Holdings, the
Contractor, the Power Purchaser, the Gas Supplier, the Gas
Transporters and each other Person who is a party to a
Project Document.
"Partner Equity Loans": Equity Loans which are made by
GE Capital to a Partner. The term "Partner Equity Loans"
shall not include any Equity Loans made by GE Capital to the
Partnership.
"Partners": collectively, the General Partner and the
Limited Partner.
"Partnership": Panda-Brandywine L.P., a Delaware
limited partnership.
"Partnership Agreement": the Agreement of Limited
Partnership of Panda-Brandywine L.P., dated as of March 25,
1991, between the General Partner and the Limited Partner,
as amended by Amendment No. 1 thereto dated as of December
2, 1993 and Amendment No. 2 thereto dated as of December 2,
1994, in the form delivered to GE Capital on the Initial
Loan Funding Date, as the same may be amended, supplemented
or otherwise modified from time to time in accordance with
the terms of such agreement and the Loan Agreement.
"Partnership Equity Loans": Equity Loans which are
made by GE Capital to the Partnership. The term
"Partnership Equity Loans" shall not include any Equity
Loans made by GE Capital to the Partners.
"Partnership Security Account": the special account
designated by that name established by the Security Agent
pursuant to subsection 2.2 of the Security Deposit
Agreement.
"Parts": appliances, parts, instruments,
appurtenances, accessories and equipment of whatever nature,
whether or not constituting Modifications.
"PBGC": the Pension Benefit Guaranty Corporation.
"PEPCO Closing Certificate": the certificate, in
substantially the form of Exhibit C to the Consent of the
Power Purchaser and otherwise in form and substance
satisfactory to GE Capital, to be delivered by the Power
Purchaser to GE Capital on the Initial Loan Funding Date.
"PEPCO Letters of Credit": as defined in subsection
2.9(a) of the Loan Agreement.
"Performance Letter of Credit": the Letter of Credit
referred to by that name in subsection 2.9(a) of the Loan
Agreement.
"Permitted Investments": as defined in the Security
Deposit Agreement.
"Permitted Liens": (i) the Liens created by the
Collateral Security Documents; (ii) Liens which arise in the
ordinary course of business (including materialmen's,
mechanics', workers', repairmen's and employees' Liens or
similar Liens which arise in connection with any tax,
assessment, governmental charge or levy) of the Partnership,
but not in connection with any Indebtedness, and which
are subject to a Contest; (iii) Liens arising out of
judgments or awards and which are subject to a Contest,
which are satisfactorily bonded or with respect to which at
the time an appeal or proceeding for review is being
prosecuted in good faith and for the payment of which
adequate cash reserves shall have been provided, (iv) Liens
arising out of the rights of the Power Purchaser arising
under the Power Purchase Agreement and the Transfer
Agreement and (v) the matters excepted on the title
insurance policies issued by the Title Company on the
Initial Loan Funding Date in favor of the Security Agent.
"Person": an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other
entity of whatever nature.
"Pipeline Facilities": collectively, the Columbia
Facilities and the construction work to be carried out by
the other Gas Transporters in order to furnish the gas
transportation service to the Facility.
"Plan": any pension plan which is covered by Title IV
of ERISA and in respect of which the Partnership or a
Commonly Controlled Entity is an "employer" as defined in
Section 3(5) of ERISA.
"Plans and Specifications": all plans and
specifications for the construction, operation and
maintenance of the Facility in accordance with the
Construction Contract, any other EPC Contract, the Power
Purchase Agreement and any Governmental Action or any Law.
"Pledge Agreements": the collective reference to the
General Partner Pledge Agreement, the Limited Partner Pledge
Agreement and the Stock Pledge Agreement.
"Power Purchase Agreement": the Power Purchase
Agreement, dated as of August 9, 1991, between the Power
Purchaser and the Partnership, as amended as of the date of
the Loan Agreement, in accordance with the First Amendment
to Power Purchase Agreement, dated as of September 16, 1994,
(provided that in the event the First Amendment to the Power
Purchase Agreement is not approved by any Governmental
Authority having jurisdiction, then in the original form of
the Power Purchase Agreement, together with such portions of
the First Amendment to the Power Purchase Agreement which
are determined to survive) in the form (including all
amendments and clarification letters relating thereto)
delivered to GE Capital on the Initial Loan Funding Date, as
the same may thereafter be amended, supplemented or
otherwise modified from time to time in accordance with the
terms of such agreement and the Loan Agreement.
"Power Purchaser" or "PEPCO": Potomac Electric Power
Company, a corporation organized under the laws of the
District of Columbia and the State of Virginia, or any
permitted successor or assign thereof.
"Present Assignment": the Present Assignment of Power
Purchase Agreement to be entered into substantially in the
form of Exhibit R to the Loan Agreement, as the same may be
amended, supplemented or otherwise modified in accordance
with its terms from time to time.
"Project": the Facility, the Site, the Easements and
all other easements, licenses, permits and other real
property interests owned by the Partnership or in which the
Partnership has any rights.
"Project Costs": the following costs and expenses
incurred by the Partnership in connection with the
development, design, engineering, acquisition, construction,
financing, testing, start-up and completion of the Project
which are referred to on Schedule 4 to the Loan Agreement:
(a) the price payable by the Partnership pursuant to the
Construction Contract and any Additional Construction
Contract; (b) all costs and expenses payable by the
Partnership in connection with the performance by it of its
covenants in the Construction Contract, any Additional
Construction Contract and all permitting costs associated
with the Project; (c) the cost of site acquisition and
improvement and the cost of the interconnection facilities
and other items required for the Project which are not
included within the work to be performed by the Contractor
under the Construction Contract; (d) initial organizational
expenses and other start-up, testing and training costs of
the Partnership (including employees' salaries and
benefits); (e) legal, accounting, engineering, development
and financial fees and expenses set forth on Schedule 4 to
the Loan Agreement, as such Schedule may revised from time
to time; (f) cost of insurance and bonds; (g) financing fees
and expenses, interest on the Loans and fees in respect of
the Letters of Credit accruing during construction; (h) ad
valorem, property and sales and use taxes (including
recordation and transfer taxes); (i) the construction
management fee payable to Panda in the amount of $1,000,000
on the Initial Loan Funding Date and the monthly management
fee payable to Panda in an amount equal to $111,000 per
month but not to exceed an aggregate amount equal to
$2,000,000; (j) third-party development costs; (k) an
amount equal to $750,000 in respect of the initial deposit
into the Warranty Maintenance Reserve Account, an amount
equal to $1,000,000 in respect of the initial deposit into
the Operation and Maintenance Reserve Account and an amount
equal to $2,400,000 in respect of the initial deposit into
the Rent Reserve Account; (l) after the payment of all other
Project Costs and to the extent of funds remaining in the
Loan Commitment, the Success Fee, if any, payable to Panda;
(m) payments to the Power Purchaser in respect of the
Partnership's interconnection security obligations pursuant
to subsection 4.2 of the Power Purchase Agreement; (n)
payments to Columbia as a "Contribution-in-aid-of
Construction" as provided in the Columbia Precedent
Agreement; (o) payments for such other reasonable costs and
expenses associated with the Project as GE Capital may
approve; and (p) principal and interest on the Development
Loans and all other amounts owing under the Development Loan
Agreement. There shall be excluded from the foregoing items
set forth in clauses (a) through (o) any amounts which have
been previously funded pursuant to the Development Loan
Agreement.
"Project Documents": the collective reference to the
Power Purchase Agreement, the Construction Contract, the
Raytheon Parent Guaranty, the Operation and Maintenance
Agreement, the Steam Agreements, the Gas Contracts, the
Effluent Water Agreement, the Partnership Agreement and each
Additional Project Document.
"Project Expenses": for any period, the sum (without
duplication) of the following items for the Partnership to
the extent that the same are due and owing or have actually
been paid by the Partnership and are necessary or desirable
for the standard operation and maintenance of the Project:
(i) the sum of all salaries, employee benefits and other
compensation, plus (ii) the cost of acquiring Fuel
(including payments under Sections 3.3 and 7.1 of the Gas
Supply Agreement and Section 6.1 of the Fuel Management
Agreement) and the cost of other materials and utilities
paid, including the transportation costs for Fuel and such
other materials and utilities paid, plus (iii) insurance
premiums, plus (iv) costs of operating and maintaining the
Project, plus (v) property and other Taxes (except income
taxes), plus (vi) fees for accounting, legal and other
professional services, plus (vii) general and administrative
expenses plus (viii) capital expenditures in the ordinary
course of business and set forth in the current Operating
Budget, plus (ix) all other cash expenditures approved by
GE Capital relating to operation, maintenance and
administrative costs of the Project plus (x) the aggregate
annual rental for leases of personal property other than
Capital Leases. There shall be excluded from the foregoing
clauses (i) through (x) payments with respect to federal,
state and local income taxes, payments of Rent or principal,
interest or fees with respect to the Loans or the funding of
the Reserve Accounts or payments in respect of any other
Indebtedness of the Partnership or any Partner.
"Project Revenues" or "Revenues": for any period the
sum of (i) all revenues received by the Partnership under
the Power Purchase Agreement, plus (ii) all other revenues
received by the Partnership from the sale of electricity,
heat or steam or from the sale of surplus natural gas
(including any payments received for "Banked Quantities"
under the Washington LDC Agreement) or from releases of firm
transportation capacity held by the Partnership under the
Gas Transportation Agreements, and all amounts received by
the Partnership as rent under the Steam Lease, plus
(iii) the amount of earnings by the Partnership in respect
of Permitted Investments during such period, to the extent
such earnings have been deposited into the Revenue Account,
plus (iv) any other revenues received by the Partnership.
"Project Schedule": a schedule of Project construction
substantially in the form of Schedule 5 to the Loan
Agreement.
"Prudent Utility Practice": at a given time, any of
the practices, methods and acts engaged in or approved by a
majority of independent power producers prior to such time
with respect to similar facilities owned and operated by
such independent power producers. "Prudent Utility
Practice" is not intended to be limited to the optimum
practice, method or act to the exclusion of all others, but
rather to a spectrum of possible practices, methods or acts
having due regard for, among other things, manufacturers'
warranties, engineering and operating considerations and the
requirements of Governmental Authorities and the
requirements of the Power Purchase Agreement and the other
Transaction Documents.
"Public Utility":
(a) any Person who has been deemed by any
Governmental Authority having jurisdiction to be, for
the purposes of the PURPA Regulations, (i) "primarily
engaged in the generation or sale of electric power
(other than electric power solely from cogeneration
facilities or small power production facilities)" or
(ii) an "electric utility" or an "electric utility
holding company" or a wholly or partially-owned direct
or indirect subsidiary of an "electric utility" or
"electric utility holding company"; or
(b) any Person who is, under any Law,
regulated as a "public utility", a "public service
corporation", an "electric utility", a "steam utility",
a "public utility holding company", an "affiliate" or
"subsidiary" of a "public utility" or "public utility
holding company", or any other type of entity subject
under any Law to regulation relating to public
utilities, including, without limitation:
(i) a "public utility"
under the Federal Power Act;
(ii) a "holding company",
an "affiliate" of a "holding company" or a
"subsidiary company" of a "holding company" under
the Holding Company Act;
(iii) a "public service
company", an "electric company" or a "steam
heating company" under Article 78, Public Service
Commission Law, of the Annotated Code of Maryland;
or
(iv) a "public utility"
or an "electric corporation" under Title 43,
Public Utilities, of part V of the District of
Columbia Code.
"PURPA": the Public Utility Regulatory Policies Act of
1978, as amended from time to time.
"PURPA Regulations": FERC's Regulations under Sections
201 and 210 of PURPA with regard to Small Power Production
and Cogeneration, 18 C.F.R. Part 292, as such regulations
may be amended or supplemented from time to time.
"QF Certification Application": as defined in
subsection 3.27 of the Loan Agreement.
"QF Certification Order": as defined in subsection
3.27 of the Loan Agreement.
"QF Efficiency Standard": the efficiency standard
specified in Section 292.205(a)(2)(i) of the PURPA
Regulations or any successor or analogous standard specified
under the PURPA Regulations that the Facility must meet to
be a Qualifying Facility.
"QF Minimum Steam Take": for purposes of each Annual
QF Status Certificate furnished pursuant to Section 6.30(b)
or (d) of the Loan Agreement, an amount of steam purchased
by the Steam Host under the Steam Sales Agreement during the
period covered by such certificate such that the Facility
would meet the QF Operating Standard for the Initial QF
Standards Measurement Period or the QF Standards Measurement
Period, as the case may be, even if both:
(i) the Steam Host were to purchase no more
steam during the remaining portion of such period; and
(ii) the Power Purchaser were to dispatch
the Facility under the Power Purchase Agreement such
that the Facility's electric generating capacity would
be fully loaded during every hour of the remaining
portion of such period at a level for each such hour
equal to the greater of (x) 230 megawatts and (y) the
Facility's reasonably predicated "Available Capacity",
as such term is defined under the Power Purchase
Agreement, for each such hour.
"QF Operating Standard": the operating standard
specified in Section 292.205(a)(1) of the PURPA Regulations
or any successor or analogous standard specified under the
PURPA Regulations that the Facility must meet to be a
Qualifying Facility.
"QF Recertification Order": as defined in subsection
6.29 of the Loan Agreement.
"QF Standards Measurement Period": (a) any calendar
year other than the calendar year in which the first day of
the Initial QF Standards Measurement Period occurred or (b)
any successor or analogous period specified under the PURPA
Regulations for the purpose of determining whether the
Facility is in compliance with the QF Operating Standard and
the QF Efficiency Standard and that does not include the
date the Facility first produces electricity.
"Qualifying Facility": a cogeneration facility that
meets all the requirements set forth in the PURPA
Regulations for such facility to be a "qualifying facility"
under such regulations.
"Quarterly Measurement Period": as of any Basic Rent
Payment Date, the three-month period (or, in the case of the
initial Quarterly Measurement Period, the two-month period)
ending one month prior to such Basic Rent Payment Date.
"Raytheon Parent Guaranty": the Parent Guaranty dated
as of March 30, 1995 executed by Raytheon Company in favor
of the Partnership, in the form delivered to GE Capital on
the Initial Loan Funding Date, as the same may thereafter be
amended, supplemented or otherwise modified from time to
time in accordance with the terms of such agreement and the
Loan Agreement.
"Registry of Deeds": the Office of Land Records for
Prince George's County and Charles County, Maryland.
"Renewal Rent": Fixed Rate Renewal Basic Rent.
"Renewal Term": Fixed Rate Renewal Term.
"Rent": the collective reference to Basic Rent,
Supplemental Rent and Renewal Rent.
"Rent Payment Date": a Basic Rent Payment Date.
"Rent Reserve Account": the special account designated
by that name established by the Security Agent pursuant to
subsection 2.2 of the Security Deposit Agreement.
"Reportable Event": any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder.
"Reportable Spill": a release, suspected or threatened
release, or spill of a Hazardous Substance which gives rise
to an obligation under applicable Law to give notice to any
Governmental Authority.
"Reporting Participant": each of the Partnership, the
General Partner, the Limited Partner, Panda and Holdings.
"Requested Specifications": as defined in subsection
6.33 of the Loan Agreement.
"Required Operation and Maintenance Reserve Balance":
from the Lease Closing Date until the fifth anniversary
thereof, $5,000,000; and for each calendar year from and
after the fifth anniversary of the Lease Closing Date, an
amount equal to the sum of (x) the Required Operation and
Maintenance Reserve Balance then in effect for the prior
calendar year (the "Existing Balance") plus (y) the product
of the GNP Deflator for the prior calendar year times the
Existing Balance.
"Required Rent Reserve Balance": at any time, the
greater of (a) $2,400,000 and (b) an amount equal to the sum
of the payments of Basic Rent scheduled to be due and owing
on the next two succeeding Rent Payment Dates.
"Required Warranty Maintenance Reserve Deposit":
$750,000.
"Reset Date": with respect to each Base Rate Loan, the
date on which such Base Rate Loan is made (or on which a
Eurodollar Loan is converted to such Base Rate Loan) and the
next-to-last Business Day of each calendar month thereafter.
"Revenue Account": the special account designated by
that name established by the Security Agent pursuant to
subsection 2.2 of the Security Deposit Agreement.
"Rosemary Project": the 180 megawatt, gas-fired,
combined cycle cogeneration facility located in Roanoke
Rapids, North Carolina owned by Panda-Rosemary, L.P.
"Sale Proceeds": the gross proceeds of any sale of the
Facility, or any part thereof, by the Lessor to any Person
paid in cash, less all costs and expenses incurred by the
Lessor in connection therewith.
"Scheduled Commercial Operation Date": as defined in
the Power Purchase Agreement.
"Security Agent": Shawmut Bank Connecticut, a national
banking association, or any bank acting as successor
security agent under the Security Deposit Agreement.
"Security Agreement": the Security Agreement to be
entered into between the Partnership and the Security Agent,
for the benefit of GE Capital and the Owner Trustee,
substantially in the form of Exhibit V to the Loan
Agreement, as the same may be amended, supplemented or
otherwise modified in accordance with its terms from time to
time.
"Security Deposit Agreement": the Security Deposit
Agreement to be entered into among the Partnership,
GE Capital, the General Partner, the Owner Trustee and the
Security Agent, substantially in the form of Exhibit O to
the Loan Agreement, as the same may be amended, supplemented
or otherwise modified from time to time.
"Severable Modification": any modification that can be
removed from the Facility without damaging the Facility or
diminishing the value, durability, performance
characteristics, useful life or utility of the Facility.
"Single Employer Plan": any Plan which is not a
Multiemployer Plan.
"Site": the land and easements located in Brandywine,
Maryland described in Schedule 1 to the Loan Agreement, on
which the Facility is to be located.
"Site Lease": the Site Lease to be entered into on the
Initial Loan Funding Date between the Partnership, as
lessor, and the Owner Trustee, as lessee, substantially in
the form of Exhibit M to the Loan Agreement, as the same may
be amended, supplemented or otherwise modified in accordance
with its terms from time to time.
"Site Sublease": the Site Sublease to be entered into
on the Initial Loan Funding Date between the Owner Trustee,
as sublessor, and the Partnership, as sublessee,
substantially in the form of Exhibit N to the Loan
Agreement, as the same may be amended, supplemented or
otherwise modified in accordance with its terms from time to
time.
"Special Payment Account": the special account
designated by that name established by the Security Agent
pursuant to Section 2.2 of the Security Deposit Agreement.
"Special Payments": the collective reference to (i)
all "Contract Price Discounts" paid by the Contractor
pursuant to Sections 5.02 and 5.04 of the Construction
Contract and all "liquidated damage" or similar payments
made by any other Contractor under any provision of any
other EPC Contract, (ii) all payments made by the Power
Purchaser under Subsection 15.3(b) of the Power Purchase
Agreement (whether made to the Security Agent or directly to
GE Capital) and (iii) all payments made by the Gas Supplier
(or any guarantor of the Gas Supplier) in respect of the
lump sum termination payment pursuant to Section 17.3 of the
Gas Supply Agreement.
"Special QF Loss Event": the loss of the Facility's
Qualifying Facility status solely as a result of the Owner
Trustee's ownership of the Facility causing the Facility not
to be in compliance with the ownership criteria of 18 C.F.R.
292.206.
"Specified Participant": each of the Partnership, the
Partners, Panda, the Steam Host, Holdings, the Contractor,
the Gas Supplier, each Gas Transporter and the Power
Purchaser, provided that after the date of expiration of the
warranties under the Construction Contract, the Contractor
shall cease to be a Specified Participant.
"Steam Agreements": the Steam Sales Agreement, the
Steam Lease and the Steam Lessee Security Agreement.
"Steam Host": Brandywine Water Company, a corporation
organized under the laws of the State of Delaware.
"Steam Lease": the Lease Agreement, dated as of the
Lease Closing Date, between the Partnership, as lessor, and
the Steam Host, as lessee, in the form of Exhibit W to the
Loan Agreement (including all amendments and clarification
letters relating thereto), as the same may thereafter be
amended, supplemented or otherwise modified from time to
time in accordance with the terms of such agreement and the
Loan Agreement.
"Steam Lessee Security Agreement": the Lessee Security
Agreement, dated as of the Initial Loan Funding Date,
between the Lessee (as steam lessor), the Steam Host and the
Security Agent, for the benefit of GE Capital and the Owner
Trustee, in the form of Exhibit X to the Loan Agreement, as
the same may be amended, supplemented or otherwise modified
from time to time.
"Steam Sales Agreement": the Steam Sales Agreement,
dated as of the Initial Loan Funding Date between the Steam
Host and the Partnership, in the form (including all
amendments and clarification letters relating thereto)
delivered to GE Capital on the Initial Loan Funding Date, as
the same may thereafter be amended, supplemented or
otherwise modified from time to time in accordance with the
terms of such agreement and the Loan Agreement and the Power
Purchase Agreement.
"Stipulated Loss Value": as of the Basic Term
Commencement Date or any Basic Rent Payment Date, as the
case may be, the percentage of Lessor's Cost set forth
opposite such date in Schedule D to the Facility Lease, as
adjusted pursuant to Section 3(d) of the Facility Lease.
Stipulated Loss Value as of any Basic Rent Payment Date
during any Renewal Term shall mean an amount equal to the
Fair Market Sales Value of the Facility as of the first day
of such Renewal Term, after deducting from such amount
depreciation to such Rent Payment Date calculated on a
straight-line basis from the first day of such Renewal Term
to the end of the estimated useful life of the Facility.
"Stock Pledge Agreement": the Stock Pledge Agreement
to be entered into by Holdings in favor of the Security
Agent, for the benefit of GE Capital and the Owner Trustee,
substantially in the form of Exhibit Q to the Loan
Agreement, as the same may be amended, supplemented or
otherwise modified from time to time.
"Stop-Work Order": any stop-work order issued by the
Partnership to any EPC Contractor, or any stop-work order
issued with respect to the Project by any Person, including,
without limitation, any Governmental Authority.
"Subsidiary": as to any Person, a corporation of which
shares of stock having ordinary voting power (other than
stock having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors
or other managers of such corporation are at the time owned,
or the management of which is otherwise controlled,
directly, or indirectly through one or more intermediaries,
or both, by such Person.
"Substantial Completion": substantial completion of
the Facility, which shall be deemed to have occurred when
the Date of Substantial Completion for the Facility shall
have occurred and the conditions described in clauses (a)
through (e) of the definition of "Date of Substantial
Completion" shall have been satisfied.
"Substantial Completion Certificate": a certificate
substantially in the form of Exhibit I-1 to the Loan
Agreement, signed by the Partnership.
"Substitute Eurodollar Rate": as defined in Section
2.7(d) of the Loan Agreement.
"Success Fee": the amount equal to the unused Loan
Commitment on the Lease Closing Date after the funding of
all other Project Costs (including any amounts funded into
the Reserve Accounts or into a completion account in respect
of punch list or similar items) incurred in connection with
the construction and start-up of the Project.
"Supplemental Rent": as defined in Section 3(b) of the
Facility Lease.
"Tax" or "Taxes": any and all fees (including, without
limitation, documentation, recording, license and
registration fees), taxes (including, without limitation,
net income, franchise, value added, ad valorem, gross
income, gross receipts, sales, use, rental, property
(personal and real, tangible and intangible) and stamp
taxes), levies, imposts, duties, charges, assessments or
withholdings of any nature whatsoever, general or special,
ordinary or extraordinary, together with any and all
penalties, fines, additions to tax and interest thereon.
"Tax Indemnity Agreement": the Tax Indemnity Agreement
to be entered into between the Partnership and GE Capital,
substantially in the form of Exhibit U to the Loan
Agreement, as the same may be amended, supplemented or
otherwise modified from time to time.
"Termination": as such term is defined in the Security
Deposit Agreement.
"Title Company": Chicago Title Insurance Company and
First American Title Insurance Company as co-insurers, or
such other title insurance company approved by GE Capital,
to insure the priority of the Lien of the Deed of Trust and
Security Agreement on (i) the Site and (ii) the Easements.
"Transaction Documents": the collective reference to
the Loan Documents, the Project Documents, the Site Lease,
the Site Sublease and, from and after the Lease Closing
Date, the other Lease Documents.
"Transfer": the transfer, by bill of sale or
otherwise, by the Lessor of all the Lessor's right, title
and interest in and to the Facility, the Site and the
Partnership's interest in the Easements, on an "as is, where
is with all faults" basis, free and clear of all Lessor's
Liens but otherwise without recourse, representation or
warranty, together with the due assumption by the transferee
of, and the due release of the Lessor and GE Capital from,
all the Lessor's and GE Capital's obligations under the
Transaction Documents by an instrument or instruments
satisfactory in form and substance to GE Capital.
"Transfer Agreement": The Agreement With Respect To
Transfers Of Interest in Panda-Brandywine, L.P., dated as of
August 8, 1991, between the Power Purchaser, the General
Partner and the Limited Partner, as the same may be amended,
supplemented or otherwise modified in accordance with the
terms of such agreement and the Loan Documents.
"Transfer Certificate": a certificate, in
substantially the form of Exhibit D to the Ascending Letter
of Credit or Exhibit D to the Overfunding Letter of Credit,
as the case may be.
"Transmission Facilities": as defined in the Power
Purchase Agreement.
"Transmission Facilities Site": as defined in the
Power Purchase Agreement.
"Treasury Index Rate": the rate per annum equal to the
sum of the average of the interpolated rates for United
States Treasury Notes with constant maturities equal to the
weighted average life of the Facility Lease (not counting
any renewals) (as published in Federal Reserve Statistical
Release H.15(519) Selected Interest Rates) for the four week
period ending on the most recent Friday which is at least 15
days prior to the Lease Closing Date.
"Trust Agreement": the Trust Agreement to be entered
into between GE Capital and the Owner Trustee, substantially
in the form of Exhibit Z to the Loan Agreement, as the same
may be amended, supplemented or otherwise modified from time
to time.
"Trust Estate": as defined in the Trust Agreement.
"Turbine Contract": the contract between the
Contractor and the Turbine Manufacturer providing for the
supply of the combustion and steam turbine generators and
associated parts and equipment to the Project.
"Turbine Manufacturer": the General Electric Company,
a corporation organized under the laws of the State of New
York, acting through its General Electric Power Systems
division.
"Turbine Warranty Termination Date": the date the
General Electric turbine warranty expires, as certified by
the Partnership to GE Capital, but no later than the second
anniversary of the Date of Final Completion.
"Value": as such term is defined in the Security
Deposit Agreement.
"Warranty Maintenance Reserve Account": the special
account designated by that name established by the Security
Agent pursuant to subsection 2.2 of the Security Deposit
Agreement.
"Washington": Washington Gas Light Company, a
corporation organized under the laws of the Commonwealth of
Virginia and the District of Columbia.
"Washington LDC Agreement": the Gas Transportation and
Supply Agreement, dated as of November 10, 1994, between
Washington and the Partnership, in the form (including all
amendments and clarification letters relating thereto)
delivered to GE Capital on the Initial Loan Funding Date, as
the same may thereafter be amended, supplemented or
otherwise modified from time to time in accordance with the
terms of such agreement and the Loan Agreement.
"Water Easement Maintenance Agreement": the Agreement
dated April 4, 1995 between the Partnership and Prince
George's County, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with the
terms of such agreement and the Loan Agreement.
"Withholding Taxes": as defined in subsection 2.14 of
the Loan Agreement.
"Work": any and all services, functions, duties,
responsibilities or other obligations to be undertaken and
performed by any EPC Contractor pursuant to any EPC
Contract, including, but not limited, to all "Work", as
defined in the Construction Contract, and the provision of
all labor, material and services utilized in the design,
construction, engineering, equipping and testing of the
Facility.
"Winter Heating Period": as defined in subsection 6.35
of the Loan Agreement.
EXHIBIT 10.25
NOTE
$215,000,000 New York, New York
April 10, 1995
FOR VALUE RECEIVED, the undersigned, PANDA-BRANDYWINE,
L.P., a Delaware limited partnership (the "Borrower"), hereby
unconditionally promises to pay to the order of General Electric
Capital Corporation ("GE Capital"), to GE Capital's account no.
50-205-776 (GECC Depositary Account), ABA #0210-0103-3 (Re: Panda-
Brandywine) at Bankers Trust Company, New York, New York, in
lawful money of the United States of America and in immediately
available funds, on the Construction Loan Maturity Date (as
defined in the Loan Agreement referred to below), the principal
amount of (a) TWO HUNDRED FIFTEEN MILLION DOLLARS ($215,000,000),
or, if less, (b) the aggregate unpaid principal amount of all
Loans made by GE Capital to the Borrower pursuant to subsection
2.1 of the Loan Agreement, as hereinafter defined. The Borrower
further agrees to pay interest in like money at such office on
the unpaid principal amount hereof from time to time outstanding
at the rates and on the dates specified in subsection 2.7 of the
Loan Agreement.
The holder of this Note is authorized to endorse on the
schedules annexed hereto and made a part hereof or on a
continuation thereof which shall be attached hereto and made a
part hereof the date and amount of each Loan made pursuant to the
Loan Agreement and the date and amount of each payment or
prepayment of principal thereof, each continuation or conversion
thereof and the length of each Interest Period with respect
thereto. Each such endorsement shall constitute prima facie
evidence of the accuracy of the information endorsed. The failure
to make any such endorsement shall not affect the obligations of
the Borrower in respect of such Loan.
This Note is the Note referred to in the Construction
Loan Agreement and Lease Commitment dated as of March 30, 1995
(as amended, supplemented or otherwise modified from time to
time, the "Loan Agreement"), between the Borrower, Panda
Brandywine Corporation and GE Capital, (b) is subject to the
provisions of the Loan Agreement and (c) is subject to mandatory
prepayment in whole or in part as provided in the Loan Agreement.
Unless otherwise defined herein, capitalized terms used herein
shall have the meanings given to such terms in the Loan
Agreement.
This Note is secured by liens on and security interests
in certain real and personal property of the Borrower, the
General Partner, the Limited Partner, Brandywine Water Company
and Holdings which have been granted by such parties to Shawmut
Bank Connecticut, National Association, as security agent of the
benefit of GE Capital, pursuant to the Collateral Security
Documents. Reference is hereby made to the Collateral Security
Documents for a description of the collateral securing this Note,
the terms and conditions upon which such liens and security
interests were granted and the rights of the holder of this Note
in respect thereof.
Upon the occurrence of any one or more of the Events of
Default, all amounts then remaining unpaid on this Note shall
become, or may be declared to be immediately due and payable, all
as provided in the Loan Agreement.
All parties now and thereafter liable with respect to
this Note, whether make, principal, surety, guarantor, endorser
or otherwise, hereby waive, presentment, demand, protest and all
other notices of any kind.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
PANDA-BRANDYWINE, L.P.
By: PANDA BRANDYWINE CORPORATION
its sole general partner
By:
Name: Robert W. Carter
Title:
EXHIBIT 10.26
SECURITY DEPOSIT AGREEMENT, dated as of March 30, 1995,
among PANDA-BRANDYWINE, L.P., a Delaware limited partnership, as
borrower and lessee (the "Partnership"), of which PANDA
BRANDYWINE CORPORATION, a Delaware corporation, is the sole
general partner (the "General Partner"), GENERAL ELECTRIC
CAPITAL CORPORATION, a New York corporation, as construction
lender and owner participant ("GE Capital"), SHAWMUT BANK
CONNECTICUT, NATIONAL ASSOCIATION, not in its individual
capacity but solely as owner trustee (in such capacity, the
"Owner Trustee") under the Trust Agreement (as defined below)
and SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national
banking association, as security agent hereunder (in such
capacity, the "Security Agent") for GE Capital and the Owner
Trustee.
W I T N E S S E T H:
WHEREAS, capitalized terms used herein
and not otherwise defined shall have the respective
meanings assigned thereto in Article I;
WHEREAS, in order to finance the cost of
of developing, constructing and equipping the Project,
the Partnership has entered into the Construction Loan
Agreement and Lease Commitment, dated as of March 30, 1995 (as
amended, supplemented or otherwise modified from time to time,
the "Loan Agreement"), among the Partnership, the General
Partner and GE Capital, pursuant to which GE Capital has
agreed, subject to the terms and conditions set forth therein,
to make loans (the "Loans") to the Partnership and to issue
letters of credit (the "Letters of Credit") for the account of
the Partnership;
WHEREAS, upon completion of construction of
the Project, and subject to the satisfaction of the conditions
precedent set forth in the Loan Agreement, GE Capital (acting
through the Owner Trustee) has agreed to purchase the Facility
from the Partnership and to lease the Facility back to the
Partnership pursuant to the Facility Lease;
WHEREAS, the obligations of the Partnership under the Loan
Agreement to GE Capital and under the Site Sublease and the Facility
Lease to the Owner Trustee, including its obligations to repay the Loans
with interest thereon, to repay the LOC Reimbursement
Obligations and to make payments of Rent, are secured by, among
other things, a first assignment of and prior perfected
security interest in all rights and property of the
Partnership, including all of the revenues of the Partnership,
to the Security Agent, as agent for GE Capital and the Owner
Trustee, pursuant to the terms and provisions of the Security
Agreement and the Deed of Trust and Security Agreement;
WHEREAS, in order to give effect to the foregoing, the parties
hereto are entering into this Agreement, pursuant to which (i)
GE Capital and the Owner Trustee appoint Shawmut Bank
Connecticut, National Association, to act as Security Agent
hereunder and the other Collateral Security Documents, to hold
all Collateral for the benefit of GE Capital and the Owner
Trustee and (ii) the Partnership agrees that its revenues will
be paid directly to the Security Agent, as agent for GE Capital
and the Owner Trustee, held by the Security Agent as collateral
security for the obligations of the Partnership to GE Capital
and the Owner Trustee, and distributed by the Security Agent as
provided herein;
WHEREAS, Shawmut Bank Connecticut, National
Association has agreed to act as security agent on behalf of GE
Capital and the Owner Trustee pursuant to the terms of this
Agreement and the other Collateral Security Documents; NOW,
THEREFORE, in consideration of the premises and of other good
and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
Definitions
Section 1.1 Capitalized terms used in this Agreement
shall, unless otherwise defined herein, have the respective meanings
assigned to such terms in Appendix A to this Agreement.
Section 1.2 Other Definitional Provisions.
(a) As used herein and in any certificate or other document
made or delivered pursuant hereto, accounting terms not defined herein
or in Appendix A and accounting terms partly defined herein or in Appendix A,
to the extent not defined, shall have the respective meanings
given to them under GAAP.
(b) The words "hereof," "herein" and
"hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement, and section,
schedule, exhibit and appendix references are to this Agreement
unless otherwise specified.
(c) References to agreements defined
herein or in Appendix A shall include such agreements
as they may be amended, supplemented or otherwise modified from
time to time in accordance with the provisions of the
Transaction Documents.
(d) Terms defined in Appendix A or
otherwise defined herein by reference to any other agreement,
document or instrument shall have the meanings assigned to them
in such agreement, document or instrument whether or not such
agreement, document or instrument is then in effect.
ARTICLE II
Appointment of Security Agent; Establishment of Accounts
Section 2.1 Appointment of Security Agent.
(a) Shawmut Bank Connecticut, National Association is
hereby appointed by GE Capital and the Owner Trustee as
security agent hereunder, under the Deed of Trust and Security
Agreement, under the Security Agreement, under the Pledge Agreements
and under the other Collateral Security Documents, and GE Capital and
the Owner Trustee hereby authorize Shawmut Bank Connecticut, National
Association, in its capacity as the Security Agent, to take such action on
their behalf under the provisions of this Agreement and the
other Collateral Security Documents and to exercise such powers
and perform such duties as are expressly delegated to the
Security Agent by the terms of this Agreement, together with such
other powers as are reasonably incidental thereto.
(b) Except as otherwise specifically provided in this Security
Deposit Agreement, upon the written instructions at any time
and from time to time of GE Capital, the Security Agent shall
take such of the following actions as may be specified in such
instructions: (i) exercise such election or option, or m ake
such decision or determination, or give such notice, consent,
waiver or the approval or exercise such right, remedy or power
or take such other action hereunder or under any other
Transaction Document or in respect of any part or all of the
Collateral as shall be specified in such instructions and as
are consistent with this Security Deposit Agreement and the
other Collateral Security Documents; (ii) take such action with
respect to, or to preserve or protect, the Collateral
(including the discharge o f Liens) as shall be specified in
such instructions and as are consistent with this Security
Deposit Agreement and the other Collateral Security Documents;
and (iii) take such other action in respect of the subject
matter of this Security Deposit Agreement and the other
Collateral Security Documents as is consistent with the terms
hereof, thereof and the other Transaction Documents. The
Security Agent shall have the righ t to request such written
instructions at any time and from time to time. The Security
Agent will execute and file or cause to be filed such
continuation statements with respect to financing statements
relating to the security interest created under the Collateral
Security Documents in the Collateral as may be specified from
time to time in written instructions of GE Capital (which
instructions may, by their terms, be operative only at a future
date and which shall be accompanied by the execution fo rm of
such continuation statements so to be filed). The Security
Agent hereby accepts the trust created by this Security Deposit
Agreement and to act as security agent hereunder and under
the Collateral Security Documents. (c) The Security Agent
agrees to accept all revenues, cash, payments, insurance and
condemnation proceeds, other amounts and Permitted Investments
to be delivered to or held by the Security Agent pursuant to
the terms of this Agreement. The Security Agent shall hold and
safeguard the Accounts (and the revenues, cash, payments,
insurance and condemnation proceeds, instruments, securities
and other amounts on deposit therein) during the term of this
Agreement and shall treat the revenues, cash, payments,
insurance and condemnation proceeds, instruments, securities
and other amounts in the Accounts as funds, instruments,
securities and other properties pledged by the Partnership to
the Security Agent as collateral securing the Obligations in
accordance with the provisions hereof.
Section 2.2 Creation of Accounts. The Security Agent hereby
establishes the following nine special, segregated and irrevocable cash
collateral accounts in the name of the Security Agent and for the benefit
of GE Capital and the Owner Trustee which shall be maintained
at all times until the termination of this Agreement: (a)
Revenue Account; (b) Operation and Maintenance Reserve Account;
(c) Rent Reserve Account; (d) Warranty Maintenance Reserve
Account; (e) Insurance and Condemnation Proceeds Account; (f)
Special Payment Account; (g) Partnership Security Account; (h)
Distribution Reserve Account; and (i) Current Account. All
moneys, investments and securities at any time on deposit in
any of the Accounts shall constitute collateral to be held in
the custody of the Security Agent for the purposes and on the
terms set forth in this Agreement.
Section 2.3 Security Interest.
(a) In order to secure the payment and performance by the
Partnership when due of all of the Obligations, this Agreement
is intended to create, and the Partnership hereby pledges to,
and creates in favor of the Security Agent, for the benefit of
GE Capital and the Owner Trustee, a prior perfected and
continuing security interest in all right, title and interest
of the Partnership in and to the Accounts, all cash, cash
equivalents, instruments, investments and other securities at
any time on deposit in the Accounts, all present and future
accounts, chattel paper, documents, general intangibles and
instruments (each as defined in the New York Uniform Commercial
Code) of the Partnership, all other rights of the Partnership
to receive the payment of money, including (without limitation)
all moneys due and to become due to the Partnership under the
Power Purchase Agreement, the Steam Sales Agreement, the Steam
Lease and any other contract of the Partnership for the sale of
electricity or steam or by-products produced by the Facility,
all other Project Revenues, all amou nts payable under
insurance policies maintained by the Partnership, all license
fees and all moneys due and to become due to the Partnership
under the Construction Contract and the Gas Supply Contract,
and all proceeds of any of the foregoing.
(b) All moneys, cash equivalents, instruments, investments and
securities at any time on deposit in any of such Accounts shall constitute
collateral security for the payment and performance by the
Partnership when due of the Obligations and shall at all times
be subject to the sole dominion and control of the Security
Agent, and shall be held in the custody of the Security Agent
for the purposes of, and on the terms set forth in, this
Agreement.
(c) The Partnership shall not have any rights or powers with
respect to any amounts in the Accounts or any part
thereof except (i) as provided in Article IV hereof and (ii)
the right to have such amounts applied in accordance with the
provisions hereof.
Section 2.4 Location of the Accounts. The Accounts
shall be maintained by the Security Agent at its corporate
trust office located at 777 Main Street, Hartford, Connecticut
06115, until the Security Agent gives written notice to the
other parties to this Agreement setting forth a different
location of the Accounts, in the manner specified in Section
9.7; provided, however, that such location shall be in
Hartford, Connecticut or New York City.
ARTICLE III
Deposits into Accounts
Section 3.1 Deposits. (a) The Partnership shall instruct
each Person from whom it receives or is entitled to receive any
Project Revenues to pay such Project Revenues directly to the
Security Agent for deposit in the Revenue Account, and if the
Partnership shall receive any Project Revenues it shall delive
r such Project Revenues in the exact form received (but with
the Partnership's endorsement, if necessary) to the Security
Agent for deposit in the Revenue Account not later than the
second Business Day after the Partnership's receipt thereof.
The Security Agent shall have the right to receive all Project
Revenues directly from the Persons owing the same. All Project
Revenues received by the Security Agent shall be deposited in
the Revenue Account. (a) The Partnership shall instruct the
Contractor, the Power Purchaser, the Gas Supplier and any other
applicable Per son to make all Special Payments (identifying
them as such) to the Security Agent for deposit in the Special
Payment Account (provided that the Partnership may instruct the
Power Purchaser to make payments pursuant to Subsection 15.3
of the Power Purchase Agreement directly to GE Capital), and if
the Partnership shall receive any Special Payments it shall
deliver such Special Payments in the exact form received (but
with the Partnership's endorsement, if necessary) to the
Security Agent for deposit in the Special Payment Account not
later than the second Business Day after the Partnership's
receipt thereof. The Security Agent shall have the right to
receive all Special Payments directly from the Persons owing
the same. All Special Payments received by the Security Agent
shall be deposited in the Special Payment Account.
(b) The Partnership shall deliver to the Security Agent all payments
in respect of casualty to or loss of property receive d by it from
any insurer pursuant to the property or casualty insurance
maintained by the Partnership and all awards and proceeds in
respect of a taking in the exact form received, bu t with the
Partnership's endorsement, if necessary ("Insurance a nd
Condemnation Proceeds"), for deposit in the Insurance and
Condemnation Proceeds Account not later than the second Busine
ss Day after the Partnership's receipt thereof.
(c) On the Lease Closing Date, the Lessee shall deposit in the
Operation and Maintenance Reserve Account an amount equal to the Initial
Operation and Maintenance Reserve Deposit.
(d) On the Lease Closing Date, the Lessee shall deposit in the
Warranty Maintenance Reserve Account an amount equal to the Required
Warranty Maintenance Reserve Deposit.
(e) On the Lease Closing Date, the Lessee shall deposit in the
Rent Reserve Account an amount equal to the Initial Rent Reserve Deposit.
Section 3.2 Information to Accompany Amounts Delivered to Security
Agent; Deposits Irrevocable. (a) All amounts delive red to the
Security Agent by the Partnership shall be accompanied by
information in reasonable detail specifying the source of the
amounts and the Account or Accounts into which such amounts are
to be deposited. If the Security Agent shall be unable to
determine the source of any payments received or the Account or
Accounts into which such payments are to be deposited, the
Security Agent shall hold such amounts in the Revenue Account
until identified by the Partnership and GE Capital.
(b) Any deposit made into any Account hereunder shall,
absent manifest error, be irrevocable and the amount of such deposit and
any instrument or security held in such Account hereunder and all
interest thereon shall be held in trust by the Security Agent
and applied solely as provided herein.
Section 3.3 Books of Account; Statements. (a) The Security Agent
shall maintain books of account on a cash basis and reco rd therein all
deposits into and transfers to and from the Accoun ts and all investment
transactions effected by the Security Agent pursuant to Article
V.
(b) Not later than the tenth Business Day of each month,
commencing with the first month to occur after the earlier of
(i) the Commercial Operation Date (as certified to the Security
Agent by GE Capital or the Partnership) and (ii) the date on
which any Special Payments or Insurance and Condemnation
Proceeds are received, the Security Agent shall deliver to the
Partnership and GE Capital a statement setting forth the
transactions in each Account during the preceding month and
specifying the Project Revenues, Special Payments, Insurance
and Condemnation Proceed s Deposits, cash equivalents and other
amounts held in each Acco unt at the close of business on the
last Business Day of the preceding month and the Value thereof
at such time.
ARTICLE IV
Payments from Accounts
Section 4.1 Revenue Account--Payments On and Prior to the Lease
Closing Date. On and prior to the Lease Closing Date, the Security Agent
shall, upon receipt by it of a certificate signed by an Authorized Officer
of the Partnership in substantially the form of Exhibit A (and
countersigned by GE Capital) instructing it to do so, apply
cash available in the Revenue Account to the payment of the
Project Costs specified in such certificate or to such other
costs or amounts or purposes (which may include the funding of
a working capital reserve) as may be specified in such
certificate.
Section 4.2 Revenue Account--Monthly Transfers After the
Lease Closing Date. (a) On or before the twentieth day of each
month (or if such day is not a Business Day, the immediately
preceding Business Day), the Partnership shall deliver to GE
Capital a Project Certificate in substantially the form of
Schedule 1 signed by an Authorized Officer of the Partnership
requesting distributions to be made from the Revenue Account.
If GE Capital approves such Project Certificate, GE Capital
shall countersign such Project Certificate on the Business Day
prior to the applicable Monthly Transfer Date and the
Partnership shall cause such countersigned Project Certificate
to be delivered to the Security Agent. On the twenty-fifth day
of each month (or if such date is not a Business Day, the
immediately succeeding Business Day) (each such date, a
"Monthly Transfer Date"), the Security Agent shall distribute,
from the cash available in the Revenue Account, (i) (A)
directly to each Person to which an amount in excess of
$100,000 is due and payable, the amounts identified as Project
Expenses then due and owing in Item 1 of the Project
Certificate referred to above, or (B) to the Partnership for
the benefit of the Persons entitled thereto, all other Project
Expenses then due and owing in Item 1 of such Project
Certificate and (ii) to the Current Account, the amounts
identified as Project Expenses expected to be due and owing
prior to the next Monthly Transfer Date in Item 2 of such Project
Certificate. Project Expenses owing to the Gas Supplier, the
Operator, the Gas Transporters and for fuel supplies shall, to
the extent sufficient funds are not on deposit to satisfy all
Project Expenses set forth in such Project Certificate, take
priority over all other Project Expenses.
(b) For purposes of this Section 4.2, cash available in the
Revenue Account shall not include any check or other instrument which may be
deposited therein until the final collection thereof.
Section 4.3 Revenue Account--Quarterly Transfers After the Lease
Closing Date. On each Basic Rent Payment Date, the Security Agent shall
distribute from the cash available in the Revenue Account
(after making any distribution required by Sections 4. 2 and
4.4) the following amounts in the following order of priority:
first, to GE Capital, the amount of all fees payable pursuant
to subsection 2.11 of the Loan Agreement, which GE Capital
certifies to the Security Agent to be due and payable on such
date; second, to the Owner Trustee (or, so long as GE Capital
shall be the sole beneficiary of the trust established pursuant
to the Trust Agreement, directly to GE Capital), the amount
of Basic Rent which GE Capital certifies to the Security Agent
to be due and payable on such date; third, to GE Capital, the
amount, if any, equal to the principal (excluding any mandatory
prepayments thereof), interest, fees and other amounts which GE
Capital certifies to the Security Agent to be due and payable
in respect of any Partnership Equity Loans; fourth, to the
Operation and Maintenance Reserve Account, the amount certified
to the Security Agent by an Authorized Officer of the
Partnership (and countersigned by GE Capital) required to be
deposited therein pursuant to Sections 7(b)(i) and 7(b)(iii) of
the Facility Lease; fifth, to the Rent Reserve Account, the
amount certified to the Security Agent by an Authorized Officer
of the Partnership (and countersigned by GE Capital) required
to be deposited therein pursuant to Sections 7(c)(i) and
7(c)(iii) o f the Facility Lease; sixth, to GE Capital, the
amount, if any, equal to the required prepayment of principal
of the Partnership Equity Loa ns which GE Capital certifies to
the Security Agent to be due and payable; seventh, to GE
Capital, the amount, if any, equal to the principal (including
any mandatory prepayments thereof), interest, fees and other
amounts which GE Capital certifies to the Security Agent to be
due and payable in respect of any Partner Equity Loans; eighth,
if the conditions precedent to cash distributions to the
Partners set forth in subsection 7.3 of the Loan Agreement are
not satisfied as of such Basic Rent Payment Date (as set forth
in a certificate of GE Capital to the Security Agent), to the
Distribution Reserve Account, an amount equal to the lesser of
(x) the remainder of the cash available in the Revenue Account
and (y) Cash Available for Distributions for the immediately
preceding Quarterly Measurement Period; and ninth, if and to
the extent permitted pursuant to subsection 7.3 of the Loan
Agreement (as set forth in a certificate of an Authorized
Officer of the Partnership and countersigned by GE Capital), to
the Partnership Security Account, an amount equal to the lesser
of (x) the remainder of the cash available in the Revenue
Account and (y) Cash Available for Distributions for the
immediately preceding Quarterly Measurement Period.
Section 4.4 Supplemental Rent. On any date when due, the Security
Agent, upon receipt of a certificate signed by an Authorized Officer
of the Partnership or GE Capital, in substantially the form of
Exhibit B (and in the case of a certificate signed by the
Partnership, countersigned by GE Capital), shall promptly pay
to the Owner Trustee or such other Person as may be entitled
thereto the amount (to the extent of cash available in the
Revenue Account) equal to the amount of Supplemental Rent
(other than amounts specifically provided for in Section 4.3),
including the fees and expenses of the Security Agent and the
Owner Trustee, then due and payable pursuant to Section 3(b) of
the Facility Lease and not otherwise paid or payable from
amounts on deposit in the Insurance and Condemnation Proceeds
Account or the Special Payment Account, as specified in such
certificate.
Section 5.5 Rent Reserve Account. If, on any Basic Rent
Payment Date, the cash available in the Revenue Account, the
Distribution Reserve Account and the Partnership Security
Account is insufficient to make the payment obligations set
forth in clauses second and third of Section 4.3 on such Basic
Rent Payment Date, the Security Agent shall immediately notify
GE Capital and GE Capital, at its option, may direct the
Security Agent (by delivering a certificate in substantially
the form of Exhibit C) to transfer to the Owner Trustee (or to
GE Capital, if GE Capital is the sole beneficiary of the trust
established pursuant to t he Trust Agreement or if the
deficiency is in the payment obligations set forth in clause
third of Section 4.3) the amount (to the extent cash is
available in the Rent Reserve Account) equal to the amount of
any deficiency in the payment obligations set forth in clauses
second and third of Section 4.3 on such Basic Rent Payment
Date.
Section 4.6 Operation and Maintenance Reserve Account. Within
three Business Days after receipt by the Security Agent of a
certificate, which (a) states that a drawing has been made und
er the O&M Letter of Credit or (b) includes a list of requested
disbursements and invoices and other supporting documents as m
ay be necessary to properly document all such disbursements,
which certificate is signed by GE Capital (in the case of
clause (a) ), or by an Authorized Officer of the Partnership
and countersign ed by GE Capital (in the case of clause (b)),
substantially in the form of Exhibit D hereto, and, in the
case of clause (b), so l ong as no Lease Default or Lease Event
of Default shall have occurred and be continuing (as set forth
in such certificate), funds on deposit in the Operation and
Maintenance Reserve Account shall be distributed to GE Capital
or to the Partnership or the payee(s), as the case may be, in
the manner, in the amount and at the addresses specified in
such certificate.
Section 4.7 Release of Excess Amounts. If, as of any
Basic Rent Payment Date, (i) an amount is on deposit in the
Rent Reserve Account or the Operation and Maintenance Reserve
Account in excess of the Required Rent Reserve Balance or the
Required Operation and Maintenance Reserve Balance, as the case
may be, as the result of the actual realization of income or
gain on the amounts on deposit in such Account, (ii) no Lease
Default or Lease Event of Default has occurred and is
continuing and (iii ) the Security Agent shall have received a
certificate signed by an Authorized Officer of the Partnership
and countersigned by GE Capital, substantially in the form of
Exhibit E, certifying as to such matters, then the Security
Agent shall distribute any such excess amounts to the Revenue
Account.
Section 4.8 Special Payment Account. (a) All Special Payments
deposited in the Special Payment Account constituting liquidated
damages (Contract Price Discount) under Section 5.04 of the
Construction Contract shall be applied by GE Capital to the
prepayment of the Loans as provided in subsection 2.6(b) of the
Loan Agreement (provided that all such liquidated damages
received after the Lease Closing Date shall be applied by GE
Capital to the retroactive reduction of Lessor's Cost) and, in
the case of Special Payments constituting liquidated damages
(Contract Price Discount) under Section 5.02 of the Construction
Contract, shall, subject to Section 4.14 of this Agreement,
be applied by GE Capital to the payment of accrued and unpaid
interest on the Loans and to such other items which are due and
owing as GE Capital may specify in writing.
(a) All Special Payments deposited in the Special Payment
Account constituting payments by the Power Purchaser pursuant to
Subsection 15.3(b) (whether in respect of costs, expenses or fees) of
the Power Purchase Agreement shall be applied by GE Capital to the
prepayment of the Loans and the LOC Reimburseme nt Obligations
and the cash collateralization of the Letters of Credit as
provided in subsection 2.6(c) of the Loan Agreement.
(b) All Special Payments deposited in the Special Payment Account
constituting payments by the Gas Supplier pursuant to Section
17.3 of the Gas Supply Agreement shall, subject to Section 4.14
of this Agreement, be applied by the Partnership with the
consent of GE Capital to the costs of entering into a
replacement gas supply agreement and to such other related costs
as shall be approved by GE Capital in writing.
Section 4.9 Partnership Security Account. (a) To the extent that at
any time the cash then available in the Revenue Account is
insufficient to make any of the payments, deposits or transfers
contemplated by Sections 4.1, 4.2, 4.3 and 4.4, the Security
Agent shall from and to the extent of the cash available in the
Partnership Security Account withdraw such amounts from the
Partnership Security Account as directed by GE Capital and make
the aforesaid payments, deposits and transfers.
(b) Within three Business Days after each Basic Rent Payment
Date, if the Partnership has delivered a certificate signed by an Authorized
Officer of the Partnership and countersigned by GE Capital,
substantially in the form of Exhibit F hereto, certifying that
the conditions precedent to cash distributions to the Partners
set forth in subsection 7.3 of the Loan Agreement have been
satisfied, the Security Agent shall distribute to the
Partnership the cash then available in the Partnership Security
Account.
Section 4.10 Distribution Reserve Account. (a) If, as of
any Basic Rent Payment Date after the issuance of the Equity
Loans, the Security Agent shall have received a certificate of
an Authorized Officer of the Partnership or GE Capital (and in
the case of a certificate of the Partnership, countersigned by
GE Capital) that the Operating Cash Flow Ratio for each of the
two Quarterly Measurement Periods immediately preceding such
Basic Rent Payment Date was less than 1.20 to 1, the Security
Agent shall, subject to any required applications taking
precedence pursuant to paragraph
(b) below, apply the amounts on deposit in the Distribution
Reserve Account to the prepayment of the remaining installments of
principal of the Equity Loans in the inverse order of maturity, as specified
in a certificate from GE Capital to the Security Agent. (a) To the
extent that at any time the cash then available in the Revenue
Account is insufficient to make any of the payments, deposits
or transfers contemplated by Sections 4.1, 4.2, 4.3 a nd 4.4,
the Security Agent shall from and to the extent of the cash
available in the Distribution Reserve Account withdraw such
amounts from the Distribution Reserve Account as directed by GE
Capital and make the aforesaid payments, deposits and
transfer s.
(c) If, as of any Basic Rent Payment Date, the
Security Agent shall have received a certificate of an
Authorized Officer of the Partnership (and countersigned by GE
Capital) that (i) the Operating Cash Flow Ratio for each of the
two Quarterly Measurement Periods immediately preceding the
date of such certificate was greater than 1.20 to 1 and
provided that no Le ase Default or Lease Event of Default shall
have occurred and be continuing (as set forth in such
certificate), the Security Ag ent shall transfer the amounts on
deposit in the Distribution Reserve Account to the Revenue
Account.
Section 4.11 Insurance and Condemnation Proceeds Account. (a)
All cash, cash equivalents, instruments, investments and
securities at any time on deposit in the Insurance and
Condemnation Proceeds Account, including all interest or other
income earned with respect thereto, are herein called the
"Insurance and Condemnation Proceeds Deposits".
(b) The Insurance and Condemnation Proceeds Deposits shall be
accumulated in the Insurance and Condemnation Proceeds Account
and held therein until paid to or upon the order of the
Partnership as provided in paragraph (c) of this Section 4.11,
or paid to GE Capital as provided in paragraph (d) or (e) of
this Section 4.11, or returned to the Partnership as provided
in Section 9.2.
(c) (i) If the amount of Insurance and Condemnation Proceeds
Deposits of the Partnership is less than $500,000, such amount shall,
subject to the provisions of paragraphs (d) and (e) of this Section 4.11,
be paid over to or upon the order of the Partnership, as the case may be, to
reimburse it for, or to pay, the cost of repairing, rebuilding
or otherwise replacing the damaged or destroyed or lost or
condemned property in respect of which such moneys were
received, upon the receipt by the Secur ity Agent of a
certificate of an Authorized Officer of the Partnership,
countersigned by GE Capital, (A) containing the plans and
specifications setting forth in reasonable detail the work
done or proposed to be done and materials purchased or to be
purchased by way of the renewal, repair, rebuilding or other
replacement of the damaged or destroyed or lost or condemned
property and (B) stating the specific amount requested to be paid
over to or upon the order of the Partnership or that such
amount is requested to reimburse the Partnership as the case
may be, for, or to pay, costs actually incurred to repair,
rebuild or replace property and that such amount, together with
amounts remaining in the Insurance and Condemnation Proceeds
Account for such purpose and other funds of the Partnership
available for such purpose, are sufficient to pay in full the
costs of such renewal, repair, rebuilding or other replacement.
GE Capital shall countersign such certificate if (w) no Lease
Default or Lease Event of Default has occurred and is
continuing, (x) GE Capital shall have received an opinion of
counsel, satisfactory to it, stating that all Governmental
Actions required in connection with the work done or proposed
to be done have been obtained, (y) in the reasonable opinion of
GE Capital and GE Capital's Representative, the matters
referred to in such certificate can be accomplished in the
manner provided for in such certificate and (z) GE Capital
shall have received (I) evidence of any lien waivers requested
to be obtained by it, a nd (II) evidence, satisfactory to GE
Capital, that the Lien of th e Collateral Security Documents is
in full force and effect; or (i) if the amount of Insurance and
Condemnation Proceeds Deposits is more than $500,000, such
amount shall, subject to the provisions of paragraphs (d) and
(e) of this Section 4.11, be paid over to the Persons entitled
thereto from time to time (as set forth in the certificate
referred to below) to pay the cost of repairing, rebuilding or
otherwise replacing the damaged or destroyed or lost or
condemned property in respect of which such moneys were
received, upon the receipt by the Security Agent of a
certificate of an Authorized Officer of the Partnership
countersigned by GE Capital, (A) containing the plans and
specifications setting forth in reasonable detail the work done
or proposed to be done and the materials purchased or to be
purchased by way of the renewal, repair, rebuilding or other
replacement of the damaged or destroyed or lost or condemned
property and (B) stating the specific amounts requested to be
paid, the Persons to whom and the dates on which such amounts
are to be paid, that such amounts will be used to pay costs
actually incurred to repair, rebuild or replace property and
that such amounts, together with amounts remaining in the
Insurance and Condemnation Proceeds Account for such purpose
and other funds of the Partnership available for such purpose,
are sufficient to pay in full the costs of such renewal,
repair, rebuilding or other replacement. GE Capital shall
countersign such certificate if (w) no Lease Default or Lease
Event of Default has occurred an d is continuing, (x) GE
Capital shall have received an opinion of counsel,
satisfactory to it, stating that all Governmental Actions
required in connection with the work done or proposed to be
done have been obtained, (y) in the reasonable opinion of GE
Capital and GE Capital's Representative, the matters referred
to in such certificate can be accomplished in the manner
provided for in such certificate and (z) GE Capital shall have
received (I) evidence of any lien waivers requested to be
obtained by it, and (II) evidence, satisfactory to GE Capital,
that the Lien of the Collateral Security Documents is in full
force and effect; or (ii) In the event that any amounts remain
in the Insurance and Condemnation Proceeds Account after
application thereof in accordance with this paragraph (c), the
Security Agent shall either apply such Insurance and
Condemnation Proceeds Deposits to the payment of the
Obligations or in accordance with Section 9(g)(iii) of the
Facility Lease, in accordance with the instructions of GE
Capital. (c) If GE Capital shall at any time notify the
Security Agent that an Event of Loss has occurred, then, unless
the Project is being repaired in accordance with Section
9(c)(i) of the Facility Lease, the Security Agent shall
promptly withdraw the Insuranc e and Condemnation Proceeds
Deposits from the Insurance and Condemnation Proceeds Account
and deliver the same to GE Capital to be applied by GE Capital
to the payment of the Obligations in accordance with the
provisions of the Loan Agreement, the Facility Lease and the
Collateral Security Documents. (d) If GE Capital shall at any
time notify the Security Agent that an Event of Default or a
Lease Event of Default has occurred and is continuing, then
the Security Agent shall promptly withdraw the Insurance and
Condemnation Proceeds Deposits from the Insurance and
Condemnation Proceeds Account and apply the same to the payment
of the Obligations in accordance with the provisions of the
Loan Agreement, the Facility Lease and the Collateral Security
Documents, as instructed in writing by GE Capital.
Section 4.12 Warranty Maintenance Reserve Account.
(a) Within three Business Days after receipt by the Security Agent of a
certificate, which includes a list of requested disbursements and invoices
and other supporting documents as may be necessary to properly
document all such disbursements, signed by an Authorized
Officer of the Partnership and countersigned by GE Capital,
substantially in the form of Exhibit G hereto, and so long as
no Lease Default or Lease Event of Default shall have occurred
and be continuing (as specified in such certificate), funds on
deposit in the Warranty Maintenance Reserve Account shall be
distributed to the Turbine Manufacturer in the manner and in the
amount and at the addresses specified in such certificate.
(b) Upon receipt of a certificate signed by an Authorized
Officer of the Partnership or GE Capital (and in the case of a
certificate signed by the Partnership, countersigned by GE
Capital) certifying that the warranty period in respect of the
Turbine Contract, including any extensions thereof, has expired,
and provided that no Lease Default or Lease Event of Default
shall have occurred and be continuing (as specified in such
certificate), the Security Agent shall promptly transfer the
amounts on deposit in the Warranty Maintenance Reserve Account
to the Revenue Account.
Section 4.13 Current Account. The Security
Agent shall pay, from and to the extent of cash available in
the Current Account and as set forth in an officer's
certificate signed by an Authorized Officer of the Partnership
(and countersigned by GE Capital), (i) directly to each Person
to which an amount in excess of $100,0 00 is due and payable,
the amounts previously identified as Project Expenses in Item
2 of the most recently delivered Project Certificate which are
then due and owing, or (ii) to the Partnership for the benefit
of the Persons entitled thereto, all other such Project
Expenses previously identified in Item 2 of the most recently
delivered Project Certificate which are then due and owing.
Section 4.14 Defaults. Any other provision contained in this Agreement
to the contrary notwithstanding, upon receipt by the Security
Agent of written notice from GE Capital stating that an Event
of Default or Lease Event of Default has occurred and is
continuing, the Security Agent shall thereafter distribute cash
from the Accounts only upon the express written instructions
of GE Capital (which instructions may provide that such
amounts be applied to the payment of the Obligations as GE
Capital sees fit) until notified in writing by GE Capital that
any such Event of Default or Lease Event of Default has been
waived by GE Capital or the Owner Trustee or has been cured.
Section 4.15 Certain Payments. Any other provision contained in this
Agreement to the contrary notwithstanding, in the event that
on any Basic Rent Payment Date there are insufficient funds on
deposit in any Account to pay principal, interest, fees,
distributions and/or other amounts due and payable from such
Account on such Basic Rent Payment Date to GE Capital or to the
Owner Trustee, as the case may be, and thereafter funds are
deposited into the Revenue Account, the Security Agent shall
distribute such funds to GE Capital or to the Owner Trustee, as
the case may be, for the payment of such principal, interest,
fees or other amounts, such payments to be made in the same order
of priority as they would have been made had such funds
been on deposit in the applicable Account on such Basic Rent
Payment Date.
Section 4.16 Delivery of Officer's Certificates; Timing
of Payments. (a) Each of the certificates of an Authorized Officer
required to be delivered hereunder shall be delivered not
later than 12:00 noon, New York City time, on the Business Day
immediately prior to the day on which the Security Agent is
required to make transfers hereunder. Any certificate of an
Authorized Officer delivered later than the time specified herein
shall nevertheless be considered valid and shall be honored
by the Security Agent on or as promptly after the date
otherwise specified herein for payment as is practicable,
subject to the availability of cash in the applicable Account.
(b) Subject to (i) the timely receipt of a certificate of an
Authorized Officer as set forth in Section 4.16(a), (ii) the
availability of cash in the applicable Account and (iii) other
circumstances beyond the control of the Security Agent, the
Security Agent shall make any payment hereunder required (except
for transfers between Accounts) by means of wire transfer of
immediately available funds, to the address of the payee(s) set
forth in the applicable certificate, to be received prior to
2 :00 p.m., New York City time, on the date specified herein
for such payment.
ARTICLE V
Investment
Section 5.1 Investment. (a) Any cash held by the Security Agent in
any Account shall be invested by the Security Agent from time to time as
directed in writing by the Partnership (or, if GE Capital shall have
notified the Security Agent that a Default, Event of Default, Lease Default
or Lease Event of Default has occurred and is continuing, by GE
Capital) in Permitted Investments. Any income or gain realized
as a result of any such investment shall be held as part of
the applicable Account and reinvested as provided herein. Any
income tax payable on account of any such income or gain shall
be paid by the Partnership or its Affiliates. Any such
investment may be sold (without regard to maturity date) by
the Security Agent whenever necessary to make any distribution
required by this Agreement. The Security Agent shall have no
liability for any loss resulting from any such investment or
sale thereof other than by reason of its willful misconduct or
negligence. The Security Agent will promptly notify GE Capital
and the Partnership of any loss resulting from any such
investment or sale and GE Capital, in its sole discretion, may
instruct the Security Agent to, and the Security Agent shall,
reimburse the affected Account from the Revenues received
pursuant to Section 4.2 hereof.
(b) The term "Permitted Investments" means (i) obligations of,
or guaranteed as to the interest and principal by, the United States
Government or any agency thereof; (ii) open market commercial paper, with a
maturity of not longer than ninety (9 0) days, of any
corporation incorporated under the laws of the United States or
any state thereof rated "prime-1" or its equivalent by Moody's
Investors Service, Inc. or "A-1" or its equivalent by Standard
& Poor's Ratings Group; (iii) bankers acceptances or
certificates of deposit issued by any bank rated "Aa" or "AA"
or better by Moody's Investors Service, Inc. or Standard &
Poor's Ratings Group, and having a maximum maturity of one (1)
year; (iv) any obligations of the Security Agent, any bank
rated "A" or better by Moody's Investors Service, Inc. or
Standard & Poor's Ratings Group, in respect of the repurchase
of obligations of the type described in clause (i) which
obligati on is secured by obligations of the type described in
clause (i) or by any one or more certificates of deposit of the
type described in clause (iii) hereof; (v) federally insured
demand deposit accounts with the Security Agent and banks
having capital, surplus and undivided profits of at least One
Billion dollars ($1,000,000,000) that are members of the
Federal Reserve Syste m of the United States; or (vi) a money
market fund registered under the Investment Company Act of
1940, as amended from time to time, the portfolio of which is
limited to United States government obligations and United
States government agency obligations (bearing the full faith
and credit of the United States government); provided, that all
funds in the Accounts shall not at any time be invested in
Permitted Investments wit h a maturity of greater than one (1)
year or with an average maturity, calculated on a weighted
average basis, of more than six (6) months; and provided,
further, that with respect to th e credit ratings specified
above, if neither Moody's Investors Service, Inc. nor Standard
& Poor's Ratings Group is in the business of rating the
relevant Permitted Investment, such Permitted Investment shall
have received a rating equivalent to that specified above for
such Permitted Investment by another nationally recognized
credit rating agency of similar standing.
ARTICLE VI
Security Agent
Section 6.1 Rights, Duties, etc. The acceptance by the Security Agent
of its duties hereunder and under the other Collateral Security
Documents is subject to the following terms and conditions
which the parties to this Agreement hereby agree shall govern
and control with respect to its rights, duties, liabilities and
immunities: (i) it shall act hereunder as an agent only and
shall not be responsible or liable in any manner whatever for
soliciting any funds or for the sufficiency, correctness,
genuineness or validity of any funds, securities or other
amounts deposited with or held by it; (ii) it shall be
protected and held harmless in acting or refraining from acting
upon, and shall not be bound to make any investigation into
the facts or other matters stated in, any written notice,
certificate, instruction, request or other paper or document,
as to the due execution thereof and the validity and
effectiveness of the provisions thereof and as to the truth of
any information therein contained, which the Security Agent in
good faith believes to be genuine; (iii) it shall not be liable
for any error of judgment or for any act done or step taken or
omitted except in the case of its gross negligence, willful
misconduct or bad faith; (iv) it may consult with and obtain
advice from counsel of its own choice in the event of any
dispute or question as to the construction of any provision
hereof or otherwise in connection with its duties as Security
Agent hereunder; (v) it shall have no duties as Security Agent
except those which are expressly set forth herein and in any
modification or amendment hereof, and it is not charged with
knowledge of or any duties or responsibilities in connection
with any other docume nt or agreement other than the Collateral
Security Documents; provided, however, that no such
modification or amendment here of shall affect its duties
unless it shall have given its prior written consent thereto;
(vi) it may execute or perform any duties hereunder and under
the other Collateral Security Documents (other than the holding
of the Accounts and stock certificates or any other Collateral
which is required to be held by it for purposes of perfection)
either directly or through agents or attorneys selected with
reasonable care; (vii) it may engage or be interested in any
financial or other transactions with any party hereto and may
act on, or as depositary, trustee or agent for, any committee
or body of holders of obligations of such Persons as freely as
if it were not Security Agent hereunder; (viii) it shall have
no right of set-off against any Account; (ix) it hereby waives
any and all Liens which may arise from time to time in its
favor on any Account or any other amounts received by it
pursuant to this Agreement; and (x) it shall not be obligated
to take any action which in its reasonable judgment would
involve it in expense or liabili ty unless it has been
furnished with an indemnity reasonably satisfactory to it.
Section 6.2 Resignation or Removal. (a) The Security Agent may at
any time resign by giving notice to each other party to this Agreement,
such resignation to be effective upon the appointment of a
successor Security Agent as hereinafter provided.
(b) GE Capital may remove the Security Agent at any time by
giving notice to each other party to this Agreement, such removal to
be effective upon the appointment of a successor Security Agent
as hereinafter provided.
(c) In the event of any resignation or removal of the Security
Agent, a successor Security Agent, which (i) shall be a bank or trust
company organized under the laws of the United States of America or of
the State of Connecticut or the State of New Yor k, having a capital and
surplus of not less than $100,000,000, an d shall in any event
maintain an office in Hartford, Connecticut or New York City
where it will hold the Accounts, and (ii) shall be appointed by
GE Capital, subject to the approval of the Partnership (which
approval shall not be unreasonably withheld or delayed) so long
as no Default or Event of Default or Lease Default or Lease
Event of Default shall have occurred and be continuing. If a
successor Security Agent shall not have been appointed or shall
not have accepted its appointment as Security Agent hereunder
within 45 days after such notice of resignation of the
Security Agent or such notice of removal of the Security
Agent, the Security Agent, GE Capital, the Owner Trustee or the
Partnership may apply to any court of competent jurisdiction
to appoint a successor Security Agent to act until such time,
if any, as a successor Security Agent shall have accepted its
appointment as above provided. Any successor Security Agent so
appointed by such court shall immediately and without further
act be superseded by any successor Security Agent appointed by
GE Capital and the Owner Trustee with the approval of the
Partnership as above provided. Any such successor Security Agent
shall deliver to each party to this Agreement a written
instrument accepting such appointment hereunder and under the
other Collateral Security Documents and thereupon such success
or Security Agent shall succeed to all the rights and duties of
the Security Agent hereunder and thereunder and shall be
entitled to receive the Accounts and other Collateral from the
predecessor Security Agent.
ARTICLE VII
Determinations
Section 7.1 Value. Cash and Permitted Investments on deposit from
time to time in the Accounts shall be valued (the "Value") by the Security
Agent as follows: (a) cash shall be valued at the face amount
thereof; and (b) Permitted Investments shall be valued at the
lesser of the face amount and the purchase price.
Section 7.2 Other Determinations. The Partnership, GE Capital and the
Security Agent may establish procedures not inconsistent with this
Agreement pursuant to which the Security Agent may conclusively
determine, for purposes of this Agreement, the amounts from
time to time to be distributed or paid by the Security Agent
from cash available in the Accounts.
Section 7.3 Sales of Permitted Investments. The Security Agent will
use its best efforts to sell Permitted Investments so tha t actual cash is
available, on each date on which a distribution is to be made pursuant to
this Agreement, for the Security Agent to make such distribution
in cash on such date. The amount of any check or other
nstrument which may be deposited in any Account shall
not be treated as cash available until the final collection
thereof.
Section 7.4 Available Cash. In determining the amount of
available cash in any Account at any time, in addition to any
cash then on deposit in such Account, the Security Agent shall
treat as available cash the amount which the Security Agent
would have received on such day if the Security Agent had
liquidated all the Permitted Investments (at then prevailing
market prices) then on deposit in such Account.
ARTICLE VIII
Representations and Warranties
Sectoin 8.1 Representations. The Partnership represents and warrants,
for the benefit of GE Capital and the Owner Trustee, that each certificate
of an Authorized Officer delivered by the Partnership in connection
with this Agreement shall be true and correct in all material
respects and that the amounts of money certified thereby shall
be the proper amounts to be set forth in such certificate of an
Authorized Officer.
Section 8.2 Indemnification. The Partnership hereby undertakes to
indemnify and hold harmless the Security Agent, the Owner Trustee and GE
Capital from and against any and all expenses imposed on, incurred by or
asserted against such Person in any way relating to or arising out of any
inaccuracy in any certificate of an Authorized Officer
delivered by the Partnership.
ARTICLE IX
Miscellaneous
Section 9.1 Fees and Indemnification of Security Agent. The
Partnership agrees to pay the reasonable fees of the Security Agent as
compensation for its services under this Agreement. In addition, the
Partnership assumes liability for, and agrees to indemnify,
protect, save and keep harmless the Security Agent and its
officers, employees, successors, assigns, agents and servants
from and against, any and all claims, liabilities, obligations,
losses, damages, penalties, costs and expenses (including
reasonable attorney's fees and expenses) that may be imposed on,
incurred by, or asserted against, at any time, the Security
Agent or its officers and employees and in any way relating to
or arising out of the execution and delivery of this Agreement,
the establishment of the Accounts, the acceptance of deposits,
the purchase or sale of Permitted Investments, the retention of
cash, Permitted Investments or the proceeds thereof and any
payment, transfer or other application of cash or Permitted
Investments by the Security Agent or GE Capital in accordance
with the provisions of this Agreement, or as may arise by
reason of any act, omission or error of the Security Agent made
in good fait h in the conduct of its duties; except that the
Partnership shal l not be required to indemnify, protect, save
and keep harmless the Security Agent against its own gross
negligence, active or passive, or willful misconduct. The
indemnities contained in this Section 9.1 shall survive the
termination of this Agreement.
Section 9.2 Termination. Subject to Section 9.1, the provisions of
this Agreement shall terminate on the date on which all Obligations shall
have been paid in full and the Loan Agreemen t and the Facility Lease shall
have terminated in accordance with their respective terms. This
Agreement shall be deemed to hav e terminated upon receipt by
the Security Agent of a certificate to such effect executed by
the Partnership and GE Capital. Upon termination of this
Agreement the Security Agent shall transfer any remaining
amounts, together with any interest thereon, on deposit in the
Accounts to the party or parties specified in such
certificate. Any liability or obligation hereunder arising prior
to the termination of this Agreement shall survive such
termination.
Section 9.3 Severability. If any one or more of the covenants or
agreements provided in this Agreement on the part of the parties hereto
to be performed should be determined by a court of competent jurisdiction
to be contrary to law, such covenant or agreement shall be deemed and
construed to be severable from the remaining covenants and agreements herein
contained and shall in no way affect the validity of the
remaining provisions of this Agreement.
Section 9.4 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of wh ich shall
constitute but one and the same instrument.
Section 9.5 Amendments. This Agreement may not be modified or amended
except in accordance with the provisions of subsection 9.1 of the Loan
Agreement and with the prior written consent of each of t he parties hereto.
Section 9.6 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
EXCEPT THAT THE CREATION, VALIDITY AND PERFECTION OF THE
SECURITY INTERESTS IN THE ACCOUNTS HEREUNDER SHALL BE GOVERNED
BY THE LAWS OF THE STATE OF CONNECTICUT.
Section 9.7 Notices. Unless otherwise specifically provided herein,
all notices, requests and demands to or upon the respective parties hereto
to be effective shall be in writing, by telecop ier or, if available,
by telex and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made when delivered by
hand, or when deposited in the mail, first class postage
prepaid or with an overnight courier service, or in the case of
transmission by telecopier, when confirmation of receipt is
obtained, or in the case of telex notice, when sent,
answerback received, and shall be directed to the address,
telecopy or telex number of such Person designated pursuant to
the Loan Agreement, or in the case of the Security Agent or the
Owner Trustee, to 777 Main Street, Hartford, CT 06115,
Attention: Corporate Trust Administration, Telecopy No. (203)
9867920, or to such other address, or telecopy number as may
be specified from time to time by such Person or the Security
Agent or the Owner Trustee.
Section 9.8 Submission to Jurisdiction; Waivers.
Each of the parties hereto irrevocably and unconditionally
agrees to the submission to jurisdiction and the waivers as set forth
in Section 9.13 of the Loan Agreement.
Section 9.9 Limited Liability. There shall be full recourse
to the Partnership and all of its assets for the liabilities of
the Partnership under this Agreement and its other Obligations,
but in no event shall any Partner, Affiliate of any Partner,
or an y officer, director or employee of the Partnership, any
Partner or their Affiliates or any holder of any equity
interest in any Partner be personally liable or obligated for
such liabilities and Obligations of the Partnership, except as
may be specifically provided in any other Loan Document or
Lease Document to which such Partner is a party or in the event
of fraudulent actions, knowing misrepresentations, gross
negligence or willful misconduct by the Partnership, any
Partner or any of their Affiliates hereunder. Subject to the
foregoing limitation on liability, GE Capital or the Owner
Trustee may sue or commence any suit, action or proceeding
against any Partner or any Affiliate thereof in order to obtain
jurisdiction over the Partnership in order to enforce its
rights and remedies hereunder. Nothing herein contained shall
limit or be construed to limit the liabilities and obligations
of any Partner or any Affiliate thereof such Person in
accordance with the terms of any other Transaction Document
creating such liabilities and obligations to which such Partner
or Affiliate is a party.
Section 9.10 WAIVERS OF JURY TRIAL. THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS SECURITY DEPOSIT AGREEMENT
AND FOR ANY COUNTERCLAIM THEREIN.
Section 9.11 Benefit of Agreement. This Agreement shall inure
to the benefit of, and be enforceable by, the parties hereto
and their respective successors and permitted assigns, and no
other Person shall be entitled to any of the benefits of this
Agreement.
Section 9.12 Leveraged Lease. If, upon the sale of the
Facility by the Partnership to the Owner Trustee in accordance
with the provisions of the Loan Agreement, GE Capital exercises
its option under subsection 5.8 of the Loan Agreement to
borrow funds to finance (or refinance) a portion of the
purchase price of the Facility, the parties hereto agree to
execute a supplement hereto to provide for the payment of any
such Lease Debt and to otherwise provide for such provisions as
are customary and appropriate in respect of leveraged lease
transactions.
Section 9.13 Certain Rights of Power Purchaser. Nothing
in this Security Deposit Agreement shall be deemed to limit the
provisions of the Consent of the Power Purchaser, which
provisions are solely for the benefit of the Power Purchaser and
not the Partnership. Without limiting the scope of the
foregoing, the Security Agent agrees, for the exclusive benefit
of the Power Purchaser and not the Partnership, that the
exercise of remedies or any similar action under this Security
Deposit Agreement is subject to, and shall be conducted in a
manner consistent with, the Power Purchaser's rights under (i)
the Consent of the Power Purchaser and (ii) the Power Purchase
Agreement and the Transfer Agreement (to the extent such rights
under the Power Purchase Agreement and the Transfer Agreement
are not explicitly waived by the Power Purchaser in accordance
with the terms of the Consent of the Power Purchaser).
IN WITNESS WHEREOF, the parties hereto have each caused this
Agreement to be duly executed by their duly authorized
officers, all as of the day and year first above written.
PANDA-BRANDYWINE, L.P.
By: Panda Brandywine Corporation,
its General Partner
By:
Name: Robert W. Carter
Title: Chairman, President and
Chief Executive Officer
PANDA BRANDYWINE CORPORATION,
as the General Partner
By:
Name: Robert W. Carter
Title: Chairman, President and
Chief Exeuctive Officer
GENERAL ELECTRIC CAPITAL CORPORATION
By:
Name: Michael E. Stewart
Title: Attorney-in-Fact
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
as Security Agent and as Owner Trustee
By:
Name: Kathy A. Larimore
Title: Assistant Vice President
SCHEDULE 1 FORM OF PROJECT CERTIFICATE
__________, _______ 199__
Shawmut Bank Connecticut,
National Association,
as Security Agent
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration Re: Panda-Brandywine
Security Deposit Agreement
Dear Sirs:
Reference is made to the Security Deposit Agreement relating to the
Brandywine cogeneration facility, dated as of March 30, 1995 (as amended,
supplemented or otherwise modified from time to time the "SDA"),
among PANDA-BRANDYWINE, L.P., a Delaware limited partnership, of which
PANDA BRANDYWINE CORPORATION, a Delaware corporation, is the general
partner, GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation and
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, as owner trustee and
security agent (in its capacity as security agent, the "Security Agent").
Capitalized terms used herein without definition shall have the meanings
assigned to them in the SDA. The undersigned hereby certifies that he is
an Authorized Offi cer of the Partnership and, as such, he is authorized to
execute this certificate on behalf of the Partnership and
further certifies that:
(1) In addition to the Project Expenses set forth in Item 2 of the
Project Certificate delivered in any previous month (if any) and
Item 2 of this Project Certificate, the following Project Expenses
will be due and payable to the following Pers ons on the next
Monthly Transfer Date [FIRST LIST ALL PAYMENTS TO THE OPERATOR,
THE GAS SUPPLIER, EACH GAS TRANSPORTER AND FOR FUEL SUPPLIES,
WHICH WILL BE PAID FIRST;
PAYMENTS IN EXCESS OF $100,000 INDIVIDUALLY WILL BE MADE
DIRECTLY TO THE OBLIGEE; AL L OTHER PAYMENTS WILL BE TO THE
PARTNERSHIP]: Amount Description Payee (2) In addition to the
Project Expenses set forth in Item 1 of this Project
Certificate, the following Project Expenses are expected to be
due and payable to the following Persons in the period after
the next Monthly Transfer Date and prior to the Monthly
Transfer Date immediately thereafter (the "Payment Period"):
Total Accrual Estimated Due Amount Description Amount Due Date
Payee (3) The following punch list items will be due and
payable to the following Persons during the Payment Period:
Amount Description Due Date Payee (4) The amounts requested in
Item 1 of the previous Project Certificate and Item 2 of the
Project Certificate delivered pr ior thereto were applied to
the payments as set forth in such Proj ect Certificate [if
applicable, specify in detail any excess in the amount
requisitioned with respect to the previous Project Certificate
for the prior month]. (5) The amounts for Project Expenses set
forth in Items 1 and 2 above (together with the aggregate
amount of all Project Expenses requisitioned by the Partnership
pursuant to the SDA during the year in which this Project
Certificate is made) are within the Partnership's Operating
Budget for this year.
IN WITNESS WHEREOF, the undersigned has executed this Project
Certificate this ___ day of ___________.
PANDA-BRANDYWINE, L.P.
By: Panda Brandywine Corporation,
its general partner
By:_______________________
Title:
COUNTERSIGNED:
GENERAL ELECTRIC CAPITAL CORPORATION
By:_____________________________
Title:
EXHIBIT A TO SECURITY DEPOSIT AGREEMENT
[Certificate To Be Delivered Prior To The
Lease Closing Date Pursuant To Section 4.1]
__________, __199__
Shawmut Bank Connecticut,
National Association,
as Security Agent
777 Main Street
Hartford, CT 06115
Attention: Corporate Trust Administration Re: Panda-Brandywine Security
Deposit Agreement
Dear Sirs:
Reference is made to the Security Deposit Agreement relating to the
Brandywine cogeneration facility, dated as of the March 30, 1995
(as amended, supplemented or otherwise modified from time to time, the
"SDA"), among PANDA-BRANDYWINE, L.P., a Delaware limited
partnership, of which PANDA BRANDYWINE CORPORATION, a Delaware
corporation, is the general partner, GENERAL ELECTRIC CAPITAL
CORPORATION, a New York corporation and SHAWMUT BANK
CONNECTICUT, National Association, as owner trustee and as
security agent (in its capacity as security agent, the
"Security Agent"). Capitalized terms used herein without
definition shall have the meanings assigned to them in the SDA.
The undersigned hereby certifies that he is an Authorized
Officer of the Partnership and, as such, he is authorized to
execute this certificate on behalf of the Partnership and
further certifies that: The following Project Costs and other
costs and amounts will be due and payable to the following
Persons [on _________, 199____] [on the next Borrowing Date] [NOTE:
PAYMENTS IN EXCESS OF $100,000 TO ANY PAYEE WILL BE MADE
DIRECTLY TO SUCH PAYEE; ALL OTHER PAYMENTS WILL BE TO THE
PARTNERSHIP]: Amount Description Payee
IN WITNESS WHEREOF, the undersigned has executed this Certificate
this ___ day of___________.
PANDA-BRANDYWINE, L.P.
By: Panda Brandywine Corporation,
its general partner
By:_______________________
Title:
COUNTERSIGNED:
GENERAL ELECTRIC CAPITAL CORPORATION
By:_____________________________
Title:
EXHIBIT B TO THE SECURITY DEPOSIT AGREEMENT
[To be delivered to release funds from the Revenue Account to pay
Supplemental Rent pursuant to Section 4.4]
__________, __ 199__
Shawmut Bank Connecticut,
National Association,
as Security Agent
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration Panda-Brandywine, Security
Deposit Agreement - Supplemental Rent
Dear Sirs:
Reference is made to the Security Deposit Agreement relating to the
Brandywine cogenerating facility (the "Securit y Deposit Agreement"), dated
as of March 30, 1995, among Panda- Brandywine, L.P., a Delaware limited
partnership (the "Partnership"), General Electric Capital Corporation, a
New York corporation ("GE Capital") and Shawmut Bank Connecticut,
National Association (the "Security Agent").
Capitalized terms used herein without definition shall have the
respective meanings specified in the Security Deposit
Agreement. The undersigned hereby certifies that he is an
Authorized Officer of the Partnership and, as such, he is
authorized to execute this certificate on behalf of the
Partnership, and further represen ts and warrants as of the
date of this certificate as follows: Supplemental Rent is due
and owing pursuant to Section 3(b) of the Facility Lease and is
not otherwise specifically provided for in Section 4.3 of the
Security Deposit Agreement and is not otherwise payable from
amounts on deposit in the Specia l Payment Account or the
Insurance and Condemnation Proceeds Account. Please transfer
funds from the Revenue Account to pa y such Supplemental Rent.
Such proceeds should be paid by [official bank check] [wire
transfer] to [_________] in the amounts and at the addresses
indicated below: [Insert name and address for payment][Insert amount]
IN WITNESS WHEREOF, the undersigned has executed this Certificate
this ____ day of _______________, 19__.
PANDA BRANDYWINE, L.P.
By: PANDA BRANDYWINE CORPORATION,
its general partner
By: _________________________
Title:
COUNTERSIGNED:
GENERAL ELECTRIC CAPITAL CORPORATION
By: ____________________
Title:
EXHIBIT C TO SECURITY DEPOSIT AGREEMENT
[To be delivered to release funds from the Rent Reserve Account pursuant to
Section 4.5]
__________ __, 199_
Shawmut Bank Connecticut,
National Association,
as Security Agent
777 Main Street
Hartford, Connecticut 06115
Attn: Corporate Trust Administration Panda-Brandywine Security Deposit
Agreement - Rent Reserve Account
Dear Sirs:
Reference is made to the Security Deposit Agreement relating to the
Brandywine cogenerating facility (the "Securit y Deposit Agreement"),
dated as of March 30, 1995, among Panda- Brandywine, L.P., a
Delaware limited partnership (the "Partnership"), General
Electric Capital Corporation, a New Yo rk corporation ("GE
Capital") and Shawmut Bank Connecticut, National Association
(the "Security Agent"). Capitalized terms used herein without
definition shall have the respective meanings specified in the
Security Deposit Agreement. The undersigned hereby represents
that he is an Authorized Officer of GE Capital, and as such,
he is authorized to execute this certificate on behalf of GE
Capital, and further represents and warrants as of the date of
this certificate as follows: The Partnership is deficient in
satisfying its payment obligations under the Facility Lease or
the Loan Agreement (in respect of amounts payable pursuant to
clauses second or third of Section 4.3 of the Security Deposit
Agreement) in an amount equal to $_______. Please liquidate
investments in the Rent Reserve Account as fully as is
necessary to yield proceeds in the amou nt of such deficiency.
Proceeds with respect thereto should be p aid by [official bank
check] or [wire transfer] to [GE Capital] [t he Owner Trustee]
as indicated below: [Insert name and address for
payment] [Insert amount]
IN WITNESS WHEREOF, the undersigned has executed this Certificate
this ____ day of______________, 19__.
GENERAL ELECTRIC CAPITAL CORPORATION
By:
Title:
EXHIBIT D
[To be delivered to release funds from the Maintenance Reserve Account
pursuant to Section 4.6]
_________, 199_
Shawmut Bank Connecticut,
National Association,
as Security Agent
777 Main Street
Hartford, Connecticut 06115
Attn: Corporate Trust Administration Panda-Brandywine Security
Deposit Agreement - Operation and Maintenance Reserve Account
Dear Sirs:
Reference is made to the Security Deposit Agreement
relating to the Brandywine cogenerating facility (the "Security
Deposit Agreement"), dated as of March 30, 1995, among Panda-
Brandywine, L.P., a Delaware limited partnership (the
"Partnership"), General Electric Capital Corporation, a New York
corporation ("GE Capital") and Shawmut Bank Connecticut,
National Association (the "Security Agent"). Capitalized
terms used herein without definition shall have the respective
meanings specified in the Security Deposit Agreement. Please
liquidate investments in the Operation and Maintenance Reserve
Account in an amount sufficient to yield proceeds of
$_________________ to be used for [Reimbursement Obligations in
respect of drawings under the O&M Letter of Credit] [ ]. [list
requested disbursements separately.] Such amount[s] should be
paid by [official bank check] [wire transf er] to [GE Capital]
[the Partnership] [payee[s]] at [address[es]] of [GE Capital]
[the Partnership] [payee[s]]. The undersigned hereby certifies
that he is an Authorized Officer of [GE Capital] [the
Partnership] and, as such, he is authorized to execute this
certificate on behalf of [GE Capital] [the Partnership,] and
[the following to apply on ly to a certificate delivered by the
Partnership] further represents and warrants as of the date of
this certificate as follows:
(a) no Lease Default or Lease Event of Default
has occurred and is continuing; and
(b) the moneys to be delivered pursuant hereto represent
[amounts that the Partnership has paid from its own funds] [amounts that are
currently due and owing to the payees identified above] with
respect to Project Expenses constituting maintenance expenses
incurred with respect to the Project or any portion thereof
for which funds are not available for payment from revenues of
the Project.
IN WITNESS WHEREOF, the undersigned has executed this Certificate
this ____ day of ________________, 19__.
[PANDA-BRANDYWINE, L.P.]
By: PANDA BRANDYWINE CORPORATION,
its general partner
By:___________________________
Title: President
[GENERAL ELECTRIC CAPITAL CORPORATION]
By:___________________________
Title:
COUNTERSIGNED:
[GENERAL ELECTRIC CAPITAL CORPORATION]
By:__________________________
Title:
EXHIBIT E TO THE SECURITY DEPOSIT AGREEMENT
[To be delivered to release funds from the Operation and Maintenance
Reserve Account or the Rent Reserve Account pursuant to Section
4.7]
________ __, 1995
Shawmut Bank Connecticut,
National Association,
as Security Agent
777 Main Street
Hartford, Connecticut 06115
Attn: Corporate Trust Administration Panda-Brandywine Security Deposit
Agreement
Dear Sirs:
Reference is made to the Security Deposit Agreement relating to the
Brandywine cogenerating facility (the "Securit y Deposit
Agreement"), dated as of March 30, 1995, among Panda-
Brandywine, L.P., a Delaware limited partnership (the
"Partnership"), General Electric Capital Corporation, a New York
corporation ("GE Capital") and Shawmut Bank Connecticut,
National Association (the "Security Agent"). Capitalized terms
used herein without definition shall have the respective
meanings specified in the Security Deposit Agreement. The
undersigned hereby certifies that he is an Authorized Officer
of the Partnership and, as such, he is authorized to execute
this certificate on behalf of the Partnership, and further
represen ts and warrants as of the date of this certificate as
follows: (a) no Lease Default or Lease Event of Default has
occurred and is continuing; and (b) the amount on deposit in
the [Operation and Maintenance Reserve] [Rent Reserve] Account
is $___________ and the amount of the Required [Operation and
Maintenance] [Rent Reserve] Balance is $___________, resulting
in excess funds in the amount of $___________ which excess
funds are as a result of income or gain earned on amounts on
deposit therein (the "Excess Amount"). In accordance with the
provisions of Section 4.7 of the Security Deposit Agreement,
the Excess Amount should be transferred to the Revenue Account.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this ____ day of ________________, 19__.
PANDA-BRANDYWINE, L.P.
By: PANDA BRANDYWINE CORPORATION,
its general partner
By:____________________________
Name:
Title:
APPROVED:
GENERAL ELECTRIC CAPITAL CORPORATION
By:__________________________
Title:
EXHIBIT F TO THE SECURITY DEPOSIT AGREEMENT
__________, __ 199__
[To be delivered to release funds from the Partnership Security Account
pursuant to Section 4.9(b) of the Security Deposit Agreement] [Within
three Business Days after each Basic Rent Payment Date]
Shawmut Bank Connecticut,
National Association,
as Security Agent
777 Main Street
Hartford, Connecticut 06115
Attn: Corporate Trust Administration Panda-Brandywine Security Deposit
Agreement
Dear Sirs:
Reference is made to the Security Deposit Agreement relating to the
Brandywine cogenerating facility (the "Security Deposit Agreement"),
dated as of March 30, 1995, among Panda-Brandywine, L.P., a Delaware
limited partnership (the "Partnership"), General Electric Capital
Corporation, a New York corporation ("GE Capital") and Shawmut Bank
Connecticut, National Association (the "Security Agent"). Capitalized terms
used herein without definition shall have the respective
meanings specified in the Security Deposit Agreement. The
undersigned hereby certifies that he is an Authorized Officer
of the Partnership and, as such, he is authorized to execute
this certificate on behalf of the Partnership, and further
represents and warrants as of the date of this certificate as
follows: (a) all amounts currently required to be deposited in
the Rent Reserve Account, the Warranty Maintenance Reserve
Account and the Operation and Maintenance Reserve Account have
been deposited therein; (b) all Basic Rent and Supplemental
Rent and all debt service on the Equity Loans due and owing
have been paid; (c) no Lease Default, Lease Event of Default,
Default or Event of Default has occurred and is continuing; (d)
the Operating Cash Flow Ratio for the immediately preceding
Quarterly Measurement Period is greater than 1.20 to 1.00; and
(e) the amount that may be withdrawn from the Partnership
Security Account pursuant to Section 4.9(b) of the Security
Deposit Agreement is $ . Such amount should be paid by
[official bank check] [wire transfer] to the Partnership at the
address indicated be low [insert address].
IN WITNESS WHEREOF, the undersigned has executed this Certificate
this ____ day of ________________, 19__.
PANDA-BRANDYWINE, L.P.
By: PANDA BRANDYWINE CORPORATION,
its general partner
By:____________________________
Name:
Title:
APPROVED:
GENERAL ELECTRIC CAPITAL CORPORATION
By:__________________________
Title:
EXHIBIT G TO THE SECURITY DEPOSIT AGREEMENT
[To be delivered to release funds from the Account pursuant to Section
4.12(a)]
___________ __, 199_
Shawmut Bank Connecticut,
National Association,
as Security Agent
777 Main Street
Hartford, Connecticut 06115
Attn: Corporate Trust Administration Panda-Brandywine Security Deposit
Agreement - Warranty Maintenance Reserve Account
Dear Sirs:
Reference is made to the Security Deposit Agreement relating to the
Brandywine cogenerating facility (the "Security Deposit
Agreement"), dated as of March 30, 1995, among Panda-
Brandywine, L.P., a Delaware limited partnership (the
"Partnership"), General Electric Capital Corporation, a New York
corporation ("GE Capital") and Shawmut Bank Connecticut,
National Association (the "Security Agent"). Capitalized terms
used herein without definition shall have the respective
meanings specified in the Security Deposit Agreement. Please
liquidate investments in the Warranty Maintenance Reserve
Account in an amount sufficient to yield proceeds of
$_________________ to be used for ________________ . [list
requested disbursements separately.] Such amount[s] should be
paid by [official bank check] [wire transfer] to the Turbine
Manufacturer at [address] of the Turbine Manufacturer. The
undersigned hereby certifies that he is an Authorized Officer
of the Partnership and, as such, he is authorized to execute
this certificate on behalf of the Partnership, and further
represents and warrants as of the date of this certificate as
follows: (a) no Lease Default or Lease Event of Default has
occurred and is continuing; and (b) the moneys to be delivered
pursuant hereto represent [amounts that the Partnership has
paid from its own funds] [amounts that are currently due and
owing to the Turbine Manufacturer with respect to Project
Expenses constituting maintenance expenses incurred with
respect to the Project or any portion thereof for which funds
are not available for payment from revenues of the Project.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this ____ day of ________________, 19__.
PANDA-BRANDYWINE, L.P.
By: PANDA BRANDYWINE CORPORATION,
its general partner
By:___________________________
Title: President
GENERAL ELECTRIC CAPITAL CORPORATION
By:__________________________
Title:
EXHIBIT 10.27
DEED OF TRUST AND SECURITY AGREEMENT
by
PANDA-BRANDYWINE, L.P., Grantor
CHICAGO TITLE INSURANCE COMPANY, Trustee
for the use and benefit of
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
as Security Agent, Beneficiary
__________________________
Dated as of March 30, 1995
---------------------------
THE PRINCIPAL SUM SECURED
BY THIS DEED OF TRUST AND SECURITY AGREEMENT
IS $130,000,000
Real Property Located in the Counties of Prince George's
and Charles, Maryland
__________________________________________________
After recording please return to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017-3909
Attention: Janet Lapidus, Esq.
TABLE OF CONTENTS
Page
ARTICLE I GENERAL COVENANTS AND AGREEMENTS 8
1.01 Instruments of Further Assurance;
Filing and Recording 8
1.02 Warranties of Title 9
1.03 General 9
1.04 Insurance 10
1.05 Monthly Payment of Assessments 11
1.06 Performance of Grantor's Obligations 11
1.07 Additional Advances and Readvances From
Beneficiary 12
1.08 Agreements Between Grantor and Beneficiary 13
1.09 Continuance of Use 13
1.10 Leases 13
1.11 Alterations of Security 13
1.12 Liability of Grantor 14
1.13 No Waiver of Remedies 14
ARTICLE II REMEDIES UPON EVENT OF DEFAULT 14
2.01 Events of Default 14
2.02 Remedies 15
2.03 Applications of Proceeds; Effect of Sale 17
2.04 Abandonment of Sale 17
2.05 Right to Purchase 17
2.06 Waiver of Marshalling, etc. 17
2.07 Remedies not Exclusive 17
2.08 Limitation of Liability 18
ARTICLE III GENERAL 18
3.01 No Waiver 18
3.02 Notices 18
3.03 Successors and Assigns 18
3.04 Indemnity 19
3.05 Severability 19
3.06 Fixture Filing 19
3.07 GOVERNING LAW 19
3.08 No Merger 19
3.09 Easement Provisions 19
3.10 Successor Trustee 20
3.11 Actions of Trustee 20
3.12 Trustee as Attorney 20
3.13 Incapacity or Absence from State 21
3.14 Leveraged Lease 21
3.15 Certain Rights of the Power Purchaser 21
Schedule A Legal Description of Site
Schedule B Easements
Schedule C UCC-1 Financing Statements
DEED OF TRUST AND SECURITY AGREEMENT
THIS DEED OF TRUST AND SECURITY AGREEMENT,
dated as of March 30, 1995 by PANDA-BRANDYWINE, L.P., a
Delaware limited partnership (the "Grantor"), having an
address at 4100 Spring Valley, Suite 1001, Dallas, Texas
75244, to CHICAGO TITLE INSURANCE COMPANY, a Missouri
corporation having an address at 19 East Fayette Street,
Baltimore, Maryland 21202 (the "Trustee"), for the use
and benefit of SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, a national banking association, in its
capacity as Security Agent under the Security Deposit
Agreement (as defined in the Loan Agreement referred to
below) (the "Beneficiary"), for the benefit of the Owner
Trustee (as defined below) and General Electric Capital
Corporation, a New York corporation ("GE Capital"). The
address of the Beneficiary is 777 Main Street, Hartford,
Connecticut 06115. References to this "Deed of Trust"
shall mean this instrument and any and all renewals,
modifications, amendments, supplements, extensions,
consolidations, substitutions, spreaders and replacements
of this instrument.
W I T N E S S E T H :
WHEREAS, Grantor, Panda Brandywine Corporation
and GE Capital are parties to that certain Construction
Loan Agreement and Lease Commitment dated as of even date
herewith (as the same may be amended, supplemented or
otherwise modified from time to time, the "Loan
Agreement");
WHEREAS, capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned
to them in Appendix A to the Loan Agreement;
WHEREAS, pursuant to the Loan Agreement and
subject to the terms and conditions contained therein, GE
Capital has agreed, among other things, (i) to make
construction loans to Grantor in an aggregate amount not
to exceed $215,000,000 in order to enable Grantor to
acquire fee title to the Site and acquire the Easements
and to develop, purchase, construct and
operate the Facility, (ii) to issue one or more Letters
of Credit for the account of Grantor in a stated amount
not to exceed $12,453,460 in the aggregate to secure
certain obligations of Grantor under the Power Purchase
Agreement, (iii) acting through the Owner Trustee, (A) to
lease the Site and obtain the rights to use the Easements
from Grantor and (B) to sublease the Site and re-grant
the rights to use the Easements back to Grantor, (iv)
upon Final Completion, to make equity loans to Grantor
(or the Partners) in an aggregate amount not to exceed
$20,000,000, and (v) upon Final Completion, acting
through the Owner Trustee, (A) to purchase the Facility
from Grantor and (B) to lease the Facility back to
Grantor;
WHEREAS, Beneficiary desires by the execution and
delivery of this Deed of Trust to secure, among other
things, the Obligations (as defined below) of Grantor
under the Loan Agreement and under any lease of the
Facility which may now or hereafter exist, as amended
from time to time (a "Lease of the Facility");
WHEREAS, all references herein to (i) the "Notes",
shall mean the Note issued pursuant to subsection 2.4 of
the Loan Agreement, any Note issued by the Grantor
pursuant to subsection 5.9(b)(ii) of the Loan Agreement
and any Note issued to any assignee of GE Capital
pursuant to subsection 9.6 of the Loan Agreement, as the
same may be amended, supplemented, otherwise modified or
replaced from time to time, (ii) the "Letters of Credit",
shall mean the Letters of Credit issued pursuant to
subsection 2.9 of the Loan Agreement, as the same may be
amended, supplemented, otherwise modified or replaced
from time to time, and (iii) the "Transaction Documents",
shall mean the Transaction Documents, as the same may be
amended, supplemented, otherwise modified or replaced
from time to time;
NOW THEREFORE, to secure (i) (x) the principal
amount of and interest on all Loans from time to time
outstanding under the Loan Agreement (including, without
limitation, interest accruing after the maturity of the
Loans and interest accruing after the filing of any
petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating
to Grantor, whether or not a claim for postfiling or post-
petition interest is allowed in such proceeding), (y) all
LOC Reimbursement Obligations from time to time
outstanding under the Loan Agreement and all other
obligations of Grantor in respect of the Letters of
Credit from time to time outstanding and all fees and
costs related thereto and (z) all fees under the Loan
Agreement; (ii) all rent and other amounts which may be
payable by Grantor to GE Capital or the Owner Trustee
under any Lease of the Facility; and (iii) the payment
and performance of all other indebtedness, liabilities
and obligations of Grantor to Beneficiary, GE Capital,
the Owner Trustee and Trustee, in each case whether now
existing or hereafter incurred, direct or indirect,
absolute or contingent, secured or unsecured, matured or
unmatured, joint or several, under, arising out of or in
connection with this Deed of Trust, the Loan Agreement
(including, without limitation, Section 5.2 thereof), any
Lease of the Facility, the Site Lease, the Site Sublease,
the Notes and the other Transaction Documents (the items
set forth in clauses (i), (ii) and (iii), collectively,
the "Obligations"), and for the uses and purposes and
subject to the terms and provisions hereof, and in
consideration of the premises and of the covenants herein
contained and of the making of the Loans, the issuance of
the Letters of Credit and the purchase and lease of the
Facility by the Owner Trustee and other good and valuable
consideration the receipt and sufficiency of which are
hereby acknowledged, GRANTOR, INTENDING TO BE LEGALLY
BOUND, DOES HEREBY GRANT, BARGAIN,
SELL, CONVEY, WARRANT, ASSIGN, TRANSFER, MORTGAGE,
PLEDGE, SET OVER AND CONFIRM UNTO TRUSTEE, IN TRUST WITH
THE POWER OF SALE FOR THE USE AND BENEFIT OF BENEFICIARY
(FOR THE BENEFIT OF GE CAPITAL AND THE OWNER TRUSTEE) AND
THEIR RESPECTIVE SUCCESSORS AND ASSIGNS, AND GRANTS TO
TRUSTEE AND BENEFICIARY (FOR THE BENEFIT OF GE CAPITAL
AND THE OWNER TRUSTEE) AND ITS SUCCESSORS AND ASSIGNS A
SECURITY INTEREST IN, UNDER THE UNIFORM COMMERCIAL CODE
OF THE STATE OF MARYLAND, THE FOLLOWING DESCRIBED
PROPERTY, WHETHER NOW OWNED OR HEREAFTER ACQUIRED
(collectively, the "Trust Property"); provided, however,
that the maximum principal sum secured by this Deed of
Trust or upon any contingency which may be secured hereby
at any time is $130,000,000, and $4,377,660.76 of the
amount secured is purchase money for the Site (as defined
below) and the Easements (as defined below) located in
Prince George's County, Maryland, and $316,193.94 of the
amount secured is purchase money for the Easements
located in Charles County, Maryland:
(i) All right, title and interest of Grantor
in and to the tracts of land described in Schedule A
attached hereto and made a part hereof (the "Site");
(ii) all the estate, right, title, claim or
demand whatsoever of Grantor, in possession or
expectancy, in and to the Real Estate (as defined
below) or any part thereof;
(iii) all right, title and interest of
Grantor in, to and under all easements (the
"Easements"), including, without limitation, those
set forth in Schedule B hereto (collectively, the
"Easement Agreements"), rights of way, gores of
land, streets, ways, alleys, passages, sewer rights,
waters, water courses, water and riparian rights,
development rights, air rights, mineral rights and
all estates, rights, titles, interests, privileges,
licenses, tenements, hereditament and appurtenances
belonging, relating or appertaining to the Real
Estate (as defined below), and any reversions,
remainders, rents, issues, profits and revenue
thereof and all land lying in the bed of any street,
road or avenue, in front of or adjoining the Real
Estate to the center line thereof; all of Grantor's
claims and rights to the payment of damages arising
under the Bankruptcy Code from any rejection of any
Easement Agreement by the grantor thereunder or any
other party;
(iv) all right, title, estate and interest of
Grantor in or to any and all present and future
buildings and improvements now or hereafter erected
on the Site and all fixtures, attachments,
appliances, equipment, machinery, and other articles
now or subsequently attached to said buildings and
improvements or used in connection with the
operation of the Facility to be located on the Site
(all of the items enumerated in this clause (iv)
being collectively referred to as the
"Improvements"; the Site, the Improvements and the
Easements collectively, the "Real Estate");
(v) all right, title, interest and estate of
Grantor now owned or at any time hereafter acquired
in and to the Facility, including all fixtures,
equipment and personalty (collectively called the
"Equipment"), now or at any time hereafter located
in or used in connection with the use of the Real
Estate or located in, used in connection with, or
constituting a part or component of, the Facility
(excluding any metering equipment owned by the Power
Purchaser), including, without being limited to, the
Distilled Water Facility, the Transmission
Facilities, the Effluent Pipeline, all fuel handling
equipment, fuel receiving and storage, fuel reclaim
and boiler feed equipment, metering and storage
equipment, boiler and related equipment, auxiliary
boiler and related equipment, steam turbine and
generator together with their dedicated auxiliaries,
fuel water systems, condensing cooling towers,
emission and wastewater control equipment,
compressed air and related equipment, fire
protection equipment, central control equipment,
dynamos, generators, engines, ducts, switchboards,
controls, motors, belting, gas and electric
fixtures, bulbs, apparatus, machinery, fittings,
appliances and appurtenances, burners, furnaces,
heaters, boilers, pipes, pumps, radiators, fans and
other power, heating, plumbing, hot water, sanitary,
drainage and ventilating apparatus and equipment,
air conditioning and cooling systems and equipment,
water cooling and condensing apparatus and
equipment, call systems and other communications
systems, fuel conveyors, incinerators, incinerating
fixtures and equipment, and all other articles,
equipment, appliances, implements, devices and
accessories or things whatsoever (including any and
all accessions to, proceeds of, replacements of and
substitutions for the Equipment), used or to be
used, or placed or to be placed, in the
Improvements, or located in, used in connection
with, or constituting a part or component of, the
Facility, whether herein enumerated or not, and
whether or not affixed to the Improvements, and
which are used or useful in the operation and
maintenance of the Facility, the Improvements or the
Equipment or in the activities conducted therein;
(vi) all right, title and interest of Grantor
in and to all substitutes and replacements of, and
all additions and improvements to, the Site, the
Improvements, the Equipment, the Facility and the
remainder of the Real Estate, subsequently acquired
by or released to Grantor or constructed, assembled
or placed by Grantor on the Real Estate, immediately
upon such acquisition, release, construction,
assembling or placement, including, without
limitation, any and all building materials whether
stored at the Real Estate or offsite, and, in each
such case, without any further mortgage, conveyance,
assignment or other act by Grantor;
(vii) all right, title and interest of
Grantor in, to and under all leases, subleases, sub-
subleases, subtenancies, assignments, occupancies,
underlettings, concession agreements, management
agreements, licenses and other agreements relating
to the use or occupancy of the Site, the
Improvements, the Equipment, the Facility, any other
part of the Real Estate or any part thereof, now
existing or subsequently entered into by Grantor and
whether written or oral and all guarantees of any of
the foregoing (collectively, as any of the foregoing
may be amended, restated, extended, renewed or
modified from time to time, the "Leases"), and all
rights of Grantor in respect of cash and securities
deposited thereunder and the right to receive and
collect the revenues, income, rents, issues and
profits thereof, together with all other rents,
royalties, issues, profits, revenue, income and
other benefits arising from the use and enjoyment of
the Trust Property (collectively, the "Rents");
(viii) all trade names, trade marks, logos,
copyrights, good will and books and records relating
to or used in connection with the operation of the
Trust Property or any part thereof;
(ix) all unearned premiums under insurance
policies now or subsequently obtained by Grantor
relating to the Site, the Improvements, the
Equipment, the Facility or any other part of the
Real Estate, and Grantor's interest in and to all
proceeds of any such insurance policies (including
title insurance policies) including the right to
collect and receive such proceeds, subject to the
provisions relating to insurance generally set forth
below; and all awards and other compensation,
including the interest payable thereon and the right
to collect and receive the same, made to the present
or any subsequent owner of the tenant's interest
under the Site Lease, the Improvements, the
Equipment, the Facility or any other part of the
Real Estate for the taking by eminent domain,
condemnation or otherwise, of all or any part of the
Site or any other part of the Real Estate, or any
easement or other right therein;
(x) all right, title and interest of Grantor in
and to (i) all contracts from time to time executed
by Grantor or any manager or agent on its behalf
relating to the ownership, construction,
maintenance, repair, operation, occupancy, sale or
financing of the Real Estate or the Equipment or any
part thereof and all agreements relating to the
purchase or lease of any portion of the Real Estate
or the Equipment or any part thereof or any property
which is adjacent or peripheral to the Real Estate,
together with the right to exercise such options
(collectively, the "Contracts"), any guarantees or
letters of credit provided to Grantor to assure the
performance by any party to any Contract and all
moneys or amounts due or to become due under or with
respect to any Contract (including all Special
Payments), any damages arising out of or for breach
or default in respect of any Contract, and all
rights of Grantor to terminate any Contract or to
perform or exercise any remedy thereunder or to
exercise any election or option or to make any
decision or determination or to give any notice,
consent, waiver or approval or to take any other
action in respect of any Contract;
(xi) all right, title and interest of Grantor,
in and to any and all monies now or subsequently on
deposit for the payment of real estate taxes or
special assessments against the Real Estate, or for
the payment of premiums on insurance policies
covering the foregoing property or otherwise on
deposit with or held by Beneficiary as provided in
this Deed of Trust;
(xii) all right, title and interest of
Grantor in and to the accounts established and
maintained pursuant to the Security Deposit
Agreement, all Project Revenues and all cash, cash
equivalents, instruments, letters of credit,
investment and other securities deposited or
required to be deposited with the Trustee or the
Beneficiary pursuant to any provision of this Deed
of Trust, the Security Deposit Agreement or any
other Transaction Document, including, without
limitation, the 9 special, segregated and
irrevocable Accounts (and all amounts deposited
therein) established by the Beneficiary at Shawmut
Bank Connecticut, National Association, more
specifically described as follows: Account Number:
Name of Account:
30-24-100-0155330 Revenue Account
30-24-100-0155360 Warranty Maintenance Reserve Account
30-24-100-0155350 Rent Reserve Account
30-24-100-0155370 Insurance and Condemnation Proceeds Account
30-24-100-0155380 Special Payment Account
30-24-100-0155390 Partnership Security Account
30-24-100-0155400 Distribution Reserve Account
30-24-100-0155340 Operation Maintenance Reserve Account
30-24-100-0155410 Current Account
(xiii) all right, title and/or interest of
Grantor in, to and under (A) all now or hereafter
existing consents, licenses, building permits, other
permits and governmental approvals, certificates of
occupancy, authorizations and agreements relating to
construction, ownership, management, completion,
occupancy, use or operation of the Trust Property or
any part thereof (collectively, the "Permits"), to
the extent assignment hereunder does not violate the
provisions of such Permits, and (B) all now or
hereafter existing drawings, plans, specifications
and similar or related items relating to the Real
Estate or the Equipment or any part thereof
(collectively, the "Plans");
(xiv) all right, title and interest of
Grantor in and to all "Accounts", "Chattel Paper",
"Documents", "Instruments", "Equipment", "General
Intangibles", "Goods" and "Inventory" (each phrase
in quotations having the meaning given in the
Uniform Commercial Code of the State of Maryland as
in effect on the date hereof) and all other, if any,
personal, real or mixed property of Grantor, now
owned or hereafter acquired (the "Personal
Property");
(xv) all right, title and interest of Grantor
in and to any and all other property that may from
time to time, by delivery or by writing of any kind,
be subjected to the lien hereof by Grantor or by
anyone on its behalf or with its consent, or which
may come into the possession or be subject to the
control of the Trustee or the Beneficiary pursuant
to this Deed of Trust, including, without
limitation, all proceeds of any sales or other
dispositions of all or part of the Trust Property,
any such property being hereby assigned to the
Trustee for the benefit of the Beneficiary and
subjected or added to the lien or estate created by
this Deed of Trust forthwith upon the acquisition
thereof by Grantor, as fully as if such property
were now owned by Grantor and were specifically
described in this Deed of Trust and subjected to the
lien and security interest hereof; and the Trustee
for the benefit of the Beneficiary is hereby
authorized to receive any and all such property as
and for additional security hereunder;
(xvi) all right, title and interest of Grantor in
and to all the remainder or remainders, reversion or
reversions, rents, revenues,issues, profits,
royalties, income and other benefits derived from
any of the foregoing, all of which are hereby
assigned to Trustee, who is hereby authorized to
collect and receive the same, to give proper
receipts and acquittances therefor and to apply the
same to the payment of the Obligations in accordance
with the provisions of this Deed of Trust; and;
(xvii) all right, title and interest of
Grantor in and to all proceeds, products and other
"Proceeds" (as such term is defined in the Uniform
Commercial Code of the State of Maryland as in
effect on the date hereof), both cash and noncash,
and including those arising from the sale, lease,
transfer or other use or disposition of any kind or
nature, of the foregoing; provided, however, that
the execution and delivery of this Deed of Trust is
for security only and shall not (a) transfer, pass
or in any way affect or modify the liability or
responsibility of Grantor under or in respect of any
Contract, or (b) subject Beneficiary or Trustee to
any liabilities or responsibilities of Grantor under
or in respect of any Contract.
Notwithstanding anything to the contrary
contained herein, this Deed of Trust shall not be deemed
to encumber any property that is perfected by the filing
of the UCC-1 financing statements set forth on Schedule C
attached hereto.
TO HAVE AND TO HOLD the Trust Property, with
all the privileges and appurtenances thereof, to Trustee,
their successors and assigns for the uses and purposes
set forth herein; PROVIDED NEVERTHELESS, that if all the
Obligations shall be paid and performed in full, then
this Deed of Trust shall be void and the Trustee shall,
on receipt of a written request therefor from Beneficiary
(A) release and discharge the lien of this Deed of Trust,
(B) cause this Deed of Trust to be cancelled of record
and (C) transfer and deliver to Grantor the Trust
Property which is then subject to the lien of this Deed
of Trust and is in the Trustee's possession or control;
otherwise it shall remain in full force and effect.
ARTICLE I
GENERAL COVENANTS AND AGREEMENTS
1.01 Instruments of Further Assurance; Filing
and Recording.
(a) Grantor covenants that it shall do,
execute, acknowledge and deliver, or cause to be done,
executed, acknowledged and delivered, such amendments or
supplements hereto and such further acts, instruments and
transfers as Beneficiary or Trustee may reasonably
require for the curing of any defect in the execution or
acknowledgment hereof or in the description of the Trust
Property or for the better conveying, assigning, pledging
and confirming unto Trustee or Beneficiary of the Trust
Property conveyed, assigned and pledged hereunder or for
properly evidencing or giving notice of the Obligations
or of each lien and security interest securing payment of
the Obligations.
(b) Grantor covenants that (i) upon the
execution and delivery of this Deed of Trust and
thereafter, from time to time, it shall cause this Deed
of Trust and each amendment and supplement hereto (or a
memorandum with respect hereto or to such amendment or
supplement) to be filed, registered and recorded and to
be refiled, re-registered and re-recorded in such manner
and in such places as may be required by Beneficiary, GE
Capital, Owner Trustee or Trustee in order to publish
notice of and fully to protect the lien of this Deed of
Trust upon, and to perfect or continue the perfection of
the security interests created by this Deed of Trust in,
the Trust Property and (ii) it shall perform or cause to
be performed from time to time any other act as required
by law, and it shall execute or cause to be executed any
and all instruments of further assurance that may be
necessary for such publication, perfection, continuation
and protection.
(c) Grantor shall pay all filing, registration
and recording fees, all refiling, re-registration and re-
recording fees, and all reasonable expenses incident to
the execution and acknowledgment of this Deed of Trust,
any amendment or supplement hereto and any instrument of
further assurance, and all federal, state, county and
municipal stamp taxes and other taxes, duties, imposts,
assessments and charges arising out of or in connection
with the execution and delivery of this Deed of Trust,
any amendment or supplement hereto or any instruments of
further assurance.
1.02 Warranties of Title.
(a) Grantor warrants that it has good and
marketable title to the Trust Property free and clear of
any Lien other than Permitted Liens, and that it has good
right to sell, mortgage and convey the same in manner and
form as provided herein. Grantor shall forever warrant
and defend the title to the Trust Property against the
claims and demands of all persons whomsoever, except
those claiming under Permitted Liens.
(b) Grantor shall proceed with reasonable
diligence to correct any defect in title to the Trust
Property, and in this connection, should there exist upon
the Trust Property any Lien, other than a Permitted Lien,
or should any such Lien hereafter arise, then, unless
Beneficiary is the only holder of such other Lien, or
Beneficiary shall have given specific prior written
consent to the creation or continuation thereof, Grantor
shall promptly discharge and remove any such Lien from
the Trust Property.
1.03 General. For the purpose of better
securing payment and performance of the Obligations,
Grantor covenants and agrees with Beneficiary, for the
use and benefit of Beneficiary, that:
(a) Grantor shall permit, subject to its
safety rules and regulations, Beneficiary and GE Capital
and their respective agents, representatives and
employees during normal business hours and upon
reasonable prior notice to go upon, examine, inspect and
remain on the Trust Property, and shall furnish
Beneficiary and GE Capital all pertinent information in
regard to the development and operation of the Trust
Property as Beneficiary and GE Capital may reasonably
request; and
(b) Grantor shall notify Trustee, Beneficiary
and GE Capital in writing promptly of the commencement of
any legal proceedings of which it has knowledge affecting
title to, or the lien or security interest of this Deed
of Trust upon, the Trust Property or any part thereof and
shall take such action as may be necessary to preserve
Trustee's and Beneficiary's rights affected thereby; and
(c) Promptly upon demand by Trustee,
Beneficiary or GE Capital, Grantor shall pay all
reasonable costs and expenses hereafter advanced or
expended by Trustee, Beneficiary or GE Capital for legal
services rendered in connection with the enforcement of
any rights or remedies of Beneficiary hereunder, together
with interest thereon at a rate per annum equal to the
Default Rate from the fifth (5th) day following demand
for payment of such advance or expenditure until paid;
and
(d) Grantor shall comply in all material
respects with all laws, ordinances, rules, regulations
and determinations of any arbitrator, court or other
governmental authority affecting the Trust Property,
including, without limitation, any applicable
environmental, zoning or building, use and land use laws,
ordinances, rules or regulations of any governmental
authority, and any applicable covenants and restrictions,
except as permitted pursuant to the Loan Agreement; and
(e) Grantor shall pay the indebtedness secured
by this Deed of Trust in accordance with the terms hereof
and of the Notes, the Loan Agreement, any Lease of the
Facility and each other Transaction Document and shall
perform in all material respects each term to be
performed hereunder and under the Notes, the Loan
Agreement, any Lease of the Facility and each other
Transaction Document; and
(f) Grantor shall comply in all material
respects with the requirements of all, and shall not
modify, amend or terminate any, easements and restrictive
covenants which from time to time benefit or burden the
whole or any portion of the Trust Property, and shall
also comply in all material respects with the
requirements of, and maintain, preserve, enforce and
renew, all material rights of way, easements, grants,
privileges, licenses, franchises and restrictive
covenants which from time to time benefit or pertain to
the whole or any portion of the Trust Property.
1.04 Insurance.
(a) Grantor shall maintain, or cause to be
maintained, policies of insurance of the types, in the
amounts and otherwise as required by subsection 6.6 of
the Loan Agreement.
(b) In the event of a sale of the Trust
Property to Beneficiary under this Deed of Trust or other
acquisition of the Trust Property or any part thereof by
Beneficiary, such policies of insurance shall become the
absolute property of Beneficiary, but receipt of any
insurance proceeds and any disposition of the same by
Beneficiary shall not constitute a waiver of any rights
of Beneficiary, statutory or otherwise, and specifically
shall not constitute a waiver of any remedies of Trustee
or Beneficiary if an Event of Default (as defined below)
shall occur and be continuing hereunder.
1.05 Monthly Payment of Assessments. Grantor
agrees that, upon the occurrence and during the
continuance of an Event of Default, Grantor shall pay to
Beneficiary on a monthly basis as hereinafter set forth a
sum equal to the municipal and other governmental real
estate and personal property taxes and other assessments
next due on the Trust Property and all premiums next due
for fire and other casualty insurance required of Grantor
hereunder, less all sums already paid therefor, divided
by the number of months to elapse not less than one (1)
month prior to the date when said taxes and assessments
will become delinquent and when such premiums will become
due. Grantor agrees that should there be insufficient
funds so deposited with Beneficiary for said taxes,
assessments and premiums when due, it will upon demand by
Beneficiary promptly pay to Beneficiary amounts necessary
to make such payments in full; any surplus funds may be
credited toward future such taxes, assessments and
premiums; and if Beneficiary shall have commenced
foreclosure proceedings, Grantor agrees that Beneficiary
may apply such funds toward the payment of the
Obligations without causing thereby a waiver of any
rights, statutory or otherwise, and specifically such
application shall not constitute a waiver of any remedies
hereunder. Grantor hereby assigns to Beneficiary all the
foregoing sums so held hereunder for such purposes.
1.06 Performance of Grantor's Obligations.
Should Grantor fail to make any payment or do any act as
and in the manner provided in this Deed of Trust, which
failure lasts beyond any applicable notice and cure
period or may materially impair Beneficiary's security
hereof, Trustee or Beneficiary, without obligation so to
do and without notice to or demand upon Grantor and
without releasing Grantor from any Obligations, may make
or do the same in such manner and to such extent as
Trustee or Beneficiary may deem necessary to protect the
security hereof. In connection therewith (without
limiting its general powers), Trustee and Beneficiary
shall each have and hereby is given the right, but not
the obligation, upon the occurrence and during the
continuance of an Event of Default (i) to enter upon and
take possession of the Trust Property, (ii) to make
additions, alterations, repairs and improvements to the
Trust Property which it may consider necessary or proper
to keep the Trust Property in good condition and repair;
(iii) to appear and participate in any action or
proceeding adversely affecting or which may adversely
affect the security hereof or the rights or powers of
Beneficiary; (iv) to pay, purchase, contest or compromise
any encumbrance, claim, charge, lien or debt (other than
Permitted Liens) which in the judgment of Trustee or
Beneficiary may adversely affect the security of this
Deed of Trust or be prior or superior hereto; (v) to
procure insurance for risks covering Beneficiary's
interest in the event Grantor fails to provide, maintain,
keep in force or deliver and furnish to Beneficiary the
policies of insurance required by subsection 1.04 of this
Deed of Trust and subsection 6.6 of the Loan Agreement;
and (vi) in exercising such powers, to pay reasonably
necessary expenses, including engagement of counsel or
other necessary or desirable consultants. Grantor hereby
irrevocably constitutes and appoints Beneficiary and any
officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact
upon the occurrence and during the continuance of an
Event of Default with full irrevocable power and
authority in the place and stead of Grantor and in the
name of Grantor or in its own name, from time to time in
Beneficiary's discretion to take any and all action and
to execute any and all instruments which Beneficiary may
deem necessary or desirable for the purpose of carrying
out the terms of this Deed of Trust and the Loan
Agreement. Upon demand of Trustee or Beneficiary,
Grantor shall pay all reasonable costs and expenses
advanced or expended by Trustee or Beneficiary in
connection with the exercise by Trustee or Beneficiary of
the foregoing rights, including, without limitation,
costs of evidence of title, court costs, appraisals,
surveys, reasonable attorneys' fees and expenses and
insurance premiums, together with interest thereon at the
Default Rate from the date of such advance or expenditure
until paid.
1.07 Additional Advances and Readvances From
Beneficiary. Upon written request of Grantor, GE Capital
may, subject to the terms of the Loan Agreement, at its
sole option, from time to time make advances and
readvances to Grantor in addition to advances outstanding
on the date hereof, whether or not pursuant to the Loan
Agreement or the Notes or any other document, provided,
however, that the total principal secured hereby and
remaining unpaid, including any such advances, shall not
at any one time exceed the sum of $130,000,000. If
requested by Beneficiary, Grantor shall execute and
deliver to GE Capital a note or other agreement
evidencing each and every such further advance or
readvance which may be made, and each and every such note
or other agreement shall contain such terms and
conditions as GE Capital may require. Grantor shall pay
when due all such further advances or readvances with
interest and other charges thereon, as applicable. Said
further advances or readvances, each note and agreement
evidencing the same, the Loan Agreement, the Notes and
any Lease of the Facility shall all be secured hereby.
All provisions of this Deed of Trust shall apply to each
further advance or readvance as well as to all other
indebtedness secured hereby, including, without
limitation, all indebtedness under the Loan Agreement,
the Notes and any Lease of the Facility. Nothing herein
contained, however, shall limit the amount secured by
this Deed of Trust if such amount is increased by
advances made by GE Capital as herein elsewhere provided
for to protect the security encumbered hereby.
1.08 Agreements Between Grantor and
Beneficiary. Any agreement hereafter made by Grantor and
Beneficiary pursuant to this Deed of Trust shall be
superior to the rights of the holder of any subsequent
lien or encumbrance to the extent allowed by law.
1.09 Continuance of Use. Grantor agrees that
if at any time the then existing use or occupancy of the
Site, the Facility or any other part of the Trust
Property shall, pursuant to any zoning or other law,
ordinance or regulation be permitted only so long as such
use or occupancy shall continue, Grantor shall not cause
or permit such use or occupancy to be discontinued
without the prior written consent of Beneficiary and GE
Capital.
1.10 Leases. Grantor shall submit all Leases
to Beneficiary and GE Capital for their examination and
approval in writing prior to the execution, delivery and
commencement thereof, which approval shall not be
unreasonably withheld or delayed; any Lease not so
approved shall not be valid; and Grantor at its cost and
expense, upon request of Beneficiary, shall cause any
parties in possession of or using the Site, the Facility
or any other part of the Real Estate under any such Lease
to vacate and cease the use thereof immediately; and
Grantor acknowledges that Beneficiary and GE Capital may
from time to time at its option enter upon the Real
Estate and take any other action in court or otherwise to
cause such parties to vacate and cease using the Real
Estate; the reasonable costs and expenses of Beneficiary
in so doing shall be paid by Grantor to Beneficiary on
demand thereof and shall be part of the indebtedness
secured by this Deed of Trust as costs and expense
incurred to preserve and protect the security; such
rights of Beneficiary shall be in addition to all its
other rights as beneficiary for breach by Grantor of the
requirements of this Deed of Trust.
1.11 Alterations of Security. Without
affecting the liability of Grantor or any other person
(except any person expressly released in writing) for
performance of any Obligations secured hereby or for
performance of any Obligation contained herein, in the
Loan Agreement, in the Notes, in any Lease of the
Facility or in any other Transaction Document, and
without affecting the rights of Beneficiary, GE Capital
or the Owner Trustee with respect to any security not
expressly released in writing, Grantor agrees that
Beneficiary, GE Capital or the Owner Trustee may at any
time and from time to time, either before or after the
maturity of the Notes or before or after the Lease
Termination Date and without notice or consent:
a. Release any person liable for payment or
for performance of any of the Obligations;
b. Exercise or refrain from exercising or
waive any right Beneficiary, GE Capital or the Owner
Trustee may have;
c. Accept additional security of any kind; or
d. Release or otherwise deal with any property
and premises, real or personal, securing the Obligations,
including all or any part of the Trust Property.
1.12 Liability of Grantor. It is expressly
agreed by Grantor that, anything herein to the contrary
notwithstanding, Grantor shall remain liable under each
Contract to observe and perform all the conditions and
obligations to be observed and performed by it
thereunder, all in accordance with and pursuant to the
terms and provisions of each such Contract. Neither
Trustee nor Beneficiary nor GE Capital nor the Owner
Trustee shall have any obligation or liability under any
Contract by reason of or arising out of this Deed of
Trust or assignment to Trustee or Beneficiary of any
payment relating to any Contract, nor shall Trustee or
Beneficiary nor GE Capital nor the Owner Trustee be
required or obligated in any manner to perform or fulfill
any of the obligations of Grantor under or pursuant to
any Contract, or to make any payment, or to make any
inquiries as to the nature or the sufficiency of any
payment received by it or the sufficiency of any
performance by any party under any Contract, or to
present or file any claim, or to take any action to
collect or enforce any performance or the payment of any
amounts which may have been assigned to it or to which it
may be entitled at any time or times.
1.13 No Waiver of Remedies. Receipt of rents,
awards, proceeds and any other moneys or evidences
thereof, pursuant to the provisions hereunder, and any
disposition of the same by Beneficiary shall not
constitute a waiver of the power of sale, right of
foreclosure, or any other remedy if an Event of Default
shall occur and be continuing hereunder.
ARTICLE II
REMEDIES UPON EVENT OF DEFAULT
2.01 Events of Default. Any of the following
events shall be deemed an Event of Default hereunder:
(a) Any Event of Default described in Section
8 of the Loan Agreement or any event of default under any
Lease of the Facility (or other event which, pursuant to
the terms of such Lease of the Facility, would permit the
lessor thereunder to exercise remedies in respect of the
Facility) shall constitute an Event of Default hereunder;
(b) It shall be an Event of Default hereunder if
Grantor shall fail to perform any covenant or agreement
contained or referred to herein to be performed by
Grantor and, in the case of any affirmative covenant,
such failure shall continue unremedied for a period of 30
days after written notice thereof from the Beneficiary to
the Grantor.
(c) It shall be an Event of Default hereunder
if, without the prior written consent of Beneficiary, Grantor
shall sell, assign, mortgage or otherwise transfer or
encumber or be or become liable under any agreement for
the lease, hire or use of any of the Trust Property,
except in accordance with the terms and conditions hereof
and of the Loan Agreement.
(d) It shall be an Event of Default hereunder
if any Easement Agreement shall terminate or be
terminated or the use of any Easement by Grantor or
Beneficiary is discontinued for any period.
2.02 Remedies.
(a) General. If an Event of Default shall
have occurred and be continuing, then in any and each
such event the aggregate of the Obligations and other
sums secured hereby shall, either automatically or at the
option of GE Capital, as provided in Section 8 of the
Loan Agreement, become due and payable immediately as
fully and completely as if originally stipulated then to
be paid, and the Owner Trustee and GE Capital may
exercise the rights and remedies specified in any Lease
of the Facility, and the Trust Property shall be subject
to the power of sale, foreclosure and such other action
as may be available at law or in equity for the
enforcement hereof and realization upon the Trust
Property. Grantor, in accordance with the applicable
rules of the Maryland Rules of Procedure or any Public
General Law or Public Local Law of the State of Maryland
relating to deeds of trust or mortgages, does hereby, for
itself and its successors and assigns, grant to the
Trustee the power of sale and assent to the passage and
entry of a decree for the sale of the Trust Property by
any circuit court having jurisdiction over the Trust
Property. At the sole option of the Security Agent, any
sale or foreclosure of the Trust Property may be combined
with any sale or foreclosure of any other Collateral held
by the Security Agent, including without limitation,
under any security agreement between Grantor and the
Security Agent.
To the extent permitted under Maryland law and
notwithstanding anything to the contrary hereinbefore
provided, if an Event of Default shall occur and be
continuing (regardless of the pendency of any proceeding
which has or might have the effect of preventing Grantor
from complying with the provisions hereof), Beneficiary
shall have the option, but not the obligation, to
exercise any one or more of the following remedies in
addition to any other right, power or remedy provided for
herein or at law or in equity: (i) cure such Event of
Default itself; (ii) declare immediately due and payable
all or any part of the Obligations; (iii) bring an action
or proceeding, at law or in equity, to specifically
enforce any provision contained herein; (iv) direct
Trustee to exercise Trustee's power of sale with respect
to the Trust Property in accordance with the Maryland
Rules of Procedure and any other legal requirements
affecting the Trust Property; Grantor assents to the
passage of a decree for the sale of the Trust Property
upon the occurrence and during the continuance of an
Event of Default by any court having jurisdiction and
Grantor authorizes and empowers Trustee, upon the
occurrence and during the continuance of an Event of
Default, to sell Grantor's interest in the Trust
Property, in accordance with the Maryland Rules of
Procedure and any other legal requirements affecting the
Trust Property; no readvertisement of any sale shall be
required if the sale is adjourned by announcement, at the
time and place set therefor, of the time and place to
which the same is to be adjourned ex parte; (v) take
possession of, or obtain the appointment of a receiver
for the purpose of taking possession of the Trust
Property; and (vi) institute and maintain an action of
judicial foreclosure against all or any part of the Trust
Property (either for the entire Obligations or for such
amounts as are then due and payable, subject to the
continuing lien or estate of this Deed of Trust for the
balance of the Obligations not then due and payable)
conducted in accordance with the laws of the State of
Maryland and the provisions hereof. The expenses
(including receiver's fees, counsel fees, costs and
agent's compensation) incurred pursuant to the powers
herein contained shall be secured hereby.
(b) Possession of Mortgaged Property. Upon
the occurrence and during the continuance of an Event of
Default, each of Beneficiary and GE Capital may
personally, or by its agents, attorneys and employees and
without regard to the adequacy or inadequacy of the Trust
Property or any other collateral as security for the
Obligations enter into and upon the Trust Property and
each and every part thereof and exclude Grantor and its
agents and employees therefrom without liability for
trespass, damage or otherwise (Grantor hereby agreeing to
surrender possession of the Trust Property to Beneficiary
upon demand at any such time) and use, operate, manage,
maintain and control the Trust Property and every part
thereof. Following such entry and taking of possession,
Beneficiary shall be entitled, without limitation, (x) to
lease all or any part or parts of the Trust Property for
such periods of time and upon such conditions as
Beneficiary may, in its discretion, deem proper, (y) to
enforce, cancel or modify any Lease and (z) generally to
execute, do and perform any other act, deed, matter or
thing concerning the Trust Property as Beneficiary or GE
Capital shall deem appropriate as fully as Grantor might
do.
2.03 Applications of Proceeds; Effect of Sale.
Beneficiary shall pay, distribute and apply the proceeds
of any such sale or foreclosure first, to the payment of
(i) all reasonable costs and expenses of such sale or
foreclosure, including reasonable attorneys' fees and
disbursements, trustee's commissions and auctioneer's
commissions (as allowed by the appropriate rules of the
courts), and the just compensation of Beneficiary for
services rendered in connection therewith or in
connection with any proceeding to sell if a sale is not
completed, and (ii) all reasonable charges, expenses and
advances incurred or made by Beneficiary or GE Capital in
order to protect the lien and security interest of this
Deed of Trust or the security afforded hereby, together
with interest at the Default Rate, and second, to the
Obligations owing to GE Capital and the Owner Trustee in
such order as GE Capital shall determine. Said sale or
foreclosure shall forever be a bar against Grantor, its
legal representatives, successors and assigns, and all
other persons claiming under any of them. It is
expressly agreed that the purchaser may rely upon the
recitals in each conveyance as full evidence of the truth
of the matters therein stated, and, as to any purchaser, all
lawful prerequisites to said sale shall be conclusively
presumed to have been performed.
2.04 Abandonment of Sale. If foreclosure
should be commenced by Beneficiary, Beneficiary may at
any time before the sale abandon the sale, and may at any
time or times thereafter again commence foreclosure; and,
irrespective of whether foreclosure is commenced by
Beneficiary, Beneficiary may institute suit for
collection of the Obligations.
2.05 Right to Purchase. Beneficiary, GE
Capital and the Owner Trustee shall have the right to
become the purchaser at any sale made hereunder, by being
the highest bidder, and credit upon all or any part of
the Obligations shall be deemed cash paid for the
purposes of this Article II.
2.06 Waiver of Marshalling, etc. All rights
of marshalling of assets or sale in inverse order of
alienation, including any such rights with respect to the
Trust Property in the event of foreclosure of any lien or
security interest at any time securing the Obligations or
any part thereof (including, without limitation, the lien
and security interests hereby created), are hereby
waived.
2.07 Remedies not Exclusive. No lien,
security interest, right or remedy in favor of
Beneficiary granted in or secured by this Deed of Trust
shall be considered as exclusive, but all liens, security
interests, rights and remedies under this Deed of Trust
shall be cumulative of each other, and of all others
which Beneficiary, GE Capital or the Owner Trustee may
now or hereafter have as security for the payment of the
Obligations.
2.08 Limitation of Liability. There shall be
full recourse to Grantor and all of its assets for the
liabilities of the Grantor under this Deed of Trust and
the other Transaction Documents, but in no event shall
any Partner, Affiliate of any Partner, or any officer,
director or employee of Grantor, any Partner or their
Affiliates or any holder of any equity interest in any
Partner be personally liable or obligated for such
liabilities of Grantor except as may be specifically
provided in any other Transaction Document to which such
Partner is a party or in the event of fraudulent actions,
knowing misrepresentations, gross negligence or willful
misconduct by Grantor, any Partner or any of their
Affiliates in connection with the financing contemplated
under the Transaction Documents. Subject to the foregoing
limitation on liability, Beneficiary may sue or commence
any suit, action or proceeding against any Partner or any
Affiliate in order to obtain jurisdiction over Grantor in
order to enforce its rights and remedies hereunder.
Nothing herein contained shall limit or be construed to
limit the liabilities and obligations of any Partner or
any Affiliate thereof in accordance with the terms of any
other Transaction Document creating such liabilities and
obligations to which such Partner or Affiliate is a
party.
ARTICLE III
GENERAL
3.01 No Waiver. No exercise by Beneficiary
of, or delay by Beneficiary in exercising, any right or
remedy hereunder, or otherwise afforded by law, shall
operate as a waiver, or preclude the exercise of any such
right or other right or remedy, including the right of
foreclosure, if an Event of Default shall occur and be
continuing.
3.02 Notices. All notices, requests, demands
and other communications hereunder shall be made in
accordance with Section 9.2 of the Loan Agreement, except
that the addresses of Trustee and the Beneficiary shall
be as shown on the first page of this Deed of Trust.
3.03 Successors and Assigns. The covenants
and agreements herein contained shall bind, and the
benefits and advantages thereof shall inure to, the
respective successors and assigns of Beneficiary, GE
Capital and the Owner Trustee and the respective
permitted successors and assigns of Grantor, subject
nevertheless to the limitations on assignment by Grantor
contained herein.
3.04 Indemnity. Grantor shall, subject to
Section 2.08 hereof, indemnify and save Beneficiary, GE
Capital, Owner Trustee and Trustee harmless from and
against and shall reimburse Beneficiary, GE Capital,
Owner Trustee and Trustee for, all liabilities,
obligations, damages, fines, penalties, claims, demands,
reasonable costs, charges, judgments and reasonable
expenses (including reasonable attorneys' fees and
expenses) which may be imposed upon or incurred or paid
by or asserted against Trustee, Beneficiary or
Beneficiary's interest in the Trust Property by reason of
or in connection with any failure on the part of Grantor
to perform or comply with any of the covenants and
agreements contained herein or in the Loan Agreement, any
Lease of the Facility or any other Transaction Document
on its part to be complied with or performed. The
provisions of this subsection 3.04 shall not in any way
be affected by the absence in any case of any insurance
or by the failure or refusal of any insurance company to
perform any obligation on its part.
3.05 Severability. If any obligation or
portion of this Deed of Trust is determined to be invalid
or unenforceable under law, it shall not affect the
validity or enforcement of the remaining obligations or
portions hereof.
3.06 Fixture Filing. This Deed of Trust is
also a fixture filing with respect to the Personal
Property which is to become fixtures and is to be
recorded in the Land Records of Prince George's County
and Charles County. No inference should be drawn from
this fixture filing that Beneficiary concedes that any
Personal Property is or will become fixtures on the Real
Estate. To the extent that this Deed of Trust is a
fixture filing, it is merely precautionary.
3.07 GOVERNING LAW. THIS DEED OF TRUST SHALL
BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND.
3.08 No Merger. Unless expressly provided
otherwise, in the event that ownership of this Deed of
Trust and title to the Trust Property or any estate
therein shall become vested in the same person or entity,
this Deed of Trust shall not merge in such title but
shall continue as a valid lien on the Trust Property for
the amount secured hereby.
3.09 Easement Provisions. (a) Grantor shall
not at any time take any action or refrain from taking
any action that adversely affects Grantor's, Trustee's or
Beneficiary's rights to use any or all of the Easements
in the manner contemplated in the Easement Agreements, as
such instruments exist on the date hereof.
(b) If it shall be deemed that a particular
Easement Agreement is an executory contract for the
purposes of Section 365 of the Bankruptcy Code and there
shall be filed by or against Grantor a petition under the
Bankruptcy Code and Grantor, as grantee under an Easement
Agreement, shall determine to reject such Easement
Agreement pursuant to Section 365(a) of the Bankruptcy
Code, then Grantor shall give Trustee, Beneficiary and GE
Capital not less than twenty (20) days' prior notice of
the date on which Grantor shall apply to the Bankruptcy
Court for authority to reject such Easement Agreement.
Trustee and Beneficiary shall each have the right, but
not the obligation, to serve upon Grantor within such
twenty (20) day period a notice stating that Trustee or
Beneficiary, as applicable, demands that Grantor assume
and assign the Easement Agreement to Trustee or
Beneficiary pursuant to Section 365 of the Bankruptcy
Code. If Trustee or Beneficiary shall serve upon Grantor
the notice described in the preceding sentence, Grantor
shall not seek to reject such Easement Agreement and
shall comply with the demand provided for in the
preceding sentence. In addition, effective upon the entry
of an order for relief with respect to Grantor under the
Bankruptcy Code, Grantor hereby assigns and transfers to
Trustee and Beneficiary a non-exclusive right to apply to
the Bankruptcy Court under subsection 365(d)(4) of the
Bankruptcy Code for an order extending the period during
which the Easement Agreement may be rejected or assumed.
3.10 Successor Trustee. Beneficiary shall
have the right to appoint a substitute, or a successor
trustee, to act as Trustee hereunder by written
designation recorded among the land records of the city
or county in the State of Maryland where this Deed of
Trust is recorded. Such right shall extend to the
appointment of other successor and substitute trustees
successively until the Obligations hereby secured have
been paid and performed in full or until the Trust
Property is sold hereunder, and each substitute and
successor trustee shall succeed to all of the rights and
powers of the original Trustee named herein.
3.11 Actions of Trustee. The Trustee shall be
protected in acting upon any notice, request, consent,
demand, statement, note or other paper or document
believed by it to be genuine and to have been signed by
the party or parties purporting to sign the same. The
Trustee shall not be liable for any error of judgment,
nor for any act done or step taken or omitted, nor for
any mistake of law or fact, nor for anything which it may
do or refrain from doing in good faith nor generally
shall the Trustee have any accountability hereunder
except for his individual willful default.
3.12 Trustee as Attorney. The Trustee may act
hereunder and may sell and convey the Trust Property as
herein provided although the Trustee has been, may now be
or may hereafter be, attorney or agent of any
beneficiary, in respect of any matter or business
whatsoever.
3.13 Incapacity or Absence from State. It is
further understood and agreed that in the event of the
disability of any Trustee, or of such Trustee's absence
from the State of Maryland, the rights, powers,
privileges, discretions, duties, obligations, and trust
hereby created and reposed in the Trustee may be executed
by any other Trustee (should there be more than one
Trustee at any time) with the same legal force, effect
and virtue as though executed by both or all of them.
3.14 Leveraged Lease. If, upon the sale of
the Facility by the Grantor to the Owner Trustee in
accordance with the provisions of the Loan Agreement, GE
Capital exercises its option under subsection 5.8 of the
Loan Agreement to borrow funds to finance (or refinance)
a portion of the purchase price of the Facility, Grantor
agrees to execute a supplement hereto to provide for such
provisions as are customary and appropriate in respect of
leveraged lease transactions.
3.15 Certain Rights of the Power Purchaser.
Nothing in this Deed of Trust and Security Agreement
shall be deemed to limit the provisions of the Consent of
the Power Purchaser, which provisions are solely for the
benefit of the Power Purchaser and not the Grantor.
Without limiting the scope of the foregoing, the Trustee
and the Security Agent agree, for the exclusive benefit
of the Power Purchaser and not the Grantor, that the
exercise of remedies or any similar action under this
Deed of Trust and Security Agreement is subject to, and
shall be conducted in a manner consistent with, the Power
Purchaser's rights under (i) the Consent of the Power
Purchaser and (ii) the Power Purchase Agreement and the
Transfer Agreement (to the extent such rights under the
Power Purchase Agreement and the Transfer Agreement are
not explicitly waived by the Power Purchaser in
accordance with the terms of the Consent of the Power
Purchaser).
IN WITNESS WHEREOF, Grantor has caused this
instrument to be executed by its General Partner hereunto
duly authorized, as of the day and year first above
written.
PANDA-BRANDYWINE, L.P.
By: Panda Brandywine
Corporation, its
General Partner
By:___________________
Name: Robert W. Carter
Title: President
This is to certify that the within instrument was
prepared under the supervision of the undersigned who is
an attorney admitted to practice before the Court of
Appeals of Maryland.
_______________________
Name:
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
I hereby certify, that on this 10th day of
April, in the year 1995, before the subscriber, a Notary
Public in the State of New York, personally appeared
Robert W. Carter, who acknowledged himself to be the
President of Panda Brandywine Corporation, the
general partner of Panda-Brandywine L.P., and that he, as
such officer, being authorized to do so, executed the
foregoing instrument for the purposes therein contained
by signing the name of such corporation by himself as
such officer.
Witness my hand and notarial seal the day and
year last above written.
_____________________
Notary Public
[Notary Seal] My commission expires: 10/15/96
Steven Maher
Notary Public, State of New York
No. 31-4973136
Qualified in New York County
Certificated Filed in New York County
Commission Expires October 15, 1996
_________________________
Schedule A
Description of Site
[Reference Election District in Prince George's County]
Schedule B Easements
Schedule C UCC-1 Financing Statements
EXHIBIT 10.28
EXECUTION COPY
GENERAL PARTNER PLEDGE AGREEMENT
GENERAL PARTNER PLEDGE AGREEMENT, dated as of March 30,
1995 ("this Agreement"), made by PANDA BRANDYWINE CORPORATION, a
Delaware corporation (together with its successors and assigns,
the "Pledgor") and the sole general partner of Panda-Brandywine,
L.P., a Delaware limited partnership (together with its
successors and assigns, the "Borrower"), to SHAWMUT BANK
CONNECTICUT, NATIONAL ASSOCIATION, a national banking
association, in its capacity as Security Agent (the "Security
Agent") under the Security Deposit Agreement (as defined in the
Loan Agreement referred to below).
W I T N E S S E T H :
WHEREAS, the Pledgor is the legal and beneficial owner
of a 50% general partnership interest in the Borrower (such
partnership interest being hereinafter referred to as the
"Partnership Interest");
WHEREAS, the Borrower, the Pledgor and General Electric
Capital Corporation ("GE Capital") have entered into the
Construction Loan Agreement and Lease Commitment, dated as of the
date hereof (as amended, supplemented or otherwise modified from
time to time, the "Loan Agreement"), pursuant to which GE Capital
has agreed, among other things, to (i) make Loans to the
Borrower, (ii) (acting through the Owner Trustee established for
the benefit of GE Capital) lease the Site from the Borrower and
sublease the Site back to the Borrower and (iii) (acting through
the Owner Trustee established for the benefit of GE Capital) upon
completion of the Project, purchase the Facility from the
Borrower and lease the Facility back to the Borrower pursuant to
the Facility Lease;
WHEREAS, it is a condition precedent to the obligation
of GE Capital to make Loans to the Borrower under the Loan
Agreement that the Pledgor shall have executed and delivered this
Agreement to the Security Agent, for the benefit of the Owner
Trustee and GE Capital;
WHEREAS, the Pledgor desires to execute this Agreement
to satisfy the condition described in the preceding recital;
NOW, THEREFORE, in consideration of the foregoing
premises and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. Defined Terms; Construction.
(a) Unless otherwise defined herein, terms used
herein shall have the meaning set forth in Appendix A to the Loan
Agreement. Defined terms in this Agreement shall include in the
singular number the plural and in the plural number the singular.
(b) The words "hereof," "herein" and "hereunder"
and words of similar import when used in this Agreement shall, un
less otherwise expressly specified, refer to this Agreement as a
whole and not to any particular provision of this Agreement and
all references to Sections shall be references to Sections of
this Agreement unless otherwise expressly specified.
(c) Unless otherwise expressly specified, any
agreement, contract, or document defined or referred to herein
shall mean such agreement, contract or document in the form
(including all amendments and clarification letters relating
thereto) delivered to GE Capital or the Security Agent on the
Initial Loan Funding Date as the same may thereafter be amended,
supplemented, or otherwise modified from time to time in
accordance with the terms of this Agreement and of the other Loan
Documents.
Section 2. Pledge. As security for the Obligations
and subject to and in accordance with the provisions of this
Agreement, the Pledgor hereby pledges, grants, assigns, hypothecates,
transfers, and delivers to the Security Agent, for the
benefit of GE Capital and the Owner Trustee, a first priority
security interest in the following, whether now owned or hereafter
acquired (the "Collateral"):
(a) all of the Pledgor's general partnership interests
in the Borrower (including, without limitation, the Partner
ship Interest and all right, title and interest of the
Pledgor in and to the Transfer Agreement), and all of the
Pledgor's rights (including, without limitation, all voting
rights in or rights to control or direct the affairs of the
Borrower), privileges, authority and powers as general
partner of the Borrower, whether arising under the terms of
the Partnership Agreement, or at law, or otherwise;
(b) all income, cash flow, revenues, issues, profits,
losses, distributions, payments, and other property of every
kind and variety due, accruing or owing to, or to be turned
over to, or to be disbursed to the Pledgor by the Borrower
in respect of the property described in the preceding clause
(a), including without limitation, all rights of the Pledgor
to allocations of profit and loss, distributions and all
monies and property representing a distribution in respect
of the property described in the preceding clause (a); and
(c) all proceeds, products and accessions of and to
any of the property described in the preceding clauses (a)
and (b);
provided, however, that notwithstanding any of the foregoing,
neither the Security Agent, the Owner Trustee nor GE Capital
shall acquire any interest in any of Pledgor's obligations
contained in the Partnership Agreement.
Section 3. Security for Obligations. This Agreement
secures, and the Collateral is collateral security for, the pay
ment and performance in full when due, whether at stated
maturity, by acceleration or otherwise, of all Obligations now or
hereafter existing.
Section 4. Delivery of Collateral. All certificates
or instruments representing or evidencing the Collateral shall be
delivered to and held by or on behalf of the Security Agent
pursuant hereto and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed undated
instruments of transfer or assignment in blank, all in form and
substance reasonably satisfactory to the Security Agent. If the
Pledgor shall become entitled to receive or shall receive any
other Collateral, then the Pledgor shall, except as otherwise
provided in Section 7, accept and hold the same in trust for the
Security Agent and segregated from the other property or funds of
Pledgor, and shall deliver to the Security Agent forthwith all
such other Collateral (except as provided in Section 7 hereof) in
the form received by the Pledgor, to be held by the Security
Agent, subject to the terms hereof, as part of the Collateral.
Upon the occurrence and during the continuance of an Event of
Default or Lease Event of Default, the Security Agent shall have
the right, at any time in its discretion and without notice to
the Pledgor, to transfer to or to register in the name of the
Security Agent, the Owner Trustee or GE Capital or any of their
respective nominees any or all of the Collateral.
Section 5. Representations and Warranties. The
Pledgor represents and warrants as follows:
(a) Due Organization. The Pledgor is a corporation
duly organized and validly existing under the laws of the
State of Delaware, and is qualified to own property and transact
business in every jurisdiction where the ownership of its proper
ty and the nature of its business as currently conducted requires
it to be qualified.
(b) Power and Authority. The Pledgor has full
corporate power, authority and legal right to enter into this
Agreement and each other Transaction Document to which it is a
party and to perform its obligations hereunder and thereunder and
to pledge all the Collateral pursuant to this Agreement.
(c) Due Authorization. The pledge of the Collateral
pursuant to this Agreement has been duly authorized by the
Pledgor. This Agreement and each other Transaction Document to
which the Pledgor is a party has been duly authorized, executed
and delivered by the Pledgor.
(d) Enforceability. This Agreement and each
other Transaction Document to which the Pledgor is a party constitutes
the legal, valid and binding obligation of the Pledgor enforceable
against the Pledgor in accordance with its terms except
as enforceability may be limited by applicable bankruptcy, insolvency,
moratorium or other similar laws affecting creditors'
rights generally and except as enforceability may be limited by
general principles of equity (whether considered in a suit at law
or in equity).
(e) No Conflicts. The execution and delivery by
Pledgor of this Agreement and each other Transaction Document to
which the Pledgor is a party, the performance by Pledgor of its
obligations hereunder and thereunder, and the pledge by the
Pledgor of the Collateral pursuant to this Agreement will not (i)
violate the provisions of the Pledgor's Certificate of Incorporation
or By-laws; (ii) violate the provisions of any Law applicable
to the Pledgor; (iii) violate any Contractual Obligation; or
(iv) result in or create any Lien (other than the Lien created
hereby) under, or require any consent which has not been obtained
under any agreement or instrument, or the provisions of any order
or decree binding upon the Pledgor or any of its properties.
(f) No Consents. No consent of any other party
(including, without limitation, stockholders or creditors of the
Pledgor) and no Governmental Action is required which has not
been obtained either (i) for the execution, delivery and performance
by Pledgor of this Agreement and each other Transaction
Document to which it is a party, (ii) for the pledge by the
Pledgor of the Collateral pursuant to this Agreement, or (iii)
for the exercise by the Security Agent of the rights provided for
in this Agreement or the remedies in respect of the Collateral
pursuant to this Agreement (except as may be required in connection
with any disposition of all or any part of the Collateral
under any laws affecting the offering and sale of securities
generally).
(g) Not a Utility. The Pledgor is not, and will
not, as a result of becoming a partner in the Borrower, be or
become, or cause the Borrower to be or become: (i) subject to
regulation under Part II or Part III of the Federal Power Act,
except for Sections 202(c), 210, 211, 212, 213, 214 and 305(c) of
the Federal Power Act (16 U.S.C. 824a(c), 824i, 824j, 824k,
824l, 824m and 825d(c), respectively) and the enforcement
provisions of Part III of the Federal Power Act relating thereto;
(ii) an "electric utility company" for purposes of the Holding
Company Act; (iii) subject to state law or regulation respecting
the financial, rate or organizational regulation of electric
utilities; or (iv) subject to regulation as a "steam heating
company" under Article 78, Public Service Commission Law, of the
Annotated Code of Maryland.
(h) Ownership of Collateral. The Pledgor is the
sole legal and beneficial owner of the Collateral free and clear
of any Lien other than Permitted Liens. No security agreement,
financing statement or other public notice with respect to all or
any part of the Collateral is on file or of record in any public
office, except such as may have been filed in favor of the
Security Agent pursuant to this Agreement, or in favor of GE
Capital, as agent for the lenders which were parties to the
Development Loan Agreement dated as of March 23, 1994, pursuant
to the Amended and Restated General Partner Pledge Agreement
dated as of March 23, 1994, between the Pledgor and GE Capital,
as agent.
(i) Perfection. The execution and delivery of
this Agreement concurrently with the filing of UCC-1 financing
statements in the filing offices listed on Schedule 1 create a
valid and perfected first priority security interest in the
Collateral securing the payment of the Obligations.
(j) Chief Executive Office. The chief executive
office of the Pledgor and the office where the Pledgor keeps its
records concerning the Borrower and the Project and all contracts
relating thereto is located at the address specified on Schedule
2. The Pledgor shall not establish a new location for its chief
executive office or change its name until (i) it has given the
Security Agent and GE Capital not less than 30 days' prior
written notice of its intention so to do, clearly describing such
new location or specifying such new name, as the case may be, and
(ii) with respect to such new location or such new name, as the
case may be, it shall have taken all action, reasonably satisfactory
to the Security Agent and GE Capital, to maintain the
security interest of the Security Agent, on behalf of the Owner
Trustee and GE Capital, in the Collateral intended to be granted
hereby at all times fully perfected and in full force and effect.
(k) Sole Business. The Pledgor is the sole general
partner of the Borrower. The Pledgor is not engaged in any
transaction or activity unrelated to the management, development,
financing, operation and/or maintenance of the Borrower and the
Project.
(l) No Proceedings. There is no action, suit or
proceeding at law or in equity or by or before any Governmental
Authority or arbitral tribunal now pending or, to the best knowledge
of the Pledgor, threatened against the Pledgor (i) which
questions the validity or legality of or seeks damages in connection
with this Agreement or any other Transaction Document to
which Pledgor is a party or (ii) which may reasonably be expected
to have a Material Adverse Effect.
(m) Financial Statements. Each of the financial
statements of the Pledgor for the fiscal year and quarter most
recently ended as of the date hereof has been heretofore furnished
to GE Capital, and each of such financial statements is
complete and correct in all material respects and fairly presents
the financial condition of the Pledgor as at said dates, in conformity
with GAAP applied on a consistent basis, except that the
financial statements were prepared on a cash basis and that
certain expenses have not been capitalized as required by GAAP.
Since the date of such annual financial statement, there has been
no Material Adverse Effect.
(n) Partnership Agreement. The copy of the Part
nership Agreement delivered to GE Capital on or prior to the date
hereof is a true, complete and correct copy of the Partnership
Agreement.
Section 6. Supplements, Further Assurances. The Pledgor
agrees that at any time and from time to time, at the expense
of the Pledgor, the Pledgor will promptly execute and deliver all
further instruments and documents, and take all further action
that the Security Agent or GE Capital may reasonably request, in
order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Security Agent to
exercise and enforce its rights and remedies hereunder with
respect to any Collateral. Without limiting the generality of
the foregoing, the Pledgor will execute and file such financing
or continuation statements, or amendments thereto, and such other
instruments, endorsements or notices, as the Security Agent or GE
Capital may deem necessary or desirable in order to perfect and
preserve the Liens created or intended to be created hereby. The
Pledgor hereby authorizes the Security Agent to file any such
financing or continuation statement without the signature of the
Pledgor to the extent permitted by applicable law. A carbon,
photographic or other reproduction of this Agreement shall be
sufficient as a financing statement for filing in any
jurisdiction.
Section 7. Rights of Pledgor; etc.
(a) Generally. The Pledgor shall be entitled to
exercise any and all rights pertaining to the Collateral or any
part thereof (including, without limitation, the right to manage
and direct the affairs of the Borrower and the right to receive
distributions in respect of its partnership interest) so long as
(i) no Event of Default or Lease Event of Default shall have
occurred and be continuing and (ii) the exercise of such rights
would not otherwise result in an Event of Default or Lease Event
of Default. Upon the occurrence and during the continuance of an
Event of Default or Lease Event of Default, all rights of the
Pledgor to manage and direct the affairs of the Borrower which it
would otherwise be entitled to exercise pursuant to the preceding
sentence shall cease, and all such rights shall thereupon become
immediately vested in the Security Agent, which shall thereupon
have the sole right (subject to the provisions of applicable Law)
to manage and direct the affairs of the Borrower.
(b) Distributions. Unless an Event of Default or
Lease Event of Default shall have occurred and be continuing, the
Pledgor shall be entitled to receive and retain any and all
distributions paid in respect of the Collateral in compliance
with the terms of the Loan Agreement and the Security Deposit
Agreement; provided, however, that any and all
(i) distributions paid or payable in respect
of or in exchange for any Collateral (whether paid in
cash, securities or other property) in connection with
a partial or total liquidation or dissolution of the
Borrower (other than in connection with any deemed
liquidation on account of a termination of the Borrower
under Section 708(b)(1)(B) of the Code), and
(ii) all property (whether cash, securities
or other property) paid, payable or otherwise
distributed in redemption of, or in exchange for, the
property described in Section 2(a) above,
shall be, and shall be forthwith delivered to the Security Agent
to hold as, Collateral and shall, if received by the Pledgor, be
received in trust for the benefit of the Security Agent, be
segregated from the other property or funds of the Pledgor, and
be forthwith delivered to the Security Agent as Collateral in the
same form as so received (with any necessary endorsement). Upon
the occurrence and during the continuance of an Event of Default
or Lease Event of Default, all rights of the Pledgor to receive
the distributions which it would otherwise be authorized to
receive and retain pursuant to the preceding sentence shall
cease, and all such rights shall thereupon become vested in the
Security Agent which shall thereupon have the sole right to
receive and hold as Collateral such distributions.
(c) Amounts Wrongfully Received Held in Trust.
All distributions and other amounts which are received by the
Pledgor contrary to the provisions of Section 7(b) above or of
the Loan Agreement shall be received in trust for the benefit of
the Security Agent, shall be segregated from other funds of the
Pledgor and shall be forthwith paid over to the Security Agent as
Collateral in the same form as so received (with any necessary
endorsement).
Section 8. Covenants.
(a) Legal Existence. The Pledgor shall preserve
and maintain (i) its legal existence, as a corporation in good
standing under the laws of the State of Delaware and (ii) its
qualification to do business in every jurisdiction where the
ownership of its property and the nature of its business require
it to be so qualified.
(b) Books, Records and Inspections. The Pledgor
shall keep proper books of record and account in which full, true
and correct entries in conformity with GAAP, except that the
Pledgor's financial statements may be prepared on a cash basis
and that certain expenses may be capitalized other than as
required by GAAP, and all requirements of Law shall be made of
all dealings and transactions in relation to its business and
activities. The Pledgor shall permit officers and designated
representatives of the Security Agent and GE Capital to visit and
inspect any of the properties of the Pledgor, and to examine the
books of record and account of the Pledgor, and discuss the affairs,
finances and accounts of the Pledgor with, and be advised
as to the same by, its and their officers and independent accountants,
all upon reasonable notice and at such reasonable times as
the Security Agent or GE Capital may desire.
(c) Taxes and Claims. The Pledgor shall pay or
cause to be paid when due, all Taxes and all charges,
betterments, or other assessments relating to the Collateral, and
all other lawful claims required to be paid by the Pledgor,
except to the extent any of the same are subject to a Contest.
(d) Compliance with Law. The Pledgor shall
comply with all Laws, except for such noncompliance as could not,
individually or in the aggregate, have a Material Adverse Effect.
(e) Governmental Actions. The Pledgor shall
obtain, maintain and comply with all Governmental Actions
applicable to the Pledgor or the Borrower, except for such
failure or noncompliance as could not, individually or in the
aggregate, have a Material Adverse Effect.
(f) Performance Under Other Agreements. The
Pledgor shall duly perform and observe all of the covenants,
agreements and conditions on its part to be performed and
observed hereunder and under the Loan Agreement and, unless the
Security Agent and GE Capital otherwise consents in writing, duly
perform and observe in all respects all of the covenants,
agreements and conditions on its part to be performed and
observed under the other Transaction Documents to which it is a
party.
(g) Remain as General Partner; Nature of
Business. The Pledgor shall remain as the sole general partner
of the Borrower and shall not withdraw as a general partner in
the Borrower. The Pledgor shall not engage in any business other
than being the general partner of the Borrower.
(h) Purchases of Assets. The Pledgor shall not
purchase or acquire any assets other than the purchase of assets
in the ordinary course of business of the Borrower required in
connection with the operation and maintenance of the Borrower's
business in accordance with the Transaction Documents.
(i) Indebtedness. The Pledgor shall not create,
incur, assume or suffer to exist any Indebtedness other than
Indebtedness of the Borrower that the Borrower is permitted to
incur under the Loan Agreement and on which the Pledgor is liable
solely by virtue of being the general partner of the Borrower.
(j) Contingent Obligations. The Pledgor shall
not create or become or be liable with respect to any Contingent
Obligation.
(k) No Sale of Collateral; No Liens. The Pledgor
agrees that it will not (i) sell, assign, transfer, exchange or
otherwise dispose of, or grant any option or warrant with respect
to, the Collateral or any interest therein without the prior
written consent of the Security Agent and (ii) except for the
Lien created hereby, create, incur or permit to exist any Lien
(other than Permitted Liens) upon or with respect to any of the
Collateral or any interest therein or any of its other property
or assets. The Pledgor will defend the right, title and interest
of the Security Agent in and to the Collateral against the claims
and demands of all Persons whomsoever.
(l) Fundamental Changes. The Pledgor shall not:
(i) enter into any merger or consolidation, or liquidate, wind-up
or dissolve (or suffer any liquidation or dissolution), discontinue
its business or convey, lease, sell, transfer or otherwise
dispose of, in one transaction or a series of transactions, all
or any part of its business or property, whether now or hereafter
acquired, except sales of obsolete and/or replaced equipment,
(ii) acquire by purchase or otherwise any property or assets of,
or stock or other evidence of beneficial ownership of, any
Person; (iii) create or acquire any Subsidiary; (iv) enter into
any partnership or joint venture; or (v) engage in any business
other than (x) holding a general partnership interest in the Borrower
and (y) managing and directing the affairs of the Borrower
as the general partner of the Borrower.
(m) Advances, Investments and Loans. The Pledgor
shall not lend money or credit or make advances or contributions
to any Person other than the Borrower, or directly or indirectly
purchase or acquire any stock, obligations or securities of, or
any other interest in, or make any capital contribution to any
Person other than Borrower.
(n) Partnership Agreement; Transfer Agreement.
The Pledgor shall not agree to or permit (i) the cancellation or
termination of the Partnership Agreement or the Transfer
Agreement or (ii) without the prior consent of GE Capital or the
Security Agent, any amendment, supplement, or modification of, or
waiver with respect to any of the provisions of, the Partnership
Agreement or the Transfer Agreement.
(o) Agent for Receipt of Service of Process. The
Pledgor shall appoint and continuously retain a Person acceptable
to the Security Agent as its agent in the State of New York for
receipt of service of process and shall pay all costs, fees and
expenses in connection therewith.
(p) Bankruptcy of the Borrower. The Pledgor
shall not authorize, seek to cause or permit the Borrower to
commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property or to
consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or to make a general assignment
for the benefit of the creditors.
Section 9. Security Agent Appointed Attorney-In-Fact.
Upon the occurrence of an Event of Default or Lease Event of
Default, the Pledgor hereby appoints the Security Agent or any
Person or agent whom the Security Agent may designate the
Pledgor's attorney-in-fact with full authority in the place and
stead of the Pledgor and in the name of the Pledgor or otherwise,
at the Pledgor's cost and expense, at any time and from time to
time in the Security Agent's reasonable discretion to take any
action and to execute any instrument which the Security Agent may
deem necessary or advisable to enforce its rights under this
Agreement, including, without limitation, authority to receive,
endorse and collect all instruments made payable to the Pledgor
representing any distribution, interest payment or other payment
in respect of the Collateral or any part thereof and to give full
discharge for the same.
Section 10. Security Agent May Perform. If the Pledgor
fails to perform any agreement contained herein after receipt
of a written request to do so from the Security Agent, the
Security Agent may itself perform, or cause performance of, such
agreement, and the reasonable expenses of the Security Agent,
including the reasonable fees and expenses of its counsel,
incurred in connection therewith shall be payable by the Pledgor
under Section 19.
Section 11. Reasonable Care. The Security Agent shall
be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral
is accorded treatment substantially equivalent to that which
the Security Agent accords its own property of the type of which
the Collateral consists, it being understood that the Security
Agent shall have no responsibility for (i) ascertaining or taking
action with respect to calls, conversions, exchanges, maturities,
tenders or other matters relative to any Collateral, whether or
not the Security Agent has or is deemed to have knowledge of such
matters, or (ii) taking any necessary steps to preserve rights
against any parties with respect to any Collateral.
Section 12. No Liability. Neither the Security Agent,
the Owner Trustee, nor GE Capital nor any of their respective
directors, officers, employees or agents shall be deemed to have
assumed any of the liabilities or obligations of a partner of the
Borrower as a result of the pledge and security interest granted
under or pursuant to this Agreement. Neither the Security Agent,
nor the Owner Trustee, nor GE Capital nor any of their respective
directors, officers, employees or agents shall be liable for any
failure to collect or realize upon the Obligations or any
collateral security or guarantee therefor, or any part thereof,
or for any delay in so doing nor shall it be under any obligation
to take any action whatsoever with regard thereto.
Section 13. Remedies Upon Default. If an Event of
Default or Lease Event of Default shall have occurred and be
continuing:
(a) The Security Agent (i) may become a substitute
or additional general partner in the Borrower or designate
another Person to become such substitute or additional general
partner and/or (ii) may manage the business and affairs of the
Borrower as provided in Section 7(a) and/or (iii) exercise the
power of attorney described in Section 9.
(b)(i) The Security Agent may exercise in respect
of the Collateral, in addition to other rights and remedies
provided for herein or otherwise available to it, all the rights
and remedies of a secured party upon a default under the Uniform
Commercial Code then in effect in the State of New York, or
unless prohibited by applicable law, the Uniform Commercial Code
then in effect in any other applicable jurisdiction. The
Security Agent may also in its sole discretion, without notice
except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale or at
any of the Security Agent's offices or elsewhere, for cash, on
credit or for future delivery, and at such price or prices and
upon such other terms as the Security Agent may, in accordance
with applicable Law, deem commercially reasonable, irrespective
of the impact of any such sales on the market price of the
Collateral at any such sale. Each purchaser at any such sale
shall hold the property sold absolutely, free from any claim or
right on the part of the Pledgor, and the Pledgor hereby waives
(to the extent permitted by law) all rights of redemption, stay
and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or
hereafter enacted. The Pledgor agrees that, to the extent notice
of sale shall be required by law, at least ten days' notice to
the Pledgor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute
reasonable notification. The Security Agent shall not be obligated
to make any sale of Collateral regardless of notice of sale
having been given. The Security Agent may adjourn any public or
private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned. The
Security Agent shall not incur liability as a result of the sale
of the Collateral, or any part thereof, at any public or private
sale. The Pledgor hereby waives any claims against the Security
Agent arising by reason of the fact that the price at which any
Collateral may have been sold at such a private sale, if commercially
reasonable, was less than the price which might have been
obtained at a public sale, even if the Security Agent accepts the
first offer received and does not offer such Collateral to more
than one offeree.
(ii) The Pledgor recognizes that the Security
Agent may elect in its sole discretion to sell all or a part of
the Collateral to one or more purchasers in privately negotiated
transactions in which the purchasers will be obligated to agree,
among other things, to acquire the Collateral for their own
account, for investment and not with a view to the distribution or
resale thereof. The Pledgor acknowledges that any such private
sales may be at prices and on terms less favorable than those
obtainable through a public sale (including, without limitation,
a public offering made pursuant to a registration statement under
the Securities Act of 1933, as amended (the "Securities Act")),
and the Pledgor and the Security Agent agree that such private
sales shall be made in a commercially reasonable manner and that
the Security Agent has no obligation to engage in public sales
and no obligation to delay sale of any Collateral to permit the
issuer thereof to register the Collateral for a form of public
sale requiring registration under the Securities Act.
(c) Any cash held by the Security Agent as
Collateral and all cash proceeds received by the Security Agent in
respect of any sale of, collection from, or other realization
upon all or any part of the Collateral shall, as soon as
reasonably practicable, be applied (after payment of any amounts
payable to the Security Agent pursuant to Section 19 and 20) by
the Security Agent first to the payment of the costs and expenses
of such sale, collection or other realization, if any, including
reasonable compensation to the Security Agent and its agents and
counsel, and all expenses, liabilities and advances made or in
curred by the Security Agent in connection therewith; and second
to the payment of the Obligations in accordance with the terms of
the Loan Agreement, the Deed of Trust and Security Agreement and
the Security Agreement. The Borrower shall be liable for any
deficiency remaining after any application of funds pursuant
hereto. Any surplus of such cash or cash proceeds held by the
Security Agent after payment in full of such amounts shall be
paid over to the Pledgor, or its successors or assigns, or to
whomsoever may be lawfully entitled to receive such surplus or as
a court of competent jurisdiction may direct.
Section 1. Purchase of the Collateral. The Security
Agent, the Owner Trustee, or GE Capital or any of their
respective Affiliates may be a purchaser of the Collateral or any
part thereof or any right or interest therein at any sale
thereof, whether pursuant to foreclosure, power of sale or other
wise hereunder and the Security Agent may apply the purchase
price to the payment of the Obligations secured hereby. Any such
purchaser of all or any part of the Collateral shall, upon any
such purchase, acquire good title to the Collateral so purchased,
free of the security interests created by this Agreement.
Section 2. Notices. All notices, requests and demands
to or upon the respective parties hereto to be effective shall be
in writing (including by telecopy), and shall be deemed to have
been duly given or made when delivered by hand, or five days
after being deposited in the United States mail, postage prepaid,
or, in the case of telecopy notice, when confirmation is
received, or, in the case of a nationally recognized overnight
courier service, one Business Day after delivery to such courier
service, addressed, in the case of each party hereto, at its
address specified below its name on Schedule 2 hereto, or to such
other address as may be designated by any party in a written
notice to the other parties hereto.
Section 3. Continuing Security Interest. This Agreement
shall create a continuing Lien in the Collateral until the
release thereof pursuant to Section 18. GE Capital may assign or
otherwise transfer any indebtedness held by it secured by this
Agreement to any other person or entity in accordance with
subsection 9.6 of the Loan Agreement, and such other person or
entity shall thereupon become vested with all the benefits in
respect thereof granted herein or otherwise.
Section 4. Security Interest Absolute. All rights of
the Security Agent and security interests hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and
unconditional irrespective of:
(i) any lack of validity or enforceability
of any of the Transaction Documents or any other
agreement or instrument relating thereto;
(ii) any change in the time, manner or place
of payment of, or in any other term of, all or any of
the Obligations, or any other amendment or waiver of or
any consent to any departure from the Transaction
Documents or any other agreement or instrument relating
thereto;
(iii) any exchange, release or non-per
fection of any other collateral, or any release or
amendment or waiver of or consent to any departure from
any guaranty, for all or any of the Obligations; or
(iv) any other circumstance which might
otherwise constitute a defense available to, or a
discharge of, the Pledgor.
Section 5. Release. Upon the indefeasible payment in
full of the Obligations, the Security Agent, upon the request and
at the expense of the Pledgor, shall execute and deliver all such
documentation necessary to release the liens created pursuant to
this Agreement.
Section 6. Expenses. The Pledgor will upon demand pay
to the Security Agent the amount of any and all reasonable
expenses, including the reasonable fees and expenses of its counsel
and of any experts and agents, and any transfer taxes, which the
Security Agent may incur in connection with (i) the custody or
preservation of, or the sale of, collection from, or other real
ization upon, any of the Collateral pursuant to the exercise or
enforcement of any of the rights of the Security Agent hereunder
or (ii) the failure by the Pledgor to perform or observe any of
the provisions hereof. Any amount payable by the Pledgor pursuant
to this Section shall be payable on demand and shall constitute
Obligations secured hereby.
Section 7. Indemnity.
(a) The Pledgor agrees to indemnify, reimburse
and hold the Security Agent, the Owner Trustee and GE Capital,
their respective successors and assigns and their respective
officers, directors, employees, and agents (each individually, an
"Indemnitee," and collectively, "Indemnitees") harmless from any
and all liabilities, obligations, damages, injuries, penalties,
claims, demands, actions, suits, judgments and any and all costs
and expenses (including reasonable attorneys' fees and
disbursements) (such expenses, for purposes of this Section,
hereinafter "expenses") of whatsoever kind and nature imposed on,
asserted against or incurred by any of the Indemnitees in any way
relating to or arising out of (i) this Agreement or the documents
executed in connection herewith or in any other way connected
with the administration of the Lien or the security interest
granted hereby, or the enforcement of any of the terms hereof, or
the preservation of any rights hereunder, (ii) any failure of the
Pledgor to comply with its obligations under this Agreement, or
any misrepresentation by the Pledgor in this Agreement, or in any
statement or writing contemplated by or made or delivered pursuant
to or in connection with this Agreement, or (iii) the owner
ship, purchase, delivery, control, acceptance, financing, possession,
condition, sale, return or other disposition, or use of,
the Collateral, excluding (x) those finally judicially determined
to have arisen, with respect to any Indemnitee, solely from the
gross negligence or willful misconduct of such Indemnitee or (y)
unless specifically provided for elsewhere in this Agreement,
those arising out of the actions of any Indemnitee while in
possession or control of the Collateral.
(b) Without limiting the application of subsection
(a), the Pledgor agrees to pay, or reimburse the Security
Agent for any and all fees, costs and expenses of whatever kind
or nature incurred in connection with the preservation,
protection or validation of the Security Agent's Liens on, and
security interest in, the Collateral, including, without
limitation, all fees and taxes in connection with the recording
or filing of instruments and documents in public offices, payment
or discharge of any taxes or Lien upon or in respect of the
Collateral, premiums for insurance with respect to the Collateral
and all other fees, costs and expenses in connection with
protecting, maintaining or preserving the Collateral and the
Security Agent's interest therein, whether through judicial
proceedings or otherwise, or in defending or prosecuting any
actions, suits or proceedings arising out of or relating to the
Collateral.
Section 1. Obligations Secured by Collateral. Any
amounts paid by any Indemnitee as to which such Indemnitee has
the right to reimbursement, and any amounts paid by the Security
Agent in preservation of any of its rights or interest in the
Collateral, together with interest on such amounts from the date
paid until reimbursement in full at a rate per annum equal at all
times to the Overdue Rate shall constitute Obligations secured by
the Collateral.
Section 2. Reinstatement. This Agreement shall continue
to be effective or be reinstated, as the case may be, if at
any time any amount received by the Security Agent, the Owner
Trustee or GE Capital hereunder, under any other Loan Document or
Lease Document or pursuant hereto or thereto is rescinded or must
otherwise be restored or returned by the Security Agent, the
Owner Trustee or GE Capital upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Pledgor or the
Borrower or upon the appointment of any intervenor or conservator
of, or trustee or similar official for, Pledgor or the Borrower
or any substantial part of their respective assets, or upon the
entry of an order by a bankruptcy court avoiding the payment of
such amount, or otherwise, all as though such payments had not
been made.
Section 3. Amendments, etc. No waiver, amendment,
modification or termination of any provision of this Agreement,
or consent to any departure by the Pledgor therefrom, shall in
any event be effective (x) without the written concurrence of the
Security Agent and (y) unless made in accordance with subsection
9.1 of the Loan Agreement and none of the Collateral shall be
released without the written consent of the Security Agent. Any
such waiver or consent shall be effective only in the specific in
stance and for the specific purpose for which given.
Section 4. Successors and Assigns. This Agreement
shall be binding upon the Pledgor and its successors and assigns
and shall inure to the benefit of the Security Agent, the Owner
Trustee and GE Capital and their respective successors and
assigns.
Section 5. Survival.
(a) All agreements, statements, representations
and warranties made by the Pledgor herein or in any certificate
or other instrument delivered by the Pledgor or on its behalf
under this Agreement shall be considered to have been relied upon
by the Security Agent and shall survive the execution and
delivery of this Agreement and the other Transaction Documents
regardless of any investigation made by or on behalf of the
Security Agent.
(b) The indemnity obligations of Pledgor
contained in Section 20 shall continue in full force and effect
notwithstanding the full payment of the Obligations and
notwithstanding the discharge thereof.
Section 6. No Waiver; Remedies Cumulative. No failure
or delay on the part of the Security Agent in exercising any
right, power or privilege hereunder and no course of dealing
between the Pledgor and the Security Agent shall operate as a
waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege hereunder or thereunder. The rights and remedies
herein expressly provided are cumulative and not exclusive of any
rights or remedies which the Security Agent, the Owner Trustee or
GE Capital would otherwise have.
Section 7. Counterparts. This Agreement may be
executed in any number of counterparts and by the different
parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
Section 8. Headings Descriptive. The headings of the
several Sections and subsections of this Agreement are inserted
for convenience only and shall not in any way affect the meaning
or construction of any provision of this Agreement.
Section 9. Severability. In case any provision in or
obligation under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforce
ability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in
any way be affected or impaired thereby.
Section 10. Consent to Pledge by General Partner.
Notwithstanding anything to the contrary contained in the
Partnership Agreement, Panda Energy Corporation, a Delaware
corporation, as holder of the Borrower limited partnership inter
est, hereby consents to (i) the execution, delivery, and performance
by the General Partner of this Agreement, (ii) the grant of
the pledge by the General Partner to the Security Agent, for the
benefit of the Owner Trustee and GE Capital, of its partnership
interests in the Borrower pursuant to this Agreement, (iii) the
sale, transfer, assignment or other disposition (whether through
foreclosure, deed-in-lieu of foreclosure, or otherwise) of such
partnership interests to the Security Agent, its designee, or any
purchaser of such partnership interests pursuant to the exercise
by the Security Agent of its rights and remedies under this
Agreement and (iv) the admission to the Borrower of the Security
Agent, such designee, or such purchaser as a general partner of
the Borrower in connection with the exercise of such rights and
remedies.
Section 11. Conflict with Loan Agreement. In case of
a conflict between any provision of this Agreement and any
provision of the Loan Agreement, the provisions of the Loan
Agreement shall control and govern. No such conflict shall be
deemed to exist merely because this Agreement imposes greater
obligations on the Pledgor than the Loan Agreement.
Section 12. Recourse Limited to Collateral. The
Security Agent acknowledges and agrees that, except in the case
of fraud, willful misconduct or knowing misrepresentation on the
part of Pledgor, its sole recourse for payment and performance of
the obligations of the Pledgor hereunder shall be to the
Collateral. This provision shall not be deemed to waive any
cause of action the Security Agent, the Owner Trustee or GE
Capital may have against any Person for fraud, willful misconduct
or knowing misrepresentation by such Person.
Section 13. GOVERNING LAW; SUBMISSION TO JURISDICTION;
WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH
AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF
LAW EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW).
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT
TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT AND ANY
ACTION FOR ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED
STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PLEDGOR HEREBY ACCEPTS
FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS AND APPELLATE COURTS FROM ANY THEREOF. THE PLEDGOR
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PLEDGOR AT ITS ADDRESS REFERRED TO IN
SECTION 15. THE PLEDGOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT
BROUGHT IN THE COURTS REFERRED TO ABOVE AND HEREBY FURTHER
IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH
COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED IN ANY OTHER JURISDICTION.
(c) EACH OF THE PLEDGOR AND THE SECURITY AGENT
HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT
OR ANY MATTER ARISING HEREUNDER OR THEREUNDER.
Section 14. Leveraged Lease. If, upon the sale of the
Facility by the Borrower to the Owner Trustee, GE Capital
exercises its option under subsection 5.8 of the Loan Agreement
to cause the Owner Trustee to borrow funds to finance (or
refinance) a portion of the purchase price of the Facility, the
parties hereto agree to execute an amendment or supplement hereto
to provide for such provisions as are customary and appropriate
in respect of leveraged lease transactions.
Section 15. Certain Rights of Power Purchaser.
Nothing in this General Partner Pledge Agreement shall be deemed
to limit the provisions of the Consent of the Power Purchaser,
which provisions are solely for the benefit of the Power
Purchaser and not the Pledgor. Without limiting the scope of the
foregoing, the Security Agent agrees, for the exclusive benefit
of the Power Purchaser and not the Pledgor, that the exercise of
remedies or any similar action under this General Partner Pledge
Agreement is subject to, and shall be conducted in a manner
consistent with, the Power Purchaser's rights under (i) the
Consent of the Power Purchaser and (ii) the Power Purchase
Agreement and the Transfer Agreement (to the extent such rights
under the Power Purchase Agreement and the Transfer Agreement are
not explicitly waived by the Power Purchaser in accordance with
the terms of the Consent of the Power Purchaser).
IN WITNESS WHEREOF, the parties hereto have caused
their duly authorized officers to execute and deliver this
Agreement as of the date first above written.
PANDA BRANDYWINE CORPORATION,
as Pledgor
By:
Name: Robert W. Carter
Title: President
SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION,
as Security Agent
By:
Name: Kathy A. Larimore
Title: Assistant Vice President
With Respect to Section 30 only:
PANDA ENERGY CORPORATION,
as limited partner
By:_______________________
Name: Robert W. Carter
Title: President
EXHIBIT 10.29
LIMITED PARTNER PLEDGE AGREEMENT
LIMITED PARTNER PLEDGE AGREEMENT, dated as of March 30,
1995 (this "Agreement"), made by PANDA ENERGY CORPORATION, a
Delaware corporation (together with its successors and assigns,
the "Pledgor") and the sole limited partner of Panda-Brandywine,
L.P., a Delaware limited partnership (together with its
successors and assigns, the "Borrower"), to SHAWMUT BANK
CONNECTICUT, NATIONAL ASSOCIATION, a national banking
association, in its capacity as Security Agent (the "Security
Agent") under the Security Deposit Agreement (as defined in the
Loan Agreement referred to below).
W I T N E S S E T H :
WHEREAS, the Pledgor is the legal and beneficial owner
of a 50% limited partnership interest in the Borrower (such
partnership interest, being hereinafter referred to as the
"Partnership Interest");
WHEREAS, the Borrower, Panda Brandywine Corporation,
the general partner of the Borrower, and General Electric Capital
Corporation ("GE Capital") have entered into the Construction
Loan Agreement and Lease Commitment, dated as of the date hereof
(as amended, supplemented or otherwise modified from time to
time, the "Loan Agreement"), pursuant to which GE Capital has
agreed, among other things, to (i) make Loans to the Borrower,
(ii) (acting through the Owner Trustee established for the
benefit of GE Capital) lease the Site from the Borrower and
sublease the Site back to the Borrower and (iii) (acting through
the Owner Trustee established for the benefit of GE Capital) upon
completion of the Project, purchase the Facility from the
Borrower and lease the Facility back to the Borrower pursuant to
the Facility Lease;
WHEREAS, it is a condition precedent to the obligation
of GE Capital to make Loans to the Borrower under the Loan
Agreement that the Pledgor shall have executed and delivered this
Agreement to the Security Agent, for the benefit of GE Capital
and the Owner Trustee;
WHEREAS, the Pledgor desires to execute this Agreement
to satisfy the conditions described in the preceding recital;
NOW, THEREFORE, in consideration of the foregoing
premises and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. Defined Terms; Construction.
(a) Unless otherwise defined herein, terms used
herein shall have the meaning set forth in Appendix A to the Loan
Agreement. Defined terms in this Agreement shall include in the
singular number the plural and in the plural number the singular.
(b) The words "hereof," "herein" and "hereunder"
and words of similar import when used in this Agreement shall,
unless otherwise expressly specified, refer to this Agreement as
a whole and not to any particular provision of this Agreement and
all references to Sections shall be references to Sections of
this Agreement unless otherwise expressly specified.
(c) Unless otherwise expressly specified, any
agreement, contract, or document defined or referred to herein
shall mean such agreement, contract or document in the form
(including all amendments and clarification letters relating
thereto) delivered to GE Capital or the Security Agent on the
Initial Loan Funding Date as the same may thereafter be amended,
supplemented, or otherwise modified from time to time in
accordance with the terms of this Agreement and of the other Loan
Documents.
Section 2. Pledge. As security for the Obligations
and subject to and in accordance with the provisions of this
Agreement, the Pledgor hereby pledges, grants, assigns,
hypothecates, transfers, and delivers to the Security Agent, for
the benefit of GE Capital and the Owner Trustee, a first priority
security interest in the following, whether now owned or
hereafter acquired (the "Collateral"):
(a) all of the Pledgor's limited partnership
interests in the Borrower (including, without limitation,
the Partnership Interest and the Pledgor's right, title and
interest in the Transfer Agreement), and all of the
Pledgor's rights, privileges, authority and powers as
limited partner of the Borrower, whether arising under the
terms of the Partnership Agreement, or at law, or otherwise;
(b) all income, cash flow, revenues, issues,
profits, losses, distributions, payments, and other property
of every kind and variety due, accruing or owing to, or to
be turned over to, or to be disbursed to the Pledgor by the
Borrower in respect of the property described in the
preceding clause (a), including without limitation, all
rights of the Pledgor to allocations of profit and loss,
distributions and all monies and property representing a
distribution in respect of the property described in the
preceding clause (a); and
(c) all proceeds, products and accessions of
and to any of the property described in the preceding
clauses (a) and (b);
provided, however, that notwithstanding any of the foregoing,
neither the Security Agent, the Owner Trustee nor GE Capital
shall acquire any interest in any of Pledgor's obligations
contained in the Partnership Agreement.
Section 3. Security for Obligations. This Agreement
secures, and the Collateral is collateral security for, the
payment and performance in full when due, whether at stated
maturity, by acceleration or otherwise, of all Obligations now or
hereafter existing.
Section 4. Delivery of Collateral. All certificates
or instruments representing or evidencing the Collateral shall be
delivered to and held by or on behalf of the Security Agent
pursuant hereto and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed undated
instruments of transfer or assignment in blank, all in form and
substance reasonably satisfactory to the Security Agent. If the
Pledgor shall become entitled to receive or shall receive any
other Collateral, then the Pledgor shall, except as otherwise
provided in Section 7, accept and hold the same in trust for the
Security Agent and segregated from the other property or funds of
Pledgor, and shall deliver to the Security Agent forthwith all
such other Collateral (except as provided in Section 7 hereof) in
the form received by the Pledgor, to be held by the Security
Agent, subject to the terms hereof, as part of the Collateral.
Upon the occurrence and during the continuance of an Event of
Default or Lease Event of Default, the Security Agent shall have
the right, at any time in its discretion and without notice to
the Pledgor, to transfer to or to register in the name of the
Security Agent, GE Capital or the Owner Trustee or any of their
respective nominees any or all of the Collateral.
Section 5. Representations and Warranties. The
Pledgor represents and warrants as follows:
(a) Due Organization. The Pledgor is a
corporation duly organized and validly existing under the
laws of the State of Delaware, and is qualified to own
property and transact business in every jurisdiction
where the ownership of its property and the nature of its
business as currently conducted requires it to be
qualified.
(b) Power and Authority. The Pledgor has
full corporate power, authority and legal right to enter
into this Agreement and each other Transaction Document
to which it is a party and to perform its obligations
hereunder and thereunder and to pledge all the Collateral
pursuant to this Agreement.
(c) Due Authorization. The pledge of the
Collateral pursuant to this Agreement has been duly
authorized by the Pledgor. This Agreement and each other
Transaction Document to which the Pledgor is a party has
been duly authorized, executed and delivered by the
Pledgor.
(d) Enforceability. This Agreement and
each other Transaction Document to which the Pledgor is a
party constitutes the legal, valid and binding obligation
of the Pledgor enforceable against the Pledgor in
accordance with its terms except as enforceability may be
limited by applicable bankruptcy, insolvency, moratorium
or other similar laws affecting creditors' rights
generally and except as enforceability may be limited by
general principles of equity (whether considered in a
suit at law or in equity).
(e) No Conflicts. The execution and
delivery by Pledgor of this Agreement and each other
Transaction Document to which the Pledgor is a party, the
performance by Pledgor of its obligations hereunder and
thereunder, and the pledge by the Pledgor of the
Collateral pursuant to this Agreement will not (i)
violate the provisions of the Pledgor's Certificate of
Incorporation or By-laws; (ii) violate the provisions of
any Law applicable to the Pledgor; (iii) violate any
Contractual Obligation; or (iv) result in or create any
Lien (other than the Lien created hereby) under, or
require any consent which has not been obtained under any
agreement or instrument, or the provisions of any order
or decree binding upon the Pledgor or any of its
properties.
(f) No Consents. No consent of any other
party (including, without limitation, stockholders or
creditors of the Pledgor) and no Governmental Action is
required which has not been obtained either (i) for the
execution, delivery and performance by Pledgor of this
Agreement and each other Transaction Document to which it
is a party, (ii) for the pledge by the Pledgor of the
Collateral pursuant to this Agreement, or (iii) for the
exercise by the Security Agent of the rights provided for
in this Agreement or the remedies in respect of the
Collateral pursuant to this Agreement (except as may be
required in connection with any disposition of all or any
part of the Collateral under any laws affecting the
offering and sale of securities generally).
(g) Not a Utility. The Pledgor is not,
and will not, as a result of becoming a partner in the
Borrower, be or become: (i) subject to regulation under
Part II or Part III of the Federal Power Act, except for
Sections 202(c), 210, 211, 212, 213, 214 and 305(c) of
the Federal Power Act (16 U.S.C. 824a(c), 824i, 824j,
824k, 824l, 824m and 825d(c), respectively) and the
enforcement provisions of Part III of the Federal Power
Act relating thereto; (ii) an "electric utility company"
for purposes of the Holding Company Act; (iii) subject to
state law or regulation respecting the financial, rate or
organizational regulation of electric utilities; or (iv)
subject to regulation as a "steam heating company" under
Article 78, Public Service Commission Law, of the
Annotated Code of Maryland.
(h) Ownership of Collateral. The Pledgor
is the sole legal and beneficial owner of the Collateral
free and clear of any Lien other than Permitted Liens.
No security agreement, financing statement or other
public notice with respect to all or any part of the
Collateral is on file or of record in any public office,
except such as may have been filed in favor of the
Security Agent pursuant to this Agreement, or in favor of
GE Capital, as agent for the lenders which were parties
to the Development Loan Agreement dated as of March 23,
1994, pursuant to the Amended and Restated Limited
Partner Pledge Agreement dated as of March 23, 1994,
between the Pledgor and GE Capital, as agent.
(i) Perfection. The execution and
delivery of this Agreement concurrently with the filing
of UCC-1 financing statements in the filing offices
listed on Schedule 1 create a valid and perfected first
priority security interest in the Collateral securing the
payment of the Obligations.
(j) Chief Executive Office. The chief
executive office of the Pledgor and the office where the
Pledgor keeps its records concerning the Borrower and the
Project and all contracts relating thereto is located at
the address specified on Schedule 2. The Pledgor shall
not establish a new location for its chief executive
office or change its name until (i) it has given to the
Security Agent and GE Capital not less than 30 days'
prior written notice of its intention so to do, clearly
describing such new location or specifying such new name,
as the case may be, and (ii) with respect to such new
location or such new name, as the case may be, it shall
have taken all action, reasonably satisfactory to the
Security Agent and GE Capital, to maintain the security
interest of the Security Agent, on behalf of the Owner
Trustee and GE Capital, in the Collateral intended to be
granted hereby at all times fully perfected and in full
force and effect.
(k) Sole Limited Partner. The Pledgor is
the sole limited partner of the Borrower. The Pledgor is
not engaged in any transaction or activity unrelated to
the financing of the Borrower and the Project.
(l) No Proceedings. There is no action,
suit or proceeding at law or in equity or by or before
any Governmental Authority or arbitral tribunal now
pending or, to the best knowledge of the Pledgor,
threatened against the Pledgor (i) which questions the
validity or legality of or seeks damages in connection
with this Agreement or any other Transaction Document to
which Pledgor is a party or (ii) which may reasonably be
expected to have a Material Adverse Effect.
(m) Financial Statements. Each of the
financial statements of the Pledgor for the fiscal year
and quarter most recently ended as of the date hereof has
been heretofore furnished to GE Capital, and each of such
financial statements is complete and correct in all
material respects and fairly presents the financial
condition of the Pledgor as at said dates, in conformity
with GAAP applied on a consistent basis, except that the
financial statements were prepared on a cash basis and
that certain expenses have not been capitalized as
required by GAAP. Since the date of such annual
financial statement, there has been no Material Adverse
Effect.
(n) Partnership Agreement. The copy of
the Partnership Agreement delivered to GE Capital on or
prior to the date hereof is a true, complete and correct
copy of the Partnership Agreement.
Section 6. Supplements, Further Assurances.
The Pledgor agrees that at any time and from time to
time, at the expense of the Pledgor, the Pledgor will
promptly execute and deliver all further instruments and
documents, and take all further action that the Security
Agent or GE Capital may reasonably request, in order to
perfect and protect any security interest granted or
purported to be granted hereby or to enable the Security
Agent to exercise and enforce its rights and remedies
hereunder with respect to any Collateral. Without
limiting the generality of the foregoing, the Pledgor
will execute and file such financing or continuation
statements, or amendments thereto, and such other
instruments, endorsements or notices, as the Security
Agent or GE Capital may deem necessary or desirable in
order to perfect and preserve the Liens created or
intended to be created hereby. The Pledgor hereby
authorizes the Security Agent to file any such financing
or continuation statement without the signature of such
Pledgor to the extent permitted by applicable law. A
carbon, photographic or other reproduction of this
Agreement shall be sufficient as a financing statement
for filing in any jurisdiction.
Section 7. Rights of Pledgor; etc.
(a) Generally. The Pledgor shall be
entitled to exercise any and all rights pertaining to the
Collateral or any part thereof (including, without
limitation, the right to receive distributions in respect
of its partnership interest) so long as (i) no Event of
Default or Lease Event of Default shall have occurred and
be continuing and (ii) the exercise of such rights would
not otherwise result in an Event of Default or Lease
Event of Default. Upon the occurrence and during the
continuance of an Event of Default or Lease Event of
Default all rights of the Pledgor which it would
otherwise be entitled to exercise pursuant to the
preceding sentence shall cease, and all such rights shall
thereupon become immediately vested in the Security
Agent.
(b) Distributions. Unless an Event of
Default or Lease Event of Default shall have occurred and
be continuing, the Pledgor shall be entitled to receive
and retain any and all distributions paid in respect of
the Collateral in compliance with the terms of the Loan
Agreement and the Security Deposit Agreement; provided,
however, that any and all
(i) distributions paid or
payable in respect of or in exchange for any
Collateral (whether paid in cash, securities or
other property) in connection with a partial or
total liquidation or dissolution of the
Borrower (other than in connection with any
deemed liquidation on account of a termination
of the Borrower under Section 708(b)(1)(B) of
the Code), and
(ii) all property (whether
cash, securities or other property) paid,
payable or otherwise distributed in redemption
of, or in exchange for, the property described
in Section 2(a) above,
shall be, and shall be forthwith delivered to the
Security Agent to hold as, Collateral and shall, if
received by the Pledgor, be received in trust for the
benefit of the Security Agent, be segregated from the
other property or funds of the Pledgor, and be forthwith
delivered to the Security Agent as Collateral in the same
form as so received (with any necessary endorsement).
Upon the occurrence and during the continuance of an
Event of Default or Lease Event of Default, all rights of
the Pledgor to receive the distributions which it would
otherwise be authorized to receive and retain pursuant to
the preceding sentence shall cease, and all such rights
shall thereupon become vested in the Security Agent which
shall thereupon have the sole right to receive and hold
as Collateral such distributions.
(c) Amounts Wrongfully Received Held in
Trust. All distributions and other amounts which are
received by the Pledgor contrary to the provisions of
Section 7(b) above or of the Loan Agreement shall be
received in trust for the benefit of the Security Agent,
shall be segregated from other funds of the Pledgor and
shall be forthwith paid over to the Security Agent as
Collateral in the same form as so received (with any
necessary endorsement).
Section 8. Covenants.
(a) Legal Existence. The Pledgor shall
preserve and maintain (i) its legal existence, as a
corporation in good standing under the laws of the State
of Delaware and (ii) its qualification to do business in
every jurisdiction where the ownership of its property
and the nature of its business require it to be so
qualified.
(b) Books, Records and Inspections. The
Pledgor shall keep proper books of record and account in
which full, true and correct entries in conformity with
GAAP, except that the Pledgor's financial statements may
be prepared on a cash basis and that certain expenses may
be capitalized other than as required by GAAP, and all
requirements of Law shall be made of all dealings and
transactions in relation to its business and activities.
The Pledgor shall permit officers and designated
representatives of the Security Agent and GE Capital to
visit and inspect any of the properties of the Pledgor,
and to examine the books of record and account of the
Pledgor, and discuss the affairs, finances and accounts
of the Pledgor with, and be advised as to the same by,
its and their officers and independent accountants, all
upon reasonable notice and at such reasonable times as
the Security Agent or GE Capital may desire.
(c) Taxes and Claims. The Pledgor shall
pay or cause to be paid when due, all Taxes and all
charges, betterments, or other assessments relating to
the Collateral, and all other lawful claims required to
be paid by the Pledgor, except to the extent any of the
same are subject to a Contest.
(d) Compliance with Law. The Pledgor
shall comply with all Laws, except for such noncompliance
as could not, individually or in the aggregate, have a
Material Adverse Effect.
(e) Governmental Actions. The Pledgor
shall obtain, maintain and comply with all Governmental
Actions applicable to the Pledgor, except for such
failure or noncompliance as could not, individually or in
the aggregate, have a Material Adverse Effect.
(f) Remain as Limited Partner. The
Pledgor shall remain as the sole limited partner of the
Borrower and shall not withdraw as a limited partner in
the Borrower. The Pledgor shall not engage in any
business other than being the limited partner of the
Borrower.
(g) No Sale of Collateral; No Liens. The
Pledgor agrees that it will not (i) sell or otherwise
dispose of, or grant any option or warrant with respect
to, the Collateral or any interest therein without the
prior written consent of the Security Agent and (ii)
except for the Lien created hereby, create or permit to
exist any Lien (other than Permitted Liens) upon or with
respect to any of the Collateral or any interest therein
or any of its other property or assets.
(h) Fundamental Changes. The Pledgor
shall not enter into any merger or consolidation, or
liquidate, wind-up or dissolve (or suffer any liquidation
or dissolution) or discontinue its business.
(i) Partnership Agreement; Transfer
Agreement. The Pledgor shall not agree to or permit (i)
the cancellation or termination of the Partnership
Agreement or the Transfer Agreement or (ii) without the
prior written consent of GE Capital or the Security
Agent, any amendment, supplement, or modification of, or
waiver with respect to any of the provisions of, the
Partnership Agreement or the Transfer Agreement.
(j) Agent for Receipt of Service of
Process. The Pledgor shall appoint and continuously
retain a Person acceptable to the Security Agent as its
agent in the State of New York for receipt of service of
process and shall pay all costs, fees and expenses in
connection therewith.
(k) Bankruptcy of the Borrower. The
Pledgor shall not authorize, seek to cause or permit the
Borrower to commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or
any substantial part of its property or to consent to any
such relief or to the appointment of or taking possession
by any such official in an involuntary case or other
proceeding commenced against it, or to make a general
assignment for the benefit of its creditors.
Section 9. Security Agent Appointed Attorney-
In-Fact. Upon the occurrence of an Event of Default or
Lease Event of Default, the Pledgor hereby appoints the
Security Agent or any Person or agent whom the Security
Agent may designate the Pledgor's attorney-in-fact with
full authority in the place and stead of the Pledgor and
in the name of the Pledgor or otherwise, at the Pledgor's
cost and expense, at any time and from time to time in
the Security Agent's reasonable discretion to take any
action and to execute any instrument which the Security
Agent may deem necessary or advisable to enforce its
rights under this Agreement, including, without
limitation, authority to receive, endorse and collect all
instruments made payable to the Pledgor representing any
distribution, interest payment or other payment in
respect of the Collateral or any part thereof and to give
full discharge for the same.
Section 10. Security Agent May Perform. If
the Pledgor fails to perform any agreement contained
herein after receipt of a written request to do so from
the Security Agent, the Security Agent may itself
perform, or cause performance of, such agreement, and the
reasonable expenses of the Security Agent, including the
reasonable fees and expenses of its counsel, incurred in
connection therewith shall be payable by the Pledgor
under Section 19.
Section 11. Reasonable Care. The Security
Agent shall be deemed to have exercised reasonable care
in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment
substantially equivalent to that which the Security Agent
accords its own property of the type of which the
Collateral consists, it being understood that the
Security Agent shall have no responsibility for (i)
ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not the
Security Agent has or is deemed to have knowledge of such
matters, or (ii) taking any necessary steps to preserve
rights against any parties with respect to any
Collateral.
Section 12. No Liability. Neither the
Security Agent, GE Capital nor the Owner Trustee nor any
of their respective directors, officers, employees or
agents shall be deemed to have assumed any of the
liabilities or obligations of a partner of the Borrower
as a result of the pledge and security interest granted
under or pursuant to this Agreement. Neither the
Security Agent, GE Capital, nor the Owner Trustee nor any
of their respective directors, officers, employees or
agents shall be liable for any failure to collect or
realize upon the Obligations or any collateral security
or guarantee therefor, or any part thereof, or for any
delay in so doing nor shall it be under any obligation to
take any action whatsoever with regard thereto.
Section 13. Remedies Upon Default. If an
Event of Default or Lease Event of Default shall have
occurred and be continuing:
(a) The Security Agent (i) may become a
substitute or additional limited partner in the Borrower
or designate another Person to become such substitute or
additional limited partner and/or (ii) may exercise the
power of attorney described in Section 9.
(b) (i) The Security Agent may exercise
in respect of the Collateral, in addition to other rights
and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party
upon a default under the Uniform Commercial Code then in
effect in the State of New York, or unless prohibited by
applicable law, the Uniform Commercial Code then in
effect in any other applicable jurisdiction. The
Security Agent may also in its sole discretion, without
notice except as specified below, sell the Collateral or
any part thereof in one or more parcels at public or
private sale or at any of the Security Agent's offices or
elsewhere, for cash, on credit or for future delivery,
and at such price or prices and upon such other terms as
the Security Agent may, in accordance with applicable
Law, deem commercially reasonable, irrespective of the
impact of any such sales on the market price of the
Collateral at any such sale. Each purchaser at any such
sale shall hold the property sold absolutely, free from
any claim or right on the part of the Pledgor, and the
Pledgor hereby waives (to the extent permitted by law)
all rights of redemption, stay and/or appraisal which it
now has or may at any time in the future have under any
rule of law or statute now existing or hereafter enacted.
The Pledgor agrees that, to the extent notice of sale
shall be required by law, at least ten days' notice to
the Pledgor of the time and place of any public sale or
the time after which any private sale is to be made shall
constitute reasonable notification. The Security Agent
shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The
Security Agent may adjourn any public or private sale
from time to time by announcement at the time and place
fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so
adjourned. The Security Agent shall not incur liability
as a result of the sale of the Collateral, or any part
thereof, at any public or private sale. The Pledgor
hereby waives any claims against the Security Agent
arising by reason of the fact that the price at which any
Collateral may have been sold at such a private sale, if
commercially reasonable, was less than the price which
might have been obtained at a public sale, even if the
Security Agent accepts the first offer received and does
not offer such Collateral to more than one offeree.
(ii) The Pledgor recognizes that the
Security Agent may elect in its sole discretion to sell
all or a part of the Collateral to one or more purchasers
in privately negotiated transactions in which the
purchasers will be obligated to agree, among other
things, to acquire the Collateral for their own account,
for investment and not with a view to the distribution or
resale thereof. The Pledgor acknowledges that any such
private sales may be at prices and on terms less
favorable than those obtainable through a public sale
(including, without limitation, a public offering made
pursuant to a registration statement under the Securities
Act of 1933, as amended (the "Securities Act")), and the
Pledgor and the Security Agent agree that such private
sales shall be made in a commercially reasonable manner
and that the Security Agent has no obligation to engage
in public sales and no obligation to delay sale of any
Collateral to permit the issuer thereof to register the
Collateral for a form of public sale requiring
registration under the Securities Act.
(c) Any cash held by the Security Agent
as Collateral and all cash proceeds received by the
Security Agent in respect of any sale of, collection
from, or other realization upon all or any part of the
Collateral shall, as soon as reasonably practicable, be
applied (after payment of any amounts payable to the
Security Agent pursuant to Section 19 and 20) by the
Security Agent first to the payment of the costs and
expenses of such sale, collection or other realization,
if any, including reasonable compensation to the Security
Agent and its agents and counsel, and all expenses,
liabilities and advances made or incurred by the Security
Agent in connection therewith; and second to the payment
of the Obligations in accordance with the terms of the
Loan Agreement, the Deed of Trust and Security Agreement
and the Security Agreement. The Borrower shall be liable
for any deficiency remaining after any application of
funds pursuant hereto. Any surplus of such cash or cash
proceeds held by the Security Agent after payment in full
of such amounts shall be paid over to the Pledgor, or its
successors or assigns, or to whomsoever may be lawfully
entitled to receive such surplus or as a court of
competent jurisdiction may direct.
Section 14. Purchase of the Collateral. The
Security Agent, GE Capital or the Owner Trustee or any of
their respective Affiliates may be a purchaser of the
Collateral or any part thereof or any right or interest
therein at any sale thereof, whether pursuant to
foreclosure, power of sale or otherwise hereunder and the
Security Agent may apply the purchase price to the
payment of the Obligations secured hereby. Any such
purchaser of all or any part of the Collateral shall,
upon any such purchase, acquire good title to the
Collateral so purchased, free of the security interests
created by this Agreement.
Section 15. Notices. All notices, requests
and demands to or upon the respective parties hereto to
be effective shall be in writing (including by telecopy),
and shall be deemed to have been duly given or made when
delivered by hand, or five days after being deposited in
the United States mail, postage prepaid, or, in the case
of telecopy notice, when confirmation is received, or, in
the case of a nationally recognized overnight courier
service, one Business Day after delivery to such courier
service, addressed, in the case of each party hereto, at
its address specified below its name on Schedule 2
hereto, or to such other address as may be designated by
any party in a written notice to the other parties
hereto.
Section 16. Continuing Security Interest.
This Agreement shall create a continuing Lien in the
Collateral until the release thereof pursuant to Section
18. GE Capital may assign or otherwise transfer any
indebtedness held by it secured by this Agreement to any
other person or entity in accordance with subsection 9.6
of the Loan Agreement, and such other person or entity
shall thereupon become vested with all the benefits in
respect thereof granted herein or otherwise.
Section 17. Security Interest Absolute. All
rights of the Security Agent and security interests
hereunder, and all obligations of the Pledgor hereunder,
shall be absolute and unconditional irrespective of:
(i) any lack of validity or
enforceability of any of the Transaction
Documents or any other agreement or instrument
relating thereto;
(ii) any change in the time,
manner or place of payment of, or in any other
term of, all or any of the Obligations, or any
other amendment or waiver of or any consent to
any departure from the Transaction Documents or
any other agreement or instrument relating
thereto;
(iii) any exchange, release or
non-perfection of any other collateral, or any
release or amendment or waiver of or consent to
any departure from any guaranty, for all or any
of the Obligations; or
(iv) any other circumstance
which might otherwise constitute a defense
available to, or a discharge of, the Pledgor.
Section 18. Release. Upon the indefeasible
payment in full of the Obligations, the Security Agent,
upon the request and at the expense of the Pledgor, shall
execute and deliver all such documentation necessary to
release the liens created pursuant to this Agreement.
Section 19. Expenses. The Pledgor will upon
demand pay to the Security Agent the amount of any and
all reasonable expenses, including the reasonable fees
and expenses of its counsel and of any experts and
agents, and any transfer taxes which the Security Agent
may incur in connection with (i) the custody or
preservation of, or the sale of, collection from, or
other realization upon, any of the Collateral pursuant to
the exercise or enforcement of any of the rights of the
Security Agent hereunder or (ii) the failure by the
Pledgor to perform or observe any of the provisions
hereof. Any amount payable by the Pledgor pursuant to
this Section shall be payable on demand and shall
constitute Obligations secured hereby.
Section 20. Indemnity.
(a) The Pledgor agrees to indemnify,
reimburse and hold the Security Agent, the Owner Trustee
and GE Capital, their respective successors and assigns
and their respective officers, directors, employees, and
agents (each individually, an "Indemnitee," and
collectively, "Indemnitees") harmless from any and all
liabilities, obligations, damages, injuries, penalties,
claims, demands, actions, suits, judgments and any and
all costs and expenses (including reasonable attorneys'
fees and disbursements) (such expenses, for purposes of
this Section, hereinafter "expenses") of whatsoever kind
and nature imposed on, asserted against or incurred by
any of the Indemnitees in any way relating to or arising
out of (i) this Agreement or the documents executed in
connection herewith or in any other way connected with
the administration of the Lien or the security interest
granted hereby, or the enforcement of any of the terms
hereof, or the preservation of any rights hereunder, (ii)
any failure of the Pledgor to comply with its obligations
under this Agreement, or any misrepresentation by the
Pledgor in this Agreement, or in any statement or writing
contemplated by or made or delivered pursuant to or in
connection with this Agreement, or (iii) the ownership,
purchase, delivery, control, acceptance, financing,
possession, condition, sale, return or other disposition,
or use of, the Collateral, excluding (x) those finally
judicially determined to have arisen, with respect to any
Indemnitee, solely from the gross negligence or willful
misconduct of such Indemnitee or (y) unless specifically
provided for elsewhere in this Agreement, those arising
out of the actions of any Indemnitee while in possession
or control of the Collateral.
(b) Without limiting the application of
subsection (a), the Pledgor agrees to pay, or reimburse
the Security Agent for any and all fees, costs and
expenses of whatever kind or nature incurred in
connection with the preservation, protection or
validation of the Security Agent's Liens on, and security
interest in, the Collateral, including, without
limitation, all fees and taxes in connection with the
recording or filing of instruments and documents in
public offices, payment or discharge of any taxes or Lien
upon or in respect of the Collateral, premiums for
insurance with respect to the Collateral and all other
fees, costs and expenses in connection with protecting,
maintaining or preserving the Collateral and the Security
Agent's interest therein, whether through judicial
proceedings or otherwise, or in defending or prosecuting
any actions, suits or proceedings arising out of or
relating to the Collateral.
Section 21. Obligations Secured by Collateral.
Any amounts paid by any Indemnitee as to which such
Indemnitee has the right to reimbursement, and any
amounts paid by the Security Agent in preservation of any
of its rights or interest in the Collateral, together
with interest on such amounts from the date paid until
reimbursement in full at a rate per annum equal at all
times to the Overdue Rate shall constitute Obligations
secured by the Collateral.
Section 22. Reinstatement. This Agreement
shall continue to be effective or be reinstated, as the
case may be, if at any time any amount received by the
Security Agent, the Owner Trustee or GE Capital
hereunder, under any other Loan Document or Lease
Document or pursuant hereto or thereto is rescinded or
must otherwise be restored or returned by the Security
Agent, the Owner Trustee or GE Capital upon the
insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Pledgor or the Borrower or upon the
appointment of any intervenor or conservator of, or
trustee or similar official for, Pledgor or the Borrower
or any substantial part of their respective assets, or
upon the entry of an order by a bankruptcy court avoiding
the payment of such amount, or otherwise, all as though
such payments had not been made.
Section 23. Amendments, etc. No waiver,
amendment, modification or termination of any provision
of this Agreement, or consent to any departure by the
Pledgor therefrom, shall in any event be effective (x)
without the written concurrence of the Security Agent and
(y) unless made in accordance with subsection 9.1 of the
Loan Agreement and none of the Collateral shall be
released without the written consent of the Security
Agent. Any such waiver or consent shall be effective
only in the specific instance and for the specific
purpose for which given.
Section 24. Successors and Assigns. This
Agreement shall be binding upon the Pledgor and its
successors and assigns and shall inure to the benefit of
the Security Agent, the Owner Trustee and GE Capital and
their respective successors and assigns.
Section 25. Survival.
(a) All agreements, statements,
representations and warranties made by the Pledgor herein
or in any certificate or other instrument delivered by
the Pledgor or on its behalf under this Agreement shall
be considered to have been relied upon by the Security
Agent and shall survive the execution and delivery of
this Agreement and the other Transaction Documents
regardless of any investigation made by or on behalf of
the Security Agent.
(b) The indemnity obligations of Pledgor
contained in Section 20 shall continue in full force and
effect notwithstanding the full payment of the
Obligations and notwithstanding the discharge thereof.
Section 26. No Waiver; Remedies Cumulative.
No failure or delay on the part of the Security Agent in
exercising any right, power or privilege hereunder and no
course of dealing between the Pledgor and the Security
Agent shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or
privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right,
power or privilege hereunder or thereunder. The rights
and remedies herein expressly provided are cumulative and
not exclusive of any rights or remedies which the
Security Agent (or the Owner Trustee or GE Capital) would
otherwise have.
Section 27. Counterparts. This Agreement may
be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an
original, but all of which shall together constitute one
and the same instrument.
Section 28. Headings Descriptive. The
headings of the several Sections and subsections of this
Agreement are inserted for convenience only and shall not
in any way affect the meaning or construction of any
provision of this Agreement.
Section 29. Severability. In case any
provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the
remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any
way be affected or impaired thereby.
Section 30. Consent to Pledge by Limited
Partner. Notwithstanding anything to the contrary
contained in the Partnership Agreement, Panda Brandywine
Corporation, a Delaware corporation, as holder of the
Borrower general partnership interest, hereby consents to
(i) the execution, delivery, and performance by the
Limited Partner of this Agreement, (ii) the grant of the
pledge by the Limited Partner to the Security Agent, for
the benefit of GE Capital and the Owner Trustee, of its
partnership interests in the Borrower pursuant to this
Agreement, (iii) the sale, transfer, assignment or other
disposition (whether through foreclosure, deed-in-lieu of
foreclosure, or otherwise) of such partnership interests
to the Security Agent, its designee, or any purchaser of
such partnership interests pursuant to the exercise by
the Security Agent of its rights and remedies under this
Agreement and (iv) the admission to the Borrower of the
Security Agent, such designee, or such purchaser as a
limited partner of the Borrower in connection with the
exercise of such rights and remedies.
Section 31. Conflict with Loan Agreement. In
case of a conflict between any provision of this
Agreement and any provision of the Loan Agreement, the
provisions of the Loan Agreement shall control and
govern. No such conflict shall be deemed to exist merely
because this Agreement imposes greater obligations on the
Pledgor than the Loan Agreement.
Section 32. Recourse Limited to Collateral.
The Security Agent acknowledges and agrees that, except
in the case of fraud, willful misconduct or knowing
misrepresentation on the part of Pledgor, its sole
recourse for payment and performance of the obligations
of the Pledgor hereunder shall be to the Collateral.
This provision shall not be deemed to waive any cause of
action the Security Agent, the Owner Trustee or GE
Capital may have against any Person for fraud, willful
misconduct or knowing misrepresentation by such Person.
Section 33. GOVERNING LAW; SUBMISSION TO
JURISDICTION; WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED
IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW EXCEPT
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
(b) ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER TRANSACTION
DOCUMENT AND ANY ACTION FOR ENFORCEMENT OF ANY JUDGMENT
IN RESPECT THEREOF MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR
THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, THE PLEDGOR HEREBY ACCEPTS
FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS AND APPELLATE COURTS FROM ANY THEREOF.
THE PLEDGOR IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY
SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID,
TO THE PLEDGOR AT ITS ADDRESS REFERRED TO IN SECTION 15.
THE PLEDGOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF
ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT
OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENT BROUGHT IN THE COURTS REFERRED TO
ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES
NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED IN ANY OTHER
JURISDICTION.
(c) EACH OF THE PLEDGOR AND THE SECURITY
AGENT HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENT OR ANY MATTER ARISING HEREUNDER OR
THEREUNDER.
Section 34. Leveraged Lease. If, upon the
sale of the Facility by the Borrower to the Owner
Trustee, GE Capital exercises its option under subsection
5.8 of the Loan Agreement to cause the Owner Trustee to
borrow funds to finance (or refinance) a portion of the
purchase price of the Facility, the parties hereto agree
to execute an amendment or supplement hereto to provide
for such provisions as are customary and appropriate in
respect of leveraged lease transactions.
Section 35. Certain Rights of Power Purchaser.
Nothing in this Limited Partner Pledge Agreement shall be
deemed to limit the provisions of the Consent of the
Power Purchaser, which provisions are solely for the
benefit of the Power Purchaser and not the Pledgor.
Without limiting the scope of the foregoing, the Security
Agent agrees, for the exclusive benefit of the Power
Purchaser and not the Pledgor, that the exercise of
remedies or any similar action under this Limited Partner
Pledge Agreement is subject to, and shall be conducted in
a manner consistent with, the Power Purchaser's rights
under (i) the Consent of the Power Purchaser and (ii) the
Power Purchase Agreement and the Transfer Agreement (to
the extent such rights under the Power Purchase Agreement
and the Transfer Agreement are not explicitly waived by
the Power Purchaser in accordance with the terms of the
Consent of the Power Purchaser).
IN WITNESS WHEREOF, the parties hereto have
caused their duly authorized officers to execute and
deliver this Agreement as of the date first above
written.
PANDA ENERGY CORPORATION,
a Delaware corporation,
as Pledgor
By:
Name: Robert W. Carter
Title: President
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
as Security Agent
By:
Name: Kathy A. Larimore
Title: Assistant Vice President
With Respect to Section 30 only:
PANDA BRANDYWINE CORPORATION,
as general partner
By:_______________________
Name: Robert W. Carter
Title: President
EXHIBIT 10.30
STOCK PLEDGE AGREEMENT
STOCK PLEDGE AGREEMENT, dated as of March 30, 1995
(this "Agreement"), made by PANDA HOLDINGS, INC., a Delaware
corporation (together with its successors and assigns, the
"Pledgor") to SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a
national banking association, in its capacity as Security Agent
(the "Security Agent") under the Security Deposit Agreement (as
defined in the Loan Agreement referred to below).
W I T N E S S E T H :
WHEREAS, the Pledgor is the legal and beneficial owner
of all of the shares of common stock described in Schedule 1
annexed hereto (such shares of common stock together with any
stock options or rights received pursuant to Section 2 hereof,
being hereinafter referred to as the "Pledged Shares") issued by
Panda Brandywine Corporation, a Delaware corporation, Panda
Energy Corporation, a Delaware corporation and Brandywine Water
Company, a Delaware corporation (Panda Brandywine Corporation,
Panda Energy Corporation and Brandywine Water Company being
individually referred to herein as the "Company" and collectively
referred to herein as the "Companies");
WHEREAS, Panda-Brandywine, L.P. (the "Borrower"), Panda
Brandywine Corporation, and General Electric Capital Corporation
("GE Capital") have entered into the Construction Loan Agreement
and Lease Commitment, dated as of March 30, 1995 (as amended,
supplemented or otherwise modified from time to time, the "Loan
Agreement"), pursuant to which GE Capital has agreed, among other
things, to (i) make Loans to the Borrower, (ii) (acting through
the Owner Trustee established for the benefit of GE Capital)
lease the Site from the Borrower and sublease the Site back to
the Borrower and (iii) (acting through the Owner Trustee
established for benefit of GE Capital) upon completion of the
Project, purchase the Facility from the Borrower and lease the
Facility back to the Borrower pursuant to the Facility Lease;
WHEREAS, it is a condition precedent to the obligation
of GE Capital to make Loans to the Borrower under the Loan
Agreement that the Pledgor shall have executed and delivered this
Agreement to the Security Agent, for the benefit of GE Capital
and the Owner Trustee;
WHEREAS, the Pledgor desires to execute this Agreement
to satisfy the condition described in the preceding recital;
NOW, THEREFORE, in consideration of the foregoing
premises and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the
Pledgor hereby agrees with the Security Agent, for the benefit of
GE Capital and the Owner Trustee, as follows:
Section 1. Defined Terms; Construction.
(b) Unless otherwise defined herein, terms used
herein shall have the meaning set forth in Appendix A to the Loan
Agreement. Defined terms in this Agreement shall include in the
singular number the plural and in the plural number the singular.
(c) The words "hereof," "herein" and "hereunder"
and words of similar import when used in this Agreement shall,
unless otherwise expressly specified, refer to this Agreement as
a whole and not to any particular provision of this Agreement and
all references to Sections shall be references to Sections of
this Agreement unless otherwise expressly specified.
(d) Unless otherwise expressly specified, any
agreement, contract, or document defined or referred to herein
shall mean such agreement, contract or document in the form
(including all amendments and clarification letters relating
thereto) delivered to GE Capital or the Security Agent on the
Initial Loan Funding Date as the same may thereafter be amended,
supplemented, or otherwise modified from time to time in
accordance with the terms of this Agreement and of the other Loan
Documents.
Section 2. Pledge. As security for the
Obligations and subject to and in accordance with the
provisions of this Agreement, the Pledgor hereby pledges,
grants, assigns, hypothecates, transfers, and delivers to
the Security Agent, for the benefit of GE Capital and the
Owner Trustee, a first priority security interest in the
following (the "Collateral"):
(i) the Pledged Shares, all
additional shares of stock of each Company from
time to time acquired by the Pledgor in any
manner (which shares shall be deemed to be part
of the Pledged Shares), and the certificates
representing all such shares and any interest
of the Pledgor in the entries on the books of
any financial intermediary pertaining to such
shares;
(ii) all dividends, cash,
options, warrants, rights, instruments and
other property or proceeds from time to time
received, receivable or otherwise distributed
in respect of or in exchange for any or all of
the Pledged Shares or the additional shares;
and
(iii) all proceeds of the
foregoing items described in clauses (i) and
(ii) above.
Section 3. Security for Obligations. This
Agreement secures, and the Pledged Shares and the other
Collateral are collateral security for, the payment and
performance in full when due, whether at stated maturity,
by acceleration or otherwise of all Obligations now or
hereafter existing.
Section 4. Delivery of Collateral. All
certificates or instruments representing or evidencing
the Collateral shall be delivered to and held by or on
behalf of the Security Agent, pursuant hereto and shall
be in suitable form for transfer by delivery, or shall be
accompanied by duly executed undated instruments of
transfer or assignment in blank, all in form and
substance reasonably satisfactory to the Security Agent.
If the Pledgor shall become entitled to receive or shall
receive any other Collateral, then the Pledgor shall,
except as otherwise provided in Section 7, accept and
hold the same in trust for the Security Agent, and
segregated from the other property or funds of Pledgor,
and shall deliver to the Security Agent, forthwith all
such other Collateral (except as provided in Section 7
hereof) in the form received by the Pledgor, to be held
by the Security Agent, subject to the terms hereof, as
part of the Collateral. Upon the occurrence and during
the continuance of an Event of Default or Lease Event of
Default, the Security Agent shall have the right, at any
time in its discretion and without notice to the Pledgor,
to transfer to or to register in the name of the Security
Agent, the Owner Trustee or GE Capital, or any of their
respective nominees any or all of the Collateral.
Section 5. Representations and Warranties.
The Pledgor represents and warrants as follows:
(a) Due Organization. The Pledgor is a
corporation duly organized and validly existing under the
laws of the State of Delaware, and is qualified to own
property and transact business in every jurisdiction
where the ownership of its property and the nature of its
business as currently conducted requires it to be so
qualified.
(b) Power and Authority. The Pledgor has
full corporate power, authority and legal right to enter
into this Agreement and to perform its obligations
hereunder and to pledge all the Collateral pursuant to
this Agreement.
(c) Due Authorization. The pledge of the
Collateral pursuant to this Agreement has been duly
authorized by the Pledgor. This Agreement has been duly
authorized, executed and delivered by the Pledgor.
(d) Enforceability. This Agreement
constitutes the legal, valid and binding obligation of
the Pledgor enforceable against the Pledgor in accordance
with its terms except as enforceability may be limited by
applicable bankruptcy, insolvency, moratorium or other
similar laws affecting creditors' rights generally and
except as enforceability may be limited by general
principles of equity (whether considered in a suit at law
or in equity).
(e) No Conflicts. The execution and
delivery by Pledgor of this Agreement, the performance by
Pledgor of its obligations hereunder, and the pledge by
the Pledgor of the Collateral pursuant to this Agreement
will not (i) violate the provisions of the Pledgor's
Certificate of Incorporation or By-laws; (ii) violate the
provisions of any Law applicable to the Pledgor; (iii)
violate any Contractual Obligation; or (iv) result in or
create any Lien (other than the Lien created hereby)
under, or require any consent which has not been obtained
under any agreement or instrument, or the provisions of
any order or decree binding upon the Pledgor or any of
its properties.
(f) No Consents. No consent of any other
party (including, without limitation, stockholders or
creditors of the Pledgor) and no Governmental Action is
required which has not been obtained either (i) for the
execution, delivery and performance by Pledgor of this
Agreement, (ii) for the pledge by the Pledgor of the
Collateral pursuant to this Agreement, or (iii) for the
exercise by the Security Agent of the rights provided for
in this Agreement or the remedies in respect of the
Collateral pursuant to this Agreement (except as may be
required in connection with any disposition of all or any
part of the Collateral under any laws affecting the
offering and sale of securities generally).
(g) No Proceedings. There is no action,
suit or proceeding at law or in equity or by or before
any Governmental Authority or arbitral tribunal now
pending or, to the best knowledge of the Pledgor,
threatened against the Pledgor (i) which questions the
validity or legality of or seeks damages in connection
with this Agreement or any other Transaction Document to
which Pledgor is a party or (ii) which may reasonably be
expected to have a Material Adverse Effect.
(h) Ownership of Collateral. The Pledgor
is the sole legal and beneficial owner of the Pledged
Shares free and clear of any Lien (other than Permitted
Liens) other than the Lien created pursuant to this
Agreement.
(i) Validly Issued. All of the Pledged
Shares have been duly authorized and validly issued and
are fully paid and non-assessable.
(j) Perfection. The pledge of the
Collateral delivered to the Security Agent pursuant to
this Agreement creates a valid and perfected first
priority security interest in the Collateral securing the
payment of the Obligations assuming continued possession
thereof by the Security Agent or its agent.
(k) Percentage Ownership. The Pledged
Shares constitute one hundred percent (100%) of the
issued and outstanding shares of stock of each Company.
Section 6. Supplements, Further Assurances.
The Pledgor agrees that at any time and from time to
time, at the expense of the Pledgor, the Pledgor will
promptly execute and deliver all further instruments and
documents, and take all further action that the Security
Agent or GE Capital may reasonably request, in order to
perfect and protect any security interest granted or
purported to be granted hereby or to enable the Security
Agent to exercise and enforce its rights and remedies
hereunder with respect to any Collateral.
Section 7. Voting Rights; Dividends; etc.
(a) The Pledgor shall be entitled to
exercise any and all voting and other consensual rights
pertaining to the Collateral or any part thereof so long
as (i) no Event of Default or Lease Event of Default
shall have occurred and be continuing and (ii) the
exercise of such voting and other consensual rights would
not result in an Event of Default or Lease Event of
Default. Upon the occurrence and during the continuance
of an Event of Default or Lease Event of Default all
rights of the Pledgor to exercise the voting and other
consensual rights which it would otherwise be entitled to
exercise pursuant to the preceding sentence shall cease,
and all such rights shall thereupon become vested in the
Security Agent, which shall thereupon have the sole right
to exercise such voting and other consensual rights.
(b) The Pledgor shall be entitled to
receive and retain any and all distributions paid in
respect of the Collateral in compliance with the terms of
the Loan Agreement and the Security Deposit Agreement so
long as (i) no Event of Default or Lease Event of Default
shall have occurred and be continuing and (ii) the
receipt of such distributions would not result in an
Event of Default or Lease Event of Default; provided,
however, that any and all
(i) distributions paid or
payable in shares (or rights to shares) of any
Company,
(ii) distributions paid or
payable in cash, securities or other property
in respect of any Collateral in connection with
a partial or total liquidation or dissolution,
and
(iii) cash, securities or other
property paid, payable or otherwise
distributed in redemption of, or in exchange
for, any Collateral,
shall be, and shall be forthwith delivered to the
Security Agent to hold as Collateral and shall, if
received by the Pledgor, be received in trust for the
benefit of the Security Agent, be segregated from the
other property or funds of the Pledgor, and be forthwith
delivered to the Security Agent as Collateral in the same
form as so received (with any necessary endorsement).
Upon the occurrence and during the continuance of an
Event of Default or Lease Event of Default all rights of
the Pledgor to thereafter receive the distributions which
it would otherwise be authorized to receive pursuant to
the preceding sentence shall cease, and all such rights
shall thereupon become vested in the Security Agent which
shall thereupon have the sole right to receive and hold
as Collateral such distributions.
(c) All distributions and other amounts
which are received by the Pledgor contrary to the
provisions of this Section or of the Loan Agreement shall
be received in trust for the benefit of the Security
Agent, shall be segregated from other funds of the
Pledgor, and shall be forthwith paid over to the Security
Agent as Collateral in the same form as so received (with
any necessary endorsement).
(d) In order to permit the Pledgor to
exercise the voting and other rights which it is entitled
to exercise pursuant to subsection (a) above and to
receive the distributions which it is authorized to
receive and retain pursuant to subsection (b) above, the
Security Agent shall, if necessary, execute and deliver
(or cause to be executed and delivered) to the Pledgor
all such proxies, dividend payment orders and other
instruments as the Pledgor may reasonably request.
Section 8. Covenants.
(a) Legal Existence. The Pledgor shall
preserve and maintain (i) its legal existence, as a
corporation in good standing under the laws of the State
of Delaware and (ii) its qualification to do business in
every jurisdiction where the ownership of its property
and the nature of its business require it to be so
qualified.
(b) No Sale of Collateral; No Liens. The
Pledgor agrees that it will not (i) sell or otherwise
dispose of, or grant any option or warrant with respect
to, the Collateral or any interest therein without the
prior written consent of the Security Agent, (ii) except
for the Lien created hereby, create or permit to exist
any Lien (other than Permitted Liens) upon or with
respect to any of the Collateral or any interest therein
or (iii) permit any Company to merge or consolidate
unless all the outstanding capital stock of the surviving
or resulting corporation is, upon such merger or
consolidation, pledged hereunder and no cash, securities
or other property is distributed in respect of the
outstanding shares of any other constituent corporation.
(c) Additional Shares. The Pledgor
agrees that it will cause each Company not to issue any
stock or other securities in addition to or in
substitution for the Pledged Shares, unless such stock or
securities are pledged to the Security Agent in
accordance with this Agreement. The Pledgor agrees that
it will pledge hereunder, immediately upon its
acquisition (directly or indirectly) thereof, any and all
additional shares of stock or other securities of each
Company.
(d) Agent for Receipt of Service of
Process. The Pledgor shall appoint and continuously
retain a Person acceptable to the Security Agent and GE
Capital as its agent in the State of New York for receipt
of service of process and shall pay all costs, fees and
expenses in connection therewith.
(e) Subsidiaries. All Subsidiaries
(including partnerships) incorporated or formed in the
United States (whether now existing or hereafter acquired
or formed) of Panda Energy Corporation, a Texas
corporation ("Panda") which are engaged in the financing,
development, construction or operation of independent
power production or energy transmission projects located
in the United States (collectively, "US Cogen
Subsidiaries"), including Panda-Kathleen, L.P., are and
shall continue to be Subsidiaries of the Pledgor, other
than Panda Rosemary Corporation and PRC II Corporation,
which are and shall continue to be direct, wholly-owned
Subsidiaries of Panda but may become Subsidiaries of the
Pledgor in the future and Panda-Rosemary, L.P., which is
and shall continue to be an indirect, wholly-owned
Subsidiary of Panda but may become a Subsidiary of the
Pledgor in the future. The foregoing notwithstanding,
but subject to the provisions of Section 8(b) hereof and
the provisions of the Loan Agreement, the Pledgor shall
be permitted to sell all or any of the stock of any US
Cogen Subsidiary to any Person who is not an Affiliate of
Panda. In the event that Pledgor merges with Panda as
contemplated by subsection 5.10 of the Loan Agreement,
all US Cogen Subsidiaries of Pledgor and Panda prior to
such merger shall be and continue to be Subsidiaries of
the surviving entity.
(f) Bankruptcy of the Companies. The
Pledgor shall not authorize, seek to cause or permit any
of the Companies to commence a voluntary case or other
proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property or
to consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary
case or other proceeding commenced against it, or to make
a general assignment for the benefit of the creditors.
(g) Bankruptcy of Holdings. Panda shall
not authorize, seek to cause or permit Holdings to
commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect
to itself or its debts under any bankruptcy, insolvency
or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or
any substantial part of its property or to consent to any
such relief or to the appointment of or taking possession
by any such official in an involuntary case or other
proceeding commenced against it, or to make a general
assignment for the benefit of the creditors.
Section 9. Security Agent Appointed Attorney-
In-Fact. Upon the occurrence of an Event of Default or
Lease Event of Default, the Pledgor hereby appoints the
Security Agent or any Person or agent whom the Security
Agent may designate the Pledgor's attorney-in-fact, with
full authority in the place and stead of the Pledgor and
in the name of the Pledgor or otherwise, at the Pledgor's
cost and expense, at any time and from time to time in
the Security Agent's reasonable discretion to take any
action and to execute any instrument which the Security
Agent may deem necessary or advisable to enforce its
rights under this Agreement, including, without
limitation, authority to receive, endorse and collect all
instruments made payable to the Pledgor representing any
dividends, interest payment or other distribution in
respect of the Collateral or any part thereof and to give
full discharge for the same.
Section 10. Security Agent May Perform. If
the Pledgor fails to perform any agreement contained
herein after receipt of a written request to do so from
the Security Agent, the Security Agent may itself
perform, or cause performance of, such agreement, and the
reasonable expenses of the Security Agent, including the
reasonable fees and expenses of its counsel, incurred in
connection therewith shall be payable by the Pledgor
under Section 19.
Section 11. Reasonable Care. The Security
Agent shall be deemed to have exercised reasonable care
in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment
substantially equivalent to that which the Security Agent
accords its own property consisting of negotiable
securities, cash or other forms of property as
applicable, it being understood that, subject to the
exercise of such reasonable care, the Security Agent
shall have no responsibility for (i) ascertaining or
taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative
to any Collateral, whether or not the Security Agent has
or is deemed to have knowledge of such matters, or (ii)
taking any necessary steps to preserve rights against any
parties with respect to any Collateral.
Section 12. No Liability. Neither the
Security Agent, nor the Owner Trustee, nor GE Capital,
nor any of their respective directors, officers,
employees or agents shall be deemed to have assumed any
of the liabilities or obligations of a shareholder of any
of the companies, or of the owner of any Pledged Shares
or any other security included in the Collateral from
time to time as a result of the pledge and security
interest granted under or pursuant to this Agreement.
Neither the Security Agent, nor the Owner Trustee, nor GE
Capital, nor any of their respective directors, officers,
employees or agents shall be liable for any failure to
collect or realize upon the Obligations or any collateral
security or guarantee therefor, or any part thereof, or
for any delay in so doing nor shall it be under any
obligation to take any action whatsoever with regard
thereto.
Section 13. Remedies Upon Default. If an
Event of Default or Lease Event of Default shall have
occurred and be continuing:
(a)(i) The Security Agent may exercise in
respect of the Collateral, in addition to other rights
and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party
upon a default under the Uniform Commercial Code then in
effect in the State of New York or, unless prohibited by
applicable law, the Uniform Commercial Code in effect in
any other applicable jurisdiction. The Security Agent
may also in its sole discretion, without notice except as
specified below, sell the Collateral or any part thereof
in one or more parcels at public or private sale, at any
exchange, broker's board or at any of the Security
Agent's offices or elsewhere, for cash, on credit or for
future delivery, and at such price or prices and upon
such other terms as the Security Agent may, in accordance
with applicable Law, deem commercially reasonable,
irrespective of the impact of any such sales on the
market price of the Collateral at any such sale. Each
purchaser at any such sale shall hold the property sold
absolutely, free from any claim or right on the part of
the Pledgor, and the Pledgor hereby waives (to the extent
permitted by law) all rights of redemption, stay and/or
appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing
or hereafter enacted. The Pledgor agrees that, to the
extent notice of sale shall be required by law, at least
ten days' notice to the Pledgor of the time and place of
any public sale or the time after which any private sale
is to be made shall constitute reasonable notification.
The Security Agent shall not be obligated to make any
sale of Collateral regardless of notice of sale having
been given. The Security Agent may adjourn any public or
private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it
was so adjourned. The Security Agent shall not incur
liability as a result of the sale of the Collateral, or
any part thereof, at any public or private sale. The
Pledgor hereby waives any claims against the Security
Agent arising by reason of the fact that the price at
which any Collateral may have been sold at such a private
sale, if commercially reasonable, was less than the price
which might have been obtained at a public sale, even if
the Security Agent accepts the first offer received and
does not offer such Collateral to more than one offeree.
(ii) The Pledgor recognizes that the Security
Agent may elect in its sole discretion to sell all or a
part of the Collateral to one or more purchasers in
privately negotiated transactions in which the purchasers
will be obligated to agree, among other things, to
acquire the Collateral for their own account, for
investment and not with a view to the distribution or
resale thereof. The Pledgor acknowledges that any such
private sales may be at prices and on terms less
favorable than those obtainable through a public sale
(including, without limitation, a public offering made
pursuant to a registration statement under the Securities
Act of 1933, as amended (the "Securities Act")), and the
Pledgor and the Security Agent agree that such private
sales shall be made in a commercially reasonable manner
and that the Security Agent has no obligation to engage
in public sales and no obligation to delay sale of any
Collateral to permit the issuer thereof to register the
Pledged Shares for a form of public sale requiring
registration under the Securities Act.
(b) Any cash held by the Security Agent
as Collateral and all cash proceeds received by the
Security Agent in respect of any sale of, collection
from, or other realization upon all or any part of the
Collateral shall, as soon as reasonably practicable, be
applied (after payment of any amounts payable to the
Security Agent pursuant to Sections 19 and 20) by the
Security Agent first to the payment of the costs and
expenses of such sale, collection or other realization,
including reasonable compensation to the Security Agent
and its agents and counsel, and all expenses, liabilities
and advances made or incurred by the Security Agent in
connection therewith; and second to the payment of the
Obligations in accordance with the terms of the Loan
Agreement, the Deed of Trust and Security Agreement and
the Security Agreement. The Borrower shall be liable for
any deficiency remaining after any application of funds
pursuant hereto. Any surplus of such cash or cash
proceeds held by the Security Agent after payment in full
of such amounts shall be paid over to the Pledgor, or its
successors or assigns, or to whomsoever may be lawfully
entitled to receive such surplus or as a court of
competent jurisdiction may direct.
Section 14. Purchase of the Collateral. The
Security Agent, the Owner Trustee, or GE Capital or any
of their respective Affiliates may be a purchaser of the
Collateral or any part thereof or any right or interest
therein at any sale thereof, whether pursuant to
foreclosure, power of sale or otherwise hereunder and the
Security Agent may apply the purchase price to the
payment of the Obligations secured hereby. Any such
purchaser shall, upon any such purchase, acquire good
title to the Pledged Shares so purchased, free of the
security interests created by this Agreement.
Section 15. Notices. All notices, requests
and demands to or upon the respective parties hereto to
be effective shall be in writing (including by telecopy),
and shall be deemed to have been duly given or made when
delivered by hand, or five days after being deposited in
the United States mail, postage prepaid, or, in the case
of telecopy notice, when confirmation is received, or, in
the case of a nationally recognized overnight courier
service, one Business Day after delivery to such courier
service, addressed, in the case of each party hereto, at
its address specified below its name on Schedule 2
hereto, or to such other address as may be designated by
any party in a written notice to the other party hereto.
Section 16. Continuing Security Interest.
This Agreement shall create a continuing Lien in the
Collateral until the release thereof pursuant to Section
18. GE Capital may assign or otherwise transfer any
indebtedness held by it secured by this Agreement to any
other person or entity in accordance with subsection 9.6
of the Loan Agreement, and such other person or entity
shall thereupon become vested with all the benefits in
respect thereof granted herein or otherwise.
Section 17. Security Interest Absolute. All
rights of the Security Agent and security interests
hereunder, and all obligations of the Pledgor hereunder,
shall be absolute and unconditional irrespective of:
(i) any lack of validity or
enforceability of any of the Transaction
Documents or any other agreement or instrument
relating thereto;
(ii) any change in the time,
manner or place of payment of, or in any other
term of, all or any of the Obligations, or any
other amendment or waiver of or any consent to
any departure from the Transaction Documents or
any other agreement or instrument relating
thereto;
(iii) any exchange, release or
non-perfection of any other collateral, or any
release or amendment or waiver of or consent to
any departure from any guaranty, for all or any
of the Obligations; or
(iv) any other circumstance
which might otherwise constitute a defense
available to, or a discharge of, the Pledgor.
Section 18. Release. Upon the indefeasible
payment in full of the Obligations, the Security Agent,
upon the request and at the expense of the Pledgor, shall
execute and deliver all such documentation necessary to
release the liens created pursuant to this Agreement.
Section 19. Expenses. The Pledgor will upon
demand pay to the Security Agent the amount of any and
all reasonable expenses, including the reasonable fees
and expenses of its counsel and of any experts and
agents, and any transfer taxes which the Security Agent
may incur in connection with (i) the custody or
preservation of, or the sale of, collection from, or
other realization upon, any of the Collateral pursuant to
the exercise or enforcement of any of the rights of the
Security Agent hereunder or (ii) the failure by the
Pledgor to perform or observe any of the provisions
hereof. Any amount payable by the Pledgor pursuant to
this Section shall be payable on demand and shall
constitute Obligations secured hereby.
Section 20. Indemnity. (a) The Pledgor
agrees to indemnify, reimburse and hold the Security
Agent, the Owner Trustee and GE Capital, their respective
successors and assigns and their respective officers,
directors, employees, and agents (each individually, an
"Indemnitee," and collectively, "Indemnitees") harmless
from any and all liabilities, obligations, damages,
injuries, penalties, claims, demands, actions, suits,
judgments and any and all costs and expenses (including
reasonable attorneys' fees and disbursements) (such
expenses, for purposes of this Section, hereinafter
"expenses") of whatsoever kind and nature imposed on,
asserted against or incurred by any of the Indemnitees in
any way relating to or arising out of (i) this Agreement
or the certificate executed by the Pledgor in connection
herewith or in any other way connected with the
administration of the Lien or the security interest
granted hereby, or the enforcement of any of the terms
hereof, or the preservation of any rights hereunder, (ii)
any failure of the Pledgor to comply with its obligations
under this Agreement, or any misrepresentation by the
Pledgor in this Agreement, or in any statement or writing
contemplated by or made or delivered pursuant to or in
connection with this Agreement, or (iii) the ownership,
purchase, delivery, control, acceptance, financing,
possession, condition, sale, return or other disposition,
or use of, the Collateral, excluding those (x) finally
judicially determined to have arisen, with respect to any
Indemnitee, solely from the gross negligence or willful
misconduct of such Indemnitee or (y) unless specifically
provided for elsewhere in this Agreement, those arising
out of the actions of any Indemnitee while in possession
or control of the Collateral.
(b) Without limiting the application of
subsection (a), the Pledgor agrees to pay, or reimburse
the Security Agent for any and all fees, costs and
expenses of whatever kind or nature incurred in
connection with the preservation, protection or
validation of the Security Agent's Liens on, and security
interest in, the Collateral, including, without
limitation, all fees and taxes in connection with the
recording or filing of instruments and documents in
public offices, payment or discharge of any taxes or Lien
upon or in respect of the Collateral, premiums for
insurance with respect to the Collateral and all other
fees, costs and expenses in connection with protecting,
maintaining or preserving the Collateral and the Security
Agent's interest therein, whether through judicial
proceedings or otherwise, or in defending or prosecuting
any actions, suits or proceedings arising out of or
relating to the Collateral.
Section 21. Obligations Secured by Collateral.
Any amounts paid by any Indemnitee as to which such
Indemnitee has the right to reimbursement, and any
amounts paid by the Security Agent in preservation of any
of its rights or interest in the Collateral, together
with interest on such amounts from the date paid until
reimbursement in full at a rate per annum equal at all
times to the Overdue Rate shall constitute Obligations
secured by the Collateral.
Section 22. Reinstatement. This Agreement
shall continue to be effective or be reinstated, as the
case may be, if at any time any amount received by the
Security Agent, the Owner Trustee or GE Capital
hereunder, under any other Loan Document or Lease
Document or pursuant hereto or thereto is rescinded or
must otherwise be restored or returned by such Person
upon the insolvency, bankruptcy, dissolution, liquidation
or reorganization of the Pledgor or the Borrower or upon
the appointment of any intervenor or conservator of, or
trustee or similar official for, Pledgor or the Borrower
or any substantial part of their respective assets, or
upon the entry of an order by a bankruptcy court avoiding
the payment of such amount, or otherwise, all as though
such payments had not been made.
Section 23. Amendments, etc. No waiver,
amendment, modification or termination of any provision
of this Agreement, or consent to any departure by the
Pledgor therefrom, shall in any event be effective (x)
without the written concurrence of the Security Agent and
(y) unless made in accordance with subsection 9.1 of the
Loan Agreement and none of the Collateral shall be
released without the written consent of the Security
Agent. Any such waiver or consent shall be effective
only in the specific instance and for the specific
purpose for which given.
Section 24. Successors and Assigns. This
Agreement shall be binding upon the Pledgor and its
successors and assigns and shall inure to the benefit of
the Security Agent, the Owner Trustee and GE Capital and
their respective successors and assigns.
Section 25. Survival.
(a) All agreements, statements,
representations and warranties made by the Pledgor herein
or in any certificate or other instrument delivered by
the Pledgor or on its behalf under this Agreement shall
be considered to have been relied upon by the Security
Agent and shall survive the execution and delivery of
this Agreement and the other Transaction Documents
regardless of any investigation made by or on behalf of
the Security Agent.
(b) The indemnity obligations of Pledgor
contained in Section 20 shall continue in full force and
effect notwithstanding the full payment of the
Obligations and notwithstanding the discharge thereof.
Section 26. No Waiver; Remedies Cumulative.
No failure or delay on the part of the Security Agent in
exercising any right, power or privilege hereunder and no
course of dealing between the Pledgor and the Security
Agent shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or
privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right,
power or privilege hereunder or thereunder. The rights
and remedies herein expressly provided are cumulative and
not exclusive of any rights or remedies which the
Security Agent, the Owner Trustee or GE Capital would
otherwise have.
Section 27. Counterparts. This Agreement may
be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an
original, but all of which shall together constitute one
and the same instrument.
Section 28. Headings Descriptive. The
headings of the several Sections and subsections of this
Agreement are inserted for convenience only and shall not
in any way affect the meaning or construction of any
provision of this Agreement.
Section 29. Severability. In case any
provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the
remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any
way be affected or impaired thereby.
Section 30. Conflict with Loan Agreement. In
case of a conflict between any provision of this
Agreement and any provision of the Loan Agreement, the
provisions of the Loan Agreement shall control and
govern. No such conflict shall be deemed to exist merely
because this Agreement imposes greater obligations on the
Pledgor than the Loan Agreement.
Section 31. Recourse Limited to Collateral.
The Security Agent acknowledges and agrees that, except
in the case of fraud, willful misconduct or knowing
misrepresentation on the part of Pledgor, the sole
recourse of the Security Agent for payment and
performance of the obligations of the Pledgor hereunder
shall be to the Collateral. This provision shall not be
deemed to waive any cause of action the Security Agent
may have against any Person for fraud, willful misconduct
or knowing misrepresentation by such Person.
Section 32. GOVERNING LAW; SUBMISSION TO
JURISDICTION; WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED
IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW EXCEPT
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
(b) ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER TRANSACTION
DOCUMENT AND ANY ACTION FOR ENFORCEMENT OF ANY JUDGMENT
IN RESPECT THEREOF MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR
THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, THE PLEDGOR HEREBY ACCEPTS
FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS AND APPELLATE COURTS FROM ANY THEREOF.
THE PLEDGOR IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY
SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID,
TO THE PLEDGOR AT ITS ADDRESS REFERRED TO IN SECTION 15.
THE PLEDGOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF
ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT
OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENT BROUGHT IN THE COURTS REFERRED TO
ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES
NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED IN ANY OTHER
JURISDICTION.
(c) EACH OF THE PLEDGOR AND THE SECURITY
AGENT HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENT OR ANY MATTER ARISING HEREUNDER OR
THEREUNDER.
Section 33. Certain Rights of Power Purchaser.
Nothing in this Stock Pledge Agreement shall be deemed to
limit the provisions of the Consent of the Power
Purchaser, which provisions are solely for the benefit of
the Power Purchaser and not the Pledgor. Without
limiting the scope of the foregoing, the Security Agent
agrees, for the exclusive benefit of the Power Purchaser
and not the Pledgor, that the exercise of remedies or any
similar action under this Stock Pledge Agreement is
subject to, and shall be conducted in a manner consistent
with, the Power Purchaser's rights under (i) the Consent
of the Power Purchaser and (ii) the Power Purchase
Agreement and the Transfer Agreement (to the extent such
rights under the Power Purchase Agreement and the
Transfer Agreement are not explicitly waived by the Power
Purchaser in accordance with the terms of the Consent of
the Power Purchaser).
IN WITNESS WHEREOF, the parties hereto have
caused their duly authorized officers to execute and
deliver this Agreement as of the date first above
written.
PANDA HOLDINGS, INC., as Pledgor
By:
Name: Robert W. Carter
Title: President
SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, as Security Agent
By:
Name: Kathy A. Larimore
Title: Assistant Vice President
With respect to Section 8(g) only:
PANDA ENERGY CORPORATION, a
Texas corporation
By:
Name: Robert W. Carter
Title: President
Accepted and Agreed:
PANDA-BRANDYWINE L.P.
By Panda Brandywine Corporation,
its General Partner
By:
Name: Robert W. Carter
Title: President
PANDA BRANDYWINE CORPORATION
By:
Name: Robert W. Carter
Title: President
PANDA ENERGY CORPORATION, a
Delaware Corporation
By:
Name: Robert W. Carter
Title: President
BRANDYWINE WATER COMPANY
By:
Name: Robert W. Carter
Title: President
Schedule 1 to
Stock Pledge Agreement
Pledged Shares
No. of Par Value of Certificate
Shares Shares Number
Panda 1000 $.01 002
Brandywine
Corporation
Panda 1000 $.01 002
Energy
Corporation
Brandywine 1000 $.01 002
Water
Company
Schedule 2 to
Stock Pledge Agreement
Notice Addresses
Panda Holdings Inc.
4100 Spring Valley, Suite 1001
Dallas, Texas 75244
Attention: President and General Counsel
telephone: (214) 980-7159
telecopy: (214) 980-6815
Shawmut Bank Connecticut, National Association,
as Security Agent
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
telephone: (203) 986-7835
telecopy: (203) 986-7920
EXHIBIT 10.31
AMENDMENT NO. 1 dated as of October 27, 1995 (the
"Amendment") to the Stock Pledge Agreement referred to below
between PANDA ENERGY CORPORATION, a Texas corporation ("Panda"),
as successor by merger to Panda Holdings, Inc., a Delaware
corporation ("Holdings"), and SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, a national banking association, in its capacity as
Security Agent (the "Security Agent") under the Security Deposit
Agreement (as defined in the Loan Agreement referred to below).
W I T N E S S E T H :
WHEREAS, in connection with the Construction Loan
Agreement and Lease Commitment dated as of March 30, 1995 among
General Electric Capital Corporation ("GE Capital"), Panda-
Brandywine, L.P. and Panda Brandywine Corporation (as the same
may be amended, supplemented or otherwise modified from time to
time, the "Loan Agreement"; capitalized terms used herein and not
otherwise defined having the meanings set forth in the Loan
Agreement), Holdings has entered into a Stock Pledge Agreement
dated as of March 30, 1995 with the Security Agent (the "Stock
Pledge Agreement"), pursuant to which Holdings has pledged the
Pledged Shares;
WHEREAS, Holdings has merged with and into Panda with
Panda as the surviving corporation (the "Merger"), the Articles
of Merger have been filed with the Secretary of State of the
State of Texas and the Certificate of Merger effecting the Merger
has been issued by the Secretary of State of the State of Texas;
WHEREAS, Panda has, pursuant to the Merger, assumed and
succeeded to all of Holdings' rights, obligations and
liabilities, including, without limitation, Holdings' rights,
obligations and liabilities under the Loan Agreement, the Stock
Pledge Agreement and the other Transaction Documents to which
Holdings is a party;
WHEREAS, pursuant to subsection 5.10 of the Loan
Agreement, GE Capital has consented to the Merger so long as
Panda assumes all of the obligations of Holdings under the
Transaction Documents and executes an amendment to the Stock
Pledge Agreement;
WHEREAS, Panda has agreed to satisfy a condition
described in the preceding recital by executing and delivering
this Amendment to the Security Agent, for the benefit of GE
Capital and the Owner Trustee.
NOW, THEREFORE, in consideration of the foregoing
premises and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, Panda
hereby agrees with the Security Agent, for the benefit of GE
Capital and the Owner Trustee, as follows:
1. References to the Pledgor in the Stock Pledge
Agreement. Each reference to "the Pledgor" in the Stock Pledge
Agreement is hereby amended to be a reference to Panda.
2. Amendment to Section 5(a) of the Stock Pledge
Agreement. The reference in Section 5(a) of the Stock Pledge
Agreement to the State of Delaware is hereby amended to be a
reference to the State of Texas.
3. Amendment to Section 5(e) of the Stock Pledge
Agreement. Clause (i) of Section 5(e) of the Stock Pledge
Agreement is hereby amended to read as follows: "(i) violate the
provisions of the Pledgor's Articles of Incorporation or By-
laws;".
4. Amendment to Section 8(a) of the Stock Pledge
Agreement. Clause (i) of Section 8(a) of the Stock Pledge
Agreement is hereby amended to read as follows: "(i) its legal
existence as a corporation in good standing under the laws of the
State of Texas and".
5. Amendment to Section 8(e) of the Stock Pledge
Agreement. Section 8(e) of the Stock Pledge Agreement is hereby
amended to read in its entirety as follows:
"(e) Subsidiaries. All Subsidiaries (including
partnerships) incorporated or formed in the United States
(whether now existing or hereafter acquired or formed) of
the Pledgor and, prior to the Merger, of Holdings, which are
engaged in the financing, development, construction or
operation of independent power production or energy
transmission projects located in the United States
(collectively, "US Cogen Subsidiaries"), including Panda-
Kathleen, L.P., are and shall continue to be Subsidiaries of
the Pledgor. The foregoing notwithstanding, but subject to
the provisions of Section 8(b) hereof and the provisions of
the Loan Agreement, the Pledgor shall be permitted to sell
all or any of the stock of any US Cogen Subsidiary to any
Person who is not an Affiliate of Panda."
6. Amendment to Section 8(g) of the Stock Pledge
Agreement. Section 8(g) of the Stock Pledge Agreement is hereby
amended to read in its entirety as follows:
"(g) Bankruptcy of Pledgor. Panda Energy
International, Inc., a Texas corporation of which the
Pledgor is a direct, wholly-owned Subsidiary, shall not
authorize, seek to cause or permit Pledgor to commence a
voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its
debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property or to
consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary
case or other proceeding commenced against it, or to make a
general assignment for the benefit of the creditors."
7. Amendment to Schedule I to the Stock Pledge
Agreement. Schedule I to the Stock Pledge Agreement is hereby
amended to read in its entirety as set forth in Exhibit A hereto.
8. Amendment to Schedule II to the Stock Pledge
Agreement. Schedule II to the Stock Pledge Agreement is hereby
amended to read in its entirety as set forth in Exhibit B hereto.
9. Conditions Precedent. This Amendment shall not
become effective until the following conditions precedent are
satisfied:
(a) Delivery of Collateral. All certificates or
instruments representing or evidencing the Collateral shall
have been delivered to and held by or on behalf of the
Security Agent, pursuant to the terms of the Stock Pledge
Agreement, and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed undated
instruments of transfer or assignment in blank, all in form
and substance reasonably satisfactory to the Security Agent.
(b) Representations and Warranties. The
representations and warranties of the Pledgor contained in
Section 5 of the Stock Pledge Agreement shall be true and
correct on and as of the Effective Date as if made on and as
of the Effective Date; provided that all references to the
"Agreement" shall be and be deemed to mean this Amendment as
well as the Stock Pledge Agreement amended hereby.
(c) No Default. No Default or Event of Default has
occurred and is occurring as of the Effective Date.
10. Effect of Amendment. Except as expressly amended
hereby, all of the terms and provisions of the Stock Pledge
Agreement shall remain in full force and effect and are hereby
ratified and confirmed. The amendments provided herein shall be
limited precisely as drafted and shall not constitute a waiver or
an amendment of any other term, condition or provision of the
Stock Pledge Agreement.
11. Expenses. Panda agrees to pay and reimburse GE
Capital and the Security Agent for all of its out-of-pocket costs
and expenses incurred in connection with the development,
preparation and execution of this Amendment, including the fees
and expenses of counsel to GE Capital and the Security Agent.
12. Definition of Effective Date. As used in this
Amendment, the term "Effective Date" shall mean the date on which
each of the conditions precedent shall have been satisfied in
accordance with Section 9 hereof.
13. Governing Law. THIS AMENDMENT SHALL BE GOVERNED
BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAW OF
THE STATE OF NEW YORK.
14. Counterparts. This Amendment may be executed in
any number of counterparts by the parties hereto, each of which
counterpart when so executed shall be an original, but all
counterparts together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their proper and
duly authorized officers as of the day and year first above
written.
PANDA ENERGY CORPORATION, a Texas corporation,
as Pledgor and as successor by merger to
Panda Holdings, Inc.
By:
Name:
Title:
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
as Security Agent
By:
Name:
Title:
With respect to Section 5 of
this Amendment only:
PANDA ENERGY INTERNATIONAL, INC.
By:
Name:
Title:
Accepted and Agreed:
PANDA-BRANDYWINE, L.P.
By Panda Brandywine Corporation,
its General Partner
By:
Name:
Title:
PANDA BRANDYWINE CORPORATION
By:
Name:
Title:
PANDA ENERGY CORPORATION, a
Delaware Corporation
By:
Name:
Title:
BRANDYWINE WATER COMPANY
By:
Name:
Title:
Acknowledged and Accepted:
GENERAL ELECTRIC CAPITAL CORPORATION
By:
Name:
Title:
EXHIBIT A
Schedule 1 to
Stock Pledge Agreement
Pledged Shares
No. of Par Value of Certificate
Shares Shares Number
Panda 1000 $.01 003
Brandywine
Corporation
Panda 1000 $.01 003
Energy
Corporation
Brandywine 1000 $.01 003
Water
Company
EXHIBIT B
Schedule 2 to
Stock Pledge Agreement
Notice Addresses
Panda Energy Corporation
4100 Spring Valley, Suite 1001
Dallas, Texas 75244
Attention: President and General Counsel
telephone: 214-980-7159
telecopy: 214-980-6815
Shawmut Bank Connecticut, National Association,
as Security Agent
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
telephone: (203) 986-7835
telecopy: (203) 986-7920
EXHIBIT 10.32
AMENDMENT NO. 2 dated as of July 31, 1996 (the
"Amendment") to the Stock Pledge Agreement referred to below
between PANDA INTERHOLDING CORPORATION, a Delaware corporation
("Panda"), PANDA ENERGY CORPORATION, a Texas corporation ("PEC"),
and FLEET NATIONAL BANK, a national banking association, formerly
known as Shawmut Bank Connecticut, National Association, in its
capacity as Security Agent (the "Security Agent") under the
Security Deposit Agreement (as defined in the Loan Agreement
referred to below).
W I T N E S S E T H :
WHEREAS, in connection with the Construction Loan
Agreement and Lease Commitment dated as of March 30, 1995 among
General Electric Capital Corporation ("GE Capital"), Panda-
Brandywine, L.P. and Panda Brandywine Corporation (as the same
may be amended, supplemented or otherwise modified from time to
time, the "Loan Agreement"; capitalized terms used herein and not
otherwise defined having the meanings set forth in the Loan
Agreement), Panda Holdings, Inc., a Delaware corporation
("Holdings") entered into a Stock Pledge Agreement dated as of
March 30, 1995 with the Security Agent (the "Stock Pledge
Agreement"), pursuant to which Holdings pledged the Pledged
Shares;
WHEREAS, on October 27, 1995 Holdings merged with and
into PEC (the "Merger") and pursuant to the Merger, PEC assumed
and succeeded to all of Holdings' rights, obligations and
liabilities, including, without limitation, Holdings' rights,
obligations and liabilities under the Loan Agreement, the Stock
Pledge Agreement (as evidenced by Amendment No. 1 to the Stock
Pledge Agreement dated as of October 27, 1995) and the other
Transaction Documents to which Holdings is a party;
WHEREAS, PEC desires to transfer to Panda, its indirect
wholly-owned subsidiary, 100% of the capital stock of the General
Partner, the Limited Partner and Brandywine Water Company (the
"Transfer"); and
WHEREAS, the Security Agent and GE Capital are willing
to agree to the Transfer on the condition that PEC and Panda
execute and deliver this Amendment to the Security Agent, for the
benefit of GE Capital and the Owner Trustee.
NOW, THEREFORE, in consideration of the foregoing
premises and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, PEC and
Panda hereby agree with the Security Agent, for the benefit of GE
Capital and the Owner Trustee, as follows:
1. Substitution of Pledgor. For all purposes of the
Stock Pledge Agreement, from and after the execution and delivery
hereof and the consummation of the Transfer, the Pledgor referred
to in the Stock Pledge Agreement shall be Panda, and PEC shall
have no further obligations or liabilities as "Pledgor"
thereunder (except with respect to the period occurring prior to
the execution and delivery hereof and the consummation of the
Transfer) and provided that the foregoing shall not limit any
other obligations of PEC in any other capacity thereunder
(including pursuant to Section 8(g) thereof).
2. Amendment to Section 5(a) of the Stock Pledge
Agreement. The reference in Section 5(a) of the Stock Pledge
Agreement to the State of Texas is hereby amended to be a
reference to the State of Delaware.
3. Amendment to Section 5(e) of the Stock Pledge
Agreement. Clause (i) of Section 5(e) of the Stock Pledge
Agreement is hereby amended to read as follows: "(i) violate the
provisions of the Pledgor's Certificate of Incorporation or By-
laws;".
4. Amendment to Section 7(b) of the Stock Pledge
Agreement. Section 7(b) of the Stock Pledge Agreement is hereby
amended to insert, after the words "receive and retain", the
words "and distribute, by dividend or otherwise, to its
stockholders".
5. Amendment to Section 8(a) of the Stock Pledge
Agreement. Clause (i) of Section 8(a) of the Stock Pledge
Agreement is hereby amended to read as follows: "(i) its legal
existence as a corporation in good standing under the laws of the
State of Delaware and".
6. Amendment to Section 8(e) of the Stock Pledge
Agreement. Section 8(e) of the Stock Pledge Agreement is hereby
amended to read in its entirety as follows:
"(e) Subsidiaries. All Subsidiaries (including
partnerships) incorporated or formed in the United States
(whether now existing or hereafter acquired or formed) of
the Pledgor which are engaged in the financing, development,
construction or operation of independent power production or
energy transmission projects located in the United States
(collectively, "US Cogen Subsidiaries"), other than Panda-
Kathleen, L.P. (the "Kathleen Partnership"), Panda-Kathleen
Corporation ("Panda-Kathleen Corp."), the general partner of
the Kathleen Partnership, and Panda/Live Oak Corporation
("Panda/Live Oak"), the limited partner of the Kathleen
Partnership (the Kathleen Partnership, Panda-Kathleen Corp.
and Panda/Live Oak hereinafter referred to as the "Kathleen
Subsidiaries"), are and shall continue to be Subsidiaries of
the Pledgor; provided that the Kathleen Subsidiaries are and
shall continue to be Subsidiaries of PEC and provided
further that PEC shall cause the Kathleen Subsidiaries to
become Subsidiaries of the Pledgor within one hundred eighty
(180) days following the date of Financial Closing, if any,
or the date of Commercial Operations, if any (whichever
first occurs), with respect to the cogeneration facility
being developed by the Kathleen Partnership (the "Kathleen
Facility"). For the purposes hereof, "Financial Closing"
shall mean the closing of the initial construction or long-
term project financing for the Kathleen Facility, whichever
first occurs. "Commercial Operations" shall mean (i) the
completion of construction and testing and the functioning
of the Kathleen Facility, and (ii) the satisfaction and
discharge of all completion requirements of, and
commencement of regular capacity or reservation payments
under, the purchase, transportation or other off-take or use
contracts for the Kathleen Project. The foregoing
notwithstanding, but subject to the provisions of Section
8(b) hereof and the provisions of the Loan Agreement, the
Pledgor shall be permitted to sell all or any of the stock
of any US Cogen Subsidiary to any Person who is not an
Affiliate of Panda."
7. Amendment to Section 8(g) of the Stock Pledge
Agreement. Section 8(g) of the Stock Pledge Agreement is hereby
amended to read in its entirety as follows:
"(g) Bankruptcy of Pledgor. PEC shall not
authorize, seek to cause or permit Pledgor to commence a
voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its
debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property or to
consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary
case or other proceeding commenced against it, or to make a
general assignment for the benefit of the creditors."
8. Amendment to Schedule 1 to the Stock Pledge
Agreement. Schedule 1 to the Stock Pledge Agreement is hereby
amended to read in its entirety as set forth in Exhibit A hereto.
9. Amendment to Schedule 2 to the Stock Pledge
Agreement. Schedule 2 to the Stock Pledge Agreement is hereby
amended to read in its entirety as set forth in Exhibit B hereto.
10. Conditions Precedent. This Amendment shall not
become effective until the following conditions precedent are
satisfied:
(a) Delivery of Collateral. All certificates or
instruments representing or evidencing the Collateral shall
have been delivered to and held by or on behalf of the
Security Agent, pursuant to the terms of the Stock Pledge
Agreement, and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed undated
instruments of transfer or assignment in blank, all in form
and substance reasonably satisfactory to the Security Agent.
(b) Representations and Warranties. The
representations and warranties of the Pledgor contained in
Section 5 of the Stock Pledge Agreement shall be true and
correct on and as of the Effective Date as if made on and as
of the Effective Date; provided that all references to the
"Agreement" shall be and be deemed to mean this Amendment as
well as the Stock Pledge Agreement amended hereby.
(c) No Default. No Default or Event of Default has
occurred and is occurring as of the Effective Date.
(d) Transfer. The Security Agent and GE Capital shall
have received evidence that the Transfer has occurred.
11. Effect of Amendment. Except as expressly amended
hereby, all of the terms and provisions of the Stock Pledge
Agreement shall remain in full force and effect and are hereby
ratified and confirmed. The amendments provided herein shall be
limited precisely as drafted and shall not constitute a waiver or
an amendment of any other term, condition or provision of the
Stock Pledge Agreement.
12. Expenses. PEC and Panda jointly and severally
agree to pay and reimburse GE Capital and the Security Agent for
all of its out-of-pocket costs and expenses incurred in
connection with the development, preparation and execution of
this Amendment, including the fees and expenses of counsel to GE
Capital and the Security Agent.
13. Definition of Effective Date. As used in this
Amendment, the term "Effective Date" shall mean the date on which
each of the conditions precedent shall have been satisfied in
accordance with Section 10 hereof.
14. Governing Law. THIS AMENDMENT SHALL BE GOVERNED
BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAW OF
THE STATE OF NEW YORK.
15. Counterparts. This Amendment may be executed in
any number of counterparts by the parties hereto, each of which
counterpart when so executed shall be an original, but all
counterparts together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their proper and
duly authorized officers as of the day and year first above
written.
PANDA INTERHOLDING CORPORATION
By:
Name: James D. Wright
Title:
PANDA ENERGY CORPORATION,
a Texas corporation
By:
Name: James D. Wright
Title:
FLEET NATIONAL BANK, as Security Agent
By:
Name: Kathy A. Larimore
Title: Assistant Vice President
Accepted and Agreed:
PANDA-BRANDYWINE, L.P.
By Panda Brandywine Corporation,
its General Partner
By:
Name: James D. Wright
Title:
PANDA BRANDYWINE CORPORATION
By:
Name: James D. Wright
Title:
PANDA ENERGY CORPORATION, a
Delaware Corporation
By:
Name: James D. Wright
Title:
BRANDYWINE WATER COMPANY
By:
Name: James D. Wright
Title:
Acknowledged and Accepted:
GENERAL ELECTRIC CAPITAL CORPORATION
By:
Name: Michael J. Tzougrakis
Title: Manager of Operations
EXHIBIT A
Schedule 1 to
Stock Pledge Agreement
Pledged Shares
No. of Par Value of Certificate
Shares Shares Number
Panda Brandywine 1000 $.01 004
Corporation
Panda Energy 1000 $.01 004
Corporation, a
Delaware corporation
Brandywine Water 1000 $.01 004
Company
EXHIBIT B
Schedule 2 to
Stock Pledge Agreement
Notice Addresses
Panda Interholding Corporation
4100 Spring Valley, Suite 1001
Dallas, Texas 75244
Attention: President and General Counsel
telephone: 214-980-7159
telecopy: 214-980-6815
Fleet National Bank, as Security Agent
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
telephone: (203) 986-7835
telecopy: (203) 986-7920
EXHIBIT 10.33
EXECUTION COPY
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of March 30, 1995 ("this Security
Agreement"), made by PANDA-BRANDYWINE, L.P., a Delaware limited
partnership (together with its successors and assigns, the
"Partnership"), in favor of SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, as Security Agent under the Security Deposit
Agreement referred to below (the "Security Agent").
W I T N E S S E T H:
WHEREAS, the Partnership, Panda Brandywine Corporation and
General Electric Capital Corporation ("GE Capital") have entered
into the Construction Loan Agreement and Lease Commitment, dated
as of the date hereof (as modified, amended or supplemented from
time to time, the "Loan Agreement"; capitalized terms used herein
and not otherwise defined herein shall have the respective
meanings set forth in the Loan Agreement), pursuant to which GE
Capital has agreed to (i) provide construction financing for the
Project, (ii) issue Letters of Credit as collateral security for
certain obligations of the Partnership under the Power Purchase
Agreement, (iii) (acting through the Owner Trustee) lease the
Site from the Partnership and sublease the Site back to the
Partnership, (iv) upon completion of the Project, (acting through
the Owner Trustee) purchase the Facility from the Partnership and
lease the Facility back to the Partnership, and (v) upon
completion of the Project, make Equity Loans to the Partnership
or the Partners, and (b) GE Capital is willing to provide such
financing, issue the Letters of Credit, (acting through the Owner
Trustee) lease and sublease the Site and purchase and lease the
Facility subject to and upon the terms and conditions set forth
in the Loan Agreement;
WHEREAS, it is a condition precedent to the obligations of GE
Capital under the Loan Agreement that the Partnership enter into
this Security Agreement as hereinafter set forth; and
WHEREAS, the Partnership desires to execute this Security
Agreement to satisfy the condition described in the preceding
recital;
WHEREAS, pursuant to the terms of the Security Deposit Agreement,
dated as of the date hereof, among the Security Agent, the
Partnership, the Owner Trustee and GE Capital, the Security Agent
has agreed to act as security agent on behalf of GE Capital and
the Owner Trustee and to hold the Collateral for the benefit of
GE Capital and the Owner Trustee;
NOW, THEREFORE, in consideration of the premises and other
benefits to the Partnership, the receipt and sufficiency of which
are hereby acknowledged, the Partnership hereby covenants and
agrees with the Security Agent, for the benefit of GE Capital and
the Owner Trustee, as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. The following terms shall have the
meanings herein specified unless the context otherwise requires.
Such definitions shall be equally applicable to the singular and
plural forms of the terms defined. Capitalized terms used but
not defined herein shall have the meanings assigned to them in
Appendix A to the Loan Agreement. Commercial terms used herein
and not otherwise defined herein or in Appendix A to the Loan
Agreement shall have the meaning specified for such terms in the
Uniform Commercial Code as in effect in the State of New York.
"Chattel Paper" shall have the meaning assigned to that term
under the Uniform Commercial Code as in effect in any relevant
jurisdiction.
"Collateral" shall have the meaning specified in Section 2.1(a).
"Contract Rights" shall have the meaning specified in Section
6.1(c).
"Contracts" shall mean all contracts to which the Partnership now
is, or hereafter will be, bound, or a party, beneficiary or
assignee, including, without limitation, all of the Project
Documents and the contracts and agreements set forth on Exhibit A
hereto and made a part hereof, all exhibits thereto and all other
instruments, agreements and documents executed and delivered with
respect to such contracts, any guarantees or letters of credit
provided to the Partnership to assure the performance by any
party to any contract and all revenues, damages, rentals,
Proceeds and other sums of money due and to become due from any
of the foregoing, as the same may be modified, supplemented or
amended from time to time in accordance with their terms.
"Document" shall have the meaning assigned that term under the
Uniform Commercial Code as in effect in any relevant
jurisdiction.
"Equipment" shall mean any equipment, as such term is defined in
the Uniform Commercial Code as in effect in any relevant
jurisdiction, now or hereafter owned or leased by the Partnership
and, in any event, shall include, but shall not be limited to,
all equipment used in connection with the Project, all machinery,
tools, office equipment, furniture, furnishings, fixtures,
vehicles, motor vehicles, and any manuals, instructions,
blueprints, computer software and similar items which relate to
the above, and any and all additions, substitutions and
replacements of any of the foregoing, wherever located, together
with all improvements thereon and all attachments, components,
parts, equipment and accessories installed thereon or affixed
thereto, but excluding property owned by the Power Purchaser
located on the Site.
"Expenses" shall have the meaning specified in Section 8.1.
"Facility Lease" shall mean the Facility Lease to be entered into
between the Owner Trustee and the Partnership, substantially in
the form of Exhibit L to the Loan Agreement, as amended,
supplemented or otherwise modified from time to time.
"Fixtures" shall have the meaning assigned that term under the
Uniform Commercial Code as in effect in any relevant jurisdiction
and in any event shall include all goods now or hereafter
attached to, placed on, or incorporated in the Site, but
excluding property owned by the Power Purchaser located on the
Site.
"GE Capital" shall have the meaning specified in the preamble to
this Security Agreement.
"General Intangibles" shall mean general intangibles as such term
is defined in the Uniform Commercial Code as in effect in any
relevant jurisdiction, now or hereafter owned by the Partnership
and shall include, but not be limited to, all trademarks,
trademark applications, trademark registrations, tradenames,
fictitious business names, business names, company names,
business identifiers, prints, labels, trade styles and service
marks (whether or not registered), including logos and/or
designs, copyrights, patents, patent applications, goodwill of
the Partnership's business symbolized by any of the foregoing,
trade secrets, license rights, license agreements, permits,
franchises, and any rights to tax refunds to which the
Partnership is now or hereafter may be entitled.
"Governmental Actions" shall mean all permits, authorizations,
registrations, consents, approvals, waivers, exceptions,
variances, claims, orders, judgments and decrees, licenses,
exemptions, publications (to the extent legally binding upon the
Partnership, any other Participant or the Project), filings
(other than filings of a purely ministerial nature), notices to
and declarations of or with any Governmental Authority and shall
include, without limitation, all siting, environmental,
construction and operating permits and licenses that are required
for the construction, use and operation of the Project and all
governmental actions set forth on Exhibit B hereto.
"Indemnitee" shall have the meaning specified in Section 8.1.
"Instrument" shall have the meaning assigned that term under the
Uniform Commercial Code as in effect in any relevant
jurisdiction.
"Inventory" shall mean all of the inventory of the Partnership of
every type or description, including all inventory as such term
is defined in the Uniform Commercial Code as in effect in any
relevant jurisdiction, now owned or hereafter acquired and
wherever located, whether raw, in process or finished, all
materials usable in processing the same and all documents of
title covering any inventory, including but not limited to work
in process, materials used or consumed in the Partnership's
business, now owned or hereafter acquired or manufactured by the
Partnership and held for sale in the ordinary course of its
business; all present and future substitutions therefore, parts
and accessories thereof and all additions thereto; and all
proceeds thereof and products of such inventory in any form
whatsoever.
"Inventory Records" shall mean all books, records and other
property and General Intangibles at any time relating to the
Inventory.
"Loan Agreement" shall have the meaning specified in the Recitals
to this Security Agreement.
"Obligations" shall mean all the unpaid principal amount of, and
accrued interest on, (including, without limitation, interest
accruing after the maturity of the Loans and interest accruing
after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like
proceeding, relating to the Partnership, whether or not a claim
for post-filing or post-petition interest is allowed in such
proceeding) the Notes, the Letter of Credit Obligations, all Rent
and other obligations payable by the Partnership under the
Facility Lease and all other obligations and liabilities of the
Partnership and the Partners to GE Capital (including, without
limitation, pursuant to subsection 5.2 of the Loan Agreement, but
excluding any Partner Equity Loans), the Owner Trustee and the
Security Agent, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter
incurred, which may arise under, out of, or in connection with,
the Loan Agreement, the Notes, the Facility Lease, this
Agreement, the other Collateral Security Documents or any other
Transaction Document and any other document made, delivered or
given in connection therewith or herewith, whether on account of
principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses (including, without limitation, all
fees and disbursements of counsel to GE Capital) or otherwise.
"Owner Trustee" shall mean Shawmut Bank Connecticut National
Association, in its capacity as trustee under the Trust
Agreement, and any successor trustee appointed in accordance with
the terms thereof.
"Partnership" shall have the meaning specified in the preamble to
this Security Agreement.
"Proceeds" shall mean proceeds as such term is defined in the
Uniform Commercial Code as in effect in any relevant jurisdiction
or under other relevant law and, in any event, shall include, but
shall not be limited to, (i) any and all proceeds of any
insurance, indemnity, warranty or guaranty payable to the
Partnership from time to time, and claims for insurance,
indemnity, warranty or guaranty effected or held for the benefit
of the Partnership with respect to any of the Collateral, (ii)
any and all payments (in any form whatsoever) made or due and
payable to the Partnership from time to time in connection with
any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any
Governmental Authority (or any person acting under color of
Governmental Authority) and (iii) any and all other amounts from
time to time paid or payable under or in connection with any of
the Collateral.
"Receivables" shall mean any Account as such term is defined in
the Uniform Commercial Code as in effect in any relevant
jurisdiction and in any event shall include, but not be limited
to, all of the Partnerships rights to payment for goods
(including, without limitation, steam and electricity) sold or
leased, or services performed, by the Partnership, whether now in
existence or arising from time to time hereafter, including,
without limitation, rights evidenced by an account, note,
contract, security agreement, chattel paper, or other evidence of
indebtedness or security, together with (i) all security pledged,
assigned, hypothecated or granted to or held by the Partnership
to secure the foregoing, (ii) all of the Partnerships right,
title and interest in and to any goods (including, without
limitation, steam and electricity prior to the sale thereof to
the Steam Host or the Power Purchaser, as the case may be), the
sale of which gave rise thereto, (iii) all guarantees,
endorsements and indemnifications on, or of, any of the
foregoing, (iv) all powers of attorney for the execution of any
evidence of indebtedness or security or other writing in
connection therewith, (v) all books, correspondence, credit
files, records, ledger cards, invoices, and other papers relating
thereto, including without limitation all similar information
stored on a magnetic medium or other similar storage device and
other papers and documents in the possession or under the control
of the Partnership or any computer bureau from time to time
acting for the Partnership, (vi) all evidences of the filing of
financing statements and other statements and the registration of
other instruments in connection therewith and amendments thereto,
notices to other creditors or secured parties, and certificates
from filing or other registration officers, (vii) all credit
information, reports and memoranda relating thereto, and (viii)
all other writings related in any way to the foregoing.
"Security Agent" shall mean Shawmut Bank Connecticut, National
Association, in its capacity as security agent under the Security
Deposit Agreement, and any successor security agent appointed in
accordance with the terms thereof.
"Security Agreement" shall mean this Security Agreement, as the
same may be amended, supplemented or otherwise modified from time
to time in accordance with its terms.
ARTICLE II
ASSIGNMENT AND GRANT OF SECURITY INTERESTS
Section 2.1 Assignment and Grant of Security Interest.
(a) As collateral security for the prompt and complete
payment and performance when due of all of the
Obligations, the Partnership hereby assigns and grants
to the Security Agent, for the benefit of the Owner
Trustee and GE Capital, a continuing security interest
of first priority, in all of the Partnership's right,
title and interest in, to and under
(i) all Receivables,
(ii) all Inventory,
(iii) all Equipment,
(iv) all General Intangibles,
(v) all Contracts and all Contract Rights,
(vi) all amounts from time to time held in any
checking, savings, deposit or other account of the
Partnership and all investments and securities at
any time on deposit in such accounts (including
all of the Accounts) and all income or gain earned
thereon,
(vii) all Governmental Actions, provided, that any
Governmental Action which by its terms or by
operation of law would become void, voidable,
terminable or revocable if mortgaged, pledged or
assigned hereunder or if a security interest
therein were granted hereunder are expressly
excepted and excluded from the Lien and the terms
of this Agreement to the extent necessary so as to
avoid such voidness, voidability, terminability or
revocability,
(viii) all Fixtures,
(ix) without limiting the generality of the foregoing,
all other personal property, rights, interests,
goods, Instruments, Chattel Paper, Documents,
credits, claims, demands and assets of the
Partnership whether now existing or hereafter
acquired from time to time, and
(x) any and all additions and accessions to any of the
foregoing, all improvements thereto, all
substitutions and replacements therefor and all
products and Proceeds thereof (all of the above
collectively, the "Collateral").
(b) The security interest granted to the Security Agent,
for the benefit of the Owner Trustee and GE Capital,
pursuant to this Security Agreement extends to all
Collateral of the kind which is the subject of this
Security Agreement which the Partnership may acquire at
any time during the continuation of this Security
Agreement, whether such Collateral is in transit or in
the Partnerships, the Security Agent's, the Owner
Trustee' s, GE Capital' s, or any other Person' s
constructive, actual or exclusive occupancy or
possession.
Section 2.2 Security Interest Absolute. All rights of the
Security Agent and all security interests hereunder, shall be
absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Loan
Agreement, any other Loan Document, the Facility Lease,
any other Lease Document or any other agreement or
instrument relating thereto;
(b) any change in the time, manner or place of payment of,
or in any other term of, all or any of the Obligations,
or any other amendment or waiver of or any consent to
any departure from the Loan Agreement or any other Loan
Document, the Facility Lease, or any other Lease
Document;
(c) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or
consent to departure from any guaranty, for all or any
of the Obligations; or
(d) any other circumstance which might otherwise constitute
a defense available to, or a discharge of, the
Partnership or a third party pledger.
Section 2.3 Power of Attorney.
(a) The Partnership hereby constitutes and appoints the
Security Agent or any Person or agent whom the Security
Agent may designate, as the Partnership's attorney-in-
fact, at the Partnership's reasonable cost and expense,
to exercise at any time following the occurrence and
during the continuance of an Event of Default or a
Lease Event of Default all or any of the following
powers, in accordance with and subject to the terms and
conditions of the Project Documents, which, being
coupled with an interest, shall be irrevocable until
all of the Obligations have been paid in full:
(i) To receive, take, endorse, sign, assign and
deliver, all in the Security Agent's name or the
Partnership's name, any and all checks, notes,
drafts, and other documents or instruments
relating to the Collateral;
(ii) To receive, open and dispose of all mail addressed
to the Partnership and to notify postal
authorities to change the address for delivery
thereof to such address as the Security Agent
designates;
(iii) To request from account debtors of the
Partnership in the Partnership's name, the
Security Agent's name, or in the name of the
Security Agent's designee, information concerning
the Receivables and the amounts owing thereon;
(iv) To transmit to account debtors indebted on
Receivables notice of the Security Agent's
interest therein;
(v) To notify account debtors indebted on Receivables
to make payment directly to the Security Agent;
(vi) To take or bring, in the Partnership's name or the
Security Agent's name, all steps, actions, suits
or proceedings deemed by the Security Agent to be
necessary or desirable to enforce or effect
collection of the Receivables;
(vii) To prepare, sign and file any Uniform
Commercial Code financing statements in the name
of the Partnership as debtor;
(viii) If the Partnership shall have failed to do so
in a timely manner, to take or cause to be taken
all actions necessary to perform or comply or
cause performance or compliance with the covenants
of the Partnership contained in the Loan Documents
and the Lease Documents;
(ix) To sign and endorse any invoices, freight or
express bills, bills of lading, storage or
warehouse receipts, drafts against debtors,
assignments, verifications, notices and other
documents in connection with any of the
Collateral;
(x) To defend any suit, action or proceeding brought
against the Partnership with respect to any
Collateral;
(xi) To settle, compromise or adjust any suit, action
or proceeding described in the preceding clause
and, in connection therewith, to give such
discharges or releases as the Security Agent may
deem appropriate;
(xii) Generally, to sell or transfer and make any
agreement with respect to or otherwise deal with
any of the Collateral as fully and completely as
though the Security Agent were the absolute owner
thereof for all purposes, and to do, at the
Security Agent's option and the Partnership's
expense, at any time, or from time to time, all
acts and things which the Security Agent deems
necessary to protect, preserve or realize upon the
Collateral and the Liens of the Security Agent
thereon;
(xiii) To execute, in connection with any
foreclosure, any endorsements, assignments or
other instruments of conveyance or transfer with
respect to the Collateral; and
(xiv) To exercise the Partnership's rights under
any Contract in accordance with Section 6.4.
(a) The Partnership hereby ratifies all that said attorney
shall lawfully do or cause to be done by virtue hereof.
The Partnership hereby acknowledges and agrees that the
Security Agent shall have no fiduciary duties to the
Partnership and the Partnership hereby waives any
claims to the rights of a beneficiary of a fiduciary
relationship hereunder.
ARTICLE III
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
The Partnership represents, warrants and covenants, which
representations, warranties and covenants shall survive execution
and delivery of this Security Agreement, as follows:
Section 3.1 Validity of Lien. This Security Agreement is
effective to create, as security for the Obligations, a legal,
valid and enforceable Lien on, and security interest in, all of
the Collateral in favor of the Security Agent, for the benefit of
GE Capital and the Owner Trustee, superior to and prior to the
rights of all third Persons and subject to no other Liens.
Section 3.2 No Liens.
(a) The Partnership is, and as to Collateral acquired by it
from time to time after the date hereof, the
Partnership will be, the owner of all Collateral free
from all Liens or other right, title or interest of any
Person (other than Permitted Liens). The Partnership
shall defend the Collateral against all Liens and
demands of all Persons at any time claiming the same or
any interest therein adverse to the Security Agent, the
Owner Trustee or GE Capital.
(b) There is no financing statement (or similar statement
or instrument of registration under the law of any
jurisdiction) covering or purporting to cover any
interest of any kind in the Collateral, other than the
financing statement previously filed in favor of GE
Capital, as agent, securing obligations under the
Development Loan Agreement, and the Partnership will
not execute or authorize to be filed in any public
office any financing statement (or similar statement or
instrument of registration under the law of any
jurisdiction) or statements relating to the Collateral,
except financing statements filed or to be filed in
respect of and covering the security interests granted
hereby to the Security Agent.
Section 3.3 Chief Executive Office; Name; Records. The chief
executive office of the Partnership is located at 4100 Spring
Valley, Suite 1001, Dallas, Texas 75244; provided that certain
records concerning the Project and certain contracts relating
thereto are kept at the Partnership's office at 6433 S. Crain
Highway, Upper Marlboro (Prince George's County), Maryland 20772
or at the Site. The Partnership will not (a) move its chief
executive office (or change the location(s) where records
concerning the Project are kept), or (b) change its name from,
nor carry on business under any name other than Panda-Brandywine,
L.P., unless it has complied with the requirements of the last
sentence of this Section 3.3. The originals of all documents
evidencing all Contracts and Receivables of the Partnership, and
the only original books of accounts and records concerning the
Collateral are, and will continue to be, kept at, and controlled
and directed (including, without limitation, for general
accounting purposes) from, such chief executive office (or such
other office set forth above), or at such new location for such
chief executive office as the Partnership may establish in
accordance with the last sentence of this Section 3.3. The
Partnership shall not establish a new location for its chief
executive office or change its name or the name under which it
presently conducts its business until (i) it has given to the
Security Agent and GE Capital not less than 30 days' prior
written notice of its intention so to do, clearly describing such
new location or specifying such new name, as the case may be, and
providing such other information in connection therewith as the
Security Agent or GE Capital may reasonably request and (ii) with
respect to such new location or such new name, as the case may
be, it shall have taken all action, reasonably satisfactory to
the Security Agent and GE Capital, to maintain the security
interest of the Security Agent, on behalf of the Owner Trustee
and GE Capital, in the Collateral intended to be granted hereby
at all times fully perfected and in full force and effect.
Section 3.4 Financing Statements. The Partnership agrees that
it shall ensure that all necessary and appropriate recordings and
filings will be effected by the Security Agent in all necessary
and appropriate public offices (as determined by GE Capital) so
that the Lien created by the Collateral Security Documents will
at all times constitute a perfected Lien on, and security
interest in, the Collateral prior and superior to all other
Liens, all in accordance with the Uniform Commercial Code as
enacted in any and all relevant jurisdictions or any other
relevant Law. The Partnership authorizes the Security Agent to
file any such financing statements in connection with the Lien
created by the Collateral Security Documents without the
signature of the Partnership.
Section 3.5 Further Actions. The Partnership will, at its own
expense, make, execute, endorse, acknowledge, file and/or deliver
to the Security Agent from time to time such lists, descriptions
and designations of its Collateral, bills of lading, documents of
title, vouchers, invoices, schedules, powers of attorney,
certificates, reports and other assurances or instruments and
take such further steps relating to the Collateral and other
property or rights covered by the security interest hereby
granted, which are necessary or desirable to create, perfect,
preserve, protect or validate any security interest granted
pursuant to this Security Agreement or to enable the Security
Agent to exercise and enforce its rights under this Security
Agreement with respect to such security interest.
Section 3.6 Taxes, Claims, etc. So long as this Security
Agreement is in effect, the Partnership shall pay (a) all taxes,
assessments and governmental charges imposed upon it or upon its
property, and (b) all claims (including, without limitation,
claims for labor, materials, supplies or services) which might,
if unpaid, become a Lien upon its property, unless, in each case,
the validity or amount thereof is subject to Contest.
Section 3.7 Right of Inspection. The Partnership shall allow
any representative of the Security Agent or GE Capital to visit
and inspect any of the Partnerships properties, including,
without limitation, the Inventory and Equipment, to examine its
books of record and account, including, without limitation, the
Inventory Records, and to make extracts therefrom and to receive
true copies of any papers, documents or instruments relating to
the Collateral, and to discuss its affairs, finances and accounts
with its officers, all at such times and as often as the Security
Agent or GE Capital may request.
Section 3.8 Additional Statements and Schedules. The
Partnership shall execute and deliver to the Security Agent, from
time to time, solely for the Security Agent's convenience in
maintaining a record of the Collateral, such written statements
and schedules as the Security Agent may reasonably require
designating, identifying or describing the Collateral.
Section 3.9 Warehouse Receipts Non-Negotiable. The
Partnership agrees that if any warehouse receipt or receipt in
the nature of a warehouse receipt is issued with respect to any
of its Inventory, such warehouse receipt or receipt in the nature
thereof shall not be drawn in such a manner as to be
"'negotiable" (as such term is used in Section 7-104 of the
Uniform Commercial Code as in effect in any relevant jurisdiction
or under other relevant law).
Section 3.10 Recourse; Limitation of Liability. There shall be
full recourse to the Partnership and all of its assets for the
liabilities of the Partnership under this Security Agreement and
the other Transaction Documents, but in no event shall any
Partner, Affiliate of any Partner, or any officer, director or
employee of the Partnership, any Partner or their Affiliates or
any holder of any equity interest in any Partner be personally
liable or obligated for such liabilities of the Partnership
except as may be specifically provided in any other Transaction
Document to which such Partner is a party or in the event of
fraudulent actions, knowing misrepresentations, gross negligence
or willful misconduct by the Partnership, any Partner or any of
their Affiliates in connection with the financing contemplated
under the Transaction Documents . Subject to the foregoing
limitation on liability, the Security Agent may sue or commence
any suit, action or proceeding against any Partner or any
Affiliate thereof in order to obtain jurisdiction over the
Partnership in order to enforce its rights and remedies
hereunder. Nothing herein contained shall limit or be construed
to limit the liabilities and obligations of any Partner or any
Affiliate thereof in accordance with the terms of any other
Transaction Document creating such liabilities and obligations to
which such Partner or Affiliate is a party.
ARTICLE IV
SPECIAL PROVISIONS CONCERNING INVENTORY AND EQUIPMENT
Section 4.1 Location of Inventory and Equipment. The
Partnership agrees that all Inventory and Equipment now held or
subsequently acquired by it shall be kept at (or shall be in
transport to) the Site, or such new location as the Partnership
may establish in accordance with the last sentence of this
Section 4.1. The Partnership may establish a new location for
Inventory and Equipment only if (i) it shall have given to the
Security Agent and GE Capital 30 days' prior written notice of
its intention so to do, clearly describing such new location and
providing such other information in connection therewith as the
Security Agent or GE Capital may reasonably request, and (ii)
with respect to such new location, it shall have taken all action
necessary to maintain the security interest of the Security Agent
in the Collateral intended to be granted hereby at all times
fully perfected and in full force and effect.
Section 4.2 Inventory Records. The Partnership shall maintain
such current Inventory Records as the Security Agent may from
time to time reasonably request.
ARTICLE V
SPECIAL PROVISIONS CONCERNING RECEIVABLES,
CONTRACTS AND INSTRUMENTS
Section 5.1 Additional Representations and Warranties. As of
the time when each of its Receivables arises, the Partnership
shall be deemed to have represented and warranted that such
Receivable and all records, papers and documents relating thereto
(if any) are genuine and in all respects what they purport to be,
and that all papers and documents (if any) relating thereto:
(i) will (subject to dispute, return, replacement,
settlement or compromise) evidence indebtedness
unpaid and owed by such account debtor arising out
of the performance of labor or services or the
sale and delivery of the merchandise listed
therein, or both,
(ii) will be the only original writings evidencing and
embodying such obligation of the account debtor
named therein (other than copies created for
purposes other than general accounting purposes),
(iii) will (subject to dispute, return,
replacement, settlement or compromise and any
limits due to applicable bankruptcy, insolvency,
moratorium or other similar rights affecting
creditors, rights generally and general principles
of equity) evidence true and valid obligations,
enforceable in accordance with their respective
terms, not subject to the fulfillment of any
contract or condition whatsoever unless set forth
in the writing, and
(iv) will be in compliance and will conform with all
applicable requirements of Law.
Section 5.2 Maintenance of Records; Legending of Records. The
Partnership will keep and maintain at its own cost and expense
satisfactory and complete records of its Receivables, including,
but not limited to, records of all payments received and all
credits granted thereon, and the Partnership will make the same
available to the Security Agent for inspection at the
Partnership's chief executive office, without charge to the
Security Agent, at such times as the Security Agent may
reasonably request. The Partnership shall, without charge to the
Security Agent, deliver all tangible evidence that the Security
Agent may request of its Receivables (including, without
limitation, all documents evidencing the Receivables) and books
and records to the Security Agent or to its representatives
(copies of which evidence and books and records may be retained
by the Partnership) at any time upon the Security Agent's demand.
If an Event of Default or a Lease Event of Default occurs and
continues, and if the Security Agent so directs, the Partnership
shall legend in form and substance satisfactory to the Security
Agent, the Receivables and Contracts, as well as books, records
and documents evidencing or pertaining to the Receivables with an
appropriate reference to the fact that the Receivables and
Contracts have been assigned to the Security Agent, for the
benefit of GE Capital and the Owner Trustee, and that the
Security Agent has a security interest therein.
Section 5.3 Modification of Terms; No Payment to the
Partnership. The Partnership shall not rescind or cancel any
indebtedness evidenced by any Receivable or make any adjustment
with respect thereto, or extend or renew the same, or compromise
or settle any dispute, claim, suit or legal proceeding relating
thereto, or sell any Receivable or interest therein, without the
prior written consent of the Security Agent or GE Capital. The
Partnership will duly fulfill all obligations on its part to be
fulfilled under or in connection with the Receivables and will do
nothing to impair the rights of the Security Agent, the Owner
Trustee and GE Capital in the Receivables.
Section 5.4 Payments Under Project Documents and Receivables.
(a) Notice to Obligors under Project Documents and
Receivables. The Partnership agrees and confirms that
it will notify each party to the Project Documents and
each account debtor or obligor under the Receivables of
the grant of the security interest therein and
assignment thereof to the Security Agent and instruct
each of them that all payments due or to become due and
all amounts payable to the Partnership hereunder shall,
until the Obligations are paid in full, be made
directly to the Security Agent as provided in the
Security Deposit Agreement. Unless notified to the
contrary by the Security Agent, and subject to Section
5.3 of this Security Agreement, the Partnership shall,
at its expense, enforce collection of any amounts
payable with respect to each of the Receivables.
(b) Non-Payment to the Security Agent. In the event the
Partnership shall receive directly from any party to
the Project Documents or from any account debtor or
other obligor under any Receivable any payments under
the Project Documents and the Receivables otherwise
than to the Security Agent, the Partnership shall
receive such payments in a constructive trust for the
benefit of the Security Agent, shall segregate such
payments from other funds of the Partnership, and,
shall forthwith transmit and deliver such payments to
the Security Agent in accordance with the terms of the
Security Deposit Agreement.
Section 5.5 Direction to Account Borrowers, Contracting
Parties; etc.
(a) The Partnership agrees that the Security Agent may, at
its option, directly notify the account debtors or
obligors with respect to any Receivables and/or under
any Project Documents to make payments with respect
thereto directly to the Security Agent.
(b) The Partnership agrees to be bound by any collection,
compromise, forgiveness, extension or other action
taken by the Security Agent with respect to the
Receivables and/or Project Documents. Without notice
to or assent by the Partnership, the Security Agent may
apply any or all amounts then in, or thereafter
deposited with any financial institution in any
checking, savings, deposit or other account of the
Partnership in accordance with the provisions of the
Loan Agreement, the Security Deposit Agreement and the
Facility Lease. The reasonable costs and expenses
(including reasonable attorneys, fees) of collection,
whether incurred by the Partnership or the Security
Agent, shall be borne by the Partnership.
Section 5.6 Instruments. At such time that an Event of
Default or a Lease Event of Default shall have occurred and be
continuing, the Partnership promptly shall deliver all
Instruments to the Security Agent appropriately endorsed to the
order of the Security Agent as further security hereunder.
ARTICLE VI
SPECIAL PROVISIONS CONCERNING CONTRACTS
Section 6.1 Security Interest in Contract Rights. The
Partnership's assignment and grant, pursuant to Section 2.1, to
the Security Agent, for the benefit of GE Capital and the Owner
Trustee, of a security interest in all of its right, title and
interest in and to each and all of the Contracts and the contract
rights thereunder, includes, but is not limited to:
(a) all (i) rights to payment under any Contract and (ii)
payments due and to become due under any Contract, in
each case whether as contractual obligations, damages
or otherwise;
(b) all of its claims, rights, powers, or privileges and
remedies under any Contract; and
(c) all of its rights under any Contract to make
determinations, to exercise any election (including,
but not limited to, election of remedies) or option or
to give or receive any notice, consent, waiver or
approval together with full power and authority with
respect to any Contract to demand, receive, enforce,
collect or provide receipt for any of the foregoing
rights or any property the subject of any of the
Contracts, to enforce or execute any checks, or other
instruments or orders, to file any claims and to take
any action which, in the reasonable opinion of the
Security Agent, may be necessary or advisable in
connection with any of the foregoing (the Contracts,
together with all of the foregoing in this Section 6.l,
the "Contract Rights");
provided, however, that until the occurrence and continuance of
an Event of Default or a Lease Event of Default, notwithstanding
anything else herein to the contrary, the Partnership may,
subject to the terms and provisions of the Loan Agreement and the
Facility Lease, exclusively exercise all of the Partnerships
rights, powers, privileges and remedies under the Contracts.
Section 6.2 Further Protection. The Partnership warrants and
forever shall defend its title to the Contract Rights against the
claims and demands of any Person and hereby grants the Security
Agent full power and authority, upon the occurrence or during the
continuance of an Event of Default or a Lease Event of Default to
take all actions as the Security Agent reasonably deems necessary
or advisable to effectuate the provisions set forth in this
sentence.
Section 6.3 Partnership Remains Liable under Receivables and
Contracts. Anything herein to the contrary notwithstanding
(including, without limitation, the grant of any rights to the
Security Agent, the Owner Trustee or GE Capital) the Partnership
shall remain liable under each of the Receivables and Contracts
to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with
the terms of any agreement giving rise to each such Receivable or
Contract. The Security Agent, the Owner Trustee and GE Capital
shall have no obligation or liability under any Receivable (or
any agreement giving rise thereto) or Contract by reason of or
arising out of this Agreement or the receipt by the Security
Agent, the Owner Trustee or GE Capital of any payment relating to
such Receivable or Contract pursuant hereto or pursuant to the
Security Deposit Agreement, nor shall the Security Agent, the
Owner Trustee or GE Capital be obligated in any manner to perform
any of the obligations of the Partnership under or pursuant to
any Receivable (or any agreement giving rise thereto) or under or
pursuant to any Contract, to make any payment, to make any
inquiry as to the nature or the sufficiency of any payment
received by it or as to the sufficiency of any performance by any
party under any Receivable (or any agreement giving rise thereto)
or under any Contract, to present or file any claim, to take any
action to enforce any performance or to collect the payment of
any amounts which may have been assigned to it or to which it may
be entitled at any time or times.
Section 6.4 Remedies. Upon the occurrence of any Event of
Default or Lease Event of Default and the continuance thereof,
the Security Agent shall have the rights set forth in Article VII
hereof, and in addition may (a) enforce all remedies, rights,
powers and privileges of the Partnership under any or all of the
Contracts, (b) sell any or all of the Contract Rights at public
or private sale upon at least 10 days prior written notice and/or
(c) substitute itself or any nominee or trustee in lieu of the
Partnership as party to any of the Contracts and to notify the
obligor of any Contract Right (the Partnership hereby agreeing to
deliver any such notice at the request of the Security Agent)
that all payments and performance under the relevant Contract
shall be made or rendered to the Security Agent or such other
Person as the Security Agent may designate.
ARTICLE VII
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
OR LEASE EVENT OF DEFAULT
Section 7.l Remedies; Obtaining the Collateral upon Default.
Upon the occurrence of any Event of Default or Lease Event of
Default and the continuance thereof, the Security Agent shall be
entitled to exercise all the rights and remedies of a secured
party under the Uniform Commercial Code as in effect in any
relevant jurisdiction to enforce this Security Agreement and the
security interests contained herein, and, in addition, subject to
any mandatory requirements of Law then in effect, the Security
Agent may, in addition to its other rights and remedies
hereunder, including without limitation under Sections 7 .2 and
7. 6, and also its (and GE Capital's and the Owner Trustee' s)
rights under the other Loan Documents and the Lease Documents, do
any of the following:
(a) personally, or by trustees or attorneys, immediately
take possession of the Collateral or any part thereof,
from the Partnership or any other Person who then has
possession of any part thereof with or without notice
or process of law, and for that purpose may enter upon
the Partnership's or such other Person's premises where
any of the Collateral is located and remove the same
and use in connection with such removal any and all
services, supplies, aids and other facilities of the
Partnership;
(b) instruct the obligor or obligors on any agreement,
instrument or other obligation (including, without
limitation, the Receivables and the Contracts)
constituting the Collateral to make any payment
required by the terms of such instrument or agreement
directly to the Security Agent; and
(c) take possession of the Collateral or any part thereof,
by directing the Partnership in writing to turn over
the same to the Security Agent at the Site, in which
event the Partnership shall at its own expense:
(i) forthwith turn over the same to the Security Agent
at the Site;
(ii) store and keep any Collateral so turned over to
the Security Agent at the Site pending further
action by the Security Agent as provided in
Section 7.2; and
(iii) while the Collateral shall be so stored and
kept, provide such guards and maintenance services
as shall be necessary to protect the same and to
preserve and maintain them in good condition.
The Partnership's obligation to turn over the Collateral as set
forth above is of the essence of this Security Agreement and,
accordingly, upon application to a court of equity having
jurisdiction, the Security Agent shall be entitled to obtain a
decree requiring specific performance by the Partnership of said
obligation.
Section 7.2 Remedies; Disposition of the Collateral. Any
Collateral repossessed by the Security Agent under or pursuant to
Section 7.l and any other Collateral, whether or not so
repossessed by the Security Agent, may, to the extent permitted
by any contract terms governing such Collateral, be sold, leased
or otherwise disposed of under one or more contracts or as an
entirety, and without the necessity of gathering at the place of
sale the property to be sold, and in general in such manner, at
such time or times, at such place or places and on such terms
(whether cash or credit, and in the case of credit, without
assumption of future credit risk) as the Security Agent may, in
compliance with applicable requirements of Law, determine to be
commercially reasonable. Any of the Collateral may be sold,
leased or otherwise disposed of, in the condition in which the
same existed when taken by the Security Agent or after any
overhaul or repair which the Security Agent shall determine to be
commercially reasonable. Any such disposition shall be made upon
not less than 10 days' written notice to the Partnership
specifying the time such disposition is to be made and, if such
disposition shall be a public sale, specifying the place of such
sale. Any such sale may be adjourned by announcement at the time
and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so
adjourned. To the extent permitted by applicable requirements of
Law, the Security Agent (or the Owner Trustee or GE Capital) may
bid for and become the buyer of the Collateral or any item
thereof offered for sale at a public auction without
accountability to the Partnership (except to the extent of
surplus money received as provided in Section 7.4).
Section 7.3 Waiver.
(a) Except as otherwise provided in this Security
Agreement, THE PARTNERSHIP HEREBY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LEGAL REQUIREMENTS, NOTICE OR
JUDICIAL HEARING IN CONNECTION WITH THE SECURITY
AGENT'S TAKING POSSESSION OR THE SECURITY AGENT'S
DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING,
WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND
HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY
SUCH RIGHT WHICH THE PARTNERSHIP WOULD OTHERWISE HAVE
UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED
STATES OR OF ANY STATE, and the Partnership hereby
further waives:
(i) all damages occasioned by such taking of
possession except any damages which are finally
judicially determined to have been the direct
result of the Security Agent's gross negligence or
willful misconduct;
(ii) all other requirements as to the time, place and
terms of sale or other requirements with respect
to the enforcement of the Security Agent's rights
hereunder; and
(iii) all rights of redemption, appraisement,
valuation, stay, extension or moratorium now or
hereafter in force under any applicable law in
order to prevent or delay the enforcement of this
Security Agreement or the absolute sale of the
Collateral or any portion thereof, and the
Partnership, for itself and all who may claim
under it, insofar as it or they may now or
hereafter lawfully do so, hereby waives the
benefit of such laws.
(b) Without limiting the generality of the foregoing, the
Partnership hereby:
(i) authorizes the Security Agent, in its sole
discretion and without notice to or demand upon
the Partnership and without otherwise affecting
the obligations of the Partnership hereunder from
time to time, to take and hold other collateral
granted to it by any other Person (in addition to
the Collateral) for payment of any Obligations, or
any part thereof, and to exchange, enforce or
release such other collateral or any part thereof,
and to accept and hold any endorsement or
guarantee of payment of the Obligations or any
part thereof, and to release or substitute any
endorser or guarantor or any other person granting
security for or in any way obligated upon any
Obligations, or any part thereof; and
(ii) waives and releases any and all right to require
the Security Agent to collect any of the
Obligations from any specific item or items of
Collateral or from any other party liable as
guarantor or in any other manner in respect of any
of the Obligations or from any collateral (other
than the Collateral) for any of the Obligations.
(c) Any sale of, or the grant of options to purchase, or
any other realization upon, any Collateral shall,
provided that it is done in accordance with applicable
law and this Security Agreement, operate to divest all
right, title, interest, claim and demand, either at law
or in equity, of the Partnership therein and thereto,
and shall be a perpetual bar both at law and in equity
against the Partnership and against any and all Persons
claiming or attempting to claim the Collateral so sold,
optioned or realized upon, or any part thereof, from,
through and under the Partnership.
Section 7.4 Application of Proceeds; Partnership Liable for
Deficiency. Except as otherwise specified therein, the proceeds
of any Collateral obtained pursuant to Section 5.4 or 7.1 or
disposed of pursuant to Section 7.2 shall be applied, first, to
the payment of any expenses incurred by the Security Agent in
connection with the administration of this Security Agreement,
the custody, preservation or sale of, collection from or other
realization from, any of the Collateral, the exercise or
enforcement of any of its rights hereunder or the failure by the
Partnership to perform or observe any of the provisions hereof,
including all reasonable attorney's fees and second, to the
payment of the Obligations in such order as GE Capital may
direct. Any surplus remaining after payment in full of all of
the Obligations shall be paid over to the Partnership or to
whomever may be entitled to receive such surplus. The
Partnership shall be liable for any deficiency remaining after
any application of funds pursuant hereto.
Section 7.5 Remedies Cumulative; No Waiver. Each and every
right, power and remedy hereby specifically given to the Security
Agent shall be in addition to every other right, power and remedy
specifically given to the Security Agent (or the Owner Trustee or
GE Capital) under this Security Agreement and the other
Transaction Documents, or now or hereafter existing at law or in
equity, or by statute, and each and every right, power and remedy
whether specifically herein given or otherwise existing may be
exercised from time to time or simultaneously and as often and in
such order as may be deemed expedient by the Security Agent. All
such rights, powers and remedies shall be cumulative, and the
exercise or the partial exercise of one shall not be deemed a
waiver of the right to exercise of any other. No delay or
omission of the Security Agent in the exercise of any of its
rights, remedies, powers and privileges hereunder or partial or
single exercise thereof, and no renewal or extension of any of
the Obligations, shall impair any such right, remedy, power or
privilege or shall constitute a waiver thereof.
Section 7.6 Discontinuance of Proceedings. In case the
Security Agent shall have instituted any proceeding to enforce
any right, power or remedy under this Security Agreement by
foreclosure, sale, entry or otherwise, and such proceeding shall
have been discontinued or abandoned for any reason or shall have
been determined adversely to the Security Agent, then, in every
such case, the Partnership and the Security Agent shall be
restored to their former positions and rights hereunder with
respect to the Collateral, subject to the security interest
created under this Security Agreement, and all rights, remedies
and powers of the Security Agent shall continue as if no such
proceeding had been instituted.
ARTICLE VIII
INDEMNITY
Section 8.1 Indemnity.
(a) The Partnership agrees to indemnify, reimburse and hold
the Security Agent, GE Capital and the Owner Trustee
and their respective successors, assigns, officers,
directors, employees, and agents (each individually, an
"Indemnitee,'' and collectively, "Indemnitees")
harmless from any and all liabilities, obligations,
damages, injuries, penalties, claims, demands, actions,
suits, judgments and any and all costs and expenses
(including reasonable attorneys, fees and
disbursements) (such expenses, collectively, the
"Expenses") of whatsoever kind and nature imposed on,
asserted against or incurred by any of the Indemnitees
in any way relating to or arising out of:
(i) this Security Agreement, any other Transaction
Document, or the documents executed in connection
herewith and therewith or connected with the
administration of the transactions contemplated
hereby and thereby, or the enforcement of any of
the terms hereof or thereof, or the preservation
of any rights hereunder or thereunder,
(ii) the ownership, purchase, delivery, control,
acceptance, lease, financing, possession,
operation, condition, sale, return or other
disposition, or use of, the Collateral (including,
without limitation, latent or other defects,
whether or not discoverable, and any claim for
patent or trademark infringement),
(iii) the violation of any requirements of Law
(including any Environmental Law) of any
Governmental Authority applicable to the
Partnership or the Project,
(iv) any tort (including, without limitation, claims
arising or imposed under the doctrine of strict
liability, or for or on account of injury to or
the death of any Person (including any
Indemnitee), or property damage), or
(v) any contract claim, excluding (x) those finally
judicially determined to have arisen solely from
the gross negligence or willful misconduct of any
Indemnitee or (y) unless specifically provided for
elsewhere in this Agreement, those arising out of
the actions of any Indemnitee while in possession
or control of the Collateral.
(b) Without limiting the application of Section 8.1(a), the
Partnership agrees to pay, or reimburse the Security
Agent, the Owner Trustee and GE Capital for any and all
reasonable fees, costs and expenses of whatever kind or
nature incurred in connection with the preservation,
protection or validation of the Security Agent's Liens
on, and security interest in, the Collateral,
including, without limitation, all fees and taxes in
connection with the recording or filing of instruments
and documents in public offices, payment or discharge
of any taxes or Liens upon or in respect of the
Collateral, premiums for insurance with respect to the
Collateral and all other fees, costs and expenses in
connection with protecting, maintaining or preserving
the Collateral and the Security Agent's interest
therein, whether through judicial proceedings or
otherwise, or in defending or prosecuting any actions,
suits or proceedings arising out of or relating to the
Collateral.
(c) Without limiting the application of Section 8.1(a) or
(b), the Partnership agrees to pay, indemnify and hold
each Indemnitee harmless from and against any losses,
costs, damages and expenses which such Indemnitee may
suffer, expend or incur in consequence of or growing
out of any failure of the Partnership to comply with
its obligations under this Security Agreement or any
other Transaction Document, or any misrepresentation by
Partnership in this Security Agreement or any other
Transaction Document, or in any statement or writing
contemplated by or made or delivered pursuant to or in
connection with this Security Agreement or any other
Transaction Document.
(d) If and to the extent that the obligations of the
Partnership under this Section 8.1 are unenforceable
for any reason, the Partnership hereby agrees to make
the maximum contribution to the payment and
satisfaction of such obligations which is permissible
under applicable requirements of Law.
Section 8.2 Obligations Secured by Collateral. Any amounts
paid by any Indemnitee as to which such Indemnitee has the right
to reimbursement, and any amounts paid by the Security Agent in
preservation of any of its rights or interest in the Collateral,
together with interest on such amounts from the date paid until
reimbursement in full at a rate per annum equal at all times to
the Overdue Rate, shall constitute Obligations secured by the
Collateral.
ARTICLE IX
MISCELLANEOUS
Section 9.l Notices. All notices and other communications to
any party hereunder shall be in writing (including telecopy or
similar teletransmission or writing) and shall be given to such
party at its address or telecopy number set forth on Annex I
hereto or such other address or telecopy number as such party may
hereafter specify by written notice to the other party. Each
such notice or other communication shall be effective (i) if
given by telecopy, when such telecopy is transmitted by confirmed
telecopier to the telecopy number specified in this Section, (ii)
if given by mail, 5 days after such communication is deposited in
the mails with first class postage prepaid, addressed as
aforesaid or (iii) if given by any other means (including,
without limitation, by air courier, when delivered at the address
specified in this Section.
Section 9.2 Amendment. None of the terms and conditions of
this Security Agreement may be amended, changed, waived, modified
or varied in any manner whatsoever except in accordance with the
provisions of subsection 9.1 of the Loan Agreement and with the
prior written consent of each of the parties hereto.
Section 9.3 Successors and Assigns. This Security Agreement
shall be binding upon the Partnership and its successors and
assigns and shall inure to the benefit of the Security Agent, GE
Capital, the Owner Trustee and their respective successors and
assigns.
Section 9.4 Survival.
(a) All agreements, statements, representations and
warranties made by the Partnership herein or in any
certificate or other instrument delivered by the
Partnership or on its behalf under this Security
Agreement shall be considered to have been relied upon
by the Security Agent and shall survive the execution
and delivery of this Security Agreement and the other
Transaction Documents regardless of any investigation
made by the Security Agent, or on its behalf, until the
Obligations shall have been paid in full.
(b) The indemnity obligations of the Partnership contained
in Article VIII shall continue in full force and effect
notwithstanding the full payment of the Obligations and
notwithstanding the discharge thereof.
Section 9.5 Headings Descriptive. The headings of the several
sections of this Security Agreement are inserted for convenience
only and shall not in any way affect the meaning or construction
of any provision of this Security Agreement.
Section 9.6 Severability. Any provision of this Security
Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
Section 9.7 Partnerships Duties. Anything contained herein to
the contrary notwithstanding, the Partnership shall remain liable
to perform all of its obligations under or with respect to the
Collateral, and neither shall the Security Agent have any
obligations or liabilities under or with respect to any
Collateral by reason of or arising out of this Security
Agreement, nor shall the Security Agent be required or obligated
in any manner to perform or fulfill any of the obligations of the
Partnership under or with respect to any Collateral.
Section 9.8 Termination; Release. When all Obligations have
been indefeasibly paid in full, this Security Agreement shall
terminate (except as provided in Section 9.4), and the Security
Agent, at the request and expense of the Partnership, will
promptly execute and deliver to the Partnership the proper
instruments (including Uniform Commercial Code termination
statements on form UCC-3) acknowledging the termination of this
Security Agreement, and will duly assign, transfer and deliver to
the Partnership (without recourse and without any representation
or warranty of any kind) such of the Collateral as may be in the
possession of the Security Agent and has not theretofore been
sold or otherwise applied or released pursuant to this Security
Agreement.
Section 9.9 Reinstatement. This Security Agreement shall
continue to be effective or be reinstated, as the case may be, if
at any time any amount received by the Security Agent, the Owner
Trustee or GE Capital in respect of the Obligations is rescinded
or must otherwise be restored or returned by the Security Agent,
the Owner Trustee or GE Capital upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Partnership or
upon the appointment of any intervenor or conservator of, or
trustee or similar official for, the Partnership or any
substantial part of its assets, or upon the entry of an order by
a bankruptcy court avoiding payment of such amount, or otherwise,
all as though such payments had not been made.
Section 9.10 Counterparts. This Agreement may be executed in
any number of counterparts, each of which, when so executed and
delivered, shall be an original, but all of which together shall
constitute one and the same instrument.
Section 9.11 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER
OF JURY TRIAL.
(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH
AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK,
EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND
EXCEPT TO THE EXTENT THE VALIDITY OR PERFECTION OF THE
SECURITY INTERESTS HEREUNDER, OR REMEDIES HEREUNDER,
ARE GOVERNED BY THE LAWS OF ANY JURISDICTION OTHER THAN
THE STATE OF NEW YORK.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT AND ANY ACTION FOR ENFORCEMENT OF ANY
JUDGMENT IN RESPECT THEREOF MAY BE BROUGHT IN THE
COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES
OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND,
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE
PARTNERSHIP HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF
ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-
EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
APPELLATE COURTS FROM ANY THEREOF. THE PARTNERSHIP
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE
PARTNERSHIP AT ITS ADDRESS REFERRED TO IN SECTION 9.1.
THE PARTNERSHIP HEREBY IRREVOCABLY WAIVES ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT
BROUGHT IN THE COURTS REFERRED TO ABOVE AND HEREBY
FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR
CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT
THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED IN ANY OTHER
JURISDICTION.
(c) EACH OF THE PARTNERSHIP AND THE SECURITY AGENT HEREBY
IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY MATTER ARISING
HEREUNDER.
Section 9.12 Leveraged Lease. If, upon the sale of the
Facility by the Partnership to the Owner Trustee in accordance
with the provisions of the Loan Agreement, GE Capital exercises
its option under subsection 5.8 of the Loan Agreement to borrow
funds to finance (or refinance) a portion of the purchase price
of the Facility, the Partnership agrees to execute a supplement
hereto to provide for such provisions as are customary and
appropriate in respect of leveraged lease transactions.
Section 9.13 Certain Rights of Power Purchaser. Nothing in
this Security Agreement shall be deemed to limit the provisions
of the Consent of the Power Purchaser, which provisions are
solely for the benefit of the Power Purchaser and not the
Partnership. Without limiting the scope of the foregoing, the
Security Agent agrees, for the exclusive benefit of the Power
Purchaser and not the Partnership, that the exercise of remedies
or any similar action under this Security Agreement is subject
to, and shall be conducted in a manner consistent with, the Power
Purchasers rights under (i) the Consent of the Power Purchaser
and (ii) the Power Purchase Agreement and the Transfer Agreement
(to the extent such rights under the Power Purchase Agreement and
the Transfer Agreement are not explicitly waived by the Power
Purchaser in accordance with the terms of the Consent of the
Power Purchaser).
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be executed and delivered by their duly authorized
officers as of the date first above written.
PANDA-BRANDYWINE, L.P.
By: Panda Brandywine Corporation,
its sole general partner
By: __________________________________
Name: Robert W. Carter
Title: President
SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, as Security Agent
By: __________________________________
Name: Kathy A. Larimore
Title: Assistant Vice President
______________________________________________________________________
Annex I to
Security Agreement
Partnership
Panda-Brandywine, L.P.
c/o Panda Brandywine Corporation
4100 Spring Valley, Suite 1001
Dallas, Texas 75244
Attention: President and General Counsel
Telephone: (214) 980-7159
Telecopier: (214) 980-6815
Secured Party
Shawmut Bank Connecticut,
National Association, as Security Agent
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
Telephone: (203) 986-7835
Telecopier: (203) 986-7920
EXHIBIT 10.34
TRUST AGREEMENT
dated as of March 30, 1995
between
GENERAL ELECTRIC CAPITAL CORPORATION,
as Owner Participant
and
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
as Owner Trustee
230 MW Natural Gas - Fired Qualifying Cogeneration Facility
located in Brandywine, Maryland
_________________________________________________________________
TRUST AGREEMENT
This TRUST AGREEMENT, dated as of March 30, 1995 between
GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation (the
"Owner Participant" or "GE Capital') and SHAWMUT BANK
CONNECTICUT, NATIONAL ASSOCIATION, a national banking association
(the "Owner Trustee").
W I T N E S S E T H:
WHEREAS, the Owner Participant desires to form the Trust
created hereby for the purpose of, among other things (a) as of
the date hereof, leasing the Site from the Partnership pursuant
to the Site Lease and subleasing the Site back to the Partnership
pursuant to the Site Sublease and (b) as of the Lease Closing
Date, purchasing the Facility from the Partnership and leasing
the Facility back to the Partnership pursuant to the Facility
Lease, and otherwise carrying out certain transactions
contemplated by the Transaction Documents; and
WHEREAS, Shawmut Bank Connecticut, National Association is
willing to act as trustee hereunder and to accept the Trust
created hereby;
NOW THEREFORE, in consideration of the mutual covenants and
agreements herein contained and for such other good and valuable
consideration, receipt of which is hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I
Definitions
SECTION l.1 Certain Definitions. For all purposes of this
Agreement, the following terms shall have the following meanings:
Agreement'' shall mean this Trust Agreement , as the same may be
supplemented' amended or otherwise modified from time to time in
accordance with the teens of this Agreement.
"Expenses" shall have the meaning set forth in Section 7.1
of this Agreement.
"Facility Lease" or "Lease" shall mean the Facility Lease,
dated as of the Lease Closing Date, to be entered into between
the Lessee and the Owner Trustee tee, as the same may be
supplemented, amended or modified from time to time in accordance
with the terms thereof and of the other Transaction Documents.
"Lessee" shall mean Panda-Brandywine, L.P. and its
successors and, to the extent Permitted by the Lease, its assigns
thereunder.
"Loan Agreement" shall mean the Construction Loan Agreement
and Lease Commitment, dated as of March 30, 1995, among the
Partnership, the General Partner and GE Capital, as amended,
supplemented or otherwise modified from time to time.
"Owner Participant" shall mean General Electric Capital
Corporation, a New York corporation, and each other person or
persons the t may f ram time to time become a party to this
Agreement pursuant to the terms of Section 11.9 hereof, and their
respective successors and assigns.
"Owner Trustee" shall mean Shawmut Bank Connecticut,
National Association, as trustee hereunder, and any successor
trustee hereunder.
"Trust Estate" shall have the meaning therefor set forth in
Section 2.1 of this Agreement.
SECTION 1.2. Terms Defined Elsewhere. All capitalized terms
used but not defined in this Agreement shal1 have the meanings
specified in Appendix A to the Loan Agreement.
ARTICLE II
Authority to Execute and Perform Various Documents;
Declaration of Trust by Owner Trustee
SECTION 2.1. Authority To Execute and Perform various
Documents. The owner Participant hereby authorizes and directs
the owner Trustee, and the owner Trustee hereby agrees for the
benefit of the Owner Participant: (a) to execute and deliver the
Facility Lease, the Site Lease, the Site Sublease, the Security
Deposit Agreement, the Bill of Sale and the Present Assignment
and (b) subject to the terms and conditions of this Agreement, to
execute and deliver all such further instruments, certificates
and documents, and take such other actions, as may be
contemplated by, and to exercise all of the rights and perform
all of the duties and obligations to be exercised or performed by
the Owner Trustee under the Transaction Documents and the other
instruments as set forth therein. The Owner Trustee further
agrees to take such other actions and to execute, deliver and
perform such other agreements, instruments , documents and
certificates as the Owner Participant may from time to time
authorize and direct to give effect to the foregoing. All of the
estate, right, title and interest of the Owner Trustee in and to
the Facility, the Transaction Documents and other property of the
Owner Trustee held pursuant to this Agreement, including, without
limitation, all Basic Rent, Supplemental Rent, all other sums of
any nature whatsoever to be paid or received by the Owner Trustee
under the Facility Lease, the Site Lease, the Site Sublease or
under any other Transaction Document, all of the right, title and
interest of the Owner Trustee under the Collateral Security
Documents and all of the property rights and interests granted to
the Owner Trustee pursuant to the Site Lease, are hereinafter
referred to as the "Trust Estate."
SECTION 2.2. Declaration of Trust by Owner Trustee. The
Owner Trustee hereby declares that it will hold all its estate,
right, title and interest in and to the properties which are part
of the Trust Estate upon the trusts set forth herein and for the
use and benefit of the Owner Participant.
ARTICLE III
Payments
SECTION 3.1. Payments from Trust Estate Only. All payments
to be made by the Owner Trustee under this Agreement shall be
made solely from the income of and the proceeds from the Trust
Estate and only to the extent that the Owner Trustee shall have
received income or proceeds from the Trust Estate, except as
specifically provided in Section 6.l hereof. The Owner
Participant agrees that it shall look solely to the income of and
proceeds from the Trust Estate to the extent available for
distribution to the Owner Participant as herein provided and
that, except as specifically provided herein, the Owner Trustee
shall not be liable in its individual capacity to the Owner
Participant for any amounts payable under this Agreement or
subject to any liability in its individual capacity under this
Agreement.
SECTION 3.2. Method at Payment. In the case of distributions
that are to be made by the Owner Trustee to the Owner Participant
pursuant to this Agreement, such distributions shall be paid by
the Owner Trustee to the Owner Participant in accordance with the
terms of the Security Deposit Agreement, or by otherwise
crediting the amount to be distributed to the Owner Participant
to an account maintained by the Owner Participant or such nominee
with the Owner Trustee, in immediately available funds, or by
transferring such amount in immediately available funds to a
banking institution with bank wire transfer facilities for the
account of the Owner Participant or such nominee, as instructed
from time to time by the Owner Participant.
ARTICLE IV
Distributions
SECTION 4.1. Distribution of Payments. Subject to the
provisions of the Security Deposit Agreement, all payments and
amounts received by the Owner Trustee with respect to the Trust
Estate shall be distributed forthwith upon receipt in the
following order of priority: first, so much of such payment or
amount as shall be required to reimburse the Owner Trustee for
any fees or Expenses not reimbursed by the Owner Participant or
the Lessee as to which the Owner Trustee is entitled to be
reimbursed hereunder shall be retained by the Owner Trustee; and,
second, the balance, if any, of such payment or amount remaining
thereafter shall be distributed to the Owner Participant.
SECTION 4.2. Distribution of Trust Estate. Whenever the
terns of this Agreement shall require the Owner Trustee to
distribute or transfer the entire Trust Estate to any Person, the
Owner Trustee shall be entitled to retain such moneys as shall
then be held by the Owner Trustee as a part of the Trust Estate
and as shall be required to reimburse the Owner Trustee for any
fees or Expenses no t reimbursed by the Owner Participant or the
Lessee as to which the Owner Trustee is entitled to be paid or
reimbursed hereunder.
ARTICLE V
Duties of the Owner Trustee
SECTION 5.1. Notice of Event of Default. In the event the
Owner Trustee shall have knowledge of a default under any
Transaction Document or an Event of Loss or an Event of
Regulation, the Owner Trustee shall give prompt (but in no case
later than two Business Days) telex, telefax, telephonic or
telegraphic notice of such occurrence to the Owner Participant
followed by prompt written confirmation thereof to the Owner
Participant. Subject to the terms of Section 5.3 hereof, the
Owner Trustee shall take or refrain from taking such action with
respect to such default, not inconsistent with the provisions of
the Transaction Documents, as the Owner Trustee shad 1 be
instructed in writing by the Owner Participant. If the Owner
Trustee shall not have received such written instructions from
the Owner Participant within 20 days after mailing notice of such
default to the Owner Participant, the Owner Trustee may, subject
to instructions received pursuant to the preceding sentence, take
or refrain from taking such action, but shall be under no duty
to, and shall have no liability except in the event of its own
willful misconduct or gross negligence) for its failure or
refusal to, take or refrain from taking any action with respect
to such default, not inconsistent with the provisions of the
Transaction Documents, as it shall deem advisable and in the best
interests of the Owner Participant. For all purposes of this
Agreement, in the absence of actual knowledge of an officer in
the Corporate Trust Administration Department of the Owner
Trustee, the Owner Trustee shall not be deemed to have knowledge
of a default unless it receives written notification thereof
given by or on behalf of the Lessee or the Owner Participant. The
Owner Trustee shall have no duty to inquire as to whether a
default has occurred.
SECTION 5.2. Action upon Instructions. Subject to the terms
of Sections 5. l and 5.3 hereof, upon the written instructions of
the Owner Participant, the Owner Trustee shall take or refrain
from taking such action or actions no t inconsistent with the
terms of the Facility Lease and the other Transaction Documents
as may be specified in such instructions.
SECTION 5.3. Indemnification. The Owner Trustee shall not be
required to take or refrain from taking any action under this
Agreement, the Facility Lease or the other Transaction Documents
(other than the actions specified in the first sentence of
Section 5.1 hereof and the last sentence of Section 5.4 hereof)
unless the Owner Trustee shall have been indemnified by the Owner
Participant or any other Person, in manner and form satisfactory
to the Owner Trustee, against any liability, cost or expense
tincturing reasonable attorneys' fees) that may be incurred in
connection therewith, other than any liability, cost or expense
resulting from the willful misconduct, bad faith or gross
negligence of the Owner Trustee. If the Owner Participant shall
have directed the Owner Trustee to take or refrain from taking
any action under this Agreement, the Facility Lease or the other
Transaction Documents, the Owner Participant agrees to furnish
such indemnity as shall be satisfactory to the Owner Trustee
(provided that the written undertaking of Owner Participant shall
be satisfactory under this sentence) and in addition pay the
reasonable compensation of the Owner Trustee for services
performed or to be pert of pursuant to such directive. The Owner
Trustee shall not be required to take any action under Section
5.1 or 5.2, nor shall any other provision of this Agreement be
deemed to impose a duty on the Owner Trustee to take any action,
if the Owner Trustee shall have been advised by counsel that such
action is contrary to the terms hereof or of the Facility Lease
or any of the other Transaction Documents to which the Owner
Trustee is a party or is otherwise contrary to law.
SECTION 5.4. No Duties Except as Specified in Trust
Agreement or Instructions. The Owner Trustee shall not have any
duty or obligation to manage, control, use, operate, sell, lease,
dispose of or otherwise deal with the Facility, the Site or any
interest therein or any other part of the Trust Estate, or
otherwise to take or refrain from taking any action under, or in
connection with, any document contemplated hereby to which the
Owner Trustee is a party, except as expressly provided by the
terms of this Agreement or in written instructions from the Owner
Participant received pursuant to Section 5.1 or 5.2 hereof, and
no implied duties or obligations shall be read into this
Agreement against the Owner Trustee. The Owner Trustee
nevertheless shall, in its individual capacity and at its own
cost and expense, and without any right of indemnity in respect
of any such cost or expense under Section 7.l of this Agreement,
promptly take all actions as may be necessary to discharge any
Liens on any part of the Trust Estate arising by, through or
under the Owner Trustee in its individual capacity, not related
or connected to its ownership interest in the Facility, its
status as lessor under the Facility Lease, the administration of
the Trust Estate or any other transaction contemplated by the
Facility Lease or any of the Transaction documents, and shall
otherwise comply with the terms of the Facility Lease and the
other Lease Documents.
SECTION 5.5. No Action Except Under Specified Documents or
Instructions. The Owner Trustee shall not manage, control, use,
operate, sell, lease, dispose of or otherwise deal with the
Facility, the Site or any other part of the Trust Estate except
(i) in accordance with the terms of this Agreement or any other
Transaction Document to which the Owner Trustee is a party, (ii)
in accordance with the powers granted to, or the authority
conferred upon, the Owner Trustee pursuant to this Agreement or
(iii) in accordance with the written instructions from the Owner
Participant pursuant to Section 51 or 5.2 hereof.
SECTION 5.6. Absence of Duties. Except in accordance with
written instructions furnished pursuant to Section 5.l or 5.2 and
except as provided in, and without limiting the generality of,
Sections 5.l, 5.4 and 5.5, the Owner Trustee shall have no duty
(a) to record or file any of the Transaction Documents, or any
notice or financing statement with respect thereto, to maintain
any such recording or filing/ or to re-record or re-file any
Transaction Document, (b) to obtain insurance on the Facility or
to effect or maintain any such insurance , whether or not the
Lessee shall be in default with respect thereto, other than to
forward to the Owner Participant any notices, policies,
certificates or binders furnished to the Owner Trustee by the
Lessee or its insurance brokers to the extent that any of the
same shall not state on its face or otherwise that it has been
previously furnished directly to Owner Participant, (c) except as
provided in the last sentence of Section 5.4 hereof, to pay or
discharge any tax, assessment or other governmental charge or any
Lien owing with respect to, or assessed or levied against, any
part of the Trust Estate, (d) to confirm or verify any financial
statements of the Lessee or (e) to inspect the Facility at any
time or ascertain or inquire as to the performance or observance
of any of the covenants of the Lessee in the Transaction
Documents.
ARTICLE VI
The Owner Trustee
SECTION 6.1. Acceptance of Trusts and Duties. (a) The Owner
Trustee accepts the trusts hereby created and agrees to perform
the same but only upon the terms of this Agreement. The Owner
Trustee also agrees to disburse all moneys actually received by
it constituting part of the Trust Estate in accordance with the
terms of the Security Deposit Agreement and this Agreement. The
Owner Trustee shall not be answerable or accountable under any
circumstances in its individual capacity, except (i) for its own
willful misconduct, bad faith or gross negligence or its failure
to use ordinary care to disburse funds, (ii) for liabilities that
may result from the inaccuracy of any representation or warranty
of the Owner Trustee contained in the Transaction Documents or
from the failure by the Owner Trustee to perform its obligations
under the last sentence of Section 5.4 hereof, or (iii) for
taxes, fees or other charges based on or measured by any fees,
commissions or compensation received by the Owner Trustee for
acting as trustee in connection with any of the transactions
contemplated by the Facility Lease or the other Transaction
Documents.
(b) Whether or not expressly so provided, every provision
of this Agreement relating to the conduct or affecting the liability
or or affording protection to the Owner Trustee shall be subject to
the provisions of Section 6.1(a) hereof.
SECTION 6.2. Furnishing of Documents. The Owner Trustee
shall furnish to the Owner Participant, promptly upon receipt
thereof, duplicates or copies of all reports, notices, requests,
demands, certificates, financial statements and other instruments
furnished to the Owner Trustee under this Agreement or the other
Transaction Documents to the extent that any of the same shall
not state on its face or otherwise that it has been previously
furnished directly to the Owner Participant or the Owner Trustee
shall have determined that the same has already been furnished to
the Owner Participant.
SECTION 6.3. No Representations or Warranties as to the
Facility or the Transaction Documents. THE OWNER TRUSTEE DOES NOT
MAKE AND SHALL NOT BE DEEMED TO HAVE MADE (i) ANY REPRESENTATION
OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, VALUE,
CONDITION, DESIGN, OPERATION, MERCHANTABILITY, COMPLIANCE WITH
SPECIFICATIONS, FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT,
ABSENCE OF LATENT DEFECTS OR FITNESS FOR USE OF THE FACILITY OR
ANY OTHER REPRESENTATION OR WARRANTY OF ANY NATURE WHATSOEVER,
EXPRESS OR IMPLIED, WITH RESPECT TO THE FACILITY, except that the
Owner Trustee hereby represents and warrants to the Owner
Participant that the Facility shall be free of Liens that result
from acts of or claims against the Owner Trustee, in its
individual capacity, not related or connected to its ownership
interest in the Facility, its status as lessor under the Facility
Lease, the administration of the Trust Estate or any other
transaction contemplated by the Facility Lease or any of the
Transaction Documents, or (ii) any representation or warranty as
to the validity, legality or enforceability of the Facility Lease
or any of the other Transaction Documents or as to the
correctness of any statement contained therein, except to the
extent that any such statement is expressly made in this
Agreement or is expressly made in any other Transaction Document
as a representation by the Owner Trustee, in its individual
capacity and except that the Owner Trustee, in its individual
capacity, hereby represents and warrants to the Owner Participant
that the execution, delivery and performance of this Agreement,
the Facility Lease and each other Transaction Document to which
it is a party have been duly authorized by all necessary
corporate or other action on its part required to be taken and do
not contravene the Owner Trustees charter or by-laws or any law
or contractual restriction binding on or affecting the Owner
Trustee, and such agreements have been or will be executed by
duly authorized officers of the Owner Trustee.
SECTION 6.4. No Segregation of Moneys; No Interest. Except
as otherwise provided herein, moneys received by the Owner
Trustee hereunder need not be segregated in any manner except to
the extent required by law and may be deposited under such
general conditions as may be prescribed by law, and the Owner
Trustee shall not be liable for any interest thereon except as
may be agreed to by it.
SECTION 6.5. Reliance: Avarice of Counsel. The Owner Trustee
shall incur no liability to anyone in acting upon any signature,
instrument, notice, resolution, request, consent, order,
certificate, report, opinion, bond or other document or paper
believed by it to be genuine and believed by it to be signed by
the proper party or parties. The Owner Trustee may accept a
certified copy of a resolution of the Board of Directors or other
governing body of any corporate party as conclusive evidence that
such resolution has been duly adopted by such body and that the
same is in full force and effect. As to any fact or matter the
manner of ascertainment of which is not specifically prescribed
herein, the Owner Trustee may for all purposes hereof rely on a
certificate, signed by the president or any vice president and by
the treasurer or an assistant treasurer or the secretary or an
assistant secretary of the relevant party, as to such fact or
matter, and such certificate shall constitute full protection to
the Owner Trustee for any action taken or omitted to be taken by
it in good faith in reliance thereon. In the administration of
the trusts hereunder, the Owner Trustee may execute any of the
trusts or powers hereof and perform its powers and duties
hereunder directly or through agents or attorneys and may consult
with counsel, accountants and other skilled persons of generally
accepted competence to be selected and retained by it (other than
persons regularly employed by it), and the Owner Trustee shall
not be liable for anything done, suffered or omitted in good
faith by it in accordance with the advice or opinion of any such
counsel, accountants or other skilled persons appointed by it
hereunder with due care and not contrary to this Agreement.
SECTION 6.6. Not Acting in Individual Capacity. Except as
provided in this Article VI and as otherwise expressly provided
in this Agreement and elsewhere in the Transaction Documents, in
accepting the trusts hereby created, the Owner Trustee acts
solely as trustee hereunder and not in its individual capacity
and all Persons (other than the Owner Participant to the extent
provided in this Agreement) having any claim against the Owner
Trustee by reason of the transactions contemplated hereby shall
look only to the Trust Estate for payment or satisfaction
thereof, except as specifically provided in this Article VI or
except to the extent the Owner Trustee shall otherwise expressly
agree in this Agreement or in any other Transaction Document.
SECTION 6.7. Interpretation of Trust Agreement. If the Owner
Trustee is uncertain as to the application of any provision of
this Agreement, or such provision is ambiguous as to its
application or is, or appears to be, in conflict with any other
applicable provision hereof, or if this Agreement permits any
determination by the Owner Trustee or is silent or incomplete as
to the course of action which the Owner Trustee is required to
take with respect to a particular set of facts, the Owner Trustee
may seek instructions from the Owner Participant and shall not be
liable to any Person to the extent that it acts in good faith in
accordance with the instructions of the Owner Participant.
SECTION 6.8. Exculpatory Provisions. Any and all exculpatory
provisions, immunities and indemnities in favor of the Owner
Trustee under this Agreement shall inure to the benefit of the
Owner Trustee as a trustee and in its individual capacity under
or as a party to any Transaction Document or under any other
agreement referred to herein.
SECTION 6.9. Fees; Compensation. Except as provided in
Section 5.3 or 7.l hereof, the Owner Trustee agrees that it shall
have no right against the Owner Participant for any fee as
compensation for its services hereunder.
ARTICLE VII
Indemnification of Owner Trustee by Owner Participant
SECTION 7.1. Owner Participant to Indemnify Owner Trustee.
The Owner Participant agrees to pay (or reimburse the Owner
Trustee for) all reasonable fees (including its Ongoing
administrative fees) and expenses of the Owner Trustee hereunder,
inch tiding, without limitation, the reasonable compensation,
expenses and disbursements of such agents, representatives,
experts and counsel as the Owner Trustee may employ in connection
with the exercise and performance of its rights and duties
hereunder, under the Facility Lease or any other Transaction
Document. The Owner Participant agrees to assume liability for,
and to indemnify the Owner Trustee against and from, any and all
liabilities, obligations, losses, damages, taxes, claims,
actions, suits, costs, expenses and disbursements (including
legal fees and expenses of any kind and nature whatsoever
(collectively, "Expenses") which may be imposed on, incurred by or
asserted at any time against the Owner Trustee (whether or not
indemnified against by other parties) in any way relating to or
arising out of the administration of the Trust Estate or the
action or inaction of the Owner Trustee hereunder, under the
Facility Lease or any other Transaction Document, except only
that the Owner Participant shall not be required to indemnify the
Owner Trustee for Expenses arising or resulting from any of the
matters described in the last sentence of Section 6.1(a) hereof;
but only if and to the extent that the Owner Trustee does not
receive payment from the Lessee within a reasonable period of
time after demand on the Lessee therefor. The indemnities
contained in this Section 7.l shall survive the termination of
this Agreement.
ARTICLE VIII
Termination of Trust Agreement
SECTION 8.1. Termination of Trust Agreement. This Agreement
and the trusts created hereby shall terminate and the Trust
Estate shall, subject to Article IV hereof, be distributed to the
Owner Participant, and this Agreement shall be of no further
force or effect, upon the earlier of (i) the sale or other final
disposition by the Owner Trustee of all property constituting
part of the Trust Estate and the final distribution by the Owner
Trustee of all moneys or other property or proceeds constituting
part of the Trust Estate in accordance with the terms of Article
IV hereof, if at such time the Lessee shall have fully complied
with all the terms of the Facility Lease, and (ii) 21 years less
one day after the death of the last survivor of all of the past
and present members of the "Rolling Stones," the worlds greatest
rock-and-roll band, and their legitimate descendants, in each
case living on the date of this Agreement, provided that if this
Trust Agreement and the trusts created hereby shall be or become
valid under applicable law for a period subsequent to the 21st
anniversary of the death of such last survivor, or if legislation
shall become effective providing for the validity thereof for a
period in gross exceeding the period hereinabove stated, then
this Agreement and the trusts created hereby shall not terminate
as aforesaid but shall extend to and continue in effect, but only
if such nontermination and extension shall then be valid under
applicable law, until such time as the same shall, under
applicable law, cease to be valid.
SECTION 8.2. Termination at Option of Owner Participant. The
provisions of Section 8.1 hereof notwithstanding, this Agreement
and the trusts created hereby shall terminate and the Trust
Estate shall be distributed to the Owner Participant, and this
Agreement shall be of no further force and effect, upon the
election of the Owner Participant by notice to the Owner Trustee
if such notice shall be accompanied by the written agreement of
the Owner Participant assuming all the obligations of the owner
Trustee under or contemplated by the Facility Lease and each
other Transaction Document to which the Owner Trustee is a party,
and all other obligations of the owner Trustee incurred by it as
trustee hereunder. Such written agreement shall be satisfactory
in form and substance to the Owner Trustee and shall release the
Owner Trustee from all further obligations of the owner Trustee
hereunder and under the agreements and other instruments referred
to in this Section.
SECTION 8.3. Action by Owner Trustee on Termination. Upon
termination pursuant to Section 8.1 or 8.2 hereof, the Owner
Trustee shall, subject to the last sentence of Section 6.1 (a)
hereof, take such action as may be requested by the Owner
Participant to transfer the Trust Estate to the Owner Participant
including, without limitation, execution of instruments of
transfer or assignment with respect to any Transaction Documents
to which the Owner Trustee is a party.
ARTICLE IX
Successor Owner Trustees, Co-Owner Trustees
and Separate Owner Trustees
SECTION 9.1. Resignation of Owner Trustee; Appointment of
Successor. (a) The Owner Trustee may resign at any time without
cause by giving at least 60 days, prior written notice to the
owner Participant and the Lessee, such resignation to be
effective upon the acceptance pursuant to Section 9.1(b) of the
trusteeship by a successor Owner Trustee. In addition, the Owner
Participant may at any time remove the Owner Trustee without
cause by an instrument in writing delivered to the Owner Trustee
and the Lessee, such removal to be effective upon the acceptance
of appointment by a successor Owner Trustee under Section 9.1(b)
hereof. In case of the resignation or removal of the Owner
Trustee the Owner Participant may appoint a successor Owner
Trustee by an instrument signed by the Owner Participant. If a
successor Owner Trustee shall not have been appointed within 30
days after the giving of written notice of such resignation or
the delivery of the written instrument with respect to such
removal, the Owner Trustee or the Owner Participant may apply to
any court of competent jurisdiction to appoint a successor Owner
Trustee to act until such time, if any, as a successor shall have
been appointed as above provided. Any successor Owner Trustee so
appointed by such court shall immediately and without further act
be superseded by any successor Owner Trustee appointed as above
provided within one year from the date of the appointment by such
court.
(b) Any successor Owner Trustee, however appointed,
shall execute and deliver to the predecessor Owner Trustee an
instrument accepting such appointment, and thereupon such
successor Owner Trustee, without further act, shall become vested
with all the estates, properties, rights, powers, duties and
trusts of the predecessor Owner Trustee in the trusts hereunder
with like effect as if originally named the Owner Trustee herein;
but nevertheless, upon the written request of such successor
Owner Trustee, such predecessor Owner Trustee shall execute and
deliver an instrument transferring to such successor Owner
Trustee, upon the trusts herein expressed, all the estates,
properties, rights, powers, duties and trusts of such predecessor
Owner Trustee, and such predecessor Owner Trustee shall duly
assign, transfer, deliver and pay over to such successor Owner
Trustee all moneys or other property then held by such
predecessor Owner Trustee upon the trusts herein expressed.
(c) Any successor Owner Trustee, however appointed,
shall be a bank or trust company incorporated and doing business
within the United States of America and having a combined capital
and surplus of at least $75,000,000, if there be such an
institution willing, able and legally qualified to perform the
duties of the Owner Trustee hereunder upon reasonable or
customary terms; provided, however , that the appointment of such
bank or trust company as successor Owner Trustee shall not
violate any provision of any law or regulation or create a
relationship which would be in violation thereof, and all
consents and approvals of, and filings and declarations with, any
governmental authority which are necessary in connection with
such appointment shall have been obtained or made and shall be in
full force and effect.
(d) Any corporation into which the Owner Trustee may be
merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any
corporation to which substantially all the corporate trust
business of the Owner Trustee may be transferred, shall, subject
to the terms of Section 9.1(c) hereof, be the Owner Trustee under
this Agreement without further act.
SECTION 9.2. Co-Owner Trustees and Separate Owner Trustees.
Whenever the Owner Trustee or the Owner Participant shall deem it
necessary or prudent in order either to conform to any law of any
jurisdiction in which all or any part of the Trust Estate shall
be situated or to make any claim or bring any suit with respect
to the Trust Estate or the Facility Lease or any other
Transaction Document, or the Owner Trustee or the Owner
Participant shall be advised by counsel satisfactory to it that
it is so necessary or prudent, the Owner Trustee and the Owner
Participant shall execute and deliver an agreement supplemental
hereto and all other instruments and agreements, and shall take
all other action, necessary or proper to constitute another bank
or trust company or one or more persons (and the Owner Trustee
may appoint one or more of its officers) either as co-trustee or
co-trustees jointly with the Owner Trustee of all or any part of
the Trust Estate, or as separate trustee or separate trustees of
all or any part of the Trust Estate, and to vest in such persons,
in such capacity, such title to the Trust Estate or any part
thereof, and such rights or duties as may be necessary or
desirable, all for such period and under such terms and
conditions as are satisfactory to the Owner Trustee and the Owner
Participant. If any co-trustee or separate trustee shall die,
become incapable of acting, resign or be removed, the title to
the Trust Estate and all rights and duties of such co-trustee or
separate trustee shall, so far as permitted by law, vest in and
be exercised by the Owner Trustee, without the appointment of a
successor to such co-trustee or separate trustee. No appointment
of, or action by, any additional trustee will relieve the
Owner Trustee of any of its obligations under, or otherwise
affect any of the terms of this Agreement or its obligations
under the Transaction Documents.
ARTICLE X
Supplements and Amendments
SECTION 10.1 Supplements and Amendments. At the written
request of the Owner Participant this Agreement shall be amended
by a written instrument signed by the Owner Trustee and the Owner
Participant, but if in the opinion of the Owner Trustee any
instrument required to be so executed adversely affects any
right, duty or liability of, car immunity or indemnity in favor
of, the Owner Trustee under this Agreement or any of the
documents contemplated hereby to which the Owner Trustee is a
party, or would cause or result in any conflict with or breach of
any terms, conditions or provisions of, or default under, the
charter or by-laws of the Owner Trustee, the Transaction
Documents or any other document contemplated hereby to which the
Owner Trustee is a party, the Owner Trustee may in its sole
discretion decline to execute such instrument.
ARTICLE XI
Miscellaneous
SECTION 11.1. No Legal Title to Trust Estate in Owner
Participant. The Owner Participant shall not have title to any
part of the Trust Estate. No transfer, by operation of law or
otherwise, of any right, title and interest of the Owner
Participant in and to the Trust Estate or hereunder shall operate
to terminate this Agreement or the trusts hereunder or entitle
any successor or transferee of the Owner Participant to an
accounting or to the transfer to it of legal title to any part of
the Trust Estate.
SECTION 11.2. Sale of Trust Estate by Owner Trustee is Binding.
Any sale or other conveyance of any of the Trust Estate or any
interest therein by the Owner Trustee made pursuant to the terms
of this Agreement, the Facility Lease or any other Transaction
Document shall bind the Owner Participant and shall be effective
to transfer or convey all right, title and interest of the Owner
Trustee and the Owner Participant in and to the Trust Estate. No
purchaser or other grantee shall be required to inquire as to the
authorization, necessity, expediency or regularity of such sale
or conveyance or as to the application of any sale or other
proceeds with respect thereto by the Owner Trustee.
SECTION 11.3. Limitations on Rights of Others. Nothing in
this Agreement, whether express or implied, shall be construed to
give to any person other than the Owner Trustee and the Owner
Participant any legal or equitable right, remedy or claim under
or in respect of this Agreement, any covenants, conditions or
provisions contained herein or the Trust Estate.
SECTION 11.4. Notices. Unless otherwise expressly specified
or permitted by the terms hereof, all notices shall be in writing
and delivered by hand or mailed by first class mail, postage
prepaid and (a) if to the Owner Trustee, addressed to it at 777
Main Street, Hartford, Connecticut, 06115, Attention: Corporate
Trust Administration, or to such other address as the Owner
Trustee may have set forth in a written notice to the Owner
Participant, (b) if to the Owner Participant addressed to it at
1600 Summer Street, Stamford, Connecticut, 06905, Attention: Vice
President, Energy Project Operations, or in each case, to such
other address as such Person shall have furnished by notice to
the Owner Trustee. Whenever any notice in writing is required to
be given by the Owner Trustee or the Owner Participant, such
notice shall be deemed given and such requirement satisfied if
such notice is mailed by first class mail, postage prepaid,
addressed as provided above.
SECTION 11.5. Severability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 11.6. Limitation on Owner Participant's Liability.
The Owner Participant shall not have any liability for the
performance of the obligations of the Owner Trustee under this
Agreement except as expressly set forth herein.
SECTION 11.7. Separate Counterparts. This Agreement may be
executed by the parties hereto in separate counterparts, each of
which when so executed and delivered shall be an original, but
all such counterparts shall together constitute but one and the
same instrument.
SECTION 11.8. Successors and Assigns. All covenants and
agreements contained herein shall be binding upon, and inure to
the benefit of, the Owner Trustee and its successors and assigns
and the Owner Participant and its successors and, to the extent
permitted by Section 11.9 hereof, its assigns, all as herein
provided. Any request, notice, direction, consent, waiver or
other instrument or action by the Owner Participant shall bind
the successors and assigns of such Owner Participant.
SECTION 11.9. Transfer of Interests. The Owner Participant
may transfer, sell, assign or otherwise dispose of all or any
part of its interest hereunder. In the event of any sale,
transfer, assignment or other disposition of such interest (the
entity to which such interest is sold, transferred, assigned or
otherwise conveyed being hereinafter called the Transferee, the
Transferee shall become a party to this Agreement and shall agree
to be bound by all the terms of and shall undertake all or an
appropriate part of the obligations of the Owner Participant
contained in this Agreement in such manner as is satisfactory to
the Owner Trustee. No such sale, transfer, assignment or other
disposition shall violate any provision of law or regulation or
create a relationship which would be in violation thereof. The
Owner Trustee shall not be on notice of or otherwise bound by any
such sale, transfer, assignment or other disposition unless and
until it shall have received an executed counterpart of the
instrument of such sale, transfer, assignment or other
disposition and such evidence that the same Is in accordance with
this Section 11.9 as the Owner Trustee shall reasonably require
Upon any such disposition to a Transferee as above provided, such
Transferee shall be deemed an "Owner Participant" for all purposes
hereof, and shall be deemed to have made all or an appropriate
part of the payments previously made by its predecessor Owner
Participant and to have acquired an appropriate interest in the
Trust Estate, and each reference herein to the Owner Participant
shall thereafter be deemed to refer to, or to include, as the
case may be, such Transferee.
SECTION 11.10. Headings, No Implied Waiver. The headings of
the various Articles and Sections herein are for convenience of
reference only and shall not modify, define, expand or limit any
of the terms or provisions hereof. No term or provision of this
Agreement may be changed, waived, discharged or terminated
orally, but only by an instrument in writing entered into as
provided in Section 10.1; and any such waiver of the terms hereof
shall be effective only in the specific instance and for the
specific purpose given.
SECTION 11.11. Governing Law. This Agreement shall in all
respects be governed by, and construed in accordance with, the
internal laws of the State of Connecticut without regard to the
conflict of laws principles thereof.
SECTION 11.12. Performance by Owner Participant. Any
obligation of the Owner Trustee hereunder or under the Facility
Lease or any other Transaction Document may be performed by the
Owner Participant, and any performance shall not be construed as
a revocation of the trusts created hereby.
IN WITNESS WHEREOF, the parties hereto have caused this
Trust Agreement to be duly executed by their respective officers
hereunto duly authorized, as of the day and year first above
written.
GENERAL ELECTRIC CAPITAL CORPORATION,
as Owner Participant
By:_________________________
Title: Attorney-in-Fact
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, as Owner Trustee
By:_____________________________
Title: Assistant Vice President
EXHIBIT 10.35
STEAM LESSEE SECURITY AGREEMENT
STEAM LESSEE SECURITY AGREEMENT, dated as of March 30, 1995
(this "Security Agreement"), made by BRANDYWINE WATER COMPANY, a
Delaware corporation (together with its successors and assigns,
the "Steam Lessee"), in favor of SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, as Security Agent under the Security
Deposit Agreement referred to below (the "Security Agent")
W I T N E S S E T H :
WHEREAS, Panda-Brandywine, L.P. ( the "Partnership" ), Panda
Brandywine Corporation and General Electric Capital Corporation
("GE Capital" ) have entered into the Construction Loan Agreement
and Lease Commitment, dated as of the date hereof (as modified,
Amended or supplemented from time to time, the "Loan Agreement"),
pursuant to which GE Capital has agreed to (i) provide
construction financing for the Project (including the Distilled
Water Facility), (ii) issue Letters of Credit as collateral
security for certain obligations of the Partnership under the
Power Purchase Agreement, (iii) (acting through the Owner
Trustee) lease the Site from the Partnership and sublease the
Site back to the Partnership, (iv) upon completion of the
Project, (acting through the Owner Trustee) purchase the Facility
(including the Distilled Water Facility) from the Partnership and
lease the Facility back to the Partnership, and (v) upon
completion of the Project, make Equity Loans to the Partnership
or the Partners, and (b) GE Capital is willing to provide such
financing, issue the Letters of Credit, (acting through the Owner
Trustee) lease and sublease the Site and purchase and lease the
Facility subject to and upon the terms and conditions set forth
in the Loan Agreement;
WHEREAS, the Steam Lessee will have a leasehold interest in
the Distilled Water Facility pursuant to the Steam Lease, to be
entered into on the Lease Closing Date, between the Partnership
And the Steam Lessees
WHEREAS, it is a condition precedent to the obligations of
GE Capital under the Loan Agreement that the Steam Lessee enter
into this Security Agreement as hereinafter set forth; and
WHEREAS, the Steam Lessee desires to execute this Security
Agreement to satisfy the condition described in the preceding
recital;
WHEREAS, pursuant to the terms of the Security Deposit
Agreement, dated as of the date hereof, among the Security Agent,
the Partnership, the Owner Trustee and GE Capital, the Security
Agent has agreed to act as security agent on behalf of GE Capital
and the Owner Trustee and to hold the Collateral for the benefit
of GE Capital and the Owner Trustee;
NOW, THEREFORE , in consideration of the premises and other
benefits to the Steam Lessee of the foregoing transactions, the
receipt and sufficiency of which are hereby acknowledged, the
Steam Lessee hereby covenants and agrees with the Security Agent,
for the benefit of GE Capital and the Owner Trustee, as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. The following terms shall have the
meanings herein specified unless the context otherwise requires.
Such definitions shall be equally applicable to the singular and
plural forms of the terms defined. Capitalized terms used but not
defined herein shall have the meanings assigned to them in
Appendix A to the Loan Agreement . Commercial terms used herein
and not otherwise defined herein or in Appendix A to the Loan
Agreement shall have the meaning specified for such terms in the
Uniform Commercial Code as in effect in the State of New York.
"Chattel Paper" shall have the meaning assigned to that term
under the Uniform Commercial Code as in effect in any relevant
jurisdiction.
"Collateral" shall have the meaning specified in Section
2.1(a).
"Contract Rights" shall have the meaning specified in
Section 6.1(c).
"Contracts" shall mean all contracts to which the Steam
Lessee now is, or hereafter will be, bound, or a party,
beneficiary or assignee (including, without limitation, the Steam
Lease), and all other instruments, agreements and documents
executed and delivered with respect to such contracts, any
guarantees or letters of credit provided to the Steam Lessee to
assure the performance by any party to any contract and all
revenues, damages, rentals, Proceeds and other sums of money due
and to become due from any of the foregoing, as the same may be
modified, supplemented or amended from time to time in accordance
with their terms.
"Document" shall have the meaning assigned that term under
the Uniform Commercial Code as in effect in any relevant
jurisdiction.
"Equipment" shall mean any "equipment", as such term is
defined in the Uniform Commercial Code as in effect in any
relevant jurisdiction, now or hereafter owned or leased by the
Steam Lessee and, in any event, shall include, but shall not be
limited to, all equipment used in connection with the Distilled
Water Facility, all machinery, tools, office equipment,
furniture, furnishings, fixtures, vehicles, motor vehicles, and
any manuals, instructions, blueprints, computer software and
similar items which relate to the above, and any and all
additions, substitutions and replacements of any of the
foregoing, wherever located, together with all improvements
thereon and all attachments, components, parts, equipment and
accessories installed thereon or affixed thereto.
"Expenses " shall have the meaning specified in Section 8.1.
"Facility Lease" shall mean the Facility Lease to be entered
into between the Owner Trustee and the Partnership, substantially
in the form of Exhibit L to the Loan Agreement, as amended,
supplemented or otherwise modified from time to time.
"Fixtures"' shall have the meaning assigned that term under
the Uniform Commercial Code as in effect in any relevant
jurisdiction and in any event shall include all goods now or
hereafter attached to, placed on, or incorporated in the
Distilled Water Facility Premises.
"GE Capital" shall have the meaning specified in the
recitals to this Security Agreement.
"General Intangibles" shall mean "general intangibles" as
such term is defined in the Uniform Commercial Code as in effect
in any relevant jurisdiction, now or hereafter owned by the Steam
Lessee and shall include, but not be limited to, all trademarks,
trademark applications, trademark registrations, tradenames,
fictitious business names, business names, company names,
business identifiers, prints, labels, trade styles and service
marks (whether or not registered), including logos and/or
designs, copyrights, patents, patent applications, goodwill of
the Steam Lessee's business symbolized by any of the foregoing,
trade secrets, license rights, license agreements, permits,
franchises, and any rights to tax refunds to which the Steam
Lessee is now or hereafter may be entitled.
"Indemnitee" shall have the meaning specified in Section
8.1.
"Instrument" shall have the meaning assigned that term under
the Uniform Commercial Code as in effect in any relevant
jurisdiction.
"Inventory" shall mean all of the inventory of the Steam
Lessee of every type or description, including all inventory as
such term is defined in the Uniform Commercial Code as in effect
in any relevant jurisdiction, now owned or hereafter acquired and
wherever located, whether raw, in process or finished, all
materials usable in processing the same and all documents of
title covering any inventory, including but not limited to work
in process, materials used or consumed in the Steam Lessee's
business, now owned or hereafter acquired or manufactured by the
Steam Lessee and held for sale in the ordinary course of its
business; all present and future substitutions therefore, parts
and accessories thereof and all additions thereto; and all
proceeds thereof and products of such inventory in any form
whatsoever.
"Inventory Records" shall mean all books, records and other
property and General Intangibles at any time relating to the
Inventory.
"Loan Agreement" shall have the meaning specified in the
Recitals to this Security Agreement.
"Obligations" shall mean all the unpaid principal amount of,
and accrued interest on (including, without limitation, interest
accruing after the maturity of the Loans and interest accruing
after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like
proceeding, relating to the Partnership, whether or not a claim
for post-filing or post-petition interest is allowed in such
proceeding) the Notes, the Letter of Credit Obligations, all Rent
and other obligations payable by the Partnership under the
Facility Lease and all other obligations and liabilities of the
Partnership and the Partners to GE Capital (including, without
limitation, pursuant to subsection 5.2 of the Loan Agreement, but
excluding any Partner Equity Loans), the Owner Trustee and the
Security Agent, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter
incurred, which may arise under, out of, or in connection with,
the Loan Agreement, the Notes, the Facility Lease, this
Agreement, the other Collateral Security Documents or Any other
Transaction Document and any other document made, delivered or
given in connection therewith or herewith, whether on account of
principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses (including, without limitation, all
fees and disbursements of counsel to GE Capital) or otherwise.
"Owner Trustee" shall mean Shawmut Bank Connecticut,
National Association, in its capacity as trustee under the Trust
Agreement, and any successor trustee appointed in accordance with
the terms thereof.
"Partnership" shall have the meaning specified in the
recitals to this Security Agreement.
"Proceeds" shall mean "proceeds" as such term is defined in
the Uniform Commercial Code as in effect in any relevant
jurisdiction or under other relevant law and, in any event, shall
include, but shall not be limited to, (i) any and all proceeds of
any insurance, indemnity, warranty or guaranty payable to the
Steam Lessee from time to tame, and claims for insurance,
indemnity, warranty or guaranty effected or held for the benefit
of the Steam Lessee with respect to any of the Collateral, (ii)
any and all payments (in any form whatsoever) made or due and
payable to the Steam Lessee from time to time in connection with
any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any
Governmental Authority (or any person acting under color of
Governmental Authority) and (iii) any and all other amounts from
time to time paid or payable under or in connection with any of
the Collateral.
"Receivables" shall mean any "Account" as such term is
defined in the Uniform Commercial Code as in effect in any
relevant jurisdiction and in any event shall include, but not be
limited to, all of the Steam Lessee's rights to payment for goods
(including, without 1imitation, steam) sold or leased, or
services performed, by the Steam Lessee, whether now in existence
or arising from time to time hereafter, including, without
limitation, rights evidenced by an account, note, contract,
security agreement, chattel paper, or other evidence of
indebtedness or security, together with (i) all security pledged,
assigned, hypothecated or granted to or held by the Steam Lessee
to secure the foregoing, (ii) all of the Steam Lessee's right,
title and interest in and to any goods (including, without
limitation, steam) the sale of which gave rise thereto, (iii) all
guarantees, endorsements and indemnifications on, or of, any of
the foregoing, (iv) all powers of attorney for the execution of
any evidence of indebtedness or security or other writing in
connection therewith, (v) all books, correspondence, credit
files, records, ledger cards, invoices, and other papers relating
thereto, including without limitation all similar information
stored on a magnetic medium or other similar storage device and
other papers and documents in the possession or under the control
of the Steam Lessee or any computer bureau from time to time
acting for the Steam Lessee, (vi) all evidences of the filing of
financing statements and other statements and the registration of
other instruments in connection therewith and amendments thereto,
notices to other creditors or secured parties, and certificates
from filing or other registration officers, (vii) all credit
information, reports and memoranda relating thereto, and (viii)
all other writings related in any way to the foregoing.
"Security Agent" shall mean Shawmut Bank Connecticut,
National Association, in its capacity as security agent under the
Security Deposit Agreement, and any successor security agent
appointed in accordance with the terms thereof.
"Security Agreement" shall mean this Steam Lessee Security
Agreement, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with its terms.
ARTICLE II
ASSIGNMENT AND GRANT OF SECURITY INTERESTS
Section 2.1 Assignment and Grant of Security Interest. (a)
As collateral security for the prompt and complete payment and
performance when due of all of the Obligations, the Steam Lessee
hereby pledges, hypothecates, assigns, grants, transfers and
delivers to the Security Agent, for the benefit of the Owner
Trustee and GE Capital, a continuing security interest of first
priority, in all of the Steam Lessee's right, title and interest
(including any leasehold interest) in, to and under (i) all
Receivables, (ii) all Inventory, (iii) all Equipment, (iv) all
General Intangibles, (v) all Contracts and all Contract Rights,
(vi) all amounts from time to time held in any checking, savings,
deposit or other account of the Steam Lessee and all investments
and securities at any time on deposit in such accounts and all
income or gain earned thereon, (vii) all Governmental Actions,
provided, that any Governmental Action which by its terms or by
operation of law would become void, voidable, terminable or
revocable if mortgaged, pledged or assigned hereunder or if a
security interest therein were granted hereunder are expressly
excepted and excluded from the Lien and the terms of this
Security Agreement to the extent necessary so as to avoid such
voidness, voidability, terminability or revocability, (viii ) all
Fixtures, (ix) without limiting the generality of the foregoing,
all other personal property, rights, interests, goods,
Instruments, Chattel Paper, Documents, credits, claims, demands
and assets of the Steam Lessee whether now existing or hereafter
acquired from time to time, and (x) any and all additions and
accessions to any of the foregoing, all improvements thereto, all
substitutions and replacements therefor and all products and
Proceeds thereof (all of the above collectively, the
"Collateral").
(b) The security interest granted to the Security Agent, for
the benefit of the Owner Trustee and GE Capital, pursuant to this
Security Agreement extends to all Collateral of the kind which is
the subject of this Security Agreement which the Steam Lessee may
acquire at any time during the continuation of this Security
Agreement, whether such Collateral is in transit or in the Steam
Lessee's, the Partnership's, the Security Agent's, the Owner
Trustee's, GE Capital's, or any other Person's constructive,
actual or exclusive occupancy or possession.
Section 2.2 Security Interest Absolute. All rights of the
Security Agent and all security interests hereunder, shall be
absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Loan
Agreement, any other Loan Document, the Facility Lease, the Steam
Lease, any other Lease Document or any other agreement or
instrument relating thereto;
(b) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Obligations, or any
other amendment or waiver of or any consent to any departure
from the Loan Agreement or any other Loan Document, the Facility
Lease, or any other Lease Document;
(c) any exchange, release or non-perfection of any
other collateral, or any release or amendment or waiver of or
consent to departure from any guaranty, for all or any of the
Obligations; or
(d) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, the Steam
Lessee, the Partnership or a third party pledgor.
Section 2.3 Power of Attorney. (a) The Steam Lessee hereby
constitutes and appoints the Security Agent or any Person or
agent whom the Security Agent may designate, as the Steam
Lessee's attorney-in-fact, at the Steam Lessee' s reasonable cost
and expense, to exercise at any time following the occurrence and
during the continuance of an Event of Default or a Lease Event of
Default all or any of the following powers, which, being coupled
with an interest, shall be irrevocable until all of the
Obligations have been paid in full:
(i) To receive, take, endorse, sign, assign and
deliver, all in the Security Agent's name or the Steam Lessee's
name, any and all checks, notes, drafts, and other documents or
instruments relating to the Collateral;
(ii) To receive, open and dispose of all mail
addressed to the Steam Lessee and to notify postal authorities to
change the address for delivery thereof to such address as the
Security Agent designates;
(iii) To request from account debtors of the
Steam Lessee in the Steam Lessee's name, the Security Agent's
name, or in the name of the Security Agent's designee,
information concerning the Receivables and the amounts owing
thereon;
(iv) To transmit to account debtors indebted on
Receivables notice of the Security Agent's interest therein;
(v) To notify account debtors indebted on
Receivables to make payment directly to the Security Agent;
(vi) To take or bring, in the Steam Lessee's name
or the Security Agent's name, all steps, actions, suits or
proceedings deemed by the Security Agent to be necessary or
desirable to enforce or effect collection of the Receivables;
(vii) To prepare, sign and file any Uniform
Commercial Code financing statements in the name of the Steam
Lessee as debtor;
(viii) If the Steam Lessee shall have failed to do
so in a timely manner, to take or cause to be taken all actions
necessary to perform or comply or cause performance or compliance
with the covenants of the Steam Lessee contained in the Steam
Lease or in the Loan Documents and the Lease Documents;
(ix) To sign and endorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts,
drafts against debtors, assignments, verifications, notices and
other documents in connection with any of the Collateral;
(x) To defend any suit, action or proceeding
brought against the Steam Lessee with respect to any Collateral;
(xi) To settle, compromise or adjust any suit,
action or proceeding described in the preceding clause and, in
connection therewith, to give such discharges or releases as the
Security Agent may deem appropriate;
(xii) Generally, to sell or transfer and make any
agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though the Security Agent
were the absolute owner thereof for all purposes, and to do, at
the Security Agent's option and the Steam Lessee's expense, at
any time, or from time to time, all acts and things which the
Security Agent deems necessary to protect, preserve or realize
upon the Collateral and the Liens of the Security Agent thereon;
(xiii) To execute, in connection with any
foreclosure, any endorsements, assignments or other instruments
of conveyance or transfer with respect to the Collateral; and
(xiv) To exercise the Steam Lessee's rights under
any Contract in accordance with Section 6.4.
(b) The Steam Lessee hereby ratifies all that said
attorney shall lawfully do or cause to be done by virtue hereof.
The Steam Lessee hereby acknowledges and agrees that the Security
Agent shall have no fiduciary duties to the Steam Lessee and the
Steam Lessee hereby waives any claims to the rights of a
beneficiary of a fiduciary relationship hereunder.
ARTICLE III
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
The Steam Lessee represents , warrants and covenants , which
representations, warranties and covenants shall survive execution
and delivery of this Security Agreement, as follows:
Section 3.l Validity of Lien. This Security Agreement is
effective to create, as security for the Obligations, a legal,
valid and enforceable Lien on and security interest in all of the
Collateral in favor of the Security Agent, for the benefit of GE
Capital and the Owner Trustee, superior to and prior to the
rights of all third Persons and subject to no other Liens.
Section 3.2 No Liens. (a) The Steam Lessee is, and as to
Collateral acquired by it from time to time after the date
hereof, the Steam Lessee will be, the owner of all Collateral
free from all Liens (other than Permitted Liens) or other right,
title or interest of any Person. The Steam Lessee shall defend
the Collateral against all Liens and demands of all Persons at
any time claiming the same or any interest therein adverse to the
Security Agent, the Owner Trustee or GE Capital.
(b) There is no financing statement (or similar
statement or instrument of registration under the law of any
jurisdiction) covering or purporting to cover any interest of any
kind in the Collateral, and the Steam Lessee will not execute or
authorize to be filed in any public office any financing
statement (or similar statement or instrument of registration
under the law of any jurisdiction) or statements relating to the
Collateral, except financing statements filed or to be filed in
respect of and covering the security interests granted hereby to
the Security Agent.
Section 3.3 Chief Executive Office; Name; Records. The chief
executive office of the Steam Lessee is located at 4100 Spring
Valley, Suite 1001/ Dallas, Texas 75244; provided that certain
records concerning the Distilled Water Facility and certain
contracts relating thereto are kept at the Steam Lessee's office
at 6433 S. Crain Highway, Upper Marlboro (Prince George's
County), Maryland 20772 or at the Site. The Steam Lessee will not
(a) move its chief executive office (or change the location(s)
where records concerning the Project are kept), or (b) change its
name from, nor carry on business under any name other than
"Brandywine Water Company", unless it has complied with the
requirements of the last sentence of this Section 3.3. The
originals of all documents evidencing all Contracts and
Receivable of the Steam Lessee, and the only original books of
accounts and records concerning the Collateral are, and will
continue to be, kept at, and controlled and directed (including,
without limitation, for general accounting purposes) from, such
chief executive office (or such other office set forth above), or
at such new location for such chief executive office as the Steam
Lessee may establish in accordance with the last sentence of this
Section 3.3 . The Steam Lessee shall not establish a new location
for its chief executive office or change its name or the name
under which it presently conducts its business until (i) it has
given to the Security Agent and GE Capital not less than 30 days
prior written notice of its intention so to do, clearly
describing such new location or specifying such new name, as the
case may be, and providing such other information in connection
therewith as the Security Agent or GE Capital may reasonably
request, and (ii) with respect to such new location or such new
name, as the case may be, it shall have taken all action,
reasonably satisfactory to the Security Agent and GE Capital, to
maintain the security interest of the Security Agent, on behalf
of the Owner Trustee and GE Capital, in the Collateral intended
to be granted hereby at all times fully perfected and in full
force and effect.
Section 3.4 Financing Statements. The Steam Lessee agrees
that all necessary and appropriate recordings and filings will be
effected by the Security Agent in all necessary and appropriate
public offices (as determined by GE Capital) so that the Lien
created by this Security-Agreement will at all times constitute a
perfected Lien on and security interest in the Collateral prior
and superior to all other Liens, all in accordance with the
Uniform Commercial Code as enacted in any and all relevant
jurisdictions or any other relevant Law. The Steam Lessee
authorizes the Security Agent to file any such financing
statements in connection with the Lien created by this Security
Agreement without the signature of the Steam Lessee.
Section 3.5 Further Actions. The Steam Lessee will, at its
own expense, make, execute, endorse, acknowledge, file and/or
deliver to the Security Agent from time to time such lists,
descriptions and designations of its Collateral, bills of lading,
documents of title, vouchers, invoices, schedules, powers of
attorney, certificates, reports and other assurances or
instruments and take such further steps relating to the
Collateral and other property or rights covered by the security
interest hereby granted, which are necessary or desirable to
create, perfect, preserve, protect or validate any security
interest granted pursuant to this Security Agreement or to enable
the Security Agent to exercise and enforce its rights under this
Security Agreement with respect to such security interest.
Section 3.6 Taxes, Claims, etc. So long as this Security
Agreement is in effect, the Steam Lessee shall pay (a) all taxes,
assessments and governmental charges imposed upon it or upon its
property, and (b) all claims (including, without limitation,
claims for labor, materials, supplies or services) which might,
if unpaid, become a Lien upon its property, unless, in each case,
the validity or amount thereof is subject to Contest.
Section 3.7 Right of Inspection. The Steam Lessee shall
allow any representative of the Security Agent or GE Capital to
visit and inspect any of the Steam Lessee's properties,
including, without limitation, the Inventory and Equipment, to
examine its books of record and account, including, without
limitation, the Inventory Records, and to make extracts therefrom
and to receive true copies of any papers, documents or
instruments relating to the Collateral, and to discuss its
affairs, finances and accounts with its officers, all at such
times and as often as the Security Agent or GE Capital may
request.
Section 3.8 Additional Statements and Schedules. The Steam
Lessee shall execute and deliver to the Security Agent, from time
to time, solely for the Security Agent's convenience in
maintaining a record of the Collateral, such written statements
and schedules as the Security Agent may reasonably require
designating, identifying or describing the Collateral.
Section 3.9 Warehouse Receipts Non-Negotiable. The Steam
Lessee agrees that if any warehouse receipt or receipt in the
nature of a warehouse receipt is issued with respect to any of
its Inventory, such warehouse receipt or receipt in the nature
thereof shall not be drawn in such a manner as to be "negotiable"
(as such term is used in Section 7-104 of the Uniform Commercial
Code as in effect in any relevant jurisdiction or under other
relevant law).
ARTICLE IV
SPECIAL PR0VISIONS CONCERNING INVENTORY AND EQUIPMENT
Section 4.1 Location of Inventory and Equipment. The Steam
Lessee agrees that all Inventory and Equipment now held or
subsequently acquired by it shall be kept at (or shall be in
transport to) the Site, or such new location as the Steam Lessee
may establish in accordance with the last sentence of this
Section 4.1. The Steam Lessee may establish a new location for
Inventory and Equipment only if (i) it shall have given to the
Security Agent and GE Capital 30 days prior written notice of its
intention so to do, clearly describing such new location and
providing such other information in connection therewith as the
Security Agent or GE Capital may reasonably request, and (ii)
with respect to such new location, it shall have taken all action
necessary to maintain the security interest of the Security Agent
in the Collateral intended to be granted hereby at all times
fully perfected and in full force and effect.
Section 4.2 Inventor Records. The Steam Lessee shall
maintain such current Inventory Records as the Security Agent may
from time to time reasonably request.
ARTICLE V
SPECIAL PROVISIONS CONCERNING RECEIVABLES,
CONTRACTS AND INSTRUMENTS
Section 5.l Additional Representations and Warranties. As of
the time when each of its Receivables arises, the Steam Lessee
shall be deemed to have represented and warranted that such
Receivable and all records, papers and documents relating thereto
(if any) are genuine and in all respects what they purport to be,
and that all papers and documents (if any) relating thereto (i)
will (subject to dispute, return, replacement, settlement or
compromise) evidence indebtedness unpaid and owed by such account
debtor arising out of the performance of labor or services or the
sale and delivery of the merchandise listed therein, or both,
(ii) will be the only original writings evidencing and embodying
such obligation of the account debtor named therein (other than
copies created for purposes other than general accounting
purposes), (iii) will (subject to dispute, return, replacement,
settlement or compromise and any limits due to applicable
bankruptcy, insolvency, moratorium or other similar rights
affecting creditors' rights generally and general principles of
equity) evidence true and valid obligations, enforceable in
accordance with their respective terms, not subject to the
fulfillment of any contract or condition whatsoever unless set
forth in the writing and (iv) will be in compliance and will
conform with all applicable requirements of Law.
Section 5.2 Maintenance of Records; Legending of Records.
The Steam Lessee will keep and maintain at its own cost and
expense satisfactory and complete records of its Receivables,
including, but not limited to, records of all payments received
and all credits granted thereon, and the Steam Lessee will make
the same available to the Security Agent for inspection at the
Steam Lessee's chief executive office, without charge to the
Security Agent, at such times as the Security Agent may
reasonably request. The Steam Lessee shall, without charge to the
Security Agent, deliver all tangible evidence that the Security
Agent may request of its Receivables (including, without
limitation, all documents evidencing the Receivables) and books
and records to the Security Agent or to its representatives
(copies of which evidence and books and records may be retained
by the Steam Lessee) at any time upon the Security Agent's
demand. If an Event of Default or a Lease Event of Default occurs
and continues, and if the Security Agent so directs, the Steam
Lessee shall legend in form and substance satisfactory to the
Security Agent, the Receivables and Contracts, as well as books,
records and documents evidencing or pertaining to the Receivables
with an appropriate reference to the fact that the Receivables
and Contracts have been assigned to the Security Agent, for the
benefit of GE Capital and the Owner Trustee, and that the
Security Agent has a security interest therein.
Section 5.3 Modification of Terms; No Payment to the Steam
Lessee. The Steam Lessee shall not rescind or cancel any
indebtedness evidenced by any Receivable or make any adjustment
with respect thereto, or extend or renew the same, or compromise
or settle any dispute, claim, suit or legal proceeding relating
thereto, or sell any Receivable or interest therein, without the
prior written consent of the Security Agent or GE Capital. The
Steam Lessee will duly fulfill all obligations on its part to be
fulfilled under or in connection with the Receivables and will do
nothing to Unpaid the rights of the Security Agent, the Owner
Trustee and GE Capital in the Receivables.
Section 5.4 Payments Under Contracts and Receivables.
(a) Notice to Obligors under Contracts and Receivables.
The Steam Lessee agrees and confirms that it will notify each
party to the Contracts and each account debtor or obligor under
the Receivables of the grant of the security interest therein and
assignment thereof to the Security Agent and instruct each of
them that all payments due or to become due and all amounts
payable to the Steam Lessee thereunder shall, until the
Obligations are paid in full, be made directly to the Security
Agent (which payments shall be credited toward the Steam Lessee's
obligations to make payments to the Partnership pursuant to the
Steam Sales Agreement and the Steam Lease). Unless notified to
the contrary by the Security Agent, and subject to Section 5.3 of
this Security Agreement, the Steam Lessee shall, at its expense,
enforce collection of any amounts payable with respect to each of
the Receivables.
(b) Non-Payment to the Security Agent. In the event the
Steam Lessee shall receive directly from any party to the
Contracts or from any account debtor or other obligor under any
Receivable any payments under the Contracts and the Receivables
otherwise than to the Security Agent, the Steam Lessee shall
receive such payments in a constructive trust for the benefit of
the Security Agent, shall segregate such payments from other
funds of the Steam Lessee, and, shall forthwith transmit and
deliver such payments to the Security Agent in accordance with
the terms of the Security Deposit Agreement.
Section 5.5 Direction to Account Borrowers, Contracting
Parties; etc. (a) The Steam Lessee agrees that the Security Agent
may, at its option, directly notify the account debtors or
obligors with respect to any Receivables to make payments with
respect thereto directly to the Security Agent.
(b) The Steam Lessee agrees to be bound by any
collection, compromise, forgiveness, extension or other action
taken by the Security Agent with respect to the Receivables.
Without notice to or assent by the Steam Lessee, the Security
Agent may apply any or all amounts then in, or thereafter
deposited with any financial institution in any checking,
savings, deposit or other account of the Steam Lessee in
accordance with the provisions of the Loan Agreement, the
Security Deposit Agreement and the Facility Lease. The reasonable
costs and expenses (including reasonable attorneys' fees) of
collection, whether incurred by the Steam Lessee or the Security
Agent, shall be borne by the Steam Lessee.
Section 5.6 Instruments. At such time that an Event of
Default or a Lease Event of Default shall have occurred and be
continuing, the Steam Lessee promptly shall deliver all
Instruments to the Security Agent, appropriately endorsed to the
order of the Security Agent as further security hereunder.
ARTICLE VI
SPECIAL PROVISIONS CONCERNING CONTRACTS
Section 6.1 Security Interest in Contract Rights. The Steam
Lessee's assignment and grant, pursuant to Section 2.1, to the
Security Agent, for the benefit of GE Capital and the Owner
Trustee, of a security interest in all of its right, title and
interest in and to each and all of the Contracts and the contract
rights thereunder, includes, but is not limited to:
(a) all (i) rights to payment under any Contract and
(ii) payments due and to become due under any Contract, in each
case whether as contractual obligations, damages or otherwise;
(b) all of its claims, rights, powers, or privileges
and remedies under any Contract; and
(c) all of its rights under any Contract to make
determinations, to exercise any election (including, but not
limited to, election of remedies) or option or to give or receive
any notice, consent, waiver or approval together with full power
and authority with respect to any Contract to demand, receive,
enforce, collect or provide receipt for any of the foregoing
rights or any property the subject of any of the Contracts, to
enforce or execute any checks, or other instruments or orders, to
file any claims and to take any action which, in the reasonable
opinion of the Security Agent, may be necessary or advisable in
connection with any of the foregoing (the Contracts, together
with all of the foregoing in this Section 6.1, the "Contract
Rights"); provided, however, that until the occurrence and
continuance of an Event of Default or a Lease Event of Default,
notwithstanding anything else herein to the contrary, the Steam
Lessee may exclusively exercise all of the Steam Lessee's rights,
powers, privileges and remedies under the Contracts.
Section 6.2 Further Protection. The Steam Lessee warrants
and forever shall defend its title to the Contract Rights against
the claims and demands of any Person and hereby grants the
Security Agent full power and authority, upon the occurrence or
during the continuance of an Event of Default or a Lease Event of
Default to take all actions as the Security Agent reasonably
deems necessary or advisable to effectuate the provisions set
forth in this sentence.
Section 6.3 Steam Lessee Remains Liable under Receivables
and Contracts. Anything herein to the contrary notwithstanding
(including, without limitation, the grant of any rights to the
Security Agent, the Owner Trustee or GE Capital) the Steam Lessee
shall remain liable under each of the Receivables and Contracts
to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with
the terms of any agreement giving rise to each such Receivable or
Contract. The Security Agent, the Owner Trustee and GE Capital
shall have no Obligation or liability under any Receivable (or
any agreement giving rise thereto) or Contract by reason of or
arising out of this Security Agreement or the receipt by the
Security Agent, the Owner Trustee or GE Capital of any payment
relating to such Receivable or Contract pursuant hereto or
pursuant to the Security Deposit Agreement, nor shall the
Security Agent, the Owner Trustee or GE Capital be obligated in
any manner to perform any of the obligations of the Steam Lessee
under or pursuant to any Receivable (or any agreement giving rise
thereto) or under or pursuant to any Contract, to make any
payment, to make any inquiry as to the nature or the sufficiency
of any payment received by it or as to the sufficiency of any
performance by any party under any Receivable (or any agreement
giving rise thereto) or under any Contract, to present or file
any claim, to take any action to enforce any performance or to
collect the payment of any amounts which may have been assigned
to it or to which it may be entitled at any time or times.
Section 6.4 Remedies. Upon the occurrence of any Event of
Default or Lease Event of Default and the continuance thereof,
the Security Agent shall have the rights set forth in Article VII
hereof, and in addition may (a) enforce all remedies, rights,
powers and privileges of the Steam Lessee under any or all of the
Contracts, (b) sell any or all of the Contract Rights at public
or private sale upon at least 10 days prior written notice and/or
(c) substitute itself or any nominee or trustee in lieu of the
Steam Lessee as party to any of the Contracts and to notify the
obligor of any Contract Right (the Steam Lessee hereby agreeing
to deliver any such notice at the request of the Security Agent)
that all payments and performance under the relevant Contract
shall be made or rendered to the Security Agent or such other
Person as the Security Agent may designate.
ARTICLE VII
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
OR LEASE EVENT OF DEFAULT
Section 7.1 Remedies; Obtaining the Collateral Upon Default.
Upon the occurrence of any Event of Default or Lease Event of
Default and the continuance thereof, the Security Agent shall be
entitled to exercise all the rights and remedies of a secured
party under the Uniform Commercial Code as in effect in any
relevant jurisdiction to enforce this Security Agreement and the
security interests contained herein, and, in addition, subject to
any mandatory requirements of Law then in effect, the Security
Agent may, in addition to its other rights and remedies
hereunder, including without limitation under Sections 7.2 and
7.6, and also its (and GE Capital's and the Owner Trustee's)
rights under the other Loan Documents and the Lease Documents, do
any of the following:
(a) personally, or by trustees or attorneys,
immediately take possession of the Collateral or any part
thereof, from the Steam Lessee or any other Person who then has
possession of any part thereof with or without notice or process
of law, and for that purpose may enter upon the Steam Lessee's or
such other Person's premises where any of the Collateral is
located and remove the same and use in connection with such
removal any and all services, supplies, aids and other facilities
of the Steam Lessee;
(b) instruct the obligor or obligors on any agreement,
instrument or other obligation (including, without limitation,
the Receivables and the Contracts) constituting the Collateral to
make any payment required by the terms of such instrument or
agreement directly to the Security Agent; and
(c) take possession of the Collateral or any part
thereof, by directing the Steam Lessee in writing to turn over
the same to the Security Agent at the Site, in which event the
Steam Lessee shall at its own expense
(i) forthwith turn over the same to the Security
Agent at the Site;
(ii) store and keep any Collateral so turned over
to the Security Agent at the Site pending further action by the
Security Agent as provided in Section 7.2; and
(iii) while the Collateral shall be so stored and
kept, provide such guards and maintenance services as shall be
necessary to protect the same and to preserve and maintain them
in good condition. The Steam Lessee's obligation to turn over the
Collateral as set forth above is of the essence of this Security
Agreement and, accordingly, upon application to a court of equity
having jurisdiction, the Security Agent shall be entitled to
obtain a decree requiring specific performance by the Steam
Lessee of said obligation.
Section 7.2 Remedies; Disposition of the Collateral. Any
Collateral repossessed by the Security Agent under or pursuant to
Section 7.l and any other Collateral, whether or not so
repossessed by the Security Agent, may, to the extent permitted
by any contract terms governing such Collateral, be sold, leased
or otherwise disposed of under one or more contracts or as an
entirety, and without the necessity of gathering at the place of
sale the property to be sold, and in general in such manner, at
such time or times, at such place or places and on such terms
(whether cash or credit, and in the case of credit, without
assumption of future credit risk) as the Security Agent may, in
compliance with applicable requirements of Law, determine to be
commercially reasonable. Any of the Collateral may be sold,
leased or otherwise disposed of, in the condition in which the
same existed when taken by the Security Agent or after any
overhaul or repair which the Security Agent shall determine to be
commercially reasonable. Any such disposition shall be made upon
not less than 15 days written notice to the Steam Lessee
specifying the time such disposition is to be made and, if such
disposition shall be a public sale, specifying the place of such
sale. Any such sale may be adjourned by announcement at the time
and place fixed therefor, and such sale may, without further
notice, be made at the and place to which it was so adjourned. To
the extent permitted by applicable requirements of Law, the
Security Agent (or the Owner Trustee or GE Capital) may bid for
and become the buyer of the Collateral or any item thereof
offered for sale at a public auction without accountability to
the Steam Lessee (except to the extent of surplus money received
as provided in Section 7.4)
Section 7.3 Waiver. (a) Except as otherwise provided in this
Security Agreement, THE STEAM LESSEE HEREBY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LEGAL REQUIREMENTS, NOTICE OR JUDICIAL
HEARING IN CONNECTION WITH THE SECURITY AGENT'S TAKING
POSSESSION OR THE SECURITY AGENT'S DISPOSITION OF ANY OF THE
COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR
NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY
SUCH RIGHT WHICH THE STEAM LESSEE WOULD OTHERWISE HAVE UNDER THE
CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE,
and the Steam Lessee hereby further waives:
(i) all damages occasioned by such taking of
possession except any damages which are finally judicially
determined to have been the direct result of the Security Agent's
gross negligence or willful misconduct;
(ii) all other requirements as to the time, place
and terms of sale or other requirements with respect to the
enforcement of the Security Agent's rights hereunder; and
(iii) all rights of redemption, appraisement,
valuation, stay, extension or moratorium now or hereafter in
force under any applicable law in order to prevent or delay the
enforcement of this Security Agreement or the absolute sale of
the Collateral or any portion thereof, and the Steam Lessee,
for itself and all who may claim under it, insofar as it or they
may now or hereafter lawfully do so, hereby waives the benefit
of such laws.
(b) Without limiting the generality of the foregoing,
the Steam Lessee hereby: (i) authorizes the Security Agent, in
its sole discretion and without notice to or demand upon the
Steam Lessee and without otherwise affecting the obligations of
the Steam Lessee hereunder from time to time, to take and hold
other collateral granted to it by any other Person (in addition
to the Collateral) for payment of any Obligations, or any part
thereof, and to exchange, enforce or release such other
collateral or any part thereof, and to accept and hold any
endorsement or guarantee of payment of the Obligations or any
part thereof, and to release or substitute any endorser or
guarantor or any other person granting security for or in any way
obligated upon any Obligations, or any part thereof; and (ii)
waives and releases any and all right to require the Security
Agent to collect any of the Obligations from any specific item or
items of Collateral or from any other party liable as guarantor
or in any other manner in respect of any of the Obligations or
from any collateral (other than the Collateral) for any of the
Obligations.
(c) Any sale of, or the grant of options to purchase,
or any other realization upon, any Collateral shall, provided
that it is done in accordance with applicable law and this
Security Agreement, operate to divest all right, title, interest,
claim and demand, either at law or in equity, of the Steam Lessee
therein and thereto, and shall be a perpetual bar both at law and
in equity against the Steam Lessee and against any and all
Persons claiming or attempting to claim the Collateral so sold,
optioned or realized upon, or any part thereof, from, through and
under the Steam Lessee.
Section 7.4 Application of Proceeds, Liable for Deficiency.
Except as otherwise specified therein, the proceeds of any
Collateral obtained pursuant to Section 5.4 or 7.1 or disposed of
pursuant to Section 7.2 shall be applied, first, to the payment
of any expenses incurred by the Security Agent in connection with
the administration of this Security Agreement, the custody,
preservation or sale of, collection from or other realization
from, any of the Collateral, the exercise or enforcement of any
of its rights hereunder or the failure by the Steam Lessee to
perform or observe any of the provisions hereof, including all
reasonable attorneys fees and second, to the payment of the
Obligations in such order as GE Capital shall determine. Any
surplus remaining after payment in full of all of the Obligations
shall be paid over to the Steam Lessee or to whomever may be
entitled to receive such surplus. The Steam Lessee shall be
liable for any deficiency remaining after any application of
funds pursuant hereto.
Section 7.5 Remedies Cumulative: No Waiver. Each and every
right, power and remedy hereby specifically given to the Security
Agent shall be in addition to every other right, power and remedy
specifically given to the Security Agent (or the Owner Trustee or
GE Capital) under this Security Agreement and the other
Transaction Documents, or non or hereafter existing at law or in
equity, or by statute, and each and every right, power and remedy
whether specifically herein given or otherwise existing may be
exercised from time to time or simultaneously and as often and in
such order as may be deemed expedient by the Security Agent. All
such rights, powers and remedies shall be cumulative, and the
exercise or the partial exercise of one shall not be deemed a
waiver of the right to exercise of any other. No delay or
omission of the Security Agent in the exercise of any of its
rights, remedies, powers and privileges hereunder or partial or
single exercise thereof, and no renewal or extension of any of
the Obligations, shall impair any such right, remedy, power or
privilege or shall constitute a waiver thereof.
Section 7.6 Discontinuance of Proceedings. In case the
Security Agent shall have instituted any proceeding to enforce
any right, power or remedy under this Security Agreement by
foreclosure, sale, entry or otherwise, and such proceeding shall
have been discontinued or abandoned for any reason or shall have
been determined adversely to the Security Agent, then, in every
such case, the Steam Lessee and the Security Agent shall be
restored to their former positions and rights hereunder with
respect to the Collateral, subject to the security interest
created under this Security Agreement, and all rights, remedies
and powers of the Security Agent shall continue as if no such
proceeding had been instituted.
ARTICLE VIII
INDEMNITY
Section 8.1 Indemnity. (a) The Steam Lessee agrees to
indemnify, reimburse and hold the Security Agent, GE Capital and
the Owner Trustee and the irrespective successors, assigns,
officers, directors, employees, and agents (each individually, an
"Indemnitee, " and collectively, "Indemnitees") harmless from any
and all liabilities, obligations, damages, injuries, penalties,
claims, demands, actions, suits, judgments and any and all costs
and expenses (including reasonable attorneys' fees and
disbursements) (such expenses, collectively, the "expenses") of
whatsoever kind and nature imposed on, as sorted against or
incurred by any of the Indemnitees in any way relating to or
arising out of (i) this Security Agreement, any other Transaction
Document, or the documents executed in connection herewith and
therewith or connected with the administration of the
transactions contemplated hereby and thereby, or the enforcement
of any of the terms hereof or thereof, or the preservation of any
rights hereunder or thereunder, (ii) the ownership, purchase,
delivery, control, acceptance, lease, financing, possession,
operation, condition, sale, return or other disposition, or use
of, the Collateral (including, without limitation, latent or
other defects, whether or not discoverable, and any claim for
patent or trademarking infringement), (iii) the violation of any
requirements of Law of any Governmental Authority applicable to
the Steam Lessee or the Project, (iv) any tort (including,
without limitation, claims arising or imposed under the doctrine
of strict liability, or for or on account of injury to or the
death of any Person (including any Indemnitee), or property
damage), or (v) any contract claim, excluding (x) those finally
judicially determined to have arisen solely from the gross
negligence or willful misconduct of any Indemnitee or (y) unless
specifically provided for elsewhere in this agreement, those
arising out of the actions of any Indemnitee while in possession
or control of the Collateral.
(b) Without limiting the application of Section 8.1(a),
the Steam Lessee agrees to pay, or reimburse the Security Agent,
the Owner Trustee and GE Capital for any and all reasonable fees,
costs and expenses of whatever kind or nature incurred in
connection with the preservation, protection or validation of the
Security Agent's Liens on, and security interest in, the
Collateral, including, without limitation, all fees and taxes in
connection with the recording or filing of instruments and
documents in public offices, payment or discharge of any taxes or
Liens upon or in respect of the Collateral, premiums for
insurance with respect to the Collateral and all other fees,
costs and expenses in connection with protecting, maintaining or
preserving the Collateral and the Security Agent's interest
therein, whether through judicial proceedings or otherwise, or in
defending or prosecuting any actions, suits or proceedings
arising out of or relating to the Collateral.
(c) Without limiting the application of Section 8.1(a)
or (b), the Steam Lessee agrees to pay, indemnify and hold each
Indemnitee harmless from and against any losses, costs, damages
and expenses which such Indemnitee may suffer, expend or incur in
consequence of or growing out of any failure of the Steam Lessee
to comply with its obligations under this Security Agreement or
any other Transaction Document, or any misrepresentation by Steam
Lessee in this Security Agreement or any other Transaction
Document, or in any statement or writing contemplated by or made
or delivered pursuant to or in connection with this Security
Agreement or any other Transaction Document.
(d) If and to the extent that the obligations of the
Steam Lessee under this Section 8.l are unenforceable for any
reason, the Steam Lessee hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations
which is permissible under applicable requirements of Law.
Section 8.2 Obligations Secured by Collateral. Any amounts
paid by any Indemnitee as to which such Indemnitee has the right
to reimbursement, and any amounts paid by the Security Agent in
preservation of any of its rights or interest in the Collateral,
together with interest on such amounts from the date paid until
reimbursement in full at a rate per annum equal at all times to
the Overdue Rate, shall constitute Obligations secured by the
Collateral.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices. All notices and other communications
to any party hereunder shall be in writing (including telecopy or
similar teletransmission or writing) and shall be given to such
party at its address or telecopy number set forth on Annex I
hereto or such other address or telecopy number as such party may
hereafter specify by written notice to the other party. Each such
notice or other communication shall be effective (i) if given by
telecopy, when such telecopy is transmitted by confirmed
telecopier to the telecopy number specified in this Section, (ii)
if given by mail, 5 days after such communication is deposited in
the mails with first class postage prepaid, addressed as
aforesaid or (iii) if given by any other means (including,
without limitation, by air courier), when delivered at the
address specified in this Section.
Section 9.2 Amendment. None of the teems and conditions of
this Security Agreement may be amended, changed, waived, modified
or varied in any manner whatsoever except in accordance with the
provisions of subsection 9.l of the Loan Agreement and with the
prior written consent of each of the parties hereto.
Section 9.3 Successors and Assigns. This Agreement shall be
binding upon the Steam Lessee and its successors and assigns and
shall inure to the benefit of the Security Agent, GE Capital, the
Owner Trustee and their respective successors and assigns.
Section 9.4 Survival. (a) All agreements, statements,
representations and warranties made by the Steam Lessee herein or
in any certificate or other instrument delivered by the Steam
Lessee or on its behalf under this Security Agreement shall be
considered to have been relied upon by the Security Agent and
shall survive the execution and delivery of this Security
Agreement and the other Transaction Documents regardless of any
investigation made by the Security Agent, or on its behalf, until
the Obligations shall have been paid in full.
(b) The indemnity obligations of the Steam Lessee
contained in Article VIII shall continue in full force and effect
notwithstanding the full payment of the Obligations and
notwithstanding the discharge thereof.
Section 9.5 Headings Descriptive. The headings of the
several sections of this Security Agreement are inserted for
convenience only and shall not in any way affect the meaning or
construction of any provision of this Security Agreement.
Section 9.6 Severability. Any provision of this Security
Agreement which is prohibited or unenforceable in any
jurisdiction shal1, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
Section 9.7 Steam Lessee's Duties. Anything contained
herein to the contrary notwithstanding, the Steam Lessee shall
remain liable to perform all of its obligations under or with
respect to the Collateral, and neither shall the Security Agent
have any obligations or liabilities under or with respect to any
Collateral by reason of or arising out of this Security
Agreement, nor shall the Security Agent be required or obligated
in any manner to perform or fulfill any of the obligations of the
Steam Lessee under or with respect to any Collateral.
Section 9.8 Termination; Release. When all Obligations have
been indefeasibly paid in full, this Security Agreement shall
terminate (except as provided in Section 9.4), and the Security
Agent, at the request and expense of the Steam Lessee, will
promptly execute and deliver to the Steam Lessee the proper
instruments (including Uniform Commercial Code termination
statements on form UCC-3) acknowledging the termination of this
Security Agreement, and will duly assign, transfer and deliver to
the Steam Lessee (without recourse and without any representation
or warranty of any kind) such of the Collateral as may be in the
possession of the Security Agent and has not theretofore been
sold or otherwise applied or released pursuant to this Security
Agreement.
Section 9.9 Reinstatement. This Security Agreement shall
continue to be effective or be reinstated, as the case may be, if
at any time any amount received by the Security Agent, the Owner
Trustee or GE Capital in respect of the Obligations is rescinded
or must otherwise be restored or returned by the Security Agent,
the Owner Trustee or GE Capital upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Steam Lessee or
upon the appointment of any intervener or conservator of, or
trustee or similar official for, the Steam Lessee or any
substantial part of its assets, or upon the entry of an order by
a bankruptcy court avoiding payment of such amount, or otherwise,
all as though such payments had not been made.
Section 9.10 Counterparts. This Security Agreement may be
executed in any number of counterparts, each of which, when so
executed and delivered, shall be an original, but all of which
together shall constitute one and the same instrument.
Section 9.11 GOVERNING LAW; SUBMISSION TO JURISDICTION;
WAIVER OF JURY TRIAL.
(a) THIS SECURITY AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND
EXCEPT TO THE EXTENT THE VALIDITY OR PERFECTION OF THE SECURITY
INTERESTS HEREUNDER, OR REMEDIES HEREUNDER, ARE GOVERNED BY THE
LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
SECURITY AGREEMENT AND ANY ACTION FOR ENFORCEMENT OF ANY JUDGMENT
IN RESPECT THEREOF MAY BE BROUGHT IN THE COURTS OF THE STATE OF
NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE STEAM LESSEE HEREBY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND APPELLATE
COURTS FROM ANY THEREOF. THE STEAM LESSEE IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE STEAM
LESSEE AT ITS ADDRESS REFERRED TO IN SECTION 9.1. THE STEAM
LESSEE HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID
ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT BROUGHT IN THE COURTS REFERRED TO ABOVE AND HEREBY
FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN
ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED IN ANY OTHER JURISDICTION.
(c) EACH OF THE STEAM LESSEE AND THE SECURITY AGENT
HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY MATTER ARISING HEREUNDER.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their duly authorized
officers as of the date first above written.
BRANDYWINE WATER COMPANY
By:________________________
Name:ROBERT W. CARTER
Title: PRESIDENT
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, as Security Agent
By:_________________________
Name: KATHY A. LARIMORE
Title: ASSISTANT VICE PRESIDENT
Annex I to Security Agreement
Steam Lessee
Brandywine Water Company
4100 Spring Valley, Suite 1001
Dallas, Texas 75244
Telephone: (214) 980-7159
Telecopier: (214) 980-6815
Attention: President and General Counsel
Secured Party
Shawmut Bank Connecticut,
National Association
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
Telephone: (203) 986-7835
Telecopier: (203) 986-7920
EXHIBIT 10.36
ASSUMPTION AGREEMENT AND RELEASE, dated as of July 31, 1996,
made by PANDA INTERHOLDING CORPORATION, a Delaware corporation
("Panda"), in favor of GENERAL ELECTRIC CAPITAL CORPORATION, a New
York corporation ("GE Captial"), and FLEET NATIONAL BANK, a national
banking association, formerly known as Shawmut Bank Connecticut,
National Association, as Security Agent under the Security Deposit
Agreement (the "Security Agent") for the benefit of GE Capital and the
Owner Trustee, in connection with the Construction Loan Agreement and
Lease Commitment, dated as of March 30, 1995 (as the same may be
amended, supplemented or otherwise modified from time to time, the
"Loan Agreement"; capitialzed terms used herein and not otherwise
defined having the meanings set forth in the Loan Agreement) among
Panda-Brandywine, L.P., a Delaware limited partnership (the "Partnership"),
Panda Brandywine Corporation, a Delaware corporation, and GE Capital,
and the other Transaction Documents.
W I T N E S S E T H:
WHEREAS, pursuant to the Loan Agreement GE Capital has agreed to
(a) provide construction financing for the Project, (b) issue the Lettes
of Credit as collateral security for certain obligations of the Partnership
under the Power Purchase Agreement, (c) acting through the Owner Trustee,
lease the Site from the Partnership and sublease the Site back to the
Partnership, (d) upon completion of the Project, acting through the
Owner Trustee, purchase the Facility from the Partnership and lease the
Facility back to the Partnership, and (e) upon completion of the
Project, make Equity Loans to the Partnership or the Partners, subject
to and upon the terms and conditions set forth in the Loan Agreement and
the other Transaction Documents;
WHEREAS, on October 27, 1995, Panda Holdings, Inc., a Delaware
corporation ("Holdings"), merged with and into Panda Energy Corporation, a
Texas corporation ("PEC") (the "Merger"), and pursuant to the Merger and
the Assumption Agreement dated as of October 27, 1995 made by PEC in favor
of GE Capital and the Security Agent, PEC assumed and succeeded to all
of Holdings' rights, obligations and liabilities, including, without
limiation, Holdings' rights, obligations and liabilities under the Loan
Agreement, the Stock Pledge Agreement and the other Transaction Documents
to which Holdings was a party;
WHEREAS, PEC desires to assign and transfer to Panda, its direct
wholly-owned subsidiary, 100% of the capital stock of the General Partner,
the Limited Partner and Brandywine Water Company, and its rights, obligations
and liabilities under the Loan Agreement, the Stock Pledge Agreement and
the other Transaction Documents to which PEC is a party (the "Transfer"); and
WHEREAS, the Security Agent and GE Capital are willing to agree to the
Transfer on the condition that Panda execute and deliver this agreement to
assume all of PEC's rights, obligations and liabilities under the Transaction
Documents, other than the obligations imposed on PEC pursuant to Amendment
No. 2 thereto.
NOW, THEREFORE, in consideration of the premises and covenants contained
herein Panda hereby agrees with the GE Capital and the Security Agent as
follows:
1. Assumption. Panda hereby assumes all obligations and liabilities
of, and succeeds to the rights of, PEC under the Loan Agreement, the Stock
Pledge Agreement, as amended (other than those obligations imposed on PEC
pursuant to Amendment No. 2 to the Stock Pledge Agreement), and each of the
other Transaction Documents and hereby joins in the Transaction Documents to
which PEC is a party for the purpose of agreeing to (a) be bound by all
covenants and agreements attributable to PEC under the Transaction Documents,
(b) perform all obligations required of PEC under the Transaction Documents and
(c) grant the Liens provided for in the Collateral Security Documents to which
PEC is a party. Without limiting the foregoing, Panda hereby (i) makes each
of the representations and warranties made by PEC in or pursuant to the
Transaction Documents on and as of the date hereof, after giving effect to
the Assignment and Transfer and (ii) hereby confirms and ratifies the grant
of Liens and security interests by PEC to the Security Agent, for the
benefit of GE Capital and the Owner Trustee, pursuant to the Collateral
Security Documents.
2. Further Assurances. Panda hereby further agrees to execute such
other documents, make such filings and to take such other actions as GE
Capital and the Security Agent may reasonably request from time to time in
connection with the Assignment and Transfer and the assumption of the
obligations and liabilities of PEC under the Loan Agreement and the other
Transaction Documents pursuant to this Assumption Agreement and Release.
3. Release. From and after the execution and delivery of Amendment
No. 2 to the Stock Pledge Agreement and the consummation of the Transfer,
the Security Agent, GE Capital and the Owner Trustee hereby release and
forever discharge PEC from any and all further liabilities and obligations
of the Pledgor under the Stock Pledge Agreement (except with respect to the
period occurring prior to the execution and delivery of Amendment No. 2 to
the Stock Pledge Agreement and the consummation of the Transfer) and
provided that the foregoing shall not limit any other obliations of PEC
in any other capacity under the Stock Pledge Agreement (including
pursuant to Section 8(g) thereof).
4. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof,
and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdicition.
5. Amendments. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified
except by a written instrument executed by Panda and GE Capital and the
Security Agent.
6. Section Headings. The Section headings used in this Agreement
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
7. Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the successors and assigns of the Security
Agent, GE Capital and the Owner Trustee.
8. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEW YORK.
9. Counterparts. This Agreement may be executed by one or more
of the parties hereto on any number of separate counterparts (including by
facsimile transmission), and all of said counterparts taken together shall
be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
duly executed and delivered as of the date first above written.
PANDA INTERHOLDING CORPORATION
By: /s/ James D. Wright
Title:
Agreed to and accepted:
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Michael J. Tzayrolis
Title: Manager of Operations
FLEET NATIONAL BANK,
as Security Agent
By: /s/ K. Larimore
Title: Assistant Vice President
EXHIBIT 10.37
POWER PURCHASE AND OPERATING AGREEMENT
BETWEEN
PANDA ENERGY CORPORATION
AND
VIRGINIA ELECTRIC AND POWER COMPANY
Power Purchase and Operating
Agreement
Table of Contents
Article
1 Definitions 4
2 Sale and Purchase of Energy and Capacity 11
3 Notices 12
4 Pre-Operation Period 13
5 Term and Termination 17
6 Representations and Warranties of Operator 20
7 Control and Operation of Facility; Dispatching 25
8 Interconnection 29
9 Metering 32
10 Compensation, Payment, and Billings 34
11 Testing and Capacity Ratings 44
12 Insurance 50
13 Liability, Noncompliance and Guarantees 52
14 Force Majeure 59
15 Taxes and Claims for Labor and Materials 61
16 Choice of Law 61
17 Miscellaneous Provisions 62
18 Statutory and Regulatory Changes 63
19 Entirety 65
POWER PURCHASE AND OPERATING AGREEMENT
BETWEEN
PANDA ENERGY CORPORATION
AND
VIRGINIA ELECTRIC AND POWER COMPANY
THIS AGREEMENT, dated as of January 24, 1989 is by and between
PANDA ENERGY CORPORATION, a Texas corporation with its principal
office located in Dallas, Texas ("Operator") and VIRGINIA
ELECTRIC AND POWER COMPANY, a Virginia public service corporation
with its principal office located in Richmond, Virginia ("North
Carolina Power" or "the Company"). Both Operator and North
Carolina Power are herein individually referred to as "Party" and
collectively referred to as "Parties".
R E C I T A L S
WHEREAS, Operator plans to own and operate a new generation
facility located within North Carolina Power's certificated
retail service area in Roanoke Rapids, North Carolina, with a
maximum nameplate rating of 172,000 kW at a power factor of
ninety (90) percent; such facility in all future correspondence
to be identified as "the Panda Facility" (or the "Facility"); and
WHEREAS, the Parties currently anticipate that the
Commercial Operations Date (as defined in this Agreement) will
occur on or about June 14, 1990 (such date hereafter the
"Anticipated Commercial Operations Date"); and
WHEREAS, Operator wishes to sell exclusively to North
Carolina Power all of the Facility's generation made available
for sale, such sale to be pursuant to the terms and conditions
set forth herein; and
WHEREAS, North Carolina Power wishes to purchase energy and
capacity which may be dispatched by North Carolina Power pursuant
to the terms and conditions set forth herein:
NOW, THEREFORE, in consideration of these premises and of
the mutual covenants and agreements hereinafter set forth,
Operator and North Carolina Power agree to the following:
ARTICLE 1: DEFINITIONS
Whenever the following terms appear in this Agreement,
whether in the singular or in the plural, present or past tense,
they shall have the meaning stated below:
1.1 "Business Day" - Monday through Friday excluding
holidays recognized by North Carolina Power. As of the date of
this Agreement, these holidays include New Year's Day, Good
Friday, Memorial Day, Fourth of July, Labor Day, Veteran's Day,
Thanksgiving Day, day after Thanksgiving Day, Christmas Eve and
Christmas Day. Such holidays may be changed by North Carolina
Power upon ten (10) Days written notice to Operator.
1.2 "Calendar Day or Day" - A Calendar Day shall be the 24-
hour period beginning and ending at 12:00 midnight Eastern Time.
The terms Day and Calendar Day may be used interchangeably and
shall have the same definition.
1.3 "Calendar Month or Month" - A Calendar Month shall
begin at 12:00 midnight on the last Day of the preceding month
and end at 12:00 midnight on the last Day of the current Month.
The terms Month and Calendar Month may be used interchangeably
and shall have the same definition.
1.4 "Calendar Quarter or Quarter" - A Calendar Quarter shall
be a 3-Month period beginning 12:00 midnight on December 31,
March 31, June 30, or September 30. The terms Calendar Quarter
and Quarter shall be used interchangeably and shall have the same
definition.
1.5 "Calendar Year or Year" - A Calendar Year shall be the
12-Month period beginning 12:00 midnight on December 31 and
ending at 12:00 midnight on the subsequent December 31. The terms
Year and Calendar Year may be used interchangeably and shall have
the same definition.
1.6 "Capacity Purchase Price" - The price North Carolina
Power will pay Operator for Dependable Capacity in accordance
with Article 10.
1.7 "Capacity Test Period" - One of the periods which either
(i) begins with the Commercial Operations Date and ends on the
next November 30, (ii) begins on December 1 and ends on the next
November 30, or (iii) begins on December 1 and ends with the date
of termination of this Agreement. Definition (i) will apply first
for one period, definition (iii) will apply last for one period,
definition (ii) will apply for all other such periods.
1.8 "Commercial Operations Date" The first Day following
the date Operator requested the test (i.e., Initial Test or
additional) that determines initial Dependable Capacity as set
forth in Sections 11.3 and 11.4.
1.9 "Dependable Capacity" - The amount of capacity
determined by testing pursuant to Article 11 and delivered from
the Facility to North Carolina Power.
1.10 "Design Limits" - When the Facility operates pursuant
to Virginia Power's Dispatch rights in accordance with this
Agreement, it is capable of operation over the continuous range
from 0 MW (the "Minimum Operating Level") through 150 MW (Summer)
and 170 MW (Winter) (the "Maximum Operating Level"), except that
due to the equipment installed the Facility cannot be operated in
the range of zero (0) percent to thirty-five (35) percent of the
Dependable Capacity or fifty (50) percent to seventy-five (75)
percent of the Dependable Capacity except in an Emergency. After
the Facility has been off line due to a Scheduled Outage, a
Forced Outage, or in response to Virginia Power's Dispatch of the
Facility for a period in excess of twelve (12) hours (i.e.: a
cold start), it can it can be resynchronized and brought to its
Minimum Operating Level within twenty (20) minutes and can
achieve its Maximum Operating Level within one hundred eighty
(180) minutes following Virginia Power's notice to start-up the
Facility. Hot and Warm start-up times shall be determined in
accordance with the characteristics of the Facility and Prudent
Utility Practices and incorporated into the operating procedures
developed pursuant to Section 4.4 of this Agreement. Once the
Facility has been synchronized with Virginia Power's system and
brought to its Minimum Operating Level, its output may be
increased at a rate not less than four (4) percent of the
generator nameplate rating per minute. If the Facility is
operating above its Minimum Operating Level, its output may be
reduced at a rate not less than ten (10) percent of the generator
nameplate rating per minute down to the Minimum Operating Level.
1.11 "Dispatch" - The ability of North Carolina Power's
System Operation Center to schedule and control, directly or
indirectly, manually or automatically, the generation of the
Facility in order to increase or decrease the electricity
delivered to the North Carolina Power system in accordance with
the Prudent Utility Practice.
1.12 "Economic Dispatch" - The distribution of total North
Carolina Power energy needs among available sources for optimum
system economy in accordance with the Prudent Utility Practice
with due consideration of incremental generating costs,
incremental power purchase costs, and incremental transmission
losses as determined solely by North Carolina Power.
1.13 "Emergency" - A condition or situation which in the
sole judgment of North Carolina Power affects or will affect
North Carolina Power's ability to meet its obligations to
maintain safe, adequate and continuous electric service to North
Carolina Power's customers and/or the customers of any member
NERC.
1.14 "Energy Purchase Price" - The price per kilowatt hour
North Carolina Power will pay Operator for energy delivered to
North Carolina Power in accordance with Article 10.
1.15 "Estimated Dependable Capacity" - The Dependable
Capacity for both the Summer Period and the Winter Period that
Operator commits to North Carolina Power as designated under the
provisions of Article 11.
1.16 "FERC"- The Federal Energy Regulatory Commission or any
successor thereto.
1.17 "Facility" - Operator's generation facility, including
auxiliary equipment and equipment installed on Operator's side of
the Interconnection Point that are not "Interconnection
Facilities".
1.18 "Financial Closing" - The date on which documents which
provide funding for the construction of the Facility are
executed.
1.19 "Forced Outage" - An interruption of the Facility's
generation that is not (a) the result of a Scheduled Outage or
(b) requested by North Carolina Power in accordance with the
terms of this Agreement.
1.20 "Forced Outage Day" - Each continuous twenty-four (24)
hour period (a) beginning with the start of a -Forced Outage
[regardless of the number of actual outages that may occur during
such twenty-four (24) hour period(s)] or (b) designated by the
Operator as a Forced Outage Day.
1.21 "Force Majeure Day" - A Forced Outage Day that is both
(i) excused under the provisions of Article 14 and (ii) is
designated as a Force Majeure Day by the Operator.
1.22 "Heat Rate" The number of British Thermal Units (Btus)
projected by the Operator to be required to produce one kilowatt-
hour of energy at the Facility. This number will be a constant
for future calculations of the Fuel Compensation Price,
regardless of the Facility's actual heat rate.
1.23 "Initial Synchronization Date"- The first date upon
which (a) energy is generated by the Facility and (b) such energy
is metered by the North Carolina Power-owned metering equipment.
1.24 "Interconnection Facilities" - All the facilities
installed by North Carolina Power to enable North Carolina Power
to receive energy, or energy and Dependable Capacity, from the
Facility, including but not limited to all metering equipment;
transmission and distribution lines and associated equipment;
transformers and associated equipment; relay and switching
equipment; protective devices and safety equipment; and
telemetering equipment, wherever located.
1.25 "Interconnection Point" - The physical point(s) where
the output of the Facility is delivered to the North Carolina
Power system. This point will be on the high side of Operator's
step-up transformer.
1.26 "Interest" - The compensation for the accrual of
monetary obligations under this Agreement computed monthly and
prorated daily from the time each such obligation arises based on
an annual interest rate equal to the Prime Rate plus two (2)
percent. For purposes hereof, Prime Rate shall mean the rate of
interest from time to time publicly announced by The Chase
Manhattan Bank, N.A., at its principal office, presently located
at 1 Chase Manhattan Plaza, New York, New York 10081, as its
prime commercial lending rate, determined for each obligation to
pay interest, at the time such obligation arises.
1.27 "NERC" - The North American Electric Reliability
Council, including any successor thereto and subdivisions
thereof.
1.28 "Net Electrical Output" - All of the Facility's energy
output made available for sale; such Net Electrical Output shall
be measured by the North Carolina Power-owned metering that would
be located both (a) on the high voltage side of the step-up
transformer and (b) on the North Carolina Power-owned side of the
Interconnection Point.
1.29 "Prudent Electrical Practices" - The practices, methods
and use of equipment required (i) to protect North Carolina
Power's system, employees, agents, and customers from
malfunctions occurring at the Facility; (ii) to protect the
Facility, and Operator's employees and agents at the Facility,
from malfunctions occurring on North Carolina Power's system or
on any other electric utility with which North Carolina Power is
directly or indirectly electrically connected; and (iii) to
adhere to applicable industry codes, standards, and regulations.
1.30 "Prudent Utility Practices" - The practices generally
followed by the electric utility industry, as changed from time
to time, which generally include, but are not limited to,
engineering and operating considerations.
1.31 "PURPA" - The Public Utility Regulatory Policies Act of
1978.
1.32 "Qualifying Facility" - A cogeneration facility or a
small power production facility which is a Qualifying Facility
under Subpart B of Subchapter K, Part 292 of Chapter I, Title 18,
Code of Federal Regulations, promulgated by the FERC. Such a
facility must be "new capacity" pursuant to PURPA, construction
of which began on or after November 9, 1978.
1.33 "Scheduled Outage" - A planned interruption of the
Facility's generation that (a) has been coordinated in advance
with North Carolina Power with a mutually agreed start and
duration pursuant to Article 7 and (b) is required for
inspection, preventive maintenance or corrective maintenance.
1.34 "Summer Demonstration Period" - The Summer
Demonstration Period shall be the period beginning 12:00 midnight
on June 14 and ending at 12:00 midnight on the following
September 15.
1.35 "Summer Period" - The Summer Period shall be the six
(6) Month period beginning 12:00 midnight on March 31 and ending
at 12:00 midnight on the following September 30.
1.36 "Term" The initial Term of this Agreement as specified
in Section 5.1 plus any renewal Term determined pursuant to
Section 5.2.
1.37 "Winter Demonstration Period" - The Winter
Demonstration Period shall be the period beginning 12:00 midnight
on November 30 and ending at 12:00 midnight on the last Day of
the following February.
1.38 "Winter Period" - The Winter Period shall be the six
(6) Month period beginning 12:00 midnight on September 30 and
ending at 12:00 midnight on the following March 31.
ARTICLE 2: Sale and Purchase of Energy and
Capacity
2.1 Operator agrees to sell and North Carolina Power agrees
to purchase the Net Electrical Output of the Facility but only to
the extent that the Facility is subject to Economic Dispatch by
North Carolina Power and subject to the Terms and Conditions of
this Agreement.
2.2 Except as otherwise provided herein, and subject to
other terms hereof, Operator agrees to sell and North Carolina
Power agrees to purchase Dependable Capacity from the Facility as
determined pursuant to Article 11 - Testing and Capacity Ratings.
2.3 Notwithstanding anything in this Agreement to the
contrary, and without limiting any other obligations of Operator
in this Agreement, North Carolina Power's obligation to purchase
energy and Dependable Capacity from Operator at the rates
specified in Article 10 is contingent upon Operator's submittal
to North Carolina Power of all the following:
a) Documents and other evidence demonstrating that Operator
has the right to operate the Facility and deliver the electricity
for the Term of this Agreement.
(b) Documents and other evidence demonstrating to the
reasonable satisfaction of North Carolina Power that the
Facility, if operated and maintained in accordance with Prudent
Electrical Practices and Prudent Utility Practices, can be
reasonably expected to have a useful life at least equal to the
Term. Evidence required under this subsection may be submitted by
Operator upon the completion of each phase of development (for
example, completion of conceptual engineering design, completion
of specifications of major equipment components, completion of
detailed engineering, completion of as-built drawings and receipt
of manufacturers' guaranteed performance data).
(c) Documents and other evidence demonstrating that the
Facility has been constructed in compliance with the terms of
this Agreement and the information submitted pursuant to Section
2.3(b).
(d) Evidence that the Facility is a Qualifying Facility.
(e) Certificates of insurance coverages or insurance
policies required by Article 12.
(f) Evidence that Operator has obtained all necessary
permits, licenses, approvals and other governmental
authorizations needed to construct and operate the Facility,
including without limitation a Certificate of Public Convenience
and Necessity as granted by the North Carolina Utilities
Commission.
(g) Necessary technical documents and data sufficient for
North Carolina Power to perform its interconnection study and
design, for construction and installation of Interconnection
Facilities.
(h) Evidence to the reasonable satisfaction of North
Carolina Power that Operator has complied with all requirements
of Article 4, to the extent compliance is required before the
Initial Synchronization Date.
(i) Documents and other evidence to the reasonable
satisfaction of North Carolina Power that Operator has complied
with the requirements of Section 8.7.
ARTICLE 3: Notices
3.1 Any notice or communication required to be in writing
hereunder shall be given by any of the following means:
registered, certified, or first class mail, telex, telecopy, or
telegram. Such notice or communication shall be sent to the
respective Parties at the address listed below. Except as
Expressly provided herein, any notice shall be deemed to have
been given when sent. Any notice given by first class mail shall
be considered sent at the time of posting. Communications by
telex, telecopy, or telegram shall be confirmed by depositing a
copy of the same in the post office for transmission by
registered, certified, or first class mail in an envelope
properly addressed as follows:
In the case of Operator to:
Panda Energy Corporation
4100 Spring Valley Suite 1001
Dallas, Texas 75244
In the case of North Carolina Power to:
Virginia Electric and Power Company (if by hand)
Manager - Capacity Acquisition
Richmond Plaza
110 South Seventh Street, 3rd Floor East
Richmond, Virginia 23219
Virginia Electric and Power Company (if by mail)
Manager - Capacity Acquisition
P. O. Box 26666
Richmond, Virginia 23261
3.2 Either Party may, by written notice to the other, change
the representative or the address to which such notices and
communications are to be sent.
ARTICLE 4: Pre-Operation Period
4.1 Operator shall, at its expense, acquire, and maintain in
effect, from the FERC and from any and all other federal, state
and local agencies, commissions and authorities with jurisdiction
over Operator and/or the Facility, all permits, licenses, and
approvals, and complete or have completed all environmental
impact studies necessary (a) for the construction, operation and
maintenance of the Facility and (b) for Operator to perform its
obligations under this Agreement. In addition Operator shall, at
its expense, acquire from the FERC, certification as a Qualifying
Facility and shall operate and maintain the Facility in a manner
consistent with the minimum requirements for such certification
in effect at the Commercial Operations Date: except, however that
if the Operator's steam host should discontinue its purchases of
steam from Operator, Operator shall use its best efforts to
acquire another host which would cause compliance with the
requirements for QF certification. If Operator, for any reason,
loses its QF certification, Operator agrees to obtain approval of
any state or federal agencies needed for this Agreement to
continue in effect if it is deemed a wholesale electric contract
(for example under Section 205 of the Federal Power Act). If such
approval is not obtained within twelve (12) months of the
Facility's loss of QF certification then North Carolina Power may
terminate this Agreement.
4.2 Operator shall submit for North Carolina Power's review
its construction schedule thirty (30) Days prior to starting
Facility construction and a start-up and test schedule for the
Facility thirty (30) Days prior to start-up and testing of new
Facilities. Operator shall submit progress reports in a form
reasonably satisfactory to North Carolina Power on the first Day
of every Month until the Initial Synchronization Date and notify
North Carolina Power of any changes to such schedules in a timely
manner. North Carolina Power shall have the right to monitor the
construction, start-up and testing of the Facility and Operator
shall comply with all reasonable requests of North Carolina Power
resulting therefrom. Operator shall cooperate in such physical
inspections of the Facility as may be reasonably required by
North Carolina Power during and after completion of construction.
North Carolina Power's technical review and inspection of the
Facility shall not be construed as endorsing the design thereof
nor as any warranty of the safety, durability or reliability of
the Facility.
4.3 Operator shall provide North Carolina Power with
generator manufacturer's capability curves, relay types, and
proposed relay settings for review and inspection by North
Carolina Power no later than two hundred and ten (210) Days prior
to the Anticipated Commercial Operations Date. Within sixty (60)
Days of receiving such material, North Carolina Power shall
inform Operator, in writing, if the proposed relay types and
relay settings are acceptable. If these are not found to be
acceptable to North Carolina Power, Operator agrees to comply
with any requests, by North Carolina Power, to provide acceptable
relay types and relay settings. Operator shall also provide North
Carolina Power with Facility design heat balance, flow diagrams
and major equipment list for review. All information must be
submitted in a manner reasonably acceptable to North Carolina
Power, particularly the turbine generator data, which shall be
used for North Carolina Power's inspections and transient
stability analysis. Turbine generator data must be completely
submitted at least two hundred and ten (210) Days prior to the
Anticipated Commercial Operations Date. If any such data
submitted in accordance with this Section 4.3 is estimated,
actual data shall be submitted no later than one hundred twenty
(120) Days prior to the Anticipated Commercial Operations Date.
4.4 Operator and North Carolina Power shall mutually develop
written operating procedures no later than one hundred and twenty
(120) Days prior to the Anticipated Commercial Operations Date.
The operating procedures will be a mutual agreement based on the
design of the Facility and the design of the interconnection to
North Carolina Power's bulk electric system. The operating
procedures will be intended as a guide on how to integrate the
Operator's Facility and output into North Carolina Power's bulk
electric system. Topics covered shall include, but not
necessarily be limited to, method of day-to-day communications:
key personnel list for both Operator and utility operating
centers; clearances and switching practices; outage scheduling;
daily capacity and energy reports; unit operations log; and
reactive power support.
4.5 North Carolina Power shall prepare and submit to
Operator a written voltage schedule no later than thirty (30)
Days prior to the Anticipated Commercial Operations Date. North
Carolina Power may change such voltage schedule upon thirty (30)
Days prior written notice to Operator. Operator shall use such
voltage schedule in the operation of its Facility. This voltage
schedule shall be based on the normally expected operating
conditions for the Facility and the reactive power requirements
of North Carolina Power's system.
4.6 Operator shall notify North Carolina Power of the
Initial Synchronization Date in writing no less than two (2)
weeks prior to that date. North Carolina Power and Operator shall
agree on the Initial Synchronization Date and North Carolina
Power shall have the right to have representatives present at
such time.
4.7 North Carolina Power reserves the right to delay the
Initial Synchronization Date due to problems with the Facility
which could reasonably be expected to adversely affect North
Carolina Power's operations. In such event, North Carolina Power
shall give Operator written notice of such problems and Operator
shall remedy any such problems with facilities or equipment which
Operator installed or maintains.
ARTICLE 5: Term and Termination
5.1 The Term of this Agreement shall begin with the
effective date and shall continue for a period of twenty-five
(25) years from the Commercial Operations Date unless extended
under this Article 5, terminated, or canceled. If the Term is
extended under this Article 5, the word "Term" shall thereafter
be deemed to mean the original Term so extended.
5.2 This Agreement may be extended for periods of up to five
(5) years each, provided that two (2) years prior to the end of
the initial Term, or subsequent extension period(s) as the case
may be, the Parties agree in writing to such extension.
5.3 If either Party materially defaults (hereafter referred
to as "Default") under this Agreement, then the non-defaulting
Party shall give the defaulting Party written notice describing
such Default. The defaulting Party shall be given sixty (60) Days
from the receipt of such notice to cure such Default. However, if
such written notice is given prior to the Commercial Operations
Date, and the Default cannot be cured within sixty (60) Days with
the exercise of reasonable diligence, the non-defaulting Party
shall grant an additional thirty (30) Day period of time in which
to cure such Default. Conversely, if such written notice is given
on or after the Commercial Operations Date, and the Default
cannot be cured within sixty (60) Days with the exercise of
reasonable diligence, the non-defaulting Party shall grant a
reasonable additional period of time in which to cure such
Default. In either case, if the defaulting Party fails to cure
such Default within such prescribed period, then the non-
defaulting Party may, in addition to any other rights or remedies
available at law or in equity, immediately terminate this
Agreement and consider defaulting Party in material breach of its
obligations under this Agreement. Conditions which shall be
considered Defaults by Operator under this Section 5.3 include:
(a) Failure to comply with the requirements of Article 13;
or
(b) Failure to complete Financial Closing by December 31,
1989, failure to commence construction of the Facility by
December 31, 1989, abandonment of construction or operation of
the Facility at any time, failure to arrange for fuel supply
contracts by December 31, 1989, and failure to reach the
Commercial Operations Date by the later of June 14, 1991 or
thirty (30) Days after North Carolina Power advises Operator that
the Interconnection Facilities are sufficient to accept
deliveries up to the Estimated Dependable Capacity .unless
excused by Force Majeure as specified in Article 14; or
(c) Attempts by Operator, its employees, contractors or
subcontractors of any tier, to operate, maintain, or tamper with
the Interconnection Facilities without the prior written consent
of North Carolina Power; any reduction in Operator's energy sales
to North Carolina Power in order to sell to any other entity or
entities; any breach of financial documents associated with the
performance of this Agreement; failure to comply with the
requirements of Section 2.3 and Section 4.1; failure to comply
with the representations and warranties specified in Article 6;
failure to comply with the insurance provisions identified in
Article 12; failure to comply with the requirements of Section
17.1; or
(d) A receiver or liquidator or trustee of Operator or of
any of its property shall be appointed by a court of competent
jurisdiction; or by decree of such a court, a party shall be
adjudicated bankrupt or insolvent or any substantial part of its
property shall have been sequestered; or a petition to declare
bankruptcy or to reorganize a party pursuant to any of the
provisions of the Federal Bankruptcy Code, as now in effect or as
it may hereafter be amended, or pursuant to any other similar
state statute as now or hereafter in effect, shall be filed
against a party and shall not be dismissed within ninety (90)
Days after such filing; or Operator shall file a voluntary
petition in bankruptcy under any provision of any federal or
state bankruptcy law or shall consent to the filing of any
bankruptcy or reorganization petition against it under any
similar law; or without limiting of the generality of the
foregoing, Operator shall file a petition or answer or consent
seeking relief or assisting in seeking relief in a bankruptcy
under any provision of any federal or state bankruptcy law or
shall consent to the filing of any bankruptcy or reorganization
petition against it under any similar law; or without limiting of
the generality of the foregoing, Operator shall file a petition
or answer or consent seeking relief or assisting in seeking
relief in a proceeding under any of the provisions of the Federal
Bankruptcy Code, as now in effect or as it may hereafter be
amended, or pursuant to any other similar state statute as now or
hereafter in effect, or an answer admitting the material
allegations of a petition filed against it in such a proceeding;
or Operator shall make an assignment for the benefit of its
creditors; or Operator shall admit in writing its inability to
pay its debts generally as they become due; or Operator shall
consent to the appointment of a receiver, trustee, or liquidator
of it or of all or any part of its property.
(e) Any other material breach hereof.
5.4 Termination of this Agreement shall not be construed as
a forfeiture or waiver of any statutory right of a Qualifying
Facility to sell to North Carolina Power nonfirm energy produced
from the Facility.
ARTICLE 6: Representations and Warranties of Operator
6.1 Operator represents and warrants that beginning with
the Commercial Operations Date and at all times thereafter until
the termination of this Agreement that it shall have (i) fuel oil
stored at the Facility site in quantities sufficient to operate
the Facility for thirty-six (36) consecutive hours at the
Dependable Capacity level determined in accordance with Article
11, (ii) fuel oil stored within four (4) miles of the Facility
site at a location owned, leased or otherwise controlled by
Operator in quantities sufficient to operate the Facility for one
hundred and thirty-two (132) consecutive hours at the Dependable
Capacity level determined in accordance with Article 11, and
(iii) a means to transport the fuel oil from the off-site
location to the Facility site, such means to be owned or fully
controlled by Operator. From time to time, as North Carolina
Power may reasonably request, Operator shall provide North
Carolina Power evidence of its compliance with this obligation.
6.2 Operator warrants that the Facility will be operated
and maintained in accordance with (a) operating and maintenance
standards recommended by the Facility's equipment suppliers, (b)
operating procedures developed pursuant to Section 4.4 and (c)
Prudent Utility Practices, including without limitation,
synchronizing, voltage and reactive power control.
6.3 Operator warrants that the Facility will be operated in
such a manner so as not to have an adverse effect on North
Carolina Power's voltage level or voltage waveform.
6.4 Operator warrants that the Facility will be operated at
the voltage levels determined pursuant to Section 4.5 provided
such levels are within the Design Limits of the Facility.
6.5 Operator shall, at all times, conform to all laws,
ordinances, rules and regulations applicable to it. Operator
shall give all required notices, shall procure and maintain all
governmental permits, licenses and inspections necessary for its
performance of this Agreement, and shall pay all charges and fees
in connection therewith.
6.6 Operator agrees to comply with all applicable
provisions of Executive Order 11246, as amended; paragraph 503 of the
Rehabilitation Act of 1973, as amended; paragraph 402 of the Vietnam Era
Veterans Readjustment Assistance Act of 1974, as amended; and
implementing regulations set forth in 41 C.F.R. paragraphs 60.1, 60-250,
and 60-741. Operator agrees that the equal opportunity clause set
forth in 41 C.F.R. paragraph 60-1.4 and the affirmative action clauses
set forth in 41 C.F.R. paragraph 60-250.4 and 41 C.F.R. paragrah 60-741.4
are hereby incorporated by reference and made a part of this
Agreement. Operator certifies that it does not and will not
maintain any facilities it provides for its employees in a
segregated manner and that it does not and will not permit its
employees to perform their services at any location under
Operator's control where segregated facilities are maintained.
Operator further agrees to submit and obtain such certifications
of nonsegregated facilities as are required by 41 C.F.R. paragraph 60-
1.8. The provisions of this section shall apply to Operator only
to the extent that (a) such provisions are required of Operator
under existing law, (b) Operator is not otherwise exempt from
said provisions and (c) compliance with said provisions is
consistent with and not violative of 42 U.S.C. paragraph 2000e et seq.,
42 U.S.C. paragraph 1981 et seq., or other acts of Congress.
6.7 Any fines or other penalties incurred by Operator or its
agents, employees or subcontractors for noncompliance by
Operator, its employees, or subcontractors with laws, rules,
regulations or ordinances shall not be reimbursed by North
Carolina Power but shall be the sole responsibility of Operator.
If fines, penalties or legal costs are assessed against North
Carolina Power by any government agency or court due to
noncompliance by Operator with any of the laws, rules,
regulations or ordinances referred to in Sections 6.5 and 6.6
above or any other laws, rules, regulations or ordinances with
which compliance is required herein, or if the work of Operator
or any part thereof is delayed or stopped by order of any
government agency or court due to Operator's noncompliance with
any such laws, rules, regulations or ordinances, Operator shall
indemnify and hold harmless North Carolina Power against any and
all losses, liabilities, damages, and claims suffered or incurred
because of the failure of Operator to comply therewith. Operator
shall also reimburse North Carolina Power for any and all legal
or other expenses (including attorneys' fees) reasonably incurred
by North Carolina Power in connection with such losses,
liabilities, damages or claims.
6.8 The Operator hereby represents and warrants:
(a) The Operator is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Texas and is or shall no later than the Initial Synchronization
Date be qualified as a foreign corporation in good standing in
the State of North Carolina and in each other jurisdiction where
the failure so to qualify would have a material adverse effect
upon the business or financial condition of the Operator; and the
Operator has all requisite power and authority to conduct its
business, to own its properties, and to execute, to deliver, and
to perform its obligations under this Agreement.
(b) The execution, delivery and performance by the Operator
of this Agreement have been or shall no later than the Initial
Synchronization Date be duly authorized by all necessary
corporate action, and do not and will not (i) require any consent
or approval of the Operator's Board of Directors or shareholders,
other than those which have been or shall no later than the
Initial Synchronization Date be obtained (evidence of which shall
be, if it has not heretofore been, delivered to North Carolina
Power), (ii) violate any provisions of the Operator's corporate
bylaws or other organic documents, any indenture, contract or
agreement to which it is a party or by which it or its properties
may be bound, or any law, rule, regulation, order, writ,
judgement, injunction, decree, determination, or award presently
in effect having applicability to the Operator, or (iii) result
in a breach or constitute a default under the Operator's
corporate bylaws, other organic documents or other material
indentures, contracts, or agreements, and the Operator is not in
default under its corporate bylaws or other organic documents or
other material indentures, contracts, or agreements to which it
is a party or by which it or its property may be bound.
(c) No authorizations or approvals by any governmental or
other official agency are necessary for the due execution and
delivery by the Operator of this Agreement as in effect on the
date hereof. Operator is aware of authorizations and approvals
necessary for its performance of this Agreement and Operator
covenants that all such authorizations and approvals shall be
applied for in a timely manner.
(d) This Agreement is a valid and binding obligation of the
Operator,
(e) There is no threatened pending action or proceeding
affecting the Operator before any court, governmental agency or
arbitrator that could reasonably be expected to affect materially
and adversely the financial condition or operations of the
Operator or the ability of the Operator to perform its
obligations hereunder, or which purports to affect the legality,
validity or enforceability of this Agreement (as in effect on the
date hereof).
6.9 Operator agrees that at no cost to North Carolina
Power, Operator shall cause its counsel to issue an opinion to
North Carolina Power (i) affirming the representations in Section
6.8 and (ii) upon request by North Carolina Power addressing such
further matters as North Carolina Power may reasonably request.
6.10 Operator agrees that, upon request of North Carolina
Power, it shall deliver or cause to be delivered from time to
time to North Carolina Power certifications of its officers,
accountants, engineers, or agents as to such matters as North
Carolina Power may reasonably request.
6.11 Operator, or the general partners of Operator if
Operator is a partnership, agrees to preserve and keep in force
and effect its corporate existence and all franchises, licenses
and permits necessary to the proper conduct of its business,
including without limitation the business of constructing, owning
and operating the Facility.
6.12 Operator will keep proper books of record and account
in which full correct entries will be made of all dealings or
transactions of or in relation to its business and affairs in
accordance with generally accepted accounting principles
consistently applied. Operator shall furnish North Carolina Power
with copies of its annual financial statements and all K-1
Filings as provided to the Securities and Exchange Commission.
ARTICLE 7: Control and Operation of the Facility: Dispatch
7.1 Operator shall inform the North Carolina Power
operations center designated in the interconnection study
performed pursuant to Article 8 as to the daily operating
availability and generation capability of its Facility,
including, without limitation, any Forced Outage.
7.2 Operator shall, at least thirty (30) Days prior to the
Commercial Operations Date, submit a written maintenance schedule
for the first year of the Facility's operations Operator shall
ensure that North Carolina Power receives copies of any
maintenance evaluations or reports to be provided to any third
party with a financial security interest in or lien on the
Facility, including evaluations or reports generated at the
request of such third parties or performed by an engineer
employed by such third party. Thereafter, Operator shall submit
to North Carolina Power, in writing, by September 1 of each Year,
its desired Scheduled Outage periods for the next Year. Such
Scheduled Outages shall not exceed twenty eight (28) Days in each
Year. By October 31 of each Year, North Carolina Power shall
notify Operator in writing whether the requested Scheduled Outage
periods are acceptable. If North Carolina Power cannot accept any
of the requested Scheduled Outage periods, North Carolina Power
shall advise Operator of the time period closest to the requested
period when the outage can be scheduled. Operator shall only
schedule outages during periods approved by North Carolina Power,
and such approval shall not be unreasonably withheld.
Notwithstanding the previous sentence, Operator shall not
schedule a maintenance shutdown of its Facility during the Months
of December, January, February or during the period from June 15
through September 15 of any Year that would decrease the capacity
output of the Facility below the Dependable Capacity without the
prior written consent of North Carolina Power.
7.3 North Carolina Power shall have the right, upon six (6)
months prior written notice, to revise the Months during which
Operator shall not, unless mutually agreed, schedule a
maintenance shutdown.
7.4 Each Party shall keep complete and accurate records and
all other data required by each of them for the purposes of
proper administration of this Agreement.
(a) All such records shall be maintained for a minimum of
five (5) years after the creation of such record or data and for
any additional length of time required by regulatory agencies
with jurisdiction over the Parties; provided, however, that
Operator shall not dispose of or destroy any such records even
after the five (5) years without thirty (30) Days prior notice to
North Carolina Power.
(b) Operator shall maintain an accurate and up-to-date operating
log at the Facility with records of: (i) real and reactive power
production for each clock hour; (ii) changes in operating status,
Scheduled Outages and Forced Outages; and (iii) any unusual
conditions found during inspections.
(c) Either Party shall have the right from time to time, upon
fourteen (14) Days written notice to the other Party, to examine
the records and data of the other Party relating to this
Agreement any time during the period the records are required to
be maintained.
7.5 Operator shall control and operate the Facility consistent
with North Carolina Power's Dispatch of the Facility; provided,
however, that from time to tine North Carolina Power shall not be
obligated to purchase or receive, and may require Operator to
reduce, energy deliveries if:
(a) In North Carolina Power's sole opinion, a condition
exists which presents a physical threat to persons or property,
and such disconnection appears necessary to protect North
Carolina Power's customers, employees, agents or property; or
(b) It is necessary to construct, install, maintain, repair,
replace, remove, investigate, inspect or test any part of the
Facility or the Interconnection Facilities, or any other affected
part of North Carolina Power's system.
North Carolina Power will make a reasonable effort to notify
and coordinate such reductions with Operator. Except that with respect
to Section 7.5(b) above, North Carolina Power shall provide Operator
with at least forty-eight (48) hours prior notice. Any reduction
required of Operator hereunder shall be implemented and completed
as soon as possible consistent with Prudent Utility Practices.
7.6 In addition to North Carolina Power's rights to reduce
energy deliveries under this Agreement, North Carolina Power
shall have the right to Dispatch the Facility within its Design
Limits subject to the following notice provisions:
(a) By 4:00 p.m. on Friday of each week, North Carolina
Power will provide Operator with an estimated schedule of
operations for the following week. The actual schedule will be
determined by the requirements for operation in accordance with
Economic Dispatch or Automatic Generation Control and may be
substantially different than the schedule provided in accordance
with this section.
(b) North Carolina Power will provide Operator with five (5)
minutes notice of changes in operating levels to be achieved by
the Facility, except that when the Facility is operated with
Automatic Generation Control, North Carolina Power shall not be
required to provide such notice.
Operator agrees to comply with the notices received from North
Carolina Power pursuant to (a), (b) and (c) above. Furthermore,
North Carolina Power will Dispatch the Facility in accordance
with Virginia Power's Economic Dispatch (which includes
consideration of Virginia Power's system security and system
requirements) and without regard to Facility ownership.
7.7 Operator shall employ qualified personnel for
monitoring the Facility and for coordinating operations of the
Facility with North Carolina Power's system. Operator shall
ensure that such personnel are on duty at all times, twenty-four
(24) hours a Day and seven (7) Days a week.
7.8 The Parties recognize that North Carolina Power is a
member of NERC and that, to ensure continuous and reliable
electric service, North Carolina Power operates its system in
accordance with the operating criteria and guidelines of NERC. If
an Emergency is declared, North Carolina Power's operations
center will notify Operator's personnel and, if requested by
North Carolina Power, Operator's personnel shall place the Net
Electrical Output within the exclusive control of North Carolina
Power's operations center for the duration of such Emergency.
Without limiting the generality of the foregoing, North Carolina
Power's operations center may require Operator's personnel to
raise or lower production of energy generated by the Facility to
maintain safe and reliable load levels and voltages on North
Carolina Power's transmission and/or distribution system;
provided, however, any changes in the level of the Net Electrical
Output required of Operator hereunder shall be implemented in a
manner consistent with safe operating procedures and within the
Facility's Design Limits.
7.9 Operator shall cooperate with North Carolina Power in
establishing Emergency plans, including without limitation,
recovery from a local or widespread electrical blackout; voltage
reduction in order to effect load curtailment; and other plans
which may arise. The Operator shall make technical references
available concerning start-up times, black-start capabilities and
minimum load-carrying ability.
7.10 Operator shall, during an Emergency, supply such power
as the Facility is able to generate and North Carolina Power is
able to receive. If Operator has a Scheduled Outage, and such
Scheduled Outage occurs or would occur coincident with an
Emergency, Operator shall make all good faith efforts to
reschedule the outage or, if the outage has begun, to expedite
the completion thereof.
7.11 Operator shall operate the Facility with its Automatic
Generation Control (AGC) equipment, speed governors, and voltage
regulators in-service whenever the Facility is connected to or
operated in parallel with the North Carolina Power system at the
sole discretion of North Carolina Power.
ARTICLE 8: Interconnection
8.1 Subject to the provisions of Section 8.8 below, North
Carolina Power shall have the Interconnection Facilities
completed within the time frame determined in the interconnection
study performed in accordance with Section 8.6, however, unless
North Carolina Power agrees, in no event shall North Carolina
Power be obligated to have the Interconnection Facilities capable
of transmitting electricity earlier than sixty (60) Days prior to
the Anticipated Commercial Operations Date. North Carolina
Power's obligation is expressly conditioned on Operator's
submission of data supportive of the Interconnection in a timely
manner as required under this Agreement and in form and substance
meeting reasonable standards and expectations of North Carolina
Power.
8.2 Operator shall be responsible for the design,
construction, installation, maintenance and ownership of the
Facility (which as defined herein includes without limitation
auxiliaries and interconnection equipment on Operator's side of
the Interconnection Point).
8.3 If it is determined in the interconnection study
performed by North Carolina Power pursuant to Sections 8.6 and
8.7 below that the North Carolina Power-owned metering facilities
(which may include current ant potential transformers and
telemetering equipment) should be installed on Operator's
property, Operator shall be responsible for the installation of
such metering facilities which would be provided to Operator by
North Carolina Power. The installation of any North Carolina
Power-owned metering facilities on Operator's side of the
Interconnection Point shall be subject to North Carolina Power's
approval, which approval shall not be unreasonably withheld.
8.4 North Carolina Power shall be responsible for the
design, construction, installation, maintenance and ownership of
the Interconnection Facilities.
8.5 Within sixty (60) Days of the execution of this
Agreement, Operator shall provide to North Carolina Power data
required in Exhibit A attached hereto.
8.6 North Carolina Power shall perform an interconnection
study within one hundred and twenty (120) Days of Operator's
completion of the requirements of Section 8.5 above under
conditions agreed upon by the Parties. The interconnection study
shall, at a minimum, (a) determine the Interconnection Point and
the time required to complete the Interconnection Facilities and
(b) designate the North Carolina Power operations center that
will coordinate the operation of the Facility. The
Interconnection Facilities shall be designed consistent with
Prudent Utility Practices considering the functional one-line
diagram and site plan provided to North Carolina Power pursuant
to Section 8.5.
8.7 Within thirty (30) Days of receipt of the
interconnection study, Operator agrees to grant to North Carolina
Power all necessary rights of way and easements, including
adequate and continuing access rights on property of Operator, to
install, operate, maintain, replace and/or remove the
Interconnection Facilities located on property of Operator.
Within thirty (30) Days of receipt of the interconnection study,
Operator agrees to execute any documents as North Carolina Power
may require to record such rights of way and easements.
Consideration for such grants, deeds or documents shall be the
execution of this Agreement and no other consideration shall be
required. Operator agrees that rights of way and easements shall
survive termination or expiration of this Agreement.
8.8 When Operator has completed the requirements of Section
8.7 above, North Carolina Power shall construct the
Interconnection Facilities in accordance with the design
determined in the interconnection study performed pursuant to
Section 8.6. Failure by North Carolina Power to complete the
Interconnection Facilities within the time frame specified in the
interconnection study performed pursuant to Section 8.6 shall not
be considered a breach of this Agreement if such failure can
reasonably be attributed to any of the following:
(a) Events beyond North Carolina Power's reasonable control,
including without limitation, time delays incident to the NCUC's
granting of any required certificate(s) of convenience and
necessity, time constraints associated with the procurement of
necessary equipment and other events of force majeure set forth
in Article 14: Force Majeure.
(b) The failure of Operator to execute in time sufficient
for North Carolina Power to complete the Interconnection
Facilities grants, deeds, or documents as North Carolina Power
may require to record rights of way, easements, or other grants
in accordance with Section 8.7.
(c) Failure of Operator to provide by the required dates
technical data necessary for North Carolina Power to perform
Interconnection.
8.9 North Carolina Power reserves the right to modify or
expand its requirements for protective devices in conformance
with Prudent Electrical Practices.
8.10 Each Party shall notify the other in advance of any
changes to its system that will affect the proper coordination of
protective devices on the two systems.
ARTICLE 9: Metering
9.1 North Carolina Power shall own and maintain all meters
and metering devices (including remote terminal units) used to
measure the delivery and receipt of energy, or energy and
Dependable Capacity, for payment purposes. Nothing in this
Agreement shall prevent Operator from installing meters and
metering devices for backup purposes.
9.2 Operator shall provide at its expense:
(a) For the purpose of telemetering, a telecommunication
circuit to the operations center designated by North Carolina
Power.
(b) A voice telephone extension for the purpose of accessing
North Carolina Power's dial-up metering equipment and for
communicating with the designated North Carolina Power operations
center.
(c) An extension of North Carolina Power's System Operations
Center's PBX system in the control room of the Facility.
(d) Equipment to transmit and receive telecopies for
purposes of generation scheduling and coordination of switching.
Items provided by Operator in accordance with this Section 9.2
shall be subject to the approval of North Carolina Power, which
approval shall not unreasonably
be withheld.
9.3 All meters and metering equipment used to determine the
electric energy, or energy and Dependable Capacity, delivered to
North Carolina Power shall be sealed, and the seals broken only
by North Carolina Power personnel when the meters are to be
inspected, tested, or adjusted; North Carolina Power shall give
Operator two (2) weeks prior written notice thereof and Operator
shall have the right to be present.
9.4 At least every twelve (12) months and, in addition, upon
two (2) weeks prior written notice by Operator, North Carolina
Power will test the meter(s) in accordance with the provisions
for meter testing in North Carolina Power's approved Terms and
Conditions for Supplying Electricity as filed with the North
Carolina Utilities Commission at the time the test is performed.
Operator may have a representative present during any metering
inspection, test, or adjustment. When, as a result of such a
test, a meter is found to be no more than two (2) percent fast or
slow because of incorrect calibration or tampering, no adjustment
will be made in the amount paid to Operator for energy, or energy
and Dependable Capacity, delivered to North Carolina Power. If
the meter is found to be more than two (2) percent fast or slow,
North Carolina Power will calculate the correct amount delivered
to North Carolina Power for the actual period during which
inaccurate measurements were made or, if the actual period cannot
be determined to the mutual satisfaction of the Parties, for a
period equal to one-half of the time elapsed since the most
recent test, but in no case for a period in excess of twelve (12)
months. The previous payments by North Carolina Power for this
period shall be subtracted from the amount of payments that are
calculated to have been owed under this Agreement. The difference
shall be offset against or added to the next payment to either
Party as appropriate under this or other Agreements between the
Parties. The percentage registration of a meter will be
calculated by the weighted average of light load and full load,
which is calculated by giving a value of one (1) to the light
load and a value of four (4) to the full load.
9.5 Whenever it is found that, for any reason other than
incorrect calibration or tampering, the metering apparatus has
not registered the true amount of electricity which has been
delivered by Operator to North Carolina Power, the electricity
delivered during the entire period of incorrect registration
shall be estimated utilizing the best information available
including but not limited to any metering installed by Operator,
and the amount of electricity so estimated will be used in
calculating the corrected amounts to be paid to Operator. The
adjusted amount will be for the actual period during which
inaccurate measurements were made or, if the actual period cannot
be determined to the mutual satisfaction of the Parties, for a
period equal to one half of the time elapsed since the most
recent test of the metering apparatus, but in no case for a
period in excess of twelve (12) months. Any overpayment or
underpayment by North Carolina Power for energy, or energy and
capacity, delivered by Operator to North Carolina Power shall be
corrected in the manner described in Section 9.4.
ARTICLE 10: Compensation, Payment, and Billings
10.1 The Operator shall be compensated for the Net
Electrical Output of the Facility on a per kWh basis at a rate
equal to the Energy Purchase Price. The Energy Purchase Price is
composed of the Fuel Compensation Price, specified in Sections
10.2 - 10.13 below, and the O&M Price specified in Section 10.14.
10.2 The Base Fuel Compensation Price, BFCP, for energy
received from the Facility shall be 2.49 cents/kWh, effective
January 1, 1988. The Base Fuel Compensation Price was calculated
using an assumed Heat Rate of 8900 Btu/kWh ("contract Heat Rate")
and a base delivered fuel cost of $2.798/million Btu. The Base
Fuel Compensation Price shall be subject to adjustment only as
specified herein. For the purpose of determining various prices
and indices in this Article 10, the following conversion factors
shall be used to express the price of different fuels in
$/million Btu:
(a) Natural gas expressed in $/1000 cubic feet shall be
multiplied by .9709 thousand cubic feet/million Btu.
(b) One percent sulfur No. 6 oil expressed in $/barrel shall
be multiplied by 0.1580 barrels/million Btu.
(c) No. 2 oil expressed in $/gallon shall be multiplied by
7.143 gallons/million Btu.
10.3 For the purpose of this Section, the following terms,
whether in the singular or in the plural, shall have the meaning
stated below:
(a) Base Gas Index (BGI) - The average of the Composite Gas
Index for the three (3) Months of April, May, and June of 1987.
Using the definitions herein,
CGI(4,1987) + CGI(5,1987) + CGI(6,1987)
BGI = -----------------------------------------
3
The Base Gas Index is equal to $2.018/million Btu as of the
execution of this Agreement.
(b) Composite Gas Index - The index used to adjust the Fuel
Compensation Price as indicated herein, designated by CGI(m,y)
where m is the Calendar Month and y is the Year. It is a
composite of the Utility Gas Index [UTIL(m,y)], the No. 6 Oil
Index [N60(m,y)], and the Spot Gas Index [SPOT(m,y)] as defined
herein and is calculated as follows:
UTIL(m-2,y) + N60(m,y) + 2 X SPOT(m,y)
CGI(m,y) = ------------------------------------
4
(c) No. 6 Oil Index - The low Estimated New York Spot Cargo
Price for 1% maximum sulfur No. 6 oil and, designated N60(m,y),
averaged for the Month (m) and Year (y) in question.
(d) Spot Gas Index - The average of (i) the Louisiana Gulf
Coast Offshore Interstate Wellhead Spot Natural Gas Price as
published in Natural Gas Week, (ii) the Natural Gas Clearinghouse
spot price for natural gas received in onshore laterals of
Columbia Gulf and (iii) the midpoint of the range of Louisiana
Wellhead spot prices for natural gas published in Natural Gas
Intelligence. All weekly price quotations shall be averaged for
the Month (m) and Year (y) in question. The Spot Gas Index shall
be designated SPOT(m,y) averaged for the Month (m) and Year (y)
in question.
(e) Utility Gas Index - The national average natural gas
price paid by electric utilities as published in the Energy
Information Administration's Natural Gas Monthly and designated
UTIL(m,y) for the Month (m) and Year (y) in question.
10.4 At least two (2) weeks prior to the Initial
Synchronization Date and at least two (2) weeks prior to the
beginning of each subsequent Calendar Quarter thereafter, the
Fuel Compensation Price effective during that next subsequent
Calendar Quarter shall be calculated as follows:
CGI(m-2,y)
Fuel Compensation Price----------------- X BFCP
BGI
Thus, if the Fuel Compensation Price were being calculated for
the first Calendar Quarter 1990, with m-1 corresponding to the
first month of that Calendar Quarter, the numerator of the above
equation would be CGI(11,1989).
10.5 If any index included in the Composite Gas Index is
discontinued, an index specified by an appropriate U.S.
Government agency, if available, shall be substituted for such
discontinued index. If no such replacement government index is
made available, a new index shall be determined by mutual
agreement of the Parties. If any of the indices specified herein
are determined by both Parties to no longer represent market
conditions, or if the basis of calculation of those published
indices is substantially modified, the indices may be replaced by
mutual agreement of the Parties, except, however, that changes in
the base year(s) reporting basis, minor changes in weighting and
minor changes in benchmarks shall not be construed as substantial
modifications of the indices and the affected values shall be
reestablished in accordance with the instructions of the
appropriate Government agency.
10.6 Operator may, with at least two (2) weeks prior written
notice, specify, revise, or revoke a discount to the Fuel
Compensation Price to be used in the following Calendar Month.
This discount shall then be applied against the Fuel Compensation
Price as calculated herein, and the resultant price will be used
in lieu of the Fuel Compensation Price for the purposes of
payments and Economic Dispatch, whereas the non-discounted Fuel
Compensation Price shall continue to be calculated in accordance
with this Article 10. This discount will be effective, in the
form specified in the Operator's notice, until Operator provides
further notice as specified in this Section 10.6, except,
however, that such discount shall be effective for at least one
Calendar Month. The resultant discounted Fuel Compensation Price
shall not exceed the non-discounted Fuel Compensation Price
calculated in accordance with this Article 10.
10.7 Opportunities to redetermine the Base Gas Index, the
Composite Gas Index, and/or the fuel component of the Base Fuel
Compensation Price shall begin on the third July 1 after the
Commercial Operations Date, and every third July 1, thereafter.
Such date shall hereafter be the "Redetermination Date". Either
Party must submit written notice to the other Party requesting
such redetermination no less than four (4) Calendar Months prior
to the Redetermination Date. Such written notice shall include
any proposed change(s)and the basis for such change(s). The
Parties shall then enter into good faith negotiations for the
purpose of revising the Base Gas Index, the Composite Gas Index,
and/or the Base Fuel Compensation Price to reflect more
accurately the prices then prevailing in the market for prudent
purchases of natural gas. If such redetermination is not complete
within thirty (30) Days after the Redetermination Date, such
matter may be submitted to binding arbitration as discussed in
Section 10.8, below.
10.8 The location of arbitration shall be in Richmond,
Virginia, unless mutually agreed. The method of arbitration shall
be:
(a) The Parties shall agree upon a single arbitrator with
knowledge of and experience in the matter of natural gas, or, if
the Parties cannot agree;
(b) Each Party shall designate one arbitrator and the
individuals so designated shall jointly select a third
arbitrator, or, if this arbitrator selection process fails;
(c) Either Party may request the American Arbitration
Association to appoint the arbitrator(s), who shall be a
specialist(s) in the matter of natural gas.
10.9 Either Party may submit a written statement of its
position to the arbitrator(s) within thirty (30) Days of
appointment. The other Party shall then have no more than twenty
(20) Days to provide the arbitrator(s) a written response to such
statement. These statements shall be the sole subject of the
arbitration, except, however that the matters subject to
arbitration shall be limited to:
(a) A determination of a new Base Fuel Compensation Price
based on the fair market price(s) which a prudent purchaser would
pay for fuel to be delivered and used during the Month of the
Redetermination Date:
(b) A determination of appropriate indices to adjust the
Base Fuel Compensation Price in the future so as to track the
fair market price(s) in the future for natural gas in such a
facility following the Redetermination Date.
10.10 The redetermination of the Base Fuel Compensation
Price shall consider the following:
(a) A fair market price for fuel during the Month of the
Redetermination Date using both price quotes referenced in fuel
contracts and prices received on either a contract or spot basis
during the twelve (12) Month period preceding the Redetermination
Date.
(b) Prices referenced pursuant to Section 10.10 (a) above
shall only be considered when such prices apply for volumes in
excess of 5,000 million Btu per Day per supplier for use in a
fully dispatchable facility with a generating capacity of no less
than 100 MW and located within the Company's service territory.
(c) The term of commitment for transportation options,
including any and all interstate and intrastate transportation
for inclusion in this price.
(d) Prices specified for gas for which either Party has an
economic interest shall not be considered in the determination of
the revised Base Fuel Compensation Price, but may be considered
in the consideration of the revised indices.
Once the fair market price for fuel, designated "FMP", is
determined, the Base Fuel Compensation Price shall be
recalculated as follows:
Contract Heat Rate
Revised BFCP = ---------------------------------- X FMP
1,000,000
10.11 In the redetermination of indices to govern future
price adjustments, the arbitrator(s) shall consider the following:
(a) Such revised indices should be similar in operation and
intent to the indices specified herein reflecting increases and
decreases in average fuel prices, and which rely on objective,
average price data for those fuels.
(b) Such revised indices should also take into account the
delivered cost to fully dispatchable natural gas fired electric
generating facilities with capacity ratings of at least 100 MW
located in the Company's service territory;
(c) These indices should use data that is both independently
verifiable and published and updated regularly by appropriate
governmental agencies or by nongovernmental publications
recognized and accepted as authoritative.
10.12 The decisions of the arbitrator(s) on the matters
presented shall be rendered within thirty (30) Days following the
submissions, if any, of the Parties. The Base Fuel Compensation
Price and/or the associated indices established in accordance
with this Article 10 shall be binding on the Parties, and shall
be invoked before any court of competent Jurisdiction and, upon
application to such court, shall be enforced by an appropriate
Judicial order. Any joint expenses of the arbitration hearing
shall be shared equally by the Parties.
10.13 Following the decision of the arbitrator(s), the Base
Fuel Compensation Price, the Base Gas Index, and the Composite
Gas Index as defined herein shall be replaced in accordance with
those decisions, and adjustments to the Fuel Compensation Price
shall thereafter be performed as if such decisions had been
included in this Agreement. The effective date of changes
determined by such redeterminations shall be one week after the
completion of such redetermination.
10.14 North Carolina Power shall also pay Operator, on a per
kWh basis, a variable operation and maintenance adjustment. This
O&M Price shall be 0.300 cents/kWh in 1988 dollars and shall be
increased or decreased, as appropriate, on April 1, 1989 and on
each April 1 thereafter by the change in the Gross National
Product Implicit Price Deflator for the previous Calendar Year as
specified by Wharton Econometrics, or such other organization as
the Parties may mutually agree.
10.15 (a) Commencing with the Commercial Operations Date and
continuing until the fourth anniversary of such date, the
Capacity Purchase Price shall be $13.321/kW per month. Commencing
with the Day after the fourth anniversary of the Commercial
Operations Date and continuing until the sixth anniversary of
such date, the Capacity Purchase Price shall be $12.488/kW per
month. Commencing with the Day after the sixth anniversary of the
Commercial Operations Date and continuing until the eighth
anniversary of such date, the Capacity Purchase Price shall be
$11.654/kW per month. Commencing with the Day after the eighth
anniversary of the Commercial Operations Date and continuing
until the fifteenth anniversary of such date, the Capacity
Purchase Price shall be $10.821/kW per month. Commencing with the
Day after the fifteenth anniversary of the Commercial Operations
Date and continuing until the termination of this Agreement, the
Capacity Purchase Price shall be $8.321/kW per month.
(b) If a Forced Outage is excused under the provisions of
Article I4 and Operator designates such Forced Outage Days as
Force Majeure Days, then beginning the Day after Operator makes
such designation, the payments for Dependable Capacity specified
in Section 10.15(a), above, shall be suspended, prorated daily,
until the non-performing Party notifies the other Party that the
condition of Force Majeure has been overcome in accordance with
Section 14.1(d).
(c) Within sixty (60) Days after the end of each Capacity
Test Period, Operator shall refund to North Carolina Power an
amount equal to the difference between payments made for
Dependable Capacity in such period and the payments for
Dependable Capacity that should have been made during such period
at the Low Availability Capacity Purchase Price together with
Interest as if such overpayment had become due and payable at the
time such overpayment was made. Such Low Availability Capacity
Purchase Price shall be the Capacity Purchase Price during such
period less four (4) percent of such Capacity Purchase Price for
each Forced Outage Day that occurred or was designated by
Operator during that period that was not both (i) excused under
the provisions of Article 14 and (ii) designated to be a Force
Majeure Day by Operator and that was in excess of the greater of
(i) twenty-five (25) Days per year prorated for the number of
Days in such period or (ii) 10% of the number of Days in such
period that the Facility operated pursuant to North Carolina
Power's dispatch orders, except that the Low Availability
Capacity Purchase Price shall not be less than $0 per kW per
Month.
(d) For each instance where Operator fails, after oral
notification from North Carolina Power, to meet the operating
level specified by North Carolina Power, pursuant to Section
7.6(c), by more than +/- 5% and the operating level specified by
Virginia Power as adjusted for ambient weather conditions is no
greater than the Dependable Capacity then either (i) Operator
shall, by the end of the next Business Day, designate the Day of
such failure a Forced Outage Day, or if Operator makes no such
designation then (ii) North Carolina Power shall decrease the
payments for Dependable Capacity to be made in that Billing
Period by ten percent (10%) per occurrence.
(e) To the extent that the initial Dependable Capacity
determined upon the Commercial Operations Date is set below the
original Estimated Dependable Capacity as specified in Section
11.1, Operator shall pay to North Carolina Power $30 per kW for
the difference as liquidated damages for the detrimental impact
upon North Carolina Power's generation planning.
(f) If, as a result of testing done pursuant to Article 11,
the Facility's Dependable Capacity is set at less than ninety
(90) percent of the Facility's initial Dependable Capacity as
determined pursuant to Article 11 for the appropriate Period
(i.e., either Summer or Winter), then Operator shall pay to North
Carolina Power an amount equal to $21.60 per kW, in 1987 dollars
as escalated by the Gross National Product Implicit Price
Deflator on April l, 1988, and on each succeeding April 1, for
the difference between ninety (90) percent of such initial
Dependable Capacity and the Dependable Capacity determined
pursuant to such testing as liquidated damages for the
detrimental impact of such lower Dependable Capacity on North
Carolina Power's generation planning.
10.16 Operator shall pay North Carolina Power an amount
reflecting all reasonable costs incurred by North Carolina Power
for meter reading and billing. The monthly meter reading and
billing charge per meter shall equal the basic customer charge in
Schedule 6 - Large General Service.
10.17 Meters shall be read, and bills rendered, according to
the meter reading and billing schedule established by North
Carolina Power except that not more than forty-five (45) Days
shall pass between readings. Payment for the energy, or energy
and Dependable Capacity, delivered to North Carolina Power during
the billing period shall be made within twenty-eight (28) Days of
the billing date. Interest shall accrue on the outstanding
payments due Operator commencing on the twenty-ninth (29) Day
after the billing date. However, any amounts due North Carolina
Power, including amounts arising from cases where Operator, at
the same site, sells to and purchases from North Carolina Power,
or other amounts due North Carolina Power arising out of this
Agreement, may at the sole option of North Carolina Power be
offset against the amounts due to Operator and, in such event,
the net result shall be paid to the appropriate Party within
twenty-eight (28) days of the billing date. Payment to North
Carolina Power shall be made by check to the following address:
North Carolina Power
P. O. Box 370
Roanoke Rapids, North Carolina 27870
Payment to Operator shall be made by check to the following
address:
Panda Energy Corporation
4100 Spring Valley Suite 1001
Dallas, Texas 75244
Either Party may, by written notice to the other, change the
address to which such payments are to be sent.
10.18 The-Parties agree that North Carolina Power will be
substantially damaged in amounts that will be difficult or
impossible to determine if the Facility (a) is not in-service by
the date required, (b) is not capable of achieving the original
Estimated Dependable Capacity set forth in Section 11.1, or (c)
cannot maintain Dependable Capacity of at least ninety (90)
percent of the initial Dependable Capacity as determined pursuant
to Article 11. Therefore, to the limited extent set forth in the
Agreement, the Parties have agreed on sums which the Parties
agree are reasonable as liquidated damages for such occurrences.
It is further understood and agreed that the payment of the
liquidated damages is in lieu of actual damages for such
occurrences. Operator hereby waives any defense as to the
validity of any liquidated damages stated in this Agreement as
they may appear on the grounds that such liquidated damages are
void as penalties.
ARTICLE 11: Testing and Capacity Ratings
11.1 Operator's original Estimated Dependable Capacity is
145 MW for the Summer Period and 160 MW for the Winter Period.
11.2 The initial Dependable Capacity for the Summer Period
and the initial Dependable Capacity for the Winter Period shall
be determined by testing as described in Sections 11.2-11.6 and
the Dependable Capacity shall be subject to change in accordance
with the testing provisions in Sections 11.7-11.8. Operator shall
notify North Carolina Power when the Facility is ready for the
first such test (hereafter the Initial Test). Operator shall
perform and North Carolina Power shall monitor the Initial Test
within fourteen (14) Days of North Carolina Power's receipt of
such notice.
11.3 If the Initial Test is completed successfully to the
satisfaction of the Parties, Operator may set the Dependable
Capacity at any level up to the tested capacity, except that the
Operator may not set the Dependable Capacity at any level in
excess of one hundred and ten (110) percent of the original
Estimated Dependable Capacity as specified in Section 11.1 for
the applicable season.
11.4 The Operator may request additional tests described
herein if Operator is not satisfied with the Initial Test. Upon
completion of such additional test(s), if any, Operator shall set
the initial Dependable Capacity at any level up to the tested
capacity, except that the Operator may not set such Dependable
Capacity at any level in excess of one hundred and ten (110)
percent of the original Estimated Dependable Capacity as
specified in Section 11.1.
11.5 The Commercial Operations Date shall be the first Day
following the date Operator requested the test (i.e., either
Initial Test or additional) that determines the initial
Dependable Capacity as set forth in Sections 11.3 and 11.4 above.
11.6 Upon completion of the first period (i.e., either
Summer Period or Winter Period) after the Commercial Operations
Date, the Facility shall be rerated by testing as described in
this Article 11. At least fourteen (14) Days prior to completion
of that first period, Operator shall designate a new Estimated
Dependable Capacity and any payments for Dependable Capacity
shall be made based on this new Estimated Dependable Capacity.
This new Estimated Dependable Capacity shall not exceed one
hundred and ten (110) percent of the original Estimated
Dependable Capacity specified in Section 11.1. Within the first
fourteen (14) Days of the applicable Summer or Winter
Demonstration Period, North Carolina Power shall monitor a test
of the Dependable Capacity. Operator may, at its sole discretion,
request one additional test if Operator is not satisfied with the
results of that first test. The number of Days that pass between
the date of that first test and the date Operator notifies North
Carolina Power that the Facility is ready for an additional test
shall be counted as Forced Outage Days. Upon successful
completion of such test, Operator may set the season's initial
Dependable Capacity rating at any level up to the tested
capacity, except that the Operator may not set such Dependable
Capacity at any level in excess of one hundred and ten (110)
percent of the original Estimated Dependable Capacity as
specified in Section 11.1. If the Dependable Capacity is set
above the new Estimated Dependable Capacity as designated
pursuant to this section, payments for Dependable Capacity shall
be increased accordingly, effective the Day testing is complete.
If the Dependable Capacity is set below the new Estimated
Dependable Capacity as designated pursuant to this section,
payments for Dependable Capacity shall be decreased accordingly,
retroactive to the first Day of the applicable Summer or Winter
Period, and any overpayment shall be refunded to North Carolina
Power with Interest as if such overpayment had become due and
payable on the Day such overpayment was made.
11.7 Not less than fourteen (14) Days prior to the start of each
Summer and Winter Period thereafter throughout the Term of this
Agreement, Operator may designate a new Estimated Dependable
Capacity for such Period, and payments for Dependable Capacity
shall be made based on such new Estimated Dependable Capacity.
This new Estimated Dependable Capacity shall not exceed one
hundred and ten (110) percent of the original Estimated
Dependable Capacity specified in Section 11.1. If Operator does
not elect to change the Dependable Capacity, pursuant to this
Section, then the Dependable Capacity rating in effect at the
conclusion of the same Period (i.e., Summer or Winter) which
began in the previous year shall become effective. If Operator
does elect to change the Dependable Capacity in this manner, then
North Carolina Power may monitor a test of the Dependable
Capacity as described herein at any time within the first
fourteen (14) Days of the Demonstration Period for such Period.
Operator may, at its sole discretion, request one additional test
if Operator is not satisfied with the results of that first test.
The number of Days that pass between the date of that first test
and the date Operator notifies North Carolina Power that the
Facility is ready for an additional test shall be counted as
Forced Outage Days. Operator may set the Dependable Capacity
rating at any level up to the tested capacity, except that the
Operator may not set the Dependable Capacity at any level in
excess of one hundred and ten (110) percent of the original
Estimated Dependable Capacity as specified in Section 11.1. If
the Dependable Capacity is set above the new Estimated
Dependable Capacity as designated pursuant to this section,
payments for Dependable Capacity shall be increased accordingly,
effective the Day such testing is completed. If the Dependable
Capacity is set below the new Estimated Dependable Capacity as
designated pursuant to this section, payments for Dependable
Capacity shall be decreased accordingly, retroactive to the start
of such Period, and any overpayment shall be refunded to North
Carolina Power with Interest as if such overpayment had become
due and payable on the Day such overpayment was made.
11.8 In addition, North Carolina Power may require new tests
of the Dependable Capacity.
(a) Once per Demonstration Period at North Carolina Power's
sole discretion, and
(b) At any time Operator fails two (2) consecutive times to
meet the operating level prescribed by North Carolina Power,
pursuant to Section 7.6(c), by +/- 5%.
In either event, Operator may, at its sole discretion, request
one additional test if Operator is not satisfied with the results of
that first test. The number of Days that pass between the date of that
first test and the date Operator notifies North Carolina Power that the
Facility is ready for an additional test shall be counted as Forced
Outage Days. Upon completion of such test, Operator may set Dependable
Capacity at any level up to the tested capacity, except that the Operator
may not set the Dependable Capacity at any level in excess of one
hundred and ten (110) percent of the original Estimated Dependable
Capacity as specified in Section 11.1. If the Dependable Capacity
is set above the Dependable Capacity in effect prior to such test
for the applicable Period, payments for Dependable Capacity shall
be increased accordingly, effective the day such testing is
completed. If the Dependable Capacity is set below the Dependable
Capacity in effect prior to such test for the applicable Period,
payments for Dependable Capacity shall be decreased accordingly,
retroactive to the start of such period, and any overpayment
shall be refunded to North Carolina Power with Interest as if
such overpayment had become due and payable on the day such
overpayment was made.
11.9 Testing of the Dependable Capacity shall be in accordance
with the following provisions:
(a) Summer Period testing shall last for twelve (12) Hours
from the time North Carolina Power initiates such testing.
(b) Winter Period testing shall last for six (6) Hours from
the time North Carolina Power initiates such testing.
(c) The tested capacity shall be determined in the testing
period for the appropriate season as specified in Section 11.9
(a) and (b) above by converting each half-hour integrated kW
demand reading from the North Carolina Power-owned meters to the
design Day parameters of the appropriate summer or winter season
as specified in Section 11.9 (h) below and taking the lowest of
such converted readings.
(d) Two (2) or more units in the Facility whose capacity is
limited by common elements shall have Dependable Capacity
determined from simultaneous demonstrations. Common elements
include without limitation:
(1) Steam headers
(2) Stacks and other boiler auxiliaries
(3) Condenser cooling equipment (spray modules, pumps,
screens, inlets, discharge canals, cooling towers)
(4) Common river flowage or watershed.
(e) Normal station service use of unit auxiliaries,
including without limitation spray modules and cooling towers
required by regulatory or governmental authority, is required
during the period when capacity tests are conducted.
(f) Atmospheric and water temperatures at the time of a
capacity test shall be used without adjustment to a predetermined
standard.
(g) Capacity tests shall be based on the elevation above sea
level at the site on which the unit is installed.
(h) Capacity tests shall be based on an ambient temperature
of 90 degrees F summer and 20 degrees F winter.
(i) Additional data that may be required by North Carolina
Power to complete the capacity test shall include without
limitation:
(1) Hourly ambient temperature during demonstration.
(2) Rating curve or graph reflecting a full range (100 degrees
- - 0 degrees.
F) of ambient temperatures versus MW output.
ARTICLE 12: Insurance
12.1 Operator shall obtain and maintain the following
policies of insurance during the term of this Agreement:
(a) Worker's Compensation insurance which complies with the
laws of the State of North Carolina and Employers' Liability
Insurance with limits of at least $1,000,000; and
(b) Comprehensive or Commercial General Liability insurance
with bodily injury and property damage combined single limits of
at least $5,000,000 per occurrence. Such insurance shall include,
but not necessarily be limited to, specific coverage for
contractual liability encompassing the indemnification provisions
in Article 13, broad form property damage liability, personal
injury liability, explosion and collapse hazard coverage,
products/completed operations liability, and, where applicable,
watercraft protection and indemnity liability; and
(c) Comprehensive Automobile Liability insurance with bodily
injury and property damage combined single limits of at least
$5,000,000 per occurrence covering vehicles owned, hired or non-
owned: and
(d) Excess Umbrella Liability Insurance with a single limit
of at least $5,000,000 per occurrence in excess of the limits of
insurance provided in subparagraphs (a), (b), and (c) above.
12.2 The amounts of insurance required in Section 12.1 above
may be satisfied by the Operator purchasing primary coverage in
the amounts specified or by buying a separate excess Umbrella
Liability policy together with lower limit primary underlying
coverage. The structure of the coverage is the Operator's option,
so long as the total amount of insurance meets North Carolina
Power's requirements.
12.3 The coverages requested in Section 12.1(b) above and
any Umbrella or Excess coverage should be "occurrence" form
policies. In the event Operator has "claims-made" form coverage,
Operator must obtain prior approval of all "claims-made" policies
from North Carolina Power.
12.4 Operator shall cause its insurers to amend its
Comprehensive or Commercial General Liability and, if applicable,
Umbrella or Excess Liability policies with the following
endorsement items (a) through (e); and to amend Operator's
Workers' Compensation and Auto Liability policies with
endorsement item (e):
(a) North Carolina Power, its directors, officers, and
employees are additional Insureds under this Policy; and
(b) This insurance is primary with respect to the interest
of North Carolina Power, its directors, officers, and employees
and any other insurance maintained by them is excess and not
contributory with this insurance; and
(c) The following Cross Liability clause is made a part of
the policy: "In the event of claims being made by reason of (i)
personal and/or bodily injuries suffered by any employee or
employees of one insured hereunder for which another insured
hereunder is or may be liable, or (ii) damage to property
belonging to any insured hereunder for which another insured is
or may be liable, then this policy shall cover such insured
against whom a claim is made or may be made in the same manner as
if separate policies have been issued to each insured hereunder,
except with respect to the limits of insurance"; and
(d) Insurer hereby waives all rights of subrogation against
North Carolina Power, its officers, directors and employees; and
(e) Notwithstanding any provision of the policy, this policy
may not be cancelled, non-renewed or materially changed by the
insurer without giving thirty (30) Days prior written notice to
North Carolina Power. All other terms and conditions of the
policy remain unchanged.
12.5 Operator shall cause its insurers or agents to provide
North Carolina Power with certificates of insurance evidencing
the policies and endorsements listed above. Failure of North
Carolina Power to obtain certificates of insurance does not
relieve Operator of the insurance requirements set forth herein.
Failure to obtain the insurance coverage required by this Article
12 shall in no way relieve or limit Operator's obligations and
liabilities under other provisions of this Agreement.
ARTICLE 13: Liability. Noncompliance and Guarantees
13.1 Neither Party shall hold the other Party (including its
corporate affiliates, parent, subsidiaries, directors, officers,
employees and agents) liable for any claims, losses, costs and
expenses of any kind or character (including, without limitation,
loss of earnings and attorneys' fees) for damage to property of
North Carolina Power or Operator in any way occurring incident
to, arising out of, or in connection with a Party's performance
under this Agreement, except as provided in Section 13.2 below.
13.2 Operator and North Carolina Power agree to indemnify
and hold each other harmless from and against all claims,
demands, losses, liabilities and expenses (including reasonable
attorneys' fees) for personal injury or death to persons and
damage to each other's property or facilities or the property of
any other person or corporation to the extent arising out of,
resulting from or caused by their negligent or intentional acts,
errors, or omissions.
13.3 No later than March 31, 1989, Operator shall provide
North Carolina Power with an unconditional and irrevocable direct
pay letter of credit issued by a bank acceptable to North
Carolina Power in a form and with substance acceptable to North
Carolina Power in an amount equal to S30.00 per kW of original
Estimated Dependable Capacity to ensure completion of the
Facility by the Anticipated Commercial Operations Date.
Commencing two (2) months after the Anticipated Commercial
Operations Date and continuing each month for ten (10) months or
until the Commercial Operations Date, North Carolina Power may
draw ten (10) percent of the value of the letter of credit per
Month as liquidated damages for the detrimental impact of such
delayed availability of Dependable Capacity on North Carolina
Power's generation planning. If after twelve (12) Months from the
Anticipated Commercial Operations Date, the Commercial Operations
Date has not occurred, then North Carolina Power may terminate
this Agreement as specified in Section 5.3. If the Commercial
Operations Date occurs less than twelve (12) months after the
Anticipated Commercial Operations Date, North Carolina Power
shall return the letter of credit to Operator. In the event that
North Carolina Power terminates this Agreement for Operator
default in accordance with Article 5, North Carolina Power may
draw down the entire amount of the letter of credit to offset
damages North Carolina Power incurs or reasonably expects to
incur as a result of Operator's default.
13.4 Commencing with the Commercial Operations Date,
Operator shall provide and maintain, at Operator's sole expense,
security for Operator's performance under this Agreement as
described in Section 13.5 below, in an amount equal to $30.00 per
kW of Estimated Dependable Capacity pursuant to Section 11.1 to
ensure continued availability of the Facility. Such security
shall be maintained throughout the term of this Agreement.
13.5 At North Carolina Power's option, Security for
compliance with Section 13.4 above shall consist of one or more
of the following:
(a) An unconditional, and irrevocable direct pay letter of
credit issued by a bank acceptable to North Carolina Power in a
form and with substance acceptable to North Carolina Power;
(b) A payment or performance bond issued by a company
acceptable to North Carolina Power for payment to North Carolina
Power in the event of a material breach by Operator in a form and
with substance acceptable to North Carolina Power;
(c) A corporate guarantee which North Carolina Power, at its
discretion, deems to be equivalent in quality to the security
detailed in (a) and (b) above in a form and with substance
acceptable to North Carolina Power.
13.6 (a) North Carolina Power shall have an exclusive right
of first refusal to purchase any Transfer Interest (as
hereinafter defined) on the terms and conditions set forth
herein; provided, however, and subject to North Carolina Power's
prior written consent, which may be withheld in North Carolina
Power's sole, absolute discretion, Operator may grant the steam
buyer a right of first refusal to purchase any Transfer Interest,
which right shall be prior to North Carolina Power's right of
first refusal. Any such right of first refusal granted to the
steam buyer shall be in form and substance satisfactory to North
Carolina Power and shall require the steam buyer to continue
operating the Facility in accordance with the provisions of this
Agreement.
(b) If Operator or any of its subsidiaries, affiliates or
other related entities ever desires to dispose of its or their
right, title, or interest in the Facility, or any part thereof
(hereinafter referred to as a "Transfer Interest"), other than by
the sale and leaseback of the Facility to provide financing for
the Facility, or if Operator receives a bona fide offer to
purchase or lease the Facility, or any part thereof (hereinafter
also referred to as a "Transfer Interest"), which offer Operator
is prepared to accept, it shall give notice thereof in writing to
North Carolina Power (the "Notice"). The Notice shall (i) specify
the terms under which Operator is prepared to dispose of the
Transfer Interest, including the purchase price of the Transfer
Interest, and (ii) include a copy of the acceptable offer, if
any, received by Operator, as the case may be.
(c) If the steam buyer has been granted a right of first
refusal as set forth above, the Operator shall offer the Transfer
Interest to the steam buyer in accordance with the terms of the
steam buyer's right of first refusal. If the steam buyer waives
its right with respect to the Transfer Interest or the steam
buyer does not have a right of first refusal, Operator shall
offer such Transfer Interest to North Carolina Power on the terms
set forth in the Notice.
(d) For a period of one hundred twenty (120) Days after
receipt by North Carolina Power of the Notice, or ninety (90)
Days after North Carolina Power receives notice from the Operator
that the steam buyer has waived its right of first refusal,
whichever is longer, North Carolina Power shall have the right to
exercise its right of first refusal with respect to the Transfer
Interest by giving written notice thereof to Operator.
(e) In the event North Carolina Power elects not to exercise
its right of first refusal pursuant to the foregoing provisions
then for a period of one year from the date North Carolina Power
notifies Operator of such election, Operator shall be free to
transfer such Transfer Interest to others at a price no lower
than and on terms not more favorable to the Transferee than those
offered in the Notice. Operator shall ensure that by the terms of
such transfer, Transferee agrees that North Carolina Power's
right of first refusal to purchase or lease the Facility, or any
part thereof, shall continue on the terms and conditions
contained herein. With respect to any such Transferee's
transfers, any sale of any Transfer Interest shall not extinguish
North Carolina power's right of first refusal with respect to any
portion of the Facility or the Operator, as the case may be, not
transferred pursuant to such sale. Any lease of any Transfer
Interest shall not extinguish North Carolina Power's right of
first refusal with respect to any extensions of such lease or
with respect to any other leases, sales or other dispositions of
any Transfer Interest. Operator agrees that it will ensure that
the terms of any transfer (other than a transfer to North
Carolina Power) of all or a portion of its interest in the
Facility provides for the continued operation of the Facility in
accordance with and under the terms of this Agreement. Any
transfer (other than a transfer to North Carolina Power) which
results in a transfer of management control over the operation of
the Facility shall require the transferee's acceptance of an
assignment of the transferor's obligations under this Agreement
with respect to the operation of the Facility pursuant to Section
17.1 of this Agreement.
(f) If North Carolina Power elects to exercise its right of
first refusal with respect to the Transfer Interest, the Parties
shall endeavor to fully consummate the transfer of the Transfer
Interest within one hundred twenty (120) Days after North
Carolina Power exercises its right of first refusal.
(g) North Carolina Power's right of first refusal shall
apply to any transfer or sale of any interest in the Operator to
any entity other than an entity which is, directly or indirectly,
controlled by, or in control of, the Operator (hereinafter also
referred to as a "Transfer Interest"). Notwithstanding the
foregoing, in the event of an involuntary transfer of any
interest in Operator, North Carolina Power agrees not to exercise
its right of first refusal if, but only if, (i) North Carolina
Power's ownership of such interest in Operator or the Facility
would cause the loss of the Facility's status as a Qualifying
Facility, and (ii) the transfer of such interest shall be made to
a party reasonably acceptable to, and approved by, North Carolina
Power.
(h) Operator will not consolidate with or be a Party to a
merger with any other corporation; provided, however, that:
(1) Any subsidiary of Operator may merge or consolidate
with or into Operator any wholly-owned subsidiary of Operator so
long as, in any such merger or consolidation, Operator shall be
the surviving or continuing corporation;
(2) Operator may consolidate or merge with any other
corporation if (i) the successor formed by or resulting from such
consolidation or merger shall be a solvent corporation organized
under the laws of the United States of America or a state thereof
or the District of Columbia, (ii) after giving effect to such
merger or consolidation, no default under this Agreement shall
exist, (iii) such successor or transferee corporation shall
expressly assume in writing the due and punctual performance and
observance of all the terms, covenants, agreements and conditions
of this Agreement and shall furnish North Carolina Power an
opinion of independent counsel to the surviving corporation to
the effect that each of the corporations participating in such
consolidation or merger or transfer of assets was, at the time
thereof, duly created, validly existing, in good standing and
otherwise in compliance with the applicable provisions of the
corporation laws of its respective state of incorporation, that
the surviving corporation is duly incorporated, validly existing
and in good standing, that the surviving corporation has all
requisite power and authority to assume and perform this
Agreement, that such assumption and performance have been duly
authorized by all necessary corporate action on the part of the
surviving corporation and that compliance by the surviving
corporation with the terms of this Agreement will not conflict
with, or result in any breach of any of the provisions of, or
constitute a default under, or result in the creation or
imposition of a lien upon, any agreement to which it is a party
of the property of the surviving corporation.
(i) The Operator covenants and agrees to sign, execute and
deliver, or cause to be signed, executed and delivered, and to do
or make, or cause to be done or made, upon the written request of
North Carolina Power, any and all agreements, instruments,
papers, deeds, acts or things, supplemental, confirmatory or
otherwise, as may reasonably be required by North Carolina Power
for the purpose of or in connection with the right of first
refusal established hereby.
13.7 Neither Party shall be liable to the other Party for
indirect, incidental, or consequential damages arising out of its
failure to deliver or purchase Dependable Capacity or energy
hereunder or failure to complete Interconnection Facilities by
the date specified in Section 8.1, irrespective of the causes
thereof, including fault or negligence. Except as otherwise
limited by the terms hereof and notwithstanding the above waiver
of indirect, incidental or consequential damages, each Party to
this Agreement shall be liable for damages to the other Party
caused by its negligent or intentional acts, errors or omissions
in connection with or arising out of this Agreement, and for any
other obligations to pay damages to, or to reimburse or indemnify
the other Party as expressly set forth in this Agreement.
ARTICLE 14: Force Majeure
14.1 Neither Party shall be responsible or liable for or
deemed in breach hereof because of any delay in the performance
of their respective obligations hereunder to the extent that such
delay is due to circumstances beyond the reasonable control of
the Party experiencing such delay, including but not limited to
acts of God; unusually severe weather conditions; strikes or
other labor difficulties; war; riots; requirements, actions or
failures to act on the part of governmental authorities
preventing performance; inability despite due diligence to obtain
required licenses; accident; fire; damage to or breakdown of
necessary facilities; or transportation delays or accidents (such
causes hereinafter called "Force Majeure"); provided that:
(a) The suspension of performance is of no greater scope and
of no longer duration than is required by the Force Majeure; and
(b) The non-performing Party uses its best efforts to remedy
its inability to perform; and
(c) When the non-performing Party is able to resume
performance of its obligations under this Agreement, that Party
shall give the other Party written notice to that effect; and
(d) The Force Majeure shall not apply to the extent caused
by any negligent or intentional acts, errors, or omissions, or
failure to comply with any law, rule, regulation, order or
ordinance or for any breach or default of this Agreement.
14.2 The term Force Majeure does not include changes in
market conditions or governmental action that affect the cost or
availability of Operator's supply of fuel or any alternate
supplies of fuel or the demand for Operator's products. In
addition, Force Majeure does not include unavailability of
equipment, following the Commercial Operations Date, or failure
or unavailability of transmission or distribution capability,
unless same is caused by an occurrence which would fit the
definition of Force Majeure in this Article 14.
14.3 Unless a Forced Outage is excused under this Article
14, a Forced Outage does not relieve Operator of any of its
obligations under this Agreement. Notwithstanding the above, each
Day of a Forced Outage excused under this Article 14 shall be
considered a Forced Outage Day unless the Operator appropriately
designates such Day as a Force Majeure Day.
14.4 The non-performing Party shall give the other Party
written notice within a reasonable time after the discovery of
the Force Majeure describing the particulars of the occurrence.
14.5 Except as otherwise provided, in no event will any
condition of Force Majeure extend this Agreement beyond its
stated Term. If any condition of Force Majeure delays a Party's
performance for a time period greater than one hundred eighty
(180) Days, the Party not delayed by such Force Majeure may: i)
upon sixty (60) Day prior written notice to the other Party,
terminate this Agreement, without further obligation; or ii)
grant a reasonable additional period of time in which to overcome
such Force Majeure. If said condition is corrected within said
notice period, the notice of termination will be withdrawn.
ARTICLE 15: Taxes and Claims for Labor and Materials
15.1 All present or future federal, state, municipal or
other lawful taxes applicable by reason of the sale of energy or
Dependable Capacity shall be paid by Operator.
15.2 Operator will promptly pay and discharge all lawful
taxes, assessments and governmental charges or levies imposed
upon it or upon or in respect of all or any part of its property
or business, all trade accounts payable in accordance with usual
and customary business terms, and all claims for work, labor or
materials which, if unpaid, might become a lien or charge upon
any of its property; provided, however, that Operator shall not
be required to pay any such tax, assessment, charge, levy,
account payable or claim if (a) the validity, applicability or
amount thereof is being contested in good faith by appropriate
actions or proceedings which will prevent the forfeiture or sale
of any property of Operator or any material interference with the
use thereof by Operator and (b) shall set aside on its books
reserves deemed by it to be adequate with respect thereto.
ARTICLE 16: Choice of Law
16.1 This Agreement shall be interpreted, Construed and
governed by the laws of the Commonwealth of Virginia. The Parties
hereby submit to the jurisdiction of courts located in, and venue
is hereby stipulated to be in Richmond, Virginia.
ARTICLE 17: Miscellaneous Provisions
17.1 Neither Party shall assign this Agreement or any
portion thereof without the prior written consent of other Party
which consent shall not be unreasonably withheld; provided,,
however, such consent shall not be required prior to an
assignment to a parent, subsidiary or affiliated corporation; but
provided, further that: (i) any assignee shall expressly assume
assignor's obligations hereunder; (ii) no such assignment shall
impair any security given by Operator hereunder; and (iii) unless
expressly agreed by the other Party, no assignment, whether or
not consented to, shall relieve the assignor of its obligations
hereunder in the event its assignee fails to perform. North
Carolina Power shall consent to the assignment by Operator of its
rights herein as security for financing obtained for the Facility
and shall execute documents reasonably satisfactory to North
Carolina Power requested by Operator to evidence such consent and
to coordinate the assignee's foreclosure rights with North
Carolina Power's rights under Section 13.6.
17.2 This Agreement, including the appendices thereto, can
be amended only by agreement between the Parties in writing.
17.3 The failure of either Party to insist in any one or
more instances upon strict performance of any provisions of this
Agreement, or to take advantage of any of its rights hereunder,
shall not be construed as a waiver of any such provisions or the
relinquishment of any such right or any other right hereunder,
which shall remain in full force and effect.
17.4 The headings contained in this Agreement are used
solely for convenience and do not constitute a part of the
Agreement between the Parties hereto, nor should they be used to
aid in any manner in the construction of this Agreement.
17.5 This Agreement is intended solely for the benefit of
the Parties hereto. Nothing in this Agreement shall be construed
to create any duty to, or standard of care with reference to, or
any liability to, any person not a Party to this Agreement.
17.6 This Agreement shall not be interpreted or construed to
create an association, joint venture, or partnership between the
Parties or to impose any partnership obligation or liability upon
either Party. Neither Party shall have any right, power or
authority to enter into any Agreement or undertaking for, or act
on behalf of, or to act as or be an agent or representative of,
or to otherwise bind, the other Party.
17.7 Cancellation, expiration or earlier termination of this
Agreement shall not relieve the Parties of obligations that by
their nature should survive such cancellation, expiration or
termination, including without limitation warranties, remedies,
promises of indemnity and confidentiality.
ARTICLE 18: Statutory and Regulatory Changes
18.1 The Parties recognize and hereby agree that if any
federal, state or municipal government or regulatory authority
should for any reason enter an order, modify its rules, or take
any action whatsoever, having the effect of disallowing North
Carolina Power the recovery from its customers of all or any
portion of the payments for Dependable Capacity hereunder in
excess of $5.62 per kW per month in 1987 dollars as escalated by
the Gross National Product Implicit Price Deflator beginning
April l, 1988, and continuing each April 1 until the termination
of this Agreement, hereinafter referred to as the Disallowance
(except where such disallowance is due to North Carolina Power's
failure to seek recovery or comply with procedural requirements
governing recovery of such costs), then:
(a) If the Disallowance occurs before the twelfth
anniversary of the Commercial Operations Date, North Carolina
Power shall continue to pay for Dependable Capacity at the
Capacity Purchase Price set forth in Article 10 through the
twelfth anniversary of the Commercial Operations Date. Payments
for Dependable Capacity beginning on the twelfth anniversary of
the Commercial Operations Date shall not exceed the amount
unaffected by the Disallowance. Further, North Carolina Power
may, at its option, beginning on the twelfth anniversary of the
Commercial Operations Date withhold up to seventy-five (75)
percent of the payments for Dependable Capacity until the sooner
of (i) the fifteenth anniversary of the Commercial Operations
Date or (ii) the entire amount of the Disallowance is repaid with
Interest from the date each part of the Disallowance was paid to
Operator. In the event that such withholding does not fully repay
the Disallowance and accrued Interest by the fifteenth
anniversary of the Commercial Operations Date, the Operator shall
pay the remainder to North Carolina Power within twenty eight
(28) Days after the fifteenth anniversary of the Commercial
Operations Date in a lump sum;
(b) If the Disallowance occurs after the twelfth anniversary
of the Commercial Operations Date, all future payments for
Dependable Capacity shall not exceed the amount unaffected by the
Disallowance. Further, the Operator shall repay the full amount
of the Disallowance with Interest by the later of (i) one year
from the date of such Disallowance or (ii) the fifteenth
anniversary of the Commercial Operations Date.
(c) The Parties agree that neither Party shall file a petition to
initiate a Disallowance and the Parties obligate themselves to
all good faith efforts to establish, if practicable, an appeal
and overruling of any Disallowance or a superseding order,
approval of modified rules or tariffs, or other action so as to
allow timely resumption of full, or failing that, adjusted
payments hereunder.
ARTICLE 19: Entirety
19.1 This Agreement is intended by the Parties as the final
expression of their Agreement and is intended also as a complete
and exclusive statement of the terms of their Agreement with
respect to the energy and Dependable Capacity sold and purchased
hereunder. All prior written or oral understandings, offers or
other communications of every kind pertaining to the sale of
energy and Dependable Capacity hereunder to North Carolina Power
by Operator are hereby
abrogated and withdrawn.
IN WITNESS WHEREOF, the Parties hereto have caused this
Agreement to be executed the 24th day of January, 1989.
VIRGINIA ELECTRIC AND POWER COMPANY PANDA ENERGY CORPORATION
By: By: Hans R. van Kuilenburg
Title: Senior Vice President Title: President
EXHIBIT A
DATA REQUIRED TO PERFORM INTERCONNECTION STUDY
1. Electrical one-line of the Facility.
2. Explanation of proposed equipment protection and control
scheme (may be shown functionally on the one-line).
3. Site plan showing plant layout, property lines, access roads
and switchyard boundaries.
4. Preliminary equipment layout and arrangement for switchyard
and generator step-up transformer (GSU).
5. Estimated GSU impedance +/- 20 percent.
6. GSU connection and winding.
7. Estimated generator reactances +/- 20 percent.
8. Estimated generator kilowatt rating +/- 10 percent.
9. Estimated generator kilovar rating +/- 10 percent.
10. Explanation of proposed excitation system.
11. Estimated station auxiliary load +/- 20 percent.
12. Requirements for construction and start-up power.
13. Project schedule (I-J or bar chart format) including but not
limited to the following milestones:
- QF status obtained
- Engineering 30% complete
- One-line approved
- Financial Closing
- Major licenses/permits
- Major material procurement
- Start construction
- Engineering 70% complete
- Utility technical submittals complete
- Operating procedures finalized
- Start test and start-up
- Roll turbine
- Initial synchronizing date
- Capacity test complete
- Commercial operation
Data submitted in a preliminary or estimated form shall be
updated within 30 days after final equipment arrangements and
specifications are established.
Exhibit 10.38
AMENDMENT
TO
THE POWER PURCHASE AND OPERATING AGREEMENT
BETWEEN
PANDA ENERGY CORPORATION
AND
VIRGINIA ELECTRIC AND POWER COMPANY
This Amendment No. 1 ( hereinafter the "Amendment")
effective as of October 24, 1989 is by and between PANDA
ENERGY CORPORATION (Operator), a Texas Corporation, and
VIRGINIA ELECTRIC AND POWER COMPANY ("North Carolina
Power" or "Virginia Power" or the "Company"), a Virginia
Public Service Corporation.
WHEREAS, Operator and the Company have entered into a
Power Purchase and Operating Agreement, dated January 24, 1989
(the "Agreement"); and
WHEREAS, Operator assigned all its rights, title and interest
in the Agreement to Panda-Rosemary Corporation ("Panda-Rosemary"),
with the consent of the Company, by a Consent and Agreement dated
May 15, 1989; and
WHEREAS, Operator and the Company now wish to amend
certain provisions of the Agreement;
NOW, THEREFORE, in consideration of the mutual
promises and obligations stated herein, Operator and the
Company do hereby agree as follows:
(1) The first paragraph on page 3 of the Agreement, first
sentence, fifth line down, after the phrase [or "the Company"],
add the phrase [or "Virginia Power"].
(2) The first Recital on page 3 of the Agreement, third line
down, delete the number "172.000" and replace it with the number
"180,000".
(3) The second Recital on page 3 of the Agreement at the end
of the second line, delete the date "June 14, 1990" and replace
it with the date "November 1, 1990".
(4) Section 1.10 "Design Limits" on page 6 of the
Agreement, first sentence, fourth line, delete the number
"170" and replace it with the number "180".
(5) Section 5.3 on page 18 of the Agreement, middle of
second line delete the words "by Operator".
(6) Insert the words "by Operator" after the word
"Failure" in Section 5.3(a) on page 18 of the Agreement.
(7) Section 5.3(b) on page 18 of the Agreement is amended
in its entirety to read as follows:
"(b) Failure by Operator to complete Financial Closing
by December 31, 1989, failure by Operator to commence
construction of the Facility by December 31, 1989.
Operator's abandonment of construction or operation of the
Facility at any time, failure by Operator to provide
evidence of reliable fuel supply by April 30, 1990, and
failure by Operator to reach the Commercial Operations Date by
the later of November 1, 1991 or thirty (30) Days after North
Carolina Power advises Operator that the Interconnection
Facilities are sufficient to accept deliveries up to the
Estimated Dependable Capacity unless excused by Force Majeure as
specified in Article 14; or
(8) Page 18 of the Agreement, Subsection 5.3(c), fifth line
down, delete the phrase "any breach of financial documents
associated with the performance of this Agreement;" and
replace it with the phrase "any termination for default
of financing agreements associated with the performance of
this Agreement or material breach thereof that could lead to the
termination of such financing agreements;"
(9) Subsection 5.3(e) of the Agreement is renumbered as
5.3(f) and the following new Subsection is added to Section 5.3
of the Agreement:
"5.3(e) The failure by the Company to make payments for
energy or capacity in accordance with this Agreement."
(10) Section 6.1 on page 20 of the Agreement is amended
in its entirety to read as follows:
"6.1 Operator represents and warrants that beginning with
the Commercial Operations Date and at all times thereafter
until the termination of this Agreement that it shall have
fuel oil stored at the Facility site in quantities
sufficient to operate the Facility for one hundred and
sixty-eight (168) consecutive hours at the Dependable
Capacity level determined in accordance with Article 11. From
time to time, as North Carolina Power may reasonably
request, Operator shall provide North Carolina Power
evidence of its compliance with this obligation. For purposes of
this provision, fuel oil will be deemed to be 'stored at the
Facility site' if such fuel oil is fully dedicated to the
Facility and stored in a storage tank or tanks that are
connected to the Facility by delivery pipelines capable of
delivering fuel oil to the Facility at a rate that will
support Facility operation at the Dependable Capacity determined
in accordance with Article ll.
(11) Add the following sentence to Section 7.1 on page 25 of
the Agreement: "In addition, prior to tenth (10th) of each
Month after the Commercial Operations Date, Operator shall
provide North Carolina Power with Facility generating,
performance and event data consistent with the format specified
in the NERC Generating Availability Data Systems (GADS) reporting
standards."
(12) Section 7.6 on page 27 of the Agreement, second line
from the bottom of the page, delete the phrase "pursuant to
(a), (b) and (c) above." and replace it with the phrase
"pursuant to (a) and (b) above."
(13) Section 8.1 on page 29 of the Agreement, middle of
sixth line down, delete the phrase "sixty (60) Days" and replace
it with "thirty (30) Days".
(14) Section 8.8(a) on page 31 of the Agreement is amended
in its entirety to read as follows:
"(a) Events of Force Majeure set forth in Article 14 of this
Agreement.
(15) The following sentence is inserted after the word
"month." on the third line of Subsection 10.15(a) on page 40 of
the Agreement:
"The Commercial Operations Date may not occur earlier than
thirty (30) days after completion of the Interconnection
Facilities if such earlier Commercial Operations Date would then
occur prior to November 1, 1990."
(16) Section 10.15(d) on page 42 of the Agreement, first
sentence, middle of third line of paragraph, delete the phrase
"Section 7.6(c)" and replace it with the phrase "Section 7.6(b)".
(17) Section 11.1 on page 44 of the Agreement is amended
in its entirety to read as follows:
"Section 11.1. Operator's original Estimated Dependable
Capacity is 150 MW for the Summer Period and 180 MW for the
Winter Period. "
(18) Section 13.5 on page 54 of the Agreement is amended
in its entirety to read as follows:
"13.5 Security for compliance with Section 13.4 above may
consist of an unconditional and irrevocable direct pay letter
of credit issued by a bank acceptable to North Carolina Power
in a form and with substance acceptable to North Carolina
Power. At North Carolina Power's option, security for
compliance with Section 13.4 may (in place of the letter of
credit) consist of one or more of the following:
(a) A payment or performance bond issued by a company
acceptable to North Carolina Power for payment to North
Carolina Power in the event of a material breach by
Operator in a form and with substance acceptable to North
Carolina power.
(b) A corporate guarantee which North Carolina Power, at
its discretion, deems to be equivalent in quality to the
security detailed above in this Section 13.5 in a form and
with substance acceptable to North Carolina Power. "
(19) Section 13.7 on page 58 of the Agreement is amended in
its entirety to read as follows:
"13.7 Neither Party shall be liable to the other Party for indirect,
incidental, or consequential damages arising out its failure to
deliver or purchase Dependable Capacity energy or hereunder or failure
to complete Interconnection Facilities by the date specified in Section 8.1,
irrespective the causes thereof, including fault or negligence.
Notwithstanding the above waiver of indirect, incidental, or
consequential damages, each Party to this Agreement shall be
liable for any obligations to pay damages to, or to reimburse or
indemnify the other Party as expressly set forth in this
Agreement."
(20) Sections 18.1(a) and (b) on page 64 of the Agreement
are amended in their entirety to read as follows: "(a) If the
Disallowance occurs before the sixteenth anniversary of the
Commercial Operations Date, North Carolina Power shall continue
to pay for Dependable Capacity at the Capacity Purchase Price
set forth in Article 10 through the sixteenth anniversary of
the Commercial Operations Date. Payments for Dependable
Capacity beginning on the sixteenth anniversary of the
Commercial Operations Date shall not exceed the amount
unaffected by the Disallowance. Further, "North Carolina Power
may, at its option, beginning on the sixteenth anniversary
of the Commercial Operations Date withhold up to seventy-five
(75) percent of the payments for Dependable Capacity until
the sooner of (i) the seventeenth anniversary of the Commercial
Operations Date or (ii) the entire amount of the
Disallowance is repaid with Interest from the date each part of
the Disallowance was paid to Operator. In the event that such
withholding does not fully repay the Disallowance and accrued
Interest by the seventeenth anniversary of the Commercial
Operations Date, the Operator shall pay the remainder to
North Carolina Power within twenty-eight (28) Days after the
seventeenth anniversary of the Commercial Operations Date in a
lump sum;
(b) If the Disallowance occurs after the sixteenth
anniversary of the Commercial Operations Date, all future
payments for Dependable Capacity shall not exceed the amount
unaffected by the Disallowance. Further, the Operator shall
repay the full amount of the Disallowance with Interest by the
later of (i) one year from the date of such Disallowance or (ii)
the seventeenth anniversary of the Commercial Operation Date."
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their duly authorized
representatives, and it is effective as of the last day set forth
below:
VIRGINIA ELECTRIC AND POWER
COMPANY PANDA ENERGY CORPORATION
By: __________________________ By________________________
Larry W. Ellis Robert W. Carter
Title: Vice-President, System Title: Chairman
Planning and Power Supply
Date: 10/24/89 Date: 10/23/89
EXHIBIT A
DATA REQUIRED TO PERFORM INTERCONNECTION STUDY
1. Electrical one-line of the Facility.
2. Explanation of proposed equipment protection and control
scheme (may be shown functionally on the one-line).
3. Site plan showing plant layout, property lines, access
roads and switchyard boundaries.
4. Preliminary equipment layout and arrangement for
switchyard and generator step-up transformer (GSU).
5. Estimated GSU impedance +/- 20 percent.
6. GSU connection and winding.
7. Estimated generator reactances +/- 20 percent.
8. Estimated generator kilowatt rating +/- 10 percent.
9. Estimated generator kilovar rating +/- 10 percent.
10. Explanation of proposed excitation system.
11. Estimated station auxiliary load +/- 20 percent.
12. Requirements for construction and start-up power.
13. Project schedule (I-J or bar chart format) including but not
limited to the following milestones:
- QF status obtained
- Engineering 30% complete
- One-line approved
- Financial Closing
- Major licenses/permits
- Major material procurement
- Start construction
- Engineering 70% complete
- Utility technical submittals complete
- Operating procedures finalized
- Start test and start-up
- Roll turbine
- Initial synchronizing date
- Capacity test complete
- Commercial operation
Data submitted in a preliminary or estimated form shall be
updated within 30 days after final equipment arrangements and
specifications are established.
EXHIBIT 10.39
AMENDMENT NO 2.
TO
THE POWER PURCHASE AND OPERATING AGREEMENT
BETWEEN
PANDA-ROSEMARY. L.P.
AND
VIRGINIA ELECTRIC AND POWER COMPANY
This Amendment No. 2 (hereinafter the "Amendment")
effective as of July 30, 1993, is by and between PANDA-
ROSEMARY, L.P., ("Operator") a Delaware limited
partnership, and VIRGINIA ELECTRIC AND POWER COMPANY
("North Carolina Power" or the "Company"), a Virginia
public service corporation.
RECITALS
WHEREAS, Operator and North Carolina Power are parties
to a Power Purchase and Operating Agreement dated
January 24, 1989, originally entered into between Panda
Energy Corporation and North Carolina Power and subsequently
assigned to Panda-Rosemary Corporation May 15, 1989 and
amended with Amendment No. 1 effective October 1, 1989
(such Agreement as amended by Amendment No.1. is hereafter
referred to as the "Agreement"); and
WHEREAS, the Agreement was assigned as of January
6, 1992 to Operator; and
WHEREAS, the Agreement contains a provision that
allows Operator and North Carolina Power to redetermine
the Base Gas Index, the Composite Gas Index, and/or the
fuel component of the Base Fuel Compensation Price; and
WHEREAS, Operator and North Carolina Power have
redetermined the Energy Purchase Price and now wish to
amend certain provisions of the Agreement;
NOW, THEREFORE, in consideration of the mutual
promises and obligations stated herein, Operator and North
Carolina Power do hereby agree to amend the Agreement as
follows:
(1) In Section 1.10, first sentence, lines 6 and 7,
delete the words "thirty-five (35) percent of the Dependable
Capacity or fifty (50) percent to Seventy-five (75)" and
insert the words "nineteen (19) percent of the Dependable
Capacity, twentyfour (24) percent to fifty-four (54) percent
of the Dependable Capacity, or sixty-five (65) percent to
eighty (80)"
(2) Section 10.2, is hereby deleted in its entirety
and replaced with the following:
"Unless the provisions of Sections 10.4 or 10.6 are in
effect, during the Months of April, May, June, July, August,
September, and October, the Fuel Compensation Price shall
be equal to the Summer Gas Compensation Price ("SGCP").
During the months of November, December, and March, the
Fuel Compensation Price shall be equal to the Winter Gas
Compensation Price ("WGCP"). During the months of January
and February, the Fuel Compensation Price shall be equal to
the Winter Oil Price ("WOP"). In each case, the Heat Rate
shall be 8900 Btu/kWh ("Contract Heat Rate"). The Energy
Purchase Price shall be calculated using the formula:
Energy Purchase Price
8,900 Btu/kWh
= [(Fuel Compensation Price)( ------------)] + O&M
1,000,000
Price specified in Section 10.14 where,
Fuel Compensation Price is in cents/mmBtu, and Variable O&M
Price specified in Section 10.14 is in cents/kWh."
(3) Section 10.3, is hereby deleted in its entirety
and replaced with the following:
"(a) During the Months when the Fuel Compensation Price
shall be set equal to the SGCP, the SGCP shall be
calculated using the formula (See Exhibit B, Example
1):
1 1
SGCP = [(((1-SR1)(1-SR2))+0.03)(SSG)] + SGT
where,
SR1 = the latest published Transco tariff retainage
value issued prior to and effective on the first day of
the applicable Month for Transco Zone 3-5 Interruptible
Transportation;
SR2 = the North Carolina Natural Gas (NCNG) tariff
retainage fixed at 2%;
SSG = Summer Spot Gas for the applicable Month
is the arithmetic average of prices determined as of the
first of that Month for (i) the Transco Zone 3 Index Price
for Spot Gas delivered to pipelines as published in the
first issue of either Inside FERC's Gas Market Report,
or Inside FERC's Gas Market Report Special Report,
whichever is published first, as appropriate; (ii) the
contract index price for spot gas delivered to pipelines
under the heading "Columbia - Rayne" as published in
Natural Gas Intelligence Gas Price Index; and (iii) the bid
week price for the Month in question, for Transcontinental
Gas Pipe Line Corp., Zone 3 as published in Natural Gas
Week in the table Spot Prices on Interstate Pipeline
Systems; and
SGT = Summer Gas Transportation for the applicable
Month is the sum of (i) the latest published Transco
tariff charges, including applicable surcharges, issued
prior to and effective on the first of the Month, for
Transco Zone 3-5 Interruptible Transportation; (ii)
$0.25, adjusted monthly beginning August 1, 1993 by the
percentage change between the index values for the Months
four and five Months prior to the applicable Month, of the
Consumer Price Index for All Urban Consumers, U. S. City
Average, as first published in Table 1 of the CPI Detailed
Report, in the row titled, "All Items", under the column
heading "Unadjusted percent change to (date) from"; and
(iii) $0.04. All references to Transco "published
tariffs" in this Section 10.3 shall refer to amounts
reported on the Transco electronic bulletin board,
"TRANSIT"; provided however, that if there is any dispute
as to the accuracy of such amounts, the term "published
tariffs" shall mean those tariff(s) filed by Transco at the
FERC.
(b) During the Months where the Fuel Compensation Price
shall be set equal to the Winter Gas Compensation
Price, the WGCP shall be calculated using the formula
(See Exhibit B, Example 2):
1 1 1
WGCP = [(((1-WR1)(1-WR2)(1-WR3))+0.03)(WSG)] + WGT
where,
WR1 = the latest published Transco tariff retainage
value issued prior to and effective on the first day of
the applicable Month for Transco Zone 6-5 (from Leidy,
PA. to Pleasant Hill, N.C.), Interruptible Transportation;
WR2 = the latest published CNG tariff retainage value
issued prior to and effective on the first day of the
applicable Month for CNG Interruptible Transportation;
WR3 = the North Carolina Natural Gas tariff retainage fixed
at 2%;
WSG = Winter Spot Gas for the applicable Month
is the arithmetic average of prices determined as of the
first of that Month for (i) the CNG Appalachia Index Price
for Spot Gas delivered to pipelines as published in the
first monthly issue Inside FERC's Gas Market Report, or
Inside FERC's Gas Market Report - Special Report, as
appropriate; and (ii) the contract index price for spot
gas delivered to pipelines under the heading "Appalachia -
CNG" as published in Natural Gas Intelligence Gas Price
Index; and
WGT = Winter Gas Transportation for the applicable
Month is the sum of (i) the latest published Transco
tariff charges, including applicable surcharges, issued
prior to and effective, on the first of the Month, for
Transco Zone 6-5 (from Leidy, PA. to Pleasant Hill, N.C.)
Interruptible Transportation; plus (ii) the latest
published CNG tariff charges, including applicable
surcharges, issued prior to and effective, on the first day
of the Month for CNG Interruptible Transportation; plus
(iii) $0.25, adjusted monthly beginning August 1, 1993 by
the percentage change between the index values for the Months
four and five Months prior to the applicable Month, of the Consumer
Price Index for All Urban Consumers, U. S. City Average as
first published in Table 1 of the CPI Detailed Report,
in the row titled "All Items", under the column heading
"Unadjusted percent change to (date) from"; and (iv) $0.04.
In addition to the WGCP, Operator will be paid a
startup fee for each "Start-up" during the Months of
November, December, and March, except as set forth
below. For the purpose of this Agreement, Start-up shall
mean each time the Facility produces Net Electrical Output
following zero Net Electrical Output, or each time the
Facility is Dispatched to continue delivery of Net
Electrical Output after Company delivers gas pursuant to
Section 10.4. The start-up fee (SF) shall be determined
using the following formula (See Exhibit B, Example 3);
SF = $38,286.00(WOP - WGCP)
where,
WOP = Winter Oil Price, using the same formula
specified in Section 10.3(c) below, but for the Months of
November, December, and March; and
WGCP = Winter Gas Compensation Price, as
determined in this Section 10.3(b). Payment of the
start-up fee will accrue upon each Start-up, and will
be made with the regular monthly billing. Payment of
the start-up fee shall be contingent upon Operator's
compliance with North Carolina Power's Dispatch and
the Design Limits of the Facility. If the Facility
operates in accordance with North Carolina Power's
Dispatch for the lesser of North Carolina Power's
Dispatch or twenty-four (24) hours and then experiences
an off-line Forced Outage, Operator will receive
payment of a start-up fee. Operator will not receive
the start-up fee for (i) any periods of time Operator
requests North Carolina Power to receive Net
Electrical Output and North Carolina Power agrees to
accept such Net Electrical Output when North Carolina
Power would not have otherwise Dispatched the
Facility to deliver such Net Electrical Output; (ii)
the first test, or Operator requested tests, for
Dependable Capacity during any Winter Period; and (iii)
Start-up following a Forced Outage that resulted from
the Facility delivering to North Carolina Power zero
Net Electrical Output during a period of time the
Facility was Dispatched to deliver Net Electrical
Output to North Carolina Power where (x) a start-up
fee has already accrued for such Dispatch period or
(y) the Start-up for such Dispatch period occurred in
a Month other than November, December, or March. The
total Fuel Compensation Price, plus the start-up
fee, for Net Electrical Output delivered during the
Dispatch period shall not exceed the WOP as determined
for the Months of November, December, and March.
(c) During the Months where the Fuel Compensation Price
shall be set equal to the Winter Oil Price, the WOP
shall be calculated using the formula:
WOP = ($4.45/mmBtu)(OI)
where,
OI = Oil Index which will be based on prices
reported in Platt's Oilgram Price Report in the U.S. Tank
Car/Truck Transport table for No. 2 fuel oil. The index
will be the sum of the most recently reported average of
low and high prices on No. 2 fuel oil delivered to
Greensboro and Norfolk, determined as set forth below,
divided by 114.49 cents/gallon (which is the sum of the
average of the low and high prices for No. 2 fuel oil for
the same locations as published in each Wednesday's Platt's
Oilgram during the month of December 1992). In calculating
the numerator for the Oil Index for the current month,
the average price for No. 2 fuel oil delivered to each
location, will be determined using the values published in
each Wednesday's Platt's Oilgram for the preceding Month,
i.e. that is January's price would be determined by prices
reported in December."
(4) Section 10.4, is hereby deleted in its
entirety and replaced with the following:
"(a) Subject to the provisions of Sections 10.2, 10.3. and
10.6, North Carolina may, at its election and in compliance
with the restrictions and provisions set forth below, supply
gas to the Facility during periods when North Carolina Power
is able to obtain sufficient quantities of gas to allow
Operator to meet North Carolina Power's Dispatch in a
manner consistent with the Facility's Design Limits.
North Carolina Power shall contact Operator each Friday
morning and advise Operator of North Carolina Power's
plans to supply the Facility with gas for the following
week, including any actual arrangements committed to as
well as additional arrangements being considered. Operator
shall use its best efforts to accept and consume North
Carolina Power's gas, except Operator shall be under no
duty to accept deliveries of natural gas for the
production of Net Electrical Output if the Facility
was projected by North Carolina Power on Friday of the
previous week to be Dispatched on-line at the Energy
Purchase Price or the price Operator has nominated
pursuant to Section 10.6; provided, however, Operator shall
be obligated to produce Net Electrical Output in
accordance with Dispatch from North Carolina Power
delivered natural gas if one of the following conditions
exist:
(x) the Company has an identifiable off system
power sale opportunity and the Company has, within a
reasonable time after having identified such off-system
power sale opportunity, provided notice thereof to
Operator, or (y) the Company has gas available as a
result of a forced outage at a Company natural gas
turbine facility and the Company has provided, within a
reasonable time after such forced outage, notice thereof to
Operator, or (z) the Company has scheduled an outage of
a Company natural gas turbine facility and the Company
has given Operator at least 30 days notice prior to
delivery of natural gas. (b) Notwithstanding anything in
this Agreement to the contrary, Operator shall not be
required to accept deliveries of gas from North Carolina
Power if (i) the consumption and/or acceptance of such
gas would cause Operator to breach or violate any
statute, regulation or permit applicable to the Facility,
or (ii) Dispatch of the Facility would transgress any
other provision of this Agreement. If it is found that
acceptance and/or consumption of such gas will be in
conflict with any of Operator's contracts, Operator shall
immediately advise North Carolina Power of such conflict.
In such event the parties will endeavor to resolve such
conflict; however, Operator shall not be required to accept
deliveries of natural gas until the conflict is resolved.
As of the execution of this Amendment, Operator is unaware
of any such conflict with any of its contracts.
(c) North Carolina Power shall pay Operator, for
the Net Electrical Output generated each day with gas
supplied by North Carolina Power, an amount equal to the
Converted Energy Purchase Price, as adjusted by sub-
section 10.4(k) hereof, in lieu of payment of the
Energy Purchase Price pursuant to Sections 10.1 through
10.3. For purposes of this section, the Converted Energy
Purchase Price shall be calculated as follows:
CEPP = NEO [O&M + (Heat Rate * (MGT Fee + PO Fee))]
+ [(DN Fee)(#Days gas supplied)]
where,
"CEPP" = Converted Energy Purchase Price
"NEO" = Net Electrical Output, expressed in kWh and
defined in Section 1.28
"O&M" = 0&M Price specified in section 10.14
"Heat Rate" = .0089 MMBtu/kWh
"MGT Fee" = The management fee of 4 cents/MMBtu
"PO Fee" = The pipeline operating fee of 12 cents/MMBtu,
adjusted monthly beginning August 1, 1993 by the percentage
change between the index values for the Months four and
five Months prior to the applicable Month, of the
Consumer Price Index for All Urban Consumers, U. S. City
Average as first published in Table 1 of the CPI Detailed
Report, in the row titled "All Items", under the column
heading "Unadjusted percent change to (date) from"
"DN Fee" = The daily nomination cost of $450 each day
(d) On each day which North Carolina Power elects
to Dispatch the Facility on-line pursuant to this Section
10.4, (i) Operator will operate the Facility in accordance
with the terms of this Agreement, and (ii) North Carolina
Power will be obligated to deliver to Operator such
quantities of natural gas as are sufficient to allow
Operator to meet Dispatch during such day, based on the
Contract Heat Rate of 8900 Btu/kWh. The amount of natural
gas presumed to have been consumed by the Facility during
such day will be based on the following:
FC = NEO * Heat Rate
where,
"FC" = Fuel Consumed, the amount of natural gas presumed
to be consumed by the Facility during Dispatch under this
section, in MMBtu's.
"Heat Rate" = .0089 MMBtu/kWh
The actual adjusted amount of natural gas delivered to the
Facility at its Pleasant Hill measuring station shall be
based on the followinq:
FA = FS * (.98) where,
"FA" = Fuel Accepted, the amount of natural gas actually
placed into the Facility's pipeline adjusted by NCNG's 2%
retainage tariff in MMBtu's.
"FS" = Fuel Supplied, the amount of natural gas
specified, in MMBtu's, in the monthly measurement
statements produced by Transcontinental Gas Pipeline Company
and/or Columbia Gas Transmission Corporation and allocated
as delivered by North Carolina Power.
Any positive difference between the Fuel Accepted
("FA") less the Fuel Consumed ("FC") ("Over Delivery") shall
be reconciled on a monthly basis as provided below in sub-
section 10.4(k)1.
Any negative difference between the Fuel Accepted ("FA")
less the Fuel Consumed ("FC") ("Under Delivery") shall be
reconciled on a monthly basis as provided below in sub-
section 10.4(k)2.
(e) To the extent that the quantity of natural gas
actually consumed at the Facility to generate the Net
Electrical Output produced by the Facility differs from
the quantity of natural gas presumed to have been
consumed at the Facility ("FC", as defined above),
Operator shall be responsible for any shortfall,
or shall be entitled to retain any surplus, of
natural gas.
(f) North Carolina Power may not exercise its election to
supply gas to the Facility unless the Facility will be
Dispatched to run for a minimum of 8 consecutive
hours.
(g) Except as provided for in Section 10.4(f) above, North
Carolina Power's Dispatch rights will not be affected
by gas deliveries made by North Carolina Power.
(h) North Carolina Power's natural gas shall be
delivered, and title to such natural gas will pass to Operator, at
Operator's Pleasant Hill measurement station. North
Carolina Power warrants title to all gas delivered to
Operator and is responsible for obtaining all necessary
regulatory authorizations.
(i) North Carolina Power's natural gas will be
delivered to Operator's Pleasant Hill measurement
station at no cost to Operator.
(j) North Carolina Power will indemnify and hold Operator
harmless from over and under deliveries of gas attributable
to North Carolina Power's movement of gas to the Facility on
interstate pipelines and such over and under deliveries will
be settled by North Carolina Power in a manner consistent
with the imbalance settlement provisions of the appropriate
pipeline(s).
(k) Over and Under deliveries of natural gas to
Operator (e.g., imbalances) attributable to North Carolina
Power's movement of gas to the Facility will be settled
monthly as follows:
1. Over Delivery of natural gas by North Carolina Power
to Operator will be credited to the Company on the
monthly billing at a rate equal to the average of
Transco's average cash-in/cash-out tied to Zone 3 IT
(See Exhibit B), including associated transport
costs and retainage factor, for such month the Over
Delivery occurs (See Exhibit B, Example 4).
2 . Under Delivery of natural gas by North Carolina
Power to Operator will be credited to Operator on the
monthly billing at a rate equal to the average of Transco's
average cash-in/cash-out tied to Zone 3 IT (See Exhibit B),
including associated transport costs and retainage factor,
for such month the Under Delivery occurs (See Exhibit B,
Example 5).
(l) If the Facility has to shut down due to a loss of gas supply
from North Carolina Power, it shall not be construed as a
Forced Outage.
(m) If the Facility is Dispatched to continue delivery
of Net Electrical Output after North Carolina Power's
delivery of gas is completed, the Energy Purchase
Price in effect at the time shall then apply for
such additional generation. If this situation
occurs in the Months of November, December, and
March, Operator shall receive the start-up fee as set
forth in Section 10.3(b).
(n) Notwithstanding any other provision of this Agreement
including Section 15.1, North Carolina Power agrees to pay
any taxes applicable to the Company's supply of or transfer
of title to natural gas under this provision. If the new
taxes are levied on the sale of energy or the
combustion/consumption of natural gas, then the Company
shall i) pay such taxes applicable to the sale of energy
or the combustion/consumption of natural gas whenever it
elects to exercise its rights under this Section 10.4, or
(ii) forfeit its rights under this Section 10.4 to supply
gas to the Facility."
(5) Section 10.5, is hereby deleted in its
entirety and replaced with the following:
"If any Government index used to determine the Energy
Purchase Price is discontinued, an index specified by an
appropriate U.S. Government agency, if available, shall be
substituted for such discontinued Government index, and if
no such replacement government index is made available, a
new index shall be determined by agreement of the
Parties. In addition, if any publication, or index within
a publication, used to determine the Energy Purchase Price
is discontinued, a new publication or index shall be
determined by agreement of the Parties. If any of the
indices or publications specified herein are determined
by both Parties to no longer represent market conditions,
or if the basis of calculation of those published
indices or publications is substantially modified, the
indices or publications may be replaced by agreement of the
Parties, except, however, that changes in the base year(s)
reporting basis, minor changes in weighting and minor
changes in benchmarks shall not be construed as
substantial modifications of the indices or publications and
the affected values shall be reestablished in accordance
with the instructions of the appropriate Government agency
or publication."
(6) Section 10.6, is hereby deleted in its entirety
and replaced with the following:
"Operator may set an Energy Purchase Price that it
believes will increase the on-line Dispatch of the
Facility, under the following terms:
(a) Operator must notify North Carolina Power in writing
prior to the close of business at noon on Wednesday of
any week that a new Energy Purchase Price is
offered, and such new Energy Purchase Price will
be effective beginning 11:59 PM the following
Friday.
(b) The new Energy Purchase Price shall remain in effect
until Operator provides notice of a new Energy Purchase
Price, but not less than seven days. (c) The new Energy
Purchase Price shall not exceed the Energy Purchase Price
in effect pursuant to Section 10.1 through Section 10.3."
(7) Section 10.7, is hereby deleted in its entirety and replaced
with the following:
"Opportunities to redetermine the Fuel Compensation
Price shall begin on the third July 1 after the
Commercial Operations Date, and every third July 1,
thereafter. Such date shall hereafter be the
"Redetermination Date." Either Party must submit written
notice to the other Party requesting such redetermination
no less than four (4) Calendar Months prior to the
Redetermination Date. Such written notice shall include
any proposed change(s) and the basis for such change(s).
The Parties shall within 30 Days of the submittal of such
notice enter into good faith negotiations for the purpose
of revising the Fuel Compensation Price to reflect more
accurately the prices then prevailing in the market for
prudent purchases of natural gas. If such redetermination
is not complete within thirty (30) Days after the
Redetermination Date, such matter may be submitted to
binding arbitration as discussed in Section 10.8 below.
The exercise by a party of its right to redetermine the
Energy Purchase price, shall cause all rights and
obligations of this Amendment No. 2, other than this
Section 10.7, to be null and void as of the Redetermination
Date, and the parties' rights and obligations under the
Agreement dated January 24, 1989 (as amended by Amendment
No. 1) will be substituted therefore."
(8) Section 10.14, is hereby deleted in its entirety
and replaced with the following:
"North Carolina Power shall also pay Operator, on a
per kWh basis, a variable operation and maintenance
adjustment. This O&M Price shall be 0.20 cents/kWh in
1993 dollars and shall be increased or decreased, as
appropriate, on April 1, 1994, and on each April 1
thereafter by the change in the Gross Domestic Product
Implicit Price Deflator for the previous Calendar Year."
Operator is responsible for securing any approvals of
this Amendment from any Lender providing financing for the
Facility (as that term is defined in the Agreement) or
those entities that are parties to the Consent to
Assignment, Delegation and Assumption Agreement other than
North Carolina Power and will bear all costs of obtaining
such approvals. North Carolina Power shall be allowed to
rely on Operator's execution of this Amendment as evidence
that such approvals have been obtained.
Except as expressly modified hereby, all the terms and
conditions of the Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their duly authorized
representatives as set forth below:
VIRGINIA ELECTRIC AND
POWER COMPANY PANDA-ROSEMARY, L.P.
By:_____________________ By Its General Partner,
Larry Ellis Panda Rosemary Corporation
Title: Senior Vice President By: Robert W. Carter
Dated: September 1, 1993 Title: Chairman
Dated August 30, 1993
EXHIBIT B
NOTE: ALL VALUES USED IN EXAMPLES ARE FOR ILLUSTRATIVE
PURPOSES ONLY.
EXAMPLE 1 - Summer Gas Compensation Price
SSG (Summer Spot Gas) = Average of:
i) Inside FERC Index - Transco Zone 3 =$2.07/Dth
ii) Natural Gas Intell - Columbia Gulf at Rayne =$2.09/Dth
iii) Natural Gas Week Average Bid Wk - Transco Zone 3 =$2.09/Dth
SSG = $2.083/Dth
SGT (Summer Gas Transport):
i) $0.3635
ii) $0.2500
iii) $0.0400
$0.6535
SR1 = .0326
SR2 = .0200
1 1
SGCP = [(((1-SR1)(1-SR2))+0.03)(SSG)] + SGT
SGCP = [(((1-.0326)(1-.0200))+0.03)($2.083/Dth)] + $0.6535
SGCP = $2.914/Dth
EXAMPLE 2 - Winter Gas Compensation Price
WSG (Winter Spot Gas):
i) Inside FERC CNG Appalachia = $2.230
ii) Natural Gas Intell CNG Appalachia = $2.240
Average = $2.235
WR1 = Transco retainage = 1.97%
WR2 = CNG retainage = 2.28%
WR3 = NCNG retainage = 2.00%
WGT (Winter Gas Transportation):
i) Transco tariff =$.2676/Dth
ii) CNG IT tariff =$.2087/Dth
iii) NCNG tariff =$.2500/Dth
iv) Natural Gas Clearing House =$.0400/Dth
Total =$.7663/Dth
1 1 1
WGCP = [(((1-WR1)(1-WR2)(1-WR3))+0.03)(WSG)] + WGT
1 1
WGCP
= [(((1-.0197)(1-.0228)(1-.0200))+0.03)(S2.235)] + S.7663/Dth
WGCP = $3.213/mmBtu
EXAMPLE 3 - Start-up Fee
Winter Oil Price = ($4.45/mmBtu)(OI) = ($4.45)(.903) =$4.018/mmBtu
OI:
i) Norfolk average #2 = 52.225 cents/gal
ii) Greensboro average #2 = 51.175 cents/gal
Total = 103.400 cents/gal
0I = 103.400/114.49 = .903
Start-up Fee = $38,286($4.018-$3.213) = $30,820
EXAMPLE 4 - Over Delivery
If Fuel Supplied = 110,000 Dth on 5 Days and North Carolina
Power requests Facility to generate 11,798,000 kWh then,
CEPP = 11,798,000 kWh [$.002/kWh + .0089
mmBtu/kWH($.16/mmBtu)] +
(5 Days)($450.00/Day) = S42, 646.00
FC = (11,798,000 kWh)(8900 Btu/kWh) = 105,000 Dth
FA = (110,000 Dth)(.98) = 107,800 Dth
FA > FC by 2,800 Dth, over delivery reconciliation is:
($2.0263/Dth + transport cost + retainage factor)(2,800 Dth)
= ($2.0263/.9674 +.3568)(2,800 Dth) = $6,864.00 due Company
EXAMPLE 5 - Under Delivery
If Fuel Supplied = 100,000 Dth on 5 Days and North Carolina
Power requests Facility to generate 11,798,000 kWh then,
CEPP = 11,798,000 kWh [$.002 kWh + .0089
mmBtu/kWH($.16/mmBtu)]
+ (5 Days)($450.00/Day) = $42,646.00
FC = (11,798,000 kWh)(8900 Btu/kWh) = 105,000 Dth
FA = (100,000 Dth)(.98) = 98,000 Dth
FC > FA by 7,000 Dth, under delivery reconciliation is:
(S2.0263/Dth + transport cost + retainage factor)(7,000 Dth)
= ($2.0263/.9674 +.3568)(7,000 Dth) $17,160.00 due
Operator
EXHIBIT 10.40
FUEL SUPPLY MANAGEMENT AGREEMENT
THIS AGREEMENT is made effective on the 10th day
of October, 1990 by and between:
PANDA-ROSEMARY CORPORATION, a Delaware corporation,
with principal offices in Dallas, Texas, hereafter
referred to as "PANDA"; and
NATURAL GAS CLEARINGHOUSE, a Colorado general
partnership, with principal offices in Houston,
Texas, hereafter referred to as "NGC".
WITNESSETH, THAT:
WHEREAS, PANDA is engaged in the development,
construction and operation of a cogeneration electricity
generating facility (the "Facility") in Roanoke Rapids,
North Carolina together with a 9.6 mile pipeline (the "Panda
Pipeline") to interconnect with the pipelines of North
Carolina Natural Gas Corporation ("NCNG"),
Transcontinental Gas Pipe Line Corporation ("Transco") and
Columbia Gas Transmission Corporation ("Columbia") near
Pleasant Hill, Northampton County, North Carolina
(hereinafter called the "Facility"); and
WHEREAS, NGC is a gas and oil marketing organization
with the capability to perform fuel management services
for industrial companies as to natural gas and other fuels;
and
WHEREAS, PANDA desires to hire and retain NGC to manage
the acquisition and transportation of fuel to the Facility
and NGC wishes to be hired and retained therefor.
NOW THEREFORE, in consideration of the mutual covenants,
obligations and considerations hereinafter set forth,
the parties hereto do hereby contract and agree as follows.
ARTICLE I.
DEFINITIONS
1.01 "Best Cost" shall mean the lowest price
reasonably available for reliable supplies and transportation
of Gas and/or No. 2 fuel oil meeting the specifications
established for the Faciality, when purchased in similar
quantities for delivery to the same point and at the same
point in time.
1.02 "Btu" shall mean the amount of heat required to raise
the temperature of one pound of water one degree at 60 degrees
Fahrenheit.
1.03 "Commercial Operations Date" shall mean the date that
the Facility is ready to commence commercial operations.
1.04 "Dekatherm" or "dt" shall be equivalent to one (1) MMBtu.
1.05 "Delivery Point" shall mean the point of
interconnection between the Transporter's sales meter and
the Panda Pipeline near Pleasant Hill, Northampton County,
North Carolina, unless otherwise expressly agreed in writing
between NGC and PANDA.
1.06 "Electrical Dispatch" shall mean the quantity
of electricity which Virginia Electric Power Company
requires the Facility to generate from time to time.
1.07 "Facility"- shall mean the steam, chilled water and
power generation facilities owned by PANDA its successors and
assigns in Roanoke Rapids, North Carolina or in the
immediate vicinity of Roanoke Rapids.
1.08 "Financiers" means (a) any individual or entity
lending money to PANDA for the construction or term
financing of the Facility, or the establishment and/or
maintenance of working capital requirements, or the
refinance or take-out of any such loan; or, (b) any lessor
under a single investor or leveraged lease finance
arrangement.
1.09 "Force Majeure" as employed herein and for all
purposes relating hereto shall mean any situation or
occurrence not reasonably within the control of the party
claiming suspension and which, by the exercise of due
diligence, such party is unable to prevent or overcome,
and shall include, not by way of limitation, acts of
God, strikes, lockouts or other industrial disturbances,
acts of the public enemy, wars, blockades, insurrections,
riots, epidemics, landslides, lightning, earthquakes, fires,
storms, hurricanes, floods, washouts, arrests and restraints
of governments and people, civil disturbances, explosions,
breakage or accident to machinery or lines of pipe including
the Facility, freezing of wells or pipelines,
curtailment of transportation, the necessity for making
repairs or alterations to machinery or lines of pipe
including the Facility, inability of any party hereto to
obtain necessary materials, supplies, licenses or permits (or
unavoidable delays, after the exercise of reasonable
diligence, in acquiring such materials, supplies, licenses
or permits), and any other causes, whether of the kind
herein enumerated or otherwise, not within the control of
the party claiming suspension and which by the exercise of
due diligence such party is unable to prevent or overcome.
It is understood and agreed that the settlement of strikes or
lockouts shall be entirely within the discretion of the
party having the difficulty. However, Force Majeure shall
not be applicable to a failure to pay sums of money owed.
1.10 "Gas" or "Natural Gas" shall mean gas in its natural
state as produced from an oil, gas or gas condensate well as
well as residue gas resulting from gas processing, and which
gas is then treated so as to comply with the quality
specifications of the interstate pipeline transporting
such Gas to markets for consumption.
1.11 "Interest" shall mean the compensation for the accrual
of monetary obligations under this Agreement computed
monthly and prorated daily, from the time each such
obligation becomes due and payable, based on an annual
interest rate equal to the Prime Rate plus one (1) percent.
For purposes hereof, Prime Rate shall mean the rate of
interest from time to time publicly announced by The Chase
Manhattan Bank, N.A., at its principal office, presently
located at 1 Chase Manhattan Plaza, New York, New York 10081,
as its prime commercial lending rate, determined as of the
time such obligation becomes due and payable, or the maximum
non-usurious rate of interest allowed by the laws of the
State of North Carolina, whichever is less.
1.12 "MMBtu" shall mean one million Btu's.
1.13 "Month" shall mean the period beginning at eight
o'clock A.M. on the first Day of a calendar Month and ending
at eight o'clock A.M. on the first Day of the next
succeeding calendar Month.
1.14 "NCNG" shall mean North Carolina Natural Gas Corporation.
1.15 "PANDA Pipeline" shall mean that certain natural
gas pipeline which PANDA has built or will build between
Pleasant Hill, North Carolina and the Facility, together
with all appurtenant safety and other operating equipment
required in the operation of a high pressure gas pipeline.
1.16 "Receipt Point" shall mean the point or points
on Transporter's pipeline set forth on Exhibit "A" attached
hereto and as the same may be amended from time to time.
1.17 "Transporter" shall mean the interstate pipeline
or pipelines taking delivery of Gas at the Receipt
Point and transporting same to the Delivery Point.
1.18 "Year" shall mean a contract year (rather than a
calendar year unless the context clearly contemplated a
calendar year) which shall mean a period of three
hundred sixty-five (365) consecutive days, the first
such contract year beginning at eight o'clock A.M. on the
Day of first delivery of Gas hereunder; provided,
however, that any such year which contains a date of February
29 shall consist of three hundred sixty six (366)
consecutive days.
ARTICLE II.
NATURAL GAS RESPONSIBILITIES OF NGC
2.1 NGC will do the following with regard to the acquisition
and transportation of natural gas:
A. Advise PANDA and assist in the negotiation of
natural gas purchase and transportation
agreements for the full requirements of the
Facility;
B. Purchase and arrange for delivery, as agent for
PANDA, of quantities of natural gas as approved by
PANDA.
C. Manage all plant and pipeline dispatching,
allocation, invoicing, verification of volumes to
assure adequate fuel supply to plant at all
times.
D. Negotiate discounts from interruptible and
firm pipeline transportation fees as to
transportation of gas supplies to the Facility,
it being understood that NGC will be entering into
interruptable transportation agreements pending
the availability of firm transportations;
and
E. Supervise and conduct communications between and
among the Facility, NCNG, any pipelines which may
transport gas on behalf of PANDA or NGC for
delivery to the Facility, and natural gas
producers to ensure delivery of reliable and
economically priced gas supplies to the Facility.
ARTICLE III.
FUEL OIL RESPONSIBILITIES OF NGC
3.1 NGC will do the following with regard to the acquisition
and transportation of fuel oil:
A. Advise PANDA and assist in the negotiation of
fuel acquisition, inventorying, deliveries, and
fuel oil hedging agreements.
B. Supervise and conduct invoicing and verification
of delivery volumes and quality specifications.
C. Purchase and arrange for delivery, as agent
for PANDA, of quantities of fuel oil as
approved by PANDA.
ARTICLE IV.
COMPENSATION
4.1 PANDA will pay the following amounts to NGC:
A. Four cents ($0.04) for each MMBtu of natural
gas which is actually purchased and transported
to the Facility pursuant to arrangements made by
NGC; or,
B. Three cents ($0.03) for each MMBtu of natural
gas reserves owned by PANDA and transported
to the Facility pursuant to arrangements made by
NGC.
C. Two-tenths of one cent ($0.002) for each gallon
of fuel oil which is actually purchased and
delivered to the Facility pursuant to arrangements
made by NGC.
4.2 So long as that certain Gas Purchase Contract between
PANDA and NGC dated April 12, 1990 (which provides
for certain minimum volumes of gas to be delivered to the
Facility) remains in effect, NGC shall not be compensated
for performing the duties and obligations set forth in
this Agreement as to such gas volumes.
4.3 In the event that in a given month NGC arranges for
natural gas supplies at a delivered price less than
the Benchmark Delivered Price for such month, then PANDA
will pay NGC an amount equal to sixty percent (60%) of
the difference in such price. The Benchmark Delivered
Price is composed of the Benchmark Gas Price together
with the Benchmark Transportation Rate. For purposes of this
agreement, the Benchmark Gas Price is the Index Price set
forth in the first issue each month of Inside F.E.R.C.'s
Gas Market Report for Zone 3 (Station 65) on
Transcontinental Gas Pipe Line Corporation and the
Benchmark Transportation Rate is the lower of the maximum
transportation rate or general discounted transportation
rate in effect for such month from Zone 3 to Zone 5 on
Transcontinental Gas Pipe Line Corporation plus applicable
surcharges.
ARTICLE V.
TERM OF AGREEMENT
5.1 This agreement shall be effective from and after the date
hereinabove written and shall have a term equal to the longer
of five (5) years from the date of commercial operations
of the plant or the term of that certain Gas Purchase
Contract dated April 12, 1990 between PANDA and NGC.
5.2 This agreement may be terminated by PANDA upon thirty
(30) days notice if NGC fails to perform its obligations
hereunder. Such failure to perform shall include:
A. Failure to arrange for the purchase or
transportation of natural gas or fuel oil when
required by the Facility.
B. Arranging for natural gas delivered to the
Facility with a price more than $.04 per
MMBtu above the Benchmark Delivered Price.
ARTICLE VI.
HEDGING ARRANGEMENTS AND BEST COST PRICING
6.1 NGC shall monitor Gas and No. 2 fuel oil market
conditions and shall communicate with PANDA monthly
regarding market expectations and opportunities,
recommending price hedging strategies, utilizing futures
and options on the New York Mercantile Exchange, when
advisable. NGC shall execute and administer hedging
transactions as approved by PANDA. For such hedging
transactions PANDA shall pay a transaction fee of one-
half cent ($.005) per MMBTU of gas of five cents ($.05) per
barrel of No. 2 fuel oil. PANDA shall advance funds to NGC
to cover the initial and subsequent maintenance margin
required to effect said hedging transaction, or
alternatively at NGC's option, shall pay NGC a working
capital charge to cover its cost of capital for funding such
transaction on behalf of PANDA.
6.2 NGC will endeavor on a best-efforts basis, at all
times during the continuation of this Agreement, to arrange
for the purchase and transportation of natural gas
and/or fuel oil supplies for the Facility on a "Best Cost"
basis.
ARTICLE VII
PAYMENT
7.1 On or before the tenth (lOth) day of each month
following the month in which services were provided by NGC
hereunder, NGC shall furnish a statement to PANDA showing
the quantity of gas (expressed in MCF and dekatherms)
delivered to the Facility together with NGC's invoice
for all sums due from PANDA to NGC therefor and including
the fees for any applicable gas transportation incurred and
paid for by NGC and also including any sums due for
sharing of gas transportation discounts received.
A. As to invoices relating to natural gas
purchases and fees due on gas transportation,
within fifteen (15) days after receipt of said
statement but in no event earlier than the 25th
day of the month following the month in which
services were provided by NGC hereunder),
PANDA shall wire transfer funds to cover said
statement to the bank designated by NGC in such
statement.
B. As to invoices relating to No. 2 fuel oil, within
ten (10) days after receipt of invoice, PANDA
shall wire transfer funds to the bank designated
by NGC in said invoice.
C. Should either party hereto fail to pay the
full amount due on any statement or invoice when
the same is due, then Interest on the unpaid balance
shall accrue from the date such payment or
payments was/were due until the same is/are paid.
If PANDA fails to pay any such statement or
invoice for thirty (30) days beyond the due
date, then, subject to notification of PANDA's
Financiers as hereinbelow provided, NGC may
suspend performance of its obligations hereunder
until such invoice or invoices is/are paid.
7.2 In the event of a dispute as to the amount due to
NGC, PANDA shall nevertheless pay the undisputed portion
of the invoice pending settlement of the dispute.
7.3 In the event that it is determined by any regulatory
or legislative body having jurisdiction over the pricing of
gas or No. 2 fuel oil or the fees charged by pipelines
or other carrier transporting such fuels that PANDA has
underpaid or overpaid therefor, then the parties hereto
shall adjust their accounts within thirty (30) days after
final determination of the amount of such over or under
payment. In no event, however, shall NGC be obligated
to refund any fees previously paid to NGC for its
services rendered hereunder, and in the event such
actions would reduce the fee to be paid
prospectively to NGC for its services, then NGC reserves
the right to terminate this agreement.
7.4 It is expressly understood and agreed that PANDA
will reimburse to NGC, in addition to all other amounts due
to be paid to NGC hereunder, the cost of all letters of
credit which NGC is required to provide in purchasing
natural gas hereunder.
VIII.
NOTICES
8.l Until PANDA is otherwise notified in writing by NGC,
notices to NGC shall be addressed to NGC at the address set
forth below or at such address as may hereafter by named:
Natural Gas Clearinghouse
13430 Northwest Freeway Suite 1200
Houston, Texas 77040
Telephone: (713) 744-1730
Telecopier: (713) 744-1795
8.2 Until NGC is otherwise notified in writing by PANDA,
notices to PANDA shall be addressed to PANDA at the address
set forth below or at such other address as may hereafter by
named:
Panda-Rosemary Corporation
Attn: Natural Resources Department
4100 Spring Valley Rd.
Suite 1001
Dallas, Texas 75244
Telephone: (214) 980-7l59
Telecopier: (214) 980-6815
8.3 Notices may be given by facsimile transmission or
in writing, postage prepaid and addressed to the last known
address of the party being notified. All notices and
invoices shall be considered delivered when actually
received. Any notice to suspend, terminate or extend this
Agreement shall be sent by United States Mail, postage
prepaid, certified, return receipt requested, to the last
known address of the party being notified.
8.4 For so long as PANDA shall have outstanding and unpaid
any financing liabilities relating to the Facilities to any
person, firm or entity (hereafter called "Financiers"), NGC
shall not suspend perforance under or terminate this
Agreement until sixty (60) days following each
Financier's receipt of NGC notification to such effect
(such notice to be sent postage prepaid, certified,
return receipt requested to the last known address of each
Financer). NGC shall not suspend performance under or
terminate this Agreement if, after notice thereof and prior
to any effective date of such suspension or termination,
Financiers, or any of them, have either: (a) caused
the condition precipitating the notice of breach or
termination to be cured; or (b) assumed all obligations of
PANDA under this Agreement.
ARTICLE IX.
INDEMNIFICATION
9.1 Each party ("Indemnitor") shall indemnify, defend and
hold harmless the other party ("Indemnitee"), and their
officers, directors, employees, heirs successors and
administrators from and against any and all claims,
demands, suits, actions, liabilities, losses, damages,
judgments, and/or legal or other expenses (collectively
"Claims") which may arise from or in connection with the
performance or non-performance of their obligations
hereunder. If a Claim is asserted or action brought against
Indemnitee as to which it believes it is entitled to
indemnification under this Article, Indemnitee shall
promptly notify Indemnitor in writing of such Claim. Prompt
notice as contemplated in the preceding sentence shall mean
such notice as would be required to enable Indemnitor
to assert and prosecute appropriate defenses relative to
such Claim or action in a timely manner. If Indemnitee
fails to give Indemnitor prompt notice of any claim or
action as provided in this Section, Indemnitor shall
have no obligation to indemnify pursuant to this
Article. Upon receipt of such notice request for
indemnification, Indemnitor shall promptly make a
determination of whether it is required to indemnify and
shall promptly notify Indemnitee in writing of that
determination.
ARTICLE X.
REPRESENTATIONS AND WARRANTIES
10.1 NGC represents and warrants the following to PANDA:
That it is a general partnership duly organized and
existing under the laws of the State of Colorado
possessing the power to do business in North Carolina as
well as each state in which it will purchase gas and No. 2
fuel oil for the Facility; that it is solvent and has not
sought protection from its creditors in Bankruptcy that each
of the general partners is solvent and has not sought
protection from its creditors in Bankruptcy; that it has the
power to enter into this Agreement; that all actions
required to enter and to perform this Agreement have been
taken or will be taken when required; that the party
executing this Agreement on behalf of NGC is duly
authorized and empowered to bind NGC hereto; and, that there
are no impediments of any sort to NGC's entering into this
Agreement.
10.2 PANDA represents and warrants the following to NGC:
That it is a duly incorporated and validly existing
Delaware corporation qualified to do business in the
State of North Carolina; that it is solvent and has not
sought protection from its creditors in Bankruptcy; that
is has the power to enter into this agreement; that all
actions required to enter and to perform this Agreement have
been taken or will be taken when required; that the party
executing this Agreement on behalf of PANDA is duly
authorized and empowered to bind PANDA hereto; and that
there are no impediments of any sort to PANDA's entering
into this Agreement.
ARTICLE XI.
FORCE MAJEURE
11.1 In the event that either party hereto is prevented
from carrying out its material duties and obligations
hereunder by the occurrence of an event beyond the control
of and not the fault of such party ("Force Majeure"),
then the affected party shall promptly give notice,
full particulars and remedial actions being taken to
correct such event of Force Majeure to the other party
and the affected party shall take all steps reasonably
necessary to correct the condition causing the Force
Majeure. The party receiving notice of the event of
Force Majeure shall have the right, to terminate this
Agreement if the event of Force Majeure continues for
ninety (90) days, upon giving the affected party thirty
(30) days written notice to such effect, unless the
affected party is able to resolve the condition of Force
Majeure and resume performance of its duties hereunder
within such thirty (30) day period. In no event shall the
failure to pay sums of money due and owing hereunder be
excused by any event of Force Majeure.
ARTICLE XII.
MISCELLANEOUS PROVISIONS
12.1 No waiver by either party of one or more defaults
or breaches by the other party in the performance of any
of the provisions of this Agreement shall operate or be
construed as a waiver of any other or further default or
breach, whether of a like or of a different character.
12.2 This Agreement shall be binding upon and inure to
the benefit of the legal representatives, successors and
assigns of the respective parties hereto. No assignment
or sale of any interest shall be effective until the
remaining party hereto has received written notice to such
effect. No assignment or sale of interest shall relieve
the assigning party of its obligations hereunder without
the written consent of the remaining party hereto;
provided, however, that NGC hereby grants its consent to and
agrees to look to Financier in the event that Financier
assumes operational control and/or ownership of the
Facilities during the term hereof. Nothing in this
Agreement shall be construed to prohibit PANDA from
assigning or pledging this Agreement as additional
security for certain loans made or to be made to PANDA
by Financier relative to the development and operation of
the Facility.
12.3 This Agreement constitutes the entire agreement between
the parties and supersedes all previous contracts,
agreements and understanding between the parties both
written and oral. This Agreement may not be amended
except in writing and executed by both parties hereto.
12.4 This Agreement may be executed in multiple originals,
each of which, when taken together, shall be construed as a
complete original.
12.5 In interpreting this Agreement, it is acknowledged that
it was prepared jointly by both parties hereto and not
to the exclusion of one party by the other and that in
preparing this Agreement, each party had access to its own
counsel.
12.6 It is not the purpose of the parties to create
a partnership, joint venture or association, or the
relationship of agency or employer-employee unless and
except as otherwise expressly provided herein. Neither
this Agreement nor any dealings hereunder shall be
construed or considered as creating such relationship.
12.7 This Agreement shall be governed by the laws of the
State of Texas.
12.8 Neither party shall be liable for consequential damages
for failure to perform its obligations hereunder.
PANDA's sole remedy for NGC's failure to perform shall be
the termination of this Agreement.
12.9 PANDA will not, during the duration of this
Agreement, contract with any other party or entity for
fuel management services.
12.10 The parties hereto recognize that execution of
additional amendments, clarifications, documentation,
assignments, mortgages, pledges and other evidences of
security herein may be required from time to time by
Financier. PANDA and NGC agree to promptly execute each such
instrument requested by Financier from time to time and at
all times during the continuance of this Agreement.
12.11 This Agreement shall remain confidential during the
Term hereof and neither party shall disclose any of
the terms, conditions, obligations, duties promises,
benefits or liabilities set forth in this Agreement
without the express prior written permission of the
remaining party hereto; except, however, that each party
shall be free to disclose such facts as may be required
by applicable statute, rule, regulation or by loan agreements
of either party's lenders or either of the parties hereto,
without need of securing the prior permission of the other
party hereto.
IN WITNESS WHEREOF, this instrument is executed in
duplicate originals as of the date first hereinabove
written.
BUYER: PANDA-ROSEMARY CORPORATION
Robert W. Carter
President
Attest
NATURAL GAS CLEARINGHOUSE
By: Stephen W. Bergstrom
Its: Executive Vice President
Marketing & Supply
Attest
EXHIBIT 10.41
March 5, 1991
Mr. Stephen W. Bergstrom
Executive Vice President
Marketing & Supply
Natural Gas Clearinghouse
13430 Northwest Freeway
Suite 1200
Houston, Texas 77040
RE: Amendment Number 1 to Fuel Supply Management Agreement
Dated October 1O, 1990
Dear Steve:
In accordance with our previous discussion, this letter will
when appropriately executed constitute our agreement relative
to the captioned matter.
The undersigned parties to the subject Agreement hereby amend
the captioned Agreement as follows:
1. The following new subsection is added to Section 4.1 of
Article IV:
D. One cent ($0.01) for each MMBTU of natural gas
purchased from North Carolina Natural Gas and used
in the facility pursuant to arrangements made by
NGC.
Sincerely,
PANDA-ROSEMARY CORPORATION NATURAL GAS CLEARINGHOUSE
Robert W. Carter Stephen W. Bergstrom
Chairman Executive Vice President
Marketing & Supply
EXHIBIT 10.42
GAS PURCHASE CONTRACT
BETWEEN
PANDA-ROSEMARY CORPORATION
AND
NATURAL GAS CLEARINGHOUSE
APRIL 12, 1990
TABLE OF CONTENTS
PAGE NO.
ARTICLE I -DEFINITIONS 2
ARTICLE II -COMMITMENT, NOMINATIONS AND 7
PRODUCTION NOTICES
ARTICLE III -FACILITIES 9
ARTICLE IV -PRICE AND PAYMENT 9
ARTICLE V -WARRANTIES 14
ARTICLE VI -TAXES 15
ARTICLE VII -TERM OF CONTRACT 16
ARTICLE VIII -DELIVERY PRESSURE, QUALITY 18
METERING AND MEASUREMENT
ARTICLE IX -NOTICES 19
ARTICLE X -DEFAULT 21
ANTICLE XI -FORCE MAJEURE 22
ARTICLE XII -ARBITRATION 23
ARTICLE XIII -BUYERS CREDIT 25
ARTICLE XIV -INDEMNIFICATION 25
ARTICLE XV -REPRESENTATIONS & WARRANTIES 26
ARTICLE XIII -MISCELLANEOUS PROVISIONS 27
GAS PURCHASE CONTRACT
This GAS PURCHASE CONTRACT (the "Contract") is
made and entered into on this day of , 1990 by and
between PANDA-ROSEMARY CORPORATION, a Delaware
corporation, hereinafter referred to as "BUYER",and
NATURAL GAS CLEARINGHOUSE, a Colorado general
partnership, hereinafter referred to as "SELLER".
WITNESSETH
THAT WHEREAS, SELLER has supplies of
natural gas ("Gas") available for sale to BUYER
hereunder; and
WHEREAS, BUYER is engaged in the development
of a cogeneration power generating project in
Roanoke Rapids, North Carolina ("Facility")
which will require Gas to fuel its operation; and
WHEREAS, SELLER desires to deliver and sell to
BUYER and BUYER desires to receive and purchase
from SELLER the Gas which SELLER has available
under the terms and conditions hereinafter set
forth.
NOW THEREFORE, in consideration of the
mutual covenants and agreements herein set
forth, the parties hereto have agreed and do
hereby contract as follows:
I.
DEFINITIONS
1.01 "Average Gas Index Price" shall mean
the average of the twelve (12) preceding months
Gas prices as quoted in the first Monthly
issue each Month of Inside FERC's Gas Market Report
in the table "Prices of Spot Gas Delivered to
Pipelines" in the row entitled Texas Gas
Transmission - Louisiana under the heading "Index
Price."
1.02 "British thermal unit" or "Btu" shall
mean the amount of heat required to raise the
temperature of one pound of pure water from
fifty-eight and five tenths (58.5) degrees
Fahrenheit to fifty-nine and five-tenths (59.5)
degrees Fahrenheit.
1.03 "Commencement Date" shall mean the
date on which the Facility becomes commercially
operational. BUYER shall notify SELLER of the
date that the Facility becomes commercially
operational promptly after such event occurs.
1.04 "Cubic Foot of Gas" shall mean the
volume of Gas which would occupy one cubic
foot of space when such Gas is at a
temperature of sixty (60) degrees Fahrenheit and a
pressure of 14.73 pounds per square inch absolute.
1.05 "Day" shall mean a period of twenty-four
(24) consecutive hours beginning and ending at eight
o'clock A.M. local time.
1.06 "Dekatherm" or "dt" shall be equivalent to
one MMBtu.
1.07 "Delivery Point" shall mean the point or
points set forth on Exhibit "A" attached hereto and
made a part hereof, as the same may be amended from
time to time hereunder.
1.08 "Facility" shall mean that certain
cogeneration electrical power generation project
under development by BUYER in Roanoke Rapids, North
Carolina.
1.09 "Financier" means (a) any individual or
entity lending money to BUYER for the construction
or term financing of the Facility, or the
establishment and/or maintenance of working capital
requirements, or the refinance or take-out of any
such loan; or, (b) any lessor under a single
investor or leveraged lease finance arrangement.
1.10 "Force Majeure" as employed herein and for
all purposes relating hereto shall mean any
situation or occurrence not reasonably within the
control of the party claiming suspension and which,
by the exercise of due diligence, such party is
unable to prevent or overcome, and shall include,
not by way of limitation, acts of God, strikes,
lockouts or other industrial disturbances, acts of
the public enemy, wars, blockades, insurrections,
riots, epidemics, landslides, lightning,
earthquakes, fires, hurricanes, crevasses,
floods, washouts, arrests and restraints of
governments and people, civil disturbances,
explosions, breakage or accident to machinery
including the Facility or lines of pipe, the
necessity for making repairs or alterations to
machinery including the Facility or lines of pipe,
freezing of pipe or wells, inability of any party
hereto to obtain necessary materials, supplies or
permits due to existing or future rules,
regulations, orders, laws or proclamations of
governmental authorities (both Federal and
State), including both civil and military, and
any other causes whether of the kind herein
enumerated or otherwise, not within the control of
the party claiming suspension and which by the
exercise of due diligence such party is unable
to prevent or overcome. Inasmuch as the ability of
BUYER and SELLER to perform hereunder is dependent
upon the availability of gas transportation at
the Delivery Point, the failure, refusal or
inability of Transporter to receive and transport
Gas on BUYER's or SELLER's behalf at the Delivery
Point shall operate as an event of Force
Majeure hereunder. It is understood and agreed
that the settlement of strikes or lockouts
shall be entirely within the discretion of the
party having the difficulty, but shall not require
the settlement of strikes or lockouts by acceding
to the demands of the opposing party when such
course is inadvisable in the discretion of the
party having the difficulty.
1.11 "Gas" or "Natural Gas" shall mean gas in
its natural state as produced from an oil, gas or
gas condensate well as well as residue gas
resulting from gas processing, and which gas
complies with the quality specifications of the
interstate pipeline transporting such Gas on
behalf of BUYER (whether directly or
beneficially).
1.12 "Beating Value" shall mean the total
number of Dekatherms attributed to SELLER's Gas by
BUYER's Transporter for Gas received at the Delivery
Point each Month.
1.13 "Interest" shall mean the compensation for
the accrual of monetary obligations under this
Contract computed Monthly and prorated Daily, from
the time each such obligation becomes due and
payable, based on an annual interest rate equal to
the Prime Rate plus one (1) percent. For purposes
hereof, Prime Rate shall mean the rate of interest
from time to time publicly announced by The Chase
Manhattan Bank, N.A., at its principal office,
presently located at 1 Chase Manhattan Plaza, New
York, New York 10081, as its prime commercial
lending rate, determined as of the time such
obligation becomes due and payable, or the maximum
non-usurious rate of interest allowed by the laws of
the State in which title to the Gas passes from
SELLER to BUYER, whichever is less.
1.14 "Maximum Daily Quantity" shall mean 3,500 dt
per Day.
1.15 "Minimum Take" shall mean 90,000 dt per
Month.
1.16 "MMBtu" shall denote one million
(1,000,000) British thermal units.
1.17 "Month" shall mean the period beginning at
eight o'clock A.M. on the first Day of a calendar
month and ending at eight o'clock A.M. on the first
Day of the next succeeding calendar month.
1.18 "Receipt Point" shall mean the
point of interconnection between BUYER's pipeline
and the pipeline facilities of TRANSCO and
Columbia Gas Transmission Corporation near Pleasant
Hill, Northampton County, North Carolina, or such
other point as the parties may mutually agree upon.
1.19 "TRANSCO" shall mean Transcontinental Gas
Pipe Line Corporation.
1.20 "Transporter" shall mean the
interstate pipeline company, whether one or more,
receiving Gas tendered by SELLER for BUYER's
account at the Delivery Point for further delivery
at BUYER's direction.
1.21 "Year" shall mean a contract year
(rather than a calendar year unless the
context clearly contemplated a calendar year)
which shall mean a period of three hundred sixty-
five (365) consecutive Days, the first such
contract year beginning at eight o'clock A.M. on
October 1, 1990 hereunder; provided, however, that
any such year which contains a date of February 29
shall consist of three hundred sixty-six (366)
consecutive Days.
II.
COMMITMENT, NOMINATIONS AND
PRODUCTION NOTICES
2.01 Commitment. Subject to all the terms and
conditions of this Contract, SELLER agrees to
sell and deliver or cause to be delivered to
BUYER, at the Delivery Point such quantities of Gas
as BUYER may nominate from time to time each Month
up to the Maximum Daily Quantity.
2.02 Commitment. If this Contract is not
terminated in accordance with Article VII hereof,
then SELLER shall, on or before October 1, 1993
do either of the following at SELLER's option, and
subject to approval by Financier in its sole
discretion: (a) dedicate Gas reserves sufficient to
deliver the Maximum Daily Quantity of Gas to the
Delivery Point for the then remaining term of this
Contract; or, (b) provide financial information
to Financier on or before October 1, 1993 and
annually thereafter sufficient to assure
Financier of SELLER's continuing ability to
perform under this Contract. SELLER shall be
conclusively presumed to have met Financier's
financial condition tests provided herein from
time to time, if its net worth (calculated in
accordance with Generally Accepted Accounting
Principles) is at least equal to seventy (70%)
percent of its net worth at date of execution of
this Contract. If, during the continuance of this
Contract, SELLER's net worth is found to be less
than seventy (70%) percent of its value at date
of execution hereof, then Financier may notify
SELLER of such fact (but the failure to so notify
shall not waive Financier's rights with regard to
this Section 2.02) and said notice shall specify in
detail the basis for Financier's concerns about
SELLER's financial condition. SELLER shall have
ninety (90) Days in which to provide Financier with
assurances of its ability to perform under the
Contract satisfactory to Financier, or to
dedicate Gas reserves sufficient to deliver the
Maximum Daily Quantity of Gas to the Delivery
Point for the remaining term of the Contract.
2.03 Nomination. On or before ten (10) business
Days prior to the beginning of each Month, BUYER
shall notify SELLER of BUYER's anticipated Gas
requirements for such Month.
2.04 Production Notices. SELLER shall have
agents or employees available at all reasonable
times to receive from BUYER, BUYER's agents, or
Transporter dispatcher's advice and requests for
changes in the rates of delivery of Gas hereunder
as required from time to time so as to prevent
BUYER's becoming liable for any penalties to
Transporter. SELLER shall deliver Gas to BUYER at
the Delivery Point at consistent rates during each
Day and during each Month and in accordance with
BUYER's or Transporter's advices.
III.
FACILITIES
3.01 SELLER's Facilities. SELLER shall, if
necessary, and at its expense, provide the
metering and interconnection facilities
necessary to accomplish delivery of the Gas at the
Delivery Point, such that Gas will be capable of
flowing on the Commencement Date.
IV.
PRICE AND PAYMENT
4.01 Gas Price-for Year 1. Subject to the
remaining terms and conditions of this Contract,
the price payable for all Gas received at the
Delivery Point by BUYER commencing October 1, 1990,
up to and including the Maximum Daily Quantity,
shall be equal to $2.147 per dt.
4.02 Gas Price for Subsequent Years.
Beginning on October 1, 1991 and on October 1 of
each Year thereafter for the term hereof, the price
payable to SELLER for quantities of Gas effective
for the next ensuing Year shall be redetermined
and shall be equal to the Average Gas Index Price
per dekatherm for the prior Year plus twenty-four
and seven-tenths cents ($0.247).
4.03 Transportation Charges. SELLER shall,
upon BUYER's request or requests from time to
time, transport the Gas to the Receipt Point
utilizing the lowest priced transportation
available from various pipelines SELLER utilizes
to deliver the Gas to the said Receipt Point.
If BUYER requests deliveries to the Receipt Point,
then BUYER and SELLER shall enter into a
mutually acceptable agreement naming SELLER as
agent under BUYER's firm or interruptible
transportation agreements. SELLER shall invoice
BUYER for all transportation costs incurred by it
in transporting the Gas from the Delivery Point to
the Receipt Point at the same time as it invoices
BUYER for Gas purchases and BUYER shall pay
therefor at the same time that it pays for said
Gas purchases.
4.04 Nomination Penalty. Should BUYER, for
any reason other than Force Majeure or a plant
turnaround initiated by BUYER's host, The Bibb
Company, fail to nominate and take during any Month
at least the Minimum Take, then BUYER shall pay
SELLER a penalty of $.40/dt for each dekatherm
less than the Minimum Take nominated and taken by
BUYER during such Month. This penalty shall not
apply until BUYER's firm transportation agreement
becomes effective and the transportation
services therein contracted are available.
4.05 Penalties for Over/Under Tender of
Gas. SELLER shall be responsible for any
scheduling, balancing or other penalties imposed by
Transporter which are caused by SELLER's delivery of
Gas to the Delivery Point during a given Month
outside of the limits established from time to
time by BUYER or Transporter. SELLER shall
reimburse BUYER for any penalty including
interest imposed upon BUYER by Transporter and
actually paid by BUYER.
4.06 Payment for Gas. On or before the tenth
(lOth) Day of the Month following the Month in
which the Gas was received, SELLER shall furnish
a statement to BUYER showing the number of
dekatherms that Transporter received from SELLER at
the Delivery Point for such Month accompanied by
SELLER's invoice for all sums due SELLER from
BUYER therefor. BUYER shall wire transfer
payment for such Gas according to SELLER's
instructions, within ten (10) Days after receipt
of SELLER's statement and invoice or the twentieth
(20th) Day of the Month in which the said
statement and invoice were received, whichever is
later, except that BUYER may withhold payment for
any Gas subject to a bona fide dispute, or if
BUYER has been put on notice that title to Gas
delivered or the right to receive payment therefor
is subject to a third party claim. BUYER agrees
to pay SELLER any undisputed amounts each Month as
required in this Article IV. Should BUYER fail to
pay the full amount due SELLER when the same is due
as herein provided, Interest on the unpaid balance
shall accrue from the date such payment or payments
was/were due until the same is/are paid. If such
failure to pay continues for thirty (30) Days beyond
the due date, then, subject to notification of
BUYER's Financiers (as hereinafter required),
SELLER may suspend deliveries of Gas hereunder,
but the exercise of such right shall be in
addition to any and all other remedies available to
SELLER.
4.07 Refunds for Overpayment. In the event
that it is determined by any regulatory or
legislative body having jurisdiction over the
pricing or sale of Gas that BUYER has paid SELLER
a price in excess of the maximum lawful price to
which SELLER is entitled, then SELLER shall,
within fifteen (15) Days after receipt of BUYER's
invoice for the amount of such overpayment, remit
its check to BUYER in full refund for such
overpayment together with applicable penalties, if
any.
4.08 Price Reopener and Minimum Take
Revision. Either party hereto may, at least ninety
(90) Days but not more than one hundred twenty
(120) Days before each anniversary commencing
October 1, 1993, give notice to the other party
that it wishes to change the method or formula by
which the price of Gas is determined. The
parties shall thereafter promptly meet and shall
negotiate in good faith to agree on a modified
price determination method or formula. In addition,
BUYER may, at least ninety (90) Days but not more
than one hundred twenty (120) Days before each
anniversary commencing October 1, 1993, give
notice to SELLER that it wishes to revise the
amount of gas which constitutes Minimum Take due
to a change in BUYER's steam host's requirements.
If the parties are unable to reach an agreement by
thirty (30) Days before the commencement of the
next anniversary, then either party may refer
the disputed matter to arbitration pursuant to
Article XII hereof. The arbitrator's decision shall
be effective from the date either party invoked
arbitration. In the event that the index used to
compute the Average Gas Index Price is
discontinued or if at any time it becomes
substantially unresponsive to the actual price of
Gas available for purchase and use by the
Facility, then the parties shall mutually agree
upon a substitute index; provided that, if such an
agreement is not reached within thirty (30) Days
after commencement of negotiation to select a new
index, then the matter shall be submitted to
arbitration as provided in Article XII hereof. The
parties shall continue to perform under the
Contract during the period prior to the
arbitrator's decision under the pricing and
other conditions including the definition of
Minimum Take in effect immediately prior to
either party's invocation of arbitration. Within
thirty (30) Days following the decision of the
arbitration board, BUYER and SELLER shall adjust
their accounts by making payments one to the other
as may be required to give effect to the decision of
the arbitration board.
V.
WARRANTIES
5.01 Warranty of Title. Title to and
responsibility for all Gas contracted hereunder
shall pass at the Delivery Point unless BUYER
requests delivery of the Gas at the Receipt Point,
in which case title to and responsibility for
the Gas shall pass at the Receipt Point. SELLER
represents and warrants that the Gas subject hereto
is not now dedicated or committed to any purchase
other than SELLER herein, except that prior to
the commencement of deliveries, SELLER shall have
the right to sell its Gas in such manner as it
deems advisable. SELLER represents and warrants
that is has the authority to contract for and
bind all interest in the Gas subject hereto.
SELLER warrants that it has good and merchantable
and unencumbered title to all of the Gas
delivered hereunder. SELLER agrees to indemnify
BUYER and save BUYER harmless from all suits,
actions, debts, accounts, damages, costs, losses
and expenses, including attorney fees, arising
from or out of adverse claims of any and all
persons to said Gas.
5.02 Warranty of Delivery. If SELLER fails to
deliver any volumes of Gas nominated by BUYER up
to the Maximum Daily Quantity, SELLER will pay
damages equal to the difference between BUYER's
reasonably incurred cost for alternate fuel at the
Facility and the applicable price under this
Contract including the transportation charges that
would have been applicable had SELLER delivered the
nominated volumes of Gas and including for BUYER's
firm transportation demand charges, if any. The
cost of such alternate fuel, if gas, will be the
actual price paid by BUYER and, if No. 2 fuel oil,
will be the current market value of No. 2 fuel
oil delivered to the Facility. SELLER shall pay
BUYER's damages under this Section 5.02 within
fifteen (15) Days after receipt of BUYER's invoice
accompanied by a statement setting forth the
particulars on which the computation of damages
was based. BUYER shall exercise its best efforts to
obtain the lowest cost alternative supplies of
fuel under the circumstances and consistent with
reliable supplies available at the time of
SELLER's nonperformance. In no event shall
SELLER be liable for any consequential damage
suffered by BUYER.
VI.
TAXES
6.01 Taxes. All taxes, severance taxes, fees
and assessments imposed with respect to Gas or
the facilities through which it is handled at or
prior to delivery to BUYER at the Delivery Point
shall be borne by SELLER, and all other taxes, fees
and assessments imposed with respect to such Gas or
the facilities through which it is handled after
delivery to BUYER at the Delivery Point shall be
borne by BUYER. BUYER shall be responsible for
any sales, use, gross receipts, franchise or
other such tax imposed by the state, city, or county
in which the Gas is ultimately consumed and if any
such taxes are imposed on SELLER, BUYER agrees to
reimburse SELLER therefor promptly after receipt of
SELLER's invoice and supporting documentation
therefor.
VII.
TERM OF CONTRACT
7.01 Term. Subject to the other terms and
conditions hereof, this Contract shall be effective
as of the date first above written and shall
continue in full force and effect through November
30, 2005, and thereafter from Month to Month until
terminated by either Party upon not less than
thirty (30) Days' prior written notice to the other
party.
7.02 BUYER's Early Termination Privilege.
BUYER may wish to purchase Gas reserves and, if it
does so, then BUYER shall have the right at any
time, prior to October 1, 1992, to terminate this
Contract by tendering written notice to SELLER not
less than one hundred and twenty (120) Days prior to
the effective date of such termination. If BUYER
exercises such privilege, then this Contract shall
be ended and the rights and duties of the parties
hereto, excepting any claims arising prior to the
effective date of the early termination, shall cease
to exist.
7.03 Termination For Condition Subsequent.
BUYER shall have the right to terminate this
Agreement upon thirty (30) Days notice in the
event that BUYER's Power Sales Agreement with
Virginia Electric And Power Company is terminated
due to reasons such as, but not limited to: (i)
failure to cure a material event of default
within a reasonable time after notice; (ii)
failure to provide and maintain the performance
and security deposit; (iii) failure to indemnify
and hold Virginia Power harmless from any liability
due to the acts of Operator (BUYER herein); (iv)
attempts by Operator to tamper with the
Interconnection Facilities; (v) reduction in energy
sales in order to sell power to any other
entity; (vi) failure to comply with
representations and warranties or insurance
provisions; or (vii) appointment of a liquidator
or trustee of Operator or adjudication by a court
of competent jurisdiction that Operator is
insolvent or bankrupt. Further, BUYER shall have
the right to terminate this Agreement in the
event that BUYER's Cogeneration Energy Supply
Agreement with The Bibb Company ("Bibb") is
terminated for reasons such as, but not limited
to: (i) SUPPLIER's (BUYER herein) failure to supply
steam and chilled water in conformance with the
terms of the Contract; or (ii) appointment of a
liquidator or trustee of SUPPLIER or adjudication
by a court of competent jurisdiction that SUPPLIER
is insolvent or bankrupt.
VIII .
DELIVERY PRESSURE, QUALITY, METERING
AND MEASUREMENT
8.01 Delivery Pressure. The Gas shall be
delivered by SELLER at the Delivery Point at
pressures sufficient to enable Transporter to
receive the Gas at flow rates consistent with
SELLER's Gas quantity obligations hereunder.
SELLER shall not be obligated to install
compression to effect deliveries hereunder.
8.02 Quality. All Gas delivered to the
Delivery Point shall be of standard pipeline
quality, including heating value and pressure
suitable for acceptance by BUYER and Transporter.
SELLER shall be responsible for such
suitability as to any Gas received at the
Delivery Points.
8.03 Metering and Measurement. The Gas
received at the Delivery Point will be metered
and measured by Transporter. The volume and
heating value of the Gas delivered hereunder shall
be determined by Transporter in accordance with
its established practices and procedures and all
payments hereunder shall be based thereon.
8.04 Corrections. BUYER will invoice or
credit SELLER with SELLER's proportionate part of
any corrected volumes for which BUYER is notified by
BUYER's Transporter promptly upon receipt of such
notification. Any payments not questioned within
two (2) Years shall be considered conclusively
correct as rendered.
IX
NOTICES
9.01 Notices. Until BUYER is otherwise
notified in writing by SELLER, notices to SELLER
shall be addressed to SELLER at the address set
forth below or at such other address as may
hereafter be named:
Natural Gas Clearinghouse
13430 Northwest Freeway
Suite 1200
Houston, Texas 77040
Telephone: (713) 744-1777
Telecopier: (713) 744-1757
Until SELLER is otherwise notified in writing
by BUYER, notices to BUYER shall be addressed to
BUYER at the address set forth below or at such
other address as may hereafter be named:
Mr. Ralph T. Killian, Vice
President Panda Energy
Corporation 4100 Spring Valley,
Suite 1001 Dallas, TX 75244
Telephone: (214) 980-7159
Telecopier: (214) 980-6815
9.02 Style of Notice. All notices are
required to be given in writing and shall be
deemed received when actually received by the
party being notified. All notices to commence,
suspend deliveries or terminate this Contract,
declare events of Force Majeure, redetermine the
price mechanism, or terminate any portion of this
Contract shall be given by telegram or telecopier
transmittal provided that such notice is
confirmed the same Day by certified mail,
postage prepaid to the last known mailing address of
the party being notified.
9.03 Notices to Financier. BUYER shall
provide SELLER in writing with the name and address
of each Financier on a current basis. For so long
as BUYER shall have outstanding and unpaid
any financing liabilities, SELLER agrees to
promptly furnish to all Financiers, then known to
SELLER, a copy of any notice of default, breach,
failure to pay billings, or notice of suspension
of deliveries or termination given to BUYER.
Notwithstanding anything to the contrary herein,
SELLER shall neither suspend its performance under
nor terminate this Contract prior to the expiration
of sixty (60) Days written notice to Financier of
SELLER's intent to suspend or terminate this
Contract, as the case may be and accompanied by, the
reasons therefor. SELLER shall not suspend
performance or terminate this Agreement if, after
said notice thereof and prior to any effective
date of suspension or termination, as the case
may be, Financier or BUYER has either: (a) caused
the condition precipitating the notice of
suspension or termination to be cured; or (b)
Financier has assumed all obligations of BUYER under
this Contract.
9.04 Change General Partner. SELLER shall
make a reasonable effort to notify BUYER in
writing of a change in the number and/or identity
of its general partners during the continuance of
this Agreement. BUYER shall have the right in its
sole discretion, for six (6) Months following
receipt of such notice, to terminate this
Agreement upon thirty (30) Days written notice to
SELLER.
X
DEFAULT
10.01 Default. If any party hereto shall fail
to perform any of the material covenants or
obligations imposed upon it under and by virtue
of this Contract, then unless such failure to
perform is due to an event of Force Majeure as
provided in Article XI below, the non-defaulting
party may at its option, and in addition to any
other remedies available to such party, elect to
terminate this Contract by giving written notice to
the party in default stating specifically the
cause or causes sufficiently material for
terminating this Contract and declaring it to be
the intention of the party giving the notice to
terminate same; whereupon the party in default
shall have sixty (60) Days after receipt of the
aforesaid notice in which to remedy or remove the
cause or causes stated in the notice for
terminating this Contract, and if within said period
of sixty (60) Days the party in default does so
remedy or remove said cause or causes and fully
indemnify the party not in default for any and
all consequences of such breach, then such notice
shall be withdrawn and this Contract shall continue
in full force and effect. In case the party in
default does not so remedy or remove the cause or
causes and indemnify the party giving the notice in
any and all consequences of such breach, within
said period of sixty (60) Days, then at the
option of the non-defaulting party, this Contract
shall become null and void from and after the
expiration of said period.
10.02 Waiver of Default. No waiver by either
party of one or more defaults by any other party
in the performance of any of the provisions of
this Contract shall operate or be construed as a
waiver of any other or further default of defaults,
whether of a like or of a different character.
XI.
FORCE MAJEURE
11.01 Force Maieure. In the event of
either party hereto being rendered unable, wholly
or in part, by Force Majeure to carry out its
obligations hereunder, it is agreed that on such
party's giving notice and full particulars of such
Force Majeure in writing or by telegraph to the
other party as soon as practicable after the
occurrence of the cause relied on, then the
obligations of the party giving such notice, so
far as they are affected by such Force Majeure,
shall be suspended during the continuance of any
inability so caused but for no longer period, and
such cause shall as far as possible be remedied
with all reasonable dispatch. The occurrence of a
cause of Force Majeure shall not excuse the
payment of money due and owing as of the date of
the event of Force Majoure.
XII
ARBITRATION
12.01 Arbitration. Any dispute arising between
SELLER and BUYER under this Contract relative to
Section 4.08 shall be determined by a board of
three (3) arbitrators to be selected for each such
dispute so arising as follows: Either SELLER or
BUYER may, at the time such board of arbitration
is desired by such party, notify the other party of
the name of an arbitrator. Such other party shall,
within ten (10) days thereafter, select an
arbitrator and notify the party desiring
arbitration of the name of such arbitrator. If such
other party shall fail to name a second
arbitrator within ten (10) days, the party who
first served the notice may, on reasonable notice
to the other party, apply to the person who is
then Chief Federal Judge of the Federal Judicial
District in which the Delivery Point is located
for the appointment of such second arbitrator for
and on behalf of the other party, and in such case
the arbitrator appointed by the Judge shall act as
if named by the other party. The two (2) arbitrators
chosen as above provided shall, within (10) days
after the appointment of the second arbitrator,
choose the third arbitrator. In the event of their
failure to do so within said (10) days, either of
the parties hereby may in like manner, on reasonable
notice to the other party, apply to such Chief
Federal Judge for the appointment of a third
arbitrator and in such case the arbitrator appointed
by the Chief Federal Judge shall act as the third
arbitrator. The arbitrators selected to act
hereunder shall be qualified by education,
experience, and training to pass upon the particular
question in dispute. The board so constituted shall
fix a reasonable time place for the hearing, at
which time each of the parties hereto may submit
such evidence as it may see fit. Such board shall
have jurisdiction solely to determine the issue in
controversy. The action of a majority of the members
of such board shall govern and their decisions in
writing shall be final and binding on the parties
hereto. Each party shall pay the expense of the
arbitrator selected by or for it and all other costs
of the arbitration shall be equally divided between
the parties hereto. The arbitration shall be
conducted under the Commercial Arbitration Rules of
the American Arbitration Association and the
arbitration hearing shall be conducted in Dallas,
Texas. The arbitrators shall, in their deliberations
as regards pricing, employ the following criteria:
(a) the location of the gas; (b) the term for which
the price is to apply; (c) the quantity of reserves
attributable thereto; (d) the average daily takes
of gas, (c) the quality of the gas; (f) the terms
and conditions of delivery; (g) BUYER's
alternative fuel costs and fuel sources; and
(h) applicable transmission and distribution rates
to deliver the gas to BUYER's Facility.
XIII.
BUYER'S CREDIT
13.01 Credit Arrangements. SELLER shall have
the right to request that BUYER make credit
arrangements reasonably satisfactory to SELLER at
any time during the term of this Agreement in
order to secure SELLER for payment of Gas
delivered hereunder for up to three (3) Months'
value of Gas, based on the Minimum Take and the
price in effect for the then current Year.
SELLER shall have the right to suspend
deliveries hereunder until such time as BUYER
provides said security should BUYER fail to make
the said credit arrangements prior to the later
of: (a) the expiration of thirty (30) Days from
BUYER's receipt of SELLER's request for said
security; or, (b) October 1, 1990.
ARTICLE XIV.
INDEMNIFICATION
14.01 Indemnification. Each party
("Indemnitor") shall indemnify, defend and hold
harmless the other party ("Indemnitee"), and their
officers, directors, employees, heirs, successors
and administrators from and against any and all
claims, demands, suits, actions, liabilities,
losses, damages, judgments, and/or legal or
other expenses (collectively "Claims") which may
arise from or in connection with the
performance or non-performance of their
obligations hereunder. If a claim is asserted
or action brought against Indemnitee as to
which it believes it is entitled to
indemnification under this Article, Indemnitee
shall promptly notify Indemnitor in writing of
such claim or action. Prompt notice as
contemplated in the preceding sentence shall mean
such notice as would be required to enable
Indemnitor to assert and prosecute appropriate
defenses relative co such claim or such action in a
timely fashion. If Indemnitee fails to give
Indemnitor prompt notice of any claim or action
as provided in this Section, Indemnitor shall
have no obligation to indemnify pursuant to this
Article. Upon receipt of such notice request for
indemnification, Indemnitor shall promptly make a
determination of whether it is required to
indemnify and shall promptly notify Indemnitee in
writing of that determination.
ARTICLE XV.
REPRESENTATIONS AND WARRANTIES
15.01 SELLER's Representations and
Warranties. SELLER represents and warrants the
following to BUYER: That is a general partnership
duly organized and existing under the laws of
the State of Colorado possessing the power to do
business in North Carolina as well as each state
in which it will purchase Gas for delivery hereunder;
that it is solvent and has not sought protection
from its creditors in Bankruptcy; that each of the
general partners is solvent and has not sought
protection from its creditors in Bankruptcy; that
it has the power to enter into this Agreement; that
all actions required to enter and to perform this
Agreement have been taken or will be taken when
required; that the parties executing this Agreement
on behalf of SELLER are duly authorized and empowered
to bind SELLER under the terms of this Agreement;
and that there are no impediments of any sort to
SELLER's entering into this Agreement.
15.02 BUYER's Representations and
Warranties. BUYER represents and warrants the
following to SELLER: That is a duly incorporated and
validly existing Delaware corporation qualified to
do business in the State of North Carolina;
that it is solvent and has not sought protection
from its creditors in Bankruptcy; that is has the
power to enter into this Agreement; that all
corporate action required to enter and to perform
this Agreement have been taken or will be taken
when required; that the parties executing this
Agreement on behalf of SELLER are duly
authorized and empowered to bind SELLER under the
terms of this Agreement; and that there are no
impediments of any sort to SELLER's entering into
this Agreement.
16.01 Assignment. This Contract shall be
binding upon and inure to the benefit of the
heirs, legal representatives, successors and
assigns of the respective parties hereto. SELLER
covenants and agrees that in the event it assigns
any interest in this Contract, then the party
receiving such interest shall expressly assume the
obligations of the party from whom the
interest was acquired hereunder. No assignment
or sale of any interest by SELLER shall be
effective for any purpose until BUYER has
approved such substitute SELLER, but approval
thereof shall not operate as a novation of this
Contract. No assignment or sale of interest shall
relieve the assigning party of its continuing
obligations hereunder, without the prior approval
of the other party hereto which will not be
unreasonably withheld.
16.02 Severability. Any part of this
Contract which is found to be in violation of any
valid rule, regulations or law promulgated by a
properly authorized state or federal agency,
Congress, or State legislature shall be stricken
from this Contract and the remainder of the
Contract shall be construed without such part,
provided that the surviving provisions achieve the
purposes and intents of the parties.
16.03 Entire Contract. ThiS Contract
constitutes the entire agreement between the
parties and supersedes all previous contracts,
agreements and understandings both written and oral.
This Contract may not be amended except in writing
and executed by both parties hereto.
16.04 Multiple Originals. This Contract
may be executed in multiple originals, each of
which, when taken together, shall be construed as
a single complete Contract.
16.05 Memorandum of Contract. Upon request
of BUYER, SELLER will execute a Memorandum of
Contract which BUYER may record in the counties
or parishes in which SELLER,s production is located.
16.06 Applicable Law. This Agreement shall
be governed by and construed in accordance with
the laws of the State of Texas, excluding any
conflicts of laws principles that might require the
application of the laws of another jurisdiction,
(except to the extent otherwise required by
Federal laws).
16.07 Assignment for Security Purposes.
BUYER may assign, pledge and hypothecate this
Contract as additional security for certain loans
made or to be made to BUYER by Financier relative to
the development of the Facility, and SELLER hereby
grants its consent and agreement to such action,
provider that BUYER shall first obtain SELLER's
written consent, which shall not be unreasonably
withheld. In the event that Financier forecloses on
its secured interest, SELLER agrees that, absent a
material breach of any of the other terms
hereof, this Contract shall remain in force and
effect, and SELLER shall accept Financier's or
Financier's assignees substitute performance
hereunder for all purposes.
16.08 Joint Preparation. In interpreting
this Contract, it is acknowledged by BUYER and
SELLER that it was prepared jointly by the parties
and not by either party to the exclusion of the
other party and that in preparing this Contract;
each Party had access to advice of its own counsel.
16.09 No Partnership. It is not the purpose
of the parties hereto to create a partnership,
joint venture or association, or the
relationship of agency or employer-employee and
neither this Contract nor any of the other
dealings hereunder shall be construed or
considered as creating such relationship.
16.10 Further Assurances. The
parties hereto recognize that execution of
additional amendments, clarifications,
documentation, assignments, mortgages, pledges and
other evidences of security herein may be required
from time to time by Financier. BUYER and SELLER
agree to promptly execute each such instrument
requested by Financier from time to time and at
all times during the continuance of this Contract.
IN WITNESS HEREOF, this instrument is
executed in duplicate originals as of the date
first hereinabove written.
BUYER:
PANDA-ROSEMARY CORPORATION
Robert W. Carter
President
Attest
Lori Coughin
SELLER:
NATURAL GAS CLEARINGHOUSE
By:
Its: Senior Vice President
Attest
Peggy K. Johnson
EXHIBIT 10.43
AMENDMENT OF GAS PURCHASE CONTRACT
WHEREAS, Panda-Rosemary Corporation, a Delaware
corporation and Natural Gas Clearinghouse, a Colorado
general partnership ("Seller") entered into a certain Gas
Purchase Contract dated April 12, 1990, providing for the
delivery and sale of natural gas to a certain cogeneration
facility located in Roanoke Rapids, North Carolina (the
"Contract"); and
WHEREAS, pursuant to a certain Consent to Assignment,
Delegation and Assumption Agreement dated January 6, 1992,
Panda Rosemary Corporation assigned all of its rights under
the Contract to Panda-Rosemary, L.P., dba Panda-Rosemary
Limited Partnership, a Delaware limited partnership
("Buyer"), and Buyer assumed all of the obligations under
the Contract, and Seller consented to such assignment and
assumption; and
WHEREAS, Buyer and Seller desire to amend and
supplement the terns and conditions of the Contract.
NOW THEREFORE, in consideration of the mutual covenants
and agreements set forth in the Contract and in this
Amendment, the parties hereby amend and supplement the
Contract as follows:
1. Section 1.01 of the Contract is deleted and Sections 1.02
through and including ,.10 are renumbered Sections 1.01
through 1.09.
2. A new Section 1.10 is added to the Contract :
1.10 "FTNT Agreement" shall mean the firm
transportation agreement dated October 22, 1991 executed by
Buyer and Transcontinental Gas Pipeline Corporation.
3. Section 1.14 of the Contract is deleted and
replaced by a new Section 1.14:
1.14 "Maximum Daily Quantity" shall be Buyer's Total
Contract Quantity (TCQ) as established in the FTNT
Agreement.
4. Delete Section 1.15 of the Contract and Sections
1.16 and l. 17 are renumbered Sections 1.15 and 1.16.
5. Delete Section 2.03 of the Contract and substitute
a new Section 2.03:
2.03 Nomination. on or before ten (10) business
Days prior to the beginning of each Month, Buyer shall
designate the minimum volume of Gas it anticipates taking
and purchasing from Seller each Day during the following
Month ("Minimum Daily Quantity"), which will constitute
Buyer's nomination of Gas for that Month. Unless the parties
agree otherwise, Seller will deliver the Minimum Daily
Quantities at the Delivery Points designated as "Primary
Points" under Item No. 1 on Exhibit A to this Agreement.
Following Buyer's nomination of the Minimum Daily Quantity,
and upon no less than twenty-four hours advance notice to
Seller, Buyer may reduce its nomination to as low as zero or
increase its nomination to the Maximum Daily Quantity,
provided that any reduction must be the result of a
reduction in Buyer' s consumption of Gas and not the result
of Buyer replacing Gas nominated under this Contract with
Gas purchased from a third party supplier. Seller's
obligation to deliver and Buyer's obligation to purchase
quantities of Gas in excess of the Minimum Daily Quantity is
subject to agreement on the price to be paid for the excess
quantities, as set forth in Section 4.02(c) of this
Contract. Unless the parties agree otherwise, quantities of
Gas in excess of the Minimum Daily Quantity will be
delivered at the Delivery Points designated as "Secondary
Points" under Item No. 1 on Exhibit A to this Agreement.
Notwithstanding the foregoing notice deadline, the parties
shall use their best efforts to implement changes in Buyer'
s nomination communicates} to Seller later than the twenty-
four hour advance notice deadline.
6. Delete Section 4.02 of the Contract and substitute a
new Section 4.02:
4.02 Gas Price for Subsequent Years.
a. Beginning on October 1, 1991 and continuing through
October 31, 1992, the price payable to Seller for quantities
of Gas delivered to Buyer shall be the arithmetic average of
the Gas prices reported for the Months October 1990 through
September 1991 in first monthly issue of Inside FERC's gas
Market Report in the table titled "Prices of Spot Gas
Delivered to Pipelines" under the heading "Texas Gas
Transmission Corp." in the column labeled "Index Price" plus
twenty-four and seven-tenths cents ($0. 247) per Tutu.
b. Beginning November 1, 1992 and continuing until
termination of the Contract, the price payable to Seller for
Gas delivered to Buyer in volumes up to the Minimum Daily
Quantity shall be the Index Price applicable during the
Month of delivery plus four cents ($0. 04) per MMBtu. The
Index Price shall vary according to the Delivery Point and
shall be as follows:
i. Carthage, Texas Delivery Point - the price
reported in the first monthly issue of Inside FERC's Gas
Market Report in the table titled "Prices of Spot Gas
Delivered to Pipelines" under the heading "Texas Gas
Transmission Corp. Zone 1" in the column labeled "Index
Price".
ii. Ada, Louisiana Delivery Point - the Texas
Gas Transmission Corp. Zone 1 Index Price described in
subpart i. of this Section.
iii. Eunice, Louisiana Delivery Point the - price
reported in the first monthly issue of Inside FERC's Gas
Market Report in the table titled "Prices of Spot Gas
Delivered to Pipelines" under the heading "Texas Gas
Transmission Corp. Zone SL" in the Column labeled "Index
Price".
iv. Henry Hub - Delivery Point - the price
reported in the first monthly issue of Inside FERC's Gas
Market Report in the entry titled "Henry Hub Cash Price".
c. Beginning November 1, 1992 and continuing until
termination of the Contract, the price payable to Seller for
Quantities of Gas in excess of the Minimum Daily Quantity
nominated by Buyer in accordance with Section 2.03 of this
Contract shall equal Seller's actual cost incurred in
acquiring the excess gas plus an administrative fee of 50.04
per MMBtu.
7. Delete Section 4.03 of the Contract and substitute a
new Section 4.03:
4.03 Transportation Options and Charges. Seller shall,
upon Buyer's request or requests from time to tine,
transport the Gas to the Receipt Point utilizing Buyer's
FTNT Agreement or the lowest priced transportation
available from various pipelines Seller utilizes to deliver
the Gas to that Receipt Point. If Buyer requests deliveries
to the Receipt Point, then Buyer and Seller shall enter into
a mutually acceptable agreement naming Seller as agent under
Buyer's firm or interruptible transportation agreements.
Seller shall invoice Buyer for all transportation costs
incurred by it in transporting the Gas from the Delivery
Point to the Receipt Point at the same time as it invoices
Buyer for Gas purchases and Buyer shall pay the
transportation costs at the same time that it pays for said
Gas purchases.
a. Delete Section 4.04 of the Contract and substitute
a new Section 4.04:
4.04 Buyer's Failure to Purchase. Should Buyer fail to
purchase the Minimum Daily Quantity it nominates prior to
the beginning of the Month of delivery in accordance with
Section 2.03 of this Contract, and such failure is not
excused under Article XI of the Contract, Buyer shall pay
Seller an amount equal to $0.14 per MMBtu of Gas Buyer
failed to purchase as liquidated damages. It is expressly
stipulated by the parties that, in the event Seller does not
resell the Gas Buyer failed to purchase prior to the date
designated above, the actual amount of damages resulting
from Buyer's failure to purchase the Gas would be difficult
if not impossible to determine accurately because of the
unique nature of this Contract, the unique needs and
obligations of Seller, the uncertainties of the gas market
and differences of opinion with respect to such matters, and
that the liquidated damages provided for in this Section are
a reasonable estimate by the parties of such damages.
9. Delete Section 4.05 of the Contract and
substitute a new Section 4.05:
4.05 The rules, guidelines, and policies of the
pipeline(s) actually transporting gas hereunder to the
Delivery Point(s), as may be changed from time to time, shall
define and set forth the manner in which gas purchased and
sold under this Agreement is transported. Buyer and Seller
recognize that the receipt and delivery on the pipeline's
facilities of gas purchased and sold under this Agreement
shall be subject to the operational procedures of the
pipeline. In the event the pipeline elects to transport in
accordance with the General Terms and Conditions of its then
effective Federal Energy Regulatory Commission Gas Tariff
which may allow the pipeline to impose scheduling fees,
penalties, cash-out costs or similar charges for imbalances
(imbalance charges), Buyer and Seller shall be obligated to
use their best efforts to avoid imposition of such charges.
If during any month Buyer or Seller receives an invoice from
the pipeline which includes an imbalance charge, both
parties shall be obligated to use their tees efforts to
determine the Fragility as well as the cause of such
imbalance charge. If the parties determine that the iota
lance charge was imposed as a result of Buyer's actions
(which shall include, but shall not be limited to, Buyer's
failure to accept a daily quantity of gas equal to Buyer's
nomination of its daily volume requirements), then Buyer
shall pay for such imbalance charge. If the parties
determine that the imbalance charge was imposed as a result
of Seller's actions (which shall include, but not be
limited to, Seller's failure to deliver a daily quantity of
gas equal to Buyer's nomination of its daily volume
requirements), then Seller shall pay such imbalance charge.
10. Delete Section 4.08 of the Contract and substitute
a new Section 4.08:
4.08 Substitute Index Price. In the event that the
index used to compute the Index Price is discontinued or if
at any time becomes unresponsive to the actual price of Gas
available for sale to and purchase and use by the facility,
the parties shall mutually agree upon a substitute index;
provided that, if such an agreement is not reached within
thirty (30) Days after commencement of negotiation to select
a new index, then the matter shall be submitted to
arbitration as provided in Article XII hereof. The parties
shall continue to perform under the Contract during the
period prior to the arbitrators' decision under the pricing
and other conditions in effect immediately prior to either
party's invocation of arbitration. The decision of the
arbitration panel shall be made retroactive to the date that
arbitration was invoked and appropriate adjustments in the
amount paid for Gas delivered under this Contract shall be
made in order to give full effect to the retroactive
decision.
11. Delete Section 7.02 of the Contract and substitute
a new Section 7.02:
7.02 Buyer's Early Termination Privilege. Buyer may
wish to purchase gas reserves for the purpose of supplying
Gas to the Facility and, if it does so, and Buyer intends
that such reserves will replace the supply of gas furnished
by Seller under this Agreement, then Buyer shall have the
right at any time, to terminate this Contract by tendering
written notice to Seller not less than one hundred and
twenty (120) Days prior to the effective date of such
termination. If Buyer exercises such privilege, then this
Contract shall be ended and the rights and duties of the
parties hereto, excepting any claims arising prior to the
effective date of the early termination, shall cease to
exist.
12. Delete Exhibit A to the Contract and substitute
the "Revised Exhibit A" attached to this Amendment.
13. Other than as amended and supplemented by the terms
and conditions of this Amendment, the original terms and
conditions of the Contract remain in full force and effect.
14. This Amendment shall not be effective until Buyer
has obtained the consent of the Fuji Bank and Trust Company,
"Collateral Agent" as provided for in the certain Consent
and Agreement dated April 12, 1990, executed by Seller and
the collateral Agent.
BUYER:
PANDA-ROSEMARY, L.P. by its
General Partner
PANDA-ROSEMARY CORPORATION
By: Ralph T. Killian
Title: Vice President
SELLER:
NATURAL GAS CLEARINGHOUSE
By:
Title: Vice President
EXHIBIT 10.44
PIPELINE OPERATING AGREEMENT
BETWEEN
PANDA ENERGY CORPORATION AND PANDA-ROSEMARY CORPORATION
("PANDA")
AND
NORTH CAROLINA NATURAL GAS CORPORATION ("NCNG")
DATED: February 14, 1990
________________________________
PIPELINE OPERATING AGREEMENT TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS 3
ARTICLE II. CONSTRUCTION OF PIPELINE 10
ARTICLE III. OPERATION AND MAINTENANCE OF PIPELINE 12
ARTICLE IV. TERM 19
ARTICLE V. USE OF PIPELINE 20
ARTICLE VI. BALANCING 21
ARTICLE VII. EASEMENTS AND RIGHTS-OF-WAY 26
ARTICLE VIII. TAXES 26
ARTICLE IX. PAYMENTS 26
ARTICLE X. NOTICES 27
ARTICLE XI. METERING AND MEASUREMENT 28
ARTICLE XII. INDEMNIFICATION 31
ARTICLE XIII REPRESENTATIONS AND WARRANTIES 32
ARTICLE XIV. DEFAULT AND FORCE MATURE 34
ARTICLE XV. OPTION TO PURCHASE PIPELINE 37
ARTICLE XVI. ARBITRATION 41
ARTICTE XVII. INSURANCE 44
ARTICLE XVIII COMPROMISE AND SETTLEMENT OF LITIGATION 45
ARTICLE XIX. MISCELLANEOUS PROVISIONS 46
SIGNATURES 50
PIPELINE OPERATING AGEEMENT
THIS AGREEMENT is made and effective on this 14th Day of
February 1990, by and between:
PANDA ENERGY CORPORATION, a Texas Corporation,
and PANDA-ROSEMARY CORPORATION, a Delaware
Corporation and a subsidiary of PANDA ENERGY
CORPORATION with principal offices in Dallas, Texas
7S244, hereinafter referred to as "PANDA";
AND
NORTH CAROLINA NATURAL GAS CORPORATION, a Delaware
Corporation with principal offices in Fayetteville,
North Carolina, hereinafter referred to as "NCNG".
WITNESSETH, THAT:
WHEREAS, PANDA is engaged in the development,
construction and operation of cogeneration and electricity
generation facilities; and
WHEREAS, NCNG is a natural gas utility that is in
the business of providing natural gas sales and
transportation services to various residential, commercial
and industrial customers in North Carolina; and
WHEREAS, PANDA is authorized, by virtue of a
Certificate of Public Convenience and Necessity granted by
the North Carolina Utilities Commission, to construct, own
and operate a cogeneration facility located in Roanoke
Rapids, North Carolina, for the production of electricity
and steam and PANDA will require a supply of Natural Gas to
be used as fuel for the cogeneration facility; and
WHEREAS, Panda intends to construct a 108'
natural gas pipeline from the high pressure lines of two
interstate pipelines approximately 10 miles to PANDA's
Facilities so as to supply Natural Gas solely to its
Facilities; and
WHEREAS, NCNG desires to have the ability to
utilize the excess capacity in PANDA's Pipeline, which is
located within NCNG's certificated territory, to augment the
operation of its own system by interconnecting NCNG's system
and PANDA's Pipeline, and PANDA is agreeable to such use and
interconnection; and
WHEREAS, PANDA desires that NCNG operate
PANDA's Pipeline and NCNG desires to operate said Pipeline;
and
WHEREAS, PANDA desires assistance in balancing
its volumes of Natural Gas supplies received from its
interstate Pipeline suppliers and NCNG is desirous of
assisting in such balancing efforts; and
WHEREAS, both PANDA and NCNG desire to dispense
with any further litigation with respect to whether PANDA has
the right to construct and operate a Pipeline to provide Gas
to its Facilities.
NOW, THEREFORE, in consideration of the mutual
covenants, obligations and considerations hereinafter set
forth, the parties hereto do hereby contract and agree as
follows:
ARTICLE I.
DEFINITIONS
Section 1.01: "British thermal unit" or "Btu" shall mean the
amount of heat required to raise the temperature of one pound
of water one degree (1 degree) Fahrenheit at sixty degrees (60 degree)
Fahrenheit.
Section 1.02: "Commercial Operations Date" shall
mean the date referred to in that certain Power Purchase and
Operating Agreement dated January 24, 1989 between Virginia
Electric & Power Company and Panda Energy Corporation when
tests have confirmed that PANDA can begin generating
electricity for commercial sale to Virginia Electric & Power
Co. but in no event shall the Commercial Operations Date be
after November 30, 1991.
Section 1.03: "Cubic Foot of Gas" shall mean the volume of
Gas which would occupy one cubic foot of space when such Gas
is at a temperature of sixty degrees (60 degree) Fahrenheit and a
pressure of 14.73 pounds per square inch absolute.
Section 1.04: "Current Carryover Gas Volume" shall mean the
product of the decimal equivalent of twenty-five (25%)
percent multiplied by the absolute value of the Receipt
Volume or the absolute value of the Delivery Volume,
whichever is higher; provided, however, that, the product of
said calculation shall never exceed the absolute value of the
Net Imbalance Volume. The Current Carryover Gas Volume shall
be considered to be a positive number when NCNG owes PANDA
Gas, and shall be considered to be a negative number when
PANDA owes NCNG Gas.
Section 1.05: "Current Imbalance Volume'' shall mean the
difference between the Monthly Entitlement Volume and the
quantity of Gas measured at the Delivery Point in such Month.
Section 1.06: "Daily Entitlement Volume" shall mean the
totalquantity of cubic feet of Gas measured at the Receipt
Point on a given Day less one (1%) percent of such volume as
an allowance to NCNG for unaccounted for and lost volumes.
Section 11.07: "Day" shall mean a period of twenty-four (24)
consecutive hours beginning at eight o'clock AM Eastern time.
Section 1.08: "Dekatherm" or "dt" shall be equivalent to one
MMBtu.
Section 1.09: "Delivery Point" shall mean the outlet
flange(s) on the meter runts) at the Facilities.
Section 1.10: "Delivery Volume" shall mean the total number
of cubic feet of Gas measured at the Delivery Point in a
given Month.
Section 1.11: "Excess Gas Volume" shall equal the difference
between the Net Imbalance Volume and the Current Carryover
Gas Volume. The said Excess Gas Volume number will be
positive when NCNG owes Gas to PANDA and negative when PANDA
owes Gas to NCNG.
Section 1.12: "Facilities" shall mean the steam, chilled
water and power generation facilities to be constructed and
owned by PANDA its successors and assigns in Roanoke Rapids,
North Carolina or in the immediate vicinity of Roanoke
Rapids.
Section 1.13: "Financier" means (a) any individual or entity
lending money to PANDA for the construction or term financing
of the Facilities, or the establishment and/or maintenance of
working capital requirements, or the refinance or take-out of
any such loan; or, (b) any lessor under a single investor or
leveraged lease finance arrangement.
Section 1.14: "Force Majaure" as employed herein and for all
purposes relating hereto shall mean any situation or
occurrence not reasonably within the control of the party
claiming suspension and which, by the exercise of due
diligence, such party is unable to prevent or overcome, and
shall include, not by way of limitation, acts of God,
strikes, lockouts or other industrial disturbances, acts of
the public enemy, wars, blockades, insurrections, riots,
epidemics, landslides, lightning, earthquakes, fires, storms,
hurricane warnings, crevasses, floods, washouts, arrests and
restraints of governments, civil disturbances, explosions,
breakage or accident to machinery or lines of pipe, temporary
failure of gas supply, the necessity for making repairs or
alterations to machinery or lines of pipe, freezing of wells
or lines of pipe, inability of any party hereto to obtain
necessary materials, supplies or permits due to existing or
future rules, regulations, orders, laws or proclamations of
governmental authorities (both Federal and State), including
both civil and military, and any other causes whether of the
kind herein enumerated or otherwise, not reasonably within
the control of the party claiming suspension and which by the
exercise of due diligence such party is unable to prevent or
overcome; such term shall likewise include (a) in those
instances where either party hereto is required to obtain
servitudes, right-of-way grants, permits or licenses to
enable such party to perform hereunder, the inability of such
party to acquire, or delays on the part of such party in
acquiring, at reasonable cost and after the exercise of
reasonable diligence, such servitudes, right-of-way grants,
permits or licenses, and (b) in those instances where either
party hereto is required to furnish materials and supplies
for the purposes of constructing or maintaining facilities,
the PANDA Pipeline and appurtenant equipment, or is required
to secure permits or permission from any governmental agency
to enable such party to fulfill its obligations hereunder'
the inability of either party to acquire, or delays on the
part of such party in acquiring at reasonable cost and after
the exercise of reasonable diligence, such materials and
supplies, permits and permissions. It is understood and
agreed that the settlement of strikes or lockouts shall be
entirely within the discretion of the party having the
difficulty, but shall not require the settlement of strikes
or lockouts by acceding to the demands of the opposing party
when such course is inadvisable in the discretion of the
party having difficulty. However, Force Majeure shall not be
applicable to a failure to pay sums of money owed.
Section 1.15: "Gas" or "Natural Gas" shall mean Gas in its
natural state as produced from oil, Gas or Gas condensate
wells as well as residue Gas resulting from Gas processing,
and which Gas is then treated by others prior to receipt at
the Receipt Point so as to comply with the quality
specifications of the interstate pipeline transporting such
Gas to markets for consumption.
Section 1.16: "Interest" shall mean the compensation for the
accrual of monetary obligations under this Agreement computed
monthly and prorated Daily, from the time each such
obligation becomes due and payable, based on an annual
interest rate equal to the Prime Rate plus one (1) percent.
For purposes hereof, Prime Rate shall mean the rate of
interest from time to time publicly announced by The Chase
Manhattan Bank, N.A., at its principal office, presently
located at 1 Chase Manhattan Plaza, New York, New York 10081,
as its prime commercial lending rate, determined as of the
time such obligation becomes due and payable, or the maximum
non-usurious rate of interest allowed by the laws of the
State of North Carolina, whichever is less.
Section 1.17: "MCF" shall denote one thousand (1,000) cubic
feet of Gas.
Section 1.18: "MMBtu" shall denote one million (1,000,000)
British thermal units.
Section 1.19: "Month" shall mean the period beginning at
eight o'clock AM Eastern Time on the first Day of a calendar
Month and ending at eight o'clock AM on the first Day of the
following calendar Month.
Section 1.20: "Monthly Entitlement Volume" shall mean the sum
of the Daily Entitlement Volumes for a given Month.
Section 1 21: "NCNG's System" shall mean the Natural Gas
pipeline and distribution system owned by NCNG within NCNG's
certificated territory in North Carolina.
Section 1.22: "NCUC" shall mean the North Carolina Utilities
Commission and any successor agency or administrative body
possessing similar powers.
Section 1.23: "Net Imbalance Volume'' shall mean the sum of
the Current Imbalance Volume and the previous Month's Current
Carryover Gas Volume, if any.
Section 1.24: "PANDA Pipeline" or "Pipeline" shall mean that
certain Natural Gas Pipeline which PANDA shall design and
build or contract to have built between the Receipt Point and
the Facilities, together with all permits, rights-of-way,
easements, pipe, valves and fittings, sales and check
meters, pigging equipment, tanks, separators, line heaters,
radio and telephonic system control and data acquisition
telemetry equipment, interconnection and metering facilities
between the PANDA Pipeline and other pipelines and other
associated equipment, spare parts, supplies, and
appurtenances used in the operation and maintenance of said
Pipeline.
Section 1.25: "Receipt Point" shall mean the outlet flange on
the sales meter run(s) at the interconnection point(s)
between the facilities of Transcontinental Gas Pipe Line
Corporation ("Transco") and/or the facilities of Columbia Gas
Transmission Corporation ("Columbia") with PANDA's Pipeline
at a point(s) near Pleasant Hill, North Carolina.
Section 1.26: "Receipt Volume" shall mean the total quantity
of cubic feet of Gas measured at the Receipt Point in a given
Month.
Section 1.27: "Subsidiary Corporations" shall mean any
corporation, now extant or hereinafter created, in which
Panda Energy Corporation or Panda-Rosemary Corporation owns a
controlling interest.
Section 1.28: "Year" shall mean a contract year (rather than
a calendar year unless the context clearly contemplated a
calendar year) which shall mean a period of three hundred
sixty-five (365) consecutive Days, the first such contract
year beginning at eight o'clock AM Eastern Time on the Day of
first delivery of Gas hereunder, provided, however, that any
such year which contains a date of February 29 shall consist
of three hundred sixty-six (366) consecutive Days.
ARTICLE II.
CONSTRUCTION OF PIPELINE
Section 2.01: PANDA shall, at its sole cost, risk, expense
and liability, design and construct the PANDA Pipeline or
cause it to be designed and constructed in such a manner that
it is sufficient to meet the anticipated requirements of the
Facilities including any compression equipment needed to meet
and maintain the Pressure requirements of PANDA's Facilities.
In addition, PANDA shall install at its expense check
meter(s) at the Receipt Point; two (2) 10" tie-ins, including
flow-control valves, between PANDA's Pipeline and NCNG's
existing 12" transmission line at points mutually agreeable
to PANDA and NCNG; and telemetry equipment needed for NCNG's
Gas Control Department to monitor Gas consumption of PANDA's
Facilities and the Receipt Point meter(s) and to operate the
Receipt Point valve and the two tie-in valves. PANDA shall
also furnish and provide for the operation of, at its
expense, the necessary equipment and supplies for odorization
of the Gas prior to its entering the PANDA Pipeline and NCNG
shall not be responsible for operating the same. The said
PANDA Pipeline shall be constructed and operated in
accordance with all applicable Federal and State laws, rules,
regulations and orders. The transmission portion of the
Pipeline will be designed, constructed, tested and certified
to comply with applicable safety requirements for a maximum
allowable operating pressure of 800 psig in a Class 3
location as defined by Section 49 CFR Part 192. PANDA shall
have the exclusive right to make modifications to the design
and operating parameters of the PANDA Pipeline from time to
time, provided that such modifications shall comply with all
applicable safety laws, rules, regulations and orders, and do
not adversely affect NCNG's operations under the terms of
this Agreement.
Section 2.02: PANDA will provide NCNG with a complete as-
built set of plans of the Pipeline and appurtenant equipment
together with copies of all rights of way easements and
operating information and data in PANDA's possession from
time to time. PANDA will give NCNG not less than thirty (30)
Days notice prior to changing the operating parameters or
commencing any modification of the PANDA Pipeline.
Section 2.03: NCNG will have the right to review the plans
and specifications of the PANDA Pipeline and to have its
agents present, at their own risk, to inspect and review the
methods used in the construction and testing of the Pipeline
as well as any subsequent modifications or repairs performed
by PANDA or its agents to verify compliance with such plans
and specifications and applicable laws, rules, regulations
and orders prior to NCNG being required to assume operation
of the PANDA Pipeline; but the design and construction of the
PANDA Pipeline, and any risk related thereto, shall be and
remain the sole responsibility of PANDA. PANDA will furnish
NCNG with a certification upon completion of the construction
of the Pipeline and any modification thereto that said
construction and/or modification is in compliance with all
applicable State and Federal rules, regulations and orders
including, but not limited to, Section 49 CFR 192 and provide
NCNG with a copy of all Regulatory Compliance records.
ARTICLE III.
OPERATION AND MAINTENANCE OF PIPELINE
Section 3.01: PANDA shall pay NCNG a fee each Month
("Operator's Fee"), in the amount set out in Section 3.02
below, in consideration of NCNG's agreement to perform the
following described duties and responsibilities with respect
to the PANDA Pipeline and its appurtenant equipment
commencing with the initial Delivery volumes: (a) Supervise
and manage day-to-day operations in a diligent and
workmanlike manner; (b) Make all regulatory filings and
safety reports required by law in a timely manner; (c)
Receive Gas from the Receipt Point and dispatch Gas through
the PANDA Pipeline in accordance with the terms of this
Agreement; (d) Provide balancing services in accordance with
the provisions of Article VI below; (e) Test the Panda
Pipeline and appurtenant equipment for leaks as required by
law; (f) Keep rights-of-way free of high weeds, grass and
trees; (g) Monitor cathodic protection; (h) Witness all meter
tests at the Receipt and Delivery Points; (i) do other usual
and necessary maintenance, operations and repairs in
accordance with its customary gas distribution pipeline
practices; and, (j) within thirty (30) Days after the end of
each Month, provide PANDA with a detailed statement of all
operations, maintenance, repairs as well as volumes of Gas
(in both MCF and Dekatherms) received at the Receipt Point
and delivered at the Delivery Point for the preceding month.
NCNG shall operate the PANDA Pipeline in the same manner and
with the same degree of care and diligence with which it
operates its own pipeline system and in full compliance with
all applicable Federal, State and Local laws and regulations.
The foregoing notwithstanding, NCNG shall not be obligated to
operate the PANDA Pipeline under conditions exceeding the
maximum pressure allowed by the NCUC Office of Pipeline
Safety.
Section 3.02: The Operator Fee for the period between the
date of first Gas takes and one (1) Year following the
Commercial Operations Date shall be $8,000 per Month. The
Operator Fee for the first Month shall be prorated if first
Gas takes do not occur on the first Day of a Month. The
Operator Fee for the two (2) Year period commencing on the
first anniversary after the Commercial Operations Date shall
be $12,000 per Month. The Operator Fee for the two (2) Year
period commencing on the third anniversary following the
Commercial Operations Date shall be $16,000 per Month. The
Operator Fee for the four (4) year period commencing on the
fifth anniversary following the Commercial Operations Date
shall be $20,000 per month. The Operator Fee for the six (6)
Year period commencing on the 9th anniversary following the
Commercial Operations Date shall be not less than $240,000
per year adjusted by the percentage increase, if any, in the
U.S. Bureau of Labor Statistics Consumer Price Index ("CPI")
from the Commercial Operations Date to said 9th Year
anniversary of this Agreement and which yearly sum shall be
payable in equal monthly installments.
Notwithstanding the foregoing, if the Facilities
generate electricity for more than 600 hours using Gas in any
single Year of the nine (9) years following the Commercial
Operations Date, then in that event, the Operator Fee for
that entire Year and each Year thereafter through the ninth
(9th) anniversary of the Commercial Operations Date shall be
$20,000 per Month.
Section 3.03: NCNG may resign as Operator of the PANDA
Pipeline upon giving PANDA one hundred eighty (180) Days
prior written notice to such effect or upon a shorter period
of notice to the extent a shorter period is provided elsewhere
in this Agreement.
Section 3.04: NCNG may not assign its duties as Operator
without PANDA's prior written consent except that it may in its
discretion hire independent contractors and/or agents to
assist it with such duties.
Section 3.05: PANDA shall be responsible for all repairs and
equipment replacement on the PANDA Pipeline and its
appurtenant equipment. NCNG is hereby authorized to incur up
to $l,000.00 of costs on any single non-emergency repair or
equipment replacement project without first securing PANDA's
consent thereto. However, if NCNG reasonably anticipates that
a repair or replacement project could cost in excess of
$1,000.00, then NCNG shall first submit an Authority For
Expenditure ("A.F.E.") and description of the work to be
performed to PANDA for its approval (Approval shall be deemed
to have been given when NCNG receives an executed copy of the
proposed A.F.E.). If PANDA does not agree with NCNG's
estimate for the cost of such work, then PANDA shall be
required to perform such work itself or to contract for the
same to be done provided such work is performed in a diligent
and workmanlike manner and pursuant to Section 2.03 above.
Regardless of who performs such work, it will be done in
compliance with all applicable laws, orders and regulations
relating to the safety and operation of Natural Gas
Pipelines.
Section 3.06: Notwithstanding Section 3.05, NCNG is hereby
authorized to make such emergency repairs as it deems
necessary to safely operate the Pipeline and shall bring
emergency conditions under control as safely, quickly and
inexpensively as is reasonably possible under the
circumstances. "Emergency conditions" are defined for
purposes of this Section, as any condition posing an
immediate threat to human life, damage to property, loss of
PANDA Pipeline system integrity due to freezing lines or
meters, or substantial loss of Gas or Gas pressure or any
other situation that under the rules and regulations of the
NCUC would require immediate attention. NCNG will notify
PANDA of any emergency situation promptly after learning of
its existence. PANDA will reimburse NCNG for all emergency
repairs and authorized maintenance and repair projects in the
manner set forth below.
Section 3.07: The Facilities will require Gas to test its
various components prior to the Commercial Operations Date
and, except for the cause of Force Majeure, NCNG shall, as
Operator of the PANDA Pipeline, commence Gas delivery to the
Facilities as required hereunder upon 30 Days prior written
notice by PANDA to NCNG of the date PANDA shall be ready to
test its Facilities; and PANDA and NCNG will work together in
order to coordinate the efficient scheduling and dispatch of
such test Gas. NCNG's Operator's Fee shall be payable from
and after the Facilities' first takes of Gas. PANDA will
arrange for its own supply of Gas for line pack (the initial
filling of the PANDA Pipeline), and the testing of its
facilities and Pipeline, or in the alternative, PANDA may
purchase Gas for such purposes and NCNG agrees to sell such
Gas at NCNG's Rate 6A then effective pursuant to the Rules
and Regulations of NCNG and the NCUC and to the extent NCNG
determines it has Gas available for PANDA to purchase without
adverse impact on NCNG's other customers.
Section 3.08: In the event that the PANDA Pipeline is not
completed prior to testing of the Facilities or prior to the
Commercial Operations Date, NCNG shall on a "best efforts"
basis either (i) sell required Gas supplies to PANDA at
NCNG's 6A tariff rate or (ii) transport such Gas as PANDA may
make available at NCNG's Receipt Point(s) with Transco or
Columbia to a point of interconnection with the Pipeline at
NCNG's Rate T-l then in effect for all volumes transported
except that during the summer period (April through October,
inclusive) of 1990 the transportation rate shall be $.35 per
dt. It is understood that all such sales and transportation
shall be subject to all rules and regulations of the NCUC and
that PANDA shall be responsible for furnishing said
interconnection (to effectuate such delivery by NCNG) at some
point on its Pipeline. Said interconnection shall be the
"Delivery Point" for purposes of deliveries made pursuant to
this Section 3.08.
Section 3.09: NCNG shall be entitled to reimbursement for
authorized repairs and equipment replacement expenditures
(whether scheduled or emergency) as described in Sections
3.05 and 3.06. In the event of a dispute as to the accuracy
or authority for any charge, PANDA will pay the undisputed
sum to NCNG and shall accompany such payment with written
reasons for its disagreement as to the disputed sum. The
parties shall thereafter attempt to resolve the dispute and,
failing that, the parties shall submit the matter to binding
arbitration as hereafter described.
Section 3.10: Subject to the provisions of Section 6.02 below
and the other terms and conditions of this Agreement, NCNG
shall at all times operate the PANDA Pipeline in a manner
that reasonably will insure delivery of Daily Entitlement
Volumes required by the Facilities except where events of
Force Majeure and maintenance or repair prevents the same.
NCNG will not unreasonably interfere with the pressure
requirements of PANDA at its Facilities.
Section 3.11: PANDA assumes responsibility for the use of Gas
in its equipment and Facilities and PANDA agrees that it
shall determine the fuel specifications for its equipment in
its Facilities and install and maintain at its Facilities
such devices as it determines are adequate to protect and
safeguard its equipment at its Facilities from liquid
hydrocarbons, other liquids or any impurities that may be
present in the Gas stream at the Delivery Point and against
irregularities in the PANDA Pipeline including, but not
limited to, fluctuations or changes in Gas pressure at the
Delivery Point.
Section 3.12: PANDA will be responsible for hiring and paying
for any independent safety inspection and report thereof
required or requested by any governmental agency or
commission. PANDA will also be responsible for the cost and
expense of any action or proceeding before the NCUC or other
applicable governmental agency or commission in connection
with the ownership and/or operation of the PANDA Pipeline.
ARTICLE IV.
TERM
Section 4.01: This Agreement shall be effective from and
after the date first hereinabove written and shall have an
initial Term of fifteen (15) years from the Commercial
Operations Date, unless extended under this Article IV or
terminated as provided elsewhere in this Agreement. If the
Term is extended under this Article IV, the word "Term" shall
thereafter be deemed to mean the original Term so extended.
If the Commercial Operations Date does not occur by November
30, 1991, NCNG may terminate this Agreement without further
obligation by written notice to that effect given on or
before December 31, 1991. PANDA will give NCNG written notice
of at least thirty (30) days in advance of its anticipated
Commercial Operations Date.
Section 4.02: This Agreement may be extended beyond its
original term, with the consent of both parties for two
additional periods of five (5) Years each, provided that at
least ninety (90) Days prior to the end of the initial Term,
or subsequent extension period as the case may be, the party
desiring the extension notifies the other of its desire to
extend the term for an additional period. Except as to the
Operator Fee which shall be adjusted at the beginning of each
of the two extension periods by the percentage increase, if
any, in the CPI since the date of the last adjustment in said
Operator Fee, all conditions and provisions of this Agreement
shall remain the same during the extension periods.
ARTICLE V.
USE OF PIPELINE
Section 5.01: PANDA shall use its Pipeline to provide fuel
solely to its Facilities for its own use and will not engage
in the sale to or the transportation of Gas for any unaffiliated
person, firm, or other person, firm, corporation, or entity
under any circumstance except as provided in Section 5.02
below.
ARTICLE VI.
BALANCING
Section 6.01: The parties anticipate that from time to time
the Facilities may require more or less Gas than the Daily
Entitlement Volume. To the extent NCNG determines in its sole
discretion that operating conditions and Gas needs on NCNG's
system permit NCNG's balancing of Daily Entitlement Volume
with the fuel requirements of the Facilities, NCNG will
attempt such balancing on a "best-efforts" basis by the
taking of Gas not needed by the Facilities into NCNG's system
or by delivering to the Facilities on an interruptible basis
Gas from NCNG's system when the fuel requirements of the
Facilities exceed the Daily Entitlement Volume. Such
balancing activities shall be consistent with and subject to
the rules, regulations and orders of the NCUC and the then
effective rules and regulations off NCNG. Deliveries to
PANDA's Facilities of NCNG owned Gas are subject to
curtailment or interruption caused by Force Majeure; Gas
supply deficiency from NCNG's interstate pipeline suppliers;
the demands of NCNG's residential, commercial and other
higher priority customers under the NCUC's approved
curtailment plan then effective; and other operating
conditions on NCNG's system. Panda agrees to curtail
immediately its use of NCNG owned Gas when instructed to do
so by NCNG. NCNG agrees to curtail immediately its use of
PANDA owned Gas when instructed to do so by PANDA and any
liability or penalties against NCNG shall be the same as
those set forth in Section 6.08 below.
Section 6.02: In order to assist NCNG with its balancing
efforts on PANDA's behalf, PANDA will notify NCNG on or
before the 20th Day of each calendar month of PANDA's
estimate of its Natural Gas requirements at its facilities
for each Day of the following Month; such notice to include
peak Day, minimum Day, average Day and total Monthly volumes
and PANDA shall also advise NCNG at that time of the packages
of Gas supplies PANDA has secured for its anticipated
requirements. Further, PANDA promptly will provide NCNG with
any VEPCO forecast of expected generation dispatch and notify
NCNG of any change in the same. PANDA also will contact
NCNG's dispatcher each Day by five o'clock PM Eastern Time
and advise the dispatcher of the quantity of Gas PANDA has
available for delivery from its interstate supplier for the
following Day and its expected Natural Gas needs ("Daily
Nomination"). PANDA also will contact NCNG's dispatcher at
least one hour before PANDA needs to use Gas at its
Facilities and advise the dispatcher of that need, including
the number of turbines to be used, the anticipated run time
for each turbine and whether PANDA will need to use NCNG
owned Gas or whether PANDA has sufficient Gas supplies
available for Delivery from its interstate supplier. When
PANDA ceases to use Gas in any of its turbines it will
immediately contact NCNG's dispatcher and advise the
dispatcher whether PANDA will need additional Gas that Day.
After eight o'clock AM Eastern Time on the Day of Gas use in
question, when there is any change by PANDA in its Daily
Nomination that requires additional Gas volumes, such Gas
shall be delivered to the Delivery Point by NCNG
solely on a "best efforts" basis. In no event shall NCNG be
liable for any penalties PANDA incurs by its failure to take
Gas supplies from PANDA's interstate suppliers.
Section 6.03: At the end of any Month in which there is a
positive Excess Gas Volume, NCNG will pay PANDA for the full
amount of such Excess Gas Volume at the lower of PANDA's
commodity cost for such Gas at the Receipt Point or NCNG' s
average commodity cost of Gas for that month. (NCNG's average
commodity cost of Gas shall mean the weighted average
commodity cost of Gas for all of NCNG's system supplies for
that month.) PANDA shall furnish NCNG with copies of all
receipts, invoices or other documentation evidencing
PANDA's Commodity Cost of Gas for each Month that there is a
positive Excess Gas Volume.
Section 6.04: At the end of any Month in which there is a
negative Excess Gas Volume, PANDA will pay NCNG for the full
amount of such Excess Gas Volume at NCNG's current unit price
in effect during the affected Month under NCNG's Rate
Schedule 6A. If said Rate Schedule 6A is discontinued or if
the basis for such schedule is changed materially, NCNG and
PANDA will mutually agree upon a substitute pricing schedule
which shall, to the maximum extent possible, achieve the same
result and be consistent with the rules, regulations and
orders of the NCUC.
Section 6.05: With respect to a negative Current Carryover
Gas Volume when there is a change from the previous Month to
the current Month in NCNG's average commodity cost of Gas
("Commodity Cost Change"): (a) If the average commodity cost
of Gas for the current Month is less than it was for the
preceding Month, then PANDA shall pay NCNG an amount equal to
the negative Current Carryover Gas Volume multiplied by the
Commodity Cost Change; and, (b) Likewise, if the average
commodity cost of Gas for the current Month is greater than
it was for the preceding Month, then NCNG shall pay PANDA an
amount equal to the negative Current Carryover Gas Volume
multiplied by the Commodity Cost Change. Said payment will be
made as hereinafter provided.
Section 6.06: With respect to a positive Current Carryover
Gas Volume when there is a change from the previous Month to
the current Month in NCNG's average commodity cost of Gas
("Commodity Cost Change": (a) If the average commodity cost
of Gas for the current Month is greater than it was for the
preceding Month, then PANDA shall pay NCNG an amount equal to
the positive Current Carryover Gas Volume multiplied by the
Commodity Cost Change; and, (b) Likewise, if the average
commodity cost of Gas for the current Month is less than it
was for the preceding Month, then NCNG shall pay PANDA an
amount equal to the positive Current Carryover Gas Volume
multiplied by the Commodity Cost Change. Said payment will be
made as hereinafter provided.
Section 6.07: To the extent that NCNG specifically requests
that PANDA allow it to transport NCNG owned Gas through the
Receipt Point and the PANDA Pipeline for purposes other than
delivery of Gas to the Facilities in any given Month, then
the Operator's Fee described in Sections 3.01 and 3.02 for
such Month shall be reduced by ten ($.10) cents per Dekatherm
of Gas so transported through the Receipt Point and the PANDA
Pipeline provided, however, that the Operator Fee may, in no
event, be reduced below zero in any given Month.
Section 6.08: If NCNG is advised by PANDA that PANDA will be
using in its Facilities all of its Gas delivered to the
Receipt Point (less 1%) subsequent to such notice NCNG shall
not take any Gas from the PANDA Pipeline into NCNG's system
until it is advised by PANDA to the contrary. After eight
o'clock AM Eastern Time on the Day of Gas use in question,
when there is any change by PANDA in its Daily Nomination
that requires additional Gas volumes, such Gas shall be
delivered to the Delivery Point by NCNG solely on a "best
efforts" basis. NCNG acknowledges that PANDA may sustain
unnecessary expenses equalling the difference between the
current market price of PANDA's alternate fuel (#2 diesel
fuel) as delivered to the Facilities and the current market
price of Natural Gas then due PANDA if NCNG wrongfully takes
PANDA's Gas into its system as provided herein; and NCNG shall
be liable to PANDA solely for said unnecessary expenses incurred
by PANDA as a result of NCNG's wrongful taking of Gas into its
system on the Day in question contrary to the information supplied
to it by PANDA.
ARTICLE VI
EASEMENTS AND RIGHTS-OF-WAY
Section 7.01: Except as otherwise specifically provided in
this Section 7.01, PANDA shall acquire any permit, easement,
license, rental or right-of-way (collectively "Easements")
necessary to interconnect the PANDA Pipeline to the Receipt
Point as well as the points of interconnection with NCNG's
system. Further, in situations where NCNG's interests would
not adversely be affected, NCNG will cooperate with PANDA's
requests to cross NCNG's Pipeline or distribution system
using NCNG's standard pipeline crossing agreement.
ARTICLE VIII.
TAXES
Section 8.01: Each party will pay the applicable taxes on the
property or other assets owned by it.
ARTICLE IX.
PAYMENTS
Section 9.01: All payments arising out of the operation of
this Agreement and due from one party hereto to the other
party hereto shall be paid within thirty (30) Days after the
billing party's invoice together with documentation
appropriate to such invoice and as may be required under the
various provisions of this Agreement is deposited in the
U.S. Mail as provided in Article X., below.Failure to pay any
invoice or billing when due, shall entitle the billing party
to receive Interest on the amount due from the date that such
invoice became due and payable.
ARTICLE X
NOTICES
Section 10.01: Until PANDA is otherwise notified in writing
by NCNG, notices to NCNG shall be addressed to NCNG at the
address set forth below or, at such other address as may
hereafter be named:
Mr. Calvin B. Wells, President
North Carolina Natural Gas Corporation
P. 0. Box 909
Fayetteville, NC 28302-0909
Telephone: 919-483-0315
Telecopier: 919-483-6874
Section 10.02: Until NCNG is otherwise notified in writing by
PANDA, notices to PANDA shall be addressed to PANDA at the
address set forth below or at such other address as may
hereafter be named:
Mr. Ralph T. Killian, Vice President
Panda-Rosemary Corporation
Suite 1001
4100 Spring Valley Rd.
Dallas, TX 75244
Telephone: 214-980-7159
Telecopier: 214-980-6815
Section 10.03: Any notice, advice, instruction or other
communication from one party to the other involving a change
in the rate of receipts or deliveries of Gas shall, if given
by telephone, be immediately confirmed by facsimile
transmission to the other party being notified. Other notices
hereunder shall be given by facsimile transmission or in
writing, postage prepaid, to the last known address of the
party being notified. All invoices shall be considered
delivered when deposited in the United States Mail postage
prepaid and addressed to the last known address of the party
being invoice. All notices shall be deemed to have been
received upon actual receipt by the party being notified. Any
notice to terminate or extend this Agreement, shall be sent
by United States Mail, postage prepaid, certified, return
receipt requested, to the last known address of the party
being notified.
ARTICLE XI.
METERING AND MEASUREMENT
Section 11.01: The measurement volume unit of the Gas
delivered under this Agreement shall be an MCF. The gross
British thermal unit content per cubic foot of Gas delivered
hereunder shall be determined in accordance with the
requirements of Transco or Columbia, as the case may be. In
any Month during which Gas is received into the PANDA
Pipeline from both Transco and Columbia, NCNG shall take the
Btu information received from the suppliers and determine the
heating value of the Gas by calculating the weighted average
of the heating values of the Gas from each source.
Section 11.02: The meters at the Receipt Point shall be
tested and calibrated by personnel of the interstate
pipeline, with NCNG having the right to observe the same, as
often as may be required by the interstate pipeline
delivering Gas there through, but in no event less often than
once each Month. The Delivery Point meters will be tested and
calibrated by NCNG personnel as often as deemed necessary by
NCNG but no less often than once each month.
Section 11.03: PANDA shall install two meters at the Delivery
Point which meet specifications approved by AGA Report #3 so
as to facilitate the accurate measurement of diverse volumes.
Section 11.04: If upon any test of the Delivery Point,
meter(s) at PANDA's Facilities, the meter(s) is/are found to
be inaccurate:
(a) By less than two percent (2%), previous readings thereof
shall be considered correct, but such meter shall be
adjusted at once to read correctly.
(b) By two percent (2%) or more, such meter shall be adjusted
at once to read correctly and previous readings thereof shall
be corrected to zero error for the period of time during
which said meter was known or agreed by the parties to be
inaccurate, and in the event the extent of such period of
inaccuracy is not known or agreed upon, then such corrections
shall be made for a period of one-half (1/2) of the elapsed
time since the date o f the last preceding test. In the event
the Delivery Point meters are out of service or
registering inaccurately, and the inaccuracy cannot be
calculated, the volume of Gas delivered hereunder shall be
estimated, by using the registration of any check meter or
meters, if installed and accurately registering, or, (2) by
correcting the error if the percentage of error is
ascertainable by calibration, test, or mathematical
calculation, or, if neither such method is feasible, (3) by
estimating the quantity of delivery by deliveries during a
period under similar conditions when the meter was
registering accurately, or (4) by any other method agreed
upon.
Section 11.05: All test data, charts, and other similar
records shall be preserved by NCNG for a period of not less
than two (2) years and NCNG shall send any part or all of
such data as may be requested by PANDA from time to time at
PANDA's expense. All such test data, charts and any other
similar records shall be returned to NCNG within thirty (30)
Days after receipt of same. In addition, PANDA's right to
obtain test data, charts and other similar records shall
extend to and shall cover any information to which NCNG might
be entitled to receive from Transco or Columbia.
Section 11.06: Payment for corrected volumes shall be made by
the party owing therefor in the manner provided elsewhere in
this Agreement.
ARTICLE XII.
IDENTIFICATION
Section 12.01: Each party ("Indemnitor") shall indemnify,
defend and hold harmless the other party ("Indemnitee"), and
their officers, directors, employees, heirs, successors,
assigns and administrators from and against any and all
claims, demands, suits, actions, liabilities, losses,
damages, judgments, and/or legal or other expenses
(collectively "Claims") to the extent that they arise from or
in connection solely with the negligent performance or non-
performance of the Indemnitor's obligations hereunder.
Further, PANDA (as Indemnitor) specifically agrees to
indemnify, defend and hold harmless NCNG (as Indemnitee) its
officers, directors, employees, heirs, successors, agents and
assigns from and against any and all claims, demands, suits,
actions, liabilities, losses, damages, judgments, and/or
legal or other expenses ("claims") which may arise from any
defect in the design and/or construction of the PANDA
Pipeline or from PANDA's use or application of said Gas, or
lack of use of said Gas, in its Facilities. If a claim is
asserted or action brought against Indemnitee as to which it
believes it is entitled to indemnification under this
Article, Indemnitee shall promptly notify Indemnitor in
writing of such claim or action. Prompt notice as
contemplated in the preceding sentence shall mean such notice
as would be required to enable Indemnitor to assert and
prosecute appropriate defenses relative to such claim or such
action in a timely fashion. If Indemnitee fails to give
Indemnitor prompt notice of any claim or action as provided
in this Section, Indemnitor shall have no obligation to
indemnify pursuant to this Article. Upon receipt of such
notice request for indemnification, Indemnitor shall
promptly make a determination of whether it is required to
indemnify and shall promptly notify Indemnitee in writing of
that determination.
Section 12.02: At no time during the continuance of this
Agreement will NCNG allow any suit, action, or lien for
nonpayment of services or materials contracted for by NCNG to
be levied against the PANDA Pipeline provided, however, that
such indemnity in this section shall not be effective as to
NCNG's invoices to PANDA which are not timely paid.
ARTICLE XIII.
REPRESENTATIONS AND WARRANTIES
Section 13.01: NCNG represents and warrants the following to
PANDA: That it is a duly incorporated and validly existing
Delaware corporation qualified to do business in the State of
North Carolina; that it is solvent and has not sought
protection from its creditors in Bankruptcy; that it has the
power to enter into this Agreement; that all corporate
actions required to enter and to perform this Agreement have
been taken or will be taken when required; that the parties
executing this Agreement on behalf of NCNG are duly
authorized and empowered to bind NCNG under the terms of this
Agreement; and that there are no impediments of any sort to
NCNG's entering into this Agreement with the exception of
regulatory approval, if required.
Section 13.02: PANDA ENERGY CORPORATION and PANDA-ROSEMARY
CORPORATION represent and warrant the following to NCNG: That
PANDA ENERGY CORPORATION is a duly incorporated and validly
existing Texas Corporation and PANDA-ROSEMARY CORPORATION is
a duly incorporated and validly existing Delaware corporation
qualified to do business in the State of North Carolina; that
it is solvent and has not sought protection from its
creditors in Bankruptcy; that it has the power to enter into
this Agreement; that all corporate action required to enter
andto perform this Agreement have been taken or will be taken
when required; that the parties executing this Agreement on
behalf of PANDA are duly authorized and empowered to bind
PANDA under the terms of this Agreement; and that there are
no impediments of any sort to PANDA's entering into this
Agreement.
Section 13.03: PANDA represents and warrants to NCNG that at
the time of delivery of Gas to the Receipt Point it will have
title to the Gas free and clear of all liens, encumbrances
and claims whatsoever and that it shall pay its suppliers for
the same and indemnify NCNG and save NCNG harmless for any
and all suits, actions, debts, accounts, damages, costs,
losses and expenses arising from or out of PANDA's failure to
pay for said Gas and/or all royalties, taxes, license fees or
charges on or with respect.
Section 13.04: NCNG represents and warrants to PANDA that at
the time of any delivery of NCNG owned Gas from NCNG's system
to the Delivery Point it will have title to the Gas free and
clear of all liens, encumbrances and claims whatsoever and that it
shall pay its suppliers for the same and indemnify PANDA and
save PANDA harmless for any and all suits, actions, debts,
accounts, damages, costs, losses and expenses arising from or
out of NCNG's failure to pay for said Gas and/or all
royalties, taxes, license fees or charges on or with respect
to said Gas.
ARTICLE XIV.
DEFAULT AND FORCE MAJEURE
Section 14.01: It is covenanted and agreed that if any party
hereto shall fail to perform any of the material covenants or
obligations imposed upon it under and by virtue of this
Agreement, then unless such failure to perform is due to an
event of Force Majeure as provided in Section 14.03 below or
is otherwise excused by a provision of this Agreement, the
non-defaulting party may at its option, and in addition to
any other remedies available to such party, elect to
terminate this Agreement by giving written notice to the
party in default stating specifically the cause or causes for
terminating this Agreement and declaring it to be the
intention of the party giving the notice to terminate same;
whereupon the party in default shall have sixty (60) Days
after receipt of the aforesaid notice in which to remedy or
remove the cause or causes stated in the notice for
terminating this ' agreement, and if within said period of
sixty (60) Days the party in default does so remedy or remove
said cause or causes and fully indemnifies the party not in
default for any and all direct damages of such breach, then
such notice shall be withdrawn and this Agreement shall
continue in full force and effect. In case the party in
default does not so remedy or remove the cause or causes and
indemnify the party giving the notice for any and all direct
damages of such breach, within said period of sixty (60)
Days, then at the option of the non-defaulting party, this
Agreement shall become null and void from and after the
expiration of said period. However, if the parties disagree
as to whether a default occurred and/or as to the amount of
damages resulting from an alleged default, the matter shall
be submitted to Arbitration as provided in Article XVI of
this Agreement.
Section 14.02: Notwithstanding Section 14.01, above,
throughout the Term of this Agreement, PANDA shall provide
NCNG in writing the name and address of each Financier on a
current basis. For so long as PANDA shall have outstanding
and unpaid any financing liabilities, NCNG agrees to promptly
furnish to all Financiers, then known to NCNG, a copy of any
notice of default, breach, failure to pay billings, demand
for arbitration, or notice of termination given to PANDA.
Additionally, NCNG shall not terminate this Agreement unless
any written notice of such termination or breach, as the case
may be, and the reasons therefor have been sent certified
mail, return receipt requested, postage prepaid and addressed
to each Financier then known to NCNG at the addressees)
furnished by PANDA or such Financier until sixty (60) Days
prior to the effective date of the termination. NCNG shall
not terminate this Agreement if, after sending notice as set
forth above and prior to any effective date of termination,
Financier has either: (a) caused the condition precipitating
the notice of breach or termination to be cured; or (b)
assumed all obligations of PANDA under this Agreement to
NCNG's satisfaction.
Section 14.03: No delay or failure in performance by either
party hereto shall constitute a default hereunder or give
rise to any claims for damages, and the same shall be
excused, if caused by an occurrence of Force Majeure,
provided that after the occurrence of the event of Force
Majeure, the party so affected gives prompt notice thereof to
the unaffected party along with a detailed account of the
facts concerning same. No failure to pay money due and owing
under the terms hereof will be excused by events of Force
Majeure.
Section 14.04: If any event of Force Majeure persists for
more than ninety (90) Days after the affected party gives
notice to the remaining party hereto, then the unaffected
party shall have the right to terminate this Agreement upon
giving the affected party thirty (30) Days prior written
notice to such effect and unless the affected party is able
to resolve the condition of force majeure and resume
performance of its duties hereunder within such thirty (30)
Day period, then this Agreement shall be terminated and of no
further effect.
ARTICLE: XV.
OPTION TO PURCHASE PIPELINE
Section 15.01: NCNG shall have an option to purchase the
PANDA Pipeline for its fair market value. Said option shall
be exercisable and operate subject to the following terms and
conditions:
(a) PANDA may sell or assign the Pipeline to a third
party or other entity at any time provided that the
third party or other entity that purchases or acquires
by assignment the Pipeline also purchases or acquires
by assignment the Facilities at the same time. NCNG's
option created by this Article XV shall survive any
such purchase or assignment. The requirements of
Section 5.01 of this Agreement shall similarly survive
any such sale or assignment and shall bind and obligate
any such third party purchaser, assignee or successor
of PANDA.
(b) NCNG's option shall not be assignable without the
prior written consent of PANDA.
(c) NCNG's option shall be exercisable (subject to all
other requirements herein) at the earlier of the
following:
(i) thirty-five (35) years after the Commercial
Operation Date;
(ii) such time, after the Commercial Operation
Date, as the Facilities cease to generate
electricity or steam for more than two years for
reasons other than force majeure;
(iii) upon the sale or assignment by PANDA or its
successors of the Facilities to a third party or
other entity without the Pipeline being sold or
assigned at that time to said third party or other
entity purchasing or acquiring by assignment the
Facilities; or
(iv) upon written notice from PANDA or its
successors that said option is available for
exercise.
NCNG must give PANDA written notice of NCNG's intent to
exercise its option within one year after said option
first becomes exercisable. Said option cannot be
exercised after said one year period if NCNG fails to
give PANDA such written notice.
(d) The fair market value ("FMV") of the Pipeline shall
be determined by mutual agreement of the parties within
60 days after PANDA receives written notice from NCNG
of its intent to exercise its option to purchase the
Pipeline or by appraisal as provided in Section I5.02
below. If mutual agreement as to FMV is not reached
within the 60 day period and NCNG does not initiate the
appraisal process within 120 days after it notified
PANDA of its intent to exercise its option, said option
shall expire.
(e) If the FMV of the Pipeline is determined by
appraisal as permitted in Section 15.02, NCNG shall not
be obligated to purchase the Pipeline but may revoke
its election to exercise said option if NCNG sends
PANDA written notice of NCNG's decision not to purchase
within 30 days after NCNG receives the Appraiser's
report as to the FMV of the Pipeline; however, if NCNG
decides not to purchase the Pipeline after it receives
the Appraiser's report, it shall be liable for all of
the reasonable and authorized expenses of the
Appraisers. Likewise, PANDA shall be liable for all the
reasonable and authorized expenses of the Appraisers if
VEPCO exercises its right of first refusal to buy the
Pipeline and Facilities after NCNG has notified PANDA
of its intent to exercise its option to purchase the
Pipeline. If NCNG does not revoke its election to
exercise the option as provided herein and VEPCO does
not exercise its rights to the Pipeline 60 days after
PANDA receives written notice from NCNG of its intent
to exercise its option to purchase the Pipeline or by
appraisal as provided in Section 15.02 below. If mutual
agreement as to FMV is not reached within the 60 day
period and NCNG does not initiate the appraisal process
within 120 days after it notified PANDA of its intent
to exercise its option, said option shall expire.
(f) PANDA will specially warrant title to the Pipeline
and its appurtenant equipment and rights-of-way and
easements, by, through and under PANDA.
(g) PANDA will not warrant the merchantability or
fitness of the PANDA Pipeline for any use whatsoever
(NCNG will accept it in an "as is, where is" condition).
(h) Said option shall not terminate as a result of the
parties failure to agree on any extension of the term of
this Agreement providing for the operation of the
Pipeline by NCNG beyond the initial 15-year term or as a
result of NCNG ceasing to be the operator of said
Pipeline; but the option shall only remain in effect for
one year beyond the date said option is available for
exercise as provided in Section l5.Ol(c) above.
(i) The parties agree that this Agreement shall survive any
exercise by VEPCO of its rights of first refusal or the
sale or assignment of the Pipeline to a third party or
other entity and those exercising said rights, making
said purchase or acquiring the Pipeline by assignment
shall take subject to this Agreement.
Section 15.02: If PANDA and NCNG cannot agree on the option
price (pursuant to Section 15.01 above), NCNG may, by written
notice to PANDA, elect to have the FMV of the Pipeline
determined by appraisal, as provided in this Section 15.02.
Within 45 days of such election by NCNG, PANDA and NCNG shall
each appoint an MAI certified appraiser (qualified to
appraise pipelines) and the two appointed Appraisers shall
select a third MAI certified appraiser (qualified to
appraise pipelines). The three Appraisers shall determine the
FMV of the Pipeline and report their determination to the
parties within 45 days of their appointment. The value
determined to be the FMV by the three Appraisers shall be the
option price and shall be binding upon NCNG and PANDA subject
to NCNG's right to revoke its election to exercise said
option and cancel the purchase as described in Section
15.01(e) above.
ARTICLE XVI.
ARBITRATION
Section 16.01: At the request of either party hereto, any
controversy or dispute between the parties arising under and
relating solely to the terms of this Agreement (except as to
the option price in Article XV above) shall be referred to
three (3) arbitrators, one to be selected by each party and
the third to be selected by the American Arbitration
Association ("AAA"). The selections to be made by the parties
hereto shall be made from the list of the National Panel of
Arbitrators maintained by the AAA. The arbitrator to be
selected by the AAA shall be an attorney-at-law admitted to
practice in the State of North Carolina. All decisions and
awards shall be binding on the parties when made by a
majority of the arbitrators, except for decisions relating to
discovery as set forth herein. In the event any arbitrator
dies, or refuses to act, or becomes incapable, incompetent or
unfit to act before hearings have been completed and/or
before an award has been rendered, a successor arbitrator may
be selected by the party who originally made the selection.
The selection of the successor arbitrator shall be made
consistent with the selection procedure set forth in the
preceding paragraph. The arbitrators selected pursuant to
this Agreement shall be governed by and apply the laws of the
State of North Carolina and federal law, if applicable, in
conducting any arbitration proceeding and/or in making any
award. The arbitration shall be conducted in Raleigh, North
Carolina in accordance with the Commercial Arbitration Rules
of the AAA then in effect.
Section 16.02: Any party hereto shall have the right to give
a notice of demand for arbitration (hereinafter referred to
as "Demand for Arbitration") of any controversy or dispute
which is subject to arbitration under the terms of this
Agreement and such notice shall be filed in writing with the
AAA by the party seeking arbitration and a copy of same shall
be served contemporaneously with such filing on the other
party. The notice shall state, with specificity, the nature
of the dispute and the remedy sought. After such notice has
been filed, the parties hereto may make discovery of any
matter relevant to such dispute before the hearing, to the
extent and in the manner provided by rules of civil procedure
of the State of North Carolina. Any question that may arise
with respect to the obligations of the parties hereto
relative to discovery and/or relative to the protection of
the discovery materials shall be referred solely to the
arbitrator selected by the AAA. Discovery shall be completed
not later than ninety (90) Days after filing of the notice of
arbitration unless such period for discovery is extended by
the arbitrator selected by the AAA, upon a showing of good
cause by either party to the arbitration. The arbitrators may
consider any material which is relevant to the subject matter
of any such controversy even if such material might also be
relevant to an issue or issues not subject to arbitration
hereunder. A stenographic record shall be made of the
arbitration hearing. Any costs associated with any
arbitration hereunder shall be paid by the party against whom
an award is entered unless the arbitrators by their award
otherwise provide. Arbitration may not be utilized, and the
arbitrators selected in accordance with this Article XVI
shall not possess the authority or power, to alter, amend or
modify any of the terms or conditions or charges set forth in
this Agreement, and further, the arbitrators may not enter
any award which alters, amends or modifies such terms,
conditions in any form or manner.
ARTICLE XVII.
INSURANCE
Section 17.01: PANDA shall at all times during the
continuance of this Agreement provide and maintain at its own
expense Comprehensive General Liability Insurance on the
PANDA Pipeline and Facilities with coverage of not less than
$1,000,000 per occurrence, $2,000,000 aggregate, and excess
liability coverage of not less than $5,000,000, as well as
All-Risk Property Insurance coverage in an amount satisfactory
to PANDA but in no event less than $1,000,000. PANDA will add
NCNG as an additional insured, as its interest may appear, to
PANDA's liability insurance policies at no cost to NCNG.
PANDA also shall maintain Worker's Compensation Insurance on
PANDA's employees in compliance with the laws of the State of
North Carolina and Comprehensive Automobile Liability
Insurance coverage on vehicles owned or operated by PANDA
with a limit of not less than $1,000,000 per occurrence.
Section 17.02: NCNG shall at all times during the
continuance of this Agreement maintain at its own expense
such Comprehensive General Liability Insurance,
Comprehensive Automobile Liability Insurance coverage on
vehicles owned or operated by NCNG and All-Risk Property
Insurance coverage on its property in an amount as it
determines to be appropriate for a natural gas utility
operating in Class 3 locations in the State of North
Carolina, but in no event less than the coverage set forth
for PANDA in Section 17.01 above. NCNG shall also maintain
Worker's Compensation Insurance on NCNG's employees in
compliance with the laws of the State of North Carolina.
Section 17.03: PANDA and NCNG shall each provide to the other
certificates of insurance upon request certifying that such
insurance is in full force and effect and shall each notify
the other immediately of any change in the status or coverage
of such insurance.
ARTICLE XVIII
COMPROMISE AND SETTLEMENT OF LITIGATION
Section 18.01: On May 2, 1989, the NCUC issued a Certificate
of Public Convenience and Necessity ("CCN") in Docket No. SP-
73, to PANDA. On October 2, 1989, in Docket No. SP-73, Sub 1,
the NCUC issued an Order Not To Reconsider the issuance of
the CCN. NCNG has subsequently filed its Exceptions and
Notice of Appeal to said Order Not to Reconsider. The Record
of Appeal has been settled and the Appeal is pending before
the North Carolina Court of Appeals.
Section 18.02: NCNG shall, within one (1) week after
execution of this Agreement, file all required Notices,
proposed Orders and Documents with the North Carolina Court
of Appeals to effect a dismissal with prejudice (to refiling
the same) of its said Appeal in Docket No. SP-73, Sub 1.
ARTICLE XIX.
MISCELLANEOUS PROVISIONS
Section 19.01: All terms defined in this Agreement shall have
the same defined meanings when used in any notice,
correspondence, report or other document made or delivered
pursuant to or in connection with this Agreement, unless the
context shall clearly otherwise require.
Section 19.02: Each party hereto agrees that in the event
that it receives any payment from the other party to which it
is not entitled, whether due to mistake or error on the part
of the other party, or due to the operation and effect of
laws and regulations promulgated from time to time during the
Term hereof, the party receiving such payment shall promptly
return all of such payment together with Interest from the
date such payment or payments were received until the date
repaid.
Section 19.03 No waiver by either party of one or more
defaults by the other party in the performance of any of the
provisions of this Agreement shall operate or be construed as
a waiver of any other or further default of defaults, whether
of a like or of a different character.
Section 19.04: This Agreement shall be binding upon and inure
to the benefit of the heirs, legal representatives,
successors and assigns of the respective parties hereto. No
assignment or sale of any interest shall be effective until
the remaining party hereto has received written notice to
such effect. No assignment or sale of interest shall relieve
the assigning party of its preexisting obligations hereunder
without the written consent of the remaining party hereto.
Section 19.05: Any part of this Agreement which is found to
be in violation of any valid rule, regulation or law
promulgated by a properly authorized state or federal agency,
Congress or State legislature shall be stricken from this
Agreement and the remainder of the Agreement shall be
construed without such part, provided that the surviving
provisions achieve the purpose and intent of the parties.
Section 19.06: This Agreement constitutes the entire
agreement between the parties and supersedes all previous
contracts, agreements and understandings both written and
oral. This Agreement may not be amended except in writing and
executed by both parties hereto.
Section 19.07: This Agreement may be executed in multiple
originals, each of which, when taken together, shall be
construed as a complete original.
Section 19.08: This Agreement shall remain confidential
during the Term hereof. Neither party hereto shall disclose
any of the terms, conditions, obligations, duties, promises,
benefits or liabilities set forth in this Agreement without
the express prior written permission of the remaining party
hereto; provided however, that each party hereto shall be
free to disclose such facts concerning this Agreement as may
be required by applicable statute, rule or regulation or by
Order of the NCUC or a Court of competent jurisdiction or by
loan agreements of either party's lenders or employees,
agents and independent contractors of either party without
need of securing the prior permission of the other party
hereto. The parties agree to obtain NCUC approval of this
Agreement to the extent required by the NCUC.
Section 19.09: This Agreement shall be interpreted, performed
and enforced in accordance with the laws of the State of
North Carolina.
Section 19.10: PANDA and NCNG each agree that they will
comply with all valid rules and regulations enforced by the
NCUC Office of Pipeline Safety. PANDA and NCNG each agree
that they will comply with all valid and applicable laws,
orders, rules and regulations of all governmental agencies
having jurisdiction over the Pipeline and of all courts of
competent jurisdiction and each will not interfere with the
other's compliance with said laws, orders, rules and
regulations. PANDA agrees to be bound by the rules and
regulations of NCNG as amended from time to time to the
extent that such rules do not conflict with the terms of this
Agreement, in which case the terms of this Agreement shall
control. PANDA acknowledges receipt of a current copy of
NCNG's rules and regulations.
Section 19.11: The parties agree that concurrent with the
execution of this Agreement they shall execute a memorandum
of this Agreement, in recordable form, specifying the
effective date, the maximum period of the Agreement including
extensions and renewals thereof, NCNG's option to purchase
the PANDA Pipeline a brief description of the Pipeline and
its location and the fact that NCNG shall have the right to
operate the Pipeline during the term of this Agreement and
any extensions thereof, and said memorandum shall be recorded
in the Office of Register of Deeds or other appropriate
office in each County of this State where the Pipeline is to
be located.
IN WITNESS WHEREOF, this instrument is executed in duplicate
originals as of the date first hereinabove written.
ATTEST: PANDA ENERGY CORPORATION
Terri Broerman ____________________________
Assistant Secretary Robert W. Carter
Chairman
(CORPORATE SEAL)
ATTEST: PANDA-ROSEMARY CORPORATION
Terri Broerman _____________________________
Assistant Secretary Robert W. Carter
President
(CORPORATE SEAL)
ATTEST: NORTH CAROLINA NATURAL GAS
CORPORATION
Sally Sowers ______________________________
Assistant Secretary Calvin B. Wells
President
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, on this day
personally appeared ROBERT W . CARTER, the duly authorized
President of PANDA ENERGY CORPORATION, a Texas Corporation,
known to me to be the person whose name is subscribed to the
foregoing instrument, and acknowledged to me that he executed
the same for the purposes and considerations therein
expressed, as the act of such corporation, and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 5 day of
March, 1990.
Theresia M. Bone
Notary Public
Seal My Commission Expires:
June 23, 1993
Theresia M. Bone
Notary Public
State of Texas
Comm. Exp. 06-23-93
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, on this day
personally appeared ROBERT W. CARTER, the duly authorized
President of PANDA-ROSEMARY CORPORATION, a Delaware
Corporation, known to me to be the person whose name is
subscribed to the foregoing instrument, and acknowledged to
me that he executed the same for the purposes and
considerations therein expressed, as the act of such
corporation, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 5th day of March,
1990.
Theresia M. Bone
Notary Public
Seal
Theresia M. Bone
Notary Public
State of Texas
Comm. Exp. 06-23-93
My Commission Expires:
June 23, 1993
EXHIBIT 10.45
PANDA-ROSEMARY CORPORATION
A Panda Company
May 7, 1990
Mr. Calvin B. Wells, President
North Carolina Natural Gas Corporation
P.O. Box 909
Fayetteville, NC 28302-0909
RE: Amendment Number 1 to
Pipeline Operating Agreement Dated February 14,
1990
Gentlemen:
In accordance with our previous discussion, this
letter will when appropriately executed constitute our
agreement relative to the captioned matter.
The undersigned parties to the subject Agreement
hereby amend the captioned Agreement as follows:
1. The third paragraph on page 2 of the Agreement
(commencing smith "WHEREAS, NCNG desires" and ending
with "interconnection; and'' is hereby deleted in its
entirety.
2. The following new Sections are hereby added to
Article III of the Agreement.
"Section 3.13. NCNG (i) will not construct
any facilities which connect the PANDA Pipeline
to any third party and (ii) will not knowingly or
willfully do anything or take any action in
connection with the PANDA Pipeline tonal is
beyond or in contravention of the duties and
obligations which it has undertaken in the
PIPELINE OPERATING AGREEMENT and which shall
subject the PANDA Pipeline to the jurisdiction
of or regulation by tile Federal Energy
Regulatory Commission.
Section 3.14. NCNG may deliver gas which it
sells to PANDA (or which it transports for
PANDA under Section 3.08 of the PIPELINE
OPERATING AGREEMENT) through either of the two
tie-ins which connect the NCNG system and the
PANDA Pipeline. If PANDA should ever have the
opportunity to sell gas to NCNG, then such
delivery shall be made at NCNG' s
interconnections with Transco or Columbia, and
then only after NCNG agrees in writing to such
deliveries and after appropriate arrangements are
made by PANDA with Transco or Columbia. No such
gas sold by PANDA to NCNG shall be delivered
through the two tie-ins which connect the NCNG
system and the PANDA pipeline.
4100 Spring Valley, Suite 1001
Dallas, Texas 75244
214/980-7159
Fax 980-6815
Nothing herein shall be construed to prevent the
free flow of gas through said tie-ins each
month for balancing purposes as contemplated in
the Pipeline and Operating Agreement and gas
taken by NCNG through its balancing efforts shall
not be deemed to be a sale of gas by PANDA to
NCNG.
3. The phrase "except as provided in Section 5.02
below" is hereby deleted from Section S.01 of the
Agreement. Section 5.02 of the Agreement is hereby
deleted in its entirety.
4. The body of Section 6.07 of the Agreement is hereby
deleted in its entirety and the following is
substituted therefor:
"NCNG shall not receive natural gas for its
own account through PANDA' s interconnections
with Transco or Columbia."
5. The following new Section 19.12 is hereby added to
the Agreement.
"Section 19. 12. PANDA shall have the right, but
not the obligation, to waive the right to
receive any payment due from NCNG at any time."
6. The remaining terms and conditions of the captioned
Agreement shall, except to the extent affected by this
Amendment Number 1, remain in full force and effect and
shall henceforth be construed together with this
Amendment Number 1.
Sincerely,
PANDA ENERGY CORPORATION PANDA-ROSEMARY CORPORATION
_____________________ _________________
Robert W. Carter Robert W. Carter
Chairman Chairman and
President
AGREED AND ACCEPTED THIS 9th
DAY OF MAY, 1990.
NORTH CAROLINA NATURAL GAS
CORPORATION
By: _______________
Clavin B. Wells
President
EXHIBIT 10.46
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT is executed this 15th day
of June, 1990, by and between Panda Energy Corporation, a
Texas corporation, ("Assignor") and Panda-Rosemary
Corporation, a Delaware corporation ("Assignee")
FOR GOOD AND VALUABLE CONSIDERATION; the receipt
and sufficiency of which is hereby acknowledged, the
Assignor and Assignee hereby agree as follows:
Assignor hereby assigns and conveys unto Assignee
all right, title and interest in a certain "PIPELINE
OPERATING AGREEMENT, between Panda Energy Corporation, Panda-
Rosemary Corporation, and North Carolina Natural Gas
Corporation dated February 14, 1990.
IN WITNESS WHEREOF, the undersigned have executed
this Assignment Agreement as of the date first set forth above.
PANDA ENERGY CORPORATION
By:__________________
ATTEST Robert W. Carter
_______________________ Chairman and Chief
SECRETARY Executive Officer
PANDA ENERGY CORPORATION
By:_______________________
ATTEST Robert W. Carter
________________________ Chairman and Chief
SECRETARY Executive Officer
STATE OF TEXAS )
: SS:
COUNTY OF DALLAS )
I Theresia M. Bone, Notary Public for said County
and State, certify that Janice Carter personally came before
me this day and acknowledged that she is the Secretary of
PANDAROSEMARY CORPORATION, a corporation, and that by
authority duly given and as the act of the corporation, the
foregoing instrument was signed in its name by its Chairman
and Chief Executive Officer, sealed with its corporate seal,
and attested by her as its Secretary.
Witness my hand and official seal this 15th day of June, 1990
(Official Seal)
Theresia M. Bons
NOTARY PUBLIC
My Commission Expires:
STATE OF TEXAS )
: ss:
COUNTY OF DALLAS )
I Theseria M. Bone Notary Public 1990. Notary Public
for said County and State, certify that Janice Carter personally
came before me this day and acknowledged that she is the Secretary
of PANDA CORPORATION, a corporation, and that by authority duly given
and as the act of the corporation, the foregoing instrument was signed
in its name by its Chairman and Chief Executive Officer, sealed
with its corporate seal, and attested by her as its
Secretary.
Witness my hand and official seal this 15th day of
June, 1990
(Official Seal)
THERESIA M BONE
Notary Public
My Commission Expires:
June 23, 1993
EXHIBIT 10.47
PANDA-ROSEMARY CORPORATION
A Panda Company
November 19, 1991
Mr. Calvin B. Wells; President
North Carolina Natural Gas Corporation
P. O. Box 909
Fayetteville, NC 28302-0909
RE: Amendment Number 2 to
Pipeline Operating Agreement
Dated February 14, 1990
Gentlemen:
In accordance with our previous discussion, this letter
will when appropriately executed constitute our agreement
relative to the captioned matter. The undersigned parties
to the subject Agreement hereby amend the captioned
Agreement as follows:
1. Section 1.04 on page 4 of the Agreement is hereby
deleted in its entirety.
2. The following new Section 1.04 is hereby added to the
Agreement:
"Section 1.04 as Amended. Current Carryover Gas Volume
shall mean the product of the decimal equivalent of
twenty-five percent (25%) multiplied by the absolute
value of the Receipt Volume.or the absolute value of the
Delivery Volume, whichever is higher; provided, however,
that when the Current Carryover Gas Volume is a positive
number, the Current Carryover Gas Volume shall be the
greater of either 50,000 dt or the twentyfive percent
(25%) referenced above for the purposes of determining
payment by NCNG to PANDA for a positive excess gas volume
in Section 6.03 below and provided further that the
product of said calculation shall never exceed the
absolute value of the net imbalance volume. The Current
Carryover Gas Volume shall be considered to be a positive
number when NCNG owes PANDA gas and shall be considered
to be a negative number when PANDA owes NCNG gas."
3. All remaining terms and conditions of the Agreement
shall remain in full force and effect except to the
extent affected by this Amendment Number 2 and shall
henceforth be construed together with this Amendment
Number 2.
Sincerely,
PANDA ENERGY CORPORATION PANDA-ROSEMARY CORPORATION
Ralph T. Killan Ralph T. Killian
Vice President- Vice President-Natural
Natural Resources Resources
AGREED AND ACCEPTED THIS 13TH DAY OF DECEMBER, 1991.
NORTH CAROLINA NATURAL GAS CORPORATOIN
By:________________________
Gerald A. Teele
Senior Vice President
EXHIBIT 10.48
REAL PROPERTY LEASE
AND EASEMENT AGREEMENT
This Lease is made and entered into by and between THE BIBB:
COMPANY ("LESSOR" hereinafter), a Georgia corporation, and PANDA-
ROSEMARY CORPORATION ("LESSEE" hereinafter), a Delaware corporation.
In consideration of the mutual covenants and agreements set forth in
this Lease, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, LESSOR does hereby (i)
demise and lease to LESSEE and LESSEE does hereby lease from LESSOR
that certain real property (the "Premises" hereinafter) located in the
City of Roanoke Rapids, County of Halifax, State of North Carolina,
more fully described in Exhibit A hereto and (ii) grant and convey to
LESSEE an easement of ingress and egress on and across property owned
by LESSOR, which real property is described in Exhibit B hereto, to
the extent necessary to assemble, construct, use, operate, inspect and
maintain the cogeneration facility (the "Facility") hereinafter
described and all interconnection facilities (the "Interconnection
Facilities") necessary to deliver electrical, steam and other energy
to LESSOR and to Virginia Electric and Power Company ("Utility")
(including, without limitation, all transformers, breakers, lines,
poles, guy wires and anchors and associated equipment and material,
and any modifications thereto, required for the purpose of connecting
the Facility to Utility's transmission lines).
ARTICLE 1 - PURPOSE OF LEASE AND EASEMENT
1.01 LESSOR and LESSEE each understand that the purpose of this Lease
and Easement is to provide land upon which LESSEE will construct the
Facility (and will employ the Facility to provide electricity and steam to
the LESSOR and Utility and to others) pursuant to that certain Cogeneration
Energy Supply Agreement (the "COGENERATION AGREEMENT" hereinafter) entered
into between LESSOR and LESSEE as of January 11, 1989.
1.02 LESSEE shall comply with all present and future laws, ordinances,
rules and regulations of any governmental authority (including, without
limitation, rules and regulations of the Environmental Protection Agency
and the Occupational Safety and Health Administration) affecting the
Facility or any part thereof and/or the operation thereof in accordance
with the terms of the COGENERATION AGREEMENT.
ARTICLE 2 - TERM OF LEASE AND EASEMENT
2.01 Subject to extension as provided in Section 2.02 or 2.03 below,
the initial term of this Lease and Easement shall commence on the date of
the execution hereof. It shall terminate on December 31 of the year in
which the twenty-fifth (25th) anniversary of the Completion Date specified
in the COGENERATION AGREEMENT occurs.
2.02 If LESSOR exercises the option described in Sections 8.01(a)
and 8.02 of the COGENERATION AGREEMENT (to extend the term of the
COGENERATION AGREEMENT for an additional ten years), the initial term
of this Lease and Easement shall be automatically extended for an
identical ten (10) year period at the annual rental and on the terms
and conditions contained herein. The term of this Lease and Easement,
if so extended, shall expire on December 31 of the year in which the
thirty-fifth (35th) anniversary of the Completion Date occurs.
2.03 Notwithstanding any provision of the COGENERATION AGREEMENT
to the contrary, LESSEE shall have the option of extending this Lease
and Easement for a term of ten years beginning on December 31 of the
year in which the twenty-fifth (25th) anniversary of the Completion
Date specified in the COGENERATION AGREEMENT occurs and terminating on
December 31st of the year in which the thirty-fifth (35th) anniversary
of the Completion Date specified in the COGENERATION AGREEMENT occurs
at the annual rental and on the terms and conditions otherwise
contained herein by giving notice to LESSOR of its intention to extend
at least two years prior to the end of the initial term hereof and
thereupon the term of this Lease and Easement shall be so extended
without any further action by either party.
ARTICLE 3 - RENT
3.01 Subject to adjustment as provided in Section 6.01 below,
LESSEE agrees to pay LESSOR the sum of one dollar ($1.00) for each
year or partial year of the initial and extended term of this Lease
and Easement.
3.02 Rent for the first year shall be due and payable
concurrently with the execution of this Lease and Easement. Rent for
the second year shall be due and payable on January 1 of the year next
following the year in which this Lease and Easement is executed. Rent
for subsequent years shall be due and payable on each subsequent
January 1. Rent may be prepaid.
ARTICLE 4 - SURRENDER
4.01 Upon the expiration of the term (initial or extended) of this
Lease and Easement, unless LESSOR elects to purchase the Facility as
permitted by Sections 8.01(b) and 8.03 of the COGENERATION AGREEMENT,
LESSEE shall within twenty-four (24) months after the expiration of the
term (initial or extended), and at its own expense, remove all
improvements on the Premises and grade and otherwise and restore the
Premises to the condition in which it existed on the date of execution
of this Lease, except that LESSEE shall not be required to replace any
materials actually excavated or removed from the Site during
construction of the Facility.
ARTICLE 5 - CONDEMNATION
5.01 If, during the term of this Lease and Easement, all of the
Premises, or such portion thereof as shall practically prevent the
intended use and operation of the Facility, should be taken for any
public or quasi-public use under any governmental law, ordinance, or
regulation, or by right of eminent domain, or should be sold to the
condemning authority under threat of condemnation, this Lease and
Easement shall terminate, and the rent shall be abated during the
unexpired portion of this Lease and Easement, effective as of the date
of the taking of the Premises by the condemning authority.
ARTICLE 6 - DEFAULT
6.01 LESSOR and LESSEE each recognize that a substantial
expenditure will be made by LESSEE to construct the Facility and the
Interconnection Facilities on the Premises and that one or more liens
on the said Facility (or on parts thereof), or on LESSOR's rights and
interest hereunder, will be created in connection with said
construction. Accordingly, LESSOR and LESSEE each agree as follows:
(a) that a termination of the COGENERATION AGREEMENT, by either
party, prior to expiration of the initial term or of the extended term
(if the initial term has been or is extended as provided in 2.02 or
2.03 above) of this Lease and Easement, shall not have the effect of
terminating this Lease and Easement. LESSOR and LESSEE shall (in the
event of any such termination of the COGENERATION AGREEMENT) negotiate
a new rental for the balance of the term of this Lease and Easement.
Said new rental shall be a reasonable rental, payable monthly, for the
Premises (without consideration of the improvements thereon) for the
use and time period in question. If LESSOR and LESSEE are unable to
negotiate a new rental, the new rental shall be determined by
arbitration pursuant to the Commercial Rules of the American
Arbitration Association. Notwithstanding the foregoing, this Lease may
be terminated by LESSOR in the event that the COGENERATION AGREEMENT
is terminated for any of the reasons specified in Section 13.01(ii)
through (vi) thereof;
(b) that, if any rental payment is not made when due, LESSOR may
terminate this Lease and Easement upon a minimum of thirty (30) days
written notice of such default to LESSEE. If LESSEE ceases to operate
an electricity or steam generating power plant on the Premises, LESSOR
may terminate this lease upon a minimum of twelve months written notice
of default to LESSEE. Said notice of termination shall be withdrawn if
the default in question is cured prior to the expiration of the notice
period in question. LESSOR shall have the option, subject to Section
8.03(d) of the COGENERATION AGREEMENT, to purchase the Facility and
the Interconnection Facilities after the effective date of such
termination for a purchase price determined in accordance with
Sections 8.03(b) and (c) of the COGENERATION AGREEMENT, which option
may be exercised by giving written notice to LESSEE of such exercise
within 30 days after such effective date. Notwithstanding anything in
Section 8.02(a) of the COGENERATION AGREEMENT to the contrary, no
option to purchase the Facility and the Interconnection Facility may be
exercised by LESSOR on or after the 31st day following such effective
date. Neither LESSEE nor its assigns shall be deemed to have ceased
operating a power plant on the Premises by reason of (i) temporarily
(for purposes of maintenance or repair) or permanently (for purposes of
replacement) removing any or all items of machinery, equipment or
other personal property located on the Premises or the Easement 9 ( ii
) the failure to generate or sell electricity or steam during any
period that electricity or steam is not required to be generated or
sold under the COGENERATION AGREEMENT or any contract LESSEE may have
to sell electricity, (iii) the failure to generate electricity or
steam during any period in which the Facility or the Interconnection
Facilities are being repaired or (iv) any act or occurrence described
in Section 11.01 of the COGENERATION AGREEMENT is preventing the
generation or sale of steam or electricity.
(c) that a default under the COGENERATION AGREEMENT by either
party, prior to the expiration of the said initial or extended term of
this Lease and Easement, shall not be considered a default under this
Lease and Easement (unless otherwise provided herein); and (~) that the
remedy for a default under this Lease and Easement shall be damages
(and not termination) unless otherwise provided herein.
6.02 The failure, by either party, to seek a remedy for a specific
breach of this Lease and Easement shall not constitute a waiver of the
right to seek a remedy for that breach.
A waiver by either party of a breach of this Lease and Easement
shall not constitute a waiver of any subsequent breach.
ARTICLE 7 - INSPECTION
7.01 Without regard to ownership or other rights in the Facility,
the Interconnection Facilities, the Easement or the property owned by
LESSOR adjacent to the Leased Premises ("LESSOR's Plant"), it is
understood that the parties hereto, their agents, employees,
contractors, subcontractors, and other authorized representatives,
will of necessity require access to facilities or areas controlled by
or under the jurisdiction of the other party; and furthermore that
Utility, its agents, employees, contractors, subcontractors and other
authorized representatives will of necessity require access to
facilities or areas controlled by both parties hereto. LESSOR and
LESSEE agree to provide and make available such access, provided that
LESSOR and LESSEE shall each take all reasonable steps to insure that
no access by such party to areas controlled by the other party whether
for inspection or otherwise shall unreasonably interfere with the
operations of such other party.
ARTICLE 8 - QUIET ENJOYMENT; TITLE TO IMPROVEMENTS
8.01 LESSOR covenants that at all times during the term
of this Lease and Easement, so long as LESSEE is not in default
hereunder, LESSEE's quiet enjoyment of the Lease and Easement Premises
or any part thereof shall not be disturbed by any act of LESSOR, or any
one acting by, through or under LESSOR.
8.02 LESSOR agrees that the Facility and Interconnection
Facilities, as between LESSOR and LESSEE, are and shall remain the
personal property of LESSEE at all times. Unless and until LESSOR has
exercised its option granted in the COGENERATION AGREEMENT to purchase
the Facility and subject to the provisions of Section 6.01(b) hereof,
LESSEE shall have the right to remove all improvements constituting the
Facility and the Interconnection Facilities, and additions thereto, at
any time and from time to time regardless of the degree of affixation
of such property to the Leased Premises, the Easement or LESSOR's
Plant. LESSOR hereby waives any landlord's lien, contractual or
otherwise, it may have in and to the improvements and personal property
constituting the Facility or the Interconnection Facilities, and
additions thereto, or which is located on or about the Premises or the
Easement.
ARTICLE 9 - MISCELLANEOUS
9.01 All notices, approvals, consents, requests and other
communications hereunder shall be in writing and shall be deemed to
have been given when delivered to the other party by registered,
certified or express mail, return receipt requested/ postage prepaid'
addressed as follows:
If to the LESSEE: Panda Energy Corporation
4100 Spring Valley
Suite 1001
Dallas, Texas 75234
Attn: Robert Carter
If to the LESSOR: Director of Operations
The Bibb Company
Terry Products Division
P.O. Box 1100
Roanoke Rapids, NC 27870
Rejection or refusal to accept or the inability to deliver because of
changed address of which no notice was given shall be deemed to be receipt
of the notice, approval, consent, request or other communication so sent.
The parties hereto may, by notice given hereunder, designate any further
or different addresses to which subsequent notices, approvals, consents,
requests or other communications shall be sent or persons to whose
attention the same shall be directed.
9.02 This Lease and Easement shall be binding upon, and inure to the
benefit of, the parties to this Lease and Easement and their respective
heirs, executors, administrators, legal representatives, successors, and
assigns when permitted by this Lease and Easement.
9.03 THIS LEASE AND EASEMENT SHALL BE CONSTRUED UNDER, AND IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NORTH CAROLINA.
9.04 The rights and remedies provided by this Lease and Easement
are cumulative, and the use of any one right or remedy by either party
shall not preclude or waive its rights to use any or all other
remedies. These rights and remedies are given in addition to any other
rights the parties may have by law, statute, ordinance, or otherwise.
9.05 If, as a result of a breach of this Lease and Easement by
either party, the other party employs an attorney or attorneys to
enforce its rights under this Lease and Easement, then the breaching
party agrees to pay the other party the reasonable attorney's fees an
costs incurred to enforce the Lease and Easement.
9.06 Either party hereto may assign its rights hereunder without
approval but may not delegate its obligations without the express
written approval of the other party.
9.07 LESSOR agrees that LESSEE shall have the right, from time to
time, and at any time during the term of this Lease and Easement, to
mortgage its leasehold estate in the leased Premises, the Easement or
any portion thereof, or to encumber the same or any portion thereof,
by deed of trust or otherwise, to secure the financing of the
development, construction or operation of the Facility. From and after
the time that LESSOR has received written notice of any such mortgage
or deed of trust from LESSEE and the mortgagee or deed of trust
beneficiary ("LENDER" hereinafter), LESSOR shall furnish written
notice to LENDER of any default hereunder and of the remedy LESSOR
intends to exercise simultaneously with notice to LESSEE thereof or,
if earlier, at least twenty (20) days prior to exercising such remedy,
and shall give LENDER copies of all notices required to be given to
LESSEE hereunder, and LENDER shall have the right to perform on
behalf of LESSEE any covenant of LESSEE hereunder. LENDER, its
successors and assigns, may, at their option, and by delivery to
LESSOR of a written agreement to assume the obligations and duties of
LESSEE under this Lease and Easement, succeed to LESSEE's rights and
privileges under this Lease and Easement and receive the benefits and
accept the responsibilities of this Lease and Easement pursuant to the
terms and provisions hereof, and LESSOR will recognize the succession
of LENDER, its successors and assigns, to LESSEE's rights and will
continue to perform LESSOR's obligations contained in this Lease and
Easement for so long as LENDER, its successors and assigns, continue
to perform the obligations of LESSEE under this Lease and Easement as
they become due. In the event that LENDER succeeds to the rights and
interest of LESSEE hereunder, LESSOR hereby agrees that LENDER may, at
its option, and by delivering written notice to LESSOR, assign its
interest under this Lease and Easement to any individual, sole
proprietorship, partnership, joint venture, trust, unincorporated
organization, association, corporation, institution, entity, or
other person ("ASSIGNEE" hereunder). Such ASSIGNEE shall succeed
to LENDER's rights and privileges under this Lease and Easement and
receive the benefits and accept the responsibilities of LESSEE pursuant
to the terms and provisions of this Lease and Easement, and LESSOR
will recognize the succession of such ASSIGNEE to LENDER's rights hereunder
and will perform its obligations and duties hereunder provided that
such ASSIGNEE executes and delivers to LESSOR a written agreement to
assume the obligations and duties of LESSEE hereunder. LESSOR
acknowledges and agrees that upon the consummation of an assignment to
an ASSIGNEE, LENDER shall have no further obligation, duty or
liability to LESSOR hereunder.
9.08 LESSEE shall pay all ad valorem taxes on, or any increase in
ad valorem taxes payable by LESSOR that results from or is
attributable to, the Facility or the Interconnection Facilities.
9.09 LESSOR and LESSEE shall cooperate with each other in
obtaining any and all government permits, certificates or other
authority that may be required as a prerequisite to the activities set
forth herein.
ARTICLE X - INDEMNIFICATION
10.01 LESSEE shall not cause or permit any Hazardous Material to
(as hereinafter defined) to be brought upon, kept, or used in or about
the Premises by LESSEE, its agents, employees, contractors or
invitees, except for such Hazardous Material as is necessary or useful
to LESSEE'S business.
10.02 Any Hazardous Material permitted on the Premises as
provided in Section 10.01 and all containers therefor, shall be used,
kept, stored and disposed of in a manner that complies with all
federal, state, and local laws or regulations applicable to the
Hazardous Material.
10.03 LESSEE shall not discharge, leak or emit, or permit to be
discharged, leaked or emitted, any material into the atmosphere,
ground, sewer system or any body of water, if that material (as is
reasonably determined by any governmental authority) does or may
pollute or contaminate the same, or may adversely affect (a) the
health, welfare or safety of persons, whether located on the Premises
or elsewhere or (b) the condition, use or enjoyment of the buildings
or any other real or personal property included in the Premises.
10.04 LESSEE shall promptly provide LESSOR with a copy of all
notices, reports and other communications sent to or received by any
governmental agency pursuant to or relating to LESSEE'S compliance
with, federal, state and local laws or regulations applicable to
Hazardous Material used, kept, stored or disposed of on the Premises
or relating to any determination of a governmental agency of the type
described in Section 10.03 above.
10.05 As used herein, the term "Hazardous Material" means (a)
any "hazardous waste" as defined by the Resource Conservation and
Recovery Act of 1976, as amended from time to time, and regulations
promulgated thereunder and (b) any "hazardous substance" as defined
by the Comprehensive Environmental Response Compensation and Liability
Act of 1980, as amended from time to time, and regulations promulgated
thereunder.
10.06 LESSEE hereby agrees that it shall be fully liable for all
costs and expenses related to the use, storage and disposal of
Hazardous Material kept on the Premises by LESSEE (except any
Hazardous Material used, stored or disposed of on the Premises prior
to the date hereof that might remain on the Premises after the date
hereof) and LESSEE shall give immediate notice to LESSOR of any
violation or potential violation of the provisions of Section 10.01,
10.02, or 10.03 that comes to its attention or knowledge. LESSEE shall
indemnify and hold LESSOR harmless from all damages, penalties,
claims, losses, liabilities, and expenses incurred by or imposed upon
LESSOR pursuant to any applicable federal or state environmental
statute where the damages, penalties, claims, losses, liabilities
or expenses arise out of or in connection with the presence of any
Hazardous Substance on or about the Premises caused as a direct result
of activities conducted by LESSEE after the date of this Lease other
than the excavation or removal by LESSEE of fly ash or other debris
found on the Premises before the date of this Lease, provided that
LESSEE will pay for the cost of actual excavation and removal of such
fly ash and other debris.
ARTICLE 11 - EASEMENT AND RIGHT OF WAY
11.01 LESSOR hereby grants and conveys to LESSEE, including
without limitation, LESSEE's contractors, subcontractors, vendors and
suppliers for the term of this Lease, an easement and right-of-way
(the "Easement" ~ for the assembly, construction, use, operation,
inspection and maintenance of the Facility, the Interconnection
Facilities and the extension of gas feeder lines to the Facility on
and across the property described on Exhibit B hereto.
EXECUTED EFFECTIVE June 9, 1989 in
[CORPORATE SEAL] THE BIBB COMPANY
ATTEST: By: Alan Davis
Title: President
[CORPORATE SEAL] PANDA-ROSEMARY CORPORATION
ATTEST: By: Robert W. Carter
Title: President
STATE OF TEXAS
COUNTY OF DALLAS
This 6th day of June, 1989, personally came before me, Janice Carter
a notary public, for the State of Texas who, being by me duly sworn, says
that she knows the Common Seal of Panda-Rosemary Corporation and is
acquainted with Robert W. Carter who is the President of said Corporation,
and that she, the said Terri Broerman is the Assistant Secretary of the
said Corporation, and saw the said President sign the foregoing instrument,
and saw the Common Seal of said Corporation affixed to said instrument by
said President, and that she, the said Assistant Secretary signed her name
in attestation of the execution of said instrument in the presence of said
President of said corporation.
Witness my hand and notarial seal or stamp this the 6th day of June,
1898.
(Notarial Seal or Stamp) Janice Carter
Notary Public
My commission expires:
7-6-93
STATE OF GEORGIA
COUNTY OF BIBB
This 9th day of June, 1989, personally came before me, Cater C. Thompson
a notary public, D. G. Vereen who, being by me duly sworn, says that he knows
the Common Seal of the Bibb Company and is acquainted with Alan Davis who is
the President of said Corporation, and that he, the said D. G. Vereen is the
Assistant Secretary of the said Corporation, and saw the said President sign
the foregoing instrument, and saw the Common Seal of said Corporation
affixed to said instrument by said President, and that he, the said
D. G. Vereen signed his name in attestation of the execution of said
instrument in the presence of said President of said corporation.
Witness my hand and notarial seal or stamp this the 9th day of June, 1989.
(Notarial Seal or Stamp)
My commission expires: Cater C. Thompson
May 14, 1993 Notary Public
EXHIBIT 10.49
FIRST AMENDMENT
TO
REAL PROPERTY LEASE AND EASEMENT AGREEMENT
WHEREAS, THE BIBB COMPANY ("LESSOR"
hereinafter), a Georgia corporation, and PANDA-
ROSEMARY CORPORATION ( "LESSEE" hereinafter), a
Delaware corporation, entered a Real Property Lease
and Easement Agreement (the "LEASE" hereinafter)
effective on June 9, 1989, wherein LESSOR agreed to
demise and lease to LESSEE and LESSEE agreed to
lease from LESSOR that certain real property (the
"PREMISES" hereinafter) located in the City of
Roanoke Rapids, County of Halifax, State of North
Carolina, the same being more particularly described
in Exhibit "A" hereto; and
WHEREAS, the LEASE is recorded in Book 1452,
Page 205 in the Register of Deeds in Halifax County,
North Carolina; and
WHEREAS, LESSOR and LESSEE desire to amend
the LEASE.
NOW THEREFORE in consideration of the
foregoing and of the premises hereinafter contained,
LESSOR and LESSEE agree as follows:
1. The following new Section 5.02 is added to the
LEASE:
5.02 If, during the term of this Lease and
Easement, all or part of the Premises is
so taken under any governmental law,
ordinance, or regulation, or by right of
eminent domain, or if all or part of the
Premises are sold to the condemning
authority under threat of condemnation,
LESSOR and LESSEE shall each have the
right to recover compensation from the
condemning authority for loss or damages
to their respective interests. Any portion
of such compensation attributable to the
value of improvements on the Premises or
to the value of the remaining portion of
the Lease term shall be and become the
property of LESSEE. Any portion of such
compensation attributable to the value of
the real property underlying such
improvements shall be and become the
property of LESSOR. Each of the parties
hereto will execute any assignment to the
other which may be necessary to effect the
intent of this provision.
2. The reference to "twenty (20) days" on the second
line of Section 9.07 on page 12 of the Lease is changed
to "sixty (60) days".
3. The following new Section 9. lO is added to the
Lease:
9.10 LESSOR represents that the Premises is
or will be identifed by a separate Halifax County,
North Carolina tax parcel identification number
and that it will remain a separately assessed
parcel for ad valorem tax purposes.
4. All other terns, conditions and provisions of the
Lease which are not expressly deleted or changed herein
shall remain in full force and effect.
EXECUTED effective the first day of October, 1989.
[CORPORATE SEAL] THE BIBB COMPANY
Title:
By:
Title: President
[CORPORATE SEAL] PANDA-ROSEMARY CORPORATION
Janice Carter
Title: Secretary Treasurer By: Robert W. Carter
Title: President
STATE OF TEXAS )
COUNTY OF DALLAS )
This___ day of _____________ , 1989, personally came
before me,_____________ a notary public, for the State
of Texas who, being by me duly sworn, says that he
knows the Common Seal of Panda-Rosemary Corporation and
is acquainted with_______________ who is the President
of said Corporation, and that he, the said
______________ is the ____________ Secretary of the
said Corporation and saw the said President sign the
foregoing instrument, and saw the Common Seal of said
Corporation affixed to said instrument by said
President, and that he, the said Secretary signed his
name in attestation of the execution of said instrument
in the presence of said President of said corporation.
STATE OF NEW YORK )
: ss:
COUNTY OF NEW YORK )
I Barbara Everson, Notary Public for said County and
State, certify that Janice Carter personally came before me
this day and acknowledged that she is the Secretary of
PANDAROSEMARY CORPORATION, a corporation, and that by
authority duly given and as the act of the corporation,
the foregoing instrument was signed in its name by its
President, sealed with its corporate seal, and
attested by her as its Secretary.
Witness my hand and official seal this 24th day of
October, 1989.
Barbara Everson
(Official Seal) Notary Public
My commission expires:
April 7, 1990
Witness my hand and notarial seal or stamp this the ___day
of ____________, 1989.
(Notarial Seal or Stamp)
My Commission Expires:
Notary Public
STATE OF GEORGIA )
COUNTY OF BIBB )
This 24th day of October, 1989, personally
came before me, Tim K. Adams a notary public, Lowell
W. Belk who, being by me duly sworn, says that he knows
the Common Seal of The Bibb Company and is acquainted
with Alan V. Davis who is the President of said
Corporation, and that he, the said Lowell w. Belk is
the Secretary of the said Corporation, and saw the said
President sign the foregoing instrument, and saw the
Common Seal of said Corporation affixed to said
instrument by said President, and that he, the said
Lowell W. Belk signed his name in attestation of the
execution of said instrument in the presence of said
President of said corporation.
Witness my hand and notarial seal or stamp this
the 24th day of October, 1989.
(Notarial Seal or Stamp)
Tim K. Adams
My Commission Expires: Notary Public
March 3, 1992
EXHIBIT 10.50
SECOND AMENDMENT
TO
REAL PROPERTY LEASE AND EASEMENT AGREEMENT
WHEREAS, THE BIBB COMPANY ("LESSOR"
hereinafter), a Georgia corporation, and PANDA
ROSEMARY CORPORATION ("LESSEE" hereinafter) , a
Delaware corporation, entered a Real Property Lease
and Easement Agreement (the "LEASE" hereinafter)
effective on June 9, 1989, wherein LESSOR agreed to
demise and lease to LESSEE and LESSEE agreed to
lease from LESSOR that certain real property (the
"PREMISES" hereinafter) located in the City of
Roanoke Rapids, County of Halifax, State of North
Carolina, the same being more particularly described
in Exhibit "A" hereto; and
WHEREAS, the LEASE is recorded in Book 1452,
Page 205 in the Register of Deeds in Halifax County,
North Carolina; and
WHEREAS, LESSOR and LESSEE desire to amend
the LEASE.
NOW THEREFORE, in consideration of the
foregoing and of the premises hereinafter contained,
LESSOR and LESSEE agree as follows:
1. Exhibit "A", attached to and made a part of the
LEASE, is hereby deleted and replaced with the new
Exhibit "A" attached hereto and made a part hereof.
2. All other terms, conditions and provisions of
the LEASE, as previously amended, which are not
expressly deleted or changed herein shall remain in
full force and effect.
EXECUTED effective the 31 day of January 1990.
[CORPORATE SEAL] THE BIBB COMPANY
By:______________
Title: President
[CORPORATE SEAL] PANDA-ROSEMARY CORPORATION
Title: Assistant By: Robert W. Carter
Secretary Title: President
STATE OF TEXAS )
COUNTY OF DALLAS )
This 19th day of February, 1989, personally came
before me, Theresia Bove a notary public, Terri
Broerman, who, being by me duly sworn, says that he
knows the Common Seal of Panda-Rosemary Corporation
and is acquainted with Robert W. Carter who is the
___ President of said Corporation, and that she, the
said Terri Broerman is the Assistant Secretary of the
said Corporation, and saw the Common Seal of said
Corporation affixed to said instrument by said ___
President and that she, the said Assistant Secretary
signed her name in attestation of the execution of
said instrument in the presence of said President of
said Corporation.
Witness my hand and notarial seal or stamp this the
19th day of February, 1989.
(Notarial Seal or Stamp)
My commission Expires: Theresia M. Bove
6-23-93 Notary Public
STATE OF GEORGIA )
COUNTY OF BIBB )
This 31 day of January, 1990, personally came
before me, Tim K. Adam, a notary public, D.G. Vereen
who, being by me duly sworn, says that he knows the
Common Seal of The Bibb Company and is acquainted
with Alan Davis who is the President of said
Corporation, and that he, the said D. G. Vereen is
the Secretary of the said Corporation, and saw the
said President sign the foregoing instrument and saw
the Common Seal of said Corporation affixed to said
instrument by said President, and that he, the said
D.G. Vereen signed his name in attestation of the
execution of said instrument in the presence of said
President of said corporation.
Witness my hand and notarial seal or stamp this 31
day of January, 1990.
(Notarial Seal or Stamp)
My commission Expires: Tim K. Adams
3-3-92 Notary Public
EXHIBIT 10.51
Please Return to:
Francis C. Bagbey, Esq. -
Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan
2500 First Union Capitol Center
25th Floor
Raleigh, North Carolina 27601
LEASEHOLD AND REAL PROPERTY
ASSIGNMENT AND ASSUMPTION AGREEMENT
This LEASEHOLD AND REAL PROPERTY ASSIGNMENT AND
ASSUMPTION AGREEMENT, dated this 6th day of January, 1992,
by and between Panda-Rosemary Corporation, a Delaware
corporation (the "Corporation") and Panda-Rosemary, L.P.,
a Delaware limited partnership, doing business in North
Carolina as Panda-Rosemary, Limited Partnership (the
"Partnership").
W I T N E S S E T H:
WHEREAS, the Corporation, as lessee, and The Bibb
Company, a Delaware corporation ("Bibb"), as lessor,
entered into a certain Real Property Lease and Easement
Agreement, dated June 9, 1989 (the "Lease Agreement"),
recorded June 13, 1989, in Book 1452, Page 205 in the
Office of the Register of Deeds of Halifax County, North
Carolina; and
WHEREAS, the Corporation and Bibb amended the
Lease Agreement by (i) the First Amendment to Real Property
Lease and Easement Agreement, dated October 1, 1989 (the
"First Amendment"), recorded October 27, 1989, in Book
1461, Page 475, in the Office of the Register of Deeds of
Halifax County, North Carolina and (ii) the Second
Amendment to the Real Property Lease and Easement
Agreement, dated January 31, 1990 (the "Second Amendment")
recorded March 26, 1990, in Book 1472, Page 465, in the
Office of the Register of Deeds of Halifax County, North
Carolina (the Lease Agreement, as amended by the First
Amendment and the Second Amendment, hereinafter referred to
as the "Agreement"); and
WHEREAS, the Corporation desires to sell and
delegate to the Partnership, and the Partnership desires to
accept and assume from the Corporation, all of the
Corporation's right, title and interest in and to, and all
of the Corporation's liabilities and obligations with
respect to, (i) the property and premises demised in the
Agreement and all improvements and fixtures located upon
said property and the personal property attached thereto,
all as described in Schedule A attached hereto, and (ii)
the encroachments, easements and certain other real
property described in Schedule B attached hereto (the
Agreement and the property referred to in subclauses (i)
and (ii) above hereinafter collectively the "Transferred
Real Property").
NOW THEREFORE, in consideration of the foregoing
premises, the mutual covenants contained herein, $10 and for
other good and valuable consideration the receipt and sufficiency
of which are hereby acknowledged, the parties hereby agree
as follows:
1. Assignment and Delegation by Corporation. The
Corporation hereby irrevocably sells, bargains, grants,
conveys, assigns, transfers and delegates to the
Partnership, all of its right, title and interest, whether
now owned or hereafter acquired, in and to, and all of
its liabilities and obligations, whether now in existence
or hereafter arising, in respect of, the Transferred Real
Property, to have and to hold the same unto the
Partnership, its successors and assigns forever.
2. Acceptance and Assumption By Partnership. The
Partnership hereby accepts the transfer and assignment of
the Transferred Real Property, subject to all liens,
encumbrances and charges thereon including, without
limitation, those created under, or contemplated by, that
certain Leasehold Deed of Trust and Security Agreement,
dated as of October 1, 1989, by and among the Corporation,
Patricia B. Carter, as Trustee, and The Fuji Bank and Trust
Company as Beneficiary, and recorded in Book 1461, page 491
in the Office of the Register of Deeds of Halifax County,
North Carolina and in Book 670, page 749 in the Office of
the Register of Deeds of Northampton County, North Carolina
as amended by (i) the First Modification to Leasehold Deed
of Trust and Security Agreement, dated as of December 29,
1989, and recorded in Book 1466, page 599, in the Office of
the Register of Deeds of Halifax County, North Carolina and
in Book 670, page 789 in the Office of the Register of
Deeds of Northampton County, North Carolina, (ii) the
Second Modification to Leasehold Deed of Trust and Security
Agreement, dated as of April 3, 1990, and recorded in Book
1473, page 493, in the Office of the Register of Deeds of
Halifax County, North Carolina and in Book 670, page 799 in
the Office of the Register of Deeds of Northampton County,
North Carolina, and (iii) the Third Modification to
Leasehold Deed of Trust and Security Agreement, dated as of
July 12, 1990, and recorded in Book 1480, page 547, in the
office of the Register of Deeds of Halifax County, North
Carolina and in Book 670, page 810 in the Office of the
Register of Deeds of Northampton County, North Carolina (as
so amended, the "Leasehold Mortgage"), and the Partnership
hereby agrees to pay, perform and discharge when due all
liabilities and obligations of the Corporation of
whatsoever kind, character or description arising under, or
with respect to, the Transferred Real Property or the
Leasehold Mortgage (whether known or unknown, contingent or
otherwise) arising prior to or after the date hereof
(including the making of any and all payments required to
be made by the Corporation under, or with respect to, the
Transferred Real Property or under, or with respect to, the
Leasehold Mortgage).
3. Limitation of Liability. Notwithstanding anything to the
contrary contained herein, no partner in the Partnership
(other than the Corporation) nor any of its or the
Corporation's stockholders or affiliates or any officer or
director of any thereof (a "Non-Recourse Person") shall
have any liability to any party hereto for the payment of
any sums now or hereafter owing hereunder, directly,
indirectly or contingently, by either party hereto, or for
the performance of any of the obligations of either party
hereto contained herein, or shall otherwise be liable or
responsible with respect thereto.
4. Further Assurances. At any time or from time to time
after the date hereof, at the Partnership's request and
without further consideration, the Corporation shall
execute and deliver to the Partnership such other
instruments of sale, transfer, conveyance, assignment and
confirmation, provide such materials and information and
take such other actions as the Partnership may reasonably
deem necessary or desirable in order more effectively to
transfer, convey and assign to the Partnership, and to
confirm the Partnership's right, title and interest in and
to, the Transferred Real Property, and to the full extent
permitted by law, to put the Partnership in possession of
the Transferred Real Property and to assist the Partnership
in exercising all rights with respect thereto.
5. Authorization to Record. Upon the execution and delivery
hereof, the Corporation and the Partnership shall record,
or cause to be recorded, this Leasehold and Real Property
Assignment and Assumption Agreement (i) in the Office of
the Register of Deeds of Halifax County, North Carolina and
(ii) in the Office of the Register of Deeds of Northampton
County, North Carolina.
6. Miscellaneous. This Leasehold and Real Property
Assignment and Assumption Agreement (i) may be executed in
any number of counterparts, each of which will be deemed an
original, but all of which together will constitute one and
the same instrument; (ii) SHALL BE GOVERNED BY, AND
ENFORCED AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NORTH CAROLINA; and shall be binding upon and
inure solely to the benefit of the parties hereto and their
respective successors and assigns.
IN WITNESS WHEREOF, the undersigned, by authority
duly given, have caused this Leasehold and Real Property
Assignment and Assumption Agreement to be executed under
seal, delivered, and effective as of the day and year first
written above.
ATTEST: PANDA-ROSEMARY CORPORATION
By:
Name: Robert A. Wolf
Assistant Secretary Title: Vice President
[Affix Corporate Seal] PANDA-ROSEMARY, L.P.
(doing business
in North Carolina as Panda-
ATTEST: Rosemary, Limited
Partnership [SEAL]
By: Panda-Rosemary
Corporation,
- ----------------- its sole general partner
Assistant Secretary
[Affix Corporate Seal] [SEAL]
By: Robert A. Wolf
Title: Vice President
EXHIBIT 10.52
THIRD AMENDMENT
TO
REAL PROPERTY LEASE AND EASEMENT AGREEMENT
THIS THIRD AMENDMENT TO REAL PROPERTY
LEASE AND EASEMENT AGREEMENT, dated as of
March 15 1996, is by and between
Panda-Rosemary, L.P., a Delaware
limited partnership ("LESSEE") and THE
BIBB COMPANY, a Delaware corporation
("LESSOR").
WITNESSETH:
WHEREAS, PANDA-ROSEMARY CORPORATION, a
Delaware corporation ("PRC") and LESSOR
entered into the certain Real Property Lease
and Easement Agreement, dated June 9, 1989,
as amended by the First Amendment to Real
Property Lease and Easement Agreement, dated
as of October 1, 1989, between PRC and LESSOR
and by the Second Amendment to Real
Property Lease and Easement Agreement, dated
January 31, 1990, between PRC and LESSOR
(collectively, the "LEASE");
WHEREAS, with the consent of LESSOR
under the Consent to Assignment,
Delegation and Assumption Agreement,
dated January 6, 1992, by and between PRC,
PANDA-ROSEMARY, L.P., a Delaware limited
partnership ("LESSEE"), LESSOR and THE FUJI
BANK & TRUST COMPANY, a trust company
organized under the State of New York, PRC
assigned to LESSEE and LESSEE assumed, all of
PRC's rights and interest in, to and under the
lease;
WHEREAS, the LEASE is recorded in Book
1452, Page 205 in the Register of Deeds in
Halifax County, North Carolina; and
WHEREAS, LESSEE and LESSOR desire to amend
the LEASE.
NOW THEREFORE, in consideration of the
mutual covenants and agreements herein
contained, and intending to be legally bound,
LESSEE and LESSOR hereby agree as follows:
1. The following new Section 2.04 is
added to the Lease and Easement:
2.04. Notwithstanding any
provision in the COGENERATION AGREEMENT to
the contrary, if LESSEE has exercised its
option to extend this LEASE as set forth in
Section 2.03, LESSEE shall have the further
option to extend this LEASE for an additional
term of ten (10) years beginning on December
31st of the year in which the thirty-fifth
(35th) anniversary of the Completion date
specified in the COGENERATION AGREEMENT
occurs and terminating on December 31st of
the year in which the forty- fifth (45th)
anniversary of the Completion Date specified
in the COGENERATION AGREEMENT occurs at the
annual rental on the terms and conditions
otherwise contained herein by giving notice
to LESSOR of its intention to extend at least
two years prior to the end of the first ten-
year extension of this LEASE and thereupon the
term of this LEASE shall be so extended
without any further action by either party.
2. Section 6.01 of the LEASE is
hereby amended by inserting a " , " in
place of the word "or" between the numbers
"2.02" and "2.03" in the fourth line of
that section and inserting after the number
"2.03" in that same line "or 2.04."
3. All other terms, conditions and
provisions of the LEASE, as previously
amended, which are not expressly deleted or
changed herein shall remain in full force and
effect.
THE BIBB COMPANY
[CORPORATE SEAL] ______________________
By: A. William Ott
Title: Claudia Baker Title: CFO
Executive
Secretary
PANDA-ROSEMARY, L.P.
By: Panda-Rosemary
[CORPORATE SEAL] Corporation, its
general partner
Janice Carter
Title: Secretary
& Treasurer By:
Name: Ralph T. Killian
Title: Senior Vice President
STATE OF TEXAS )
)
COUNTY OF DALLAS )
This 11th day of March, 1996,
personally came before me, Sherrie R. Crow,
a notary public for the State of Texas who,
being by me duly sworn, says that he knows the
Common Seal of Panda-Rosemary Corporation and
is acquainted with Ralph T. Killian who is the
Senior Vice President of said Corporation, and Janice
Carter who is the ______ secretary of the said
Corporation, and saw the said Senior Vice
President sign the foregoing instrument, and
saw the Common Seal of said Corporation
affixed to said instrument by said Senior Vice
President, and that the said Secretary signed her
name in attestation of the execution of said instrument
in the presence of said Senior Vice President of said Corporation.
Witness my hand and notarial seal or
stamp this the 11th day of March, 1996.
(Notarial Seal or Stamp)
My Commission Expires:
8-24-97
Notary
Public Sherrie R. Crow
STATE OF GEORGIA )
)
COUNTY OF BIBB )
This 15th day of March, 1996,
personally came before me, Robert E.
Bridgeman, a notary public for the State of
Georgia who, being by me duly sworn, says that
she/he knows the Common Seal of the Bibb
Company Corporation and is acquainted with A.
William Ott who is the Chief Financial Officer
of said Corporation, and the said Claudia
Baker is the Executive Secretary of the said
Corporation, and saw the said Chief Financial
Officer sign the foregoing instrument, and saw
the Common Seal of said Corporation affixed to
said instrument by said Chief Financial
Officer, and that he/she, the said Executive
Secretary signed his/her name in attestation
of the execution of said instrument in the
presence of said Chief Financial Officer of
said Corporation.
Witness my hand and notarial seal or
stamp this the 15th day of March, 1996.
(Notarial Seal or Stamp)
My Commission Expires:
October 10, 1997 Robert E. Bridgeman
Notary Public
EXHIBIT 10.53
COGENERATION ENERGY SUPPLY AGREEMENT
BETWEEN
PANDA ENERGY CORPORATION
AND
THE BIBB COMPANY
January l1, 1989
INDEX
Page
Section 1 - Definitions 1
Section 2 - The Facility 2
Section 3 - Purchase Obligation 4
Section 4 - Term of Agreement 4
Section 5 - Purchase Prices 4
Section 6 - Payment 5
Section 7 - Commencement of Operations 5
Section 8 - Options at Conclusion of Term 5
Section 9 - Lease of Land 7
Section 10 - Insurance and Indemnification 8
Section 11 - Force Majeure 10
Section 12 - Performance Conditions 10
Section 13 - Default 10
Section 14 - Remedies 11
Section 15 - Supplier's Representations and Warranties 12
Section 16 - Purchaser's Representations and Warranties 13
Section 17 - Maintenance and Modification of the FACILITY 13
Section 18 - Taxes, Governmental Charges and Utilities 13
Section 19 - Applicable Law 14
Section 20 - Standby Steam and Chilled Water 14
Section 21 - Miscellaneous 15
Section 22 - Conclusion of Operations 16
Exhibit A - Real Property Lease 18
COGENERATION ENERGY SUPPLY AGREEMENT
This Cogeneration Energy Supply Agreement (the AGREEMENT"
hereinafter) is entered effective January 12, 1989 by and
between PANDA ENERGY CORPORATION ("SUPPLIER" hereinafter)' a
Texas Corporation and THE BIBB COMPANY ("PURCHASER"
hereinafter), a Georgia Corporation.
W I T N E S S E T H:
WHEREAS, SUPPLIER is in the business of constructing and
operating cogeneration facilities for the production of steam and
chilled water; and
WHEREAS, PURCHASER is a consumer of steam and chilled water; and
WHEREAS, SUPPLIER desires to construct a cogeneration facility on
property belonging to PURCHASER, and PURCHASER desires to
purchase steam and chilled water produced in said facility.
NOW THEREFORE, in consideration of the foregoing and of the
premises hereinafter set forth, the parties hereto agree as
follows:
Section 1 - Definitions.
1.01 "FACILITY" means the cogeneration facility to be constructed
by SUPPLIER pursuant to this Agreement. The FACILITY is
described in Section "2" below.
1.02 "Leased Site" means the tract of land (identified in Exhibit
"B" hereto), leased by SUPPLIER from PURCHASER, upon which
the bulk of the FACILITY will be built (as provided in
"2.07" below).
1.03 "Lease" means that certain Lease Agreement described in
Section "9" below (and attached hereto as Exhibit "A") which
will be executed pursuant to this AGREEMENT.
1.04 "Completion Date" means the date upon which the FACILITY
becomes operational and upon which regular deliveries of
steam and chilled water to PURCHASER commence.
1.05 "Plant" means all facilities belonging to or operated by
PURCHASER at the Rosemary Complex in Roanoke Rapids, North
Carolina.
Section 2 - The Facility.
2.01 SUPPLIER will design, construct and operate the FACILITY at
its sole expense. The FACILITY shall include, without
limitation, the following:
(a) Such buildings, fixtures and equipment as shall be
necessary for the purpose of generating the quantities
of steam and chilled water specified in Section "2.06"
hereof.
(b) Such steam and condensate-return pipes as shall be
required to deliver steam from the FACILITY to and from
the existing Rosemary Plant boiler room.
(c) Such chilled water delivery pipes as shall be required
to deliver chilled water to and from the existing
Rosemary Plant boiler room.
PURCHASER will not be responsible for the funding of said
design, construction or operation.
2.02 The FACILITY will be designed and constructed to meet and to
comply with all of the following requirements and limits.
(a) To meet the qualifying requirements established as of
the effective date of this Agreement by Federal Energy
Regulatory Commission ("FERC") Rules (18 Code of
Federal Regulations 292) implemented by the Public
Utility Regulatory Policies Act of 1978.
(b) To comply with all other requirements of Federal, State
and local governmental agencies established and imposed
by law.
2.03 PURCHASER shall have the right to approve the design of the
following:
(a) All interfaces and interconnections between the
FACILITY and the Plant.
(b) External architecture of the FACULTY.
(c) Fire and security systems.
Said approvals will not be unreasonably withheld. PURCHASER
shall not have the right to otherwise approve the design,
construction or operation of the FACILITY.
2.04 SUPPLIER will own the FACILITY.
2.05 The FACILITY will be fueled by natural gas (with diesel fuel
backup). SUPPLIER will provide its own backup fuel tanks
and shall be responsible for complying with all Federal,
State and Local regulations concerning said tanks.
2.06 SUPPLIER warrants that the FACILITY will have the capacity
to provide PURCHASER at least the following minimum
quantities of steam and chilled water during the following
periods:
(a) An annual average of sixty-five thousand (65,000)
pounds of steam per hour at 150 psi.
(b) Up to two thousand (2,000) tons of chilled water for
eight thousand (8000) hours per year.
SUPPLIER further warrants that it will continuously staff
and operate the FACILITY (or will cause it to be so staffed
and operated) so that it will, in fact, provide the minimum
quantities of steam and chilled water specified above on a
non-interrupted basis. Deliveries of quantities in excess
of the foregoing will not be required hereunder.
2.07 The FACILITY will be built on the Leased Site except for
delivery lines and pipes or other equipment which design
requirements dictate be installed elsewhere at the Plant.
Section 3 - Purchase Obligation.
3.01 PURCHASER will purchase all steam and chilled water which it
consumes at the Rosemary Complex (which SUPPLIER can and
will supply) from SUPPLIER. This requirement is not
intended as a warranty of the continued consumption of any
particular quantity of steam or of chilled water.
3.02 Notwithstanding Section 3.01 above, PURCHASER may purchase
any quantity of steam or chilled water which SUPPLIER is
unable or fails to supply (or otherwise does not supply)
from other suppliers or sources, including itself.
Section 4 - Term of Agreement.
4.01 This Agreement shall become effective upon the execution
hereof by both parties. It shall remain in effect for a
twenty-five- (25) year period after the Completion Date.
The parties may exchange a memorandum memorializing the
Completion Date.
Section 5 - Purchase Prices.
5.01 PURCHASER will pay the following fixed prices for each 1,000
lbs. of steam at 150 psi:
Delivery Period Quantity Price
Twenty-Five (25) Years First 45 000 Pounds $1.00
Twenty-Five (25) Years All Steam Over $2.50
45,000 Pounds
5.02 PURCHASER will pay the following fixed prices per ton hour
for chilled water:
Period of Deliveries Price
During First Five (5) Years 3. 0 cents
During Next Five (5) Years 3. 5 cents
During Next Five (5) Years 4. 0 cents
During Next Five (5) Years 4. 5 cents
During Last Five (5) Years 5. 0 cents
Section 6 - Payment.
6.01 The purchase prices paid pursuant to "5" above shall be
paid in calendar month increments within fifteen (15) days
after receipt of an invoice from SUPPLIER. Payment shall be
required for the actual quantity of steam and chilled water
delivered during the prior month. Interest equal to the
prime rate at M-Bank, Dallas plus two percent shall be paid
on all late payments together with (and in addition to) all
costs incurred in collecting or in attempting to collect
late payments. If any payment is not so received within
fifteen (15) days after receipt of an invoice, SUPPLIER
shall have the additional remedy of terminating deliveries
of steam and chilled water to PURCHASER until payment is
received. If payment of any part of an invoice is withheld
by PURCHASER due to a dispute or question regarding the
amount of such invoice, SUPPLER shall not terminate
deliveries of steam or chilled water so long as payment for
any undisputed or unquestioned portion of said invoice has
not been withheld. Any such dispute or question may, at the
option of either Party, be resolved under the rules of the
American Arbitration Association if it is not otherwise
resolved by the Parties.
Section 7 - Commencement of Operations.
7.01 The FACILITY will be operational and regular deliveries
of steam and chilled water will commence within thirty-six
(36) months after the effective date of this Agreement.
Section 8 - Options At Conclusion Of Term.
8.01 PURCHASER shall have the OPTION, effective at the end of the
original twenty-five (25) year term, to do ONE of the
following (or to require SUPPLER to do so):
(a) TO NEGOTIATE a ten- (10) year extension to the term
hereof (as described in "8.02" below).
(b) TO PURCHASE the FACILITY (as described in "8.03"
below).
(c) To enforce the original termination date.
8.02 The ten (10) year extension option will be exercisable and
shall operate as follows:
(a) PURCHASER shall give SUPPLIER written notice at least
two (2) years prior to expiration of the original term
if said option is to be exercised (notice may not be
given thereafter).
(b) All provisions of this Agreement shall remain in
effect.
(c) The lease term (described in "9.02" below) shall be
extended for an additional ten (10) years.
(d) Purchase prices for steam and chilled water for the
extended term will be negotiated and an extension
Amendment (to this AGREEMENT) will be executed at least
twelve (12) months prior to expiration of the original
term.
(e) The extension of the original year term will not be
made without the Agreement of both parties.
8.03 The Purchase Option shall be exercisable and shall operate
as follows:
(a) PURCHASER shall give SUPPLIER written notice of its
exercise of the purchase option as follows:
(i) At least twenty-four (24) months prior to
expiration of the original term if the extension
option has not been exercised as provided in
"8.02(a)" above.
(ii) At least fourteen (14) months prior to expiration
of the original term if the extension option is
exercised and if the Parties have not yet executed
an extension Amendment as provided in "8.02(d)
above. Notice of exercise may not be exercised
after the foregoing times.
(b) The purchase price for the FACILITY shall be fair
market value. Fair market value shall:
(i) Be determined as if SUPPLIER owned the Leased Site
but shall exclude the value of the Leased Site.
(ii) Include the value of the FACILITY and of all
improvements made by SUPPLIER on or off of the
Leased Site.
(c) Fair market value (i.e. the purchase price) shall be
determined by the following methods, applied and
attempted in the following sequence.
(i) By negotiation between the Parties.
(ii) By arbitration, administered in accordance with
the rules and practices of the American
Arbitration Association in the Plant locality.
Arbitration will be resorted to if the purchase
price has not been determined by negotiation at
least twelve (12) months prior to expiration of
the original term.
(d) Any purchase by Bibb must be approved by Virginia
Electric & Power Company.
Section 9 - Lease of Land.
9.01 PURCHASER will lease a sufficient tract of real property
(the "Leased Site") to SUPPLIER for the construction of the
FACILITY. Said Leased Site will be located in the area
identified in Exhibit "B" hereto. The rental (to be paid by
SUPPLIER to PURCHASER) will be in the amount of one ($1.00)
dollar per year, payable each January 1 throughout the term
of the Lease. Rent may be prepaid.
9.02 The TERM of the Lease will start with identification and
approval (by both Parties) of the tract and will terminate
twenty-five (25) years after the Completion Date of the
FACILITY. If PURCHASER exercises the option described in
Section "8.02" above (to extend the term of this AGREEMENT),
the term of the Lease shall be extended for a like period.
9.03 SUPPLIER, (including without limitation its agents,
representatives and subcontractors), shall have the RIGHT OF
INGRESS and EGRESS on and across property belonging to (or
controlled by) PURCHASER during the term of the Lease, to
the extent necessary to construct, operate and maintain the
FACILITY and all interconnection facilities to deliver steam
and chilled water to PURCHASER.
9.04 (a) The Lease shall be essentially identical the form
of Lease attached to this Agreement as Exhibit "A."
(b) SUPPLIER and PURCHASER shall execute the Lease within
six (6) months after the effective date of this
Agreement and shall cause the same to be duly recorded
in such manner as shall establish the leasehold
interest of SUPPLIER in the Leased Site.
Section 10 - Insurance and Indemnification.
10.01 Each Party as indemnitor shall save harmless and
indemnify the other Party and the directors, officers, and
employees of such other Party against and from any and all
loss and liability for injuries to persons (including
employees of either Party), and property damages (including,
without limitation, property of either party) resulting from
or arising out of; (i) the engineering, design,
construction, maintenance, or operation of, or (ii) the
making of replacements, additions or betterments to, the
indemnitor's facilities. Neither Party shall be indemnified
hereunder to the extent its liability or loss results from
its negligence or willful misconduct. The indemnitor shall,
if requested by the other Party, defend any suit asserting a
claim covered by this indemnity and shall pay all costs,
(including, without limitation, reasonable attorney fees)
that may be incurred in enforcing this indemnity
10.02 SUPPLIER shall furnish PURCHASER a certificate of
WORKMEN'S COMPENSATION indicating compliance with the Labor
Code of the State of North Carolina, including Employer's
Liability insurance with a minimum of $2,000,000 basic
coverage or excess umbrella for injury or death of any
person. This certificate shall provide for 30 days' written
notice to PURCHASER prior to cancellation, termination,
alteration, or material change of such insurance.
10.03 (a) SUPPLIER shall maintain during the term hereof,
comprehensive General Liability and Comprehensive
Automobile Liability of not less than $3,000,000 single
or combined limit or equivalent for bodily injury,
personal injury, and property damage as the result of
any one occurrence.
(b) SUPPLIER shall also maintain during the term hereof,
comprehensive General Liability which shall include
coverage for Premises-Operations, Owners and
Contractors Protective, Products/Completed Operations
Hazard, Explosion, Collapse, Underground, Contractual
Liability, and Broad Form Property Damage including
Completed Operations. Comprehensive Automobile
Liability shall include coverage for Owned, Hired, and
Non-Owned Automobile.
10.04 (a) Evidence of coverage described in "10.02" and
"10.03" above shall state that coverage provided is
primary and is not excess to or contributing with any
insurance or self-insurance maintained by PURCHASER.
(b) PURCHASER shall have the right to inspect or obtain a
copy of the original policy(ies)) of insurance.
(c) SUPPLIER shall furnish the required certificates and
endorsements to PURCHASER prior to the date
construction of the FACILITY begins. Said certificates
and endorsements (and any subsequent endorsements,
alternations or cancellations) shall be mailed to
PRODUCER addressed as required by Section "20.05"
below.
Section 11 - Force Majeure.
11.01 All obligations of the parties to this Agreement
(except for the payment of money for steam, and chilled
water which has been delivered) shall be suspended while and
for so long as compliance is prevented in whole or in part
by an act of God, strike, lockout, war, civil disturbance,
explosion, breakage, accident to machinery, failure of
natural gas supply, or the failure or refusal of a pipeline
to transport natural gas, Federal or State or Local law,
inability to secure materials or approvals or licenses,
binding order of a Court or Governmental Agency, or any
other cause beyond the reasonable control of SUPPLIER or
PURCHASER.
Section 12 - Performance Conditions.
12.01 SUPPLIER shall complete each of the following within
one year after the effective date of this Agreement and
shall provide evidence thereof to PURCHASER.
(a) Obtain a commitment for project financing.
(b) Determine that the FACILITY and all associated
equipment and interconnections will meet all State and
Federal Environmental Regulations.
(c) Prepare a natural gas transportation plan.
(d) Identify carriers and provide a schedule for the
furnishing of required insurance and bonds. Required
insurance and bonds will be obtained in a timely manner
(as required by this AGREEMENT) whether before or after
said one-year period.
The foregoing information will be written and may be
furnished from time to time in one or more increments.
Section 13 - Default.
13.01 SUPPLIER shall, without limitation, be considered in
default under this Agreement (i) if it has not consummated a
Power Purchase Agreement with North Carolina Power Company
on or before March 1, 1989 to sell electricity produced in
the FACILITY; or (ii) if said Power Purchase Agreement is
terminated prior to the commencement of construction of the
FACILITY; or (iii) if the conditions enumerated in Section
12.01 above are not complied with within eighteen (18)
months after the effective date hereof; or (iv) if it fails
to commence construction of the FACILITY within eighteen
(18) months after the effective date hereof; or (v) if it
shall fail to proceed with the due diligence to cause the
FACILITY to be constructed; or (vi) if the FACILITY does not
become operational within forty-two (42) months after the
effective date of this Agreement; or (vii) if SUPPLIER is
unable or fails to supply steam or chilled water to
PURCHASER as a consequence of SUPPLIER's failure to comply
with the requirement of Section 2.06 above; or (viii) it
shall apply for or consent to the appointment of a receiver,
custodian, trustee or liquidator, become unable to pay debts
as such become due, make a general assignment for the
benefit of creditors, or commence a voluntary case under the
Bankruptcy Code; or (ix) if a final order for relief is
granted against it in an involuntary bankruptcy proceeding;
or (x) if it fails to perform or to meet any other
requirement or condition of this AGREEMENT.
13.02 PURCHASER shall, without limitation, be considered in
default under this contract if it shall (i) fail to pay sums
due hereunder; or it (ii) shall apply for or consent to the
appointment of a receiver, custodian, trustee or liquidator,
become unable to pay debts as such become due, make a
general assignment for the benefit of creditors, or commence
a voluntary case under the Bankruptcy Code; or (iii) if a
final order for relief is granted against it in an
involuntary bankruptcy proceeding; or (iv) if it fails to
perform or to meet any other requirement or condition of
this AGREEMENT.
Section 14 - Remedies.
14.01 Whenever an event of default occurs, the party not in
default shall have the right to seek every remedy and to
take every action which is allowed by the terms of this
AGREEMENT or which is otherwise available at law or in
equity.
14.02 In addition to any other remedies provided by law,
PURCHASER shall have the right, upon written notice of
thirty (30) days or longer, to terminate this Agreement upon
an event of default of any of the types specified in
Sections 13.01(i) through 13.01(vii) above. PURCHASER shall
have a similar right to terminate this Agreement, upon
written notice which can be effective immediately or at any
specified subsequent time, for a default of any of the types
specified in Sections 13.01(viii) or 13.01(ix) above.
14.03 In addition to all other remedies provided by law,
SUPPLIER shall have the right, upon written notice of thirty
(30) days or longer, to terminate this Agreement upon an
event of default of the type specified in Section 13.02(i)
above. SUPPLIER shall have a similar right to terminate
this Agreement, upon written notice which can be effective
immediately or at any subsequent time, for a default of any
of the types specified in Sections 13.02(ii) or 13.02(iii)
above.
14.04 Any notice of termination given pursuant to Section
14.02 or Section 14.03 above shall be withdrawn (and the
AGREEMENT shall not be terminated) if the default in
question is corrected within the prescribed notice period.
14.05 This AGREEMENT may not otherwise be terminated except
as determined by a court of competent jurisdiction for
material breach.
Section 15 - SUPPLIER's Representations and Warranties.
15.01 SUPPLIER has been duly incorporated, and is in good
standing as a corporation under the laws of the State of
Texas. SUPPLIER will qualify to do business in North
Carolina as required by the laws of North Carolina.
15.02 SUPPLIER has all requisite corporate power and
authority to enter this AGREEMENT, and to perform the
obligations on its part herein contained.
15.03 There is no litigation or proceeding pending or, to its
knowledge, threatened against SUPPLIER (otherwise than as
expressly disclosed in writing to PURCHASER) that would, if
determined adversely to SUPPLIER have a material adverse
effect on the ability of SUPPLIER to enter or to perform
this AGREEMENT.
15.04 The execution and performance by SUPPLER of its
obligations hereunder will not result in the breach of any
agreement or instrument to which SUPPLIER is a party or in
the violation of any order, rule or regulation of any court
or governmental body having jurisdiction over SUPPLIER.
Section 16 - PURCHASER's Representations and Warranties.
16.01 PURCHASER has been duly incorporated, and is in good
standing as a corporation under the laws of the State of
Georgia.
16.02 PURCHASER has all requisite corporate power and
authority to enter this AGREEMENT and to perform the
obligations on its part herein contained.
16.03 There is no litigation or proceeding pending or, to its
knowledge, threatened against PURCHASER (otherwise than as
expressly disclosed in writing to SUPPLIER) that would, if
determined adversely to PURCHASER have a material adverse
effect on the ability of PURCHASER to enter or to perform
this AGREEMENT.
16.04 The execution and performance by PURCHASER of its
obligations hereunder and will not result in a breach of any
agreement or instrument to which PURCHASER is a party or in
the violation of any order, rule or regulation of any court
or governmental body having jurisdiction over PURCHASER.
Section 17 - Maintenance and Modification of the FACILITY.
17.01 SUPPLIER shall keep the FACILITY (except for those
parts to which it does not retain title) in good repair and
operating condition, and shall make all necessary repairs
and replacements thereto.
17.02 SUPPLIER may make any additions to, expansion of,
modifications of or improvements to the FACILITY which it
deems appropriate in at its sole discretion and cost subject
only to Purchaser's approval rights described above.
17.03 Except as otherwise provided for in Section 20 of this
AGREEMENT, PURCHASER will be responsible for maintaining all
equipment not installed on the Leased Site.
Section 18 - Taxes, Governmental Charges and Utilities.
18.01 SUPPLIER shall pay (i) all taxes and governmental
charges with respect to its interest in the FACILITY; (ii)
all utility charges incurred with respect to the FACILITY;
and (iii) all assessments and charges made by any
governmental body for public improvements that may be
secured by a lien or charge on the FACILITY.
Section 19 - Applicable law.
19.01 This Agreement shall be performable in the State of
North Carolina.
Section 20 - Standby Steam And Chilled Water.
20.01 SUPPLIER will maintain (at its sole expense) and will
be permitted to use PURCHASER's existing boilers and related
equipment (pumps, condensers, fans, instrumentation, etc.)
at the Rosemary Complex during the term of this Agreement to
provide a backup source for steam. Said maintenance shall
include preparation of the boiler and related equipment for
the required annual State inspection, maintenance of an
appropriate chemical charge in the boiler, the periodic
running of pumps and fans, and similar actions to prevent
abnormal deterioration. SUPPLIER shall not be required to
rebuild, refurbish, replace or to otherwise perform
overhauls or major maintenance on said equipment.
20.02 PURCHASER will maintain (at its sole expense) its
existing chillers and related equipment at the Rosemary
Complex to provide a backup source for chilled water during
the term of this Agreement. PURCHASER shall (as part of
said maintenance process and notwithstanding the
requirements of Section 3 of this Agreement) be permitted to
operate said chillers to the extent necessary to so maintain
them (estimated to be two or three hours per week).
20.03 If SUPPLIER elects to use said chillers to provide
backup chilled water, the operating costs thereof during the
period so used shall be paid by SUPPLIER.
20.04 Nothing contained herein shall modify the obligation of
SUPPLIER to supply the required quantity of steam and/or
chilled water. If SUPPLIER cannot supply the required
quantity of steam and/or chilled water from the FACILITY,
SUPPLIER shall immediately supply such steam and/or chilled
water by using PURCHASER's boilers and/or chillers, with the
cost of such operation to be paid by SUPPLIER.
20.05 Should SUPPLIER, at any time, fail to supply the
required quantity of steam and/or chilled water, PURCHASER
shall have the right to operate PURCHASER's said boilers
and/or chillers to provide said steam and/or chilled water
and the cost of such operation shall be paid by SUPPLIER.
Section 21- Miscellaneous.
21.01 SUPPLIER will, at its expense, install and connect
water and steam lines sufficient to effect deliveries of
steam, and chilled water to PURCHASER. PURCHASER will
perform any conversions and internal connections within
existing buildings, at its sole expense (per final design
drawings).
21.02 SUPPLIER's obligations hereunder are conditioned (i)
upon the successful negotiations of contracts for the sales
and transmission of electricity produced by said FACILITY;
(ii) upon the negotiation of agreements for the natural gas
to the FACILITY, and (iii) upon obtaining financing
sufficient to construct the FACILITY.
21.03 PURCHASER's obligations to purchase steam and chilled
water are irrevocable. This Agreement may not be terminated
by either party during the twenty-five- (25) year term
hereof except as provided herein.
21.04 Should the Plant be sold or leased to a third party at
any time during the term hereof and should the operation of
the Plant (after such sale) require the consumption of steam
and/or chilled water, PURCHASER shall (subject to SUPPLIER's
approval) require the purchaser or lessee thereof to assume
the obligations of this AGREEMENT.
21.05 All notices, approvals, consents, requests and other
communications hereunder shall be in writing and shall be
deemed to have been given when delivered to the other party
by registered, certified or express mail, return receipt
requested, postage prepaid, addressed as follows:
If to SUPPLIER: Panda Energy Corporation
4100 Spring Valley Rd.
Suite 1001
Dallas, Texas 75234
Attn: President
if to PURCHASER: Director of Operations
The Bibb Company
Terry Products Division
P.O. Box 1100
Roanoke Rapids, NC 27870
21.06 All amendments to this AGREEMENT must be written and
must be signed by both Parties hereto.
21.07 If any provision of this AGREEMENT shall be found to be
invalid by any court of competent jurisdiction, such finding
shall not invalidate any other provision hereof.
21.08 This AGREEMENT shall inure to the benefit of and shall
be binding upon the parties hereto and their respective
successors and assigns, in accordance with the terms hereof.
Either party hereto and may assign its rights hereunder without
approval but may not delegate its obligations without the
express written approval of the other party.
21.09 Nothing herein shall be construed as requiring
PURCHASER to maintain any minimum level of business activity
or any minimum level of energy consumption at the Plant.
Section 22 - Conclusion of Operations.
22.01 SUPPLIER shall at the conclusion of the term (original
or extended) hereof, close the FACILITY and restore the
leased tract. A period of eighteen (18) additional months
shall be granted SUPPLIER, at no cost, to remove its
equipment and to restore said tract to a reasonably
acceptable state.
EXECUTED effective the 12th day of January , 1989.
SUPPLIER PURCHASER
By:_____________________________ By:_____________________________
Hans R. van Kuilenburg President
President
STATE OF TEXAS
COUNTY OF DALLAS
Executed and acknowledged by Hans R. van Kuilenburg as the act
and deed of PANDA ENERGY CORPORATION before the undersigned
Notary Public this 13th day of January, 1989 to certify which
witness my hand and seal of office.
Terri Broerman
Notary Public in and for
Dallas County, Texas
My Commission Expires:
8-7-92
STATE OF GEORGIA
COUNTY OF BIBB
Executed and acknowledged by Alan V. Davis as the act and deed of
The Bibb Company, before the undersigned Notary Public this 12th
day of January, 1989 to certify which witness my hand and seal of
office.
Jim K. Adams
Notary Public in and for Bibb
County Georgia
My Commission Expires:
3-3-92
EXHIBIT 10.54
FIRST AMENDMENT
TO
COGENERATION ENERGY SUPPLY AGREEMENT
WHEREAS, PANDA ENERGY CORPORATION ("SUPPLIER"
hereinafter), a Texas Corporation, and THE BIBB
COMPANY ("PURCHASER" hereinafter), a Georgia
Corporation, entered a Cogeneration Energy Supply
Agreement (the "AGREEMENT" hereinafter) effective on
or about January 12, 1989, wherein SUPPLIER agreed
to construct and operate a cogeneration facility
(the "FACILITY" hereinafter) in Roanoke Rapids,
North Carolina and wherein PURCHASER agreed to
purchase steam and chilled water produced in the
FACILITY; and
WHEREAS, SUPPLIER and PURCHASER executed a
Consent and Agreement on May 19, 1989 wherein
PURCHASER consented to the assignment by SUPPLIER to
PANDA-ROSEMARY CORPORATION of all of its right,
title and interest in the AGREEMENT, subject to the
express provision that such assignment would not
release SUPPLIER from any of its obligations to
PURCHASER pursuant to the AGREEMENT; and
WHEREAS, SUPPLIER and PANDA-ROSEMARY
CORPORATION executed an Assignment And Assumption
Agreement effective on May 15, 1989 wherein SUPPLIER
assigned to PANDA-ROSEMARY CORPORATION all of its
right, title and interest in the AGREEMENT; and
WHEREAS, PURCHASER, SUPPLIER and PANDA-ROSEMARY
CORPORATION desire to amend the AGREEMENT.
NOW THEREFORE, in consideration of the
foregoing and of the premises hereinafter contained,
the parties hereto agree as follows:
1. The following new Section 2.02(c) is added to the
AGREEMENT:
(c) In designing the FACILITY to meet the
requirements set forth in Section 2.02(a)
above, SUPPLIER has relied on PURCHASER's
estimation that the plant should normally use
between thirty thousand (30,000) and one
hundred thousand (100,000) pounds of steam per
hour for process and to produce chilled water.
PURCHASER will use its best efforts to notify
SUPPLIER when and if PURCHASER determines that
there will be a prolonged material reduction in
such minimum usage levels. Nothing contained
herein shall modify the provisions of Section
3.01 that PURCHASER has made no warranty that
it will use any particular quantity of steam or
of chilled water.
2. Section 2.01(C) of the AGREEMENT is changed to
read as follows:
(c) Such chilled water delivery pipes as shall be
required to deliver chilled water to and from
PURCHASER's No. 1, No. 2 and No. 3 Mills within
PURCHASER's Rosemary Complex.
3. Section 2.06(b) of the AGREEMENT is changed to
read as follows:
(b) Up to two thousand (2,000) tons of chilled
water for eight thousand (8,000) hours per
year, delivered at 45 degrees Fahrenheit.
4. Section 3.01 of the AGREEMENT is changed to read
as follows:
3.01 PURCHASER will purchase all steam and
chilled water which it consumes at the Rosemary
Complex (which SUPPLIER can and will supply and
which can be delivered to the points of
consumption throughout said Complex). This
requirement is not intended as a warranty of
the continued consumption of any particular
quantity of steam or of chilled water,
notwithstanding the provisions of Section
2.02(c) above.
5. Section 5.01 of the AGREEMENT is deleted in its
entirety. The following is substituted therefor:
5.01 PURCHASER will pay the following fixed
prices for each 1000 lbs. of steam per hour at
150 psi purchased pursuant to Section 3.01
above:
Delivery Period Quantity/Hr. Price
Twenty-Five (25) Years First 45,000 Pounds $1.00
Twenty-Five (25) Years All Steam Over $2.50
45,000 Pounds
6. The following sentence is added to Section 14.01
of the AGREEMENT:
Notwithstanding the foregoing, neither party
to this AGREEMENT shall be liable to the other
party for indirect, incidental, consequential
or punitive damages hereunder except as may be
otherwise provided herein.
7. All references to "thirty (30) days" in Sections
14.02 and 14.03 of the AGREEMENT are changed to
"sixty (60) days".
8. The following new Sections 21.10 is added to the
AGREEMENT:
21.10 The point of delivery from SUPPLIER to
PURCHASER shall be located at a point, to be
selected by SUPPLIER, on the Leased Site. This
provision is not intended to modify or change
SUPPLIER's obligation, to design, construct,
operate and maintain steam and chilled water
delivery and return pipes off of the Leased
Site as provided in Section 2 of this AGREEMENT
or to modify or change the provisions of
section 3.01 hereto.
9. The form of Exhibit "A" attached to the AGREEMENT
is deleted in its entirety. The Revised form of
Exhibit "A" dated June 6, 1989, attached hereto is
substituted therefor.
l0. Section 22.01 of the AGREEMENT is deleted in its
entirety. No substitution is made therefor.
11. All other terms, conditions and provisions of
the AGREEMENT which are not expressly deleted or
changed herein shall remain in full force and
effect.
Executed effective this first day of October, 1989.
PANDA ENERGY CORPORATION THE BIBB COMPANY
(SUPPLIER) (PURCHASER)
By:______________________ By:__________________
Robert W. Carter President
Chairman of the Board
PANDA-ROSEMARY CORPORATION
BY: ________________________
Janice Carter
Secretary/Treasurer
STATE OF NEW YORK )
: ss:
COUNTY OF NEW YORK )
Executed and acknowledged by Robert W. Carter
as the act and deed of PANDA ENERGY CORPORATION
before the undersigned Notary Public this 25th day
of October, 1989 to certify which witness my hand
and seal of office.
Notary Public In and
For The State of New
York
(Official Seal)
My Commission Expires: April 7, 1990
STATE OF NEW YORK )
: ss:
COUNTY OF NEW YORK )
Executed and acknowledged by Janice Carter as
the act and deed of PANDA ENERGY CORPORATION before
the undersigned Notary Public this 25th day of
October, 1989 to certify which witness my hand and
seal of office.
Notary Public In and
For
The State of New York
(Official Seal)
My Commission Expires: April 7, 1990
STATE OF GEORGIA )
: ss:
COUNTY OF GEORGIA )
Executed and acknowledged by Alan V. Davis as
the act and deed of THE BIBB CORPORATION before the
undersigned Notary Public this 24th day of October,
1989 to certify which witness my hand and seal of
office.
Jim Adams
Notary Public In and
For The State of New
York
(Official Seal)
My Commission Expires: March 3, 1992
EXHIBIT A
FIRST AMENDMENT TO COGENERATION ENERGY SUPPLY AGREEMENT
[See Exhibit 10.48 filed with this Registation Statement]
EXHIBIT 10.55
SERVICE AGREEMENT
THIS AGREEMENT entered into this 26th day of July, 1996, by
and between TRANSCONTINENTAL GAS PIPE LINE CORPORATION, a
Delaware corporation, hereinafter referred to as "Seller," first
party, and PANDA-ROSEMARY, L.P., a Delaware limited partnership,
hereinafter referred to as "Buyer," second party,
W I T N E S S E T H
WHEREAS, pursuant to Order Nos. 636, issued by the Federal
Energy Regulatory Commission (Commission) and Seller's procedures
set forth on page 7 of Seller's August 4, 1993 Order No. 636
Compliance Filing in Docket No. RS92-86, Buyer has notified
Seller of its desire to unbundle its bundled firm transportation
service under Seller's Rate Schedule FT-NT and convert such
service from Part 157 of the Commission's regulations to service
with Seller and the upstream pipeline(s) under Part 284(G) of the
Commission's regulations; and
WHEREAS, Buyer has designated that Seller's Part 284(G)
service will be rendered under Seller's Rate Schedule FT; and
WHEREAS, Seller has prepared this agreement for service for
Buyer under Rate Schedule FT, and this agreement will supersede
and terminate the existing service agreement between Seller and
Buyer under Rate Schedule FT-NT (Transco system contract number
.5315); and
WHEREAS, this agreement shall not be effective until
Seller's service agreement(s) with the upstream transporter(s)
has (have) been amended to reflect Seller's reduced
transportation service entitlement and Buyer has entered into
contracts with the upstream transporter(s) for equivalent
quantities of firm transportation service.
NOW, THEREFORE, Seller and Buyer agree as follows:
ARTICLE I
GAS TRANSPORTATION SERVICE
1. Subject to the terms and provisions of this agreement
and of Seller's Rate Schedule FT, Buyer agrees to deliver or
cause to be delivered to Seller gas for transportation and Seller
agrees to receive, transport and redeliver natural gas to Buyer
or for the account of Buyer, on a firm basis, up to the dekatherm
equivalent of a Transportation Contract Quantity ("TCQ") of 3,075
Mcf per day.
2. Transportation service rendered hereunder shall not be
subject to curtailment or interruption except as provided in
Section 11 of the General Terms and Conditions of Seller's FERC
Gas Tarriff.
ARTICLE II
POINT(S) OF RECEIPT
Buyer shall deliver or cause to be delivered gas at the point(s)
of receipt hereunder at a pressure sufficient to allow the gas to
enter Seller's pipeline system at the varying pressures that may
exist in such system from time to time; provided, however, the
pressure of the gas delivered or caused to be delivered by Buyer
shall not exceed the maximum operating pressure(s) of Seller's
pipeline system at such point(s) of receipt. In the event the
maximum operating pressure(s) of Seller's pipeline system, at the
point(s) of receipt hereunder, is from time to time increased or
decreased, then the maximum allowable pressure(s) of the gas
delivered or caused to be delivered by Buyer to Seller at the
point(s) of receipt shall be correspondingly increased or
decreased upon written notification of Seller to Buyer. The
point(s) of receipt for natural gas received for transportation
pursuant to this agreement shall be:
See Exhibit A, attached hereto, for points of receipt.
ARTICLE III
POINT(S) OF DELIVERY
Seller shall redeliver to Buyer or for the account of Buyer
the gas transported hereunder at the following point(s) of
delivery and at a pressure(s) of:
See Exhibit A, attached hereto, for points of delivery and
pressures.
ARTICLE IV
TERM OF AGREEMENT
This agreement shall be effective as of August 20, 1996 and
shall remain in force and effect until 8:00 a.m. Eastern Standard
Time November 1, 2006, and thereafter until terminated by Seller
or Buyer upon at least twelve (12) months prior written notice;
provided, however, this agreement shall terminate immediately
and, subject to the receipt of necessary authorizations, if any,
Seller may discontinue service hereunder if (a)Buyer, in Seller's
reasonable judgement fails to demonstrate credit worthiness, and
{b) Buyer fails to provide adequate security in accordance with
Section 32 of the General Terms and Conditions of Seller's Volume
No. 1 Tariff. As set forth in Section 8 of Article 11 of Seller's
August 7, 1989 revised Stipulation and Agreement in Docket Nos.
RP88-68 et. al., (a) pregranted abandonment under Section 284.221
(d) of the Commission's Regulations shall not apply to any long
term conversions from firm sales service to transportation
service under Seller's Rate Schedule FT and (b) Seller shall not
exercise its right to terminate this service agreement as it
applies to transportation service resulting from conversions from
firm sales service so long as Buyer is willing to pay rates no
less favorable than Seller is otherwise able to collect from
third parties for such service.
ARTICLE V
RATE SCHEDULE AND PRICE
1. Buyer shall pay Seller for natural gas delivered to
Buyer hereunder in accordance with Seller's Rate Schedule FT and
the applicable provisions of the General Terms and Conditions of
Seller's FERC Gas Tariff as filed with the Federal Energy
Regulatory Commission, and as the same may be legally amended or
superseded from time to time. Such Rate Schedule and General
Terms and Conditions are by this reference made a part hereof.
2. Seller and Buyer agree that the quantity of gas that
Buyer delivers or causes to be delivered to Seller shall include
the quantity of gas retained by Seller for applicable compressor
fuel, line loss make-up {and injection fuel under Seller's Rate
Schedule GSS, if applicable) in providing the transportation
service hereunder, which quantity may be changed from time to
time and which will be specified in the currently effective Sheet
No. 44 of Volume No. 1 of this Tariff which relates to service
under this agreement and which is incorporated herein.
3. In addition to the applicable charges for firm
transportation service pursuant to Section 3 of Seller's Rate
Schedule FT, Buyer shall reimburse Seller for any and all filing
fees incurred as a result of Buyer's request for service under
Seller's Rate Schedule FT, to the extent such fees are imposed
upon Seller by the Federal Energy Regulatory Commission or any
successor governmental authority having jurisdiction.
ARTICLE VI
MISCELLANEOUS
1. This Agreement supersedes and cancels as of the
effective date hereof the following contract(s) between the
parties hereto:
Rate Schedule FT-NT Service Agreement between Seller
and Buyer, dated October 22, 1991 (Transco system
contract number .5315).
2. No waiver by either party of any one or more defaults
by the other in the performance of any provisions of this
agreement shall operate or be construed as a waiver of any future
default or defaults, whether of a like or different character.
3. The interpretation and performance of this agreement
shall be in accordance with the laws of the State of Texas,
without recourse to the law governing conflict of laws, and to
all present and future valid laws with respect to the subject
matter, including present and future orders, rules and
regulations of duly constituted authorities.
4. This agreement shall be binding upon, and inure to the
benefit of the parties hereto and their respective successors and
assigns.
5. Notices to either party shall be in writing and shall
be considered as duly delivered when mailed to the other party at
the following address:
(a) If to Seller:
Transcontinental Gas Pipe Line Corporation
P.O. Box 1396
Houston, Texas, 77251
Attn: Customer Services
(b) If to Buyer:
Panda-Rosemary, L.P.
4100 Spring Valley Road, Suite 1001
Dallas, Texas 75244
Attention: Fuel Manager
Such addresses may be changed from time to time by mailing
appropriate notice thereof to the other party by certified or
registered mail.
IN WITNESS WHEREOF, the parties hereto have caused this
agreement to be signed by their respective officers or
representatives thereunto duly authorized.
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
(Seller)
By:
Frank J. FerazzI
Vice President - Customer Service
PANDA-ROSEMARY, L.P.
By Panda-Rosemary Corporation its general
partner
(Buyer)
By: William C. Nordlund
Title: Vice President
EXHIBIT 10.56
THIS FT SERVICE AGREEMENT IS
SUBJECT TO THE PROVISIONS OF A
CONTEMPORANEOUS "CONSENT AND
AGREEMENT" & LEGAL OPINION
SERVICE AGREEMENT
APPLICABLE TO TRANSPORTATION OF NATURAL GAS
UNDER RATE SCHEDULE FT
(X-74 ASSIGNMENT)
AGREEMENT made as of this 20th day of August, 1996,
by and between CNG TRANSMISSION CORPORATION, a Delaware
corporation, hereinafter called "Pipeline," and PANDA-ROSEMARY,
L.P., a Delaware limited partnership, hereinafter called
"Customer."
WHEREAS, Customer has elected to take assignment of a
portion of the firm transportation service entitlements
provided by Pipeline to Transcontinental Gas Pipeline
Corporation ("Transco"), under Pipeline's Rate Schedule X-74
(Lebanon-to-Leidy Service); and
WHEREAS, Pipeline has agreed to assign such
entitlements to Customer for service under Part 284 of the
Commission's regulations, subject to Pipeline's ability to
obtain relief from its contractual obligation to serve Transco
for a like quantity of firm transportation service, under
Pipeline's Rate Schedule X-74.
WITNESSETH: That, in consideration of the mutual
covenants herein contained, the parties hereto agree as
follows:
ARTICLE I
Quantities
A. During the term of this Agreement, Pipeline will
transport for Customer, on a firm basis, and Customer may
furnish, or cause to be furnished, to Pipeline natural gas for
such transportation, and Customer will accept, or cause to be
accepted, delivery from Pipeline of the quantities Customer has
tendered for transportation.
B. The maximum quantities of gas which Pipeline shall
deliver and which Customer may tender shall be as set forth on
Exhibit A, attached hereto.
ARTICLE II
Rate
A. Unless otherwise mutually agreed in a written
amendment to this Agreement, beginning on August 20, 1996,
Customer shall pay Pipeline for transportation services rendered
pursuant to this Agreement:
1. The maximum rates and charges provided under
Rate Schedule FT set forth in Pipeline's effective FERC Gas
Tariff, including applicable surcharges and the Fuel Retention
Percentage; and
2. All additional charges applicable to Rate
Schedule X-74 Capacity and set forth on Sheet No. 37 of
Pipeline's effective FERC Gas Tariff.
B. Pipeline shall have the right to propose, file and
make effective with the Federal Energy Regulatory Commission or
any other body having jurisdiction, revisions to any applicable
rate schedule, or to propose, file, and make effective
superseding rate schedules for the purpose of changing the rate,
charges, and other provisions thereof effective as to Customer;
provided, however, that (i)Section 2 of Rate Schedule FT
"Applicability and Character of Service," (ii) term, (iii)
quantities, and (iv) points of receipt and points of delivery
shall not be subject to unilateral change under this Article.
Said rate schedule or superseding rate schedule and any revisions
thereof which shall be filed and made effective shall apply to
and become a part of this Service Agreement. The filing of such
changes and revisions to any applicable rate schedule shall be
without prejudice to the right of Customer to contest or oppose
such filing and its effectiveness.
ARTICLE III
Term of Agreement
Subject to all the terms and conditions herein, this
Agreement shall be effective as of the later of August 20, 1996
or the date on which any and all authorizations are received by
Pipeline, Transco, and Texas Gas Transmission Corporation, as
may be required to effectuate the transportation contemplated
hereby including the transportation services immediately
upstream and downstream of Pipeline. This Agreement shall
continue in effect for a primary term through and including
October 31, 2006, and from year to year thereafter, until
either party terminates this Agreement by giving written notice
to the other at least twelve months prior to the start of the
next contract year.
ARTICLE IV
Points of Receipt and Delivery
The Points of Receipt and Delivery and the maximum
quantities for each point for all gas that may be received for
Customer's account for Transportation by Pipeline shall be as
set forth on Exhibit A.
ARTICLE V
Incorporation By Reference of Tariff
Provisions
To the extent not inconsistent with the terms and
conditions of this Agreement, the following provisions of
Pipeline's effective FERC Gas Tariff, and any revisions thereof
that may be made effective hereafter are hereby made applicable
to and a part hereof by reference:
1. All of the provisions of Rate Schedule FT, or
any effective superseding rate schedule or otherwise applicable
rate schedule; and
2. All of the provisions of the General Terms
and Conditions, as they may be revised or superseded from time to
time.
ARTICLE VI
Miscellaneous
A. No change, modification or alteration of this
Agreement shall be or become effective until executed in writing
by the parties hereto; provided, however, that the parties do not
intend that this Article VI.A. requires a further written
agreement either prior to the making of any request or filing
permitted under Article II hereof or prior to the effectiveness
of such request or filing after Commission approval, provided
further, however, that nothing in this Agreement shall be deemed
to prejudice any position the parties may take as to whether the
request, filing or revision permitted under Article II must be
made under Section 7 or Section 4 of the Natural Gas Act.
B. Any notice, request or demand provided for in this
Agreement, or any notice which either party may desire to give
the other, shall be in writing and sent to the following
addresses:
Pipeline: CNG Transmission Corporation
445 West Main Street
Clarksburg, West Virginia 26301
Attention: Vice President,
Marketing
and Customer Services
Customer: Panda-Rosemary, L.P.
4100 Spring Valley, Suite 1001
Dallas, Texas 75244
Attention: Vice President, Gas
Supply
or at such other address as either party shall designate by
formal written notice.
C. No presumption shall operate in favor of or
against either party hereto as a result of any responsibility
either party may have had for drafting this Agreement.
D. The subject headings of the provisions of this
Agreement are inserted for the purpose of convenient reference
and are not intended to become a part of or to be considered in
any interpretation of such provisions.
IN WITNESS WHEREOF, the parties hereto intending to be
legally bound, have caused this Agreement to be signed by their
duly authorized officials as of the day and year first written
above.
CNG TRANSMISSION CORPORATION
(Pipeline)
By:
Its: Vice President
PANDA-ROSEMARY, L.P.
(Customer)
by PANDA-ROSEMARY
CORPORATION, its General Partner
By: William C. Nordlund
Its: Vice President
(Title)
EXHIBIT A
To The FT Service Agreement
Dated August 20, 1996
Between CNG Transmission Corporation
And Panda-Rosemary, L.P.
(X-74 Assignment)
A. Quantities
The maximum quantities of gas which Pipeline shall deliver
and which Customer may tender shall be as follows:
1. A Maximum Daily Transportation Quantity (MDTQ) of 3,097
Dt.
2. A Maximum Annual Transportation Quantity (MATQ) of
1,130,405 Dt.
B. Point of Receipt
The Point of Receipt and the maximum quantities for such
point shall be as set forth below. Each of the parties will use
due care and diligence to assure that uniform pressures will be
maintained at the Receipt Point as reasonably may be required
to render service hereunder, but Pipeline shall not be required
to accept gas at less than the minimum pressure specified
herein. In addition to the quantities specified below, Customer
may increase the quantities furnished to Pipeline at the
Receipt Point, so long as such quantities, when reduced by the
fuel retention percentage specified in Pipeline's
currently-effective FERC Gas Tariff, do not exceed the quantity
limitation specified below for the Receipt Point.
1. Up to 3,097 Dt per Day at the interconnection of the
facilities of Pipeline and Texas Gas Transmission
Corporation in Warren County, Ohio, known as the
Lebanon Interconnection, at a pressure of not less
than five hundred thirty-one (531) pounds per square
inch gauge ("psig").
EXHIBIT A
August 20,1996 FT Service Agreement (X-74 Assignment)
Between CNG Transmission Corporation
and Panda-Rosemary, L. P.
C. Point of
Delivery
The Maximum Daily Delivery Obligation ("MDDO") stated below
reflects Pipeline's total obligation to deliver quantities to
the Point of Delivery under all firm service agreements between
Pipeline and Customer, Customer's assignee, any applicable
Replacement Customer, or any other Customer. Each of the
parties will use due care and diligence to assure that uniform
pressures will be maintained at the Delivery Point as reasonably
may be required to render service hereunder, but Pipeline shall
not be required to deliver gas (or to cause gas to be
delivered) at greater than the maximum pressure specified
herein. The Point of Delivery and the MDDO shall be as follows:
1. Up to 3,097 Dt per Day at the interconnection of the
facilities of Pipeline and Transcontinental Gas Pipe
Line Corporation in Clinton County, Pennsylvania, known
as the Leidy Interconnection, at a pressure of not
greater than one thousand, two hundred (1,200) psig.
EXHIBIT 10.57
GAS TRANSPORTATION AGREEMENT
BETWEEN
TEXAS GAS TRANSMISSION CORPORATION
AND
PANDA-ROSEMARY,L.P.
DATED AUGUST 1, 1996
INDEX
PAGE NO.
ARTICLE I Definitions 1
ARTICLE II Transportation Service 1
ARTICLE III Scheduling 2
ARTICLE IV Points of Receipt and Delivery 2
ARTICLE V Term of Agreement 3
ARTICLE VI Points(s) of Measurement 3
ARTICLE VII Facilities 3
ARTICLE VIII Rates and Charges 3
ARTICLE IX Miscellaneous 4
EXHIBIT "A"
FIRM POINT(S) OF RECEIPT
EXHIBIT "A-I"
SECONDARY POINT(S) OF RECEIPT
EXHIBIT "B"
FIRM POINT(S) OF DELIVERY
EXHIBIT "C"
SUPPLY LATERAL CAPACITY
STANDARD FACILITIES KEY
FIRM TRANSPORTATION AGREEMENT
THIS AGREEMENT, made and entered into this 1st day of
August, 1996, by and between Texas Gas Transmission Corporation,
a Delaware corporation, hereinafter referred to as "Texas Gas,"
and Panda-Rosemary, L.P., a Delaware limited partnership,
hereinafter referred to as "Customer,"
WITNESSETH:
WHEREAS, Customer has natural gas which it desires
Texas Gas to movethrough its existing facilities; and
WHEREAS, Texas Gas has the ability in its pipeline
system to move natural gas for the account of Customer; and
WHEREAS, Customer desires that Texas Gas transport such
natural gas for the account of Customer; and
WHEREAS, Customer and Texas Gas are of the opinion that
the transaction referred to above falls within the provisions of
Section 284.223 of Subpart G of Part 284 of the Federal Energy
Regulatory Commission's (Commission) regulations and the blanket
certificate issued to Texas Gas in Docket No. CP88-686-000, and
can be accomplished without the prior approval of the Commission;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained, the parties hereto covenant
and agree as follows:
ARTICLE I
Definitions
1.1 Definition of Terms of the General Terms and Conditions
of Texas Gas's FERC Gas Tariff on file with the Commission is
hereby incorporated by reference and made a part of this
Agreement.
ARTICLE II
Transportation Service
2.1 Subject to the terms and provisions of this Agreement,
Customer agrees to deliver or cause to be delivered to Texas Gas,
at the Point(s) of Receipt in Exhibit "A" hereunder, Gas for
Transportation, and Texas Gas agrees to receive, transport, and
redeliver, at the Point(s) of Delivery in Exhibit "B" hereunder,
Equivalent Quantities of Gas to Customer or for the account of
Customer, in accordance with Section 3 of Texas Gas's effective
FT Rate Schedule and the terms and conditions contained herein,
up to 3,243 MMBtu per day, which shall be Customer's Firm
Transportation Contract Demand, and up to 489,693 MMBtu during
the winter season, and up to 694,002 MMBtu during the summer
season, which shall be Customer's Seasonal Quantity Levels.
2.2 Customer shall reimburse Texas Gas for the Quantity of
Gas required for fuel, company use, and unaccounted for
associated with the transportation service hereunder in
accordance with Section 16 of the General Terms and Conditions of
Texas Gas's FERC Gas Tariff. The applicable fuel retention
percentage(s) is shown on Exhibit "A". Texas Gas may adjust the
fuel retention percentage as operating circumstances warrant;
however, such change shall not be retroactive. Texas Gas agrees
to give Customer thirty (30) days written notice before changing
such percentage.
2.3 Texas Gas, at its sole option, may, if tendered by
Customer, transport daily quantities in excess of the
Transportation Contract Demand.
2.4 In order to protect its system, the delivery of gas to
its customers and/or the safety of its operations, Texas Gas
shall have the right to vent excess natural gas delivered to
Texas Gas by Customer or Customer's supplier(s) in that part of
its system utilized to transport gas received hereunder. Prior to
venting excess gas, Texas Gas will use its best efforts to
contact Customer or Customer's supplier(s) in an attempt to
correct such excess deliveries to Texas Gas. Texas Gas may vent
such excess gas solely within its reasonable judgment and
discretion without liability to Customer, and a pro rata share of
any gas so vented shall be allocated to Customer. Customer's pro
rata share shall be determined by a fraction, the numerator of
which shall be the quantity of gas delivered to Texas Gas at the
Point of Receipt by Customer or Customer's supplier(s) in excess
of Customer's confirmed nomination and the denominator of which
shall be the total quantity of gas in excess of total confirmed
nominations flowing in that part of Texas Gas's system utilized
to transport gas, multiplied by the total quantity of gas vented
or lost hereunder.
2.5 Any gas imbalance between receipts and deliveries of
gas, less fuel and PVR adjustments, if applicable, shall be
cleared each month in accordance with Section 17 of the General
Terms and Conditions in Texas Gas's FERC Gas Tariff. Any
imbalance remaining at the termination of this Agreement shall
also be cashed-out as provided herein.
ARTICLE III
Scheduling
3.1 Customer shall be obligated four (4) working days prior
to the end of each month to furnish Texas Gas with a schedule of
the estimated daily quantity(ies) of gas it desires to be
received, transported, and redelivered for the following month.
Such schedules will show the quantity(ies)of gas Texas Gas will
receive from Customer at the Point(s) of Receipt, along with the
identity of the supplier(s) that is delivering or causing to be
delivered to Texas Gas quantities for Customer's account at each
Point of Receipt for which a nomination has been made.
3.2 Customer shall give Texas Gas, after the first of the
month, at least twenty-four (24) hours notice prior to the
commencement of any day in which Customer desires to change the
quantity(ies) of gas it has scheduled to be delivered to Texas
Gas at the Point(s) of Receipt. Texas Gas agrees to waive this 24-
hour prior notice and implement nomination changes requested by
Customer to commence in such lesser time frame subject to Texas
Gas's being able to confirm and verify such nomination change at
both Receipt and Delivery Points, and receive PDAs reflecting
this nomination change at both Receipt and Delivery Points. Texas
Gas will use its best efforts to make the nomination change
effective at the time requested by Customer; however, if Texas
Gas is unable to do so, the nomination change will be implemented
as soon as confirmation is received.
ARTICLE IV
Points of Receipt, Delivery, and Supply Lateral Allocation
4.1 Customer shall deliver or cause to be delivered natural
gas to Texas Gas at the Point(s) of Receipt specified in Exhibit
"A" attached hereto and Texas Gas shall redeliver gas to Customer
or for the account of Customer at the Point(s) of Delivery
specified in Exhibit "B" attached hereto in accordance with
Sections 7 and 15 of the General Terms and Conditions of Texas
Gas's FERC Gas Tariff.
4.2 Customer's preferential capacity rights on each of
Texas Gas's supply laterals shall be as set forth in Exhibit "C"
attached hereto, in accordance with Section 34 of the General
Terms and Conditions of Texas Gas's FERC Gas Tariff.
ARTICLE V
Term of Agreement
5.1 This Agreement shall become effective August 20, 1996
and remain in full force and effect for a primary term beginning
August 20, 1996 (with the rates and charges described in Article
VIII becoming effective on that date) and extending for a period
of ten years, two months, eleven days from that date, or through
October 31, 2006; with extensions of one year at the end of the
primary term and each additional term thereafter unless written
notice is given at least one hundred eighty (180) days prior to
the end of such term by either party.
ARTICLE VI
Point(s) of Measurement
6.1 The gas shall be delivered by Customer to Texas Gas and
redelivered by Texas Gas to Customer at the Point(s) of Receipt
and Delivery hereunder.
6.2 The gas shall be measured or caused to be measured by
Customer and/or Texas Gas at the Point(s) of Measurement which
shall be as specified in Exhibits "A", "A-I", and "B" herein. In
the event of a line loss or leak between the Point of Measurement
and the Point of Receipt, the loss shall be determined in
accordance with the methods described contained in Section 3,
"Measuring and Measuring Equipment," contained in the General
Terms and Conditions of First Revised Volume No. 1 of Texas Gas's
FERC Gas Tariff.
ARTICLE VII
Facilities
7.1 Texas Gas and Customer agree that any facilities
required at the Point(s) of Receipt, Point(s) of Delivery, and
Point(s) of Measurement shall be installed, owned, and operated
as specified in Exhibits "A", "A-I", and "B" herein. Customer may
be required to pay or cause Texas Gas to be paid for the
installed cost of any new facilities required as contained in
Sections 1.3, 1.4, and 1.5 of Texas Gas's FT Rate Schedule.
Customer shall only be responsible for the installed cost of any
new facilities described in this Section if agreed to in writing
between Texas Gas and Customer.
ARTICLE VIII
Rates and Charges
8.1 Each month, Customer shall pay Texas Gas for the
service hereunder an amount determined in accordance with Section
5 of Texas Gas's FT Rate Schedule contained in Texas Gas's FERC
Gas Tariff, which Rate Schedule is by reference made a part of
this Agreement. The maximum rates for such service consist of a
monthly reservation charge multiplied by Customer's firm
transportation demand as specified in Section 2.1 herein. The
reservation charge shall be billed as of the effective date of
this Agreement. In addition to the monthly reservation charge,
Customer agrees to pay Texas Gas each month the maximum commodity
charge up to Customer's Transportation Contract Demand. For anY
quantities delivered by Texas Gas in excess of Customer's
Transportation Contract Demand, Customer agrees to pay the
maximum FT overrun commodity charge. In addition, Customer agrees
to pay:
(a) Texas Gas's Fuel Retention percentage(s).
(b) The currently effective GRI funding unit, if
applicable, the currently effective FERC Annual
Charge Adjustment unit charge (ACA), the currently
effective Take-or-Pay surcharge, or any other then
currently effective surcharges, including but not
limited to Order 636 Transition Costs.
If Texas Gas declares force majeure which renders it unable to
perform service herein, then Customer shall be relieved of its
obligation to pay demand charges for that part of its FT Contract
Demand affected by such force majeure event until the force
majeure event is remedied.
Unless otherwise agreed to in writing by Texas Gas and Customer,
Texas Gas may, from time to time, and at any time selectively
after negotiation, adjust the rate(s) applicable to any
individual Customer; provided, however, that such adjusted
rate(s) shall not exceed the applicable Maximum Rate(s) nor shall
they be less than the Minimum Rate(s) set forth in the currently
effective Sheet No. 10 of this Tariff. If Texas Gas so adjusts
any rates to any Customer, Texas Gas shall file with the
Commission any and all required reports respecting such adjusted
rate.
8.2 In the event Customer utilizes a Secondary Point(s) of
Receipt or Delivery for transportation service herein, Customer
will continue to pay the monthly reservation charges as described
in Section 8.1 above. In addition, Customer will pay the maximum
commodity charge applicable to the zone in which gas is received
and redelivered up to Customer's Transportation Contract Demand
and the maximum overrun commodity charge for any quantities
delivered by Texas Gas in excess of Customer's winter season or
summer season Transportation Contract Demand. Customer also
agrees to pay the ACA, Take-or-Pay Surcharge, GRI charges, fuel
retention charge, and any other effective surcharges, if
applicable, as described in Section 8.1 above.
8.3 It is further agreed that Texas Gas may seek
authorization from the Commission and/or other appropriate body
for such changes to any rate(s) and terms set forth herein or in
Rate Schedule FT, as may be found necessary to assure Texas Gas
just and reasonable rates. Nothing herein contained shall be
construed to deny Customer any rights it may have under the
Natural Gas Act, as amended, including the right to participate
fully in rate proceedings by intervention or otherwise to contest
increased rates in whole or in part.
8.4 Customer agrees to fully reimburse Texas Gas for all
filing fees, if any, associated with the service contemplated
herein which Texas Gas is required to pay to the Commission or
any agency having or assuming jurisdiction of the transactions
contemplated herein.
8.5 Customer agrees to execute or cause its supplier or
processor to execute a separate agreement with Texas Gas
providing for the transportation of any liquids and/or
liquefiables, and agrees to pay or reimburse Texas Gas, or cause
Texas Gas to be paid or reimbursed, for any applicable rates or
charges associated with the transportation of such liquids and/or
liquefiables, as specified in Section 24 of the General Terms and
Conditions of Texas Gas's FERC Gas Tariff.
ARTICLE IX
Miscellaneous
9.1 Texas Gas's Transportation Service hereunder shall be
subject to receipt of all requisite regulatory authorizations
from the Commission, or any successor regulatory authority, and
any other necessary governmental authorizations, in a manner and
form acceptable to Texas Gas and Customer. The parties agree to
furnish each other with any and all information necessary to
comply with any laws, orders, rules, or regulations.
9.2 Except as may be otherwise provided, any notice,
request, demand, statement, or bill provided for in this
Agreement or any notice which a party may desire to give the
other shall be in writing and mailed by regular mail, or by
postpaid registered mail, effective as of the postmark date, to
the post office address of the party intended to receive the
same, as the case may be, or by facsimile transmission. as
follows:
Texas Gas
Texas Gas Transmission Corporation
3800 Frederica Street
Post Office Box 20008
Owensboro, Kentucky 42304
Attention: Gas Revenue Accounting
(Billings and Statements)
Marketing Administration (Other Matters)
Gas Transportation and Capacity Allocation
(Nominations)
Fax (502) 688-6817
Customer
Panda-Rosemary, L.P.
4100 Spring Valley, Suite 1001
Dallas, Texas 75244
Attention: Fuel Manager
The address of either party may, from time to time, be changed by
a party mailing, by certified or registered mail, appropriate
notice thereof to the other party. Furthermore, if applicable,
certain notices shall be considered duly delivered when posted to
Texas Gas's Electronic Bulletin Board, as specified in Texas
Gas's tariff.
9.3 This Agreement shall be governed by the laws of the
State of Kentucky.
9.4 Each party agrees to file timely all statements,
notices, and petitions required under the Commission's
Regulations or any other applicable rules or regulations of any
governmental authority having jurisdiction hereunder and to
exercise due diligence to obtain all necessary governmental
approvals required for the implementation of this Transportation
Agreement.
9.5 All terms and conditions of Rate Schedule FT, the
General Terms and Conditions of Texas Gas's effective FERC Gas
Tariff, and the attached Exhibits "A", "A-I", "B", and "C" are
hereby incorporated to and made a part of this Agreement.
9.6 This contract shall be binding upon and inure to the
benefit of the successors, assigns, and legal representatives of
the parties hereto.
9.7 Neither party hereto shall assign this Agreement or any
of its rights or obligations hereunder without the consent in
writing of the other party. Notwithstanding the foregoing, either
party may assign its right, title and interest in, to and by
virtue of this Agreement including any and all extensions,
renewals, amendments, and supplements thereto, to a trustee or
trustees, individual or corporate, collateral agent, or other
entity holding this Agreement, as security for bonds or other
obligations or securities, without the consent of the other Party
and without such trustee or trustees, collateral agent, or other
such entity, assuming or becoming in any respect obligated to
perform any of the obligations of the assignor and, if any such
trustee be a corporation, without its being required by the
parties hereto to qualify to do business in the state in which
the performance of this Agreement may occur, nothing contained
herein shall require consent to transfer this Agreement by virtue
of merger or consolidation of a party hereto or a sale of all or
substantially all of the assets of a party hereto, or any other
corporate reorganization of a party hereto.
9.8 This Agreement insofar as it is affected thereby, is
subject to all valid rules, regulations, and orders of all
goverurnental authorities having jurisdiction.
9.9 No waiver by either party of any one or more defaults
by the other in the performance of any provisions hereunder shall
operate or be construed as a waiver of any future default or
defaults whether of a like or a different character.
IN WITTNESS WHEREOF, the parties hereto have caused
this Agreement to be signed by their respective representatives
hereunto duly authorized, on the day and year first above
written.
ATTEST: TEXAS GAS TRANSMISSION CORPORATION
Vivian C. Poole
By_____________________________
Secretary Vice President
WITNESSES: PANDA-ROSEMARY, L.P.
BY PANDA-ROSEMARY CORPORATION
Jerry Sanders ITS GENERAL PARTNER
Lori Coughlin
__________________ By William C. Nordlunc
Vice President
Attest: Kim R. Knightstep
Assistant Secretary
Date of Execution by Customer:
August 15, 1996
EXHIBIT 10.58
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT is
executed as of this 15th of May, 1989, by and between
Panda Energy Corporation, a Texas corporation
("Assignor"), and Panda-Rosemary Corporation, a Texas
corporation ("Assignee").
FOR GOOD AND VALUABLE CONSIDERATION, the receipt
and sufficiency of which are hereby acknowledged,
Assignor and Assignee hereby agree as follows:
1. Assignment. Assignor hereby assigns,
transfers, and conveys unto Assignee all assets of
Assignor, real and personal, tangible and intangible,
that relate to or were acquired by Assignor in connection
with the development, construction, and operation of a
175 Megawatt cogeneration facility to be located in
Roanoke Rapids, North Carolina (the "Project"), including
but not limited to the applications, permits and
contracts described in Exhibit A attached hereto, subject
to any conditions set out in Exhibit A (the "Transferred
Assets").
2. Assumption. As partial consideration for the
assignment of the Transferred Assets, Assignee hereby assumes
and agrees to pay, perform, or otherwise
satisfy and discharge any and all debts, obligations, and
liabilities of Assignor arising or to be performed after
the effective date hereof under, pursuant to, or in
connection with the Transferred Assets or the Project.
3. Additional Consideration. As additional consideration
for the Transferred Assets, Assignee hereby agrees to (i) issue 1,000
shares of its Common Stock, $0.01 par value, and (ii) pay
to Assignor, $------ in cash to be determined, as reimbursement for certain
expenses incurred by Assignor in connection with the
Project.
IN WITNESS WHEREOF, the undersigned have
executed this Assignment and Assumption Agreement as of
the date and year first above written.
PANDA ENERGY CORPORATION
By:_________________________
Robert W. Carter
Chairman and Chief
Executive Officer
PANDA-ROSEMARY CORPORATION
By: _______________________
Robert W. Carter
President and Chief
Executive Officer
EXHIBIT A
1. Power Purchase and Operating Agreement dated
to be effective as of January 24, 1989, between the Company
and Virginia Electric and Power Company.
2. Cogeneration Energy Supply Agreement dated to
be effective as of January 12, 1989, between the Company
and The Bibb Company.
3. Agreement with General Electric Company for
the manufacture and purchase of new Frame Six and Frame
Seven Gas Turbine Generators.
4. Fuel supply contracts or commitments.
5. Agreement with ABB Turbine, Inc. for the
manufacture and purchase of a 50 Megawatt Steam Turbine
(Type HT25/LT33).
6. Agreement with Radian Corporation of Research
Triangle, North Carolina to prepare an application for a
permit from the North Carolina Department of Natural
Resources and the Community Development, Air Quality
Section, in Raleigh, North Carolina.
7. Agreement with Trigon Engineering
Consultants, Inc. to conduct an environmental evaluation of
the Project site.
8. Agreement with Nooter/Erkisen Cogeneration
Systems, Inc. for the manufacture and purchase of one
Frame 6 heat recovery steam generator and one Frame 7
heat recovery steam generator.
9. Certificate of Public Convenience and
Necessity
issued on May 12, 1989, by the North Carolina Utility
Commission, such assignment to be effective only upon
approval by the North Carolina Utility Commission, if
required.
10. Conditional use approval issued by the City
of Roanoke Rapids, North Carolina, evidenced by a letter
dated May 2, 1989, such assignment to be effective only
upon approval by the City of Roanoke Rapids, North
Carolina, if required.
11. Application for Certification of Facility as
a Cogeneration Facility submitted to the Federal Energy
Regulatory Commission on May 9, 1989, such assignment to
be effective only upon approval by the Federal Energy
Regulatory Commission, if required.
EXHIBIT 10.59
BILL OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT
This BILL OF SALE AND ASSIGNMENT AND ASSUMPTION
AGREEMENT is entered into this 6th day of January, 1992, by and
between Panda-Rosemary Corporation, a Delaware corporation (the
"Corporation") and Panda-Rosemary, L.P., a Delaware limited
partnership doing business in North Carolina as Panda-Rosemary,
Limited Partnership (the "Partnerships"). Capitalized terms not
defined herein shall have the meanings ascribed to them in the
Restated Letter of Credit and Reimbursement Agreement, dated as
of March 2l, 1990, as amended on June 1, 1990, by and among the
Corporation, The Fuji Bank Limited, acting through its Houston
Agency, as agent and as issuing bank, and the banks party thereto
(the "Reimbursement Agreement"). Commercial terms used herein
and not otherwise defined herein (whether expressly or by
reference to another document) shall have the meaning specified
for such terms in the Uniform Commercial Code in effect in the
State of North Carolina.
W I T N E S S E T H:
WHEREAS, the Corporation has agreed to sell, bargain,
transfer, convey, assign and deliver to the Partnership, and the
Partnership has agreed to accept and assume from the Corporation,
substantially all of the Corporation's right, title and interest
in and to all tangible and intangible assets used or useful by
the Corporation in connection with that certain cogeneration
facility located in Roanoke Rapids, North Carolina, together with
all of the Corporation's liabilities and obligations in
connection therewith; and
WHEREAS, contemporaneously herewith, the Corporation
and the Partnership have entered into (i) the Leasehold and Real
Property Assignment and Assumption Agreement of even date
herewith and (ii) the Loan Agreement Assignment and Assumption
Agreement of even date herewith (all right, title and interest
transferred pursuant to the Agreements identified in (i) and (ii)
hereinafter the "Excluded Property"); and
WHEREAS, the Corporation desires to sell, bargain,
transfer, convey, assign, deliver and delegate to the
Partnership, and the Partnership desires to accept and assume
from the Corporation, the assets described below, together with
all of the Corporation's liabilities and obligations with respect
thereto;
NOW, THEREFORE, for and in consideration of the
foregoing premises, the mutual covenants contained herein, $10
and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Corporation
hereby irrevocably grants, bargains, sells, transfers, conveys,
assigns and delivers to the Partnership its successors and
assigns, forever, all of the Corporation's right, title and
interest (after giving effect to the transactions contemplated by
that certain Assignment, Delegation and Assumption Agreement of
even date herewith from the Parent to the Corporation) in and to
all assets and properties of the Corporation of every kind,
nature, character and description (whether real, personal or
mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), including
the goodwill related thereto, including, without limitation, cash
and cash equivalents, investment assets, accounts and notes
receivable, chattel paper, documents, instruments, general
intangibles, equipment, inventory, goods and intellectual
property, owned by the Corporation and used or useful in the
ownership, design, construction, operation, management,
maintenance, engineering or equipping of the Project, as the same
shall exist on the date hereof, including, without limitation,
all of the following:
(i) All of the Corporation's right, title and interest in
and to each contract, lease, agreement, evidence of debt,
mortgage, indenture, security agreement, option and any other
contract or right (whether written or oral) relating to the
Project or any aspect thereof, including, without limitation, all
of the Corporation's rights with respect to the agreements and
instruments identified on Schedule A attached hereto, and
including the Subordinated Loan Documents (collectively, the
"Contracts", and, individually, as a "Contract").
(ii) (A) The leases and subleases of real property as to
which the Corporation is the lessor or sublessor and (B) the
leases and subleases of real property as to which the Corporation
is the lessee or sublessee, together with any options to purchase
the underlying property and all buildings, structures,
facilities, fixtures and other improvements thereon (the
"Leasehold Improvements") and in each case all other rights ,
subleases, licenses, permits, deposits and profits appurtenant to
or related to such leases and subleases (the leases and subleases
described in subclauses (A) and (B), the "Real Property Leases");
(iii) All rights to receive payments and all accounts
receivable and all notes, bonds and other evidences of debt
arising in connection with the Project, and the security
agreements related thereto, including, but not limited to, the
rights to receive payments arising out of the sale of electricity
and capacity and steam, including any rights of the Corporation
with respect to any third party collection procedures or any
other actions or proceedings which have been commenced in
connection therewith (the "Accounts Receivable");
(iv) All furniture, fixtures, equipment, machinery,
inventory and other tangible personal property (other than
vehicles), including, but not limited to, all natural gas, all
fuel oil, all turbines, and generators, used or held for use in
connection with the Project located at the Facility Site or at
any other location or otherwise used or held for use by the
Corporation in connection with the Project, including any of the
foregoing purchased under and subject to any conditional sales or
title retention agreement in favor of any other person (the
"Tangible Personal Property");
(v) (A) The leases or subleases of tangible personal
property as to which the Corporation is the lessor or sublessor
and (B) the leases of tangible personal property as to which the
Corporation is the lessee or sublessee, together with any options
to purchase the underlying property (the leases and subleases
described in subclauses (A) and (B), the "Personal Property
Leases"), and each such Personal Property Lease with annual rent
in excess of $200,000 is identified on Schedule B attached
hereto;
(vi) All prepaid expenses arising in connection with the
Project (the "Prepaid Expenses");
(vii) All patents, trademarks, copyrights, service
marks, trade secrets, logos and designs and other Intellectual
Property used or held for use in connection with the Project
(including the Corporation's goodwill therein) and all rights,
privileges, claims, causes of action and options relating or
pertaining to the Project (the "Intangible Personal Property";
(viii) To the extent transfer is not covered exclusively
pursuant to a certificate of title, all motor vehicles owned or
leased by the Corporation and used or held for use in connection
with the Project (the "Vehicles");
(ix) All books and records used or held for use in the
conduct of the business or otherwise relating to the Project,
other than the minute books, stock transfer books and corporate
seal of Corporation (the "Business Books and Records");
(x) All insurance policies, all title insurance policies,
all claims under insurance policies, all rights to
indemnification, all warranties (whether express or implied)
arising under any Contract and all other claims and causes of
action relating to the Project, but excluding, in all such cases,
any such policies, claims thereunder, rights to indemnification,
warranties and other claims and causes of action relating to, or
in respect of, the Retained Property (as defined below); and
(xi) All of the Corporation's right, title and interest to
any checking, saving, deposit or other account, to any investment
of any kind, and to any monies held in any such account or
otherwise to the extent, in each case, not constituting Retained
Property;
All such assets, properties and rights being
hereinafter collectively referred to as the "Assigned Assets".
Notwithstanding the foregoing, the Corporation shall
not be deemed to have granted to the Partnership its right, title
and interest in any of the following:
(i) the Excluded Property; and
(ii) the Corporation's right, title and interest in and to
(a) the Construction Contract, (b) the Construction Guarantee,
(c) the Gas Sales Agreement, dated July 24, 1989, between the
Corporation and Sunrise Energy Company, (d) the Government
Approvals, to the extent that both the Corporation and the
Partnership are designated permitees thereunder, prior to giving
effect to this Agreement (but only to the extent of the
Corporation's interest therein) or, in the case of the Government
Approvals set forth on Schedule C hereto, the Corporation is the
sole permittee thereunder, and any other Government Approvals to
the extent that transfer hereunder is contrary to the terms and
conditions thereof or could void or otherwise adversely affect
such Government Approval, (e) $3,416,033.61 deposit on the date
hereof in the Reimbursement Obligations Account, (f) all amounts
on deposit on the date hereof in each of the Revenues Account and
the Debt Service Reserve Account (such right, title and interest
in subclauses (a), (b), (c), (d), (e) and (f) above, hereinafter
collectively, the "Retained Property") :
TO HAVE AND TO HOLD the same unto the Partnership, its
successors and assigns, forever.
The Partnership hereby accepts, subject to the Liens of
the Collateral Agent for the benefit of the Secured Parties
arising in connection with the Security Documents, the sale,
transfer conveyance, assignment and delivery of the Assigned
Assets and the delegation of the obligations in connection
therewith and hereby assumes and agrees to perform, pay and
discharge when due all liabilities and obligations of whatsoever
kind, character or description (whether known or unknown, whether
contingent or otherwise) of the Corporation in connection with
the Assigned Assets. In addition, the Partnership agrees to pay
to the Contractor, on behalf of the Corporation, all amounts, if
any, up to $5.6 million, payable by the Corporation in respect of
any settlement or adjudication of that certain litigation styled
Hawker Siddeley Power Engineering Inc. v. Panda-Rosemary
Corporation, #91-CVS-1168, currently pending in the Superior
Court of Halifax County, North Carolina, it being understood and
agreed that such amount shall represent the Partnership's sole
liability and obligation in respect of such matter.
The Corporation (i) represents, warrants, covenants and
agrees that (x) it has good and marketable title to the Assigned
Assets, free and clear of all liens and encumbrances other than
Permitted Encumbrances and (y) it has all power and authority
(corporate and otherwise) to sell, assign and transfer the
Assigned Assets to the Partnership and (ii) will warrant and
defend the sale of the Assigned Assets against all and every
person or persons whomsoever claiming against any or all of the
same.
At any time or from time to time after the date hereof,
at the Partnership's request and without further consideration,
the Corporation shall execute and deliver to the Partnership such
other instruments of sale, transfer, conveyance, assignment and
confirmation, provide such materials and information and take
such other actions as the Partnership may reasonably deem
necessary or desirable in order more effectively to transfer,
convey and assign to the Partnership, and to confirm the
Partnership's title to, all of the Assigned Assets, and, to the
full extent permitted by law, to put the Partnership in actual
possession and operating control of the Assigned Assets and to
assist the Partnership in exercising all rights with respect
thereto.
The Corporation agrees that in the event that it shall
receive any payment that becomes due under any Contract
constituting an Assigned Asset or with respect to any Accounts
Receivable constituting an Assigned Asset or any other Assigned
Asset on or after the date hereof, it will promptly pay over the
same to the Partnership or as directed by the Partnership.
This Assignment and Assumption and Bill of Sale
Agreement, shall inure to the benefit of and be binding upon the
Corporation and the Partnership and their respective successors
and assigns.
Notwithstanding anything to the contrary contained
herein, no partner in the Partnership (other than the
Corporation) nor any of its or the Corporation's stockholders or
affiliates or any officer or director of any thereof (a "Non-
Recourse Person") shall have any liability to any party hereto
for the payment of any sums now or hereafter owing hereunder,
directly, indirectly or contingently, by either party hereto, or
for the performance of any of the obligations of either party
hereto contained herein, or shall otherwise be liable or
responsible with respect thereto.
This Bill of Sale and Assignment and Assumption
Agreement may be executed in any number of counterparts, each of
which will be deemed an original, but all of which together will
constitute one and the same instrument.
THIS BILL OF SALE AND ASSIGNMENT AND ASSUMPTION
AGREEMENT SHALL BE GOVERNED BY, AND ENFORCED AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NORTH CAROLINA.
IN WITNESS WHEREOF, the undersigned have caused their
duly authorized officers to execute this Bill of Sale and
Assignment and Assumption Agreement under seal on the day and
year first above written.
PANDA-ROSEMARY CORPORATION
By:
Name: Robert A. Wolf
Title: Vice President
ATTEST:
By:
Its:
[AFFIX CORPORATE SEAL]
PANDA-ROSEMARY, L.P., (doing
business in North Carolina as
PANDA-ROSEMARY, LIMITED
PARTNERSHIP) [SEAL]
By Panda-Rosemary Corporation,
its sole general partner
[SEAL]
By:
Name: Robert A. Wolf
Title: Vice President
ATTEST:
By:
Its:
[AFFIX CORPORATE SEAL]
Schedule A to
Bill of Sale and Assignment
and Assumption Agreement
1. Power Purchase and Operating Agreement, dated as of January
24, 1989, between Panda Energy Corporation and Virginia
Electric and Power Company, as assigned by Panda Energy
Corporation to Panda-Rosemary Corporation pursuant to an
Assignment and Assumption Agreement, dated May 15, 1989,
between Panda Energy Corporation and Panda-Rosemary
Corporation, and as amended by Amendment No. 1, dated
October 24, 1989.
2. Letter dated October 26, 1989, from Virginia Electric and
Power Company authorizing change of party from Panda Energy
Corporation to Panda-Rosemary Corporation.
3. Letter dated October 20, 1989, from Virginia Electric and
Power Company concerning notice to Panda-Rosemary
Corporation when dispatch in excess of 2000 hours is
expected.
4. Fuel Supply Management Agreement, dated October 10, 1990,
between Panda-Rosemary Corporation and Natural Gas
Clearinghouse, as amended by Amendment Number 1, dated March
5, 1991.
5. Supplements to, and supplemental agreements relating to, the
Fuel Supply Management Agreement:
a. Fuel Oil Hedging Agreements under the Fuel Supply
Management Agreement:
(i) August 22, 1991 for 4,000 bbls.
(ii) September 9, 1991 for 2,000 bbls.
(iii) September 9, 1991 for 2,000 bbls.
b. Fuel Oil Purchase Agreement, between Panda-Rosemary
Corporation and Natural Gas Clearinghouse effective
October 15, 1990.
c. Fuel Oil Purchase Agreement, between Panda Energy
Corporation and Natural Gas Clearinghouse effective
November 18, 1991.
d. Fuel Oil Purchase Agreement, between Panda-Rosemary
Corporation and Natural Gas Clearinghouse effective
November 18, 1991.
e. Confidentiality Agreement, dated June 5, 1991, between
Panda Energy Corporation and Natural Gas Clearinghouse.
f. General Agent Confirmation Letter, dated August 2, 1990
between Panda-Rosemary Corporation and Natural Gas
Clearinghouse.
6. Real Property Lease and Easement Agreement, dated as of June
9, 1989, between Panda-Rosemary Corporation and The Bibb
Company, as amended by the First Amendment, dated October 1,
1989, and by the Second Amendment dated as of January 31,
1990.
7. Turnkey Construction Agreement, dated as of May 16, 1989,
between Panda-Rosemary Corporation and Hawker Siddely Power
Engineering, Inc., as amended by the First Amendment to
Turnkey Construction Agreement, dated as of October 1, 1989.
8. Notice to Proceed under the Turnkey Construction Contract,
dated May 24, 1989.
9. Construction Contract Payment and Performance Guarantee,
dated as of October 1, 1989 between Panda-Rosemary
Corporation and Hawker Siddeley, PLC.
10. Operations and Maintenance Agreement, dated October 1, 1989,
between University Technical Services, Inc. and Panda-
Rosemary Corporation.
11. Performance Bond and Labor Material Payment Bond, dated
November 13, 1990.
12. Cogeneration Energy Supply Agreement January 12, 1989,
between Panda Energy Corporation and The Bibb Corporation,
dated as of January 12, 1989, as assigned by Panda Energy
Corporation to Panda-Rosemary Corporation pursuant to an
Assignment and Assumption Agreement, dated May 15, 1989,
between Panda Energy Corporation and Panda-Rosemary
Corporation, and as amended by the First Amendment to
Cogeneration Energy Supply Agreement, dated October 1, 1989.
13. Guaranty, dated January 6, 1992 by and between Panda Energy
Corporation, Panda-Rosemary Corporation and Bibb.
14. Gas Purchase Contract, dated April 12 , 1990 , between Panda-
Rosemary Corporation and Natural Gas Clearinghouse.
15. Pipeline Operating Agreement, dated February 14, 1990, among
Panda Energy Corporation, Panda-Rosemary Corporation and
North Carolina Natural Gas, as amended by Amendment Number 1
dated May 9, 1990 and Amendment Number 2, dated December 13,
1991.
16 Assignment Agreement, dated June 15, 1990 by and between
Panda Energy Corporation and Panda-Rosemary Corporation.
17. Supplements to, and supplemental agreements relating to, the
Pipeline Operating Agreement:
a. NCNG Pipeline Construction Approval, dated November 2,
1990.
b. Construction Contract effective September 4, 1990,
between Distribution Construction Co. and Panda-
Rosemary Corporation relating to the NCNG Interconnect
.
c. NCNG Encroachment Agreement, granted June 19, 1990 by
North Carolina Natural Gas Corporation and Panda-
Rosemary Corporation.
18. Precedent Agreement, dated December 28, 1990, between Panda
Energy Corporation and Transcontinental Pipeline
Corporation.
l9. Supplements to, and supplemental agreements relating to,
Precedent Agreement:
a. Lateral Line Interconnect and Reimbursement Agreement,
dated August 1, 1990, between Transcontinental Gas
Pipeline Corporation and Panda Energy Corporation.
b. Service Agreement, dated October 22, 1991 between
Transcontinental Gas Pipeline Corporation and Panda
Energy Corporation.
c. Depository Escrow Agreement, dated November 1, 1991
between Panda-Rosemary Corporation and NCNB Texas
National Bank.
20. ITS-l Transportation Service Agreement, dated April 4, 1991,
between Columbia Gulf Transmission Company and Panda Energy
Corporation (acting on behalf of Columbia Gas Transmission
Corporation) (Contract No. 900614-003 Agreement No. 35931).
21. Service Agreement for Service under ITS Rate Schedule, dated
April 4, 1991, by and between Columbia Gas Transmission
Corporation and Panda-Rosemary Corporation (Control No.
900614002 Agreement No. 35930).
22. Letter Agreement between Columbia Gas Transmission
Corporation and Panda-Rosemary Corporation, dated March 7,
1991.
23. Turnkey Pipeline Construction Agreement, dated April
27,1990, between Panda-Rosemary Corporation and Universal
Ensco, Inc.
24. Consent to Assignment, Delegation and Assumption Agreement
between Transcontinental Gas Pipeline Corporation , Panda
Energy Corporation and Panda-Rosemary Corporation, dated
August 23, 1991.
25. Assignment and Assumption Agreement between Panda Energy
Corporation and Panda-Rosemary Corporation dated May
15,1989.
26. Assignment and Assumption Agreement, dated January 9, 1990,
between Panda Energy Corporation and Panda-Rosemary
Corporation.
27. Assignment of Agreements, effective July 1, 1991, from Panda-
Rosemary Corporation to and accepted by Panda-Rosemary
Corporation and the Panda-Rosemary, L.P., and consented to
by CSX Transportation, Inc. on July 16, 1991.
28. Irrevocable Letter of Credit No. LG9009/950029, dated
October 26, 1989 in an aggregate amount not exceeding
$121,961,200 for the account of Panda-Rosemary Corporation
in favor of the NCNB National Bank of North Carolina issued
by The Fuji Bank Limited, Acting Through Its Houston Agency.
29. Irrevocable Standby Letter of Credit No. CLC909/050086,
dated January 11, 1991 in an aggregate amount not exceeding
$4,950,000 for the account of Panda-Rosemary Corporation in
favor of Virginia Electric and Power Company issued by The
Fuji Bank Limited, Acting Houston Agency.
30. Leasehold Deed of Trust and Security Agreement, dated as of
October 1, 1989, among Panda-Rosemary Corporation, The Fuji
Bank & Trust Company and Patricia B. Carter as Trustee.
31. First Modification to the Leasehold Deed of Trust and
Security Agreement, dated as of December 29, 1989, among the
Panda-Rosemary Corporation, The Fuji Bank & Trust Company
and Patricia B. Carter as Trustee.
32. Second Modification to the Leasehold Deed of Trust and
Security Agreement, dated as of April 3, 1990, among the
Panda-Rosemary Corporation, The Fuji Bank & Trust Company,
and Patricia B. Carter as Trustee.
33. Third Modification to the Leasehold Deed of Trust and
Security Agreement, dated as of July 12, 1990, among the
Panda-Rosemary Corporation, The Fuji Bank & Trust Company,
and Patricia B. Carter as Trustee.
34. Loan Agreement, dated as of October 1, 1989, between Panda-
Rosemary Corporation and Halifax Regional Economic
Development Corporation.
35. Letter of Representation and Indemnification, dated October
18, 1989, from the Panda-Rosemary Corporation to the Halifax
Regional Economic Development Corporation and Morgan Stanley
& Co. Incorporated and Eppler Guerin & Turner.
36. Subordinated Loan Agreement, dated as of October 1, 1989,
between Panda-Rosemary Corporation and Heller Financial,
Inc.
37. Subordinated Note, dated October 27, 1989, by Panda-Rosemary
Corporation to Heller Financial, Inc.
38. Amended and Restated Net Profits Share Agreement, dated as
of October 1, 1989, by and between Panda-Rosemary
Corporation and Heller Financial, Inc.
39. Subordinated Loan Agency Agreement, dated October 20, 1989,
between Panda-Rosemary Corporation and NCNB Bank of North
Carolina.
40. Memorandum of Agreement and Option to Purchase, dated May 8,
1990, by and among Panda Energy Corporation, Panda-Rosemary
Corporation and North Carolina Natural Gas Clearinghouse,
filed at Book 1477, Page 484, Halifax County Registry and at
Book 669, Page 301, Northampton County Registry, North
Carolina.
41. Right of way Encroachment Agreement dated March 8, 1990, by
and between the North Carolina Department of Transportation
and Panda-Rosemary Corporation, permitting the pipeline to
cross under NC 48 and NC 125 in Halifax County.
42. Right of Way Encroachment Agreement dated February 2, 1990,
by and between the North Carolina Department of
Transportation and Panda-Rosemary Corporation, permitting
the pipeline to cross Highway 9 and State Roads 1201, 1202
and 1203.
43. Right of Way Encroachment Agreement dated March 27, 1990, by
and between the North Carolina Department of Transportation
and Panda-Rosemary Corporation, permitting the pipeline to
cross under I-95 South at NC 46.
44. Right of Way Encroachment Agreement dated April 18, 1990,
from the City of Roanoke Rapids to Panda-Rosemary
Corporation along city-owned streets and crossing city-owned
streets for the 9.6 mile natural gas pipeline.
45. Easement, dated April 26, 1990, from the State of North
Carolina to Panda-Rosemary Corporation for under water
natural gas pipeline.
46. Virginia Electric and Power Company Right-of-Way
Encroachment and Easement Agreement dated as of May 11,
1990, between the Virginia Electric and Power Company and
Panda-Rosemary Corporation.
47. Release Deeds dated October 24 , 1989, by and between Ashley
L. Hogewood, Jr., Trustee, Heller Financial, Inc. and Panda-
Rosemary Corporation.
48. J.W. Crew Estate Fee Simple Conveyance to Panda-Rosemary
Corporation for the Pleasant Hill Metering Station, dated
April 16, 1990, and recorded in Book 669, page 358,
Northampton Public Registry .
49. Waiver, Release, Attornment and Nondisturbance Agreement
from Citicorp North America, Inc. re: facility site as
amended by Amendment Number One dated February 2l, 1990 and
Amendment Number Two, dated , 1990.
50. Easement from The Bibb Company dated April 30, 1990, re: the
Patterson Plant site.
51. Easement from James W. Mullis dated April 25, 1990, re: the
closed portion of 8th Street.
52. Pipeline Crossing Agreement dated as of May 9, 1990, by and
between CSX and Panda-Rosemary Corporation, re: eight
pipelines or duct work.
53. Wireline Crossing Agreement dated as of May 10, 1990, by and
between CSX and Panda-Rosemary Corporation, re: two wires or
cable.
54. Pipeline Crossing Agreement dated as of May 11, 1990, by and
between CSX and Panda-Rosemary Corporation, re: a pipeline
or duct work.
55. Right-of-Way/Easements with respect to the pipeline from the
following entities and individuals:
Tract Owner
NH-1A.1 J.W. Crew Estate
NH-1A.1A J.W. Crew Estate
NH-1A.2 J.W. Crew Estate
NH-1A J.W. Crew Estate
NH-1B J.W. Crew Estate
NH-1C Champion International Corp.
NH-2 Priscilla Cotton
NH-3 Julie F. Ingram
NH-4 Waverly C. Hardy Estate
NH-5 Julie F. Ingram
NH-6A Champion International Corp.
NH-6B Champion International Corp.
NY-7 Champion International Corp.
NH-8A J.T. Hargrave Jr.
NH-8B Planter Nat'l Bank & Trust
NH-9 J.T. Hargrave Jr.
NH-10 Mary C. (Suiter) Memory
NH-11 Intentionally omitted
NH-12 R.W. Jordan Estate
NH-13A Ernest Elton Odom
NH-13B Ernest Elton Odom
NH-14 Nina T. Hawkins Estate
NH-15 Albert Ray Tudor
NH-16 Nina T. Hawkins Estate
NH-17 Nina T. Hawkins Estate
NH-18 Tudor et ux
NH-19 J.H. Harris Estate
Nh-20 J.A. Suiter Estate
NH-21 W.J. Long
NH-22 W.J. Long
NH-23 Champion International Corp.
NH-24 Champion International Corp.
H-l Virginia Electric and Power Company
(corridor)
56. Engineering Services Contract, dated February 21, 1991,
between Panda-Rosemary Corporation and Ford, Bacon & Davis,
Inc.
57. C.H. Guernsey & Company, dated July 7, 1989 (Panda-Rosemary
Corporation's Consulting Engineering Firm for the Facility).
58. Purchase Orders attached hereto as Exhibit A.
SCHEDULE B
TO THE BILL OF SALE AND
ASSIGNMENT AND ASSUMPTION AGREEMENT
Personal Property Leases
With Annual Rents in Excess of
$200,000
None exist as of the date hereof.
SCHEDULE C
TO THE BILL OF SALE AND
ASSIGNMENT AND ASSUMPTION AGREEMENT
PAGE 1 OF 2
Permits With the Corporation
as Sole Permittee
1. Conditional Use Permit for Panda Energy Corporation,
approved May 1, 1989 - City of Roanoke Rapids.
2. Approval of the Application for Approval of Plans and
Specifications for Water Supply Systems (extension of water
main under North Carolina State Highway 48 - Roanoke Avenue)
- State of North Carolina.
3. Privilege License - City of Roanoke Rapids.
4. Right-of-way encroachment agreement to construct water pipes
extending to and connecting with existing water main under
State Highway (North Carolina State Highway 48 - Roanoke
Avenue) - State of North Carolina.
5. Wastewater Discharge Approval - City of Roanoke Rapids
Sanitary District.
6. Permit to cross Interstate Highway (Interstate I-95) -
Federal Highway Administration and State of North Carolina.
7. Permit to cross State Highway (North Carolina State Highway
46) - State of North Carolina.
8. Permit to cross State Highway (North Carolina State Highway
48) - State of North Carolina.
9. Permit to cross State Highway (North Carolina State Highway
48 - Roanoke Avenue) - State of North Carolina.
10. Permit to cross State Highway (North Carolina State Highway
125 - 10th Street) - State of North Carolina.
11. Permit to cross S.R. 1201 - State of North Carolina.
12. Permit to cross S.R. 1202 - State of North Carolina.
13. Permit to cross S.R. 1203 - State of North Carolina.
14. NC DOT Driveway Permit - State of North Carolina.
SCHEDULE C
TO THE BILL OF SALE AND
ASSIGNMENT AND ASSUMPTION AGREEMENT
PAGE 2 OF 2
Permits With the Corporation
as Sole Permittee
15. Order Granting Application for Certification as a Qualifying
Cogeneration Facility, issued August 4, 1989 - FERC.
16. Radio Permits - Federal Communications Commission
a. Form 572C - Interim Permit in the name of the
Company.
b. Forms 1046 and 574.
17. Oil Terminal Facility Certificate - State of North Carolina.
EXHIBIT 10.60
ASSIGNMENT AND ASSUMPTION AGREEMENT
This ASSIGNMENT AND ASSUMPTION AGREEMENT is executed as
of this 6th day of January, 1992 by and between Panda Energy
Corporation, a Texas Corporation, (the "Assignor") and Panda-
Rosemary Corporation, a Delaware Corporation, (the "Assignee").
Capitalized terms not defined herein shall have the meanings
ascribed to them in the Second Amended and Restated Letter of
Credit and Reimbursement Agreement, dated as of January 6, 1992,
by and among Panda-Rosemary, L.P., a Delaware limited
partnership, The Fuji Bank Limited, acting through its Houston
Agency, as Agent and as issuing bank, and the banks which are
party thereto.
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
sufficiency of which are hereby acknowledged, Assignor and
Assignee hereby agree as follows:
1. ASSIGNMENT AND DELEGATION. Assignor hereby, and
immediately prior to the consummation of the transactions
contemplated by the Transfer Agreements, assigns, transfers,
delegates and conveys unto Assignee all of its right, title,
interest, duties and obligations with respect to those agreements
listed on Schedule A attached hereto (the "Assigned Agreements").
2. ASSUMPTION. Assignee hereby, and immediately
prior to the consummation of the transactions contemplated by the
Transfer Agreements, assumes and agrees to pay, perform, or
otherwise satisfy and discharge any and all debts, obligations
and liabilities of the Assignor under or with respect to any of
the Assigned Agreements, arising prior to or after the date
hereof.
IN WITNESS WHEREOF, the undersigned have executed this
Assignment and Assumption Agreement as of the date and year first
above written.
PANDA ENERGY CORPORATION
By:
Name: Robert A. Wolf
Title: Vice President
PANDA-ROSEMARY CORPORATION
By:
Name: Robert A. Wolf
Title: Vice President
SCHEDULE A
1. Lateral Line Interconnection and Reimbursement
Agreement dated as of August 1, 1990, between Assignor and
Transcontinental Gas Pipeline Corporation.
2. Service Agreement dated as of October 22, 1991
between Assignor and Transcontinental Gas Pipeline Corporation.
3. Confidentiality Agreement, dated June 5, 1991,
between Assignor and Natural Gas Clearinghouse.
4. ITS-1 Transportation Service Agreement, dated
April 4, 1991, between Columbia Gulf Transmission Company (acting
on behalf of Columbia Gas Transmission Corporation) and Assignor
(Contract No. 900614-003).
5. Fuel Oil Purchase Agreement, dated November 18,
1991, between Assignor and Natural Gas Clearinghouse.
EXHIBIT 10.61
POWER PURCHASE AGREEMENT
between
POTOMAC ELECTRIC POWER COMPANY and
PANDA-BRANDYWINE, L.P. dated
August 9, 1991
TABLE OF CONTENTS
ARTICLE I - Definitions 2
ARTICLE II - Term 11
2.1 Term 11
2.2 Extension of Term 11
ARTICLE III - Conditions to Purchase Obligations 12
3.1 Regulatory Approvals 12
3.2 Conditions Precedent 15
3.3 Timing for PEPCO's Response; Updates 19
ARTICLE IV - Financial Assurances 22
4.1 Development Security 22
4.2 Interconnection Security 24
4.3 Form of Development Security and
Interconnection Security 25
4.4 Extension to the Scheduled Commercial
Operation Date 26
4.5 Performance Security 27
4.6 Liquidated Damages 28
ARTICLE V - Sale and Purchase Obligations 29
5.1 Delivery of Electric Energy and
Capacity 29
5.2 Electric Characteristics 29
5.3 Interruption or Suspension of
Deliveries by PEPCO 29
5.4 Reduction 30
5.5 Maximum Emergency Generation Condition 30
ARTICLE VI - Compensation, Billing and Payment 31
6.1 Monthly Capacity Payment 31
6.2 Monthly Energy Payment 35
6.3 Loss of Qualifying Facility Status 54
6.4 Other Charges 55
6.5 Billing and Payment 55
6.6 Other Payments 56
ARTICLE VII - Pre-Operation Period 57
7.1 Facility Construction and Start-Up 57
7.2 Commencement Date 60
7.3 Actual Commercial Operation Date 60
ARTICLE VIII - Operation and Maintenance 62
8.1 Operation of Facility 62
8.2 Dependable Capacity; Testing of Capacity
Rating 62
8.3 Schedule and Dispatch of Generation 64
8.4 Annual Notice of Scheduled
Maintenance Outages 66
8.5 Routine Maintenance 66
8.6 Annual Maintenance and Inspection
Report 66
8.7 Maintenance Reserve 67
8.8 Special Operational Audits 69
8.9 Modification of Project and
Financing Documents 69
8.10 Operating Committee 70
ARTICLE IX - Interconnection 71
9.1 Interconnection and Transmission Facilities 71
9.2 Cost Estimate and Schedule for Design
Construction 71
9.3 Interconnection Costs 73
9.4 Protective Devices 73
9.5 Access to Facility and Site 74
9.6 Transmission Facilities 74
ARTICLE X - Metering 75
10.1 Metering Devices 75
10.2 Inspection of Metering Devices 75
10.3 Adjustments for Inaccurate Meters 76
ARTICLE XI - Representations, Warranties and
Additional Covenants of Seller and PEPCO's
Representations 77
11.1 Qualifying Facility 77
11.2 Fuel Supply and Transportation 77
11.3 Operating and Maintenance Standards 78
11.4 Effects on Voltage 78
11.5 Electrical Characteristics 78
11.6 Status and Authorization 78
11.7 Permits; Compliance with Laws 79
11.8 Certificates 80
11.9 Continuity of Existence 80
11.10 Books and Records; Information 80
11.11 PEPCO's Representations 80
ARTICLE XII - Taxes; Fines 81
12.1 Taxes 81
12.2 Fines 81
ARTICLE XIII - Insurance 82
13.1 Insurance Required 82
13.2 Substitute Coverages 84
13.3 Scope of Insurance 84
13.4 Evidence of Insurance 85
13.5 Application of Proceeds 85
13.6 Primary or Excess Insurance 85
ARTICLE XIV - Force Majeure 86
14.1 Effect of Force Majeure 86
14.2 Force Majeure Defined 86
14.3 Notification and Obligation to Remedy
the Cause of Force Majeure 86
14.4 Limitations on Force Majeure; Right
to Terminate 86
ARTICLE XV - Termination and Default 87
15.1 Event of Default 87
15.2 Remedies for Default 91
15.3 Termination Due to Market Forces 93
ARTICLE XVI - Indemnification and Liability 94
16.1 Indemnification 94
16.2 Consequential Damages 96
ARTICLE XVII - Dispute Resolution 96
17.1 Senior Officers 96
17.2 Maryland Commission 97
ARTICLE XVIII - Option to Purchase Facility; Rights
of First Refusal 97
18.1 Option to Purchase Transfer Interest 97
18.2 Right of First Refusal to Purchase
Transfer Interest 98
18.3 Right of First Refusal to Purchase
Interest in Seller 99
18.4 Seller's Right to Convey Transfer
Interest; Owner's Right to Convey
Seller Interest 100
18.5 Limitations on Option to Purchase and
Rights of First Refusal 101
18.6 PEPCO General Transfer Rights 101
ARTICLE XIX - Miscellaneous 103
19.1 Assignment 103
19.2 Notices 104
19.3 Choice of Law 104
19.4 Entire Agreement 104
19.5 Further Assurances 105
19.6 Waiver 105
19.7 Modification or Amendment 105
19.8 Severability 105
19.9 Counterparts 106
19.10 Confidential Information 106
19.11 Independent Contractors 106
19.12 Third Parties 107
19.13 Headings 107
19.14 Press Releases 107
19.15 Survival of Rights 107
19.16 Incorporated Provisions 107
19.17 Sections 108
ARTICLE XX - No Warranty of Facility by PEPCO 108
20.1 No Implied Warranty 108
APPENDICES
APPENDIX A - Description of Facility and Site
APPENDIX B - Sample Calculations
APPENDIX C - Guidelines and Performance Standards for
Parallel Operation of Customer Generation
Equipment on the PEPCO System
APPENDIX D - Testing Procedures for Determining Net
Capability
APPENDIX E - Metering Equipment
APPENDIX F - Interconnection and Communication Specification
APPENDIX G - Procedures for Determination of Fair Market
Value of Facility
APPENDIX H - Requirements With Respect to Fuel Supply
Arrangements
APPENDIX I - Generating Unit Event Reporting
APPENDIX J - Summary Specification for 230KV Overhead
Transmission Lines
APPENDIX K - Contributions to Maintenance Reserve Pursuant to
Subsection 8.7(b)(ii)
APPENDIX L - Capacity Rate
APPENDIX M - Natural Gas Reserve Commitment and Price
APPENDIX N - Equivalent Availability Factor ("EAF")
APPENDIX O - Equivalent Forced Outage Rate ("EFOR")
APPENDIX P - Valuation Procedures for PEPCO's
Buyout Rights under Subsection 18.6(b)(ii)
POWER PURCHASE AGREEMENT
This Agreement, dated as of August 9, 1991, by and
between Panda-Brandywine, L.P. ("Seller"), a Delaware Limited
Partnership, and Potomac Electric Power Company ("PEPCO"), a
District of Columbia and Virginia corporation, (referred to
hereinafter individually as "Party" and collectively as the
"Parties").
WITNESSETH:
WHEREAS, Seller proposes to design, construct,
operate and maintain an electric generating facility, with a
nominal rating of approximately 230,000 kilowatts to be
interconnected with PEPCO's electric transmission system, at
a site in Prince George's County, Maryland for the generation
and sale of electricity to PEPCO, such facility and site
being more specifically described in Appendix A hereto
(collectively, the "Facility");
WHEREAS, PEPCO desires to encourage and promote the
development of the lowest cost, reliable generation options,
including Qualifying Facilities, as part of its least cost
plans for meeting customer needs;
WHEREAS, Seller desires to sell to PEPCO, and PEPCO
desires to purchase from Seller, all the electricity
generated by the Facility for a period of twenty-five (25)
Years after the Actual Commercial Operation Date at the
rates and in accordance with the terms and conditions set
forth herein; and
WHEREAS, PEPCO's willingness to enter into this
Agreement and willingness to purchase electric power from the
Facility at the rates and in accordance with the terms and
conditions set forth herein in based upon the expectation
that the regulatory agencies with jurisdiction over PEPCO's
sales will determine that this Agreement is consistent with
PEPCO's least cost planning with respect to timing and costs.
NOW, THEREFORE, in consideration of these premises
and the mutual covenants set forth herein, the Parties hereby
agree that the following terms and conditions shall govern
Seller's sale and delivery of electricity from the Facility
to PEPCO and PEPCO's purchase and receipt of such electricity
from Seller:
ARTICLE I
DEFINITIONS
Unless otherwise defined herein or in any appendix
hereto, the following terms when used herein or in any
appendix hereto shall have the meanings set forth below. Such
meanings shall be applicable to both the singular and the
plural and to the masculine and the feminine forms of such
terms.
1.1 "Actual Commercial Operation Date" - The date
following the Day upon which Seller first successfully
completes the Net Capability test of the Facility pursuant to
Section 8.2 and has otherwise complied with all conditions
set forth in Section 7.3.
1.2 "Agreement" - This Power Purchase Agreement
including all appendices and amendments and supplements that
may be entered into by the Parties from time to time.
1.3 "Availability Market" or "AT" - The AT as
defined in Subsection 6.1(a).
1.4 "Available Capacity" - The Net Capability of
the Facility adjusted for ambient temperature as prescribed
in manufacturer's design specifications.
1.5 "Billing Period" - The approximately thirty
(30) Day period used for billing purposes pursuant to Article
VI hereof. This period will correspond as closely as
practicable to the Calendar Month.
1.6 "Business Day" - Monday through Friday
excluding holidays recognized by PEPCO. As of the date of
this Agreement, these holidays include New Year's Day, Martin
Luther King's Birthday, Inauguration Day, Washington's
Birthday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, Day after Thanksgiving, and Christmas Day.
Such holidays may be changed by PEPCO upon ten (10) Days'
written notice to Seller.
1.7 "Calendar Day" or "Day" - A Calendar Day shall
be the twenty-four (24) Hour period beginning and ending at
12:00 midnight Eastern Time.
1.8 "Calendar Month or "Month" - A Calendar Month
shall begin at 12:00 midnight on the last Day of the
preceding month and end at 12:00 midnight on the last Day of
the current month.
1.9 "Calendar Quarter" or "Quarter" - A Calendar
Quarter shall be a three (3) Month period beginning at 12:00
midnight on December 31, March 31, June 30, or September 30.
1.10 "Calendar Year" - A Calendar Year shall be
the twelve (12) Month period beginning at 12:00 midnight on
December 31 and ending at 12:00 midnight on the subsequent
December 31.
1.11 "CERCLA" - The Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C.
9601, et seq., as amended from time to time.
1.12 "Closing Date" - The date of the execution
and delivery of the Financing Documents for the construction
financing for the Facility, which in any event shall not be
earlier than the Scheduled Closing Date.
1.13 "Columbia Gas System" - The Columbia Gulf
Transmission Company and the Columbia Gas Transmission
Corporation, or any successors thereto.
1.14 "Columbia Gas Transmission Corporation" -
The Columbia Gas Transmission Corporation or any successor
thereto.
1.15 "Columbia Gulf Transmission Company" - The
Columbia Gulf Transmission Company or any successor thereto.
1.16 "Columbia LNG" - The Columbia LNG
Corporation or any successor thereto.
1.17 "Commencement Date" - The first date energy
is generated by the Facility and is metered by the PEPCOowned
metering equipment.
1.18 "Construction Start Date" - The date when
continuing work has started on the Facility with the pouring
of concrete foundations for the structures to be erected and
the equipment to be installed at the Site.
1.19 "Contract Year" - A Contract Year shall be
the twelve (12) Month period beginning on the first Day of
the first Month following the Actual Commercial Operation
Date (provided, however, that if the Actual Commercial
Operation Date occurs on the first Day of a Month, then the
first Contract Year shall begin on the Actual Commercial
Operation Date), and on each succeeding anniversary thereof,
and provided further that the last Contract Year shall end at
the end of the Term.
1.20 "Critical Path Method Schedule" or "CPM
Schedule" - The milestone schedule required pursuant to
Subsection 7.1(c).
1.21 "Dependable Capacity" - The capacity
expressed in kilowatts committed by Seller to PEPCO for the
Term and determined in accordance with Section 8.2.
1.22 "Development Security" - The security
provided by the Seller pursuant to Section 4.1.
1.23 "Dispatch Payment" - The payment for Net
Electrical Output from the Second and Fourth Dispatch
Segments in any given Billing Period calculated in accordance
with Subsection 6.2(b)(iii).
1.24 "Dispatchable Portion" - The portion of the
Facility's capacity and the Net Electrical Output associated
therewith under the sole direction and control of PEPCO's
dispatchers, which portion consists of all of the Dependable
Capacity in excess of the Limited Dispatch Portion and shall
equal one hundred and forty (140) MW at 92 degrees F. and fifty
percent (50%) relative humidity.
1.25 "District of Columbia Commission" - The
Public Service Commission of the District of Columbia or any
successor thereto.
1.26 "Effective Date" - The date set forth in the
first paragraph of this Agreement.
1.27 "Emergency Condition" - A condition or
situation which in PEPCO's sole judgment presents an imminent
physical threat of danger to life, health or property or
could cause a significant disruption on the PEPCO System and
could adversely affect PEPCO's ability to meet its
obligations to provide safe, adequate, and reliable electric
service to its customers including, but not limited to, other
utilities with which PEPCO is interconnected or the PJM Pool.
1.28 "Engineering Procurement & Construction
Contractor" or "EPC Contractor" - The firm or firms retained
by Seller for the purpose of engineering, procurement,
construction and testing of the Facility.
1.29 "Equivalent Availability Factor" or "EAF" -
The availability of the Facility to produce kilowatt-hours of
electrical energy during any period, to be determined as set
forth in Appendix N attached hereto.
1.30 "Equivalent Forced Outage Rate" or "EFOR" -
The equivalent forced outage rate of the Facility as
determined in accordance with Appendix O attached hereto.
1.31 "Extended Scheduled Commercial Operation
Date" - The date to which the Scheduled Commercial Operation
Date has been extended upon the Seller's compliance with the
requirements of Section 4.4.
1.32 "Event of Default" - Shall be defined as set
forth in Sections 15.1 and 18.3 and Appendix H attached
hereto.
1.33 "Facility" - Seller's generation facility
including the Site, auxiliary equipment and equipment located
on the Site as more specifically described in Appendix A, and
including Seller's equipment required by Appendices C, E and
F.
1.34 "Federal Power Act" - The Federal Power Act,
16 U.S.C. 791a et seq., as amended from time to time.
1.35 "FERC" - The Federal Energy Regulatory
Commission or any successor thereto.
1.36 "Financier Period" - Shall be defined as set
forth in Subsection 15.2(b)(i).
1.37 "Financing Documents" - The loan agreements
(including any subordinated debt), notes, bonds, indentures,
security agreements, and other documents relating to the
construction financing and/or the permanent financing for the
Facility, including any refinancing documents and any and all
amendments and supplements to the foregoing that may be
entered into from time to time.
1.38 "Financing Parties" - Any and all lenders
providing the construction financing and/or the permanent
financing for the Facility, pursuant to the Financing
Documents.
1.39 "First Dispatch Segment" - Shall be defined
as set forth in Subsection 6.2(b)(i).
1.40 "Force Majeure" - An event, condition or
circumstance as specified by Section 14.2.
1.41 "Fourth Dispatch Segment" - Shall be defined
as set forth in Subsection 6.2(b)(i).
1.42 "Fuel" - The primary fuel to be used by the
Facility will be natural gas. The Facility will use No. 2
fuel oil as an alternate fuel.
1.43 "Fuel Supply Contract(s)" - The contracts
entered into, or to be entered into, by Seller for the supply
of, and transportation of, Fuel for the Facility.
1.44 "Fuel Supply Plan" - Seller's plan for
providing Fuel for the Facility to ensure the operation of
the Facility in accordance with the terms and provisions of
this Agreement. The Fuel Supply Plan shall include, but not
be limited to, Seller's proposed Fuel supply and
transportation arrangements, and Seller's plans to facilitate
use of the most economic Fuel.
1.45 "GNP Deflator" - The implicit price deflator
associated with the Gross National Product ("GNP") as
normally published by the United States Department of
Commerce for each Quarter or, if the quarterly GNP deflator
is no longer published, such other substitute index that
measures quarterly or annual inflation in prices for goods
and services in the United States as the Parties shall
mutually agree upon.
1.46 "Hour" - A period of sixty (60) consecutive
minutes commencing at 12:00 midnight Eastern Time, or
commencing at the end of such consecutive sixty (60) minute
period or at the end of a subsequent consecutive sixty (60)
minute period.
1.47 "Independent Engineer" - The consulting
engineering firm or professional engineer retained by the
Seller or the Financing Parties and approved by PEPCO, which
approval shall not be unreasonably withheld.
1.48 "Interconnection Costs" - PEPCO's costs and
expenses associated with the construction and installation of
the Interconnection Facilities in accordance with the terms
and conditions set forth in Article IX, including but not
limited to any applicable allowance for funds used during
construction, any PEPCO income tax obligation
(including the tax on tax effect, if any), and the reasonable
costs incurred by PEPCO to remedy or mitigate any system
stability risks to the PEPCO System caused or contributed to
by the Facility.
1.49 "Interconnection Facilities" - All the
facilities (except for any Transmission Facilities)
determined to be necessary by PEPCO in accordance with
Prudent Utility Practices to enable PEPCO to receive Net
Electrical Output and Dependable Capacity from the Facility
and to maintain the stability of the PEPCO system, including
but not limited to, all metering devices, transformers and
associated equipment, communications equipment, relay and
switching equipment, circuit breakers and other protective
devices and safety equipment, and telecommunications
equipment, wherever located.
1.50 "Interconnection Plan" - The plan for the
construction and installation of the Interconnection
Facilities, including the estimates of the Interconnection
Costs, prepared by PEPCO in accordance with the terms and
conditions set forth in Article IX.
1.51 "Interconnection Point" - The physical point
at PEPCO's Burches Hill Substation where the Transmission
Facilities and the PEPCO System are connected, or such other
point as the Parties may agree.
1.52 "Interconnection Security" - The security
provided by Seller pursuant to Section 4.2.
1.53 "Limited Dispatch Portion" - The portion of
the Facility's capacity and the Net Electrical Output
associated therewith over which PEPCO has limited dispatch
control. The Limited Dispatch Portion shall consist of up to
approximately eighty-five percent (85%) of the maximum
capability of the Facility and the Net Electrical Output
associated therewith with one combustion turbine operating
and shall equal ninety (90) MW at 92 degrees F. and fifty percent
(50%) relative humidity.
1.54 "Maintenance Reserve" - The Maintenance
Reserve fund described in and maintained in accordance with
Section 8.7.
1.55 "Maryland Commission" - The Maryland Public
Service Commission or any successor thereto.
1.56 "Maximum Emergency Generation Condition" - A
period in which PEPCO has determined that it needs the
maximum attainable Net Electrical Output from the Facility as
a result of an emergency shortage of electric capacity or
energy as declared by the PEPCO dispatcher or for such other
periods as the Parties may mutually agree upon.
1.57 "MBtu" - One million (1,000,000) British
thermal units.
1.58 "Maximum Generation Emergency Condition" - A
light load period declared by the PEPCO dispatcher.
1.59 "Monthly Capacity Payment" - The payment
PEPCO will pay Seller each Billing Period for Dependable
Capacity calculated in accordance with Section 6.1.
1.60 "Monthly Energy Payment" - The payment PEPCO
will pay Seller each Billing Period for the Net Electrical
Output of the Facility calculated in accordance with Section
6.2. The Monthly Energy Payment shall consist of the sum of
the Dispatch Payment, Unit Commitment Payment, and Simple
Cycle Energy Payment.
1.61 "MW" - Megawatt.
1.62 "MWH" - Megawatt-hour.
1.63 "Net After-Tax Cash Flow" - The sum equal to
the net cash flow from the operation of the Facility (all
revenues net of all direct and indirect expenses, including
but not limited to operation and maintenance expenses
incurred in good faith and debt service and any debt reserve
funding requirements, and excluding as an expense,
depreciation, amortization or other non-cash expenditures)
available to Seller for distribution to its partners minus
the Seller's effective Federal and State income taxes as
determined in accordance with generally accepted accounting
principles consistently applied.
1.64 "Net Capability" - The capacity expressed in
kilowatts or megawatts from the Facility metered by the PEPCO-
owned metering equipment as established in accordance with
Appendix D.
1.65 "Net Electrical Output" - The electric
energy output of the Facility net of station use in kilowatt
hours metered by the PEPCO-owned metering equipment and
delivered at the Interconnection Point.
1.66 "Operating Committee" - The Committee
established in accordance with Section 8.10.
1.67 "PEPCO" - The Potomac Electric Power Company
or any successor thereto.
1.68 "PEPCO System" - The bulk power network
controlled or used by PEPCO for the purpose of generating,
transmitting, and distributing electricity to PEPCO's
customers.
1.69 "Performance Security" - The security
provided by Seller pursuant to Section 4.5.
1.70 "PJM Agreement" - The Pennsylvania-New
Jersey Maryland Interconnection Agreement, made among the
members of the PJM Pool, providing, inter alia, for
coordinated planning and operation of the members' systems in
order to enhance the efficiency, economy, and reliability of
electrical service in the Mid-Atlantic Region, as it may be
amended or superseded from time to time.
1.71 "PJM Pool" - The power pool comprised of
various electric utility systems in the Mid-Atlantic Region,
including PEPCO, serving customers in the States of Maryland,
New Jersey, and Delaware, the Commonwealths of Virginia and
Pennsylvania, and the District of Columbia, or any other
power pool in which PEPCO may be included hereafter.
1.72 "Prudent Utility Practices" - The practices
generally followed by the United States electric utility
industry with respect to the design, construction, operation,
and maintenance of electric generating, transmission, and
distribution facilities (including, but not limited to, the
engineering, operating, and safety practices generally
followed by the electric utility industry).
1.73 "PURPA" - The Public Utility Regulatory
Policies Act of 1978, Pub. L. No. 95-617, as amended from
time to time.
1.74 "Qualifying Facility" - A cogeneration
facility or a small power production facility which is a
qualifying facility within the meaning of the FERC
regulations implementing PURPA set forth in Part 292 of Title
18 of the Code of Federal Regulations, as in effect from time
to time.
1.75 "RCRA" - The Resource Conservation and
Recovery Act of 1976, 42 U.S.C. 6901, et seq., as amended
from time to time.
1.76 "Reduction" - The reduction or interruption
of Net Electrical Output by Seller at PEPCO's request
pursuant to Section 5.4.
1.77 "Scheduled Closing Date" - The date on which
Seller, by at least one hundred (100) Days' prior written
notice to PEPCO, projects that the Closing Date will occur.
1.78 "Scheduled Commencement Date" - The
scheduled commencement date specified by Seller pursuant to
Subsection 7.1(c)(viii) in the initial CPM Schedule, as such
date is confirmed pursuant to Subsection 9.2(a).
1.79 "Scheduled Commercial Operation Date" -
June 1, 1996.
1.80 "Scheduled Outage" - A planned interruption
of the Facility's generation that has been coordinated in
advance with PEPCO with a mutually agreed start date and
duration pursuant to Section 8.4 and that is required for
inspection, preventive maintenance, or corrective maintenance
of the Facility.
1.81 "Second Dispatch Segment" - Shall be defined
as set forth in Subsection 6.2(b)(i).
1.82 "Seller" - Panda-Brandywine, L.P., a
Delaware Limited Partnership.
1.83 "Simple Cycle Energy Payment" - The payment
for Net Electrical Output during periods when the Facility is
dispatched in simple cycle mode (i.e., when the steam turbine
is not available), calculated in accordance with Subsection
6.2(b)(iv)
1.84 "Site" - The parcel of land upon which the
Facility is to be constructed and located.
1.85 "Start-up Energy" - The electric energy
delivered at the Interconnection Point associated with the
start-up testing of the Facility prior to the Actual
Commercial Operation Date as metered by the PEPCO-owned
metering equipment.
1.86 "Steam Supply Contract" - The contract(s)
entered into by Seller and an industrial host for the sale
of thermal energy produced by the Facility.
1.87 "Summer Period" - The Months of June, July
and August.
1.88 "Term" - The period of this Agreement as
specified in Section 2.1 hereof, plus any extension thereof
in accordance with Section 2.2.
1.89 "Test Energy" - The electric energy
delivered at the Interconnection Point associated with the
testing of the Facility following the Actual Commercial
Operation Date as metered by the PEPCO-owned metering
equipment.
1.90 "Third Dispatch Segment" - Shall be defined
as set forth in Subsection 6.2(b)(i).
1.91 "Transco System" - The Transcontinental Gas
Pipe Line Corporation or any successor thereto.
1.92 "Transfer Interest" - All or any portion of
Seller's right, title or interest in the Facility and/or the
Site, which Seller proposes to sell, transfer, convey or
otherwise dispose of, whether upon Seller's own initiative,
or in response to a bona fide offer received by Seller from a
third party, or otherwise.
1.93 "Transmission Facilities" - The transmission
lines and associated equipment for connecting the Facility at
the line side of the Facility's line disconnect switch to the
line side of the line disconnect switch at PEPCO's Burches
Hill 230 kV Substation.
1.94 "Transmission Facilities Plan" - The plan
for construction of the Transmission Facilities to be
prepared by Seller and approved by PEPCO pursuant to Section
9.6.
1.95 "Transmission Facilities Site" - The
parcel(s) of land upon which the Transmission Facilities are
to be constructed and located.
1.96 "Unit Commitment Payment" - The payments
associated with commitment of the Facility's First Dispatch
Segment and Third Dispatch Segment calculated in accordance
with Subsection 6.2(b)(ii).
1.97 "Week" - A period of seven (7) consecutive
Days beginning at 12:00 midnight on Sunday and ending at
12:00 midnight on the following Sunday.
1.98 "Winter Period" - The Months of December,
January and February.
1.99 "Year" - A Year shall be the three hundred
and sixty-five (365) Day period beginning at 12:00 midnight
on the Day before the first Day of such period and ending at
12:00 midnight on the 365th Day of such period, provided that
a Year in which there is a February 29th shall consist of
three hundred and sixty-six (366) Days.
ARTICLE II
TERM
2.1 Term. This Agreement shall become effective
as of the Effective Date, and shall continue in effect for an
initial period ending on the date that is twenty-five (25)
Years from the Actual Commercial Operation Date, unless
otherwise extended or terminated in accordance with the
provisions set forth herein.
2.2 Extension of Term. If PEPCO requests an
extension of this Agreement prior to two (2) Years before the
end of the then current Term, Seller shall enter into good
faith negotiations with PEPCO to reach an extension agreement
on terms and conditions acceptable to each Party in its sole
discretion, and Seller shall not negotiate with any other
person for such purpose unless no such extension agreement
has been reached as of one (1) Year prior to the end of the
then current Term.
ARTICLE III
CONDITIONS TO PURCHASE OBLIGATIONS
3.1 Regulatory Approvals.
(a) PEPCO's obligation to purchase, accept and pay
for Dependable Capacity and Net Electrical Output pursuant to
Articles V and VI shall not commence until (i) PEPCO's
receipt of final, nonappealable orders from the Maryland
Commission and the District of Columbia Commission, each in
form and substance satisfactory to Seller and PEPCO, each in
its sole discretion, finding that the need for and the timing
of the Facility are consistent with PEPCO's least cost
planning, finding that the payments for energy and capacity
purchases from the Facility by PEPCO pursuant to the terms of
this Agreement are equal to or less than PEPCO's avoided
costs, and approving this Agreement, (ii) PEPCO's receipt of
all other governmental or regulatory approvals required by
PEPCO in connection with its execution and performance of
this Agreement in form and substance satisfactory to Seller
and PEPCO, each in its sole discretion, and (iii) Seller's
receipt of all other governmental or regulatory approvals
required by Seller in connection with its execution and
performance of this Agreement in form and substance
satisfactory to Seller and PEPCO (as determined by each Party
in accordance with the standards set forth in Subsection
3.1(b)). The Parties hereto agree to seek all such
regulatory approvals expeditiously and to use all reasonable
efforts to obtain approval of the Agreement from the Maryland
Commission and the District of Columbia Commission.
(b) For purposes of the governmental or regulatory
approvals to be received by Seller referred to in Subsection
3.1(a)(iii) (other than any approval for the Transmission
Facilities or any air permit for the Facility from the
Maryland Department of Environment's Air Management
Administration), any such approval shall be satisfactory to a
Party unless such Party reasonably determines that such
approval would materially impair the operation of the
Facility by Seller as a facility that is dispatchable by
PEPCO in accordance with the terms and provisions of this
Agreement or would otherwise materially impair PEPCO's rights
in accordance with the terms and provisions of this
Agreement. Any governmental or regulatory approval required
for the Transmission Facilities (including, but not limited
to, any certificate of public convenience and necessity for
the Transmission Facilities from the Maryland Commission)
shall be satisfactory to a Party if such approval is
satisfactory to such Party in its sole discretion. The air
permit for the Facility from the Maryland Department of
Environment's Air Management Administration shall be
satisfactory to a Party if such permit satisfies the standard
set forth in the first sentence of this Subsection 3.1(b)
and, additionally in the case of PEPCO, if such permit does
not materially impair any existing air permit for any
existing or planned facility issued to PEPCO prior to the
Effective Date.
(c) Upon receipt by PEPCO or Seller of any order
or approval described in Subsection 3.1(a) above, such Party
shall promptly transmit to the other Party a copy of such
order or approval. Within thirty (30) Days of the date of
such transmittal, each Party shall give notice to the other
Party whether it deems the terms and conditions of such order
or approval to be satisfactory in accordance with the
standards set forth for its review of such order or approval
in the relevant subpart of Subsection 3.1(a) and, if
applicable, Subsection 3.1(b). If a Party determines that
any such order or approval does not satisfy such standards,
such Party shall include with its notice a brief written
explanation of the basis for its determination, unless the
determination of whether such order or approval was
satisfactory was left to the sole discretion of the Party, in
which case no written explanation shall be required.
(d) If the orders identified in Subsection
3.1(a)(i) have not been received and accepted by the Parties
in accordance with Subsections 3.1(a)(i) and 3.1(c) by June
1, 1992, either Party shall have the right to terminate this
Agreement immediately without any further liability hereunder
by providing written notice of such termination to the other
Party within thirty (30) Days of June 1, 1992.
(e) (i) On or before April 1, 1992, PEPCO shall
provide to Seller for informational purposes a list of all
governmental or regulatory approvals to be obtained by PEPCO
in connection with PEPCO's execution and performance of this
Agreement that are within the scope of Subsection 3.1(a)(ii).
This list shall indicate the status of each such approval
(i.e., whether such approval has been received and accepted
by PEPCO pursuant to Subsections 3.1(a)(ii) and 3.1(c),
whether an application is pending for such approval, or the
approximate time when PEPCO contemplates applying for and
receiving such approval). PEPCO shall have the right to
revise the list of governmental or regulatory approvals
submitted to Seller under this Subsection 3.1(e) at any time
to include any additional governmental or regulatory
approvals required to be obtained by PEPCO in connection with
its execution and performance of this Agreement, provided
that the requirement to obtain any such additional approval
was imposed after the submittal of the list under this
Subsection 3.1(e).
(ii) When PEPCO receives any governmental
or regulatory approval specified in the list provided by
PEPCO to Seller pursuant to Subsection 3.1(e)(i), as such
list may be revised by PEPCO pursuant to such subsection,
PEPCO shall notify Seller whether it considers such approval
to be satisfactory in form and substance in its sole
discretion in accordance with the procedures set forth in
Subsection 3.1(c). If PEPCO notifies Seller that any such
approval that is in final and nonappealable form is not
satisfactory to PEPCO, PEPCO may terminate this Agreement
immediately by written notice to Seller given within ten (10)
Days after the date of the notice that such approval was not
satisfactory.
(iii) On or before thirty (30) Days prior
to the Scheduled Closing Date, PEPCO shall advise Seller of
the status of any remaining governmental or regulatory
approvals specified in the list provided by PEPCO to Seller
pursuant to Subsection 3.1(e)(i), as such list may be revised
by PEPCO pursuant to such subsection, for which PEPCO has not
provided Seller notice under Subsection 3.1(c). If PEPCO has
not obtained any such approval in form and substance
satisfactory to PEPCO in its sole discretion on or before the
Closing Date, then PEPCO, by written notice given to Seller
at any time prior to the Closing Date, may terminate this
Agreement.
(iv) If PEPCO terminates this Agreement
pursuant to this Subsection 3.1(e), neither Party shall have
any further liability to the other Party, except that PEPCO
shall return or release, as the case may be, the Development
Security, and the accumulated interest thereon, to Seller
within thirty (30) Days after the date of such termination.
(f) Both Parties agree that the rates pursuant to
which PEPCO shall purchase Net Electrical Output and
Dependable Capacity from Seller hereunder constitute formula
rates established pursuant to this Agreement which must be
filed with, and approved by, the Maryland Commission in
accordance with Subsection 3.1(a)(i) as a condition precedent
to the commencement of PEPCO's obligation to purchase, accept
and pay for Dependable Capacity and Net Electrical Output
from Seller at such rates. The Parties further agree that in
the event that the facility loses its status as a Qualifying
Facility, they hereby (i) waive the right to make any
unilateral filing with the FERC under Section 205 of the
Federal Power Act, (ii) waive the right to submit any
complaint under Section 206 of the Federal Power Act which
seeks to modify or change this Agreement without the prior
consent of the other Party, and (iii) intend that FERC's
power to impose changes to this Agreement under Section 206
of the Federal Power Act be limited to circumstances in which
FERC finds that this Agreement is contrary to the public
interest.
3.2 Conditions Precedent. PEPCO's obligation to
purchase, accept and pay for Dependable Capacity and Net
Electrical Output pursuant to Articles V and VI of this
Agreement shall not commence until Seller has provided the
following material and information to PEPCO (or, in the case
of the information to be provided under Subsection
3.2(h)(vi), to PEPCO's fuel consultant) within the times
specified herein (unless previously provided to PEPCO) and
PEPCO has approved such material and information in
accordance with Section 3.3 (except that PEPCO's obligation
to purchase Start-up Energy shall not be subject to the
provision of the material and information identified in
Subsections 3.2(p) or (q)):
(a) As soon as available, but no later than one
hundred and eighty (180) Days after the last to occur of
receipt of (i) approval of this Agreement, with the findings
specified in Subsection 3.1(a)(i), by the Maryland Commission
and (ii) approval of this Agreement, with the findings
specified in Subsection 3.1(a)(i), by the District
of Columbia Commission:
(i) a copy of Seller's water supply plan for
the Facility;
(ii) a copy of Seller's waste disposal plan
for the Facility;
(iii) a Phase 1 EPA environmental assessment
of the Site and the portion of the Transmission
Facilities Site that is not on property owned by PEPCO
as of the Effective Date (including, but not limited to,
identification of the presence of any polychlorinated
biphenyls, materials stored in underground storage
tanks, hazardous wastes within the meaning of RCRA and
hazardous substances within the meaning of CERCLA);
(iv) information and analyses reasonably
satisfactory to PEPCO demonstrating that the Site and
the Transmission Facilities Site and construction and
operation of the Facility and the Transmission
Facilities shall comply with all applicable
environmental requirements;
(v) a copy of the Fuel Supply Plan for the
Facility;
(vi) a report of the Independent Engineer to
the effect that the Facility can be constructed in
accordance with Prudent Utility Practices and the other
requirements of this Agreement; and
(vii) a report from an independent third party
knowledgeable in the operation and maintenance of a
generating facility such as the Facility and mutually
acceptable to the Parties that, given reasonable
assumptions as to costs and inflation, the projected
revenues under this Agreement throughout the Term will
be sufficient to cover the projected expenses to operate
and maintain the Facility in accordance with Prudent
Utility Practices throughout the Term.
(b) Within one hundred and twenty (120) Days after
the last to occur of receipt of (i) approval of this
Agreement, with the findings specified in Subsection
3.1(a)(i), by the Maryland Commission, and (ii) approval of
this Agreement, with the findings specified in Subsection
3.1(a)(i), by the District of Columbia Commission, the
initial CPM schedule as required pursuant to Subsection
7.1(c) of this Agreement.
(c) As soon as available, but no later than
September 1, 1992, a copy of Seller's application for an air
permit for the Facility from the Maryland Department of
Environment's Air Management Administration.
(d) As soon as available, but no later than
September 1, 1993, a copy of Seller's applications for a
water withdrawal permit for the Facility from the Maryland
Department of Environment and for either (i) a national
pollutant discharge elimination system permit for the
Facility from the Maryland Department of Environment or (ii)
a permit for the Facility in compliance with rules
promulgated pursuant to the pre-treatment effluent standards
of the Clean Water Act.
(e) The Development Security in the amounts and at
such times as required under Section 4.1.
(f) No later than ninety (90) Days prior to the
Scheduled Closing Date, a copy of the Seller's limited
partnership agreement.
(g) Beginning at least forty-five (45) Days prior
to the Scheduled Closing Date and continuing through the
Closing Date as required pursuant to Subsection 3.3(b) of
this Agreement, copies of the current drafts of those
Financing Documents which include provisions that may affect
PEPCO's rights under this Agreement, or for which the
Financing Parties will request PEPCO's consent.
(h) At least thirty (30) Days prior to the
Scheduled Closing Date:
(i) an air permit for the Facility from the
Maryland Department of Environment's Air Management
Administration;
(ii) a water withdrawal permit from the
Maryland Department of Environment and either (A) a
national pollutant discharge elimination system permit
for the Facility from the Maryland Department of
Environment, or (B) a permit for the Facility in
compliance with rules promulgated pursuant to the pre
treatment effluent standards of the Clean Water Act;
(iii) a final and nonappealable FERC order
certifying that the Facility is a Qualifying Facility
pursuant to the Optional Certification Procedure
established in Section 292.207(b) of Subpart A of the
FERC Regulations issued pursuant to Sections 201 and 210
of PURPA, as in effect from time to time;
(iv) (A) a special exception or other zoning
approval from Prince George's County, Maryland, if
necessary, for Seller to construct and operate the
Facility on the Site and (B) a special exception or
other zoning approval from Prince George's County,
Maryland, and/or a certificate of public convenience and
necessity from the Maryland Commission, if necessary,
for Seller to construct and operate the Transmission
Facilities prior to the transfer of the Transmission
Facilities to PEPCO pursuant to Subsection 7.3(a)(v) and
for PEPCO's initial operation of the Transmission
Facilities subsequent to such transfer;
(v) Seller's plan for obtaining all material
governmental and regulatory approvals required for
operation of the Facility in accordance with this
Agreement that Seller has not obtained, or does not
anticipate obtaining, prior to the Closing Date;
(vi) copies of all executed Fuel Supply
Contract(s) and other commitments then in existence to
implement the Fuel Supply Plan for the Facility, and all
information required to be provided under Appendix H,
shall be delivered to the fuel consultant selected by
PEPCO in accordance with the provisions of Subsection
3.3(e);
(vii) a report of the Independent Engineer,
to the effect that: (A) the Facility can be constructed
in accordance with Prudent Utility Practices and the
other engineering, construction and performance
requirements of this Agreement (updating and confirming
the report provided pursuant to Subsection 3.2(a)(vi)),
(B) it is technically feasible for the Actual Commercial
Operation Date to occur on or before the Scheduled
Commercial Operation Date, and (C) the Facility's useful
life is at least equal to the initial twenty-five (25)
Year Term;
(viii) a report from an independent third party
knowledgeable in the operation and maintenance of a
generating facility such as the Facility and mutually
acceptable to the Parties updating and confirming the
report provided pursuant to Subsection 3.2(a)(vii);
(ix) a copy of the Steam Supply Contract
(edited to delete specific dollar amounts to be paid to
Seller); and
(x) a copy of all easements or rights of way
necessary: (A) for Seller to construct and operate the
Facility for the Term of this Agreement plus fifteen
(15) Years, (B) for Seller to construct the Transmission
Facilities (including environmental indemnifications to
PEPCO from the parties providing each such easement or
right of way satisfactory to PEPCO in its sole
discretion), (C) for PEPCO to install, operate,
maintain, replace and/or remove the metering devices
specified in Appendix E on Seller's side of the
Interconnection Point for the Term of this Agreement
plus fifteen (15) Years and (D) for PEPCO to operate the
Transmission Facilities for the Term of this Agreement
plus fifteen (15) Years. (i) Within thirty (30) Days
after the Closing Date:
(i) a copy of a deed or lease entitling
Seller to the use of the Site for a period of at least
forty (40) Years from the Actual Commercial Operation
Date; and
(ii) conceptual engineering drawings and the
specifications pertaining to the electric generators and
step-up transformers of the Facility, including
demonstrations that (A) the requirements for reactive
supply facilities at the Facility will be met, and (B)
the Facility will meet the guidelines and performance
standards for parallel operation set forth in Appendix
C.
(j) At least two (2) Years prior to the Scheduled
Commencement Date specific information necessary for
preparation of the Interconnection Plan required to be
provided by Seller pursuant to Subsection 9.2(a)
(k) At least fifteen (15) Days prior to the
Construction Start Date, certificates of insurance coverage
or insurance policies for the construction period required
under Subsection 13.1(a).
(l) At least thirty (30) Days prior to the
commencement of construction of the Interconnection
Facilities as indicated in the Interconnection Plan, the
Interconnection Security pursuant to Section 4.2.
(m) As soon as available, but no later than one
hundred and twenty (120) Days prior to the Commencement Date,
a copy of the operation and maintenance agreement for the
Facility (edited to delete specific dollar amounts to be paid
to the operator) or, if Seller is to operate the Facility,
Seller's plans and procedures for such operation.
(n) At least fifteen (15) Days prior to the
Commencement Date, certificates of insurance coverage or
insurance policies for the operation period required under
Subsection 13.1(b).
(o) Prior to the Actual Commercial Operation Date,
a certificate from the Independent Engineer to the effect
that the Facility has been designed and constructed in
accordance with (i) Prudent Utility Practices, (ii) the terms
of this Agreement and (iii) the design information submitted
pursuant to Subsection 3.2(i)(ii).
(p) Prior to the Actual Commercial Operation Date,
a certificate from the Independent Engineer to the effect
that the acceptance testing by the EPC Contractor hen been
substantially completed for the Facility.
(q) Within ten (10) Days after the Commencement
Date, written confirmation that such date has occurred.
3.3 Timing for PEPCO's Response; Updates.
(a) Except as otherwise explicitly provided in
this Agreement, PEPCO shall, within thirty (30) Days (one
hundred and twenty (120) Days in the case of Subsection
3.2(j), sixty (60) Days in the case of Subsection 3.2(i)(ii)
and forty-five (45) Days in the case of Subsections 3.2(a)
(v) and 3.2(h)(vi)), of receipt of any material or
information required to be delivered by Seller pursuant to
Subsections 3.2(a) through (f), Subsections 3.2(h)(v) through
3.2(h)(x), or Subsections 3.2(i) through (q), respectively,
review and approve or disapprove (with written objections)
the material or information submitted. For purposes of such
review, PEPCO shall approve the material or information
submitted unless PEPCO reasonably determines that such
material or information would materially impair the operation
of the Facility by Seller as a facility that is dispatchable
by PEPCO in accordance with the terms and provisions of this
Agreement or would otherwise materially impair PEPCO's rights
in accordance with the terms and provisions of this
Agreement. Notwithstanding the foregoing, any environmental
indemnification to PEPCO from the parties providing each
easement or right of way for the Transmission Facilities (as
provided to PEPCO pursuant to Subsection 3.2(h)(x)(B)) must
be satisfactory to PEPCO in its sole discretion. The
regulatory approvals referred to in Subsections 3.2(h)(i)
through 3.2(h)(iv) shall be subject to review and approval by
the Parties in accordance with Subsections 3.1(b) and 3.1(c).
(b) During the period beginning forty-five (45)
Days prior to the Scheduled Closing Date and ending twenty
five (25) Days prior to the Scheduled Closing Date, Seller
shall provide to PEPCO in a timely manner current drafts
(including revised drafts) of all Financing Documents
referred to in Subsection 3.2(g) of this Agreement that are
in a form reasonably satisfactory to Seller. During the
period beginning twenty-five (25) Days prior to the Scheduled
Closing Date and continuing through the Closing Date, Seller
shall provide to PEPCO in a timely manner current drafts of
all Financing Documents referred to in Subsection 3.2(g) of
this Agreement, and all modifications to such drafts
(irrespective of whether such drafts and modified drafts are
in a form reasonably satisfactory to Seller). PEPCO shall
review drafts of Financing Documents submitted by Seller
pursuant to Subsection 3.2(g) and provide comments thereon to
Seller within a reasonable period of time, taking into
account the Scheduled Closing Date and the scope of the
material to be reviewed. PEPCO shall approve any Financing
Document unless PEPCO reasonably determines that such
Financing Document would materially impair PEPCO's rights in
accordance with the terms and provisions of this Agreement
(without regard to those terms and provisions of this
Agreement that subordinate PEPCO's rights to the rights of
the Financing Parties under Financing Documents reviewed and
approved by PEPCO), provided, however, that PEPCO shall not
be required to provide its final approval or disapproval of
any such Financing Document until the Closing Date.
Notwithstanding the foregoing: (i) PEPCO shall not be
required to provide its final approval or disapproval of any
Financing Document unless PEPCO has been provided at least
five (5) Business Days to review a final execution copy of
such Financing Document, and (ii) any Financing Document to
be executed by PEPCO (including, but not limited to, any
consent) shall be subject to approval by PEPCO in its sole
discretion.
(c) Seller shall, as soon as possible, provide
PEPCO with written notice of and, to the extent applicable,
copies of, any significant change made prior to the Actual
Commercial Operation Date in any material or information
previously submitted to PEPCO to fulfill any of the
requirements of Section 3.2, other than Subsection 3.2(g).
PEPCO shall use all reasonable efforts to review and approve
or disapprove such material or information pursuant to the
standard set forth in Subsection 3.3(a) as soon as possible
but in any case within thirty (30) Days after PEPCO's receipt
of such material or information (or such longer period of
time as is reasonably necessary taking into consideration the
nature and extent of the changes involved and Seller's timing
and need for PEPCO's review and approval). If Seller
materially changes or fails to implement any material or
information as previously provided to PEPCO pursuant to
Section 3.2 and approved by PEPCO, without receiving PEPCO's
written approval for such change or failure, PEPCO shall not
be bound by its prior review and approval of such material
and information, nor shall it have the obligation to commence
to purchase, accept and pay for the Dependable Capacity and
Net Electrical Output under this Agreement.
(d) During the period between the Closing Date and the
Actual Commercial Operation Date, (i) changes to any
Financing Documents that were submitted to PEPCO for review
and approval pursuant to Subsection 3.2(g) and Subsection
3.3(b), (ii) changes to any Financing Document that has been,
or is to be, executed by PEPCO, or (iii) any new or revised
provision added to a Financing Document or any new Financing
Document that affects PEPCO's rights under this Agreement or
for which the Financing Parties will request PEPCO's consent,
shall be subject to review and approval by PEPCO in
accordance with Subsection 8.9(b). If Seller has not
received PEPCO's prior written approval in accordance with
Subsection 8.9(b) for any such change or revision to any such
Financing Document or for any new such Financing Document,
PEPCO shall not be bound by its prior review and approval
pursuant to Subsection 3.3(b) of any such Financing Document,
nor shall it have the obligation to commence to purchase,
accept and pay for Dependable Capacity and Net Electrical
Output under this Agreement.
(e) PEPCO shall have the right to retain a consultant, which
is reasonably acceptable to Seller, to review the Fuel Supply
Plan, any Fuel Supply Contract(s), or any other contract or
arrangement to obtain Fuel for the Facility that is subject
to PEPCO's review and approval under Subsections 3.2(a)(v),
3.2(h)(vi), 3.3(a) and/or 3.3(c). Any such fuel consultant
shall execute a confidentiality agreement, in form and
substance reasonably satisfactory to Seller and PEPCO,
obligating the fuel consultant not to disclose any
confidential information obtained from Seller in connection
with the Fuel Supply Plan, any Fuel Supply Contract(s), or
any other contract or arrangement to obtain Fuel for the
Facility.
ARTICLE IV
FINANCIAL ASSURANCES
4.1 Development Security.
(a) At the times and in the amounts set forth
below, Seller shall provide to PEPCO a security deposit (the
"Development Security") in any form set forth in Section 4.3.
The Development Security shall be provided as follows:
(i) Within the later of one hundred and
twenty (120) Days after the Effective Date or sixty (60)
Days after receipt of the orders required under
Subsection 3.1(a)(i), one million one hundred fifty
thousand dollars ($1,150,000.00) (equal to the product
of five dollars ($5.00) per kilowatt multiplied by
230,000 kilowatts);
(ii) On or before December 1, 1993, and on or
before the first Day of every second Month thereafter through
June 1, 1995, an additional two hundred thirty thousand
dollars ($230,000.00) (equal to the product of one dollar
($1.00) per kilowatt multiplied by 230,000 kilowatts), so
that the total amount of Development Security provided by
Seller to PEPCO by June 1, 1995 shall equal three million
four hundred fifty thousand dollars ($3,450,000.00) (equal to
the product of fifteen dollars ($15) per kilowatt multiplied
by 230,000 kilowatts). The Development Security is to ensure
that the Actual Commercial Operation Date will occur by the
Scheduled Commercial Operation Date or the Extended Scheduled
Commercial Operation Date, if applicable. PEPCO will hold
cash provided as Development Security in an interest bearing
escrow account. Seller will be responsible for the payment
of any and all federal, state or local taxes imposed on any
such interest and any fees of the escrow agent. At Seller's
election (or at PEPCO's election if Seller fails to pay any
such taxes or escrow fees), any accumulated interest on the
Development Security remaining at the time payment of any
such taxes or escrow fees is due may be used to pay such
taxes or escrow fees, thereby reducing the amount of
accumulated interest that would be available for return or
release to Seller under various provisions of this Agreement.
(b) If the Actual Commercial Operation Date
does not occur by the Scheduled Commercial Operation Date, or
the Extended Scheduled Commercial Operation Date, if
applicable, for any reason other than PEPCO's default, PEPCO
shall have the right to terminate this Agreement immediately
by providing written notice of such termination to Seller.
In the event that PEPCO exercises any of its rights under
this Agreement to terminate this Agreement prior to the
Actual Commercial Operation Date, except for its right to
terminate under Subsection 3.1(e) or Section 15.3, PEPCO may
draw upon and retain the Development Security as liquidated
damages and any interest accumulated on such Development
Security shall be returned or released, as the case may be,
to Seller within thirty (30) Days after such termination. If
PEPCO terminates this Agreement pursuant to Subsection 3.1(e)
or Section 15.3 or if Seller terminates this Agreement
prior to the Scheduled Commercial Operation Date, or the
Extended Scheduled Commercial Operation Date, if applicable,
due to PEPCO's default, any remaining Development Security,
and the accumulated interest on the Development Security,
shall be returned or released, as the case may be, to the
Seller within thirty (30) Days after the date of such
termination, subject to the prior payment to PEPCO of all
amounts due to PEPCO under Section 4.4.
(c) Either Party may terminate this Agreement
immediately by written notice to the other Party given within
thirty (30) Days after September 1, 1993, if by September 1,
1993, Seller has not: (i) entered into a letter of intent
with Columbia Gas Transmission Corporation for firm
transportation of 23.7 million cubic feet of natural gas per
day from Broad Run, West Virginia to an interconnection with
the Columbia LNG pipeline at Loudoun, Virginia for the Term
of this Agreement, (ii) entered into a letter of intent with
Columbia LNG for transportation of a sufficient volume of
natural gas per day to fuel the four (4) dispatch segments of
the Facility (as specified in Subsection 6.2(b)(i)) from an
interconnection with the Columbia Gas Transmission
Corporation pipeline at Loudoun, Virginia to Waldorf,
Maryland for the Term of this Agreement or, in lieu thereof,
entered into a letter of intent with a third party whereby
such third party will include Seller's gas under its existing
or replacement transportation agreement with Columbia LNG, or
as part of such third party's letter of intent with Columbia
LNG, for transportation to Waldorf, Maryland, and (iii)
entered into a letter of intent with Conrail (Consolidated
Rail Corporation) for an easement for construction and
operation of Transmission Facilities for the Term of this
Agreement on that portion of Conrail's right-of-way located
in Prince George's County, Maryland that extends from the
Facility to that portion of the Transmission Facilities Site
that is owned by PEPCO as of the Effective Date. If either
Party terminates this Agreement pursuant to this Subsection
4.1(c), neither Party shall have any further liability to the
other Party, except that PEPCO may retain the Development
Security as liquidated damages for such termination, and the
accumulated interest on the Development Security shall be
returned or released, as the case may be, to Seller within
thirty (30) Days after the date of such termination.
(d) Either Party may terminate this Agreement
immediately by written notice to the other Party given within
thirty (30) Days after April 1, 1994, if by April 1, 1994,
Seller has not provided evidence reasonably satisfactory to
PEPCO demonstrating that sufficient natural gas reserves to
fuel the Limited Dispatch Portion are available for purchase
by Panda at prices that are economic in light of the
provisions of this Agreement. If either Party terminates
this Agreement pursuant to this Subsection 4.1(d), neither
Party shall have any further liability to the other Party,
except that PEPCO may retain the Development Security as
liquidated damages for such termination, and the accumulated
interest on the Development Security shall be returned or
released, as the case may be, to Seller within thirty (30)
Days after the date of such termination.
(e) Within thirty (30) Days after the Actual
Commercial Operation Date, PEPCO will return or release, as
the case may be, to Seller the remaining portion of the
Development Security against which PEPCO does not assert a
claim, with any accumulated interest thereon.
4.2 Interconnection Security.
(a) Thirty (30) Days prior to PEPCO's commencement
of the construction of the Interconnection Facilities, or the
procurement of the major equipment or components related
thereto, as specified in the schedule provided by PEPCO
pursuant to Subsection 9.2(b), Seller shall provide PEPCO
with a security deposit in an amount equal to the
Interconnection Costs estimated pursuant to Section 9.2 (the
"Interconnection Security") in any form set forth in Section
4.3. The Interconnection Security may be drawn upon and
retained by PEPCO for the payment of Interconnection Costs,
the payment of any cancellation charges, the payment of
removal costs, or other out-ofpocket expenses reasonably
incurred by PEPCO with respect to the study, planning,
engineering, procurement and construction of the
Interconnection Facilities if this Agreement is terminated
prior to the Scheduled Commercial Operation Date or the
Extended Scheduled Commercial Operation Date, if applicable.
Without limiting the foregoing, if this Agreement is
terminated by Seller due to PEPCO's default, PEPCO may draw
upon and retain the Interconnection Security for the payment
of (i) any Interconnection Costs incurred by PEPCO prior to
the date of such termination and (ii) any costs reasonably
incurred by PEPCO to remove or complete any Interconnection
Facilities, or to restore PEPCO's facilities to their
condition prior to the commencement of construction of the
Interconnection Facilities. Within ninety (90) Days after
the date that Seller terminates this Agreement due to PEPCO's
default, the remaining portion of the Interconnection
Security against which PEPCO does not assert a claim,
together with any accumulated interest thereon, shall be
returned or released, as the case may be, to Sellers.
(b) Within ten (10) Days after PEPCO's receipt of
any payment from Seller for Interconnection Costs pursuant to
Section 9.3, PEPCO shall return or release, as applicable, to
Seller an amount of the Interconnection Security equal to the
amount of such Interconnection Costs payment, provided,
however, that the Interconnection Security will in no event
be reduced below fifteen percent (15%) of the amount of the
Interconnection Security initially posted by Seller pursuant
to the first sentence of Subsection 4.2(a), which shall be
returned or released, as the case may be, to Seller in
accordance with Subsection 4.2(c).
(c) Within thirty (30) Days after the Actual
Commercial Operation Date, PEPCO will return or release, as
the case may be, to Seller the remaining portion of the
Interconnection Security against which PEPCO does not assert
a claim.
(d) PEPCO will hold cash provided as
Interconnection Security in an interest bearing escrow
account. Seller will be responsible for the payment of any
and all federal, state or local taxes imposed on any interest
accumulated on the Interconnection Security and any fees of
the escrow agent. At Seller's election (or at PEPCO's
election if Seller fails to pay any such taxes or escrow
fees), any accumulated interest on the Interconnection
Security remaining at the time payment of any such taxes or
escrow fees is due may be used to pay such taxes or escrow
fees, thereby reducing the amount of accumulated interest
that would be available for return or release to Seller under
various provisions of this Section 4.2.
4.3 Form of Development Security and
Interconnection Security. The Development Security and
Interconnection Security shall be cash or such other
equivalent assurance, satisfactory in form and substance to
PEPCO in its sole discretion, including without limitation
(a) an irrevocable direct pay letter of credit in PEPCO's
name issued by a financial institution acceptable to PEPCO in
its sole discretion; (b) an escrow account with an escrow
agent satisfactory to PEPCO in its sole discretion; (c) a
surety bond with a surety satisfactory to PEPCO in its sole
discretion; (d) a corporate guarantee from an entity of
demonstrable financial substance sufficient to back the
guarantee as determined by PEPCO in its sole discretion; or
(e) any combination of the foregoing. A letter of credit in
form and substance satisfactory to PEPCO in its sole
discretion issued by a financial institution with a Thomson
BankWatch rating of C or better and with assets of at least
twenty-five billion dollars ($25,000,000,000.00) shall be
deemed to satisfy the requirements of Subsection 4.3(a). A
surety bond in form and substance satisfactory to PEPCO in
its sole discretion issued by a surety with an A.M. Best's
rating of B or better and adjusted policyholders' surpluses
of at least five hundred million dollars ($500,000,000.00)
shall be deemed to satisfy the requirements of Subsection
4.3(c). A corporate guarantee in form and substance
satisfactory to PEPCO in its sole discretion issued by a
corporation with a Standard & Poor's credit rating of at
least A and assets of at least one billion dollars
($1,000,000,000.00) shall be deemed to satisfy the
requirements of Subsection 4.3(d). The Development Security
and Interconnection Security shall not be subject to any lien
or other claim by any person (including, but not limited to,
any Financing Parties) other than PEPCO. The Development
Security and Interconnection Security need not be in the same
form. The Development Security and the Interconnection
Security each may be provided in up to two (2) different
forms of security. Each security instrument specified above
shall reference this Agreement and Seller's obligations to
PEPCO hereunder and shall include a provision allowing PEPCO
to draw against such instrument or otherwise collect
therefrom for the amounts due PEPCO under this Agreement.
From time to time after the initial posting of the
Development Security and the Interconnection Security, Seller
shall, within thirty (30) Days of PEPCO's request therefor,
provide evidence (including, without limitation, legal
opinions) reasonably satisfactory to PEPCO of the continuing
existence of the Development Security and/or the
Interconnection Security.
4.4 Extension to the Scheduled Commercial
Operation Date.
(a) If the Actual Commercial Operation Date has
not occurred by June 1, 1996, Seller may by written notice to
PEPCO extend the Scheduled Commercial Operation Date by up to
twelve (12) Months. Such extension to the Scheduled
Commercial Operation Date will be operative only if:
(i) the Seller with the aforementioned notice pays to PEPCO a
non-refundable, one-time payment of one million one hundred
fifty thousand dollars ($1,150,000.00) (equal to the product
of five dollars ($5.00) per kilowatt multiplied by 230,000
kilowatts) and (ii) for each Month, or portion of a Month,
that the Scheduled Commercial Operation Date is extended
Seller pays to PEPCO a non-refundable payment of two hundred
thirty thousand dollars ($230,000.00) (equal to the product
of one dollar ($1.00) per kilowatt multiplied by 230,000
kilowatts) on or before the first Day of each such Month. In
no event shall the extension to the Scheduled Commercial
Operation Date exceed a twelve (12) Month period.
(b) Notwithstanding the foregoing, if Seller is
unable to achieve the Actual Commercial Operation Date by
June 1, 1996 due to an event or events of Force Majeure in
effect after the Closing Date, Seller may extend the
Scheduled Commercial Operation Date day-for-day for the
period that such Force Majeure remains in effect after the
Closing Date ("Force Majeure Delay Period") to a date no
later than June 1, 1997 by making a nonrefundable payment to
PEPCO as liquidated damages in the amount of one hundred
seventy-two thousand five hundred dollars ($172,500.00)
(equal to the product of seventy-five cents ($0.75) per
kilowatt multiplied by 230,000 kilowatts) per Month for each
Month of the extension requested for such Force Majeure Delay
Period on or before the first Day of each such Month. If, at
the end of any extension of the Scheduled Commercial
Operation Date implemented pursuant to this Subsection 4.4(b)
the Facility has not achieved the Actual Commercial Operation
Date, Seller may further extend the Scheduled Commercial
Operation Date (to a date no later than June 1, 1997)
pursuant to Subsection 4.4(a), in which case the initial
payment of one million one hundred fifty thousand dollars
($1,150,000.00) and the payment of two hundred thirty
thousand dollars ($230,000.00) due for the first Month under
Subsection 4.4(a) shall be paid on or before the first Day
following the end of the extension period implemented
pursuant to this Subsection 4.4(b).
4.5 Performance Security.
On or before the Actual Commercial Operation Date,
Seller shall provide and maintain throughout the Term
Performance Security by establishing an escrow account under
escrow arrangements satisfactory to PEPCO in its sole
discretion with a depository institution acceptable to PEPCO
in its sole discretion and deposit therein: (i) two million
dollars ($2,000,000.00) in cash, (ii) an irrevocable letter
of credit in form and substance satisfactory to PEPCO in its
sole discretion in the amount of two million dollars
($2,000,000.00) payable to the escrow agent issued by a
financial institution with a Thomson BankWatch rating of C or
better and assets of at least twenty-five billion dollars
($25,000,000,000.00), (iii) a surety bond in form and
substance satisfactory to PEPCO in its sole discretion in the
amount of two million dollars ($2,000,000.00) payable to the
escrow agent issued by a surety company with an A.M. Best's
rating of B or better and adjusted policyholders' surpluses
of at least five hundred million dollars ($500,000,000.00),
or (iv) any other form of financial guarantee upon which
PEPCO and Seller mutually agree. Seller will be responsible
for the payment of any and all federal, state or local taxes
imposed on any interest accumulated on the Performance
Security and for the payment of all of the escrow agent's
fees. PEPCO shall have the right to apply this Performance
Security to the payment of any monetary damages awarded to
PEPCO as a result of a termination of this Agreement at any
time after the Actual Commercial Operation Date to the extent
such damages are not the result of events covered by
liquidated damages pursuant to Section 4.2 in the event of
such termination. From time to time after the initial
posting of this security, Seller shall, within thirty (30)
Days of PEPCO's request therefor, provide evidence
(including, without limitation, legal opinions) reasonably
satisfactory to PEPCO of the continuing existence of such
security. Each security instrument specified above shall
reference this Agreement and Seller's obligations to PEPCO
hereunder and shall include a provision allowing PEPCO to
draw against such instrument or otherwise collect therefrom
for the amounts due PEPCO under this Agreement, including any
termination resulting from Seller's failure to secure and
maintain the security described hereunder. The Performance
Security shall not be subject to any lien or other claim by
any person (including, but not limited to, any Financing
Parties) other than PEPCO.
4.6 Liquidated Damages.
(a) The Parties agree that the sums to be paid to
PEPCO as specified in: (i) Sections 4.1 and 4.2, if the
Actual Commercial Operation Date does not occur by the
Scheduled Commercial Operation Date, or the Extended
Scheduled Commercial Operation Date, if applicable, or for
reimbursement of Interconnection Costs upon termination of
this Agreement (ii) Section 4.4, if Seller elects to extend
the Scheduled Commercial Operation Date pursuant to such
section, or (iii) Subsection 7.1(a), if the Construction
Start Date fails to occur by the date specified in such
subsection, constitute liquidated damages, and not a penalty,
for each such occurrence. The Parties acknowledge and agree
that it is difficult or impossible to determine with
precision the amount of damages that would or might be
incurred by PEPCO as a result of such occurrences and that
the liquidated damages specified in the foregoing Sections
and Subsection are fair and reasonable and represent a
reasonable estimate of fair compensation for the losses that
may reasonably be anticipated by PEPCO under such
circumstances. Such liquidated damages shall be the sole and
exclusive remedy of PEPCO for each and every circumstance for
which they are or may be payable.
(b) Seller hereby waives any defense as to the
validity of the payment of any liquidated damages stated in
this Agreement as they may appear on the grounds that such
liquidated damages are unfair, unreasonable, inadequate or
should be void as penalties.
ARTICLE V
SALE AND PURCHASE OBLIGATIONS
5.1 Delivery of Electric Energy and Capacity.
Subject to the satisfaction of the conditions set forth in
Article III and in accordance with the terms of this
Agreement (a) Seller shall sell and deliver to PEPCO and
PEPCO shall purchase and accept the Dependable Capacity and
the Net Electrical Output from the Facility for the Term at
the rates set forth in Article VI, (b) Seller shall sell and
deliver to PEPCO and PEPCO shall purchase and accept Startup
Energy generated by the Facility on a total of up to one
hundred and twenty (120) Days in the aggregate occurring
during the period between the Commencement Date and the
Actual Commercial Operation Date, provided, however, that
PEPCO shall continue to accept, but shall not be required to
pay for, Start-up Energy from the Facility after such
aggregate period of one hundred and twenty (120) Days, and
(c) Seller shall sell and deliver to PEPCO and PEPCO shall
purchase and accept from time to time Test Energy generated
by the Facility, provided, however, that in no event shall
PEPCO be obligated to purchase Test Energy from the Facility
for more than an aggregate total of twelve (12) equivalent
full load hours occurring over no more than a seven (7) Day
period associated with any single series of tests.
5.2 Electric Characteristics. Electricity
generated by Seller shall be delivered to PEPCO at the
Interconnection Point in the form of three-phase, sixty (60)
hertz, alternating current at a nominal voltage of two
hundred and thirty (230) KV, with reasonable variation of
frequency and voltage allowed consistent with Prudent Utility
Practices, and with voltage control as specified in Appendix
F. The Seller's power factor must meet the requirements of
Appendix C, Section V.C.
5.3 Interruption or Suspension of Deliveries by
PEPCO. PEPCO may interrupt or suspend deliveries of Net
Electrical Output and Dependable Capacity so long as the
circumstances set forth below continue, provided, however,
that such interruption or suspension shall not affect PEPCO's
obligation to make payment for Dependable Capacity in
accordance with Article VI, except as reflected in
determination of the EAF and EFOR:
(a) If the PEPCO dispatcher declares an Emergency
Condition or inspection of the interconnection reveals an
unsafe condition, PEPCO may interrupt the interconnection
between the PEPCO System and the Facility and/or require
Seller immediately to suspend or reduce deliveries to the
extent directed by PEPCO. Such interruption or suspension
may occur on an instantaneous basis; provided that PEPCO
shall give Seller advance notice of such occurrences to the
extent practical, and, if not practical, PEPCO shall give
Seller a written explanation of such occurrence as soon as
practicable, but in no event later than twenty (20) Days
after such occurrence.
(b) If in the reasonable opinion of PEPCO, consistent
with Prudent Utility Practices: (i) the Facility produces
energy or energy and capacity of a character or quality of
service which may adversely affect the safety, reliability or
security of PEPCO's equipment, facilities, personnel, or
system or the safety, reliability or security of those of any
other supplier of electricity to PEPCO or to PEPCO's
customers, or which does not meet PEPCO's obligation to the
PJM Pool in terms of safety, reliability or security, or (ii)
inspection of the interconnection and protective equipment
reveals a lack of maintenance, lack of records of maintenance
or noncompliance with the provisions of Appendix C, then
PEPCO shall notify Seller of this condition and reserves the
right to interrupt the interconnection. If Seller fails to
correct the condition within a reasonable time specified by
PEPCO, PEPCO may interrupt the connection between the PEPCO
System and the Facility until Seller demonstrates to the
reasonable satisfaction of PEPCO that Seller is operating in
accordance with the operating standards set forth in this
Agreement and such interruption shall be deemed to be an
Unplanned Outage - Immediate (Code U1) pursuant to Appendix I
attached hereto.
5.4 Reduction. In addition to the interruptions
and suspensions in Net Electrical Output from the Facility
pursuant to Section 5.3 and the rights of PEPCO to dispatch
the Facility, during Minimum Generation Emergency Conditions
Seller shall cease the delivery of Net Electrical Output to
the PEPCO System when requested to do so by PEPCO's
dispatcher ("Reduction"), for up to two hundred (200)
cumulative hours of operation of the Limited Dispatch Portion
in any Year.
5.5 Maximum Emergency Generation Condition.
Subject to Prudent Utility Practices, Seller agrees, to the
extent it can be accomplished without exceeding the
manufacturer's recommended operating limits, to use all
reasonable efforts to deliver the maximum attainable Net
Electrical Output from the Facility to PEPCO whenever the
PEPCO dispatcher notifies Seller that a Maximum Emergency
Generation Condition has been declared and requests that the
Facility be dispatched to its Available Capacity.
ARTICLE VI
COMPENSATION, BILLING AND PAYMENT
6.1 Monthly Capacity Payment.
(a) Except as otherwise expressly provided herein,
PEPCO shall pay a Monthly Capacity Payment to Seller for
Dependable Capacity available to PEPCO from the Facility
after the Actual Commercial Operation Date, but in no event
prior to June 1, 1996, commencing at the end of the first
Billing Period after the later of such dates and continuing
through the last Billing Period of the Term of this
Agreement. The Monthly Capacity Payment shall be calculated
in accordance with the following payment formula:
MCP = (DC) * (CR) * ( EAF/AT)
MCP = Monthly Capacity Payment in dollars.
DC = Dependable Capacity (net) in
kilowatts.
CR = Capacity Rate in Dollars/kilowatt/
Billing Period, as set forth in Appendix L
to this Agreement for each Month of each
Contract Year. On the Actual Commercial
Operation Date, the CR will be set at the
Capacity Rate amount listed in column 2 of
Appendix L for Contract Year one, as adjusted
based on the percentage change in the GNP
Deflator for the period between June 1, 1994
and June 1, 1996, and as further adjusted
pursuant to Subsection 6.1(c), if
applicable. This CR will remain in
effect through the first Contract Year.
The CR will be adjusted on the first Day
of each subsequent Contract Year
thereafter to the Capacity Rate amount
listed for that Contract Year in Appendix
L, as adjusted based on the same
percentage change in the GNP Deflator for
the period between June 1, 1994 and June
1, 1996, and as further adjusted pursuant
to Subsection 6.1(c), if applicable.
EAF = The Facility's Equivalent Availability Factor
for the previous twelve (12) Months expressed
as a percentage, provided that for purposes of
determining the MCP for each of the first
eleven (11) Months following the Actual
Commercial Operation Date, the EAF will
be deemed to be eighty-eight percent (88%)
during those Months prior to the Actual
Commercial Operation Date for which no actual
EAF exists.
AT = The Availability Target
set at eighty-eight percent (88%) if the
EAF is less than or equal to eighty-eight
percent (88%); set at ninety-two percent
(92%) if the EAF is greater than or equal
to ninety-two percent (92%); and set
equal to the EAF for values of the EAF
greater than eighty-eight percent (88%)
but less than ninety-two percent (92%).
(b) If the Actual Commercial Operation Date occurs
on a date other than the first Day of a Billing Period, or if
the Dependable Capacity shall be established or demonstrated
on a day other than the first Day of a Billing Period, or if
this Agreement terminates on a Day other than the last Day of
a Billing Period, then the Monthly Capacity Payment for such
Billing Period shall be equal to the sum of (i) the amount of
the Monthly Capacity Payment determined in accordance with
the formula set forth in Subsection
6.1 (a) using the Dependable Capacity up to such date
multiplied by a fraction, the numerator of which is the
number of Days in such Billing Period up to and including
such date and the denominator of which is the total number of
Days in the Billing Period, plus, (ii) the amount of the
Monthly Capacity Payment calculated in accordance with
Subsection 6.1(a) using the Dependable Capacity after such
date multiplied by a fraction, the numerator of which is the
number of Days remaining in such Billing Period after such
date and the denominator of which is the total number of Days
in such Billing Period. For purposes of this Subsection
6.1(b), the Dependable Capacity of the Facility shall be
deemed to be zero (0) for the period either prior to the
Actual Commercial Operation Date or following the termination
of this Agreement.
(c) (i) The Capacity Rate used to calculate the
Monthly Capacity Payment pursuant to Subsection 6.1(a) shall
be adjusted in the following manner to reflect the yield to
maturity on United States Treasury Securities with a maturity
of twelve (12) years ("12 year T-Bonds") in effect as of the
date that the interest rate for permanent financing for the
Facility is designated pursuant to an executed commitment for
such financing ("Commitment Date"). Seller shall use
reasonable efforts to ensure that the Commitment Date occurs
on a Day on which the yield to maturity on actively traded 12
year T-Bonds is as low as possible. If the yield to maturity
on actively traded 12 year T-Bonds as of the Commitment Date
is between eight percent (8%) and nine percent (9%), no
adjustment shall be made to the Capacity Rate as specified in
Subsection 6.1(a). If the yield to maturity on actively
traded 12 year T-Bonds as of the Commitment Date is greater
than nine percent (9%), then the Capacity Rates set forth in
Appendix L for each Contract Year shall be increased by an
amount equal to the product of the amount shown in column 3
of such appendix multiplied by the difference between such
yield and nine percent (9%). If the yield to maturity on
actively traded 12 year T-Bonds as of the Commitment Date is
less than eight percent (8%), then the Capacity Rates for
each Contract Year set forth in Appendix L shall be reduced
by an amount equal to the product of the amount shown in
column 3 of such appendix multiplied by the difference
between eight percent (8%) and such yield. Sample
calculations showing the adjustment under this Subsection
6.1(c)(i) are set forth in Appendix B.
(ii) If the yield to maturity on actively
traded 12-year T-Bonds as of the Commitment Date is greater
than nine percent (9%), then subsequent to the Actual
Commercial Operation Date Seller shall undertake to refinance
any or all of its debt instruments or debt securities or
enter into new or revised lease arrangements for the Facility
if so doing will result in a reduction in Seller's effective
interest rate (when the fees or other costs incurred by
Seller in connection with such refinancing or new or revised
lease arrangements are taken into account). Seller shall
continue to be obligated to undertake such refinancing or new
or revised lease arrangements until the Capacity Rates are
reduced to the Original Capacity Rates in accordance with the
first sentence of Subsection 6.l(c)(iii).
(iii) Upon the effective date of any
refinancing or new or revised lease arrangements for the
Facility entered into by Seller that results in a reduction
in Seller's effective interest rate, the Capacity Rates (as
adjusted in accordance with Subsection 6.1(c)(i) or previous
applications of this Subsection 6.1(c)(iii)) will be reduced
by an amount equal to the product of the amount shown in
column 3 of Appendix L, multiplied by the reduction in
Seller's effective interest rate, until the Capacity Rates
are reduced to the amounts set forth in column 2 of Appendix
L (as adjusted based on the percentage change in the GNP
Deflator for the period between June 1, 1994 and June 1, 1996
(the "Original Capacity Rates")), beginning with the Capacity
Rates in effect for the then current Contract Year. If,
pursuant to the immediately preceding sentence, the Capacity
Rates have been reduced to the Original Capacity Rates, then
Seller and PEPCO agree to negotiate additional reductions in
such Capacity Rates so that both Parties share equally in the
calculated savings from that portion of the reduction in
Seller's effective interest rate that was not applied in
making the reductions to the Capacity Rates in the
immediately preceding sentence. If Seller refinances any or
all of its debt instruments or debt securities or enters into
a new or revised lease arrangement for the Facility which
results in a lower effective interest rate for Seller at any
time when the Original Capacity Rates, or Capacity Rates
lower than the Original Capacity Rates, are in effect, then
Seller and PEPCO agree to renegotiate such Capacity Rates so
that both Parties share equally in the calculated savings.
(d) If the availability or the operation of the
Transmission Facilities is interrupted or otherwise impaired
after the Actual Commercial Operation Date due to: (i) a
defect, lien or other encumbrance on the title to the
Transmission Facilities or the Transmission Facilities Site,
(ii) the failure of an easement necessary for PEPCO to
operate the Transmission Facilities, (iii) the failure of
Seller to obtain any zoning approval or other governmental or
regulatory approval required for construction or operation of
the Transmission Facilities by Seller prior to the transfer
of the Transmission Facilities to PEPCO pursuant to
Subsection 7.3(a)(v) or for the initial operation of the
Transmission Facilities by PEPCO subsequent to such transfer,
(iv) environmental contamination of any portion of the
Transmission Facilities Site that is not on property that was
owned by PEPCO on the Effective Date (which in any of cases
(i), (ii), (iii) or (iv) existed or arose from circumstances
in existence prior to the transfer of Seller's rights in the
Transmission Facilities and the Transmission Facilities Site
to PEPCO pursuant to Subsection 7.3(a)(v)), or (v) any breach
of this Agreement by, or other fault of, Seller, its
directors, officers, employees, agents or affiliates, then
PEPCO shall be entitled to immediately suspend payment of the
Monthly Capacity Payment to the extent, and for the duration,
of such interruption or impairment.
(e) Notwithstanding any other provision of this
Section 6.1 or Section 1.65, if, in any Billing Period after
the Actual Commercial Operation Date (i) the availability or
the operation of the Transmission Facilities is impaired or
interrupted for any reason other than those specified in
Subsection 6.1(d), and (ii) the Facility is capable of
generating electric energy in accordance with the terms of
this Agreement but Seller is unable to deliver Net Electrical
Output to the Interconnection Point because of such
impairment or interruption of the Transmission Facilities,
then the Monthly Capacity Payment for such Billing Period
shall be calculated on the basis of the Dependable Capacity
and EAF in effect in the Billing Period immediately preceding
such impairment or interruption.
(f) Sample calculations demonstrating the
calculation of the Monthly Capacity Payment are set forth in
Appendix B.
6.2 Monthly Energy Payment.
(a) PEPCO shall pay Seller for Test Energy at the
rate provided by Subsection 6.2(b), provided, however,
that for purposes of the formula for determining the
Unit Commitment Payment pursuant to Subsection
6.2(b)(ii), startup costs for the Facility will not be
included (i.e., the variables X, Y and Z shall each be
equal to zero (0)). PEPCO shall pay Seller for Start-up
Energy at the rate determined in accordance with the
following formula:
SEP = NEO * 8.461 MBtu/MWH * IFR
Where:
SEP = Start-Up Energy Payment.
NEO = Net Electrical Output (MWH).
IFR = Interruptible Fuel Rate (dollars/MBtu)
determined as set forth in Subsection
6.2(b)(ii).
(b) (i) PEPCO shall make a Monthly Energy Payment
to the Seller for the Net Electrical Output after the Actual
Commercial Operation Date, for each Billing Period commencing
with the Billing Period in which such date occurs and
continuing through the last Billing Period of the Term of
this Agreement. When the Facility is dispatched in combined
cycle mode (i.e., when the steam turbine is available), the
Monthly Energy Payment shall consist of the sum of the Unit
Commitment Payment calculated as described in Subsection
6.2(b)(ii) and the Dispatch Payment calculated as described
in Subsection 6.2(b)(iii). The portion of the Monthly Energy
Payment for any period when the Facility is dispatched in
simple cycle mode (i.e., when the steam turbine is not
available), shall be calculated on the basis of the Simple
Cycle Energy Payment calculated as described in Subsection
6.2(b)(iv).
For purposes of calculating the Monthly Energy Payment,
the Net Electrical Output of the Facility will be assigned on
an hourly basis among the following four (4) dispatch
segments of the Facility's capacity beginning with the First
Dispatch Segment and moving sequentially through the
remaining dispatch segments:
Number of Cumulative
Cumbustion Turbines MW (at 59 degrees F
Operating with and 50%
Dispatch the Steam Turbine Relative
Segment Also Operating Description Humidity)
First 1 Up to minimum 0 to
99 MW
load
Second 1 From minimum 99 MW to
load to full 199 MW
load
Third 2 From full load 117 MW to
with one (1) 199 MW
combustion
turbine operating
to minimum load
with two (2)
cumbustion
turbines
operating
Fourth 2 From minimum 199 MW to
load to full load 237MW
with two (2)
combustion
turbines
operating.
(ii) PEPCO shall make a Unit Commitment Payment to the
Seller for costs associated with commitment of the First
Dispatch Segment and the Third Dispatch Segment in accordance
with the following formula:
UCP = {[SHA*(NLA+MMA)*MPF] * (FGRa+VOM)} +
{[SHB*(NLB+MMB)*MPF] * (IFR+VOM)} +
{[FS*X + HS*Y + CS1*Z + CS2*X] * (IFR)}
Where:
UCP = Unit Commitment Payment.
SHA = Service Hours:
Period of time in hours during the
Billing Period that the Facility was
synchronized with the PEPCO System
exclusive of service hours when the
Facility was operated in simple cycle
mode as described in Subsection
6.2(b)(iv).
SHB = Service Hours:
Period of time in hours during the
Billing Period that both combustion
turbines of the Facility were
synchronized with the PEPCO System
exclusive of service hours when the
Facility was operated in simple cycle
mode as described in Subsection
6.2(b)(iv).
NLA = No Load MBtu for
the First Dispatch Segment: 204.1 MBtu
per hour of operation.
NLB = No Load MBtu for the Third Dispatch
Segment: 205.1 MBtu per hour of operation.
MMA = Maintain Minimum
MBtu for the First Dispatch Segment:
633.6 MBtu per hour of operation.
MMB = Maintain Minimum
MBtu for the Third Dispatch Segment:
499.6 MBtu per hour of operation.
MPF = Monthly Performance Factor: Heat input
adjustment based on average historical
ambient conditions for each monthly
Billing Period. Monthly Performance
Factors are as follows:
Monthly Billing Period Performance Factor
January 1.08
February 1.06
March 1.04
April 1.01
May 0.98
June 0.96
July 0.96
August 0.96
September 0.97
October 1.00
November 1.03
December 1.06
FS = Partial Facility Start-Ups: Number of times
during the Billing Period that the Facility
was dispatched at a time when neither
combustion turbine was synchronized with the
PEPCO System.
HS = Hot Start-Ups: Number of times during the
Billing Period that one (1) of the Facility's
combustion turbines is dispatched and
synchronized with the PEPCO System after having
been disconnected from the PEPCO System for a
period of less than or equal to twelve
(12) Hours while the other combustion
turbine remained synchronized with the
PEPCO System.
CS1 = Cold Start-Ups - Level 1:
Number of times during the Billing Period
that one (1) of the Facility's combustion
turbines is dispatched and synchronized
with the PEPCO System after having been
disconnected from the PEPCO System for a
period of more than twelve (12) Hours
while the other combustion turbine
remained synchronized with the PEPCO
System.
CS2 = Cold Start-Ups - Level 2:
Number of times during the Billing Period
that the second of the Facility's two (2)
combustion turbines is dispatched and
synchronized with the PEPCO System and
the occurrence cannot be classified as a
Hot Start-Up (HS) or a Cold Start-Up -
Level 1.
X = four hundred and sixty-three (463) MBtu.
Y = one hundred and thirty-two (132) MBtu.
Z = three hundred and ninety-seven (397) MBtu.
FGRA = Firm Gas Rate to be applied for generation
of the First Dispatch Segment (Dollars/MBtu):
Calculated as described in Subsection
6.2(b)(v).
IFR = Interruptible Fuel Rate
(Dollars/MBtu):
The IFR will be equal to the
Interruptible Gas Rate as calculated in
Subsection 6.2(b)(vi) when the unit is
dispatched on natural gas. Otherwise,
the IFR will equal the Oil Rate as
calculated in Subsection 6.2(b)(vi).
VOM = Variable Operation and Maintenance Rate:
The VOM rate will be set initially at an
amount equal to thirty-six cents ($0.36)
per MBtu on June 1, 1994. On June 1 of each
Year thereafter, the VOM rate will be adjusted
based on the annual percentage change in
the GNP Deflator.
(iii) In addition to the Unit Commitment
Payment calculated in Subsection 6.2(b)(ii), PEPCO shall
make a Dispatch Payment for the Net Electrical Output in
any given Billing Period from the Second Dispatch
Segment and the Fourth Dispatch Segment. The Dispatch
Payment for such Net Electrical Output shall be
determined in accordance with the following formula:
N {[GEN(A)i * IHR(A)i * (FGRB+VOM)]+
DP = [GEN(B)i * IHR(B)i * (IFR +VOM)]}
i=1
Where:
DP = Dispatch Payment.
N = Hours in the Billing Period.
VOM = Variable Operation and Maintenance
Rate: Calculated as defined in Subsection
6.2(b)(ii).
GENi = Generation: The Net Electrical Output of
the Facility in MWH for each Hour of the
Billing Period when the Facility is operated
in combined cycle mode.
GEN(B)i = The portion of GENi attributable to the
Third Dispatch Segment and the Fourth
Dispatch Segment when the Facility is
operated in combined cycle mode.
= The greater of zero (0) or {GENi -
[the lesser of 117 or (117 * MCA)]}.
Where:
MCA = Monthly Capability adjustment:
Adjustment to the Facility's generating
capability based on average historical
ambient conditions for each monthly
Billing Period. The Monthly Capability
Adjustments are as follows:
Monthly Billing Capability
Period: Adjustment:
January 1.09
February 1.08
March 1.05
April 1.01
May 0.98
June 0.95
July O.94
August 0.95
September 0.96
October 1.00
November 1.03
December 1.07
GEN(A)i = The portion of GENi attributable to the
First Dispatch Segment and the Second
Dispatch Segment, not to exceed 117 MWH.
= GENi - GEN(B)i.
IHR(A)i = Incremental Heat Rate (MBtu/MWH) of the
Facility's Second Dispatch Segment
= The greater of zero (0) or
{[Ba* (GEN(A)i/MCA) +
CA*(GEN(A)i/MCA)2 - MMA]* MPF/GEN(A)i}.
Where:
MPF = Monthly Performance Factor:
Shall be defined as set forth in
Subsection 6.2(b)(ii).
BA = 4.193 MBtu/MWH
CA = O.02229 MBtu/MWH2
MMA = Maintain Minimum MBtu for the First
Dispatch Segment: Shall be defined as
set forth in Subsection 6.2(b)(ii).
IHR(B)i = Incremental Heat Rate (MBtu/MWH) of the Facility's
Fourth Dispatch Segment
= The greater of zero (O) or
{[Bb*(GEN(B)i/MCA) +
CB*(GEN(B)i/MCA)2 - MMB] *
MPF/GEN(B)i.
Where:
BB = 4.846 MBtu/MWH
CB = O.01520 MBtu/MWH2
MMB = Maintain Minimum MBtu for the Third
Dispatch Segment: Shall be defined as
set forth in Subsection 6.2(b)(ii).
FGRB = Firm Gas Rate to be applied for generation
of the Second Dispatch Segment (Dollars/MBtu):
Shall be calculated as described in
Subsection 6.2(b)(v).
IFR = Interruptible Fuel Rate (Dollars/MBtu):
Shall be calculated as described in Subsection
6.2(b)(ii).
(iv) Notwithstanding the other provisions of
this Subsection 6.2(b), if, when the Facility's steam turbine
is not available, Net Electric Output is available from either
one (1) or both of the combustion turbines of the Facility in
simple cycle mode, the Seller will make such Net Electrical
Output available to PEPCO when a Maximum Emergency Generation
Condition is in effect. If PEPCO elects to dispatch the Facility
at any such time (i.e. when the Facility's steam turbine
in not available) PEPCO shall be required to do so at the
Facility's maximum Net Electrical Output. PEPCO, however, shall
not be required to purchase or accept any Net Electrical
Output from the Facility at any time when the Facility's steam
turbine is not available. The Monthly Energy Payment for Net
Electrical Output purchased and accepted by PEPCO under this
Subsection 6.2(b)(iv) shall be determined in accordance with the
following formula:
SCEP - [(SCG * SCHR) + (SCS * 25 MBtu/Start-up)] * (IFR+VOM)
Where:
SCEP = Simple Cycle Energy Payment
SCG = Simple Cycle Generation (MWH): Net
Electrical Output when the steam turbine
is not available.
SCHR = Simple Cycle Heat Rate: 12.0 MBtu/MWH.
SCS = Simple Cycle Start-ups: The number of times
during the Billing Period a combustion turbine
was dispatched and synchronized with the PEPCO
System while in simple cycle mode.
IFR = Interruptible Fuel Rate (Dollars/MBtu): Shall be
calculated as defined in Subsection 6.2(b)(ii).
VOM = Variable Operation and Maintenance Rate: Shall be
calculated as defined in Subsection 6.2(b)(ii).
(v) The firm gas rates (FGRA and FGRB) will be the
weighted average of two (2) components. The first component will
represent natural gas supplied from gas reserves purchased by
Seller and will have a guaranteed price throughout the Term. The
second component will represent natural gas market purchases by
Seller and be tied to natural gas market prices. The percentages
of the Fuel to be made available from Seller's reserves for the
Term which are required to operate the Facility for the First
Dispatch Segment and the Second Dispatch Segment, are given in
Appendix M as %GRCA and %GRCB, respectively. The firm gas rate
to be applied for generation of the First Dispatch Segment (FGRa)
and for the generation of the Second Dispatch Segment (FGRb)
will be calculated in accordance with the following formulae:
FGRA = (FGRR * %GRCA/100%) + [FGMR * (1-%GRCA/100%)]
FGRB = (FGRR * %GRCB/100% ) + [FGMR * (1-%GRCB/100%)]
Where:
FGRa = Firm Gas Rate for First Dispatch Segment.
FGRB = Firm Gas Rate for Second Dispatch Segment.
FGRR = Firm Gas Reserve Rate.
FGMR = Firm Gas Market Rate.
%GRCA = Percent Gas Reserve Commitment to
fuel the First Dispatch Segment, as set
forth in column 2 of Appendix M for
each Contract Year.
%GRCB = Percent Gas Reserve Commitment to
fuel the Second Dispatch Segment, as
set forth in column 3 of Appendix M for
each Contract Year.
The unadjusted Firm Gas Reserve
Rate ("FGRR") for each Contract Year is
set forth in column 4 of Appendix M.
After the Actual Commercial Operation
Date, the FGRR for each Contract Year
will be adjusted by the percent change
in the Producer Price Index for Oil and
Gas Field Services (Industry Code 138)
published by the Bureau of Labor
Statistics, U.S. Department of Labor,
for the period between June 1, 1994 and
June 1, 1996. In the event that the
Producer Price Index for Oil and Gas
Field Services is no longer published
or otherwise available as of June 1,
1996, the Parties agree to negotiate in
good faith to replace such index with
an appropriate alternate source of
information. A sample calculation of
the FGRR is set forth in Appendix B.
The Firm Gas Market Rate (FGMR)
will be set initially on June 1, 1990
at an amount equal to the sum of
S2.27/MBtu plus the firm displacement
tariff rate, not to exceed $0.20/MBtu,
payable by, or on behalf of, Seller for
transportation on the Columbia LNG
pipeline from Loudoun, Virginia to
Waldorf, Maryland. Such rate will be
adjusted each Billing Period thereafter
in accordance with the following
formula:
FGMR = FGMRi * [(.77*CIf) + (.23*TIf)]
Where:
FGMR = Firm Gas Market Rate in effect for
the Billing Period (Dollars/MBtu).
FGMRi = Initial Firm Gas Market Rate.
CIf = Commodity Index for the FGMR:
Shall be calculated as described below.
TIf = Transportation Index for the FGMR:
Shall be calculated as described below.
The Commodity Index for the FGMR will
equal the sum of the most recent data
for each of the following four (4)
published spot gas prices available for
the Billing Period that the Commodity
Index for the FGMR is to be calculated,
divided by $6.46/MBtu (which is the sum
of the same spot gas prices as
published for June 1990).
1. Natural Gas Clearinghouse, "Survey of Domestic
Spot Market Prices for markets accessed by
Columbia Gulf Transmission Company on Onshore
Laterals, Louisiana;
2. Natural Gas Clearinghouse, "Survey of Domestic
Spot Market Prices" for markets accessed by
Tennessee Gas Pipeline Company, Vinton,
Louisiana;
3. Natural Gas Intelligence Gas Price Index,
"Spot Gas Price" delivered to pipelines thirty
(30) Day supply transactions for the
Appalachian Region - contract index price for
Columbia Gas Transmission Corporation; and
4. Natural Gas Week, "Spot Prices on Gas
Pipeline Systems" Columbia Gas Transmission
Corporation at Broad Run, W. VA.
In the event that any of the sources of information
referred to in the Commodity Index for the FGMR is no
longer published or otherwise available, the Parties
agree to negotiate in good faith to replace such source
of information with an appropriate alternate source.
The Transportation Index for the FGMR will be updated
for each Billing Period, beginning with the Billing
Period in which the Actual Commercial Operation Date
occurs, in accordance with the following formula:
(The CPI for the most recent Month
for which data have been published)
TIf = {[----------------------------------- - 1] / 2} + 1
129.9
Where: CPI = Consumer's Price Index
for all Urban Consumers, U.S. City
Average, or a suitable successor
index published monthly by the
Bureau of Labor Statistics, U.S.
Department of Labor.
129.9 = The value of the CPI
for June, 1990.
Sample calculations demonstrating the calculation of FGMR
and associated indices are set forth in Appendix B. Either
Party may, by written notice to the other Party given
during the period between one hundred and fifty (150) Days
and one hundred and twenty (120) Days prior to either the
tenth anniversary of the Actual Commercial Operation Date
or each subsequent third anniversary of the Actual
Commercial Operation Date thereafter ("Anniversary Date"),
request that the FGMR, and/or the Commodity Index and/or
Transportation Index for the FGMR, be reviewed and revised
in accordance with the standards set forth herein. If
either Party provides such notice within the specified time
period, the Operating Committee shall in good faith
undertake such review and revision of the FGMR, and/or the
Commodity Index and/or Transportation Index for the FGMR,
as applicable. The purpose of such review of the FGMR
shall be to determine the current market price of the
natural gas component and the transportation component of
the FGMR at the time of such review and to revise each such
component of the FGMR, as necessary, to reflect such then-
current market price. The purpose of such review of the
Commodity Index and/or Transportation Index for the FGMR,
shall be to determine the most accurate method of tracking
changes in the price of each of the components of the FGMR
at the time of such review and to revise the Commodity
Index and/or Transportation Index for the FGMR, as
necessary, for this purpose. If the Operating Committee
cannot agree on appropriate revisions to the FGMR, and/or
the Commodity Index and/or Transportation Index for the
FGMR, as applicable, within sixty (60) days prior to the
relevant Anniversary Date, the Parties shall use their best
efforts to resolve the matter in accordance with Subsection
17.1(b) and Section 17.2. Any revision of the FGMR, and/or
the Commodity Index and/or Transportation Index for the
FGMR, as applicable, determined in accordance with the
provisions of this Subsection 6.2(b)(v) or Article XVII
shall be effective on the relevant Anniversary Date,
subject to receipt of all regulatory authorizations
(including, but not limited to, approval of such revision
by the Maryland Commission and the District of Columbia
Commission) necessary to implement such revision, in a form
satisfactory to each of the Parties in accordance with the
standards set forth in Subsections 3.1(a) and 3.1(b). The
Parties agree to cooperate in obtaining all such necessary
regulatory authorizations. If a revised FGMR, and/or
Commodity Index and/or Transportation Index for the FGMR,
as applicable, has not been determined in accordance with
the foregoing procedures and so approved by regulatory
authorities prior to the relevant Anniversary Date, PEPCO
shall continue to make payments to Seller thereafter based
on an FGMR determined in accordance with the FGMR
provisions and Commodity Index and/or Transportation Index
for the FGMR, that were in effect on the Day prior to the
Anniversary Date, until a revised FGMR, and/or Commodity
Index and/or Transportation Index for the FGMR, as
applicable, is determined and so approved. Any revision to
the FGMR, and/or the Commodity Index and/or Transportation
Index for the FGMR, as applicable, determined and so
approved after the Anniversary Date shall be made effective
retroactively to the Anniversary Date, subject to the
receipt of all regulatory authorizations necessary for such
retroactive application in a form satisfactory to each of
the Parties in accordance with the standards set forth in
Subsections 3.1(a) and 3.1(b). Any credit or additional
payment resulting from any such retroactive adjustment of
the FGMR, and/or the Commodity Index and/or Transportation
Index for the FGMR, as applicable, shall be reflected in
the next Monthly Energy Payment due under this Agreement
(and subsequent Monthly Energy Payments, if necessary).
(vi) The third part of the Monthly Energy
Payment will reflect the cost of fuel associated with that
portion of the Net Electrical Output attributable to the
Third Dispatch Segment and the Fourth Dispatch Segment. An
Interruptible Gas Rate ("IGR") will be applied to the
portion of this generation that is fueled by natural gas
and/or by liquified natural gas ("LNG"), and an Oil Rate
("OR") will be applied to the portion of this generation
that is fueled by oil. The IGR will be set initially on
June 1, 1990 at an amount equal to the sum of $2.27/MBtu
plus the firm displacement tariff rate, not to exceed
$0.20/MBtu, payable by, or on behalf of, Seller for
transportation on the Columbia LNG pipeline to Waldorf,
Maryland. Such rate will be adjusted each Billing Period
thereafter in accordance with the following formula:
IGR = IGRi * [(%C*CIi) + (%T*TIi)]
Where: IGR = Interruptible Gas Rate in
effect for the Billing Period
(Dollars/MBtu).
IGRi = Initial Interruptible Gas Rate.
%C = 71 for the monthly Billing
Periods of March through November, and .84
for the monthly Billing Periods of
December through February.
CIi = Commodity Index for the IGR: Shall
be calculated as described below.
%T = 29 for the monthly Billing Periods
March through November, and .16 for the
monthly Billing Periods of December
through February.
TIi = Transportation Index for the IGR:
Shall be calculated as described below.
The Commodity Index for the IGR will equal the sum of
the most recent data for each of the following four (4)
published spot gas prices available for the Billing Period
that the Commodity Index for the IGR is to be calculated,
divided by $6.46/MBtu (which is the sum of the same spot
gas prices as published for June 1990).
1. Natural Gas Clearinghouse, "Survey of
Domestic Spot Market Prices" for markets accessed
by Columbia Gulf Transmission Company on Onshore
Laterals, Louisiana;
2. Natural Gas Clearinghouse, "Survey of
Domestic Spot Market Prices" for markets accessed
by Tennessee Gas Pipeline Company, Vinton,
Louisiana;
3. Natural Gas Intelligence Gas Price Index,
"Spot Gas Price" delivered to pipelines thirty
(30) Day supply transactions for the Appalachian
Region - contract index price for Columbia Gas
Transmission Corporation; and
4. Natural Gas Week, "Spot Prices on Gas
Pipeline Systems" Columbia Gas Transmission
Corporation at Broad Run, W. VA.
In the event that any of the sources of information
referred to in the Commodity Index for the IGR is no longer
published or otherwise available, the Parties agree to
negotiate in good faith to replace such source of
information with an appropriate alternate source.
The Transportation Index for the IGR will be updated
for each Billing Period, beginning with the Billing Period
in which the Commencement Date occurs, in accordance with
the following formula:
(The CPI for the most recent Month for
which data have been published)
TIi = {[------------------------- - 1] / 2} + 1
129.9
Where: CPI = Consumer's Price Index for
all Urban Consumers, U.S. City Average, or
a suitable successor index published
monthly by the Bureau of Labor Statistics,
U.S Department of Labor.
129.9 = The value of the CPI for June,
1990.
Sample calculations demonstrating the calculation of
IGR and associated indices are set forth in Appendix B.
Either Party may, by written notice to the other
Party given during the period between one hundred and fifty
(150) Days and one hundred and twenty (120) Days prior to
either the third anniversary of the Actual Commercial
Operation Date or each subsequent third anniversary of the
Actual Commercial Operation Date thereafter ("Anniversary
Date"), request that the IGR, and/or the Commodity Index
and/or the Transportation Index for the IGR, be reviewed
and revised in accordance with the standards set forth
herein. If either Party provides such notice within the
specified time period, the Operating Committee shall in
good faith undertake such review and revision of the IGR,
and/or the Commodity Index and/or Transportation Index for
the IGR, as applicable. The purpose of such review of the
IGR shall be to determine the current market price of
interruptible natural gas delivered to comparable users
located within the Washington, D.C. Metropolitan Area at
the time of such review and to revise each such component
of the IGR, as necessary, to reflect such then-current
market price. For the purposes of this Agreement, the
Washington, D.C. Metropolitan Area includes the District of
Columbia; Calvert County, Charles County, Frederick County,
Montgomery County, Prince George's County and St. Mary's
County in the State of Maryland; and Arlington County,
Fairfax County, Fairfax City, Loudoun County, Prince
William County, Stafford County, Alexandria City, Falls
Church City, Manassas City and Manassas Park City in the
Commonwealth of Virginia. The purpose of such review of
the Commodity Index and/or Transportation Index for the
IGR, shall be to determine the most accurate method of
tracking changes in the market price of interruptible
natural gas delivered to comparable users located within
the Washington, D.C. Metropolitan Area at the time of such
review and to revise the Commodity Index and/or
Transportation Index for the IGR, as necessary for this
purpose. If the Operating Committee cannot agree on
appropriate revisions to the IGR, and/or the Commodity
Index and/or Transportation Index for the IGR, as
applicable, within sixty (60) days prior to the relevant
Anniversary Date, the Parties shall use their best efforts
to resolve the matter in accordance with Subsection 17.1(b)
and Section 17.2. Any revision of the IGR, and/or the
Commodity Index and/or Transportation Index for the IGR, as
applicable, determined in accordance with the provisions of
this Subsection 6.2(b)(vi) or Article XVII shall be
effective on the relevant Anniversary Date, subject to
receipt of all regulatory authorizations (including, but
not limited to, approval of such revision by the Maryland
Commission and the District of Columbia Commission)
necessary to implement such revision in a form satisfactory
to each of the Parties in accordance with the standards set
forth in Subsections 3.1(a) and 3.1(b). The Parties agree
to cooperate in obtaining all such necessary regulatory
authorizations. If a revized IGR has not been determined
in accordance with the foregoing procedures and so approved
by regulatory authorities prior to the relevant Anniversary
Date, PEPCO shall continue to make payments to Seller
thereafter based on an IGR determined in accordance with
the IGR provisions of this Agreement and the Commodity
Index and/or Transportation Index for the IGR, that were in
effect on the Day prior to the Anniversary Date, until a
revised IGR, and/or Commodity Index and/or Transportation
Index for the IGR, as applicable, is determined and so
approved. Any revision to the IGR, and/or the Commodity
Index and/or Transportation Index for the IGR, as
applicable, determined and so approved after the
Anniversary Date shall be made effective retroactively to
the Anniversary Date, subject to the receipt of all
regulatory authorizations necessary for such retroactive
application in a form satisfactory to each of the Parties
in accordance with the standards set forth in Subsections
3.1(a) and 3.1(b). Any credit or additional payment
resulting from any such retroactive adjustment of the IGR,
and/or the Commodity Index and/or Transportation Index for
the IGR, as applicable, shall be reflected in the next
Monthly Energy Payment due under this Agreement (and
subsequent Monthly Energy Payments, if necessary).
The OR will be set initially at $3.89/MBtu on June 1,
1990 and will be adjusted each Billing Period thereafter in
accordance with the following formula:
OR = 0Ri * OI
Where:
0R = 0il Rate in effect for the
Billing Period.
ORi = Initial Oil Rate: $3.89/MBtu.
OI = Oil Index: Shall be calculated
as described below.
The Oil Index for the Oil Rate will be based on prices
reported in Platt's Oilgram Price Report in the U.S. Tank
Car/Truck Transport table for No. 2 fuel oil. The Index
will be the sum of the most recently reported average of
the low and high prices of No. 2 fuel oil delivered to
Baltimore, Norfolk and Philadelphia, determined as set
forth below, divided by 151.41 cents/gallon (which is the
sum of the average of the low and high prices for No. 2
fuel oil for the same locations as published in Platt's
Oilgram-Monthly Average Supplement for June 1990). In
calculating the numerator of the above Oil Index, the
average price for No. 2 fuel oil delivered to each location
will be determined by averaging the low and high prices for
each such location as published in Platt's Oilgram for each
Wednesday in the Billing Period. In the event that any of
the sources of information referred to in the Oil Index is
no longer published or otherwise available, the Parties
agree to negotiate in good faith to replace such source of
information with an appropriate additional source. Sample
calculations demonstrating the calculation of the OR are
set forth in Appendix B.
Either Party may, by written notice to the other Party
given during the period between one hundred and fifty (150)
Days and one hundred and twenty (120) Days prior to either
the third anniversary of the Actual Commercial Operation
Date or each subsequent third anniversary of the Actual
Commercial Operation Date thereafter ("Anniversary Date"),
request that the OR and/or the Oil Index be reviewed and
revised in accordance with the standards set forth herein.
If either Party provides such notice within the specified
time period, the Operating Committee shall in good faith
undertake such review and revision of the OR and/or the Oil
Index, as applicable. The purpose of such review of the OR
shall be to determine the current market price of the fuel
oil component and the transportation component of the OR at
the time of such review and to revise each such component
of the OR, as necessary, to reflect such then-current
market price. The purpose of such review of the Oil Index
shall be to determine the most accurate method of tracking
changes in the price of each of the components of the OR
and to revise the Oil Index, as necessary, for such
purpose. If the Operating Committee cannot agree on
appropriate revisions to the OR and/or the Oil Index, as
applicable, within sixty (60) days prior to the relevant
Anniversary Date, the Parties shall use their best efforts
to resolve the matter in accordance with Subsection 17.1(b)
and Section 17.2. Any revision of the OR and/or the Oil
Index, as applicable, determined in accordance with the
provisions of this Subsection 6.2(b)(vi) or Article XVII
shall be effective on the relevant Anniversary Date, subject
to receipt of all regulatory authorizations (including, but
not limited to, approval of such revision by the Maryland
Commission and the District of Columbia Commission)
necessary to implement such revision in a form
satisfactory to each of the Parties in accordance with
the standards set forth in Subsections 3.1(a) and
3.1(b). The Parties agree to cooperate in obtaining
all such necessary regulatory authorizations. If a
revised OR and/or Oil Index, as applicable, has not
been determined in accordance with the foregoing
procedures and so approved by regulatory authorities
prior to the relevant Anniversary Date, PEPCO shall
continue to make payment to Seller thereafter based on
an OR determined in accordance with the OR provisions
of this Agreement and the Oil Index that were in
effect on the Day prior to the Anniversary Date, until
a revised OR and/or Oil Index, as applicable, is
determined and so approved. Any revision to the OR
and/or Oil Index, as applicable, determined and so
approved after the Anniversary Date shall be made
effective retroactively to the Anniversary Date,
subject to the receipt of all regulatory
authorizations necessary for such retroactive
application in a form satisfactory to each of the
Parties in accordance with the standards set forth in
Subsections 3.1(a) and 3.1(b). Any credit or
additional payment resulting from any such retroactive
adjustment of the OR and/or Oil Index shall be
reflected in the next Monthly Energy Payment due under
this Agreement (and subsequent Monthly Energy
Payments, if necessary).
6.3 (a) Loss of Qualifying Facility
Status. It is the intent and understanding of the Parties
that the Facility will be a Qualifying Facility throughout
the Term of this Agreement. If the Facility nevertheless
loses its status as a Qualifying Facility after the Actual
Commercial Operation Date, the Parties' rights and
obligations under this Agreement, including but not limited
to PEPCO's obligation to make payments in accordance with
this Agreement, shall continue, subject to the limitations
set forth in Subsection 6.3(b) and further subject to
receipt of all governmental and regulatory approvals
necessary for such continuation (whether the Facility is a
Qualifying Facility or attains another status) in form and
substance acceptable to each of the Parties pursuant to the
standard set forth in Subsection 6.3(c). PEPCO may
terminate this Agreement upon one hundred and eighty (180)
Days written notice given at any time subsequent to five
hundred and forty (540) Days following such loss of
Qualifying Facility status if all such necessary
governmental and regulatory approvals have not been
received in a form acceptable to each of the Parties as set
forth above. If at any time prior to the effective date of
such termination: (i) the Facility regains Qualifying
Facility status and receives all necessary governmental and
regulatory approvals therefor in form and substance
acceptable to each of the Parties, pursuant to the standard
set forth in Subsection 6.3(c), or (ii) the Facility does
not regain Qualifying Facility status, but Seller and PEPCO
receive all necessary governmental and regulatory approvals
in form and substance acceptable to each of the Parties
pursuant to the standard set forth in Subsection 6.3(c) for
the continued purchase and sale of capacity and energy from
the Facility in accordance with the provisions of this
Agreement, then the Parties' rights and obligations shall
continue in accordance with this Agreement.
(b) During any period when the Facility has
lost its status as a Qualifying Facility; (i) the
Dispatchable Portion shall be deemed to include the full
capacity and Net Electrical Output of the Facility and
there shall not be any Limited Dispatch Portion; (ii) the
four dispatch segments identified in Subsection 6.2(b)(i)
shall remain in effect without change; (iii) the rates
payable by PEPCO for the Net Electrical Output of each
dispatch segment shall remain in effect except that,
subject to conditions imposed by any governmental or
regulatory permit or approval relating to the Facility
reviewed and approved by PEPCO, Seller may use, and be
compensated for, No. 2 fuel oil as the Fuel for the
Facility on any Day when the Facility is dispatched by
PEPCO and Seller is not able, despite its best efforts, to
comply with the deadlines included in the thenprevailing
required procedures for monthly and daily nomination of gas
transportation service for the Columbia Gas Transmission
Corporation for scheduling transportation of gas to the
Facility on such Day. Such best efforts shall include, but
not be limited to, reasonable estimates of expected
Facility operation taking into account historical
experience, weather conditions, and nonbinding information
provided by the PEPCO dispatcher. The Operating Committee
shall modify the operating procedures as necessary to
reflect the elimination of a Limited Dispatch Portion.
(c) A Party shall accept any governmental
or regulatory approval referred to in Subsection 6.3(a)
unless such Party reasonably determines that such
governmental or regulatory approval would materially impair
the operation of the Facility by Seller as a facility that
is dispatchable by PEPCO in accordance with the terms and
provisions of this Agreement or would otherwise materially
impair PEPCO's rights in accordance with the terms and
provisions of this Agreement.
6.4 Other Charges. Seller shall pay PEPCO
itemized charges for metering and testing requested by
Seller in addition to the metering and testing required to
be performed by PEPCO under this Agreement.
6.5 Billing and Payment. (a) PEPCO shall
prepare and render to Seller (or to any person designated
in writing by Seller to PEPCO) within twenty-five (25) Days
after the end of each Billing Period: (i) a statement
detailing PEPCO's calculation of the Monthly Capacity
Payment and the Monthly Energy Payment due to Seller for
such Billing Period, less any undisputed amounts overdue to
PEPCO from Seller pursuant to this Agreement and less any
amounts owing to PEPCO under Sections 6.4 and 6.6, (ii)
payment to Seller in the amount indicated in such
statement, and (iii) calculations of the EAF and EFOR of
the Facility for the most recent time periods referred to
in Subsection 15.1(c) for which data are available.
(b) If any undisputed payment from either
Party is not paid when due, there shall be due and payable
to the other Party interest thereon from the date on which
such payment became overdue and calculated at the prime
interest rate(s) then in effect at Citibank of New York, or
its successor, plus two percent (2%), from the last Day of
the Billing Period(s) for which the overdue payment is
owed.
(c) If either Party disputes the accuracy
of a bill, the Parties shall use their best efforts to
resolve the dispute in accordance with Section 17.1. Any
adjustments which the Parties may subsequently agree to
make with respect to any such billing dispute shall be made
by a credit or additional charge on the next bill rendered.
If the Parties are unable to resolve the dispute in this
manner, any amounts disputed on subsequent bills for the
same reason may thereafter be withheld pending final
resolution of the dispute in accordance with the procedures
described in Section 17.2, but the undisputed amount shall
be promptly paid.
(d) Upon resolution of a disputed amount,
the amount shall be due and payable to the appropriate
Party, with interest thereon from the date on which such
amount would otherwise have been overdue hereunder if no
dispute had arisen, calculated at the prime interest
rate(s) then in effect at Citibank of New York, or its
successor, plus two percent (2%). The existence of a
dispute as to any bill shall not relieve either Party of
compliance with any other provision of this Agreement.
6.6 Other Payments. Any amounts, other
than those specified in Sections 6.1 and 6.2, due either
Party under this Agreement shall be paid or objected to
within thirty (30) Days following receipt by either Party
of an itemized invoice from the other setting forth, in
reasonable detail, the basis for such payment. If any
undisputed payment shall not be paid when due, there shall
be due and payable to the other Party interest from the
date on which such payment became overdue and calculated at
the prime interest rate(s) then in effect at Citibank of
New York, or its successor, plus two percent (2%). PEPCO
shall have the option in any invoice it provides to Seller
pursuant to this Section to require payment from Seller or
to require Seller to treat the amount due as a credit
against any amounts PEPCO may then owe Seller under the
terms of this Agreement.
ARTICLE VII
PRE-OPERATION PERIOD
7.1 Facility Construction and Start-Up.
(a) The Construction Start Date shall not
be later than forty-eight (48) Months after the Effective
Date. Seller shall provide PEPCO with written confirmation
of the Construction Start Date within ten (10) Days after
the occurrence thereof. If the Construction Start Date
fails to occur by the time specified above, PEPCO may, at
its option, terminate this Agreement immediately by written
notice to Seller and PEPCO shall have the right to retain
the Development Security as liquidated damages, and any
remaining interest accumulated on the Development Security
shall be returned or released, as the case may be, to
Seller within thirty (30) Days after the date of such
termination.
(b) Commencing one (1) Month after the
Effective Date and continuing every Month thereafter until
the Actual Commercial Operation Date, Seller shall provide
a report to PEPCO outlining the progress on development of
the Facility.
(c) Seller shall provide PEPCO with a
Critical Path Method Schedule within one hundred and twenty
(120) Days after receipt of the orders required under
Subsection 3.1(a)(i). Thereafter, Seller shall update and
otherwise report progress on implementation of the Critical
Path Method Schedule in the monthly progress reports to be
provided by Seller pursuant to Subsection 7.1(b). The CPM
Schedule shall include, as a minimum, the following
milestones:
(i) Acquisition of the Site or a lease
thereof and required easements;
(ii) Acquisition of each major permit,
certificate, order, and other governmental or
regulatory authorization required prior to the
Construction Start Date and required for the operation
of the Facility during start-up and commercial operation;
(iii) Acquisition of project financing,
initial Fuel Supply Contract(s), and a Steam Supply Contract;
(iv) Issuance of notice to proceed to EPC
Contractors, and contractors or subcontractors for
major civil, mechanical, and electrical equipment
required by the project;
(v) Delivery of major equipment;
(vi) Major construction milestones (e.g.,
generator set in place);
(vii) Major equipment installed and tested;
and
(viii) The Scheduled Commencement Date. The
CPM Schedule shall also track, to the extent possible and
to the extent not specified above, all activities to be
performed by the project contractors, including but not
limited to PEPCO, the EPC Contractor, major equipment
vendors, construction contractors, and operation and
maintenance contractors, and will identify all major
deliverables through permitting, design, construction,
testing, start-up and parallel operation with the PEPCO
System. The Parties recognize that some of the foregoing
information will be revised after the CPM Schedule is first
submitted and that such information will be updated as
required. Interface points for PEPCO oversight
requirements will be delineated in the CPM Schedule. PEPCO
shall evaluate the reasonableness of the CPM Schedule and
monitor progress of the development of the Facility in
order to assess whether the Seller will meet the Actual
Commercial Operation Date as an aid to PEPCO's planning
process.
(d) After the Construction Start Date and
until the Actual Commercial Operation Date has occurred,
Seller shall provide PEPCO copies of the routine reports
provided to the Financing Parties, which explain
construction progress.
(e) PEPCO shall have the right to review
the design of the Facility and monitor the construction,
start- up, testing and operation of the Facility, including
physical inspections at the Site. Seller shall comply with
all reasonable requests of PEPCO for access to the Site for
such purposes. Seller shall cooperate with PEPCO to ensure
that the Facility's power generation equipment and
switchgear are designed and installed so that the Facility
can safely and successfully operate in parallel with the
PEPCO System.
7.2 Commencement Date.
(a) Seller shall provide PEPCO with at
least thirty (30) Days' prior notice of the proposed
Commencement Date. Such notice shall include Seller's
intended hourly delivery schedule of Start-up Energy.
(b) PEPCO and Seller shall agree on the
Commencement Date and PEPCO shall have the right to have
representatives present at the Site on the Commencement
Date; provided, however, that PEPCO reserves the right to
reasonably delay the Commencement Date until the
requirements of Subsection 7.1(i) have been satisfied or in
the event PEPCO is unable to complete the Interconnection
Facilities by such proposed Commencement Date due to Force
Majeure or a failure by Seller to provide information as
required by Subsection 9.2(a) or to carry out its
obligations under the Interconnection Plan provided
pursuant to Subsection 9.2(b) or to make payment of any
Interconnection Costs under this Agreement. In such event,
PEPCO shall give Seller written notice of the reason for
delaying the Commencement Date or the completion of the
Interconnection Facilities and the applicable Party shall
promptly proceed to rectify the identified problems.
(c) Written confirmation of the
Commencement Date shall be sent to PEPCO by Seller within
ten (10) Days after the occurrence thereof.
7.3 Actual Commercial Operation Date.
(a) The Actual Commercial Operation Date
shall be no sooner than the Scheduled Commercial Operation
Date, (or if the Scheduled Commercial Operation Date has
been extended as otherwise permitted under Section 4.4,
then the Actual Commercial Operation Date may occur during
the period between the Scheduled Commercial Operation Date
and the Extended Scheduled Commercial Operation Date) when
all of the following conditions have been satisfied:
(i) All of the conditions set forth in
Sections 3.1, 3.2 and 3.3 have been satisfied;
(ii) Seller has provided PEPCO with
evidence that it has obtained a commitment for the
permanent financing for the Facility;
(iii) Seller has provided PEPCO at least
thirty (30) Days' prior written notice of the proposed
Actual Commercial Operation Date;
(iv) Seller has established the Dependable
Capacity as set forth in Subsection 8.2(a); and
(v) Seller has transferred to PEPCO
ownership of the Transmission Facilities and Seller's
rights in the Transmission Facilities Site, free and
clear of any liens or other encumbrances of title,
unless otherwise agreed to by PEPCO. At the time of
such transfer, Seller shall provide PEPCO with a
warranty that the construction and operation of
electric transmission lines is a permitted use on all
portions of the Transmission Facilities Site and that
Seller has obtained all zoning approvals and other
governmental or regulatory approvals required for
construction and operation of the Transmission
Facilities by Seller prior to the transfer of the
Transmission Facilities to PEPCO pursuant to this
Subsection 7.3(a)(v) and for the initial operation of
the Transmission Facilities by PEPCO subsequent to
such transfer (including, but not limited to, any
certificate of public convenience and necessity for
the Transmission Facilities required from the Maryland
Commission). Prior to such transfer, Seller shall
provide PEPCO with such information as PEPCO may
reasonably request to evaluate the Transmission
Facilities, the Transmission Facilities Site and such
transfer. Such information shall include, but not be
limited to: (i) a Phase I EPA environmental
assessment of the Transmission Facilities Site
(including but not limited to, identification of the
presence of any polychlorinated biphenyls, materials
stored in underground storage tanks, hazardous wastes
within the meaning of RCRA and hazardous substances
within the meaning of CERCLA) current as of the date
of such transfer and in form and substance
satisfactory to PEPCO, (ii) any required easements or
rights of way necessary for construction and operation
of the Transmission Facilities (including
environmental indemnifications to PEPCO from the
parties providing each easement or right of way
satisfactory to PEPCO in its sole discretion), and
(iii) access to the Transmission Facilities Site for
the purpose of such inspections, testing, and sampling
as PEPCO may require. No transfer of the Transmission
Facilities or the Transmission Facilities Site to
PEPCO shall occur unless PEPCO has agreed in writing
to accept such transfer. Such agreement shall not be
unreasonably withheld.
ARTICLE VIII
OPERATIONS AND MAINTENANCE
8.1 Operation of Facility.
(a) Seller shall design, construct, operate
and maintain the Facility in accordance with Prudent
Utility Practices and otherwise in accordance with this
Agreement.
(b) Every operation of the intertie and/or
synchronizing circuit breaker shall occur under the
direction of the PEPCO dispatcher. The generation and
delivery of electricity shall be in accordance with
Appendix F.
(c) Seller shall operate the Facility in
parallel with the PEPCO System during the Term of this
Agreement, provided that, the Facility is designed,
constructed, maintained, and operated in accordance with
Prudent Utility Practices and the Guidelines and
Performance Standards for Parallel Operation contained in
Appendix C hereto, including but not limited to, such
practices, guidelines and standards relating to
synchronization, voltage control, and generation of
harmonic frequencies so that operation of the Facility will
not have an adverse impact on the voltage level or wave
form of the PEPCO System.
(d) Seller shall notify PEPCO in a timely
manner of any limitations, restrictions or outages of the
Net Electrical Output in accordance with Appendix I.
(e) Seller's selection of the operator for
the Facility and the terms and conditions of any operation
and maintenance agreement entered into by Seller with
respect to the Facility shall be subject to PEPCO's review
and approval; provided, however, that PEPCO may only
withhold its approval on the bases that the operator lacks
appropriate experience with the operation of facilities
similar to the Facility or that the operating agreement
would materially impair the operation of the Facility by
Seller as a facility that is dispatchable by PEPCO in
accordance with the terms and provisions of this Agreement
or would otherwise materially impair PEPCO's rights in
accordance with the terms and provisions of this Agreement.
8.2 Dependable Capacity; Testing of
Capacity Rating.
(a) Prior to or on the Actual Commercial
Operation Date, Seller shall establish a Dependable
Capacity of two hundred thirty thousand (230,000) kilowatts
for the Facility under summer ambient conditions (defined
as 92 degrees F. and fifty percent (50%) relative humidity) in
accordance with the test of "Net Capability" of Appendix D.
The Facility shall also be tested during each Summer Period
and each Winter Period occurring during the Term after the
Actual Commercial Operation Date in accordance with the
procedures set forth in Appendix D to demonstrate the Net
Capability of the Facility. The Parties agree that the
Dependable Capacity for the Facility under this Agreement
shall be established by testing the Net Capability of the
Facility as specified by Appendix D and shall be the lower
of (i) the Net Capability so tested and certified (stated
in kilowatts) and (ii) the Dependable Capacity specified in
the first sentence of this subsection.
(b) PEPCO shall have the right to require
the Seller to revalidate the Dependable Capacity of the
Facility if the Equivalent Availability Factor of the
Facility falls below eighty percent (80%) as calculated for
any twelve (12)-Month period which commences on or after a
one (l)-Year period following the Actual Commercial
Operation Date, or if the Equivalent Forced Outage Rate of
the Facility exceeds ten percent (10%) as calculated for
any twelve (12)-Month period which commences on or after a
one (l)-Year period following the Actual Commercial
Operation Date. Periods during which Seller has declared a
Force Majeure to exist or during which an Emergency
Condition exists shall be included in the calculation of
the EAF or the EFOR for purposes of this subsection.
(c) PEPCO may periodically need recognition
and credit for the generating capacity of the Facility from
the PJM Pool or such other power coordinating group to
which PEPCO belongs and has contractual responsibilities
for providing electrical capacity, or for regulatory or
other reporting purposes. If, in order to obtain such
recognition, PEPCO must verify the capacity rating of the
Facility under the PJM Pool's criteria, or PEPCO procedures
implementing such criteria, Seller shall, in addition to
the demonstrations of the Dependable Capacity of the
Facility during each Summer Period and Winter Period made
pursuant to Subsection 8.2(a), perform such actual tests of
the Facility's Net Capability as PEPCO may reasonably
request upon at least ten (10) Days' prior notice, with due
consideration to Seller's obligations under the Steam
Supply Contract.
(d) In the event that PEPCO is required to
derate the Net Capability of the Facility in accordance
with PJM Pool guidelines, then the Dependable Capacity of
the Facility shall automatically be reduced accordingly.
(e) If Seller is consistently unable during
the period from June through September in any Calendar Year
to provide the full Dependable Capacity when dispatched by
PEPCO, due to the unavailability of supplemental firing
equipment or other special equipment or methods used by
Seller in establishing the Dependable Capacity, then PEPCO
may require Seller to reestablish the Dependable Capacity,
in accordance with the test of Net Capability in Appendix
D, without such equipment or methods in operation.
8.3 Schedule and Dispatch of Generation.
(a) PEPCO shall dispatch the portion of the
Facility's Dependable Capacity designated as the Limited
Dispatch Portion for a total of one hundred and eight (108)
Hours between 8:00 a.m. Monday and 8:00 p.m. Friday for
each Week it is available. At all other times when the
Facility is required at less than the Facility's First
Dispatch Segment by PEPCO System dispatch, the Limited
Dispatch Portion may be cycled off by PEPCO's dispatchers.
Seller shall provide PEPCO with (i) an annual schedule of
the estimated generating capability and availability of the
Limited Dispatch Portion for each Calendar Year no later
than November 1st of the prior Calendar Year in accordance
with Section 8.4, (ii) a monthly schedule of the estimated
generating capability and availability of the Limited
Dispatch Portion no later than one (1) Week prior to the
end of the previous Month and (iii) a weekly schedule
(Monday through Sunday) of estimated generating capability
and availability of the Limited Dispatch Portion no later
than 4:00 p.m. on Thursday of the previous Week and shall
inform PEPCO promptly of any material changes in such
schedules. PEPCO may request Seller to modify the aforesaid
schedules as needed to meet the requirements of the PEPCO
System and shall take into consideration the obligations of
Seller under the Steam Supply Contract in requesting such
modification. Subject to Prudent Utility Practices, Seller
shall use its reasonable efforts to alter these schedules
to conform to modifications reasonably requested by PEPCO
throughout the Calendar Year. PEPCO shall furnish to
Seller PEPCO's estimated dispatch schedule for the Facility
and any changes thereto, at the times and in the manner
that PEPCO provides such estimated schedules for its own
generating facilities.
(b) For the portion of the Facility's
Dependable Capacity designated as the Dispatchable Portion,
PEPCO's dispatcher shall have the sole discretion to
schedule and control the generation of electricity.
PEPCO's dispatcher shall also have sole discretion to
control operation of the intertie circuit breaker. When
PEPCO elects to dispatch the Dispatchable Portion, subject
to Prudent Utility Practices and after the Limited Dispatch
Portion, if any, has been fully loaded, PEPCO shall do so
as agreed to by the Parties up to the Facility's Available
Capacity. PEPCO will not guarantee any hourly generation
level when scheduling the Dispatchable Portion. The
Facility dispatch shall be in accordance with a dispatch
plan as mutually agreed by the members of the Operating
Committee. The dispatch plan will be consistent with
Prudent Utility Practices.
(c) Seller shall purchase and install the
telecommunications equipment and channels for the Facility
listed in Appendix F attached hereto, subject to such
additions as PEPCO may determine to be appropriate prior to
the Actual Commercial Operation Date in accordance with
Prudent Utility Practices. At PEPCO's sole expense, from
time to time after the Actual Commercial Operation Date
Seller shall install additional equipment as may be
reasonably required by PEPCO consistent with Prudent
Utility Practices in order to allow PEPCO to maximize
economic and reliable dispatch of the Facility in
coordination with the PEPCO system.
(d) Seller shall coordinate with PEPCO to
ensure that any Start-up Energy or Test Energy generated by
the Facility that Seller proposes to deliver to PEPCO on
any Day is delivered at such time during such Day that is
most consistent with economic dispatch of the Facility.
(e) For purposes of determining payments to
be made pursuant to Section 6.2, the following will apply.
Natural gas or LNG will be used for the First Dispatch
Segment and the Second Dispatch Segment at all times,
except as allowed by Subsection 6.3(b). Natural gas or LNG
will be used for the Third Dispatch Segment and the Fourth
Dispatch Segment at all times when natural gas or LNG is
available. Natural gas will be considered to be available
if supply into either the Columbia Gas System or Transco
System is available and interruptible transportation on the
respective pipeline is available. Supply availability is
intended to mean supply from spot markets (excluding stored
natural gas) in the Gulf of Mexico, mid-continent and
Appalachian regions which are connected to the Columbia Gas
System or Transco System directly or via major interstate
pipeline systems with direct access to these supply
sources. Other sources of supply may be included in the
future by the Operating Committee.
(f) The Fuel Supply Plan is to set forth
Seller's plans to facilitate use of the most economic Fuel
in the Facility, among other matters. As of the Effective
Date, the most economic Fuel is natural gas. If, during
the Term, No. 2 fuel oil becomes a more economic Fuel than
natural gas on a long term basis, the Parties agree to
enter into good faith negotiations for the purpose of
agreeing to appropriate revisions to the Fuel Supply Plan
and to this Agreement in order to continue to facilitate
use of the most economic Fuel in the Facility.
8.4 Annual Notice of Scheduled Maintenance
Outages. Prior to November 1st of each Calendar Year,
Seller shall submit a proposed schedule of expected
maintenance outages for the twenty-four (24) Month period
beginning on January 1st of the following Calendar Year.
The schedule shall include estimated times of Facility
operation, amounts of electricity production, number of
anticipated and Scheduled Outages and reductions of output
and the reasons therefor, and the start dates and durations
of scheduled maintenance, including a specification of
maintenance requiring shutdown or reduction in output of
the Facility. PEPCO may request Seller to revise its
proposed schedule for the timing and duration of any
Scheduled Outages or reduction of output of the Facility,
taking into consideration Seller's obligations under the
Steam Supply Contract, to accommodate the requirements of
PEPCO. Subject to Prudent Utility Practices, Seller shall:
(a) use its best efforts not to schedule maintenance during
the periods from June through September and December
through February unless requested to do so by PEPCO, (b)
use its best efforts to restore the availability of the
Facility as soon as possible during unscheduled outages
that occur during the periods from June through September
and December through February and (c) use its reasonable
efforts to accommodate requests made by PEPCO with respect
to maintenance activities during other periods throughout
the Calendar Year. Seller may request that its proposed
maintenance schedule as previously provided to PEPCO
pursuant to this Section 8.4 be revised with respect to the
timing and duration of any Scheduled Outages or reduction
of output of the Facility. PEPCO shall endeavor in good
faith to accommodate any such revision requested by Seller
that is consistent with the requirements of the PEPCO
System and Prudent Utility Practices.
8.5 Routine Maintenance. In accordance
with the requirements of the PEPCO System and Prudent
Utility Practices, Seller agrees to coordinate routine
maintenance with PEPCO, including providing PEPCO with:
(a) at least seven (7) Days' notice prior to removing the
Facility from service for routine maintenance, which notice
shall include the scheduled start date and time and
duration of the proposed maintenance outage, or (b) the
number of Days that the maintenance can be deferred and the
duration of the proposed outage.
8.6 Annual Maintenance and Inspection
Report. Prior to February 1st of each Calendar Year, Seller
shall submit to PEPCO a summary of all maintenance and
inspection work performed in the prior Calendar Year, and
of all conditions experienced or observed during that
Calendar Year that may have a material adverse effect on,
or may materially impair the short or long-term operation
of, the Facility at the operational levels contemplated by
this Agreement. The summary shall also include Seller's
proposals for correcting or preventing recurrences of such
conditions and for performing such other maintenance and
inspection work as is required by Prudent Utility
Practices. PEPCO may provide comments concerning such
proposals, provided, however, that PEPCO's making or
failing to make comments with respect to operation or
maintenance of the Facility shall not be deemed to
constitute an endorsement of the operation and maintenance
thereof nor a warranty or other assurance by PEPCO of the
safety, durability or reliability of the Facility.
8.7 Maintenance Reserve.
(a) Seller agrees to establish and maintain
for the Term in accordance with Subsection 8.7(b), a
Maintenance Reserve (the "Maintenance Reserve") with a
financial institution with a Thomson BankWatch rating of C
or better and assets of at least twenty-five billion
dollars ($25,000,000,000.00), and under depository
arrangements satisfactory to PEPCO in its sole discretion,
to be used exclusively to pay for certain maintenance
expenses for the Facility, including any repairs, or
replacements that are necessary or appropriate to assure
that the Facility will continue to be operated and
maintained in accordance with Prudent Utility Practices and
the performance standards set forth in this Agreement. The
Maintenance Reserve shall not be subject to any lien or
other claim by any person (including, but not limited to,
any Financing Party) other than PEPCO. From time to time
after the initial posting of the Maintenance Reserve,
Seller shall, within thirty (30) Days of PEPCO's request
therefor, provide evidence (including, without limitation,
legal opinions) reasonably satisfactory to PEPCO of the
continuing existence of the Maintenance Reserve.
(b) (i) On or before the first anniversary
of the Actual Commercial Operation Date, Seller shall
deposit at least one million dollars ($1,000,000.00) in the
Maintenance Reserve. On or before the second anniversary
of the Actual Commercial Operation Date, Seller shall
deposit an additional one million dollars ($1,000,000.00)
in the Maintenance Reserve. On or before the third
anniversary of the Actual Commercial Operation Date, Seller
shall deposit an additional two million dollars
($2,000,000.00) in the Maintenance Reserve so that by such
third anniversary the aggregate amount of funds deposited
in the Maintenance Reserve pursuant to this Subsection
8.7(b)(i) shall be four million dollars ($4,000,000.00).
Thereafter, Seller shall maintain the portion of the
Maintenance Reserve funded pursuant to this Subsection
8.7(b)(i) at a funding level of four million dollars
($4,000,000.00). To the extent funds are withdrawn from
the Maintenance Reserve to pay for maintenance costs, the
Maintenance Reserve will be replenished out of the Seller's
Net After-Tax Cash Flow available during the next Month.
If Seller's Net After-Tax Cash Flow is insufficient to fund
the Maintenance Reserve at the required levels, any
shortfall shall be carried over and be due in the following
Month and subsequent Months until the required funding
level of the Maintenance Reserve has been reached. As an
alternative to depositing cash in the Maintenance Reserve,
Seller may fund the Maintenance Reserve with a letter of
credit, in the amounts and at the times specified in this
Subsection 8.7(b)(i) and otherwise in form and substance
satisfactory to PEPCO in its sole discretion, issued by a
financial institution with a Thomson BankWatch rating of C
or better and with assets of at least twentyfive billion
dollars ($25,000,000,000.00).
(ii) (A) In addition to the amounts
specified in Subsection 8.7(b)(i), Seller shall provide
additional funding for the Maintenance Reserve at quarterly
intervals, commencing with the Actual Commercial Operation
Date, in the amount of fifty-seven dollars ($57.00) for
each hour (or part thereof) of operation of the Facility's
combustion turbines during the prior Quarter. The hours of
operation for each of the Facility's combustion turbines
shall be added together to determine the total hours of
operation of the Facility's combustion turbines during said
prior Quarter. The quarterly contributions shall continue
thereafter as necessary to achieve and maintain a level of
funding for the Maintenance Reserve pursuant to this
Subsection 8.7(b)(ii)(A) equal to the amounts specified in
Appendix K attached hereto for the relevant time periods
identified in said Appendix. The portion of the
Maintenance Reserve funded pursuant to this Subsection
8.7(b)(ii)(A) may be used to perform manufacturer's
recommended maintenance in accordance with the schedule
shown generally on Appendix K attached to this Agreement.
(b) By written notice to PEPCO prior to the
Actual Commercial Operation Date, Seller may elect to
increase the total funding level of the Maintenance Reserve
provided pursuant to Subsection 8.7(b)(i) from four million
dollars ($4,000,000.00) to five million dollars
($5,000,000.00). If Seller so elects, the deposit that
Seller shall be required to make in the Maintenance Reserve
on or before the third anniversary of the Actual Commercial
Operation Date shall be increased by one million dollars
($1,000,000.00) over the amount specified in Subsection
8.7(b)(i) (i.e., so that the aggregate amount of funds
deposited in the Maintenance Reserve by such date shall be
five million dollars ($5,000,000.00)). Thereafter Seller
shall maintain the Maintenance Reserve at a funding level
of five million dollars ($5,000,000.00) in accordance with
the provisions of Subsection 8.7(b)(i). If Seller elects
pursuant to this Subsection 8.7(b)(ii)(B) to so increase
the funding level of the Maintenance Reserve, then Seller
shall not be required to provide the funding for the
Maintenance Reserve required under Subsection
8.7(b)(ii)(A).
(c) In the event the operating experience
indicates that the amount of funds retained in the
Maintenance Reserve should be increased or is greater than
necessary for the prudent long term operation of the
Facility in accordance with Prudent Utility Practices, the
Parties shall undertake good faith negotiations to modify
accordingly the funding requirements of Subsection 8.7(b).
8.8 Special Operational Audits. PEPCO
further reserves the right to have a special operations and
maintenance audit conducted at PEPCO's expense by an
independent third party qualified to conduct such audits:
(a) in the event that the Equivalent Availability Factor of
the Facility falls below eighty percent (80%), or the
Equivalent Forced Outage Rate of the Facility exceeds ten
percent (10%), in either case as calculated for any
consecutive twenty-four (24) Month period occurring after
the date that is one (1) Year after the Actual Commercial
Operation Date, or (b) if circumstances occur in which
PEPCO has the right to require Seller to reestablish the
Dependable Capacity pursuant to Subsection 8.2(e). If such
a special audit is conducted, Seller agrees to implement
the recommendations of such independent auditor, to the
extent such recommendations are consistent with Prudent
Utility Practices, in a timely and cost effective manner
(but in no event longer than one (1) Year after performance
of the audit, unless the Parties reasonably agree that an
additional period of time is necessary), or to otherwise
make necessary corrections in a manner reasonably
satisfactory to the Parties. Periods during which a Force
Majeure is in effect or when an Emergency Condition exists
shall be included in the calculation of EAF or EFOR for
purposes of this Section 8.8.
8.9 Modification of Project and Financing
Documents.
(a) Without the prior written consent of
PEPCO, Seller may not terminate or modify in a material
manner the Steam Supply Contract, or the Fuel Supply
Contract(s), or its operation and maintenance arrangements,
and may not enter into any new contract or arrangement with
respect to such matters, provided, that, PEPCO's consent
shall not be required for any additional Fuel Supply
Contract(s) for amounts of Fuel in excess of those required
to satisfy Seller's covenant under Section 11.2 of this
Agreement. PEPCO shall grant its consent for any such
proposed termination, modification or entry unless PEPCO
reasonably determines that such termination, modification
or entry would materially impair the operation of the
Facility by Seller as a facility that is dispatchable by
PEPCO in accordance with the terms and provisions of this
Agreement or would otherwise materially impair PEPCO's
rights in accordance with the terms and provisions of this
Agreement. Seller agrees to pay or reimburse PEPCO for all
reasonable costs and expenses reasonably incurred by PEPCO
in connection with any third party review in accordance
with Appendix H up to a maximum of $50,000.00 per review.
(b) Without the prior written approval of
PEPCO, Seller may not: (i) modify any of the Financing
Documents which include provisions that may affect PEPCO's
rights under this Agreement, or for which the Financing
Parties have requested PEPCO's consent, or which PEPCO has
executed or (ii) enter into any refinancing or additional
financing with respect to the Facility. PEPCO's review and
approval or disapproval of any such modification,
refinancing or additional financing shall be subject to the
same standards as set forth in Subsection 3.3(b) for
PEPCO's review and approval or disapproval of the Financing
Documents submitted by Seller pursuant to Subsections
3.2(g) and 3.3(b).
8.10 Operating Committee.
(a) Seller and PEPCO agree to establish an
Operating Committee consisting of one (1) representative
each of Seller and PEPCO. The Operating Committee shall
act only by unanimous agreement or consent. Seller and
PEPCO shall designate their respective representatives to
the Operating Committee, plus any alternate, by written
notice delivered in accordance with Section 19.2. Each
Party's representative on the Operating Committee is
authorized to act on behalf of such Party with respect to
any matter arising under this Agreement.
(b) The Operating Committee shall develop
and implement suitable operating, maintenance, outage and
capability reporting, accounting, and recordkeeping
policies and procedures to coordinate the operation of the
Facility with the operation of the PEPCO System and
facilitate the coordination and interaction between the
Parties with respect to their performance of the duties and
obligations imposed on the Parties hereunder. The
Operating Committee shall not, however, have any authority
to modify or otherwise alter the rights and obligations of
the Parties under this Agreement.
(c) Seller shall keep the Operating
Committee informed on a current basis of its own policies
and procedures for operation and maintenance of the
Facility and for otherwise implementing this Agreement and
shall discuss with the Operating Committee its suggestions
and proposals with respect to these matters.
ARTICLE IX
INTERCONNECTION
9.1 Interconnection and Transmission
Facilities. (a) All metering devices specified in Appendix
E and all Interconnection Facilities to be installed on
PEPCO's side of the Interconnection Point necessary to
enable PEPCO to receive power from the Facility at the
Interconnection Point, including, but not limited to, any
transformers, switches, relays, other protective devices,
communications equipment and safety equipment, and
transmission improvements necessary to accommodate the
interconnection of the Facility to the PEPCO System shall
be planned, designed, constructed, installed, operated and
maintained by PEPCO at the expense of Seller (except as
otherwise specified in Subsections 10.2(a) and 10.2(b) with
respect to responsibility for the expense of inspecting and
testing the metering devices). Such amounts shall be paid
by Seller to PEPCO pursuant to Section 6.6. All
Interconnection Facilities, other than the metering devices
specified in Appendix E, to be installed at the Site or on
property not owned by PEPCO shall be planned, designed,
constructed, installed, operated and maintained by, and at
the expense of, Seller in accordance with PEPCO's
requirements.
(b) All Transmission Facilities necessary
to transmit power from the line side of the Facility's line
disconnect switch to the line side of the line disconnect
switch at PEPCO's Burches Hill Substation shall be
designed, constructed and installed in accordance with
PEPCO's requirements by Seller and at Seller's expense
pursuant to Section 9.6. Subject to PEPCO's approval and
in accordance with Subsection 7.3(a)(v), prior to the
Actual Commercial Operation Date Seller shall transfer
ownership of the Transmission Facilities and its rights in
the Transmission Facilities Site to PEPCO at no cost to
PEPCO. PEPCO shall be responsible for all maintenance of
the Transmission Facilities after the date of such
transfer.
9.2 Cost Estimate and Schedule for Design
and Construction.
(a) Seller shall, no later than two (2)
Years prior to the Scheduled Commencement Date, provide
PEPCO with such information concerning the Facility as
PEPCO may reasonably require to prepare an Interconnection
Plan and a cost estimate and schedule for the
Interconnection Facilities to be installed by PEPCO. Such
information shall include, as a minimum (i) a functional
one-line diagram of the Facility showing at least the
generator(s), protective relay functions, step-up
transformers and circuit breakers proposed by Seller, (ii)
a Site plan showing Facility layout, property lines, access
road, and proposed boundaries allowed for the switchyard
and (iii) confirmation of the Scheduled Commencement Date.
(b) As soon as reasonably practicable, but
in any event no later than one hundred and twenty (120)
Days after receipt of the information provided by Seller
pursuant to Subsection 9.2(a), PEPCO shall provide Seller
with (i) an Interconnection Plan, (ii) an estimate of the
Interconnection Costs for PEPCO's design, procurement,
construction, and installation of the Interconnection
Facilities to be installed by PEPCO, including the metering
devices and metering systems required in connection with
the performance of this Agreement, which estimate shall
include, among other matters, any applicable overhead
costs, and (iii) a schedule for all work relating to the
Interconnection Facilities to be provided by PEPCO designed
to complete such work within a period mutually acceptable
to both Parties, but in any event prior to the Scheduled
Commencement Date; provided that: (iv) such plan,
estimate, or schedule shall be revised to the extent
necessary, consistent with Prudent Utility Practices, as
determined by PEPCO if Seller provides revised or
additional information which materially affects such plan,
estimate, or schedule, (v) engineering analysis confirms
the technical feasibility of the proposed interconnection
and (vi) such Interconnection Plan is completed at least
eighteen (18) Months prior to the Scheduled Commencement
Date.
(c) Seller agrees to grant, or cause to be
granted, to PEPCO all necessary rights of way and
easements, including adequate and continuing access rights
to, and on, the Site or other property of Seller, necessary
to install, operate, maintain, replace and/or remove any
Interconnection Facilities or Transmission Facilities.
Seller agrees that rights of way and easements shall
survive termination or expiration of this Agreement. Prior
to the construction, by PEPCO, of the Interconnection
Facilities, Seller agrees to execute such other grants,
deeds or documents as PEPCO may require to record such
rights of way and easements. PEPCO agrees to grant to
Seller on land which PEPCO owns or controls (by right of
way) all easements, permits or permission required by
Seller to construct and operate the Facility during the
Term of this Agreement and to construct and operate the
Transmission Facilities prior to the transfer of the
Transmission Facilities to PEPCO pursuant to Subsection
7.3(a)(v). Consideration for such grants, deeds or
documents shall be the execution of this Agreement and no
other consideration shall be required.
(d) PEPCO shall complete the construction
and installation of the Interconnection Facilities to be
installed by PEPCO in accordance with Prudent Utility
Practices and the schedule established pursuant to
Subsection 9.2(b)(iii), as such schedule may be modified as
provided above; provided, however, that PEPCO's obligation
to complete the construction and installation of such
Interconnection Facilities in accordance with such schedule
is expressly conditioned on Seller's submission of data in
support of the Interconnection Facilities in a timely
manner as required by this Agreement and in form and
substance meeting the requirements of PEPCO. PEPCO shall
provide Seller with notice of changes in such schedule in a
timely manner. Failure by PEPCO to complete the
Interconnection Facilities by the date specified pursuant
to Subsection 9.2(b)(iii) shall not be considered a breach
of this Agreement to the extent that such failure can
reasonably be attributed to any of the following:
(i) Events of Force Majeure;
(ii) The failure of Seller to comply with
Subsection 9.2(c); and
(iii) The failure of Seller to make any
monthly payment of Interconnection Costs to PEPCO
pursuant to Section 9.3.
9.3 Interconnection Costs. All Interconnection
Costs incurred by PEPCO in accordance with the estimates
provided pursuant to Section 9.2 shall be paid by Seller
in the following manner. Within twenty (20) Days after the
end of each Month commencing with the Month after PEPCO
provides Seller with the Interconnection Plan described
in Subsection 9.2(b) and continuing until Seller has paid
such Interconnection Costs to PEPCO in full, PEPCO shall
submit to Seller a detailed statement of the Interconnection
Costs actually incurred by PEPCO during the preceding Month
and copies of invoices from third parties relating thereto.
Within twenty (20) Days after receipt of such detailed
statement, Seller shall pay to PEPCO the Interconnection
Costs as specified in such statement.
9.4 Protective Devices. Final approval of
the design, construction, and installation of the
protective relays, step-up transformers, circuit breakers,
and other protective devices that Seller proposes to
install on the Facility side of the line disconnect switch
insofar as the requirements of PEPCO are concerned, is
reserved to PEPCO. Such approval shall not be unreasonably
delayed or withheld. PEPCO's approval shall not be required
hereunder for the generating equipment (however,
information with respect to the generating equipment for
the purpose of determining the adequacy of the other
equipment and devices described in the preceding sentence
shall be provided). PEPCO reserves the right to modify or
expand its requirements for protective devices for the
Interconnection Facilities in accordance with Prudent
Utility Practices. Except as otherwise provided in
Appendix C, each Party shall be responsible for installing
equipment necessary to protect its own facilities from
possible damage by reason of electrical disturbances or
faults caused by the operation, faulty operation, or
nonoperation of the other Party's facilities.
9.5 Access to Facility and Site. Seller
authorizes and empowers PEPCO and its authorized agents to
have reasonable access to the Facility and the Site, upon
reasonable prior notice (in light of the circumstances) and
subject to Seller's safety rules and regulations, in
connection with the design, construction, installation,
operation, and maintenance of any of the Interconnection
Facilities or Transmission Facilities and for the purpose
of reading and maintaining meters, examining, repairing, or
removing any of PEPCO's property, or other purposes related
to the operation and maintenance of such Interconnection
Facilities and Transmission Facilities. Such access shall
include access to the Seller's maintenance records upon
twenty-four (24) Hours notice by PEPCO.
9.6 Transmission Facilities. As soon as
reasonably practicable, but in any case no later than two
(2) Years prior to the Scheduled Commencement Date, Seller
shall provide PEPCO with the Transmission Facilities Plan,
which shall: (a) be consistent with Prudent Utility
Practices, Appendix J, and PEPCO's requirements, (b)
identify the Transmission Facilities to be constructed and
installed and (c) include a schedule for all work relating
to the Transmission Facilities to be provided by Seller
designed to complete such work within a period mutually
acceptable to both Parties, but in any event prior to the
Scheduled Commencement Date. The Transmission Facilities
Plan shall be subject to review and approval or disapproval
by PEPCO, which approval or disapproval shall be provided
within ninety (90) Days of PEPCO's receipt of the
Transmission Facilities Plan. Seller shall be responsible
for: (x) obtaining all governmental or regulatory
approvals required for construction and operation of the
Transmission Facilities by Seller prior to the transfer of
the Transmission Facilities to PEPCO pursuant to Subsection
7.3(a)(v) and for the initial operation of the Transmission
Facilities by PEPCO subsequent to such transfer (including,
but not limited to, any certificate of public convenience
and necessity for the Transmission Facilities required from
the Maryland Commission), (y) obtaining all easements and
rights of way required for construction and operation of
the Transmission Facilities located on land other than land
owned by PEPCO as of the Effective Date (including
appropriate environmental indemnifications to PEPCO from
the parties providing each easement or right of way
satisfactory to PEPCO in its sole discretion) and (z)
constructing the Transmission Facilities in accordance with
the Transmission Facilities Plan, as reviewed and approved
by PEPCO. Each governmental or regulatory approval to be
obtained by Seller in accordance with Subsection 9.6(x)
must be in form and substance satisfactory to PEPCO in its
sole discretion.
ARTICLE X
METERING
10.1 Metering Devices.
(a) The electricity delivered to PEPCO by
Seller pursuant to this Agreement shall be measured by
metering devices to be owned, installed, maintained, and
read by PEPCO in accordance with Prudent Utility Practices.
For billing and payment purposes, PEPCO will use data
collected at PEPCO's control center from signals
telecommunicated by the metering devices included in
Appendix E.
(b) The number, type and general location
of such metering devices shall be as set forth in the
Metering Plan contained in Appendix E. All PEPCO metering
devices shall be sealed and the seal shall be broken only
by PEPCO when such metering devices are to be inspected and
tested or adjusted in accordance with Sections 10.2 and
10.3.
(c) Upon request from Seller, PEPCO will,
consistent with Prudent Utility Practices, provide Seller
with reasonable access to pulse initiating contacts that
Seller may use.
10.2 Inspection of Metering Devices.
(a) PEPCO shall inspect and test all
metering devices at its own expense upon installation and
thereafter at least as frequently as required by American
National Standards Institute (ANSI) Standard C21.1. PEPCO
shall provide Seller with reasonable advance notice of, and
permit a representative of Seller to witness and verify,
such inspections and tests and any adjustments to be made
thereto in accordance with this Section 10.2 and Section
10.3.
(b) Upon request by Seller, PEPCO shall
perform additional inspections or tests of any PEPCO
metering device. Seller and PEPCO shall agree on a
mutually convenient time for such test and PEPCO shall
permit a qualified representative of Seller to inspect or
witness such testing of any metering device. The
reasonable and actual expense of any such requested
additional inspection or testing shall be borne by Seller
unless, upon such inspection or testing, a metering device
is found to register inaccurately by more than the
allowable limit for meter accuracy established by the
Maryland Commission for retail electric service (which
currently is plus/minus two percent (2%) of true registration), in
which event the expense of the requested additional
inspection or testing shall be borne by PEPCO.
(c) If a PEPCO metering device is found to
be defective or inaccurate it shall be adjusted, repaired,
replaced, and/or recalibrated by PEPCO. Subject to the
provisions of Appendix E, Seller may elect to install and
maintain at its own expense, as part of the Facility, back
up metering including separate current and potential
transformers in addition to those installed and maintained
by PEPCO. At all times, Seller agrees to keep all meter
locations associated with the Facility clean, clear and
accessible to PEPCO and its authorized agents upon
reasonable advance notice.
10.3 Adjustments for Inaccurate Meters. If
a PEPCO-owned metering device fails to register, or if the
measurement made by a metering device is found upon testing
to be inaccurate pursuant to the standard set by the
Maryland Commission for retail electric service (which
currently is plus/minus two percent (2%) of true registration) an
adjustment shall be made correcting all measurements by the
inaccurate or defective metering device for billing
purposes for both the amount of the inaccuracy and the
period of the inaccuracy, in the following manner:
(a) In the event that the Parties cannot
agree on the amount of the adjustment necessary to correct
the measurements made by any inaccurate or defective
metering device, the Parties shall use Seller's back-up
metering devices, if installed, to determine the amount of
such inaccuracy; provided, however, that in the event that
Seller's back-up metering devices also are found upon
testing to be inaccurate by more than the allowable limits
applicable to PEPCO's metering devices under this Section
10.3 and the Parties cannot agree on the amount of the
adjustment necessary to correct the measurements made by
such inaccurate or defective back-up metering devices, the
Parties shall estimate the amount of the necessary
adjustment on the basis of deliveries of Net Electrical
Output during periods of similar operating conditions
(e.g., based on the Facility's fuel use records) when the
PEPCO metering devices were registering accurately;
(b) In the event that the Parties cannot
agree on the actual period during which the inaccurate
measurements were made, the period during which the
measurements are to be adjusted shall be the shorter of (i)
one-half of the period from the last previous test of the
metering device, or (ii) the one hundred and eighty (180)
Days immediately preceding the test which found the
metering device to be defective or inaccurate; and
(c) To the extent that the adjustment
period covers a period of deliveries for which payment has
already been made by PEPCO, PEPCO shall use the corrected
measurements as determined in accordance with Subsections
10.3(a) or 10.3(b) to recompute the amount due for the
period of the inaccuracy and shall subtract the previous
payments by PEPCO for this period from such recomputed
amount. If the difference is a positive number, that
difference shall be paid by PEPCO to Seller; if the
difference is a negative number, that difference shall be
paid by Seller to PEPCO. Payment of such difference by the
owing Party shall be made within the thirty (30) Day time
period specified in Section 6.6.
ARTICLE XI
REPRESENTATIONS, WARRANTIES AND
ADDITIONAL COVENANTS OF SELLER
AND PEPCO'S REPRESENTATIONS
11.1 Qualifying Facility. Seller
represents and warrants that the Facility is a qualifying
cogeneration facility under 18 CFR 292.201-292.207.
11.2 Fuel Supply and Transportation.
(a) Seller covenants that at all times,
from the Actual Commercial Operation Date and continuing
throughout the Term of this Agreement, Seller will have a
reliable supply of Fuel of quality and in quantity
sufficient to meet the energy delivery requirements
hereunder of the Dispatchable Portion and Limited Dispatch
Portion of the Dependable Capacity, and reliable
transportation therefor. Without limiting the nature of
the foregoing in any manner, Seller specifically covenants
that throughout the Term of this Agreement: (i) Seller
will own sufficient reserves of natural gas to satisfy the
gas reserve commitment in Appendix M, (ii) Seller will
acquire sufficient additional supplies of natural gas and
oil from time to time to meet the remaining fuel
requirements of its Facility, (iii) Seller will contract
for sufficient firm pipeline transportation capacity to
transport sufficient volumes of natural gas to meet the
fuel requirements for the First Dispatch Segment and the
Second Dispatch Segment, and (iv) Seller will obtain
sufficient interruptible pipeline transportation capacity
to transport the remaining natural gas requirements of the
Facility.
(b) Seller covenants that at all times,
from the Actual Commercial Operation Date and continuing
throughout the Term of this Agreement, Seller reasonably
expects that, as determined over the Term of this
Agreement, Seller will be able to obtain Fuel on a basis
that will enable Seller to recover its variable operating
costs, including, but not limited to, those costs required
for Fuel and fuel transportation, from the Monthly Energy
Payment which Seller receives from PEPCO pursuant to
Section 6.2 of this Agreement.
11.3 Operating and Maintenance Standards.
Seller covenants that the Facility will be operated and
maintained in accordance with (a) operating and maintenance
standards recommended by the Facility's equipment
suppliers, (b) Prudent Utility Practices, including without
limitation, synchronizing, voltage and reactive power
control, (c) operating procedures developed pursuant to
Subsections 7.1(h) and 8.10(b), and (d) the requirements of
Appendix C.
11.4 Effects on Voltage. Seller covenants
that the Facility will be operated in such a manner so as
not to have an adverse effect on PEPCO's voltage level or
waveform.
11.5 Electrical Characteristics. Seller covenants
that the Facility will be operated with the electrical
characteristics specified in Section 5.2.
11.6 Status and Authorization. The Seller
represents and warrants:
(a) The Seller is a limited partnership
duly organized, validly existing and in good standing under
the laws of the State of Delaware and is qualified as a
foreign entity in good standing in the State of Maryland
and in each other jurisdiction where the failure so to
qualify would have a material adverse effect upon the
business or financial condition of the Seller or the
Facility; and the Seller has all requisite power and
authority to conduct its business, to own its properties,
and to execute, to deliver, and to perform its obligations
under this Agreement.
(b) The execution, delivery and performance
by the Seller of this Agreement have been duly authorized
by all necessary partnership action, and do not and will
not (i) require any consent or approval of the holders of
partnership interests in Seller, other than those which
have been obtained (evidence of which shall be, if it has
not theretofore been, delivered to PEPCO), or (ii) result
in a breach or constitute a default under the Seller's
certificate of limited partnership or partnership
agreement, any indenture, contract or agreement to which it
is a party or by which it or its properties may be bound,
or (iii) violate any law, rule, regulation, order, writ,
judgment, injunction, decree, determination, or award
presently in effect having applicability to the Seller.
(c) No authorization or approval by any
governmental or other official agency is necessary for the
due execution and delivery of this Agreement by Seller.
(d) This Agreement is a valid, legal and
binding obligation of the Seller, enforceable in accordance
with its terms.
(e) There is, as of the date of execution
of this Agreement, no pending or threatened action or
proceeding affecting the Seller before any court,
governmental agency or arbitrator that could reasonably be
expected to materially and adversely affect the financial
condition or operations of the Seller or the ability of the
Seller to perform its obligations hereunder, or which
purports to affect the legality, validity or enforceability
of this Agreement.
11.7 Permits; Compliance with Laws.
(a) Seller shall, at its expense, acquire,
and maintain in effect, from any and all federal, state and
local agencies, commissions and authorities with
jurisdiction over Seller, the Facility, and/or the
Transmission Facilities, all permits, licenses, approvals
and other governmental authorizations, and complete or have
completed all inspections and environmental impact studies,
in each case and to the degree necessary (i) for the
construction, operation and maintenance of the Facility,
for the construction and operation of the Transmission
Facilities by Seller prior to the transfer of the
Transmission Facilities to PEPCO pursuant to Subsection
7.3(a)(v), and for the initial operation of the
Transmission Facilities by PEPCO subsequent to such
transfer, (ii) for Seller to perform its obligations under
this Agreement, and (iii) to obtain and maintain
certification as a Qualifying Facility. Seller also shall,
at its expense, provide such support for PEPCO's
applications for approval of this Agreement by the District
of Columbia Commission and the Maryland Commission as may
be reasonably requested by PEPCO.
(b) Seller shall, at all times, conform to
all applicable laws, ordinances, rules and regulations
applicable to it, to the Facility and/or to the
Transmission Facilities.
11.8 Certificates. Seller agrees that,
upon request of PEPCO, it shall deliver or cause to be
delivered from time to time to PEPCO certifications of its
officers, accountants, engineers, or agents as to such
matters as PEPCO may reasonably request.
11.9 Continuity of Existence. Seller and
its general partner each agrees to preserve and keep in
force and effect its existence and all franchises, licenses
and permits necessary to the proper conduct of its
business, including without limitation the business of
constructing, owning and operating the Facility.
11.10 Books and Records; Information.
(a) Seller will keep proper books of record
and account in which full correct entries will be made of
all dealings or transactions of or in relation to its
business and affairs, in accordance with generally accepted
accounting principles consistently applied.
(b) Sixty (60) Days prior to the Scheduled
Commercial Operation Date, and within one hundred and
twenty (120) Days after the end of each Calendar Year
thereafter, Seller shall furnish to PEPCO copies of a
report from Seller's independent auditors stating that they
are not aware of any material modifications that should be
made in order for Seller's most recent annual audited
financial statements to be in conformance with generally
accepted accounting principles consistently applied. If
any report from Seller's auditors provided to PEPCO
includes any qualification, Seller shall provide PEPCO with
a copy of Seller's annual audited financial statements to
which such report refers.
11.11 PEPCO'S Representations. PEPCO
hereby represents that:
(a) this Agreement has been duly
authorized, executed and delivered by PEPCO, and is in full
force and effect on the date hereof; and
(b) this Agreement is a valid, legal and
binding obligation of PEPCO, enforceable in accordance with
its terms, except (i) as such enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium, or
other similar laws now or hereafter in effect relating to
creditors' rights generally, and (ii) to the extent that
the remedies of specific performance, injunctive relief and
other forms of equitable relief are subject to equitable
defenses, the discretion of the court before which any
proceeding therefor may be brought, and the principles of
equity in general.
ARTICLE XII
TAXES; FINES
12.1 Taxes.
(a) Except as specified in Subsection
15.2(b)(i) and as otherwise specified below, the payment of
any and all present or future federal, state, county, or
municipal taxes, or other lawful taxes imposed by any other
entity in connection with the design, construction,
operation or maintenance of the Facility or in connection
with the design and construction of the Transmission
Facilities shall be the sole and exclusive responsibility
and obligation of Seller.
(b) The Parties agree to oppose by all
reasonable lawful means any federal, state, county or
municipal tax that is sought to be imposed upon the
purchase or sale of the Dependable Capacity or Net
Electrical Output from the Facility, provided, however,
that any such tax which nevertheless is imposed upon Seller
(other than any taxes which Seller is required by law to
collect from PEPCO in connection with this Agreement) shall
be the sole and exclusive responsibility and obligation of
Seller and any such tax which nevertheless is imposed upon
PEPCO (other than any taxes which PEPCO is required by law
to collect from Seller in connection with this Agreement)
shall be the sole and exclusive responsibility and
obligation of PEPCO.
12.2 Fines.
(a) Any fines, penalties or other costs
incurred by Seller or its agents, employees or
subcontractors for noncompliance by Seller, its agents,
employees, or subcontractors with the requirements of any
laws, rules, regulations, licenses, permits, approvals or
other governmental requirements shall not be reimbursed by
PEPCO but shall be the sole responsibility of Seller.
(b) If such fines, penalties or other costs
are assessed against PEPCO by any government agency or
court due to noncompliance by Seller or its agents,
employees, or subcontractors with any laws, rules,
regulations, licenses, permits, approvals or other
governmental requirements or if the work of Seller or any
part thereof is delayed or stopped by order of any
government agency or court due to the noncompliance of
Seller or its agents, employees or subcontractors with any
such laws, rules, regulations, licenses, permits, approvals
or other governmental requirements, Seller shall indemnify
and hold harmless PEPCO against any and all losses,
liabilities, damages, and claims suffered or incurred
because of the failure of Seller, its agents, employees or
subcontractors to comply therewith. Seller shall also
reimburse PEPCO for any and all legal or other expenses
(including attorneys' fees) reasonably incurred by PEPCO in
connection with such losses, liabilities, damages or
claims.
(c) If such fines, penalties or other costs
are assessed against Seller by any government agency or
court due to noncompliance by PEPCO or its agents,
employees or subcontractors with any laws, rules,
regulations, licenses, permits, approvals or other
governmental requirements or if the work of PEPCO or any
part thereof is delayed or stopped by order of any
government agency or court due to the noncompliance of
PEPCO or its agents, employees or subcontractors with any
such laws, rules, regulations, licenses, permits, approvals
or other governmental requirements, PEPCO shall indemnify
and hold harmless Seller against any and all losses,
liabilities, damages, and claims suffered or incurred
because of the failure of PEPCO, its agents, employees or
subcontractors to comply therewith. PEPCO shall also
reimburse Seller for any and all legal or other expenses
(including attorneys' fees) reasonably incurred by Seller
in connection with such losses, liabilities, damages or
claims.
ARTICLE XIII
INSURANCE
13.1 Insurance Required
(a) Seller shall obtain, or cause to be
obtained by its EPC Contractor, prior to the commencement
of on-Site construction activities with respect to the
Facility (and prior to the commencement of construction
activities with respect to the Transmission Facilities),
and shall maintain in effect thereafter until the Actual
Commercial Operation Date the following insurance policies
and coverages with respect to the Facility, and with
respect to the Transmission Facilities prior to the
transfer of such Transmission Facilities to PEPCO pursuant
to Subsection 7.3(a)(v), in form and substance reasonably
satisfactory to PEPCO:
(i) "Comprehensive General Liability
Insurance," occurrence form, in the amount of at least
twenty million dollars ($20,000,000.00) annual
aggregate for all locations, including but not limited
to coverage for demolition of any building or
structure, collapse, blasting, excavation below
surface of the ground, operations, latent defects,
active malfunctions, broad form contractual liability
covering all liabilities assumed under the EPC
contract, property damage and personal injury;
(ii) "Workers' Compensation Insurance"
which complies with the law of the State of Maryland
and "Employers' Liability Insurance" with limits of at
least five hundred thousand dollars ($500,000.00);
(iii) "Comprehensive Automobile Insurance"
with bodily injury and property damage combined single
limit of at least one million dollars ($1,000,000.00)
per occurrence and in the aggregate. Such insurance
shall include owned, non-owned, hired and rented
vehicles;
(iv) "Completed Operations Insurance" for a
period of two (2) Years after the Actual Commercial
Operation Date;
(v) "Comprehensive Builders All Risk
Insurance" covering physical loss or damage including,
but not limited to, that caused by flood, earthquake,
windstorm, subsidence, comprehensive boiler and
machinery with testing exclusion deleted, vandalism,
malicious mischief, explosion, collapse and
underground hazards, erection, installation and
testing, while in transit, while in storage and until
completed and accepted in its entirety by Seller; and
(vi) Any other insurance required by
applicable law or which may otherwise be required by
the Financing Parties.
(b) Seller shall obtain from the Actual
Commercial Operation Date and shall maintain in effect
thereafter throughout the Term of this Agreement the
following insurance policies and coverages with respect to
the Facility, in form and substance reasonably satisfactory
to PEPCO:
(i) "Comprehensive or Commercial General
Liability Insurance" with bodily injury and property
damage combined single limits of at least one million
dollars ($1,000,000.00) per occurrence and two million
dollars ($2,000,000.00) in the aggregate, where
applicable, including but not limited to coverage for
"Completed Operations Liability", "Contractual
Liability" and "Broad Form Property Damage";
(ii) "Workers' Compensation Insurance"
which complies with the law of the State of Maryland
and "Employers' Liability Insurance" with limits of at
least five hundred thousand dollars ($500,000.00);
(iii) "Comprehensive Automobile Insurance"
with bodily and property damage combined single limit
of at least one million dollars ($1,000,000.00) per
occurrence and in the aggregate, covering owned, non
owned, hired and rented vehicles;
(iv) "All Risks Property Coverage
Insurance" and "Boiler and Machinery Insurance"
against damage to the Facility in amounts not less
than the construction cost of the Facility or its
replacement cost, whichever is greater, subject to
deductibles of no more than five hundred thousand
dollars ($500,000.00);
(v) "Excess Umbrella Liability Insurance"
with a limit of at least ten million dollars
($10,000,000.00) per occurrence and in the aggregate,
where applicable, in excess of the limits of insurance
provided in Subsections 13.1(b)(i) through
13.1(b)(iii) above; and
(vi) "Business Interruption Insurance" to
provide funds to cover all of Seller's costs to the
extent that such costs would not be eliminated or
reduced by the failure of the Facility to operate
(including but not limited to rent or mortgage
payments, interest and principal payments on loans or
bonds, salaries, and wages) for a period of at least
eighteen (18) Months after a deductible period not to
exceed two (2) Months. The nominal amount of coverage
required by Subsections 13.1(b)(iv) and 13.1(b)(vi)
shall be updated every five (5) years on the
anniversary of the Actual Commercial Operation Date as
agreed upon by the Parties in good faith negotiations
consistent with replacement cost values and gross
earning revenues.
13.2 Substitute Coverages. If the
designated coverages, or other relatively comparable
coverages, are unavailable on reasonable commercial terms,
Seller shall provide to PEPCO detailed information as to
the maximum amount of available coverage that it is able to
purchase on reasonable commercial terms; and shall be
required to obtain PEPCO's consent as to the adequacy of
said coverage under the circumstances prevailing at that
time, which consent PEPCO will not unreasonably withhold.
13.3 Scope of Insurance. Seller shall cause
the insurers providing the coverages described in Section
13.1 to amend or endorse each such "Comprehensive or
Commercial General Liability Insurance" and "Excess
Umbrella Liability Insurance" policy to (a) include PEPCO,
its directors, officers, and employees as additional
insureds, (b) provide that such insurance is primary with
respect to the interest of PEPCO, its directors, officers
and employees and that any other insurance maintained by
PEPCO, its officers, directors and employees is excess and
not contributory to the insurance provided under Section
13.1, (c) include a waiver of all rights of subrogation
against PEPCO, its directors, officers and employees, (d)
contain a severability of interest provision, (e) provide
that none of PEPCO, its directors, officers or employees
shall be liable for the payment of premiums under such
policy, (f) provide that complete copies of all inspection
or other reports required or performed for the insurer
shall be provided to PEPCO within thirty (30) Days of
delivery to Seller, and (g) provide for at least thirty
(30) Days' written notice to PEPCO prior to the
cancellation, termination, nonrenewal or material change of
such insurance.
13.4 Evidence of Insurance. Seller shall
cause such insurers or the agents thereof to provide PEPCO
with certificates of insurance evidencing the policies and
endorsements described in Sections 13.1 and 13.3 initially
at the times specified in Subsections 3.2(k) and 3.2(n) and
annually thereafter. Failure to provide such certificates
shall not relieve Seller of the insurance requirements
described herein, nor shall failure to obtain or maintain
such insurance relieve, or in any way reduce, any
obligation or liability imposed on Seller elsewhere in this
Agreement.
13.5 Application of Proceeds. For the Term
of this Agreement, and subject to the requirements of the
Financing Documents reviewed and approved by PEPCO pursuant
to Subsections 3.2(g), 3.3(b), 3.3(d) or 8.9(b) or the
exercise of any rights or remedies of the Financing Parties
under such Financing Documents, Seller shall either apply
the proceeds of any such insurance policies for damages to
the Facility, as well as the proceeds of any condemnation
awards or proceeds from any other recovery with respect to
the Facility, to the repair of the Facility, or, if the
Facility is not repaired, Seller shall use such proceeds to
pay PEPCO the liquidated damages, which are due to PEPCO,
pursuant to Article IV to the extent such damages are not
adequately provided by the Development Security or
Interconnection Security, unless Seller and PEPCO shall
otherwise agree.
13.6 Primary or Excess Insurance. Any
insurance required by this Article XIII may be satisfied by
any combination of primary or excess insurance at Seller's
option.
ARTICLE XIV
FORCE MAJEURE
14.1 Effect of Force Majeure. Subject to
the limitations set forth in this Agreement, in the event
that either Party is rendered unable by reason of an event
of Force Majeure in effect after the Closing Date, to
perform, wholly or in part, any obligation or commitment
set forth in this Agreement, then upon such Party's giving
notice and full particulars of such event as soon as
practicable after the occurrence thereof, the obligations
of such Party (except for the obligation to pay sums of
money owing hereunder for periods prior to the event of
Force Majeure) shall be suspended to the extent of such
Force Majeure condition, and such Party shall not be deemed
to be in breach of this Agreement, for the period of such
Force Majeure condition up to a maximum of: (a) three
hundred and sixty (360) Days, if such condition occurs
subsequent to the Closing Date but before the Actual
Commercial Operation Date, or (b) five hundred and forty
(540) Days, if such condition occurs subsequent to the
Actual Commercial Operation Date. Notwithstanding the
foregoing, Force Majeure shall not be applicable to any of
the occurrences specified in Article XV, except: (y) the
events of default covered by Subsection 15.1(b), or (z) to
the extent that Force Majeure is explicitly provided for in
Subsection 15.1(c).
14.2 Force Majeure Defined. For purposes of
this Agreement, Force Majeure shall mean an event,
condition, or circumstance beyond the reasonable control
and without the fault or negligence of the Party claiming
Force Majeure, which, despite all reasonable efforts of the
Party claiming Force Majeure to prevent it, causes a
material delay or disruption in the performance of any
obligation imposed hereunder. Force Majeure shall include,
without limitation, acts of God, natural disasters, fires,
earthquakes, lightning, floods, storms, civil disturbances,
riots, war, the action of a court or action or failure to
act on the part of any governmental body having or
asserting jurisdiction that is binding upon the Parties and
has been opposed by all reasonable lawful means, strikes,
lockouts or other labor disputes, or any other such causes
or events to the extent beyond the reasonable control, and
without the fault or negligence, of the Party relying
thereon as justification for not performing an obligation
or complying with any condition required of such Party
under this Agreement. Under no circumstances will lack of
finances be construed to constitute Force Majeure.
14.3 Notification and Obligation to Remedy
the Cause of Force Majeure. In the event of the occurrence
of a Force Majeure after the Closing Date, which prevents a
Party from performing its obligations hereunder, such Party
shall (i) immediately notify the other Party in writing of
such Force Majeure, (ii) not be entitled to suspend
performance of any greater scope or longer duration than is
required by the Force Majeure, (iii) use its best efforts
to mitigate the effect of such event of Force Majeure,
remedy its inability to perform and resume full performance
hereunder, (iv) keep such other Party apprised of such
efforts on a continual basis and (v) provide written notice
of the resumption of performance hereunder provided,
however, that the settlement of any strike, lockout or
labor dispute constituting a Force Majeure shall be within
the sole discretion of the Party to this Agreement involved
in such strike, lockout or labor dispute and the
requirement that a Party must use its best efforts to
remedy the cause of the Force Majeure and/or mitigate its
effects and resume full performance hereunder shall not
apply to strikes, lockouts, or labor disputes.
14.4 Limitations on Force Majeure; Right to Terminate.
(a) Notwithstanding any provision of this
Agreement, in no event will any condition of Force Majeure:
(i) extend the Actual Commercial Operation Date for the
Facility beyond June 1, 1997, or (ii) extend the dates for
posting Development Security, Interconnection Security, or
Performance Security beyond those set forth in Sections
4.1, 4.2 and 4.5, respectively.
(b) In no event will any condition of Force
Majeure extend this Agreement beyond the Term specified in
Article II. If any condition of Force Majeure excuses a
Party's performance for a time period greater than: (i)
three hundred and sixty (360) Days in the event a Force
Majeure occurring during the period between the Closing
Date and the Actual Commercial Operation Date, or (ii) five
hundred and forty (540) Days during the period after the
Actual Commercial Operation Date, the Party not excused by
such Force Majeure may terminate this Agreement immediately
by written notice to the other Party, without further
obligation, or extend such period at its sole discretion.
ARTICLE XV
TERMINATION AND DEFAULT
15.1 Event of Default. The occurrence of
any one of the following shall constitute an Event of
Default:
(a) Either Party fails to make timely
payment of any amounts due to the other Party under this
Agreement, which failure continues for a period of sixty
(60) Days after notice of such non-payment, provided,
however, that the failure to make such payment shall not be
an Event of Default during any period in which the payment
is being disputed in good faith pursuant to Section 6.5; or
(b) Either Party fails to comply with a
material provision of this Agreement, which failure
continues for a period of sixty (60) Days after notice of
such non-performance, unless such non-performance cannot
reasonably be cured within the sixty (60) Day notice period
and the defaulting Party is thereafter diligently pursuing
remedial efforts with regard to the failure, in which case
the defaulting Party will have an additional period of
sixty (60) Days or such other additional reasonable time
period as the Parties may mutually agree upon in light of
the circumstances to cure such default. Notwithstanding
the foregoing, the provisions of this Subsection l5.1(b)
shall not be applicable to: (i) Events of Default that are
subject to any other subsection of this Section 15.1, (ii)
any failure which automatically terminates or entitles
PEPCO to immediately terminate this Agreement pursuant to
any other provision of this Agreement, in which case such
failure shall, unless waived by PEPCO, constitute an
immediate Event of Default, or (iii) loss of Qualifying
Facility status by the Facility; or
(c) Any (i) reduction of the Equivalent
Availability Factor of the Facility to less than fifty
percent (50%), or (ii) increase in the Equivalent Forced
Outage Rate for the Facility to greater than twenty percent
(20%), as calculated in either such case for a period of
more than eighteen (18) consecutive Months, exclusive of:
(i) any periods (not to exceed eighteen (18) Months) in
which one or more Emergency Conditions is in effect; and
(ii) any periods (not to exceed eighteen (18) Months) in
which one or more events of Force Majeure is in effect.
PEPCO shall include with the monthly billing statement
provided to Seller pursuant to Subsection 6.5(a),
calculations of the Equivalent Availability Factor and
Equivalent Forced Outage Rate of the Facility for the most
recent time periods referred to in this Subsection l5.1(c)
for which data are available; or
(d) Seller sells any Dependable Capacity or
Net Electrical Output from the Facility to any party other
than PEPCO; or
(e) The Closing Date does not occur by
December 1, 1994; or
(f) By order of a court of competent
jurisdiction, a receiver or liquidator or trustee of either
Party or of a substantial part of the assets of either
Party shall be appointed, and such receiver or liquidator
or trustee shall not have been discharged within a period
of sixty (60) Days, or if by decree of such a court, a
Party shall be adjudicated bankrupt or insolvent or a
substantial part of the assets of such Party shall have
been sequestered, and such decree shall not have been
dismissed, revoked, stayed, or discharged within sixty (60)
Days after the entry thereof, or if an order for relief
shall be entered by a court of competent jurisdiction
against a Party in an involuntary case pursuant to any of
the provisions of the Federal Bankruptcy Code (Title 11,
Bankruptcy, U.S. Code), as it now exists or as it may
hereafter be amended, or pursuant to any other similar
state statute applicable to such Party, as now or hereafter
in effect, which order shall not have been dismissed within
sixty (60) Days after such entry, provided, however, that,
if the Actual Commercial Operation Date has occurred, the
failure to dismiss, revoke, stay or discharge any such
action within such sixty (60) Day period shall not be an
Event of Default for as long as: (i) Seller is pursuing a
motion for rehearing or reconsideration or an appeal of
such order or decree, and (ii) the Facility is continuing
to operate in a manner consistent with this Agreement; or
(g) Either Party shall file a voluntary
petition under bankruptcy or shall consent to the filing of
any bankruptcy or reorganization petition against it under
any similar law, or, without limitation of the generality
of the foregoing, if a Party shall file a petition or
answer or consent seeking relief or assisting in seeking
relief in a proceeding under any of the provisions of the
Federal Bankruptcy Code (Title 11, Bankruptcy, U.S. Code),
as it now exists or as it may hereafter be amended, or
pursuant to any other similar state statute applicable to
such Party, as now or hereafter in effect, or an answer
admitting the material allegations of a petition filed
against it in such a proceeding; or if a Party shall make
an assignment of a substantial part of its assets for the
benefit of its creditors, or if a Party shall become unable
to pay its debts generally as they become due, or if a
Party shall consent to the appointment of a receiver or
receivers, or trustee or trustees, or liquidator or
liquidators of it or of all or a substantial part of its
assets; or
(h) The Site or the Facility is taken, in
whole or in part, by the exercise by a person or entity of
the right of eminent domain or its equivalent unless (i)
such person or entity agrees to be bound by this Agreement
and demonstrates to the reasonable satisfaction of PEPCO
that it is capable of fulfilling the requirements of this
Agreement or (ii) Seller demonstrates to the reasonable
satisfaction of PEPCO that Seller's rights to operate the
Facility and PEPCO's rights under this Agreement are not
materially impaired; or
(i) The Development Security, the
Interconnection Security, the Performance Security or the
Maintenance Reserve is not provided in accordance with this
Agreement; or
(j) The Development Security, the
Interconnection Security, the Performance Security, or the
Maintenance Reserve that has been provided in accordance
with this Agreement becomes materially and adversely
impaired through no fault or action or inaction of PEPCO,
which impairment continues for a period of sixty (60) Days
after PEPCO's notice to Seller of such impairment (such
impairment shall be deemed to include, but shall not be
limited to, instances when the financial institution or
other entity that has been used by Seller to provide a form
of security or reserve no longer satisfies the objective
criteria for such institutions or entities set forth in
this Agreement); or
(k) Any tampering by Seller, or its
employees, agents, contractors or subcontractors of any
tier with the Interconnection Facilities on PEPCO's side of
the Interconnection Point or the Transmission Facilities on
the line side of the Facility's line disconnect switch
without the prior written consent of PEPCO (except in
situations where such actions are taken to prevent
immediate injury, death, or property damage, and Seller
uses its best efforts to provide PEPCO with advance notice
of the need for such actions), which Seller does not stop
immediately after receiving notice of such tampering from
PEPCO; or
(l) The Fuel Supply Contract(s) shall cease
to be effective in substantially the form initially
furnished to PEPCO as the result of modification or
termination, or the Financing Documents or the Steam Supply
Contract in the forms initially provided to PEPCO shall be
amended or modified, or Seller shall have entered into a
replacement for any such contract or an additional such
contract, unless consent to the modification or termination
of any such Fuel Supply Contract, Financing Document or
Steam Supply Contract, or to any additional such contract,
has been obtained in accordance with the provisions of
Section 8.9 or is not required pursuant to such section; or
(m) Seller shall fail to use the
supplemental firing capability of the Facility or other
special equipment or methods used by Seller in establishing
the Dependable Capacity to generate Net Electrical Output
when the Facility is dispatched by PEPCO at levels up to
230 MW that require supplemental firing or such other
special equipment or methods, provided that there is no
physical equipment limitation preventing use of the
supplemental firing capability, or such other special
equipment or methods, of the Facility, which failure
continues for a period of thirty (30) Days after notice
from PEPCO for such failure.
15.2 Remedies for Default.
(a) If an Event of Default occurs, the non
breaching Party may, in addition to any rights described in
specific sections and subsections of this Agreement,
terminate this Agreement by giving notice of such default
and intention to terminate to the other Party, which
termination shall be effective no earlier than the 30th Day
following the date of said notice (except for terminations
pursuant to termination rights provided in Subsections
3.1(d), 3.1(e), 4.1(b), 4.1(c), 6.3(a), 7.1(a) or 14.4(b),
in which case such termination shall be effective
immediately upon such notice or as otherwise set forth in
each such Subsection), whereupon both Parties shall be
relieved of all obligations and liabilities under this
Agreement, except for payment of amounts due before the
effective date of termination or except as otherwise
explicitly provided in this Agreement. The period between
the giving of notice of intention to terminate and the
effective termination date shall not constitute an
additional cure period and the non-breaching Party's right
to terminate will not be affected by any actions of the
breaching Party during such period. If, pursuant to its
rights under this Agreement, PEPCO terminates this
Agreement prior to the Actual Commercial Operation Date,
the amounts specified in Sections 4.1 and 4.2 or Section
15.3, as the case may be, in event of such termination
shall be liquidated damages and shall be the sole and
exclusive remedy of either Party. Except as otherwise
provided in this Subsection 15.2(a), the nonbreaching Party
may exercise any rights or remedies it has at law or in
equity, including but not limited to bringing suit for
monetary damages (unless this Agreement provides for
liquidated damages for the harm caused by the default),
injunctive relief and specific performance.
(b) (i) In addition to all of PEPCO's
rights under this Section 15.2, but subject to the rights
of any Financing Party under Financing Documents reviewed
and approved by PEPCO pursuant to Subsections 3.2(g),
3.3(b), 3.3(d) or 8.9(b) so long as such Financing
Documents are in effect, in the case of an Event of Default
by Seller and if operation of the Facility is not assumed
by any Financing Party or assignee of the Financing Party
within one hundred and twenty (120) Days after such Event
of Default (the "Financier Period"), PEPCO shall have the
right, but under no circumstances the obligation, either:
(A) to purchase the Facility at fair market value as
determined in accordance with the valuation procedures
contained in Appendix G, or (B) to assume responsibility for
the operation and/or the construction of the Facility so as
to assure the uninterrupted availability of electric power,
in which case PEPCO shall also assume liability for the costs
associated with operating or constructing the Facility
(including, but not limited to, obligations to the
Financing Parties) after the date that PEPCO assumes
operating or construction responsibility. Seller shall
assure that the Financing Documents specifically
acknowledge this right of PEPCO. PEPCO's obligation to
make Monthly Capacity Payments and Monthly Energy Payments
to Seller pursuant to Sections 6.1 and 6.2 shall terminate
when PEPCO assumes responsibility for the construction
and/or operation of the Facility, if such obligations have
not previously terminated. Within ninety (90) Days after
the sooner to occur of the expiration of the Financier
Period or the date upon which the Financing Parties notify
PEPCO that they will not exercise this right, PEPCO shall
notify Seller whether PEPCO elects to purchase the Facility
or to assume responsibility for the construction and/or
operation of the Facility pursuant to this Subsection
15.2(b)(i). If PEPCO notifies Seller within such period
that PEPCO intends to exercise its right to purchase the
Facility or to assume responsibility for the construction
and/or operation of the Facility, Seller shall immediately
enter into good faith negotiations with PEPCO with the
objective of reaching a purchase agreement or a
construction and/or operating agreement, as the case may
be, on terms and conditions acceptable to each Party within
two hundred and seventy (270) Days after expiration of the
Financier Period, and Seller shall not negotiate with any
other person for such purposes during this period. It is
the intent of the Parties that the terms and conditions of
any such construction and/or operating agreement shall
include, as appropriate, provision for Seller to resume
operation of the Facility if Seller is able to demonstrate
to PEPCO's satisfaction that Seller is able to perform its
obligations under this Agreement and to operate the
Facility in accordance with this Agreement. During such
two hundred and seventy (270) Day period, Seller shall
provide PEPCO with the opportunity to inspect, examine, and
audit all records necessary to evaluate the operational
viability of the Facility and Seller's obligations. In the
event that PEPCO exercises its option to assume
responsibility for construction and/or operation of the
Facility pursuant to this Subsection 15.2(b)(i), the
Parties agree and acknowledge that PEPCO shall be liable
only for those obligations of Seller in connection with the
Facility arising after the date on which PEPCO assumes such
construction and/or operation responsibility. PEPCO in no
event shall be liable for any of Seller's obligations prior
to such date.
(ii) In no event shall PEPCO's election to
assume responsibility for constructing and/or operating the
Facility be deemed to be a transfer of title in the
Facility, or a transfer of Seller's obligations as owner
thereof arising from the period prior to PEPCO's assumption
of construction and/or operating responsibility for the
Facility.
(iii) During any period in which PEPCO
operates the Facility, PEPCO shall exercise its reasonable
efforts, consistent with Prudent Utility Practices, to
produce and deliver electrical energy, subject to the
Facility being operable at the time of PEPCO's takeover, or
later being made operable by repairs or otherwise.
15.3 Termination Due to Market Forces.
(a) In addition to the termination rights
which PEPCO has been granted in other provisions of this
Agreement, PEPCO may terminate its obligations under this
Agreement at any time prior to the Actual Commercial
Operation Date by giving notice to Seller if such
termination results from a material change or material
changes in circumstances (including, but not limited to, a
change in load growth, technology or legislation) which is
recognized in PEPCO's least cost planning process. Upon
receipt of notice from PEPCO pursuant to this Subsection
15.3(a), Seller will use its good faith efforts to stop
incurring further costs in connection with the development
of the Facility. Seller and PEPCO will negotiate in good
faith for a period of one hundred and eighty (180) Days
after the date of such notice in an effort to modify this
Agreement to make provision for the circumstances then
existing (including, but not limited to, PEPCO's then
effective avoided costs and the circumstances that led
PEPCO to give such notice). In considering any such
modifications, the Parties will make an effort to maintain
the relative balance of benefits and burdens reflected in
this Agreement. If the Parties are unable to reach
agreement on appropriate modifications to this Agreement
during the one hundred and eighty (180) Day negotiating
period, this Agreement shall terminate at the end of such
one hundred and eighty (180) Day period. If the Parties
are able to reach agreement on a modified Agreement, they
each shall expeditiously seek all necessary governmental
and regulatory approvals for such modified Agreement.
Approvals to be obtained by PEPCO, including but not
limited to approvals from the District of Columbia
Commission and the Maryland Commission, must be in a form
satisfactory to each Party in its sole discretion.
Approvals to be obtained by Seller must be in a form
satisfactory to each Party in accordance with the standards
set forth in Subsection 3.1(b). If all such approvals have
not been obtained in a form satisfactory to each of the
Parties in accordance with the standards referenced above
within two hundred and seventy (270) Days of the Parties'
agreement on a modified Agreement, this Agreement shall
terminate.
(b) If this Agreement is terminated pursuant
to Subsection l5.3(a), PEPCO shall pay to Seller, as
liquidated damages and as Seller's sole and exclusive
remedy for such termination: (i) an amount equal to the
reasonable incremental costs incurred by Seller up to and
including the effective date of such termination in
connection with the development of such Facility and (ii) a
fixed fee of (A) three million dollars ($3,000,000.00) if
PEPCO gives notice of termination pursuant to the first
sentence of Subsection 15.3(a) prior to December 1, 1994 or
(B) five million dollars ($5,000,000.00) if PEPCO gives
notice of termination pursuant to the first sentence of
Subsection 15.3(a) on or after December 1, 1994. Seller
shall be obligated to endeavor in good faith to mitigate
such costs through such actions as sale of work or assets
related to the Facility, prompt cancellation of commitments
with respect to the Facility, or sale of capacity and
energy from the Facility to another purchaser. If PEPCO so
elects in its notice of termination, PEPCO may assign its
rights and obligations under this Agreement to another
power purchaser subject to the prior consent of Seller and
the Financing Parties, which consent shall not be
unreasonably withheld. Within thirty (30) Days of
termination of this Agreement pursuant to Subsection
15.3(a), Seller shall provide PEPCO with a detailed listing
of the costs for which it is seeking reimbursement under
this provision. PEPCO shall have the right to audit and
verify such costs, at its own expense, and Seller shall
make its records, personnel and outside auditors available
to PEPCO to facilitate such audit. Both Parties agree that
such amount shall constitute fair and reasonable
compensation to Seller for the loss of the benefit of
Seller's bargain with respect to the Facility and waive any
argument or defense as to the validity of this payment
provision on the grounds that it is unfair, unreasonable,
inadequate or should be void as a penalty.
ARTICLE XVI
INDEMNIFICATION AND LIABILITY
16.1 Indemnification.
(a) Except as otherwise specifically
provided in this Agreement, or unless the damage or injury
arises out of, results from, or is caused by the breach of
this Agreement by a Party or by the negligence or
misconduct of a Party's own officers, directors, employees,
agents, contractors, or subcontractors, neither Party shall
be liable to the other for any claims, losses, costs,
expenses, or damages of any kind or character (including
loss of use of property), in connection with damages or
destruction of property or personal injury (including
death) arising out of the performance of this Agreement,
including, but not limited to, the design, construction,
maintenance, or operation of property, facilities, or
equipment owned or used by the other Party, or the use of,
misuse of, or contact with the electric energy delivered
hereunder.
(b) Each Party shall indemnify and hold the
other Party, and its officers, directors, affiliates,
agents, employees, contractors and subcontractors, harmless
from and against any and all claims, demands, actions,
losses, liabilities, expenses (including reasonable
attorneys' fees), suits and proceedings of any nature
whatsoever for personal injury, death, or property damage
to third parties, except workers compensation claims,
caused by any act or omission of the indemnifying Party's
own officers, directors, affiliates, agents, employees,
contractors or subcontractors that arise out of or are in
any manner connected with the performance of this
Agreement, except to the extent such injury or damage is
attributable to the negligence or willful misconduct of, or
breach of this Agreement by, the Party seeking
indemnification hereunder.
(c) Seller shall also defend, indemnify and
hold PEPCO, and its officers, directors, affiliates,
agents, employees, contractors and subcontractors, harmless
from and against any and all damages, claims, demands,
judgments, losses, costs and expenses (including, but not
limited to, reasonable attorneys' fees) under CERCLA, RCRA
or any other applicable federal, state, or local environmental
laws or regulations, or under federal or state common law,
arising out of any condition, whether known or unknown, of the
Site or the portion of the Transmission Facilities Site that
is not on property owned by PEPCO as of the Effective Date,
or arising out of Seller's ownership or operation of the
Facility or the Transmission Facilities, including without
limitation the discharge, dispersal, release, storage,
treatment, generation, disposal or escape of pollutants or
other toxic or hazardous substances from the Facility or
the Transmission Facilities, the contamination of the soil,
air, surface water or groundwater at or around the Site or
the Transmission Facilities Site, or any pollution
abatement, replacement, removal, or other decontamination
or monitoring obligations with respect thereto, except to
the extent such damages are attributable to the negligence
or willful misconduct of, or breach of this Agreement by,
PEPCO, its officers, directors, affiliates, agents,
employees, contractors or subcontractors. Seller further
agrees to reimburse any costs incurred by PEPCO in
enforcing this defense, indemnification, and hold harmless
agreement, including PEPCO's reasonable attorneys' fees.
(d) Seller shall also defend, indemnify and
hold PEPCO, and its officers, directors, affiliates,
agents, employees, contractors and subcontractors, harmless
from and against any and all damages, claims, demands,
judgments, losses and expenses (including, but not limited
to, reasonable attorneys' fees) that arise out of or are in
any way connected with use and operation of the
Transmission Facilities prior to the transfer of ownership
of the Transmission Facilities to PEPCO in accordance with
Subsection 7.3(a)(v) of this Agreement.
(e) In no case shall PEPCO be liable for
damage or destruction of property, facilities, or equipment
operated by Seller as the result of PEPCO's dispatch of the
Facility.
16.2 Consequential Damages. Except to the
extent that the liquidated damages specifically provided
for in this Agreement may be so considered or as otherwise
expressly provided in Subsection 4.2(a), neither Party
shall be liable to the other Party for any indirect,
incidental, consequential, punitive, or liquidated damages
as a result of the performance or non-performance of the
obligations imposed pursuant to this Agreement, including
failure to deliver or purchase Dependable Capacity and Net
Electrical Output hereunder, irrespective of the causes
thereof, including fault or negligence.
ARTICLE XVII
DISPUTE RESOLUTION
17.1 Senior Officers.
(a) The Operating Committee is authorized to
resolve any dispute arising under this Agreement in an
equitable manner and, unless otherwise expressly provided
herein, to exercise the authority of the Parties hereto to
make decisions by mutual agreement.
(b) If the Operating Committee is unable to
resolve a dispute under this Agreement, such dispute shall
be referred by the Operating Committee directly to a senior
officer designated by Seller and a senior officer
designated by PEPCO for resolution.
(c) The Parties hereto agree to attempt to
resolve all disputes arising hereunder promptly, equitably,
and in a good faith manner and further agree to provide
each other with reasonable access during normal business
hours to any and all non-privileged records, information,
and data pertaining to any such dispute.
17.2 Maryland Commission.
(a) In the event that the Parties are unable
to resolve any dispute arising under this Agreement in
accordance with the procedures set forth in Section 17.1,
the Parties shall submit such dispute to the Maryland
Commission for expedited resolution before pursuing any
other rights or remedies that may be available at law or in
equity, unless such dispute involves the existence of a
default hereunder, in which event the Party alleging the
default may immediately pursue such other rights or
remedies without first having to submit such matter to the
Maryland Commission.
(b) Any decision rendered by the Maryland
Commission with respect to any dispute of the Parties shall
be subject to appeal in the normal manner for appeals from
other decisions of the Maryland Commission.
(c) In the event that the Maryland
Commission formally declines to render a decision resolving
a dispute of the Parties, as evidenced by a formal Maryland
Commission determination to such effect, or the Maryland
Commission fails to render a decision on the dispute within
one hundred and eighty (180) Days, or one hundred and
twenty (120) Days in the case of a dispute solely involving
the amount of payment due hereunder, of the submission of
such dispute to the Maryland Commission by the Parties,
either Party may then remove the dispute from the Maryland
Commission (and both Parties hereby agree that in such an
event neither Party will assert or support any claim that
the Maryland Commission has the appropriate jurisdiction)
and pursue in any other forum having jurisdiction any other
rights or remedies that may be available at law or in
equity, including, but not limited to, compensation for
monetary damages (in the case of harms for which liquidated
damages are not available pursuant to this Agreement),
injunctive relief, and specific performance.
ARTICLE XVIII
OPTION TO PURCHASE FACILITY; RIGHTS OF FIRST REFUSAL
18.1 Option to Purchase Transfer Interest. If at
any time during the Term, Seller desires to sell, transfer,
convey or otherwise dispose of a Transfer Interest for
which Seller has not received a bona fide offer, Seller
shall so notify PEPCO and PEPCO shall have the right to
purchase such Transfer Interest in the Facility at the fair
market value of the Transfer Interest as determined by the
Parties in good faith negotiation. PEPCO shall notify
Seller within sixty (60) Days of PEPCO's receipt of such
notice whether PEPCO intends to exercise such purchase
right. If PEPCO notifies Seller that it does intend to
exercise such purchase right, Seller and PEPCO shall
negotiate in good faith to consummate such purchase and
Seller shall not negotiate with any other party regarding
the sale of the Transfer Interest until the earlier of:
(y) the date that Seller and PEPCO agree that their
negotiations are terminated or (z) one hundred and eighty
(180) Days after Seller's receipt of PEPCO's notice
declaring its intent to purchase the Transfer Interest.
Upon reasonable notice to Seller, PEPCO shall have the
right to investigate and inspect the Facility, the Site,
and all books and records pertaining to the Facility and
the Site during the period following PEPCO's notice to
Seller declaring its intent to purchase the Transfer
Interest until negotiations related thereto are terminated
pursuant to this Section 18.1. Except as otherwise provided
in Section 18.4, it is intended that no sale or transfer
will be made to PEPCO pursuant to this Section 18.1 if
Seller and PEPCO are unable through negotiations conducted
in good faith to reach agreement on the price and other
terms of such sale or transfer.
18.2 Right of First Refusal to Purchase Transfer
Interest. In the event that Seller receives a bona fide
offer from a third party to purchase a Transfer Interest
and Seller desires to sell to said third party pursuant to
the terms of such offer, Seller shall so notify PEPCO and
PEPCO shall have the right of first refusal to purchase the
Transfer Interest at a price equal to and on the same, or
substantially the same, terms as offered to the third
party; provided that, PEPCO shall reimburse Seller for any
negotiation expenses reasonably incurred by Seller in its
consideration of such third party's offer. Within sixty
(60) Days of PEPCO's receipt of Seller's notice, PEPCO
shall notify Seller whether PEPCO intends to exercise its
right of first refusal to purchase the Transfer Interest.
In the event that PEPCO so notifies Seller of its intent to
exercise its right of first refusal, Seller and PEPCO agree
to negotiate in good faith as expeditiously as possible to
consummate such purchase and Seller shall not negotiate
with such third party or any other party regarding the sale
of the Transfer Interest until the earlier of: (a) the
date that Seller and PEPCO agree that their negotiations
are terminated or (b) one hundred and twenty (120) Days
after Seller's receipt of PEPCO's notice of its intent to
exercise its right of first refusal. Upon reasonable
notice to Seller, PEPCO shall have the right to investigate
and inspect the Facility, the Site, and all books and
records pertaining to the Facility and the Site during the
period following PEPCO's written notice to Seller declaring
its intent to purchase the Transfer Interest until
negotiations related thereto are terminated pursuant to
thin Section 18.2.
18.3 Right of First Refusal to Purchase Interest
in Seller. If at any time during the Term, a transfer or
sale of any interest in Seller ("Seller Interest") is
planned or proposed, the Owner of such Seller Interest
("Owner") shall so notify PEPCO in writing and PEPCO shall
have the right to purchase such Seller Interest:
(a) (i) if the Owner has not received a bona
fide offer for such Seller Interest, at the fair
market value of the Seller Interest determined by
PEPCO and Owner in good faith negotiations and upon such other
terms and conditions determined by the Parties through
negotiation. Within sixty (60) Days of PEPCO's
receipt of any such notice from Owner, PEPCO shall
notify Owner in writing whether PEPCO intends to
exercise its right to purchase the Seller Interest.
In the event that PEPCO notifies Owner of its intent
to purchase the Seller Interest, the Owner and PEPCO
shall negotiate in good faith to consummate such
purchase, and the Owner shall not negotiate with any
other party regarding the sale of the Seller Interest
until the earlier of: (A) the date that PEPCO and
Owner agree that their negotiations are terminated or
(B) one hundred and eighty (180) Days after Owner's
receipt of PEPCO's notice of intent to purchase the
Seller Interest. Except as otherwise provided in
Section 18.4, it is intended that no sale or transfer
will be made to PEPCO pursuant to this Subsection
18.3(a)(i) if the Owner and PEPCO are unable through
negotiations conducted in good faith to reach
agreement on the price and other terms of such sale or
transfer.
(ii) Notwithstanding the foregoing, Seller
shall have been deemed to have fulfilled its
obligations under Subsection 18.3(a)(i) if Seller,
without having received a bona fide offer for a Seller
Interest: (A) provides PEPCO and other interested
persons simultaneously an offering memorandum in which
Seller offers to sell such Seller Interest and
solicits bids therefor and (B) provides PEPCO with a
right of first refusal to purchase such Seller
Interest in accordance with the provisions of
Subsection 18.3(b).
(b) if the Owner has received a bona fide offer
for such Seller Interest, at a price equal to and on
the same, or substantially the same terms as, such
bona fide offer; provided that PEPCO shall reimburse
Owner for any negotiation expenses reasonably incurred
by Owner in its consideration of such third party's
offer. Within sixty (60) Days after PEPCO's receipt of
written notice from Owner of such a bona fide offer
for a Seller Interest, PEPCO shall notify Owner in
writing whether PEPCO intends to exercise its right of
first refusal to purchase the Seller Interest. In the
event that PEPCO so notifies Owner of its intent to
exercise its right of first refusal, Owner and PEPCO
agree to negotiate in good faith an expeditiously as
possible to consummate such purchase and Owner shall
not negotiate with such third party or any other party
regarding the sale of the Seller Interest until the
earlier of: (i) the date that Owner and PEPCO agree
that their negotiations are terminated or (ii) one
hundred and twenty (120) Days after Owner's receipt of
PEPCO's notice of its intent to exercise its right of
first refusal.
Upon reasonable notice to Seller and Owner, PEPCO shall
have the right to investigate and inspect the Facility, the
Site, and all books and records pertaining to the Facility
and the Site during the period following PEPCO's written
notice to Owner declaring its intent to purchase the Seller
Interest until negotiations related thereto are terminated
pursuant to this Section 18.3. Prior to the execution of
this Agreement, PEPCO and the owners of all interests in
Seller shall enter into a separate agreement, in form and
substance satisfactory to PEPCO in its sole discretion,
confirming and implementing the rights granted to PEPCO in this Section
18.3 and Sections 18.4, 18.5 and 18.6. Any person or
entity that subsequently acquires an interest in Seller
shall, immediately upon such acquisition, enter into such
an agreement with PEPCO, and the failure to do so may be
treated by PEPCO as an immediate Event of Default under
Article XV of this Agreement.
18.4 Seller's Right to Convey Transfer
Interest; Owner's Right to Convey Seller Interest. In the
event that: (a) PEPCO elects by written notice to Seller or
Owner, as applicable, not to exercise PEPCO's option to
purchase under Section 18.1 or PEPCO's right of first
refusal under Section 18.2 or 18.3, (b) PEPCO fails to
provide to Seller or Owner, as applicable, written notice
of PEPCO's intention to exercise such option to purchase or
right of first refusal within the applicable time period
allotted for PEPCO's response under Section 18.1, 18.2, or
18.3, or (c) PEPCO and Seller or Owner, as applicable, have
agreed that their negotiations have terminated or the
negotiation period set forth in Section 18.1, 18.2, or 18.3
has expired, then for a period of one (1) Year after such
election, failure, agreement, or expiration, as the case
may be, Seller or Owner, as applicable, shall have the
right to transfer such Transfer Interest or Seller
Interest, as the case may be, to a third party provided
that: (y) the price is no lower than that, and the terms
are not materially more favorable to the transferee than
those, offered to PEPCO and (z) PEPCO has approved the
transferee as a party that is financially and technically
capable of operating the Facility and providing Dependable
Capacity and Net Electrical Output to PEPCO in accordance
with the terms of this Agreement. If Seller or Owner
proposes to transfer the Transfer Interest or Seller
Interest, as the case may be, to a third party at a price
that is lower than that, and/or on terms that are
materially more favorable to the transferee than those,
offered to PEPCO, then PEPCO shall be given a right of
first refusal to purchase such Transfer Interest (pursuant
to Section 18.2) or Seller Interest (pursuant to Subsection
18.3(b)), as the case may be, at the same price and on the
same, or substantially the same terms, as offered to the
third party.
18.5 Limitations on Option to Purchase and
Rights of First Refusal. PEPCO shall not have a right of
first refusal or option to purchase under Section 18.1,
18.2, or 18.3: (a) when such transfer is (i) a transfer of
a security interest in Seller or the Facility to a
Financing Party providing financing for the Facility in
accordance with the Financing Documents reviewed and
approved by PEPCO pursuant to Subsections 3.2(g), 3.3(b),
3.3(d) or 8.9(b), (ii) a transfer of a Transfer Interest or
a Seller Interest to such Financing Party(ies) upon
foreclosure on such Transfer Interest or Seller Interest
pursuant to the Financing Documents, under the
circumstances set forth in Subsection 18.6(b)(iii), or
(iii) a transfer of a Transfer Interest or a Seller
Interest acquired by such Financing Party(ies) as described
in Subsection 18.5(a)(ii), or the transfer of a Transfer
Interest or a Seller Interest to a third party under a
foreclosure sale, in either case under the circumstances
set forth in Subsection 18.6(b)(iii); or (b) in the case of
the right of first refusal granted pursuant to Section 18.2
or 18.3, with respect to a proposed transfer of less than
all interests in the Facility, the Site or Seller, if the
exercise of such right of first refusal would materially
jeopardize existing regulatory approvals.
18.6 PEPCO General Transfer Rights.
(a) Notwithstanding the foregoing sections
of this Article XVIII, Seller may not sell, convey,
transfer, or otherwise dispose of the Facility and/or the
Site or any material part thereof or any interest therein
to any other party without the prior written consent of
PEPCO, which such consent shall not be unreasonably
withheld. Under no circumstances may Seller or any owner of
an interest in Seller assign or transfer any interest in
Seller, which assignment or transfer would result in a
change in control of either Seller or the Facility, without
the prior written consent of PEPCO, which consent shall not
be unreasonably withheld. PEPCO shall not withhold its
consent for any assignment or transfer that would result in
a change in control of either Seller or the Facility unless
PEPCO reasonably determines that the parties that would
control Seller or the Facility after such assignment or
transfer are not financially and technically capable of
operating the Facility in accordance with the terms of thin
Agreement. For purposes of this Section 18.6: (i) any
transfer or assignment of any general partnership interest,
(ii) any transfer or assignment of any ten percent (10%) or
greater limited partnership interest or (iii) any transfer
of an interest that will result in the transferee holding
in the aggregate a ten percent (10%) or greater limited
partnership interest, shall constitute a change in control.
(b) (i) Prior to exercising any of their
rights to foreclose on the Facility and/or the Seller, the
Financing Parties shall notify PEPCO whether the capacity
and associated energy of the Facility will continue to be
sold to PEPCO in accordance with the terms and provisions
of this Agreement following such foreclosure. If the
Financing Parties notify PEPCO that the capacity and
associated energy of the Facility will continue to be sold
to PEPCO in accordance with the terms and provisions of
this Agreement, the Financing Parties may exercise their
rights to foreclose on the Facility and/or the Seller, or
may assign their rights in the Facility and/or the Seller
to a third party following foreclosure, or may proceed with
a foreclosure sale to a third party, subject to PEPCO's
prior consent. The Financing Parties, any third party to
which the Financing Parties may assign their rights in the
Facility and/or the Seller, and/or, as appropriate, any
third party that may purchase the Facility or the Seller at
foreclosure, shall agree in writing, in a form reasonably
satisfactory to PEPCO, to continue to sell the capacity and
associated energy of the Facility to PEPCO in accordance
with the terms and provisions of this Agreement.
(ii) If the Financing Parties notify
PEPCO pursuant to Subsection 18.6(b)(i) that the capacity
and associated energy of the Facility will not continue to
be sold to PEPCO following foreclosure on the Facility
and/or the Seller, then PEPCO shall have the right to
purchase the Facility at its fair market value as
determined by PEPCO and the Financing Parties in good faith
negotiations in accordance with the procedures set forth in
Appendix P attached to this Agreement. Within thirty (30)
Days after PEPCO's receipt of such notice from the
Financing Parties, PEPCO shall notify the Financing Parties
and the Seller whether PEPCO intends to pursue its right to
purchase the Facility. If PEPCO notifies the Financing
Parties and the Seller that PEPCO intends to pursue such
right, PEPCO shall have the right to purchase the Facility
in accordance with the provisions of Appendix P attached to
this Agreement within two hundred seventy (270) Days after
its notice to the Financing Parties and the Seller.
(iii) PEPCO shall not have a right of
first refusal or an option to purchase with respect to a
transfer of a Transfer Interest or a Seller Interest as set
forth in Subsections 18.5(a)(ii) and 18.5(a)(iii) if:
(A) the Financing Parties have notified PEPCO in accordance
with Subsection 18.6(b)(i) that the capacity and the
associated energy of the Facility will continue to be sold
to PEPCO in accordance with the terms and provisions of
this Agreement after foreclosure and such agreement with
PEPCO has been acknowledged in writing, in form reasonably
satisfactory to PEPCO, by the Financing Parties, any third
party to which the Financing Parties have assigned their
rights in the Facility and/or the Seller, and/or, as
appropriate, any third party that has purchased the
Facility and/or the Seller at foreclosure, or (B) PEPCO
notifies the Financing Parties and the Seller pursuant to
Subsection 18.6(b)(ii) that PEPCO does not intend to pursue
its right to purchase the Facility, or (iii) PEPCO, in
accordance with the procedures set forth in Appendix P
attached to this Agreement, elects not to purchase the
Facility.
(iv) The Financing Parties shall
explicitly acknowledge and agree in writing with PEPCO to
the provisions of this Subsection 18.6(b).
ARTICLE XIX
MISCELLANEOUS
19.1 Assignment. Neither this
Agreement, nor any of the rights or obligations hereunder,
may be assigned, transferred, or delegated by either Party
without the express prior written consent of the other
Party, which consent shall not be unreasonably withheld;
provided, however, that (i) such consent shall not be
required prior to an assignment to a wholly-owned
subsidiary of such Party and (ii) Seller may assign its
rights and/or obligations under this Agreement to the
Financing Parties as required for financing purposes,
subject to PEPCO's right to review and approve the
Financing Documents pursuant to Subsections 3.2(g), 3.3(b),
3.3(d) and 8.9(b) and provided, further, that, in each case
(x) any assignee shall expressly assume assignor's
obligations hereunder, including but not limited to in the
case of an assignment by Seller, making the
representations, warranties and additional covenants set
forth in Article XI hereof, (y) no such assignment shall
impair any security given by Seller hereunder and (z)
unless expressly agreed by the other Party, no assignment,
whether or not consented to, shall relieve the assignor of
its obligations hereunder in the event its assignee fails
to perform.
19.2 Notices. Except as otherwise
specified in this Agreement, any notice, demand for
information, or documents required or authorized by this
Agreement to be given to a Party shall be given in writing
and shall be either: (a) personally delivered, (b) mailed
by registered or certified mail (return receipt requested)
postage prepaid, (c) sent by overnight delivery service
(with a receipt for delivery), or (d) sent by telefacsimile
with a signed acknowledgment of receipt by return
facsimile, to such Party at the following address:
For Seller: For PEPCO:
President Manager, Supply Side Resources
Panda Energy Corporation PEPCO
4100 Spring Valley 1900 Pennsylvania Avenue, N.W.
Suite 1001 Washington, D.C. 20068
Dallas, TX 75244 Telephone: (202) 872-3044
Telephone: (214) 980-7519 Telefacsimile: (202) 331-6185
Telefacsimile: (214) 980-6815
With a copy to:
Vice-President, Energy Policy and
Development
PEPCO
1900 Pennsylvania Avenue, N.W.
Washington, D.C. 20068
Each Party's designation of such person and/or address may be
changed at any time by such Party upon written notice given
pursuant to the requirements of this section. A notice served by
mail shall be effective upon receipt.
19.3 CHOICE OF LAW. THIS AGREEMENT SHALL BE
INTERPRETED, CONSTRUED AND GOVERNED BY THE LAWS OF THE STATE OF
MARYLAND AND, TO THE EXTENT APPLICABLE, FEDERAL LAW, WITHOUT REGARD
TO ANY APPLICABLE CONFLICT OF LAWS PROVISIONS. THE PARTIES HEREBY
SUBMIT TO THE JURISDICTION OF COURTS LOCATED IN, AND VENUE IS
HEREBY STIPULATED TO BE IN, BALTIMORE, MARYLAND.
19.4 Entire Agreement. This Agreement, including the
appendices hereto, and the "Agreement With Respect to Transfers of
Interests in Panda-Brandywine, L.P." (entered into by PEPCO, Panda
Energy Corporation and Panda Brandywine Corporation and
acknowledged and agreed to by Seller) of even or approximately even
date herewith constitute the entire understanding between the
Parties and supersede any and all previous understandings between
the Parties with respect to the subject matter hereof. This
Agreement shall be binding upon and inure to the benefit of the
Parties, and their respective successors and assigns.
19.5 Further Assurances. If either Party
determines in its reasonable discretion that any further
instruments, assurances or other things are necessary or desirable
to carry out the terms of this Agreement, the other Party will
execute and deliver all such instruments and assurances and do all
things reasonably necessary or desirable to carry out the terms of
this Agreement; provided, however, that PEPCO's obligations under
this Section shall be subject to PEPCO's right to review and
approve Financing Documents under Subsections 3.2(g), 3.3(b),
3.3(d) and 8.9(b), and any Financing Documents required to be
executed by PEPCO shall be subject to approval by PEPCO in its sole
discretion.
19.6 Waiver. No waiver by either Party of the
performance of any obligation under this Agreement or with respect
to any default or any other matter arising in connection with this
Agreement shall be deemed a waiver with respect to any subsequent
performance, default or matter.
19.7 Modification or Amendment. No modification,
amendment or waiver of any provision of this Agreement shall be
valid unless it is in writing and signed by both Parties.
19.8 Severability. After the approvals required
under Subsection 3.1(a) have been obtained, if any term or
provision of this Agreement or the application thereof to any
person, entity or circumstance shall to any extent be declared
invalid or unenforceable by any competent agency or court, the
remainder of this Agreement, or the application of such term or
provision to persons, entities or circumstances other than those as
to which it is invalid or unenforceable, shall not be affected
thereby, and each other term and provision of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
In the event that any such term or provision of this Agreement or
the application thereof to any person, entity or circumstance shall
be so declared invalid or unenforceable, the Parties agree to
negotiate in good faith in an effort to reach agreement on
appropriate revisions to this Agreement to restore the relative
benefits and burdens of the Parties as originally incorporated in
this Agreement.
19.9 Counterparts. This Agreement may be executed in
several counterparts, and all such counterparts shall constitute
one agreement binding on both Parties hereto and shall have the
same force and effect as an original instrument, notwithstanding
that both Parties may not be signatories to the same original or
the same counterpart.
19.10 Confidential Information. The Parties agree that
this Agreement contains confidential commercial information and,
therefore, shall not be disclosed to any third party without the
consent of both Parties. Further, any information provided by a
Party to the other Party pursuant to this Agreement and labeled
"CONFIDENTIAL" shall be used by the receiving Party solely in
connection with the purposes of this Agreement and shall not be
disclosed by the receiving Party to any third party, except with
the providing Party's consent, and upon request of the providing
Party shall be returned thereto. Notwithstanding the above, the
Parties acknowledge and agree that this Agreement and any such
information may be disclosed to the Financing Parties, suppliers
and potential suppliers of Fuel and major equipment to the Facility
and other third parties as may be necessary for PEPCO and Seller to
perform their obligations under this Agreement (including, but not
limited to, consultants retained by PEPCO to review Seller's Fuel
Supply Plan, Fuel Supply Contract(s), or other contracts or
arrangements with respect to fuel for the Facility). To the extent
that such disclosures are necessary, the Parties also agree that
they shall endeavor in disclosing the Agreement and any such
information to seek to preserve the confidentiality of such
disclosures. This provision shall not prevent either Party from
providing this Agreement or any confidential information received
from the other Party to any court or governmental body as may be
required by such court or body, provided that, if feasible, the
disclosing Party shall have given prior notice to the other Party
of such required disclosure and, if so requested by such other
Party, shall have used all reasonable efforts to oppose the
requested disclosure, as appropriate under the circumstances, or to
otherwise make such disclosure pursuant to a protective order or
other similar arrangement for confidentiality. Without limiting
the scope of the foregoing, the Parties explicitly agree to use all
reasonable efforts to maintain the confidentiality of this
Agreement in any filings with, or submissions to, any governmental
or regulatory authorities.
19.11 Independent Contractors. The Parties are
independent contractors. Nothing contained herein shall be deemed
to create an association, joint venture, partnership, or
principal/agent relationship between the Parties hereto or impose
any partnership obligation or liability on either Party. Neither
Party shall have any right, power or authority to enter into any
agreement or commitment, act on behalf of, or otherwise bind the
other Party in any way.
19.12 Third Parties. This Agreement is intended solely
for the benefit of the Parties, and nothing in this Agreement shall
be construed to create any duty to, or standard of care with
reference to, or any liability to, any person not a Party to this
Agreement.
19.13 Headings. The headings contained in this
Agreement are solely for the convenience of the Parties and should
not be used or relied upon in any manner in the construction or
interpretation of this Agreement.
19.14 Press Releases. Prior to the Actual
Commercial Operation Date, neither Party shall issue any press
release referring to this Agreement without coordination with, and
the prior approval of the other Party.
19.15 Survival of Rights. Cancellation, expiration or
earlier termination of this Agreement shall not relieve the Parties
of obligations that by their nature should survive such
cancellation, expiration or termination, including, without
limitation, warranties, remedies, promises of indemnity and
confidentiality.
19.16 Incorporated Provisions. PEPCO has an Areawide
Contract with the General Services Administration (GS-00 P-90-BSD-
0027) (hereinafter referred to as the "Areawide Contract") which
requires PEPCO to comply with the following Federal Acquisition
Regulations ("FAR") clauses: (1) 52.222-26 Equal Opportunity (Apr.
1984), 48 C.F.R. 52.222-26 (1990); (2) 52.222-35 Affirmative Action
for Special Disabled and Vietnam Era Veterans (Apr. 1984), 48 C.F.R.
52.222-35 (1990); (3) 52.222-36 Affirmative Action for Handicapped
Workers (Apr. 1984), 48 C.F.R. 52.222-36 (1990); (4) 52.219-8
Utilization of Small Business Concerns and Small Disadvantaged
Business Concerns (Jun. 1985), 48 C.F.R. 52.219-8 (1989); and (5)
52.223-2 Clean Air and Water (Apr. 1984), 48 C.F.R. 52.223-2 (1990).
To the extent that these and any other government
contract clauses are required to be incorporated by reference and
made part of this Agreement pursuant to the terms of the clauses
themselves, the existence of the Areawide Contract or by operation
of law, such clauses are hereby so incorporated and made part of
the Agreement. Seller agrees to comply with the requirements of any
such government contract clause to the extent that the clause
applies to Seller and Seller is not otherwise exempt from these
requirements.
19.17 Sections. Unless otherwise specified, references
in this Agreement to numbered Sections and Subsections shall be to
Sections and Subsections of this Agreement.
ARTICLE XX
NO WARRANT OF FACILITY BY PEPCO
20.1 No Implied Warranty. Notwithstanding any other
provision of this Agreement, PEPCO's review and/or approval of any
material or information submitted to PEPCO under this Agreement
(including but not limited to any governmental or regulatory permit
or approval) and any review, inspection or monitoring of the
Facility or of the design and/or construction thereof by PEPCO and
PEPCO's participation in the Operating Committee shall not be
deemed to constitute either a waiver of any requirement of this
Agreement or an endorsement of the design of the Facility nor a
warranty or other assurance by PEPCO of the safety, durability or
reliability of the Facility.
IN WITNESS WHEREOF, the Parties have caused this
Agreement to be executed by their respective duly authorized
officers as of the date first above written.
POTOMAC ELECTRIC POWER COMPANY
Attest:
By: Paul Dragoumis
Title: Executive Vice President
PANDA-BRANDYWINE, L.P.
By It's General Partner,
Attest: Panda Brandywine Corporation
By: Robert W. Carter
Title: Chairman, Chief Executive Officer
The undersigned, Panda Brandywine Corporation, the general partner
in Panda-Brandywine, L.P., is executing this Power Purchase
Agreement for the limited purpose of acknowledging and agreeing to
comply with the provisions of Section 11.9 of this Agreement.
PANDA BRANDYWINE CORPORATION
Attest:
By: Robert W. Carter
Title: Chairman, Chief Executive Officer
APPENDIX G
PROCEDURES FOR DETERMINATION OF
FAIR MARKET VALUE OF
FACILITY
The then current net fair market value of the
Facility shall be determined in accordance with the following
procedures if upon the occurrence of an Event of Default by
Seller, PEPCO notifies Seller of its intent to purchase the
Facility pursuant to section 15.2(b) of the Agreement:
1. PEPCO shall, at PEPCO's expense, submit to the
Seller, within twenty (20) days of the receipt by the Seller of
PEPCO's notice of intent to purchase the Facility, an appraisal
of the then current net fair market value of the Facility
repared by a nationally recognized engineering or consulting
firm elected by PEPCO.
2. In the event that Seller disagrees with the
appraisal submitted by PEPCO, Seller shall promptly notify
PEPCO to that effect and, within twenty (20) days of submittal
of the appraisal by PEPCO, Seller shall obtain, at Seller's
expense, its own appraisal of the current net fair market value
of the acility prepared by a nationally recognized engineering
or consulting firm selected by Seller.
3. If the Parties or the two (2) appraisers cannot
reach a consensus on the current net fair market value of the
Facility within ten (10) Days of the submission of Seller's
appraisal to PEPCO, then the two (2) appraisers shall designate
a third similarly qualified appraiser within five (5) Days
after the end of such ten (10) Day period. PEPCO and Seller
shall share equally the expenses of the third appraiser. The
current net fair market value of the Facility shall be the
average of the values submitted by any two (2) of the three (3)
appraisers which are nearest to each other (or, if the two (2)
extreme values are equidistant from the middle value, the
middle value), which average (or middle value) shall be
presented to PEPCO and Seller. If an average (or middle value)
has not been determined within fifteen (15) Days of the
designation of the third appraiser, PEPCO and Seller may
mutually agree to terminate such appriasal process and to
initiate a new process to determine the current net fair market
value of the Facility (either pursuant to the procedures set
forth in this Appendix or otherwise), provided, however, that
PEPCO and Seller and/or the appraisers must reach agreement on
the purchase price within one hundred and twenty (120) Days
after Seller's receipt of PEPCO's notification of its intent to
pursue its right to purchase the Facility under Subsection
15.2(b)
4. Seller shall provide the appraisers with
reasonable access to the Facility (including the Site) and to
records anclicable to the Facility (including the Site) during
normal business hours in order to enable the appraisers to
conduct their appraisals. Seller shall provide PEPCO, its
officers, employees, agents, and consultants with reasonable
access to the Facility (including the Site) during normal
business hours to conduct such inspections (including but not
limited to soil sampling and other environmental audits and
inspections) and review of records as PEPCO may deem
appropriate in evaluating whether to acquire the Facility
(including the Site).
5. Following the establishment of the current net
fair market value of the Facility pursuant to the procedures
set forth in this Appendix G, PEPCO shall have up to ninety
(90) Days to provide Seller with irrevocable notice of whether
PEPCO will purchase the Facility at such net fair market value.
PEPCO's determination of whether to purchase the Facility shall
be in PEPCO's sole discretion.
6. In the event PEPCO elects to purchase the
Facility pursuant to Subsection 15.2(b) of the Agreement and
paragraph 5 above, Seller shall provide PEPCO good and
marketable title to the Facility free and clear of all liens,
conditions, easements, encumbrances or restrictions other than
those which existed at the time of the appraisal process and
which were not expressly excluded by the appraisers in
establishing the current net fair market value of the Facility,
as well as any other such encumbrance which PEPCO specifically
and expressly agrees to assume; provided, however, that as long
as the Financing documents remain in effect, Seller shall not
sell the Facility to PEPCO hereunder unless: (i) PEPCO agrees
to assume all of Seller's then-outstanding obligations under
the Financing Documents with respect to the Facility, (ii) if
PEPCO seeks to purchase and Seller agrees to sell the Facility
free and clear of the Financing Documents, the net proceeds
available to Seller must at a minimum be sufficient, and shall
be used, to satisfy in full all of its then outstanding
obligations under the Financing Documents (including without
limitation any prepayment fees) with respect to the Facility,
or (iii) the Financing Parties otherwise consent to the sale.
PEPCO's purchase of the Facility shall be consummated at a
settlement to be scheduled at a time and place mutually
agreeable to the Parties. Seller and PEPCO shall execute and
deliver at settlement all documents necessary to transfer,
assign and convey to PEPCO all of Seller's right, title and
interest in the Facility. PEPCO shall pay to Seller at
settlement the amount specified in paragraph 5 hereof in cash,
by certified check or by wire transfer of funds.
7. Capitalized terms used in this Appendix shall
have the meanings assigned to those terms in the Agreement,
unless otherwise defined herein. Notices and other materials to
be provided to the Parties hereunder shall be provided in
accordance with the requirements set out in Section 19.2 of the
Agreement.
<TABLE>
<CAPTION>
APPENDIX K
CONTRIBUTIONS TO MAINTENANCE RESERVE
PURSUANT TO SUBSECTION 8.7(b)(ii)
Deposits Withdrawals
to from
Maintenance Maintenance
Hours Account Account Balance
<C> <C> <C> <C>
8,000 $ 696,000 $ 475,000 $221,000
16,000 696,000 470,000 447,000
24,000 696,000 960,000 183,000
32,000 696,000 475,000 404,000
40,000 696,000 470,000 630,000
48,000 696,000 1,320,000 6,000
---------- ----------
$4,176,000 $4,170,000
========== ==========
</TABLE>
(Schedule will repeat each 48,000 hours)
APPENDIX N
EQUIVALENT AVAILABILITY FACTOR ("EAF")
N
(PHm + SCAm - EUHm)
m=1
EAF = _______ _ _____ ___ _ _________ _______
N
PHm
m=1
Where:
m = Month
N = Number of Months in the calculation period
PH = Period Hours: Total hours in the month.
SCA = Simple Cycle Adjustment: The total
Net Electrical Output in simple cycle mode for
the Month as provided for in Subsection
6.2(b)(iv) of the Agreement divided by the
average Available Capacity for the Month(4).
EUH = Equivalent Unavailable Hours
= UOH + POH + MOH + EUDH + EPDH + EMDH
Where:
UOH = Unplanned Outage Hours: Sum of the
time, in hours, during which the Facility
experienced a full unplanned outage including
outage events with codes U1, U2, U3, and SF(1,2)
POH = Planned Outage Hours: Sum of the
time, in hours, during which the Facility
experienced a full planned outage or full
planned outage extensions including outage
events with codes PO and SE(1,2)
MOH = Maintenance Outage Hours: Sum of the
time, in hours, during which the Facility
experienced a full maintenance outage including
outage events with code MO(1,2)
EUDH = Equivalent Unplanned Deration Hours:
The sum of the products of the time (hours) and
size (MW-net) for each unplanned derating of
the Facility (deration events with codes D1,
D2, and D3) divided by the average Available
Capacity for the Month(1,3,4)
EPDH = Equivalent Planned Deration Hours:
The sum of the products of the time (hours) and
size (MW-net) for each planned derating of the
Facility or extension thereof deration events
with codes PD and DE) divided by the average
Available Capacity for the Month(1,3,4)
EMDH = Equivalent Maintenance Deration
Hours: The sum of the products of the time
(hours) and size (MW net) for each mintenance
aerating of the Facility or extension thereof
(deration events with codes D4 and DE) divided
by the average Available Capacity for the Month
(1,3,4)
Notes:
(1) Outage and aeration events and their associated
codes are defined in Appendix I in the Generating Unit
Event Reporting procedure.
(2) The Facility experiences a full outage event when it
cannot supply electrical energy in the combined-cycle
mode of operation.
(3) The Facility experiences a aeration event when its
ability to supply electrical output in the combined cycle
mode of operation is limited to below its Available
Capacity. The length of a aeration event excludes hours
coincident with full planned, unplanned, or maintenance
Outage Events.
(4) The average Available Capacity is defined as the
Available Capacity calculated for an ambient temperature
equal to the average of the weekday peak hour
temperatures for the Month, excluding those weekdays
which are holidays recognized by PEPCO (as identified
pursuant to Section 1.6 of the Agreement).
APPENDIX O
EQUIVALENT FORCED OUTAGE RATE ("EFOR")
N
(UOHm + EUDHm - SCAm)
m=1
EFOR = _______ __ ________________________ _________
N
(SHm + UOHm + EUDERSm)
m=1
Where:
m = Month
N = Number of Months in the calculation period
UOH = Unplanned Outage Hours: Sum of the time, in hours,
during which the Facility experienced a full
unplanned outage including outage events with
codes U1, U2, U3, and SF.(1,2)
EUDH = Equivalent Unplanned Deration Hours: The sum of
the products of the time (hours) and size (MW net)
for each unplanned derating of the Facility
(deration events with codes D1, D2 and D3) divided
by the average Available Capacity for the Month(1,3,4).
EUDHRS = Equivalent Unplanned Deration Hours During Reserve
Shutdown: The sum of the products of the length
(hours) and size (MW net) for each unplanned
derating of the Facility (Deration Events with
codes D1, D2, and D3) which occurred during reserve
shutdown divided by the average Available Capacity
for the Month(1,3,4,5).
SCA = Simple Cycle Adjustment: The total Net Electrical
Output of the Facility in simple cycle mode for the
Month as provided for in Subsection 6.2(b)(iv) of the
Agreement divided by the average Available Capacity for
the Month(4).
SH = Service Hours: Sum of the time, in hours, when the
Facility was electrically connected to the PEPCO
System.
Notes:
(1) Outage and aeration events and their associated
codes are defined in Appendix I in the Generating Unit
Event Reporting procedure.
(2) The Facility experiences a full outage event when
it cannot supply electrical energy in the combined-
cycle mode.
(3) The Facility experiences a deration event when its
ability to supply electrical output in the combined-
cycle mode of operation is limited to below its
Available Capacity. The length of a deration event
excludes hours coincident with full planned, unplanned,
or maintenance outage events.
(4) The average Available Capacity is defined as the
Available Capacity calculated for an ambient
temperature equal to the average of the weekday peak
hour temperatures for the Month, excluding those
weekdays which are holidays recognized by
PEPCO (as identified pursuant to Section 1.6 of
the Agreement).
(5) Hours when the Facility is available but not
dispatched. Reserve shutdown hours are equal to Period
Hours less Service Hours less all full planned,
unplanned, and maintenance outage hours.
APPENDIX P
VALUATION PROCEDURES FOR PEPCO'S
BUYOUT RIGHTS UNDER SUBSECTION 18.6(b)(ii)
The fair market value of the Facility shall be
determined in accordance with the following procedures
if PEPCO notifies the Financing Parties and the Seller
of its intent to pursue its right to purchase the
Facility pursuant to Subsection 18.6(b)(ii).
1. PEPCO and the Financing Parties shall negotiate for
a period of sixty (60) Days after receipt by the
Financing Parties of PEPCO's notification of PEPCO's
intent to pursue its right to purchase the Facility
pursuant to Subsection 18.6(b)(ii) in an effort to agree
upon the purchase price. If PEPCO and the Financing
Parties cannot agree upon the purchase price within such
sixty (60) Day period, then, within the next ten (10)
Days, PEPCO and the Financing Parties each shall, at its
own expense, select an appraiser from a nationally
recognized engineering or consulting firm.
2. If the two (2) appraisers cannot reach a consensus
on the fair market value of the Facility within ten (10)
Days of the submission of the matter to them by PEPCO
and the Financing Parties, then the two (2) appraisers
shall designate a third similarly qualified appraiser
within five (S) Days after the end of such ten (10) Day
period. PEPCO and the Financing Parties shall share
equally the expenses of the third appraiser. The fair
market value of the Facility shall then be the average
of the values submitted by any two (2) of the three (3)
appraisers which are nearest to each other (or, if the
two (2) extreme values are equidistant from the middle
value, the middle value), which average (or middle
value) shall be presented to PEPCO and the Financing
Parties hereto. If an average (or middle value) has not
been determined within fifteen (15) Days of the
designation of the third appraiser, PEPCO and the
Financing Parties may mutually agree to terminate such
appraisal process and to initiate a new process to
determine the fair market value of the Facility (either
pursuant to the procedures set forth in this Appendix or
otherwise), provided, however, that PEPCO and the
Financing Parties and/or the appraisers must reach
agreement on the purchase price within one hundred and
twenty (120) Days after the Financing Parties' and
Seller's receipt of PEPCO's notification of its intent
to pursue its right to purchase the Facility under
Subsection 18.6(b)(ii).
3. Notwithstanding any other considerations, a bona
fide offer received by the Financing Parties from a
third party not affiliated or otherwise related to, or
associated with, the Financing Parties, which offer is
acceptable to the Financing Parties in their sole
discretion, shall be presumptive evidence of fair market
value.
4. PEPCO and the Financing Parties shall use all
reasonable efforts to arrive at a mutually agreeable
determination of the fair market value of the Facility
as expeditiously as possible, and shall negotiate in
good faith to arrive at such determination. The
Financing Parties and the Seller shall provide the
appraisers with reasonable access to the Facility
(including the Site) and to records applicable to the
Facility (including the Site) during normal business
hours in order to enable the appraisers to conduct their
appraisals. The Financing Parties and the Seller shall
provide PEPCO, its officers, employees, agents, and
consultants with reasonable access to the Facility
"including the Site) during normal business hours to
conduct such inspection (including but not limited to
soil sampling and other environmental audits and
inspections) and reviews of records as PEPCO may deem
appropriate in evaluating whether to acquire the
Facility.
5. Following the establishment of the fair market
value of the Facility pursuant to the procedures set
forth in this Appendix P, PEPCO shall have up to thirty
(30) Days to provide the Financing Parties and the
Seller with irrevocable notice of whether PEPCO will
purchase the Facility at such fair market value. PEPCO's
determination of whether to purchase the Facility shall
be in PEPCO's sole discretion.
6. In the event PEPCO elects to purchase the Facility,
pursuant to Subsection 18.6(b)(ii) and paragraph 5
above, PEPCO shall purchase the Facility free and clear
of all liens, conditions, easements, encumbrances or
restrictions other than those which existed at the time
of the appraisal process or which PEPCO specifically
agrees to assume. The appraisers must take all such
liens, conditions, easements, encumbrances or
restrictions into account in establishing the fair
market value of the Facility. The Financing Parties in
the Financing Documents shall recognize PEPCO's rights
as set forth herein, and in Subsection 18.6(b)(ii).
PEPCO's purchase of the Facility shall be consummated at
a settlement to be scheduled within two hundred and
seventy (270) Days from the receipt by the Financing
Parties and the Seller of PEPCO's notice of its
intention to pursue its right to purchase the Facility
pursuant to Subsection 18.6(b)(ii), at a time and place
mutually agreeable to PEPCO and the Financing Parties.
The Financing Parties, the Seller and PEPCO shall
execute and deliver at settlement all documents
necessary to transfer, assign and convey to PEPCO all of
the right, title and interest in the Facility. PEPCO
shall pay to the Financing Parties (or to the Seller, if
so instructed by the Financing Parties) at settlement
the amount specified in paragraph 5 hereof in cash, by
certified check or by wire transfer of funds.
7. Capitalized terms used in this Appendix shall have
the meanings assigned to those terms in the Agreement,
unless otherwise defined herein. Notices and other
materials to be provided to PEPCO, the Financing Parties
and the Seller hereunder shall be provided in accordance
with the requirements set out in Section 19.2 of the
Agreement, at the following addresses:
PEPCO:
Manager, Supply Side Resources
PEPCO
l900 Pennsylvania Avenue, N.W.
Washington, D.C. 20068
Telephone: (202) 872-3044
Telefacsimile: (202) 331-6185
With a copy to:
Vice-President, Energy Policy
and Development
PEPCO
1900 Pennsylvania Avenue, N.W.
Washington, D.C. 20068
SELLER
President
Panda Energy Corporation
4100 Spring Valley
Suite 1001
Dallas, Tx 75244
Telephone: (214) 980-7159
Telefacsimile: (214) 980-6815
FINANCING PARTIES: (To be
provided by Seller after the Closing Date)
8. The Seller shall cooperate with PEPCO and the
Financing Parties to implement the provisions of this
Appendix P and PEPCO's right to purchase the Facility in
accordance with Subsection 18.6(b)(ii). The Seller shall
be bound by any determination made by PEPCO and the
Financing Parties as to the fair market value of the
Facility or any other terms and conditions of the
transfer of the Facility to PEPCO.
FIRST AMENDMENT TO POWER PURCHASE AGREEMENT
This First Amendment to Power Purchase Agreement ("First
Amendment") is entered into as of September 16, 1994, by and
between Panda-Brandywine, L.P. ("Seller'), a Delaware limited
partnership, and Potomac Electric Power Company ("PEPCO"), a
District of Columbia and Virginia corporation (referred to
hereinafter individually as "Party" and collectively as the
"Parties".
WITNESSETH:
WHEREAS, Seller and PEPCO entered into a Power Purchase
Agreement, dated as of August 9, 1991 ("Power Purchase
Agreement"), pursuant to the terms of which PEPCO is to purchase
capacity and energy from an approximately 230 megawatt electric
generating facility to be constructed by Seller; and
WHEREAS, Seller and PEPCO desire to amend the Power Purchase
Agreement.
NOW, THEREFORE, in consideration of these premises, the
mutual covenants set forth herein, and other good and valuable
consideration, the receipt of which is hereby acknowledged, the
Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Capitalized terms used herein that are not
otherwise defined herein shall have the same meanings as set
forth in the Power Purchase Agreement .
ARTICLE II
AMENDMENTS
2.1 Amendments to Article I. Article I of the Power
Purchase Agreement is amended as follows:
(a) The following new section is added after Section 1.17:
1.17A "Conrail" - The Consolidated Rail Corporation or any
successor thereto.
(b) The following new section is added after Section 1.60:
1.60A "Must Run Hours" - The Hours during which PEPCO is
required to dispatch the Limited Dispatch Portion pursuant to the
first two sentences of Subsection 8.3(a).
(c) Section 1.77 is deleted in its entirety and replaced by the
following:
1.77 "Scheduled Closing Date" - The date after October 30,
1994 on which the Seller, by at least sixty ( 60 ) Days' prior
written notice to PEPCO, projects that the Closing Date will
occur, provided that Seller may replace such written notice with
a new sixty 60 Days' written notice upon Seller's determination
that; the Scheduled Closing Date shall be delayed beyond the date
specified in the previous notice.
(d) Section 1.79 is deleted in its entirety and replaced by the
following:
1.79 "Scheduled Commercial Operation Date" - The date during
the period from June 1, 1996 to June 1, 1997 on which the Seller
projects that the Actual Commercial Operation Date will occur.
Seller shall designate the Scheduled Commercial Operation Date on
or before the Closing Date.
2.2 Amendments to Article III. Article III of the Power
Purchase Agreement is amended as follows:
(a) Subsection 3.2(h)(x) is amended as follows:
(1) Change the word "or" on the first line to a comma;
(2) insert the following phrase between the words "way" and
"necessary" on the second line:
or, in the case of subparts B and D of this subsection,
occupancy permits issued by Conrail
(3) change the word "or" on the sixth line to a comma; and
(4) insert the phrase "or occupancy permit" between the
words "ways and "satisfactory" on the seventh line.
(b) Subsection 3.2(1) is deleted in its entirety and replaced by
the following:
(1) At the times specified in Subsection 4.2(a), the
Interconnection Security pursuant to Section 4.2.
(c) Subsection 3.3(a) is amended by changing the word "or" on the
twentieth line to a comma, and by inserting the phrase "or
occupancy permit" between the words "way" and "for" on the
twentieth line.
2.3 Amendments to Article IV. Article IV of the Power
Purchase Agreement is amended as follows:
(a) Subsection 4.1(b) is amended by changing the contra on the
twenty-first line to a period, and by deleting the language
beginning with the word "subject" on the twenty-first line and
continuing through the phrase "Section 4.4." on the twenty-third
line.
(b) Subsection 4.1(c) is amended as follows:
(1) Insert the word "and" following the comma at the end of
the eighth line;
(2) Change the comma following the word "Maryland" on the
nineteenth line to a period, and delete the language beginning
with the word "and" at the end of the nineteenth line and
continuing through the word "Date" on the twenty-sixth line; and
(3) Insert the following new sentence between the first and
second sentences:
Either Party may terminate this Agreement immediately
by written notice to the other Party given within thirty
(30) Days after the Closing Date, if by the Closing Date
Seller has not received easements or occupancy permits from
Conrail for construction and operation of Transmission
Facilities for the Term of this Agreement on that portion of
Conrail's right-of-way located in Prince George's County,
Maryland that extends from the Facility to that portion of
the Transmission Facilities Site that is owned by PEPCO as
of the Effective Date.
(c) Subsection 4.2(a) is amended by deleting the first sentence
in its entirety and replacing it with the following sentences:
On or before December 1, 1994, Seller shall provide PEPCO with a
security deposit in an amount equal to the Interconnection Costs
incurred by PEPCO prior to such date (including, but not limited
to, commitments incurred for future delivery of goods and
services) for which Seller has not previously paid PEPCO pursuant
to Section 9.3. On the Closing Date, Seller shall provide PEPCO
with an additional security deposit in an amount equal to the
remaining balance of Interconnection Costs estimated pursuant to
Section 9.2 for which Seller has not previously provided PEPCO a
security deposit pursuant to the first sentence of this
Subsection 4.2(a) or paid PEPCO pursuant to Section 9.3. (The
security deposits made pursuant to the first two sentences of
this Subsection 4.2(a) are defined as the "Interconnection
Security.") The Interconnection Security shall be in any form set
forth in Section 4.3.
(d) Subsection 4.2(b) is amended as follows:
(1) Change the phrase "of the amount of the Interconnection
Security" on the seventh and eighth lines to the phrase "of the
sum of the amounts of Interconnection Security";
(2) Delete the word "initially" on the eighth line; and
(3) Change the phrase "the first sentence" on the eighth
and ninth lines to the phrase "the first and second sentences".
(e) Section 4.4 is deleted in its entirety and replaced by the
following:
4.4 Extension to the Scheduled Commercial Operation Date.
If the Scheduled Commercial Operation Date designated by
Seller pursuant to Section 1.79 of this Agreement is prior
to June 1, 1997, then, upon written notice to PEPCO given at
least sixty (60) Days prior to such Scheduled Commercial
Operation Date, Seller may extend such Scheduled Commercial
Operation Date until June 1, 1997. If the Extended Scheduled
Commercial Operation Date designated by Seller pursuant to
the first sentence of this Section 4.4 is prior to June 1,
1997, then, upon written notice to PEPCO given at least
sixty (60) Days prior to such Extended Scheduled Commercial
Operation Date, Seller may further extend such Extended
Scheduled Commercial Operation Date until June 1, 1997.
(f) Subsection 4.6(a) is amended by deleting the language
beginning with "(ii)" on the seventh line and continuing through
the word "Section" on the eighth line, and by changing "(iii)"
to "(ii)" on the ninth line.
2.4 Amendments to Article VI. Article VI of the Power
Purchase Agreement is amended as follows:
(a) Subsection 6.1(a) is amended as follows:
(1) The date "June 1, 1996" on the fifth line is changed to
the date "January 1, 1997"; and
(2) In the definition of the term "CR", the date "June 1,
1996" is deleted on the eleventh and twenty-second lines and
replaced in both places by the phrase "the Actual Commercial
Operation Date".
(b) Subsection 6.1(b) is amended by inserting the following
phrase between the phrase "Subsection 6.1(a)" and the word
"using" in both places where they appear on the ninth and
fifteenth lines:
(as adjusted in accordance with Subsections 6.1(f) and 6.1(g))
(c) Subsection 6.1(c)(iii) is amended by deleting the date "June
1, 1996" on the twelfth line and replacing it with the phrase
"the Actual Commercial Operation Date".
(d) Subsection 6.1(d) is amended by inserting the phrase "or
occupancy permit" on the sixth line between the words "easement"
and "necessary".
(e) Subsection 6.1(f) is redesignated as Subsection 6.1(h) and
new Subsections 6.1(f) and 6.1(g) are added as follows:
(f) The Monthly Capacity Payments calculated pursuant to
Subsection 6.1(a) shall be adjusted to reflect the annual
capacity payment adjustments set forth in Appendix Q.
The annual capacity payment adjustments set forth in Column
2 of Appendix Q shall be made by Contract Year unless the
first Contract Year begins before January 1, 1997, in which
case such annual capacity payment adjustments shall be made
by Calendar Year (with Calendar Year 1 to begin at 12:00
midnight on December 3l, 1996 and end at 12:00 midnight on
December 31, 1997). The annual capacity payment adjustments
shall be spread evenly over the Monthly Capacity Payments in
each such Contract Year or Calendar Year, as applicable.
The annual capacity payment adjustments for each of Contract
Years 11 through 25 set forth in Column 4 of Appendix Q
shall be spread evenly over the Monthly Capacity Payments in
each such Contract Year.
(g) The Monthly Capacity Payments calculated pursuant to
Subsection 6.1(a) shall be reduced to reflect any Potential Costs
calculated in accordance with the following formula:
PC = CPWIRR Increase - TC
Where:
PC = Potential Costs
CPWIRR
Increase = The predicted increase in PEPCO`s Cumulative
Present Worth of Incremental Revenue Requirements. If the actual
peak load experienced by PEPCO during or before 1997 equals or
exceeds 5,697 MW, the CPWIRR Increase shall be determined from
Column 1 of Appendix S . If the actual peak load experienced by
PEPCO during (but not before) 1998 equals or exceeds 5,697 MW,
the CPWIRR Increase shall be determined from Column 2 of Appendix
S. If the actual peak load experienced by PEPCO during and before
1998 does not equal or exceed 5,697 MW, the CPWIRR Increase shall
be determined from Column 3 of Appendix S. For purposes of the
determination of the CPWIRR Increase, the actual peak load
experienced by PEPCO in any year shall be PEPCO's 60-minute
system peak demand for such year, weather corrected and adjusted
to account for unused available energy use management and shall
be adjusted to account for emergency procedures (voltage
reductions and rolling black-outs) occurring during the actual
peak, for the purpose of approximating what the highest actual
peak load would have been in the absence of the emergency
procedures. PEPCO shall undertake to promptly disclose to Seller
all reports made to any state or federal regulatory commission,
reliability council or power pool concerning any such emergency
procedures instituted during the actual peak, provided, however,
that PEPCO shall not incur any liability to Seller, or be deemed
to be in breach of this Agreement, if PEPCO should inadvertently
fail to make any such disclosure. Such peak load and adjustments
shall be as prepared by PEPCO for PJM Pool accounting and other
reporting purposes. Actual peak load shall also be adjusted
upward for reductions of capacity under the contract entered into
by PEPCO and Ohio Edison Company, dated March 18, 1987, as
supplemented or amended from time to time.
TC = An estimate of the costs that would be payable by
PEPCO pursuant to Subsection 15.3(b) assuming that PEPCO provided
notice of termination under Subsection 15.3(a) on the Closing
Date, which costs shall equal the sum of (x) the cost estimates
set forth in Column 1 of Appendix R for the appropriate Closing
Date and (y) a fixed fee of either three million dollars
($3,000,000.00) if the Closing Date occurs prior to May 1, 1995,
or five million dollars ($5,000,000.00) if the Closing Date occurs
on or after May 1, 1995.
PEPCO shall calculate the Potential Costs by February 1, 1999. If
this Calculation results in a positive number for Potential
Costs, then, within ten (10) Days after PEPCO notifies Seller of
the results of the calculation, the Parties shall enter into
negotiations in an effort to agree upon adjustments to the
Monthly Capacity Payments or other measures that will reduce the
Potential Costs to zero (on a net present value basis expressed
in 1994 dollars using an annual discount rate of 9.84%). If the
Parties are unable to agree upon such adjustments or measures on
or before April 1, 1999, then the Monthly Capacity Payments for
Contract Years 11 through 25 shall be reduced by the product of
the Potential Costs multiplied by 0.0335, provided that:
(i) for each of Contract Years 11 through 15, the
Monthly Capacity Payments shall be reduced by no more then
the amount shown in Column 4 of Appendix Q for such Contract
Year divided by twelve (12) (for each such Contract Year,
the amount by which the product of the Potential Costs
multiplied by O.402 exceeds the amount shown in Column 4 of
Appendix Q for such Contract Year shall be referred to as
the "Unrecovered Amount"); and
(ii) for each of Contract Years 16 through 25, the
Monthly Capacity Payments shall be reduced by an additional
amount equal to the product of the sum of the present values
(in 1994 dollars using a 9.84% discount rate) of the
Unrecovered Amounts multiplied by 0.0664.
(f) Subsection 6.2(b)(v) is amended as follows:
(1) The first paragraph is amended to read in its entirety
as follows:
The firm gas rate to be applied for Generation of the First
Dispatch Segment (FGRA) during the Must Run Hours will be
the weighted average of two (2) components. The first
component will represent natural gas supplied from natural
gas reserves, or pursuant to a firm gas supply contract
equivalent to natural gas reserves, purchased by Seller and
will have a guaranteed price throughout the Term. The
second component will represent natural gas market purchases
by Seller and be tied to natural gas market prices. The
percentage of the Fuel to be made available from Seller's
natural gas reserves (or equivalent firm gas supply
contract) for the Term which is required to operate the
Facility for the First Dispatch Segment during the Must Run
Hours is given in Appendix M as %GRCA. The firm gas rate to
be applied for generation of the First Dispatch Segment
(FGRA) during Hours other than the Must Run Hours and for
the generation of the Second Dispatch Segment (FGRB) will
represent natural gas market purchases by Seller and be tied
to natural gas market prices. The FGRA and FGRB will be
calculated in accordance with the following formulas:
FGRA During Must Run Hours =
(FGRR * %GRCA/100%) + [FGMR *
(1-%GRCA/100%)
FGRA During Hours Other Than Must Run Hours = FGMR
FGRB = FGMR
Where: FGRA = Firm Gas Rate for the First Dispatch Segment.
FGRB = Firm Gas Rate for the Second Dispatch
Segment.
FGRR = Firm Gas Reserve Rate.
FGMR = Firm Gas Market Rate.
%GRCA = Percent Gas Reserve Commitment to fuel the
First Dispatch Segment, as set forth in column 2 of
Appendix M for each Contract Year.
(2) The second paragraph is amended by changing the phrase
"column 4" on the second line to the phrase "column 3", and by
deleting the date "June 1, 1996" on the eighth and tenth lines
and replacing it in both places with the phrase "the Actual
Commercial Operation Date".
(3) The formula for the "FGMR" at the end of the third
paragraph is amended to read as follows in its entirety:
FGMR = FGMRi * [(.77*CIf) + (.23*TIf)] * P
(4) A new definition for the new term "P" is added following
the definition of the term "TIf" at the end of the third
paragraph as follows:
P = 0.9 for each of the first four (4) Contract Years and
1.0 for each Contract Year after the fourth Contract Year.
(5) The last paragraph is amended by changing the phrase
"tenth anniversary" on the fourth line to the phrase "sixth
anniversary".
2.5 Amendments to Article VII. Article VII of the Power
Purchase Agreement is amended as follows:
(a) Subsection 7.1 (a) is amended by changing the phrase "forty-
eight (48) Months" on the second line to the phrase "fifty (50)
Months".
(b) Subsection 7.1(c)(i) is amended by adding the phrase "or
occupancy permits" at the end of the second line between the word
"easements" and the semicolon.
(c) The first sentence of Subsection 7.3(a) is amended by
deleting the language beginning with the word "the" on the second
line and continuing through the phrase "Operation Date)" on the
seventh line, and replacing it with the phrase "June 1, 1996".
(d) Subsection 7.3(a)(v) is amended as follows:
(1) On the thirtieth line, change the word "or" to a comma,
and insert the phrase "or occupancy permits" between the words
"way" and "necessary"; and
(2) On the thirty-third line, change the word "or" to a
comma, and insert the phrase "or occupancy permit" between the
words "way" and "satisfactory".
2.6 Amendments to Article VIII. Article VIII of the Power
Purchase Agreement is amended as follows:
(a) The first sentence of Subsection 8.3 (a) is deleted in its
entirety and replaced by the following two sentences:
PEPCO shall dispatch the portion of the Facility's Dependable
Capacity designated as the Limited Dispatch Portion for a total
of sixty (60) Hours Monday through Friday for each Week it is
available. Initially, such dispatch shall be scheduled for the
Hours from 8:00 A.M. to 8:00 P.M. on each such Day, but this
schedule may be adjusted by the Operating Committee.
(b ) Subsection 8.7(b)(i) is amended as follows:
(1) The Phrase "first anniversary" in the first sentence is
changed to the phrase "later of December 31, 1998 or the second
anniversary";
(2) The phrase "second anniversary" in the second sentence
is changed to the phrase "later of December 31, 1999 or the third
anniversary";
(3) The phrase "third anniversary" on the seventh line is
changed to the phrase "later of December 3l, 2000 or the fourth
anniversary"; and
(4) The phrase "such third anniversary" on the tenth line is
changed to the phrase "the later of December 3l, 2000 or such
fourth anniversary".
(c) Subsection 8.7(b)(ii)(B) is amended by changing the phrase
"third anniversary" on the seventh and eighth lines to the phrase
"later of December 31, 2000 or the fourth anniversary".
2.7 Amendments to Article IX. Article IX of the Power
Purchase Agreement is amended as follows:
(a) Section 9.6 is amended as follows:
(1) Change the word "and" on the twenty-third line to a
comma;
(2) insert the phrase "or occupancy permits" between the
words "way" and "required" on the twenty-fourth line; and
(3) on the twenty-eighth line, change the word "or" to a
comma, and insert the phrase "or occupancy permit" between the
words "way" and "satisfactory".
(b) A new Section 9.7 is added as follows:
9.7 Third Party Assertion of Interest in Portion of
Transmission Facilities Site.
(a) Seller shall promptly provide PEPCO with a copy of any
revision that Seller makes to its title search for the
Transmission Facilities Site at any time up to and including the
Closing Date. Seller shall provide PEPCO with copies of Seller's
agreement(s) with Conrail for easements, occupancy permits or
other rights for the Transmission Facilities Site, and copies of
all documents related to such agreement (s). Seller shall be
responsible for any and all costs of obtaining and maintaining
rights to locate the Transmission Facilities upon the Conrail
right of-way, including, but not limited to, an initial fee,
annual rentals, relocation costs, and all other costs payable to
Conrail under the terms of Seller's agreement with Conrail,
during the Term of this Agreement plus fifteen (15) Years.
(b) If at any time during the Term of this Agreement a person
asserts an Interest in one or more parcels of land covered by an
occupancy permit issued by Conrail to Seller for any portion of
the Transmission Facilities Site and the assertion of such
interest may prevent, interrupt or delay the construction and/or
operation of Transmission Facilities on such parcel, then the
Parties shall undertake the following actions. Seller shall
notify PEPCO of such assertion of an interest, provided that if
the interest is asserted against PEPCO following the transfer of
the Transmission Facilities Site to PEPCO, PEPCO shall notify
Seller of such assertion. Seller shall use its best efforts to
resolve the matter expeditiously to eliminate the impediment to
construction and/or operation of the Transmission Facilities. If
Seller is unable to eliminate the impediment to construction
and/or operation of the Transmission Facilities within one
hundred and twenty (120) Days after the date of the notice
provided for in the second sentence of this Subsection 9.7(b) or
if a court of competent jurisdiction issues an order suspending
construction and/or operation of the Transmission Facilities
(which order Seller is unable to have modified or withdrawn to
eliminate such suspension within thirty (30) Days after the date
of such order) in a proceeding involving an assertion of an
interest in one or more parcels of land covered by an occupancy
permit issued by Conrail to Seller for any portion of the
Transmission Facilities Site, then, upon request by Seller, PEPCO
shall use good faith efforts to exercise any eminent domain
rights it may have in order to obtain title to the parcel or to
obtain an easement or other right to use the parcel for
construction and operation of the Transmission Facilities. (After
PEPCO's obligation to exercise its eminent domain rights arises
under the immediately preceding sentence, Seller shall continue
to seek to eliminate the impediment to construction and/or
operation of the Transmission Facilities (including, if
applicable, to seek modification of any order issued by a court
of competent jurisdiction suspending construction and/or
operation of the Transmission Facilities to eliminate such
suspension)). PEPCO's obligation to so exercise its eminent
domain rights is contingent upon the prior transfer by Seller to
PEPCO of Seller's rights under the certificate of public
convenience and necessity issued by the Maryland Commission to
Seller authorizing construction and operation of the Transmission
Facilities ("CPCN"). Such transfer is to be made on or prior to
the Actual Commercial Operation Date, subject to approval by the
Maryland Commission on terms satisfactory to PEPCO in its sole
discretion. If however, a third party asserts an interest in a
portion of the Transmission Facilities Site prior to such
transfer, then PEPCO and Seller shall seek authorization from the
Maryland Commission on terms satisfactory to PEPCO in its sole
discretion to transfer Seller's rights under the CPCN to PEPCO on
an expedited basis.
(c) Seller shall bear all costs incurred by PEPCO in exercising
its eminent domain rights for any portion of the Transmission
Facilities Site. Such costs shall be paid by Seller to PEPCO
pursuant to Section 6.6. If Seller fails to pay any such costs
within the thirty (30) Day period specified in Section 6.6, then,
in addition to its other rights under this Agreement in the event
of such failure, PEPCO's obligation to exercise any eminent
domain rights it may have shall cease and PEPCO may terminate any
eminent domain proceedings which have been instituted.
(d) PEPCO's good faith efforts to exercise its eminent domain
rights in order to obtain use of any portion of the Transmission
Facilities Site for construction and operation of the
Transmission Facilities shall not relieve Seller of any of its
obligations under this Agreement with respect to the Transmission
Facilities Site or the Transmission Facilities (including, but
not limited to Seller's indemnification obligation under
Subsection 16.1(c)). Seller remains responsible for fulfilling
all such obligations by the deadlines specified in this
Agreement. PEPCO shall have no liability to Seller arising out of
PEPCO's good faith efforts to exercise its eminent domain rights
as set forth in Subsection 9.7(b) hereof, including but not
limited to, any liability for any delays in the Actual Commercial
Operation Date. Furthermore, PEPCO shall not be precluded from
exercising any right that it has under this Agreement (including,
but not limited to, rights to terminate the Agreement) as a
result of PEPCO' s good faith efforts to exercise its eminent
domain rights as set forth in Subsection 9.7(b) hereof.
2.8 Amendments to Article XI. Article XI of the Power
Purchase Agreement is amended by inserting the phrase ", or
purchase sufficient natural gas pursuant to a firm gas supply
contract equivalent to natural gas reserves," between the words
"gas" and "to" on the eleventh line of Subsection 11.2(a).
2.9 Amendments to Article XIV. Article XIV of the Power
Purchase Agreement is amended as follows:
(a) the phrase "three hundred and sixty (360) Days" on the
thirteenth line of Subsection 14.1 is changed to the phrase
"three hundred and sixty-six (366) Days".
(b) The date "June 1, 1997" on the fourth line of Subsection
14.4(a) is changed to the date "June 1, 1998".
(c) The second sentence of Subsection 14.4(b) is amended to read
as follows in its entirety:
In any condition of Force Majeure excuses a Party's
performance for a time period of: (i) three hundred and sixty-six
(366) Days in the event of a Force Majeure occurring during the
period between the Closing Date and the Actual Commercial
Operation Date, or (ii) five hundred and forty (540) Days during
the period after the Actual Commercial Operation Date, and the
condition of Force Majeure continues after the conclusion of the
applicable time period, the Party not excused by such Force
Majeure may terminate this Agreement immediately by written
notice to the other Party, without further obligation, or extend
such period at its sole discretion.
2.10 Amendments to Article XV. Article XV of the Power
Purchase Agreement is amended as follows:
(a) Subsection 15.1(e) is amended by changing the date "December
1, 1994" on the second line to the date "October 1, 1995".
(b) The first sentence of Subsection 15.3(b) is amended by
changing the date "December 1, 1994" in both places where it
occurs in the first sentence to the date "May 1, 1995".
2.11 Amendments to Article XIX. Article XIX of the
Power Purchase Agreement is amended by making the following
changes to Section 19.10:
(a) Insert the phrase "persons providing corporate financing to
Panda Energy Corporation or PEPCO," between the comma and the
word "suppliers" at the beginning of the thirteenth line.
(b) Insert the phrase "to the extent required pursuant to
applicable federal securities laws or regulations of the United
States, and" between the word "Party". and the word "to" at the
beginning of the twenty-fifth line.
2.12 Amendments to Appendices. The Appendices to the Power
Purchase Agreement are amended as follows:
(a) Appendix B is amended as follows:
(1) Delete Tables 2, 6 and 8 in their entirety and replace
them with revised Tables 2, 6, and 8 respectively, as set forth
in Attachment E to this First Amendment.
(2) Add new Table 9 as also set forth in Attachment E to
this First Amendment.
(b) Appendix F is deleted in its entirety and replaced by a new
Appendix F as set forth in Attachment F to this First; Amendment.
(c) Appendix L is amended by changing the date "June 1, 1996" on
the second line of footnote 2 to the phrase "the Actual
Commercial Operation Date".
(d) Appendix M is deleted in its entirety and replaced by a new
Appendix M as set forth
(e) A new Appendix Q, as set forth in Attachment B to this First
Amendment, is added to the Power Purchase Agreement.
(f) A new Appendix R, as set for the Attachment C to this First
Amendment, is added to the Power Purchase Agreement.
(g) A new Appendix S, as set for in Attachment D to this First
Amendment, is added to the Power Purchase Agreement.
ARTICLE III
EFFECTIVE DATE OF AMENDMENTS
3.1 Effective Date of Amendments.
(a) The amendments to Subsections 4.2(a) and 4.2(b) of the Power
Purchase Agreement set forth in Sections 2.3(c) and 2.3(d) of
this First Amendment and the amendments to Subsections 15.1(e)
and 15.3(b) of the Power Purchase Agreement set forth in Section
2.10 of this First Amendment shall be effective as the date that
appears in the first paragraph of this First Amendment.
(b) All other amendments to the Power Purchase Agreement
set forth in Article II of this First Amendment, except for
those set forth in Sections 2.3(c), 2.3(d) and 2.10 of this
First Amendment, shall become effective when: (i) PEPCO has
received a final, nonappealable order from the Maryland
Commission finding that this First Amendment is consistent
with PEPCO's least cost planning and approving the First
Amendment, (ii) PEPCO has received a final, nonappealable
order from the District of Columbia Commission approving an
action plan which includes the Facility, in the context of
the District of Columbia Commission's consideration of
PEPCO's Integrated Least-Cost Resource Plan dated June 30,
1994, and (iii) each Party has notified the other Party
pursuant to Subsection 3.1(c) hereof that each such order
is satisfactory inform and substance to the notifying Party
in its sole discretion. The Parties shall seek all such
regulatory approvals expeditiously and use all reasonable
efforts to obtain the approvals specified above from the
Maryland Commission and the District of Columbia
Commission.
(c) Upon receipt by PEPCO or Seller of any order or
approval described in Subsection 3.1(b) above, such Party
shall promptly transmit to the other Party a copy of such
order or approval. Within thirty (30) Days after the date
of such transmittal, each Party shall give notice to the
other Party whether it deems the order to be satisfactory
in form and substance in its sole discretion.
ARTICLE IV
MISCELLANEOUS
4.1 Notices. Any notice or documents required or authorized
by this First Amendment to be given to a Party shall be given in
writing and shall be either: (a) personally delivered, (b)
mailed by registered or certified mail (return receipt
requested) postage prepaid, (c) sent by overnight delivery
service (with a receipt for delivery), or (d) sent by
telefacsimile with a signed acknowledgment of receipt by return
facsimile, to such Party at the following address:
For Seller: For PEPCO:
President Manager, Supply Side Resources
Panda Energy Corporation PEPCO
4100 Spring Valley 1900 Pennsylvania Avenue, N.W.
Suite 1001 Washington, D.C. 20068
Dallas, TX 75244 Telephone: (202 ) 872-3044
Telephone: (214) 980-7159 Telefacsimile: (202) 331-6185
Telefacsimile:(214) 980-6815
With a copy to:
Group Vice-President,
Energy and Market Policy and Development
PEPCO
1900 Pennsylvania Avenue, N.W.
Washington, D.C. 20068
Each Party's designation of such person and/or address may be
changed at any time by such Party upon written notice given
pursuant to the requirements of this section. A notice served by
mail shall be effective upon receipt.
4.2 CHOICE OF LAW. THIS FIRST AMENDMENT SHALL BE
INTERPRETED, CONSTRUED AND GOVERNED BY THE LAWS OF THE STATE
OF MARYLAND AND, TO THE EXTENT APPLICABLE, FEDERAL LAW,
WITHOUT REGARD TO ANY APPLICABLE CONFLICT OF LAWS PROVISIONS.
THE PARTIES HEREBY SUBMIT TO THE JURISDICTION OF COURTS
LOCATED IN, AND VENUE IS HEREBY STIPULATED TO BE IN,
BALTIMORE, MARYLAND.
4.3 Further Assurances. If either Party determines in its
reasonable discretion that any further instruments, assurances
or other things are necessary or desirable to carry out the
terms of this First Amendment, the other Party shall execute
and deliver all such instruments and assurances and do all
things reasonably necessary or desirable to carry out the terms
of this First Amendment.
4.4 Waiver. No waiver by either Party of the performance of
any obligation under this First Amendment or with respect to any
default or any other matter arising in connection with this
First Amendment shall be deemed a waiver with respect to any
subsequent performance, default or matter.
4.5 Modification or Amendment. No modification, amendment
or waiver of any provision of this First Amendment shall be
valid unless it is in writing and signed by both Parties.
4.6 Counterparts. This First Amendment may be executed in
several counterparts, and all such counterparts shall constitute
one agreement binding on both Parties hereto and shall have the
same force and effect as an original instrument, notwithstanding
that both Parties may not be signatories to the same original or
the same counterpart.
4.7 Confidential Information. The Parties agree that this First
Amendment contains confidential information and, therefore,
shall not be disclosed to any third party without the consent of
both Parties. Further, any information provided by a Party to
the other Party pursuant to this First Amendment and labeled
"CONFIDENTIAL" shall be used by the receiving Party solely in
connection with the purposes of this First Amendment and the
Power Purchase Agreement as amended by this First Amendment and
shall not be disclosed by the receiving Party to any third
party, except with the providing Party's consent, and upon
request of the providing Party shall be returned thereto.
Notwithstanding the above, the Parties acknowledge and agree
that this First Amendment and any such information may be
disclosed to the Financing Parties, persons providing
development financing to Seller or providing corporate financing
to Panda Energy Corporation or PEPCO, consultants, suppliers and
potential suppliers of Fuel and major equipment to the Facility
and other third parries as may be necessary for PEPCO and Seller
to perform their obligations under the Power Purchase Agreement
as amended by this First Amendment (including, but not limited
to, consultants retained by PEPCO to reviews Seller's Fuel
Supply Plan, Fuel Supply Contract(s), or other contracts or
arrangements with respect to fuel for the Facility). To the
extent that such disclosures are necessary, the Parties also
agree that they shall endeavor in disclosing the First Amendment
and any such information to seek to preserve the confidentiality
of such disclosures. This provision shall not prevent either
Party from providing this-First Amendment or any confidential
information received from the other Party to the extent required
pursuant to applicable federal securities laws or regulations of
the United States, and to any court or governmental body as may
be required by such court or body, provided that, if feasible,
the disclosing Party shall have given prior notice to the other
Party of such required disclosure and, if so requested by such
other Party, shall have used all reasonable efforts to oppose
the requested disclosure, as appropriate under the
circumstances, or to otherwise make such disclosure pursuant to
a protective order or other similar arrangement for
confidentiality . Without limiting the scope of the foregoing,
the Parties explicitly agree to use all reasonable efforts to
maintain the confidentiality of this First Amendment in any
filings with, or submissions to, any governmental or regulatory
authorities.
4.8 Third Parties. This First Amendment is intended solely
for the benefit of the Parties, and nothing in this First
Amendment shall be construed to create any duty to, or standard
of care with reference to, or any liability to, any person not
a Party to this First Amendment.
4.9 Headings. The headings contained in this First Amendment
are solely for the convenience of the Parties and should not
be used or relied upon in any manner in the construction or
interpretation of this First Amendment.
4.10 Press Releases. Prior to the Actual Commercial
Operation Date, neither Party shall issue any press
release referring to this First Amendment without
coordination with, and the prior approval of the other
Party.
4.11 Continuing Effectiveness of Power Purchase
Agreement. The Power Purchase Agreement, as amended by
Article II of this First Amendment (which amendments
shall become effective at the times specified in Article
III of this First Amendment, remains in full force and
effect and is hereby ratified by the Parties.
IN WITNESS WHEREOF , the Parties have caused
this First Amendment to be executed by their respective
duly authorized officers as of the date first above
written.
POTOMAC ELECTRIC POWER COMPANY
ATTEST: By:
Title: Group Vice President
Energy & Market Policy &
Development
PANDA-BRANDYWINE, L.P.
ATTEST:
By: Robert W. Carter
Title: President
APPENDIX F
INTERCONNECTION AND COMMUNICATION SPECIFICTION
A. Dispatchable Portion
Commencing on the Actual Commercial Operation Date,
PEPCO shall have dispatch control over the Dispatchable
Portion of the Facility's Dependable Capacity in accordance
with the terms of the Agreement. Mutually acceptable
dispatch procedures shall be established by the Operating
Committee pursuant to Subsection 8.3(b) of the Agreement and
adopted prior to the Actual Commercial Operation Date, and
shall include, but shall not be limited to, the following
elements:
1. Subject to Prudent Utility Practices, Section 8.3 of
the Agreement and the provisions of Section A.3 hereof,
PEPCO shall have the right to dispatch the Dispatchable
Portion of the Facility in order to increase or decrease the
Net Electrical Output to the PEPCO System. The Dispatchable
Portion of the Facility shall have an incremental cost curve
with zero or positive slope. The Dispatchable Portion of the
Facility cannot have other variable costs that negate the
effect of the positive or zero incremental cost curve.
2. Seller shall purchase and own such
telecommunications equipment for the Facility as may be
reasonably required from time to time by PEPCO consistent
with Prudent Utility Practices in order to allow PEPCO to
maximize economic and reliable dispatch of the Facility in
coordination with the PEPCO System. The equipment that is
initially installed shall conform to the provisions set
forth in the operational requirements of section A.5 hereof.
3. Subject to Prudent Utility Practices and to the
terms and provisions of the Agreement, PEPCO shall have the
sole discretion to determine whether to dispatch the
Dispatchable Portion of the Facility. If PEPCO elects to
dispatch the Dispatchable Portion of the Facility, PEPCO
will do so at certain specified incremental steps as agreed
upon by the Parties, as such increments and rate of change
of output (ramping rate) may be modified by the Operating
Committee. PEPCO will not guarantee any minimum hourly load
or minimum annual generation in dispatching the Dispatchable
Portion of the Dependable Capacity of the Facility. However,
to the extent practicable in making decisions with respect
to dispatch of the Dispatchable Portion of the Facility,
PEPCO shall give reasonable consideration to the obligations
of Seller under the Steam Supply Contract, in accordance
with procedures to be established by the Operating Committee
which procedures shall include reasonable prior notice of
dispatch of the Dispatchable Portion of the Facility to and
from the various load levels when conditions permit such
notice.
4. PEPCO shall be entitled to the reduction of the Net
Electrical Output of the Facility as specified in Section
5 of the Agreement during Minimum Emergency Generation
Conditions for up to a maximum of two hundred (200)
cumulative hours of operation of the Limited Dispatch
portion during any Year. PEPCO may interrupt or suspend
delivery of electricity from the Facility during an
Emergency Condition or otherwise in accordance with Section
5 of the Agreement. Such occurrences shall not be included
for purposes of determining compliance with the two hundred
(200) cumulative hours limitation on reductions set forth in
the first sentence of this Section A.4.
5. The following equipment, specified by PEPCO, will
be required at the Facility Site.
(a) Remote Terminal Unit (RTU) with Redundant
Automatic Generation Control. (AGC). A single RTU
combining the functions of SCADA and Generation/
Voltage control is required. A "desired generaltion"
signal from the PEPCO Control Center will cause the
AGC at the Facility to transmit an analog or digital
signal corresponding from zero (0) to full unit load,
to the Facility's coordinated boiler/trubine control
system or product a visual display for use by the
Facility operator. The Facility will follow this
"desired generation" requirement within the limits
allowed by the Facility's coordinated contorl system.
VAR loading (voltage set points) will also be signalled
from the PEPCO Control Center to control the voltage
of the Facility's excitation system. This interface
as well as the necessary status and permissive signals
must be included in the AGC units for implementation of
both automatic WATT and VAR control. (See Attachment
"A" for block diagram of RTU/AGC equipment.)
It will be the Facility operator's responsibility to assure that the
generator is operated within its voltage limitations, and the limits of its
capability curve, at all times.
The RTU/AGC shall have a protocol compatible for communications with
PEPCO's Master Station.
(b) Telecommunications Requirements. The RTU/AGC unit will
incorporate the capability for telecommunication of three
(3) phase watts, vars, volts, and amperes measured at the
generator terminals, and three (3) phase station service
watts, vars, volts and amperes measured at the normal and
startup transformer secondaries. Other parameters, such as
those listed below, will be telemetered via the RTU/AGC from
the turbine generator equipment with the choice of parameters
to be made durinq preparation of the Interconnection Plan as
appropriate for the actual Facility design:
(1) Actual gross MW.
(2) Actual station service.
(3) Actual gross MVAR.
(4) Desired generation (set point return).
(5) Unit response rate (MW)/minute).
(6) Maximum limit (MW).
(7) Minimum limit (MW).
(8) Low Boiler limit (MW).
(9) High Boiler limit (MW).
(10) Unit desired volts (set point return).
(11) Unit actual volts.
(12) Response rate (volts).
(13) Maximum operating volts.
(14) Minimum operating volts.
(c) Status Monitoring. The RTU/AGC units will also require
input for monitoring of the status of other conditions
such as those listed below, for AGC control functions
with the choice of conditions to be made during preparation
of the Interconnection Plan as appropriate for the
actual Facility design.
(1) Governor mechanical limit (on-off).
(2) Automatic control (on-off) (MW).
(3) Redundant AGC unit in control.
(4) Generator circuit breaker position (open-closed).
(5) Normal and start-up station service circuit breaker
position (open-closed).
(6) Maximum/Minimum MW limit violated.
(7) Automatic control (on-off) (volts)
(8) Plant frequency alarm.
(9) Intertie circuit breaker position (open-closed).
(10) Man/Machine Interface com. line failure alarm.
(d) Control Points. The RTU/AGC shall be equipped, as a minimum,
with control points for the intertie breakers. Other points
may be requird as determined by the seller.
(e) Billing Metering. The RTU/AGC shall be equipped for
telecomunicating 3 phase KWH and KVH as supplied by a
meter encoder.
The design of the control system which is selected by the Seller
for the Facility may influence the manner in which the above
functions are accomplished, but in any case, the Facility
control system must furnish analog and digital inputs to the
TRU/AGC unit for the parameters and conditions selected pursuant
to this Section (See Attachment "A"). Voltage measurement shall be
on a one hundred and twenty (120) volt basis and 90-130 volt range.
All transducers shall have a minimum accuracy of plus/minus of 0.5%.
6. Incremental voltage control of the generator must be
provided. PEPCO requires that the generator have reactive
characteristics consistent with manufacturers' capacities, and
as similar to PEPCO units as follows:
(a) Fifty percent (50%) of nameplate MVA at generator
minimum load (lagging NVAR).
(b) Thirty percent (30%) of nameplate MVA at generator full
load rating (lagging MVAR).
(c) Fifty percent (50%) of nameplate MVA at
generator minimum load (leading MVAR);
(d) Fifteen percent (15%) of nameplate MVA at
qenerator full load rating (leading NVAR).
7. Loan Profile Recorder. Pulse outputs from kilowatt hour and
kilovar hour meters (In/Out) are required to be sent to a load profile recorder.
8. Communication Channels. Communications channels are required
to be installed and maintained between PEPCO and the Facility. The following
list comprises the minimum presently conceived requirements for
communications links between the Facility and PEPCO. Additional
communications requirements may be required in accordance with
Section 9 of this Appendix F.
(a) Two (2) separate alternate routed full duplex
channels for AGC 1 and 2. Telecommunications of
meter outputs, circuit breaker status, and some alarm
functions, (Facility to PEPCO) will be provided in
the RtU/AGC remote unit.
(b) A dedicated voice channel to the PEPCO
Control Center from the Facility via fiber
optic/microwave/or leased line facilities. Battery back-up
must be provided for this communications facility so that
it will function under utility blackout conditions.
(c) An alternate routed dial-up phone system as back-
up for the communications equipment identified in
subsection (b) above.
(d) Four (4) dedicated, full duplex channels per
interconnection feeder are required for protective relaying
and transfer tripping, two (2) channels for each alternate route.
(e) One (1) full duplex channel for billing meter to PEPCO.
(f) One (1) full duplex channel for analog metering.
(g) One half duplex channel for load profile
recording equipment.
Two independent routes for communication must be geographically
located so that a single accident cannot render both communications
facilities inoperative. As an option to Seller, one of these communication
facilities can be provided through optic fibers integrated into the
construction of the transmission line static wire (spiraled around the
static wire is an acceptable control), separate conductors suspended on the
transmission structure or optic fibers buried underground beneath the
transmission right-of-way. Other methods may be used subject to the approval
of PEPCO.
9. Design details of the Facility which are presently
not available to PEPCO may result in modifications to the
interconnection and communication facilities. These
modifications will be documented by PEPCO as required and
implemented by the Parties.
B. Other Interconnection Requirements
The control, telecommunication and protection equipment included in the
Interconnection Facilities must be incorporated into the design of the Facility.
The equipment requires a clean and controlled environment. The equipment shall
be capable of withstanding, with no sacrifice of performance, temperatures
from -15 degrees c. with 90% percent noncondensing humidity.
The attached layout sketch (Attahment B) provides some basic
information on approximate space allocation requirements for some of the PEPCO
specified equipment racks for analog matering, tone equipment and transfer
trip, the protective relaying panels, and the 125 VDC batteries and charges.
PEPCO acknowledges that the Facility has limited floor space and will
cooperate with Sellers during Interconnection Facilities design efforts to
minimize space requirements. Associated equipment such as distribution panels
are not shown. The load profile recorders, which are usually wall mounted,
and the telephone company terminal equipment are also not shown.
The above facility as a whole require 125VDC battery and charger
systems. Two 125VDC batteries and chargers are required. Each set of
batteries shall have a minimum amp-hour capacity to supply their load under
emergency conditions for a period of eight hours. The two 125 VDC systems must
physically and electrically isolated alal the way to the systems they are
supplying. Some of the above facilities require inputs to be furnished and
installed by the Seller. Inputs to the RTU/AGC unit may be wired directly to
terminal blocks inside the RTU/AGC cabinet.
PEPCO will work closely with the Seller on the design layout and provide
information on PEPCO's design practices. PEPCO will in accordance with the
Agreement, review Facility purchase specifications and drawings to assure
compatibility with interconnection equipment, and will also review Seller's
design studies/calculations for systems such as short circuit studies and
grounding to assure safety and protection and proper operation of
interconnection equipment. These reviews are not meant to relieve the
Seller of responsibility or liability for the design of the Facility, but are
meant to assure proper coordination between Facility and Interconnection
Facility designs.
C. Limited Dispatch Portion
Commencing upon the Actual Commercial Operation Date,
the Limited Dispatch Portion of the Dependable Capacity from
the Facility will be provided to PEPCO in accordance with the
terms of the Agreement. The equipment provided by Seller
pursuant to Section A.5 of this Appendix F will suffice for
the Limited Dispatch Portion as well. Mutually acceptable
schedule and control procedures shall be established by the
Operating Committee and adopted prior to the Actual
Commercial Operation Date, and shall include, but shall not
be limited to, the followinq elements:
1. Subject to Prudent Utility Practices, Section 8.3 of
the Agreement and the provisions of Section A.4 hereof, PEPCO
shall dispatch the portion of the Facility's Dependable Capacity
designeated as the Limited Dispatch Portion for a total of sixty (60)
Hours Monday through Friday for each Week it is available. Initially,
such dispatch shall be scheduled for the Hours from 8:00 a.m. to 8:00 p.m.
on each such Day, but the schedule may be adjusted by the Operating
Committee. At all other times when the Facility is
required at less than the Facility's minimum dispatch, the Limited
Dispatch Portion may be cycled off by PEPCO's dispatchers.
<TABLE>
<CAPTION>
ATTACHMENT A
APPENDIX M
NATURAL GAS RESERVE COMMITMENT AND PRICE
GAS RESERVE
COMMITMENT FOR UNADJUSTED
1ST CT REQUIREMENTS FIRM GAS
FIRST RESERVE
CONTRACT DISPATCH RATE
YEAR (1) SEGMENT $/MBtu
- -------- (%GRCA) (FGRR)
COLUMN 1 COLUMN 2 COLUMN 3
<S> <C> <C>
1 100% 2.58
2 100% 2.68
3 100% 2.79
4 100% 2.90
5 100% 3.02
6 100% 3.14
7 100% 3.26
8 100% 3.33
9 100% 3.40
10 100% 3.46
11 100% 3.53
12 100% 3.60
13 100% 3.68
14 100% 3.75
15 100% 3.82
16 & thereafter 0% N/A
</TABLE>
NOTE: (1) Contract Year shall be defined as set forth in Section 1.19 of
the agreement.
<TABLE>
<CAPTION>
ATTACHMENT B
APPENDIX Q
ANNUAL CAPACITY PAYMENT ADJUSTMENTS
LATER OF
CALENDAR
YEARS (1) ANNUAL ANNUAL
OR CAPACITY CAPACITY
CONTRACT PAYMENT CONTRACT PAYMENT
YEARS ADJUSTMENTS YEAR ADJUSTMENTS
- -------- ------------- ---------- -------------
Column 1 Column 2 Column 3 Column 4
<C> <C> <C> <C>
1 ($15,000,000) 1 $ 0
2 ($16,000,000) 2 $ 0
3 $0 3 $ 0
4 ($1,000,000) 4 $ 0
5 $2,000,000) 5 $ 0
6 $0 6 $ 0
7 $0 7 $ 0
8 $0 8 $ 0
9 $0 9 $ 0
10 $0 10 $ 0
11 $0 11 $ 1,650,000
12 $0 12 $ 2,850,000
13 $0 13 $ 4,050,000
14 $0 14 $ 5,250,000
15 $0 15 $ 6,450,000
16 $0 16 $ 7,650,000
17 $0 17 $ 8,850,000
18 $0 18 $10,050,000
19 $0 19 $11,250,000
20 $0 20 $12,450,000
21 $0 21 $13,650,000
22 $0 22 $14,850,000
23 $0 23 $16,050,000
24 $0 24 $17,250,000
25 $0 25 $18,450,000
</TABLE>
NOTES: (1) With Calendar Year 1 beginning at 12:00 midnight on 12/31/96 and
ending at 12:00 midnight on 12/31/97.
<TABLE>
<CAPTION>
ATTACHMENT C
APPENDIX R
ESTIMATE TERMINATION COSTS (1)
CLOSING DATE TERMINATION
------------ COSTS
MONTH YEAR ESTIMATE
----- ---- -----------
Column 1
<S> <C> <C>
9 1994 $14,700,000
10 1994 $15,700,000
11 1994 $16,700,000
12 1994 $17,300,000
1 1995 $17,700,000
2 1995 $18,200,000
3 1995 $18,600,000
4 1995 $19,000,000
5 1995 $19,300,000
6 1995 $19,600,000
7 1995 $19,900,000
8 1995 $20,200,000
9 1995 $20,500,000
10 1995 $20,800,000
</TABLE>
NOTE: (1) The sole purpose of this Appendix is to determine the TC component
of the formula for determining the Potental Cost under Subsection
6.1(g).
<TABLE>
<CAPTION>
ATTACHMENT D
APPENDIX S
CPWIRR INCREASE
Actual
Commercial
Operation CPWIRR Increase for
Date Actual Peak Load of 5697 MW Occurring:
- ----------- ----------------------------------------------
Month Year In or before In 1998 In 1999 or
1997 Thereafter
- ----- ---- ------------ ------------- ------------
Column 1 Column 2 Column 3
<C> <C> <C> <C> <C>
6 1996 $ 6,000,000 $29,000,000 $39,000,000
7 1996 $ 7,857,143 $30,857,143 $40,857,143
8 1996 $ 9,714,286 $32,714,286 $42,714,286
9 1996 $11,571,429 $34,571,429 $44,571,429
10 1996 $13,428,571 $36,428,571 $46,428,571
11 1996 $15,285,714 $38,285,714 $48,285,714
12 1996 $17,142,857 $40,142,857 $50,142,857
1 1997 $19,000,000 $42,000,000 $52,000,000
2 1997 $17,713,061 $40,713,061 $50,713,061
3 1997 $16,426,122 $39,426,122 $49,426,122
4 1997 $15,139,183 $38,139,183 $48,139,183
5 1997 $13,852,244 $36,852,244 $46,852,244
6 1997 $12,565,305 $35,565,305 $45,565,305
</TABLE>
PARENT GUARANTY
This GUARANTY, dated as of March ____, 1995, made by RAYTHEON
COMPANY, a Delaware corporation, ("Guarantor") in favor of
PANDA-BRANDYWINE, L. P., a Delaware Limited partnership
("Owner").
RECITALS
WHEREAS, Owner has entered into an Amended and Restated
Turnkey Cogeneration Facility Agreement dated as of
February _____, 1995 with Raytheon Engineers &
Constructors, Inc., a Delaware corporation ("Contractor"),
for the performance by Contractor of certain work and
services in connection with the establishment of a
cogeneration facility in Prince George's County, Maryland,
(the ''Agreement"; capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the
Agreement );
WHEREAS, Contractor is an indirect subsidiary
of Guarantor;
WHEREAS, Contractor has agreed to request Guarantor
to guarantee its performance under the Agreement in lieu of
Contractor providing a performance bond to assure its
performance;
WHEREAS, Owner has agreed to accept this Guaranty
from Guarantor in lieu of such performance bond; and
WHEREAS, Guarantor has agreed to guarantee
the obligations of Contractor as described in this
Guaranty.
NOW, THEREFORE, in consideration of the mutual
covenants arid premises contained herein, Owner and
Guarantor agree as follows:
SECTION 1. Guaranty. Guarantor hereby irrevocably and unconditionally
guarantees the punctual performance of each and every obligation of
Contractor under the Agreement (including, without limitation, under
Sections 5.02, 5.04, 8.06 (b) and 9.01 thereof) and agrees that if
for any reason whatsoever Contractor shall fail or be unable duly,
punctually and fully to perform any such obligation under the
Agreement, Guarantor shall forthwith perform each and every such
obligation, or cause each such obligation to be performed, without
regard to any exercise or nonexercise by Owner of any right, remedy,
power or privilege under or in respect of the Agreement against
Contractor. Guarantor's obligations shall be subject to Owner
providing Guarantor written notice (unless the giving of such notice
is prevented by applicable law or court order of any default of
Contractor in performing any obligation f or which Owner i s seeking
Guarantor's guaranty. Guarantor shall cure such default within 15
business days after receipt by Guarantor of written notice thereof
specifying the nature of such default. Should a default that cannot
be cured by the payment of money reasonably require more than 15
business days to cure, Guarantor shall commence to cure such default
and diligently prosecute such cure to completion. In addition,
Guarantor agrees to reimburse Owner on demand for any and all expenses
(including counsel fees and expenses) reasonably incurred by Owner in
enforcing or attempting to enforce any rights under this
Guaranty.
SECTION 2. Guaranty Absolute. The liability of
Guarantor under this Guaranty with respect to the guaranteed
obligations shall be absolute and unconditional, irrespective of:
(a) any lack of validity or enforceability of the
Agreement or any other agreement or instrument relating
thereto; provided, that this clause shall not ever have
the effect of increasing the liability of the Guarantor
beyond the obligations of the Contractor set forth in the
Agreement, assuming, for purposes of establishing Guarantor's
liability hereunder, that such obligations are valid
and enforceable obligations of Contractor;
(b) any amendment to, waiver of or consent to departure
from, or failure to exercise any right, remedy,
power or privilege under or in respect of, the
Agreement, unless Owner, and any assignee of Owner
pursuant to Section ll hereof, shall expressly
agree otherwise in writing, and then only to the
extent that such liability is released in such
written agreement;
(c) any exchange, release or nonperfection of any
collateral, or any release or amendment or waiver of
or consent to departure from any other guaranty of
or security for the performance of all any of the
obligations of Contractor under the Agreement;
(d) the insolvency of Contractor or any other guarantor or
any proceeding, voluntary or involuntary, involving
the bankruptcy, insolvency, receivership,
reorganization, arrangement, dissolution or
liquidation of Contractor or any other guarantor or
any defense which Contractor or any other guarantor
may have by reason of the order, decree or decision
of any court or administrative body resulting from
any such proceeding;
(e) any change in ownership of Contractor or any change,
whether direct or indirect, in Guarantor's
relationship to Contractor, including, without
limitation, any such change by reason of any merger
or any sale, transfer, issuance, or other
disposition of any stock of Contractor, Guarantor or
any other entity; and
(f) any other circumstance of a similar or different
nature that might otherwise constitute a defense
available to Guarantor as a guarantor.
Except as provided above in this Section 2, in no
event shall the obligations of Guarantor hereunder exceed the
obligations Guarantor would have had if it were itself a party
to the Agreement, and Guarantor shall have all rights and
defenses of "Contractor" under the terms of the Agreement.
This Guaranty shall continue to be effective, or be reinstated,
as the case may be, if at any time any payment made, or any
part thereof, to Owner by Contractor under the Agreement or by
Guarantor hereunder is ordered rescinded or must otherwise be
returned by Owner to Contractor or its representative for any
reason, including, without limitation, upon the insolvency,
bankruptcy, reorganization, dissolution or liquidation of
Contractor or otherwise, all as though such payment had not
been made.
SECTION 3. Waiver. Guarantor hereby waives
promptness, diligence, notice of acceptance and any other
notice with respect to this Guaranty and any requirement that
the Owner exhaust any right or take any action against or with
respect to Contractor or any other person or entity or any
property.
SECTION 4. Consent to Jurisdiction: Waiver of
Immunities. (a) Guarantor hereby irrevocably submits to the
jurisdiction of any State or Federal court sitting in the
State of New York, United States of America in any action or
proceeding arising out of or relating to this Guaranty, and
the Guarantor hereby irrevocably agrees that all claims in
respect of such action or proceeding may be heard and
determined in such State or Federal court. Guarantor hereby
irrevocably waives, to the fullest extent it may effectively
do so, the defense of an inconvenient forum to the maintenance
of such action or proceeding. Guarantor hereby irrevocably
consents to the service of any and all process in any such
action or proceeding by the mailing of copies of such process
to Guarantor at its address specified in Section 9 hereof .
Guarantor agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner
permitted by law.
(b) Nothing in this Section shall affect the right
of Owner to serve legal process in any other manner permitted
by law or affect the right of Owner to bring any action or
proceeding against Guarantor or its property in the courts of
any other jurisdiction.
(c) To the extent that Guarantor has or hereafter
may acquire any immunity from jurisdiction of any court or
from any legal process (whether through service or notice,
attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to itself or its
property, Guarantor hereby irrevocably waives such immunity
in respect of its obligations under this Guaranty.
SECTION 5. Representations. Guarantor hereby represents as follows:
(a) Guarantor (i) is a duly organized and validly
existing corporation in good standing under the Laws of
Delaware, and (ii) has the corporate power and authority to
own its property and to transact the business in which it is
engaged:
(b) Guarantor has the corporate power to execute,
deliver and carry out the terms and provisions of this
Guaranty and has taken all necessary corporate action to
authorize the execution, delivery and performance of this
Guaranty. This Guaranty has been duly executed and delivered
by Guarantor and constitutes the legal, valid and binding
obligation of Guarantor enforceable against it in accordance
with its terms:
(c) Neither the execution, delivery or performance
by Guarantor of this Guaranty nor the consummation of the
transactions herein contemplated, nor compliance with the terms
and provisions hereof will (i) violate any provision of the
charter, by-laws or like organization documents of Guarantor;
or (ii) in any manner that would have a material adverse
effect on the Guarantor or on its ability to perform its
obligations hereunder, contravene any applicable provision of
any law, statute, rule, regulation, order, writ, in junction or
decree of any court or governmental instrumentality or
authority or requires the authorization or approval of or any
filing with any such instrumentality or authority or (iii) will
conflict or be inconsistent with, or result in any breach-of,
any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or
imposition of (or the obligation to create or impose] any lien
upon or assignment of any of the property or assets of
Guarantor pursuant to the terms of any agreement or other
instrument to which Guarantor is a party or by which it or any
of its property or assets is bound or to which it is subject;
and
(d) There are no actions, suits or proceedings
pending or, to the best of the knowledge of Guarantor (without
having made any independent inquiry in respect thereof) ,
threatened against or affecting Guarantor before any court or
before any governmental or administrative body or agency of
which there is a likelihood that the outcome will materially
and adversely affect its ability to perform its obligations
hereunder.
SECTION 6. No Subornation. Notwithstanding any payment or
payments made by Guarantor hereunder or any set-off or
application of funds of Guarantor by Owner, Guarantor shall
not, until all of Contractor's obligations under the
Agreement (including Warranty obligations) shall have been
fulfilled, (a) be entitled to be subrogated to any of the
rights of Owner against Contractor or any other guarantor
or in any collateral security or guaranty or right of
offset held by Owner for the performance and payment of all
of the obligations of Contractor under the Agreement, or
(b) seek any reimbursement or contribution from Contractor
or any other guarantor in respect of any payment, set-off
or application of funds made by Guarantor hereunder.
SECTION 7. No Petition. Guarantor shall not,
without the prior consent of Owner, (i) voluntarily commence,
or join with or solicit any other person or entity in
commencing, any case or other proceeding seeking liquidation,
reorganization or other relief with respect to Contractor or
its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar
official of Contractor, or (ii) authorize or permit Contractor
to (A) confluence any such proceeding, or (B) consent to any
such relief or to the appointment of any such case or
proceeding.
SECTION 8. Amendments. No amendment or waiver of
any provision of this Guaranty nor consent t o any departure
by Guarantor therefrom shall in any event be effective unless
the same shall be in writing and signed by Owner (including
any Person becoming an "Owner" hereunder pursuant to Section
11), and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose of which
given.
SECTI0N 9. Addresses for Notices. All notices and
other communication provided for hereunder shall be writing
and, if to Guarantor, mailed or communicated by facsimile or
delivered to it, addressed to:
Raytheon Company
l41 Spring Street
Lexington, Massachusetts 02173
Attention: General Counsel
if to Owner, mailed or delivered to it, addressed to it at its
address specified in the Agreement (and as to any Person
becoming an "Owner" hereunder pursuant to Section 11, at such
address as shall be specified by such Person), or as to each
party at such other address as shall be designated by such
party in a written notice to the other party. All such
notices and other communications shall, when mailed or
communicated by facsimile transmission, respectively, be
effective when deposited in the mails addressed as aforesaid
or when such facsimile transmission is confirmed.
SECTION 10. No Waiver; Remedies. No failure on the
part of Owner to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise thereof or the exercise of any
other right operate as a waiver thereof. The remedies herein
provided are cumulative and are not exclusive of any remedies
provided by law.
SECTION 11. Continuing Guaranty; Assignments. This Guaranty
shall be construed as a continuing, absolute and unconditional
Guaranty of performance, and, except as specifically provided in
Section 1 hereof, the obligations of Guarantor hereunder shall
not be conditioned or contingent upon the pursuit by Owner at
any time of any right or remedy against Contractor or against
any other person or entity which may be or become liable in
respect of all or any part of the obligations of Contractor
under the Agreement or against any collateral security or
guaranty therefor. This Guaranty shall (i) remain in full force
and effect until satisfaction in full of all Contractor's
obligations under the Agreement, (ii) be binding upon Guarantor
and its successors and ( iii ) inure to the benefit of and be
enforceable by Owner and its successors, transferees and
assigns. Except as may be necessary to fulfill its obligations
hereunder in a timely manner, and with the consent of Owner, not
to be unreasonably withheld or delayed, Guarantor shall have no
right, power or authority to delegate a1 or any of its
obligations hereunder; provided that upon any such delegation
permitted hereunder, Guarantor shall nevertheless remain liable
for the performance of any obligations so delegated. Guarantor
hereby expressly agrees that Owner may assign all or any of its
rights hereunder without Guarantor's approval to any person or
entity to which it has assigned its rights under the Agreement
(including, without limitation, the Construction Lender referred
to in the Agreement and/or any security agent acting on its
behalf) and that any such assignee of Owner may similarly further
assign such rights assigned to it. Owner or any such assignee
shall notify Guarantor in writing of each such assignment (other
than to Construction Lender and/or any security agent acting on
its behalf) made pursuant to this Section 11. In the event of
any such assignment, references herein to ''Owner" shall be
deemed to include references to the relevant assignee. Guarantor
shall not be obligated to render performance under this Guaranty
to any person other than Owner unless Guarantor shall have first
received notice of the assignment of this Guaranty by Owner to
such person.
SECTION 12. Waiver of Jury Trial. Guarantor hereby
irrevocably and unconditionally waives any and all right to
trial by jury in any action, suit or counterclaim arising in
connection with this Guaranty.
SECTION 13. Governing Law. This Guaranty shall be
governed by, and construed and interpreted in accordance
with, the laws of the State of New York.
SECTION 14. Severabilitv. If any provision hereof
is invalid or unenforceable in any jurisdiction, the other
provisions hereof shall remain in full force and effect in
such jurisdiction and the remaining provisions hereof shall be
construed in order to carry out the provisions hereof. The
invalidity or unenforceability of any provision of this
Guaranty in any jurisdiction shall not affect the validity or
enforceability of any such provision in any other
jurisdiction.
SECTION 15. Miscellaneous. Any suit under this
Guaranty must be instituted within two years of the date of
Final Acceptance. No right or action shall accrue hereunder
to or for the use or benefit of any Person other than the
Owner, Construction Lender (any security agent acting on its
behalf) and their respective successors and assigns, but
only then to the extent and in the manner permitted hereby.
This Guaranty No. l787 supersedes and replaces Guarantor's
Guaranty No. 1613 dated as of December 2, 1993 between Guarantor
and Owner, as amended on May 18, 1994.
IN WITNESS WHEREOF, Guarantor has caused this
Guaranty to be duly executed and delivered by its officer
thereunto duly authorized as of the date first above written.
RAYTHEON COMPANY
By_____________________
Name: Max E. Bleck
Title: President
EXHIBIT 10.65
STEAM SALES AGREEMENT
between
PANDA-BRANDYWINE, L.P.
a Delaware limited partnership
and
BRANDYWINE WATER COMPANY a Delaware
corporation
March 30, 1995
STEAM SALES AGREEMENT
This STEAM SALES AGREEMENT (this "Agreement")
is entered into as of March 30, 1995 by and between
PANDABRANDYWINE, L.P., a Delaware limited partnership
("Supplier") and BRANDYWINE WATER COMPANY, a Delaware
corporation ("Purchaser", and together with Supplier, the
"Parties").
RECITALS
WHEREAS, Supplier is in the business of
developing and operating a cogeneration facility for the
production of electric and thermal energy; and
WHEREAS, Purchaser is in the business of
producing distilled water products using thermal energy of
the type produced by Supplier; and
WHEREAS, Supplier wishes to sell thermal energy
to Purchaser and Purchaser wishes to buy thermal energy
from Supplier.
NOW, THEREFORE, in consideration of the
foregoing and of the premises hereinafter set forth, the
Parties agree as follows:
The following Exhibits are attached to this
Agreement and incorporated herein by reference as though
fully set forth herein:
(a) Exhibit A, generally describing those steam
lines, condensate lines and other interconnection devices
located on the Facility Site and located between the
Facility Site and the Interconnection Points and the
Distilled Water Facility, which lines and other devices
may be necessary to interconnect any steam, condensate, or
water, Cooling Water, Feed Water, waste water disposal and
Distilled Water Facility Premises runoff with the
Distilled Water Facility.
(b) Exhibit B, which is the proposed sublease
(the "Lease") between Supplier and Purchaser providing for
the sublease of the Distilled Water Facility Premises, the
Distilled Water Facility and all related equipment to
Purchaser, which sublease will be entered into on the date
on which the Facility Lease becomes effective.
ARTICLE I
DEFINITIONS
1.01 All capitalized terms not otherwise defined
herein shall have the meanings ascribed in that certain
Power Purchase Agreement between Potomac Electric Power
Company, a District of Columbia and Virginia corporation
("Utility"), and Supplier, dated August 9, 1991, as
amended, and the following terms shall have the following
definitions:
1.02 Cooling Water means the water delivered to
the Interconnection Points by Supplier for the
condensation of Purchaser's steam.
1.03 Distilled Water Facility means that certain
distilled water facility to be constructed by Supplier and
leased by Purchaser on the Distilled Water Facility
Premises.
1.04 Distilled Water Facility EPC Contractor means
Raytheon Engineers & Constructors, Inc., a Delaware
corporation or any other EPC contractor responsible for
the design, engineering, procurement and construction of
the Distilled Water Facility.
1.05 Distilled Water Facility Premises means the
land to be leased to Purchaser by Supplier under the
Lease.
1.06 Facility means that certain 230 megawatt gas-
fired cogeneration facility to be constructed by Supplier
and to be located on the Facility Site in Brandywine,
Maryland.
1.07 Facility Site means the land upon which the
Facility is to be located described in the Facility Lease
(excluding the Distilled Water Facility Premises).
1.08 Facility Lease means the Facility Lease intended to
be entered into between the Supplier, as Lessee, and the
Lender, as Lessor, covering the Facility and the Distilled
Water Facility.
1.09 Feed Water means that certain water delivered
to the Interconnection Points by Supplier for use as feed
stock for distilled water.
1.10 Heat Recovery Steam Generator means the
equipment used to convert the thermal energy emanating
from the Facility's gas turbine generator(s) into steam.
1.11 Interconnection Points means the points set
forth in Exhibit A where Thermal Energy, condensate,
water, Cooling Water, Feed Water and waste water disposal
lines are interconnected between the Distilled Water
Facility and the Facility.
1.12 Lender shall mean persons providing
construction or permanent financing to the Facility and
Distilled Water Facility in the case of loan arrangements
or the person acting as "lessor" in the case of a lease or
leveraged lease financing.
1.13 Metering Devices shall have the meaning set
forth in Section 13.01 of this Agreement.
1.14 Power Contract or PEPCO Contract means the
Power Purchase Agreement between Utility and Supplier,
dated August 9, 1991, as the same has been or may from
time to time be further amended, modified, or
supplemented.
1.15 Stipulated Interest Rate means the lesser of
(a) interest at the annual rate quoted from time to time
by Citibank, N.A., New York, N.Y., as its base rate plus
one percent (1%) or (b) the maximum rate permitted by
applicable law for loans to corporate borrowers.
1.16 Thermal Energy means saturated steam generated
by Supplier and delivered to Purchaser which steam shall
have a pressure range between 90 psig minimum and 110 psig
maximum at the Interconnection Point and delivered to the
Interconnection Point at an expected pressure range
between 90 and 110 pounds per square inch gage pressure.
1.17 Utility means Potomac Electric Power Company, a
District of Columbia and Virginia corporation.
ARTICLE II
TERM OF AGREEMENT
2.01 This Agreement shall become effective as of the
date hereof and, unless sooner terminated pursuant to the
terms hereof, shall remain in full force and effect for an
initial term from the date hereof to the date that is 25
years from the Actual Commercial Operation Date under the
Power Contract. Supplier shall have the option to renew
this Agreement for additional terms of 5 years each by
notifying Purchaser in writing of such extension at least
30 days before the expiration of the prior term.
2.02 If any of the following events or circumstances
have occurred on or before the Actual Commercial Operation
Date, Supplier shall have the right to terminate this
Agreement upon giving written notice of termination to
Purchaser, and all of the obligations of the Parties shall
be null and void as if this Agreement were never entered
into and executed; provided that the obligations of the
Parties under any other agreement, instrument or contract
shall not be affected (including the rights of Utility and
the Lender to consent to termination of this Agreement)
unless specifically set forth therein:
(a) Supplier is unable to secure necessary
financing for the Facility and all matters related
thereto on terms acceptable to Supplier in its sole
discretion; or
(b) Supplier is unable to obtain all permits,
licenses, utility company agreements, and
approvals, including environmental permits, necessary
to construct, own and operate the Facility; or
(c) Utility terminates the Power Contract; or
(d) There is any change in law, regulation or
policy that materially and adversely affects the
economic viability of the Supplier.
2.03 In the event the Power Contract is terminated
for any reason after the Actual Commercial Operation Date,
Supplier shall have the right to terminate this Agreement
upon giving written notice of termination to Purchaser and
all of the obligations hereunder of the Parties shall be
null and void as if this Agreement were never entered into
or executed; provided that the obligations of the Parties
under any other agreement, instrument or contract shall
not be affected (including the rights of Utility and the
Lender to consent to termination of this Agreement) unless
specifically set forth therein.
2.04 The Parties may terminate this Agreement
earlier, with the prior written consent of the Lender and
Utility, by their express written mutual agreement.
2.05 Subject to the rights of Utility to consent
to any termination of this Agreement, if an Event of
Default has occurred and is continuing under the Facility
Lease or the Lender's construction loan agreement, the
Lender, as collateral assignee of Supplier, may, by
written notice to Purchaser, terminate this Agreement.
ARTICLE III
THE FACILITY AND THE DISTILLED WATER FACILITY
3.01 Supplier shall construct and operate the
Facility such that it shall be capable of supplying the
amount and quality of Thermal Energy, Cooling Water, and
Feed Water described in Article IV hereof, without in any
way adversely affecting Supplier's obligations under the
PEPCO Contract. The Facility shall at all times remain
the leasehold property of Supplier as lessee from the
Lender. Supplier shall sublease the Distilled Water
Facility to Purchaser for the term of this Agreement
pursuant to the Lease set forth in Exhibit B hereto. The
Parties agree to enter into the Lease on the date on which
the Facility Lease becomes effective.
3.02 Supplier shall, so long as same is required by
the PEPCO Contract, design, construct, operate and
maintain the Facility in compliance with the requirements
of the Public Utility Regulatory Policies Act of 1978, as
amended, and the regulations and decisions of the Federal
Energy Regulatory Commission, including 18 CFR 292,
relating thereto (collectively "PURPA") and the other
requirements of the Power Contract.
3.03 Supplier shall be responsible for the design
and construction of all interconnected systems between the
Facility and the Interconnection Points at the Distilled
Water Facility.
3.04 Supplier shall operate the Distilled Water
Facility and perform or provide, at Supplier's expense,
such services, repairs and maintenance to the Distilled
Water Facility and all equipment on the Distilled Water
Facility Premises, as are reasonably required to maintain
the Distilled Water Facility and such equipment and
facilities in good working order and in safe and lawful
operating condition. Supplier shall at all times ensure
that the Distilled Water Facility, including all
equipment, is appropriate for operation in accordance with
the certification of the Facility as a "Qualifying
Facility" under PURPA by the Federal Energy Regulatory
Commission and applications relating thereto (collectively
the "QF Certification") and is properly designed, operated
and maintained. Purchaser shall give Supplier two (2)
weeks notice of any scheduled activities that will cause
Purchaser's Thermal Energy requirements from the Facility
to cease for a period of more than twenty-four (24) hours.
Notification of such activities shall be made by telephone
and confirmed by written notice. Purchaser hereby grants
to Supplier all easements, rights-of-way and/or rights of
ingress and egress necessary for Supplier to perform
conveniently any services, repairs, operations or
maintenance or any one or more of the other activities
contemplated by this Agreement or the Power Contract.
Further, Purchaser hereby agrees that it will not
interfere in any manner whatsoever with the construction
activities of the Facility, including, without limitation,
the deliveries of materials to the Facility Site.
3.05 Supplier shall perform or provide all services,
repairs and maintenance to the Interconnection Facilities
(and associated Metering Devices) as are reasonably
required to maintain the Interconnection Facilities in
good working order and in safe and lawful operating
conditions.
3.06 Supplier shall design and build the Distilled
Water Facility using a Distilled Water Facility EPC
Contractor selected by Supplier and acceptable to Lender.
The Distilled Water Facility will be designed, built and
demonstrate performance requirements in accordance with
the specifications approved by Supplier and Lender (the
"Distilled Water EPC Contract").
ARTICLE IV
SALE OF THERMAL ENERGY
4.01 Commencing on the Actual Commercial Operation
Date, Supplier will deliver to the Interconnection Points,
and Purchaser agrees to accept and use all (up to the
maximum design limits of the Distilled Water Facility)
Thermal Energy produced by the Facility which is delivered
to the Interconnection Points. The amount of Thermal
Energy to be delivered to the Interconnection Points may
be adjusted downward by Supplier, in its sole discretion.
Supplier shall also deliver effluent Cooling Water to
condense steam generated by the Distilled Water Facility
and Feed Water to make distilled water. Prior to the
Actual Commercial Operation Date, during any operations
and testing of the Facility, Supplier, as agent for
Purchaser shall accept and use all Thermal Energy
delivered up to the maximum design limit of the Distilled
Water Facility and payment shall be made in the same
manner as after the Actual Commercial Operation Date.
Title to and full responsibility for all Thermal Energy,
Cooling Water and Feed Water generated by the Facility
will pass to Purchaser upon its delivery at the
Interconnection Points, and Supplier shall have no
responsibility for such Thermal Energy, Cooling Water and
Feed Water thereafter.
4.02 Purchaser unconditionally agrees that it will
accept delivery of and use all Thermal Energy delivered by
Supplier up to the maximum design limit of the Distilled
Water Facility. The amount of Thermal Energy supplied by
Supplier to Purchaser hereunder shall be sufficient to
maintain the status of the Facility as a "Qualifying
Facility" within the meaning of PURPA on an annual basis
under any possible load or configuration that the Supplier
could reasonably be expected to run as anticipated under
the Power Contract. If Purchaser fails to accept such
Thermal Energy up to the maximum design limits of the
Distilled Water Facility, then in addition to its other
rights hereunder and as may be allowed by law, Supplier
shall have the right, without Purchaser's approval, to
sell Thermal Energy from the Facility to any other person
or entity to the extent required to maintain such status,
and such failure shall be deemed a material default by
Purchaser hereunder.
4.03 Without limiting any right or remedy which
Supplier might have at law or in equity as a result of
such breach, Purchaser agrees that a breach by it of any
covenant contained in Section 4.01 or 4.02 hereof will
cause irreparable injury to Supplier and that Supplier has
no adequate remedy at law in respect of such breach and,
as a consequence, Purchaser agrees that the covenants
contained in Sections 4.01 and 4.02 hereof shall be
specifically enforceable by Supplier against it, and it
waives and agrees not to assert any defense against an
action for specific performance of such covenants except
for a defense that such covenants have not been breached.
4.04 The price for the sale of Thermal Energy, Feed
Water and Cooling Water shall be $1.00 per 1,000 pounds of
Thermal Energy and $1.00 per 1,000 gallons of Feed Water
or Cooling Water.
4.05 Supplier will install, maintain, operate and
own all meters for Thermal Energy, Cooling Water, Feed Water
and waste water along with all other items the Parties
deem necessary for metering and controlling the Distilled
Water Facility. Meters will be calibrated and maintained
in accordance with general practices.
4.06 All Cooling Water delivered by Supplier
shall be returned by Purchaser to Supplier. Cooling Water
delivered by Supplier to Purchaser shall not exceed 97 degrees F.
Supplier will be obligated to supply only enough Cooling
Water to condense Purchaser generated steam.
4.07 All payments due under this Agreement to one or
the other Party shall be due and payable at the
recipient's office thirty (30) days after receipt of the
relevant invoice. Any sum remaining unpaid after such date
shall bear interest at the Stipulated Interest Rate.
4.08 Supplier shall be under no obligation to supply
Thermal Energy, Cooling Water and Feed Water to the extent
it is not operating one or both of its Heat Recovery Steam
Generators; or such operation is for repair or testing of
the Facility.
ARTICLE V
GOVERNMENTAL APPROVALS
5.01 Supplier shall secure, at its own expense,
permits, licenses, easements and rights-of-way, leases,
releases, and other governmental or administrative
approvals necessary for construction and operation of
the Facility and the interconnection facilities relating
thereto. Purchaser shall use its best efforts to assist
Supplier in obtaining and maintaining all necessary
permits and approvals and shall fully cooperate with
Supplier in the event Supplier seeks a waiver of the
operating or efficiency standards for a "Qualifying
Facility" under PURPA, as any of the foregoing may be now
or hereafter amended. Except to the extent covered by
Supplier's permits, approvals, easements, rights-of-way
and licenses, Purchaser shall secure at its own expense
all permits, licenses, easements, rights-of-way, releases
and other governmental or administrative approvals
necessary for operation of the Distilled Water Facility
and related equipment. Supplier shall operate and maintain
the Distilled Water Facility, including all related
equipment, in accordance with all applicable federal,
state and local laws, rules, regulations and permits and
the QF Certification. Supplier shall use its best efforts
to assist Purchaser in obtaining and maintaining
necessary permits and approvals. Supplier and Purchaser
shall perform their respective obligations hereunder in
compliance with any and all valid and applicable federal,
state and local laws, rules and regulations.
ARTICLE VI
INSURANCE AND INDEMNIFICATION
6.01 Purchaser shall indemnify, defend and save harmless
and reimburse Supplier, its partners and Utility and their
respective officers, directors, affiliates, partners,
employees, servants and agents, and their respective
successors and assigns and the Lenders, from and against
all losses, claims, liabilities, damages, causes of
action, suits, judgments, costs and expenses (including
reasonable attorneys' fees and litigation expenses)
arising from any injury to or death of any person or
persons or damage to any property resulting from or
arising out of or in any way connected with:
(a) the use of Thermal Energy in the use or
operation of the Distilled Water Facility and all related
equipment, including the steam equipment;
(b) operation or non-operation or location
of the Distilled Water Facility or equipment
(including the steam equipment) by Purchaser, its
agents, employees, officers or independent
contractors;
(c) any other equipment or appurtenances on
the Distilled Water Facility Premises (including
steam equipment);
(d) Thermal Energy present or escaping from any
point from and including the steam Interconnection
Points to and including the Distilled Water Facility;
(e) Purchaser or its operators, officers,
shareholders, directors, managers, employees,
agents, servants or contractors tampering with or
attempting to repair and/or maintain the steam
equipment, or any of Supplier's steam lines, meters,
apparatus or equipment (including, without
limitation, the Facility, the interconnection
facilities and the Metering Devices); or
(f) the gross negligence or willful misconduct
of Purchaser.
If any action or proceeding should be brought
against Supplier or Utility or Supplier's or Utility's
partners or their respective officers, directors,
affiliates, partners, employees, servants, and agents or
their respective successors or assigns, based upon any
such claim and if Purchaser, upon notice from Supplier,
shall cause such action or proceeding to be
satisfactorily defended in Supplier's reasonable judgment
at Purchaser's expense by counsel reasonably satisfactory
to Supplier, without any disclaimer of liability by
Purchaser in connection with such claim, Purchaser shall
not be required to indemnify Supplier for attorneys' fees
and expenses in connection with such action or proceeding.
The obligations of Purchaser under this Section 6.01 shall
commence to accrue on the date of this Agreement and
shall survive any termination of this Agreement and any
permitted transfer or assignment by Purchaser or Supplier
of this Agreement or any interest hereunder.
6.02 Supplier shall indemnify, defend and save harmless
and reimburse Purchaser, its directors, officers,
affiliates, employees, servants and agents, and their
respective successors and assigns, from and against all
losses, claims, actions, liabilities, damages, causes of
action, suits, judgments, costs and expenses (including
reasonable attorneys fees and litigation expenses) arising
from any injury or death of any person or persons or
damage to any property resulting from or arising out of or
in any way connected with the gross negligence or willful
misconduct of Supplier. If any action or proceeding should
be brought against Purchaser or Purchaser's directors,
officers, affiliates, employees, servants and agents or
their respective successors or assigns, based upon any
such claim and if Supplier upon notice from Purchaser,
shall cause such action or proceeding to be satisfactorily
defended in Purchaser's reasonable judgment at Supplier's
expense by counsel reasonably satisfactory to Purchaser,
without any disclaimer of liability by Supplier in
connection with such claim, Supplier shall not be required
to indemnify Purchaser for attorneys' fees and expenses
in connection with such action or proceeding. The
obligations of Purchaser under this Section 6.02 shall
commence to accrue on the date of this Agreement and shall
survive any termination of this Agreement and any
permitted transfer or assignment by Purchaser or Supplier
of this Agreement or any interest hereunder.
6.03 Purchaser (at Supplier's cost) shall carry and
maintain during the term hereof at least the minimum
insurance coverage set forth in this subsection with
insurers of recognized responsibility satisfactory to the
Supplier and Lender. Such insurance shall be written on
such forms and with such terms, conditions and deductibles
acceptable to the Supplier and Lender.
6.03.1 During the construction phase (from the
commencement of on site construction):
(i) Purchaser shall maintain
Comprehensive General Liability insurance
written on an occurrence basis with a
limit of not less than $1,000,000. Such
coverage shall include, but not be limited
to, premises/operations, explosion,
collapse, underground hazards, broad form
contractual, independent contractors,
products/completed operations, broad form
property damage and personal injury
liability.
(ii) Purchaser shall maintain (a)
Worker's Compensation insurance in
accordance with statutory provisions of
the State of Maryland and (b) Employers'
Liability insurance with a limit of not
less than $1,000,000. Such policy shall not
contain an exclusion for occupational
disease.
(iii) Purchaser shall maintain
Comprehensive Automobile Liability
insurance for owned, non-owned, leased,
hired and borrowed vehicles covering bodily
injury or property damage with a limit of
not less than $1,000,000.
(iv) Purchaser shall maintain
Excess Umbrella Liability insurance written
on an occurrence basis and providing
coverage limits in excess of the insurance
required to be maintained pursuant to
Sections (i), (ii)(b), and (iii). The limit
of such insurance and Excess Umbrella
coverage, when combined, shall not be less
than $15,000,000. Such insurance shall
contain a drop down provision in the event
of exhaustion of underlying limits or
aggregates and apply on a following form
basis.
6.03.2 From Actual Commercial Operation
Date to the end of the term of this Agreement:
(i) Purchaser shall maintain
Comprehensive General Liability insurance
written on an occurrence basis with a
limit of not less than $1,000,000. Such
coverage shall include, but not be limited
to, premises/operations, explosion,
collapse, underground hazards, broad form
contractual, independent contractors,
products/completed operations, broad form
property damage and personal injury
liability.
(ii) Purchaser shall maintain (a)
Workers' Compensation insurance in
accordance with statutory provisions of
the State of Maryland and (b) Employers'
Liability insurance with a limit of not
less than $1,000,000. Such policy shall not
contain an exclusion for occupational
disease.
(iii) Purchaser shall maintain
Comprehensive Automobile Liability
insurance for owned, non-owned, leased,
hired and borrowed vehicles covering bodily
injury or property damage with a limit of
not less than $1,000,000.
(iv) Purchaser shall maintain Excess
Umbrella Liability insurance written on an
occurrence basis and providing coverage
limits in excess of the insurance required
to be maintained pursuant to Sections (i),
(ii)(b), and (iii). The limit of such
insurance and Excess Umbrella coverage,
when combined, shall not be less than
$15,000,000. Such insurance shall contain a
drop down provision in the event of
exhaustion of underlying limits or
aggregates and apply on a following form
basis.
6.03.3 Endorsements: The Purchaser
shall cause the insurance maintained in accordance with
this Article to be endorsed as follows:
(1) the Purchaser shall be the named
insured with respect to the insurance
carried pursuant to this section and
Supplier, Utility and Lender shall be
included as additional insured with respect
to 6.03.1(i), (ii)(b), (iii), and (iv) and
6.03.2(i), (ii)(b), (iii), and (iv) with
the understanding that any obligation
imposed upon the Purchaser (excluding the
obligation to Pay premiums, which shall be
the obligation of Supplier) shall be the
sole obligation of the Purchaser and not
that of the Supplier, Utility or Lender;
(2) inasmuch as the liability
policies are written to cover more than one
insured, all terms, conditions, insuring
agreements and endorsements, with the
exception of the limits of liability, shall
operate in the same manner as if there were
a separate policy covering each insured;
(3) the insurers thereunder shall
waive all rights of subrogation against
the Supplier, Utility and Lender, any right
of setoff or counterclaim and any other
right of deduction, whether by attachment
or otherwise;
(4) such insurance shall be primary
without right of contribution of any other
insurance carried by or on behalf of the
Supplier, Utility or Lender, or any other
Party, with respect to its interest as such
in the facility;
(5) if such insurance is canceled for
any reason whatsoever, including for
nonpayment of premium, or any changes are
initiated by the carrier which affect the
interest of the Supplier, Utility or
Lender, such cancellation or change shall
not be effective as to the Supplier,
Utility and Lender until thirty (30) days
after receipt by the Supplier, Utility and
Lender of written notice sent by registered
mail from such insurer.
6.03.4 Certification: At closing, and at
each policy renewal, but not less than annually, Purchaser
shall provide to Supplier, Utility and Lender approved
certification from each insurer or by an authorized
representative of each insurer. Such certification shall
identify the underwriters, the type of insurance, the
limits, deductibles, and term thereof. Upon request, the
Purchaser shall furnish Supplier, Utility and Lender with
copies of all insurance policies, binders, and cover notes
or other evidence of such insurance.
6.03.5 Power Contract Insurance. This
Article VI shall in no way affect or modify the Parties
obligations relating to insurance under the Power
Contract. In the event of any conflict in insurance
requirements, the requirements of the Power Contract shall
prevail.
ARTICLE VII
DEFAULT
7.01 Supplier shall be in default of its obligations under this
Agreement if:
7.01.1 Supplier fails to perform any material obligation
or breaches any of its warranties in a material manner under this
Agreement, unless such failure by Supplier is expressly excused under this
Agreement.
7.02 Purchaser shall be in default of its obligations under this
Agreement if:
7.02.1 Purchaser fails to perform its agreement contained
in the first sentence of Section 4.02 hereof.
7.02.2 Purchaser applies for or consents to the
appointment of a receiver, custodian, trustee or liquidator, becomes
unable to pay debts as such become due, makes a general assignment for the
benefit of creditors, or commences a voluntary case under the United
States Bankruptcy Code of 1978, or if final order for relief is granted
against it in an involuntary bankruptcy proceeding.
7.02.3 The occurrence of an "Event of Default"
(as defined in the Lease) under the Lease; or
7.02.4 Purchaser fails to perform any other
material obligation or breaches any of its warranties in a material
manner under this Agreement, unless such failure is expressly excused
under this Agreement.
ARTICLE VIII
REMEDIES
8.01 Upon the occurrence of a default by Purchaser hereunder, and
subject to the rights of Utility under the PEPCO Contract, Supplier may,
without an election of remedies and in addition to any other remedies
herein provided:
(a) suspend deliveries of Thermal Energy from the Facility until
Purchaser shall cure such default; and
(b) exercise all remedies available at law or at equity or other
appropriate proceedings including bringing an action or actions from
time to time for recovery of damages which shall include all costs and
expenses reasonably incurred in the exercise of its remedies
(including reasonable attorneys' fees); and
(c) without recourse to legal process, terminate this Agreement by
delivery of a notice declaring termination; and
(d) terminate the Lease and exercise its rights set forth therein;
and
(e) in the event Purchaser disavows its obligations hereunder or
otherwise breaches the terms hereof, Supplier may elect either to
enforce or to rescind this Agreement. This remedy shall not be deemed
to limit the generality of the foregoing, and in the event of an
election to enforce this Agreement, Supplier shall be entitled to all
remedies and damages available at law and in equity.
8.02 Upon the occurrence of a default by Supplier, Purchaser shall have
the right, with or without recourse to legal process, to seek to enforce
this Agreement and recover compensatory damages (specifically excluding
consequential damages, such as loss of use, lost revenues and costs
incurred because of delays and all other damages and remedies whatsoever)
directly caused by such default. This remedy shall be the exclusive
remedy of Purchaser in the event of a default by Supplier.
8.03 Notwithstanding anything in this Agreement to the contrary, unless
and until this Agreement has been terminated, Supplier shall not refuse to
deliver, suspend or delay any delivery of Thermal Energy as required under
this Agreement as a result of any breach or alleged breach by Purchaser,
nor shall Purchaser refuse to take and productively use the quantity of
Thermal Energy from Supplier as required under Article IV of this
Agreement, or refuse to make, suspend or delay any of the payments
required under this Agreement, as a result of any breach or alleged breach
by Supplier; provided however, that to the extent Purchaser has failed (or
is reasonably likely to fail) to purchase and productively use the minimum
quantity of Thermal Energy in any year, Supplier may enter into
arrangements for the sale of such Thermal Energy to third parties as in
Supplier's sole discretion may be necessary for the Facility to maintain
its Qualifying Facility status under PURPA; and provided further, however,
that Purchaser's and Supplier's obligations with respect to the minimum
quantity of Thermal Energy shall be reduced in any subsequent year, to the
extent such alternative arrangements for the sale of Thermal Energy to
third parties continues into such subsequent year.
8.04 In no event shall Supplier or Purchaser be liable to the other for
indirect, special, incidental, consequential or exemplary damages,
including, but not limited to, loss of profits or revenue, or, in the case
of Supplier, costs of purchased or replacement steam. Supplier shall not
be liable to Purchaser for damages arising out of Supplier's failure to
deliver Thermal Energy to Purchaser hereunder due to failure to achieve
commercial operation of the Facility or otherwise due to a termination by
Potomac Electric Power Company of the PEPCO Contract.
ARTICLE IX
FORCE MAJEURE
9.01 All obligations of the Parties to this Agreement (except for the
payment of money for Thermal Energy which has been supplied) shall be
suspended while and for so long as compliance is prevented in whole or in
part by an act of God, war, civil disturbance, explosion, Federal, State,
or Local law, inability to secure permits, approvals, or licenses, binding
order of a court or governmental agency, or any other cause beyond the
reasonable control of Supplier or Purchaser. Force Majeure shall not
include lack of financial funds, economic slowdowns, or strikes or labor
disputes of the employees of the party claiming Force Majeure. A party
shall notify the other party in writing of the occurrence of a Force
Majeure event within 10 days after the occurrence of such Force Majeure
event. The party suffering an event of Force Majeure shall use its best
efforts to remedy as soon as possible the cause(s) preventing the
performance of this Agreement.
9.02 Notwithstanding anything to the contrary contained herein,
Supplier shall have the right, at such times as it in its sole reasonable
judgment deems necessary, to interrupt the production and delivery of
Thermal Energy, Cooling Water and Feed Water hereunder when the continued
production and/or delivery of such Thermal Energy, Cooling Water and Feed
Water would constitute a threat of damage or loss to property or of injury
to the health and safety of any individual. Such interruption shall not
constitute a default in the performance of any Supplier's obligations
hereunder.
ARTICLE X
SUPPLIER'S REPRESENTATIONS AND WARRANTIES
10.01 Supplier has been duly formed, and is in good standing as a
limited partnership under the laws of the State of Delaware. Supplier is
qualified to do business in the State of Maryland.
10.02 Supplier has all requisite power and authority to enter this
Agreement, and to perform the obligations on its part herein contained.
10.03 There is no litigation or proceeding pending or, to its
knowledge, threatened against Supplier (otherwise than as expressly
disclosed in writing to Purchaser) that would, if determined adversely to
Supplier have a material adverse effect on the ability of Supplier to
enter or to perform this Agreement.
10.04 The execution and performance by Supplier of its obligations
hereunder will not result in the breach of any agreement or instrument to
which Supplier is a Party or in the violation of any order, rule or
regulation of any court or governmental body having jurisdiction over
Supplier.
ARTICLE XI
PURCHASER'S REPRESENTATIONS AND WARRANTIES
11.01 Purchaser has been duly incorporated, and is in good standing as a
corporation under the laws of the State of Delaware.
11.02 Purchaser has all requisite corporate power and authority to enter
this Agreement and to perform the obligations on its part herein
contained.
11.03 There is no litigation or proceeding pending or, to its knowledge,
threatened against Purchaser (otherwise than as expressly disclosed in
writing to Supplier) that would, if determined adversely to Purchaser,
have a material adverse effect on the ability of Purchaser to enter or to
perform this Agreement.
11.04 The execution and performance by Purchaser of its obligations
hereunder will not result in a breach of any agreement or instrument to
which Purchaser is a Party or in the violation of any order, rule or
regulations of any court or governmental body having jurisdiction over
Purchaser.
ARTICLE XII
DAMAGE OR DESTRUCTION OF FACILITY; REPAIR
12.01 If any portion of the Facility is damaged or destroyed and such
damage or destruction is an event that is covered by insurance, Supplier
will use its reasonable efforts (if permitted by the Facility Lease or
loan agreement with the Lender) to repair or restore steam supply
capability to the extent of insurance proceeds received by Supplier for
repair or restoration. If the insurance proceeds are insufficient or if
the Facility has been damaged or destroyed by an uninsured casualty, and
Supplier or the Lender determine that the restoration of the Facility is
not economically practical, Supplier may terminate this Agreement without
default by a notice to Purchaser declaring such termination. Upon such
termination, Supplier may dismantle and/or remove any part of the Facility
from the Facility Site without liability in any suit, action or other
proceeding to Purchaser on account of such action, and Purchaser shall
have no further obligation to Supplier hereunder; provided that
obligations of the Parties under any other agreement, instrument or
contract shall not be affected (including Supplier's obligations under
Section 13.5 of the PEPCO Contract) unless specifically set forth therein.
In the event of any conflict between this Section 12.01 and the terms and
conditions of the PEPCO Contract, the PEPCO Contract shall prevail.
12.02 Supplier shall at all times have the right to replace, delete or
substantially alter any component of the Facility; provided that any
alterations to the Facility permitted herein shall not materially change
Purchaser's obligations hereunder.
12.03 If any portion of the Distilled Water Facility or the steam
equipment relating thereto is damaged or destroyed, Purchaser shall comply
with the provisions of the Lease.
ARTICLE XIII
METERING
13.01 Supplier shall provide, own and maintain, at its own expense, all
necessary meters and associated equipment to be utilized in measuring the
Thermal Energy output of the Facility, measuring the condensate returned
to the Facility, measuring Cooling Water and measuring Feed Water (the
"Metering Devices") which measurements will form the basis of the
calculation of the monies owed pursuant to this Agreement. A single set of
Metering Devices for each service provided will be located at the
Facility. All Metering Devices, the arrangement thereof, and all
calibration procedures shall be approved by Purchaser in writing prior to
the purchase and installation by the Supplier.
13.02 An authorized representative of Supplier will read the Metering
Devices at the end of each calendar month, and will thereafter prepare and
send to Purchaser or its designee a notice of the amounts of steam
delivered to Purchaser by Supplier during such calendar month.
13.03 Supplier's metering devices shall be sealed and such seals shall be
broken only by Supplier and only when a Metering Device is to be
inspected, tested, adjusted, or repaired. Purchaser shall receive
reasonable prior notice of any testing, inspecting, or adjustment of the
Metering Devices and shall have the right to be present at such events.
13.04 Periodic calibration of the Metering Devices will be made at least
once every 2 years at no cost to Purchaser and additional tests will be
made at any reasonable time upon request therefor by Purchaser. If, as a
result of such tests the Metering Devices are found to be defective or
inaccurate, it will be promptly restored to a condition of accuracy or
replaced by Supplier. If a test of the Metering Devices is made at the
request of the Purchaser with the result that said Metering Device is
found to be registering correctly or within plus or minus two percent (2%)
of one hundred percent (100%) Purchaser agrees to bear all costs of such
test; provided, however, that if such test shows an error greater than
plus or minus two percent (2%) of one hundred percent (100%), then
Supplier shall bear all costs of such test. All Metering Devices shall be
calibrated by Supplier as close as practical to one hundred percent (100%)
at the time of installation and subsequent testing.
If any of the Metering Devices tests provided for herein disclose
that the error for such equipment exceeds plus or minus two percent (2%)
of one hundred percent (100%) an adjustment will be made for the actual
period during which inaccurate measurements were made, if that period can
be determined to the mutual satisfaction of the Parties, and otherwise,
for one-half (50%) of the measured quantities resulting from the readings
of such Metering Device taken during the billing periods since the last
test on such Metering Device was made, such adjustments to be made either
upward or downward from the amount of the error to one hundred percent
(100%). Any correction in billing resulting from such adjustment in meter
records shall be made in the next monthly bill rendered by Supplier after
the inaccuracy is discovered, and such correction when made, so long as
the error did not result from the intentional conduct of a Party, shall
constitute a complete and final settlement arising between the Parties out
of such inaccuracy of the Metering Devices.
Should any Metering Device fail to register the Thermal Energy
output of the Facility, the condensate returned, or the other services
provided during any period of time, the amount of Thermal Energy output,
condensate return, or other services provided will be estimated by
agreement by the Parties based on the amounts previously delivered during
similar periods under substantially similar conditions, producers
production volumes and historical records.
ARTICLE XIV
CONDENSATE
14.01 Condensate shall be returned by Purchaser to the Interconnection
Points, and shall be of a quality suitable for use by the Facility.
Condensate return shall be monitored by Supplier.
ARTICLE XV
MISCELLANEOUS
15.01 This Agreement shall be governed by the laws of the State of New
York.
15.02 This Agreement sets forth the entire agreement between the parties
on the subject matter hereof. Any modification of this Agreement can only
be in the form of a writing, signed by both Parties and having the prior
written consent of the Lender and, if required by the PEPCO Contract,
Utility.
15.03 If any provision of this Agreement shall be found by a court of
competent jurisdiction to be invalid, such finding shall not invalidate
any other provision hereof.
15.04 Neither Party shall be permitted to assign its rights or
obligations under this Agreement except in accordance with this Section
15.04. Supplier, in its sole discretion, may assign this Agreement and
delegate all rights, duties and obligations to any affiliate, successor
or subsidiary of Supplier, to any general or limited partnership in which
Supplier is a general or limited partner at the time of the assignment, or
to any person or entity who acquires the Facility or an interest in the
Facility. Supplier or any such successor or assignee may assign this
Agreement as security to any of Supplier's Lenders. Purchaser is aware
that Supplier (or its successor) will enter into a loan agreement (the
"Facility Loan Agreement") and related security documents with Supplier's
Lenders under which Supplier's Lenders or their agent, trustee, successors
or assigns may acquire the rights of Supplier under this Agreement or
assume the rights and obligations of Supplier under this Agreement.
Purchaser is also aware that Supplier intends to transfer the Facility and
the Distilled Water Facility to the Lender and leaseback such Facilities
from the Lender. Purchaser hereby acknowledges and agrees that Supplier
shall be entitled to enter into an agreement for the operation and
maintenance of the Facility with a third party qualified to perform such
services and further agrees that the execution of any such agreement shall
not constitute an assignment of this Agreement.
15.04.2 Purchaser may not assign this Agreement without (a)
the prior written consent of Supplier and the Supplier's Lenders and (b)
the written agreement of the assignee whereby such assignee expressly
assumes and agrees to perform each and every obligation of this Agreement,
and any assignment by Purchaser in violation hereof shall be null and
void.
15.05 Nothing contained in this Agreement shall be deemed or construed
for any purpose to establish a partnership, joint venture or a principal-
agent relationship between Supplier and Purchaser.
15.06 All notices under this Agreement shall be given in writing and
shall be deemed to have been given when delivered to the other party by
registered, or certified mail, return receipt requested, addressed as
follows:
For Purchaser:
Brandywine Water Company
4100 Spring Valley, Suite 1001
Dallas, Texas 75244
Attn: Chairman & General Counsel
For Supplier:
Panda-Brandywine, L.P.
4100 Spring Valley, Suite 1001
Dallas, Texas 75244
Attn: Chairman & General Counsel
15.07 This Agreement shall inure to the benefit of the Parties hereto and
their respective successors and assigns, in accordance with the terms
hereof.
Executed as of this 30th day of March, 1995.
PANDA-BRANDYWINE, L.P. BRANDYWINE WATER COMPANY
By: Panda Brandywine Corporation,
General Partner
By: Robert W. Carter By: Robert W. Carter
Title: President Title: President
EXHIBIT 10.65
PRECEDENT AGREEMENT
BETWEEN
COLUMBIA GAS TRANSMISSION
CORPORATION AND
PANDA-BRANDYWINE, L.P.
THIS PRECEDENT AGREEMENT ("this Agreement")
is made and entered into as of the 25th day of February,
1994, by and between COLUMBIA GAS TRANSMISSION
CORPORATION, a Delaware Limited Partnership (hereinafter
called "Panda").
WITNESSETH
WHEREAS, Panda desires that Columbia provide
firm transportation service ("FTS") for up to 24,24O
Dth/day of natural gas supplies from an interconnection
between Columbia and ANR Pipeline Company for delivery
to Cove Point LNG Limited Partnership ("LNG"), at an
interconnection of the facilities of Columbia and LNG
near Loudoun (meter M.S. B-17762), Loudoun County,
Virginia for transportation and re-delivery by LNG to
a gas line serving the Panda cogeneration facility in
Brandywine, Maryland (the "Brandywine Facility");
WHEREAS, Panda has requested such FTS
pursuant to Columbia's currently effective Federal Energy
Regulatory Commission (FERC) Gas Tariff;
WHEREAS, Panda has made or will make
arrangements for the natural gas supply necessary for
transportation to the Brandywine Facility;
WHEREAS, Columbia desires to render such FTS
for Panda;
WHEREAS, construction of facilities by Columbia
will be necessary in order for Columbia to provide the
FTS;
WHEREAS, Panda will make arrangements for
transportation service on LNG to further transport such
natural gas supplies to the Brandywine Facility; and
WHEREAS, Columbia and Panda have executed a
Service Agreement attached hereto obligating Columbia to
provide the FTS as conditioned and described herein;
NOW THEREFORE, in consideration of the
mutual covenants herein contained, the parties hereto
agree as follows:
Section 1. (a) Fire Transportation Service.
Columbia shall provide Panda with 24,240 Dth/day
("Transportation Demand") of Firm Transportation Service
("FTS") for a primary term of approximately 25 years as
provided for herein and in the attached FTS Service
Agreement ("Service Agreement"), such FTS shall be
rendered under the Service Agreement pursuant to
Columbia's FTS Rate Schedule. Deliveries of the
Transportation Demand will be at even hourly rates of
flow equal to or less than 1/24 of the Transportation
Demand, which shall be incorporated into the Service
Agreement attached hereto; provided Columbia's gas
controller shall deliver gas to Panda at the rate of
flow requested by Panda to the extent that Columbia's gas
controller determines, in his discretion, that such rate
of flow can be accommodated within Columbia's system
limitations.
(b) Points of Receipt and Delivery. The primary
Point of Receipt for gas into Columbia's system shall
be at the interconnection of the facilities referenced
in Appendix A of the Service Agreement. The primary
Point of Delivery will be at the interconnection of the
facilities of Columbia and LNG near Loudoun, (meter M. S. 8-
17762) Loudoun County, Virginia as further described in
the Service Agreement. Columbia shall deliver gas to
the Point of Delivery at Columbia's prevailing line
pressure on the suction side of the Loudoun Compressor
Station.
Section 2. (a)(1) Columbia's New Facilities. In
order to provide the FTS requested by Panda, Columbia
will have to construct certain facilities on
Columbia's pipeline system, which facilities Columbia
will own, operate and maintain. The estimated cost
of constructing Columbia's new facilities is
$11,448,000, excluding any gross-up for income taxes.
Such amount is Columbia's budget estimate of the costs
associated with the construction of facilities
necessary to provide FTS to Panda. Subject to
the provisions of this Section 2 concerning additional
facility costs and Section 4 hereof concerning actual
cost reconciliation, Panda agrees to pay to Columbia a
Contribution-in-Aid-of-Construction of $8,772,590
plus the applicable gross-up for income tax in accordance
with the provisions set forth in Section 3 hereof.
(a)(2) Columbia shall diligently undertake the
effort to obtain all governmental approvals necessary for
Columbia to construct the new facilities and provide
FTS to Panda, as provided herein. Panda shall cooperate
with and provide to Columbia on a timely basis all
information and data requested by Columbia which
Columbia deems necessary in order to obtain the
necessary regulatory approvals, including any
information requested by the FERC or its staff, for
construction of the new facilities. Upon (i) receipt
of all necessary regulatory authority upon terms and
conditions acceptable to Columbia and Panda, (ii)
receipt of all requisite approvals and permits
acceptable to Columbia and Panda, (iii) receipt of the
initial payment by Panda to Columbia of the
Contribution-In-Aid-of-Construction as specified in
Section 3(b)(i) hereof and (iv) satisfaction of the
Conditions Precedent set forth in Section 11 hereof,
Columbia shall commence construction of the facilities
required to provide the FTS to Panda.
(b) Additional Facility Cost. If, after
Columbia receives an order from the FERC approving the
construction of the new facilities upon terms and
conditions acceptable to Columbia and Panda, or any
time during construction of the facilities, Columbia
determines that the budget estimate for the cost of
the new facilities ($11,448,000 excluding any gross-up
for income taxes) necessary for Columbia to serve the
Brandywine Facility is anticipated to increase by 10% or
less of such budget estimate, then Columbia agrees to
pay such additional increase in cost. If said costs are
anticipated to increase by greater than 10% of the
budget estimate, Columbia shall give Panda advanced
written notice of such cost increase, with information
supporting the cost increase. Columbia shall not
proceed to incur such cost increase until Columbia and
Panda negotiate in good faith for the sole purpose of
determining a method to fund that portion of the
increase which is in excess of 10% of the budget
estimate. The funding method negotiated for the sole
purpose of determining the method to fund such excess
will be acceptable to both parties and structured so as
to preserve the economic integrity of the new facilities
construction. All facility costs for which Panda is
responsible shall remain unchanged or be adjusted upward
in accordance with the outcome of such negotiations. In
the event such negotiations are necessary, the
negotiation period will terminate upon the earlier of
(i) the parties reaching agreement as to the basis upon
which the project will proceed or (ii) the effective date
of termination of this Agreement by Panda or
Columbia as provided in Section l0(a)(i) or l0(b)(i)
hereof. However, such negotiation period shall be limited
to no more than 6 (six) months from the date Panda
receives notice of an Increase in the budget estimate
unless otherwise mutually agreed to by both Columbia
and Panda.
Section 3. (a) Contribution-in-Aid-of-
Construction. Panda shall make a Contribution-in-Aid-of-
Construction (the "Contribution") of $8,772,590, plus
applicable grossup for income taxes calculated at the
applicable tax rates over the life of the construction
of the facilities contemplated herein. The tax gross-
up will apply only to the facilities paid for by Panda
but owned by Columbia as further identified in
Appendix A to this Agreement. For purposes of this
Agreement, the "tax gross-up", or reimbursement for
income taxes incurred by Columbia as a result of
receipt of the Contribution, shall be calculated in
accordance with the decision of the FERC In
Transwestern Pipeline Company, 45 FERC (CCH) Para.
61,116 (l988). The parties understand and agree that
the cost of the new facilities construction for which
Panda is ultimately responsible shall be reconciled with
the actual costs of this project pursuant to Section 4 of
this Agreement.
(b)(1) Payment of Contribution. Panda will make
an initial payment in the amount of $100,000 toward
its Contribution upon the execution of this Agreement
by both Columbia and Panda. In addition, Panda will
make a second payment to Columbia in the amount of
$100,000 towards its Contribution, on March 1, 1994.
Columbia shall use such payments to defray the cost
of preparing and making the required FERC filing for
the new Columbia facilities, and to defray the cost of
Columbia's environmental assessment with respect to the
construction of the new Columbia facilities. Panda will
fund the balance of the Contribution out of the proceeds
of the financing for the Brandywine Facility. Upon the
closing of such financing, Panda shall certify in writing
to Columbia that the full amount of the Contribution
as defined in Section 3(a) hereof as of the date
of this Agreement ($8,772,590 plus the tax gross-up) is
or will be available to Columbia under the terms and
provisions of such financing (but not in a manner
inconsistent with the specific terms of this Agreement)
to pay the remaining amount due Columbia in respect of
the Contribution.
(b)(2) Columbia shall provide to Panda, on a monthly
basis, a good faith estimate of the cost of the
materials, other related construction costs and expenses
and any tax "gross-up" then known to Columbia that
Columbia will have to incur for the construction of the
Columbia facilities during the upcoming month. Panda
shall review such estimate and, within twenty (20) days
of Panda's receipt of such estimate, may provide
Columbia with a list of suppliers that may provide at a
lower cost materials that are the same as those described
in Columbia's estimate. If Columbia, in its
discretion, deem appropriate, it may purchase the same
materials from the list of suppliers provided by Panda;
provided that nothing herein shall be construed as an
obligation on Columbia to do so.
(b)(3) Panda shall pay in full or cause to be
paid in full to Columbia, within thirty (30) days of Panda's
receipt of any and all monthly invoices in respect of
the Contribution submitted by Columbia. Such monthly
invoices will be accompanied by a schedule and
supporting information reflecting in reasonable detail
the purpose for which Columbia will expend the requested
funds in connection with the construction of the new
Columbia facilities. Such amounts requested and actually
received by Columbia from Panda shall be applied toward
Panda's Contribution. In no event will Columbia be
obligated to proceed with or continue with any
construction of facilities as described herein until
payment by Panda and receipt by Columbia of the
funds requested by Colombia in the monthly invoices.
After payment in full by Panda of all facilities
costs for which it is responsible, as may be adjusted
pursuant to the terms of this Agreement, Columbia
shall begin expending Colombia's own funds to satisfy any
of its obligations hereunder for the cost of facilities.
Section 4. Actual Cost Reconciliation. (a) In
the event the actual cost of the new Columbia facilities
constructed hereunder is equal to or less than
$7,530,120 excluding any gross-up for income taxes, Panda
shall only be responsible for such actual cost, plus any
gross-up for income taxes.
(b) If the actual cost is greater than
$7,530,120 but equal to or less than $11,448,000.
excluding any gross-up for income taxes, Panda shall only
be responsible for 31.713% of the amount by which such
actual cost exceeds $7,530,120, plus any gross up for
income taxes, and Columbia shall be responsible for the
remaining portion (68.287%) of the amount by which
such actual cost exceeds S7,530,120. In addition, Panda
shall be responsible for the first $7,530,120 of the
actual total cost, plus any gross-up for income taxes.
(c) If the actual cost is greater than
$11,448,000, excluding any gross-up for income taxes,
the provisions of Section (4)(b) hereof shall apply with
respect to actual cost up to $11,448,000, and the
actual costs in excess of $11,448,000 shall be borne:
(1) by Columbia to the extent such excess is less than or
equal to 10% of $11,448,000; and (2) by Panda and
Columbia, to the extent such excess is greater than the
10% of $11,448,000; borne by Columbia pursuant to the
preceding Section 4(c)(1), in accordance with the
results of the negotiations between the parties as
provided for in Section 2(b) hereof, plus any gross-up
for income taxes applicable to the amount of the excess
cost for which a party is responsible.
(d) For any portion of the new facilities costs
for which Panda is responsible and has not paid to
Columbia at the end of the new facilities construction,
Columbia will render Panda a final invoice for the
balance, plus applicable grossup for income taxes, which
shall be payable by Panda within 30 days of Panda's
receipt of the invoice from Columbia. If Columbia has
collected more from Panda than for which Panda is
responsible, Columbia shall refund such excess to Panda
within 180 days of completion of the construction of the
new facilities, plus interest on such excess calculated
at the FERC approved interest rate at the time of such
refund.
Section 5. Commencement of Service. Subject to
the provisions of Section 11 hereof, this Precedent
Agreement shall become effective as of the date first
above written. For purposes of payment of the reservation
charge and Panda's right to deliver to or cause the
Transportation Demand to be delivered by Columbia, the
FTS and the primary term of the Service Agreement
shall commence on the date of the completion of the
Columbia facilities, which date shall be no earlier than
November 30, 1995. The primary term of the Service
Agreement shall end on that date 25 years after the
"Actual Commercial Operation Date" determined pursuant
to that certain Power Purchase Agreement, dated
August 9, 1991, between Panda and Potomac Electric
Power Company, which ending date shall be no earlier
than May 31, 2021. After the initial primary term (of
approximately 25 years) such service shall continue from
year to year thereafter unless terminated by either
party upon six (6) months written notice to the other.
Panda will notify Columbia of the "Actual Commercial
Operation Date" in the form of an actual date certain
as soon as it becomes known to Panda.
Section 6. Compliance with Columbia Gas Tariff.
The terms and conditions of this Agreement and the
Service Agreement are subject to the FTS Rate Schedule and
the General Terms and Conditions of Columbia's effective
FERC Gas Tariff, as the same may be amended or
superseded from time to time, and which are applicable
to the FTS Rate Schedule. Panda will submit to Columbia
from time to time, and within specified time periods,
all required forms and information necessary under
Columbia's FERC Gas Tariff to receive the
transportation services specified herein.
Section 7. Notices. Notices under this Agreement
shall be in writing, by letter, telex, or telecopier, and
shall be deemed to have been duly made when hand
delivered, when deposited in the mail as registered
or certified postage prepaid, or in the case of
transmission by telecopier, when confirmation of receipt
is obtained, or in the case of telex notice of answer-
back received, and shall be addressed as follows:
If to Columbia
Columbia Gas Transmission Corporation
Post Office Box 1273
Charleston, West Virginia 25325
Attention: Director of Market Development
PH: 304/357-2880
FAX:304/357-2424
If to Panda
Panda Energy Corporation
4100 Spring Valley Suite 1001
Dallas, TX 75244
Attention: Manager, Transportation and
Exchange
Ph: 214/980-7159
Fax: 214/980-6815
Either party may change its address for purposes of
notice by so notifying the other in writing.
Section 8. Governing Law. This Agreement shall
be governed by the laws of the State of West Virginia,
except as to any matters subject to federal law and
the exclusive jurisdiction of the FERC.
Section 9. Successors and Assigns. This
Agreement cannot be assigned except by the written
agreement of the parties hereto; provided, Panda may,
without the consent of Columbia, pledge or assign a
security interest in its rights and interests under this
Agreement and the Service Agreement to its lenders or
other parties providing financing for the Brandywine
Facility ("Panda's Lenders") as security for Panda's
obligations under the terms of such financing.
Columbia acknowledges but without relinquishing any right
or action it may assert against Panda, or as otherwise
permitted by law, upon an event of default by Panda
under the terms of such financing, any of Panda's
Lenders may (but shall not obligated to) assume or cause
its designee or a new lessee or purchaser of the
Brandywine Facility to assume, all of the interests,
rights, and obligations of Panda thereafter arising under
this Agreement or the Service Agreement; provided, that
if any of Panda's Lenders assume this Agreement or the
Service Agreement as a result of Panda's default,
Panda's Lenders shall provide written notice to
Columbia within sixty (60) days of such assumption. If
the rights and interests of Panda in this Agreement
or Service Agreement shall be assumed, sold or
transferred to Panda's Lenders, as provided for herein:
(i) the successor party shall be bound by and assume the
terms and conditions of this Agreement, the Service
Agreement and any and all obligations to Columbia
arising or accruing under this Agreement and the Service
Agreement from and after the date of such assumption, sale
or transfer; (ii) Columbia shall continue this Agreement
and the Service Agreement with the successor party as
if such person had thereafter been named as the
contracting party under this Agreement and the
Service Agreement; and (iii) Panda shall be released
and discharged from any and all obligations to Columbia
arising or accruing under this Agreement or the Service
Agreement from and after the date of such assumption,
sale or transfer; provided, that nothing herein shall be
construed as releasing or discharging Panda of any and
all obligations arising or accruing under this Agreement
or the Service Agreement prior to such date. In the
event of any assumption, assignment or transfer, the
terms of this Agreement and the Service Agreement shall
be binding upon and inure to the benefit of the successors
or assignees of the parties hereto. Any such assignment
shall expressly provide that the assignee thereunder
assumes all of the obligations of the assigning party
under this Agreement and the Service Agreement;
provided, however, if any of Panda's lenders assumes this
Agreement or the Service Agreement as a result of Panda's
default, their liability shall be limited to the parent
of applicable reservation charges and reservation
surcharges, and commodity charges and commodity
surcharges to Columbia for the transportation service
provided under the Service Agreement.
Section 10. Termination. This Agreement shall
only be terminated as provided in this section.
(a) Termination by Panda. Panda, upon thirty
(30) days written notice to Columbia, may terminate
this Agreement if: (i) the negotiations contemplated
in Section 2(b) hereof are not satisfactory to Panda,
in its reasonable discretion, at the end of the
negotiation period; (ii) Panda fails to complete the
construction of the Brandywine Facility by June 1, 1996;
or (iii) if any of the conditions precedent in Section
11) hereof are not fulfilled by June 1, 1997. Any such
termination shall not be effective if the unsatisfied
condition of this Section 10(a) is satisfied prior to the
end of the 30-day notice period.
(b) Termination By Columbia. Columbia, upon
thirty (30) days written notice to Panda, or Panda's
Lenders, as the case way be, may terminate this
Agreement if: (i) the negotiations contemplated in
Section 2(b) of this Agreement are not satisfactory to
Columbia, in its reasonable discretion, at the end of
the negotiation period; (ii) Panda's failure to make
payments to Columbia as provided in Section 3(b) hereof;
or (iii) if any of the conditions precedent in Section 11
hereof are not fulfilled by June 1, 1997. Any such
termination shall not be effective if the unsatisfied
condition of this Section 10(b) is satisfied prior to the
end of the 30-day notice period.
(c) Termination Costs. If this Agreement is
terminated by Panda or Columbia pursuant to this
Section 10, Panda shall reimburse and pay Columbia,
within sixty (60) days of Columbia's providing Panda with
an itemized listing, for any and all costs and expenses
incurred by Columbia, its agents or contractors, up to,
but not exceeding the Contribution, as of the effective
date of such termination pertaining to the design of the
facilities contemplated herein; obtaining regulatory and
other approval for construction of such facilities;
and the actual construction of such facilities. Such
costs and expenses shall include, but not be limited
to, costs and expenses for all: construction; materials;
supplies; labor; taxes; equipment; charges attributable
to holding and returning any unused equipment,
materials or supplies; design engineering; legal and
professional fees; internal charges; preparation of
regulatory or other filings, reports and supporting
materials; and all efforts to obtain the requisite
regulatory and other approvals. Columbia shall retain title
to any facilities constructed or in the process of
being constructed and to any equipment, materials
or supplies that cannot be returned to vendors or
suppliers. Columbia shall not be required to
refund or reimburse Panda for any funds paid by
Panda to Columbia pursuant to this Agreement, to the
extent such funds are necessary to satisfy any of
the aforementioned costs and expenses, or any "tax gross-
up" thereon.
(d) Service Agreement. If this Agreement is
terminated, the Service Agreement attached hereto
shall also be deemed terminated as of the effective
date of termination of this Agreement.
Section 11. Conditions Precedent. Except for the
rights and obligations of Columbia and Panda set forth in
Section 2(a)(2) hereof, which shall be effective on
the date first above written, performance by Columbia
and Panda under this Agreement and the Service Agreement
is expressly conditioned upon:
(a) Columbia obtaining any and all necessary
internal budgetary approvals;
(b) Panda executing appropriate precedent
and/or transportation agreements with the upstream and
downstream transporters under terms satisfactory to
Panda, in its sole discretion, and furnishing proof
to Columbia's reasonable satisfaction of such
agreements prior to Columbia commencing construction of
the required facilities;
(c) Panda executing appropriate gas supply
agreement(s) or purchasing gas reserves under terms
satisfactory to Panda, in its sole discretion, and
furnishing proof to Columbia's reasonable satisfaction of
such agreements prior to Columbia commencing
construction of the required facilities;
(d) Panda and Columbia executing the
attached Service Agreement concurrently with the
execution of this Precedent Agreement;
(e) Columbia receiving regulatory approvals,
acceptable to Columbia and Panda in their reasonable
discretion, from the FERC approving the required
facilities construction as set forth herein;
(f) Panda closing on or making arrangements
for the construction financing for the Brandywine
Facility, on terms and conditions satisfactory to Panda,
in its sole discretion;
(g) Approval by the United States Bankruptcy
Court for the District of Delaware, if such approval
is determined by Columbia to be necessary; and
(h) Execution of an Operating and Balancing
Agreement by and between LNG, Panda and other parties as
deemed necessary by Columbia containing terms
acceptable to Columbia and Panda, in their reasonable
discretion.
Columbia shall exercise all due diligence
to cause the conditions precedent (a), (d), (e), (g) and
(h) set forth above, and Panda shall exercise all due
diligence to cause the conditions precedent (b), (c),
(d), (f) and (h) set forth above to be satisfied on or
before October 1, 1994, which is the target date for
closing of the construction financing of the Brandywine
Facility. Each party shall provide notice to the other
party of the satisfaction of each condition for which the
notifying party is responsible within 30 days after
the fulfillment of each such condition. If any of the
foregoing conditions precedent are not satisfied, this
Agreement may be terminated as provided for in Section
10 hereof.
Section 12. Miscellaneous. Terms defined in
the Service Agreement and not otherwise defined herein
shall have the meaning assigned in the Service
Agreement.
Section 13. Financing Review. Columbia
acknowledges that Panda intends to finance the
Brandywine Facility on non-recourse basis. As such,
Panda's Lenders will review this Agreement as part of
their due diligence review prior to providing
construction financing for the Brandywine Facility.
Columbia therefore agrees to provide such
documentation, including but not limited to consents to
assignment, opinions of counsel or certificates, as
Panda's Lenders may reasonably require in connection
with such financing, and the arrangement between
Columbia and Panda contemplated in this Agreement.
Panda shall reimburse Columbia for any costs and
expenses incurred by Columbia in hiring any third parties
necessary to comply with this Section 13.
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed by a duly authorized
representative as of the date first above written.
COLUMBIA GAS TRANSMISSION
CORPORATION
By:
Name:
Its:
PANDA-BRANDYWINE, L.P.
By:
Name:
Its:
EXHIBIT 10.68
AMENDING AGREEMENT
This Amending Agreement ("Amendment") is made and
entered into this 24th day of March, 1995, by and between
Columbia Gas Transmission Corporation, a Delaware
corporation ("Columbia"), and Panda-Brandywine, L.P., a
Delaware Limited Partnership ("Panda") to be effective as
set forth in section four of this Amendment.
W I T N E S S E T H:
WHEREAS, Columbia and Panda are parties to that
certain Precedent Agreement dated February 25, 1994
("Precedent Agreement"), and the FTS Service Agreement
attached to the Precedent Agreement also dated February
25, 1994 ("Service Agreement");
WHEREAS, Panda has requested that Columbia amend
the Precedent Agreement and Service Agreement in light of
certain Panda business concerns; and
WHEREAS, Columbia is agreeable to amending the
Precedent Agreement and Service Agreement to accommodate
Panda's requests based upon Panda's having provided
Columbia the assurance of its continuing commitment to
Columbia that Columbia will be the pipeline to serve the
Brandywine Facility;
NOW, THEREFORE, in consideration of the mutual
covenants and agreements set forth herein, Columbia and
Panda agree as follows:
1. Amendments to Precedent Agreement. Columbia and
Panda agree that the Precedent Agreement is amended effective
as of the effective date of this Amendment as follows:
(a) All three references to the "$8,772,590" amount
in Sections 2(a)(1), 3(a) and 3(b)(1) shall be replaced
with "$6,772,590."
(b) All five references to the "$7,530,120" amount
in Sections 4(a) and 4(b) shall be replaced with
"$5,530,120".
(c) The reference to "31.713%" in Section 4(b)
shall be replaced with "20.995%."
(d) The reference to "68.287%" in Section 4(b)
shall be replaced with "79.005%."
(e) The second sentence of Section 5 shall be
amended and restated as follows:
"For purposes of payment of the reservation charge and
Panda's right to deliver to or cause the Transportation
Demand to be delivered by Columbia, the FTS and the
primary term of the Service Agreement shall commence on
the date of the completion of the Columbia facilities,
which date shall be no earlier than November 1, 1996;
provided that such commencement date and completion of the
Columbia facilities can be August 1, 1996, if Panda
provides Columbia with written notification by May 1,
1996, of Panda's desire for such commencement date and
completion of the Columbia facilities to be August 1,
1996."
(f) Section 10(a) shall be amended and restated as
follows:
"Termination By Panda. Panda, upon thirty (30) days
written notice to Columbia, may terminate this Agreement
if: (i) the negotiations contemplated in Section 2(b)
hereof are not satisfactory to Panda, in its reasonable
discretion, at the end of the negotiation period; (ii)
Panda fails to complete the construction of the
Brandywine Facility by June 1, 1997; or (iii) if any of
the conditions precedent in Section 11 hereof are not
fulfilled by June 1, 1997. Any such termination shall not
be effective if the unsatisfied condition of this
Section 10(a) is satisfied prior to the end of the 30-day
notice period."
(g) Section 11(h) shall be deleted, and the two
references to "(h)" in the last paragraph of Section 11
shall likewise be deleted.
2. Amendments to Service Agreement. Pursuant to the
Amended and Restated FTS Service Agreement attached
hereto, Columbia and Panda agree that the Service
Agreement is amended effective as of the effective date of
this Amendment as follows:
(a) The Service Agreement shall be amended to
provide for Panda's requested new point of receipt of
Monclova, Ohio, from ANR Pipeline Company.
(b) The second sentence of Section 2 shall be
amended and restated as follows:
"For purposes of payment of the reservation charge and
Panda's right to deliver to or cause the Transportation
Demand to be delivered by Columbia, the FTS and the
primary term of this Agreement shall commence on the date
of the completion of the Columbia facilities, which date
shall be no earlier than November 1, 1996; provided that
such commencement date and completion of the Columbia
facilities can be August 1, 1996, if Panda provides
Columbia with written notification by May 1, 1996, of
Panda's desire for such commencement date and
completion of the Columbia facilities to be August 1,
1996."
3. Effect of Amendment. Except as specifically amended
in above Sections 1 and 2 of this Amendment, all other
terms and provisions of the Precedent Agreement and
Service Agreement shall remain in full force and effect.
4. Effective Date of Amendment. This Amendment shall be
effective as of the date Columbia and Panda have executed
both this Amendment, and the Amended and Restated Service
Agreement attached hereto, the latter as amended in
accordance with section 2 of this Agreement.
5. Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be an
original, but such counterparts together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be executed by a duly authorized
representative.
COLUMBIA GAS TRANSMISSION CORPORATION
By:
Name: Peter J. Kinsella
Its: Vice President
Date March 23 1995
PANDA-BRANDYWINE, L. P.
By: Panda Brandywine Corporation
Its General Partner
By:
Name: Ralph T. Killian
Its: Senior Vice President
Date: March 21, 1995
EXHIBIT 10.69
AMENDED AND RESTATED FTS SERVICE AGREEMENT
THIS AGREEMENT, made and entered into this 23rd day of
March, 1995, by and between COLUMBIA GAS TRANSMISSION
CORPORATION ("Seller") and PANDA BRANDYWINE, L.P. ("Buyer").
WITNESSETH
That in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
Section 1. Service to be Rendered. Seller shall perform
and Buyer shall receive service in accordance with the
provisions of the effective FTS Rate Schedule and applicable
General Terms and Conditions of Seller's FERC Gas Tariff,
Second Revised Volume No. 1 (Tariff), on file with the
Federal Energy Regulatory Commission (Commission), as the
same may be amended or superseded in accordance with the
rules and regulations of the Commission. The maximum
obligation of Seller to deliver gas hereunder to or for
Buyer, the designation of the points of delivery at which
Seller shall deliver or cause gas to be delivered to or for
Buyer, and the points of receipt at which Buyer shall
deliver or cause gas to be delivered, are specified in
Appendix A, as the same may be amended from time to time by
agreement between Buyer and Seller, or in accordance with
the rules and regulations of the Commission. Service
hereunder shall be provided subject to the provisions of
Part 284.223 of Subpart G of the Commission's regulations.
Buyer warrants that service hereunder is being provided on
behalf of BUYER.
Section 2. Term. This Agreement is being executed
concurrently with an "Amending Agreement" between Seller and
Buyer, and shall become effective on the first date written
above. For purposes of payment of the reservation charge and
Panda's right to deliver to or cause the Transportation
Demand to be delivered by Columbia, the FTS and the primary
term of the Service Agreement shall commence on the date of
the completion of the Columbia facilities, which date shall
be no earlier than November 1, 1996; provided that such
commencement date and completion of the Columbia facilities
can be August 1, 1996, if Panda provides Columbia with
written notification by May 1, 1996, of Panda's desire for
such commencement date and completion of the Columbia
facilities to be August 1, 1996. The primary term of the
Service Agreement shall end on that date 25 years after the
"Actual Commercial Operation Date" determined pursuant to
that certain Power Purchase Agreement, dated August 9, 1991,
between Panda and Potomac Electric Power Company, which
ending date shall be no earlier than May 31, 2021. After the
initial primary term (of approximately 25 years) such
service shall continue from year to year thereafter unless
terminated by either party upon six (6) months written
notice to the other. Panda will notify Columbia of the
"Actual Commercial Operation Date" in the form of an actual
date certain as soon as it becomes known to Panda.
Pre-granted abandonment shall apply upon termination
of the agreement, subject to any right of first refusal
Buyer may have under the Commission's regulations and
Seller's Tariff.
Section 3. Rates. Buyer shall pay Seller the charges and
furnish Retainage as described in the above-referenced Rate
Schedule, unless otherwise agreed to by the parties in
writing and specified as an amendment to this Service
Agreement.
Section 4. Notices. Notices to Seller under this Agreement
shall be addressed to it at Post Office Box 1273,
Charleston, West Virginia 25325-1273, Attention: Manager -
Agreements Administration and notices to Buyer shall be
addressed to it at:
Panda-Brandywine, L.P.,
Suite 1001, 4100 Spring Valley,
Dallas, Texas 75244,
Attention: Ralph Killian;
until changed by either party by written notice.
Section 5. Prior Agreements. This Amended and
Restated Service Agreement, amends and restates, as of
this Agreement's effective date that Service Agreement
entered into on February 25, 1994 and revised on
January 1, 1995.
By: PANDA-BRANDYWINE, L.P.
PANDA-BRANDYWINE CORPORATION, GENERAL PARTNER
Name: Ralph T. Killian
Title: Senior Vice President
Date: March 21, 1995
COLUMBIA GAS TRANSMISSION CORPORATION By:
Name: Barry J. Lowery
Title: Manager, Agreements
Administration Date: March 21, 1995
EXHIBIT 10.70
FTS SERVICE AGREEMENT
THIS AGREEMENT, made and entered into this 30th day of
March, 1995 by and between COVE POINT LNG LIMITED
PARTNERSHIP, a Delaware limited partnership ("Operator")
and PANDA-BRANDYWINE, L.P., a Delaware limited partnership
("Customer").
WITNESSETH: That in consideration of the mutual
covenants herein contained, the parties hereto agree as
follows:
Section 1. Service to be Rendered. Operator shall
perform and Customer shall receive service in accordance
with the provisions of the effective Rate Schedule FTS and
the applicable General Terms and Conditions of Operator's
FERC Gas Tariff, Revised Volume No. 1, on file with the
Federal Energy Regulatory Commission ("Commission"), which
are incorporated by reference herein, as the same may be
amended or superseded in accordance with the rules and
regulations of the Commission and the terms and conditions
of this Service Agreement including Appendix A. The maximum
obligation of Operator to provide FTS service to or for
Customer is specified in Appendix A, as the same may be
amended from time to time by agreement between Customer and
Operator. Service hereunder shall be provided subject to
the provisions of Subpart G of Part 284 of the Commission's
regulations.
Section 2. Term. Service under this Agreement shall
commence on the later of (i) June 1, 1996, or (ii) the date
Customer commences commercial operation of its proposed
cogeneration facility to be constructed in Prince George's
County, Maryland (the "Brandywine Project"), but in no
event later than June 1, 1997, and shall continue in full
force and effect for an Initial Term of twenty (20) years
from the date service commences and year-to-year
thereafter, subject to termination by either party upon
written notice to that effect not less than six (6) months
prior to the expiration of the Initial Term or any
subsequent one (1) year period; provided however, that
Customer and Operator respectively waive their right to
give notice of termination of this agreement until six (6)
months after commencement of the (1) year extension term
after the Initial Term that is twenty-five (25) years from
the date Customer commenced commercial operations of the
Brandywine Project; provided further that if Customer has
not commenced commercial operations of the Brandywine
Project by June 1, 1999, this Service Agreement may be
terminated by either party upon sixty (60) days prior
written notice to the other party, with such termination
not being effective if Customer commences commercial
operation of the Brandywine Project during such 60-day
period. This Agreement shall terminate if Customer has not
executed the Agreement and returned an executed copy to
Operator on or before May 31, 1995, which termination shall
not prevent Customer from submitting a request for firm
transportation service in accordance with Operator's
effective FERC Gas Tariff. Upon termination of this
Agreement, Customer shall incur no further liability under
this Agreement. Pre-granted abandonment shall apply upon
termination of this Agreement.
Section 3. Rates. Unless otherwise agreed, Customer
shall pay Operator the maximum charges and furnish
Retainage as described in the above referenced Rate
Schedule.
Section 4. Notices. Notices to Operator under this
Agreement shall be addressed to it at 2100 Cove Point Road,
Lusby, MD 20657, and notices to Customer shall be addressed
to it at 4100 Spring Valley, Suite 1001, Dallas, TX 75244,
Attention: Ralph T. Killian until changed by either party
by written notice.
Section 5. Superseded Agreements. This Service
Agreement supersedes and cancels, as of the effective date
hereof, the following Service Agreements: N/A
PANDA-BRANDYWINE, L.P. COVE POINT LNG LIMITED
by Panda Brandywine Corporation, PARTNERSHIP
its general partner
By ___________________ By_____________________
Title: President Title: Chairman
Date: March 30, 1995 Date: March 27, 1995
Appendix A
to
FTS Service Agreement
between Cove Point LNG Company (Operator)
and Panda-Brandywine, L.P. (Customer)
Maximum Firm Transportation Quantity (MFTQ): 24,000
Dth/day. FTS Service is not being performed as the Elected
FTS Service option pursuant to Rate Schedule FPS.
Primary Receipt Points
Measuring Maximum Daily
Sta. Name Quantity (Dth/day)
Columbia Gas Transmission 24,000
Loudoun County Virginia
Primary Delivery Points
Measuring Maximum Daily
Sta. Name Quantity (Dth/day)
Washington Gas Light Company 24,000
White Plain
The Master List of Interconnects (MLI) as defined in the
General Terms and Conditions of Operator's Tariff is
incorporated herein by reference for the purposes of
listing valid secondary receipt points and delivery points.
Service changes pursuant to this Appendix A shall become
effective as of the date service commences under the
Service Agreement. This Appendix A shall cancel and
supersede the previous Appendix A effective as of N/A, to
the Service Agreement referenced above. With the exception
of this Appendix A, all other terms and conditions of said
Service Agreement shall remain in full force and effect.
PANDA-BRANDYWINE, L.P. COVE POINT LNG LIMITED
by Panda Brandywine Corporation, PARTNERSHIP
its general partner
By ______________________ By_____________________
Title: President Title: Chairman
Date: March 30, 1995 Date: March 27, 1995
EXHIBIT 10.71
GAS TRANSPORTATION AND SUPPLY AGREEMENT
Between PANDA-BRANDYWINE, L.P.
and
WASHINGTON GAS LIGHT COMPANY Dated:
November 10, 1994
TABLE OF CONTENTS
ARTICLE I DEFINITIONS 2
Section 1.1 Definitions 2
ARTICLE II CONDITIONS PRECEDENT 7
Section 2.1 Conditions Precedent 7
Section 2.2 Buyer's Conditions Precedent 7
Section 2.3 Seller's Conditions Precedent 7
Section 2.4 Fulfillment of Conditions Precedent 8
Section 2.5 Failure to Fulfill Conditions
Precedent 8
ARTICLE III TERM 8
Section 3.1 Term 8
ARTICLE IV FIRM TRANSPORTATION SERVICE 9
Section 4.1 Firm Transportation Service 9
Section 4.2 Rate
ARTICLE V PEAK PERIOD RELEASE 10
Section 5.1 Peak Period Release 10
Section 5.2 Resolution of Banked Quantities 12
ARTICLE VI MERCHANT SERVICE 14
Section 6.l Merchant Service 14
Section 6.2 Merchant Service Price 14
Section 6.3 Disclaimer of Warranties 15
ARTICLE VII BALANCING SERVICE 15
Section 7.1 Daily Imbalance 15
Section 7.2 Monthly imbalance 16
Section 7.3 Imbalance Make-Up 18
ARTICLE VIII TESTING PERIOD SERVICE 18
Section 8.1 Testing Period Service 18
ARTICLE IX NOMINATIONS 18
Section 9.1 Monthly Estimates 18
Section 9.2 Daily Nomination 19
Section 9.3 Intraday Nomination Changes 19
Section 9.4 Predetermined Allocation 19
ARTICLE X QUALITY AND PRESSURE 20
Section 10.1 Delivery Pressure 20
Section 10.2 Physical Quality of Gas 20
Section 10.3 Failure to Conform to Quality
Specifications 20
ARTICLE XI MEASUREMENT 20
Section 11.1 Measurement 20
ARTICLE XII MEASURING EQUIPMENT 21
Section 12.1 Ownership and Operation 21
Section 12.2 Check Meters 22
Section 12.3 Access to Meters and Records 22
Section 12.4 Measurement Equipment Failures 22
Section 12.5 Accuracy of Measuring Equipment 23
Section 12.6 Correction of Errors 23
Section 12.7 Preservation of Records 24
ARTICLE XIII BILLING AND PAYMENT 24
Section 13.1 Billing 24
Section 13.2 Payment 24
Section 13.3 Billing Disputes 25
Section 13.4 Verification 25
Section 13.5 Correction of Errors 25
Section 13.6 Non-Business Days 26
ARTICLE XIV NOTICES 26
Section 14.1 Notices 26
ARTICLE XV POSSESSION AND RESPONSIBILITY 27
Section 15.1 Possession and Responsibility 27
ARTICLE XVI WARRANTY OF TITLE 27
Section 16.1 Warranty of Title 27
ARTICLE XVII FORCE MAJEURE 28
Section 17.1 Effect of Force Majeure 28
Section 17.2 Force Majeure Termination 29
Section 17.3 Settlement of Strikes, Lockouts, or
Other Labor Disputes 29
ARTICLE XVIII TRANSFER AND ASSIGNMENT 30
Section 18.1 Assignments 30
ARTICLE XIX DEFAULT AND REMEDIES 30
Section 19.1 Definition of Event of Default 31
Section 19.2 Remedies for Event of Default 32
Section 19.3 Seller's Failure to Deliver 33
Section 19.4 Exclusion of Certain Damages 34
ARTICLE XX INDEMNIFICATION 34
Section 20.1 Indemnification 34
Section 20.2 Notice and Legal Defense 34
Section 20.3 Failure to Defend Action 34
Section 20.4 Indemnification Amount 35
ARTICLE XXI FACILITIES CONSTRUCTION 35
Section 21.1 WGL Facilities 35
ARTICLE XXII WEATHER PREDICTIONS 35
Section 22.1 Weather Predictions 35
ARTICLE XXIII MISCELLANEOUS PROVISIONS 36
Section 23.1 Regulation 36
Section 23.2 Binding Effect 36
Section 23.3 Nonwaiver of Defaults 36
Section 23.4 Written Amendments 36
Section 23.5 Choice of Law 36
Section 23.6 Severability and Renegotiation 36
Section 23.7 Other Agreements 37
Section 23.8 No Third Party Beneficiary 37
Section 23.9 Priority 37
Section 23.10 Captions 37
Section 23.11 Survival 37
Section 23.12 Further Assurances 37
Section 23.13 Counterparts 37
THIS GAS TRANSPORTATION AND SUPPLY AGREEMENT
("Agreement"), is made and entered into this 10th day of
November, 1994, by and between Panda-Brandywine, L.P., a
Delaware limited partnership ("Buyer"), and Washington
Gas Light Company, a District of Columbia corporation
and a Virginia corporation ("Seller"). Buyer and Seller
are sometimes referred to herein individually as a
"Party" and together as "Parties".
WITNESSETH
WHEREAS, Seller, a gas distribution company
subject to regulation by the Maryland Public Service
Commission, owns and operates natural gas distribution
Facilities in the states of Maryland and Virginia and
the District of Columbia; and
WHEREAS, Buyer intends to construct, own and
operate an approximately 230 MW (net) natural gas and
oil-fired cogeneration facility to be located in Prince
George's County, Maryland (the "Brandywine Facility");
and
WHEREAS, Buyer has contracted for firm
transportation service on the interstate pipelines
of Columbia Gas Transmission Corporation and CLNG;
and
WHEREAS, Buyer has requested Seller to provide
transportation service, whereby Seller will transport to
the Brandywine Facility on a firm basis certain
quantities of natural gas owned by Buyer and delivered
to Seller through the interstate pipeline facilities of
CLNG; and
WHEREAS, Buyer has requested Seller to provide a
merchant service, whereby Seller will sell and Buyer
will purchase certain quantities of natural gas
nominated by Buyer in addition to the quantities of
natural gas transported by Seller on behalf of Buyer;
and
WHEREAS, Seller has agreed to provide
transportation service and merchant service to Buyer;
and
WHEREAS, Buyer has agreed to release or sell to
Seller quantities of natural gas for resale by seller
during certain peak periods of natural gas usage; and
WHEREAS, Seller has agreed, in order to provide
Buyer with transportation service and merchant
service, to construct at its own expense certain
facilities necessary to provide such services.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements contained herein, the
sufficiency of which is hereby acknowledged, and
intending to be legally bound, Buyer and Seller hereby
agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions: For purposes of this
Agreement, except where another meaning is expressly
stated, the following capitalized words shall have the
following meanings:
(a) "Air Permit Restrictions" means the limits
on Buyer's ability to burn fuel oil at the Brandywine
Facility, set forth in the certificate of public
convenience and necessity issued to Buyer by the
Maryland Public Service Commission in Case No. 8488,
as such limits may be amended from time to time.
(b) "Average Daily Temperature" means the
average of the hourly temperatures measured during a
Day at the Washington National Airport Station of the
National Weather Service.
(c) "Agreement" a means this Gas Transportation
and Supply Agreement, between Buyer and Seller, as it
may be amended, supplemented or modified from time to
time.
(d) "Banked Quantity" means the Quantity of Gas
released by Buyer to Seller during a Peak Period
Release and credited to Buyer's account pursuant to
Section 5.1.
(e) "Brandywine Facility" means the
approximately 230 MW (net) natural gas and oil-fired
cogeneration facility Buyer intends to construct, own
and operate in Prince George's County, Maryland,
including any and all appurtenant facilities necessary
to receive Gas delivered by Seller under this
Agreement.
(f) "British thermal unit" or "Btu" means the
amount of heat required to raise the temperature of one
(1) pound of water one (1) degree Fahrenheit from sixty
(60) degrees Fahrenheit to sixty-one (61) degrees
Fahrenheit.
(g) "Buyer" means Panda-Brandywine, L.P., its
successors and permitted assignees.
(h) "Buyer's Lenders" means the lenders or other
entities providing financing for the construction and
operation of the Brandywine Facility.
(i) "Carry-over Quantity" means that portion
of a Monthly Imbalance that is (i) not subject to cash-
out pursuant to Section 7.2(b) and (c), and (ii) that
may be made-up pursuant to Section 7.3.
(j) "Commencement Date" means the Day on which
Buyer commences commercial operation of the Brandywine
Facility in accordance with the Power Purchase
Agreement, dated August 9, 1991, between Buyer and
Potomac Electric Power Company, as such agreement may
be amended from time to time.
(k) "Commodity Fee" has the meaning set forth in
Section 6.2.
(l) "Contract Year" means the twelve (12) Month
period beginning on the first Day of the first Month
following the Commencement Date (provided, however, if
the Commencement Date occurs on the first Day of a
Month, the first Contract Year shall begin on the
Commencement Date), and on each succeeding anniversary
of such Day.
(m) 'CLNG" means Columbia LNG Corporation, or
its successor Cove Point LNG Limited Partnership, or a
successor or assignee of either of them to the pipeline
and Gas liquefaction facilities currently owned by
Columbia LNG Corporation.
(n) "CLNG Pressure Deficiency" shall have the
meaning set forth in Section 4.1.
(o) "Cubic Foot" means a quantity of Gas that
occupies one (1) cubic foot when such Gas is at a
temperature of sixty (60) degrees Fahrenheit and at an
absolute pressure of fourteen and seventy-three one-
hundredths (14.73) pounds per square inch.
(p) "Daily Balancing Fee" has the meaning set
forth in Section 7.1.
(q) "Daily Delivery Quantity" means the Quantity
of Gas Seller actually delivered to Buyer and Buyer
actually received at the Delivery Point during a Day
pursuant to Article IV (including any Quantity of Gas
Seller delivers to the Delivery Point during such Day
allowing Buyer to makeup an imbalance pursuant to
Section 7.3), less the Daily Merchant Quantity, and
less any Quantity of Gas Seller actually delivered to
Buyer at the Delivery Point during such Day pursuant to
Option 3 in Section 5.2.
(r) "Daily Imbalance" means a Daily Negative
Imbalance or a Daily Positive Imbalance.
(s) "Daily Merchant Quantity" means, for any
Day, the Quantity of Gas that Seller sold and actually
delivered and Buyer purchased and actually received
during a Day at the Delivery Point in accordance with
Article VI.
(t) "Daily Negative Imbalance" shall have the
meaning set forth in Section 7.1(a).
(u) "Daily Positive Imbalance" shall have the
meaning set forth in Section 7.1(a).
(v) "Daily Receipt Quantity" means the Quantity
of Gas CLNG actually delivered during a Day at the
Receipt Point for Buyer's account during a Day pursuant
to Article IV (including any Quantity of Gas CLNG
delivers to the Receipt Point during such Day allowing
Buyer to make-up an imbalance pursuant to Section
7.3), and less any Banked Quantity arising from a Peak
Period Release elected by Seller during such Day
pursuant to Section 5.1.
(w) "Daily Transportation Quantity" means, for
any Day, a Quantity of Gas equal to the sum of (i) the
Daily Delivery Quantity, plus (ii) any Quantity of Gas
actually delivered by Seller at the Delivery Point
during such Day in accordance with Option 3 in Section
5.2.
(x) "Day" means a period of twenty-four (24)
consecutive hours beginning at 8:00 a.m. EST on a
calendar day and ending at 8:00 a.m. EST on the next
calendar day.
(y) "Delivery Point" means the point of
interconnection between the WGL Facilities and the
Brandywine Facility.
(z) "Dekatherm" or "Dth" means a Quantity of
Gas equal to one (1) MMBtu.
(aa) "Event of Default" shall have the meaning
set forth in Section l9.1(a).
(bb) "Excessive Monthly Imbalance" shall have
the meaning set forth in Section 7.2.
(cc) "F" means Fahrenheit.
(dd) "FERC" means the Federal Energy Regulatory
Commission, or its successor agency.
(ee) "Force Majeure" shall have the meaning set
forth in Section 17.1.
(ff) "Gas" means natural gas meeting the
quality specifications set forth in Article X.
(gg) "Gas Supply Contract" means any natural
gas supply agreement entered into by Buyer providing
for the sale and delivery of gas, on a firm basis, to
Buyer.
(hh) "Heating Value of Gas" shall have the
meaning set forth in the effective FERC Gas Tariff of
CLNG.
(ii) "Imbalance Tolerance Levels shall have the
meaning set forth in Section 7.2.
(jj) "Mcf" means 1,000 Cubic Feet of Gas.
(kk) "Merchant Fee" shall have the meaning set
forth in Section 6.2.
(ll) Merchant Service Price" shall have the
meaning set forth in Section 6.2.
(mm) "Minimum Pressure" means 375 psig.
(nn) MMBtu" means one million (1,000,000) Btu.
(oo) "Month" means the period beginning at
5:00 a.m. EST on the first day of a calendar month
and ending at 8:00 a.m. on the first day of the next
calendar month.
(pp) "Monthly Delivery Quantity" means the
sum of (i) the sum of each Daily Delivery Quantity
during a Month, plus (ii) any carry-over Quantity
arising from a prior Month's Negative Monthly
Imbalance that is not made-up by Buyer pursuant
to Section 7.3. A Quantity of Gas received by Buyer
at the Delivery Point to make-up, pursuant to
Section 7.3, a Daily Positive Imbalance incurred
during such Month or a carry-over Quantity
arising from Positive Monthly Imbalance during the
prior Month shall, in no event, be considered part of
a Monthly Delivery Quantity.
(qq) "Monthly Imbalance" shall have the
meaning set forth in Section 7.2.
(rr) "Monthly Receipt Quantity" means the sum
of (i) the sum of each Daily Receipt Quantity
during a Month, plus (ii) any carry-over Quantity
arising from a prior Month's Positive Monthly
Imbalance that is not made-up by Buyer pursuant to
Section 7.3. A Quantity of Gas delivered at the
Receipt Point for Buyer's account to make-up,
pursuant to Section 7.3, a Daily Negative
Imbalance incurred during such Month or a carry-
over Quantity arising from Negative Monthly Imbalance
during the prior Month shall, in no event, be
considered part of a Monthly Receipt Quantity.
(ss) "Negative Monthly Imbalance" shall have
the meaning set forth in Section 7.2.
(tt) "Nominated Daily Merchant Quantity" means
the Quantity of Gas Buyer nominates in accordance
with Article IX for sale and delivery at the Delivery
Point by Seller during a Day in accordance with this
Agreement..
(uu) "Nominated Daily Delivery Quantity" means
the Quantity of Gas Buyer nominates in accordance
with Article IX for transportation and delivery at
the Delivery Point by Seller during a Day in
accordance with this Agreement, including any
Quantity of Gas to be delivered in accordance with
Option 3 in Section 5.2.
(w) "Nominated Daily Receipt Quantity" means
the Quantity of Gas Buyer nominates in accordance
with Article IX for receipt by Seller at the Receipt
Point during a Day in accordance with this Agreement.
(ww) "Peak Period Release" shall have the
meaning set forth in Section 5.1.
(xx) "Positive Monthly Imbalance" shall have
the meaning set forth in Section 7.2.
(yy) "Psig" means pounds per square inch
gauge.
(zz) "Quantity of Gas" means a volume of Gas
expressed in Dekatherms as determined under Section
11.1
(aaa) "Receipt Point" means the point of
interconnection between the WGL Facilities and the
interstate pipeline facilities of CLNG at the White
Plains meter station in Charles County, Maryland, or
some other point mutually agreed to by Buyer and
Seller.
(bbb) "Seller" means Washington Gas Light
Company, its successors and permitted assignees.
(ccc) "Transportation Rate" shall have the
meaning set forth in Section 5.2.
(ddd) "WGL Facilities means the facilities of
Seller that are necessary for Seller to provide Buyer
with the services set forth in this Agreement,
including gas distribution facilities that Seller
must construct at its sole expense from the
interstate pipeline of CLNG to the Brandywine
Facility and the metering, regulating and appurtenant
facilities to be constructed by Seller at its sole
expense on the site of the Brandywine Facility, as
such facilities are described in the report Seller
must provide under Section 21.1.
ARTICLE II
CONDITIONS PRECEDENT
Section 2.1 Conditions Precedent: The
obligations of Buyer and Seller under this Agreement shall be
subject to the fulfillment of the conditions precedent set forth
in Section 2.2 and Section 2.3.
Section 2.2 Buyer's Conditions Precedent:
Buyer shall endeavor in good faith to fulfill the
following conditions precedent by the dates set forth
below, unless the Parties mutually agree to waive
fulfillment of any of the conditions precedent or
mutually agree to a different date by which each such
condition must by fulfilled.
(a) Buyer shall have made arrangement for or
closed on financing for the construction of the
Brandywine Facility, on terms and conditions
satisfactory to Buyer in its sole discretion, no
later than June 1, 1997.
(b) The Maryland Public Service Commission
shall have issued a final and non-appealable order
approving any amendment or modification to the certificate of
public convenience and necessity issued by the
Maryland Public Service Commission authorizing Buyer
to construct and operate the Brandywine Facility as
may be necessary to reflect the entering into of this
Agreement, on terms and conditions satisfactory to
Buyer in its sole discretion, no later than April 1,
1995.
(c) Columbia Gas Transmission Corporation shall
have received and accepted all necessary FERC
approvals to construct the facilities necessary to
provide to Buyer 24,000 Dth per day of firm
transportation service, which approvals shall be
final and non-appealable, and such facilities shall
be operational, no later than June 1, 1997.
(d) CLNG and Buyer shall have entered into a
firm transportation agreement obligating CLNG to
provide Buyer with 24,000 Dth per day of firm
transportation service and CLNG shall have received
and accepted all necessary FERC approvals to provide
such service to Buyer, which approvals shall be final
and non-appealable, no later than June 1, 1997.
Section 2.3 Seller's Conditions Precedent:
Seller shall endeavor in good faith to fulfill each
of the following conditions precedent by the dates
set forth below, unless Buyer waives fulfillment of
either of the conditions precedent or the Parties
mutually agree to a different date by which such
conditions must by fulfilled.
(a) The Maryland Public Service Commission
shall have issued a final and non-appealable order
approving this Agreement, on terms and conditions
reasonably satisfactory to Buyer and Seller, no later
than April 1, 1995.
(b) Seller shall have commenced construction
of the WGL Facilities no later than six (6) Months after
Seller receives notice from Buyer that Buyer has
commenced construction of the Brandywine Facility.
Section 2.4 Fulfillment of Conditions
Precedent: Upon fulfillment of each of the conditions
precedent in Section 2.2 and Section 2.3, the Party
responsible for the fulfillment of the condition
shall notify the other Party in writing of the
fulfillment of the condition. With respect to the
condition precedent set forth in Section 2.3(a),
Seller shall promptly provide Buyer with a copy of
any order issued by the Maryland Public Service
Commission approving the Agreement and shall notify
Buyer whether it accepts the order. Buyer shall
review the order and shall notify Seller within
twenty (20) Days of Buyer's receipt of such order
whether it finds the terms and conditions of such
order reasonably satisfactory and whether it accepts
the order. If Buyer determines that the order is
unsatisfactory, Buyer shall provide Seller with the
reasons for its determination. If Buyer fails to
notify Seller that it accepts the order within such
20-Day notice period, Buyer shall be deemed to have
accepted the order. If either Buyer or Seller does
not accept the order, Seller shall use its best
efforts to obtain an amendment or modification to
such order to make the terms and conditions of such
order reasonably satisfactory to both Buyer and
Seller.
Section 2.5 Failure to Fulfill Conditions
Precedent: If the conditions precedent in Section 2.2
and Section 2.3 are not fulfilled or waived in a
timely manner, either Party may terminate this
Agreement by providing the other Party with forty-
five (45) Days prior written notice of its intent to
terminate this Agreement. Unless the condition for
which such notice of termination is given is
fulfilled within such 45-Day notice period, this
Agreement shall terminate and neither Party shall
have any further obligations or liabilities under
this Agreement.
ARTICLE III
TERM
Section 3.1 Term: This Agreement shall become
effective on the date first written above and shall
continue in full force and effect for a primary term
of twenty-five (25) Contract Years, and for
additional terms of one (1) Contract Year thereafter
unless and until terminated by either Party upon six
(6) Months' prior written notice to the other Party
to be given no later than the end of the sixth Month
after the commencement of any additional Contract
Year term.
ARTICLE IV
Section 4.1 Firm Transportation Service:
Subject to the terms and conditions of this
Agreement, commencing on the Commencement Date and on
every Day thereafter during the effectiveness of this
Agreement, Seller shall receive at the Receipt Point
a Quantity of Gas up to the Nominated Daily Receipt
Quantity and shall transport and deliver at the
Delivery Point a Quantity of Gas up to the Nominated
Daily Delivery Quantity, all on a firm basis;
provided, however, during any period in which the
pressure on the CLNG pipeline system at the Receipt
Point is less than 500 psig (a "CLNG Pressure
Deficiency"), Seller shall, using its best efforts,
deliver at the Delivery Point as much Gas as is
possible during the Day, up to the Nominated Daily
Delivery Quantity, at no less than the Minimum
Pressure; and provided further, if Seller is unable
to deliver any portion of the Nominated Daily
Delivery Quantity at the Delivery Point due to a CLNG
Pressure Deficiency, Buyer shall not incur a Daily
Imbalance due to Seller's failure to deliver the
Nominated Daily Delivery Quantity.
Section 4.2 Rate
(a) Subject to the terms of this Agreement,
Buyer shall pay Setter the Transportation Rate for
each Dekatherm of Gas Seller actually transports and
delivers to Buyer and Buyer actually receives at the
Delivery Point during each Month in accordance with
this Article IV.
(b) The Transportation Rate shall equal $0.05
per Dth, plus the amount of any excise, use, gross
receipts, franchise or other similar tax which Seller
shall be required to pay or collect by the State of
Maryland for the transportation service provided by
Seller to Buyer under this Agreement. Any such tax
payable by Buyer under this Section 4.2 shall be
calculated with reference to the Quantity of Gas
actually transported by Seller and received by Buyer
under this Agreement.
(c) The amount payable by Buyer each Month for
transportation service provided by Seller under this
Agreement shall be determined by multiplying the
Transportation Rate by the Daily Transportation
Quantity for each Day during such Month.
ARTICLE V
PEAK PERIOD RELEASE; BANKED QUANTITIES
Section 5.l Peak Period Release
(a) (i) Subject to the restrictions set forth
in Section 5.1(c), commencing on the Commencement
Date and during the effectiveness of this Agreement,
Seller may elect that Buyer release for Seller's
resale during a Day the Quantity of Gas Buyer has
scheduled and confirmed for delivery and actually
received at the Receipt Point during such Day, up to
24,000 Dth of Gas per Day (such red ease, a "Peak
Period Release". Seller shall notify Buyer twentyfive
(25) hours in advance of a potential Peak Period Red
easel Such notice shall include the predicted
duration and the Quantity of Gas Seller may require
Buyer to release during such Peak Period Release. To
the extent that the Quantity of Gas Seller has
specified in such notice exceeds the Quantity of Gas
Buyer has previously scheduled and confirmed for
delivery at the Receipt Point curing such Day, Buyer
shall nominate in accordance with the terms of the
Gas Supply Contracts) the full Quantity of Gas
requested by Seller in such notice to be delivered at
the Receipt Point during such Day, up to 24,000 Dth
of Gas per Day.
(ii) Seller's actual election of a Peak Period
Release, on the Day specified by Seller in the notice
required in Section 5.1(a)(i), shall be effective
during the Day for such Peak Period Release upon
Seller providing Buyer with no less than one (1)
hour's prior notice. Such notice shall indicate the
duration of the Peak Period Release (consistent with
the terms of this Agreement) and the Quantity of Gas
Seller requests Buyer to release. If Buyer makes
arrangements for the delivery of a Quantity of Gas to
the Receipt Point during a Day in reliance on
Seller's prediction of a Peak Period Release set
forth in the notice provided to Buyer under Section
5.1(a)(i) and Seller does not actually elect a Peak
Period Release during such Day, at Buyer's election
such Quantity of Gas shall be either (A) stored on
Seller's distribution system as a Daily Positive
Imbalance that shall not be subject to any fees or
charges by Seller as either a Daily Imbalance or an
Excessive Monthly Imbalance (as those terms are
defined in this Agreement), or (B) transported by
Seller for delivery at the Delivery Point. Seller
shall indemnify and hold Buyer harmless from any and
all imbalance penalties, fees or charges that may be
assessed Buyer by its pipeline transporters to the
extent Se1ler's actual election of a Peak Period Red
ease differs from the predicted Peak Period Release
set forth in the notice required under Section
5.1(a)(i).
(b) During any Peak Period Release, Buyer
shall cause to be delivered at the Receipt Point the
Quantity of Gas Buyer has scheduled and confirmed for
delivery at the Receipt Point during the Day of the
Peak Period Release, and Buyer shall not take
delivery at the Delivery Point of such Quantity of
Gas. Seller shall credit to Buyer's account the
Quantity of Gas released to Seller during a Peak
Period Release (such Quantity of Gas, a "Banked
Quantity"). Buyer assumes no liability to Seller if a
third-party gas supplier or pipeline transporter
fails to deliver the Quantity of Gas Seller has
requested be released during a Peak Period Release,
and Buyer agrees to pursue in good faith on behalf of
Seller any right or cause of action Buyer may have
against such third-party gas supplier or pipeline
transporter when such failure prevents or impairs
Seller's receipt of such Quantity of Gas. If Buyer
fails to pursue in good faith any right or cause of
action against a third-party gas supplier or pipeline
transporter as set forth in the previous sentence,
Buyer's rights to pursue such cause of action shall
be subrogated to Seller and Seller may also pursue
its rights and remedies as set forth in Article XIX.
Seller shall be liable for and shall indemnify and
hold Buyer harmless from the imposition of any and
all penalties that may be assessed by any Gas
transporter arising from or out of Seller's election
of a Peak Period Release.
(c) Seller's right to request a Peak Period
Release shall be limited as follows:
(i) Seller may elect a Peak Period Release
only during the Months of December, January and
February of each calendar year, and may elect only up
to five (5) Days of Peak Period Release in each of
such Months.
(ii) Seller may elect no more than two (2)
Days of Peak Period Release in any seven (7) Day
period during the Months in which Setter may elect a
Peak Period Release.
(iii) Seller may elect a Peak Period Release
only on a Day for which the Average Daily Temperature
is predicted to be 20 degrees F or below.
(iv) Except as limited by Section 5.1(f),
Seller may not elect a Peak Period Release if Buyer
determines, in its sole discretion, that use of fuel
oil at the Brandywine Facility during such Peak
Period Release in lieu of the Quantity of Gas to be
red eased by Buyer will result in Buyer's violation
of the Air Permit Restrictions.
(d) Buyer's release of a Quantity of Gas to
Seller during a Peak Period Release shall be subject
to the following:
(i) In accordance with Section 15.1, Seller
shall be deemed to be in possession-and control of
any Quantity of Gas released by Buyer to Seller
during a Peak Period Release.
(ii) Seller shall be responsible for any and
all taxes that may arise as a result of Buyer's
release of a Quantity of Gas to Seller during a Peak
Period Release and Seller's possession and control of
possession and control of
ARTICLE IV
FIRM TRANSPORTATION SERVICE
Section 4.1 Firm Transportation Service:
Subject to the terms and conditions of this
Agreement, commencing on the Commencement Date and on
every Day thereafter during the effectiveness of this
akes with respect to the quality of Gas it delivers to the
Receipt Point set forth in Section 10.2 and with
respect to title set forth in Section 16.1, BUYER
MAKES NO WARRANTIES (WHETHER EXPRESSED, IMPLIED OR
STATUTORY) WITH RESPECT TO SUCH QUANTITY OF GAS
INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY AND
IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR
PURPOSE.
(e) Each Month during the effectiveness of
this Agreement, Buyer shall provide Seller with a
report setting forth the number of hours during the
prior Month that Buyer operated the Brandywine
Facility using fuel oil.
(f) On any Day during which the Average Daily
Temperature is less than 30 degrees F and Buyer has not
delivered or caused to be delivered at the Receipt
Point a Quantity of Gas for transportation by Seller
that is sufficient to meet the Gas supply
requirements at the Brandywine Facility during such
Day, Seller may permit Buyer to incur a Daily
Negative Imbalance pursuant to Article VII to the
extent necessary to meet the Gas supply requirements
at the Brandywine Facility. To the extent that Seller
permits Buyer to incur a Daily Negative Imbalance
pursuant to this Section 5.1(f), Buyer shall be
prohibited, during the current Contract Year, from
exercising its rights under Section 5.1(c)(iv) to
prevent Seller from requesting a Peak Period Release
up to the Quantity of Gas constituting the Daily
Negative Imbalance incurred by Buyer pursuant to this
Section 5.1(f). Nothing in this Section 5.1(f) shall
in any way limit or remove the restrictions on
Seller's right to request a Peak Period Release set
forth in Sections 5.1(c)(i), (ii) or (iii) or alter
or modify Buyer's right to resolve a Banked Quantity
pursuant to Section 5.2.
Section 5.2 Resolution of Banked Quantities
(a) Any Banked Quantity shall remain credited
to Buyer's account until Buyer exercises one of three
options for reducing a Banked Quantity, set forth in
this Section 5.2(a). Buyer shall elect an option or
options for reducing a Banked Quantity and exercise
such option or options by the March 31 following the
Day in which the Banked Quantity is credited to
Buyer's account. If Buyer does not take delivery at
the Delivery Point of a Quantity of Gas pursuant to
Option 3 below by such March 31, Buyer shall elect
either of the payment options set forth below (either
Option 1 or Option 2), and Seller shall credit such
amounts to the next invoice that Seller provides
Buyer pursuant to Section 13.1 Banked Quantities
shall be resolved in the order in which such
Quantities of Gas are credited to Buyer's account.
Option 1: Buyer may elect to receive
payment from Seller for some or all of a Banked
Quantity in an amount equal to the product of (A)
l.5, multiplied by (B) the Commodity Fee in effect
during the Peak Period Release from which such Banked
Quantity arose or, if a Commodity Fee His not in
effect during such Peak Period Red ease, the sum of
(x) the price as first published in the Month during
which the Peak Period Release occurred as the n
Louisiana Index" price for Columbia Gulf Transmission
Company as listed under "Prices of Spot Gas Delivered
to Pipeline" (per MMBtu dry) in Inside FERC's Gas
Market Report by McGraw-Hill, Inc. (or, if such index
price shall no longer be published, such replacement
index price that provides an index price that is
comparable in all material respects to the "Louisiana
Index" price and that is agreed to by the Parties),
plus (y) the sum of the maximum interruptible
transportation rates set forth in the effective FERC
Gas Tariffs of Columbia Gulf Transmission Company (or
its successor), Columbia Gas Transmission Corporation
(or its successor) and CLNG applicable to the
interruptible transportation of Gas on Columbia Gull
from Rayne, Louisiana to Leach, Kentucky, on Columbia
Gas Transmission from Leach, Kentucky to Loudoun,
Virginia and on CLNG from Loudoun, Virginia to the
Receipt Point, and multiplied by (C) the Banked
Quantity for which Buyer has elected such payment.
Option 2: Buyer may elect to receive payment
from Seller for some or all of a Banked Quantity in
an amount equal to the product of (A) the actual cost
of fuel oil per Btu during the Day of the Peak Period
Release from which such Banked Quantity arose,
multiplied by (B) the Banked Quantity for which Buyer
has elected such Payment. Buyer shall provide Seller
with documentation demonstrating the actual cost of
fuel oil Buyer incurred during such Peak Period
Release.
Option 3: Buyer may elect to have Seller
transport and deliver at the Delivery Point, in
accordance with Section 4.l, a Quantity of Gas equal
to the product of (A) 1.5, multiplied by (B) the
Banked Quantity for which Buyer has elected such
delivery.
(b) If Buyer selects Option 3 for the delivery
of a Banked Quantity, Seller shall deliver such
Banked Quantity at the Delivery Point for Buyer as
part of the Nominated Daily Delivery Quantity
submitted by Buyer pursuant to Article IX; provided,
however, Seller shall not be required to deliver such
Banked Quantity to Buyer at any time during a Day
when the Average Daily Temperature is below 21 degrees F.
ARTICLE VI
MERCHANT SERVICE
Section 6.1 Merchant Service: Subject to
the terms and conditions of this Agreement,
commencing on the Commencement Date and on every Day
thereafter during the effectiveness of this
Agreement, Seller shall sell and deliver at the
Delivery Point and Buyer shall purchase and receive a
Quantity of Gas up to the Nominated Daily Merchant
Quantity. Seller's obligation to sell and deliver a
Quantity of Gas to Buyer pursuant to this Section 6.1
shall be on a best efforts basis from each April 1
through the next following October 31 during the
effectiveness of this Agreement, and shall be on an
as available basis from each November 1 through the
next following March 31 during the term of this
Agreement.
Section 6.2 Merchant Service Price
(a) Subject to the terms and conditions of
this Agreement, Buyer shall pay Seller the Merchant
Service Price for each Dekatherm of Gas Seller
actually sells and delivers to Buyer and Buyer
actually receives at the Delivery Point during each
Month in accordance with this Article VI. Buyer shall
be responsible for the payment of all taxes arising
from the sale of a Quantity of Gas to Buyer at the
Delivery Point. Seller shall be responsible for the
payment of all taxes, royalties, overriding
royalties, fees and other costs arising prior to the
sale of a Quantity of Gas to Buyer at the Delivery
Point. The Merchant Service Price shall be determined
as follows:
Merchant Service Price = (Merchant Fee + Commodity
Fee)
WHERE:
(i) The Merchant Fee shall equal $0.05.
(ii) The Commodity Fee for each Month during
the effectiveness of this Agreement shall be
determined as follows: At least five (5) Days prior
to the beginning of each Month, Seller and Buyer
shall negotiate in good faith to agree on a Commodity
Fee to be effective during the next Month. If Seller
and Buyer are unable to agree on a Commodity Fee for
the next Month, no Commodity Fee shall be effective
for such Month and Buyer shall not be permitted to
receive merchant service from Setter during such
Month.
(b) The amount payable by Buyer each Month for
merchant service provided by Setter under this
Agreement shall be determined by multiplying the
Merchant Service Price by the Daily Merchant Quantity
for each Day during such Month.
Section 6.3 Disclaimer of Warranties: Except
for the warranty Seller makes with respect the
quality of Gas it delivers at the Delivery Point set
forth in Section 10.2 and with respect to title set
forth in Section 16.1, SELLER MAKES NO WARRANTIES
(WHETHER EXPRESSED, IMPLIED OR STATUTORY) WITH
RESPECT TO ANY QUANTITY OF GAS SOLD TO BUYER PURSUANT
TO THIS ARTICLE VI INCLUDING IMPLIED WARRANTIES OF
MERCHANTABILITY AND IMPLIED WARRANTIES OF FITNESS FOR
A PARTICULAR PURPOSE.
ARTICLE VII
BALANCING SERVICE
Section 7.1 Daily Imbalance
(a) Commencing on the Commencement Date and
on every Day thereafter during the effectiveness of
this Agreement, on any Day in which the Daily Receipt
Quantity is greater than the Daily Delivery Quantity'
Buyer shall have incurred a "Daily Positive
Imbalance." On any Day in which the Daily Receipt
Quantity is less than the Daily Delivery Quantity,
Buyer shall have incurred a "Daily Negative
Imbalance" (a Daily Positive Imbalance or a Daily
Negative Imbalance shall also be a "Daily Imbalance");
provided, however, during any Day on which Buyer
has elected to receive merchant service from Seller
pursuant to Article VI, Buyer shall not be deemed to
have incurred a Daily Negative Imbalance on such Day.
(b) For each Dekatherm of Gas constituting
a Daily Imbalance, Buyer shall pay Seller a "Daily
Balancing Fee" of $0.025 per Dth. On any Day in which
the Average Daily Temperature is greater than or
equal to 30 degrees F. Buyer shall have the right,
without restriction, to incur either a Daily Negative
Imbalance or a Daily Positive Imbalance. On any Day
in which the Average Daily Temperature is greater
than or equal to 20 degrees F and less than 30
degrees F. Buyer shall have the right to incur a
Daily Negative Imbalance only to the extent Gas is
available on the gas distribution system of Seller to
accommodate such Daily Negative Imbalance. Otherwise,
there shall be no restriction on Buyer's right to
incur a Daily Imbalance. In no event shall Buyer be
subject to the payment of the Daily Imbalance Fee for
any Daily Imbalance that is the result of an event of
Force Majeure or caused by Seller's failure to
perform under the terms of this Agreement.
Section 7.2 Monthly Imbalance
(a) Commencing on the Commencement Date and
for each Month thereafter during the effectiveness of
this Agreement, during any Month in which the Monthly
Receipt Quantity is greater than the Monthly Delivery
Quantity, Buyer shall have incurred a "Positive
Monthly Imbalance." During any Month in which the
Monthly Receipt Quantity is less than the Monthly
Delivery Quantity, Buyer shall have incurred a
Negative Monthly Imbalance. N A Positive Monthly
Imbalance or a Negative Monthly Imbalance shall be
the Buyer's "Monthly Imbalance."
(b) Commencing on the Commencement Date and
for each Month thereafter during the effectiveness of
this Agreement, during any Month in which Buyer's
Monthly Imbalance exceeds a quantity that is 10% of
the greater of (i) the Monthly Receipt Quantity or
(ii) the Monthly Delivery Quantity (such quantity,
the "Imbalance Tolerance Level"), the Quantity of Gas
constituting the portion of the Monthly Imbalance
that exceeds the Imbalance Tolerance Level (the
"Excessive Monthly Imbalances) shall be "cashed-out"
by the Parties as set forth in this Section 7.2.
Notwithstanding the above, upon mutual agreement of
the Parties, Buyer may carry-over into the next
Month, pursuant to Section 7.2(e), its entire Monthly
Imbalance in lieu of cashing-out an Excessive Monthly
Imbalance pursuant to this Section 7.2. If the
Parties cannot so agree, the Excessive Monthly
Imbalance shall be cashed-out pursuant to this
Section 7.2.
(c) An Excessive Monthly Imbalance shall be
cashed-out as fo1lows:
(i) If the Buyer experienced a Positive
Monthly Imbalance during the Month, Seller shall pay
Buyer an amount equal to the product of (A) the
Excessive Monthly Imbalance, multiplied by (B) the
Commodity Fee in effect during such Month. If a
Commodity Fee is not in effect for such Month, the
price at which a Positive Monthly Imbalance is cashed-
out shall equal the sum of (A) the price as first
published in the Month during which the Buyer
experienced the Positive Monthly Imbalance as the
"Louisiana Index" price for Columbia Gulf
Transmission Company as listed under "Prices of Spot
Gas Delivered to Pipeline" (per MMBtu dry) in Inside
FERC's Gas Market Report by McGraw-Hill, Inc. (or, if
such index price shall no longer be published, such
replacement index price that provides an index price
that is comparable in all material respects to the
"Louisiana Index" price and that is agreed to by the
Parties), plus (B) the sum of the maximum
interruptible transportation rates set forth in the
effective FERC Gas Tariffs of Columbia Gulf
Transmission Company (or its successor), Columbia Gas
Transmission Corporation (or its successor) and CLNG
applicable to the interruptible transportation of Gas
on Columbia Gulf from Rayne, Louisiana to Leach,
Kentucky, on Columbia Gas Transmission from Leach,
Kentucky to Loudoun, Virginia and on CLNG from
Loudoun, Virginia to the Receipt Point. Seller shall
credit any amount due Buyer under this Section 7.2(c)
in the invoice next sent to Buyer pursuant to Section
13.1.
(ii) If the Buyer experienced a Negative
Monthly Imbalance during the Month, Buyer shall pay
Setter an amount equal to the product of (A) the
Excessive Monthly Imbalance, multiplied by (B) the
Commodity Fee in effect during such Month. If a
Commodity Fee is not in effect for such Month, the
price at which a Negative Monthly Imbalance is cashed-
out shall equal the sum of (A) the price first
published in the Month during which the Buyer
experienced the Negative Monthly Imbalance as the
"Louisiana Index" price for Columbia Gulf
Transmission Company as listed under "Prices of Spot
Gas Delivered to Pipeline" (per MMBtu dry) in Inside
FERC's Gas Market Report by McGraw-Hill, Inc. (or, if
such index price shall no longer be published, such
replacement index price that provides an index price
that is comparable in all material respects to the
"Louisiana Index" price and that is agreed to by the
Parties), plus (B) the sum of the maximum
interruptible transportation rates set forth in the
effective FERC Gas Tariffs of Columbia Gulf
Transmission Company (or its successor), Columbia Gas
Transmission Corporation (or its successor) and CLNG
applicable to the interruptible transportation of Gas
on Columbia Gulf from Rayne, Louisiana to Leach,
Kentucky, on Columbia Gas Transmission from Leach,
Kentucky to Loudoun, Virginia and on CLNG from
Loudoun, Virginia to the Receipt Point.
(d) Any Excessive Monthly Imbalance that is
cashed-out shall be removed from Buyer's account for
the purpose of determining a future Daily Imbalance
or Monthly Imbalance. In no event shall any portion
of an Excessive Monthly Imbalance resulting from an
event of Force Majeure or caused by Seller's failure
to perforate under the terms of this Agreement be
cashed-out pursuant to this Section 7.2.
(e) For any portion of Buyer's Monthly
Imbalance that is less than or equal to the Imbalance
Tolerance Level or for any Excessive Monthly
Imbalance that is not cashed-out pursuant to Section
7.2(c) due to the Parties' mutual agreement pursuant
to Section 7.2(b), Buyer may carry-over the Quantity
of Gas constituting such Monthly Imbalance (the
"carry-over Quantity") into the next Month without
being subject to the monthly cash-out set forth in
this Section 7.2 and may attempt to make-up such
carry-over Quantity in accordance with Section 7.3.
Section 7.3 Imbalance make-up: Subject to the
limitations in this Section 7.3, during any Day of a
Month, Buyer may make-up all or any portion of a
Daily Imbalance incurred during such Month or ail or
any portion of a carry-over Quantity from the prior
Month by adjusting the Nominated Daily Receipt
Quantity relative to the Nominated Daily Delivery
Quantity. On any Day during which the Average Daily
Temperature is greater than or equal to 30 degrees F,
Buyer shall have the right without restriction to
make-up any imbalances in accordance with this
Section 7.3. On any Day during which the Average
Daily Temperature is less than 30 degrees F or
greater than 20 degrees F, Buyer shall have the right
to make-up in accordance with this Section 7.3 any
Daily Positive Imbalance or any carry-over Quantity
arising from a Positive Monthly Imbalance only to the
extent Gas is available on the gas distribution
system of Seller, as determined by Seller in its sole
discretion, to enable Buyer to exercise such make-up
rights. Any imbalance that is made-up by Buyer
pursuant to this Section 7.3 shall be removed from
Buyer's account for the purpose of determining a
future Daily Imbalance or Monthly Imbalance.
ARTICLE VIII
TESTING PERIOD SERVICE
Section 8.1 Testing Period Service: Prior to
the Commencement Date, but no earlier than February
1, 1996 or the date Buyer commences testing of the
Brandywine Facility, at the request of Buyer, Seller
shall, on an as available basis, receive a Quantity
of Gas at the Receipt Point for Buyer' s account and
sham 1 transport and deliver at the Delivery Point
such Quantity of Gas for Buyer's use in testing the
Brandywine Facility. The rate for such transportation
service shall be the Transportation Rate. In
addition, at the request of Buyer in its sole
discretion and in lieu of the transportation service
available to Buyer in this Section 8.1, Seller shall
sell and deliver, on an as available basis, and Buyer
shall purchase and receive at the Delivery Point a
Quantity of Gas for Buyer's use in testing the
Brandywine Facility. The price for any Gas Seller
sells and delivers and Buyer purchases and receives
under this Section 8.1 shall be the Merchant Service
Price. Buyer shall provide Seller with thirty (30)
Days' prior written notice of Buyer's commencement of
testing at the Brandywine Facility.
ARTICLE IX
NOMINATIONS
Section 9.1 Monthly Estimates: Commencing
on the Commencement Date and during the effectiveness
of this Agreement, five (5) Days prior to each Month,
Buyer shall submit to Setter estimates of the
Nominated Daily Receipt Quantity, the Nominated Daily
Delivery Quantity (which shall include, as indicated
separately by Buyer, any Quantity of Gas to be
delivered at the Delivery Point by the Seller
pursuant to Option 3 in Section 5.2) and the
Nominated Daily Merchant Quantity, that Buyer desires
Seller to receive, transport, sell or deliver (as the
case may be) during each Day of the following Month.
Buyer shall not be bound by the estimates submitted
to Seller pursuant to this Section 9.1.
Section 9.2 Daily Nomination:
Commencing on the Commencement Date and for each Day
during the effectiveness of this Agreement, by S:00
a.m. of each Day, Buyer shall submit to Seller the
Nominated Daily Receipt Quantity, the Nominated Daily
Delivery Quantity (which shall include, as indicated
separately by Buyer, any Quantity of Gas nominated by
Buyer to be delivered at the Delivery Point by the
Seller pursuant to Option 3 in Section 5.2) and the
Nominated Daily Merchant Quantity that Buyer desires
Setter to receive, transport, sell or deliver (as the
case may be) during such Day. Such nomination shall
also indicate an estimate of the Quantity of Gas
Buyer intends to make-up in accordance with Section
7.3. Seller shall confirm such daily nomination by
facsimile to Buyer. Buyer shall endeavor in good
faith to submit nominations that accurately reflect
Buyer's estimates of the Quantity of Gas Buyer
expects to use at the Brandywine Facility. If Buyer
fails to submit a nomination to Seller in accordance
with this Article IX, Seller shall deem Buyer's
nomination for that Day to be equal to the last
effective nomination Buyer provided to Seller. Buyer
may designate an agent to submit nominations on its
behalf in accordance with this Article IX.
Section 9.3 Intraday Nomination Chances:
During each Day, Buyer may submit to Seller a change
to the nomination effective for such Day. Any such
nomination change shall be effective no later than
one (1) hour after Buyer submits such nomination
change to Seller.
Section 9.4 Predetermined Allocation: With
each nomination Buyer submits to Seller pursuant to
Section 9.2, Buyer shall indicate the method Seller
shall utilize for al locating Gas among the Daily
Delivery Quantity, the Daily Merchant Quantity, and
any Quantity of Gas delivered at the Delivery Point
during such Day pursuant to Option 3 in Section 5.2,
such allocation to be based on the total Quantity of
Gas delivered by Seller at the Delivery Point during
such Day.
ARTICLE X
QUALITY AND PRESSURE
Section 10.1 Delivery Pressure: Any Quantity of
Gas delivered by Seller at the Delivery Point for the
account of Buyer shall be delivered at a pressure of no
less than the Minimum Pressure.
Section 10.2 Physical Quality of Gas: All Gas
delivered at the Receipt Point for Buyer's account and
delivered by Seller at the Delivery Point shall
substantially conform to the quality specifications set
forth in the effective FERC Gas Tariff of CLNG, as the
same may be amended from time to time.
Section 10.3 Failure to Conform to Quality
Specifications
(a) If the Gas delivered by or on behalf of
Buyer at the Receipt Point fails to conform to the
quality specifications set forth in Section 10.2,
Seller shall have the right, upon reasonable prior
written notice to Buyer, to discontinue acceptance of
Buyer's Gas. Such notice must specify the manner in
which the quality of the Gas fails to conform to the
specifications set forth in this Agreement.
(b) If the Gas delivered by Seller at the
Delivery Point fails to conform to the quality
specifications set forth in Section 10~2, Buyer shall
have the right to discontinue acceptance of deliveries
of Gas. Buyer shall provide written notice to Seller as
soon as practicable after such discontinuance of the
acceptance of Gas. Such notice must specify the manner
in which the quality of Gas fails to conform to the
specifications set forth in this Agreement.
ARTICLE XI
MEASUREMENT
Section 11.l Measurement
(a) The Heating Value of Gas delivered by Seller
on behalf of Buyer at the Delivery Point shall be
determined by Seller in accordance with the applicable
measurement provisions set forth in CLNG's then-
effective FERC Gas Tariff, as amended or modified from
time to time, and shall be based on the measurements
made by Seller's measuring equipment at
the Receipt Point"
(b) The Quantity of Gas delivered by Seller at
the Delivery Point shall be measured at the Delivery
Point in a manner consistent with the applicable
measurement provisions set forth in CLNG's then-
effective FERC Gas Tariff, as amended or modified from
tine to time, and shall be based upon the Heating Value
of Gas determined pursuant to Section 11.1.
ARTICLE XII
MEASURING EQUIPMENT
Section 12.1 Ownership and Operation
(a) Seller shall install, own, maintain, and
operate, at no additional expense to Buyer, at or near
the Receipt Point a measuring station, conforming with
those in general use in the natural gas industry,
properly equipped with displacement, turbine or orifice
meters, Gas samplers, chromatography, and other
equipment necessary to measure the Quantity of Gas and
the Heating Value of Gas received at the Receipt Point;
provided, however, Seller may utilize measurements made
by CLNG for Gas delivered by CLNG to the Receipt Point
in lieu of installing, owning, maintaining and
operating a measuring station for measuring Gas
received at the Receipt Point. Orifice meters shall be
installed and operated in accordance with the
specifications recommended in Gas Measurement Committee
Report No. 3 of the American Gas Association, as
amended from time to time and applied in a practical
manner. Displacement or turbine meters, if used, shall
be installed and Gas volumes computed, in accordance
with specifications recommended by the American Gas
Association, applied in a practical manner, or, in the
absence of such specifications, in accordance with
generally accepted industry practices.
(b) Seller shall install own, maintain, and
operate, at no additional expense to Buyer, at the
Delivery Point a measuring station, conforming with
those in general use in the natural gas industry,
containing the equipment necessary to measure the
Quantity of Gas delivered at the Delivery Point. Buyer
shall provide Seller with a location on the site of the
Brandywine Facility to construct such measuring
station. Orifice meters shall be installed and operated
in accordance with the specifications recommended in
Gas Measurement Committee Report No. 3 of the American
Gas Association, as amended from time to time and
applied in a practical manner. Displacement or turbine
meters, if used, shall be installed and Gas volumes
computed, in accordance with specifications recommended
by the American Gas Association, applied in a practical
manner, or, in the absence of such specifications, in
accordance with generally accepted industry practices.
Section 12.2 Check Meters
(a) Buyer may install, operate, and maintain at
the Delivery Point its own check measuring equipment at
no additional expense to Seller except as specifically
provided herein. The installation and operation of any
check measuring equipment by Buyer shall not interfere
with the operation of Seller's measuring equipment that
is located at the Delivery Point.
(b) Buyer may connect to any electronic real-
time information regarding total receipts and
deliveries that Seller obtains with respect to the
measurement of Gas at the Receipt Point and the
Delivery Point. In such case, the construction,
ownership, cost and expense of such connection shall be
borne (i) by Buyer, for that portion of the connection
located on the site of the Brandywine Facility, and
(ii) by Setter, for the remaining portion of the
connection. Setter, at no expense to Buyer except as
specifically provided herein, may connect to any
electronic real-time information Buyer obtains
regarding total receipts and deliveries at Buyer' s
check meter on Buyer's Plant property; provided,
however, such connection shall not interfere with the
operation of Buyer's check measuring equipment.
Section 12.3 Access to Meters and Records:
Seller and Buyer shall be given prior notice of and
shall have the right to be present at the time of any
installation, reading, cleaning, changing, repairing,
inspecting, testing, calibrating or adjusting done in
connection with the other Party's equipment used in
measuring the Quantity of Gas and the Heating Value of
Gas received or delivered at the Receipt Point or
Delivery Point. The records from this equipment shall
remain the property of their owner, but upon request,
each Party shall submit to the other Party copies of
the requested records and charts, together with
calculations therefrom, for inspection and
verification, and copying, subject to return within ten
(10) Days after receipt.
Section 12.4 Measurement Equipment Failures
(a) Subject to the provisions of Section
12.4(b), with respect to Seller's measurement equipment
at the Receipt Point and at the Delivery Point, in the
event Seller's measurement equipment is out of service
or registering inaccurately, the Quantity of Gas
received or delivered at the Receipt Point or Delivery
Point shall be determined, unless mutually agreed
otherwise: (i) by using the registration of any check
meter or other equipment if installed and accurately
registering; (ii) in the absence of such registrations,
by correcting the error if the percentage of error is
ascertainable by calibration, test or mathematical
calculation; or (iii) in the absence of both such
registrations and percentages of error, by estimating
the Quantity of Gas or the Heating Value of Gas
delivered to the Receipt Point or Delivery Point by
receipts or deliveries during periods under similar
conditions when the meter-was registering accurately.
(b) In the event there is a discrepancy between
the Quantity of Gas measured by Seller's measurement
equipment at the Delivery Point and the Quantity of Gas
measured by Buyer's check meter on the site of the
Brandywine Facility (if such check meter is installed),
the Parties shall promptly seek to determine the
correct Quantity of Gas. Until such discrepancy is
corrected, unless otherwise agreed, the Quantity of Gas
delivered at the Delivery Point shall be determined:
(i) by using Buyer's check meter if Buyer's check meter
is accurate and Seller's meter is not accurate; (ii)
by using Seller's meter if such meter is accurate and
Buyer's check meter is not accurate; or (iii) by using
Seller's meter if both meters are determined to be
accurate; and (iv) by using Buyer's check meter for any
time period prior to verification and correction of
such meters for any circumstances not covered by (i) and
(iii) above.
Section 12.5 Accuracy of Measuring Equipment:
The accuracy of Seller Is measuring equipment and
Buyer's check meter on the site of the Brandywine
Facility shall be verified at reasonable intervals;
provided, however, neither Party shall be required to
verify the accuracy of its equipment more frequently
than once in any thirty (30) Day period. In the event
either Party shall notify the other that it desires a
special test of any measuring equipment, the Parties
shall cooperate to secure a prompt verification of the
accuracy of such equipment. The cost of any special
test, if requested, shall be paid for by the requesting
Party if the measuring equipment tested is found to be
in error by less than two percent (2%).
Section 12.6 Correction of Errors
(a) If testing indicates that Seller's measuring
equipment, or Buyer's Delivery Point check meter, is in
error such equipment shall be adjusted immediately to
record accurately and any previous recordings from the
equipment shall be corrected to zero (O) error for any
period that is known definitely or agreed upon, but in
case the period is not known definitely or agreed upon,
corrections shall be for a period extending for one-
half of the time elapsed since the date of the last
test.
(b) If a test of Seller's measuring equipment
demonstrates an inaccuracy of two percent (2%) or more,
adjustment of payments made by Buyer to Seller during
the period of inaccuracy shall be as follows:
(i) If the metering equipment registers a
Quantity of Gas greater than is actually delivered to
Buyer at the Delivery Point, Seller shall make a refund
to Buyer for the amount which has been charged in
excess of that which would have been charged had the
meter registered with 100 percent accuracy. The refund
will be computed upon the assumption that the meter was
registering 100 percent prior to the beginning of the
period of inaccuracy or the period of adjustment as
determined in Section 12.6(a). The actual error of the
meter, and not the difference between the allowable
error and the error as found, shall be used as the
basis for calculating the refund.
(ii) If the metering equipment registers a
Quantity of Gas less than actually delivered to Buyer
at the Delivery Point, Seller may bill Buyer one half
of the unbilled undercharge for a period of twelve
months, unless the meter has been tested within that
twelve month period, in which event Seller may bill
Buyer one half of the unbilled undercharge for the
period since the meter was last tested.
Section 12.7 Preservation of Records: Each Party
shall preserve for a period of at least three (3)
years, or such longer period as is required by any
governmental authority having jurisdiction, all test
data, charts, and other similar records.
ARTICLE XIII
BILLING AND PAYMENT
Section 13.1 Billing: Seller shall present to
Buyer on or before the fifteenth (15th) Day following a
Month in which Gas was delivered to Buyer under this
Agreement a statement showing (i) the Quantity of Gas
and the Heating Value of Gas received at the Receipt
Point and delivered at the Delivery Point on behalf of
Buyer on each Day during such Month, separately for the
Daily Receipt Quantity, the Daily Delivery Quantity,
the Daily Merchant Quantity, any Banked Quantity
credited to Buyer's account and any Quantity of Gas
delivered by Seller to Buyer at the Delivery Point
pursuant to Option 3 in Section 5.2, (ii) the
quantities of Gas in Mcf received at the Receipt Point
and delivered at the Delivery Point on behalf of Buyer
on each Day during such Month, separately for the Daily
Receipt Quantity, the Daily Delivery Quantity, the
Daily Merchant Quantity, for any Banked Quantity
credited to Buyer's account and any Quantity of Gas
delivered by Seller to Buyer at the Delivery Point
pursuant to Option 3 in Section 5.2, and (iii) the
total amounts and charges due and payable by Buyer.
Section 13.2 Payment: Subject to the provisions
of Section 13.5, within forty-eight (4%) hours after
Buyer receives a draw from Buyer's Lenders following
receipt-of Seller's statement (but no later than five
(5) Days after the end of the Month in which Seller's
statement was delivered to Buyer) or on or before the
last day of the Month in which Seller's statement is
received by Buyer if Buyer is no longer drawing funds
from Buyer's Lenders, Buyer shall pay to Seller by wire
transfer to an account identified by Seller the amount
due pursuant to such statement and this Agreement for
transportation service and merchant service performed
during the preceding Month. The account number for
Seller shall be such account number as reflected on
Seller's invoice from time to time. If presentation of
a bill to Buyer is delayed beyond the fifteenth (15th)
Day of a Month as required in Section 13.1, then the
payment date shall be postponed by a period equal to
the number of Days elapsed between the fifteenth (15th)
Day of the Month and the Day on which the bill was
actually presented, unless Buyer is responsible for
such delay in which case payment shall be due as set
forth above. If Buyer fails to pay the undisputed
portion of any amount when due, interest on the unpaid
amount shall accrue from the date such payment was due
at a rate equal to two percent (2%) above the prime
interest rate of Chase Manhattan Bank, N.A. (New York)
or its successor bank, in effect on the first business
Day of the Month for which interest is being
calculated.
Section 13.3 Billing Disputes: If Buyer in good
faith disputes the amount of a bill issued by Seller,
or any part of it, Buyer shall pay such amount as is
undisputed and shall notify Seller of the amount in
dispute and the reasons for that dispute not later than
the date payment of the undisputed amount is due. In
the event such good faith dispute is resolved by the
Parties, Buyer shall pay Seller any additional amounts
due. Buyer's withholding of payment of amounts which it
disputes in good faith until final resolution of such
dispute shall not constitute a payment default under
l9.1(a)(i).
Section 13.4 Verification: Seller and Buyer
shall have the right to examine at any reasonable time
the books, records, and charts of the other Party to
the extent necessary to verify the accuracy of any
statement, chart or computation made under or pursuant
to the provisions of this Agreement.
Section 13.5 Correction of Errors In the event
either Party determines that there is an error in the
amount billed in any statement rendered by Seller, the
error shall be adjusted within thirty (30) Days of the
Day on which a final determination of whether an error
has occurred has been made. If the error resulted in an
overcharge and the bill has been paid, Seller shall
refund the amount of the overcharge, with interest at a
rate equal to two percent (2%) above the prime interest
rate of Chase Manhattan Bank, N.A. (New York) or its
successor bank, in effect on the first business Day of
the Month for which interest is being calculated, from
the time the overcharge or undercharge was paid to the
date of refund. If the error resulted in an undercharge
and the bill has been paid, Buyer shall pay the amount
of the undercharge upon notice from Seller.
Notwithstanding the above, in no event shall Seller or
Buyer be liable to the other Party for errors
determined to have occurred in any bill or statement
that was originally issued more than twenty-four (24)
Months prior to the Day on which the error was
determined.
Section 13.6 Non-Business Days: If a payment
date under this Article XIII falls on a Day that is not
a Day on which Seller is open for business, then the
payment date shall be the next Day Seller is open for
business after the date that the payment is otherwise
due.
ARTICLE XIV
NOTICES
Section 14.1 Notices: All notices including,
without limitation, communications, statements, and
nominations that are required or permitted under this
Agreement shall be in writing except as otherwise
provided for in this Agreement or as otherwise agreed
to by the Parties. Notice or communication shall be
deemed effective upon receipt. Notice may be
accomplished by personal service, telegram, telecopier,
overnight courier or U.S. mail and shall be sent to the
Parties at the following addresses:
Seller:
Washington Gas Light Company
6801 Industrial Road
Springfield, Virginia 22157
Telephone: (703) 750-4265
Telecopier: (703) 750-7945
Buyer: Panda-Brandywine, L. P.
4100 Spring Valley
Suite 1001
Dallas, TX 75244
Attention: Fuel Manager
Telephone: (214) 980-7159
Telecopier: (214) 980-6815
Either Party may change its address from time to time
by giving written notice of such change to the other
Party. Any notice or communication given or delivered
under this Agreement by mail shall be deemed received
by the addressee at the end of the third (3rd) business
Day after the date of mailing by prepaid mail in the
U.S. mail; provided, however, at any time when there is
a strike affecting delivery of U.S. mail, all such
deliveries shall be made by hand, overnight courier or
telecopier. If any such notice, communication,
statement or nomination is delivered by hand, overnight
courier or telecopier to the addressee, it shall be
deemed to have been received by the addressee as soon
as such delivery or transmission has been effected.
ARTICLE XV
POSSESSION AND RESPONSIBILITY
Section 15.1 Possession and Responsibility: As between
the Parties, Buyer shall be deemed to be in exclusive
control and possession of the Gas to be received,
transported, and delivered by Seller pursuant to
Article IV prior to receipt by Seller at the Receipt
Point and after receipt by Buyer of such Gas at the
Delivery Point. Otherwise Seller shall be deemed to be
in exclusive control and possession of the Gas,
including with respect to any Banked Quantity until
reduced by Buyer pursuant to Section 5.2. The Party
that has exclusive control and possession of the Gas
shall have sole responsibility for any event or
occurrence regarding the Quantity of Gas in that
Party's exclusive control and possession, and shall
indemnify, defend and hold harmless the other Party
with regard to such event or occurrence in accordance
with Article XX hereof, except to the extent of the
fault, negligence or willful misconduct of the other
Party, or except to the extent the other Party fails to
comply with the terms of this Agreement.
ARTICLE XVI
WARRANTY OF TITLE
Section 16.1 Warranty of Title
(a) Buyer warrants for itself, its agents and
its principals that at the time of delivery of its Gas
to Seller at the Receipt Point, Buyer shall have good,
valid, and legal title to the Gas, or the right to
deliver or cause to be delivered such Gas, free and
clear of all liens, encumbrances, security interests,
charges, and other adverse claims. Buyer agrees to pay
or cause to be paid to the entities entitled all
royalties, overriding royalties or like charges and
remove hi adverse claims in respect of Buyer's Gas or
the value thereof.
(b) Seller warrants for itself, its agents and
its principals that at the time of sale and delivery of
Gas to Buyer at the Delivery Point pursuant to Article
VI, Seller shall have good, valid, and legal title to
the Gas, or the right to sell and deliver such Gas,
free and clear of all liens, encumbrances, security
interests, charges, and other adverse claims. Seller
agrees to pay or cause to be paid to the entities
entitled all royalties, overriding royalties or like
charges and remove all adverse claims in respect of
Seller's Gas or the value thereof. Seller hereby
warrants to Buyer that at the time of Seller's
redelivery of Gas transported on behalf of Buyer
pursuant to Article IV, including redelivery of any
Quantity of Gas at the Delivery Point pursuant to
Option 1 in Section 5.1, Seller will have the good
right to deliver or redeliver such Gas, and that such
Gas shall be free and clear of all liens, encumbrances,
security interests, charges and other adverse claims.
(c) Each Party agrees, with respect to the Gas
delivered or redelivered by it, to indemnify the other
against all suits, actions, debts, accounts, damages,
costs (including reasonable attorney's fees), losses
and expenses arising from or out of any adverse claims of any and
all persons to or against said Gas.
ARTICLE XVII
FORCE MAJEURE
Section 17.1 Effect of Force Manure
(a) If either Party is rendered wholly or
partially unable to perform its obligations under this
Agreement because of an event of Force Majeure, that
Party shall be excused from whatever performance is
affected by the event of Force Majeure to the extent so
affected; provided, that such Party shall comply with
the provisions of this Section 17.1. Under the terms of
this Agreement, Force Majeure shall mean any act of
God, strikes, lockouts or other industrial
disturbances, acts of the public enemy, wars,
blockades, insurrections, riots, epidemics, landslides,
lightning, earthquakes, fires, storms, floods,
washouts, arrests and restraints of governments and
people, civil disturbances, explosions, breakage or
accident to machinery or lines of pipe, the necessity
for making repairs to or alterations of machinery or
lines of pipe, freezing of machinery or lines of pipe
due to abnormally cold weather, partial or entire
failure of Buyer's Gas supply due to an event of force
Majeure, failure of any third party pipeline
transporter to transport under a firm transportation
agreement the Gas that would be received at the Receipt
Point prior to delivery to Seller at the Receipt Point
due to an event of force Majeure, inability to obtain
materials, equipment, supplies , permits or labor, the
binding future order of any court or administrative
body of applicable jurisdiction which materially
adversely affects either Party's ability to perform
under this Agreement, or any other cause, whether of
the kind herein enumerated or otherwise, and whether or
not caused or occasioned by or happening on the account
of, the act or omission of one of the Parties or some
person or concern not a Party to this Agreement, not
within the reasonable control and without the fault or
negligence of the Party claiming the event of Force
Major.
(b) The non-performing Party claiming-suspension
of its obligations under this Agreement due to an event
of Force Majeure, as soon as practicable after learning
of the occurrence of the inability to perform due to an
event of Force Majeure, shall provide written notice to
the other Party giving the particulars of the
occurrence, including an estimation of its expected
duration and probable impact on the performance of its
obligations under this Agreement, and shall continue to
furnish timely regular reports with respect thereto
during the period of Force Majeure.
(c) The non-performing Party shall exercise all
reasonable efforts to continue to perform its
obligations under this Agreement and to remedy its
inability to so perform.
(d) The non-performing Party shall provide the
other Party with prompt notification of the cessation
of the event of Force Majeure giving rise to the excuse
from performance.
(e) No obligation of either Party that arose
prior to the occurrence of the event of Force Majeure
shall be excused as a result of that occurrence.
Section 17.2 Force Manure Termination: In the
event that Buyer is unable to utilize the
transportation service or merchant service under this
Agreement for a period of three-hundred and sixty-five
(365) consecutive Days or longer, due to an event of
Force Majeure declared by a Party, the Party not
claiming Force Majeure may terminate this Agreement on
thirty (30) Days' prior written notice to the other
Party.
Section 17.3 Settlement of Strikes Lockouts or
Other Labor Disputes: Nothing in this Article XVII
shall require the settlement of any strike, walkout,
lockout or other labor dispute on terms that, in the
sole judgment of the Party involved in the dispute, are
contrary to that Party's interest. It is understood and
agreed that the settlement of strikes, walkouts,
lockouts or other labor disputes shall be entirely
within the discretion of the Party having the
difficulty.
ARTICLE XVIII
TRANSFER AND ASSIGNMENT
Section 18.1 Assignments
(a) Except as specified in Section l8.1(b), the
rights and obligations of the Parties to this Agreement
may not be assigned by either Party except upon the
express written consent of the other Party, which
consent shall not be unreasonably withheld. In the
event that an assignment is made and consented to, the
assigning Party shall be released and discharged from
all obligations to the other Party under this Agreement
thereafter arising, such assignee shall be substituted
in place of the assigning Party herein, and the
assigning Party shall remain liable for all obligations
to the other Party hereunder arising and accruing
hereunder prior to the effectiveness of such
assignment.
(b) Either Party may assign its rights and
interests under this Agreement, without the consent of
the other Party but upon written notice to the other
Party, to any person or entity that succeeds by
purchase, merger, or consolidation to the assets of the
assigning Party substantially or in its entirety. Buyer
may assign to any person, without the consent of Setter
but upon written notice to the Seller, its duties
relating to the administration of this Agreement,
including but not limited to submitting nominations to
Seller pursuant to Article IX. Buyer shall have the
right, without the consent of Seller but upon written
notice to Seller, to assign all of its rights and
interests (but not its obligations) under this
Agreement to Buyer's Lenders as security for Buyer's
obligations under the terms of financing provided by
Buyer's Lenders. Seller acknowledges that upon an event
of default by Buyer under the terms of such financing,
any of Buyer's Lenders may (but shall not be obligated
to) assume or cause its designee or a new lessee or
purchaser of the Brandywine Facility to assume, all of
the interests, rights, and obligations of Buyer
thereafter arising under this Agreement. If the rights,
obligations and interests of Buyer in this Agreement
shall be assumed, sold or transferred as provided for
herein, Buyer shall be released and discharged from and
the assuming party shall be bound by and assume the
terms and conditions of this Agreement and any and all
obligations to Seller arising or accruing under this
Agreement from and after the date of such assumption,
and Seller shall continue this Agreement with the
assuming party as if such person had thereafter been
named as the contracting party under this Agreement;
provided/ however, if any of Buyer's Lenders assumes
this Agreement as provided herein they shall not be
liable for the performance of such obligations
hereunder except to the extent of their interest in the
Brandywine Facility.
ARTICLE XIX
DEFAULT AND REMEDIES, FAILURE TO DELIVER
Section 19.1 Definition of Event of Default
(a) An Event of Default under this Agreement
shall be deemed to exist upon the occurrence of any one
or more of the following events:
(i) The unexcused failure by either Party to
make payment of any amounts due to the other Party
under this Agreement and that failure continues for a
period of thirty (30) Days after written notice of
nonpayment; or
(ii) The unexcused failure by Seller to
receive, transport, sell or deliver any Quantity of Gas
in accordance with this Agreement for twenty (20) Days
during any Contract Year, except during a Peak Period
Release or as a result of Force Majeure; or
(iii) The unexcused failure by either Party to
perform fully any other material provision of this
Agreement and (A) such failure continues for a period
of sixty (60) Days after written notice of non-
performance from the other Party or (B) if within such
60-Day period the non-performing Party commences and
proceeds with due diligence to cure the failure and the
failure is not cured within one hundred and eighty
(80) Days or the period of time agreed to by the
Parties in writing as being necessary for the Party to
cure the failure with all due diligence; or
(iv) If by order of a court of competent
jurisdiction, a receiver or liquidator or trustee of
either Party or of any of the property of either Party
shall be appointed and such receiver or liquidator or
trustee shall not have been discharged within a period
of sixty (60) Days; or, if by decree of such a court,
either Party shall be adjudicated bankrupt 'or
insolvent or any substantial part of the property of
such Party shall have been sequestered or, such decree
shall have continued undischarged and unstayed for a
period of sixty (60) Days after the entry thereof; or,
if a petition to declare bankruptcy or to reorganize
either Party pursuant to any of the provisions of the
Federal Bankruptcy Code, as it now exists or as it may
hereafter be amended or pursuant to any other similar
state statute applicable to such Party, as now or
hereafter in effect, shall be filed against such Party
and shall not be dismissed within sixty (60) Days after
such filing; or
(v) If either Party shall file a voluntary
petition in bankruptcy under any provision of any
Federal or state bankruptcy law or shall consent to the
f fling of any bankruptcy or reorganization petition
against it under any similar law; or without limitation
of the generality of the foregoing, if either Party
shall file a petition or answer or consent seeking
relief or assisting in seeking relief in a proceeding
under any of the provisions of the Federal Bankruptcy
Code, as it now exists or as it may hereafter be
amended or pursuant to any other similar state statute
applicable to such Party, as now or hereafter in
effect, or an answer admitting the material allegations
of a petition filed against it in such a proceeding;
or, if either Party shall make a general assignment for
the benefit of its creditors; or, if either Party shall
admit in writing its inability to pay its debts
generally as they become due; or if either Party shall
consent to the appointment of a receivers), trustee (s)
or Liquidator(s) of its or of all or of any part of its
property.
(b) If both Parties reasonably agree that an
Event of Default has occurred, then the non-defaulting
Party may proceed to exercise any remedy provided under
this Agreement or existing at law or in equity. If one
Party believes in good faith that no Event of Default
has occurred and promptly informs the Party asserting
the existence of the Event of Default of this belief,
then the Parties shall enter negotiations in an attempt
to resolve the dispute; provided, however, if the non-
defaulting Party believes in good faith that a
negotiated resolution to the dispute is unlikely, then
that Party may proceed to exercise any and all remedies
available under this Agreement or existing at law or in
equity; and provided, further, nothing contained in
this Section l9.1(b) shall be deemed to extend the cure
periods set forth in Section 19.1(a).
Section 19.2 Remedies for Event of Default:
During any Event of Default, the Party not in default
shall have the right, subject to the cure periods set
forth in Section l9.1(a):
(a) To suspend service under this Agreement for
thirty (30) Days upon written notice to the defaulting
Party and, after such 30-Day suspension period, to
terminate this Agreement upon thirty (30) Days' written
notice to the defaulting Party; provided, however, such
termination shall not be effective if the Event of
Default is cured prior to the end of such 30-Day notice
period; and
(b) To pursue any other remedy provided under
this Agreement or now or hereafter existing at law or
in equity or otherwise/except as expressly limited by
this Agreement; provided, however, in the case of an
Event of Default by Buyer hereunder, Seller shall
provide Buyer's Lenders with notice of such Event of
Default at the same time such notice is provided to
Buyer pursuant to Article XIV hereof and Buyer's
Lenders each shall have the right (but not the
obligation), within the time periods for cure set forth
in Section 19.1(a) hereof, (i) to cure the Event of
Default on behalf of Buyer or (ii) to cure the Event of
Default on behalf of Buyer and to assume or cause its
designee or a lessee or purchaser of the Brandywine
Facility to assume all of the rights and obligations of
Buyer under this Agreement arising after the date of
such assumption.
Section 19.3 Seller's Failure to Deliver
(a) If on any Day, Seller fails to receive,
transport, sell or deliver a Quantity of Gas in
accordance with the terms of this Agreement for any
reason, except during a Peak Period Release or as a
result of Force Majeure, Seller shall pay to Buyer as
liquidated damages an amount equal to either of the
following:
(i) On any Day during which Buyer's use of fuel
oil at the Brandywine Facility in lieu of the Quantity
of Gas Seller fails to receive, transport, deliver or
sell under this Agreement would not violate the Air
Permit Restrictions, or on any Day during which Buyer
is able to obtain a replacement supply of Gas for the
full Quantity of Gas Seller fails to receive,
transport, deliver or sell, the difference between (x)
the total cost Buyer reasonably incurs to purchase and
transport replacement fuel (either Gas or fuel oil) to
the Brandywine Facility for use at the Brandywine
Facility during such Day, and (y) the total cost Buyer
would have incurred for the Quantity of Gas Seller
failed to receive, transport, sell or deliver in
accordance with the terms of this Agreement; or
(ii) On any Day during which Buyer's use of fuel
oil at the Brandywine Facility in lieu of the Quantity
of Gas Seller fails to receive, transport, sell or
deliver would violate the Air Permit Restrictions, or
during which Buyer is unable to obtain replacement fuel
(either Gas or fuel oil), the total reduction in
payments due to Buyer from Potomac Electric Power
Company, pursuant to that certain Power Purchase
Agreement, dated August 9, 1991, between Seller and
Potomac Electric Power Corporation (as such agreement
may be amended from time to time), as a result of
Buyer's failure to deliver capacity or energy to
Potomac Electric Power Company during the period of
Seller's failure to receive, transport, sell or deliver
a Quantity of Gas.
(b) Buyer's remedy of liquidated damages under
this Section 19.3 shall be in addition to such other
remedies available to Buyer hereunder if Seller's
failure to receive, transport, sell or deliver a
Quantity of Gas under this Agreement constitutes an
Event of Default, including commencing an action before
the Maryland Public Service Commission; provided,
however, such other remedies available to Buyer shall
not include an action to recover the costs Buyer incurs
to construct its own pipeline in lieu of receiving
service from Seller hereunder.
Section 19.4 Exclusion of Certain Damages:
Neither Party shall be liable to the other Party for
special, incidental, consequential or punitive damages
arising out of or related to this Agreement.
ARTICLE XX
INDEMNIFICATION
Section 20.1 Indemnification: Each Party
hereto shall indemnify and hold the other Party, its
affiliates, successors and assigns, and the officers,
directors, employees, agents, representatives,
contractors and stockholders of each of them, harmless
from and against all damages, losses or expenses
suffered or paid as a result of any and all claims,
demands, suits, causes of action, proceedings,
judgments, and liabilities, including reasonable
attorneys' fees incurred in litigation or otherwise,
assessed, incurred or sustained by or against any such
Party with respect to or arising out of a willful or
negligent act or failure to act or of a breach of this
Agreement by the indemnifying Party, its successors and
assigns, or any of their officers, directors,
employees, contractors, agents or representatives,
except to the extent that any such damages, losses or
expenses are the result of a willful or negligent act
or the failure to act or of a breach of the terms of
this Agreement by the indemnified Party, its successors
and assigns or any of their officers, directors,
employees, contractors, agents or representatives.
Section 20.2 Notice and Legal Defense:
Promptly after receipt by a Party of any claim or
notice of the commencement of any action,
administrative or legal proceeding or investigation as
to which the indemnity provided for in Section 20.1
hereof may apply, the indemnified Party shall notify
the indemnifying Party in writing of this fact. The
indemnifying Party shall assume the defense thereof
with an attorney designated by that Party and
satisfactory to the indemnified Party. However, the
indemnifying Party may not settle or compromise any
claim or lawsuit without the prior consent of the
indemnified Party if such settlement or compromise (a)
requires the indemnified Party to forego or relinquish
any rights or make any unindemnified payment; or (b)
subjects the indemnified Party to any injunction. The
indemnified Party shall have the right, at its sole
option and expense, to retain counsel to represent its
interests in defending the claim or lawsuit.
Section 20.3 Failure to Defend Action: Should
a Party be entitled to indemnification under Section
20.1 hereof as a result of a claim by a third party and
the indemnifying Party fails to assume the defense of
that claim, the indemnified Party may at the expense of
the indemnifying Party contest (or, with the prior
written consent of the indemnifying Party, settle) the
claim; Provided, however, the indemnified Party may,
without the consent of the indemnifying Party (with the
indemnifying Party remaining obligated to indemnify the
indemnified Party under Section 20.1) choose not to
contest such claim if, in the written opinion of the
indemnified Party's attorney, such claims) is
meritorious.
Section 20.4 Indemnification Amount: In the
event that a Party is obligated to indemnify and hold
the other Party and its successors and assigns harmless
under Section 20.1, the amount owing to the indemnified
Party shall be the amount of such Party's actual out-of-
pocket loss and expenses net of any net insurance or
other actual recovery but shall not include any
special, incidental, consequential or punitive damages.
ARTICLE XXI
FACILITIES CONSTRUCTION
Section 21.1 GAL Facilities: Upon Seller's
receipt of notice from Buyer that Buyer has commenced
construction of the Brandywine Facility, Seller shall
construct, at its sole expense and in accordance with
Section 2.3(b), the WGL Facilities. Within four (4)
months of Sellers receipt of such notice, Seller shall
provide Buyer with a report describing, with
particularity, the facilities to be constructed, their
location, their physical characteristics, and the time
schedule Seller shall follow for the construction,
testing and completion of the WGL Facilities. Once
Seller has commenced construction of the WGL
Facilities, Seller shall provide Buyer with a Monthly
progress report concerning the construction of the WGL
Facilities until the WGL Facilities are operational.
Seller shall complete construction of and put into
operation the WGL Facilities no later than twelve (12)
Months following receipt of Buyer's notice required by
this Section 21.1, but in any event no later than
February 1, 1996, provided, Buyer is making reasonable
progress toward completion of construction of the
Brandywine Facility. If Buyer significantly changes the
date by which it will commence testing of the
Brandywine Facility (which date is currently scheduled
to be February 1, 1996), Buyer and Seller shall meet to
negotiate a change in the date by which Seller must
complete construction and put into operation the WGL
Facilities, which date shall correspond to the date
Buyer will commence testing of the Brandywine Facility.
ARTICLE XXII
WEATHER PREDICTIONS
Section 22.1 Weather Predictions: On each Day,
by 8:00 a.m. EST, Seller shall provide Buyer with the
weather prediction Seller is then relying on to plan
its Gas supply needs for its distribution customers for
the next Day.
ARTICLE XXIII
MISCELLANEOUS PROVISIONS
Section 23.1 Regulation
(a) This Agreement and the respective
obligations of the Parties hereto are subject to all
present and future valid laws, orders, rules and
regulations by governmental authorities having
jurisdiction over the Parties, this Agreement or any
provision hereof. Neither Party shall be held in
default for failure to perform hereunder if such
failure is due to compliance with laws, orders, rules
or regulations of any such governmental authorities.
(b) This Agreement is subject to the approval
of the Maryland Public Service Commission, on terms and
conditions reasonably acceptable to both Parties.
Section 23.2 Binding Effect: The terms and
provisions of this Agreement and the respective rights
and obligations hereunder of Buyer and Seller shall be
binding upon and inure to the benefit of their
respective successors and permitted assigns.
Section 23.3 Nonwaiver of Defaults: No waiver
by Seller or Buyer of any default by the other under this
Agreement in the performance of any provisions of this
Agreement shall operate or be construed as a waiver of
any future default or defaults, whether of a similar or
different character.
Section 23.4 Written Amendments: No modification of the terms
and provisions of this Agreement shall be or become effective except
by written amendment executed by the Parties.
Section 23.5 Choice of Law: This Agreement
shall be governed by and construed in accordance with the
laws of the State of Maryland, other than such laws
governing choice of laws.
Section 23.6 Severability and Renegotiation:
Should any provision of this Agreement for any reason
be declared invalid or unenforceable by final and non-
appealable order of any court or regulatory body having
jurisdiction, such decision shall not affect the
validity of the remaining portions, and the remaining
portions shall remain in force and effect as if this
Agreement had been executed without the invalid or
unenforceable portion. In the event any provision of
this Agreement is declared invalid or unenforceable,
the Parties shall promptly negotiate in good faith a
new provisions) to eliminate the invalidity or
unenforceable provision and to restore this Agreement
as near as possible to its original intent and effect.
Section 23.7 Other Agreements: This Agreement
contains the entire agreement and understanding of the
parties relating to the transportation and sale of Gas
and supersedes any and ail oral or written agreements
and understandings that may have been made previously
that relate to the subject matter herein.
Section 23.S No Third Party Beneficiary: No
customer of Seller other than Buyer shall have any
rights under this Agreement.
Section 23.9 Priority: Notwithstanding
anything that may be contained in this Agreement, if there is a
conflict between the provisions of this Agreement and
an effective tariff of Setter, to which this Agreement
is or may become subject, the provisions of this
Agreement shall control unless the Maryland Public
Service Commission orders otherwise.
Section 23.10 Captions: All indices, titles,
subject headings, section titles, and similar items are
provided for the purpose of reference and convenience
and are not intended to be inclusive, definitive or to
affect the meaning, content or scope of this Agreement.
Section 23.1l Survival: Any provisions) of
this Agreement that expressly or by implication comes into
or remains in force following the termination or
expiration of this Agreement shall survive the
termination or expiration of this Agreement.
Section 23.12 Further Assurances: The Parties
shall execute such additional documents including,
without limitation, a reasonable consent to assignment
or similar document required by Buyer's Lenders, and
shall cause such additional action to be taken as may
be reasonably required or, in the good faith and
prudent judgment of any Party, may be necessary or
desirable to effect or evidence the provisions of this
Agreement and the transactions contemplated hereby.
Section 23.13 Counterparts: This Agreement
may be executed in any number of counterparts, and each
counterpart shall have the same force and effect as the
original instrument.
IN WITNESS WHEREOF, the Parties hereto have
caused this Agreement to be signed by their duly
authorized officers as of the day and year first above
written.
ATTEST: WASHINGTON GAS LIGHT COMPANY
BY: Frank J. Hollewa
TITLE: Senior Vice President
ATTEST PANDA-BRANDYWINE, L.P.
BY: Panda Brandywine
Corporation its sole
general partner
BY: Robert C. Carter
Title: Chairman
EXHIBIT 10.72
SITE LEASE
DATED AS OF MARCH 30, 1995
between
PANDA-BRANDYWINE, L.P.
as Site Lessor
and
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
(not in its individual capacity
but solely as Owner Trustee),
as Site Lessee
Real Property Located in the Counties of
Prince George's and Charles, Maryland
TABLE OF CONTENTS
Definitions 1
Article II Lease of Site; Term; Election to
Terminate; Removal 1
Section 2.1 Lease of Site; Term 1
Section 2.2 Election to Terminate 1
Article III TITLE; SEVERANCE AGREEMENT 2
Section 3.1 Title 2
Section 3.2 Severance Agreement 2
Article IV RENTAL PAYMENTS 2
Section 4.1 Rental Payments 2
Section 4.2 Method of Payment 3
Article V RETURN OF SITE 3
Article VI QUIET ENJOYMENT 3
Article VII USE OF SITE 4
Article VIII EASEMENTS 4
Section 8.1 Grant of Easements 4
Section 8.2 Exercise of Easements 4
Section 8.3 Dedications; Joinder in Recording 4
Section 8.4 Termination 5
Section 8.5 Easements Appurtenant; No Interference 5
Article IX LIENS 5
Article X UNDERTAKINGS OF SITE LESSOR 6
Section 10.1 Sufficiency of Site Lease;
Maintenance 6
Section 10.2 Site Lessor to Defend Title 6
Article XI TAXES AND CLAIMS 6
Section 11.1 Before Lease Termination Date 6
Section 11.2 After Lease Termination Date 6
Section 11.3 Apportionment 7
Section 11.4 Indemnification 7
Section 11.5 Additional Indemnification by
Site Lessor 8
Section 11.6 Survival 8
Article XII INSURANCE 9
Article XIII CONDEMNATION 9
Article XIV SITE LEASE DEFAULTS; REMEDIES 9
Article XV SUBLEASE; ASSIGNMENT 10
Article XVI LIMITATION OF LIABILITY 11
Article XVII NOTICES 12
Article XVIII Binding Effect 12
Article XIX MISCELLANEOUS 12
Section 19.1 Severability 12
Section 19.2 Amendments 12
Section 19.3 Headings 12
Section 19.4 Counterparts 12
Section 19.5 GOVERNING LAW 13
Section 19.6 No Merger 13
Section 19.7 Recording 13
Section 19.8 Leveraged Lease 13
Section 19.9 Certain Rights of Power Purchaser 13
Schedule 1 Legal Description of Site
Schedule 2 Legal Description of Easements
Exhibit A Memorandum of Lease
SITE LEASE
SITE LEASE dated as of March 30, 1995 between PANDA
BRANDYWINE, L.P., a Delaware limited partnership having an
address at 4100 Spring Valley, Suite 1001, Dallas, Texas
75244, as lessor (the "Partnership" or "Site Lessor"), and
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national
banking association, not in its individual capacity but
solely as Owner Trustee under the Trust Agreement (as defined
in the Loan Agreement referred to below), as lessee (the
"Owner Trustee" or "Site Lessee"), having an address at 777
Main Street, Hartford, Connecticut 06115.
ARTICLE I
DEFINITIONS
For purposes of this Site Lease, capitalized terms
used herein and not otherwise defined herein shall have the
respective meanings assigned to them in Appendix A to the
Construction Loan Agreement and Lease Commitment dated as of
March 30, 1995 among the Partnership, Panda Brandywine
Corporation and General Electric Capital Corporation (as the
same may be amended, supplemented or otherwise modified, the
"Loan Agreement"). Any term defined by reference to an
agreement, instrument or other document shall have the
meaning so assigned to it whether or not such document is in
effect. Unless otherwise indicated, references in this Site
Lease to sections, paragraphs, clauses, appendices, schedules and
exhibits are to the same contained in or attached to this
Site Lease.
ARTICLE II
LEASE OF SITE; TERM;
ELECTION TO TERMINATE; REMOVAL
SECTION 2.1. Lease of Site; Term. Site Lessor
hereby leases and demises to Site Lessee, and Site Lessee
hereby leases and hires from Site Lessor, upon and subject to
the terms and conditions hereof, the parcels of land
described in Schedule 1 hereto (the "Site"), together with
Site Lessor's interests in and to the easements described in
Schedule 2 hereto (the "Easements"), TO HAVE AND TO HOLD for
a term (the "Site Lease Term") which shall commence on the
date hereof and shall expire on the earlier of (i) November
1, 2037, and (ii) the termination of the Facility Lease
pursuant to Section 9(c), 9(d) or 12(b) thereof.
SECTION 2.2. Election to Terminate. Site Lessee
may at any time following the Lease Termination Date at its
option, terminate this Site Lease and the Site Lease Term
upon payment of $1 to Site Lessor. Upon such termination all
of Site Lessee's obligations and liabilities hereunder,
including its obligation to make rental payments hereunder,
shall automatically terminate.
ARTICLE III
TITLE; SEVERANCE AGREEMENT
SECTION 3.1. Title. Site Lessor warrants and
represents that (a) it has good and marketable and
indefeasible fee simple title in and to the Site and good
title in and to the Easements and (b) upon execution and
delivery of this Site Lease, Site Lessee will have (i) good
leasehold title in and to the Site and good title in and to
the Easements and (ii) good title to the easements granted to
it pursuant to Article VIII hereof, in each case free and
clear of all liens and encumbrances except for Permitted
Liens. Site Lessor further warrants and represents that such
Permitted Liens do not and will not materially adversely
affect the use of the Site, the Facility, the Easements and
the easements granted to Site Lessee pursuant to Article VIII
hereof, as contemplated by the Loan Agreement, the Facility
Lease and the other Transaction Documents.
SECTION 3.2. Severance Agreement. It is the
intention of Site Lessor and Site Lessee that the Facility
and each portion thereof, and all repairs, replacements,
substitutions and additions thereto, whether now or at any
time hereafter located on the Site, are severed, and shall
remain severed, from the Site and the Easements even if
physically attached, are and shall remain personal property,
and are not and shall not be fixtures or an accession to the
Site and the Easements, the title thereto being separate and
distinct from the title to the Site and the Easements, and
shall be treated as personal property with respect to the
rights of all Persons whatsoever and for all purposes of the
Loan Agreement, this Site Lease, the Site Sublease, and the
Facility Lease, and title to the Facility shall not, except
as specifically contemplated by the Transaction Documents, be
affected in any way by any instrument dealing with the Site or any part
thereof. Notwithstanding the foregoing, if contrary to the
intention of Site Lessor and Site Lessee, any Governmental
Authority with jurisdiction over the Site or the Easements
determines that any portion of the Facility is a fixture or
accession to the Site or the Easements, such portion of the
Facility shall constitute part of the Site being leased
hereunder.
ARTICLE IV
RENTAL PAYMENTS
SECTION 4.1. Rental Payments. For the period
commencing on the date hereof and ending on the earlier of
(x) the end of the Site Lease Term and (y) the Lease
Termination Date (but only if on such Lease Termination Date,
no Event of Default or Lease Event of Default shall have
occurred and be continuing), the rent payable by Site Lessee
hereunder for the lease of the Site, the right to use the
Easements and the grant of the easements granted pursuant to
Article VIII hereof shall be $1 per year. Site Lessee agrees
to pay the sum of $20 towards such rent in advance upon the
execution of this Site Lease. After the Lease Termination
Date (but only if on such Lease Termination Date, no Event of
Default or Lease Event of Default shall have occurred and be
continuing) to the end of the Site Lease Term, Site Lessee
shall pay to Site Lessor, for the lease of the Site, the
right to use the Easements and the grant of the easements
granted pursuant to Article VIII hereof, the Fair Market
Rental Value of the Site, the right to use the Easements and
the grant of the easements granted pursuant to Article VIII
hereof, for such period. Such rent shall be payable
quarterly in arrears during the period commencing on the
Lease Termination Date (but only if on such Lease Termination
Date, no Event of Default or Lease Event of Default shall
have occurred and be continuing) and ending on the last day
of the Site Lease Term.
SECTION 4.2. Method of Payment. Rental payments
(other than the rental payment made on the date hereof) shall
be paid to Site Lessor to a bank account with a bank
designated by Site Lessor. Each such payment shall be made
by Site Lessee in immediately available funds by 12:00 noon,
New York City time, on the scheduled date on which such
payment shall be due, unless such scheduled date shall not be
a Business Day, in which case such payment shall be due and
payable on the next succeeding Business Day.
ARTICLE V
RETURN OF SITE
On the last day of the Site Lease Term, Site Lessee
shall peaceably and quietly surrender possession of the Site
to Site Lessor free and clear of all liens and encumbrances
except for Permitted Liens.
ARTICLE VI
QUIET ENJOYMENT
Site Lessor warrants and covenants that neither it
nor any of its successors or assigns shall disturb Site
Lessee's peaceful and quiet use and possession of the Site
and will take no action in violation of Site Lessee's rights to
possession and use of the Facility, the Site, the Easements
and the easements granted to Site Lessee pursuant to Article
VIII hereof in accordance with the terms of this Site Lease
and the other Transaction Documents.
ARTICLE VII
USE OF SITE
Site Lessee shall use the Site only for legitimate
business purposes and, so long as the Power Purchase
Agreement is in full force and effect, in a manner consistent
with the terms thereof, and Site Lessee shall not use the
Site or permit the Site to be used for any unlawful use or
any use that constitutes a public or private nuisance upon
the Site or any part thereof or in any manner which will
violate or breach the provisions of any Easements or
Governmental Actions. After the Lease Termination Date, upon
the request of Site Lessee, Site Lessor shall cooperate with
Site Lessee in obtaining the valid and effective issuance,
or, as the case may be, transfer or amendment of all
Governmental Actions necessary or, in the reasonable opinion
of Site Lessee, desirable for the ownership, operation and
possession of the Site by Site Lessee or any permitted
transferee, lessee or assignee thereof of the Facility or the
possession and use of any property covered by this Site Lease
until the expiration or termination of the Site Lease Term.
ARTICLE VIII
EASEMENTS
SECTION 8.1. Grant of Easements. Subject to
the provisions of Section 8.2 hereof, Site Lessor hereby
covenants and agrees to grant to Site Lessee from time to
time such easements, if any, in, to, over, under and across
the lands, if any, owned by Site Lessor adjacent to the
Facility as Site Lessee shall reasonably determine to be
necessary or desirable in connection with the construction,
use, operation or maintenance of the Facility.
SECTION 8.2. Exercise of Easements. Except as
otherwise provided under the Facility Lease, Site Lessee
shall be responsible for the construction, installation,
maintenance and repair of all improvements and equipment
installed by it pursuant to the easements referred to in this
Article VIII.
SECTION 8.3. Dedications; Joinder in Recording.
The parties hereto shall each, to the extent necessary and to
the extent the same shall not result in the loss of
compensation otherwise obtainable from condemnation, join in
the execution of such instruments as may be required by any
Governmental Authority or Applicable Law in order to
effectuate widenings of streets or the installation of public
utilities and similar utility easements under and across
portions of the Site. Each party hereto shall comply, at the
expense of Site Lessor, with each reasonable request of the
other party hereto to join in the execution, delivery and
recordation of such instruments as may be required to locate
a specific easement granted herein.
SECTION 8.4. Termination. The easements granted
pursuant to this Article VIII shall terminate at the end of
the Site Lease Term, and Site Lessee shall, upon request and
at the cost and expense of Site Lessor, execute and deliver
such instruments as Site Lessor may reasonably require to confirm
the termination of Site Lessee's interest therein.
SECTION 8.5. Easements Appurtenant; No
Interference. The easements granted to Site Lessee pursuant
to this Article VIII shall be deemed to be appurtenant to the
Site and shall be for the benefit of Site Lessee and its
permitted successors and assigns and any sublessee of the
Site or any part thereof. Site Lessor shall not grant or
convey any easement or other interest that, if used or
enjoyed in accordance with its terms, would interfere with
the use and enjoyment of the Facility, the Site, the
Easements or the easements granted pursuant to this Article
VIII or the operation of the Facility by Site Lessee (or
Lessee under the Facility Lease) or its successors, assigns
or sublessees at any time during the Site Lease Term.
ARTICLE IX
LIENS
From the date hereof until the Lease Termination
Date, Section 7(a) of the Facility Lease and subsection 7.4
of the Loan Agreement shall apply with respect to Liens on or
with respect to the Site, the Easements and the Site Lessee's
title thereto or interest therein. During the period, if
any, from the Lease Termination Date to the end of the Site
Lease Term, (i) Site Lessee will keep, or cause to be kept,
the Site free and clear of all Liens in favor of any Person
claiming by, through or under Site Lessee (excluding Site
Sublessee under the Site Sublease and any Person claiming by,
through or under Site Sublessee) except for Permitted Liens
and Liens based upon amounts the payment of which is either
not yet delinquent or is bonded, provided that Site Lessee
shall not be required to discharge any such Lien during any
period that Site Lessee shall in good faith be contesting the
validity or the amount of any such Lien so long as such
contest shall not involve any substantial risk of any
material adverse effect on the ability of Site Lessee to
perform its obligations under this Site Lease, or any danger
of civil or criminal liability being imposed on Site Lessor,
and (ii) Site Lessor will keep, or cause to be kept, the
Site, the Easements and the easements granted pursuant to
Article VIII hereof free and clear of Liens (other than
Permitted Liens) in favor of any Person claiming by, through
or under Site Lessor.
ARTICLE X
UNDERTAKINGS OF SITE LESSOR
SECTION 10.1. Sufficiency of Site Lease;
Maintenance. Site Lessor covenants, represents and warrants
to Site Lessee that the Site and the Easements are sufficient
and will, at all times during the Site Lease Term, be
sufficient, or, if the same shall cease to be so sufficient,
Site Lessor will at its expense take such action, including
the conveyance of easements and the grant of common
facilities rights, as is reasonable or necessary, in order to
provide Site Lessee with reasonable means of connecting,
operating, maintaining, modifying, replacing, renewing,
repairing and removing the Facility. In addition, Site
Lessor shall use its reasonable efforts to provide fire and
water systems necessary to maintain, protect and preserve the
Site and the Facility. At all times during the Site Lease
Term, Site Lessor, at its expense, shall maintain the Site in
accordance with Applicable Laws and Prudent Utility Practice,
so that it will be available for the operation of the Facility,
including, without limitation, the maintenance of bridges, roads,
equipment, pumps and pipelines located on the Site.
SECTION 10.2. Site Lessor to Defend Title. Site
Lessor shall, at all times, at Site Lessor's cost and
expense, warrant and defend the leasehold estate in the Site
and the interests in the Easements and title to the easements
granted to Site Lessee pursuant to Article VIII hereof
conferred on Site Lessee by this Site Lease, as represented
in subsection 3.9 of the Loan Agreement.
ARTICLE XI
TAXES AND CLAIMS
SECTION 11I.1. Before Lease Termination Date.
During the period from the date hereof until the Lease
Termination Date, Section 6.11 of the Loan Agreement and
Section 7(a) of the Facility Lease shall apply with respect
to any and all Taxes and Claims (as defined below) incurred
or asserted in any way relating to, or arising out of, the
Site or the Easements.
SECTION 11.2. After Lease Termination Date.
During the period, if any, from the Lease Termination Date to
the end of the Site Lease Term, Site Lessee shall pay or
cause to be paid, before delinquency, any and all Taxes
(including, without limitation, income and franchise taxes of
Site Lessee or any Affiliate of Site Lessee) assessed,
levied, imposed upon or to become due and payable out of or
in respect of the use, ownership, possession, operation,
control or maintenance of the Site and Easements, and Site
Lessor shall pay or cause to be paid, before delinquency, any
and all other Taxes (including, without limitation, income
and franchise taxes of Site Lessor or any Affiliate) in any
way relating to or arising out of the Site and Easements;
provided, however, that neither Site Lessee nor Site Lessor
shall be required to pay any Tax payable by it pursuant to
the preceding provisions of this Section 11.2 if it shall be
contesting in good faith the validity thereof, so long as
such contest does not involve any risk of the sale,
forfeiture, interference with the use of or loss of any
material part of the Facility or the Site.
SECTION 11.3. Apportionment. If after the Lease
Termination Date and during the Site Lease Term, the Site
shall not be separately assessed but shall be assessed as
part of a larger tract of land, Site Lessor and Site Lessee
shall apportion any Tax resulting from such assessment. Site
Lessee's proportionate share of any such Tax shall be
determined by multiplying the amount of such Tax by a
fraction, the numerator of which shall be the acreage of the
Site, and the denominator of which shall be the acreage of
all the land covered by such Tax. Before the calculation of
each party's proportionate share of such Tax, the amount of
any such Tax shall be reduced by an amount equal to that
amount of such Tax attributable to all improvements located
on the larger tract, inclusive of the Site (including, but
not limited to, the Facility). The amount of Site Lessee's
proportionate share of the Tax so calculated shall be
increased by the amount of the Tax allocable to those
improvements owned by Site Lessee and the amount of Site
Lessor's proportionate share of the Tax so calculated shall
be increased by the amount of the Tax allocable to those
improvements owned by Site Lessor. Site Lessor and Site
Lessee shall each, on request of the other, apply individually
(if legally required) or join in the other's application (if
legally required) for separate assessments for the Facility and
the Site.
SECTION 11.4. Indemnification. During the period,
if any, from the Lease Termination Date to the end of the
Site Lease Term, Site Lessor and Site Lessee each agrees,
subject to the indemnification provisions of the Loan
Documents and the Lease Documents, to assume liability for
and to indemnify, protect, save and keep harmless the other
party and the other party's permitted successors, assigns,
shareholders, officers, directors and agents, from and
against any and all liabilities, obligations, losses,
damages, penalties, claims, actions, suits, judgments, legal
fees, costs, expenses and disbursements, excluding Taxes
(herein collectively called "Claims"), incurred by or
asserted against such other party, whether or not such other
party shall also be indemnified as to any such Claim by any
other Person, in any way relating to or arising out of the
conduct, operation or management of, or any work, act or
thing done in or on, or any accident, injury or damage caused
to any person or property in or on (i) the land owned or
occupied by Site Lessor adjacent to the Site, in the case of
Site Lessor or (ii) the Site, in the case of Site Lessee;
provided, however, that one party shall not be required to
indemnify the other party for (x) any Claim resulting from
acts which constitute the willful misconduct or gross
negligence of such other party or (y) any Claim resulting
directly from a transfer by such other party of all or part
of its interest in this Site Lease or the Site, other than to
the party otherwise indemnified or as a result of an Event of
Default, Lease Event of Default or Site Lease Event of
Default. To the extent that one party, in fact, receives
indemnification payments from the other party under the
indemnification provisions of this Section 11.4, the
indemnifying party shall be subrogated, to the extent of such
indemnity paid, to such indemnified party's rights with
respect to the transaction or event requiring or giving rise
to such indemnity.
SECTION 11.5. Additional Indemnification by Site
Lessor. Site Lessor hereby assumes liability for and agrees
to indemnify, protect, save and keep harmless Site Lessee and
its permitted successors, assigns, shareholders, officers,
directors and agents from and against any and all Claims in
any way relating to or arising out of the condition of the
Site, including, without limitation, those arising from any
act of the Site Lessor, (i) at the time Site Lessee enters
into possession thereof pursuant to this Site Lease and (ii)
at any time prior to the Lease Termination Date, but not with
respect to any condition caused by the gross negligence or
willful misconduct of Site Lessee. Without in any way
limiting the obligation of Site Lessor to indemnify and hold
harmless Site Lessee herein or pursuant to any other
Transaction Document, Site Lessor agrees to indemnify,
protect, save and keep harmless Site Lessee and its
successors, assigns, shareholders, officers, directors and
agents from and against all Claims (including response costs
such as clean-up, removal or mitigation costs) in any way
relating to or arising out of the presence or release of any
Hazardous Substance (i) on the Site (A) at the time Site
Lessee enters into possession thereof pursuant to the Site
Lease and (B) at any time prior to the Lease Termination Date
or (ii) resulting, directly or indirectly, from the
activities of Site Lessor, its agents, employees, affiliates
or contractors.
SECTION 11.6. Survival. The obligations of Site
Lessor and Site Lessee under this Article XI shall survive
the expiration or termination of this Site Lease and are
expressly made for the benefit of, and shall be enforceable
by, the indemnified party. The extension of any applicable
statute of limitations by one party shall not affect the
survival of the other party's obligations, as the case may
be, under this Article XI. All payments required to be paid
pursuant to this Article XI shall be made directly to, or as
otherwise required by, the indemnified party upon written
demand.
ARTICLE XII
INSURANCE
During the period, if any, from the Lease
Termination Date to the end of the Site Lease Term, Site
Lessor and Site Lessee shall maintain or cause to be
maintained in effect, with insurers of recognized
responsibility, insurance policies with respect to the Site,
and any improvements or equipment installed by such party
pursuant to the easements referred to in Article VIII,
insuring against such loss or damage to the person and
property of others from such risks and in such amounts as
owners of similar properties maintain with respect to such
property; provided, however, that such party may self-insure
against such risks, by deductible provisions or otherwise, to
the extent that equally creditworthy responsible owners of
similar properties self-insure against such risks with
respect to such property. Any insurance policies maintained
in accordance with the preceding sentence shall name the
other party as an additional insured thereunder.
ARTICLE XIII
CONDEMNATION
If after the Lease Termination Date, all or a
substantial portion of the Site and/or the Easements is
condemned or transferred in lieu of condemnation and the
remainder is not sufficient to permit operation of the
Facility on a commercial basis, the Site Lease Term shall
terminate at the time title vests in the condemning
authority, and the net proceeds of the condemnation shall be
divided between Site Lessor and Site Lessee in proportion to
the Fair Market Sales Values of their respective interests in
the property condemned. If an insubstantial portion of the
Site and/or the Easements is condemned at any time, the Site
Lease Term shall not terminate and the net proceeds of the
condemnation shall be used first to restore the Site and the
Easements, with the balance divided between Site Lessor and
Site Lessee in proportion to the Fair Market Sales Values of
their interests in the property condemned. For the purposes
of this Article XIII the net proceeds of a condemnation shall
mean the total condemnation proceeds less the costs and
expenses incurred in connection with the condemnation
(including legal fees).
ARTICLE XIV
SITE LEASE DEFAULTS; REMEDIES
The term "Site Lease Default", whenever used
herein, shall mean the following event but only if such event
occurs after the Lease Termination Date:
Site Lessee shall fail to pay rent pursuant to
Section 4.1 hereof, shall fail to comply with the
provisions of Article IX hereof or shall fail to pay any
amounts under Section 11.2, Section 11.4 and Article XII
hereof within 15 days after payment thereof shall have
become due and demanded by Site Lessor.
Upon the occurrence of a Site Lease Default and so
long as the same shall be continuing, Site Lessor may, at its
option, declare this Site Lease to be in default by written
notice to such effect given to Site Lessee and at any time
thereafter, so long as Site Lessee has not remedied all
continuing Site Lease Defaults, Site Lessor may exercise the
following remedies, as Site Lessor in its sole discretion
shall elect:
Site Lessor may exercise any right or remedy that
may be available to it under Applicable Law (including,
without limitation, the offsetting of any sums owing to
Site Lessor hereunder against sums owing by Site Lessor
in its capacity as lessee under the Facility Lease) or
proceed by appropriate court action to enforce the terms
hereof or to recover damages for the breach hereof
except that Site Lessor shall not exercise any right or
remedy that may be available to it hereunder or at law
or in equity to rescind or terminate this Site Lease or
take possession of the Site, the Easements or the
easements granted pursuant to Article VIII hereof.
ARTICLE XV
SUBLEASE; ASSIGNMENT
Site Lessee will not sublease the Site or assign
this Site Lease, except that:
(a) Site Lessee may sublease the Site to the
Partnership (the "Site Sublessee") pursuant to the Site
Sublease; and
(b) At any time after the Lease Termination Date,
or at any time after the Loan Agreement has been
declared to be in default pursuant to Section 8 thereof,
or the Facility Lease has been declared to be in default
pursuant to Section 15 thereof, Site Lessee may
sublease the Site or assign this Site Lease or any
rights hereunder to any Person in connection with the
sale or lease or other disposition of the Facility or
any interest therein to such Person.
Upon the assumption by any assignee of the obligations of
Site Lessee hereunder, the Site Lessee so assigning shall be
automatically released from such obligations.
ARTICLE XVI
LIMITATION OF LIABILITY
16.1 Partnership. There shall be full recourse to the
Partnership and all of its assets for the liabilities of the
Partnership under this Site Lease, but in no event shall any
Partner, Affiliate of any Partner, or any officer, director
or employee of the Partnership, any Partner or their
Affiliates or any holder of any equity interest in any
Partner be personally liable or obligated for such
liabilities of the Partnership, except as may be specifically
provided in any other Transaction Document to which such
Partner is a party or in the event of fraudulent actions,
knowing misrepresentations, gross negligence or willful
misconduct by the Partnership, any Partner or any of their
Affiliates in connection with this Site Lease. Subject to
the foregoing limitation on liability, Site Lessee may sue
or commence any suit, action or proceeding against any Partner
or any Affiliate in order to obtain jurisdiction over the
Partnership to enforce its rights and remedies hereunder.
Nothing herein contained shall limit or be construed to limit
the liabilities and obligations of any Partner or Affiliate
thereof in accordance with the terms of any other Transaction
Document creating such liabilities and obligations to which
such Partner or Affiliate is a party.
16.2 Owner Trustee. Shawmut Bank Connecticut is
entering into this Site Lease solely as Owner Trustee under the Trust
Agreement and not in its individual capacity. Accordingly,
each of the representations, warranties, undertakings and
agreements herein made on the part of the Site Lessee, is
made and intended not as a personal representation, warranty,
undertaking or agreement by or for the purpose or with the
intention of binding Shawmut Bank Connecticut personally, but
is made and intended for the purpose of binding only the
Trust Estate. This Site Lease is executed and delivered by
the Site Lessee solely in the exercise of the powers
expressly conferred upon it as trustee under the Trust
Agreement; and no personal liability or responsibility is
assumed hereunder by or shall at any time be enforceable
against Shawmut Bank Connecticut or any successor in trust on
account of any action taken or omitted to be taken or any
representation, warranty, undertaking or agreement hereunder
of the Site Lessee, either expressed or implied, all such
personal liability, if any, being expressly waived by the
parties hereto, except that the parties hereto, or any Person
acting by, through or under them, making a claim hereunder,
may look to the Trust Estate for satisfaction of the same and
Shawmut Bank Connecticut or its successor in trust, as
applicable, shall be personally liable for its own gross
negligence or willful misconduct in the performance of its
duties as Owner Trustee or otherwise.
ARTICLE XVII
NOTICES
Unless otherwise specifically provided for herein,
all notices, consents, directions, approvals, instructions,
requests and other communications required or permitted by
the terms hereof to be given to each party hereto shall be in
writing, and shall become effective when delivered in the
manner and to the address specified in the Facility Lease.
ARTICLE XVIII
BINDING EFFECT
The terms and provisions of this Site Lease and the
respective rights and obligations hereunder of Site Lessee
and Site Lessor shall be binding upon, and inure to the
benefit of, their respective permitted successors and
assigns.
ARTICLE XIX
MISCELLANEOUS
SECTION 19.1. Severability. Any provision of this
Site Lease that shall be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable
law, the parties hereto hereby waive any provision of law
that renders any provision hereof prohibited or unenforceable
in any respect.
SECTION 19.2. Amendments. Neither this Site Lease
nor any of the terms hereof may be terminated, amended,
supplemented, waived or modified other than (x) by an
instrument in writing signed by the party against which the
enforcement of the termination, amendment, supplement, waiver
or modification shall be sought and (y) pursuant to the
provisions of subsection 9.1 of the Loan Agreement.
SECTION 19.3. Headings. The headings of the
various Articles and Sections of this Site Lease are for convenience
of reference only and shall not modify, define or limit any
of the terms or provisions hereof.
SECTION 19.4. Counterparts. This Site Lease may
be executed by the parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one
and the same instrument.
SECTION 19.5. GOVERNING LAW. THIS SITE LEASE SHALL
IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF MARYLAND.
SECTION 19.6. No Merger. There shall not be any
merger of the leasehold estate and interest in the Easements
created hereunder with the fee estate in the Site or any part
thereof or with any other estate in the Site by reason of the
fact that the same Person may simultaneously acquire, own or
hold, as the case may be, directly or indirectly, (a) the
leasehold estate created hereunder or any interest in or Lien
upon the leasehold estate created hereunder, and (b) the fee
estate in the Site or any part thereof or any other estate in
the Site or any interest in or Lien upon such fee estate or
upon such other estate in the Site, unless and until all
Persons having any interest in or Lien upon (i) the leasehold
estate and interest in the Easements created hereunder and
(ii) the fee estate in the Site or any part thereof or such
other interest in the Site, shall join in a written
instrument effecting such merger and shall duly record the
same among the Land Records of the County of Prince George's,
Maryland and the County of Charles, Maryland (collectively,
the "Land Records").
SECTION 19.7. Recording. Site Lessor and Site
Lessee agree that a Memorandum of Lease substantially in the
form annexed hereto as Exhibit A shall be recorded among the
Land Records as soon as possible after the execution hereof.
The memorandum shall expressly state that it is executed
pursuant to provisions contained in this Site Lease, and is
not intended to vary the terms and conditions hereof.
SECTION 19.8. Leveraged Lease. If, upon the sale
of the Facility by the Partnership to the Owner Trustee in
accordance with the provisions of the Loan Agreement, GE
Capital exercises its option under subsection 5.8 of the Loan
Agreement to cause the Owner Trustee to borrow funds to
finance (or refinance) a portion of the purchase price of the
Facility, the parties hereto agree to execute a supplement
hereto to provide for such provisions as are customary and
appropriate in respect of leveraged lease transactions.
SECTION 19.9. Certain Rights of Power Purchaser.
Nothing in this Site Lease shall be deemed to limit the
provisions of the Consent of the Power Purchaser, which
provisions are solely for the benefit of the Power Purchaser
and not the Site Lessee. Without limiting the scope of the
foregoing, Site Lessor agrees, for the exclusive benefit of
the Power Purchaser and not the Site Lessee, that the
exercise of remedies or any similar action under this Site
Lease is subject to, and shall be conducted in a manner
consistent with, the Power Purchaser's rights under (i) the
Consent of the Power Purchaser and (ii) the Power Purchase
Agreement and the Transfer Agreement (to the extent such
rights under the Power Purchase Agreement and the Transfer
Agreement are not explicitly waived by the Power Purchaser in
accordance with the terms of the Consent of the Power
Purchaser).
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed and delivered by their
respective officers thereunto duly authorized as of the day
and year first above written.
PANDA-BRANDYWINE, L.P.
By: Panda Brandywine
Corporation, its general
partner
By: ________________________
Name: Robert W. Carter
Title:President
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, not in its
individual capacity but solely
as Owner Trustee
By: _____________________
Name: Kathy A.
Larimore Title:
Assistant Vice
President
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
PERSONALLY APPEARED on this 10th day of April 1995
the above-named Kathy A. Larimore, Assistant Vice President,
of SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national
banking association, and acknowledged the foregoing to be his
free act and deed in his said capacity and the free act and
deed of said SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION.
Notary Stamp
Steven Maher
Notary Public, State of New York
No. 31-4973136
Qualified in New York County
Certificate Filed in New York County
Commission Expires October 15, 1996
Notary Public
Type or print name: Steve Maher
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
PERSONALLY APPEARED on this 10th day of April, 1995
the above-named Robert W. Carter, President of PANDA
BRANDYWINE CORPORATION, the general partner of PANDA-
BRANDYWINE, L.P., a Delaware limited partnership, and
acknowledged the foregoing to be his free act and deed in his
said capacity and the free act and deed of said PANDA
BRANDYWINE CORPORATION, and PANDA BRANDYWINE, L.P.
Notary Stamp
Steven Maher
Notary Public, State of New York
No. 31-4973136
Qaulified in New York County
Certificate Filed in New York County
Commission Expires October 15, 1996
Notary Public
Type or print name: Steven Maher
EXHIBIT 10.73
SITE SUBLEASE
SITE SUBLEASE dated as of March 30, 1995 made
between SHAWMUT BANK CONNECTICUT NATIONAL ASSOCIATION, a
national banking association, not in its individual capacity
but solely as Owner Trustee under the Trust Agreement (as
defined in the Loan Agreement referred to below), as
sublessor (the "Owner Trustee" or "Sublessor"), and PANDA-
BRANDYWINE, L.P., a Delaware limited partnership
("Partnership" or "Sublessee"), as sublessee.
RECITALS:
A. Sublessor is the owner of a leasehold estate
in the real property described on Schedule A hereto (the
"Site") and the holder of certain interests under the
easements described on Schedule B hereto (the "Easements")
under the terms of the Site Lease dated as of the date
hereof (as the same may be amended, supplemented or
otherwise modified from time to time, the "Site Lease") a
memorandum of which is to be recorded among the Land Records
of Prince George's County, Maryland and the Land Records of
Charles County, Maryland (the "Land Records").
B. Sublessor is, or in the future will be, the
owner of a natural gas-fired cogeneration facility and a
distilled water facility more particularly described in
Schedule C attached hereto (the "Facility") which is or will
be located on the Site and the land covered by the
Easements.
C. Pursuant to the Facility Lease to be entered
into on the Lease Closing Date between Sublessor and
Sublessee (the "Facility Lease"), Sublessor will lease and
demise the Facility to Sublessee.
D. In connection with said lease of the Facility,
Sublessor desires to sublease to Sublessee the Site (as
hereinafter defined) together with Site Lessor's interest in
the Easements, and Sublessee desires to sublease the Site
and obtain such interests in the Easements from Sublessor
upon the terms and conditions hereinafter set forth.
AGREEMENT:
In consideration of the mutual agreements herein
contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged,
Sublessor and Sublessee, intending to be legally bound
hereby, hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. Unless otherwise defined
herein, capitalized terms used herein shall have the
meanings assigned to them in Appendix A to the Construction
Loan Agreement and Lease Commitment, dated as of March 30,
1995, among General Electric Capital Corporation, Panda
Brandywine Corporation and the Partner ship (as the same may
be amended, supplemented or otherwise modified from time to
time, the "Loan Agreement") (such definitions to be equally
applicable to both the singular and plural forms of the terms
defined). Any term defined by reference to an agreement,
instrument or other document shall have the meaning so assigned
to it whether or not such document is in effect.
1.2 Other Definitional Provisions. The words
"hereof," "herein" and "hereunder" and words of similar
import when used in this Site Sublease shall refer to this
Site Sublease as a whole and not to any particular provision
hereof. Section, subsection, Appendix, Exhibit and Schedule
references contained in this Site Sublease are references to
Sections, subsections, Appendices, Exhibits and Schedules in
or to this Site Sublease unless otherwise specified.
SECTION 2. DEMISING PROVISIONS
2.1 Sublease. Sublessor hereby demises and
subleases to Sublessee and Sublessee hereby subleases and
hires from Sublessor, upon and subject to the terms and
conditions hereinafter set forth, the Site and any and all
additions, alterations and improvements from time to time
included in the Site, excluding the Facility (which Site,
additions, alterations and improvements are hereinafter
referred to as the "Site"), together with Sublessor's
interest in and to the Easements, TO HAVE AND TO HOLD the
same, subject as aforesaid, unto Sublessee and Sublessee's
successors and assigns, commencing on the date hereof and
continuing for the term described in Section 3 hereof.
Sublessee acknowledges that it subleases and hires and takes
the Site and the Easements "as is" and Sublessor has not
made any covenants, representations or warranties about the
Site or the Easements other than those expressly set forth
herein.
2.2 Severance. It is the intention of the
Sublessor and the Sublessee that the Facility and each
portion thereof, and all repairs, replacements,
substitutions and additions thereto, whether now or at any
time hereafter located on the Site, are severed, and shall
remain severed, from the Site and the Easements even if
physically attached, are and shall remain personal property,
and are not and shall not be fixtures or an accession to the
Site and the Easements, the title thereto being separate and
distinct from the title to the Site and the Easements, and
shall be treated as personal property with respect to the
rights of all Persons whatsoever and for all purposes of the
Loan Agreement, the Site Lease, this Site Sublease and the
Facility Lease, and title to the Facility shall not, except
as specifically contemplated by the Transaction Documents,
be affected in any way by any instrument dealing with the
Site and the Easements or any part thereof. Notwithstanding
the foregoing, if contrary to the intention of Sublessor and
Sublessee, any Governmental Authority with jurisdiction over
the Site or the Easements determines that any portion of the
Facility is a fixture or accession to the Site or the
Easements, such portion of the Facility shall constitute
part of the Site being leased hereunder.
SECTION 3. TERM
The term of this Site Sublease shall commence on
the date hereof and shall end on the earlier to occur of (i)
expiration or earlier termination of the Facility Lease
(taking into account any renewals of the term thereof) and
(ii) the day before the date of expiration or termination of
the Site Lease.
SECTION 4. USE
During the term of this Site Sublease, the Site
and the Easements shall be used by Sublessee as provided in
the Site Lease. Sublessee shall perform all the terms,
covenants and conditions to be performed by Sublessor under
the Site Lease other than any obligation of Sublessor
contained in Article IX and Sections 11.2 and 11.4 thereof.
SECTION 5. RENT
As rent for the Site and the Easements for the
term hereof, Sublessee shall pay rent of $1 per year.
Sublessee agrees to pay to Sublessor the sum of $20 towards
such rent in advance upon execution of this Site Sublease.
SECTION 6. POSSESSION AND QUIET ENJOYMENT
Subject to the provisions of the Site Lease, and
so long as no Event of Default or Lease Event of Default
shall have occurred and be continuing, neither Sublessor nor
any of its permitted successors and assigns shall disturb
Sublessee's peaceful and quiet use and possession of the
Site and the Easements, and Sublessee shall enjoy all rights
of Sublessor under the Site Lease; provided, however,
Sublessor shall not be responsible for the acts of
predecessors in title to Sublessor. Sublessor warrants that,
as of the date hereof, it has not heretofore assigned or
encumbered its interests acquired pursuant to the Site Lease
or any part thereof.
SECTION 7. NO MERGER OF TITLE
There shall be no merger of this Site Sublease or
the leasehold estate or interest in the Easements created by
this Site Sublease with any estate in the Facility or other
estate in the Site or any part thereof by reason of the fact
that the same Person may acquire, own or hold, directly or
indirectly, (a) this Site Sublease or any interest in this
Site Sublease or in any such leasehold estate and (b) any
estate in the Facility or other estate in the Site and the
Easements or any part thereof or any interest in such
estate, and no such merger shall occur unless and until all
Persons having any interest (including a security interest)
in (i) this Site Sublease or the leasehold estate or
interest in the Easements created by this Site Sublease and
(ii) any estate in the Facility or other estate in the Site
and the Easements or any part thereof, shall join in a
written instrument effecting such merger and shall duly
record the same among the Land Records.
SECTION 8. RESPONSIBILITY OF SUBLESSOR
Sublessor shall have no duty, responsibility,
liability or obligation to Sublessee in respect of the Site
and the Easements for the use, maintenance or condition of
the Facility, except as provided in Section 6 hereof and in
the Site Lease (which obligations are hereby incorporated
herein by reference). Sublessor shall have no liability or
obligation whatsoever to Sublessee under this Site Sublease
by reason of termination of the Site Lease in the absence of
any breach by Sublessor of its express affirmative obligations
to Sublessee hereunder or under the Site Lease.
SECTION 9. SURRENDER
At the termination of this Site Sublease,
Sublessee shall forthwith quit and surrender the Site and
the Easements and deliver the Site and the Easements to
Sublessor in the same condition, reasonable wear and tear
excepted, as on the date hereof. Subject to any applicable
provisions of the Site Lease and except as provided in
Section 8 of the Facility Lease, all improvements affixed to
the Site and the Easements shall be and remain the property
of Sublessor from and after the termination of this Site
Sublease.
SECTION 10. MISCELLANEOUS
10.1 Notices. Unless otherwise specifically
provided for herein, all notices, consents, directions,
approvals, instructions, requests and other communications
required or permitted by the terms hereof to be given to
each party hereto shall be in writing, and shall become
effective when delivered in the manner and to the address
specified in the Facility Lease.
10.2 Amendments. Neither this Site Sublease nor
any of the terms hereof may be terminated, amended,
supplemented, waived or modified orally, but only (x) by an
instrument in writing signed by the party against which
enforcement of the termination, amendment, supplement,
waiver or modification shall be sought and (y) pursuant to
the provisions of the Loan Agreement.
10.3 Headings, etc. The headings of various
Sections and subsections of this Site Sublease are for
convenience of reference only and shall not modify, define,
expand or limit any of the terms or provisions hereof.
10.4 Successors and Assigns. The terms of this
Site Sublease shall be binding upon and inure to the benefit
of Sublessee and Sublessor and their permitted respective
successors and assigns.
10.5 GOVERNING LAW. THIS SITE SUBLEASE HAS BEEN
DELIVERED IN AND SHALL BE GOVERNED BY AND BE CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
MARYLAND.
10.6 Severability. Any provision of this Site
Sublease that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and
such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision
in any other jurisdiction.
10.7 Limitation of Liability. (a) There shall
be full recourse to the Partnership and all of its assets
for the liabilities of the Partnership under this Site
Sublease, but in no event shall any Partner, Affiliate of
any Partner, or any officer, director or employee of the
Partnership, any Partner or their Affiliates or any holder
of any equity interest in any Partner be personally liable
or obligated for such liabilities of the Partnership, except
as may be specifically provided in any other Transaction
Document to which such Partner is a party or in the event of
fraudulent actions, knowing misrepresentations, gross negligence
or willful misconduct by the Partnership, any Partner or any of
their Affiliates in connection with this Site Sublease. Subject
to the foregoing limitation on liability, Sublessor may sue or
commence any suit, action or proceeding against any Partner or
any Affiliate in order to obtain jurisdiction over the Partnership
to enforce its rights and remedies hereunder. Nothing herein
contained shall limit or be construed to limit the liabilities and
obligations of any Partner or Affiliate thereof in accordance with
the terms of any other Transaction Document creating such
liabilities and obligations to which such Partner or Affiliate
is a party.
(b) Shawmut Bank Connecticut is entering into
this Site Sublease solely as Owner Trustee under the Trust
Agreement and not in its individual capacity. Accordingly,
each of the representations, warranties, undertakings and
agreements herein made on the part of the Sublessor, is made
and intended not as a personal representation, warranty,
undertaking or agreement by or for the purpose or with the
intention of binding Shawmut Bank Connecticut personally,
but is made and intended for the purpose of binding only the
Trust Estate. This Site Sublease is executed and delivered
by the Sublessor solely in the exercise of the powers
expressly conferred upon it as trustee under the Trust
Agreement; and no personal liability or responsibility is
assumed hereunder by or shall at any time be enforceable
against Shawmut Bank Connecticut or any successor in trust
on account of any action taken or omitted to be taken or any
representation, warranty, undertaking or agreement hereunder
of the Sublessor, either expressed or implied, all such
personal liability, if any, being expressly waived by the
parties hereto, except that the parties hereto, or any
Person acting by, through or under them, making a claim
hereunder, may look to the Trust Estate for satisfaction of
the same and Shawmut Bank Connecticut or its successor in
trust, as applicable, shall be personally liable for its own
gross negligence or willful misconduct in the performance of
its duties as Owner Trustee or otherwise.
10.8 Recording. Sublessor and Sublessee agree
that a Memorandum of Lease substantially in the form annexed
hereto as Exhibit A shall be recorded among the Land Records
as soon as possible after the execution hereof. The
memorandum shall expressly state that it is executed
pursuant to provisions contained in this Site Sublease, and
is not intended to vary the terms and conditions hereof.
10.9 Sublease; Assignment. Sublessee will not
subsublease the Site or assign this Site Sublease, except
that Sublessee may sub-sublease the Site to Brandywine Water
Company pursuant to the Steam Lease.
10.10 Leveraged Lease. If, upon the sale of the
Facility by the Partnership to the Owner Trustee in
accordance with the provisions of the Loan Agreement, GE
Capital exercises its option under subsection 5.8 of the
Loan Agreement to cause the Owner Trustee to borrow funds to
finance (or refinance) a portion of the purchase price of
the Facility, the parties hereto agree to execute a
supplement hereto to provide for such provisions as are
customary and appropriate in respect of leveraged lease
transactions.
IN WITNESS WHEREOF, the parties hereto have caused
this Site Sublease to be duly executed by their respective
officers thereunto duly authorized as of the day and year
first above written.
SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, not in its individual
capacity but solely as Owner Trustee
By: __________________________
Name: Kathy A Larimore
Title:Assistant Vice President
PANDA BRANDYWINE, L.P.
By: Panda Brandywine Corporation,
its general partner
By: ________________________
Name: Robert W. Carter
Title:President
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
PERSONALLY APPEARED on this 10th day of April, 1995,
the above-named Kathy A. Larimore, Assistant Vice President, of SHAWMUT
BANK, CONNECTICUT, NATIONAL ASSOCIATION, a national banking
association, and acknowledged the foregoing to be his free act
and deed in his said capacity and the free act and deed of said
SHAWMUT BANK CONNECTICUT.
Notary Stamp
Steven Maher
Notary Public, State of New York
No. 31-4973136
Qualified in New York County
Certificate Filed in New York County
Commission Expires October 15, 1996
Notary Public
Type or print name: Steven Maher
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
PERSONALLY APPEARED on this 10th day of April, 1995,
the above-named Robert W. Carter, President of PANDA
BRANDYWINE CORPORATION, the general partner of PANDA-
BRANDYWINE, L.P., a Delaware limited partnership, and
acknowledged the foregoing to be his free act and deed in his
said capacity and the free act and deed of said PANDA
BRANDYWINE CORPORATION, and PANDABRANDYWINE, L.P.
Notary Stamp
Steven Maher
Notary Public, State of New York
No. 31-4973136
Qualified in New York County
Certificate Filed in New York County
Commission Expires October 15, 1997
Notary Public
Type or print name: Steven Maher
EXHIBIT 10.74
$105,525,000
Panda Funding Corporation
11-5/8% Pooled Project Bonds, Series A due 2012
PURCHASE AGREEMENT
July 26, 1996
JEFFERIES & COMPANY, INC.
11100 Santa Monica Boulevard
10th Floor
Los Angeles, California 90025
Ladies and Gentlemen:
Panda Funding Corporation, a Delaware corporation ("PFC"),
proposes, upon the terms and conditions set forth in this
Purchase Agreement (this "Agreement"), to issue and sell to
Jefferies & Company, Inc. (the "Initial Purchaser"), $105,525,000
aggregate principal amount of its 11-5/8%% Pooled Project Bonds,
Series A due 2012 (the "Bonds"). The Bonds will be issued
pursuant to the provisions of a Trust Indenture, to be dated as
of July 31, 1996 (the "Indenture"), among PFC, Panda Interfunding
Corporation, a Delaware corporation, which will be the sole
stockholder of PFC on the Closing Date (the "Company" and,
together with PFC, the "Issuers"), and Bankers Trust Company, as
Trustee (the "Trustee"). The Bonds will be unconditionally and
irrevocably guaranteed as to principal, premium, if any, and
interest by the Company pursuant to the Company Guaranty (the
"Company Guaranty" and, together with the Bonds, the
"Securities"). Capitalized terms used but not defined herein
have the meanings assigned to them in the Indenture. Capitalized
terms used but not defined herein or in the Indenture have the
meanings assigned to them in the Offering Circular (defined
below).
PFC, the Company and Panda Energy International, Inc., a
Texas corporation ("Panda International"), wish to confirm as
follows their agreement with the Initial Purchaser in connection
with the purchase and resale of the Securities.
1. Preliminary Offering Circular and Offering Circular.
The Securities will be offered and sold to the Initial Purchaser
without registration under the Securities Act of 1933, as amended
(the "Act"), in reliance on an exemption pursuant to Section 4(2)
under the Act. The Issuers have prepared a preliminary Offering
Circular, dated July 5, 1996 (the "Preliminary Offering
Circular"), and an Offering Circular, dated July 26, 1996 (the
"Offering Circular"), setting forth information regarding the
Issuers and the Securities. Any references herein to the
Preliminary Offering Circular and the Offering Circular shall be
deemed to include all amendments and supplements thereto. The
Issuers hereby confirm that they have authorized the use of the
Preliminary Offering Circular and the Offering Circular in
connection with the offering and resale of the Securities by the
Initial Purchaser.
The Issuers understand that the Initial Purchaser proposes
to make offers and sales (the "Exempt Resales") of the Securities
purchased by the Initial Purchaser hereunder only on the terms
and in the manner set forth in the Offering Circular and
Section 2 hereof, as soon as the Initial Purchaser deems
advisable after this Agreement has been executed and delivered,
(a) to persons whom the Initial Purchaser reasonably believes to
be qualified institutional buyers ("Qualified Institutional
Buyers") as defined in Rule 144A under the Act, as such rule may
be amended from time to time ("Rule 144A"), in transactions
satisfying the conditions set forth in Rule 144A and (b) to a
limited number of other institutional "accredited investors," as
defined in Rule 501(a)(1), (2), (3) and (7) under Regulation D of
the Act ("Accredited Investors"), in private sales exempt from
registration under the Act (such persons specified in clauses (a)
and (b) being referred to herein as the "Eligible Purchasers").
It is understood and acknowledged that upon original
issuance thereof, and until such time as the same is no longer
required under the applicable requirements of the Act, each of
the Bonds (and each security issued in exchange therefor or in
substitution thereof) shall bear a legend substantially the same
as the following legend:
THIS BOND HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR
THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET
FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (i) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(a)(1), (2), (3) OR (7) UNDER REGULATION D OF
THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED
INVESTOR"), (ii) AGREES THAT IT WILL NOT WITHIN THREE
YEARS AFTER THE ORIGINAL ISSUANCE OF THIS BOND RESELL
OR OTHERWISE TRANSFER THIS BOND EXCEPT (A) TO PANDA
FUNDING CORPORATION, (B) INSIDE THE UNITED STATES TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED
STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO BANKERS TRUST
COMPANY, AS TRUSTEE, OR ITS SUCCESSOR TRUSTEE, A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF
THIS BOND (THE FORM OF WHICH LETTER CAN BE OBTAINED
FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES TO
FOREIGN PURCHASERS IN OFFSHORE TRANSACTIONS MEETING THE
REQUIREMENTS OF RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
(iii) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THIS BOND IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS BOND WITHIN THREE YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS BOND, THE HOLDER MUST CHECK
THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THE
CERTIFICATE TO BANKERS TRUST COMPANY, AS SECURITIES
REGISTRAR. IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO PANDA FUNDING
CORPORATION, PANDA INTERFUNDING CORPORATION AND BANKERS
TRUST COMPANY, AS TRANSFER AGENT, SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS THEY MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS
BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL
BE REMOVED AFTER THE EXPIRATION OF THREE YEARS FROM THE
ORIGINAL ISSUANCE OF THIS BOND. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM IN
REGULATION S UNDER THE SECURITIES ACT.
It is also understood and acknowledged that holders
(including subsequent transferees) of the Securities will have
the registration rights set forth in the registration rights
agreement (the "Registration Rights Agreement") substantially in
the form attached hereto as Exhibit A, to be dated the date
hereof among the Issuers and the Initial Purchaser.
2. Agreements to Sell, Purchase and Resell. (a) The
Issuers hereby agree, subject to the terms and conditions set
forth herein, to issue and sell to the Initial Purchaser and,
upon the basis of the representations, warranties and agreements
of the Issuers and Panda International contained herein and
subject to the terms and conditions set forth herein, the Initial
Purchaser agrees to purchase from the Issuers, at a purchase
price of 98% of the principal amount thereof, $105,525,000
principal amount of Bonds (together with the Company Guaranty).
(b) The Initial Purchaser has advised the Issuers that
it proposes to offer the Securities for sale upon the terms and
conditions set forth in this Agreement and in the Offering
Circular. The Initial Purchaser hereby represents and warrants
to, and agrees with, the Issuers that the Initial Purchaser
(i) is an Accredited Investor, (ii) will not solicit offers for,
or offer or sell, the Securities by means of any form of general
solicitation or general advertising within the meaning of
Rule 502(c) under the Act and (iii) will solicit offers for the
Securities only from, and will offer, sell or deliver the
Securities, as part of their initial offering, only to
(A) persons whom the Initial Purchaser reasonably believes to be
Qualified Institutional Buyers or, if any such person is buying
for one or more institutional accounts for which such person is
acting as fiduciary or agent, only when such person has
represented to the Initial Purchaser that each such account is a
Qualified Institutional Buyer, to whom notice has been given that
such sale or delivery is being made in reliance on Rule 144A and,
in each case, in transactions entered into in reliance upon the
exemption from the registration requirements of the Act set forth
in Rule 144A and (B) to a limited number of other institutional
investors who represent to the Initial Purchaser that they are
Accredited Investors. The Initial Purchaser has advised the
Issuers that it will offer the Securities at a price initially
equal to 100% of the principal amount thereof, plus accrued
interest, if any, from the date of issuance of the Securities.
Such price may be changed by the Initial Purchaser at any time
thereafter without notice.
3. Delivery of the Securities and Payment Therefor.
Delivery to the Initial Purchaser of and payment for the
Securities (the "Closing") shall be made at the office of
Jefferies & Company, Inc., 39 Broadway, New York, New York 10006,
at 10:00 a.m., New York City time, on July 31, 1996 (the "Closing
Date"). The place of the Closing and the Closing Date may be
varied by agreement among the Initial Purchaser and the Issuers.
The Securities will be delivered to the Initial Purchaser
against payment of the purchase price therefor by means of a wire
transfer of same day funds in accordance with written
instructions from PFC. The Issuers will reimburse the Initial
Purchaser for its costs of obtaining such same day funds. The
Securities will be evidenced by a single global security in
definitive form (the "Global Security") and/or by additional
certificated securities, and will be registered, in the case of a
Global Security, in the name of Cede & Co. as nominee of The
Depository Trust Company ("DTC"), and in the other cases, in such
names and in such denominations as the Initial Purchaser shall
request prior to 9:30 a.m., New York City time, on the second
business day preceding the Closing Date. The Securities to be
delivered to the Initial Purchaser shall be made available to the
Initial Purchaser in New York City for inspection and packaging
not later than 9:30 a.m., New York City time, on the business day
next preceding the Closing Date.
4. Agreements of the Issuers and Panda International. The
Issuers and Panda International agree with the Initial Purchaser
as follows:
(a) Until the completion of the distribution of the
Securities by the Initial Purchaser to Eligible Purchasers, the
Issuers and Panda International will advise the Initial Purchaser
promptly, and if requested by the Initial Purchaser, will
promptly confirm such advice in writing of any change in the
condition (financial or other), business, prospects, properties
or results of operations of PFC, the Company and any of the
Projects described in the Offering Circular, or of the happening
of any event or the existence of any condition which requires any
amendment or supplement to the Offering Circular so that the
Offering Circular (x) will not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading or (y) will comply with applicable law.
(b) The Issuers will furnish to the Initial Purchaser,
without charge, as of the date of the Offering Circular, such
number of copies of the Offering Circular as may then be amended
or supplemented as the Initial Purchaser may request.
(c) The Issuers will not make any amendment or supple
ment to the Preliminary Offering Circular or to the Offering
Circular of which the Initial Purchaser shall not previously have
been advised or to which the Initial Purchaser shall reasonably
object after being so advised.
(d) Prior to the execution and delivery of this
Agreement, the Issuers have delivered, and after the date hereof
the Issuers will deliver, to the Initial Purchaser, without
charge, in such quantities as the Initial Purchaser has requested
or may request, copies of the Preliminary Offering Circular. The
Issuers consent to the use, in accordance with the securities or
Blue Sky laws of the jurisdictions in which the Securities are
offered by the Initial Purchaser and by dealers, prior to the
date of the Offering Circular, of each Preliminary Offering
Circular so furnished by the Issuers. The Issuers consent to the
use of the Offering Circular in accordance with the securities or
Blue Sky laws of the jurisdictions in which the Securities are
offered by the Initial Purchaser and by all dealers to whom
Securities may be sold, in connection with the offering and sale
of the Securities.
(e) If, at any time prior to completion of the
distribution of the Securities by the Initial Purchaser to
Eligible Purchasers, any event shall occur or otherwise exist
that in the judgment of the Issuers or in the opinion of the
Initial Purchaser should be set forth in the Offering Circular so
that the Offering Circular (x) will not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading or (y) will comply with applicable law, the
Issuers will forthwith prepare an appropriate supplement or
amendment thereto, and will expeditiously furnish to the Initial
Purchaser the number of copies thereof as the Initial Purchaser
shall reasonably request.
(f) The Issuers will cooperate with the Initial
Purchaser and with its counsel in connection with the
qualification of the Securities for offering and sale by the
Initial Purchaser and by dealers under the securities or Blue Sky
laws of such jurisdictions as the Initial Purchaser may designate
and will file such consents to service of process or other
documents necessary or appropriate in order to effect such
qualification; provided that in no event shall the Issuers be
obligated to qualify to do business in any jurisdiction where
they are not now so qualified or to take any action which would
subject them to service of process in suits, other than those
arising out of the offering or sale of the Securities, in any
jurisdiction where they are not now so subject.
(g) For a period of three years beginning on the date
of this Agreement, the Issuers will furnish to the Initial
Purchaser (i) as soon as available, a copy of each report of the
Issuers mailed to stockholders or filed with the Securities and
Exchange Commission (the "Commission") and (ii) from time to time
such other information concerning the Issuers as the Initial
Purchaser may reasonably request.
(h) The Issuers and Panda International will apply the
net proceeds from the sale of the Securities in accordance with
the description set forth under "Use of Proceeds" in the Offering
Circular.
(i) Without the prior consent of the Initial
Purchaser, prior to the expiration of 180 days after the date of
the Offering Circular, neither of the Issuers will offer, sell,
contract to sell or otherwise dispose of any fixed income
obligation having a maturity of more than one year, other than
fixed income obligations issued under the Indenture.
(j) Neither of the Issuers or Panda International have
taken, nor will they take, directly or indirectly, any action
designed to or that might reasonably be expected to cause or
result in stabilization or manipulation of the price of the
Securities to facilitate the sale or resale of the Securities.
Except as permitted by the Act, neither of the Issuers or Panda
International will distribute any offering material in connection
with the offering and sale of the Securities or Exempt Resales
other than the Offering Circular. Neither of the Issuers or
Panda International will solicit any offers to buy or offers to
sell the Securities by means of any form of general solicitation
or general advertising (within the meaning of Rule 502(c) under
the Act).
(k) From and after the Closing Date, so long as any of
the Securities are outstanding and are "restricted securities"
within the meaning of the Rule 144(a)(3) under the Act or, if
earlier, until three years after the Closing Date, and during any
period in which the Issuers are not subject to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Issuers will furnish to holders of the
Securities and prospective purchasers of Securities designated by
such holders, upon request of such holders or such prospective
purchasers, the information required to be delivered pursuant to
Rule 144A(d)(4) under the Act to permit compliance with Rule 144A
in connection with resales of the Securities.
(l) The Issuers have complied, and will continue to
comply in connection with the Exempt Resales, with all provisions
of Florida Statutes Section 517.075 relating to the Issuers doing
business with Cuba.
(m) The Issuers agree to not sell, offer for sale or
solicit offers to buy or otherwise negotiate with respect to any
security (as defined in the Act) that could be integrated with
the sale of the Securities in a manner that could require the
registration under the Act of the sale of the Securities by the
Issuers to the Initial Purchaser or by the Initial Purchaser to
the Eligible Purchasers.
(n) The Issuers agree to comply with all of the terms
and conditions of the Registration Rights Agreement and all
agreements set forth in the representation letters of the Issuers
to DTC relating to the approval of the Securities by DTC for
"book entry" transfer.
(o) The Issuers agree that, prior to any registration
of the Securities pursuant to the Registration Rights Agreement,
or at such earlier time as may be so required, the Indenture
shall be qualified under the Trust Indenture Act of 1939 (the
"1939 Act") and they will cause to be entered into any necessary
supplemental indentures in connection therewith.
5. Representations and Warranties of the Issuers and Panda
International. The Issuers and Panda International, jointly and
severally, represent and warrant to the Initial Purchaser that:
(a) The Preliminary Offering Circular and Offering
Circular with respect to the Securities have been prepared by the
Issuers for use by the Initial Purchaser in connection with the
Exempt Resales. No order or decree preventing the use of the
Preliminary Offering Circular or the Offering Circular, or any
order asserting that the transactions contemplated by this
Agreement are subject to the registration requirements of the
Act, has been issued and no proceeding for that purpose has
commenced or is pending or, to the knowledge of the Issuers and
Panda International, is contemplated.
(b) The Preliminary Offering Circular and the Offering
Circular as of their respective dates and the Offering Circular
as of the Closing Date, did not or will not at any time contain
an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading, except that this representation
and warranty does not apply to statements in or omissions from
the Preliminary Offering Circular and Offering Circular made in
reliance upon and in conformity with information relating to the
Initial Purchaser furnished to the Issuers in writing by or on
behalf of the Initial Purchaser expressly for use therein, and
PFC, the Company and Panda International agree that the only such
information provided in writing by or on behalf of the Initial
Purchaser, expressly for use in the Preliminary Offering Circular
or Offering Circular, is that information contained in the
section entitled "Plan of Distribution."
(c) The Indenture has been duly and validly authorized
by each of the Issuers and, upon its execution and delivery by
the Issuers and assuming due authorization, execution, delivery
and performance by the Trustee, will be a valid and binding
agreement of each of the Issuers, enforceable against each of the
Issuers in accordance with its terms, except as enforcement
thereof may be limited by bankruptcy, insolvency or other similar
laws affecting creditors' rights generally and subject to the
applicability of general principles of equity; no qualification
of the Indenture under the 1939 Act is required in connection
with the offer and sale of the Securities contemplated hereby or
in connection with the Exempt Resales; and the Indenture conforms
in all material respects to the description thereof in the
Offering Circular.
(d) The Bonds and the Company Guaranty have been duly
authorized by PFC and the Company, respectively, and, when
executed and delivered by PFC and the Company, respectively, and,
in the case of the Bonds, authenticated by the Trustee in
accordance with the Indenture and delivered to the Initial
Purchaser against payment therefor in accordance with the terms
hereof, will have been validly issued and delivered, and will
constitute valid and binding obligations of PFC and the Company,
respectively, entitled to the benefits set forth in the Indenture
and enforceable against the Issuers in accordance with their
respective terms, and on the Closing Date the issuance and sale
of the securities to be exchanged for the Securities (the
"Exchange Securities") will have been duly authorized by PFC and
the Company and, when issued, authenticated and delivered in
accordance with the terms of the Indenture and the Registration
Rights Agreement, the Exchange Securities will constitute valid
and legally binding obligations of PFC and the Company, and will
be entitled to the benefits provided in the Indenture and
enforceable in accordance with their terms, except in each case
as enforcement thereof may be limited by bankruptcy, insolvency
or other similar laws affecting the enforcement of creditors'
rights generally and subject to the applicability of general
principles of equity; and the Securities conform in all material
respects to the description thereof in the Offering Circular.
(e) PFC is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware, with full corporate power and authority to own, lease
and operate its properties and to conduct its business as
described in the Offering Circular, and is duly registered and
qualified to conduct its business and is in good standing in each
jurisdiction or place where the nature or location of its
properties (owned or leased) or the conduct of its business
requires such registration or qualification, except where the
failure to so register or qualify would not have an adverse
effect on the condition (financial or other), business,
prospects, properties or results of operations of PFC, the
Company, or any subsidiary of the Company that is or would be,
singly or in the aggregate, material to PFC, the Company and any
such subsidiary, taken as a whole, whether or not occurring in
the ordinary course of business (a "Material Adverse Effect").
PFC does not own or hold any capital stock or any other equity
securities of any corporation or have any equity interest in any
firm, partnership, association or other entity. The authorized
capital stock of PFC consists of 1,000 shares of Common Stock,
par value $0.01 per share, all of which is issued and
outstanding. All of PFC's issued and outstanding shares of
capital stock are owned by the Company and have been duly
authorized and validly issued, are fully paid and non-assessable
and are not subject to any preemptive or similar rights. All
such capital stock is free and clear of any Lien and upon Closing
will be free and clear of any Lien except for the restrictions
under the Indenture and the Liens created by the Company Stock
Pledge Agreement. PFC does not have outstanding any securities
convertible into or exchangeable for any of its capital stock or
any rights to subscribe for or to purchase, or any warrants or
options for the purchase of, or any agreements providing for the
issuance (contingent or otherwise) of, or any calls, commitments
or claims of any character relating to, any such capital stock.
(f) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State
of Delaware, with full corporate power and authority to own,
lease and operate its properties and to conduct its business as
described in the Offering Circular, and is duly registered and
qualified to conduct its business and is in good standing in each
jurisdiction or place where the nature or location of its
properties (owned or leased) or the conduct of its business
requires such registration or qualification, except where the
failure to so register or qualify would not have a Material
Adverse Effect. The authorized capital stock of the Company
consists of 1,000 shares of Common Stock, par value $0.01 per
share, all of which will be issued and outstanding at the
Closing. All of the Company's issued and outstanding shares of
capital stock are owned by PEC and have been duly authorized and
validly issued, are fully paid and non-assessable and are not
subject to any preemptive or similar rights. All such capital
stock is free and clear of any Lien and upon Closing will be free
and clear of any Lien except for the restrictions under the
Indenture and the Liens created by the PEC Stock Pledge
Agreement. The Company does not have outstanding any securities
convertible into or exchangeable for any of its capital stock or
any rights to subscribe for or to purchase, or any warrants or
options for the purchase of, or any agreements providing for the
issuance (contingent or otherwise) of, or any calls, commitments
or claims of any character relating to, any such capital stock.
(g) PEC is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Texas, with full corporate power and authority to own, lease and
operate its properties and to conduct its business as described
in the Offering Circular, and is duly registered and qualified to
conduct its business and is in good standing in each jurisdiction
or place where the nature or location of its properties (owned or
leased) or the conduct of its business requires such registration
or qualification, except where the failure to so register or
qualify would not have a Material Adverse Effect. All of PEC's
issued and outstanding shares of capital stock are owned by Panda
International and have been duly authorized and validly issued.
(h) Panda International is a corporation duly
incorporated, validly existing and in good standing under the
laws of the State of Texas, with full corporate power and
authority to own, lease and operate its properties and to conduct
its business as presently conducted or as proposed to be
conducted, and is duly registered and qualified to conduct its
business and is in good standing in each jurisdiction or place
where the nature or location of its properties (owned or leased)
or the conduct of its business requires such registration or
qualification, except where the failure to so register or qualify
would not have a Material Adverse Effect.
(i) Panda-Brandywine, L.P. ("PBLP") is a limited
partnership duly organized, validly existing and in good standing
under the laws of the State of Delaware, with full partnership
power and authority to own, lease and operate its properties and
to conduct its business as described in the Offering Circular,
and is duly registered and qualified to conduct its business and
is in good standing in each jurisdiction or place where the
nature or location of its properties (owned or leased) or the
conduct of its business requires such registration or
qualification, except where the failure to so register or qualify
would not have a Material Adverse Effect. All the partnership
interests in PBLP have been duly and validly authorized and
issued and Panda-Brandywine Corporation, a Delaware corporation
("PBC"), owns the sole general partner interest in the
Partnership and Panda Energy Corporation, a Delaware corporation
("PECD"), owns the sole limited partner interest in PBLP, free
and clear of any Lien on such general or limited partner
interests except for restrictions under the partnership agreement
of PBLP and Liens under the Brandywine Financing Documents. PBLP
does not have outstanding any certificates or securities that
evidence interests in PBLP, or any securities convertible into or
exchangeable for any of its partnership interests or any rights
to subscribe for or to purchase, or any warrants or options for
the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims
of any character relating to, any such partnership interests
except for those rights established by the partnership agreement
of PBLP and the Liens under the Brandywine Financing Documents.
PBLP does not own or hold any capital stock or any other
securities of any corporation or have any equity interest in any
firm, partnership, association or other entity.
(j) PBC is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware, with full corporate power and authority to own, lease
and operate its properties as presently conducted or as proposed
to be conducted, and is duly registered and qualified to conduct
its business and is in good standing in each jurisdiction or
place where the nature or location of its properties (owned or
leased) or the conduct of its business requires such registration
or qualification, except where the failure to so register or
qualify would not have a Material Adverse Effect. PBC is the
sole general partner of PBLP. PBC does not conduct any business
or participate in any activities other than those necessary to
perform its duties and obligations as the sole general partner of
PBLP. The authorized capital stock of PBC consists of 1,000
shares of Common Stock, par value $0.01 per share, all of which
are issued and outstanding and owned by PEC. Upon Closing, all
of such shares will be owned by Panda Interholding Corporation, a
Delaware corporation ("Interholding"). All of the outstanding
shares of capital stock of PBC have been duly authorized and
validly issued, are fully paid and non-assessable and are not
subject to any preemptive or similar rights. Such capital stock
is free and clear of any Lien except for the Liens under the
Brandywine Financing Documents. PBC does not have outstanding
any securities convertible into or exchangeable for any of its
capital stock or any rights to subscribe for or to purchase, or
any warrants or options for the purchase of, or (except for the
Liens under the Brandywine Financing Documents) any agreements
providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, any
such capital stock. Except for the general partner interest in
the Panda-Brandywine Partnership, PBC does not own or hold any
capital stock or any other securities of any corporation or have
any equity interest in any firm, partnership, association or
other entity.
(k) PECD is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware, with full corporate power and authority to own, lease
and operate its properties as presently conducted or as proposed
to be conducted, and is duly registered and qualified to conduct
its business and is in good standing in each jurisdiction or
place where the nature or location of its properties (owned or
leased) or the conduct of its business requires such registration
or qualification, except where the failure to so register or
qualify would not have a Material Adverse Effect. PECD is the
sole limited partner of PBLP. PECD does not conduct any business
or participate in any activities other than those necessary to
perform its duties and obligations as a limited partner of PBLP.
The authorized capital stock of PECD consists of 1,000 shares of
Common Stock, par value $0.01 per share, all of which are issued
and outstanding and owned by PEC. Upon Closing, all of such
issued and outstanding shares will be owned by Interholding. All
of the outstanding shares of capital stock of PECD have been duly
authorized and validly issued, are fully paid and non-assessable
and are not subject to any preemptive or similar rights. Such
capital stock will be free and clear of any Lien except for the
Liens under the Brandywine Financing Documents. PECD does not
have outstanding any securities convertible into or exchangeable
for any of its capital stock or any rights to subscribe for or to
purchase, or any warrants or options for the purchase of, or any
agreement providing for the issuance (contingent or otherwise)
of, or (except for the Liens under the Brandywine Financing
Documents) any calls, commitments or claims of any character
relating to, any such capital stock. Except for its limited
partner interest in PBLP, PECD does not own or hold any capital
stock or any other securities of any corporation or have any
equity interest in any firm, partnership, association or other
entity.
(l) Brandywine Water Company ("BWC") is a corporation
duly incorporated, validly existing and in good standing under
the laws of the State of Delaware, with full corporate power and
authority to own, lease and operate its properties and to conduct
its business as described in the Offering Circular, and is duly
registered and qualified to conduct its business and is in good
standing in each jurisdiction or place where the nature or
location of its properties (owned or leased) or the conduct of
its business requires such registration or qualification, except
where the failure to so register or qualify does not have a
Material Adverse Effect. The authorized capital stock of the
Company consists of 1,000 shares of Common Stock, par value $0.01
per share, all of which are issued and outstanding and owned by
PEC. Upon Closing, all of such issued and outstanding shares
will be owned by Interholding. All of the outstanding shares of
capital stock of BWC have been duly authorized and validly
issued, are fully paid and non-assessable and are not subject to
any preemptive or similar rights. Upon Closing, such capital
stock will be free and clear of any Lien except for the Liens
under the Brandywine Financing Documents. BWC does not have
outstanding any securities convertible into or exchangeable for
any of its capital stock or any rights to subscribe for or to
purchase, or any warrants or options for the purchase of, or any
agreements providing for the issuance (contingent or otherwise)
of, or any calls, commitments, or claims of any character
relating to, any such capital stock except under the Brandywine
Financing Documents.
(m) Interholding is a corporation duly incorporated,
validly existing and in good standing under the laws of the State
of Delaware, with full corporate power and authority to own,
lease and operate its properties and to conduct its business as
described in the Offering Circular, and is duly registered and
qualified to conduct its business and is in good standing in each
jurisdiction or place where the nature or location of its
properties (owned or leased) or the conduct of its business
requires such registration or qualification, except where the
failure to so register or qualify would not have a Material
Adverse Effect. The authorized capital stock of Interholding
consists of 1,000 shares of Common Stock, par value $0.01 per
share, all of which will be issued and outstanding and owned by
the Company upon Closing. Upon Closing all of Interholding's
outstanding shares of capital stock will have been duly
authorized and validly issued, will be fully paid and non-
assessable and will not be subject to any preemptive or similar
rights. Upon Closing such capital stock will be free and clear
of any Lien except for the restrictions under the Indenture and
the Liens created by the Company Stock Pledge Agreement.
Interholding does not have outstanding any securities convertible
into or exchangeable for any of its capital stock or any rights
to subscribe for or to purchase, or any warrants or options for
the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments, or
claims of any character relating to any such capital stock
except, upon Closing, for restrictions under the Indenture and
Liens created by the Company Stock Pledge Agreement.
(n) Panda Cayman Interfunding Company ("PIC (Cayman)")
is a Cayman Islands exempted company duly formed and validly
existing under the laws of the Cayman Islands, British West
Indies with full power and authority to own, lease and operate
its properties and to conduct its business as described in the
Offering Circular, and is duly registered and qualified to
conduct its business and is in good standing in each jurisdiction
or place where the nature or location of its properties (owned or
leased) or the conduct of its business requires such registration
or qualification, except where the failure to so register or
qualify would not have a Material Adverse Effect. The authorized
share capital of PIC (Cayman) consists of 50,000 shares with a
nominal or par value of $1.00 each, 100 shares of which will be
issued and outstanding upon Closing. Upon Closing, all of PIC
(Cayman)'s issued and outstanding shares will be owned by the
Company and will have been duly authorized and validly issued.
Such shares are free and clear of any Lien except, upon Closing,
for restrictions under the Indenture and Liens created by the
Company Stock Pledge Agreement. PIC (Cayman) does not have
outstanding any securities convertible into or exchangeable for
any of its share capital or any rights to subscribe for or to
purchase, or any warrants or options for the purchase of, or any
agreements providing for the issuance (contingent or otherwise)
of, or any calls, commitments, or claims of any character
relating to any such share capital, except for Liens created by
the Company Stock Pledge Agreement upon Closing. Each of
Interholding, PIC (Cayman), PBC, PECD, BWC, PBLP, PR Corp., PRC
II, the Panda-Rosemary Partnership and Panda-Rosemary Funding
Corporation, a Delaware corporation are herein referred to as a
"Subsidiary" or collectively as the "Subsidiaries".
(o) Each of PFC, the Company and the Subsidiaries has
all authorizations, approvals, orders, licenses, franchises,
certificates and permits (collectively, "Permits") of and from,
and has made all filings with, all regulatory or governmental
officials, bodies and tribunals necessary to own or lease its
respective properties and to conduct its respective businesses
described in the Offering Circular, except as otherwise described
in the Offering Circular or where failure to have obtained or
made the same will not have a Material Adverse Effect, and none
of PFC, the Company, any Subsidiary and Panda International has
received any notice of proceedings relating to the revocation or
modification of any such Permits or filings; each of PFC, the
Company and the Subsidiaries has fulfilled and performed all its
current material obligations with respect to such Permits and
filings and no event has occurred which allows, or after notice
or lapse of time, or both, would allow, revocation or termination
thereof or result in any other material impairment of the rights
of the holder of any such Permit, subject in each case to such
qualification as may be set forth in the Offering Circular,
except where the failure to so do will not have a Material
Adverse Effect; and, except as described in the Offering
Circular, such Permits and filings contain no restrictions that
are materially burdensome to PFC, the Company and the
Subsidiaries taken as a whole; and each of PFC, the Company and
the Subsidiaries is in compliance with all applicable laws,
rules, regulations, orders and consents, the violation of which
would have a Material Adverse Effect. The property and business
of PFC, the Company and the Subsidiaries conform in all material
respects to the descriptions thereof contained in the Offering
Circular.
(p) Each of PFC, the Company and the Subsidiaries has
good and marketable title to all of its respective properties and
assets described in the Offering Circular as owned by it, free of
all Liens, except such as are described in the Offering Circular
or such as are not burdensome and do not interfere with the use
of the property or the conduct of the business of PFC, the
Company or such Subsidiary in a manner that is or would be
material to the business of PFC, the Company and the Subsidiary
taken as a whole. Each of PFC, the Company and the Subsidiaries
has valid, subsisting and enforceable leases for the properties
described in the Offering Circular as leased by it, with such
exceptions as are described in the Offering Circular or such as
in the aggregate are not burdensome and do not interfere with the
conduct of the business of the Company or such Subsidiary in a
manner that is or would be material to the Company and the
Subsidiaries taken as a whole.
(q) All Permits required to be obtained by or on
behalf of PFC, the Company or any of the Subsidiaries in
connection with (i) the due execution, delivery and performance
by the Company or the Subsidiaries of the Project Agreements
(defined below) to which it is a party and (ii) the use,
occupancy, operation, or maintenance of the Panda-Brandywine
Facility, are set forth on Schedule 5(q) attached hereto. To the
best knowledge of the Issuers and Panda International (i) all of
the Permits that are required to be obtained in the name of any
of the Subsidiaries on or prior to the date hereof are listed on
Part A of Schedule 5(q) and have been duly obtained, have been
validly issued and are in full force and effect and (ii) none of
the Permits listed on Part B of Schedule 5(q) is required to be
obtained by any Subsidiary as of the Closing. None of the
Issuers and Panda International has any reason to believe that
the Permits set forth in Part B of Schedule 5(q) will not be
obtained by the Subsidiaries.
(r) Each of the representations and warranties
contained the Purchase Agreement dated July 26, 1996 by and among
the Initial Purchaser, Panda-Rosemary Funding Corporation, Panda-
Rosemary, L.P. and Panda International relating to $111,400,000
principal amount of 8-5/8% First Mortgage Bonds Due 2016 is true and
correct.
(s) The Panda-Brandywine Facility is a "qualifying
cogeneration facility" under the Federal Power Act ("FPA"), as
amended by Section 201 of the Public Utility Regulatory Policies
Act of 1978 ("PURPA") and the regulations of the Federal Energy
Regulatory Commission ("FERC") promulgated thereunder, and the
Panda Brandywine Facility's current intended use, operation and
ownership are consistent with such facility's status as a
"qualifying cogeneration facility."
(t) Attached hereto as Schedules 5(t)-1 and 5(t)-2,
respectively, are lists of all agreements relating to the Panda-
Rosemary Facility (the "Panda-Rosemary Project Agreements") and
the Panda-Brandywine Facility (the "Panda-Brandywine Project
Agreements", and collectively with the Panda-Rosemary Project
Agreements, the "Project Agreements"), other than those that are
not material to the ownership or the current or future
construction, operation, maintenance or results of operation of
either the Panda-Rosemary Facility or the Panda-Brandywine
Facility. None of the Project Agreements has been amended,
modified or terminated. None of the Company, PFC and any
Subsidiary is, or, except as permitted in accordance with Section
6.26 of the Rosemary Indenture and any similar provisions in the
Brandywine Financing Documents, will be, as a result of the
construction, ownership, operation or maintenance of the Panda-
Rosemary Facility or the Panda-Brandywine Facility in accordance
with the Project Agreements, subject to regulation (i) under
PUHCA as a "public utility company" or an "affiliate" or
"subsidiary company" or a "holding company" or a "registered
holding company" or a company subject to registration under
PUHCA, (ii) under the Federal Power Act, as amended, as a "public
utility" or an "electric utility" or a "transmitting utility"
other than as contemplated by 18 C.F.R. Section 292.601,
(iii) under any other similar federal law regulating the
generation, transmission or sale of electricity under which the
Company or any Subsidiary would be deemed to be the generator,
transmitter or seller of such electricity (including, but not
limited to, treatment as an "electric utility," "electric
corporation," "electrical company," "public utility," "public
utility holding company" or any similar entity under any existing
law or an "affiliate" or "subsidiary company" of a "registered
holding company"), (iv) respecting the rates or the financial and
organizational regulations of electric utilities under any state
law or regulation or (v) the equivalent under the applicable laws
of any state relating to public utilities and/or public service
corporations or any similar entity, except that Panda-Rosemary
Funding Corporation and the Panda-Rosemary Partnership are
subject to continuing oversight by the NCUC, and the jurisdiction
of the NCUC, particularly with regard to organizational and
operational matters, under N.C.G.S. 62-110.1 and 156 and NCUC
Rule R1-37(d)(3), under the terms and conditions imposed by the
NCUC in the CPCNs issued or transferred to them, and the terms
and conditions imposed by the NCUC in its Order Not to Reconsider
but to Impose New Conditions issued regarding PR Corp. in NCUC
Docket No. SP-73, Sub 1 on October 2, 1989.
(u) None of the Trustee, the Collateral Agent or any
holder of the Securities will, solely by reason of (i) the
ownership, operation and maintenance of a Project by a
Subsidiary, (ii) the purchase and ownership of the Securities or
(iii) any other transaction contemplated by the Indenture (except
foreclosure which results in any such person owning or operating
any facility), be deemed by any governmental authority having
jurisdiction to be, or to be subject to financial, organizational
or rate regulation as, (A) a "public utility" under the North
Carolina Public Utilities Act, N.C.G.S. 62-3(23), (B) a "natural
gas company" under the Natural Gas Act of 1938, as amended, or
(C) an "electric utility," "electric corporation," "electrical
company," "public utility," "public utility holding company," an
"affiliate," a "subsidiary company" or any similar entity under
any existing law (including, but not limited to, the laws of the
States of North Carolina and Maryland).
(v) The easements, licenses and other rights granted
or to be granted to the Subsidiaries pursuant to the terms of the
Project Agreements are not subject to any Liens (other than Liens
permitted by such Project Agreements) and provide or will provide
the Subsidiaries with all rights and property interests required
to enable the Subsidiaries to obtain all services, materials or
rights (including access) required for the design, construction,
start-up, operation and maintenance of the Panda-Rosemary
Facility and the Panda-Brandywine Facility, including the
Subsidiaries' full and prompt performance of their obligations,
and full and timely satisfaction of all conditions precedent to
the performance by others of their obligations, under the Project
Agreements, other than those services, materials or rights that
reasonably can be expected to be obtainable in the ordinary
course of business.
(w) PFC, the Company and the Subsidiaries own, or
possess adequate rights to use, all trademarks, service marks and
other rights necessary for the conduct of their business as
described in the Offering Circular, and none of PFC, the Company,
any Subsidiary and Panda International has received any notice of
conflict with the asserted rights of others in any such respect
that would materially adversely affect the business of PFC, the
Company or any Subsidiary, and none of PFC, the Company, any
Subsidiary and Panda International know of any basis therefor.
(x) Price Waterhouse LLP, who have certified the
financial statements included in the Offering Circular, are
independent accountants with respect to PFC and the Company as
required by the Act.
(y) None of PFC, the Company, any Subsidiary and Panda
International is in violation of its respective charter or
by-laws or similar organizational documents, or of any law,
ordinance, administrative or governmental rule or regulation
applicable to PFC, the Company, such Subsidiary or Panda
International or of any Permit, judgment or any decree of any
court or governmental agency or body having jurisdiction over
PFC, the Company, the Subsidiaries or Panda International that is
not accurately described in the Offering Circular in all material
respects or that would have a Material Adverse Effect, or in
default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease, bond,
debenture, bank loan, credit agreement or other agreement,
instrument or evidence of indebtedness to which PFC, the Company,
any Subsidiary or Panda International is a party or by which any
of them may be bound, or to which any of their respective
property or assets is subject, that is not accurately described
in the Offering Circular in all material respects or that would
have a Material Adverse Effect.
(z) There are no legal or governmental proceedings
pending or, to the knowledge of PFC or the Company, threatened,
against PFC, the Company, any Subsidiary or Panda International,
or to which any of their respective properties is subject, that
are not accurately disclosed in all material respects in the
Offering Circular or that, if resolved adversely to PFC, the
Company, such Subsidiary or Panda International, could reasonably
be expected to have a Material Adverse Effect or to materially
affect the issuance of the Securities or the consummation of the
transactions contemplated by this Agreement or the Transaction
Documents (defined below). There are no agreements, contracts,
indentures, leases or other documents or instruments of PFC, the
Company, any Subsidiary or Panda International that are required
to be described in the Offering Circular in order that the
statements made therein are not misleading in any material
respect or in order that there are no material omissions
therefrom, that are not described in the Offering Circular.
(aa) None of PFC, the Company, any Subsidiary or Panda
International is involved in any labor dispute or, to the
knowledge of PFC, the Company or Panda International, is any such
dispute threatened, other than a charge of discrimination in
violation of Title VII of the Civil Rights Act of 1964, as
amended, filed against Panda International by Mrs. Brenda L.
Hudgins with the Equal Employment Opportunity Commission, which
charge could not reasonably be expected to result in a Material
Adverse Effect.
(bb) Each of PFC, the Company and the Subsidiaries has
filed all federal, state and local tax returns that are required
to be filed (other than returns with respect to which failure to
so file would not have a Material Adverse Effect) or has obtained
extensions thereof and has paid all taxes shown on such returns
and all assessments received by it to the extent that the same
have become due.
(cc) None of the issuance, offer, sale or delivery of
the Securities, the execution, delivery or performance of this
Agreement, or any of the Transaction Documents by the Issuers,
PEC or Panda International or the consummation by the Issuers,
PEC or Panda International of the transactions contemplated
hereby or thereby (i) requires any consent, approval,
authorization or other order of, or registration or filing with
(based on the assumptions set forth in paragraph (nn) below with
respect to registration under the Act), any court, regulatory
body, administrative agency or other governmental body, agency or
official except for such as may have been obtained or may be
required in connection with the registration under the Act of the
Securities or the Exchange Bonds in accordance with the
Registration Rights Agreement, the qualification of the Indenture
under the 1939 Act and except for such as may be required in
connection with registration under the Act of the Securities or
the Exchange Bonds in accordance with the Registration Rights
Agreement and compliance with the securities or Blue Sky laws of
certain jurisdictions and to perfect security interests as
contemplated by the Security Documents, (ii) conflicts or will
conflict with or constitutes or will constitute a breach of, or a
default under, the certificate or articles of incorporation or
bylaws, or other organizational documents, of the Issuers, the
Subsidiaries, PEC or Panda International, (iii) after giving
effect to the transactions contemplated by this Agreement and the
Transaction Documents (other than the Project Agreements)
conflicts or will conflict with or constitutes or will constitute
a breach of, or a default under, any agreement, indenture, lease
or other instrument to which the Issuers, the Subsidiaries, PEC
or Panda International is a party or by which any of them or any
of their respective properties may be bound, other than
conflicts, breaches or defaults that could not reasonably be
expected to result in a Material Adverse Effect or to materially
affect the issuance of the Securities or the consummation of the
transaction contemplated by this Agreement or the Transaction
Documents, (iv) based on the assumptions set forth in paragraph
(nn) below with respect to registration under the Act, and except
for compliance with the securities laws or Blue Sky laws of
certain jurisdictions (as to which no representation or warranty
is given), violates or will violate any statute, law, regulation
or filing or judgment, injunction, order or decree applicable to
the Issuers, the Subsidiaries, PEC or Panda International or any
of their respective properties, other than violations that could
not reasonably be expected to result in a Material Adverse Effect
or to materially affect the issuance of the Securities or the
consummation of the transaction contemplated by this Agreement or
the Transaction Documents, or (v) except as contemplated by the
Indenture and the Security Documents, will result in the creation
or imposition of any Lien upon any property or assets of the
Issuers, the Subsidiaries, PEC or Panda International pursuant to
the terms of any agreement or instrument to which any of them is
a party or by which any of them may be bound or to which any of
the property or assets of any of them is subject.
(dd) The financial statements, together with the notes
thereto, included as part of the Offering Circular, present
fairly the financial position, results of operations and changes
in partners' equity and cash flows of the Company on the basis
stated in the Offering Circular at the respective dates or for
the respective periods to which they apply, and have been
prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved.
The other financial and statistical information and data set
forth in the Offering Circular (other than the Projections, as
defined in paragraph (qq) below) are accurate in all material
respects and, to the extent such information and data is derived
from the financial books and records of the Issuers, present
fairly in all material respects the information purported to be
shown thereby at the respective dates or for the respective
periods for which they apply and is prepared on a basis
consistent with such financial statements and the books and
records of the Issuers.
(ee) The pro forma financial data included in the
Offering Circular include all material adjustments to the
historical data required to reflect the issuance of the
Securities and the other transactions described in the notes
related to such pro forma financial data contained in the
Offering Circular and the pro forma adjustments and assumptions
used in the preparation of such pro forma data in the Offering
Circular are reasonable.
(ff) The Company's capitalization as of March 31, 1996
was as set forth in the Offering Circular in the section titled
"Capitalization" under the column titled "Actual."
(gg) Except as disclosed in the Offering Circular,
subsequent to the date as of which such information is given in
the Offering Circular, neither the Issuers nor any Subsidiary has
incurred any liability or obligation, direct or contingent, or
entered into any transaction that is in each case material to the
Issuers and the Subsidiaries taken as a whole, and there has not
been any change in the capital stock, or material increase in the
short-term or long-term debt, of the Issuers or any Subsidiary
or any event or circumstance that has had, or reasonably could be
expected to have, a Material Adverse Effect.
(hh) This Agreement, the Registration Rights Agreement,
the Indenture, the Security Documents, the Additional Projects
Contract and the Project Agreements are collectively referred to
as the "Transaction Documents". The Issuers, PEC, Panda
International and the Subsidiaries are collectively referred to
as the "Panda Parties". Each of the Panda Parties has full
corporate or partnership power and authority, as the case may be,
to execute and enter into, and deliver and perform its
obligations under the Transaction Documents to which it is a
signatory. The execution and delivery of, and the performance by
each of the Panda Parties of its obligations under the
Transaction Documents to which it is a signatory have been duly
and validly authorized by such party. The Transaction Documents
either are, or at the Closing shall have been, duly executed and
delivered by each of the Panda Parties that is a signatory
thereto, and constitute, or at the Closing will constitute, the
valid and legally binding agreement of each of the Panda Parties
that is a signatory thereto, enforceable against each of the
Panda Parties that is a signatory thereto in accordance with its
terms, except as the enforcement hereof and thereof may be
limited by bankruptcy, insolvency or other similar laws affecting
the enforcement of creditors' rights generally and subject to the
applicability of general principles of equity.
(ii) The execution and delivery of each of the Security
Documents to which PFC or the Company is a party or will be a
party on the Closing Date will be effective to create in favor of
the Collateral Agent for the benefit of the Secured Parties, as
security for payment and performance of the obligations secured
thereby, a valid and enforceable security interest in the
Collateral covered or purported to be covered thereby upon the
delivery of stock certificates representing certain Collateral
and upon filing of the appropriate UCC-1 financing statements
(the "Financing Statements"), with the first priority purported
to be created thereby. The Financing Statements on the Closing
Date will be in appropriate form for filing (including the
description of the collateral set forth therein) in each office
and in each jurisdiction where required to create and perfect the
lien and security interest described above.
(jj) Except as permitted by the Act, none of the
Issuers or Panda International have distributed any offering
material in connection with the offering and sale of the
Securities other than the Preliminary Offering Circular and the
Offering Circular.
(kk) Each of the Issuers is not and, upon sale of the
Securities to be issued and sold thereby in accordance herewith
and the application of the net proceeds to the Issuers of such
sale as described in the Offering Circular under the caption "Use
of Proceeds," will not be an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "1940 Act").
(ll) When the Securities are issued and delivered
pursuant to this Agreement, such Securities will not be of the
same class (within the meaning of Rule 144A(d)(3) under the Act)
as any security of the Issuers that is listed on a national
securities exchange registered under Section 6 of the Exchange
Act or that is quoted in a United States automated interdealer
quotation system.
(mm) Neither the Issuers nor any of their affiliates
(as defined in Rule 501(b) of Regulation D ("Regulation D") under
the Act) has directly, or indirectly through any agent or
otherwise, (1) sold, offered for sale, solicited offers to buy
or otherwise negotiated in respect of, any security (as defined
in the Act) which is or will be integrated with the offering and
sale of the Securities in a manner that would require the
registration of the Securities under the Act or (2) engaged in
any form of general solicitation or general advertising (within
the meaning of Rule 502(a) of Regulation D under the Act) in
connection with the offering of the Securities.
(nn) Assuming (1) that the representations and warranties
of the Initial Purchaser in Section 2 hereof are true and
correct in all material respects, (2) the Initial Purchaser
complies in all material respects with the covenants set forth in
Section 2 hereof, (3) compliance by the Initial Purchaser in all
material respects with the offering and transfer procedures and
restrictions described in the Offering Circular, (4) the accuracy
in all material respects of the representations and warranties
made in accordance with this Agreement and the Offering Circular
by Eligible Purchasers to whom the Initial Purchaser initially
resells Securities and (5) Eligible Purchasers to whom the
Initial Purchaser initially resells Securities receive a copy of
the Offering Circular prior to such sale, the purchase and sale
of the Securities pursuant hereto (including the Initial
Purchaser's proposed offering of the Securities on the terms and
in the manner set forth in the Offering Circular and Section 2
hereof) do not require registration under the Act.
(oo) The execution and delivery of this Agreement and
the sale of the Securities to the Initial Purchaser by the
Issuers, Panda International or by the Initial Purchaser to
Eligible Purchasers will not involve any prohibited transaction
within the meaning of Section 406 of ERISA or Section 4975 of the
Code. The representation made by the Issuers and Panda
International in the preceding sentence is made in reliance upon
and subject to the accuracy of, and compliance with, the
representations and covenants made or deemed made by the Eligible
Purchasers as set forth in the Offering Circular under the
section entitled "Transfer Restrictions."
(pp) Each Project Agreement is in full force and effect
and constitutes a valid and legally binding obligation of the
Subsidiaries that are parties thereto and, to the best knowledge
of PFC, the Company and Panda International, of each person other
than the Subsidiaries that is party thereto, enforceable against
the Subsidiaries and each person other than the Subsidiaries that
is a party thereto, in accordance with the terms thereof, except
as such enforceability may be limited by bankruptcy, insolvency
or other similar laws affecting the enforcement of creditors'
rights generally and subject to the applicability of general
principles of equity. After giving effect to the transactions
contemplated by this Agreement and the Transaction Documents
(other than the Project Agreements), except as set forth in the
Offering Circular, to the best knowledge of the Issuers and Panda
International, the Subsidiaries and such other parties are not in
default (and no event has occurred which with lapse of time or
notice or action by a third party could result in a default) in
the performance of or compliance with any term or provision of
any Project Agreement and, to the best knowledge of PFC and the
Company, no force majeure has occurred and is continuing under
any Project Agreement.
(qq) The Issuers and Panda International have reviewed
the financial projections for the Panda-Rosemary Facility
contained in the Panda-Rosemary Cogeneration Project Condition
Assessment Report for Potential Investors at the Request of Panda
Energy Corporation prepared by Burns & McDonnell included in the
Offering Circular as Appendix C thereto, the financial
projections for the Panda-Brandywine Facility contained in the
Independent Panda-Brandywine Pro Forma Projections prepared for
Panda International by ICF included in the Offering Circular as
Appendix E and the consolidated projections contained in the
Summary of the Consolidated Pro Forma of the Panda-Rosemary and
Panda Brandywine Power Projects prepared for Panda International
by ICF included in the Offering Circular as Appendix B thereto
(collectively, the "Projections") and believe that the
Projections are based upon assumptions that, to the extent
material for purposes of consideration of the Projections taken
as a whole, are accurately disclosed in all material respects in
the Offering Circular. The Issuers and Panda International
believe the Projections to be reasonable in light of the
assumptions made therein. The Issuers and Panda International
have reviewed the assumptions contained in (1) the Assessment of
Fuel Price, Supply and Delivery Risks for Panda-Rosemary
Cogeneration Project prepared by Benjamin Schlesinger and
Associates, Inc., included in the Offering Circular as Appendix D
thereto, (2) the Independent Engineer's Report Panda-Brandywine
Cogeneration Project prepared by Pacific Energy Systems, Inc.,
included in the Offering Circular as Appendix G thereto and
(3) the Panda-Brandywine, L.P. Generating Facility Fuel
Consultant's Report prepared by C. C. Pace Resources, Inc.
included in the Offering Circular as Appendix H thereto, and the
Issuers and Panda International believe such assumptions to be
reasonable. The reports described in this paragraph are
collectively referred to as the "Independent Engineers' Reports."
Burns & McDonnell, ICF, Benjamin Schlesinger & Associates, Inc.,
Pacific Energy Systems, Inc. and C. C. Pace Resources, Inc. are
collectively referred to as the "Independent Engineers."
(rr) Except as disclosed in the Offering Circular, PFC,
the Company and the Subsidiaries are in compliance with all
applicable federal, state and local laws (including common law)
and regulations, ordinances, permits, approvals and consent
decrees relating to the protection of human health and safety,
the environment or hazardous or toxic substances or wastes,
pollutants or contaminants (collectively "Safety and
Environmental Laws"), except for such noncompliance as could not
reasonably be expected to have a Material Adverse Effect. Except
as disclosed in the Offering Circular (as it may be amended or
supplemented), compliance with Safety and Environmental Laws
currently in effect is not expected to have a material effect
upon the capital expenditures, earnings and competitive position
of PFC and the Company, there are not any material estimated
capital expenditures for environmental control facilities for the
current and succeeding fiscal year and, to the best knowledge of
the Issuers and Panda International, there are not any past or
present actions, activities, circumstances, events or incidents
with respect to environmental matters, including releases of any
material into the environment, that could reasonably be expected
to have a Material Adverse Effect. Except as disclosed in the
Offering Circular, there is no claim under any Safety and
Environmental Law, including common law, pending or, to the best
knowledge of the Issuers and Panda International, threatened
against the Issuers, the Company or any Subsidiary ("Claim") that
would have a Material Adverse Effect and, to the best of the
knowledge of the Issuers and Panda International, under
applicable law there are not any past or present actions,
activities, circumstances, events or incidents, including
releases of any material into the environment, that would be
reasonably likely to form the basis of any Claim against the
Issuers or any Subsidiary that would have a Material Adverse
Effect.
(ss) None of Panda International, the Company or any of
the Subsidiaries has violated any U.S. or foreign federal, state
or local laws applicable to its business relating to
discrimination in the hiring, promotion or pay of employees or
any applicable federal or state wages and hours laws, or any
provisions of the Employee Retirement Income Security Act of 1974
or the rules and regulations promulgated thereunder, which in
each case could result in any Material Adverse Effect.
6. Indemnification and Contribution. (a) PFC, the Company
and Panda International agree, jointly and severally, to
indemnify, defend and hold harmless the Initial Purchaser and its
officers, shareholders, employees and directors and any person
who controls the Initial Purchaser within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, from and against
any loss, expense, liability or claim (including the reasonable
cost of investigating such claim) which, jointly or severally,
such Initial Purchaser or any such officer, shareholder,
employee, director or controlling person may incur under the Act,
the Exchange Act or otherwise, as such expenses are incurred,
insofar as such loss, expense, liability or claim arises out of
or is based upon any untrue statement or alleged untrue statement
of a material fact contained in the Preliminary Offering Circular
or Offering Circular, as amended or supplemented, or arises out
of or is based upon any omission or alleged omission to state a
material fact required to be stated in the Preliminary Offering
Circular or Offering Circular, as amended or supplemented, or
necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading, except
insofar as any such loss, expense, liability or claim arises out
of or is based upon any untrue statement or omission or alleged
untrue statement or omission which has been made therein or
omitted therefrom in reliance upon and in conformity with the
information provided in writing to PFC or the Company by or on
behalf of the Initial Purchaser, expressly for use in the
Preliminary Offering Circular or Offering Circular, and PFC, the
Company and Panda International agree that the only such
information provided in writing by or on behalf of the Initial
Purchaser, expressly for use in the Preliminary Offering Circular
or Offering Circular, is that information contained in the
section entitled "Plan of Distribution." The foregoing indemnity
agreement shall be in addition to any liability which PFC, the
Company and Panda International may otherwise have. The
indemnification contained in this Section 6(a) with respect to
untrue statements made in, or omissions or alleged omissions
from, the Preliminary Offering Circular shall not inure to the
benefit of the Initial Purchaser or the other persons entitled to
indemnification as described above on account of any loss,
expense, liability or claim arising from the resale of the
Securities by the Initial Purchaser if (1) the Company and PFC
shall have complied with their obligations under Sections 4(b),
4(c), 4(d) and 4(e) hereof, (2) a copy of the Offering Circular
(as amended or supplemented if any amendments or supplements
thereto shall have been furnished to the Initial Purchaser prior
to the written confirmation of such resale) shall not have been
given or sent to such person by or on behalf of the Initial
Purchaser prior to the written confirmation of such resale and
(3) the untrue statement or alleged untrue statement of, or
omission or alleged omission of, a material fact contained in the
Preliminary Offering Circular, or any amendment or supplement
thereto, that is the basis for the loss, expense, liability or
claim as to which such claim for indemnification is made was
corrected in the Offering Circular (as amended or supplemented
and delivered to the Initial Purchaser prior to the written
confirmation of such resale).
If any notice of claim is received by or any action is
brought against the Initial Purchaser or its officers,
shareholders, employees, directors or persons who control the
Initial Purchaser (as described above) in respect of which
indemnity may be sought against PFC, the Company and Panda
International pursuant to the foregoing paragraph, the Initial
Purchaser shall promptly notify PFC, the Company or Panda
International in writing of such notice of claim or the
institution of such action (provided, that the failure to give
such notice shall not relieve either PFC, the Company or Panda
International of any liability which they may have pursuant to
this Agreement, except to the extent that it shall have been
determined by a court of competent jurisdiction by final judgment
that such failure has resulted in the forfeiture of substantive
rights or defenses by the indemnifying party) and PFC, the
Company or Panda International shall assume the defense of such
action, including the employment of counsel and payment of
reasonable expenses. The Initial Purchaser or such officer,
shareholder, employee, director or person who controls the
Initial Purchaser (as described above) shall have the right to
employ its or their own counsel in any such case (but not to
direct the defense), but the fees and expenses of such counsel
shall be at the expense of the Initial Purchaser or of such
persons unless (i) the employment of such counsel shall have been
authorized in writing by PFC, the Company or Panda International
in connection with the defense of such action, (ii) PFC, the
Company or Panda International shall not have employed counsel
reasonably satisfactory to the Initial Purchaser to have charge
of the defense of such action or (iii) such indemnified party or
parties shall have been advised by counsel that there may be
defenses available to it or them that are different from or in
addition to those available to PFC, the Company and Panda
International (and, in the case of clause (i), (ii) or (iii)
above, the Company, the Partnership and Panda International shall
not have the right to direct the defense of such action on behalf
of such indemnified party or parties and such fees and expenses
shall be borne, jointly and severally, by PFC, the Company and
Panda International and paid as incurred, provided that PFC, the
Company and Panda International shall only be responsible for the
fees and expenses of one counsel for the indemnified parties
hereunder). Anything in this paragraph to the contrary
notwithstanding, none of PFC, the Company and Panda International
shall be liable for any settlement of any such claim or action
effected without its written consent, which consent shall not be
unreasonably withheld or delayed. Notwithstanding the
immediately preceding sentence, if at any time the Initial
Purchaser shall have requested PFC, the Company or Panda
International to reimburse the Initial Purchaser for fees and
expenses of counsel required to be paid by the Company, the
Partnership or Panda International, each of PFC, the Company and
Panda International shall be liable for any settlement of such
claim or action effected without its written consent if (i) such
settlement is entered into more than 60 days after receipt by
PFC, the Company or Panda International of such request,
(ii) PFC, the Company or Panda International shall not have
reimbursed the Initial Purchaser in accordance with such request
prior to the date of such settlement and (iii) the Initial
Purchaser shall have given PFC, the Company or Panda
International at least 30 days' prior notice of its intention to
settle.
(b) The Initial Purchaser agrees to indemnify, defend
and hold harmless PFC and the Company, each of their respective
directors, officers and employees and any person who controls PFC
or the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act from and against any loss,
expense, liability or claim (including the reasonable cost of
investigating such claim) which PFC, the Company or any such
person may incur under the Act, the Exchange Act or otherwise,
insofar as such loss, expense, liability or claim arises out of
or is based upon any untrue statement or alleged untrue statement
or omission of a material fact or alleged omission of a material
fact which has been made in or omitted from the Preliminary
Offering Circular or Offering Circular in reliance upon and in
conformity with the information relating to the Initial Purchaser
furnished in writing by or on behalf of the Initial Purchaser to
PFC and the Company. PFC, the Company and Panda International
agree that the only information provided in writing by or on
behalf of the Initial Purchaser to PFC and the Company, expressly
for use in the Preliminary Offering Circular or Offering
Circular, is that information contained in the section entitled
"Plan of Distribution." The foregoing indemnity agreement shall
be in addition to any liability which the Initial Purchaser may
otherwise have.
If any notice of claim is received by or any action is
brought against PFC, the Company or any such person in respect of
which indemnity may be sought against the Initial Purchaser
pursuant to the foregoing paragraph, PFC, the Company, Panda
International or such person shall promptly notify the Initial
Purchaser in writing of such notice of claim or the institution
of such action (provided, that the failure to give such notice
shall not relieve the Initial Purchaser of any liability which it
may have pursuant to this agreement, except to the extent that it
shall have been determined by a court of competent jurisdiction
by final judgment that such failure has resulted in the
forfeiture of substantive rights or defenses by the indemnifying
party) and the Initial Purchaser shall assume the defense of such
action, including the employment of counsel and payment of
reasonable expenses. PFC, the Company, Panda International or
such person shall have the right to employ its or their own
counsel in any such case (but not to direct the defense), but the
fees and expenses of such counsel shall be at the expense of PFC,
the Company or such person unless (i) the employment of such
counsel shall have been authorized in writing by the Initial
Purchaser in connection with the defense of such action, (ii) the
Initial Purchaser shall not have employed counsel reasonably
satisfactory to the Issuers or Panda International to have charge
of the defense of such action or (iii) such indemnified party or
parties shall have been advised by counsel that there may be
defenses available to it or them which are different from or
additional to those available to the Initial Purchaser (and, in
the case of clause (i), (ii) or (iii) above, the Initial
Purchaser shall not have the right to direct the defense of such
action on behalf of such indemnified party or parties) and such
fees and expenses shall be borne by the Initial Purchaser and
paid as incurred, provided that the Initial Purchaser shall only
be responsible for the fees and expenses for one counsel for all
persons in respect of which indemnity may be sought against the
Initial Purchaser). Anything in this paragraph to the contrary
notwithstanding, the Initial Purchaser shall not be liable for
any settlement of any such claim or action effected without the
written consent of the Initial Purchaser, which consent shall not
be unreasonably withheld or delayed. Notwithstanding the
immediately preceding sentence, if at any time the Issuers and
Panda International shall have requested the Initial Purchaser to
reimburse such indemnified party for fees and expenses of counsel
required to be paid by the Initial Purchaser, the Initial
Purchaser agrees that it shall be liable for any settlement of
any proceeding effected without its written consent if (i) such
settlement is entered into more than 60 days after receipt by the
Initial Purchaser of such request, (ii) the Initial Purchaser
shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement and
(iii) such indemnified party shall have given the Initial
Purchaser at least 30 days' prior notice of its intention to
settle.
(c) If the indemnification provided for in this
Section 6 is unavailable to an indemnified party under subsection
(a) or (b) of this Section 6 in respect of any losses, damages,
expenses, liabilities or claims referred to therein, then each
applicable indemnifying party shall contribute to the amount paid
or payable by such indemnified party as a result of such losses,
expenses, liabilities or claims (i) in such proportion as is
appropriate to reflect the relative benefits received by PFC, the
Company and Panda International on the one hand and the Initial
Purchaser on the other hand from the offering of the Securities
or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of PFC, the Company and
Panda International on the one hand and the Initial Purchaser on
the other in connection with the statements or omissions which
resulted in such losses, expenses, liabilities or claims, as well
as any other relevant equitable considerations. The relative
benefits received by PFC, the Company and Panda International on
the one hand and the Initial Purchaser on the other shall be
deemed to be in the same proportion as the total proceeds from
the offering (net of underwriting discounts and commissions but
before deducting expenses) received by PFC, the Company and Panda
International bear to the total discounts and commissions
received by the Initial Purchaser. The relative fault of PFC,
the Company and Panda International on the one hand and of the
Initial Purchaser on the other shall be determined by reference
to, among other things, whether the untrue statement or alleged
untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied
by PFC, the Company or by the Initial Purchaser and the parties'
relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the losses, expenses,
liabilities and claims referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred
by such party in connection with investigating or defending any
claim or action.
(d) PFC, the Company, Panda International and the
Initial Purchaser agree that it would not be just and equitable
if contribution pursuant to this Section 6 were determined by pro
rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in
Section 6(c) above. Notwithstanding the provisions of this
Section 6, the Initial Purchaser shall not be required to
contribute any amount in excess of the difference between the
consideration paid to PFC by such Initial Purchaser for the
Securities purchased by it and the consideration received by such
Initial Purchaser upon the resale of such Securities by reason of
such untrue statement or alleged untrue statement or omission or
alleged omission.
(e) The indemnity and contribution agreements
contained in this Section 6 and the covenants, warranties and
representations of PFC, the Company and Panda International
contained in this Agreement shall remain in full force and effect
irrespective of any investigation made by or on behalf of the
Initial Purchaser, or any of its officers, employees, directors,
shareholders or persons who control the Initial Purchaser within
the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, or by or on behalf of PFC, the Company, Panda
International, their respective directors, officers, employees or
any person who controls PFC, the Company or Panda International
within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, and shall survive any termination of this Agreement
or the issuance and delivery of the Securities. PFC, the
Company, Panda International and the Initial Purchaser agree
promptly to notify the others of the commencement of any
litigation or proceeding against it and, in the case of PFC, the
Company or Panda International, against any of their respective
officers and directors in connection with the issuance and sale
of the Securities, or in connection with the Preliminary Offering
Circular or Offering Circular.
7. Conditions of the Initial Purchaser's Obligations. The
obligations of the Initial Purchaser to purchase the Securities
on the Closing Date hereunder is subject to the fulfillment or
waiver, in the Initial Purchaser's sole discretion, of the
following conditions:
(a) At the time of execution of this Agreement and on
the Closing Date, no order or decree preventing the use of the
Offering Circular or any amendment or supplement thereto, or any
order asserting that the transactions contemplated by this
Agreement are subject to the registration requirements of the Act
shall have been issued and no proceedings for that purpose shall
have been commenced or shall be pending or, to the knowledge of
the Issuers and Panda International, be contemplated. No order
suspending the sale of the Securities in any jurisdiction
designated by the Initial Purchaser shall have been issued and no
proceedings for that purpose shall have been commenced or shall
be pending or, to the knowledge of the Issuers and Panda
International, shall be contemplated.
(b) Subsequent to the date hereof, there shall not
have occurred any change, or any development involving a
prospective change, in or affecting the condition (financial or
other), business, prospects, properties or results of operations
of PFC, the Company, PEC, Panda International or any of the
Subsidiaries, which in the opinion of the Initial Purchaser,
singly or in the aggregate, would materially adversely affect the
market for the Securities.
(c) The Initial Purchaser shall not have been advised
by the Issuers or Panda International or shall not have concluded
and disclosed to PFC or the Company that the Offering Circular
contains an untrue statement of a fact which in the opinion of
the Initial Purchaser or its counsel is material or omits to
state a fact which in the opinion of the Initial Purchaser or its
counsel, is material and is required to be stated therein or
necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(d) PFC and the Company shall have furnished to the
Initial Purchaser:
(i) the opinion of Chadbourne & Parke LLP, dated
the Closing Date and addressed to the Initial Purchaser,
substantially in the form of Exhibit B-1 hereto;
(ii) the opinion of Chadbourne & Parke LLP, dated
the Closing Date and addressed to the Initial Purchaser,
substantially in the form of Exhibit B-2 hereto;
(iii) the letter of Chadbourne & Parke LLP, dated
the Closing Date and addressed to the Initial Purchaser,
substantially in the form of Exhibit B-3 hereto;
(iv) the opinion of Simpson Thacher & Bartlett,
dated the Closing Date and addressed to the Initial
Purchaser, substantially in the form of Exhibit C hereto;
(v) the opinion of Maples & Calder, dated the
Closing Date and addressed to the Initial Purchaser,
substantially in the form of Exhibit D hereto;
(vi) the opinion of Venable, Baetjer & Howard,
LLP, dated the Closing Date and addressed to the Initial
Purchaser, substantially in the form of Exhibit E-1 hereto;
(vii) the opinion of Venable, Baetjer & Howard,
LLP, dated the Closing Date and addressed to the Initial
Purchaser, substantially in the form of Exhibit E-2 hereto;
(viii) the opinion of McGuire, Woods, Battle &
Boothe, LLP, dated the Closing Date and addressed to the
Initial Purchaser, substantially in the form of Exhibit F
hereto;
(ix) the opinion of Canterbury, Stuber, Pratt,
Elder & Gooch, P.C., dated the Closing Date and addressed to
the Initial Purchaser, substantially in the form of Exhibit
G hereto; and
(x) the opinion of Gibbs and Haller, dated the
Closing Date and addressed to the Initial Purchaser,
substantially in the form of Exhibit H hereto.
(e) The Initial Purchaser shall have received on the
Closing Date an opinion of Vinson & Elkins L.L.P., counsel for
the Initial Purchaser, dated the Closing Date, and addressed to
the Initial Purchaser, with respect to such matters as the
Initial Purchaser may request.
(f) The Initial Purchaser shall have received letters
addressed to the Initial Purchaser, and dated the date hereof and
the Closing Date from Price Waterhouse LLP, independent public
accountants, substantially in the forms heretofore approved by
the Initial Purchaser.
(g) (i) There shall not have been any change in the
capital stock of the Issuers nor any material increase in the
short-term or long-term debt of the Issuers (other than in the
ordinary course of business) from that set forth or contemplated
in the Offering Circular (or any amendment or supplement
thereto); (ii) there shall not have been, since the respective
dates as of which information is given in the Offering Circular,
except as may otherwise be stated in the Offering Circular, any
Material Adverse Change; (iii) PFC, the Company and the
Subsidiaries shall not have any liabilities or obligations,
direct or contingent (whether or not in the ordinary course of
business), that are material to PFC, the Company and the
Subsidiaries, taken as a whole, other than those reflected in the
Offering Circular (or any amendment or supplement thereto); and
(iv) all the representations and warranties of the Issuers and
Panda International contained in this Agreement and the Indenture
shall be true and correct in all material respects on and as of
the date hereof and on and as of the Closing Date as if made on
and as of the Closing Date, and the Initial Purchaser shall have
received a certificate, dated the Closing Date and signed by the
chief executive officer and the chief accounting officer of the
Issuers and Panda International (or such other officers as are
acceptable to the Initial Purchaser), to the effect set forth in
this Section 7(g) and in Section 7(h) hereof.
(h) The Issuers and Panda International shall not have
failed at or prior to the Closing Date to have performed or
complied in all material respects with any of their respective
agreements herein contained and required to be performed or
complied with by them hereunder at or prior to the Closing Date.
(i) The Issuers and Panda International shall have
furnished or caused to be furnished to the Initial Purchaser such
further certificates and documents as the Initial Purchaser shall
have reasonably requested.
(j) The Initial Purchaser shall have received copies
of all Permits set forth on Part A of Schedule 5(q), certified by
an authorized officer of the Company as being complete and in
full force and effect.
(k) On or prior to the Closing Date, the Financing
Statements shall have been delivered for filing, recordation
and/or registration in each office and in each jurisdiction where
required to create and perfect a valid and enforceable security
interest in the Collateral covered or purported to be covered by
the Security Documents, with the priority purported to be created
thereby. All filing fees required to be paid with respect to the
execution, recording or filing of the Financing Statements shall
have been paid or provided for.
(l) No law, regulation, ruling guideline or other
governmental action or inaction shall have occurred (or be
proposed if such proposal has a reasonable likelihood of being
enacted and, if enacted, would have a Material Adverse Effect),
the effect of which is to prevent, directly or indirectly, the
Trustee, any Secured Party, the Issuers or any other party to any
Project Agreement from fulfilling its respective obligations
thereunder, or which would subject any Secured Party to any
unreimbursed liability by reason of the performance of its
obligations under the Indenture (other than taxes levied on the
income of such Secured Party).
(m) The conditions to closing set forth in Section 7
of that certain Purchase Agreement dated as of the date hereof,
by and among the Initial Purchaser, Panda-Rosemary Funding
Corporation and Panda-Rosemary, L.P. (relating to the offering
and sale by Panda-Rosemary Funding Corporation of its 8-5/8% First
Mortgage Bonds Due 2016) shall have been satisfied or waived by
the Initial Purchaser.
(n) The Independent Engineers will have consented to
the references to them in the Offering Circular and the use of
the Independent Engineer's Reports prepared by the Independent
Engineers and contained in Appendices B, C, D, E, G and H to the
Offering Circular, and since the dates of the Independent
Engineer's Reports, no event affecting the Independent Engineers'
Reports or the matters referred to therein shall have occurred
(i) which shall make untrue or incorrect in any material respect,
as of the Closing Date, any information or statement contained in
the Independent Engineers' Reports or in the Offering Circular
under the caption "Offering Circular Summary - Independent
Engineers' and Consultants' Reports" or (ii) which shall not be
reflected in the Offering Circular but should be reflected
therein in order to make the statements and information contained
in the Independent Engineers' Reports, or in the Offering
Circular relating to matters referred to in the Independent
Engineers' Reports, in light of the circumstances under which
they were made, not misleading, as evidenced by a certificate
satisfactory to the Initial Purchaser of an authorized officer of
each of the Independent Engineers, dated the Closing Date.
(o) The Initial Purchaser shall have received an
opinion, dated the Closing Date from Kelly, Drye & Warren,
counsel to the Trustee, the Collateral Agent and the Depositary
Agent, in respect of the enforceability of the Transaction
Documents to which the Trustee, the Collateral Agent and the
Depositary Agent are parties.
(p) The Initial Purchaser shall have received, in form
and substance satisfactory to the Initial Purchaser:
(i) certified copies of the (A) certificate of
incorporation and by-laws, of each of PFC and the Company
and (B) resolutions of the board of directors of each of
PFC, the Company, PEC and Panda International authorizing
the execution, delivery and performance of each Security
Document to which such Person is a party and of all
documents evidencing other necessary action with respect
thereto;
(ii) certificates signed by an authorized officer
of each such Person certifying the name, incumbency and
signature of each individual authorized to sign the Security
Documents to which such Person is a party and the other
documents or certificates to be delivered pursuant hereto
and thereto, which may be conclusively relied upon until a
revised certificate is similarly so delivered; and
(iii) good standing certificates, certificates of
authority to transact business as a foreign corporation, as
applicable, and franchise tax certificates with respect to
each such Person.
(q) The Issuers and Panda International shall have
paid in full on the Closing Date the fees and expenses referred
to in clause (v) of Section 8 by delivering to counsel for the
Initial Purchaser on such date a check payable to such counsel in
the requisite amount.
All such opinions, certificates, letters and other documents
will be in compliance with the provisions hereof only if they are
reasonably satisfactory in form and substance to the Initial
Purchaser and counsel for the Initial Purchaser.
Any certificate or document signed by any officer of an
Issuer pursuant to this Agreement shall be deemed a
representation and warranty by the Issuers to the Initial
Purchaser as to the statements made therein.
8. Expenses. (a) Whether or not the purchase and sale of
the Securities hereunder is consummated or this Agreement is
terminated pursuant to Section 9 hereof, the Issuers and Panda
International agree, jointly and severally, to pay the following
costs and expenses and all other costs and expenses incident to
the performance by them of their obligations hereunder: (i) the
preparation, printing or reproduction of the Preliminary Offering
Circular and the Offering Circular (including financial
statements thereto), this Agreement, the Registration Rights
Agreement, the Indenture and the other Transaction Documents;
(ii) the printing (or reproduction) and delivery (including
postage, air freight charges and charges for counting and
packaging) of such copies of the Offering Circular and the
Preliminary Offering Circular as may be requested for use in
connection with the offering and sale of the Securities;
(iii) the preparation, printing (or reproduction),
authentication, issuance and delivery of certificates for the
Bonds including any stamp taxes in connection with the original
issuance and sale of the Bonds; (iv) the printing (or
reproduction) and delivery of this Agreement, the preliminary and
supplemental Blue Sky Memoranda and all other agreements or
documents printed (or reproduced) and delivered in connection
with the offering of the Securities; (v) the qualification of the
Securities for offer and sale under the securities or Blue Sky
laws of the several states as provided in Section 4(f) hereof
(including the fees, expenses and disbursements of counsel for
the Initial Purchaser relating to the preparation, printing or
reproduction and delivery of the preliminary and supplemental
Blue Sky Memoranda and such qualification in the amount of
$15,000); (vi) the performance by the Issuers of their
obligations under this Agreement, the Registration Rights
Agreement and the Transaction Documents.
(b) If the purchase and sale of the Securities
hereunder is not consummated because of any failure, refusal or
inability on the part of the Issuers or Panda International to
perform all obligations on their part to be performed hereunder
other than by reason of a default by the Initial Purchaser in
payment for the Securities on the Closing Date, the Issuers shall
reimburse the Initial Purchaser promptly upon demand for all out-
of-pocket expenses (including fees and disbursements of counsel)
that shall have been incurred by it in connection with the
proposed purchase and sale of the Securities and the other
transactions contemplated hereby.
(c) Except as otherwise expressly provided in this
Agreement, each party hereto shall bear its own expenses in
connection with the transactions contemplated by this Agreement
(including the fees and disbursements of its counsel).
9. Termination of Agreement. This Agreement shall be
subject to termination in the absolute discretion of the Initial
Purchaser, without liability on the part of the Initial Purchaser
to the Issuers or Panda International, by notice to the Issuers
and Panda International, if prior to the Closing Date (a) there
shall occur any default or breach by PFC, the Company or Panda
International hereunder or the failure to satisfy any of the
conditions contained in Sections 4 or 7 hereof or (b) if, since
the date of this Agreement and prior to the Closing Date,
(i) there has occurred any material adverse change in the
financial markets of the United States or any outbreak of
hostilities or other calamity or crisis, the effect of which on
the financial securities markets of the United States is such as
to make it, in the reasonable good faith judgment of the Initial
Purchaser, impracticable to market the Securities or to enforce
contracts for the sale of the Securities, or (ii) trading
generally on the New York Stock Exchange or the American Stock
Exchange has been suspended (other than by limitation on hours or
number of days of trading), or minimum or maximum prices for
trading have been fixed, or maximum ranges for prices for
securities have been required, by the New York Stock Exchange or
the American Stock Exchange or by order of the Commission or any
other governmental authority, (iii) a banking moratorium has been
declared by any federal or state authorities, (iv) there shall
have occurred any downgrading in the rating of the Securities by
Moody's Investors Service, Inc., Duff & Phelps Credit Rating Co.
or any public announcement that such organization has under
surveillance or review its rating of the Securities or (v) any
invalidation of Rule 144A by any court or any withdrawal or
proposed withdrawal of any rule or regulation under the Act or
the Exchange Act by the Commission or any amendment or proposed
amendment thereof by the Commission which in the Initial
Purchaser's judgment, would materially impair the Initial
Purchaser's ability to purchase, hold or effect resales of the
Securities as contemplated hereby or the ability of holders of
the Securities to effect resales as currently contemplated by
Rule 144A and Regulation S.
If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any
other party except as provided in Section 8.
10. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been
duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Initial Purchaser shall be
directed to the Initial Purchaser, c/o Jefferies & Company, Inc.,
11100 Santa Monica Boulevard, 10th Floor, Los Angeles, California
90025, attention: Syndication Department, notices to PFC, the
Company and Panda International shall be directed to 4100 Spring
Valley Road, Suite 1001, Dallas, Texas 75244, Attention: General
Counsel.
11. Parties. This Agreement shall inure to the benefit of
and be binding upon the Initial Purchaser, PFC, the Company,
Panda International and their respective successors and legal
representatives. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to provide any
person, firm or corporation, other than the Initial Purchaser,
PFC, the Company, Panda International and their respective
successors and legal representatives and the controlling persons
and officers, employees, directors and shareholders referred to
in Section 6 and their respective heirs and legal
representatives, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein or
therein contained. This Agreement and all conditions and
provisions hereof are intended to be for the sole and exclusive
benefit of the Initial Purchaser, PFC, the Company, Panda
International and their respective successors and legal
representatives, and said controlling persons, shareholders,
employees, officers and directors and their respective heirs and
legal representatives, and for the benefit of no other person,
firm or corporation. No purchaser of Securities from the Initial
Purchaser shall be deemed to be a successor by reason merely of
such purchase.
12. Governing Law and Time. This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York applicable to agreements made and to be
performed in said State. Specified times of day refer to New
York time, unless otherwise specified.
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to PFC, the Company and
Panda International a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding
agreement among the Initial Purchaser, PFC, the Company and Panda
International in accordance with its terms.
Please confirm that the foregoing correctly sets forth the
agreement between the Issuers, Panda International and the
Initial Purchaser.
Very truly yours,
Panda Funding Corporation
By:
Name: William C. Nordlund
Title: Vice President
Panda Interfunding Corporation
By:
Name: William C. Nordlund
Title: Vice Presidnet
Panda Energy International, Inc.
By:
Name: William C. Nordlund
Title: Vice President
Confirmed as of the date first
above mentioned.
JEFFERIES & COMPANY, INC.
By: JEFFERIES & COMPANY, INC.
By:
Name: Christopher W. Allick
Title: Executive Vice President
EXHIBIT 10.75
ADDITIONAL PROJECTS CONTRACT
among
PANDA ENERGY INTERNATIONAL, INC.,
PANDA ENERGY CORPORATION,
and
PANDA INTERFUNDING CORPORATION
Dated as of July 31, 1996
_______________
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS 1
SECTION 1.01 DEFINITIONS 1
SECTION 1.02 USAGE 2
ARTICLE II. TRANSFERS OF OWNERSHIP INTERESTS 2
SECTION 2.01 TRANSFERS OF OWNERSHIP INTERESTS ON THE
EFFECTIVE DATE 2
SECTION 2.02 REQUIRED FUTURE TRANSFERS OF OWNERSHIP
INTERESTS IN ELIGIBLE PROJECTS 2
SECTION 2.03 SPECIAL EXCEPTIONS 4
SECTION 2.04 PERMISSIVE FUTURE TRANSFERS OF OWNERSHIP
INTERESTS 4
SECTION 2.05 DISPOSITION OF OWNERSHIP INTERESTS NOT
SUBJECT TO TRANSFER 5
SECTION 2.06 PANDA INTERNATIONAL AND PEC COVENANTS 5
SECTION 2.07 ADDITIONAL PROVISIONS 5
ARTICLE III. REPRESENTATIONS AND WARRANTIES 6
SECTION 3.01 REPRESENTATIONS AND WARRANTIES REGARDING
PANDA INTERNATIONAL, PEC AND THE PIC 6
SECTION 3.02 REPRESENTATIONS AND WARRANTIES REGARDING
THE PROJECT COMPANIES 7
SECTION 3.03 REPRESENTATIONS AND WARRANTIES REGARDING
TRANSFERS OF ELIGIBLE PROJECTS 9
ARTICLE IV. MISCELLANEOUS 12
SECTION 4.01 NOTICES 12
SECTION 4.02 AMENDMENTS 13
SECTION 4.03 ASSIGNMENT 13
SECTION 4.04 SUCCESSORS AND ASSIGNS 13
SECTION 4.05 INVALIDITY 13
SECTION 4.06 COUNTERPARTS 13
SECTION 4.07 NO ORAL AGREEMENTS 14
SECTION 4.08 GOVERNING LAW AND SUBMISSION TO
JURISDICTION 14
SECTION 4.09 RELATED PARTY CONTRACTS 14
SECTION 4.10 EFFECTIVE DATE AND TERM 14
GLOSSARY 1
_________________
ADDITIONAL PROJECTS CONTRACT
This ADDITIONAL PROJECTS CONTRACT, dated as of
July 31, 1996, is by and among Panda Energy International,
Inc., a Texas corporation ("Panda International"), Panda
Energy Corporation, a Texas corporation ("PEC"), and Panda
Interfunding Corporation, a Delaware corporation ("PIC").
W I T N E S S E T H
WHEREAS, PIC, Panda Funding Corporation, a Delaware
corporation and a subsidiary of PIC (the "Issuer"), and
Bankers Trust Company, a New York banking corporation, as
trustee (the "Trustee") under the Trust Indenture, dated as of
July 31, 1996 (the "Indenture"), by and among PIC, the Issuer
and the Trustee, have entered into the Indenture for the
purpose of issuing $105,525,000 principal amount of Pooled
Project Bonds, Series A due 2012 (the "Series A Bonds") and
additional series of bonds ("Additional Series", and
collectively with the Series A Bonds, the "Bonds");
WHEREAS, PEC has agreed to contribute to PIC (or a
wholly owned subsidiary of PIC) on the Effective Date (as
hereinafter defined) all of its ownership interests in the
Project Companies (as hereinafter defined), which interests
will serve as partial collateral for the Series A Bonds; and
WHEREAS, Panda International and PEC have agreed to
transfer or to cause to be transferred, as applicable, all
ownership interests held by Panda International, PEC or any
Affiliate (as hereinafter defined) of either of them in any
Future U.S. Project or Future International Project (as
hereinafter defined) that satisfies the requirements for such
transfer as set forth herein within the period set forth
herein;
NOW, THEREFORE, in consideration of the mutual
covenants and agreements herein contained, Panda
International, PEC and PIC hereby agree as follows:
ARTICLE I
Definitions
Section 1.01 Definitions. In addition to the terms
defined in this Agreement, the capitalized terms used in this
Agreement will have the meanings ascribed to such terms in the
Glossary attached hereto. The Glossary constitutes a part of
this Agreement and is incorporated herein.
Section 1.02 Usage. Unless the context of this
Agreement clearly requires otherwise, (a) pronouns, wherever
used herein, and of whatever gender, will include natural
Persons and corporations and associations of every kind and
character, (b) the word "included" or "including" will mean
"including without limitation", (c) the word "or" will have
the inclusive meaning represented by the phrase "and/or", (d)
the words hereof, herein, hereunder, and similar terms in this
Agreement will refer to this Agreement as a whole and not any
particular section or article in which such words appear, (e)
all terms defined in this Agreement (or in the Glossary
attached hereto) in the singular will have the same meaning
when used in the plural and vice versa, (f) each reference to
a "year" that is not described as a calendar year, will refer
to the 12-month period following the applicable date of
commencement. The section, article and other headings in this
Agreement and the Table of Contents to this Agreement are for
reference purposes and will not control or affect the
construction of this Agreement or the interpretation hereof in
any respect. Article, section and subsection references are
to this Agreement unless otherwise specified.
ARTICLE II
Transfers of Ownership Interests
Section 2.01 Transfers of Ownership Interests on
the Effective Date. On the Effective Date PEC shall transfer
to a PIC U.S. Entity all of the Ownership Interests of PEC in
each of Panda-Rosemary Corporation, PRC II Corporation, Panda-
Brandywine Corporation, Panda Energy Corporation, and
Brandywine Water Company, each of which is a Delaware
corporation (individually, a "Project Company" and
collectively, the "Project Companies").
Section 2.02 Required Future Transfers of Ownership
Interests in Eligible Projects. (a) If at any time within the
period commencing on the Effective Date and ending on the
fifth anniversary thereof Panda International, PEC, or any
Affiliate of either of them executes a Power Purchase
Agreement with respect to any Future U.S. Project or any
Future International Project, Panda International or PEC, as
the case may be, shall transfer, and in the case of an
Ownership Interest owned by an Affiliate of either of them,
Panda International or PEC, as the case may be, shall cause
such Affiliate to transfer all of its Ownership Interest in
such Future U.S. Project to a PIC U.S. Entity or all of its
Ownership Interest in such Future International Project to a
PIC International Entity, as the case may be, on a date that
is not later than ninety (90) days following the earlier of
the Financial Closing or the Commercial Operations Date with
respect to such Future U.S. Project or Future International
Project, provided that the following conditions are satisfied:
(i) as a result of the transfer of such Ownership
Interest, after taking into account the Anticipated Additional
Debt, the annual projected PIC Debt Service Coverage Ratio and
the annual projected Consolidated Debt Service Coverage Ratio,
if then applicable under the Indenture, will equal or exceed
1.7:1 and 1.25:1, respectively, for each Future Ratio
Determination Period (as defined in the Indenture).
(ii) Rating Agency Confirmation has been received;
(iii) as a result of such transfer, none of Panda
International, PEC, PIC, any PIC Entity or any of their
respective Affiliates will become an "investment company" or a
company "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended;
(iv) as a result of such transfer, none of Panda
International, PEC, PIC, any PIC Entity or any of their
respective Affiliates will be classified as a "holding
company", a "subsidiary company" of a "holding company", an
"affiliate" of a "holding company", or an "affiliate" of a
"subsidiary" of a "holding company", as such terms are defined
in the Public Utility Holding Company Act of 1935, as amended;
(v) such transfer is not prohibited by any
Project Document (other than a Related Party Contract);
(vi) the Ownership Interest is not at such time
the subject of a foreclosure action commenced in connection
with indebtedness incurred with respect to such Ownership
Interest or the Eligible Project to which it pertains, nor has
a default or event of default occurred and not been cured or
waived with respect to such indebtedness whether or not a
foreclosure action has been commenced; and
(vii) in the case of an Ownership Interest in a
Future International Project, such transfer, in the opinion of
nationally recognized tax counsel selected by Panda
International, would not prevent Panda International (and any
affiliated group of companies with which it files a U.S.
consolidated return) from deferring U.S. income taxes on the
earnings from such Future International Project.
(b) Notwithstanding the provisions of Section
2.02(a), if the electric power generating facility being
developed by PEC near Lakeland, Florida (the "Panda-Kathleen
Facility") achieves Financial Closing or the Commercial
Operations Date, PEC shall transfer to a PIC U.S. Entity all
of the Ownership Interests held by PEC in each of Panda-
Kathleen Corporation, a Delaware corporation, and Panda/Live
Oak Corporation, a Delaware corporation, not later than ninety
(90) days following the earlier of Financial Closing or the
Commercial Operations Date with respect to the Panda-Kathleen
Facility. Such transfer shall occur irrespective of whether
the requirements of Section 2.02(a)(i)-(vii) are satisfied.
(c) Notwithstanding anything to the contrary set
forth in Section 2.02(a), with respect to any Eligible Project
that has been acquired by the Transferor after such Project
has achieved the Commercial Operations Date and that is
required to be transferred pursuant to Section 2.02(a), such
transfer shall occur on a date that is not later than ninety
(90) days following the date of such acquisition.
Section 2.03 Special Exception.
Notwithstanding anything to the contrary set forth
elsewhere herein, none of Panda International, PEC, or any
Affiliate of either of them shall be required to comply with
the requirements of Section 2.02(a) with respect to any
Ownership Interest in an Eligible Project that is being
developed in phases unless the phases can be legally separated
in a commercially reasonable manner. If the phases of an
Eligible Project cannot be so separated, then such Eligible
Project shall be treated as having achieved Financial Closing
or reaching Commercial Operatons only when such milestones are
achieved or reached with respect to all phases of such
Eligible Project.
Section 2.04 Permissive Future Transfers of
Ownership Interests. If Panda International, PEC, or any
Affiliate of either of them is not required to sell, transfer
or contribute an Ownership Interest to a PIC Entity within the
ninety (90) day period following the earlier of the Financial
Closing or the Commercial Operations Date with respect to a
Future U.S. Project or a Future International Project because
all of the conditions in Section 2.02(a)(i)-(vii) have not
been satisfied within such period, Panda International, PEC,
or such Affiliate may, but shall not be required to, sell,
transfer or contribute such Ownership Interest to a PIC Entity
at any time, provided the conditions in Section
2.02(a)(i)-(vii) are then satisfied.
Section 2.05 Disposition of Ownership Interests Not
Subject to Transfer. With respect to an Ownership Interest in
any Eligible Project as to which either Financial Closing or
the Commercial Operations Date has occurred but that was not
subject to transfer pursuant to Section 2.02(a) at the
earliest to occur of such dates, Panda International, PEC, or
any Affiliate of either of them shall be entitled, in its sole
discretion, to retain, sell, transfer, exchange, abandon or
otherwise dispose of, in whole or in part, such Ownership
Interest and any and all rights and interests therein, and no
PIC Entity shall have any right or interest with respect to
such Ownership Interest.
Section 2.06 Panda International and PEC Covenants.
Panda International and PEC each covenant and agree as
follows:
(a) Panda International and PEC shall use, and
shall cause their Affiliates to use, commercially reasonable
efforts to structure the Project Documents relating to each
Eligible Project such that their Ownership Interests in each
such Eligible Project will be eligible for transfer to a PIC
Entity pursuant to Section 2.02(a) or (b), as applicable, and
shall use and cause their Affiliates to use commercially
reasonable efforts to obtain all consents necessary in
connection with any such transfer; and
(b) PIC shall cause each PIC Entity to become a
party to this Agreement through the execution of an
appropriate instrument of accession.
Section 2.07 Additional Provisions.
(a) Nothing contained herein shall require that
Panda International, PEC, or any Affiliate of either of them
expend funds on the development, construction, ownership or
operation of any Eligible Project.
(b) Nothing contained herein shall be deemed to
prohibit the sale of any Ownership Interest prior to or in
connection with the Financial Closing for any Eligible Project
or to the extent permitted under the Indenture.
ARTICLE III
Representations and Warranties
Section 3.01 Representations and Warranties
Regarding Panda International, PEC and PIC.
Each of Panda International, PEC and PIC, as
applicable, hereby represents and warrants to each other as
follows:
(a) Due Authorization; Binding Obligation. Such
party is duly organized and validly existing as a corporation
under the laws of its state of organization and has all
requisite corporate power and authority to execute, deliver
and perform this Agreement. This Agreement has been duly and
validly authorized, executed and delivered by such party.
This Agreement constitutes the valid and binding obligation of
such party, enforceable in accordance with its terms, except
as enforcement may be limited by bankruptcy and other similar
laws of general application relating to or affecting the
rights and remedies of creditors and to general principles of
equity.
(b) Non-Contravention. The execution, delivery and
performance of this Agreement by such party does not violate
or conflict with (i) any provision of the organizational
documents of such party, (ii)Eany law, rule or regulation of
any federal, state, local or foreign government or agency
thereof, to which such party is subject or (iii)Eany contract
or other agreement binding upon such party.
(c) Third-Party and Regulatory Approvals. Such
party is not required to file, seek or obtain, from any Third
Party or any governmental body or agency, any notice, filing,
authorization, approval, order or consent in connection with
the execution, delivery and performance of this Agreement.
(d) Legal Proceedings, etc. Such party is not
engaged in or a party to or, to such party's knowledge,
threatened with, any suit, investigation, legal action or
other proceeding that, if determined adversely to such party,
would affect the ability of such party to perform its
obligations under this Agreement. There is no outstanding
order, ruling, decree, judgment or stipulation by or with any
court, administrative agency or other similar authority to
which such party is subject, that could reasonably be expected
to affect such party's ability to perform its obligations
under this Agreement.
Section 3.02 Representations and Warranties
Regarding the Project Companies. PEC represents and warrants
to PIC, with respect to each Project Company in which an
Ownership Interest is required to be transferred pursuant to
Section 2.01, the following:
(a) Organization. Such Project Company is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Such
Project Company has full corporate power and authority to
carry on its business as presently conducted by it and to own,
lease and operate its properties and assets.
(b) Qualifications, etc. Such Project Company is
duly qualified to do business as a foreign corporation in the
jurisdictions in which it conducts operations, and neither the
character of the properties owned or held under lease or
license by such company nor the nature of the business
conducted by it requires qualification to do business in any
other jurisdiction, except for such qualifications which if
failed to be obtained would not have a Material Adverse Effect
on the Project Company.
(c) Subsidiaries. Except as set forth on Schedule
3.02(c), such Project Company does not own, directly or
indirectly, any capital stock or security or other equity
interest in, or have any obligation to form or participate in,
any company, partnership, joint venture or other organization
or enterprise. All capital stock, securities and other equity
interests set forth on Schedule 3.02(c) are owned by the
entities set forth on Schedule 3.02(c) free and clear of all
liens, except for liens created or permitted under the
applicable Project Documents.
(d) Legal Proceedings, etc. Such Project Company
is not a party to or, to PEC's knowledge, is not threatened
with, any suit, investigation, legal action or other
proceeding, before any court, administrative or regulatory
agency, arbitration panel or other similar authority the
outcome of which could reasonably be expected to have a
Material Adverse Effect on such Project Company. There is no
outstanding order, ruling, decree, judgment or stipulation by
or with any court, administrative agency, arbitration panel or
other similar authority to which such Project Company is
subject that could reasonably be expected to have a Material
Adverse Effect on such Project Company.
(e) Capitalization. PEC owns all of the issued and
outstanding shares of capital stock in such Project Company,
which shares are validly issued, fully paid and nonassessable.
Except as set forth on Schedule 3.02(e), there are no
outstanding options, warrants or other rights to purchase,
obtain or acquire, or any outstanding securities or
obligations convertible into or exchangeable for, or any
voting agreements with respect to, any shares of capital stock
of such Project Company or any other securities or other
equity interests of any such Entity and no such Entity is
obligated, now or in the future, contingently or otherwise, to
issue, purchase or redeem capital stock or any other
securities or other equity interests to or from any Person.
Except as set forth on Schedule 3.02(e), no Entity other than
PEC has a contractual right to participate in the cash flow
related to the Ownership Interests in such Project Company.
True and complete copies of the organizational documents of
such Project Company shall be delivered to the PIC U.S. Entity
to which each Ownership Interest is to be transferred on or
before the date of such transfer.
(f) Clear Title. The Ownership Interest will be
conveyed free and clear of liens or other material rights or
material encumbrances, except for Permitted Liens.
(g) Project Documents and Violations. There are no
Project Document Violations under the Project Documents
relating to such Project Company. True and complete copies of
all Project Documents relating to such Project Company will be
provided to the PIC U.S. Entity to which the Ownership
Interest in such Project Company will be transferred following
such transfer.
(h) Non-contravention. The consummation of the
transfers contemplated by Section 2.01 will not conflict with
or cause a breach of, or require any consent that has not been
obtained under, the organizational documents with respect to
such Project Company, any Project Document related to such
Project Company, or any applicable law, regulation, permit or
authorization relating to the Ownership Interest or such
Project Company, except to the extent that any such conflict,
breach or failure to obtain such consent could not reasonably
be expected to have a Material Adverse Effect on such Project
Company.
(i) Taxes. No Liens for taxes exist with respect
to any assets or properties of such Project Company, except
for statutory Liens for taxes not yet due and Liens for taxes
that are the subject of a Good Faith Contest.
(j) Compliance with Laws. (i) Such Project Company
is in compliance with all applicable laws and regulations,
except where the failure to so comply could not reasonably be
expected to have a Material Adverse Effect on such Project
Company, (ii) to the knowledge of PEC, no claims or notices of
claims have been received by such Project Company to the
effect that such Project Company is in violation of any
applicable laws or regulations, except for violations that
could not reasonably be expected to have a Material Adverse
Effect on such Project Company and (iii) all permits and
authorizations required by such Project Company to fulfill its
obligations under its respective Project Documents have been
obtained and are in full force and effect, except for permits
or authorizations that are not yet required to be obtained or
as to which the failure to have obtained the same could not
reasonably be expected to have a Material Adverse Effect on
such Project Company.
(k) Regulatory Matters. Such Project Company is
not a "public utility", an "electric utility", an "electric
utility holding company", an "electric utility company", a
"holding company" or any similarly named Entity that is
subject to utility regulation, or a subsidiary or an affiliate
of any of the foregoing, under any applicable law of any state
or the U.S. (including, without limitation, the Public Utility
Holding Company Act of 1935, as amended, and the Federal Power
Act of 1935, as amended).
Section 3.03 Representations and Warranties
Regarding Transfers of Eligible Projects. In connection with
each transfer of an Ownership Interest in an Eligible Project
required by Section 2.02(a) or 2.02(b) or permitted by Section
2.04, Panda International or PEC shall represent and warrant
in the instruments of transfer, to the extent that either of
such Entities is the Transferor, or shall cause their
Affiliate to represent and warrant in the instruments of
transfer, if such Affiliate is the Transferor, the following:
(a) Organization. Each Project Ownership Entity in
which an Ownership Interest is to be transferred is duly
organized and validly existing under the laws of the
jurisdiction of its organization. Each such Project Ownership
Entity has full power and authority to carry on its business
as presently conducted by it and to own, lease and operate its
properties and assets.
(b) Qualifications, etc. Each Project Ownership
Entity in which an Ownership Interest is to be transferred is
duly qualified to do business in the jurisdictions in which it
conducts operations, and neither the character of the
properties owned or held under lease or license by such
Project Ownership Entity nor the nature of the business
conducted by it requires qualification to do business in any
other jurisdiction, except for such qualifications which if
failed to be obtained would not have a Material Adverse Effect
on the Ownership Interest of such Project Ownership Entity.
(c) Subsidiaries. Except as set forth in a
schedule to the instruments of transfer, no Project Ownership
Entity in which such Ownership Interest is to be transferred
owns, directly or indirectly, any capital stock or security or
other interest in, nor has any obligation to form or
participate in, any company, partnership, joint venture or
other organization or enterprise.
(d) Legal Proceedings, etc. No Project Ownership
Entity in which an Ownership Interest is to be transferred is
a party to or, to such Transferor's knowledge, threatened
with, any suit, investigation, legal action or other
proceeding before any court, administrative or regulatory
agency, arbitration panel or other similar authority the
outcome of which could reasonably be expected to have a
Material Adverse Effect on such Project Ownership Entity.
There is no outstanding order, ruling, decree, judgment or
stipulation by or with any court, administrative agency,
arbitration panel or other similar authority to which such
Project Ownership Entity is subject that could reasonably be
expected to have a Material Adverse Effect on the Ownership
Interest of such Project Ownership Entity.
(e) Capitalization. The Ownership Interests to be
transferred are validly issued, fully paid and non-assessable
and there are no outstanding options, warrants or other rights
to purchase, obtain or acquire, or any outstanding securities
or obligations convertible into or exchangeable for, or any
voting agreements with respect to, any member interests,
shares of capital stock or other equity interests of any such
Project Ownership Entity and such Project Ownership Entity is
not obligated, at the time of such transfer or at any time in
the future, contingently or otherwise, to issue, purchase or
redeem capital stock or any other securities or other equity
interests to or from any Person. Except as set forth in a
schedule to the instruments of transfer, no Entity other than
the Transferor has a contractual right to participate in the
cash flow related to such Ownership Interest. True and
complete copies of the organizational, charter or partnership
documents of each Project Ownership Entity in which an
Ownership Interest will be transferred pursuant to such
instruments of transfer will be provided to the PIC Entity to
which such Ownership Interest is to be transferred on or
before the effective date of transfer.
(f) Clear Title. The Ownership Interest will be
conveyed free and clear of material liens or other material
rights or material encumbrances, other than those created by
or permitted under the Project Documents relating to the
Ownership Interest or such Project Ownership Entity.
(g) Project Documents and Project Document
Violations. There are no Project Document Violations with
respect to the Project Documents relating to the Ownership
Interest or any Project Ownership Entity to which the
Ownership Interest pertains. True and complete copies of all
Project Documents relating to the Ownership Interest and the
Project Ownership Entity to which the Ownership Interest
pertains will be provided to the PIC Entity to which such
Ownership Interest will be transferred.
(h) Non-contravention. The consummation of the
transfer of the Ownership Interest will not conflict with or
cause a breach of, or require any consent that has not been
obtained under, any Project Document related to the Ownership
Interest or any Project Ownership Entity to which the
Ownership Interest pertains, or any applicable law,
regulation, permit or authorization, except to the extent that
any such conflict, breach or failure to obtain such consent
could not reasonably be expected to have a Material Adverse
Effect on the Ownership Interest or such Project Ownership
Entity.
(i) Taxes. No liens for taxes exist with respect
to any assets or properties of any Project Ownership Entity to
which such Ownership Interest pertains, except for statutory
liens for taxes not yet due and Liens that could not
reasonably be expected to have a Material Adverse Effect on
the Ownership Interest or such Project Ownership Entity.
(j) Compliance with Laws. (i) Each Project
Ownership Entity to which such Ownership Interest pertains is
in compliance with all applicable laws and regulations, except
where the failure to so comply could not reasonably be
expected to have a Material Adverse Effect on the Ownership
Interest or such Project Ownership Entity, (ii) to the
knowledge of the Transferor, no claims or notices of claims
have been received by such Project Ownership Entity to the
effect that such Project Ownership Entity is in violation of
any applicable laws or regulations, except for violations that
could not reasonably be expected to have a Material Adverse
Effect on the Ownership Interest or such Project Ownership
Entity, and (iii) all permits and authorizations required by
such Project Ownership Entity to fulfill its obligations under
its respective Project Documents have been obtained and are in
full force and effect, except for permits or authorizations
that are not, as of the time of such transfer, required to
have been obtained or as to which the failure to have obtained
the same could not reasonably be expected to have a Material
Adverse Effect on the Ownership Interest or such Project
Ownership Entity.
(k) Regulatory Matters. None of the Project
Ownership Entities in which an Ownership Interest is to be
transferred pursuant to such instruments of transfer is a
"public utility", an "electric utility", an "electric utility
holding company", an "electric utility company", a "holding
company" or any similarly named entity that is subject to
utility regulation, or a subsidiary or an affiliate of any of
the foregoing, under any applicable law of any state or the
U.S. (including, without limitation, the Public Utility
Holding Company Act of 1935, as amended, and the Federal Power
Act of 1935, as amended).
ARTICLE IV
Miscellaneous
Section 4.01 Notices. All notices and other
communications provided for herein (including any
modifications of, or waivers or consents under, this
Agreement) shall be given or made in writing and delivered by
hand, telecopy, courier or U.S. Mail to the intended recipient
at the "Address for Notices" specified below (or, as to any
party, at such other address as will be designated for notice
by such party in a notice to the other party). Any notice
given pursuant to this Agreement will be deemed effective when
such notice is received (or upon refusal of receipt) by the
addressee; provided that notices received by any party after
its normal business hours (or on a day other than a Business
Day) will be effective on the next Business Day.
Addresses For Notices:
To Panda
International: Panda Energy International, Inc.
Attention: General Counsel
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Telecopy No. (214) 980-6815
To PEC, PIC or
a PIC Entity: Panda Energy Corporation or
Panda Interfunding Corporation
or PIC Entity
c/o Panda Energy International,
Inc.
Attention: General Counsel
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Telecopy No. (214) 980-6815
Section 4.02 Amendments. No amendment,
modification, waiver, consent, approval, direction or other
action under this Agreement will be effective unless in
writing and signed by the party to be bound.
Section 4.03 Assignment. Except as otherwise
provided in this Section 4.03 no party shall have the right to
assign any of its rights or delegate any of its duties or
obligations under this Agreement to any other Person without
the prior written consent of the other parties hereto, which
consent may be withheld in the consenting party's sole
discretion. Any such assignment or delegation without such
consent will be void ab initio. Notwithstanding the foregoing
provisions of this Section 4.03 to the contrary, any party
hereto shall be entitled to assign all of its rights and
delegate all of its duties and obligations under this
Agreement to any successor of such party by merger or to any
purchaser of all or substantially all of the assets of such
party.
Section 4.04 Successors and Assigns. Subject to
Section 4.03, this Agreement will be binding upon and inure to
the benefit of the parties hereto and their respective
permitted successors and assigns.
Section 4.05 Invalidity. In the event that any one
or more of the provisions contained in this Agreement will,
for any reason, be held invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability
will not affect any other provision of this Agreement.
Section 4.06 Counterparts. This Agreement may be
executed in any number of counterparts, all of which taken
together will constitute one and the same instrument and the
parties hereto may execute this Agreement by signing any such
counterpart.
Section 4.07 No Oral Agreements. This Agreement
embodies the entire agreement and understanding between the
parties and supersedes all other agreements and understandings
between such parties relating to the subject matter hereof and
may not be contradicted by evidence of prior, contemporaneous,
or subsequent oral agreements of the parties.
Section 4.08 Governing Law and Submission to
Jurisdiction. THIS AGREEMENT WILL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO THE PRINCIPLES THEREOF RELATING TO
CONFLICTS OF LAW (EXCEPT SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW).
Section 4.09 Related Party Contracts. Any Related
Party Contract shall be deemed acceptable for all purposes of
this Agreement if it contains terms and conditions that would
generally be considered in the independent power industry to
represent an arm's length transaction.
Section 4.10 Effective Date and Term. This
Agreement will become effective as of the date of issuance of
the Series A Bonds pursuant to the Indenture (the "Effective
Date"), and will terminate (the "Initial Term") on the earlier
of (i) July 31, 2006, or (ii) the date on which neither Panda
International nor PEC nor any Affiliate (excluding PIC and any
PIC Entity) thereof has any Ownership Interest in a Future
U.S. Project or a Future International Project for which a
Power Purchase Agreement has been executed during the period
commencing on the Effective Date and ending on the fifth
anniversary thereof and that is subject to being transferred
to a PIC Entity pursuant to Section 2.02(a) or (b). The
parties hereto will have no further rights or obligations
hereunder following such termination (other than with respect
to any defaults by either party hereunder prior to such
termination). Notwithstanding the foregoing, Panda
International and PEC shall each have the right, which may be
exercised by either of them independently or by both of them,
to extend the term of this Agreement for up to an additional
five (5) years beyond the Initial Term, if notice of such
extension is given to PIC and to each PIC Entity which becomes
a party to this Agreement not later than thirty (30) days
prior to the expiration of the Initial Term. Neither PIC nor
any PIC Entity which becomes a party to this Agreement shall
have the right to extend the Initial Term hereof.
Although this Agreement is dated July 31, 1996, this
Agreement will become effective only on the Effective Date.
EXECUTED as of the Effective Date.
PANDA ENERGY INTERNATIONAL, INC.
By:
Name: Robert W. Carter
Title: Chairman of the Board,
President and Chief
Executive Officer
PANDA ENERGY CORPORATION
By:
Name: Robert W. Carter
Title: Chairman of the Board,
President and Chief
Executive Officer
PANDA INTERFUNDING CORPORATION
By:
Name: Robert W. Carter
Title: Chairman of the Board,
President and Chief
Executive Officer
________________
GLOSSARY
Additional Projects Contract
among
Panda Energy International, Inc.
Panda Energy Corporation and
Panda Interfunding Corporation
In addition to such other defined terms as may be
set forth in the Agreement in which this Glossary is included,
as used in such Agreement or in this Glossary, the following
terms have the following respective meanings (capitalized
terms not otherwise defined herein or in the Agreement shall
have the meanings set forth in the Indenture):
"Additional Series" -- Additional series of Bonds
(other than the Series A Bonds) issued pursuant to the
Indenture and a Series Supplemental Indenture (as defined in
the Indenture).
"Anticipated Additional Debt" -- The original
principal amount of an Additional Series proposed to be issued
which is equal to the largest principal amount of such
Additional Series that will provide a projected PIC Debt
Service Coverage Ratio and a projected Consolidated Debt
Service Coverage Ratio (if then applicable) of at least 1.7:1
and 1.25:1, respectively, for each Future Ratio Determination
Period, as confirmed by the Consolidating Engineer, assuming,
in respect of the Additional Series proposed to be issued:
(i) a maximum maturity and average life generally available in
the marketplace for debt of a similar nature and (ii) a coupon
rate then prevailing in the market for debt of a similar
nature, and taking into account (a) in the case of the PIC
Debt Service Coverage Ratio, Cash Available for Distribution
from the Project Portfolio and (b) in the case of the
Consolidated Debt Service Coverage Ratio, Cash Available from
Operations (net of any reserve requirements under Project-
level debt and Company-level debt) from the Project Portfolio
(giving effect, in each case, to transfer to the Projected
Portfolio of any Project in respect of which such Additional
Series is proposed to be issued). In making this analysis,
the Consolidating Engineer shall use generally accepted
financial analysis methods and generally follow the methods
used to calculate the amount of the offering of the Series A
Bonds, including the methods used in the Consolidated Pro
Forma Report for the Series A Bonds.
"Affiliate" -- With respect to any Person, (a) a
Person directly or indirectly owning, controlling or holding
the power to vote 50 percent or more of the outstanding voting
securities of such other Person, (b) any Person 50 percent or
more of whose outstanding voting securities are directly or
indirectly owned, controlled or held with power to vote, by
such other Person, or (c) any Person directly or indirectly
controlling, controlled by or under common control with, such
other Person.
"Agreement" -- The Additional Projects Contract
dated as of July 31, 1996 among Panda Energy International,
Inc., Panda Energy Corporation and Panda Interfunding
Corporation, in which this Glossary is included.
"Bonds" -- Pooled Project bonds of any series issued
under the Indenture and any Series Supplemental Indenture (as
defined in the Indenture).
"Cash Available for Distribution" -- As defined in
the Indenture.
"Cash Available from Operations" -- As defined in
the Indenture.
"Commercial Operations Date" -- With respect to an
Eligible Project, the date of (a) completion of construction
and testing and the functioning of such Eligible Project, and
(b) the satisfaction and discharge of all completion
requirements of, and commencement of regular capacity or
reservation payments under, the purchase, transportation or
other off-take or use contracts for such Eligible Project.
"Consolidated Debt Service Coverage Ratio" -- As
defined in the Indenture.
"Consolidating Engineer" -- As defined in the
Indenture.
"Consolidating Pro Forma Report" -- The report
entitled "Summary of the Consolidated Pro Formas of the Panda-
Rosemary and Panda-Brandywine Power Projects" prepared by ICF
Resources Incorporated, dated July 26, 1996, containing a
summary consolidation of the pro forma financial projections
for the Panda-Brandywine Facility and the Panda-Rosemary
Facility.
"Control" -- The power to exercise a controlling
influence over the management and policies of an Entity,
directly or indirectly, whether through the ownership of
Equity Interests, by contract or otherwise.
"Effective Date" -- As defined in Section 4.10 of
the Agreement.
"Eligible Project" -- Any Future U.S. Project or
Future International Project in which Panda International or
PEC or any Affiliate of either of them (other than PIC or any
direct or indirect subsidiary thereof), holds or acquires an
Ownership Interest.
"Entity" -- Any corporation, company, voluntary
association, partnership, joint venture, trust, estate,
unincorporated organization, governmental authority or any
other form of legal Person, other than a natural Person.
"Equity Interests" -- Collectively, stock in
corporations, shares in limited liability and offshore
companies and other partnership or equity interests that
participate in the profits of the underlying Entity.
"Financial Closing" -- With respect to an Eligible
Project, means closing of the initial construction or
long-term project financing (or acquisition financing after
either of such dates) of such Eligible Project.
"Future International Project" -- An electric power
generation project (including businesses substantially related
thereto, such as a steam host affiliated therewith) being
developed, constructed, owned or operated in a country other
than the U. S., except for any such project that is included
within the definition of Future U.S. Project.
"Future Ratio Determination Period" -- As defined in
the Indenture.
"Future U.S. Project" -- An electric power
generation project (including businesses substantially related
thereto, such as a steam host affiliated therewith) being
developed, constructed, owned or operated in the U.S. (other
than the projects being developed, constructed, owned or
operated by the Project Companies), or (i) being developed,
constructed, owned or operated in a country other than the
U.S. and (ii) as to which U.S. tax deferred status is not
being sought.
"Glossary" -- This Glossary to the Agreement.
"Indenture" -- The Trust Indenture dated as of July
31, 1996 by and among the Issuer, PIC and the Trustee, as
supplemented by any Series Supplemental Indenture thereto.
"Initial Term" -- As defined in Section 4.10 of this
Agreement.
"Ownership Interest" -- Collectively, with respect
to any Eligible Project, Equity Interests or other securities
in the corresponding Project Company or other Project
Ownership Entity representing (i) at least a direct or
indirect 50% ownership or equivalent interest in an Eligible
Project, or (ii) at least a direct or indirect 25% ownership
interest in, and Control over, an Eligible Project, provided,
that no other Ownership Interest represents greater control
over such Eligible Project. An Ownership Interest may be in
the form of Equity Interests or other securities in a Project
Company, or in a Project Ownership Entity that owns (directly
or through one or more Project Ownership Entities) Equity
Interests or other securities in a Project Company.
"Panda-Brandywine Facility" -- The 230 MW natural
gas-fired, combined-cycle cogeneration facility being
constructed and located in Brandywine, Prince George's County,
Maryland.
"Panda-Kathleen Facility" -- The natural gas-fired,
combined-cycle cogeneration facility to be located near
Lakeland, Florida that is being developed by PEC.
"Panda-Rosemary Facility" -- The 180 MW natural gas-
fired, combined-cycle cogeneration facility located in Roanoke
Rapids, North Carolina.
"Payment Date" -- As defined in the Indenture.
"Person" -- Any natural person or Entity.
"PIC Debt Service Coverage Ratio" -- As defined in
the Indenture.
"PIC Entity" -- Any PIC U.S. Entity or PIC
International Entity.
"PIC International Entity" -- Any Entity (i) that
100% of its voting capital stock or other voting equity
interest (other than directors' qualifying shares mandated by
applicable law and de minimis shares issued to comply with
legal requirements for a minimum number of shareholders), is
owned directly by PIC and (ii) that holds or has been
established to hold an Ownership Interest in a Future
International Project.
"PIC U.S. Entity" -- Any Entity (i) that 100% of its
voting capital stock or other voting equity interest is owned
directly by PIC and (ii) that holds or has been established to
hold an Ownership Interest in a Future U.S. Project.
"Power Purchase Agreement" -- A power purchase
agreement or similar agreement for the sale of electric
capacity and/or electric energy to a utility or other
purchaser from an Eligible Project.
"Project" -- As defined in the Indenture.
"Project Company" -- Each of Panda-Rosemary
Corporation, a Delaware corporation, PRC II Corporation, a
Delaware corporation, Panda-Brandywine Corporation, a Delaware
corporation, Panda Energy Corporation, a Delaware corporation,
and Brandywine Water Company, a Delaware corporation.
"Project Document Violation" -- Any breach,
violation or default (or event that with notice or the lapse
of time, or both, would constitute a breach, violation or
default) under a Project Document that could reasonably be
expected to have a Material Adverse Effect on the
corresponding Ownership Interest. Any such breach, violation
or default that would, if unremedied, give rise to a right to
terminate (or accelerate indebtedness under) a Project
Document will be deemed to have a Material Adverse Effect on
the corresponding Ownership Interest.
"Project Documents" -- With respect to an Eligible
Project, a Project Company, a Project Ownership Entity or any
Ownership Interest therein, the contracts, agreements,
licenses and permits (including all amendments thereto) that
burden or benefit (in any material respect) such Eligible
Project, Project Company, Project Ownership Entity or
Ownership Interest, including without limitation contracts and
agreements relating to the project construction, financing or
operation. The Project Documents may include one or more
Related Party Contracts and Shareholder Commitments.
"Project Ownership Entities" -- Collectively, with
respect to any Eligible Project, an Entity (excluding any PIC
Entity or any direct or indirect parent of such PIC Entity)
that is (i) the direct or indirect owner of a Project or
(ii) that is obligated under or a guarantor of Project Debt or
that has granted a security interest in any of its assets
(including Project cash flows), other than the capital stock
of any of its Subsidiaries (and any dividends or other
distributions on such capital stock and proceeds therefrom),
to secure the payment of Project Debt or the performance of
any Project Document.
"Project Portfolio" -- As defined in the Indenture.
"Rating Agency Confirmation" -- Confirmation by any
two of the three Top Tier Rating Agencies that then maintains
a rating on the Bonds (all of which Rating Agencies shall be
requested to provide such confirmation) to the effect that the
rating on the Bonds will not be reduced as a result of the
transfer of an Ownership Interest, including without
limitation as a result of the issuance of Additional Series in
an amount equal to the Anticipated Additional Debt.
"Related Party Contract" -- Any contract burdening
or benefiting an Eligible Project pursuant to which Panda
International or any Affiliate of it is required to perform
services for or is entitled to obtain benefits from such
Project, including any marketing, capacity, operations and
maintenance, fuel management or fuel supply contract; provided
that a Related Party Contract shall not include any
Shareholder Commitment.
"Series A Bonds" -- The 11-5/8% Pooled Project
Bonds, Series A due 2012, issued pursuant to the Indenture.
"Shareholder Commitment" -- Any guarantee,
indemnity, other liability, undertaking or commitment of Panda
International, PEC or any Affiliate of either of them entered
into in connection with the development, acquisition,
financing or ownership of an Eligible Project or an Ownership
Interest therein, in favor of one or more of the corresponding
Project Ownership Entities or any lender, supplier, customer
or governmental Entity for the primary purpose of providing
financial or other credit support with respect to the Eligible
Project or the Ownership Interest therein.
"Third Party" -- With respect to an Entity, any
person that is not an Affiliate of such Entity.
"Top Tier Rating Agencies" -- Standard and Poor's,
Moody's Investors Service, Inc. and Duff & Phelps Credit
Rating Co., and any successor to any of the foregoing, and any
other firm that in the regular course of its business
evaluates and issues ratings on bonds and other debt
instruments and whose ratings are generally recognized as
having significant influence in the debt financing markets for
similar debt offerings.
"Transferor" -- Panda International, PEC, or any
Affiliate of either of them, as the case may be, that holds an
Ownership Interest that has been, is being, or will be
transferred to any PIC Entity pursuant to this Agreement.
"U.S." -- All states, commonwealths, territories and
possessions of the United States of America, as of the date
hereof.
EXHIBIT 10.76
NON-PETITION AGREEMENT
NON-PETITION AGREEMENT dated as of July 31, 1996,
among Panda Interfunding Corporation, Panda Interholding
Corporation, Panda-Rosemary Corporation, PRC II Corporation,
Panda-Rosemary Funding Corporation (the "Funding
Corporation"), each a Delaware corporation, and Panda-
Rosemary, L.P., a Delaware limited partnership (the
"Partnership").
WHEREAS, the Funding Corporation will issue
$111,400,000 principal amount of 8-5/8 percent First Mortgage
Bonds due 2016 (the "Bonds"); and
WHEREAS, each of the parties hereto acknowledges
that it will realize substantial direct or indirect benefits
from the issuance of the Bonds; and
WHEREAS, the execution and delivery of this
Agreement by each of the parties hereto is required by (i)
the Purchase Agreement dated as of July 26, 1996 among the
Partnership, the Funding Corporation and Jefferies &
Company, Inc. as a condition precedent to the effectiveness
of the parties' obligations under said Purchase Agreement,
and (ii) Fleet National Bank, as trustee (the "Trustee")
under the Trust Indenture dated as of July 31, 1996, as
supplemented by the First Supplemental Indenture dated as of
July 31, 1996 (the "Indenture"), among the Funding
Corporation, the Trustee and the Partnership, as a condition
to release of the preceeds of the Bond;
NOW, THEREFORE, for and in consideration of the
premises and mutual covenants herein contained and for other
good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto, intending
to be legally bound, do hereby covenant and agree for the
benefit of each other and the Trustee that, until one
hundred twenty-four (124) days after the satisfaction and
discharge of the Indenture, none of the parties hereto shall
file, join in, or otherwise cause the filing of, any
bankrufptcy, reorganization, arrangment, insolvency, or
liqudation proceeding or other proceeding under any federal
or state bankruptcy or similar laws against any of the other
parties hereto.
IN WITNESS WHEREOF, the undersigned have cause
this Agreement to be duly executed by their duly authorized
officers, all as of the date first written above.
Panda Interfunding Corporation
By: __________________________
Name: Robert W. Carter
Title: Chairman of the Board,
President and Chief
Executive Officer
Panda Interholding Corporation
By: __________________________
Name: Robert W. Carter
Title: Chairman of the Board,
President and Chief
Executive Officer
Panda-Rosemary Corporation
By: __________________________
Name: Robert W. Carter
Title: Chairman of the Board,
President and Chief
Executive Officer
PRC II Corporation
By: ___________________________
Name: Robert W. Carter
Title: Chairman of the Board,
President and Chief
Executive Officer
Panda-Rosemary Funding Corporation
By: ______________________________
Name: Robert W. Carter
Title: Chairman of the Board,
President and Chief
Executive Officer
Panda-Rosemary, L.P.
By: Panda-Rosemary Corporation,
General Partner
By: __________________________
Name: Robert W. Carter
Title: Chairman of the Board,
President and Chief
Executive Officer
EXHIBIT 10.77
NON-PETITION AGREEMENT
NON-PETITION AGREEMENT dated as of July 31, 1996,
among Panda Funding Corporation (the "Issuer"), Panda Interholding
Corporation, Panda Interfunding Corporation (the "Company"),
each a Delaware corporation, Panda (Cayman) Interfunding Company,
a Cayman Islands exempted company.
WHEREAS, the Issuer will issue $105,525,000 principal
amount of 11-5/8% Pooled Project Bonds due 2012 (the "Bonds");
and
WHEREAS, each of the parties hereto acknowledges
that it will realize substantial direct or indirect benefits
from the issuance of the Bonds; and
WHEREAS, the execution and delivery of this Agreement
by each of the parties hereto is required by (i) the Purchase
Agreement dated as of July 26, 1996 among the Company, the Issuer
and Jefferies & Company, Inc. as a condition precedent to the
effectiveness of the parties' obligations under said Purchase
Agreement, and (ii) Bankers Trust Company, as trustee (the "Trustee")
under the Trust Indenture dated as of July 31, 1996, as supplemented
by the First Supplemental Indenture dated as of July 31, 1996 (the
"Indenture"), among the Issuer, the Trustee and the Company, as a
condition to release of the proceeds of the Bonds;
NOW, THEREFORE, for and in consideration of the
premises and mutual covenants herein contained and for other
good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto, intending
to be legally bound, do hereby covenant and agree for the
benefit of each other and the Trustee that, until one hundred
twenty-four (124) days after the satisfaction and discharge of
the Indenture, none of the parties hereto shall file, join in,
or otherwise cause the filing of, any bankruptcy, reorganization,
arrangement, insolvency, or liquidation proceeding or other
proceeding under any federal or state bankruptcy or similar laws
against any of the other parties hereto.
IN WITNESS WHEREOF, the undersigned have cause
this Non-Petition Agreement to be duly executed by their duly
authorized officers, all as of the date first written above.
Panda Interfunding Corporation
By:
Name: Robert W. Carter
Title: Chairman of the Board,
President and Chief
Executive Officer
Panda Interholding Corporation
By:
Name: Robert W. Carter
Title: Chairman of the Board,
President and Chief
Executive Officer
Panda Funding Corporation
By:
Name: Robert W. Carter
Title: Chairman of the Board,
President and Chief
Executive Officer
Panda (Cayman) Interfunding Company
By:
Name: Robert W. Carter
Title: Chairman of the Board,
President and Chief Executive Officer
EXHIBIT 12.00
<TABLE>
PANDA INTERFUNDING
RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Thousands)
<CAPTION>
----------------Year Ended December 31,---------------- -Six Months Ended June 30,-
1991 1992 1993 1994 1995 1995 1995 1996 1996
Pro Forma Pro Forma
----- ----- ----- ----- ----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Including capitalized interest:
Income(loss) before minority interest $3,573 $4,957 $4,502 $5,242 $3,045 $(6,695) $2,345 $ (70) $(4,442)
Interest expense 15,414 11,478 11,066 11,018 11,716 21,875 5,669 6,370 10,942
Amortization of debt issue costs 493 436 502 600 554 312 273 282 170
Capitalized interest 803 5,793 5,793 1,360 6,225 6,225
------ ------ ------ ------ ------ ------ ----- ------ ------
Total fixed charges 15,907 11,914 11,568 12,421 18,063 27,980 7,302 12,877 17,337
Earnings before fixed charges 19,480 16,871 16,070 16,860 15,315 15,492 8,287 6,582 6,670
Ratio of earnings to fixed charges 1.22 1.42 1.39 1.36 0.85 0.55 1.13 0.51 0.38
Deficiency in coverage of fixed charges $(2,748) (12,488) $(6,295) $(10,667)
Excluding capitalized interest:
Earnings before fixed charges $19,480 $16,871 $16,070 $16,860 $15,315 $15,492 $8,287 $ 6,582 $ 6,670
Total fixed charges excluding
capitalized interest 15,907 11,914 11,568 11,618 12,270 22,187 5,942 6,652 11,112
Ratio of earnings to fixed charges,
excluding capitalized interest 1.22 1.42 1.39 1.45 1.25 0.70 1.39 0.99 0.60
Deficiency in coverage of fixed
charges, excluding capitalized
interest $(6,695) $ (70) $(4,442)
</TABLE>
EXHIBIT 21.00
SUBSIDIARIES OF PANDA INTERFUNDING CORPORATION
Jurisdiction of
Name of Entity Organization
Panda Funding Corporation Delaware
Panda Cayman Interfunding Corporation Cayman Islands, B.W.I.
Panda Interholding Corporation Delaware
Panda-Rosemary Corporation Delaware
PRC II Corporation Delaware
Panda-Rosemary, L.P. Delaware
Panda-Rosemary Funding Corporation Delaware
Panda Brandywine Corporation Delaware
Panda Energy Corporation Delaware
Brandywine Water Company Delaware
Panda-Brandywine, L.P. Delaware
SUBSIDIARIES OF PANDA FUNDING CORPORATION
None.
EXHIBIT 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated May 20, 1996,
relating to the financial statements of Panda Interfunding as of December 31,
1994 and 1995 and for each of the three years in the period ended December 31,
1995, which appears in such Prospectus. We also consent to the reference
to us under the heading "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Dallas, Texas
October 11, 1996
EXHIBIT 23.03
[ICF RESOURCES INCORPORATED LETTERHEAD]
October 11, 1996
Panda Interfunding Corporation
Panda Funding Corporation
c/o Panda Energy International, Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Re: Consultant's Report
Ladies and Gentlemen:
We consent to the use of (i) our report entitled "Independent Panda-Brandywine
Pro Forma Projections" and our Officer's Certificate, of even date herewith,
related thereto, and (ii) our report entitled "Summary of the Consolidated Pro
Formas of the Panda Rosemary and Panda Brandywine Power Projects" and our
Officer's Certificate, of even date herewith, related thereto, in the
Prospectus (the "Prospectus") relating to the offering of Pooled Project
Bonds, Series A-1 due 2012 offered by Panda Funding Corporation and included
in the registration statement on Form S-1 by Panda Interfunding Corporation
and Panda Funding Corporation and the inclusion of such reports and
certificates as Appendices to the Prospectus.
We also consent to the statements by Burns & McDonnell in their report (and the
summary thereof) included in the Prospectus, that they have relied on our
report entitled "Independent Assessment of the Dispatchability of the
Panda-Rosemary Project".
We also consent to the statements by C.C. Pace Resources, Inc., in their report
included in the Prospectus, that they have relied on our reports referenced
above.
We also consent to the statements by Pacific Energy Systems, Inc., in their
report included in the Prospectus, that they have relied on our reports
referenced above.
We also hereby consent to being referred to (i) under the term "Consolidating
Engineer" provided that it is understood that ICF Resources Incorporated did
not perform engineering services in connection with its work relating to the
Prospectus, and (ii) as experts under the heading "Independent Engineers and
Consultants" in the Prospectus.
All of the above-referenced ICF Resources Incorporated reports were prepared
pursuant to the terms of the Consulting Agreement(s) between ICF Resources and
Panda Energy International.
ICF RESOURCES, INCORPORATED
By: /s/ B. S. Venkateshwara
Name: B. S. Venkateshwara
Title: Vice President
EXHIBIT 23.04
[BURNS & MCDONNELL LETTERHEAD]
October 11, 1996
Panda Interfunding Corporation
Panda Funding Corporation
c/o Panda Energy International, Inc.
4100 Spring Valley Road
Suite 1001
Dallas, TX 75244
Re: Independent Engineer's Report
Ladies and Gentlemen:
We consent to the use of our report entitled "Panda-Rosemary Cogeneration
Project Assessment Report for Potential Investors at the Request of Panda
Energy Corporation" and the Officer's Certificate, of even date herewith,
related thereto in the Prospectus (the "Prospectus") relating to the offering
of Pooled Project Bonds, Series A-1 due 2012 offered by Panda Funding
Corporation and included in the registration statement on Form S-1 by Panda
Interfunding Corporation and Panda Funding Corporation, and to the inclusion
of such report and certificate as an Appendix to the Prospectus.
We also consent to the statements by ICF Resources, Incorporated in their
reports (and the summaries thereof) included in the Prospectus, that they have
relied on our report referenced above, and we authorize such reliance.
We also hereby consent to the reference to us as experts under the heading
"Experts-Independent Engineers and Consultants" in the Prospectus.
Sincerely,
BURNS & MCDONNELL
By: /s/ Michael W. McComas
Name: Michael W. McComas
Title: Vice President
EXHIBIT 23.05
[BENJAMIN SCHLESINGER AND ASSOCIATES LETTERHEAD]
October 11, 1996
Panda Interfunding Corporation
Panda Funding Corporation
c/o Panda Energy International, Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Re: Fuel Consultant's Report
Ladies and Gentlemen:
We consent to the use of our report entitled "Assessment of Fuel Price, Supply
and Delivery Risks for the Panda-Rosemary Cogeneration Project" and the
Officer's Certificate, of even date herewith, related thereto in the
Prospectus (the "Prospectus") relating to the offering of Pooled Project
Bonds, Series A-1 due 2012 offered by Panda Funding Corporation and included
in the registration statement on Form S-1 by Panda Interfunding Corporation
and Panda Funding Corporation, and to the inclusion of such report and
certificate as an Appendix to the Prospectus.
We also hereby consent to the reference to us as experts under the heading
"Experts-Independent Engineers and Consultants" in the Prospectus.
BENJAMIN SCHLESINGER AND ASSOCIATES, INC.
By: /s/ Benjamin Schlesinger, Ph.D.
Name: Benjamin Schlesinger
Title: President
EXHIBIT 23.06
[PACIFIC ENERGY SYSTEMS LETTERHEAD]
October 11, 1996
Panda Interfunding Corporation
Panda Funding Corporation
c/o Panda Energy International, Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Re: Independent Engineer's Report
Ladies and Gentlemen:
We consent to the use of our report entitled "Independent Engineer's Report,
Panda-Brandywine Cogeneration Project" and our Officer's Certificate, of even
date herewith, related thereto in the Prospectus (the "Prospectus") relating
to the offering of Pooled Project Bonds, Series A-1 Due 2012 offered by Panda
Funding Corporation and included in the registration statement on Form S-1 by
Panda Interfunding Corporation and Panda Funding Corporation, and to the
inclusion of such report and certificate as an Appendix to the Prospectus.
We also consent to the statements by ICF Resources, Incorporated in their
reports (and the summaries thereof) included in the Prospectus, that they have
relied on our report above and we authorize such reliance.
We also consent to the statements by C.C. Pace Resources, Inc., in their
report included in the Prospectus, that they have relied on our report
referenced above and we authorize such reliance.
We also hereby consent to the reference to us as experts under the heading
"Experts-Independent Engineers and Consultants" in the Prospectus.
PACIFIC ENERGY SYSTEMS
By: /s/ John R. Martin
John R. Martin
President
EXHIBIT 23.07
[C.C. PACE LETTERHEAD]
October 11, 1996
Panda Interfunding Corporation
Panda Funding Corporation
c/o Panda Energy International, Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Re: Fuel Consultant's Consent
Ladies and Gentlemen:
We consent to the use in the Prospectus constituting part of the registration
statement on Form S-1 by Panda Interfunding Corporation and Panda Funding
Corporation relating to the offering of Pooled Project Bonds, Series A-1 due
2012 by Panda Funding Corporation (the "Prospectus") of our report dated
July 2, 1996 entitled "Panda-Brandywine, L.P. Generating Facility Fuel
Consultant's Report" (the "Report") and our Officer's Certificate of even date
herewith related thereto, which are included as an Appendix to the Prospectus,
and to the reference to us as experts under the heading "Experts-Independent
Engineers and Consultants" in the Prospectus.
We also consent to the statements by ICF Resources, Incorporated in their
reports included in the Prospectus, that they have relied on the Report and we
authorize such reliance.
C.C. PACE RESOURCES, INC.
By: /s/ Daniel E. White
Daniel E. White
Title: Senior Vice President
___________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF
1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2) ___________
______________________________
BANKERS TRUST COMPANY
(Exact name of trustee as specified in its charter)
NEW YORK 13-4941247
(Jurisdiction of Incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification no.)
FOUR ALBANY STREET
NEW YORK, NEW YORK 10006
(Address of principal (Zip Code)
executive offices)
Bankers Trust Company
Legal Department
130 Liberty Street, 31st Floor
New York, New York 10006
(212) 250-2201
(Name, address and telephone number of agent for service)
_________________________________
Panda Funding Corporation
Panda Interfunding Corporation
(Exact name of obligor as specified in its charter)
Delaware 75-2660911
75-2660915
(State or other jurisdiction of (I.R.S. employer
Incorporation or organization) Identification no.)
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
(Address of principal executive offices) (Zip Code)
11 5/8% Pooled Project Bonds, Series A due 2012
11 5/8% Pooled Project Bonds, Series A-1 due 2012
(Title of the indenture securities)
Item 1. General Information.
Furnish the following information as to the trustee.
(a) Name and address of each examining or supervising authority to
which it is subject.
Name Address
Federal Reserve Bank (2nd District) New York, NY
Federal Deposit Insurance Corporation Washington, D.C.
New York State Banking Department Albany, NY
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with Obligor.
If the obligor is an affiliate of the Trustee, describe each such
affiliation.
None.
Item 3. -15. Not Applicable
Item 16. List of Exhibits.
Exhibit 1 - Restated Organization Certificate of Bankers Trust
Company dated August 7, 1990 and Certificate of
Admendment of the Organization Certificate of
Bankers Trust Company dated March 21, 1996, copy
attached.
Exhibit 2 - Certificate of Authority to commence business -
Incorporated herein by reference to Exhibit 2 filed
with Form T-1 Statement, Registration No. 33-21047.
Exhibit 3 - Authorization of the Trustee to exercise corporate
trust powers - Incorporated herein by reference to
Exhibit 2 filed with Form T-1 Statement, Registration
No. 33-21047.
Exhibit 4 - Existing By-Laws of Bankers Trust Company, dated as
amended on October 19, 1995. - Incorporated herein
by reference to Exhibit 4 filed with Form T-1
Statement, Registration No. 33-65171.
Exhibit 5 - Not applicable.
Exhibit 6 - Consent of Bankers Trust Company required by Section
321(b) of the Act. - Incorporated herein by
reference to Exhibit 4 filed with Form T-1
Statement, Registration No. 22-18864.
Exhibit 7 - A copy of the latest report of condition of Bankers
Trust Company dated as of June 30, 1996.
Exhibit 8 - Not Applicable.
Exhibit 9 - Not Applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this
statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in The City of New York, and State of New York,
on the 8th day of October, 1996.
BANKERS TRUST COMPANY
By: /s/ Scott Thiel
Scott Thiel
Assistant Vice President
Legal Title of Bank: Bankers Trust Company Call Date: 6/30/96
ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-1
City, State ZIP: New York, NY 10006 11
FDIC Certificate No.: 0 0 6 2 3
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks June 30, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, reported the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
_______________
C400
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ------------------------------------------------------------------------------
ASSETS / / / / / / / / / /
1. Cash and balances due from depository
institutions (from Schedule RC-A): / / / / / / / / / /
a. Noninterest-bearing balances and currency
and coin(1) ........................... 0081 1,631,000 1.a.
b. Interest-bearing balances(2)........... 0071 2,066,000 1.b.
2. Securities: / / / / / / / / / /
a. Held-to-maturity securities
(from Schedule RC-B, column A) ....... 1754 0 2.a.
b. Available-for-sale securities
(from Schedule RC-B, column D)........ 1773 3,761,000 2.b.
3. Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and of its Edge and Agreement
subsidiaries, and in IBFs: / / / / / / / / / /
a. Federal funds sold..................... 0276 5,162,000 3.a.
b. Securities purchased under agreements to
resell................................. 0277 4,192,000 3.b.
4. Loans and lease financing receivables: / / / / / / / / / /
a. Loans and leases, net of unearned income
(from Schedule RC-C)
RCFD 2122 24,849,000 / / / / / / / / / / 4.a.
b. LESS: Allowance for loan and lease
losses.................................
RCFD 3123 923,000 / / / / / / / / / / 4.b.
c. LESS: Allocated transfer risk reserve
RCFD 3128 0 / / / / / / / / / / 4.c.
d. Loans and leases, net of unearned income,
allowance, and reserve (item 4.a minus
4.b and 4.c)............................. 2125 23,926,000 4.d.
5. Assets held in trading accounts............... 3545 33,052,000 5.
6. Premises and fixed assets (including capitalized
leases)....................................... 2145 858,000 6.
7. Other real estate owned (from Schedule RC-M).. 2150 216,000 7.
8. Investments in unconsolidated subsidiaries and
associated companies (from Schedule RC-M) 2130 271,000 8.
9. Customers' liability to this bank on acceptances
outstanding................................... 2155 572,000 9.
10. Intangible assets (from Schedule RC-M)........ 2143 18,000 10.
11. Other assets (from Schedule RC-F)............. 2160 7,612,000 11.
12. Total assets (sum of items 1 through 11)...... 2170 83,337,000 12.
__________________________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading accounts.
Legal Title of Bank: Bankers Trust Company Call Date: 6/30/96
ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-2
City, State Zip: New York, NY 10006 12
FDIC Certificate No.: 0 0 6 2 3
Schedule RC--Continued
Dollar Amounts in Thousands / / / / / / Bil Mil Thou
- -------------------------------------------------------------------------------
LIABILITIES / / / / / / / / / /
13. Deposits: / / / / / / / / / /
a. In domestic offices (sum of totals
of columns A and C from Schedule RC-E,
part I) RCON 2200 9,040,000 13.a.
(1) Noninterest-bearing(1)
RCON 6631 3,569,000........../ / / / / / / / / / 13.a.(1)
(2) Interest-bearing ...............
RCON 6636 5,471,000........../ / / / / / / / / / 13.a.(2)
b. In foreign offices, Edge and Agreement
subsidiaries, and IBFs (from Schedule
RC-E part II) RCFN 2200 19,648,000 13.b.
(1) Noninterest-bearing
RCFN 6631 494,000.......... / / / / / / / / / / 13.b.(1)
(2) Interest-bearing
RCFN 6636 19,154,000........ / / / / / / / / / / 13.b.(2)
14. Federal funds purchased and securities sold
under agreements to repurchase in domestic
offices of the bank and of its Edge and
Agreement subsidiaries, and in IBFs: / / / / / / / / / /
a. Federal funds purchased..........RCFD 0278 2,564,000 14.a.
b. Securities sold under agreements to
repurchase.......................RCFD 0279 790,000 14.b.
15. a. Demand notes issued to the U.S.
Treasury.........................RCON 2840 0 15.a.
b. Trading liabilities..............RCFD 3548 18,177,000 15.b.
16. Other borrowed money: / / / / / / / / / /
a. With original maturity of one year or
less.............................RCFD 2332 16,421,000 16.a.
b. With original maturity of more than
one year.........................RCFD 2333 3,388,000 16.b.
17. Mortgage indebtedness and obligations under
capitalized leases....................RCFD 2910 31,000 17.
18. Bank's liability on acceptances executed
and outstanding.......................RCFD 2920 572,000 18.
19. Subordinated notes and debentures.....RCFD 3200 1,227,000 19.
20. Other liabilities (from Sch. RC-G)....RCFD 2930 6,911,000 20.
21. Total liabilities (sum of items 13
through 20)...........................RCFD 2948 78,769,000 21.
22. Limited-life preferred stock and related
surplus...............................RCFD 3282 0 22.
EQUITY CAPITAL / / / / / / / / / /
23. Perpetual preferred stock and related
surplus...............................RCFD 3838 500,000 23.
24. Common stock..........................RCFD 3230 1,002,000 24.
25. Surplus (exclude all surplus related to
preferred stock)......................RCFD 3839 528,000 25.
26. a. Undivided profits and capital
reserves.........................RCFD 3632 2,915,000 26.a.
b. Net unrealized holding gains (losses)
on available-for-sale securities.RCFD 8434 ( 5,000) 26.b.
27. Cumulative foreign currency translation
adjustments...........................RCFD 3284 ( 372,000) 27.
28. Total equity capital (sum of items 23
through 27)...........................RCFD 3210 4,568,000 28.
29. Total liabilities, limited-life preferred
stock, and equity capital (sum of items 21,
22, and 28)...........................RCFD 3300 83,337,000 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the
statement below that best describes the most
comprehensive level of auditing work performed for
the bank by independent external auditors as of any Number
date during 1995..................... RCFD 6724 N/A M.1
1 = Independent audit of the bank conducted in
accordance with generally accepted auditing
standards by a certified public accounting
firm which submits a report on the bank
2 = Independent audit of the bank's parent holding
company conducted in accordance with generally
accepted auditing standards by a certified public
accounting firm which submits a report on the
consolidated holding company
3 = Directors' examination of the bank conducted in
accordance with generally accepted auditing
standards by a certified public accounting firm
(may be required by state chartering authority)
4 = Director's examination of the bank performed by
other external auditors (may be required by state
chartering authority)
5 = Review of the bank's financial statements by
external auditors
6 = Compilation of the bank's financial statements by
external auditors
7 = Other audit procedures (excluding tax preparation
work)
8 = No external audit work
______________________
(1) Including total demand deposits and noninterest-bearing time and savings
deposits.
State of New York,
Banking Department
I, PETER M. PHILBIN, Deputy Superintendent of Bank of the State of New
York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF
AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY Under
Section 8005 of the Banking Law," dated March 20, 1996, providing for an
increase in authorized capital stock from $1,351,666,670 consisting of
85,166,667 shares with a par value of $10 each designated as Common Stock
and 500 shares with a par value of $1,000,000 each designated as Series
Preferred Stock to $1,501,666,670 consisting of 100,166,667 shares with a
par value of $10 each designated as Common Stock and 500 shares with a par
value of $1,000,000 each designated as Series Preferred Stock.
Witness, my hand and official seal of the Banking Department at the City of
New York,
this 21st day of March in the Year of our
Lord one thousand nine hundred and ninety-six.
Peter M. Philbin
Deputy Superintendent of Banks
CERTIFICATE OF AMENDMENT
OF THE
ORGANIZATION CERTIFICATE
OF BANKERS TRUST
Under Section 8005 of the Banking Law
_____________________________
We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a
Managing Director and an Assistant Secretary of Bankers Trust Company, do
hereby certify:
1. The name of the corporation is Bankers Trust Company.
2. The organization certificate of said corporation was filed by the
Superintendent of Banks on the 5th of March, 1903.
3. The organization certificate as heretofore amended is hereby
amended to increase the aggregate number of shares which the corporation
shall have authority to issue and to increase the amount of its authorized
capital stock in conformity therewith.
4. Article III of the organization certificate with reference to the
authorized capital stock, the number of shares into which the capital stock
shall be divided, the par value of the shares and the capital stock
outstanding, which reads as follows:
"III. The amount of capital stock which the corporation is
hereafter to have is One Billion, Three Hundred Fifty One
Million, Six Hundred Sixty-Six Thousand, Six Hundred Seventy
Dollars ($1,351,666,670), divided into Eighty-Five Million, One
Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven (85,166,667)
shares with a par value of $10 each designated as Common Stock
and 500 shares with a par value of One Million Dollars
($1,000,000) each designated as Series Preferred Stock."
is hereby amended to read as follows:
"III. The amount of capital stock which the corporation is
hereafter to have is One Billion, Five Hundred One Million, Six
Hundred Sixty-Six Thousand, Six Hundred Seventy Dollars
($1,501,666,670), divided into One Hundred Million, One Hundred
Sixty Six Thousand, Six Hundred Sixty-Seven (100,166,667) shares
with a par value of $10 each designated as Common Stock and 500
shares with a par value of One Million Dollars ($1,000,000) each
designated as Series Preferred Stock."
6. The foregoing amendment of the organization certificate was
authorized by unanimous written consent signed by the holder of all
outstanding shares entitled to vote thereon.
IN WITNESS WHEREOF, we have made and subscribed this certificate this
20th day of March , 1996.
James T. Byrne, Jr.
------------------------------
James T. Byrne, Jr.
Managing Director
Lea Lahtinen
-------------------------------
Lea Lahtinen
Assistant Secretary
State of New York )
) ss:
County of New York )
Lea Lahtinen, being fully sworn, deposes and says that she is an
Assistant Secretary of Bankers Trust Company, the corporation described in
the foregoing certificate; that she has read the foregoing certificate and
knows the contents thereof, and that the statements herein contained are
true.
Lea Lahtinen
-----------------------
Lea Lahtinen
Sworn to before me this 20th day
of March, 1996.
Sandra L. West
- --------------------------------
Notary Public
SANDRA L. WEST Counterpart filed in the
Notary Public State Office of the Superintendent of
of New York Banks, State of New York
No. 31-4942101 This 21st day of March, 1996
Qualified in New York County
Commission Expires September 19, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC Form S-1
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> JUN-30-1996 DEC-31-1995
<CASH> 8,293,887 3,036,238
<SECURITIES> 0 0
<RECEIVABLES> 4,824,659 5,199,999
<ALLOWANCES> 0 0
<INVENTORY> 3,077,790 3,084,168
<CURRENT-ASSETS> 16,239,838 11,333,069
<PP&E> 276,181,188 237,801,668
<DEPRECIATION> (23,114,476) (21,008,036)
<TOTAL-ASSETS> 314,836,578 275,115,175
<CURRENT-LIABILITIES> 19,640,805 18,457,226
<BONDS> 274,343,682 234,608,361
0 0
0 0
<COMMON> 0 0
<OTHER-SE> (16,761,993) (14,786,078)
<TOTAL-LIABILITY-AND-EQUITY> 314,836,578 275,115,175
<SALES> 14,821,905 30,331,515
<TOTAL-REVENUES> 15,208,731 31,226,783
<CGS> 5,061,346 9,347,707
<TOTAL-COSTS> 6,254,005 11,169,083
<OTHER-EXPENSES> 4,560,887 10,344,460
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 6,369,754 11,715,929
<INCOME-PRETAX> (1,975,915) (2,002,689)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,975,915) (2,002,689)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,975,915) (2,002,689)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
